MiMedx is a publically traded, for-profit company that takes donated human placentas -- solicited via a website featuring babies and a cartoon butterfly -- and turns them into health products. These can be used as skin grafts or injections, and they're intended to treat inflammation and scar tissue formation as well as promote healing, according to the company's website.
But the FDA says there are currently no licensed products that contain placental tissue at all, and it sent MiMedx a letter explaining that the company violated federal law by failing to get the proper license or investigational new drug application prior to marketing its ground up placenta products.
As a result of the FDA letter, MiMedx's investors have filed a class-action lawsuit alleging that the company made misleading statements and falsely inflated stock market prices.
"If it's a biologic, it has to be put through FDA scrutiny and they have to do extensive testing before they're able to market the product," said Phillip Kim, an attorney with the Rosen Law Firm in New York City. It is one of the law firms that have either filed several class-action lawsuits on behalf of MiMedx investors or announced they're investigating MiMedx. Kim said dozens of investors have reached out to his firm.
MiMedx is registered with the FDA to accept placenta donations, but manipulating them beyond a certain extent makes them drugs, which means they would need to be approved and licensed by the FDA under federal law, according to an Aug. 28 letter the FDA sent to MiMedx, based in Marietta, Ga. This means MiMedx needed to demonstrate the "safety and efficacy" of several of its injectable products -- which are crushed, dehydrated placenta -- via clinical trials, which it hadn't done, the letter reads.
"Mother nature did safety and efficacy testing on the tissue," MiMedx CEO Pete Petit told ABCNews.com, likening treatment with a placenta-based product to a kidney transplant rather than the use of a drug. Since the placenta product is made from human tissue, he said testing is unnecessary because placental cells already work in the human body.
He said that over the last two years, his company has shipped about 18,000 vials of the crushed placental product, but it has not received a single report of a patient having a bad reaction. If safety were in question, he said he would expect more than a letter from the FDA.
"We have a philosophical misunderstanding on how we grind our product up," Petit said, referencing the part of the FDA letter that says tissue-based products regulated under the Public Health Service Act need to be "minimally manipulated" to avoid needing clinical trials for FDA approval.
In a response to the FDA's letter, the company filed with the Securities and Exchange Commission on Sept. 5 to say that it is still expecting between $54 million and $60 million in revenue this year.
Dr. Stephen Badylak, who heads a regenerative medicine laboratory at the University of Pittsburgh, said placental tissue is somewhat mysterious, but it does actually have healing properties.
"There are so many goodies in these naturally occurring materials that it's virtually impossible to isolate a particular growth factor and say that's what's making a wound heal quicker," Badylak said.
Still, human placenta cells could potentially carry greater health risks than placental cells from pigs or cows, which are sometimes used in other products, because they can spread human viruses and bacteria, Badylak said. And since the drugs are being treated as human tissue donation, they don't have the same sterility standards as other drugs or medical devices.
Though the company lists three patient studies on its website, a review of those studies revealed that only 53 patients actually received the treatment in a trial setting. Twenty-three patients received a MiMedx product to treat diabetic foot ulcers. Thirty patients received it for plantar fasciitis, a condition that involves inflammation of the foot.
Though MiMedx's website says its placenta-based injections can be used in spinal surgeries, it lists no trials conducted in spinal surgery patients on its website.
Petit told ABCNews.com that only 10 percent of the company's business comes from the products the FDA says need to be approved, and that it will contest whether that approval is necessary in the coming weeks.
"There are a lot of things going on here that don't meet the eye," he said, adding that the FDA letter, which stopped short of ordering MiMedx to stop selling its product, came as a surprise.
MiMedx solicits placenta donations via a website called PlacentaDonation.Com, which bears the slogan "Give the gift of healing." In the frequently asked questions portion of the site, the donation is referred to as "an act of charity," though MiMedx's federal financial filings indicate that its business is dependent upon donations.
"Any disruption in the supply of donated human tissue could restrict our growth and could have a material adverse impact on our business and financial condition," the filing reads.
Injections of the dehydrated, crushed placental product cost $400 or $500 each, but patients may need more than one dose depending on their condition and their physician's orders, a MiMedx spokeswoman told ABCNews.com.