MIMEDX GROUP, INC. 10-K

Item 1. Business Overview MIMEDX is a pioneer and leader in placental biologics, developing and distributing placental tissue allografts with patent-protected, proprietary processes for multiple sectors of healthcare. The Company is focused on addressing unmet clinical needs in the areas of Advanced Wound Care (“ AWC ”), Surgical Recovery, and osteoarthritis. We derive our products primarily 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 sold in the United States are regulated by the U.S. Food & Drug Administration (“ FDA ”), and to the extent we sell our products outside the United States, by other regulatory agencies in such international markets. 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 direct shipments. Our primary platform technologies include tissue allografts derived from human placental membrane (EPIFIX®, AMNIOFIX®, and AMNIOEFFECT®), tissue allografts derived from human umbilical cord (EPICORD® and AMNIOCORD®), and a particulate extracellular matrix derived from human placental disc (AXIOFILL®). EPIFIX and EPICORD products are marketed for external use, such as in Advanced Wound Care applications, while our AMNIOFIX, AMNIOEFFECT, AXIOFILL, 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 & Pipeline. ” 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 guidance documents, 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 ” (collectively, the “ Guidance ”), which 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, AMNIOBURN, AXIOFILL and AMNIOEFFECT) as Section 361 HCT/Ps so long as the claims we make for them are consistent with the Section 361 framework. Beginning in May 2021, the FDA began regulating certain of our other products, including our micronized dehydrated human amnion chorion membrane (“ mDHACM ”) products that we previously marketed in the United States as Section 351 HCT/Ps. 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 products that were impacted by enforcement discretion 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, in order to continue to market the products, we would be required to obtain the appropriate FDA clearance or approval. In 2022, revenues from US sales of our umbilical cord-derived products were $23.2 million. See discussion below in Item 1A, 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 6 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.” 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 We combine a large donor network developed over multiple years that sources donated birth tissue from consenting mothers, with our proprietary tissue manufacturing process and significant research and development expertise to develop innovative placental-derived products that address a wide range of chronic and acute health conditions affecting large patient populations. Our core business delivers innovative products that help clinicians treat patients suffering from acute and chronic non-healing wounds. These wounds can be slow to respond or unresponsive to conventional treatments and may benefit from advanced treatments, such as our products, in order to support the healing process. The costs associated with treatment and management of patients with acute and chronic wounds is also high, with some estimates of the Medicare spend associated with such wounds approaching $100 billion annually. The treatment of chronic wounds is often referred to as wound care. Chronic wounds are defined and characterized as those that do not progress through the normal process of healing and remain open for over a month. Patients, typically in the elderly population, with conditions such as diabetes, obesity and other comorbidities, are among those with the highest risk of developing chronic wounds, which include diabetic foot ulcers (“ DFUs ”), venous leg ulcers (“ VLUs ”), and pressure ulcers, among others. Studies estimate that in 2022 roughly 2.1% of the U.S. population was affected by chronic wounds 1 . Complications from non-healing chronic wounds can result in significant, life-altering adverse outcomes, such as limb amputation. Today, up to one-fifth of diabetic patients who develop a DFU will require some form of amputation 2 . Further, patients who undergo a major lower extremity amputation have an increased five-year mortality rate that is comparable to and in some cases higher than many forms of cancer 3 . Acute wounds are defined as those that are recent, are acquired from an incision or trauma and have yet to progress through the sequential stages of wound healing. Acute wounds can be caused accidentally or they can arise in the normal course of a wide-range of surgical procedures. When acute wounds present in patients with similar comorbidities to those of chronic wound patients, the risk of a slow or ineffective healing wound increases, and the risk of a surgical site infection or other similar complication increases for the patient. We refer to the combination of a wide variety of surgical procedures on patients with these comorbidities, who could thus see slow or ineffective healing, as the Surgical Recovery market. Our strategy is to continue to deliver advanced products that serve patient needs within the Advanced Wound Care and Surgical Recovery markets and increase access to our products through clinical data generation and physician education. We estimate that the combined U.S. wound and surgical market for our products is currently $2.0 billion ($1.1 billion in wound; $0.9 billion in surgical) and is largely under-penetrated 4 . We expect the U.S. wound and surgical market will grow at an annual rate of 7-10% over the next 3 to 5 years 5 . The prevalence of both acute and chronic wounds has grown not only in the U.S. but also globally. While historically we have focused primarily on the U.S. market, we are now in the process of expanding our footprint internationally, most notably with the recent launch of our EPIFIX product in Japan. In 2021, we secured regulatory approval for EPIFIX in Japan followed by reimbursement approval in 2022. We also announced an exclusive distribution agreement with Gunze Medical Limited (“ Gunze Medical” ), a subsidiary of Gunze Limited, for sales of EPIFIX in the Japanese market, and expect to commence sales in the region in 2023. In Japan, EPIFIX is the first and currently the only amniotic tissue product approved for wound treatment across a broad range of conditions. We believe our first-mover advantage, favorable reimbursement rate, and strong distribution partner set us up for long-term success in this large and growing market. 1 GlobalData: 2022 Wound Care Management- Tissue Engineered Skin Subs U.S. Updated May 2022 2 Five year mortality and direct costs of care for people with diabetic foot complications are comparable to cancer, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7092527/#CR1 3 Epidemiology and Risk of Amputation in Patients With Diabetes Mellitus and Peripheral Artery Disease, https://www.ahajournals.org/doi/10.1161/ATVBAHA.120.314595 4 GlobalData Tissue Engineered-Skin Sub Data Model Wound Management Year 2020 – retrieved Sept 2021 5 GlobalData Tissue Engineered-Skin Sub Data Model Wound Management Year 2020 – retrieved Sept 2021 7 Additionally, we have a regenerative medicine pipeline led by an injectable placental biologic product candidate, for which we are targeting an indication to help decrease pain and improve function in patients suffering from knee osteoarthritis (“ KOA ”), also known as degenerative joint disease of the knee. KOA is the most prevalent form of osteoarthritis and is a leading source of chronic pain and disability in the U.S. Our KOA program is in late-stage clinical trials and we are working toward the filing of a BLA in order to obtain regulatory approval for this product and a subsequent commercial launch in the U.S. By incorporating a strategy to advance the scientific and therapeutic potential of placental tissue and rigorously demonstrate the clinical and economic effectiveness of our products, we believe we 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 organization that position us to realize our commercial ambitions over the long-term while also generating a profitable, cash flow positive business capable of self-funding our future growth objectives. Business Segments Beginning in the third quarter of 2022, the Company manages itself as two reportable segments: Wound & Surgical and Regenerative Medicine. Wound & Surgical focuses on the Advanced Wound Care and Surgical Recovery markets through the sale of the Company’s existing product portfolio and product development to serve these end markets. Its platform technologies include tissue allografts derived from human placental membrane (EPIFIX, AMNIOFIX, and AMNIOEFFECT), tissue allografts derived from human umbilical cord (EPICORD and AMNIOCORD), and a particulate extracellular matrix derived from human placental disc (AXIOFILL). This segment is also responsible for the international sales of the Company’s Section 351 products. The Regenerative Medicine business focuses solely on Regenerative Medicine technologies, specifically progressing the Company’s placental biologics platform towards registration as an FDA-approved biological drug. mDHACM is the lead product candidate in its late-stage pipeline targeted at achieving FDA approval for specific clinical indications, including degenerative musculoskeletal conditions, beginning with KOA. Our Product Portfolio & Pipeline We sell our placenta-based allograft products primarily under our own brands. 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 CGMP regulations. EPIFIX EPIFIX is a 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, but does sell outside the United States. As further discussed below under the heading “ Government Regulation - 2017 FDA Guidance and Transition Policy for HCT/Ps ,” the FDA clarified in its 2017 guidance that it regards micronized amniotic membrane products as subject to FDA licensure as biological products under Section 351. AMNIOFIX AMNIOFIX is a 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 four late-stage randomized controlled studies under open INDs, evaluating mDHACM in plantar fasciitis, Achilles tendonitis and KOA. While the KOA Phase 2B trial did not meet its primary endpoints, we initiated a post-Phase 2B registrational clinical trial for KOA in February 2023. For further details, see “- Clinical Trials ” below. AMNIOBURN 8 AMNIOBURN is a 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, respectively. 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. AXIOFILL The Company launched AXIOFILL during the third quarter of 2022. AXIOFILL is an extracellular matrix derived from human placental disc, and is designed to provide a cost-effective human collagen scaffold that is conducive for use in large, complex wounds and those of irregular geometries. Our AXIOFILL product has seen initial adoption by clinicians primarily focused on Surgical Recovery applications. AMNIOEFFECT The Company also launched AMNIOEFFECT during the third quarter of 2022. AMNIOEFFECT is a tri-layer placental tissue allograft that contains amnion, intermediate layer, and chorion membranes. This product is designed to meet the needs of surgeons performing procedures where a more robust allograft with expansive size offerings is desired. 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. Antimicrobial Wound & Surgical Products In December 2022, we announced an in-licensing and distribution agreement with Global Health Solutions, Inc. (d.b.a. Turn Therapeutics or “ Turn ”), providing us with worldwide exclusive rights to Turn’s proprietary antimicrobial technology platform, PermaFusion®, for the development of future products focused on Advanced Wound Care and Surgical Recovery applications. PermaFusion® is petrolatum-based, liquid-in-oil suspension technology that involves the creation of nanodroplets without binding agents or emulsifiers and also includes a process to coat materials with antimicrobial-infused petrolatum. Turn’s intellectual property estate includes “mixing” and “coating” intellectual property and provides protection up to 20 years. MIMEDX expects this technology to be included in the creation of a number of new antimicrobial products for the Wound & Surgical markets. In addition to the exclusive license obtained to Turn’s intellectual property, MIMEDX will acquire the commercial rights to Turn’s FleX™ Antimicrobial Collagen Matrix product, contingent upon its receipt of FDA 510(k) clearance and other conditions. FleX™ is a bovine collagen powder product that incorporates antimicrobial properties to aid in the management of partial and full thickness wounds. Under the terms of the agreement, MIMEDX has exclusive rights to develop future products for the wound care, burn, and surgical fields using Turn’s intellectual property. Turn received an upfront cash payment from MIMEDX and is entitled to future payments upon completion of regulatory and product commercial milestones, along with royalties on the sales of products covered by the licensed intellectual property. OEM Products We sell a selection of allografts on an Original Equipment Manufacturer ( “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. This agreement is concluding during 2023, after which we do not anticipate generating sales of our allograft products on an OEM basis. 9 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 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. We have developed a large, geographically diverse, network of hospitals across the United States that participate in our placenta donation program, and we employ a dedicated staff that work with these hospitals. We also utilize third-party providers 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. 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 processing methods are not the same – we believe that our proprietary 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 markings 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 robust 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 made progress in its CGMP compliance and continued to make quality improvements through its quality plan. 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. 10 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 68 U.S. patents related to our amniotic tissue technology and products, and 30 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 not begin to expire until August 2027. Globally, the Company has over 200 issued and pending patents. 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. Advanced Wound Care The Advanced Wound Care market is comprised of 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. Not included in Advanced Wound Care are traditional wound care dressings, such as bandages, gauzes and ointments, which typically are used in the treatment of non-severe or non-chronic wounds. In the United States, estimates indicate that in 2022 the prevalence of chronic wounds was 2.1% of the total U.S. population, or approximately 6.9 million people suffering from chronic wounds. Of these chronic wounds, approximately 58% or 4.0 million are categorized as chronic leg ulcers (which include DFUs and VLUs), with 47% treated with Advanced Wound Care dressings such as skin substitutes 6 . 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 7 . 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 where the use of our tissue products could help reduce complications across several surgical specialties, including plastic surgery, general surgery, gynecology, urology, orthopedics, spinal surgery, lower extremity repair and sports medicine procedures. Collectively, we refer to these areas as the Surgical Recovery segment of the market. 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. In the Surgical Recovery setting, applications of our products are used 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 6 GlobalData: 2022 Wound Care Management- Tissue Engineered Skin Subs U.S. Updated May 2022 7 Chronic Wounds: Economic Impact & Costs to Medicare, https://www.woundcarestakeholders.org/news/studies-and-publications/chronic-wounds-economic-impact-costs-to-medicare 11 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. AXIOFILL The Company launched AXIOFILL during the third quarter of 2022. AXIOFILL is an extracellular matrix derived from human placental disc, and is designed to provide a cost-effective human collagen scaffold that is conducive for use in large, complex wounds and those of irregular geometries. Our AXIOFILL product has seen initial adoption by clinicians primarily focused on Surgical Recovery applications. AMNIOEFFECT The Company also launched AMNIOEFFECT during the third quarter of 2022. AMNIOEFFECT is a tri-layer placental tissue allograft that contains amnion, intermediate layer, and chorion membranes. This product is designed to meet the needs of surgeons performing procedures where a more robust allograft with expansive size offerings is desired. 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. International The Company is actively pursuing international expansion, with an initial focus on Japan. Estimates for 2022 indicate that within a total Japanese population of approximately 126 million people, there are approximately 629,000 chronic leg ulcers, 100,000 of which are potential candidates for an Advanced Wound Care product 8 . 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 9 . 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 (“ JMHLW ”) 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 secured reimbursement approval in September 2022, and are putting in place the necessary structure, medical education programs, and market development initiatives to operationalize our commercial strategy. In December 2022, we announced an exclusive distribution agreement with Gunze Medical for sales of EPIFIX in the Japanese market. Under the terms of the agreement, Gunze Medical and its team of dedicated sales representatives will work to distribute EPIFIX for clinicians to treat patients with hard-to-heal DFUs and VLUs across Japan. MIMEDX will be responsible for the supply of EPIFIX to Gunze Medical, which will sell the products locally, pursuant to the indications for use and reimbursement rates secured for the product. The parties will collaborate to continue physician education activities and drive further key opinion leader engagement in-country. 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 an indication 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 this product or indication. 8 GlobalData: 2022 Wound Care Management – Tissue Engineered Skin Subs, Japan, updated May 2022; management estimates 9 Statistics Bureau of Japan, https://www.stat.go.jp/english/data/handbook/c0117.html 12 mDHACM is our lead BLA product candidate and we are currently focused on conducting a post-Phase 2B registrational clinical trial for the KOA market, which we initiated in February 2023. 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 18 million people suffered from symptomatic knee osteoarthritis in 2022 10 , and this number is expected to increase to 19 million people by 2025 11 . 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 12 . 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 2022 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. 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 categories 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. We also sell our products through distributors. Distributors purchase products from us at wholesale prices and resell products to providers and end users. For example, in Japan, our distribution partner, Gunze Medical, purchases products from us and is responsible for sales to the end users for the approved indications of use and at the prevailing reimbursement rate for the product. See Note 12, Revenue to our consolidated audited financial statements included in Item 8 of this Annual Report. 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 is 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 10 GlobalData: 2022 Orthopedic Devices — Knee Reconstruction – US – 2015-2030 11 GlobalData: 2020 Orthopedic Devices – Knee Reconstruction – US – 2015-2030 12 GlobalData: 2020 Orthopedic Devices – Viscosupplementation – US – 2015-2030 13 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 unique geographical jurisdictions. Each MAC also 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 adoption of 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, within the HOPD and ASC places of service, skin substitutes are reimbursed under a “packaged” or “bundled” methodology that provides a single payment for both 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. For 2023, the geometric mean unit cost threshold applicable to both our EPIFIX and EPICORD allograft products was $47 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 $1,549 in 2019, $1,623 in 2020, $1,715 in 2021, $1,749.26 in 2022, and is $1,725 in 2023. CMS assigns lower national rates to the ASC to reflect a less resource-intensive place of service. Revenue in the ASC setting constitutes less than 1% of the Company’s annual net sales. Medicare payments for most items and services, including EPIFIX and EPICORD sheet products, have been subject to sequestration reductions of approximately 2% periodically from 2013. 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 to physician offices, as well as places of service such as patient home, assisted living and nursing home. The Medicare payment rates are updated quarterly based on this ASP information for many skin substitute 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%. Recently, several wide-ranging proposals have been published for public comment, including relating to payment methodology within the physician office, and are under consideration by the CMS. In addition, three MACs have recently published for public comment changes to their Local Coverage Determinations (“ LCDs ”) that they are considering. If adopted, these proposals would significantly change Medicare policies governing the reimbursement of skin substitute products principally when used for wound treatment in the private physician office setting. The LCDs in the proposals could adopt a new standard of clinical evidence required as a prerequisite to coverage. In addition, the proposals all require a confirmation that the products are regulated solely under Section 361 of the Public Health Service Act as a prerequisite to continued coverage. We have the required confirmation for EPIFIX, but not currently for EPICORD. The proposed LCDs also include language that could lower the number of allowed applications of a product below what is commonly used in standard practice by physicians today (supported by clinical evidence) and reflected by LCDs currently in force with the MACs. The Company as well as stakeholders across the wound care industry do not support lowering the applications. Private Payers 14 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. 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. Seasonality Revenues during our fourth quarter tend to be stronger than other quarters because many hospitals increase their purchases of our products during the fourth quarter to coincide with the end of their budget cycles in the United States. Satisfaction of patient deductibles through the course of the year also results in increased revenues later in the year. In general, our first quarter usually has lower revenues than the preceding fourth quarter, the second and third quarters have higher revenues than the first quarter, and the fourth quarter revenues are the highest in the year. Customer Concentration For the years ended December 31, 2022, 2021, and 2020, our net sales to all U.S. government accounts comprised approximately 2%, 3% and 5% of our net sales, respectively. See discussion below in Item 1A, 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 to provide two studies out of the 22 evaluated that performed a subgroup analysis of patients with DFUs 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. 15 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, smaller competitors that compete regionally and nationally. Our Regenerative Medicine efforts around KOA are also subject to a wide range of potential future competitors. Based on published information from across the medical device and biotherapeutics industry, there are over 70 other active R&D programs currently developing potential treatments for KOA using a variety of different scientific approaches. The speed with which we can successfully develop our product, complete clinical trials, obtain regulatory clearance, and begin commercialization efforts for our KOA offering will influence our ability to succeed in this market. 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. 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 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. 16 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. 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 products that were impacted by enforcement discretion 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 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, 17 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 previously completed four IND studies investigating the use of mDHACM to reduce pain and increase function in patients with KOA, as well as plantar fasciitis and Achilles tendonitis. The Company is not currently pursuing the use of mDHACM to treat plantar fasciitis or Achilles tendonitis. The Company continues to pursue the use of mDHACM to treat KOA. 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 this or for other products or indications. Knee Osteoarthritis Trial Overview 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 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 impact 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 occurred (open label extension) during the second quarter of 2022. The final endpoint of the study was at 12 months. All 12-month visits have now been completed, and data analysis has been accomplished. MIMEDX is currently evaluating these results and preparing a clinical report. As previously announced, the trial did not meet its primary endpoints at six months. However, in a cohort of 190 subjects enrolled prior to a planned interim analysis performed for sample size correction in July through August 2019, 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 was observed. Subjects enrolled after this interim analysis did not show separation of results from the mDHACM treated from those of the placebo arm. 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. A root-cause analysis determined that the potency of the investigational product decreased as it aged, which we believe caused the study to fail to meet its primary endpoints. The Company’s proprietary biochemical and biological tests, along with the clinical observations, detected this reduced potency. 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 initiated the first of two registrational KOA trials in February 2023 and has been working closely with the FDA in advancing this program. There can be no assurance, however, that our anticipated time frame for the registrational KOA trials 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 or other public health emergencies 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. 18 Prior to May 31, 2021, the date the FDA’s period of enforcement discretion ended, we also filed investigational applications for additional indications for AMNIOFIX Injectable and EPIFIX Micronized. These two INDs were allowed to proceed for the injectable products, one in chronic wounds, another in surgical incisions. We have not yet initiated any clinical trials 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 a BLA 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, including costs incurred on top of those fees incurred as part of conducting various clinical studies. 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 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. 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 placental tissues. 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 maintain compliance 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 19 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. • The federal Anti-Kickback Statute (“ AKS ”), 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 AKS, so that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. A conviction for violation of the AKS 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 AKS 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. • 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. International Regulation (Japan) 20 MIMEDX received regulatory approval from the Japanese Ministry of Health, Labour and Welfare (JMHLW) to market EPIFIX in Japan. Under JMHLW guidelines, EPIFIX is classified as a Class IV Medical Device and “Specified Biological Product” and is approved for the treatment of refractory ulcers, such as DFUs and VLUs that do not respond to conventional therapy. As a condition of the final approval, MIMEDX will conduct post-market surveillance, consisting of a limited study over 75 participants. The JMHLW has the ultimate responsibility of granting final approval on all Class III and IV Medical Devices and “Specified Biological Products.” All approved products in Japan, including EPIFIX, are regulated by the Pharmaceuticals and Medical Devices Agency (“ PMDA ”), which acts as the technical arm of the JMHLW. The PMDA serves in a similar function as the FDA in the United States, and is responsible for ensuring the safety, efficacy, and quality of pharmaceuticals and medical devices in Japan. The PMDA provides review and approval of medical devices, QMS/GLP/GCP inspections, and collection and analysis of adverse event reports. MIMEDX also secured reimbursement approval from JMHLW on September 1, 2022 with an awarded rate of 35,100 Yen/cm 2 , and subsequently entered into an exclusive distribution agreement with Gunze Medical for sales of EPIFIX in Japan. Insurance coverage for EPIFIX will provide doctors and patients in Japan with new treatment options and optimal wound care. 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. Environmental, Social & Governance Matters (“ESG”) At MIMEDX, we are committed to improving people’s health and lives through innovation that makes healing possible. Our product offering is derived from donated human placental and umbilical cord tissue, which are processed into products used by health professionals to treat patients suffering from both acute and chronic hard-to-heal wounds. We are continuously looking to expand the breadth of our product offering, further leveraging birth tissue that would otherwise become medical waste, and have a product pipeline that includes innovations for wound and surgical end markets as well as a potential treatment option for other conditions such as knee osteoarthritis (KOA). Our Core Values define how we lead the field with rigorous science, help clinicians elevate the standard of care, provide a safe and healthy environment for our employees, and work and grow as a company. In an effort to deliver long-term value to all of our stakeholders, we incorporate environmental, social, and governance (ESG) objectives that are relevant to our business. These ESG objectives are informed by a combination of feedback from our stakeholders as well as leading ESG frameworks, such as the Sustainability Accounting Standards Board (SASB) Medical Equipment & Supplies standards, under the oversight of our Board of Directors. Environmental Matters Stewardship is a Core Value at MIMEDX. We are stewards of a precious, life-protecting and life-giving resource – human birth tissue – which currently represent the biological source material for all of our products. Without our placental donation and recovery program, this material would most likely be discarded as medical waste at the hospital. We do not produce a significant amount of emissions from our operations. Environmental Management We recently worked with a third-party to conduct an environmental, health, and safety gap assessment in order to accurately benchmark our environmental impact. The review looked at several areas including: • Air Pollution Control Management • Battery Handling and Disposal • Community Right-to-Know (Hazardous Material Reporting) • Hazardous Waste Management • SARA Title III (Release Reporting) • Solid Waste Management • Spill, Prevention, Control and Countermeasure • State Pollutant Discharge Elimination System (SPDES) 21 • Storm Water Management • Universal Waste Management • Waste Oil Management We are evaluating the results of this exercise in order to consider implementation of measures in support of our Environmental Management program. Waste Management We work with waste removal providers to responsibly dispose of medical waste and biohazardous waste and have a program in place for the management of all medical and biohazardous waste processed in our facilities. In addition, we follow applicable packaging requirements for regulated medical waste, and conduct regular required training for all employees responsible for packaging medical waste for shipment. Our waste management initiatives also include the shredding and recycling of paper waste from our facilities, our transition to digital systems where possible to reduce print waste, and the distribution of electronic tablets to our sales teams to minimize printing needs, shipping costs, and printed materials. Our facilities management team collects recyclable and reusable material when possible, including for cardboard, plastics, batteries, fluorescent lamps, and ballasts. We have significantly reduced the use of plastic and aluminum materials with the installation of filtered water and soda machines within our facilities. The packaging of our product cartons is recyclable and, since 2015, has been reduced in size by 50%. Human Capital As of December 31, 2022, we had 867 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 regular surveys of employees to monitor engagement levels and act on feedback received through this process. Our Diversity and Inclusion MIMEDX values the diversity of perspective, experience, and background within our Company. We have stated goals to promote diversity, inclusion, and equal opportunity regardless of race, gender, nationality, ethnic origin, religion, age, or sexual orientation. Intimidation or harassment of any kind are not acceptable in our workplace. Our business requires a workforce with a wide range backgrounds, experiences, skills, and knowledge and a culture that blends this diversity into an effective team. In order for our employees to do their best work, and for us to achieve our mission, everyone at MIMEDX must feel respected, valued, and included. Comprised of employees across the company, our Inclusion and Diversity Council implements programs to create greater visibility to work environment challenges, champion diversity, and provide an intentional link for each employee to the company values and goals. The table below provides an overview of MIMEDX’s diversity as of December 31, 2022: Board of Directors Women and minorities hold one-third of the seats on our Board, including the Chair of the Board. Employee Gender Diversity Women represented 57% of our workforce as of December 31, 2022. Women represented 61% of our new hires in 2022. Employee Ethnic/Racial Diversity Black or African American: 25% Hispanic or Latino: 8% Other Non-White (including American Indian, Alaskan Native, Asian, Native Hawaiian, or Other Pacific Islander): 6% Recruiting, Retaining, and Engaging Talent Talent is our greatest asset and we are dependent on being able to recruit, develop, and retain talent that share our Core Values. We use tools, such as an interview guide and a process reviewed by our Inclusion and Diversity Council, designed to prevent us from bias in our hiring decisions. We are currently in compliance with affirmative action reporting. As part of our Affirmative Action Plan, we leverage targeted outreach in our hiring process to ensure our postings reach underrepresented groups. We are focused on retaining our talented professionals who we believe are key to the Company’s success. Our human resource group continuously monitors and benchmarks employee turnover and other trends in our industry and on a regional level to ensure MIMEDX is competitive and responsive to changes in the broader marketplace. Combining this data with feedback from exit interviews in any instances of voluntary employee turnover, we are able to use these actionable insights to improve 22 employee engagement, provide opportunities for career development, evolve our total rewards offering and evaluate implementation of additional resources to enhance the employee experience at MIMEDX. Training and Development We provide financial assistance to employees earning certifications through our Tuition Reimbursement Plan. Internally, we provide personal development and goal setting courses and counsel to help our employees understand how to grow their careers and learn new things. Compensation and Benefits We offer all full-time employees a comprehensive benefits package, including: • Health coverage, including Medical, Dental, Vision insurance, a wellness incentive program and virtual and text-based healthcare • Paid Parental and Caregiver leave • Employee Assistance Program • Paid company holidays, recently adding Juneteenth • Tuition Reimbursement Program • 401(k) plan, including Employer match • Employee Stock Purchase Plan 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. 23