Kensey Nash Corp. (KNSY) agreed to nonbinding mediation in an
effort to resolve royalty disputes with St. Jude Medical Inc. (STJ)
regarding a vascular closure device in which Kensey claims it has
been underpaid by more than $30 million.
In addition to royalty rates for the Angio-Seal vascular device,
how long St. Jude is required to make the payouts also is under
dispute.
Kensey, a medical device maker focused on regenerative medicine,
has maintained that St. Jude since 2007 should have been paying a
higher royalty rate of 8% under its licensing agreement for the
Angio-Seal vascular device, rather than the 6% it has been
providing. Kensey also is disputing St. Jude's claims that starting
last month the royalty rate is to be reduced to 2%.
"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," Kensey
Nash President and Chief Executive to Joe Kaufmann said. "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."
Kensey in October reported that fiscal first quarter earnings
fell 41% on higher costs, though as net sales rose 29%. However
royalty income fell slightly, including a 3% drop in Angio-Seal
royalties, which represented about 75% of Kensey Nash's royalty
income.
St. Jude, also in October, reported better-than-expected
third-quarter sales because of growth in products like devices that
treat a type of faulty heart beat, but the company warned it
continues to see a soft market for its biggest category, devices
that shock the heart.
Shares of Kensey and St. Jude closed Thursday at $26.70 and
$33.60, respectively. Neither was active in premarket trading.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com