CTSO: CytoSorbents reports 2nd quarter 2023 financial and results which showed strong product revenue growth and an improved cost structure.
NASDAQ:CTSO
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CytoSorbents (NASDAQ:CTSO) reported 2nd quarter 2023 results on August 1st which showed strong product revenue growth. 2nd quarter revenues increased 10.1% and grant income increased 15.7%. The increase in the Euro to U.S. dollar exchange rate positively impacted product sales by approximately $187,000. The company has lapped unfavorable Covid-19 comparisons as there were no sales related to the demand for CytoSorb to treat COVID-19 patients during the 2nd quarter of 2023 and the 2nd quarter of 2022.
Total revenues were $9.4 million for the 2nd quarter of 2023, as compared to total revenues of approximately $8.5 million for the prior year period, an increase of 10.9%. The product gross margin increased to 74% from approximately 67% in the prior year period largely due to inefficiencies associated with the relocation of production activities to a new manufacturing facility in Princeton, New Jersey during the 2nd quarter of 2022 that did not recur in the 2nd second quarter of 2023.
Research & Development expenses were $3.7 million in the 2nd quarter compared to $4.2 million in the prior year period. The decrease was primarily due to a decrease in clinical trial activities of approximately $627,000 related to the pause of the STAR-D trial in November 2022.
The net loss for the quarter was ($6.15) million which was a substantial improvement from ($10.9) million in the 2nd quarter of 2022. Operating cash flow was a use of cash of ($10.0) million for the first six months of 2023, which is an improvement from the use of cash of ($16.1) million for the first six months of 2022.
As of the end of the 2nd quarter, the company had current assets of approximately $23.6 million and current liabilities of approximately $10.4 million. The company has unrestricted cash of $13.1 million and long-term debt of $5.0 million. There is still $22.8 million available under the company’s ATM equity facility. In April 2023, the company received approximately $1.0 million in cash from the approved sale of net operating losses and research and development credits from the State of New Jersey. The company still has substantial net operating loss carryforwards to help shield against future taxes.
In early 2022, CytoSorbents began introducing tighter cost controls and have reduced headcount by 10% in order to reduce the cash burn rate. The company is currently actively engaged in making further reductions to total operating expenses to reduce the future cash burn. These include a major reduction in capital expenditures, restoration of gross margins to the 75%-80% range, reduced fixed overhead, realization of cost savings from work force reductions and significantly reduced clinical trial expenses. It is expected that the quarterly burn rate for the remaining quarters of 2023 will be in the $4.0-$4.5 million range. We believe the company has sufficient cash and resources to fund operations at least until the 1st quarter of 2024.
Based on various cost controls implemented over the past 12 months, along with an improvement in sales and product gross margins, the quarterly cash burn during the first half of 2023 averaged approximately $4.5 million, down significantly from the average quarterly burn in the first half of 2022 of approximately $11 million. Cash at the end of the quarter stood at approximately $14.8 million. We expected the quarterly burn rate to remain in the $4.0-$4.5 million range for the rest of 2023.
CytoSorbents CEO stated, “Overall, we are excited about completing the STAR-T trial and potentially being on the cusp of reporting topline data by the end of the year and the full data set analysis shortly thereafter. If positive, these data could lead to U.S. FDA and Health Canada marketing approval for DrugSorb-ATR, and importantly, commercial revenue targeting an initial $300 million total addressable market in these two countries alone. Meanwhile, the gradual but steady recovery we are seeing for CytoSorb is expected to build momentum as the hospital markets recover, with anticipated future growth of the therapy in so many different clinical indications addressing multi-billion dollar markets. If we are successful, we believe CytoSorb and DrugSorb-ATR could transform CytoSorbents into a dual U.S. and international growth company, fueled by two major high margin revenue engines, helping to drive significant shareholder value.”
We are lowering our 2nd half 2023 revenues and earnings estimates due to slower than expected recovery of open ICU beds in European markets. We expect total quarterly revenues to remain in the $9 million range. We are adjusting our 2023 revenue estimates to $37.9 million and adjusting our full year EPS estimate to a loss of ($0.49). These estimates may prove to be conservative if the company’s major cost saving initiatives are greater than expected and sales increases from the German hospital market are realized sooner than expected.
There are no changes to our valuation target of $6.00 at this time as we believe that over the long term, the company can generate substantial levels of free cash flow, particularly if the approval and commercialization of DrugSorb-ATR is successful.
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