Worcester Business Journal

www.wbjournal.com March 16, 2015 • Worcester Business Journal 7 A t the end of 2005, Boston Scientific Corp. made the fateful choice to buy cardiovascular equipment company Guidant Corp. for $27 billion. Since then, repercussions from the acquisition have weighed on the Marlborough-based medical device company. But with the settlement of a lawsuit over the deal in February, the company seems to be moving forward. It recently made its first major acquisition since Guidant (for a far more modest $1.65 billion), and analysts say it's poised for more good news. The lawsuit was filed by rival medical device maker Johnson & Johnson, which had reached a deal to acquire Guidant in 2005 before Boston Scientific swooped in with a better offer. J&J sought $7.2 billion in dam- ages. The companies ended up settling for $600 million, and the stock market reacted with a 10.85-percent boost to Boston Scientific shares. Tao Levy, an analyst who follows Boston Scientific for WedBush Securities, said there had been little chance the company would have had to pay the full $7.2 billion, but the possibil- ity wasn't zero. That meant it was living under the threat of a disaster until it reached a settlement. "I wouldn't say 'bankrupted the com- pany,' but it would have been a real big issue for them to deal with," Levy said. Shagun Singh Chadha, an analyst with CRT Capital, said both sides should be pleased with the settlement since it avoids dragging out the process with appeals that could have gone on for another year or more. But she said the truth is that J&J didn't have a particu- larly strong case to begin with. "The burden of proof was high in establishing that the breach was not only willful, but also material in causing damage to Johnson & Johnson," she said. Acquired company, inherited problems The idea that Boston Scientific gained a material benefit from the Guidant acquisition is shaky at best, partly because the company has been caught up in legal battles over problems with Guidant products for years. In October 2006, less than a year after the acquisition, Fortune Magazine was already calling it the second worst deal ever. Fortune noted that Boston Scientific had already been forced to issue recalls or warnings on almost 50,000 Guidant devices, while its stock had dropped 46 percent. The important thing, Levy and Chadha said, is that Boston Scientific can now focus on the future. And it went right ahead and did that with the acqui- sition of American Medical Systems' (AMS) urology business from Endo International Plc for about $1.6 billion in cash, plus the potential for another $50 million in milestone payments. Please join us for the 9th Annual 5-Minute Pitch Contest! Advance registration required. Visit www.theventureforum.org/event-920255 Gold Sponsors We will have 10 of New England's finest pitching for you, the audience, and our team of judges from InnoLoft, Boynton Angels, Gesmer Updegrove, Boston Harbor Angels, and Launch Capital. In addition, the room will have approximately 20 other businesses presenting their ideas. With food, wine, coffee, and dessert, the atmosphere couldn't be better! Non-members – $35.00 Students – $10.00 College/University ID required at check-in. TVF Members – Free TUESDAY, APRIL 14, 2015 5:00 PM - 8:30 PM WPI Campus Center, Odeum We have a new Worcester office . . . but we've been here all along! As we celebrate our new office at 120 Front Street, we reflect on the past two decades and 400+ projects we've worked on in Worcester and surrounding communities, and look forward to continuing to serve our Central and Western Massachusetts clients. Building better communities with you Civil Engineering | Structural Engineering | Transportation Engineering Land Surveying | Green Infrastructure | Planning | GIS Boston | Worcester www.nitscheng.com Top: Worcester Recovery Center and Hospital. Right: UNUM Headquarters at CitySquare Court settlement spells relief for Boston Scientific Analysts bullish on medical device manufacturer after out-of-court settlement with Johnson & Johnson BY LIVIA GERSHON Special to the Worcester Business Journal >> Continued on Page 9 After agreeing to pay $600 million to settle a lawsuit brought by Johnson & Johnson, stock in Boston Scientific soared more than 12 percent on Feb. 18. $16.42 $10 $12 $14 $16 $18 $13.22 1/2/15 3/10/15 2/18/15 $16.68 Stock lift for Boston Scientific Source: Yahoo Finance

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