Cytori Reports First Quarter 2013 Business and Financial Results

  Cytori Reports First Quarter 2013 Business and Financial Results

Business Wire

SAN DIEGO -- May 09, 2013

Cytori Therapeutics (NASDAQ: CYTX) today reports its first quarter 2013
financial results and provides updates on clinical development and
commercialization activities.

For the first quarter of 2013, Cytori achieved $3.8 million in total revenue
including $1.9 million in combined product and government contract revenue.
Cytori reiterates guidance for the year of $15 million of product and contract

Milestone Highlights

Cytori’s year-to-date accomplishments include the following:

  *Entered into an agreement to acquire the remaining interest in the
    Olympus-Cytori Joint Venture, including all manufacturing rights for the
    Celution® System
  *Continued enrollment in the ATHENA trial of Cytori’s cell therapy for
    chronic ischemic heart failure; goal for completion of enrollment remains
    summer of this year
  *Continued enrollment in the ADVANCE European heart attack trial; the
    current goal for enrollment is 25 patients by year-end 2013
  *Opened new tissue ischemia and intravascular markets for the Celution®
    System with expanded CE Mark claims for these respective indications
  *Submitted report to BARDA containing data demonstrating achievement of the
    first of three objectives under the BARDA contract by validating the core
    design elements of the next-generation Celution® System; achievement of
    the other objectives is anticipated on or ahead of schedule
  *On track to have a nationwide Japanese distribution network
  *Awarded two patents, including a methods patent for using adipose-derived
    stem and regenerative cell therapy for treating renal disease
  *Recruited Dr. Steven Kesten as Executive Vice President and Chief Medical

“Year-to-date, we have continued to execute on our 2013 priorities,” said
Christopher J. Calhoun, Cytori’s Chief Executive Officer. “Completion of
enrollment in ATHENA, successful execution of our BARDA contract deliverables,
and growth in total revenues remain our highest priorities.”

Financial Performance

Total revenues for the first quarter of 2013 were $3.8 million, compared to
$1.5 million in the first quarter of 2012. Product and government contract
revenues for the first quarter of 2013 were $1.9 million, compared to $1.5
million for the first quarter of 2012. Government contract revenues for the
first quarter of 2013 were $0.5 million related almost entirely to work
performed under the BARDA contract, for which there were no comparable
revenues recognized in the first quarter of 2012. Additionally, $1.8 million
in revenue was recognized for services performed in relation to the Joint
Venture with Olympus and the Senko distribution agreement. During the first
quarter of 2013, Cytori terminated the Senko distribution agreement and
reacquired from Senko the rights to SurgiWrap in Japan.

Gross profit was $0.6 million, or 46%, in the first quarter of 2013 compared
to $0.6 million, or 42%, in the first quarter of 2012. Gross margins are
expected to increase substantially in the second half of 2013 as increased
second half revenues are realized.

Research and development expenses were $3.7 million in the first quarter of
2013 compared to $2.8 million in the first quarter of 2012. The planned
increase in research and development expenses is mostly related to services
performed under the BARDA contract, in addition to clinical trial costs.
Sales, general and administrative expenses were $6.1 million for the first
quarter of 2013 compared to $6.3 million in the first quarter of 2012.

Net loss was $7.7 million, or ($0.11) per share, for the first quarter of 2013
compared to $9.3 million, or ($0.16) per share, in the first quarter of 2012.
Cytori ended the first quarter of 2013 with $16.4 million of cash and cash
equivalents and $3.0 million in accounts receivable. Further, Cytori reduced
near and long-term liabilities in the first quarter by approximately $5.8
million. A substantial portion of Cytori’s recent and projected cash needs
relate to principal payments on its existing term loan. The Company is in
discussions with its lender group to extend the term of the loan and defer
principal payments to coincide with anticipated product sales, government
contract payments, and other potential cash milestones.

“For the first quarter, R&D expenses increased over last year as we invested
in ATHENA and performed services under the BARDA contract which were more than
offset in contract revenue,” said Mark E. Saad, Chief Financial Officer of
Cytori. “We continued to control SG&A expenses, which remained flat as
projected. Additionally, we reaffirm our $15 million combined product and
government contract revenue guidance for 2013, which we previously projected
will be weighted toward the second half of 2013 as we realize the effects from
recent regulatory approvals in Japan and Europe, anticipated new country
approvals and continued work under the BARDA contract.”

Cardiovascular Disease Pipeline

The ATHENA trial evaluating Cytori’s cell therapy as a treatment for chronic
ischemic heart failure is the Company’s primary clinical focus in 2013.
Enrollment continued during the first quarter of 2013 and additional sites
went live and began screening and treating patients. The Company’s goal for
completion of enrollment is this summer with six month outcomes reported in
the first half of 2014. Additionally, the ADVANCE European pivotal trial for
acute myocardial infarction (heart attacks) is actively enrolling patients and
ahead of schedule to treat the budgeted 25 patients by the end of the year.

BARDA Contract

Cytori’s contract with BARDA, a division of the U.S. Department of Health and
Human Services, could provide up to $106 million to fully fund the regulatory
and clinical trials required by FDA to gain approval for Cytori’s Celution®
System for the treatment of soft tissue injuries. This would be achieved
through a series of contract options exercised at BARDA’s discretion upon
achievement of specifieddevelopment milestones. Upon FDA approval, or in
certain circumstances as deemed appropriate by BARDA prior to approval, the
U.S. government has the option to purchase Celution® Systems and consumables
as a medical countermeasure for national preparedness. The total amount that
may be awarded under the contract is $106 million, not including the value of
any potential purchases. ShouldFDA approval be received, the Company has the
right to commercialize its cell therapy in accordance with the claims allowed
by the FDA.

Cytori is currently in the proof-of-concept phase of this contract. As
specified in the contract, this phase funds three objectives thatif
successful could trigger up to $56 million in the first set of contract
options. The three objectives are 1) to validate performance of core design
elements incorporated within Cytori’s next-generation Celution® System; 2) to
demonstrate that Cytori’s therapeutic cell population can be obtained from
patients with burn injury; and 3) to show efficacy of Cytori’s cell therapy in
a novel preclinical model of thermal burn with concomitant radiation exposure.

In the first quarter of 2013, Cytori made considerable progress on contract
deliverables related to all three objectives. In particular, Cytori has
recently submitted data to BARDA that the Company believes demonstrates
accomplishment of the contract milestone pertaining to feasibilityofthe
next-generation Celution® System. This has been achievedahead of schedule.
Significant progress is also being made on the two remaining milestones, which
Cytori expects to achieve on or ahead of schedule.Additionally, and as
previously stated, Cytori recognized $0.5 million in contract revenue toward
the achievement of contract deliverables in the first quarter of
2013.Consistent with previous statements, Cytori continues to expect to
achieve all three proof-of-concept milestones as required under the contract
by the end of the first quarter of 2014.

Commercial Business

Cytori’s product revenues were more heavily weighted by orders from Japan in
the first quarter of 2013. For the remainder of 2013, it is expected that
product revenue growth will be driven by expanded research and general
clinical use based on recent regulatory approvals in Japan and Europe. This is
driven in Japan based on the recent Class I approval and in Europe by the
Celution® System CE Mark for intravascular delivery and tissue ischemia.

Cytori is seeing growing interest in the number of investigator-initiated
studies, the number of multi-center studies and the number of patients
anticipated to be treated in those trials. Financially, these trials are
funded primarily by government grants or funds from specific healthcare
institutions. Recently, a ¥500 million (approximately $5 million) grant from
the Ministry of Health, Labour and Welfare (MHLW) in Japan was issued to
support a multi-center trial that could lead to approval and reimbursement for
Cytori’s cell therapy for stress urinary incontinence. In Europe, Cytori has
been informed by an investigator in France that an ongoing pilot study in
patients with hand complications from scleroderma is being considered for a
multi-center trial based on encouraging preliminary results.

Finally, the Puregraft® product line continues its positive sales trends.
Record Puregraft® revenues were reported with growth in both sales and units
shipped in sequential quarters as well as quarter over year ago quarter. This
trend reflects the increasing demand for this product as well as the overall
growth in fat grafting amongst plastic and reconstructive surgeons. Cytori
expects to accelerate Puregraft® sales with the launch of an important product
line extension later this year, targeting a significant market for small
volume fat grafting procedures.

Olympus Joint Venture

Cytori has finalized an agreement with Olympus Corporation to acquire all of
Olympus’ rights to the Olympus-Cytori Joint Venture, including Celution®
product manufacturing and patent rights and eliminating any royalty
obligations to the Joint Venture. Regaining full control of manufacturing
rights provides Cytori with greater flexibility on the manufacturing process
and associated costs, enables higher margins, and speeds the transition to the
smaller next-generation system. As part of the agreement, the Olympus-Cytori
Joint Venture will return all rights to Cytori at closing in exchange for
alternative payment options including: $4.5 million within one year or $6
million within two years.

“In 2011, following unforeseen disruptions to Olympus’ business and
corporative governance, we took immediate and proactive measures to protect
our business interests associated with the Joint Venture, which ultimately
resulted in our acquisition of Olympus’ interest in the Celution® technology
and the JV,” said Mr. Calhoun. “We are grateful for the strategic,
technological and financial support Olympus has provided Cytori over the
years. In partnership with them, we were able to enhance the performance of
the Celution® technology, improve our operational capability and increase our
presence in Japan. Based on our internal capabilities to miniaturize and
directly manufacture the next-generation system and the importance of
protecting and controlling our supply chain and related economics, we believe
this action is in the best near and long-term interest of our business.”

Upcoming Milestones

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

  *Complete enrollment in the ATHENA trial
  *Achieve proof-of-concept milestones in the BARDA contract and qualify
    Cytori for up to $56 million in additional development funding
  *Publish the 18 month outcomes from the PRECISE European chronic ischemic
    heart failure trial
  *Continue to strengthen the Company’s patent position
  *Generate product and contract revenue of $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: 51847937.

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.

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 an
investigator-initiated study to lead to MHLW approval and reimbursement of our
cell therapy in Japan, our ability to pursue additional grant funding and
partnership opportunities, 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 our annual and
quarterly Securities and Exchange Commission Filings on Forms 10-K and 10-Q.
We assume no responsibility to update or revise any forward-looking statements
to reflect events, trends or circumstances after the date they are made.


                                          As of March 31,   As of December
                                           2013               31, 2012
Current assets:
Cash and cash equivalents                  $ 16,404,000       $ 25,717,000
Accounts receivable, net of reserves of
$374,000 and of $278,000 in 2013 and         2,961,000          3,926,000
2012, respectively
Inventories, net                             3,646,000          3,175,000
Other current assets                        1,189,000        1,161,000    
Total current assets                         24,200,000         33,979,000
Property and equipment, net                  2,049,000          2,174,000
Restricted cash and cash equivalents         350,000            350,000
Investment in joint venture                  37,000             85,000
Other assets                                 2,808,000          2,740,000
Goodwill                                    3,922,000        3,922,000    
Total assets                               $ 33,366,000      $ 43,250,000   
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses      $ 6,000,000        $ 7,411,000
Current portion of long-term                 9,800,000          9,784,000
obligations, net of discount
Current portion of termination fee           800,000            —
Warrant liability                           84,000           418,000      
Total current liabilities                    16,684,000         17,613,000
Deferred revenues, related party             —                  638,000
Deferred revenues                            232,000            2,635,000
Option liability                             2,500,000          2,250,000
Long-term deferred rent and other            988,000            756,000
Long-term obligations, net of discount,     10,594,000       12,903,000   
less current portion
Total liabilities                            30,998,000         36,795,000
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value;
5,000,000 shares authorized; -0- shares      —                  —
issued and outstanding in 2013 and 2012
Common stock, $0.001 par value;
95,000,000 shares authorized; 67,173,050
and 65,914,050 shares issued and             67,000             66,000
outstanding in 2013 and 2012,
Additional paid-in capital                   284,806,000        281,117,000
Accumulated other comprehensive loss         (110,000     )     —
Accumulated deficit                         (282,395,000 )    (274,728,000 )
Total stockholders’ equity                  2,368,000        6,455,000    
Total liabilities and stockholders’        $ 33,366,000      $ 43,250,000   


                                              For the Three Months
                                               Ended March 31,
                                               2013            2012
Product revenues                               $ 1,392,000      $ 1,481,000
Cost of product revenues                        756,000        853,000    
Gross profit                                    636,000        628,000    
Development revenues:
Development, related party                       638,000          —
Development revenue                              1,179,000        —
Government contracts and other                  549,000        3,000      
                                                2,366,000      3,000      
Operating expenses:
Research and development                         3,720,000        2,836,000
Sales and marketing                              2,257,000        2,376,000
General and administrative                       3,846,000        3,924,000
Change in fair value of warrant liability        (334,000   )     130,000
Change in fair value of option liability        250,000        (270,000   )
Total operating expenses                        9,739,000      8,996,000  
Operating loss                                  (6,737,000 )    (8,365,000 )
Other income (expense):
Interest income                                  —                2,000
Interest expense                                 (709,000   )     (865,000   )
Other expense, net                               (173,000   )     (47,000    )
Equity loss from investment in joint venture    (48,000    )    (50,000    )
Total other expense                             (930,000   )    (960,000   )
Net loss                                        (7,667,000 )    (9,325,000 )
Other comprehensive loss – foreign currency     (110,000   )    —          
translation adjustments
Comprehensive loss                             $ (7,777,000 )   $ (9,325,000 )
Basic and diluted net loss per common share    $ (0.11      )   $ (0.16      )
Basic and diluted weighted average common       66,990,950     57,484,990 


                                         For the Three Months Ended March 31,
                                          2013                2012
Cash flows from operating activities:
Net loss                                  $  (7,667,000  )     $  (9,325,000 )
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization                200,000              220,000
Amortization of deferred financing           192,000              237,000
costs and debt discount
Increase (decrease) in allowance for         87,000               (24,000    )
doubtful accounts
Change in fair value of warrant              (334,000    )        130,000
Change in fair value of option               250,000              (270,000   )
Stock-based compensation                     873,000              942,000
Equity loss from investment in joint         48,000               50,000
Increases (decreases) in cash caused by
changes in operating assets and
Accounts receivable                          868,000              859,000
Inventories                                  (477,000    )        (56,000    )
Other current assets                         (28,000     )        (298,000   )
Other assets                                 (974,000    )        (22,000    )
Accounts payable and accrued expenses        (523,000    )        (83,000    )
Deferred revenues, related party             (638,000    )        —
Deferred revenues                            (1,203,000  )        (68,000    )
Long-term deferred rent                     32,000             (6,000     )
Net cash used in operating activities       (9,294,000  )       (7,714,000 )
Cash flows from investing activities:
Purchases of property and equipment          (81,000     )        (25,000    )
License agreement termination fee           (200,000    )       —          
Net cash used in investing activities       (281,000    )       (25,000    )
Cash flows from financing activities:
Principal payments on long-term              (2,485,000  )        (71,000    )
Proceeds from exercise of employee           —                    947,000
stock options and warrants
Proceeds from sale of common stock           3,001,000            4,396,000
Costs from sale of common stock             (184,000    )       (56,000    )
Net cash provided by financing              332,000            5,216,000  
Effect of exchange rate changes on cash     (70,000     )       —          
and cash equivalents
Net decrease in cash and cash                (9,313,000  )        (2,523,000 )
Cash and cash equivalents at beginning      25,717,000         36,922,000 
of period
Cash and cash equivalents at end of       $  16,404,000       $  34,399,000 


Cytori Therapeutics
Tom Baker, +1-858-875-5258
Megan McCormick, +1-858-875-5279