(MDT) Medtronic’s Bone Protein in Controversy

Leading medical devices player Medtronic (MDT) has been put under the scanner based on some articles published on recombinant human Bone Morphogenetic Protein-2 (rhBMP-2) in a recent edition of Spine Journal. According to a report issued in The Wall Street Journal (WSJ) on the Spine Journal finding, surgeons missed to mention the complications encountered with bone-growth protein in clinical trials.

The WSJ reported that the Spine Journal found many serious complications such as sterility, infection, bone dissolution and worsened back and leg pain as well as cancer in 10-50% of patients who were treated with Infuse or a sister product in 13 clinical trials. These trials were funded by Medtronic and conducted by the surgeons during 2000 and 2010.

Infuse Bone Graft constitutes rhBMP-2, which is applied to an absorbable collagen sponge carrier. The product received US Food and Drug Administration (FDA) approval in 2002. The purpose of the protein (which develops naturally in the body) is to help bone formation.

However, according to the WSJ, at least 85% of Infuse has off-label usage. Based on this, the Justice Department launched an investigation into Infuse in late 2008 following reports of serious adverse events, including some patient deaths.

The chairman and CEO of Medtronic, Omar Ishrak, issued a statement regarding the published article. He considers integrity and patient safety to be the company’s highest priorities. According to him, although the article raises questions about researchers’ conclusions, no doubts were raised regarding the credibility of data submitted to the FDA during the approval process.

Spinal is Medtronic’s second biggest segment which has been witnessing several challenges over the past few quarters. During the last reported quarter, this segment generated $875 million in sales compared to $880 million in the year-ago period, down 1% (down 2% at CER). Revenues from Core Spinal and Biologics were $648 million (down 2% year over year) and $227 million (up 5%).

Core Spinal includes Core metal constructs, Interspinous Process Decompressions Systems (IPDs) and balloon kyphoplasty procedures (BKP). Sales of InFuse declined during the quarter due to softer procedural volumes. The latest articles are likely to worsen the situation and add to its woes.

We are currently ‘Neutral’ on Medtronic.

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