Hold on Tablo production hurts earnings, spurs shareholder lawsuit for Outset Medical
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A lengthy review by the FDA of 510(k)-related updates to Outset Medical’s Tablo home dialysis machine has halted shipments to dialysis providers, hurting company earnings and sparking a shareholder lawsuit.
The company said in a press release it has not identified any safety issues with the Tablo and will continue to market and ship machines to acute care and outpatient dialysis customers for in-center use. Tablo machines have not been removed from home users and “current users can continue to work with their health care providers on appropriate treatment,” the company said.
Shipments of the Tablo for home use will be on hold until completion of the FDA review, which is expected to be in the third quarter.
“While we are optimistic about shipping new Tablo home units to patients in the near term, it is too early to provide guidance for the full year absent clarity of the timing of the completed review,” Nabeel Ahmed, chief financial officer of the company, said during an earnings call with investors. “We expect to know more in Q3 and expect to be in a better position to provide guidance for the second half of 2022 on our Q2 earnings call,” Ahmed said. “Until then, we are suspending our prior, full-year and long-term guidance.”
The news sent company stock down to $13.25 on the day after Outset Medical announced the shipment hold, after reaching a high of $40.51 in early May.
Human factor studies
The FDA review involves data from human factor studies provided by Outset on the Tablo’s performance in the home environment. “The company has conducted six human factor studies over the last 5 years,” Leslie Trigg, chair and CEO of Outset, said during the conference call with investors.
The shipment hold on the Tablo was placed by the company in late May, Trigg said, and the company initially expected the FDA clearance would only take “a couple of weeks,” Trigg said, allowing the company to meet second-quarter earnings goals. “It became apparent ... that the review of our data would extend into Q3, therefore materially impacting our ability to meet Q2 revenue forecasts,” she said.
Lawsuit
Saxena White PA has filed a securities fraud class action against Outset Medical, claiming the company hid information about the FDA review from shareholders.
“The class action alleges that, during the class period, defendants misled investors and/or failed to disclose that 1) defendants had ‘continuously made improvements and updates to Tablo over time since its original clearance’ that required an additional 510(k) application; 2) as a result, the company could not conduct a human factors study on a cleared device in accordance with FDA protocols; 3) the company’s inability to conduct the human factors study subjected the company to the likelihood of the FDA imposing a ‘shipment hold’ and marketing suspension, leaving the company unable to sell Tablo for home use; and 4) as a result, defendants’ positive statements about the Company’s business, operation and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times,” the law firm said in a press release.
References:
Outset Medical announces shipment hold on new Tablo systems for home use pending FDA review and clearance of recent 510(K) submission. https://investors.outsetmedical.com/news-releases/news-release-details/outset-medical-announces-shipment-hold-new-tablo-systems-home. Published June 13, 2022. Accessed July 21, 2022.
Saxena White P.A. files new securities fraud class action against Outset Medical, Inc, https://www.globenewswire.com/news-release/2022/07/20/2483094/0/en/UPDATING-AND-REPLACING-Saxena-White-P-A-Files-New-Securities-Fraud-Class-Action-Against-Outset-Medical-Inc.html. Published July 20, 2022. Accessed July 21, 2022.
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