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Executives

Martin Rosendale - Chief Executive Officer

Andrew Maslan - Chief Financial Officer

Analysts

Jason Napodano - Zacks Investment Research

Ken Trbovich - C. K. Cooper & Company

Mike Scott - Stephens Inc.

Tim O'Connell - Insight Investments

Cytomedix, Inc. (CMXI.OB) Q3 2012 Earnings Call November 15, 2012 8:30 AM ET

Operator

Good day, ladies and gentlemen, and welcome to your Q3 Cytomedix Earnings Conference Call. My name is Allison and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) Just as a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. [Mike Wood] at [Lise Advisors] Please proceed.

Unidentified Speaker

Good morning. This is Michael Wood with [Lise Advisors] Thank you all for participating in today's call. Joining me from Cytomedix are Martin Rosendale, Chief Executive Officer, and Andrew Maslan, Chief Financial Officer.

After the market closed yesterday, Cytomedix announced financial results for the 2012 third quarter. If you have not yet received this news release or if you would like to be added to the company's distribution list, please call [Lise Advisors] in New York at 646-597-6988, and ask to speak Tyler Vanburen.

Before we begin today, I would like to caution that comments made during the conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and the future results of Cytomedix. Actual results could differ materially from those projected. I encourage you to review the company's filings with the Securities and Exchange Commission including, without limitation, the company's forms 10-K and 10-Q as amended to date, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time sensitive information that is accurate only as far as the date of the live broadcast, November 15, 2012. Cytomedix undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. So with that said, I would now like to turn over the call to Martin Rosendale.

Martin Rosendale

Thank you, Michael. Good morning, everyone and thank you for joining us this morning. Before I get started I would like to apologize to those of you that listened to the inflection and enthusiasm in my voice to detect my optimism. I am suffering from laryngitis this week and so what you’re likely to hear is more related to an inflamed larynx than anything else, so my apologies.

During the third quarter of 2012, we continued to successfully execute on our business model. We have recently achieved important milestones in reimbursement and regulatory areas which will have immediate commercial implications for our two lead products. Back in August CMS agreed to cover our AutoloGel system for wound healing in three major wound types with the national coverage decision or NCD, for coverage with evidence development.

And just last week the FDA informed us that Angel is now cleared for processing whole blood and bone marrow aspirates. In addition, our pipeline in ALDH Bright Cell technology continues to make progress. We announced the initiation of a clinical study funded by the Duke University Medical Center to treat cognitive orders in patients that have been treated for malignant glioma. We continue to report double-digit year-over-year growth in product sales. Total product sales for the third quarter came in at $1.7 million. It was a modest sequential decline which we attribute to seasonality during the summer months.

However, we are pleased to report a strong rebound in the fall and in fact in October we achieved the highest sales yet reported in any single months we have now placed over 400 Angel devices in the U.S. market and over 50 internationally. We are currently treating well over 30,000 patients every year. The growth trajectory is continuing and this underscores the strong interest we are seeing in the marketplace and the effectiveness of our sales and marketing efforts.

We received noticed from the FDA last week. They had cleared our 510(k) for the use of the Angel CPRP system for processing whole blood and bone marrow aspirates. This really contributes to the value of Angel and will ultimately allow us to reach deeper into the marketplace. The Angel system is now even more useful in a range of orthopedic procedures in the operating room, such as spinal fusion, healing of non-union bone fractures and other bone grafting applications.

Based on clinical requirements, an orthopedic surgeon can now elect to process whole blood, bone marrow or both to facilitate bone grafting procedures. The incremental commercial opportunity is significant. In the U.S. approximately 500,000 spinal fusion procedures are performed each year and the majority of these procedures, as many as 90% would be candidates for use of the Angel system. We are positioning the Angel system as a best in class device that represents a significant engineering advance in the separation of whole blood and bone marrow for clinical use and offers clear competitive advantages over other currently available systems.

Awareness and acceptance of autologous regenerative therapies has grown significant with the emergence of new supportive clinical data. In the coming year, you can expect to see more published peer reviewed clinical data supporting the use of Angel system. We are expanding our Angel awareness program and actively targeting experienced high volume PRP clinics in orthopedics and sports medicine. With the new bone marrow indication, we can a make very convincing case to orthopedic doctors to utilize both whole blood and bone marrow aspirates therapeutically and will benefit from the device capable of processing both.

Our rate of switching large PRP clinics to Angel has continued to increase over the past quarter. We have distributed over 120 Angel machines so far in 2012 and much of our current effort is on driving utilization of disposables for new device placements. By focusing on high volume providers in clinics, we are effectively increasing the number of procedures performed by each device we place. Over the past six months, we have strengthened our Angle commercial team with the addition of two new regional sales managers and an East Coast based medical science liaison. We have plans to add additional sales staff and support going into 2013 and we have several events planned for the upcoming American Academy of Physical Medicine and Rehabilitation Meeting in Atlanta, including a presentation with our key opinion leaders.

Before opening your call to questions, Drew will provide a review of our financials and will provide more details on our plans for AutoloGel followed by a brief overview of the progress for our Bright Cell technologies. Before we proceed, I would like to take just a minute to talk about your company in general.

Cytomedix has evolved in to a fully integrated regenerative medicine company. At the same time the market has transitioned to a new level of awareness and acceptance of autologous regenerative therapies. In my opinion, the evolution of healthcare in the U.S. is about to undergo a period of dramatic change. It will be imperative for innovators to demonstrate that new therapies can improve outcomes while lowering the cost of care. With our commercial technologies, AutoloGel and Angel, we have established that regenerative therapies can meet both of those critical criteria.

In addition, with the highly differentiated Bright Cell population we acquired in February, I am increasingly of the opinion that the utility of this primitive, heterogeneous, biologically active cell population is under appreciated today. Our recent is indicative of a management team that understands the commercial and regulatory and political requirements for success and can execute effectively in a complex environment.

So before I turn the call over Drew, I would like to thank all of our investors for your unwavering support and or entire staff to their dedication, resourcefulness and commitment to success. I will now turn the call over to Drew.

Andrew Maslan

Thanks, Marty. Good morning, everyone. Total revenue for the third quarter of 2012 was $1.8 million a 15% increase compared to $1.5 million in the comparable quarter of 2011. Both of our commercial products continued to post solid year-over-year gains with total product sales of $1.7 million. Angel sales were $1.6 million, up 10% year-over-year. AutoloGel sales were $108,000, up 9% compared with 2011.

While Angel sales did decline by 3% sequentially from the second quarter in 2012, we believe this is due to seasonality, with the summer months being particularly slow this year. Best evidence of this is the dramatic recovery in October where we achieved our highest sales from one month yet. While AutoloGel sales were up over the same period in 2011, they too were down as compared to the second quarter of this year. AutoloGel is still very early in its lifecycle and is subject to unevenness quarter-to-quarter. As you are aware, our commercial efforts for AutoloGel have focused on CMS coverage and partnership discussions.

The recent CMS coverage decision will provide access to AutoloGel for Medicare beneficiaries and is expected to provide a significant boost to future sales. Marty will discuss this in more detail shortly. Gross margin on product sales declined from 53% to 42% year-over-year primarily due to higher raw materials related costs and a mix shift to lower margin products as a result of more Angel machines to international distributors. As we go forward, these machines placements are expected to drive additional sales of disposables and this will ultimately result in higher margin revenue.

We also saw an increase in depreciation expense charged to cost of sales as more Angel machines were brought online. We also track cash margin which we define as gross margin exclusive of patent amortization and depreciation expense. Cash margins on product sales in the third quarter were 52%, with 56% cash margins on disposables. While these numbers are modestly behind historical norms, we do expect them to improve in this quarter Q4 and also plan to see margin gains in 2013.

For the nine months of 2012, revenues increased 97% to $8.5 million. Total product sales were up 21% to $5.2 million. Gross profit on product sales increased 4% year-over-year to $2.4 million. Gross margins in the first nine months of this year were 46% compared to 53% in the comparable 2011 period. Operating expenses in the third quarter were $5 million compared with $1.9 million in the third quarter of 2011. This increase was mainly due to Aldagen operating expenses of $1.5 million and investments in various operating expenses focused on growing and sustaining our commercial sales and furthering our partnership opportunities.

We expect this level of operating expense to continue for the remainder of the year. Year-to-date, operating expenses were $14.9 million compared with $6 million in the first nine months of last year. Net other income during the third quarter was $428,000 compared to a loss of $1.2 million a year ago, primarily due to non-cash changes in the fair value of derivative liabilities. Net other expense for the first nine months was $6.7 million compared with $641,000 last year.

We reported a net loss for the quarter of $3.8 million or $0.04 per share compared with a $2.2 million loss or $0.04 in the same period last year. For the first nine months of 2012, we reported a loss of $16 million or $0.20 per share compared with $4.7 million or $0.09 in 2011. We ended the quarter with cash and equivalents of $5.8 million compared with $2.3 million at December 31, 2011. Cash used in operating activities was just under $3 million compared with $3.8 million in the second quarter and $1.1 million in the third quarter of 2011. Approximately $1.7 million of the operating cash burn this quarter related to legacy Aldagen business.

As always, we recommend that for any additional information you refer to our quarterly report on Form 10-Q that we filed with the SEC, and with that I will now turn the call back to Marty.

Martin Rosendale

Thank you, Drew. We announced at the beginning of the quarter that the Center for Medicare and Medicaid service or CMS has agreed to provide coverage for AutoloGel in the treatment of three major chronic wound types through Coverage with Evidence Development or CED. The coverage decision is a major step-forward as it underscores the potential value CMS sees in the use of PRP to treat clinical wounds and provides access to millions of Medicare beneficiaries.

AutoloGel now has the potential to be a much more meaningful contributor to our topline. Medicare makes up a substantial portion of the wound care market with an estimated two-thirds of chronic wound care patients being Medicare beneficiaries. We have spent the time since the August 2 decision, working with CMS to prepare the procedures for collecting evidence and delivered the first protocol to CMS just over two weeks ago. Our interactions with CMS while developing the protocol continued to be very positive.

While there is no defined timeframe for review, we expect to have a response in the coming weeks. The designs we have presented are robust, cost efficient, and the data can be applied across the entire Medicare beneficiary population, satisfying the needs of CMS. Roll out and participation is under Cytomedix control. We plan to utilize the wound care registry already familiar to CMS that will simplify the roll out and help us efficiently manage costs.

Evidence collection details and the registry specifics will be made public as soon CMS agrees to our plans. Our initial focus will be on hospital outpatient wound care clinics that have established a high quality of care. As we proceed, we will develop key opinion leaders in these clinics to provide peer-to-peer support and public presentations of the technology and clinical results. Our coverage decision is meant to provide access to Medicare beneficiaries. Not all of them will have access to outpatient clinics. As a result, we will establish additional evidence collection protocols with CMS for alternative sites of care such as skilled nursing facilities where the unmet medical need is well established, to further expand the use of AutoloGel in 2013.

AutoloGel will contribute meaningfully to our topline sales revenue in 2013. We are looking forward to establishing a new standard for clinical evidence care. Our view on and approach to clinical evidence has already allowed us to reverse a 20 year old CMS national non-coverage decision. A feat we are particularly proud of. It is that same approach to clinical evidence that will support the eventual establishment of AutoloGel as a standard of care for chronic wounds.

During the third quarter numerous presentations were made on AutoloGel at various scientific conferences in the U.S. and overseas, including the Congress of the World Union of Wound Healing Societies in Yokohama, Japan; and the Symposium on Advanced Wound Care in Baltimore. The data from these studies demonstrates that AutoloGel can significantly and reliably improve the rate of healing in a variety of chronic wound indications.

This strong scientific exposure is instrumental in advancing interest among key opinion leaders and early adopters of the product. Ultimately, our strategic plan is to secure a commercial partnership for AutoloGel. While we experienced a setback with the cessation of our lengthy negotiations with an interested party earlier this year, this has not slowed us down. The CMS decision underscores an enhances the value of AutoloGel and we have reengaged discussions with company's who had come to us earlier in the year and shown interest.

I can say we are now in discussions with several potential partners. While I cannot make any predictions on timing, I think that the due diligence process can proceed faster this time as we have been through the entire process once already. The possibility of us signing a deal that will unlock the true commercial potential of AutoloGel looks very favorable.

Turning to the ALDH Bright Cell technology. We continue to make substantive progress here and enrollment is proceeding in RECOVER-Stroke with ALD-401. The trial passed a critical early safety test earlier this year when the independent Data Safety Monitoring Board recommended the continued enrollment of patients after no safety issues were detected in the first ten patients. Enrollment of the remaining 90 patients in to this study is ongoing and additional DSMB reviews will take place after 30 M-60 patients are treated. The plan here is to enroll 100 patients at over 15 clinical sites in the U.S. today.

We have nine sites and prepared to enroll patients. Four of the nine sites have been enrolling patients actively and the other five are actively screening. More importantly the queue of interested sites give us confidence that we will have more than 15 sites screening and enrolling patients soon, allowing us to make our enrollment forecast in 2013. In October, the draft protocol and safety data from the initial ten patients in this study were presented at the 8th World Stroke Congress in Brazil by Dr. Sean Savitz of the University of Texas Health and Science Center and the lead PI on the study.

This was a great opportunity to introduce ALD-401 to a wide audience of clinicians from around the world. The enthusiasm for the RECOVER-Stroke trial continues to be strong among treating clinicians and neurology experts.

In the third quarter we also announced the initiation of a clinical study funded by Duke University’s Robertson Clinical and Translational Cell Therapy Program, to treat cognitive disorders in patients that have been treated for malignant glioma. The initiation of this study further demonstrates the potential value of Bright Cells in regenerative medicine. We are forward to additional third party funded clinical work with Bright Cells in the coming months and advanced awareness of the value of these vital cells.

Let me take a minute now and speak off script. Cytomedix has now been transformed into a fully integrated and broad-based regenerative medicine company. In the past three months alone, we have achieved a favorable national coverage decision for AutoloGel and an additional FDA 510(k) clearance for the Angel system. Essentially my entire business career has involved the commercialization of biological therapies. So my focus is always on the fundamentals of the business. Therefore, I rightly leave the valuation of this company to the experts and the market in general. But I would be remiss if I didn’t tell you, this company has never been in such an attractive fundamental position.

As I just stated, having achieved a national coverage decision and a 510(k) clearance in a three-month period is something that I suspect most companies could not claim today. With respect to a potential partnership as I said, we have several ongoing discussions, a number of them look very promising. These discussions are with companies that have deep reach into the wound care marketplace or have a large commercial presence with a sales organization that’s ideally suitable for our products and to facilitate the success of AutoloGel going forward.

These discussions do take time and I know it’s a difficult to ask, but I ask you all to be patient with us as we work through this but I can assure you the process will go smoothly. Having been through the process recently as you all know, our entire system was fully validated. The value of the technology was validated, our ability to scale manufacturing was validated, our ability to promote and effectively market the process in the marketplace was validated through interviews with key opinion leaders and other healthcare providers in the field. We will pass scrutiny with any other company that we are in discussions with today. So I am confident in our discussions, I am confident in our progress.

As I said, my focus is always on the fundamental of the business. The fundamentals at Cytomedix are strong. We are in a better position than we have ever been before and I am excited unfortunately my laryngitis is probably preventing me from communicating that fully on the call this morning. But I am excited, I am enthusiastic. Our team here is extremely optimistic. We are looking forward to the coming weeks and months and anticipate reporting to you the achievement of additional milestones very soon.

So with that, we would be happy to take your questions and I will turn the call back over to Allison, our operator.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from Jason Napodano of Zacks. Please proceed.

Jason Napodano - Zacks Investment Research

Marty, I want to dig into your statement a little bit that AutoloGel will contribute meaningful revenues to the top line in 2013. Can you give us a sense of the cost of the registry versus the revenues that you expect to generate from essentially the CED? It’s interesting that revenues could accelerate from AutoloGel in 2013, but give us a sense if cost will also accelerate and kind of what the net-net there is?

Martin Rosendale

Sure. So I will make a couple of points here Jason. First of all, the revenues from Medicare beneficiaries through coverage should more than offset the cost of collecting evidence. And there will be some -- some of that cost will be upfront, so you are likely to see some increase in operating expense in Q1 as a result of those upfront costs. But overall as we begin to collect the reimbursement through the coverage decision, those costs will be offset.

To give you a bit of a sense of what to expect. In 2012, I estimate that we will have treated about 300 patients this year or maybe a few more with AutoloGel. Soon I hope our protocols or procedures reflecting evidence will be made public and you will be able to see from that, that our expectation in 2013 is to treat over 1000 patients through those programs. Again, this is a program through CMS that’s intended to provide access for Medicare beneficiaries and therefore it is not obviously meant to limit that access. So Medicare and CMS will work with us or provide us with the proper modifier codes and such to facilitate coverage and reimbursement.

And very early on in the process, official at CMS explained to us that others that have similar coverage decisions with Coverage with Evidence Development are in fact paying for that evidence collection through the reimbursement coverage from CMS. So we have good grounds to make that claim that the coverage will offset the, or more than offset the cost of the study.

In addition to that we anticipate that this coverage decision will positively influence other payers in the marketplace as well. So our expectation is we will treat quite a few patients beyond the patients that are just planned to be a part or the Coverage with Evidence Development process. In addition, of course as I said we would bring partner on during the year, that should expand our sales quite dramatically there as well. I just want to say, this is an important topic so I am going to spend a little bit more time here.

We have retained the appropriate consultants to help us facilitate the reimbursement, the coverage piece of this going forward. It’s a part of our launch plan and our brand plan going into 2013. We are developing the coverage document, when I say document I mean the guidance, the guidelines that our customers will need in order to achieve this coverage and we will be going out very soon and meeting with the regional Medicare Max or regional fiscal intermediaries to make sure that they are aware that there was a national coverage decision and are prepared to facilitate coverage. So the launch is moving forward in earnest as we speak.

Jason Napodano - Zacks Investment Research

I appreciate those comments. In October I noticed that Medtronic had started a registry for its transcatheter aortic valve replacement procedure and they received CED coverage from CMS in May. So the remaining months back was five months there, they turned that around pretty quickly. I am wondering if that kind of is a good path for investors or something that investors should take a look at with respect to kind of pathway that you guys are on?

Martin Rosendale

Yeah, I think, as I said in my scripted remarks, there is no defined timeline on CMS on this but I think that’s a very fair example to look at, right. Because that’s a decision that was made just before our decision. And you can see, if I remember correctly, between Edwards and Medtronic, they have got five protocols already in place for collecting evidence. They have established a registry through a couple of the national associations and as a result they are up and running full speed. In fact it also points out something else that’s important that I think has been under appreciated here.

In that particular situation, I presume because of the promotional power of those organizations to a great extent, that registry will become a quality benchmark for that procedure. And as a result it brings value. And if I remember correctly, well first of all I would encourage others to go look at it, but I believe they charge institutions or customers, $25,000 for the first year of participation and $10,000 for every thereafter. So this process and this registry can actually bring value by benchmarking quality practices and it’s a value that physicians and healthcare providers can and will appreciate.

Jason Napodano - Zacks Investment Research

Any update on the status of the next gen AutoloGel product?

Martin Rosendale

Yes. So we slowed that process down a little bit while we were in discussions with the previous partner because I didn’t want it to conflict with the outcome of that process. We are back running full speed with it. Essentially the status is similar to my last report in that we need to finish the validation which is a simple laboratory comparison of the output of that device to the current AutoloGel system. And we have already done that in a small number of samples to confirm that (inaudible). But we need to complete that validation. We have gone back to the engineers in Israel. The tooling is ready and ready to go to produce the parts that we need in order to manufacture it. And I would anticipate a submission to the FDA for a 510(k) clearance sometime in the first quarter to finish the validation. We have already finished the sterilization validation. We had to finish the product validation and get the data submitted to the FDA.

Jason Napodano - Zacks Investment Research

One question on Aldagen. Can you give us a sense of when you think that DSMB will hit that 30 patient review?

Martin Rosendale

Yeah. It appears now that that’s likely to happen sometime in the first quarter. I realize that I think with the last call I predicted that would happen in the fourth quarter of this year. Clearly, based on the enthusiasm from the sites that are in the queue, I got a little over enthusiastic myself. I think if Jim Hinson, our Chief Medical Officer were on the line right now, he would tell you that the start to this study is typical of these kinds of studies. The sites themselves are very excited and the screening process is going on very actively and I would anticipate at this point that the first 30 patient DSMB review will take place in the first quarter of next year.

For what is worth, I am going to whirlwind tour at the end of this month taking a week and Jim Hinson and I are going to be visiting a large number of these sites just to, first of all, keep the enthusiasm and the motivation up but also to benchmark best practices and help the sites continue to enroll at a very active rate.

Jason Napodano - Zacks Investment Research

And then just last question. What kind of data are we expecting to see from that Phase 1 study from (inaudible)?

Martin Rosendale

Well, as a Phase 1 study, it will be safety data. It will be a small number of patients. But we are hopeful that based on the preclinical data that we have got that led to the RECOVER-Stroke trial, we are very hopeful that what we will see is some signal of efficacy or effectiveness in improving the cognitive disorders that these patients suffer from as a result of their treatment and care for brain tumors.

Operator

Thank you. And your next question comes from the line of Ken Trbovich of C. K. Cooper & Company. Please proceed.

Ken Trbovich - C. K. Cooper & Company

I had a quick follow up on the discussion about CED leading to other payers making a similar decision. Can you walk us through sort of what you expect that process to be? Do you expect that you are going to have to wait until the study is, the coverage -- the CED, the collection of data is underway or do you think that there is a way that you can approach some of these payers with the initial CED decision and begin that discussion sooner rather than later.

Martin Rosendale

Well, we are definitely going to begin that discussion and process sooner rather than later. We are about to embark on hiring a reimbursement sales specialist who will be focused on that. The data that we have in place today is the data packet essentially that we prepared for CMS to get this non-coverage decision reversed. It is a very robust data set. And my expectation is that there will be a bit of a mix. Some payers will look at that data set, look at the CMS decision and make a decision to cover very quickly, very early. Others may take a wait and see point of view, and may reimburse one off one at a time. But I think the important thing here is that the data set that we have got is very robust. It had to be to get CMS to reverse such a long standing non-coverage decision.

And my anticipation and expectation is that it will be strong enough to convince a large portion of the non-government payers to AutoloGel.

Ken Trbovich - C. K. Cooper & Company

Okay. And then specifically looking at those wound types, do you have a sense for what proportion of the total market you think is covered by Medicare versus the managed care organization?

Martin Rosendale

Yeah, in total it would appear that the market place is about two thirds Medicare. Now it’s a bit more complex than that, in that some of these patients are in a variety of settings, right. Some Medicare Part B would cover these patients in the home settings, would cover these patients in outpatient wound care clinics. Of course there are Medicare managed care programs, Medicare Advantage, and there are other complexities here. The way Medicare manages coverage or reimbursement in long-term and acute care hospitals and in skilled nursing facilities is different than how it’s managed for home care or for outpatient care.

So it’s relatively complex but in general the number of patients that suffer these wounds or the percentage that are Medicare beneficiaries is about two-thirds.

Ken Trbovich - C. K. Cooper & Company

Okay. And then from the standpoint of that process of establishing additional protocols, obviously this first protocol is the most important and most critical once you have got an understanding with CMS on that protocol. What is that process like? Is it essentially, hey, here is the framework by which we have an understanding and then you start to look at different sort of settings, different care types around the setting or the institution that’s providing or the care. Does that mean that that process is much faster for the subsequent protocols against for the first?

Martin Rosendale

Again, there is so much that we are learning as we go. My expectation and the answer to your question is yes. And here is why I believe that. The first protocol, the one that’s been submitted, will establish a number of things. It will establish the usual and optimal care that’s used in combination with the AutoloGel. It will establish the registry that’s the basis for collecting the evidence. It will establish a number of the key critical components. And then, for instance moving into skilled nursing facilities, it will be simply a matter of determining who will be responsible for collecting the evidence, how the evidence will get placed into the registry. But most of the fundamental aspects of the procedures in protocol will have already been established with the first protocol.

So that’s a long way to answer your question but my expectation is that each subsequent protocol will be easier and faster.

Ken Trbovich - C. K. Cooper & Company

Okay. And I know when we talked in the past you have mentioned that the initial focus will be on those locations that have electronic medical records that you would have a plan for eventually being able to rollout and use facilities or have a protocol adopted by a facilities that don’t have electronic medical records at this time. Is that a significant challenge or is that a challenge you think can be easily overcome in sort of the earlier stages of the CED trials?

Martin Rosendale

It appears to be a challenge that can be easily overcome. In talking with the programmers of the registry and I should say others in the company have talked to the programmers of the registry, I haven’t talked to them directly myself. The feedback that we have gotten is that it’s essentially a matter of programming the input into the database. If the site already has an electronic system then it’s a matter of writing a very small program that extracts the data and puts it in the registry. If the site doesn’t have an electronic system then it’s a matter of using paper forms and handing and putting the data. So it is a challenge, but it is a small challenge and should be easily overcome.

Ken Trbovich - C. K. Cooper & Company

Okay. And then just lastly on the whole issue of trying to manage that process of both rolling out the trial as well as continuing to support the new FDA clearance for Angel. Help us understand sort of the management process and I get the point that you have got into discussions with potential partners, but internally, can you speak to how you plan to deploy resources around those opportunities as we roll into 2013?

Martin Rosendale

Sure. As I mentioned, we will see some early upfront expense. And by the way when I answered, I believe Jason’s question earlier about the cost of the CED process and it being covered. I am including in those costs people that we are bringing on board, the hires that we are making. So it’s not just the cost of the actual data collection that I am assuming will be covered by the coverage and reimbursement. So along those lines we have already brought on board a manager, somebody who is very experienced and will be responsible for overseeing the implementation, the process of collecting the data and such.

As I mentioned, we are -- soon we will be recruiting a highly qualified managed care sales professional. That person’s responsibility will not only be working with non-government payers, but they will be responsible in working with our reimbursement consultants and going into these Medicare [max]. And to make sure that they are aware of the process and where we are headed and where CMS is headed. And then we will be adding a couple of people.

At this point we will most likely take some of our sales professionals who are very experienced with the technology and focus them on this effort. And then in our sales organization with respect to the Angel’s system, bring in some additional sales support to backfill, if you will.

Operator

Thank you. And your next question comes from Mike Scott, Stephens Inc. Please proceed.

Mike Scott - Stephens Inc.

The question I guess I would ask is, could you speak to the, for potential capital raises as we go forward and specifically I know the distribution part was spoken about. Are we looking at someone there strictly on a contract situation to distribute or is there chance that partnership could involve an equity partner at some point?

Martin Rosendale

Well, it’s possible that that could involve an equity partner at some point. And I want to make sure I am clear on what you are suggesting. Could equity be -- well, let me back up. We have several discussions ongoing and the nature of these discussions vary from a simple out license relationship where we manufacture and out license the product and then it becomes potentially a royalty or a profit share arrangement to more complex arrangement opportunities.

To the extent that we have a partner that’s interested in more than just the AutoloGel system, then there is the possibility that there is equity participation as well. So I guess right now these discussions are taking a lot of different form, so there is no one simple way to answer your question.

Mike Scott - Stephens Inc.

Sure. Do we think just capital (inaudible) that you are going to be able to be pretty much met by current cash flow and we are looking at actually at some point (inaudible)?

Martin Rosendale

I am going to pass the mic to Drew here to answer that for you.

Andrew Maslan

Yeah. We have a number of business development and other strategic opportunities before us. We have always been extremely thoughtful about our approach to capital raises and we have been pretty I think sound financial stewards of the company. So that’s something we consistently look at and are mindful of -- and we will kind of just keep you updated as things develop.

Martin Rosendale

So we are not answering your question directly but I think it’s important to point out that we had $5.8 million in cash at the end of the quarter. Our sales are continuing to go up. As I said October was our best sales month ever. So certainly that will offset our capital and cash requirements and then also potentially will come about in these partner discussions as well.

Operator

Thank you. And your next question comes from Tim O'Connell of Insight Investments. Please proceed.

Tim O’Connell - Insight Investments

To talk about this CED protocol that you submitted a few weeks ago and you are looking for a response in the next few weeks. Could that response be an approval and then gives you the green light to go ahead and start collecting data?

Martin Rosendale

Yes. So let me give you a little more clarity. As soon as we got the decision on August 2 from CMS, we very quickly asked for a meeting, we actually requested a meeting before the final decision was published. So we very quickly had a face to face meeting with CMS. And in that face to face meeting we set down and we presented to them a proposal. Really, actually two proposals, we gave them a choice. And from that meeting we selected one of those proposals. So we started with feedback from CMS. Then we went back and we outlined that proposal in greater detail, prepared a synopsis overall. And then we had a telephone meeting with CMS to go through that synopsis.

Then we took that feedback from CMS and went back and put the detail to the proposal on the protocol. And that’s what we submitted to CMS a couple of weeks ago. So it’s possible they will come back and have questions around that detail and want us to clean it up a bit. And it’s possible they will come back and say, you did exactly what we asked you to do and it looks great and so we are going to give this our green light, our approval. In any event, whichever way it goes, I anticipate having this completed before the end of the year.

Tim O’Connell - Insight Investments

Okay. That’s helpful. And then so, once you do get that green light and it seems that you don’t have that distribution partner yet and I think you alluded to this in the previous question. Are you going to allocate some more sales personal to AutoloGel then?

Martin Rosendale

That’s correct.

Operator

(Operator Instructions)

Martin Rosendale

So, Allison, I assume the silence means there are no further questions?

Operator

We don’t have any further questions at this time so I would now like to turn the call over to Mr. Martin Rosendale, CEO, for closing remarks.

Martin Rosendale

Thank you, Allison. In closing, I would like to thank you all for joining us this morning and your continued support. These are exciting times for Cytomedix and I am looking forward to our next conference call and reporting to you our success on our next milestones. Thank you very much.

Operator

Ladies and gentlemen, thank you for joining today's conference. This concludes the presentation, you may now disconnect and good day.

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