Biomedical company MiMedx’s shares plunged on Thursday after it said it will restate its financial statements for five years and had replaced CFO Michael Senken with a veteran healthcare executive.
The restatement reflects the results of a previously disclosed investigation into the accounting treatment for certain contracts between MiMedx and two distributors that affected the recognition of revenue.
MiMedx said it would restate financials from fiscal 2012 to 2016 as well as for the first three quarters of 2017 and warned that the investigation “may ultimately result in the identification of additional issues” and “broaden the scope of financial items or periods required to be restated.”
Senken stepped down as CFO on Wednesday after more than eight years with the company. MiMedx said it had appointed former Edward J. Borkowski as interim finance chief, effective immediately.
“The announcements are the latest sign of trouble at the Marietta, Georgia-based company, which has delayed making previous financial filings and faced attacks from short sellers,” Reuters said.
Short sellers have accused MiMedx of channel stuffing, the practice of inflating sales and earning figures by sending retailers products in excess of what they can sell. In trading Thursday, its shares dropped 23.4% to $6.29 after touching a four-year low of $5.79.
“It is important that investors understand that our business performance remains strong — I’m going to repeat — the business performance remains strong,” CEO Parker Petit said on a conference call with analysts.
MiMedx, which makes wound coverings and injections from placental tissue to assist healing and reduce inflammation, had said in February it would delay releasing results for the fourth quarter and full year 2017. It also disclosed in March that the Department of Justice was reviewing its accounting practices on a preliminary basis.
The company’s revenue reportedly topped $300 million last year, a more than tenfold increase since 2012. Petit has insisted that while some MiMedx employees may have engaged in “rogue” behavior, there was no evidence of widespread fraud.
Borkowski has 20 years of experience at the executive level in the healthcare and pharmaceutical industries.