MiMedx Group Inc. responded to a report by Bloomberg News that the biotech firm is under federal investigation over business practices.
Bloomberg's report, which cited anonymous sources, stated that the U.S. Justice Department was investigating whether MiMedx overcharged the government for its tissue repair products and was looking into the company's distribution practices.
The Georgia-based company said it is unaware of any such investigation and denied that it had charged higher prices to federal accounts than it did to commercial accounts. It added that three years ago a competitor filed a "qui tam" suit — a type of suit that rewards whistleblowers if their cases recover funds for the government — against the company. However, the DOJ declined to intervene, resulting in a dismissal of the case.
MiMedx said the audit committee of its board and its independent advisers are investigating certain sales and distribution activities, which it expects will be completed in a timely a manner.
In addition, MiMedx said it has been the target of so-called short sellers since September 2017. Short selling is the sale of a security that is not owned but borrowed by the seller and is based on the belief that the security's price will go down, which allows it to be acquired later at a lower price to make a profit.
The company alleges that the group of short sellers, which includes Marc Cohodes, Aurelius Value, Viceroy Research, and other numerous hedge funds and individuals, has publicized a "continuous stream of misinformation and lies" about the company's business.
MiMedx said it has made many public disclosures about short selling and the lack of reliability of these allegations because of the individuals involved.
The company has terminated certain employees for cause over the last 15 months and believes that some of these employees are "retaliating by acting in concert with this group of short sellers to distort information and negatively impact the company's stock price."
MiMedx management believes the recent activity of and accusations by the short sellers should not affect the company's operational performance and clinical research activities. The independent investigation by the audit committee and their legal and accounting advisers should not have a material impact on the company's 2018 revenue guidance of $383 million to $387 million.
In October 2017, the company filed a lawsuit in a federal court against various short sellers, stating that they were improperly trying to drive down the company's stock for their own gain. The suit targeted Viceroy Research, John Fichthorn, BR Dialectic Capital Management LLC and Sparrow Fund Research LP.