HemCon Medical Technologies, Inc. Files for Chapter 11

HemCon Medical Technologies, Inc. (“HemCon”) announced today that it filed a voluntary petition for Chapter 11 reorganization in U.S. Bankruptcy Court.

The filing comes following the U.S. Court of Appeals for the Federal Circuit (CAFC) en banc decision on March 15, 2012 which affirmed an award of $34.2 million in damages to Marine Polymer Technologies, Inc. in a patent infringement case initiated in 2006.

“Chapter 11 gives us the best opportunities to maximize the value of HemCon and to continue to conduct business operations while we restructure debt, costs and other obligations,” said Nick Hart, HemCon’s President and Chief Financial Officer. “In addition, HemCon is planning on filing a petition to request that the CAFC rehear its 5-5 decision on claim construction, in the patent infringement case.”

During the past year, HemCon reformulated its chitosan-derived product line, branded as HemCon® PRO products. The HemCon PRO chitosan-derived product line has been successfully introduced in the U.S. and is approved for European and Japanese distribution, allowing for uninterrupted supply of product. Similarly, HemCon will continue supporting the recently introduced GuardaCare®XR Surgical product, as well as all of its other product lines including HemCon Patch® PRO and ChitoGauze® PRO.

HemCon anticipates commencing Phase II clinical trials in June for its U.S. Army-funded Lyophilized Plasma product (LyP). The U.S. military believes that early administration of plasma has an important role in reducing battlefield mortality rates, and sees this program as a top research and development priority.

HemCon’s European subsidiary is not subject to the Chapter 11 proceedings and will continue to operate as previously, selling its oxidized cellulose-based products including GuardIVa® Antimicrobial Hemostatic IV Dressing, Synaero™ Hemostatic Gel, and the consumer products line.

HemCon Medical Technologies, Inc. ( www.hemcon.com ), founded in 2001, develops, manufactures, and markets innovative technologies that control bleeding resulting from trauma or surgery. HemCon products are designed for use by military and civilian first responders as well as medical professionals in hospital, dental and clinical settings where rapid control of bleeding is of critical importance. HemCon is headquartered in Portland, Ore., with additional commercial operations in Ireland and the Czech Republic.

SOURCE: HemCon Medical Technologies, Inc.

Morgan out, Hart in as CEO at Portland-based HemCon Medical Technologies

John W. Morgan, the chief executive of Portland-based HemCon Medical Technologies since 2004, resigned Monday "to pursue other opportunities," the company said in a press release.
He has been replaced as CEO by Nick Hart, who has been the company's chief financial officer for the last two years.
HemCon, a privately held company that makes and sells bandages and dressings that promote coagulation and discourage infection, employs about 126 people in Portland, Ireland and the Czech Republic. The company doesn't disclose revenues.
The company's dressings are derived from chitosan, a component of shrimp shells. They have been widely used by the U.S. military and, the company says, are responsible for saving at least 100 lives. For the last several years, the company has pushed aggressively into civilian markets.
A federal jury in New Hampshire last spring awarded a $29.4 million judgment to HemCon rival Marine Polymer Technologies, which makes a biocompatible dressing made from algae and claimed HemCon had violated its patent. HemCon appealed that award and has been permitted to continue selling its products while the case proceeds.
HemCon Chairman William P. Wiesmann said Monday that the change was "a natural progression," as Morgan sought bigger challenges.
Wiesmann said annual sales had fallen off from a high of more than $72 million several years ago, but that he expects the company to be profitable again by the fourth quarter of this year.

Appeals Court Stays Judgment in HemCon's Patent Infringement Case

PORTLAND, Ore.--(BUSINESS WIRE)--HemCon Medical Technologies, Inc., announced today that the U.S. Court of Appeals for the Federal Circuit granted HemCon's motion to stay the injunction and final judgment (including the damages award) obtained against it in a patent infringement case brought by Marine Polymer Technologies, Inc. The stay halts any enforcement of the lower court’s injunction and damages award while HemCon attempts to have both overturned on appeal, a process expected to take on the order of 12 to 18 months to complete. As a result, HemCon can continue selling its chitosan-based wound care products and will not be required to pay financial damages during this appeal process.
"HemCon is extremely pleased that the appellate court agreed that HemCon could continue selling its product line during the pendency of the appeal. We will urge on appeal that the lower court decision finding infringement was incorrect, in part because the Marine Polymer patent is invalid when properly interpreted," said John W. Morgan, HemCon's President and Chief Executive Officer. "The stay is a victory for HemCon's customers, including military personnel whose lives are being saved by HemCon products, and hospital patients who benefit from reduced infection risk and better hemostasis."
The stay is the most recent decision in the patent infringement action instituted by Marine Polymer Technologies, Inc. "In imposing the stay, the Court of Appeals concluded that HemCon had shown a strong likelihood of succeeding on appeal, or at least a substantial case on the merits and that any potential harm weighed in HemCon’s favor," Morgan explained. "We believe the appeals court will ultimately agree with our conclusion that our products do not infringe the Marine Polymer patent. We look forward to further presenting our case to the Court.”
HemCon Medical Technologies, Inc. (www.hemcon.com) founded in 2001, develops, manufactures, and markets innovative technologies to control bleeding and infection resulting from trauma or surgery. HemCon products are designed for use by military and civilian first responders as well as medical professionals in hospital, dental and clinical settings where rapid control of bleeding is of critical importance. HemCon is headquartered in Portland, Ore., with additional commercial operations in Ireland and the Czech Republic.

HemCon to ask court to reverse $29.4M patent award

An Oregon company plans to challenge a $29.4 million jury award to a Massachusetts company for patent infringement over a product derived from shrimp shells or algae that can be used to control bleeding. HemCon Medical Technologies Inc. of Portland says it makes a material called chitosan from shrimp shells while Marine Polymer Technologies in Danvers, Mass., makes it from algae. The chitosan is used in bandages to help control bleeding and infection from trauma or surgery and to treat battlefield wounds for the military. Last week, a U.S. District Court jury in Concord, N.H., ruled in favor of Marine Polymer in a patent infringement lawsuit it filed against Hemcon four years ago. Sergio Finkielsztein, president and CEO of Marine Polymer, praised the verdict and said the company will seek a permanent injunction against HemCon. "Our company was built on innovation, and new technologies we have developed since the early 90s and continue to develop to this day," Finkielszstein said. But John Morgan, president and CEO of HemCon, said the verdict would allow the patent to cover shrimp-based chitosan compounds that were publicly disclosed by others well before the Marine Polymer patent application was filed. "We believe the jury's decision is wrong and will ask the court to review and reverse it," Morgan said Wednesday. He also said the U.S. Patent Office granted a HemCon request for re-examination of the patent last November and the agency made an initial determination last month to reject Marine Polymer's claims. Morgan said the Patent Office indicated its willingness to allow the claims of the patent if Marine Polymer would limit them to algae. "There were broad claims in the patent that looked at all forms of materials," Morgan said. "But clearly the process and material employed by Marine Polymer is not what we used."

Vascular Solutions Wins Appeal In Disparagement Litigation With Marine Polymer; To Accept $3.2 Mln In Damages

Monday, medical device company Vascular Solutions, Inc. (VASC:News ) said that the First Circuit of the U.S. Court of Appeals has affirmed the earlier judgment in its favor in its product disparagement litigation with Marine Polymer Technologies and $2.7 million in damages to be paid to Vascular.
In the two-week trial in April 2008, the jury has issued a permanent injunction prohibiting Marine Polymer from making disparaging statements concerning the safety of Vascular Solutions' D-Stat hemostat products. The jury had also awarded $4.5 million in damages to Vascular Solutions and found five statements made by Marine Polymer regarding Vascular Solutions' D-Stat products false.
The Appeals Court,however, has determined that due to differences in opinion among the judges Vascular may either accept a $2.7 million award of damages, plus interest, or insist upon a new trial limited to the issue of determining the reasonable amount of damages.
Adding interest at the statutory rate, Vascular said that it calculates the $2.7 million award to currently total approximately $3.2 million. Today's appellate decision is subject to Marine Polymer Technologies' ability to petition for rehearing by the First Circuit and appeal to the U.S. Supreme Court. The permanent injunction issued against Marine Polymer at the conclusion of the earlier trial will remain in effect.
Independently, the Appeals Court found that the evidence "provides ample proof of malice. And the most inflammatory of the five statements, and the most glaringly unsupported, are the two that associated D-Stat Dry with specific and serious outcomes in percentages that would be remarkable for a relatively straightforward medical task -- to stop bleeding at a modest-size doctor-created incision."
Howard Root, CEO, Vascular Solutions, said, "In order to conclude this litigation, we intend to accept the $2.7 million award of damages, plus interest, and to forgo the cost and distraction of an additional trial on damages. We expect the final steps in this litigation to be concluded during the first half of 2010, and the approximately $3.2 million in damages and interest to be collected by Vascular Solutions without substantial additional expense."
VASC is currently trading at $8.40, down $0.05 or 0.59, on the Nasdaq.