Jacobson speaks: Genetic Technologies and BRCA testing

In July last year, Michael Ohanessian, the newly appointed CEO of Melbourne-based gene testing company Genetic Technologies (GTG), announced that GTG would enforce its exclusive Australasian rights to screen for mutations in two genes notorious as central players in breast and ovarian cancers.

With his decision, Ohanessian went boldly where angels had feared to tread. The decision to reverse GTG’s previous largess in allowing testing for free drew massive fire from the media and from the healthcare sector, which believed the company’s enforcement of its exclusive rights would have adverse consequences for women’s health.

GTG’s policy change meant that public laboratories like Melbourne’s Peter MacCallum Cancer Centre would be able to continue research into the role of the BRCA1 and BRCA2 tumor-suppressor genes in cancer, but would no longer be permitted to perform commercial testing on its patients for mutations in the genes.

Hospital laboratories carrying out the test also worried that GTG’s decision put them in a position of having to increase charges for the lengthy and complex testing procedure, or would have to cease offering the service completely. It also provoked criticism in Federal Parliament and questions from the federal consumer watchdog, the Australian Competition and Consumer Commission.

The background to the drama began back in 2007, when former CEO and co-founder of GTG, Dr Merv Jacobson, turned 65 and decided to retire. With his 40 per cent stake, Jacobson was also GTG’s biggest shareholder.

Ohanessian was appointed Jacobson’s successor in September 2007, and Jacobson stayed on as a non-executive director. Jacobson says he was strongly opposed to Ohanessian’s decision to enforce the BRCA testing rights, having declined to enforce them during his own term at the helm. He declared them to be “GTG’s gift to Australia”.

GTG’s ownership of exclusive testing rights for the BRCA genes in Australia and New Zealand has been a fraught issue virtually since Jacobson struck a complex cross-licensing deal with Salt Lake City, Utah, gene-testing company Myriad Pharmaceuticals in October 2002.

GTG granted Myriad a licence to use its non-coding DNA technology, which uses unique DNA sequences in introns and other non-coding DNA between genes, as proxy markers for specific mutations associated with inherited genetic disorders.

In return, Myriad agreed to pay GTG a sign-on fee and an annual access fee, and gave the Australian company an exclusive licence to its BRCA patents in Australia and New Zealand.

---PB--- Debate blows up

Around 50.55 per cent of Australia’s population has a double X karyotpe and is thus at theoretical risk of inherited or sporadic mutations in the BRCA1 and BRCA2 tumour-suppressor genes.

Inevitably, the list of women who have survived or succumbed to breast cancer or ovarian cancer features some famous names. Entertainers Olivia Newton-John and Kylie Minogue, and former Olympian Raelene Boyle, are all survivors of breast cancer. Last year breast cancer claimed the lives of marathon runner Kerryn McCann and Jane McGrath, wife of former Test bowler Glenn McGrath, and South Australian National Party Senator Jeannie Ferris succumbed to ovarian cancer.

When the licensing debate blew up, Ohanessian issued a press release to “clarify misconceptions" arising from its plans to enforce its exclusive intellectual property rights over BRCA1 and BRCA2 testing for hereditary breast and ovarian cancer risk.

The press release pointed out that the decision would not restrict research into the two genes. It said GTG was not contemplating any major change to its pricing regime, and was “looking forward to negotiating mutually satisfactory arrangements” with the relevant state health authorities. Health care providers in Australia and New Zealand already enjoyed lower prices than most other countries, he said.

The press release stated that the company’s previous policy of not enforcing its patent rights had come at considerable cost over the six years since its agreement with Myriad.

“The beneficiaries have been laboratories that have been shielded from paying any licence fees for use of the patents,” Ohanessian said.

“Genetic Technologies, on the other hand, continues to carry the financial commitment for its exclusive rights to the patents. Given that we now offer an excellent service, we believe it is time to revisit that arrangement.”

The issue came to a head on September 18, when GTG asked the Australian Stock Exchange to halt trading of its shares after Jacobson announced he would move a resolution at the company’s annual general meeting on November 19 to remove five of the company’s directors, including Ohanessian, and appoint one new director.

Jacobson also sought to remove GTG chairman Henry Bosch and non-executive directors Dr John Dawkins, Dr Leanne Lowe and David Carruthers. His new nominee was Melbourne lawyer and accountant Grahame Leonard, but Leonard subsequently declined the nomination.

---PB--- Board spill

Jacobson says he disagreed with many of Ohanessian’s decisions, including the decision to enforce the BRCA patents in Australia, and resolved to do what he could to ensure other laboratories in Australasia could continue performing the tests.

He says the board was failing its duty to shareholders to pursue all the commercial opportunities available through GTG patents, and claims that 60 per cent of stock holders supported the spill, sufficient for the motion to pass even if he did not vote.

Ohanessian’s public defence of his decision had failed to placate the media, so on October 31, he issued a second press release seeking to clarify the reasons for decision to enforce its patents in Australia.

The press release repeated that all patients would benefit from GTG’s best-practice testing, which he claimed provided the quickest turnaround time of any Australian laboratory.

GTG also pointed out that individuals identified by public hospital clinics as being at high risk of breast and ovarian cancers, who comprise the vast majority of individuals tested, had their tests funded the Federal Government, and there was no reason why this arrangement would not continue if GTG became Australia’s sole testing laboratory.

To counter a charge that it would compromise women’s access to government-funded testing by lifting its fees, GTG promised to maintain pricing at 2008 levels throughout 2009, and thereafter to increase prices by no more than the consumer price index.

The press release also announced that GTG would suspend all action against public laboratories to enforce its exclusive testing rights, pending further talks with “all stakeholders”. It reiterated that the decision exempted researchers studying the BRCA genes.

However, Jacobson’s spill motion succeeded, and Ohanessian was deposed as CEO at the annual general meeting on November 1. At its first meeting on December 2, the new board announced it would review its earlier decision to enforce its BRCA testing rights. It met again on December 12, and formally rescinded the decision.

In a press release, the company announced it was looking forward to “working positively with all its parties, including other public and private testing laboratories, to continue providing these world class testing services”.

On the same day even more drama arose, when Jacobson announced his resignation as a GTG director, pending the determination of charges brought by the Australian Securities and Investment Commission under the Corporations Act 2001 that he had attempted to create a false market to boost GTG’s share price.

Geoffrey Newing, Jacobson’s son-in-law and a former chief operating officer for GTG during Jacobson’s term as CEO, and his wife, Jacobson’s daughter Tamara Newing, were charged with the same offence.

---PB--- Long-term controversy

Controversy has swirled around GTG’s ‘junk DNA’ patents, and Jacobson’s aggressive pursuit of licensing deals in Australia and overseas, for nearly a decade.

At the International Genetic Congress in Melbourne in 2003, British Nobel Laureate Sir John Sulston and Professor Francis Collins, director of the US National Human Genome Institute, attacked GTG and Dr Malcolm Simons, inventor of the GTG patents, suggesting that Simons had opportunistically patented a gene-discovery technique in 1990 that molecular geneticists had routinely used since the late 1980s.

Collins and Sulston claimed the patent, which applied to virtually all human, animal and plant genes, was invalidated by prior art, and did not fulfill the criteria of novelty and non-obviousness.

Collins and other critics have since conceded that Simons inventions were indeed novel when he patented them – they provided a novel way of identifying sequence variation, including pathogenic mutations, within megabase-sized chunks of chromosome.

These chromosomal segments preserve specific combinations of alleles of neighbouring genes – haplotypes – that tend to be inherited intact between generations over evolutionary time scales.

Sulston and Collins were wrong; the scientific literature confirms that Simons was the first researcher to realise that junk DNA markers specific to particular haplotypes could be exploited to track down pathogenic mutations in unidentified genes.

The realisation that junk DNA was not junk, but actually coded for a micro-RNA operating system in the genome, was slow to dawn.

Simons was a decade ahead of most of his peers in recognising that highly conserved haplotype “blocks” shared by unrelated individuals, even of different races or ethnic groups, offered a powerful alternative to the traditional but restrictive approach of using extended, multi-generational family pedigrees to hunt mutant genes.

Many gene testing companies initially rejected GTG’s demand that they obtain a licence and pay royalties to GTG on tests for mutations in genes they had discovered themselves.

Jacobson leveraged GTG’s patents, which were backed by substantial patent insurance, to negotiate contra-licensing deals with reluctant rivals, including Myriad. He took those that resisted to court, and won.

---PB--- Jacobson speaks

“In the 1990s several companies were contending to identify the BRCA genes, and Myriad got there first,” Jacobson says.

“They discovered and patented the protein-coding sequences of the BRCA genes, but they didn’t sequence the non-coding introns because everyone knew they were just ‘junk’, and the sequencing technology of the day wasn’t up to the task of screening the genes in their entirety.

“It was tough enough just to analyse the coding exons of the genes. Nobody wanted to believe that the non-coding DNA, which constitutes 95 per cent of all DNA, also had to be sequenced, so the ‘junk DNA’ notion persisted.”

Fast forward to early this decade, and the Human Genome Program, Jacobson says. “Myriad and the rest of the world are finally waking up to the fact that the DNA in introns is not junk, but actually codes for RNA sequences that regulate gene activity.

“Unless they also tested the non-coding DNA, they could get false results, because defects can occur in both coding and non-coding regions.”

Jacobson says he led the GTG program to licence the technology internationally, and alerted Myriad to the fact that it needed a licence from GTG to test the non-coding DNA of the BRCA genes. They subsequently agreed this was necessary to get the right result.

“I met their CEO, Peter Meldrum, and their senior management team, and offered them a licence. Their view was that they had discovered the genes, they owned the BRCA patent, and they didn’t want anybody else competing in their testing field.

“It contrasted with our approach, which was that we’d made the junk DNA discoveries, and wanted to share them with the whole world. I offered them a licence, and they gave GTG up-front fees, and annuities.

“Uniquely, they also gave us exclusive rights to perform BRCA testing in Australia and New Zealand. I returned to Australia believing I had achieved a great victory for GTG and for Australia, and we immediately moved to set up a world-class testing facility here in Melbourne.”

---PB--- Not Myriad’s policemen

Jacobson says some government laboratories were already performing BRCA testing, but they knew they were acting illegally. “So they hadn’t make the substantial investment required to perform the tests efficiently, because of concern that Myriad might come after them,” he says.

“As a result, the waiting lists in many government laboratories for BRCA tests stretched to six months – indeed, some women were waiting up to two years, which put them at risk of developing cancers as they waited.

“We decided to set up a state-of-the-art laboratory, at least as good as Myriad’s, that would perform BRCA testing accurately, and in much less time.

“Some of the other laboratories were almost antagonistic to the idea of us acquiring the Australian rights – they had previously feared Myriad, and assumed GTG represented an equal threat.

“I tried to make our stance clear – we were not Myriad’s policemen, and we didn’t obtain the BRCA rights to beat up other testing laboratories.

“We had secured those rights to set world class laboratory, and we wanted other Australian laboratories to work with us.

“It was a unique situation – I had the full support of the board at the time, and we developed what we believed was a socially responsible strategy, with the guidance of one of our board members, Dr Deon Venter, an expert in BRCA testing.

“It was not an adverse approach – if people wanted to do BRCA testing themselves, they were free to do so, but if they wanted our help, they had that too. That’s still GTG’s attitude.”

When Jacobson stood down as CEO in 2007, he initially supported Ohanessian as his successor. But that changed when Ohanessian convinced the GTG board to write to other Australian and NZ laboratories performing BRCA testing, telling them they were no longer permitted to do so – the tests would henceforth be GTG’s exclusive domain.

“I was horrified – I felt our company had reneged on its commitment to the medical profession, and I was totally opposed to the idea,” Jacobson says.

“I also opposed several other things the new CEO was planning, and warned the board they risked a stockholders’ revolt if they persisted.

“At the AGM in 2008, with the support of other substantial shareholders, I moved a motion to remove the CEO and most of the board. The vote, in terms of shares, was 200 million to 25 million – if I hadn’t voted, it would still have been carried 50 million to 25 million.”

“Immediately after the first meeting of the new board, we received a letter from the ACCC asking us to clarify our position. A few days later, we were able to inform them the new board had replaced the enforcement policy with the policy that had worked so well during the previous seven years.”

GTG’s lawyers also wrote to the other laboratories to advise them that a new board was in place, and had reversed the decision to enforce the BRCA patents. Also, all legal action would be terminated.

Jacobson says the BRCA tests are very complex and time-consuming because of the need to check both genes for a wide range of variation of mutations. “You have to read the whole genes forwards and backwards to ensure you cover all the known mutations, and it yields a huge amount of data,” he says.

“Some public hospitals were taking two years to perform the tests. We got it down to two months and we can now do it in as little as four weeks.

“In Australian dollars, our fee is about half what Myriad charges for the same tests. They have a different marketing approach – they market direct to the public, and spend perhaps $50 million a year on advertising.

“GTG spends nothing on marketing – we simply offer the tests to the oncologist and the medical community in Australia and New Zealand.

“I still regard the BRCA tests as GTG’s gift to women in Australia and New Zealand.”