Natus Medical Comments on FDA Recall, Says Doesn't See Cost of Measures Material

Natus Medical Incorporated

today released a statement regarding the issuance by the Food & Drug Administration (the “FDA”) of a recall notice for the Company's Olympic Cool-Cap. The recall addresses a situation where the Cool-Cap screen freezes and interrupts patient cooling. Natus had previously communicated the problem to customers in May 2012 by issuing a Class II Recall notice, which is the FDA's mid-level health hazard classification. Customers are able to recover from the screen freeze failure by simply rebooting the Cool-Cap system. Cooling treatment can continue in a safe manner with the Cool-Cap system as originally intended. The Company has provided recall information to the FDA as required in a timely manner since this problem originated. Today's announcement indicates that the FDA has re-classified this action as a Class I Recall which is the highest relative degree of health hazard classification for a product recall. As a result of this reclassification, Natus will be sending follow up Safety Notice letters to all customers reminding them how to recognize this screen freeze condition and how to recover from it. Separately, an unreliable power supply module is being replaced on an ongoing basis in effected units. The costs of the measures described above are not expected to be material, including costs yet to be incurred, and were previously accrued as an expense in the Company's financial results for the nine months ended September 30, 2012. The recall does not prevent the Company from continuing to market and sell the Cool-Cap, nor does it prevent clinicians from using the device. Revenue from the Cool-Cap represents less than one percent of the Company's consolidated revenue. The Company received premarket approval (“PMA”) from the FDA to market the Olympic Cool-Cap in December 2006. The Cool-Cap system, which is the only FDA-approved device for the treatment of hypoxic ischemic encephalopathy (“HIE”) in term newborns, provides selective head cooling to prevent or reduce the severity of neurologic injury associated with HIE.