Full Press Release Details
MiMedx Announces Filing of 2019 Annual Report
Annual Report on Form 10-K includes Audited Financial Results for 2019
Transition to Revenue Recognition on an As-Shipped Basis Reflects Improved Internal
MARIETTA, Ga., July 6, 2020 MiMedx Group, Inc. (OTC PINK: MDXG) ( MiMedx or the Company ), an
industry leader in advanced wound care and an emerging therapeutic biologics company, today announced the filing of its 2019 Annual Report. With this filing, we are one step closer to scheduling and holding the 2019 shareholder meeting. On
July 2, 2020, the Company also announced the closing of concurrent $150 million private equity and debt financings, and the addition of Martin P. Sutter and William A. Hawkins III to its Board of Directors.
Timothy R. Wright, MiMedx Chief Executive Officer, said: The filing of our 2019 annual report marks a key milestone for our business, and reflects a new
tone of transparency for our employees and shareholders. Current financial reporting and relisting our common stock, along with increased and timely dialogue, are a top priority. We also continue to take actions that focus on our patients, provide
business resiliency, and restore the Company s financial integrity and reputation. We are moving forward.
M. Kathleen Behrens, Ph.D., Chair of
the MiMedx Board of Directors, commented, The new senior management team at MiMedx has navigated a number of substantial and complex matters, inherited from prior management. Their combined experience and dedication to transforming the culture
and instilling operational excellence across the Company sets a new tone, and establishes a robust foundation for a different future.
| Years Ended December 31, | ||||||||
| (in thousands) | ||||||||
| 2019 | 2018 | |||||||
| Net sales | $ | 299,255 | $ | 359,111 | ||||
| Net (loss) income | (25,580 | ) | (29,979 | ) | ||||
| EBITDA 1 | (13,292 | ) | 2,992 | |||||
| Adjusted EBITDA 1 | 42,084 | 69,082 | ||||||
| Net (loss) income per common share - basic | $ | (0.24 | ) | $ | (0.28 | ) | ||
| Net (loss) income per common share - diluted | $ | (0.24 | ) | $ | (0.28 | ) |
We recorded revenue for the year ended December 31, 2019 of $299.3 million, a decrease of $59.9 million or
16.7% over 2018 revenue of $359.1 million. As further described in the Critical Accounting Policies section within the Company s 2019 Form 10-K, this includes a benefit of
$29.6 million, related to the method in which the Company recognizes revenue. Excluding this benefit related to the method in which the Company recognizes revenue, the decrease primarily resulted from unfavorable insurance coverage
developments, which resulted in a decrease in the number of units sold. Additionally, approximately 50% of the reduction of the Company s workforce announced in December 2018 were sales personnel. The personnel disruption for our customers,
negative publicity resulting from the Audit Committee investigation, and the discontinuation of the OrthoFlo and AmnioFix Sports Medicine product lines adversely affected revenues.
Gross margin in 2019 was 85.6%, compared to 89.9% in 2018. Gross margin decrease reflects fixed overhead costs being spread over lower production levels,
increased costs of production related to the higher quality standards of current good manufacturing practices (cGMPs) implemented in 2019, and higher scrap levels in the second half of the year.
Research and development expenses decreased 29.3% from 2018 to 2019, due primarily to year-over-year decreases in clinical trial activities, reductions in
personnel due to the 2018 reduction in workforce and the decision to significantly reduce basic research and preclinical studies. We anticipate increasing our research and development spend in 2020 as we initiate additional Investigational New Drug
(IND) filings and work to advance our clinical trials.
Selling, General and Administrative (SG&A) expense for 2019 decreased 23.3% compared to 2018.
Sales and Marketing expense included in SG&A decreased 19.8% for 2019 compared to 2018, primarily due to a decrease in compensation related to the reduced headcount and reduced commissions from the lower sales level.
Investigation, restatement, and related expenses were $66.5 million in 2019. The Audit Committee investigation was completed in May 2019, and we
do not expect to incur these costs going forward. Restatement costs are third-party service costs related to compiling, completing and auditing the financial
statements included in the 2018 and 2019 Form 10-Ks, and thus we continued incurring these costs in the first half of 2020. Litigation costs increased by
$11.6 million to $26.2 million for 2019 due to the increase in the settlement of disputes and near-term contingencies, including legal fees and litigation settlements related to the issues that were the subject of the Audit Committee
investigation. We expect to continue incurring these costs in the future as we address our contingent liabilities.
Peter M. Carlson, MiMedx Chief
Financial Officer, commented: There has been significant work done to strengthen the Company s internal controls, improve liquidity, and provide an accurate picture of our business performance. This filing is the culmination of tremendous
teamwork and collaboration at all levels of the organization, and marks decisive progress for the Company. Ultimately, restoring our financial reputation will enable us to continue addressing the needs of people who can benefit from our products,
delivering the level of quality and excellence our customers deserve, and elevating the standards of patient care, science and regulatory compliance for the category as a whole.
Food and Drug Administration (FDA) Inspection Update
Company remains focused on elevating the standard of care for patients in need, and we are committed to doing our part to advance the science and technology that advances human health. Following the December 2019 Food and Drug Administration (FDA)
inspections at both of our processing facilities, which measured the Company s compliance with cGMP, the FDA issued a Form 483 for both facilities at the conclusion of each inspection. MiMedx provided timely responses to the FDA, including
corrective action commitments for each observation. As of the date of this release, all of these remediation actions are now complete.
Portfolio and Clinical Trials Update
The Company is taking comprehensive action to enhance manufacturing capabilities, capacity, and investments into
Research and Development that increase the scientific rigor of our category and serve as the foundation for our existing and future product portfolio. We continue to research new opportunities for amniotic and other placental tissue, and we have
several additional offerings in various stages of conceptualization and development.
Timothy R. Wright, MiMedx Chief Executive Officer, said: Over
the past year, significant effort has been made to characterize, understand, and assess the Company s true state of readiness to file Biologics License Applications and potential to commercialize a novel biologic, if approved. We conducted a
critical analysis of our existing INDs to better understand our current state, including the expected timing and resources needed to improve the probability of technical and regulatory success. We have taken steps to enhance our Chemistry,
Manufacturing and Controls, reestablish the Company s relationship with the FDA through collaborative dialogue, and will leverage our Regenerative Medicine Advanced Therapy (RMAT) designation to schedule End of Phase review meetings that will
help inform our next steps and set a realistic view of our program timelines. We have attracted leaders with significant subject matter expertise that can guide the Company as we translate our current clinical understanding to a more rigorous
demonstration of the future clinical potential of human tissue.
We expect to complete enrollment in our Phase 3 Plantar Fasciitis trial by October 2020. If the trials are
successful, determined to be adequate proof of efficacy and safety, and accepted by the FDA following an End of Phase meeting, we expect to file a BLA in the second half of 2021. We expect the outcome of this trial to help inform additional areas of
unmet need for potential clinical study as we examine the broader utility of our product in other areas of musculoskeletal degeneration.
advanced in enrollment in our Phase 2B 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 2 meeting with the FDA to discuss next steps,
including discussion of our Phase 3 pivotal trial design, and refine our timelines for this program.
At this time, we have completed subject enrollment
in our Phase 3 IND study for Achilles tendonitis, and we anticipate that the last patient visit will occur in the first half of 2021. Data analyzed following a sample size analysis indicated a substantial increase in sample size would be required to
observe clinically and statistically significant improvement and separation between treatment and control groups. We do not plan to increase the study size and instead we plan to review our options for this program after we have assessed the results
We have begun efforts to file an IND for AmnioFill, and an IND for injectable micronized EpiFix for the treatment of Diabetic Foot Ulcers
(DFUs) 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. Clinical study initiation will depend on FDA feedback for both of these programs.
Through the COVID-19 pandemic, we have prioritized the health and safety of our workforce, ensured continued
access to the Company s products, protected our supply chain and distribution lines, and maintained business operations. COVID-19 did not affect our financial condition and results of operations for the
year ended December 31, 2019. It began affecting us late in the first quarter of 2020. Many of our patients have wounds that unfortunately have not improved throughout the past few months, and are starting to present back to facilities with
larger and potentially more critical wounds. However, at this time, the future impacts of COVID-19 remain uncertain.
MiMedx will host a webcast of its
full year 2019 and first quarter 2020 results on Tuesday, July 7, 2020, beginning at 8:30am, Eastern Daylight Time. This call can be accessed using the following information:
U.S. Investors: 1-877-407-4018
International Investors: 201-689-8471
Conference ID: 13706593
A replay of the webcast will be available on the Company s website at www.mimedx.com following
the conclusion of the call.
Important Cautionary Statement
This press release contains forward-looking statements. All statements relating to events or results that may occur in the future are forward-looking
statements, including, without limitation, statements regarding anticipated future costs and expenses, BLA applications and clinical trials. Forward-looking statements generally can be identified by words such as expect,
will, intend, seek, target, future, plan, continue, potential, possible, could, would, may,
anticipate, to be and similar expressions. These statements are based on numerous assumptions and involve known and unknown risks, uncertainties and other factors that could significantly affect the Company s operations
and may cause the Company s actual actions, results, financial condition, performance or achievements to differ materially from any future actions, results, financial condition, performance or achievements expressed or implied by any such
forward-looking statements. Factors that may cause such a difference include, without limitation, those discussed under the heading Risk Factors in the Company s Annual Report on Form 10-K for
the year ended December 31, 2019.
Unless required by law, the Company does not intend, and undertakes no obligation, to update or publicly
release any revision to any forward-looking statements, whether as a result of the receipt of new information, the occurrence of subsequent events, a change in circumstances or otherwise. Each forward-looking statement contained in this release is
specifically qualified in its entirety by the aforementioned factors. Readers are advised to carefully read this release in conjunction with the important disclaimers set forth above prior to reaching any conclusions or making any investment
decisions and not to place undue reliance on forward-looking statements, which apply only as of the date of this release.
MiMedx is an industry leader in advanced wound care and an emerging therapeutic biologics company
developing and distributing human placental tissue allografts with patent-protected processes for multiple sectors of healthcare. The Company processes the human placental tissue utilizing its proprietary PURION process methodology, among other processes, to produce allografts by employing aseptic processing techniques in addition to terminal sterilization. MiMedx has supplied over 1.9 million
allografts, through both direct and consignment shipments. For additional information, please visit www.mimedx.com.
Investor Relations & Corporate
Selected Unaudited Financial Information
Condensed Consolidated Balance Sheet
| December 31, | ||||||||
| 2019 | 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 69,069 | $ | 45,118 | ||||
| Accounts receivable, net | 32,327 | |||||||
| Inventory, net | 9,104 | 15,986 | ||||||
| Prepaid expenses | 6,669 | 6,673 | ||||||
| Income tax receivable | 18 | 454 | ||||||
| Other current assets | 6,058 | 5,818 | ||||||
| Total current assets | 123,245 | 74,049 | ||||||
| Total assets | $ | 167,166 | $ | 122,844 | ||||
| LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,710 | $ | 14,864 | ||||
| Accrued compensation | 21,302 | 23,024 | ||||||
| Accrued expenses | 32,161 | 31,842 | ||||||
| Current portion of long term debt | 3,750 | |||||||
| Other current liabilities | 1,399 | 1,817 | ||||||
| Total current liabilities | 67,322 | 71,547 | ||||||
| Long term debt, net | 61,906 | |||||||
| Other liabilities | 3,540 | 1,642 | ||||||
| Total liabilities | 132,768 | 73,189 | ||||||
| Total stockholders equity | 34,398 | 49,655 | ||||||
| Total liabilities and stockholders equity | $ | 167,166 | $ | 122,844 |
Consolidated Statements of Operations
(in thousands, except
| Years Ended December 31, | Change | |||||||||||||||
| 2019 | 2018 | $ | % | |||||||||||||
| Net sales | $ | 299,255 | $ | 359,111 | $ | (59,856 | ) | (16.7 | %) | |||||||
| Cost of sales | 43,081 | 36,386 | 6,695 | 18.4 | % | |||||||||||
| Gross profit | 256,174 | 322,725 | (66,551 | ) | (20.6 | %) | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 198,205 | 258,528 | (60,323 | ) | (23.3 | %) | ||||||||||
| Investigation, restatement and related | 66,504 | 51,322 | 15,182 | 29.6 | % | |||||||||||
| Research and development | 11,140 | 15,765 | (4,625 | ) | (29.3 | %) | ||||||||||
| Amortization of intangible assets | 1,039 | 1,034 | 5 | 0.5 | % | |||||||||||
| Impairment of intangible assets | 446 | 446 | 100.0 | % | ||||||||||||
| Operating (loss) income | (21,160 | ) | (3,924 | ) | (17,236 | ) | (439.2 | %) | ||||||||
| Other income | ||||||||||||||||
| Interest (expense) income, net | (4,708 | ) | 527 | (5,235 | ) | (993.4 | %) | |||||||||
| Other income, net | 283 | 283 | 100.0 | % | ||||||||||||
| (Loss) income before income tax provision | (25,585 | ) | (3,397 | ) | (22,188 | ) | (653.2 | %) | ||||||||
| Income tax provision benefit (expense) | 5 | (26,582 | ) | 26,587 | 100.0 | % | ||||||||||
| Net (loss) income | $ | (25,580 | ) | $ | (29,979 | ) | $ | 4,399 | 14.7 | % |
Condensed Consolidated Statements of Cash Flows
| Years Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net (loss) income | $ | (25,580 | ) | $ | (29,979 | ) | $ | 64,727 | ||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities | ||||||||||||
| Effect of change in revenue recognition | (17,382 | ) | ||||||||||
| Share-based compensation | 12,064 | 14,768 | 21,195 | |||||||||
| Depreciation | 6,546 | 5,882 | 4,087 | |||||||||
| Amortization of intangible assets | 1,039 | 1,034 | 1,678 | |||||||||
| Amortization of inventory fair value step-up | 203 | |||||||||||
| Amortization of deferred financing costs and debt discount | 1,431 | 137 | 176 | |||||||||
| Amortization of discount on notes receivable | (190 | ) | (12 | ) | ||||||||
| Net cash lease expenses | 947 | |||||||||||
| Change in fair value of earn-out consideration | (3,560 | ) | ||||||||||
| Loss on fixed asset disposal | 318 | |||||||||||
| Intangible asset impairment | 1,258 | 590 | ||||||||||
| Change in deferred income taxes | 25,541 | (26,670 | ) | |||||||||
| Loss on divestiture of Stability | 1,048 | |||||||||||
| Increase (decrease) in cash, net of effects of divestiture, resulting from changes in the balance sheet | (20,053 | ) | 18,603 | (523 | ) | |||||||
| Net cash flows (used in) provided by operating activities | (39,412 | ) | 35,796 | 62,939 | ||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchases of property and equipment | (1,752 | ) | (9,419 | ) | (5,126 | ) | ||||||
| Proceeds from property and equipment sale | 30 | |||||||||||
| Principal payments from note receivable | 2,722 | 778 | ||||||||||
| Patent application costs | (466 | ) | (609 | ) | (271 | ) | ||||||
| Net cash flows (used in) provided by investing activities | 504 | (9,220 | ) | (5,397 | ) | |||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from term loan | 72,750 | |||||||||||
| Repayment of term loan | (1,875 | ) | ||||||||||
| Deferred financing costs | (6,650 | ) | ||||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock | (1,474 | ) | (4,914 | ) | (4,082 | ) | ||||||
| Proceeds from exercise of stock options | 108 | 3,555 | 11,987 | |||||||||
| Shares repurchased under repurchase plan | (7,572 | ) | (68,263 | ) | ||||||||
| Payments under capital lease obligations | (3 | ) | (29 | ) | ||||||||
| Net cash flows provided by (used in) financing activities | 62,859 | (8,934 | ) | (60,387 | ) | |||||||
| Net change in cash | 23,951 | 17,642 | (2,845 | ) | ||||||||
| Cash and cash equivalents, beginning of year | 45,118 | 27,476 | 30,321 | |||||||||
| Cash and cash equivalents, end of year | $ | 69,069 | $ | 45,118 | $ | 27,476 |
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
In addition to our GAAP results, we provide certain non-GAAP metrics including Earnings Before Interest, Taxes,
Depreciation and Amortization ( EBITDA ) and Adjusted EBITDA. We believe that the presentation of these measures provides important supplemental information to management and investors regarding our performance. These measurements are not