Cytosorbents Corporation — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing was signed March 5, 2020. Although the request identifies 2019 Q4, this is an annual report; fourth-quarter figures are included below where available. CytoSorbents develops and commercializes blood-purification devices. Its principal commercial product, CytoSorb, is CE-marked in Europe; it was not approved for sale in the United States at year-end.
Financial performance and liquidity
| Metric | FY2019 | FY2018 | Change / context |
|---|---|---|---|
| Total revenue | $24.95 million | $22.50 million | Up 11% |
| Product sales | $22.77 million | $20.25 million | Up 12%; CytoSorb sales were $22.55 million |
| Grant income | $2.18 million | $2.25 million | Down about 3% |
| Gross profit | $17.59 million | $15.01 million | Up 17%; product gross margin was about 77%, versus 74% |
| Operating expenses | $36.56 million | $30.60 million | Up 19%, led by higher R&D and clinical-trial costs |
| Operating loss | $(18.97) million | $(15.58) million | Loss widened |
| Net loss | $(19.27) million | $(17.21) million | Loss widened; basic and diluted loss per share was $(0.60), versus $(0.56) |
| Operating cash flow | $(16.76) million | $(10.84) million | Cash used increased |
| Cash and cash equivalents, year-end | $12.23 million | $22.37 million | Down $10.14 million |
| Working capital, year-end | $10.97 million | $21.73 million | Down $10.76 million |
| Debt principal, year-end | $15.00 million | $10.00 million | Includes the $5 million Term B draw in July 2019 |
Q4 2019: Revenue was $7.43 million, gross profit was $5.34 million, operating loss was $5.43 million, net loss attributable to common stockholders was $3.95 million, and loss per share was $0.13. Revenue and gross profit were higher than in Q4 2018; losses remained substantial.
Liquidity and funding: Current assets were $20.90 million and current liabilities $9.94 million at year-end. The company reported a 2019 cash burn of approximately $10.14 million, measured as the net decrease in cash. Debt bears interest at prime plus 3.66% (8.41% at December 31, 2019) and matures April 1, 2022, subject to scheduled principal payments and covenant terms. After year-end, the company raised approximately $13.32 million net through its at-the-market offering by March 2, 2020, and expected about $1.09 million from the sale of New Jersey tax attributes. Management said it believed cash would fund operations into 2021 but that further capital would be required.
Material changes and business developments
- Product sales growth was driven by a roughly $3.19 million increase in direct sales, partly offset by a roughly $0.68 million decline in distributor sales. A weaker euro reduced reported sales by about $1.20 million.
- R&D expense increased 57% to $12.09 million, primarily because clinical-trial costs rose by about $3.89 million, including REFRESH 2-AKI and TISORB. SG&A increased 5% to $22.01 million.
- The company drew the remaining $5 million under its Bridge Bank facility, bringing debt principal to $15 million. It also issued 191,244 shares under a new ATM facility in 2019 for approximately $0.76 million net; substantial additional ATM issuance occurred after year-end.
- CytoSorb’s EU CE Mark was renewed through May 2024. The device received an EU label expansion for ticagrelor removal in January 2020, after the reporting year. In 2019, direct sales expanded to Poland and the Netherlands, and to Sweden, Denmark and Norway for critical-care applications.
- CytoSorb was commercially distributed in 58 countries, but sales remained concentrated in Germany. No individual customer, distributor or agency represented more than 10% of total revenue.
Outlook, risks and unusual items
- Going concern: The auditor’s report and management disclosures state that recurring losses and the need for additional financing raise substantial doubt about the company’s ability to continue as a going concern. The financial statements do not include adjustments for the outcome of this uncertainty. Management’s view that cash would fund operations into 2021 included post-year-end financing and anticipated tax-credit proceeds.
- Clinical and regulatory risk: U.S. commercialization depends on clinical evidence and FDA authorization. The pivotal REFRESH 2-AKI cardiac-surgery study was paused in November 2019 after a blinded milestone review; the data monitoring committee requested additional data and analysis, and the company changed CROs. The filing does not establish that the pause reflected a safety finding. Restart and outcome were uncertain.
- Other studies: The 250-patient REMOVE study completed enrollment in January 2020, with analysis then pending. TISORB was underway in the UK. Management described a possible 2022 U.S. PMA submission if REFRESH 2-AKI succeeded; this is a conditional plan, not assured guidance.
- Commercial risks: Adoption and reimbursement may be limited, particularly outside Germany; distributor registrations and sales are uncertain. Foreign-exchange movements matter because much product revenue is euro-denominated. The company also faces manufacturing scale-up, competition, patent, product-liability and regulatory-compliance risks.
- COVID-19 and China: In February 2020, the company announced a collaboration to explore CytoSorb use in severe COVID-19 cases in China. The filing characterizes the use as exploratory and not approved for commercial purposes in mainland China.
- Other items: Royalty costs included approximately $0.68 million under a 3% gross-revenue royalty and $1.13 million under a separate license arrangement in 2019. The company reported no current legal proceedings and effective internal control over financial reporting.
Important facts for investors to verify
- Cash runway and financing needs, including proceeds, dilution and remaining capacity under the ATM and shelf registration.
- Bridge Bank covenant compliance, principal-payment schedule, interest cost and April 2022 maturity obligations.
- REFRESH 2-AKI restart status, additional data requested by the monitoring committee, and eventual safety and efficacy results.
- REMOVE results, TISORB progress, and whether clinical evidence supports broader adoption or future FDA submissions.
- Revenue growth and product margins by geography and channel, especially Germany exposure, distributor performance and euro sensitivity.
- Reimbursement progress outside Germany, regulatory developments under the EU Medical Device Regulation, and the status of any U.S. authorization pathway.