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Contentious merger talks between Boston Scientific Corp. and its Israeli stent supplier, Medinol Ltd., appear to have broken down with the Natick, Mass., medical technology firm now seeking to “recover damages” from Medinol. Despite a turbulent five-year relationship marked by product delays, protracted merger talks dating back to the summer and a breach of contract lawsuit filed by Medinol on April 4, BSC publicly remained committed to doing a deal with the promising coronary stent supplier until Monday. In its April 10 release of first-quarter financial results, BSC stressed it was still interested in buying Medinol, which produces stents often used to support tissue during healing. After withholding comment for nearly three days, BSC’s lawyers at Boston’s Hale and Dorr filed a counterclaim Monday in U.S. District Court for the Southern District of New York against Medinol and its majority shareholders, Judith and Jacob Richter, for breach of supply contracts, misappropriations of trade secrets, fraud, defamation and other claims. Medinol’s head of regulatory affairs, Nasr Salman, is also named in the suit. BSC is seeking an injunction forbidding dissemination of Medinol’s technology to a third party. While the document doesn’t specify financial damages, BSC argues that the decline in its share of the $2.2 billion stent market from 32 percent in the third quarter of 1998 to 13.5 percent in January is “substantially attributable” to Medinol. BSC’s legal team is led by Hale and Dorr attorneys Johanna Toth and Peter Macdonald in New York and William Lee, Robert Mahoney and Stephen Jonas in Boston. Rory Millson of Cravath, Swaine & Moore is Medinol’s lead attorney. The 127-page counterclaim chronicles a stormy relationship including charges the Richters excluded outside researchers from clinical trials, requested that BSC employees be fired or reassigned and verbally berated BSC employees. The relationship began in 1995 following Johnson & Johnson’s decision not to exercise an option to purchase Medinol. On Oct. 25, 1995, BSC invested $40 million for 11.5 percent of the Israeli stent startup and signed a 10-year supply agreement. BSC now owns 22 percent of Medinol. According to court documents, Medinol failed to make a $25 million investment in BSC’s stent technology required under terms of the 1995 agreement. In 1996 and 1997, Medinol failed to provide sufficient quantities as defined under the supply agreement, forcing BSC to delay shipments. BSC also claims Medinol interfered with a broad legal settlement with Guidant Corp. by sending a letter to Guidant’s general counsel objecting to the agreement. Last year, BSC entered merger talks as a last resort for settling differences. In March, the companies were close to a deal, but Medinol backed away. The filing claims “Medinol’s investment banker called Pete Nicholas, BSC’s Chairman, and said that if he did not intervene, Medinol would sue the next day. When BSC did not raise its offer, Medinol filed their original complaint.” Copyright (c)2001 TDD, LLC. All rights reserved.

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