Risk management

 

Four key risks

Investment in Össur’s shares involves various risks where the business, financial conditions, and results of operations going forward rest upon certain assumptions and could be negatively affected if any of the factors described in this chapter occur. Össur has chosen to highlight four key risks which are currently considered most relevant. Össur cannot ensure that its given assumptions for the description of the risk is correct. Furthermore, additional risks and uncertainties which are listed in the next section, or not presently known to Össur, or that the Company currently deems immaterial, may adversely affect its business operations and financial results, to an even greater extent, than the four risks identified here.

 

 

Changes in reimbursement

 

Description

Most of Össur’s products and services are reimbursed by third-party payers, including both government healthcare programs and private health insurance plans. All third-party payers continue to develop methods of controlling healthcare costs, including review of claims, selective contracting, and competitive bidding.

Potential impact

These cost-control methods may limit or even eliminate the coverage and the amount of payment for which third-party payers may be willing to pay on Össur‘s products and services. As a result, sales may decline significantly, and customers may reduce or eliminate purchases. Reviews of claims may lead to repayment of prior sales.

Mitigative actions

Össur only brings products to the market that have medical indication and are clinically validated. Össur applies its reimbursement knowledge from the earliest stages of product development to the post-sale education of customers. Össur also pursues several strategies to manage the reimbursement of its products and services.

 

 

Regulatory requirements

 

Description

Össur’s products are medical devices that are subject to extensive global regulations by the respective authorities in countries where Össur conducts its business. Such regulations can restrict virtually all aspects of a medical device’s design and testing, manufacturing, safety, labeling, storage, recordkeeping, reporting, clearance and approval, promotion, distribution, and services.

Potential impact

Failure to comply with the regulatory requirements of the applicable authority may subject Össur to sanctions ranging from warning letters to penalties and product withdrawal. Össur’s failure to comply with regulatory requirements or receive regulatory clearance and approval for its products or operations would adversely affect Össur’s sales and potential for future growth.

Mitigative actions

Össur maintains a robust global quality system that complies with international medical device standards and is an intrinsic part of the Company‘s internal processes. Furthermore, employees actively monitor the medical device regulation landscape and stay on top of changes to international and local regulations in the countries where Össur markets and sells medical devices.

 

 

Össur may be unable to develop or secure the use of new technologies

 

Description

Össur operates in markets that are characterized by rapid technological change, driven by extensive research that is carried out by market participants. Technological innovation takes place at various stages in Össur’s value chain and may include individual components, design, and functionalities of Össur products, and patient care.

Potential impact

The development by any suppliers or competitors of substitute products or components that better satisfy market demands could have a material adverse effect on Össur’s business and results of operations. A failure to develop new products or enhance existing products could also have a material adverse effect on Össur’s operations and potential for future growth.

Mitigative actions

Significant reinvestment into R&D and constant strive to find new technologies has resulted in a vast IP portfolio and enables a strong position to compete with potential new entries. External connections and appeal to universities, research institutes and investors provides the opportunity to stay informed and review emerging innovation as part of acquisitions or research cooperation initiatives.

 

 

Industry consolidation and forward integration

 

Description

Major shifts in Össur’s market place include the consolidation of prosthetics manufacturers in recent years and the additional momentum that forward integration is gaining in the industries where the Company operates. Given the nature of acquisitions, it is uncertain to what degree Össur will be able to participate in further consolidation and to what degree forward integration will affect Össur‘s operations.

Potential impact

The consolidation has been a material contributor to the growth of Össur in the past. If Össur were not to participate in further consolidation or forward integration, it might limit Össur‘s potential for future growth. In addition, these shifts may impact the competitive landscape of the industries and the associated market shares. Changes in the industry may furthermore impact Össur’s customers.

Mitigative actions

Össur continuously reviews value enhancing acquisition and investment opportunities in its business segments and keeps a good relationship with the relevant stakeholders in the industry. Össur furthermore operates its own clinics in certain regions and has partnership programs in place with patient care providers to offer end-users quality services.

 

 

Other relevant risk factors

 

Össur is exposed to a range of other risks that have not been discussed in the previous section. Below is a list of other risks that Össur considers relevant but they are not listed in order of priority and the list is not exhaustive.