Cytori Therapeutics Inc. (CYTX), a biotechnology company developing experimental burn treatment therapies, lost a U.S. appeals court bid to overturn the Food and Drug Administrations initial rejection of two medical devices that use fat as a source of stem-cell therapy.

The U.S. Court of Appeals in Washington upheld the FDAs decision that two devices submitted by Cytori for approval required more extensive testing before they could be released safely on the market.

The devices, called Celution and StemSource, arent substantially equivalent to currently marketed devices, which rely on blood or marrow cells, U.S. Circuit Judge Brett Kavanaugh wrote today in the 12-page opinion.

The FDA reasonably concluded and reasonably explained that the Celution and StemSource did not meet either the intended use requirement or the technological characteristics requirement for a substantial equivalence determination, Kavanaugh said in a ruling joined by circuit judges Janice Rogers Brown and David Sentelle.

In order to win approval for new medical devices through a more streamlined premarket notification process, the devices have to be similar to others already on the market and have similar uses, Kavanaugh said.

Cytori shares fell as much as 3 percent on the news before recovering to $2.77 in New York trading, unchanged from yesterdays close.

Cytoris experimental therapy takes adipose tissue, or body fat, from a patient and through its device separates the adult stem and regenerative cells. The San Diego, California-based company last year won a $4.7 million U.S. government contract to develop a stem cell therapy to treat burns caused by thermal or radioactive bombs.

Testing the technology in a clinical trial and getting approval may take five years, Chief Executive Officer Christopher Calhoun said in an interview with Bloomberg Television Sept. 28. The company is testing its therapy for other soft tissue damage, as well as cardiovascular disease, Calhoun said.

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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Cytori Loses Bid to Overturn FDA Bar on Stem - Cell Devices