FTC Biting at Wright and Tornier’s Ankles

Wright Medical Group, Inc. has received a “Second Request” from the Federal Trade Commission (FTC) regarding its proposed merger with Tornier N.V.

Second requests are typically made when the FTC staff has heard from potential customers that there may be some difficulties in replacing products sold by the merged entity. Zimmer Holdings Inc. received such a request from the FTC over their plan to merge with Biomet, Inc.

According to the company, all product lines identified in the Second Request are lower extremity products. Tornier said its lower extremity product lines in the Second Request accounted for approximately $14.9 million in U.S. revenue for the identified period.

Needham & Co. analyst Mike Matson says he suspects that the product lines in question consist of Tornier’s ankle products because that is an area of overlap between the two companies. Both have around 30% of market share. He now thinks it’s likely that the FTC will require Wright to sell one of the two companies’ total ankles. He views this as a modest negative since it would mean the ankle could end up in the hands of a competitor like Smith & Nephew plc or Zimmer.

Wright President and CEO Robert Palmisano stated, “We just received the Second Request and are evaluating our options. We will continue to work cooperatively with the FTC to resolve this as quickly as possible. Whatever the final resolution, we do not expect it to have a material impact on the strategic rationale or economics of the proposed merger, and we remain firmly committed to the transaction.”

Augment FDA Approval Delay

The February 2, 2015 announcement by the company also included news that a Wright vendor received a Form 483 at completion of a recent FDA pre-approval inspection for Augment Bone Graft. Wright management believes the response from the vendor will satisfy the FDA and the agency will give final approval to Augment by the end of June.

An FDA Form 483 is issued to firm management at the conclusion of an inspection when an investigator has observed any conditions that in their judgment may constitute violations of the Food Drug and Cosmetic (FD&C) Act and related Acts.