Cytomedix: A Little-Known Biotech With Big, PDUFA-Type Decision Coming Up

| About: Nuo Therapeutics, (NUOTQ)

A little known biotech stock, Cytomedix (CMXI.OB), has a critical medical reimbursement decision coming up shortly that is expected to bring a lot of interest into the stock.

Cytomedix develops, sells and licenses regenerative biological therapies primarily for wound care, inflammation and angiogenesis. The company markets the AutoloGel System, a device for the production of autologous platelet rich plasma ("PRP") gel for use on a variety of exuding wounds; the Angel Whole Blood Separation System, a blood processing device and disposable products used for the separation of whole blood into red cells, platelet poor plasma ("PPP") and PRP in surgical settings; and the activAT Autologous Thrombin Processing Kit, which produces autologous thrombin serum from PPP. The activAT kit is sold exclusively in Europe and Canada, where it provides a completely autologous, safe alternative to bovine-derived products. On February 8, 2012 Cytomedix closed the acquisition of Aldagen, a biopharmaceutical company developing regenerative cell therapies based on its proprietary ALDH bright cell ("ALDHbr") technology, currently in a Phase 2 trial for the treatment of ischemic stroke.

Next week, around May 9, the Centers for Medicare & Medicaid Services (NYSE:CMS) is scheduled to make a decision on CMXI.OB's autologous PRP Gel in chronic wound care. A positive reimbursement decision by CMS should be very beneficial for the company and Medicare beneficiaries as it will improve wound care for people with Medicare, lower the cost of care for CMS, improve the quality of life for patients with non-healing wounds, and reduce the number of amputations for Medicare beneficiaries with diabetes. Additionally, a favorable decision will almost assuredly lead to a finalization of an agreement with a top 20 global pharma company for the supply and distribution agreement of the AutoloGel System in the US chronic wound market.

For some background, PRP gel is an autologous blood product containing proteins that regulate tissue growth for wound healing and is used successfully as a therapy to address the chronic wound care problem. Upon activation, platelets release cytokines, growth factors, and chemokines to act on cell receptors to cause cellular growth and migration while the fibrinogen in the plasma converts to a fibrin matrix scaffold upon which the cells can adhere. This biological system is integral to normal wound healing.

The company's most recent request for reimbursement was rejected by the CMS in early 2008. However, last year the company restarted the reimbursement process again. On May 31, Cytomedix made a formal submission to the CMS requesting reimbursement reconsideration for autologous platelet rich plasma gel, including the AutoloGel System. The comprehensive request proposed that there is sufficient clinical evidence to support the conclusion that the use of autologous PRP gel for chronic, non-healing pressure ulcers and diabetic foot ulcers, compared with standard wound care, significantly and reliably improves the rate of complete healing, speed and progress to healing, and quality of life in the Medicare-eligible population.

Cytomedix believes that the clinical evidence presented convincingly documents the effectiveness of PRP gel, including demonstrating improved and accelerated wound healing, re-animation of stalled wounds onto a positive wound healing trajectory, reduction and closure of undermining and sinus tracts/tunneling, growth of new wound bed granulation tissue, reduced infection, and reduced pain.

On August 31, the company provided an update on the process. The company said that it and CMS met to discuss aspects of the clinical evidence and questions that arose as part of the initial review of the company's submission, and to discuss whether CMS' policy on Coverage with Evidence Development (CED) can be used to answer the open questions. Cytomedix said that it would work with CMS to propose appropriate treatment protocols and clinical data endpoints to be collected in an ongoing prospective wound care registry of patients with chronic wounds being treated with a standardized formulation of autologous PRP gel. The data collection and analysis would likely be conducted under the auspices of CMS' Coverage with Evidence Development policy. CED allows for Medicare coverage for the appropriate use of an item or service while additional data is collected to support its ongoing use for Medicare beneficiaries. The clinical information in the database may also be used by wound care providers.

On November 9, CMS officially approved the reconsideration request for reimbursement. The company further noted that CMS proposed to publish an initial decision memo by May 9, 2012.

Unlike most other biotech companies, Cytomedix is generating healthy revenues. For 2011, the company generated revenue of $7.2 million, an increase of 85% from 2010. Although the initial fee from the global pharma company generated a nice chunk of that growth, CMXI's product sales jumped 56% due to an increase in Angel sales.

Furthermore, the company isn't sitting still. It is focusing on increasing penetration for its Angel system through targeted marketing efforts and planned expansion of indications into sports medicine and orthopedics. That should provide opportunities to significantly increase utilization. In addition, it plans to add sales and clinical support positions in key territories and already has ramped up manufacturing and placement of devices to meet the expected increase in demand.

Although the coverage on Cytomedix is limited, the sentiment is positive. The stock has one analyst covering it with a target price of $3, which is upside of over 100% from CMXI's current price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.