Alphatec Postpones 2013 Results amid Court Loss

Posted in Medical Device Business by Chris Newmarker on February 21, 2014

Alphatec Holdings Inc. is delaying fourth-quarter financial results while it waits to see how lawsuit damages shake out for a company it acquired.

The Carlsbad, CA–based company said Thursday that it is postponing the release of its financial results for the fourth quarter and fiscal year 2013 from February 27 until after the market close on March 17. Its explanatory conference call, also now slated for March 17, will begin at 5 PM Eastern time.

On February 11, a jury awarded OrthoTec LLC damages in the amount of $47.9 million plus interest in its case against Surgiview S.A.S., which Alphatec acquired in 2010.

"Given last week's jury verdict in the OrthoTec v. Surgiview S.A.S. legal matter, we believe that it is in the best interest of all stakeholders that Alphatec takes the appropriate time to fully explore the options available to us going forward," said Les Cross, Alphatec's chairman and CEO. "We understand the importance of bringing greater clarity to this matter and this additional time will allow us to provide as much information as possible on our upcoming call."

It seems that a now-bankrupt company, Eurosurgical AS, was accused of fraudulently transferring assets to Surgiview to avoid paying $39 million in damages OrthoTec had won from Eurosurgical in previous breach-of-contract and copyright infringement lawsuits.

Surgiview is a subsidiary of Scient'x S.A.S, which was acquired by Alphatec Holdings Inc., parent of Alphatec Spine Inc., in 2010. Therefore Alphatec may have to stand good for the award, but whether that will be the case will be the matter at issue for a second trial “within 60 days,” on a date that is yet to be determined.

According to court documents, OrthoTec in 1998 purchased the US rights to Eurosurgical's surgical devices. OrthoTec was to be the exclusive manufacturer of the devices for 18 months. Also included in the deal were the U.S. rights to any new products that might be created by Eurosurgical.

When Eurosurgical saw the success OrthoTec was having at selling its devices, Eurosurgical backed out of the deal and began selling their devices in the U.S. themselves. In 2004, OrthoTec won about $9 million in a breach-of-contract suit in California state court. Then, in 2007, a copyright infringement suit in federal court, also heard in California, brought a $30 million award.

David McAfee's article on Law360, explains what happened next.

“In 2004, Eurosurgical leased its entire business to Surgiview, according to the complaint, and in 2006 Eurosurgical transferred its remaining assets—excepting the damages liability—to Surgiview, according to court documents.

OrthoTec sued Surgiview in 2008 for $47 million, contending that the transfer was fraudulent and that the parties that took on Eurosurgical's assets should also be liable for the breach of contract and copyright damages, plus interest.”

Alphatec bought Scient'x, Surgiview's parent, in 2010. It was added as a defendant in the case in 2012.