Fisher & Paykel Healthcare has filed a patent infringement case against larger competitor ResMed in the US District Court of California. The company alleges that some of ResMed’s continuous positive airway pressure (CPAP) devices and accessories infringe patents held by F&P Healthcare, including the flagship AirSense 10 and AirCurve 10 range of flow generators, ClimateLineAir heated air tubes, and Swift masks.
‘Fisher & Paykel Healthcare is seeking all available remedies, including damages and injunctive relief’, the announcement said.
It’s too early to tell how this will play out and judging the financial repercussions – if any – is next to impossible at this stage. ResMed’s management is yet to make an announcement but we will keep you updated as things progress.
In ResMed: Result 2016 from 29 Jul 16 (Hold – $9.06) we said ‘ResMed is getting close to our Sell price and is on our watch list for a potential downgrade. Given the price increase, the stock may have become a large portion of your portfolio. If that's the case, you should consider taking some chips off the table in favour of the better opportunities on our Buy list.’ This patent infringement case doesn't give us any extra optimism – although it's important not to jump at shadows. For now, HOLD.
F&P Healthcare, on the other hand, is still trading above our estimate of intrinsic value with a forward price-earnings ratio of 35. That’s expensive, especially relative to ResMed’s forward price-earnings ratio of 24, and we’re sticking with SELL.
Disclosure: The author owns shares in ResMed.