Shareholders sued Danvers, Mass.-based Abiomed in November 2012, accusing the medical device company of inflating its share price with falsely rosy predictions for its flagship Impella 2.5 heart pump.
The lawsuit accused Abiomed, CEO Michael Minogue and CFO Robert Bowen of misleading investors about problems with the FDA over its marketing of the Impella 2.5 device, according to court documents.
The FDA sent a warning letter to Abiomed in January 2010, according to the documents, "informing Abiomed that its promotional and marketing materials were making claims about the Impella 2.5 that were inappropriate and not supported for its intended use.”
“No disclosure of this letter was made to Abiomed’s shareholders at the time," according to the lawsuit.
The federal watchdog agency followed up with another warning in June 2011, saying a review of Abiomed’s advertising, product labels and website "indicate that Abiomed is making claims that we stated were inappropriate in a January 28, 2010, letter to your firm" about its Impella Recover LP 2.5 cardiac assist device.
"These claims represent a major modification to both the intended use and the indications for use of the device," according to the letter.
Abiomed spokeswoman Aimee Maillet at the time told MassDevice.com that the FDA’s letter addressed promotional materials the company used in 2010 and has since dropped.
But Abiomed revealed in November 2012 that the U.S. Justice Dept. opened a probe into its Impella 2.5 marketing, sending shares down more than 30% in a single day.
"As a direct and proximate result of defendants’ false and misleading statements and omissions of material facts, the company’s stock value has dropped dramatically and plaintiffs and other class members have suffered significant damages," according to the lawsuit.
But Judge Dennis Saylor IV ruled that the defendants failed to prove that Abiomed or its executives intended to deceive investors, although the judge did find the charges of off-label marketing "plausible," according to court documents.
"While the complaint is relatively low on specifics and relies heavily on inferences, that is a sufficient basis on which to draw the inference that the practice had a material effect on the stock price," Saylor wrote. "Plaintiffs here have not alleged the existence of a high-level corporate whistleblower, or any other direct evidence of statements of knowledge or intent. Although the complaint identifies 7 confidential witnesses, none allege that they were present at any meetings at which critical statements or admissions were made by senior management. Nor have plaintiffs alleged the existence of internal records showing the requisite knowledge or intent by any insider. Instead, plaintiffs assert an entirely circumstantial case, essentially alleging that senior management must have known about the off-label marketing, the effect of the practice on revenues, and therefore the effect of it on the stock price."