CytoSorbents Corporation (OTCBB: CTSO), a critical care focused
company using blood purification to treat life-threatening
illnesses, issued the following letter to shareholders.
Dear Shareholders and Friends,
As we approach mid-year, I wanted to take an opportunity to
update you on our recent accomplishments and to discuss our plans
for CytoSorb™ in greater detail. It has been an extremely busy, but
exciting time for the company, particularly as we remain on track
towards a CytoSorb™ controlled market release in Europe later this
year.
As many of you know, we achieved a landmark milestone about two
months ago with the European regulatory approval of CytoSorb™ as an
extracorporeal cytokine filter to be used in clinical conditions
where cytokine levels are elevated. In an interim analysis, we
successfully reached the primary endpoint of the European Sepsis
Trial, demonstrating 49.1% removal of interleukin-6 (IL-6) over the
treatment period compared to control, in patients with severe
sepsis or septic shock in the setting of respiratory failure. This
level of removal was highly statistically significant, with a
p-value of 0.01.
Why is this important? IL-6 is one of the major cytokines most
closely correlated with severity of disease and mortality in severe
sepsis and septic shock. Its removal, in general, is a surrogate
for broad overall cytokine removal. It is generally well-accepted
in the medical community that excessive cytokines, often called
"cytokine storm," play a major role in severe inflammation that can
cause multiple organ failure and death in commonly seen diseases
such as sepsis, acute respiratory distress syndrome, severe burn
and smoke inhalation injury, trauma, and severe acute pancreatitis.
In fact, multiple organ failure is one of the leading causes of
death in the intensive care unit, for which little can currently be
done. Certain other cytokines also suppress the immune system,
leading to a high susceptibility to infection, another major cause
of death in hospitalized, critically ill patients. And very
interestingly, our colleagues at University of Pittsburgh Medical
Center, who we collaborate with, have discovered yet another
compelling mechanism of action of CytoSorb™ that we will discuss
when their data is published. Removal of toxic levels of cytokines
by CytoSorb™ is designed to actively mitigate these
life-threatening sequelae.
As mentioned, the European Sepsis Study has already been a
success, with the achievement of our primary endpoint of IL-6
reduction and CE Mark approval of CytoSorb™ in the European Union
(E.U.) as a broad cytokine filter. We also demonstrated that
CytoSorb™ treatment was safe, with more than 300 human treatments
in septic patients and now more than 650 human treatments overall
when including our other clinical studies. We can now sell
CytoSorb™ throughout the E.U., not just as a treatment of sepsis,
but for all diseases where cytokines are elevated. We have been
diligently working with our contract research organization and
trial sites to finish data monitoring and statistical analysis of
the data following the recent completion of our targeted enrollment
of 100 patients. The trial was originally designed to demonstrate a
statistically significant reduction in IL-6, which we have
achieved. We are also interested to see whether or not an overall
reduction of IL-6 led to clinical benefits in survival, and
improvement in other objective measures of organ function such as
the need for mechanical ventilation. These data would be helpful in
marketing CytoSorb™. We plan to announce these data in the near
future after all sites have been fully monitored and in cooperation
with our investigators in Germany.
We have also recently returned from a productive two-week trip
to Europe, with a focus on Germany. One of the major stops on our
travel agenda was the German Congress of Anesthesiology in Hamburg,
Germany. In Germany, the majority of critical care intensivists
specialize in both anesthesiology and critical care. There we met
with a number of our clinical trial investigators who were very
interested to continue working with our company to conduct new
studies with CytoSorb™. We also met with new critical care
physicians who we introduced to our technology for the first time.
It was encouraging to see that these physicians readily understood
the potential value of cytokine reduction and expressed a desire to
try CytoSorb™ in different applications in the intensive care unit.
In fact, we were pleasantly surprised at the number of potential
new applications suggested for our technology. We heard many times
that the medical need for new therapies in critical care is great,
and that if CytoSorb™ works as stated, it represents a powerful
tool that they don't have today. After looking at some of our
preclinical and clinical trial data, many expressed that the
mechanism of action of CytoSorb™ as a cytokine filter was intuitive
and that the treatment was straightforward and "should work." This
confirmed our own ongoing market research that most clinicians
understand and accept the role of excessive cytokines in
inflammation, organ dysfunction and failure in critical illnesses.
This is an important point, as it reduces the need to have to
educate or convince physicians that excessive cytokines are
detrimental, reducing a major hurdle in the sales process.
We have mentioned previously that we plan a "controlled market
release" of CytoSorb™ in certain markets in Europe by the end of
the year. Please allow me to elaborate on what we mean by this. To
date, the company has been focused predominantly on the development
and regulatory approval of CytoSorb™. CE Mark approval marks a
major transition and opportunity for us to become a
commercial-stage company. However, the road to revenue requires a
significant amount of planning, preparation, and build-out of
infrastructure, both here and abroad. Our goal is to meet this
challenge in a fiscally responsible and intelligent fashion, armed
with the correct information and assumptions, the ability to
support our products in the market, the appropriate capacity to
match demand, the right people representing our company, and
adequate financing to fund our expansion.
For this controlled-market release, we have selected key
geographic territories in Germany that we feel are representative
of the broader German market. This phase is expected to last
approximately three to six months, and because of the limited
roll-out, revenues are initially expected to be modest. During this
time, we plan to identify and address as many issues as possible on
a small scale that could affect the adoption and sales of
CytoSorb™, before doing a more ambitious, broader launch in 2012.
Included are issues common to product test marketing, such as
refinement of the sales and marketing approach, production of
marketing materials, price sensitivity analyses, customer surveys,
reimbursement optimization, identification of key factors that
drive market adoption, and establishment of product support and
customer service. But we are also focused on other critical issues
such as making key company hires, streamlining and bolstering
manufacturing, driving down costs, identifying production and sales
bottlenecks, managing supply chain logistics and distribution,
establishing robust financial and accounting systems, and ensuring
these systems can scale with greater demand. We are confident in
our ability to execute upon our agenda and have the people with the
appropriate experience to be successful. For instance, our Chief
Operating Officer Vincent Capponi is a veteran of commercial device
production. He, for example, oversaw the regulatory approval of the
first pre-filled saline and heparin syringes as COO of Sabratek and
managed the production of more than 1 million units per week before
the business was sold to Baxter. Al Kraus, our chairman, has
extensive experience in sales and marketing in the dialysis sector
and was the former VP of Sales and Marketing, and later the
Subsidiary Manager, of Gambro's US subsidiary, growing it from $8M
to $50+M in revenue and leading a successful U.S. initial public
offering.
Our broader commercialization strategy is straightforward. We
intend to roll-out in the European Union in stages with an initial
emphasis on Germany. There are a number of reasons why we will
focus on Germany. Germany is the largest medical device market in
Europe and the third largest in the world, with world-class medical
care and a high incidence of sepsis, with more than 154,000 new
cases each year, according to the German Sepsis Society. German
clinicians are leaders in sepsis research, with a dedicated network
of hospitals and investigators called SepNet that conducts clinical
trials in sepsis on a regular basis. We have been fortunate to have
worked with a number of these thought leaders in our European
Sepsis Trial and now have a head start in terms of physician
awareness of our technology. We have also observed that German
intensivists are willing to try new technologies and routinely
perform extracorporeal therapies on their own -- making them ideal
users for CytoSorb™. We have a good understanding of the medical
system and reimbursement process in Germany. And finally, we have
the ability to cost-effectively target the main maximum care
hospitals and intensive care units in Germany with a small direct
sales team. There are approximately 2,000 hospitals in Germany, but
only 380 major hospitals with more than 400 beds each. These are
the hospitals with the largest ICUs and are likely the biggest
potential users of CytoSorb. With an estimated total addressable
market for critical care applications in Germany approaching EUR 1
billion alone, CytoSorbents could become successful here without
ever branching out to other European countries.
As we approach commercialization, we are focused on key elements
to drive success. First, we have already begun ramping
manufacturing of CytoSorb™ under the CE Mark and are now building
devices to support both commercial sales and additional clinical
trials. Second, we are beginning to drive market awareness of
CytoSorb™. We plan to work with critical care thought leaders to
conduct additional clinical trials in both sepsis and new
therapeutic areas, and will disseminate these results widely. We
also plan to conduct a larger pivotal study in sepsis in the U.S.
to gain U.S. FDA approval. We believe interest and usage of
CytoSorb™ will be driven in large part by data that demonstrates
how the device can be used in different scenarios. We also plan to
exhibit and present data on CytoSorb™ at European and German
critical care and sepsis conferences later this year. Third, we are
working to maximize reimbursement for CytoSorb™. Currently, the
device can be paid for through standard DRG payments to hospitals.
However, we are pursuing other mechanisms to potentially attain
even higher reimbursement for the product. Fourth, we have been
working to build the team and infrastructure, both domestically and
internationally, to support the sales of CytoSorb™ in Europe.
Selection of our sales team in Germany will be critical to our
success and we have made good progress in this regard. And although
we plan to sell direct in Germany, we are working to establish
relationships with independent distributors in other key countries.
Nothing we do here would preclude us from entering into a strategic
partnership or distributorship, but at this stage, it is important
for us to control our own destiny. Lastly, we have been
strengthening our balance sheet to be able to finance our
expansion. We closed May 2011 with approximately $4 million in
cash.
From a competitive landscape, the alternatives to treat sepsis
continue to shrink. The only product that has been approved to
treat sepsis in the U.S. or E.U. is Xigris® by Eli Lilly. Due to a
number of factors, the product has not met Lilly's initial
expectations and the company recently announced that it was no
longer going to market Xigris itself in the U.S., and instead
licensed Xigris U.S. marketing rights to a newly formed company
backed by a private investor group. The only other late stage Phase
III compound for sepsis was Eritoran, a TLR-4 antagonist
manufactured by Eisai. However, earlier this year, Eisai announced
that Eritoran failed to reach its primary endpoint in its pivotal
Phase III trial. We believe, now more than ever, that the timing is
right to introduce CytoSorb™ into the critical care market.
Beyond commercialization of CytoSorb™, we have been making some
exciting progress. As a matter of practice, we have not
historically disclosed the full extent of what we have been working
on for both competitive reasons and to appropriately manage
expectations of our shareholders. There are, after all, no
guarantees that any of our efforts will come to pass, but these
projects represent potential upside to the company. For example,
our research and development pipeline has expanded to now include
positive proof-of-concept data in several promising new
applications. These applications, which we plan to discuss in
detail at a future date, address areas of significant medical need
and, with a broad worldwide IP strategy, could substantially raise
the value of our underlying platform technology, particularly if
these are out-licensed. We continue to have a very active business
development program with the goal of securing strategic
partnerships for our technologies. Another example is our effort to
obtain government and military support. Earlier this year, the
Defense Advanced Research Projects Agency (DARPA) released a broad
agency announcement requesting formal proposals to develop a blood
purification system that could remove cytokines, toxins, pathogens
and cells from blood to treat patients with sepsis. Their goal is
to provide the most advanced medical treatment for sepsis to
improve the survival of our wounded warriors. We were gratified
that agencies like DARPA, who fund the development of leading-edge
technologies, are recognizing the potential of blood purification
to treat sepsis, and are putting millions of dollars towards
developing these therapies. More importantly, we felt that we were
in a unique position to address many of the requirements of this
project. At the end of March, we submitted our technology, along
with an ambitious development program, as a key component of a
broader multi-institutional proposal. We expect to hear
definitively about our application soon.
Hopefully this letter has given you some insight into the
activity of the company. We are certainly not standing still, but
are instead driving forward to create our future. As always, I
appreciate your faith in the company, its management and your
ongoing support. I look forward to the next shareholder update.
Sincerely,
Phillip
Phillip P. Chan, MD, PhD Chief Executive Officer CytoSorbents
Corporation
About CytoSorbents and CytoSorb™
CytoSorbents Corporation is a development stage, critical care
focused therapeutic device company using blood purification to
treat life threatening illnesses such as severe sepsis, the end
result of "overwhelming infection," with a novel blood purification
device called CytoSorb™. Severe sepsis afflicts more than 1 million
people in the United States (U.S.), 1.5 million people in the
European Union (E.U.), and an estimated 18 million people worldwide
each year, killing one in every three patients despite the best
medical treatment. In the U.S., more die from severe sepsis than
from either heart attacks, strokes or any single form of cancer.
Severe sepsis is typically triggered by bacterial infections like
pneumonia, or viral infections like influenza. However, it is the
body's abnormal immune response to the trigger that leads to severe
inflammation and the unregulated, massive production of cytokines,
often called "cytokine storm," that then causes multi-organ failure
and often death. CytoSorb™ is a cartridge containing highly porous
polymer beads that are designed to filter cytokines and treat
potentially fatal cytokine storm. As blood is pumped repeatedly
through the CytoSorb™ cartridge using standard dialysis equipment,
the beads bind and remove cytokines and other toxins from blood.
The treated blood is then returned to the patient. The Company is
finalizing its European Sepsis Trial -- a multi-center, randomized,
controlled clinical trial using CytoSorb™ and has achieved its
targeted enrollment with 100 patients with severe sepsis or septic
shock in the setting of respiratory failure. Importantly, cytokine
reduction via CytoSorb™ has broad applicability to a number of
other critical care diseases where cytokine storm plays a
detrimental role, including burn and smoke inhalation injury,
trauma, acute respiratory distress syndrome, advanced influenza,
acute pancreatitis and others. In March 2011, the Company
successfully achieved CE Mark approval to market its CytoSorb™
device as an extracorporeal cytokine filter to be used in clinical
situations where excessive cytokine levels exist. CytoSorbents has
also achieved ISO 13485:2003 Full Quality Systems certification, an
internationally recognized quality standard designed to ensure that
medical device manufacturers have the necessary comprehensive
management systems in place to safely design, develop, manufacture
and distribute medical devices in the E.U. Assuming availability of
adequate and timely funding, and continued positive results from
our clinical studies, the Company intends to begin commercializing
its product in Europe and then seek to commence clinical trials in
the U.S. for approval. CytoSorb™ is one of a number of different
resins the Company has designed for various medical applications,
including improved dialysis, the potential treatment of
inflammatory and autoimmune disorders, rhabdomyolysis in trauma,
removal of chemotherapy drugs during treatment of cancer with high
dose regional chemotherapy, drug detoxification, and others.
Additional information is available for download on the Company's
website: www.cytosorbents.com
Forward-Looking Statements This press
release includes forward-looking statements intended to qualify for
the safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements in this press release are not promises or guarantees and
are subject to risks and uncertainties that could cause our actual
results to differ materially from those anticipated. These
statements are based on management's current expectations and
assumptions and are naturally subject to uncertainty and changes in
circumstances. We caution you not to place undue reliance upon any
such forward-looking statements. Actual results may differ
materially from those expressed or implied by the statements
herein. CytoSorbents Corporation and CytoSorbents, Inc believe that
its primary risk factors include, but are not limited to: obtaining
government approvals including required FDA and additional CE Mark
approvals; ability to successfully develop commercial operations;
dependence on key personnel; acceptance of the Company's medical
devices in the marketplace; the outcome of pending and potential
litigation; compliance with governmental regulations; reliance on
research and testing facilities of various universities and
institutions; the ability to obtain adequate and timely financing
in the future when needed; product liability risks; limited
manufacturing experience; limited marketing, sales and distribution
experience; market acceptance of the Company's products;
competition; unexpected changes in technologies and technological
advances; and other factors detailed in the Company's Form 10-K
filed with the SEC on March 31, 2011, which is available at
http://www.sec.gov.
Contact: CytoSorbents Corporation David Lamadrid Chief
Financial Officer (732) 329-8885 ext. 816
DavidL@cytosorbents.com
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