3M Accused of Breaking Promise to Market Life-Saving Medical Device Invented by British Government

LONDON, June 17, 2011 -

- Court hears that
3M Chairman and CEO George Buckley suggested 3M “pull the plug” on
MRSA detecting device that was ready for market in Europe, the U.S.
and globally

Lawyers representing the UK Government and private investment
group Porton opened their case yesterday against multinational
conglomerate 3M, accusing the Dow 30 company of breaching its
obligation to bring a potentially life-saving medical device
invented by the Ministry of Defence to market.

The case centers around BacLite, a MRSA detection technology
which was acquired by 3M from a group of investors including Porton
and the UK Government in February 2007. The terms of the sale
required 3M to actively market and diligently seek regulatory
approval for BacLite and to pay the investors one hundred percent
of BacLite’s 2009 sales up to a limit of 41m pounds Sterling.

In the opening statements presented over the past two days,
attorneys for the Claimants stated that 3M’s Chair and CEO George
Buckley was involved in seeking to purchase BacLite and also
personally involved in walking away from unconditional contract
commitments to market the device. The court heard that just over a
year after Baclite was acquired, 3M’s UK-born CEO Mr Buckley sent
an email in March 2008 querying whether the company should “just
pull the plug”  on BacLite, without making any reference to
the contractual commitments.

The opening statement set out the decision by 3M to effectively
terminate development of BacLite December 2008, ensuring that sales
of the device in 2009 would be zero. Lawyers also revealed that 3M
later offered to reimburse Acolyte’s investors US$1.07m, an
estimate that was explicitly intended by 3M to be
“conservative”.

The Government is now asking the High Court to award the full
41m pounds that would have been accrued had 3M met its obligations.
Its lawyers yesterday noted that 3M executives had once boasted
that BacLite might have had the company “printing money,” and that
even 3M’s estimates at all times were higher than the company’s
US$1.07m offer.

The Government’s lawyers used the opening statement to highlight
3M’s litigation strategy. The court heard that 3M’s lawyers are
declining to call senior executives responsible for the decisions
surrounding BacLite, insulating them from cross-examination. The
Government’s lawyers expect the Court to draw adverse influences
from this failure, putting it in the context of a series of moves
by 3M to prevent transparency, including holding witness scientists
behind confidentiality agreements.

Media Inquiries:

• Josh Block in the U.S. at Davis-Block, LLC:
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• Charles Cook at Attila Consultants on: +44-20-7776-8825 or
  +44-7710-910563
• Catherine Nicholls at Tetra Strategy on: +44-20-7881-7784 or
  +44-7789-644979

    NOTES FOR EDITORS:

    1.  The case is currently being heard in the High Court of
        Justice in London.
    2.  Porton Capital - is a venture and development capital firm
        which specializes in the commercialization of technology in
        partnership with the British Government. Porton has approx.
        $700m AUM and has offices in North America, Europe, the Middle
        East, Africa and Asia.
    3.  On the effectiveness of BacLite, the Court heard that:
         - BacLite obtained EU regulatory approval by 2005, demonstrating
           95% reliability in tests.
         - It quickly penetrated the diagnostics market in the UK. By May
           2006 the device was in use in hospitals, with the laboratory
           manager of Salisbury hospital commenting on its "excellent
           performance" in providing results "within one working day."
         - BacLite had a unique "value proposition," offering MRSA
           detection that was faster than traditional 'culture methods'
           but cheaper than 'molecular' methods. Culture methods generally
           take days to give results. BacLite produced results in 5 hours.
           Molecular methods generally cost "$35-$45" per test. BacLite
           was estimated to cost $14 per test.
         - Upon acquiring BacLite in February 2007, 3M terminated the
           sales team that had existed since May 2005 but did not reassign
           a new team until September 2007. Lawyers cited concerned emails
           from BacLite scientists stretching from March to August 2007,
           worried that it would take months to train a new sales team and
           that sales were being impacted.
         - 3M eventually scaled back European sales efforts to just the
           UK without informing former Acolyte shareholders, losing 34
           confirmed or targeted customer hospitals in the process. EU
           sales forces were moved to other projects in March 2008. By May
           2008, 3M had functionally ceased its marketing efforts in
           Europe.
    4.  Government lawyers presented the following arguments on 3M's
        failure to diligently seek regulatory approval:
         - 3M started testing BacLite in October 2007 but the technology
           soon began underperforming, demonstrating 50% reliability.
           BacLite had demonstrated 95% reliability in European trials.
         - Inadequate monitoring on 3M's part ensured that company
           executives did not discover that BacLite was underperforming
           until the week of 19 November 2007. Trials were suspended a
           week later, pending investigation of what had gone wrong.
         - Multiple errors were quickly discovered, which would have been
           found earlier had the trials been monitored closely.
         - None of the five sites were maintaining incubation temperature
           at the required 37C, an issue that 3M technical staff described
           in an email as "an especially crucial factor."
         - 3M scientists used a new testing protocol that differed from
           the one used in European trials (and of which the FDA would
           approve). The decision to alter the testing protocol was made,
           according to evidence cited by government lawyers, after the 3M
           team evaluating BacLite consulted with a 3M team working on a
           potentially rival diagnostic test.
         - After discovering these failures, 3M recognized that further
           "beta testing" would be necessary to reach reliable
           conclusions. However subsequent "beta tests" were limited to a
           single patient before being suspended.
         - By 7 March 2008, 3M CEO George Buckley had concluded in emails
           that it was time "to fish or cut bait" with Acolyte, despite 3M
           not informing Acolyte's investors that it was suspending work
           on the technology until months later.
    5.  Lawyers for the Claimants addressed 3M's claims over
        BacLite's effectiveness and set out the due diligence
        undertaken by 3M in purchasing the device:
         - Company technicians visited laboratories, reviewed technical
           reports, and received unanimously favorable reports from UK
           hospitals where BacLite was already in use.
         - 3M's investigation recognized strong customer acceptance
           amongst hospitals, found the existence of a market for BacLite,
           and confirmed that the device performed as advertised with high
           reliability.
         - As late as March 24 2008, 3M officials were giving "honest and
           best assessment[s]" of positive responses from customer trials
           in Europe. An email cited by lawyers reported on satisfactory
           results from 24 out of 32 customers, with 5 unsatisfactory
           results written off as "protocol and user related incidents."
           Six additional customers had committed to buying BacLite by
           April 2008, with an annualized value around US$1.3m.

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