St. Jude Medical announced on Sept. 7 that the company had filed a lawsuit against an investment research firm, a startup cybersecurity research firm and three employees of those companies for false statements about St. Jude’s implantable cardiac devices.
On Aug. 25, Muddy Waters released a report alleging that St. Jude Medical’s pacemakers and defibrillators could be prone to hacking. Muddy Waters CEO Carson Block said the company had shorted St. Jude’s stock. He added that St. Jude could lose 46 percent of its revenue for two years or longer if its pacemakers, implantable cardioverter defibrillators and chronic resynchronization therapy devices were recalled.
St. Jude’s stock price fell more than five percent to around $77 per share in a few hours after the report’s release. By mid-afternoon Sept. 7, the stock was trading at $79.39 per share.
St. Jude filed the lawsuit against Muddy Waters and MedSec Holdings, a cybersecurity research firm that warned Muddy Waters about potential hacking issues with St. Jude’s devices. MedSec also has a short position in St. Jude and benefits when the company’s stock price falls.
Three University of Michigan (UM) researchers refuted the Muddy Waters report, according to St. Jude’s complaint, while an electrophysiologist and cardiologist from UM said patients should continuing using St. Jude’s implantable cardiac devices.
“We felt this lawsuit was the best course of action to make sure those looking to profit by trying to frighten patients and caregivers, and by circumventing appropriate and established channels for raising cybersecurity concerns, do not use this avenue to do so again,” St. Jude Medical CEO and president Michael T. Rousseau said in a news release. “We believe this lawsuit is critical to the entire medical device ecosystem—from our patients who have our life saving devices, to the physicians and caregivers who care for them, to the responsible security researchers who help improve security, to the long-term St. Jude Medical investors who incurred losses due to false accusations as part of a wrongful profit-making scheme.”
After St. Jude filed its lawsuit, a spokesman for Muddy Waters told the Wall Street Journal that “it is not unusual for a company like this to try to silence its critics, and we are always prepared to vigorously defend our right to criticize a company that puts its profits before its patients.”
The lawsuit, filed in the U.S. District Court in Minnesota, comes at a critical time for St. Jude. In April, Abbott Laboratories agreed to acquire St. Jude for approximately $25 billion. The companies expect the deal to close in the fourth quarter of this year.
“Our top priority is to reassure patients, caregivers and physicians who use our life-saving devices that we are committed to the security of our products and to ensure patients and their doctors maintain ongoing access to the proven clinical benefits of remote monitoring,” Mark Carlson, vice president and chief medical officer at St. Jude Medical, said in a news release. “We decided to take this action because of the irresponsible manner in which these groups have acted.”