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MDXG: Last Patients, Last Visits in Late-stage Trials

04/20/2021

By John Vandermosten, CFA

NASDAQ:MDXG

READ THE FULL MDXG RESEARCH REPORT

Last Patients, Last Visits in Late-stage Trials

What’s New

On April 19, 2021, MiMedx Group, Inc. (NASDAQ:MDXG) announced that three late stage trials in MiMedx’ pipeline had recently achieved important milestones. All patients in the Phase III studies for AmnioFix Injectable in plantar fasciitis (PF) and Achilles tendonitis (AT) have completed their last clinical visits. The Phase IIb trial for AmnioFix Injectable in knee osteoarthritis (KOA) has completed the recording of all clinical effectiveness endpoints. Next steps for the programs include a planned review and statistical analysis of data for all three trials.

The PF, AT and KOA trials are evaluating AminoFix Injectable, which uses MiMedx’ micronized dehydrated Human Amnion Chorion Membrane (mdHACM). Following completion of the planned review and statistical analysis of data, MiMedx expects to share top-line data this summer and will begin planning a Phase III in KOA assuming data are supportive. A biologics license application (BLA) is expected to be submitted for PF in 1H:22; however, due to trial design, a BLA for AT is not expected. Data from the AT trial will be used to support safety of the product. Next steps for the PF program include:

➣ Closing sites

➣ Cleaning the data

➣ Locking database

➣ Conducting statistical analysis

➣ Meeting with the FDA

➣ BLA submission

Prescience Point Capital Management Board Nominations

Prescience Point Capital Management recently announced that it will nominate four directors to MiMedx board at the 2021 Annual Meeting. The Louisiana-based asset manager owns ~8.1% of the shares outstanding. When accounting for the Series B Convertibles and adjusting for their ultimate conversion to equity, ownership drops to ~6.6%. Prescience contends that EW Healthcare’s interests may conflict with those of other shareholders and that MiMedx management has not provided sufficient information regarding the opportunities for AmnioFix in Knee Osteoarthritis.

We remind investors that data is not yet available for the Phase II study in KOA and that even if favorable information is generated and AmnioFix progresses to Phase III, there remain many hurdles to cross, including the approval of a BLA before commercialization may begin. Based on several independent studies that have been conducted on clinical trial success rates, only about half of products that enter Phase III are eventually approved, supporting a conservative stance by management at the current stage of development.

Prescience disagrees with other efforts and initiatives taken by management which can be found in a news release and letter to shareholders made public on April 16, 2021. If all of Prescience’s board members are added, they will hold four of nine seats (44% representation), compared with their 6% ownership adjusting for Series B conversion. MiMedx acknowledged the receipt of the director nominations in an April 16 press release.

MiMedx’ largest holder is Essex Woodlands Health Ventures (EW Healthcare), which, on an as converted basis, owns about ~17% of shares outstanding. As part of their investment they have secured the right to appoint two directors to the board as long as they hold in excess of 10% of the shares in equity or on an as-converted basis. The board members appointed by EW Healthcare are Martin P. Sutter and William A. Hawkins, III.

Based on our review and excluding holdings by Vanguard, the only other holder above 2% is RTW Investments with a 2.4% interest (2.0% with Series B conversion). While Vanguard is reported to hold over half the shares outstanding, we believe this may be inflated by shares owned by individual investors held in Vanguard’s name.

Clinical Pipeline

MiMedx Clinical Pipeline1

 

MiMedx has three clinical development programs underway, in knee osteoarthritis, plantar fasciitis and Achilles tendonitis. These indications have annual prevalence rates of 4-6%, ~1% and ~60,000 respectively in the United States. While the AmnioFix injectable has been used in non-homologous applications, we believe that with supportive data and the FDA’s assent, penetration into these markets can be substantially increased. Adjacent markets, such as in other joints and tendons, may be expansion opportunities. To date there have been no reports of direct adverse reactions related to human uses of amniotic membrane products supporting a durable safety record and a strong rationale for eventual approval of ongoing studies.

AminoFix (mdHACM)

MiMedx’ Purion® process, in use since 2006, is a patented method for the aseptic processing of human amnion/chorion, sourced from human placental tissue, which involves gentle cleansing, lamination of the amnion and chorion, dehydration and terminal sterilization of the tissues under controlled conditions.

AmnioFix is available in sheet and particulate forms in various sizes. AmnioFix injectable comprises micronized dehydrated human amnion/chorion membrane. The product is semi-permeable, providing a protective barrier that supports the healing cascade and facilitates development of granulation tissue, depending on use and application. It has a five-year shelf life and is stored at room temperature.

MiMedx holds a strong position in the wound care market with a supportive set of preclinical and clinical work demonstrating safety and efficacy for the company’s portfolio of products. With additional studies underway, new product launches and a favorable demographic trend, we anticipate double digit growth in the second half of 2022. We see a high degree of probability that the trials will be successful thereby supporting even greater penetration for AmnioFix and related products.

Key reasons to own MiMedx shares:

➣ Existing high margin business in placental and umbilical cord tissue products

◦ EpiFix

◦ EpiCord

◦ EpiCord Expandable

◦ AmnioFix

◦ AmnioFill

◦ AmnioCord

◦ EpiBurn

➣ Products recognized by payors

◦ EpiFix on largest US health insurer formulary for diabetic foot ulcers

◦ EpiFix and EpiCord allografts eligible for coverage by Medicare Administrative Contractors

➣ International growth opportunities

◦ Japan – anticipated approval mid-2021

◦ United Kingdom – approved, reimbursement in process

◦ Germany – approved, reimbursement in process

➣ Development candidates

◦ Plantar fasciitis – Phase III

◦ Achilles tendonitis – Phase III

◦ Knee Osteoarthritis – Phase II

Designated as a Regenerative Medicine Advanced Therapy (RMAT) by FDA

◦ Multiple preclinical advanced would care development projects

➣ Investigation and expenses related to prior management misconduct are largely complete

Summary:

MiMedx is a biotechnology company operating in the wound care and regenerative medicine spaces, with both commercialized and in-development assets. Completing the final events in the three most advanced trials is an important achievement. We expect the standard checklist of events to be completed for BLA submission for PF and for the start of a Phase III in KOA to take place over the next several months. We also expect an update on company performance and the status of enforcement discretion in the upcoming quarterly report which should occur in the next few weeks. We recently initiated on MiMedx and maintain our valuation of $16.00 per share. For details on the company’s products, development portfolio and our valuation assumptions and methodology, please see our initiation.

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1. MiMedx March 2021 HCW Global Life Sciences Conference, Corporate Presentation

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