Thank you for pointing this out and reminding everyone. Some of the criteria Fresenius or any other major company would have evaluated prior to entering any partnership or licensing agreement with Cytosorbents:
-Is it a novel product and/or technology that solves an unmet need or clinical issue
-Does it provide an opportunity to secure a sustainable competitive advantage and become to become a top player in a specific category
- Does the technology/product have the potential to improve patient outcomes cost effectively (or reduce costs), or improve hospital processes and efficiencies
- Is it a platform technology or a single use product (platform technologies are more desirable than single products)
- Is it an addressable market large enough to be meaningful
- Is there sufficient clinical data or studies or at least at a minimum an operational prototype and clinical proof-of-concept that will provide substantial evidence that the risk of failure of the product/technology will be low and that it is safe and effective
- Are the clinical outcomes at least as good as ― and preferably better than a current product or technology in in the market
- Is there a known or established regulatory pathway or strategy (a global regulatory strategy is more desirable than a US only or an OUS only strategy)
- Is there an existing or clear path to reimbursement
- Does the company have sound quality systems and design controls in place; manufacturing scalability
- Does the company have a knowledgeable and experienced management team
Companies the size and profile of Fresenius do not enter partnerships unless most of these criteria are met as well in addition to whether the agreement supports their own overall corporate strategy and will help them drive revenue growth and bottom-line performance. This is why this partnership along with the cardiac surgery partnership (Medtronic, Sorin, Maquet or Terumo), are such validation of the company and the technology.
The company's current facility is approximately 10,750 sq. ft., which houses research laboratories, clinical manufacturing operations and administrative offices. It is under a lease agreement, of which 950 sq. ft. expire in February 2015 and 9,800 sq. ft. expire in May 2015. They are renting this space for approximately $27,000 per month. They are probably leasing this from Princeton Corporate Plaza, LLC which owns about 240,000 square feet of laboratory and plant space there on 7 Deer Park Drive (this is according to the New Jersey Division of Taxation property tax records). What I found interesting is also in that same space is another publicly traded company Insmed (INSM), a biopharmaceutical company that develops inhaled pharmaceuticals for the site-specific treatment of serious lung infections.
I would assume that Insmed is also leasing their facilities from Princeton but how much of property Princeton owns there is still vacant or available for expansion was unclear and whether the company's plan is to expand at this location or something nearby is also not clear. Hopefully just from a logistical perspective they can obtain additional space at this address to avoid any production disruption.
For more information go to Princeton Corporate Plaza web site and under 'Site Plans' for a layout of the property there. Not related but if you are interested check out the stock performance of INSM currently trading at $18.54.
Also, it should be noted that some of the costs for #1 and #2 are coming out of the recent $385,000 in non-dilutive funding they received from the New Jersey Technology Business Tax Certificate Transfer Program. This tax benefit allows NJ business to turn their tax losses and credits into cash to buy equipment or facilities, or for other allowable expenditures.
I haven't seen any updates specifically with regards to locating a facility/site to retrofit since this last communication back in November:
"We have initiated a number of infrastructure upgrades to accommodate further growth within our existing facility. These upgrades would allow us to increase production capacity within our current manufacturing facility with minimal cost. We have now completed those infrastructure upgrades and have begun the process of hiring manufacturing personnel to complete a second shift. The addition of a second shift provides additional capacity to bridge our transition from the current location into a new facility.
Since our last meeting we have identified and contracted with an engineering firm for the new manufacturing, R&D and corporate center. We are completing the initial engineering phase of the project focusing on the manufacturing and office layout while concurrently working with our recently-signed real estate broker to identify a new site. Our objective is to identify an existing facility that will not require extensive modification to keep costs down and expedite facility renovations to allow for occupancy in a timely manner. The new manufacturing facility is a progressive step to a final manufacturing facility and is expected to be able to meet our production needs for the next several years, while increasing operational efficiency and helping us to work through any scaling issues."
Based on these comments they addressing the increased production capacity in three phases. In the immediate to short term: (1) upgrades to the existing facility and (2) purchase an existing facility with a build-out and expansion.. Longer term they have plans to design and build a new plant and offices. This once again shows how management approaches things in a very strategic, methodical and fiscally prudent manner.
Z3, under the category of 'Revenues Up' I would offer the following in addition to what you have stated, which could have a positive impact:
- Biocon minimum sales targets - this could go either way - we don't know if their contract is based on the fiscal year or from the date when their original agreement was signed (Sept/October) or immediately upon the expansion of their agreement this past November. In either event I suspect that Biocon will result in some strong sales in Q4 if their recent Cytosorb-specific sales team expansion is any indication.
- Initial orders:
- Hofno brought this up concerning initial orders for new distributors, which is typically part of the distributor agreement. If the Fresenius agreement which was inked in December included such a provision there is the possibility that an initial order was booked in Q4 FY14 when the agreement was signed, which keep in mind would be for a sufficient inventory to perform additional clinical studies and for sales into a 6 country region (France, Poland, Sweden, Denmark, Norway, and Finland). This could be somewhat substantial.
- The company may also have had an initial order from the "partnership with a major cardiac surgery device company for a first initial evaluation in France" which was announced in the November 2014 shareholder call.
hofno I have pointed this out before as well concerning initial stocking orders so I am glad you brought this up. What is going to be interesting is whether the Fresenius agreement included a provision for this and if so orders were booked in Q4 FY14 when the agreement was inked or Q1 FY15. For a 6 country region (France, Poland, Sweden, Denmark, Norway, and Finland) this could be somewhat substantial.
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Totally agree. I would venture to say that there is a core group of retail investors here that have been here for years that held all or most of their shares through the split and uplisting because they believe in this company - it could approximate at least 6-8% of the outstanding shares collectively (based on some older holdings thrown around that remember). Many like peartree have come posting their drivel, but its not going to dissuade those that have seen this company execute on its strategy and vision.
Good catch bertha! If I am not mistaken this is a new slide in the deck and they made it a point to call out these details whereas in the past "cancer, cancer cachexia, graft vs host disease" was just a bullet point on a general slide concerning inflammation. I have seen this investor presentation deck multiple times over the years and each time there is something new in it that it is easy to miss.
I have read some things on Jonathan Aschoff at Brean and some of his past research at the old firms he used to work for several years ago and it has been borderline insider information. I wonder if he's been sniffing around and this is tied somehow to his recent comments and that he's onto something that might be forthcoming. It doesn't negate however the significance of this application for the product and the potential that it might bring.
I am conservatively looking for Q4 2014 number of around $1.3M, possibly 1.5M on the high end in product sales which would represent a 25-40% increase over Q3 sales. This is factoring in at least one more distributor coming online in Q4 having completed product registration and reimbursement. Like you I am anticipating that Q1 and Q2 FY15 will be much more substantial with Biocon's increased sales targets (my guess they went into effect 1/1/15), Fresenius initial orders, Aferetica at full steam and deeper penetration in the direct customers in Germany, Austria and Switzerland. Additional clinical data with more published case studies in Q1 will add fuel to the fire.
I have been wondering the last couple of quarters how much as a percentage Biocon makes up of the company's revenue. I was a bit concerned that the company had just one 'racehorse' in the distributor stable so to speak, but in doing a little review again of the last 10Q that does not seem to be the case.
The company does not publish what their revenue mix is between the different regions and there is no breakdown by distribution partner - it only breaks the revenue down between product sales and government revenue. However, in going over the notes to the financial statements again, I had forgotten that in addition to the breakdown of the accounts receivable there is also a sales composition statement. In reviewing this it indicates that it is not more than 10%. You can also deduce that the company has at had at least 4 distributors generating revenue in 2014 in addition to the direct sales force, from the breakdown of the balances in receivables at quarter end.
"As of September 30, 2014, four distributors and one hospital accounted for approximately 64% of outstanding grant and accounts receivable. For the nine months ended September 30, 2014, approximately 19% of revenues were from one U.S. government agency, and no other agency, distributor, or direct customer represented more than 10% of the Company’s revenue."
To me this is a positive sign that that company is not only NOT heavily dependent on a single customer nor are they heavily dependent upon the direct sales force. Instead it seems to indicate that sales to new regions are expanding and that the sales penetration strategy as outlined by management is beginning to take hold as overall revenues are exponentially increasing.
As great minds have the faculty of saying a great deal in a few words, so lesser minds have a talent of talking much, and saying nothing. With the desire for silence .... Tech
Z3, man you are tearing it up this morning - great information you, cars and evertjan have provided! I have to take some time today to digest this and do some research myself on it.
hofno, floyd posted this case study back on Feb 6 but its good you surfaced again as it is worth noting, especially considering the reputation of this hospital where this was performed. Here are the details:
Bad Oeynhausen is THE largest heart transplant center in Germany and is one of the largest cardiosurgical clinics in all of Europe. 190 beds, 55 of them cardiosurgical ICU beds, nine operating theaters and a separate ward for artificial heart patients. They have performed over 1,900 heart transplantations since inception.
Z3, I believe it will get even more interesting if we get some additional analyst coverage after the 10K is released. Assuming that the sales continue their current trajectory, any new analyst reports or upward revisions of price targets by the existing analysts (Brean Capital, H.C Wainwright, Merriman Capital and Zacks) could result in expanded institutional interest and investment. It is proven that less researched companies trade at a meaningful discount to those that receive the most coverage (up to 33% in a recent study). The greater the number of analysts, the richer the stock’s valuation tends to be and I believe one reason this stock is skewed toward the lower end of what the valuation should be is because of the lack of sell-side coverage.
The article goes on with some general information about sepsis and the filter and then ends with this quote:
"The treatment opportunities with CytoSorb® in critical care are enormous,” Mr. Mauro Atti, Chief Executive Officer of Aferetica SRL, stated. “[The use of] extracorporeal blood purification to treat disease is common in Italy, particularly for complex conditions such as sepsis… I am amazed with the initial results we have seen with this easy-to-use therapy inside Italian hospitals and truly believe, with CytoSorb®, that we are introducing a therapy that gives real hope to critically-ill patients, their families, and medical professionals facing terrible odds."
Apologies if this article has already been posted but it appeared to be new (last week) on Nuvian. A few extra insights about the new distributor in Italy.
US-based CytoSorbents Corporation and Italy’s Aferetica SRL collaborate to bring a new blood purification treatment, CytoSorb®, to the Italian medical device market. Northern Italy is known for its art, cathedrals, and cuisine. But, Mirandola, the region that brought us opera and the Ferrari, is also known as Italy’s Biomedical Valley. Incubated within the biomedical district of Mirandola, Aferetica SRL is a start-up specializing in blood purification devices. Hospitals use these devices to support procedures (e.g., organ transplants) and to treat critical illnesses (e.g., sepsis and autoimmune diseases). Italy is the fourth largest country in Europe, with 60 million residents and annual healthcare spending of approximately $150 billion. It is the second largest consumer of medical devices and disposables in the European Union. Despite increasing bureaucratic barriers and payment delays, Italy remains the 4th largest medical technology industry in Western Europe and the 7th largest in world.
Recently, US-based CytoSorbents Corporation signed an exclusive distribution agreement with Aferetica SRL to distribute CytoSorb® in Italy for critical care applications. Bringing new products to the Italian market is nothing new for Aferetica SRL. Aferetica SRL’s founders Mauro Atti and Stefano Rimondi have decades of experience in dialysis, intensive care, cardiology, and medical devices in general. Aferetica SRL aims to be a catalyst for the creation of a network of clinicians, academics, researchers, industrialists, and institutions capable of creating, validating, and using apheresis therapies in clinical practice. While others in the biomedical technology industry develop blood purification techniques, Aferetica SRL seeks a more holistic and methodical therapy.
Bertha, I never considered this being a market but perform a search for sepsis and nursing homes and you will see as many articles from law firms as you do medical or scientific articles. This is because nursing homes are being held liable for negligence for infections caused by bed sores, poor care,etc which are very common and are a major cause of disease and mortality among those elderly individuals living in these types of homes. It could be that in India that Cytosorb has become now as a key component to patient care and avoiding potential liability claims. Just more proof that the market potential continues to grow for this product.