MiMedx Group, Inc. (OTC Bulletin Board: MDXG), an integrated developer, manufacturer and marketer of patent protected regenerative biomaterials and bioimplants processed from human amniotic membrane, announced today its results for the quarter ended September 30, 2012.
Highlights of Third Quarter 2012 Results include:
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Revenue Increased by more than 3.5 times over Third Quarter of 2011
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Quarter over Quarter Revenue increased by 63%
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Gross Margins Hit Record Level of 82%
The Company recorded record revenue of $8.0 million for the third quarter of 2012, a 270% or $5.8 million increase over third quarter of 2011 revenue of $2.2 million, and a 63% increase over second quarter of 2012 revenue of $4.9 million. The Company's earnings before interest, taxes, depreciation, amortization and share-based compensation (Adjusted EBITDA) for the quarter ended September 30, 2012, were $726,000, a $1.7 million improvement as compared to the Adjusted EBITDA loss of $934,000 for the third quarter of 2011.
For the nine months ended September 30, 2012, the Company recorded revenue of $16.5 million, more than threefold increase over revenue of $5.1 million for the first nine months of 2011. The Company's Adjusted EBITDA for the nine months ended September 30, 2012 was $2.0 million, a $6.6 million improvement over Adjusted EBITDA loss of $4.7 million for the first nine months of 2011.
For the 7th consecutive quarter, the Company reported improved gross profit margins. The Company's third quarter 2012 gross margins of 82% is nearly a twenty-three percentage point improvement over third quarter of 2011 gross margins of 59%, and a six percentage point improvement over the Company's second quarter of 2012 gross margins of 77%.
Management Commentary on Second Quarter Results
Parker H. "Pete" Petit, Chairman and CEO stated, "By all the measures that I have traditionally used, I would clearly classify this as "excellent" quarterly performance. When you can increase revenues quarter -over -quarter by more than 60%, increase gross profit margins by 5%, increase the size of your sales organization by 5 times and still maintain positive EBIDTA, that is excellent quarterly performance. Our third quarter revenue growth was primarily attributed to our EpiFix® wound care product gaining acceptance in numerous Veterans Administration hospitals. Up to this point, our AmnioFix® tissue grafts had provided the majority of our revenue; however, we now expect sales of our EpiFix® tissue grafts to show accelerated growth, especially in wound care. While we are pleased with the prolific growth we achieved in the third quarter, I want to make it very clear that management does not expect revenue to grow at a 60 plus percent quarter- over -quarter rate. We believe that our growth will be very robust, but that the incremental quarter- over- quarter rate we saw last quarter is not going to be achievable in the ensuing quarters. However, we are confident we will exceed the upper end of our previous 2012 revenue goal of $25 million."
The Company reported that prior to the start of the third quarter, it embarked on a strategy to aggressively establish its direct sales force to serve the VA hospitals. "We recognized the significant and timely opportunity we had available to us to increase our presence in the VA hospitals where the reimbursement process for our grafts is well established. Late in the second quarter, we added a sales executive to head up the government sector of our sales force. Throughout the third quarter, we added 19 additional members to that government- focused team of sales executives. With only a partial quarter of activity under our belt, the sales results from our government sales team is dramatic: The professionalism of our sales team and the clinical and cost effectiveness of our grafts will enable strong revenue and profit growth in the future," said Petit.
"This is the fourth quarter in a row where we met or exceeded our revenue goals, with our latest quarter exceeding our revenue goal by a significant margin," commented Bill Taylor, President and COO. "If you add to this, the results of our first EpiFix® Randomized Controlled Trial, where 92% of the patients treated with EpiFix® fully healed in six weeks, I think it is safe to say we had a fantastic quarter. Additionally, we have significantly improved the quality and depth of our and organization, particularly in the sales and management functions, and we are well-positioned for continued strong growth over the coming quarters."
As the Company continues to receive impressive results from studies currently underway to validate the clinical and cost effectiveness of its EpiFix® grafts, used externally, and its AmnioFix® grafts, which are used internally for surgical procedures, MiMedx expects to see reimbursement coverage broaden among commercial health insurance plans and Medicare intermediaries. "We received the Medicare C-code for our EpiFix® grafts on January 1, 2012; however, the various Medicare intermediaries generally do not reimburse products in this category without additional clinical data to support their efficacy and cost-effectiveness. With the excellent results emanating from these clinical studies, we are confident that we will have successful break-throughs in these reimbursement processes. The reimbursement successes we anticipate in the Medicare and commercial insurance coverage sectors, combined with our government focused efforts in the VA hospitals, will set in motion our growth expectations for the years to come," added Taylor.
Revenue Breakdown
The Company also reported the revenue breakdown between its primary regenerative medicine specialties. MiMedx will now report its regenerative medicine specialties in three categories... "Wound Care", "Surgical & Sports Medicine", and "Other." Revenue for the Company's EpiFix® grafts comprises the Wound Care category. Its Surgical & Sports Medicine specialty is comprised of the Company's injectable, orthopedic and surgical applications for its AmnioFix® grafts. The "Other" category of the MiMedx regenerative medicine specialties includes the Company's tissue revenue from its dental and ophthalmic applications and products, as well as revenue from its HydroFix® technology. The third quarter of 2012 marked the first quarter in which Wound Care revenue exceeded Surgical & Sports Medicine revenue. In the quarter, 61% of MiMedx sales volume was for Wound Care, 34% for Surgical and Sports Medicine and 5% for "Other." On a year- to- date basis, Wound Care represents 38%, Surgical & Sports Medicine represents 51%, and "Other" represents 11% of total MiMedx revenue.
Balance Sheet and Cash Flow
Cash and cash equivalents as of September 30, 2012, were $7.6 million, as compared to $2.7 million as of June 30, 2012, and $4.1 million, as of December 31, 2011. During the quarter, the Company raised over $6.2 million from the exercise of warrants and options. Cash flow from operating activities of negative $862,000 for the quarter was due primarily to increases in working capital in line with the Company's sales growth. During the quarter, the Company invested $163,000 in capital equipment to continue its ramp up of tissue processing activities to meet the market demand for its grafts.
Total Current Liabilities increased to $10.5 million as of September 30, 2012. During the quarter, the Company paid off the convertible debt related to the Surgical Biologics acquisition and recorded an additional provision of $1.3 million based upon the forecasted increase in sales volume. The earnout related to the acquisition will be paid in MiMedx common stock in April 2013.
Early in the quarter, a total of 3.3 million Contingent Warrants at an exercise price of $0.01 were voided per the terms of the 2012 Contingent Warrant agreement related to the trading price of the Company's Common Stock.
GAAP Earnings
For the quarter ended September 30, 2012, the Company recorded a Net Loss from Operations of $3.6 million and a $4.4 million loss for the nine months ended September 30, 2012. This represents a $2.0 million increase over the third quarter of 2011 Net Loss from Operations and a $2.9 million improvement over the nine months ended September 30, 2011. Included in the third quarter net loss were the earnout liability charge mentioned previously and a $1.8 million impairment charge. Research and development expenses increased due to the decision to accelerate investment in clinical trials for reimbursement purposes. Selling, general and administrative expenses increased due to the decision to build out the Company's direct sales force for government accounts, as well as to add key management and infrastructure related resources to support the Company's growth.
The Net Loss for the quarter was $4.2 million, or $0.05 per diluted common share, as compared to the Net Loss of $1.8 million, or $0.02 per diluted common share, recorded for the quarter ended September 30, 2011. In addition to the previously mentioned charges and investments, there were also increases of $358,000 in debt discount expense and $113,000 in interest expense related to the Company's convertible debt offerings. The Net Loss for the nine months ended September 30, 2012, of $6.1 million or $0.07 per diluted common share, represents a $1.6 million improvement as compared to the Net Loss of $7.6 million, or $0.11 per diluted common share, recorded for the nine months ended September 30, 2011. Included in reported Net Loss for the first nine months of the year is non-cash related financing expense associated with the debt discount of $1.2 million. This expense will continue to be amortized over the life of the convertible notes.
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