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Waters Wins Appeal in German IP Suit Filed By HP and Agilent; French, British Appeals Ongoing

San Francisco — Waters has won an appeal in a German court on a case brought by Hewlett-Packard and Agilent Technologies alleging that a pump technology used in Waters' Alliance HPLC and LC/MS product lines infringes on their European patents.

Hewlett-Packard filed patent infringement suits against Waters in Germany, France, and the UK, and prevailed in the suits, which Waters then appealed. The appeals in France and the UK are still in process.

This week at the JPMorgan Healthcare Conference here, Waters said that it received a finding of non-infringement in Germany in December on its appeal. Waters’ corporate counsel Mark Beaudouin said the company expects Agilent to appeal.

Waters has set aside a reserve fund of “less than $10 million” to cover possible damages and fees, Douglas Berthiaume, Waters’ CEO, said. The company’s most recent 10-Q states that it has set up a reserve fund of $7.8 million for this purpose.

“We don’t think it could result in a seven-figure settlement, and it seems highly unlikely that it has any ongoing impact on our product line,” Berthiaume told analysts. “That is our best judgment and this is just Europe.”

Berthiaume said HPLC in combination with mass spectrometry is a growing application in therapeutic drug monitoring, particularly for immunosuppressants.

The disclosures of the progress of the patent litigation occurred in the breakout session following Waters’ formal presentation on the first day of the four-day conference. In that session, Berthiaume said Waters’ growth initiatives center around the Acquity product line, which began shipping in August, new products shipping in proteomics, and new products in laboratory informatics.

Berthiaume said response to the Acquity product line has been “remarkable.” Waters is marketing the Acquity UPLC (Ultra Performance Liquid Chromatography) system as a complement to mass spectrometry instrumentation, to be used to separate constituents in a liquid sample prior to analysis.

The company recorded some $12 million in sales for the system during its third quarter ending Sept. 30, and expects some $12 million to $14 million in sales for the fourth quarter, and a doubling of its installed base by the end of 2004, Berthiaume said in October. (See BCW, 10/28/2004).

Waters is seeking to recover a mass spectrometry market share that has eroded since March 2003 when it lost an appeal of a jury’s finding of patent infringement that enjoined the firm from selling its Quattro Ultima triple-quadrupole mass spectrometer in the US, and assessed damages and interest of some $53 million.

The company is focusing its sales efforts for the Acquity product line on analytical development labs, said Berthiaume.

“We are trying to force the sale in every lab that is qualified as an analytical development lab,” he said.

Waters has shipped some 30 units to its demonstration laboratories.

Additionally, the company has been cycling customers through its Milford, Mass., demonstration laboratory, which has resulted in sales to 10 customers, he said.

“We are trying to run as many through as we could,” he said. He said the company has been “forced” to do the demos to answer doubts about the product’s capabilities.

For proteomics applications, Waters is combining the Acquity product with its recently launched QTOF Premier and targeting biomarker and proteomics applications.

“There has been remarkable response in an area where we had been out of the marketplace for a year and a half,” said Berthiaume.

In the first quarter of 2005, the company will launch its NanoAcquity product line, combining its QTOF Premier mass spectrometer, and protocols and software, to be marketed as the Waters protein expression system, and targeting biomarker discovery, he said. The system will sell in the range of $400,000 to $600,000, according to Waters.

In informatics, the acquisitions of NuGenesis Technologies for $43 million in January and Creon Lab Control for $16 million in July 2003 have not yielded the revenue growth the company would have liked.

“We are a little bit disappointed in the speed of uptake in our [informatics] business in 2004,” Berthiaume said.

The launch of the company’s E-Lab notebook products is giving the company optimism for 2005, he said. Both the notebook product and the company’s scientific database products hit the market after the initial target dates the company set for shipment.

— Mo Krochmal ([email protected])


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