I would be really careful with this one. I have been short, covered most of it recently but hold some remaining put positions.
The first thing to note is no one has any idea what the underlying revenue is and last 6 yrs of financials are being restated. If you look at its comps OSIR and DSCI, they all started with roughly the same amount of revenue in 2013, MDXG/OSIR has $25mil, DSCI had $34mil. MDXG grew revenues are 75% pa (!?!), OSIR, and DSCI at 35% and 11% respectively. The amount of stuffing that may have occurred here could be enormous. You will also note that OSIR ran into similar issues with its management team and growth slowed significantly. If you apply OSIR growth rate of 35% to 2013 revs then Epifix revenues would be in the ~$120mil range. Attached a 3x rev multiple (like OSIR) and keep MDXG's other line of biz flat at $60mil you get a value of ~$492mil, or $4.40 per share. Certainly higher than current price but not that great.
You have to keep in mind that the previous CEO is fired for cause and having all his comp shares clawed back. Usually that is only if criminal activity occurred. The underlying sales number is anyone's guess.
Then you have the liabilities to think about. The accounting restatement, especially given C-suite firings, over 6 years is going to be really expensive. They also have a mountain of lawsuits from whistleblowers, hedge funds, equity holders etc. There is also the cost of VA, DOJ investigations, SEC fines etc. Going into all this the company only had $30mil of cash. Even if equity value is positive, is it really greater than all these liabilities? One counterpoint here, somehow the company has survived this long, so maybe it still is generating some cash, and that is a positive point. However, their current CEO is from A&M a restructuring firm and he is paid hourly.
As for as the product. It is really hard for me to know. This company was growing sales really quickly, but not much cash. This could indicate, and there is evidence to suggest that perhaps bribes were paid to increase sales. No idea if this is true, but may explain why they grew sales at incredible rates relative to its peers. This may also explain why their product is loved.
Having spoken to some dr friends they say that the evidence behind wound care like this is mixed. There is a lot of hype, there is a need for better products, but it is not clear if these products work as well as advertised. He also was surprised by the amount of sales as he thought the market was pretty small as this stuff is used for difficult wounds like diabetes etc.
If you attach peer growth rates and multiples you can make the argument that this stock is not that cheap. If you consider the liabilities then you may say its is very expensive. Since none of this is exactly clear I have covered because if I am wrong it could go up a lot. On the poison pill, they may just be doing this to preserve NOL's if there were to file? Just a guess. I am not sure one can read into it too much, seems like a standard move any company with such advisors in control would do. But I could be wrong.
My view is this could be interesting if they restructured. That would cause an even bigger equity washout, and then any discount to the value of the underlying business could be very large.
The counter point is that DOJ/SEC/courts are very hesitant to force a company to fail. Therefore they may lean on the light side on any fines/charges etc. In that case the stock does go up, but perhaps not nearly as much as it may appear.
