By Saabira Chaudhuri
NuVasive Inc. (NUVA) will raise its estimated litigation royalty
expense for the year and also record a charge in the current
quarter following a U.S. District Court ruling that set ongoing
royalty rates to be paid to Medtronic Inc. (MDT), although these
are lower than Medtronic had requested.
"While we disagree with the court-ordered royalty rates, they
are significantly lower than those sought by Medtronic after its
motion for an injunction following the verdict was denied,"
NuVasive Chief Executive Alex Lukianov said in a statement.
"Today's ruling will have an immaterial impact on our liquidity and
our ability to fund strategic initiatives."
The court ruling is for Phase I of NuVasive's patent litigation
with Medtronic Inc. (MDT). Phase 2 surrounding the cervical plates
involved in the dispute was settled.
NuVasive, a medical device company focused on developing
surgical products and procedures for the spine, said Medtronic had
requested ongoing royalty rates of 36% on NuVasive's CoRoent XL
implants and 11% on the company's MaXcess retractors and related
products.
However in the ruling, the District Court ordered royalty rates
of 13.75% on the CoRoent XL implants and 8.25% on the MaXcess
retractors.
A representative of Medtronic didn't immediately respond to a
request for comment.
NuVasive said since September 2011 it has been accruing an
estimated litigation royalty expense based on the royalty rates
used in the jury's original calculation of lost profits and
monetary damages. The jury had set royalty rates of 10% on CoRoent
XL implants and 3% on the MaXcess retractors and related
products.
Before the court's verdict, NuVasive had expected litigation
royalty expense of about $11 million for 2013. Wednesday, it said
the new royalty rates will increase this expense by roughly $5
million.
In addition, in the current quarter, the company will record a
roughly $6.5 million charge to account for the historical
difference between the post-verdict royalty rates determined and
the rates that were being used to calculate the litigation royalty
expense accruals since September 2011.
NuVasive also said it will "aggressively appeal" the verdict and
damage award to the Court of Appeals for the Federal Circuit.
Shares of NuVasive closed at $22.09 and Medtronic closed at
$52.07 on Tuesday.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires