Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the non-exclusive license agreement dated April 3, 2022 between Genome Dx Therapeutics Inc. ("GenomeDx" or "Licensor") and Veridian Molecular Labs, Inc. ("Veridian" or "Licensee"), covering U.S. Patent Nos. 10,438,271 (the "'271 Patent") and 11,204,893 (the "'893 Patent"), and evaluates its comparability to a hypothetical negotiation between GenomeDx and Helios Precision

1. Field-of-use limitation. The Veridian license is limited to bladder cancer diagnostics, a field in which Veridian does not compete with GenomeDx. By contrast, Helios directly competes with GenomeDx in prostate cancer genomic prognostic testing — GenomeDx's core commercial market and the application that drives the vast majority of GenomeDx's $387.6 million in annual revenue.

2. Non-litigation negotiation context. The Veridian license was negotiated as a voluntary, arm's-length commercial arrangement with no pending or threatened litigation between the parties. Under the hypothetical negotiation framework, the negotiation with Helios is deemed to occur against the backdrop of an assumption that the patents are valid and infringed, which materially alters the bargaining dynamic and support

3. Absence of the '647 Patent. The Veridian license covers only the '271 Patent and the '893 Patent. The '647 Patent (U.S. Patent No. 11,891,647) had not yet issued when the Veridian license was executed and therefore was not included. The '647 Patent, which issued on February 6, 2024, covers the integration of genomic risk scores with clinical covariates — a feature that Helios's ProstaSignal™ Genomic Classifier exp

II. BACKGROUND A. The Veridian License Agreement The Veridian License Agreement was executed on April 3, 2022 between GenomeDx, as licensor, and Veridian Molecular Labs, Inc., as licensee. Veridian is a Delaware corporation headquartered in Research Triangle Park, North Carolina, specializing in molecular diagnostic assays for urological cancers, with a particular focus on bladder cancer detection and monitoring. The

III. GEORGIA-PACIFIC FACTOR-BY-FACTOR ANALYSIS OF THE VERIDIAN LICENSE AS A COMPARABLE The following analysis addresses each of the fifteen Georgia-Pacific factors in the context of evaluating the Veridian license's comparability to the hypothetical negotiation between GenomeDx and Helios. This section identifies the ways in which the Veridian license supports the proposed reasonable-royalty rate and the ways in whic

I. Factor 9 — Utility and Advantages of the Patent Property Over Old Modes or Devices Georgia-Pacific factor 9 considers "the utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results." 318 F. Supp. at 1120. Prior to the development of the patented technology, prostate cancer recurrence risk assessment after radical prostatectomy relied pri

1. Direct competition in prostate cancer. Unlike Veridian, which operates in the non-competing bladder cancer field, Helios directly competes with GenomeDx in the genomic prostate cancer prognostic testing market. A license to a direct competitor that would erode GenomeDx's approximately 74% market share commands a significant premium over a license to a non-competitor (Factors 3, 5, and 6).

2. Inclusion of the '647 Patent. The hypothetical Helios license would cover all three patents-in-suit, including the '647 Patent, which was not part of the Veridian license and which adds claims directed to the integrated genomic-clinical prognostic model — a key feature of ProstaSignal™. The '647 Patent also has a longer remaining patent life (through September 9, 2041, versus June 14, 2036 for the other two patent

3. GenomeDx's dominant market share at risk. GenomeDx held approximately 74% of the genomic prostate cancer prognostic testing market prior to ProstaSignal™'s launch, and this market share declined to approximately 68% after launch. A rational licensor facing the prospect of further market share erosion would demand a premium royalty to compensate for this competitive harm (Factor 5).

4. Litigation context. The hypothetical negotiation is deemed to occur against the assumption that the patents are valid and infringed. This is a fundamentally different negotiating dynamic from the voluntary Veridian negotiation. The licensee (Helios) is negotiating to avoid an injunction and ongoing damages liability, not merely acquiring optional technology for a new product line. Courts routinely recognize that t

5. GenomeDx's established policy of protecting its patent monopoly. GenomeDx has demonstrated a clear policy of restricting licenses in the prostate cancer market and enforcing its patent rights against competitors. This policy gives GenomeDx significant bargaining leverage in the hypothetical negotiation (Factor 4). Taking all of these considerations into account, a prudent licensor (GenomeDx) and a prudent licensee

IV. ADJUSTMENT ANALYSIS: FROM 15% (VERIDIAN) TO 18% (PROPOSED HYPOTHETICAL RATE) This section sets forth the detailed adjustment analysis that bridges the gap between the Veridian license's 15% running royalty rate and the proposed 18% rate for the hypothetical negotiation between GenomeDx and Helios. The analysis identifies three principal factors warranting upward adjustment, addresses potential downward adjustment

1. Direct Competitive Overlap (Estimated Premium: +1.5–2.0 Percentage Points). The single most significant distinction between the Veridian license and the hypothetical Helios license is the competitive relationship between the licensor and the licensee. Veridian used the licensed technology for bladder cancer diagnostics — a therapeutic area in which it does not compete with GenomeDx. Helios uses the infringing tech

2. Broader Patent Coverage — Inclusion of the '647 Patent (Estimated Premium: +0.5–1.0 Percentage Point). The Veridian license covers two patents: the '271 Patent and the '893 Patent. It does not cover the '647 Patent (U.S. Patent No. 11,891,647), because the '647 Patent had not yet issued at the time the Veridian license was executed on April 3, 2022. The '647 Patent issued on February 6, 2024, nearly two years afte

3. Litigation Context — "Book of Wisdom" (Estimated Premium: +0.5–1.0 Percentage Point). The hypothetical negotiation framework mandated by Georgia-Pacific and its progeny requires that the negotiation be deemed to occur against the assumption that the patent is valid and infringed. See Georgia-Pacific, 318 F. Supp. at 1121; see also Rite-Hite Corp., 56 F.3d at 1554 n.13 ("The hypothetical negotiation requires the pa

1. Non-Exclusive vs. Exclusive License. Helios may argue that the Veridian license's non-exclusive nature should be considered in the adjustment analysis. However, this argument does not support a downward adjustment because the hypothetical Helios license would also be non-exclusive. GenomeDx would have no rational basis for granting exclusivity to a competitor in its core prostate cancer market, as doing so would p

2. Different Gene Panel Size. Helios may argue that ProstaSignal™'s use of a 24-gene panel (versus GenomeDx's 22-gene panel) represents a mean