CytoSorbents Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The company develops and commercializes blood-purification medical devices, led by CytoSorb, marketed in more than 75 countries. CytoSorb is not approved for commercial sale in the United States; its U.S. COVID-19 use is under an FDA Emergency Use Authorization for specified circumstances. DrugSorb-ATR remains investigational.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $8.81 million | $8.11 million | $27.68 million | $25.30 million |
| Product sales | $7.75 million | $6.46 million | $23.74 million | $21.72 million |
| Gross margin dollars | $5.61 million | $3.62 million | $17.08 million | $14.98 million |
| Operating loss | $(7.35) million | $(9.02) million | $(21.87) million | $(25.17) million |
| Net loss | $(9.19) million | $(12.20) million | $(22.67) million | $(32.05) million |
| Loss per share, basic and diluted | $(0.21) | $(0.28) | $(0.52) | $(0.74) |
- Q3 product sales increased 20%; total revenue rose 9%. Management attributed product growth to higher direct and distributor sales, with a favorable euro exchange-rate impact of about $508,000. Grant income fell 36% as several grants concluded.
- Product gross margin was 72% in Q3 versus 55% a year earlier, and 71% for the nine-month period versus 68%. Management cited improved manufacturing efficiency after the 2022 production relocation. Total gross margin was approximately 64% and 62%, respectively, for those comparative periods.
- For the first nine months, operating cash used was $15.25 million, versus $22.89 million in 2022. Investing activities used $0.80 million; financing provided $2.26 million, including about $2.11 million net from ATM stock sales and $0.21 million from option exercises.
- At September 30, cash and equivalents were $8.36 million and restricted cash was $1.69 million. Current assets were $19.26 million and current liabilities $11.97 million. Total liabilities were $29.06 million, including $5.03 million of debt principal and accrued final fee and $13.01 million of lease liabilities.
- The company reported an accumulated deficit of $276.67 million. Management said cash was expected to fund operations through Q1 2024 and that additional capital would be needed. The filing states that available cash is not expected to fund operations beyond the next twelve months from issuance and identifies substantial doubt about the company’s ability to continue as a going concern.
Changes, outlook and notable items
- Compared with Q3 2022, net loss narrowed by about $3.01 million. Lower cost of revenue and a smaller foreign-currency transaction loss contributed; Q3 2023 still included a $1.81 million FX loss. For the nine months, the FX loss was $0.73 million versus $6.97 million in 2022, materially affecting the year-over-year net-loss comparison.
- Q3 operating expenses included $3.75 million of R&D, $1.10 million of legal, financial and consulting expense, and $8.10 million of SG&A. The nine-month period included a $280,000 litigation settlement and about $476,000 of patent-cost impairment charges.
- STAR-T completed final patient follow-up in August 2023. The trial remained blinded; the company said it expected initial data analysis before year-end and planned to assess whether results could support an FDA marketing-approval application. STAR-D enrollment was paused in November 2022 and was expected to resume after STAR-T activities.
- Management’s stated priorities were seeking U.S. approval for DrugSorb-ATR, growing CytoSorb sales toward profitability, and reducing cash burn. It reported $7.6 million of revenue remaining to be earned on open grant contracts and said R&D efforts were being consolidated around HemoDefend-BGA and DrugSorb-ATR.
- The company terminated a confidential process for an underwritten common-stock offering, citing market conditions, and was evaluating debt, royalty financing, strategic or direct investment, and equity alternatives. ATM sales during the first nine months raised about $2.11 million net; the filing said approximately $22.8 million remained available under the ATM facility.
- The Nikkiso pump-distribution agreement expired in September 2023; the company was seeking a new supplier. A planned Fresenius collaboration launch was expected in 2024. Inflation, labor and input costs, hospital staffing and budgets, reimbursement, and reliance on Germany (about 40% of nine-month product sales) were identified as business risks.
- Other notable matters: a $280,000 litigation settlement was accrued; a 3% perpetual royalty applies to CytoSorb gross revenue under an earlier agreement. The company reported no other current litigation and no off-balance-sheet arrangements.
Key facts for investors to verify
- Current cash runway, cash-burn trajectory, and whether financing can be secured before liquidity becomes constrained; going-concern doubt is expressly disclosed.
- STAR-T database lock, results, and regulatory pathway, plus timing and funding for any resumption of STAR-D.
- Underlying CytoSorb sales trends excluding currency effects, grant-income variability, and sustainability of improved product margins.
- Availability, terms, and potential dilution or economic trade-offs of financing; the ATM capacity and shelf-registration amounts are distinct facilities.
- Progress toward a replacement stand-alone pump supplier and the expected 2024 Fresenius program launch.