Ra Medical Systems, Inc. (NYSE: RMED), a medical device company
focusing on commercializing excimer laser systems to treat vascular
and dermatological diseases, today announced that the Audit
Committee of the Board of Directors (the “Audit Committee”) has
substantially completed its internal investigation, which was
originally announced in August. The Audit Committee, assisted by
independent legal counsel, Morrison & Foerster LLP, conducted a
thorough investigation of allegations raised by an employee, as
well as additional matters discovered during the course of the
investigation.
The Audit Committee’s primary investigative findings are: (i)
the DABRA catheter frequently failed to calibrate and occasionally
overheated, posing a risk of injury to physicians and patients;
(ii) the Company’s explanations regarding the Company’s fourth
quarter 2018 and first quarter 2019 sales created a risk of
confusion because they did not explicitly reference inconsistent
DABRA catheter performance and catheter failures; (iii) the Company
failed to timely make at least two Medical Device Reports, or MDRs,
to the FDA; (iv) the Company, out of a concern for the DABRA
catheters’ performance, engaged in systematic efforts to replace
product held by customers, which constituted product recalls, but
were not documented as such, (v) the Company lacks documentation of
sufficient detail and specificity to support certain payments to
physicians, ostensibly for training and consulting services, and as
to three physicians did not accurately reflect the purpose and
nature of approximately $300,000 of payments, which could be
perceived as an improper attempt to obtain business or to gain
special advantage, (vi) while the indication for use in the 510(k)
clearance the Company obtained for the DABRA system is not for
atherectomy, the Company’s salespeople were instructed to
characterize DABRA as performing atherectomy and to encourage
doctors to seek reimbursement using atherectomy codes, (vii)
Company determinations to direct potentially valuable benefits and
opportunities to doctors were informed in part by sales prospects,
and (viii) the Company received complaints regarding regulatory or
compliance concerns that, because they implicated executive
officers, should have been brought to the attention of the Board or
the Audit Committee, but were not.
The Audit Committee, in reviewing the allegations, identified
certain behavior inconsistent with the Company’s Code of Ethics and
Conduct and related policies involving certain current and former
executive officers and employees of the Company. With respect to
current Company executives and employees, the Audit Committee
referred these matters to the Board or the Company for appropriate
action and discipline.
The Audit Committee made a number of recommendations which the
Board of Directors has adopted, including: separation of certain
employees, implementing additional and enhanced policies and
training, strengthening the Company’s quality regulatory systems,
and adopting certain enhanced controls related to the matters
investigated.
In addition, the Company has continued to take steps in an
effort to improve the performance and reliability of the Company’s
DABRA laser system, including hiring a VP, Quality, Regulatory and
Clinical, conducting extensive internal and external audits of its
quality systems, clinical trial data and manufacturing process, as
well as initiating the previously announced voluntary recall of
DABRA catheters.
Based on the results of the investigation, the Company is in the
process of evaluating the impact of the results of the
investigation on its previously issued or announced financial
statements, and its internal controls over financial reporting and
compliance procedures.
As previously disclosed, due to the Audit Committee
investigation the Company has not filed its Quarterly Report on
Form 10-Q for the quarter ended June 30, 2019 (the “Form 10- Q”)
with the SEC. The Company is working diligently to evaluate the
Audit Committee investigation findings, including the assessment of
the impact on the Company’s financial statements, if any, and its
internal controls over financial reporting. After the conclusion of
the Audit Committee investigation and the Company’s evaluation, the
Company will file its Form 10-Q as soon as practicable
thereafter.
The Company notes that its physician customers continue to use
the DABRA laser system with success, and the Company believes that
the previously announced change in shelf life will significantly
reduce the number of catheters that fail to calibrate and thereby
improve customer satisfaction with the product. The Company is
focusing its efforts on improving the manufacturing process, with
the goals of improving product consistency and extending the shelf
life.
In addition, in order to more effectively market DABRA, the
Company currently is pursuing expanded indications for use of DABRA
to include an atherectomy indication for use, which the FDA
currently defines to include a prespecified improvement in luminal
patency, or a prespecified increase in the openness of the artery
at a pre-defined time point. To satisfy the FDA’s data requirements
to support an atherectomy indication, the Company submitted an
investigational device exemption, or IDE, designed to gather the
clinical data necessary to determine substantial equivalence in
support of the atherectomy indication. This IDE was approved in
July 2019. However, as a result of the DABRA catheter recall to
change the shelf life, the Company plans to submit updates to the
IDE and enroll the first patient in the first quarter of 2020.
As also previously announced, the Company voluntarily contacted
the SEC regarding the Audit Committee’s investigation. In October
2019, the Department of Justice provided the Company with a Civil
Investigative Demand seeking information with respect to a False
Claims Act investigation concerning whether the Company
fraudulently obtained 510(k) marketing clearance for its ablation
devices marketed under the trade name DABRA (which is not an item
that has been investigated by the Audit Committee), whether the
Company marketed and promoted DABRA devices for unapproved uses
that were not covered by federal healthcare programs, and whether
the Company paid improper remuneration to physicians and other
healthcare providers in violation of the Anti-Kickback Statute, 42
U.S.C. §1320a-7b. The Company intends to cooperate with the SEC and
the Department of Justice’s inquiries or investigations.
About Ra Medical Systems
Ra Medical Systems commercializes excimer lasers and catheters
for the treatment of vascular and dermatological diseases. In May
2017, the DABRA laser system and single-use DABRA catheter received
FDA 510(k) clearance in the U.S. as a device for crossing chronic
total occlusions, or CTOs, in patients with symptomatic
infrainguinal lower extremity vascular disease with an intended use
for ablating a channel in occlusive peripheral vascular disease.
Pharos excimer laser system is FDA-cleared and is used as a tool in
the treatment of psoriasis, vitiligo, atopic dermatitis, and
leukoderma. DABRA and Pharos are both based on Ra Medical’s core
excimer laser technology platform and deploy similar mechanisms of
action. Ra Medical manufactures DABRA and Pharos excimer lasers and
catheters in a 32,000-square-foot facility located in Carlsbad,
California. The vertically integrated facility is ISO 13485
certified and is licensed by the state of California to manufacture
sterile, single-use catheters in controlled environments.
Cautionary Note Regarding Forward Looking Statements
This communication contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
and Section 21E of the Securities Exchange Act of 1934 (the
“Exchange Act”). In some cases, you can identify forward-looking
statements because they contain words such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,”
“target,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these
words or other similar terms or expressions that concern Ra
Medical’s future expectations, strategy, plans or intentions.
Forward-looking statements in this communication include, but are
not limited to, statements regarding Ra Medical’s implementation of
remedial measures recommended by the Audit Committee, expectations
with respect to future actions regarding the Company’s employees,
the results of management’s review of its previously issued or
announced financial statements and internal control over financial
reporting and disclosure controls, the Company’s expectations with
respect to the impact of its recently announced change in shelf
life, the timing of the Company’s atherectomy trial, and
expectations regarding the timing of Ra Medical’s periodic reports.
These forward-looking statements involve risks and uncertainties,
and actual results could vary materially from these forward-looking
statements. Factors that may cause future results to differ
materially from management’s current expectations include, among
other things: how promptly and thoroughly the recommendations of
the Audit Committee can be implemented, potential legal or
regulatory action related to the matters under investigation, the
results of further review by the Company or others of certain
matters that came to the Audit Committee’s attention during the
course of its investigation, any matters arising out of the review
and audit of Ra Medical’s financial statements by the Company’s
independent registered public accounting firm, and other factors
detailed from time to time in Ra Medical’s SEC reports, including
its most recent annual report on Form 10-K, subsequent quarterly
reports on Form 10-Q, and in its other filings with the Securities
and Exchange Commission. The forward-looking statements in this
communication are based on information available to Ra Medical as
of the date hereof. Ra Medical disclaims any obligation to update
information contained in these forward-looking statements whether
as a result of new information, future events, or otherwise.
Ra Medical investors and others should note that we announce
material information to the public about the company through a
variety of means, including our website (www.ramed.com), our investor relations website
(https://ir.ramed.com/), press
releases, SEC filings, and public conference calls in order to
achieve broad, non-exclusionary distribution of information to the
public and to comply with our disclosure obligations under
Regulation FD. We encourage our investors and others to monitor and
review the information we make public in these locations as such
information could be deemed to be material information. Please note
that this list may be updated from time to time.
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version on businesswire.com: https://www.businesswire.com/news/home/20191031005931/en/
At the Company: Jeffrey
Kraws President, Ra Medical Systems 760-707-7516
jkraws@ramed.com
Investors and Media: LHA
Investor Relations Jody Cain / Kevin McCabe
310-691-7100 jcain@lhai.com /
kmccabe@lhai.com
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