Orthopedic specialist Wright Medical ($WMGI) is up almost 10% to a $1.2 billion valuation in early trading on the news that its Augment Bone Graft has been granted a PMA approval. It's slated for use as an alternative to auto-graft for ankle or hind-foot fusion indications.
The company said it expects to launch Augment in the U.S. in the next "several weeks" once it has sufficient inventory to its U.S. distribution network. Wright expects U.S. revenues for the new product of $10 million to $12 million within the first 7 or 8 months after approval. It also said it would start reimbursement-related activities such as reviews by hospital value analysis committees as well as physician education
The approval comes after the agency initially rejected Augment in August 2013, demanding Wright perform clinical trials in a group of higher-risk subjects. Wright acquired Augment in the spring of 2013 through a $380 million acquisition of Biomimetic Therapeutics for $190 million upfront in cash and stock, in addition to another $190 million in FDA approval and revenue milestones.
The upfront included $42.5 million in cash, about 7 million shares of stock and 28.1 million publicly tradeable contingent value rights (CVRs) worth up to $6.50 apiece. On the approval news, the CVRs soared 21% to $4.51.
When the acquisition was announced in March 2013, an Augment was approval was expected by January 2014, with an anticipated U.S. market of about $300 million. Wright had received an approvable letter from the FDA for Augment in October that was contingent upon facilities inspections.
|Wright Medical CEO Robert Palmisano|
"We continue to believe … the product as well as the PDGF technology platform will be important drivers of long-term growth for our business for years to come," said Wright President and CEO Robert Palmisano on a late July earnings call. "We're continuing to use this time to get ready internally to bring Augment Bone Graft to the U.S. market. We've prepared our supply chain and are continuing to train our U.S. foot and ankle sales organization. We will be ready to launch Augment in the U.S. upon receipt of the final approval order from the FDA."
Augment is based on two key active components: recombinant human Platelet-Derived Growth Factor (rhPDGF) and Beta-tricalcium phosphate (Beta-TCP). The former stimulates the recruitment and proliferation of cells, including osteoblasts, which are responsible for the formation of bone, while the latter offers a scaffold for new bone growth. The standard-of-care auto-graft requires the harvest of a patient's own tissue for implantation from a secondary surgical site that can result in complications or harvest site pain, according to Wright.
"The FDA approval of Augment provides a valuable new therapeutic healing option as an alternative to auto-graft in ankle and/or hind-foot fusion procedures, which is especially important since the outcomes of these interventions can at times be complicated by delayed union or non-union," noted lead pivotal trial investigator Dr. Christopher DiGiovanni in a statement.
He added, "This approval is based on strong clinical data showing that Augment offers clear patient benefit by enabling a healing rate and safety profile equivalent to autogenous bone graft--while simultaneously avoiding the additional surgery required to harvest autograft bone graft tissue that can result in site-specific complications and/or prolonged harvest site pain in some patients."
- here is the statement