CytoSorbents Corporation (CTSO)

[techxen]

PE plus an industry partnership could be in the cards

A management buyout is something I would not want to see as a shareholder nor do I think it is what Dr. Chan was referring to. Under an MBO management can use its control of a company to manipulate the sale process to its own benefit and it's in management's best interest to get the lowest price possible. Plus they would have to come up with the financing. I think if a Growth PE firm gets involved it might be a first step to get the company sufficiently capitalized to finish these US trials (REFRESH and HEMO). They could get a huge chunk of change up front with potentially some large milestone payments in exchange for a minority stake using preferred securities along with some protective provisions and redemption rights upon certain triggering events. There is also the potential partnership from another large healthcare or device company and obviously an acquisition is not off the table. However I believe an acquisition would not come until after Phase 2 results at the earliest. From what I have read FDA clearance has been perceived as the primary milestone to trigger an acquisition for companies in this space.

One thing the company has going for it is that it is peaking at the right time. Operating history and their financial performance has demonstrated they can sustain this growth pattern and with the increasing margins exceeding what you typically see in medical device companies, they are on a great trajectory. This combined with the fact that the M&A activity for medical device companies is heating up again, especially with the recent tax act where billions of dollars are being re-patriated. The tax reform did away with U.S. taxes on corporations’ future foreign earnings – including repatriation of cash. The provision, according to S&P, represents a “permanent reduction in a company’s tax obligation and gives companies greater access to cash from profits generated overseas.” Medical device companies with billions of accumulated foreign earnings in their most recent fiscal year include Johnson & Johnson (NYSE: JNJ) ($66.2 billion), Medtronic ($31.8 billion), Abbott ($24 billion) and Danaher (NYSE: DHR) ($23 billion), S&P reports. JNJ and Medtronic are two of the most aggressive acquires of medical device companies.

I am not an expert in this area and this just speculation and my opinion of course.