MIMEDX GROUP, INC. 10-K

Item 1. Business Overview MiMedx is a transformational placental biologics company, developing and distributing placental tissue allografts with patent-protected, proprietary processes for multiple sectors of healthcare. As a pioneer in placental biologics, we are focused on addressing unmet clinical needs in the areas of advanced wound care, surgical recovery applications, and musculoskeletal conditions. We derive our products from human placental tissues and process these tissues using our proprietary methods, including the PURION® process. We employ Current Good Tissue Practices (“ CGTP ”), Current Good Manufacturing Practices (“ CGMP ”), and terminal sterilization to produce our allografts. MiMedx provides products primarily for use in the wound care, burn, and surgical recovery sectors of healthcare. All of our products are regulated by the U.S. Food & Drug Administration (“ FDA” ). At MiMedx, our vision is to advance regenerative science and innovative biologics that restore quality of life. Our mission is to improve people’s health and lives through innovation that makes healing possible. By advancing rigorous science and increasing access to evidence-based regenerative technologies, we elevate the standard of care. Our commitment to the highest quality standards maximizes our potential to reduce cost to the healthcare system and restore quality of life. Character, Customer Orientation, Innovation, Collaboration and Stewardship are our core values. MiMedx is a leading supplier of human placental allografts, which are human tissues that are derived from one person (the donor) and used to produce products that treat another person (the recipient). MiMedx has supplied over two million allografts, through both direct and consignment shipments. Our primary platform technologies include EPIFIX®, AMNIOFIX®, EPICORD®, and AMNIOCORD®. AMNIOFIX and EPIFIX are our tissue allografts derived from the amnion and chorion layers of the human placental membrane. EPICORD and AMNIOCORD are tissue allografts derived from umbilical cord tissue. Our EPIFIX and EPICORD products are marketed for external use, such as in advanced wound care applications, while our AMNIOFIX and AMNIOCORD products are positioned for use in surgical recovery applications, including lower extremity repair, plastic surgery, vascular surgery and multiple orthopedic repairs and reconstructions. We describe these in greater detail below under the heading “ Our Product Portfolio. ” 2017 FDA Guidance . The products we sell are regulated by the FDA. Generally, our products are regulated as Human Cells, Tissues and Cellular and Tissue – Based Products (“ HCT/Ps ”), which do not require pre-market clearance or approval by the FDA and are subject solely to Section 361 of the Public Health Service Act (“ Section 361 ”) and related regulations. However, in November 2017 the FDA published a series of related guidances, including one entitled “ Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue–Based Products: Minimal Manipulation and Homologous Use – Guidance for Industry and Food and Drug Administration Staff ” (the “ Guidance ”). The Guidance established an updated framework for the FDA’s regulation of cellular and tissue-based products. Among other things, the Guidance clarified the FDA’s views about the criteria that differentiate those products subject to regulation solely under Section 361 (“ Section 361 HCT/Ps ”) from those cellular and tissue-based products considered to be drugs, devices, and/or biological products (“ Section 351 HCT/Ps ”) subject to licensure under Section 351 of the Public Health Service Act (“ Section 351 ”) and related regulations. Effect of Guidance on Our Products. Under the Guidance, we expect that the FDA will continue to regulate certain of our placental tissue products (EPIFIX, AMNIOFIX, EPICORD, AMNIOCORD and AMNIOBURN) as Section 361 HCT/Ps so long as the claims we make for them are consistent with the Section 361 framework. However, the FDA is now regulating certain of our other products, such as our micronized products (AMNIOFIX Injectable and EPIFIX Micronized, collectively “ mdHACM ” or “ micronized dehydrated human amnion chorion membrane ”) and our particulate product (AMNIOFILL), as Section 351 HCT/Ps and/or medical devices. Enforcement Discretion . Under the Guidance, the FDA exercised enforcement discretion under limited conditions with respect to the Investigational New Drug (“ IND ”) application and pre-market approval requirements for certain HCT/Ps through May 31, 2021. We continued to market our micronized products (mdHACM) and our particulate product (AMNIOFILL) under this policy of enforcement discretion in the United States until May 31, 2021, while at the same time pursuing Biologics License Applications (“ BLAs ” ) for certain of our micronized products in specific clinical applications. After May 31, 2021, we no longer sell our micronized and particulate products in the United States, and do not intend to sell such products in the United States until the FDA grants pre-market approval. As a result, we will only be able to market such products for indications that have been cleared or approved by the FDA. Similarly, we are engaged with the FDA regarding the classification of our umbilical cord products, EPICORD, EPICORD Expandable, and AMNIOCORD, which are tissue allografts derived from the structural, protective covering and extracellular matrix cushioning layers of the umbilical cord. If the FDA makes a final determination that our umbilical cord-derived products do not meet the requirements for regulation solely under Section 361, then the products will require additional pre-market clearance or approval. In 2021, revenues from US sales of our umbilical cord-derived products were $23.6 million. See discussion below – “ Risk Factors ” under the heading “ Certain of our products do not qualify for regulation as human cells, tissues and cellular and tissue-based products solely under Section 361 of the Public Health Service Act, which has resulted in removal of the applicable products from the market, made the introduction of 6 some new tissue products more expensive, significantly delayed the expansion of our tissue product offerings and subjected us to additional post-market regulatory requirements. Additional regulatory requirements may be imposed in the future.” Our History Our current business began on February 8, 2008 when Alynx, Co., our predecessor company, acquired MiMedx, Inc., a development-stage medical device company, the assets of which included licenses to two development-stage medical device technology platforms which we do not currently market. On March 31, 2008, Alynx, Co. merged into MiMedx Group, Inc., a Florida corporation and wholly-owned subsidiary that had been formed for purposes of the merger, with MiMedx Group, Inc. as the surviving corporation in the merger. In January 2011, we acquired all of the outstanding equity interests of Surgical Biologics, LLC (n/k/a MiMedx Tissue Services, LLC). Current Business Priorities and Strategy As a pioneer in placental biologics, we are focused on addressing the needs of patients with acute and chronic non-healing wounds in the areas of advanced wound care and surgical recovery. We have a promising late-stage pipeline platform aimed at decreasing pain and improving function in patients with degenerative musculoskeletal conditions. There is significant unmet patient need due to an aging population, an increasing incidence of obesity and diabetes, and other contributing comorbidities that result in a higher susceptibility to non-healing across each of these therapeutic areas. An increasing number of patients require advanced treatment, which represents a significant cost burden on the healthcare system. By incorporating a strategy to advance the scientific and therapeutic potential of placental tissue and more rigorously establish the clinical and economic effectiveness of our products, we believe the Company can differentiate the value of our portfolio and address multiple areas of significant unmet clinical need. We have focused our priorities on initiatives across our Commercial, Operations and Research & Development organizations that position the Company to achieve its goal of sustainable double digit annual percentage growth in our business and advance our late-stage musculoskeletal pipeline. We believe there are a number of large, underpenetrated market opportunities in the areas of advanced wound care and surgical recovery, including across multiple international markets. We anticipate receiving reimbursement approval in Japan in mid-2022, and plan to launch EPIFIX in Japan as the first amniotic tissue approved for wound treatment across a broad range of conditions. Domestically, we are expanding our addressable markets from the treatment of diabetic foot ulcers, venous leg ulcers, pressure ulcers and complex wounds into areas of surgical recovery where the use of our tissue products could help reduce complications across several specialties, including plastic surgery, general surgery, gynecology, urology, orthopedics, spinal surgery, lower extremity repair and sports medicine procedures. After studying the landscape of surgical procedures, we are targeting certain procedures based on potential complication rate, clinical relevance, economic factors and business priorities. We have a robust pipeline of organic products in development, and have a goal of improving the Company’s Product Vitality Index by launching two new organic products per year, beginning with AMNIOEFFECT™ and our Placental Collagen Matrix (“ PCM ”) product in 2022. We believe we have a sustainable competitive advantage with our customer focused ecosystem, consisting of a leading portfolio of products, proprietary technology, and best-in-class sales and support organization, together with our broad access and coverage, robust clinical support and medical education efforts, and record of proven outcomes focused on improving patient care. The Company is also pursuing FDA approval for mdHACM as a platform technology to treat musculoskeletal degeneration across multiple indications, beginning with knee osteoarthritis (“ KOA ”). In late 2021, we reviewed the results of our Phase 2B KOA clinical trial, which did not meet its primary endpoints, but did yield significant outcomes from the “Pre-Interim Analysis Cohort” consisting of 190 patients. The 190 subjects enrolled prior to an interim analysis performed for sample size correction in July through August 2019 showed a statistically significant and clinically meaningful difference in favor of mdHACM in Western Ontario and McMaster Universities Arthritis Index (“ WOMAC ”) total scores, and in each of the pain and function subscales compared to the placebo. However, subjects enrolled after this interim analysis did not show separation from the placebo. Root-cause analysis determined that the potency of the investigational product faded as it aged, resulting in the study’s failure to meet its primary endpoints. Based on the data from the Pre-Interim Analysis Cohort in the Phase 2B trial, published retrospective data, extensive real-world clinical use, and ongoing scientific mechanism of action research, the Company expects to initiate a Phase 3 KOA program in 2022, with a BLA filing anticipated in late 2025, and will work closely with the FDA in advancing this program. Our Product Portfolio We sell our placenta-based allograft products under our own brands and, on a limited basis, through a private label or original equipment manufacturer (“ OEM ”). We maintain strict controls on quality at each step of the manufacturing process beginning at the time of procurement. Our Quality Management System is focused on compliance with the American Association of Tissue Banks’ (“ AATB ”) standards and the FDA’s CGTP, and we are implementing CGMP. We believe the application of CGMP will provide benefits throughout our entire product portfolio, and add to our competitive differentiation. 7 EPIFIX EPIFIX is a semi-permeable, protective barrier allograft comprised of dehydrated human amnion/chorion membrane that may be used in the treatment of chronic wounds, including diabetic foot ulcers (“ DFUs ”), venous leg ulcers (“ VLUs ”), and pressure ulcers. EPIFIX is available in an assortment of sheet configurations and sizes to accommodate various wounds. MiMedx also has a micronized version of this product that it no longer markets or sells in the United States. As further discussed below under the heading “ Government Regulation - Recent FDA Guidance and Transition Policy for HCT/Ps ,” the FDA clarified in its 2017 guidance that it regards micronized placental membrane products as subject to FDA licensure as biological products under Section 351. AMNIOFIX AMNIOFIX is a semi-permeable, protective barrier allograft comprised of dehydrated human amnion/chorion membrane that may be used in surgical recovery applications. AMNIOFIX is available in an assortment of sheet configurations and sizes for internal use, including in the areas of lower extremity repair, spine, orthopedic, sports medicine, gastrointestinal, urologic, and other general surgery applications. mdHACM mdHACM is a micronized form of AMNIOFIX, and supplied in powder form, reconstituted with 0.9% sterile saline for injection. This product is our lead BLA candidate. We completed three late-stage randomized controlled studies under open INDs, evaluating mdHACM in plantar fasciitis, Achilles tendonitis and knee osteoarthritis. While the trials did not meet their primary endpoints, we intend to initiate our Phase 3 clinical trial program for knee osteoarthritis in 2022. For further details, see “-- Clinical Trials .” AMNIOBURN AMNIOBURN is a semi-permeable, protective barrier allograft comprised of dehydrated human amnion/chorion membrane that may be used in the treatment of partial-thickness and full-thickness burns. EPICORD and AMNIOCORD EPICORD and AMNIOCORD are dehydrated human umbilical cord allografts that may be used to provide a protective environment for the healing process and are used in the areas of advanced wound care and surgical recovery. These products are thicker than our amniotic membrane allografts and can be applied in deeper wounds or in areas where suturing the allograft in place may be advantageous. EPICORD Expandable is an allograft derived from the umbilical cord, and can expand to twice its size, conforming to uneven surfaces and deep wounds. The thickness of the product allows for suturing as needed to keep the graft in place, and it provides healthcare professionals a new option to support the advanced wound care needs of their patients with larger, chronic, and hard-to-heal wounds. AMNIOFILL The Company ceased marketing and selling AMNIOFILL in the United States in May 2021, following the end of the FDA’s period of enforcement discretion. We have not yet initiated any clinical trials in furtherance of any regulatory approvals for this product. OEM Products We sell a selection of allografts on an OEM basis pursuant to an agreement under which we have granted a third party an exclusive license to some of our technology for use in dental applications. We continue to research new opportunities for amniotic and other placental tissue, and we have additional offerings in various stages of conceptualization and development. Placenta Donation Program We partner with physicians and hospitals to recover donated placental tissue. Through our donor program, a mother who delivers a healthy baby via Caesarean section can donate her placenta and umbilical cord tissue in lieu of having it discarded as medical waste. After consent for donation is obtained, a blood sample from each donor is tested for communicable diseases, and 8 the donor is screened for risk factors in order to determine eligibility in compliance with federal regulations and AATB standards. We operate a licensed tissue bank that is registered as a tissue establishment with the FDA, and we are an accredited member of the AATB. All donor records and test results are reviewed by our Medical Director and staff prior to the release of the tissue for distribution. However, see discussion below, “ Risk Factors ” under the heading “ The products we manufacture and process are derived from human tissue and therefore have the potential for disease transmission.” We have developed a large, geographically diverse, network of hospitals that participate in our placenta donation program, and we employ a dedicated staff that work with these hospitals. We also utilize a third-party provider of placenta donations on an as- needed basis to mitigate business risk. We believe that we will be able to obtain an adequate supply of tissue to meet anticipated demand for the foreseeable future. However, see discussion below “Risk Factors” under the heading “ Our products depend on the availability of tissue from human donors, and any disruption in supply could adversely affect our business. ” Processing (Manufacturing) The Company has developed and patented a unique and proprietary technique (PURION) for processing allografts from the donated placental tissue. This technique specifically focuses on preserving the tissue’s natural growth factor content and regulatory proteins, and maintaining the structure and collagen matrix of the tissue. Our patented and proprietary processing method employs aseptic processing techniques in addition to terminal sterilization for increased product safety. Despite starting with similar placental tissues, all placental tissue products and processes are not the same – we believe that our proprietary tissue engineering process preserves more of the natural beneficial characteristics of the tissue than the processes used by many of our competitors. The PURION process produces an allograft that retains the tissue’s inherent biological properties and regulatory proteins (including cytokines, chemokines, and growth factors) found in the placental tissue and produces an allograft that is safe and easy for healthcare providers to use. The allograft can be stored at room temperature and has a five-year shelf life. Each sheet allograft incorporates specialized visual embossments that assist the health care practitioner with allograft placement and orientation. To ensure the safety of human tissue products, the FDA enforces CGTP manufacturing regulations. We believe that MiMedx has developed mature systems to comply with, and is in compliance with, these regulations. As an important part of the Company’s product safety compliance, MiMedx products are terminally sterilized to an internationally recognized industry standard in addition to having been processed via the PURION process. Our facilities are subject to periodic unannounced inspections by regulatory authorities and may undergo compliance inspections conducted by the FDA and corresponding state and foreign agencies. We are registered with the FDA as a tissue establishment and are subject to the FDA’s CGTP quality program regulations, state regulations and regulations promulgated by various regulatory authorities outside the United States. The Company’s September 2018 FDA inspection for compliance with CGTP regulations resulted in no observations and a no action indicated (“ NAI ”) rating, which is the most favorable designation the FDA provides after an inspection. In December 2019, the FDA conducted CGMP inspections at our Marietta, Georgia, and Kennesaw, Georgia, processing facilities. The FDA issued a Form FDA 483 (“ 483 ”), which is a list of inspectional observations, at the conclusion of each inspection. Specifically, the FDA issued a 483 consisting of nine observations at our Marietta, Georgia processing facility, and a 483 consisting of 14 observations at our Kennesaw, Georgia processing facility. MiMedx timely responded to the FDA regarding each observation, providing substantive responses to all of the observations. The Company’s response included completed and planned actions to address each observation, and all of these remedial actions have been completed. The FDA classified its December 2019 inspection of our Kennesaw, Georgia facility as voluntary action indicated (“ VAI ”), which means objectionable conditions or practices were found in their December 2019 inspection but the agency is not taking or recommending any administrative or regulatory actions. The FDA also categorized its December 2019 inspection of our Marietta, Georgia facility as VAI. The Company believes it has significantly progressed its CGMP compliance and maintains a proactive dialogue with the FDA regarding its continued application of CGMP throughout its portfolio. Intellectual Property Our intellectual property includes owned and licensed patents, owned and licensed patent applications and patents pending, proprietary manufacturing processes and trade secrets, and trademarks associated with our technology. We believe that our patents, proprietary manufacturing processes, trade secrets, trademarks, and technology licensing rights provide us with important competitive advantages. Patents and Patent Applications Due to the substantial expertise and investment of time, effort and financial resources required to bring new regenerative biomaterial products and implants to the market, the importance of obtaining and maintaining patent protection for significant new technologies, products and processes cannot be underestimated. As of the date of the filing of this Annual Report, in addition to international patents and patent applications, we own 62 U.S. patents related to our amniotic tissue technology and products, and 32 additional patent applications covering aspects of this technology are pending at the United States Patent and Trademark Office. The vast majority of our domestic patents covering our core amniotic tissue technology and products will 9 not begin to expire until August 2027. See discussion below – “ Risk Factors ” under the heading “ Risks Related to Our Intellectual Property .” Market Overview Domestic sales currently account for substantially all of our revenue, and we are actively pursuing international expansion, primarily targeting Japan and select countries in Europe, Asia Pacific, and the Middle East. In the United States, our primary areas of clinical use include advanced wound care and surgical recovery applications. Wound Care The broad wound care category includes traditional dressings such as bandages, gauzes and ointments, which are used to treat non-severe or non-chronic wounds, and advanced wound care products such as medical devices, advanced dressings, xenografts, biological products, and HCT/Ps, which are used as skin substitutes to treat severe wounds or chronic wounds that have not appropriately closed after four weeks of treatment with traditional or standard of care dressings. In the United States, estimates indicate that in 2021, the prevalence of chronic wounds was 2% of the total U.S. population, or approximately 6.9 million people suffering from chronic wounds. Of these chronic wounds, approximately 58% or 3.9 million are categorized as chronic leg ulcers (which include DFUs and VLUs), with 43% treated with advanced wound care dressings such as skin substitutes (GlobalData: 2021 Wound Care Management- Tissue Engineered Skin Subs - US - 2015-2030). MiMedx is a leader in the cellular tissue products/skin substitute segment of the advanced wound care category and the amniotic tissue allograft sub-category. We expect these markets will continue to grow due to certain demographic trends, including an aging population, increasing incidence of obesity and diabetes and the associated higher susceptibility to non-healing chronic wounds. Furthermore, the increasing number of patients requiring advanced treatment represents a significant cost burden on the healthcare system. The overall cost of treating chronic wounds is rising sharply, and the current annual estimated cost in the United States exceeds $28 billion. Traditional dressings such as bandages, gauzes and ointments, along with treatment of active infection and debridement, currently represent the “standard of care” for treating chronic wounds such as DFUs and VLUs. If, after four weeks of standard of care therapy, the wound has not responded appropriately or improved, clinical research has shown that advanced therapy such as a skin substitute can be beneficial as part of the patient’s treatment plan. However, often times advanced therapies are not employed due to current treatment guidelines, product access, or medical education around the clinical and economic benefits of advanced skin substitutes. We believe this represents a large opportunity for us to expand the market and drive initiatives resulting in market growth. According to data provided by BioMedGPS, MiMedx’s EPIFIX is the current product of choice for physicians choosing to use an amniotic skin substitute product as a barrier or cover. Our EPIFIX and EPICORD products can be stored at room temperature for up to five years compared to certain other skin substitutes currently on the market that require cryogenic freezer storage, have limited shelf life, and may not be human-derived. In addition, we market multiple sizes of EPIFIX and EPICORD sheets for use as protective barriers, which enables a healthcare provider to select an appropriate size graft based on the size of the wound to reduce product waste. Our EPICORD and EPICORD Expandable product lines also offer an alternative treatment option to address larger, deeper wounds in a cost-effective way earlier in the treatment algorithm. Surgical Recovery We are expanding beyond advanced wound care into areas of surgical recovery where the use of our tissue products could help reduce complications across several specialties, including plastic surgery, general surgery, gynecology, urology, orthopedics, spinal surgery, lower extremity repair and sports medicine procedures. Certain surgical procedures can have an increased likelihood of complications such as dehiscence, adhesions, and others that may affect both the recovery of the patient and the outcome of the surgery. The rate of complications can depend on a number of factors, including the complexity of the procedure and patient specific issues, such as obesity, diabetes or advanced age. Surgical recovery applications focus on the use of tissue products to augment tissue, serve as a barrier membrane in procedures where scar tissue formation may be problematic or where a second surgery may be required, or aid in incisional closure with the goal of preventing or reducing procedural complications. Following a thorough review of surgical procedures and potential clinical applications across several specialties, we have identified those areas where we believe our tissue products could be incorporated. We are targeting certain procedures for use of our products based on unmet clinical need, potential procedural complication rate, clinical relevance, economic factors and overall business priorities. As in advanced wound care, we believe this market is expanding as a result of demographic trends, including an aging population, increasing incidence of obesity and diabetes and the associated higher susceptibility to non-healing chronic wounds. International The Company is actively pursuing international expansion, with an initial focus in Japan. 2021 estimates indicate that within a total Japanese population of approximately 126 million people, there are approximately 626,000 chronic leg ulcers, 100,000 of which are potential candidates for an advanced wound care product (GlobalData Tissue Engineered-Skin Sub Data Model 10 Wound Management Year). The Japanese population has the largest proportion of people 65 or older in the world, estimated to be approximately 36.2 million (28.8%) in 2020, increasing the potential need for healthcare products and services (Statistics Bureau of Japan, https://www.stat.go.jp/english/data/handbook/c0117.html). We believe these demographic trends, along with an increasing incidence of obesity and diabetes and the associated higher susceptibility to non-healing chronic wounds, present a significant unmet patient need and underpenetrated market opportunity. MIMEDX received regulatory approval from the Japanese Ministry of Health, Labor and Welfare in June 2021 to market EPIFIX in Japan, as the first amniotic tissue approved for hard-to-heal chronic wounds, such as DFUs and VLUs, which do not respond to conventional therapy. We expect to secure reimbursement approval in mid- 2022, and are putting in place the necessary structure, medical education programs, and market development initiatives to operationalize our commercial strategy. The Company is also evaluating opportunities for geographic expansion in the United Kingdom and certain other countries in Europe and the Middle East. Current efforts are focused on the collection of real-world evidence to support the development of patient treatment guidelines, health economic analysis, and product reimbursement in core markets. Biologics License Application (BLA) Programs In 2017 the FDA released guidance clarifying its views that certain cellular and tissue-based products, including certain products marketed by MiMedx, are considered drugs, devices, and/or biological products subject to Section 351 requirements under the federal Food, Drug and Cosmetic Act (the “ FD&C Act ”). In order to conform to this regulatory guidance, MiMedx is pursuing indications under the BLA pathway, although there can be no assurance that we will obtain a BLA and we may ultimately decide not to pursue a BLA for these products or indications. See Risk Factors - “ Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and time consuming and may impede our ability to fully exploit our technologies.” mdHACM is our lead BLA product candidate. We conducted three IND programs in the areas of plantar fasciitis (Phase 3 clinical trial conducted), Achilles tendonitis (Phase 3 clinical trial conducted) and knee osteoarthritis (Phase 2B clinical trial conducted). See Clinical Trials, below, for more information. After oral non-habit forming pain medication fails to adequately relieve a patient’s joint, ligament or tendon pain, market available injections such as corticosteroids and hyaluronic acid are commonly used treatment options. However, a number of patients still do not get adequate relief from these injections, or do not want to use corticosteroids for a variety of reasons. Additionally, in light of the crisis with opioid abuse, non-surgical treatments and alternative approaches to musculoskeletal pain management are under consideration. Patients and physicians are searching for new products that are safe and effective for the management of chronic and degenerative musculoskeletal conditions. Osteoarthritis (“ OA ”) is a disease characterized by progressive articular cartilage destruction, ultimately leading to disabling pain and joint dysfunction. The knee is the most commonly affected joint and knee OA represents the leading cause of disability in the adult population. Estimates indicate that approximately 17.5 million people suffered from symptomatic knee osteoarthritis in 2020 (GlobalData: 2020 Orthopedic Devices Knee Reconstruction - US - 2015-2030), and this number is expected to increase to 19 million people by 2025 (GlobalData: 2020 Orthopedic Devices - Knee Reconstruction - US - 2015-2030). According to the Arthritis Foundation, more than half of knee osteoarthritis sufferers are younger than 65 years old. Current treatment options include analgesics, non-steroidal anti-inflammatory drugs (“ NSAIDs ”), injectable corticosteroids, viscosupplements, platelet rich plasma, and other emerging therapies. Approximately 80% of symptomatic knee OA patients fail conservative therapy (GlobalData: 2020 Orthopedic Devices - Viscosupplementation - US - 2015-2030). When conservative and non-operative treatment options fail, patients often consider surgical intervention. According to estimates by Global Data’s United States Knee Reconstruction Model, approximately one million people required knee reconstruction surgery in 2020, with 2% needing bilateral knee replacement. Costs for knee replacement procedures can exceed $55,000, on average. We believe there is significant unmet need for a non-surgical treatment option to reduce pain and improve function in patients suffering from knee osteoarthritis. Current estimates of the potential addressable market for mdHACM are dependent on many factors, including the results of our clinical trial program, recommended place in the knee osteoarthritis treatment algorithm, anticipated dosing regimen, as well as the potential for our clinical trials to demonstrate disease modifying characteristics which could further amplify the market opportunity. However, mdHACM has not yet been approved by the FDA for any such use. See Item 1A - Risk Factors - “ Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and time consuming and may impede our ability to fully exploit our technologies.” Marketing and Sales Our direct sales team includes field sales representatives and field sales management, who call on hospitals, wound care clinics, physician offices, and federal health care facilities such as the Department of Veterans Affairs (the “ VA ”) and Department of Defense (“ DoD ”) hospitals. Our direct sales force focuses on the advanced wound care and surgical recovery category through multiple sites of service. We also maintain a network of independent sales agents that focus on surgical recovery applications leveraging the complementary products in their portfolios, and provide access to certain customers, as well as sales coverage for areas where we do not have a full time sales representative. 11 We also sell our products through distributors. Distributors purchase products from us at wholesale prices and resell products to end users. See Note 15 to our consolidated audited financial statements included in Item 8 of this Annual Report, “ Revenue .” As discussed above, we sell allografts for certain applications on an OEM basis pursuant to an agreement under which we grant a third party an exclusive license to some of our technology for use in certain fields. Coverage and Reimbursement With the exception of government accounts, most purchasers of our products include physicians, hospitals or ambulatory surgery centers (“ ASCs ”) that rely on reimbursement by third-party payers. Accordingly, our growth substantially depends on adequate levels of third-party reimbursement for our products from these payers. Third-party payers are sensitive to the cost of products and services and are increasingly seeking to implement cost containment measures to control, restrict access to, or influence the purchase of health care products and services. In the U.S., such payers include U.S. federal healthcare programs ( e.g. , Medicare and Medicaid), private insurance plans, managed care programs and workers’ compensation plans. Federal healthcare programs have prescribed coverage criteria and reimbursement rates for medical products, services and procedures. Similarly, private, third-party payers have their own coverage criteria and negotiate reimbursement amounts for medical products, services and procedures with providers. In addition, in the U.S., an increasing percentage of insured individuals are receiving their medical care through managed care programs (including managed federal healthcare programs) which monitor and may require pre- approval of the products and services that a member receives. Ultimately, however, each third-party payer determines whether and on what conditions they will provide coverage for our products, and such decisions often include each payer’s assessment of the science and efficacy of the applicable product. A portion of our products are purchased by U.S. government accounts ( e.g. , the VA and the Public Health Service (including the Indian Health Service), which do not depend on reimbursement from third party payers. In order for us to be eligible to have our products purchased by such federal agencies and paid for by the Medicaid program, federal law requires us to participate in the VA Federal Supply Schedule (“ FSS ”) pricing program. Medicare Coverage The largest third-party payer in the United States is the Medicare program, which is a federally-funded program that provides healthcare coverage for senior citizens and certain disabled individuals. The Medicare program is administered by the Centers for Medicare and Medicaid Services (“ CMS ”), an agency within the U.S. Department of Health and Human Services (“ HHS ”). Medicare Administrative Contractors (“ MACs ”) are private insurance companies that serve as agents of CMS in the administration of the Medicare program and are responsible for making coverage decisions and paying claims for the designated Medicare jurisdiction. There are seven Part A/B MACs in the U.S., which cover 12 jurisdictions, each with its own geographical jurisdictions, and each MAC has its own standards and process for determining coverage and reimbursement for a procedure or product. Private payers often follow the lead of governmental payers in making coverage and reimbursement determinations. Therefore, achieving favorable Medicare coverage and reimbursement is usually a significant gating factor for successful coverage and reimbursement for a new product or clinical application by private payers. The coverage and reimbursement framework for products under Medicare is determined in accordance with the Social Security Act and pursuant to regulations promulgated by CMS, as well as the agency’s coverage and reimbursement guidance. In some cases, CMS does not specify coverage, leaving each of the MACs to determine whether and on what conditions they will provide coverage for the product. Such decisions are based on each MAC’s assessments of the science and efficacy of the applicable product. As noted below under the heading “ Research and Development, ” we have devoted significant resources to clinical studies to provide data to the MACs, as well as other payers, in order to demonstrate the clinical efficacy and economic effectiveness of our tissue technologies. As of the date of this report, both EPIFIX and EPICORD allografts are eligible for coverage by all MACs. In January 2019, EPIFIX and EPICORD received separate CMS HCPCS Codes, Q4186 and Q4187, distinguishing each product in coverage and reimbursement policies. For Medicare reimbursement purposes, our EPIFIX and EPICORD allografts are classified as “skin substitutes.” Current reimbursement methodology varies between the hospital outpatient department (“ HOPD ”) and ASC setting versus the physician office. Currently, skin substitutes are reimbursed under a “packaged” or “bundled” methodology along with the related application procedure under a two-tier payment system. In the HOPD and ASC setting, providers receive a single payment that reimburses them for the application of the product as well as the product itself. CMS classifies skin substitutes into low cost or high cost groups, based on a geometric mean unit cost and per day cost. For 2022, the geometric mean unit cost threshold applicable to both our EPIFIX and EPICORD allograft products was $48 per square centimeter, and the per day cost threshold was $949. The national HOPD average packaged (“bundled”) rate for our EPIFIX and EPICORD allograft products was $1,568 in 2018, was $1,549 in 2019, was $1,623 in 2020, was $1,715 in 2021, and is $1,749.26 in 2022. This “bundled” payment structure applies only to the HOPD and ASCs settings. Currently, providers that administer EPIFIX or EPICORD allografts and other skin substitutes in the physician office setting are reimbursed based on the size of the graft, computed on a per square centimeter basis. The payment rate is calculated using the manufacturer’s reported average sales price (“ ASP ”) submitted quarterly to CMS. This payment methodology applies only to physician offices. The Medicare payment rates are updated quarterly based on this ASP information for many skin substitute 12 products but not all. EPIFIX and EPICORD are included on the Medicare national ASP Drug Pricing File. The published skin substitute Medicare payment rate established by statute is ASP plus 6%. Reimbursement for products not included on the Medicare national ASP Drug Pricing File are at the discretion of each MAC, which typically is invoice cost or wholesale acquisition cost (“ WAC ”) plus 6%. Medicare payments for all items and services, including EPIFIX and EPICORD sheet products, since 2013 have been reduced by 2% under the sequestration required by the Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012. Subsequent legislation extended the 2% reduction to 2030 (although the sequestration was suspended from May 1, 2020 through December 31, 2020 due to COVID-19). This 2% reduction in Medicare payments affects all parts of the Medicare program. The law allows for additional sequestration orders, potentially resulting in up to a 4% reduction in Medicare payments under a statutory PAYGO sequestration order. The Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended the sequestration payment adjustment percentage of 2% applied to all Medicare Fee-for-Service (FFS) claims from May 1 through December 31, 2020. The Consolidated Appropriations Act, 2021, extended the suspension period to March 31, 2021. An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes, signed into law on April 14, 2021, extended the suspension period to December 31, 2021. Private Payers We have devoted considerable resources to clinical trials to support coverage and reimbursement of our products. An increasing number of private payers reimburse for EPIFIX and EPICORD in the physician office, the HOPD and the ASC settings, and we have complete national commercial coverage for the use of EPIFIX in the treatment of DFUs. Coverage and reimbursement vary according to the patient’s health plan and related benefits. The majority of health plans currently provide coverage for EPIFIX and EPICORD for the treatment of DFUs, and many include treatment of VLUs. MiMedx has secured payer coverage for over 300 million covered lives, allowing a significant number of patients access to our products. Information contributing to the coverage determination included a third-party technical brief (by the Agency for Healthcare Research and Quality (“ AHRQ ”)) that evaluated a number of skin substitutes for treating chronic wounds, in which EPIFIX was noted to have the most Randomized Controlled Trials, a low risk of overall study bias, and statistically significant findings. We have established and continue to grow a reimbursement support group to educate providers and patients with regard to accurate coverage and reimbursement information regarding our products, and plan to continue investing in clinical data supportive of coverage for our products in additional clinical areas of use. See discussion below – “ Risk Factors ” under the heading “ Our revenues depend on adequate reimbursement from public and private insurers and health systems. ” Hospital Use Products administered in the hospital inpatient setting are bundled when submitted as part of the hospital’s claim under a diagnosis-related group (“ DRG ”). In these cases, we continue to educate the hospital that our products are cost-effective, and have the potential to improve patient outcomes and reduce the length of stay. We are working to develop additional health economic data to support this effort. As noted above, the ability to sell products in a hospital is dependent upon demonstrating to the hospital the product’s efficacy and cost effectiveness. Customer Concentration For the years ended December 31, 2021, 2020, and 2019, our net sales to all U.S. government accounts comprised approximately 3%, 5% and 6% of our net sales, respectively. We have contracted with a third party as our indefinite delivery/ indefinite quantity channel partner into the VA and DoD markets. See discussion below – “ Risk Factors ” under the heading “ A portion of our revenues and accounts receivable come from government accounts. ” Competition Due to lower barriers of entry in the Section 361 HCT/P regulated market, competition in the placenta-based and allograft tissue field is intense and subject to new entrants and evolving market dynamics. Companies within the industry compete on the basis of price, ease of handling, logistics and efficacy. Another important factor is third-party reimbursement, which is difficult to obtain as it is a time-consuming and expensive process. We believe our success in obtaining third-party reimbursement, our strong position with group purchasing organizations, capabilities and investments to apply CGMP, and established clinical evidence for our products are competitive advantages. In February 2020, the AHRQ published a technology assessment analyzing Skin Substitutes for Treating Chronic Wounds. AHRQ conducted a literature search yielding 164 studies and 81 Supplemental Evidence and Data for Systematic Reviews (“ SEADs ”) submissions. Only 22 randomized, controlled trials (“ RCTs ”) met the inclusion criteria to be reviewed in the AHRQ analysis, and out of the 22 RCTs MiMedx had six RCTs included in the final brief. Of the 22 studies reviewed, only 12 were assessed as low risk of bias, of which five were MiMedx RCTs. This important government assessment highlights our commitment to providing unbiased level 1 clinical evidence in advanced wound treatment. This dedication to elevating the standard of care is further underscored by the fact that the AHRQ points out in its assessment that MiMedx was the only entity 13 to provide two studies out of the 22 evaluated that performed a subgroup analysis of patients with diabetic foot ulcers that received adequate debridement. Both studies reported an increase in wounds healed with adequate debridement. Advanced wound care therapies employ technologies to aid in wound healing in cases where the wound is chronic and healing progress has stalled or stopped. The primary competitive products in the skin substitutes category include, among others, placental-tissue allografts, tissue-engineered living skin equivalents, porcine-, bovine- and fish skin-derived xenografts and collagen matrix products. Xenografts, or tissue transplants from non-human species, serve mainly as an extracellular matrix and have to undergo aggressive processing to remove immunogenic animal products from the tissue. In addition, challenges with xenografts include limited clinical published data, and some products may require suturing or stapling to the wound bed, making handling more difficult. Furthermore, other skin substitutes currently on the market require cryogenic freezer storage and have limited shelf life. Our main competitors in the skin substitute market include Integra LifeSciences Holdings Corporation, Organogenesis, Inc., and Smith & Nephew plc, which sell a variety of advanced wound care products, including skin substitutes and placental tissue allografts. In addition, the overall market is competitive, with a large number of other competitors that compete regionally and nationally. See discussion below – “ Risk Factors ” under the heading “ We are in a highly competitive and evolving field and face competition from well-established tissue processors and medical device manufacturers, as well as new market entrants. ” Government Regulation The products manufactured and processed by the Company are derived from human tissue. As discussed below, our Section 361 HCT/Ps are tissue-based products that are regulated solely under Section 361 and do not require pre-market clearance or approval by the FDA. Our Section 351 HCT/Ps are also tissue products, but are regulated as biological products, and, in order to be lawfully marketed in the United States, require FDA pre-market approval. See discussion below – “ Risk Factors ” under the heading “ Risks Related to Regulatory Approval of Our Products and Other Government Regulations .” Tissue Products In 1997, the FDA proposed a regulatory framework for cells and tissues. This framework was intended to provide adequate protection of public health while enabling the development of new therapies and products with limited regulatory burden. A key innovation in the system was that covered HCT/Ps would be regulated solely under Section 361 and would not be subject to pre-market clearance. The registration and listing rules were finalized in January 2001 in 21 CFR Part 1271. Additional rules regarding donor eligibility and good tissue practices were soon adopted. Together, these rules form a comprehensive system intended to encourage significant innovation. The FDA requires each HCT/P establishment to register and establish that its product meets the requirements to qualify for regulation solely under Section 361. To be a Section 361 HCT/P, a cellular or tissue-based product generally must meet all four of the following criteria (fully set forth in 21 CFR Part 1271): • it must be minimally manipulated; • it must be intended for homologous use; • its manufacture must not involve combination with another article, except for water, crystalloids or a sterilizing, preserving or storage agent; and • it must not have a systemic effect and must not be dependent upon the metabolic activity of living cells for its primary function. Certain amniotic and other birth tissues are considered cellular and tissue-based articles and are therefore eligible for regulation solely as a Section 361 HCT/P depending on whether the specific product at issue and the claims made for it are consistent with the criteria set forth above. HCT/Ps that do not meet these criteria are subject to more extensive regulation as drugs, medical devices, biological products or combination products. Products Regulated Solely as Section 361 HCT/Ps The FDA has specific regulations governing HCT/Ps, including some regulations specific to Section 361 HCT/Ps, which are set forth in 21 CFR Part 1271. All establishments that manufacture Section 361 HCT/Ps must register and list their HCT/Ps with the FDA’s Center for Biologics Evaluation and Research within five days after commencing operations. In addition, establishments are required to update their registration annually in December or within 30 days of certain changes and submit changes in HCT/P listing at the time of or within six months of such change. The regulations in 21 CFR Part 1271 also require establishments to comply with donor screening, eligibility and testing requirements and CGTP to prevent the introduction, transmission and spread of communicable diseases. The CGTP govern, as may be applicable, the facilities, controls and methods used in the manufacture of all HCT/Ps, including processing, storage, recovery, labeling, packaging and distribution of Section 361 HCT/Ps. CGTP require us, among other things, to maintain a 14 quality program, train personnel, control and monitor environmental conditions as appropriate, control and validate processes, properly store, handle and test our products and raw materials, maintain our facilities and equipment, keep records and comply with standards regarding recovery, pre-distribution, distribution, tracking and labeling of our products and complaint handling. 21 CFR Part 1271 also mandates compliance with adverse reaction and CGTP deviation reporting and labeling requirements. The FDA conducts periodic inspections of HCT/P manufacturing facilities, and contract manufacturers’ facilities, to assess compliance with CGTP. Such inspections can occur at any time, with or without written notice, at such frequency as determined by the FDA in its sole discretion. To determine compliance with the applicable provisions, the inspection may include, but is not limited to, an assessment of the establishment’s facilities, equipment, finished and unfinished materials, containers, processes, HCT/Ps, procedures, labeling, records, files, papers and controls required to be maintained under 21 CFR Part 1271. If the FDA were to find serious non-compliant manufacturing or processing practices during such an inspection, it could take regulatory actions that could adversely affect our business, results of operations, financial condition and cash flows. See Item 1A Risk Factors, “ Our business is subject to continuing regulatory compliance by the FDA and other authorities, which is costly, and our failure to comply could result in negative effects on our business, results of operations and financial condition.” 2017 FDA Guidance and Transition Policy for HCT/Ps In November 2017, the FDA released four guidance documents that, collectively, the agency described as a “comprehensive policy framework” for applying existing laws and regulations governing regenerative medicine products, including HCT/Ps. One guidance document in particular, “ Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue – Based Products: Minimal Manipulation and Homologous Use – Guidance for Industry and Food and Drug Administration Staff ,” offered important clarity. The guidance documents confirmed that sheet forms of amniotic membrane generally are appropriately regulated as solely Section 361 HCT/Ps when intended for use as a barrier or covering. We continually evaluate our marketing materials for each of our products to align with FDA guidance. Second, the guidance documents confirmed the FDA’s stance that all micronized amniotic membrane products are more than minimally manipulated, and therefore do not qualify as Section 361 HCT/Ps. However, the guidance documents also stated that the FDA intended to exercise enforcement discretion under limited conditions with respect to the IND application and pre-market approval requirements for certain HCT/Ps through November 2020, which was later extended through May 2021. This period of enforcement discretion was intended to give sponsors time to evaluate their products, have a dialogue with the agency and, if necessary, begin clinical trials and file the appropriate pre-market applications. The FDA’s approach was risk-based, and the guidance documents clarified that high-risk products and uses could be subject to immediate enforcement action. This enforcement discretion applied across our industry, and during the period, the Company continued to market its products under this policy of enforcement discretion. After May 31, 2021, the Company no longer markets or sells its micronized and particulate products in the United States. We are pursuing the BLA pre-market approval process for certain uses of mdHACM. However, there is no assurance that the FDA will grant these approvals on a timely basis, or at all, or that we will not discontinue our pursuit of a BLA for certain products or indications. See “ Clinical Trials ” below for more information. Products Regulated as Biologics – The BLA Pathway The typical steps for obtaining FDA approval of a BLA to market a biological product in the United States include: • Completion of preclinical laboratory tests, animal studies and formulations studies under the FDA’s Good Laboratory Practice regulations; • Submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin and which must include independent Institutional Review Board approval at each clinical site before the trials may be initiated; • Performance of adequate and well-controlled clinical trials in accordance with Good Clinical Practices to establish the safety and efficacy of the product and its dosage (as applicable) for each indication; • Development of purity, potency and identity tests to demonstrate consistency and reliability of the manufacturing process through a chemistry, manufacturing and control program; • Submission to the FDA of a BLA for marketing the product that includes, among other things, reports of the outcomes and full data sets of the clinical trials, and proposed labeling and packaging for the product; • Satisfactory review of the contents of the BLA by the FDA, including the satisfactory resolution of any questions raised during the review; • Satisfactory completion of an FDA Advisory Committee review, if applicable; • Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with FDA’s CGMP regulations, to assure that the facilities, methods and controls are adequate to ensure the product’s identity, potency, quality and purity; and • FDA approval of the BLA, including agreement on post-marketing commitments, if applicable. Generally, clinical trials are conducted in three phases, though the phases may overlap or be combined. Phase 1 trials typically involve a small number of healthy volunteers and are designed to provide information about the product safety and to evaluate the pattern of drug distribution and metabolism within the body. Phase 2 trials are conducted in a larger but limited group of 15 patients afflicted with a particular disease or condition in order to determine preliminary efficacy, dosage tolerance and optimal dosing, and to identify possible adverse effects and safety risks. Dosage studies are typically designated as Phase 2A, and efficacy studies are designated as Phase 2B. Phase 3 clinical trials are generally large-scale, multi-center, comparative trials conducted with patients who have a particular disease or condition in order to provide statistically valid proof of efficacy, as well as safety and potency. In some cases, the FDA will require Phase 4, or post-marketing trials, to collect additional data after a product is on the market. All phases of clinical trials are subject to extensive record keeping, monitoring, auditing and reporting requirements. The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that the Company has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, such as issuing an FDA Form 483 notice of inspectional observations; sending a warning letter or untitled letter; issuing an order of retention, destruction, or cessation of marketing; imposing civil money penalties; suspending or delaying issuance of approvals; requiring product recalls; imposing a total or partial shutdown of production; withdrawing approvals or clearances already granted; pursuing product seizures, consent decrees or other injunctive relief; and criminal prosecution through the Department of Justice (“ DOJ ”). Clinical Trials Trial Overview The Company recently completed three IND studies investigating the use of mdHACM to reduce pain and increase function in patients with plantar fasciitis, Achilles tendonitis, and knee osteoarthritis. As previously disclosed, the trials were developed and initially overseen by senior managers, many of whom are no longer with the Company. The Company has instituted several actions with respect to its ongoing and anticipated clinical trials to address the resources, capabilities and expertise needed for an effective dialogue with the FDA regarding our BLA progress. However, there can be no assurance that we will obtain BLA approval and we may ultimately decide not to pursue a BLA for certain products or indications. See Risk Factors - “Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and time consuming and may impede our ability to fully exploit our technologies.” Plantar Fasciitis In March 2015, we initiated a Phase 2B prospective, single-blinded, RCT investigating a single injection of 40 mg of mdHACM as compared to a single intra-plantar injection of saline (placebo control) in the treatment of patients with recalcitrant plantar fasciitis pain and foot dysfunction. This trial enrolled 145 patients at 15 study sites. In September 2017, we announced the trial had met its efficacy endpoints, and the three-month endpoint data were published in 2018. In April 2017, we met with the FDA and informally discussed preliminary data from the Phase 2B study, our progress toward achieving CGMP compliance, and our proposed Phase 3 study design. Formal FDA feedback from this meeting was incorporated into our development plans. Based on this feedback and the Phase 2B interim data, in January 2018 we initiated a Phase 3 prospective, double-blinded, RCT to assess the safety and efficacy of a single 40 mg intra-plantar injection of mdHACM as compared to a single intra-plantar injection of saline (placebo control) to treat patients with recalcitrant plantar fasciitis pain. The trial plan was initially to enroll 164 patients, with an interim analysis to assess adequacy of this sample size built into the statistical plan. In July through August 2019, we conducted an interim analysis on subjects representing 50% of total enrollment that had reached the primary efficacy endpoint, to assess adequacy of the sample size to assess differences between the two treatment groups. This analysis indicated that a significant increase in sample size would be required to observe clinically and statistically significant improvement and separation between treatment and control groups. We determined that increasing the sample size to 276 patients would provide sufficient power to observe an efficacy result with statistical and clinical significance. We instituted these changes and amendments and completed enrollment of 277 subjects in September 2020. Following completion of the study, initial review of the trial data during the third quarter of 2021 revealed that the study did not meet its endpoints. The data from the study continue to be the subject of extended analyses, however, as previously disclosed, we do not expect to file a BLA or pursue further studies in this indication at this time. Knee Osteoarthritis In March 2018, the FDA granted mdHACM the Regenerative Medicine Advanced Therapy (“ RMAT ”) designation for use in the treatment of osteoarthritis of the knee. RMAT-designated products are eligible for increased and earlier interactions with the FDA, similar to those interactions available to fast-track and breakthrough-designated therapies. In addition, these products may be eligible for rolling review and accelerated approval. The meetings with sponsors of RMAT- designated products may include discussions of whether accelerated approval would be appropriate based on surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or reliance upon data obtained from a meaningful number of sites. In March 2018, we initiated a Phase 2B prospective, double-blinded RCT investigating a single intra-articular injection of 40 mg of mdHACM as compared to a single injection of saline (placebo control) in the treatment of pain and functional impairment in patients with osteoarthritis of the knee. This trial was planned to enroll 318 patients, with an interim analysis to assess adequacy of this sample size built into the statistical plan. This blinded interim analysis was performed in July through 16 August 2019 and revealed that while differences in the treatment groups were observed, the power to observe statistically and clinically significant results would be enhanced by increasing the sample size to 466 patients. Amendments to the protocol to allow this increase were subsequently approved. It should be noted that during the first half of 2020 in particular, study enrollment slowed considerably due to the ongoing COVID-19 pandemic , although this did begin to resolve in the third quarter of the year. Due to actual dropout rates observed in the study being lower than planned, in September 2020, we completed enrollment of 447 patients. We also amended the protocol to establish an open label extension to the trial and allow patients to receive a second injection of the active treatment at six months, nine months, or 12 months subsequent to their completion of study visits, if their pain has not resolved or responded, regardless of treatment arm. The study was still blinded to subjects, sites and MiMedx during this extension. The six months blinded efficacy visits in this study were completed during the second quarter of 2021, and analyses were completed during the third quarter of 2021. The final study visits are expected to occur (open label extension) during the second quarter of 2022. As previously announced, the trial did not meet its primary endpoints, however it revealed that the 190 subjects enrolled prior to an interim analysis performed for sample size correction in July through August 2019 showed a statistically significant and clinically meaningful difference in favor of mdHACM in WOMAC total scores and both the pain and function subscales compared to the placebo. However, subjects enrolled after this interim analysis did not show separation from the placebo. Third-party biostatisticians validated the improvement in WOMAC Pain at three and six months, respectively (p=0.032 and p=0.009), WOMAC Function (p=0.046 and p=0.009), and WOMAC Total (p=0.038 and p=0.008) for the Pre-Interim Analysis Cohort of 190 patients. Our root-cause analysis has determined that the potency of the investigational product faded as it aged, resulting in the study’s failure to meet its primary endpoints. The Company’s proprietary biochemical and biological tests detected this reduced potency, related to the age of the investigational product used in the Phase 2B KOA study. Based on the clinically meaningful and statistically significant data from the Pre-Interim Analysis Cohort of 190 patients in the Phase 2B trial, published retrospective data, extensive real-world clinical use, and ongoing scientific mechanism of action research, the Company expects to initiate a Phase 3 KOA program in 2022, with a BLA filing anticipated in late 2025, and will work closely with the FDA in advancing these trials. There can be no assurance, however, that our anticipated time frame for commencing the Phase 3 KOA program and submitting a BLA will be achieved or that we will receive FDA approval for mdHACM and be able to commercialize this product, or that such approval will not be delayed for a variety of reasons, including failure of the studies to achieve their endpoints; the impact of the COVID-19 pandemic on study enrollment and FDA operations; the potential that the results of the clinical studies do not merit further investment; and the work required to achieve commercial and manufacturing readiness. See discussion in Item 1A - “ Risk Factors ” under the heading “ Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and time-consuming and may impede our ability to fully exploit our technologies.” Achilles Tendonitis In January 2018, we initiated a Phase 3 prospective, double-blinded RCT investigating a single intra-tendon injection of 40 mg of mdHACM as compared to a single injection of saline (placebo control) in the treatment of Achilles tendonitis. The planned trial enrollment was 158 patients, with an interim analysis to assess adequacy of the sample size built into the statistical plan. We analyzed data received from this sample size analysis, conducted on patients representing 50% of total enrollment that had reached the primary efficacy endpoint. This analysis indicated that a substantial increase in sample size would be required to observe clinically and statistically significant improvement and separation between treatment and control groups. With this in mind, we determined that the most reasonable approach was to continue the study to completion with the originally planned sample size, and analyze the final results to determine the adequacy of the measures employed and time points of observation to show meaningful clinical and statistical analyses. Enrollment for this study was completed and the last patient visit occurred in the first half of 2021. The data from this study are currently being prepared for analysis. We plan to review our options for this program after we have assessed the results of this study; however, as previously disclosed, we do not expect to file a BLA or pursue further studies in this indication at this time. Prior to May 31, 2021, the date the FDA’s period of enforcement discretion ended, we filed appropriate investigational applications for AMNIOFILL and EPIFIX Micronized. Two INDs were approved for EPIFIX, one in chronic wounds, another in surgical incisions, and an investigational device exemption (“ IDE ”) was filed for AMNIOFILL. We have not yet initiated any clinical trials for AMNIOFILL or EPIFIX Micronized related to these applications, and have no immediate plans to advance these programs. BLA Process If study results support potential product approval and potential for commercialization, we intend to file BLAs as described above. The process of obtaining an approved BLA requires the expenditure of substantial time, effort and financial resources and may take years to complete. The fee for filing a BLA and the annual user fees payable with respect to any establishment that manufactures biologics and with respect to each approved product are substantial. While there can be no assurance that we will ultimately obtain regulatory approval for our micronized products, we have already completed substantial work towards our BLA program, including engineering our manufacturing processes to conform to CGMP requirements. FDA Post–Market Regulation 17 Tissue processors regulated solely under Section 361 are still required to register as a tissue establishment with the FDA. As a registered tissue establishment, we are required to comply with regulations regarding labeling, record keeping, donor eligibility, screening and testing. We are also required to process the tissue in accordance with established CGTP, as well as report any deviations from core CGTP requirements or adverse reactions caused by a possible transmission of an infectious disease attributed to our tissue. Our facilities are also subject to periodic inspections to assess our compliance with the regulations. Products covered by a BLA, New Drug Application, 510(k) clearance or a pre-market approval are subject to numerous additional regulatory requirements, which include, among others, compliance with CGMP (or, in the case of devices, with FDA’s Quality System Regulation), which imposes certain procedural, substantive and record keeping requirements, and labeling regulations to ensure the product’s identity, potency, quality, and purity. These products are also subject to the FDA’s general prohibition against promoting products for unapproved or “off-label” uses, and additional adverse reaction reporting. As part of our BLA development effort, we are updating our manufacturing establishments into maintaining application of CGMP for production of our injectable and other applicable Section 351 products. The process includes development and enhancement of production processes, procedures, tests and assays, and it requires extensive validation work. It also involves the procurement and installation of new production and lab equipment. These efforts require human capital, expertise and resources. We have made significant improvements over the last two years. We have engaged industry experts to assess our state of compliance and to provide guidance on the additional activities needed to maintain CGMP. Significant improvements include a newly built, validated processing suite applying CGMP that is utilized for processing of Section 351 products. See discussion in Item 1A – “ Risk Factors ” under the heading “ Certain of our products no longer qualify for regulation as human cells, tissues and cellular and tissue-based products solely under Section 361 of the Public Health Service Act (“Section 361”), which has resulted in removal of the applicable products from the market, made the introduction of some new tissue products more expensive, significantly delayed the expansion of our tissue product offerings and subjected us to additional post-market regulatory requirements. Additional regulatory requirements may be imposed in the future.” Other Regulation Specific to Tissue Products National Organ Transplant Act Procurement of certain human organs and tissue for transplantation is subject to the restrictions of the National Organ Transplant Act (“ NOTA ”), which prohibits the transfer of certain human organs, including skin and related tissue, for valuable consideration, but permits the reimbursement of reasonable expenses associated with the removal, transportation, implantation, processing, preservation, quality control and storage of human tissue and skin. Our wholly-owned subsidiary, MiMedx Tissue Services, LLC, is registered with the FDA as an establishment that manufactures human cells, tissues and cellular and tissue- based products and is involved with the recovery and storage of donated human amniotic membrane. We reimburse tissue banks, hospitals and physicians for their services associated with the recovery and storage of donated human tissue. Tissue Bank Laws, Regulations, and Related Accreditation As discussed above, we are required to register with the FDA as an establishment that manufactures human cells, tissues and cellular and tissue-based products. We are licensed, registered, or permitted as a tissue bank in California, New York, Delaware, Illinois, Oregon, and Maryland. Additionally, we received and actively maintain AATB accreditation. The AATB has issued operating standards for tissue banking. Compliance with these standards is required in order to become an AATB-accredited tissue establishment. AATB standards include specific requirements for recovery, screening, testing, labeling, processing, and storing of birth tissue. We believe we are compliant in all material respects with AATB standards and our state licensure requirements. To the extent we sell our products outside of the United States, we also are subject to laws and regulations of foreign countries. Other Healthcare Laws and Compliance Requirements In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including CMS, other divisions of the HHS (e.g., the Office of Inspector General), the DOJ and individual United States Attorney offices within the DOJ, and state and local governments. These regulations include those described below. See also the discussion under “ Risk Factors - We and our sales representatives, whether employees or independent contractors, must comply with various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause an adverse effect on our business, results of operations and financial condition.” • The federal Anti-Kickback Statute, which is a criminal law that prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward referrals, purchases or orders, or arranging for or recommending the purchase, order or referral of any item or service for which payment may be made in whole or in part by a federal healthcare program, such as the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include anything of value. The Patient Protection and Affordable Care Act amended the intent requirement of the federal Anti-Kickback Statute, so that a person or entity no longer needs to have actual knowledge of this statute or 18 specific intent to violate it. A conviction for violation of the Anti-Kickback Statute results in criminal fines and requires mandatory exclusion from participation in federal health care programs. Although there are a number of statutory exceptions and regulatory safe harbors to the federal Anti-Kickback Statute that protect certain common industry practices from prosecution, the exceptions and safe harbors are drawn narrowly, and arrangements may be subject to scrutiny or penalty if they do not fully satisfy all elements of an available exception or safe harbor. • The federal False Claims Act (“ FCA ”) imposes significant civil liability on any person or entity that knowingly presents, or causes to be presented, a claim for payment to the U.S. government, including the Medicare and Medicaid programs, that is false or fraudulent. The FCA also allows a private individual or entity as a whistleblower to sue on behalf of the government to recover civil penalties and treble damages. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties of between $11,181 and $22,363 per false claim or statement for penalties assessed after January 29, 2018, with respect to violations occurring after November 2, 2015. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. See also Item 3, “Legal Proceedings.” • The federal Health Insurance Portability and Accountability Act of 1996 (“ HIPAA ”) fraud and abuse provisions prohibit executing a scheme to defraud any healthcare benefit program, willfully obstructing a criminal investigation of a health care offense, or making false statements or concealing a material fact relating to payment for healthcare benefits, items or services. • While manufacturers of human cell and tissue products regulated solely under Section 361 are not subject to the federal Physician Payments Sunshine Act and its implementing regulations (together with the Act, the “ Sunshine Act ”), in the future, if we expand our product portfolio beyond those regulated solely under Section 361, this law will require us (with certain exceptions) to report information to CMS related to certain payments or other transfers of value we make to U.S.-licensed physicians and teaching hospitals, and for reports submitted on or after January 1, 2022, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and certified nurse-midwives. If we receive a BLA approval, the Sunshine Act would also require us to report annually certain ownership and investment interests held by U.S.-licensed physicians and their immediate family members. Such information will subsequently be made publicly available by CMS on the Open Payments website. There is a risk that CMS or another government agency may take the position that our products are not human cell and tissue products regulated solely under Section 361, and thereby assert that we are currently subject to the Sunshine Act, which could subject us to civil penalties and the administrative burden of having to comply with the law. • Federal conflicts of interest laws, the Standards of Ethical Conduct for Employees of the Executive Branch, and local site policies for each federal institution we call upon govern our interactions with federal employees at our various government accounts ( e.g. , DoD, VA, etc .) and impose a number of limitations on such interactions. • There are state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts. In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“ HITECH ”) and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of protected health information. Among other things, HITECH made HIPAA’s privacy and security standards directly applicable to “business associates,” independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and possibly other persons and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Research and Development Our research and development group has extensive experience in developing products for our target markets, and works to design products that are intended to improve patient outcomes, simplify techniques, shorten procedures, reduce hospitalization and rehabilitation times and, as a result, reduce costs. Our research and development group also works to establish scientific evidence in support of the use of our products. Clinical trials that demonstrate the safety, efficacy and cost effectiveness of our products are key to obtaining broader third-party reimbursement for our products. In addition to our internal staff, we contract with outside laboratories and physicians who aid us in our research and development process. See Part II, Item 7, below, for information regarding expenditures for research and development in each of the last three fiscal years. 19 Environmental Matters Our tissue preservation activities generate a small amount of chemical and biomedical waste, consisting primarily of diluted alcohols and acids and human biological waste, including human tissue and body fluids removed during laboratory procedures. The biomedical waste generated by our tissue processing operations are placed in appropriately constructed and labeled containers and are segregated from other waste. We contract with third parties for transport, treatment, and disposal of our biomedical waste. Human Capital As of December 31, 2021, we had 811 full time employees. Generally, we consider our relationships with our employees to be good, and none of our employees are covered by a collective bargaining agreement. We conduct an annual survey of employees to monitor engagement levels and act on feedback received through this process. We strive to promote diversity, inclusion and equal opportunity across the organization. In 2020, we formed an Inclusion and Diversity Council with the goal of supporting strategic initiatives and practices to foster an inclusive, diverse and equitable organization in order to better serve our customers and their patients. Women and minorities hold a third of the seats on our Board of Directors, including the Chair of the Board. As of December 31, 2021, 55% of our employees are women, and women comprised 56% and 57% of our new hires in 2021 and 2020, respectively. Additionally, as of December 31, 2021, approximately 22% of our workforce self-identifies as Black or African American, 7% as Hispanic or Latino, and 4% as other non-White (including American Indian, Alaskan Native, Asian, Native Hawaiian, or Other Pacific Islander). We track turnover and retention for all employees. We also track time-to-hire and time-to-train for certain departments. In the last year, turnover has been elevated relative to historical trends. We have adopted specific measures and incentives to improve retention within the most affected organizational areas. The health of our workforce is important to us, particularly that of our processing employees and other employees who, based on their specific job tasks and requirements, have not been able to work remotely during the ongoing COVID-19 pandemic. We employ approximately 77 highly-trained employees in our processing area. While we process donated tissue using aseptic techniques in a controlled environment, the manufacturing space is a confined space in which an employee with COVID-19 may spread the virus to other employees despite the use of personal protective equipment in all required areas at MiMedx. To date, we have been successful in mitigating these risks through a variety of measures, including screening employees for COVID-19 prior to entering our facilities at earlier stages of the pandemic, implementing a number of safety protocols, partnering with a testing facility to provide test kits and rapid results for employees that have symptoms or have a known risk of exposure, and supplying employees with appropriate personal protective equipment. However, there can be no assurance that we will continue to be successful. See Item 1A., Risk Factors, “ The COVID-19 pandemic and governmental and societal responses thereto have adversely affected our business, results of operations and financial condition, and the continuation of the pandemic or the outbreak of other health epidemics could harm our business, results of operations, and financial condition.” Available Information We are required to file proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K with the SEC. The SEC maintains an internet site, www.sec.gov, where these reports are available free of charge. We also make these reports available free of charge on our website, www.mimedx.com, under the heading “ Investors–SEC Filings .” In addition, our Audit Committee, Compensation Committee, Ethics and Compliance Committee, and Nominating and Corporate Governance Committee Charters as well as our Code of Business Conduct and Ethics, are on our website under the heading “ Investors–Corporate Governance .” The reference to our website does not constitute incorporation by reference of any information contained on that site. 20