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Teleflex Admits Trouble with Sustain Coating

Teleflex Inc.--which bought Massachusetts Institute of Technology (MIT) spinout Semprus BioSciences Corp. in May 2012 for a reported $30 million plus contingencies--has reported to its shareholders that it is experiencing difficulties with the Sustain coating technology it gained through the acquisition.

Limerick, PA-based Teleflex stated in its most recent annual report filed with the SEC:  "During 2013, the Company experienced unexpected difficulties with respect to the development of the Semprus technology, which the company is currently attempting to resolve through further research and testing."

That Semprus technology, which is called the Sustain coating, is "a long-lasting, covalently bonded, non-leaching polymer designed to reduce infections and thrombus related complications" on implanted medical devices. A covalent bond is where the atoms in a molecule share electrons. It is what holds the hydrogen and the oxygen together in water.

This is the same Sustain coating that, on Teleflex's Nylus Peripherally Inserted Central Catheter (PICC), received the CE Mark in July 2012 and an FDA 510(k) clearance in November of the same year. Interestingly, on March 20, 2014, Teleflex's website makes no mention whatsoever of the Nylus product or the Sustain coating, aside from in the old press releases.

The 2013 Annual Report says, "While the company will explore opportunities to apply this technology to a broad array of its product offerings, the initial focus for the technology is on vascular devices within the Company's Critical Care product group."

Elsewhere in the filing, it is reported that as of the end of last year, Teleflex had spent an additional $1.2 million in attempting to resolve its issues with Sustain. And, "As of December 31, 2013, we continue to experience difficulties with respect to the development of the Semprus technology," the company said.

Refresh your medical device industry knowledge at BIOMEDevice, March 26-27, 2014 in Boston.

Semprus Biosciences Corp., which now operates as a wholly-owned subsidiary of Teleflex in Cambridge, MA, was incorporated in 2007. MIT students and co-founders David Lucchino and Christopher Loose, PhD, in 2006 developed a business plan that took first place in the MIT $100K Entrepreneurship Competition.

That business plan became Semprus Biosciences Corp., and the company was able to raise a total of $26 million in two rounds of financing to develop its technology. In November 2012, the U.S. Army's Telemedicine and Advanced Technology Research Center gave the company an additional $2.3 million grant to develop an endotracheal tube using the coating. Then Teleflex bought the company in 2012 for $30 million, plus up to $50 million in contingencies--at least $2.4 million of which is now forfeit.

And now, Teleflex says, "As of December 31, 2013, the Company has recorded net assets in the amount of approximately $42 million related to this investment." And, "Failure to resolve these issues may result in a reduction of the expected future cash flows related to the Semprus technology and could result in recognition of impairment charges with respect to the related assets, which could be material." In other words, they may just have to pull the plug and write it all off.

Stephen Levy is a contributor to Qmed and MPMN.

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