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Nevro Lawsuit against BSX Could Impact Its Neuromodulation Revenues

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Dec. 1 2016, Updated 10:05 a.m. ET

Overview

Patent protection and lawsuits are integral business issues for any medical device company. Boston Scientific (BSX) has also witnessed its share of litigation issues and related gains over the years, as the company holds more than 4,500 patents.

Boston Scientific was confronted with huge settlement payouts to Johnson & Johnson (JNJ) related to the Guidant liabilities, which BSX acquired in 2006. In early November 2016, the University of California Board of Regents filed a lawsuit against Boston Scientific and St. Jude Medical (STJ) related to its atrial fibrillation device.

However, Boston Scientific has brought in ~$632 million in litigation settlements year-to-date. Boston Scientific has maintained litigation contingency as one of its key capital allocation areas in recent years, as shown in the chart below.

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Nevro lawsuit

On November 29, 2016, Nevro Corp. (NVRO) filed a lawsuit against Boston Scientific, claiming patent infringement on its patents for Senza and HF10 spinal cord stimulation therapies for chronic back pain. Nevro alleges infringement of six of its patents with Boston Scientific’s Precision Spinal Cord Stimulation devices.

According to Nevro’s CEO, Rami Elghandour, “Nevro was founded in 2006 to develop meaningful advances in the treatment of chronic pain to improve patients’ lives. Intellectual property is the basis for innovation in health sciences given the long development timelines, investment, and risk required to bring meaningful advances to market. We are committed to ensuring continued innovation in health sciences by protecting our intellectual property.”

The patent infringement is estimated to cost Nevro around $150 million. For Boston Scientific, it could amount to a portion of its year-to-date Neuromodulation segment revenues of ~$407 million. On November 29, 2016, Boston Scientific stock fell ~1.8% compared to its November 28 closing price. Such events also impact the price changes of the Vanguard Growth ETF (VUG), which holds ~0.31% of its total holdings in BSX.

Next, let’s discuss the clinical study results of Boston Scientific’s HeartLogic device.

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