Endo is stocking up at least $520M to cover vaginal mesh lawsuit legal costs

Pennsylvania's Endo Health Solutions ($ENDP) is betting that the thousands of pending lawsuits it faces alleging its vaginal mesh devices caused pain and injury will be costly to defeat or resolve. The device and pharmaceutical company disclosed it is building up a $520 million stash to cover expected fallout from what stands as a significant challenge to Endo and many of its competitors in similar situations.

There's more. Endo disclosed in a regulatory filing that the reserve (boosted through a $316 million pretax charge at the end of 2013) could actually grow much higher in the end. It will help support legal matters involving vaginal mesh made by its American Medical Systems Unit.

"The increase in our reserve reflects management's ongoing assessment of our product liability portfolio, including the vaginal mesh cases, the status of the company's ongoing settlement discussions related to vaginal mesh litigation and the inherent uncertainty as to the ultimate costs of resolving this litigation," AMS said in its regulatory filing detailing the cash reserve increase and why it was necessary.

The company added that it intends "to contest vigorously all currently pending cases and any future cases that may be brought," and also that the ultimate outcome could hurt quite a bit, resulting in such challenges as "losses in excess of insurance reimbursement levels that could have a material adverse effect on our business, financial condition, results of operations and cash flows."

Endo hinted last June that it would settle at least some vaginal mesh cases rather than fighting them, disclosing then that it would pay $54.5 million to resolve a number of pending, related product liability cases at that time.

Vaginal mesh implants are used to help treat pelvic organ prolapse and a form of urinary incontinence. But they have become controversial, with tens of thousands of patients suing, alleging that the devices caused pain, organ damage and incontinence. Endo isn't the only one dealing with packs of vaginal mesh-related lawsuits. Johnson & Johnson ($JNJ), Boston Scientific ($BSX) and C.R. Bard ($BCR) are also facing troubles regarding their products in the space. J&J, however, recently got a small bit of good news in at least one of the trials. After a week of testimony, a federal district judge in Charleston, WV, ruled that the company's pelvic mesh product did not cause injury.

Endo literally bought into its problem, however. In 2011, the company snatched up American Medical Systems, the original manufacturer of its vaginal mesh implants, for $2.9 billion. Patients had begun suing AMS at least three years before that point.

- read the SEC Form 8-K filing
- check out Law360's take

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