UPDATE 1-Kensey Nash says St. Jude to pay lower royalty; withdraws outlook

* St Jude intends to pay 2 pct royalty on Angio-Seal

* Says in discussion with St Jude to resolve dispute

Dec 16 (Reuters) - Medical device maker Kensey Nash Corp withdrew its second-quarter outlook citing the uncertainty surrounding the royalty payment it receives on the sales of Angio-Seal, a vascular closure device, from St. Jude Medical Inc.

St. Jude now intends to pay a reduced royalty rate of 2 percent on Angio-Seal net sales, down from the 6 percent that Kensey Nash used to book earlier.

Kensey Nash said it has agreed to enter into a non-binding mediation with St. Jude to resolve the disputes over the royalty payments.

In March, 1999, St. Jude acquired the license for Angio-Seal, which was originally developed by Kensey Nash.

Kensey Nash shares closed at $26.70 on Thursday on Nasdaq.