Oppenheimer stays bullish on ConforMIS after 'positive' settlement in intellectual property dispute

Analysts at Oppenheimer reiterated their Outperform rating Tuesday for Conformis Inc (NASDAQ:CFMS) after the medical-devices company, which develops and sells joint-replacement implants, successfully defended its intellectual property, winning a “positive settlement.”

The Billerica, Massachusetts-based company settled its long-running patent dispute with Smith & Nephew PLC (NYSE:SNN). It entered into a licensing agreement with the British company that sells sports medicine joint repair products to surgeons.

“Under the agreement, which contains both up-front payments as well as cross-licensing, ConforMIS will receive US$10.5mln from Smith & Nephew plus future royalties should Smith & Nephew commercialize its patient-specific instruments for use with off-the-shelf implants beyond knee implants,” wrote Oppenheimer analyst Steven Lichtman.

ConforMIS was also granted a fully paid-up worldwide license from Smith & Nephew to patents related to patient-specific implants.

“Overall, this is a positive development for ConforMIS; the settlement bolsters the balance sheet, further solidifies its strong IP position and reduces litigation spend on the case looking ahead (costs have been running approximately US$800,000/quarter and should more fully roll-off starting 2019),” wrote Lichtman.

In 2016, ConforMIS filed a lawsuit against Smith & Nephew claiming patent infringement by its Visionaire instrumentation and implants system. Smith & Nephew subsequently filed counterclaims alleging ConforMIS infringed patents with its iUni, iDuo, and iTotal products.

The analyst was also bullish about the company’s product pipeline.

“Initiatives/pipeline in focus for ConforMIS looking ahead include the ongoing new iHip limited launch which began 7/31/18 (management believes the ability to reduce leg-length discrepancy with its system will resonate with surgeons), next-gen iTotal knee (2H19E limited launch) and iTotal cementless knee (1H20E) as well as ongoing salesforce expansion and new cost-savings initiatives in 2019,” wrote Lichtman.

In addition to its knee replacement products, the company also makes a hip replacement product billed as the ConforMIS Hip System.

The analyst has a US$1.28 price target on the stock, which recently traded at US$1.21.

Contact Uttara Choudhury at [email protected]

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