MiMedx Group, Inc

Yeah, I'm going to stay away from forecasting how much of our business might convert to a higher-priced product. Look, this was not our first choice. This was a step we felt it was necessary to take to protect some portion of our business. It's a little bit more niche-y for us. Again, 25% exposure in that category. And within our current customer mix, you don't have – the majority of them are probably niche.

not moving in that direction. Let's just put it that way.

And to the extent that they do, because there's some fear of missing out, they're looking for products that are priced higher than our existing portfolio, but more moderately priced as compared to what we're seeing out there in the marketplace today. What we're seeing out there is rather obscene. And remember, when a doctor decides to use a product that's several thousand dollars, They still have exposure and risk around audit. And we know that audits are increasing at quite a high rate, right? So the higher the bill of charges, the higher the potential callback in the event of an unsuccessful audit outcome. So I think for us, it's a little bit more niche-y. That's why in my prepared remarks, I cautioned against looking at this as some sort of a windfall. I would look at it as just a tactic or step that we're taking to protect as much business as we can until reform takes place.

And just last for me, you know, strong surgical growth in the quarter. You know, can you cue us in on what portion of growth is driven by Heliogen? And then is there any specific surgical indication that is having an outsized impact on the growth? And then kind of what's driving that? Is it just better sales execution or was there a recent data set that's kind of really driving volumes in the surgical side?

I think it's just better execution. We had growth across the category. And the effect, obviously, is growing nicely. And the fix continues to grow nicely. Heligen, as you mentioned, is new to the, off of a base of zero last year. So any growth is good there. We actually still continue to retain a good portion of our axial fill business, waiting for an outcome there. So really across the portfolio. And I would just say more use in areas where the product had already been used. It wasn't some new revelation and some new data set, but I do appreciate you pointed it out because, again, that's a portion of our business that has no ASP exposure, and you see the kind of execution we're getting there. If you go back a few years prior to when we had this flood of new products under the category, even our private office business was growing at a very nice clip. So, look, again, we feel really good about the business at large, and our ability to grow the entire business at double digits once we get through this phase. But obviously, the surgical business is a bright spot for us.

Thanks, Joe.

Thank you. And just a reminder to the audience, to ask a question, press star 1 on your telephone keypad. To remove yourself from the queue, press star 2 on your telephone keypad. Our next question comes from Ross Osborne with Cantor Fitzgerald. Please say your question.

Hey, guys. Thanks for taking our questions. Maybe just one for me at this point in the call. Would you walk through what efforts you guys are putting in place now to get ready for what is hopefully a better market environment next year? I think you called out some sales turnover, so I was curious on that. you know, what the bench looks like there in terms of hiring, any manufacturing initiatives that are planned, you know, support incremental demand next year when we're in a much better marketplace.

Yeah, I think, you know, Salesforce turnover you mentioned, it was relatively high about a year ago, and that's come way down. Once we got through sort of that late second quarter, third quarter surge last year when we had folks chasing dollars, we got through that as, again, I would say at a more normalized rate. In terms of growth for the rest of this year and then the next year, it's just executing our plan, right? We talked about the continued to expand our product portfolio and service offerings within the wound care business and within the surgical market. That's really important for us. We know we need to continue to invest in the commercial strep, the clinical and scientific research to support additional surgical applications are used in the product. So we'll continue to do those things. You know, we're teetering around from a corp dev standpoint, a couple of new assets we might be able to bring into the portfolio in some format, and that could help augment growth next year as well, as long as it fits within our strategic plan. So we have a lot going on and feel really good about it. Once this kind of distraction settles down and we can stop talking about it so much and we get some advancement, and the industry gets cleaned up and becomes much more investable, we think the business is going to be in great shape.

Yeah, maybe Ross, just to add to that real quick, I mean, and you see it with SAWC later this week, as well as DDW next week. I mean, the commitment to generating and publishing all the various proof points that we can to you know, show the breadth of the utilization of our portfolio, I think is meaningful. You know, DDW in particular is a show that you wouldn't normally think of as a skin substitute, you know, showcase. And yet, you know, we've got normal presentation there. And I think that's the sort of the tip of the spear as it relates to various surgical applications for the products.

Great. Thanks, guys.

Thank you. Our next question comes from Anthony Patron with Mizoho Group. Please, your question.

Thank you, and I hope everyone's having a good afternoon. I hope everyone's well. Maybe, Joe, to just jump in back to, obviously, the LCDs. I know, you know, not a topic that, obviously, the team wants to continue to focus on here, but two-parter here for you on this topic. One is, in prior announcements on LCD changes as this has evolved, the primary channel kind of shifted their purchasing patterns. So do you think this latest iteration will drive any changes in purchasing pattern shifts near term? So that would be the first part. The second part is, it seems like for Doge, looking at fraud and waste, The company has previously put out a billion, up to a billion of billable claims here that potentially are fraudulent. And so how do you look at this under the lens of Doge and sort of tackling waste? Thanks.

I'll go backwards. So, you know, Doge is, we're led to believe or told that Doge is well aware of the issue and that it's on the work list. I sincerely believe that folks were able to convince the new administration that a postponement was necessary because the LCDs weren't necessarily the right way to address a pricing and spending issue. And there's some merit to that argument. I get it, right? It was the last best option, and I think the MACs were put in a position that they had to do something. project that they worked on for some time. So yeah, I think it's a doze issue. But again, if you take Dr. Oz for his word, he's said that eradicating fraud, waste, and abuse, CMS, which has a, I don't know, a trillion and a half dollar budget out of the nearly $7 trillion total U.S. budget. He's got a big portion of it. If you take him at his word that this is going to be a focus area for him. And again, this is a kind of low-hanging fruit for them, right? So your number that you stated of a billion dollars, we started stating that number last year as a run rate. We know the total spent prior year was close to $4 billion. We had gotten that number directly from the max that the run rate by mid-year was closer to a billion dollars a month. And more recently, we've heard numbers that are much higher than that, right? I won't quote them because I'm not 100% sure of the sourcing on it. but it would make sense that the issue continued to escalate. All that makes it very difficult to answer the first part of your question, ordering patterns with delays. Do I think there's going to be some shift in ordering pattern? Probably because folks can make more money for a longer period of time and more people hear about it. There's more and more folks out there talking about these products and selling them. So I think it just makes that much more difficult to predict. And again, calls on, I think, CMS to take steps possibly sooner rather than later. I mentioned that we believe they have statutory authority to take those steps sooner rather than later. Whether or not they do that, I don't know. We'll see. But look, we haven't spoken to anybody within Max, within CMS, congressional staffers for all of the oversight committees, Senate Finance, Ways and Means, Energy and Commerce. Everybody is aware of this issue. Nobody thinks that this is something that does not need to be addressed. It's escalated at such an alarming rate. So again, logic would tell you that something is going to happen. We felt like, based on feedback from everyone we were hearing in the community, that the LCDs had a high probability of being implemented. And obviously we know now that the administration postponed them. So hopefully that means, and again, the right answer was for CMS to do something on this issue, right? This is really a pricing issue. So hopefully they take action sooner rather than later.

I appreciate that. And good luck as this proceeds. We'll get back in queue.

Thanks. Thank you. And ladies and gentlemen, there are no further questions at this time, so I'll hand the floor back to Joe Capper, CEO, for any closing remarks. Thank you.

Thank you. Thank you, everybody, for your attendance and your continuous interest in the company. We will talk to you all after our next quarter. Operator, that concludes today's call.

Thank you, and all parties may disconnect. Have a good day.