Item 1. Business.
Overview
We are a leader in
critical care immunotherapy, investigating and commercializing our CytoSorb blood purification technology to reduce deadly uncontrolled
inflammation in hospitalized patients around the world, with the goal of preventing or treating multiple organ failure in life-threatening
illnesses and cardiac surgery. Organ failure is the cause of nearly half of all deaths in the intensive care unit (“ICU”),
with little to improve clinical outcome. CytoSorb, our flagship product, is approved in the European Union (“EU”) as
a safe and effective extracorporeal cytokine filter and is designed to reduce the “cytokine storm” that could otherwise
cause massive inflammation, organ failure and death in common critical illnesses such as sepsis, burn injury, trauma, lung injury,
and pancreatitis. These are conditions where the mortality is extremely high, yet no effective treatments exist. In May 2018, we
received a label expansion for CytoSorb covering use of the device for the removal of bilirubin and myoglobin in the treatment
of liver disease and trauma, respectively. In January 2020, we received a further label expansion for CytoSorb covering the use
of the device for the removal of the anti-platelet agent, ticagrelor, in patients undergoing surgery requiring cardiopulmonary
bypass. CytoSorb is used during and after cardiac surgery to remove inflammatory mediators, such as cytokines, activated compliment
and free hemoglobin that can lead to post-operative complications, such as acute kidney injury, lung injury, shock, and stroke.
We believe CytoSorb has the potential to be used in many other inflammatory conditions, including the treatment of autoimmune disease
flares, cytokine release syndrome in cancer immunotherapy, and other applications in cancer, such as cancer cachexia. CytoSorb
has been used globally in more than 80,000 human treatments to date in critical illnesses and in cardiac surgery. Our purification
technologies are based on biocompatible, highly porous polymer beads that can actively remove toxic substances from blood and other
bodily fluids by pore capture and surface adsorption. . The technology is protected by 21 issued U.S. patents and multiple international
patents, with applications pending both in the U.S. and internationally. We have numerous product candidates under development
based upon this unique blood purification technology, including HemoDefend, ContrastSorb, DrugSorb, and others.
In March 2011, CytoSorb
was “CE Marked” in the EU as an extracorporeal cytokine filter indicated for use in clinical situations where cytokines
are elevated, allowing for commercial marketing. The CE Mark demonstrates that a conformity assessment has been carried out and
the product complies with the Medical Devices Directive. The goal of CytoSorb is to prevent or treat organ failure by reducing
cytokine storm and the potentially deadly systemic inflammatory response syndrome (“SIRS”) in diseases such as sepsis,
trauma, burn injury, acute respiratory distress syndrome, pancreatitis, liver failure, and many others. Organ failure is the leading
cause of death in the ICU, and remains a major unmet medical need, with little more than supportive care therapy (e.g., mechanical
ventilation, dialysis, vasopressors, fluid support, etc.) as treatment options. By potentially preventing or treating organ failure,
CytoSorb may improve clinical outcome, including survival, while reducing the need for costly ICU treatment, thereby potentially
saving significant healthcare costs.
Our CE Mark enables
CytoSorb to be sold throughout the European Union and member states of the European Economic Area. In addition, many countries
outside the EU accept the CE Mark for medical devices, but may also require registration with or without additional clinical studies.
The broad indication for which CytoSorb is CE marked allows it to be used “on-label” in diseases where cytokines are
elevated including, but not limited to, critical illnesses such as those mentioned above, autoimmune disease flares, cancer cachexia,
and many other conditions where cytokine-induced inflammation plays a detrimental role.
Cytokines are small
proteins that normally stimulate and regulate the immune response. However, in certain diseases, particularly life-threatening
conditions commonly seen in the ICU, such as sepsis and infection, trauma, acute respiratory distress syndrome (“ARDS”),
severe burn injury, liver failure, and acute pancreatitis, cytokines are often produced in vast excess – a condition often
called cytokine storm. Left unchecked, this cytokine storm can lead to a severe maladaptive SIRS that can then cause cell death,
multiple organ dysfunction syndrome, and multiple organ failure. Failure of vital organs such as the heart, lungs, and kidneys,
accounts for nearly half of all deaths in the ICU, despite the wide availability of supportive care therapies, or “life support”,
such as dialysis, mechanical ventilation, extracorporeal membrane oxygenation, and vasopressors. By replacing the function of failed
organs, these supportive care therapies can initially help to keep patients alive, but do not help patients recover faster, and
in many cases can increase the risk of dangerous complications. Unlike these supportive care therapies, the goal of the CytoSorb
cytokine filter is to proactively prevent or treat organ failure by reducing cytokine storm and reducing the maladaptive SIRS response.
In doing so, CytoSorb targets the reduction in the severity of patient illness and the need for intensive care, while potentially
improving clinical outcome and saving healthcare costs.
As part of the CE Mark
approval process, we completed our randomized, controlled, European Sepsis Trial amongst 14 trial sites in Germany in 2011, with
enrollment of 100 patients with sepsis and respiratory failure. The trial established that CytoSorb was sufficiently safe in this
critically-ill population, and that it was able to broadly reduce key cytokines in the blood of these patients. We plan to conduct
larger, prospective studies in septic patients in the future to confirm the European Sepsis Trial findings.
In addition to CE Marking,
we 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 EU. We manufacture CytoSorb at our manufacturing facilities in New Jersey for
commercial sales abroad and for additional clinical studies, the expansion of which we officially completed in June 2018. Upon
expanding our facility we quadrupled our manufacturing capacity and completed an audit upgrade from an ISO 13485:2003 certification
to an ISO 13485:2016 certification.
In late June 2012,
following the establishment of our European subsidiary, CytoSorbents Europe GmbH, a wholly-owned operating subsidiary of CytoSorbents
Corporation, we began the commercial launch of CytoSorb in Germany with the hiring of Dr. Christian Steiner as Vice President of
Sales and Marketing and three additional sales representatives who joined us and completed their sales training during the third
quarter of 2012. The fourth quarter of 2012 represented the first quarter of direct sales with the full sales team in place. During
this period, we expanded our direct sales efforts to include both Austria and Switzerland.
Fiscal year 2013 represented
the first full year of CytoSorb commercialization. We focused our direct sales efforts in Germany, Austria and Switzerland with
four sales representatives. The focus of the team was to encourage acceptance and usage by key opinion leaders (“KOLs”)
throughout these countries. We believe our relationships with KOLs are essential to drive adoption and recurrent usage of CytoSorb,
facilitate purchases by hospital administration, arrange reimbursement, and generate data for papers and presentations. As of the
end of 2019, we had hundreds of KOLs in our commercialized territories worldwide in critical care, cardiac surgery, and blood purification,
who were either using CytoSorb or supporting its use in clinical practice or clinical trials.
In March 2016, we established
CytoSorbents Switzerland GmbH, a wholly-owned subsidiary of CytoSorbents Europe GmbH, to conduct marketing and direct sales in
Switzerland. This subsidiary began operations during the second quarter of 2016. In 2017, we further expanded our direct sales
efforts into Belgium and Luxembourg.
In May 2018, the approved
uses of CytoSorb in the E.U. were expanded to include the removal of bilirubin in liver disease, and the removal of myoglobin in
trauma.
On March 5, 2019, the
Company announced the expansion of direct sales of CytoSorb for all applications to Poland and the Netherlands, and critical care
applications to Sweden, Denmark and Norway. As part of this effort, the Company established CytoSorbents Poland Sp. z.o.o., a wholly-owned
subsidiary of CytoSorbents Europe GmbH.
In the third quarter
of 2019, we established CytoSorbents UK Limited, a wholly-owned subsidiary of CytoSorbents Medical, Inc., to manage our clinical
trial activities in the United Kingdom.
In August 2019, we
announced that CytoSorb had received renewal of its European Union CE Mark through May 2024 and ISO 13485:2016 Full Quality Assurance
System certification of its manufacturing facility through September 2022.
In addition, we now
have more than 50 investigator-initiated studies and additional Company sponsored trials that are currently planned, enrolling
or completed in Europe and elsewhere outside of the United States. We believe that these trials, which are conducted and supported
by what we believe to be well-known university hospitals and KOLs, are the equivalent of Phase 3 and Phase 4 clinical studies.
We believe they will provide invaluable information regarding the success of the device in the treatment of sepsis, cardio-pulmonary
bypass surgery, trauma, and many other indications, and if successful, may be integral in helping to drive additional usage and
adoption of CytoSorb.
In January 2020, the
Company received CE-Mark label expansion approving the use of CytoSorb to remove the anti-platelet agent, ticagrelor, in cardiac
patients during surgery requiring cardiopulmonary bypass.
As of February 28,
2020, our European commercialization team included 79 people.
We have complemented
our direct sales efforts with sales to distributors and/or strategic corporate partners. For more information regarding our distributors
and strategic partners, refer to the Sales and Marketing section in item 1 of this report.
We continuously evaluate
other potential distributor and strategic partner networks in other countries where we are approved to market the device.
Overall, we have established
either direct sales or distribution (via distributors or strategic partners) of CytoSorb in 58 countries worldwide. Registration
of CytoSorb is typically required in each of these countries prior to active commercialization. With CE Mark approval, this can
be typically achieved within several months in EU countries. Outside of the EU, the process is more variable and can take several
months to more than a year due to different requirements for documentation and clinical data. Variability in the timing of registration
affects the initiation of active commercialization in these countries, which affects the timing of expected CytoSorb sales. We
actively support all of our distributors and strategic partners in the product registration process. We cannot generally predict
the timing of these registrations, and there can be no guarantee that we will ultimately achieve registration in countries where
we have established distribution. For example, in August 2014 we announced exclusive distribution of CytoSorb in Taiwan with Hemoscien
Corporation. However, in March 2015, due to the complexity we encountered with Taiwanese product registration, we elected to terminate
our agreement with Hemoscien. Outside of the EU, CytoSorb has distribution in Turkey, India, Sri Lanka, Australia, New Zealand,
Russia, Serbia, Norway, Vietnam, Malaysia, Hong Kong, Chile, Panama, Costa Rica, Colombia, Brazil, Mexico, Iceland, Israel, UAE,
Iran, Saudi Arabia and other Middle Eastern countries, and South Korea. We cannot guarantee that we will generate meaningful sales
in the countries where we have established registration, due to other factors such as market adoption and reimbursement. For example,
in December 2019, we discontinued our distributor relationship with Dr. Reddy’s in South Africa. We continuously evaluate
other potential distributor and strategic partner networks in other countries that accept CE Mark approval.
In February 2020, we
announced an agreement with China Medical System Holdings Limited (“CMS”), a well-established, innovation-driven specialty
pharma with a focus on sales and marketing in China and Asia, to bring CytoSorb to mainland China to treat critically-ill patients
with COVID-19 (fka Wuhan or 2019-nCoV) coronavirus infection. Under the terms of the agreement, CytoSorbents and CMS will partner
together to earn regulatory clearance to import CytoSorb into China under the “fast-track” review process established
by the National Medical Products Administration of the People’s Republic of China (NMPA) to respond to the 2019 novel coronavirus
(COVID-19) pandemic. CytoSorbents will donate initial CytoSorb devices and provide product, training, and support to CMS to introduce
CytoSorb initially into four hospitals in the Wuhan, China area. The therapy will be evaluated in severe COVID-19 coronavirus patients
with a systemic inflammatory response who are being treated with either continuous renal replacement therapy (CRRT) or extracorporeal
membrane oxygenation (ECMO). During the initial term of the agreement, CytoSorbents and CMS will explore the possibility for future
commercial collaboration in China. The use of CytoSorb for the treatment of patients with severe COVID-19 coronavirus infection
is considered exploratory in nature, and is currently not yet approved for commercial purposes in mainland China.
In addition to our
direct and distributor commercial channels, we have a number of strategic partners to market and distribute CytoSorb. These partners
include Biocon Ltd, Fresenius Medical Care AG, Aferetica s.r.l. and Terumo Cardiovascular Group. For detailed information regarding
these partnerships, see the section entitled “Commercial and Research Partners” in item 1 of this report.
The market focus for
CytoSorb is the prevention or treatment of organ failure in life-threatening conditions, including commonly seen illnesses in the
ICU such as infection and sepsis, trauma, burn injury, ARDS, and others. Severe sepsis and septic shock, a potentially life-threatening
systemic inflammatory response to a serious infection, accounts for approximately 10% to 20% of all ICU admissions, and is responsible
for an estimated one in every five deaths worldwide. Sepsis is one of the largest target markets for CytoSorb. Sepsis is a major
unmet medical need with no approved products in the U.S. or Europe to treat it. As with other critical care illnesses, multiple
organ failure is the primary cause of death in sepsis. When used with standard of care therapy, that includes antibiotics, the
goal of CytoSorb in sepsis is to reduce excessive levels of cytokines and other inflammatory toxins, to help reduce the SIRS response
and either prevent or treat organ failure.
In addition to the
sepsis indication, we intend to conduct or support additional clinical studies in sepsis, cardiac surgery, and other critical care
diseases where CytoSorb could be used, such as ARDS, trauma, severe burn injury, acute pancreatitis, and in other acute conditions
that may benefit by the reduction of cytokines in the bloodstream. Some examples include the prevention of post-operative complications
of cardiac surgery (cardiopulmonary bypass surgery) and damage to organs donated for transplant prior to organ harvest. We intend
to generate additional clinical data to expand the scope of clinical experience for marketing purposes, to increase the number
of treated patients, and to support potential future publications and regulatory submissions.
In 2014, we completed
a single arm, dose ranging trial in Germany amongst several clinical trial sites to evaluate the safety and efficacy of CytoSorb
when used 24 hours per day for seven days, each day with a new device and are conducting final statistical analysis of the data.
These additional dosing data were used to support the label expansion to increase treatment time from 6 hours, the initial approval,
to 24 hours of treatment. This study also provided additional treatment options for CytoSorb, helped to support the positive clinical
data from our first European Sepsis Trial, and helped to shape the trial protocol for a pivotal sepsis study.
In addition to the
dosing study, we plan to use data generated and published in the more than 50 investigator-initiated studies and trials sponsored
by us currently planned, enrolling or completed in Europe and abroad. Approximately 20 of these studies are currently enrolling.
These trials, which are funded and supported by well-known university hospitals and KOLs, are the equivalent of Phase 2 clinical
studies. They will provide invaluable information regarding the success of the device in the treatment of sepsis, cardio-pulmonary
bypass surgery, trauma, and many other indications, and if successful, will be integral in helping to drive additional usage and
adoption of CytoSorb.
In addition to sepsis
and other critical care applications, cardiac surgery is an important application for CytoSorb in the European market. There are
approximately one million cardiac surgery procedures performed annually in the U.S. and EU combined including, for example, coronary
artery bypass graft surgery, valve replacement surgery, heart and lung transplant, congenital heart defect repair, aortic reconstruction,
and left ventricular assist device (“LVAD”) implantation. Cardiac surgery can result in inflammation and the production
of high levels of inflammatory cytokines, as activation of complement, and cause hemolysis, leading to the release of toxic plasma
free hemoglobin. These can lead to post-operative complications such as respiratory failure, circulatory failure, and acute kidney
injury. CytoSorb has a unique competitive advantage as the only cytokine and free hemoglobin removal technology that can be used
during the operative procedure and can be easily installed in a bypass circuit in a heart-lung machine without the need for an
additional pump. Direct cytokine and hemoglobin removal with CytoSorb enables it to replace the existing market for leukoreduction
filters in cardiac surgery that attempt to indirectly reduce cytokines by capturing cytokine-producing leukocytes – an inefficient
and suboptimal approach.
The Company is currently
conducting the following clinical trials:
Country
|
|
Trial Name
|
Indication
|
United States
|
|
REFRESH 2-AKI
|
Post-Cardiac Surgery AKI
|
Germany
|
|
REMOVE
|
Infective Endocarditis
|
Germany
|
|
CYTORELEASE
|
Cytokine Release Syndrome in CAR-T Cell Treatment
|
United Kingdom
|
|
TISORB
|
Ticagrelor Removal During Cardiac Surgery
|
For further detailed
information regarding our clinical trial strategy, see the section entitled “Clinical Studies” of this Item 1 of this
Report.
Even though we have
obtained CE Mark approval for CytoSorb, no guarantee or assurance can be given that our CytoSorb product will work as intended
or that we will be able to obtain FDA approval to sell CytoSorb in the U.S. or approval in any other country or jurisdiction. Because
of the limited studies we have conducted, we are subject to substantial risk that our technology will have little or no effect
on the treatment of any indications that we have targeted.
We have been successful in obtaining technology development
contracts from agencies in the U.S. Department of Defense, including the Defense Advanced Research Projects Agency (“DARPA”),
the U.S. Army, the U.S. Air Force, as well as the National Institutes of Health. See the section entitled “Government Research
Grants” of this Item 1 of this Report for information regarding the specific grants.
Corporate History
We were originally
organized as a Delaware limited liability company in August 1997 as Advanced Renal Technologies, LLC. We changed our name to RenalTech
International, LLC in November 1998, and to MedaSorb Technologies, LLC in October 2003. In December 2005, MedaSorb Technologies,
LLC converted from a limited liability company to a corporation, called MedaSorb Technologies, Inc. CytoSorbents Corporation was
incorporated in Nevada on April 25, 2002 as Gilder Enterprises, Inc., and was originally engaged in the business of installing
and operating computer networks that provided high-speed access to the Internet. On June 30, 2006, we disposed of our original
business, and pursuant to an Agreement and Plan of Merger, acquired all of the stock of MedaSorb Technologies, Inc., in a merger,
and the business of MedaSorb Technologies, Inc. became our business. Following the merger, in July 2006, we changed our name to
MedaSorb Technologies Corporation. In November 2008, we changed the name of our operating subsidiary from MedaSorb Technologies,
Inc. to CytoSorbents, Inc. In May 2010, we finalized the name change of MedaSorb Technologies Corporation to CytoSorbents Corporation.
On October 28, 2014, we changed the name of our operating subsidiary from CytoSorbents, Inc. to CytoSorbents Medical, Inc.
On December 3, 2014,
we effected a twenty-five-for-one (25:1) reverse split of our common stock. As a result of this reverse stock split, shares of
our common stock outstanding were reduced by approximately 96%. Accordingly, all share, option and warrant information included
in this Annual Report has been retroactively adjusted to reflect the reduced number of shares resulting from this action. Immediately
after the reverse stock split, pursuant to an Agreement and Plan of Merger dated December 3, 2014, we changed our state of incorporation
from the State of Nevada to the State of Delaware, whereby we merged with and into our wholly-owned Delaware subsidiary. At the
effective time of the merger, (i) we merged with and into our Delaware subsidiary, (ii) our separate corporate existence in Nevada
ceased to exist, (iii) the Delaware subsidiary became the surviving corporation, (iv) the certificate of incorporation, as amended
and restated, and the bylaws of the Delaware subsidiary became our certificate of incorporation and bylaws, and (v) each share
of our common stock outstanding immediately prior to the effective time was converted into one fully-paid and non-assessable share
of our common stock as a Delaware corporation. The reverse stock split, the merger and the Agreement and Plan of Merger were approved
by our Board of Directors and stockholders representing a majority of our then-outstanding common stock. All references to “us”,
“we”, or the Company, on or after December 3, 2014, refer to CytoSorbents Corporation, a Delaware corporation.
Our executive offices
are located at 7 Deer Park Drive, Suite K, Monmouth Junction, New Jersey 08852, and our telephone number is (732) 329-8885. Our
website address is http://www.cytosorbents.com. We have included our website address as an inactive textual reference only.
We make available free of charge through our website our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current
Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as
soon as reasonably practicable after we electronically file such material, or furnish it to the SEC. We also similarly make available,
free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant
to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those
persons. We are not including the information contained at http://www.cytosorbents.com, or at any other website address,
as part of, or incorporating it by reference into, this Annual Report on Form 10-K.
We have been engaged
in research and development since our inception and have raised approximately $133 million from investors. These proceeds have
been used to fund the development of multiple product applications and to conduct clinical studies, to establish in-house manufacturing
capacity to meet commercial and clinical testing needs, expand our intellectual property through additional patents, and to develop
extensive proprietary know-how with regard to our products.
We have raised funds
through various means including convertible note offerings, equity transactions, and term loans. Our most significant financing
transactions are discussed below.
Shelf
Registration
On
July 26, 2018, the Company filed a registration statement on Form S-3 with the SEC (as amended, the “2018 Shelf”).
The 2018 Shelf, which was declared effective on August 7, 2018, enables the Company to offer and sell, in one or more offerings,
any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar
amount of $150 million.
Termination
of Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.
On May 31, 2019, we
delivered to Cantor Fitzgerald & Co. (“Cantor”) written notice of termination (the “Termination Notice”)
of the Controlled Equity Offering Sales Agreement, dated November 4, 2015, by and between us and Cantor, as amended by Amendment
No. 1 to Sales Agreement, dated July 26, 2018 (collectively, the “Sales Agreement”). In accordance with Section 13(b)
thereof, the Sales Agreement terminated on June 10, 2019, ten (10) days after the delivery of the Termination Notice. As provided
in the Sales Agreement, the Sales Agreement terminated without liability of any party to any other party, except that certain provisions
of the Sales Agreement identified therein shall remain in full force and effect notwithstanding the termination.
Under the Sales Agreement,
we sold 2,094,140 shares at an average selling price of $8.72 per share, generating net proceeds of approximately $17,718,000 from
November 4, 2015 through December 31, 2018. We made no sales under the Sales Agreement during the year ended December 31, 2019.
Open Market Sale Agreement with Jefferies
LLC and B. Riley FBR, Inc.
On July 9, 2019 we
entered into an Open Market Sale Agreement (the “New Sale Agreement”) with Jefferies LLC and B. Riley FBR, Inc. (each
an “Agent” and, together, the “Agents”), pursuant to which we may sell, from time to time, at our option,
up to an aggregate proceeds of $25,000,000 from shares of our common stock through the Agents, as the Company’s sales agents.
During the year ended December 31, 2019, we sold 191,244 shares of our common stock pursuant to the New Sale Agreement, at an average
selling price of $4.11 per share, generating net proceeds of approximately $762,000. During the period from January 1, 2020 through
March 2, 2020, we sold an additional 2,435,086 shares pursuant to the New Sale Agreement, at an average selling price of $5.64
per share, generating net proceeds of approximately $13,322,000. In the aggregate, the Company has sold 2,626,330 shares pursuant
to the New Sale Agreement, at an average selling price of $5.53 per share, generating net proceeds of approximately $14,083,000.
Research and Development
We have been engaged
in research and development since inception. Since 2012, we have been awarded an aggregate of approximately $20.0 million in grants,
contracts, and other non-dilutive funding from DARPA ($3.8M over 5 years), the U.S. Army ($100K Phase I SBIR; $50K Phase I option,
$803K Phase II SBIR, $443K Phase II enhancement), the U.S. Air Force $3.0M Rapid Innovation Fund, the Congressionally Directed
Medical Research Program Office, (“CDRMP”, $718K), the National Heart, Lung and Blood Institute and USSOCOM ($203K
Phase I SBIR; $1.5M Phase II SBIR; $3.0M Bridge SBIR), the Joint Program Executive Office – Chemical and Biological Defense,
(JPEO-CBD), ($150K Phase I and Phase I option, $1.0M Phase II), the U.S. Army Peritoneal dialysis/mesh packing for hyperkalemia
($150K Phase I SBIR, $1.0M Phase II), Universal Plasma ($150K Phase I and 1.0M Phase II), New Jersey Technology Business Tax Certificate
Program for research related expenses ($2.9M), and others to further develop our technologies for sepsis, trauma and burn injury,
and blood transfusions, respectively. Some payments are based on achieving certain technology milestones.
Technology, Products and Applications
For approximately the
past half-century, the field of blood purification has been focused on hemodialysis, a mature, well-accepted medical technique
primarily used to sustain the lives of patients with permanent or temporary loss of kidney function. It is widely understood by
the medical community that dialysis has inherent limitations in that its ability to remove toxic substances from blood drops precipitously
as the size of toxins increases. Our hemocompatible adsorbent technology helps to address this shortcoming by removing toxins and
toxic compounds largely untouched by dialysis technology.
Our polymer adsorbent
technology can remove drugs, bioactive lipids, inflammatory mediators such as cytokines, free hemoglobin, toxins, and immunoglobulin
from blood and physiologic fluids depending on the polymer construct. It is believed that the technology may have many applications
in the treatment of common, chronic and acute healthcare conditions including, but not limited to, the adjunctive treatment and/or
prevention of sepsis; the treatment of other critical care illnesses such as severe burn injury, trauma, acute respiratory distress
syndrome and pancreatitis; the prevention of post-operative complications of cardiopulmonary bypass surgery; the treatment of cancer
cachexia; the treatment of cytokine release syndrome in cancer immunotherapy, the prevention of damage to organs donated by brain-dead
donors prior to organ harvest; the prevention of transfusion reactions caused by contaminants in transfused blood products; the
prevention of contrast induced nephropathy, the treatment of drug overdose, and the treatment of chronic kidney failure. These
applications vary by cause and complexity as well as by severity but share a common characteristic, i.e., high concentrations of
inflammatory mediators and toxins in the circulating blood.
Our flagship product,
CytoSorb, animal-targeted VetResQ, and other product candidates under development, including CytoSorb XL, BetaSorb, ContrastSorb,
and DrugSorb, consist of a cartridge containing adsorbent, porous polymer beads, although the polymers used in these devices are
physically different. The cartridges incorporate industry standard connectors at either end of the device, which connect directly
to the extracorporeal circuit (bloodlines) in series with a dialyzer as a standalone device. The extra-corporeal circuit consists
of plastic blood tubing, our blood filtration cartridges containing adsorbent polymer beads, pressure monitoring gauges, and a
blood pump to maintain blood flow. The patient’s blood is accessed through a catheter inserted into his or her veins. The
catheter is connected to the extra-corporeal circuit and the blood pump draws blood from the patient, pumps it through the cartridge
and returns it back to the patient in a closed loop system. All of these devices are expected to be compatible with standard blood
pumps or hemodialysis machines used commonly in hospitals and will therefore not require hospitals to purchase additional expensive
equipment, and will require minimal training.
The polymer beads designed
for the HemoDefend platform are intended to be used in multiple configurations, including a point-of-transfusion in-line filter
between the blood bag and the patient, as well as a patent-pending “Beads in a Bag” configuration, where the beads
are placed directly into a blood storage bag.
Markets
We are a critical care
focused immunotherapy company. Immunotherapy is the ability to control the immune response to fight disease. Critical care medicine
includes the treatment of patients with serious or life-threatening conditions who require comprehensive care in the ICU, with
highly-skilled physicians and nurses and advanced technologies to support critical organ function to keep patients alive. Examples
of such conditions include severe sepsis and septic shock, severe burn injury, trauma, acute respiratory distress syndrome, acute
liver disease, and severe acute pancreatitis. In the U.S., an estimated $110 billion or 0.7% of the U.S. gross domestic product
is spent annually on critical care medicine. In larger hospitals, critical care treatment accounts for up to 20% of a hospital’s
overall budget and often results in financial losses for the hospital.
In many critical care
illnesses, the mortality is often higher than 30%. A major cause of death is multiple organ failure, where vital organs such as
the lungs, kidneys, heart and liver are damaged and no longer function properly. These patients are kept alive with supportive
care therapy, or “life support”, such as mechanical ventilation, dialysis and vasopressor treatment, that is designed
to keep the patient from dying while using careful patient management to tip the balance towards gradual recovery over time. Unfortunately,
most supportive care therapies only help to keep patients alive by supporting organ function but do not help reverse the underlying
causes of organ failure and do not help patients recover more quickly. Because of this, the treatment course is often poorly defined
and highly variable, leading to lengthy ICU stays, a higher risk of adverse outcomes from hospital acquired infections, medical
errors, and other factors, as well as exorbitant costs. There is an urgent need for more effective “active” therapies
that can help to reverse or prevent organ failure. Our main product, CytoSorb, is a unique cytokine filter designed to try to address
this void, by reducing “cytokine storm” and working to reduce the subsequent deadly inflammation that can lead to organ
failure and death. In May 2018, the approved indications for use of CytoSorb in the EU were expanded to include the removal of
bilirubin in liver disease, and the removal of myoglobin in trauma. In January 2020, the Company received a CE-Mark label expansion
for CytoSorb to remove the anti-platelet agent, ticagrelor, in patients undergoing surgery requiring cardiopulmonary bypass.
In addition to critical
care, CytoSorb is used in many applications related to cardiac surgery. Intra-operatively, CytoSorb is either used to help stabilize
patients with serious conditions such as infective endocarditis, or to prevent post-operative complications such as acute kidney
injury, vasoplegia, respiratory failure, infection, and others. Post-operatively, CytoSorb is used in the intensive care unit to
treat the post-operative systemic inflammatory response syndrome (post-op SIRS), sepsis, and other complications.
Together the total
addressable market for these numerous critical care and cardiac surgery applications with CytoSorb is estimated to be in excess
of $20 billion worldwide.
Sepsis
Sepsis is characterized
by a systemic inflammatory response triggered by a severe infection. It is commonly seen in the ICU, accounting for approximately
10% to 20% of all ICU admissions. However, there are currently no approved products that are available to treat sepsis in the U.S.
or EU. A 2020 study published in The Lancet estimated that there were 49 million new cases of sepsis globally, killing 11 million
people. The researchers estimate that 1 in every 5 deaths worldwide is due to sepsis. , Data released by the Healthcare Cost and
Utilization Project (H-CUP) identified approximately 1.6 million cases of sepsis each year in the U.S. According to the CDC, the
incidence of serious infection and sepsis has doubled in the U.S. in the past 10 years. The main driver of sepsis incidence is
the aging demographic, specifically patients who are older than age 65 who are more prone to infection and now account for two-thirds
of patients hospitalized for sepsis and the majority of sepsis deaths. Other factors contributing to the increase in sepsis incidence
include the spread of antibiotic resistant bacteria like methicillin-resistant Staphylococcus aureus (“MRSA”), an increase
in co-morbid conditions like HIV, cancer, obesity, and diabetes that increases the risk of infection, an increasing use of implantable
devices like artificial hips and knees that are prone to colonization by bacteria, and the appearance of new highly virulent or
contagious strains of common pathogens such as H3N2 or H1N1 influenza, COVID-19 coronavirus, and others.
There are generally
three categories of sepsis, including mild to moderate sepsis, severe sepsis and septic shock. Mild to moderate sepsis typically
occurs with an infection that is responsive to antibiotics or antiviral medication. An example is a patient with self-limiting
influenza or a treatable community acquired pneumonia. Mortality is generally very low. Severe sepsis is sepsis with evidence of
organ dysfunction. An example is a patient who develops respiratory failure due to a severe pneumonia and requires mechanical ventilation
in the ICU. Severe sepsis has a mortality rate of approximately 20% to 25% despite the use of antibiotics and the highest level
of available care. Septic shock, or severe sepsis with low blood pressure that is not responsive to fluid resuscitation, is the
most serious form of sepsis with an expected mortality in excess of 40% to 50%, and up to 80-100% if it is refractory to vasopressors
and other therapies.
In sepsis, there are
two major problems: the infection and the body’s immune response to the infection. Antibiotics are the main therapy used
to treat the triggering infection, and although antibiotic resistance is growing, the infection is often eventually controlled.
However, it is the body’s immune response to this infection that frequently leads to the most devastating damage. In recognition
of this, in 2016 the 3rd International Consensus Definition Task Force re-defined sepsis as “life-threatening
organ dysfunction due to a dysregulated host response to infection.” The body’s immune system normally produces large
amounts of inflammatory mediators called cytokines to help stimulate and regulate the immune response during an infection. In severe
infection, however, many people suffer from a massive, unregulated overproduction of cytokines, often termed “cytokine storm”
that can kill cells and damage organs, leading to multiple organ dysfunction syndrome and multiple organ failure, and in many cases
death. Until recently, there have been no available therapies in the U.S. or EU that can control the aberrant immune response and
cytokine storm. Our CytoSorb device is a first-in-class, clinically-proven broad-spectrum extracorporeal cytokine filter currently
approved for sale in the E.U. The goal of CytoSorb is to prevent or treat organ failure by reducing cytokine storm and controlling
a “run-away” immune response, while antibiotics work to control the actual infection. CytoSorb has been evaluated in
the randomized, controlled European Sepsis Trial in 100 patients in Germany with predominantly septic shock and acute respiratory
distress syndrome or acute lung injury. The therapy was safe in more than 300 human treatments and generally well-tolerated. CytoSorb
demonstrated the ability to reduce a broad range of cytokines from the blood of critically-ill patients. In a post-hoc analysis,
this was associated with improvements in clinical outcome in two high-risk patient populations – those with very high cytokine
levels and patients 65 years of age and older. We have completed a follow-up dosing study at several clinical trial sites in Germany,
supporting the safety of continuous treatment, exchanging a new device daily for up to 7 days.
The only treatment
that had been approved to treat sepsis in the U.S. or EU was Xigris from Eli Lilly. Because of concerns of cost, limited efficacy,
and potentially dangerous side effects including the increased risk of fatal bleeding events such as intracranial bleeding for
those at risk, and also because of problems with reimbursement, worldwide sales of Xigris decreased from $160M in 2009 to $104M
in 2010. In October 2011, following its PROWESS SHOCK trial that demonstrated no benefit in mortality in septic shock patients,
Lilly voluntarily withdrew Xigris from all markets worldwide, and is no longer available as a treatment.
Development of many
experimental therapies has been discontinued, including Eritoran from Eisai, CytoFab from BTG/Astra Zeneca, Talactoferrin from
Agennix, tranexemic acid from Leading Biosciences, and others.
For more information
regarding our competitor’s clinical trials, see the section entitled “Competition” in Item 1 of this report.
Severe sepsis and septic
shock patients are among the most expensive patients to treat in a hospital. Because of this, we believe that cost savings to hospitals
and/or clinical efficacy, rather than the cost of treatment itself, will be the determining factor in the adoption of CytoSorb
in the treatment of sepsis. CytoSorb is approved in the EU and is being sold directly in Germany, Austria, Switzerland, Belgium,
Luxembourg, Poland, Norway, Denmark, Sweden, and the Netherlands with our own direct sales force. In December 2016, we announced
the achievement of a permanent, dedicated reimbursement procedure code for CytoSorb therapy in Germany, providing for specific
and enhanced reimbursement in the largest medical device market in Europe. We have established strategic partnerships with Fresenius
Medical Care, the world’s largest dialysis company, for exclusive distribution of CytoSorb for critical care applications
in France, Finland, the Czech Republic, Mexico, and Korea, and Terumo Cardiovascular, the largest cardiac surgery disposables company,
for exclusive distribution of the CytoSorb Cardiopulmonary Bypass Kit in France, Denmark, Sweden, Norway, Finland, and Iceland.
We are also partnered with Biocon Ltd, India’s largest biopharmaceutical company, for exclusive distribution of CytoSorb
in India, Sri Lanka, Malaysia, and other select emerging markets. We have ongoing discussions with potential corporate partners
and independent distributors to market CytoSorb in other select EU countries and in other countries outside the EU that accept
CE Mark approval. We have established direct sales or distribution of CytoSorb in 58 countries worldwide.
We estimate that the
market potential in Europe for our products is larger than that in the U.S. For example, in the U.S. and Europe, there are an estimated
1.6 million cases of sepsis, while the European Sepsis Alliance estimates 3.4 million individuals in Europe become septic each
year. In Germany alone, according to the Center of Sepsis Control and Care, there are approximately 175,000 cases of severe sepsis
each year. Germany is the largest medical device market in Europe and the third largest in the world.
Sepsis patients are
treated in the ICU for 12 to 18 days on average and for a total of 20 to 25 days in the hospital. A typical severe sepsis or septic
shock patient in the U.S. costs approximately $45,000 to $60,000 to treat without using CytoSorb. CytoSorb therapy for sepsis typically
costs in the range of $1,000 to $5,000, depending on the number of treatments. The goal of therapy is to not only improve clinical
outcomes, but to also reduce the severity of illness and reduce the need for costly ICU care (estimated at approximately $4,300
per day in the ICU in the U.S.). The cost of CytoSorb therapy represents a fraction of what is currently spent on the treatment
of patients with sepsis and would be cost-effective if it decreased ICU stay by one to two days. Based upon this price point, the
total addressable market for CytoSorb for the treatment of sepsis in the U.S. and EU is approximately $6 billion to $8 billion.
Cardiac Surgery
There are approximately
500,000 cardiopulmonary bypass and cardiac surgery procedures performed annually in the U.S., 500,000 in the EU, and approximately
1.5 million procedures worldwide. These include relatively common procedures including coronary artery bypass graft surgery, valve
replacement surgery, heart and lung transplant, aortic reconstruction, congenital heart defect repair, and LVAD for the treatment
of heart failure. Cardiac surgery can result in inflammation and the production of high levels of inflammatory cytokines, activation
of complement, as well as hemolysis, causing the release of free hemoglobin. These can lead to post-operative complications including
infection, pulmonary, renal, and neurological dysfunction. Complications lead to longer ICU recovery times and hospital stays,
increased morbidity and mortality, and higher costs. An average coronary artery bypass graft procedure already costs approximately
$36,000 in the U.S. without complications. According to the National Foundation for Transplants, a heart and lung transplant and
first year expenses costs $1.2 million in the U.S. Valve replacement surgery of infective endocarditis is poorly reimbursed and
costs $150,000-$250,000 in the U.S. The use of CytoSorb to reduce cytokines and other inflammatory mediators during and after the
surgical procedure may prevent or mitigate these post-operative complications. During the procedure, the CytoSorb filter can be
incorporated in a bypass circuit in the heart-lung machine without the need for a separate pump, a unique competitive advantage
over other technologies. After the surgery, CytoSorb can be used similarly to dialysis on patients that develop a severe post-operative
inflammatory response. Modified ultrafiltration is sometimes used after termination of cardiopulmonary bypass in cardiac surgery
to remove excess fluid and inflammatory substances, but has had mixed benefit. The peri-procedural total addressable market for
CytoSorb in the U.S. and EU in cardiothoracic surgery procedures is estimated to be $500 million to $1 billion.
Acute Respiratory Distress Syndrome
Acute lung injury (“ALI”)
and ARDS are two of the most serious conditions on the continuum of respiratory failure when both lungs are compromised by inflammation
and fluid infiltration, severely compromising the lung’s ability to both oxygenate the blood and rid the blood of carbon
dioxide produced by the body. There are an estimated 165,000 cases of acute respiratory distress syndrome in the U.S. each year,
with more cases in the EU. Patients with ALI and ARDS typically require mechanical ventilation, and sometimes extracorporeal membrane
oxygenation therapy, to help achieve adequate oxygenation of the blood. Patients on mechanical ventilation are at high risk of
ongoing ventilator-induced lung injury, oxygen toxicity, barotrauma, ventilator-acquired pneumonias, and other hospital acquired
infections, and outcome is significantly dependent on the presence of other organ dysfunction as well as co-morbid conditions such
as pre-existing lung disease (e.g., emphysema or chronic obstructive pulmonary disease) and age. Because of this, mortality has
been high (16-33%) even with modern medicine and ventilation techniques. ALI and ARDS can be precipitated by a number of conditions
including pneumonia and other infections, burn and smoke inhalation injury, aspiration, reperfusion injury and shock. Cytokine
injury plays a major role in the vascular compromise and cell-mediated damage to the lung through tight junction disruption of
respiratory endothelium, leading to capillary leak syndrome, and other factors. Reduction of cytokine levels may either prevent
or mitigate lung injury, enabling patients to wean from mechanical ventilation faster, potentially reducing numerous sequelae such
as infection, pneumothoraces, and respiratory muscle deconditioning, and allow faster ICU discharge, thereby potentially saving
costs. CytoSorb treatment of patients with either ALI or ARDS in the setting of sepsis was the subject of our European Sepsis Trial
where in a post-hoc analysis in patients with very high cytokine levels, we observed faster ventilator weaning in CytoSorb treated
patients that showed a statistical trend to benefit. Future, prospectively defined, larger studies are required to confirm these
findings. Although a number of therapies have been tried such as corticosteroids, nitric oxide, surfactant therapy, and others,
there are currently no approved treatments for ARDS. However, techniques to improve ventilation and reduce ongoing lung injury
are being used. For example, low tidal volume ventilation has been demonstrated to improve mortality (31.0% as compared to 39.8%
control) in this patient population in the ARDSNet Trial. Prone positioning, or placing a patient chest-side down, in severe ARDS
patients in order to redistribute gravity-dependent pulmonary edema and allow ventilation of collapsed or atelectatic alveoli,
is also used, following studies that suggest benefit including the PROSEVA trial (16% vs 32.8% in the control). However, even with
these interventions, we believe mortality is still unacceptably high. The total addressable market for CytoSorb to treat ARDS and
ALI in the EU is estimated to be between $500 million to $1.25 billion, and between $1 billion to $2 billion in the U.S .and EU.
Severe Burn Injury
In the U.S., there
are approximately 2.4 million burn injuries per year, with 650,000 treated by medical professionals and approximately 75,000 requiring
hospitalization. Aggressive modern management of burn injury, including debridement, skin grafts, anti-microbial dressings and
mechanical ventilation for smoke and chemical inhalation injury has led to significant improvements in survival of burn injury
to approximately 95% on average in leading burns centers. However, there remains a need for better therapies to reduce the mortality
in those patients with large burns and inhalation injury as well as to reduce complications of burn injury and hospital length
of stay for all patients. According to National Burn Repository Data, the average hospital stay for burn patients is directly correlated
with the percent total body surface area (“TBSA”) burned. Every 1% increase of TBSA burned equates to approximately
1 additional day in the hospital. A single patient with more than 30% TBSA burned who survives, is hospitalized for an average
of 30 days and costs approximately $200,000 to treat. Major causes of death following severe burn and smoke inhalation injury are
multiple organ failure (hemodynamic shock, respiratory failure, acute renal failure) and sepsis, particularly in patients with
greater than 30% TBSA burns. Specifically, burns and inhalation injury lead to severe systemic and localized lung inflammation,
loss of fluid, and cytokine overproduction. This “cytokine storm” causes numerous problems, including: hypovolemic
shock and inadequate oxygen and blood flow to critical organs, acute respiratory distress syndrome preventing adequate oxygenation
of blood, capillary leakage resulting in tissue edema and intravascular depletion, hypermetabolism leading to massive protein degradation
and catabolism and yielding increased risk of infection, impaired healing, severe weakness and delayed recovery, immune dysfunction
causing a higher risk of secondary infections (wound infections, pneumonia) and sepsis, and direct apoptosis and cell-mediated
killing of cells, leading to organ damage. Up to a third of severe hospitalized burn patients develop multiple organ failure and
sepsis that can often lead to complicated, extended hospital courses, or death. Broad reduction of cytokine storm has not been
previously feasible and represents a novel approach to limiting or reversing organ failure, potentially enabling more rapid mechanical
ventilation weaning, prevention of shock, reversal of the hypermetabolic state encouraging faster healing and patient recovery,
reducing hospital costs, and potentially improving survival. The total addressable market in the EU for CytoSorb to address burn
and smoke inhalation injury is estimated at $150 million to $350 million and $300 million to $600 million in the U.S. and EU.
Trauma
According to the National
Center for Health Statistics, in the U.S., there are more than 31 million visits to hospital emergency rooms, with 1.9 million
hospitalizations, and 167,000 deaths every year due to injury. The leading causes of injury are trauma from motor vehicle accidents,
being struck by an object or other person, and falls. Trauma is a well-known trigger of the immune response and a surge of cytokine
production or cytokine storm. In trauma, cytokine storm contributes to a systemic inflammatory response syndrome and a cascade
of events that cause cell death, organ damage, organ failure and often death. Cytokine storm exacerbates physical trauma in many
ways. For instance, trauma can cause hypovolemic shock due to blood loss, while cytokine storm causes capillary leak and intravascular
volume loss, and triggers nitric oxide production that causes cardiac depression and peripheral dilation. Shock can lead to a lack
of oxygenated blood flow to vital organs, causing organ injury. Severe systemic inflammation and cytokine storm can lead to acute
lung injury and acute respiratory distress syndrome as is often seen in ischemia and reperfusion injury following severe bleeding
injuries. Penetrating wound injury from bullets, shrapnel and knives, can lead to infection and sepsis, another significant cause
of organ failure in trauma. Complicating matters is the breakdown of damaged skeletal muscle, or rhabdomyolysis, from blunt trauma
that can lead to a massive release of myoglobin into the blood that can crystallize in the kidneys, leading to acute kidney injury
and renal failure. Renal failure in trauma is associated with a significant increase in expected mortality. Cytokine and myoglobin
reduction by CytoSorb and related technologies may have benefit in trauma, potentially improving clinical outcome. In May 2018,
the approved indications for use of CytoSorb in the EU were expanded to include the removal of myoglobin in trauma. The total addressable
market for CytoSorb for the treatment of trauma is estimated to be $1.5 billion to $2.0 billion in the U.S. and the EU.
Acute Liver Disease
Chronic liver disease
afflicts an estimated 850 million people worldwide, or 11% of the world population, due to the prevalence of viral hepatitis infection,
alcohol abuse, and non-alcoholic steatohepatitis (NASH or “fatty liver”). Chronic liver disease is blamed for nearly
one million deaths a year, with another one million dying of hepatic cancer and acute hepatitis. In the U.S., liver disease is
the second leading cause of death from digestive disease, and the 10th leading cause of death amongst men. Many patients
with advanced chronic liver disease will develop an acute exacerbation or decompensation (“acute-on-chronic”) of their
disease, with associated inflammation and cytokine elevation, often requiring hospitalization. Also, many patients will present
with acute hepatitis triggered by viral infection or alcohol. A range of symptoms, depending on the severity of illness include
jaundice (high bilirubin), variceal hemorrhage, cognitive dysfunction and hepatic encephalopathy, ascites, coagulopathy, renal
failure, liver failure, and others. The extracorporeal blood purification of liver toxins such as bilirubin has been used to help
treat patients and is often called “liver dialysis”. Current liver dialysis therapies include MARS (Molecular Adsorbent
Recirculation System; Baxter), Prometheus (Fresenius), SPAD (single pass albumin dialysis), and others. However, none of these
therapies can remove cytokines, key elements in acute-on-chronic exacerbations and cases of acute hepatitis. CytoSorb represents
a potentially superior liver dialysis therapy, as it can remove both liver toxins such as bilirubin and bile salts, as well as
cytokines. In May 2018, the approved indications for use of CytoSorb in the E.U. were expanded to include the removal of bilirubin
in liver disease. The total addressable market for CytoSorb for the treatment of acute-on-chronic liver disease, acute hepatitis,
and acute liver failure is estimated in excess of $15 billion worldwide.
Severe Acute Pancreatitis
Acute pancreatitis
is the inflammation of the pancreas that results in the local release of digestive enzymes and chemicals that cause severe inflammation,
necrosis and hemorrhage of the pancreas and local tissues. Approximately 210,000 people in the U.S. are hospitalized each year
with acute pancreatitis with roughly 20% requiring ICU care. It is caused most frequently by a blockage of the pancreatic duct
or biliary duct with gallstones, cancer, hyperlipidemia, or from excessive alcohol use. Severe acute pancreatitis is characterized
by severe pain, inflammation, and edema in the abdominal cavity, as well as progressive systemic inflammation, generalized edema,
and multiple organ failure that is correlated with high levels of cytokines and digestive enzymes in the blood. Little can be done
to treat severe acute pancreatitis today, except for pancreatic duct decompression with endoscopic techniques, supportive care
therapy, pain control, enteral tube feeding, and fluid support. ICU stay is frequently measured in weeks and although overall ICU
mortality is approximately 10%, patients with multiple organ failure have a much higher risk of death. CytoSorb may potentially
benefit overall outcomes in episodes of acute pancreatitis by removing a diverse set of toxins from blood. The total addressable
market for CytoSorb for the treatment of severe acute pancreatitis in the U.S. and EU is estimated to be between $400 million to
$600 million.
Cancer Cachexia and Cancer Immunotherapy
Cancer cachexia is
a progressive wasting syndrome characterized by rapid weight loss, anorexia, and physical debilitation that significantly contributes
to death in the majority of cancer patients. Cancer cachexia is a systemic inflammatory condition, driven by excessive pro-inflammatory
cytokines and other factors, that cripples the patient’s physical and immunologic reserve to fight cancer. Despite afflicting
millions of patients worldwide each year, there are no effective approved treatments for cancer cachexia, with only symptomatic
treatments available. CytoSorb blood purification may stop or reverse cancer cachexia through broad reduction of cytokines and
other inflammatory mediators, when treated over time. For example, CytoSorb efficiently removes TNF-alpha (originally called “cachectin”
or “cachexin” when first isolated in cancer cachexia patients) and other major pro-inflammatory cytokines including
IL-1, IL-6, and gamma interferon that can cause cachexia. This broad immunotherapy approach may lead to improved clinical outcomes
while reducing patient suffering.
CytoSorb may also
represent a rescue or salvage therapy in activated CAR T-cell cancer immunotherapy, where cytokine release syndrome (i.e. CRS
or cytokine storm) is common, and can lead to organ failure and death in certain patients. In the CRS literature, researchers
have drawn parallels to both macrophage activating syndrome and secondary hemophagocytic lymphohistiocytosis (HLH) which
produce a similar clinical picture and cytokine storm profile. To date, CytoSorb has been used successfully in approximately
a dozen cases of secondary HLH. In March 2017, the pioneer of CAR T-cell immunotherapy, Dr. Carl June at University of
Pennsylvania, joined our scientific advisory board. In 2017, both Kymriah from University of Pennsylvania and Novartis, and
Yescarta from Kite Pharma and Gilead Sciences, received FDA approval for the treatment of certain hematologic cancers. In
early 2020, the first two case reports of CRS successfully treated with the adjunctive use of CytoSorb were published.
The total addressable
market for CytoSorb for the treatment of cancer cachexia and cancer in the U.S. and EU is estimated to be in excess of $4 billion.
Brain-Dead Organ Donors
There are in excess
of 6,000 brain dead organ donors each year in the United States; worldwide, the number of these organ donors is estimated to be
at least double the U.S. brain dead organ donor population. There is a severe shortage of donor organs. Currently, there are more
than 100,000 individuals on transplant waiting lists in the United States. Cytokine storm is common in these organ donors, resulting
in reduced viability of potential donor organs. The potential use of CytoSorb hemoperfusion to control cytokine storm in brain
dead organ donors could increase the number of viable organs harvested from the donor pool and improve the survival of transplanted
organs. A proof-of-concept pilot study using our technology in human brain dead donors has been published. In addition, CytoSorb
treatment in a porcine animal model of brain death demonstrated a reduction in cytokines as well as a preservation of cardiac function
compared to untreated controls.
Removal of Ticagrelor in Cardiac Patients During Surgery
Requiring Cardiopulmonary Bypass
Ticagrelor
(Astra Zeneca - Brilinta®, Brilique®) is one of the most commonly used anti-platelet drugs to reduce the risk of cardiac
death, heart attacks, and strokes in patients with either a history of a heart attack, or those actively undergoing percutaneous
coronary intervention (PCI) with stent placement for acute coronary syndrome or heart attack. However, in patients on the
drug requiring urgent or emergent coronary artery bypass graft (CABG) surgery or other cardiothoracic surgery procedure, the risk
of major fatal/life-threatening bleeding has been reported to be as high as 65%. CytoSorb rapidly removes ticagrelor
from blood. The use of CytoSorb during emergency cardiac surgery significantly reduced post-operative bleeding complications in
a landmark observational study and had projected cost savings of approximately $5,000 per patient, including the
cost of the device.
The
majority of ticagrelor usage is in patients with acute coronary syndrome, or a history of heart attack, who have a much higher
rate of cardiac surgery than the general population. Overall, the 1.1 million hospital admissions annually for acute coronary
syndrome in the U.S. drives approximately 400,000 CABG procedures each year. In the European Union, there are approximately 250,000
CABG procedures annually, with nearly 100,000 in Germany alone.
Blood Transfusions
The HemoDefend platform
is a development-stage technology designed to be a practical, low cost, and effective way to safeguard the quality and safety of
the blood supply. In the U.S. alone, 15 million packed red blood cell (“pRBC”) transfusions and another 15 million
transfusions of other blood products (e.g., platelet, plasma, and cryoprecipitate) are administered each year with an average of
10% of all U.S. hospital admissions requiring a blood transfusion. The sheer volume of transfusions, not just in the U.S., but
worldwide, complicates an already difficult task of maintaining a safe and reliable blood supply. Trauma, invasive operative procedures,
critical care illnesses, supportive care in cancer, military usage, and inherited blood disorders are just some of the drivers
of the use of transfused blood. In war, hemorrhage from trauma is a leading cause of preventable death, accounting for an estimated
30% to 40% of all fatalities. For example, in Operation Iraqi Freedom, due to a high rate of penetrating wound injuries, up to
8% of admissions required massive transfusions, defined as 10 units of blood or more in the first 24 hours. There is a clear need
for a stable and safe source of blood products. However, blood shortages are common and exacerbated by the finite lifespan of blood.
According to the Red Cross, pRBC units have a refrigerated life span of 42 days. However, many medical experts believe there is
an increased risk of infection and transfusion reactions once stored blood ages beyond two weeks. Transfusion-related acute lung
injury is the leading cause of non-hemolytic transfusion-related morbidity and mortality, with an incidence of 1 in 2,000-5,000
transfusions and a mortality rate of up to 10%. Fatal cases of transfusion-related acute lung injury have been most closely related
to anti-HLA or anti-granulocyte antibodies found in a donor’s transfused blood. Other early transfusion reactions such as
transfusion-associated dyspnea, fever and allergic reactions occur in 3% to 5% of all transfusions and can vary in severity depending
on the patient’s condition. These are caused by cytokines, bioactive lipids, free hemoglobin, toxins, foreign antigens, certain
drugs, and a number of other inflammatory mediators that accumulate in transfused blood products during storage. Leukoreduction
can remove the majority of white cells that can produce new cytokines but cannot eliminate those cytokines already in blood, and
cannot otherwise remove other causative agents such as free hemoglobin and antibodies. Automated washing of pRBC is effective but
is impractical due to the time, cost, and logistics of washing each unit of blood. The HemoDefend platform is a potentially superior
alternative to purify blood transfusion products to these methods. CytoSorbents has also received grant and contract funding to
develop the HemoDefend platform to enable both universal plasma and fresh whole blood transfusions through the reduction of anti-A
and anti-B blood group antibodies. Today, plasma and whole blood products must be carefully blood-type matched to prevent potentially
fatal hemolytic transfusion reactions in the recipient, caused by the accidental administration of mismatched blood products. The
reduction of anti-A and anti-B antibodies could potentially reduce or eliminate this risk, allowing for a broader range of available
donors and simplifying the transfusion process. The total addressable market for HemoDefend is more than $500 million for pRBCs
alone.
Radiocontrast Removal
ContrastSorb is a development-stage
blood purification technology that is being optimized for the removal of IV contrast from blood in order to prevent CIN. Contrast-induced
nephropathy is the acute loss of renal function within the first 48 hours following IV contrast administration. IV contrast is
widely administered to patients undergoing CT scans, to enhance the images and make it easier to identify anatomic structures.
IV contrast is also administered during vascular interventional radiology procedures and angiography of blood vessels in the brain,
heart, limbs, and other parts of the body to diagnose and treat atherosclerosis (narrowing of blood vessels due to cholesterol
deposits), vascular injury, aneurysms, etc. For example, an estimated 10 million coronary angiograms are performed worldwide each
year to diagnose and treat coronary artery disease by placing coronary stents, performing balloon angioplasty, or atherectomy (removal
of plaque in arteries). Overall, there are an estimated 80 million doses of IV contrast administered worldwide each year, split
between approximately 65 million contrast-enhanced CT scans, 10 million coronary angiograms, and 5 million conventional angiograms.
There are an estimated 30 million doses administered each year in the U.S. alone. The reported risk of CIN in patients undergoing
contrast enhanced CT scans has been reported to be 2% to 13%. For coronary intervention, the risk has been estimated to be as high
as 20% to 30% in high risk patients with pre-existing renal insufficiency, long-term diabetes, hypertension, congestive heart failure,
and older age. The use of low osmolar IV contrast, hydration of patients pre-procedure, orally administration of N-acetylcysteine,
and other agents to prevent CIN have demonstrated modest benefit in some clinical studies, but in many cases, the results across
studies have been equivocal and inconsistent. In high risk patients, the direct removal of IV contrast from the blood with ContrastSorb
to prevent CIN represents a potentially more effective alternative. The worldwide market opportunity for ContrastSorb in this high
risk group is approximately $1 billion to $2 billion.
Drug Removal
DrugSorb is a development-stage
blood purification technology that is capable of removing a wide variety of drugs and chemicals from blood, as a potential treatment
for drug overdose, drug toxicity, toxic chemical exposure, use in high-dose regional chemotherapy, and other applications. It has
demonstrated extremely high single pass removal efficiency of a number of different drugs that exceeds the extraction capability
of hemodialysis or other filtration technologies. It is similar in action to activated charcoal hemoperfusion cartridges that have
been available for many years, but has the advantage of having inherent biocompatibility and hemocompatibility without coatings,
and can be easily customized for specific agents.
Chronic Kidney Failure
The National Kidney
Foundation estimates that more than 20 million Americans have chronic kidney disease. Left untreated, chronic kidney disease can
ultimately lead to chronic kidney failure, which requires a kidney transplant or chronic dialysis (generally three times per week)
to sustain life. There are approximately 500,000 patients in the U.S. currently receiving chronic dialysis and more than 3.0 million
worldwide. Approximately 66% of patients with chronic kidney disease are treated with hemodialysis. One of the problems with standard
high-flux dialysis is the limited ability to remove certain mid-molecular weight toxins such as β 2 -microglobulin.
Over time, β 2 -microglobulin can accumulate and cause amyloidosis in joints and elsewhere in the musculoskeletal
system, leading to pain and disability. Our BetaSorb device has been designed to remove these mid-molecular weight toxins when
used in conjunction with standard dialysis. Standard dialysis care typically involves three sessions per week, averaging approximately
150 sessions per year.
Products
The polymer adsorbent
technology used in our products can remove middle molecular weight toxins, such as cytokines, from blood and physiologic fluids.
All of the potential applications described below (i.e., the adjunctive treatment and/or prevention of sepsis; the adjunctive treatment
and/or prevention of other critical care conditions such as acute respiratory distress syndrome, burn injury, trauma and pancreatitis;
the prevention of damage to organs donated by brain-dead donors prior to organ harvest; the prevention of post-operative complications
of cardiopulmonary bypass surgery; the prevention of kidney injury from IV contrast; and the treatment of chronic kidney failure)
share in common high concentrations of toxins in the circulating blood. However, because of the limited studies we have conducted
to date, we are subject to substantial risk that our technology will have little or no effect on the treatment of any of these
indications. In 2011, we completed our European Sepsis Trial of our CytoSorb device. The study was a randomized, open label, controlled
clinical study in 14 sites in Germany of 100 critically ill patients with predominantly septic shock and respiratory failure. The
trial successfully demonstrated the ability of CytoSorb to reduce levels of key cytokines from whole blood in treated patients,
and that treatment was safe in these critically-ill patients with multiple organ failure. We completed the CytoSorb technical file
review with our notified body and CytoSorb subsequently received EU regulatory approval under the CE Mark as an extracorporeal
cytokine filter indicated for use in any clinical situation where cytokines are elevated. Given sufficient and timely financial
resources, we intend to continue to commercialize in Europe and conduct additional clinical studies of our products. However, there
can be no assurance that we will ever obtain regulatory approval for any other device, or that the CytoSorb device will be able
to generate significant sales.
We manufacture the
CytoSorb device at our facility located in Monmouth Junction, New Jersey. We purchase our raw materials from multiple vendors located
primarily in the United States. We believe that our risk of an interruption in the supply of our raw materials is minimal due to
the use of multiple vendors and the availability of alternate vendors. We do not have contractual minimum finished goods inventory
requirements, however our practice is to maintain a minimum inventory level sufficient to provide a supply of products for the
next three months.
The CytoSorb Device (Critical Care)
APPLICATION: Adjunctive Therapy in the Treatment of Sepsis
Sepsis is a potentially
life-threatening disease defined as “life-threatening organ dysfunction caused by a dysregulated host response to an infection”.
Sepsis is mediated by high levels of inflammatory mediators such as cytokines, which are released into the bloodstream as part
of the body’s immune response to severe infection or injury. Excessive concentrations of these mediators cause severe inflammation
and damage healthy tissues, which can lead to organ dysfunction and failure. Organ failure is the leading cause of death in the
ICU. Sepsis is very expensive to treat and has a high mortality rate.
Potential Benefits:
To the extent our adsorbent blood purification technology is able to prevent or reduce the accumulation of cytokines, toxins, or
other inflammatory mediators in the circulating blood, we believe our products may be able to prevent or mitigate severe inflammation,
organ dysfunction and failure in sepsis patients. Therapeutic goals as an adjunctive therapy include improved clinical outcome,
reduced ICU and total hospitalization time, and reduced hospital costs.
Background and
Rationale: We believe that the effective treatment of sepsis is the most valuable potential application for our technology.
Severe sepsis (sepsis with organ dysfunction) and septic shock (severe sepsis with persistent hypotension despite fluid resuscitation)
carries mortality rates of between 20% and 80%. Death can occur within hours or days, depending on many variables, including cause,
severity, patient age and co-morbidities. There are approximately 1.6 million new cases of sepsis in the U.S. each year; and based
on a recent 2020 The Lancet study, the worldwide incidence is estimated to be 49 million cases annually, accounting for 1 in every
5 deaths globally. The incidence of sepsis is also rising due to:
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an aging population;
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increased incidence of antibiotic resistance;
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increase in co-morbid conditions like cancer and diabetes; and
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increased use of indwelling medical devices that are susceptible to infection.
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In the U.S. alone,
treatment of sepsis costs nearly $20 billion annually. According to the CDC, sepsis is a top ten cause of death in the U.S. The
incidence of sepsis is believed to be under-reported as the primary infection (i.e., pneumonia, pyelonephritis, etc.) is often
cited as the cause of death.
An effective treatment
for sepsis has been elusive. Pharmaceutical companies have been trying to develop drug therapies to treat the condition. With the
exception of Xigris® from Eli Lilly, no other products have been approved in either the U.S. or Europe for the treatment of
sepsis. In 2011, after completing a follow up study required by the FDA, it was subsequently determined that Xigris® did not
have a statistically significant mortality benefit, and Eli Lilly withdrew Xigris® from all markets worldwide.
Many medical professionals
believe that blood purification for the treatment of sepsis holds tremendous promise. Studies using dialysis and hemofiltration
technology have been encouraging, but have only had limited benefit to sepsis patients. The reason for this appears to be rooted
in a primary limitation of dialysis technology itself: the inability of standard dialysis to effectively and efficiently remove
significant quantities of larger toxins such as cytokines from circulating blood. CytoSorb has demonstrated the ability to safely
reduce key cytokines in the blood of septic patients with multiple organ failure in our European Sepsis Trial.
The ability of CytoSorb
to interact safely with blood (hemocompatibility) has been demonstrated through ISO 10993 testing, which includes testing for hemocompatibility,
biocompatibility, cytotoxicity, genotoxicity, acute sensitivity and complement activation. CytoSorb use has been considered safe
and well-tolerated in more than 80,000 human treatments to date.
CytoSorb has been designed
to achieve broad-spectrum removal of both pro- and anti-inflammatory cytokines, preventing or reducing the accumulation of high
concentrations in the bloodstream. It also removes a wide range of inflammatory mediators such as activated complement, bacterial
toxins, myoglobin, free hemoglobin, bilirubin, and many others. This approach is intended to modulate the immune response without
causing damage to the immune system. For this reason, researchers have referred to the approach reflected in our technology as
“immunomodulatory” therapy.
Projected Timeline:
In 2011, the CytoSorb filter received EU regulatory approval under the CE Mark as an extracorporeal cytokine filter to be used
in clinical situations where cytokines are elevated. Our manufacturing facility 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 EU. We are
currently manufacturing our CytoSorb device for commercial sale in the EU. We are currently selling CytoSorb in Germany, Austria,
Switzerland, Belgium, Luxembourg, Poland, Norway, Sweden, Denmark, and the Netherlands with a direct sales force. Based on its
CE Mark approval, CytoSorb can also be sold throughout all 27 countries of the EU, the United Kingdom and countries outside the
EU that will accept European regulatory approval with registration. Overall, we have established either direct sales or distribution
(via distributors or strategic partners) of CytoSorb in 58 countries worldwide. Registration of CytoSorb is typically required
in each of these countries prior to active commercialization. With CE Mark approval, this can be typically achieved within several
months in EU countries. Outside of the EU, the process is more variable and can take months to more than a year due to different
requirements for documentation and clinical data. Variability in the timing of registration affects the initiation of active commercialization
in these countries, which affects the timing of expected CytoSorb sales. We actively support all of our distributors and strategic
partners in the product registration process. Outside of the EU, CytoSorb is distributed in Turkey, India, Sri Lanka, Australia,
New Zealand, Russia, South Africa, Serbia, Norway, Vietnam, Malaysia, Hong Kong, Chile, Panama, Costa Rica, Colombia, Brazil, Mexico,
Iceland, Israel, UAE, Iran, Saudi Arabia and other Middle Eastern countries, Mexico and South Korea. We cannot generally predict
the timing of these registrations, and there can be no guarantee that we will ultimately achieve registration in countries where
we have established distribution. We also cannot guarantee that we will generate meaningful sales in the countries where we have
established registration, due to other factors such as market adoption and reimbursement. We are currently actively evaluating
other potential distributor and strategic partner networks in other major countries that accept CE Mark approval. With sufficient
resources and continued positive clinical data, assuming availability of adequate and timely funding, and continued positive results
from our clinical studies, we intend to continue our commercialization plans for our product worldwide as well as to pursue U.S.
clinical trials to seek FDA regulatory approval for CytoSorb in the U.S. by 2022.
APPLICATION: Adjunctive Therapy in Other Critical Care Applications
Potential Benefits:
Cytokine-mediated organ damage and immune suppression can increase the risk of death and infection in patients with commonly seen
critical care illnesses such as acute respiratory distress syndrome, severe burn injury, trauma and pancreatitis. By reducing both
pro- and anti-inflammatory cytokines, CytoSorb has the potential to reduce the systemic inflammatory response and:
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prevent or mitigate multiple organ dysfunction syndrome (“MODS”) and/or multiple organ failure (“MOF”);
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prevent or reduce secondary infections;
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reduce the need for expensive life-sparing supportive care therapies such as mechanical ventilation; and
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reduce the need for ICU care, freeing expensive critical care resources, and reducing hospital costs and costs to the healthcare system.
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Background and Rationale:
A shared feature of many life-threatening conditions seen in the ICU is severe inflammation (either sepsis or systemic inflammatory
response syndrome) due to an over-reactive immune system and high levels of cytokines that can cause or contribute to organ dysfunction,
organ failure and patient death. Examples of such conditions include severe burn injury, trauma, acute respiratory distress syndrome
and severe acute pancreatitis. MODS and MOF are common causes of death in these illnesses and mortality is directly correlated
with the number of organs involved. There are currently few active therapies to prevent or treat MODS or MOF. If CytoSorb can reduce
direct or indirect cytokine injury of organs, it may mitigate MODS or MOF, improve overall patient outcome and reduce costs of
treatment. In addition, secondary infection, such as ventilator-acquired pneumonia, urinary tract infections, or catheter-related
line infections, are another major cause of morbidity and mortality in all patients treated in the ICU that increase with longer
ICU stay. Prolonged illness, malnutrition, age, multiple interventional procedures, and exposure to antibiotic resistant pathogens
are just some of the many risk factors for functional immune suppression and infection. In sepsis and SIRS, the overexpression
of pro-inflammatory cytokines can also cause a depletion of immune effector cells through apoptosis and other means, and anti-inflammatory
cytokines can cause profound immune suppression, both major risk factors for infection.
Projected Timeline:
The EU CE Mark approval for CytoSorb as an extracorporeal cytokine filter and its broad approved indication to be used in any clinical
situation where cytokines are elevated, allows it to be used “on label” in critical care applications such as acute
respiratory distress syndrome, severe burn injury, trauma, liver failure, and pancreatitis, and in other conditions where cytokine
storm, sepsis and/or SIRS plays a prominent role in disease pathology. In addition, the expanded indications for use label now
includes reduction of bilirubin and reduction of myoglobin, further strengthens the on-label use of the technology for the treatment
of liver disease, and severe trauma, respectively. Our goal is to stimulate investigator-initiated clinical studies with our device
for these applications. Currently, we have more than 50 investigator initiated or company-sponsored studies being planned, enrolling,
or completed. We have been moving forward in parallel with a program to further understand the potential benefit of CytoSorb hemoperfusion
in these conditions through additional investigational animal studies and potential human pilot studies in the U.S. funded either
directly by us, through grants, or through third-parties. Commencement of these and other formal studies is contingent upon adequate
funding and, in the case of U.S. human studies, FDA IDE approval of the respective human trial protocols.
APPLICATION: Prevention and treatment of post-operative complications
of cardiopulmonary bypass surgery
Potential Benefits:
If CytoSorb is able to prevent or reduce high levels of cytokines, free hemoglobin, and other inflammatory mediators from
accumulating in the bloodstream during and following cardiac surgery, we anticipate that post-operative complications of cardiopulmonary
bypass surgery may be able to be prevented or mitigated. In addition, CytoSorb can remove certain anti-thrombotics such as ticagrelor
and rivaroxaban during cardiopulmonary bypass in patients requiring urgent or emergent surgery. The primary goals for this application
are to:
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reduce ventilator and oxygen therapy requirements;
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reduce post-operative complications such as ARDS, acute kidney injury, post-perfusion syndrome, and the SIRS;
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reduce length of stay in hospital ICUs;
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reduce the total cost of patient care;and
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reduce the risk of post-operative bleeding complications
such as need for blood and platelet transfusions, rethoracotomy, and death
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Background and
Rationale: Due to the highly invasive nature of cardiopulmonary bypass surgery, high levels of cytokines are produced by the
body, triggering severe inflammation. In addition, hemolysis of red blood cells frequently occurs, resulting in the release of
free hemoglobin into the bloodstream. These inflammatory mediators can lead to post-operative complications. CytoSorb is the only
cytokine reduction technology approved in the EU that can be used intraoperatively in a bypass circuit in a heart-lung machine
during cardiopulmonary bypass without the need for another machine. If our products are able to prevent or reduce the accumulation
of cytokines or free hemoglobin in a patient’s blood stream, we may be able to prevent or mitigate post-operative complications
caused by an excessive or protracted inflammatory response to the surgery. Intra-operative use of CytoSorb on high risk cardiac
surgery patients, where the risk of post-operative complications is the highest, is expected to be the main initial target market.
The use of CytoSorb in the post-operative period to treat post-operative SIRS is another application of the technology.
CytoSorb was recently approved
to remove the anti-platelet agent, ticagrelor, during cardiac surgery involving cardiopulmonary bypass via label expansion of its
CE Mark. Ticagrelor (Brilinta®, Astra Zeneca) is a widely-used anti-platelet agent used to decrease cardiovascular risk
and risk of stroke in patients with a known history of heart disease or heart attack. It is also widely used during dual-anti platelet
therapy in patients with acute coronary syndrome undergoing percutaneous coronary intervention and stent placement. However, when
patients on ticagrelor require emergent or urgent cardiac surgery, up to 65% of patients will have severe or massive peri-operative
bleeding complications that contributes to a high risk of death and major costs to the healthcare system. CytoSorb has already
demonstrated the ability to remove ticagrelor rapidly and efficiently from human blood in vitro. Meanwhile, a retrospective
case series reported by clinicians at Asklepios Klinik St. Georg in Hamburg, Germany on the investigational use of CytoSorb to
reverse the effects of ticagrelor during emergency cardiac surgery demonstrated a greatly reduced risk of bleeding complications
and the need for repeat surgery to explore the source of bleeding, with extrapolations showing projected cost savings of £3,982,
or approximately $5,000 USD, per patient in a U.K. based study.
Projected
Timeline: Cardiac surgeons, cardiac perfusionists, and cardiothoracic ICU intensivists in Germany, Austria, and other
countries have now used CytoSorb intra-operatively and post-operatively in more than 25,000 treatments in cardiac surgery patients.
This application is also the focus of number of planned and enrolling company-sponsored and investigator-initiated studies in
the United States and Europe.
CytoSorb is the subject
of a pivotal, 400-patient randomized controlled trial in the United States called the REFRESH 2-AKI trial. Two CytoSorb cartridges
are being used intraoperatively to reduce activated complement, free hemoglobin, and other inflammatory toxins that are generated
during valve replacement surgery as well as aortic reconstruction with hypothermic cardiac arrest, with the goal of reducing the
risk of acute kidney injury. Acute kidney injury following cardiac surgery is associated with an increased risk of death in the
first 5 years after surgery. The trial has enrolled more than 150 patients to date and is currently being voluntarily paused, at
the recommendation of the data monitoring committee, as the company transitions to a new contract research organization and improves
data quality and analysis.
The 250-patient randomized
controlled REMOVE infective endocarditis trial completed in January 2020. The data is in the process of being analyzed, with the
goal of announcing data in mid-2020.
We are currently conducting
the 30-patient, single arm trial in the United Kingdom called the TISORB trial, obtaining more country-specific data to support
the use of CytoSorb to remove ticagrelor in emergent or urgent cardiac surgery to reduce perioperatively bleeding complications.
For further detailed information regarding our clinical trial
strategy, see the section entitled “Clinical Studies” of this Item 1 of this Report.
APPLICATION : Prevention and
treatment of organ dysfunction in brain-dead organ donors to increase the number and quality of viable organs harvested from donors
Potential Benefits:
If CytoSorb is able to prevent or reduce high-levels of cytokines from accumulating in the bloodstream of brain-dead organ donors,
we believe CytoSorb may be able to mitigate organ dysfunction and failure, which results from severe inflammation following brain-death.
The primary goals for this application are:
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improving the viability of organs which can be harvested from brain-dead organ donors, and
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increasing the likelihood of organ survival following transplant.
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Background and Rationale:
When brain death occurs, the body responds by generating large quantities of inflammatory cytokines. This process is similar to
the systemic inflammatory response syndrome and sepsis. A high percentage of donated organs are never transplanted due to this
response, which damages healthy organs and prevents transplant. In addition, inflammation in the donor may damage organs that are
harvested and reduce the probability of graft survival following transplant. CytoSorb treatment in a porcine animal model of brain
death demonstrated a reduction in cytokines as well as a preservation of cardiac function compared to untreated controls.
There is a shortage
of donated organs worldwide, with approximately 100,000 people currently on the waiting list for organ transplants in the U.S.
alone. Because there are an insufficient number of organs donated to satisfy demand, it is vital to maximize the number of viable
organs donated, and optimize the probability of organ survival following transplant.
Projected Timeline:
Studies have been conducted under a $1 million grant from the Health Resources and Services Administration (“HRSA”),
an agency of the U.S. Department of Health and Human Services. Researchers at the University of Pittsburgh Medical Center and the
University of Texas, Houston Medical Center have completed the observational and dosing phases of the project. The results were
published in Critical Care Medicine, January 2008. The next phase of this study, the treatment phase, would involve viable donors
treated with the CytoSorb device. In this phase of the project, viable donors will be treated and the survival and function of
organs in transplant recipients will be tracked and measured. The treatment phase would be contingent upon further discussion with
the FDA and HRSA regarding study design, as well as obtaining additional funding.
The VetResQ Device (Animal Health Critical Care)
APPLICATION: Adjunctive Therapy in the Treatment of Sepsis,
Pancreatitis and Other Critical Illnesses in Animals
Potential Benefits
and Rationale: In January 2017, the VetResQ device became commercially available for the United States veterinary market. VetResQ
is a broad spectrum blood purification adsorber based upon similar underlying technology to CytoSorb and has been configured in
3 sizes (50, 150 and 300mL sized cartridges) to accommodate treatment of small, medium, and large animals such as cats, dogs, and
high-value animals such as foals and horses. VetResQ is compatible with standard hemodialysis, continuous
renal replacement therapy (“CRRT”), and hemoperfusion blood pumps. Like CytoSorb, VetResQ is designed
to help treat (via hemoadsorption of cytokines, bacterial toxins and other inflammatory mediators) deadly inflammation and toxic
injury in animals with critical illnesses such as septic shock, toxic shock syndrome, toxin-mediated diseases, pancreatitis, trauma,
liver failure, drug intoxication, and lung injury. Critical illness in animals is similar to that in humans. Based
upon cumulative studies, VetResQ is capable of reducing a broad range of excessive inflammatory mediators and toxins that could
otherwise cause direct tissue injury or serious systemic inflammation that can rapidly lead to instability, organ failure, and
death. VetResQ is available in the U.S. only for veterinary animal usage and is not for human use.
Projected
Timeline : VetResQ is available for commercial purchase for animal health applications in the United States. The
FDA was notified of the launch in 2016 and we have provided the FDA with the related instructions for use and a marketing
brochure.
The CytoSorb-XL Device (Critical Care)
APPLICATION: Adjunctive Therapy in the Treatment of Sepsis
and other critical illnesses
Potential Benefits
and Rationale: The CytoSorb-XL device is a next-generation porous polymer under advanced development and targets the same markets
as CytoSorb. Through novel patent-pending chemistry, CytoSorb-XL adds the ability to reduce Gram negative bacterial endotoxin (lipopolysaccharide)
to broad spectrum cytokine, exotoxin, and other inflammatory mediator removal. CytoSorb-XL removed comparable amounts of endotoxin
when compared in vitro against the leading standalone endotoxin filter, Toraymyxin (Toray, Japan). This could potentially
increase the effectiveness of CytoSorb in sepsis and septic shock caused by Gram negative bacteria.
Projected Timeline
: CytoSorb-XL is in advanced pre-clinical development as a potential next generation polymer to CytoSorb. It is expected to follow
a similar path to E.U. approval as CytoSorb, expected within 4-5 years.
The HemoDefend Blood Purification Technology Platform (Acute
and Critical Care)
APPLICATION: Reduction of contaminants
in the blood supply that can cause transfusion reactions or disease when administering blood and blood products to patients.
Potential
Benefits: The HemoDefend RBC blood purification technology platform is designed to reduce contaminants in the blood
supply that can cause transfusion reactions or disease. It is a development stage technology that is not yet approved in any
markets, but is comprised of our highly advanced, biocompatible, polymer bead technology. If this technology is successfully
developed and then incorporated into a regulatory approved product, it could have a number of important benefits,
including:
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reduce the risk of transfusion reactions and improve patient outcome;
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improve the quality, or extend the shelf life of stored blood products;
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improve the availability of blood and reduce blood shortages by reducing the limitations of donors to donate blood; and
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allow easier processing of blood.
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Background and Rationale:
The HemoDefend technology platform was built upon our successes in designing and manufacturing porous polymer beads that can remove
cytokines. We have expanded the technology to be able to remove substances as small as drugs and bioactive lipids, to proteins
as large as antibodies from blood that can cause transfusion reactions and disease. Although the frequency of these reactions are
relatively low (approximately 3% to 5%), the sheer number of blood transfusions is so large, that the number of transfusion reactions,
ranging from mild to life-threatening, is substantial, ranging from several hundreds of thousands to millions of reactions each
year. In critically-ill patients, the risk of transfusion reactions is significantly higher than in the general population and
can increase the risk of death because their underlying illnesses have depleted protective mechanisms and have primed their bodies
to respond more vigorously to transfusion-associated insults.
A number of retrospective
studies have also suggested that administration of older blood leads to increased adverse events and even increased mortality,
compared with blood recently harvested. Biological studies have demonstrated the accumulation of erythrocyte storage lesions that
compromise the function and structural integrity of packed red blood cells and have also demonstrated the accumulation of substances
during blood storage that can lead to transfusion reactions. Three adult, prospective, randomized, controlled studies, RECESS (completed),
ABLE (completed), and TRANSFUSE (completed) were designed to evaluate the morbidity and mortality in cardiovascular surgery patients
(RECESS) and critically ill patients (ABLE and TRANSFUSE), treated with either “new or fresh” or “older”
blood. The RECESS Trial was a randomized, controlled trial in a total of 1,098 evaluable patients
undergoing complex cardiac surgery given fresh blood (≤10 days old) as compared to older blood (≥21 days old). The overall
conclusion was that the age of blood had no statistically significant impact on the progression to organ dysfunction (as measured
by the multiple organ dysfunction syndrome score) or death. However, a statistically significant increase in hepatobiliary-related
serious adverse events (5% fresh vs 9% older, p=0.02) was related to hyperbilirubinemia, possibly caused by hemolysis and release
of free hemoglobin in old blood. The serious adverse event rate in both new and old blood groups was approximately 50%, which is
considered high for this group of patients. There are many details and subgroup analyses that were not discussed, particularly
an analysis of those patients receiving more units of blood than average, as the risk of adverse events is cumulative. The ABLE
Trial was a randomized, controlled trial in 2,430 critically-ill patients receiving either fresh (≤ 7 days) or standard issue
blood. There was no difference in 90-day mortality between the two groups. The TRANSFUSE Trial was a large scale RCT in
Australia evaluating the impact of age of leukodepleted pRBCs (short-term storage: 11.8 days mean, N=2,457, mean 4.1 units transfused;
long-term storage: 22.4 days mean, N=2,462, m) on 90-day mortality in critically-ill patients. There was no significant difference
in 90-day mortality (24.8% mortality short-term storage vs 24.1% long-term storage) though there were statistically more febrile
non-hemolytic transfusion reactions (n=123; 5% short-term storage vs n=88; 3.6% long-term storage). Also, patients who had short-term
storage blood with APACHE III > 21.5% (median risk), demonstrated higher mortality (37.7% vs 34% long-term storage , p=0.05).
The outcomes of these trials do not alter the current pressing need for better solutions to purify transfused blood products in
order to reduce transfusion-related adverse events and improve clinical outcome, but suggest that age of blood is not the critical
factor.
Projected Timeline:
The HemoDefend platform is a development stage product based on our advanced polymer technology. The base polymer is ISO 10993
biocompatible, meeting standards for biocompatibility, hemocompatibility, cytotoxicity, genotoxicity, acute sensitivity and complement
activation. HemoDefend has demonstrated the in vitro removal of many different substances from blood such as antibodies,
free hemoglobin, cytokines and bioactive lipids. We have also prototyped a number of different implementations of the HemoDefend
technology, including the “Beads in a Bag” blood treatment blood storage bag, and standard in-line blood filters. The
technology has been supported by the NHLBI, a division of the National Institute of Health, under a Phase I SBIR, an awarded $1.5M
Phase II SBIR contract (funded by NHLBI and U.S. Special Operations Command (USSOCOM)), and more recently under a $3M multi-year
Phase IIB bridge contract funded by NHLBI. We expect to advance the in-line filter to human testing, expected in the second half
of 2020. We intend to out-license this technology to a strategic partner in the transfusion medicine space, but may elect to continue
our development in parallel with out-licensing efforts.
APPLICATION: Removal of anti-A and anti-B
blood group antibodies from fresh whole blood and plasma
Potential Benefits:
The HemoDefend-BGA blood purification technology platform is designed to reduce anti-A and anti-B antibodies in plasma and whole
blood. The goal is to either enable the production of universal plasma, or enable fresh warm whole blood transfusions. If this
technology is successfully developed and then incorporated into a regulatory approved product, it could have a number of important
benefits, including:
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reduce the risk of transfusion reactions and improve patient outcome;
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eliminate the need to blood-type plasma, improving its availability
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enable the use of low titer whole blood, ideal for trauma resuscitation; and
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easier processing of blood products.
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Background and
Rationale: Plasma is the straw-colored, cell-free portion of whole blood. It contains a wide range
of important substances such as electrolytes, hormones, proteins such as albumin, clotting factors, and antibodies. The transfusion
of plasma, or plasma-derived products, is used widely to help save the lives of trauma and bleeding victims, septic and other critically-ill
patients, and patients with life-threatening blood coagulation and autoimmune disorders. In 2008, more than 4.5 million units of
plasma were transfused in the United States alone. With the exception of the relatively uncommon Type AB, or “universal”
plasma, most plasma contains blood-type specific antibodies and must be cross-matched with the intended recipient ahead of time
or risk serious transfusion reactions. By reducing these blood-type specific antibodies, the goal is to create a cost-effective,
reliable, and expanded source of “universal” plasma that can be administered immediately, without blood-typing, in
a wide range of emergent and non-emergent situations.
Projected
Timeline: The HemoDefend-BGA platform is a development stage product based on our advanced blood purification technology.
Prototype filtration devices have been evaluated by a government agency, resulting in excellent depletion of both anti-A and anti-B
antibodies. Work is continuing to advance these prototypes to commercial-ready devices. This work has received $1.15 million in
Phase I and II Small Business Technology Transfer (STTR) funding by the U.S. Army Medical Research Acquisition Activity (USAMRAA),
U.S. Army Medical Research and Materiel Command (USAMRMC), Fort Detrick, MD.
K+ontrol (Acute and Critical Care)
APPLICATION: Treatment of severe hyperkalemia
that can occur in patients with life-threatening conditions such as trauma, burn injury, kidney failure, tumor lysis syndrome,
and those with no access to dialysis
Potential Benefits:
K+ontrol was developed to rapidly treat severe hyperkalemia by reducing potassium in the blood. Although hemodialysis
remains the definitive treatment for severe hyperkalemia, K+ontrol represents a simpler, and more flexible alternative.
The primary goals for this application are to:
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Enable the rapid treatment of deadly hyperkalemia without the need for hemodialysis
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Prevent potentially fatal cardiac arrhythmias following severe injury
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Improve survival in victims in remote areas and during prolonged field care in combat
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Background and Rationale:
Potassium is an important electrolyte in the body that is present inside cells at high concentrations, with the amount in blood
tightly regulated. Following injury to cells by, for example, trauma, burn injury, ischemia, or cytotoxic drugs, such cells will
continuously leak high levels of potassium into the blood, resulting in hyperkalemia. The kidneys normally excrete excess potassium
from the blood, but when compromised, as in critically-ill patients suffering from kidney failure or in chronic dialysis patients
with end-stage kidney disease, the levels of blood potassium can rapidly rise unabated. When the potassium level in the blood exceeds
a concentration of 6.0 mmol/L (normal 3.6 - 5.2 mmol/L), the risk of heart arrhythmias and sudden cardiac death increases significantly.
Orally administered potassium sorbents such as Kayexalate® (Sanofi-Aventis) and Veltassa® (Relypsa) are only recommended
for the non-emergent lowering of mild to moderate hyperkalemia, while the use of insulin and glucose to drive potassium into cells
in severe hyperkalemia is only a temporary strategy. Dialysis has been the definitive treatment of severe hyperkalemia, but requires
a large dialysis machine, electricity, bags of dialysate, a skilled technician, and prolonged treatment times that are not practical
in certain situations such as in remote locations, during prolonged field care in combat, in areas that lack modern medical facilities,
or in situations where the numbers of victims outstrip available dialysis equipment and supplies. Because of this, there is a major
need for simple, but effective ways to rapidly treat severe hyperkalemia.
Hyperkalemia is a common
problem and has been reported to occur in 1.7-5.2% of hospitalized patients in a number of studies. It has also been recognized
as a serious complication of combat injury since World War II, when hyperkalemia and acute kidney injury was associated with a
mortality rate of 90%, and was a leading cause of post-traumatic death in the Korean War, until the advent of dialysis therapy.
In the wars in Iraq and Afghanistan, an estimated 5.8% of all combat casualties developed hyperkalemia within 48 hours of injury.
Even in non-crush traumatic injury, severe hyperkalemia (>6 mmol/L) occurred in approximately 20% of patients. Hyperkalemia
was also observed in approximately 16% of victims of natural disasters such as earthquakes, where crush injury is common.
Projected Timeline:
K+ontrol has demonstrated the ability to reduce potassium in several animal models of hyperkalemia and is currently
being optimized with funding support from the US Army and Defense Health Agency under under a Phase I and Phase II SBIR contract
for a total of $1.15 million and a $3 million Rapid Innovation Fund (RIF) award from the U.S. Air Force Materiel Command. We plan
to move forward with clinical development of this product, pending the successful outcome of these animal studies.
ContrastSorb (Radiology and Interventional Radiology)
APPLICATION: Removal of IV contrast
in blood administered during CT imaging, an angiogram, or during a vascular interventional radiology procedure, in order to reduce
the risk of contrast-induced nephropathy.
Potential Benefits:
IV contrast can lead to CIN, in susceptible patients. Risk factors include chronic kidney disease and renal insufficiency caused
by age, diabetes, congestive heart failure, long-standing hypertension, and others co-morbid illnesses. CIN can lead to increased
risk of patient morbidity and mortality. Removal of IV contrast by ContrastSorb may:
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reduce the risk of acute kidney injury
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improve the safety of these procedures and reduce the risk of morbidity and mortality
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Background and Rationale:
Contrast-induced nephropathy is the acute loss of renal function within the first 48 hours following IV contrast administration.
IV contrast is widely administered to patients undergoing CT scans, to enhance the images and make it easier to identify anatomic
structures. IV contrast is also administered during vascular interventional radiology procedures and angiography of blood vessels
in the brain, heart, limbs, and other parts of the body to diagnose and treat atherosclerosis (narrowing of blood vessels due to
cholesterol deposits), vascular injury, aneurysms, etc. The reported risk of CIN undergoing contrast enhanced CT scans has been
reported to be 2% to 13%. For coronary intervention, the risk has been estimated to be as high as 20% to 30% in high risk patients
with pre-existing renal insufficiency, and other risk factors. The use of low osmolar IV contrast, hydration of patients pre-procedure,
orally administration of N-acetylcysteine, and other agents to prevent CIN have demonstrated modest benefit in some clinical studies,
but in many cases, the results across studies have been equivocal and inconsistent. In high risk patients, the direct removal of
IV contrast from the blood with ContrastSorb to prevent CIN represents a potentially more effective alternative.
Projected Timeline:
ContrastSorb has demonstrated the high efficiency single pass removal of IV contrast and is in the process of optimization. The
underlying polymer is made of the same ISO 10993 biocompatible polymer as CytoSorb, but with different structural characteristics.
The ContrastSorb device is a hemoperfusion device similar in construction to CytoSorb and BetaSorb. Assuming successful optimization
of the ContrastSorb polymer, safety and efficacy of IV contrast removal will need to be established in human clinical studies.
We seek to out-license this technology to a potential strategic partner.
The BetaSorb Device (Chronic Care)
APPLICATION: Prevention and treatment of health complications
caused by the accumulation of metabolic toxins in patients with chronic renal failure
Potential Benefits:
If BetaSorb is able to prevent or reduce high levels of metabolic waste products from accumulating in the blood and tissues of
long-term dialysis patients, we anticipate that certain health complications characteristic to these patients can be prevented
or mitigated. The primary goals for this application are to:
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improve and maintain the general health of dialysis patients;
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reduce disability and improve the quality of life of these patients
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reduce the total cost of patient care; and
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increase life expectancy.
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Background and Rationale:
Our BetaSorb device is intended for use on patients suffering from chronic kidney failure who rely on long-term dialysis therapy
to sustain life. Due to the widely recognized inability of dialysis to remove larger proteins from blood, metabolic waste products,
such as beta2-microglobulin, accumulate to toxic levels and are deposited in the joints and tissues of patients. Specific
toxins known to accumulate in these patients have been linked to their severe health complications, increased healthcare costs,
and reduced quality of life.
Researchers also believe
that the accumulation of toxins may play an important role in the significantly reduced life expectancy experienced by dialysis
patients. In the U.S., the average life expectancy of a dialysis patient is five years. Industry research has identified links
between many of these toxins and poor patient outcomes. If our BetaSorb device is able to routinely remove these toxins during
dialysis and prevent or reduce their accumulation, we expect our BetaSorb device to maintain or improve patient health in the long-term.
We believe that by reducing the incidence of health complications, the annual cost of patient care will be reduced and life expectancy
increased.
The poor health experienced
by beta2-microglobulin patients is illustrated by the fact that in the U.S. alone, more than $33 billion is spent annually
caring for this patient population according to the United States Renal Data System, at a cost of approximately $88,000 per patient
annually.
Projected Timeline:
We have collected a significant amount of empirical data for the development of this application. As the developer of this technology,
we had to undertake extensive research, as no comparable technology was available for reference purposes. We have completed four
human pilot studies, including a clinical pilot of six patients in California for up to 24 weeks in which our BetaSorb device removed
the targeted toxin, beta2-microglobulin, as expected. In total, we have sponsored clinical studies utilizing our BetaSorb
device on 20 patients involving approximately 345 total treatments. Each study was conducted by a clinic or hospital personnel
with us providing technical assistance as requested.
As discussed above,
due to practical and economic considerations, we are focusing our efforts and resources on commercializing our CytoSorb device
for critical care and cardiac surgery applications. Following commercial introduction of the CytoSorb device, and with sufficient
additional resources, we may continue development of the BetaSorb resin and may conduct additional clinical studies using the BetaSorb
device in the treatment of end stage renal disease patients.
Commercial and Research Partners
Biocon Ltd
In September 2013,
we entered into a distribution agreement with Biocon Ltd. (“Biocon”), India’s largest biopharmaceuticals company,
under which Biocon was granted exclusive commercialization rights to the CytoSorb therapy in India and select emerging markets,
initially focused on sepsis. Biocon committed to annual minimum purchases to maintain exclusivity. In October 2014, the Biocon
partnership was expanded to include all critical care applications and cardiac surgery. In addition, Biocon committed to higher
annual minimum purchases of CytoSorb to maintain distribution exclusivity and committed to conduct and publish results from multiple
investigator initiated studies and patient case studies. Under the terms of the expanded partnership, the term of the distribution
agreement was extended to December 2022.
Fresenius Medical Care AG
In December 2014, we
entered into a multi-country strategic partnership with Fresenius Medical Care AG & Co KGaA (together with its affiliates,
as appropriate, “Fresenius”) to commercialize the CytoSorb therapy. Under the agreement reflecting the terms of the
partnership, Fresenius was granted exclusive rights to distribute CytoSorb for critical care applications in France, Poland, Sweden,
Denmark, Norway, and Finland. The partnership allows Fresenius to offer an innovative and easy way to use blood purification therapy
for removing cytokines in patients that are treated in the ICU. To promote the success of CytoSorb, Fresenius agreed to also engage
in the ongoing clinical development of the product. This includes the support and publication of a number of small case series
and patient case reports as well as the potential for future larger, clinical collaborations. In May 2016, Fresenius launched the
product in the six countries for which it was granted exclusive distribution rights. In January 2017, the Fresenius partnership
was expanded pursuant to a revised three-year agreement. The terms of the revised agreement extended Fresenius’ exclusive
distributorship of CytoSorb for all critical care applications in their existing territories through 2019 and include guaranteed
minimum quarterly orders and payments, evaluable every one and a half years.
At the same time, we
entered into a comprehensive co-marketing agreement with Fresenius. Under the terms of the co-marketing agreement, CytoSorbents
and Fresenius agreed to jointly market CytoSorb to Fresenius’ critical care customer base in all countries where CytoSorb
is being actively commercialized. CytoSorb continues to be sold by our direct sales force or through our international network
of distributors and partners, while Fresenius sells all ancillary products to their customers. Fresenius further provides written
endorsements of CytoSorb for use with their multiFiltrate and multiFiltratePRO acute care dialysis machines that can be used by
us and our distribution partners to promote CytoSorb worldwide. Training and preparation for this co-marketing program began in
five initial countries in 2017 and is continuing, with implementation of the co-marketing program in additional countries planned
for the future.
In December 2018, the
Fresenius agreement signed in December 2014 was amended, to grant Fresenius exclusive distribution rights for the Czech Republic
and Finland and all critical care medicine and ICU applications on dialysis or ECMO machines for France. In addition, in 2019,
Poland, Sweden, Denmark, and Norway were transitioned into the co-marketing program. Finally, the guaranteed minimum quarterly
purchases and payments requirements were removed for 2019.
In addition, also in
December 2018, we entered into agreements to expand the partnership with Fresenius into South Korea and Mexico. Under the terms
of these agreements, Fresenius has exclusive rights to distribute CytoSorb for acute care and other hospital applications in Korea
and Mexico. Commercial sales of CytoSorb are expected to commence after securing market registration clearance from the South Korean
and Mexican health authorities. These multi-year agreements include an initial stocking order and are subject to annual minimum
purchases of CytoSorb to maintain exclusivity. These agreements, which commenced on January 1, 2019, have an initial term of three
years and will automatically renew for an additional two years unless terminated by either party.
Aferetica s.r.l.
In 2015, we entered
into a distribution agreement with Aferetica s.r.l., a distributor based in Bologna, Italy that specializes in the sale of certain
medical products and devices, specifically extracorporeal therapies, in the critical care, cardiac surgery and liver disease markets
(“Aferetica”). Under the terms of the agreement, we granted Aferetica the exclusive right to distribute CytoSorb in
Italy, San Marino and the Vatican for application in CRRT (Continuous Renal Replacement Therapies), dialysis and hemoperfusion
machine run treatments, as described in the agreement. In connection with the grant of distribution rights, Aferetica agreed to
certain minimum purchase and inventory requirements. Aferetica further agreed not to market or sell products competitive with CytoSorb
in Italy, San Marino and the Vatican. The agreement expired by its terms on December 31, 2019. We are currently negotiating a new
multi-year agreement with Aferetica and they are continuing to act as our exclusive distributor in Italy.
In addition, in September
2017, we announced a partnership with Aferetica to provide dedicated, branded sorbent cartridges for use with Aferetica’s
proprietary PerLife™ ex-vivo organ perfusion system, with the goal of rehabilitating or preserving the function solid organs
destined for eventual transplant. In July 2018, Aferetica and CytoSorbents debuted the PerLife™ system for organ preservation
at the 27th International Congress of the Transplantation Society. Aferetica is currently seeking CE Mark registration
of the system.
Terumo Cardiovascular Group
In September 2016,
we entered into a multi-country strategic partnership with Terumo Cardiovascular Group (“Terumo”) to commercialize
CytoSorb for cardiac surgery applications. Under the terms of the agreement, Terumo has exclusive rights to distribute the CytoSorb
CPB procedure pack for intra-operative use during cardiac surgery in France, Sweden, Denmark, Norway, Finland and Iceland. Terumo
launched CytoSorb in its six exclusive countries in December 2016.
University of Pittsburgh Medical Center
Two government research
grants by the National Institutes of Health (“NIH”) and the U.S. Department of Health and Human Services were awarded
to investigators at the University of Pittsburgh to explore the use of adsorbent polymers in the treatment of sepsis and organ
transplant preservation. Under “Sub Award Agreements” with the University of Pittsburgh, we developed polymers for
use in these studies.
A grant of $1 million
was awarded to the University of Pittsburgh Medical Center in 2003. The project sought to improve the quantity and viability of
organs donated for transplant by using CytoSorb to detoxify the donor’s blood. The observational and dosing phases of the
study, involving 30 viable donors and eight non-viable donors, respectively, have been completed. The next phase of this study,
the treatment phase, was planned to involve viable donors. However, we are not currently focusing our efforts on the commercialization
of CytoSorb for application in organ donors.
In September 2005,
the University of Pittsburgh Medical Center was awarded a grant of approximately $7 million from NIH entitled “Systems Engineering
of a Pheresis Intervention for Sepsis (SEPsIS)” to study the use of adsorbent polymer technology in the treatment of severe
sepsis. The study, which lasted for a total of five years, commenced in September 2005. Under a SubAward Agreement, we worked with
researchers at the University of Pittsburgh - Critical Care Medicine Department. We believe that the only polymers used in this
study were polymers we have developed specifically for use in the study, which are similar to the polymers used in our devices.
Under the SubAward Agreement, for our efforts in support of the grant during 2006 through 2010, we received approximately $402,000.
These grants represent
a substantial research cost savings to us and demonstrate the strong interest of the medical and scientific communities in our
technology.
Researchers at UPMC
have participated in nearly every major clinical study of potential sepsis intervention during the past twenty years. Drs. Derek
Angus and John Kellum were investigators for Eli Lilly’s sepsis drug, Xigris®. Dr. Kellum, a member of the UPMC faculty
since 1994, is the Chairman of our Sepsis Advisory Board. Dr. Kellum’s research interests span various aspects of Critical
Care Medicine, but center on critical care nephrology (including acid-base, and renal replacement therapy), sepsis and multiple
organ failure, and clinical epidemiology. He is Professor and Vice Chair for Research in the Critical Care department, and Director
of the Center for Critical Care Nephrology(“CRISMA”) at the University of Pittsburgh Medical Center and has authored
more than 400 publications and has received numerous research grants from foundations and industry.
Advisory Boards
From time to time our
management meets with scientific advisors who sit on our Scientific Advisory Board, our Medical Advisory Board – Critical
Care Medicine, our Medical Advisory Board – Chronic Kidney Failure / Dialysis and our Scientific Advisory Board – Cardiac
Surgery.
Our Scientific Advisory
Board consists of three scientists with expertise in the fields of fundamental chemical research, and polymer research and development.
Our Medical Advisory
Board-Critical Care Medicine consists of four medical doctors, one of whom is affiliated with UPMC, with expertise in critical
care medicine, sepsis, multiple organ failure and related clinical study design. One of our advisors is the pioneer of CAR T-cell
immunotherapy from University of Pennsylvania.
Our Trauma Advisory
Board consists of four medical doctors with expertise in trauma, burn injury and critical care medicine.
Our Cardiac Surgery
Advisory Board consists of six medical doctors with experience in cardiac surgery and complications caused by inflammation generated
by the surgery.
We compensate members
of our Advisory Boards at the rate of $2,000 for each full-day meeting they attend in person; $1,200 if attendance is by telephone.
When we consult with members of our Advisory Board (whether in person or by telephone) for a period of less than one day, we compensate
them at the rate of $200 per hour. We also reimburse members of our Advisory Boards for their travel expenses for attending our
meetings.
Royalty Agreements
With Principal Stockholder
In August 2003, in
order to induce Guillermina Vega Montiel, a principal member of RenalTech International, LLC at the time, to make a $4 million
investment in RenalTech International, LLC, Ms. Montiel was granted a perpetual royalty (the “Royalty”) equal to three
percent of all gross revenues received by us from sales of CytoSorb in the applications of sepsis, cardiopulmonary bypass surgery,
organ donor, chemotherapy and inflammation control. In addition, for her investment, Ms. Montiel received 1,230,770 membership
units of RenalTech International, LLC. Such membership units ultimately were converted into and became 7,420 shares of our common
stock following our June 30, 2006 merger. In February 2017, all rights, title and interest to the Royalty was assigned to The Robert
Shipley Living Trust. For the year ended December 31, 2019 we have recorded royalty costs of approximately $675,000.
With Purolite
In 2003, Purolite filed
a lawsuit against us asserting, among other things, co-ownership and co-inventorship of certain of our patents. On September 1,
2006, the United States District Court for the Eastern District of Pennsylvania approved a Stipulated Order and Settlement Agreement
under which we and Purolite agreed to the settlement of the action. The Settlement Agreement provides us with the exclusive right
to use our patented technology and proprietary know how relating to adsorbent polymers for a period of 18 years. In particular,
the Settlement Agreement relates to several of our issued patents and several of our pending patent applications covering our biocompatible
polymeric resins, our methods of producing these polymers, and the methods of using the polymers to remove impurities from physiological
fluids, such as blood.
Under the terms of
the Settlement Agreement, we have agreed to pay Purolite royalties of 2.5% to 5% on the sale of those of our products, if and when
those products are sold commercially, that are used in direct contact with blood or, in certain cases, in direct contact with a
physiological fluid other than blood. The royalty payments provided for under the Settlement Agreement would apply to our currently
envisioned CytoSorb, VetResQ, and BetaSorb products. For the year ended December 31, 2019 per the terms of the license agreement
we have recorded royalty costs of approximately $1,125,000.
Following the expiration
of the 18-year term of the Settlement Agreement, the patents and patent applications that are the subject of the Settlement Agreement
should have expired under current patent laws, and the technology claimed in them will be available to the public. However, following
such time, we would continue to exclusively own any confidential and proprietary know how.
Product Payment & Reimbursement
CytoSorb
Germany
Effective January 1,
2017, we achieved a dedicated reimbursement code in Germany that provides for specific and enhanced reimbursement for our CytoSorb
device. We believe in most cases that this dedicated reimbursement code provides our customers in Germany with reimbursement that
not only covers the cost of the device, but the procedural costs as well. Reimbursement can also be covered by the standard “diagnosis
related group” (“DRG”) acute care reimbursement. Under this system, hospitals would purchase CytoSorb and subtract
the cost from a pre-determined lump-sum payment made by the payor to the hospital based on the patient’s diagnosis.
Switzerland
In 2019, CytoSorb
was assigned two specific procedure codes from the Swiss Federal Statistical
Office, a division of the Federal Department of Home Affairs in Switzerland. With cost data related to use of the CytoSorb
device, a prerequisite for receiving reimbursement from the Swiss DRG system, we expect to receive a response soon regarding reimbursement
levels.
Europe (excluding Germany and Switzerland)
Payment for our CytoSorb
device for the removal of cytokines in patients with life-threatening illnesses is country dependent in Europe. We are pursuing
reimbursement of CytoSorb in other major territories, with our partners, such as France, England, Italy and Spain, representing
the other four economic leaders in Europe. There can be no assurances that reimbursement will be granted. Additional clinical data
may be required to establish reimbursement.
United States
Critical care applications
such as those targeted by our CytoSorb device involve a high mortality rate and extended hospitalization, coupled with extremely
expensive ICU time. In view of these high costs and high mortality rates, we believe acceptance of our proprietary technology by
critical care practitioners and hospital administrators will primarily depend on safety and efficacy factors rather than solely
based on cost.
CytoSorb is not yet
approved in the U.S., and we have not fully assessed the potential for reimbursement for the device. Payment for our CytoSorb
device in the U.S. for the treatment and prevention of sepsis and other related acute care applications is anticipated to fall
under the DRG prospective repayment system, which is currently the predominant inpatient hospital reimbursement methodology in
the U.S. Under this system, hospital reimbursement is generally based upon pre-determined amounts payable for specific diagnoses
(e.g. septic shock with respiratory failure), regardless of the number of services provided during the patient’s stay. If
CytoSorb can improve outcomes and reduce the costs of ICU treatment and hospital length of stay, it could potentially save hospitals
a significant amount of money.
Competition
General
We believe that our
products represent a unique approach to disease states and health complications associated with the presence of larger toxins (often
referred to as middle molecular weight toxins) in the bloodstream, including sepsis, acute respiratory distress syndrome, trauma,
severe burn injury, pancreatitis, post-operative complications of cardiac surgery, damage to organs donated for transplant prior
to organ harvest, and renal disease. Researchers have explored the potential of using existing membrane-based dialysis technology
to treat patients suffering from sepsis. These techniques are unable to effectively remove the middle molecular weight toxins.
We have demonstrated the ability of CytoSorb to reduce key cytokines in the blood of human patients with predominantly septic shock
and acute respiratory distress syndrome. In a post-hoc subgroup analysis of our European Sepsis Trial, we have also demonstrated
statistically significant improvements in mortality in patients at high risk of death, including patients with either very high
cytokine levels or patients older than age 65, both of which have a high predicted mortality. Larger studies are needed to confirm
these preliminary data.
The CytoSorb, VetResQ,
CytoSorb XL, DrugSorb, ContrastSorb, and BetaSorb devices consist of a cartridge containing adsorbent polymer beads. The cartridge
incorporates industry standard connectors at either end of the device which connect directly to an extra-corporeal circuit (bloodlines)
on a standalone basis. The extra-corporeal circuit consists of plastic tubing through which the blood flows, our cartridge containing
our adsorbent polymer beads, pressure monitoring gauges, and a blood pump to maintain blood flow. The patient’s blood is
accessed through a catheter inserted into his or her veins. The catheter is connected to the extra-corporeal circuit and the blood
pump draws blood from the patient, pumps it through the cartridge and returns it back to the patient in a closed loop system. As
blood passes over the polymer beads in the cartridge, toxins are adsorbed from the blood, without removing any fluids from the
blood or the need for replacement fluid or dialysate.
There are three common
forms of blood purification, including hemodialysis, hemofiltration, and hemoperfusion. All modes are generally supported by standard
hemodialysis machines. All take blood out of the body to remove toxins and unwanted substances from blood, and utilize extracorporeal
circuits and blood pumps. Dialysis and hemofiltration remove substances from blood by diffusion and ultrafiltration, respectively,
through a semi-permeable membrane, allowing the passage of certain sized molecules across the membrane, but preventing the passage
of other, larger molecules. Hemoperfusion utilizes solid or porous sorbents to remove substances based on pore capture and surface
adsorption, not filtration.
CytoSorb is a hemoperfusion
cartridge, using an adsorbent of specified pore size, which controls the size of the molecules which can pass into the adsorbent
and vastly increases the area available for surface adsorption. As blood flows over our polymer adsorbent, middle molecules such
as cytokines flow into the polymer adsorbent and are adsorbed. Our devices do not use semipermeable membranes or dialysate. In
addition, our devices do not remove fluids from the blood like hemodialysis or hemofiltration. Accordingly, we believe that our
technology has significant advantages as compared to traditional dialysis techniques, including ease of use.
Our HemoDefend platform
is a development-stage technology utilizing a mixture of proprietary porous polymer beads that target the removal of contaminants
that can cause transfusion reactions or cause disease in patients receiving transfused blood products. The HemoDefend beads can
be used in multiple configurations, including the common in-line filter between the blood bag and the patient as well as a unique,
patent-pending “Beads in a Bag” treatment configuration, where the beads are placed directly into a blood storage bag.
Sepsis
Researchers have explored
the potential of using existing membrane-based dialysis technologies to treat patients suffering from sepsis. These techniques
are unable to effectively remove middle molecular weight toxins, which leading researchers have shown to cause and complicate sepsis.
The same experts believe that a blood purification technique that efficiently removes, or significantly reduces, the circulating
concentrations of such toxins might represent a successful therapeutic option. CytoSorb has demonstrated the ability to remove
middle molecular weight toxins, such as cytokines, from circulating blood in a statistically significant manner.
Medical research during
the past two decades has focused on drug interventions aimed at chemically blocking or suppressing the function of one or two inflammatory
agents. In hindsight, some researchers now believe this approach has little chance of significantly improving patient outcomes
because of the complex pathways and multiple chemical factors at play. Clinical studies of these drug therapies have been largely
unsuccessful. An Eli Lilly drug, Xigris®, cleared by the FDA in November 2001, is the first and only drug to be approved for
the treatment of severe sepsis. Clinical studies demonstrated that use of Xigris® resulted in an average absolute 6% reduction
in 28-day mortality, and an absolute 13% reduction in 28-day mortality in the most severe sepsis patients. The drug remains controversial
and is considered expensive when compared to the percentage of patients who benefit. In 2011, after completing a follow up study
required by the FDA, it was subsequently determined that Xigris® did not have a statistically significant mortality benefit,
and in October 2011, Eli Lilly withdrew Xigris® from all markets worldwide.
Development of many
experimental therapies has been discontinued, including Eritoran from Eisai, CytoFab from BTG/Astra Zeneca, Talactoferrin from
Agennix, tranexemic acid from Leading Biosciences, selective cytapheresis from CytoPheryx, and others.
Since January 1, 2013,
there have been three Phase 1, one Phase 1/2, nine Phase 2, four Phase 2/3, three Phase 3, and five Phase 4 interventional drug
trials posted on clinicaltrials.gov for sepsis-related indications (sepsis, late-onset sepsis, severe sepsis, septic shock, systemic
inflammatory response). Of these studies, three are not yet recruiting, nine are currently recruiting, five have been completed,
and five have been terminated. Three additional studies were scheduled to be completed at this time, but their current status is
unknown.
The sponsors for these
studies include the following industry and academic organizations:
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Asahi Kasei Pharma America Corporation
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Baxter Healthcare Corporation
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Exponential Biotherapies Inc.
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Ferring Pharmaceuticals
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Hamad Medical Corporation
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Kaneka Pharma America LLC
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Leading BioSciences, Inc
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Merck Sharp & Dohme Corp.
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SciClone Pharmaceuticals
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Shionogi, Shionogi Inc.
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Techpool Bio-Pharma Co., Ltd.
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Tianjin Chasesun Pharmaceutical Co., LTD
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Primary outcomes of
the investigational drug trials include safety and pharmacokinetic/pharmacodynamic primary outcome measures such as adverse event
rates, maximum tolerated dose, clearance rates, and distribution. Additional primary outcomes for these trials include:
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number of days alive without CV, renal, or pulmonary organ support
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number of days free of treatment with vasopressors
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28-day survival and all-cause mortality
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60-day hospital mortality
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reduction rate of IL-6 serum concentration
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change in biomarkers indicative of endothelial activation and damage
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change in microvascular perfusion
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immune reconstitution of lymphocytopenic sepsis patients
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immunomodulatory effect (IL6/IL10 ratio)
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lymphocyte counts and percentage
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reduction in Sequential Organ Failure Assessment score (SOFA)
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Notable active Phase
III trials in sepsis include the following:
Initiated in November
2012, the 800 patient Phase III randomized controlled SCARLET study began for Recomodulin (ART 123, Artisan/Asahi Kasei), a recombinant
human thrombomodulin, for the treatment of septic patients with coagulopathy. In 2019, the results of the study were published
in JAMA, demonstrating no benefit in 28-day all-cause mortality. The 800 patient Phase III SCARLET-2 randomized, controlled trial,
evaluating Recomodulin in patients with sepsis and coagulopathy, was scheduled to begin in July 2019, but was withdrawn to be
amended following the results of the SCARLET trial. The status of the trial is unknown.
Another study is being
conducted by Atox Bio, a development stage company in clinical studies with peptide therapeutics that are designed to prevent
superactivation of the immune response by certain toxins such as toxic shock syndrome toxin. It is currently focused on necrotizing
soft tissue infections. The investigational peptide, AB103 or Reltecimod, binds to the CD28 co-stimulatory receptor to attempt
to restore the host’s appropriate immune response to severe infections and is being evaluated in the ACCUTE Trial, a Phase
III randomized controlled trial in 60 investigative sites in the U.S in 290 patients with necrotizing soft tissue infections.
Primary outcomes include 28-day survival, amputation, and reduction in the modified sequential organ failure assessment score.
According to clinicaltrials.gov, the estimated study completion date was November 2019, with results of the study expected to
be presented at a medical meeting in the first half of 2020. The company also expects to report interim results of another study
called the REAKT (Reltecimod Efficacy for Acute Kidney Injury Trial) in patients with abdominal sepsis induced AKI in the first
half of 2020.
Spectral Medical,
Inc. collaborated with Toray on the EUPHRATES trial, combining an endotoxin assay with extracorporeal endotoxin removal by Toraymyxin,
a polymyxin-B immobilized polystyrene fiber cartridge. The study began in June 2010 and completed enrollment in June 2016. Endotoxemia
is a result of Gram negative sepsis, which only accounts for 45% of cases of sepsis. It is a potent stimulator of cytokine storm.
However, all anti-endotoxin strategies have failed pivotal studies to date, believed to be the result of intervening too late
in the sepsis cascade. The original trial was designed as a randomized control trial in 360 patients with septic shock and high
endotoxin levels (≥ 0.60 EAA units) as confirmed by Spectral’s Endotoxin Activity Assay (“EAA”). In a second
interim analysis finalized in April 2014, following the enrollment of 184 patients with 28-day follow-up, the DSMB recommended
that the trial continue. However, the expected trial size was increased to 650 patients and the exclusion criteria was modified
to only accept sicker patients with a multiple organ dysfunction syndrome score greater than 9. In September 2015, Spectral reported
that the composite mortality in the new subgroup had risen to ~50%, from ~30% previously. New statistical analysis on patients
in the new subgroup, and comparable patients in a European treatment registry, led to a sample size recalculation of 446 evaluable
patients. Spectral announced in June 2016 that they had completed enrollment for the EUPHRATES trial. In October 2016, Spectral
announced top-line results that the trial did not meet the main goal of absolute reduction in 28-day all-cause mortality, but
reiterated safety of treatment and potential benefit in the sickest group of patients (multiple organ dysfunction score > 9).
A secondary analysis of the sub-population of patients with septic shock and high circulating endotoxin activity also failed to
demonstrate a beneficial effect of Toraymyxin on 28-day mortality in sepsis, however, an exploratory post-hoc analysis of the
suggested trends toward improvements in changes in mean arterial pressure and ventilator-free days. In February 2019, Spectral
announced an amendment of the original EUPHRATES trial to enroll an additional 150 septic shock patients under the TIGRIS expansion,
in patients with a MODS score > 9 and an EAA level between 0.60 and 0.90, and will analyze the combined data from these two
trials using a Bayesian statistical approach. Based on the the 179 patients from the EUPHRATES trial, treated patients had a mortality
of 38% (N=90) compared to 485 mortality in the control (N=89), but not statistically significant. The TIGRIS study will be in
US sites only, randomized (2:1), open label trial, with an additional 150 new patients (100 treated, 50 control) to be added.
Projected trial completion at 8-10 active sites is Q3 2021.
Enlivex has developed
an investigational cell-based therapy called Allocetra that is an infusion of donor mononuclear cells that have been chemically
induced to be apoptotic. Once infused, the patient’s macrophages and dendritic cells phagocytose these apoptotic cells which
purportedly then causes them to reduce inflammatory signals that results in immune modulation. Phase I data from 6 treated patients
with sepsis, compared with matched historical controls with sepsis, will be published soon.
In 2017, a single
center, retrospective, non-randomized, unblinded before-after clinical study evaluating the effect of hydrocortisone, intravenous
Vitamin C, and thiamine in a total of 94 patients with severe sepsis and septic shock was published suggesting a significant decrease
in hospital mortality of 8.5% (4 of 47 treated) versus mortality of 40.4% (19 of 47 control), p<0.001. Mechanistically, Vitamin
C is an antioxidant that scavenges free oxygen radicals, and plays a role in preserving endothelial function and microcirculatory
flow. Thiamine is a co-factor of pyruvate dehydrogenase that is a key step in the conversion of lactate to pyruvate to acetyl-CoA,
then to the Krebs cycle, leading to a consumption of lactate. Steroids are anti-inflammatory. Vitamin C or steroids alone have
not demonstrated a significant benefit in patients with severe sepsis and septic shock in large scale clinical trials. Observational
studies in septic patients have demonstrated a deficiency in Vitamin C and thiamine. Critics of this study cite weaknesses in
the study design, and confounders such as the significantly higher incidence of renal replacement therapy in the control arm (33%
vs 10% treatment, p=0.02), that is an independent and significant risk factor for mortality in sepsis. Many compare it to another
well-known single center trial in 2001 in 263 patients that suggested a significant reduction in hospital mortality (30.5%, N=130
treatment versus 46.5%, N=133 control) due to early goal directed therapy (EGDT), which protocolized resuscitation, oxygenation,
and hemodynamic targets in the emergency room for patients with severe sepsis or septic shock prior to being admitted to the ICU.
Three subsequent large scale randomized controlled trials failed to demonstrate any benefit. Regardless, the results of the Vitamin
C, thiamine and steroid single center trial have spawned a number of randomized controlled clinical trials evaluating this therapeutic
strategy, including VICTAS, VITAMINS, ACTS, and others. The largest of these studies is VICTAS, a 2,000 patient U.S. multi-center
randomized controlled trial that started in August 2018 comparing intravenous Vitamin C, thiamine, and hydrocortisone for 4 days
or until ICU discharge versus placebo and standard of care in patients with suspected or confirmed infection and either respiratory
dysfunction requiring mechanical support or shock of less than 24 hours from enrollment. The primary outcome is vasopressor and
ventilator-free days at 30 days. The trial is expected to conclude in October 2021. The ACTS trial is a 200 patient U.S. multicenter
study that started in February 2018 comparing 4 days of treatment with intravenous Vitamin C (6g/d), thiamine (400 mg/d), and
hydrocortisone (50 mg every 6 hours) versus saline placebo in patients having suspected or confirmed infection, requiring vasopressors.
The primary endpoint is change in SOFA score in 72 hours. Expected study completion is was February 28, 2020. The VITAMINS RCT
began in Australia and New Zealand in November 2017, comparing the effect of Vitamin C (6g/d), thiamine (400 mg/d) and hydrocortisone
(50mg every 6 hours) versus hydrocortisone (50mg every 6 hours) alone, in 216 patients with septic shock and a blood lactate >
2 mmol/L, with a primary endpoint of time alive and free of vasopressors at day 7 after randomization. The results of the VITAMINS
trial were published in JAMA in January 2020, concluding that treatment with vitamin C, hydrocortisone, and thiamine, compared
with intravenous hydrocortisone alone, did not significantly improve the duration of time alive and free of vasopressor administration
over 7 days, and does not lead to a more rapid resolution of septic shock compared with intravenous hydrocortisone alone. Ninety-day
mortality was 28.6% in the treatment group, and 24.5% in the control group.
Four Phase 1 trials
and three Phase 2 trials have been posted for interventional biologics with sepsis-related indications. Sponsors of the interventional
biologic studies include Adrenomed AG, Biomedizinische Forschungs gmbH, Medical University of Vienna, Bristol-Myers Squibb, Central
Hospital, Nancy, France, Diagnostica Stago; Hospices Civils de Lyon, Bioaster, BioMérieux, Sanofi, InflaRx GmbH, Intron
Biotechnology, Inc., Enlivex, Revimmune, Washington University School of Medicine, University Hospital, Limoges, and George Clinical
Pty Ltd.
Of the registered studies,
one is not yet recruiting, one is currently recruiting, four have been completed, and one has been terminated. Primary outcomes
of the investigational biologic trials include safety and pharmacokinetic/pharmacodynamic primary outcome measures such as adverse
event rates, maximum tolerated dose, clearance rates, and distribution. Additional primary outcomes for these trials include:
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90-day all-cause mortality
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90-day mortality related to intervention
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clinical laboratory abnormalities
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interruption of infusion due to intolerability
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lymphocyte reconstitution
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presence of antibodies to biologic intervention,
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Additionally,
seven interventional device studies for sepsis-related indications have been registered since January 2013. Sponsors for
these studies include ExThera Medical Corporation, Cheetah Medical Inc., Alteco Medical AB, TFS Trial Form Support, Uppsala
University, Mespere Lifesciences Inc., Wayne State University, Magnolia Medical Technologies, Inc., PRo-IV, and Bait Balev
Hospital. Of the interventional device studies, one is currently recruiting participants, two have been completed, two were
terminated, and two are of unknown status. Primary outcomes of the interventional device studies include:
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fluid balance at 72 hours or ICU discharge
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rate of blood culture contamination, and
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successful operation of device.
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Using a medical device
to treat sepsis remains a relatively novel treatment approach. Toray Industries currently markets an endotoxin removal cartridge
called Toraymyxin™ for the treatment of sepsis in Europe, Japan, and 16 other countries, but is not yet approved in the United
States. To date, it has been used in more than 100,000 treatments since 1994. Toraymyxin does not directly reduce cytokines. Spectral
Medical Inc. has obtained exclusive development and commercial rights in the U.S. for Toraymyxin, with plans to combine the use
of its endotoxin activity assay to create a theranostic product. Spectral collaborated with Toray on the EUPHRATES trial, combining
an endotoxin assay with extracorporeal endotoxin removal by Toraymyxin, a polymyxin-B immobilized polystyrene fiber cartridge.
As noted above, the EUPHRATES trial failed to demonstrate its primary endpoint. Spectral is now pursuing an amendment to the EUPHRATES
trial, called TIGRIS. There have been now several large scale studies failing to demonstrate a benefit of Toraymyxin on 28-day
mortality in sepsis. Toraymyxin represents a competitive, although potentially complementary, therapeutic approach to CytoSorb.
In September 2017,
Baxter re-launched oXiris in the E.U., a hollow-fiber acrylonitrile and methalylsulfonate (AN69) membrane hemofilter coated with
polyethyleneimine (PEI) that was originally launched by Gambro in 2009 for use in hemodialysis as a strategy to treat acute kidney
injury and gram negative septic shock while reducing endotoxin. The filter itself has not changed. However, Baxter has expanded
the label to now include reduction of cytokines based on a set of in vitro experiments evaluating cytokine reduction from
recirculating plasma over two hours. In December 2018, Baxter began a 40 patient randomized, controlled trial, called ECRO, evaluating
the effect of endotoxin and cytokine (IL-6) removal during continuous hemofiltration with oXiris in patients with septic shock
due to peritonitis, as compared to a standard polysulfone filter. The estimated study completion date is March 2022. In addition,
Baxter also launched the Theranova mid-molecular weight cutoff or high retention onset (HRO) hemodialysis membrane to improve
the efficiency of hemodialysis, claiming improved mid-molecular weight substance removal. Neither oXiris nor Theranova are approved
in the U.S.
Each of the following
technologies claims to remove inflammatory mediators such as cytokines, or to treat sepsis, and represents a potential competitive
alternative to CytoSorb. However, to our knowledge, none of these technologies are approved in the U.S. and, with the exception
of oXiris, none are approved in the European Union to reduce cytokines.
Toray markets its
Hemofeel CH1.0 polymethylmethacrylate membrane (“PMMA”) in Japan and it has been used in several non-controlled, or
historically controlled, clinical or case studies treating patients with sepsis, acute respiratory distress syndrome and pancreatitis.
We are not aware of any prospective, randomized controlled studies using this PMMA hemofilter in patients with sepsis. Without
such studies, it is difficult to assess the true impact of this technology in these conditions. Gambro AB launched its Prismaflex
eXeed system in August 2009 and introduced the SepteX high molecular weight cutoff hemodialyzer in Europe, intended to treat patients
with acute renal failure and the removal of inflammatory mediators from blood. Gambro also launched the oXiris dialyzer, based
upon the AN69 CRRT membrane, to bind endotoxin. To our knowledge, neither are specifically approved for the treatment of sepsis.
Fresenius had launched a high molecular weight cut off filter in response to SepteX called the Ultraflux EMiC2. To our knowledge,
there has been a lack of published data on the treatment of sepsis with these devices. Bellco S.R.L, acquired by Medtronic in
February 2016, also sells the CPFA (coupled plasma filtration and adsorption) system in Europe. This uses a sorbent cartridge
to remove cytokines from plasma. However, because the sorbent cannot treat blood directly, it requires the cost and complexity
of an additional plasma separator to treat blood. In April 2018, Medtronic issued a field safety notice informing all users of
CPFA that the COMPACT-2 study using CPFA in septic shock patients was terminated early due to observed higher mortality rates
in septic shock patients receiving CPFA therapy compared to patients receiving standard care. The CPFA system is similar to the
I.M.P.A.C.T. System that was commercialized outside of the U.S. by Hemolife Medical Inc. that requires a three-cartridge system
and a proprietary blood pump. In 2018, Hemolife Medical filed for Chapter 11 bankruptcy. We believe that CytoSorb, which can treat
whole blood directly, and which works with standard hemodialysis pumps already found in hospitals worldwide, has significant competitive
advantages compared to these multi-cartridge sorbent systems.
Kaneka Corporation currently markets Lixelle™, a modified
porous cellulosic bead, for the removal of beta2–microglobulin during hemodialysis in Japan. Lixelle has been
used in several small human pilot studies including a 5 patient pilot study in 2002 and a 4 patient pilot study in 2009. Though
these studies correlate Lixelle use with cytokine reduction, they are not randomized, controlled studies and so do not control
for natural cytokine clearance. To our knowledge, no large, randomized, controlled trials have been conducted with Lixelle as a
treatment for sepsis. Kaneka obtained U.S. humanitarian device exemption for Lixelle in March 2015, but is restricted to treating
amyloidosis in chronic dialysis patients. Kaneka has since developed a modified cellulosic resin called CTR that can also remove
cytokines from experimental pre-clinical systems. In 2009, CTR was used in an 18-patient randomized, controlled trial in patients
with septic shock with undisclosed improvements in APACHE II scores and IL-6 and IL-8. To our knowledge, Kaneka has not conducted
or published any other study using CTR to treat human sepsis patients since then. To our knowledge, none of the following technologies
are approved in the U.S. and none are approved for cytokine reduction or as a therapy to treat sepsis in the EU. Jafron Biomedical
is an integrated dialysis public company in China selling dialysis machines and hemodialysis and hemoperfusion cartridges containing
a neutral microporous adsorption resin to purify blood of toxins in liver failure, critical illness, poisoning, and autoimmune
diseases. Jafron is currently recruiting a 144 patient efficacy and safety study in China using its CA330 cartridge to reduce IL-6
in septic patients. The estimated study completion date is October 2020. Foshan Biosun Medical Technology Co, Ltd, and Baihe Medical
Technology Co, market hemoperfusion cartridges under the BioSky brand name, including the MG series claiming cytokine reduction,
and the DX series for bilirubin reduction. Ube Industries, Ltd was currently developing an adsorbent resin called CF-X for the
removal of cytokines. To our knowledge, Ube has not published any study using CF-X to treat human sepsis patients. CytoPherx Inc.,
had developed an extracorporeal system based on selective cytapheresis, or the inactivation or removal of activated leukocytes.
It was enrolling a 344 patient pivotal trial that began in August 2011 and was expected to be completed by December 2014 in patients
with acute kidney injury with or without severe sepsis, on continuous renal replacement therapy with the goal of reducing mortality.
This system does not remove cytokines directly, but attempts to reduce the numbers of activated white blood cells that can produce
cytokines or cause cell-mediated injury. The company appears to no longer be in business. ExThera Medical Corporation is a privately
held company that has developed its Seraph™ (Selective Removal by Apheresis) platform that consists of heparin coated, solid
polyurethane beads. Heparin has the ability to bind some, but not all viruses, bacteria, toxins and cytokines. In in vitro
studies using 1 mL of human septic blood, there was no statistically different change in IL-6 or Interferon-gamma compared to control,
but effected a ~50% reduction in TNF-alpha. This inability to remove a broad range of cytokines will likely limit its efficacy
as a treatment in sepsis. It has repositioned Seraph™ as a pathogen removal technology, and has completed a 15 patient CE
Mark registration trial in Germany evaluating the safety and efficacy of bacterial removal from blood Received EU CE-Mark approval
in July 2019, and established distribution in Germany, Italy and Benelux.. In addition, in 2013, it partnered with BioBridge Global
to apply its technology to pathogen reduction in transfused blood products. Seraph was recently designated by FDA for inclusion
into the Expedited Access Pathway (EAP) Program for the specific application of removing drug resistant pathogens from whole blood.
We believe our CytoSorb cartridge has significant competitive, technological, and/or economic advantages over systems by these
other companies.
Acute Respiratory Distress Syndrome
Treatment of ARDS is predominantly supportive
care using supplemental oxygen, careful fluid management, multiple modes of ventilation incorporating the concepts of low tidal
volume, prone ventilation, and extracorporeal membrane oxygenation (“ECMO”). Corticosteroids, nitric oxide, statins,
non-steroidal anti-inflammatory drugs, and surfactant therapy have been tried, but are not indicated for the treatment of ARDS.
We are not aware of any specific products approved to treat ARDS.
Severe Burn Injury
Modern management of
severe burn injury patients involves a combination of therapies. From a burn standpoint, patients undergo active escharotomy and
debridement of burns, the use of skin grafts and substitutes, anti-microbial dressings and negative pressure dressings. Tight fluid
control, nutrition, prevention of hypothermia and infection are also priorities. Smoke and chemical inhalation injury in burn victims
is also common and increasing as a cause of death in severe burn injury. Carbon monoxide and cyanide poisoning is also an issue.
Supplemental oxygen, mechanical ventilation, and ECMO are often required and are the mainstay of supportive care treatment. Recently
continuous renal replacement therapy has been used to treat patients with acute kidney injury with an improvement in survival compared
to a historical control cohort. We believe CytoSorb therapy may yield improved results. We are not aware of any specific products
approved to directly address inhalational lung injury or multiple organ failure in severe burn injury.
Trauma
Trauma management initially
involves respiratory, hemodynamic and physical stabilization of the patient. However, in the days to weeks that ensue, the focus
shifts to preventing or treating organ failure and preventing or treating infection. We are not aware of any specific therapies
to prevent or treat multiple organ dysfunction or multiple organ failure in trauma. Rhabdomyolysis, or the breakdown of muscle
fibers due to crush injury or other means, occurs in trauma and can lead to acute kidney injury or renal failure. Aggressive hydration,
urine alkalinization, and forced diuresis are the main therapies to prevent renal injury. Continuous hemodiafiltration with super-high-flux
membranes has demonstrated modest myoglobin clearance but was associated with albumin loss. In general, however, most extracorporeal
therapies are not well-suited to remove myoglobin. CytoSorb reduces myoglobin, and other polymers under development, reduces myoglobin,
some without significant losses of albumin.
Severe Acute Pancreatitis
Treatment of severe
acute pancreatitis is predominantly supportive care focused on aggressive hydration, enteral nutrition and pain control. Mechanical
ventilation, hemodialysis and vasopressor use is common in cases of multiple organ failure. In cases where cholelithiasis or other
obstruction is the underlying cause of the pancreatitis, endoscopic retrograde cholangiopancreatography and/or stent placement
can be used to relieve the obstruction. Antibiotics are often instituted to prevent or treat infection. Surgery is sometimes indicated
to remove or drain necrotic or infected portions of the pancreas. To our knowledge, there are no other specific treatments approved
to treat severe acute pancreatitis or multiple organ failure that is caused by systemic inflammation in this disease.
Cardiopulmonary Bypass Surgery
There is currently
a pre-existing market for the use of leukocyte reduction filters sold by Pall Corporation, Terumo Medical Corporation and others
in the cardiopulmonary bypass circuit. The purpose of these devices is to reduce cytokine-producing white blood cells from blood.
They do not remove cytokines, free hemoglobin, or activated complement directly and are not considered by many to be an effective
solution for the reduction of these substances. Other than blood compatible sorbent technologies, we are not aware of any practical
competitive approaches for removing cytokines, free hemoglobin, activated complement, and a broad range of other inflammatory mediators
in patients undergoing cardiopulmonary bypass during cardiac surgery. To our knowledge, CytoSorb is the leading cytokine reduction
therapy capable of being placed directly into a bypass circuit in the heart-lung machine and used during cardiopulmonary bypass
without the need for another pump. Modified ultrafiltration is sometimes used after termination of cardiopulmonary bypass in cardiac
surgery to remove excess fluid and inflammatory substances, but has had mixed benefit. Cell saver machines that collect and wash
pericardial shed blood is one potential alternative, but is typically done in batches and not a real-time filter during surgery.
Alternative therapies such as “off-pump” surgeries are available but “post-bypass” syndrome and cytokine
production still remain a problem in this less invasive, but more technically challenging procedure. If successful, CytoSorb is
expected to be useful in both on-pump and off-pump procedures. CytoSorb is also being used with a dialysis machine to treat the
development of a post-cardiac surgery systemic inflammatory response syndrome, a deadly complication of open-heart surgery that
if left untreated, can lead to multiple organ dysfunction syndrome, multiple organ failure, and potentially death.
Radiocontrast Removal
ContrastSorb has demonstrated
the rapid, high efficiency single pass removal of IV contrast. The use of low osmolar IV contrast, oral administration of N-acetylcysteine,
and other agents to prevent CIN have demonstrated modest benefit in some clinical studies, but in many cases, the results across
studies have been equivocal and inconsistent. Hydration of high risk patients pre-procedure is standard of care but has limited
efficacy. PLC Medical Systems, Inc., now Renalguard Solutions, received CE Mark approval for its RenalGuard system in 2007. RenalGuard
encourages excretion of IV contrast and a reduction of CIN, by administering IV hydration that matches urine output in patients
receiving a loop diuretic. Hemodialysis can remove IV contrast, but is relatively slow (46% at 1 hour, 65% at 2 hours, and 75%
at 3 hours) in chronic renal failure patients who lack normal renal clearance. In high risk patients, the rapid and direct removal
of IV contrast from the blood with ContrastSorb to prevent CIN represents a potentially more effective alternative.
Drug Removal
Treatment of patients
suffering from drug overdose often involves a number of pharmacological treatments and mechanical interventions to detoxify and
stabilize the patient. Mechanical interventions include procedures such as orogastric lavage, activated charcoal, whole bowel irrigation
and extracorporeal blood purification. Each method has its own limitations, many of which are associated with the timing of administration
following overdose. Blood purification with high flux dialyzers or with activated charcoal cartridges by Gambro, Fresenius, Nephros
and others are typically efficient at removing hydrophilic drugs that are not protein bound. However, they are inefficient at removing
drugs that have a large volume of distribution, or drugs that are hydrophobic or lipophilic. Many drugs of overdose fall into this
category. The administration of lipid emulsions, such as Intralipid, have been used with some success to create a depot for lipophilic
drugs. Resin based hemoperfusion devices have been used to remove lipophilic drugs that are protein bound, but have historically
had issues of biocompatibility. DrugSorb is a highly biocompatible resin-based hemoperfusion device that can remove a wide range
of drugs of overdose in vitro very rapidly, with high single pass removal.
Chronic Dialysis
Although standard dialysis
treatment effectively removes urea and creatinine from the blood stream (which are normally filtered by functioning kidneys), standard
dialysis has not been effective in removing beta2 -microglobulin toxins from the blood of patients suffering from chronic
kidney failure. High flux dialyzers by Gambro, Fresenius, Nephros and others are capable of removing some beta2-microglobulin.
However, we believe our technology would significantly improve clearance of this and other toxins. Kaneka markets Lixelle™,
a cellulosic resin, outside the US to remove beta2-microglobulin in dialysis patients. In March 2015, Lixelle received
Humanitarian Device Exemption (“HDE”) approval in the U.S. for the treatment of beta-amyloidosis and removal of beta2–microglobulin
, a complication of chronic dialysis. HDE approval applies to the treatment of diseases with an incidence of less than 8,000 cases
a year in the U.S. annually. Other than blood compatible sorbents, we know of no other device, medication or therapy considered
directly competitive with our technology.
Treatment of Organ Dysfunction in Brain-Dead Organ Donors
We are not aware of
any directly competitive products to address the application of our technology for the mitigation of organ dysfunction and failure
resulting from severe inflammation following brain-death.
Removal of Anti-thrombotics such as Ticagrelor in Cardiac
Patients During Surgery Requiring Cardiopulmonary Bypass
There are more than
$20 billion in annual worldwide sales of anti-thrombotic drugs such as the P2Y12 platelet inhibitors (e.g. clopidogrel,
ticagrelor, prasugrel), thrombin inhibitors (dabigatran), and the Factor Xa inhibitors (e.g. apixaban, rivaroxaban). These are
generally used to reduce thromboembolic events in a wide range of applications, including dual anti-platelet therapy in percutaneous
coronary intervention and stent placement, myocardial infarction, stroke, peripheral artery disease, atrial fibrillation, deep
vein thrombosis, pulmonary embolus, and others. For example, ticagrelor (Brilinta®, Astra Zeneca) is a widely-used anti-platelet
agent used to decrease cardiovascular risk and risk of stroke in patients with a known history of heart disease or heart attack.
It is also widely used during dual-anti platelet therapy in patients with acute coronary syndrome undergoing percutaneous coronary
intervention and stent placement. However, when patients on ticagrelor require emergent or urgent cardiac surgery, up to 65% of
patients will have severe or massive peri-operative bleeding complications, based on the PLATO Trial, that contributes to a high
risk of morbidity and death and major costs to the healthcare system. CytoSorb has already demonstrated the ability to remove ticagrelor
rapidly and efficiently from human blood in vitro. Meanwhile, a retrospective case series reported by clinicians at Asklepios
Klinik St. Georg in Hamburg, Germany on the investigational use of CytoSorb to reverse the effects of ticagrelor and the Factor
Xa inhibitor, rivaroxaban, during emergency cardiac surgery demonstrated a greatly reduced risk of bleeding complications and the
need for repeat surgery to explore the source of bleeding, with extrapolations showing projected cost savings of £3,982,
or approximately $5,000 USD, per patient in a U.K. based study. CytoSorb recently received E.U. CE Mark label expansion to remove
ticagrelor during cardiac surgery involving cardiopulmonary bypass via label expansion of its CE Mark. We are currently
conducting the 30-patient, single arm trial in the United Kingdom called the TISORB trial, obtaining more country-specific data
to support the use of CytoSorb to remove ticagrelor in emergent or urgent cardiac surgery to reduce perioperatively bleeding complications.
Of the anti-platelet
agents, only ticagrelor is technically reversible. Other than CytoSorb, there is no approved reversal agent for ticagrelor in the
European Union. However, PhaseBio, a clinical-stage biopharmaceutical company focused on the development and commercialization
of novel therapies to treat orphan diseases, has licensed an intravenously administered Fab antibody fragment with high affinity
for ticagrelor called PB2452 from Medimmune, a division of AstraZeneca. The company paid AstraZeneca $100,000 upfront, with $68
million in potential future milestones. AstraZeneca owns approximately 5% of PhaseBio’s stock.PB2452 is a novel reversal
agent for the antiplatelet drug ticagrelor, which was developed for the treatment of patients on ticagrelor who are experiencing
a major bleeding event or those who require urgent surgery. PhaseBio is seeking US FDA approval of PB2452 in the United States
through an accelerated approval process. In its Phase 1 clinical trial of PB2452, PhaseBio observed immediate and complete reversal
of ticagrelor’s antiplatelet activity within five minutes following initiation of infusion and sustained reversal for over
20 hours in dosing cohorts in which they administered PB2452 over an extended infusion period.
PhaseBio recently completed
a Phase 2a clinical trial of PB2452 in older and elderly subjects dosed with ticagrelor and aspirin and in healthy younger subjects
on supratherapeutic doses of ticagrelor where they observed a statistically significant reversal of ticagrelor within 5 minutes
of initiation of PB2452 infusion, that was sustained for over 20 hours. Platelet function was normalized by 15 minutes (30 minutes
for the supratherapeutic ticagrelor-dose cohort) following initiation of PB2452 infusion and remained normal for over 20 hours.
PB2452 was generally well-tolerated, with only minor adverse events reported. These results are consistent with results observed
in healthy younger subjects treated with ticagrelor in the Phase 1 trial. The older and elderly subjects in the Phase 2a trial
resemble the patient population most likely to be treated with ticagrelor and to potentially benefit from PB2452, if approved.
The company is currently conducting a U.S. Phase 2b clinical study evaluating the safety and efficacy of PB2452 in approximately
200 healthy volunteers aged 50-80. Patients will receive loading with dual anti-platelet therapy consisting of aspirin and ticagrelor
in the U.S. and will be evaluated on the ability of PB2452 to reverse platelet dysfunction.
The FDA granted Breakthrough
Therapy designation for PB2452 in April 2019. Based on feedback from the FDA, PhaseBio intends to submit a Biologics License Application,
or BLA, for potential accelerated approval based on an interim analysis of the first approximately 100 patients treated in their
Phase 3 trial, with approximately 50 subjects from each of the major bleeding and surgical populations. They expect to initiate
a Phase 3 trial in the first quarter of 2020. Based on an 18-month estimated enrollment timeline for the first 100 patients in
the Phase 3 trial, PhaseBio expects to submit a BLA for PB2452 in the second half of 2022. To support full approval for patients
with major bleeding or requiring urgent surgery, the FDA recommended enrollment of 200 total patients in the Phase 3 trial. For
post-approval commitments, the FDA recommended the completion of the remaining portions of the Phase 3 trial and the establishment
of post-approval registry.
Meanwhile, Portola
Pharmaceuticals is currently commercializing the biologic Andexxa, as a reversal agent for Factor Xa inhibitors. Andexxa generated
more than $110 million in sales in 2019. Andexxa is a Factor Xa analog that competes for binding to Factor Xa inhibitors. Due to
the short duration of action, pro-thrombotic effect, and very high cost, it is not ideally suited to reduce the risk of perioperative
bleeding in cardiac surgery. CytoSorb has demonstrated the ability to rapidly remove both rivaroxaban (Xarelto®; Bayer, Janssen)
and apixaban (Eliquis®, Bristol-Myers Squibb) from whole blood.
We believe that CytoSorb
represents a more cost-effective, readily available, and easy to implement solution for ticagrelor or Factor Xa inhibitor reversal
in cardiac surgery than these biologic alternatives.
HemoDefend Purification Technology Platform for Transfused
Blood Products
There are only a few
directly competitive approved products to address the removal of substances from blood and blood products that can cause transfusion
reactions. Leukoreduction (Haemonetics, Terumo-BCT, Hemerus Corporation, others) is widely used in transfusion medicine and
can remove the majority of white cells that can produce new cytokines but cannot eliminate those cytokines already in blood, and
cannot otherwise remove other causative agents. Automated washing of pRBC is very effective at cleansing contaminants from blood,
but is impractical due to the time, cost, materials, and logistics of washing each unit of blood and is not widely used. Blood
filters that utilize affinity technologies are in development to remove certain substances such as antibodies from blood, but have
other issues, such as cost and concern about the stability or leachability of the affinity technology. The HemoDefend platform
represents a potentially superior alternative to these methods, as it can provide comprehensive removal of a wide variety of contaminants
that can trigger transfusion reactions without washing blood, requires no additional equipment, energy source, or manipulation,
and can be incorporated directly into the blood storage bag or used as an in-line blood filter.
Clinical Studies
Our first clinical
studies were conducted in patients with chronic renal failure. The health of these patients is challenged by high levels of toxins
circulating in their blood but, unlike sepsis patients, they are not at imminent risk of death. The toxins involved in chronic
renal failure are generally different from those involved in sepsis, eroding health gradually over time. The treatment of patients
with chronic renal failure is a significant target market for us, although not the current focus of our efforts and resources.
Our clinical studies and product development work in this application functioned to obtain safety and instrument data without the
need to put the patient at additional risk (e.g. placing a new temporary dialysis catheter), with direct benefit to the development
of the critical care applications on which we are now focusing our efforts.
We are focusing our research efforts on
critical care and cardiac surgery applications of our technology.
Sepsis
In 2011, the CytoSorb
filter received EU regulatory approval under the CE Mark as an extracorporeal cytokine filter to be used in clinical situations
where cytokines are elevated. As part of the CE Mark process, in 2011 we completed our randomized, controlled, European Sepsis
Trial amongst 14 trial sites in Germany, with enrollment of 100 patients with sepsis and respiratory failure. The trial established
that CytoSorb was sufficiently safe in this critically-ill population to support the CE mark and published in PLOS ONE. In the
European Sepsis Trial, the treatment was well-tolerated with no serious device related adverse events reported. The trial also
demonstrated the ability of CytoSorb to reduce cytokines such as IL-6 from the blood of septic patients. The trial was not powered
to demonstrate significant reduction in other clinical endpoints such as mortality.
Cardiac Surgery
In February 2015, the
U.S. Food and Drug Administration (the “FDA”) approved our Investigational Device Exemption (“IDE”) application
to commence a planned U.S. cardiac surgery feasibility study called REFRESH I (REduction of FREe Hemoglobin) amongst 20 patients
and three U.S. clinical sites. The FDA subsequently approved an amendment to the protocol, expanding the study to a 40 patient
randomized controlled study (20 treatment, 20 control) in eight clinical centers. REFRESH I represented the first part of a larger
clinical trial strategy intended to support the approval of CytoSorb in the U.S. for intra-operative use during cardiac surgery.
The REFRESH I study
was designed to evaluate the safety and feasibility of CytoSorb when used intra-operatively with a heart-lung machine to reduce
plasma free hemoglobin (pfHb) and cytokines in patients undergoing complex cardiac surgery. The study was not powered to
measure effect on clinical outcomes. The length, complexity and invasiveness of these procedures cause hemolysis and inflammation,
leading to high levels of plasma free hemoglobin, cytokines, activated complement, and other substances. These inflammatory
mediators are correlated with the incidence of serious post-operative complications such as kidney injury, renal failure and other
organ dysfunction. The goal of CytoSorb is to actively remove these inflammatory and toxic substances as they are being generated
during the surgery and reduce complications. Enrollment was completed with 46 patients. A total of 38 patients were evaluable for
pfHb and completed all aspects of the study.
The primary safety
and efficacy endpoints of the study were the assessment of serious device related adverse events and the change in plasma free
hemoglobin levels, respectively. On October 5, 2016, we announced positive top-line safety data. In addition, following a
detailed review of all reported adverse events in a total of 46 enrolled patients, the independent Data Safety Monitoring Board
(“DSMB”) found no serious device related adverse events with the CytoSorb device, achieving the primary safety endpoint
of the study. In addition, the therapy was well-tolerated and technically feasible, implementing easily into the cardiopulmonary
bypass circuit without the need for an additional external blood pump. The REFRESH I study represented the first randomized
controlled study demonstrating the safety of intra-operative CytoSorb use in patients undergoing high risk cardiac operations.
Investigators of the
REFRESH I study submitted an abstract with data, including free hemoglobin data, from the REFRESH I study which was selected for
a podium presentation at the American Association of Thoracic Surgery conference on May 1, 2017. On May 5, 2017, we announced additional
REFRESH I data, including data from the study on the reduction of pfHb and activated complement, and in May 2019, the manuscript
of the REFRESH I study was electronically published in the journal, Seminars in Thoracic and Cardiovascular Surgery.
In December 2017,
the FDA approved our IDE application for our REFRESH 2-AKI study, permitting us to conduct this pivotal study designed to provide
the key safety and efficacy data needed to support United States regulatory approval for CytoSorb in cardiac surgery, which we
plan to pursue via the premarket approval (PMA) pathway. The REFRESH 2-AKI study is a randomized, controlled, multi-center,
clinical study designed to evaluate intraoperative CytoSorb use as a therapy to reduce the incidence and severity of AKI, as measured
by Kidney Disease Improving Global Outcomes (KDIGO) criteria, following complex cardiac surgery. Postoperative AKI following
cardiac surgery is common and is associated with 1-5 year mortality, and is a risk factor for developing chronic kidney disease
requiring hemodialysis in the future. The study will enroll up to 400 patients at increased risk of cardiovascular surgery-associated
AKI, undergoing elective, non-emergent open-heart surgery for either valve replacement, or aortic reconstruction with hypothermic
cardiac arrest. In April 2018, we announced the first patient enrollment into the pivotal U.S. REFRESH 2-AKI study. Based on the
recommendations of key clinical advisors, a protocol amendment was submitted to the FDA on July 19, 2018 to improve operational
aspects of the patient screening process and expand the inclusion criteria. It was the preference of clinical trial sites
to defer enrollment until the amendment was approved by the FDA, announced in September 2018. On November 25, 2019 the Company
announced a pause in enrollment for the REFRESH 2-AKI study. The study’s Data Monitoring Committee (the “DMC”)
recommended this pause following a blinded, interim, milestone review of clinical study data. The DMC requested that additional
clinical data and data analysis, not pre-specified in the current version of the protocol, be provided by Company. In addition,
the Company appointed NAMSA as the new contract research organization (“CRO”) for the study to improve the monitoring
of patient safety endpoints. As of November 25, 2019, the study had enrolled 153 patients at 25 initiated sites. Assuming a timely
restart of the study expected by mid-year 2020, we anticipate progressing to a pre-specified interim analysis at 200 patients
enrolled, where the DMC will evaluate the trial for safety and futility, by Q4 2020-Q1 2021. Assuming no changes to the trial
by the DMC, we expect to complete enrollment in the REFRESH 2-AKI study by the end of 2021. However, there can be no assurance
the study will be restarted or will enroll patients in a timely manner. We cannot predict the outcome of a DMC-led interim analysis,
which could have a number of different outcomes such as: 1) continuation of the trial unchanged 2) continuation of trial but with
modifications such as an expansion of the study or a change in the protocol 3) discontinuation of the study due to futility 4)
termination of the study by the FDA or DMC due to potential new safety signals, or 5) other outcomes. These outcomes may trigger
business and/or clinical decisions on the trial based on factors such as the cost, timing, probability of success of the study,
and other factors. Because of this, there can be no assurances that trial will continue or have a positive outcome. However, if
the study is successful, we plan to submit a PMA application to the FDA in 2022 for U.S. regulatory approval.
The German government,
via the German Federal Ministry of Education and Research, is funding a 250 patient, multi-center randomized, controlled study
(“REMOVE”) using CytoSorb during valve replacement open heart surgery in patients with infective endocarditis. The
study enrolled its first patient in January 2018. An interim analysis of the first 50 patients has been completed. On February
4, 2019, Prof. Dr. med. Frank Brunkhorst, Director of the Center for Clinical Studies at Jena University Hospital, who is
providing management and oversight to the REMOVE study, and Prof. Dr. med. Torsten Doenst, Director of the Clinic for Cardiac and
Thoracic Surgery at the University of Jena, provided the following joint statement, “The Scientific Advisory Board (SAB)
of the Center of Sepsis Control and Care (CSCC) and the Data Safety Monitoring Board (DSMB) of the REMOVE study recommended continuation
of the study, based upon results of a pre-specified interim analysis that analyzed cytokine and vasoactive mediator levels as an
indicator of the mechanistic mode of action of the device in 28 CytoSorb-treated patients and 22 control patients. There
were no device-associated adverse events in the CytoSorb group.” As of January 31, 2020, enrollment of the study was complete
with 288 patients enrolled. Analysis of the study data and issuance of the study report is anticipated to be completed by the mid-2020.
In September 2019,
we announced that Hannover Medical School in Germany will begin the first clinical study, called CYTORELEASE, evaluating
the use of CytoSorb in treating CRS and inflammation of the brain called CAR-related Encephalopathy Syndrome (“CRES”),
following CAR-T cell immunotherapy. The CYTORELEASE trial, entitled “Effectivity of Extracorporeal Cytokine Adsorption
(CytoSorb) as Additive Treatment of CAR-T Cell Associated Cytokine Release Syndrome (“CRS”) and Encephalopathy Syndrome
(“CRES”),” is a randomized, controlled pilot study in 34 cancer patients who have received CAR-T cell immunotherapy
and who have developed either severe CRS or CRES for a duration less than 6 hours. Patients will receive either standard
of care therapy versus standard of care therapy plus CytoSorb hemoadsorption. The primary endpoint of the study is a plasma
reduction of the pro-inflammatory cytokine interleukin-6 (IL-6). Secondary and exploratory endpoints will examine other potential
clinical benefits such as improvements in CRES, shock, and other organ injury. The trial has been approved by the Hannover
Medical School ethics committee and has been screening patients for enrollment.
In
September 2019, a new publication entitled, "Hemoadsorption with CytoSorb showed a decreased observed versus expected 28-day
all-cause mortality in ICU patients with septic shock: a propensity-score-weighted retrospective study," in the journal Critical
Care. In this study, clinical researchers at Maasstad Hospital and at Erasmus University Medical Center in Rotterdam, Netherlands
conducted a retrospective evaluation of 116 patients with septic shock, who required vasopressors to increase their blood pressure,
and renal replacement therapy (RRT) due to kidney failure. Of these, 49 patients received standard of care therapy, and
67 were treated with standard of care plus CytoSorb. Both groups were compared by stabilized Inverse Probability of Treatment
Weights (sIPTW) to overcome baseline differences in the type of sepsis, age, comorbidities, surgery vs no surgery, Sequential
Organ Failure Assessment (SOFA) score, use of the vasopressor noradrenaline, and lactate levels. Patients treated with standard
of care and CytoSorb had a statistically significant reduction in 28-day all-cause mortality compared to standard of care alone
(53% vs 72% control, p<0.04), based on the sIPTW analysis. In addition, observed 28-day all-cause mortality in the CytoSorb
treatment group was significantly lower than the predicted mortality (48% observed vs 75% predicted, p<0.001), based on SOFA
score.
In October 2019,
CytoSorbents initiated TISORB (Ticagrelor CytoSorb Hemoadsorption), a Company-sponsored, multicenter study in the United
Kingdom to prospectively evaluate the removal of ticagrelor during cardiopulmonary bypass in patients on ticagrelor
undergoing emergent cardiothoracic surgery. Ticagrelor (Brilinta®, Astra Zeneca) is a potent platelet inhibitor and
antithrombotic therapy and recognized as standard of care to reduce the risk of heart attacks and strokes in patients with
advanced cardiovascular disease. Unfortunately, given the absence of an approved treatment to reverse the antithrombotic
effects of ticagrelor, the approximately 4% of patients requiring emergency cardiothoracic surgery experience an upto 65%
risk of severe or massive perioperative bleeding with potential negative clinical outcomes or death, with significantly
increased costs to the hospital and healthcare system. On October 5, 2019, we presented
data showing the cost effectiveness of CytoSorb when used intraoperatively to remove ticagrelor in patients undergoing
emergency open heart surgery at the 33rd Annual Meeting of the European Association for Cardio-Thoracic
Surgery (EACTS). This study predicts an average cost savings of £3,982 per patient (approximately $5,000
USD per patient), including the cost of the CytoSorb adsorber. The primary endpoint of the TISORB study is the change in platelet
reactivity and ticagrelor blood concentration before and after cardiopulmonary bypass for patients undergoing CytoSorb hemoadsorption
removal of ticagrelor from their blood. A protocol amendment was submitted to expand the population of eligible patients to now
include patients requiring urgent cardiac surgery, and third-party consent. These changes were approved by the UK Medicines and
Healthcare products Regulatory Agency (MHRA) at the end of February, with approvals pending from the key regional ethics committees
(RECs). We intend to enroll thirty patients who will have received ticagrelor within 48 hours of undergoing emergent or urgent
cardiothoracic surgery with cardiopulmonary bypass. As of March 5, 2020, the Company has initiated six sites and one patient has
been enrolled. Once we receive REC approvals, enrollment is expected to accelerate and be complete in the second half of 2020.
In January 2020, CytoSorb received E.U. CE Mark label expansion to include the removal of ticagrelor.
Government Research Grants
We have historically
been successful in obtaining technology development contracts from governmental agencies such as the National Institutes of Health
and the U.S. Department of Defense, including the Defense Advanced Research Projects Agency (“DARPA”), the U.S. Army,
U.S. Special Operations Command (“USSOCOM”), the U.S. Air Force, Air Force Material Command (“USAF/AFMC”)
and others. Currently, we have ongoing projects funded, in part, by the U.S. Army Medical Research Acquisition Activity (“USAMRAA”),
the NHLBI, and the USAF/AFMC.
In August 2012, we
were awarded a $3.8 million, five-year contract by DARPA for our “Dialysis-Like Therapeutics” (“DLT”) program
to treat sepsis. DARPA has been instrumental in funding many of the major technological and medical advances since its inception
in 1958, including development of the Internet, development of GPS, and robotic surgery. The DLT program in sepsis sought to develop
a therapeutic blood purification device that was capable of identifying the cause of sepsis (e.g., cytokines, toxins, pathogens,
activated cells) and remove these substances in an intelligent, automated, and efficient manner. Our contract was for advanced
technology development of our hemocompatible porous polymer technologies to remove cytokines and a number of pathogen and biowarfare
toxins from blood. We have completed our work under the contract with DARPA and SSC Pacific under Contract No. N66001-12-C-4199,
that provided for maximum funding of approximately $3,825,000. We received approximately $3,825,000 in funding under this contract
and no funding remains. Our performance under this contract has been completed.
In September 2012,
we were awarded a Phase II SBIR contract by the U.S. Army Medical Research and Material Command to evaluate our technology for
the treatment of trauma and burn injury in large animal models. In 2013, we finalized the Phase II SBIR contract which provided
for a maximum funding of approximately $803,000 with the granting agency. This work is supported by the U.S. Army Medical Research
and Material Command under an amendment to Contract W81XWH-12-C-0038. In June 2016, this contract was further amended to increase
the maximum funding by $443,000 to approximately $1,246,000. We received approximately $1,246,000 in funding under this contract
and no funding remains. Our performance under this contract has been completed.
In September 2013,
the National Heart Lung and Blood Institute (“NHLBI”) awarded us a Phase I Small Business Innovation Research (“SBIR”)
contract, (number HHSN-268201-300044C), valued at $203,351, to further advance our HemoDefend blood purification technology for
pRBC transfusions. The University of Dartmouth collaborated with us as a subcontractor on the project, entitled “Elimination
of blood contaminants from pRBCs using HemoDefend hemocompatible porous polymer beads.” The overall goal of this program
was to reduce the risk of potential side effects of blood transfusions, and help to extend the useful life of pRBCs. Our performance
under this contract has been completed.
In October 2015, we
were awarded a Phase II SBIR contract by the NHLBI and USSOCOM to help advance our HemoDefend blood purification technology towards
commercialization for the purification of pRBC transfusions. The contract, entitled “pRBCs Contaminant Removal with Porous
Polymer Beads”, (contract number HHSN-268201-600006C), provided for maximum funding of approximately $1,524,000 over a two-year
period. We received approximately $1,524,000 under this contract and no funding remains. Our performance under this contract has
been completed.
In March 2016, we were
awarded a Phase I SBIR contract for a development program entitled “Mycotoxin Adsorption with Hemocompatible Porous Polymer
Beads.” The purpose of this contract was to develop effective blood purification countermeasures for weaponized mycotoxins
that can be easily disseminated in water, food and air. This work was funded by the U.S. Joint Program Executive Office for Chemical
and Biological Defense, or JPEO-CBD, under contract number W911QY-16-P-0048 and provided for maximum funding of $150,000.
We received approximately $150,000 and no funding remains under this contract. Our performance under this contract has been completed.
In June 2016, we were
awarded a Phase I Small Business Technology Transfer (“STTR”) contract for its development program entitled “Use
of Highly Porous Polymer Beads to Remove Anti-A and Anti-B antibodies from Plasma for Transfusion”. The purpose of this contract
was to develop our HemoDefend blood purification technology to potentially enable universal plasma. This work was funded by the
USAMRAA under contract W81XWH-16-C-0025 and provided for maximum funding of $150,000. We received approximately $150,000 and no
funding remains under this contract. Our performance under this contract has been completed.
In July 2016, we were
awarded a Phase I SBIR contract for its development program entitled “Investigation of a sorbent-based potassium adsorber
for the treatment of hyperkalemia induced by traumatic injury and acute kidney injury in austere conditions”. The objective
of this Phase I project was to develop two novel and distinct treatment options for life-threatening hyperkalemia. This work was
funded by the U.S. Army Medical Research Acquisition Activity (“USAMRAA”) under contract W81XWH-16-C-0080 and provided
for maximum funding of approximately $150,000. We received approximately $150,000 and no funding remains under this contract. Our
performance under this contract has been completed.
In January 2017, we
were awarded a Phase II SBIR contract to continue development of CytoSorb for fungal mycotoxin blood purification. This program
focused on demonstrating the ability of CytoSorb to adsorb mycotoxins in vivo and improve survival in animals. This contract,
W911QY-17-C-0007, provided for maximum funding of $999,996 over two years. This program was funded by the Joint Program Executive
Office - Chemical and Biological Defense (“CBD”) SBIR program. As of December 31, 2019, we received approximately $999,996
in funding under this contract and no further funding remains under this contract. Our performance under this contract has been
completed.
In May 2017, we were
awarded a Phase II STTR contract entitled “Use of Highly Porous Polymer Beads to Remove Anti-A and Anti-B Antibiotics from
Plasma Transfusion”. The purpose of this contract is to continue development of our HemoDefend blood purification technology
to potentially enable universal plasma. We collaborate with researchers at Penn State University on this project. This contract
provides for maximum funding of $999,070 over two years. This work is being funded by the USAMRAA under contract number W81XWH-17-C-0053.
As of December 31, 2019, we received approximately $999,070 and no further funding remaining under this contract. Our performance
under this contract has been completed.
In May 2017, the Company
was awarded a Congressionally Directed Medical Research Program (“CDMRP”) Phase I contract to improve delayed evacuation
and prolonged field care for severe burn injury via novel hemoadsorptive and hydration therapies. This work is being funded by
the USAMRAA under contract number W81WH-17-2-0013. This contract provides for maximum funding of $719,000 over four years. As of
December 31, 2019, we received approximately $507,000 and have approximately $212,000 remaining under this contract.
In September 2017,
the Company was awarded a Phase II SBIR contract for its development program entitled “Investigation of a sorbent-based potassium
adsorber for the treatment of hyperkalemia induced by traumatic injury and acute kidney injury”. The purpose of this contract
is to continue development of two novel and distinct treatment options for life-threatening hyperkalemia. This work is being funded
by the USAMRAA under contract W81XWH-17-C-0142 and provides for maximum funding of approximately $999,871. As of December 31, 2019,
we received approximately $873,000 and have approximately $127,000 remaining under this contract.
In August 2018, the
Company was awarded a Phase IIB Bridge SBIR contract by the NHLBI to facilitate and accelerate the commercialization of our HemoDefend
blood purification technology for the purification of pRBC transfusions. The contract, entitled “pRBCs Contaminant Removal
with Hemocompatible Porous Polymer Beads” (award number 2R44HL141928-03), provides for maximum funding of approximately $2,971,000
over a three-year period. As of December 31, 2019, we received approximately $1,222,000 in funding under this contract and have
approximately $1,749,000 remaining under this contract. Under the terms of this contract, we must make a matching contribution
equal to the funds awarded thereunder.
In September 2019,
the Company was awarded a Rapid Innovation Fund contract by the USAF/AFMC to develop a simple, easy-to-use renal support system
to treat severe hyperkalemia. The contract, entitled “K+ontrol Renal Support System for Reduction of Hyperkalemia”
(award number FA8650-19-C-6065), provides for maximum funding of approximately $2,960,000 over a two-year period. As of December
31, 2019, we received approximately $174,000 funding under this contract and have approximately $2,786,000 remaining under this
contract.
Our business could
be adversely impacted by automatic cuts in Federal spending. The American Taxpayer Relief Act (“ATRA”) of
2012, referred to generally as the fiscal cliff deal, that went into effect on March 1, 2013, enacted automatic spending cuts of
nearly $1 trillion over the next 10 years (commonly known as sequestration) that were included under the Budget Control Act of
2011. Sequestration may delay payments under the SBIR grant agreements, although no material delays have occurred
to date. The short term and long-term economic impact of the sequestration will not be known until the actual spending cuts are
implemented and the economic impact of the changes in the budget and taxes are known. It will take an extended number of years
to understand the impact of any changes brought about from the sequester.
These grants represent
a substantial research cost savings to us and we believe demonstrate the strong interest of the medical and scientific communities
in our technology. We are also exploring potential eligibility in several other government-sponsored grant programs which could,
if approved, represent a future source of non-dilutive funds for our research programs.
Regulation
The medical devices
that we manufacture are subject to regulation by numerous regulatory bodies, including the FDA and comparable international regulatory
agencies. These agencies require manufacturers of medical devices to comply with applicable laws and regulations governing the
development, testing, manufacturing, labeling, marketing and distribution of medical devices. Devices are generally subject to
varying levels of regulatory control, the most comprehensive of which requires that a clinical evaluation program be conducted
before a device receives approval for commercial distribution.
In the EU,
medical devices that we manufacture are (until May 26, 2022) required to comply with the Medical Devices Directive 93/42/EC
(“MDD”) (one of the three medical device directives with the other two covering active implantable medical
devices and in vetro diagnostic devices, respectively) and obtain CE Mark certification in order to market medical devices.
The CE Mark certification, granted following approval from an independent notified body, is an EU-wide international symbol
evidencing adherence to quality assurance standards and compliance with the MDD or other applicable European Medical Devices
Directives. Distributors of medical devices may also be required to comply with other foreign regulations such as Ministry of
Health Labor and Welfare approval in Japan. The time required to obtain these foreign approvals to market our products may be
longer or shorter than that required in the U.S., and requirements for those approvals may differ from those required by the
FDA. In Europe, our devices are classified as Class IIb, and conform to the MDD. As of May 27, 2020, devices that have not
received CE Mark renewal under the MDD or where existing device or processes are substantially amended, certification would
be required in accordance with the new European Union Medical Device Regulation (“MDR”) in order to maintain CE
Mark approval. However, devices already certified under the MDD can continue to use the CE Mark under the MDD until the
expiry of those MDD CE Marks and in August of 2019, we announced that CytoSorb received of its E.U. CE Mark through May
2024.
In March 2011, we successfully
completed our technical file review with our notified body, and received approval to apply the CE Mark to the CytoSorb device as
an extracorporeal cytokine filter. We 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 EU. In February 2015, we extended the coverage of
our ISO 13485 Certificate with the inclusion of Canadian Quality Systems requirements. This additional level of certification will
allow us to apply for product approvals in Canada in the future.
In June 2016, we successfully
completed an ISO 13485:2003 annual surveillance audit maintaining our good standing with our notified body. In September 2016,
we were granted a two-year renewal for the CytoSorb CE Mark. In June 2018, we received clearance from our notified body to begin
production in our new manufacturing facility. In July 2018, we successfully completed an audit upgrade from an ISO 13485:2003 certification
to an ISO 13485:2016 certification, which is valid through September 2022.
In the U.S., specific
permission from FDA to distribute a new device is usually required (that is, other than in the case of very low risk devices),
and we expect that some form of marketing authorization will be necessary for our devices. Marketing authorization is generally
sought and obtained in one of three ways. The first process requires that a pre-market notification (510(k) Submission) be made
to the FDA to demonstrate that the device is as safe and effective as, or “substantially equivalent” to, a legally
marketed device that is not subject to pre-market approval (“PMA”). A legally marketed device is a device that (i)
was legally marketed prior to May 28, 1976, (ii) has been reclassified from Class III to Class II or I, or (iii) has been found
to be substantially equivalent to another legally marketed device following a 510(k) Submission. The legally marketed device to
which equivalence is drawn is known as the “predicate” device. Applicants must submit descriptive data and, when necessary,
performance data to establish that the device is substantially equivalent to a predicate device. In some instances, data from
human clinical studies must also be submitted in support of a 510(k) Submission. If so, these data must be collected in a manner
that conforms with specific requirements in accordance with federal regulations including the Investigational Device Exemption
(IDE) and human subjects protections or “Good Clinical Practice” regulations. After the 510(k) application is submitted,
the applicant cannot market the device unless FDA issues “510(k) clearance” deeming the device substantially equivalent.
The FDA’s 510(k) review process usually takes from three to six months, but may take longer. The FDA may require additional
information, including clinical data, to make a determination regarding substantial equivalence. After an applicant has obtained
clearance, the changes to existing devices covered by a 510(k) Submission which do not significantly affect safety or effectiveness
can generally be made without additional 510(k) Submissions, but evaluation of whether a new 510(k) is needed is a complex regulatory
issue, and changes must be evaluated on an ongoing basis to determine whether a proposed change triggers the need for a new 510(k),
or even PMA (pr de novo). The 510(k) clearance pathway is not available for all devices: whether it is a suitable path
to market depends on several factors, including regulatory classifications, the intended use of the device, and technical and
risk-related issues for the device. Should a suitable predicate device not be available, the second pathway is the de novo request
pathway. The de novo pathway is available for novel device technologies, including novel device changes, that have not
been previously classified by FDA and for which there is no suitable predicate device. To obtain marketing authorization via the
de novo pathway, the applicant must show that the subject device can be reclassified as Class I or Class II. The de
novo request pathway typically requires additional testing data, which may include clinical data.
The third, more rigorous,
process requires that an application for PMA be made to the FDA to demonstrate that the device is safe and effective for its intended
use as manufactured. This approval process applies to most Class III devices. A PMA submission is the most burdensome FDA premarket
submission type for devices and includes data regarding design, materials, bench and animal testing, and human clinical data for
the medical device. Again, clinical trials are subject to extensive FDA regulation.
Following completion
of clinical trials, an applicant will submit a PMA with the required data. Within 45 days after a PMA is received by the FDA, the
agency will notify the applicant whether the application has been “filed” (a threshold determination that the application
is sufficiently complete to begin an in-depth review), then a substantive review period begins on the date of filing. Although
the stated regulatory timeframe for the FDA’s review of PMAs is 180 days, FDA does not meet this goal for all applications;
review often takes at least one year and may take significantly longer. During this review period, the FDA may request additional
information or clarification of information already provided. Also during the review period, an advisory panel of experts from
outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA. In addition, the
FDA will conduct a pre-approval inspection of the manufacturing facilities to evaluate compliance with the FDA’s Quality
System Regulation (“OSR”), which requires manufacturers to implement and follow design, testing, control, documentation
and other quality assurance and good manufacturing practice procedures.
Following review of
a PMA, the FDA will authorize commercial distribution if it determines there is reasonable assurance that the medical device is
safe and effective for its intended purpose. This determination is based on the benefit outweighing the risk for the population
intended to be treated with the device. Alternatively the agency may issue an “approvable letter” or “not approvable
letter” identifying deficiencies of varying degrees, or issue an order denying approval. The PMA process is much more detailed,
time-consuming, and expensive than the 510(k) process. Also, FDA may impose a variety of conditions on the approval of a PMA.
In the U.S., we believe
that our potential devices, if we were to pursue marketing authorization, would likely fall under the classification for “Sorbent
Hemoperfusion Systems” (21 C.F.R. § 876.5870). This category of device is Class II (subject to a 510(k) and special
controls) when the device is intended for the treatment of poisoning and drug overdose, and Class III (subject to PMA) when the
device is intended for the treatment of sepsis, hepatic coma and metabolic disturbances or other life-threatening illnesses.
Both before and after
a device for the U.S. market is commercially released, we would have ongoing responsibilities under FDA regulations. The FDA reviews
design and manufacturing practices, labeling and record keeping, complaint handling, and manufacturers’ required reports
of adverse events and device malfunctions and other information to identify potential problems with marketed medical devices. We
would also be subject to periodic inspection by the FDA for compliance with the FDA’s QSR requirements, as mentioned above.
In addition, the FDA and other U.S. regulatory bodies (including the Federal Trade Commission, the Office of the Inspector General
of the Department of Health and Human Services, the Department of Justice (DOJ), and various state Attorneys General) monitor the
manner in which we promote and advertise our products. Although physicians are permitted to use their medical judgment to employ
medical devices for indications other than those cleared or approved by the FDA, we are prohibited from promoting products for
such “off-label” uses, and can only market our products for cleared or approved uses. If the FDA were to conclude that
we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable
health risk, the FDA could require us to notify health professionals and others that the devices present unreasonable risks of
substantial harm to the public health; order a recall, repair, replacement, or refund of such devices, detain or seize adulterated
or misbranded medical devices; or ban such medical devices. The FDA may also impose operating restrictions, enjoin and/or restrain
certain conduct resulting in violations of applicable law pertaining to medical devices, including a hold on approving new devices
until issues are resolved to its satisfaction, and work with the DOJ to assess civil or criminal penalties against our officers,
employees, or us. Conduct giving rise to civil or criminal penalties may also form the basis for private civil litigation by third-party
payers or other persons allegedly harmed by our conduct.
The delivery of our
devices in the U.S. market would be subject to regulation by the U.S. Department of Health and Human Services and comparable state
agencies responsible for reimbursement and regulation of health care items and services. U.S. laws and regulations are imposed
primarily in connection with the Medicare and Medicaid programs, as well as the government’s interest in regulating the quality
and cost of health care.
Federal health care
laws apply when we or customers submit claims for items or services that are reimbursed under Medicare, Medicaid, or other federally-funded
health care programs. The principal federal laws include: (1) the False Claims Act which prohibits the submission of false or otherwise
improper claims for payment to a federally-funded health care program; (2) the Anti-Kickback Statute which prohibits offers to
pay or receive remuneration of any kind for the purpose of inducing or rewarding referrals of items or services reimbursable by
a Federal health care program; (3) the Stark law which prohibits physicians from referring Medicare or Medicaid patients to a provider
that bills these programs for the provision of certain designated health services if the physician (or a member of the physician’s
immediate family) has a financial relationship with that provider; and (4) health care fraud statutes that prohibit false statements
and improper claims to any third-party payer. There are often similar state false claims, anti-kickback, and anti-self referral
and insurance laws that apply to state-funded Medicaid and other health care programs and private third-party payers and some state
laws apply regardless of payor (i.e., even in self-pay scenarios). These and other laws (including, for example, the Physician
Payment Sunshine Act and state transparency and compliance laws) will become increasingly important as we progress toward commercialization
in the U.S. In addition, the U.S. Foreign Corrupt Practices Act can be used to prosecute companies in the U.S. for arrangements
with physicians, or other parties outside the U.S. if the physician or party is a government official of another country and the
arrangement violates the law of that country.
The laws applicable
to us are subject to change, and subject to evolving interpretations. If a governmental authority were to conclude that we are
not in compliance with applicable laws and regulations, we and our officers and employees could be subject to severe criminal and
civil penalties including substantial fines and damages, and exclusion from participation as a supplier of product to beneficiaries
covered by Medicare or Medicaid.
The process of obtaining
clearance or approval to market products is costly and time-consuming in virtually all of the major markets in which we expect
to sell products and may delay the marketing and sale of our products. Countries around the world have recently adopted more stringent
regulatory requirements, which are expected to add to the delays and uncertainties associated with new product releases, as well
as the clinical and regulatory costs of supporting those releases. No assurance can be given that any of our other medical devices
will be approved on a timely basis, if at all, or that our CytoSorb® device will be approved for CE Mark labeling under the
MDR in other potential medical applications or that it will be approved for cytokine filtration in markets not covered by the CE
Mark on a timely basis, or at all. In addition, regulations regarding the development, manufacture and sale of medical devices
are subject to future change. We cannot predict what impact, if any, those changes might have on our business. Failure to comply
with regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.
Pertaining to our VetResQ™
device (offered for veterinary use only), in the U.S., the FDA does not require submission of a 510(k), PMA, or any other pre-market
review application for devices used in veterinary medicine. Device manufacturers who exclusively manufacture or distribute veterinary
devices are not required to register their establishments and list veterinary devices and are exempt from post-marketing reporting.
FDA does have regulatory oversight over veterinary devices and can take appropriate regulatory action if a veterinary device is
misbranded or adulterated. It is the responsibility of the manufacturer and/or distributor of these articles to assure that these
animal devices are safe, effective, and properly labeled.
Exported devices are
subject to the regulatory requirements of each country to which the device is exported. Some countries do not have medical device
regulations, but in most foreign countries medical devices are regulated. Frequently, device companies may choose to seek and obtain
regulatory approval of a device in a foreign country prior to application in the U.S., as we have done, given the differing regulatory
requirements. However, this does not ensure approval of a device in the U.S.
Sales and Marketing
In 2012, we established
our European subsidiary, CytoSorbents Europe GmbH, a wholly-owned subsidiary of CytoSorbents Corporation. Following the completion
of a controlled market release in late June 2012, CytoSorb was formally launched in Germany with reimbursement established at more
than $500 per cartridge. We recruited Dr. Christian Steiner, MD as our Vice President of Sales and Marketing and hired three additional
sales representatives. The fourth quarter of 2012 was the first full quarter of direct CytoSorb sales with our sales force in place.
We began expansion into Austria, where reimbursement for CytoSorb is now available, and Switzerland. In March 2016, we established
CytoSorbents Switzerland GmbH, a wholly-owned subsidiary of CytoSorbents Europe GmbH, to conduct marketing and direct sales in
Switzerland. This subsidiary began operations during the second quarter of 2016. In 2017 we began direct sales in Belgium and Luxembourg.
On March 5, 2019, the Company announced the expansion of direct sales of CytoSorb for all applications to Poland and the Netherlands,
and critical care applications to Sweden, Denmark and Norway. As part of this effort, the Company established CytoSorbents Poland
Sp. z.o.o., a wholly-owned subsidiary of CytoSorbents Europe GmbH. From the beginning of the controlled market release in the fourth
quarter of 2011 through December 31, 2019, we achieved cumulative sales of CytoSorb of approximately $72,339,000. During this time
period, the CytoSorb device represented substantially all of our product sales. At the end of 2019, we had hundreds of KOLs worldwide
who are either using CytoSorb or supporting its use in clinical practice and/or in clinical studies. These relationships with KOLs
were an essential step in our initial goal of driving usage, adoption and reorders of CytoSorb as they facilitate ordering and
reimbursement within the hospital, have a strong influential role within their department and amongst their peers and colleagues
outside the hospital, and have the ability to conduct studies and generate data, papers and conference presentations that could
drive awareness and demand.
We are approved
to sell CytoSorb in all 27 countries in the EU, including Germany, Italy, France and Spain as well as the United Kingdom, and
currently have either direct sales or distributor or strategic partnership in 58 countries worldwide. We plan to expand to
other countries in the EU, and with registration, other countries outside the EU that will accept CE Mark approval with a
mixed direct and independent distributor strategy, that can be augmented through strategic partnerships.
We have complemented
our direct sales efforts with sales to distributors and/or corporate partners. In 2013, we reached agreement with distributors
in the United Kingdom, Ireland, the Netherlands, Russia and Turkey. In December 2014, we entered into an exclusive agreement with
Smart Medical Solutions S.R.L., to distribute CytoSorb for critical care applications in Romania and the neighboring Republic of
Moldova. In 2015, we announced exclusive distribution agreements with Aferetica s.r.l. to distribute CytoSorb in Italy, AlphaMedix
Ltd. to distribute CytoSorb in Israel, TekMed Pty Ltd. to distribute CytoSorb in Australia and New Zealand, and Hoang Long Pharma
to distribute CytoSorb in Vietnam. In June 2016, we announced an exclusive distribution agreement with Palex Medical SA to distribute
CytoSorb in Spain and Portugal. In September 2016, we announced an exclusive agreement with Armaghan Salamat Kish Group (Arsak)
to distribute CytoSorb in Iran. In April 2017, we entered into a distribution agreement with KRA Technical Services to distribute
CytoSorb in Qatar. In July 2017, we announced an exclusive agreement with Droguería, Ramón, González, Revilla
(DRGR) S.A. to distribute CytoSorb in Panama. In April 2018, we entered into exclusive agreements with Pharmaworld and Chong Lap
(H.K.) Co. Ltd. to distribute CytoSorb in Lebanon and Hong Kong, respectively. As of the third quarter of 2018, we had expanded
distribution to include Bosnia, Herzegovina, and Croatia with Medis, d.o.o.; Estonia, Latvia, and Lithuania with SIA Scanmed; and
Montenegro and Serbia with Mar Medica, d.o.o. and Cardiotec Vascular Ltda., in Chile. In March 2019, we announced the registration
of CytoSorb in Israel and the change to Gad Medical as the distributor in Israel. As of July 2019, we expanded distribution to
include a new distributor in Saudi Arabia with Al Mofadaly Trading Est. In August 2019, we announced expanded distribution in Latin
America with the addition of Conatti Medical in Brazil, Service & Medical Columbia in Columbia and Nutricare Costa Rica in
Costa Rica.
In addition to our
direct and distributor commercial channels, we have a number of strategic partners to market and distribute CytoSorb. These partners
include Biocon Ltd, Fresenius Medical Care AG, Aferetica s.r.l. and Terumo Cardiovascular Group. For detailed information regarding
these partnerships, see the section entitled “Commercial and Research Partners” in item 1 of this report.
A significant portion of our revenues are
from product sales in Germany. Substantially all of our grant and other income are from grant agencies in the United States.
During the years ended
2019, 2018 and 2017, no agency, distributor or direct customer represented more than 10 percent of the Company’s total revenue.
Orders received for
product from both direct customers and distributors are fulfilled upon receipt. Accordingly, we have no significant sales backlog.
Intellectual Property and Patent Litigation
The medical device
market in which we primarily participate is in large part technology driven. As a result, intellectual property rights, particularly
patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation
to defend or create market advantage is inherently complex, unpredictable and is expensive to pursue. Litigation often is not ultimately
resolved until an appeal process is completed and appellate courts frequently overturn lower court patent decisions.
Moreover, competing
parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to
balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series
of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not
only of individual cases, but also of a series of pending and potentially related and unrelated cases. In addition, although monetary
and injunctive relief is typically sought, remedies are generally not determined until the conclusion of the proceedings, and are
frequently modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are
often dependent upon the outcomes of other cases in other forums, both domestic and international.
We rely on a combination
of patents, trademarks, trade secrets and non-disclosure agreements to protect our intellectual property. As of February 28, 2020,
our patent portfolio includes 21 issued United States patents as well as multiple issued foreign patents and pending patent applications
both in the U.S. and internationally, directed to various compositions and methods of use related to our blood purification technologies,
which are expected to expire between 2020 and 2035, absent any patent term extensions. Management believes that any near-term expiring
patents will not have a significant impact on our ongoing business. The following table provides a brief description of our patents
that have been issued in the U.S.:
Product
|
|
|
|
Patent
|
|
Patent
|
|
Patent
|
Group
|
|
Description/Indications
|
|
Term
|
|
Expiration
|
|
Type
|
CytoSorb
|
|
Perfusion Device Combining Adsorbing Material and Hollow Fibers to Filter and Recombine Plasma
|
|
20 Years
|
|
4/17/2020
|
|
Standard
|
CytoSorb
|
|
Method of Peritoneal Dialysis
|
|
20 Years
|
|
4/27/2020
|
|
Standard
|
CytoSorb
|
|
Material and Method of Producing: Biocompatible Polymeric Adsorbents Using a One-Pot Process
|
|
20 Years
|
|
10/10/2020
|
|
Standard
|
CytoSorb
|
|
Protective clothing
|
|
20 Years
|
|
1/15/2021
|
|
Standard
|
CytoSorb
|
|
Method of Introducing Fluids into a Patient’s Body
|
|
20 Years
|
|
2/17/2021
|
|
Standard
|
CytoSorb
|
|
Devices, systems, and methods for reducing levels of pro-inflammatory or anti-inflammatory stimulators or mediators in the blood
|
|
20 Years
|
|
4/10/2021
|
|
Standard
|
CytoSorb
|
|
Method of Producing Devices
|
|
20 Years
|
|
4/25/2021
|
|
Standard
|
CytoSorb
|
|
Hemocompatible Coated Polymer and Related One-Step Methods
|
|
20 Years
|
|
10/18/2022
|
|
Standard
|
CytoSorb
|
|
Hemocompatible Coated Polymer and Related Methods
|
|
20 Years
|
|
10/18/2022
|
|
Standard
|
CytoSorb
|
|
Hemocompatible Coated Polymer and Related One-Step Methods
|
|
20 Years
|
|
10/18/2022
|
|
Standard
|
CytoSorb
|
|
Hemocompatible Polymer Systems and Related Devices
|
|
20 Years
|
|
7/6/2023
|
|
Standard
|
CytoSorb
|
|
Size-Selective Hemoperfusion Polymeric Adsorbents
|
|
20 Years
|
|
11/20/2026
|
|
Standard
|
CytoSorb
|
|
Size-Selective Hemoperfusion Polymeric Adsorbents
|
|
20 Years
|
|
11/20/2026
|
|
Standard
|
CytoSorb
|
|
Size-Selective Hemoperfusion Polymeric Adsorbents
|
|
20 Years
|
|
11/20/2026
|
|
Standard
|
CytoSorb
|
|
Method of Treating Inflammation
|
|
20 Years
|
|
4/30/2031
|
|
Standard
|
CytoSorb
|
|
Polymer Modification
|
|
20 Years
|
|
12/31/2031
|
|
Standard
|
CytoSorb
|
|
Method of Treating Acute Radiation Syndrome
|
|
20 Years
|
|
10/22/2035
|
|
Standard
|
CytoSorb
|
|
Method of Treating Inflammation
|
|
20 Years
|
|
3/31/2031
|
|
Standard
|
CytoSorb
|
|
Method of Removal of Impurities from Whole Blood
|
|
20 Years
|
|
1/6/2032
|
|
Standard
|
CytoSorb
|
|
Use of Gastrointestinally Administered Porous Sorbent Polymers
|
|
20 Years
|
|
10/22/2035
|
|
Standard
|
CytoSorb
|
|
Use of Polymeric Sorbent Polymers
|
|
20 Years
|
|
8/10/2032
|
|
Standard
|
In addition to the
above, we have received notice from the U.S. Patent Office that two of our patent applications have been allowed and we are awaiting
the issuance of the formal patent number.
There can be no assurance
that pending patent applications will result in issued patents, that patents issued to us will not be challenged or circumvented
by competitors, or that such patents will be found to be valid or sufficiently broad to protect our technology or to provide us
with a competitive advantage. Certain of these patents also have foreign counterparts.
We also rely on non-disclosure
and non-competition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary
technology. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach,
that others will not independently develop equivalent proprietary information or that third parties will not otherwise gain access
to our trade secrets and proprietary knowledge.
We may find it necessary
to initiate litigation to enforce our patent rights, to protect our trade secrets or know-how and to determine the scope and validity
of the proprietary rights of others. Patent litigation can be costly and time-consuming, and there can be no assurance that our
litigation expenses will not be significant in the future or that the outcome of litigation will be favorable to us. Accordingly,
we may seek to settle some or all of our pending litigation described below. Settlement may include cross-licensing of the patents
which are the subject of the litigation as well as our other intellectual property and may involve monetary payments to or from
third parties.
We currently hold multiple
trademarks including CytoSorb®, HemoDefend™, BetaSorb™, K+ontrolTM, and VetResQ™. We
have spent considerable resources registering the trademark and building brand awareness and equity of the CytoSorb® tradename,
which has been used in commerce since 2006. We expect to maintain and defend our various trademarks to the fullest extent possible.
Environmental Matters
We believe that there
are no compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect
on us or our business. We incur waste removal costs in connection with both our solid and liquid wastes which are byproducts of
our manufacturing process. We utilize the services of various qualified contractors to dispose of these waste products. These waste
removal costs amounted to approximately $274,000 for the year ended December 31, 2019.
Employees
As of February 10,
2020, we had 153 full-time and part-time employees. We also utilize consultants and temporary service providers who are not our
employees, as necessary. None of our employees are represented by a labor union or are subject to collective-bargaining agreements
and we believe we have good relationships with our employees.
Risks Related to our Business and our
Industry
We have a history of losses and expect
to incur substantial future losses, and the report of our auditor on our consolidated financial statements expresses substantial
doubt about our ability to continue as a going concern.
We have experienced
substantial operating losses since inception. As of December 31, 2019, we had an accumulated deficit of approximately $188,789,000,
which included net losses of approximately $19,266,000, $17,211,000 and $8,461,000 for the years ended December 31, 2019, 2018
and 2017, respectively. Due in part to these losses, our audited consolidated financial statements have been prepared assuming
we will continue as a going concern, and the auditors’ report on those financial statements express substantial doubt about
our ability to continue as a going concern. Our losses have resulted principally from costs incurred in the research and development
of our polymer technology, clinical studies and general and administrative expenses. We intend to conduct significant additional
research, development, and clinical study activities which, together with expenses incurred for the establishment of manufacturing
arrangements and a marketing and distribution presence and other general and administrative expenses, are expected to result in
continuing net losses for the foreseeable future. The amount of future losses and when, if ever, we will achieve profitability
are uncertain. Our ability to achieve profitability will depend, among other things, on continued adoption and usage of our products
in the market, obtaining additional regulatory approvals in markets not covered by the CE mark, establishing sales and marketing
arrangements with third parties, satisfactory reimbursement in key territories, and raising sufficient funds to finance our activities.
No assurance can be given that our product development efforts will be successful, that our current CE Mark will enable us to achieve
profitability, that additional regulatory approvals in other countries will be obtained, that any of our products will be manufactured
at a competitive cost and will be of acceptable quality, that reimbursement will be available or satisfactory, that we will be
able to achieve profitability or that profitability, if achieved, can be sustained, or our ability to raise additional capital
when needed or on terms acceptable to us. Our failure with respect to any or all of these matters would have a material adverse
effect on our business, operating results, financial condition and prospects.
We will require additional capital
in the future to fund our operations.
As of December 31,
2019, we had current assets of approximately $20,902,000, including cash on hand of approximately $12,232,000 and current liabilities
of approximately $9,936,000. For the year ended December 31, 2019, our cash burn was approximately $10,136,000. Our current and
historical cash burn is not necessarily indicative of our future use of cash and cash equivalents.
We will require additional
financing in the future in order to complete additional clinical studies and to support the commercialization of our proposed products.
There can be no assurance that we will be successful in our capital raising efforts. The amount of long-term capital needed is
expected to depend on many factors, including:
|
·
|
rate of sales growth and adoption of our products in the marketplace;
|
|
··
|
product gross margin;
|
|
·
|
continued progress and cost of our research and development programs;
|
|
·
|
progress and costs associated with pre-clinical studies and clinical studies;
|
|
·
|
the time and costs involved in
obtaining regulatory clearance in other countries and/or for other
indications;
|
|
·
|
costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims;
|
|
·
|
costs of developing sales, marketing and distribution channels;
|
|
·
|
market acceptance and reimbursement of our products; and
|
|
·
|
cost for training physicians
and other health care personnel.
|
We
have an effective shelf registration statement with the SEC which enables us to raise up to $150 million in one or more offerings,
through the issuance and sale of any combination of equity securities, debt securities, warrants and units.
On
July 9, 2019 we entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC and B. Riley
FBR, Inc., pursuant to which we may offer to sell, from time to time shares of our common stock, up to a maximum of
$25,000,000. During the year ended December 31, 2019, we sold 191,244 shares of our common stock pursuant to the Sale
Agreement, at an average selling price of $4.11 per share, generating net proceeds of approximately $762,000. During the
period from January 1, 2020 through March 2, 2020, we sold 2,435,086 shares of our common stock pursuant to the Sale
Agreement, at an average selling price of $5.64 per share, generating net proceeds of approximately $13,322,000.
On July 31, 2019 (the
“Settlement Date”) we entered into the First Amendment to the Amended and Restated Loan and Security Agreement (the
“First Amendment”) with Bridge Bank, which amended certain provisions of the Amended and Restated Loan and Security
Agreement (the “Restated Loan and Security Agreement”) and the 2018 Success Fee Letter,
each previously entered into by and among us and Bridge Bank on March 28, 2018. In connection with the execution of the First Amendment,
the draw period for the Term B Loan (as defined therein) was extended to August 15, 2019 and we drew down the full $5.0 million
Term B Loan on the Settlement Date, bringing the total outstanding debt to $15,000,000 at July 31, 2019.
Despite the foregoing,
we expect we will require additional financing in the future. Should the financing we require be unavailable to us, or on terms
unacceptable to us when we require it, the consequences could have a material adverse effect on our business, operating results,
financial condition and prospects.
In addition, in the
event that additional funds are obtained through arrangements with collaborative partners or other non-dilutive sources, we may
have to relinquish economic and/or proprietary rights to some of our technologies or products under development that we would otherwise
seek to develop or commercialize by ourselves. Such events may have a material adverse effect on our business, operating results,
financial condition and prospects.
Although historically we have been
a research and development company, we are in the process of commercializing our products. There can be no assurance that we will
be successful in developing and expanding commercial operations or balancing our research and development activities with our commercialization
activities.
We have historically
been engaged primarily in research and development activities and have generated limited revenues to date. With the launch of our
CytoSorb product in the EU and elsewhere, there can be no assurance that we will be able to successfully manage the balance of
our research and development operations with our planned commercial enterprise. Potential investors should be aware of the problems,
delays, expenses and difficulties frequently encountered by an enterprise in balancing development, which include unanticipated
problems relating to testing, product registration, regulatory compliance and manufacturing, with commercialization, which includes
problems with market adoption, reimbursement, marketing problems and additional costs. Our products and product candidates will
require significant additional research and testing, and we will need to overcome significant regulatory burdens prior to commercialization
in other countries, such as the U.S., and for ongoing compliance for our CE Mark. We will also need to raise additional funds to
complete additional clinical studies and obtain regulatory approvals in other countries before we can begin selling our products
in markets not covered by our CE Mark. In addition, we may be required to spend significant funds on building out our commercial
operations. There can be no assurance that after the expenditure of substantial funds and efforts, we will successfully develop
and commercialize any products, generate any significant revenues or ever achieve and maintain a substantial level of sales of
our products.
If users of our products are unable
to obtain adequate reimbursement from third-party payers, or if reimbursement is not available in specific countries, or if new
restrictive legislation is adopted, market acceptance of our products may be limited and we may not achieve anticipated revenues.
The continuing efforts
of government and insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce
costs of health care may affect our future revenues and profitability, the future revenues and profitability of our potential customers,
suppliers and collaborative partners, and the availability of capital. For example, in certain foreign markets, pricing or profitability
of medical devices is subject to government control. In the United States, given recent federal and state government initiatives
directed at lowering the total cost of health care, the U.S. Congress and state legislatures will likely continue to focus on health
care reform, the cost of medical devices and on the reform of the Medicare and Medicaid systems. While we cannot predict whether
any such legislative or regulatory proposals will be adopted, the announcement or adoption of these proposals could materially
harm our business, financial condition and results of operations.
Our ability to commercialize
our products will depend in part on the extent to which appropriate reimbursement levels for the cost of our products and related
treatment are obtained by governmental authorities, private health insurers and other organizations, such as health maintenance
organizations (“HMOs”). Third-party payers are increasingly challenging the prices charged for medical care. Also,
the trend toward managed health care in the United States and the concurrent growth of organizations such as HMOs, which could
control or significantly influence the purchase of health care services and medical devices, as well as legislative proposals to
reform health care or reduce government insurance programs, may all result in lower prices for our products. The cost containment
measures that health care payers and providers are instituting and the effect of any health care reform could materially harm our
ability to operate profitably.
Outside of the United
States, reimbursement systems vary significantly by country. Many foreign markets often have a combination of government-managed
and privately-managed healthcare systems that govern reimbursement for medical devices and related procedures. Socialized medicine
is common in the EU, and reimbursement and the pricing of medical devices is generally subject to governmental control. Application
for reimbursement, subsequent approvals, if any, and pricing negotiations with governmental authorities can take considerable time
after a device has been CE marked. Private insurance has similar challenges. CytoSorb is currently reimbursed in Germany under
government-funded insurance, and in other countries may be covered under the diagnosis-related group (“DRG”), or “lump
sum payment” reimbursement, or other generalized reimbursement for acute care medical products. We are continuously working
to obtain or improve upon the type and amount of reimbursement available to us in countries where CytoSorb is available, and as
we attempt to move from an existing reimbursement platform to a new reimbursement platform, we may experience interruptions and/or
reductions in the amount available for reimbursement. Because of this, there can be no assurance that new reimbursement will be
obtained or that existing reimbursement will continue or that such reimbursement will be sufficient to adequately cover the cost
of the device or treatment. As a result, our future revenues, profitability and access to capital may be negatively affected by
any interruption or reduction in amounts of reimbursement. We plan to seek reimbursement for our product in other EU and non-EU
countries to help further adoption. There can be no assurance when, or if, this additional reimbursement might be approved.
We depend upon key personnel who
may terminate their employment with us at any time.
As of February 28,
2020, we had 153 full-time and part-time employees as well as several consultants and temporary employees. Our success will depend
to a significant degree upon the continued services of our key management team and advisors, including, Dr. Phillip Chan, our Chief
Executive Officer; Kathleen P. Bloch, our Chief Financial Officer; and Vincent Capponi, our Chief Operating Officer. On July 30,
2019, we entered into amended and restated employment agreements with Dr. Chan, Mr. Capponi, and Ms. Bloch that expire on December
31, 2021, and provide thereafter for annual renewals of the contract, unless either party provides written notice of non-renewal
at least 60 days prior to renewal. There can be no assurance that key management personnel or other members of our management team
and advisors will continue to provide services to us. In addition, our success will depend on our ability to attract and retain
other highly skilled personnel. We may be unable to recruit such personnel on a timely basis, if at all. Management and other employees
may voluntarily terminate their employment with us at any time. The loss of services of key personnel, or the inability to attract
and retain additional qualified personnel, could result in delays in development or approval of our products, loss of sales and
diversion of management resources.
Acceptance of our medical devices
in the marketplace is uncertain, and failure to achieve market acceptance will prevent or delay our ability to generate revenues.
Our future financial
performance will depend, at least in part, upon the introduction and customer acceptance of our products. Even with CE mark approval
for our CytoSorb device as a cytokine filter, our products and product candidates may not achieve market acceptance in the countries
that recognize and accept the CE mark. Additional approvals from other regulatory authorities (such as the FDA) will be required
before we can market our device in countries not covered by the CE mark. There is no guarantee that we will be able to achieve
additional regulatory approvals, and even if we do, our products may not achieve market acceptance in the countries covered by
such approvals. The degree of market acceptance will depend upon a number of factors, including:
|
·
|
the receipt of regulatory clearance of marketing claims for
the uses that we are developing;
|
|
·
|
the establishment and demonstration of the advantages, safety and efficacy of our polymer technology;
|
|
·
|
pricing and reimbursement policies of government and third-party payers such as insurance companies, health maintenance organizations and other health plan administrators;
|
|
·
|
the development by our competitors of products or product candidates that are similar or identical to ours;
|
|
·
|
our ability to attract corporate partners, including medical device companies, to assist in commercializing our products; and
|
|
·
|
our ability to effectively market our products.
|
Physicians, patients,
payers or the medical community in general may be unwilling to accept, utilize or recommend any of our products. Approval of our
CytoSorb device as a cytokine filter as well as the data we have gathered in our clinical studies to support device usage in this
indication may not be sufficient for market acceptance in the medical community. We may also need to conduct additional clinical
studies to gather additional data for marketing purposes. If we are unable to obtain regulatory approval or commercialize and market
our products when planned, we may not achieve any market acceptance or generate revenue.
If we are unable to obtain and maintain
patent protection for our products and product candidates, or if the scope of the patent protection obtained is not sufficiently
broad, our competitors could develop and commercialize products and product candidates similar or identical to ours, and our ability
to successfully commercialize our products and product candidates may be adversely affected.
Our commercial success
will depend, in part, on our ability to obtain and maintain patent protection in the United States and other countries with respect
to our products and product candidates. We seek to protect our proprietary position by filing patent applications in the United
States and abroad related to our products and product candidates that are important to our business. We cannot be certain that
patents will be issued or granted with respect to applications that are currently pending or that we apply for in the future with
respect to one or more of our products and product candidates, or that issued or granted patents will not later be found to be
invalid and/or unenforceable.
The patent prosecution
process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications
at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research
and development output before it is too late to obtain patent protection. Although we enter into non-disclosure and confidentiality
agreements with parties who have access to patentable aspects of our research and development output, such as our employees, distribution
partners, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output
before a patent application is filed, thereby jeopardizing our ability to seek patent protection.
The patent position
of medical device companies generally is highly uncertain, involves complex legal and factual questions and has in recent years
been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent
rights are highly uncertain. Our pending and future patent applications may not result in patents being issued, and even if issued,
the patents may not meaningfully protect our products or product candidates, effectively prevent competitors and third parties
from commercializing competitive products or otherwise provide us with any competitive advantage. Our competitors or other third
parties may be able to circumvent our patents by developing similar or alternative products in a non-infringing manner.
Changes in the patent
laws, implementing regulations or interpretation of the patent laws in the United States and other countries may also diminish
the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our
rights to the same extent as the laws of the United States, and many companies have encountered significant difficulties in protecting
and defending such rights in foreign jurisdictions.
We cannot be certain
that our patents and patent rights will be effective in protecting our products, product candidates and technologies. In addition,
our existing patents are scheduled to expire between 2020 and 2035. Failure to protect such assets may have a material adverse
effect on our business, operations, financial condition and prospects.
We may face litigation from third
parties claiming that our products infringe on their intellectual property rights, or seek to challenge the validity of our patents.
Our future success
is also dependent in part on the strength of our intellectual property, trade secrets and know-how, which have been developed from
years of research and development. In addition to the “Purolite” litigation discussed below, we may be exposed to additional
future litigation by third parties seeking to challenge the validity of our rights based on claims that our technologies, products
or activities infringe the intellectual property rights of others or are invalid, or that we have misappropriated the trade secrets
of others.
Since our inception,
we have sought to contract with large, established manufacturers to supply commercial quantities of our adsorbent polymers. As
a result, we have disclosed, under confidentiality agreements, various aspects of our technology with potential manufacturers.
We believe that these disclosures, while necessary for our business, have resulted in the attempt by potential suppliers to improperly
assert ownership claims to our technology in an attempt to gain an advantage in negotiating manufacturing rights.
We previously engaged
in discussions with the Brotech Corporation and its affiliate, Purolite International, Inc. (collectively referred to as “Purolite”),
which had demonstrated a strong interest in being our polymer manufacturer. For a period of time beginning in December 1998, Purolite
engaged in efforts to develop and optimize the manufacturing process needed to produce our polymer products on a commercial scale.
However, the parties eventually decided not to proceed. In 2003, Purolite filed a lawsuit against us asserting, among other things,
co-ownership and co-inventorship of certain of our patents. On September 1, 2006, the United States District Court for the Eastern
District of Pennsylvania approved a Stipulated Order and Settlement Agreement under which we and Purolite agreed to the settlement
of the action. The Settlement Agreement provides us with the exclusive right to use our patented technology and proprietary know
how relating to adsorbent polymers for a period of 18 years. Under the terms of the Settlement Agreement, we have agreed to pay
Purolite royalties of 2.5% to 5% on the sale of certain of our products through 2029, after which time no royalties will be due
under this settlement agreement.
The expiration or loss of patent
protection may adversely affect our future revenues and operating earnings.
We rely on patent,
trademark, trade secret and other intellectual property protection in the discovery, development, manufacturing, and sale of our
products and product candidates. In particular, patent protection is important in the development and eventual commercialization
of our products and product candidates. Patents covering our products and product candidates normally provide market exclusivity,
which is important in order for our products and product candidates to become profitable.
Our existing patents
are scheduled to expire between 2020 and 2035. While we are seeking additional patent coverage which may protect the technology
underlying these patents, there can be no assurances that such additional patent protection will be granted, or if granted, that
these patents will not be infringed upon or otherwise held enforceable. Even if we are successful in obtaining a patent, patents
have a limited lifespan. In the United States, the natural expiration of a utility patent typically is generally 20 years after
it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without
patent protection for our products and product candidates, we may be open to competition from generic versions of such methods
and devices.
We have commenced the process of
seeking regulatory approvals of our products and product candidates, but the approval process involves lengthy and costly clinical
studies and is, in large part, not in our control. The failure to obtain government approvals, internationally or domestically,
for our products and product candidates, or to comply with ongoing governmental regulations could prevent, delay or limit introduction
or sale of our products and result in the failure to achieve revenues or maintain our operations.
CytoSorb has already
achieved marketing authorization in the EU under the CE marking process and the Medical Devices Directive. It is manufactured at
our manufacturing facility in New Jersey under ISO 13485 Full Quality Systems certification. The manufacturing and marketing of
our products will be subject to extensive and rigorous government regulation in the EU, as well as in the U.S. and in other countries.
In the U.S. and other countries, the process of obtaining and maintaining required regulatory approvals is lengthy, expensive,
and uncertain. There can be no assurance that we will ever obtain the necessary additional approvals to sell our products in the
United States or other non-EU countries. Even if we do ultimately receive FDA approval or clearance for any of our products, we
will be subject to extensive ongoing regulation. While we have received approval from our notified body to apply the CE mark to
our CytoSorb device, we will be subject to extensive ongoing regulation and auditing requirements to maintain the CE mark.
Our products will be
subject to international regulation as medical devices under the Medical Devices Directive. In Europe, which we expect to provide
the initial market for our products, the notified body and Competent Authority govern, where applicable, development, clinical
studies, labeling, manufacturing, registration, notification, clearance or approval, marketing, distribution, record keeping, and
reporting requirements for medical devices. Different regulatory requirements may apply to our products depending on how they are
categorized by the notified body under these laws. Current international regulations classify our CytoSorb device as a Class IIb
device. Even though we have received CE mark certification of the CytoSorb device, there can be no assurance that we will be able
to continue to comply with the required annual auditing requirements or other international regulatory requirements that may be
applicable. In addition, there can be no assurance that government regulations applicable to our products or the interpretation
of those regulations will not change. The extent of potentially adverse government regulation that might arise from future legislation
or administrative action cannot be predicted. There can be no assurances that reimbursement will be granted or that additional
clinical data will be required to establish reimbursement.
If we fail to maintain the CE Mark
in the European Union, we will not be able to commercially sell and market CytoSorb.
In March 2011, CytoSorb,
was “CE marked” in the EU as an extracorporeal cytokine filter indicated for use in clinical situations where cytokines
are elevated, allowing for commercial marketing. The CE Mark demonstrates that a conformity assessment has been carried out and
the product complies with the Medical Devices Directive. A re-certification audit was conducted in April 2019. The successful completion
of this audit CE-certifies CytoSorb under the current Medical Device Directive (93/42/EEC) until May 2024. Prior to the expiration
of such certificate, we will apply for certification under the new Medical Devices Regulation. Failure to certify CytoSorb under
the Medical Devices Regulation will prevent us from using the CE mark for commercial distribution of CytoSorb in the European Union.
Any new product that we submit for the CE Mark after August 2019 must be approved under the new Medical Devices Regulation.
Furthermore, if:
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we are not able to obtain re-certification
for CytoSorb’s current use;
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we are not able to do so in time before
the existing certificate expires;
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CytoSorb does not meet the new (and more
stringent) requirements under the Medical Devices Regulation; or
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any variation in the uses for which the
CE Mark has been affixed CytoSorb requires us to perform further research or to modify the technical documentation required to
affix the CE Mark, our revenues and operating results could be adversely affected and our reputation could be harmed.
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We may pursue various indications for our product candidates,
and they may be subject to different FDA regulatory pathways for marketing authorization, and under the jurisdiction of different
FDA review divisions within the FDA’s Office of Device Evaluation.
As we seek to determine
commercially viable indications for our product candidates, we may consider pursuing a variety of indications that may be approved
through one of several different FDA regulatory clearance or approval pathways, and under the jurisdiction of different FDA review
divisions within the FDA’s Office of Device Evaluation. We expect the pathways available to us will be impacted by the FDA
regulatory history of the category of “sorbent hemoperfusion systems” and our options may also be impacted by the FDA’s
interpretations and application of these and other regulatory standards to our product candidates. The regulatory pathways available
to us may impact the level and type of data necessary to support our applications, and the post-marketing requirements to which
we and our products will be subject.
Inadequate
funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other
personnel, prevent new products and services from being developed or commercialized in a timely manner, affect whether government
agencies promptly pay amounts awarded under grants from such agencies, or otherwise prevent those agencies from performing normal
business functions on which the operation of our business may rely, which could negatively impact our business.
The
ability of the FDA to review and approve new drugs and medical devices can be affected by a variety of factors, including government
budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory,
and policy changes. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding
of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities
is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the
FDA and other agencies may also slow the time necessary for new drugs and medical devices to be reviewed and/or approved by necessary
government agencies as well as affect whether we receive timely payment of amounts awarded to us under grants and contracts with
government agencies, including DARPA, which would adversely affect our business. For example, over the last several years, including
from December 22, 2018 until January 25, 2019, the U.S. government has shut down several times and certain regulatory agencies,
such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities.
If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our
regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company,
future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to
properly capitalize and continue our operations.
We have conducted limited clinical
studies of our CytoSorb device. Clinical and pre-clinical data is susceptible to varying interpretations, which could delay, limit
or prevent additional regulatory clearances.
To date, we have conducted
limited clinical studies on our CytoSorb product. There can be no assurance that we will successfully complete additional clinical
studies necessary to receive additional regulatory approvals in markets not covered by the CE Mark. While studies conducted by
us and others have produced results we believe to be encouraging and indicative of the potential efficacy of our products and technology,
data already obtained, or in the future obtained, from pre-clinical studies and clinical studies do not necessarily predict the
results that will be obtained from later pre-clinical studies and clinical studies. Moreover, pre-clinical and clinical data are
susceptible to varying interpretations, which could delay, limit or prevent additional regulatory approvals. A number of companies
in the medical device and pharmaceutical industries have suffered significant setbacks in advanced clinical studies, even after
promising results in earlier studies. The failure to adequately demonstrate the safety and effectiveness of an intended product
under development could delay or prevent regulatory clearance of the device, resulting in delays to commercialization, and could
materially harm our business. Even though we have received approval to apply the CE Mark to our CytoSorb device as a cytokine adsorber,
there can be no assurance that we will be able to receive approval under the MDR for other potential applications of CytoSorb,
or that we will receive regulatory clearance from other targeted regions or countries.
We rely extensively on research and
testing facilities at various universities and institutions, which could adversely affect us should we lose access to those facilities.
At the same time, relationships with these individuals and entities are the subject of heightened scrutiny and may present the
potential for future healthcare enforcement risk.
Although we have our
own research laboratories and clinical facilities, we collaborate with numerous institutions, universities and commercial entities
to conduct research and studies of our products. We currently maintain a good working relationship with these parties. However,
should the situation change, the cost and time to establish or locate alternative research and development facilities could be
substantial and delay gaining CE Mark for other potential applications of our products, our other product candidates or technologies,
and/or FDA approval and commercializing our products. In addition, our interactions, communications, and financial relationships
with these individuals and entities present future healthcare enforcement risks.
We are and will be exposed to product
liability risks, and clinical and preclinical liability risks, which could place a substantial financial burden upon us should
we be sued.
Our business exposes
us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of medical
devices. We cannot be sure that claims will not be asserted against us. A successful liability claim or series of claims brought
against us could have a material adverse effect on our business, financial condition and results of operations.
We cannot give assurances
that we will be able to continue to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or
that such insurance will provide adequate coverage against potential liabilities. Claims or losses in excess of any product liability
insurance coverage that we may obtain could have a material adverse effect on our business, financial condition and results of
operations.
Certain university and other relationships
are important to our business and may potentially result in conflicts of interests.
Dr. John Kellum and
others are critical care advisors and consultants of ours and are associated with institutions such as the University of Pittsburgh
Medical Center. Their association with these institutions may currently or in the future involve conflicting interests in the event
they or these institutions enter into consulting or other arrangements with competitors of ours.
We have limited manufacturing experience,
and once our products are approved, we may not be able to manufacture sufficient quantities at an acceptable cost, or without shut-downs
or delays.
In March 2011, we received
approval from our notified body to apply the CE Mark to our CytoSorb device for commercial sale as a cytokine filter. We also achieved
ISO 13485:2003 Full Quality Systems certification, and have since upgraded to ISO 13485:2016 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 EU. We manufacture CytoSorb
at our manufacturing facilities in New Jersey for sale in the EU and for additional clinical studies. Manufacturers and manufacturers’
facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures
conform to current Good Manufacturing Practices (“cGMP”) for medical devices, as set forth in the QSR. As such,
we are subject to continual review and periodic inspections to assess compliance with cGMP/QSR requirements as required by our
International notified body and those FDA regulations governing companies that export medical products for sale outside the United
States. Accordingly, we must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing,
production and quality control. We have limited experience in establishing, supervising and conducting commercial manufacturing.
If we or the third-party manufacturers of our products fail to adequately establish, supervise and conduct all aspects of the manufacturing
processes, we may not be able to commercialize our products.
In the second quarter
of 2018 we quadrupled our manufacturing capabilities upon the official completion of the expansion of our CytoSorb manufacturing
facility in New Jersey. While we currently believe we have established sufficient production capacity to supply potential near-term demand for the CytoSorb device, we will likely need to scale up and increase our manufacturing capabilities in the future.
In the event of any unforeseen increase in short- or long-term demand for CytoSorb or any of our other products, our commercial
distributions could be delayed significantly as we establish alternative supply sources within our budget. No assurance can be
given that we will be able to successfully scale up our manufacturing capabilities or that we will have sufficient financial or
technical resources to do so on a timely basis or at all.
Due to our limited marketing, sales and distribution experience,
we may be unsuccessful in our efforts to sell our products.
We expect to enter
into agreements with third parties for the commercial marketing, and distribution of our products. There can be no assurance that
parties we may engage to market and distribute our products will:
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satisfy their financial or contractual obligations to us;
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adequately market our products; or
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not offer, design, manufacture or promote competing products.
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If for any reason any
party we engage is unable or chooses not to perform its obligations under our marketing and distribution agreement, we would experience
delays in product sales and incur increased costs, which would harm our business and financial results.
Our results of operations can be
significantly affected by foreign currency fluctuations and regulations.
A significant portion
of our revenues is currently derived in the local currencies of the foreign jurisdictions in which our products are sold. Accordingly,
we are subject to risks relating to fluctuations in currency exchange rates. In the future, and especially as we further expand
our sales efforts in international markets, our customers will increasingly make payments in non-U.S. currencies. Fluctuations
in foreign currency exchange rates could affect our revenues, operating costs and operating margins. In addition, currency devaluation
can result in a loss to us if we hold deposits of that currency or if it reduces the cost-competitiveness of our products. We cannot
predict the effect of future exchange rate fluctuations on our operating results.
If we are unable to convince physicians
and other health care providers as to the benefits of our products, we may incur delays or additional expense in our attempt to
establish market acceptance.
Broad use of our products
may require physicians and other health care providers to be informed about our products and their intended benefits. The time
and cost of such an educational process may be substantial. Inability to successfully carry out this education process may adversely
affect market acceptance of our products. We may be unable to educate physicians regarding our products in sufficient numbers or
in a timely manner to achieve our marketing plans or to achieve product acceptance. Any delay in physician education may materially
delay or reduce demand for our products. In addition, we may expend significant funds towards physician education before any acceptance
or demand for our products is created, if at all.
The market for our products is rapidly
changing and competitive, and new devices and drugs, which may be developed by others, could impair our ability to maintain and
grow our business and remain competitive.
The medical device
and pharmaceutical industries are subject to rapid and substantial technological change. Developments by others may render our
technologies and products noncompetitive or obsolete. We also may be unable to keep pace with technological developments and other
market factors. Technological competition from medical device, pharmaceutical and biotechnology companies, universities, governmental
entities and others diversifying into the field is intense and is expected to increase. Many of these entities have significantly
greater research and development capabilities and budgets than we do, as well as substantially more marketing, manufacturing, financial
and managerial resources. These entities represent significant competition for us.
Our business could be harmed by adverse
economic conditions in Germany, our primary geographical market, or by economic and/or political instability in the EU or elsewhere
caused by Brexit, trade conflicts, or other factors.
For the year ended
December 31, 2019, we derived a majority of our net product sales from sales in Germany. Despite modest European and global growth,
there are many economic and political issues that could negatively impact the health of Germany’s economy, the broader EU
economy, and the world economy overall. Examples include the uncertainty over the implications of the United Kingdom’s exit
from the EU, also known as “Brexit,” economic instability in a number of EU member countries, and changes in the political
leadership in the EU and United States. Germany and other European countries face additional risks to their local economies, some
of which include the impact of foreign exchange fluctuations, unemployment, tightening of monetary policy, the economic burden
of immigration, diminished liquidity and reliance on debt, the rising cost of healthcare, and other factors. In addition, the German
government, insurance companies, health maintenance organizations and other payers of healthcare costs continue to focus on healthcare
reform and containment of healthcare costs. We cannot predict whether Germany’s economy will continue to grow or decline
consistent with the overall global economy, which decline would negatively impact the demand for medical devices and healthcare
technologies generally and lead to reduced spending on the products we provide. In addition, continued healthcare cost containment
efforts may result in lower prices and a reduction or elimination of reimbursement for our products. Due to the concentration of
our product sales in this country, any of the foregoing may have a negative impact on our revenues, business operations and financial
condition.
Significant economic downturns or
international trade disruptions or disputes could adversely affect our business and operating results.
Significant portions
of our business are conducted in Europe, including the U.K.; Asia; and other international geographies. Interruptions in international
relationships such as the recent exit by the U.K. from the EU, and trade disputes such as the current trade negotiations between
the U.S. and China, could result in changes to regulations governing our products and our intellectual property, or otherwise affect
our ability to do business. Additionally, global events such as the current COVID-19 coronavirus
pandemic, that slow worldwide economies, disrupt travel and trade, and destabilize financial markets, may interfere with our ability
to raise capital, sell and market our products, obtain reimbursement and payment of our products, or reduce the ability of our
customers to pay for our product. Although these global problems transcend our company and afflict companies across industries
and borders, these and similar events could adversely affect us, or our business partners or customers.
Our business may
be negatively affected if the United States and/or the countries in which we sell our products participate in wars, military
actions or are otherwise the target of international terrorism.
Involvement
in a war or other military action or international acts of terrorism may cause significant disruption to commerce throughout the
world. To the extent that such disruptions result in (i) delays or cancellations of customer orders, (ii) a general decrease in
consumer spending on healthcare technology, (iii) our inability to effectively market and distribute our products globally or (iv)
our inability to access capital markets, our business and results of operations could be materially and adversely affected. We
are unable to predict whether acts of international terrorism or the involvement in a war or other military actions by the United
States and/or the countries in which we sell our products will result in any long-term commercial disruptions or if such involvement
or responses will have any long-term material adverse effect on our business, results of operations, or financial condition.
We could be adversely affected by
violations of the Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.
We are subject to the
Foreign Corrupt Practices Act (the “FCPA”), which generally prohibits companies and their intermediaries from making
payments to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage.
We are also subject to anti-bribery laws in the jurisdictions in which we operate. Although we have policies and procedures designed
to ensure that we, our employees and our agents comply with the FCPA and other anti-bribery laws, there is no assurance that such
policies or procedures will protect us against liability under the FCPA or other laws for actions taken by our agents, employees
and intermediaries with respect to our business or any businesses that we acquire. We do business in a number of countries in which
FCPA violations by other companies have recently been enforced. Failure to comply with the FCPA, other anti-bribery laws or other
laws governing the conduct of business with foreign government entities, including local laws, could disrupt our business and lead
to severe criminal and civil penalties, including imprisonment, criminal and civil fines, loss of our export licenses, suspension
of our ability to do business with the federal government, denial of government reimbursement for our products and/or exclusion
from participation in government healthcare programs. Other remedial measures could include further changes or enhancements to
our procedures, policies, and controls and potential personnel changes and/or disciplinary actions, any of which could have a material
adverse effect on our business, financial condition, results of operations and liquidity. We could also be adversely affected by
any allegation that we violated such laws.
We
are subject to governmental export and import controls that could impair our ability to compete in international markets due to
licensing requirements and subject us to liability if we are not in compliance with applicable laws.
Our
products are subject to export control and import laws, tariffs, and regulations, including the U.S. Export Administration Regulations,
U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s
Office of Foreign Assets Controls. Exports of our products must be made in compliance with these laws, tariffs, and regulations.
If we fail to comply with these laws, tariffs, and regulations, we and certain of our employees could be subject to substantial
civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and
responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.
In
addition, changes in our products or changes in applicable export or import laws, tariffs, and regulations may create delays in
the introduction and sale of our products in international markets or, in some cases, prevent the export or import of our products
to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement
or scope of existing laws, tariffs, and regulations, or change in the countries, governments, persons, products, or technologies
targeted by such laws, tariffs, and regulations, could also result in decreased use of our products, or in our decreased ability
to export or sell our products to existing or potential customers. Any decreased use of our products or limitation on our ability
to export or sell our products would likely adversely affect our business, financial condition and results of operations.
Cyberattacks and other security breaches
could compromise our proprietary and confidential information which could harm our business and reputation.
In the ordinary
course of our business, we generate, collect and store proprietary information, including intellectual property and business
information, as well as employee personal data. The secure storage, maintenance, and transmission of and access to this
information is important to our operations our day-to-day business and our reputation. Security breaches have become more
common across industries. Computer hackers may attempt to penetrate our computer systems and, if successful, misappropriate
our proprietary and confidential information including e-mails and other electronic communications, as well as our
intellectual property and business data. In addition, an employee, contractor, or other third-party with whom we do business
may attempt to obtain such information, and may purposefully or inadvertently cause a breach involving such information. We
have recently experienced mulitiple attempts by third parties to penetrate our computer systems. While we have certain
safeguards in place to reduce the risk of and detect cyber-attacks, as well as limit the potential exposure of proprietary
and confidential information, including multi-layer security protections, our information technology networks and
infrastructure may be vulnerable to unpermitted access by hackers or other breaches powered by new and sophisticated
technologies, or employee error or malfeasance. Further, we may not be immediately aware of any unpermitted access by hacker
or other breaches and we may be unable to quickly and effectively remediate any such breaches. Any such compromise of our
data security and access to, or public disclosure or loss of, confidential business or proprietary information could disrupt
our operations, damage our reputation, provide our competitors with valuable information, and subject us to additional costs
which could adversely affect our business.
Our failure
to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against
us, and adversely impact our operating results.
European
Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which
impose significant compliance obligations. Moreover, the collection and use of personal health data in the European Union, which
was formerly governed by the provisions of the European Union Data Protection Directive, was replaced with the European Union General
Data Protection Regulation, or the GDPR, in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating
to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security
and confidentiality of the personal data, data breach notification and the use of third party processors in connection with the
processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the
United States, provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines
of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The recent
implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including
in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR,
which could divert management's attention and increase our cost of doing business. In addition, new regulation or legislative actions
regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In
this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy
and data protection in the United States, the European Union and other jurisdictions, and we cannot determine the impact such future
laws, regulations and standards may have on our business.
In
the U.S., even for companies that are not “covered entities” or business associates” under HIPAA, the U.S. Federal
Trade Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes
unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA,
15 U.S.C § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the
sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools
to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The
FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA
Security Rule. Some state privacy and security laws apply more broadly than HIPAA and associated regulations. For example, California
recently enacted legislation – the California Consumer Privacy Act, or CCPA – which goes into effect January 1, 2020.
The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California
residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of
action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Legislators
have stated that they intend to propose amendments to the CCPA before it goes into effect, and the California Attorney General
will issue clarifying regulations. Although the law includes limited exceptions, including for certain information collected as
part of clinical trials as specified in the law, it may regulate or impact our processing of personal information depending on
the context. It remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted.
Risks Connected to Our Securities
The price of our common stock has
been highly volatile due to factors that will continue to affect the price of our stock.
Our common stock closed
as high as $8.56 and as low as $3.61 per share between January 1, 2019 and December 31, 2019 on Nasdaq. On March 3, 2020, the
closing price of our common stock, as reported on Nasdaq, was $5.18. Historically, medical device company securities such as our common
stock have experienced extreme price fluctuations. Some of the factors leading to this volatility include, but are not limited
to:
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fluctuations in our operating results;
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announcements of product releases by us or our competitors;
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announcements of acquisitions and/or partnerships by us and our competitors; and
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general market conditions.
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There is no assurance
that the price of our common stock will not continue to be volatile.
Directors, executive officers and
principal stockholders own a significant percentage of the shares of common stock, which will limit your ability to influence corporate
matters.
Our directors, executive
officers and principal stockholders together beneficially own a significant percentage of the voting control of the common stock
on a fully diluted basis. Accordingly, these stockholders could have a significant influence over the outcome of any corporate
transaction or other matter submitted to stockholders for approval, including mergers, consolidations and the sale of all or substantially
all of our assets and also could prevent or cause a change in control. The interests of these stockholders may differ from the
interests of our other stockholders. Third parties may be discouraged from making a tender offer or bid to acquire us because of
this concentration of ownership. As of December 31, 2019, two shareholders hold 13.1% of our shares and our directors and officers
hold 6.0% of our shares on a fully diluted basis.
Our Board of Directors may, without
stockholder approval, issue and fix the terms of shares of preferred stock and issue additional shares of common stock adversely
affecting the rights of holders of our common stock.
On December 3, 2014,
we effected a twenty-five-for-one (25:1) reverse split of our common stock. Immediately after the reverse stock split, we changed
our state of incorporation from the State of Nevada to the State of Delaware pursuant to an Agreement and Plan of Merger, dated
December 3, 2014, whereby we merged with and into our recently formed, wholly-owned Delaware subsidiary. Pursuant to the Agreement
and Plan of Merger effecting the merger, we adopted the certificate of incorporation, as amended and restated, and bylaws of our
Delaware subsidiary as our certificate of incorporation and bylaws at effective time of the merger. As a result, our certificate
of incorporation, as amended and restated, authorizes the issuance of up to 5,000,000 shares of “blank check” preferred
stock, with such designation rights and preferences as may be determined from time to time by the Board of Directors. Currently,
our certificate of incorporation, as amended and restated, which was effective June 12, 2019, authorizes the issuance of up to
100,000,000 shares of common stock, of which approximately 67,384,000 shares remain available for issuance as of December 31, 2019
and may be issued by us without stockholder approval.
Anti-takeover provisions in our charter
documents and under Delaware law could prevent or delay transactions that our stockholders may favor and may prevent stockholders
from changing the direction of our business or our management.
After giving effect
to our merger into our wholly-owned Delaware subsidiary, provisions of our certificate of incorporation, as amended and restated,
and bylaws may discourage, delay or prevent a merger or acquisition that our stockholders may consider favorable, including transactions
in which you might otherwise receive a premium for your shares, and may also frustrate or prevent any attempt by stockholders to
change the direction or management of us. For example, these provisions:
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authorize the issuance of “blank check” preferred stock without any need for action by stockholders;
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eliminate the ability of stockholders to call special meetings of stockholders;
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prohibit stockholder action by written consent; and
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establish advance notice requirements
for nominations for election to the board of directors or for
proposing matters that can be
acted on by stockholders at stockholder meetings.
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Compliance with changing corporate governance and public
disclosure regulations may result in additional expense.
Keeping abreast of,
and in compliance with, changing laws, regulations and standards relating to corporate governance and public disclosure, including
the Sarbanes-Oxley Act of 2002, new SEC regulations will require an increased amount of management attention and external resources.
In addition, prior to the merger, our current management team was not subject to these laws and regulations, as we were a private
corporation. We intend to continue to invest all reasonably necessary resources to comply with evolving standards, which may result
in increased general and administrative expense and a diversion of management time and attention from revenue-generating activities
to compliance activities.
Our common stock is thinly traded on The Nasdaq Capital
Market exchange and no assurances can be made about stock performance, liquidity, or maintenance of our Nasdaq listing.
Prior to December 23,
2014, our common stock was quoted on the OTCQB, which provided significantly less liquidity than a securities exchange (such as
the New York Stock Exchange or the Nasdaq Stock Market). On December 17, 2014, our common stock was approved for trading on Nasdaq.
Beginning on December 23, 2014, our common stock began trading on Nasdaq under the symbol “CTSO.” Although currently
listed on Nasdaq, there can be no assurance that we will continue to meet Nasdaq’s minimum listing requirements or that of
any other national exchange. In addition, there can be no assurances that a liquid market will be created for our common stock.
If we are unable to maintain listing on Nasdaq or if a liquid market for our common stock does not develop, our common stock may
remain thinly traded.
Future sales of our common stock
may cause our share price to fall.
We are party to a Controlled
Equity Offering Sales Agreement with Jefferies LLC and B. Riley FBR, who serve as agents, pursuant to which we may offer shares
of our common stock from time to time through “at-the-market” offerings. We are not obligated to make or continue to
make any sale of shares of our common stock under the “at-the-market” offerings. Although any sale of securities pursuant
to the “at-the-market” offerings will result in a concomitant increase in cash for each share sold, it may result in
shareholder dilution and may cause our share price to fall.