A class action lawsuit has been filed against medical device company Medtronic in the United States District Court for the District of Minnesota on behalf of all persons and entities who purchased or otherwise acquired Medtronic securities between June 8, 2019 and May 25, 2022, both dates inclusive, according to Bragar Eagel & Squire, P.C., a stockholder rights law firm.
Investors have until Nov. 7, 2022 to apply to the Court to be appointed as lead plaintiff in the lawsuit against Medtronic.
Among Medtronic’s suite of medical device products is the MiniMed insulin pump system for the treatment of diabetes. The systems include the MiniMed 600 series models and the MiniMed 780G model. Medtronic is currently seeking regulatory approval for the MiniMed 780G model, which uses an advanced hybrid closed loop system. During the Class Period, Medtronic repeatedly assured investors that the MiniMed 780G model was “on track” for approval by the U.S. FDA and would provide Medtronic with the edge it needed to close a growing gap with its competitors in the diabetes market.
Medtronic made these representations despite known issues with the MiniMed 600 series models. Indeed, in November 2019, the company issued a warning that certain MiniMed 600 series insulin pumps might have damaged pump retainer rings, which could cause the system to release too much insulin, and instructed customers with damaged rings to contact the company for replacements. On Feb. 7, 2020, the FDA classified Medtronic’s November 2019 notification as a Class I recall—the most serious type of recall.
Problems with the MiniMed 600 series mushroomed in October 2021, when the company expanded its recall to all MiniMed model 630G and 670G insulin pump systems—whether or not any retainer ring damage was actually visible. Despite these serious issues with the 600 series, Medtronic assured investors that they expected the MiniMed 780G “to drive growth.” Consistent with these optimistic statements, Medtronic again assured investors that FDA approval of the MiniMed 780G was imminent.
Investors began to learn more about company’s MiniMed operations on Dec.15, 2021, when Medtronic revealed that it had received a warning letter from the FDA regarding its Northridge, California facility. The warning letter followed an FDA inspection relating to the company’s MiniMed 600 series recall, and focused on “the inadequacy of specific medical device quality system requirements . . . in the areas of risk assessment, corrective and preventive action, complaint handling, device recalls, and reporting of adverse events.”
As a result of the Warning Letter—including the resulting uncertainty about FDA approval of the MiniMed 780G and other products in Medtronic’s diabetes operating unit, the Diabetes Group, Medtronic lowered its guidance for its Diabetes Group, now projecting that Diabetes Group product revenues would decline in the mid-single digit range for fiscal year 2022. On this news, the price of Medtronic common stock declined $6.75 per share, or approximately 6%, from a close of $111.69 per share on December 14, 2021, to close at $104.94 per share on Dec. 15, 2021.
The financial fallout from the FDA’s findings continued to surface on May 26, 2022, when Medtronic reported its financial results for the fourth quarter and full fiscal year 2022, and provided guidance for fiscal year 2023, according to Bragar Eagel & Squire. Notably, Medtronic disclosed that as a result of the company’s need to improve its quality control system and its expectation that the MiniMed 780G model—which Defendants had repeatedly identified as crucial to future growth—would not be approved in 2023, the company expected revenues from its Diabetes Group to decline between 6% and 7% in fiscal year 2023. On this news, the price of Medtronic common stock fell $6.10 per share, or nearly 6%, from a close of $105.54 per share on May 25, 2022, to close at $99.44 per share on May 26, 2022.
According to Bragar Eagel & Squire., throughout the Class Period, Defendants made a number of materially false and/or misleading statements, as well as failed to disclose material adverse facts, about the company’s business and operations by failing to disclose that: (1) Medtronic’s product quality control systems were inadequate; (2) Medtronic had failed to comply with numerous regulations regarding risk assessment, corrective and preventive action, complaint handling, device recalls, and reporting of adverse events; (3) these failures increased the risk of regulatory investigation and action; (4) as a result of the company’s misconduct, the FDA would delay the approval of additional Medtronic MiniMed devices, including the MiniMed 780G; (5) these delays in product approvals, as well as the company’s need to improve its quality control systems, would negatively affect Medtronic’s financial performance and cause it to fall further behind its competitors; and (6) as a result of the foregoing, Defendants’ statements about the company’s business, operations, and prospects lacked a reasonable basis.