A Medical Device Daily

As the result of a recent analysis of cumulative changes in the ownership of its common stock, embattled vascular brachytherapy provider Novoste (Norcross, Georgia) has reported that two-thirds of its net operating loss (NOL) carryforwards will expire unused.

The company said that it recently evaluated the filings on “Schedules 13D and 13G by certain stockholders“ in accordance with Securities and Exchange Commission (SEC) rules, as well doing its own additional review. As a result, it said, it “became aware . . . of potential inaccuracies [in those filings] made by certain persons with the SEC during the past several years and has determined that certain purchases and sales of its common stock were not reported accurately.“

It said that the defined “change in ownership“ took place on Sept. 17, 2003, thereby imposing limitations restricting the timing and amounts of the future use of its available NOL carryforwards, with the resulting loss of two-thirds of them.

The company previously reported in its consolidated financial statements for the year ended Dec. 31, 2003, that it had about $108 million of NOL carryforwards which were fully reserved and will expire beginning 2007 through 2023. The Internal Revenue Code imposes an annual limitation on the utilization of NOL carryforwards based on a statutory rate of return “and the value of the corporation at the time of a change in ownership,“ Novoste said.

It said that, as of Sept. 17, 2003, the future use of NOL carryforwards is limited to $1.8 million annually, and about $36 million in total. It also said that the change in ownership had no impact on reported net income or loss per share for the year ended Dec. 31, 2003, or the nine months ended Sept. 30, 2004.

Any future changes in ownership “may result in significant additional amounts of these NOL carryforwards expiring unused,“ Novoste said.

The company also reported that it has “received inquiries from, and has engaged in discussions with, companies potentially interested in a merger or business combination“ with it, but added that no such deal can be guaranteed.

The company previously reported that it is “actively“ seeking new product opportunities, as well as a merger, business combination or other disposition of its business or assets, “due to the continuing challenges facing its vascular brachytherapy products business, which have resulted in a sustained decline in its revenues“ (Medical Device Daily, Oct. 15/Nov. 4, 2004).

The company was further hurt by a report made at last September's Transcatheter Cardiovascular Therapeutics (TCT) conference saying that vascular brachytherapy provides no benefit for prevention of complications in angioplasty patients five years post-treatment.

Martin Leon, MD, chairman of the TCT-sponsoring Cardiovascular Research Foundation (CRF; New York), called the results of the study “sobering,“ adding: “What we had once viewed as a powerful therapy to prevent short-term tissue overgrowth [restenosis] actually may not have any lasting benefits.“

Novoste retained an investment banking and strategic advisor, Asante Partners (New York/Menlo Park, California), in April 2004 to assist in exploring alternatives and that it will know how to proceed “in the near term.“

But it said that if no suitable transaction becomes available “in the relatively near term,“ the alternatives could include “the shutdown of our operations and dissolution and liquidation.“

Novoste develops medical treatments for coronary and vascular diseases. Its Beta-Cath System is available in the U.S., as well as in the European Union and several other countries.

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