A Delaware judge ruled that Johnson & Johnson
(NYSE: JNJ)
must pay $1 billion in damages to Auris Health shareholders, according to media reports.
Reuters, Bloomberg Law, and others report that the ruling claims that J&J breached its agreement to acquire Auris, which went through for $3.4 billion in February 2019. The deal also included up to an additional $2.35 billion in payments to shareholders based on various milestones.
Vice Chancellor Lori Will of the Delaware Court of Chancery ruled that J&J breached the agreement and failed to support the acquired iPlatform technology. According to the report, this would have led to increased payments to Auris shareholders.
Reuters says Will’s ruling stated that J&J breached the agreement “almost immediately after closing.” The judge deemed that J&J declined to put resources toward advancing iPlatform and instead pitted it against its own Verb device.
In a 2021 denial of J&J’s effort to dismiss the Auris shareholder suit, Fortis Advisors, acting on behalf of Auris shareholders, claimed a partnership between J&J’s Ethicon and Google company Verily’s Verb Surgical began raising questions. During acquisition talks, Auris founder Dr. Fred Moll and his colleagues were led to believe that Auris would be able to run independently of Verb after the acquisition, according to Fortis.
Fortis alleged that, after the acquisition, the Auris team had to enter into a covert “bakeoff” with Verb Surgical, diverting employees and resources. After the iPlatform won out over the Verb Surgical Robot, Ethicon bought out Verily’s stake in Verb and rolled Verb into Auris, according to Will back in 2021. The latest report quotes Will as saying that iPlatform “effectively became a parts shop for Verb.”
According to Reuters, J&J said it disagrees with the ruling and is considering an appeal. The company also said this ruling has no bearing on its current robotics program, which includes the much-anticipated Ottava system. J&J remains on track to submit the Ottava surgical robot for FDA investigational device exemption (IDE) in the second half of this year.
Reuters says J&J blamed missed milestones on technical issues with Auris devices. The company also claims the merger agreement allowed it to use Auris products in any way that advanced its robotics program. However, Will’s opinion disputed that, the report said.
