Boston Scientific (BSX) and Edwards Lifesciences (EW) could reach a cross-licensing agreement for designs on their heart valves, Evercore analyst Vijay Kumar suggested Thursday after Boston triumphed in a German court on patent issues.
The court ruled Edwards infringed on two of Boston's patents for a "skirt" and a "sac" to reduce leaks for transcatheter aortic valve replacements. But the court also ruled Boston infringed on one of Edwards patents for a structure within the heart valve known as the "support beam." It tossed out a second Edwards patent.
The German decision puts Boston in "a commanding position in its IP litigation with Edwards," Kumar wrote in a research report. He expects Boston to file for a court action that would prevent Edwards from selling its heart valve in Germany. An injunction is unlikely while Edwards' appeal is ongoing, he wrote.
Thursday's ruling follows a U.K. decision last week in which a court ruled one Edwards' patents for a "sac outside the anchor to provide a seal" as valid and infringed. But a second patent for a fabric seal on its Sapien 3 valve was ruled invalid.
Edwards said Thursday it's planning to appeal the German decision. The company expects court proceedings to continue in various locations over an extended period of time. The two med-tech giants also are battling it out in the U.S., France and Canada.
Boston Scientific stock closed up 0.7% at 24.69 on the stock market today, and Edwards jumped 3.9% 93.06.
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Edwards is also appealing portions of the UK court decision, but precedence doesn't look good for the company, Kumar wrote. In an earlier patent battle with Medtronic (MDT) regarding heart-valve tech, higher courts upheld decisions in Germany and the UK. Medtronic and Edwards ultimately settled. Medtronic pays Edwards a royalty of no less than $40 million annually.
Edwards has 65% of the transcatheter aortic valve replacement — a type of heart-valve replacement — market, Kumar wrote. Medtronic trails with 30%. Using the earlier settlement model, Edwards could end up paying Boston no less than $80 million per year, he said. Or, the duo could agree to license one another's tech.
"In our scenario analysis, we had noted that in the event Boston Scientific wins and Edwards Lifesciences comes out with the poorer hand, it could potentially force the players to arrive at a cross licensing agreement," he wrote.
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