Medical device company Baxano Surgical (NASDAQ:BAXS), formerly known as TranS1, will pay $6 million to settle a federal inquiry into the firm.
The Raleigh company said today it has reached a definitive agreement with the U.S. Department of Justice related to a federal investigation that started in October 2011. A tentative agreement was reached last December. With this final agreement, Baxano must pay $6 million, plus accrued 2 percent interest, in nine quarterly installments starting this month.
According to TranS1 filings, the October 2011 subpoena came from the Office of Inspector General under the authority of the federal healthcare fraud and claims laws. The subpoena sought company documents from Jan. 1, 2008 through Oct. 6, 2011. Other than saying that it was cooperating with the investigation, TranS1 did not offer additional details about the inquiry. And the company is still not saying much now.
“Baxano Surgical has cooperated fully with this investigation and the settlement is consistent with our diligent efforts to instill a culture of compliance throughout the company,” CEO Ken Reali said in a statement. “We believe the full resolution of this matter and the elimination of related financial uncertainty is in the best interests of the company and its shareholders.”
As TranS1, the company’s primary revenue driver was its AxiaLIF line of products, used in spinal fusion surgery. TranS1 reported $14.5 million in 2012 revenue, down from $19.2 million in 2011 and $26.2 million in 2010. The company attributed the declines to the lower number of procedures done using the AxiaLIF device, due to physician’s limitations getting reimbursement as well as a growing number of denials from insurance companies on the basis that the lumbar spinal fusion surgery is not medically necessary.
As part of Baxano’s settlement with federal investigators, the company admits no wrongdoing. The settlement also calls for Baxano to enter a” Corporate Integrity Agreement” with the Office of Inspector General-U.S. Department of Health and Human Services. Under this agreement, Baxano is obligated to maintain its current compliance program and undertake a series of compliance related obligations. These procedures include training and monitoring procedures and maintaining a disciplinary process for compliance obligations for five years.
TranS1 was a medical device company that focused on minimally invasive lumbar spine treatments. Founded in 2000, the company had maintained its headquarters in Wilmington until earlier this year, when it relocated to Raleigh. In March, the company announced it would acquire Baxano, a privately-held California spinal products company, in a stock deal was valued at about $23.6 million. After the Baxano acquisition closed in May, TranS1 took the Baxano name.
In mid-day trading, Baxano shares fell to $2.20 per share, down 3 percent from Tuesday’s closing price.
