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Cytori Reports 2012 Business and Financial Results; Provides Outlook for 2013



  Cytori Reports 2012 Business and Financial Results; Provides Outlook for
  2013

 - U.S. ATHENA trial on track for mid-2013 completion of enrollment with 1^st
                              data in 1H 2014 -

                   - BARDA: Contract activities underway -

      - Achieved $9.1 million in product and contract revenue for 2012 -

-  Recent approvals in Japan and EU to drive continued revenue growth in 2013
                                 and beyond -

Business Wire

SAN DIEGO -- March 7, 2013

Cytori Therapeutics (NASDAQ: CYTX) reports its 2012 business and financial
results and provides an outlook for 2013. The Company achieved record total
revenues for the year and fourth quarter ended December 31, 2012 of $14.5
million and $7.3 million, respectively, compared to $10.0 million and $2.8
million, respectively, for the same periods in 2011.

Milestone Highlights

Cytori’s 2012 and year-to-date milestones include the following:

  * Initiated enrollment in the ATHENA U.S. refractory heart failure trial;
    all six centers are actively screening patients, enrollment is on track to
    be complete mid-summer
  * Awarded contract with BARDA, a division of the U.S. Health and Human
    Services, worth up to $106 million to develop a novel cell-based treatment
    of thermal burns combined with radiation injury
  * Obtained Class I device clearance in Japan, opening the Japanese market
    and increasing fourth quarter revenues
  * Opened EU vascular market with CE Mark claims for intravascular delivery
    (Intravase®)
  * Expanded CE Mark claims for multiple indications including cryptoglandular
    fistulae and tissue ischemia
  * Amended and resumed enrollment in the ADVANCE European heart attack trial
  * Achieved $9.1 million in product and contract revenue, including a record
    $4.3 million in the fourth quarter
  * Grew Celution® and StemSource® System shipments by 46% year-over-year
  * Increased patent portfolio year-over-year by 36% with the issuance of 15
    patents worldwide, bringing the total number of global patents to 57 with
    75 additional applications under review
  * Recruited Steven Kesten, M.D., as Executive Vice President and Chief
    Medical Officer
  * Raised $21.4 million in net proceeds from public offering of shares,
    including $2.8 million in net proceeds in January 2013 from the exercise
    of the full over-allotment option

“We made substantial progress in 2012 across three key areas of our business:
our cardiac pipeline, our recently awarded government contract and our
commercial operations,” said Chris Calhoun, Chief Executive Officer of Cytori.
“The specific developments include the initiation of the ATHENA trial, a
significant contract with the Biomedical Advanced Research Authority (BARDA)
related to thermal burns, and growing revenue opportunities through important
European and Japanese regulatory approvals, which was reflected in strong
fourth quarter sales and which we see significantly contributing to revenue
growth in 2013 and beyond.

“These three areas will be the priorities we intend to focus on in the next 12
to 18 months. We believe these objectives provide the greatest potential to
impact shareholder value and make the most efficient use of our capital. Given
the platform nature of our products, there are several other compelling
medical applications and geographies in which we have made progress. We expect
to move these opportunities forward as additional resources become available
with an emphasis on grant and contract funding, organic customer demand or
partnerships.”

Financial Performance and Guidance

Product and contract revenues more than doubled in the fourth quarter of 2012
to $4.3 million compared to $2.1 million for the same period in 2011. For the
full year 2012, we saw 14% growth in product and contract revenues to $9.1
million as compared to $8.0 million for the prior year. The increase in
product revenue in the fourth quarter ($4.0 million in 2012 compared to $2.1
million in 2011) was primarily a result of sales under the Class I device
clearance in Japan achieved in September 2012.

Cytori recognized $0.4 million in contract revenue related to the BARDA
agreement for the year and fourth quarter of 2012 for which there was no
comparable revenue recognized in 2011. Total development revenues, including
contract revenue, were $5.8 million and $3.4 million for the year and fourth
quarter of 2012 compared to $2.0 million and $0.8 million in the same periods
of 2011. The balance of development revenue is the result of the recognition
of deferred revenue in connection with the Astellas 2010 equity agreement and
the recognition of clinical and regulatory milestones related to the Company’s
Joint Venture with Olympus Corporation.

Gross profit was $2.6 million for the fourth quarter ended December 31, 2012,
compared to $1.1 million in the fourth quarter in 2011, representing a 126%
increase in gross profit and exceeding sales and marketing expenses in the
quarter by $0.5 million. Gross profit was $4.7 million for the full year 2012
as compared to $4.1 million in 2011.

Research and development expenses were $13.6 million and $4.0 million for the
year and fourth quarter ended December 31, 2012, compared to $10.9 million and
$2.0 million for the same periods in 2011. This planned increase was
principally associated with the initiation of the ATHENA trial. In contrast,
sales, general and administrative expenses were reduced to $25.2 million and
$6.3 million for the year and fourth quarter ended December 31, 2012, compared
to $28.3 million and $6.5 million for the respective periods in 2011. The
decrease in SG&A expenses was the result of planned reductions in expenses
based on the establishment of a more efficient commercial operations
structure.

Net loss was $32.3 million, or ($0.55) per share, and $3.8 million, or ($0.06)
per share, for the year and fourth quarter ended 2012, respectively. This
compares to $32.5 million, or ($0.61) per share, and $6.9 million, or ($0.12)
per share for the same periods of 2011, respectively. Net loss for year end
2012 includes a net non-cash charge of $0.1 million compared to a net non-cash
credit of $3.6 million in 2011. Net non-cash charges include the change in the
fair value of warrant and option liabilities.

At the end of 2012, Cytori had $25.7 million of cash and cash equivalents and
$3.9 million of accounts receivable, net. In addition, in January 2013 the
Company received $2.8 million in net proceeds from the exercise of the
over-allotment option as part of the public equity offering Cytori executed in
December 2012.

“We are focusing our variable expenditures on key areas that are expected to
provide substantial near and medium term value,” said Mark Saad, Chief
Financial Officer. “Our greatest single investment will be the U.S. ATHENA
trial, for which we expect the first data readout in the first half of 2014.
We believe the BARDA contract represents a potentially fully funded pathway to
U.S. commercialization with a near term opportunity to qualify for the next
option phases within twelve months. And lastly, we expect to accelerate
revenue growth in 2013 based on recent regulatory approvals to achieve at
least $15 million in combined product and contract revenue, while maintaining
sales, general and administrative expenses at their current levels. Similar to
2012, the majority of the total revenue estimate is expected to be achieved in
the second half of the year.”

Cardiovascular Disease Pipeline

The ATHENA trial is Cytori’s primary clinical focus in 2013. For this trial,
all six centers have received institutional review board approval to begin
screening and enrolling patients. We believe low screen failure rates and
positive feedback from investigators have contributed to relatively rapid
enrollment per active site thus far. The trial currently remains on track for
completion of enrollment by mid-summer with six month results anticipated in
the first half of 2014.

In 2012, Cytori amended the ADVANCE trial and enrolled patients across a small
number of European trial centers. The Company is encouraged by the long term
data from the pilot trial APOLLO, which led to the initiation of ADVANCE. 15
patients have been enrolled in ADVANCE to date. In light of the required
resources to complete enrollment in an accelerated fashion and competing
corporate priorities at this time, Cytori is prepared only to commit a minimal
level of investment in ADVANCE for 2013. The goal for 2013 is to bring the
total ADVANCE enrollment to 25 patients with an interim analysis to be
performed after the first 72 patients.

Thermal Burns Combined with Radiation Injury

We believe Cytori’s contract with BARDA provides a potentially fully funded
path to market and a likely customer for Cytori technology, the U.S.
government. In the fourth quarter, the first quarter under contract, Cytori
recognized $0.4 million in contract revenue toward the achievement of contract
deliverables including development of the next-generation Celution® device.
Cytori expects to achieve proof-of-concept milestones as required under the
contract in the first quarter of 2014.

Revenue Growth

The commercial operations in 2012 delivered by increasing revenues despite the
implementation of substantial cost reductions:

  * Total product and contract revenues grew 14% year-over-year, with $4.4
    million coming from Japan
  * System shipments grew 46% year-over-year, due mostly to the Class I device
    clearance in Japan in September 2012
  * Puregraft® sales grew 46% in 2012 during which time more than 5,000 units
    were shipped
  * Demonstrated leverage of commercial infrastructure as fourth quarter gross
    profit of $2.6 million exceeded sales and marketing expenses of $2.1
    million

In the second half of 2012, we achieved Class I device clearance in Japan.
This contributed to an increase in total product sales in the fourth quarter
of 2012 based on demand that has continued into 2013. Demand for Cytori’s
products as a result of this approval is coming primarily from hospitals
seeking to perform self or government funded investigator-initiated research
or trials with Celution® cell therapy. At present, there are 40
investigator-initiated clinical studies in development, in process or now
complete utilizing Cytori’s cell therapy technology. Future customers will
include groups beginning new investigator-initiated trials and current
customers expanding existing studies involving more centers and patients and a
related increase in systems and consumables. Reflective of this model is a
stress urinary incontinence pilot study that was approved to begin in May 2011
at Nagoya University. The University was recently awarded a ¥500 million
(approximately $5 million) grant from the Ministry of Health, Labour and
Welfare (MHLW) to fund a multi-center trial that we believe could lead to
approval and reimbursement for Cytori’s cell therapy for that indication.

In 2012, Cytori expanded its CE Mark to include treatment of ischemic tissue
and recently (February 2013) received certification of its Intravase® product
specifically for the safe infusion of ADRCs into the intravascular system.
These expanded certifications enable commercial sales of Celution® for
ischemic tissue and vascular delivery. The ongoing commercial launch will
target ADVANCE centers as well as other select hospitals in Europe and other
regions that recognize the CE Mark. Further claims expansion and reimbursement
is expected upon completion of ATHENA, a subsequent U.S. pivotal study and
further clinical experience, including registries, in key countries.

Upcoming Milestones

Cytori’s core milestones for the next 12 months include the following:

  * Complete enrollment in the ATHENA trial in mid-summer; six month data in
    the first half of 2014
  * Achieve proof-of-concept under the first option of the BARDA contract,
    which will qualify Cytori for up to $56 million in additional development
    funding
  * Publish the 18 month outcomes from the PRECISE European refractory heart
    failure trial
  * Continue to strengthen the Company’s patent position
  * Increase product and contract revenue by at least 65% (at least $15
    million) in 2013

Management Conference Call Webcast and Shareholder Letter Information

Cytori will host a management conference call at 5:00 p.m. Eastern Time today
to further discuss the company’s progress. The webcast will be available live
and by replay two hours after the call and may be accessed under “Webcasts” in
the Investor Relations section of Cytori’s website. If you are unable to
access the webcast, you may dial in to the call at +1-877-402-3914, Conference
ID: 11509895.

About Cytori

Cytori Therapeutics is developing cell therapies based on autologous
adipose-derived regenerative cells (ADRCs) to treat cardiovascular disease and
other medical conditions. Our scientific data suggest ADRCs improve blood
flow, moderate the inflammatory response and keep tissue at risk of dying
alive. As a result, we believe these cells can be applied across multiple
“ischemic” conditions. These therapies are made available to the physician and
patient at the point-of-care by Cytori’s proprietary technologies and
products, including the Celution® System product family. www.cytori.com

Cautionary Statement Regarding Forward-Looking Statements

This press release includes forward-looking statements regarding events,
trends and business prospects, which may affect our future operating results
and financial position, such as our expectation of completion of enrollment of
the ATHENA clinical trial by mid-summer with six month results in the first
half of 2014, our ability to meet the BARDA proof-of-concept milestones by the
first quarter of 2014, the potential for the BARDA contract to represent a
fully funded pathway to U.S. commercialization, our expectation of continuing
demand from investigator initiated trial customers, the ability of the Nagoya
University trial to lead to approval and reimbursement of our cell therapy in
Japan, our ability to pursue additional grant funding and partnership
opportunities, our establishment of a patient registry, our publication of 18
month trial outcomes from the PRECISE trial, our ability to maintain our
sales, general and administrative expenses at current levels, and our revenue
guidance of $15 million in product and contract revenue for the year. Such
statements are subject to risks and uncertainties that could cause our actual
results and financial position to differ materially. Some of these risks
include the level of future interest in our products by Japan research
institutions, performance of our Japan distribution network, clinical,
pre-clinical and regulatory uncertainties, such as those associated with the
ATHENA clinical trial and the BARDA proof-of-concept milestones, including
risks in the collection and results of clinical data, final clinical outcomes,
dependence on third party performance, performance and acceptance of our
products in the marketplace, and other risks and uncertainties described under
the “Risk Factors” in Cytori’s Securities and Exchange Commission Filings. We
assume no responsibility to update or revise any forward-looking statements to
reflect events, trends or circumstances after the date they are made.

 
CYTORI THERAPEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
 
                                           As of December 31,
                                           2012               2011
                                                               
Assets
Current assets:
Cash and cash equivalents                  $ 25,717,000       $ 36,922,000
Accounts receivable, net of reserves of
$278,000 and of $474,000 in 2012 and         3,926,000          2,260,000
2011, respectively
Inventories, net                             3,175,000          3,318,000
Other current assets                         1,161,000          837,000       
                                                               
Total current assets                         33,979,000         43,337,000
                                                               
Property and equipment, net                  2,174,000          1,711,000
Restricted cash and cash equivalents         350,000            350,000
Investment in joint venture                  85,000             250,000
Other assets                                 2,740,000          1,772,000
Intangibles, net                             —                  192,000
Goodwill                                     3,922,000          3,922,000     
                                                               
Total assets                               $ 43,250,000       $ 51,534,000    
                                                               
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities:
Accounts payable and accrued expenses      $ 7,411,000        $ 5,334,000
Current portion of long-term obligations     9,784,000          2,487,000
Warrant liability, current                   418,000            —             
                                                               
Total current liabilities                    17,613,000         7,821,000
                                                               
Deferred revenues, related party             638,000            3,520,000
Deferred revenues                            2,635,000          5,244,000
Warrant liability, long-term                 —                  627,000
Option liability                             2,250,000          1,910,000
Long-term deferred rent                      756,000            504,000
Long-term obligations, net of discount,      12,903,000         21,962,000    
less current portion
                                                               
Total liabilities                            36,795,000         41,588,000
                                                               
Commitments and contingencies
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value;
5,000,000 shares authorized; -0- shares      —                  —
issued and outstanding in 2012 and 2011
Common stock, $0.001 par value;
95,000,000 shares authorized; 65,914,050
and 56,594,683 shares issued and             66,000             57,000
outstanding in 2012 and 2011,
respectively
Additional paid-in capital                   281,117,000        252,338,000
Accumulated deficit                          (274,728,000 )     (242,449,000 )
                                                               
Total stockholders’ equity                   6,455,000          9,946,000     
                                                               
Total liabilities and stockholders’        $ 43,250,000       $ 51,534,000    
equity
 

 
CYTORI THERAPEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
                 For the Three Months              For the Twelve Months
                 Ended December 31,                Ended December 31,
                 2012             2011             2012              2011
                                                                      
Product          $ 3,967,000      $ 2,076,000      $ 8,709,000       $ 7,983,000
revenues
                                                                      
Cost of
product            1,412,000        944,000          4,000,000         3,837,000    
revenues
                                                                      
Gross profit       2,555,000        1,132,000        4,709,000         4,146,000    
                                                                      
Development
revenues:
Development,       469,000          761,000          2,882,000         1,992,000
related party
Development        2,529,000        —                2,529,000         —
Government
contract and       360,000          1,000            381,000           21,000       
other
                   3,358,000        762,000          5,792,000         2,013,000    
Operating
expenses:
Research and       4,013,000        1,956,000        13,628,000        10,904,000
development
Sales and          2,081,000        3,000,000        9,488,000         13,560,000
marketing
General and        4,183,000        3,498,000        15,672,000        14,727,000
administrative
Change in fair
value of           (1,453,000 )     (646,000   )     (209,000    )     (4,360,000  )
warrant
liability
Change in fair
value of           (150,000   )     60,000           340,000           740,000      
option
liability
                                                                      
Total
operating          8,674,000        7,868,000        38,919,000        35,571,000   
expenses
                                                                      
Operating loss     (2,761,000 )     (5,974,000 )     (28,418,000 )     (29,412,000 )
                                                                      
Other income
(expense):
Interest           1,000            3,000            4,000             9,000
income
Interest           (804,000   )     (861,000   )     (3,386,000  )     (2,784,000  )
expense
Other income       (223,000   )     (18,000    )     (314,000    )     (55,000     )
(expense), net
Equity loss
from               (36,000    )     (56,000    )     (165,000    )     (209,000    )
investment in
joint venture
                                                                      
Total other
income             (1,062,000 )     (932,000   )     (3,861,000  )     (3,039,000  )
(expense)
                                                                      
Net loss         $ (3,823,000 )   $ (6,906,000 )   $ (32,279,000 )   $ (32,451,000 )
                                                                      
Basic and
diluted net      $ (0.06      )   $ (0.12      )   $ (0.55       )   $ (0.61       )
loss per
common share
                                                                      
Basic and
diluted
weighted           59,581,607       55,664,792       58,679,687        53,504,030   
average common
shares
 

 
CYTORI THERAPEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
                                             For the Years Ended December 31,
                                             2012              2011
Cash flows from operating activities:
Net loss                                     $ (32,279,000 )   $ (32,451,000 )
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization                  933,000           855,000
Amortization of deferred financing costs       930,000           711,000
and debt discount
Increase in allowance for doubtful             144,000           483,000
accounts
Change in fair value of warrants               (209,000    )     (4,360,000  )
Change in fair value of option liability       340,000           740,000
Stock-based compensation                       3,904,000         3,316,000
Equity loss from investment in joint           165,000           209,000
venture
Increases (decreases) in cash caused by
changes in operating assets and
liabilities:
Accounts receivable                            (1,810,000  )     (670,000    )
Inventories                                    143,000           60,000
Other current assets                           (324,000    )     (3,000      )
Other assets                                   (74,000     )     (1,206,000  )
Accounts payable and accrued expenses          1,183,000         (1,436,000  )
Deferred revenues, related party               (2,882,000  )     (1,992,000  )
Deferred revenues                              (2,609,000  )     315,000
Long-term deferred rent                        252,000           106,000      
                                                                
Net cash used in operating activities          (32,193,000 )     (35,323,000 )
                                                                
Cash flows from investing activities:
Purchases of property and equipment            (1,204,000  )     (560,000    )
                                                                
Net cash used in investing activities          (1,204,000  )     (560,000    )
                                                                
Cash flows from financing activities:
Principal payments on long-term                (2,692,000  )     (4,529,000  )
obligations
Proceeds from long-term obligations            —                 9,444,000
Debt issuance costs and loan fees              —                 (719,000    )
Proceeds from exercise of employee stock
options and warrants and stock purchase        1,413,000         2,849,000
plan
Proceeds from sale of common stock             24,953,000        13,286,000
Costs from sale of common stock                (1,482,000  )     (194,000    )
                                                                
Net cash provided by financing activities      22,192,000        20,137,000   
                                                                
Net (decrease) increase in cash and cash       (11,205,000 )     (15,746,000 )
equivalents
                                                                
Cash and cash equivalents at beginning of      36,922,000        52,668,000   
year
                                                                
Cash and cash equivalents at end of year     $ 25,717,000      $ 36,922,000   
 

Contact:

Cytori Therapeutics
Investors
Tom Baker, +1-858-875-5258
tbaker@cytori.com
or
Media
Megan McCormick, +1-858-875-5279
mmccormick@cytori.com
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