Henry McCusker's  Instablog

Net loss of $8.9 million or $0.05 per share

Net loss was approximately $8.9 million or $0.05 per share compared to $9.2 million or $0.08 for Q1/12. Net losses from continuing operations for Q1/13 and Q1/12 were approximately $8.9 million and $8 million, respectively. The net losses from discontinued operations - net for Q1/12 were approximately $1.2 million, representing the operations of former Regenerative Medicine - China segment which was …"deconsolidated" … in Q1/12, and the operations of the former Pharmaceutical Manufacturing - China segment, which related to 51% interest in Suzhou Erye was sold in Q4/12.

Total revenues were approximately $2.5 million compared to $3.8 million for Q1/12, representing a decrease of $1.2 million, or 33%. Revenues were comprised of: clinical services of $1.365 million, clinical reimbursement services of $362.8 K and processing and storage services of $795.5 K for a total of $2.524 million.

For Q1/13, total cost of revenues was approximately $2.4 million compared to $3 million for Q1/12, representing a decrease of $600 K or 19%.

Gross profit for Q1/13 was $100 K or 5% of 2013 revenues, compared to gross profit for Q1/12 of $800 K or 22% or 2012 revenues. The gross profit percentage decrease was due to lower overall third party revenue in Q1/13, creating excess capacity and lower efficiency in the usage of clinical manufacturing facilities, which were partially, offset by lower levels of clinical services reimbursable revenues that have little or no margin.

Q1/13 operating expenses increased to $9 million compared to $8.4 million for Q1/12 representing an increase of $600 K or 7%. Operating expenses were comprised of the following: R&D expenses were approximately $3.2 million compared to $1.9 million for Q1/12, representing an increase of approximately $1.3 million, or 62%.

R&D expenses increased by approximately $1.4 million in Q1/13 due to the initiation in 1/12 of the P2 clinical trial for AMR-001. This increase was partially offset by reduced internal research activities following the closing of the research facility in Cambridge, Ma in 2012 and the relocation of research activities to PCT facilities.

Equity-based compensation included in R&D expenses for Q1/13 and Q1/12 was approximately $200 K in each period.

SG&A expenses were approximately $5.8 million compared to $6.4 million for Q1/12, representing a decrease of approximately $600 K, or 10%. Equity-based compensation included in SG&A expenses was approximately $1.9 million, compared to approximately $2.2 million for Q1/12; representing a decrease of $300 K. G&A expenses decreased approximately $100 K, primarily due to lower overall professional fees. Selling expenses also decreased $200 K compared to Q1/12.

Other expense, net for Q1/13 was $11 K which was decreased from $87 K in Q1/12, and primarily relates to the revaluation of derivative liabilities that have been established in connection with the Convertible Redeemable Series E Preferred Stock and the warrants issued in connection therewith.

Interest expense decreased to $44 K compared with $524 K in Q1/12. Interest expense in FY12 was primarily due to the amortization of debt discount related to the Series E Preferred Stock. The Series E Preferred Stock was fully redeemed in October 2012.

The operations and cash flows for the Regenerative Medicine - China business for were reported in discontinued operations. For Q1/12, the loss from discontinued operations was $1.7 million, and included a $1.1 million loss on exit of segment.

Shares used in the computing of the net loss were 166.98 million in Q1/13 as compared with 111.81 million in Q1/12

• NBS ended Q1/13 with $9.3 million in cash and successfully completed a common stock offering in 5/13 which generated $10.7 million of net proceeds.

Guidance: Gross profit percentages generally will increase as clinical service revenue increases, and will fluctuate in each period due to the mix of service and reimbursable revenues and costs, as well as the timing of revenue recognition under the clinical services revenue recognition policy.

The Bottom Line: China was sold for <received> cash decreasing outflows and revenues that were about to be manipulated by Chinese policies. The net loss decreased $300 K but revenues did drop $12 million but the cost of revenues is dropping. Gross profit dropped due to lower Q1/13 overall third party revenue. Operating costs increased $600 K due to due to the initiation in 1/12 of the P2 clinical trial for AMR-001. But, SG&A expenses dropped $600 K along with equity based component of $300 K. G&A is down as is selling expense.

Not BAD considering the total refocus and spin-out of the China driven < I say draining> business to stabilize the on-going business and AMR-001 development cycle … a BUY. An offering is done - $10.7 million so it is time to show what NBS can do to focus …the next few Q's - expectation is HIGH.

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

No new securities are being offered ..contrary to the "Fly" non-article

NeoStem is … NOT … engaged in a new financing as reported by "The Fly on the Wall.com … Get the facts straight - they just finished one for $10.7 M in proceeds.

This registration statement was merely a renewal of an outstanding registration statement that covered the potential issuance of shares underlying warrants that were issued 3 years ago and remain outstanding.

NBS has an existing "shelf" registration statement on Form S-3, File No. 333-166169, that was declared effective on May 11, 2010 and which expires on May 11, 2013 pursuant to Rule 415(a)(5) under the Securities Act.

NBS filed … this new Registration Statement for the sole purpose of ensuring that an effective Registration Statement covers the exercise of such previously issued November 2010 $1.85 Warrants and Series E Warrants.

The Bottom Line: What the "hell" is this …!!! If NBS … were … to sell … any securities being registered, NBS would identify this event! The underlying shares were previously registered but the registration statement expired under relatively recent SEC rules needed to be refreshed. So bless me father in public confessional for using bad words to tell the truth!

NBS closed at $0.53 DOWN a penny from Wednesday.

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

Net loss was $7.7 million, or ($0.11) per share

Net loss was $7.7 million, or ($0.11) per share for Q1/13 compared to $9.3 million, or ($0.16) per share, in Q1/12.

Revenues were $3.8 million, compared to $1.5 million in Q1/12. Product and government contract revenues were $1.9 million, compared to $1.5 million for Q1/12. Government contract revenues were $500 K related almost entirely to work performed under the BARDA contract, for which there were no comparable revenues recognized in Q1/12. Additionally, $1.8 million in revenue was recognized for services performed in relation to the JV with Olympus and the Senko distribution agreement. During Q1/13, CYTX terminated the Senko distribution agreement and reacquired from Senko the rights to SurgiWrap in Japan. Gross profit was $600 K, or 46%, compared to $600 K, or 42%, in Q1/12.

R&D expenses were $3.7 million compared to $2.8 million in Q1/12. The planned increase in R&D expenses is mostly related to services performed under the BARDA contract, in addition to clinical trial costs. SG&A expenses were $6.1 million compared to $6.3 million in Q1/12. Total operating expenses were $9.739 million versus 8.996 million in Q1/12 with an operating loss of (-6.737) million versus (-8.365) million. Shares used in computing the net loss in Q1/13 were 66.99 million compared with 57.48 million in Q1/12.

• CYTX ended Q1/13 with $16.4 million of cash and cash equivalents and $3 million in accounts receivable.

Guidance: CYTX reiterates guidance for the year of $15 million of product and contract revenue. Gross margins are expected to increase substantially in the second half of 2013 as increased second half revenues are realized. CYTX's core milestones for the next 12 months include the following:

• Complete enrollment in the ATHENA trial
• Achieve proof-of-concept milestones in the BARDA contract and qualify Cytori for up to $56 million in additional development funding
• Publish the 18 month outcomes from the PRECISE European chronic ischemic heart failure trial
• Continue to strengthen the Company's patent position
• Generate product and contract revenue of $15 million in 2013

Q1/13 Highlights:

• Entered into an agreement to acquire the remaining interest in the Olympus-Cytori Joint Venture, including all manufacturing rights for the Celution® System;
• Continued enrollment in the ATHENA trial of Cytori's cell therapy for chronic ischemic heart failure; goal for completion of enrollment remains summer of this year;
• Continued enrollment in the ADVANCE European heart attack trial; the current goal for enrollment is 25 patients by year-end 2013;
• Opened new tissue ischemia and intravascular markets for the Celution® System with expanded CE Mark claims for these respective indications;
• Submitted report to BARDA containing data demonstrating achievement of the first of 3 objectives under the BARDA contract by validating the core design elements of the next-generation Celution® System; achievement of the other objectives is anticipated on or ahead of schedule;
• On track to have a nationwide Japanese distribution network;
• Awarded 2 patents, including a methods patent for using adipose-derived stem and regenerative cell therapy for treating renal disease;
• Recruited Dr. Steven Kesten as EVP and CMO.

The Bottom Line: CYTX closed at $2.60 UP +$0.04 or +1.56% to $2.60 and is DOWN in the after-market -$0.01 or -0.38% to $2.59. I believe this was one of the most informative Q reporting with no whining aspects of beginning the year compared to a few of the reporting companies.

CYTX reduced near and long-term liabilities in Q1/ by approximately $5.8 million. A substantial portion of its recent and projected cash needs relate to principal payments on its existing term loan. CYTX is in discussions with its lender group to extend the term of the loan and defer principal payments to coincide with anticipated product sales, government contract payments, and other potential cash milestones.

Also, consider the positives of CYTX in relation to the RegMed sector: completion of enrollment in ATHENA, successful execution of the BARDA contract deliverables, and growth in total revenues.

CYTX's product revenues were more heavily weighted by orders from Japan.This is driven in Japan based on the recent Class I approval and in Europe by the Celution® System CE Mark for intravascular delivery and tissue ischemia.

For the remainder of 2013, it is expected that product revenue growth will be driven by expanded research and general clinical use based on recent regulatory approvals in Japan and the EU.

Another positive, CYTX is seeing growing interest in the number of investigator-initiated studies, the number of multi-center studies and the number of patients anticipated to be treated in those trials. Financially, these trials are funded primarily by government grants or funds from specific healthcare institutions. Recently, an approximate $5 million grant from the Ministry of Health, Labor and Welfare (MHLW) in Japan was issued to support a multi-center trial that could lead to approval and reimbursement for cell therapy for stress urinary incontinence.

In Europe, CYTX has been informed by an investigator in France that an ongoing pilot study in patients with hand complications from scleroderma is being considered for a multi-center trial based on encouraging preliminary results.

The Puregraft® product line continues its positive sales trends. Record Puregraft® revenues were reported with growth in both sales and units shipped in sequential quarters as well as quarter over year ago quarter. This trend reflects the increasing demand for this product as well as the overall growth in fat grafting among plastic and reconstructive surgeons.

CYTX expects to accelerate Puregraft® sales with the launch of an important product line extension later this year, targeting a significant market for small volume fat grafting procedures.

CYTX has finalized an agreement with Olympus Corporation to acquire all of Olympus' rights to the Olympus-Cytori Joint Venture, including Celution® product manufacturing and patent rights and eliminating any royalty obligations to the Joint Venture.

As part of the agreement, the Olympus-Cytori Joint Venture will return all rights to Cytori at closing in exchange for alternative payment or call options including: $4.5 million within 1 year or $6 million within 2 years <some of which is part of dollars already held>.

I consider CYTX a … BUY … and value <that they haven't driven to the offering window> reducing costs and decreasing the net losses while structuring their guidance to highlight their current service agreements with BARDA and other sources. Regaining full control of manufacturing rights provides CYTX with greater flexibility on the manufacturing process and associated costs, enables higher margins, and speeds the transition to the smaller next-generation system although at a I believe a … minimal cost as associated with the dollars invested over the development and past partnered agreement.

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