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Here's Why MiMedx Group Inc. Rose 24.7% in August

By Maxx Chatsko – Sep 10, 2018 at 12:44PM

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The company announced product updates and earned an extension to remain listed on the Nasdaq exchange -- for now.

What happened

Shares of MiMedx Group (MDXG 2.91%) rose 24.7% in August, according to data provided by S&P Global Market Intelligence. The bump was delivered after the company reported updates related to its product portfolio, clinical drug pipeline, and ability to keep its stock listed on the Nasdaq exchange -- for now, anyway. That collection of positive news outweighed a major insurer's decision to no longer cover one of its key products.

The busy month of updates follows a stretch of bad news for the biologic drug developer, which has been embroiled in controversy following a Wall Street Journal article that alleged questionable sales tactics had carried MiMedx Group's impressive growth over the years.

A bar chart with the final and tallest bar represented by a red arrow on a springboard.

Image source: Getty Images.

So what

In August, the company reported phase 2 results for a micronized dehydrated human amnion/chorion membrane (dHACM) product as a treatment for plantar fasciitis, which is expected to report phase 3 results in 2019. MiMedx Group also received a regulatory green light to begin marketing its product portfolio in Australia.

Perhaps more important to investors, the company announced it had been granted an extension with the Nasdaq exchange, which decided to wait to rule on the ability of MiMedx Group stock to remain listed until after the meeting scheduled for September 13. The company will meet with the exchange to explain why it hasn't filed recent SEC filings, including its annual report for 2017 and reports for the first two quarters of this year, and what it plans to do to rectify the situation.

Now what

Of course, investors already know the reason for the missed reporting deadlines is due to the accounting deficiencies reported by the Wall Street Journal, which are currently subject to an independent investigation. It's likely that MiMedx Group will be required to restate financial numbers stretching back years. What investors don't know is the magnitude of any potential restatements or how that explanation will be received by the Nasdaq. If the stock is delisted, then it could severely alter the company's trajectory and ability to raise funds. Given the major red flags and sources of uncertainty, this is a biopharma stock to avoid.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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