Judge rules J&J owes Auris investors $1 billion related to 2019 robotics deal

By Tom Hals

WILMINGTON, Delaware (Reuters) -Johnson & Johnson owes shareholders of Auris Health $1 billion in damages for breaching a 2019 agreement to acquire the private developer of robotics, a Delaware judge ruled on Wednesday.

Vice Chancellor Lori Will of the Court of Chancery found after a two-week trial that J&J (NYSE:) had breached a merger agreement and failed to support the acquired iPlatform technology, which would have led to increased payments to Auris shareholders.

J&J had paid $3.4 billion up front in cash, but also committed to paying up to an additional $2.35 billion to Auris shareholders if various milestones were met with the acquired technology.

“J&J’s promise to Auris was broken almost immediately after closing,” Will said in her 145-page ruling.

The New Jersey-based healthcare conglomerate also acquired Auris’ Monarch robotic platform and the pair were developed to diagnose and treat lung cancer.

The judge said that rather than dedicating resources to the iPlatform device so it could achieve regulatory milestones and deliver additional payments to Auris shareholders, J&J forced it to compete with its own Verb device.

“The iPlatform robot effectively became a parts shop for Verb,” Will wrote.

J&J said it disagreed with the ruling and was considering an appeal.

“Fundamentally, the court viewed our commercially reasonable contract as imposing a commercially unreasonable obligation,” the company said. J&J also said the ruling had no bearing on its current robotics program.

J&J blamed the missed milestone goals on technical problems with the Auris devices, according to Will’s ruling. The company also has asserted the merger agreement allowed it to use Auris’ products in any way that advanced J&J’s overall robotics program, a claim Will disputed in her opinion.

Shares of J&J were little changed at $167.46 in midday trading.

Auris investors included founder Dr. Fred Moll, Lux Capital Management, Mithril Capital Management, which was the largest shareholder, and Highland Capital Management, according to court records. A unit of J&J also invested in Auris.