Company Press Releases Back
CytoSorbents Reports Corporate Update and First Quarter 2012 Financial Results
Tuesday May 15, 2012
MONMOUTH JUNCTION, NJ--(Marketwire -05/15/12)- CytoSorbents Corporation (OTC.BB: CTSO), a critical care-focused company using blood purification to modulate the immune system to prevent or treat organ failure caused by life-threatening illnesses, announced a corporate update and its financial results for the three months ended March 31, 2012.
Dr. Phillip Chan, Chief Executive Officer, stated, "We have successfully achieved the majority of our goals in our controlled market release for CytoSorb® and are now putting the last pieces in place that will enable us to transition smoothly from a development stage company into one focused on early commercialization. Here are highlights of our recent progress.
- Sales Development: As part of a number of goals we were working on during the controlled market release, in the first quarter of this year we focused our sales efforts on evaluating a number of distributor networks in several countries in Europe, making some initial non-exclusive sales. The remainder of the time, we expanded market awareness of CytoSorb® at major critical care conferences such as the recent conferences in Bremen, Germany and the ISICEM conference in Brussels, Belgium where we held our research symposium. Our efforts are beginning to bear fruit, with key opinion leaders from nearly 20 leading hospitals in Germany and approximately 10 more outside of Germany now agreeing to evaluate CytoSorb® and/or participate in investigator-led clinical studies. We view this as important, as it represents interest in many different clinical applications in different countries, and may result in future sales. We expect gross margins on direct sales to be greater than 50%. We expect overall gross margins to fluctuate based on a number of factors including the mix of direct and distributor sales. Over time we are confident that our margins will improve with volume.
- Sales Force: Stressing the importance of a strong sales force, we focused our resources heavily during the past many months to identify and recruit a highly-experienced sales team, including an experienced head of sales and marketing with whom we have been working during the controlled market release. In general, we were looking for educated and articulate sales representatives in specific geographic territories who not only had a strong knowledge and experience in extracorporeal therapies, and had experience in launching new technologies, but who were also veterans of selling products into critical care with their own intensivist contacts. We took extra time in our screening process to ensure that we selected the right sales people and are confident that we have now identified an experienced initial core team to formally launch CytoSorb® more broadly into the market. Two sales representatives will join the company over the next several weeks and the next two sales representatives will join in Q3 due to former employment contract provisions. We will gauge the market demand and adjust the number of sales representatives to be added commensurate with the market opportunity. As most of you are aware it will take several months for the new salespeople to be trained and begin generating revenue, but during this transition period, we hope to accelerate their productivity with opportunities we have already generated.
- Distribution outside of Germany: We are currently in various stages of ongoing discussions with a number of potential independent distributors and potential strategic partners for distribution outside of Germany. We consider CytoSorb® as our most important and valuable product going forward and there are a number of advantages and disadvantages of working with a strategic partner at this early juncture. That being said, we continue to evaluate our options with the goal of maximizing the long-term return for the Company and shareholders.
- Clinical Programs: As discussed previously, we seek to continue to support additional studies to expand the clinical experience with CytoSorb®. In addition to Company-sponsored studies, we are also in discussions with a number of major hospitals that may initiate their own investigator-led studies. We will have a more detailed update on some of these activities in the future.
- European Subsidiary: We recently established our CytoSorbents Europe GmbH subsidiary with offices in Berlin, Germany. As previously discussed, this forms an integral part of our European expansion strategy.
- Trademark, Marketing and Website: CytoSorb® is now a registered trademark in the U.S. and E.U. We have been promoting CytoSorb® at conferences with our "Fight the Storm!" campaign, and are translating our marketing materials into German. We are also in the process of completely redesigning our website in both English and German to be more product-focused, with more information available.
- Research Programs: This has been an exciting time for the company as research initiatives for other potential applications for our technology beyond sepsis have been growing. We have been achieving our objectives under the $100K Phase I SBIR grant awarded by the US Army, and believe we are well-positioned to apply for the up to $1 million Phase II portion of this grant later this year. We hope that this grant will generate additional collateral funding opportunities within the military and other government sponsored research programs. We have also previously disclosed that we are in contract negotiations with DARPA to participate in their "Dialysis-Like Therapeutics" program to treat sepsis. While this has taken longer than expected, we still believe that these discussions will come to a positive conclusion. Lastly, HemoDefend continues to garner a significant amount of interest from non-profit organizations and potential strategic partners in the blood transfusion medicine space. All of these programs are important because they help advance our technologies and provide the company with potential non-dilutive funding.
- Raising Capital: In the near-term, as we transition into early commercialization, we will need to continue to raise capital. Our philosophy as a management team has been to tightly control costs, while selectively raising capital and obtaining grants and other non-dilutive capital to limit dilution to shareholders. As an example of our ability to control costs, in all of 2011, our cash expenses were only about $4M, despite the costs associated with our clinical trial and ramping manufacturing of CytoSorb®. In the first quarter of 2012, we raised $700K in a convertible note that requires no cash repayment. We also raised $1M through sales of common stock to Lincoln Park Capital under our $8.5M funding agreement. Because the funding agreement allows us to sell common stock to them at prevailing market prices without additional sweeteners, it currently represents the lowest cost of capital to the company and is beneficial to shareholders, particularly if our share price rises. Looking forward, other grant and contract sources may provide a significant way to offset our expenses and reduce the need to raise capital.
- Increasing Investor Awareness: Today, with CytoSorb® in the early stages of commercialization, a growing number of exciting products under development, and an expanding research pipeline with government interest, CytoSorbents' story has become even more compelling and needs to be heard by more investors. Our goal is to increase awareness of the company and its technology. We are working to accomplish this first and foremost by executing on our business strategy and increasing the fundamental value of the company through operational progress. We also are presenting the story to new institutional investors, launching a revitalized website that can help communicate our story more effectively, increasing our presence on the web and in social and print media, planning to uplist our company to a national exchange when eligible, and working on attracting new analyst coverage.
In all, with our small but growing team of dedicated professionals, we have been able to accomplish a significant number of major milestones over the past several years. As we wind down our controlled market release and transition towards a formal launch of CytoSorb® in Germany, I am confident that the experience we have gained during this time will help us execute well on our go-to-market strategy. I would encourage investors to keep focused on the longer-term prospects of the Company as we enter into this exciting early commercialization phase. We thank our employees and shareholders for their continued support and belief in the company."
Financial Results for the first quarter of 2012
CytoSorbents generated product revenues of $16,893 and $-0- for the three months ended March 31, 2012 and 2011, respectively. Revenues in the current quarter were part of an initial test market phase of CytoSorb® with the company exploring direct sales to hospitals in Germany and sales to distributor networks in other parts of Europe. The device was not available or approved for sale during the first quarter of 2011.
Our research and development costs were, $643,281 and $759,157, for the three months ended March 31, 2012 and 2011, respectively. The Company had net losses of $1,426,596 and $1,214,584 for the three month periods ended March 31, 2012 and 2011, respectively. Historically, our losses have resulted principally from costs incurred in the research and development of our polymer technology, and selling, general and administrative expenses, which together were $912,747 and $1,029,249 for the three month periods ended March 31, 2012 and 2011, respectively. The Company had $1,803,049 in cash at the end of the quarter.
For additional information please see the company's 10Q report for the period ended March 31, 2012 filed on May 15, 2012 on www.sec.gov.
About CytoSorbents, CytoSorb™, and HemoDefend
CytoSorbents Corporation is a critical care focused therapeutic device company using blood purification to modulate the immune system and fight multi-organ failure in life-threatening illnesses. Its purification technology is based on biocompatible, highly porous polymer beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and adsorption. In March 2011, CytoSorb®, the Company's flagship product, achieved European regulatory approval as an extracorporeal cytokine filter, and can now be sold throughout the European Union (E.U.) under the CE Mark to be used in clinical situations where cytokines are elevated. The goal of CytoSorb® is to modulate the immune system by removing excessive cytokines, often called "cytokine storm," in critically-ill patients that can lead to deadly inflammation, multiple organ failure, immune dysfunction, and often death in common illnesses such as sepsis, trauma, burn injury, acute respiratory distress syndrome, and pancreatitis. CytoSorb® has demonstrated statistically significant reductions in mortality in septic patients at high risk of death and is now available for sale in Germany for the treatment of critical care illnesses under a controlled market release, with a planned broad product launch in Germany starting in the first half of 2012 and availability in other E.U. countries, assuming adequate and timely funding, and continued positive results from our clinical studies. HemoDefend is a development-stage blood purification technology platform for the blood transfusion industry intended to reduce transfusion reactions and safeguard the quality and safety of blood products. The HemoDefend technology utilizes the Company's polymer bead technology to remove many substances, such as antibodies, free hemoglobin and inflammatory mediators that can cause potentially serious and sometimes fatal transfusion reactions. CytoSorb® and HemoDefend are just two of a number of different polymers the Company has designed for various medical applications, including improved dialysis, reduction of post-surgical complications, the potential treatment of inflammatory and autoimmune disorders, rhabdomyolysis in trauma, drug detoxification, and others. Additional information is available for download on the Company's website: http://www.cytosorbents.com.
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. Forward-looking statements in this press release are not promises or guarantees and are subject to risks and uncertainties that could cause our actual results to differ materially from those anticipated. These statements are based on management's current expectations and assumptions and are naturally subject to uncertainty and changes in circumstances. We caution you not to place undue reliance upon any such forward-looking statements. Actual results may differ materially from those expressed or implied by the statements herein. CytoSorbents Corporation and CytoSorbents, Inc believe that its primary risk factors include, but are not limited to: obtaining government approvals including required FDA and additional CE Mark approvals; ability to successfully develop commercial operations; dependence on key personnel; acceptance of the Company's medical devices in the marketplace; the outcome of pending and potential litigation; compliance with governmental regulations; reliance on research and testing facilities of various universities and institutions; the ability to obtain adequate and timely financing in the future when needed; product liability risks; limited manufacturing experience; limited marketing, sales and distribution experience; market acceptance of the Company's products; competition; unexpected changes in technologies and technological advances; and other factors detailed in the Company's Form 10-K filed with the SEC on March 30, 2012, which is available at http://www.sec.gov.
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Source: CytoSorbents Corporation