Shares in Guidant Corp. Resumed Their Descent
REUTERS / Forbes.com
June 13, 2003
CHICAGO (Reuters) - Shares in Guidant Corp. resumed their descent Friday as investors weighed the company's exposure to civil litigation after it admitted misleading regulators about 12 deaths linked to its medical device used to treat abdominal aortic aneurysms.
Attorney Kenneth Moll, of Kenneth Moll and Associates in Chicago, said his law firm was investigating two deaths that may have been related to the device and that he expected to file a class action suit by June 20.
'There are about 18,000 patients (globally) who have received the device and there's a failure rate of about one-third. ... The potential legal exposure is $30 billion,' Moll said.
A Guidant spokesman Steve Tragash declined to comment on the impending lawsuit but the company said it would hold a conference call on Monday to discuss 'recent developments.'
Thomas Gunderson, an analyst with U.S. Bancorp Piper Jaffray, said he thought $30 billion seemed excessive.
'But what's new? You always ask for a lot in lawsuits. There's no downside to a law firm doing that.'
Guidant shares fell as much as 8.6 percent to a two-month low before recovering losses and finishing down 61 cents, or 1.5 percent, at $39.95 on the New York Stock Exchange. Options traders noted heavy put buying, which could be a bearish sign or just stock holders hedging their stock.
The drop came on top of a 6 percent decline on Thursday following news the company settled 10 felony charges leveled by the U.S. Attorney in San Francisco. Guidant agreed to plead guilty and pay $92.4 million for misleading U.S. Food and Drug Administration regulators about 12 deaths and an unspecified number of serious injuries linked to its device called the Ancure Endograft System, used to prevent the heart's main artery, the aorta, from rupturing.
The settlement followed a lengthy government investigation into the 2001 marketing and recall of the device. The company had already set aside $92 million to settle the matter.
'While Guidant believes these reserves are adequate, patient civil suits and a final settlement with the Inspector General of U.S. Department of Health and Human Services remain ongoing risks for further financial charges,' said analyst Thomas Gunderson of U.S. Bancorp Piper Jaffray.
Guidant's Tragash said the company has outstanding 12 product liability suits related to the device.
Prosecutors said an investigation was continuing and could lead to criminal charges.