Bio-Rad loses bid to re-hear $8m loss to former GC

Bio-Rad

The U.S. Court of Appeals for the Ninth Circuit late last month shot down a bid from Bio-Rad Laboratories(NYSE:BIO) to rehear a decision to affirm a loss to a former general counsel in a whistleblower retaliation suit, according to recently released court documents.

Bio-Rad and its CEO had appealed a jury verdict in favor of former GC Sanford Wadler in which he alleged that the company terminated his employment after he blew the whistle on allegations that the company violated the Foreign Corrupt Practices Act in China.

A jury later ruled in Wadlers favor, finding that Bio-Rad violated the Dodd-Frank Act and the Sarbanes-Oxley Act, according to court documents.

In its decision, the appeals court vacated in part, affirmed in part and remanded the case, finding that the district court erred in specific jury instructions related to the Sarbanes-Oxley Act, but rejected an argument from Bio-Rad that a jury could not return a verdict related to the claims in Wadler’s favor.

The court did reverse a decisions related to a Dodd-Frank claim, and vacated approximately $3 million in damages attributable to the claim, according to court documents.

The case was sent back to the appeals court in February.

Final defendant sentenced in insider trading case

Federal prosecutors have wrapped up an insider trading case based on alleged tips from a Bank of America consultant on pending corporate transactions, including Abbott‘s (NYSE:ABT) $25 billion acquisition of St. Jude Medical.

Rodolfo Sablon, 39, of Miami, Fla., was sentenced Friday to six months in prison for his role in the insider trading scheme based on tips from Bank of America technical consultant Daniel Rivas. U.S. District Judge Alison Nathan also sentenced Sablon to two years of supervised release, including six months in a community confinement center, and ordered him to pay $923,566 in forfeiture and a $5,000 fine. Sablon pleaded guilty in July 2018 to conspiracy to commit securities fraud and fraud.

In August 2017, U.S. authorities accused seven individuals of reaping more than $5 million in illicit profits based on tips from Daniel Rivas. Prosecutors said that childhood friends Rivas and Roberto Rodriguez conspired to trade on confidential information and colluded with Sablon, Rodriguez’s friend and roommate, to create an investment fund using proceeds from the inside trades with an ownership stake going to Rivas.

Rodriguez pleaded guilty in September 2018 to conspiracy to commit securities fraud and fraud in connection with a tender offer and was sentenced to one year and one day in prison, according to federal prosecutors. Michael Siva pleaded guilty in October 2018 to one count of conspiracy to commit securities fraud and fraud and was sentenced to 18 months in prison. Jhonatan Zoquier pleaded guilty in August 2018 to conspiracy to commit securities fraud and was sentenced to three months in prison. Jeffrey Rogiers pleaded guilty in August 2018 to conspiracy to commit securities fraud and was sentenced to three months in prison. The scheme brought in some $2 million in illegal profits, according to prosecutors. In all, tips from Rivas led to about $5 million in illegal gains, they said.

“Today’s sentencing of Rodolfo Sablon closes the book on this multimillion-dollar, multi-pronged insider trading scheme,” U.S. Attorney Geoffrey Berman said in a prepared statement. “Sablon and his co-defendants acted as though the securities laws that are designed to keep our nation’s marketplace fair did not apply to them. However, as they all have learned, our office is committed to identifying and prosecuting these types of insider trading networks.”

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SEC details Fresenius’ $231m FCPA settlement

Fresenius Kabi updated logo

The U.S. Securities and Exchange Commission today detailed the more than $231 million that Fresenius Medical Care (NYSE:FMS; ETR:FRE) agreed to pay to resolve self-reported violations of the Foreign Corrupt Practices Act.

In its release, the SEC said that it found that Germany-based Fresenius engaged in misconduct in Saudi Arabia, Morocco, Angola, Turkey, Spain, China, Serbia, Bosnia, Mexico, and eight countries in the West African region. The agency added that the misconduct occurred “against a backdrop where the company failed to have sufficient internal accounting controls.”

The company made improper payments through a number of different schemes, according to the SEC, including sham consulting contracts, falsifying documents and funneling bribes through a system of third party intermediaries.

The SEC said that despite having seen “red flags of corruption” since the early 2000s, the company did not devote sufficient resources towards compliance. The agency went on to claim that Fresenius failed to take even basic steps, such as providing anti-corruption training or performing due diligence on its agents.

“In many instances, senior management actively engaged in corruption schemes and directed employees to destroy records of the misconduct. All told FMC paid nearly $30 million in bribes to government officials and others to procure business,” the SEC wrote in its posting.

Fresenius agreed to pay $147 million in disgorgement and interest to the SEC alongside a criminal fine of $84.7 million as part of a non-prosecution agreement that was announced by the Department of Justice last Friday.

Terms of the agreement include a requirement that Fresenius retain an independent compliance monitor for two years as well as the self-reporting of its FCPA compliance efforts for the year after.

“Failure to address the corruption risks in its growing business allowed complicit managers to engage in bribery schemes that went undetected for more than a decade. As companies expand their business, their internal accounting controls and compliance programs must keep up,” FCPA Unit chief Charles Cain said in a press release.

“By engaging in widespread bribery schemes across multiple countries, the company prioritized profits over compliance in its dealings with foreign government officials,” FCPA Unit Enforcement Division Deputy Chief Tracy Price said in a prepared release.

In February, Fresenius Medical Care said that it closed the $2 billion acquisition of NxStage Medical and settled self-reported violations of the U.S. Foreign Corrupt Practices Act for nearly $255 million.

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Medtronic seeks another bite at the apple in $24m patent loss to spine doc inventor

Medtronic logo updated

Medtronic (NYSE:MDT) asked a federal appeals court for a full-bench review of its nearly $24 million loss in a patent infringement lawsuit brought by a physician inventor.

In February 2014, Dr. Mark Berry alleged that Fridley, Minn.-based Medtronic infringed on three patents covering a “system and method for aligning vertebrae in the amelioration of aberrant spinal column deviation conditions.”

In November 2016, a jury in the U.S. District Court for Eastern Texas sided with Barry, awarding $15.1 million for infringement of one patent, more than $2.6 million for infringement on the second and $2.6 million for overseas infringement. In January 2017 a judge reduced the $20.3 million verdict by $2.6 million, ruling that Barry did not present sufficient evidence on the overseas violation but upholding the U.S. infringement claims. Later that year, the court awarded total damages of nearly $24 million.

In January the U.S. Court of Appeals for the Federal Circuit issued a split 2-1 opinion affirming the lower court’s decision. In a March 27 filing, Medtronic asked the appeals court to seat its full complement of judges for a review of the case, arguing that the dissenting judge’s argument on one of the patents should carry the day.

“In Dr. Barry’s case, all of the foregoing considerations – the lack of records indicating experimentation, the normal fee charged, the control exercised, and the failure to inform customers of experimental purpose – would look the same if the surgeries were for commercial purposes. The only thing that affirmatively suggests these surgeries were experimental is that Dr. Barry said they were – after the fact, during litigation. As a matter of law, that is insufficient to show experimental purpose,” Judge Sharon Prost wrote in the dissent. “The record in this case shows that Dr. Barry waited too long to file for the ‘358 patent and that the on-sale bar applies.”

“Rehearing is warranted to reaffirm that such post hoc testimony, unsupported by contemporaneous objective evidence, cannotsave otherwise-invalid patent claims from operation of the statutory on-sale and public use bars,” Medtronic wrote in its rehearing petition.

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LivaNova to settle majority of U.S. 3T Heater-Cooler cases

LivaNova

LivaNova (NSDQ:LIVN) said that it inked a deal to settle approximately 75% of litigations it faces in the U.S. related to its 3T Heater-Cooler device, which has been implicated in a number of unexpected severe patient infections, expecting to pay up to $225 million to settle the claims.

In June 2016, the FDA warned patients and doctors about the risk of a type of bacterial infection posed by LivaNova’s 3T Heater-Cooler. Four months later, the U.S. Centers for Disease Control & Prevention warned of the risk of serious bacterial infection in open heart surgery patients using the 3T Heater-Cooler.

A year later, a report emerged suggesting that a dozen children who underwent cardiac procedures at Children’s Hospital New Orleans earlier were infected with myobacterium previously linked to LivaNova’s 3T Heater-Cooler.

Last October, the company updated customers on efforts to correct issues with its 3T Heater-Cooler related to patient infections, providing instructions to monitor hydrogen peroxide concentration and information on a design upgrade.

The London-based company said today that it established a settlement framework looking to resolve a pending multi-district litigation in U.S. Federal Court as well as a related, pending class action and other certain cases in state courts across the country.

“We believe entering into the settlement is in the best interest of the company, its shareholders and patients, because it will remove ongoing costs and uncertainty as we focus on executing our strategy to deliver quality care to patients around the world,” CEO Damien McDonald, Chief Executive Officer of LivaNova.

Through the settlement framework, the company said it expects to pay up to $225 million, with up to $135 million to be paid no earlier than July 2019 with the remainder paid in January 2020.

LivaNova said that it previously established a $294 million reserve during its fourth quarter of 2018 to handle 3T Heater-Cooler litigation.

“We are pleased with the manner in which LivaNova has responded to these claims. These were complicated cases and the patients involved with this litigation have difficult medical histories. Protracted litigation was in no one’s interest, as the plaintiffs could benefit from settlement proceeds today. We especially appreciate the guidance from U.S. District Judge John E. Jones III, who oversaw the federal litigation,” plaintiff’s exec committee lead counsel Sol Weiss said in a press release.

The company said that it made no admission of liability under the settlement agreement and added that it can void the agreement if certain conditions, including participation rates of 95% of the category of plaintiffs, are not met.

LivaNova said that it still stands buy its 3T Heater-Cooler and plans to “vigorously defend the product and company actions in remaining cases.”

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Align Tech, ClearCorrect parent co Straumann bury the hatchet, ink distro deal

Align, ClearCorrect

Align Technology (NSDQ:ALGN) said today that it inked a deal with competitor ClearCorrect parent company Straumann Holding to settle all outstanding patent disputes between the companies.

The deal includes a $35 million payment from Switzerland-based Straumann, as well as a 5-year global distribution deal through which Straumann will distribute 5,000 of San Jose, Calif.-based Align Tech’s iTero Element scanners. The scanners will be integrated into the Straumann/Dental Wings Cares/DWOS workflow, Align Tech said in an SEC filing.

Both companies agreed to dismiss all existing patent disputes between them in both the U.S. and the UK, and Align said that Straumann’s Neodent will withdraw its invalidity action against it in Brazil.

Align Tech said that the deal also includes a clause that specifies that if the companies do not enter a development and distribution deal within 90 days of the settlement agreement’s effective date, Straumann will be required to pay Align Tech an additional $16 million in lieu of the dev and distro deal.

“This agreement brings an end to a series of patent disputes and allows both Align and Straumann to avoid the expense, uncertainty and distraction of continued litigation. We can now turn our attention to the potential of an exciting new channel for iTero scanners and a digital integration partner in Straumann, recognized as a world leader in digital dentistry,” Align Tech GC & SVP Roger George said in an SEC filing.

Straumann Group picked up clear orthodontic corrective device maker ClearCorrect in August 2017 for approximately $150 million.

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Bayer loses bid to toss some claims in Essure class action suit

A federal judge in Philadelphia will allow six women who are suing Bayer (ETR:BAYN) over its Essure sterilization implant to proceed with their personal injury claims and three others to pursue their breach-of-warranty claims. One woman who became pregnant following implantation with Essure will be able to pursue her claim that Bayer fraudulently concealed the risk of pregnancy, the judge ruled.

Bayer had filed a motion for partial summary judgment on all 12 plaintiffs’ claims in the class action suit, citing statutes of limitations. Judge John Padova of the Eastern District of Pennsylvania granted Bayer’s motion for summary judgment on the personal injury claims of six of the women and on some or all of the breach-of-warranty claims of nine women.

The women had the Essure coils implanted in their fallopian tubes between 2006 and 2013 and claimed they suffered a variety of ailments afterward, including pain, bleeding and autoimmune disorders. Two became pregnant.

Under Pennsylvania law, the women had two years to file claims seeking damages for personal injury and four years to file claims for breach of warranty. Bayer and some of the women differed on when the clock began to run, based on when the women — or their doctors — connected their health problems to Essure and when they filed suit.

Padova heard the arguments on Bayer’s motion on February 11. Bayer took Essure off the market in the United States in December 2018. In April of 2018, the FDA put restrictions on U.S. sales of Essure, a small metal coil that’s placed in the fallopian tubes via catheter, after concluding that some patients were not adequately warned of its risks.

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Appeals court upholds BD win in Retractable Technologies case

Becton Dickinson, Retractable TechnologiesA federal appeals court this week upheld a ruling that Becton Dickinson (NYSE:BDX) owes nothing more in a long-running false advertising claims case brought by Retractable Technologies (NYSE:RVP).

The dispute dates back to 2001, when Little Elm, Texas-based RTI sued BD for patent infringement; that case settled for $100 million in 2004. RTI sued again barely three years later, alleging further patent infringement and anti-trust violations. That case was split, with the anti-trust portion stayed while the patent infringement claims were litigated; in July 2011 a federal appeals court decided that case.

The anti-trust phase began in 2010; eventually BD was found to have made false claims about some of its safety syringes. In September 2013 a jury found for RTI, awarding $113.5 million after finding that BD violated the Lanham Act’s false advertising rules, the Eastern Texas court later trebled that amount, ordering the company to pony up more than $352.2 million in damages.

In December 2016 the U.S. 5th Circuit Court of Appeals overturned the anti-trust ruling but upheld the false advertising claim, sending it back to the U.S. District Court for Eastern Texas for a decision on how much profit BD must disgorge. The Eastern Texas court found the following August that BD needn’t disgorge any more profits to RTI and that prior court rulings already gave adequate relief.

RTI appealed that decision to the 5th Circuit, which in a split decision March 26 upheld the lower court’s ruling.

“The district court’s denial of disgorgement of profits from RTI’s competitor was made against the larger backdrop of its prosecution of a meritless antitrust claim against BD for conduct in the marketplace – during a time in which RTI nearly doubled its own sales and increased its share of the retractable syringe sub-market to two-thirds,” Judge Patrick Higginbotham wrote for the majority. “RTI elected not to test its proof of Lanham Act damages before the jury, but rather to later argue, as now, that equity mandates disgorgement. Its effort to carry the flag of “public interest” and guide the profits of its competitor to its own coffers here must fail. That effort must be taken outside—to the marketplace. There the public interest is best vindicated. The district court did not abuse its discretion.”

Judge James Graves Jr. dissented on the grounds that the Eastern Texas court misjudged how much of RTI’s sales were diverted by BD’s false claims and erred in not finding enough evidence for giving up some profits to RTI.

RTI said it’s evaluating the ruling huddling with its lawyers “regarding possible future action.”

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Osiris shareholders sue to block $660m merger with Smith & Nephew

Smith & Nephew to acquires Osiris TherapeuticsA group of Osiris Therapeutics (NSDQ:OSIR) shareholders is suing to block its $660 million acquisition by Smith & Nephew (NYSE:SNN) because the purchase price is too low.

Earlier this month the British orthopedics and wound care giant put $19 per share on the table to acquire Osiris and its regenerative medicine portfolio, representing a 37% premium on the 90-day volume-weighted average for OSIR shares.

The deal is structured as a two-step tender offer, with Osiris chairman & co-founder Peter Friedli agreeing to commit his 30% stake. The acquisition is slated to close during the second quarter, with the 360 people employed by Osiris joining S&N, that company said. Osiris put up profit growth of 334.9% to $36.9 million last year, on sales growth of 20.5% to $142.8 million.

The lawsuit, brought by lead plaintiffs Elizabeth Recupero and Raymond Morrison in the U.S. District Court for Maryland against Friedli and fellow directors Thomas Knapp, Willi Miesch and Charles Reinhart III, alleges that the $19-per-share price “does not adequately reflect Osiris’s future growth prospects.” The suit disputes the calculation by Cantor Fitzgerald, which advised Osiris on the deal, saying that it’s based on revenue projections that are roughly half of the actual revenue growth from the prior four years.

“Over the prior four-year period, Osiris has grown revenues at 20%+ per year. At a valuation of $19.00 per share, Cantor Fitzgerald’s discounted cash flow analysis utilizes management’s projections which reflect revenue growth of just 10%, 10%, 9%, and 9% for 2019, 2020, 2021, and 2022, respectively,” according to the lawsuit. “Using Cantor Fitzgerald’s DCF model and the application of more appropriate revenue growth rates during the forecast period of 15% – 18%, (rather than 9%-10%) results in implied value per share of approximately $24.00, an increase of $5.00 per share over the offer price.”

That would make Osiris worth something more like $834 million.

The lawsuit seeks to block the merger “until such time that the individual defendants have adequately undertaken all appropriate and available methods to obtain a transaction which is in the best interests of Osiris’s stockholders,” according to the compliant.

Should the deal go through, the lawsuit asks the court to rescind the merger and award compensatory and rescissory damages. Either way the lawsuit wants the plaintiff’s legal costs to be covered by the defendants.

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Analogic escapes Labor Dept. suit over alleged pay discrimination

AnalogicA U.S. Labor Dept. judge last week dismissed a suit the agency brought against Analogic over alleged pay discrimination.

The Labor Dept. sued Analogic in October 2016, alleging that it paid female assembly workers at its Peabody, Mass., headquarters less than their male counterparts after a compliance review by its Office of Federal Contract Compliance Programs.

In a March 22 decision, Administrative Law Judge Colleen Geraghty dismissed the case, ruling that the OFCCP failed to prove that the alleged discrimination took place.

The office “failed to identify the employment practice causing the alleged pay disparity and Analogic successfully challenged the methodology and findings of OFCCP’s statistical evidence,” Geraghty wrote, noting the company’s successful challenge to an OFCCP expert’s statistical analysis with its own review of the numbers.

In June 2018 Altaris Capital Partners closed a $1.1 billion buyout of Analogic after the imaging device maker’s prolonged search for a suitor.

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