Biotech Values

[DewDiligence]

Inamed settles on LapBand:

[Inamed, best known for breast implants and collagen facial fillers, also markets a product called LapBand for morbid obesity. The LapBand insertion procedure is safer than the popular gastric bypass and is reversible, which has made LapBand a fast-growing product in the white-hot market for obesity procedures. The only problem: Inamed ripped off IP from JNJ, but that’s now resolved.

Inamed is a former short position I closed out at a small profit in March. It’s probably still overpriced, but there are other more tempting shorts these days.]

http://biz.yahoo.com/rc/040621/health_inamed_3.html

>>
Inamed pays to settle Lap-Band dispute with J&J

CHICAGO, June 21 (Reuters) - Inamed Corp. (NasdaqNM:IMDC) on Monday said it would make a $17.25 million lump sum payment to Johnson & Johnson's (NYSE:JNJ) Ethicon Endo-Surgery unit for the worldwide license of gastric banding treatments for obesity.

News of the settlement sent shares of Santa Barbara, California-based Inamed up by more than 8 percent on Monday. Analysts had feared a trial in the case could have resulted in stiff penalties or the forced withdrawal of Inamed's Lap-Band product from the market.

"This will eliminate a significant risk, as the case was scheduled to go to trial in Los Angeles this week," said CIBC World Markets analyst John Calcagnini in a research note.

As part of the agreement, Inamed will pay Ethicon royalties on future U.S. sales of the Lap-Band obesity product in an agreement to resolve a patent dispute between the companies.

The royalty payments will be 7.5 percent of U.S. sales; Inamed said it had been accruing a royalty on U.S. sales of 1.2 percent. The 7.5 percent royalty would fall to 5.5 percent of U.S. sales if Ethicon got U.S. approval for a competing product. Inamed said it will also pay a 3.5 percent royalty on foreign sales.

Calcagnini said Inamed likely has pricing flexibility that could offset the higher royalty payment. Inamed said it will take a second-quarter charge of $17.2 million in the June quarter to cover the payment and related litigation costs. The deal stipulates payments of the lump sum be made by June 26.

The Lap-Band product, a device used to treat obesity in lieu of gastric bypass surgery, had worldwide sales of $19.2 million in the first quarter of 2004. The company had total sales of $90.8 million in that period.

Inamed's shares were up 5.6 percent or $3.22 to $60.51 Monday afternoon on the Nasdaq market after hitting a year-high of $62.00 earlier.
<<