Stryker Q2 2011

In addition, the company's biosurgery business manufactures hemostasis product such as the Vitagel, which are designed to control interoperative and postoperative bleeding. We believe the collective talent of our sizable sales forces across multiple franchises positions us to build on Orthovita's success and accelerate sales growth....Matthew O'Brien - William Blair & Company L.L.C.

Okay. And then the second question on the biologic side with the Orthovita acquisition. Can you just talk a little bit about where your utilization was with your biologic portfolio before the Orthovita deal in terms of all the spine cases, spinal fusion cases you were involved with? And then where you think that may go over the next 6 months or a couple of years even with that broad portfolio available to you now?

Katherine Owen

I would view that the acquisition is very similar in that if we're going to leverage the product offering that we got with the Orthovita deal through our much broader distribution channels in both inpatient and outpatient and across multiple divisions, Instruments, Spine, as was mentioned earlier. I wouldn't view this as leveraging the revenue that we were generating within our biotech specifically. This is where we're rounding out our product portfolio where there was a gap and, again, focusing on our core and leveraging the distribution capability that we have.

Stryker Announces Definitive Agreement to Acquire Orthovita, Inc. for $3.85 Per Share in Cash

Kalamazoo, Michigan - May 16, 2011- Stryker Corporation (NYSE:SYK) announced today a definitive agreement to acquire Orthovita, Inc. (Nasdaq:VITA), a global developer and manufacturer of orthobiologic and biosurgery products through an all cash tender offer. Orthovita competes in the $5 billion orthobiologics market and is a global leader in synthetic bone grafts with its Vitoss(TM) product offering, and also competes in vertebral augmentation with its Cortoss(TM) product offering. In addition, the company's Biosurgery business manufactures hemostasis products such as Vitagel(TM) which are designed to control intra-operative and post-operative bleeding. Combined, Orthovita's product portfolio achieved sales of $95 million in 2010. The acquisition of Orthovita is highly complementary to Stryker's existing orthobiologics offering, which is currently sold through multiple Stryker divisions.
Under the terms of the agreement, Orthovita shareholders will receive $3.85 for each outstanding Orthovita share of common stock. The value of the transaction is estimated at $316 million, based upon Orthovita's 79 million fully diluted shares outstanding as well as net debt of $12 million.  
"With this acquisition we are meaningfully expanding our orthobiologics product portfolio and strengthening our competitive position in key segments of the Spine, Orthopaedics and Biosurgery markets," said Stephen P. MacMillan, Chairman, President and Chief Executive Officer of Stryker. "We believe the collective talent of our sizable sales forces across multiple franchises positions us to build on Orthovita's success and accelerate sales growth."  
The boards of directors at Stryker and Orthovita have approved the transaction, and the board of directors of Orthovita resolved to recommend that Orthovita shareholders tender their shares to Stryker in the tender offer.  In addition, shareholders holding approximately 14.5% of the outstanding shares of Orthovita common stock have entered into agreements with Stryker to support the transaction and to tender their shares in the offer.
The tender offer is scheduled to commence within 10 business days and is expected to close in the second quarter of 2011.  The tender offer is subject to customary closing conditions, including the tender of a majority of the outstanding shares of Orthovita common stock on a fully diluted basis and the expiration or termination of the Hart-Scott-Rodino Antitrust Improvements Act waiting period. Following the tender offer, Stryker will acquire the remaining outstanding shares of Orthovita common stock through a second step merger.  Upon closing, the transaction is expected to be neutral to Stryker's 2011 earnings per share excluding acquisition and integration-related charges.
Citi served as Stryker's exclusive financial advisor in connection with this transaction.
Stryker is one of the world's leading medical technology companies and is dedicated to helping healthcare professionals perform their jobs more efficiently while enhancing patient care. The Company offers a diverse array of innovative medical technologies, including reconstructive, medical and surgical, and neurotechnology and spine products to help people lead more active and more satisfying lives. For more information about Stryker, please visit www.stryker.com.

Powder Hemostatic Medical Devices Segment

To date there are many types of Hemostatic Medical Devices on the market, there are also a plethora of formats utilized e.g. gauze, liquid, pastes and powders. Today I will introduce a list of powders, and while not comprehensive it is indicative of current technologies available to the surgeon. Initially Oxi Cell, Gelatin and Avitene powders were the main products. However now Chitin, and Starch/polysacharides have increased in visibility originally, and now with a very large program of out-licensing of the same technologies under different names. Powders face application and procedural technique issues, as do all formats. Over the following weeks I would like to explore needs, demands and evaluate these systems. Repetitive technology re-branding is also something I hope Blog followers will offer further thoughts on, another item to be considered is sourcing, manufacturing source such as China and due diligence of some of these companies. If you wish to contribute experience or thoughts please feel free to contact me at hemostatguy@gmail.com. We will also explore geographic factors, manufacturing,. distribution and due diligence

Pro Fibrix - Fibrocaps thrombin fibrinogen
 A dry powder based on a mixture of fibrinogen and thrombin, Fibrocaps is a ready-to-use preparation designed to be stable at room temperature and applied in different formats. This is a product and company that shows innovation! Pro Fibrix feel free to contact me.....hemostatguy@gmail.com

HemostasisLLC - Starch

BioCer Entwicklungs-GmbH is a Bayreuth, Germany based company which commercializes innovative technologies developed in conjunction with leading German Research Institutes and Universities.
Biocer have the most powerful of the plant based Starch products with HaemoCer Plus which was commercialized in Q3 2013. The video shows HaemoCer Pl;us compared to the other powdered polysaccharides with double speed and double absorbency. 

Starch Medical - PerClot Starch (AKA OrthoClot)
Absorbable Modified Polymer (AMP™) Chinese technology is a proprietary engineering process that modifies plant starch into ultra-hydrophilic, adhesive forming hemostatic polymers. AMP™ materials are biocompatible, absorbable polysaccharides containing no animal or human components. 

ClotPlus - OrthoClot Starch (AKA PerClot)
OrthoClot™ China made Polysaccharide Haemostatic System Administrator (PHS) is a natural plant-based haemostatic system composed of Absorbable Modified Polymer (AMP™). OrthoClot™ is intended as an absorbable haemostatic system

Medafor - Arista Starch (Outlicensed as Hemostase and Vitasure)
Arista™AH is an absorbable hemostat, based on Medafor's patented MPH® (Microporous Polysaccharide Hemospheres) Technology that is used in the control of profuse bleeding in general surgery when conventional procedures are ineffective or impractical.

CryoLife - Hemostase starch (AKA Arista and Vitasure) 
HemoStase is a plant-based powder that rapidly dehydrates blood and promotes clotting on contact.

Orthovita - Vitasure Starch (AKA Arista, Hemostase)
Vitasure Absorbable Hemostat is comprised of many powerful polysaccharide spheres packaged within a bellows applicator.






Celox - Chitin
Celox™ is made with chitosan, a natural polysaccharide. Chitosan has a known metabolic pathway. That means any left in the body is broken down by the bodies normal enzymes and converted into materials normally present in the body.

Hemcon (Alltracel) - Oxi Cell

Davol - Avitene

Ethicon - Gelatin Powder

FDA Approves Orthovita's New Collagen Facility

Orthovita, Inc. (NASDAQ: VITA | PowerRating), an orthobiologics and biosurgery company, reported today that the U.S. Food and Drug Administration (FDA) approved Orthovita's PMA supplement for a new collagen processing facility in Malvern, Pennsylvania. Orthovita will use the new facility to process the highly purified form of collagen used in its VITAGEL(TM) Surgical Hemostat product. VITAGEL is a composite liquid hemostat used in surgical procedures as an adjunct to hemostasis when control of bleeding by ligature or conventional procedures is ineffective or impractical. VITAGEL is combined with the patient's own plasma immediately prior to application to a bleeding site. A fibrin/collagen clot forms quickly to control bleeding and provide a three-dimensional matrix to facilitate healing.

The approval of the new facility not only gives Orthovita enhanced control over the supply and quality of a key raw material for its VITAGEL product, but also provides the Company with an opportunity to develop, manufacture and market additional collagen-based products. This technology processes collagen to retain crucial aspects of its natural molecular structure and the potent biological characteristics found in the collagen of living tissues. As a result, the collagen processed at the facility will be among the purest available on the market.

Orthovita's President and Chief Executive Officer Antony Koblish stated, "We are very pleased to have further solidified our supply control over our VITAGEL product. The regulatory approval of our collagen facility also gives us another resource for executing on our goal to broaden our product offerings and increase sales force leverage. We are actively engaged in research and development work for products based on the versatile properties of the ultra pure collagen that can be made at our FDA-approved facility. We are also pursuing outside partnering and co-development arrangements to utilize our collagen facility and technical know-how."

Hemostase: Medafor says its off...CryoLife its on.......

NOT SO FAST, MY FRIEND!

The continued quagmire that is the CryoLife/Medafor relationship appears set to continue according to This latest Press Release from CryoLife.

Background

After a failed takeover bid by CryoLife they encouraged Medafor shareholder's to withhold their votes at a recent Medafor shareholder meeting. This was rejected by 95% of the 70% of attendee's and one disappointed shareholder will no doubt be Jim Karerchersuch who commented "I say get rid of CryoLife and let investors make some money,".

Expenses in the tussle continue to escalate for both companies with Medafor CEO Shope stating... "The real problem for Medafor is the distraction and expense stemming from CryoLife's takeover bid and continuing litigation, Shope said. Had it not been for the $1.2 million the company shelled out for legal expenses last year, Medafor would have been profitable, ."

and another online source stating ...."Anderson, who launched the hostile takeover attempt of Medafor in 2009 and chose several public venues to prosecute his case, spent approximately $6 million in the effort."

Conclusions

For those on the sidelines this extremely public battle has been an intriguing insight. Lately barely concealed personal attacks are now appearing in certain news articles relating to CryoLife CEO Steven Andersons, age and absence from the shareholder meeting despite his residence in MN. Meanwhile Medafor management were brought under the spotlight with the CryoLife claim "that Medafor's CEO and chief financial officer earned a combined $700,000 last year." Medafor management also denied any issues related to the fact that Medafor senior executives, and Pennsylvania residents Shope and Pasquale don't live in Minnesota, where the company's 21 employees are based. With Pasquale claiming it isn't necessary to live locally.

Investors and Distributors must be feeling unsettled by the lack of clarity in terms of supply, and without any public statement from Medafor or the courts (where both companies appear more comfortable communicating) the status quo appears confusing.

One positive indication from this mess is that plant-based hemostatic technology is certainly worth fighting for. Medafor partner Orthovita must have an eye on these occurences, as will other key China manufacturer Starch Medical.

CryoLife Requests Medafor Shareholders WITHHOLD Support for Medafor Directors

Dear Fellow Medafor Shareholder:

You should have recently received a proxy statement from Medafor asking you to re-elect the five incumbent members of their board of directors.

As Medafor's largest shareholder, we are deeply concerned by both Medafor's rush to hold their annual shareholders' meeting and by the troubling information disclosed in their proxy statement and recently issued financial statements and letters to shareholders. We are writing to urge you to WITHHOLD your support for directors Michael Pasquale, Paul Gray, Robert Halverson, Gary Shope andGerald Van Eeckhout given their poor oversight of Medafor.

• Do NOT return your proxy to management.
• If you have already given management your proxy, revoke it by writing Medafor.
• If you can, attend the meeting in person.

MEDAFOR'S DIRECTORS: ENRICHING THEMSELVES AT THE EXPENSE OF SHAREHOLDERS

Medafor's management and board have continually diluted shareholders, issuing new shares to finance the company without receiving adequate value in return. Their proxy statement and financial statements provide further evidence of this fact.

Specifically, the proxy discloses several instances during 2009 where stock, warrants and options were issued to employees, contractors, distributors and others at prices inconsistent with Medafor's statements about the value of Medafor shares.

In 2009, Medafor's board granted shares to themselves that they valued at only $1.50 per share. In the fourth quarter of 2009, Medafor issued options to management with an exercise price of $2.00 per share. This means that at the end of 2009, the Medafor board concluded that $2.00 per share was "fair market value," as is required under the stock incentive plan that Medafor shareholders approved. Despite this, just two months later, Medafor urged its shareholders not to sell their shares to CryoLife because, in Gary Shope's words, $2.00 per share was not "even close to a fair price" and was "grossly inadequate." Apparently, $2.00 per share is unconscionably low when Medafor shareholders want to sell their shares, but it's fair enough when Medafor's insiders are compensating themselves. One thing is certain, either the Medafor board and management have been enriching themselves at the shareholders' expense by undervaluing their equity and option awards, or their statements regarding the adequacy of CryoLife's$2.00 per share offer were not made in good faith.

Also raising a concern is the fact that, in its proxy statement, Medafor implied that the shares issued to Magle in conjunction with the technology transfer transaction were issued at an average price of $5.28 per Medafor share. This valuation raises questions as to why Medafor routinely granted stock, options and warrants that were priced considerably below $5.28 per share in the months leading up to the consummation of the Magle transaction. Have Medafor's board and management unjustly, and potentially illegally, enriched themselves and key partners at the expense of other shareholders by granting stock and options at prices considerably below market value or have they not been candid in their statements to Medafor shareholders regarding the Magle transaction and its impact on Medafor and its shareholders?

The proxy also indicates that Medafor has entered into severance and change in control agreements with its CEO and CFO, providing the current management with golden parachutes that could deter potential buyers. These agreements are in addition to the excessive compensation earned by key executives. For instance, in addition to stock awards and stock option grants, Medafor's CEO and CFO earned a combined $700,000 in cash in 2009 while delivering questionable financial performance and significant shareholder dilution. The amount of cash taken out of the business by the CEO and CFO for their compensation represents over 70 percent of Medafor's available cash at the end of 2009. These are compensation levels that public company executives would be pleased to receive. They are not appropriate for a private company at Medafor's stage of development with limited cash.

MEDAFOR'S LIMITED FINANCIAL DISCLOSURES RAISE NEW CONCERNS

We do not believe that Medafor has sufficient capital to invest adequately in its business in order to protect its technology from competition or to maximize its commercial potential. Medafor has disclosed in its financial statements that it must repay $3.2 millionin convertible notes in 2011 and that it is currently in default of the covenants of its $1.0 million credit facility that expires in November 2010, but it has not provided shareholders with any clarity as to how it plans to fund the $3.2 million in convertible note payments.

Furthermore, the Medafor board continues to withhold information that is required in order to accurately assess the company's current financial condition and performance. In fact, Medafor has failed to provide any financial statements for the first quarter of 2010. In addition, Medafor's directors entered into a highly unusual and material contract with Magle, involving substantial dilution to shareholders and a significant cash outlay, while concealing the information that would be necessary to allow an accurate assessment of Medafor's current financial condition following the transaction. Despite our repeated requests, Medafor has refused to allow us to see the contract with Magle, or their accounting records related to this transaction, including what value Medafor ascribed to the technology. They have also failed to provide key balance sheet data, shareholders' equity information, or detail on the company's cash position, as they have in the past, which would allow shareholders to gauge the impact of the transaction. Additionally, Medafor has trumpeted some improvement in earnings for the first quarter of 2010, without noting the impact on earnings per share of the Magle transaction. This lack of disclosure suggests that Medafor's board has significantly impaired the value of Medafor shares and is hiding it from shareholders.

MEDAFOR: CURTAILING SHAREHOLDER RIGHTS

Medafor's directors have unexpectedly scheduled their annual shareholders' meeting just seven months since the last meeting and have given shareholders barely three weeks' notice of this surprising meeting. This timing appears designed to prevent shareholders from being able to meaningfully evaluate the performance of Medafor and its board, nominate an alternative slate of directors, put forth shareholder proposals or otherwise participate fully in the meeting. In addition to attempting to prevent shareholder action at the meeting, the timing leads us to believe that Medafor's directors are anxious to ensure their re-election before shareholders have any possibility of discovering the impact that the Magle transaction has had on the company's condition and the value of their shares.

Medafor has also been actively attempting to curtail the shareholder rights granted in its bylaws by attempting to keep shareholders from being able to call their own meetings. They are working in court to take away the right guaranteed certain Medafor shareholders to call a special meeting at any time for any purpose.

Additionally, Medafor is attempting to deny shareholders access to records of board proceedings in order to conceal information from shareholders about the board's activities and the current financial condition of the company. Medafor has also stated that it has granted Magle the right to terminate its exclusive supply agreement with Medafor in the event that Medafor is acquired without board approval, regardless of whether a majority of shareholders think the transaction is fair.

MEDAFOR'S DIRECTORS ARE DESTROYING SHAREHOLDER VALUE AND LIMITING SHAREHOLDER RIGHTS

Medafor's board of directors has overseen the destruction of Medafor's business, its technology, and the value of its shares. Please join CryoLife in sending a message to Medafor's board that they must provide shareholders with up-to-date, complete information about the current condition of the company, especially the recent Magle transaction, and that they must respect our fundamental rights as shareholders to participate in director elections.

• Do NOT return your proxy to management ? this communicates you are WITHHOLDING your vote.
• If you have already voted, you can rescind your proxy by writing to Medafor at 2700 Freeway Blvd., #800, Minneapolis, MN55430-1757 and stating "I hereby revoke the proxy that I previously provided to you in connection with the annual shareholders' meeting to be held on June 10, 2010." Your revocation should be dated and signed, using your exact name as it appears on your Medafor shares. EVEN IF YOU HAVE RETURNED YOUR PROXY TO WITHHOLD YOUR VOTES FOR THE MEDAFOR BOARD, IT IS IMPORTANT THAT YOU RESCIND IT, IN ORDER TO AVOID GIVING MEDAFOR MANAGEMENT DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER PROPOSALS THEY MAY BRING AT THE MEETING WITHOUT HAVING GIVEN YOU PROPER NOTICE.
• If you can, we also encourage you to attend the meeting and voice your discontent in person.

By NOT returning your proxy to management, thereby withholding your vote for Medafor board of director nominees, you will be sending a clear message to the Medafor management and board that its actions are unacceptable!

If you have any questions, please do not hesitate to contact Nina Devlin at 212-704-8145.

Sincerely,

Steven G. Anderson

Founder, CEO and President

Shareholders may continue to visit www.cryolife.com/medaforoffer

Orthovita Q1 2010 - Edited

Our biosurgery sales increased 12% during the first quarter of 2010, compared to the first quarter of 2009. Biosurgery offers an important strategic entry to hospitals where our Hemostats product have many application and new sales representatives benefit particularly from this product line as they seek to gain access to new accounts......

Graham Tenneco

What is the direction or do you think drift going to be or trends based on the Obama's healthcare plan and what might meaningful procedures and where an ASP basically?

Tony Koblish

We can't know all of that what's going to happen. However, I think the concept of evidence-based medicine and clinical data and clinical value proposition to the patients; I believe is going to be more and more important as we go forward. I think that we are exceptionally well positioned across all of our product platforms for that day, not just with Cortoss, which happens to have superb therapeutic benefit, value proposition to the patient, subsequent fracture benefit to the patient also reduced healthcare expenditure and re-hospitalization as shown in our clinical data, but we have an excellent proposition around the Vitoss business relative to more expensive therapies in bone grafting and our Vitagel business is also plays to demonstrate some effected clinical data around knee replacements etcetera. So, I think we are very well positioned in terms of comparative effectiveness, clinical data value proposition that one trend that’s not going to go away and I think that’s going to just be the price to play going forward. We are not going to get there all at once, but it’s going to happen and so I think cost effective, clinical value proposition we are very well situated for that eventuality, which is I think going to be the major fallout long-term.

Source: Seekingalpha

CryoLife Files for Preliminary Injunction Against Medafor

CryoLife Believes Attempt to Terminate Distribution Agreement Is Improper

ATLANTA, GA…(March 30, 2010)…CryoLife, Inc. (NYSE: CRY), an implantable biological medical device and cardiovascular tissue processing company, announced today that it filed an emergency motion for a preliminary injunction against Medafor, Inc. in the United States District Court for the Northern District of Georgia, Atlanta division. CryoLife contends that Medafor is improperly attempting to terminate the exclusive distribution agreement ("EDA”) between the parties, and CryoLife has requested that the Court enjoin Medafor from proceeding with the termination.

CryoLife believes that Medafor’s attempt to terminate the EDA is wrongful for several reasons. Primarily, Medafor ignored the fact that the parties contracted away any right to apply the adequate assurances statute that Medafor is now invoking to attempt to terminate the EDA. Even if the statute applied, CryoLife believes Medafor failed to meet the statutory prerequisites for termination, for numerous reasons, including those described below.

Specifically, the statute is only available to a party with a reasonable basis for insecurity regarding the other party’s future performance, and CryoLife’s adherence to the contract has never been in legitimate doubt. The statute requires that any assurances demanded by a party with an insecurity be reasonable. CryoLife believes that Medafor’s requested assurances were not reasonable and in fact were designed to be overreaching and abusive. Perhaps most importantly, the statute demands that the party invoking it do so in absolute good faith, and CryoLife believes Medafor’s invocation of the statute was made in bad faith, as a pretextual scheme to get out of a contract that Medafor found itself unable and unwilling to honor.

The statute is also not available to a party who itself is in breach of its obligations. CryoLife is aware of numerous breaches by Medafor of the EDA, including: promoting and marketing product on its website for use in CryoLife’s exclusive Field in violation of the EDA; failing to prevent its Brazilian distributor from marketing and promoting the product on its website; failing to respond to notice letters of prohibited conduct in 17 instances, along with failing to respond to many of the allegations contained in the complaint filed against it by CryoLife; failing to respond to CryoLife’s notice letters regarding Medafor’s breaches of conduct in Spain; and refusing to protect the intellectual property rights of Medafor’s MPH technology in accordance with the terms of the EDA.

Steven G. Anderson, CryoLife’s chairman, president and chief executive officer, commented, “CryoLife has assiduously followed the terms of the EDA and has repeatedly communicated to Medafor its intention to continue to honor the terms of the EDA. We believe that Medafor’s request for assurances was not made in good faith and that it was simply a pretext to terminate a contract that they cannot consistently comply with, as evidenced by their repeated breaches. Unfortunately, in attempting to repudiate the EDA, we believe Medafor has put itself and its shareholders at great risk. Should this gambit fail, Medafor has exposed itself to significant damages in addition to the damages arising under the complaint previously filed by CryoLife and the substantial litigation costs this process will accrue.”

In the event an injunction is not granted, however, CryoLife will pursue its rights with respect to the EDA vigorously, including claims, for among other things, breach of contract, fraud and negligent misrepresentation and violation of the Georgia RICO provisions, and CryoLife will consider all avenues open to it to protect its interests and those of its shareholders and recover appropriate compensation from Medafor for its reckless actions.

CryoLife believes that it currently has enough inventory, with or without the fulfillment of the March 16, 2010 purchase order that was disputed by Medafor, to meet its business needs through the end of May 2010. CryoLife is optimistic that the court will rule on its motion for preliminary injunction prior to that time.

Shareholders may continue to visit www.cryolife.com/medaforoffer for additional information about CryoLife and its relationship with Medafor. Additional detail regarding the litigation between CryoLife and Medafor is also available in CryoLife’s filings with the Securities and Exchange Commission.

About CryoLife, Inc.

Founded in 1984, CryoLife, Inc. is a leader in the processing and distribution of implantable living human tissues for use in cardiac and vascular surgeries throughout the U.S. and Canada. The Company's CryoValve^® SG pulmonary heart valve, processed using CryoLife's proprietary SynerGraft^® technology, has FDA 510(k) clearance for the replacement of diseased, damaged, malformed, or malfunctioning native or prosthetic pulmonary valves. The Company’s CryoPatch^® SG pulmonary cardiac patch has FDA 510(k) clearance for the repair or reconstruction of the right ventricular outflow tract (RVOT), which is a surgery commonly performed in children with congenital heart defects, such as Tetralogy of Fallot, Truncus Arteriosus, and Pulmonary Atresia. CryoPatch SG is distributed in three anatomic configurations: pulmonary hemi-artery, pulmonary trunk, and pulmonary branch. The Company's BioGlue^® Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels. BioGlue is also CE marked in the European Community and approved in Canada and Australia for use in soft tissue repair. The Company's BioFoam™ Surgical Matrix is CE marked in the European Community for use as an adjunct in the sealing of abdominal parenchymal tissues (liver and spleen) when cessation of bleeding by ligature or other conventional methods is ineffective or impractical. BIOGLUE Aesthetic^® Medical Adhesive is CE marked in the European Community for periosteal fixation following endoscopic browplasty (brow lift) in reconstructive plastic surgery and is distributed by a third party for this indication. CryoLife distributes HemoStase^®, a hemostatic agent, in much of the U.S. for use in cardiac and vascular surgery and in many international markets for cardiac, vascular, and general surgery, subject to certain exclusions.

Medafor CEO responds to latest Cryolife salvo

MINNEAPOLIS - (Business Wire) Medafor Inc. (“the Company”) sent a letter to its shareholders detailing recent corporate accomplishments, including highlights from the Company’s unaudited financial results for 2009, and recent significant developments at the Company.

The complete text of that letter follows:

March 22, 2010

Dear Medafor Shareholders,

I am writing to update you on our financial highlights for 2009, as well as to provide you with some information about recent developments at our Company.

2009 Financial Highlights

I am pleased to report that Medafor has once again experienced a very strong year. Our performance was highlighted by continued revenue growth, a significant increase in operating profitability and steady positive cash generation. Perhaps most important is our demonstrated success in increasing MPH market penetration worldwide. As a result, we have entered 2010 with an improved financial base and a strong operational foundation.

Each shareholder will be receiving the audited numbers and detailed commentary following the completion of our annual audit. The audit has just commenced and we expect it to be finalized in late April or early May. In the interim, here are some highlights based upon our preliminary unaudited financial results for 2009:

• Strong Revenue Growth

In 2009, Medafor experienced an approximately 40% growth in revenue as compared to 2008. Unaudited revenues of $13.8 million for 2009 exceeded the business plan of $12.5 million by approximately 10%.

In the U.S., our fast growing general surgery distributor network achieved a revenue growth rate for 2009 that was well in excess of 120% for the year, and we are seeing impressive new daily growth in the use of our products in Urology and OB-GYN surgical applications. Further, our well established distributors in Japan and China achieved substantial revenue growth in 2009 of approximately 90% as compared to 2008, reflecting what appears to be enormous ongoing demand for our product in China, as well as the initial entry into Japan following successful receipt of regulatory clearance by the Japanese authorities.

The only decline in our overall net revenues came from those markets that are serviced by CryoLife. Revenues in those markets declined by approximately 40% as compared to the same sectors for 2008, after taking into account the transition of our then existing International network to CryoLife under the terms of the Exclusive Distribution Agreement (“EDA”), effective January 1, 2009.

• Operating Performance

Since receiving FDA approval in 2006, we have been focused on achieving positive operating cash flow from the sale of the MPH product as rapidly as possible. I am pleased to report that, consistent with that objective, Medafor’s cash based operating profit increased to approximately $2.4 million in 2009, representing a roughly 350% increase as compared to the comparative figure reported in 2008. Unfortunately, these operating profits were reduced by the very significant legal expenses we incurred in defending ourselves against the lawsuit initiated by CryoLife, which totaled over $1.2 million in total legal and associated fees for 2009. As a result, our basic operating income, though still strong due to steady margins and disciplined SG&A management, was reduced by about 50% to $1.2 million to reflect these litigation expenses. Therefore, net growth of operating profit was just over 120% in 2009.

• Improved Cash Position

From a balance sheet and liquidity point of view, we generated positive cash flow. Our cash position was further increased by a positive inflow arising from the debenture extension. Medafor therefore ended the year with approximately $1 million in cash on hand, and about $1 million in additional cash availability under an unutilized line of credit. Absent the legal fees caused by the CryoLife litigation, Medafor would have had $2 million in cash on hand.

Long Term Agreement with Magle Life Sciences

We are extremely pleased with our results for the year, and are even more excited for the future prospects that this positive momentum will bring to our Company. Now that our MPH product is generating strong operating cash flow, we are better equipped to turn our focus on expanding the range and scope of possible new surgical and medical applications.

With this in mind, we are delighted to share with you a very significant and exciting development regarding an expanded relationship with our long-term technology and supply partner, Magle Life Sciences of Sweden. As you may have read on our website and in the press release we issued on March 12^th, we recently signed a long term agreement with Magle, under which we have secured full control of the vital technology and manufacturing process needed to make the key powder component in our patented MPH surgical product.

In the past, ownership of the manufacturing process and technology resided overseas and was not within Medafor’s control. This agreement is a watershed event for our company and its future, and one which we believe will enable us to create greater value for Medafor shareholders in hemostasis and other initiatives long after the Hemarrest owned patent expires. By deepening our partnership with Magle, a company with a recognized strength in starch technology and research, we will be able to develop and enhance new applications of the MPH product, and strengthen our valuation prospects for a potential IPO or acquisition, if deemed appropriate.

Under this agreement, Magle will continue to exclusively supply Medafor with our DSM-A product for hemostasis on a long-term basis under favorable terms from both a pricing and minimum commitment point of view. This guarantees Medafor a quality long-term supply from a trustworthy and reliable partner. Medafor now also has the ability to create a second source of supply (with Magle’s active assistance).

For nearly a decade, our partnership with Magle has been built on a foundation of trust and mutual respect. We believe that Magle’s starch technology expertise, combined with Medafor's proven success penetrating the market for intra-operative surgical hemostasis products, is the ideal partnership arrangement as we continue executing our global growth strategy. The new agreement is particularly important because the prior agreement was expiring at the end of 2010. We began negotiating the contract renewal in 2009 and are very pleased that we were able to complete the negotiations expeditiously, while at the same time addressing the goals and objectives of both Medafor and Magle.

As consideration for acquiring this technology, we issued 1.8 million shares of Medafor stock to Magle, making Magle a significant shareholder in our company (approximately 7%) and further aligning their interests with those of our other Medafor shareholders. Based on reasonable expected revenue growth rates, the effective cost of the technology amortized over the next 10-15 years, will have a roughly 1% effect on net margins going forward. The cash savings we will generate from lowered mandatory minimum purchase commitments will offset the outlay for this technology, but much more importantly, as a single product/single technology company, we have finally secured perpetual control over our powder supply line and technology, which was previously threatened by the uncertainty surrounding CryoLife's actions.

Repudiation by CryoLife of the Exclusive Distribution Agreement

First, I would like to thank the many shareholders who have reached out to express their vocal support with regard to our Board’s recent actions taken in response to the unsolicited takeover attempt of our Company by CryoLife. We appreciate your continued confidence in Medafor, our strategic direction, and the promising future we see for our Company.

Now allow me to take a moment to bring you up to date on the status of our relationship with CryoLife and the EDA. On March 18^th, 2010, we informed CryoLife that it has repudiated our exclusive distribution agreement by failing to respond to our reasonable request for adequate assurance that it would properly adhere to the terms of our agreement. Under state law, CryoLife’s repudiation effectively permits Medafor to treat that contract as terminated and cease all performance under the EDA, effective immediately. Our March 18^th letter informed them that we intend to do so.

CryoLife has breached the terms of our agreement in China, Europe, Brazil and repeatedly in the U.S., and has continued to insist that it is somehow entitled to distribute HemoStase in China and Japan, despite the clear terms to the contrary set forth in the EDA. As a result of that action, we became highly concerned about whether CryoLife had any intention of honoring our agreement going forward, and we insisted it provide us assurance, as required by state law. CryoLife ignored this request, thus repudiating the contract.

Given their continuing actions and breaches of the EDA, we no longer believe that CryoLife can be viewed as a trustworthy partner, and worse, their actions confuse our customers which we believe is negatively impacting our future growth, thus impeding the overall objective of driving value for our shareholders. Thus, our Board unanimously determined that it is in the best interests of our shareholders to treat the EDA as though it has been terminated going forward.

As we have said in our previous communications, we will not engage in a public back-and-forth debate with CryoLife. However, we do recognize that you may have questions about the current situation and the allegations and personal attacks that CryoLife has been making. Therefore, we will continue to provide updates as warranted via the ongoing Questions and Answers section, which has been posted on our website and, if necessary, will be sent out in further mailings.

We have urged our shareholders, our customers and our employees not to be overly distracted by the noise CryoLife is making – be it via litigation, in letters to Medafor shareholders, or in the press. We view their aggressive campaign as nothing more than a sign of desperation on their part as they appear to be dealing with problems of their own making. As we have previously stated, it is becoming increasingly clear that our Hemostase MPH product is materially important to CryoLife’s business. However, what may be in the best interests of CryoLife and its shareholders, is not necessarily in the best interests of our Company, our future growth and our shareholders.

As always, please feel free to call me with any questions. Thank you for your ongoing support.

Sincerely,

Gary J. Shope

Chief Executive Officer

Medafor Cryolife Agreement in Jeopardy

ATLANTA, March 19, 2010 /PRNewswire via COMTEX/ -- CryoLife, Inc. (NYSE: CRY), an implantable biological medical device and cardiovascular tissue processing company, today responded to Medafor's allegation that it has repudiated the Exclusive Distribution Agreement ("Agreement") between the two companies.

On March 18, 2010, Medafor informed CryoLife that it is treating the Agreement as terminated. Medafor alleges that it had reasonable grounds, pursuant to Georgia law, to demand that CryoLife provide adequate assurances that it would perform under the Agreement and that CryoLife has repudiated the Agreement by not providing adequate assurances. After completing its preliminary analysis, CryoLife believes that Medafor's position that it may treat the Agreement as terminated is not valid and that Medafor's request that CryoLife give adequate assurance of due performance under the Agreement was not reasonable or made in good faith.

This is Medafor's fourth attempt to terminate the Agreement. CryoLife is currently evaluating all of its options related to this most recent termination attempt by Medafor.

On March 16, 2010, CryoLife placed a purchase order of approximately $500,000 of HemoStase(R) product to be delivered to CryoLife on April 15, 2010. On March 18, 2010 after notifying CryoLife that it was treating the EDA as terminated, Medafor notified CryoLife that it would not fulfill this order because CryoLife submitted the order 30 days prior to shipment, instead of the minimum 35 days set forth in the Agreement and the amount requested was more than CryoLife had forecasted as set forth in the Agreement. Assuming Medafor's effort to deem of the Agreement as being terminated is not successful, CryoLife may simply submit a new purchase order.

If Medafor is ultimately successful in terminating the Agreement or if Medafor fails to ship HemoStase as ordered by CryoLife, CryoLife's previously issued financial guidance for fiscal 2010 may be materially affected.

In 2009, CryoLife filed a lawsuit against Medafor for, among other things, breach of contract, fraud, negligent misrepresentation, and violations of Georgia Racketeer Influenced and Corrupt Organizations Act ("Georgia RICO"), alleging that Medafor has violated the Agreement by, among other things, allowing other companies to distribute HemoStase in territories and medical fields reserved exclusively for CryoLife per the terms of the Agreement. CryoLife's lawsuit alleges that Medafor, contrary to its representations in the Agreement, had numerous distribution agreements regarding HemoStase with other distributors in the U.S. and internationally, allowing them to market and distribute HemoStase in the territory and field given exclusively to CryoLife. Medafor is alleged to have knowingly and purposefully withheld from CryoLife disclosure of all but three of these agreements; to have knowingly and purposefully misrepresented that the three distributors with these agreements would not be allowed to compete with CryoLife after the effective date of the Agreement except in several explicitly identified facilities, and then only for a short period of time; and to have intentionally misrepresented to CryoLife that no such contracts existed with any other distributors, and that no such contracts would exist after CryoLife's exclusive rights commenced. The lawsuit also alleges that Medafor has failed to take reasonable steps to prevent other distributors from distributing HemoStase in CryoLife's exclusive field and territory, and that Medafor breached its contractual obligation to prevent competing products from violating Medafor's intellectual property rights in HemoStase, thereby impairing the value of CryoLife's exclusive distributorship.

As specified in the lawsuit, CryoLife brought these transgressions to Medafor's attention on numerous occasions and attempted to work with Medafor to secure its compliance with the terms of the parties' Agreement, but was unable to get Medafor to follow the terms of the Agreement. CryoLife believes that Medafor's actions have deprived CryoLife of significant sales volume and have impaired and delayed CryoLife's development of relationships with customers in its exclusive territory.