St. Jude settles over heart devicesPosted On: Jul. 8, 2016 12:00 AM CST
(Reuters) — St. Jude Medical Inc. has reached a $39.25 million class action settlement with shareholders to resolve claims it downplayed the possible dangers associated with a product used to connect implantable defibrillators to patients' hearts.
The preliminary settlement, disclosed Thursday with the U.S. District Court in Minneapolis, requires a judge's approval.
It resolves claims that St. Jude inflated its stock price by concealing risks revealed in a November 2012 U.S. Food and Drug Administration report about its Durata lead, a cable linking the heart to a defibrillator.
St. Jude used a material called Optim to insulate Durata and help preserve its ability to deliver needed electric shocks.
But the FDA report raised questions about whether St. Jude had properly tested Durata, and whether the lead could face problems similar to what prompted a 2011 recall of Riata, a lead that was prone to failure because the insulation wore away.
St. Jude's share price fell more than 12% on Nov. 21, 2012, the day after the FDA report was released, wiping out roughly $1.3 billion of its market value.
The St. Paul, Minnesota-based company denied liability in agreeing to the settlement, which averted a February 2017 trial.
St. Jude had no immediate comment on Friday. In a May 4 regulatory filing, it said it had not taken a charge for a possible settlement. The company reported $880 million of profit on net sales of $5.54 billion for 2015.
Abbott Laboratories agreed in April to buy St. Jude for about $25 billion.
Forsta AP-Fonden of Sweden and Danske Invest Management A/S of Denmark led the class action on behalf of St. Jude shareholders from Feb. 5, 2010 to Nov. 20, 2012.
Their law firms, Kessler Topaz Meltzer & Check and Motley Rice, plan to request up to $9.81 million in legal fees plus up to $2.9 million for costs.
Gregory Castaldo, from Kessler Topaz, and Gregg Levin, from Motley Rice, on Friday said they were pleased to settle.
The case is Forsta AP-Fonden et al v. St. Jude Medical Inc. et al, U.S. District Court, District of Minnesota, No. 12-03070.