Let me begin by saying I regard GCC and the lung cancer test development as distractions. I place little value on them when valuing Diagnocure. For me, Progensa is a home run. It is the reason I hold the stock. I recommended to the company that they split the company in two, keeping Progensa and the tax losses from PCA3 development in one company and putting all the scientists, GCC, new test development and all the cash in a separate company. Give the shares in both companies to the existing shareholders. Let the shareholders sell the part they don't like and buy more of what they like. And put both on the Venture Exchange to save money. No reply yet.
It is starting to look like Signal Genetics decided to consolidate operations in their Arkansas lab location instead of closing two labs and moving to Rockville Maryland. This puts everything close to the owner's home. Signal Genetics bought a company called ChipDX in Feb/2012. Its CEO and owner was Dr Ryan van Laar. If Signal Genetics were in financial difficulty, they would also have closed ChipDX. But van Laar is now listed as the director of the Arkansas lab. I can't be sure that they won't eventually reopen GCC testing using their Arkansas lab. However, Diagnocure did say GCC is no longer being offered.
The Buy/Sell agreement for the Pennsylvania Lab and the License (Royalty) Agreement were both posted to Sedar.com by Diagnocure. The posting is dated July 2011 but the agreements are dated June 28 2011. The research support agreement is missing from Sedar. Here are the interesting sections in the Royalty Agreement:
- 9.2.4 Termination for Convenience: "CC shall have the right to terminate this Agreement for convenience upon ninety (90) days prior written notice to Diagnocure."
- 5.3.1: Royalty report and payment is due 30 days after calendar quarter-end.
- 5.1 Royalty Installments: "In the event that, within (3) years after the Effective Date, either of the following occurs: [redacted] then CC shall have no further obligation to pay any amounts owing under this Section 5.1 accruing after the occurance of such event." (I think this is talking about the future $5million.)
- 11.2 Bankruptcy and Insolvency: GCC is treated as intellectual property and Diagnocure has rights to it if CC goes bankrupt, using the laws of the State of New York. I don't know if this means they recover their intellectual property, or if it means the bankruptcy trustee can sell the IP to help pay all creditor claims.
The Buy/Sell Agreement for the Pennsylvania Lab is less interesting. It talks about a $5.7m payment up-front but no future payments. The buyer of the Lab company is a Delaware limited company called CC LLC (limited liability company). So the only assets that Diagnocure can recover are what is in CC LLC. They cannot go after assets in Signal Genetics LLC. (I don't think.) Employee severance would also have a claim against CC LLC.
I'm starting to think Diagnocure would have preferred to sell the GCC Lab along with the GCC research team. But Signal Genetics would only buy it if Diagnocure continued to manage the scientists. As I said above, I would prefer Diagnocure get out of the business of developing anything but Progensa. Maybe this will result in Dr. Fradet rationalizing his company. Although I hate to walk away from the future $5m, maybe this Signal Diagnostics issue is a good thing for us in the long-run.