Swiss Maker of Hip Implants Now Facing 1,000 Lawsuits

Sulzer Medica, Europe’s biggest maker of orthopedic products, now faces about 1,000 lawsuits over a recalled hip implant, up from 800 previously reported. The Swiss company said insurance probably won’t cover all the related costs.

About 2,200 patients have had surgery to replace the Inter-Op implants, the company said. Medica Chairman Max Link said he sees that figure rising to 2,500.

Medica’s insurance coverage is capped at $223 million, but analyst estimates for the costs have run as high as twice that amount.

Medica has lost more than two-thirds of its market value since mid-May.

“The risks are just too high and nobody is going to jump into this stock,” said Patrick Stutz, an analyst at Bank Vontobel in Zurich who has a “neutral” rating on Medica shares.

Analysts at Bank Sarasin estimated in June that Medica faces about $425 million in costs in a worst-case scenario. That was based on the possibility that Medica will have to pay punitive damages, as well as the costs of 2,600 patients undergoing surgery to replace hip implants and 160 procedures for a faulty knee implant.

So far, about 140 patients have had surgery to replace the knee implant, Medica said Monday. That implant was much less widely used than the Inter-Op hip product and won’t cost nearly as much, Medica executives have said. About 1,600 of the implants were sold in the United States, Link said.

The number of patients needing surgery to replace the knee implant will probably climb to “several hundred,” said Medica spokesman Henner Alms. There have been two lawsuits related to the knee implants so far, he said.

About 60 of the 1,000 hip implant lawsuits are seeking class-action status, including at least one filed in California.

Sportscaster Jim Lampley also sued the Swiss company in Los Angeles, saying he suffered “agonizing” pain when standing up.

Medica said it may aside reserves to cover the recall. It will release details in September when it states first-half results.

In response to a shareholder question Monday at an extraordinary shareholder meeting, Link said sabotage is “one scenario we can’t rule out.” He declined to discuss the subject further.

“We’re working day and night to hold the course of our boat,” Link said. The orthopedics division, based in Austin, Texas, is “responsible for all consequences.”

Medica has fired the head of its joint and fracture care business, and Link said Dave Bartkowiak, head of global production, has resigned. Both were based in Austin.

“This incident will be expensive,” Link said.

Medica said it also has agreed to pay $10.5 million to help with the costs of its spinoff from parent company Sulzer and the defense of a takeover attempt by InCentive Capital. Swiss machinery maker Sulzer will pay $17.5 million, it said.

The costs of the spinoff and the implant recall will “lead to deep traces in our profit and loss account,” Link said. But he wouldn’t comment on the extent of costs Medica faces. He said the company would have to wait for the first lawsuits to come to trial in the fall. “These costs are not excessive, and the bankruptcy risk is not too high,” said Matthias Fehr, an analyst at Lombard Odier & Cie. Still, he has a “sell” rating on the company.

Medica is holding a shareholder meeting to complete the spinoff from Sulzer, scheduled for today. As part of the spinoff, Medica will change its name, though not before the middle of next year, Alms said.