By Tom Hales
WILMINGTON, Del. (Reuters) – A Delaware judge ruled on Wednesday that Johnson & Johnson owes Oris Health shareholders $1 billion in damages for breaching a 2019 agreement to acquire the privately held robotics developer.
After a two-week trial, Deputy Chancellor Laurie Weil of the Court of Chancery found that Johnson & Johnson (NYSE:) breached the merger agreement and failed to support the acquired iPlatform technology, which would have resulted in increased payments to Oris shareholders.
Johnson & Johnson had paid $3.4 billion in cash up front, but also committed to paying up to an additional $2.35 billion to Oris shareholders if various milestones were achieved with the acquired technology.
“Johnson & Johnson’s promise to Oris was breached almost immediately after closing,” Weil said in her 145-page ruling.
The New Jersey-based healthcare company also acquired Auris’s Monarch robotic platform, both developed to diagnose and treat lung cancer.
Instead of dedicating resources to the iPlatform so it could meet regulatory milestones and provide additional payments to Auris shareholders, J&J forced it to compete with its Verb device, the judge said.
“The iPlatform robot has effectively become a Verb parts store,” Will wrote.
Johnson & Johnson said it disagreed with the ruling and was considering an appeal.
“Essentially, the court held that our commercially reasonable contract imposes a commercially unreasonable obligation,” the company said. Johnson & Johnson also said the ruling has no impact on its current robotics program.
According to Weil’s ruling, Johnson & Johnson blamed technical problems with the Oris devices for failing to meet its targets. The company also claimed that the merger agreement allowed it to use the Oris products in any way that would enhance Johnson & Johnson’s overall robotics program, a claim Weil disputed in her opinion.
Johnson & Johnson shares were little changed at $167.46 in midday trading.
According to court records, Oris’ investors included founder Dr. Fred Moll, Lux Capital Management, Mithril Capital Management, which was the largest shareholder, and Highland Capital Management. A unit of Johnson & Johnson also invested in Oris.