MiMedx’s board of directors has decided to replace its president and its CEO as a result of an ongoing internal investigation and federal probes into its accounting and sales compliance practices, less than a month after the company said it would need to restate five years’ worth of financial disclosures.
CEO Parker “Pete” Petit, who also served as chairman of the board, has resigned from his roles but remains on MiMedx’s board as a member. In addition, William Taylor resigned as president and chief operating officer, as well as a member of the board.
The resignations follow the departures of the Marietta, Georgia-based company’s chief financial officer, Michael Senken, and its treasurer, John Cranston—and the June 7 announcement that MiMedx would withdraw its financial guidance for 2018, as well as retract its statements and financial information from the fourth quarter of 2017 and the first quarter of 2018.
According to a February report from Bloomberg, the Justice Department and Manhattan federal prosecutors are investigating whether MiMedx overcharged the government for its regenerative medicine and tissue-repair products and grafts, as well as whether the company fabricated certain sales.
At the time, the company said it was unaware of any Justice Department probe, but it had disclosed a 2017 subpoena from the SEC, which was later described as “in parallel” with the DOJ’s investigation. MiMedx said it continues to provide documents related to the subpoena and is cooperating with regulatory authorities.
RELATED: MiMedx offloads bone graft business to focus on biopharma
Today’s decisions from the board of directors “arise, in part, from information the audit committee has identified through its previously announced independent investigation,” they said in a statement, describing the moves as initiatives to improve corporate compliance and internal operations, and adding that future actions may be taken.
David Coles, a managing director with corporate-restructuring consulting firm Alvarez & Marsal, has been named interim CEO to help reshape the company. Coles specializes in interim management and profitability analysis, with experience in a wide range of companies. He also stepped in as interim CFO of investment firm Lehman Brothers for the six months after it filed for bankruptcy in September 2008.
“The board is confident that now is the right time for MiMedx to transition its leadership team as we look to the future and prepare our company for its next chapter,” said Charles Evans, the newly appointed chairman of the board, who previously served as lead independent director. Evans has been a member of the board since September 2012.
The news of the resignations sent MiMedx’s stock price down another 30%, to less than $5 a share, following the loss of more than half its value in February after the Bloomberg report, and another 30% hit from early June’s announcement recalling its financial statements.
A search is on to identify a permanent CEO and president, the company said, which is evaluating internal and external candidates. In addition, MiMedx is looking to fill its CFO position, as well as the newly established posts of chief accounting officer and internal auditor.
The board has also established an ethics and compliance committee of independent directors, and has started the planning process to prepare the redone financial statements.