Merit Medical Systems, Inc.

Case Details

Class Period: February 26, 2019 - October 30, 2019
Date Filed: December 03, 2019
Case Number: 8:19cv02326
Jurisdiction: Central District of California

Case Summary

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against Merit Medical Systems, Inc. (“Merit,” or the “Company”), and certain of its senior executives. The Complaint alleges that Defendants made false and misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired Merit common stock during the Class Period.

Merit is a medical device company whose entire business model was predicated on a “growth-by-acquisitions” strategy. In late-2018, Merit set its sights on two acquisitions that Defendants told investors would significantly bolster the Company’s upward trajectory: (i) Cianna, a manufacturer of devices for the treatment of breast cancer that was by far the largest acquisition in the Company’s history; and (ii) ClariVein, a device for varicose vein treatment that was Vascular Insights’ crown jewel.

Throughout the Class Period, Defendants repeatedly assured investors that Merit was timely and successfully integrating Cianna and Vascular Insights. However, unknown to investors, the Cianna and Vascular Insights integrations were a disaster. Furthermore, while Defendants had touted sales generated by the acquisition of ClariVein, they concealed from investors that Merit had not had a single order for ClariVein during the entire first half of 2019.

The truth began to be revealed on July 25, 2019, when Defendants shocked investors by disclosing the truth about the lack of ClariVein orders. Investors were further blindsided by Defendants’ announcement that instead of retaining the entirety of Cianna’s sales force—as Defendants had expressly represented during the Class Period—there had been “attrition” among Cianna’s sales representatives and, as a result, post-integration sales for Cianna were well below expectations. On this news, Merit’s stock price fell 25%. Then, on October 30, Merit disclosed that sales for ClariVein and Cianna had lagged so far behind that Merit was forced to slash year-end revenue guidance and withdraw entirely its guidance for 2020. Defendant Lampropoulos also admitted that Merit was “nine or ten months behind” in integrating ClariVein, which it had acquired ten months earlier. In response, the Company’s stock price plummeted 29%.

On February 24, 2020, the Court appointed City of Atlanta Police Pension Fund, City of Atlanta Firefighters’ Pension Fund, and Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge as Lead Plaintiffs and Saxena White P.A. as Co-Lead Counsel.

On May 11, 2020, the Court denied Defendants’ Motion to Transfer Venue to the District Court of Utah, finding “that (A) this Action could have been brought in the District of Utah, (B) the convenience and justice factors do not weigh in favor of transfer, and, on balance, (C) the convenience and justice factors do not outweigh any deference afforded to Plaintiffs’ choice of litigating this Action in the Central District of California.”

Lead Plaintiffs filed a Consolidated Class Action Complaint on June 30, 2020. Defendants filed their Motion to Dismiss on August 14, 2020.  Motion to Dismiss briefing is scheduled to conclude by October 19, 2020.