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Sales of Waters LC Systems Unaffected by Settlement, Ongoing Litigation with Agilent

Waters' settlement with rival Agilent last week of patent litigation in the United Kingdom and ongoing litigation elsewhere will have no effect on the firm's ability to sell its Alliance or Acquity liquid chromatography systems, a company official told BioCommerce Week late last week.

According to a statement issued by Waters, the firm will make a one-time payment to Agilent of £3.5 million ($6.1 million) as part of a settlement agreement to resolve a patent-infringement suit involving pump technology used in high-performance liquid chromatography instruments.

Waters said that in 2002 it stopped using a portion of the pump technology, which was part of its Alliance HPLC instruments, as a result of a patent-infringement suit brought by Agilent in the UK. Since the firm stopped using the infringing IP in 2002, "there are no implications for Acquity," Waters' most advanced LC system, said Gene Cassis, Waters' vice president of investor relations.

As a result of the settlement, Waters has revised downward its fourth-quarter 2005 and full-year 2005 earnings results that were previously reported on Jan. 24 to include a pre-tax $3.1 million for provision of damages and estimated remaining costs related to the suit. The firm had previously reported net income of $78.2 million for the fourth quarter and $204.5 million for fiscal 2005.


"When we look at the situation of the pending litigation in those two jurisdictions, we feel confident that the funds that we have set aside and have already counted as potentially associated with those activities ... will be sufficient."

The revision results in a reduction of earnings per diluted share for the fourth quarter to $0.69 from $0.71. For the full year 2005, the revision results in a reduction of earnings per diluted share to $1.74 from $1.76.

Other patent infringement suits between Waters and Agilent, similar to the one in the UK, are pending in France and Germany. Waters said it believes that damages from those suits are "unlikely to be materially different from amounts previously recorded."

"We already have accrued some funds, and they're already counted in our 2005 numbers," said Cassis. "And when we look at the situation of the pending litigation in those two jurisdictions, we feel confident that the funds that we have set aside and have already counted as potentially associated with those activities ... will be sufficient."

He declined to say whether or not the firms are engaged in settlement talks in the cases in Germany and France. "Those [cases] are still working their way through the legal system," Cassis said.

Cassis also noted that there haven't been any legal actions in the US related to this dispute.

Waters introduced its Acquity UPLC system in August 2004, and has been trying to convince customers to migrate from its Alliance HPLC system and competitors' instruments to the higher-speed, higher-resolution Acquity system. The company does not break out sales for individual products, but during its fourth-quarter conference call last month President and CEO Douglas Berthiaume said sales of Acquity more than doubled in the quarter in terms of underlying growth rate and order rate (see BioCommerce Week 1/25/2006).

The firm is predicting strong sales growth for Acquity in 2006, driven by demand outside of its pharmaceutical base and expected enhancements to the system throughout the year. But it will face competition from Agilent's newly launched 1200 Series LC system, a high-speed, high-resolution LC instrument (see BioCommerce Week 1/25/2006).

Though Waters has first-mover advantage with the Acquity, Agilent believes that the flexibility and high resolution of its new system, the successor to its 11-year-old 1100 Series liquid chromatography instrument, will enable it to take market share from Waters, as well as other LC vendors that have yet to launch a high-speed instrument.

— Edward Winnick ([email protected])

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