Cytori Reports First Half and 2nd Quarter 2013 Business and Financial Results

  Cytori Reports First Half and 2nd Quarter 2013 Business and Financial

Business Wire

SAN DIEGO -- August 8, 2013

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

Total revenue for the six months and quarter ended June 30, 2013 were $6.0
million and $2.3 million, respectively. Net loss for the six months and
quarter ended June 30, 2013 were $10.9 million and $3.2 million, respectively.

Milestone Highlights

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

  *Received FDA approval to expand the ATHENA trial of Cytori’s cell therapy
    for chronic ischemic heart failure
  *Completed first BARDA objective; substantial progress toward the second
    objective; final objective underway and is on schedule
  *Entered $15 million agreement to divest Puregraft®; Out-licensed Celution®
    for Alopecia
  *Restructured term loan resulting in net proceeds of approximately $8
    million and deferral of principal payments through June 2014
  *Establishing a nationwide Japanese distribution network for Class 1
    Celution® System sales
  *Received approval for the Celution® System in Australia for processing and
    delivering adipose-derived regenerative cells as well as commercial
    registration in New Zealand
  *Entered into an agreement to acquire the remaining interest in the
    Olympus-Cytori Joint Venture, including all manufacturing rights for the
    Celution® System
  *Awarded three patents, including a methods patent for using
    adipose-derived regenerative cell therapy for treating renal disease and
    licensed exclusive rights to a patent related to adipose-derived
    regenerative cells for the treatment of autoimmune diseases
  *Successfully recruited Dr. Steven Kesten as Executive Vice President and
    Chief Medical Officer

“During the first six months we have made progress across all of our core
business objectives and further sharpened our corporate focus,” said
Christopher J. Calhoun, Cytori’s Chief Executive Officer. “We continued
patient enrollment in the ATHENA trial and received FDA approval to expand the
scope of the ATHENA clinical program, with the initial data to be available in
the first half of 2014. We remain on track to qualify for the next phase of
our BARDA contract worth up to $56 million in development funding. Our
commercial team continued to broaden market access, most recently reflected by
the Australian approval and commercial registration in New Zealand, with an
initial goal of selling to centers performing investigator-sponsored
translational research.”

Financial Performance

Total revenues for the first six months of 2013 were $6.0 million compared to
$5.9 million for the first six months of 2012. Total revenue for the first six
months of 2013 included $2.8 million in product sales and $1.4 million in
BARDA contract revenue. Total product and BARDA contract revenues for the
second quarter of 2013 were $2.3 million, compared to $1.9 million in the
second quarter of 2012. Total revenue in the second quarter of 2012 included
$2.4 million in non cash development revenues.

Gross profit for the first six months and quarter ended June 30, 2013 were
$1.4 million and $0.8 million respectively compared to $1.5 million and $0.9
million respectively for the first six months and quarter ended June 30, 2012.
Gross margins are expected to increase in the second half of 2013 as increased
revenues are realized.

Research and development expenses for the first six months and quarter ended
June 30, 2013 were $7.9 million and $4.2 million respectively compared to $6.1
million and $3.2 million respectively for the first six months and quarter
ended June 30, 2012. The planned increase in research and development expenses
is predominately related to reimbursed services performed under the BARDA
contract, in addition to increased clinical trial costs. Sales, general and
administrative expenses for the first six months and quarter ended June 30,
2013 were $12.6 million and $6.5 million respectively compared to $12.7
million and $6.4 million respectively for the first six months and quarter
ended June 30, 2012. During the second quarter of 2013, as a result of Cytori
acquiring Olympus Corporation’s 50% interest in the Olympus-Cytori Joint
Venture, Cytori realized a non-cash gain of $4.9 million due to the
independently assessed valuation of its previously held equity interest. Also,
as a result of the acquisition, Cytori recorded a $2.5 million non-cash gain
resulting from the elimination of the option liability between Olympus
Corporation and Cytori.

Net loss for the first six months of 2013 was $10.9 million, or ($0.16) per
share, compared to $17.2 million, or ($0.30) per share, in the first six
months of 2012. Net loss for the second quarter of 2013 was $3.2 million, or
($0.05) per share, compared to $7.9 million, or ($0.13) per share, in the
second quarter of 2012.

Cytori ended the second quarter of 2013 with $13.6 million of cash and cash
equivalents and $2.9 million in accounts receivable. Subsequent to the end of
the quarter Cytori received $5 million from the upfront payment associated
with the divestiture of the Puregraft® product line.

“For the first half of 2013, we increased R&D expenses, as planned, to support
ATHENA and perform reimbursed services under the BARDA contract and contained
SG&A expenses,” said Mark E. Saad, Chief Financial Officer of Cytori. “As
previously guided, we anticipate product sales to be weighted to the second
half of 2013 as we realize the impact from recent regulatory approvals in
Japan, Europe and now Australia. As a result of the divestiture of Puregraft®,
we are adjusting our 2013 revenue target to $14 million in combined product
and cash contract revenue.”

Cardiovascular Disease Pipeline


ATHENA is a prospective, multi-center, double-blind, randomized and
placebo-controlled clinical trial investigating Cytori’s cell therapy in 45
patients with chronic ischemic heart failure. At present, 16 patients have
been treated. The majority of patients have been treated at two trial centers
which began treating patients in late 2012. Two new trial centers began
enrolling in the second quarter and a third began enrolling in July. Three
additional trial centers are expected to begin enrolling patients in
September. In July, the FDA approved expanding the ATHENA trial from six trial
centers to a total of eight centers. Based on the average enrollment rates of
the active centers to date, the anticipated average enrollment rate going
forward is one patient per-month per-center. At this rate, full enrollment
should be achieved in the fourth quarter of 2013. Top-line 6-month data
remains on schedule for the first half of 2014.

Cytori has also received approval from the FDA to expand the ATHENA program to
include a higher cell dose (0.8MM cells/kg vs. 0.4MM cells/kg). This trial,
ATHENA II, which will run in parallel to ATHENA, is a prospective,
multi-center double-blind 45-patient trial with 2:1 randomization of cells to
placebo. We expect the trial to begin enrolling in the fourth quarter at up to
10 centers, immediately following the full enrollment of ATHENA. Athena II is
important to determining the optimal cell dose for heart failure. In addition
to strengthening the clinical data on the utility of ADRCs for heart failure,
Cytori believes having this additional data on a second dose will maximize the
chance of a successful pivotal trial. Full enrollment of ATHENA II is
anticipated during the first half of 2014 and is not expected to delay the
initiation of the U.S. pivotal trial planned for 2015.

Cytori will meet with the FDA to receive input and guidance on the pivotal
trial requirements including the target patient population, target clinical
indication and defining the primary and secondary trial end-points. This is an
important next step in completing the Company’s cardiovascular roadmap toward
achieving market access, which includes FDA approval for cardiovascular
indications, reimbursement and will support establishing a strategic

“Based on our current rate of enrollment with five active centers and the
prospect of all eight trial centers recruiting and treating patients within
the next month, we are confident we will meet our goal for completing
enrollment during the fourth quarter,” said Steven Kesten, M.D., Chief Medical
Officer for Cytori. “Our plan to have top-line six-month data from the ATHENA
trial available in the first half of 2014 remains unchanged. The addition of a
higher dose cohort will result in more comprehensive data while not slowing
the timeline to initiate a U.S. pivotal trial.”


ADVANCE is the Company’s European clinical trial for acute myocardial
infarction (heart attack). To date, the trial has enrolled 23 patients. As
part of a comprehensive evaluation of the Company’s global cardiovascular
strategy, resource utilization and development priorities, Cytori has decided
to discontinue enrollment in the ADVANCE trial once it has achieved the 2013
target enrollment goal of 25 patients or on September 30, 2013. All evidence
to date supports a strong safety profile and the patients enrolled in the
trial will continue to be followed according to the protocol. The outcomes
will be fully analyzed in conjunction with the existing safety and feasibility
data from the APOLLO acute myocardial infarction trial.

The decision to conclude ADVANCE is based on several considerations. Each
country in Europe interprets and implements GMP requirements in a unique
fashion. Satisfying these disparate and evolving requirements is proving to be
more challenging and costly than anticipated. Furthermore, certain European
regulatory authorities and institutional review boards have rendered mixed
opinions on approving the trial with a placebo control arm, a key factor in
showing scientifically valid efficacy in this trial. In short, the overall
fluidity and lack of standardization in the regulatory environment in Europe
around device-based cell therapy in clinical trials will continue to make it
increasingly difficult to forecast and manage associated costs and resources.
Management will focus internal and financial resources on the highest clinical
development priority, which is the expanded U.S. ATHENA trial.

BARDA Contract

Cytori’s contract awarded by BARDA, a division of the U.S. Department of
Health and Human Services, may 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 targeted soft tissue injuries. The
initial phase of the contract includes approximately $5 million in research
funding to achieve three principal objectives. Attaining all three objectives
qualifies Cytori for a second phase of the contract worth up to $56 million in
additional funding toward product development and clinical trials.

Cytori has submitted a final report demonstrating completion of the first
objective, which was validation of the performance of a next-generation,
miniaturized Celution® System. During the second quarter, Cytori shared data
with BARDA demonstrating substantial progress on the second objective, which
is confirmation that a therapeutic cell population may be obtained from
patients with severe full thickness burn injuries. Cytori plans to submit a
report demonstrating achievement of this objective this quarter. Lastly, the
Company is making significant progress and remains on schedule toward the
third objective, which is to demonstrate efficacy in a preclinical study,
which is underway.

Cytori is on schedule to hold an In-Process Review meeting with BARDA and
other stakeholders (the key step to progressing to the second phase of the
contract) detailing the fulfillment of the three objectives in the first
quarter of 2014.

Commercial Business

Cytori’s commercial business has been focused primarily on selling Celution®
Systems and consumables to researchers performing investigator-initiated and
sponsored studies. This supports the Company’s strategy of facilitating the
discovery of additional therapeutic applications for its cell therapy. For the
second half of 2013, it is expected that product revenue growth will be driven
by expanded research and general clinical use based on recent regulatory
approvals including Class I registration in Japan, expanded Celution® System
CE Mark clearance in Europe for intravascular delivery and tissue ischemia and
approvals and country registrations in other regions throughout the world.

Subsequent to the end of the second quarter, Cytori received notice from the
Australian Therapeutic Goods Administration (TGA) that the Celution® System
was approved for commercial use through inclusion on the Australian Registry
of Therapeutic Goods. This approval will allow physicians to utilize Celution
across a variety of indications for patients in Australia. Additionally,
Cytori has registered the Celution® System for commercial sale in New Zealand.

Also following the end of the second quarter, Cytori entered agreements with
Bimini Technologies to divest the Puregraft® line of products in a $15 million
agreement, including a $5 million up-front cash payment and up to an
additional $10 million in commercial milestone payments. In addition, Bimini
Technologies was granted a license for exclusive worldwide rights to develop
and sell the Celution® System for Alopecia (hair loss) in exchange for a
perpetual royalty on sales.

Upcoming Milestones

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

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

Management Conference Call Webcast

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: 25841269.

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 the fourth quarter of 2013 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, our
expectation of product revenue growth based on recent regulatory approvals
including Class I registration in Japan, expanded Celution® System CE Mark
clearance in Europe for intravascular delivery and tissue ischemia, and
approvals and country registrations in other regions throughout the world, our
ability to meet our product and contract revenue objectives, and our
publication of 18-month trial outcomes from the PRECISE trial. 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

                                  As of June 30, 2013    As of December 31,
Current assets:
Cash and cash equivalents         $    13,621,000         $   25,717,000
Accounts receivable, net of
reserves of $485,000 and of            2,897,000              3,926,000
$278,000 in 2013 and 2012,
Inventories, net                       4,012,000              3,175,000
Other current assets                  1,189,000             1,161,000
Total current assets                   21,719,000             33,979,000
Property and equipment, net of
accumulated depreciation of            2,043,000              2,174,000
$8,604,000 and of $8,609,000 in
2013 and 2012, respectively
Restricted cash and cash               350,000                350,000
Investment in joint venture            —                      85,000
Other assets                           2,448,000              2,740,000
Intangibles, net                       9,282,000              —
Goodwill                              3,922,000             3,922,000
Total assets                      $    39,764,000         $   43,250,000
Liabilities and Stockholders’
Current liabilities:
Accounts payable and accrued      $    6,252,000          $   7,411,000
Current portion of long-term           21,000                 9,784,000
obligations, net of discount
Termination fee obligation             800,000                —
Current portion of Joint               769,000                —
Venture purchase obligation
Warrant liability                     —                     418,000
Total current liabilities              7,842,000              17,613,000
Deferred revenues, related             —                      638,000
Deferred revenues                      235,000                2,635,000
Option liability                       —                      2,250,000
Long-term deferred rent and            784,000                756,000
Joint Venture purchase
obligation, less current               3,921,000              —
Long-term obligations, net of         25,719,000            12,903,000
discount, less current portion
Total liabilities                      38,501,000             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
Common stock, $0.001 par value;
95,000,000 shares authorized;
67,235,591 and 65,914,050              67,000                 66,000
shares issued and outstanding
in 2013 and 2012, respectively
Additional paid-in capital             286,835,000            281,117,000
Accumulated other comprehensive        (34,000        )       —
Accumulated deficit                   (285,605,000   )      (274,728,000   )
Total stockholders’ equity            1,263,000             6,455,000
Total liabilities and             $    39,764,000         $   43,250,000
stockholders’ equity

                 For the Three Months              For the Six Months

                 Ended June 30,                    Ended June 30,
                  2013           2012            2013            2012
Product          $ 1,408,000      $ 1,947,000      $ 2,800,000       $ 3,427,000
Cost of
product           608,000         1,032,000       1,365,000        1,885,000
Gross profit      800,000         915,000         1,435,000        1,542,000
Development,       —                2,413,000        638,000           2,413,000
related party
Development        —                —                1,179,000         —
contracts and     859,000         16,000          1,408,000        19,000
                  859,000         2,429,000       3,225,000        2,432,000
Research and       4,150,000        3,224,000        7,869,000         6,060,000
Sales and          2,410,000        2,581,000        4,667,000         4,956,000
General and        4,046,000        3,788,000        7,892,000         7,712,000
Change in fair
value of           (84,000    )     251,000          (418,000    )     381,000
Change in fair
value of          (2,500,000 )    460,000         (2,250,000  )    190,000
operating         8,022,000       10,304,000      17,760,000       19,299,000
Operating loss    (6,363,000 )    (6,960,000 )    (13,100,000 )    (15,325,000 )
Other income
Loss on asset      (257,000   )     —                (257,000    )     —
Loss on debt       (708,000   )     —                (708,000    )     —
Interest           1,000            1,000            1,000             2,000
Interest           (652,000   )     (860,000   )     (1,361,000  )     (1,726,000  )
Other income       (124,000   )     (27,000    )     (296,000    )     (73,000     )
(expense), net
Gain on
held equity        4,892,000        —                4,892,000         —
interest in
Joint Venture
Equity loss
from              —               (37,000    )    (48,000     )    (86,000     )
investment in
joint venture
Total other
income            3,152,000       (923,000   )    2,223,000        (1,883,000  )
Net loss         $ (3,211,000 )   $ (7,883,000 )   $ (10,877,000 )   $ (17,208,000 )
income (loss)
– foreign         76,000          —               (34,000     )    —
comprehensive    $ (3,135,000 )   $ (7,883,000 )   $ (10,911,000 )   $ (17,208,000 )
Basic and
diluted net      $ (0.05      )   $ (0.13      )   $ (0.16       )   $ (0.30       )
loss per
common share
Basic and
weighted          67,200,588      58,676,092      67,096,348       58,080,541
average common

                                           For the Six Months Ended June 30,
                                           2013               2012
Cash flows from operating activities:
Net loss                                   $  (10,877,000  )   $ (17,208,000 )
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization                 660,000            453,000
Amortization of deferred financing costs      330,000            470,000
and debt discount
Joint Venture acquisition obligation          51,000             —
Provision for doubtful accounts               188,000            19,000
Change in fair value of warrants              (418,000     )     381,000
Change in fair value of option                (2,250,000   )     190,000
Share-based compensation expense              1,838,000          1,977,000
Equity loss from investment in joint          48,000             86,000
Loss on asset disposal                        257,000            —
Gain on previously held equity interest       (4,892,000   )     —
in Joint Venture
Loss on debt extinguishment                   708,000            —
Increases (decreases) in cash caused by
changes in operating assets and
Accounts receivable                           862,000            258,000
Inventories                                   (816,000     )     210,000
Other current assets                          (27,000      )     (278,000    )
Other assets                                  (587,000     )     17,000
Accounts payable and accrued expenses         (279,000     )     (268,000    )
Deferred revenues, related party              (638,000     )     (2,413,000  )
Deferred revenues                             (1,200,000   )     52,000
Long-term deferred rent                      28,000            96,000
Net cash used in operating activities        (17,014,000  )    (15,958,000 )
Cash flows from investing activities:
Purchases of property and equipment           (432,000     )     (886,000    )
License agreement termination fee             (400,000     )     —
Cash acquired in purchase of Joint           5,000             —
Net cash used in investing activities        (827,000     )    (886,000    )
Cash flows from financing activities:
Principal payments on long-term               (22,292,000  )     (140,000    )
Proceeds from long-term obligations           27,000,000         —
Debt issuance costs and loan fees             (1,744,000   )     —
Payments toward purchase of Joint             (70,000      )     —
Proceeds from exercise of employee stock
options and warrants and stock purchase       115,000            951,000
Proceeds from sale of common stock            3,001,000          4,946,000
Costs from sale of common stock              (184,000     )    (64,000     )
Net cash provided by financing               5,826,000         5,693,000
Effect of exchange rate changes on cash      (81,000      )    —
and cash equivalents
Net decrease in cash and cash                 (12,096,000  )     (11,151,000 )
Cash and cash equivalents at beginning       25,717,000        36,922,000
of period
Cash and cash equivalents at end of        $  13,621,000       $ 25,771,000


Cytori Therapeutics
Tom Baker
Megan McCormick
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