Medtronic ($MDT) is facing additional fallout over Infuse bone-growth protein, which has been tied to an increased risk of male infertility. More shareholders are suing the device giant and its directors of falsely inflating its stock through off-label promotion of the product.
Plaintiffs in the suit include Minneapolis Firefighters' Relief Association, which is accusing Medtronic--along with ex-CEOs Bill Hawkins and Arthur Collins Jr. and CFO Gary Ellis--of making "materially false and misleading statements and omissions concerning the sale, promotion and marketing" of Infuse, MassDevice is reporting. These actions put the company at risk of regulatory actions and declining sales.
According to the suit, the board authorized the buyback of more than $2.8 billion of its shares at a weighted average price of $50.39. "Tellingly, this weighted average price is substantially higher than Medtronic's share price of $31.60 on November 18, 2008, when its true business health was revealed," MassDevice says, citing court documents.
Shareholders aren't the only ones demanding answers over Infuse. Last year, Sens. Chuck Grassley (R-IA) and Max Baucus (D-MT) sent a letter to CEO Omar Ishrak seeking more information about the financial relationships between Medtronic and doctors conducting clinical trials on the safety of the product.
All of this scrutiny hasn't helped boost Medtronic's spine business, which has been experiencing financial difficulties. And these difficulties have prompted rumors of a potential sale. Ishrak did little to stave off these rumors in last month's earnings call. "I was not happy with our overall performance," he said at the time. "While we continue to believe in the potential of this market, we urgently need to see meaningful signs of improvement from our current initiatives. If we do not, we will need to reassess our strategy and approach for this business."
This isn't the first time the company has faced legal action over Infuse. For example, last summer, a patient sued Medtronic, saying the use of Infuse on her back caused her serious injuries.
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