As a counterpoint to recent reverses, tissue processing company CryoLife (Kennesaw, Georgia) received some good news last month, reaching an agreement with the FDA that allowed it immediately to resume processing and limited distribution, with specific conditions, of its non-valved cardiac and vascular tissues. The FDA earlier had ordered a recall of human ligaments, tendons, cartilage and blood vessels that the company had processed since Oct. 3, 2001. The agency also ordered the company to halt further shipments until it resolved concerns about its infection-prevention measures. At the time, the FDA said CryoLife couldn't assure the tissues didn't contain bacteria or fungus. The agency was not required to recall its human-tissue heart valves, but federal regulators have said they have "serious concerns" about them and recommended doctors consider using alternative sources.

The new agreement — which does not apply to its orthopedic tissue business — allows CryoLife to distribute existing and newly processed non-valved cardiac conduits and patches, saphenous veins, femoral veins and arteries, and aorto-iliac arteries "for specified medically urgent uses when alternative treatments have been exhausted or are unavailable," according to an FDA letter.

"[The agreement] allows us a mechanism whereby we can distribute the tissues that are still subject to the recall," said D. Ashley Lee, CryoLife CFO and vice president. He told The BBI Newsletter that the agreement also gives the company a means to begin processing non-valve conduit and vascular tissues going forward. "As long as we process the tissues, subject to the two or three conditions that are laid out in the agreement letter ... we'll be able to distribute those tissues on an unrestricted basis," Lee said.

The agreement comes with various conditions. The FDA said it would allow these tissues to be distributed only after CryoLife completed steps to assure that the tissue is used for approved purposes and that patients will be notified of any risks associated with tissue use. Specifically, CryoLife must obtain physician prescriptions, and tissue packaging must contain appropriate warning labels. And the company must identify third-party records of donor tissue testing and destroy tissue from donors in whom microorganisms associated with an infection are found.

The agreement has a term of 45 working days and specifies interim operating procedures to permit CryoLife to distribute tissues processed during that period. The company also agreed to form a corrective action plan within 30 days with steps to validate its tissue processing procedures. The company estimated that most of the covered tissue under its control is used by surgeons under the conditions permitted by the agreement.

Another issue surfaced last month when CryoLife laid off 105 employees, about a quarter of its staff, and revised downward its 2Q results to post a net loss of $5.5 million. It also disclosed that its lender, Bank of America, had determined that the widespread human-tissue recall put the company in non-compliance with loan covenants, though the bank hasn't declared it in default on its $6 million term loan. The bank has blocked CryoLife, for now, from drawing on a $10 million line of credit arranged on July 30, it acknowledged.

Alliance cuts staff, Organogenesis in hiatus

The roller-coast ride taken by current stock prices has been mirrored by developments in the medical technology, with some companies on the sharp downside of that ride. Two companies currently in a fall are Alliance Pharmaceutical (San Diego, California), which last month cut 40% of its workforce, and Organogenesis (Canton, Massachusetts), which put about 100 of its employees on a forced two-week unpaid vacation.

Alliance laid off 55 employees associated with its Oxygent product, leaving about 80 employees. The company has spent more than $200 million developing Oxygent (perflubron emulsion), an intravascular oxygen carrier, but said it faces a revised development plan that it cannot afford. Besides making the workforce cut, it warned PFC Therapeutics that its agreement and joint-venture arrangement could be dissolved if new funds don't materialize.

Oxygent was successful in a Phase III trial in general surgery patients, but a Phase III trial in cardiac surgery patients was suspended in January 2001 due to an imbalance in adverse events between the treated group and controls. That problem was related to the trial's construction, not Oxygent, but the trial nevertheless was broken off before its conclusion. Alliance would like to file for regulatory approval in the general surgery indication first, but that requires a second successful Phase III trial. A cardiac surgery indication would be pursued only after approval in the general indication, according to Gwen Rosenberg, vice president for corporate communications.

PFC Therapeutics was established as an equally owned joint venture between Alliance and Baxter Healthcare (Deerfield, Illinois), with Baxter in May 2000 gaining the rights to Oxygent in North America and Europe. PFC agreed to develop Oxygent in those regions using a specified plan and funds of about $42 million. But clinical setbacks and other problems produced a different set of needs, Rosenberg said, adding that Alliance has put PFC "on notice that we intend to terminate the license unless the resources can be made available." If these resources don't transpire, Alliance will reacquire full product rights and seek "additional funding through investors or a new partner," she said.

Capping its own series of setbacks, Organogenesis last month "temporarily" shut down its operations, sending more than 100 employees on forced two-week vacations and halting shipments of Apligraf, the human tissue substitute it markets with Novartis Pharma (Basel, Switzerland). According to newspaper reports, the furloughed employees, who were expected to return to work following the hiatus, will lose only their vacation pay while a group of 10 senior-level managers and support staff remained on the job.

In July the company termed its marketing agreement with Novartis "unsustainable" and reported having just $3.7 million in cash on hand as of June 30. The company said at that time that renegotiating its pact with Novartis was critical to its survival. At that time it laid off 26 employees, a follow-on to a reduction of 37 workers in February.

In the first quarter, Organogenesis reported losses of $6.7 million on revenue of $2.9 million, and its stock had tumbled 98% this year to 9 cents a share. Its stock has since been delisted from the American Stock Exchange due to its failure to file its second-quarter Form 10-Q with the Securities and Exchange Commission on time.

Baxter issues warning, gets blood system OK

Baxter Healthcare received both good and bad news last month, receiving FDA clearance for its Alyx blood collection system but also being forced to confront deaths in dialysis patients. The company warned kidney dialysis providers not to use certain tubing with its Meridian dialysis machines after reports of five patient deaths and two injuries, according to an FDA report. Baxter said the cause of the deaths and injuries has not been determined and an investigation is ongoing. The FDA said it also is probing the matter.

This is the second problem that Baxter has had in the past year with its dialysis products. Last year, Baxter pulled from the market some A and AF dialysis filters, acquired when the company bought Althin Medical (Ronneby, Sweden) in March 2000. It said a fluid used in their manufacturing may have contributed to some 50 patient deaths in Spain, Croatia and the U.S. The company was compelled at that time to take a charge of more than $150 million to cover the costs of discontinuing the product line, for litigation and for other related costs.

In a letter dated Sept. 6, Baxter told providers to immediately discontinue use of certain blood tubing made by privately held Medisystems (Seattle, Washington) in conjunction with the Meridian machine. Baxter's letter said the tubing might kink when used with the Meridian machine.

On the positive side, the company received U.S. approval to market its Alyx blood collection system, aimed at increasing the nation's perpetually low blood supply. The Alyx system will allow blood centers to collect two units of red blood cells, instead of just one, from eligible donors. The system, which will compete with Haemonetics' (Braintree, Massachusetts) MCS+ collection system, enables blood banks to maximize each donation of blood they get.

Orchid to apply SNP analysis to WTC effort

More than a year after the Sept. 11 tragedy, about half of the victims at New York's World Trade Center remain unidentified. While about 49% of the nearly 3,000 killed as a result of the terrorist attacks on the twin towers have been identified using forensic techniques including DNA analysis, the effort remains far from complete. Orchid BioSciences (Princeton, New Jersey), was awarded a contract by New York's chief medical examiner to continue the process. Though DNA in more than half of the remains is so damaged or degraded that it has been rendered unidentifiable to date, Orchid will use its single nucleotide polymorphism (SNP) analysis technology to analyze remaining samples. Orchid said panels of SNPs, the smallest and most common element of genetic variation between individuals that the firm has used in paternity suits and other identity cases, could help identify additional DNA specimens that have failed previous attempts.

Tissue samples from the World Trade Center will be amplified to create copies of the location of the DNA. The amplified sample is added to a reaction that includes Orchid's SNP-IT technology, the chemistry for doing SNP scoring. The product is then run through SNPstream UHT, the company's hardware system that can work with a panel of SNPs and a large number of samples. It is capable of analyzing more than 800,000 SNPs daily.

The project, which has completed pilot-stage validation testing, will take several months. "If there's a match, we'll find it if there's DNA to be had," Orchid CEO Dale Pfost said, though he added there is not a 100% guarantee of identification, since DNA may be completely missing from some samples.