Wright Medical Group N.V. (NASDAQ:WMGI) today announced that on
November 1, 2016, its wholly owned subsidiary Wright Medical
Technology, Inc. (WMT) entered into a Master Settlement Agreement
(MSA) with Court-appointed attorneys representing plaintiffs in the
previously disclosed metal-on-metal hip multi-district litigation
known as In Re: Wright Medical Technology, Inc., CONSERVE® Hip
Implant Products Liability Litigation, MDL No. 2329 (MDL) and the
consolidated proceeding pending in state court in California known
as In re: Wright Hip System Cases, Judicial Council Coordination
Proceeding No. 4710 (JCCP). In addition, on October 28, 2016,
the Company entered into a Settlement Agreement with three of its
insurance carriers (Three Settling Insurers).
Under the terms of the MSA, the parties agreed to settle 1,292
specifically identified CONSERVE, DYNASTY or LINEAGE revision
claims which meet the eligibility requirements of the MSA and are
either pending in the MDL or JCCP, or are subject to tolling
agreements approved in the MDL or JCCP, for a total settlement
amount of $240 million, of which approximately $180 million will be
funded from cash on hand and $60 million will be funded from
insurance recoveries.
Eligibility requirements of the MSA include that the claimant
has a pending or tolled case in the MDL or JCCP, has undergone a
revision surgery within eight years of the original implantation
surgery, and that the claim has not been identified by WMT as
having possible statute of limitation issues. Claimants who
have had bilateral revision surgeries will be counted as two claims
but only to the extent both claims separately satisfy all
eligibility criteria.
The MSA includes a 95% opt-in requirement, meaning the MSA may
be terminated by WMT prior to any settlement disbursement if
claimants holding greater than 5% of eligible claims in the Final
Settlement Pool elect to “opt-out” of the settlement. No
funding of any individual plaintiff settlement will occur until the
95% opt-in requirement has been satisfied or waived.
Robert Palmisano, president and chief executive officer,
commented, “We are very pleased to have reached this settlement
agreement, in particular the population of claims that the
settlement covers as well as the required 95% opt-in rate for those
claims. With this clarity, we will continue to focus on
accelerating growth opportunities in the extremities and biologics
markets. This settlement addresses approximately 85% of the
known U.S. revision claims that do not have potential statute of
limitations issues and removes a great deal of the uncertainty that
has been associated with this litigation.”
Wright will continue to vigorously defend metal-on-metal hip
claims not settled pursuant to the MSA. As of September 25,
2016, the company estimates there were approximately 600
outstanding metal-on-metal hip revision claims that would not be
included in the MSA settlement, including approximately 200 claims
with an implant duration of more than eight years, approximately
300 claims subject to possible statute of limitations preclusion,
approximately 30 claims pending in U.S. courts other than the MDL
and JCCP, approximately 50 claims pending in non-U.S. courts, and
approximately 20 claims that would be eligible for inclusion in the
settlement but for the participation limitations contained in the
MSA. The company also estimates that there were approximately
700 outstanding metal-on-metal hip non-revision claims as of
September 25, 2016. These non-revision cases are excluded
from the MSA.
The final MSA settlement amount (not to exceed $240 million),
and the final number of claims settled under the MSA, will depend
on, among other things, the number of claimants electing to
participate in the settlement and the mix of products implanted in
the settling claimant group. Claims which do not meet the
eligibility requirements of the MSA, new claims, and claims which
have opted-out of the settlement will not be settled under the MSA
and the company will continue to defend these claims.
The company previously disclosed a loss range applicable to a
substantial portion of revision cases of $150 million to $198
million and, in accordance with U.S. generally accepted accounting
practices (US GAAP), recognized as a charge within discontinued
operations in the second quarter of 2016 $150 million, the low end
of the range of probable loss for these cases. During the
third quarter of 2016, the company recorded charges of
approximately $39 million to increase its accrual from the low end
of its previous range of probable loss to the amounts in line with
the final agreements and to record accruals for certain other
revision cases. Please refer to the disclosures in the company’s
third quarter 2016 quarterly report on Form 10-Q for a full
discussion of our accruals and disclosures related to this matter.
WMT has agreed to escrow $150 million to secure its obligations
under the MSA, and parent corporation Wright Medical Group N.V. has
agreed to guaranty WMT’s obligations under the
MSA.
The MSA will help bring to a close significant metal-on-metal
litigation activity in the U.S. Some lawsuits, however, will
remain and Wright will continue to defend against remaining claims
and any future claims that could be filed. The ultimate cost
to entirely resolve these matters will depend on many factors that
are difficult to predict and may be materially different than the
amounts accrued to date, including future revision claims and
additional insurance recoveries. Further charges may need to
be recorded in the future as additional information becomes
available.
Internet Posting of Information
Wright routinely posts information that may be important to
investors in the “Investor Relations” section of its website at
www.wright.com. The company encourages investors and
potential investors to consult the Wright website regularly for
important information about Wright.
About Wright Medical Group N.V.
Wright Medical Group N.V. is a global medical device company
focused on extremities and biologics products. The company is
committed to delivering innovative, value-added solutions improving
quality of life for patients worldwide and is a recognized leader
of surgical solutions for the upper extremities (shoulder, elbow,
wrist and hand), lower extremities (foot and ankle) and biologics
markets, three of the fastest growing segments in
orthopaedics. For more information about Wright, visit
www.wright.com.
™ and ® denote trademarks and registered trademarks of Wright
Medical Group N.V. or its affiliates, registered as indicated in
the United States, and in other countries. All other
trademarks and trade names referred to in this release are the
property of their respective owners.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This release includes forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally can be identified by the use
of words such as “will,” “may,” “continue,” “anticipate,” “expect,”
“could,” “believe,” “estimate,” “future,” other words of similar
meaning and the use of future dates. Forward-looking
statements in this release include, but are not limited to,
statements about the effects of the settlement agreements and the
amount and funding of the settlement amounts. Forward-looking
statements by their nature address matters that are, to different
degrees, uncertain. Each forward-looking statement contained in
this release is subject to risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by such statement. Applicable risks and uncertainties
include, among others, risks and uncertainties associated with the
MSA and the settlement agreement with the Three Settling Insurers,
including without limitation, the final MSA settlement amount and
the final number of claims settled under the MSA, the
possibility that the 95% opt-in requirement may not be achieved,
the resolution of the remaining unresolved claims, the effect of
the broad release of certain insurance coverage for present and
future claims, the resolution of the company’s dispute with the
remaining carriers; and the other risks identified under the
heading “Risk Factors” in Wright’s Annual Report on Form 10-K for
the year ended December 27, 2015 filed by Wright with the SEC on
February 23, 2016 and Wright’s Quarterly Report on Form 10-Q for
the quarter ended September 25, 2016 anticipated to be filed by
Wright with the SEC on November 2, 2016. Investors should not
place considerable reliance on the forward-looking statements
contained in this release. Investors are encouraged to read
Wright’s filings with the SEC, available at www.sec.gov, for a
discussion of these and other risks and uncertainties. The
forward-looking statements in this release speak only as of the
date of this release, and Wright undertakes no obligation to update
or revise any of these statements. Wright’s business is
subject to substantial risks and uncertainties, including those
referenced above. Investors, potential investors, and others
should give careful consideration to these risks and
uncertainties.
Investors & Media:
Wright Medical Group N.V.
Julie D. Tracy
Sr. VP, Chief Communications Officer
(901) 290-5817 (office)
julie.tracy@wright.com
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