The FDA Letter Won't Impact Atossa's Business
By Grant Zeng, CFA
On Feb 25, 2013,
Atossa Genetics, Inc. (
received a Warning Letter from the FDA regarding its Mammary
Aspirate Specimen Cytology Test
System and MASCT System Collection Test.
The Letter arises from certain FDA findings during a July 2012
inspection, to which the Company responded in August 2012,
explaining why the Company believed it was in compliance with
applicable regulations and/or was implementing changes responsive
to the findings of the FDA inspection. The FDA alleges in the
Letter that following 510(k) clearance the Company changed the
System in a manner that requires submission of an additional
510(k) notification to the FDA. Specifically, the FDA observes
that the Instructions For Use (IFU) in the original 510(k)
submission stated that the user must "Wash the collection
membrane with fixative solution into the collection vial…" and
the current IFU states "…apply one spray of Saccomanno's Fixative
to the collection membrane…" and that "this change fixes the NAF
specimen to the filter paper rather than washing it into a
collection vial." At the time that the changes were made the
Company determined that a new 510(k) was not required in
accordance with the FDA's guidance document entitled "Deciding
When to Submit a 510(k) for a Change to an Existing
The Company is working with the FDA to resolve these issues in
the best interests of patients and their doctors. The Company has
until March 14, 2013 to respond to the Letter and is currently
working to prepare that response. Among other things, the Company
currently expects that the response will explain why the Company
believes that the System in its current form has been and
continues to be appropriately marketed under a cleared 510(k)
premarket notification, and why it is in substantial compliance
with applicable regulations, including cGMP.
We think the FDA letter won't impact Atossa's major business
much based on our following analysis.
First, based on our conversation with the Company, we have
reasons to believe that the new version of MASCAT System is in
compliance with the FDA regulations and not required for 510(K)
clearance. In such a best scenario, the MASCAT System and
The ForeCYTE Test
will continue to operate as usual.
Second, if the FDA does not agree with the Company's position
concerning clearance of the new version of the MASCAT System,
Atossa may be required to submit and receive clearance of a new
510(k) notice for the current form of the System. Even in such a
case, we think the business of ForeCYTE Test and the MASCAT
System itself won't be much impact. Below are the reasons:
- Atossa's previous version of the MASCAT System has been
approved by the FDA under 510(k). The Company can still use the
old version of the System for NAF collection and processing and
conduct the ForeCYTE Test.
- The difference between the old version and the new version
of the System is not huge in our view. The old System washs the
collection membrane with fixative solution into the collection
vial. The new System only applies one spray of Saccomanno's
Fixative to the collection membrane, and this change fixes the
NAF specimen to the filter paper rather than washing it into a
- Since the new version of the System is more convenient for
patients and physicians, Atossa may resubmit the new System to
the FDA for 510(k) clearance and at the same time use the old
System for NAF collection and processing.
- If Atossa decides to resubmit the new System to the FDA for
510(k) clearance, it won't take a long time. Since the device
is going to be filed as a new version of an already approved
device, we estimate that time from submission to clear will be
less than six months.
Therefore, we have a fair reason to believe that the FDA
letter has only very limited impact on the Company's MASCAT
System and the ForeCYTE Test business. We reminder investors that
in addition to the ForeCYTE Test, Atossa has another test
The ArgusCYTE Test
on the market, and will launch two more tests in 2013. These
three tests won't be impacted by the FDA requirement at all.
Based on our analysis, we think it is a great opportunity to
accumulate Atossa shares if there is any correction after the FDA
letter. We are firmly optimistic about Atossa's prospect as a
pure play breast health testing company.
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