A Medical Device Daily

A U.S. court last week dealt a blow to Johnson & Johnson (J&J; New Brunswick, New Jersey) in its $5.5 billion lawsuit concerning the $27.2 billion the sale of Guidant (Indianapolis) to Boston Scientific (Natick, Massachusetts), dismissing some claims but only allowing part of the case to proceed.

The ruling, made public last Thursday, throws out most of the case against Abbott Laboratories (Abbott Park, Illinois), which teamed up with Boston Sci to beat out J&J for Guidant, but allows J&J to go ahead with its claim against Guidant for breach of contract.

“Abbott has said throughout that J&J’s suit against Abbott is without merit,” said Scott Stoffel, an Abbott spokesman. “We are pleased the court has agreed by granting our motion to dismiss.”

Last year J&J lost its battle to acquire Guidant, a medical device maker, to Boston Scientific. It sued Guidant, Boston Scientific and Abbott, which played a secondary role in the deal, in September (Medical Device Daily, Sept. 27, 2006).

“This case arises from a proposed merger that left plaintiff Johnson & Johnson with a broken heart,” U.S. District Judge Gerard Lynch in Manhattan wrote in a 43-page ruling.

Lynch granted a motion by Abbott to dismiss it from the lawsuit. He also granted dismissal of a claim against Boston Scientific for interference with contract and a claim against Guidant for breach of an implied duty of good faith and fair dealing.

But he denied requests from Boston Scientific and Guidant for dismissal of J&J’s claim against Guidant for breach of contract.

The judge said he let that claim stand because a merger agreement between J&J and Guidant “makes clear that Guidant was not allowed to solicit bids.”

“The complaint alleges that Guidant provided the due diligence without any inquiry from Abbott that permitted it to do so,” Lynch wrote. “At this point it cannot be said as a matter of law that this is not what happened.”

J&J alleged that Guidant gave confidential information to Abbott and that this ultimately led to Boston Scientific winning the battle to acquire Guidant.

J&J’s suit asked the court to rule that Guidant breached their agreement, reached in December 2004 and revised the following November, and that Boston Scientific and Abbott intentionally interfered with the deal and induced Guidant to breach it.

Boston Scientific trumped J&J’s final offer of $24.2 billion to acquire Guidant and its portfolio of stents, defibrillators, pacemakers and other medical devices, with its $27.2 billion offer. Guidant paid J&J a $705 million breakup fee after it opted to accept Boston Scientific's offer in late January, ending a two-month bidding war.

To eliminate possible antitrust snags, Boston Sci agreed to divest Guidant’s stent and vascular business to Abbott for $4.1 billion in cash and a $900 million loan.

But J&J claimed it was entitled to further damages, but waited nearly eight months after Boston Sci entered into an agreement with Guidant and about five months after the deal closed.

“We’re pleased that the majority of the claims were dismissed,” said Paul Donovan, a Boston Scientific spokesman. “We continue to believe the remaining claim is without merit.”

Not surprisingly, J&J also took an upbeat stance. Spokesman Marc Monseau said J&J was gratified that “the court upheld the breach of contract clause,” and that his company would continue to pursue its case.

Ironically, safety concerns involving both stents and other heart devices sold by Boston Sci as well as massive debt from the Guidant deal, have prompted a major fall in Boston Scientific’s share price. Consequently, some analysts have suggested J&J dodged a major bullet by failing to acquire Guidant.