LabCorp and CareDx call it quits on partnership to develop lupus test

LabCorp ($LH) and CareDx ($CDNA) have officially pulled the plug on a previously announced agreement to develop a lupus flare predictor test after completing the first phase of their collaboration.

The companies called off a licensing and collaborative agreement that was chartered in 2012 to split the costs of creating a lupus test, a deal that would have awarded CareDx royalties in the "high single digits" from LabCorp on net sales for a commercialized product or other tests developed using samples sold, CareDx said in a 10-Q filing. As part of the original deal, LabCorp paid the company a nonrefundable upfront license fee of $1 million and also forked over a nonrefundable, noncreditable payment of $250,000 for certain lupus samples.

Under the terms of the termination agreement, CareDx will hand over 300 "SAGE I" clinical samples and related data and documentation gathered from patients during the discovery phase of the companies' collaboration to LabCorp and will grant LabCorp a nonexclusive, royalty-free license to use any IP and data from their previous work. LabCorp in turn will pay CareDx $500,000 but is not responsible for any other royalties, milestone or miscellaneous fees, according to the 10-Q filing.

The news comes at a transitional moment for both companies, as CareDx builds momentum after filing an IPO and LabCorp forges ahead with plans to revitalize sales. In July, CareDx raised $40 million to support development of its cfDNA technology for monitoring heart and kidney transplant patients and to expand use of AlloMap, its blood-based test for heart transplant patients. The Brisbane, CA-based company also has its eye on personalized medicine, as in June it inked a deal with diagnostics giant Illumina ($ILMN) to get its hands on the company's next-generation sequencing technologies.

Meanwhile, LabCorp has been working hard to boost sales and ramp up operations after a disappointing 2013. In September, the Burlington, NC-based company announced that it would buy personalized diagnostics maker LipoScience ($LPDX) for $85 million to diversify its product offerings. Last month, LabCorp inked a $6 billion cash-and-stock deal with contract drug development outfit Covance ($CVD), positioning itself for growth in the CRO sector and expanding its lab business in the U.S. and abroad.

- here's CareDx's 10-Q filing