The St. Paul Teachers’ Retirement Fund Assn. brought a lawsuit in the U.S. District Court for Southern New York, alleging that the company misled investors about the problems at a plant in Miami Lakes, Fla., according to court documents.
The FDA revealed the warning letter June 2, 2014, flagging HeartWare for violations in design and software validation, complaint management and documentation for its HVAD left ventricular assist device. The federal safety watchdog also cited the potential mismanagement of at least 27 complaints about HeartWare’s products, including 2 reported deaths and 4 serious injuries. By April 2015 the company had issued a field notice on the HVAD, over issues with worn alignment guides and connection pins that could lead to the pump stopping, which the FDA labeled as a Class I recall.
The FDA labeled it a Class I recall, the most serious type of recall issued by the federal watch dog, indicating that “there is a reasonable probability that use of these products will cause serious adverse health consequences or death.”
Last year the problems extended to HeartWare’s next-gen MVAD device, prompting the Framingham, Mass.-based company to halt a clinical trial of the device. Earlier this year HeartWare said it’s unclear when the trial will be able to resume.
HTWR shares closed at $26.50 apiece Jan. 12, 72% off their peak during the purported class period, according to the lawsuit. The stock closed at $34.48 each yesterday, down -0.1%.
The lawsuit, which seeks class-action status for all HTWR shareholders who bought the stock between June 10, 2014, and Jan. 11, alleged that HeartWare and its management “falsely and repeatedly represented to investors both that HeartWare was adequately addressing its regulatory failures and that those failures posed no risk to timely MVAD approval” beginning with a June 10, 2014, conference call with investors.
“Contrary to defendants’ public statements, and as revealed through a series of events that informed the public of the truth, HeartWare failed to adequately address the serious manufacturing-related issues that the FDA identified and that threatened the company’s ability to bring MVAD to market. Moreover, the very same HVAD-related problems that the FDA identified caused an indefinite delay in commencing clinical trials of MVAD,” the lawsuit alleged.