FIGHTING THE 'CYTOKINE STORM'
By Amanda Pedersen
Senior Staff Writer
After reporting a loss this time last year, Cytosorbents (Monmouth Junction, N.J.) reported second-quarter net income of $1.4 million, beating Wall Street expectations. The company, which develops blood purification technology, said it had a 5-cent profit on a per-share basis in the quarter. Analysts surveyed by Zacks Investment Research estimated a 9-cent loss for the company on a per-share basis.
Cytosorbents' stock (NASDAQ: CTSO) was up 11%, or 68 cents, Friday and closed at $6.86. In the past 52 weeks, the stock has ranged from a low of $4.40 to a high of $15.24.
CEO Phillip Chan said the strength was in direct sales of the company's CytoSorb technology. Despite having a small direct sales force of only four people, Cytosorbents achieved its second best quarter in the company's history in terms of product sales, which grew during the quarter to $773,000, a 17% increase over product revenues of $663,000 for the same period in 2014. Chan noted that the numbers were impacted by the decline in the euro to U.S. dollar exchange rate and would have been $920,000, a 39% increase, without that currency exchange headwind.
During the company's quarterly earnings call, Chan talked about several developments and near-term catalysts that are expected to have a positive impact on growth in the second half of the year. Among those developments, he said, is an expansion of the direct sales team to seven people early in the third quarter, and possibly increasing that sales force to nine people by the end of the year.
CytoSorb is designed to reduce the "cytokine storm" that could otherwise cause massive inflammation, organ failure and death in common critical illnesses such as sepsis, burn injury, trauma, lung injury and pancreatitis, according to the company.
Going forward, Chan said the company is working on demonstrating the value of its technology to hospital administrators to further enhance direct sales. "Based on the incidence of sepsis and other critical care illness, if CytoSorb became standard of care it could command potentially a revenue generation of $1 million to $2 million per hospital," he said, adding that there are 2,100 acute care hospitals in Germany, one of the company's primary focus territories for its direct sales force. "Our message for hospital administrators is this: CytoSorb is not just another item on their PSL. CytoSorb is one of those therapies that has the ability to change the economics in that hospital because it's addressing such a big issue."
Chan said an estimated 10% to 20% of a hospital's operating expenses are connected to critical care medicine. "They lack effective tools to help patients get better. They lack effective tools to help prevent organ failure. Why do these patients stay in the ICU at a cost of $2,000 to $3,000 a day? Because they're stuck on a machine because their lungs don't work. Or they're stuck on dialysis because their kidneys don't work. This is where the costs are for hospitals. This is where hospitals are losing billions of dollars both here in the United States as well as abroad. This product, CytoSorb, has the ability to change the economics of your hospital and reduce significant costs in your hospital."
If the company is able to get that message across to hospital administrators, Chan said, it could open up a significant bottleneck in the sales process.
Where to place valuable sales force assets?
The company's direct sales force is focused on Germany, Austria, and Switzerland, Chan said, because those territories represent the greatest market for the CytoSorb product. Germany alone represents a multi-billion market opportunity, he said.
"If we were successful nowhere else in the world, we could do very well by just being successful in Germany," Chan said.
Recently the CytoSorb was approved for sale in Saudi Arabia and the company is working with Fresenius Medical Care for distributorship in France, Poland, Denmark, Norway, Finland, and Sweden, which he said would unlock additional markets covering more than 127 million people. Cytosorbents also entered into a multi-year distribution agreement recently with Tekmed (Preston, Australia), a provider of dialysis equipment, vascular access devices and disposables. Tekmed will distribute CytoSorb throughout Australia and New Zealand for all critical care and cardiac surgery applications, the company noted. Cytosorbents also established an agreement with Alphamedix for distribution of the product in Israel and Alphamedix is seeking Israeli Ministry of Health approval for CytoSorb.
In the U.S., Chan said Cytosorbents is "heavily focused" on bringing CytoSorb to market. In cardiac surgery, the company plans to seek FDA approval to use CytoSorb intra-operatively during cardiac surgery and extended cardiopulmonary bypass procedures that can result in the production of large amounts of toxic plasma free hemoglobin, cytokines, activated complement and other factors that can lead to post-operative complications such as kidney and respiratory failure.
The FDA has approved an amendment to the company's REFRESH (REduction in FREe Hemoglobin) trial to convert it into a 40-patient, eight-center, randomized controlled feasibility study. In doing so, the company said it has consolidated the original 20-patient, single arm, three-center study together with the larger non-interventional study that it had previously planned on doing.
Chan said the company is on schedule to begin the study in September.
In sepsis and critical care, Cytosorbents said it is preparing an expedited access pathway application and plans to submit that application to the FDA in the coming weeks.
Published August 17, 2015