Legitimizing license

SAVANNAH, Ga.—HealthDisocvery Corp. announced in early December that it had granted a non-exclsuivelicense for the use of its pattern recognition technology to Pfizer Inc. foruse in its R&D activities worldwide. Included under the license is accessto HDC's support vector machine (SVM) and Fractal Genomic Modeling (FGM)technology data analysis tools.

While specifc financial terms of the deal were not released,nor were details of the exact use of the SVM and FGM tools to Pfizer, the deal,nonetheless, promised to put wind in HDC's sails as it looks to aggressivelydefend its SVM and other related patents and establish itself as a researchorganization also dedicated to its own internal discovery programs.

"This license is a significant step forward for HDC as welook to license our SVM and related patents," says Steven Barnhill, chairmanand CEO of Health Discovery Corp. "Pfizer is the third licensee in for us inthe past four months. The recent deal shows our program is gaining momentum andis further proof of the commercial viability of the SVM technology."

The other two recent licensees of the SVM technology areEpigenomics who is using it for DNA methylation analysis and tool maker BrukerDaltonics which has integrated it into its ClinProTools line of clinicalproteomic tools.

For HDC, the growing revenue stream from license deals comesin the wake of its activity over the past three years to aggregate SVM andother related patents. In all, the company currently holds 17 related patentsand, according to Barnhill, has applied for more than 40 others.

Dr. Herbert A. Fritsche, Jr. preofessor of laboratorymedicine at M.D. Anderson Cancer Centerat the University of Texasand a member of HDC's Science Board says, "In my opinion, HDC's patternrecognition technology can be an important tool for the discovery of new drugtargets such as proteins, genes or other molecules that a drug is intended toaffect. [It] might also be helpful in possible identification of new biomarkersto assess both efficacy and toxic response to new drugs."

While Barnhill was not at liberty to discuss specifics ofthe Pfizer deal, he does believe SVM has significant potential in the area oftoxicology studies, a point further highlighted by a March 2004 cooperativestudy by a half dozen pharma heavyweights, among them Abbott, Novartis andPfizer that showed SVM as a powerful and viable tool for toxicity studies.

While HDC will continue to pursue its licensingstrategy—Barnhill estimates there are "hundreds" of companies currently usingit who may not know it is patented technology—he is quick to point out thatHDC's strategy is not "to be a patent troll."

"We have our own internal discovery programs aimed atbiomarker discovery including biomarkers for prostate cancer that we hope willallow us to partner with a company to develop new diagnostic tools," he says.

In fact, for its internal discovery programs, Barnhill seesmost of the opportunity in the diagnostics arena. The opportunity here isgreat, he notes, based on the FDA's new mandate of the development of companiondiagnostics. HDC also intends to exploit SVM for use as a breast cancerdiagnostic. Under this model, mammography images could be sent securely via theInternet to HDC where its diagnostic tool could automatically read the imageand determine with much greater accuracy than other mammography readings, ifcancer was present.

"There is already reimbursement for CAD reading and we coulddeliver results to doctors within seconds of their submission," says Barnhill."That alone is a potential $180 million market." Meanwhile,the company will continue to assert its rights to SVM and look to expand itslicensing base over the coming years. HDC's business model calls for thisrevenue stream to help fund the company's ongoing internal research anddevelopment activities.