The cost of Medtronic’s battle with Edwards Lifesciences over TAVI: $245M, so far

Medtronic’s (NYSE:MDT) legal battle with Edwards Lifesciences over patent infringement and its transcatheter aortic valve products has been going on for years and last week a federal appeals court affirmed a lower court’s ruling in Edwards’ favor allowing that Medtronic had,  in fact, willfully infringed on a single Edwards’ patent.

It asked Medtronic to pay damages, but the court did not bar Medtronic from selling the related products within the U.S. in the future. Instead, it sent the case back to the lower court to determine whether Medtronic’s CoreValve transcatheter aortic valve system should be barred from being sold in the U.S. CoreValve, which is sold in Europe, is currently being tested in the U.S.

Not surprisingly, the legal tussle is having a cost impact. On Tuesday, while discussing Medtronic’s fiscal second-quarter earnings, chief financial officer Gary Ellis provided some initial estimates of what he expects the burden to be.


“Based on this ruling, we believe the one-time noncash $245 million pre-tax charge represents our best estimate of our exposure at this time,” Ellis said in his prepared remarks to analysts.

Later in the call, in response to a question from an analyst, CEO Omar Ishrak confirmed that Medtronic was moving the bulk of manufacturing of CoreValve overseas and that this would be completed soon. He added the legal wrangling is not expected to have a “material impact” on CoreValve’s launch in the U.S., which is expected to be in fiscal 2015 that starts in May 2014. The fact that Ishrak doesn’t expect the litigation to affect the launch is probably because injunctions like the type Edwards is seeking against Medtronic are rare in the medtech world, said Thom Gunderson, a Piper Jaffray senior analyst.

Meanwhile, the single patent that Medtronic infringed upon is expired in May 2012, although Edwards Lifesciences has asked for a patent extension, Gunderson noted.

He described Medtronic’s legal battled succinctly:

“Mostly, this is sporadic whiffs of risk with long periods of legal costs in between,” he said.

A previous version of the story quoted Gunderson saying that the Edwards patent is set to expire in May 2013. Actually the patent expired in May 2012.

No comments