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Boston Scientific to Pay JNJ $1.73 Billion in Settlement

From Associated Press (February 1, 2010)

NEW YORK--Johnson & Johnson said Monday its medical device rival Boston Scientific Corp. will pay the company $1.73 billion to settle two suits related to stent patents.

Boston Scientific will pay Johnson & Johnson’s Cordis unit $1 billion Monday and $725 million next January.

Johnson & Johnson, based in New Brunswick, N.J., said it expects to post most of the payment as a special item in the first quarter.

Leerink Swann analyst Rick Wise said in a note that the settlement would resolve some uncertainties for the Natick, Mass.-based company, but "clearly this will result in more anxiety about Boston Scientific’s balance sheet leverage."

Boston Scientific reported stent sales of $450 million in the last quarter. The company also makes pacemakers, defibrillators and other implants.

Well Fargo analyst Larry Biegelsen said he worries the enormous payout to J&J "will hamper Boston Scientific’s ability to supplement its pipeline with bolt-on acquisitions, which is an important avenue for enhancing a company’s pipeline."

Shares of Boston Scientific rose 17 cents, or 2 percent, to $8.80 in morning trading.

The lawsuits had been pending in U.S. District Court in Delaware. They involved several drug-coated stents, including Cordis’s Cypher stent and Boston Scientific’s Liberte, Taxus Liberte and Taxus Express stents.

Stents are mesh-wire tubes used to hold arteries open after they are surgically cleared of blockages. They became one of the most lucrative medical devices in modern history after companies began adding drug coatings in 2003 to prevent scar tissue from growing over the mesh.

Other litigation between the companies remains, including Cordis lawsuits against Boston Scientific’s Promus stent products. Last month the U.S. District Court of Delaware found four Promus patents challenged by J&J to be invalid.

The companies are familiar patent case foes. In September, Boston Scientific agreed to pay Johnson & Johnson $716 million to settle 14 other patent infringement suits.

Johnson & Johnson shares added 9 cents to $62.96.

Posted: February 2010