By Randall Osborne

Oncormed Inc. has granted exclusive rights to its patents for breast cancer genetic testing to Myriad Genetics Inc., ending the back-and-forth litigation between the two companies with an arrangement that pleases both.

In return for undisclosed fees, Gaithersburg, Md.-based Oncormed will stop offering BRCA1 and BRCA2 tests, transfer its customer lists to Myriad and refer inquiries for the testing services to Myriad, of Salt Lake City.

The settlement is "definitely a good thing," said William Hockett, spokesman for Myriad.

"Yes, they got something out of us, but it's not that big a deal to Myriad," Hockett told BioWorld Today. The payment was less than two or three months of litigation would have cost, he added.

David Stone, an analyst with Cowen & Co., of Boston, estimated the amount paid by Myriad for the rights at less than $1 million. Although Myriad only earned $500,000 in sales of the tests last quarter, the market potential is $400 to $500 million, Stone added.

"It was a smart move by both companies," he said.

Hockett said it's "not always the best [move] to make a payment to a competitor you feel got in the business under the fence or through the back door, but it's still better for the company," he said.

Oncormed 'Had No Intention' Of Continuing Testing

Leslie Alexandre, spokeswoman for Oncormed, called the settlement a "win-win" arrangement.

"We've changed our direction over the last year, and we're more focused on genomics services," Alexandre said. "We had no intention of continuing to provide the [BRCA1 and BRCA2] testing services."

As an example of the new direction, she cited the deal disclosed last week with Merck & Co. Inc., of Whitehouse Station, N.J., to provide ras gene testing services for Phase I trials of an anti-cancer compound under development by Merck. The ras, or rat sarcoma, gene is believed to play a role in up to 30 percent of human cancers.

Oncormed's decision to venture into genomics is not related to its perceived chances in the patent fight, Alexandre added.

"To try and link the two together wouldn't make sense," she said. "There have been a number of lawsuits on both sides."

Myriad, under terms of the settlement with Oncormed, gets an exclusive license to all BRCA1 and BRCA2 current and pending patents for all genetic testing — a deal that affirms the validity of Oncormed's patents, Alexandre said.

The test for mutation of the BRCA1 gene, which indicates a predisposition to breast and ovarian cancer, has been the subject of lawsuits filed by each company against the other. BRCA2 is the second gene responsible for most inherited forms of breast cancer. Neither company has been issued a patent related to BRCA2, but both have BRCA1 and BRCA2 testing services on the market.

Myriad, which had claimed ownership to the entire sequence of the BRCA1 gene, was sued by Oncormed last year, after Oncormed was awarded a patent related to the gene. In January, Myriad — awarded a pair of BRCA1 patents — sued Oncormed. (See BioWorld Today, Nov. 19, 1997, p. 1, and Jan. 21, 1998, p. 1.)

Gaining the rights to the testing lets customers know who is the chief provider of BRCA1 and BRCA1 tests, and allows Myriad to capitalize on exclusivity, Stone said. If too many labs are allowed in the testing arena, prices fall.

"That's the product cycle in diagnostic testing," Stone said. "It's a short cycle."

Even before the settlement, Hockett said, Myriad had some of Oncormed's business.

"They were sending us a good part of it to do full sequencing on samples," he said. Oncormed sent samples to Myriad, which completed the sequencing and sent them back to the physicians — with a bill from Myriad.

Oncormed's stock (AMEX:ONM) closed Monday at $3.937, down $0.25. Myriad's shares (NASDAQ:MYGN) ended the day at $20.125, unchanged. *