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 tours 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.

Amid news Seer Medical’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, the company revealed it will withdraw its Seer Home System from the US and Australian markets.

“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.”

Australia’s medicines regulator confirmed “Seer Medical Holdings Ltd has recalled specific units of their Sense, Sight Monitoring Hub and Monitoring Portal (part of Seer Home) devices.”

“The recall is due to the potential electromagnetic interference with other medical devices in the vicinity of the Seer Home System,” a spokesman said in a statement.

“There is a low likelihood of causing injury to patients. Patients who are affected by this problem will be contacted by their clinic. Clinics have been advised to return affected devices to Seer Medical.”

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.

A representative of a major Seer shareholder – who requested anonymity due to legal obligations – told The Australian Breakthrough Victoria was not a shareholder before March 2024, its investment was limited to a convertible note up to this stage and it had no seat on the board.

“Breakthrough Victoria is the main creditor of Seer’s in this situation, accordingly their ability to influence a deal is limited, unless the deal requires a renegotiation of their note” he said.

He said the company was “burning through cash” and the shareholders viewed the leadership and board of the company as failing, which ultimately led to the actions of shareholders on January 23.

On January 23, the entire board quit except Dr Freestone, amid fears the company was about to fall into administration.

The representative of the shareholder said after their letter to the board and consequent resignations, the shareholders formed a bloc and orchestrated a rescue deal.

Once this rescue deal was completed, new interim leadership and an interim board was put in place and a “deep due diligence process commenced with relevant expert input”, he said.

The representative of the shareholder stated Breakthrough Victoria only became a shareholder after their participation in the rescue deal.

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.

He first stepped down as CEO in July 2023, after he co founded the company which created a cutting edge device that could track brain activity at home instead of the hospital.