April 9, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
San Diego-based Cytori Therapeutics, Inc. recent media push to put a positive spin on increasing skepticism about the company’s stem-cell partnership with Lorem Vascular is being met with scorn this week, as columnists and analysts excoriated a recent interview given by the company’s chief executive.
“Did you read the “exclusive” interview Cytori Therapeutics (CYTX - Get Report) ) CEO Marc Hedrick gave to Benzinga on Tuesday? I did. Afterwards, I vomited on my shoes,” wrote closely followed columnist Adam Feuerstein over at The Street.
Feuerstein said that while Hedrick may have the duty to talk up the company, biotech investors and media are still waiting for an answer about why Lorem fell more than $7 million short of its spending commitments over the partnership’s two-year life span. That lack of funding came close on the heels of a 30 percent drop in revenue for Cytori for 2014 from the year prior.
“As the CEO of a struggling stem-cell therapy company, Hedrick needs to don brightly colored pom-poms just to grab investors’ attention,” he said. “Unfortunately, to believe the fairy-tale story Hedrick spins to Benzinga requires ignorance of Cytori‘s ugly past and an inability or unwillingness to actually conduct any due diligence on the company outside of Hedrick’s assertions.”
Feuerstein said he had continued to pressed the company for answers, but hadn’t received any specific information.
“With the new China approval, Cytori claims Lorem will be purchasing 23 Celution Devices and 1,100 sets of consumable Sets throughout 2015,” he said. “How much revenue are these purchases expected to deliver for Cytori? The company won’t say. Is it even credible to expect that Lorem will make good on these promised purchase orders given its failure to meet prior spending commitments to date?”
This is the first time that Cytori has felt investor pressure. Last September, Cytori was forced to lay off 42 full-time employees and an executive vice president will resign as it begins a restructuring process designed to free up liquidity to pay off the firm’s lenders.Rumors of Cytori’s shakeup sent its share price soaring 6 percent at the time, a climb it continued during today’s trading.
As part of the initiative, 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.
The company said that after these measures are complete it 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 its operating expenses by more than $8 million on an annualized basis.
Cytori said it would use the restructuring to expand its U.S. clinical pipeline, build on current governmental and corporate partnerships, and ensure that its commercial efforts are cash flow positive immediately. It will immediately begin shuffling its senior management and the global commercial and development ranks.
“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,” said Marc Hedrick, Cytori’s president and chief executive, in a statement.
Cytori said its lenders have recently provided a temporary waiver of the liquidity threshold that requires it to maintain certain minimum cash balances, and that it is in talks to restructure its loans.
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