Plaintiff Plymouth County Retirement Association filed a class-action complaint against defendants Outset Medical, Inc., several executives, including Leslie Trigg, Nabeel Ahmed, and Rebecca Chambers on Friday in the Northern District of California. The complaint cites violations of the federal securities laws and alleges that the defendants withheld material information that resulted in the plaintiff and class members sustaining damages.
The plaintiff is seeking class certification for all individuals or entities who purchased the defendant’s common stock in the class period, between September 2020 and June 2022.
Defendant Outset Medical is described in the complaint as a “medical technology company focused on kidney dialysis, the primary treatment for acute and chronic kidney failure.” Specifically, the company produces a dialysis machine known as the Tablo Hemodialysis System, which purifies tap water and then artificially purifies and removes toxins from the blood of patients suffering from kidney failure. The defendant allegedly represented that Tablo was like a “dialysis clinic on wheels.”
During the aforementioned class period, the defendant stated that Tablo had been cleared by the FDA and made it clear that “the Company’s true value proposition would be recognized through the emerging use-at-home market rather than the more traditional acute or clinical setting it targeted historically.” Outset Medical was differentiated from its competitors due to its home setting component. The defendant expressed that its total addressable market opportunity was around $8.9 billion.
Since Tablo is used in a non-professional setting, the complaint explains that it is subject to heightened scrutiny (post-market surveillance studies) by the FDA. Although Tablo had been initially approved by the FDA, it would be subject to additional studies, “the results of which could require additional applications for clearance and approvals.”
Defendant Outset Medical represented to its investors during the class period that it was conducting regulatory studies. It also completed two secondary stock offerings throughout the class period, raising more than $570 million in proceeds.
During the class period, the defendant was also making significant changes to Tablo which remained undisclosed to investors. The complaint asserts that the changes made by Outset Medical “made it likely that the FDA would order the Company to cease all marketing and selling of Tablo for use in the home pending additional applications and approvals,” and also prevented the company from being able to conduct the regulatory studies it claimed it was completing.
Outset Medical’s first quarter of 2022 report resulted in its common stock declining over 40% in just three trading days. The complaint explains that analysts attributed the disappointing results to the “untested nature of Tablo in the home setting.” On June 13, 2022, the company announced that the FDA had forced it to cease shipping Tablo until it gained a proper regulatory clearance, which resulted in the common stock falling an additional 34%. Defendant Trigg, the CEO of Outset Medical, acknowledged in a review call that the ship hold had been in place for weeks earlier.
The complaint concludes that due to the defendant’s misconduct, the plaintiff and other class members have suffered significant losses and damages. The complaint cites two violations of the Exchange Act.
The plaintiff is seeking class certification, damages, pre- and post-judgment interest, litigation fees, and any other relief deemed appropriate by the court.
The plaintiff is represented by Saxena White P.A.
