CYTOMEDIX ANNOUNCES SECOND QUARTER 2013 FINANCIAL RESULTS AND COMMERCIAL PARTNERSHIP FOR ANGEL® TECHNOLOGY
Conference Call Scheduled for August 8, 2013 at 8:00 a.m. Eastern Time
GAITHERSBURG, Maryland – August 7, 2013 – Cytomedix, Inc. (OTCQX: CMXI), a regenerative therapies company commercializing and developing innovative platelet technologies, today released financial results for the second quarter of 2013 and announced a commercial licensing agreement for Angel® that provides for an upfront $5 million payment and an ongoing source of royalty income.
- Cytomedix has signed a five-year worldwide licensing agreement with Arthrex, Inc., a privately held global leader in orthopedics, for the commercialization of the Angel® Concentrated Platelet Rich Plasma System. As discussed below, Arthrex will pay Cytomedix an upfront payment of $5 million, plus royalties on future sales of Angel®.
- Cytomedix will focus its commercial operations on selling AutoloGel in the wound care market and leverage AutoloGel's current reimbursement status to begin treating Medicare beneficiary patients, which make up over half of the approximately 2.0 million pressure ulcers, 1.7 million venous ulcers and 1.5 million diabetic foot ulcers treated in the U.S. each year. The Company is expected to expand its access to the Veterans Health Administration (“VA”) utilizing its listing on the Federal Supply Schedule (“FSS”).
- Cytomedix will also continue to evaluate strategic partnerships or co-promotions as a means to further accelerate AutoloGel growth.
2Q 2013 Earnings (all comparisons are with the 2012 second quarter)
- Product revenue of $2.4 million compared with $1.8 million in the prior year, an increase of 30%.
- Net loss to common stockholders of $5.0 million, or ($0.05) per share. This compares to a net loss of $7.5 million, or ($0.09) per share in the prior year.
- Cash and cash equivalents of approximately $3.4 million at June 30, 2013.
Angel® Technology Licensed to Arthrex
Cytomedix announced that today it has signed a five-year exclusive worldwide licensing agreement with Arthrex, Inc., for the commercialization of the Angel® Concentrated PRP System (Angel®). Angel® is the Company’s cPRP device and associated disposable products used in surgical settings for the separation of concentrated platelets from whole blood or bone marrow aspirates. Arthrex has a large commercial infrastructure supporting sales throughout the world and will immediately take responsibility for all sales and marketing activities for Angel®. Angel® is currently approved in the U.S., and various countries in Europe and in the Middle East, as well as in Canada and Australia.
Under the terms of the agreement, Cytomedix will retain ownership of the asset and will grant Arthrex exclusive worldwide rights to develop, manufacture, and commercialize Angel®. Arthrex will pay Cytomedix an upfront payment of $5 million, plus royalties on future sales in the low teen range. The term of the agreement is five years, with a three year renewal option. In connection with the Arthrex technology license agreement, the Company was required to make certain modifications and amendments to its financing arrangement with its senior secured lender, which were executed as of the same date and which are described in the Financial Results section of this press release and in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013.
Martin Rosendale, Chief Executive Officer of Cytomedix, commented, “We are proud to partner with Arthrex, an acknowledged leader in orthopedics. We are confident that the greater commercial resources they will put into marketing Angel® will translate into faster sales growth and a consistent royalty stream for Cytomedix. We believe that, given Arthrex’s extensive experience and success in marketing products in this space, it will be able to maximize the global potential of this best in class product.”
Focus on Targeted AutoloGel Expansion
The licensing of Angel® is expected to provide Cytomedix with additional commercial and financial resources to increase AutoloGel’s visibility in the long-term chronic wound care market. The Company's existing commercial operations, which include sales, marketing, clinical and operations, will focus on driving greater awareness and utilization of AutoloGel in outpatient wound care clinics following the Coverage with Evidence Development (“CED”) determination by the Centers for Medicare & Medicaid Services (“CMS”) and with institutional customers where treatment of non-healing wounds with AutoloGel can help reduce patient healing times and increase quality of care.
Cytomedix expects to double its experienced device and biologics sales force during 2014 to accommodate the growing number of AutoloGel treatment sites. The Company will also expand access to the VA to leverage AutoloGel's listing on the FSS. The VA is America's largest integrated health care system with over 1,700 sites of care and serves 8.3 million veterans each year.
To maximize AutoloGel's unique reimbursement position with the CMS following the CED determination, Cytomedix is preparing for a major launch in outpatient wound clinics in early 2014. CMS issued proposed payment regulations on July 8, 2013 that include guidelines covering Medicare reimbursement for AutoloGel under the Physician Fee Schedule and the Hospital Outpatient Prospective Payment System. As previously discussed, the Company will continue to work with CMS with the goal of obtaining appropriate payment for AutoloGel in the hospital outpatient setting. CMS is expected to announce the final ruling in late November 2013, which would take effect on January 1, 2014.
The Company will also continue to evaluate strategic partnerships or co-promotions as a means to further accelerate AutoloGel growth.
“We are excited to begin treating Medicare beneficiaries with AutoloGel, which addresses an existing unmet need in wound care” said Martin Rosendale. “We have worked hard to build a strong clinical data package supporting the efficacy and cost advantages of using AutoloGel to treat chronic wounds. The realignment of our commercial organization will now allow us to build on the significant gains we have made in reimbursement. Provided that our reimbursement efforts to date and in the near future bring the anticipated results, we estimate a market opportunity to drive a sustainable revenue ramp to be at least $500 million worldwide.”
Financial Results, Three-Month Period Ended June 30, 2013
Total revenues were $2.4 million in the three months ended June 30, 2013, a decrease of approximately $1.3 million compared to the same period last year. The decrease was mostly due to license fee revenue of $1.8 million recognized in 2012 with respect to an option agreement with a top 20 global pharmaceutical company. Product sales in the quarter were $2.4 million, an increase of 30% compared with the same period last year.
Gross margin on product sales decreased to 43% from 46% comparing the three months ended June 30, 2013, to the same period last year. The decrease in gross margin is primarily attributable to Angel® machine refurbishment costs, the medical device excise tax, which took effect in 2013, and a non-cash patent amortization charge related to the AutoloGel product. Overall gross margin decreased to 44% from 73%. The license fee recorded in the second quarter of 2012 had no associated cost of revenue and was the primary reason for the decline in overall gross margin year over year.
Second quarter cash margins on product sales decreased to 50% from 54%. Cash margin is a non-GAAP financial measure, most directly comparable to the U.S. GAAP measure of gross margin, and should not be considered as an alternative thereto. Cytomedix defines cash margin as gross margin exclusive of patent amortization and depreciation expense, and it is a significant performance metric used by management to indicate cash profitability on product sales. Patent amortization and depreciation expense was $163,000 and $137,000 during the three months ended June 30, 2013 and 2012, respectively.
Total operating expenses in the second quarter were $5.7 million an increase of $0.7 million or 13% compared to the same period in 2012.
Salaries and wage expenses during the quarter were $2.0 million compared with $1.8 million last year. The increase was primarily due to additional operational head-count. Total Consulting and Professional fee expenses in the quarter were $1.0 million compared to $0.7 million last year. The increase was primarily due to CMS reimbursement related consulting services and higher legal fees. Research and development expenses in the quarter were $1.2 million compared with $1.1 million last year. The increase was primarily due to one-time manufacturing charges related to the sourcing and testing of Angel® centrifuge replacement components. General and administrative expenses were $1.5 million, essentially even with the same quarter in 2012.
The Company recorded a net loss of $5.0 million, or ($0.05) per share in the three-month period ended June 30, 2013, compared to a net loss of $7.5 million, or ($0.09) per share in the comparable period in 2012.
Financial Results, Six-Month Period Ended June 30, 2013
Total revenues in the first half of 2013 were $4.7 million, compared with $6.7 million in the first half of 2012. The decrease was mostly due to license fee revenue of $3.2 million recognized in 2012 with respect to the option agreement with a top 20 global pharmaceutical company. Product sales for the first six months were $4.6 million, an increase of 32% year over year. Gross margins on product sales were 43% in the first half, compared with 48% in the same period in 2012.
Salaries and wages for the first half were $4.0 million, compared with $3.8 million the first half of 2012. Consulting expenses and Professional fees were $1.6 million in the first half, down from $1.9 million in the same period last year. Research & development expenses were $2.1 million, compared with $1.4 million last year. General and administrative expenses were $4.0 million in the first half, compared with $2.7 million last year. Total operating expenses in the first six months were $11.8 million, compared with $9.9 million reported in the same period in 2012.
The Company recorded a net loss of $10.4 million, or ($0.10) per share for the six-month period ended June 30, 2013, compared to a net loss of $12.2 million, or ($0.17) per share in the same period last year. Cash used in operating activities for the six-months ended June 30th was $7.9 million.
Cash and Liquidity
Cash and cash equivalents were approximately $3.4 million at June 30, 2013, up from $2.6 million at December 31, 2013. Upon receipt of the Arthrex upfront payment of $5 million, the Company will have cash and cash equivalents of approximately $7 million on or about August 8, 2013.
In order to complete the Arthrex licensing engagement and the agreement in connection therewith, on August 7, 2013, the Company entered into Consent and First Amendment to Security Agreement (the “Amendment to Credit Agreement”) with MidCap Funding III, LLC, its senior secured lender, amending the February 13, 2013 Credit and Security Agreement. MidCap consented to the Company entering the Arthrex Agreement in consideration for, among other things, termination of the Company’s ability to borrow an additional $3 million, reducing the loan amount from $7.5 million to $4.5 million, $4.5 million of which has been extended to the Company to date. The parties also agreed to an accelerated payment schedule under the credit facility commencing on September 1, 2013. Finally, the Company granted to the lender a first priority security interest in the royalty payments payable to the Company pursuant to the Arthrex Agreement. For more details relating to this transaction, see the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013.
Cash used in operating activities during the quarter was $3.7 million. There were approximately 104.8 million shares of common stock issued and outstanding as of June 30, 2013.
Conference Call & Webcast Details
Thursday, August 8, 2013 @ 8:00am Eastern/5:00am Pacific
Domestic dial in: 866-280-4960
Replays – Available through August 15, 2013
About Arthrex, Inc.
Arthrex, headquartered in Naples, Florida, is a global medical device leader in new product development and medical education in orthopedics. Arthrex has pioneered the field of arthroscopy and developed more than 6,000 innovative products and surgical procedures to advance minimally invasive orthopedics worldwide. For more information, visit www.arthrex.com.
About The AutoloGel™ System
The AutoloGel System utilizes a proprietary unique technology that enables the rapid isolation and activation of PRP from a patient’s own blood. The PRP is subsequently processed to produce a bioactive gel for application to the wound bed, re-establishing a balance needed for natural healing to occur. In normal healing, platelets migrate from the blood into the wound site where they serve as the primary source of growth factors for effective wound healing. In chronic wounds, blood supply may be impaired and the delivery of platelets is impeded, disallowing adequate concentrations of growth factors. The AutoloGel System is used at the point-of-care and is the only PRP system cleared by the U.S. Food and Drug Administration for use on exuding wounds, such as leg ulcers, pressure ulcers and diabetic ulcers, and for the management of mechanically or surgically-debrided wounds. Cytomedix’s clinical studies have shown that AutoloGel rapidly and more effectively improved healing compared with control-treated wounds. This has been demonstrated in a variety of clinical studies including a systematic review of 21 comparison studies and a number of other observational and case series publications as well.
Cytomedix, Inc. is an autologous regenerative therapies company commercializing innovative platelet technologies for orthopedics and wound care. The Company markets the AutoloGel™ System, a device for the production of autologous platelet rich plasma ("PRP") gel for use on a variety of exuding wounds and the Angel® Concentrated Platelet Rich Plasma System, a blood processing device and disposable products used for the separation of whole blood or a mixture of blood and bone marrow, into red cells, platelet poor plasma ("PPP") and PRP in surgical settings. For additional information please visit cytomedix.com.
Safe Harbor Statement – Statements contained in this press release not relating to historical facts are forward-looking statements that are intended to fall within the safe harbor rule for such statements under the Private Securities Litigation Reform Act of 1995. The information contained in the forward-looking statements is inherently uncertain, and Cytomedix’ actual results may differ materially due to a number of factors, many of which are beyond Cytomedix’ ability to predict or control, including among many others, risks and uncertainties related to the Company’s ability to successfully execute its Angel® and AutoloGel sales strategies, to successfully launch its efforts in outpatient and other clinics and to achieve AutoloGel expected reimbursement rates in 2013 and thereafter, to successfully negotiate with physician offices as anticipated and to realize the anticipated sales growth from such treatments; to meet its stroke trial enrollment rates, to successfully realize sales of the Angel® Technology under the Arthrex licensing arrangement resulting in the royalty stream to the Company, the Company’s ability to successfully integrate the Aldagen acquisition, the Company’s ability to expand patient populations as contemplated, its ability to raise capital as needed, its ability to provide Medicare patients with access as expected, the Company’s expectations of favorable future dialogue with potential strategic partners, and its ability to successfully manage contemplated clinical trials, to manage and address the capital needs, human resource, management, compliance and other challenges of a larger, more complex and integrated business enterprise, viability and effectiveness of the Company’s sales approach and overall marketing strategies, commercial success or acceptance by the medical community, competitive responses, the Company's ability to raise additional capital and to continue as a going concern, and Cytomedix's ability to execute on its strategy to market the AutoloGel™ System as contemplated. To the extent that any statements made here are not historical, these statements are essentially forward-looking. The Company uses words and phrases such as “believes", "forecasted," "projects," "is expected," "remain confident," "will" and/or similar expressions to identify forward-looking statements in this press release. Undue reliance should not be placed on forward-looking information. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual events to differ from the forward-looking statements. More information about some of these risks and uncertainties may be found in the reports filed with the Securities and Exchange Commission by Cytomedix, Inc. Cytomedix operates in a highly competitive and rapidly changing business and regulatory environment, thus new or unforeseen risks may arise. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. Except as is expressly required by the federal securities laws, Cytomedix undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. Additional risks that could affect our future operating results are more fully described in our U.S. Securities and Exchange Commission filings, including our Annual Report for the year ended December 31, 2012, as amended to date, and other subsequent filings. These filings are available at www.sec.gov.
Cytomedix, Inc. Investors
Martin Rosendale, Chief Executive Officer Michael Rice
Steven A. Shallcross, EVP/Chief Financial Officer LifeSci Advisors, LLC
(240) 499-2680 firstname.lastname@example.org