St. Jude Medical Closes Class Action Suit With $39M Settlement
Three-and-a-half years of litigation between St. Jude Medical and its investors ended on Thursday with the med-tech company agreeing to a $39.25 million settlement.
The class action suit from December 2012 claimed the Little Canada-based company’s executives misled investors about the problems revolving around its Durata and Riata defibrillator wires.
In the years leading up to 2010, surgeons who had used Riata during heart surgery found that patients were suffering from serious injuries when they attempted to extract the leads. With an estimated 22 deaths tied to the product, the U.S. Food and Drug Administration placed Riata under a Class 1 status recall, the most severe recall category reserved solely for “a violative product [that] will cause serious adverse health consequences or death.”
As a result, St. Jude’s share price plummeted.
With Riata pulled off the market in 2011, St. Jude began to prep a reintroduction of its defibrillator leads product, which is used to connect an implantable cardioverter defibrillator, or ICD, to the heart. That next-generation product was re-dubbed as Durata and introduced in 2012.
To show medical professionals the differences between Durata and its recalled predecessor, St. Jude touted a 10-year ICD study that stated Durata’s mortality rates were significantly improved from Riata. According to reports, St. Jude even held a special presentation with cardiologist from Ohio that was entitled “Should we trust Durata?”
Shortly after all this, in late 2012, an FDA inspection of St. Jude’s manufacturing plant in Sylmar, California uncovered 11 problems relating to the standard manufacturing processes of the Durata leads. News of the report sunk St. Jude stock by 11 percent that day.
The investors who sued St. Jude said in the initial complaint from that year that the company “misled investors by consistently presenting Durata as a well-researched, well-designed improvement to the Riata Lead design, statements that led investors to push St. Jude’s share prices higher.”
The securities class action suit in regards to this issue is what was settled Thursday. Those who were St. Jude shareholders from February 5, 2010 and November 20, 2012 will see the cash agreement split amongst them.
Throughout the legal process, St. Jude repeatedly claimed it found “the lawsuit [to be] without merit” and that it would “vigorously defend” itself against the allegations.