Health Complications Cited After 50 of MiMedx’s Graft Treatments

(Bloomberg) -- Biotech firm MiMedx Group Inc. has assured the public that its tissue grafts are safe, causing zero complications for patients, as it faces down federal investigations and short sellers.

Now that depiction is growing cloudy.

Top officials at the company are aware of at least 50 instances of patient complications that followed treatments with MiMedx’s skin grafts or injections, according to people familiar with the matter and documentation reviewed by Bloomberg News. As of early last year, the company had reported four incidents to regulators and said its products weren’t at fault in any of them. (That was the most recent government data available.)

It’s unclear whether the dozens of additional incidents are related to MiMedx’s products or if other factors are to blame. The FDA’s reporting guidelines are designed to cover gray areas, and medical companies tend to over-report occurrences in the interest of caution.

With adverse events, “you have to report,” said Dr. David Gortler, a former medical officer in the Food and Drug Administration. Failing to do so can violate federal rules and can “open up companies to serious repercussions,” he said.

In a statement, MiMedx said it has documented and assessed all adverse reactions and has notified regulators of the cases required by law and its internal compliance process. The company also said its reporting process had been reviewed by the FDA twice in the last three years without any complaint.

“Not every ‘adverse reaction’ is a ‘reportable adverse reaction,’” the company said. Along with companies, physicians can report incidents to the FDA, MiMedx noted, saying that the agency has referred only one to it since 2016.

Related: Hedge Fund Bullish on Biotech Stock Crushed by Short-Sellers

As with the cause, the seriousness of the health complications was unclear.

One issue that has drawn attention at MiMedx is quality control. The FDA and an independent consultant have raised concerns about the testing regimen and related processes for its injectable products.

The findings could spell more trouble for the embattled biotech company, based in Marietta, Georgia, which is charting a path forward after recently installing new management. Failure to report complications to the government can prompt regulatory scrutiny or, in severe cases, even curtail a company’s distribution of certain therapies or products. FDA investigators have interviewed one person familiar with MiMedx’s practices, one of the people said. A representative for the federal agency declined to comment.

The U.S. Veterans Affairs Department recently decided to stop paying for some of the tissue-based products made by MiMedx and its competitors, awaiting further studies on their effectiveness. The company, which is under investigation by federal authorities, selected a new top executive last month and recently withstood a proxy fight by its former chief executive officer, who was terminated for cause. The firm’s stock plunged to a six-year low of $1.15 in December, down more than 90% from its peak, although it has pared losses in 2019. The shares rose 3% on Wednesday to $4.34.

Tissue Grafts

MiMedx produces tissue grafts from amniotic membranes, harvested from donated placentas. The grafts are turned into sheets or ground into a powder -- a process called micronization -- that’s applied topically to a wound or injected. The products are used mainly to treat joint pain and soft-tissue wounds, but some doctors have advertised them for things as far afield as hair loss and acne.

They belong to the emerging field of regenerative medicine, a collection of methods to generate new cells to replace those lost to injury or disease. Supporters say the science is promising. Critics point to scant evidence for many of the purported benefits. The FDA has had to strike a balance between the two competing interests and has given companies leeway as long as their products aren’t harmful.

“Regenerative medicine is still a bit of a gray area,” Gortler said. “The treatments hold great promise for the future, but more research needs to be done.”

On its website, in presentations and on investor calls, MiMedx and its officials have repeatedly stated that patients have experienced zero adverse reactions attributable to its products. Marketing material provided to company salespeople this year also included the claim, a person familiar with the matter said.

Inflammation, Infections

The four adverse-events reports that the company filed with the FDA provide more details. They describe patients who developed inflammation or infections after receiving grafts or injections -- or both treatments -- applied to their ankles, backs or feet. Three of the patients were hospitalized. One had a toe amputated because of an infection.

In each case, MiMedx said its records showed that the products had been properly sterilized and that tissue from the same placentas had been used on other patients without complication. Multiple other factors, including the doctors’ technique, could have caused the incidents, the reports said.

Though neither cited product contamination, regulators and the outside consultant said that MiMedx’s processes to ensure that its injectables are safe previously failed to meet federal standards.

In early 2016, the FDA conducted an inspection of MiMedx’s facilities, focusing on the injectables. Over a four-week period, the agency’s investigator found 13 violations of FDA standards, ranging from the company’s testing regimen and production process to its record-keeping.

FDA Report

“There are no written procedures for production and process controls designed to assure that the drug products have the identity, strength, quality and purity they purport or are represented to possess,” the FDA said in the report, obtained by Bloomberg News through an open-records request.

In subsequent letters sent to the agency, MiMedx said it had developed a plan to correct the violations and provided updates on its progress. The agency conducted overarching inspections in November 2016 and September 2018 that didn’t focus on the earlier deficiencies. Records show that the FDA found no issues with MiMedx’s processes in those reviews, which lasted one day and two days, respectively.

But a document produced for MiMedx by Lachman Consultants, a firm that focuses on regulatory compliance, casts doubt. The report, dated Jan. 10, 2019, and seen by Bloomberg News, describes shortcomings in attempts to rectify several violations cited three years earlier by the FDA, including those described as most serious.

The Wall Street Journal previously reported Lachman’s findings.

In its statement, MiMedx said its manufacturing process complies with the law and the FDA’s earlier inspection found no deficiencies in its protocol for reporting adverse reactions. The company also said that it’s on track to comply with agency standards for injectables, which it must meet in 2020.

--With assistance from Anna Edney and Michelle Fay Cortez.

To contact the reporter on this story: Anders Melin in New York at amelin3@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Winnie O'Kelley, Peter Jeffrey

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