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AMERICAN MEDICAL ELECTRONICS SIGNS LETTER OF INTENT TO LICENSE BONE SUBSTITUTE; FDA UPDATE ON CERVICAL PEMF STIMULATOR

    DALLAS, Aug. 13 /PRNewswire/ -- American Medical Electronics, Inc. (NASDAQ: AMEI), a manufacturer and distributor of advanced devices for orthopaedics and neurosurgery, announced today that it has signed a letter of intent with OsteoGenics, Inc. of Barrington, Ill., to acquire an exclusive worldwide license to manufacture, market and distribute a proprietary hydroxyapatite cement bone substitute (HA Cement) for all orthopaedic applications.
    The letter of intent also provides AME with the option to acquire all of the outstanding shares of OsteoGenics, Inc.  Completion of the transactions contemplated in the letter of intent is primarily subject to satisfactory completion of due diligence reviews of the businesses of AME and OsteoGenics, negotiation and execution of definitive license and option agreements, receipt of all necessary consents and approvals, and approval by the boards of directors of AME and OsteoGenics.
    Under the license agreement, AME would pay OsteoGenics $2 million plus a royalty based on its sales of the HA Cement material, with minimum royalties to be negotiated.  The letter of intent provides for the company to pay OsteoGenics' shareholders $1.5 million cash for the option to acquire OsteoGenics that will expire 2-1/2 years after the execution of the definitive option agreement, and for an option exercise price of $9 million payable upon exercise of the option.  At the option of the shareholders, up to $6 million of the option price may be payable in shares of AME's common stock, valued at $7.30 per share, subject to adjustment of such number of shares in certain circumstances.  In addition, a performance payment of up to $9 million, based on revenue from the sale of the HA Cement material following exercise of the option, would be made to OsteoGenics' shareholders.
    Joseph Mooibroek, president and chief executive officer of AME, noted that, "The letter of intent provides for AME and OsteoGenics to jointly fund development and clinical trials of the HA Cement material for orthopaedic applications, where it might be used in place of bone that is normally harvested from patients or donors.  When mixed with water, the bone substitute has a putty-like consistency and can be shaped in the body prior to hardening into a structurally stable implant.  Researchers believe, and limited clinical applications have demonstrated, that the HA Cement material is biocompatible and that it may resorb and be replaced over time by natural bone, which is largely composed of hydroxyapatite."
    The HA Cement material was initially developed by scientists at the American Dental Association Health Foundation.  Practical application of the HA Cement material was furthered beginning in 1987 by two of OsteoGenics' shareholders, Peter D. Costantino, M.D., clinical assistant professor at the Loyala University Stritch School of Medicine, and Craig D. Friedman, M.D., assistant professor at Yale University Medical  School.
    OsteoGenics has licensed the craniomaxillofacial applications of the HA Cement material to a manufacturer and supplier of craniomaxillofacial products.  OsteoGenics is currently conducting clinical trials for craniomaxillofacial and dental applications of its HA Cement material under an investigational device exemption (IDE) granted by the Food and Drug Administration (FDA).
    Dominic Mangone, chief executive officer of OsteoGenics, said that, "We are pleased that we will have the opportunity to work with AME in the further development of this breakthrough in materials technology, and look forward to benefiting from its experience in product applications for the orthopaedic marketplace."
    Mooibroek continued, "AME has received a letter from the FDA that the company needs to gather and provide additional clinical information concerning its cervical pulsed electromagnetic field (PEMF) stimulator system under an approved IDE before further FDA consideration can be given to AME's application to gain approval to market the product commercially."
    AME originally filed a premarket approval application (PMA) supplement for the cervical stimulator in February 1990.  Since then, several amendments have been filed in response to FDA requests for additional information to help the agency establish the similarity between the lumbar and cervical regions of the spine in terms of healing rates, success rates, and the nature and types of indications in each area.  AME intends to meet with the FDA to seek clarification of the FDA's communication to obtain commercial marketing approval of the cervical unit.  AME has been providing the cervical device to physicians under the FDA's custom device regulations.
    "Until we have received further clarification from the FDA, we cannot assess what impact its letter will have on our revenues from the cervical unit," added Mooibroek.  "We hope to get that clarification within the next several weeks."
    AME produces and distributes medical devices used primarily by orthopaedic and neurosurgical professionals.  The company's product lines include: the Spinal-Stim(R) System to enhance the healing of spinal fusions, Physio-Stim(R) bone growth stimulators for the healing of non-union fractures, the AME(R) Universal Bone Plate, the Halifax(R) Clamp cervical spine fixation system, the Ogden bone anchor and the Carbon-One(TM) Halo System for patients suffering trauma or deteriorating cervical spine conditions.
    -0-             08/13/93
    CONTACT:  Joseph Mooibroek, president and CEO, 214-918-8383, or Wesley Johnson, vice president-finance and CFO, 214-918-8477, both of American Medical Electronics, Inc.
    (AMEI) CO:  AMERICAN MEDICAL ELECTRONICS, INC.; OSTEOGENICS, INC. IN:  MTC SU:  LIC ST:  TX,IL


-- NY056 -- X680 08/13/93
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Date:Aug 13, 1993
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