On a recall, 3-D printed knee implant maker ConforMIS falls 25% to IPO price

ConforMIS ($CFMS) had one of the most staggeringly successful med tech IPOs this summer. Its July IPO raised more than $155 million at a $15 share price. The custom 3-D printed orthopedic implant company saw its share price climb as high as almost $27--but all that ground has been lost on this week's news of a voluntary recall by the company.

Shares of ConforMIS have fallen roughly 25% in the last week in a rough broader market context. That puts its share price near $15, almost exactly where it started from about two months ago when the IPO priced.

iUni--Courtesy of ConforMIS

The company has started a voluntary recall of four of its knee replacement systems due to complaints of moisture on the patient-specific instrumentation for its iUni, iDuo, iTotal CR and iTotal PS systems. About 950 sets of custom instrumentation are affected by the recall. Of these, about 650 have already been used in knee implant procedures, with the remaining roughly 300 having been shipped but not yet used in scheduled surgeries.

ConforMIS said the recall is based on three complaints that it received, but added that they were used in knee replacement procedures "without apparent incident," according to a statement. It added that "the company does not believe that the customized knee implants used in these procedures were themselves affected" and that no adverse events have been reported.

The company believes the moisture on the instrumentation is due to the commonly used ethylene oxide sterilization process, which can result in small amounts of residue when ethylene oxide comes in contact with water. The company has suspended its use of this sterilization process.

Based on an initial assessment, ConforMIS believes that the recalled instrumentation held excess water before undergoing the commonly used ethylene oxide sterilization process and, as a result, may contain small amounts of ethylene glycol residue. Ethylene glycol residue may form when ethylene oxide comes into contact with water. ConforMIS has temporarily suspended its use of the ethylene oxide sterilization process and is working expeditiously to investigate the root cause of the excess moisture and evaluate potential corrective and preventative actions.

The instruments were manufactured and distributed from a new manufacturing facility between July 18 and Aug. 28. As it investigates further, the company expects to curtail manufacturing "substantially" in September and maybe even October. It already has an undisclosed alternative sterilization process in place--but it has a much lower capacity than the previously used process.

Due to the recall and the related manufacturing slowdown, ConforMIS downwardly revised its 2015 revenue guidance to $64 million to $66 million from $72 million to $74 million. That still represents year-over-year growth of 33% to 37% on a reported basis and 39% to 43% on a constant currency basis.

- here is the Aug. 31 recall announcement

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