Troubled MiMedx axes a quarter of its workforce in the wake of a C-suite purge
Remember when MiMedx $MXDG got rid of its CEO and COO to prepare the company “for its next chapter”? The troubled biotech now says that 240 of its full-time employees will be left out of that chapter.
The layoffs, which account for 24% of MiMedx’s total workforce, are part of a sweeping reorganization with the aim of slimming down its cost structure to stay afloat.
MiMedx’s woes first came under the spotlight in February, weeks after the FBI showed up at the door of a short seller who’s been hurling insults against the company and its ex-CEO, Parker “Pete” Petit. The short seller, Marc Cohodes, made a complaint to the Department of Justice.
As it soon emerged, the DOJ seemed to already be busy investigating MiMedx’s sales and distribution practices.
The company, which makes tissue grafts used to treat burns and soft tissue wounds, has faced lawsuits brought by ex-employees who allege the company has fraudulently boosted its sales. It’s spent several years challenging the FDA, which says its grafts don’t meet regulatory standards.
In Wednesday’s announcement, MiMedx offers an update from its audit committee, whose ongoing investigation is also incurring “significant legal and accounting-related expenses.” Their findings have already led to proposed “changes to business practices to address issues identified in the investigation,” the company writes without spelling out specifics.
The issues run deep, MiMedx says, which is why it will take yet some more time to release the already delayed financial statements for 2017 — together with those from the previous five years that it promised to restate following the internal investigtion.
(M)anagement has expanded the scope of work in connection with the preparation of the Company’s financial statements and is unable to estimate the expected completion date at this time.
Despite all these, interim CEO David Coles insists there is a way forward.
“Today’s announcement is a continuation of management’s efforts to position the business for long-term success by focusing on our wound care business, where our clinical studies best support patient outcomes and for which reimbursement policy has traditionally been more stable,” he says in a statement.