Business context and reporting period
CytoSorbents Corporation filed this Form 10-K for the fiscal year ended December 31, 2021. The company develops and sells blood-purification devices based on proprietary polymer adsorption technology. Its commercial flagship, CytoSorb, is CE-marked in the EU for several uses; U.S. commercial access remained limited to an FDA Emergency Use Authorization for specified critically ill COVID-19 patients. DrugSorb-ATR was investigational in the U.S.
CytoSorb had been used in more than 162,000 cumulative treatments globally. Product sales were concentrated in Germany, which generated $21.0 million of 2021 product revenue, and the company reported direct sales or distribution in more than 70 countries.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Total revenue | $43.17 million | $41.00 million |
| Product sales | $40.11 million | $39.45 million |
| Gross profit | $32.12 million | $29.95 million |
| Product gross margin | Approximately 80% | Approximately 76% |
| Operating loss | $22.74 million | $10.37 million |
| Net loss | $24.56 million; $0.57 per share | $7.84 million; $0.20 per share |
| Cash from operating activities | -$14.01 million | -$5.61 million |
| Cash used in investing activities | -$4.28 million | -$1.68 million |
At year-end, cash and cash equivalents were $52.14 million, with an additional $1.69 million restricted; working capital was $50.61 million. Current assets were $64.30 million and current liabilities were $13.69 million. The company reported no outstanding term-loan balance at December 31, 2021. In January 2022, it obtained an option to draw up to $15 million in term loans through December 31, 2022. Lease liabilities totaled $13.82 million, largely reflecting the new facility lease.
For Q4 2021, revenue was $10.78 million, gross profit $7.66 million, operating loss $9.56 million and net loss $9.31 million, or $0.25 per share. The filing does not provide a clear quarterly cash-flow figure.
Material changes versus prior periods
- Annual revenue increased 5% year over year, but product sales grew only 2%. Management estimated COVID-19-related product sales of $6.3 million in 2021, down from $9.4 million in 2020.
- Operating expenses rose 36% to $54.86 million. Research and development increased 86% to $16.38 million, primarily due to U.S. and German clinical-trial start-up and staffing; selling, general and administrative expenses increased 26% to $35.75 million.
- Net loss more than tripled. In addition to higher operating expenses, results included a $2.58 million foreign-currency transaction loss, compared with a $2.61 million gain in 2020. The stronger average euro modestly supported sales, while the year-end exchange-rate movement hurt reported earnings.
- Q4 revenue was lower than Q4 2020 ($10.78 million versus $11.96 million), while net loss widened to $9.31 million from $0.68 million. Management cited hospital access restrictions and fewer sales opportunities among pandemic-related pressures on sales.
- Operating cash use increased; management-defined cash burn, including operating and investing activities, was $18.29 million. The company invested $3.64 million in property and equipment, including work on its new facility.
Outlook, risks and unusual items
- No specific revenue or earnings guidance was provided. Management said available cash was expected to fund operations and clinical-trial activities well into the future, while acknowledging that additional financing may be needed.
- The company began construction/fit-out of a 48,511-square-foot Princeton-area headquarters and manufacturing facility designed to support annual sales of up to $400 million. It expected certification in the first half of 2022 and commercial production in the second half of 2022; these were forward-looking expectations, not completed milestones in this filing.
- Two FDA-authorized IDE trials, STAR-T (ticagrelor) and STAR-D (apixaban and rivaroxaban), were intended to support U.S. marketing approval for DrugSorb-ATR. STAR-T had begun enrollment; STAR-D was preparing to enroll. The filing described timing estimates that could be affected by COVID-19 and trial recruitment.
- The company stopped the REFRESH 2-AKI study for business reasons to prioritize STAR-T and STAR-D; it reported no safety concern. The German REMOVE study did not meet its primary efficacy endpoint, although CytoSorb was reported as well tolerated and the proposed cytokine-reduction mechanism was supported.
- Approximately $6.3 million of 2021 product sales was estimated to relate to COVID-19 treatment demand, and management said it was uncertain whether that revenue could be replaced as the pandemic eased. The U.S. EUA is limited, may be revoked or end, and is not FDA marketing approval.
- Customs authorities assessed approximately $641,000 in import duties, paid in October 2021. The company also accrued approximately $598,000 for potential German payroll taxes and social costs; the audit was ongoing and expected to conclude in Q2 2022.
- Other significant risks include continuing losses, dependence on product adoption and reimbursement, concentration of sales in Germany, foreign-exchange exposure, clinical and regulatory uncertainty, patent protection, manufacturing scale-up, and COVID-related disruption. CytoSorb’s EU CE certificate was stated to run through May 2024, with future certification under the EU Medical Device Regulation required.
- The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; management and the auditor reported controls effective as of December 31, 2021.
Important facts for investors to verify
- Whether CytoSorb sales can grow without the 2020–2021 pandemic-related demand, particularly in Germany and other major markets.
- Enrollment, timelines, safety and efficacy results for STAR-T and STAR-D, and the regulatory pathway and evidence required for U.S. approval.
- Progress on new-facility certification and the planned start of commercial production, including the associated capital and operating costs.
- Cash burn, remaining liquidity, potential use of the $15 million loan commitment and the $150 million shelf registration/ATM capacity, including possible shareholder dilution.
- Outcome of the German payroll-tax audit and any further costs, and the effect of foreign-exchange movements on reported results.
- Whether reimbursement, clinical evidence and market adoption support durable product margins and a path toward profitability.