State VC and medtech legal fight heats up as epilepsy support taken off market

Seer Medical has revealed it will recall one of its key services used to support people at home with epilepsy, after the company’s co-founder launched legal action against it.

Former Prime minister Scott Morrison touring the Seer medical facility in Melbourne. Picture: NCA NewsWire / David Crosling

The medtech company at the centre of an extraordinary court case launched by one of its founders has recalled a key home monitoring product used to track the brain’s electrical activity for people with epilepsy.

Seer Medical revealed it will withdraw its Seer Home System from the US and Australian markets, after the company’s co-founder Dean Freestone lodged a Federal Court case against it and $2bn state venture capital fund Breakthrough Victoria over allegations he was illegally sacked.

“After a comprehensive review, Seer Medical has identified gaps in the required quality and regulatory systems,” a Seer spokeswoman said.

“Seer Medical has therefore initiated a voluntary recall of the Seer Home System. Seer has notified the US Food and Drug Administration (FDA) and the Therapeutic Goods Administration (TGA).”

Despite the recall, a statement issued by the company’s spokeswoman said the health risk to patients was assessed as low and the “quality of the data collected in patient studies is unaffected”.

“The recalls require us to restructure our US operations and we anticipate that changes will also need to be made to the Australian business,” she said.

“We will continue to work with the regulators on a complete assessment and remediation plan to re-enter both the US and Australian markets.”

The Australian revealed on Monday Dr Freestone launched legal proceedings against Seer and one of its key funders, Breakthrough Victoria.

Dr Freestone alleged funding negotiations soured after the venture capital fund attempted to change conditions of a further $10m proposed investment into the company, after an initial $30m sum by way of a convertible note in July 2022.

He alleged Breakthrough Victoria preferred additional investments from healthcare investor KPRx instead of a Boston based venture capital group Safar and Hostplus.

The story so far

Dr Freestone said he is “devastated” by the fallout from funding negotiations allegedly souring between Seer Medical and Victoria’s $2bn venture capital fund, and wants “fair treatment and the truth” through a Federal Court case lodged against Breakthrough Victoria.

The medical scientist and co-founder of Seer Medical, told The Australian he had dedicated nearly 20 years to helping people with epilepsy but after a drawn-out dispute over funding for the company – involving Breakthrough Victoria – he felt there were limited options to protect his reputation and entitlements, so he decided to launch legal action.

“It’s hard for people to understand what it’s taken. I’ve had to work all day and all night with a fairly singular focus,” Dr Freestone said.

“It’s really, really tough. If I can get a fair hearing and a fair treatment and the truth … that’s important to me.”

It is understood an announcement about a Seer Medical recall is imminent.

Dr Freestone lodged a Fair Work case against Seer Medical and Breakthrough Victoria in early July, alleging he was unfairly dismissed from his position at Seer in March this year and is seeking compensation in lost wages and superannuation.

Responding to some allegations raised by Dr Freestone, a representative of a major Seer shareholder – who requested anonymity due to legal obligations – told The Australian Dr Freestone was “removed under the terms of a new investment offer that related to the rescue of the company”.

“The terms of Dr Freestone’s removal were set by the major shareholders,” he said.

The representative of the shareholder said Dr Freestone was originally removed as CEO in July 2023.

“If you then fast forward the next six months, whatever deals were on the table, the Seer Medical board and executives were trying to negotiate, nothing got through, and suddenly the shareholders discovered out of the blue that the company had been put into safe harbour, and that it was in a seriously distressed financial situation.”

Seer medical facility in Melbourne. Picture: NCA NewsWire / David Crosling

“Certain shareholders took action to essentially force the whole board out, all the board members resigned, excluding Dr Freestone, who ultimately moved to appoint himself acting chairman and CEO.”

A Breakthrough Victoria spokesman said: This is an employment dispute between Seer and its former employee – any questions about Seer’s day-to-day operations should be directed to the company. As this is before the court it would be inappropriate to comment further.”

Seer were contacted for comment.

Dr Freestone alleged after Breakthrough Victoria invested $30m in Seer by way of a convertible note in July 2022, it also agreed to provide an additional $10m in March 2023 on the condition Seer was to make certain roles redundant and amid other cost cutting measures.

In April last year, private equity Boston based fund Safar Partners and Host Plus were also discussing a possible $10m investment with Seer.

But Dr Freestone alleged Victoria’s chief asset management officer Sally McCutchan said the funding would be withheld unless Seer Medical agreed to a number of changes designed to increase its ownership and control of the business. He told The Australian the Seer board ultimately did not approve this model, and after he communicated that to Breakthrough Victoria he became an “adversary”.

Dr Freestone alleged instead, from November last year, Breakthrough Victoria wanted the additional funding to come from healthcare investor KPRx.

“Eventually, the Boston-based VC and the Host Plus deal went off the rails,” he said.

As well, Dr Freestone alleged Breakthrough Victoria pulled out of the KPRx deal and on January 23 this year, the entire Seer board resigned amid concerns about financial strains and personal liability, leaving him as the sole director.

“On that day I actually had to go into cancer surgery,” he said.

Asked why the board was concerned and resigned, Dr Freestone said: “Because at that point we were … operating under safe harbour. That means that the company was technically insolvent, but there was full reason to believe that we could trade out of it through getting more investment.”

In the end, he was the only director left and was lumped with significant liability so felt pressured to agree to Breakthrough Victoria plans to restructure the share table, Dr Freestone said.

Dr Freestone said Breakthrough Victoria agreed to improve his position but on March 27 he was dismissed.