Staar Surgical (NSDQ:STAA) and its management are facing a purported class action lawsuit alleging that they concealed problems at a California plant that led to an FDA warning letter.
Plaintiff Edward Todd alleges that Staar, president & CEO Barry Caldwell, ex-CFO Deborah Andrews and current CFO Stephen Brown “made false and/or misleading statements and/or failed to disclose” the problems at the plant in Monrovia, Calif., according to court documents.
The May 21 warning letter, which was not released by the FDA until June 26, stemmed from inspections earlier this year at the Monrovia plant where Staar manufactures its intraocular lenses. Inspectors cited missing design files for the several models of the Visian implantable lenses, insufficient record-keeping of design changes and transfers, lack of risk analysis documentation and inadequate customer complaint management, among others. More than anything else, investigators appeared to cite a lack of documentation and Staar’s failure to turn over necessary files.
STAA shares slid 11.3% to $14.91 apiece on the news. Although analysts at William Blair called the matter one of “innocent disorganization,” saying that the FDA warning shouldn’t affect the company’s operations going forward, Todd alleges that Staar and its management deliberately concealed the problems.
The defendants “made false and/or misleading statements and/or failed to disclose that the company’s Monrovia facility: (i) lacked adequate methodologies and facilities for the manufacture, packing, storage and installation of the company’s implantable lenses; (ii) lacked adequate procedures for documenting complaints, sterility testing, and maintaining required records; and (iii) as a result of the foregoing, the Monrovia facility was not in conformity with current good manufacturing practice requirements at all relevant times,” according to the lawsuit.
The lawsuit seeks class action status, compensatory damages and interest and legal costs, according to court documents.
STAA shares were trading at $12.62 apiece as of about 10:30 a.m. today, up 2.4%.