Investors claim St. Jude buried FDA worries over device wires
- Article by: DAVID PHELPS
- Star Tribune
- December 20, 2012 - 9:20 PM
The troubled Durata defibrillator lead manufactured by St. Jude Medical Inc. is the subject of a growing number of lawsuits by investors claiming the company downplayed concerns by the Food and Drug Administration over the manufacturing process.
At least three securities lawsuits have been filed in U.S. District Court against St. Jude, and several attorneys and law firms can be found online soliciting clients for additional class-action litigation.
The company's response is standard. "We believe the lawsuits are without merit, and we will vigorously defend against the allegations," said a statement provided by St. Jude spokeswoman Amy Jo Meyer.
Lead wires such as the Durata connect a defibrillator to the heart. The Durata replaced an earlier St. Jude lead called the Riata that also had reliability issues and was recalled in 2011 because the wires were said to break through the insulation. A recent study paid for by rival Medtronic said Durata's insulation could begin to break down after six years in the bloodstream.
The first Durata-related lawsuit was filed earlier this month by a single investor. A second lawsuit was filed on behalf of the Norfolk County [Massachusetts] Retirement System and a third investor suit was filed earlier this week.
The allegations in each are similar. They assert that in a conference call with stock analysts on Oct. 17, St. Jude downplayed an anticipated FDA report regarding manufacturing shortcomings in its California production facility where the Durata was produced.
The FDA report, released publicly on Nov. 20, raised concerns about flaws in testing and oversight in the inspection process at the plant.
On the next trading day, St. Jude's stock declined $4.34 a share, or 12 percent, to $31.37 on volume of 26 million shares compared with normal trading volume of 3.2 million shares.
St. Jude's stock has since rebounded and closed Thursday at $36.55.
"Despite knowing [in October] that most of the inspection report concerned issues pertaining to Durata, defendants chose to conceal that information from the investment community and released a version [of the report] that redacted the name of the product," said a lawsuit filed by the Minneapolis law firm of Chestnut Cambronne and the Philadelphia firm of Barrack, Rodos & Bacine.
The retirement fund's suit claims that "false and misleading statements" by St. Jude "caused the company shares to trade at artificially inflated prices to the detriment of the company's shareholders."
The potential class includes investors who acquired St. Jude shares between Oct. 17 and Nov. 20.
In addition to St. Jude Medical, the lawsuits also list various corporate executives as co-defendants, including CEO Daniel Starks.
It is not uncommon in class-action litigation for competing lawsuits to be filed. Often, a judge will consolidate the lawsuits if they are deemed substantive.
David Phelps • 612-673-7269
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