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Endologix Hid Nellix Device’s Migration in the Body, Says Securities Class Action

Model of Nellie Device in the Body

Endologix, Inc. makes medical devices to treat aortic aneurysms, which can become fatal if not treated properly. When the class period began for this action began, Endologix’s Nellix device had been in use in Europe for three years, and the company claimed the results there were good. But the complaint claims that Nellix had a serious problem, and the company could not find a solution—or even a cause.

The class for this action is all persons and entities who acquired the publicly-traded securities of Endologix between May 5, 2016 and May 18, 2017.

Endologix’s Nellix device worked by sealing the aneurism sac, thus avoiding the risks of blood leaking in. Before Nellix could be sold in the US, however, it would need Food and Drug Administration (FDA) approval. The FDA required that the company submit the data from clinical trials, which had fewer than 500 patients, plus the data from the use of Nellix in Europe. By November 2016, that included data from 6,500 European patients.

According to the complaint, the company “flooded investors with rosy results from their clinical findings” and said it expected to receive approval from the FDA in late 2016 or early 2017. When asked how Nellix was doing in Europe, the complaint says, the CFO answered that it was delivering “a fantastic performance.” 

However, a confidential witness who worked on the device claims that Nellix had an unsolvable problem: It moved out of place and migrated within the body, a situation which could end in catastrophe. The problem was particularly severe after about two years of implantation.

As early as November 2015, the complaint says, senior scientists had asked the company to issue field safety notices (FSNs) and to narrow the device’s indications for use (IFU) to exclude patients with thrombosis. The company had not done so. In March 2016, the complaint claims, the company’s closest surgical advisor told the company the situation was “urgent”—but on a conference call two months later, company officials spoke of “good feedback” on the device from doctors in Europe.

On November 16, 2016, the company finally admitted that the FDA required another two years of patient follow-up data because of the problems of migration. At the news, the company’s stock price fell by over 20%. The complaint claims that at the time the Nellix application was submitted to the FDA, the company must have known that the organization would require longer follow-ups, but it continued to withhold information on the device’s problems from investors, thus violating the Securities Exchange Act of 1934.

On May 17, 2017, the company announced that it was no longer seeking FDA approval for the original device, but was now working on a study of a second-generation device, which would delay FDA approval until 2020.  At this news, the company’s stock lost over 36% of its value.

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