Cardinal Health, Inc.

On August 2, 2017, Cardinal Health announced low earning for its fourth quarter and fiscal year 2017, along with lowering its earnings guidance for fiscal year 2018 due to “higher-than-planned write-offs for excess inventory” at Cordis Corp. (“Cordis”), which the Company had purchased in March 2015 from Johnson & Johnson (“J&J”).

On this news, Cardinal Health’s share price fell $6.34 per share, or over 8%, to close at $70.99 on August 2, 2017, thereby injuring investors.

Then, on May 3, 2018, the Company reported negative results for third quarter 2018 due to the “disappointing performance from [its] Cordis business.” Cardinal Health disclosed additional write-offs for millions of dollars of unsellable and expired heart stents and catheters stationed overseas.

On this news, Cardinal Health’s share price fell $13.85 per share, or over 21%, to close at $50.80 on May 3, 2018, thereby injuring investors.

The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that the radio frequency identification inventory tracking technology and advanced supply chain solutions that Defendants told investors the Company would to use to improve Cordis’s performance were never implemented across Cordis; (2) that Cordis’s existing global supply chain and inventory control systems were antiquated and ineffective, which were causing operational and inventory problems at Cordis; (3) that Cordis’s inventory and supply chain platforms were so deficient that the Company lacked visiblity into customer demand and existing inventory levels, particularly with respect to products consigned to third-party vendors overseas; (4) that, as a result, Cordis manufactured and accumulated excessive amounts of cardiovascular product inventories, which sat on the shelf and became unsellable and/or expired; (5) that the Company failed to establish reserves, write off expired products, and subtract that inventory from the Company’s assets on its balance sheets; (6) that, as a result, the Company materially overstated Cordis’s inventory balances; (7) that, contrary to Defendants’ representations, Cordis was not “performing well” and its integration was not “on track,” “going incredibly well” or “largely on plan"; (8) that the Company struggled separating the Cordis business from J&J due to operational, manufacturing, and personnel deficiencies; and (9) that, to correct Cordis’s deficiencies, the Company would have to make substantial investments in Cordis’s IT and supporting infrastructure, thereby incurring significant Selling, General and Administrative Expenses charges beyond the levels internally budgeted or projected by Cardinal and diminishing operating earnings.