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Cytori Announces 2nd Quarter Results; Reports Cardiovascular Clinical Development Plans

Posted on: Monday, 14 August 2006, 18:00 CDT

Cytori Therapeutics, Inc. (NASDAQ:CYTX)(Frankfurt:XMPA) today announced financial results for the quarter ended June 30, 2006 and outlined plans for its upcoming clinical trials of adipose-derived stem and regenerative cells (ADRC) for cardiovascular indications in Europe.

"Since the end of last quarter we continued preparations for transition into the clinical phase of development for cardiovascular applications, reported results from our key chronic ischemia preclinical study and placed the Celution(TM) System in a breast reconstruction study marking the first clinical experience for our system," said Christopher J. Calhoun, Chief Executive Officer of Cytori Therapeutics. "To support our ongoing efforts, we entered into agreements to raise $16.8 million from an equity investment led by Olympus Corporation and included a syndicate of new and existing institutional investors."

Cytori expects to begin cardiovascular clinical trials in Europe as early as the fourth quarter of 2006 in the following two applications:

-- Acute Myocardial Infarction (Heart Attack): The APOLLO Trial

will be a randomized, placebo-controlled, double-blind, dose

escalation safety and feasibility study and will enroll up to

48 patients. Professor Patrick W. Serruys of Thoraxcenter,

Erasmus University Medical Center in The Netherlands will be

the principal investigator. As part of the study, the

patient's ADRCs will be extracted and concentrated in about an

hour using the Celution(TM) System and then delivered into the

ischemic area of the heart via intracoronary delivery.

-- Chronic Ischemia: The PRECISE Trial will be a randomized,

placebo-controlled, double-blind, dose-escalation safety and

feasibility study in up to 36 patients with chronic ischemia

who are not eligible for coronary artery bypass surgery or

percutaneous coronary intervention. Doctor Francisco

Fernandez-Aviles, of Gregorio Maranon Hospital in Madrid,

Spain will be the co-principal investigator. As part of the

study, cells will be processed using the Celution(TM) System

and delivered using a NOGA(R) mapping and delivery system.

Select milestones that the Company has achieved during and subsequent to the end of the second quarter include the following:

-- The first three patients were successfully treated without

complications in an investigator-initiated clinical study that

is evaluating ADRCs, isolated with the Celution(TM) System,

for use in breast reconstruction following partial mastectomy

-- Reported positive data from Cytori's preclinical study

demonstrating that ADRCs processed via the Celution(TM) System

and injected into ischemic areas of a heart imparted a

statistically significant improvement in ejection fraction and

ventricular wall thickness

-- Formed a cardiovascular clinical advisory board comprised of

pre-eminent cardiologists and imaging specialists to assist in

the design and execution of these planned clinical studies

-- Entered a strategic marketing agreement with Cambrex Bio

Science to provide adipose-derived stem cell products globally

to support research into the discovery of new therapies and

applications

-- Entered into agreements to raise approximately $16.8 million

from the sale of 2,918,255 shares at $5.75 per share

Financials

Cash, cash equivalents and short term investments were $9.3 million as of June 30, 2006. Subsequent to the end of the second quarter, Cytori entered into agreements to raise $16.8 million through the sale of 2,918,255 shares at $5.75 per share.

Total product and development revenues for the three and six months ended June 30, 2006 were $516,000 and $1.8 million, respectively, compared to $1.5 million and $3.3 million for the same periods in 2005. Research and development expenses for the three and six months ended June 30, 2006 were $6.0 million and $11.2 million, respectively, compared to $3.5 million and $6.6 million for the three and six months ended June 30, 2005, respectively. General and administrative expenses for the three and six months ended June 30, 2006 were $3.6 million and $6.8 million, respectively, compared to $2.3 million and $4.4 million for the same periods in 2005, respectively. Net loss for the three and six months ended June 30, 2006 was $7.3 million and $14.8 million, or $0.47 and $0.95 loss per common share, respectively, compared to a net loss of $5.4 million and $9.9 million, or $0.37 and $0.70 loss per common share, for the same periods in 2005, respectively.

The increase in R&D for the first half is attributed to additional pre clinical studies as part of preparations for upcoming clinical trials; increased Celution System development expenses to attain regulatory approvals; internal scale-up for manufacturing of devices and consumables for clinical trials and expenses related to transitioning commercial generation development efforts to our Joint Venture.

"For the remainder of the year, we will significantly reduce our total operating expenses through decreased allocation of resources to our non-core biomaterials operations as well as reductions in certain product development costs resulting from the sharing of responsibilities under the Joint Venture," said Mark Saad, Chief Financial Officer of Cytori Therapeutics. "In addition, we completed the build-out of our new research facility which resulted in approximately $2 million of non-recurring capital expenditures during the first half. These factors, combined with other adjustments, will result in reducing our ongoing cash burn to approximately $2 million per month before any potential benefit from the biomaterials operations."

Conference Call Information

The management of Cytori Therapeutics will host a conference call today at 4:30 p.m. Eastern Daylight Time (EDT) or 10:30 p.m. Central European Summer Time (CEST). The conference call will be webcast live and may be accessed under "Events & Webcasts" in the Investor Relations section of the Company's website at http://www.cytoritx.com. The archived version of the webcast will be available two hours after the call on the company's website and accessible for 14 days. A telephone replay will be available for one week. To access the replay, please call +1 (303) 590-3000 (PIN: 11067643#).

About Cytori Therapeutics

Cytori Therapeutics, Inc. (NASDAQ:CYTX)(Frankfurt:XMPA) is discovering and developing proprietary cell-based therapeutics utilizing adult stem and regenerative cells derived from adipose tissue, also known as fat. The Company is targeting cardiovascular disease, gastrointestinal disorders and new approaches for aesthetic and reconstructive surgery. To facilitate processing and delivery of adipose stem and regenerative cells, Cytori has developed its proprietary Celution(TM) System to isolate and concentrate a patient's own stem and regenerative cells in about an hour. This system will dramatically improve the speed in which personalized cell-based therapies can be delivered to patients.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes forward-looking statements regarding events, trends and prospects of our business which may affect our future operating results and financial position. Such statements 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 our history of operating losses and expected continuing losses, the need for further financing, our ability to develop and commercialize regenerative cell-based therapies, our dependence on third parties, our ability to obtain, defend and enforce our intellectual property, and other risks and uncertainties described (under the heading "Risk Factors") in Cytori Therapeutics' Form 10-K annual report for the year ended December 31, 2005 and subsequent SEC filings. We assume no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made. Consolidated Condensed Balance Sheets (Unaudited) As of As of June December 30, 31, 2006 2005 ------------ ------------ Assets Current assets: Cash and cash equivalents $2,379,000 $8,007,000 Short-term investments, available-for-sale 6,964,000 7,838,000 Accounts receivable, net of allowance for doubtful accounts of $4,000 and $9,000 in 2006 and 2005, respectively 344,000 816,000 Inventories, net 202,000 258,000 Other current assets 791,000 621,000 ------------ ------------ Total current assets 10,680,000 17,540,000 Property and equipment, net 5,351,000 4,260,000 Investment in joint venture 84,000 -- Other assets 521,000 458,000 Intangibles, net 1,411,000 1,521,000 Goodwill 4,387,000 4,387,000 ------------ ------------ Total assets $22,434,000 $28,166,000 ============ ============ Liabilities and Stockholders' Deficit Current liabilities: Accounts payable and accrued expenses $4,272,000 $6,129,000 Current portion of long-term obligations 928,000 952,000 ------------ ------------ Total current liabilities 5,200,000 7,081,000 Deferred revenues, related party 29,128,000 17,311,000 Deferred revenues 2,393,000 2,541,000 Option liabilities 2,191,000 5,331,000 Long-term deferred rent 897,000 573,000 Long-term obligations, less current portion 1,122,000 1,558,000 ------------ ------------ Total liabilities 40,931,000 34,395,000 ------------ ------------ Commitments and contingencies Stockholders' deficit: Preferred stock, $0.001 par value; 5,000,000 shares authorized; -0- shares issued and outstanding in 2006 and 2005 -- -- Common stock, $0.001 par value; 95,000,000 shares authorized; 18,498,004 and 18,194,283 shares issued and 15,625,170 and 15,321,449 shares outstanding in 2006 and 2005, respectively 18,000 18,000 Additional paid-in capital 84,720,000 82,196,000 Accumulated deficit (92,781,000) (78,013,000) Treasury stock, at cost (10,414,000) (10,414,000) Accumulated other comprehensive loss (40,000) (16,000) ------------ ------------ Total stockholders' deficit (18,497,000) (6,229,000) ------------ ------------ Total liabilities and stockholders' deficit $22,434,000 $28,166,000 ========================= Consolidated Condensed Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months For the Six Months Ended June 30, Ended June 30, ------------------------------------------------- 2006 2005 2006 2005 ------------------------------------------------- Product revenues, related party $453,000 $1,477,000 $955,000 $3,232,000 Cost of product revenues 504,000 738,000 958,000 1,483,000 ------------------------------------------------- Gross (loss) profit (51,000) 739,000 (3,000) 1,749,000 ------------------------------------------------- Development revenues: Development 6,000 -- 831,000 9,000 Research grant and other 57,000 64,000 63,000 89,000 ------------------------------------------------- 63,000 64,000 894,000 98,000 ------------------------------------------------- Operating expenses: Research and development 6,021,000 3,465,000 11,197,000 6,581,000 Sales and marketing 473,000 337,000 974,000 728,000 General and administrative 3,608,000 2,292,000 6,824,000 4,358,000 Change in fair value of option liabilities (2,665,000) 60,000 (3,140,000) 60,000 ------------------------------------------------- Total operating expenses 7,437,000 6,154,000 15,855,000 11,727,000 ------------------------------------------------- Operating loss (7,425,000) (5,351,000) (14,964,000) (9,880,000) ------------------------------------------------- Other income (expense): Interest income 183,000 54,000 379,000 109,000 Interest expense (53,000) (36,000) (111,000) (76,000) Other expense, net (1,000) (26,000) (6,000) (39,000) Equity loss from investment in joint venture (17,000) -- (66,000) -- ------------------------------------------------- Total other income (expense) 112,000 (8,000) 196,000 (6,000) ------------------------------------------------- Net loss (7,313,000) (5,359,000) (14,768,000) (9,886,000) ------------------------------------------------- Other comprehensive (loss) income- unrealized holding (loss) income (10,000) 14,000 (24,000) 14,000 ------------------------------------------------- Comprehensive loss $(7,323,000)$(5,345,000)$(14,792,000)$(9,872,000) ================================================= Basic and diluted net loss per common share $(0.47) $(0.37) $(.95) $(0.70) ================================================= Basic and diluted weighted average common shares 15,592,293 14,379,849 15,510,586 14,168,234 ================================================= Consolidated Condensed Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, -------------------------- 2006 2005 ------------- ------------ Cash flows from operating activities: Net loss $(14,768,000) $(9,886,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,124,000 861,000 Inventory provision 70,000 -- Reduction in allowance for doubtful accounts (5,000) (3,000) Change in fair value of option liabilities (3,140,000) 60,000 Stock-based compensation expense 1,873,000 63,000 Equity loss from investment in joint venture 66,000 -- Increases (decreases) in cash caused by changes in operating assets and liabilities: Accounts receivable 477,000 375,000 Inventories (14,000) (153,000) Other current assets (170,000) 83,000 Other assets (63,000) (157,000) Accounts payable and accrued expenses (2,144,000) 160,000 Deferred revenues, related party 11,817,000 7,811,000 Deferred revenues (148,000) (9,000) Long-term deferred rent 324,000 -- ------------- ------------ Net cash used in operating activities (4,701,000) (795,000) ------------- ------------ Cash flows from investing activities: Proceeds from sale and maturity of short- term investments 33,222,000 22,089,000 Purchases of short-term investments (32,372,000) (23,242,000) Purchases of property and equipment (1,818,000) (546,000) Investment in joint venture (150,000) -- ------------- ------------ Net cash used in investing activities (1,118,000) (1,699,000) ------------- ------------ Cash flows from financing activities: Principal payments on long-term obligations (460,000) (474,000) Proceeds from exercise of employee stock options 651,000 15,000 Proceeds from sale of common stock -- 3,003,000 Proceeds from issuance of options -- 186,000 ------------- ------------ Net cash provided by financing activities 191,000 2,730,000 ------------- ------------ Net (decrease) increase in cash and cash equivalents (5,628,000) 236,000 Cash and cash equivalents at beginning of period 8,007,000 2,840,000 ------------- ------------ Cash and cash equivalents at end of period $2,379,000 $3,076,000 ============= ============

Source: Business Wire

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