Spire Corp.’s (NSDQ:SPIR) medical device unit sued Creganna-Tactx Medical subsidiary Catheter and Disposable Technology Inc. over an alleged breach of contract related to the manufacture of hemodialysis catheters.
The unit, Spire Biomedical Inc., yesterday filed a suit in U.S. District Court in Massachusetts alleging that CDT failed to assemble the catheters in accordance with its designs.
The Bedford, Mass. based company further alleges that the manufacturing issues resulted in both a Food & Drug Administration recall and the revaluing of its hemodialysis business, which C.R. Bard Inc. (NYSE:BCR) was in the process of acquiring when the regulatory action commenced, according to court documents.
Spire hired CDT in 2003 to manufacture its Decathlon and Alta catheters. In early 2006, the company received two field complaints on the failure of hemodialysis catheters related to connections between their components. Three more complaints came in 2009 despite corrective actions involving a Spire redesign of the product subsequent to the 2006 events.
Spire initiated a recall of 55,000 hemodialysis catheters in Oct. 2009, according to court documents, a month after it had signed the agreement to offload the hemodialysis business to Bard. The recall delayed the acquisition deal, and because Spire signed the deal prior to the recall, the company needed to renegotiated the terms of the buyout, according the court filing. The restructuring of the agreement resulted in a portion of the catheter business assets being transferred at closing, but a remainder being transferred once the recall was complete. The action resulted in "substantial reduction to the purchase price of Spire’s hemodialysis catheter business as well as other material changes to the terms of the original asset purchase agreement," according to the documents, with Spire agreeing to accept $2.5 million less than the original offer.
Spire is seeking a double or tripling of the damages it incurred through CDT’s alleged malfeasance in addition to interest, related costs and attorney’s fees.
