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Biotech Firm to Raise $10M - Atlanta Business Chronicle

Atlanta Business Chronicle - by Urvaksh Karkaria, Staff Writer

Friday, November 27, 2009


A Marietta-based orthopedic and spine implant maker plans to raise $10 million and launch a high-tech production facility as it marches toward profitability.

MiMedx Group Inc., backed by health-care hotshot Parker "Pete" Petit, is developing biomaterial-based products for use in musculoskeletal specialties, based on technology from Georgia Tech and the University of South Florida.

The company, which went public (OTCBB: MDXG) through a reverse merger in February 2008, plans to raise an initial $5 million by year-end, which it will be use to commercialize a polyvinyl alcohol (PVA) polymer. That Food and Drug Administration-cleared product, expected to hit the market next month, may be used as a blood vessel guard to protect against scar-tissue formation after surgery.

MiMedx is also developing a proprietary collagen-based fiber that act as platforms or "scaffolds" on which a patient's tissue grows during the healing process to achieve healthy tissue reconstruction without major scarring. That technology is expected to hit the market by the end of the second quarter of 2010.

"The two materials we have, have some far-reaching uses in orthopedics," said Petit, former CEO of Matria Healthcare Inc. "It's going to take years and years to exploit the various aspects of what we have."

MiMedx, which holds exclusive rights to eight issued and 33 pending U.S. and foreign patent applications, was launched by serial entrepreneur Steve Gorlin. Petit, a major investor in the company, took over as chairman, president and CEO in February.

MiMedx's PVA-based technology is new to the orthopedics space, said Chris Fair, an orthopedic industry executive and chief operating officer at MedShape Solutions Inc., an Atlanta-based orthopedic startup.

MiMedx is "on the forefront of trying to find the right applications for their base technologies," Fair said.

Jobs and dollars

Petit is a serial entrepreneur with a track record of building companies. He sold Matria to Inverness Medical Innovations Inc. (NYSE: IMA) for $900 million last year. Matria was a subsidiary of Healthdyne, which Petit founded in 1971.

Petit is also a noted financier of research.

At Georgia Tech, Petit funded the Parker H. Petit Distinguished Chair for Engineering in Medicine, endowed the Petit Institute for Bioengineering and Bioscience, and assisted with the funding of the Biotechnology Building that bears his name. At Georgia State University, he assisted with the funding of the Science Center building that also bears his name. Petit is an inductee of the Technology Hall of Fame of Georgia and the GSU's Robinson College Business Hall of Fame.

At MiMedx, Petit has focused the company on the core technologies, Fair said.

He has "cleaned up a lot of the stuff that didn't matter," Fair said, referring to Petit's decision to jettison some of MiMedx's me-too technologies.

Having figured out product strategy, Petit is now focused on the execution filling out the management team and going to market slowly, Fair said.

"If you chase clinical efficacy first," he said, "revenue will always follow."

Raising dollars in a recession

MiMedx, which expects to triple its workforce to about 135 in 2011, plans to launch an up to 18,000-square-foot production facility, possibly in Marietta, next year.

The company is in negotiations with orthopedic device-makers to license parts of the PVA and collagen-based technologies, Petite said, declining to disclose names.

Forging relationships with the guys higher up the industry food chain not only allows MiMedx to raise capital, it's necessary to fully exploit the company's technologies.

"If we had $50 million of cash in the bank, which we don't," Petit said, "I'd still be seeking some relationships with the larger companies because I couldn't build sufficient staff, or facilities, fast enough to take advantage of some of the materials that we have here."

The second and final $5 million raise will be used to finance the production facility and take the company to break-even.

MiMedx hopes to go from pre-revenue to break-even in the fourth quarter of 2010.

The company expects annual earnings of about $7.2 million on net revenue of about $36 million in 2012, according to Securities and Exchange Commission filings.

Petit is raising dollars in a tough market. Wealthy Americans, who generally invest in early-stage companies, have watched their investment portfolios take a hit in the volatile stock market.

Venture capital funds, meanwhile, have gotten conservative and are steering clear from investing in early-stage companies.

MiMedx hopes to raise the initial $5 million from angel investors and may look to venture firms and institutional investors for the remaining financing.

The company raised $3.5 million earlier this year.

Petit is confident the startup will raise the financing it needs.

"It's not easy, but it's possible," he said. "Between people I know, and people who know me and our company's founder, we know a lot of angels."