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Cytori Therapeutics (CYTX) Q4/12 And FY12 Results

Net loss was $3.8 M or ($0.06) per share

The Q4/12 net loss was $3.8 M or ($0.06) per share compared to $6.9 M, or ($0.12) per share in Q4/11. FY12 net loss was $32.3 M, or ($0.55) per share compared to $34.5 M, or ($0.61) per share for FY11.

Net loss for FY12 includes a net non-cash charge of $100 K compared to a net non-cash credit of $3.6 M in 2011. Net non-cash charges include the change in the fair value of warrant and option liabilities.

Q4/12 product and contract revenues more than doubled to $4.3 M compared to $2.1 M for Q4/11.CYTX recognized $0.4 M in contract revenue related to the BARDA agreement <for the year and fourth quarter of 2012 for which there was no comparable revenue recognized in 2011>. Q4/12 total development revenues, including contract revenue was $2 M compared to $0.8 M in Q4/11. The balance of development revenue is the result of the recognition of deferred revenue in connection with the Astellas 2010 equity agreement and the recognition of clinical and regulatory milestones related to the Joint Venture with Olympus Corporation. Q4/12 gross profit was $2.6 M compared to $1.1 M in Q4/11 representing a 126% increase in gross profit and exceeding sales and marketing expenses in the quarter by $0.5 M. Q4/12 R&D expenses were $4 M compared to $2 M for Q4/11. This planned increase was principally associated with the initiation of the ATHENA trial. Sales and marketing expenses were $2.081 M in Q4 comparing to $3 M and G&A expenses were 4.18 M compared to $3.498 M in Q4/11. The decrease in Sales and Marketing and G&A expenses was the result of planned reductions in expenses based on the establishment of a more efficient commercial operations structure. Shares utilized to compute the net loss were 59.581 M in Q4/12 versus 55.664 M in Q4/11.

  • At the end of 2012, Cytori had $25.7 M of cash and cash equivalents and $3.9 M of accounts receivable, net. In addition, in 1/13 CYTX received $2.8 M in net proceeds from the exercise of the over-allotment option as part of the public equity offering Cytori executed in 1212.

FY12 Results: CYTX saw 14% growth in product and contract revenues to $9.1 M as compared to $8 M for FY11. The increase in product revenue $4 M in FY12 compared to $2.1 M in FY11 was primarily a result of sales under the Class I device clearance in Japan achieved in 9/12. Total development revenues, including contract revenue, were $5.8 M. Gross profit was $4.7 M for FY12 as compared to $4.1 M in FY11. R&D expenses were $13.6 M compared to $10.9 million for FY11. The commercial operations in 2012 delivered by increasing revenues despite the implementation of substantial cost reductions: Total product and contract revenues grew 14% year-over-year, with $4.4 M coming from Japan; System shipments grew 46% year-over-year, due mostly to the Class I device clearance in Japan in September 2012; Puregraft® sales grew 46% in 2012 during which time more than 5 K units were shipped; Demonstrated leverage of commercial infrastructure as Q4 gross profit of $2.6 M exceeded sales and marketing expenses of $2.1 M. Shares utilized to compute the FY12 net loss were 58.679 M versus 53.5 M in FY11.

FY12 Milestone Highlights

  • Initiated enrollment in the ATHENA U.S. refractory heart failure trial; all six centers are actively screening patients, enrollment is on track to be complete mid-summer;
  • Awarded contract with BARDA, a division of the U.S. HHS, worth up to $106 M to develop a novel cell-based treatment of thermal burns combined with radiation injury;
  • Obtained Class I device clearance in Japan, opening the Japanese market and increasing fourth quarter revenues;
  • Opened EU vascular market with CE Mark claims for intravascular delivery (Intravase®);
  • Expanded CE Mark claims for multiple indications including cryptoglandular fistulae and tissue ischemia;
  • Amended and resumed enrollment in the ADVANCE European heart attack trial;
  • Achieved $9.1 M in product and contract revenue, including a record $4.3 M in Q4/12;
  • Grew Celution® and StemSource® System shipments by 46% year-over-year;
  • Increased patent portfolio year-over-year by 36% with the issuance of 15 patents worldwide; bringing the total number of global patents to 57 with 75 additional applications under review
  • Recruited Steven Kesten, M.D., as EVP and Chief Medical Officer;
  • Raised $21.4 M in net proceeds from public offering of shares, including $2.8 M in net proceeds in 1/13 from the exercise of the full over-allotment option.

Guidance and Upcoming Milestones

  • Complete enrollment in the ATHENA trial in mid-summer; 6 month data in the first half of 2014;
  • Achieve proof-of-concept under the first option of the BARDA contract, which will qualify CYTX for up to $56 M in additional development funding;
  • Publish the 18 month outcomes from the PRECISE European refractory heart failure trial;
  • Continue to strengthen the patent position;
  • Increase product and contract revenue by at least 65% (at least $15 M) in FY13.

The Bottom Line: CYTX Q4 EPS of -$0.06 beats by $0.10. Revenue of $4.3 M beats by $0.2 M. CYTX made substantial progress in 2012 in its cardiac pipeline, recently awarded government contract and commercial operations. The specific developments include the initiation of the ATHENA trial, a significant contract with the Biomedical Advanced Research Authority (BARDA) related to thermal burns, and growing revenue opportunities through EU and Japanese regulatory approvals.

  • CYTX is focused on the U.S. ATHENA trial, for which they expect the 1st data readout in the 1st half of 2014. The BARDA contract represents a potentially fully funded pathway to U.S. commercialization with a near term opportunity to qualify for the next option phases within 12 months. CYTX expects to accelerate revenue growth in 2013 based on recent regulatory approvals to achieve at least $15 M in combined product and contract revenue, while maintaining SG&A expenses at their current levels. Similar to 2012, the majority of the total revenue estimate is expected to be achieved in the 2nd half of the year;
  • The ATHENA trial is CYTX's primary clinical focus in 2013. For this trial, all 6 centers have received institutional review board approval to begin screening and enrolling patients. CYTX believes low screen failure rates and positive feedback from investigators have contributed to relatively rapid enrollment per active site thus far. The trial currently remains on track for completion of enrollment by mid-summer with six month results anticipated in the first half of 2014;
  • In 2012, Cytori amended the ADVANCE trial and enrolled patients across a small number of EU trial centers and is encouraged by the long term data from the pilot trial APOLLO, which led to the initiation of ADVANCE. 15 patients have been enrolled in ADVANCE to date. In light of the required resources to complete enrollment in an accelerated fashion and competing corporate priorities at this time, CYTX is prepared only to commit a minimal level of investment in ADVANCE for 2013. The goal for 2013 is to bring the total ADVANCE enrollment to 25 patients with an interim analysis to be performed after the first 72 patients;
  • CYTX expanded its CE Mark to include treatment of ischemic tissue and recently (2/13) received certification of its Intravase® product specifically for the safe infusion of ADRCs into the intravascular system. These expanded certifications enable commercial sales of Celution® for ischemic tissue and vascular delivery. The ongoing commercial launch will target ADVANCE centers as well as other select hospitals in Europe and other regions that recognize the CE Mark. Further claims expansion and reimbursement is expected upon completion of ATHENA, a subsequent U.S. pivotal study and further clinical experience, including registries, in key countries.

CYTX closed at $2.93 up +$0.08 or $2.63%. A "BUY" with expectation of a $0.10 to $0.20 pop in the next week.

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