Good day, and welcome to the Mymedix Group Annual Meeting of Stockholders. I would now like to turn the conference over to Kathy Behrens. Please go ahead.
Thank you. Good morning, and welcome to the 2019 Annual Shareholders' Meeting of memetics Group, Inc. Thank you for joining us today. My name is Kathy Behrens, and I am Chairperson of the Board. I want to express appreciation on behalf of the Board of Directors and Management of the company for your attendance today.
Pursuant to the bylaws of our company, I will act as Chair of the meeting. William or Butch, Holes, Corporate Secretary of the company will act as Secretary of the meeting. In my capacity as Chair of the meeting, I now call this annual meeting to order. In light of public health concerns regarding the COVID-nineteen pandemic and related travel restrictions, we are hosting our meeting virtually, which allows us to be more inclusive and reach a greater number of our shareholders, while protecting the health and well-being of our shareholders, directors and employees. As is our custom, we will conduct the business portion of our meeting first and answer questions at the end of the meeting.
Though we may not be able to answer every question, we will do our best to provide a response to as many as possible. I would like to thank 2 directors, J. Terry Dewberry and Richard J. Berry, who declined to stand for reelection and who will retire from the Board after today's meeting. Terry and Rick, thank you for your service as Directors of MeMedics.
With us today are the 9 directors whose service will continue following this meeting. In addition to myself, James L. Bierman, Charles R. Evans, William A. Hawkins, Charles E.
Koob, K. Todd Newton, Martin P. Sutter, Neil S. Yeston and Timothy Wright. A number of our officers are also here with us today, including our CEO, Tim Wright and CFO, Pete Carlson, both of whom will have some comments immediately following the business portion of the meeting.
The meeting format will follow the agenda displayed on the virtual meeting website. During today's meeting, shareholders who have logged into the meeting using their 16 digit control number will be given an opportunity to vote on the matters specified in the notice of annual meeting of shareholders sent out to this meeting, if they have not already done so or if they would like to change their vote. We will then open the polls to collect the votes on the proposals that are before the company's shareholders at this annual meeting. We will then adjourn the meeting. At that point, our CEO, Tim Wright and our CFO, Pete Carlson, will make some remarks.
After that, we will have time for shareholders to ask questions regarding the company's business and operations. Please be aware that this meeting is being bought cast publicly, is being recorded and will be archived and publicly accessible for approximately 30 days. Also note that the meeting rules of conduct and procedures are available on the meeting website for your reference. Butch Hull, our General Counsel and Secretary of this meeting, will now present proof of the due calling of the meeting.
Thank you, Kathy. I present the following. 1st, a complete and certified list of the company's shareholders as of the close of business on July 14, 2020, the record date set for the shareholders entitled to notice of and to vote at this annual meeting and a certificate stating the number of shares as of the record date eligible to vote at this meeting. This list, which is presently being maintained by the Inspector of Elections, shows that as the close of business on the record date, there were 110,291,863 shares of common stock outstanding, each share having one vote at 100,000 shares of Series T preferred stock were outstanding, each having approximately 190.48 votes. 2nd, a copy of the printed notice for this annual meeting required by the Florida Business Corporations Act.
This notice was included in the proxy materials mailed to each shareholder of record as of the record date for the meeting at the address for such shareholder appearing on the company's records. 3rd, the affidavit of Broadridge Financial Services, which shows that on or about August 3, 2020, a notice of annual meeting along with copies of the company's proxy statement and proxy parts for this meeting were mailed to each of the shareholders of record as of the record date. The notice of meeting, certified list of the company's shareholders as of the record date and the affidavit of mailing will be included in the minutes of this meeting.
Thanks, Butch. We are also joined here today by representatives of BDO USA, our independent auditors. They will be available during the question and answer session to respond to appropriate questions. And finally, the company has appointed Ms. Claudia Bell to act as Inspector of Elections.
Claudia is with us today and has taken the oath of Inspector of Elections, which the secretary will incorporate as part of the minutes of the meeting. The inspector has a certified list of shareholders of the company as of July 14, 2020, the record date. Based on the percentage of the total shares of the company held by holders of record now present at this meeting, either virtually or in person or by proxy, in the Inspector's final report. We in the Inspector's final report. We are now ready to proceed to the proposals that you will vote on today.
Again, we ask that all comments and questions be held until the comment and question period that will follow the formal voting. Let's proceed. Proposal number 1, election of 1 Class 3 Director. Proposal number 1 is to elect 1 Class 3 Director to serve on the Board of Directors. The Board of Directors of the company has nominated 1 Director candidate, James L.
Bierman. The nominee is duly nominated and present and the company has not received valid notice of any other nominees. As such, I declare the nominations closed. Is there a motion to vote on this proposal?
So moved. 2nd.
Proposal number 2, advisory vote on executive compensation. Proposal number 2 is the advisory vote to approve the compensation of our named executive officers as described in the company's proxy statement. This vote, which is often called a say on pay vote, is required under the Dodd Frank Act. This is a non binding vote, although the compensation committee and the Board intend to take the results of the vote into account when considering future executive compensation arrangements. Is there a motion to vote on this proposal?
So moved.
2nd.
Proposal number 3, advisory vote on the frequency of the advisory vote on executive compensation. Proposal number 3 is the advisory vote on the frequency of the advisory vote on the compensation of our named executive officers as described in the proxy statement. Shareholders can vote in favor of the say on pay vote being held every 1, 2 or 3 years. This vote, which is often called a say on frequency vote, is required every 6th year under the Dodd Frank Act. This is a non binding vote, although the compensation committee and the Board intend to take the results of the vote into account when considering how frequently to hold future say on pay votes.
Is there a motion to vote on this proposal?
So moved. 2nd.
Proposal number 4 is for the ratification of the appointment of BDO USA LLP to serve as the company's independent registered public accounting firm for the company's 2020 fiscal year. Is there a motion to vote on this proposal?
So moved. 2nd.
Because no further business is on the agenda to come before this meeting, we will move on to voting. It is now 10:0:9 a. M. Eastern Time on August 31, 2020, and I declare the polls now open for each matter to be voted on today. Shareholders attending this meeting can vote their shares online by clicking the Vote Here button on their screen.
Shareholders who have sent in proxies or voted via telephone or Internet and who do not want to change their vote do not need to take any further action. If you would like to submit your vote at this time, please ensure that you have logged into this meeting using your 16 digit control number and click the Vote Here button on your screen. I now ask that shareholders who have not yet voted or wish to change their vote do so now through the virtual meeting website. Now that everyone has had the opportunity to vote, I declare the polls for the 2019 Themedix Group Annual Shareholder Meeting closed at 10:10 am Eastern Time on August 31, 2020. Will the Inspector of Elections please report on the vote?
Based on the preliminary view of the vote cast, Class III Director nominee James Behrman has been duly elected. The compensation of our named executive officers has been approved on an advisory basis. The shareholders have approved 1 year as a strict frequency of future stay on pay vote on an advisory basis and the appointment of BDO USA LLP as our independent registered public accounting firm for 2020 has been ratified.
The company expects to report the final results of voting on a Form 8 ks to be filed with the SEC within 4 business days of this meeting. The company will also file the final report of the Inspector of Elections with the records of this meeting. I now declare that this 2019 annual meeting of shareholders has been duly held and that the business before the meeting has been properly concluded. This brings us to the end of the formal part of the meeting. We thank you again for your attendance and your interest in MeMedics.
The formal portion of our meeting is hereby adjourned and we will now hear from our CEO and CFO, and then we'll have an opportunity for questions. At this time, I'd like to introduce you to Hillary Dixon, our Vice President of Investor Relations and Corporate Communications.
Thank you, Doctor. Barron. Before we get started, I want to remind you that our comments today may contain forward looking statements. The company's actual results may differ materially from those expectations discussed here. Additional information concerning factors that could cause such a difference can be found in our periodic filings with the SEC and in our important cautionary statements regarding forward looking statements in our most recent earnings press release.
In addition, today's discussion may contain certain non GAAP financial measures. We believe that the presentation of these measures provides important supplemental information to management and investors regarding our performance. These measurements are not a substitute for GAAP measurements. You are encouraged to review the reconciliation of any such non GAAP financial measures with our most direct comparable GAAP financial results, which can be found on the Investor Relations page of our website, www.mymedix.com. Now I would like to introduce Tim Wright, our Chief Executive Officer, who will make some remarks followed by Pete Carlson, our Chief Financial Officer.
Tim?
Thank you, Hillary, and welcome again to the 2019 Annual Meeting. MuMedix in many ways is a special company as real products based on powerful underlying biology. It also is special in the way we have the opportunity to treat special patients like Matt who you saw in the video or the 6 year old Ivy who suffered significant burns. We also have a unique platform technology that's based on inflammatory modulation. This has allowed us the company to pivot into the musculoskeletal area using the same underlying technology.
We have the possibility to transform not only NeMedics, but also advanced wound care category as a whole, as well as the musculoskeletal area that we're studying in the clinic today. We have built a formidable experienced leadership team that's now in place. I call these the impact players. Most recently, we added Doctor. Keship as an accomplished leader in the wound care space, has track record for more than 20 years of experience in medical device and has a proven history of performance in developing strategies for market creation as well as developing commercial models that deliver value to patients and the healthcare system as a whole.
Doctor. Bob Stein has also joined us. Doctor. Stein brings to MuMedix more than 35 years of drug discovery, development experience across multiple pharmaceutical and biotech companies. He served as a lead contributor in the discovery and registration of 8 marketed drugs and is experienced in product development, including the areas of molecular and cellular biology, biochemistry, animal pharmacology, drug metabolism and safety assessment among others, all critical to our successful maturation of our pipeline.
Also, Stan Meisig has joined the company as well. Stan brings significant life sciences experience to the company, including leadership roles in multiple aspects of branded and generic pharmaceutical companies and new business ventures and negotiation of several large corporate transactions, Stan was pivotal to our capital raise that we concluded in Q3. So we now have a team in place that is cohesive, has significant domain expertise and dedicated to transforming a culture and indeed, Momentix. I transition to Slide 9. Certainly, our stakeholders are at the heart of what we're doing here.
As I mentioned to you in last year at our first Annual Shareholder Meeting that was held, my priority was to restore the financial integrity and reputation of the company. As you can see from the schematic below, part of the restoration of our reputation and our financial integrity obviously was moving on our restatements, getting those concluded and also resolving the SEC issues there as well as the DOJ. Next priority was creating a solid foundation for future performance. Over the past 16 months, we've spent a significant time focused on the culture of the business and cross functional collaboration. We've rebuilt almost every function in the company to perform at the level we need to be performing to participate in the advanced wound care market, which is very competitive as well as begin to process our products that are in clinical trials.
We also from a resource allocation standpoint, we must invest in our manufacturing area, our commercial area as well as in our R and D area to be highly successful. We are able to focus on building our pipeline out as well as expanding into the international markets, which we'll talk a little bit later on. But it's time for us to start to playing offense as a company. We've been playing defense for the last two and a half years. As I move to Slide number 10, Mimics is special and also in that pioneered the whole area of amniotic tissue using amniotic tissue in advanced wound care.
We still have that DNA inside of us. We're going to leverage our platform, which we referenced as the placental platform here to develop the next generation of portfolio products. The beauty of this platform, it has a lot of versatility around different types of applications to solve unmet clinical needs. So whether that's be in VFU or VOU or in the other areas of musculoskeletal conditions such as knee osteoarthritis, we have the versatility from a mechanism of versatility from a mechanism of action to be able to address that. The business continues to leverage its vertically integrated network for supplying placentas.
We spent a significant amount of time working with the FDA on building out our proprietary manufacturing process here. Our goal is to become cGMP compliant by May 31, 2021. As you all know, the Advanced Wound Care sector is very large. It's growing. We have a significant position in this.
The overall market is $12,000,000,000 in size. It grows around 4% a year. We do not participate in that market. The market that we are participating in is in the skin substitute market, which is roughly $1,000,000,000 This market is growing at around 8% to 10% a year. There's still ample growth for us given the aging population in the growing incidence and prevalence of diabetes and chronic wound care.
One of the areas that we focus significantly on, and I mentioned this in our last call, the Agency For Healthcare Research and Quality, AHRQ, through its evidence based practice centers, sponsors the development of systematic meta analysis reviews to assist public and private sector organizations in their efforts to improve the quality of healthcare in the United States. In February of 2020, AHRQ issued the skin substitutes for treating chronic wounds technical briefing. The recently issued technical brief provided a review of 76 commonly used available skin substitutes. AHRQ conducted a literature search yielding 164 studies and 81 seed submissions. Only 22 randomized controlled trials met the inclusion criteria.
Of the 22 randomized controlled trials, Omedics had 6 included in the final brief. Epifix, our flagship wound care brand was noted to have the most randomized controlled trials and a low risk of overall study bias with statistically significant findings. The overall conclusion, which is independent to MuMedix in their 2020 assessment is that additional studies are needed, which we agree. It's currently in line with our strategy around filing our INDs in the wound care space. The key takeaway and what I want to leave you with here is that this report confirms for healthcare decision makers, payers, 3rd party payers and Medicare, including policymakers as well that we're using this information.
We begin to use this information in our field efforts to support the efficacy, safety and economic value of our products. Of the 16 skin substitute products, only one skin substitute was examined in 5 studies and that was Epifix. Now let's move on to our growth strategy. On Slide 13, if you look at the existing core business, on the left hand side will be a column enhanced portfolio value. This is the segment that is growing roughly at 8% to 10%.
We're going to continue to focus on our core business, supplemented by an enhanced sales force organization, enhanced medical education, enhanced economic information of our products demonstrating their true economic value. As we also look over 30,000,000 patients suffer from diabetes. There is a large population of patients who are suffering in silence, who are not getting adequate treatment. We think there is an opportunity to expand this market as well. The new business area from our BD efforts led by Stan Mysick We'll continue to identify some adjacencies to put new products into the bag of our sales organization.
Additionally, we're going to explore additional priority markets. This leads me to the international expansion. This is a bit longer term. We don't have any financials for you on this. We have filed registrations for our products in Japan.
Last week, we received a registration approval from the German authorities and we are also advancing our efforts in the UK. Lastly, I want to focus on our pipeline. This is where I think we have the most significant benefit to leverage our leadership in placental science. Our intent is to maximize our musculoskeletal amniotic based platforms here. If you look on the left hand side of this slide, there is still ample growth in the advanced wound care market.
We'll be filing INDs in diabetic foot ulcers and surgical wounds for that. Those will be those filings will be completed prior to or before May 31, 2021. So though we'll be keeping you updated in future meetings. Before I move on to the musculoskeletal pipeline, I do want to talk about the underlying need for us to operate in a GMP environment from a manufacturing standpoint. We spent a significant amount of time and effort, not only internally, but also with the FDA in working through GMP requirements for validation.
We've also hired an outside consultant to assist us in that as a third party review of any and all actions that we take. An important element of this in our submission BLA submissions will be our chemistry and manufacturing control section, which we're highly focused on. Additionally, we'll be working to optimize the formulation of our products that are in the clinic. Another important aspect of this is led by Mark Rogers is our quality system. We must have that integrated in with everything that we do from a manufacturing standpoint.
So organizational capabilities are in place to prepare us for BLA submissions. I'll start on the left hand side of this chart, knee osteoarthritis. We've made significant progress in the clinic on these. And I Bob Stein is with us today to address questions here. This is a significant and growing market for us.
The competitive landscape here is populated with large pharmaceutical companies and startup companies here, which I'll address a little bit later on. But we're well on our way of including our Phase 2b clinical trial. Plantar fasciitis, as we noted to you in our last communication, we will be enrolling our last patient in the October timeframe for our Phase 3 study that could come a little bit earlier given the uptake in enrollment in the field or with our institutions. As with the Achilles tendinitis, we've reported that we completed that trial as designed from an enrollment standpoint. And frankly, to be candid with you, for us to improve the statistical power here, we would have to add a large bulk of patients.
So for scientific and financial reasons, we have not pursued that. But we'll let the trial run out and get the readout on those results as well. On Slide 15, if I take you to
the plantar
fasciitis assessment here. So just broadly speaking, we'll get into this later on in our non deal road shows, but also for our next 2020 Annual Meeting, a more extensive review of the market, the competitive landscape for plantar fasciitis as well as other musculoskeletal conditions that we're studying. There's a patient population of approximately 2,000,000 patients here, about half those patients go to the hospital and get treatment. We think the addressable market here is probably 20% to 30%. Keeping in mind, our ability to penetrate this market is based on the results of our clinical trial and our ability to get our products
reimbursed.
There's a significant gap in treatment options in the musculoskeletal area, knee osteoarthritis. The competitive landscape here is significant. At least there are 4 or 5 Phase 3 trials here, all focused on different types of mechanisms to treat pain primarily and potentially function. So whether it's a mechanism of action of anti NGF or with signal inhibitors or capsaicin, what distinguishes Lumetix in this particular area is our safety track record where this product been used in retrospective studies by some of our investigators, but also the unique mechanism of action of the amniotic tissue membrane. As you all are very familiar with Doctor.
Alden's work was a retrospective study where they evaluated 82 patients with knee OA and 100 knees were injected. So the results of that proved to be clinically effective in reducing pain and improving the patient's function. This really led the company to begin to put forth a well controlled, double blind, placebo controlled clinical trials that would be required for BLA submission. The market here is significant. There are over 242,000,000 patients worldwide with symptomatic OA of the knee and the hip.
Even if you cut that in half, it's a significant opportunity for us. There are approximately 14000000, 15000000 patients that are available for treatment in this area. And again, I would caution you that, our ability to penetrate this market will be based on the robustness of our efficacy and safety that will be noted in our clinical trials. This is a growing area. It's a huge unmet need and I feel that we are very well positioned both with our capabilities internally and the use of external consultants to continue to aggressively pursue the completion of our Phase 2b trial, meet with the FDA, go through the findings there and initiate our Phase 3b trial.
So as we conclude this section of my presentation, I'd like to turn the meeting over to Pete Carlson, our CFO.
Thank you, Tim, and good morning, everyone. We received a lot of questions on revenue trends, particularly since reported net sales for Myrmedex in recent quarters includes amounts related to sales made prior to the transition in the company's revenue recognition methodology at September 30, 2019. To help you understand revenue trends excluding this impact, this slide presents both reported net sales in gray and adjusted net sales in blue for the last 6 quarters. Adjusted net sales in both the first and second quarter of 2020 were impacted by the COVID-nineteen pandemic, which led to cancellations and postponements for many elective procedures. We noted on our last call that when considered on a consistent accounting basis, net sales in April May 2020 were down significantly from 1 year ago and that net sales in June July 2020 were in line with net sales in those months in 2019.
Net sales in August 2019 on that same basis were the highest of the 3 months in the Q3 of 2019 and is a tough comparative for this year. That being said, we anticipate that net sales in August 2020 will be in line with net sales in June July 2020. While we are pleased to have recovered a consistent to a consistent level of sales despite the pandemic, our goal is to grow sales as we move forward, which Tim discussed. Now let me discuss operating expenses. Starting with research and development, which is a form of investment in future growth.
The chart on the left presents R and D expense in dollars for the last 6 quarters, which averaged $2,700,000 per quarter. The chart also notes that R and D expense in 2018 averaged $3,900,000 per quarter that year. As Tim mentioned, we have a broad range of clinical trials underway and planned as we leverage our placental science across multiple markets. We do expect R and D expenses to increase in future quarters, likely to levels above the 2018 quarterly average I just mentioned. The chart on the right presents selling, general and administrative expenses as a percent of adjusted net sales for the same 6 quarters, which has averaged about 75%.
I have said before that we anticipate that with an increase in sales, we can leverage our normal run rate operating cost, which would lead to a decrease in these percentages. The impact on net sales made prior to the transition in the company's revenue recognition methodology is seen in net sales and gross profit and has been removed to arrive at adjusted EBITDA. This slide presents all these amounts on an adjusted basis for the last year, arriving at a trailing 12 month view of these profitability measures. The charts below present the respective margins on a trailing 12 month basis for each of the last four quarters. Adjusted gross margin currently is in the mid-80s, down slightly from earlier levels.
This reflects overhead costs being spread over lower production levels and increased cost of production related to the higher quality standards of current good manufacturing processes implemented to date. Tim noted on an earlier call that we completed in June all of the remediation actions related to Form 483 findings from FDA inspections at both of our processing facilities. While there are always improvements to be made in the manufacturing processes, at this point, we believe that much of the cost of the CGMV biologic manufacturing requirements are reflected in our recent results. In the Q2 of 2020, the adjusted EBITDA margin using adjusted net sales was 19.7% and reflected the temporary cost containment actions put in place to offset the impact of the pandemic on 2nd quarter net sales. As you can see in the chart at the bottom right of this slide, that metric has been around 15% when measured on a trailing 12 month basis.
We are pleased with the margin in the 2nd quarter and aspire to meet or exceed that level as time progresses. Although there will be periods when investments in our value drivers may impact quarterly profitability. Finally, I want to touch on the recent financing transactions that have provided financial flexibility. Key terms of both the convertible preferred stock and term loan facility are presented on this slide with some additional information included in the appendix. Also included in the appendix is a summary of selected balance sheet amounts and how they are impacted by the transactions that closed in early July and thus were not reflected in the 2nd quarter amounts.
You will note that after consideration of the transactions, including repayment of the prior term loan, the company had approximately $114,000,000 in cash and cash equivalents and approximately $47,000,000 in long term debt. These additional resources provide us the ability to strengthen areas critical to stabilizing our business, while prioritizing investments that enhance our research and development, manufacturing and commercial organizations and pursue the attractive growth opportunities afforded by the company's amniotic tissue products and know how. Before turning back to Tim to discuss these strategic priorities, I will again remind you that we have initiated the process for relisting our common stock on NASDAQ and continue to be optimistic that this event will occur before the beginning of Q4. We look forward to that day when your stock will once again be traded actively traded on a major stock exchange system. Tim?
Thank you, Pete. On Slide 23, I would like to just reiterate our strategic priorities. We must return to the innovative roots of this company. At the end of the day, Amedix is a biologics company, whether it's in wound care space or in the musculoskeletal space. Our R and D efforts to build the right team, to use the right consultants have been enormous.
As I mentioned in an earlier call, Doctor. Stein is along with Doctor. Koop will be developing a scientific advisory board to augment our scientific understanding of our products and present new opportunities. A good measure of our productivity will be evidenced with the launch of a new product here in the September timeframe. This product is a derivative of our EpiCord product, which is an umbilical cord product.
It's called EpiCord Expandable. This product will offer the features of being able to expand the product two times its normal size. It has nice application across uneven wounds and we think this will be an important product to place in the armamentarium of our physician population. Another important effort here has been on demonstrating the economic value of our products. We've spent a significant amount of time doing retrospective analysis on large databases, which will inform us in the future around how we develop our pipeline and integrate economic principles into our clinical trials.
The pipeline is something that I all know that you're very would like as much information as you can provide on our pipeline today. We'll be able to provide you some information. And later on, as we move throughout the year, we'll tighten up our timelines post FDA meetings. From a commercial standpoint, the addition of Rohit Kashyap and Kim Marrow, both significant players in the wound care space, will begin the process of taking back some of the market share that I believe that we've lost during the last two and a half years of playing defense. Now it's time for us to play offense in our commercial organization and unleash the power of our increasing data that we've been populating over the last 15 months.
From a manufacturing standpoint, we continue to progress on our GMP process. This is absolutely critical in our filing of BLA that I think I've discussed with everyone historically. Building a more muscular approach to marketing, more muscular approach to our clinical trials as well as more muscular approach to our manufacturing will be absolutely imperative to our success in the company. So we're investing in the business. This was really important for us from our capital raise standpoint to have the ability to do that.
At the end of the day, the company is returning to its purpose to help patients, help patients that have wounds, nasty open wounds that just don't heal, wounds like MAT, wounds like IV. What we're learning from our cross functional groups is our ability to work together harder and faster than ever before and I look forward to answering your questions and providing you more insight into the company.
Thank you, Tim. We will now open up the proceedings for general questions. We will take shareholders' questions that are being entered today on the web portal. Please note, we will attempt to answer as many questions as possible in the next 20 minutes that we've set aside for our Q and A session, but only appropriate questions that are germane to the meeting and the company's business will be addressed. Pursuant to the rules of procedure posted on the meeting site, each shareholder will be limited to 2 questions.
The floor is now open for any comments and questions you may have on matters related to our business.
Tim, the first question is on the international area. The shareholder asked that we have identified international expansion as a growth area. When you expect 1st dollar revenue from this aspect of the business, what product lines do you anticipate will be in most demand? What initial market or markets are you targeting?
Well, thank you for the question. Our previously filings noted that we were considering international expansion. Under over the last 12 months, we've been evaluating where there's an opportunity for international expansion. And I can say conclusively that we are pursuing this. Our primary target areas are the UK and Japan.
We've applied for approval for Epifix in Japan. And this past week, we received marketing authorization from the Paul Ehrlich Institution for EpiFix in Germany. So really 3 countries that we're focusing on. After extensive regulatory review process, we're happy to receive this great news and terminate. As you all know, tissue products are regulated under the drug law and it's a very rigorous regulatory pathway.
I'm very proud of the regulatory function here and the accompanying research and development support that they received in not only filing the registration, but also gaining approval. This requires significant perseverance from our MeMedics team and I'm very, very proud of the cross collaboration that existed in the company. Naturally, getting an approval in a country is just the first step. We have to go through the process for pricing our product as well as reimbursement from the authorities since there is a single payer system in many of these countries. So it is a marketing authorization only.
We've got a lot of work to do to prepare for these types of launches, including significant product evaluation and the supporting clinical data that we've used that would allow us to achieve reimbursement. As we formalize our plans, we'll provide you more information on not only our timing around pricing and reimbursement, but also what we anticipate potentially as an opportunity to create more value for the company. Thanks, Tim.
The next question, Bob or Doctor. Stein, I think you can it is for you. Can you give color on what prompted the expansion of the osteoarthritis trial based on certain observation and what the next step is regarding discussions with the FDA regarding Stage 3 clinical trial design and if that has been scheduled yet. Thank you, Steve. As you know, we have a blinded Phase 2 study ongoing in osteoarthritis of the knee.
And there was an interim analysis of the blinded data conducted in August of 2019, which showed that in order to get a statistically robust signal, we should increase the sample size from its original intent to about 4 60 patients and we did make that subsequent adjustment. We're on schedule or even slightly ahead of schedule to reach the number of patients required to have statistically significant results. And after that, we will be observing those patients for a blinded interval of 6 months and a total interval of 12 months. When we have those data, we'll schedule an end of Phase 2 meeting with the FDA to discuss our results in our potential Phase 3 plans. This product has also received a designation called RMAT, which stands for regenerative medicine advanced therapy, which is a very nice indication that they believe it's innovative and could help people with unmet medical needs.
And that presents an opportunity for us to have informal discussions with the FDA in a more collaborative mode that's non binding and we will be applying for a meeting to discuss several of the topics which are of interest to us to clarify as we do
our Phase III planning. Thank you, Doctor. Stein.
There are several questions about not only the relisting process, which I discussed and so I'd reiterate to those questions that we are hopeful to have the relisting completed by the end of September. And there are also questions related to that about what we will be doing to engage the financial community. And I do want to assure the shareholders, it is a high priority of the company and management team to engage with the financial community. We are in the midst of interaction and outreach to analysts and we will be doing a non deal road show here in the fall. And so we do expect to get out or we will get out and do expect that we will share the material being reviewed during that non deal road show and make that available to the public so you can see the information being discussed.
Tim, the next question refers to the product launch. You mentioned the new product launch. Can you tell me more about what that is?
Yes, sure. EpiCore is a product built from our from the umbilical cord as well as Ennion and Chlorion. The beauty of Epicore, the original product is its Stitchable has a variety of applications. The expandable version is helpful in covering more surface area there and that leads to economic advantages for not only the physician, the patient and the payer. So we're looking forward to launching this in mid September to complement our not only our Epicor products, but also our other products that are used in surgery and in wound care centers as well as physicians offices, primarily Epicor expandable we sold in the wound care centers where we have some great partners in Healogics and Restorix.
Tim, another question. I think this is for you. Do you plan to release interim data for our trials?
Yes. We have not planned we did not plan to introduce interim data. Doctor. Stein will probably provide you more of a perspective on that. Our focus is really on the clinical trials.
I know this question has come up several times. We don't think, given the type of trial we're conducting that providing interim data is that actually that useful for our shareholder. Bob, do
you have any additional comments? Yes. The interim looks are to assess the statistical robustness of your study design. The treatment groups remain blinded and it helps you know whether on the basis of differences you're seeing if you can go with the number of patients you have or whether you might want to increase. It's often the case that you get the results there that's going to actually apply exactly to the final result.
It's premature to discuss those results. And after we have the appropriate analysis, complete study and appropriate communication with the FDA, then we can have more detailed explication of what we found. Yes. Thank you, Doctor. Stein.
Next
question and actually it's a series of questions relates to sales growth and sales reps, etcetera. So, Tim, let me start and I'll have you add. We have talked about before that we're not we are no longer going to provide the sales rep count, but that does not at all mean we do not think it is appropriate an important resource. And as I mentioned in my remarks, we are interested in very much growing our sales. That is our priority.
We have 4 areas and Tim talked about those. I just recapped that. It's the just market growth. In the amniotic tissue subset of that skin substitute market, growth is in that 8% to 10% range that Tim mentioned. We also believe that with things like the AHRQ and other initiatives, we can expand the growth of that market beyond just normal market growth.
3rd is the opportunity for licensing or partnering through business developments. Again, Tim talked about Stan Meisick and the activity that he will be leading. And then the 4th are the international opportunities that Tim talked about. So again, sales growth is a key focus of management and we have the 4 areas in which we are forward levers that we see as focus or as levers in growing our current revenue volumes in addition to the opportunities associated with the BLAs. Tim, anything you would want to add?
Well, I think it's important for us to talk a little bit about the VA, the Veterans Administration. We're very committed to our veterans as well as our active military who suffer from chronic debilitating wounds. A significant portion of our products are purchased by the U. S. Government, the VA, the Public Health Service, including the Indian Health Service.
For the years ended December 31, 2019, 2018 2017, our net sales in government accounts were 6%, 15% and 9% respectively on net sales. Now, based on our renewed relationship with the VA, we think we can grow in that segment of the market as well. It's an important market because of our commitment to the Veterans Administration.
Thank you, Tim. Doctor. Stein, there's another question here on the clinical trials. And this is what kind of lead do you have versus competitors? What is advantageous other than the sole competitor when you will have as first market?
I'm sorry. So really talking about what how this relates to what others may be doing in the marketplace and what relative to our business. The company has been very far sighted in setting up randomized controlled trials of our products, including products that are more than minimally manipulated. There are products that involve make forms that can be injected under the surface of the skin and can exert effects on internal tissue. So in that setting, we have very good studies in plantar fasciitis that are predicated on a very positive earlier study.
That is a program which is nearing the completion of the Phase 3 enrollment, almost completed. And after that, we'll have a 6 month line of observation and again a 12 month total observation. And there is an opportunity to perhaps file a BLA on that product by the end of 2021, which is very substantially in front of other competitors. And we're not aware of a similar product that's being pursued even with a time lag from other companies. And the prior studies really show a very dramatic benefit in terms of pain and foot function.
So that is one area where we're I think have a very powerful product.
We also have a retrospective analysis of
the same micronized material used in osteoarthritis where not only does it relieve pain, but it helps people be able to resume the activities of daily living with better function. And we're very pleased with the progression of that program in terms of patient enrollment. And as we discussed a little long ago, we'll be looking to complete the Phase 2 about a year from now and that again puts us quite in front of our competitors. So I think that we have been farsighted in getting these studies going. They're being conducted well.
We're encouraged by the prior
assessments of
the products. And I think that that does put us out in front of the competition, not just in terms of time, but in terms of quality and the outcomes for patients. Thank you. Tim, the next question is for you. What is the COVID-nineteen pandemic impact on the supply chain?
It's an excellent question. We source the raw material for our products to hospitals, which are coming from others who consented to donate their placenta to us. We have a large geographically diverse network of donor hospitals across the United States. We did experience interruptions to access to some of the hospitals in some geographic areas beginning in the second half of March of twenty twenty. However, we were successful in mitigating this disruption to our supply chain by adding additional donor hospitals using third party providers of donated placentas and by increasing our efforts at hospitals that did not impose an access limit to us.
Additionally, in anticipation of future expected disruptions, we have run our manufacturing at levels greater than demand and have been successful in doing an inventory of safety stock.
Okay. The next question is for me, it's regarding what the company has done to improve our internal controls and how does that relate to expenses. The company's internal controls and culture have been a priority of management and we have strengthened and formalized accounting practices that encompass numerous levels of review. We designed and implemented many new controls prior to the end of 2019. However, there was insufficient time to consistently execute against some of these new controls prior to that date, leading to the 2 remaining material weaknesses that were reported in the 10 ks.
We expect that our remediation efforts will continue through 2020, which is also discussed in the 2019 Form 10 ks. From a cost standpoint, the investments needed to implement these controls have been made and are reflected in our recent results. Tim, a question, I think for you on health economics. When do you anticipate being able to quantify health anticipate being able to quantify health economic studies for insurance companies and others? And are you aware of anybody else being able to quantify thus far?
Yes. Amedix continues to engage and have conversations with CMS and other payers as they study payment methods and reimbursement coverage for future years. We have a very robust market access group led by Mary and Snyder aimed towards aligning with providers and patients with our payer coverage support, reimbursement
contract opportunities.
The company is investing in additional clinical and scientific research, including internal product development, which yielded the Epicor Expandable within about a 9 month timeframe from envisioning the product to completion. Part of our core approach to doing any type of product development now and in the future is to understand the economic data. Does it make sense from an outcome standpoint for a payer to reimburse for our product? Are we doing something? We have to be more than just clinically applications or safe.
We've got to provide a beneficial outcome. This HECON, health Economics effort by us is being led by our Medical Affairs Organization that reports into Doctor. Stein, as well as our health policy group, which reports in through our market access group. So this is a significant focus for us given our understanding of the how the sophistication of payers and buying groups is evolving over the past couple of years.
And the final question, Tim, is for you. What would you like to see happen in the next 1 to 2 years at MiMedx?
It's a great question. I'd like to continue to evolve our culture to have the healthiest organization we can have in healthcare. That's number 1. I think our people deserve that and our customers deserve that as well as our stakeholders other stakeholders like you. I do believe it's absolutely critical for us to increase the productivity of our commercial operation in the areas that we decide to go after.
And it's more than just the sales force. We have a medical affairs organization led by Bill Petelbach. Doctor. Petelbach is known in the wound care sector as a thought leader. We need to provide more medical education to our customers around our product that should be augmented by health economic data.
The third area that is absolutely important to us is maturing our pipeline, whether that's implantar fasciitis or in knee osteoarthritis. Over the next 1 to 2 years, we will have a good indication of where this potentially exceptional value creating opportunity stands.
Okay, Kathy, we'll turn it back to you.
Yes. Thank you, Tim and Steve. Now that we've reached our time limit on this portion of our meeting, this brings us to the end of the comments and questions. We would like to thank you again for your attendance at our annual meeting and your interest in MeMedics. This concludes the meeting.
Thank you again.