The FDA wants to have a regulatory meeting with the leaders of Zimmer Biomet Holdings, Inc. about the company’s Warsaw North Campus quality remediation problems.
On August 27, 2018, Zimmer Biomet filed a Form 8-K with the SEC disclosing that the company received a Warning Letter in August 24, 2018 from the FDA related to “observed non-conformities with current good manufacturing practice requirements of the Quality System regulation” at the company’s North Campus manufacturing facility in Warsaw, Indiana, acquired in the Biomet merger.
In the Warning Letter, the FDA proposes a regulatory meeting with the company to discuss proposed corrections.
Warning Letter
Regulatory Focus (RF) reported on August 28, 2018 that the Warning Letter was posted on the FDA’s website, but then removed.
The RF report said that Zimmer was cited for six violations, including failing to establish and maintain procedures for verifying or validating a corrective and preventive action.
“During the inspection, review of three separate CAPA’s [Corrective Action/Preventive Action] revealed that your firm has not been able to demonstrate that the corrective or preventive actions taken by your firm are effective in ensuring that devices being distributed meet all finished product specifications,” the Warning Letter stated.
Zimmer, according to RF, “was also cited for failing to adequately ensure that when the results of a process cannot be fully verified by subsequent inspection and test that the process shall be validated with a high degree of assurance.”
“During the inspection. we observed five separate operations in which employees on the production line were not following production procedures adequately,” said the FDA.
The FDA initially inspected the North Campus facility in 2016 and issued a Form 483 with “inspectional observations”. The FDA then reinspected the facility in April 2018 and issued another Form 483.
The company provided written responses to the FDA detailing corrective actions underway.
The current 8-K SEC (Securities Exchange Commission) filing stated, “While the Warning Letter acknowledges our quality remediation plan and actions we’ve already taken to address the FDA’s inspectional observations, it notes violations that require additional action or explanation.”
The company says it intends to respond to the FDA’s newest Warning Letter within 15 business days and then have the proposed regulatory meeting.
Regulatory Restrictions
While the Warning Letter did not restrict production or shipment of products from the facility, require withdrawal of any product from the market or prohibit the company from seeking 510(k) clearances, the Letter stated that premarket approval (PMA) applications for products “reasonably related” to the quality issues, will not be approved until corrections are made.
The FDA also told the company that requests for Certificates to Foreign Governments will not be granted until the violations have been corrected.
Wall Street: “No Material Effect”
The Warning Letter represents more of a headline risk than an actual setback for the company, according to an expert used by analysts at Wells Fargo Securities, LLC
In an August 28, 2018 note, the analysts wrote that their expert concluded this because: “(1) [the warning letter] does not delay new product approvals given that the limitation is only on pre-market approvals (PMAs) and Zimmer Biomet has none pending FDA review; and (2) it should not materially increase the spending required for remediation because the company has already been spending as though they had a warning letter.”
The expert also does not expect the Warning Letter to have a material effect on the company. “The issues that were noted by FDA appear to be ones that the company was already addressing, so there should be few new corrective actions that need to be initiated. The Warning Letter may affect timelines—FDA is dissatisfied with the alacrity with which some fixes are being made—but it does not appear that it would affect the scope of what needs to be done.”
Re-Inspection
The FDA said there will need to be verification of corrections by a re-inspection. The analysts expect the next inspection to take place sometime in April 2019.
“Our consultant believes that if Zimmer Biomet shows substantial progress, then the likelihood of FDA seeking an injunction is quite low. Conversely, if problems persist or worsen, FDA may decide that it has given the company enough time to undertake remedial actions on its own and seek an injunction. While it is possible that FDA would pursue an injunction before a new inspection, it would be a departure from practice,” concluded the analysts.
