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Cytori Therapeutics, Inc. Message Board

  • eyesandears51 eyesandears51 Oct 26, 2012 1:40 PM Flag

    Business Partnership Update

    As others have pointed out, Cytori are showing signs of stress for two reasons, the macro stock market environment this week is a strong headwind and CYTX specific technicals are under pressure with MACD declining and the 5 day EMA crossing below the 13 day EMA. Overshadowing all is the obvious uncertainty of attaining funding to replenish the companies fast depleting cash. I previously wrote that “All of this is known to management, and we can reasonably assume that they are working hard to deliver funded partnerships in Q-4, albeit one quarter after previous assurances. BARDA is positive, but will not provide near term funding relief and may be further delayed by negotiations over the fiscal cliff and the potential for sequestration. A secondary will certainly solve the funding problem but at the expense of dilution to existing shareholders. While this option is clearly far less desirable than funded partnerships in Q-4 the clock is timing out. Realistically, management has between now and Thanksgiving to conclude agreements. Beyond that date, the imperatives of Cytori's prospective partners to meet YE revenue, EBITDA, and operational objectives will likely defer their focus until after New Year. Since these potentials partners can read balance sheets, they must all be aware that Q-4 is imperative to Cytori leadership but not necessarily to them. It is hard to conclude an attractive deal when one side needs it more urgently than the other. Shareholders may face the painful prospect of CC concluding deals in the next 4 1/2 weeks that transfer disproportionate rewards to funding partners, denying shareholders substantial medium/long term value, or floating a secondary and concluding superior agreements from a position of cash strength”. Concluding mutually beneficial funded partnerships early next year may be preferable to taking a deal now, if available that is sub-optimal. The pressure on management between now and Thanksgiving to conclude any deal is increasing and their leverage with prospective partners is decreasing daily. I was a buyer today at $ 3.85 but believe the stock may decline in the near term to the mid $3's, but be better positioned by mid Q-1 after funding is secured.

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    • For purposes of full transparency. I added to my CYTX position today @ $ 3.61/share. As indicated, I believe the stock to be range bound between the mid $3's and mid $4's until a positive or negative catalyst is manifest. The most likely positive catalyst is the announcement of funded partnerships, and secondarily removing the federal government budgeting cloud affecting BARDA, and all other non-entitlement contracts. Negative catalysts is bad news on either.

    • Folks, here's how sequestration works. Only entitlement programs that are enshrined in law and outside of the budgeting process, are exempted, that is Social Security, al. Beyond that there is a prescribed allocation of cuts between existing DOD and non-DOD programs. Unless the BARDA program is enacted by congress and signed by the president to be classified as an entitlement it is not exempt from the sequester. Most current contractors, or in Cytori's case, new contractors, to the federal government are understandably concerned about the impending impact. Will their program be cut permanently or temporarily, will they re-reimbursed if work is continued retroactively when a budget is passed? With a $1.2 trillion budget gap that will be closed by spending cuts, higher taxes, or a combination of both, everything is on the table. To believe otherwise is providential hope, not an actionable plan. Cytori, may ultimately get it's funding, the question is when. For a small company with rapidly depleting cash, this could be a real problem. As an current investor, I can not rely on BARDA because it's impact on Cytori is inherently unknowable until the federal budget is clarified either through sequestration, or preferably by passing a budget. Cytori management has few if any options to impact BARDA, what they can affect is funded commercial partnerships that will address their near term cash flow shortfall and strategically position the company for accelerated future growth.

    • will this go to 5's?

    • eyesandears51,

      A very knowledgeable and well articulated description of the current situation with which I completely agree!

      Sentiment: Strong Buy

    • My understanding is that the BARDA Award has been granted to CYTX and cannot be revoked or delayed by defense cuts including sequestration. If someone knows otherwise, kindly post accordingly.

      Sentiment: Strong Buy

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