CMXI - Setback Creates Opportunity In Cytomedix

Zacks Small Cap Research

By Jason Napodano, CFA

It s been a mixed August for Cytomedix (OTC BB:CMXI). Earlier in the month the company announced that CMS has granted Coverage with Evidence Development (CED) for AutoloGel for the treatment of chronic non-healing diabetic, venous, and/or pressure wounds. The final memo is very favorable for the company, and we believe kicks open a potential multi-million dollar opportunity for the company.

On August 14, 2012, the company reported strong financial results for the second quarter highlighted by record sales in both AutoloGel and Angel and meaningful clinical progress with ALD-401 in the ongoing RECOVER-Stroke program. However, a bombshell was also announcement that talks with the company's potential AutoloGel licensing partner, a top-20 global pharmaceutical company, have ended. This was clearly a disappointment.

We see a partnership for AutoloGel as an important for future growth of the product. Management does get to keep the $4.5 million non-refundable payment, and already claims to be in talks with potential new partners for the device. Nevertheless, we have revised down our estimates given the lack of big pharma promotion we had built into our model prior to the news. 

Despite the setback, we maintain our optimism on Cytomedix, and believe, in the long run, terminating talks with this partner may work to the company's benefit if they can secure a new partner (or partners) on equal footing.

Our full report on Cytomedix, published August 15, 2012, can be downloaded here: Cytomedix/Napodano_8.15.2012
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