A securities class action has been filed against Integra LifeSciences Holdings Corporation (IART) on behalf of all persons or entities that purchased or otherwise acquired Integra common stock between March 11, 2019 through May 22, 2023. This case has been filed in the USDC – NJ.
Headquartered in Princeton, New Jersey, Integra develops regenerative tissue technologies and neurological solutions. The Company’s Tissue Technologies business manufactures and sells collagen-based medical devices that are used for complex wound care, peripheral nerve repair, and reconstruction surgery. Several of those products are produced at the Company’s manufacturing plant located in Boston, Massachusetts (the “Boston Facility”), including SurgiMend, PriMatrix, Revize, and TissueMend. SurgiMend, one of Integra’s principal Tissue Technologies products, is an implant approved by the U.S. Food and Drug Administration (“FDA”) for use as a reinforcement for soft tissue where weakness exists, including within plastic and reconstructive surgery.
The claims against Defendants arise from the Company’s violations of federal manufacturing regulations governing medical devices, which are intended to protect patients receiving these medical devices from infections and other medical complications. In October 2018, the FDA inspected the Boston Facility and found that Integra was in violation of the good manufacturing practice requirements of the Quality System Regulation. Consequently, on November 2, 2018, the FDA issued a Notice of Inspectional Observations on Form 483 (the “2018 Form 483”) to put Integra on notice of those violations. Most significantly, the FDA found that Integra failed to adequately test for bacterial endotoxins in the medical devices manufactured at the Boston Facility. On March 7, 2019, Integra received a warning letter (the “2019 Warning Letter”) from the FDA that detailed the Company’s continued failure to remediate the violations that the FDA identified in the 2018 Form 483.
Since 2018, Integra has received multiple warnings from the FDA that its Boston Facility is not in conformity with the good manufacturing practice requirements of the Quality System Regulation. However, throughout the Class Period, Defendants assured investors that they had “undertaken significant efforts” and were working closely with the FDA to remediate the violations in the Boston Facility identified by the FDA in the 2018 Form 483 and 2019 Warning Letter. One Defendant went so far as to say that “[t]here are no patient safety issues” in the Boston Facility.
In the third quarter of 2021, the Company submitted an application to the FDA for premarket approval (“PMA”) for SurgiMend to be used in implant-based breast reconstruction. This was the first PMA application for an implant-based breast reconstruction surgical matrix and represented a major opportunity for the Company to grow SurgiMend’s addressable market. As part of the approval process for SurgiMend’s PMA application, Integra and the SurgiMend product would be required to undergo rigorous testing and review by the FDA to assess the product’s safety, efficacy, and quality. Throughout the Class Period, Defendants repeatedly touted that Integra was on track to grow SurgiMend’s addressable market by obtaining FDA approval for use as implant-based breast reconstruction surgical matrix.
The truth began to emerge on April 26, 2023, when the Company revealed that it had paused production at the Boston Facility. The Company also disclosed declining operating margins for the quarter and flat revenue growth projections, which the Company attributed to the manufacturing stoppage. As a result of these disclosures, the price of Integra common stock declined by $4.64 per share, or 8%. Later that same day, Integra further disclosed that the FDA had commenced another inspection at the Boston Facility and that the Company expected to receive another Notice of Inspectional Observations on Form 483 documenting good manufacturing practices failures as a result of that inspection. However, Defendants continued to reassure investors by downplaying the pause at the Boston Facility and reiterating their confidence in obtaining PMA for SurgiMend to be used in implant-based breast reconstruction.
Then, on May 23, 2023, the Company announced that it was recalling all products made at the Boston Facility between March 1, 2018 and May 22, 2023. Integra explained that it had determined that the Boston Facility deviated from good manufacturing practices in testing for bacterial endotoxin and allowed the release of products with higher levels of endotoxins. Accordingly, the Company implemented a “voluntary recall” and extended the pause on production in the Boston Facility. The recalled products included SurgiMend, PriMatrix, Revize, and TissueMend. As a result of the recall and manufacturing shutdown, the Company revised its guidance for the second quarter of 2023, lowering its revenue expectations by 6% and adjusted earnings per diluted share by 26%. The Company further disclosed that it expected to take a $22 million impairment charge in the second quarter due to the inventory write-off. These disclosures caused the price of Integra stock to decline by an additional $10.24 per share, or 20%.