Appeals court declines full review of $254m Zimmer loss to Stryker

Stryker, Zimmer BiometA federal appeals court declined a full review of its earlier decision to affirm a $248 million win for Stryker (NYSE:SYK) in its surgical tool patent case against Zimmer Biomet (NYSE:ZBH).

The U.S. Court of Appeals for the Federal Circuit last December upheld treble damages in the case, based on a U.S. Supreme Court decision in Halo Electronics v. Pulse Electronics that relaxed the standard for enhanced damage awards in patent infringement cases. Zimmer Biomet appealed that per curiam decision, asking for both a three-judge panel and the full Federal Circuit bench to re-evaluate the case. The court denied both petitions March 19, setting March 26 as the date for issuing the mandate of the court.

The case dates back to December 2010, when Stryker sued Zimmer the U.S. District Court for Western Michigan, alleging infringement of three patents covering wound debridement technology by Zimmer’s Pulsavac Plus device. In February 2013 a jury awarded $70 million to Stryker; Judge Robert Jonker trebled the damages in August of that year.

The Federal Circuit in 2014 rolled back that $228 million ruling, finding that Stryker failed to prove willful infringement. Stryker appealed to the Supreme Court, which vacated the appeals court’s ruling and ordered it to reconsider the case. The Supremes found that the Federal Circuit’s test was too rigid and allowed egregious infringers to evade liability.

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10+ orthopedic products from AAOS 2019 you need to know

Attendees line up to register for the American Academy of Orthopaedic Surgeons annual meeting in Las Vegas this week. More than 30,000 people were expected. (Image from AAOS)

The American Academy of Orthopaedic Surgeons (AAOS) annual meeting in Las Vegas is abuzz about robotics, according to industry analysts from SVB Leerink.

While the SVB Leerink analysts termed Stryker’s  (NYSE:SYK) Mako platform “best-in-class,” it’s an expanding category. Other major orthopedics companies are using this week’s AAOS meeting to introduce new offerings or tout updates to existing ones.

Johnson & Johnson (NYSE:JNJ), for example, said it plans to debut its Orthotaxy total knee system in 2020, with spine, hip and eventually shoulder indications likely to follow. J&J bought the French robot-assisted surgery startup in 2018, and didn’t have any photos of the prototype to share. But the analysts said it attaches to the patient table and includes a saw/bone cutting capability, like Mako. Unlike Mako, it will not have haptic capability. Rather, it gets the surgeon locked into a cutting plane and preserves the surgeon’s control of the saw (side to side and front to back) on that plane.

Get the full story on our sister site, Medical Design & Outsourcing.

 

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Stryker pays up to $220m for OrthoSpace

OrthospaceStryker (NYSE:SYK) said today that it put $220 million on the table for OrthoSpace and its InSpace rotator cuff repair device.

Stryker said it paid $110 million in up-front cash and agreed to another $110 million in potential milestones for the Caesarea, Israel-based company.

“The acquisition of OrthoSpace is highly complementary to our existing portfolio and aligns with Stryker’s focus on investing in sports medicine,” medsurg president Andy Pierce said in prepared remarks. “We are excited about the momentum OrthoSpace has in key global markets and the additional surgical option this technology provides our customers to address a complex pathology.”

Kalamazoo, Mich.-based Stryker said the deal isn’t expected to affect its earnings this year.

Johnson & Johnson (NYSE:JNJ) and Smith & Nephew (NYSE:SNN) are both investors in OrthoSpace.

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Stryker closes Arrinex buy

Stryker, Arrinex

Stryker (NYSE:SYK) said yesterday that it closed its acquisition of Arrinex and its Clarifix cryoablation technology intended for treating chronic rhinitis.

Kalamazoo, Mich.-based Stryker said that Menlo Park, Calif.-based Arrinex was founded in 2013 and began commercializing the Clarifix technology in late 2017.

Stryker said that the acquisition will expand its ENT portfolio and that the Clarifix technology will address a large segment of the ENT market in which the company does not currently compete.

“The acquisition of Arrinex is highly complementary to Stryker’s ENT portfolio, which is part of our Neurotechnology business. This acquisition aligns with our focus on providing ENT physicians with new technologies that deliver more treatment options and better patient outcomes,” neurotechnology, instruments & spine group prez Spencer Stiles said in a press release.

Earlier this month, Stryker said that it launched a select voluntary recall of Lifepak 15 monitor/defibrillators over issues in which the device locks up and may not deliver life-saving therapy, adding that it has received six reports of deaths related to the issue.

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Stryker recalls select Lifepak 15 defibs on lock-up issues

Stryker

Stryker (NYSE:SYK) said last Friday that it is launching a select voluntary recall of Lifepak 15 monitor/defibrillators over issues in which the device locks up and may not deliver life-saving therapy, adding that it has received six reports of deaths related to the issue.

The Kalamazoo, Mich.-based company said that an issue with the Lifepak 15 may cause the device to cease functioning after it delivers a defibrillation shock, displaying a blank monitor while keeping LED lights on to indicate the device is powered.

In this state, the device “has the potential to delay delivery of the therapy, and this delay in therapy has the potential to result in serious injury or death,” Stryker wrote in a press release.

The company said that it has received 58 complaints of the issue globally, including six patient deaths reported related to the malfunction. A total 13,003 devices are potentially affected by the issue.

Stryker said that it is reaching out to customers with affected devices to schedule for a device correction, which includes updated firmware for an internal component. The company said that it hopes to complete servicing all affected devices by the end of this year, and instructed customers experiencing the issue to contact it immediately.

Stryker said that individuals should use the systems normally until corrections can be completed, and added that automatic self-tests will not identify the fault as it occurs only during defibrillation.

Last week, Stryker saw shares rise after the medical device maker beat expectations on Wall Street with its fourth quarter and full fiscal year 2018 earnings.

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Stryker shares rise on Q4, FY2018 earnings Beat

Stryker

Shares in Stryker (NYSE:SYK) have risen in after-hours trading today after the medical device maker beat expectations on Wall Street with its fourth quarter and full fiscal year 2018 earnings.

The Kalamazoo, Mich.-based company posted profits of approximately $2.1 billion, or $5.44 per share, on sales of approximately $3.8 billion for the three months ended December 31, seeing a swing from the red on the bottom-line while sales grew 9.4% compared with the same period during the previous year.

Adjusted to exclude one-time items, earnings per share were $2.18, just ahead of the $2.15 consensus on Wall Street, where analysts expected to see sales of approximately $3.7 billion, which the company topped.

For the full year, Stryker posted profits of approximately $3.6 billion, or $9.34 per share, on sales of approximately $13.6 billion, for bottom-line growth of 248.3% while sales grew 9.3% compared with the previous year.

After adjusting for one-time items, earnings per share for the year were $7.31, just ahead of the $7.28 consensus on Wall Street where analysts expected to see sales of approximately $13.5 billion, which the company topped.

“We had an excellent finish to 2018 with the best organic sales growth in a decade, and strong adjusted earnings performance. Our multi-year momentum reflects the strength of our diversified model, progress on globalization and outstanding people and culture. We are well positioned to deliver for our customers, employees and shareholders in 2019 and beyond,” chair & CEO Kevin Lobo said in a press release.

The company released guidance for the coming fiscal year, expecting to see net sales growth of between 6.5% and 7.5% with adjusted net earnings per diluted share of between $8.00 and $8.20. Stryker added that it expects to post adjusted EPS of between $1.80 and $1.85 for the first quarter of 2019.

Shares in Stryker have risen approximately 6.2% in after hours trading today, at $171 as of 4:16 p.m. EST.

Late last month, the U.S. Court of Appeals for the Federal Circuit affirmed Stryker’s enhanced $248 million win in a surgical tool patent case against Zimmer Biomet (NYSE:ZBH).

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Analyst downgrades pressure medtech stocks

thumbs downSeveral medical device companies took hits yesterday after analysts on Wall Street downgraded their stocks, on a day when the major market indices each closed up a hair, and even medtech firms that enjoyed upgrades came under pressure.

Globus Medical (NYSE:GMED) suffered the most after Morgan Stanley analyst David Lewis cut his rating on the stock from “overweight” to “equal-weight,” sliding -8.5% to a $39.61-per-share close yesterday, compared with the prior day’s closing price.

In fact, Lewis’s downgrades led the pack in terms of impact, taking Insulet (NSDQ:PODD) and Hologic (NSDQ:HOLX) shares down some -7.4% and -6.5%, respectively. Here’s a look at some of yesterday’s downgrade action:

DOWNGRADES
Company Analyst Old rating New rating Close 1/2/19 %
Globus (GMED) Morgan Stanley Overweight Equal-Weight $39.61 -8.5%
Insulet (PODD) Morgan Stanley Hold Hold* $73.43 -7.4%
Hologic (HOLX) Morgan Stanley Equal-Weight Under-Weight $38.42 -6.5%
Abbott (ABT) Citigroup Neutral Sell $69.50 -3.9%
Medtronic (MDT) Citigroup Buy Neutral $87.92 -3.3%
Henry Schein (HSIC) Robert W. Baird Outperform Neutral $76.39 -2.7%
Smith & Nephew (SNN) JP Morgan Overweight Neutral $36.40 -2.6%
Bayer (BAYN) JP Morgan Overweight Neutral $17.40 -1.0%
*cut price target

The upgrade picture was murkier, with a trio of medical device companies taking hits despite upgrades, but three others gaining (including a bullish move from Lewis on shares of Baxter (NYSE:BAX)):

UPGRADES
Company Analyst Old rating New rating Close 1/2/2019 %
Tactile Systems (TCMD) Northland Capital Under Perform Market Perform $44.59 -2.1%
Stryker (SYK) Evercore ISI In-line Outperform $154.50 -1.4%
Zimmer Biomet (ZBH) Citigroup Neutral Buy $102.28 -1.4%
Bausch Health (BHC) Piper Jaffray Neutral Overweight $20.23 0.1%
Baxter (BAX) Morgan Stanley Under-Weight Overweight $65.30 0.8%
Citigroup Neutral Buy
Apollo Endosurgery (APEN) Northland Capital Under Perform Market Perform $3.65 5.8%

By way of comparison, the three major U.S. market indices all closed up a hair yesterday, with the Dow Jones Industrial Average closing up 0.1% at 23,346.24. The S&P 500 also closed up 0.1%, at 2,510.03, and the NASDAQ index ended at 6,665.94, up 0.5%.

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Appeals court OKs $248m Stryker win over Zimmer Biomet

Stryker, Zimmer Biomet

The U.S. Court of Appeals for the Federal Circuit this week affirmed Stryker‘s (NYSE:SYK) enhanced $248 million win in a surgical tool patent case against Zimmer Biomet (NYSE:ZBH).

The Federal Circuit court affirmed the judgement in a per curiam ruling dated on Monday, according to recently released court documents.

The damages in the case were previously enhanced due to a US Supreme Court ruling which made it easier to award enhanced damages. In July, Western District of Michigan Judge Robert Jonker reaffirmed an earlier decision to award enhanced damages “in light of the Supreme Court’s clarification of the governing standard in Halo Electronics, Inc. v. Pulse Electronics, Inc.,” according to court documents.

The court was also asked to reconsider its award of attorney’s fees, due to a Supreme Court ruling in Octane Fitness, LLC, v. Icon Health & Fitness, Inc., which it also reaffirmed.

Judge Jonker reaffirmed both decisions for triple damages for the 2013 jury verdict, which had been vacated on appeal by the Federal Circuit last year. He ruled that in the case, Stryker had “proven by clear and convincing evidence” that Zimmer had willfully infringed on 1 or more claims in all 3 of the patents-in-suit, according to court documents.

Last September, a federal appeals court overturned the enhanced damages and attorney fees awarded in the $70 million patent infringement case Stryker had won over Zimmer Biomet, but upheld its prior ruling that patents were valid and infringed.

The case was sent back to the U.S. Court of Appeals for the Federal Circuit in June, when the Supreme Court held that the standard for enhanced damages awards in patent infringement cases should be relaxed. The case dates back to December 2010, when Stryker sued orthopedics rival Zimmer, alleging infringement of 3 patents covering wound debridement technology by Zimmer’s Pulsavac Plus device.

In February 2013 a jury in the U.S. District Court for Western Michigan awarded $70 million to Stryker in damages plus royalties, ruling that Zimmer infringed all 3 patents claimed in the suit. Judge Robert Jonker trebled the damages in August of that year, ruling that the infringement was willful, ordering a permanent injunction and granting Stryker’s bid for lost profit damages for another nearly $2.4 million. The judge also granted Stryker’s motion for prejudgment interest, awarding nearly $11.2 million, plus reasonable attorney’s fees and additional prejudgment interest on those fees at a rate of 3.83%.

The Federal Circuit court in 2014 rolled back that $228 million ruling, finding that Stryker failed to prove willful infringement. Stryker appealed to the Supreme Court, which vacated the appeals court’s ruling and ordered it to reconsider the case. The Supremes found that the Federal Circuit’s test was too rigid and allowed egregious infringers to evade liability.

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Stryker closes $1.4B K2M buy

Stryker, K2M

Stryker (NYSE:SYK) said today that it closed its $1.4 billion acquisition of K2M (NSDQ:KTWO).

Kalamazoo, Mich.-based Stryker paid $27.50 per share for each outstanding share of K2M, representing a 27% premium over K2M’s average closing price during the 90 days of trading ended August 29.

With the acquisition, Leesburg, Va.-based K2M will become a wholly owned subsidiary of Stryker, the companies said.

“K2M’s broad product portfolio and robust pipeline complement Stryker’s established leadership in the spine and neurotechnology markets. We believe that our combined businesses will offer innovative solutions for our customers while expanding our global footprint,” Stryker neurotech, instruments and spine group prez Spencer Stiles said in an SEC filing.

The closure comes only a day after the U.S. FTC granted early termination to the Hart-Scott-Rodino Antitrust Improvement Act of 1976 waiting period for the merger, and only two days after K2M won shareholder approval for the merger during a special meeting of stockholders.

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FTC clears Stryker, K2M tie-up early

Stryker, K2M

K2M (NSDQ:KTWO) said today that the U.S. FTC granted early termination to the Hart-Scott-Rodino Antitrust Improvement Act of 1976 waiting period for its pending $1.4 merger with Stryker (NYSE:SYK).

The termination of the HSR Act clears yet another hurdle to the union between the two companies, which will position K2M as a wholly owned subsidiary of Kalamazoo, Mich.-based Stryker.

In the deal, Stryker will pay $27.50 per share for each outstanding share of K2M, for a 27% premium over K2M’s average closing price during the 90 days of trading ended August 29.

K2M said that it expects the merger to complete tomorrow, November 9, according to an SEC filing.

Yesterday, K2M said that it won shareholder approval for the merger during a special meeting of stockholders.

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