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Cytomedix, Inc. (GTF-AMEX)

Current Recommendation Outperform

Prior Recommendation N/A

Date of Last Change 04/16/2010

Current Price (04/16/10) $0.56

Target Price $1.50

INITIATION

SUMMARY DATA

Risk Level Above Average

Type of Stock Small-Growth

Industry Med-Biomed/Gene

Zacks Rank in Industry 51 of 139

We are initiating coverage of Cytomedix with an Outperform rating. At today s price, we do not believe the market has come to grips with the transformation underway at Cytomedix thanks to the recent acquisition of the Angel Whole Blood Separation System and ActivAT Autologous Thrombin Processing Kit from the Sorin Group completed on April 9, 2010. Outside of the recent Sorin asset purchase, the core business in AutoloGel remains an exciting opportunity for management. With a current capitalization of only $21 million, we believe the market is far undervaluing Cytomedix. Based on our NPV analysis, a market capitalization closer to $60 million, or approximately $1.50 per share, more accurately values Cytomedix and the future earnings potential for the company with AutoloGel and Angel.

52-Week High $0.69

52-Week Low $0.40

One-Year Return (%) 21.05

Beta 1.53

Average Daily Volume (sh) 249,902

Shares Outstanding (mil) 37

Market Capitalization ($mil) $26

Short Interest Ratio (days) 0.19

Institutional Ownership (%) 1

Insider Ownership (%) 16

Annual Cash Dividend $0.00

Dividend Yield (%) 0.00

5-Yr. Historical Growth Rates

Sales (%) 11.6

Earnings Per Share (%) N/A

Dividend (%) N/A

P/E using TTM EPS N/A

P/E using 2009 Estimate N/A

P/E using 2010 Estimate N/A

Zacks Rank 3

GTF: Cytomedix Makes A Bold Move With Angel Acquisition. Initiating With An Outperform Rating.

Equity Research

www.zacks.com 111 North Canal Street, Chicago, IL 60606

April 19, 2010 Jason Napodano, CFA

Brian Marckx, CFA 312-265-9421

[email protected]

ZACKS ESTIMATES

Revenue (In millions of $)

Q1 Q2 Q3 Q4 Year

(Mar) (Jun) (Sep) (Dec) (Dec) 2009 0.5 A 0.6 A 0.5 A 0.4 A 2.1 A 2010 0.1 E 1.5 E 1.5 E 1.6 E 4.8 E 2011

7.4 E 2012

10.2 E

Earnings per Share (EPS is operating earnings before non-recurring items)

Q1 Q2 Q3 Q4 Year

(Mar) (Jun) (Sep) (Dec) (Dec) 2009 -$0.03 A -$0.03 A -$0.02 A -$0.03 A -$0.10 A 2010 -$0.03 E -$0.02 E -$0.02 E -$0.02 E -$0.07 E 2011

-$0.02 E 2012

$0.04 E

Zacks Projected EPS Growth Rate - Next 4 Years % N/A

http://www.zacks.com

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WHAT S NEW

Initiating Coverage

We are initiating coverage of Cytomedix with an Outperform rating and near-term price target of $1.50 per share. At this price, we do not believe the market has come to grips with the transformation underway at Cytomedix thanks to the recent acquisition of the Angel Whole Blood Separation System and ActivAT Autologous Thrombin Processing Kit from the Sorin Group completed on April 9, 2010. Management acquired these two key assets for a price of $7 million in cash, with $2.0 million upfront and $5.0 million in the form of a promissory note payable in installments over the next 2.5 years. The Angel whole blood separation device reported sales in 2009 of approximately $4.8 million, up 7% from 2008, and generated profits of approximately $1.7 million. Cytomedix exited 2009 with $2.1 million in cash and investments, and in April 2010 raised approximately $3.65 million through the issuance of convertible preferred stock and warrants. Therefore, we see little concern at this point on management s ability to meets its future obligations to Sorin. In fact, with assuming only modest growth in Angel, the acquisition should be accretive almost immediately.

With Angel, Cytomedix now enters the rapidly growing platelet rich plasma market for both orthopedic and cardiovascular applications. The Angel system consists of a blood processing device and disposable products used for separation of whole blood into red cells, platelet poor plasma and platelet rich plasma (PRP). We estimate this is approximately a $50 million market growing at 10% to 15% annually, with Angel holding roughly 10% share. Use of PRP has been on the rise significantly over the past several years thanks to applications in sports medicine. Recent data presented at the American Academy of Orthopaedic Surgeons in March 2010 demonstrated that PRP was effective at treating chronic tennis elbow, severe Achilles tendonitis and osteoarthritis of the knee. That being said, the bulk of the Angel business in 2009 was from perfusionist groups in the cardiovascular setting. We note that there are an estimated 200 units in place at 150 customers, and 90% of the revenues are from the high margin single-use disposable sets sold along with the system. We are excited about this acquisition and believe it creates a clear path to profitability for the company. Management will largely use the existing infrastructure currently in place with AutoloGel and should be able to ramp sales of Angel through expanding the distribution network and use of independent representatives in 2011 and 2012.

Outside of the recent Sorin asset purchase, the core business in AutoloGel remains an exciting opportunity for management. The AutoloGel system is a unique technology that enables rapid isolation and activation of platelet rich plasma from a patient s own blood specifically for the treatment of chronic wounds, including leg ulcers, pressure ulcers, and diabetic ulcers and for the management of mechanically and surgically debrided wounds. Besides being the only approved PRP product for chronic wounds, AutoloGel has certain key advantages that we believe make it a share gainer over the next several years. These include a simple and rapid processing time and a thoughtfully designed reagent formulation and concentration that are optimal for the wound healing process.

Far Undervalued

With a current capitalization of only $21 million, we believe the market is far undervaluing Cytomedix. We estimate the company should generate revenues in 2010 near $5 million thanks to the recent acquisition of The Angel System and growing sales of AutoloGel. The current value of only 4x revenues is far below the peer-group average of roughly 6-7x revenues. We believe the company is on a clear path toward profitability in 2012 thanks to growing revenues, high margin products, and a low-cost structure. Based on our NPV analysis, a market capitalization closer to $60 million, or approximately $1.50 per share, more accurately values Cytomedix and the future earnings potential for the company with AutoloGel and Angel.



OVERVIEW

Whole Blood Separation

Human blood is a bodily fluid that delivers essential substances such as nutrients and oxygen to the body s cells, as well as transporting waste products, mainly carbon dioxide, away from the cells for removal. Blood is composed of blood cells suspended in liquid called plasma. Blood cells include: red blood cells (erythrocytes), white blood cells (leukocytes), and platelets. Red blood cells are responsible for transporting oxygen to the cells of the body. In contrast, carbon dioxide is transported almost entirely extracellularly dissolved in plasma and deposited in the lungs where it is exhaled for removal. Blood plasma is yellow liquid component of blood in which the blood cells are suspended. Plasma makes up about 55% of the total blood volume, of which the leading component is water at ~92%. Plasma also contains glucose, clotting factors (fibrinogen, albumin, and globulins), mineral ions, hormones, and carbon dioxide. Blood fractionation is the process of separating whole blood into its components, typically performed by using a centrifuge to rapidly spin the blood.

Platelets (thrombocytes) are very small cellular components of blood that help the clotting process by sticking to the lining of blood vessels. Platelets are made in the bone marrow and survive in the circulatory system for an average of 9 10 days before being removed from the body by the spleen. Platelets helps prevent massive blood loss resulting from trauma, as well as blood vessel leakage that would otherwise occur in the course of normal, day-to-day activity. Physicians can prepare units of platelets by using a centrifuge to separate the platelets from the donated unit of whole blood. Traditionally, the platelet-rich plasma (PRP) is then centrifuged again to concentrate the platelets further. Platelets also may be obtained from a process known as apheresis (or plateletpheresis). In this process, blood is drawn from the donor into an apheresis instrument, which, using centrifugation, separates the blood into its components, retains the platelets, and returns the remainder of the blood to the donor. The resulting component can contain up to six times as many platelets as a unit of platelets obtained from whole blood

...Platelet Rich Plasma

PRP contains and releases (through degranulation) at least seven different growth factors (cytokines) that stimulate bone and soft tissue healing, thus allowing for use in a variety of clinical settings, including wound healing, tendonitis, cardiac care, cartilage regeneration, disc regeneration, and dental health. Plasma supplies protease inhibitors to stop tissue destruction, clotting factors and a fibrin matrix for cell growth, and serum albumin which inhibits inflammation and cell destruction. Orthopedic surgeons are a significant user of PRP for common procedures including rotator cuff repairs, knee ligament reconstruction, meniscal repairs, ACL reconstructions, Achilles and patellar tendon repairs, and chronic tendinopathy such as tennis elbow . The benefits of PRP include enhanced and shorter recovery times, reduction in bleeding and pain, and reduction in infection. Thus, the sports medicine avenue for future PRP use is significant in our view. Finally, cardiovascular surgeons also use PRP to improve healing times and reduce bleeding risk during open heart surgery.

Yet, despite the fact that PRP separation and concentration is an exact science, there exists on the market today dozens of approved devices to prepare PRP. The method and volume depend on the clinical application. For example, Cytomedix topical AutoloGel, with its enhanced formulation including ascorbic acid, is the only PRP device approved for wound care. The addition of ascorbic acid aids the synthesis of collagen and the stability structure. Ascorbic acid also scavenges free radicals to prevent cell destruction. The AutoloGel system also offers significantly shortly preparation time versus early technology and a physiological platelet concentration proven optimal for wound care by an abundance of clinical data.

The recently acquired Angel Whole Blood Separation System from Sorin Group gives Cytomedix one of the leading products on the market today for PRP preparation, and a direct entry into the surgical market. Angel was cleared by the U.S. FDA in August 2005 and posted worldwide sales in 2009 of roughly $4.8 million (90% in the U.S.), up 7% from the $4.5 million posted in 2008. Angel is a closed system that maintains aseptic conditions critical for the surgical setting. The device processes greater volumes of blood, allowing for lots between 40ml and 180 ml of four-to-six fold increased platelet rich plasma. The system is also very user-friendly, with a Microsoft Windows based operating platform, easy one button push to start, continuous volume counting and monitoring, self-loading pumps, and pre-assembled disposable packets for fast and safe use.



The Angel System

Cytomedix closed the Angel transaction in April 2010 with Sorin Group. Sorin was a highly motivated seller of the product as the company streamlines its operations in the cardiovascular market. The Angel System was originally acquired by Sorin through its acquisition of COBE Cardiovascular in 2004. Since that time, Sorin has been divesting non-core COBE businesses, including renal care and peripheral stents in 2008. Sorin has always made it its intention to divest Angel given the products more frequent use in the orthopedic setting. However, Sorin has wisely been selective in to whom it divests Angel, as there are a significant number of cardiovascular perfusionists using the product as well. Clearly, the Italian-based company has a vested interest in its continued reputation to see a smooth transition with these core customers. We believe Cytomedix offered Sorin the three key aspects it was looking for with the divestiture: complimentary (not competitive) business lines, ability to target both the orthopedic and cardiovascular segment, and U.S.-based operations. Therefore, we believe Cytomedix picked up the system for a very attractive price.

Total purchase price of $7 million include $2.0 million upfront in April 2010, and $0.8 million in October 2010, $0.8 million April 2011, $1.2 million in October 2011, $1.2 million in April 2012, and $1.0 million in October 2012. In April 2010, Cytomedix raised approximately $3.65 million through the private placement of 3,650 shares of convertible preferred stock at $1,000 value. The preferred shares pay a 10% annual dividend and are convertible into common stock at an exercise price of $0.44. Cytomedix also offered 4.1 million warrants to purchase common stock at an exercise price of $0.54 as part of the transaction. Based on audited 2009 financials, Angel and ActivAT (discussed below) reported total revenues in 2009 of $4.932 million, about $4.8 million of which was Angel and $0.2 million of which was ActivAT. This was up approximately 7% from 2008 levels. Gross margin on this business is roughly 65%, and net profits totaled $1.741 million.

The current size of the PRP surgical market is approximately $40 to 50 million. We estimate that Angel holds around 12% market share. No one product has over 30% share; so at this point things remains wide open. Angel has certain advantages that should lead to share gains in the future. The product is built on the tried-and-true apheresis technology surgeons are familiar and comfortable with. Plus, the system is completely closed (aseptic), able to handle larger volumes than competitors, and fully customizable. Other available PRP systems include:

Cytomedix Angel

Tech: Computer Centrifugation Process Time: 20 min

Platelet Count: ~4x

DePuy Symphony

Tech: Floating Shelf Process Time: 16 min

Platelet Count: ~4x

Biomet GPS

Tech: Floating Buoy Process Time: 27 min

Platelet Count: ~3x

Harvest Tech SmartPrep

Tech: Floating Shelf Process Time: 16 min

Platelet Count: ~4x

Haemonetics Cell Saver

Tech: Std. Centrifugation Process Time: 20 min

Platelet Count: ~5x

Arteriocyte Megellan

Tech: Computer Centrifugation Process Time: 17 min

Platelet Count: ~5x



However, we do not believe this is only a market share grab play. The opportunity is significant because the entire market is growing at over 20% CAGR. The existing $5 million in revenues is being accomplished with little infrastructure and support. Cytomedix will add only 3 full time employees as part the transaction for sales support, shipping, quality control, and logistics. Management will work to expand the independent representatives to sell the system over the next few quarters. As the clinical data becomes more prevalent and the distributor networks are expanded, sales of Angel should dramatically increase. Management s goal is to leverage the current installed base, and then ramp new system placements. Sales outside the U.S. are only about $500,000, but Cytomedix has the opportunity to expand the distribution network for the device, and much like the U.S., management can partner with additional independent sales reps. and key opinion leaders to drive brand awareness as they push forward.

One of the largest opportunities we see for expansion of sales is into sports medicine. The evidence that using PRP to shorten and improve healing with knee, ankle, elbow, or an ACL or MCL sprains is growing rapidly. Data presented at the American Academy of Orthopaedic Surgeons in March 2010 demonstrated that PRP was effective at treating chronic tennis elbow, severe Achilles tendonitis and osteoarthritis of the knee. Golfer Tiger Woods was reported to use PRP to shorten his recovery time after his ACL tear in 2008. The New York Times reported that Pittsburgh Steelers Hines Ward and Troy Polamalu both used PRP to recover from an injury during the 2008 NFL season in which the team won the Super Bowl. New York Mets all-star center fielder Carlos Beltran used PRP over the summer to aid in his recovery from a bone bruise on his right knee. The LA Dodgers, Seattle Mariners, Denver Nuggets, and Dallas Cowboys have all embraced the use of PRP. The use of PRP is clearly on the rise in professional sports. Standards have yet to be set however and some sports purists are bringing up ethical questions regarding the use of PRP. In fact, the World Anti-Doping Agency, as of January 1, 2010, has banned the use of PRP in international competition when injected directly into muscle. The agency continues to allow PRP use for tendon, bone, and ligament injuries. Nevertheless, for the non-professional athlete, PRP could represent a cheap and quick alternative to a lengthy recovery processes following orthopedic surgery or an injury.

Source: Jenny Vrentas & Michael Guillen, Star Ledger The economics of the product are very strong. We estimate gross margins on the disposable device is >70%, and with only about 200 installed units (systems) the majority (~90%) of the sales are re-orders of the single-use consumable device. The centrifugation unit costs an estimated $7,500 and a single consumerable runs about $150 in the U.S. and about 160 in the E.U. Over 90% of the manufacturing is outsourced and Cytomedix will assume these OEM agreements. Cytomedix will add only 3 additional full-time employees as part of the transaction for technical support, QA/QC, logistics, and service. The model follows the highly successful razor & blade pioneered by Gillette. With Angel, we think Cytomedix can approach profitability in 2011.

Included in the Sorin transaction, Cytomedix acquired an ActivAT Autologous Thrombin Processing Kit. The kit is a complete system which includes all reagents and necessary components to rapidly produce about 7 ml of autologous thrombin serum from only 12 ml of platelet poor plasma (PPP). Key aspects of the technology include a simple and easy-to-use process with no platelet waste. The procedure takes only 30 minutes, and results in a sterile and highly active serum (minimum thrombin activity 50 IU) that is stable for up to six hours after preparation. The market for ActivAT is primarily in Europe where there is no readily available supply of bovine serum. European orthopedic and cardiovascular surgeons have been very slow to adopt King s Thrombin-JMI bovine serum due to fears from Creutzfeldt Jakob ( Mad Cow ) disease. As such, the ActivAT product yields a safer alternative. We estimate that the ActivAT system posted sales of approximately $200k outside the U.S. in 2009.



ActivAT

Outside of the surgical market that Cytomedix has now entered with the Angel system, the core business remains with topical applications of PRP for wound care.

Chronic Wounds Background

A healthy wound needs a moist environment and adequate delivery and balance of nutrients and cellular sources of growth factors, cytokines and chemokines to heal itself naturally. After a tissue injury, blood clotting, platelet aggregation, and migration of leukocytes ensues. Macrophages and neutrophils trigger the inflammatory response, destroying bacteria and debris. Fibrin and fibronectin provide a scaffold for platelet aggregation and cell growth. The body produces proteases (uPA, tPA, MMP) and growth factors (TGF, VEGF, PDGF, KGF) to facilitate migrating granulated tissue.

A chronic wound is one that does not repair or heal itself through the normal process of cellular healing due to a loss or imbalance in the cascade effect of growth factors, cytokines and chemokines. Therefore, chronic wounds typically become stalled in the inflammatory stage of healing. Blood flow becomes reduced in the stagnant wound bed, further restricting the supply of nutrients needed for healing. As the imbalance in nutrients and cellular factors grows, the wound worsens creating a chronic condition for the patient in which infection and inflammation persist and further deterioration occurs. Over time the bacterial load, neutrophils, protease and free radical activity increases and a polysaccharide biofilm (slough) appears in the wound, further protecting microorganisms from the body s defenses or antibiotics.

There are several intrinsic factors that can influence a chronic wound, including the patient s age and physical well-being, or an illness or disease. Other factors including history of alcohol abuse, smoking, infection, temperature, pressure, hydration, medication, and stress. These factors contribute to the stalled inflammatory stage of low blood flow, proteases, free radicals, and bacterial infection that prevent or delay healing. Typically, a wound that has not progressed toward healing after 30 days requires an external agent to reignite the repair process.

From The Journal of Investigation Dermatology 2007 127, 1018-1029 (Figure 1)



There are several types of wounds that could turn chronic. These include:

Pressure Ulcers, also known as bedsores, are caused by unrelieved pressure, friction and humidity to any part of the body. They are most common over bony or cartilaginous areas such as the hip, elbow, knees, or ankles. They manifest in stages from superficial (Stage I) to the most severe (Stage IV). With higher stages, healing time is prolonged. While about 75% of Stage II ulcers heal within eight weeks, only 62% of Stage IV pressure ulcers ever heal, and only 52% heal within one year. Incidence is modest (between 5% and 20%) for nursing home and long-term care facilities, with higher risk for immuno-compromised patients in the ICU (between 15 to 30%). There are an estimated 2 million patients that suffer from pressure ulcers each year; 25% will require hospitalization.

Diabetic Foot Ulcers are common due to neurological and vascular complications resulting from the underlying disease. Diabetes causes blood vessels of the foot and leg to narrow and harden, resulting in poor circulation. It can also cause changes in the skin of the foot to become very dry or cracked. Neuropathy lessens the ability to feel pain, heat, and cold, and as a result diabetics are more prone to an injury. The ADA estimates 30 million Americans (10% of the population) have diabetes, with another estimated 57 million considered pre-diabetic or at risk for developing full onset diabetes. The incidence of foot ulcers for diabetics is 15% per year. The most severe cases (about 10 to 15% of the time) will require amputation.

Chronic Venous Insufficiency (CVI) occurs when the values in the legs are unable to pump blood back to the heart. It is caused by higher than normal blood pressure inside the legs. The build-up of blood can clog or create a blockage, potentially leading to deep vein thrombosis (DVT). DVT is particularly dangerous and can lead to heart attack or stroke. Varicosity can also create changes in skin structure which form ulcerations, in turn leading to a chronic wound. CVI accounts for 80% to 90% of lower extremity ulcers and affects 2% to 5% of the population, the clear majority over the age of 60. The cost of treating CVI in the U.S. alone tops $2 billion per year.

Amputation Site Ulcerations form as a result of a medically required amputation frequently on the leg or arm. The main reason why amputation needs to be performed is traumatic injury. Poor blood circulation the result of an underlying disease such as diabetes, cancer, or atherosclerosis, or an infection, severe burn or freeze are also major causes. Amputation sites require a significant period of time to heal given the already poor circulation in the appendage and the typical exposing of bone or tendon during the procedure. There are an estimated 150k procedures done each year and 2.5 million amputees living in the U.S. alone. Over 10% will develop site specific chronic wounds.

Traumatic Injury or Infection resulting in exposed bone or tendon can take several months or even years to heal. In these injuries often the epidermis, dermis, and blood vessels are all lost, creating an environment where the body s ability to close the wound is completely removed. The area can become stuck in a continuous stage of inflammation and infection. A variety of medical products are often used to re-build the cellular matrix scaffold and facilitate tissue integration and granulation. There are an estimated 3 to 5 million traumatic injuries that result in the exposure of bone or tendon in the U.S. each year. Less than 5% will require amputation.



A Fragmented Market

Treatment of chronic wounds remains a very fragmented market. There are no true wound specialists , so patients are often treated by multiple physicians depending on the nature of the wound. In most cases, wounds are treated at wound care centers or in long-term acute care / VA hospitals by dermatologists, plastic surgeons, vascular surgeons, or podiatrists. There are roughly 5,000 of these facilities around the U.S. Patients are often referred to these centers by their primary-care physician or endocrinologists (in the case of diabetics). Reimbursement codes are not sufficiently in place to encourage primary-care physicians from treating these wounds themselves. However, once reimbursement through private-pay or Medicare / Medicaid is in place, a simple and easy-to-use product like AutoloGel may keep more patients under the care of their primary physician. This is a significant revenue advantage for the general practitioner, as they can keep the point-of-care for the patient in-house. It is also a big improvement in convenience in terms of time, co-pays, and relationships for the patient.

Management estimates there are over 18 million chronic wounds treated annually, of which a third (6 million) exist in the U.S. Prevalence has been on the increase over the past several years due to aging demographics and an increase in vascular disease, venous insufficiency, and diabetes. Unfortunately, the number of amputations resulting from chronic wounds is also on the rise as a result.

Worldwide U.S. Venous Stasis 4.0 million 2.5 million

Diabetic Foot Ulcers 6.0 million 1.5 million Pressure Ulcers 8.0 million 2.0 million

The size of the wound care market in the U.S. is roughly $2.3 billion, with negative pressure wound technology (NPWT) as the leading choice for treatment at 40% share. Advanced dressings account for 25% of the market, with skin substitutes and growth factors at around 15% combined. The opportunity we see with AutoloGel is to be a major player in the market, whether it be in compliment or in competition with existing options.

NPWT, also known as topical negative pressure and vacuum sealing technique is a therapeutic procedure used to promote healing in acute or chronic wounds or burns. A vacuum is used to create a low (or negative) pressure in the wound environment that helps to remove excess fluid, biofilm, and desiccated tissue, fight infection, and improve blood flow. NPWT pulls the edges of the wound tissue together, promoting coaptation, allowing the tissues to stick together through natural tissue adherence and increases healing. However, NPWT has its limitations. The vacuum can only remove so much debris and the pressure applied can only pull the wound closed so far. In this regard, physicians are now beginning to use a combination of NPWT combined with autologous platelet-derived gels, such as AutoloGel.

A case study conducted at the Wound Healing Center in Chicago, IL, and published in Wounds, the Journal of the American Association of Wound Care, in 2009 (Wound 2009; 21(5):134-140) demonstrates positive clinical outcomes when combining the two techniques (NPWT + AutoloGel). The investigator, Leo Gurvich, ANP, MS, MPH, CWS, of the L. Weiss Memorial Hospital Wound Healing Center, noted the patients tested in this case study all exhibited recalcitrant wounds with tunneling or sinus tracts, so the improvements were significant events. Previous clinical data has shown the significant positive effects can be achieved in wound healing by applying platelet growth factors in an enriched hyper-vascular environment. We expect to see additional data in these application at the Wound Care Symposium meeting in mid April 2010.



This is admittedly a more sophisticated approach than most physicians are taking to treat chronic wounds, but we believe as additional pilot studies and clinical trials are conducted combining NPWT and autologous platelet-derived gels it will only fare well for AutoloGel and Cytomedix in terms of market share gains. The science behind the technique is clear, Cytomedix just needs to collect the data and educate the market through publications and key opinion leaders. There are numerous NPWT devices on the market, including leading products from Kinetic Concepts (V.A.C. Therapy) and Smith & Nephew.

...Other Products

Skin substitutes are a growing fragment of the market. The products are a heterogeneous class of therapeutic devices that vary in biology and application. Skin substitute sales in 2009 tracked around $250 million. There are about six or seven major players:

Dermagraft (Advanced BioHealing, Inc.) is a cryopreserved human dermal substitute composed of fibroblasts, extracellular matrix, and a bioabsorbable scaffold. Dermagraft is manufactured from human fibroblast cells derived from newborn foreskin tissue. During the manufacturing process, the human fibroblasts are seeded onto a bioabsorbable polyglactin mesh scaffold. The fibroblasts proliferate to fill the interstices of this scaffold and secrete human dermal collagen, matrix proteins, growth factors, and cytokines to create a three-dimensional human dermal substitute containing metabolically active, living cells. The product is indicated for use in the treatment of full-thickness diabetic foot ulcers greater than 6 weeks duration, which extend through the dermis, but without tendon, muscle, joint capsule, or bone exposure. Limitations include required use with standard wound care regimens and in patients who have adequate blood supply to the involved foot.

Apligraf (Organogenesis) is an advanced skin repair therapy of dermis and epidermis created from biological ingredients found in healthy human skin. The product contains living cells and structural (rebuilding) proteins and growth factors similar to healthy human skin. The product has been approved and on the market for over ten years used to heal sores such as diabetic foot and venous leg ulcers that are not healing after 3-4 weeks, despite treatment with conventional therapies. Similar to other skin substitutes, the product is not recommended when tendon, muscle, joint capsule, or bone exposure are exposed and the area must have adequate blood supply.

Graft Jacket (Wright Medical) is a three-dimensional regenerative tissue matrix is processed from donated human skin supplied from U.S. tissue banks utilizing the guidelines of the American Association of Tissue Banks (AATB) and the FDA applicable rules and regulations. The allograft skin is minimally processed to remove epidermal and dermal cells through a patented method while preserving the remaining bioactive components and structure of dermis. The resulting product serves as a framework to support cellular repopulation and vascularization. Graft Jacket is approved for the repair or replacement of damaged or inadequate intergumental tissue and most commonly used to treat chronic wounds and diabetic foot ulcers.

OrCel (Ortec) is a bilayered cellular matrix in which normal human allogeneic skin cells (epidermal keratinocytes and dermal fibroblasts) are cultured in two separate layers into a Type I bovine collagen sponge. The product is FDA approved for the treatment of acute surgical excisions, such as contracture release sites and donor sites in Epidermolysis Bullosa (EB) patients undergoing hand reconstruction surgery and donor sites in burn victims undergoing excision and auto-grafting. Applications are also viable in chronic wound healing.

AlloDerm (Kinetic Concepts / LifeCell) is donated human cadaveric skin processed to remove all epidermal and dermal cells while preserving the remaining biological dermal matrix. The removal of the cells significantly reduces the chances of tissue rejection from donor to receiver. Once implanted, AlloDerm is revascularized (blood flow restored) and repopulated with the patient s own cells. The primary areas of use are in plastic and reconstructive surgery, including complicated and uncomplicated hernia surgery, and reconstructive breast surgery following partial or full mastectomy. The product is also used in ENT head & neck reconstruction such as rhinoplasty (nose), carotid overlay (neck), vestibuloplasty (jaw muscle), tympanoplasty (ear drum), and septal perforation repair (nasal).

Integra (Integra Life Sciences) is a synthetic bilayer acellular skin substitute composed of an outer silastic sheet (epidermal analogue) with a matrix composed of bovine collagen and glycosaminoglycan (dermal analogue). The dermal matrix is engineered to promote fibroblast and endothelial cell in-growth by the host wound bed. The product was first approved by the U.S. FDA for wound coverage after excision of life-threatening deep partial- or full-thickness burns when sufficient autograft was not available or desirable, however, additional use indications now include pressure ulcers, venous ulcers, diabetic foot ulcers, surgical wounds, and traumatic wounds. Disadvantages of Integra include its relative expense, learning curve for use, and its higher risk for seroma/hematoma formation after initial placement.



A head-to-head efficacy and pharmacoeconomic case study analysis of these leading products was performed by Shores MD, Gabriel MD, and Gupta MD and published in the September 2007 Journal of Prevention and Healing (Vol. 20, No. 9: 493-508, Advances in Skin & Wound Care). The authors conclude that there is no single perfect skin substitute, but that certain characteristics, including a long shelf-live, easy storage, cost-efficient pricing, and a flexible model for application are the leading considerations to evaluate. Specifically within the chronic wound application, the authors note that there are limited options when using skin substitutes for debris removal and infection control, and that surgical treatment through local or regional flaps or microvascular (free tissue) transplantation should be considered prior to the use of skin substitutes. This leads us to believe that the use of PRP and NPWT will remain the leading treatment options for smaller chronic wounds such as pressure ulcers and diabetic foot ulcers.

Another popular treatment for diabetic foot and lower extremity neuropathic ulcers are growth factor (GF) creams and gels. One such product, Systagenix Regranex, originally developed by Johnson & Johnson and approved in 1997, is a gel product that contains a recombinant growth factor (becaplermin) to aid in angiogenesis and granulated tissue formation. The product is designed to replicate the biologic activity of a single growth factor platelet derived growth factor (PDGF), and promote recruitment and proliferation of monocytes and fibroblasts necessary for wound healing. Clinical data demonstrated a modest improvement in wound healing 50% vs. 37% after 20 weeks (34% vs. 25% at 12 weeks) of use for mild diabetic foot ulcers (Stage II). However, the product is not sufficient enough once wounds progress past Stage II in classification, and it is not approved for pressure ulcers or venous stasis. Plus, the topical gel must be applied every twelve hours and the delivery system has been associated with minor increased incidence (~2%) of erythematous rashes. In June 2008, the U.S. FDA issued a block box warning for the product on a potential increased risk of cancer mortality associated in patients who use three or more tubes. Despite these limitations, a tube of Regranex still costs roughly $600 and the drug posted sales of near $100 million annually at its peak. Sales in 2009 were down over 50% from the peak.

Cardium Therapeutics is currently planning phase III trials with Excellagen, a DNA-based collagen topical gel for chronic and non-chronic diabetic foot ulcers. Excellagen mediates sustained cellular release of PDGF at the site of the injury. The product is being designed with significantly improved dosing at once every several weeks (far less frequent than BID with Regranex). Phase IIb data is encouraging for Stage I and Stage II ulcers; however, we expect this product will have similar limitations in terms of efficacy in more severe stages of wounds and adverse reactions to Regranex. Through our research and combing of medical journal articles, the data suggests that PRP outperforms GF alone in facilitating tissue regeneration in chronic wounds.

The AutoloGel System

The AutoloGel system is a unique technology that enables rapid isolation and activation of platelet rich plasma (PRP) from a patient s own blood. The system was approved by the U.S. FDA on September 20, 2007 with the following indication: The AutoloGel System is intended to be used at point-of-care for the safe and rapid preparation of platelet rich plasma (PRP) from a small sample of the patient s own blood. Under the supervision of a healthcare professional, the PRP gel produced by the AutoloGel System is suitable for exuding wounds, such as leg ulcers, pressure ulcers, and diabetic ulcers and for the management of mechanically and surgically debrided wounds. Cytomedix currently has 8 U.S. and 22 international patents granted. There are an additional 5 patients pending (1 U.S. and 4 internationally).

Use of AutoloGel is a simple process that takes 1 minute to prepare. This is an enormous improvement over older technology for preparing active PRP that can still take as long as 15 to 30 minutes. AutoloGel is the only FDA approved PRP device for wound care, giving the product significant advantages over the competition. Cytomedix

reagent formulation includes ascorbic acid, a proven free radical scavenger, as well as aiding in the synthesis of collagen to add stability to the forming structure. Thrombin (King s JMI) is also added to active the platelets in the PRP. Cytomedix has designed AutoloGel so that the final PRP concentration is only 1x, in concert with physiological platelet concentration proven to be optimal for wound care by an abundance of clinical data and scientific journal reports. In fact, overly high concentrated PRP was show to have an inhibitory effect on tissue regeneration and wound healing (Han et al. Cell Prolif. 2007, 40: 241 252).



Clinical Data

Management conducted a prospective, randomized, double blind clinical program under U.S. FDA investigation device exemption (IDE) regulations in patients with diabetic foot ulcers. The results were published in the Journal of Ostomy and Wound Management, 2006; 52(6):68-87. Seventy-two (72) Patients were randomized into two groups, the treatment group with platelet-rich plasma (PRP) gel or control (saline gel) dressing group, and evaluated twice a week for 12 weeks or until healing. Healing was confirmed 1 week following closure and monitored for another 11 weeks. Results were analyzed by an independent audit. Results show that AutoloGel treated wounds were more likely to heal than the control, with a mean healing time of 6 weeks.

p=0.125 for all wounds, p=0.036 for major wounds

The efficacy data on AutoloGel compares very favorably to the competing biologic products mentioned above in the report, including Apligraf, OrCel, Dermagraft, and Regranex.

Confirmed Healing

PRP Gel (n=19)

Control (n=21)

All Wounds 13/19 = 68.4% 9/21 = 42.9% Major Wounds 13/16 = 81.3% 8/19 = 42.1%



AutoloGel also offers effective wound healing in cases were other techniques have failed. Management has collected data from a prospective case study looking at the treatment of 65 chronic wounds in 49 patients at 11 sites over a six month period during the first half of 2009. Patients presented with all types of chronic wounds, including diabetic foot ulcers, pressure ulcers, venous stasis ulcers, and other traumatic injuries. In most cases, healing had stalled. The average patient had wound duration of 47.8 weeks prior to trying AutoloGel. After only an average of three weeks (applications) of treatment with AutoloGel, roughly $1,000 in cost, 97% of the wounds (63/65) responded favorably. This included a 51% reduction in wound area and a 62% reduction in wound volume. Even in the most severe cases where there was wound undermining (skin separation from the muscle), management saw a 78% mean reduction in wound size. These data will be published in a medical journal in 2010.

AutoloGel clearly works. However, when price is factored into the equation the product becomes even more impressive. We estimate the average cost of NPWT is between $500 and $800 per week. Typically a patient can expect to cycle five weeks using NPWT until either the wound is closed or it is time for another option. During that five week period a patient may have their dressing changed over a dozen times. That s a cost of therapy between $2,500 and $4,000. The average cost of AutoloGel is $325 per treatment. Assuming the same five week cycle, the cost of therapy is between $1,625.

In September 2007, B&D Consulting, an independent advisory and advocacy firm located in Washington, DC, completed a cost effectiveness analysis of AutoloGel compared to alternative therapies for patients with diabetic foot ulcers. Results of this study demonstrate AutoloGel offers a lower cost and better healing outcomes than the other therapies analyzed. According to B&D s findings, the estimated 5-year average direct wound care costs (exclusive of lost work, disability, etc.; inclusive of recurrent wounds, amputations) when AutoloGel was used to treat the most commonly sized diabetic foot ulcers were approximately $15,000. This compared very favorably to alternative therapies ranging from $24,000 to $47,000, including standard of care (gauze / advanced dressings) at $40,000. B&D s work also suggests a measurable increase in Quality Adjusted Life Years (a function of increased survival rates and fewer wound complications) with AutoloGel. This study was published in the journal Advances in Skin and Wound Care in December 2008.

Shifting Focus for Better Penetration

In January 2009, Cytomedix implemented a strategic shift in the commercialization tactics for the marketing of AutoloGel to put new emphasis on the scientific and clinical messaging of the product. As such, the clinical support staff has been expanded to facilitate clinical product evaluations and establish protocols for the standardized use of the AutoloGel system. The new approach includes top management assisting sales managers and the clinical staff during the sales process. New sales associated have been hired with significant experience in selling into the clinical market or demonstrating medical devices to clinicians. Cytomedix has also hired two clinicians to work in the field. The new sales approach includes increased clinical involvement to assist prospective customers in conducting intensive on-site evaluations of AutoloGel and offering on-going support to existing customers in order to optimize healing outcomes. Management is also focusing on publishing and presenting data on AutoloGel in trade journals and at conferences to help drive home the clinical and scientific advantage of the product. Two abstracts demonstrating the uses of the AutoloGel System were published at the April 2009 Symposium on Advanced Wound Care and Wound Healing Society (SAWC/WHS) Meeting. Separately, two additional abstracts were presented at the Clinical Symposium for Advances in Skin and Wound Care and a single abstract was presented at the National Association for Long Term Hospitals (NALTH) conference in October 2009. We expect to see additional data to be presented from the real-world case study of the AutoloGel system in 2010.



As part of the FDA s stipulation for approval, Cytomedix was required to conduct a post-marketing open-label safety program. The study is designed to collect data from 300 subjects over a 3-year period. The safety analysis will look at adverse event rates and the potential immunogenicity or coagulopathy that could occur from using King s bovine thrombin product, JMI. We do not believe this will be a concern once the data is available. King Pharmaceuticals has been relentless in its efforts to increase the safety and purity of Thrombin-JMI over the past several years and to date we have not seen any issues to be concerned with. We note that management at Cytomedix is looking at the potential to use ZymoGenetics recombinant thrombin product in the future, but as for now King s Thrombin-JMI remains the best available option. As of the year-end 2009, management had collected data on roughly 10% of the required 300 since the program initiated in October 2009. We expect management to report data on the first 100 patients during the second half of 2010. Besides the required safety analysis, management will also collect efficacy (wound closure rates / healing rates) as well.

So far, the renewed efforts to focus on the scientific and clinical advantages of AutoloGel have been encouraging Sales in the first nine months of 2009 up more than double those in the first nine months of 2008. Additionally, management is using the recent publications, along with other published literature, to help support the case for reconsideration of Medicare Part B reimbursement by the Centers for Medicare and Medicaid Services (CMS). As a reminder, CMS issued a non-coverage decision on AutoloGel in March 2008. Management met with CMS to discuss the decision in April 2008. CMS noted that the data on AutoloGel was suggestive of a benefit but inadequate to support full reimbursement at the time. Cytomedix has been working since that time to collect and analyst additional data to submit to CMS. This includes the data from the prospective case study looking at the treatment of 65 chronic wounds in 49 patients over a six month period during the first half of 2009 discussed above, and the 300 patient open-label safety program stipulated by the U.S. FDA. We expect management to submit this data to CMS for review around the middle of the year.

In total, it will be roughly 3x the amount submitted for the first coverage review and should be more than sufficient to gain CMS reimbursement under Medicare Part B in 2011. We estimate this is about 45% of the market opportunity. On the private insurance front, management is currently working on a plan-by-plan basis to improve coverage around the U.S. Key opinion leaders in the space have expressed strong support for Cytomedix technology and the AutoloGel system. Cytomedix has been working to drive private pay reimbursement, as well as effectively lobbying congress in efforts to support coverage for AutoloGel. We believe that as additional data becomes available, for example there were 6 posters plus one oral presentation will be presented at the Wound Care Symposium last weekend, the more it helps drive reimbursement forward

Management is also listening to its customers and looking to take advantage of the positive product perception. An AutoloGel case series, authored by one of our customers, was published in May 2009 in the journal Wounds. And based on customer feedback, management has also developed a new packaging concept for the AutoloGel system. The new package will allow for the separation of the two key steps in the process, collect the blood and mix the solution, based on how the wound center or hospital allocates staff. Blood collection is usually done by the phlebotomist whereas the mixing and application is handled by the physician or nurse practitioner. The new design and component enhancements will improve the customer experience, reduce process steps and simplify the preparation of AutoloGel. We expect this roll-out to take place during the first half of 2010. If perceived as a positive by the customer, we expect management to further refine the packaging system.

AutoloGel Outside the U.S

In Europe, Cytomedix hopes to expand upon the distribution network already in place with the acquisition of the Angel and ActivAT systems. Similar to the U.S., management hopes to enhance upon existing distribution networks and customer bases to increase AutoloGel sales. The European market for wound care is even more fragmented than the U.S., but the potential exists to see meaningful growth with increased marketing and promotional efforts.

In September 2009, management entered into a license and distribution agreement with Millennia Holdings, Inc. for the use of the AutoloGel system in Japan. The agreement provides territorial exclusivity for a period of 10 years, with an option to extend. Japan represents an attractive market opportunity for Cytomedix with AutoloGel. There are an estimated 22 million diabetics in the country. Millennia is responsible for implementing regulatory and reimbursement processes for AutoloGel in Japan. Millennia plans to work with its network of 22 hospitals in Japan to conduct the necessary clinical studies for regulatory approval. Thereafter, Millennia plans to sell and distribute AutoloGel for the treatment of a variety of chronic wounds, including diabetic wounds, which represent a growing and underserved patient population in Japan. According to the National Health and Nutrition Report 2008 by the Ministry of Health Labor and Welfare in Japan, one out of five Japanese either has diabetes or is suspected to be diabetic, thus providing a significant market potential for diabetic wound healing in Japan.



The Evolution of AutoloGel

Cytomedix is currently working on a next-generation bioengineered AutoloGel product that would produce PRP for use in the wound care setting in a more rapid, aseptic, and convenient fashion. The company is working with an Israeli firm on the development of the device. AutoloGel 2.0 is currently in the validation and biocompatibility stage of testing. The new design should improve safety and efficiency of use. We expect that management will be in position to file the 510k application on the AutoloGel 2.0 later this year, and then undertake a seamless transition of the customer base to the new device throughout 2011.

With the acquisition of Angel, Cytomedix has effectively entered the orthopedic market. However, potential exists for the use of AutoloGel 2.0 in the orthopedic segment as well. We remind investors that Cytomedix previously filed a 510k for the use of AutoloGel for orthopedic use in early 2009. In August 2009 the FDA issued a response asking for additional data on the stability and sterility parameters of the device. Cytomedix believes that the new Israeli bioengineered version of AutoloGel will aid in the answering of these questions, and the validity testing currently ongoing should address the sterility question posed by the FDA. Management plans a shelf-life test to address the stability question posed by the FDA. Once this data is in hand, Cytomedix plans to file another 510k application seeking approval for use in orthopedic indications.

Other markets where AutoloGel may be relevant are:

Hair transplantation and/or hair growth

Angiogenesis (the growth of new blood vessels)

Applications systems for biologics and synthetics

Delivery system for stem cells

The hair transplantation opportunity is an interesting one. There were just over 800,000 hair restoration procedures in 2008, 240,000 of which were surgical hair transplants. Some of these procedures are beginning to use PRP to aid in the recovery and growth of the transplanted hair follicle. Pilot data has shown that the physiological platelet concentration produced by AutoloGel is optimal to avoid scarring and maximize retention. We expect additional data on this opportunity to be presented later this year.

Patent Licenses Term Expirations

Up until the end of November 2009, Cytomedix was receiving a royalty on certain intellectual property arising from its process patents regarding the use of platelet releasates to heal damaged tissue. Over several years it has reached settlement and/or licensing agreements with numerous companies infringing or seeking to avoid infringement of the company s patents. These companies included: DePuy Spine Inc. (J&J), Medtronic Inc., COBE Cardiovascular Inc., Biomet Biologics Inc., Smith & Nephew Inc., Harvest Technologies Inc., Perfusion Partners & Associates Inc., SafeBlood Technologies Inc., and CellMedix Inc. These licensing payments totaled $0.494 million in the third quarter 2009, and $1.99 million total in 2008.

Unfortunately, the licensing period on the core patents that protected this IP expired on November 24, 2009. Cytomedix will no longer record royalty revenues starting in the first quarter 2010. Nevertheless, these patents helped Cytomedix in its strategic plan to acquire Angel from Sorin Group in April 2010, as the company received royalty payment from all the above players and had direct insight on which areas of the market and which products within those areas were growing the fastest. In our view, the acquisition of Angel more than adequately makes up for the loss in licensing revenues and management was wise in their strategic planning to leverage the insight gained from the royalty payments into a transformational acquisition on Angel.

CT-112

Cytomedix possess anti-inflammatory octapeptide derived from platelet factor IV in preclinical trials called CT-112. These preclinical in-vitro and in-vivo studies have shown CT-112 to be potentially useful as a therapeutic for a number of autoimmune diseases, such as rheumatoid arthritis (RA), graft-versus-host disease (GvHD), chronic obstructive pulmonary disease (COPD), reperfusion injury and atherosclerosis. These are clearly large markets which would require significant clinical work to be completed prior to commercialization.



As such, management plans to focus on niche or underserved opportunities with the drug that may allow for faster and cheaper commercialization. These include conditions that also have a well-defined regulatory pathway such as pyoderma gangrenosum (PG), atopic dermatitis, and an anti-inflammatory coating for medical devices. PG would most likely qualify for U.S. FDA Orphan Drug designation. To facilitate partnering and further development of the CT-112 candidate, management is in the process of completing studies in human cell systems that are intended to provide potency estimates. Results from these studies will be available shortly. Once the data is in hand, we believe Cytomedix will actively seek to out-license CT-112 to a partner for clinical development for dermal indications or medical device coating.

RECOMMENDATION

Initiating Coverage

We are initiating coverage of Cytomedix with an Outperform rating and near-term price target of $1.50 per share. At this price, we do not believe the market has come to grips with the transformation underway at Cytomedix thanks to the recent acquisition of the Angel Whole Blood Separation System and ActivAT Autologous Thrombin Processing Kit from the Sorin Group completed on April 9, 2010. We see little concern at this point on management s ability to meets its future payment obligations to Sorin. In fact, with assuming only modest growth in Angel, the acquisition should be accretive almost immediately.

Sales Forecasts / Revenue Opportunity

With Angel, Cytomedix now enters the rapidly growing platelet rich plasma market for both orthopedic and cardiovascular applications. The Angel system consists of a blood processing device and disposable products used for separation of whole blood into red cells, platelet poor plasma and platelet rich plasma (PRP). We estimate this is approximately a $50 million market growing at 10% to 15% annually, with Angel holding roughly 10% share. Use of PRP has been on the rise significantly over the past several years thanks to applications in sports medicine. Recent data presented at the American Academy of Orthopaedic Surgeons in March 2010 demonstrated that PRP was effective at treating chronic tennis elbow, severe Achilles tendonitis and osteoarthritis of the knee. That being said, the bulk of the Angel business in 2009 was from perfusionist groups in the cardiovascular setting. We note that there are an estimated 200 units in place at 150 customers, and 90% of the revenues are from the high margin single-use disposable sets sold along with the system. We are excited about this acquisition and believe it creates a clear path to profitability for the company. Management will largely use the existing infrastructure currently in place with AutoloGel and should be able to ramp sales of Angel through expanding the distribution network and use of independent representatives in 2011 and 2012.

Outside of the recent Sorin asset purchase, the core business in AutoloGel remains an exciting opportunity for management. The AutoloGel system is a unique technology that enables rapid isolation and activation of platelet rich plasma from a patient s own blood specifically for the treatment of chronic wounds, including leg ulcers, pressure ulcers, and diabetic ulcers and for the management of mechanically and surgically debrided wounds. Besides being the only approved PRP product for chronic wounds, AutoloGel has certain key advantages that we believe make it a share gainer over the next several years. These include a simple and rapid processing time and a thoughtfully designed reagent formulation and concentration that are optimal for the wound healing process.

Price Target / Valuation

With a current capitalization of only $21 million, we believe the market is far undervaluing Cytomedix. We estimate the company should generate revenues in 2010 near $5 million thanks to the recent acquisition of The Angel System and growing sales of AutoloGel. The current value of only 4x revenues is far below the peer-group average of roughly 6-7x revenues. We believe the company is on a clear path toward profitability in 2012 thanks to growing revenues, high margin products, and a low-cost structure. Based on our NPV analysis, a market capitalization closer to $60 million, or approximately $1.50 per share, more accurately values Cytomedix and the future earnings potential for the company with AutoloGel and Angel.



MANAGEMENT PROFILES

Martin Rosendale, Chief Executive Officer Mr. Rosendale joined Cytomedix, Inc. in March 2008 as COO and he was appointed Chief Executive Officer in July 2008. Prior to joining Cytomedix, Mr. Rosendale was Chief Executive Officer of Core Dynamics, Inc. where he managed their Israel based R&D program and initiated U.S. commercial operations for cryobiology and cell lyophilization technologies. Mr. Rosendale has more than 24 years of specialty medical experience. He has held leadership positions for the past 15 years with American Red Cross, SangStat, North American Vaccine and ZLB Bioplasma, in addition to serving on the boards of the Transplant Recipients International Organization and the American Red Cross Biomedical Services, San Jose Region. Mr. Rosendale earned a Bachelor of Science degree in Microbiology from California State University.

Andrew Maslan, CPA, Chief Financial Officer Mr. Maslan joined Cytomedix, Inc. in July 2005 and he was appointed Chief Financial Officer in August 2005. Prior to joining Cytomedix, Mr. Maslan served as controller for BioReliance Corporation (now Invitrogen), he was a principal with GlobeTraders, Inc., and a senior accountant for Providence Laboratory Associates. He began his professional career serving as an auditor with KPMG Peat Marwick, earned a Bachelor of Science degree in Accountancy from Miami University in Oxford, Ohio, and he is a Certified Public Accountant in the State of Maryland.

Carelyn Fylling, R.N., M.S.N., Vice President, Professional Services Ms. Fylling joined the new management team at Cytomedix, Inc. in December 2001 having joined the Company s predecessor Curative Health Services in 1988. At Curative, Ms. Fylling helped design a national wound database, developed clinical protocols, conducted outcome studies and trained physicians and nurses in comprehensive wound management. Prior to joining Curative, Ms. Fylling was Director of Training and Program Development at the International Diabetes Center in Minneapolis, Minnesota and served on the National Board of Directors of the American Diabetes Association. In 1980, Ms. Fylling received the prestigious Ames Award for Outstanding Educator in the Field of Diabetes.

David A. Hotchkiss, Vice President, Sales and Marketing Mr. Hotchkiss joined Cytomedix, Inc. in October 2006. Prior to joining Cytomedix, Mr Hotchkiss served as VP Sales and Marketing for Coloplast Corp., where he built successful teams. Mr. Hotchkiss has spent over 15 years in the wound care market and has substantial sales, leadership and marketing experience in senior sales and marketing roles with Carrington Laboratories, Oclassen Pharmaceuticals, and Rhone Poulenc Rorer. He earned a Bachelor of Business Administration degree in Marketing from the University of North Texas, and has completed advanced management studies at UCLA and JL Kellogg.

Peter A. Clausen, Ph.D., Vice President, Business Development Dr. Clausen joined Cytomedix, Inc. in September 2008 after consulting to the Company since May 2008. Prior to joining Cytomedix, Dr. Clausen was a founding member and Vice President, Research and Development at Marligen Bioscience, a biotechnology company that develops, manufactures and markets innovative products for the life sciences market. Dr. Clausen is a seasoned biochemist with nearly 15 years experience in the biotechnology sector. Dr. Clausen completed his post-doctoral training in the Laboratory of Molecular Oncology at the National Cancer Institute where his research efforts focused in the areas of oncology, hematopoiesis, and gene therapy. Dr. Clausen earned a Bachelor of Science degree in Biochemistry from Beloit College and a Ph.D. in Biochemistry from Rush University.

David Jorden, Executive Board Director & Investor Relations Mr. Jorden joined Cytomedix, Inc. in September 2008. He brings to Cytomedix more than 20 years of public and private company investment experience. Prior to joining Cytomedix, Mr. Jorden was responsible for equity portfolio management at Morgan Stanley's Private Wealth Management group and previously served as CFO at Genometrix, Inc., a private genomics/life sciences company. Mr. Jorden serves on the Board of Opexa Therapeutics, Inc., PLx Pharma, Inc., and DLush, a San Diego based deluxe beverage company. Mr. Jorden earned a Master of Management from the Kellogg School of Management at Northwestern University and a BBA from the University of Texas at Austin. He holds both CFA and CPA designations.



SUPPLEMENTAL INFORMATION

Cytomedix will be presenting 6 posters and delivering 1 oral presentation at the 23rd Annual Symposium on Advanced Wound Care and Wound Healing Society (SAWC/WHS) taking place in Orlando, Florida from April 17 to 20, 2010. Data at SAWC is designed to highlight the clinical merits of the company s AutoloGel System. We encourage investors to view the posters for additional information on AutoloGel. The following posters will be presented from April 18th to April 20th:

The Impact of Autologous Platelet Rich Plasma Gel on Rapid Wound Improvement in the Outpatient Setting Presented by Donna R. Carman, M.D.,Phoenix Indian Medical Center, Poster Number CR-020.

Use of Platelet Rich Plasma Gel in Chronic Pressure Ulcers of the Pelvic Region Presented by Jean DeLeon, M.D., Medical Director, Baylor Specialty Hospital, Poster Number CS-021.

The Use of Platelet Rich Plasma and Negative Pressure Wound Therapy in the Treatment of Large Post Surgical Abdominal Wounds Presented by Jean DeLeon, M.D., Medical Director, Baylor Specialty Hospital, Poster Number CS-022.

Use of Platelet Rich Plasma Gel (PRPG) with Negative Pressure Wound Therapy (NPWT) to Treat Surgically Debrided Wounds Presented by Jean DeLeon, M.D., Medical Director, Baylor Specialty Hospital, Poster Number CS-023.

Efficient Rapid Wound Improvement in the LTAC Setting with Autologous Platelet Rich Plasma Presented by Carelyn Fylling, R.N., M.S.N., Vice President, Professional Services, Cytomedix, Inc., Poster Number CR-0382.

Platelet Rich Plasma A Comparison of Outcomes from Clinical Trials on Chronic Wounds Presented by Laurie M. Rappl, PT, CWS, Cytomedix, Inc., Poster Number IR-051.

At SAWC, the company also presented one oral abstract:

Response of Wounds of Spinal Cord Injury Patients to Autologous Platelet Rich Plasma Gel Presented by Laurie M. Rappl, PT, CWS, Cytomedix, Inc.



PROJECTED FINANCIALS

Cytomedix, Inc. Income Statement

2008 A

2009 A

Q1 E

Q2 E

Q3 E

Q4 E

2010 E

2011 E

2012 E

2013 E

Product Sales

$0.101

$0.226

$0.065

$1.453

$1.500

$1.565

$4.760

$7.365

$10.225

$14.085

YOY Growth

65.5%

124.0%

53.4%

1892.4%

3314.1%

2236.7%

2004.2%

54.7%

38.8%

37.8%

Royalties $1.990

$1.840

$0

$0

$0

$0

$0

$0

$0

$0

YOY Growth

5.7%

-7.5%

-100.0%

-100.0%

-100.0%

-100.0%

-

-

-

-

Total Revenues

$2.091

$2.066

$0.065

$1.453

$1.500

$1.565

$4.760

$7.365

$10.225

$14.085

YOY Growth

7.6%

-1.2%

-87.9%

155.2%

178.6%

273.1%

130.4%

54.7%

38.8%

37.8%

Cost of Royalties

$0.584

$0.400

$0

$0

$0

$0

$0

$0

$0

$0

Royalty Net Margin

70.6%

78.3%

-

-

-

-

-

-

-

-

Cost of Sales

$0.017

$0.059

$0.016

$0.450

$0.450

$0.485

$0.916

$1.620

$2.198

$2.958

Product Gross Margin

83.4%

74.1%

76.0%

69.0%

70.0%

69.0%

80.8%

78.0%

78.5%

79.0%

R&D

$0.146

$0.227

$0.025

$0.045

$0.055

$0.065

$0.190

$0.250

$0.275

$0.300

% R&D

7.0%

11.0%

38.5%

3.1%

3.7%

4.2%

4.0%

3.4%

2.7%

2.1%

G&A, Other Fees

$9.384

$4.829

$1.250

$1.450

$1.500

$1.600

$5.800

$5.900

$6.000

$6.250

% G&A

448.8%

233.7%

1923.1%

99.8%

100.0%

102.2%

121.8%

80.1%

58.7%

44.4%

Operating Income

($8.040)

($3.449)

($1.226)

($0.492)

($0.505)

($0.585)

($2.146)

($0.405)

$1.752

$4.577

Operating Margin

0%

0.0%

-

-

-

-

-45.1%

-5.5%

17.1%

32.5%

Interest & Other Income

$0.233

$0.011

$0.001

($0.025)

($0.026)

($0.028)

($0.078)

($0.088)

$0.068

($0.054)

Pre-Tax Income

($7.806)

($3.439)

($1.225)

($0.517)

($0.531)

($0.613)

($2.224)

($0.493)

$1.820

$4.523

Taxes $0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Tax Rate

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

Divs on Preferred A&B

$0.015

$0.015

$0.003

$0.129

$0.129

$0.105

$0.366

$0.320

$0.220

$0.016

Net Income

($7.821)

($3.454)

($1.228)

($0.646)

($0.660)

($0.718)

($2.590)

($0.813)

$1.600

$4.507

Net Margin

0.0%

0.0%

-

-

-

-

-54.4%

-11.0%

15.6%

32.0%

Reported EPS

($0.24)

($0.10)

($0.03)

($0.02)

($0.02)

($0.02)

($0.07)

($0.02)

$0.04

$0.10

YOY Growth

-

-

-

-

-

-

-33.1%

-70.2%

-292.1%

166.1%

FAS-123R Expense

$0.726

$0.443

$0.100

$0.125

$0.150

$0.150

$0.525

$0.600

$0.700

$0.800

EPS Impact of FAS-123R

($0.02)

($0.01)

($0.00)

($0.00)

($0.00)

($0.00)

($0.01)

($0.01)

($0.02)

($0.02)

Weighted Ave. Shares Out

32.5

35.1

37.5

39.5

40.0

40.5

39.4

41.5

42.5

45.0

Source: Zacks Investment Research, Inc. Jason Napodano, CFA


HISTORICAL ZACKS RECOMMENDATIONS

DISCLOSURES

The analysts contributing to this report do not hold any shares of GTF. Zacks EPS and revenue forecasts are not consensus forecasts. Zacks Investment Research may have, or seeks to have, a business relationship with the companies listed in this report. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next one to two quarters. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next one to two quarters. Underperform- Zacks expects the company will underperform the broader U.S. Equity market over the next one to two quarters. The current distribution of Zacks Ratings is as follows on the 1004 companies covered: Outperform- 13.4%, Neutral- 79.1%, Underperform 6.8%. Data is as of midnight on the business day immediately prior to this publication.

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