Durus Bails Out of Various Medical Holdings

Durus Capital Management, the hedge fund being sued by two companies after it "inadvertently" acquired huge percentages of their stock, has been selling millions of shares of other firms in which it had held substantial but less dominant stakes.

It is hard to ascertain from financial records the precise timing of all of Durus' transactions, or whether the fund made or lost money on these deals. But it is clear that since March 31, the fund run by Scott Sacane has sharply cut its investments in several companies in which Durus held stakes as high as 23%.

These holdings pale in comparison to the large chunks of stock that Durus owns in AksysAKSY and Esperion Therapeuticssymbol.

Durus owns 79% of Aksys, a Lincolnshire, Ill.-based provider of kidney dialysis products and services. At one point, Durus owned 33% of Esperion, an Ann Arbor, Mich., company developing heart disease medications. Esperion recently completed a secondary public offering in August, effectively reducing Durus' stake to 29%.

Both companies are suing Durus under a federal law that prohibits major shareholders from generating short-term trading profits in a stock. Such profits must be returned to the companies.

Both companies are negotiating with Durus over how best to reduce Durus' involvement without sparking chaos among traders and without discouraging potential investors. They have said Durus is cooperating, adding that Sacane -- and his hedge fund -- have always acted as a passive investor.

And both companies have signed agreements with Durus preventing the hedge fund from selling shares in their companies for a certain period of time. Esperion's lock-up provision extends through Jan. 31, 2004. Calls to Aksys were not returned; a spokesman for Durus declined to comment.

Aksys' shares were up 89% through the third quarter ended Sept. 30. The stock had nearly tripled by late July before the news broke about Durus' stake. Esperion's stock is up about 174% for the year, having also nearly tripled by late July.