Boston Scientific Corp. (NYSE:BSX) will pay Johnson & Johnson (NYSE:JNJ) $1.725 billion to settle a quartet of patent infringement lawsuits concerning the companies’ lines of cardiovascular stents.
The Natick, Mass.-based medical devices monolith agreed to the settlement, which calls for it to pay J&J $1 billion today and the rest in about a year, said it plans to post a $745 million letter of credit to cover the $725 million balance and interest. The deal won’t have "an appreciable impact" on Boston Scientific’s debt covenants, according to a press release, and will leave BSX with "significant liquidity" under its credit facilities.
"We have recently made a concerted effort to mitigate risk throughout the company, including litigation risk," president and CEO Ray Elliott said in the release. "In the past year, we have significantly reduced the volume of outstanding litigation, having now settled 17 lawsuits with J&J, as well as disputes with other competitors and the government. We believe today’s settlement — while substantial — is in the best interest of the company and its shareholders. It resolves major litigation without exposing Boston Scientific to the uncertainties of a jury trial and a potential damages award that was impossible to predict. While we still have a number of litigation matters remaining, this recent settlement has materially reduced our financial risks going forward. We will continue to manage carefully our outstanding litigation, as part of our ongoing and comprehensive effort to reduce risk. With the resolution of these matters, there are now no material judgments or jury verdicts pending against the company."
The settlement covers three patent infringement cases dating back to 2003, in which the companies accused each other of violating various patents related to Boston Scientific’s Express, Taxus Express and Liberté stents and J&J’s Cypher, BX Velocity and Genesis lines. Juries in the first two cases found infringement on both sides. After those findings were upheld on appeal, they were scheduled for jury decisions on damages this month; those trials are off the table. The third case, scheduled for trial in September, is also canceled.
The settlement also covers a fourth case, involving Boston Scientific’s Promus private-label version of the Abbott (NYSE ABT) Xience V stent, in which a federal judge last week ruled four Johnson & Johnson patents invalid. A trial slated for Feb. 9 in that case is also off the docket.
It’s not the first huge settlement with Johnson & Johnson for Boston Scientific. In September 2009, BSX agreed to pay J&J’s Cordis Corp. subsidiary $716 million to settle 14 stent patent infringement suits. The settled cases, involving lawsuits in U.S., Canadian, Belgian, German, French and Italian courts. That settlement and the most recent both involve a patent originated by the radiologist who invented stents, Julio Palmaz.