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TOPIC: The Cytori Q1 Conference Call - May 9th

The Cytori Q1 Conference Call - May 9th 10 May 2012 09:52 #3

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To be honest- after close of business on the nasdaq and after reading the shareholder letter and news release, I decided to forsake on the CC and instead continued watching the baseball game between my team (The A´s) and the Jays. Yeah- we lost, but they had their best man on the mount and us our #5. No big deal.

This morning I did listen to the broadcast though and came away from that with kind of mixed feelings-

on the main issue- therapeutic partners- negative- yeah, I heard all that before- positive- their seems to be a sense of urgency in Calhouns statements, which hasnt been there before.

on the issue of re-vamping the ADVANCE protocolls- negative- the requirements of the member states in the EU hasnt changed overnight, so having issues in recruiting new sites appear house-made to me. positive- makes sense to make the trial smaller (40% of the original 350=140 patients) and just do one dose- 20 Million cells.
That not only saves a lot of time, but makes sense- the number of local receptors arent much greater it seems- the MSB trial seemed to indicate that too.

Shall we give Chris one more vote of confidence i.e. some more time to like him? :sick:

Have to think about that first.... :P

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Board moderator and Site-owner. I still regret the day I started analysing the prospects of MacroPore (now Cytori) back in 2004- a left-over from the tech-bubble at that time from the century change in my portfolio- and became addicted to Cytori´s fat cell technology. :cry:

Re: The Cytori Q1 Conference Call - May 9th 14 May 2012 06:50 #4

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A gentleman from north California wrote the below summary of the last CC- he is not a financial advisor but an inquisite DD-man like myself, with an understanding of the potential of the techology-

in two parts- first the prepared statements from management-

Management prepared comments - summary points:

1) Overview remark - The three principle objectives are to advance our cardiovascular disease pipeline, grow the commercial business and achieve our operational and financial performance goals.

2) European no-option CMI CE approval - Most open items have now been resolved. Our response to three remaining items will be submitted shortly followed by an in-person meeting in the upcoming weeks. Due to the complexity of the evaluation process, request for additional information and the landmark importance of this first-in-class approval, we now anticipate the decision coming in the second half of the year. We're confident in our ability to supply our notified body with the requisite information to address the remaining open items.

3) ATHENA trial - The U.S. ATHENA trial for refractory heart failure, including chronic myocardial ischemia patients, is ahead of schedule. Five trial centers have been selected, including Texas Heart Institute and the Minneapolis Heart Institute. Patient enrollment will begin this quarter and is anticipated to be completed by mid-2013.

4) ADVANCE trial - Our pan-European ADVANCE pivotal trial for acute myocardial infarction is being amended to meet current regulatory standards, improve the trial design and to expand utility of the trial toward reimbursement. The primary end point for market approval in this trial remains the reduction in infarct size as measured by MRI at six months.

5) Commercial business - We reaffirm our $9 million product revenue target for 2012. Sales are expected to be weighted towards the second half of the year. Celution consumable sales were the highest of the last five quarters and second highest in company history. In addition, we achieved record Puregraft sales in the quarter.

6) Financials - Total operating expenses were reduced by 31% in Q1 compared to the same period in 2011, down from $13 million to $9 million. Operating cash burn was reduced by 27% in the quarter down from $10.6 million to $7.7 million. The company ended the first quarter with $34.4 million in cash and cash equivalents plus $1.4 million in accounts receivable. Recently, we terminated the financing agreement with Seaside 88. The company raised approximately $18 million through that agreement.

7) Partnerships - We are actively negotiating strategic partnerships to develop and commercialize solution cell therapy in specific indications in markets. While a number of these are progressing, management is particularly focused on closing one or two of the most advanced opportunities which we believe can be completed in the near term.

8) Patents - Cytori now has 46 issued patents with more than 75 additional applications under review. Our intellectual property position was strengthened during the quarter with the receipt of two U.S. patents including a composition patent for ADRC enriched fat grafting for soft tissue applications and a device based patent for using cells to accelerate the healing of wounds. We anticipate our IT portfolio of issued patents worldwide will grow by at least 15% this year.

9) 2012 goals - The remaining value driving milestones that we expect to achieve between now and the end of the year include the following: completing a strategic partnership, initiating enrollment in the ATHENA trial, expanding CE Mark claims to include no option chronic myocardial ischemia, publishing the APOLLO 18-month data, publishing precise 6-month and 18-month trial data and achieving $9 million in product revenue for the year.

10) CEO color - From my perspective as CEO, we've never operated as efficiently as a company as we do today. We've never had as much assurance that our core technology really works, and we've never had more aggregate deal value and third party interest this close to the goal line in our history. I believe 2012 is our year and we are well on the way to delivering strong results and increasing shareholder value. B)

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Board moderator and Site-owner. I still regret the day I started analysing the prospects of MacroPore (now Cytori) back in 2004- a left-over from the tech-bubble at that time from the century change in my portfolio- and became addicted to Cytori´s fat cell technology. :cry:

Re: The Cytori Q1 Conference Call - May 9th 14 May 2012 06:54 #5

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Summary of the Q and A session- same author- as previous post-

Q&A - summary points

1) ATHENA trial – The FDA has been very responsive. We've gotten very fast turnaround from them. We've shown that we are a device regulated in the U.S., not a cell therapy. Leading cardiology stem cell doctors in the U.S. coming on board with this study. From a clinical perspective, in some ways this trial is the mirror image trial from the Precise study in Europe, but it has that U.S. rigor, scientific characterization and meets the FDA clinical bar, and it's meant to lay the foundation for a pivotal trial in the U.S. to follow upon that. When there is a clear regulatory path, which I think we have, we're able to move I think very quickly, and I think you'll continue to see that over the year.

2) No option CMI market - This is a gigantic multibillion dollar market. There really aren't good options for these patients, and there's about 250,000 U.S. patients a year going into this from an incidence perspective, but there's a prevalence that's probably 10X. U.S., Europe, Japan are roughly equal in size. We're talking about $10 billion plus markets. So, it represents a critical market and there really aren't good therapies out there to address this need.

3) Cultured cells versus Cytori solution - The benefit of having a cultured cell therapy as you effectively turn that cell or group of sales into a drug and you can have very strict wide release criteria and you can very much apply manufacturing constraints that are applied to drugs. While that's a good thing if you're a regulator, it's a bad thing if you're a patient because when you culture cells, no matter where the source of the cells are from, you tend lose their potency. One of the core, if not the primary, benefits of our cells – and this gets to the question of mechanism of action – it's because they're fresh, because it's a mixed population of cells, because these cells have never seen tissue culture plastic and haven't gone through hat but artificial process of cell culture. The potency is much higher than it would be if you were to culture it and lose that potency. The downside of that is that you get a lot more patient to patient variability than you would expect in a culture cell therapy, but in aggregate, in our view the benefits strongly outweigh the negatives because you have a more potent cell population, you're regulated as a device, The cells all are autologous – in other words, they're not rejected – and you take away the cost structure of building a big plant to manufacture cells. The mechanisms of the cells are related to their ability to create blood supply in the fat tissue, and that actually translates over into the heart, and that facet's preserved in our process.

4) Partnerships - The board and management realize the importance of completing one of these asset partnerships as soon as possible. There's more activity and interest and real tangible field processes going on than we've ever seen before. While we have many more discussions that are going on, there're really seven distinct deal processes that underway currently. These include approximately three large pharmaceutical companies, a medical device company, two government groups and at least one philanthropic organization. We're talking to a variety of people. They also represent organizations from around the world. There's some that are in Europe, some that are in Asia and some that are here in the U.S. It's really looking at deals globally. These include core and non-core indications, both regional and global focus type deals and now including several that are really new areas and these are areas beyond things that have either been clinically treated or that we've even discussed to date. There's even some new things that people are interested in that we think the technology could be very powerful at. I think when you kind of hear all of that, it sounds like a lot of opportunistic effort that's going on. but I would say that it really reflects what we know and see in the technology, that the application of these ADRCs are broad, significant, they're big markets and it's far reaching. While we continue to move kind of each of these through towards success, the management team is intensely focused on the two that are the furthest along. We're very confident that we're going to deliver one of these in the very near term. There's a couple that are really very close and we're focused on getting those done.

5) Breast reconstruction - The publication of the RESTORE-2 data is a significant milestone for us because it validates the technology, the safety and efficacy in breast reconstruction, but it was a key piece that we needed through really head with the INTACT submission, which is the medical technology assessment committee of the NHS in the UK. There are two key things about this. One is that it helps us progress formally toward getting that formal reimbursement and toward valuating the technology in the UK market, but it also is really much broader than that. It's a proxy for cost effective and innovative therapy that improves patient care versus the standard of care for breast reconstruction today, which is either flaps or increasingly serial fat grafting, and that's growing at a very rapid pace. With the IMPACT submission and their approval of this technology, it will not only open up our market force in the U.K., but that kind of proxy will also enable us to expand our market access in Europe, Canada and many other countries around the world. The near term implication once we have that approval will be increased sales and movement towards getting formal reimbursement which will really open up the market force in that indication.

6) Partnerships types - The ideal partnership at this stage for us comes within three fronts. One front is core or things that are on the market and that's kind of more of a commercialization partnership and that would be around some of the approved products, approved technologies, soft-tissue type applications in Europe and America, and that is more to help stimulate market access and drive the commercial platform. The second is for kind of deep in the pipeline core applications and this is probably vascular, cardiovascular, wound – those kinds of things where we have good clinical data, even some completed trials, now moving into later stage trials, and this would be more of a kind of late stage development and then commercialization type trial, and that would be upfront money and some milestones, and then a commercialization structure. The third possible partnership is kind of around the stuff that's earlier, and the platform – we've only been able to focus on a few things because each one of these tales a significant amount of resources and you really just can't do everything. We've kind of selected a couple of things that we thought were the right things to go after, and we've been focusing on those, but this technology as a platform can really apply to a lot of things. You could see a partnership that's a little earlier, that's more developmental in nature, that ultimately turns into a commercialization partnership, and this is an example of what we put together with Astellas. They took an option on a market that was early. It's liver. This is in the public domain, and I think that would be an earlier partnership that could move into a earlier clinical trial and then a later clinical trial and then, ultimately, a commercialization partnership. There's probably a lot of those kind of partnership potentials out there, some of which are now supported by the translational work that's going on around the world. There may be even some level of clinical data out there that could support an indication that's outside of what we typically think of as Cytori core indications right now. We've tried to protect the value to move it downstream. We think there's now a lot of clarity around our regulatory, our patents, the markets, and the clinical data and the indications and the mechanisms and all of the science – all of that stuff's really coming together that this is now a very partner-able technology.

7) Technology monetization - It would be absolutely feasible to sell one of the technologies to create funding for the rest of the company. I wouldn't count anything out. I mean I think if we had the right partnership we could. It gets a little messy because you do have this core device. That's certainly contractible. I think we could figure out terms on that. Either you're going to get it through a revenue sharing model and some milestones to fund the development work or you're going to get a royalty type structure. I think you ultimately end up capturing that value. We'd like to see the value – the technology moved as far downstream as possible to maximize the shareholder value since we've really invested the last decade bringing it to this point.

8) Monetizing EU CMI approval - Let me start by reviewing the cardiovascular strategies because you see a European part of the strategy and you see this emerging U.S. part of the strategy for two different cardiovascular indications. The strategy itself might not be fully apparent. From a near-term commercialization perspective, the strategy is really about heart failure. It's about these no-option patients, the unmet medical need, the fact that there aren't enough hearts to transplant and no good treatments for these patients. The reason we have the ADVANCE trial and the claims initiative going through our Notified Body is the idea that we would marry the refractory heart failure claims with the 35 advanced trial sites – that although there for acute myocardial infarction, that pre-places 30 plus systems around Europe with physicians that are trained to use them, and strategically we're making sure that as many of them as possible have the ability to deliver cells for the chronic indication. If we can marry those two, we think it really gives us a jumpstart on the commercial activity related to treating heart failure in Europe. Then, the second part of the strategy is in leveraging what we've done in a PRECISE study and our risk benefit ratio for this very difficult patient that we've uncovered in our data in Europe, and then bringing that to U.S. where we think we have the opportunity getting to our ATHENA trial and then into the pivotal trial to be first to market with heart therapy in this difficult group of patients. The idea from a monetization perspective is, yes, we do have a plan to get the claims in Europe. We already have the KOLs identified in Europe, the early adopters, and we need to make them successful users of the technology in treating patients. That's step one after we get the claims. The second part is to expand the consumable sites to these advanced sites that I mentioned before when I was reviewing the strategy. Part of that strategy is to pick advanced sites – heart attack sites – that have the ability to deliver cells with respect to NOGA or some other delivery technology that we've talked about on previous calls. ADVANCE is important for this commercial activity even though we may not get claims in the very near term. In the third part of this is a registry, and so it's likely that if we are to get claims in Europe for refractory heart failure – no option, there will be a registry but, in fact, we want a registry because that helps to drive throughput of the systems' adoption and drive cases and build a KOL base and then, ultimately, that registry data can potentially – although not fully – but can potentially help us support reimbursement downstream. We do have some revenue built into a 2012 revenue assumption and then, although it's still early to talk about, we have that growing into 2013 and beyond based on the sites that we've outlined for CMI.

9) Okyanos - We built some [Okyanos-related sales] into our [2012] revenue assumptions and discounted that because there's uncertainty both from the regulatory claims perspective and for the rate of enrollment. I think from a regulatory perspective, obviously the number one goal is to protect what we're doing in the U.S. and we've got a great relationship with the FDA, we're moving quickly, and we're strictly following FDA regulations, so that's number one. We also have customers around the world and Okyanos is one of those that can legally acquire the technology and, under the appropriate local regulations, treat patients as part of a related study, as part of a registry, or as part of full commercialization, as the Bahamas is more aligned with the U.K. and CE marketing process rather than the U.S. We think that it's entirely possible to have successful, safe utility of the no-option chronic ischemic therapy for patients in those areas where there's a clear regulatory path. That's why we're pursuing it so aggressively in the European community because we think the data supports the utility of these patients who are dying at 20% per year. There is no good option for these patients. It's the humane thing to do to try to treat them, and we think the data in aggregate shows we can do it successfully and customer partners such as Okyanos we think are tooled to be able to deliver that therapy in a U.S., high level type of way. There any other institutes out there that are looking at similar ventures at this point.

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Board moderator and Site-owner. I still regret the day I started analysing the prospects of MacroPore (now Cytori) back in 2004- a left-over from the tech-bubble at that time from the century change in my portfolio- and became addicted to Cytori´s fat cell technology. :cry:
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