From Life Sciences Report Dated 7/15/2015. Four Small-Cap Medtechs Primed for Outsize Returns: Zacks' Brian Marckx.
BM: CytoSorbents Corp.'s (CTSO:OTCBB) flagship product is called CytoSorb, another blood filtration device. It is a cartridge filled with highly porous, adsorbent polymer beads that connects to an extracorporeal circuit in a standard blood pump machine. These beads filter the blood as it is pumped through, removing excessive and harmful cytokines and other toxic substances. It is designed to treat people who are very sick with critical care illnesses such as sepsis, acute respiratory distress syndrome and acute pancreatitis, all of which can lead to massive organ failure and death.
CytoSorb was shown to be safe and to effectively remove key cytokines in a clinical study in Europe. It has a CE Mark and has been commercialized in Europe for the last few years. Commercialization is following a very structured approach, and is supported by getting the device in front of key opinion leaders and incorporating it in investigator-initiated studies. The company is demonstrating that the product works, that it's efficacious and safe, and this is how CytoSorbents has been able to grow sales and interest.
The company has used a combination of a small in-house sales force and third-party distribution, and has ramped up its geographic footprint fairly rapidly, with distribution now covering more than 30 countries. Distribution partners include some "majors," including Fresenius, the world leader in dialysis, and Biocon, the largest biotechnology company in India. CytoSorbents also recently announced a partnership with an unnamed "top four" medical device company for use of CytoSorb in France for cardiac surgery. Distribution is already substantial and continues to grow.
Revenue grew from about $800,000 in 2013 to $3.1M in 2014. While revenue disappointed somewhat in the first quarter of 2014, it still showed growth. Management attributed the softer-than-expected results to a restructuring of the sales force, which is anticipated to be worked out in the second half of the year. Importantly, there's no indication that demand, adoption or interest in the device is waning. In fact, management has noted seeing demand for the product in various indications, including cardiac surgery.
And this is interesting. Initially the company expected to seek FDA approval in a sepsis indication and had talked about designing a sepsis trial. But then the device was used more in cardiac surgery, and successfully so. Results of a study done in Germany were recently published—the study indicated that CytoSorb reduced cardiac surgery-related inflammation, and the investigators concluded that CytoSorb, pending further validation, may have utility as a routine measure in heart surgery procedures. The thinking is that a cardiac surgery indication may be easier, faster and lower cost to market than sepsis.
So CytoSorb shifted focus from sepsis to cardiac surgery as an initial indication for the U.S. market. An investigational device exemption (IDE) was recently approved for a 20-patient U.S. study in cardiac surgery, which is expected to commence shortly. And CytoSorbents has applied to follow the EAP pathway, the benefits of which we discussed earlier. Assuming eventual FDA approval, CytoSorbents would then look to expand the label to critical care illnesses, which would likely include sepsis.
The beauty of CytoSorb is that it targets an enormous market—critical care illnesses—which aggregate to a multibillion-dollar market that is not sufficiently addressed by current therapies. There's an awful lot to like about CytoSorbents.
The stock price took a beating following the disappointing Q1/15 numbers, but I see this as a short-term thing and not representative of the long-term fundamentals. The dip offers an attractive entry point for anyone looking to buy the stock cheap.