MediWound Loses Stock Purchase Agreement Case

Nasdaq-listed, Israel-headquartered biotechnology company MediWound Ltd. lost a lawsuit brought against the company by biotech company PolyHeal Ltd. in a Tel Aviv district court, the company announced Monday. The court ordered MediWound to purchases the shares of three PolyHeal shareholders for approximately $1.5 million. Following the announcement, MediWound's stock dropped 4.5% on the Tel Aviv Stock Exchange.

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Founded in 2001 in central Israel, MediWound develops, manufactures and commercializes treatments for severe burns and chronic wounds.

Pineapples (illustration)	צילום: שאטרסטוק

In 2010, MediWound signed a series of agreements with PolyHeal that gave MediWound a global license to develop, manufacture and commercialize a device developed by PolyHeal for the treatment of wounds.

MediWound then granted Teva Pharmaceutical Industries Ltd. a worldwide sub-license to Teva to commercialize the product. Under the agreement, Teva agreed to fund MediWound's research and development and also invested through stock acquisition.

Under the parallel agreements, when a clinical trial milestone was achieved in 2012 Teva was required to invest an additional $6.75 million in MediWound in exchange for shares, and MediWound was required to purchase shares from PolyHeal's existing shareholders for an identical amount.

When Teva did not invest, MediWound believed that under the terms of its 2010 agreements with PolyHeal, it was "under no obligation to purchase" the additional shares agreed upon at the time.

PolyHeal shareholders filed a complaint against MediWound in September 2014, demanding compensation within 15 days from the date of the court's ruling.

Teva said it notified MediWound of its decision to end the agreement before the latter reached the contested milestone, people familiar with the matter who spoke on conditions of anonymity told Calcalist, prompting the Judge to rule that MediWound knew in advance that Teva would not finance further operations.

MediWound continues to evaluate the ruling, its legal and accounting implications and the company’s options, including a potential appeal, said MediWound in the announcement. 

This is a tough blow for MediWound, who is not yet profitable. The company raised $25.5 million last month to cover its operational loss.

MediWound declined to comment.

Update: This article has been corrected. A previous version of the article stated that the product in question was MediWound's flagship prodcut, but in fact the case referred to a seperate device not currently marketed by MediWound.