Cynosure (NSDQ:CYNO) said it agreed to put to bed 2 patent infringement lawsuits against Tria Beauty that it inherited when it acquired Palomar Medical Technologies earlier this year with Phillips & Associates.
The settlement calls for Renu 28 Side Effects and pay royalties on future sales of its hair removal products, according to a press release.
“This agreement resolves the litigation involving certain Palomar patents, eliminating potential future legal expense to enforce those patents,” Cynosure president & CEO Michael Davin said in prepared remarks. “Equally important, the settlement fully values our intellectual property rights by fairly compensating Cynosure and its shareholders for sales of products based on our proprietary hair-removal technology.”
Cynosure, which acquired the lawsuits along with Palomar for $234 million in June, said the deal covers 2 sets of patents for hair removal technologies. The 1st portion of the settlement grants a non-exclusive license to 2 of the patents for consumer hair removal products, in return for $8.5 million, according to the release. The 1st, $3.4 million payment is due Dec. 20; the 2nd, $5.1 million installment is due either Sept. 15, 2014, or 5 business days after any initial public offering or buyout on the part of Tria.
The 2nd portion of the settlement grants another non-exclusive license to Tria for a trio of consumer hair removal products in return for $1.5 million, with $600,000 due Dec. 20 and the balance due the same day or 5 business days after an IPO or sale. Tria will also pay a 3% royalty after Oct. 1 through Sept. 30, 2021 on all U.S. sales of products made using the 3 patentsd, according to the release.
“We are pleased to have executed this settlement agreement with Cynosure so we can continue our focus on delivering breakthrough skincare devices directly to consumers that provide transformative benefits not available outside of a physician’s office, without the distraction and expense of litigation,” Tria president & CEO Kevin Appelbaum said in prepared remarks.
“The settlement – while not huge – is an incremental positive and beneficial for CYNO in 3 ways: (1) it provides for a $10M cash payment ($8.2M net), adding to CYNO’s existing $127M net cash position (including $25M of proceeds generated from the recent PMTI HQ sale); (2) it will generate some ongoing (100% gross margin) royalty revenue on selected Tria home-use hair removal patents (which extend through 2021); and (3) it should help reduce CYNO’s legal expense in future quarters – we estimate expenses relating to this particular trial were running at $500K-$1M annually,” Leerink Swann analyst Richard Newitter wrote in a note to investors yesterday.