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Sydney-based medtech Next Science (ASX: NXS) has been slapped with legal action by a former US-based employee alleging breaches of the company's fiduciary duties and mismanagement against a number of employees.
Next Science, which has developed technology to reduce the impact of biofilm-based infections in human health, reveals that the action has come on the heels of its own litigation against Michael Morello and “several former employees” launched in May last year for alleged breach of post-employment restraints.
Morello, who is also said to be a shareholder in Next Science, has lodged a derivative complaint in the Duval County Fourth Judicial Circuit Court in Florida in which he has made allegations against the company regarding its key products XBIO and XPERIENCE.
XBIO is said to physically break down the body’s protective biofilm layer to better facilitate the penetration of antimicrobials in treating diseases. The company also markets BLASTX and XPERIENCE, the latter used in orthopaedic surgeries that are focused on hip, shoulder, knee and podiatry applications.
“Mr Morello’s complaint makes several claims including that Next Science’s XBIO technology has not been approved by the FDA (US Food and Drug Administration) as a biofilm eradication process and that the company did not take adequate measures to address safety concerns about the use of its surgical solution XPERIENCE in breast implant procedures,” says the company in an announcement to the ASX.
“The company confirms that the products it sells are safe, effective, approved by the FDA and promoted within their FDA approved intended use.”
Morello was Next Science’s vice president of wound care sales in the US until December 2023, although Morello’s LinkedIn profile lists his employment ending in March last year. According to the company, Morello was subject to a non-compete clause following his departure.
“The board is concerned that the complaint has not been brought in good faith due to the fact that Mr Morello has sought to tie the derivative complaint to the non-compete action,” says Next Science.
“However, the company is following recommended practice in undertaking an independent investigation into the matters alleged.”
Next Science says that in conjunction with consulting its insurers it has engaged US attorneys to represent the company in both proceedings.
"The company and (US subsidiary) Next Science LLC will continue to pursue the non-compete action against Mr Morello and several former employees for the breach of post-employment restraints,” the company says.
“Next Science will provide further updates as and when there is material progress in these USA civil proceedings.”
Next Science, a company heavily backed by property developer the late Lang Walker, had previously forecast revenue guidance of between US$36 million and US$40 million for calendar 2024.
However, it withdrew this guidance in August last year due to a lower-than-expected sales performance by the group as it transitions most of its direct sales force to agency reps.
The company posted a net loss of US$5.84 million in the six months to the end of June last year, down 32 per cent from the previous year, as revenue rose 11 per cent to US$11.2 million.
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