Judge To Rule On J&J-Boston Scientific Dispute Over Guidant

By Jof Enriquez,
Follow me on Twitter @jofenriq

A federal court judge will soon rule on whether or not Boston Scientific owes Johnson & Johnson billions of dollars over the acquisition of heart device maker Guidant. This comes after the end of the non-jury trial of the case in New York federal court. The ruling will be announced at an unspecified date.

J&J is seeking $7.2 billion in damages and interest from Boston Scientific as Guidant's successor company, Reuters reported. Under the claim, Guidant allegedly reneged on its deal with J&J in order to pursue a more lucrative offer from Boston Scientific.

The case stems from Boston Scientific’s acquisition of Guidant in 2006. After a bidding war, Boston Scientific beat out J&J and bought Guidant for $27 billion. J&J alleges that Guidant willfully breached an agreement when it gave due diligence to Abbott Laboratories. Abbott agreed to buy Guidant's vascular intervention business to satisfy anti-trust concerns. This helped Boston Scientific in clinching the deal with Guidant.  

"What made the breach material was that Boston Scientific was not going to make an offer if Abbott was not involved," J&J attorney Harold Weinberger said in court, according to Reuters.

U.S. District Judge Richard Sullivan reportedly asked J&J why it did not challenge Guidant as soon as it found out that Guidant disclosed information to Abbott.

"There's a glaring absence of the sorts of emails and documents you would expect if you thought you had just been hosed on a multibillion-dollar deal," Sullivan said, according to the Reuters report. Weinberger said that J&J was not aware of Guidant's actions until weeks later when the bidding war ended.

Boston Scientific lawyer David Boies said that the company relied on the advice of its attorneys in sharing information with Abbott, according to the report.

Boston Scientific argued that J&J cannot claim any damages now, because J&J had not proven that it lost potential earnings from its failed bid.

"They have not presented any evidence that they would have been better off," Boies said, according to Reuters.

“They would have lost money rather than made money. The plaintiffs’ damages, even if they proved a breach, are zero,” Boies added in court, according to a Bloomberg article.

According to a previous Med Device Online article, J&J needed to demonstrate that they were financially damaged and that the damage was caused by a willful breach of confidentiality. 

The Guidant acquisition was widely panned by analysts. As noted by Bloomberg, Boston Scientific had to take a hefty $10 billion loan to acquire Guidant. Meanwhile, J&J claims damages of $4.35 billion plus interest, for a total of $7.2 billion. Between the two companies, Boston Scientific stands more to lose than J&J. Boston Scientific has a known market capitalization of $19 billion. In comparison, market leader J&J has a market capitalization of $285 billion, with annual sales ten times bigger than Boston Scientific.