Judge Dismisses All Claims in Medtronic Securities Suit
A federal judge in Minnesota has thrown out remaining charges against Medtronic in a securities case involving allegedly false statements about the bone graft treatment Infuse and a second-generation product, Amplify.
Citing statute of limitations issues, U.S. District Judge John Tunheim told the institutional investor plaintiffs that he would grant Medtronic’s motion for summary judgment on their remaining claims, dismissing them with prejudice.
The West Virginia Pipe Trades Health & Welfare Fund, Employees’ Retirement System of the State of Hawaii and Union Asset Management Holding, AG, brought their lawsuit in 2013 in the U.S. District Court for the District of Minnesota, alleging that Medtronic’s false statements about Infuse and promises about Amplify artificially inflated the company’s stock prices.
Their complaint also named several company executives, but claims had been dropped against all except ex-CEO Bill Hawkins. The remaining claim against him stemmed from a third quarter 2011 earnings call, when he was asked whether the FDA was going to delay its approval of Amplify and if that would negatively affect Infuse sales.
According to the plaintiffs, Hawkins responses falsely suggested that he didn’t know the approvability status of Amplify, even though the FDA had sent a letter before Jan. 28, 2011, saying the product wouldn’t be approved. In a March 9, 2011, 10-Q filing, Medtronic disclosed that the FDA had sent it a non-approval letter for Amplify.
The plaintiffs also accused Medtronic of manipulating early clinical studies of Infuse and obfuscating adverse events associated with the product. In June 2011, the company had faced tough questions from members of the U.S. Senate following reports that doctors investigating Infuse did not report dangerous adverse events in patients who received the device. A report on the investigation found that Medtronic had ghostwritten and edited journal articles by physician consultants on Infuse. These consultants received royalties and consulting fees from the company.
Further, an analysis in The Spine Journal found 13 Medtronic-sponsored studies reported no adverse events with Infuse. The journal calculated the adverse event rate as being between 10 percent and 50 percent.
According to court documents, Medtronic submitted filings to the U.S. Securities and Exchange Commission admitting that the journal’s analysis could have an impact on future sales. The company’s stock experienced a one-day decline of about 3 percent and dropped even more the next week.
Statute of Limitations
As Tunheim notes in court documents, there is a two-year statute of limitations on securities claims cases, and the clock starts ticking when plaintiffs discover evidence constituting a violation.
He barred the claim against Hawkins, stating the plaintiffs didn’t file by March 9, 2013 — exactly two years after the SEC filing disclosed that the FDA would not approve Amplify.
Although the plaintiffs maintained that Medtronic had not raised this defense with this specific charge, Tunheim disagreed. He also ruled they had plenty of time to file against Medtronic for hiding clinical trial results, but they had missed that cut-off point as well. — Elizabeth Hollis