A Medical Device Daily

American Medical Systems (AMS; Minnetonka, Minnesota) reported Monday that it has lost an arbitration ruling and also that its president/CEO has left the company.

The company will pay shareholders of CryoGen (San Diego) $13.8 million, the amount to be reflected in the company’s 4Q07 financial reports but not in its recently released earnings-per-share guidance.

AMS has been involved in arbitration with a representative of the former shareholders of CryoGen, concerning an earn-out payment related to its acquisition of that company. AMS bought Cryogen for $40 million in cash, plus earn-outs based on future sales of CryoGen’s HerOption products for excessive menstrual bleeding (Medical Device Daily, Dec. 17, 2002/Jan. 6, 2003).

The arbitration demand alleged that the AMS had breached the merger agreement by, among other things, failing to use reasonable efforts to promote, market and sell the Her Option system and acting in bad faith, thereby hurting the former CryoGen shareholders’ right to an earn-out payment under the merger pact.

The demand requested damages of $110 million, and the arbitration panel ruled that the CryoGen shareholders should receive the $13. 8 million payment.

AMS also reported that its board has accepted the “mutually-agreed-upon” resignation of Martin Emerson as president/CEO and board member, as of Jan. 4. Ross Longhini, executive VP and COO, will serve as interim CEO.

A. Jay Graf, lead independent director, said that Emerson “has made a significant contribution to the growth of AMS during his more than seven years with the company, and we thank him for his efforts and service.

AMS said that the board has begun a search for a new CEO and has retained Heidrick & Struggles to assist in recruiting.

In a statement issued yesterday, the company also reported preliminary 4Q07 revenue of $130 million, at the upper end of its recent guidance of $124 million to $130 million and a 12.7% increase over sales of $115.4 million in the year-ago quarter.

Preliminary sales for the year 2007 were reported at $463.9 million, a 29.5% increase over sales of $358.3 million for the year 2006. The fourth quarter marked the first quarter that contained a full quarter of Laserscope operations in the prior year. Excluding Laserscope from the full year comparisons, 2007 base revenue of $352.6 million increased by 13.5% over 2006.

The company’s 4Q men’s health business grew 10.4% to $88.2 million. Within men’s health, 4Q sales, excluding laser therapy, grew 14.5% to $58.1 million. Laser therapy revenue grew 3.3% to $30.1 million compared to 4Q06. The company said that the performance in the base men’s health business was led by the AdVance sling system used to address mild male incontinence and the success of its 700 MS product line, an inflatable penile prosthesis.

Its women’s health business grew 17.8% in 4Q07 to $41.9 million, with female incontinence experiencing “strong performance, driven by the recent introduction of the MiniArc Single Incision Sling System.”

Longhini said, “Overall, we are pleased by our top-line results for the fourth quarter. While the laser therapy business continues to be challenging to predict, our base business grew 15.8%, driven by strong performance in many of our key product lines.”

AMS said it will provide 2008 guidance during its 4Q07 earnings call on Thursday.

AMS is a supplier of medical devices and procedures to treat erectile dysfunction, benign prostatic hyperplasia, incontinence, menorrhagia, prolapse and other pelvic disorders. The company says that its products were used to treat some 310,000 patients in 2007.