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DewDiligence

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DewDiligence

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Re: DewDiligence post# 3706

Saturday, 02/19/2005 2:16:39 PM

Saturday, February 19, 2005 2:16:39 PM

Post# of 252758
Another small bio whose CEO has a checkered history:

[Forbes is one of the better publications out there at old-fashioned investigative journalism. The recent article on CYTR is a case in point (#msg-4073074). Now Forbes in taking on the new stent player, Conor Medsystems (CONR). Caveat emptor!]

http://www.forbes.com/business/free_forbes/2005/0228/042.html?partner=yahoomag&referrer=

>>
Revisionist History

Michael Maiello
02.28.05

Investors in Conor Medsystems heard a lot about the company's medicated stent. But not nearly enough about its chief executive.

Who says there are no second acts in life? In 1991 Frank Litvack took his company public on the strength of a laser that he helped develop for heart surgery. It turned out that Advanced Interventional Systems' laser violated patents held by a rival. Patent and shareholder suits ensued--a jury found against Advanced Interventional on the patent issue, and that case, along with the shareholder suit, were ultimately settled. During the drama the market value of Litvack's company collapsed from $149 million after its offering to $12 million when it was sold in 1993.

Two months ago Litvack brought Conor Medsystems public at $13 a share, raising $78 million. The Menlo Park, Calif. company didn't have a penny of revenue in 2004, but investors have since bid the stock up to $16. Conor's one product: a medicated vascular stent that the company thinks will make it profitable by 2008.

Strange thing is, investors were in the dark about Litvack's history. Conor's underwriters--Citigroup, CIBC, AG Edwards and SG Cowen--didn't mention it in the prospectus accompanying Conor's stock offering. Nor, of course, do the analysts at those banks--who all rate Conor a "buy," with the exception of Cowan, which doesn't issue ratings.

Too bad, because it looks like the past is repeating itself. Boston Scientific makes a similar medicated stent, under a patent licensed from a Vancouver firm called Angiotech. BostonScientific and Angiotech have already sued Conor in the Netherlands in an effort to keep their new rival from bringing its stent to market in the European Union. Conor plans to fight that suit. It doesn't plan to sell the stent in the U.S. until 2007 at the earliest.

Boston Scientific has signaled it will fight Conor vigorously on the patent issue. The stent accounted for 42% of its $5.6 billion in sales last year. At a recent meeting of health care analysts Chief Financial Officer Lawrence Best characterized Conor's stent plans as "dreaming in Technicolor."

The underwriters won't say why they left Advanced Interventional out of Litvack's career history. Conor's chief financial officer, Michael Boennighausen, says only: "We believe that everything material was included in our registration statement." In that statement the company said that a patent suit was the major risk factor. For his part, Litvack says in a statement that neither the Advanced shareholder suit nor the patent infringement were material to that company's business. [LOL]
<<

“The efficient-market hypothesis may be
the foremost piece of B.S. ever promulgated
in any area of human knowledge!”

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