(RTTNews) -  Medical device maker Boston Scientific Corp. (BSX: News ) Friday said it has reached an agreement in principle with the U.S. Department of Justice related to product advisories issued by its Guidant subsidiary in 2005. The company will pay $296 million on behalf of Guidant to settle the DOJ investigation. Boston Scientific also updated its third quarter results to include the the charge related to the settlement and now indicating a net loss of $94 million for the quarter. The company also cut its GAAP earnings outlook for fiscal 2009.

The alleged conduct and product sales occurred prior to Boston Scientific's acquisition of Guidant in 2006. The products involved in the investigation were the Ventak Prizm 2, the Contak Renewal and the Contak Renewal 2 devices, which were the subjects of the 2005 product advisories.

Under the terms of the agreement with the DOJ, Guidant will plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration. Boston Scientific will pay $296 million on behalf of Guidant.

According to Boston Scientific, it had previously disclosed an investigation by the U.S. Attorney's Office in Minneapolis into alleged violations of the Food, Drug, and Cosmetic Act by Guidant.

Commenting on the deal, Ray Elliott, President and Chief Executive Officer of Boston Scientific, stated, "We are pleased this investigation has been resolved."

"Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations. We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies," Elliott added.
Boston Scientific said that the agreement has to be recorded in its recently closed third quarter based on U.S. Generally Accepted Accounting Principles, or GAAP, as it occurred after the October 19th release of the company's third-quarter financial results and before the filing of the Quarterly Report on Form 10-Q.

Accordingly, the company recorded a charge of $294 million in the third quarter, on a pre-tax as well as after-tax basis. This amount represents the $296 million charge associated with the agreement net of a $2 million reversal of a related accrual.

Based on the charge, the company has updated its financial results for the third quarter and nine months ended on September 30, 2009. As updated, the company reported a net loss of $94 million or $0.06 per share in the third quarter. As per the company's announcement on October 19, it had recorded a net income of $200 million or $0.13 per share for the third quarter of 2009.

To receive FREE breaking news email alerts for Boston Scientific Corp and others in your portfolio

 1   2   Next Page