CytoSorbents Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited consolidated results; comparisons are with Q1 2021 unless otherwise noted.
Business context
CytoSorbents develops and commercializes blood-purification devices based on proprietary polymer adsorption technology. Its flagship CytoSorb device is marketed in more than 70 countries, primarily outside the United States. U.S. sales for COVID-19 use are under an FDA Emergency Use Authorization; the device is not FDA-cleared or approved for that indication. The company is pursuing U.S. marketing approval for investigational DrugSorb-ATR through the STAR-T and STAR-D clinical trials.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $8.69 million | $10.60 million; down 18% |
| Product sales | $7.92 million | $10.14 million; down 22% |
| Grant income | $0.77 million | $0.46 million; up 68% |
| Gross margin | $6.41 million; about 74% of revenue | $7.85 million; about 74% of revenue |
| Operating expenses | $14.20 million | $10.70 million |
| Operating loss | $7.79 million | $2.85 million |
| Net loss | $8.97 million; $0.21 per share | $4.17 million; $0.10 per share |
| Cash used in operations | $8.12 million | $2.34 million |
| Cash, cash equivalents and restricted cash | $44.71 million at quarter-end | $53.83 million at December 31, 2021 |
| Current assets / current liabilities | $55.85 million / $14.67 million | Working capital: $41.18 million |
| Lease liabilities | $13.66 million total | Current portion: $0.49 million |
The company reported no funded term-loan balance in the presented balance sheet. A $15 million Bridge Bank term-loan facility was available to draw in three tranches through December 31, 2022, subject to the agreement’s terms. Q1 investing cash outflow was $0.85 million. Quarter-end unrestricted cash and cash equivalents were $43.02 million.
Changes versus the prior comparable period
- Product sales fell 22%, primarily from lower direct sales in Germany amid pandemic-related hospital restrictions and reduced severe COVID-19 cases. Management estimated COVID-related product demand at about $0.3 million, versus $1.8 million in Q1 2021.
- Management estimated that the weaker euro reduced Q1 2022 product sales by about $0.55 million. Foreign-currency transaction losses were $1.21 million, versus $1.31 million.
- Product gross margin increased to about 80% from 77%, partly because approximately $0.73 million of prior-year German tariff costs did not recur. Total gross margin as a percentage of total revenue was approximately 74% in both periods.
- Research and development expense rose $1.96 million to $4.24 million, principally due to clinical-trial costs. Selling, general and administrative expense rose $1.45 million to $9.16 million, including higher salaries, occupancy, sales and marketing, and travel costs.
- Net loss more than doubled, while operating cash use increased to $8.12 million. Cash and cash equivalents declined $9.11 million from year-end, including the effect of exchange rates.
Outlook, commentary and risks
- Management stated that cash, cash equivalents and restricted cash were expected to fund operations beyond 12 months from issuance of the statements. In April 2022, the company received approximately $0.74 million from the approved sale of New Jersey tax attributes. It began tighter cost controls in April, which management expected to reduce planned cash burn by an additional $2 million per quarter. No revenue or earnings guidance was provided.
- Management expected COVID-related revenue to continue declining, while noting that pandemic conditions, hospital access, staffing and clinical-trial recruitment remained uncertain. It cited plans to grow core CytoSorb sales, transition production to the Princeton facility, expand direct sales and pursue strategic partnerships.
- STAR-T was actively recruiting; management estimated its first 33% enrollment milestone and data-safety monitoring board meeting could occur in summer 2022, with full enrollment expected in Q1 2023, subject to pandemic-related uncertainty. STAR-D enrolled its first patient in April 2022; management estimated 12–18 months to complete enrollment.
- The company reported a $0.60 million accrual for a continuing German payroll-tax and social-cost audit covering 2018–2021. The audit was expected to conclude in Q2 2022; the final liability could differ from the estimate.
- A $0.31 million patent impairment charge was recorded in Q1. The company also faces exposure to euro exchange-rate movements, concentration in Germany, clinical and regulatory execution risk, and potential delays to development programs. Blood-supply shortages were delaying validation work for HemoDefend-RBC and could delay an IDE submission.
- The company reported no current legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether Germany sales recover as hospital access and purchasing conditions normalize, and whether lower COVID-related demand is offset by other applications.
- Actual cash burn against management’s stated cost-control target, and whether the company draws on the available $15 million facility or uses its ATM equity program.
- STAR-T and STAR-D enrollment progress, trial timing, and the regulatory evidence required for U.S. marketing approval.
- The final outcome of the German payroll-tax audit and any adjustment to the $0.60 million accrual.
- Euro-dollar movements and their effect on reported revenue, expenses and foreign-currency losses.