Wright Medical reported weaker-than-expected sales of its recently-acquired Cartiva implant in the second-quarter, prompting the company to reduce its guidance for the year. The news comes amid some investor concerns and analyst commentary regarding the clinical performance and market opportunity for Cartiva.
Wright shelled out $435 million to acquire Cartiva last year. FDA approved the Cartiva Synthetic Cartilage Implant (SCI) for treating arthritis at the base of the great toe in July 2016. The implant is composed of a biocompatible, durable, low-friction organic polymer designed to function similarly to natural cartilage, and it can be implanted in about 35 minutes, Wright noted at the time of the acquisition.
Other benefits the company has touted include the reduction of joint pain without sacrificing the foot's natural movement and the retention of the patient's mobility and range of motion. Also, due to a less restrictive rehabilitation protocol, Cartiva patients typically return to function and daily activities faster than patients who undergo a fusion procedure, according to the company.
But investor concerns prompted Mike Matson, a medtech analyst at Needham & Co., to dig into the data from Cartiva's pivotal trial, known as the MOTION trial.
"The MOTION pivotal trial showed statistically significant higher pain scores with Cartiva but similar functional scores," Matson wrote in a price target and estimate change report published July 23, 2019. "We also found a Cartiva case series with mixed results and numerous online complaints from dissatisfied Cartiva patients."
Will a Vocal Minority Discourage Prospective Patients?
Matson cited patient complaints on various websites including this thread on patient.info, which has more than 800 replies posted over the past two years; and a physician's complaints posted here. He also pointed to the blog of Jane Langille, a health and medical writer whose blog offer a relatively positive and informative review of the device based on her personal experience: Cartiva Implant Reduces Toe Pain, Improves Motion. Langille said her procedure was performed by Timothy Daniels, MD, who was the primary investigator at St. Michael's Hospital in Toronto, one of 12 sites across Canada and the United Kingdom, and a co-author of the MOTION trial.
"While some of the patients are satisfied with Cartiva, a majority are dissatisfied with many citing pain that lasts longer than they expected. We believe that this is consistent with the MOTION trial results," Matson wrote in his report. "Although we suspect that the complaints are coming from a vocal minority (we think unhappy patients are much more likely to voice their opinions), we worry that the negative comments could discourage prospective patients from getting a Cartiva procedure."
Matson said that managing both physician and patient expectations and ensuring proper patient selection is key to Cartiva's continued success.
MD+DI attempted to reach Wright Medical for comment on Matson's report and sent questions via email on July 25, but the company did not respond.
Wright Medical CEO: 'We Strongly Disagree'
"There has been some recent negative commentary from the investment community regarding the clinical performance of the Cartiva product and the market opportunity for Cartiva that we strongly disagree with," Wright CEO Bob Palmisano said during the second-quarter earnings call. "Nothing mentioned in this commentary was new to us, nor do we think anything differently now. This was all known at the time of the deal, was considered in our deal model and has no impact on current year constant currency organic growth rates."
Wright executives dedicated the majority of the second-quarter earnings call to addressing both the shortfall and the negative buzz.
In the first half of the year, Wright was focused on the U.S. launch of Cartiva as an alternative to cheilectomy, which Palmisano previously said is roughly a $400 million market opportunity. But the company is now selling the implant in Europe and Australia through its direct salesforce. The company has also been exploring the use of Cartiva for a thumb indication and expects to begin a limited launch of the Cartiva thumb implant in the UK later this year, with additional European countries to follow early in 2020. Wright has not yet shared a timeline for bringing the Cartiva thumb implant to the U.S. market, but Palmisano said the U.S. IDE study for that indication completed enrollment in March.
"When we acquired Cartiva, our goal was to lead with the best-in-class differentiating technologies in extremities and biologics. That is still the case," Palmisano said. "To be clear, our Cartiva shortfall in Q2 was due to underperformance by the former Cartiva distributors. It was not due to any clinical issue. Cartiva is backed by the highest level of prospective randomized clinical research and has been proven to be a viable alternative to fusion for patients wanting to maintain a range of motion. With almost six years of follow-up from a rigorously conducted clinical trial, the data supports Cartiva being a game-changer in the treatment of this condition. The market opportunity has not changed based on the PMA study and our own independent research."
Palmisano said Wright Medical has now conducted two separate independent studies, each including 200 physicians, half of whom use Cartiva and half of whom do not.
"The conclusion of those studies were strikingly similar," he said. "In the most recent study, 95% of current Cartiva users expected to maintain or increase their usage and 71% of the non-Cartiva users expected to use the product in the future. We believe Cartiva is a fantastic, more conservative treatment option than fusion that can easily be revised for the small percentage of patients who are dissatisfied no matter what the reason."
The CEO noted that the company is still in the early phases of the Cartiva launch and that it is not unusual to see some variation in physician learning curves, clinical experience, and adoption rates. "We do expect this to improve as our clinical education programs continue to train greater numbers of physicians on proper patient selection and the importance of setting realistic patient expectations on the front end, particularly with regard to the time it takes to realize the full benefits of the procedures," he said.
Here's What the Science Tells Us
It's not common for a medtech company to invite an independent physician to speak during a quarterly earnings call, but that's exactly what Wright Medical did during the second-quarter call. Judith Baumhauer, MD, an orthopedic foot and ankle surgeon from the University Of Rochester School Of Medicine and a primary investigator in the MOTION study participated in the earnings call.
In the original MOTION study, 152 patients received the Cartiva implant. Of these, long-term outcomes were available for 106 patients of the 135 eligible at this time point, with a mean follow-up of 5.8 years. These outcomes demonstrate that the Cartiva synthetic cartilage implant provides durable pain relief with patients achieving a 97% medium reduction in pain, Baumhauer said. It is sustainable with functional improvement with patients demonstrating 176% median improvement in sports activities. It also demonstrated motion preservation, with patients experiencing 25% improvement in range of motion from baseline and also a high rate of satisfaction with the treatment with 93% of patients saying that they would have that procedure again.
Cartiva patients demonstrated this substantial and clinically meaningful reduction of pain at their two-week post-op and at every subsequent visit included in this study as assessed by this validated digital-analog scale.
"This is not unusual to see this level of improvement slowly over time. For other motion-preserving orthopedic procedures such as hip replacements, knee replacements and ankles; we see these similar patterns in successful implants. We know that not only does the bone need to heal since we drill a hole and implanted an implant, but the adjacent soft tissues also need to heal because they're still moving and doing their job," she said. "So the secret here is time."
Baumhauer said many patients are willing to trade off a certain amount of low-level pain for a period of time for the extra mobility that the Cartiva device provides.
"I consider Cartiva to be a significant advance in effectively treating great toe arthritis, preserving motion, improving function and decreasing pain for my patients," Baumhauer said. "It's quickly become an important treatment option for my patients and my practice and I look forward to continuing to provide my patients with this breakthrough technology. I have the utmost confidence in it and the science that we produced with it."