Outset Medical, Inc.

On May 4, 2022, after the market closed, Outset disclosed disappointing results for first quarter 2022, including a net loss of $35.9 million. Analysts attributed the results to the unproven reliability of the Company’s Tablo Hemodialysis System (“Tablo”) for kidney failure patients.

On this news, Outset’s stock fell $16.88, or 42.3%, over the next three consecutive trading days, to close at $23.06 per share on May 9, 2022, thereby injuring investors.

Then, on June 13, 2022, Outset announced that it had implemented “a shipment hold on the distribution of its Tablo Hemodialysis System for home use pending” a review and clearance of a 510(k) application by the U.S. Food and Drug Administration (“FDA”). The Company withdrew its prior guidance and expected second quarter 2022 revenue of at least $25 million due to the shipment hold. Despite prior assurances that the Company was conducting its study in accordance with FDA protocols requiring “real-world data” gathered in “the home environment,” its Chief Executive Officer also revealed that  it had “run with a protocol that involves a simulated use environment at a human factors lab.”

On this news, Outset’s stock fell $6.95, or 34.1%, to close at $13.46 per share on June 14, 2022, thereby injuring investors further.

The complaint filed in this 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 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 the Tablo for home use; and (4) as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.