Stockholders Send “Pete” Petit Packing; His Future? – Unknown

Are criminal charges in the air for Parker “Pete” Petit? He raised the question himself.

Are MiMedx’s orthopedic products-in-development gone for good? Or are they merely in need of more testing and development, leading to a place in what is widely seen as a transformative, huge market for new, tissue-regeneration-based orthopedic treatments?

Will the company’s current line of wound care products survive eventual Food and Drug Administration (FDA) scrutiny—and that of insurers and medical buyers like the Department of Defense (DOD) and the Department of Veteran Affairs (VA)?

How big will the restatements of company sales and financials going back to 2012 be (or how small, if one accepts Petit’s view)?

And how big will the penalties and liabilities be from stockholder lawsuits and federal investigations into the Petit regime’s actions?

Those are the main questions going forward for MiMedx now that 80% of stockholders of the troubled wound-care allograft manufacturer voted June 17 against letting Petit, the former CEO and former board chairman, back onto the board. His two allies were rejected for board seats by the same margin.

The stockholder meeting was court-ordered; the board had been delaying the mid-2018 meeting for nearly a year while its auditors continue to work to restate the company’s financials for 2012 into mid-2018, the period during which Petit had run the business.

Two stockholder resolutions Petit had pushed for—one to force the board to hold the 2019 annual stockholder meeting in August, the other to rescind all board resolutions from last October—failed by two-to-one margins. MiMedx’s former board chairman (and still board member) Charles Evans said the company hopes to finish the restatement of financials in time to hold a 2019 stockholder meeting in late fall.

Uncertified but precise vote counts of the June 17 vote are available at this Securities and Exchange Commission (SEC) page.

Stockholders elected the three candidates the board had offered, all with substantial biotech industry experience: M. Kathleen Behrens Wilsey (who was named board chair, as previously announced), K. Todd Newton, and the new CEO, Timothy R. Wright.

One June 19, the board appointed two new directors, Richard J. Barry and James L. Bierman, at least temporarily filling two board seats which are due to stand for election at the 2019 stockholder meeting.

Just after the results came in, Petit gave an interview to the Atlanta Journal and Constitution newspaper, in which he said he expects to be questioned by federal investigators and that he might be charged with crimes. The newspaper quoted him as saying, “I don’t think me or any of our management knowingly did anything illegal. I’m innocent, but I could be found guilty.”

Petit’s former management team is being investigated by the SEC over allegations of “channel stuffing”—reporting unrealized product sales as a fiscal quarter ends in order to boost apparent revenues to prop up or raise the stock price—and for other sales irregularities by the DOD and the VA. The Justice Department is involved in one or more of these investigations.

In a statement, the company said, “With such strong support for our new CEO and board members, we are hopeful that Mr. Petit will stand down from further actions that could distract the company from its mission to serve patients and in turn create value for shareholders. The new management team and refreshed board are eager to get back to work and further distinguish MiMedx as a leader in advanced wound care and an emerging therapeutic biologics company.”

What’s Missing: No Current Orthopedic Products

When Parker Petit headed the company, and until sometime after his departure, MiMedx was promoting two potentially promising orthopedic products.

The company was claiming that one of these, called OrthoFlo, an amniotic fluid allograft, could cushion, lubricate and protect joints. It was being offered for sale.

The other, CollaFix, a braided-strand product, was still in development. It was intended to be used in surgical repairs of ligaments and tendons. Fascinating claims were made for this possible miracle product—that “The braids are as strong as human tendons and thereby allow the repaired tendon to be loaded by exercise immediately after surgery.”

Under the interim board, the company put both of those products on back burners and deleted from the company website. Asked in April 2019 what the company’s plans are for its orthopedic products, a spokesperson said it was premature to comment.

The company is far from out of the woods.

In addition to the federal investigations, MiMedx and its former management face stockholder lawsuits over the alleged 2012-2018 financial improprieties. Also looming over the entire tissue-based-treatment industry is a November 2020 Food and Drug Administration end date to the period of what FDA has called “enforcement discretion” for tissue-based products.

Also, in a blow to the businesses of MiMedx and competitors, the VA reissued in May a memo it had sent out in January, forbidding its hospitals to buy injectable wound care products, the Wall Street Journal said in a June 14 report. The memo said caregivers should not use injectable human amniotic membrane “for managing plantar fasciitis, tendinitis or osteoarthritis since evidence is currently limited or is lacking.”

The January memo was reissued by the VA “due to some recent questions/concerns about use of these products within VA,” the Journal report said.

The memo by the VA follows a similar directive last year by UnitedHealthcare, Inc., which said, “Due to limited studies, small sample sizes, and weak study designs, there is insufficient clinical evidence to conclude that these skin substitutes have an improved health outcome over standard therapies; well-designed, randomized comparative clinical trials are needed to demonstrate the efficacy and safety of these products.”

The United Kingdom’s National Institute for Health Care and Excellence (NICE) has questioned the trustworthiness of clinical studies of MiMedx’s EpiFix product (MiMedx Gets Ever Weirder – Pete Wants Back In, Orthopedics This Week, April 15, 2019).

MiMedx has tried to counter these adverse conclusions with a web page citing 23 clinical studies, another citing 13 scientific studies, and a page listing 67 poster sessions on its products.