|Spectranetics CEO Scott Drake|
Spectranetics' ($SPNC) AngioScore unit scored a victory in its breach of trust suit against a former board member, as a U.S. District Court ruled in the company's favor and ordered the defendants to fork over $20 million.
The legal hullabaloo centers on Eitan Konstantino, a former AngioScore board member and co-founder and the founder of med tech companies TriReme Medical, Quattro Vascular and QT Vascular. AngioScore claimed Konstantino breached his fiduciary duty by developing the Chocolate balloon catheter while serving on the company's board and for failing to present the business opportunity at the time, Spectranetics said in a statement. Konstantino ended up launching the product through TriReme, Quattro and QT Vascular.
The U.S. District Court for the Northern District of California agreed, finding that Konstantino breached his duties to AngioScore and that TriReme and Quattro aided and abetted the process. QT Vascular is also being held liable for TriReme and Quattro's bad behavior. In addition to the $20 million AngioScore will receive from defendants, the company will get a payment of all benefits Konstantino accrued while developing the balloon, including a royalty on past and future sales of the product and all his shares and options in QT Vascular. AngioScore is also planning to recover attorney fees and costs through an agreement with Konstantino.
The ruling marks a bright point for Spectranetics, which has struggled to generate positive numbers since acquiring AngioScore last spring. In May 2014, the Colorado Springs, CO-based company shelled out $230 million upfront plus milestones for AngioScore to boost its offerings and get its hands on AngioScore's drug-coated balloon. Spectranetics has "strict criteria" when it comes to dealmaking, CEO Scott Drake said at the time, but AngioScore proved too good an opportunity to pass up.
"As a combined entity, we expect to have a meaningfully expanded market opportunity and a compelling product portfolio," Drake said in a statement.
But Spectranetics has hit a few road bumps since then, reporting lower quarterly earnings in April and snipping its forecast for the year. Part of the problem is increased competition for its drug-coated balloon device, AngioSculpt, as heavyweights such as Medtronic ($MDT) and C.R. Bard ($BCR) charge ahead with their own products. Spectranetics expects AngioSculpt revenue in 2015 will ring in at $59 million to $66 million, lower than its previous outlook of $62 million to $66 million.
Still, the company is staying optimistic that it can lift itself out of its sales funk. "We've got two sets of products launching. One is a new platform and the other one is simply an improvement on the current technology that we have out in the field that could be a mitigator to that flatness that we're seeing in the U.S.," Drake said on the company's first-quarter earnings call.
- read Spectranetics' statement