Wright Medical Hit by Inquiries from Two Federal Agencies

Wright Medical Group, Inc. was walloped by two federal agencies recently.

On Jan. 28, the company received a “Request for Additional Information and Documentary Material” (commonly known as a second request) from the Federal Trade Commission (FTC) in connection with Memphis, Tenn.-based firm’s proposed merger with Tornier N.V.

In addition, Wright officials also announced that the previously disclosed pending pre-approval inspection of a third-party vendor involved in the manufacturing of the company’s Augment bone graft concluded and resulted in the issuance of a warning letter from the U.S. Food and Drug Administration (FDA) containing “certain observations to which the vendor has already responded.”
The letter cited several observations, and according to Wright officials, the vendor in question already has submitted a full response to FDA. The “vendor and the company believe [the response] will satisfactorily address the FDA’s observations,” the company said in a prepared statement.

Wright executives continue to anticipate final approval of Augment bone graft by the FDA in the first half of 2015 but believe a first-quarter approval is unlikely.

On the matter of the merger with Tornier, the second-request notice extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, until 30 days after both parties have substantially complied with the inquiry, unless that period is extended voluntarily by the parties or terminated sooner by the FTC.

Wright officials said they plan to cooperate fully with the FTC.

All product lines identified in the second request are lower extremity products. Tornier has indicated that, for the period ended Sept. 30, 2014, its lower extremity product lines identified in the second request accounted for, in the aggregate, global revenue of approximately $21 million, and U.S. revenue of approximately $14.9 million, which is less than the $15 million U.S. revenue threshold identified in Section 6.05(e) of the merger agreement.

“We just received the second request and are evaluating our options,” said Robert Palmisano, president and CEO of Wright. “We will continue to work cooperatively with the FTC to resolve this as quickly as possible.”

From a timing standpoint, Wright leadership believes that a second-quarter 2015 closing is still possible, but is now a “best-case scenario,” officials noted.

In addition to obtaining FTC clearance, the proposed merger remains subject to customary closing conditions, including approval by both Wright and Tornier shareholders.

The all-stock $3.3 billion merger deal first was announced in October last year. As structured, when the deal closes, Wright shareholders will own 52 percent of the shares of the combined companies and Tornier’s investors will own approximately 48 percent.