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  • rookiesareu rookiesareu Aug 14, 2013 6:23 PM Flag

    another Cytomedix read...enjoy...

    On August 8, Cytomedix (CMXI) announced corporate updates and financial results for the second quarter of 2013. As part of this update, the Company announced a new five-year partnership with Arthrex, Inc. (private) for the commercialization of the Angel® Concentrated Platelet Rich Plasma System. Cytomedix will receive an up-front payment of $5 million as part of the deal.
    Cytomedix is Refocusing Efforts on AutoloGel. As part of their announcement of quarterly results on August 8, Cytomedix management indicated an intention to focus all commercial efforts on the sale of AutoloGel in the wound care market. This decision was prompted in part by the significant progress they have made in obtaining reimbursement from the Centers for Medicare and Medicaid Services (CMS) for AutoloGel use in Medicare patients. This is very important because more than half of the addressable market - patients suffering from pressure ulcers, venous ulcers, and diabetic foot ulcers - are covered by Medicare. Cytomedix is also preparing to launch AutoloGel into Veterans Health Administration (VA) hospitals. Company management expressed an intention to continue to explore potential commercial agreements for AutoloGel that may help to improve the pace of sales growth.

    We believe the shift in focus towards AutoloGel is a smart move for Cytomedix, as they have been working to grow the market for this product, which addresses a clear unmet need. The decision to provide reimbursement through the Coverage with Evidence Development (CED) program shows that CMS recognizes the wound healing properties of the platelet rich plasma (PRP) gel that is produced by the AutoloGel system. Moreover, the Company can now focus their resources on selling AutoloGel while putting Angel into the capable hands of their new partner Arthrex. Details of this commercial partnership are described below.

    Cytomedix Licensed Exclusive Rights for the Angel® System to Arthrex. Along with second quarter earnings, Cytomedix also announced that it has issued an exclusive 5-year license agreement with privately-held Arthrex, Inc. for the commercialization of the Angel Concentrated Platelet Rich Plasma (cPRP) platform. The agreement also contains an option for an additional 3-year license. We believe this is a very favorable deal for Cytomedix, as they will receive a $5 million up-front payment from Arthrex in addition to low double-digit royalties on all sales. Moreover, Cytomedix retains ownership of the Angel technology.

    Arthrex is a strong and ideal partner to move forward with the commercialization of the Angel cPRP System. The company has a presence in all areas of orthopedic medicine, having developed more than 6,000 products that supply the arthroscopic and minimally invasive orthopedic surgical markets. Arthrex controls a patent estate of more than 205 granted US patents, with additional coverage in foreign countries. Although it is a US-based company, Arthrex has a strong international presence, especially in Europe, and distributes supplies to more than 90 foreign countries. As a leading provider of orthopedic supplies, the company already has an established sales force interacting with the physicians who would use Angel.

    Explanation of CMS Reimbursement for AutoloGel and Product Launch. In August 2012, Cytomedix announced that the CMS had issued a National Coverage Determination (NCD) indicating that PRP gel would be eligible for coverage under the Coverage with Evidence Development (CED) program. This NCD reversed a 20 year old non-coverage determination and was the culmination of significant efforts by Cytomedix. This reimbursement milestone also dramatically improved the commercial prospects for AutoloGel. Since that time Cytomedix has continued to work through the complicated process of obtaining reimbursement. In March, CMS issued a Healthcare Common Procedure Coding System (HCPCS) code to enable reimbursement of AutoloGel. The new HCPCS code is G-0460, which covers "Autologous platelet rich plasma for chronic wounds/ulcers, including phlebotomy, centrifugation, and all other preparatory procedures, administration and dressings, per treatment."

    In July, CMS issued proposed rules that will determine the coding and reimbursement for any new or changed products and procedures in 2014. This includes regulations for the Physician Fee Schedule (PFS) and the Hospital Outpatient Prospective Payment System (HOPPS). The proposed rules make it relatively easy to obtain reimbursement for AutoloGel in a physician's office, meaning Cytomedix can immediately start charging a price in this setting that is economically viable. However, under HOPPS, for claims submitted from July 1 through December 31 of this year, CMS has placed the reimbursement code for AutoloGel in an Ambulatory Payment Classification or APC that initially provides only limited reimbursement. Cytomedix plans to work with CMS to get this situation reversed. A final decision on the reimbursement rate will be made in late November and will go into effect on January 1, 2014.

    As part of the rules process, CMS is also proposing that AutoloGel and other wound healing products be reimbursed as part of a procedure, rather than for the individual product. This type of 'packaging' is designed to control costs by giving doctors incentives to use lower priced products in procedures. Because AutoloGel has a competitive price, this may be a net positive for Cytomedix when all wound healing products are reimbursed this way, but the final rules are not yet known.

    With the reimbursement process moving forward, Cytomedix is preparing to launch AutoloGel initially in high-volume physicians' office and into Veteran's Health Administration hospitals. This will give the Company access to a large number of wound healing procedures with a relatively small sales force. A full scale launch in large wound care centers is planned for early 2014. The Company's sales force is expected to double by the end of 2013 from 4 or 5 representatives and to double again through 2014.

    Second Quarter Financial Results. For the quarter ending June 30, 2013, Cytomedix reported product sales of and total revenues of $2.4 million. Excluding a one-time license payment recorded in the same period in 2012, this represents a $0.5 million increase in revenue over the previous year's quarter. Cash used for operating expenses in the quarter was $3.7 million. Total operating expenses for the quarter were $5.7 million, an increase of $0.7 million over 2012. Cytomedix recorded a net loss of $5 million or $0.05/share for the three months, compared to a net loss of $7.5 million or $0.09/share in the same period in 2012.

    The Company reported a cash position at the end of the quarter of $3.4 million, although this total does not take into account the $5 million up-front payment from Arthrex. Cytomedix therefore reported pro forma cash of $7 million as of August 8, 2013.

    Upcoming Expected Milestones

    Q3 2013 - Expected enrollment of first AutoloGel patients in CED.
    Q3 2013 - Submit comments to CMS regarding AutoloGel reimbursement.
    Q4 2013 - Final CMS rules for AutoloGel reimbursement are expected in November.
    Q1 2014 - Launch AutoloGel in the hospital outpatient market and wound healing clinics under CED program.
    H1 2014 - Data expected from AutoloGel CED for patients with diabetic foot ulcers.
    H2 2014 - Expected CE mark for European commercialization of AutoloGel.

    Sentiment: Strong Buy

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