MDXG
#Thank you, <UNK>.
Good morning.
We appreciate you joining us for this quarterly update.
I have with me Bill <UNK>, our President and Chief Operating Officer; Mike <UNK>, our Chief Financial Officer; Chris <UNK>, our Executive Vice President and Chief Commercialization Officer; and Debbie <UNK>, one of our other executive vice presidents who has wide responsibilities.
First, please refer to our December 13, 2017, press release for our 2018 financial guidance.
Given the investigation by audit committee, we cannot release the specifics of our financials yet.
However, we can give you sufficient information to assist you in understanding how excellent our first quarter was.
For the first quarter, we exceeded top end of our revenue guidance nicely.
Recall that our top end revenue guidance was $92 million.
Also, our distributed and OEM revenue was less than 5% of our total revenue.
That's the way it's been for a number of quarters now.
Our cash flow for the quarter was strong, and we're tracking to or exceeding our annual goals on gross margin of 89% to 90%, operating income of 15% to 17% as well as fully diluted GAAP EPS of 30% (sic) [$0.30] to 35% (sic) [$0.35] and adjusted EPS of 45% (sic) [$0.45] to 50% (sic) [$0.50].
Cents.
Cents, excuse me.
Refer to the December 13 press release for more details on those particular items, if necessary.
We're also increasing our 2018 revenue guidance and providing guidance on our second quarter.
We had previously communicated revenue guidance in that press release for 2018 of $383 million to $387 million.
We're increasing our revenue guidance range to $389 million to $394 million because of our performance in the first quarter and of course, anticipated performance throughout the year.
Relative to the second quarter, net revenue is now expected to be $96 million to $98 million.
We had, what I consider to be, an excellent quarter.
Operationally, we continue to improve our manufacturing processes, which now include the use of lasers for cutting and perforating, and that could further enhance our gross profit margins.
Additionally, all of our functional areas performed very well.
The efficiency and effectiveness resulting from the implementation of a new Sales Management System is proving to be an extremely effective asset, and will continue to make a substantial difference in our ability to accomplish our sales planning and execution in quarters and years ahead.
We now have over 400 dedicated sales representatives, and that group is growing rapidly.
Now I'll turn the meeting over to Bill, and I'll have some further comments later.
Thanks, Pete.
Good morning, everyone.
Our first quarter 2018 was operationally one of the best first quarters in the past several years.
As most people will recall, the first calendar quarter tends to be the softest quarter of each year for many reasons.
This year, we overcame the normal insurance deductible resets, a challenging winter that just seemed to never to stop, as well as the external noise from our current situation.
With all these factors in play, our teams stayed focused and performed extremely well.
For that continued performance and focus, I thank each and every member of the MiMedx team.
MiMedx is keenly focused on serving clinicians and the patients they treat.
We also continue to be very focused on expanding our sales footprint, and further penetrating each of the markets we serve.
We are managing our territories with a vision 4 to 6 quarters out, and this continues to help our predictability and our ability to forecast with good accuracy.
In our February call, I mentioned that we had reached 400 field sales personnel earlier this year, which was up from 350 in September of last year.
Today, when including recently accepted offers, we are at about 425, with plans to get to 450 field sales personnel by the third quarter.
This puts us slightly ahead of our previously discussed pace.
Our detailed planning, territory management, discipline, education, execution and accountability, particularly through the use of our Sales Management System, or SMS, continues to drive predictable and sustainable results.
The other areas of our operations are also performing quite well.
We are expanding our research and development organization and continue to add personnel who have experience with biologics and other more complex regulatory past.
We are looking at our 5-year-plus strategic plan to evaluate how we can expand and improve our product pipeline and R&D projects.
It is a bit early to discuss the details of this initiative, but at the appropriate time, we will discuss our pipeline planning.
It is definitely an exciting time that we're going through.
Our processing, recovery and quality groups continue to do an excellent job in expanding production and in innovating the process to continue finding ways to improve efficiencies and ultimately, lower costs.
We continue to hire and expand in virtually all areas of our business.
We continue to have a strong candidate base and are making some great additions to our organization.
One area where we don't have enough capacity is office space.
We are running very tight in all 3 of our current facilities.
Therefore, we just signed a lease for another 28,000 square feet facility that will be split with approximately 8,000 square foot of the office space ---+ will be office space, and about 20,000 square feet will be distribution, warehouse and packaging space.
This building is located on our main business park in Marietta, Georgia and is 2-building away from our headquarters.
This addition gives us just north of 170,000 square feet of space for our distribution, operations and offices.
We still need more space this year because of our growth.
So we also signed a letter of intent on another property for about 40,000 square feet that will be used as office space.
We hope to sign a contract on the incremental space in the next several weeks.
Regarding our intellectual property, we now have 134 issued and allowed patents in total, with 51 of them being placental-based.
We still have over 120 total patents pending, more than 90 of which are placental tissue-based, all of which, we believe, offer a significant barrier to entry for our competition, and enables us to confront other patent infringers, if needed.
Regarding our open patent lawsuits, we don't have any new updates for you this time, but as developments occur, we will keep you informed.
Now I'll turn the call over to Chris <UNK>.
Thanks, Bill, and good morning.
First, I want to thank our whole team for the diligence and hard work that they each exhibited in pursuit of outstanding performance.
The first quarter is always our toughest quarter of the year, and everyone buckled down and worked the Sales Management System business plan that they each formulated with management.
We are energized for our continued progress in our markets and are continuing to hire within the sales organization and support groups.
As Bill noted, we expect to continue hiring beyond our budget of 450 sales personnel by year-end in order to meet our growth plans and to further access the market opportunities.
As we are well into the second quarter, I want to address the importance of our product and specialty initiatives.
It is paramount that we continue to focus, first and foremost, on our core Wound Care products.
As the recognized leader, it is critical for MiMedx to continue to gain market share as well as drive market expansion.
Our competition is trying to lead with price, and say their products perform the same.
Even though there is no Level I clinical data to support those claims.
We continue to be successful in communicating and educating physicians on our safety profile and efficacy as well as the importance of processing, quality and consistency, as exhibited by our U.S. Pharmacopeia mark and compliance to good manufacturing practices.
Our MiMedx representatives are focused on being a part of making a difference in patients' lives.
We continue to invest in medical education and peer-to-peer symposiums.
Once providers have experienced the power of healing that resides with MiMedx' product offering and wound healing, then they begin to expand their applications into foot-and-ankle pain and lower extremity in complex wound and surgical procedures.
MiMedx is also continuing to invest in clinical studies, because we know physicians want to understand the science and clinical data in order to make a well-informed choice as to what is most beneficial to their patients' healing and outcomes.
It follows that physicians may conclude that MiMedx' products are the best option for the patients.
We feel strongly that physicians and hospital organizations should be given LI clinical options, and we deliver solutions and economic value that enhance healing and improve outcomes for their patients.
Our new products, AmnioFill and EpiCord and AmnioCord made terrific strides in the first quarter.
While still a small percentage of total revenue, these products are gaining momentum with a strong repeat customer base that can accelerate the surgical and wound growth for the second quarter and balance of the year.
AmnioFill and Epi and AmnioCord also offer our sales force a cross-selling opportunity into their base business.
Regarding surgicals, sports medicines and orthopedics.
Our pain and surgical team efforts continue to gain traction.
Surgical is finding a strong base and acceptance in the operating room with surgical specialties through increasing value analysis committees, better known as VAC, approvals.
Surgeons are adopting MiMedx products for enhanced healing in high-risk patients with complicated wounds and in specialized surgical procedures.
The musculoskeletal pain specialist team is committed to educating the market on the attributes of the AmnioFix Injectable platform under the HCT/p Section 361 pathway.
With the plantar fasciitis Phase IIb efficacy data out now and publication coming in the near term, we have outstanding outcomes that can be shared with podiatry, foot-and-ankle orthopedics and physician offices treating musculoskeletal pain.
AmnioFix Injectable is highly differentiated from alternative options available today and should be instrumental in offsetting the common, first-line therapy use of degenerative corticosteroids as well as minimizing the prescribing end use of opioids to relieve pain.
We believe we will make good progress through continued education, as we initially target the cash-pay market and ultimately believe peak AmnioFix revenue for musculoskeletal pain management, including an osteoarthritic pain indication, could exceed $4 billion.
MiMedx employees are passionate to assist providers and facilities to deliver clinically and economically viable product solutions to its patients.
I'm confident that we are part of the fiscally responsible solution that will allow providers to practice evidence-based medicine to treat their patients.
And now I'll turn it over to Debbie.
Thanks, Chris.
Good morning.
Today, I would like to start by updating you on our IND trials and RMAT designation.
As you might remember, we are currently running 4 IND, or Investigational New Drug trials, as we progress toward the filing of biological license applications with the Food and Drug Administration for micronized dHACM or AmnioFix Injectable to treat certain musculoskeletal pain management indications.
We currently have our manuscript for the primary endpoint measurements for our plantar fasciitis Phase IIb trial under review.
We hope that it can be published in the next 60 days.
Once the study is published, we plan to submit to payers for coverage determination.
This product has proven repeatedly to be highly efficacious.
At the 3-month follow-up visit mean VAS, visual analogue scale scores for pain in the treatment of the group were 76% lower compared with a 45% reduction in mean VAS scores for control, which equates to a 54-point drop in the treatment group versus a 32-point drop in the control group, or a p-value of less than 0.0001.
Additionally, subjects who received a micronized dHACM injection had a mean reduction of 60% in the FFI-R, foot function index score compared to baseline, which subjects who received the saline placebo had a mean reduction of 40% in FFI-R score at 3 months compared to baseline, which equates to a 36-point drop in treatment group and a 22-point drop in the control group, with a p-value of 0.0004.
Enrollment in our 2 Phase III clinical trials for plantar fasciitis and Achilles tendinitis are going very well.
Currently, we anticipate the plantar fasciitis trial will finish prior to the AT trial, but they are both ramping nicely.
Our Phase IIb trial for treatment of knee pain due to osteoarthritis started enrollment in late March.
Additionally, we are granted the regenerative medicine advanced therapy or RMAT, designation for this IND, with MiMedx being one of only 14 companies in the United States to receive the designation to date.
In granting the RMAT designation, the FDA committed to a multidisciplinary, comprehensive discussion with MiMedx regarding the company's development program for AmnioFix Injectable for use in the treatment of OA of the knees.
This includes planned clinical trials and plans for expediting the manufacturing development strategy.
We have submitted our meeting request to meet with FDA to discuss ways to expedite approval for this indication.
The clinical, regulatory and scientific teams have done an exemplary job in bringing these INDs to the point ---+ to this point in a short period of time.
The FDA routinely inspects pharmaceutical and medical device and HCT/p companies as part of their duties.
At the end of an FDA inspection of Form 483, a notice of inspectional observations may be issued.
These observations are commonly referred to as 483.
The FDA inspector may issue a 483 when they're ---+ in their judgment, they observe something that may violate regulations governing the inspected company.
Receiving a Form 483 is very common, and most companies are accustomed to it.
Companies such as Medtronic, Nemaura, et cetera, all have received such inspection findings.
In fiscal year 2017, the FDA actually issued 5,155, Form 483s across the industries they regulate.
Companies receiving the 483 should respond to the FDA within 15 days to describe the corrective action plan to realign our activities with regulation.
This response is not mandatory, but uses a method to show the FDA that the company takes the observation seriously and are treating them as an opportunity for improvement, with a specific plan and time line to resolve the issue.
When issues are resolved, then no further action is taken.
If the issues were not resolved, it could result in a warning letter.
MiMedx has never received a warning letter.
Additionally, on the clinical studies front, we have completed the study for EpiCord, in the treatment of diabetic foot ulcers, which includes a per protocol population of 139 patients across 14 centers.
Healing rates for EpiCord-treated patients were 79% and 83% at 12 and 16 weeks.
These healing rates represent a significant improvement over the control population with p-values of 0.0067 and 0.0040 at 12 and 16 weeks, respectively.
We are preparing the manuscript for publication and look forward to showing the publication results with you soon.
For the DFU study, we will be presenting a poster at SAWC, which includes a per-protocol population of 98 patients across 14 centers.
Healing rates for EpiFix-treated patients were 81% and 85% at 12 and 16 weeks.
Similar to EpiCord, these healing rates also represent a significant improvement over the control population, with p-values of 0.0093 and 0.0356 at 12 and 16 weeks respectively.
A number of surgical studies are also nearing completion and heading for publication.
From a pair perspective, we had a significant win with Anthem, they have reduced the criteria for approval of EpiFix for VLUs and DFUs after seeing our additional studies, and have experience with efficacy of EpiFix, which has resulted in a 40% increase in Anthem approval since the policy change.
Since the Bianchi VLU study, we have added a total of 4.3 million covered lives or DFU and VLU in 2018.
I will now turn the call back over to Pete for closing remarks.
Thank you, Debbie.
Obviously, we continue to relentlessly execute on our business strategy.
We continue to fulfill commitments made to you, our shareholders, we continue to fulfill commitments made to our patients, and to our scientific and clinical endeavors.
We continue to build assets of this business in a very routine and programmed manner.
Our cash flow is strong and is expected to continue to build.
In fact, I believe you'll see a significant buildup in our cash in the second quarter, which is generally a way the business has been run for years.
I will remind you that the company has no debt and sees no need for debt financing at this point.
Recall that we've repurchased over $130 million of our stock in the last 3.5 years.
That cash came from our strong earnings and resulting cash flow.
The company is currently very undervalued in my opinion.
There's another company I'll mention that has gross profit margins and growth rates of approximately the same as ours in the healthcare area, that company's name is Abiomed, the company is currently trading at approximately 22x this year's revenue.
I'll say that again, 22x this year's revenue.
MiMedx is currently trading at about 2.3x this year's revenue.
I'll say, this is clearly a demonstration of an undervalued situation on our part.
At some point, the audit committee of our Board will complete its investigation and we will then publish our audited 2017 financial statements and our reviewed first quarter financial statements.
It is management's opinion that your company has a very bright future ahead, as we continue to grow in the advanced Wound Care sector of healthcare, and now, very importantly, bring new therapies to the market through our FDA, BLA, IND processes.
I want to thank our investors, who have been patient enough to retain their stock ownership in the company during this time.
We want to make it clear that companies continue to perform operation like we have over the years, which led MiMedx to become the fifth fastest growing public company in America according to Fortune Magazine.
Finally, I want to thank our employees and the Board of Directors for their dedication and ongoing commitment.
We thank you for listening today.
We look forward to speaking with you again in near future, about some new opportunities.
On that call, we will open it up for questions.
Thank you very, very much.
