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TOPIC: My Response to a concerned stockholder

My Response to a concerned stockholder 14 Sep 2014 11:44 #2174

  • DOV
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I thought I would share my response to a large stockholder that is in my network. I did copy Hedrick, Rickey and Dean on this letter.


September 14, 2014

Hi Dick,

Sorry for the delay in getting back to you. I think I can address most of your questions with fact or personal opinion.

1) Several years ago Cytori abandoned their direct sales efforts in the cosmetic area (breast reconstruction). This was done to save money. Plastic surgeons resisted adopting fat grafting for augmentation and reconstruction because it required them to purchase the $ 100K Celution device and then pay $ 2000 for the consumable for each patient. The procedure took about 5 hours. Silicon implants took less than an hour to insert and the cost was around $ 4000 for the patient with a $ 600 profit for the doctor. The sales force costs exceeded the annual sales they were generating. Cytori sold off this portion of their business to Bimini Partners a few years ago. The new Celution System that will be assembled in Wales will cost only about $ 10,000 and will be the only system produced for all applications. The much lower cost and equal to or better performance will make cosmetic applications more affordable. It will also make forward deployment by the Department of Defense more affordable and that is why the Barda contract paid for the development of the smaller, faster, and cheaper device.

In order to build clinical data to support the adoption of stem cell therapies, Cytori concentrated on sales purely to clinical trials. These sales are priced high enough to be profitable with approximately 70% gross margins. As you may remember there are roughly 50 clinical trials going on around the world covering a wide variety of therapeutic applications. These trials are small and treat somewhere between five and twenty patients. Of the roughly $ 8 million per year in consumable sales worldwide, $ 2 to $ 3 million are to clinical trials and the rest represent early adopters treating patients in countries where the system is approved. 70% of sales occur in Japan. The EU is next.

2) Lorem Vascular is owned by KT Lim, a billionaire entrepreneur. He is spending a fair amount of money putting his infrastructure in place. He has established country offices and hired country managers. He is working hard to apply for device approval in China. Australia, Malaysia, Singapore, and Hong Kong have already approved the device. His concept is to seed the hospitals in these countries with the new Celution System and to advertise the benefits of stem cell therapies to generate interest. The main focus (and licensing agreement) is to focus on cardiac ischemia, renal failure, and diabetes. These are areas that have shown very strong clinical results over the years. KT Lim's projections were mentioned by Chris Calhoun in a quarterly conference call earlier this year. Sales from Lorem Vascular to their hospital customers are estimated to be $ 10 billion between the years 2016 and 2023. This would represent sales by Cytori of $4 billion to Lorem Vascular. Only $ 5 to $ 10 million in sales are expected in 2014 and 2015 ($ 5 million of which has already occurred ). Obviously the market places no value on these projections.

3) Okyanos Heart Institute has updated their web site and has announced construction of their state of the art cath lab has been completed. They are expected to treat their first patient in September and possibly next week. You should go to their web site at www.okyanos.com and watch their main video. Many other videos on stem cell therapy will pop up and are worth watching or listening to as well. Time is the issue - there is lots of info.

4) The best way to describe the distribution method in Japan is to call it consignment. We ship a system to a distributor and they sell it to a hospital. When the hospital pays the distributor, then we get paid. The credit quality is good, but the terms of sale eat up our working capital. Cytori has engaged a bank to "factor" these sales so we get paid sooner, but at a discounted price.

Concerning the Japanese Stem Cell Regulations, the public comment period is over and the regulations will become law on November 25th. Our interpretation of the regulations are that Cytori's stem cells will not be regulated at all. However, bone marrow cultures will be regulated and will require some level of proof that the procedure is safe. This is a big benefit for Cytori. Our device has been used in Japan for about 10 years now and the safety record is well known. Only the US FDA considers one's own stem cells to be a drug and therefore regulated under the FDA. All other countries have the opposite opinion. The reason Cytori has moved the manufacturing of the device from San Diego to Deeside, Wales is because China will not purchase a medical device manufactured in a country where it is not approved.

Once the new regulations become law in November, a doctor can treat a patient using Cytori's device without any paperwork. However, there will be a "patient chart" that records the before and after medical condition of each patient. The government will monitor this registry and will use it to determine which therapies show strong patient benefit and should be reimbursed by the health care system. This, of course, is the holy grail. Cytori has a significant advantage over other stem cell companies. The others will have to prove their procedure is safe before treating a patient. The path of least resistance is in our favor.

Cytori has not speculated about 2015 sales in Japan. Currently, sales are approximately $ 8 million per year from Japan. I would be very disappointed if 2015 sales came in less than $ 15 million and very pleased with $ 25 million.

5) Insider buying has always been an issue with Chris Calhoun's board members. Only The Chairman of the Board, David Rickey, has been a consistent buyer. As you know, there are periods when insiders can trade the stock and there are lock-out periods as well. If the board members are aware of material events in the near term, they cannot trade the stock. We are all hoping this is the reason there has been no insider buying.

6) The company did a $ 10 million private placement that closed on June 4th. There were 13 individual investors put together by Steve Brozak at WBB Securities who participated. The purchase price was $ 2.47 per share with an equal number of 5 year warrants to buy at $ 3.00 per share. About two months later, the company announced the Athena trial had been suspended to investigate 3 patients who had experienced a temporary mini-stroke and that the previously announced 4th quarter time frame for the completion of the Athena I trial would not be met. The stock dropped in price as a result of this news. Cytori's cash position had fallen to $ 7 million by the end of August and that violated the loan covenants with Oxford Capital. They are required to have 3 months cash on the balance sheet at all times. Because there was a gray area concerning the timing of the June 4th closing and the actual suspension of the Athena trial, the company approached the 13 individual investors with an offer. They were allowed to purchase an equal number of shares at $1.00, making their average cost approximately $ 1.75 and their 5 year warrants were repriced at $ 2.00 instead of $ 3.00. This deal probably kept the company out of court and raised $ 4 million to give them more time to complete a strategic deal. If the company cannot complete a strategic deal (similar to the Lorem Vascular partnership), they will have to use their pre-registered ATM facility. This permits the company to sell newly registered shares of stock in the open market "at the money" (ATM). At this low price the cost of capital would be very high and only done as a last resort. The company will not go bankrupt anytime soon.

7) As far as expecting some sort of good news in the near future, I would say YES! There is quite a bit of good news out there in the near future. However, the stock did not react to the upside with the news that Barda had exercised the second phase of the contract with Cytori. This was expected to happen, but still it was a very significant event and bodes very well for the future of the company. The good news was overshadowed by the delay in getting to the results of the Athena I trial. These results are expected to be the same as the Precise trial since the two trials are exactly the same with two exceptions: Athena I has 30 treated and 15 placebo patients and Precise had 21 treated and 6 placebo. When Athena I was temporarily suspended, 31 patients had been enrolled so it was already larger than the Precise trial and most importantly, it was conducted in the United States under a FDA approved trial.

For background, Phase one trials are done to determine safety of the procedure or drug and obtain a hint of efficacy. If all goes well, companies will conduct a larger Phase two clinical trial which is designed to show continued safety, but powered to demonstrate efficacy. A Phase three trial follows and is called a "pivotal trial" because it provides the expanded data to gain FDA approval. There are many examples of major pharmaceutical companies partnering or even buying out companies based on the results of Phase two clinical trial results. Pharmaset was purchased by Gilead Scientific for $ 11 billion in cash when phase two data was released on their Hepatitis C drug. Pharmaset had no sales and a balance sheet similar to Cytori's. This was why the delay in the Athena I trial hurt the stock price so much. The trial was expected to be completed in the 4th quarter of 2014 with results released in the 3rd quarter of 2015. If those results are the same as the Precise Trial, then finding a "real" partner would be assured. That partner would invest substantial dollars in taking the Celution technology through a pivotal trial to FDA approval. That point in time has now moved from the 3rd quarter 2015 to at least 2016. Because of this delay, the company will have to raise enough money to continue operations to fill this longer time gap. In response, Marc Hedrick has done what Chris Calhoun had always refused to do and that is lay off a significant number of employees to reduce the cash burn. If you are not working directly on the Athena trial or the Barda contract, you probably have been laid off. The Barda contract is an expense reimbursement arrangement. For example, if Cytori has fifteen employees totally devoted to the Barda contract, all of their employment costs are expensed against the Barda escrow account plus a 7.5% profit margin. (an expense report submitted for $ 1,000 will be reimbursed for $ 1,075.) During the first six months of 2014, Cytori burned through $ 12.25 million in cash. The layoffs and the Barda contract will reduce this burn rate by a large margin. Still capital is needed to fund the company until the Athena I results bring in a major partner.

In the meantime, it is quite possible for Cytori to find other partners similar to the Lorem Vascular deal. As mentioned, this is far more preferable than using the ATM at these depressed prices. Clinical data is starting to come out from all of the studies around the world. There is a lot of interest in stem cell therapies from major pharmaceutical companies but no company has been willing to invest as yet. Cytori has either released articles or pointed to articles that have been released on clinical data in the areas of: Diabetic foot ulcers, fistulas, scleroderma treatment in the hands, ACL repair, SUI - stress urinary incontinence, thermal and radiation burns, cosmetic applications involving fat grafting. I believe there are other studies involving diabetes, stroke, MS, rheumatoid arthritis, COPD and more.

Near term "good news" could come in the form of: 1) a strategic partner or licensing agreement that results in badly needed capital 2) Japanese regulation clarification and financial implications to Cytori 3) Okyanos publicity from treating the first patient 4) China application feedback 5) Canadian approval for the Celution system 6) Government sponsored clinical trials outside the US 7) Barda type contracts may not be limited to the USA: ISIS is a worldwide threat 8) Lorem updates 9) Athena restart 10) Barda trial details 11) Additional information on the timing of Deeside, Wales production 12) visual material made public by Cytori showing how well the cells work in healing thermal wounds (something I have asked Hedrick to provide) 13) back end loaded quarterly sales numbers that surprise to the upside.

One more thing. The Athena I trial cannot restart without the necessary funds being raised. The time spent on raising additional capital and answering the questions from the FDA run congruently. I do believe the Athena trial will restart in the next three to five months. After all, Okyanos and Lorem Vascular are both devoted to treating patients in the exact same way as the Athena trial. The risks associated with inserting a stent to open an artery is the same risk that suspended the Athena trial. This is perhaps an oversimplification of the situation because there are other factors, but the point is we will get through this delay.

It is all about the money and the rising cost of capital. Unfortunately, institutional investors are not willing to bid up the stock price until there is phase two data or sales numbers begin to demonstrate there is substantial demand for stem cell therapies. Marc Hedrick has stated his primary goal is to concentrate on getting one or more cell therapies to phase two data as quickly as possible. This will address the capital needs. Revenues are expected to accelerate modestly to nicely from the commercial ventures at Okyanos, Japan and Lorem. Perhaps there will be others announced in the coming quarters.
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My Response to a concerned stockholder 14 Sep 2014 14:34 #2176

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DOV , thank you for the due diligence. Well stated. Forgot

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My Response to a concerned stockholder 14 Sep 2014 16:42 #2177

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Excellent dissertation!

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My Response to a concerned stockholder 14 Sep 2014 21:24 #2178

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DOV, thank you for sharing the well detailed summary. I would ask you to double check one thing. I recall that the BARDA reimbursement rate of 7.5% relates to outsourced expenses (I.e., Clinical trial) but more like 50% when allocating Cytori employee expenses to BARDA related work.

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My Response to a concerned stockholder 15 Sep 2014 08:12 #2179

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Great summary Lewis. Thanks a lot for the effort and even more for sharing the write up with the readers of the Lodge.

I know you have little time and have to work. So although I have heaps of questions on some of your statements, maybe you can answer just one sometime this week or the coming week-end and that is on KT Lim and China.

You wrote: The main focus (and licensing agreement) is to focus on cardiac ischemia, renal failure, and diabetes. These are areas that have shown very strong clinical results over the years.

Is this information coming from Hedrick? I presume everybody can understand that when Cytori (and KT Lim) file for Category 1 approval of Celution in China, they will not get this approval for being a sympathetic bunch of folks, but because they accompany the filing with real clinical data on humans on certain apps along with the safety of the app with the device. Anything else is wishful thinking and plain naive. One needs clinical proof.

Personally I think if some of that data would have been published on major disorders like COPD or Type II diabetes we would not be in the "survival mode" where we are. :bash: :bash:
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Board moderator and Site-owner. I still regret the day I started analysing the prospects of MacroPore (now Cytori) back in 2004- a left-over from the tech-bubble at that time from the century change in my portfolio- and became addicted to Cytori´s fat cell technology. :cry:

My Response to a concerned stockholder 15 Sep 2014 09:29 #2180

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Thanks DOV.

Had same thoughts as Fas on applications not well documented by Cytori....I made assumptions in the Lorem deal that there is clinical proof for the applications to be up and running or there is at least phase 1 data that Lorem would like to purse with additional trials in the selected countries.

Also found it curious why you decided to send copies to Hedrick, Rickey and Dean....since surely they already know.

In any case thanks, for sharing with us.

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My Response to a concerned stockholder 15 Sep 2014 10:28 #2181

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While, I appreciate the write up and thanked DOV accordingly, information and analysis like this should come from the likes of Hendrik. So much for better communication, directly with shareholders. Guess this team will continue to communicate through those with whom they decide to speak. Thus far the information shared has been useless and usually incorrect. Breeding false hope and expectations. We sit here at $ 1 for a reason, and those reasons continue to reward themselves with options, collect salaries that are not earned and make the wrong decisions every step of the way. It's all been bullshit, plain and simple. Any DD that any of us did to educate themselves has been tainted, worthless and self serving for management to paint a rosey picture . It is what it is and that is where we stand, on very shaky ground, possibly on the verge of bankruptcy and with a group of investors, which without exception are all in the red, severely under water and extremely pissed off at themselves for being in this most unenviable position.
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My Response to a concerned stockholder 21 Sep 2014 07:19 #2279

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You wrote: The main focus (and licensing agreement) is to focus on cardiac ischemia, renal failure, and diabetes. These are areas that have shown very strong clinical results over the years.


Lewis- any possibility in you confirming that you picked that up from a Cytori source versus being your own judgment?

Thanks

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Board moderator and Site-owner. I still regret the day I started analysing the prospects of MacroPore (now Cytori) back in 2004- a left-over from the tech-bubble at that time from the century change in my portfolio- and became addicted to Cytori´s fat cell technology. :cry:

My Response to a concerned stockholder 21 Sep 2014 07:46 #2280

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One of the reasons for asking, is obviously the vast- and incredible value hidden in procedures and treatments against disorders of the main organs.

The slide below is over one year old- from August 2013-





From the filings of the Lorem Vascular contract we know that "cardiovascular" is uniquely defined to include things like ischemic stroke, renal failure, diabetes and COPD, so is geared to a DEVICE used in cardiovascular procedures.

The normal medical nomenclature is totally different in that the cardiovascular system is only the heart, all arteries and veins and bone mark. Lungs are than part of the respiratory system- liver- gastrointestinal etc etc.

Obviously you are right that several important clinics should be finished by now- it just would be great to learn- what they are. :vegas: :grin:
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Board moderator and Site-owner. I still regret the day I started analysing the prospects of MacroPore (now Cytori) back in 2004- a left-over from the tech-bubble at that time from the century change in my portfolio- and became addicted to Cytori´s fat cell technology. :cry:

My Response to a concerned stockholder 21 Sep 2014 12:58 #2281

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Sorry for the delayed response. My travel schedule has been crazy this entire year and I do not get a chance to check this board when on the road.

Regarding renal failure, Cytori did a study on mice about 10 years ago. You probably have seen the poster hanging on the wall in the hallway outside their lab. There may have been a press release back then as well. From memory, they clamped off the blood supply to the kidneys of 1000 mice for a significant period of time. Cytori injected ADRCs into the renal artery in 500 of these mice and 100% of them had a full recovery. Of the remaining 500 mice, very few survived at all. I remember reading years ago where Hedrick once speculated that the renal market may turn out to be the largest market of all. As far as I know this is the only research Cytori has conducted on renal failure. There has been much more research done by other companies. YouTube has many testimonials, but it is hard to separate the con artists from the real thing.

On diabetes, the same story. Lots of anecdotal evidence, but not from Cytori. Dr Mitsui in Japan had had some anecdotal success with diabetes. I used to get info from Brian Gagnon on Dr Mitsui's treatments. The Japanese government tighten the regulations a few years ago and he stopped all patient treatments. I expect he will be one of the most active Japanese doctors after November 25th when the new regulations become law. I met Dr Mitsui in San Diego at the first Cell Society meeting in 2010 or 2011.

One of the compelling reasons to favor Cytori over other stem cell companies is the low cost of obtaining fresh stem and regenerative cells. Other companies can conduct clinical trials and get various therapies FDA approved. But they still have to obtain the cells. If Cytori's patents are still good by that time, the cheapest source of the cells should be the Celution system.

Like you and Hedge, I was curious as to why the licensing agreement included Renal and Diabetes. Frankly, I think Cytori threw them in as a bonus because they had not invested much, in any, money in them. Same thing with alopecia in the Bimini license.

Perhaps I should have not made the statement "very strong clinical results over the years". Perhaps I should have said "very strong anecdotal evidence."

In a recent conversation with Marc Hedrick, he did say to me "there is a lot of data out there and much more is coming out all of the time." He is trying hard to avoid selective disclosure which is how rumors get started. I believe Hedrick will confirm they will have a second indication entering the clinical trial phase by the end of the year. The speculation is related to the ACL repair data from Dr Cugat. Hedrick stated in the last conference call he would not announce anything publicly until he has the deal done, the financing done and the FDA approvals done.
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My Response to a concerned stockholder 26 Sep 2014 08:46 #2319

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Thanks Lewis for all of the deliberations.

That makes a lot of sense to me- I can add that shortly before the "crush-down" in Japan on studies with ADRCs on humans like Mitsui, but also highly regarded university clinics, were doing- some renal patients must have been treated. In the November 2009 call there was even a question from an analyst on how the first patient was doing in the renal study. Hedrick´s answer at the time was, that it was too early to tell.

Anyway-

Hedrick stated in the last conference call he would not announce anything publicly until he has the deal done, the financing done and the FDA approvals done.

[/i]

Yes- that came through loud and clear.... :evil: :bash:

I discussed this with everybody who was willing to listen to me, how scilly and dumb such a statement was. We do not need more mysteries, we need more openness and clear communications. I think Hedrick has come back from that, especially considering the last announcement.

Mind you- reading those reports from Jason Kolbert- I do think that is selective information also, which I strongly disapprove.

Hedrick has still a lot to learn, but hopefully relies on other people more than CC did. :grin:

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Board moderator and Site-owner. I still regret the day I started analysing the prospects of MacroPore (now Cytori) back in 2004- a left-over from the tech-bubble at that time from the century change in my portfolio- and became addicted to Cytori´s fat cell technology. :cry:

My Response to a concerned stockholder 25 Oct 2014 08:03 #2526

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Dov,
With all that has transpired surprised that we have not heard from you. What is your take on the rape of Cytori and it's shareholders by management. I believe this is going to wind up in court and the actions taken to and I use the term loosely "save" the company were dubious at best. All who have chosen to invest are of course respondsible for there own actions.,You had a direct line to CC,Saad,Hendrik et el so I am curious as to your perspective as to what went so terribly wrong and what are your expectations. $500 is certainly out of the question.
Respectfuly,
Rothco

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My Response to a concerned stockholder 25 Oct 2014 17:30 #2530

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Rothco,
I don't think there is any real debate about what happened over the last four plus years. Cytori's management knew how effective the stem cells can be in a number of different applications. They really expected Big Pharma to write them a huge check to partner with them. Chris Calhoun thought the data collected over the years, but more specifically from the Precise Trial and the Apollo Trial, was enough to attract $ 200 plus million just for the rights to play in one application or region of the world. In order to be attractive to a big Pharma company, Cytori had to be visible and have multiple irons in the fire (shots on goal was Calhoun's favorite). This invisible courtship (to the stockholders) was expensive in that it required 119 employees engaged in various activities with the exception of actually selling the product. The strategy became one of passive sales - concentrate on profitable sales only to support clinical trials (50+) which would generate data using other people's money. I understood this strategy since they were losing a lot of money trying to sell to plastic surgeon's who were worried about margin squeeze and the high cost of entry into stem cell enhanced fat transfer procedures. This passive sales strategy should have required maybe 40 to 50 employees. But Calhoun and Saad never wanted to downsize to this appropriate cost structure because they firmly believed a major partnership was right around the next bend in the road. They were successful in convincing the BOD to delay downsizing. It wasn't until a fairly large group of stockholders got together and pressured the BOD to get rid of Calhoun that things began to change for the better (from a cash burn viewpoint).

There were several BOD members who thought the stock should have been trading at $ 30 simply based on the Precise and Apollo results. There are many examples of start-up drug companies that do sell for these valuations based on early clinical results and future potential. Cytori is a medical device company that has a very large patent portfolio on their device and also on how the ARDCs are obtained. The FDA shut Cytori down cold when they expanded their authority (without Congressional approval) to include transferring ADRCs into the same human whereas before their authority covered transferring ADRCs into a different human. In other words, no 510K for Cytori because the stem cells work better than many drugs on the market and therefore they must go through the same pathway to approval as if your own cells are drugs regulated by the FDA. The US FDA is the only government body on the planet that has taken this stance. Someday it will be a source of great embarrassment, but frankly no one at the FDA cares about that.

My point is this belief that the stock should be recognized for its commercial potential and rightfully sell for $ 30 was what made it easy for Calhoun and Saad to build up the company to 119 employees and burn $ 35 million a year. Basically, the company spent 40 million shares trying to appear attractive to Big Pharma to land the big partnership and have the skills to run a business transfer over to Cytori. At the end of this four year period, Calhoun had failed to ink a deal and most every therapeutic pathway was abandoned. The Athena trial should have started in 2010 or early 2011. All is not lost, however.

Cytori did get the BARDA contract and that has never been appreciated by the market. This is an area where the cells work extremely well. The trials will prove this out and the FDA will find it hard not to recognize that fact.

The Japanese shut down our sales momentum years ago while they studied stem cell therapies in an effort to see how best to regulate it. Next month, this momentum will begin to accelerate once again. The ball is in Seijiro Shirahama's court.

Lorem Vascular is progressing faster than we are being told. David Oxley was responsible for initiating this licensing agreement and Calhoun got the credit for closing the deal. One of KT Lim's comments was "you guys spend way too much money!"

Okyanos treated five patients in their first full week of operation. What is not widely known is Okyanos has received approval to treat quite a variety of diseases: Autoimmune complications, Parkinson's, diabetes, arthritis just to name a few. This will result in greater revenues to Cytori than is currently expected.

After four years of no sales growth, it is good to see a few things about to happen in the revenue column. Cytori is being valued strictly as a medical device company. It is all about revenue growth and expense control. The stock seems appropriately priced considering the 130 million shares outstanding and sales where they are today. Roth Capital attracted buyers to the secondary who are selling the stock to get their money out and play the warrants for free. That is how they play the game and Cytori has been played hard. The current management and the BOD have no illusion of a Big Pharma partnership any more. Their passive sales efforts are slowly turning more active.

One other thing: The FDA now knows the stem cells work. They have seen the work done under the Barda contract and supported the grant of Option #1. It won't be long now before Cytori has six month results on the initial 31 patients. Twenty should have gotten the cells and 11 should have gotten the placebo. It would not surprise me if Cytori chose not to continue the Athena trial to save money. They have a history of not completing their goals and then choosing a shortcut. Okyanos is treating the same type patients as the Athena trial and will treat 500 patients in the same time frame that Cytori could treat 45 in the Athena II trial. The FDA will not want to acknowledge the patients treated by Okyanos, just as they and the market ignored the results from the Precise trial. There is strength in numbers though.

The stock price will work its way higher as the revenue numbers begin to grow and the quality analysts can calculate the revenue and earnings impact of multiple Okyanos type clinics around the world. I expect Okyanos to purchase about $ 5 million in consumables from Cytori through the end of 2015. But, I think it is wise to get used to a company with 175 million shares outstanding (prior to the 1 for 5 reverse split which is likely to happen to stay listed on the NASDAQ).
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My Response to a concerned stockholder 25 Oct 2014 18:17 #2531

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Thanks for your reply Dov What is the mindset of your group now. Are you holding, buying or waiting for some sign. My concern is that the poor judgement that has been rule of thumb up to this point will continue if the same players remain in place. I don't understand why Hedrik and the BOD cared so little for long term shareholders. Saad had said specifically that there were plenty of investors willing to write a check,why did he not go to them instead of these shysters. How do you feel KT feels about paying $3 for his shares and how he feels about Cytori management. I can't believe he would want to have anything to do with any of them.

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My Response to a concerned stockholder 25 Oct 2014 20:30 #2532

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Roth,

No doubt KT is pissed off with CYTX management for misshandling their finances/funding. I imagine that what pisses him off most is the inability of CYTX to complete the ATHENA trials which would provide significant validation for regenerative medicine in general and ADRC in particular. It is this validation that would provide the marketing platform/strategy for rollout promotion in asia. Lim paid for asian distribution rights and he will retain these no matter what happens to the CYTX share price. His gaining the rights to asia was predicated on the share purchase. He would no doubt have preferred that the company did not mishandle the financing so that he could remain "the" major shareholder. This may still be the case if the shysters ontinue to sell out their positions. I do not believe that he bought the shares to sell them for a trade.

DOV,

Japan was the region that appeared to provide the basis for the partnership deal that management/BoD expected. Perhaps the new legislation and the uncertainty that it created was the reason for the non-consumation of the deal. Why should we not expect the possibility of a partnership deal from this region, along with increased translational sales given its impending implementation on what appear to be favourable terms ?

I can understand why CYTX is reluctant to proceed with funding the ATHENA trials due to lack of funds. However they cannot negotiate a deal with BP if they are not prepared to complete the Phase 2 trials. They have already enrolled 2/3 of the ATHENA I patients and the FDA specifically requested the dose escalation trial which was ATHENA II. These need to get done !

As you so eloquently put it "The US FDA is the only government body on the planet that has taken this stance. Someday it will be a source of great embarrassment, but frankly no one at the FDA cares about that." and "The FDA will not want to acknowledge the patients treated by Okyanos" . You either play by their rules or you don't get to play at all. The ATHENA trials need to get funded. Perhaps unblinding the data of the results to date may be sufficient to entice a partner into serious negotiations ......... but it will not circumvent the need for additonal phase 2 trials as mandated by the FDA before the pivotal can be undertaken. All well and good to have the NIH fund the LVAD trial, but by delaying focused trials in those indications which we have identified as being significant we are letting time slip by thus running the risk of technological advancement superceeding our technology or reducing the shelf life of our patent protection. And as we are talking about heart related data why don't they publish the ADVANCE data that is matured well past the 6 and 12 month time frame?

Personally I favour scleroderma as an area of treatment with a much quicker confirmation fo efficacy. Success in that area will open the whole autoimmune domain. Any thoughts ? Could they not fund a US trial in conjunction with an EU funded trial? Aa an aside, If I can't buy shares on the terms provided to Roth/Maxim I am quite happy to pour a bucket of ice cold water over my head, and make a donation to such research !!!!!!!!!!!!!!!!!!!

As you state we should be looking for 175M shares outstanding in the not too distant future. This is inevitable with our funding needs and debt repayment issues. What I am looking for is those actions on the part of management that will ensure that the new shares are priced at a level that better reflects the potential of the technology. Do you believe this is feasible or have we proven ourselves (ie. mangement) to be so weak that we will forever be at the tender mercies of our financiers. As you have stated they are selling their shares, and the warrants I believe are nothing more for them than a tool to continue their shorting antics.

I would rather ask for funds from BP on realistic terms than go cap in hand to the shysters again. Do you believe management and the BoD will finally act for the benefit of the shareholders? I wonder how Brozak and his investors feel about the way things have turned out? Still they have their warrants ........ we don't.

Management needs to be more forthcoming and proactive in spreading the story. They need to adress the questions that we have raised on this message board and which we were told that they would address. No doubt they have been busy, still adressing these questions may be a vital step in reversing the company's direction. Any assistance you may provide in that respect would be most appreciated.

Yours sincerely,
A mushroom called rongside.
The following user(s) said Thank You: d9dozrman

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My Response to a concerned stockholder 26 Oct 2014 01:37 #2533

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To the lawsuit touters. Its been mentioned here and on the YMB several times on a on and off basis. Can we please give it a rest. NO ONE has filed squat and no one cares if you have talked to or are going to talk to a lawyer. Your as bad a CC...all talk and no delivery !!!!! File first then you can thump your chest on a message board...otherwise can I suggest we keep it to company discussions, both pro and con, as warranted.

rongside: You still seem to be grabbing at straws that do not exist...LOL

DOV: Lots of varying thoughts as I read your post but I will keep my comments simple. Little has changed. We still need tens of thousands of patients on a annual basis. The shorts will love a reverse split and still attack but I agree its very likely coming. A therapy working and wide scale acceptance by the public are two completely different things and we still have no idea how long this curse,,I mean curve will take.
On a more humorous note, whats with you and the number 500 ? LOL

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My Response to a concerned stockholder 26 Oct 2014 09:46 #2534

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Rothco,
Most of my group are hanging in there for the "longer than expected term". There have been some that have thrown in the towel and blamed me for their losses (same as on the YMB). That is human nature. I am not much of a technician, but I believe the theory about capitulation is playing out perfectly here. The Athena trial got suspended which pushed out the timing of a real potential partnership to finish the pivotal trials in the USA. Capitulation started immediately and is not over yet. Tax loss selling coupled with the Roth investors selling out should keep the stock down for a while longer. Capitulation creates an extreme bottom in a stock and all of the bad news is out. With the one exception of more capital being needed to reach break-even, most of the news from here on out should be positive. I can only hope that 175 million shares (up from 130 million currently) is enough to get us to break-even. Back of the envelope calculations points toward $ 35 million in revenue as the magic number. That should get the stock to $ 8 per share even with 175 million shares outstanding, IMO. My reasoning here is what gets us to $ 35 million in revenue is medical acceptance of stem cell therapies followed by insurance reimbursement.

To humor Hedge and all of the other posters who conveniently omitted the key word "IF" Cytori can treat x number of patients per year then....

1,000,000 patients per year x $ 3,500/patient = $ 3,500,000,000 in annual revenue

subtract cost of goods sold: $ 500,000,000
subtract overhead: $ 200,000,000
apply 35% tax bracket: $ 980,000,000

Net Profit: $1,820,000,000
Shares out: 175 million
profit/share $ 10.40
PE ratio: whatever you think
price target: do the math

Estimate on number of consumables sold in last 12 months: 750 to 1,000

Conclusion: A ten-fold increase in consumable sales should get us to break-even with strong sales momentum. This is why investors should stick around. With Okyanos, Japan, and Lorem just getting started, sales should finally begin to move forward. Barda could eventually add to the sales mix. There are enough Celution 800 systems out there to drive consumable sales now, but the newer device will help penetrate additional markets.

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My Response to a concerned stockholder 26 Oct 2014 10:00 #2535

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Rongside,
I agree with everything you said. For mental health reasons, I would avoid counting on a BP partnership until Cytori completes the Athena trials. The remaining 14 patients will cost just over a million dollars. Let's finish something for once! When those results are released, we can sit back and wait for a partner while Okyanos spits out (Athena like) patient data for the world to see.

To me, it is all about treating patients and getting paid for those sales.

I think Hedrick is focused on a US based low cost trial just to get something approved by the FDA. More needs to be understood about the proposed osteoarthritis trial and the timing of the BARDA thermal burn trial.

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My Response to a concerned stockholder 26 Oct 2014 11:19 #2536

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Always nice to be humored DOV...LOL
I do like the consumable numbers as a eventual mix of $ 3500 per patient seems reasonable.
However getting to a million annual patients is a tall order in the next 10 years, even with China.
Needless to say I have lost a lot of faith. Its all show me now !!!

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My Response to a concerned stockholder 26 Oct 2014 16:58 #2537

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Hedge,

I don't know how the 1 million patients per annum treated will work out, but I do know that there is a multitude of clinics in the USA (not to mention abroad) who are providing expensive adipose derived regenerative cell treatments using methods,tools and treatment protocols that are highly suspect in terms of cGMP, efficacy and trial data............. so quite obviously the demand is there !!!

The share price can be very positively affected if there was positive sales momentum, and revenue that covered break even expenses. At USD 35M it would not take much to reach that number of patients per annum at a price of USD 3500 per procedure, ie. 10,000 patients.

For the sake of simplicity assume 20 devices working 52 weeks per annum for 5 days per week doing 2 procedures per day, we get our 10,000 procedures. I think there are already more than 20 Celution800 out there. In the not too distant future we should have the new improved USD 10,000 Celution rollout which will totally change the cost structure for doctors/hospitals and clinics.

We don't need the actual 1,000,000 procedures per annum to make money .......... just the prospect that that may be fesible is enough.

You have been clearly right in your scepticism about the company todate. My question to you is whether at 50cents isn't the risk reward sufficiently favourable to buy shares at this level? If not, what will it take for you to change your mind?

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