Xoft Inc. could turn out to be a lot more expensive for iCad (NSDQ:ICAD) than the $1 million in cash and the 8.47 million shares of stock it paid for the oncology device manufacturer late last year.
Two unidentified plaintiffs, Jane Doe and John Doe, filed suit three weeks ago in California’s Orange County Superior Court against Xoft, iCad and a Los Angeles-area hospital, alleging personal injury resulting from use of Xoft’s Axxent Flexishield Mini, a small protective device used during intra-operative radiation therapy. iCad voluntarily pulled Flexishield from the market Feb. 3.
The complaint was amended last week to include a request for $14.5 million in damages. iCad disclosed the lawsuit on Wednesday in securities documents filed yesterday with the federal Securities & Exchange Commission.
According to published reports, the female plaintiff is a 58-year-old clinical psychologist treated for breast cancer using IORT at Hoag Memorial Hospital Presbyterian in Newport Beach, Calif. During a follow-up examination six months after her initial procedure, doctors found small particles of tungsten in her left breast. The metal was scattered mostly near the procedure site and along the incision, suggesting it fell off the Flexishield while it was inserted into the plaintiff’s breast to protect the surrounding tissue from radiation.
FDA records indicate that four patients treated with Xoft’s Axxent Brachytherapy System, and the Flexishield Mini in particular, have shown signs of metallic particles in mammography images. In all, 27 women are thought to be at risk of having tungsten residue in their bodies from the Flexishield device. There have been no adverse reactions or other “untoward effects” yet reported by any of the patients. Tungsten also is generally believed not to be toxic.
The extent of the company’s potential costs obviously will depend on the number and the outcome of court cases. In the regulatory filing, iCad executives reported “very limited” sales for Flexishield since its August 2009 commercial launch, adding that indemnification provisions of the Dec. 15, 2010, merger agreement may limit its possible expenses. Like most manufacturers, iCad also carries product liability insurance that could be used to pay a judgment for the plaintiffs.
As part of the recall notice, iCad has been telling doctors that patients should have physical exams every six to 12 months, as well as mammography and breast MRIs once a year (six months apart), along with annual serum and urine tests for tungsten.
According to the SEC filing, iCad does not expect the recall to have a material impact on company revenues. The company said it’s working to find suitable replacements for the Flexishield. It also stated that while it has not fully examined the merits of the claim, “based upon preliminary analysis, (the company) plans to vigorously defend the law suit.”
