Georgia-based MiMedx has been dealing with continued fallout from questions over its earnings and sales practices.
Five months after Parker H. “Pete” Petit abruptly resigned as chief executive officer of Marietta, Georgia-based MiMedx following concerns raised about company finances, the company has initiated a restructuring program that will include the elimination of nearly one-fourth its employees as it transitions to a biopharmaceutical company.
MiMedx said the “broad-based organizational realignment” will focus on cost reduction and efficiency to preserve the company’s cost structure is appropriate “given its revenue expectations.” MiMedx said it will eliminate 240 employees, about 24 percent of its workforce. About half of these terminated employees are part of the company’s sales force, MiMedx said in its announcement. With its realignment, the company management anticipates cost savings to be realized in the first quarter of 2019. MiMedx said it plans to “execute these initiatives while continuing to deliver products and support for healthcare providers and the patients they serve.”
For MiMedx, the realignment means a near-term focus on its wound care business, developing the company’s product pipeline and continuing to pursue regulatory approval from the U.S. Food and Drug Administration for micronized dehydrated human amnion/chorion membrane (dHACM), which is being developed to treat certain musculoskeletal pain indications.
David Coles, interim CEO, said the organizational realignment is part of management’s effort to position MiMedx for long-term success through a focus on its wound care business. It is in that area, Coles said, that clinical studies best support patient outcomes, and where the reimbursement policy has traditionally been more stable.
“Recent business trends and our internal analysis have led us to simplify and streamline our organizational structure, and reduce costs in order to improve profitability and liquidity,” Coles said in a statement.
Earlier this year, MiMedx was forced to restate its historical financial statements for 2012 to 2016 and part of 2017 following an audit that raised questions about earnings and its sales practices. As a result of the investigation, the company was forced to withdraw its financial guidance for 2018. The company does plan to restate that guidance. The resignation of Petit, as well as Chief Operating Officer William C. “Bill” Taylor, were directly related to the financial misstatements the company made over that more than a four-year period.
In addition to the financial issues, MiMedx has been scrutinized by several government agencies over its sales practice. Also, the company has been embroiled in kickback scandals for the way the company marketed its wound care products.
MiMedx said the independent investigation by an Audit Committee required the changes to the company’s business practices. The realignment was developed largely in response to the changes that resulted in a “material softening in the company’s recent revenue performance,” MiMedx said.
Cole said the company is confident the organizational changes will align its cost structure with near-term revenue expectations. The realignment will allow the company to operate more efficiently and effectively, he added.
“By tackling the cost structure now, we believe we are better able to position MiMedx to capitalize on the market opportunities presented by our products and pipeline and, hence, preserve and drive long-term shareholder value,” Coles said.
MiMedx said its search for a permanent CEO continues and the board of directors has been meeting with candidates. However, the company said the ongoing investigation and other challenges facing the company has made it difficult to attract qualified candidates.
