BioMimetic Therapeutics (Nasdaq:BMTI) may be a target of Stryker (NYSE:SYK) and Zimmer (NYSE:ZMH), but these acquisition-hungry orthopedic rivals are unlikely to make a move on BioMimetic just yet.
That’s because Food and Drug Administration approval of BioMimetic’s bone graft treatment for foot and ankle surgeries is still up in the air. So Stryker and Zimmer probably want to avoid anything that could muck up getting the much-needed FDA thumbs-up.
An expert FDA advisory committee recently supported the safety and effectiveness of BioMimetic’s treatment, which is called Augment. The product involves a synthetic protein and is intended to be an alternative to using a patient’s own tissue, known as an autograft, in surgeries to repair broken foot and ankle bones.
However, approval doesn’t appear to be imminent – the FDA wants the company to do additional testing of the treatment. Evidently, the agency is concerned that the synthetic protein used in the treatment promotes the growth of any existing cancer cells in a patient. Augment was approved for use in Canada in 2009, although sales haven’t amount to much.
Of course, investors dislike uncertainty, so the FDA panel’s tepid endorsement caused BioMimetic’s shares to be rocked. Since the advisory panel meeting, the company’s stock price has taken an $8 haircut, falling from $13.40 to the mid-$5 level. Its 52-week high is $14.80.
In addition to Augment, BioMimetics is developing a number of other product candidates, including Augment Injectable, an orthopedic product candidate, and Augment Rotator Cuff Graft, a sports medicine product. The company’s products are poised to compete in the fast-growing “osteobiologics” segment of the orthopedic and sports medicine market. According to research reports, the osteobiologics market accounted for $1.5 billion of revenue in the U.S. alone in 2010. This segment is forecasted to grow at a compounded annual rate of 8%, resulting in a projected market size of $2.3 billion by 2015
BioMimetics says the success of Medtronic’s (NYSE:MDT) Infuse Bone Graft for treating certain spinal fusions and bone fractures is paving the way for other osteobiologics. Since the Medtronic product was introduced in the U.S. in 2002, worldwide sales have climbed to about $5 billion.
Given BioMimetics’ limited revenue, its burn rate and the need to build a sales and marketing force in the U.S., an acquisition may be the company’s best bet. Based on a spokesperson’s recent comments, the biotech firm is definitely open to an arranged marriage.
Stryker and Zimmer are likely suitors. These two need to do something to keep Johnson & Johnson (NYSE:JNJ) from running away with the orthopedic-device market. The ability to challenges J&J recently became even more difficult following its $21.3 billion acquisition of Synthes.
If they don’t go after BioMimetics, rumors persist that Stryker and Zimmer have their eyes on other targets, including ArthroCare (Nasdaq:ARTC), Wright Medical (Nasdaq:WMGI) and MAKO Surgical (Nasdaq:MAKO).
