Getinge 2022 Annual Report

Getinge 2022 Annual Report Introduction Strategy Corporate Governance Annual Report Sustainability Report Other information Contents Settlement related to liability claims for surgical mesh products In December 2021, Getinge's subsidiary Atrium Medical Corporation entered into a settlement agreement with the plaintiff's lead counsel related to the multidistrict litigation (MDL) linked to surgical mesh product liability in the US. An additional provision of SEK 600 M was made to account for the settlement in addition to litigation expenses incurred to date. The surgical mesh implants are manu- factured by Atrium Medical Corporation, which was acquired by Getinge in 2011. Getinge made a provision of SEK 1.8 billion in 2018 for expected costs associated with surgical mesh claims, based on information available at the time. There are about 3,200 plaintiffs in the MDL and the settlement aims to maximize the participation rate by the vast majority of claims filed up until November 30, 2021. The settlement process and multidistrict litigation between Atrium Medical Corporation and the plaintiffs ended on January 30, 2023, with over 96% of eligible plaintiffs having opted into the settlement. The overwhelming majority of the settlement amount was paid as from January 30, 2023 (refer also to the information under Events after the end of the reporting period). The settlement is not an admission of liability or wrongdoing on the part of the company. Getinge will continue to defend against any litigation that the final agreement does not resolve. Costs for such litigations are not expected to be material. Lawsuit against Moderna Försäkringar and If In the fourth quarter of 2020, Getinge AB and its subsidiaries Atrium Medical Corporation and Maquet Cardiovascular US Sales, LLC filed a lawsuit against the insurer Moderna Försäkringar (the Swedish branch of Tryg Forsikring A/S Denmark). The dispute concerns the right to insurance compensation for expected costs associated with the ongoing product liability claims filed in Canada and the US regarding surgical mesh products. The lawsuit involves disputed insurance coverage of up to approximately SEK 500 M. In 2021, a lawsuit was filed against If Skadeförsäkringar AB (publ) regarding similar insurance compensation of up to approximately SEK 1 billion. The litigation against the insurers is expected to continue in 2023. Getinge's financial targets 2022-2025 and dividend policy • • • Average annual organic growth in net sales: 4-6% Average adjusted earnings per share growth: >10% Getinge's dividend policy is to pay dividends of 30-50% of net profit to shareholders Acquisition of operations In January 2022, Getinge completed a minor acquisition of Irasun GmbH, which is based in Munich. The company develops products for venous drainage and temperature control, which can be used in combination with heart lung machines and equipment for ex- tracorporeal life support (ECLS). Through the acquisition, Getinge broadens its portfolio to include innovative solutions in surgical perfusion. In July 2022, Getinge completed the acquisition of 100% of the shares in Fluoptics SAS, a France-based leader in fluorescence imaging as an aid to surgery. The acquisition expands Getinge's customer offering in clinical decision support, enhancing the safe- ty and efficiency of operations. Fluoptics has 29 employees and generated sales of SEK 45 M in 2022. The purchase price amounted to SEK 343 M, of which SEK 57 M comprised contingent consider- ation that may be paid in 2024 if specific regulatory approvals are obtained and certain financial targets achieved. Settlement agreements with authorities in Brazil As a consequence of ongoing government investigations regarding anti-competitive practices relating to the sale of medical devices, mainly to public hospitals, Getinge has previously entered into Settlement Agreements with the Brazilian Federal Prosecutor's Office (Ministério Público Federal) and the competition authority, the Administrative Council for Economic Defense (CADE). The negotiations with the federal agency for internal control, public transparency and counter-corruption, Comptroller General of the Union (CGU), are still pending (Refer to Note 26 for further information). Update regarding Consent Decree with the FDA Getinge signed the original Consent Decree with the FDA in 2015 which encompassed four production units in the US and Germany. Plans for remedying identified shortcomings have already been completed and the work at the production units in Hechingen was completed in 2021. In addition, Getinge's production units in Fairfield and Mahwah received warning letters from the FDA in autumn 2018 and the start of 2019. The reason for the warning letters was routine inspections performed by the FDA at these production units in 2018. The FDA's observations and opinions pertain to procedures and processes linked to demands for supplier checks, processes for the approval of design changes and incident reporting. The same observations were identified by Getinge during internal inspections in the fourth quarter of 2017. The local organiza- tion has since worked to correct the shortcomings in the quality management system. Getinge has submitted an action plan, includ- ing activities and a related schedule, to the FDA and improvements are proceeding according to this plan. In November 2022, the FDA announced that it would include Getinge's subsidiary Datascope as an additional facility in the company's existing consent decree. The FDA's conclusion relates to a previously communicated warning letter in 2019 and sub- sequent inspections at the Datascope site in Wayne, NJ, US, between November 1, 2021 and January 21, 2022. According to FDA, Getinge's subsidiary Datascope has failed to fully comply with the Quality Management System and related processes. Datascope is enforcing the ongoing actions to address the findings from the inspections and warning letter and to ensure that the organization acts in compliance with the Quality Management System. The company is implementing a new operational quality organization with new leadership closer and integrated in the business opera- tions. A work plan for further improvements for the site has been submitted to FDA in January 2023, in accordance with standard procedure and dialogue with FDA is ongoing. An independent inspector has been appointed. Datascope's improvement activities from 2018-2022 amounted to approx. SEK 500 M. The additional costs for the improvements going forward are not expected to be material. Innovation and product development Innovation and product development are a cornerstone of the Group's strategy to strengthen the customer offering and thereby ensure future organic growth. The Group uses innovation and product renewal to manufacture products, systems and solutions 60 60