Full Press Release Details
Continues Strong Trajectory of Growth in the Third Quarter 2017
record quarterly total sales of $3.8 million, and record quarterly and trailing
twelve-month product sales of $3.4 million and
$11.7 million, respectively
JUNCTION, N.J., November 9, 2017 - CytoSorbents Corporation (NASDAQ: CTSO), a critical care immunotherapy leader using blood
purification to prevent or treat life-threatening injury and infection in critically-ill and cardiac surgery patients around the
world, reports financial and operational results for the quarter ending September 30, 2017.
2017 Financial Highlights:
Third Quarter 2017 Operational Highlights:
Dr. Phillip Chan, Chief Executive Officer
of CytoSorbents stated, "CytoSorb usage continues to expand as a potent treatment of deadly inflammation in both critical
care and cardiac surgery, powering our strongest quarterly results to date. In the first three quarters of 2017, we have already
exceeded 2016 full year CytoSorb sales. With an expected solid finish to the year, and with numerous catalysts such as higher reimbursement
in Germany, the recent launch of our co-marketing agreement with Fresenius Medical Care in 5 countries with more to come, new product
releases such as our CytoSorb Therapeutic ECMO kit, continued geographic expansion with our distribution partners, and increased
capacity with anticipated product gross margin improvements, we believe we are well-positioned to achieve continued rapid growth
and our target of operating profitability in 2018."
"Meanwhile, we are working diligently
to initiate our U.S.-based, REFRESH 2 cardiac surgery trial by the end of 2017. This pivotal, registration trial is designed to
support U.S. regulatory approval of CytoSorb for complex cardiac surgeries like valve replacement. We have already met with the
FDA to discuss our proposed trial design and will provide an update when we have more information on our investigational device
exemption (IDE) application."
"With now more than 31,000 CytoSorb
treatments delivered in a wide range of life-threatening illnesses and open heart surgeries, we can look back and see how far we
have come from the first clinical studies, done many years ago, when we were treating patients very late in the course of their
disease, and for only six hours a day. Our knowledge and understanding of how and when to treat has advanced tremendously, where
today, physicians are using CytoSorb early, aggressively, and continuously, and obtaining positive clinical outcomes. We continue
to see an acceleration of publications highlighting the use of CytoSorb in a wide range of indications. For example, we have had
some extremely exciting data recently where CytoSorb has helped to tip the balance of life in many patients by improving hemodynamic
stability, organ dysfunction, and survival.
In addition, we reported impressive survival
data using CytoSorb in rat models of traumatic brain injury and hemorrhagic shock. Given
that these two injuries are the leading causes of death in trauma, we hope to demonstrate similar benefits in humans in the future."
Dr. Chan concluded, "Finally, we
are very pleased with the growing recognition of our company as a leading innovator in the treatment of critical illnesses and
complications of cardiac surgery by major organizations, with the 2017 Global Frost & Sullivan
Product Leadership Award in Blood Purification, and today's announcement of being named to the Deloitte
Technology Fast 500 as one of the fastest growing,
innovative and impactful companies in North America."
Results of Operations
Adoption of New Accounting Standard:
Effective September 30, 2017, the Company
adopted the provisions of Accounting Standards Update ("ASU") 2017-11, "Earning Per Share (Topic 260); Distinguishing
Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815). The provisions of this ASU change the classification
analysis of certain equity-linked financial instruments (or embedded features) with down round features. The fair value of a financial
instrument with a down round feature is now required to be classified as a component of stockholders equity, as opposed to a liability
as it was previously required to be reported. In addition, this recorded fair value of the financial instrument is no longer to
be subsequently remeasured. When the down round feature of the financial instrument is triggered due to a change in the underlying
strike price, the change in the fair value is now required to be treated as a dividend and as a reduction of income available to
common stockholders in accordance with the guidance of ASC-260. Accordingly, the Company has restated its current and historical
financial statements to properly reflect the provisions of this ASU.
Comparison for the three months ended
September 30, 2017 and 2016:
Revenue from product sales was approximately
$3,449,000 in the three months ended September 30, 2017, as compared to approximately $2,143,000 in the three months ended September
30, 2016, an increase of approximately $1,306,000, or 61%. 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 $375,000
for the three months ended September 30, 2017 as compared to approximately $269,000 for the three months ended September 30, 2016,
an increase of approximately $106,000. This increase was a result of revenue recognized from new grants.
As a result of the increases in both product
sales and grant income, for the three months ended September 30, 2017, we generated total revenue of approximately $3,824,000,
as compared to total revenues of approximately $2,412,000, for the three months ended September 30, 2016, an increase of approximately
For the three months ended September 30,
2017 and 2016, cost of revenue was approximately $1,517,000 and $964,000, respectively, an increase of approximately $553,000.
Product cost of revenues increased approximately $385,000 during the three months ended September 30, 2017 as compared to the three
months ended September 30, 2016 due to increased sales. Product gross margins were approximately 69% for the three months ended
September 30, 2017, as compared to approximately 68% for the three months ended September 30, 2016. This increase in gross
margin was primarily due to the mix of direct and distributor sales.
Research and Development Expenses:
For the three months ended September 30,
2017, research and development expenses were approximately $538,000 as compared to research and development expenses of approximately
$1,172,000 for the three months ended September 30, 2016. The decrease of approximately $634,000 was due to a decrease in costs
related to our various clinical studies and trials of approximately $519,000 and an increase in direct labor and other costs being
deployed toward grant-funded activities of approximately $168,000, 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
Legal, financial and other consulting expenses
were approximately $238,000 for the three months ended September 30, 2017, as compared to approximately $279,000 for the three
months ended September 30, 2016. The decrease of approximately $41,000 was due to a decrease in legal fees of approximately $29,000
related to certain corporate initiatives in the three months ended September 30, 2016 that did not recur in the three months ended
September 30, 2017 and a decrease in consulting fees of approximately $23,000. These decreases were offset by an increase in auditing
and accounting fees of approximately $11,000.
Selling, General and Administrative
Selling, general and administrative expenses
were approximately $3,680,000 for the three months ended September 30, 2017, as compared to approximately $2,141,000 for the three
months ending September 30, 2016. The increase of $1,539,000 was due to an increase in non-cash stock-based compensation expense
of approximately $927,000 primarily based upon progress toward meeting the 2017 operating milestones, increases in salaries, commissions
and related costs of approximately $94,000 due to headcount additions and personnel related costs, an increase in royalty expenses
of approximately $124,000 due to the increase in product sales, additional sales and marketing costs, which include advertising
and conferences of approximately $220,000, an increase in rent expense of approximately $29,000 related to facility expansion,
an increase in public relations costs of approximately $42,000, an increase in stock transfer fees of approximately $6,000, an
increase in office supplies and related expenses of approximately $47,000 and other general and administrative cost increases of
approximately $50,000.
Interest Income (Expense):
For the three months ended September 30,
2017, interest expense was approximately $254,000, as compared to interest expense of approximately $117,000 for the three months
ended September 30, 2016. This increase in interest expense of approximately $137,000 is directly related to interest expense incurred
related to the Company's draw down of Term Loan B with Bridge Bank on which $5,000,000 was drawn on June 30, 2017 and was