Amedica, a biomaterial company focused on using its silicon nitride technology platform to develop a range of medical devices, announced that it will cease distribution of amniotic derived allograft products under a distribution agreement with a third party supplier.
Here are five key observations:
1. The derived allograft products revenue accounted for less than 4 percent of overall first quarter sales this year, quite a bit lower than in 2013 when it was as high as 12 percent. Gross margin from these products was negligible, however, which factored into the decision to cease distribution.
"While our decision to cease distribution of these allograft products under the distribution agreement may initially result in a decline in top-line revenue in the short term, we believe it is in the best interest of our customers and shareholders that our company focuses on our proprietary biomaterials which yield much higher gross margins," said Amedica CFO Jay Moyes in a news release.
2. Terminating distribution of the allograft products allows the company to obtain U.S. Food and Drug Administration 510(k) clearance for its silicon nitride cancellous structured ceramic biomaterial, a potential alternative to allograft bone. The bioceramic material is designed to facilitate bone growth in the center lumen of an interbody spinal device.
3. Amedica is also conducting a prospective randomized clinical trial in Europe named CASCADE comparing its valeo composite silicon nitride interbody devices, which includes cancellous structured ceramic biomaterial, to PEEK interbody devices. The results of the trial will be used to support the application for FDA clearance.
4. According to Amedica's recently released first quarter 2014 financial report, product revenue from the company's proprietary silicon nitride ceramic products increased 41 percent over the same period last year. Amedica reported an overall net loss of $4.7 million for Q1, a $1.2 million increase over the same period last year. The increased net loss was primarily due to stock compensation expense of approximately $1.4 million recorded in the first quarter of 2014.
5. In February, Amedica announced an initial public offering of 3,500,000 shares at $5.75 per share. Towards the end of last year, the company also signed an agreement with Kyocera Industrial Ceramics Corporation to manufacture medical devices from Amedica's Silicon Nitride biomaterial. The agreement aimed at helping the company meet market demands.
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