|Wright Medical CEO Robert Palmisano|
When Wright Medical ($WMGI) paid $190 million for BioMimetic Therapeutics this spring, it was counting on the company's Augment bone graft to pad its sales and pace future growth.
However, now that the FDA has again rejected the implant, Wright and its acquisition are in limbo, and the devicemaker's shares dropped double digits on news.
In its not-approvable letter, the FDA takes issue with the patient population Wright used in its Augment studies, saying Wright picked low-risk subjects when testing its product against the standard of care and demanding the company conduct a new study on a higher-risk population if it wants to reapply for approval.
Considering the time-consuming nature of clinical trials, the FDA's rejection puts off Augment's approval and launch indefinitely, and investors punished Wright overnight, sending shares down 10% to roughly $24 apiece.
And the timing could hardly be worse. In June, the Memphis company sold off its hip- and knee-replacement business for $290 million, planning to focus instead on foot and ankle technologies, which include Augment. Wright closed its $190 million acquisition of Augment inventor BioMimetic in March, and that deal could be worth as much as $380 million for BioMemetic if the bone graft wins FDA approval and meets certain sales milestones.
That's likely the last thing on Wright CEO Robert Palmisano's mind at the moment, however.
"This is not what we expected, as we believed that all of the FDA's concerns as outlined in their previous not approvable letter from December 2011 had been fully and thoroughly addressed in the PMA amendment that BioMimetic submitted in June 2012," Palmisano said in a statement. "We are continuing to study the FDA's position and expect we will work collaboratively with the agency to determine an appropriate path forward."
Wright has shuffled execs in and out since admitting in 2010 that it violated federal anti-kickback laws. The company finally completed a deferred prosecution agreement last fall, and, after the hip and knee division sale, Wright said it plans to push forward as a more nimble operation focused on high-growth spaces.
- read Wright's release