St. Jude Medical Inc. (STJ) has agreed to pay one of its suppliers $39 million over two years following royalty disputes over a component used in its vascular closure device, according to a regulatory filing.

The supplier Kensey Nash Corp. (KNSY) will receive the amount in 12 equal quarterly payments beginning March 31 and ending in 2014. The payments will be made in lieu of future royalties.

St. Jude said in a statement that it is "pleased that the two companies have resolved all outstanding legal issues, including the removal of any future royalty payments due to Kensey Nash by St. Jude Medical."

Kensey supplies the collagen component in St. Jude's Angio-Seal device, which stops bleeding during certain types of medical procedures. As a result of the settlement, Kensey lowered its fiscal 2012 guidance. It now expects full-year adjusted earnings per share of $1.59 to $1.63 on revenue of $87.9 million to $89.1 million. In October, it projected $1.88 to $1.91 on revenue of $92 million.

The company also said that for fiscal year 2013, it expects earnings of $2.00 a share on sales of $100 million. Analysts surveyed by Thomson Reuters expect earnings of $1.74.

For Kensey, the agreement removed uncertainty in the market over its supply agreement with St. Jude. According to the agreement, Kensey will continue to be the exclusive outside supplier of collagen for the Angio-Seal device through 2017.

Kensey shares rose 22% to $30 in recent trading. St. Jude shares fell 0.3% to $42.75.

-By Anjali Athavaley, Dow Jones Newswires; 212-416-4912; anjali.athavaley@dowjones.com

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