USA – The law firm of Kessler Topaz Meltzer & Check has sued Medtronic in US District in Minnesota, claiming securities fraud over how it disclosed insulin pump problems.

The initial plaintiffs in the suit are the Trustees of the Welfare and Pension Funds of Local 464A – Pension Fund, the trustees of the Local 464A United Food & Commercial Workers’ Union Welfare Service Benefit Fund, and the trustees of the New York-New Jersey Amalgamated Pension Plan for Acme Employees.

The complaint, filed September 8, is also against present and former top Medtronic executives.

Also, 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.

Meanwhile, recall problems mounted with previous models.

In a statement shared with MassDevice, Medtronic spokesperson Erica Winkels said the company has been made aware of the shareholder lawsuit but has not been served or reviewed the complaint.

Medtronic stock plummets

Diabetes business problems culminated in the company’s mid-December announcement of an FDA warning letter claiming inadequate medical device quality system requirements at Medtronic’s Northridge, California facility. Medtronic shares fell more than 6 percent in value on the news.

Within weeks, CEO Geoff Martha added that the warning letter created uncertainty over when FDA would approve the 780G and Guardian 4 sensor system.

During the company’s fourth-quarter earnings call in May, CFO Karen Parkhill added that the company was no longer assuming 780G approval in its guidance and that Diabetes business sales would decline in the new fiscal year. Medtronic shares dropped another 6 percent.

The lawsuit complaint alleges that Medtronic management made misrepresentations and concealed information, causing investors to lose money when the truth came out.

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.

Subsequently, the warning slowed the review of the company’s diabetes products and the removal of 780G revenues from the forecast for fiscal 2023.

Improving situation

During Medtronic’s first-quarter earnings call in August, the company reported that the situation was improving for the Diabetes business.

Martha said that the company has achieved 90% of the action items in FDA’s warning letter. Medtronic Diabetes continues to focus on achieving US approval of the MiniMed 780G + Guardian 4 sensor and advancing its next-generation portfolio.

Stronger growth in international markets allowed Medtronic to reduce the sales losses it expects in the diabetes space during the present fiscal year. The decline is now expected to be 3 to 6 percent.

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