Wound Care Boosts MiMedx

05/12/2015 7:00 am EST

Focus: STOCKS

Tom Bishop

Founder, BI Research

This small-cap firm utilizes amniotic membrane derived from placentas donated by mothers after giving birth, (that would otherwise be discarded), to make tissue allografts, explains Tom Bishop, editor of BI Research.

MiMedx (MDXG) then stitches these grafts into place to heal wounds such as chronic bedsores that will not heal on their own.

It is the leader in its field, having supplied over 350,000 allografts for application in the wound care (primarily), surgical, sports medicine, and dental sectors.

The company uses its PURION cleansing process to remove all impurities that could cause rejection, resulting in a tissue matrix that can be repopulated by the patient’s own cells to heal hard-to-heal wounds. It markets these under the trade names EpiFix and AmnioFix.

The material has proven superior in clinical testing, comes in different sizes, costs less, and has the logistical benefits of being able to be stored at room temperature with a 5-year shelf life, eliminating the need for special storage equipment and thawing before use.

MiMedx announced a strong earnings report. In a nutshell, the company is hitting on all cylinders with the best yet to come in the remaining three quarters of this year. 
EPS came in at $0.04, a penny higher than the consensus and well above last year’s loss of $0.01. Revenue grew 108% to $40.8 million at the upper end of the guidance range. This is some serious growth going on here.

This is the 14th straight quarter of meeting or beating revenue guidance, so the company has a good handle on knowing what to expect from its business.

This tremendous growth rate justifies the current forward PE of 40 and an apparent 2015 exit run rate PE of more like 30. Growing as rapidly as it is, there is no sense looking at the trailing PE.

In the latest conference call, the company noted that it has added 25 reps to the field sales force in Q1, bringing the total to 193 compared to 140 just six months ago. So this will be one driver of progressively higher results as we go through 2015. 

In addition, the company added 53 million covered lives during Q1. In all, commercial (insurance) lives coverage has grown to approximately 150 million, plus 36 million are now covered under Medicare and 29 states have now confirmed coverage under Medicaid. 

So, all this growth in coverage (and sales reps) really ought to put the sales pedal to the metal as 2015 progresses.  

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