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July 28th, 2005
"CryoLife to settle shareholder lawsuit stemming from 2002 recall"
CryoLife Inc. said it has agreed to settle a shareholder lawsuit for more than $23 million that accused the company of not disclosing enough information to investors before a 2002 government issued tissue recall.
The settlement must be approved in federal court in Atlanta, but it is expected to be paid with a combination of insurance money and company cash and stock. CryoLife has maintained there has been no wrongdoing on its part, but believes settling was in its best interests since the plaintiffs were looking for more than $150 million in damages had the lawsuit gone to trial.
CryoLife is the nation’s largest supplier of living human tissue for implantation. In August 2002, the government ordered the company to stop distributing cadaver tissue. The FDA said the company failed to adopt and follow safety procedures to keep fungus and bacteria from contaminating soft tissue.
After an FDA inspection found the problems had been corrected, the company resumed processing and distributing all types of tissue. CryoLife settled a lawsuit in April 2004 for an undisclosed sum with the family of 23-year old Brian Lykins who died in November 2001, four days after receiving a soft-tissue implant from CryoLife during reconstructive knee surgery, according to the FDA.
The Centers for Disease Control and Prevention and the FDA began investigating CryoLife in December 2003 after a Colorado teenager contracted a rare strep infection days after receiving CryoLife tissue during a knee transplant.
According to the terms of the $23.25 million shareholder settlement, $11.5 million is expected to be paid from insurance proceeds, and the company will pay the remainder with $8 million in cash and $3.75 million in stock. CryoLife said it expects to record a pre-tax charge of $11.75 million in the second quarter.
