Dr. Kurt Amplatz’s grandfatherly voice boomed across the public address system at AGA Medical Corp. on Nov. 14. He asked his 100 employees to assemble in the dining room.
Standing near a large abstract painting Amplatz himself had done, he regaled the crowd with personal anecdotes that ended with an emotional goodbye. Then he leveled his blue eyes and scanned faces.
“I know there are a few traitors among you and we’ll deal with that later on,” the 79-year-old Amplatz said. He strode out of the building, vowing to return.
So far, he can’t.
As a result of a war among the company’s three owners, including Amplatz, a judge has ordered them to manage the company from their homes.
“It’s unbelievable,” said Amplatz, who is ranked as one of medicine’s most innovative researchers. “I’m not allowed inside my own company. I’ve never heard of an owner being told he’s not allowed in his own office.”
The charges flying among Amplatz and his partners are as much about money and control as about business and medical philosophy.
The son of an Austrian physician who died of heart failure, Amplatz gave away $1 million worth of the company’s heart repair devices to impoverished patients before his ouster.
At the same time, he charged $3,500 per device while some hospitals were buying them and marking them up to $10,000.
“I formed this company to save lives,” Amplatz said. “I don’t care about the money.”
Profits were considered incidental, almost accidental, confirmed Franck Gougeon, a Paris trained businessman, Amplatz’s son-in-law, a partner and the G in AGA. “It’s beyond my wildest expectations of where we’ve gone with this turmoil.”
Trial is scheduled for May in district court in Minneapolis to deal with charges and countercharges leveled by the three partners against one another.Until then a court-appointed receiver acts as arbitrator on decisions they make.
AGA’s sales have more than doubled since 2001, according to court records, although exact sales figures are considered confidential and have been sealed. And this month the company announced its corporate space will quadruple with the purchase of a 27-acre campus.
Based in Golden Valley, Minn., AGA burst onto the medical scene with the Amplatzer Septal Occluder in 1995. The device seals congenital holes in cardiac tissue without the need for open-heart surgery. Patients often are discharged within hours of the procedure.
The device resembles a small wire-mesh umbrella. In its collapsed state it is snaked through a catheter tube, threaded through a heart cavity, and then popped open like a parasol.
“It’s brilliant,” said Dr. Ziyad Hijazi, chief of pediatric cardiology at the University of Chicago Hospitals. “None of us ever thought you could do this.”
The device initially was designed for the smallest of holes found in newborns, but is commonly used on adults. An estimated 40,000 U.S. children are born each year with holes in their heart tissue, according to the federal Centers for Disease Control and Prevention and the American Heart Association.
Uncorrected, these defects of the upper heart chamber can cause numerous life-threatening complications and death.
The device is the culmination of the vision of Amplatz, who graduated from medical school in 1951, immigrating to the U.S. two years later.
Initially he chose a career in radiology but then found he preferred inventing and hovering over machines rather than bedsides.
Over the years Amplatz has been awarded 100 patents, many of them related to the use of catheters and devices used in urology. He has published more than 650 research papers and has written seven books.
In the 1970s, while teaching at the University of Minnesota, he turned his attention to the heart.
Most equipment manufacturers at that time were trying to serve the burgeoning market for adult cardiac services. But Amplatz said he was drawn to the less popular niche of pediatric cardiology because newborns sometimes died from invasive heart surgeries. He was determined to find a better way.
While working as an inventor for another Minnesota medical equipment company, Microvena, Amplatz worked privately on his own designs, renting a small industrial office for about $75 a month, he said.
It was at Microvena, acquired by ev3 Inc. in 2001, that Amplatz met Michael Afremov, now 47 years old, a gifted Russian engineer, who later would become a partner at AGA and share all patent rights.
Earlier, Amplatz had secured a low-level job at the company for his son-in-law, Gougeon, now 37, who rapidly rose to manager of international sales.
Gougeon met Amplatz’s daughter in Paris and moved to Minnesota in the early 1980s, about the same time Afremov arrived in the U.S.
With his designs in hand, Amplatz recruited Afremov and Gougeon to gamble their futures by forming their own company.
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A competitor’s similar but unlicensed product was already in clinical trials. The trio poured every dollar into Amplatzer clinical trials in a frantic race against a much larger company. They won.
The Amplatzer secured European licensing by 1996 and in 2001 became the first product of its kind licensed by the U.S. Food and Drug Administration.
Annual sales of about $30 million soared above $70 million within two years, court records indicate.
AGA’s corporate structure was virtually nonexistent, bound only by trust. Amplatz, who refused a salary, handled new research; Gougeon oversaw administration; Afremov controlled manufacturing.
Amplatz banned most self-promotion efforts, such as press releases and booths at trade shows. Instead, he forged direct relationships with cardiac surgeons and pressed them to help impoverished patients.
Donated skills
More than a dozen formed a tight fraternity, of sorts, and frequently donated their time and skills.
Dr. Donald Hagler of the Mayo Clinic in Rochester, Minn., said he has traveled to Thailand and Italy with Amplatz to provide free care. If post-surgical patients could not afford to pay for follow-up checkups, Amplatz assumed those costs, he said.
In Chicago, Hijazi is considered one of Amplatz’s closest friends. He was the first surgeon recruited by Amplatz to work on Amplatzer clinical trials.
Based on their first meeting, during a presentation at a medical conference in Colorado, their collaboration probably should not have worked.
Dr. Hijazi, who was the event chairman, was startled when a tanned, white-haired man stood up in the back of the audience and abruptly shouted an expletive at the speaker.
Hijazi raced to the back of the room to quiet the heckler.
“It was Kurt Amplatz,” Hijazi said. “I mean, I had read his name in medical journals for years. Everywhere you turned was another Amplatz invention. He was a legend.”
For the next several minutes, Amplatz systematically made a case that the distinguished speaker’s presentation had been more conjecture than fact, Hijazi recalled.
Yet, Hijazi said he was entranced by Amplatz’s no-nonsense intellect and readily agreed to test the Amplatzer. To date, he has installed more than 1,000 devices.
Because of its concentration of hospitals offering pediatric services, Chicago has become a popular destination for patients with congenital heart defects.
Dr. Alexander Javois, pediatric cardiologist at Advocate Hope Children’s Hospital in Oak Lawn, said he has implanted three donated Amplatzer devices for impoverished Chicago-area children.
Dr. Carlos Ruiz, chief of pediatric cardiology at the University of Illinois Medical Center at Chicago, said he has joined Amplatz overseas to provide free services to low-income patients.
“Amplatz is an extraordinary man,” he said. “This is a rare company. It’s a tragedy what is happening to this company today.”
Problems began when an aging Amplatzer–still feeling more comfortable in the lab than a boardroom–agreed to ease himself out of the company in 1999. He valued his private shares at a modest $8 million, which he agreed to sell back over 15 years.
“I live well and make enough money to fund my research. Why do I need more?” Amplatz said of his decision.
But in October 2002, as Amplatz was divesting his shares, he accused Afremov of engaging in several business-related improprieties, such as running a Persian rug business from company premises, court records show. Afremov asserts that he did nothing improper.
Amplatz then refused to sell off his remaining shares in order to retain more control.
Buyout offer
According to court records, Amplatz offered to buy out Afremov for about $6 million. Afremov refused and was fired.
Afremov filed suit for wrongful termination, also charging that Amplatz didn’t have authority to fire him based on his prior stock deal and was in collusion with Gougeon to create a subsidiary sales division that might dilute the value of AGA Medical.
A Minnesota district judge ruled in May that there was evidence to support that Afremov was improperly fired.
The judge reinstated Afremov’s salary, but has not ruled on whether he can return to the company.
With Gougeon at the helm, the three partners retained equal voting rights. That balance was shattered in September when the judge ruled that Gougeon and Amplatz had failed to disclose a key meeting involving federal regulators to Afremov. Gougeon was ordered off company premises.
In November, the judge ruled in Afremov’s favor involving the stock sale. Consequently, Amplatz no longer retained the power to make company decisions.
He also was barred from company premises.
Gougeon and Afremov retain limited voting powers. All have motions or appeals pending.
For the most part, Gougeon and Amplatz have joined against Afremov in the legal fight, court records show.
Afremov’s attorney declined to discuss the case.
Company spokeswoman Marsha Appel said sales of the Amplatzer and other devices are strong and that the firm has retained its charitable legacy, doling out more than $50,000 in free devices in recent months.
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In December, for example, a free Amplatzer was provided to a Tennessee child whose family could not afford the operation. Likewise, overseas training missions are continuing, she said.
Since Amplatz’s forced departure, he now sits at home, forced to read his company press releases from afar.
“I do feel proud of my accomplishments,” he said. “Nobody can take that away from me. Not even a judge.”