CytoSorbents Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; quarterly figures below include the quarter ended December 31, 2022.
Business context
CytoSorbents develops and commercializes blood-purification medical devices using proprietary porous-polymer adsorption technology. Its principal commercial product, CytoSorb, is CE-marked in Europe for specified uses and sold in more than 75 countries. The company is pursuing U.S. marketing approval for DrugSorb-ATR, including through the STAR-T clinical trial. CytoSorb is not FDA-cleared or approved for general U.S. marketing; its COVID-19 use was under an Emergency Use Authorization.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $34.7 million | $43.2 million |
| Product sales | $29.4 million | $40.1 million |
| Grant income | $5.3 million | $3.1 million |
| Gross profit | $20.7 million | $32.1 million |
| Product gross margin | 70% | 80% |
| Operating loss | $31.5 million | $22.7 million |
| Net loss | $32.8 million | $24.6 million |
| Basic and diluted loss per share | $0.75 | $0.57 |
| Cash used in operating activities | $28.2 million | $14.0 million |
| Cash used in investing activities | $6.5 million | $4.3 million |
At December 31, 2022, cash and cash equivalents were $22.1 million, restricted cash was $1.7 million, current assets were $33.8 million, and current liabilities were $9.7 million. Long-term debt was $5.0 million; lease liabilities totaled $13.3 million. Management-defined cash burn, operating plus investing cash use, was approximately $35 million after excluding the $5 million debt draw. The company reported an accumulated deficit of approximately $254.0 million.
Fourth-quarter 2022 total revenue was $9.4 million, gross profit was $5.8 million, operating loss was $6.4 million, and net loss was $0.8 million. The filing does not provide a clear fourth-quarter product-sales figure in the quarterly summary.
Changes versus prior period and unusual items
- Total revenue fell 20% year over year; product sales declined 27%, with direct sales down approximately $9.0 million and distributor sales down approximately $1.8 million.
- Management estimated COVID-19-related product sales at $0.3 million in 2022 versus $6.3 million in 2021. The stronger U.S. dollar also reduced 2022 product sales by an estimated $3.1 million.
- Product margin fell from 80% to 70%, reflecting lower production volume, inefficiencies during the manufacturing move, and a refrigeration-unit failure. The inventory loss was approximately $599,000, partially offset by approximately $299,000 of insurance proceeds.
- Research and development expense decreased 8% to $15.1 million, partly due to the STAR-D pause and discontinuation of the Hep-On-Fire trial. Selling, general and administrative expense decreased 4% to $34.3 million.
- Foreign-currency transaction loss was $2.4 million, compared with a $2.6 million loss in 2021. The company recorded a $636,000 impairment/write-off of certain patent costs.
- A German payroll-tax and social-cost audit accrual was reduced to approximately $173,000 after the company received an assessment; no current legal proceedings were reported.
Outlook, commentary and key risks
- Management said it was adequately capitalized and expected year-end cash to fund operations beyond twelve months from issuance of the financial statements. It also noted that additional financing will be required in the future. The company reported approximately $35 million of 2022 cash burn, reduced headcount by 10%, tightened spending, and cited an $11.5 million grant backlog.
- Management’s stated priorities were to return to sales growth, improve product margins as production transitions to the new facility, reduce cash burn, and complete STAR-T. It aimed to complete STAR-T and file for U.S. FDA and Health Canada approvals in 2023; these are objectives, not assured outcomes.
- STAR-T was enrolling, with the first one-third enrollment safety review recommending continuation without changes. STAR-D enrollment was temporarily paused for business reasons and was expected to resume after STAR-T.
- The company drew $5 million under its Bridge Bank facility in December 2022. The remaining potential draw period was extended to March 24, 2023 by an amendment dated March 9, 2023; verify whether any further borrowing occurred after filing.
- Key risks include continued losses and cash consumption; reliance on CytoSorb and Germany; market adoption and reimbursement uncertainty; euro exchange-rate exposure; clinical-trial and regulatory risk; and maintaining the EU CE Mark, then scheduled to expire in May 2024, while transitioning to the EU Medical Device Regulation.
- CytoSorb’s U.S. COVID-19 EUA is limited and does not constitute general FDA approval. The company also faces potential dilution from future equity financing. Its $150 million shelf registration and $25 million at-the-market facility were unused at year-end.
- The auditor gave an unqualified opinion on the financial statements and internal control over financial reporting; management and the auditor reported controls effective at December 31, 2022.
Investor facts to verify
- Subsequent sales trends, particularly whether product revenue stabilized or recovered after the 2022 decline and the reduction in COVID-related demand.
- Quarterly product sales and product margins, manufacturing performance at the Princeton facility, and whether margins returned toward prior levels.
- Cash runway, current operating burn, remaining bank-facility availability and any financing or dilution after the filing date.
- STAR-T enrollment, final results and regulatory-submission timing; the status and funding of STAR-D.
- Progress toward MDR certification and continued CE Mark eligibility, along with reimbursement and adoption trends in Germany and other markets.