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Commitments And Contingencies
9 Months Ended
Sep. 30, 2016
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

12.  Commitments and Contingencies 

 

Liability Claims 

 

The Company’s estimated unreported loss liability was $1.7 million and $1.4 million as of September 30, 2016 and December 31, 2015, respectively.  As of September 30, 2016 and December 31, 2015, the related recoverable insurance amounts were $643,000 and $600,000, respectively.  The Company accrues its estimate of unreported product and tissue processing liability claims as a component of other long‑term liabilities and records the related recoverable insurance amount as a component of other long‑term assets, as appropriate.  Further analysis indicated that the liability as of September 30, 2016 could have been estimated to be as high as $3.1 million, after including a reasonable margin for statistical fluctuations calculated based on actuarial simulation techniques. 



Employment Agreements



The employment agreement of the Company’s Chairman, President, and Chief Executive Officer (“CEO”), Mr. J. Patrick Mackin, provides for a severance payment, which would become payable upon the occurrence of certain employment termination events, including termination by the Company without cause.



The employment agreement of the Company’s former President, CEO, and Executive Chairman, Mr. Steven G. Anderson, conferred certain benefits on Mr. Anderson upon his retirement or termination of employment in conjunction with certain change in control events.  On April 9, 2015 Mr. Anderson retired from service as an employee of the Company and Chair of its Board of Directors, and entered into a separation agreement with the Company.  The Company recorded expense of approximately $1.4 million related to Mr. Anderson’s separation agreement in the second quarter of 2015.  The Company had remaining obligations due under Mr. Anderson’s separation agreement of $93,000 and $195,000 as of September 30, 2016 and December 31, 2015, respectively.



PerClot Technology



On September 28, 2010 the Company entered into a worldwide distribution agreement (the “Distribution Agreement”) and a license and manufacturing agreement (the “License Agreement”) with Starch Medical, Inc. (“SMI”), for PerClot, a polysaccharide hemostatic agent used in surgery.  The Distribution Agreement has a term of 15 years, but can be terminated for any reason before the expiration date by CryoLife by providing 180 days’ notice.  The Distribution Agreement also contains minimum purchase requirements that expire upon the termination of the Distribution Agreement or following U.S. regulatory approval for PerClot.  Separate and apart from the terms of the Distribution Agreement, pursuant to the License Agreement, as amended by a September 2, 2011 technology transfer agreement, CryoLife can manufacture and sell PerClot, assuming appropriate regulatory approvals, in the U.S. and certain other jurisdictions and may be required to pay royalties to SMI at certain rates on net revenues of products.



CryoLife paid $500,000 to SMI in January 2015 related to the achievement of a contingent milestone.  The Company may make additional contingent payments to SMI of up to $1.0 million if certain U.S. regulatory and certain commercial milestones are achieved.



The Company is conducting its pivotal clinical trial to gain approval to commercialize PerClot for surgical indications in the U.S.  The Company began enrollment in the trial in the second quarter of 2015 but later suspended enrollment pending consultation with the FDA regarding the trial protocol.  These discussions resulted in two amendments to the trial protocol, the last of which was approved by the FDA in July 2016.   The Company is in the process of conducting site start-up activities and anticipates resuming enrollment into the trial in the fourth quarter of 2016 with the goal of receiving Premarket Approval (“PMA”) from the FDA in 2019.



As of September 30, 2016 the Company had $1.5 million in prepaid royalties, $3.0 million in net intangible assets, and $1.2 million in property and equipment, net on the Company’s Summary Consolidated Balance Sheets related to the PerClot product line.  If the Company does not ultimately pursue or receive FDA approval to commercialize PerClot in the U.S., these assets could be materially impaired in future periods.