Abstract
Kensey Nash Corporation has announced that it has agreed with St. Jude Medical to enter into non-binding mediation in an attempt to resolve disputes over royalty payments to Kensey Nash relating to the Angio-Seal vascular closure device, as well as other related claims.
Background
Kensey Nash is a pioneer in the field of arterial puncture closure, as the inventor and original developer of the Angio-Seal™ Vascular Closure Device (Angio-Seal), which is exclusively licensed to St. Jude Medical. Today, the Angio-Seal device (which is manufactured, marketed and sold by St. Jude Medical) is the leading arterial puncture closure product in the world with approximately 17 million Angio-Seal units having been sold since its market introduction approximately 15 years ago. Kensey Nash has manufactured key resorbable components for the Angio-Seal device and also received an approximate 6% royalty on Angio-Seal end-user sales according to its most recent annual report.
The dispute
Kensey Nash has repeatedly advised St. Jude that royalties are currently to be paid, and should since 2007 have been paid, at a rate of 8% rather than the 6% rate at which St. Jude had been paying. The Company has further advised St. Jude that, as a result of St. Jude’s incorrect interpretation of the license agreements between the two companies, St. Jude has to date underpaid the Company by over $30 million. Kensey Nash was recently informed and surprised to learn that St. Jude is now asserting that, effective November 2011, the rate at which that it owes royalties with respect to Angio-Seal is to be reduced from 6% to 2% and that St. Jude intends to pay the Company at this reduced rate.
Company comments
According to Joe Kaufmann, President and CEO of the Company; “St. Jude’s action to reduce the royalty rate to 2% suggests that St. Jude Medical intends to assert that their obligation to pay any royalties to Kensey Nash will end in April 2014. Our strongly-held view is that, based upon the current design of the Angio-Seal device, St. Jude’s royalty obligations to Kensey Nash extend at least through April 2016, and potentially through 2023. While we are hopeful that mediation will lead to an appropriate resolution of these matters, we will take all necessary steps to protect our intellectual property and the interests of our stockholders.”
Implications for shareholders
In its financial reports Kensey Nash will now state revenues at the rate at which St. Jude is actually paying royalties to the Company (2%), rather than the rate at which such royalties are owed. For this reason, the Company has withdrawn its previously issued guidance for the quarter ending December 31, 2011, the other two remaining quarters of fiscal 2012 and for fiscal 2012 as a whole. Kensey Nash’s share price took an 18% tumble on the news.
Implications for international users of Angio-Seal
Most users of Angio-Seal are probably unaware of its Kensey Nash origins let alone any ongoing wrangles. This dispute is unlikely to impact supply in any event as St Jude now manufacture the product, and the parties will no doubt come to a mediated agreement. We’ll be watching this space though and will report on the outcome.
Source: Kensey Nash
published: December 18, 2011 in: Cardio, Financial, St Jude, USA, Vascular