Broker snap: Brokers play down Smith & Nephew patent impact

11th Mar 2010 11:33

Smith & Nephew's loss of a patent law suit with US firm KCI over its foam implants is a setback but unlikely to have any significant impact on earnings, brokers Morgan Stanley, Charles Stanley and Panmure Gordon all suggest.The patents at issue involve foam dressing used with vacuum-pressure systems used to treat serious wounds, Panmure added.A federal court jury decided that S&N wound-therapy products infringe key patents of a competitor, Kinetic Concepts (KCI).Morgan Stanley says that S&N is likely to appeal the ruling that KCI's patents are valid and it infringed them. The broker expects more litigation between the two companies in the coming months. If S&N were to lose any appeal, Morgan Stanley estimates it would reduce it estimate for 2014 sales by $70-$100m or less than 2% of estimated 2014 revenues.Charles Stanley adds that the appeals process could take up to a year and the key Kinetic patents expire between 2011-14. It has a 'Buy' rating on S&N shares and suggests any weakness be used to pick them up.Morgan Stanley says the patent ruling decision does not impact its investment case. Its 'Overweight' rating is based on a return of hip and knee growth and an overall improvement in demand for hospital capital equipment.Panmure maintains a 'Hold' recommendation and 552p price target.