Medtronic Faces Sprint Fidelis Lead Shareholder LawsuitNov 21, 2007 | Parker Waichman LLP
Medtronic Inc.’s Sprint Fidelis Defibrillator Lead recall has resulted in a shareholder lawsuit against the company. The plaintiff filing the lawsuit accuses Medtronic of withholding information regarding defects in the Sprint Fidelis Defibrillator lead.
Medtronic suspended sales of the Sprint Fidelis Leads after receiving reports of 5 fatalities linked to lead fractures. A lead is a wire that connects an implantable defibrillator to the heart. When it breaks, the defibrillator can emit a massive and painful shock. And in the worse case scenario, the fractured lead can prevent a defibrillator from sending a necessary, lifesaving shock to the heart. Replacing a lead is not an easy procedure, as the invasive surgery can cause the tissue of the blood vessels and heart to tear. In fact, replacing a defibrillator lead is so risky that patients with Sprint Fidelis Leads are being told to leave the defective components in place unless they fracture.
The Sprint Fidelis Defibrillator Lead recall has hurt Medtronic’s bottom line. Earlier this week, the company said that revenue in its Cardiac Rhythm Disease Management unit was down by $130 million, and it also absorbed $31 million in costs to write off the Sprint Fidelis leads recalled during the quarter. Last month, Medtronic had predicted a $150 million to $250 million loss of second-quarter revenue and inventory write-off costs of $15 million to $20 million.
The plaintiff, whose lawsuit was filed in the US District Court in Minneapolis, is seeking class action status for the lawsuit for those who bought Medtronic stock between June 25 and October 15, 2007. During that period, the suit alleges that Medtronic made false and misleading statements about the leads, claiming in a securities filing that the product enjoyed "strong market acceptance." But just prior to that period, the Minneapolis Heart Institute conducted a data analysis of Sprint Fidelis Lead fracture reports from hospital databases around the country. The researchers found that the thinner Sprint Fidelis lead had a higher chance of fracturing than an earlier Medtronic defibrillator lead. That study was published in the March issue of the medical journal “Heart Rhythms”. As a result of those findings, the Minneapolis Heart Institute quit using the Sprint Fidelis lead, and the study authors informed the Food and Drug Administration that the defective Sprint Fidelis Lead was “significantly less reliable” than its predecessor.
The Medtronic Sprint Fidelis Lead shareholder lawsuit is seeking unspecified damages from the company, and from Medtronic Chairman Arthur Collins Jr., CEO William Hawkins III and CFO Gary Ellis.