F&P Healthcare shares rally after ResMed deal to drop legal action

The patent fight has cost millions of dollars. Photo/File.

Shares in Fisher and Paykel Healthcare rallied by 6.3 per cent on the back of news that it had agreed to agreed to bury the legal hatchet with its American arch-rival, ResMed, over patent issues.

After a few minutes of trade, the stock was up 84c at $14.22.

The company earlier announced its settlement of the global patent infringement litigation with ResMed would not have a material impact on its net profit after tax guidance for the financial year.

However, Mark Lister, head of private wealth research at Craigs Investment Partners, said analysts had factored in ongoing future legal costs into their valuations of the company.

"The litigation has by no means been a show stopper for them, but it has been a negative issue that's been hanging around for quite a while now," Lister said.

F&P Healthcare said last November it expected full-year operating revenue for the 2019 financial year to be about $1.07 billion and net profit after tax to be in the range of approximately $205m to $210m.

F&P Healthcare and ResMed had agreed to settle all outstanding patent infringement disputes with no payment or admission of liability by either side after racking up millions of dollars in legal fees in a fight that spanned the globe.

In a joint statement, the companies said all ongoing infringement proceedings against named products will be dismissed and each party will bear its own attorney fees and costs incurred in global proceedings.

All other terms remain confidential, they said. As a result of the settlement, there will be no further infringement proceedings against ResMed or F&P Healthcare products.

F&P Healthcare has been locked in patent disputes spanning the US, UK, Europe, New Zealand and Australia with rival ResMed since 2016.

The Kiwi breathing mask manufacturer spent $15.6 million on litigation in the year ended March 31, down from $20.7 million a year earlier. Litigation cost it about $7.7 million in the six months through September last year.

F&P Healthcare said the settlement would not have a material impact on its net profit after tax guidance for the 2019 financial year "given the proximity of the settlement to the end of the company's financial year and the legal fees expected to be incurred to withdraw the pending infringement cases," it said.

At the time, managing director Lewis Gradon noted the "lumpy" nature of legal action, and the fact the US International Trade Commission action and a Federal Court action in Australia would cause "big spending" by the company later in the second half.

- Additional reporting BusinessDesk