'Poetic justice' earns licence deal for Genetic Technologies

In a newspaper opinion piece in March 2001, Genetic Technologies' (ASX: GTG) executive chairman Dr Mervyn Jacobson defended the rights of US genetic testing company Myriad Genetics to charge high prices for its patented gene testing service for familial breast cancer.

"Wouldn't it be poetic justice if it turned out that a foreign company seeking to exploit its patent in Australia had to first obtain an appropriate licence from a socially responsible Australian company?" Jacobson wrote.

In an ironic twist of fate, GTG has now signed a strategic alliance agreement with Myriad giving the US company non-exclusive licence to use Genetic Technologies' DNA analysis and mapping patents for human therapeutics and diagnostics applications.

In return, Genetic Technologies will become Myriad's exclusive marketing agent in Australia and New Zealand, with an option to expand into the wider Asia-Pacific region, for a range of predictive genetic tests for susceptibility to human diseases including breast cancer, ovarian cancer, colon cancer, melanoma and hypertension.

Myriad is paying Genetic Technologies $US1 million ($1.85 million) up-front, plus annual licence fees of more than $100,000 per year. Genetic Technologies also has to pay option fees and royalties to Myriad, but the actual amounts have not been revealed.

Jacobson noted that the alliance with Myriad, a well-established genetics company with a reputation for being a hard-nosed player, provided a very strong endorsement of Genetic Technologies' patent position, which would almost certainly have an impact on continuing negotiations with other companies.

The alliance is the fourth US licensing agreement for Genetic Technologies this year, and the most lucrative to date. Earlier deals with Sequenom, Nanogen and Perlegen have brought in $1 million, $620,000 and $1.6 million in cash and securities respectively. However, the Myriad licence is the first one to include annual licence fees, which Jacobson regards as significant.

"In my negotiations with other companies, the fact that we put this deal together will put pressure on them to secure their licence before the price increases again," said Jacobson.

According to Jacobson, the alliance developed between the two companies as it became clear during the negotiations with Myriad that a reciprocal agreement between the two companies was the optimal arrangement, by providing access to Genetic Technologies' patents and giving Myriad a formal entry point into the Australian market.

Under the terms of the agreement, Genetic Technologies will expand its Melbourne laboratory facilities to perform whole gene sequence testing for breast and ovarian cancer, while the other tests will be sent on to Myriad's facility in the US. Myriad has also granted Genetic Technologies an option to perform the other tests in Melbourne in the future, subject to payment of appropriate fees and royalties.

Until now, Genetic Technologies has primarily focused on the paternity testing market through its subsidiary GeneType, and Jacobson sees this opportunity as a chance to expand into the market of testing for susceptibility to inherited disorders.

"It's an opportunity to significantly expand our service testing capability, not just in Victoria but Australia-wide, New Zealand and eventually South East Asia," he said.