PDI, Inc. has signed a collaboration with a privately held molecular diagnostics company to commercialize its molecular diagnostic tests. The initial test to be commercialized is fully developed. For competitive reasons, the name of the company and the specific focus area of the initial test to be commercialized are not being disclosed at this time.
PDI has paid the company an initial fee of $1.5 million and has received an option to purchase the company outright. The option price is dependent on the achievement of certain milestones during the collaboration period (the period up to the exercise of the purchase option or termination of the collaboration agreement) and could be as much as $6 million if all milestones are achieved at their maximum levels. PDI can terminate the collaboration agreement if all milestones are not achieved within one year and would receive a $1 million termination fee from the Company. If all milestones are achieved within one year and PDI has not exercised its option, the company can require PDI to exercise the option to purchase it or terminate the collaboration agreement and pay PDI a termination fee of approximately $2 million.
If PDI purchases the company, in addition to the option price based on the achievement of milestones, beginning in 2015, PDI would pay a royalty of 7% on annual net revenue up to $50 million with escalating royalty percentages for higher annual net revenue capped at 11% for annual net revenue in excess of $100 million.
During the collaboration period PDI and its partner will pilot various sales and marketing programs and build additional supportive sales and marketing materials, while working together to achieve the contract milestones that are focused on launching the test on a broad basis in "the most impactful, profitable and cost effective manner," according to a PDI statement.
"As we have previously stated, we have been pursuing commercialization opportunities for products aimed at adding more predictable, higher growth, higher margin businesses that can leverage the substantial full commercialization capabilities of PDI," said Nancy Lurker, chief executive officer of PDI, Inc. "Should we exercise our purchase option, this opportunity could meet all of our criteria."
Ms. Lurker added that the core technology of the test is "unique and sound, the value to the health care system is potentially significant, the clinical value to patients is compelling, the accuracy of the test is high and reimbursement from both private and public payors is expected to be very attractive." She estimated that the collaboration period will run through 1Q414 and that PDI should then be in a position to determine if it will exercise its purchase option.
PDI To Commercialize Diagnostic
By Gil Roth
Published August 20, 2013
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