Below The Knee | Market Signal

MiMedx's CEO Just Told Congress the Real Fraud Number Isn't the Price. It's the Discount.

Last edition flagged a House roundtable being scheduled on Medicare skin substitute fraud. The full record is out now, and it's a bigger story. Convened off VP Vance's fraud task force press conference citing a 7,100% spike in Medicare skin substitute claims, the roundtable put MiMedx CEO Joseph Capper on record with the sharpest line to come out of it: manufacturers set a list price, discount it 40 to 60 percent back to providers in what functions as a kickback, then report the discounted net as the following quarter's average selling price. Cycle the product off the market, launch a similarly priced one, repeat. It isn't that the price was too high. The reported price was never the real price.

The outlier numbers entered into the record are the ones that will stick. Two hospice patients billed $2.1 million in skin substitutes before death in 2024. One patient billed $36 million in six months. Clinicians who billed over $80 million in skin substitutes in the first half of 2025 alone. ACOs told the committee they flagged this in real time and Medicare kept paying, because no mechanism existed to stop a claim once it was submitted.

The reform proposals on the table, an invoice-price ceiling instead of a flat rate, higher application fees to de-link clinician pay from product margin, and ACO authority to trigger a prepayment hold, are covered in full below. What's worth sitting with here is the timing. MiMedx's own CEO is proposing reimbursement mechanics to Congress in the same month Medtronic closed a $650 million cash acquisition of a differentiated, clean-regulatory-record pain therapy, and in the same month Cellution, Merakris, and Vivex all treated CAMP as open territory for new launches. Capital keeps rewarding clear differentiation. Congress keeps bearing down on undifferentiated volume. Both are happening to the same reimbursement dollar, in the same thirty days.

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Regulatory | House Roundtable on Skin Substitute Fraud Puts MiMedx's CEO, Two ACO Executives, and Hard Numbers on the Record

The House roundtable on Medicare skin substitute fraud, held July 21 by a subcommittee focused on health care and financial services, produced a fuller record than the calendar item alone suggested. Convened off VP Vance's fraud task force press conference citing a 7,100% spike in Medicare skin substitute claims, the panel put four witnesses on record: MiMedx CEO Joseph Capper, Accountable for Health CEO Mara McDermott, Leverage Global CEO Elena Olmstead, and an ACO physician witness. McDermott cited 2025 Medicare Part B skin substitute spending at $19 billion, up from roughly $250 million in 2019, against the committee's own $14.4 billion figure for the same year, a gap attributed to differing product scope. Capper reconfirmed the $127.14/cm² CY2026 flat rate and described a discount-then-report cycle, providers receiving 40 to 60 percent kickback-style discounts off billed price, with the discounted net reported as the following quarter's average selling price, as the core fraud mechanism. Olmstead put true domestic manufacturing cost at $281 to $500/cm², against imported product as low as $8/cm². Proposals discussed include an invoice-price ceiling in place of the flat rate, higher application fees to de-link clinician compensation from product margin, and ACO authority to trigger a prepayment hold rather than the current pay-and-chase recovery model.

The BTK read: This is a materially bigger story than "a roundtable was scheduled." A sitting public-company CEO went on the record proposing specific reimbursement mechanics to Congress, and the spending growth figures cited here (60x to 75x, 2019 to 2025) are larger in scope than the ~40x figure this newsletter has been running from CMS's own $252M-to-$10B-plus, 2019-to-2024 window. Worth reconciling which figure becomes the reference stat going forward. The mechanism Capper described, discount-and-report rather than sticker price, is also the more useful framing for anyone trying to explain this to a non-clinical audience: it isn't that the price was too high, it's that the reported price was never the real price. Set against Olmstead's manufacturing cost data, any invoice-ceiling reform will need to land above $281/cm² or it risks squeezing out legitimate domestic manufacturers along with the fraud. Worth watching whether any of these specific mechanisms show up in the CY2028 differentiation rulemaking this newsletter has been tracking.

Investment | Cellution Biologics Acquires SimpliDerm ADM Business from Elutia for $11M

Cellution Biologics signed a definitive agreement to acquire Elutia's SimpliDerm hydrated human acellular dermal matrix business for up to $11 million, consisting of $8 million at closing plus $3 million in milestones. The deal marks Cellution's entry into the U.S. reconstructive surgery market and expands its allograft portfolio beyond wound care and ocular repair.

The BTK read: A small check by dollar value, but a meaningful one structurally. SimpliDerm comes with existing reimbursement coverage and surgeon relationships already built in, which is exactly the kind of asset that lets an acquirer skip the multi-year commercialization runway most ADM entrants have to build from scratch. Worth tracking whether Cellution treats this as a standalone reconstructive line or starts cross-selling it against its existing wound care and ocular accounts.

Investment | Merakris Therapeutics Wins $2.2M NIH SBIR Grant for Diabetic Foot Ulcer Program

Merakris Therapeutics received a Direct-to-Phase II SBIR award from NIH's NIDDK, providing approximately $2.2 million in non-dilutive funding over two years to advance MTX-001 for diabetic foot ulcers. MTX-001 is a dual-action investigational biologic designed to modulate inflammation and protease activity while activating endogenous repair cells.

The BTK read: Non-dilutive federal funding for a DFU-specific biologic is worth flagging on its own, but the bigger signal is that this expands Merakris' pipeline into DFUs alongside its existing FDA Fast Track venous leg ulcer program. A company building a two-indication regenerative biologic pipeline on federal grant dollars, rather than pure equity raises, is a capital-efficient path that's easy to overlook next to the bigger CAMP headlines this month.

Investment | Medtronic Completes $650M Acquisition of SPR Therapeutics

Medtronic announced it has completed its acquisition of SPR Therapeutics, a privately held leader in short-term, percutaneous peripheral nerve stimulation therapies for chronic and acute pain, valued at $650 million in an upfront cash payment. The deal adds SPRINT PNS technology to Medtronic's pain therapy portfolio.

The BTK read: This closes the loop on a transaction flagged as pending in the Q2 2026 Capital Signal report. It's now a completed, cash-paid deal, not an announced intention. Not a BTK core category directly, but it's a useful data point on strategic appetite: Medtronic paid full price in cash for a minimally invasive, non-opioid pain therapy with a clean regulatory record, at the same time skin substitute manufacturers are facing congressional fraud scrutiny over billing volume without matching clinical differentiation. Capital continues to reward the former and punish the latter.

Market | Abbott Raises Full-Year EPS Guidance After Q2 Beat

Abbott reported second-quarter 2026 adjusted EPS of $1.31, beating consensus of $1.28, on revenue of $12.59 billion. The company raised full-year adjusted diluted EPS guidance to $5.45 to $5.60, up from $5.38 to $5.58, driven by medical devices growth of 8.4% on a comparable basis and continued strength in diagnostics.

The BTK read: A large-cap beat and raise is a broadly positive tailwind read for device demand heading into H2, and Abbott's diagnostics strength (helped by the Exact Sciences integration) reinforces a name that sits adjacent to vascular intervention and imaging workflow categories this platform tracks. Worth noting as a macro data point more than a BTK-specific one.

Regulatory | Vivex Biologics Launches VIA Linx, a 510(k)-Cleared Synthetic Peptide Matrix

Vivex Biologics commercially launched VIA Linx, a 510(k)-cleared self-assembling synthetic peptide matrix for partial and full thickness wounds. The bioabsorbable, lyophilized powder transitions to a semi-solid scaffold on application and is dosed once weekly. The launch is clinically notable for a limb salvage case involving necrotizing fasciitis.

The BTK read: A synthetic scaffold entering the same competitive space as CAMP-classified biologics, but cleared through the 510(k) pathway rather than the more scrutinized skin substitute billing category. That distinction matters right now. As CAMP faces congressional fraud scrutiny and a flat reimbursement rate, a synthetic, device-classified alternative with a clean once-weekly dosing story and a limb salvage case study attached is a genuinely different competitive position to build a launch narrative around.

Clinical | Applied Biologics Launches Multi-Center Real-World Study for XWRAP

Applied Biologics initiated a multi-center retrospective outcomes study evaluating XWRAP across DFUs, VLUs, pressure ulcers, and arterial ulcers at 10 to 15 high-volume U.S. wound care centers, analyzing EMR data on healing outcomes, time to closure, applications required, recurrence, adverse events, and cost-to-close.

The BTK read: This is evidence-generation infrastructure, and the timing is deliberate. Building a real-world outcomes dataset now, ahead of any CY2028 differentiated rate decision, is exactly the kind of groundwork a manufacturer needs if it wants its product treated differently than the flat $127.14 rate everyone else is living under. Worth watching whether this converts into peer-reviewed publication before that rulemaking window closes.

Also this week, briefly: Kane Biotech (TSXV: KNE) completed an oversubscribed private placement raising $1.16 million CAD to support U.S. commercial expansion of its biofilm-focused wound care products, a small but real signal of continued investor appetite in the biofilm management space.

Market | Brightshores Expands Swift Medical AI Wound Assessment Tool Across Ontario Region

Brightshores Health System is scaling its AI-powered wound assessment platform from Swift Medical across Grey and Bruce counties in Ontario, extending beyond its initial six hospital sites to additional hospitals and community care partners through February 2027. The tool uses AI to measure wound surface area, depth, and tissue type, and to predict healing trajectories.

The BTK read: Regional health system scale-ups like this are the adoption signal that matters more than a single pilot announcement. Going from six hospital sites to a full regional rollout, with community care partners included, is the kind of institutional commitment that's harder to reverse than a pilot. Worth tracking as a comp point for how AI wound documentation tools move from pilot to standard of care in public health systems outside the U.S.

Investment | Cardinal Health Acquires AdaptHealth Diabetes and Strive Medical for $360M

Cardinal Health announced two tuck-in acquisitions totaling approximately $360 million: the Diabetes Health business of AdaptHealth Corp. and Strive Medical, a multi-specialty urology supply provider. The deals build on Cardinal's prior Advanced Diabetes Supply acquisition and expand its at-Home Solutions distribution platform.

The BTK read: Not wound care specific, but relevant to anyone tracking the home care distribution channel that overlaps with BTK's wound and vascular logistics coverage. Cardinal is building a chronic disease home care platform through repeated tuck-ins rather than one large purchase, and that channel consolidation intensifies competition for any smaller distributor trying to hold shelf space in home-based chronic disease management.

Also this week, briefly: Smith+Nephew launched an expanded ASC Solutions enterprise strategy targeting ambulatory surgery centers, with its ASC ONE platform integrating partners including STERIS and Brasfield & Gorrie to support ASC development and operations.

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BTK Wound Care Fund (5D): +0.005% vs - S&P 500: −0.65% | Dow Jones: −0.84% | NASDAQ: −1.43%

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The BTK read: Worth flagging that two of this week's biggest laggards, AVITA Medical and Organogenesis, both report Q2 earnings on the same day next month. See Earnings Watch below. A stretch of underperformance heading straight into a print is exactly the setup where the next few weeks tell you whether this was noise or a signal the market was already pricing in.

Educational model portfolio. Not a real fund. Not investment advice. Performance is model-calculated and unaudited.

LOTS coming up:

July 29 — MiMedx (MDXG), Integra LifeSciences (IART), and Anika Therapeutics (ANIK) all report the same day, after market close for MiMedx, before market open for Integra. Worth flagging: this is MiMedx's first earnings print since CEO Joseph Capper testified in front of Congress on skin substitute fraud and reimbursement reform. Any call commentary on that testimony, or on how he sees the invoice-ceiling proposal affecting MiMedx directly, is worth listening for.

July 30 — Merit Medical Systems (MMSI) reports Q2.

August 4 — LeMaitre Vascular (LMAT) reports Q2.

August 6 — AVITA Medical (RCEL) and Organogenesis (ORGO) both report after market close the same day, the two names sitting at the bottom of this week's fund performance table above.

August 6–9 | Nashville, TN — APMA Annual Scientific Meeting — Gaylord Opryland

September 10–11 | New Orleans, LA — IPAWS & Tissue Repair Summit (Kernexus) — The Ritz-Carlton (BTK Official Market Intelligence Partner)

September 14–16 | Louisville, KY — NAWCO HEAL Conference 2026

September 23–27 | Kuala Lumpur, Malaysia — WUWHS 2026

October 15–18 | Las Vegas, NV — SAWC Fall 2026 — Caesars Palace

October 22–24 | Anaheim, CA — DFCon 2026 — JW Marriott

November 6 | Virtual — WoundCon Fall 2026

December 9–12 | Phoenix, AZ — Desert Foot, Multi-Disciplinary Limb Salvage & Wound Care Conference

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See you next week,

-Scott