Securities fraud class action filed on behalf of all purchasers of Medtronic, Inc. (“Medtronic” or the “Company”) securities from November 20, 2006 through November 17, 2008 (the “Class Period”), alleging that Medtronic, and certain of its current and former officers and directors, made false and misleading statements in connection with its financial reporting and the value of its flagship INFUSE Bone Graft (“INFUSE”) product, causing Medtronic’s stock to trade at artificially inflated prices.
On May 26, 2009, the Honorable Paul A. Magnuson adopted an April 24, 2009 report and recommendation by the Honorable Arthur J. Boylan and appointed BLB&G client, the Teachers' Retirement System of Oklahoma, as Co-Lead Plaintiff and BLB&G as Co-Lead Counsel for the Class. On August 21, 2009, the Lead Plaintiffs filed a Consolidated Complaint in the action.
Lead Plaintiffs allege that during the Class Period, Medtronic, its Chief Executive Officer William A. Hawkins III (“Hawkins”), former Chief Executive Officer Arthur D. Collins, Jr. (“Collins”), and Chief Financial Officer Gary Ellis (“Ellis”) violated the federal securities laws by issuing false and misleading press releases, financial statements, filings with the Securities and Exchange Commission, and statements during investor conference calls. As alleged by Lead Plaintiffs, throughout the Class Period, Medtronic—a medical device manufacturer—made repeated false statements to the investing public concerning one of its flagship products, the INFUSE Bone Graft, representing to investors that it was a valuable and reliable source of revenues for the Company.
Specifically, Defendants’ statements and their portrayal of INFUSE, a surgically-implanted medical device containing a genetically engineered protein designed to stimulate bone growth, were materially false and misleading because Defendants concealed and failed to disclose material facts known to or recklessly ignored by them about INFUSE that were necessary to make their otherwise positive statements about the product and the Company’s financial condition accurate, truthful, and not misleading to investors. In particular, Defendants did not disclose the extraordinarily high extent to which revenues from sales of INFUSE were dependent on applications of the product not approved by the United States Food and Drug Administration, or so-called “off-label” uses; did not disclose that a significant and increasing number of patients subjected to such off-label uses of INFUSE were suffering severe medical complications; and hid the fact that the extensive off-label usage of INFUSE was the result of an unlawful campaign by Defendants to market and encourage off-label use of the product, which invited, and ultimately brought about the scrutiny of federal regulators and an abrupt decline in sales.
Defendants’ false and misleading statements concerning INFUSE and the Company’s financial condition artificially inflated the price of the Company’s publicly traded securities during the Class Period. Revelations concerning Defendants’ false and misleading statements during the Class Period caused significant losses to investors as the prices of the Company’s securities experienced severe declines as a direct result of these revelations, with the Company’s stock price closing the day after the end of the Class Period at $31.60 per share, down from a Class Period high of $57.86 per share.
The Consolidated Complaint alleges that the Defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and that Defendants Hawkins, Collins and Ellis violated Section 20(a) of the Exchange Act.
On October 5, 2009, Defendants filed a motion to dismiss the Consolidated Complaint and Judge Magnuson heard arguments concerning that motion on January 7, 2010. On February 3, 2010, Judge Magnuson substantially denied Defendants’ motion to dismiss, and sustained claims against both the Company and the individual defendants.
