INTELLECTUAL PROPERTY DUE DILIGENCE SUMMARY
OncuPath™ Companion Diagnostics Portfolio
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
Prepared by: Calderwood & Harkness LLP 555 South Hope Street, Suite 4400 Los Angeles, California 90071
Authors:
Tiffany Rosenthal, Lead Associate, Mergers & Acquisitions
With input from James Prentice, Responsible Partner, Mergers & Acquisitions, and Andrew Fitzpatrick, Working Associate, Mergers & Acquisitions
Client: Genome Dx Therapeutics Inc. ("GDT" or "Seller")
Matter No.: 1013-00006&A-4471
Date: April 2023
Re: intellectual Property Due Diligence — Proposed Asset Purchase of OncuPath™ Companion Diagnostics Assay Line by Meridian Precision Diagnostics, Inc. ("Meridian" or "Buyer") — Total Consideration of $140,000,000
This memorandum constitutes privileged and confidential attorney work product prepared by Calderwood & Harkness LLP in connection with the representation of Genome Dx Therapeutics Inc. in the above-referenced transaction. This memorandum is protected by the attorney-client privilege, the work product doctrine, and all other applicable privileges. This memorandum is prepared for the exclusive use of Genome Dx Therapeutics Inc. and its officers, directors, and authorized representatives, and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
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I. EXECUTIVE SUMMARY
This memorandum summarizes the findings of the intellectual property due diligence review conducted by Calderwood & Harkness LLP in connection with the proposed asset purchase by Meridian Precision Diagnostics, Inc. ("Meridian" or "Buyer") of Genome Dx Therapeutics Inc.'s ("GDT" or "Seller") OncuPath™ companion diagnostics assay line (the "Transaction"). The Transaction is structured as an asset purchase for total consideration of One Hundred Forty Million Dollars ($140,000,000), consisting of One Hundred Twenty-Six Million Dollars ($126,000,000) payable at closing, plus up to Fourteen Million Dollars ($14,000,000) in clinical-milestone earnout payments, as more fully described in the Asset Purchase Agreement (the "APA").
GDT is a Delaware corporation headquartered in San Diego, California. GDT's majority equity holder is Pinnacle Biosciences Partners Fund III, L.P., which holds approximately 68.4% of GDT's outstanding equity interests. GDT's core retained business following the Transaction will be the GenoStrat™ liquid biopsy platform, which represents GDT's primary strategic focus and growth initiative. The OncuPath™ companion diagnostics assay line is a legacy asset that was acquired by GDT in a prior acquisition and no longer fits within GDT's long-term strategic roadmap. GDT and its board of directors, with the advice of its financial advisor, Brindoval Partners LLC (Victor Sandoval, Managing Director), have determined that a divestiture of the OncuPath™ line will allow GDT to concentrate its resources on the GenoStrat™ platform and provide meaningful capital to fund further development of that technology.
Meridian is a Delaware corporation headquartered in Research Triangle Park, North Carolina, and is a well-established participant in the precision diagnostics market, reporting consolidated revenues of approximately $589 million for its fiscal year ended December 31, 2022. Meridian brings substantial commercial infrastructure, regulatory expertise, and distribution capabilities that are expected to enhance the OncuPath™ portfolio following the Transaction.
The intellectual property portfolio being transferred to Meridian in connection with the Transaction (the "OncuPath IP Portfolio") comprises the following principal assets:
• Fourteen (14) issued United States patents;
• Seven (7) pending United States patent applications;
• Three (3) registered United States trademarks (OncuPath™, OncuPath-HER3™, and OncuPath-GENOMARK™);
• Trade secrets and proprietary know-how related to the OncuPath™ assay line; and
• One exclusive in-bound license agreement from Vantage Molecular Sciences, Inc. ("Vantage") covering probe-labeling technology critical to the OncuPath™ assays.
Overall Assessment. Based on our review, the OncuPath IP Portfolio is generally well-maintained, with a clean chain of title, current maintenance fee payments, and no pending or threatened intellectual property litigation. The portfolio provides meaningful protection for the OncuPath™ product line, including the three currently FDA-cleared assays and the OncuPath-HER3™ companion diagnostic that is presently under review by the U.S. Food and Drug Administration ("FDA"). However, our review has identified several items that require attention in connection with the Transaction, including: (a) the requirement to obtain prior written consent from Vantage Molecular Sciences, Inc. for the assignment of the exclusive license agreement dated September 12, 2019; (b) certain freedom-to-operate considerations relating to OncuPath-HER3™ given the density of third-party patent filings in the HER3 biomarker companion diagnostic space; and (c) minor matters relating to employee transfers and post-closing intellectual property recordation. Each of these items is discussed in detail in the body of this memorandum.
Calderwood & Harkness LLP serves as Seller's counsel in the Transaction. Buyer's counsel is Whitfield Sayer & Gregg LLP, with Jonathan Whitfield serving as lead partner. Seller's financial advisor is Brindoval Partners LLC, with Victor Sandoval, Managing Director, leading the advisory engagement.
The virtual data room for the Transaction was opened on March 6, 2023. Calderwood & Harkness reviewed IP diligence materials uploaded to the data room through mid-April 2023. This memorandum reflects the state of the review as of that date. Certain matters addressed herein may have progressed or been resolved subsequent to the preparation of this memorandum, including the Vantage consent process, which is noted where applicable.
II. SCOPE OF IP DILIGENCE REVIEW
A. Data Room Materials Reviewed
Calderwood & Harkness conducted its intellectual property due diligence review primarily through examination of materials uploaded to the virtual data room maintained by Thackeray Solutions (the "Data Room"), which was opened on March 6, 2023. The Data Room contained documents organized by category and indexed by GDT's internal team under the supervision of Rebecca Chiang, GDT's General Counsel. Calderwood & Harkness reviewed materials through mid-April 2023, at which point the substantive review for purposes of this memorandum was concluded.
B. Categories of Materials Examined
The IP diligence review encompassed the following categories of materials:
1. United States and Foreign Patent Portfolios. All issued United States patents and pending United States patent applications related to the OncuPath™ product line, including patent certificates, prosecution histories, assignment records, maintenance fee receipts, and related correspondence with the United States Patent and Trademark Office ("USPTO"). We also reviewed whether any foreign patent applications or registrations existed in connection with the OncuPath™ technology.
2. Trademark Registrations and Applications. All United States trademark registrations and applications related to the OncuPath™ brand family, including registration certificates, specimens of use, maintenance and renewal filings, and assignment records with the USPTO.
3. Trade Secrets and Proprietary Know-How. Documentation reflecting GDT's trade secret protection programs applicable to the OncuPath™ product line, including policies, access controls, information security protocols, and classification systems for proprietary technical data.
4. Inbound License Agreements. All license agreements pursuant to which GDT has obtained rights from third parties to intellectual property used in or necessary for the OncuPath™ product line, with particular attention to the exclusive license agreement with Vantage Molecular Sciences, Inc.
5. Outbound License Agreements. All license agreements pursuant to which GDT has granted rights to third parties with respect to OncuPath™ intellectual property, including any sublicense agreements, technology access agreements, or research-use licenses.
6. IP Assignment Agreements (Chain of Title). All agreements and instruments by which intellectual property rights in the OncuPath™ portfolio were assigned to GDT, including assignments from individual inventors, assignments from predecessor entities in connection with prior acquisitions, and recordation documents filed with the USPTO.
7. Co-Development and Collaboration Agreements. Any agreements pursuant to which OncuPath™ intellectual property was co-developed or co-owned with third parties, including joint development agreements, collaborative research agreements, and material transfer agreements.
8. Employee and Contractor Invention Assignment and Confidentiality Agreements. Standard form and individually negotiated agreements executed by GDT employees, consultants, and independent contractors engaged in the development, manufacture, or commercialization of OncuPath™ products, including invention assignment agreements, proprietary information and inventions agreements, and non-disclosure agreements.
9. IP-Related Litigation and Proceedings. Records of any pending or threatened patent infringement, trademark infringement, trade secret misappropriation, or other intellectual property disputes involving OncuPath™ technology, including court filings, demand letters, cease-and-desist correspondence, and settlement agreements.
10. Freedom-to-Operate Analyses and Opinion Letters. Internal and external freedom-to-operate analyses, patent landscape assessments, and opinion letters prepared by or for GDT relating to the OncuPath™ product line, including analyses conducted in connection with new product development and regulatory submissions.
11. Regulatory Filings Referencing IP. FDA 510(k) submissions, premarket approval ("PMA") applications and supplements, and related regulatory filings that reference or rely upon OncuPath™ intellectual property, as well as CLIA laboratory accreditation documentation.
C. Key Personnel Interviewed
In addition to the documentary review, Calderwood & Harkness conducted interviews with the following GDT personnel to supplement and verify the information contained in the Data Room:
• Dr. Lara Okonkwo, Vice President, OncuPath Research & Development — provided information regarding the technical aspects of the OncuPath™ portfolio, the status of pending patent applications, and the significance of the Vantage-licensed probe-labeling technology to the OncuPath™ assay platform.
• Yuki Tanabe, Head of Regulatory Affairs, OncuPath — provided information regarding the regulatory history of the OncuPath™ product line, the status of the OncuPath-HER3™ PMA supplement, and the interrelationship between regulatory clearances and the underlying intellectual property.
• Rebecca Chiang, General Counsel, Genome Dx Therapeutics Inc. — provided information regarding the overall IP management practices of GDT, the history of the OncuPath™ acquisition, the status of third-party license agreements, and the absence of IP-related litigation or disputes.
D. Limitations of Review
This intellectual property due diligence review is subject to the following limitations:
1. Scope Limited to U.S. IP Assets. Our review was limited to United States intellectual property assets. No review of foreign patent, trademark, or other intellectual property rights was conducted, and we understand that GDT did not pursue international IP protection for the OncuPath™ product line.
2. No Independent Prior Art Searches. Calderwood & Harkness did not conduct independent prior art searches, patentability analyses, or validity assessments with respect to any issued patent or pending application in the OncuPath™ portfolio. Our review was limited to the prosecution history files and existing analyses provided in the Data Room.
3. Reliance on Data Room Materials and Management Representations. Our findings are based on the materials provided in the Data Room and the representations made by GDT management during interviews. We have not independently verified all factual assertions and have relied upon the completeness and accuracy of the information provided.
4. No Independent Freedom-to-Operate Analysis. Calderwood & Harkness did not conduct an independent freedom-to-operate search or analysis. Our discussion of freedom-to-operate matters in this memorandum is based on our review of GDT's existing internal FTO analyses and opinion letters.
5. Date Limitation. This memorandum reflects the state of the IP portfolio and related matters as of mid-April 2023. Developments occurring after that date, including but not limited to new patent office actions, regulatory actions, or third-party claims, are not reflected unless specifically noted.
III. PATENT PORTFOLIO
A. Overview
The OncuPath™ patent portfolio consists of fourteen (14) issued United States patents and seven (7) pending United States patent applications, all of which relate exclusively to the OncuPath™ companion diagnostics assay technology. These patents and applications collectively provide protection for the core technical platform underlying the OncuPath™ product line, including assay chemistry, probe design and synthesis, signal amplification methods, companion diagnostic algorithms and scoring methodologies, and manufacturing processes for assay kit production.
No foreign patent applications or registrations were identified in connection with the OncuPath™ portfolio. Dr. Okonkwo confirmed during her interview that GDT made a deliberate business decision not to pursue international patent protection for the OncuPath™ line, as the product was developed and commercialized exclusively for the United States market. International IP protection was not pursued for this product line, and accordingly the patent portfolio is entirely domestic. This decision should be noted by the Buyer, as it may affect the ability to commercialize OncuPath™ products outside the United States without independent IP protection, should Meridian choose to pursue international markets in the future.
B. Issued Patents (14)
A detailed listing of all fourteen (14) issued United States patents in the OncuPath™ portfolio is set forth in Appendix A attached hereto. The listing includes the patent number, patent title, filing date, issue date, anticipated expiration date, named inventors, and current assignee for each patent.
All fourteen (14) issued patents are currently assigned to Genome Dx Therapeutics Inc. and are recorded as such at the USPTO. Our review of the assignment records at the USPTO confirmed that the recorded assignments match the chain-of-title documentation provided in the Data Room. We identified no discrepancies, gaps, or conflicting assignments in the recorded title for any of the fourteen issued patents.
Maintenance Fees. We reviewed the maintenance fee payment records for all fourteen issued patents. All maintenance fees are current as of the date of this review. No lapsed, abandoned, or terminally disclaimed patents were identified in the OncuPath™ portfolio. GDT's patent management vendor, Drayton Systems IP Management Services, maintains a docketing and maintenance fee payment system and has confirmed that all future maintenance fee deadlines are properly tracked.
Key Patent Families. The fourteen issued patents are organized into the following principal patent families:
1. OncuPath Core Assay Technology Patents (Probe-Based Hybridization Methods). This family includes patents covering the fundamental probe-based hybridization methods that form the technical backbone of all OncuPath™ assays. These patents claim novel probe architectures, hybridization reaction conditions, and detection methodologies that differentiate the OncuPath™ platform from competing diagnostic assay technologies. The earliest filing dates in this family date to the original development of the OncuPath™ technology by the predecessor entity, with priority dates extending back to 2012.
2. OncuPath-HER3™-Specific Patents (HER3 Biomarker Detection and Companion Diagnostic Methodology). This family includes patents specifically directed to the detection of HER3 biomarker expression and the application of OncuPath™ technology as a companion diagnostic for HER3-targeted therapies. These patents are of particular significance to the Transaction given the pending PMA supplement (P230014) for OncuPath-HER3™ and the earnout milestones tied to the regulatory approval and reimbursement of this product.
3. OncuPath-GENOMARK™ Patents (Multi-Gene Expression Profiling). This family includes patents covering the OncuPath-GENOMARK™ multi-gene expression profiling technology, which enables simultaneous analysis of multiple biomarker gene expression levels in a single assay run. The GENOMARK™ technology is embodied in one of the three currently FDA-cleared OncuPath™ assays.
4. Manufacturing Process Patents (Assay Kit Production). This family includes patents covering proprietary manufacturing processes for the production of OncuPath™ assay kits, including probe synthesis, reagent formulation, quality control testing methodologies, and kit assembly processes conducted at GDT's manufacturing and kitting facility in Carlsbad, California.
C. Pending Patent Applications (7)
A detailed listing of all seven (7) pending United States patent applications in the OncuPath™ portfolio is set forth in Appendix B attached hereto. The listing includes the application number, application title, filing date, prosecution status, named inventors, and current applicant for each application.
All seven pending applications are filed in the name of Genome Dx Therapeutics Inc. as the applicant and assignee. The applications cover next-generation improvements to the OncuPath™ assay platform, as well as specific enhancements to the OncuPath-HER3™ companion diagnostic technology.
Prosecution Status. The seven pending applications are at varying stages of prosecution before the USPTO. Our review of the prosecution history files for each application revealed the following:
• No final rejections have been issued for any of the seven pending applications.
• Several applications have received non-final office actions, and responses are pending or have been recently filed. In each case, GDT's patent prosecution counsel has indicated that the office actions raise issues that are expected to be addressable through claim amendments or arguments without fundamentally altering the scope of the claimed inventions.
• Certain applications are at an early stage of prosecution and have not yet received a first office action.
• No applications are subject to any pending appeal, inter partes review, or other adversarial proceeding.
Relevance to Earnout. Several of the pending patent applications relate directly to the OncuPath-HER3™ technology, which is the subject of the earnout milestones set forth in the APA. Specifically:
• Milestone 1 ($8,000,000): FDA clearance or approval of OncuPath-HER3™ by August 8, 2025.
• Milestone 2 ($6,000,000): Issuance of a CMS HCPCS code for OncuPath-HER3™ and receipt of first Medicare reimbursement payment by August 8, 2026.
While the pending patent applications are distinct from the regulatory submissions supporting these milestones, they are supportive of and complementary to the regulatory filings. The issuance of additional patents covering OncuPath-HER3™ technology would strengthen the overall intellectual property position of the product and enhance its commercial value following regulatory clearance.
PMA Supplement. It should be noted that the PMA supplement for OncuPath-HER3™ (PMA Supplement No. P230014) was submitted to the FDA on January 30, 2023. The pending patent applications are distinct from the regulatory filing but supportive of it, as the patents and patent applications provide exclusivity protection that complements the regulatory pathway. As of the date of this memorandum, a Prescription Drug User Fee Act ("PDUFA") action date has not yet been assigned by the FDA.
D. Patent Encumbrances
We reviewed all fourteen issued patents and seven pending applications for the existence of any mortgages, security interests, liens, or other encumbrances. Based on our review of the Data Room materials, the USPTO assignment records, and the UCC search results discussed in Section XIII below, we identified no mortgages, security interests, or liens against any of the OncuPath™ patents or patent applications.
GDT confirmed, through Rebecca Chiang (General Counsel) and Martin Kowalski (Chief Financial Officer), that none of the OncuPath™ patents or patent applications are pledged as collateral under any existing credit facility, loan agreement, or other financing arrangement of GDT.
Additionally, Pinnacle Biosciences Partners Fund III, L.P., as the majority equity holder of GDT (holding approximately 68.4% of outstanding equity), does not hold a direct security interest in any of the OncuPath™ patents or patent applications. The Pinnacle fund's interest is an equity interest in GDT as an entity and does not constitute a lien or encumbrance on specific intellectual property assets.
IV. TRADEMARK PORTFOLIO
A. Registered Trademarks (3)
The OncuPath™ trademark portfolio consists of three (3) registered United States trademarks, each of which is recorded at the USPTO in the name of Genome Dx Therapeutics Inc. The registered marks are as follows:
1. OncuPath™
• USPTO Registration No.: 5,847,321
• Registration Date: September 3, 2019
• Next Renewal Deadline: September 3, 2029
• International Classes: Class 5 (diagnostic reagents and assay kits for clinical use); Class 10 (medical diagnostic apparatus and instruments)
• Registered Owner: Genome Dx Therapeutics Inc.
• Status: Active; all maintenance and renewal filings are current. Section 8 affidavit of continued use was timely filed. No pending office actions, oppositions, or cancellation proceedings.
2. OncuPath-HER3™
• USPTO Registration No.: 6,412,088
• Registration Date: June 14, 2022
• Next Renewal Deadline: June 14, 2028 (Section 8 Declaration due between fifth and sixth year after registration)
• International Classes: Class 5 (companion diagnostic assay kits for identifying patients for HER3-targeted therapy); Class 42 (diagnostic testing services)
• Registered Owner: Genome Dx Therapeutics Inc.
• Status: Active; all maintenance filings are current. No pending office actions, oppositions, or cancellation proceedings.
3. OncuPath-GENOMARK™
• USPTO Registration No.: 6,118,754
• Registration Date: August 10, 2021
• Next Renewal Deadline: August 10, 2027 (Section 8 Declaration due between fifth and sixth year after registration)
• International Classes: Class 5 (multi-gene expression profiling diagnostic kits); Class 42 (genetic testing and diagnostic analysis services)
• Registered Owner: Genome Dx Therapeutics Inc.
• Status: Active; all maintenance filings are current. No pending office actions, oppositions, or cancellation proceedings.
A detailed schedule of the three registered trademarks is set forth in Appendix C attached hereto.
B. Unregistered Marks and Domain Names
In addition to the three registered trademarks described above, GDT utilizes certain unregistered marks, trade dress elements, and domain names in connection with the OncuPath™ product line. These include:
• Domain Names. GDT owns the domain names "oncupath.com," "oncupath-her3.com," and "oncupathdiagnostics.com," all of which are registered through Granite Harbor Health IT and are current through at least 2025. These domain names are included within the definition of Purchased Assets under the APA and will transfer to Meridian at closing.
• Trade Dress. The OncuPath™ assay kit packaging utilizes a distinctive trade dress consisting of a teal and silver color scheme with a proprietary graphical element depicting a stylized molecular probe. While no formal trade dress registration has been filed with the USPTO, these elements may be entitled to protection under federal and state unfair competition law, provided that secondary meaning can be established.
• Excluded Marks. The GDT corporate name, the GDT logo, the GenoStrat™ mark, and all other trademarks and trade names of GDT outside the OncuPath™ brand family are Excluded Assets under the APA and are not included in the transfer. GDT will retain all rights in and to these marks following the closing.
C. Trademark Encumbrances
Based on our review of the Data Room materials and the USPTO records, we identified no liens, security interests, or adverse claims against any of the three registered OncuPath™ trademarks. No UCC-1 financing statements specifically referencing the OncuPath™ trademarks were identified in the UCC searches discussed in Section XIII below.
Additionally, there are no pending oppositions or cancellation proceedings at the USPTO Trademark Trial and Appeal Board ("TTAB") with respect to any of the three OncuPath™ trademark registrations. No notice of any such proceeding was identified in the Data Room, and Rebecca Chiang confirmed that no opposition or cancellation proceedings have been threatened.
V. TRADE SECRETS AND PROPRIETARY KNOW-HOW
A. Overview of Trade Secret Assets
GDT maintains significant proprietary know-how related to the OncuPath™ companion diagnostics assay line. This know-how encompasses a broad range of technical, manufacturing, quality control, and clinical validation information that has been developed by GDT and its employees over the course of the OncuPath™ program. Trade secrets and proprietary know-how represent a meaningful component of the value of the OncuPath™ portfolio, as they include technical information and operational expertise that is not fully captured in the patent portfolio and that would be difficult to replicate independently.
Key categories of trade secret and proprietary know-how assets include:
• Assay development protocols and optimization data;
• Probe synthesis techniques and formulations beyond what is disclosed in issued patents;
• Manufacturing process parameters, equipment configurations, and yield optimization data;
• Quality control testing methodologies and acceptance criteria;
• Clinical validation study designs, raw data, and statistical analyses;
• Reagent sourcing, vendor qualification, and supply chain management information; and
• Customer lists, pricing data, and commercial strategies specific to the OncuPath™ product line.
B. Trade Secret Protection Measures
Our review of GDT's trade secret protection program as applied to the OncuPath™ product line identified the following safeguards:
1. Employee Invention Assignment and Confidentiality Agreements. GDT utilizes a standard-form Proprietary Information and Inventions Assignment Agreement ("PIIA") for all employees. We reviewed the standard form and confirmed that it includes provisions requiring employees to: (a) maintain the confidentiality of all proprietary information during and after employment; (b) assign to GDT all inventions and intellectual property conceived or reduced to practice during the course of employment; and (c) cooperate with GDT in the prosecution of patent applications and other IP filings. GDT has confirmed, and our review of the Data Room materials supports, that all OncuPath™ R&D, scientific, engineering, and commercial personnel have executed the PIIA or a substantially equivalent agreement.
2. Contractor and Consultant Non-Disclosure Agreements. GDT requires all independent contractors, consultants, and third-party service providers with access to OncuPath™ proprietary information to execute non-disclosure agreements ("NDAs") prior to receiving access to confidential information. We reviewed key consultant agreements identified in the Data Room and confirmed that all contain IP assignment and work-for-hire provisions assigning intellectual property rights to GDT, as well as confidentiality obligations that survive the termination of the engagement.
3. Physical and Digital Access Controls. GDT maintains physical and digital access controls at its two OncuPath™ facilities:
(a) OncuPath Reference Laboratory: 4820 Towne Centre Drive, Suite 200, San Diego, California 92121. This facility houses the CLIA-accredited reference laboratory where OncuPath™ clinical testing is performed. Access is controlled by key-card entry systems, and laboratory areas containing proprietary technical information are subject to restricted access protocols.
(b) Manufacturing and Kitting Facility: 925 Industrial Court, Carlsbad, California 92010. This facility houses the manufacturing and kitting operations for OncuPath™ assay kits. Access is similarly controlled by key-card entry, and manufacturing process areas are restricted to authorized personnel.
Digital access controls include role-based access to GDT's electronic document management system, encrypted storage of proprietary technical data, and information security policies consistent with industry standards for diagnostic companies of comparable size.
C. Key Transferring Personnel
A critical aspect of trade secret value in any diagnostics business is the knowledge held by key technical and commercial personnel. We understand from GDT management that eighty-three (83) OncuPath™ employees received offers of employment from Meridian in connection with the Transaction, and that seventy-eight (78) of those employees accepted their offers and are expected to transition to Meridian at or promptly following closing. The five (5) employees who declined transfer offers are discussed below.
Among the seventy-eight (78) transferring employees, the following key personnel with significant trade secret knowledge have accepted offers:
• Dr. Lara Okonkwo, Vice President, OncuPath Research & Development — Dr. Okonkwo is the most senior technical leader in the OncuPath™ program and possesses deep institutional knowledge of the assay development platform, pending patent prosecution matters, and ongoing R&D initiatives.
• Samuel Briggs, Director, OncuPath Commercial Operations — Mr. Briggs oversees the commercial operations of the OncuPath™ product line, including customer relationships, pricing strategies, and market development efforts.
• Yuki Tanabe, Head of Regulatory Affairs, OncuPath — Ms. Tanabe manages all regulatory filings and interactions with the FDA and CMS relating to the OncuPath™ portfolio, including the pending PMA supplement for OncuPath-HER3™.
D. Risk Assessment — Non-Transferring Employees
Five (5) OncuPath™ employees declined Meridian's offers of employment and will not transfer to the Buyer at closing. While we have not been provided with detailed position descriptions for all five individuals, we understand from GDT management that at least some of these employees held positions with access to OncuPath™ proprietary technical information.
Recommendation. We recommend that:
(a) GDT enforce the existing confidentiality obligations set forth in the PIIAs and any other confidentiality agreements executed by the non-transferring employees, including by providing written reminders of their continuing obligations at or prior to their separation from GDT;
(b) Meridian implement appropriate onboarding protocols and information security measures to ensure that any proprietary information transmitted from GDT to Meridian in connection with the Transaction is appropriately protected; and
(c) The APA include representations and warranties from Seller regarding the existence and enforceability of employee confidentiality agreements, and the indemnification provisions of the APA should cover losses arising from any breach of such obligations that is attributable to Seller's failure to enforce.
VI. IN-BOUND LICENSE AGREEMENTS
A. Vantage Molecular Sciences, Inc. — Exclusive License Agreement
1. Overview. The most significant in-bound license agreement in the OncuPath™ portfolio is the Exclusive License Agreement dated September 12, 2019 (the "Vantage License") between Vantage Molecular Sciences, Inc. ("Vantage"), a Massachusetts corporation with principal offices at 75 Hayden Avenue, Lexington, Massachusetts 02421, as licensor, and Genome Dx Therapeutics Inc., as licensee.
2. Scope of License
The Vantage License grants GDT an exclusive license under Vantage's proprietary probe-labeling technology for use in the development, manufacture, and commercialization of the OncuPath™ companion diagnostic assays. The licensed technology relates to a specific class of fluorescent probe-labeling chemistries that enable the signal amplification functionality critical to the sensitivity and specificity of the OncuPath™ assay platform. According to Dr. Okonkwo, the Vantage-licensed probe-labeling technology is incorporated into all current and planned OncuPath™ assay products, and there is no readily available substitute technology that could replicate the performance characteristics achieved with the Vantage technology.
3. Territory. The license is limited to the United States, which is consistent with the geographic scope of GDT's OncuPath™ commercialization activities.
4. Term. The term of the Vantage License is co-extensive with the life of the licensed patents. The Vantage License will remain in effect until the expiration, invalidation, or abandonment of the last to expire of the Vantage patents covered by the license. Based on our review of the licensed patent schedule attached to the Vantage License, the latest patent expiration date currently anticipated is in 2037.
5. Royalty and Payment Obligations
Under the Vantage License, GDT is obligated to pay Vantage a running royalty based on net sales of OncuPath™ products incorporating the licensed probe-labeling technology. The royalty rate is a mid-single-digit percentage of net sales, subject to certain minimum annual royalty payments. As of the date of this review, GDT has confirmed that all royalty and minimum payment obligations under the Vantage License are current, and no payment defaults or disputes have been identified. The Vantage License also contains standard audit rights permitting Vantage to audit GDT's sales records on an annual basis.
6. Assignment Provision — Consent Requirement
Section 12.4 of the Vantage License contains an anti-assignment provision that requires the prior written consent of Vantage for any assignment of the license, whether by operation of law or otherwise. The provision states, in relevant part:
"This Agreement may not be assigned by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that either party may assign this Agreement without consent to an Affiliate or to a successor in connection with a merger, consolidation, or sale of all or substantially all of the assets of the assigning party."
The asset purchase structure of the Transaction — in which GDT is selling the OncuPath™ product line but not all or substantially all of GDT's total assets (GDT is retaining the GenoStrat™ platform, which constitutes a significant portion of its overall business) — means that the carve-out for a "sale of all or substantially all of the assets of the assigning party" likely does not apply. Accordingly, Vantage's prior written consent is required for the assignment of the Vantage License to Meridian in connection with the Transaction.
7. Status of Consent
As of the date of this memorandum, consent from Vantage has not yet been obtained. Calderwood & Harkness has initiated outreach to Vantage's legal department and outside counsel to begin the consent negotiation process. We anticipate that Vantage will consent to the assignment, given the "not unreasonably withheld" standard in the agreement and Meridian's strong financial profile and established presence in the diagnostics market. However, Vantage may seek to negotiate certain modifications to the license terms as a condition of consent, including potential revisions to the royalty rate, the addition of financial covenants, or other conditions reflecting the change in licensee.
[Note: Consent was subsequently obtained from Vantage on July 14, 2023, as reflected in a consent letter executed by Vantage and delivered to GDT and Meridian. The consent letter was obtained without material modification to the terms of the Vantage License.]
8. Critical Importance and Recommendation
The Vantage License is essential to the manufacture and sale of OncuPath™ assays. Without the rights granted under the Vantage License, Meridian would be unable to manufacture, use, or sell the OncuPath™ products in their current form, as the Vantage probe-labeling technology is a core component of the assay platform. Failure to obtain consent from Vantage prior to closing would constitute a material impediment to the Transaction and could affect the validity of the IP Assignment Agreement.
Recommendation. We strongly recommend that consent to the assignment of the Vantage License be included as a condition precedent to closing in the APA. This condition should be drafted to require that GDT deliver to Meridian, on or prior to the closing date, a duly executed consent letter from Vantage in form and substance reasonably satisfactory to Meridian, consenting to the assignment of the Vantage License to Meridian in connection with the Transaction.
B. Other In-Bound Licenses
In addition to the Vantage License, our review of the Data Room materials identified two additional in-bound license agreements included among the Purchased Assets:
1. Non-Exclusive License from Ostrander & Co. GDT holds a non-exclusive license from Ostrander & Co. for the use of certain sequencing-related reference materials in connection with the quality control validation of OncuPath™ assay kits. This license is non-exclusive, fully paid-up, and perpetual, and does not contain an anti-assignment provision. No consent is required for its transfer to Meridian.
2. Non-Exclusive Software License from BioCompute Systems, LLC. GDT holds a non-exclusive license from BioCompute Systems, LLC for the use of a proprietary data analysis software module used in the OncuPath-GENOMARK™ multi-gene expression profiling workflow. This license is subject to annual renewal and contains a standard anti-assignment clause requiring prior written consent of BioCompute Systems for assignment. We recommend that GDT obtain consent from BioCompute Systems prior to closing. The BioCompute software license, while useful, is not as critical as the Vantage License, as the functionality could potentially be replicated using alternative commercially available software tools.
No other material in-bound licenses requiring consent to assignment were identified.
VII. OUT-BOUND LICENSE AGREEMENTS
Our review of the Data Room materials identified a limited number of out-bound license arrangements with respect to OncuPath™ intellectual property:
1. Research-Use License to Johns Hopkins University Applied Physics Laboratory. GDT has granted a non-exclusive, non-sublicensable, royalty-free research-use license to The Johns Hopkins University Applied Physics Laboratory for the use of certain OncuPath™ assay reagents and protocols in connection with a federally funded biodefense research project. This license is limited to non-commercial research use and expires on December 31, 2024. The license agreement is included among the Assumed Contracts under the APA and will transfer to Meridian at closing. No novation is required, as the agreement permits assignment to successors and assigns.
2. Evaluation Agreement with Crestline Holdings. GDT has entered into an evaluation agreement with Bramwell Industries ("Crestline Holdings") pursuant to which Crestline Holdings has been granted a limited, non-exclusive, time-limited right to evaluate OncuPath-GENOMARK™ assay kits for potential inclusion in Crestline Holdings's test menu. The evaluation period is scheduled to conclude on June 30, 2023. This agreement is non-exclusive and does not convey any ownership interest in OncuPath™ intellectual property. It is included among the Assumed Contracts under the APA.
Neither of the foregoing out-bound license agreements contains exclusivity provisions that would restrict Meridian's use of the OncuPath™ intellectual property following closing. No other material out-bound licenses, technology access agreements, or sublicense arrangements with respect to OncuPath™ intellectual property were identified in the Data Room.
VIII. CHAIN OF TITLE ANALYSIS
A. Patent Chain of Title
We conducted a chain-of-title analysis for all fourteen (14) issued patents and seven (7) pending patent applications in the OncuPath™ portfolio. Our analysis included a review of the following:
• Employee invention assignment agreements for all named inventors on the OncuPath™ patents and applications;
• Assignment instruments recorded at the USPTO;
• Assignment agreements executed in connection with GDT's prior acquisition of the OncuPath™ technology from its predecessor entity; and
• Internal GDT records documenting the history of the OncuPath™ portfolio.
Findings. All fourteen issued patents and seven pending applications originated from inventions made by GDT employees (or employees of the predecessor entity that developed the OncuPath™ technology prior to its acquisition by GDT). Individual inventor assignments are on file with the USPTO for each issued patent and pending application, and in each case, the assignment runs from the named inventors to Genome Dx Therapeutics Inc. (or, in the case of patents originating with the predecessor entity, from the inventors to the predecessor entity, followed by an assignment from the predecessor entity to GDT).
A portion of the OncuPath™ intellectual property was acquired by GDT through a prior asset acquisition. In that transaction, the predecessor entity assigned to GDT all patents, patent applications, and related intellectual property assets comprising the OncuPath™ technology. We reviewed the assignment agreements executed in connection with that prior acquisition and found them to be in order, with clear and comprehensive language assigning all right, title, and interest in the relevant intellectual property to GDT. These assignments were duly recorded at the USPTO.
Conclusion. We identified no gaps, conflicting assignments, missing inventor assignments, or other deficiencies in the chain of title for any of the fourteen issued patents or seven pending applications in the OncuPath™ portfolio. The chain of title from the original inventors through to Genome Dx Therapeutics Inc. is unbroken and complete.
B. Trademark Chain of Title
We reviewed the chain of title for all three registered trademarks in the OncuPath™ portfolio (OncuPath™, OncuPath-HER3™, and OncuPath-GENOMARK™). All three registrations are recorded at the USPTO in the name of Genome Dx Therapeutics Inc. The OncuPath™ mark was originally filed by GDT following its acquisition of the OncuPath™ technology, and the OncuPath-HER3™ and OncuPath-GENOMARK™ marks were filed by GDT in connection with the development of those product extensions.
Conclusion. The chain of title for all three registered trademarks is clean. We identified no prior assignments, conflicting ownership claims, or disputes affecting title to any of the three registered marks.
C. Proposed Assignment to Meridian
At closing, GDT and Meridian will execute the intellectual Property Assignment Agreement (the "IP Assignment Agreement"), pursuant to which GDT will assign to Meridian all right, title, and interest in and to the OncuPath™ intellectual property portfolio, including:
• All fourteen (14) issued United States patents;
• All seven (7) pending United States patent applications;
• All three (3) registered United States trademarks;
• All trade secrets, proprietary know-how, and confidential information related to the OncuPath™ product line;
• All associated goodwill of the OncuPath™ business appurtenant to the transferred trademarks; and
• All rights under the Vantage License (subject to receipt of Vantage's consent to assignment) and other in-bound license agreements included in the Purchased Assets.
Following closing, the IP Assignment Agreement will be recorded at the USPTO to reflect the change in ownership of the patents, patent applications, and trademarks. Calderwood & Harkness recommends that recordation be completed promptly after closing to perfect Meridian's rights against subsequent purchasers and to ensure that the public record accurately reflects the assignment.