BSX’s litigation expenses
Boston Scientific (BSX) has spent ~$89 million on the settlement of lawsuits related mainly to its mesh litigation. The company claims to have conditionally, nearly, or finally settled ~44,000 of the total 49,000 mesh claims against it and to have thus reduced significant risks on its balance sheet.
For the most recent litigation settlement details, read Boston Scientific Settles Some 5-Year Lawsuits on 350 Pelvic Mesh. The company plans to resolve the majority of its mesh claims by the end of 2018. Boston Scientific expects to make ~$800 million in cash payments toward the settlement of these remaining cases during 2018.
As of December 31, 2017, Boston Scientific’s total legal reserve, including mesh claims, was $1.6 billion. The company is also required to settle its dispute with the Internal Revenue Service via a payment of ~$600 million in 2018. Thus, the company has an existing contingency requirement of $1.4 billion to be paid in the year.
Some other recently settled litigations in the medical device industry include Medtronic’s (MDT) $12 million settlement for a deceptive marketing claim related to its Infuse bone graft device and a poaching lawsuit between Stryker (SYK) and Zimmer Biomet Holdings (ZBH).
BSX’s cash flow guidance
In 2017, Boston Scientific registered a YoY (year-over-year) rise of ~7% in its cash flows, which came in at $1.7 billion. However, the company’s reported cash flows fell short of its expected 2017 cash flows of $1.8 billion due to some working capital–related expenses. For 2018, Boston Scientific expects to register adjusted cash flows of $1.9 billion. Thus, excluding the existing legal contingency requirements of $1.4 billion in 2018, as discussed above, the company expects to have ~$500 million in cash reserves for investment toward its strategic growth plans during 2H18. The company is looking forward to making more tuck-in acquisitions and advancing its category leadership strategy.
In the next article, we’ll discuss Boston Scientific’s recent investment in Millipede.