I suggest that the Directors and Shareholders, of BOTH companies, use the change in website presentation as an “ice breaker”. It is now time to resolve differences of opinion rationally.
It makes no sense for CRY to litigate the EDA, when the litigation costs run both companies about $1.5 million each year and the likely calculable damages appear to be less than $150,000 each year. Does it make sense to spend $1.5 million to get a maximum return of less than $150,000? Is this rational management on behalf of CRY?
On the flip side of the coin, does it make sense that Medafor be permitted to to terminate the EDA? My Opinion: Probably not. I expect the Judge to rule in CRY's favor on the preliminary injunction matter. This effectively would mean that Medafor couldn't cancel the EDA, and would be required to to continue to deliver HemoStase to CRY in accordance with the EDA. So what seems logical is for Medafor to deliver HemoStase on an on going basis. The cross selling issue, and other contact issues are not likely to go to trial until 2013. By then Medafor might as well fully comply with the EDA which ends June 30, 2014. Damage awards would be negligible, because there would not have been a material disruption in HemoStase delivery. So get it CRY? Get it Medafor? Instead drop all litigation and figure out how to sell more product, so BOTH companies can make more money. That doesn't sound too complicated now does it?
CRY and Medafor each have a lot to offer each other. Medafor can manufacture HemoStase with margins that are acceptable to Medafor. CRY, on the other hand, did not previously have the product, but they importantly have an impressive presence in the cardiac and vascular space. The whole situation cries out for a “win-win”, not “lose-lose” outcome.
Now here is where both sides need to apply some common sense. Medical products are sold by specialty (ENT, general surgery, OB-GYN, cardiac, vascular, etc.), not by location (hospital or clinic). Because of this structure, it is inevitable that some cross-selling will occur. However, it should not be difficult for accountants to reasonably estimate any cross-selling numbers. So here is what both companies should agree to. They agree to start cooperating, or at least seriously trying to do so. Management, of both companies, should try to get their sales staff and distributors to follow the contract as closely as possible. Both management teams need to make it clear to their sales personnel and distributors that they are not to bad mouth anyone at the other company. Both sides should try to sell as much product as possible. In fact cooperation could easily be broadened. For example, there are many hospitals where neither company has a presence. There are many where Medafor is present where CRY is not present (smaller hospitals and clinics). There are others where CRY is present where Medafor is not present (generally large hospitals I think). Instead of limiting each other, perhaps Medafor should be permitted to sell HemoStase into hospitals where CRY is not present and CRY should be able to sell Arista at large hospitals were Medafor is not present. Then let the accountants make reasonable estimates as to the cross-selling amounts. Then one company or the other makes a “net” payment to the other. Instead of making cross-selling into a problem, why not reverse it and make it a plus for both companies?
Medafor has not done a good job of protecting their intellectual property as evidenced by past key employees that are out there now competing against Medafor. I predict CRY will do an end run on Medafor leaving them in the dust and going with a similarly effective product produced by someone else....but not before extracting a pound or two of flesh for the trouble Medafor has caused them. Medafor shareholders will learn the hard way that Medafor management had only THEIR OWN best interests in mind and NOT the company's or shareholder's best interests. Time will tell.
Your Comment: Medafor has not done a good job of protecting their intellectual property as evidenced by past key employees that are out there now competing against Medafor.
Question: Please amplify on this point.
Your Comment: I predict CRY will do an end run on Medafor leaving them in the dust and going with a similarly effective product produced by someone else.
Question: Please amplify on this point too.
Comment: You suggest that Medafor management is looking out for their own interest. Yes, probably true. All management does. However, they appear to be fair and honest based upon my observing them for the past 3 years. This aspect doesn't bother me in the least.
You do seem to have insight here that I do not have, so your responses will be interesting for me to read.
Sorry, but they are like the Palestinians and the Israelis, and ne'er the twain shall meet. CRY should get together with the manufacturer of the raw product that owns 10% of Medafor, to figure out how to take over Medafor, divvy up the spoils, etc.