Cytosorbents Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. CytoSorbents develops and commercializes blood-purification devices. Its CytoSorb product is marketed in more than 75 countries, but is not approved for general commercial sale in the United States; U.S. use is limited to applicable emergency authorization circumstances.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 / prior period | Change |
|---|---|---|---|
| Total revenue | $9.79 million | $9.45 million | Up 4% |
| Product sales | $8.99 million | $7.91 million | Up 14% |
| Grant income | $0.80 million | $1.54 million | Down 48% |
| Gross profit | $6.57 million | $5.46 million | Up $1.12 million |
| Operating expenses | $11.50 million | $13.35 million | Down 14% |
| Operating loss | $(4.93) million | $(7.89) million | Loss narrowed |
| Net loss | $(6.36) million | $(7.33) million | Loss narrowed |
| Loss per share, basic and diluted | $(0.12) | $(0.17) | — |
| Cash used in operations | $(4.83) million | $(3.11) million | Cash use increased |
Reported gross profit was 67.1% of total revenue, versus 57.7% a year earlier. Management reported product gross margin of approximately 76% excluding a one-time, non-recurring $304,000 inventory adjustment; product gross margin was 68% in Q1 2023. The filing does not provide a comparable product-margin figure including that adjustment.
Revenue growth reflected higher product sales: distributor sales increased approximately 20% and direct sales 10%. Grant income fell following completion of several grants in 2023. Lower R&D expense, including reduced STAR-T trial costs and non-recurring 2023 facility start-up expenses, helped narrow the operating loss. A $1.43 million foreign-currency transaction loss, compared with a $0.66 million gain in Q1 2023, partly offset the improvement.
At March 31, cash and cash equivalents were $8.61 million; restricted cash was $1.48 million, for total cash, cash equivalents and restricted cash of $10.09 million. Current assets were $19.99 million and current liabilities $13.42 million. Debt principal was $4.38 million, including $2.50 million current; long-term debt carrying value, including accrued final fee, was $4.43 million. Lease liabilities totaled $13.18 million. The company repaid $625,000 of debt during the quarter.
Management said available cash was expected to fund operations into Q4 2024. The company states it will need additional capital and that its cash position raises substantial doubt about its ability to continue as a going concern. Financing options being pursued include debt, royalty financing, strategic or direct investment, and equity; management gave no assurance of success. The company reported approximately $20.3 million remaining available under its ATM facility and received approximately $880,000 from the approved sale of New Jersey tax attributes in March.
Material developments, outlook and risks
- STAR-T clinical results: The pivotal trial met its primary safety endpoint, but did not meet its primary effectiveness endpoint in the overall study population. The company reported evidence of fewer bleeding complications, including serious events, in the pre-specified isolated CABG subgroup, which represented more than 90% of participants. Management believes the results will support parallel FDA and Health Canada submissions in Q3 2024; this is a target, not an assurance of approval.
- Commercial plans: Management is focused on growing CytoSorb sales, controlling expenses and seeking U.S. market access for DrugSorb-ATR. A new third-party stand-alone pump, PuriFi, was expected to launch in mid-2024. The Fresenius marketing program was also expected to launch in 2024.
- Risks and contingencies: Continued operating losses, cash burn and dependence on additional financing are significant risks. Other uncertainties include product adoption, regulatory review, clinical outcomes, hospital capacity and inflation-related labor, materials and energy costs. A former employee filed a New Jersey CEPA retaliation lawsuit in March 2024; the company disputes the allegations and intends to defend itself.
- Other items: The company recorded a $304,000 one-time inventory adjustment affecting product costs. It also reported $64,000 of patent impairment charges. Outstanding options, warrants and restricted stock awards were excluded from diluted loss per share as anti-dilutive. Subsequent to quarter-end, the board granted substantial additional options and restricted stock units; see the filing for award details.
Most important facts for investors to verify
- Cash runway assumptions, actual operating cash use, and the timing and terms of any required financing.
- STAR-T’s full results, including the overall endpoint failure and the CABG subgroup evidence, and the basis and timing for planned regulatory submissions.
- Whether product-sales growth and the stated product gross margin continue, including the effect of the inventory adjustment and grant revenue decline.
- Progress and commercial impact of the planned PuriFi and Fresenius programs.
- Debt repayment requirements, lease commitments, potential dilution from equity financing and equity awards, and developments in the former employee litigation.