UPDATE 1-Investor sues Abbott over discontinued stent

(Adds comment from Abbott spokesman)

CHICAGO, Dec 18 (Reuters) - An investor sued Abbott Laboratories (ABT.N) for halting development of the ZoMaxx stent, saying the healthcare company breached an obligation when it dropped the product.

Birmingham Associates, a Cayman Islands corporation managed by New York-based Elliott International Capital Advisors, is seeking more than $70 million in damages, according to a lawsuit filed in the U.S. Court for the Southern District of New York on Monday.

Birmingham, which invested in an Abbott unit called Abbott Laboratories Vascular Enterprises Ltd (ALVE), contends ZoMaxx was a commercially viable product on a path to obtaining regulatory approval for sale in Europe and the United States.

Abbott, based in suburban Chicago, stopped development of the ZoMaxx stent in October 2006 and said it would focus on developing another drug-coated stent called Xience, which it acquired from Guidant in April 2006.

An Abbott spokesman said the lawsuit was "without merit."

"Abbott has met its contractual obligations and we are confident we will prevail," said Abbott spokesman Kurt Ebenhoch.

Stents are small mesh tubes used to prop open arteries after doctors have cleared them of blockages. Some versions have a drug coating meant to keep the vessels from reclogging.

According to the complaint, Birmingham said it and other investors provided $182.7 million to ALVE as part of a research and funding agreement for development and commercialization of pharmaceutical products and devices including ZoMaxx.

Birmingham said it provided $60 million of that total, in exchange for the right to future milestone and royalty payments.

Birmingham said Abbott reported it had spent more than $31 million of the investors' funds on ZoMaxx in 2005 and $27.9 million in 2006, according to the suit. (Reporting by Susan Kelly, editing by Leslie Gevirtz and Carol Bishopric)