On November 6th, Globus Medical announced a few things in their third quarter earnings call. [1]
- Revenue: Reached $626 million in Q3 2024, a 63% increase from the previous year.
- Earnings per Share (EPS): Non-GAAP EPS rose to $0.83, marking a 45% improvement.
- Free Cash Flow: Achieved a record free cash flow of $162 million.
During the Q&A session, someone asked for an update on the FDA warning letter that recently came out. To which the President, Chief Executive Officer, and Director, Daniel T. Scavilla, responded:
So, just again, to remind everybody, that warning letter was really about our internal processes of how we handle complaints. It was not directed toward the actual robot nor did it imply any issues with a robot or with patient safety.
It was about how we handle complaints. And it was really about the array of criteria we selected when we’re analyzing complaints. The FDA would like us to do more, in which case we did. We went back to the very first complaint and went through every single one of them, realized that our outcome would not change with all the additional criteria.
We’ve agreed to put that going forward. We’ve submitted that out to the FDA. We’ve had a few back and forth for clarification. And now we’re in the phase of just proving it out as an effective approach.
So what was this letter? And where did this all start?
Earlier…
I need to point out that there are two separate items that occurred or is occurring with Globus Medical in reference to their Excelsius GPS surgical robot.
On December 7, 2023, Globus Medical issued a Class I recall for its ExcelsiusGPS Flat Panel Fluoroscopy Registration Fixture, due to a calibration error that could compromise navigation accuracy in spinal surgeries. This fixture, part of the ExcelsiusGPS surgical guidance system, helps align medical images with a CAD model to assist surgeons with implant placement. The calibration error was suggested as may lead to misalignment, risking implant or instrument misplacement, which could cause serious injuries, including tissue damage, nerve irritation, or paralysis. Although seven devices were distributed between July and November 2023, only two injury cases had been reported, with no fatalities. Healthcare providers using the affected devices were advised to return them to Globus Medical and report any adverse events. It needs to be noted that this recall was a correction, not a product removal.[2]
In earlier February 2024, the FDA issued Globus Medical multiple recalls for multiple sized cranial drills, citing sterility concerns. [3]
On July 15, 2024, the FDA issued a warning letter to Globus Medical following a February-March inspection of its Pennsylvania facility. The inspection found that Globus Medical’s Class II ExcelsiusGPS surgical robot and associated spine and cranial modules had manufacturing and quality control practices that did not comply with the FDA’s Quality System Regulation (21 CFR Part 820). Key issues included failure to follow corrective and preventive action (CAPA) procedures for addressing recurring quality issues, such as complaints about misplaced screws, which had 55 and 76 documented cases but lacked a trend analysis to prompt CAPAs. The FDA determined that Globus Medical’s responses to these issues were inadequate, as they did not demonstrate effective use of statistical methods to identify product trends and failed to establish timelines for corrective actions.[5]
Failure to establish and maintain procedures for implementing corrective and preventive actions:
In your responses, you provided data showing counts of misplaced screws per 10,000 screws implanted from 2017 to 2024. However, there was no additional level of data analyses, using appropriate statistical methodology, to determine whether there are any trends associated with part numbers, including the spine and cranial modules; lot numbers; patient symptoms; confirmed and alleged defects; causes determined by complaint investigations (e.g., software, components, user error); etc. for complaints specifically related to misplaced screws navigated by the EGPS surgical robot.
The FDA also found deficiencies in Globus Medical’s complaint-handling practices. Complaints related to potential device malfunctions were not investigated thoroughly, and documentation lacked essential details to rule out device malfunction or user error. For instance, a complaint about a patient death following device use lacked a comprehensive investigation, which should have included autopsy results or a physician statement. The company’s response with revised complaint procedures and database improvements was deemed insufficient by the FDA due to the absence of clear timelines and retrospective reviews of past complaints to ensure corrective actions aligned with regulatory requirements.[5]
Failure to review, evaluate, and investigate complaints involving the possible failure of a device:
Your complaint record lacked details on how you concluded that there was no device malfunction or user error for complaint COM-21-3115 (10/5/21) where the EGPS surgical robot was in use when a patient experienced adverse health effects and passed away. In addition, the complaint record for COM-22-0414 (2/10/22), received for “screw missed pedicle which then went superior into the disc space and the screw was removed,” lacked evidence that you made multiple attempts to verify whether a malfunction occurred.
The letter further highlighted that Globus Medical was not in compliance with the Medical Device Reporting (MDR) requirements, as reports of serious injuries were not submitted within the mandatory 30-day window (examples below), and some reports incorrectly classified incidents as malfunctions rather than injuries. Several historical MDRs were submitted late, and Globus Medical did not retain electronic acknowledgments of their MDR submissions. The FDA warned that failure to address these issues could lead to regulatory actions, including product seizures and federal contract limitations, emphasizing the need for prompt and comprehensive corrective measures to bring Globus Medical into compliance.[5]
Failure to submit a report to FDA no later than 30 calendar days:
The information included for Complaint COM-19-2014 (Exhibit 15) describes an event where a patient’s dural lining of the spinal cord was damaged during a procedure with your firm’s EGPS spinal robotic system, necessitating surgical intervention and repair. There is no information reasonably suggesting that the device might not be a contributing factor to the patient’s serious injury.
The information included for Complaints COM-21-0424, COM-21-0467, COM-21-2838, COM-22-0414 and COM-23-2525 reasonably suggests that your firm’s EGPS spinal robotic system malfunctioned (i.e., misplaced screws) while in use. We believe that the referenced malfunction would be likely to cause or contribute to a death or serious injury if it were to recur.
What to take away…
Globus is prepared for a potential reinspection to validate their improvements and hopes to resolve the warning letter faster than the typical one-year timeframe seen in similar cases. While some customers expressed concerns about the warning, the company has proactively engaged with them, reassuring that the issues are unrelated to the robot’s performance or safety. So far, the impact on sales has been minimal and not significantly affected by the warning.[1]
References
[1] Transcribing, M. F. (2024, November 6). Globus Medical (GMED) Q3 2024 earnings call transcript. The Motley Fool. https://www.fool.com/earnings/call-transcripts/2024/11/05/globus-medical-gmed-q3-2024-earnings-call-transcri/
[2] Globus Medical, Inc. Recalls ExcelsiusGPS Flat Panel Fluoroscopy Registration Fixture Due to a Calibration Error. (2024, January 30). US Food & Drug Administration. https://www.fda.gov/medical-devices/medical-device-recalls/globus-medical-inc-recalls-excelsiusgps-flat-panel-fluoroscopy-registration-fixture-due-calibration#:~:text=On%20December%207%2C%202023%2C%20Globus,Registration%20Fixture%20to%20Globus%20Medical.
[3] Spine safety notices. (n.d.). Retrieved November 8, 2024, from https://www.spine.org/Research-Clinical-Care/Patient-Safety/Spine-Safety-Notices
[4] Medical device recalls. (n.d.). US Food and Drug Administration. Retrieved November 8, 2024, from https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfRES/res.cfm?start_search=1&event_id=93742
[5] WARNING LETTER Globus Medical, Inc. MARCS-CMS 685606 — July 15, 2024. (2024, July 15). U.S. Food & Drug Administration. https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/globus-medical-inc-685606-07152024
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