Win-Win Deal Sees Angiotech And Ethicon Get Cake And Eat It In Sale Of Quill IP

In short

Angiotech Pharmaceuticals, Inc. has announced the sale of certain of its so-called Quill™  intellectual property to Johnson & Johnson’s Ethicon division. Under the terms of the transaction, Angiotech will retain worldwide rights to manufacture, market and sell Quill wound closure products.

In addition, Ethicon and Angiotech entered into a Manufacturing and Supply Agreement, pursuant to which Angiotech will exclusively manufacture knotless wound closure products that utilise the Quill technology for Ethicon for an undisclosed term.

Background

Quill technology is best described as bidirectional barbs on a suture, which effectively distribute tension across the entire length of the wound or tissue being approximated, and eliminate the need for interrupted suture or tying knots. It’s therefore an obvious bedfellow for a suture company.

The fundamentals of the transaction, as reported in a press release from Angiotech, are that the company, despite selling certain elements of the Quill IP to Ethicon (for an initial $20M), will continue to manufacture knotless wound closure products for it. Furthermore, in a slightly surprising twist, Angiotech retains the right to sell Quill-based products through its own channels on a royalty free basis.

The deal may not end here as Ethicon may pay up to a further $42M in the event that it picks up certain know-how or should Angiotech hit certain development and launch milestones.

Angiotech comments

“We are pleased after many years of investment and effort by all parts of our organization that the potential of our proprietary Quill technology has been validated by one of the industry’s most important companies,” said Thomas Bailey, President and CEO of Angiotech. “The opportunity to realize value for Quill through the sale of intellectual property to Ethicon and through our manufacturing relationship, while maintaining our own wholly independent opportunity to market and sell Quill profitably, presents a unique proposition for Angiotech, and builds on our history of providing key technology to partners simultaneous with our own continued direct participation in markets.”

“In addition, the payments and potential payments received from Ethicon will enable Angiotech to build upon our recent positive operational and financial momentum by further reducing our net debt and enhancing our operating flexibility, liquidity and capital resources,” said Mr. Bailey.

We say

How fascinating that Ethicon seems to want Quill, but not enough to want Angiotech out of the way in the market. It’s one of those deals that looks a bit like Ethicon couldn’t agree with Angiotech’s demands, but equally didn’t want “someone else” to get the product. Angiotech probably didn’t want to risk Ethicon buying the IP and sitting on it, so big E said “OK, you can keep selling it yourselves”. Either way Angiotech wins. As far as Ethicon goes, it’s one of those toe-in-the-water type deals we reckon… and in any event has prevented “some other big suture company” getting it. For which $20M sounds like a good deal.

Source: Angiotech Pharmaceuticals Inc