A jury has awarded bone cement maker Pabban Development $15.4 million after finding that Medtronic, Inc. didn’t hold up its end of the deal to acquire Pabban’s Natrix system.
In August 2008 the Federal Trade Commission ruled that Medtronic would have to sell off a Kyphon bone cement delivery system in order to get permission to buy Kyphon, Inc. Pabban claimed that because it had a superior bone cement system for spinal surgeries, Medtronic agreed to acquire their system.
According to court documents, Medtronic paid nearly $18.8 million in an up-front payment and a series of milestones to be worth another $9.3 million. The deal also contained a royalty arrangement worth an additional $22 million, according to the documents, for a total deal value of about $50 million.
After the deal, Medtronic did not make further payments, claiming that Pabban concealed problems with the Natrix system. Pappan sued in 2010.
“Medtronic’s stated justification for terminating the supply agreement were alleged defects in the Natrix product. Yet the claimed ‘defects’ were a result of Medtronic’s changes in the processing and packaging of the Natrix system, ” Pabban claimed, according to the documents quoted by MassDevice.
Medtronic countered that Pabban CEO Nick Herbert claimed that Natrix would be market-ready in time for the North American Spine Society’s annual meeting in October 2008, despite problems with Natrix’s packaging system.
Medtronic further claimed, “Prior to closing of the [deal], Kyphon requested permission to test the Natrix system in its own facilities. Pabban refused Kyphon’s request because of purported concerns with confidentiality. It turns out, however, that Pabban refused to provide Kyphon with access to the Natrix system for testing because such testing may have revealed the product was defective and not market-ready, ” according to the documents. “Pabban was attempting to correct dangerous saline leaks on the same day that Kyphon paid in excess of $18 million for a medical device that Pabban represented was market-ready and to be used on patients.”
The jury didn’t buy Medtronic’s case. The jury also cleared Pabban on Medtronic’s counter-claim that Pabban and Herbert committed fraud in allegedly concealing problems with Natrix.
In the end, Medtronic paid a total of about $33.4 million for Natrix. The original deal was for up to $50 million.
