CryoLife Appeals Rare Injunction In Patent Case

CryoLife Inc. on Wednesday filed its notice of appeal to the Federal Circuit of a preliminary injunction barring its PerClot blood-clotting powder, one day after a Delaware federal judge ordered Medafor Inc. to pay CryoLife $100,000 in the event that any court finds the injunction was wrongly issued. 
C.R. Bard Inc. unit Medafor satisfied the test for securing a preliminary injunction, including showing a reasonable likelihood that it will succeed on the merits and would suffer irreparable harm if CryoLife's product remained on the market, U.S. District Judge Sue L. Robinson ruled last month, in a relatively rare instance of a judge granting a preliminary injunction in a patent case. On Wednesday, CryoLife filed its notice of appeal of the injunction to the Federal Circuit.

The judge said Medafor has represented that it is able to pay the $100,000 if the condition on the injunction is met and that CryoLife agreed with the representation, adding that the requirement was proper and adequate security for the injunction.

“Pursuant to Federal Rule of Civil Procedure 65(c), this court orders that if this court or another court of competent jurisdiction finds this preliminary injunction wrongfully enjoined CryoLife, Medafor shall pay CryoLife $100,000 within ten (10) days of the order vacating or reversing this injunction,” the judge said.

CryoLife's PerClot Topical, launched last fall, competes with a Medafor product called Arista that was approved by the U.S. Food and Drug Administration in 2006. Both are powders used to control bleeding when conventional methods are ineffective.

The dispute began in April, when CryoLife filed suit seeking declaratory judgment that PerClot Topical would not infringe Medafor's patent. Medafor responded by filing an infringement counterclaim and seeking a preliminary injunction. CryoLife began selling PerClot Topical last fall.

Judge Robinson found that Medafor had shown that CryoLife likely infringes and that CryoLife was unlikely to show that the patent is invalid.

Medafor Injunction Holds Up US Perclot Topical

CryoLife, Inc. (NYSE: CRY), a leading medical device and tissue processing company focused on cardiac and vascular surgery, today provided an update on its ongoing litigation with C.R. Bard, Inc. and certain of its subsidiaries regarding PerClot. The U.S. District Court for the District of Delaware (the "Court") has allowed CryoLife's declaratory judgment lawsuit against C.R. Bard's Medafor, Inc. subsidiary ("Medafor") to proceed. The Court also granted Medafor's motion for a preliminary injunction with respect to CryoLife's marketing and sale of PerClot Topical in the U.S. CryoLife is currently awaiting the Court's order, which it expects will provide details regarding the scope of the injunction.

Pat Mackin, CryoLife President and Chief Executive Officer, said, "While we are disappointed with the District Court's ruling on the preliminary injunction motion, we continue to believe we have a strong case and remain focused on securing the best long-term outcome in the litigation for our shareholders. We remain on track to begin enrollment in our PerClot IDE clinical trial for surgical applications during the first half of 2015, which would position us for potential FDA approval in the second half of 2017."

In April 2014, CryoLife filed a declaratory judgment lawsuit against C.R. Bard and certain of its subsidiaries, including Medafor, requesting that the Court 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 No. 6,060,461 (the "'461 Patent"). In addition CryoLife requested that the Court declare that the claims of the '461 Patent are invalid. In September 2014, Medafor filed a motion for a preliminary injunction against CryoLife.

The preliminary injunction applies to PerClot Topical, which is in the early stages of launch in the U.S. CryoLife included approximately$1.5 million in PerClot Topical sales in its previously announced 2015 financial guidance. At this low-volume level, the Company was anticipating the gross margin for PerClot Topical to be approximately breakeven. The Company's previously announced earnings per share guidance for 2015 included $3 million to $4 million in expense related to the litigation with C.R. Bard. The Company continues to expect that this represents the high end of potential litigation expenses for the year related to this matter, and it will re-assess its litigation strategy and provide appropriate updates to its financial guidance, if any, after receiving the Court's order.

See official papers below....

https://drive.google.com/file/d/0B6J8c60Kq5rVUVBka0ExTjdYaWc/view?usp=sharing
https://drive.google.com/file/d/0B6J8c60Kq5rVSmhSWXVFd1daNWM/view?usp=sharing

HaemoCer approved for use in China and Canada

BioCer Entwicklungs GmbH (BCE), a German implantable biological medical device development and manufacturing company, announced today that it has achieved approval to commence sales of HaemoCer™, an Absorbable Polysaccharide Hemostat (APH), in the People's Republic of China.

"BioCer has now achieved near comprehensive Asia-Pacific regional representation, and the addition of the PRC approval of HaemoCer™ is a significant milestone," Dr Markus Heinlein, Managing Director stated. "The entry into China of our first product HaemoCer™ has been assisted by the early establishment of regional sales representation in the Asia-Pacific region. BCE are pleased Chinese surgeons and patients will now share the benefits of our technology. Our new Health Canada approval is also further evidence of strong international acceptance of our technology."

The PRC approval of HaemoCer™ expands an international sales network encompassing Australia, Hong Kong, India, Korea,Malaysia, New Zealand, Singapore and Thailand within the APEC region. BCE will be exhibiting at the EACTS, Milan, Italy, 11-15thOctober and the CMEF, Chongqing, China, 23-26th October 2014. 

Clinical Papers - Fibrin Sealants, BioGlue, Perclot, HaemoCer, Thrombin

BioCer Launch of HaemoCer Plus versus Arista, Perclot and unknown other as presented at EACTS in Vienna

Clearly demonstrated without question German technology continues to impress as "THE" device developer in the powdered plant based starch market. In the video you see from left to right Arista, Perclot, Unknown and the radical new polysaccharide agent HaemoCer Plus.

Medafor sells to Bard for $200 million, plus incentives that could add another $80 million.

Officials at Medafor Inc., a Brooklyn Center-based maker of a novel blood clotting product, said they’ve been looking for ways to enhance shareholder value — be it an initial public offering, new business relationships or just continuing organic growth. The one thing they weren’t looking for was a buyer, leaders said Monday.

Then the folks at C.R. Bard Inc., a New Jersey-based medical equipment maker, came calling.

Their offer — $200 million in cash now and up to $80 million more if revenue targets are hit in the next two years — proved too attractive to pass up, said Medafor CEO Gary Shope.

Medafor on Monday announced that it has an agreement to be purchased by C.R. Bard’s Davol Inc. division. The transaction has been approved by both companies’ boards of directors, but is subject to approval by Medafor’s shareholders and customary regulatory review.

“The premium price underscores what we have been building on,” Shope said in an interview Monday. “I think the shareholders are being rewarded with a great price.”

Medafor’s appeal has been its plant-based microporous polysaccharide hemospheres technology, which is used in its Arista MPH hemostat product. The product rapidly dehydrates blood and accelerates the body’s natural blood-­clotting process.

Sept. 24 is the target date for shareholder approval, Shope said. The deal values Medafor’s privately held shares at $6.37 per share. The revenue-based incentives are valued at up to $2.82 per share.

It’s a significantly better deal than the $2 per share that Atlanta-based CryoLife Inc. proposed in a takeover bid in 2010. At the time, the Medafor board called the bid “grossly inadequate.” CryoLife was an exclusive-rights distributor for Medafor’s blood-clotting technology in the United States and some international markets. It had also made offers for Medafor in 2008 and 2009, which Medafor also rebuffed.

C.R. Bard said Medafor will add approximately 1 percent to its 2014 revenue.

The company, a maker of vascular, oncology and surgical products, had revenue of about $3 billion last year. Scott Lowry, C.R. Bard vice president and treasurer, said he expects Medafor, which has 33 employees, to have annual revenue of $30 million to $40 million by the end of 2013. Medafor’s products will complement C.R. Bard’s hemostasis unit and broaden its product portfolio, he said.

“We look at this as a growth opportunity,” Lowry said. “Our plan is to grow this business.”

He says it is premature to comment on status of Medafor’s management and employees since the deal still needs Medafor shareholder approval and to pass other regulatory requirements. Shope, the Medafor CEO, said he believes that Bard is considering keeping the Medafor organization intact but that “going forward, they will be making their own decisions.”

John Houston, an attorney at Fredrikson & Byron who served as Medafor’s lead legal counsel for the transaction, said: “This really was an offer that came out of left field. It was not solicited and it was not anticipated.”

Officials from Bard had met with two of Medafor’s senior officers at a conference in Spain less than a year ago, he said.

According to C.R. Bard’s statement on the acquisition, the global market for surgical hemostats is over $1.4 billion. “The Arista hemostat provides a great alternative to other commercially available hemostats while providing strong synergy with our Progel Sealant technology and sales channel,” said Timothy Ring, C.R. Bard’s chairman and CEO.

Chinese Starch Medicals Perclot Patent Claims Denied - Impact for Cryolife predicted

Recently denied claims for China based Perclot manufacturer Starch Medical have seen Starch re-file a dramatically reduced set of claims revised patent application published May 16, 2013 (see HERE). 
The original 2009 filing which includes "Inventors" Ji Xin (James Ji), previously Chinese Distributor of Medafor's Arista, has now dropped Jianping Chen (Jane Chen) as an "Inventor".

 Of more critical importance the patent has now shrunk in respect of claims made. Currently claims 1-53 have now been cancelled and it seems likely this patent is less than secure.

The EU search indicates denial regarding incorrect claims and scope of the claims regarding novelty, and inventive steps. Comments such as "the skilled person knows....this method does not support an inventive step" amongst others is available in the embedded document below.

  European Search Report Starch Medical PCT_US2009000227

In the meantime it will be interesting to see the reaction from Cryolife Shareholders who, having been subjected to the Medafor - Cryolife debacle, may now have serious due diligence queries of executives. The millions spent already on the CRY-Starch marriage may be a concern, but continued investments highlighted in the last quarterly report by executives such as Ashley Lee who announced Q1 2013 the intention of (after initial denial of the Perclot IDE) re-filing the IDE with the FDA in May. Ashley also stated further investment in Perclot with "a 320 patient study, randomized 1:1 with a 30-day follow up over across several medical specialties". CEO Steve Anderson commented when questioned about Perclot manufacturing "I think we’ve already spent the money that we’re going to spend to build out our manufacturing facility that frankly is up and ready to go".

It's Perclot AMP.......No, It's Endoclot AMP

Cryolife last month announced that finally they had some good news regarding the litigation with Medafor, and under terms of the settlement, Medafor has agreed to pay CryoLife $3.5 million in cash. However the Atlanta based CryoLife foray into the powdered Hemostat market segment may still prove "interesting". When making their arrangement with Chinese Starch Medical for rights to Perclot in all territories worldwide excluding China, Hong Kong, Macau, Taiwan, North Korea, Iran and Syria. They also included the following in the contract:

  1.5 Product Applicators, Etc. SMI agrees to promptly notify CryoLife of all improvements to applicators, tips and other accessories included within or used in connection with the Products, including all new applicators, tips and other accessories. All such improvements and any such new applicators, tips or accessories to the Products shall be included within the Products and the Parties shall adjust the catalog of Products to reflect these new products, with any transfer price to be negotiated in good faith, but based solely on costs to SMI for such improvements and/or new applicators, tips and accessories. The Parties agree that the Endoscopic applicator system used for powder delivery via gastrointestinal endoscope, as further described on Schedule 2.1 is not an improvement or new applicator and is not included in this Agreement.

2.   Distribution

    2.1  Limitations on SMI Activities. During the term of this Agreement SMI agrees (i) to sell the Products exclusively to CryoLife for use in Permitted Clinical Applications within the Territory, (ii) to refrain from selling or licensing any Products to any Existing Distributor or Third Party for sale or distribution in Permitted Clinical Applications within the Territory, (iii) to refrain from directly or indirectly marketing, promoting, or encouraging any Third Party to market, promote or Distribute the Products for any of the Permitted Clinical Applications within the Territory, (iv) to refrain from licensing or transferring any AMP™ Technology to any Third Party within the Territory for the purpose of manufacturing any Products upon terms or conditions that would enable or allow such Third Party to sell any Products for Permitted Clinical Applications within the Territory. In addition, SMI agrees that it shall refrain until January 1, 2015 from (A) directly, or indirectly selling, permitting to sell, market, promote or encouraging third parties to sell, permit to sell, market or promote any Competitive Product (defined below) for any Permitted Clinical Application within the Territory or (B) licensing or transferring to any Third Party technology that would enable or allow any Third Party to manufacture any Competitive Product within the Territory. The provisions of the foregoing sentence shall be deemed further modified so that SMI may only take the actions described therein if SMI complies with Section 1.4 (and therefore CryoLife does not match the right of first refusal set forth therein). As used herein, “Competitive Product” means any powdered absorbable surgical hemostat that is intended for or could be used for a Permitted Clinical Application. The foregoing limitations do not apply to sales by SMI of those products described on Schedule 2.1.

Read the full document HERE

.

Now Cryolife and their partners face the interesting prospect of Chinese made Perclot AMP particles meeting them in the EU re-branded as "Endoclot".  

As can be seen HERE the original Chinese Xijing Hospital trial changes for the use of AMP show the changes from perclot to "endoclot", but the endoclot webpage discusses AMP particles....see HERE. 

The CRY Q2 Earnings Conference Call is scheduled for 7/31/2012. 
Click the images below to enlarge

HaemoCer Instrumentation Advances Plant-sourced Hemostat Applications into Minimally Invasive Surgeries

BAYREUTH, Germany, May 31, 2012 /PRNewswire/ --BioCer Entwicklungs GmbH (BCE), a German based medical device manufacturer, announces the CE approval of its advanced HaemoCer™ Universal Applicator (UA). HaemoCer™ UA is a delivery configuration for applications of the HaemoCer™ Absorbable Polysaccharide Hemostat (APH) system in minimally invasive surgical procedures.

The HaemoCer™ UA system is a unique instrumentation for laparoscopic, ENT, spinal and other MIS procedures where precise delivery of APH particles to the bleeding site is mandatory. The delivery instrument is easily attached to the HaemoCer™ bellows dispenser and enables hemostat delivery under direct vision to the wound site for the control of capillary, venous and arteriolar bleeding. The initial HaemoCer™ 5 gram product range has also expanded to include multiple size configurations meeting the strong international market demand for HaemoCer™ in multidisciplinary procedures.

Dr. Markus Heinlein, Managing Director of BioCer, commented, "The clinical introduction of HaemoCer™ UA offers surgeons a delivery option within the expanding practice of minimally invasive surgery. Collaborating with leading laparoscopic surgeons and German engineers, our system has been designed for the controlled release of hemostatic particles. HaemoCer™ UA encompasses 3 unique advances, including a press-and-release locking system facilitating UA tip placement without uncontrolled discharge. Secondly the system features a tip design which minimizes tip blockage, both common difficulties with current particle delivery devices. Finally the new instrumentation is sold separately and the push-on coupling sheath will accommodate other devices allowing medical professionals and patients to immediately benefit from this new instrumentation while converting stocks to HaemoCer™."

BioCer Entwicklungs-GmbH, HaemoCer APH particles are manufactured utilizing a Polysaccharide Ultra-hydrophilic Resorbable Engineering (PURE) process.  HaemoCer™ contains no human or animal components and is developed and manufactured in Germany. For information, distribution inquiries, and licensing options, please visit http://www.biocer-gmbh.de or email info@biocer-gmbh.de.

Revealed - UK NHS tests for Transfusion related vCJD. US California new cases.

In More Bad news for purveyors of Bovine derived products and transfusion supporters, thousands of NHS patients could be secretly monitored by the Government for symptoms of the human form of mad cow disease amid concerns that there could be another wave of infections.

Experts advising the Department of Health believe patients who have received more than 80 blood transfusions are most at risk of developing the fatal brain disease because it can be passed on through infected blood.

They say monitoring these patients could give vital clues about the way the disease develops and is transmitted from person to person and could help work out whether there are likely to be further deaths. 

Thousands of NHS patients could be secretly monitored by the Government for symptoms of the human form of mad cow disease amid concerns that there could be another wave of infections

It could also inform officials whether the risk from blood donations needs to be treated more seriously.

But they are considering conducting their surveillance secretly because they fear that informing patients they are at risk and are being monitored will cause unnecessary alarm.

The proposals have been discussed by a powerful panel of leading scientists and doctors, which advises the Government on the disease, known as variant CJD.

More...

• Blood test for mad cow disease used in UK for the first time
• Flesh-eating bug that you can catch on the bus or train is spreading in the UK

The panel's report, published online, suggests conducting 'covert health surveillance' of around 30,000 patients known to have received a high number of blood transfusions.

Experts would expect to see at least 150 cases of vCJD in this group of patients, based on scientific evidence that between one in 4,000 and one in 20,000 of the population may be infected.

Experts believe patients who have received more than 80 blood transfusions are most at risk of developing the fatal brain disease as it can be passed on through infected blood

But this has so far not been seen and may either mean the risk is lower than previously thought, or that it is taking longer for cases to develop.

The 'highly transfused' group includes people suffering life-threatening illnesses including acute leukaemia, aplastic anaemia and the blood disorder thalassemia - as well as those with multiple injuries due to road accidents, or heavy blood loss from aneurysms. 

The report acknowledges that following patients without their consent is 'ethically problematic'.

But the panel, a subcommittee of the Advisory Committee on Dangerous Pathogens, has asked the Health Protection Agency to set out the various options for monitoring these patients based on seeking their consent or not. 

Chris James, chief executive of the Haemophilia Society, said: 'We are shocked to learn there was ever any suggestion of non-consensual monitoring. 

'Given the history of contaminated blood in the 1970s and 1980s, the maintenance of medical ethics is especially important to the haemophilia community.

'Any proposed framework must be reviewed by an ethics committee and open to challenge from individuals and organisations such as ourselves through a formal consultation process.' 

Latest official figures show seven NHS patients have died from vCJD after having blood transfusions.

Four are known to have been given blood from people who were infected with fatal vCJD, and the other three had previously had transfusions although it is not known whether the blood was contaminated.  

Since the first vCJD cases emerged in the mid-1990s, 175 people in Britain have died from the brain wasting disease, which is linked to eating beef infected with BSE.

Experts predicted that hundreds more could die after receiving blood infected with the disease. But they now admit they are baffled as to why these cases have failed to emerge. 

One theory is that some people have a genetic advantage and may only carry the disease without developing symptoms. However, they can still infect others if they give blood.

In one case, a patient is known to have been exposed to vCJD in a blood transfusion and is still alive 24 years later. 

A memorial plaque to victims of Human BSE on the Riverside Walk near Westminster Bridge, London

At the moment, patients are only informed that they are at increased risk of developing vCJD if they have been exposed to blood from more than 80 donors and if they are about to have brain, spinal or complex eye surgery.

But this threshold may now be raised to only inform patients if they are exposed to 300 or more blood donors because the lack of vCJD cases so far may indicate that the risk of catching vCJD in blood may be lower than previously suspected. 

Judy Kenny, of the CJD Support Network, whose husband Deryck died aged 69 in 2003 after being given contaminated blood, said: 'If the authorities are going to do any monitoring, patients should be aware of it. 

'There is no grey area - if they are thinking about unconsented monitoring, then it is wrong.'

CJD occurs when nerve-tissue proteins called prions (illustration above) turn 'bad' and gradually destroy the brain

Professor Chris Bunce, science director of charity Leukaemia and Lymphoma Research, said: 'The extent of the risk [of vCJD] to patients who receive regular blood transfusions as part of their treatment is as yet uncertain. 

'One way to ascertain the risk would be to monitor the distribution of the pathogen among people in this group. 

'But with that comes the moral question of whether patients should be informed or not, and this is the dilemma of the Health Protection Agency.'

A Department of Health spokesman said: 'No decisions have been taken on any unconsented follow-up of highly transfused patients.

'No unconsented follow-up has taken place and none would without appropriate ethical approval and on the basis of legal advice.


Meanwhile Stateside...
(Sacramento, CA) 
Friday, February 10, 2012

The Marin County Public Health Officer, Dr. Craig Lindquist, says one person who was diagnosed with a brain disorder similar to Mad Cow Disease has passed away, but that the person did not contract the disease from contaminated beef.  That makes it the classic form of the disease and not the varient form.   

There is another resident still living with Creutzfeldt Jacob Disease or CJD.  Lindquist says there is no evidence it is of the varient variety either. 

CJD is very rare, but always fatal.  It attacks the memory, hand eye coordination and vision before killing the victim within a year. 

The Mad Cow variant of the disease can be spread only by contact with the brain tissue or nervous system tissue of someone or something that is afflicted.  Twenty five years ago, nearly 170 people died of the variant form of the disease in Europe.

Doctor Richard Breitmeyer runs the lab at UC Davis that  tests  Mad Cow disease in sheep and cattle.  

BREITMEYER:  "The current science believes in the United Kingdom that was the cause of Varient CJD in people in that they had consumed meat products that were contaminated with the bovine form."

Breitmeyer's lab is one of six in the nation.

Cattle fed with bovine bone meal was found to be a significant cause of the spread of the disease in Europe.  Of the 40,000 animals tested each year in the United States since, only two tested positive.

In humans, 85 percent of those afflicted with classic CJD had no known risk factors.  Five to ten percent had a genetic history of the disease.

CRY Q3 10Q, FDA Disapproves Perclot IDE.....Perclot China Trial underway......

10Q - PerClot and HemoStase
Revenues from the sale of hemostats, consisting of PerClot and HemoStase, decreased 71% for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010. Revenues from the sale of PerClot and HemoStase decreased 40% for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010. The revenue decreases in the three and nine months ended September 30, 2011 were primarily due to a decrease in hemostat sales volume in domestic markets, partially offset by an increase in sales volume in international markets. The revenue decrease in the nine months ended September 30, 2011 was also impacted by a decrease in average selling prices, which decreased revenues by 6%.
International hemostat revenues increased 24% for the three months ended September 30, 2011 and 55% for the nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively. This increase is primarily due to an increase in international sales of PerClot in the 2011 periods over the international sales of HemoStase in the corresponding 2010 periods. Management believes that international PerClot revenues have been favorably impacted by the Company’s ability to market PerClot for all surgical specialties, expanding the direct European sales force into Austria, and PerClot’s product performance when compared to other hemostatic agents.
The decrease in domestic sales volume for the three and nine months ended September 30, 2011 was due to the Company’s planned discontinuation of sales of HemoStase in late March 2011. The Company recognized no domestic hemostat sales in the second or third quarters of 2011, subsequent to the discontinuance of HemoStase sales, as PerClot is not yet approved for commercial distribution in domestic markets. The Company anticipates this loss of domestic hemostat sales to result in a decrease in total hemostat sales for the remainder of 2011 when compared to the corresponding 2010 periods.


The Company will not be able to sell PerClot in the U.S. in future years until U.S. Food and Drug Administration (“FDA”) approval is granted. On March 31, 2011 CryoLife filed an Investigational Device Exemption (“IDE”) with the FDA seeking approval to begin clinical trials for the purpose of obtaining Premarket Approval to distribute PerClot in the U.S. On April 29, 2011 the FDA disapproved CryoLife’s IDE filing with numerous comments and questions. CryoLife is currently addressing those comments and questions and anticipates refiling its IDE for PerClot in the fourth quarter of 2011.


Q3 Report - Brackets have been added-
Ashley Lee...

We experienced some delays in getting PerClot approved in certain international markets and some competitive issues in the EU, which leaves us to slightly lower our guidance.

Worldwide BioGlue revenues were up 10% for the third quarter and up 5% for the nine month period. These increases were predominantly driven by volume increases, particularly in Japan, due to the recent launch of the product. This was the largest year-over-year quarterly increase for BioGlue revenues, since third quarter of 2008, and we continue to remain enthusiastic about the opportunity in Japan.

Total sales in the third quarter in Japan were $651,000 and year-to-date in Japan were approximately $1.2 million. To-date, approximately 250 surgeons have been trained and over 160 accounts have ordered product. We expect another large order from Japan before the end of the year.

PerClot sales for the third quarter were $620,000 and were $1.9 million year-to-date. We experienced some delays in getting PerClot approved in certain international markets and some competitive issues in the EU, which leaves us to slightly lower our guidance. However, despite these delays, our international revenues from the sale of powdered hemostats in the third quarter still increased 24% compared to the prior year, and 55% for the nine month period compared to the prior year.

Steve Anderson...As Ashley has discussed earlier in third quarter of 2010, we announced our first technology acquisition and that we have signed a worldwide manufacturing and distribution agreement for a unique powered hemostatic agent PerClot with Starch Medical of San Jose (Shanghai), California (China).
(Chinese) PerClot is an ideal replacement for the hemostatic powder that we had been distributing worldwide. The primary difference is that PerClot’s gross margin will be 80%.....we filed our IDE for PerClot with the FDA in March of this year. The FDA had questions about our submission that we have been addressing. We will be reaching our IDE to the FDA in mid November. We expect to begin the clinical trial for PerClot (Link to current trial Xijing Hospital of Digestive Diseases, Xi'an, Shaanxi, China) during the second quarter of next year. The clinical trial will probably involve about 300 patients, 150 PerClot patients and 150 control patients. We expect that with six months enrollment and three months follow-up of these patients that we will file our PMA in the second quarter of 2013.

• In which circumstances does the FDA disapprove or withdraw an IDE?
  FDA may disapprove or withdraw approval of an IDE application if FDA finds that:
• 1. The sponsor has not complied with applicable requirements of the IDE Regulation, any other applicable regulations or statutes, or any condition of approval imposed by an IRB or FDA.
  2. The application or a report contains untrue statements or omits required material information.
  3. The sponsor fails to respond to a request for additional information within the time prescribed by FDA.
  4. There is reason to believe that the risks to the human subjects are not outweighed by the anticipated benefits to the subjects or the importance of the knowledge to be gained, that informed consent is inadequate, that the investigation is scientifically unsound, or that the device as used is ineffective.
  5. It is unreasonable to begin or to continue the investigation due to the way in which the device is used or the inadequacy of:
     (i) the report of prior investigations or the investigational plan; (ii) the methods, facilities, and controls used for the manufacturing, processing, packaging, storage, and, where appropriate, installation of the device; or (iii) the monitoring and review of the investigation.

Q & A...

Matt Dolan - Roth Capital Partners

Great. First question on the guidance, just looking at the revenue at this point it implies maybe around 10% sequential uptick in Q4. So how far below $122 million should we expect or what gets you to that type of sequential uptick, meaning, is there a category that improves something on the macro level that rebounds?

Ashley Lee

We think that the upside is in the Cardiogenesis product line and the PerClot product line as well as potentially BioGlue in Japan.

Matt Dolan - Roth Capital Partners

Okay. But given your guidance on those categories it still requires a pretty big sequential uptick?

Ashley Lee

Yeah well the possibility exists again that we could do better and then we expect to do better in Cardiogenesis, PerClot, and BioGlue in Japan. And that -- we think that that’s, we have more upside in those three areas than the rest of the business.

Matt Dolan - Roth Capital Partners

Okay. And then on the earnings guidance just to clarify, I think the delta between adjusted and GAAP last quarter was $0.05 as supposed to an $0.08 differential at mid year. So I wanted to make sure that that’s the reason for the increase in the earnings guidance? And secondly the implied guidance for Q4 cuts EPS basically in half. So I’m just trying to understand why that would be?

Ashley Lee

The primary driver in non-GAAP, the increase in non-GAAP EPS as compared to the end of the second quarter is primarily due to the shifting of some R&D expenses due to some delays and getting some studies started, as those will be shifting out of 2011 into 2012. As it relates to the fourth quarter we provided for some additional expenses in the fourth quarter this year to account for the ongoing discovery and the acceleration of the discovery in our litigation with Medafor.

Raymond Myers - Benchmark

And that was going to be my next question. So let’s get right to that. Roughly how much Medafor litigation expense should we expect?

Ashley Lee

If you go through the end of the third quarter we had spent about $1.4 million and we’re expecting a similar amount in the fourth quarter of this year about $1.4 million.....