Dentsply Sirona must face U.S. disappointing results lawsuit

A U.S. judge mostly rejected a motion to dismiss a shareholder class action lawsuit against dental equipment manufacturer Dentsply Sirona, which is accused of breaching its fiduciary duties to its shareholders, according to a story published on May 6 in Legal Newsline.

The lawsuit accuses Donald Casey, the company's former CEO, and Jorge Gomez, its former executive vice president and chief financial officer (CFO), of manipulating numbers to achieve maximum compensation in 2021 during the COVID-19 pandemic.

On May 1, Judge Arun Subramanian of New York declined most of Dentsply Sirona's motion to dismiss based on public statements made downplaying supply-chain disruptions during the second half of 2021 that some may consider misleading.

"In September, Casey said that 'we're very comfortable that we're going to be able to deliver what our customers need,' and that '[w]e feel very good that we have adequate supply,’'" the judge stated in the order, according to the story. "And in November and December, Casey and Gomez made several statements downplaying supply-chain problems. If the company was already facing severe supply-chain issues, these statements could be misleading."

During start of the pandemic, the demand for dental products dropped off while the industry dealt with supply-chain issues. Meanwhile, Dentsply Sirona executives allegedly boasted that the company was in good shape while exaggerating sales. They reportedly were able to do this by making distributors take extra inventory, according to the story.

From there, sales dropped, executives were fired, and an internal investigation followed. In May 2022, Dentsply Sirona disclosed an ongoing investigation by its audit and finance committee, outside counsel, and a forensic accounting firm into whether "former and current members of senior management" used improper means to achieve executive compensation goals and other matters relating to financial reporting.

Furthermore, Dentsply Sirona did not file its U.S. Securities and Exchange Commission (SEC) Form 10-Q in a timely manner for the first quarter of 2022, according to the release. Form 10-Q is a financial performance report that publicly listed companies are required to file with the SEC. A 10-Q filing provides unaudited financial statements from the previous financial quarter and an overview of a company's financial position.

In April 2022, the company announced that Gomez had resigned, effective May 6, 2022. Gomez left to take the position of CFO at Moderna. Gomez was out at the Massachusetts-based pharmaceutical and biotechnology company just one day after Dentsply Sirona announced its internal probe involving financial reporting.