Wright Medical Executive Exodus Continues

Three more senior executives at Wright Medical Technology Inc. have jumped ship. Raymond Kolls, senior vice president, general counsel and secretary; Alicia Napoli, vice president of clinical and regulatory affairs; and Cary Hagan, senior vice president for EMEA commercial operations all have resigned.

A U.S. Securities and Exchange Commission filing by the Arlington, Tenn.-based orthopedic device manufacturer stated that the resignations had been accepted. The filing also noted that all three executives resigned without “good reason.”

Effective immediately, Thomas L. McAllister has been appointed interim general counsel and secretary and Max K. Mortenson has assumed the role of vice president, clinical and regulatory affairs. Aurelio Sahagun began serving as vice president of quality, clinical and regulatory affairs two weeks ago.

The resignations come just one month after CEO Gary Henley abruptly resigned and CTO Frank Bono was fired. These latest announcements seem to be as unanticipated as the earlier departures. It is unclear whether the recent spate of firings and resignations are related to recent charges that the company conducted a kickbacks scheme; in the same news release, the company announced that it has concluded the internal investigation by its board, aided by outside council, a requirement by the deferred prosecution agreement (DPA) reached with the U.S. Attorney’s Office in New Jersey last fall. Wright Medical was accused of using consulting sessions with physicians to deliver the alleged kickbacks. At the time, the company agreed to pay approximately $8 million to settle charges that it ran a kickbacks scheme to influence sales of its hip and knee implants.

“The Board is committed to maintaining the highest standards of ethical conduct and we remain diligent in ensuring that Wright Medical complies with all applicable laws and regulations,” David D. Stevens, chairman of the board and interim CEO, said.

The filing also reported first quarter net sales of $135.4 million, a three percent increase compared with the same period in 2010. These numbers suggest stable-to-improving trends in the orthopedic reconstruction segments, but hip and knee growth still is lagging.

Analysts from Leerink Swann said that concern still exists about the DPA investigation. Potential risk to guidance and estimates exists, resulting from possible sales or customer disruptions, increased expenses and overall management or sales force distractions.

“Without a clearer sense of the impact or resolution from these new issues, we do not expect [Wright Medical] shares will move sustainably higher in the near-term,” a statement from Leerink Swann said.