QT Vascular Ltd. - AngioScore Litigation Additional Updates

PLEASANTON, Calif., July 8, 2015 /PRNewswire/ -- Further to the Company's announcement of 29 April 2015 and 2 July 2015, and media release of 4 May 2015, the Board of Directors of the Company ("Board") would like to provide the following additional updates to shareholders of the Company in relation to the lawsuit filed by AngioScore, namely the State Law Claims and Patent Claim:

1. State Law Claims (in relation to breach of fiduciary duty) – Next Steps

The trial court had on 1 July 2015 awarded damages of US$20.034 million jointly and severally against the Defendants and further ordered Dr. Konstantino to disgorge benefits he had received arising from the alleged breach of fiduciary duty, including amounts he had received for assigning his intellectual property rights to Chocolate®, royalties on past and future sales of Chocolate®, and all of his shares and options in the Company.

The Defendants have been advised by their US counsel that they have multiple grounds for appeal, and that the decision of the single judge in a federal district court in Northern California contains numerous legal errors, which an experienced panel of judges at the court of appeal may take a differing view of.

Amongst others, the Defendants and their US counsel are of the view that the trial court may have erred in:

• taking jurisdiction over AngioScore's claims which are based on state law;
• finding Dr. Konstantino, as a director who did not have an invention assignment agreement[1] with AngioScore on whose board he sat, had an obligation at law to offer his invention to AngioScore, when it had been independently conceived and developed without utilizing any resources of AngioScore;
• awarding damages to AngioScore without taking into due consideration the undisputed record-at-trial which established that a co-inventor of Chocolate® had separately assigned his rights to develop and commercialize Chocolate® to Quattro Vascular Pte. Ltd. in 2010; and
• finding that AngioScore's claims are not barred by applicable statutes of limitations.

The appeal against the trial court decision will be made by the Defendants to the appeal court, which is expected on or about September 2015. Any decision of the appeal court may in turn be subject to petition for further review by the Supreme Court, being the highest court of the United States. The appeal against the decision made in respect of the State Law Claims is anticipated to at least 18 months, and resolution may be further prolonged if a petition for review is filed and granted by the Supreme Court.

Pending the conclusion of the appeal and final resolution of the State Law Claims, the Defendants do not intend to make any payments to AngioScore.

The trial court decision is publicly available at https://cases.justia.com/federal/district-courts/california/candce/4:2012cv03393/256625/665/0.pdf?ts=1435824632 and a copy of the same is available for inspection by shareholders during normal business hours at the Company's premises at 3A International Business Park, #09-10/11/12 ICON @ IBP Tower B, Singapore 609935.

2. Patent Claim

The Company would like to reiterate that the above trial court decision does not have any adverse impact on the Defendants' defenses related to the Patent Claim, which is the other ongoing litigation involving AngioScore.  The Patent Claim is scheduled for trial in September 2015. 

The Board continues to believe, as stated in the Offer Document, that the Patent Claim will not have a material effect on the financial position or profitability of the Company for the following reasons:

• By virtue of the 25^th June 2014 Order, the Defendants have obtained partial summary judgment that the Chocolate® PTA does not satisfy one limitation of the claims of the '119 Patent literally and AngioScore is barred from showing that two other limitations are satisfied under the doctrine of equivalents;
• the Defendants will have the opportunity to demonstrate that the Chocolate® PTA does not practice at least two (2) distinct limitations of the '119 Patent;
• the Defendants will have the opportunity to demonstrate that the claims of the '119 Patent are invalid; and
• even in the unlikely event that AngioScore were to prevail on its claim at trial, the probability that AngioScore could obtain a permanent injunction against the Chocolate® PTA is minimal because AngioScore does not practice the '119 Patent.

The Company continues to believe that its worst case liability would involve payment of a reasonable royalty on such products made, used or sold in the USA which is not expected to have a material effect on the financial position and profitability of the Group.  Furthermore, we have designed a version of Chocolate® PTA which we believe will materially reduce the risks related to the patent claim by AngioScore on Chocolate® PTA if needed.

3. Convertible Bonds Investors

Subsequent to the above trial court decision, the Company has also engaged in discussions with ICH Gemini Asia Growth Fund Pte Ltd, Toe Teow Heng, Toe Teow Teck and Kuah Ann Thia (collectively "Investors"), who have entered into a conditional convertible bond subscription agreement ("CB Agreement") with the Company to subscribe for US$12 million 8% convertible bonds due in 2017, as announced by the Company on 1 July 2015 ("Investment").

The Investors and the Company have mutually agreed to terminate the CB Agreement, and all parties are working towards the execution of the formal termination documents.

4. Company's Operations and Future Plans

The Company would like to assure shareholders that the State Law Claims and Patent Claim are not expected to materially affect the current as well as future plans and operations of the Company and its subsidiaries (collectively the "Group") and management remains focused on executing its business strategies and delivering value to shareholders. 

As the trial court has denied AngioScore's application for an injunction to enjoin the sale of Chocolate®, the Group will continue to promote and sell its flagship product, Chocolate® and  advance the development of the drug-coated Chocolate®.

The Board is pleased that the efficacy and success of the Group's Chocolate® products have garnered the attention of various strategic partners.  The Group is in preliminary discussions with these interested strategic partners which may lead to sufficient funding for our operations and any potential contingent liabilities.

5. Further Updates

The Company will keep shareholders informed of any subsequent material developments in the State Law Claims and Patent Claim as well as its discussions with interested strategic partners.

The Board would like to emphasise that it continues to repose full faith and confidence in Dr. Konstantino, the Chief Executive Officer, and expects him to discharge his leadership and management functions and responsibilities to the best of his abilities. 

In the meantime, shareholders should exercise caution in trading of the Company's shares, and where they have any doubts, should consult their professional advisers accordingly.

[1]    An Invention assignment is an agreement whereby an individual or entity, the assignor, agrees to transfer all substantial rights to inventions to another individual or entity, the assignee. 

SOURCE QT Vascular Ltd.