MiMedx Increases Lower End Of Guidance For Second Quarter And Full Year 2014 Company Provides Insight into 2015 Revenue Opportunities
MARIETTA, Ga., May 27, 2014 /PRNewswire/ -- MiMedx Group, Inc. (NASDAQ: MDXG), an integrated developer, processor and marketer of patent-protected regenerative biomaterials and bioimplants processed from human amniotic membrane, announced today its revised guidance for the second quarter of 2014 and full year 2014, and provided insight onto various factors influencing the Company's revenue opportunities in 2015 and beyond.
Parker H. "Pete" Petit, Chairman and CEO, said, "Our second quarter is developing just as we forecasted. In fact, our expanded sales force is demonstrating the early stages of its effectiveness. While some payment issues still remain across the country related to the new Center for Medicare and Medicaid Services ("CMS") payment policies for wound care, to a great extent, those issues have been resolved. As a result, we expect to meet or exceed our forecasts previously provided for this quarter and the year. Based on the strength of our April and May revenue, we are increasing the low end of our second quarter revenue guidance range that we previously announced on April 7, 2014. As we did in 2013, we are also updating our annual revenue forecast as our actual revenue results indicate stronger than expected revenue performance. On March 24, 2014, we raised our original low end estimate for full year 2014 revenue from $90 million to $95 million. Given the back-to-back revenue performance in March and April, we are again comfortable in raising the lower end of our 2014 full year revenue range."
The Company's updated estimates are for second quarter of 2014 revenue to be in the range of $22.5 million to $23.5 million. Previously, the Company had published second quarter revenue estimates in the range of $21.5 million to $23.5 million. Updated full year 2014 revenue is now estimated by the Company to be in the range of $100 million to $110 million.
Three of four analysts that have written reports on MiMedx have reported 2015 revenue estimates of $145.5 million to $156 million, and one of the four has an estimate of $133 million. The Company reported that it is very comfortable with the 2015 revenue estimates in the high range and believe they are conservative. However, the Company believes that the low revenue estimate from the fourth analyst of $133 million is much too conservative based on current information.
Petit commented, "Some investors have expressed concerns that after the pass-through reimbursement status of EpiFix® expires next year, our continued growth in advanced wound care will be hindered. We understand the concern; however, we believe there are a number of factors at play that should ease those concerns. Conceptually, the concern is based on the premise that because the pass-through status of EpiFix will change in 2015, there will be a drop in demand for our allografts."
The factors that the Company believes mitigate those concerns can be summarized as follows:
- MiMedx is a regenerative biomaterials company with product applications in multiple areas of healthcare. MiMedx is NOT just a wound care company. Although MiMedx expects the majority of its 2014 growth opportunity to be in the wound care sector of the market, the Company expects the surgical, orthopedic, and sports medicine segments to be considerably larger than the wound care segment over time. The current U.S. wound care market is estimated to be just under $3 billion, but the market for the Company's grafts used in surgical, orthopedic, and sports medicine applications is in excess of $10 billion.
- Only a portion of the Medicare wound care market will be affected by the change. By dissecting the types of wounds for which the Company's allografts are used and the sites of service where its allografts are applied, insight is gained. In wound care, these sites of service include the physician office, the hospital in-patient and the hospital outpatient settings. The Centers for Medicare and Medicaid Services (CMS) reimbursement in those three settings is addressed differently.
- In the physician office, reimbursement is currently based on an Average Sales Price (ASP) + 6% model. The pass-through status of EpiFix is not applicable in this setting.
- In the hospital in-patient setting, reimbursement is under the DRG, and therefore, the pass-through status of EpiFix is not applicable here. This is the setting where many of the very large wounds are treated. These types of wounds include large Diabetic Foot Ulcers (DFUs) and Venous Leg Ulcers (VLUs), but also include many other types of wounds.
- The pass-through status within CMS reimbursement only applies to the third of these three settings…the Hospital Outpatient and Ambulatory Surgery Center.
- The next factor that dispels this concern is the fact that commercial health plans continue to follow a payment policy of reimbursing on a square centimeter basis, and do not set a packaged rate as does CMS. Therefore, the pass-through is relevant only for wound care in Hospital Outpatient or Ambulatory Surgical Center (ASC) environments for Medicare patients.
"Assuming CMS leaves the current payment methodology and rates intact for 2015, our smaller size allografts from 6 square centimeters and below will be applicable for approximately 70% of all of the DFUs and VLUs. These prices fall under the packaged rate and are not in question. The very large wounds fall into the 'outlier' category for CMS and receive additional payment that is based on wound size and the cost of the grafts. Therefore, any loss of the pass-through in 2015 would not be applicable to the small and very large category of wounds. Finally, one also needs to remember that the revenue in the Veteran's Administration (VA) facilities and our surgical and orthopedic revenue are not affected by the loss of pass-through status either," added Petit.
"If we assume 2014 revenue to be $100 million, only an estimated $8 million of our revenue is associated with our larger allograft sizes that are applied on Medicare patients in the Hospital Outpatient and ASC setting and do not qualify for the outlier category," commented Bill Taylor, President and Chief Operating Officer. "Therefore, the entire portion of our revenue potentially impacted by the pass-through status is only about 8% of our projected revenue this year. A large percentage of these bigger grafts are applied on inpatient DRG cases. In 2015, when the pass-through status of EpiFix expires, we still expect to capture a large part of this 8%. Taylor went on to say, "In addition, we expect coverage to continue to build rapidly this year with commercial payors and Medicaids, which reimburse on a per square centimeter basis."
Speaking to the issues associated with 2015 wound care revenues, Mr. Taylor commented, "The wound care market is a very large segment of healthcare consisting of both chronic and acute wounds. Even with the rapid growth we are seeing in this market in 2014, we expect to penetrate only roughly 5% of this nearly $3 billion market by the end of the year. Also, it is important to understand that our allograft offerings are used in far more procedures than just DFUs and VLUs. In fact, a substantial amount of our wound care revenue comes from uses in other chronic cases, such as decubitus (pressure) ulcers, as well as acute cases such as burns, Mohs surgery, surgical dehiscence, plastic surgery, radiation burns, scar revisions, etc. Our tissue utilization records show in excess of 40 different types of wounds that have been treated with our wound care allografts."
Petit concluded, "Although we have very strong growth in the wound care area, do not forget that MiMedx is not just a wound care company. Our platform technology is positioned to address unmet needs in multiple surgical applications. Beginning in 2015, the Company expects to see significant growth in certain surgical applications utilizing our allografts. You should be well aware of our distribution agreement with Medtronic related to spinal surgeries. We are actively exploring other potential distribution agreements. In addition, we have started and will complete this year certain clinical studies on the use of our allografts in other surgical procedures."
MiMedx® is an integrated developer, processor and marketer of patent protected regenerative biomaterial products and bioimplants processed from human amniotic membrane. "Innovations in Regenerative Biomaterials" is the framework behind our mission to give physicians products and tissues to help the body heal itself. Our biomaterial platform technologies include AmnioFix® and EpiFix®, our tissue technologies processed from human amniotic membrane that is derived from donated placentas. Through our donor program, mothers delivering full-term Caesarean section births can elect in advance of delivery to donate the placenta in lieu of having it discarded as medical waste. We process the human amniotic membrane utilizing our proprietary PURION® Process, to produce a safe and effective implant. MiMedx® is the leading supplier of amniotic tissue, having supplied over 225,000 allografts to date for application in the Wound Care, Surgical, Sports Medicine, Ophthalmic and Dental sectors of healthcare.
Safe Harbor Statement
This press release includes statements that look forward in time or that express management's beliefs, expectations or hopes. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the Company's projected revenues for second quarter and full year 2014, the Company's comfort level with analysts 2015 estimates, the impact of the loss of pass-through status on the Company's revenue growth in 2015 and beyond, the assumption that there will not be further changes in reimbursement by CMS or other payors or the price at which government accounts purchase the Company's products, the rate of increase in coverage by commercial payors and Medicaids, the Company's ability to increase its penetration of the wound care market, the prospect of significant growth in surgical and sports medicine applications of the Company's products, the potential for new distribution agreements, and the outcome of in-process clinical trials. These statements are based on current information and belief, and are not guarantees of future performance. Among the risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements include the uncertainties of litigation, that the Company may not achieve its projected revenue goals or the estimates put forth by analysts that follow the Company, that the loss of pass-through status will have a greater than anticipated impact on the Company's revenue growth in 2015 and beyond, that there will be further changes in reimbursement by government or commercial payors or changes in the price at which government accounts purchase the Company's products, that coverage by commercial payors and Medicaids will not increase as expected, that the Company will not increase its penetration of the wound care market as anticipated, that the use of the Company's products in surgical and sports medicine applications will not grow, that the Company will not be successful in entering into new distribution agreements, that the results of in-process clinical trials will not be as anticipated, and the risk factors detailed from time to time in the Company's periodic Securities and Exchange Commission filings, including, without limitation, its 10-K filing for the fiscal year ended December 31, 2013. By making these forward-looking statements, the Company does not undertake to update them in any manner except as may be required by the Company's disclosure obligations in filings it makes with the Securities and Exchange Commission under the federal securities laws.
SOURCE MiMedx Group, Inc.