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Under Pressure: MiMedx Faces an Uncertain Future

Pixabay/GERALT Under Pressure: MiMedx Faces an Uncertain Future
The company is delaying the release of its 2017 financial results due to an internal investigation surrounding its sales and distribution practices.

An internal investigation has thrown MiMedx into a state of uncertainty.

The Marietta, GA-based company said Tuesday it is postponing the release of its financial results and the filing of its Form 10-K for 2017, while independent legal and accounting advisors investigate allegations regarding the company's sales and distribution practices at the company. MiMedx said its executives are also reviewing the accounting treatment of certain distributor contracts. 

The company's stock (Nasdaq: MDXG) fell 39.53% Tuesday, closing at $8.75, and at least one analyst decided to downgrade the stock citing "too much uncertainty."

If the investigation doesn't find any wrongdoing, MiMedx shares are likely to bounce back, said Mike Matson of Needham & Co.

"And if the investigation does find serious issues, we think it could result in further turmoil, potentially including management changes, SEC fines/penalties, and other issues which could drive shares down further," Matson said in a report published Tuesday. "Timing of the investigation is hard to predict but we suspect it will last several months or longer."

Matson said MiMedx could become an acquisition target, but that is "highly unlikely" until the accounting issues and SEC investigation are resolved.

MiMedx said the outcome of the investigation is not expected to have a material impact on revenue guidance for 2018. The company said it had about $33 million in unaudited cash and cash equivalents as of Dec. 31, 2017.

The company's chairman and CEO, Parker "Pete" Petit, said the company plans to release its 2017 financial results as soon as the investigation is complete.

"MiMedx has been experiencing rapid growth over the last few years as our product portfolio continues to meet significant, unmet needs in the marketplace," Petit said. "We are literally saving lives by saving limbs, and we expect to continue to deliver operational and clinical success in the months and years to come."

The regenerative medicine company is no stranger to conflict. Last year the company was accused of coercing its employees to donate to the company's political action committee.

This also is not the first time the company has had its accounting practices questioned. Last year a whistleblower lawsuit filed by two former sales employees claimed that MiMedx and Petit had artificially pumped the company's quarterly revenue in an illegal practice called "channel stuffing" since 2014. Both of those two employees had been fired for allegedly breaching their contract to sell competitive products.

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