Scimitar Equity Blog

Cytori Therapeutics is developing treatments of cardiovascular disease, spinal disc degeneration, gastrointestinal disorders, liver and renal disease, and pelvic health conditions. CYTX engages in the development, manufacture, and sale of medical technologies to enable the practice of regenerative medicine. (http://www.cytoritx.com )

Financial: The cumulative revenue base of combined systems increased in Q3 to 85:  15 systems were shipped; with 314 consumables shipped in Q3/09. Reorders to established accounts  represented  100% growth of the cumulative revenue base of systems and 75% growth in the number of quarterly consumables shipped since the beginning of FY09:

• Product revenues were $1.4 M while gross profit was $0.6 M ($4.6 M in FY09 so far). Total operating expenses, less the change in fair value of warrants and option liabilities were $6.7 M and $20.7 M for Q3/09 and FY09,
• Operating expenses were reduced due to reductions in R&D as products have gone from development to full commercial launch and a significant reduction in G&A, offset by a modest increase in sales and marketing,
• Net loss was $6.8 M for Q3/09 and $13.7 M for FY09. The improvement in net loss for FY09 was attributable to increased development revenues and reductions in R&D and G&A,
• Ended Q3/09 with $13.1 M in cash and cash equivalents plus $1.9 M in accounts receivable.  Subsequent to Q3/09, CYTX completed 3 scheduled closings with Seaside 88, LP raising $2.6 M from the sale of 825 K shares on 6/19/09.

Quarterly Regulatory Update: RESTORE-2: So far, 69 of 70 patients have been treated.  For the first 30 patients who have reached the six-month follow-up, CYTX reports interim data on 12/12/09 at the San Antonio Breast Cancer Symposium,

• Enrollment has been completed in the cardiovascular disease studies in the EU and was deemed to have met their safety and feasibility objectives with completion of the 6 month evaluation while the heart attack study (APOLLO) should report results in Q1/10. Results from the chronic heart disease study (PRECISE) in Q2/10,
• Results were also reported on the use of the Celution® System and its cellular output for the treatment of stress urinary incontinence (SUI) as part of an independent, investigator-initiated 5 patient safety and feasibility study in Japan with the results suggest that the investigational treatment is thus far safe and feasible. The treatment resulted in improved sphincter muscle control and increased blood flow, through the combination of bulking generated by a cell-enriched graft and an injection of cells directly into the sphincter. As a result, the investigator is now planning a larger study to more fully evaluate the potential for the Celution® System in SUI.

Bottom Line: Who defines  this “new normal” market status of disappointing share appreciation, analyst expectation and product revenues?

• As compared to a number of tool or equipment companies – in this market – be happy – they could sell any,
• I have covered companies who have partnered with GE Health and have never seen them – truly – drive volumes as they have too many products and too few focused reps.  But, the cost of direct sales reps and marketing “must” be priced to  incentive based systems then controlled, measured and monitored. The S of SG&A has sunk many a company in this economy,
• The number of Celution and StemSource systems continue to grow as did the number of patients treated,
• The Celution system has a high ticket price as do its disposables per procedure but it has NOT stopped utilization,
• Product utilization for research purposes should stimulate future regulatory approvals; enhanced acceptance will better define potential for partnerships,
• CYTX can now seek marketing approval for the Celution System in the EU and US  as a medical device.  However, it is unclear at this time if a clinical study will be required or the scale/scope for any study in the US.   So much easier …,
• CYTX closed at $3.40 down $0.15 (4.23%) on 11/9/09 with a market cap of $125.15 M; a lot better than the closing price on 4/14/09 of $1.56,
• I believe CYTX is a  “BUY” and should out-perform expectation … in the near term versus the short term (FY09),
• Remember the story of the “Tortoise and the Hare” – slow and sure will win the race to a better share price.