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Why MiMedx Group Shares Rebounded

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of MiMedx Group (NASDAQ: MDXG  ) , a manufacturer of patented regenerative biomaterial products, jumped as much as 22% today following yesterday's mammoth 36% decline after holding a conference call to discuss the Food and Drug Administration's untitled letter.

So what: If you recall, yesterday MiMedx announced the receipt of an untitled letter (i.e., an initial notification of violations from the FDA, but not meeting the threshold in severity of a warning letter) that because it uses a micronization process on select manufactured products, those products should, in turn, be treated as drugs. Since the FDA has not allocated the proper licenses to MiMedx, it therefore could be manufacturing some of these products illegally.

Today, management reiterated its full-year 2013 and 2014 fiscal guidance, noting that the FDA's untitled letter will not stop it from reaching its revenue targets and adamantly denied any wrongdoing with its manufacturing process. In fact, MiMedx points out that the FDA has examined the line of products in question and OK'd them from a safety perspective last year! With the expectation of a meeting shortly with the FDA and a resolution, MiMedx doesn't anticipate any production interruptions.

Now what: As a shareholder, you have to be pleased with how quickly MiMedx's management team has fired back at the FDA. On the other hand, there are still a lot of unanswered questions here, and there doesn't seem to be much of a reason for the share price to head higher until they're answered. Lawsuits are pouring in by the handful as well, which will only further complicate matters for MiMedx. As I stated yesterday, the best course of action might be to just add MiMedx to your watchlist but avoid the stock altogether until we have better clarity.

Even though MiMedx has been a day-trader's dream stock over the past two days, it's tumble serves as a stark reminder that the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.

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Related Tickers

9/26/2016 1:21 PM
MDXG $8.64 Down -0.29 -3.20%
MiMedx Group CAPS Rating: ***