The Sulzer Medica company of Winterthur has petitioned a United States court to allow a class action settlement of hundreds of costly lawsuits related to a recall of faulty hip implants and the withdrawal of defective knee implants.
The proposed compensation package is worth an estimated $780 million (SFr1.3 billion). Sulzer said in a statement it petitioned the US District Court in Cleveland to effectively collect all pending lawsuits to meet patient claims "quickly and fairly".
News of Sulzer Medica's offer sent a positive signal to the Swiss stock exchange. Company shares soared more than 38 per cent in Wednesday's session to close at SFr120. They closed at SFr86.60 on Tuesday.
Forecasting 4,000 corrective surgeries altogether for hips and knees, Sulzer Medica said the proposed settlement terms would be financially bearable, and would be spread over several years.
Sulzer Medica's chief executive Stephan Rietiker told swissinfo that he had been planning a swift settlement since his appointment two months ago.
"I made a detailed analysis and decided we had to move forward very quickly to get a settlent and get on with the business," explained Rietiker.
Payments in cash and equity
Under terms of the proposed settlement, Sulzer Medica would pay patients needing multiple corrective surgeries $97,500 (SFr163,117)in cash and equity, while those requiring a single operation would receive $57,500. The spouse of the patients would also receive compensation.
Patients who received a hip shell or tibial baseplate and did not require corrective surgery would receive $2,750 in cash and equity and their spouses would also receive compensation.
Sulzer Medica said the number of patients undergoing hip revision surgery had increased to 2,353 as of August 10. The corresponding number for tibial baseplate revision surgery had risen to 280, the company said.
The number of lawsuits filed remains 1,029 for hip shells and two for tibial baseplates.
Sulzer Medica's chief executive Stephan Rietiker told swissinfo that he hoped for a swift resolution of the group's problems in the US now that the offer had been made.
"From my experience I expect it'll be between 60 and 90 days until we have a final settlement," explained Rietiker.
Meeting "obligations to patients"
The compensation payments will be financed by Sulzer's insurance coverage and by 50 per cent of group net income "over the next few years", but no less than $25 million per year and no more than $50 million cumulatively per year.
Sulzer Medica said the compensation in equity required the approval of shareholders who would vote on authorising the payments at a special shareholders' meeting later this year.
The company said US trial lawyer Richard Scruggs, who led the successful legal assault on the tobacco industry, had helped it reach the proposed conditions.
"This agreement represents a positive development towards finding a legal way for compensating patients, while preserving a key player that is vital to the public health," Scruggs commented.
The new president of Sulzer Orthopedics in the US, David Floyd, said the proposed settlement proved that, as promised, the company would meet its obligations to patients.
"Although this has been a very difficult time, we have kept our commitments and look forward to serving surgeons and their patients in the future," he said.
swissinfo with agencies