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  • KCI: 2 Patents Invalidated by US Federal Court
  • 19/10/2010

  •          A federal court ruling late Monday invalidating two patents on wound-closure devices made by San Antonio's Kinetic Concepts Inc. could open the door for other medical-technologies companies to introduce similar products.
             That's the prediction of Wall Street analyst Paul K. Choi after U.S. District Judge W. Royal Furgeson Jr. declared the patents licensed by KCI from Wake Forest University are invalid because certain claims of the patents "would have been obvious to a person of ordinary skill" when the patent applications were filed in 1991.
             Choi, with New York's Caris & Co., said some of KCI's competitors may have been waiting for clarity on the validity of the patents before launching their own products. "Thus, this may embolden them to enter the market," he said. He is neutral on the stock.
             KCI had warned investors in a regulatory filing earlier this year that it could face increased competition and significant price declines if its patent claims were found invalid or unenforceable.
             A KCI spokesman on Tuesday, though, declined to speculate on what impact the adverse court ruling could have on its business. "We'll see what the marketplace bears out," KCI's Kevin Belgrade said. "What's important here is to recognize that we've been in a competitive environment for a number of years and continue to feel very positive about what we can provide to customers."
             Furgeson's ruling overturned a March verdict delivered by a San Antonio jury, which found that rival Smith & Nephew Inc. infringed on two patents for KCI's lucrative line of vacuum-assisted wound-closure devices used to treat large and chronic wounds. The jury's verdict declaring the patents valid was merely advisory, leaving the court to ultimately decide on their validity.
             The jury also awarded KCI about $1 million in damages for lost profits and royalties based on the sales Smith & Nephew generated since it started selling foam dressing kits last year. The award no longer stands.
             KCI indicated it may ask the judge to reconsider his ruling or it may file an appeal. The two companies have waged similar patent battles in courts in the United Kingdom and Germany.
             Christopher Cooley, an analyst with Stephens Inc., said once you get beyond the court ruling's "shock value," KCI's prospects remain solid. "At the end of the day, this is very disappointing, at least from an investor's perspective of KCI," Cooley said. "But in terms of the fundamentals, do we think this causes a material shift here in terms of market share or their ability to service the marketplace in the shorter run? The answer to that is no."
             Cooley added that KCI has demonstrated the "superior efficacy" of their ... offerings in negative-pressure wound therapy. He rates the KCI shares a buy, with a price target of $51.
             KCI's shares tumbled as much as 9.5 percent Tuesday before rebounding to close at $35.51, a decline of 6.8 percent for the day. Belgrade said KCI will remain focused on product launches, and offering great economic value and optimal clinical outcomes. It plans to introduce soon two products on its negative-pressure technology platform, including V.A.C. Via and V.A.C. Ulta therapy systems.

             By Patrick Danner Published 8:03 am, Tuesday, October 19, 2010
             http://www.mysanantonio.com/business/local/article/Court-rules-KCI-patents-are-invalid-712967.php

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