June 7, 2018 / 11:29 AM / 14 days ago

MiMedx to restate financial statements, replaces CFO

(Reuters) - Biotech firm MiMedx Group Inc (MDXG.O) replaced its chief financial officer on Thursday and said it would restate at least five years of financial statements following an internal investigation into sales and distribution practices, sending shares down as much as 30 percent.

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, who as of May 15 had borrowed 48.6 percent of the company’s free float to short its shares.

The company, which makes skin tissue grafts, said in March that the U.S. Department of Justice was also reviewing its practices on a preliminary basis, following media reports of a federal probe into whether the company had overcharged the government for its treatments.

On Thursday, the company appointed Edward Borkowski as its interim chief financial officer and said that Michael Senker had stepped down as CFO, along with corporate controller and treasurer, John Cranston.

“It is important that investors understand that our business performance remains strong - I’m going to repeat - the business performance remains strong,” Chief Executive Officer Parker Petit said on the call.

MiMedx said it would restate statements from fiscal 2012 to 2016 as well as for the first three quarters of 2017.

It said that was due to the accounting treatment of practices used by two distributors “for which certain implicit arrangements modified the explicit terms of the contracts, impacting revenue recognition during specified periods.”

The company did not further elaborate on what these arrangements were.

Accusations leveled by short-sellers against the company include channel stuffing, which refers to the practice of inflating sales and earning figures by sending retailers products in excess of what they can sell.

MiMedx has denied these claims and has filed lawsuits against some of the short-sellers.

MiMedx also said financial information for the fourth quarter of 2017 and the first quarter of 2018 should not be relied upon.

On the conference call after the announcement, the company did not take questions from analysts.

By 10.30 a.m. eastern time, the company’s shares were down 18.6 percent on the day, having earlier fallen nearly 30 percent to touch a more than 4-year low of $5.79.

Reporting by Manas Mishra in Bengaluru; Editing by Shounak Dasgupta and Patrick Graham

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