A Medical Device Daily

Up to four class action suits have been filed on behalf of shareholders who purchased the common stock and other securities of Possis Medical (Bala Cynwyd, Pennsylvania), a manufacturer of medical devices. The company’s primary product is the AngioJet System, a minimally invasive catheter system designed to remove blood clots using a stream of water.

The actions were filed in the U.S. District Court for the District of Minnesota for those who purchased the company’s shares between Sept. 24, 2002, and Aug. 24, 2004. The complaints allege that during this period the company and certain of its officers failed to disclose and misrepresented material adverse facts, including that the AngioJet System was not more effective than existing alternatives such as competing drug therapies; that it did not reduce significant procedural complications or increase benefits; that it could not be expanded as a “technology platform” because the AngioJet product was not effective for routine use in a broad range of heart attack patients; and that Possis could not maintain or sustain revenue growth targets as high as 35%.

The artificial inflating of shares, the suits charge, allowed defendants and other company insiders to sell more than 361,730 shares of their Possis stock, for proceeds of more than $7.07 million, while in possession of this adverse, non-public information.

Then, on Aug. 24, 2004, it was disclosed that AngioJet failed to demonstrate clinical superiority in the majority of heart attack patients, causing Possis’ share price to fall more than 38%, with the company losing nearly 40% of its capitalization and the defendants lowering the company’s 2005 earnings and revenue guidance.

Thermage (Hayward, California) and Syneron Medical (Yokneam, Israel), competitors in the aesthetic technologies sector, reported reaching an agreement resolving lawsuits in which Syneron allegedly infringed certain patents held by Thermage and that Thermage allegedly infringed a patent held by Syneron.

In the settlement, the two companies granted one another non-exclusive, paid-up licenses for the patents in dispute. And Syneron paid Thermage a one-time sum, the amount undisclosed. Thermage excluded from this license any rights to utilize monopolar radio frequency (RF) and capacitive electrical coupling. Syneron excluded from this license any patents related to its proprietary Electro-Optical Synergy (elos) technology.

Both parties admitted validity of all patents in the litigation, but neither admitted wrongdoing or liability. Additional terms, they said, are confidential.

The Thermage lawsuit, filed last year in the U.S. District Court for the Northern District of California, sought damages and injunctive relief for infringement of six Thermage patents that Thermage alleged were infringed by Syneron’s systems for tightening skin and achieving other improvements in skin and tissue structures.

Syneron subsequently filed an infringement counterclaim against Thermage, alleging that Thermage infringed a U.S. patent which Syneron had acquired. The counterclaim related to a patent covering methods for controlled contraction of collagen using RF energy. Syneron’s counterclaim alleged that this patent was infringed by Thermage’s ThermaCool product.

The heads of both companies praised the settlement agreement. Moshe Mizrahy, CEO of Syneron, termed his company the only one “in the world that makes aesthetic medical devices that combine light and RF energy, and we will continue to innovate and to develop new products using this technology.” Stephen Fanning, president and CEO of Thermage, said that the settlement protects his company’s “monopolar and capacitive technology, the two key components proven to create deep, uniform volumetric heating and unique clinical effects.”

Thermage’s flagship product is the ThermaCool system, saying it is installed in more than 2,000 dermatology, plastic surgery and other cosmetic specialty practices worldwide.

Syneron’s elos technology is the platform for medical-aesthetic applications including hair removal, wrinkle reduction, rejuvenating the skin’s appearance through the treatment of superficial benign vascular and pigmented lesions, and the treatment of acne, leg veins and cellulite.

In other legalities, Quest Diagnostics (Teterboro, New Jersey), in a Securities and Exchange Commission filing, reported that U.S. Attorney’s office for New Jersey has subpoenaed the company for various documents pertaining to capitation and risk-sharing arrangements with government and private payers from 1993 through 1999. Capitation refers primarily to payment agreements with health maintenance organizations.

Gary Samuels, a spokesman for Quest, said the subpoena sought a range of financial and business documents related to capitation and risk-sharing, but that the overall purpose of the probe was not disclosed. He said that the company is cooperating with the investigation.

Quest said that capitation arrangements with payers account for 15% to 20% of its testing volume and 5% to 10% of its revenue.