Shares in the Sulzer Medica company soared at the stock exchange on Monday after news that it had agreed to pay about $1 billion (SFR1.7 billion) to settle lawsuits in the United States.This content was published on February 4, 2002 - 16:49
The settlement, which is to be ruled on at a final hearing on May 14, concerns faulty hip and knee implants.
The share price rose by almost 21 per cent to SFr111 from Friday's close at SFr91.75.
Shares in the former parent company, Sulzer, also benefited from the settlement news. The share price rose by more than 10 per cent to SFr300, after closing at SFr271 on Friday.
Thousands of mainly elderly patients, mostly in the United States, needed replacement operations for lubricant-tainted hip or knee implants produced by Sulzer Medica's US facility. The hip joints were recalled at the end of the year 2000.
Not signed and sealed
However, analysts warned on Monday against investor frenzy, commenting that the deal was not yet signed and sealed. The settlement would clear the uncertainty hanging over the Winterthur-based company, which had said it would have to put its US subsidiary into Chapter 11 protection from creditors if claims got out of hand.
Concerns about the faulty implants caused Sulzer Medica's share price to fall by 83.55 per cent last year.
In a statement on Saturday, Sulzer Medica's CEO, Stephan Rietiker, described the settlement as a "decisive milestone" on the path to resolving the litigation against Sulzer Orthopedics.
The company said an enhanced and definite term sheet for settlement had been signed by all parties involved and submitted to US District Court Judge Kathleen O'Malley in Cleveland, Ohio.
Under the terms of the proposed plan, signed by all parties in the dispute, the total payment from Sulzer Medica would be $725 million, in the form of $425 million in cash and $300 in financial instruments.
Sulzer Medica's former parent company, Sulzer, and insurers are set to pay the rest of the deal.
Sulzer is to pay $50 million in cash and will also make its remaining 480,000 shares available for settlement purposes.
With the Sulzer participation in the settlement plans, Judge O'Malley has reinstated with immediate effect the injunction of all claims against the company.
In a statement, also issued at the weekend, Sulzer repeated that it accepted no legal or moral responsibility for the alleged faulty manufacturing of hip and knee implants by Sulzer Orthopedics.
CEO Fred Kindle said he was glad that by reaching the settlement, the case could be closed satisfactorily and further years of litigation could be avoided.
"We prefer to spend our time on our customers and markets rather than in court," he said.
The compensation to patients will amount to about $200,000 each. As of February 1, some 2,786 people had undergone hip revision surgery, while 561 patients had revision knee implant operations.
Confident about the future
Sulzer Medica has said it is now confident about the future. "The patients will receive greater compensation and we can proceed under the assumption that there will be a very small number of opt-outs," he said.
The injunction on the filing of individual claims remains in effect until February 22.
An analyst at Bank Leu, Martin Schmidt said the rise in the Sulzer Medica share price was an overreaction to the settlement news.
"The party is not over yet. There is still a danger that not all plaintiffs will join the class action settlement," he commented.
Bank Baer analyst Thomas Thaeler said many questions remained unanswered, including whether doctors would continue to cooperate with Sulzer Medica in the development of new products.
swissinfo with agencies
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