MiMedx (NSDQ:MDXG) said yesterday that it plans to eliminate 24% of its total workforce as part of a larger overall plan to reduce cost and improve efficiency.
The Marietta, Ga.-based company said that it plans to eliminate 240 full-time employees, with approximately half of those cuts coming from the salesforce. The plan also includes reducing costs of “various non-employee expenses,” with MiMedx expecting to realize the savings during the beginning of the first quarter of 2019.
“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. Recent business trends and our internal analysis have led us to simplify and streamline our organizational structure, and reduce costs in order to improve profitability and liquidity,” interim CEO David Coles said in a prepared statement. “I’d like to thank all of our employees for their contributions to our company and their support of our mission. We are confident these organizational changes will both better align our cost structure with our near-term revenue expectations and allow us to operate more efficiently and effectively. By tackling the cost structure now, we believe we are better able to position MiMedx to capitalize on the market opportunities presented by our products and pipeline and, hence, preserve and drive long-term shareholder value.”
The reorganization plans came about in response to an independent investigation performed by the company’s audit committee, MiMedx said, which are still ongoing.
“MiMedx’s realignment program was developed largely in response to these changes that have resulted in a material softening in the company’s recent revenue performance and expected near-term sales forecast,” the company wrote.
The company said that it is still working on restating its financial statements, but due to the “breadth and complexity of issues identified,” it has no estimated completion date at this time. It added that it can also not provide any financial performance-related information, and cannot estimate its exposure to “potential contingent liabilities related to pending and threatened shareholder lawsuits, pending government investigations or other legal proceedings.”
MiMedx said that it is still searching for a permanent CEO and that the board has been meeting with candidates, but that the “ongoing investigation” and “pending financial restatement process” makes it difficult find the appropriate candidate.
“We regret that the tough decisions being made as a result of the realignment program are affecting team members across the organization. We do believe MiMedx is making significant progress on numerous, critical fronts. In particular, the company has established an independent compliance function, assessed and improved sales and other business practices, is advancing the financial restatement process, continues to remediate the internal control environment, and is developing a long-range strategic plan,” board chair Charles Evans said in a press release.
In October, a report emerged suggesting that MiMedx held from government hospitals some of the lower-cost products it made available to private hospitals.
