Dive Brief:

• Edwards Lifesciences has agreed to pay Abbott $368 million upfront to settle disputes over patents for transcatheter mitral and tricuspid valve repair products, plus roughly $100 million in royalties through mid-2024, Edwards said in a filing Monday.

• Edwards said the pacts settle intellectual property cases in multiple countries that threatened to hold back its push to compete across those two valve repair markets. Abbott said it will receive "ongoing payments" through 2025 based on sales of Edwards' transcatheter mitral valve repair device, called Pascal, and "a potential sales milestone payment" come 2026.

• Analysts at Jefferies called the 10-year agreement “a very good deal” for Edwards, pointing to the precedent of a heftier transcatheter aortic valve replacement dispute settlement with Medtronic. SVB Leerink analysts also said the news should reassure investors about the company's growth prospects even once Edwards' low-risk TAVR opportunity matures.

Dive Insight:

Abbott and Edwards have engaged in a multi-front patent dispute over the past year and a half. The row erupted early last year when Abbott alleged Edwards’ transcatheter valve repair system Pascal infringes on its MitraClip patents in lawsuits filed in the U.S. and several European markets. Abbott secured injunctions against Pascal in rulings in the U.K. and Switzerland.

With a German court case set to begin this week, and a trial in the U.S. on the horizon, Abbott and Edwards have agreed to settle all the outstanding cases. The settlement frees Edwards to compete with Abbott in Europe, where Pascal is already on the market, and eliminates the risk of a negative ruling in the German case.

“As the German market is the largest outside the U.S. and given the thought leadership of the German clinical community, there was concern that an injunction in the market could hurt sentiment around mitral therapies at [Edwards],” analysts at Jefferies wrote in a note to investors.

Global sales of MitraClip, which currently dominates transcatheter valve repair, approached $700 million last year, making the $368 million paid by Edwards a significant sum in the context of the current size of the market. At the same time, Edwards contends the market for transcatheter mitral and tricuspid therapies will grow to $3 billion by 2024.

Analysts at Jefferies framed the fee in the context of a 2014 TAVR settlement between Edwards and Medtronic. Back then, Edwards had just made about $700 million in annual TAVR sales, making it the dominant force in a fast-growing $1.2 billion market. Medtronic paid Edwards $750 million upfront and committed to around $50 million a year in royalties for eight years to clear patent barriers to the market. The TAVR market has continued to grow quickly since Medtronic settled the dispute.

Now, Edwards is paying considerably less to access a market that could be on a similar growth curve. A recent change to reimbursement is set to significantly expand the U.S. addressable market for transcatheter mitral valve repair. Abbott will be the near-term beneficiary of the change but Edwards plans to enter the expanded market in the coming years, positioning it to try to seize a key growth opportunity.