December 16, 2020

Mimedx Group Inc. | MDXG – Update

We are raising our price target on MiMedx Group to $31 per share based on extensive new research showing that MiMedx’s Amniofix treatment will be a blockbuster for knee OA

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We are raising our price target on MDXG to $31 a share (or 5x the current price) on new findings that indicate Amniofix will be a blockbuster, game-changing osteoarthritis treatment. At the current equity price, investors are getting the core wound care business at a discount to fair value and the Amniofix potential for free.

Prescience Point Research Opinions:

  • Based on conservative assumptions, MDXG shares are worth $31.84, 4.9x the current share price
  • Amniofix will be a blockbuster, game-changing treatment for knee osteoarthritis (“knee OA”) and a variety of other musculoskeletal ailments
  • MDXG’s wound care sales will re-accelerate over the coming quarters

Research Highlights:

  • MDXG has put its period of turmoil behind it. Over the past two years, the Company has refreshed its mgmt team and Board, strengthened its balance sheet by raising $150m, settled with the SEC and DOJ for a modest amount, completed its financial restatement, and relisted on the NASDAQ
  • The wound care business is poised to re-accelerate in FY 21. MDXG has begun hiring addt’l sales reps in anticipation of increased demand resulting from recent, positive developments which incl. the release of a new wound care product, gaining coverage from the largest US insurer, and several hospital contract wins
  • Knee OA is a chronic, debilitating, and widespread condition affecting >20m people in the US alone
  • There are few FDA-approved treatments for knee OA, and those treatments that exist – NSAIDs, hyaluronic acid (“HA”) injections, and corticosteroid injections – have significant efficacy/safety drawbacks
  • Significant evidence indicates that Amniofix is a highly effective and safe treatment for knee OA which is far superior to HA and corticosteroids, and that the product is highly likely to receive FDA approval and take significant share in the knee OA treatment market, leading to multi-billions of dollars in potential peak revenue
  • Studies suggest & several physicians that we spoke w/ believe that Amniofix is regenerative and can slowdown OA progression
  • Preliminary results from MDXG’s Phase 2b knee OA trial were very promising and showed a separation between the treatment and control group with a low dropout rate
  • Independent knee OA studies of Amnoifix have shown very positive results. This includes a 100-person study which showed that Amniofix was very safe and highly effective with average quality of life and pain scores improving by 111% and 67%, respectively
  • Amniofix’s efficacy can last for 9-12 months, while HA & corticosteroids last for just 4-6 months and 4-6 weeks, respectively
  • Amniofix has reportedly been used on an off-label basis in >100,000 patients with zero severe adverse events reported
  • The RMAT designation the FDA gave to Amniofix for the treatment of knee OA further increases Amniofix’s already high chance of approval due to the often lower standard of evidence required for treatments with a fast track designation
  • The RMAT designation also gives Amniofix the opportunity to receive early FDA approval after its Phase 2b knee OA trial
  • The FDA’s approval of Zilretta – an extended-release corticosteroid – despite mediocre clinical results indicates that the FDA has lowered the standard of evidence required for knee OA treatments in general, even for those without an RMAT designation
  • Amniofix has also shown overwhelmingly positive results for the treatment of a variety of musculoskeletal ailments beyond knee OA, including plantar fasciitis, shoulder arthritis, and ankle arthritis, and will likely receive approval for multiple indications
  • Our conclusion that Amniofix will be a blockbuster treatment is supported by the fact that 3 of the top 5 selling drugs in the US are for rheumatoid arthritis and psoriasis, which are conditions with similar disease burden characteristics as osteoarthritis, and is further supported by the lofty sales of HA injections despite their highly questionable efficacy
  • Pre-revenue biotechs with comparable treatments to Amniofix have received lofty valuations early on in the clinical trial process. This includes Samumed which received a $12Bn valuation while its lead indication for knee OA was in Phase 2 trials

 

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