The owners of stent-manufacturer Medinol demanded $8 billion for their company from
(NYSE:BSX), Credit Suisse First Boston analyst Glenn Novarro told Bloomberg yesterday. Credit Suisse itself assesses the value of the Israeli company at $1 billion to $2 billion.
Two weeks ago a report from Merrill Lynch surmised that Boston had bid $2 billion for Medinol, but that the Richter family had turned it down.
The Bloomberg article focused on an interview with Boston CEO James R. Tobin, who vowed to cure the company's ills when taking his seat about 18 months ago. He could claim several successes during his first six months, but his biggest problem remains unsolved. Namely, the festering feud with Medinol, producer of its NIR line of stents.
Stents are tiny metal mesh tubes implanted to prop open major blood vessels after heart surgery.
The Natick, Massachusetts-based company entered into a strategic relationship with Medinol back in 1995. Medinol's stents boosted Boston into leading position in the stent market by 1998. But relations turned strained in October of that year, when the Food and Drugs Administration began probing suspicions that NIR stents had been involved in some patient deaths. Boston and Medinol began exchanging accusations. Relations deteriorated to such a degree that product development was hindered and some analysts even said Medinol was sabotaging Boston.
Boston sank from first place in the stent market to third. Its market segment contracted from 30% a year ago to 17% today. In nominal terms, Boston's fourth-quarter sales of stents and related products are expected to be 30% to 35% below sales in the corresponding quarter of 1999
Boston is working on developing stents of its own, but Merrill Lynch estimates that completion is 12 to 18 months away. Moreover, Boston will have to pay Medinol royalties of 20%.
Meanwhile, a jury in the U.S. District Court in Wilmington, Delaware ruled that the NIR stent made by Medinol and distributed by Boston infringed a patent held by
(NYSE:JNJ). The jury awarded J&J damages of $324.4 million for patent infringement. Of the total award, $253.6 million was granted for projected lost profits for J&J and $70.8 million was awarded for royalties based on sales of Boston Scientific's stent.
Partly in order to end the feuding once and for all, the Natick, Massachusetts-based company has been negotiating to buy out Medinol. Analysts estimated Medinol to be worth $1 billion to $3 billion. But $8 billion? Won't happen, Novarro predicts. Tobin is a tough negotiator, and he won't be prepared to pay beyond what the company is worth.