A Medical Device Daily
The law firm of Schiffrin & Barroway (Radnor, Pennsylvania) said that a class-action lawsuit was filed in the U.S. District Court for the Eastern District of Texas on behalf of all purchasers of securities of Advanced Neuromodulation Systems (ANS; Plano, Texas) between April 24, 2003, and Feb. 16 of this year.
The complaint charges ANS, company CEO Christopher Chavez and F. Robert Merrill III, executive vice president-finance, with violations of the Securities Exchange Act of 1934.
More specifically, the complaint alleges that the company failed to disclose and misrepresented the following "adverse facts" which the suit charges the defendants knew about: 1) that the company engaged in "undisclosed and improper promotional practices"; 2) that the company offered physicians $1,000 if they implanted a pain-management device in certain patients for a five-day trial; 3) that the company through the use of improper promotional practices induced physicians to implant ANS's devices, thereby inflating the company's revenue; and 4) as a result of the improper promotional practices the company was able to capture 20% of the market and triple its stock price over five years.
On Feb. 17, ANS reported that it had received a subpoena from the Inspector General, Department of Health and Human Services, requesting documents related to certain of the company's sales and marketing, reimbursement, Medicare and Medicaid billing, and certain other business practices – news which "shocked the market," according to Shiffrin & Barroway. Shares of ANS fell $8.23 per share or 22% on Feb. 17, to close at $29.37 per share.
DaVita (El Segundo, California) reported that it has received a subpoena from the U.S. Department of Justice, U.S. Attorney's Office for the Eastern District of Missouri.
The subpoena, which was received on March 4, requires production of a wide range of documents relating to the operations of the company and its subsidiaries from Dec. 1, 1996, to the present. The company said it would meet with representatives of the government to discuss the scope of the subpoena and the production of responsive documents.
The subpoena requires the production of documents related to, among other things, pharmaceutical and other services provided to patients, relationships with pharmaceutical companies, financial relationships with physicians and joint ventures. The company said the subject matter of this subpoena significantly overlaps with the subject matter of the investigation being conducted by U.S. Attorney's Office for the Eastern District of Pennsylvania. The subpoena has been issued in connection with a joint civil and criminal investigation.
DaVita said, "To the company's knowledge, no proceedings have been initiated against the company at this time," although it also said it "cannot predict whether or when proceedings might be initiated."
DaVita said it intends to cooperate with the government's investigation.
Kent Thiry, chairman and CEO, said, "We have worked hard to create and sustain a culture of compliance at DaVita, as well as the policies and systems to support that culture. We look forward to the opportunity to answer whatever questions the government has." Additionally, Thiry said, "This process will have no impact on our plans to acquire Gambro Healthcare [Nashville, Tennessee]."
In other legalities:
• Thermogenesis (Rancho Cordova, California), maker of cryogenic systems for cord blood banks, said that it has asked that the U.S. Patent and Trademark Office (PTO) re-examine patent numbers 6,569,427 and 6,461,645, issued to PharmaStem Therapeutics (Wayne, Pennsylvania).
This action follows the March 1 announcement by Ther-moGenesis and the international foundation NETCORD, described as the "leading international network of public cord blood banks," that the PTO had re-examined PharmaStem's patent No. 5,192,553 and rejected all its claims. These patents relate to the collection and preservation of umbilical cord and placental blood stem cells and the use of these cells in hematopoietic or immune reconstitution and the treatment of other diseases.
PharmaStem's patents have been attacked in the U.S. owing to the existence of prior art. In Europe, a single PharmaStem patent that consolidated all claims of both U.S. patents (5,192,553 and 5,004,681) had all claims rejected, without further appeal, on April 10, 2003 as a result of actions brought on the same basis before the European Patent Office by ThermoGenesis, NETCORD and others. In Japan, the same prior art, filed in opposition by ThermoGenesis led to the rejection of all PharmaStem patent claims by the Japanese Patent Office on June 4, 1999.
Philip Coelho, chairman and CEO of ThermoGenesis, said, "The organizations currently affected by this patent are our customers, not ThermoGenesis, and a favorable ruling to this request by the U.S. PTO could assist these stem cell banks and research organizations' abilities to conduct breakthrough research and offer life-saving treatments to patients without being encumbered by unwarranted royalty expenses."
Coelho added, "This request, which supports umbilical cord blood stem cell banking and assists the rapid and unencumbered proliferation of cord blood stem cell research, is in concert with our urging of the FDA to license this industry and set the highest possible standards of quality."
• Bausch & Lomb (B&L; Rochester, New York) said that to protect its significant investment in ocular nutritional research and its patent rights, the company has filed a patent infringement lawsuit in U.S. District Court in Rochester against Inverness Medical Innovations (Waltham, Massachusetts) and its wholly owned subsidiary, IVC Industries (Freehold, New Jersey).
The lawsuit charges that Inverness and IVC manufacture and distribute eye vitamins that infringe Bausch & Lomb's patent rights to the unique high-potency antioxidant and mineral formula in B&L's Ocuvite PreserVision nutritional supplements. Bausch & Lomb said Ocuvite PreserVision is the only dietary supplement demonstrated to preserve eye health and vision in the National Eye Institute's landmark Age-Related Eye Disease Study.
Bausch & Lomb co-developed the formula with the National Eye Institute (Bethesda, Maryland) and holds its worldwide patent rights under a license agreement with the National Institutes of Health (also Bethesda).
• 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 Harbert.
As previously disclosed, an amended complaint was filed on Oct. 20, 2003, and purportedly brought on behalf of purchasers of shares of Fischer's common stock during the period Feb. 14, 2001 to July 17, 2003, and alleges that, among other things, during the putative class period, the company and two former officers and directors, Morgan Nields and Louis Rivelli, made materially false statements in violation of Section 10(b) of the Exchange Act, Rule 10b-5 promulgated under the Exchange Act, and Section 20(a) of the Exchange Act.
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.