Kensey Nash shares down 20 pct. on royalty dispute

Shares of Kensey Nash Corp. were down as much as 21 percent Friday morning after the medical device maker said it would enter mediation over a long-running dispute involving royalty payments.

The Exton company has been squabbling with the much bigger St. Jude Medical Inc. over how much Kensey Nash has received from sales of a product called Angio-Seal. That device is used to close wounds after heart-artery surgery.

St. Jude acquired the rights to the Kensey Nash-developed product in 1999.

Kensey Nash contends that St. Jude should have been paying royalties at an 8 percent rate, rather than 6 percent, since 2007. The company estimated that Minnesota-based St. Jude has underpaid Kensey Nash by more than $30 million.

In addition, Kensey Nash said that St. Jude further cut that royalty rate to 2 percent as of November.

In a statement, Kensey Nash CEO Joseph W. Kaufmann said that latest reduction in the royalty rate suggests that St. Jude intends to end all royalty payments in April 2014. But Kensey Nash said it interprets agreements between the two long-time partners as calling for payments to continue at least through April 2016 and possibly through 2023.

Kaufmann said on a conference call that the company expects the mediation process would be completed in 90 to 120 days. The company estimated the value of the intellectual property and royalty payments at stake at $125 million.

Kensey Nash had revenues of $71.6 million in its most recent fiscal year. St. Jude had 2010 net sales of $5.2 billion.

In early afternoon trading, Kensey Nash shares were down $5.59, or 20.9 percent, to $21.11.

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