INDIANAPOLIS — With one day left for Johnson & Johnson to seal the deal on its $25.4-billion acquisition of Guidant Corp., New York Atty. Gen. Eliot Spitzer said Thursday that he was suing Guidant, alleging it concealed information about a heart defibrillator's design flaw.
Shares of the Indianapolis-based maker of medical devices fell 4.7%, or $2.83, to $57.57. J&J lost 10 cents to $61.20.
Even if the deal the companies agreed to 10 months ago goes through, J&J probably would pay significantly less than the original price, some experts said. And if J&J scraps it, the companies may go to court.
Although the agreement stipulates a $700-million breakup fee, J&J has already suggested that product recalls in recent months by Guidant and federal investigations of the company may have had the materially negative effect that would allow it to simply walk away.
The companies have until today to close the purchase.
Since June, Guidant has recalled or issued warnings on about 88,000 heart defibrillators -- including its top seller, the Contak Renewal 3 -- and almost 200,000 pacemakers because of reported malfunctions. The company faces multiple lawsuits from patients and shareholders, as well as a reported criminal investigation by the Food and Drug Administration.
U.S. attorneys in Boston and Minneapolis last week issued subpoenas seeking documents about Guidant's devices and its Ventak Prizm 2 and Contak Renewal 1 and 2 defibrillators.
Spitzer filed the civil lawsuit Wednesday in state Supreme Court in Manhattan.
"We wouldn't permit this type of conduct in connection with the sale of cars or washing machines," Spitzer said. "It is simply unconscionable that it occurred with a critical medical device."
Spitzer accuses the company of failing to disclose a flaw in its Ventak Prizm 2 DR Model 1861 cardio defibrillator. The device is implanted in a patient who is at high risk of death because of an abnormal heart rhythm. A heart could stop if the device fails.
Spitzer claims that the model has failed 28 times and that one patient died as a result. He seeks fuller disclosure of the problem and restitution to patients and their families as well as recovery of the company's profit from the uncorrected devices.