Date: Jan 11, 2016 Source: PR Newswire (
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MONMOUTH JUNCTION, N.J., Jan. 11, 2016 /PRNewswire/ -- CytoSorbents Corporation (NASDAQ: CTSO), a critical care immunotherapy company commercializing its European Union approved CytoSorb® blood filter to treat deadly inflammation in critically-ill and cardiac surgery patients worldwide, issues a letter to its stockholders from Chief Executive Officer, Dr. Phillip Chan.
2015 Financial Highlights:
We expect to report record quarterly CytoSorb® sales of approximately $1.5 million (range $1.4-1.6M), an approximately 40% increase over Q3 2015 (range 30-50%) and an approximately 70% increase over Q4 2014 (range 60-80%).
Full year 2015 CytoSorb® sales are expected to be approximately $4.0 million (range $3.9-4.1M)
Gross product margins for Q4 2015 and full year 2015 are expected to be greater than 60%
Adjusted for the decline in the Euro, Q4 2015 and full year 2015 CytoSorb® sales would have been in the range of $1.6-1.8M and $4.6-4.8M, respectively
Dear Fellow Stockholders and Friends,
It certainly has been a tumultuous beginning of 2016, with a devaluation of the Chinese currency, a 12-year low in the price of oil, and concerns of a potential global recession leading to a major drop in stock markets worldwide, and the worst start of the year in the U.S. markets ever. For all of us, it has been an especially challenging time as our stock has seen more than its fair share of selling in this volatile market.
That said, no, the sky is NOT falling. We finished the best year in our Company's history, with record Q4 and full-year 2015 sales of CytoSorb® in the range of $1.5 million and $4.0 million, respectively. The acceleration in product revenue was powered by strong direct sales that tripled from a year ago, consisting of a good balance of orders from both existing and new customers, and was derived from a direct customer base that has doubled in the interim.
Healthy growth from distributors and partners also contributed to the record quarter, including new product orders from Fresenius Medical Care, the world's largest dialysis company and our partner in 6 countries in Europe, and continued orders from Biocon, the largest biotechnology company in India. Fresenius is preparing for a multi-country launch of CytoSorb® shortly. CytoSorb® is now distributed in 32 countries around the world, with the 2015 additions of Italy, Australia, New Zealand, Israel, and Vietnam, as well as Saudi FDA approval of CytoSorb®. As we mentioned previously, CytoSorb® has been registered and is actively being sold in approximately half of these countries with the majority of the other countries expected to come on-line in 2016. Among the many potential 2016 catalysts to growth, we look forward to following Fresenius' product launch, hearing about tender orders submitted last year for the Middle East, getting first orders from Russia where we hope to finally obtain product registration, expanding into Canada, and others. We also are in discussions with distributors and strategic partners about expansion to many additional countries this year.
We are pleased to have achieved year over year growth in every quarter since the commercial launch of CytoSorb®. In 2015, we worked diligently to overcome a number of obstacles such as the restructuring of our sales force, a 20% drop in the Euro to dollar conversion rate from the start of 2014 to the end of 2015, and slower than expected product registrations and launches in key territories, to achieve these results.
Most importantly, we continue to obtain feedback from users of CytoSorb® that treatment has been safe and that they are using it successfully to help their patients. Usage has grown to more than 9,000 human treatments. In 2016 alone, we expect the submission of more than a half dozen publications of case series or clinical trials where safety and efficacy have been evaluated. Our International CytoSorb® Registry that is collecting treatment data from around the world now has 94 sites registered, with data from 78 patients. The first interim analysis on these patients will be completed shortly by the University of Jena and the registry's scientific steering committee.
Driving Toward the Inflection Point
There comes a point in every successful business where it reaches a critical mass and all of the laid groundwork, growth initiatives, building of credibility, and positioning begins to bear fruit. Selling is easier, growth is faster, strategic partner interest is greater, revenues begin to accelerate, and profitability is within sight. The business just begins to click. This is the revered "inflection point" and we believe our business is rapidly approaching this important juncture.
CytoSorb® has been on the market for three years in Germany, a market that was developed approximately one year ahead of the rest of most of our other territories. During that period of time, it has gone from zero market recognition to now being considered one of the only viable treatment options for patients in many different diseases and conditions in the intensive care unit (ICU) and cardiac surgery. More than 70% of German university hospitals and most of the major public hospitals are customers. We have added many of the small to mid-tier hospitals as customers as well. We have expanded throughout the world and continue our geographic push. The number of treatments continues to grow, and the feedback from physicians on usage has been very positive. Attendance at our research symposia and conferences are at an all-time high, often exceeding our seating capacity. And the quality and quantity of our speakers and users continues to expand. We are seeing orders being placed by hospitals without sales calls. Data is being generated by many ongoing studies. And we are working with, and in contact with, more strategic partners than at any time previously.
So where is the disconnect between our potential and our current revenues? The short answer is that there is no disconnect. We believe we are simply on track and are nearing, but have not yet reached, the inflection point.
As a reminder, we have a high margin, high value, repeat order disposables business. We sell a "razorblade" that works with the existing "razor" dialysis and cardiac surgery blood pump infrastructure in hospitals worldwide today. Our results are neither padded by, nor limited by, one-time sales of expensive and lower margin pieces of hardware with small value disposables. So although we can't post initial numbers like these other mixed medical equipment/disposables businesses where the more they sell, the more they often lose, our business is ideally suited to generate cash flow. Our current product gross margins allow us to capture more than sixty cents of every dollar in product we sell, and channel it towards driving growth, funding next generation life-saving products, and achieving the goal of future profitability. By controlling our own manufacturing, and with volume and scale, we anticipate being able to increase our gross margins on direct sales in excess of 80%, while still keeping the therapy affordable and cost-effective for the physicians and hospitals who are using it to help their patients.
So how do we get to the inflection point? We believe the answer is to continue on the path that we have established from the beginning to build long-term, sustainable growth and profitability. Our strategy for CytoSorb® is fairly straight-forward:
Continue producing high quality product that is affordable while reducing costs and driving margin expansion
Pick and support the best partners to make CytoSorb® broadly available and to get it to the market as quickly as possible
Establish collaborations and support high quality basic and clinical research to maximize our understanding of the technology and how best to apply it
Invest in a broad strategy to obtain clinical data (e.g. company sponsored and 50+ investigator-initiated studies, International CytoSorb® Registry) needed to make CytoSorb® a mainstream standard care therapy and to establish reimbursement worldwide
Foster strategic partnerships and leverage their reach and resources to expand more quickly
Be opportunistic and take calculated risks when opportunities arise
Strive to be a leader in the markets we serve, doing so ethically and honestly, always with the patient's safety and well-being as the priority
Ensure that the business is well-funded to support the above activities
As with most things, perhaps easier said than done. Although we have generally been executing well against our plan, and even though many things are out of our direct control, we need to do it better and faster, and that is a fundamental goal for the entire CytoSorbents team in 2016.
Bringing the CytoSorb® Story Home to the U.S.
REFRESH I Update
Although we don't need approval in the U.S. to be successful, a major company objective is to obtain U.S. FDA regulatory approval for CytoSorb® for use in cardiac surgery. There are approximately 1,000,000 open heart surgeries (e.g. coronary artery bypass graft surgery, valve replacement, aortic reconstruction, congenital defect repair, heart-lung transplant, and others) each year in the U.S. and European Union. This application was chosen because, with the aging baby boomer population, it represents a $1 billion growing total addressable market and unmet medical need, and has lower regulatory risk than sepsis or other critical illnesses.
The REduction in FREe Hemoglobin I (REFRESH I) cardiac surgery trial is a 40-patient randomized, controlled safety and feasibility study using CytoSorb® intra-operatively in elective, non-emergent complex cardiac surgery patients. The goal is to safely reduce free hemoglobin and other inflammatory toxins that can potentially cause dangerous post-operative complications such as organ failure, and is intended to lead to a REFRESH II pivotal trial targeting U.S. approval. REFRESH I is currently 10% enrolled with the majority of sites up and running. Though too early to draw any conclusions, free hemoglobin levels and incidence of adverse events are tracking to the published literature and to our expectations, which supports the trial design and patient selection procedures of REFRESH I. We plan another update in the near future and are focused on completing REFRESH I by the summer.
