A Medical Device Daily

Despite the best efforts by ArthroCare (Austin, Texas) to deny any wrongdoing in its accounting practices, still another class action suit has been filed in the U.S. District Court for the Southern District of Florida on behalf of investors who bought ArthroCare common stock between Aug. 4, 2006 and Jan. 23, 2008.

The law firm of Dreier (New York) reported the class action lawsuit. Coughlin Stoia Geller Rudman & Robbins (New York) also reported litigation against the company this week (Medical Device Daily, April 8, 2008).

According to the complaint, ArthroCare reported financial results that were "materially overstated" and that these misrepresentations served to inflate the the company's stock price , causing it to trade as high as $64.84 a share. As a result of various adverse news stories and partial disclosures concerning the accuracy of the company's reported financial results and its business dealings with DiscoCare (Margate, Florida), an ArthroCare sales agent, the company's stock price fell to roughly $38.11 by Jan. 25, 2008.

ArthroCare has been plagued by rumors since it bought DiscoCare, a third-party billing and reimbursement company, in January for $25 million in cash (MDD, Jan. 7, 2008). The rumors surrounding the purchase led investors to question DiscoCare's business practices and the relationship between the two companies prior to the acquisition.

ArthroCare officials have repeatedly defended the DiscoCare purchase, and even confronted the rumors during a conference call sponsored by Bear Stearns (New York) in late January (MDD, Jan. 23, 2008).

ArthroCare makes devices for use in soft-tissue surgery. Many of its products are based on its Coblation technology, which uses low-temperature radio frequency energy to dissolve rather than burn soft tissue, minimizing damage to healthy tissue, according to the company.