A proposed class action looks to represent Penumbra, Inc. shareholders who were allegedly injured financially by multiple stock price drops that followed reports of safety concerns and the recall of the company’s flagship Jet 7 Xtra Flex aspiration catheter.
The 30-page lawsuit says Penumbra failed to disclose to stockholders that the Jet 7 Xtra Flex had design defects that made it unsafe for normal use; that the company had failed to address the risk of the product causing serious injury and deaths, which had already occurred; and that the catheter was likely to be recalled.
The case claims Penumbra instead constantly assured investors of the Jet 7 Xtra Flex’s safety, which artificially inflated the company’s stock, not to mention bolstered the defendant’s image, and caused investors to lose money when share prices fell.
“These material misstatements and omissions had the cause and effect of creating in the market an unrealistically positive assessment of the Company and its financial well-being and prospects, thus causing the Company’s common stock to be overvalued and artificially inflated at all relevant times,” the complaint states.
Penumbra, a global healthcare company that sells medical devices designed for patients suffering from stroke and other vascular and neurovascular diseases, introduced the Jet 7 Xtra Flex in July 2019, after which the catheter quickly became one of the company’s flagship products, the case says. According to the complaint, the aspiration catheter was designed to be inserted into a patient’s artery, navigate to a blood clot, and “suck the clot out of the patient’s body.”
By mid-2020, however, concerns over the product’s safety began to emerge, the suit says. In July 2020, Penumbra’s distributor in Japan notified hospitals of an incident in which “part of the catheter inflated into a balloon and damaged a patient’s blood vessel,” after which sales of the Jet 7 Xtra Flex were suspended in the country, the lawsuit relays.
It wasn’t until a month later that Penumbra notified practitioners in the U.S. of adverse events in which the tip of the catheter broke or expanded, causing injury and deaths, the lawsuit goes on. Despite urging doctors to “exercise caution” when using the product and warning against the practice of injecting contrast dye through the catheter, Penumbra repeatedly assured investors that the Jet 7 Xtra Flex was “absolutely safe” and “not a product that has any possibility of needing to be recalled,” according to the suit.
In September 2020, independent non-profit news outlet Foundation for Financial Justice published an article “raising serious questions” about the Jet 7’s safety, citing 12 deaths that occurred after surgeons injected contrast dye into the catheter, the complaint relays. The article reportedly claimed Penumbra’s warnings against using contrast dye or non-Penumbra products with the Jet 7 Xtra Flex “did little” to address the issues. Following the article’s release, Penumbra’s stock price dropped nearly three percent, the suit says.
The stock price dropped again after the circulation of two more articles in November 2020, according to the case. Securities research firm Quintessential Capital Management (QCM) accused Penumbra of “seemingly blatant disregard for patients’ lives” in an article titled “Penumbra and Its Killer Catheter,” while an article published in the Journal of NeuroInterventional Surgery described three cases of patients who suffered because of malfunctions of the Jet 7 Xtra Flex, the suit says. As the Journal of NeuroInterventional Surgery report became more widely circulated, particularly after reputed short sellers shared the story on Twitter, Penumbra’s stock price sank another 12 percent, according to the complaint.
Another QCM report published in December 2020 questioned the validity and independence of the scientific research supporting the safety of the Jet 7 Xtra Flex and accused the company of using a “fake author” to publish studies supporting its products’ safety, the lawsuit says. In response, Penumbra’s stock price reportedly fell again by nine percent.
Finally, Penumbra issued a December 15, 2020 press release announcing an “urgent” recall of the Jet 7 Xtra Flex due to concerns that the product “may become susceptible to distal tip damage during use,” leading to a risk of injury or death, the case relays. Penumbra’s stock price dropped another seven percent in response, the suit says.
The lawsuit claims proposed class members—anyone who purchased or otherwise acquired Penumbra common stock between August 3, 2020 and December 15, 2020—have suffered “significant damages” as a result of Penumbra’s allegedly false and misleading statements concerning the Jet 7 Xtra Flex’s safety.
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