Medtronic is paying an upfront $750 million plus quarterly royalties till 2022 to settle patent infringement lawsuits related to both companies' transcatheter aortic valve replacement products.
Medtronic and Edwards announced Tuesday that the Minnesota device maker will make an one-time $750 million payment to the California developer of the Sapien transcatheter aortic valve replacement system to settle all related patent infringement lawsuits worldwide.
Also, through 2022, Medtronic will make quarterly royalty payments to Edwards based on a percentage of sales of its competing CoreValve product in an amount no less than $40 million per year. The maximum amount Medtronic will pay annually, irrespective of CoreValve salesm, is $60 million, wrote Danielle Antalffy, in a research note Tuesday following a conference call with Medtronic's senior management to discuss the setllement and the firm's fiscal fourth-quarter results.
An Edwards spokeswoman said that Medtronic paid $84 million to Edwards in 2013 after a jury verdict favored the California device company'a argument back in 2010.
Edwards first brought a patent infringement lawsuit against Medtronic in Germany in 2007, and in 2008 in the U.S. related to the Andersen patent but Medtronic also has had counterclaims. Neither side admitted to violate any patents in the agreement.
Tuesday's agreement between the two warring sides is for a period of eight years during which neither party can sue one another in the field of transcatheter aortic heart valves or any other transcatheter heart valves, according to an Edwards regulatory filing.
“Edwards has looked forward to resolving these cases for a long time, and more recent court activity prompted a productive dialogue that led to this agreement,” said Edwards CEO Michael Mussallem, in a letter to customers Tuesday.
That “court activity” is a reference to the preliminary injunction that a court issued in mid April preventing Medtronic to sell CoreValve commercially in the U.S. Medtronic had obtained a temporary stay on the injunction shortly after and vowed to argue its case. But in the end the company seems to have decided that settlement is the more prudent course.
The settlement leaves the choice of which system to use open to physicians. Medtronic has been the only company to prove that its TAVR system has better clinical outcomes than open-heart surgery, the conventional method of treating diseased heart valves. Meanwhile, in a smaller European study that pitted Edwards’ next-generation device - Sapien XT - with Medtronic’s CoreValve showed that Sapien XT worked better.
"This agreement brings to an end years of disputes between our companies related to TAVI patents, and allows both companies to make their respective therapies available to physicians and patients around the world," said John Liddicoat president of the Structural Heart business at Medtronic, in a statement. "With this resolution, we are pleased that Medtronic will be able to continue to provide the CoreValve System, as well as other products, to patients who need them in the U.S. and abroad without the overhang of any potential injunction or additional damages. "
Edwards is making a goodwill gesture by donating $50 million of the settlement to the Edwards Lifesciences Foundation to “support efforts to improve patient care, raise disease awareness and educate clinicians, such as through its Every Heartbeat Matters philanthropic program.” Mussallem said in the letter to customers.
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Correction: An earlier version of the story incorrectly stated that a small European study found that Sapien worked better than CoreValve. The study reviewed Sapien XT, Edwards' next generation device, against Medtronic's Core Valve.