Guidant's woes
Okay, for those of you not in the medical device industry, here's the background:
Guidant's one of the three big manufacturers of pacemakers and defibrillators. Johnson & Johnson, maker of tear-less baby shampoos, is also a huge medical device company. The two had been planning for almost a year now to walk down the aisle, and had just been cleared to merge last week. But....
A design flaw in one of Guidant's defibrillators was revealed this past May. Apparently, the insulation used on the wires can degrade when in contact with body fluids, leading to a short and device failure. This has resulted in something like 0.1% failures, one of which was fatal. Which is fine (though quite damaging PR-wise), if the company addressed the problem and recalled all units. BUT apparently, Guidant had known about this problem as early as April 2002. The flaw was corrected in all new models, but this was not publicised and they continued to sell their old inventory. Hence several class action lawsuits, including one from the New York Attorney General. Add to that allegations of insider trading in the month leading up to the May disclosure and what you get are plummeting stock prices.
Which takes us to the impending nuptials. J&J basically declared the merger contract void because of significant changes in Guidant's long-term material worth, leaving Guidant at twenty minutes to nine, with only one shoe on (for those familiar with Great Expectations). As the tainted, jilted bride, Guidant's natural action is to sue J&J for breach of contract. Shed a tear also for J&J, who is now left without any candidate for expansion. As for the other two major pacemaker companies, they can look forward to a horrible hounding by the public and the government in the foreseeable future.
Business - it's like a very slow sports game, but way more fun.
Guidant's one of the three big manufacturers of pacemakers and defibrillators. Johnson & Johnson, maker of tear-less baby shampoos, is also a huge medical device company. The two had been planning for almost a year now to walk down the aisle, and had just been cleared to merge last week. But....
A design flaw in one of Guidant's defibrillators was revealed this past May. Apparently, the insulation used on the wires can degrade when in contact with body fluids, leading to a short and device failure. This has resulted in something like 0.1% failures, one of which was fatal. Which is fine (though quite damaging PR-wise), if the company addressed the problem and recalled all units. BUT apparently, Guidant had known about this problem as early as April 2002. The flaw was corrected in all new models, but this was not publicised and they continued to sell their old inventory. Hence several class action lawsuits, including one from the New York Attorney General. Add to that allegations of insider trading in the month leading up to the May disclosure and what you get are plummeting stock prices.
Which takes us to the impending nuptials. J&J basically declared the merger contract void because of significant changes in Guidant's long-term material worth, leaving Guidant at twenty minutes to nine, with only one shoe on (for those familiar with Great Expectations). As the tainted, jilted bride, Guidant's natural action is to sue J&J for breach of contract. Shed a tear also for J&J, who is now left without any candidate for expansion. As for the other two major pacemaker companies, they can look forward to a horrible hounding by the public and the government in the foreseeable future.
Business - it's like a very slow sports game, but way more fun.
posted by Lucky Monkey at
9:39 p.m.
2 Comments:
Wow, the sordid, backstabbing world of...medical devices. My heart bleeds for these companies, but only if I imagine the heart as an organ that pumps amusement.
How come Guidant has to be the jilted "bride", huh? I admit the Miss Havisham analogy does sound extremely nice but let's dump the bridegroom once in a while. We can go with Jane Eyre for the clever literary reference, maybe.
By
wy jay, at 12:12 a.m., November 13, 2005
You don't want to know what really goes on in these companies. Every industry has its shady side, and it all seems so logical when you first make that decision.
And as we all know, people feel sorry for the jilted bride, but a jilted groom is just fodder for an empowered free spirit :)
By
Lucky Monkey, at 11:04 p.m., November 16, 2005
Post a Comment
<< Home