Wright Medical Dips 11% After FDA's Not Approvable Letter For Augment Bone Graft

(RTTNews) - Shares of Wright Medical Group, Inc. (WMGI) plunged nearly 11 percent in extended trading on Thursday after the orthopedic medical device company received a not approvable letter from the U.S. Food & Drug Administration for its augment bone graft for use as an alternative to autograft in hindfoot and ankle fusion procedures. The FDA issued the letter in response to the company's amended Pre-Market Approval (PMA) application.

"Needless to say, we are very disappointed by the FDA's decision to issue a not approvable letter for our PMA application for Augment Bone Graft. This is not what we expected, as we believed that all of the FDA's concerns as outlined in their previous not approvable letter from December 2011 had been fully and thoroughly addressed in the PMA amendment that BioMimetic submitted in June 2012," Wright's President and CEO Robert Palmisano said in a statement.

Wright Medical and BioMimetic Therapeutics Inc. agreed in November 2012 to combine their businesses in a deal having a potential value of about $380 million or $12.97 per share for BioMimetic shareholders. BioMimetic deals in products that heal musculoskeletal injuries and diseases. As of March 1, 2013, Franklin, Tennessee-based BioMimetic Therapeutics has become a part of Wright Medical.

Augment Bone Graft, made by BioMimetic, is a bioengineered alternative to autograft in orthopedic surgery (non-human origin). In clinical studies, Augment Bone Graft has been evaluated as a healing adjunct in foot and ankle fusion surgeries and distal radius fractures.

The FDA stated in their letter today that it is "concerned that the population enrolled was predominantly low risk and, therefore, may not have warranted the use of either autograft or Augment Bone Graft."

FDA added that it believes "it will be necessary to perform a new clinical study that evaluates the use of Augment Bone Graft as a substitute for autograft in hindfoot and ankle fusion procedures in a well-defined high-risk target population, where the use of autograft would be clinically warranted."

In summary, FDA concerns included "the patient population studied in the clinical study, the amount of graft material implanted, and the uncertainty as to whether any graft material would be needed or if the use of no graft material in a fusion procedure of the hindfoot and ankle in the population studied would have achieved similar results."

The company said the FDA provided a number of additional observations about the clinical study design and results.

"We are continuing to study the FDA's position and expect we will work collaboratively with the agency to determine an appropriate path forward," Palmisano added.

In May 2011, the FDA's orthopedic and rehabilitation devices panel of the medical devices advisory committee had voted favorably on Augment Bone Graft's safety, efficacy and benefit to risk profile for its use as an alternative to autograft in hindfoot and ankle fusions, but the product is still not been approved by the FDA.

AugmentBone Graft was approved for use in Canada in November of 2009 and Australia and New Zealand in October of 2011 for foot and ankle indications. Augment Bone Graft is currently under review by the FDA, and is not yet available for sale in the U.S. It is also awaiting regulatory decisions in the European Union for similar indications.

BioMimetic also markets a bone graft substitute line of products for orthopedic indications called Augmatrix Biocomposite Bone Graft.

WMGI closed Thursday's regular trading session at $27.06, down $0.23 or 0.84% on a volume of 1.29 million shares. The stock plunged a further $2.96 or 10.94% in after-hours trading.