Monday, November 28, 2016

MiMedx Group, Inc. (MDXG) set to Triple Revenues by Healing Wounds Faster

To paraphrase the renowned German playwright, Bertolt Brecht, nature does not remember kisses on the cheek. Wounds, on the other hand, perversely leave scars. Perhaps fortunately, kisses leave no mark, but injuries to the body do. And the scars of such damage not only disfigure appearances but result in adhesion, which occurs when scars bind with surrounding tissue.

Luckily, however, advances in the field of regenerative medicine may soon relegate scar tissue to the indecipherable lyrics of a Red Hot Chili Peppers ballad. MiMedx Group, Inc. (NASDAQ: MDXG) is now bringing comfort to the wounded with its groundbreaking amniotic tissue allografts that promote tissue regeneration.

Scar tissue, however, is not the only issue that MiMedx is addressing. Its regenerative therapies based on amniotic tissue not only reduce scarring but modulate inflammation and enhance the healing process. This trifecta of winning outcomes has driven MiMedx to the top. In the span of eight years, the company has risen to become the world’s premier processor and supplier of human amniotic tissue and has, to date, distributed over 700,000 amniotic tissue grafts worldwide. Successful clinical outcomes have been achieved in a variety of therapeutic settings, including ophthalmology, spinal, chronic wounds, dental, orthopedic surgery, sports medicine, and urology.

Tissue derived from the amniotic membrane, which is the innermost layer of the placenta, is the building block of the MiMedx regenerative therapies. Normally, a mother’s placenta, or afterbirth, along with the amniotic membrane, is discarded as medical waste. However, through its Placenta Donation Program (, MiMedx allows mothers, delivering healthy babies by planned Caesarean section, to donate their placentas. The amniotic membrane is then separated from the rest of the placenta and subjected to MiMedx’s proprietary Purion® technology, which is the foundation of its two lead products: AmnioFix® and EpiFix®.

The AmnioFix® and EpiFix® allograft solutions are MiMedx’s chief wound care (and company) products. Both allografts have an advantage over competitive products in that they can be stored at room temperature for five years without the need for refrigeration or freezing. As a result, they can be used right out of the package without a complicated thawing process. These critical qualities of the MiMedx® allografts allow hospitals, clinics, and surgeons to quickly provide the appropriate treatment while effectively managing their inventory of allografts.

The care of wounds is an undeveloped market. In a report issued earlier this month, Aegis Capital ( estimated that MiMedx commanded a 60 percent share of the amniotic tissue market, a market that is, at present, growing by roughly 15 percent annually. MiMedx derives about three-quarters of its revenues from its amniotic tissue business. Together with its Surgical, Sports Medicine, and Other (SSO) business lines, Aegis expects that by 2020, the company will triple revenues to $560 million and earn one dollar in EPS (earnings per share). There are numerous caveats, however. Gross margin must stay in the low 80 percent range; operating margin must hover around 30 percent; and sales, general and administration (SG&A) expenses must not exceed half of sales.

Management is certainly expecting growth. The company has been engaged in an aggressive $60 million share buyback program, which could be signaling undervaluation. The Aegis analysts certainly think so. They have put a ‘Buy’ rating and price target of $12.00 on MiMedx. The stock is current trading at around $9.90 on the NASDAQ under the symbol MDXG.

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