By HOLLAND JOHNSON
BBI Associate Managing Editor
and CHRISTOPHER DELPORTE
BBI Washington Editor

Insofar as words of advice are concerned, one of the most time-tested has to do with not biting the hand that feeds you. But two device companies – Cyberonics (Houston) and Utah Medical Products (UTMD; Midvale, Utah) – blew off that advice big-time last month as they locked horns with the agency whose approval is one of the most important keys to a med-tech company's growth and perhaps even survival.

After the FDA rejected the advice of its Neurological Devices Panel and delivered a "non-approvable" letter for the use of Cyberonics' vagus nerve stimulation (VNS) system in the treatment of treatment-resistant depression (TRD) via a premarket approval supplement (PMA-S), company president and CEO Skip Cummins blasted the agency, calling the decision "an unprecedented move on FDA's part." His remarks came during an Aug. 12 conference call regarding the non-approvable letter.

For UTMD's part, after an announcement by the FDA that it was filing suit against the company in an attempt to block continued manufacture and sale of its products, an attorney for the firm repeated the company's charge that the agency has provided no response to its frequent pleas for guidance. Larry Pilot, a partner in the Washington office of McKenna, Long & Aldridge, said that the agency is asking UTMD to do "some things," but those things "are unknown to the company." He compared the FDA's lack of clear feedback to being stopped for speeding without being provided an explanation of specific charges. "It's like ... you're stopped by police and the policeman tells you you're speeding, but won't tell you what the speed limit is and no signs are posted," he said. He said that Utah Medical has sought agency guidance over the past three years, but has received no clear answers.

First rejection of panel's recommendation

According to Cyberonics, the FDA's rejection of its panel's recommendation for approval of the depression indication for VNS Therapy marked the first time the agency has ever rejected an expedited review PMA-S after one of its panels has given a "green light" recommendation for marketing of such a device. VNS Therapy, which was approved by the FDA in 1997 as an adjunctive treatment for epilepsy, consists of a small pacemaker-like device implanted in the left chest area and delivers intermittent electrical stimulation to the patient's left vagus nerve through threadlike wires. The device is programmed using a hand-held device with special software. VNS Therapy already has been approved for depression in Canada and Europe.

The company said it was notified by the FDA in writing on Aug. 11 that "notwithstanding their [the Neurological Devices Panel's] recommendation, we regret to inform you that [your] PMA-Supplement, absent additional information, must be considered not approvable." The agency's stated reasons for rejecting the approval included worsening depression, potential biases stemming from a non-randomized control and an inability to distinguish one-year VNS effects from placebo and concomitant treatment effects.

"We are shocked and bewildered by FDA's decision to ignore its expert advisory panel's recommendation," Cummins said. "FDA's Center for Neurological and Restorative Devices had no prior depression experience before the VNS submission and as a result, FDA deputized four of the seven voting members of its expert advisory panel. All four of these deputized members were psychiatrists, including three who also serve on the antidepressant drug advisory panel."

Cummins said that all of the reasons cited in the agency's "not approvable" letter were addressed at the panel meeting on June 15 prior to the advisory body's 5-2 vote recommending approval. "FDA has now chosen inexplicably to ignore not only the recommendation of its panel of experts, but also the strong recommendations of numerous psychiatric thought leaders and the compelling testimony and needs of people with treatment-resistant depression who today have no long-term treatment for their lifelong and life-threatening illness," an angry Cummins said.

He attacked the FDA as "one of the most unpredictable groups we have dealt with" and also accused the agency of demanding clinical tests that he said are "inconsistent" with the FDA's regulations governing the testing of experimental medical devices. "This unprecedented decision was a mistake," he said. Cummins said Cyberonics executives wanted to meet with FDA officials as soon as possible to discuss what additional research information would be needed to get the VNS Therapy device approved for marketing. He said the company is considering all its options, including legal action, to "try to convince the FDA that it made a mistake."

Asked by an analyst during the conference call how long it might take for Cyberonics to develop, conduct and evaluate the necessary research, Cummins said it could take three years – "give or take six months" – to get the information to an FDA advisory panel again. "The rules seem to change at FDA's whim," he added.

While the depression market could have increased the company's VNS sales by as much as ten-fold, Cummins said the real losers in this turndown are the patients who he said are in "desperate need" of a meaningful therapy option. "Depression is the leading cause of disability for women in the U.S., and every month an estimated 2,500 Americans with no treatment options and treatment-resistant depression commit suicide," Cummins said. "That's 5,000 [people] since our panel meeting." He pointed out that company's VNS studies "targeted patients with extreme treatment-resistant depression that are excluded from other antidepressant studies, including studies of electro-convulsive therapy [ECT]."

Cummins said that to his mind, the FDA apparently believes that the absence of a randomized control is adequate justification to leave 4.4 million Americans at significant suicide risk without a treatment option. "FDA's expert advisory panel, including three of the four deputized members of that panel, people living with treatment-resistant depression, psychiatric thought leaders, payers and all of us at Cyberonics obviously strongly disagree," he said.

Despite the extreme treatment resistance of the VNS patients, Cummins said that after one year of treatment, one out of six patients was depression-free and 56% had realized a "meaningful benefit." Most importantly, he added, about 70% of the VNS responders sustained their response out to two years. By comparison, an active control group of similarly resistant patients treated for one year with currently available treatments (no VNS) predictably showed minimal response and no sustained response.

During the June panel meeting, several conditions were recommended in order for an approved clearance of the device for the depression indication. In response to safety concerns, one of the conditions the panel recommended was that the device should only be used for patients who did not respond to at least four other types of therapy. Other conditions included educating physicians for programming and implanting the device; patient education; psychiatrist education; and establishing a patient registry to collect more data. A number of labeling changes also were recommended.

Some members of the panel had said during the June meeting that they were troubled by what they saw as a lack of substantial clinical data to support the effectiveness of the device. "My principal reason for voting against approval is because it is this non-randomized comparative study," said panel member Jonas Ellenberg, PhD, a statistician with Westat (Rockville, Maryland). "I don't believe the standard for efficacy has been met."

Other panel members said they viewed the therapy as the final recourse for desperate patients. "The reason I voted for approval with conditions, is that this is a very tough group of patients, and it is difficult to treat them," said panel member Annapurni Jayam-Trouth, MD, a neurologist at Howard University College of Medicine (Washington). "The death rate is very high, almost a terminal type of condition, more or less."

Cummins said during last month's conference call that in the 10 weeks since that panel meeting, the company's regulatory team has been working with the FDA's reviewer, following up on information presented at the panel. "We had no discussions with the division director or other members of FDA's senior management because the final review seemed to be proceeding, until yesterday evening."

Cummins maintained that the FDA's decision now leaves these treatment-resistant patients with the same thing that they had to treat their depression prior to his company's six-year odyssey to develop a treatment for them, "and that is nothing." He added: "No hope and nothing but a bunch of expensive ineffective drugs whose safety and efficacy in patients with TRD has never been and never will be studied." And after repeated treatment of ECT, the final recourse that these patients have open to them is one he had already said roughly 2,500 Americans already pursue every month, "and that's suicide."

Less than two weeks after receiving word of the FDA's action – or lack of it – Cyberonics received both an investment boost and an unwelcome advance from fellow neurostimulation firm Advanced Neuromodulation Systems (ANS; Plano, Texas).

ANS reported acquiring 3.5 million shares of Cyberonics' outstanding common stock – or about 14% of that company's shares – in a purchase completed Aug. 13. The total value of the purchase was not disclosed.

At the same time, ANS also proposed a merger with Cyberonics. In a statement announcing the share buy, Chris Chavez, CEO of ANS, said, "We suggested to Mr. Cummins that we discuss the possibility of a combination, and we look forward to having that conversation soon."

In response, Cyberonics issued its own statement rejecting the offer, but doing so rather mildly. In the release, Cummins said the company "is not interested in any combination or merger and remains focused on growing its epilepsy business and gaining clarity and certainty in a revised depression regulatory timeline," a reference to the FDA's rejection. In the statement, he said that Cyberonics has been making "good progress" in its discussions with the FDA concerning the rejected PMA-S.

As to the proposed merger, Cummins tempered his rejection of the offer by taking it as a compliment to Cyberonics and its technology. "ANS's actions are evidence that yet another knowledgeable device market leader, in this case with highly relevant FDA experience, has recognized the value of Cyberonics' VNS Therapy franchise, intellectual property, demand creation organization and model, profitable epilepsy business, and depression and other new indications opportunities," he said.

Chavez said of ANS's purchase of Cyberonics stock: "We were pleased to have the opportunity to establish this position ... We think this is a great investment. Cyberonics pioneered the application of neuromodulation technology for the treatment of epilepsy, which they developed and in which they possess a combination of strong products, patents and sales and marketing organization. ANS believes, as a leading participant in the neuromodulation industry, that Cyberonics has additional growth potential in its core business of epilepsy, as well as other future therapeutic applications of its technology."

He added, "The Cyberonics team has accomplished a great deal and earned our respect. Late yesterday, we apprised Skip Cummins ... of our investment and expressed our belief that a combination of our two companies offers potentially substantial benefits to the employees and stockholders of both organizations, as well as to the growing number of physicians and patients who rely on our products. ANS believes that, together, we could build something truly exciting – with critical mass, synergies and leverage – that would add value for both companies' stakeholders."

What Chavez did not say is that the combined company would provide an even more formidable competitor to Medtronic (Minneapolis, Minnesota), a leader in the neuromodulation sector. Medtronic makes the Activa brain stimulation therapy, the Intercept system and the Kinetra Neurostimulator.

Boston Scientific (Natick, Massachusetts) also has a stake in Cyberonics – 15% of the shares outstanding – as well as distribution agreement with ANS. But ANS in June said it was reassessing that relationship after Boston Scientific bought Advanced Bionics (Valencia, California).

ANS designs implantable systems used to manage chronic intractable pain and other disorders of the central nervous system.

Forbes magazine recently recognized the company as one of America's 200 Best Small Companies, and Frost & Sullivan recently presented ANS with its Product Innovation Award, as the technology innovation leader in the neurostimulation market and ANS's Genesis Implantable Pulse Generator system as the most advanced fully implantable spinal cord stimulator on the market.

Cyberonics develops devices for the long-term treatment of epilepsy and other chronic neurological disorders using VNS Therapy. Stimulation is delivered by the VNS system – an implantable generator similar to a pacemaker – via continuous preprogrammed intermittent mild electrical pulses to the vagus nerve. The company's initial market is epilepsy, and the VNS system was approved by the FDA in 1997 for use as an adjunctive therapy in reducing the frequency of seizures in adults and adolescents over the age of 12.

The system also is approved for sale as a treatment for epilepsy in all the member countries of the European Economic Area, Canada, Australia and other markets. VNS Therapy is approved in the European Economic Area and in Canada as a treatment for depression in patients with treatment-resistant or treatment-intolerant major depressive episodes, including unipolar depression and bipolar disorder.

VNS Therapy is at various levels of investigational clinical study as a potential treatment for depression, anxiety disorders, Alzheimer's disease and chronic headache/migraine.

UTMD bemoans the 'unknown'

Following the Aug. 10 announcement by the FDA relative to Utah Medical Products' manufacture and sale of its products, Pilot said the company was flying blind insofar as the agency's position was concerned. Pilot, who has represented UTMD since the company received a warning letter from the FDA in 2001, said that no one from the FDA's Office of Compliance has spoken with the company to discuss the issues raised. "There has only been one meeting since December 2001, and it was a completely one-sided meeting where the company talked to FDA personnel but [got] nothing of substance [back]."

Overall, Pilot decried the agency's tactics, saying that the FDA's issuance of a statement concerning a lawsuit "before notifying the accused of the accusations," is "reckless and irresponsible – it doesn't even rise to the level of amateur."

He said another key issue arose last year when the agency declined to issue the company a Certificate for Foreign Government (CFG), representing FDA assurance that the company's products are in lawful commercial distribution. The lack of a CFG does not prevent the company from selling its product abroad, but UTMD then filed suit vs. the agency – "not once but twice," Pilot said – to obtain the certificate. Both lawsuits, he noted, are pending, and Utah Medical "continues to export its devices and sell them domestically." And there are no issues regarding the company's products themselves, Pilot said.

He indicated that the FDA's suit ultimately would serve to benefit UTMD, since the process of adjudication could clarify the issues at stake. As of the time of his comments, Pilot said the company had not yet been served with the complaint, he said, but that when it is, Utah Medical "will have the opportunity to answer the complaint and proceed to discovery – which will enable the company to understand what is behind all of this."

Following UTMD's release of a statement on Aug. 10 denying the agency's charges, the company issued another statement the next day in the form of a letter to customers and shareholders from Chairman and Chief Executive Officer Kevin Cornwell. The key message: assurance of UTMD product quality and safety.

"[A]t no time has there ever been any evidence to support a concern about either the safety or effectiveness of our devices," Cornwell said in the statement. "Although we have consistently responded comprehensively in writing to inspectors' observations, FDA supervisory and management personnel have refused for nearly three years to engage in dialogue with UTMD that would identify a violation of the Quality System Regulation [QSR] ..." He added that "independent experts ... have concluded that UTMD does comply with a reasonable interpretation of applicable laws and regulations, including the QSR."

He concluded: "We regret it if the FDA's public statements give an unfair implication of guilt. There has never been, nor is there now, an FDA allegation that UTMD's products are not safe and effective."

Utah Medical manufactures medical devices used in obstetrics, gynecology, neonatal intensive care, urology, electro-surgery and blood pressure monitoring.

In its initial statement, the FDA said that it was asking to permanently enjoin the company from manufacturing and distributing medical devices until the firm has demonstrated that it has corrected "deviations" from the agency's Current Good Manufacturing Practice rules as set forth in its Quality System regulation. The government's complaint was filed by the U.S. Department of Justice in the U.S. District Court for the District of Utah. In addition to the charges vs. Utah Medical, the complaint named as defendants Kevin Cornwell, the company's chairman and chief executive officer, and Ben Shirley, its quality manager and vice president of engineering.

The agency said in its statement that it previously sent a warning letter to the firm following an FDA inspection but that the company "has consistently failed to ensure that its products are manufactured in accordance with the Quality System regulation."

In its own statement in response to the FDA's announcement, UTMD said that following the FDA's "five-week long inspection," it sent a 600-page response to the agency in March with "detailed explanations" concerning seven cited items by the agency's inspection team but that it never received any "feedback" to that document. It said that in May, it requested mediation, a request "rejected by Tim Ulatowski, director, Office of Compliance in the Center for Devices and Radiological Health."

The company further stated that as a result of a previous warning letter from the FDA concerning its Midvale, Utah, facility and subsequent inspections, it hired a former 28-year employee of the agency "to review the documentation of the prior FDA inspections as well as conduct an independent investigation of UTMD's quality system." It said that the former FDA staff member had provided his opinion "that the investigators who conducted the inspection of the Utah Medical facility in February and March of 2003 engaged in inspectional practices in disregard of explicit instructions and policy stated in FDA's Investigations Operations Manual and prepared an Establishment Inspection Report that contains numerous misrepresentations of the actual facts, bias and material omissions." UTMD further quoted that individual as saying that "the number and significance of deficiencies found in the EIR suggests the real possibility of agency misconduct and bias against Utah Medical Products."

Cornwell expressed absolute assurance in the quality and safety of the company's products, and said he as "disappointed and bewildered by the performance of the FDA. "We advise that the FDA has the burden to prove its allegations in the courts of law, and regret that efforts by UTMD to engage in meaningful dialogue since 2001 have been repeatedly spurned." And he said that it is "in the best interests of the company, the industry and the American public that the details of our dispute and the FDA's performance be fully discovered and publicly disclosed."

In its report of the action against UTMD, the agency said that failure to comply with good manufacturing rules does not automatically mean that a device will be defective, but that failure to comply with the regulation "decreases the level of assurance that its products are safe and effective." Lester Crawford, FDA acting commissioner, said the agency "will not tolerate manufacturing practices that can potentially put patients at risk. Patients have a right to expect that the medical devices used to treat them are safe and effective."

The agency said that the legal action follows a series of inspections over the past three years that "revealed a pattern of significant deviations from the Quality System regulation at Utah Medical's Midvale facility. During the most recent inspection, conducted between Feb. 3 and March 3, 2004, FDA investigators found a variety of problems, including the failure to establish that manufacturing processes were adequately controlled, and the failure to have an effective system to identify and correct manufacturing problems."

The legal action against UTMD by the FDA appears as the culmination of a variety of disputes between the agency and the company. In its most recent quarterly report, Utah Medical said that its international gynecology product sales were weak "due to the FDA's refusal" to provide it with Certificates to Foreign Government. Cornwell charged that withholding the CFGs was a "unilateral" decision "done without due process." And he said that no one at FDA has provided a "justification" for the refusal.

Cornwell added that refusal of the CFG "simply makes no sense relative to the Bush administration's stated economic goals of creating jobs in America and seeking a level playing field with respect to foreign commerce."

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