It’s Getting Ugly As St.Jude Wins Injunction Against AorTech’s Threat To Pull Optim Supply

In short

A few weeks ago AorTech’s share price was soaring as it looked like it was about to escape from its contract to supply St.Jude subsidiary business Pacesetter with the coating for its Durata ICD leads. Now, however, AorTech’s shareprice has dropped almost 50% from its peak three weeks ago as St.Jude wins an injunction against the termination of the contract.

Background

We covered this unfolding tale in October, here. The story, as far as we’re given to believe, relates to the relationship between St.Jude’s Pacesetter subsidiary (so St.Jude then) and Scottish company AorTech, the latter being provider of the clever polymer coating that St.Jude is pinning its hopes on as its Durata ICD lead strives manfully to repair the commercial damage done by its predecessor.

Anyway, to cut a long story short, AorTech decided that St.Jude had breached its contract, for reasons it didn’t disclose at the time. In St.Jude’s pursuit of legal countermeasures, proceedings suggested that the breach was for St.Jude placing “excessive supply orders intended to cause AorTech to default on its supply obligations”. It also seems the company allegedly broke another agreement entered into when it acquired AorTech’s manufacturing assets “by entering into an employment agreement with an AorTech employee at his request”.

Back to the story, AorTech said it would terminate the supply agreement in the event that the breach(es) was(were) not rectified and clearly believed that this would happen. The contract to supply one of the world’s biggest cardiovascular device companies was clearly so bad for AorTech that it’s share price shot up on the very thought of its termination.

So St.Jude, clearly determined to shore up its supply of its so-called Optim coating, sued AorTech and have now been granted an injunction against the termination of the supply agreement.

And why wouldn’t St.Jude want the arrangement to continue? It owns the manufacturing assets for the coating material, but not the IP, so that could get messy in the event of a split. It doesn’t to our knowledge have an alternative supplier, and even if it did one can only imagine that switching would be a painful process. And finally, it has just announced preliminary results from an analysis of registry data pertaining to Durata which rather supports its long-held view that the device with its AorTech-manufactured coating is performing rather well, with rates of insulation abrasion and mechanical failure of Riata ST Optim and Durata leads appearing to be very low. Find that release here.

What happens next? To be honest we’ve absolutely no idea, but one possibility seems to be that the antagonists may decide it was all a big misunderstanding, have a few too many drinks to patch things up and fall into bed together. AorTech wants to sell and St.Jude has reasons to buy…that’s all we’re saying.

Source: St.Jude Medical Inc., AorTech International PLC