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VOL. 128 | NO. 156 | Monday, August 12, 2013

FDA Rejects Wright’s Augment Bone Graft

By Jennifer Johnson Backer

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Wright Medical Group Inc. said Thursday, Aug. 8, that the U.S. Food and Drug Administration rejected its Augment Bone Graft product for use as an alternative in foot and ankle fusion procedures.

The U.S. Food and Drug Administration’s decision to reject Wright Medical Group Inc.’s Augment Bone Graft product has company leaders “shocked.”

(Daily News/Andrew J. Breig)

The company was seeking approval of Augment Bone Graft as an alternative to taking bone from one part of a patient’s body and using it in another area, a procedure known as autograft.

The FDA said the population enrolled in Wright Medical’s clinical trial was low-risk and may not have warranted the use of either autograft or Augment Bone Graft. The regulatory agency said it would be willing to re-evaluate the use of Augment Bone Graft after a new clinical trial that evaluates the use of the product in a high-risk target population, where the use of an autograft transfer would be clinically warranted.

“When you get a letter like this, you’re shocked and you’re disappointed and you try to think about what we’re going to do next,” Wright Medical president and CEO Bob Palmisano said on a conference call with investors and analysts. “So I’m trying to calm our folks down to make sure that we’re going to take this calmly and logically and to work with the agency and find out where they are and what would be needed going forward.”

The blow comes as the Arlington-based company has spent the last 19 months focusing on growing its foot and ankle extremities business. In June, Wright Medical announced the sale of its hip- and knee-implants business to OrthoRecon, a unit of Shanghai-based MicroPort Scientific Corp., for $290 million in cash. Palmisano has previously said the sale will allow Wright Medical to focus on its breakthrough biologic opportunities as a high-growth extremities company.

When asked how far the company will go to seek FDA approval of the product in foot and ankle fusion surgeries, Palmisano said it’s too early to say.

“I wish I could give you a specific answer as to what the line in the sand is here, but I just don’t know,” he told analysts.

BMO Capital Markets analyst Joanne Wuensch said Wright Medical still has a healthy franchise of biologic products that are growing by double digits – even without the regulatory approval of Augment Bone Graft for use in foot and ankle fusion procedures. The product already is being used in overseas markets including Australia and Canada, she said.

“My understanding is that they have left the door open for management to go back to talk to the FDA,” Wuensch said. “I think management was shocked, and they were pretty forthright about that on the call.”

Wuensch said FDA’s decision shouldn’t have any impact on the OrthoRecon sale to MicroPort Scientific.

“They are completely different things,” she said.

Even if Augment Bone Graft never gets approval, Palmisano said Wright Medical still plans to focus on the medical-device extremities business.

“Our plan is to be a pure-play extremities bio company,” Palmisano said.

He added that the company hopes to replace revenue lost from the MicoPort deal as soon as possible. He said the company is eying mergers and acquisitions, including overseas.

Jeff Johnson, an analyst with Robert W. Baird & Co., said he was maintaining a “neutral” rating on the stock but trimming his 12-month price estimate to $27 on the news that the FDA had refused to approve Augment Bone Graft.

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