Hearing implant firm Cochlear sheds millions in US litigation case loss

As the coronavirus pandemic took hold and delayed elective surgeries, a patent infringement case judgment in the US was a major hit to hearing loss device developer Cochlear.

Hearing device developer Cochlear Ltd has taken a dive in full-year earnings after being hit with the cost of losing a long-running patent litigation case in the US.

Sales revenue also fell as the coronavirus pandemic caused elective surgery deferrals in the second half.

The company booked a reported net loss of $283.3 million for 2019-20, an about-face from its reported net profit of $276.7 million for the previous financial year.

The result includes $416.3 million in expenses related to the successful lawsuit against Cochlear by the Alfred E Mann Foundation for Scientific Research and Advanced Bionics earlier this year.

Cochlear said the case related to two patents that had long expired.

“We believe the amount of damages awarded was out of proportion with the limited application of the patented feature, acknowledging that inflated damages awards are a risk of patent disputes in the US,” the company said on Tuesday.

While Cochlear has reached a settlement with the parties for pre-judgment interest and legal fees, it is conditional on the company’s US Supreme Court appeal against the quantum of damages, which, if successful, could mean a fresh trial to land on a new figure.

Cochlear Ltd is appealing to the US Supreme Court to reduce a damages bill for patent infringement. Picture: Chip Somodevilla/Getty Images/AFP

The company said elective surgery had resumed rapidly in some markets, but levels remained low in others, including the UK, Italy and Spain.

Surgeries in China were growing quickly, Cochlear said, but remained very low in markets including India and Latin America as COVID-19 cases continue to grow.

Ord Minnett analysts expected investors would focus on the company’s recovery pathway, with revenues bouncing back to 85 per cent of 2018-19 levels in June and July, supported by catch-up surgeries and market share gains, rather than the latest financial results.

Macquarie Research agreed, noting the company had net cash remaining from a $1.1 billion capital raising in March that slashed net debt by $560 million.

Cochlear did not provide earnings guidance for the current financial year, citing the uncertain timing of a global recovery.

Shares in Cochlear jumped almost 10 per cent to $217.74.