CytoSorbents 2013 - The Rise of an Emerging Critical Care Immunotherapy Company

CytoSorbents 2013 - The Rise of an Emerging Critical Care Immunotherapy Company 
MONMOUTH JUNCTION, NJ -- (Marketwired) -- 01/15/14 --  CytoSorbents
Corporation (OTCQB: CTSO), a critical care immunotherapy company
commercializing its European Union approved CytoSorb(R) blood
purification therapy to treat life-threatening illnesses in the
intensive care unit, issues a shareholder letter authored by its
Chief Executive Officer, Dr. Phillip Chan, MD, PhD.  
2013 Financial Highlights: 


 
--  2013 represents the first full year of CytoSorb(R)
    commercialization
--  We expect to report total 2013 revenue of approximately $2.4 million,
    including both product sales and grant income
--  Full year 2013 CytoSorb(R) sales are expected to be in the range of
    $840,000 to $870,000
--  Expected Q4 2013 product sales in the range of $330,000 to $360,000
    were a record for the Company and represent a greater than 60%
    sequential increase from the previous Q3 2013, and a greater than 275%
    increase from the year ago fourth quarter
--  Gross product margins in Q4 2013 are expected to exceed 60%
--  Ramping manufacturing of CytoSorb(R) to meet increased demand from
    direct sales and distributors

  
Dear Fellow Shareholders and Friends, 
The ability to alter the immune response to combat disease is called
immunotherapy. This is one of the most historically important and
promising areas in medicine today and also one of the most valuable.  
CytoSorbents is emerging as a leading pioneer in the critical care
immunotherapy space. Our flagship product, CytoSorb(R), represents a
potential paradigm shift in the treatment of critically ill patients
suffering from massive inflammatory conditions such as sepsis,
trauma, burn injury, lung injury, pancreatitis, and a host of other
life-threatening conditions. Severe uncontrolled inflammation can
precipitate organ failure, the cause of nearly half of all deaths in
the intensive care unit (ICU) and for which no effective treatment
exists. Because of this, millions of critically ill patients die each
year. CytoSorb(R), as the only specifically approved cytokine filter
in the European Union (E.U.), reduces the cytokine storm that "fuels
the fire" of inflammation, with the goal of reducing inflammation a
nd
then preventing or treating deadly organ failure.  
To further understand the key role that CytoSorb(R) plays in the
immunotherapy ecosystem, the following explanation may be helpful.
The immune system is a remarkably complex network of specialized
immune cells whose activities are tightly orchestrated by a host of
signaling factors, the most important of which are cytokines. Every
day, our immune system protects us against infection and injury by
generating some degree of inflammation. This inflammation is normally
helpful and protective, provided that it is kept under control. A
simple but illustrative example is a sprained ankle. When the injury
occurs, there is an immediate local release of cytokines and other
inflammatory substances that lead to local inflammation and rapid
swelling. This, in fact, is a completely normal immune response.
Inflammation increases blood flow, oxygen, nutrient delivery, immune
cells, and healing factors to the site of injury to help it heal.
Once the area is healed, the inflammation is turned off. But the
problems arise when the immune system does not respond the way it
should, causing either too little inflammation at one end of the
spectrum, or too much inflammation at the other end. 
When the immune system is too weak or fails to recognize and kill
bacteria, viruses, tumor cells, and other dangerous substances, it
can lead to a high risk of infection and cancer. To counter this,
many different immunotherapy approaches have been developed to
activate the immune response.  


 
--  Vaccines are a classic example. In the influenza vaccine, for example,
    flu virus particles are mixed with immune stimulants that boost the
    immune response against the flu, providing future protection. The top
    5 vaccine companies including Sanofi, Merck, Glaxo Smith Kline,
    Pfizer, and Novartis, generated $21.5 billion in vaccine sales in
    2012.
--  Another example is cancer immunotherapy, which was cited by Science
    Magazine as the 2013 Breakthrough of the Year. Cancers have evolved
    clever ways to evade and suppress the immune system. The use of
    monoclonal antibodies against cancer targets to enable better immune
    system recognition is the basis of blockbuster therapies such as
    Rituxan(R) and Herceptin(R) (Genentech/Roche) and Erbitux(R)
    (Bristol Meyers Squibb) which together generated $14.4 billion in 2012
    revenue. And now a new breed of cancer immunotherapy companies are
    stimulating immune cells to directly attack cancer cells through
    activated cell therapies or cancer vaccines. Examples include
    Dendreon, which generated $325M in sales of its PROVENGE(R)
    prostate cancer vaccine in 2012, and other companies still in clinical
    trials such as NewLink Genetics, Northwest Biotherapeutics,
    ImmunoCellular Therapies; Celldex Therapeutics; Galena Biopharma and
    Inovio Pharmaceuticals. These six pre-revenue companies have a
    collective market capitalization of $4.3 billion.

  
On the other end of the spectrum is when the immune system is
overactive. This can be subtle, as in heart disease, or it can be
overt and catastrophic, as seen in life-threatening illnesses in the
ICU. The latter is where CytoSorbents is focused, and is estimated to
be a $10-15 billion market in the U.S. and Europe alone.  


 
--  Autoimmune diseases such as rheumatoid arthritis, psoriasis, and
    inflammatory bowel disease, where an overactive immune system attacks
    normal healthy tissues is a prime example. Blockbuster biologics that
    try to treat these diseases by targeting specific cytokines, include
    Humira(R) from AbbVie, Remicade(R) from Johnson and Johnson, and
    Enbrel(R) from Amgen. These 3 products have 2012 worldwide sales of
    $25.5 billion.
--  Other examples of a hyperactive immune response include allergy,
    asthma, and anaphylaxis, where even minute exposure to an allergen can
    lead to a severe, and even rapidly fatal immune response. Common
    prescription and over the counter antihistamines and steroids are a
    multi-billion dollar category.

  
As can be seen, immunotherapy is a massive market with many, many
multi-billion dollar products. And this is our opportunity. Unlike
most areas of immunotherapy that are extremely crowded, critical care
immunotherapy for the treatment of patients in the ICU is just
beginning to develop. Steroids have been the blunt hammer used by
critical care physicians to fight inflammation in the ICU for
decades, but it has been well-documented in many clinical trials
studying many life-threatening illnesses, that although steroids may
have a beneficial near term effect, they don't improve survival and
in some cases, actually increase the risk of death. For most critical
illnesses, such as sepsis, burn injury, trauma, pancreatitis, acute
respiratory distress syndrome and others, there is nothing currently
being done to control the underlying deadly inflammation (often
called the systemic inflammatory response syndrome or SIRS) that can
then lead to organ failure and death. This is one of the biggest
unmet medical needs in medicine, and CytoSorb(R) is uniquely
positioned to step into this void and potentially become a dominant
therapy in the ICU. With o
ur progress in 2013 we now have a foothold
in this market and are very excited by what we are seeing. 
Accelerating Momentum in 2013.  
This was the operative phrase for 2013.  
We saw a tremendous amount of progress in all parts of our business.
But the first full year of CytoSorb(R) commercialization was the
highlight. Our strategy to grow revenue combining direct sales of
CytoSorb(R) using our own sales force in Germany, Austria and
Switzerland, as well as distributor or partner sales in other
countries, is working and there is a lot of room for expansion.
CytoSorb(R) is approved through the European C.E. Mark and can be
sold in all 28 countries of the E.U. With registration, CytoSorb(R)
can also be sold in countries outside the E.U. that accept CE Mark
approval, such as India, Russia, Canada, Australia, the Middle East,
Brazil and others. In fact, our European approval allows us access to
most of the world, with the notable exception of countries like the
U.S. and Japan.  
As mentioned previously, we expect to report strong 2013 full-year
revenue of approximately $2.4 million, a combination of both
CytoSorb(R) sales and grant income. 2013 sales of CytoSorb(R) are
expected to be in the range of $840-870K with continued solid gross
margins, buoyed by strong fourth quarter sales and increasing order
and re-order momentum. These results were primarily based on the
efforts of our small 4 person dire
ct sales force, who have generated
the support and interest of more than 100 key opinion leaders in
major university and public hospitals throughout Germany and many in
Austria and now in the U.K. But in addition to the sales efforts, it
is the initial clinical data that continues to drive this increasing
interest. As we reported from our first ever CytoSorb(R) Users
Meeting at the DIVI conference in December, our customers and
collaborators are seeing many treatment successes with the therapy.
And now we have advanced the establishment of a first class
international CytoSorb(R) registry to help keep track of the outcomes
of CytoSorb(R) treatment which will also help. The registry will be
hosted by SepNet, the Sepsis Trials Network in Germany, and the
University of Jena, Germany, a leading epicenter of sepsis research
in Europe. 
In Q4, we have also witnessed the early success of our initial
efforts to increase adoption and usage amongst junior and senior
physicians, a trend we expect to continue in 2014. In addition, we
now have more than 30 investigator initiated studies, looking at a
broad set of clinical applications that include sepsis, cardiac
surgery, trauma, liver failure, and others, that have either started,
or are being planned, with many of these expected to yield data this
year. Dr. Rainer Kosanke, our European Director of Scientific
Affairs, is actively overseeing these studies on behalf of the
company, as well as our ongoing Dosing Study that we discussed
recently. Importantly, these studies will provide a stream of
clinical data that may help to create even greater awareness and
usage of CytoSorb(R) in the scientific community.  
Based upon the increasing interest in the market, we have invested in
the expansion of our sales team with now 5 sales reps, with a near
term target of 7. We have added a clinical support person to support
our customers, with another addition soon. We are also hiring a
resource to help support and manage our distributors as well.  
We have now established distribution of CytoSorb(R) in the United
Kingdom, Ireland, the Netherlands, Turkey, Russia and India.
Distributor sales were accretive to the overall results in 2013, but
we expect a more meaningful contribution to sales in 2014 as
marketing efforts intensify at existing distributors, and more
distributorships and partnerships are added - which we are pursuing
aggressively. In particular, our strategic partnership with Biocon,
India's largest biotechnology company, is very exciting and holds
great promise. They have committed a significant amount of internal
resources to support the launch and exclusive distribution of
CytoSorb(R) in India and select emerging countries, and a number of
patients have already been treated, again with many positive
outcomes. 
And finally, we were very active in the U.S. First, in early 2013, we
solidified our management team with the addition of Kathleen Bloch as
Chief Financial Officer, and Chris Cramer as Vice President of
Business Development. We received FDA IDE approval to run a US Air
Force funded randomized controlled 30 patient human pilot study
(valued at ~$3M) using CytoSorb(R) to treat patients with trauma and
rhabdomyolysis. To help support our efforts, we established a world
class trauma board. We executed well against our milestones for DARPA
and the US Army, bringing in more than $1.5M in non-dilutive
milestone payments. And we were awarded a $204K Phase I SBIR contract
by the National Heart, Lung and Blood Institute (NHLBI), a division
of the National Institutes of Health (NIH), to accelerate commercial
development of our HemoDefend(TM) technology for blood transfusions.
Lastly, we recently met with officials from both NYSE and NASDAQ to
discuss our options to up-list our stock to one of these exchanges, a
goal for 2014. 
Growth in 2014. 
2014 could be a pivotal year for CytoSorbents as we near critical
mass in many parts of our business, particularly commercialization of
CytoSorb(R). Our product revenues have been growing rapidly, and we
are nearing the important milestone of $1 million in trailing
twelve-month sales. Based on the foundation we laid in 2013, we now
have the formula in place for growth: 


 
--  Strong key opinion leader support
--  Positive clinical experiences
--  Increasing orders and reorders
--  A growing sales and clinical support team to more efficiently capture
    sales
--  Clear evidence that our marketing efforts with junior and senior
    physicians in critical care departments are bearing fruit
--  New clinical data from a multitude of clinical studies that may drive
    usage
--  New markets like cardiac surgery where we are seeing a high level of
    interest
--  Existing distributors coming on-line, with new distribution being
    added
--  Reimbursement in key markets
--  Strong interest from potential strategic partners

  
If we execute well and are successful, this has the potential to
significantly change our value proposition as a Company and the
trajectory of our business. 
In conclusion, we look back at our accomplishments in 2013 with pride
as a Company, but also with humble appreciation for how we got there.
So many people - from physicians and nurses, to patients, to our
advisors and research collaborators, to our distribution partners, to
our investors, to our service providers, to our Board of Directors,
and to our dedicated employees and their families -- have contributed
greatly to our progress, and they have our deepest gratitude. Thank
you all for sharing our common vision of helping those who need it
most, in our quest to save lives and revolutionize critical care
medicine.  
Best wishes to all in the New Year! 
Phillip 
______________________________ 
Phillip P. Chan, MD, PhD
 Chief Executive Officer
 CytoSorbents
Corporation 
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About CytoSorbents Corporation  
CytoSorbents is a critical care focused immunotherapy company using
blood purification to modulate inflammation - with the goal of
preventing or treating multiple organ failure in life-threatening
illnesses. Organ failure is the cause of nearly half of all deaths in
the intensive care unit, with little to improve clinical outcome.
CytoSorb(R), the Company's flagship product, is approved in the
European Union as a safe and effective extracorporeal cytokine
filter, designed to reduce the "cytokine storm" that could otherwise
cause massive inflammation, organ failure and death in common
critical illnesses such as sepsis, burn injury, trauma, lung injury,
and pancreatitis. These are conditions where the mortality is
extremely high, yet no effective treatments exist. CytoSorbents'
purification technologies are based on biocompatible, highly porous
polymer beads that can actively remove toxic substances from blood
and other bodily fluids by pore capture and surface adsorption.
CytoSorbents has numerous products under development based upon this
unique blood purification technology, protected by 32 issued US
patents and multiple applications pending, including HemoDefend(TM),
ContrastSorb, DrugSorb, and others. Additional information is
available for download on the Company's website:
http://www.cytosorbents.com 
Forward-Looking Statements 
This press release includes forward-looking statements intended to
qualify for the safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. Forward-looking statements
in this press release are not promises or guarantees and are subject
to risks and uncertainties that could cause our actual results to
differ materially from those anticipated. These statements are based
on management's current expectations and assumptions and are
naturally subject to uncertainty and changes in circumstances. We
caution you not to place undue reliance upon any such forward-looking
statements. Actual results may differ materially from those expressed
or implied by the statements herein. Risk factors are detailed in the
Company's Form 10-K filed with the SEC on April 3, 2013, which is
available at http://www.sec.gov. 
* All product names are registered trademarks of their respective
manufacturers 
Company Contact:
CytoSorbents Corporation
Dr. Phillip Chan
Chief Executive Officer
(732) 329-8885 ext. *823
pchan@cytosorbents.com 
 
 
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