Edwards wins $1bn from Medtronic, but may still lose in the market
Bad news for the lawyers: Medtronic and Edwards Lifesciences have finally reached an accord ending their long-running patent litigation concerning their transcatheter aortic valves, with the larger company agreeing to pay over $1bn.
Medtronic is to pay Edwards a one-off fee of $750m and royalties based on a percentage of its CoreValve device. These royalty payments will come to no less than $40m annually and must be paid each year until April 2022. An Edwards victory had been looking likely for some months, but the battle will now move from the courts to the market, and a win in the former is no guarantee of greater sales.
Billion dollar baby
The companies have been at daggers drawn over transcatheter aortic valve implantation (TAVI) technologies since 2008 in the US, before CoreValve and Edwards’ Sapien won approval. The latest twists in the US cases saw CoreValve forced off the market in early April, though this ruling was overturned less than two weeks later.
There have also been legal cases in other countries, notably Germany where CoreValve was banned from sale last July, before being reinstated in November.
The companies will now cancel all pending litigation and patent office actions, and grant each other cross-licenses to patent litigation claims. The companies have even promised not to sue one another for patent matters concerning transcatheter heart valves anywhere in the world for eight years. Naturally, neither company has conceded that any patents have been infringed or that any are invalid.
CoreValve was approved in the US in January for use in patients at extreme risk for open-heart surgery (EP Vantage interview – Medtronic aims to build on CoreValve approval, January 23, 2014). US approval in patients at high risk – those who are not entirely inoperable but who would still be in danger if they were to undergo surgery – is expected within months.
The various sales hiatuses and unpredictable legal twists have made it difficult for analysts to forecast CoreValve sales. Worldwide 2020 expectations for Medtronic’s transcatheter valves – the majority of which will come from CoreValve – vary from $752m to $1.4bn, EvaluateMedTech data show.
Medtronic acquired the valve five years ago when it bought its originator, also called CoreValve, for $700m upfront. The company has thus paid $1.5bn so far and is liable for more. Medtronic must see greater sales for CoreValve than sellside analysts.
Once CoreValve is approved in high-risk patients the devices will be on an equal regulatory footing and Medtronic’s scale – it is the world’s largest pure-play medtech firm – will come into play. Back in January, analysts from Morgan Stanley said that Medtronic’s US market share could exceed 20% by the end of calendar 2014.
Edwards was first to market with a transcatheter aortic valve and has certainly come out of the patent spat ahead. But it may not be the ultimate winner. EvaluateMedTech data show that in 2020, worldwide sales for Edwards transcatheter valves will be $1.2bn compared with $1.1bn for Medtronic’s – but Medtronic's are growing faster. By the time the current settlement plays out, Medtronic might well be the worldwide leader.
Edwards has won a moral victory, and one that comes with a hefty payout. In eight years’ time, though, it may find itself in second place.
|Transcatheter valves – Edwards V Medtronic|
|WW annual sales of transcatheter valves ($m)|