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More physician owned distributors – MiMedx may not wish to address its investors but it will have to answer the regulators

Viceroy is releasing more on illegal physician owned distributors (PODs) operating in the wound care space within the state of Texas. Our spreadsheet will follow shortly to expose multi state PODS and conflicts.

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Given the large proportion of income derived from Texas sales, investors should be concerned, especially as the numerous, undeniable, illegal PODs we illustrated on our report dated October 13, 2017 have not been addressed by management.

MiMedx’s blanket denial of Viceroy’s report and aversion to conducting an investigation suggest that management are either fully aware of these illegal distributors, or have been negligent in their duties…

MiMedx is not operating in an industry where these abuses are commonplace, and yet within the single state of Texas, we have connected MiMedx with:

  • Numerous illegal PODs;
  • Numerous related party distributors; and
  • Forest Park Medical Center, a $40m fraud uncovered by the DOJ and FBI.

Malfeasance by Physician Owned Distributors and kickbacks are an abuse of the healthcare system. The abuse not only costs patients and insurers, but ultimately undermines the integrity of physicians where products are prescribed to enrich suppliers (namely MiMedx) and enable Physician’s to obtain a kickback in reward.

This report further details connections between MiMedx and its network of physician owned distributors. This network of distributorships owned by employees and physicians allows MiMedx to engaged in large scale channel stuffing activities. The benefit to the physicians and employees comes at a cost to insurers and the medical facilities who ultimately pay the costs.

Lou Roselli made the headlines once more last week as an incriminating email surfaced where Lou admits MiMedx cannot reconcile inventory to federal customers. In the tissues business, this is strictly against the law.

Given the substantive evidence presented in our reports, we call on the board of MiMedx launch an immediate external investigation into the conduct of Senior Personnel, and subsequently resign.

The structure of these distributors leaves open great opportunities to exploit the US healthcare system. As a reminder to our readers, the Office of the Inspector General of the Department of Health and Human Services issued a special fraud warning stating that such ventures “should be closely scrutinized under the fraud and abuse laws.”

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Bankruptcy & DOJ/FBI indictments of Physician Owned Medical Center inconvenienced MiMedx CPM channel stuffing program

This report focuses on commercial relationships with currently indicted individuals for fraud with direct trading links with MiMedx and a Physician Owned Distributors in Texas with more to come.

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In this report, we detail exactly what MiMedx management withheld about its relationship with CPM Medical & unquestionably evidence physician owned distributors that have sold & are selling MiMedx products, with full references & FDA evidence. MiMedx’s channel stuffing distributor, CPM Medical, defaulted on its credit terms due to a DOJ/FBI crackdown on a key client, Forest Park Medical Center – a convicted $40M fraudulent kickback scheme.

Viceroy also present indisputable FDA evidence that MiMedx was specifically trading with physician’s spouses – via physician owned/related distributors registered to store MiMedx products ONLY.

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More whistleblowers come forward with details of MiMedx sales scheme

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Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation. Since publication many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations.

Information Viceroy has received from a further Whistleblower expands and gives details into the channel stuffing practices at MiMedx, including the structure of the employee and physician owned distributors and mechanisms of sales enticements.

 

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Ex-employees blow the lid on MiMedx sales scheme

Prior to Viceroy’s publications, we filed a significant data bundle of evidence to the SEC Whistleblower program. We always believe where appropriate in notifying regulators first. We under some may not wish to disclose or communicate with Viceroy, however can contact the SEC directly: https://www.sec.gov/whistleblower.

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Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation.

Many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations.

In this report, we detail:

  • Allegations corroborated by whistleblowers that MiMedx engage in a scheme with its distributors, in which larger and / or a number of small products are labeled as cheaper products. This scheme would draw attention away from MiMedx financial accounts as there are no ‘direct’ cash kickbacks to distributors, but distributors can unsuspiciously make large margins on marked up products.
  • Further apparent MiMedx related party entities controlled Donovan Schmidt, all of which appear to deal with medical products – we have a lot more to come on this.
  • MiMedx former subsidiary and current distributor Stability Biologics’ history as a with Osiris Therapeutics, a former NASDAQ listed competitor who is under investigation by the US Attorney’s Office for a criminal offence which, Viceroy believe this investigation is likely related to channel stuffing practices and revenue recognition.

Allegations as they stand are so substantial that Viceroy are now engaging in dialogue with the Department of Justice.

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How are MiMedx making their numbers?

“I don’t know how they’re hitting their numbers: that’s what’s blowing me away. What is going on? How are they supposedly hitting these numbers? I want to know.” – Former MiMedx Employee

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Viceroy continues piecing together further damning evidence of MiMedx’s dwindling relationship with the Department of Veteran Affairs.

As a recap, we have established flawed and dubious hiring practices for MiMedx, connections to related party employee owned distributors, improper government filings, photographic evidence of channel stuffing and an undisclosed SEC investigation.

MiMedx refuse to acknowledge the facts. In what appears to be a blatant disregard for the SEC rules and the need for 8-K filing, MiMedx recently filed an 8-K for relating to a “Amendment to Credit Agreement”, ignoring the elephant in the room: the SEC subpoena. According to MiMedx actions, an amendment to credit agreement” is significantly more important than the need to file an 8-K relating to an SEC subpoena. Viceroy believe that this is to avoid people tracking the issues of MiMedx and/or owning up to the seriousness of an on-going investigation.

This is in addition to MiMedx misleading its investors about the publication of an alleged independent report that was concealed from its own investors. As highlighted by Aurelius Value, MiMedx went one step further and prohibited its disclosure even when the SEC made enquiries. Investors would be prudent to check the SEC filings from April 18, 2017

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MiMedx’s selective non-compete litigation & questionable disclosures

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While Viceroy pieces together further damning evidence of MiMedx’s dwindling relationship with the Department of Veteran Affairs, investors should question the discretionary nature of MiMedx’s aggressive litigation. Namely against employees which have breached their non-compete with MiMedx. Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation.

Many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations. All whistleblowers are extremely fearful of physical and legal retribution from MiMedx. They have provided images, statements, corroborating phone data/records and further information about the company’s channel stuffing practices, executive impropriety and lack of disclosure.

Contrary to their statements, we believe MiMedx intentionally turns a blind eye to certain employees setting up their own distributorships especially where it is likely to benefit MiMedx revenue schemes. This has been confirmed by former employees who told Viceroy:

“…some people are allowed to break a rule [that] others are not. And there’s so much stuff that goes on behind the scenes with the executive team that no one knows who makes the rules…” – Former MiMedx Employee.

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MiMedx’s Channel-Stuffing: Hard Evidence

Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation.

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Following publication of our first report, MiMedx held an investor conference call on September 21st where management knowingly made false statements to their investors and the general public. MiMedx published a rebuttal to Viceroy’s second report, which is posted to the front page of the MiMedx website, linked to a Box account, and not on company letterhead.

We believe this represents a misaligned focus between the organization’s strategy in crisis control and Pete Petit’s systematic attempts to clear his name and slander Viceroy’s investigations.

Many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations. All whistleblowers are extremely fearful of physical and legal retribution from MiMedx. They have provided us with images, statements and further information about the company’s channel stuffing practices, executive impropriety and lack of disclosure.

 

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MiMedx (MDXG:NASDAQ) Part 2 – The same old story; Mimedx’s response is typical of companies trying to cover their tracks and is unacceptable.

MiMedx cherry-picked a handful of bulls for the September 21 call last week, restricting access for their own investors and others with an interest in the events that transpired on the week ending September 22, 2017. During the call, analysts asked pertinent questions that remain substantially unanswered. To assist investors, we’ve compiled a list of items that were conveniently ignored, avoided or even blatantly misrepresented.

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Over the last week, MiMedx has:

  • Dismissed “Deceptive Short Seller Reports”, including Viceroy’s, which presented evidence in the form of a withheld FOIA request suggesting that MiMedx was the subject of an undisclosed SEC enforcement investigation.
  • Announced that MiMedx are complying with an SEC subpoena, thus subject to an SEC investigation.
  • Failed to formally announce to the market that they are a subject of an SEC investigation. Viceroy requested management confirm whether it will fulfill their regulatory requirements by filing an 8-K in relation to an ongoing SEC investigation within the four days of becoming aware of it. If they have not filed an 8-K within 4 days of becoming aware of an SEC investigation, they are in breach of withholding material information from the investing public.
  • Been announced as the subject of an investigation by two securities litigation firms: Block & Leviton and Bragar Eagel & Squire, P.C. Both firms announced it had commenced investigations into a class action on behalf of MiMedx shareholders on September 22 and 25, 2017 respectively for not disclosing they were under SEC investigation, amongst other things.
  • Backdated government FAR & DFARS certification records as far as 2013 which were previously filled out by an employee, Don Ayers – who no longer worked at MiMedx at the time of certification – with Kimberley Durgan – who only commenced employment with MiMedx in 2014.
  • Backdated FAR & DFARs certifications remained signed with the authority of VP Brent Miller, whose LinkedIn status as of May 2017 is ‘Officially Retired’, and thus had no authority within MiMedx at the time of the amendments.
  • Announced it had come to a settlement of a confidential lawsuit with terminated employee Hal Purdy, a move we believe serves only to distract from the issues raised in our report which as yet go unacknowledged and undiscussed by the company. With ‘sealed’ documentation.
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MiMedx’s (NASDAQ:MDXG) employment of kickback & bribery scheme inducers makes it uninvestable.

Viceroy Research uncovered substantial previously-unreported data evidencing an incestuous hiring policy from a kickback & bribery scheme, a possible SEC enforcement investigation, and indications of channel stuffing.

  • Sean McCormack – MiMedx’s “New Market Initiatives Director” – was an instrumental figure in Advanced BioHealing’s kickback and bribery inducement scheme, which resulted in the largest settlement of a False Claims Act breach to date: $350m settlement, and a $600m+ write-down by Shire. At least 54 Advanced BioHealing alumnus have been identified by Viceroy within MiMedx’s sales force including at least 15 in senior employment positions.
  • A FOIA request was withheld by the Securities and Exchange Commission (SEC) suggesting MiMedx is the target of an undisclosed SEC enforcement investigation.
  • Former employees-turned whistleblowers accused MiMedx of aggressive channel-stuffing practices and improper revenue recognition policies. Their statement named many ex-Advanced BioHealing employees. Despite the fact these allegations having been withdrawn, Viceroy’s analysis found evidence supporting these claims in MiMedx’s financial accounts – there’s no smoke without fire.
  • MiMedx’s SAM compliance certification was filled out by Don Ayers, who was no longer employed by MiMedx at the time the forms were signed.

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Mitsubishi Tanabe is making a huge mistake: Why we believe that Neuroderm (NASDAQ:NDRM) is a lemon.

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We believe that Mitsubishi Tanabe and its board need to immediately put a hold on the Neuroderm acquisition. We don’t know what representations have been made to Mitsubishi Tanabe by Neuroderm or others pushing this acquisition, but our research findings demonstrate the following:

  • Neuroderm has misrepresented the SIZE of the market, the RELEVANCE of their clinical study, and the EFFECTIVENESS of their ND0612 pump-delivered drug.
  • AbbVie’s Duopa/Duodopa pump is already ESTABLISHED in the market, has a SUBSTANTIALLY LOWER adverse effect rate, conducted its trials on an APPROPRIATE subject pool, and did not rely on SUPPLEMENTARY oral levodopa or entacapone, to boost its clinical trial results, unlike Neuroderm.
  • Neuroderm claims the size of ND0612’s target market across the USA and EU is ~350,000 patients. AbbVie’s superior pump has targeted the SAME market, only capturing ~3,500 patients.
  • The ND0612 drug is marketed towards ADVANCED stage Parkinson’s sufferers, however the efficacy study for the drug was conducted on EARLY stage Parkinson’s sufferers, which require substantially lower doses of the active drug component in order to be effective. We believe the FDA will closely review the stage 3 trials to ensure ND0612 is tested on an APPROPRIATE and RELEVANT subject pool.
  • Neuroderm’s ND0612 delivery pump is made up of GENERIC COMPONENTS and presents ZERO R&D proprietary value.
  • ND0612 is now only being tested for bioequivalence, not efficacy. While this may lead to a speedier FDA approved drug, Mitsubishi Tanabe is meant to be buying Neuroderm for its TECHNOLOGY. We see this concession as further evidence of Neuroderm’s weak R&D value, which Mitsubishi Tanabe thought it was buying with this acquisition.