CHICAGO, Mar 24: Medtronic Inc. said it owns patents that could hinder a key heart product owned by rival Guidant Corp., which agreed in January to be acquired by Boston Scientific Corp. for 27 billion dollars.
Medtronic's move raises questions about the timing of Boston Scientific's planned takeover of Guidant, according to a Citigroup analyst. But others on Wall Street disagreed.
Scott Ward, chief of Medtronic's vascular business, told Reuters the company has purchased an exclusive license to patents owned by a small Canadian company called Evysio.
Ward said yesterday a French court ruled that Guidant's Vision stent may infringe those patents. The Vision stent is the foundation of Guidant's Xience drug-eluting stent, a highly anticipated heart device used to prop open clogged heart arteries.
''We will be enforcing patents in the rest of the world and certainly in the United States,'' Ward said.
Citigroup analyst Matt Dodds in a research note on Thursday said intellectual property challenges facing Guidant's Xience stent suggest the deal ''may not close on time.'' Boston Scientific expects to close the week of April 3.
Guidant agreed to sell certain businesses to Abbott Laboratories Inc. in order to clear regulatory hurdles related to the Boston Scientific deal. Dodds said Abbott's price for Guidant's vascular business ''looks excessive.'' Abbott was unfazed. ''We are confident that Abbott will enjoy the full benefits of the acquisition,'' said spokesman Jonathon Hamilton.
Guidant did not return phone calls seeking comment.
Boston Scientific disputed the assertion that the deal would be stalled.
''We've reviewed the intellectual property issues and are comfortable proceeding with the transaction,'' said Boston Scientific spokesman Paul Donovan. ''We don't expect this issue to impact the transaction.'' Michael Barr, an analyst with Victory Capital Management, agreed. ''I'd say this is closer to a bump in the road than a real red flag,'' he said.
''Intellectual property issues rarely derail a merger,'' said mergers and acquisitions attorney Randy Katz. ''If there was an issue, there would probably be an economic adjustment between Abbott and Boston Scientific.'' Katz said Medtronic is aggressive in the litigation arena.
''They sort of need to be because the product they have isn't doing that well in the market, so they have to use nonmarketing methods to try to decrease their competitors' market share,'' he said.
Abbott's shares slipped 43 cents to .91 in afternoon trading on the New York Stock Exchange. Shares of Medtronic and Johnson&Johnson also edged lower while Guidant and Boston Scientific were slightly higher.
PATENT WARS Medtronic is a fierce competitor in the medical device sector, but an unfavorable patent ruling five years ago prevented it from selling a popular coronary stent delivery system in the United States. That left the company weakened and largely unable to compete in the nearly billion global market for drug-eluting stents, which deliver drugs to help keep blood vessels clear.
J&J and Boston Scientific are the only two companies approved to sell drug-eluting stents in the United States.
Minneapolis-based Medtronic hopes its Endeavor stent, approved for sale in Europe last August, will be the third on the US market, with a launch expected in 2007.
Analysts see the Endeavor stent as a niche product because clinical trials haven't proven the device to be superior to existing products by certain measures.
Medtronic is hamstrung since it still does not have access to the rapid exchange stent delivery system, which allows a doctor to insert a stent without an assistant.
Nevertheless, Ward said, Medtronic has been ticking off wins in the legal arena that could bolster its prospects ahead of its U.S. launch.
In addition to licensing the Evysio patents, Medtronic earlier on Thursday said it won a stent dispute with J&J.
The company said an independent arbitration panel ruled that Medtronic's Driver stent did not violate a license agreement involving patents held by J&J.
However, J&J said the matter is far from settled. Spokesman Marc Monseau said the arbitration panel did not consider the issue of patent infringement. The company expects a new arbitration panel to take up that issue.
Medtronic, meanwhile, is turning its attention to a second potential legal threat to Endeavor, Guidant's Lau patents. It lost a patent battle with Guidant a year ago, but Ward is optimistic about the chances to invalidate Guidant's patents.
Ward said the company in February convinced the U.S. Patent and Trademark Office to reexamine the validity of Guidant's Lau stent patents. Those patents govern Guidant's Xience drug-eluting stent, which plays a central role in the Boston Scientific deal.
''The fact that they granted a re-exam on all four patents is a pretty big deal,'' Ward said.