By WENDY LEE, Star Tribune
Last update: March 10, 2011 – 9:07 PM
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The Food and Drug Administration has declined to approve a spinal product that Medtronic Inc. hoped to bring to market, a setback for the medical device giant as it deals with declining sales in some core businesses.
The Fridley-based company received a letter saying the agency would not approve the bone graft product Amplify without more information, according to documents filed with the U.S. Securities and Exchange Commission.
The company said Thursday that it is working with the FDA to resolve its concerns but did not disclose details of what was in the letter. FDA reviewers had raised issues about possible cancer risks in a report last year.
“We are in active dialogue with the FDA to address the issues in its letter, have been given the opportunity by the FDA to provide further information relevant to these issues and are hopeful that the FDA will ultimately approve Amplify,” Medtronic said in the SEC filing.
The setback came the same week Medtronic announced that it had resolved two FDA warning letters that had largely prevented the company from launching products in the United States that were made in certain facilities.
While not the last word, analysts said the “nonapprovable” letter on Amplify is significant.
Phil Nalbone, a medical devices analyst with Wedbush Securities, said it could take several years to satisfy the FDA.
Michael Weinstein, an analyst with J.P. Morgan, said in a note to investors that he views “the odds of a reversal following the issuance of the letter as low.”
The company’s stock declined $1.17 Thursday to $38.63 a share.
The Amplify product is placed in the patient during spinal fusion surgery and is used to help with bone growth and spinal support. One analyst had predicted the product could bring up to $175 million in annual sales for Medtronic.
Last year, an FDA advisory panel recommended approval by a slim margin. Six members of the panel voted that the benefits of the product outweighed the risks, five voted that the benefits didn’t outweigh the risks and three abstained on that question.
Medtronic had hoped for an approval that could have helped revive growth in its spine business. The company recently reported that sales were declining in some key businesses and said it would cut up to 2,000 jobs, about 4 to 5 percent of its global workforce.
The company’s spine business has been affected by price competition, a decline in sales volume due to the economy and insurance carriers toughening their standards regarding payments for surgical procedures.
Just a year ago, the worldwide spine surgery devices was growing by 9 to 10 percent and now it’s flat to down slightly, Nalbone said.
“Investors have been hopeful that Medtronic would find ways to resuscitate that growth, even a little bit,” Nalbone said. “This denial by the FDA of Amplify deprives Medtronic of one of those potential levers to get the spine business moving again.”
Meanwhile, Medtronic said on Thursday that it is launching two other spine products in the United States, a titanium implant for patients with degenerative disc disease and rods that connect existing or new fusion systems.
Still, portfolio manager Les Funtleyder of Miller Tabak + Co. says the company faces significant challenges. Even before the Amplify setback, he recommended investors sell the stock.
“They’ve grown too big to really grow effectively,” Funtleyder said. “This is just another example of them having problems bringing new products to market.”
Wendy Lee • 612-673-1712