End of the golden run
F&P stock falls after US rival claims patents infringed, seeks ban on imports
Fisher and Paykel Healthcare’s rampaging run on the share market came to an abrupt end yesterday after a US medical equipment maker alleged to the United States International Trade Commission that the Auckland-based company had infringed its patents.
New York-listed ResMed — which competes with the Kiwi company in the same highly specialised space — sought an order banning the importation and sale in the US of three of Fisher & Paykel’s masks which it said infringed five ResMed patents relating to mask system and cushion design.
The action is the latest in a string of actions taken by ResMed against F&P Healthcare.
ResMed filed a new lawsuit in the United States District Court for the Southern District of California, seeking monetary damages based on Fisher & Paykel’s alleged patent infringement, plus an injunction against future sales of “infringing” masks in the US.
Fisher & Paykel Healthcare said it would contest the patent allegations but added that the cost of doing so could cut its annual earnings by as much as $10 million.
Its stock has had a phenomenal run, hitting a record high last week of $16.40 after gaining close to 40 per cent over the last 12 months.
But after yesterday’s announcement, the stock fell by 99 cents or 6 per cent to a session low of $15.41. It closed at $15.75, down 64c. “In terms of the merits of the claim, it’s very hard to tell, although [it became] clear when this issue arose . . . that F&P Healthcare takes a forthright stance in protecting what it believes its patent position to be,” Salt Funds managing director Matt Goodson said.
F&P Healthcare is a manufacturer, designer and marketer of products and systems for use in respiratory care, acute care, and the treatment of obstructive sleep apnoea.
The company — the NZX’s second biggest stock after a2 Milk — was one of a handful of top stocks picked for heavy buying last month as mostly foreign investors spent up on healthcare stocks across Australasia.
“F&P Healthcare was not priced for the faintest skerrick of bad news — so this clearly is a skerrick of bad news,” Goodson said.
“Whether or not it amounts to anything . . . remains to be seen, but at the very least there will be significant costs in defending its intellectual property portfolio,” he said.
Harbour Asset Management portfolio manager Shane Solly said legal costs had altered F&P’s bottom line in the past.
F&P’s legal expenses were less than the company expected in the 2018 financial year due to ResMed delaying its patent action, allowing the company to deliver a profit at the top end of its guidance, he said.
In yesterday’s statement, F&P Healthcare cut forecast profit to $205m-$210m in the year ending March 31, 2019, from a previous forecast of $215m, due to the cost of defending the litigation.
“F&P Healthcare respects the valid intellectual property rights of others, and we are confident in our position with respect to ResMed’s patents given the rigorous clearance we conduct before any product is released to market,” managing director Lewis Gradon said. “We are well prepared to vigorously contest these claims.”
The ResMed company withdrew a complaint to the US International Trade Commission (ITC) last year, saying at the time that it still intended to file a new action.
“ResMed provides millions of consumers with high-quality products, which are the direct result of substantial . . . investments in research and development, as well as a focus on each consumer’s therapy needs,” ResMed global general counsel and chief administrative officer David Pendarvis said.
“We will defend our intellectual property wherever necessary to ensure that patients worldwide continue to receive the high-quality care they deserve, and are confident . . . ResMed will prevail in these cases.”
F&P Healthcare’s profit warning comes little over a week after the company raised its full-year earnings forecast by about $5m as a weak New Zealand dollar increased the value of overseas sales.