Medafor ISO Biotech Partner

Another story line to watch. Steven Anderson, the president and chief executive of CryoLife Inc. has written a letter to the board of directors of Medafor, a Minnesota based medical-technology company, suggesting a proxy fight is in the works.

The fate of the two companies is intertwined anyway. Cryolife (which is Georgia based) is the distributor of Medafor's product, HemoStase, a powder used to stop bleeding. In January, Cryolife bought 1.6 million shares of Medafor, and more recently indicated that it would like to buy the company outright, for $2 a share. Medafor rejected that offer, and Anderson's letter came in response to that rejection.

Then, in a conference call on Thursday, Anderson made the following pitch to Medafor shareholders: "Medafor's difficulty in securing working capital is a good illustration of a weakness we can help the company to overcome. Over the last two years, Medafor's management has attempted to secure more working capital in order to access better cash flow. This has been very difficult for management to accomplish because of the financial environment in the U.S. and the illiquidity issues facing the company. Medafor has been further hindered by a 'going concern' letter issued to the company in September 2009 by KPMG, Medafor's auditor, in connection with their 2008 audit of Medafor. A letter like this is issued by an auditing firm when they feel that the company may not have the capital resources to survive for the next twelve months. Both of these situations have negatively affected management's ability to adequately fund the company."