News Feature | February 18, 2015

Boston Scientific, J&J Settle Guidant Suit For $600M

By Jof Enriquez,
Follow me on Twitter @jofenriq


Boston Scientific announced that it has agreed to settle a lawsuit brought against the company by Johnson & Johnson (J&J) over the acquisition of cardiovascular device maker Guidant. The settlement ends a decade-long dispute between the two companies.

In a statement, Boston Scientific said it will make aggregate payments totaling $600 million to J&J and record the charge in its 2015 Q4 results as a recognized subsequent event. Moreover, Boston Scientific said it will not pursue patent infringement claims against J&J over certain stent products. In return, J&J has agreed to drop the entire suit without acknowledgment of liability from Guidant.

"We feel this settlement is in the best interests of the company and its shareholders," said Tim Pratt, executive VP, chief administrative officer, and general counsel and secretary of Boston Scientific. "We are pleased to end this longstanding litigation between Guidant and Johnson & Johnson, and to continue focusing on delivering innovative products and solutions to physicians and patients."

In a New York Times article, J&J spokesman Ernie Knewitz was quoted as saying: “This case was about playing by the rules, and today’s $600 million settlement, which was reached after all of the evidence was presented at trial and before the court rendered its decision, reflects how important it is for parties involved in merger agreements to fully live up to their obligations.” In addition to a $705 million breakup fee that J&J had received from Guidant, J&J has received total payments of $1.305 billion related to the matter, Knewitz added.

J&J had sought $7.2 billion worth of damages and interest from Boston Scientific over the Guidant acquisition, according to a previous Med Device Online article. J&J had offered to buy Guidant for $21 billion but eventually lost out to Boston Scientific, which offered $27 billion. In the case filed in 2006, J&J alleged that Guidant violated a prior merger agreement by allowing Abbott Laboratories access to Guidant's books, which allowed it to buy Guidant's vascular business. That move, J&J contended, allowed Guidant to divest the business to satisfy antitrust regulators and paved the way for Boston Scientific to clinch the deal.

While Boston Scientific won the takeover bid for Guidant, the company had to bear a heavy debt burden to finance it. But even though $600 million seems like a hefty price to pay for Boston Scientific, the amount is far lower than what J&J was seeking.

“We view this resolution as a significant positive for [Boston Scientific], lifting what has been a major overhang over the past few months,” J.P. Morgan analyst Michael Weinstein said in a note recently, according to the Wall Street Journal.