Dive Brief:
- Investors have accused Medtronic of failing to disclose problems with its insulin pump business that led to the delay of a product previously tipped to drive growth.
- The securities fraud class action lawsuit focuses on the MiniMed 780G insulin pump. According to the plaintiffs, Medtronic “repeatedly assured investors” that the pump was on track to win approval and would enable it to close the gap on its competitors.
- Medtronic made the claims despite known issues with the MiniMed 600 series models, the lawsuit states, that ultimately led to a warning letter from the Food and Drug Administration, which has slowed review of the company’s diabetes products, and the removal of 780G revenues from the forecast for fiscal 2023.
Dive Insight:
The lawsuit involves investors who bought Medtronic stock between June 8, 2019, and May 25, 2022. The period runs from when Medtronic disclosed the start of a pivotal trial of MiniMed 780G to when it said it expected diabetes sales to fall 6% to 7% in fiscal 2023. Medtronic’s forecast for 2023 assumed no sales of 780G in the U.S., a step it took in the wake of the FDA’s warning letter.
According to the plaintiffs, Medtronic touted the prospects of 780G across the period, for example by saying it was “very close to its launch phase” and “the regulatory timelines are all on track,” early in 2020 despite problems with the broader insulin pump business.
Initially, the problems centered on older devices such as certain MiniMed 630G and 670G pumps, which were the subject of a Class I recall notice early in 2020. However, the situation escalated late last year, when Medtronic disclosed a warning letter related to an insulin pump facility and “uncertainty on the timing of U.S. diabetes product approvals.”
Based, in part, on the warning letter, the plaintiffs claim that Medtronic failed to disclose that its product quality control systems were inadequate and that it was noncompliant with regulations regarding risk assessment, corrective and preventive action, complaint handling, device recalls and adverse event reporting. The plaintiffs argue Medtronic was aware of the problems while touting 780G.
Medtronic’s share price fell around 6% in response to the warning letter and by a similar amount when it released its guidance for fiscal 2023. The plaintiffs argue investors suffered losses when information that was allegedly concealed from the market became public.
Shares in Medtronic opened just above $90 on the New York Stock Exchange Tuesday, down from about $130 a year ago.
