Palmaz Scientific, seeking buyer, files for bankruptcy protection
07 Mar 2016
Palmaz Scientific said last week that it filed for Chapter 11 bankruptcy protection while it seeks a buyer for the medical alloy technology it was developing, claiming its ability to attract investors was “seriously impaired by a negative campaign of false information.”
Co-founded by coronary stent pioneer Dr. Julio Palmaz in 2008, the San Antonio, Texas-based company last summer told its shareholders that Palmaz planned to resign as chairman in favor of former Kinetic Concepts Inc. CEO Cathy Burzik. Serving as interim CEO, Burzik was to have help find a replacement for ex-chief Steven Solomon, and a cash infusion from a group of investors led by venture capital shop Targeted Technology, where Burzik is an operating partner. Palmaz was to have remained with his namesake as chief scientific officer.
But the deal fell apart within days after Targeted Technology backed out. Palmaz told MassDevice.com at the time that the decision to end the deal was mutual and in the best interest of Palmaz Scientific’s shareholders.
The company said March 4 that its “ability to attract capital investment and continue its business operations has been seriously impaired by a negative campaign of false information disseminated by certain individuals about the company. Litigation involving these false charges was brought by and against the company in 2015. The company seeks millions of dollars in damages.” Palmaz Scientific said the individuals gave false information to “investors, potential business partners, the news media and even federal government authorities – resulting in substantial damage to the company and crippling its ability to maintain its ongoing operations.”
“For example, the company asserted that the misinformation prompted a federal investigation by the U.S. attorney’s office in Dallas. The company quickly and completely cooperated in the investigation and was cleared in a letter from the U.S. attorney’s office, which not only closed their investigation, but also praised the company’s timely and transparent response,” Palmaz Scientific said in a press release, claiming that it suffered “irreparable harm due to the spread of this so-called ‘information,’ with potential transactions and development projects with large medical device companies falling victim to the defamation campaign. The company will vigorously pursue its claims.”
“While potential suitors have expressed great praise for the technology, the company believes that the toxic atmosphere created by the defamation and the related litigation prevented any meaningful investment. The Chapter 11 proceeding presents an opportunity to separate the valuable technology from the collateral effects of the defamation and litigation. The company intends to market the technology and maximize its value,” according to the press release.
Last October, a federal judge in Texas dismissed without prejudice a lawsuit Palmaz brought against a securities broker, Susan Harriman, finding that the case doesn’t belong in a federal court because both the defendant and plaintiff are from the Lone Star State, according to court documents. Judge Fred Biery of the U.S. District Court for Western Texas wrote that the suit should be re-filed in state court, but said “the parties would be well advised to resolve this matter before further expensive litigation, whether in federal or state court.”
Palmaz Scientific raised $26.3 million from some 260 private investors in November 2013, but a hoped-for debt offering worth $15 million in the spring failed to bring in any outside backers despite the $2 million put down by members of the board. An outside investment firm also failed to gin up any interest, according to the shareholders letter.
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