With a patent challenge from Medtronic ($MDT) now settled, Insulet ($PODD) is $10 million lighter but gets to keep its fleet of insulin pumps on the market.
Medtronic took the Bedford, MA, devicemaker to court on allegations that Insulet's OmniPods infringed on patents tied to MiniMed insulin pumps, and the company responded with intellectual property allegations of its own. Now, according to the terms of the settlement, the two will cross-license certain patents to one another and have agreed not to file anymore patent suits over any on-the-market product.
Insulet owes Medtronic a one-time cash payment, which, added to legal fees incurred, will result in a $10 million total charge, the company said.
Despite the cost, Insulet came out relatively unscathed, CEO Duane DeSisto said, as it can keep its devices on the market and double down on R&D.
"This agreement allows us to maintain our focus on the launch of the new OmniPod, which continues to receive an enthusiastic response from both customers and healthcare professionals," DeSisto said in a statement. "In addition, the agreement provides us significant freedom to continue developing the products in our pipeline, including an OmniPod System for the Type 2 diabetes market and an OmniPod with integrated continuous glucose monitoring."
Now, Medtronic will dismiss another pending lawsuit and the pair will negotiate a more detailed settlement agreement, Insulet said.
In an investor note, Canaccord Genuity analyst William Plovanic said the news is a net positive for Insulet, as it's now clear of Medtronic's threat and, with a no-more-suing agreement, can press forward with business as usual. The company's shares increased as much as 3% on Thursday morning.
Insulet is expecting as much as $252 million in revenue for 2013, good for up to 19% annual growth. Despite the rapid uptake of its OmniPod devices, Insulet was dealt a blow this year when the Centers for Medicare and Medicaid Services cut off reimbursement for some of its diabetes testing products, and the company said that'll cut about $10 from full-year revenue.
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