A Medical Device Daily

A judge in a California district court last week vacated a $420 million damage award against Nellcor (Pleasanton, California), a unit of Tyco International (Pembroke, Bermuda), in a lawsuit brought against it by Masimo (Irvine, California).

In her ruling, Judge Mariana Pfaelzer said that the damages were not sustainable, based on the proof in the case. She vacated some of the findings and ordered a new trial on damages. No date was set for the retrial.

The judge did affirsm various charges vs. Nellcor.

A jury had found against Nellcor in a dispute related to the marketing of pulse oxymetry systems and awarded $140 million in damages, an amount that was automatically trebled to $420 million under the state's antitrust statute.

Masimo had charged that Tyco Healthcare (Mansfield, Massachusetts) and Nellcor, a unit of Tyco's Mallinckrodt (St. Louis) business, had used their market position to keep hospitals from purchasing Masimo's products.

Tyco said that it had made no provision in its consolidated financial statements for the damage award.

In other legalities, a $4 billion class action lawsuit has been filed in U.S. District Court in New Jersey on behalf of shareholders of Biovail (Mississagua, Ontario) vs. S.A.C. Capital Management and its founder Steven Cohen, Gradient Analytics (Scottsdale, Arizona), Banc of America Securities and one of its securities analysts David Maris.

The lawsuit alleges “a massive, illegal and continuing stock market manipulation scheme, which targeted the common stock of Biovail and severely harmed its investors, and which has resulted in immense ill-gotten profits for S.A.C. Capital and other extremely powerful hedge funds.“

“At the core of this scheme was defendants' preparation of a massive and fraudulent disinformation campaign attacking the stock of Biovail and other targeted publicly-traded companies, including the preparation of ostensibly objective, but in fact biased, analyst reports; defendants' accumulation of short positions in the stock of those companies – i.e., bets that the stock prices would decline; and defendants' subsequent unleashing of the disinformation campaign and biased analyst reports on the unsuspecting trading public – thus bringing about the sought-after stock price declines and the resulting immense profits for defendants and commensurate harm to the plaintiff,“ according to the suit. “Defendants' scheme thus attacked the very basis for the financial markets, the free and fair disclosure and dissemination of information concerning publicly-traded stocks.

“In spring 2003, when Biovail in fact was poised for substantial growth, S.A.C. Capital and the other defendants launched a devastating attack on Biovail's stock. In furtherance of their scheme, after having taken short positions, defendants manipulated the market for Biovail stock and artificially lowered its stock price by, among other things, disseminating materially false and misleading information concerning Biovail and tortiously interfering with Biovail's business.“

The suit also alleges that one of the tools used by the defendants was to “ghost write“ negative and false analyst reports concerning Biovail, issuing these reports through Camelback and Gradient, which offered them as independent analysis.

“In fact, Camelback and Gradient were anything but independent. Instead, Camelback and Gradient permitted hedge fund clients such as S.A.C. Capital to author reports – nearly always negative – on companies, and then publicly release the report as a product of its own independent research and analysis. These reports-for-hire were referred to internally at Camelback and Gradient as 'hatchet jobs' and typically were released at the behest of short-selling hedge funds.“

In February, the company filed a lawsuit in the Superior Court in New Jersey alleging that various hedge funds and analysts manipulated the market in order to drive down Biovail's share price to benefit their own stock positions. That lawsuit, which seeks $6 billion in damages, claims the company's business plans were disrupted, its stock price was attacked and its shareholders were directly and materially damaged.

Biovail is engaged in the formulation and manufacture of pharmaceutical products that use advanced drug-delivery technologies.