Two-and-a-half years after regenerative medicine company Mimedx Group Inc. came under federal investigation for improper sales and marketing practices and nearly two years since it was delisted by Nasdaq, the company is back on track financially and pursuing an active pipeline of new products.
Marietta, Ga.-based Mimedx recently reported second quarter sales of $61.7 million, a 7.2% decline from the same period the prior year. The second quarter 10Q Form – one of seven SEC financial statements submitted in the last five months as the company worked to regain compliance – brings Mimedx up to date, paving the way for it to relist its stock.
“The company has restored its financial integrity,” CEO Timothy Wright told BioWorld. “Now we’re focused on operations. We don’t have any more distractions. We’re playing offense now.”
In recent weeks, the once-troubled company filed its 2019 annual report and 2020 first-quarter report, and took initial steps to relist its common stock. “I anticipate toward the end of September, if not sooner, we’ll get relisted on Nasdaq,” Wright said.
Mimedx also raised $150 million in concurrent private equity and debt financings. The funds will be used to further stabilize the business, build its R&D, manufacturing and commercialization arms and pursue growth opportunities in the company’s amniotic tissue products and know-how.
“Mimedx started out here as a pioneer. It had purpose,” Wright said. “The last couple of years that purpose drifted. So bringing that purpose back into focus is very important.”
The milestones are part of an aggressive, 15-month turnaround effort led by Wright, who joined the company in May 2019 after a long career that included Dupont Merck Pharmaceuticals, Élan Corporation plc, Mallinckrodt Pharmaceuticals and a stint in academia.
Mimedx’s troubles trace back to February 2018, when the U.S. Department of Justice (DOJ) launched an investigation of its sales and marketing practices, including undisclosed payments to doctors. The DOJ investigation, as well as related reassessments by payers and earnings restatements required by the SEC, all stem back to short-seller Viceroy Research that, along with other similar activist investors Aurelius Value and Citron Research, started issuing reports critical of Mimedx and its sales practices in the fall of 2017.
The company was subsequently delisted in November 2018.
“Our business certainly has seen plenty of challenges,” Wright said. In addition to the delisting and its regulatory issues, the marketing and sale of its micronized products “face risk in an unsettled regulatory environment as we approach the end of the FDA’s period of enforcement discretion” around human cell- and tissue-based products, Wright said. Getting the company back on track also required “the significant restatement and legal costs that strained our ability to invest in the underlying business.”
All new C-suite
Since coming on board, Wright has focused on restoring financial integrity to the company and replacing the old regime with an entirely new C-suite. Over the last year, he has put in place a new chief financial officer, Peter Carlson; new general counsel, William “Butch” Hulse; and head of business development, Stan Micek. He also recently hired Rohit Kashyap as commercial head of the business and Robert Stein to lead R&D.
As part of the process of “getting current,” Mimedx strengthened internal controls, tightened up its culture and instituted a strong code of business ethics, Wright said. “It did require letting a lot of people go, but I felt the best thing for creating shareholder value was to put the right people in place, reward the right behaviors [and] bring this process to improve the credibility of the company.”
During an Aug. 11 second-quarter earning call, Carlson attributed the drop in net sales primarily to the COVID-19 pandemic and the cancellation or postponement of many elective procedures. Net sales in April and May were down significantly compared the previous year, but June and July sales were in line with 2019 counterparts.
“Future sales will depend on patients’ willingness to visit health care providers for care, the company’s sales forces, access to health care providers and the severity of the COVID-19 pandemic across the country, including future waves of the outbreak,” he said. Donor collections “have remained resilient” throughout the crisis, he added.
Mimedx has been a leader in advanced wound care. Its Epifix is a placental-based tissue product that acts as a barrier to enhance wound healing and reduce inflammation in chronic, hard-to-heal wounds, including diabetic foot ulcers. “Our focus there in creating shareholder value is growth through enhancing our market share and expanding the market,” Wright said. While the U.S. and North America are obvious growth targets, the company is now in a position to look at its international market share as well, he added.
On the pipeline side, Mimedx is in phase III with its plantar fasciitis product. “We’ll be wrapping up the patients in that clinical trial in October and sitting down with the FDA for a pre-BLA [biologics license application] sub mission dialogue,” Wright said.
“Our next program in the clinic is in osteoarthritis of the knee,” he said. "We are well advanced in enrollment in our phase IIB knee osteoarthritis trial, and have amended the protocol and established an open label extension to the trial, to allow patients to receive a second injection of the active treatment if their pain and function has not resolved or responded, regardless of treatment arm. If this trial is successful and determined to be adequate support for safety and efficacy observations, we expect to request an end of phase II meeting with the FDA to discuss next steps, including discussion of our phase III pivotal trial design, and refine our timelines for this program.”
Both products in the clinic are injectable. The company also completed enrollment in a phase III investigational new drug (IND) study for Achilles tenonitis and expects the last patient visit in the first half of 2021. Data from a sample size analysis suggested a much larger study would be needed to observe clinically and statistically significant improvement in the treatment vs. control groups, Wright said, adding the company does not plan to increase the study size and will review its options for the program after the full study results have been analyzed.
In addition, the company has started work on filing an IND for Amniofill, and an IND for injectable micronized Epifix for the treatment of diabetic foot ulcers or other areas of advanced wound care. “The timeline for both of these filings is anticipated for the second half of 2020, though we have not yet initiated any clinical trials under an IND in furtherance of regulatory approval for these products,” Wright said. The launch of clinical trials will depend on FDA feedback for both programs.
Wright is particularly passionate about the potential for Mimedx to help diabetes patients with chronic wounds. He said someone develops a diabetic foot wound every 1.2 seconds, and about one in four to one in six people with diabetes will develop an ulcer that won’t heal.
After talking with physicians about the safety and efficacy of the company’s products and then talking with patients, “I came to the conclusion that this was the most underdiagnosed, undertreated, underserved population I’d ever seen in my life,” he told BioWorld. “And I felt that with these products in the pipeline, we could do something to interrupt this disability cascade that exists with these patients with these ugly wounds.”
That idea of interrupting chronic disability also translates to the plantar fasciitis and osteoarthritis of the knee candidates. “If we do the clinical trials right, if we conduct the trials smartly and generate the data, we can do our role in interrupting this disability cascade,” Wright said.
Besides advancing clinical trials and scheduling a pre-BLA meeting on the plantar fasciitis product, Mimedx plans to file additional INDs on a couple of products by year end, including one that is helpful in tunneling wounds, Wright said.
While the company focuses on creating safety and efficacy data in its pipeline, it is also concentrating on generating health economics data to support reimbursement. “Payers are getting much, much more sophisticated about what they’re going to reimburse and at what rate,” he said, adding the company’s package inserts include a cost-benefit component based on outcomes. There will also be an emphasis on physician education around the proper treatment of wounds to improve outcomes.
“This team, over the past 15 months, has done an incredible job of pulling the plow to restore financial integrity and our reputation as a health care company,” Wright said. “We still have a lot to do … but we’re well on our way to growing this business and really contributing, not only to patients but to all of our stakeholders.”