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CryoLife Inc. Message Board

  • dlhild Oct 9, 2012 5:18 PM Flag

    Medafor has served "notice" on Cryolife & Starch Medical

    Medafor recently sent "notice" to Cryolife and Starch Medical. The apparent substance of the "notice" is to advise Cryolife and Starch Medical that Medafor will consider any U.S. PerClot sales to violate Medafor's patent (Pat. No. 6060641).

    IMO it is pretty clear. CRY doesn't sell PerClot in the U.S. Alternatively, if they do sell PerClot in the U.S. they should expect immediate, forceful, and expensive litigation to ensue.

    I think we all already knew this, but apparently legal "notice' has now been served.

    CRY paid $8 million to SMI for a ‘PerClot’ distribution license. CRY paid $1 million more to SMI to obtain a ‘PerClot’ manufacturing license. Total costs to date: $10-$12 million (includes FDA costs etc.). Assuming PerClot ever does gets FDA approval, the total imbedded cost would be roughly $14-$16 million. If PerClot receives FDA approval, CRY intends to sell it in the USA. What then? Obviously, Medafor would immediately sue CRY for patent infringement resulting in litigation expense coupled with an unknown outcome. Also, if CRY were to sell PerClot in the USA market, it would negatively affect the value of CRY’s 2.4 million Medafor shares (cost basis ~ $4.8 million).

    To my knowledge SMI owns no similar USA patent. IMO it is unlikely this could be resolved using arbitration or mediation, because this is simply a life or death fight. In order for the CRY Board to have met their fiduciary duty, they must have gotten some sort of outside patent opinion before investing $8+ million in a PerClot distribution license. Then again with SA at the controls, who knows what happened. If they didn’t, they clearly violated their fiduciary responsibility to shareholders. No question that PerClot is an effective product. The problem is that neither SMI nor CRY own the patent for the subject technology. Medafor owns the patent. Therefore, because of this legal difficulty, it is my opinion that it is unlikely that CRY will ever be able to monetize PerClot in any serous sort of way. Thanks to Gary Shoppe, CRY’s 2.4 million Medafor shares may do well in the future though.

    IMO PerClot’s long term profitability is highly problematic. Also, unless PerClot can be sold in volume in the USA, it is not likely to ever generate much in the way of after tax earnings. This discussion represents nothing more than my own views and opinions. I am not representing anything here as being factually accurate. You’re responsible for your own due diligence.

    During the upcoming conference call, SA needs to explain why this is not yet again another SA screw-up.

    I see "The Devil" visited CRY today, as the price is down $0.34.

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