ReGen Sues FDA Over Menaflex Reversal

ReGen Sues FDA Over Menaflex Reversal

ReGen Biologics is suing the U.S. Food and Drug Administration (FDA) for revoking approval of its Menaflex knee implant device. ReGen filed for Chapter 11 bankruptcy on April 11, a decision Chief Executive Gerald Bisbee claims was a direct result of the FDA’s actions, which a company statement called “arbitrary and capricious.” The lawsuit was filed May 31 in the U.S. District Court for the District of Columbia.

A spokesperson from the FDA said that the agency does not comment on pending legal matters.

ReGen’s bankruptcy petition includes its wholly owned subsidiary RBio Inc. but not its wholly owned Swiss subsidiary, ReGen Biologics AG, according to a document submitted to the U.S. Securities and Exchange Commission (SEC). The firm, which now functions as a debtor-in-possession, will use cash flow from operations and proceeds from a loan to continue to operate during the bankruptcy process. It is seeking costs and expenses, including attorneys’ fees, from the court.

The SEC document claims ReGen raised $1 million through a private deal with Sports Medicine Holding Company LLC, an affiliate of Ivy Healthcare Capital II LP, a creditor and one of the company’s largest shareholders. Sports Medicine Holding Company has agreed to provide ReGen with funding through senior secured notes due Aug. 31; those notes carry a 12 percent annual interest rate.

The additional infusion of cash should enable ReGen to submit its annual earnings filing with the SEC. The company said in a late March regulatory dossier that it was unable to obtain the proper financing to complete the “necessary accounting and internal control procedures required for preparing the Form 10-K and…management’s discussion and analysis of the financial and other information required to be included in the Form 10-K.”

ReGen’s cash flow troubles are the latest setback in the company’s protracted effort to market its controversial Menaflex knee implant in the United States. The firm has spent more than five years and $30 million trying to prove the implant’s safety and efficacy for the FDA’s Center for Devices and Radiological Health (CDRH). ReGen thought it sufficiently had argued its case after the FDA cleared the device in December 2008, but the approval occurred over the objections of agency scientists. Nearly a year later (September 2009), the FDA launched an investigation into the Menaflex approval after admitting that its decision was influenced by four New Jersey congressmen and former FDA Commissioner Andrew von Eschenbach.

Last fall, the FDA rescinded the 510(k) clearance it granted ReGen for its Menaflex Collagen Scaffold and re-classified it as Class III, an action that ReGen claims “has no lawful basis under the FD&C (Food, Drug & Cosmetic) Act.” As a result, ReGen must keep the device off the market until it can prove its safety and effectiveness to the FDA’s satisfaction.

The FDA told the company that it wanted to discuss the “appropriate marketing pathway for the device” as well as the kind of data needed to provide a “reasonable assurance of safety and effectiveness.”

The rescission, combined with the effects of negative press and the September 2009 Preliminary Report, caused ReGen to lay off a significant number of employees, including all of its U.S. marketing and sales personnel, according to the company.

“[The] Defendants’ arbitrary and unlawful conduct resulted in needless costs to ReGen and ultimately crippled its U.S. business,” the lawsuit states.

“There were in fact numerous departures from the review process,” Jeffrey Shuren, M.D., CDRH director said about his office’s 2008 decision. “There is no adequate information in the record establishing why the device was approved.”

After reevaluating its decision, FDAofficials concluded that Menaflex was“technologically dissimilar” from othersurgical-mesh devices the agency hadapproved, and it embodied differences that could affect its safety and effectiveness. Unlike predecessor products that repair or reinforce damaged tissue, for example, Menaflex helped the human body grow new meniscal tissue.

“Because of these differences, the Menaflex device should not have been cleared by the agency,” according to a news release from the FDA.

The FDA’s about-face infuriated ReGen CEO Gerald Bisbee, who called the move “totally unbelievable.” He blamed the agency’s change of heart on politics.

“The agency’s clearance of Menaflex has become a political football and the FDA is not playing by the rules,” Bisbee said in a statement last October following the FDA’s decision.
“ReGen has invested 58 months and more than $30 million to meet [the center’s] requirements only to have the agency reverse decisions made by previous officials by stating that they were in error with no substantial evidence that is true.”

ReGen additionally posits that the FDA’s actions create “substantial uncertainty in the device industry because the FDA could decide to revisit other products that were legally classified through the 510(k) premarket notification process without observing lawful processes.”

The FDA recently finalized the revocation of approval for the Menaflex implant. Before making its decision permanent, the FDA reached out to ReGen one final time to discuss its about-face on the Menaflex approval, but the agency’s offer fell on deaf ears—Bisbee quickly rejected the offer, calling it an exercise in futility.

“ReGen has already suffered serious injury, including the inability to sell its sole product in the United States, which has forced the company into bankruptcy, and it faces both the reality and the immediate threat of irreparable harm as a direct and proximate result of the Defendants’ acts,” the lawsuit states. “Remedies at law are unavailable or inadequate.”

In his 18-page letter to the FDA (dated March 21), Bisbee accuses the agency of failing repeatedly to provide ReGen with a fair and impartial review process. “It’s unbelievable that after more than five years of 510(k) review of this product—and after being told by the ODE (Office of Device Evaluation) director and the CDRH director to file two separate 510(k) submissions for this device as a surgical mesh—[CDRH Director Jeffrey] Shuren now says that they were wrong,” Bisbee said. “This arbitrary and unsubstantiated intention is an example of why the investment community is increasingly wary of investing in companies with products requiring FDA approval.”

New Take on PatentsShakes Up Abbott-Becton Dickinson Case

A federal appeals court ruled that “inequitable conduct” should be used to invalidate a patent only if materials information was withheld in order to obtain the patent. The decision follows an en banc hearing that is part of an ongoing lawsuit filed by Abbott Laboratories against Franklin Lakes, N.J.-based Becton Dickinson & Co. and Leverkusen, Germany-based Bayer HealthCare LLC, and is expected to make the invalidation of patents due to application errors more difficult.

Abbott claims that Becton Dickinson and Bayer HealthCare infringed its patents for disposable blood glucose test strips, which are manufactured by subsidiary Therasense, Inc.

The court reversed a previous edict that ruled the test strips patent unenforceable due to missing disclosures. According to discovery, however, contradicting information was supplied to patent offices in the United States and Europe.

Abbott, based in Abbott Park, Ill.,argued that companies should not be penalized for errors that do not affect theissuing of a patent.

Chief Judge of the U.S. Court of Appeals Federal Circuit, Randall Rader, who has labeled inequitable conduct allegations the “atomic bomb” of patent law, stated that to “prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the [U.S. Patent and Trademark Office (PTO)].”

Proof of intent still can be taken from indirect or circumstantial evidence, but only when it is “the single most reasonable inference able to be drawn from the evidence.”

Defendants also will have to meet a “but for” standard, requiring courts to “determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference.” Five of Rader’s Federal Circuit colleagues supported the decision; one partially dissented and four dissented.

“We are pleased that the Federal Circuit has tightened the standards for finding inequitable contact, and reversed the decision that found our patent unenforceable,” said Scott Stoffel, a spokesperson for Abbott.

A Becton Dickinson spokeswoman said in a statement that the decision is not expected to have much impact on the underlying litigation “as the asserted patents claims have been held and remain invalid.”

However, the defendants’ attorney fee awards resulting from the original inequitable conduct finding by Judge William Alsup in 2008 might not be in the same safety zone; Becton Dickinson was awarded $6 million; Bayer’s award is confidential.

“The only issue here is inequitable conduct, and at stake is the $6 million attorneys fee award,” Becton Dickinson counsel Bradford Badke of Ropes & Gray LLP said.

It is estimated that 80 percent of patent lawsuits include allegations of unfair dealings with the patent office. These allegations have “plagued not only the courts but also the entire patent system,” according to a statement released by the FederalCircuit Court.

“The case raised the standard for proving inequitable conduct,” said David Dykeman, a shareholder and patent attorney at Greenberg Traurig, LLP. “The inequitable conduct defense will be harder to prove, as the accuser must prove both intent and materiality by ‘clear and convincing’ evidence.”

“It’s a game-changer,” said Charles Shifley, a patent lawyer with Banner & Witcoff Ltd. in Chicago, Ill. “The last place for a scoundrel who was found to infringe and couldn’t probe invalidity was to throw mud at the patent lawyer. This will rein that in.”

AdvaMed Still Seeking Approval for U.S.-Korea FTA

Though the U.S.-Korea Free Trade Agreement (FTA) currently is stalled on Capitol Hill, medical device industry officials—including the Advanced Medical Technology Association (AdvaMed)—are still pushing for passage.

Free trade agreements with South Korea, Colombia and Panama won’t be voted on until Congress meets a White House demand to renew the Trade Adjustment Assistance (TAA) program, which retrains U.S. workers who are displaced when their companies go overseas.
TAA expired in February, and the renewal bid was rejected by the House of Representatives—an extension was estimated to cost about $7.2 billion at 2009 levels.

“They want $7.2 billion at a time when this country is basically broke,” Sen. Orrin Hatch (R-Utah) said. Hatch is the top Republican on the Senate Finance Committee.

At one time, the United States was Korea’s biggest trading partner, but it has fallen behind China, Japan and the European Union since 2003. Still, AdvaMed

officials remain hopeful.

“The U.S.-Korea FTA has specific provisions addressing the concerns of the medical technology industry, and it illustrates the benefits that these agreements can bring to the medical technology sector and to job creation in the United States,” Stephen J. Ubl, president and CEO of AdvaMed, said in a statement. “According to the U.S. Department of Commerce, Korea is one of the largest and fastest growing markets for medical technology.”

More than $875 million in medical technology products were exported to Korea in 2010, and $331 million in medical technology products were exported from Korea to the United States

“With a growing economy, the Korean people will come to demand an even higher level of healthcare and with that demand comes increased U.S. export opportunities,” Ubl continued. “AdvaMed views the implementation of this agreement as an opportunity to increase exports of medical technology products to this expanding market.”

Stryker Continues Spending Spree With Purchase of Orthovita

Buying out the competition seems to be in vogue these days in the orthopedic industry. A mere three weeks after Johnson & Johnson purchased Swiss device manufacturer Synthes Inc. for $21.67 billion (one of the largest deals in medical device history), Stryker Corp. followed suit with the $316 million acquisition of orthobiological developer Orthovita Inc.

Stryker executives announced the deal on May 16, saying the company agreed to pay $3.85 per share for Orthovita, a 41 percent premium over the firm’s closing share price the previous trading day (May 13). The buyout price includes net debt of $12 million.

The boards of both companies haveapproved the deal, which also requires approval from the holders of at least half of Orthovita’s shares as well as clearance from antitrust regulators. The holders of 14.5 percent of Orthovita shares also already have endorsed the deal. Stryker already started an offer for Orthovita shares and expects to close the deal by June 30.

Analysts believe the acquisition will help Stryker better compete against its larger rivals and further diversify its product base. Last fall, the Kalamazoo, Mich.-based orthopedic manufacturing giant purchased the neurovascular business of Boston Scientific Corp. for $1.5 billion, a move executives deemed both important and strategic as the company attempts to offset slowing hip and knee implant sales with products in potential growth markets. The neurovascular business acquisition gave Stryker a division that has generated operating margins of more than 30 percent for Boston Scientific.

Stryker’s strong cash position has enabled the firm to go on a virtual spending spree over the last 18 months, gobbling up the likes of the Sonopet Ultrasonic Aspirator from Mutoh Co. and Synergetics U.S.A. ($67 million); Gaymar Industries Inc., an Orchard Park, N.Y.-based developer of surface and pressure ulcer management devices ($150 million); and the Porex Surgical division of Aurora Capital Group, which develops porous polyethylene products for reconstructive surgery of the head and face (terms were undisclosed).

“We consider this deal [Orthovita] a good fit for Stryker and believe the company should be able to drive a turnaround in Orthovita’s performance over the next 12 to 24 months,” Jeff Johnson, an analyst with Robert W. Baird & Co., told Reuters.

Stryker executives agree.

“We believe the collective talent of our sizable sales forces across multiple franchises positions us to build on Orthovita’s success and accelerate sales growth,” Stryker Chairman, President and CEO Stephen P. MacMillan said. “With this acquisition we are expanding our orthobiologics product portfolio and strengthening our competitive position in key segments of the spine, orthopedics and biosurgery markets.”

Orthovita’s products include Vitoss bone grafts and Cortoss bone augmentation material as well as Vitagel, which is designed to reduce bleeding. Last year, the company generated $95 million in sales.

“This transaction delivers significant value to our shareholders and allows us to combine our portfolio of orthobiologic and biosurgery products as well as our proprietary biomaterials pipeline with Stryker’s sales and marketing teams. We look forward confidently to an exciting future with a great partner,” Orthovita President and CEO Antony Koblish said.

Compliance Data to be Released by FDA

As part of the Obama administration’sefforts to improve transparency in government, the U.S. Food and Drug Administration (FDA) is releasing inspection records and citations for misleading advertising.

The FDA recently released a database detailing manufacturing inspections conducted from Oct. 1, 2008, to Sept. 30, 2010. Agency spokesperson Tamara Ward said the database will be updated every fiscal year. The database includes the names and addresses of all medical product manufacturing companies that have been inspected, the purpose of the inspection, the date of conclusion and whether the findings prompted additional action by state or FDA officials.

The FDA also plans to share letters issued to companies warning them of illegal medical product promotions.A plan to disclose drug rejections that have been criticized in the industry also is under consideration. The FDA will have more information on this issue by the end of 2011.

Synthes Sells Subsidiary to Settle Plea Bargain

West Chester, Pa.-based Synthes Inc. sold assets of its Norian subsidiary to Exton, Pa.-based Kensey Nash Corporation for $22 million to satisfy terms of a plea bargain agreement with the federal government.

Last year, Synthes was charged with running an illegal test market for a Norian bone cement which resulted in three patients’ deaths. The company pleaded guilty to unauthorized testing, paid $23 million in fines for failing to report the incident to the U.S. Food and Drug Administration, and agreed to divest its Norian assets.

Synthes faced a divesture deadline of May 24. Missing the deadline would have subjected the company to fines and possible exclusion from Medicare and Medicaid. It is expected that Synthes will dissolve Norian as a stand-alone company due to exclusion.

“As part of a long-term supply agreement, Kensey Nash will manufacture Norian products, and Synthes will exclusively distribute the products worldwide,” said a statement from Kensey Nash. The company paid Synthes $11 million upfront and will pay another $11 million when manufacturing is transferred from Norian’s facility to Kensey’s.