Marietta’s MiMedx moving past recent woes

Credit: MiMedx

Credit: MiMedx

High hopes for a new arthritis drug

Marietta skin graft maker MiMedx hopes a treatment it is developing for osteoarthritis, tendonitis and plantar fasciitis will help it bounce back from a scandal that saw its former CEO go to prison for securities fraud last year.

The company plans to start late-stage trials by December of its injection therapy for musculoskeletal conditions. If federal regulators approve the drug, MiMedx could begin selling it as soon as the second half of 2026 and help return the company to its high-flying days.

“It’s a huge, huge market,” CEO Tim Wright said during a recent interview at MiMedx headquarters. “At least 240 million patients suffer from knee and hip osteoarthritis worldwide.”

Ramakanth Swayampakula, an analyst for investment bank H.C. Wainwright & Co., wrote in a November report that MiMedx, with its revamped management, a multiyear commercialization plan and a late-stage research and development pipeline, should see significant sales growth in the coming years.

The new treatment is made from placental tissue that has been ground into a powder, added to a liquid solution and injected at the source of osteoarthritis. The anti-inflammatory and healing properties of the mixture promote rapid regeneration of vital cells.

The chemical makeup of placental tissue can’t be replicated synthetically. MiMedx obtains the tissue from women who have recently given birth through cesarean section and have donated their placentas.

Other pharmaceutical companies are testing similar injection treatments, though none has obtained U.S. Food and Drug Administration approval.

In the meantime, MiMedx will continue to rely on its line of skin substitutes made from placental tissue that are used to treat diabetic foot ulcers, burn unit patients and other severe wounds. The skin grafts, which are produced in sheets, keep wounds sterile and promote healing.

Its sales of wound-care products rose 15% in 2021 to $240 million, compared to 2020. But that is lower than the company’s 2018 peak of $359 million, according to regulatory filings.

Wright, who joined MiMedx as CEO in May 2019 after a stint at Teva Pharmaceuticals, said the company wants to expand wound-care product sales to surgical recovery units and launch sales in Japan.

The global wound-care market is huge, with market research firm DelveInsight estimating its value could grow 80% from its 2020 figure of $9.5 billion to $17 billion in 2026.

Wright said he expects Veterans Administration hospitals to provide a major sales boost for MiMedx, as its wound-care products are “tailor-made for our active military members and our veterans.” MiMedx recently won a $67 million contract with the U.S. Department of Veterans Affairs.

MiMedx’s sales to the VA hospital system were at the center of a years-long criminal investigation. In 2020, the company paid $6.5 million to settle a federal probe into overcharging the VA.

As part of that probe, former CEO Pete Petit was accused of masterminding a scheme aimed at inflating revenues at the company. He was convicted of securities fraud in February 2021, sentenced to one year in prison and ordered to pay a $1 million fine. The 82-year-old Petit is scheduled to be released from a federal prison in October. His appeal of the conviction remains pending in federal court in New York.

MiMedx has faced other legal challenges, from former employees who alleged they were fired for flagging Petit’s fraud to a challenge last spring from an investor group. Prescience Point Capital Management put up three of its own nominees for the company board. The group withdrew its slate of candidates in May 2021 after MiMedx made changes to its corporate governance.

All major lawsuits and investigations have now been resolved, and Wright said MiMedx has put that era behind it.

“The integrity of the company had been challenged significantly, and many, many people here got hurt,” Wright said. “Our values today are around character and integrity. We’re in this for the long term.”