What must Robert Palmisano, the almost new president and CEO of Wright Medical Group, Inc., be thinking?
Just as he’s taken over the wheels of the Wrightmobile recovering from a serious speeding ticket (deferred prosecution agreement) that seems to be on its way to being put behind him, he’s cruising down Beale Street and the sirens go off again.
On August 3, 2012, the company disclosed in a 10-Q SEC (Securities and Exchange Commission) filing that it has received a subpoena from the U.S. Attorney’s Office for the Western District of Tennessee requesting records and documentation relating to the company’s Profemur series of hip replacement devices. The subpoena covers the period from January 1, 2000 to August 2, 2012. The company is in the process of collecting the responsive documents and responding to the subpoena.
No further details regarding the subpoena were disclosed.
BMO Capital Market analyst Joanne Wuensch pointed out that this was a request for information, not an allegation and does not impact the company’s ability to manufacture and sell products.
Wuensch said hip sales were 33% of Wright’s revenue in the six months ending June 30, 2012. Hip sales in the U.S. were only 10% of total revenue. The Profemur modular hip systems generate the majority of segment sales. Wright’s overall revenues and the U.S. business have been declining at double-digit rates as the company rebuilds its recon business in the wake of new corporate compliance requirements.
In the August 3 SEC disclosure, the company also said Stryker Corporation’s recall of that company’s Rejuvenate Modular and ABG II modular hip stems could negatively impact sales of the Profemur system.
“Although Stryker’s recalled modular hip stems differ in design and material from our Profemur modular neck hip stems, there is a risk that Stryker’s recall and the resultant publicity could negatively impact sales of modular neck systems of other manufacturers, including our Profemur system, even if the issues cited by Stryker are unique to Stryker products, ” said the company disclosure.
One can only speculate about the nature of the U.S. Attorney’s inquiry. Given that the company is under a deferred prosecution agreement related to relationships with surgeon customers, the inquiry seems likely to be about other matters.
