Medtronic Gets Mixed Panel OK8200 for Spine Device – Buys Biologics Firm

Medtronic Gets Mixed Panel OK for Spine Device; Buys Biologics Firm

In late July, a U.S. Food and Drug Administration (FDA) advisory panel recommended clearance for Medtronic’s spinal implant Amplify, which stimulates bone growth in spinal surgery patients.
The panel did ask that the company perform the appropriate follow-up studies to monitor for cancer, birth defects and other adverse events.

The panel voted nine to four (with one abstention) in favor of the safety and 10 to three (also with one abstention), in favor of the effectiveness of the Amplify recombinant human bone morphogenetic protein 2 (rhBMP2) matrix device for spinal fusion in patients with degenerative disk disease.

The panel was more evenly split when it weighed the risks and benefits of the new device, which uses recombinant bone morphogenetic protein 2 to promote the formation of new bone. Six panel members voted yes when asked if the device worked well enough to outweigh the risks, but five voted no, and three abstained.

FDA’s Orthopedic and Rehabilitation Devices panel looked at data regarding the product from a trial, and found the product safe and effective for fusions of the lower spine in patients with degenerative disc disease, according to the company.

The protein used in Amplify to stimulate bone growth also is used in the company’s InFuse device, which already is on the market for spinal surgery.

In a letter to investors, Analyst Rick Wise of healthcare investment bank Leerink Swann, wrote that he was “cautiously optimistic” that the product’s approval could happen within six to 12 months. Wise said the device had the potential “to drive increased sales momentum for MDT’s under-performing spine business.” He noted that Amplify could add as much $175 million (roughly 8 cents a share), to Medtronic’s earnings in its first year on the market.

Medtronic, the world’s largest maker of heart devices, is trying to revive growth in its $3.5 billion spinal products business, which accounted for 22 percent of the Minneapolis, Minn-based firm’s $15.8 billion in revenue for the year ended April 30.

There were, however, concerns regarding elevated cancer risk and risks to women’s reproductive health. In one of the clinical trials, 3.8 percent of patients using Amplify developed cancer within two years, compared with 0.9 percent in the control group. But because the cancers developed were different types, many panelists felt it wasn’t a result of Amplify.

“We will continue to collaborate closely with the FDA to develop the path forward,” said Tom McGuinness, Medtronic’s vice president and general manager of the company’s biologics panel, in a statement. “The potential approval of [Amplify] will further strengthen our position as the market-leading provider of a comprehensive portfolio of bone grafting options.”

Medtronic makes a range of medical devices, including pacemakers, implantable defibrillators, and spinal implants.

The FDA normally follows the advice of its panels, though it is not a requirement.
In other Medtronic news, the medical device giant purchased Osteotech Inc. for $123 million, roughly $6.50 a share, which is a 65 percent premium compared with Osteotech’s stock price when the deal was announced in early August.

Osteotech, which makes orthopedic-focused biologic products that spur regenerative healing, recently has been under attack by a group of dissident investors unhappy with the company’s financial performance.

Heartland Advisors, Spencer Capital Management and Boston Avenue Capital, which collectively own nearly 23 percent of the company’s shares, urged shareholders to replace four of Osteotech’s six board members with their candidates.

“The board’s poor oversight of management has contributed to the loss of key customers, revenue stagnation, delayed product introductions and missed opportunities,” the investors wrote in a letter to shareholders.

Last year, Osteotech lost $4 million on revenue of $97 million compared to a profit of $2.2 million on revenue of $103.8 million in 2008. Since September 2009, Osteotech shares have fallen about 20 percent.

Osteotech’s board argued that the company’s performance recently improved, noting that the company reported a small profit in the second quarter. Osteotech also disclosed that it hired Deutsche Bank Securities last year to explore selling the company.

“This acquisition represents a key step in Medtronic’s strategy to build a broader business in regenerative biologics,” Chris O’Connell, Medtronic executive vice president and Restorative Therapies Group president, said in a statement. “Osteotech’s products and capabilities will better position Medtronic in today’s competitive musculoskeletal biologics market, and also position the company more broadly for the opportunity we see in the future.”

Osteotech’s board unanimously approved the takeover, saying it offers “significant value” to shareholders. The deal is subject to Osteotech shareholder and other regulatory approvals.

“We are currently reviewing the proposed transaction and will reserve comment until an appropriate time,” said Kenneth Shubin Stein of Spencer Capital Management LLC, a member of the dissident group, in a statement.

Medtronic officials claim Osteotech, based in Eatontown, N.J., offers “strong products” such as its Grafton demineralized bone mix. Osteotech also is awaiting approval from the FDA for its engineered human collagen biomaterial technology. These technologies will help Medtronic strengthen its position in the spine, orthopedic trauma and dental markets, as well as expand into new growth areas such as joint reconstruction, foot and ankle, and sports medicine.

FDA Names Maisel to Lead New Internal Review Board

The U.S. Food and Drug Administration (FDA) certainly is quick to follow its own advice. Within days of releasing a comprehensive report last month that recommended ways it could improve the medical device approval process, the agency began following through on one of the suggestions.

On Aug. 4, the FDA’s Center for Devices and Radiological Health (CDRH) released two major reports recommending actions the Center could take to change the way it oversees medical devices. The first report provided preliminary recommendations to strengthen the 510(k) premarket review process. The second report discussed a task force finding regarding CDRH’s use of science in decision making and managing the device approval process as science evolves. A key element of this second report is the creation of a new Center Science Council (CSC) to guide CDRH in science-based decision making.

The mission and makeup of the CSC remains somewhat vague, though an FDA report in early August said it “should meet regularly and be available, as needed, to discuss and vet potential changes in the Center’s regulatory expectations on which staff at lower organizational levels wish to seek additional advice from a wider range of experts, or whose impact could be cross-cutting enough to warrant broad or Center-level attention. Another role for the Science Council relates to increasing the consistency of 510(k) decision making.”

CDRH Director Jeffrey Shuren hired William Maisel, M.D., to lead the CSC. Maisel is no stranger to the inner workings of the agency. He has served on a number of FDA advisory committees for new medical device approval. He has been a consultant to CDRH since 2003 and previously chaired the FDA’s Postmarket and Heart Device advisory panels.

Maisel is an electrophysiologist at Harvard/Beth Israel Deaconess Medical Center in Boston, Mass. A prominent expert on medical device safety who often has been critical of the industry, Maisel is the founder and director of the Medical Device Safety Institute, a Boston-based organization dedicated to improving the safety and reliability of medical devices. He received his medical degree from Cornell University, his master’s degree in Public Health from the Harvard School of Public Health, and completed his internal medicine and cardiovascular training at Brigham and Women’s Hospital in Boston.

STJ Buys Stake in Novel Cardio Firm, Possible Future Purchase

St. Jude Medical, Inc. will purchase a $60 million equity stake in privately held CardioMEMS, a medical device company that has developed a wireless sensing and communication technology to assess
cardiac performance.

The agreement provides St. Jude Medical an immediate 19 percent ownership in CardioMEMS and the exclusive option to acquire the company for an additional payment of $375 million following the completion of certain commercialization milestones.

CardioMEMS’ wireless monitoring technology can be placed directly in the pulmonary artery to assess cardiac performance via measurement of pulmonary artery pressure (PAP). According to the firm’s leadership, the implant procedure is “fast, and simple” and can be performed by any physician who does right-heart catheterizations.

The sensor transmits real-time hemodynamic data via an external monitor to the patient’s clinic for review. PAP is a commonly used measurement to assess heart failure (HF) patients in hospitals. Using CardioMEMS technology, doctors would be able to obtain critical information without the need for a cardiac catheterization, company officials noted. Patients would be able to transmit readings from their homes, potentially allowing physicians to directly and more effectively direct treatments to keep patients out of the hospital.

According to the American Heart Association, more than five million Americans suffer from heart failure, with 670,000 new cases diagnosed each year. The estimated direct and indirect cost of HF in the United States for 2009 was $37.2 billion

“As we work toward the commercialization of this promising technology, we are excited to have the support of a company like St. Jude Medical, with its significant expertise and focus in the areas of cardiac rhythm management, heart failure disease management and other cardiac technologies,” said Jay S. Yadav, M.D., founder and CEO of Atlanta, Ga.-based CardioMEMS.

According to Eric S. Fain, M.D., president of St. Jude Medical’s Cardiac Rhythm Management division, the investment in CardioMEMS “reaffirms our commitment to technology platforms that improve heart failure management and the potential benefits of hemodynamic monitoring for both patients and the health care economic system.”

According to St. Jude officials, the agreement does not change the company’s earnings outlook for 2010. St. Jude Medical is headquartered in St. Paul, Minn. and has four major focus areas that include: cardiac rhythm management, atrial fibrillation, cardiovascular and neuromodulation.

Boston Scientific Settles Warning Letter Issues

The pall finally has been lifted.

After more than four years, Natick, Mass.-based Boston Scientific Corp. has resolved regulatory issues cited in a U.S. Food and Drug Administration (FDA) warning letter, clearing the cloud of perceived misgivings from the agency that has hovered over the company longer than expected.

The January 2006 warning letter cited “serious deficiencies” at several Boston Scientific facilities throughout the nation, including the Maple Grove, Minn., headquarters of its $1.7 billion drug-coated heart stent business. One of the deficiencies cited by the FDA was a failure to promptly and properly report product issues, according to published reports. The letter followed three site-specific warnings in 2005 that Boston Scientific failed to adequately address.

Though they typically are used to force companies to comply with FDA regulations, corporate-wide letters such as the one received by Boston Scientific are relatively rare. When it issued the letter, the FDA gave the company an ultimatum: Fix the regulatory issues or the agency would block approval of all Class III products (which are the most novel and highest-risk devices the FDA evaluates).

The FDA made good on its threat, too. For two years, the Class III product approval ban remained in place, delaying the release of Boston Scientific’s much-anticipated Taxus Liberte medicated heart stent. By the time Taxus was approved, the domestic market for stents had become more crowded and competitive. In late 2008, the company showed improved quality systems during an inspection of its facilities, prompting the FDA to note that Boston Scientific was in “substantial compliance” with the agency’s regulations. Since that time, the warning letter has not been an issue, though it still cast a dark cloud of doubt over the company until the letter was officially resolved in August.

“The resolution of the corporate warning letter marks a major milestone in our journey of continuous quality improvement,” Ray Elliott, Boston Scientific’s president and CEO, said in a statement. “Quality is our highest priority and our greatest responsibility. While our quality work will never be done, we have revolutionized our approach and transformed our culture, and we are confident that our commitment to the highest levels of quality will create a competitive advantage for Boston Scientific.”

Resolving problems cited in warning letters can be time-consuming and expensive for companies. Stryker Corp., for example, is still revamping its quality and compliance programs three years after receiving a string of warning letters from the FDA. The Kalamazoo, Mich.-based orthopedic manufacturer resolved the final warning letter in May.

Stryker Inks Deal to Buy One of Its Suppliers

Stryker Corp. will pay $150 million for Gaymar Industries, which manufactures temperature management devices and pressure ulcer treatment technology. The deal is expected to close by Oct. 1. Gaymar is owned by private equity firms Nautic Partners and Norwest Equity Partners.

The buyout is the culmination of a 10-year relationship between the two companies. Orchard Park, N.Y.-based Gaymar has been providing Stryker with exclusive rights to sell support surface and pressure ulcer management products to acute care customers in North America. Gaymar reported sales of $77 million in 2009, of which approximately $14 million were related to the OEM relationship with Stryker.
The acquisition will expand Kalamazoo, Mich.-based Stryker’s portfolio of acute care offerings.

Stephen P. MacMillan, Chairman, president and CEO of Stryker, said: “Gaymar provides our Medical division with an attractive portfolio of high-performance support surface and pressure ulcer management products that target an approximately $1.8 billion worldwide market, while simultaneously enhancing our customer relationships through the addition of their temperature management offering.”

Stryker officials said the deal would not affect its 2010 or 2011 earnings per share, but should start adding to its bottom line in 2012.

InHealth Awards Grants to Duke and Northwestern

The Washington, D.C.-based Institute for Health Technology Studies, or InHealth, has awarded two follow-on grants totaling more than $830,000 to research teams at Northwestern University and Duke University.

Northwestern investigators will receive $240,000 to study opportunities for improving the U.S. Food and Drug Administration’s 510(k) product review process for medical devices. The work builds on previous InHealth-funded research that for the first time documented in detail the medical technology development process.

Duke researchers will receive $600,000 during the course of three years to focus on the lifetime benefits of implantable devices, including replacement knees and hips, and cardiac pacemakers. This research will add to the Duke team’s previously published analyses of the shorter-term impacts of total knee and total hip replacement procedures.

“Evidence-based policy is at the center of the new healthcare landscape, placing even more importance on measuring the effects of medical technology,” said Martyn Howgill, InHealth’s executive director.
Since its founding in 2004, InHealth has invested more than $11 million in research-related activities at U.S. universities.