While Roche (Basel, Switzerland) continues in a long struggle to maintain control of Origen technology licensed from Igen (Gaithersburg, Maryland), the European diagnostics firm won a large battle on another front last month. The Technical Board of Appeals of the European Patent Office (EPO) informed Roche that it will maintain the company's foundational polymerase chain reaction (PCR) patents (EP patent nos. 0 201 184 and 0 200 362), covering groundbreaking methods for the analysis of DNA. The PCR technology, in simplest terms, allows the rapid multiplication of a small bit of DNA for faster testing of that material and so has become a gold standard in the genetic testing field. The company said that the ruling "will be the final determination of the EPO and cannot be appealed." Specifically, the '184 patent covers the exponential amplification of a target nucleic acid; the '362 patent governs the detection of the target nucleic acid once it is exponentially amplified.

Heiner Dreismann, PhD, head of Roche Molecular Diagnostics, described the patents as forming "the cornerstone of our extensive PCR patent portfolio, which is of strategic importance to our molecular diagnostic business. The ruling recognizes the pioneering invention behind these patents as well as the outstanding contribution of PCR technology to science and medicine."

In addition to the European decision, the validity of the counterpart U.S. patents (U.S. patent Nos. 4,683,195 and 4,683,202) was upheld by a U.S. jury in 1991, following an unsuccessful challenge by DuPont (Wilmington, Delaware), Roche said. Additionally, the U.S. Patent and Trademark Office "re-examined these patents in 1990, upholding all of their claims without amendment."

The central issue of the appeal was whether particular prior art activities and related publications deprived the patents of novelty or inventiveness. This was also the central issue in the earlier U.S. litigation and re-examination proceedings concerning the U.S. counterparts to these European patents. The foundational European patents were originally filed with the EPO on March 27, 1986, and issued on Dec. 16, 1992, and Jan. 20, 1993. Oppositions to the patents were filed by several companies but have been rejected.

PCR is a nucleic acid amplification technology that has enabled many significant advances in the Human Genome project, DNA fingerprinting and the diagnosis and monitoring of diseases such as AIDS and hepatitis. Roche has developed and encouraged the use of PCR technology through out-licensing programs that have led to new research products and medical advances. These include the rapid screening of blood and blood-derived products for major infectious diseases, such as HIV and HCV.

Roche's Diagnostics Division offers a wide array of innovative testing products and services to researchers, physicians, patients, hospitals and laboratories world-wide. Roche has made PCR the leading DNA probe technology in the world and is the foremost supplier of PCR-based enzymes, kits and systems for both the clinical diagnostic and research community.

Sigma-Aldrich to spin off diagnostics

In what constitutes the largest spin-off initiative for the year 2002, the board of Sigma-Aldrich (St. Louis, Missouri) last month authorized sale of most of the company's diagnostics business assets and said the divestitute will likely involve a workforce cutback. The company said it may have to lay off a substantial number of workers in that division to reduce costs in the upcoming months. The diagnostics unit currently has 512 employees worldwide, with 180 on staff at St. Louis headquarters. And if there are no buyers willing to absorb staff as part of a purchase, the company said it may cut up to 75% of worldwide staff of the diagnostics unit and up to 50% of St. Louis staff over the remainder of the year, mostly in the second quarter. Diagnostics employees will be reassigned within the organization, the company said, "when possible." The company has reclassified out of diagnostics to scientific research some products which contributed $11 million in sales, with all remaining assets of the diagnostics business are available for sale.

In March, the company signed a letter of intent to sell its enzyme immunoassay (EIA) product line to Ivax Diagnostics (Miami, Florida), with that sale set for completion in the current quarter, said the company. Those products contributed $7 million in 2001 sales but reduced diluted earnings per share by 4 cents.

The initial effort to refocus the diagnostics business on niche opportunities was begun in early 2000 with a three-year plan to reach a target of 10% growth in both sales and profits. But David Harvey, Sigma-Aldrich chairman and chief executive, said as part of the latest company earnings report that the unit, which sells medical kits and instruments to doctors and hospitals, failed to reach projections. "As I've said on previous occasions, results for this business, which now include those for the first quarter of 2002, have not met expectations, leading to the decision to discontinue our efforts and seek a quick and financially prudent resolution," Harvey said in a statement.

Excluding products to be sold by the scientific research unit, diagnostics sales in 1Q02 declined 11.2%, reducing otherwise reportable diluted earnings per share by 4 cents. The company reported net income for the quarter increasing to $39.7 million, or 54 cents a share, helped by higher sales in fine chemicals and biotechnology units. This compared to income of $36.6 million, or 48 cents a share, in the year-ago quarter.

Without the diagnostics business, the company said it expected earnings per share to range from $2.24 to $2.29 for 2002. A one-time charge of up to $63 million (86 cents per share) will be recorded in the second quarter for reductions in the carrying value of applicable assets and costs of staff reductions. When completed, the sale is expected to provide at least $20 million in after-tax cash, depending upon the outcome of asset sales. Cash received will be used to repay borrowings, repurchase shares, acquire businesses or serve general corporate purposes.

Sigma-Aldrich's biochemical and organic chemical products and kits are used in scientific and genomic research, biotechnology, pharmaceutical development, the diagnosis of disease and chemical manufacturing.

Calypte prepares for bankruptcy

Calypte Biomedical (Alameda, California), a public company developing urine-based diagnostic products and services, said last month that it was winding down operations and might soon file for bankruptcy. The company said it was immediately laying off more than half its workforce, about 35 employees. "We've been fighting for so long," said Rick Brounstein, Calypte's executive vice president and CFO. "I really believe that if this company was a start-up that had its FDA approvals and FDA facilities, and its business was growing like this business grew last year, then finding the money — if it was a first story — would be pretty easy. But that wasn't the case."

Brounstein added, "It's not the business; it's the financial statements. If you look at last year, for instance, the business doubled to almost $7 million. And then you're starting to get some international approvals falling in, so with some time and money you can see that going."

Calypte's urine-based diagnostic products and services are aimed at HIV-1, sexually transmitted diseases and other infectious diseases. Its tests include the screening EIA and supplemental Western blot tests, the only two FDA-approved HIV-1 antibody tests that can be used on urine samples.

The company's technology has garnered recent interest. Calypte and the University of North Carolina's (Chapel Hill, North Carolina) Department of Medicine, Division of Infectious Diseases, began using the urine HIV-1 antibody tests for an international community-based study. The UNC department has taken its studies in fighting HIV and AIDS worldwide, and Calypte's urine tests were to be used as the biological marker in a community-based survey that will study perceived risk of HIV infection and pregnancy in rural Malawi, Africa.

The company said that in a recently completed Brazilian study, its HIV-1 Urine EIA achieved 100% sensitivity. Outside the U.S., Brazil has the highest number of HIV cases in the Western Hemisphere. All 76 patients identified as HIV-1 positive by blood testing were also shown to be repeatedly reactive with the Calypte HIV-1 Urine EIA test.

Despite the seemingly positive news, though, Calypte said that without additional outside investment, it will no longer be able to sustain operations from its existing revenues and current financing lines. The company, which went public in 1996 and has approximately 46 million shares outstanding, began posting warning signs a year ago. Even as it reported record preliminary revenues of $1.4 million for 1Q01, a record quarter for the company, Calypte said that its financing did not appear sufficient to sustain operations. "It's been payroll-to-payroll since then," Brounstein said. "Now we're down to the point where either somebody is going to come in and structure it in some way to salvage what is good, or we'll close the doors."

Recently secured financing has not been enough. Earlier this year ago, Calypte signed an agreement to place up to $850,000 in two secured convertible debentures with Bristol Investment Fund. At the time, Calypte said it expected aggregate net proceeds from the debentures and exercise of the warrants to amount to about $2.1 million. But the company only received the first half of the $850,000, which Brounstein said equaled roughly a month's worth of expenses. "We've been saying this for a long time," he said. "We need $5 million to get this thing from where we are now [to] over the finish line."

CardioGenesis raises $2.8 million

CardioGenesis (Foothill Ranch, California), a developer of angina-relieving transmyocardial revascularization and percutaneous myocardial revascularization, reported raising a total of $2.8 million in two separate transactions. The company received $2.3 million by selling its equity interest in Microheart (Mountain View, California), a maker of devices for site-specific delivery of drugs, growth factors, gene therapy and other therapeutic agents, back to that privately held company. And it raised $500,000 from a private placement of 500,000 shares of CardioGenesis common stock with the State of Wisconsin Investment Board.

No Comments