LONDON, June 17, 2011 /PRNewswire/ -- Lawyers representing the UK Government and private investment group Porton opened their case yesterday against multinational conglomerate 3M, accusing the Dow 30 company of breaching its obligation to bring a potentially life-saving medical device invented by the Ministry of Defence to market.
The case centers around BacLite, a MRSA detection technology which was acquired by 3M from a group of investors including Porton and the UK Government in February 2007. The terms of the sale required 3M to actively market and diligently seek regulatory approval for BacLite and to pay the investors one hundred percent of BacLite’s 2009 sales up to a limit of 41m pounds Sterling.
In the opening statements presented over the past two days, attorneys for the Claimants stated that 3M’s Chair and CEO George Buckley was involved in seeking to purchase BacLite and also personally involved in walking away from unconditional contract commitments to market the device. The court heard that just over a year after Baclite was acquired, 3M’s UK-born CEO Mr Buckley sent an email in March 2008 querying whether the company should “just pull the plug” on BacLite, without making any reference to the contractual commitments.
The opening statement set out the decision by 3M to effectively terminate development of BacLite December 2008, ensuring that sales of the device in 2009 would be zero. Lawyers also revealed that 3M later offered to reimburse Acolyte’s investors US$1.07m, an estimate that was explicitly intended by 3M to be “conservative”.
The Government is now asking the High Court to award the full 41m pounds that would have been accrued had 3M met its obligations. Its lawyers yesterday noted that 3M executives had once boasted that BacLite might have had the company “printing money,” and that even 3M’s estimates at all times were higher than the company’s US$1.07m offer.
The Government’s lawyers used the opening statement to highlight 3M’s litigation strategy. The court heard that 3M’s lawyers are declining to call senior executives responsible for the decisions surrounding BacLite, insulating them from cross-examination. The Government’s lawyers expect the Court to draw adverse influences from this failure, putting it in the context of a series of moves by 3M to prevent transparency, including holding witness scientists behind confidentiality agreements.
Media Inquiries:
- Josh Block in the U.S. at Davis-Block, LLC: 202/756-8293
- Charles Cook at Attila Consultants on: +44 20.7776.8825 or +44 7710.910563
- Catherine Nicholls at Tetra Strategy on: +44 20.7881.7784 or +44 7789.644979
NOTES FOR EDITORS: | |
1. The case is currently being heard in the High Court of Justice in London. | |
2. Porton Capital is a venture and development capital firm which specializes in the commercialization of technology in partnership with the British Government. Porton has approx. $700m AUM and has offices in North America, Europe, the Middle East, Africa and Asia. | |
3. On the effectiveness of BacLite, the Court heard that: | |
- BacLite obtained EU regulatory approval by 2005, demonstrating 95% reliability in tests. | |
- It quickly penetrated the diagnostics market in the UK. By May 2006 the device was in use in hospitals, with the laboratory manager of Salisbury hospital commenting on its “excellent performance” in providing results “within one working day.” | |
- BacLite had a unique “value proposition,” offering MRSA detection that was faster than traditional ‘culture methods’ but cheaper than ‘molecular’ methods. Culture methods generally take days to give results. BacLite produced results in 5 hours. Molecular methods generally cost "$35-$45" per test. BacLite was estimated to cost $14 per test. | |
- Upon acquiring BacLite in February 2007, 3M terminated the sales team that had existed since May 2005 but did not reassign a new team until September 2007. Lawyers cited concerned emails from BacLite scientists stretching from March to August 2007, worried that it would take months to train a new sales team and that sales were being impacted. | |
- 3M eventually scaled back European sales efforts to just the UK without informing former Acolyte shareholders, losing 34 confirmed or targeted customer hospitals in the process. EU sales forces were moved to other projects in March 2008. By May 2008, 3M had functionally ceased its marketing efforts in Europe. | |
4. Government lawyers presented the following arguments on 3M’s failure to diligently seek regulatory approval: | |
- 3M started testing BacLite in October 2007 but the technology soon began underperforming, demonstrating 50% reliability. BacLite had demonstrated 95% reliability in European trials. | |
- Inadequate monitoring on 3M’s part ensured that company executives did not discover that BacLite was underperforming until the week of 19 November 2007. Trials were suspended a week later, pending investigation of what had gone wrong. | |
- Multiple errors were quickly discovered, which would have been found earlier had the trials been monitored closely. | |
- None of the five sites were maintaining incubation temperature at the required 37C, an issue that 3M technical staff described in an email as “an especially crucial factor.” | |
- 3M scientists used a new testing protocol that differed from the one used in European trials (and of which the FDA would approve). The decision to alter the testing protocol was made, according to evidence cited by government lawyers, after the 3M team evaluating BacLite consulted with a 3M team working on a potentially rival diagnostic test. | |
- After discovering these failures, 3M recognized that further “beta testing” would be necessary to reach reliable conclusions. However subsequent “beta tests” were limited to a single patient before being suspended. | |
- By 7 March 2008, 3M CEO George Buckley had concluded in emails that it was time “to fish or cut bait” with Acolyte, despite 3M not informing Acolyte’s investors that it was suspending work on the technology until months later. | |
5. Lawyers for the Claimants addressed 3M’s claims over BacLite’s effectiveness and set out the due diligence undertaken by 3M in purchasing the device: | |
- Company technicians visited laboratories, reviewed technical reports, and received unanimously favorable reports from UK hospitals where BacLite was already in use. | |
- 3M’s investigation recognized strong customer acceptance amongst hospitals, found the existence of a market for BacLite, and confirmed that the device performed as advertised with high reliability. | |
- As late as March 24 2008, 3M officials were giving “honest and best assessment[s]” of positive responses from customer trials in Europe. An email cited by lawyers reported on satisfactory results from 24 out of 32 customers, with 5 unsatisfactory results written off as “protocol and user related incidents.” Six additional customers had committed to buying BacLite by April 2008, with an annualized value around US$1.3m. | |
SOURCE Lanny J. Davis & Associates
