Intuitive Surgical (NSDQ:ISRG) is under fire from shareholders for allegedly under-reporting adverse events associated with its da Vinci surgical robot and concealing at least 3 recalls from the FDA.
Led by the City of Birmingham Relief & Retirement System, the shareholder derivative lawsuit filed in the U.S. District Court for Northern California accuses Sunnyvale, Calif.-based Intuitive and its board and management of "failing to make a good-faith effort to ensure that Intuitive complied with applicable laws and FDA regulations governing the safety of medical devices designed to protect the health of the American public," according to court documents.
"Defendants caused the company to (i) grossly underreport adverse events and complications caused by da Vinci; (ii) mischaracterize the events that it did report by improperly classifying many events as in the benign category of ‘other,’ rather than as a ‘serious injury’ or even ‘death’; (iii) concealing from the FDA at least 3 voluntary recalls the company instigated to warn hospitals about the tendency of a part of the da Vinci device, known as the ‘tip cover,’ to malfunction, resulting in burning of the patient’s internal tissue," the lawsuit alleges.
The lawsuit also accuses CEO Gary Guthart, CFO Marshall Mohr and chairman and former CEO Lonnie Smith of some $113 million in insider trading in ISRG stock.
"These 3 insider trading defendants were permitted to sell massive percentages of their holdings in Intuitive during a period where the stock was trading at an artificially inflated value because the insider trading defendants knew, based on their proprietary information, that investors would soon learn of the company’s quality and safety issues with da Vinci and regulatory issues with the FDA arising from the suppression of the quality and safety issues," according to the lawsuit.
Intuitive is also facing lawsuits from at least 2 insurers alleging that the company hid legal claims. The Illinois Union Insurance Co. filed the 1st lawsuit in November 2013 in the U.S. District Court for Northern California, accusing Intuitive of revealing only 25 legal claims filed over the da Vinci device. Intuitive had also agreed to extend the deadline for other lawsuits filed over the da Vinci device beginning in November 2012, but never told the insurance company about the deals, called "tolling agreements," the lawsuit claims. Navigators Specialty Insurance Co. later made similar allegations, looking to rescind its policy covering claims against the da Vinci device covering Intuitive once the Illinois Union coverage is exhausted, court records show.
