A Medical Device Daily

Medafor (Minneapolis) said it sent a letter to CryoLife (Kennesaw, Georgia) informing the company that by CryoLife's failure to provide adequate assurance that it would properly perform its obligations under the two companies' exclusive distribution agreement (EDA), CryoLife has effectively repudiated the contract between the two companies.

Under Georgia law, failure to respond within 30 days of Medafor's request for adequate assurance constitutes a repudiation of the contract by CryoLife, thus allowing Medafor to treat the contract as terminated and cease all performance under the EDA immediately.

Medafor said that it would seek damages for the full amount of the profit it would have received if not for CryoLife's repudiation. Medafor has notified CryoLife that it will specify the amount of these damages once they are determined.

Gary Shope, CEO of Medafor, said, “Over the past six months, CryoLife has repeatedly breached our contract in China, Europe, Brazil and the U.S. CryoLife has also continued to insist that it is entitled to distribute HemoStase in China and Japan, despite the clear terms of the EDA to the contrary. As such, we were highly concerned about whether CryoLife was going to honor our agreement in the future, and had no choice but to insist it provide us assurance, as required by law. CryoLife ignored our request, effectively repudiating the contract and allowing us to cease all performance under the agreement.“

CryoLife had the exclusive right to sell the MPH product into cardiac and vascular surgeries in the U.S. (excluding Department of Defense facilities) and into cardiac, vascular and general surgeries in the rest of the World (except China and Japan) excluding ENT, orthopedic, neurosurgery and topical applications.

On March 16, 2010, CryoLife placed a purchase order of nearly $500,000 of HemoStase product to be delivered to CryoLife on April 15, 2010. On March 18, 2010 after notifying CryoLife that it was treating the EDA as terminated, Medafor notified CryoLife that it would not fulfill this order because CryoLife submitted the order 30 days prior to shipment, instead of the minimum 35 days set forth in the agreement and the amount requested was more than CryoLife had forecasted as set forth in the agreement. Assuming Medafor's effort to deem of the agreement as being terminated is not successful, CryoLife may simply submit a new purchase order.

In other legalities, Coughlin Stoia Geller Rudman & Robbins reported that a class action has been commenced on behalf of an institutional investor in the U.S. District Court for the District of Minnesota on behalf of purchasers of the common stock of St. Jude Medical (St. Paul, Minnesota) between April 22, 2009 and Oct. 6, 2009.

The complaint charges St. Jude and certain of its officers and executives with violations of the Exchange Act. The complaint alleges that, throughout the class period, defendants failed to disclose material adverse facts about the company's true financial condition, business and prospects. Specifically, the complaint alleges that defendants failed to disclose: (i) that the company was experiencing a slowdown in demand for its products as hospitals reduced purchases and delayed purchasing decisions; (ii) that the company was not receiving anticipated orders for cardiac rhythm management devices; and (iii) as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the company, its earnings and prospects.

On Oct. 6, 2009, St. Jude reported “preliminary third quarter results,“ for the period ending Oct. 3, 2009. The company said that it was reducing its earnings guidance for the completed third quarter. The day of the report, the price of St. Jude common stock declined from $38.24 per share to $33.40 per share on extremely heavy trading volume.