Zimmer Biomet Holdings, Inc. (ZBH) Accused of Misleading Shareholders
As justification for the Zimmer/Biomet merger, ZBH touted the potential for acceleration in organic growth. Following its merger in early 2016, ZBH’s officers and directors recognized that it would be unable to attain this growth due to “systemic” quality control issues at one of its primary manufacturing facilities, at which an FDA inspection was imminent. The facility needed remediation, which would require a shutdown and result in production losses. Despite this knowledge, ZBH’s officers and directors failed to disclose these issues in its financial reports and instead insisted that its growth was being realized. Then, in October 2016, ZBH shocked investors when its Q3 financials reported decelerated revenue growth and a lowered organic revenue guidance for Q4 2016. On this news, ZBH’s stock price fell nearly 14%. Then, in November 2016, ZBH admitted its disappointing financials were caused by issues with one of its campuses and an analyst report revealed ZBH’s decelerated growth had been the result of shipment delays imposed by the FDA. ZBH has been named the defendant in a securities class action that could cause potential harm to investors.