A Diagnostics & Imaging Week

Cytyc (Marlborough, Massachusetts) reported that an arbitration panel has issued a partial final award in its dispute with DEKA Products Limited Partnership (DEKA; Manchester, New Hampshire) regarding royalties involving a 1993 agreement concerning Cytyc's ThinPrep Pap Test products. The partial final award established the products upon which a royalty of 1% is due but reserved a decision on the exact amount of the final past royalties award until the parties have submitted royalty calculations.

Cytyc contended that the terms of the license with DEKA required paying a 1% royalty only on the filter component used to prepare the ThinPrep Pap Test. The arbitration panel determined, however, that the agreement required Cytyc to pay a 1% royalty on the entire multi-component ThinPrep Pap Test kit from Nov. 17, 2000, to Dec. 31, 2004.

The panel dismissed all other claims against Cytyc.

Cytyc said the exact amount of the final award will be determined "in the next several weeks." Meanwhile, it will take a pretax charge against 1Q earnings of about $8 million, or 4 cents a share.

"We believe that this charge, along with existing reserves for this matter, will be sufficient for our estimate of the final award amount payable to DEKA for all past royalties and other costs, if any," said Patrick Sullivan, Cytyc's president, CEO and chairman. He said that, based on the 4-cent impact of this charge, earnings-per-share guidance for 1Q05 will be in the range of 17 cents to 18 cents and full-year 2005 earnings per share guidance will be reduced to the range of 89 cents to 96 cents. "Exclusive of this first quarter charge, we expect the 1% royalty on all future sales of ThinPrep Pap Test disposables to be paid by Cytyc as a result of this award will not be material to our subsequent quarterly financial results," said Sullivan.

He expressed disappointment with the findings, adding: "We continue to believe that DEKA has been paid all royalties due under the terms of the license ... "

In other legalities: Fischer Imaging (Denver) said that the U.S. District Court for the District of Colorado denied preliminary approval for the previously disclosed proposed settlement of the putative class-action lawsuit brought by plaintiffs the Sorkin Law Firm and James K. Harbert.

As previously disclosed, an amended complaint was filed on Oct. 20, 2003, purportedly brought on behalf of purchasers of shares of Fischer's common stock during the period Feb. 14, 2001, to July 17, 2003, alleging that during the class period the company and two former officers and directors, Morgan Nields and Louis Rivelli, made materially false statements.

The amended complaint seeks unspecified compensatory damages and other relief. The company and Nields and Rivelli have moved to dismiss all claims asserted by The Sorkin Law Firm and Harbert. A hearing on those motions is scheduled for May 6.

Fischer Imaging said it "believes it has meritorious defenses to this suit and intends to defend it vigorously or settle the matter if possible."

Fischer Imaging manufactures medical imaging systems.