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“if we have bad news, we’ll get it out to you ahead of time. Okay”
-Promise made by MiMedx CEO Parker Petit to investors during a company earnings call
In recent months, we have focused on uncovering and exposing the pervasive fraud that we believe is taking place at MiMedx. Extensive evidence has emerged of channel stuffing, Medicare and coding fraud, anti-kickback violations, undisclosed related party transactions, and the systematic harassment of whistleblowers. New information reveals that the company has also put patients at risk.
After MiMedx announced it was unable to file its financials and would commence a second internal investigation, investors have increasingly begun to recognize the severity of the company’s problems. Yet shares still trade at a lofty valuation of 2.5x sales because many seem to believe the company’s products have significant intrinsic value.
But this report specifically exposes severe undisclosed manufacturing problems and contamination risks uncovered by FDA investigators that are so serious that Mr. Petit “expressed concern regarding their product being pulled from the market”. Even though FDA investigators identified issues that “pose a significant risk to the recipient”, the company is marketing unapproved products produced by these facilities for experimental indications such as spinal injections. Unsuspecting patients are being defrauded through false advertisements used by dubious clinics to entice them into receiving the injections. We therefore believe the FDA has no choice but to immediately intervene and protect patients.
The MiMedx stock promotion is premised on the growth potential of new products that management claims will transition MiMedx into a valuable “biopharmaceutical company”. The lynchpin of this narrative is Amniofix Injectible (“AI”), a product intended to treat pain that MiMedx touts as having the “potential to become a blockbuster therapeutic biologic, with long-term peak revenue potentially exceeding $4 Billion”.
Yet as an unapproved drug, there is no legal basis for Amniofix injectable to be marketed for sale (we explore this in greater detail later in this report). MiMedx attempted to address this issue on its website in January by invoking the results of a 2012 FDA inspection in an effort to portray AI as having regulatory legitimacy. MiMedx declared the “actual facts” include:
This is an egregious misrepresentation because MiMedx has concealed the existence of two subsequent FDA inspections in 2014 and 2016 which uncovered severe deficiencies that were documented in Form 483s (failed manufacturing site inspection reports). The agency’s findings are so serious that the FDA investigator noted in 2016 that: “Mr. Petit expressed concern regarding their product being pulled from the market as well as the effect of such actions on their stock values” (below). We find it particularly telling that Petit was primarily concerned about the impact of these problems on MiMedx’s stock price rather than the potential impact on the patients who have been injected with his company’s products. Yet not only has MiMedx failed to disclose the existence of these deficient inspections to investors, but the company took steps to conceal documents from the public by asking the FDA not to release them via FOIA requests (the FDA’s report can be viewed here).
The FDA’s 2016 inspection focused on MiMedx’s micronized products (which include Amniofix Injectable) and identified 13 separate deficiencies that the investigators outlined in the Form 483 issued to MiMedx. Industry experts we spoke with described both the quantity and severity of the FDA’s observations as being extremely unusual and troubling. In addition to uncovering significant problems with the claimed sterility and purity of MiMedx’s manufacturing process, the FDA specifically identified issues that “pose a significant risk to the recipient”:
Additional troubling observations documented by FDA investigators during the 2016 inspection include:
- “Written representation that processing methods reduce the risk of transmission of communicable disease by HCTp/S was not based on a fully validated or verified process”
- “fails to address bacteriostasis and fungistatis testing”
- “each batch of drug product required to be free of objectionable microorganisms not tested through appropriate laboratory testing”
- “The firm’s endotoxin validation is inadequate”
- “significant deficiencies within the Micronization process. The most egregious violations were that the firm failed to fully validate their micronization manufacturing process”
- “the current process lacks validation of particle size, distribution, product identity, safety, and potency”
- “drug products do not bear an expiration date determined by appropriate stability data”
During the FDA’s earlier inspection of MiMedx in 2014, the investigator observed that “procedures for cleaning and sanitizing the equipment were not followed”. The investigator also identified that “tissue cartons contained discrepant product labeling” and cited two examples where the label on the cartons was different than the label on the product’s barcode. This is problematic because it suggests that the FDA has also uncovered tissue tagging irregularities at MiMedx.
Furthermore, we discovered that MiMedx uses a Texas manufacturer named INCELL to produce Orthoflo, an unapproved amniotic fluid product that both MiMedx and its captive distributor/agent, SLR Medical, market for orthopedic injections. MiMedx has failed to disclose that INCELL received an October 2016 FDA warning letter (following two deficient inspections) stating that:
“ the investigator observed serious deficiencies in your practices for producing sterile drug products, which put patients at risk” (emphasis ours). In addition “The FDA investigator noted that drug products that were intended or expected to be sterile were prepared, packed, or held under insanitary conditions whereby they may have been contaminated with filth or rendered injurious to health”.
Despite these serious manufacturing issues, MiMedx is now actively marketing its unapproved products for experimental and exotic indications. For example, we received an internal MiMedx email which demonstrates that MiMedx’s sales team is marketing AI for Epidural Steroid Injections (below).
Injections of unapproved substances into the spinal column can be extremely dangerous because the drug directly enters the central nervous system. This is problematic because the nervous system is particularly susceptible to infection from unsterile products and also could experience side effects from substances that have not been subjected to robust clinical study. The extreme risks can be seen in the New England Compounding Center Meningitis Outbreak, in which 76 patients died after receiving contaminated epidural steroid injections illegally produced by a compounding pharmacy.
We also have learned that many doctors and clinics are selling AI through false advertisements which claim that these are “stem cell injections” (they are absolutely not). We believe that unsuspecting patients are being defrauded because the advertisements are used to entice them into receiving an injection of an unapproved drug under false pretenses. Several examples of these advertisements include:
So why has the FDA continued to allow MiMedx to actively market and sell Amniofix Injectable?
In our opinion, the most likely explanation is that the FDA is simply not aware that MiMedx is marketing its products in this way. For example, we find it implausible that the FDA would have signed off on injections of an unapproved biologic like AI as an epidural steroid. Especially since the FDA’s 483 report to MiMedx stated that the agency “discussed the fact that his [Mr. Petit’s] product is a biological drug and as such must have an approved biological license [BLA] in effect in order to be legally marketed and distributed”. Since MiMedx does not have an approved BLA, we believe that these products are clearly being marketed and sold with no legal basis.
Mr. Petit is a CEO who believes himself to be above the law. It is possible that his political benefactors have kept the FDA at bay, at least up until now. But we believe this evidence leaves the FDA with no choice but to immediately intervene in order to protect patients.