Summary
Boston Scientific Corporation (BSX) announced a significant development on November 2, 2009, regarding an agreement in principle with the U.S. Department of Justice concerning product advisories issued by its former Guidant subsidiary in 2005. This agreement, which resolves an investigation into alleged violations of the Food, Drug, and Cosmetic Act by Guidant, involves Guidant pleading to two misdemeanor charges related to reporting failures to the FDA. Importantly, the alleged conduct and product sales occurred prior to Boston Scientific's acquisition of Guidant in 2006. As a result of this agreement, Boston Scientific will pay $296 million on behalf of Guidant. In accordance with U.S. GAAP, this agreement necessitated an update to the company's third-quarter and nine-month financial results for the period ended September 30, 2009. A pre-tax and after-tax charge of $294 million has been recorded in the third quarter, reflecting the $296 million settlement amount offset by a $2 million reversal of a related accrual. This charge, while material, relates to historical issues of an acquired entity.
Key Highlights
- 1Agreement in principle reached with U.S. Department of Justice regarding Guidant's 2005 product advisories.
- 2Guidant subsidiary to plead to two misdemeanor charges for failure to include information in FDA reports.
- 3Boston Scientific will pay $296 million on behalf of Guidant.
- 4Alleged conduct and sales occurred prior to Boston Scientific's 2006 acquisition of Guidant.
- 5A $294 million charge (pre-tax and after-tax) has been recorded in the third quarter of 2009.
- 6The charge reflects the settlement amount net of a $2 million reversal of a related accrual.
- 7This filing updates the company's third-quarter and nine-month financial results for the period ended September 30, 2009.