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Cytori Therapeutics
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.”
Business update
* Clinical pipeline update
* On September 19^th, 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.
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