A Medical Device Daily

Shareholders of Genzyme Biosurgery (Cambridge, Massachusetts), the former tracking stock of the Genzyme Corp., received their $64 million settlement from the class action lawsuit filed against Genzyme Corporation in connection with Genzyme's consolidation of the tracking stocks which resulted in the forced buyback of all the outstanding stock of Biosurgery for $1.77 a share, as reported on May 8, 2003, which was 32% below the market price of Biosurgery stock, which closed at $2.57 a share on May 7, 2003. The final settlement distribution to shareholders was about $1.58 a share after legal fees and expenses, representing a nearly 100% increase over the original payout by Genzyme.

According to the amended class action complaint, which originally had been sealed pursuant to court order, the action arose from "insider trading and the manipulation of the market price of Biosurgery stock in connection with the repurchase; breaches of fiduciary duty by Genzyme executives and board of directors relating to the management of Biosurgery earnings, the manipulation of the market price of Biosurgery stock, and the timing of the announcement of the Repurchase-and therefore the price at which it took place; and breaches of contract and of implied covenants of good faith and fair dealing in connection with the repurchase."

The class-action lawsuit was initiated by Rory Riggs, principal of Balfour and former president of Biomatrix (San Diego), and John Lewis, president of Gardner Lewis, a money management firm and one of the largest shareholders of Biosurgery.

Genzyme Biosurgery was created on Dec. 19, 2000, through a merger between Biomatrix, a NYSE-listed public company and Genzyme's former tracking stocks, Genzyme Surgical Products and Genzyme Tissue Repair. In the merger documents and thereafter, Genzyme management represented repeatedly that Biosurgery would be managed with the objective of creating a self-sustaining business that would generate near term profits. According to the complaint, based on this business model and the existence of the tracking stock structure, Biosurgery shareholders reasonably expected and were led to believe by Genzyme executives that Biosurgery would be managed as a stand-alone business with the objective to maximize the market price of Biosurgery stock.

According to information presented in discovery and included in the amended complaint, Genzyme executives and board, "systematically plotted to repurchase the Biosurgery stock at a fraction of its value for their own benefit and the benefit of the Genzyme General shareholders."

Documents obtained from discovery that were included in the amended complaint showed that Genzyme's internal valuations reflected a value of Biosurgery that ranged from $12.75 a share to more than $50 a share, valuations which were never publicly disclosed by the company.

In other legalities:

• QLT (Vancouver. British Columbia) reported that the U.S. Court of Appeals for the First Circuit reported that it affirmed the judgment of the U.S. District Court for the District of Massachusetts in the lawsuit brought against QLT by Massachusetts Eye and Ear Infirmary (MEEI; Boston) in connection with events related to U.S. patent No. 5,798,349 and certain MEEI research results related to QLT's Visudyne. The Court of Appeals upheld the liability and damages aspects of the 2007 judgment of the District Court in which QLT was found liable under Massachusetts state law for unfair trade practices and ordered to pay to MEEI damages equal to 3.01% on past, present and future worldwide net sales of Visudyne plus interest and certain legal fees.

The decision of the District Court had included an award to MEEI of legal fees in an amount of $14.1 million, to which was applied a reduction of $3 million previously agreed to by MEEI. The Court of Appeals ordered that the amount of legal fees payable by QLT be remanded to the District Court for further consideration. QLT said it is reviewing the decision of the Court of Appeals with its legal counsel and considering its options for further appellate review.

As a result of the court's decision, QLT said it will mail a notice to shareholders prescribed by Canadian securities laws describing this change in the company's affairs and extending the expiry date of the company's modified dutch auction tender offer.

• Kinetic Concepts (KCI; San Antonio) reported that a temporary injunction against Smith & Nephew (S&N; London) has been granted by the Specialist Patents Court in the High Court of Justice of England and Wales. The temporary injunction prohibits S&N from selling foam dressing kits for negative pressure wound therapy in the UK until the court can rule on the patent infringement action that KCI has brought against it. A trial date on infringement and validity of the patent will be set for some time after March 23, the company noted.