Facts

Merit Medical Systems, Inc. is a medical device company that operated under a "growth-by-acquisitions" strategy. In 2018, Merit began the process of acquiring and integrating Cianna, a manufacturer of devices for the treatment of breast cancer, and ClariVein, a device for varicose vein treatment. After its acquisition of Cianna, Merit announced that it would retain the entirety of Cianna's sales force because of that team's experience and relationships with doctors and hospitals. On February 26, 2019, Merit told investors that the Cianna integration was going as well "as well as could be expected" and claimed that ClariVein was on its way to generating 2019 revenues of $10 to $11 million. Again, on April 23, 2019, Merit assured investors that the Cianna integration was complete; that it was "as good of a transaction and transition that [it] had done"; that it "may be the best" integration in the Company's history because it had maintained the Cianna's sales force. It also told investors that Merit itself had strong standalone sales numbers, including the ClariVein product line. In spite of this, more than 20 percent of Cianna's sales force, responsible for 22 percent of Cianna's overall revenues, had resigned after the acquisition. Furthermore, Merit did not have any orders for ClariVein during the entire first half of 2019. This situation came to light on July 25, 2019, during an investor conference. Following this news, Merit's share price dropped by over 25 percent, from $54,85 to $41.00 per share. Merit's CEO, however, continued to maintain that ClariVein orders were rising to meet expectations and did not disclose existing regulatory obstacles. After these revelations, Merit's CEO began to sell off his stock, eventually selling over $6 million worth of shares. At the end of the following quarter, on October 30, 2019, Merit finally disclosed that Cianna and ClariVein sales were lagging, and it adjusted its year-end revenue guidance down by $27 million. It further disclosed that integration was lagging behind schedule and was not complete. This news caused Merit's stock price to plummet 29 percent, falling from $29.11 per share on October 30 to $20.66 per share on October 31. Eventually, this class action lawsuit was filed against Merit on behalf of investors, led by the City of Atlanta Police Officers' Pension Fund, the City of Atlanta Firefighters' Pension Fund, and the Employees' Retirement System of the City of Baton Rouge and Parish of East Baton Rouge.

PLAINTIFFS' CONTENTIONS: Plaintiffs contended that Merit, its CEO, and its CFO made false and materially misleading statements to investors; that defendants made materially misleading omissions in statements to investors; that these false statements and omissions artificially inflated defendant's stock price and maintained that artificial price; that investors relied on these statements and purchased the stock at this artificially inflated price; that the revelation of the truth caused the stock to decline precipitously leading to investors suffering economic losses; and that the statutory safe harbor for forward-looking statements did not apply.

DEFENDANTS' CONTENTIONS: Defendants denied any allegations of wrongdoing. Defendants also asserted that the statements were forward-looking, and were, therefore, protected under the statutory safe harbor provision.

Result

$18.25 million settlement, of which approximately $8.5 million will be paid from insurance, to satisfy all claims against defendants.