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The failure of Wright Medical Group’s (WMGI) Augment bone graft to get past the FDA was not wholly unexpected in light of its first-time defeat and an almost perfunctory attempt to plug the holes in the data for the resubmission. Nevertheless Wright’s investors appeared to be taken by surprise, sending the company’s shares down 8% on Friday.

Augment’s denial leaves Medtronic (MDT) and Integra LifeSciences (IART) dominating the market for these contentious products, EvaluateMedTech data show. But with Medtronic’s flagship orthobiologic graft Infuse beset by negative trial findings, its bone filler sales are set to stagnate. Indeed, consensus forecasts show that the companies with the fastest-growing orthobiologic sales are relative minnows in the sector (see table).

Deals

Wright itself is stuck in neutral following the FDA’s non-approvable letter for Augment’s use in hindfoot and ankle fusion. The company had bet big on Augment, selling its hip and knee business to MicroPort Scientific less than two months ago as part of a biologics-focused strategy which looked risky at the time (MicroPort’s Wright turn could lead to parallel ortho market, June 21, 2013).

It is Wright’s other recent deal that the rejection affects most profoundly. Wright bought fellow Tennessee firm BioMimetic in November for $190m upfront, principally to obtain Augment. The deal was structured so that each BioMimetic share entitled its holder to up to $6.50 on Augment being approved in the US and hitting sales milestones (BioMimetic buy could augment Wright’s orthopaedic offering, November 20, 2012).

While the FDA has left the door open for Wright to conduct further trials and reapply, BioMimetic shareholders will be waiting a good while before they see that $6.50.

Up for grabs

With its principal biologic bone filler going nowhere in the U.S. – though it is still undergoing European review – the forecast worldwide sales for Wright’s orthobiologics segment will surely be revised downwards.

Wright’s predicted 2018 sales of $78m are therefore up for grabs. And the grabbiest company appears to be San Diego group NuVasive (NUVA), whose orthobiologic bone filler sales are predicted to grow at a rate of 73%, EvaluateMedTech’s data shows. Its AttraX biologic is awaiting FDA 510(k) clearance; analysts at Barclays Capital expect approval in the first quarter of next year.

The biggest player by far in orthobiologics is Medtronic. Consensus shows that its sales are barely growing, though individual analysts’ predictions for its main biologic, spinal fusion product Infuse, vary quite widely following some negative trial results (Infuse trials backfire on Medtronic with negative findings, June 18, 2013).

Biologics for bone fusion procedures are tricky to get approved, have never wholly proven their safety and are not setting the market alight in terms of sales. Now Augment is delayed or perhaps even killed off entirely, companies might be wise to give this area a miss, even though a competitor has taken a step back.

Worldwide sales forecasts ($m) for orthobiologic bone filler segments
Company 2012 2013 2014 2015 2016 2017 2018 CAGR
Medtronic 528 607 587 578 571 564 557 1%
Integra LifeSciences 76 81 86 92 97 103 109 6%
Wright Medical Group - 0 12 28 45 61 78 n/a
NuVasive 1 2 8 15 22 29 36 73%
Exactech (EXAC) 17 17 17 18 19 20 21 4%
Globus Medical (GMED) 5 6 7 8 9 10 11 15%
Kinetic Concepts (KCI) 2 2 2 2 3 3 3 4%

All data sourced to EvaluateMedTech

Source: FDA Rejection Of Augment Graft Improves Future For Smaller Companies