Villare v. Abiomed, Inc., 19 Civ. 7319 (ER)

KEVIN VILLARE, individually and on behalf of all others similarly situated,, Plaintiff, v. ABIOMED, INC., MICHAEL R. MINOGUE, and TODD A. TRAPP, Defendants.

No. 19 Civ. 7319 (ER)

United States District Court, S.D. New York

September 21, 2021

OPINION & ORDER

Edgardo Ramos, U.S.D.J.

Lead Plaintiff Local 705 International Brotherhood of Teamsters Pension Fund (“Local 705”) brings this federal securities class action against Abiomed, Inc. (“Abiomed”), Michael R. Minogue, and Todd A Trapp. In its Amended Complaint, Local 705 seeks to pursue remedies under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, promulgated thereunder. Doc. 52. Local 705 brings its claims on behalf of purchasers of publicly traded securities of Abiomed between May 3, 2018 to July 31, 2019 (the “Class Period”).

Pending before the Court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc 56. For the following reasons, Defendants' motion is GRANTED.

I. BACKGROUND

A. Factual Background

The following facts are taken from the Amended Complaint or SEC filings referenced in the pleading, and are assumed to be true for purposes of the instant motion. See Hesse v. Godiva Chocolatier, Inc., 463 F.Supp.3d 453, 462 (S.D.N.Y. 2020).

1. The Parties

Founded in 1981, Abiomed develops, manufactures, and markets devices that are designed to improve blood flow to the coronary arteries and to temporarily assist the pumping function of the heart. Doc. 52 ¶ 37. Minogue served as Abiomed's chairman, president, and CEO at all relevant times. Id. ¶ 33. Trapp served as Abiomed's vice president and chief financial officer at all relevant times. Id. ¶ 35. Minogue and Trapp signed Abiomed's annual reports and Sarbanes-Oxley Act certifications and participated in each of the company's quarterly-earnings conference calls. Id. ¶ 34-35. Local 705 and the other plaintiffs purchased or otherwise acquired Abiomed securities during the Class Period. Id. ¶ 31.

2. Abiomed's Impella Products and Its Competition

The strategic focus and driver of Abiomed's revenue growth is its family of the Impella Platform, which includes the Impella 2.5, Impella 5.0, Impella LD, Impella CP, and Impella RP. Id. ¶¶ 38-39. The Impella products (the “Impella Pumps”) are percutaneous heart pumps-that is, they are installed by puncturing the skin with a needle rather than by surgical means-with some pumps used by interventional cardiologists in the cath lab, some used by cardiac surgeons, and some used by both. See Id. ¶¶ 42-45. The Food and Drug Administration ("FDA") categorizes these devices as Class III devices, meaning that they require premarket approval for sale to the public, based on a determination by the FDA that a given device is safe and effective for its intended use. Id. ¶ 41. During the Class Period, sales of Impella Pumps accounted for 96% of Abiomed's total revenue, and Minogue and Trap stressed the importance of these products. Id. ¶¶ 38, 207-10.

Although many of the Impella Pumps had been on the market since 2012, Abiomed began to show substantial year-on-year revenue growth after the FDA granted the Impella RP a humanitarian exemption in the third quarter of Fiscal Year 2015.^[1] Id. ¶ 39. The Impella RP, unlike the other Impella Pumps, is designed to compensate for right heart failure, and was touted as the "first percutaneous single access heart pump designed for right heart support to receive FDA approval.” Id. ¶ 45. As Local 705 notes, Abiomed reported year-on-year revenue growth of 34% for the third quarter of 2015 and went on to report year-on-year revenue growth of more than 25% for the next fifteen quarters. Id. ¶¶ 40, 54.

Intra-Aortic Balloon Pump (“IABP”) therapy represented the biggest competition for the Impella Pumps. Id. ¶ 46 & n.14. IABP is a therapeutic device that helps the heart pump more blood. Id. ¶ 46. It consists of a long balloon attached to the end of a catheter, is inserted through the skin and into the aorta, and is attached to a computer console that inflates and deflates the balloon as the heart beats. Id. According to Local 705, IABP has been the most widely used mechanical circulatory support device for decades. Id. ¶ 47.

3. Abiomed's Five-Year Vision for Growth and Financial Revenue Outlook

On August 11, 2015, during its annual investor conference, Abiomed laid out its long range earnings plan, which included specific figures for revenue and operating margin goals. Id. ¶ 50. Minogue and other Abiomed executives informed investors that, by August 2020, Abiomed expected annual Impella Pump revenues in the range of $1.2 and $1.8 billion, while also growing the company's operating margin to more than 30%. Id. ¶¶ 50-51. Abiomed based these projections on three factors: (1) assumptions about the size of the available market for the Impella Pumps, (2) the average selling price of the pumps, and (3) the financial impact of unlocking new patient opportunities. Id. ¶ 50.

During the presentation, Minogue informed investors that the potential market for Impella Pumps included 221, 000 patients, with potential sales revenue of more than $5 billion. Id. ¶ 51. Abiomed stated that, based on the company's current growth, the company would have 21.5% market penetration by Fiscal Year 2020. Id. According to Local 705, several analyst reports responded favorably to this presentation, while acknowledging the need to dedicate meaningful resources to the expansion of Abiomed's products. See Id. ¶¶ 52-53.

4. Abiomed's Public Statements During the Class Period

On May 3, 2018, Abiomed issued a press release, attached to a Form 8-K, reporting the company's financial results for its fourth fiscal quarter and full year, ending on March 31, 2018. Id. ¶ 125. The press release reported quarterly revenue of $174 million, up 40% year over year, and yearly revenue of $594 million, up 33% year over year. Id. That same day, Abiomed hosted a conference call to discuss the content of the press release. During the call, Minogue stated:

And we're also maintaining this best growth rate at a higher base and we're doing it while improving operating margin. So again, it's sustainable growth[, ] it's strategic, but we have to continue to improve outcomes and go at the right pace to have that-the success we want, which is to achieve the best outcomes for patients.

Id. ¶ 126.^[2] Regarding Abiomed's revenue projections, Trapp stated the following:

The guidance is based on the following assumptions: continued penetration of the existing and expanded markets for Protected [Percutaneous Coronary Intervention] in cardiogenic shock; accelerated growth in Impella RP post-[pre-market] approval and approximately $10 million in revenue from Japan. The business continues to expand rapidly, and our growth rates are in line with our 5-year vision outlined back in 2015. We will continue with our patients-first sustainable growth model.

Id. ¶ 127.

Minogue also touted the increased adoption of the Impella RP line, stating:

Impella RP also delivered solid results in our second full quarter since the commercial launch with 48 new U.S. sites and growth of 93% in patients and 154% in revenue. However, Impella adoption is a function of training, data and time. And as a result, we are still in the early innings with a penetration rate of approximately 9% of 231, 000 patients in the U.S. alone.

From a [Center for Medicare and Medicaid Services] population perspective, most patients above 65 years old are not candidates for heart transplant and prioritize heart recovery above all other treatment options based on quality of life and cost. We believe our continued focus on best practice protocols are driving improved clinical outcomes and adoption.

In the [Impella] RP we're only 19% penetrated in the install base. So we have essentially, many years ahead of new doctors, new indications and new products into all the existing U.S. hospitals in our current install base.

Id. ¶ 128. Trapp also touted the expanded use of Impella Pumps-and the Impella RP specifically-stating:

“Both the [Impella] 5.0 and RP are now being adopted by more sites and have significant runway. . . . We saw broad-based growth in the U.S. and outside the U.S. due to continued adoption of the entire Impella platform. . . . We are replacing technology that's been around for 40 years, and we're going for the global standard of care.

Id. ¶ 129. Additionally, Minogue highlighted the expanded approval by the FDA of the Impella Pumps, stating: “While we remain focused on the 231, 000 U.S. high-risk patient population, we acknowledge that these additional indications expand our addressable market and enable a wider range of patients in the future.” Id. ¶ 130.

In response to these statements, analyst reports noted Abiomed's strong growth, and expressed optimism about continued growth for the company. See Id. ¶¶ 131-33.

On May 24, 2018, Abiomed filed its annual report on Form 10-K with the Securities and Exchange Commission ("SEC"), reporting the company's financial and operating results for the fourth fiscal quarter and full year 2018. Id. ¶ 134. Minogue and Trapp certified this filing, which stated: "Our strategic focus and the driver of our revenue growth is the market penetration of our family of Impella heart pumps.” Id. ¶¶ 134-35.

On July 26, 2018, Abiomed issued a press release, attached to a Form 8-K signed by Trapp, reporting the company's financial results for the first fiscal quarter of 2019- which ended on June 30, 2018-and reporting revenue of $132.5 million, up 36% year over year. Id. ¶ 137. In the release Minogue stated: “Abiomed is committed to sustainable growth and improving patient outcomes each quarter. We do this through advanced training,...