Cytori Consolidates and Restructures Its Operations, Provides Business Update
Cytori Therapeutics (NASDAQ:CYTX) today announced its updated strategy and plan to restructure its operations and reduce costs. In addition, Cytori has also provided an interim update on some important business items.
Corporate Strategy and Restructuring
Over the last few months, the Company’s board and management team have been carefully re-evaluating corporate strategy and the resources required to achieve the Company’s goal to be a leader in the cell therapy industry. Going forward, the Company will focus on delivering value by limiting its activities to: expanding the US clinical pipeline, building on current governmental and corporate partnerships and ensuring that its commercial efforts are cash flow positive immediately. To accomplish this, the Company has: (1) restructured senior management and the global commercial and development teams, (2) consolidated operations, and (3) reduced duplicative activities and unnecessary expenses. Dr. Marc H. Hedrick, Cytori’s President and CEO, noted: “Besides significant changes in strategy and expense reductions, we are also working in partnership with our lenders, with whom we have an outstanding relationship, to strengthen our financial position for the next 12-24 months. In this regard, our lenders have recently provided us a temporary waiver of the liquidity threshold that requires us to maintain certain minimum cash balances, and we are in discussions with them for the overall restructuring of the loan. I will provide more details on our restructuring and long term financial plan in forthcoming releases and on our Q3 conference call.”
As a part of the restructuring effort, Mr. Clyde Shores, Cytori’s Executive Vice President of Marketing and Sales, resigned and a number of other employees have left or will be leaving the Company after a brief transition period. After the transition period, the Company will have reduced the number of full time employees from a peak of 119 earlier this year to approximately 77 employees. As a consequence of these efforts, we estimate that we will incur a one-time restructuring charge of approximately $500,000. The consolidation and cost reduction initiatives over the past several months are expected to lower our operating expenses by more than $8 million on an annualized basis.
“My first order of business as the new CFO at Cytori will be focused on putting the Company on a sustainable financial path by both strengthening the balance sheet and significantly reducing expenses. I believe that the Company can be more effective in delivering near term value to the shareholders after these measures are implemented,” said Mr. Tiago Girao, Vice President of Finance and Chief Financial Officer of Cytori. “We will provide additional details on the steps we are implementing to improve the focus and performance of the Company over the next several months. Personally, I am honored to be part of the leadership team and to have the opportunity to bring Cytori’s ground breaking medical technology to suffering patients.”
- Clinical pipeline update
- On September 19th, Cytori filed its responses and related data to FDA regarding the ATHENA trial hold. FDA feedback is anticipated in 30 days.
- Cytori has received conditional approval from FDA to begin a US IDE trial on patients with Osteoarthritis and enrollment will likely begin in the first quarter of 2015. In light of this approval and the restructuring, Cytori is assessing the merits of continuing its current RECOVER trial for acute muscle tears.
- Cytori anticipates that the U.S. pilot clinical trial for burn injury as part of its BARDA contract and subsequent receipt of the related $8m milestone, will move forward when the Company’s next generation system is available for clinical trial use, which is expected in 2015.
- The Japanese government sponsored pivotal clinical trial for urinary incontinence is undergoing review with MHLW and should commence enrolling next year.
- BARDA contract and next generation technology development
- Activities related to Option 1 of Cytori’s contract with BARDA are now ongoing. Cytori is actively drawing on the initial $12m which supports research and development work while also covering a substantial portion of overhead.
- Cytori’s development of its next generation platform technology is proceeding. Initial product release is expected in 2015.
- Commercial Restructuring & Revenue Forecast
- Despite the impact of the cost reduction efforts, Cytori continues to anticipate modest overall revenue growth in 2014.
- Overall revenue growth in 2015 and 2016 will likely continue to be modest but should show a positive contribution margin beginning in 2015 based on the combination of recent expense reductions and forecasted increases in sales to Lorem Vascular and other partners, as well as through Cytori’s leaner direct sales teams in both Japan and Europe.
- The new regenerative medicine law in Japan has completed its public comment period and, based on current feedback, the Company believes the outcome could be favorable to Cytori’s business prospects in Japan in 2015 and beyond.
- Warrant Exercise
- In September, we received approximately $4 million as a result of warrant exercises following the amendment of the June 4, 2014 warrants as announced by the Company on September 8, 2014.
About Cytori Therapeutics
Cytori Therapeutics is developing cell therapies based on autologous adipose-derived regenerative cells (ADRCs) to treat cardiovascular disease, thermal burns and other medical conditions. Our scientific data suggest ADRCs improve blood flow, moderate the inflammatory response and keep tissue at risk of dying alive. As a result, we believe these cells can be applied across multiple “ischemic” conditions. These therapies are made available to the physician and patient at the point-of-care by Cytori’s proprietary technologies and products, including the Celution(R) System product family. www.cytori.com
Cautionary Statement Regarding Forward-Looking Statements
This communication includes forward-looking statements regarding events, trends and business prospects, which may affect our future operating results and financial position. Such statements, including, but not limited to, those regarding our ability to restructure our existing loan and strengthen our financial position, our ability to lower our operating expenses by more than $8 million, our expectation of modest revenue growth in 2014, 2015 and 2016, our expectation of positive contribution margin from our commercial sales in 2015 and 2016, our ability to initiate the pilot clinical trial for burn injury in conjunction with BARDA, our ability to launch the next generation cell processing system in 2015, our expectation that the Japan Government sponsored pivotal clinical trial in Japan will begin enrolling in 2015, and our expectation that the new regenerative medicine law in Japan will be favorable to Cytori’s business prospects, each of which are subject to risks and uncertainties that could cause our actual results and financial position to differ materially. Some of these risks and uncertainties include challenges is raising additional capital, regulatory uncertainties, unforeseen costs and expenses, future Japan and US Government funding and procurement priorities, the Government’s sole discretion in determining funding timing and amounts, and its ability to terminate or modify the contract in the Governments best interests, the performance of our products and our commercial sales team, dependence on third party performance, and other risks and uncertainties described under the “Risk Factors” section in Cytori’s Securities and Exchange Commission Filings on Form 10-K and Form 10-Q. Cytori assumes no responsibility to update or revise any forward-looking statements contained in this press release to reflect events, trends or circumstances after the date of this communication.
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