MONMOUTH JUNCTION, N.J.,
April 19, 2017 /PRNewswire/
-- CytoSorbents Corporation (NASDAQ: CTSO), a critical care
immunotherapy leader commercializing its CytoSorb® blood
purification technology to treat deadly inflammation in
critically-ill and cardiac surgery patients around the world,
issues a stockholder letter from its 2016 Annual Report from its
Chief Executive Officer, Dr. Phillip
Chan.
Dear Fellow Stockholders and Friends,
We spoke last year of driving towards the inflection point.
After achieving record CytoSorb® sales of $8.2 million last year, helping to save many
lives in more than 20,000 treatments, and numerous accomplishments
through the first quarter of this year, we believe we are now
well-positioned to drive the next phase of our evolution into a
potentially very profitable and visible, high margin disposables
pure play that can transform medical care. Specifically, we are
targeting the following major milestones.*
1. Continued
Strong Year-over-Year Revenue Growth
In 2016, we more than doubled our product sales and CytoSorb
treatments from the prior year. Direct sales were particularly
strong, with broad increases in usage and one hospital already
exceeding $1 million in sales,
confirming our assertion that large hospitals can be multi-million
dollar accounts. Several major recent developments give us
visibility and confidence on future growth. The first is the recent
achievement of a dedicated reimbursement code for CytoSorb in
Germany, the largest medical
device market in Europe and third
largest in the world, accounting for approximately 60% of our 2016
revenue. Importantly, this new code was initiated and supported by
many major German medical societies, providing yet more validation
of our technology. The new reimbursement is expected to cover the
full cost of the device and procedure, significantly improving upon
the previous reimbursement, and eliminating a significant
bottleneck in usage. German hospitals are completing government
negotiations for their annual operating budgets, which includes
procedures like our CytoSorb therapy. We are already seeing solid
increases in reimbursement rates. Once these rates are more widely
established, they are expected to progressively enhance CytoSorb
sales over time.
Our expanded agreement with Fresenius Medical Care ("FMC"), the
largest dialysis company in the world, is expected to be another
major catalyst going forward. Exclusive critical care distribution
rights for CytoSorb were extended by three years in France, Poland, Denmark, Sweden, Norway and Finland, with FMC increasing its commitment to
guaranteed quarterly purchases. More importantly, we entered into a
co-marketing agreement where FMC's sales force will co-market
CytoSorb as a preferred critical care therapy on its
industry-leading multiFiltrate and multiFiltratePRO dialysis
machines, with a written endorsement that can be used worldwide.
This will effectively increase the number of sales reps in each
country marketing CytoSorb, where we (or our partners) will record
the sale of CytoSorb, and FMC's sales reps will gain sales on all
ancillary disposable products (e.g., blood lines, fluids, dialysis
filters) and dialysis machines. We believe this win-win scenario
will drive greater usage of CytoSorb while maximizing utilization
of FMC's acute care dialysis machine infrastructure and growing the
overall ICU market. We are in the training and preparation stage
with FMC, and plan to start in major countries later this year.
We have strong expectations for our other strategic partners as
well. In December 2016, our partner
Terumo Cardiovascular, a global leader in cardiac and vascular
surgery, launched CytoSorb for cardiac surgery applications in six
countries – France, Denmark, Sweden, Finland, Norway, and Iceland. We may potentially expand this
agreement to other countries, such as Japan, where Terumo is the market leader.
Biocon, the largest biopharmaceutical company in India, is also expanding steadily in
India and Sri Lanka after establishing a specially
focused CytoSorb sales division. Furthermore, the addition of Dr.
Reddy's Laboratories, a $2 billion in
sales global pharmaceuticals company, for South Africa shows the broad interest of our
platform across all types of international healthcare partners.
Meanwhile, we continue to grow our international sales team, adding
reimbursement support and regional sales managers, by way of
example, to drive the success of our distribution network
worldwide.
New CytoSorb growth opportunities abound in the $100 billion in product sales immunotherapy
market, even beyond critical illness and cardiac surgery. For
example, the recent addition of cancer immunotherapy pioneer, Dr.
Carl June, to our advisory board
highlights the potential of CytoSorb and related technologies in
the massive cancer and immuno-oncology fields.
2. Achievement
of Operating Profitability Within One to Two Years
We believe CytoSorbents has significant operating leverage as a
high value, high margin "therapeutic razorblade" pure play. We are
able to achieve this leverage throughout our business model: from a
highly scalable and robust manufacturing process requiring only
modest capital expenditures for major production gains; to our
R&D program that is nearly fully-funded by external grants and
contracts; to our mixed direct and distributor-based sales model
where blended gross margins are expected to approach 80% with
volume manufacturing and economies of scale. Because of these
dynamics, we expect to achieve operating profitability (excluding
clinical trial costs and non-cash expenses) within the next one to
two years at approximately $20
million in sales. At 2016 year end, we had already achieved
a $10 million sales run rate. Once
$20 million in sales is achieved and
clinical trial costs are offset, we expect to generate significant
amounts of cash and income, where approximately 50 cents on every dollar in sales could drop to
the bottom line. This would be further enhanced by using our
sizeable net operating loss carryforwards to offset corporate
taxes. We believe this is why our company is unlike many other
medtech companies who often incur increasing losses, as sales and
marketing expenses skyrocket to drive machine sales. We also
believe our high margin disposables model is why we have such
strong partnership interest. We appear to fit perfectly with their
acute care sales models of selling machines and disposables, while
giving them the ammunition to out-innovate and out-compete their
competitors.
3. Bringing
the Story Home to the U.S. – REFRESH 2 Cardiac Surgery
Trial
The expected initiation of our U.S. cardiac surgery REFRESH 2
trial in the second half of 2017, pending FDA protocol approval,
would establish a timeline for U.S. approval (potentially as early
as 2020) for the first time. This would be a major milestone for
investors. Last year we successfully completed the 40-patient,
8-center randomized, controlled REFRESH (REduction of FREe
Hemoglobin) I feasibility and safety trial which demonstrated that
CytoSorb was safe when used intra-operatively during on-pump
complex cardiac surgery. The trial also identified complex cardiac
surgery procedures with the highest levels of plasma-free
hemoglobin (which will be used to enrich REFRESH 2 for those at
greatest risk of organ injury), and demonstrated statistically
significant reductions of key inflammatory mediators in this group.
An abstract of our REFRESH I data was submitted and accepted for
podium presentation to the "Late Breaking Abstracts" tract of the
American Association for Thoracic Surgery conference on
May 1, 2017. Selection of abstracts
by AATS is very competitive, while podium presentation selection is
even more so. We feel this represents encouraging validation of our
strategy to control excessive inflammation during cardiac
surgery.
4. Enhanced
Stock Profile with Increased Liquidity and Institutional
Ownership
We recently announced the completion of an $11.5 million financing that was led by Cowen and
Company ("Cowen"), one of the top U.S. healthcare investment banks,
and co-managed by our existing investment banking syndicate
including Aegis Capital Corp. and HC Wainwright & Co., as well
as B. Riley & Co., Maxim Group, LLC, and Northland Capital
Markets. We are pleased that Cowen, following its own due
diligence, sought to work with us to introduce a new tier of
fundamental institutional investors to our story. This complemented
meetings organized by our existing banking syndicate, with a broad
range of smaller fundamental investors in non-deal roadshows over
the past year. We are also delighted that many other well-known
healthcare focused investment banks also want to work with us.
We accomplished several important goals in this financing.
First, we strengthened the balance sheet, eliminating the financing
"overhang" and enabling us to fund our anticipated growth without
interruption, including the build-out of a new CytoSorb
manufacturing facility and the financing of REFRESH 2, pending
discussions with the FDA. Second, we have garnered the support of
Cowen and other major investment banks and plan to continue working
with them on non-deal roadshows to increase our exposure and spread
our story to a new universe of investors. Third, we met with a
large number of fundamental investors, some of whom we knew, and
many of whom we met for the first time, with a number of such
investors participating in this deal. These investors form the
beginning of a core base of fundamental institutional stockholders
that is intended to drive sustained, increased liquidity of the
stock.
Improving the daily trading volume and liquidity of our stock is
one of our main priorities. Increasing liquidity would allow our
stock to respond more appropriately to good news. It would allow
large investors to begin taking open-market positions in the stock,
where previously they could not. And future financings, if needed
at all, would not need to "bake in" a liquidity discount for larger
investors. This discount contributed to a greater than
expected 17% discount to our stock price in this most recent
financing, but was still slightly better than the approximate 20%
mean and median discounts for most comparable life science and
medical device follow-on financings done in the past two years, and
below the approximate 23% discount on financings for medical device
companies with revenue of $5-20M.
That said, this financing with Cowen and our existing banks, the
participating core investors, and the marketing we did around the
deal, were central to our goal of propelling the company to the
"next level" with greater visibility and institutional sponsorship
that is intended to benefit all stockholders in the longer term. In
the coming months, we will work to build upon this progress, and
bring in new institutional and retail investors from both the U.S.
and Europe. We will complement
these efforts with a newly focused PR and IR effort specifically
designed with these goals in mind.
In summary, we have ambitious plans for 2017 across
a broad front and are now well-positioned, with important recent
catalysts and funding, to be able to target these goals
aggressively. We are a unique high margin disposables pure play
with an approved product and growing revenue in multi-billion
dollar markets; high operating leverage with the prospects of
near-term profitability; tremendous technology validation seen by
clinical usage, major strategic partnerships, and government
funding; and the potential for U.S. approval in the next several
years. For these reasons, we believe we bring an uncommon value to
investors. We look forward to continuing this exciting journey with
all of you: our patients and physicians, our customers, our
partners, our stockholders, and our CytoSorbents family. Thank you
again for all of your support.
Sincerely,
Dr. Phillip Chan, MD, PhD
Chief Executive Officer and President
About CytoSorbents Corporation (NASDAQ:
CTSO)
CytoSorbents Corporation is a leader in critical care
immunotherapy, specializing in blood purification. Its flagship
product, CytoSorb® is approved in the European Union with
distribution in 43 countries around the world, as a safe and
effective extracorporeal cytokine adsorber, designed to reduce the
"cytokine storm" or "cytokine release syndrome" that could
otherwise cause massive inflammation, organ failure and death in
common critical illnesses such as sepsis, burn injury, trauma, lung
injury and pancreatitis, as well as in cancer immunotherapy. These
are conditions where the risk of death is extremely high, yet no
effective treatments exist. CytoSorb® is also being used during and
after cardiac surgery to remove inflammatory mediators, such as
cytokines and free hemoglobin, which can lead to post-operative
complications, including multiple organ failure. CytoSorbents has
completed its REFRESH (REduction in FREe Hemoglobin) I trial - a
multi-center, randomized controlled study that has demonstrated the
safety of intra-operative CytoSorb® use in a heart-lung machine
during complex cardiac surgery. In 2017, the company plans to
initiate a pivotal REFRESH 2 trial intended to support U.S. FDA
approval. CytoSorb® has been used safely in more than 20,000
human treatments to date.
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. Its technologies have received non-dilutive
grant, contract, and other funding in excess of $18 million from DARPA, the U.S. Army, the U.S.
Department of Health and Human Services, the National Institutes of
Health (NIH), National Heart, Lung, and Blood Institute (NHLBI),
U.S. Special Operations Command (SOCOM) and others. The Company has
numerous products under development based upon this unique blood
purification technology, protected by 32 issued U.S. patents and
multiple applications pending worldwide, including CytoSorb-XL,
HemoDefend™, VetResQ™, ContrastSorb, DrugSorb, and others.
For more information, please visit the Company's websites at
www.cytosorbents.com and www.cytosorb.com or follow us
on Facebook and Twitter.
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. These
forward-looking statements include, but are not limited to,
statements about our plans, objectives, representations and
contentions and are not historical facts and typically are
identified by use of terms such as "may," "should," "could,"
"expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential," "continue" and similar words, although some
forward-looking statements are expressed differently. You should be
aware that the forward-looking statements in this press release
represent management's current judgment and expectations, but our
actual results, events and performance could differ materially from
those in the forward-looking statements. Factors which could cause
or contribute to such differences include, but are not limited to,
the risks discussed in our Annual Report on Form 10-K, filed with
the SEC on March 3, 2017, as updated by the risks reported in
our Quarterly Reports on Form 10-Q, and in the press releases and
other communications to shareholders issued by us from time to time
which attempt to advise interested parties of the risks and factors
which may affect our business. We caution you not to place undue
reliance upon any such forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise, other than as required under the Federal securities
laws.
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Cytosorbents
Contact: Amy Vogel
Investor
Relations
(732)
398-5394
avogel@cytosorbents.com
|
Public Relations
Contact:
Amy
Phillips
Pascale Communications
412-327-9499
amy@pascalecommunications.com
|
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SOURCE CytoSorbents Corporation