Getinge AB (publ) (GETIB) Earnings Call Transcript & Summary

[Audio Gap] Thank you very much, moderator, and thanks, everyone, who has been able to join the call with very short notice here. I wanted to provide a short summary of the announcement we made just a moment ago and then open up for Q&A. So we can move directly to Page #2, please. So today's announcement in brief is that we have reached a settlement regarding the multi-district litigation, or MDL, linked to surgical mesh product liability in the U.S., where Atrium Medical Corporation has been the [ Getinge's ] party to this agreement. We're making a concluding provision of additional SEK 600 million related to this, and that's to cover the remaining costs for seeing this through. The provision will be reported as an item affecting comparability, and it will impact the operating results for the fourth quarter of 2021. This settlement is not an admission of liability or wrongdoing by the company. That's important to be aware of as well. We can move to Page #3, please. So the settlement agreement aims to conclude the MDL with the representatives for 3,200 plaintiffs. It's subject to certain contingencies. But I think one of the more important would be -- including participation rate, which is at a high level of the plaintiffs inside the MDL. We expect the payment to be made during the first half of 2022 when we have concluded everything regarding -- including the participation rate for the plaintiffs in the MDL. The amount to be paid out is already well-covered for -- within our current cash flows. We can move to Page #4, please. So a couple of points that I think is of interest related to this as well. There is a minor tail possibility, and there's also a question regarding insurance coverage. So if we begin with the minor tail. There is the possibility that a minority of the plaintiff may not accept the agreement between Atrium and the plaintiffs' representatives. We're, of course, hoping for 100% participation rate, but you'll never know until this is completely done. These plaintiffs, if there are such, they need to seek other routes, and that will be handled in a different process accordingly. Then on the insurance coverage point, I want to point out that we have not included anything in the provision regarding insurance. We do hold related product liability insurance, though. We are, as you may remember, in the legal dispute with insurance providers regarding this coverage. And we do believe that we have a strong case here, and one of the indications for that is that the first layer of this insurance actually did pay out and did agree with our view on this. So nevertheless, the insurance coverage is not taken into the account when we arrived at the provision announced here. So that's the overall high level message, and we can move to the Q&A, please. Thank you.

[Operator Instructions] Our first question comes from Kristofer Liljeberg with Carnegie.

Just a quick question. Is it possible for you to give any sort of indication how much was still left of the initial provision when you ended the third quarter? And if you could say anything about how to think about the cash flow effect? Because I think it was said that part of the provision was also going to cover the legal advisory costs, which has already happened. So I guess, not all of the SEK 1.8 billion is there.

No, that's true. We have consumed a fair amount of the original provision. We don't disclose exactly how much other than what you can find in our public report. But you're absolutely right that a significant portion of the costs so far have been legal. Consequently, the provision -- the additional provision now is meant to cover both the settlement and also the potential tail, hence, the legal costs associated with this.

So the cash flow effect in 2022, that will, for sure, then be less than SEK 1.8 billion, i.e., the original provision here plus SEK 600 million?

Yes, absolutely.

[Operator Instructions] Our next question comes from Karl Norén with Danske Bank.

Yes, one question on the insurance things here. You -- I think you stated in the press release, like 1 year ago, that you had a dispute with Moderna Försäkringar in Stockholm [ states ] I think. And I'm just wondering, you said that this first layer was paid out. Was this -- this was not the SEK 500 million you mentioned then? Or can you give us an update on that legal process of it?

The only update I can give is that, you're right, we have filed a lawsuit in the Stockholm Court. This is likely to take around four years, it's the indication that we had from the starting point. It is, again -- but then, as you point out -- and the -- we have not disclosed the amount that was paid out previously, I mean, from the first layer of insurance providers.

Okay. But it's not the SEK 500 million that you -- that was the first layer that was -- that has not been paid out to you, I guess?

Well, the first layer has been paid out to us, that's been exhausted completely. But we haven't disclosed the amount there.

Our next question comes from Victor Forssell with Nordea.

Just a quick one. Any risk that you could talk about regarding the participation rate, what you foresee there? Should you not maximize the rates?

Yes. We deem the risk to be very small, given that there is a commitment from the lead council in the MDL to get above a certain -- very high threshold for the settlement to become effective. So we really deem this to be very small. But of course, there's no guarantee until it's actually -- well, with each and every plaintiff, whether they will be part of the settlement or not. But we believe that we have arrived at a very good settlement here.

Okay. And those -- that perhaps do not settle at this point, those are sort of the cost of less material impact that you foresee could happen in due course?

Yes, absolutely. We do believe that this will be really not material. And as I've mentioned initially as well, we have -- part of the provision is to cover the potential risk that we have [ a tail ] after the sentiment becomes effective.

We have no further questions. I hand back over to our speakers.

All right. Thank you very much, and thanks again for tuning in with short notice. I have nothing to add in terms of the summary here. We -- and both -- this recording, is of course, available afterwards, and we remain available for questions afterwards as well. So thank you very much.