Nov-07-2009Boston Scientific to Settle
(topic overview)
CONTENTS:SOURCESFIND OUT MORE ON THIS SUBJECTUnder the terms of the agreement, Guidant will plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration (FDA), and Boston Scientific will pay $296 million on behalf of Guidant. U.S. Generally Accepted Accounting Principles (GAAP) require that this agreement be recorded in the third quarter, as it occurred after the October 19 release of the Company's third quarter financial results and before the filing of the Company's Quarterly Report on Form 10-Q. Accordingly, the Company has updated its financial results for the third quarter and nine months ended September 30, 2009, recording a third quarter charge of $294 million, on both a pre-tax and after-tax basis. This amount represents the $296 million charge associated with the agreement net of a $2 million reversal of a related accrual. "We are pleased this investigation has been resolved," said Ray Elliott, President and Chief Executive Officer of Boston Scientific. "Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations. We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies."
[1] Boston Scientific Corp. said Friday it has reached a $296 million agreement with the U.S. Department of Justice related to a series of product recalls in 2005, ending a wrenching chapter in medical technology that has lingered for more than four years. In an investigation led by the U.S. attorney's office in Minneapolis, the company's Arden Hills-based subsidiary, Guidant, will plead guilty to two misdemeanor charges for "failure to include information" in reports to the Food and Drug Administration (FDA), which regulates medical devices and recalls them if they are found to be faulty. That was the case in 2005 after two Minneapolis physicians, Robert Hauser and Barry Maron, went public with concerns about the safety of a popular heart defibrillator made by Guidant, which was later purchased by Boston Scientific. Their unusual public outcry came after one of their patients, Joshua Oukrop, 21, of Grand Rapids, Minn., died while biking after his Guidant defibrillator short-circuited and failed to revive him.
[2] In order to settle an investigation by the U.S. Justice Department, the Boston Scientific Group has paid as much as $296 Million. The probe had been into the company's Guidant unit's handling of heart devices, and the settlement has, as reported by the company, led to losses in its third quarter. Under the settlement terms, in addition to the payment, Guidant will also plead to as many as two criminal misdemeanors for not informing that U. S. Food and Drug Administration that there were some problems with its implantable defibrillators, as has been confirmed by Boston Scientific.
[3] Boston Scientific settles for $296m Boston Globe Boston Scientific Corp. yesterday said it has agreed to pay $296 million to settle a U.S. Department of Justice investigation into charges that its Guidant heart-device subsidiary made faulty product reports to the Food and Drug Administration.
[4] Shares rise 1.2 pct (Adds HHS subpoena, background, analyst comment, updates stock price) By Debra Sherman CHICAGO, Nov 6 (Reuters) - Boston Scientific Corp ( BSX.N ) will pay $296 million to settle a U.S. Department of Justice investigation into product recalls issued by its Guidant subsidiary, and will record a third-quarter charge of $294 million, the company said in a government filing. In a separate filing, the company said it received a subpoena from the U.S. Department of Health and Human Services, Office of Inspector General, requesting certain information relating to contributions made by cardiac rhythm management to charities with ties to physicians or their families.
[5] NEW YORK — Medical device maker Boston Scientific Corp. said Friday it will pay $296 million to settle a Department of Justice investigation into the company's Guidant unit.
[6] Boston Scientific Corp., the Natick medical device maker, said it has reached an agreement in principle with the U.S. Justice Department under which it will pay $296 million to settle allegations that its Guidant subsidiary had violated the Food, Drug, and Cosmetic Act.
[7] Now you don't. It goes with Boston Scientific's third-quarter profit as a result of a settlement agreement with the Justice Department that the company announced today. Boston Scientific agreed to pay $296 million because of faulty reports made in 2005 to the FDA by its Guidant heart-device unit. The settlement will be charged against its third-quarters results, so Boston Scientific now says it had posted a loss for the period of $94 million rather than a profit of $200 million, as it had
reported last month.
[8] Boston Scientific Corp. will pay $296 million in an agreement with the Justice Department stemming from an investigation involving problems with Guidant Corp. defibrillators and a major related recall in 2005. Boston Scientific has been addressing fallout from those problems since it bought Guidant in 2006.
[9] 'Tis the season for Boston Scientific to put old disputes to bed. A month after the company agreed to pay Johnson & Johnson $726 million to end 14 heart stent patent suits, the company announced it would pay $296 million to resolve a Justice Department investigation into failures of its Guidant division to disclose problems with some implantable defibrillators.
[10] Boston Scientific Corp. (BSX) agreed to pay $296 million to resolve a Justice Department investigation into to product advisories at its Guidant defibrillator unit.
[11] Boston Scientific Corp. will pay $296 million to settle a federal investigation accusing its Guidant medical device unit of knowingly selling
heart defibrillators that had potentially deadly defects for more than three years.
[12] Natick-based medical device maker
Boston Scientific has agreed to pay $296 million to settle a U.S. Department of Justice case against a company that it acquired in 2006.
[13] Under the terms of the agreement, Guidant will plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration, and Boston Scientific will pay $296 million on behalf of Guidant.
[14] Under the current deal, Guidant will plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration. Natick, Mass. Boston Scientific updated its third-quarter profit results to reflect the charge. It is now reporting a third-quarter loss of $94 million, or 6 cents per share, instead of a $250 million, or 13 cents per share profit.
[6] The terms of the agreement call for Guidant to plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration, Boston Scientific said. Boston Scientific president and chief executive Ray Elliott said in a statement: "We are pleased this investigation has been resolved. Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations. We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies."
[7] As part of the agreement, the subsidiary company, Guidant, will plead guilty to two misdemeanor charges related to failing to include information in reports to the U.S. Food and Drug Administration.
[13] The filing said the company agrees to plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration and to pay approximately $296 million in fines and civil forfeitures on behalf of Guidant.
[15] Before
Boston Scientific Corp. spent $26 billion on Guidant Corp. in 2006, its soon-to-be subsidiary discovered design flaws in one of its implantable cardiac defibrillators but didn't disclosed that flaw and similar problems with another device until 2005. Those failures turned out to be costly for Guidant's new parent, which today settled a case with the U.S. Justice Dept., agreeing to pay penalties of $296 million and to Guidant pleading guilty to two misdemeanor counts of failing to supply certain information to U.S. regulators.
[16] NEW YORK (Reuters) - Shares of Boston Scientific (BSX.N: Quote, Profile, Research ) fell 3.1 percent to $7.80 in premarket trading on Friday, after the company reached an agreement with the U.S. Department of Justice related to product recalls issued by its Guidant subsidiary.
[17] The total number of shares sold was 41,112,500, including 5,362,500 shares issued in connection with the exercise of the underwriters´ over-allotment option to purchase additional shares. On 11/06/09, Boston Scientific Corporation (NYSE:BSX) announced it has reached an agreement in principle with the U.S. Department of Justice (DOJ) related to product advisories issued by its Guidant subsidiary in 2005.The alleged conduct and product sales occurred prior to Boston Scientific's 2006 acquisition of Guidant.
[18] NATICK, Mass., Nov. 6 /PRNewswire-FirstCall/ -- Boston Scientific Corporation (NYSE: BSX) today announced that it has reached an agreement in principle with the U.S. Department of Justice (DOJ) related to product advisories issued by its Guidant subsidiary in 2005.
[1] Boston Scientific Corp on Friday reach an agreement with the U.S. Department of Justice related to product recalls issued by its Guidant subsidiary.
[14] The Justice Department settlement covers Guidant's failure early in the decade to report malfunctions properly in three heart devices before the St. Paul, Minn., company was acquired by Boston Scientific for $27 billion in 2006. After the takeover, Boston Scientific "implemented a system of enhanced processes and standards for both existing and future products,'' said spokesman Paul Donovan. As Elliott reassesses the company's business operations, there has been speculation on Wall Street that it may combine the Guidant unit with its cardiovascular devices business based in Minneapolis. "Ray has said structural change is something he's looking at,'' said Donovan. He added that the company was not ready to disclose any changes being contemplated.
[4] The settlement with the Justice department came five weeks after Boston Scientific agreed to pay $716.3 million to rival Johnson & Johnson's Cordis unit to resolve more than a dozen patent lawsuits over heart devices. Industry analysts said the moves suggest Ray Elliott, who took over as Boston Scientific's chief executive in July, is eager to clear away lingering legal problems and move forward with restructuring plans he has alluded to in recent conference calls with investors.
[4] A key chapter in the 4-year-old saga of troubled heart devices from Guidant Corp. closed on Friday when Boston Scientific announced a $296 million settlement with the federal government and a related guilty plea to two misdemeanor charges. It's thought to be one of the largest fines ever to come out of the Minnesota federal district. "That's a lot of money," said Dr. Robert Hauser of the Minneapolis Heart Institute.
[15] Boston Scientific, which had previously disclosed the investigation of Guidant by the U.S. attorney's office in Minneapolis, noted in a press release that Guidant's alleged misconduct occurred before Boston Scientific bought Guidant in 2006. As a result of the settlement, Boston Scientific said it has updated its third-quarter results, recording a third-quarter charge of $294 million, and revised its guidance.
[7] The violation occurred in 2005, before BSX bought the company. Boston Scientific updated its third-quarter results to include a $294 million charge, reflecting the settlement and a $2 million reversal of a related accrual.
[13] The settlement agreed upon is roughly one-fifth of the total cash that Boston Scientific has in hand. The company has confirmed that because of the payment, its third quarter net loss came to a total of $94 million, or 6 cents a share, in contrast to earnings posted in October of $200 million, or 13 cents.
[3] The settlement means a $294 million charge goes on the books for BSX's 2009 third quarter, reversing $200 million in Q3 profits into a $94 million net loss. That prompted the company to lower its full-year earnings-per-share guidance buy 20 cents, from $.043-$.048 per share to $0.23-$0.28 per share.
[16] The resolution, part of an effort by the company's new top executive to clean up long-running legal issues, more than erased the $200 million profit the company reported for the third quarter. In a statement, the Natick medical device maker said it recorded a one-time charge against its earnings - equivalent to about 20 percent of its cash on hand - to cover the cost of the settlement. That resulted in a $94 million loss for the three months ending Sept. 30.
[4] The Company recorded pre-tax charges of $287 million during the first quarter of 2009 and $334 million during the third quarter of 2008 associated with certain patent litigation matters. Management does not believe these items reflect expected on-going operating expenses. Accordingly, management excluded these (credits) charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance and for comparison to the Company's past operating performance. Discrete tax items - These items represent current period adjustments of certain tax positions, which were initially established in prior periods as a result of acquisitions or as a result of divestiture- and litigation-related charges, or restructuring and restructuring-related costs. These adjustments do not reflect expected on-going operating results. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance and for comparison to the Company's past operating performance. Amortization expense - Amortization expense is a non-cash charge and does not impact the Company's liquidity or compliance with the covenants included in its debt agreements.
[1] Intangible asset impairment charges - These amounts represent non-cash write-downs of certain of the Company's intangible assets. Following the Company's acquisition of Guidant in 2006, and the related increase in the Company's debt, management has heightened its focus on cash generation and debt pay down. Management removes the impact of these charges from the Company's operating performance to assist in assessing the Company's cash generated from operations. Management believes this is a critical metric for the Company in measuring the Company's ability to generate cash and pay down debt. Therefore, these charges are excluded from management's assessment of operating performance and are also excluded from the measures management uses to set employee compensation. Accordingly, management believes this may be useful information to users of its financial statements and therefore has excluded these charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance, particularly in terms of liquidity. Acquisition-related net charges (credits) - These adjustments consist of purchased research and development and a gain resulting from the receipt of an acquisition-related milestone payment.
[1] The non-GAAP numbers focus instead upon the core business of the Company, which is only a subset, albeit a critical one, of the Company's performance. The Company provides detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure in the accompanying schedules, and Boston Scientific encourages investors to review these reconciliations. The Company believes that presenting non-GAAP net income, non-GAAP net income per share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange in addition to the related GAAP measures provides investors greater transparency to the information used by Boston Scientific management for its financial and operational decision-making and allows investors to see Boston Scientific's results "through the eyes" of management. The Company further believes that providing this information better enables Boston Scientific's investors to understand the Company's operating performance and to evaluate the methodology used by management to evaluate and measure such performance.
[1] To supplement Boston Scientific's condensed consolidated financial statements presented on a GAAP basis; the Company discloses certain non-GAAP measures that exclude certain amounts, including non-GAAP net income, non-GAAP net income per share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States.
[1] Amortization expense and intangible asset impairment charges, though not directly affecting Boston Scientific's cash flow position, represent a reduction in value of intangible assets. The expense associated with this reduction in value is not included in Boston Scientific's non-GAAP net income or non-GAAP net income per diluted share and therefore these measures do not reflect the full effect of the reduction in value of those intangible assets. Revenue growth rates stated on a constant currency basis, by their nature, exclude the impact of foreign exchange, which may have a material impact on GAAP net sales. Other companies may calculate non-GAAP net income, non-GAAP net income per diluted share, or regional and divisional revenue growth rates that exclude the impact of foreign exchange differently than Boston Scientific does, limiting the usefulness of those measures for comparative purposes.
[1] Non-GAAP net income, non-GAAP net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange may have limitations as analytical tools, and these non-GAAP measures should not be considered in isolation from or as a replacement for GAAP financial measures. Items such as purchased research and development, gains on acquisition-related milestones and divestiture-related gains and losses reflect economic costs and benefits to the Company and are not reflected in non-GAAP net income and non-GAAP net income per diluted share. Items such as restructuring and restructuring-related costs, litigation-related (credits) charges, and discrete tax items that are excluded from non-GAAP net income and non-GAAP net income per diluted share can have a material impact on cash flows and GAAP net income and net income per diluted share.
[1] Forward-looking statements may be identified by words like "anticipate," "expect," "project," "believe," "plan," "estimate," "intend" and similar words. These factors, in some cases, have affected and in the future (together with other factors) could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the statements expressed in this press release. Factors that may cause such differences include, among other things: future economic, competitive, reimbursement and regulatory conditions; new product introductions; demographic trends; intellectual property; litigation; financial market conditions; and, future business decisions made by us and our competitors. All of these factors are difficult or impossible to predict accurately and many of them are beyond our control. For a further list and description of these and other important risks and uncertainties that may affect our future operations, see Part I, Item 1A - Risk Factors in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which we may update in Part II, Item 1A - Risk Factors in Quarterly Reports on Form 10-Q we have filed or will file hereafter. A reconciliation of the Company's non-GAAP financial measures to the corresponding GAAP measures, and an explanation of the Company's use of these non-GAAP measures, is included in the exhibits attached to this press release. Assumes dilution of 10.9 million shares for all or a portion of these amounts. An explanation of the Company's use of these non-GAAP measures is provided at the end of this document.
[1] Shares of Boston Scientific edged up 3 cents to $8.08 on the New York Stock Exchange. Even as it tried to put its legal problems behind it, a new one arose yesterday. Boston Scientific disclosed in a regulatory filing that it received a subpoena from the Office of Inspector General at the Department of Health and Human Services requesting information about contributions made by the company's cardiac rhythm management division - the former Guidant Corp. - to charities with ties to doctors or their families. Such contributions could pose a conflict of interest for a company that sells medical gear to physicians groups and hospitals. "We are currently working with the government to understand the scope of the subpoena,'' the company wrote in its filing. It declined to provide more details. Don White, a spokesman for the inspector general's office at the health and human services department, confirmed his office issued a subpoena to Boston Scientific on Sept. 26, but said he had no other information about the request.
[4] Boston Scientific, a maker of heart pacemakers, implantable heart defibrillators, heart stents and other medical devices, now expects 2009 net earnings of 23 cents to 28 cents per share, or 75 cents to 79 cents per share, excluding items. "I'm a little relieved that this is over," said Tim Nelson, an analyst with FAF Advisors, whose fund does not own Boston shares. He said he sees limited downside for the shares, but does not advise buying them either, even at current levels. He noted losses may be limited in the near-term by talk on Wall Street that the company is about to roll out a big restructuring, including layoffs and the replacement of key managers in its cardiac rhythm management business.
[5] Boston Scientific said it had a third-quarter net loss of $94 million, or 6 cents a share, compared with net income of $200 million, or 13 cents, reported in October.
[2] Because of the settlement, Boston Scientific now says it had a third-quarter loss of $94 million, or 6 cents a share, not the profit of $200 million, or 11 cents a share, it reported last month.
[11] Boston Scientific said it is now reporting a third-quarter loss of $94 million versus a previously reported net income of $200 million.
[7] The lab services providers third-quarter sales rise 58 percent but net income slides 39 percent to $10 million. The Natick, Mass. -based medical device monolith agrees to settle a U.S. Justice Dept. case, paying nearly $300 million in fines; the charge reverses third-quarter profits into $94 million in Q3 losses and prompts BSX to nearly halve its 2009 earnings guidance.
[16] During the third quarter of 2009, the Company recorded a pre-tax charge of $294 million associated with a U.S. Department of Justice investigation.
[1] As updated, the company's third quarter net loss was $94 million, or $0.06 per share.
[19] As updated, the company's adjusted earnings per share for the quarter were $0.19. The Company has updated its full-year 2009 GAAP earnings per share guidance as a result of recording this charge.
[19] The adjustments in the table are also reflected in the Company's Form 10-Q, which will be filed later today. The Company has updated its full-year 2009 GAAP earnings per share guidance as a result of recording this charge.
[1] The company now expects a charge of 20 cents per share to be included in full-year profit results. It now expects profit between 23 cents and 28 cents per share in 2009, while analysts surveyed by Thomson Reuters had forecast profit of 50 cents per share.
[6] Adjusted profit, which excludes the charge, still stands at 19 cents per share.
[6] Accordingly, it is reporting a third-quarter loss of $94 million, or 6 cents per share, instead of a $250 million, or 13 cents per share profit.
[15] The Company now expects net income on a GAAP basis of $0.23 to $0.28 per share for the full year ending December 31, 2009.
[19] The company said it now expects net income on a GAAP basis of 23 to 28 cents per share for the full year ending Dec. 31. Its previous guidance was in the range of 43 to 48 cents a share.
[7] The GAAP measure most comparable to non-GAAP net income is GAAP net income and the GAAP measure most comparable to non-GAAP net income per share is GAAP net income per share. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP measure are included in the accompanying schedules.
[1] To calculate regional and divisional revenue growth rates that exclude the impact of foreign exchange, the Company converts actual current-period net sales from local currency to U.S. dollars using constant foreign exchange rates. The GAAP measure most comparable to this non-GAAP measure is growth rate percentages based on GAAP revenue. A reconciliation of this non-GAAP financial measure to the corresponding GAAP measure is included in the accompanying schedules. Management uses these supplemental non-GAAP measures to evaluate performance period over period, to analyze the underlying trends in the Company's business, to assess its performance relative to its competitors, and to establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP measures to further its understanding of the performance of the Company's operating segments. The adjustments excluded from the Company's non-GAAP measures are consistent with those excluded from its reportable segments' measure of profit or loss. These adjustments are excluded from the segment measures that are reported to the Company's chief operating decision maker and are used to make operating decisions and assess performance.
[1] Management removes the impact of amortization from the Company's operating performance to assist in assessing the Company's cash generated from operations. Management believes this is a critical metric for the Company in measuring the Company's ability to generate cash and pay down debt. Therefore, amortization expense is excluded from management's assessment of operating performance and is also excluded from the measures management uses to set employee compensation. Accordingly, management believes this may be useful information to users of its financial statements and therefore has excluded amortization expense for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance, particularly in terms of liquidity.
[1] Boston Scientific compensates for the limitations on its non-GAAP financial measures by relying upon its GAAP results to gain a complete picture of the Company's performance.
[1] Lawyers for patients contended that the company actually knew as early as June 2002 that the devices were flawed and hid the defects to protect sales. In 2007, Boston Scientific, represented by Shook, Hardy & Bacon,
agreed on the eve of trial to pay $195 million to settle more than 8,000 suits claiming that Guidant failed to disclose defects in its defibrillators.
[10] Boston Scientific has agreed to settlements with former Guidant defibrillator patients, who sued claiming the company knew about the potential for life-threatening defects in the heart devices, but failed to take sufficient action to protect patients.
[12] The settlement covers three Guidant heart devices the Contak Renewal and Contak Renewal 2 and Ventak Prizm 2 and occurred before Boston Scientific acquired the bulk of Guidant in 2006 for almost $27 billion after a bidding war with Johnson Johnson.
[8] The investigation involved product advisories issued by Guidant in 2005, which was a year before Boston Scientific paid $27 billion for the heart device maker.
[20] Medical device manufacturer Boston Scientific plans to settle a federal investigation into its handling of product advisories for $296 million.
[21] Boston Scientific is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a broad range of interventional medical specialties.
[1] Guidant, which was acquired by Boston Scientific in 2006, was accused of issuing deficient product advisories in 2005 and taking too long to notify doctors, patients, and the Food and Drug Administration about potential problems with defective defibrillators,
according to The Wall Street Journal.
[12] Boston Scientific had previously disclosed an investigation by the U.S. attorney's office in Minneapolis into alleged violations of the Food, Drug, and Cosmetic Act by Guidant.
[10] As part of the deal, Guidant will plead to two misdemeanor charges related to improper reporting to the FDA, failings that were investigated by the U.S. Attorney's office in Minneapolis. Boston Scientific CEO Ray Elliott said in a statement that Guidant employees 'believed they complied with applicable laws and regulations' but now the company wanted to resolve the matter.
[8] Jeanne Cooney, a spokeswoman for the U.S. attorney's office, said "an agreement has been reached in principle; formal documents will be filed and made public in the next few weeks." Boston Scientific said in a regulatory filing that a definitive agreement will be struck by the end of this year or in early 2010. Boston Scientific CEO Ray Elliott said in a statement that "Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations."
[2] On Nov. 3, the company and the Justice Department reached an agreement in principle to resolve the matters raised in the Minneapolis subpoena, according to a Boston Scientific regulatory filing on Friday.
[15] Accounting rules require Boston Scientific to record the agreement announced Friday during the company's third quarter.
[15] The company was not immediately available to comment. Boston Scientific said in another filing that William McConnell Jr, the company's senior vice president for sales and marketing for its Cardiac Rhythm Management business, would retire by the end of the year. "At first glance, we don't believe these three events will have a material impact on the company but it's too early to draw a firm conclusion regarding the HHS subpoena given the limited information available at this time," Wells Fargo analyst Larry Biegelsen wrote in a research note. "We believe the new CEO, Ray Elliott, is conducting a strategic review of all businesses at Boston Scientific and we think there is a good chance that the company will announce a significant restructuring this quarter. Until we see the details of any plan, it's premature to predict how the stock will react," he added. Earlier this week, Johnson & Johnson ( JNJ.N ), which competes with Boston Scientific in the cardiovascular and other markets, announced plans to cut up to 7 percent of its workforce.
[5] Here's more on the settlement. BSX Bonus : Boston Scientific separately disclosed in a filing this morning that it had received a subpoena from HHS's Inspector General seeking information about contributions made by its Cardiac Rhythm Management group to charities with ties to physicians or their families.
[8] Throughout 2007, Boston Scientific agreed to various settlements over heart patients' legal claims that Guidant knowingly sold defibrillators with potentially life-threatening defects over a three-year period.
[6] Natick, Mass. -based Boston Scientific acquired Guidant in 2006 and with it the company's Arden Hills division that manufactures pacemakers and implantable heart defibrillators. That local business unit also was at the epicenter of troubles back in 2005.
[15] While the furor grew about the company's reaction, a bidding war erupted between Boston Scientific and Johnson & Johnson to buy Guidant. Natick, Mass. -based Boston Scientific bought Guidant for $27 billion but struggled until recently to integrate the troubled operations into its own.
[2] In November 2007, Boston Scientific said it would pay up to $240 million to cover 8,550 patient claims involving Guidant defibrillators.
[15] Paul Donovan, spokesman for Boston Scientific, said the guilty pleas will be entered by Guidant not by any individuals who worked for the company. "We are pleased this investigation has been resolved," Ray Elliott, president and chief executive officer of Boston Scientific, said in a statement, which added the company resolved the matter "so we could put it behind us."
[15] Boston Scientific bought the bulk of Guidant in 2006 while Abbott Laboratories (ABT) bought the company's vascular business.
[11] In addition to the massive fine to be paid by Boston Scientific, Guidant also will plead guilty to two misdemeanor criminal counts for failing to include information about defects to reports to the FDA, the Journal reports.
[12] Guidant will plead to two misdemeanor charges related to failure to include information in reports to the FDA.
[20] As part of the Justice Department agreement, Guidant will plead to two misdemeanor charges related to failure.
[9] As part of the agreement, Guidant will plead to two misdemeanor charges related to improper reporting to the Food and Drug Administration.
[11] As part of the deal, Guidant will plead guilty to two criminal misdemeanors for failing to include information about the defibrillators in reports it made to the Food and Drug Administration to the problems.
[10] When the doctor asked Guidant whether the other recipients would be told, the company said no, it did not want to "alarm" anyone. The company kept its word in subsequent SEC filings and press releases, never mentioning the defect or Oukrop's death. Guidant's first public acknowledgment of the problem came in a letter to physicians issued about a month after its shareholders approved the JNJ deal, and then only because of an impending New York Times article that was to reveal the device's flaws. The FDA issued a national recall for the devices June 17, 2005; Guidant issued a physician communication and a press release on the same day, disclosing 15 reports of failure of the Contak Renewal and Contak Renewal 2 defibrillators, out of approximately 16,000 implanted worldwide, and two memory error incidents among its four models of AVT defibrillators, out of about 21,000 implanted worldwide.
[16] The DOJ settlememt news follows a
federal appeals court upholding the dismissal of a shareholders lawsuit against Guidant, accusing it and former management of malfeasance in failing to disclose the problems with the defibrillators. In February 2002, Guidant discovered a design flaw in one of its implantable cardiac defibrillators, the Ventak Prizm 2 DR, after receiving reports of device failures. "Instead, it continued selling its inventory of defective units without disclosing either to physicians or the public the design flaw or malfunctions that had led to device failures," wrote Judge Diane Wood of the U.S. Court of Appeals for the Seventh Circuit, adding that Guidant never mentioned the defects in subsequent press releases and filings with the Securities and Exchange Commission.
[16] The company opted to resolve the matter in an effort to devote "our full energies and resources to developing our innovative technologies." (The company's Arden Hills cardiac rhythm management division employs about 2,000 people.) Hauser, of the Minneapolis Heart Institute Foundation, said the agreement "sends a message to the medical device industry that this type of behavior will not be tolerated." He said the controversy has prompted companies to be more transparent about defects and more timely in warning doctors. At the time of the outcry, Guidant said the failure rate of the defibrillators was too low to justify warning doctors and that surgically replacing the devices would have been more harmful than keeping them in place.
[2] Hauser was among doctors who in 2005 blew the whistle on Guidant in connection with the heart device problem. "(The settlement) should convince the medical device industry that it needs to be transparent and timely with (disclosing) any device issues," Hauser said, adding he hoped it also would improve federal oversight of devices when they're in use.
[15] The Twin Cities serves as the epicenter of the once-flourishing industry, with the world's largest makers of the $30,000 devices, Guidant, Medtronic Inc. and St. Jude Medical Inc. The Justice Department did not release any information regarding the guilty pleas, which are unusual in this type of corporate case.
[2] The charge rocked the Twin Cities-dominated industry for heart rhythm devices and led to a series of product recalls by Guidant.
[15] The only products involved in the investigation were the VENTAK PRIZM('') 2, the CONTAK RENEWAL('') and the CONTAK RENEWAL 2 devices, which were the subjects of the 2005 product advisories. The table below reconciles the Company's updated third quarter and year-to-date 2009 financial results to those previously reported.
[1] In the third quarter of 2008, recorded $4 million to cost of products sold; $9 million to selling, general and administrative expenses; and $1 million to research and development expenses.
[1] In the first nine months of 2008, recorded $11 million to cost of products sold; $24 million to selling, general and administrative expenses; and $5 million to research and development expenses. An explanation of the Company's use of these non-GAAP measures is provided at the end of this document.
[1] Thousands of patients sued the company, prompting a $240 million settlement in 2007. The company has overhauled its quality systems as a result of the FDA warning and has launched new defibrillator models. It also posts safety data on its website, and many now consider the company a model of transparency.
[2] The company also said it would record a third-quarter charge of $294 million.
[17] During the third quarter of 2009, the Company recorded a pre-tax credit of $58 million associated with the reduction of previously recorded reserves related to certain other litigation matters.
[1] The Company continues to expect adjusted earnings, excluding intangibleasset impairment charges; acquisition-, divestiture-, and litigation-related net charges; restructuring and restructuring-related costs; discrete tax items; and amortization expense of between $0.75 and $0.79 per share.
[19] Analysts polled by Thomson Reuters expect the company to report earnings of $0.51 per share.
[19] Two weeks later the J&J merger was revealed and Guidant's stock again surged, eventually reaching $75 per share.
[16] Shares of Guidant rose nearly 8 percent in the week following the announcement, from about $65 per share to $70.
[16] 
Shares of Boston Scientific fell 1.9 percent to $7.90 in premarket trading. [14] Boston Scientific was later hit with a corporate warning letter from the FDA, a serious violation that hampered the company's ability to introduce products in the U.S. market.
[2] The alleged conduct and product sales occurred prior to Boston Scientific's 2006 acquisition of Guidant.
[19] Elliott is "a supremely pragmatic individual,'' said Rick Wise, managing partner at Leerink Swann in New York, an investment bank specializing in health care and life sciences. "He's making the practical decisions to position Boston Scientific for today's global health care environment. That argues for a more focused company, trying to move past extraneous legal issues that are time wasters and focus on what the company is good at: medical technology and innovation.''
[4] The Litigation Daily has confirmed that Akin Gump Strauss Hauer & Feld represented Boston Scientific in the Justice settlement, but as of Friday afternoon, a firm spokesperson could not divulge the names of the attorneys involved.
[10] Here's Boston Scientific's press release on the settlement, and here's
The Wall Street Journal's story about it.
[10] In an unrelated development, Boston Scientific said in a filing with the Securities and Exchange Commission that it has received a subpoena from the Department of Health and Human Services Office of Inspector General, according to the Journal. The subpoena seeks information on contributions from Boston Scientific's heart-rhythm-device business to charities with ties to doctors or their families.
[12] Jan Wald, an analyst with Noble Financial, called the agreement "a good deal" for Boston Scientific.
[15] Share prices plunged to $70.33 on the news ''' a $1.09 billion loss for Guidant investors ''' and when J&J said it was reconsidering the buyout in October shares fell to $64.10. [16] The news led to an intense industry review of the way it handles defects and malfunctions. Part of an $11 billion global industry for cardiac rhythm devices, implantable cardioverter defibrillators shock the heart back into rhythm when they sense an irregular heartbeat.
[2] In May of that year, the New York Times reported on the death of Joshua Oukrop, 21, of Grand Rapids, Minn. a college student with a heart condition who was on mountain biking trip in Utah at the time. Oukrop's doctors had implanted in his chest a Guidant Ventak Prizm 2 defibrillator, a device meant to provide a life-saving jolt when patients are stricken with dangerous heart rhythms.
[15] "Guidant is finally being held accountable by the government for withholding information that hurt a lot of people", Hunter Shkolnik, a New York-based lawyer who represented consumers who sued the company.
[3] The claims were that Guidant knowingly sold defibrillators with potentially life-threatening defects over a three-year period and the company was also criticized for taking too long to notify doctors, patients and regulators about potential problems.
[20] The Guidant devices were later recalled by the FDA, but the company was criticized for not warning doctors sooner about the potential defect.
[2] The company said it had fixed a manufacturing problem in 2002 that led to the devices short-circuiting, but continued to sell the potentially faulty devices made before the fix. A spokesman said Friday the company still sells the defibrillator models, called Ventak Prizm 2, Contak Renewal and Contak Renewal 2, but since they are older technologies, the sales volume is low. When it recalled 109,000 defibrillators in 2005, seven deaths were linked to the malfunction. (It's unclear whether the number has increased since then.)
[2] The medical device monolith acquires nearly 90 percent of the Norwood, Mass. -based brain monitoring equipment maker for $194 million.
[16] In the first nine months of 2009, recorded $36 million to cost of products sold; $11 million to selling, general and administrative expenses; and $3 million to research and development expenses.
[1] CF Industries said on Friday its board rejected rival Agrium Inc's sweetened bid worth about $4.5 billion, arguing the proposal substantially undervalues the company. CF has been fending-off Agrium's hostile bid since February, as it pursues its own hostile bid for smaller U.S. rival Terra Industries.
[14] Accordingly, management excludes the impact of foreign exchange for purposes of reviewing regional and divisional revenue growth rates to facilitate an evaluation of the Company's current operating performance and comparison to the Company's past operating performance.
[1] SOURCES1.
Boston Scientific Announces Agreement With DOJ On Pre-Acquisition Investigation of Guidant2.
Boston Sci settles implant recall case | StarTribune.com3.
$296 Million Paid by Boston Scientific to Settle Investigation | TopNews United States4.
Boston Scientific agrees to pay $296m settlement - The Boston Globe5.
UPDATE 4-Boston Sci to pay $296 mln to settle US probe | Reuters6.
The Associated Press: Boston Scientific paying $296 million settlement7.
Boston Scientific agrees to $296m Guidant settlement - Daily Business Update - The Boston Globe8.
Boston Scientific Sets $296 Million Settlement on Devices - Health Blog - WSJ9.
Boston Scientific to Settle DOJ Defibrillator Case - WSJ.com10.
Akin Gump on $296 Million Boston Scientific Defibrillator Settlement with Justice Department11.
Boston Scientific Reaches $296 Million Settlement In Guidant Case12.
Boston Scientific to Pay $296 Million for Defective Guidant Defibrillators Attorney At Law13.
BSX Settles Case | Worcester Business Journal14.
STOCKS NEWS US-Boston Scientific reaches pact with DOJ - Forbes.com15.
$296M settles defibrillator investigation - TwinCities.com16.
Boston Scientific settles Guidant Corp. suit for $300 million | MassDevice - Medical Device Industry News17.
Boston Scientific down after comments on DOJ | Reuters18.
American Chronicle | News and FDA Updates for Ferro (NYSE:FOE), Boston Scientific (NYSE:BSX), Keryx (Nasdaq:KERX)19.
RTTNews - Latest Earnings,Upcoming Earnings, Pos Pre Announcements, Pos Pre Announcements , Positive Surprises, Negative Surprises, Hot Stocks, Stock Split Calendar, Stock Buybacks, Dividends, Negative, Positive PreAnnouncements,Surprises . 20.
Boston Scientific Paying $296 Million To Settle Investigation Into Guidant Unit (BSX) - Comtex SmarTrend Alert21.
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