Johnson & Johnson has negotiated a lower purchase price for medical device manufacturer Guidant, putting the merger between the companies back on track.

Last week J&J threatened to pull out of the agreement, saying that a series of problems besetting Guidant, including a massive recall of defibrillators in the summer that cut into its third-quarter earnings and regulatory probes by the Justice Department and Securities and Exchange Commission, had made the original agreement between the companies void.

Guidant subsequently initiated legal proceedings in a bid to force the transaction through.

In the latest incarnation of the agreement, Guidant has agreed to a 15% reduction in the price that will be paid by J&J, bringing the offer per share down from $76 dollars to a little over $63, much closer to Guidant’s closing trading price of $62.50 yesterday.

The revised terms now mean that J&J will pay around $21.5 billion for Guidant, rather than the $25.4 billion price tag agreed by the companies last December. The merger, which is now expected to close during the first quarter 2006, is still subject to Guidant shareholder approval.

Both companies said the rationale behind the merger still made sense, and would create a company with a strong portfolio in the cardiovascular device sector Guidant has led the market for bare metal stents for some time, while J&J has a strong position in the drug-eluting stent market place with its Cypher stent, which combines a metal mesh tube coated with Wyeth's immunosuppressant Rapamune (sirolumus).

- Meanwhile, Guidant also announced that its president and chief executive officer of 11 years, Ronald Dollens, is retiring. Guidant's chairman, James Cornelius, will assume the position of interim chief executive officer.