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Stryker agrees to settle four metal hip lawsuits as hundreds more loom

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Stryker ($SYK) is settling the first of hundreds of lawsuits it faces alleging it sold defective metal hip implants that harmed patients. Expect the Kalamazoo, MI, orthopedic device company to pursue this path more often in the coming months, considering the mounting costs it has faced in the matter.

The Record reported that four patients settled their claims against the company in New Jersey state Supreme Court alleging its Rejuvenate all-metal hip implants injured them, Attorneys representing the patients would not disclose the financial terms, citing confidentiality agreements. But they told the newspaper that a deal came through after two weeks of mediation hearings.

Sure, it's not to the level of Johnson & Johnson's DePuy division ($JNJ), which recently submitted a $2.5 billion-plus settlement offer to resolve 8,000 lawsuits over its now-recalled ASR implants. But the settlement offers could be the precedent of something larger down the line. The Record noted that Stryker already must content with 600 metal hip lawsuits filed, with the anticipation of thousands more to come. Stryker voluntarily recalled its Rejuvenate implant in July 2012, and plaintiffs have charged that the implants didn't meet the promise of long-term durability, failing in under two years and injuring patients in the process as they broke down. (Stryker is also dealing with lawsuits alleging it sold a defective ABG II hip replacement.)

Stryker has to do something. While the company's net earnings hit $103 million during the 2013 third quarter, that number reflects a drop of nearly 71% from the same period a year ago due to a $313 million charge stemming mostly from expenses relating to Stryker's Rejuvenate and ABG II recalls. As of the third quarter, Stryker has recorded $700 million in charges to date relating to the all-metal hip recall effort.

With all of that expense dragging down earnings and no sign of letting up, it's possible Stryker could pursue a larger settlement down the line. After all, the orthopedic device giant is trying to look ahead, diversify and move onto other things. On Dec. 17, it closed its $1.7 billion purchase of Mako Surgical, gaining access to a line of knee implants and Mako's robot-assisted surgical device for orthopedic procedures.

Beyond J&J and Stryker, Biomet is also dealing with its own onslaught of metal hip lawsuits. More than 900 Biomet lawsuits have been consolidated in U.S. District Court in Indiana and a status conference on those cases is scheduled for Jan. 6, 2014, according to Bernstein Liebhard, attorneys representing many of the plaintiffs in those cases.

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