Introduction
A Delaware judge has ruled that Johnson & Johnson (J&J) must pay $1 billion in damages to Auris Health shareholders, a significant blow to the healthcare giant. The ruling comes after a lengthy legal battle, with the judge determining that J&J breached its agreement to acquire Auris and failed to support the acquired iPlatform technology.
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Auris Health’s Monarch surgical system can perform robotic-assisted bronchoscopy and urology procedures. | Source: Johnson & Johnson
A Delaware judge ruled that Johnson & Johnson, or J&J, must pay $1 billion in damages to Auris Health shareholders, according to media reports.
Reuters, Bloomberg Law, and others reported that the ruling claims that J&J breached its agreement to acquire Auris, which went through for $3.4 billion in February 2019. The deal also included up to an additional $2.35 billion in payments to shareholders based on various milestones.
Vice Chancellor Lori Will of the Delaware Court of Chancery ruled that J&J breached the agreement and failed to support the acquired iPlatform technology. The report said this would have led to increased payments to Auris shareholders.
Reuters said Will’s ruling stated that J&J breached the agreement “almost immediately after closing.” The judge deemed that the company declined to put resources toward advancing iPlatform. Instead, the company pitted it against its own Verb device.
J&J allegedly misled Verb Surgical
In a 2021 denial of J&J’s effort to dismiss the Auris shareholder suit, Fortis Advisors, acting on behalf of Auris shareholders, claimed a partnership between J&J’s Ethicon and Google company Verily’s Verb Surgical began raising questions. During acquisition talks, Auris founder Dr. Fred Moll and his colleagues were led to believe that Auris could run independently of Verb after the acquisition, according to Fortis.
Fortis alleged that, after the acquisition, the Auris team had to enter into a covert “bakeoff” with Verb Surgical, diverting employees and resources. After the iPlatform won out over the Verb Surgical Robot, Ethicon bought out Verily’s stake in Verb and rolled Verb into Auris, according to Will back in 2021.
The latest report quoted Will saying that iPlatform “effectively became a parts shop for Verb.”
Monarch and Ottava surgical robots unaffected by ruling
The ruling wasn’t a complete loss for J&J, however. Will rejected contract claims involving Auris’ other device, the Monarch robotic-assisted surgical system.
While she did rule with Auris shareholders on one count of fraud involving Monarch, the judge also dismissed allegations of J&J defrauding Auris by convincing it to accept deferred payments J&J never planned to make.
According to Reuters, J&J said it disagrees with the ruling and is considering an appeal.
The company also said this ruling has no bearing on its current robotics program, which includes the much-anticipated Ottava system. J&J remains on track to submit the Ottava surgical robot for FDA investigational device exemption (IDE) in the second half of this year.
J&J blamed missed milestones on technical issues with Auris devices, said Reuters. The company also claimed that the merger agreement allowed it to use Auris products in any way that advanced its robotics program. However, Will’s opinion disputed that, the report said.
Conclusion
The $1 billion damages award to Auris Health shareholders marks a significant setback for Johnson & Johnson, which is facing increased scrutiny over its acquisition and integration of the surgical robotics company. The ruling highlights the importance of transparency and fairness in corporate transactions, and serves as a reminder of the legal consequences of breaching contractual agreements.
Frequently Asked Questions
Question 1: What is the significance of the ruling?
The ruling is significant because it holds Johnson & Johnson accountable for breaching its agreement to acquire Auris Health and failing to support the acquired iPlatform technology.
Question 2: What are the implications for Johnson & Johnson?
The implications for Johnson & Johnson are significant, as the company must now pay $1 billion in damages to Auris Health shareholders. The ruling also casts a shadow over the company’s current robotics program and its ability to integrate new technologies.
Question 3: What does the ruling mean for Auris Health shareholders?
The ruling means that Auris Health shareholders will receive $1 billion in damages from Johnson & Johnson, a significant victory for the company and its investors.
Question 4: What is the status of Johnson & Johnson’s robotics program?
Johnson & Johnson’s robotics program is ongoing, with the company planning to submit its Ottava surgical robot for FDA investigational device exemption (IDE) in the second half of this year.
Question 5: What is the next step for Johnson & Johnson?
The next step for Johnson & Johnson is to consider an appeal of the ruling and to continue developing its robotics program. The company must also address the concerns raised by the court and ensure that its future transactions are transparent and fair.
