UPDATE 3-FDA staff: Cancer a concern with Medtronic device

* Cancers seen with Amplify device -- FDA staff

* Medtronic: No statistical difference in cancer rates

* Shares down 0.6 percent (Adds analyst comments; updates stock price)

By Lisa Richwine

WASHINGTON, July 23 (Reuters) - U.S. reviewers are concerned about cancer cases in some patients implanted with an experimental Medtronic Inc (MDT.N) device developed to treat lower back pain, according to documents released on Friday.

The Amplify device contains a genetically engineered form of a protein to help fuse vertebrae by spurring bone growth. Approval could help Medtronic boost its spine business, which now accounts for 22 percent of the company's sales.

"The primary safety concern is the increased numbers of cancer events in patients treated with Amplify compared to the control group," Food and Drug Administration reviewers said in an analysis prepared for an advisory panel that will review the device on Tuesday.

At five years, cancer rates were 5 percent with Amplify and 1.8 percent in a control group that had standard fusion surgery using a piece of their hip bone implanted in the spine, FDA reviewers said.

Medtronic said there was "no plausible biological mechanism" to suggest Amplify causes cancer. The company also said cancer rates for the device and a comparison group were not statistically different. That means the findings may have been due to chance.

The agency will ask the outside experts on the advisory panel for input on the cancer findings and other issues, including whether the product might harm fetuses.

The advisory panel is expected to vote late Tuesday on whether to recommend approval of Amplify. The FDA will make the final decision in the coming months, but usually follows panel recommendations.

J.P. Morgan analyst Michael Weinstein put the odds of a positive panel recommendation at 40 percent, pointing to "inconclusive data regarding cancer risk."

The FDA summary said the agency wants another animal study to evaluate if Amplify may lead to birth defects. Medtronic proposed a strong boxed warning with the product saying women of child-bearing age should be warned about "potential risk to a fetus" and the device should not be implanted immediately before or during pregnancy, agency reviewers said.

The company said it would present to the panel "extensive and compelling reproductive toxicity testing" that addresses FDA concerns.

The protein used in Amplify is called recombinant human bone morphogenetic protein-2, or rhBMP-2. It is used in Medtronic's InFuse device, which is already on the market for spinal surgery and other uses.

Spinal products accounted for $3.5 billion of Medtronic's $15.8 billion in fiscal 2010 sales.

Analyst Weinstein said a negative vote on Amplify could pose challenges for futures sales of InFuse, which he said were about $750 million to $800 million annually. A positive vote on Amplify "de-risks the franchise," he said.

Medtronic shares were down 22 cents or 0.6 percent at $36.55 in late afternoon trading on the New York Stock Exchange. (Reporting by Lisa Richwine; editing by Gerald E. McCormick, Andre Grenon and Matthew Lewis)