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Letter to the editor

Medical device's claims disputed

An investor is suing a Clearwater company over its kit to cure back pain.

By Scott Barancik
Published June 12, 2007

A Clearwater company that raised $8-million this year for a surgical backache cure is battling allegations that it misled investors about the device's potential.

Marketing materials distributed by Orthopedic Development Corp. say its TruFUSE product - a $2, 500 kit that includes a drill bit and two freeze-dried dowels made from the thigh bone of a donated cadaver - is a cheaper, easier and more effective tool for curing chronic lower-back pain than the metal rods and screws typically used in spinal-fusion surgery.

In most cases, ODC claims, TruFUSE surgery can be completed in no more than 30 minutes and on an outpatient basis, with only a local anesthetic and a tiny incision. "TruFUSE is less invasive, less destructive, less complicated, subjects the patient to minimal risk, promises a superior long-term solution and is less expensive, " a company brochure says. Hospitals supposedly can save as much as $9, 000 per surgery while charging Medicare or private insurers the same amount they would for a rod-and-screw procedure.

Several parties beg to differ, however. Terje Gronlie, the largest investor in ODC's $8-million private placement at $900, 000, claims in a lawsuit that the company defrauded him by exaggerating TruFUSE's track record.

Dan Grayson, a former vice president of sales who filed suit after being fired last month, said in an interview Monday, "They don't have any clinical evidence that TruFUSE works." Securities watchdog ShareSleuth.com, a Web site bankrolled by billionaire entrepreneur Mark Cuban, largely concurred in a report published Friday.

But ODC says its critics' motives are suspect. In its own lawsuit, the company accuses Gronlie and Grayson of masterminding an anonymous e-mail campaign that allegedly defamed the company and certain principals for unspecified economic gain. President and CEO James Doulgeris added in an interview Monday that ODC had in fact designed a clinical study and signed contracts with physicians, but that Gronlie and another former employee assigned to implement it failed to do so.

Negotiations with St. Petersburg-based BayCare Health Systems to perform a separate "cost-and-outcome" study fell through for unrelated reasons.

"It's not like we just made this up, " Doulgeris said. "This is all supervised by board-certified spinal surgeons."

No matter who is right, what's at stake is a chunk of the 1-million rod-and-screw spinal fusions performed each year in U.S. hospitals. Grayson said hospitals can charge up to $15, 300 for each procedure.

The dispute could ensnare other Tampa Bay area players. According to ODC, chairman and Clearwater surgeon David Petersen is the company's largest shareholder, as well as TruFUSE's inventor.

LifeLink Tissue Bank, a Tampa not-for-profit, manufactures the devices. Faculty from the University of South Florida helped test it.

Also playing a role is GunnAllen Financial, a Tampa brokerage firm and investment bank that earned $800, 000 for managing ODC's private placement. GunnAllen controls one of the six seats on ODC's board.

According to ShareSleuth.com and confirmed by the Times, a key GunnAllen employee in the transaction was temporarily barred from the New York Stock Exchange in 2003, although he did not admit guilt in the case.

Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.

[Last modified June 11, 2007, 23:22:35]