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Pharmaceutical industry

United States Surgical Corporation Faces Financial Struggles Amid Patent Lawsuit Loss

Strategic Insights

— 2 min read

The United States Surgical Corporation faced a turbulent day on the stock market yesterday, with its shares plummeting 21 percent after posting losses for the last nine months of 1993 and losing a patent infringement lawsuit against competitor Johnson & Johnson. The company, which produces miniature surgical instruments inserted through a tube, had delayed reporting fourth-quarter earnings in hopes of improving its financial picture by winning the lawsuit. However, despite these setbacks, analysts believe the company can recover, and prices for the devices have led to increased market share for Johnson & Johnson.

Key Takeaways:

  • The United States Surgical Corporation's stock fell 21 percent to $21.50 per share on the New York Stock Exchange after posting losses for the last nine months of 1993 and losing a patent infringement lawsuit against Johnson & Johnson.
  • The company, which produces miniature surgical instruments inserted through a tube, has delayed reporting fourth-quarter earnings in hopes of improving its financial picture.
  • Analysts believe the company can recover from its financial struggles, with some predicting that United States Surgical will work its way out of its current situation.
  • The company's sales for the year were $1.04 billion, down 13 percent from $1.2 billion in 1992.
  • The lawsuit involved a device called a multiple clip applier, which immediately closes tissue after an incision, and Johnson & Johnson had gained $40 million in sales from this product.
  • The company has hired Kidder, Peabody & Company and Bear, Stearns & Company to examine its strategic alternatives, including equity investments.
  • United States Surgical has adequate funds and anticipates sufficient cash flow to preclude the necessity for additional borrowing until negotiations are concluded.

Statistics:

  • The company's stock fell $5.625 a share, or 21 percent, to $21.50 on the New York Stock Exchange.
  • Sales for the year were $1.04 billion, down 13 percent from $1.2 billion in 1992.
  • The company has lost $22 million for the second quarter of last year and $14.3 million in the third quarter.
  • Johnson & Johnson has gained 35 percent of the worldwide market of $700 million for the devices.
  • The multiple clip applier device involved in the lawsuit has annual sales of about $90 million, with Johnson & Johnson accounting for $40 million of this.

Sources:

  • "United States Surgical Corporation said yesterday" (no specific source mentioned in the original text)
  • "Kenneth S. Abramowitz, a health care analyst at Sanford C. Bernstein & Company" (no specific source mentioned in the original text)
  • "Lorraine Schwarz at Wertheim Schroder" (no specific source mentioned in the original text)
  • "Leon C. Hirsch, chairman of United States Surgical" (no specific source mentioned in the original text)
  • "Kurt H. Kruger at Hambrecht & Quist" (no specific source mentioned in the original text)
  • "F. Robert Kniffin, a spokesman for Johnson & Johnson" (no specific source mentioned in the original text)

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