CytoSorbents Reports First Quarter 2017 Financial Results
MONMOUTH JUNCTION, N.J., May 8, 2017 /PRNewswire/ -- CytoSorbents Corporation (NASDAQ: CTSO), a critical care immunotherapy leader commercializing its flagship CytoSorb® blood filter to prevent or treat deadly inflammation and organ failure in critically-ill and cardiac surgery patients around the world, reports financial and operational results for the quarter ending March 31, 2017.
First Quarter 2017 Financial Highlights:
- Total Q1 2017 revenues increased 72% to $3.1 million, which includes both product sales and grant income, from $1.8 million in Q1 2016
- Q1 2017 product sales were $2.6 million, an increase of $1.0 million, or 63%, compared to $1.6 million in Q1 2016, driven by record unit sales
- Product gross margins for Q1 2017 increased to 68%, compared to 62% for Q1 2016
- Trailing twelve month product sales at the end of Q1 2017 were $9.2 million, compared to $4.9 million a year ago
- In April 2017, the Company raised $11.5M in an equity offering led by Cowen & Company, netting $10.3M after fees, increasing cash to $13.5M. Another $5M in term loan debt is available to further extend our operating runway
First Quarter 2017 Operational Highlights:
- More than 23,000 CytoSorb treatments are have been performed worldwide in critical care illnesses and cardiac surgery
- The REFRESH I trial abstract was selected by the American Association for Thoracic Surgery for podium presentation where positive results demonstrating the safe and significant reduction of toxic inflammatory mediators by CytoSorb during complex open heart surgery were presented
- Entered into a partnership with Dr. Reddy's Laboratories, a leading international pharmaceuticals firm, for expansion to South Africa. Dr Reddy's is our fourth major strategic partner
- Expanded our partnership with Fresenius Medical Care to include a co-marketing agreement for CytoSorb across all current territories
- Welcomed Dr. Carl June, cancer immunotherapy pioneer, to the scientific advisory board to help guide new applications of CytoSorb in the cancer field, including the treatment of cytokine release syndrome in cancer immunotherapy
- Awarded a $1M Phase II SBIR contract for fungal toxin blood purification
- Strengthened our intellectual property portfolio with the issuance of a new composition of matter patent in the U.S., Japan, China, Russia, and Australia
- Hosted a full-capacity, successful 4th International CytoSorb Users' Meeting in Brussels, Belgium bringing together more than 120 users from 22 countries
- Launched VetResQ for the U.S. veterinary market
Dr. Phillip Chan, Chief Executive Officer of CytoSorbents stated, "After a strong 2016 finish, we began 2017 with continued solid year-over-year growth and healthy 68% product gross margins, while adding new catalysts that are expected to accelerate sales through the remainder of 2017 and beyond. Our trailing 12 month revenue is now $9.2 million, up from $8.2 million at the end of 2016. We continue to target operating profitability before the end of 2018, based upon increased visibility and key factors outlined in our recent annual shareholder letter. These include 1) Continued direct and distributor sales momentum of CytoSorb in key international markets 2) Significantly enhanced reimbursement in our largest market of Germany and reimbursement progress in other major markets 3) The ramp of our co-marketing agreement with Fresenius Medical Care (FMC) 4) Continued progress by our strategic partners, including FMC, Terumo Cardiovascular, Biocon, and Dr. Reddy's in their exclusive sales territories, and 5) New clinical data driving the use of CytoSorb in different applications."
"In particular, we are pleased that many hospitals in Germany, following first quarter negotiations of their 2017 operating budgets with the government, have reported solid increases in reimbursement for CytoSorb under the new dedicated reimbursement code that includes the full cost of the device as well as the procedure. Our sales force and customers in Germany have been eagerly awaiting the finalization of these rates, as these data are very important to purchasing decisions. We expect many more hospitals to post similar reimbursement rates soon."
"Meanwhile, we continue numerous initiatives throughout our business that are expected to help us meet the growing demand for CytoSorb. These include our recently announced financing that gives us the capital for commercial expansion and to fund our clinical strategy; our ongoing buildout of a new manufacturing facility at less than 20% of our previously budgeted cost by remaining on-site and leveraging our existing manufacturing infrastructure; strengthening our U.S. clinical team with the planned start of our REFRESH 2 trial later this year, pending FDA approval; and the pending launch of our new therapeutic extracorporeal membrane oxygenation (ECMO) kit that is designed to accelerate this field beyond the 1,000+ treatments already performed."
"Please join us on our previously announced earnings call today at 4:45PM EST where we will cover our progress. We will also respond to questions from the audience during our live Q&A session. The investor presentation and a written transcript of the conference call will be available within a week of the webcast."
Conference Call Details:
Date: Monday, May 8, 2017
Time: 4:45 PM Eastern
Participant Dial-In: 1-719-325-4929
Live Presentation Webcast: http://public.viavid.com/index.php?id=124222
It is recommended that participants dial in approximately 10 minutes prior to the start of the call. There will also be a simultaneous live webcast of the conference call that can be accessed through the following audio feed link: http://public.viavid.com/index.php?id=124222
An archived recording of the conference call will be available within a week under the Investor Relations section of the Company's website at http://www.cytosorbents.com/investor-relations/financial-results
Results of Operations
Comparison for the three months ended March 31, 2017 and 2016:
Revenues:
Revenue from product sales was approximately $2,596,000 in the three months ended March 31, 2017, as compared to approximately $1,597,000 in the three months ended March 31, 2016, an increase of approximately $999,000, or 63%. This increase was largely driven by an increase in direct sales from both new customers and repeat orders from existing customers, along with an increase in distributor sales.
Grant income was approximately $517,000 for the three months ended March 31, 2017 as compared to approximately $213,000 for the three months ended March 31, 2016, an increase of approximately $304,000. This increase was a result of revenue recognized from new grants and billable milestones achieved on existing grants.
As a result of the increases in both product sales and grant income, for the three months ended March 31, 2017, we generated total revenue of approximately $3,114,000, as compared to revenues of approximately $1,810,000, for the three months ended March 31, 2016, an increase of approximately $1,304,000 or 72%.
Cost of Revenues:
For the three months ended March 31, 2017 and 2016, cost of revenue was approximately $1,254,000 and $819,000, respectively, an increase of approximately $435,000. Product cost of revenues increased approximately $228,000 during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016 due to increased sales. Product gross margins were approximately 68% for the three months ended March 31, 2017, as compared to approximately 62% for the three months ended March 31, 2016. This increase in gross margin was due to a favorable mix of sales prices.
Research and Development Expenses:
For the three months ended March 31, 2017, research and development expenses were approximately $470,000 as compared to research and development expenses of approximately $856,000 for the three months ended March 31, 2016. The decrease of approximately $386,000 was due to a decrease in costs related to our various clinical studies and trials of approximately $208,000, a decrease in salaries related to non-clinical research and development activities of approximately $26,000, and an increase in direct labor and other costs being deployed toward grant-funded activities of approximately $205,000, which had the effect of decreasing the amount of our non-reimbursable research and development costs. These decreases were offset by an increase in our non-clinical research and development activities of approximately $53,000.
Legal, Financial and Other Consulting Expense:
Legal, financial and other consulting expenses were approximately $280,000 for the three months ended March 31, 2017, as compared to approximately $255,000 for the three months ended March 31, 2016. The increase of approximately $25,000 was due to an increase in employment agency fees of approximately $31,000 related to the recruitment of senior level personnel and an increase in legal fees of approximately $22,000 related to certain corporate initiatives. These increases were offset by decreases in auditing and other consulting fees of approximately $28,000 due to fees incurred related to the audit of our internal controls as required by The Sarbanes-Oxley Act of 2002 in 2016 that did not recur.
Selling, General and Administrative Expense:
Selling, general and administrative expenses were approximately $2,667,000 for the three months ended March 31, 2017, as compared to approximately $1,970,000 for the three months ending March 31, 2016. The increase of $697,000 was due to increase in salaries, commissions and related costs of approximately $320,000 due to headcount additions and personnel related costs, an increase in royalty expenses of approximately $94,000 due to the increase in product sales, additional sales and marketing costs, which include advertising and conferences of approximately $69,000, an increase in travel and entertainment and other costs of approximately $56,000, an increase in stock-based compensation of approximately $89,000 related to restricted stock units awarded to the Company's executive staff during the year ended December 31, 2016, an increase in rent expense of approximately $17,000 related to the new expanded office facility in Germany, an increase in office supplies and related expenses of approximately $15,000 and other general and administrative cost increases of approximately $37,000.
Interest Income (Expense):
For the three ended March 31, 2017, interest expense was approximately $120,000, as compared to interest income of approximately $4,000 for the three ended March 31, 2016. This increase in interest expense of approximately $124,000 is directly related to interest expense incurred and amortization of loan acquisition costs related to the Company's financing facility with Bridge Bank on which $5,000,000 was drawn on June 30, 2016.
Gain (Loss) on Foreign Currency Transactions:
For the three months ended March 31, 2017, the gain on foreign currency transactions was approximately $153,000 as compared to approximately $232,000 for the three months ended March 31, 2016. The 2017 first quarter gain is directly related to the increase in the exchange rate of the Euro at March 31, 2017 as compared to December 31, 2016. The exchange rate of the Euro to the U.S. dollar was $1.07 per Euro at March 31, 2017 as compared to $1.05 per Euro at December 31, 2016.
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