Cytori Reports Nine Month and Third Quarter 2013 Business and Financial Results

  Cytori Reports Nine Month and Third Quarter 2013 Business and Financial
  Results

Business Wire

SAN DIEGO -- November 7, 2013

Cytori Therapeutics (NASDAQ: CYTX) today reports its nine month and third
quarter 2013 financial results and provides updates on clinical development,
commercialization and corporate development activities.

Total revenue for the nine months and quarter ended September 30, 2013 were
$8.7 million and $2.7 million, respectively. Net loss for the nine months and
quarter ended September 30, 2013 was $16.1 million and $5.3 million,
respectively.

Milestone Highlights

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

  *Formed a commercialization partnership for select emerging markets,
    including $24 million in equity, a long term supply agreement with an
    initial $7 million product purchase commitment, and up to $500 million in
    commercial milestones
  *Under the BARDA contract, the Company made significant progress toward the
    achievement of critical preclinical milestones needed to seek up to $56
    million in additional funding
  *Expanded the number of actively recruiting centers in the ATHENA clinical
    trial program to seven and identified additional sites for ATHENA II
  *Received approvals for the Celution® System in Australia and Singapore
  *Awarded seven 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

“The recently signed partnership significantly strengthens our balance sheet,
accelerates the expansion of our international cardiovascular business, and
positions us for future revenue growth,” said Christopher J. Calhoun, Cytori’s
Chief Executive Officer. “Year-to-date, we continued to make progress globally
in our heart failure program and U.S. trials and are close to achieving all
three objectives under the BARDA contract to qualify for the next phase worth
up to $56 million.”

Financial Performance

Total revenues for the first nine months of 2013 were $8.7 million compared to
$7.2 million for the first nine months of 2012. Total product and contract
revenues for the first nine months of 2013 were $6.9 million, which consisted
of $4.4 million in product sales and $2.5 million in contract revenue. Total
product and contract revenues for the first nine months of 2012 were $4.8
million, which consisted of $4.7 million in product sales and negligible
contract revenues. Total product and cash contract revenues for the third
quarter of 2013 were $2.7 million, compared to $1.3 million in the third
quarter of 2012. Based on projected sales in the fourth quarter of 2013,
Cytori reiterates its 2013 revenue objective of $14 million in combined
product and contract revenue.

Gross profit for the first nine months and quarter ended September 30, 2013
were $2.1 million and $0.7 million respectively compared to $2.2 million and
$0.6 million respectively for the first nine months and quarter ended
September 30, 2012.

Research and development expenses for the first nine months and quarter ended
September 30, 2013 were $12.0 million and $4.1 million compared to $9.6
million and $3.6 million respectively for the first nine months and quarter
ended September 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 nine months and quarter ended
September 30, 2013 were $18.7 million and $6.1 million respectively compared
to $18.9 million and $6.2 million respectively for the first nine months and
quarter ended September 30, 2012.

Net loss for the first nine months of 2013 was $16.1 million, or ($0.24) per
share, compared to $28.5 million, or ($0.49) per share, in the first nine
months of 2012. Net loss for the third quarter of 2013 was $5.3 million, or
($0.08) per share, compared to $11.2 million, or ($0.19) per share, in the
third quarter of 2012. The reduction of net loss for the first nine months of
2013 is predominately attributable to gains totaling $9.3 million from the
sale of Puregraft® in the third quarter of 2013 and from the gain on
previously held equity interest in the Olympus-Cytori Joint Venture in the
second quarter of 2013.

Cytori ended the third quarter of 2013 with $10.2 million of cash and cash
equivalents and $2.6 million in accounts receivable. Subsequent to the end of
the quarter, Cytori entered into a strategic partnership that will bring in
$24 million in committed capital before the end of the year from the
partnering agreement. The cash is expected to enable the Company to meet
potential 2014 milestones such as achieving options under the BARDA contract
and presentation of initial ATHENA data.

Strategic Partnership

Emerging Markets

Cytori entered a partnership with Lorem Vascular subsequent to the end of the
quarter to commercialize Cytori Cell Therapy in China, Hong Kong, Malaysia,
Singapore and Australia. Under the agreement, Cytori and Lorem Vascular
entered into a long term supply agreement for a 30-year exclusive license to
Cytori Cell Therapy for cardiovascular disease, renal failure, diabetes, and
all other indications, except alopecia and aesthetics, in the licensed
territories. Pursuant to our agreement, Lorem Vascular will pay up to $500
million in commercial milestones and will initially commit to order $7 million
in Celution® devices and consumables. Lorem Vascular will place its first
order for $2 million of Cytori Cell Therapy products immediately, followed by
a $5 million order to be placed upon regulatory approval in China, anticipated
to be received in 2014. In a related transaction, Cytori will receive $24
million in exchange for the sale of 8 million shares of Cytori common stock at
$3.00 per share. Equity purchased will be closed in two installments; a $12
million payment has been received and a second $12 million payment that will
be made by the end of 2013. In addition, one board seat will be granted to Mr.
K.T. Lim, Chairman of Lorem Vascular.

Cardiovascular Disease Pipeline

Heart Failure: ATHENA I & II Trials

ATHENA I is a prospective, multi-center, double-blind, randomized and
placebo-controlled clinical trial investigating Cytori Cell Therapy for heart
failure due to ischemic heart disease. ATHENA I will enroll 45 patients at a
dose of 0.4MM cells/kg at eight centers. During the first quarter of 2014, the
Company expects to initiate ATHENA II enrollment of 45 patients at a higher
dose of 0.8MM cells/kg at up to ten trial centers. During the recent quarter,
Cytori took action to modify the ATHENA protocols to enhance enrollment and
safety, streamline the screening process, better align ATHENA I and II trials
and facilitate the process of obtaining approval of an anticipated U.S.
pivotal trial. Enrollment, which was deferred during the IRB approval process,
has now resumed at seven of eight centers. Our updated projection is that
ATHENA I should be fully enrolled by April 2014 and the first patient in
ATHENA II may be enrolled in January 2014. Presentation of ATHENA I top-line
six-month data is expected to be announced in the second half of 2014, full
enrollment of ATHENA II is anticipated in the second half of 2014 and
initiation of the U.S. pivotal trial in 2015.

Acute Myocardial Infarction: ADVANCE Trial

ADVANCE is the Company’s European clinical trial for acute myocardial
infarction (heart attacks). Cytori previously announced plans to discontinue
ADVANCE following a review of the Company’s global cardiovascular strategy,
resource utilization and development priorities. The trial has enrolled 23
patients who will continue to be followed according to the trial protocol.

BARDA Contract

Cytori’s contract with 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 thermal burn 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 to
seek 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 the next-generation
Celution® System. During the third quarter, Cytori submitted data to BARDA
demonstrating substantial progress on the second and third objectives. On the
basis of this progress the Company is in the process of accelerating the
scheduling of an In-Process Review (IPR) meeting with BARDA early in the first
quarter of 2014. Favorable review at this meeting may lead to funding of up to
$32.6 million over three years for Option 1. This would fund a pilot stage
clinical trial program in thermal burn injury, ongoing development of the next
generation Celution® System, and any FDA-required preclinical studies. Cytori
anticipates a second IPR meeting on schedule for Option 3. Option 3 is valued
at up to $23.4 million over approximately four years.

Commercial Sales Efforts

Cytori’s sales efforts continue to focus primarily on researchers performing
investigator-initiated and sponsored studies. This supports the Company’s
strategy of facilitating the development of additional therapeutic
applications for its cell therapy. For the fourth quarter of 2013 and into
2014, product revenue growth will be driven by expanded research and general
clinical use based on recent regulatory approvals in Japan, Europe, and Asia
Pacific, planned international registration studies, and the aforementioned
strategic partnership.

Specifically, during the third 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. Additionally, the Celution® System was approved
subsequent to the end of the quarter in Singapore and Cytori has registered
the Celution® System for commercial sale in New Zealand.

Upcoming Milestones

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

  *Complete enrollment in the ATHENA I and II trials
  *Report six-month outcomes from the ATHENA trial
  *Achieve proof-of-concept milestones in the BARDA contract and qualify
    Cytori for up to $56 million in additional development funding
  *Obtain product registration for the Celution® System in China
  *Achieve product and contract revenue objectives
  *Publish the long term outcomes from the PRECISE European chronic ischemic
    heart failure trial

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: 95080960.

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 the end of the first quarter of 2014 with six
month results in the second half of 2014, full enrollment in ATHENA II in 2014
and initiation of a pivotal trial in 2015, our ability to meet the BARDA
proof-of-concept milestones by the first quarter of 2014 and conduct a
successful In-Process Review meeting, 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, our acceleration and expansion of our
international cardiovascular business, 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 made.

CYTORI THERAPEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)

                                          
                                           As of September   As of December
                                           30, 2013           31, 2012
Assets
Current assets:
Cash and cash equivalents                  $ 10,205,000       $ 25,717,000
Accounts receivable, net of reserves of
$1,218,000 and of $278,000 in 2013 and       2,622,000          3,926,000
2012, respectively
Inventories, net                             4,138,000          3,175,000
Other current assets                        1,128,000        1,161,000    
                                                              
Total current assets                         18,093,000         33,979,000
                                                              
Property and equipment, net of
accumulated depreciation of $9,131,000       1,550,000          2,174,000
and of $8,609,000 in 2013 and 2012,
respectively
Restricted cash and cash equivalents         350,000            350,000
Investment in joint venture                  —                  85,000
Other assets                                 1,962,000          2,740,000
Intangibles, net                             9,345,000          —
Goodwill                                    3,922,000        3,922,000    
                                                              
Total assets                               $ 35,222,000      $ 43,250,000   
                                                              
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses      $ 5,471,000        $ 7,411,000
Current portion of long-term                 1,193,000          9,784,000
obligations, net of discount
Termination fee obligation                   600,000            —
Puregraft divestiture obligation             608,000            —
Joint Venture purchase obligation            4,772,000          —
Warrant liability                           —                418,000      
                                                              
Total current liabilities                    12,644,000         17,613,000
                                                              
Deferred revenues, related party             —                  638,000
Deferred revenues                            190,000            2,635,000
Option liability                             —                  2,250,000
Long-term deferred rent and other            754,000            756,000
Long-term obligations, net of discount,     24,822,000       12,903,000   
less current portion
                                                              
Total liabilities                            38,410,000         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; 67,270,466
and 65,914,050 shares issued and             67,000             66,000
outstanding in 2013 and 2012,
respectively
Additional paid-in capital                   287,752,000        281,117,000
Accumulated other comprehensive loss         (142,000     )     —
Accumulated deficit                         (290,865,000 )    (274,728,000 )
                                                              
Total stockholders’ (deficit) equity        (3,188,000   )    6,455,000    
                                                              
Total liabilities and stockholders’        $ 35,222,000      $ 43,250,000   
equity


CYTORI THERAPEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)

                For the Three Months              For the Nine Months
                 Ended September 30,                Ended September 30,
                  2013          2012            2013           2012        
                                                                      
Product          $ 1,616,000      $ 1,314,000       $ 4,416,000       $ 4,741,000
revenues
                                                                      
Cost of
product           931,000        703,000         2,296,000       2,588,000   
revenues
                                                                      
Gross profit      685,000        611,000         2,120,000       2,153,000   
                                                                      
Development
revenues:
Development,       —                —                 638,000           2,413,000
related party
Development        —                —                 1,179,000         —
revenue
Government
contracts and     1,095,000      2,000           2,503,000       21,000      
other
                  1,095,000      2,000           4,320,000       2,434,000   
Operating
expenses:
Research and       4,123,000        3,555,000         11,992,000        9,615,000
development
Sales and          1,786,000        2,450,000         6,453,000         7,406,000
marketing
General and        4,332,000        3,777,000         12,225,000        11,489,000
administrative
Change in fair
value of           —                863,000           (418,000    )     1,244,000
warrant
liability
Change in fair
value of          —              300,000         (2,250,000  )    490,000     
option
liability
                                                                      
Total
operating         10,241,000     10,945,000      28,002,000      30,244,000  
expenses
                                                                      
Operating loss    (8,461,000 )    (10,332,000 )    (21,562,000 )    (25,657,000 )
                                                                      
Other income
(expense):
Loss on asset      —                —                 (257,000    )     —
disposal
Loss on debt       —                —                 (708,000    )     —
extinguishment
Interest           1,000            —                 2,000             3,000
income
Interest           (1,094,000 )     (857,000    )     (2,456,000  )     (2,582,000  )
expense
Other income       (96,000    )     (17,000     )     (392,000    )     (91,000     )
(expense), net
Gain on
Puregraft          4,392,000        —                 4,392,000         —
divestiture
Gain on
previously
held equity        —                —                 4,892,000         —
interest in
Joint Venture
Equity loss
from              —              (42,000     )    (48,000     )    (128,000    )
investment in
joint venture
                                                                      
Total other
income            3,203,000      (916,000    )    5,425,000       (2,798,000  )
(expense)
                                                                      
Net loss         $ (5,258,000 )   $ (11,248,000 )   $ (16,137,000 )   $ (28,455,000 )
                                                                      
Other
comprehensive
income (loss)
– foreign         (108,000   )    —               (142,000    )    —           
currency
translation
adjustments
                                                                      
Net
comprehensive    $ (5,366,000 )   $ (11,248,000 )   $ (16,279,000 )   $ (28,455,000 )
loss
                                                                      
Basic and
diluted net      $ (0.08      )   $ (0.19       )   $ (0.24       )   $ (0.49       )
loss per
common share
                                                                      
Basic and
diluted
weighted          67,248,384     58,713,036      67,147,584      58,292,911  
average common
shares


CYTORI THERAPEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

                                      For the Nine Months Ended September 30,
                                         2013               2012         
Cash flows from operating
activities:
Net loss                               $  (16,137,000  )     $  (28,455,000  )
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization             1,169,000             712,000
Amortization of deferred financing        605,000               706,000
costs and debt discount
Joint Venture acquisition obligation      204,000               —
accretion
Provision for doubtful accounts           938,000               99,000
Change in fair value of warrants          (418,000     )        1,244,000
Change in fair value of option            (2,250,000   )        490,000
liabilities
Share-based compensation expense          2,723,000             2,907,000
Equity loss from investment in joint      48,000                128,000
venture
Loss on asset disposal                    257,000               —
Gain on previously held equity            (4,892,000   )        —
interest in Joint Venture
Gain on sale of assets                    (4,392,000   )        —
Loss on debt extinguishment               708,000               —
Increases (decreases) in cash caused
by changes in operating assets and
liabilities:
Accounts receivable                       361,000               698,000
Inventories                               (975,000     )        (93,000      )
Other current assets                      69,000                (253,000     )
Other assets                              (117,000     )        16,000
Accounts payable and accrued              (1,080,000   )        254,000
expenses
Deferred revenues, related party          (638,000     )        (2,413,000   )
Deferred revenues                         (1,245,000   )        (97,000      )
Long-term deferred rent                  (2,000       )       180,000      
                                                             
Net cash used in operating               (25,064,000  )       (23,877,000  )
activities
                                                             
Cash flows from investing
activities:
Purchases of property and equipment       (536,000     )        (1,077,000   )
Proceeds from Puregraft divestiture       5,000,000             —
License agreement termination fee         (600,000     )        —
Cash acquired in purchase of Joint       5,000               —            
Venture
                                                             
Net cash provided by (used in)           3,869,000           (1,077,000   )
investing activities
                                                             
Cash flows from financing
activities:
Principal payments on long-term           (22,292,000  )        (210,000     )
obligations
Proceeds from long-term obligations       27,000,000            —
Debt issuance costs and loan fees         (1,744,000   )        —
Payments toward purchase of Joint         (141,000     )        —
Venture
Proceeds from exercise of employee
stock options and warrants and stock      147,000               988,000
purchase plan
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           5,787,000           5,660,000    
activities
                                                             
Effect of exchange rate changes on       (104,000     )       —            
cash and cash equivalents
                                                             
Net decrease in cash and cash             (15,512,000  )        (19,294,000  )
equivalents
                                                             
Cash and cash equivalents at             25,717,000          36,922,000   
beginning of period
                                                             
Cash and cash equivalents at end of    $  10,205,000        $  17,628,000   
period

Contact:

Cytori Therapeutics
Investor Relations
Tom Baker, +1.858.875.5258
tbaker@cytori.com
or
Media
Megan McCormick, +1.858.875.5279
mmccormick@cytori.com
 
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