The complaint alleges that Beauty Health failed to disclose that: (1) Syndeo 1.0 and 2.0 devices had issues leading to “frequent treatment interruptions;” (2) as a result, the company incurred significant costs to develop enhancements; (3) despite the enhancements, providers continued to experience issues with Syndeo devices; and (4) as a result, the company would discontinue marketing Syndeo 1.0 and 2.0 devices and incur significant inventory write-downs.
The alleged fraud unraveled on Nov. 13, 2023, when Beauty Health announced disappointing Q3 2023 financial results. The company said “[t]he quarter was overshadowed by lower-than-expected U.S. revenue and $63.1 million in restructuring charges related to device upgrades of early generation Syndeo devices.” The company further slashed its 2023 net sales guidance and suspended its long term 2025 financial outlook and revealed that its CEO (Andrew Stanleick) would be departing effective Nov. 19, 2023.
The complaint alleges an earlier corrective disclosure on Aug. 9, 2023, when Beauty Health revealed that its Q2 2023 gross margins was unfavorably impacted by a mix shift toward lower margin refurbished devices as U.S. providers awaited Syndeo enhancements in Q3 2023 to improve user experience.
