Global medical device company CryoLife Inc. CRY recently provided an update on its ongoing patent infringement litigation with CR Bard Inc. BCR and certain of its subsidiaries. The lawsuit leveled against CR Bard pertains to PerClot – CryoLife’s adhesive forming hemostatic powder, intended to stop bleeding.
Per the latest update, the U.S. District Court for the District of Delaware has allowed CryoLife's declaratory judgment lawsuit against Medafor Inc. – CR Bard’s subsidiary – to proceed.
CryoLife had filed the declaratory judgment lawsuit against C.R. Bard and certain of its subsidiaries, including Medafor, in Apr 2014. The lawsuit appealed the Court to declare that CryoLife's manufacture, use, offer for sale, and sale of PerClot in the U.S. does not and would not infringe Medafor's U.S. Patent. In addition, CryoLife requested the Court to declare the claims of the patent invalid.
Subsequently, in Sep 2014, Medafor filed a motion for a preliminary injunction against CryoLife with respect to the marketing and sale of the latter's PerClot Topical, which is still in the early stages of launch in the U.S. In its latest ruling, the Court approved Medafor's motion.
While the District Court’s ruling came as a disappointment to CryoLife, the company is still positive and on track to begin enrollment in its PerClot IDE clinical trial for surgical applications during the first half of 2015. The company anticipates a potential FDA approval for the same in the second half of 2017.
We note that the company’s recently concluded fourth quarter (reported Feb 17, 2015) included a 52% year-over-year increase in PerClot revenues. Moreover, CryoLife included roughly $1.5 million in PerClot Topical sales in its previously announced 2015 financial guidance.
However, management expects unfavorable foreign exchange rate to impact the top line at the product segment by approximately $1 million in 2015. Moreover, costs associated with CryoLife’s patent infringement lawsuit against CR Bard are keeping the company’s operating margin as well as earnings under pressure.
Notably, the company's previously announced earnings per share guidance for 2015 included $3 million to $4 million in expense related to the litigation with CR Bard.
Hence, although we remain positive about the PerClot IDE trial and continued customer demand for the company’s tissue products, concerns regarding lower processing capacity and rising operating expenses persist.
Zacks Rank
Currently, Cryolife carries a Zacks Rank #4 (Sell). Better-ranked stocks in the medical instruments industry include Abiomed ABMD and Inogen INGN. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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