Stryker Corp. has received another warning letter from the U.S. Food and Drug Administration, this time regarding problems in the company's small Biotech division, which makes products that promote bone growth.
The FDA letter is related to quality systems and compliance issues in the Biotech unit's Hopkinton, Mass., facility, according to Stryker. Issues include the falsification of hospital-approval documents used under an FDA rule that allows device sales on a very limited basis. The small number of field sales employees behind the problem are no longer with the company, Stryker said.
Stryker Biotech is small, representing about 1% of revenue for a company that pulled in $6 billion in sales last year and is well known for replacement orthopedic joints. But the new warning letter compounds a recent spate of regulatory trouble for Stryker, which has seen three warning letters since early last year.
The letter also raises the risk of a corporate-wide warning from the FDA, and may muddy the reputation of a company that had formerly enjoyed a very clean image, Piper Jaffray analyst Mark Mullikin said.
"It doesn't have a big impact on the numbers, but it certainly reinforces the theory that there's a systemic issue, a widespread issue, at Stryker," Mullikin said.
Shares of the company were recently down $1.86, or 2.8%, to $63.82.
Stephen P. MacMillan, Stryker's president and chief executive, said in a statement that the company is committed to strengthening quality systems and fully meeting all FDA requirements. "While we have made progress in fulfilling this commitment, we still have more work to do," he said.
Stryker in January disclosed that it had received an FDA warning letter related to failure to identify and correct recurring issues with some products, including replacement-hip parts, made at the company's Mahwah, N.J., plant. A third letter, from early 2007, cited issues at a Stryker facility in Ireland.
An internal probe Stryker launched in response to these problems led it to recall replacement-hip cups under its "Trident" line in January; that recall caused an estimated $15 million to $20 million in lost first-quarter sales.
"Obviously, it was a huge disappointment for us," said MacMillan, speaking at a Morgan Stanley conference on Thursday, regarding the hip-business issues. "We shot ourselves in the foot."
The new warning letter doesn't involve a recall, Stryker said. The business at issue mainly makes bone-growth products called OP-1. One version, called "OP-1 Implant," is used in trauma situations, while "OP-1 Putty" is used specifically in spinal surgery.
The implant product is sold in markets around the world, and both products are sold in the U.S. on a very restricted basis as so-called humanitarian-use devices.
Under this program, institutional review-board documents from hospitals are used to approve usage of the products. Stryker said a Biotech-led probe found that a small number of field personnel had falsified such documents. Stryker reported this issue before the FDA inspection in September that led to the warning letter, and is now taking an extra step to double-check the validity of these documents.
The warning letter also identified inadequate procedures with historical clinical studies, which weren't related to the pursuit of product approval, and also took issue with how device reports and product complaints were handled.
Stryker submitted an application with the FDA in 2006 seeking authorization for broad use of OP-1 Putty, and had hoped for approval by late 2007. But MacMillan told analysts about a year ago that an FDA request for additional data would significantly delay the process, and the spinal-putty product has yet to win approval.
According to Stryker, the issues highlighted in the new warning letter are unrelated to the approval-process delay. However, the FDA will often decline to approve products until warning letters are resolved, which means OP-1 approval could hinge on fixing the new-found problems.
Stryker had already launched steps ahead of the new warning letter to shore up quality systems, including establishing company-wide standard operating procedures and tying senior management compensation to resolution of problems.
"Several corrective actions and changes to processes put in place by Stryker Biotech were noted in the letter and future improvements are forthcoming as the division continues to work with FDA," Stryker said in its release.