A Medical Device Daily

A nearly three-year-long patent dispute between two medical diagnostics companies reached an unexpected ending last week with one company agreeing to buy the other's rapid diagnostics business.

Inverness Medical Innovations (Waltham, Massachusetts) has agreed to acquire the rapid diagnostics business from ACON Laboratories (San Diego) for $175 million. The deal ends a patent infringement case brought by Inverness in 2004 over some of ACON's core rapid test technology.

ACON's lateral-flow immunoassay business, which is what Inverness is acquiring, had 2005 revenue of $50 million and operating income of $17 million. As part of the announced settlement, Inverness also will acquire ACON's newly-constructed manufacturing facility in Hangzhou, China.

The acquisition is expected to close in the first or second quarter, with the Hangzhou manufacturing facility to be acquired through a separate closing expected to occur by the end of 2Q06.

The aggregate purchase price for the acquired business, including the manufacturing facility, will be $175 million, subject to adjustment for working capital and net indebtedness with Inverness assuming, on a consolidated basis, up to $4 million in indebtedness related to the Hangzhou facility.

Inverness will pay ACON about $75 million at the closing of the acquisition and $20 million upon closing on the Hangzhou facility. The remainder of the aggregate purchase price will be paid on completion of certain milestones related to achievement of functional manufacturing targets related to the products sold in each of the territories.

The purchase price will be paid by issuing an aggregate of up to $50 million of Inverness common stock to ACON, with the remainder being paid in cash.

The deal involves ACON's business in the U.S., Canada, Western Europe, Israel, Australia, Japan and New Zealand. The two companies said they also expect to enter into an agreement at the time of the closing under which Inverness would agree to acquire ACON's rapid diagnostic business in the rest of the world in about three years, subject to satisfaction of certain future financial performance and operational conditions.

Inverness CEO Ron Zwanziger said that by acquiring the majority of the rapid diagnostic test business of ACON, “who has proven to be an efficient manufacturer of both consumer and professional diagnostic products, we are adding significant revenues at attractive margins as well as manufacturing capabilities that will benefit us companywide.“

Zwanziger said, “We are pleased to fully settle our infringement claims against ACON,“ adding that the strength of the company's patents “will be validated in several key jurisdictions through the issuance of permanent injunctions, including findings of infringement.“

He said that in order to leverage the ACON business's “unique and successful operating philosophy,“ Inverness intends to continue that business as a stand-alone sales unit operating through its existing distribution channels.

David Doyle, a partner in the New York law firm of Morrison & Foerster, which represented ACON in the underlying patent litigation, said, “This is a tremendous outcome for both companies, one that we have been hoping for ever since the patent litigation commenced several years ago. We are pleased that the company has forged a partnership with Inverness to advance its innovative diagnostic capabilities internationally.“

Angiotech Pharmaceuticals (Vancouver, British Columbia) said Friday that it intends to appeal a UK trial court decision to revoke the company's UK designation of its European Patent No. 0,706,376.

The UK court ruled Friday that Angiotech's UK patent lacked inventive step in light of certain prior art in a challenge brought by Conor MedSystems (Menlo Park, California) filed in February 2005. This patent, which applies to the UK only, is just one of a number in Angiotech's portfolio of patents protecting its pioneering paclitaxel stent technology, which cover Boston Scientific's (Natick, Massachusetts) Taxus stent.

Angiotech said its European patent remains valid and enforceable in the other designated countries in Europe, in light of its successful defense of the patent in the January 2005 European Patent Office Opposition Division decision, which maintained the validity of the patent, including claims related to stents coated with paclitaxel and a polymeric carrier.

Angiotech President and CEO William Hunter, MD, said, “This UK decision is contrary to the thorough consideration of the European Patent Office, which after extensive opposition proceedings, upheld the validity of [our] European counterpart of this UK patent. We are committed to protecting our intellectual property rights and intend to appeal the UK trial court's judgment.“

For its part, Conor Medsystems hailed the decision by the UK High Court of Justice in the patent case.

In other European legalities, a patent court in Frankfurt, Germany, has granted a preliminary injunction sought by Pro-Med AG (Linz, Austria), maker of the SmartDose infusion system, that prohibits Fresenius-Kabi from promoting and selling its Ambix Anapa infusion pumps in Germany.

The patent chamber of the first instance court of Frankfurt granted the Pro-Med request on Jan. 25 to halt Fresenius-Kabi's intentions to launch in Germany single-use Ambix Anapa infusion pump systems with what it said were several SmartDose patent-infringing characteristics.

The decision prohibits Fresenius-Kabi from manufacturing, marketing, selling and otherwise promoting the Ambix Anapa products in that country after the judgment is served on it.

Fresenius is appealing the decision before the appeal court of Frankfurt.

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