Cytomedix Reports Second Quarter Financial Results

GAITHERSBURG, Md., Aug. 15, 2011 (GLOBE NEWSWIRE) -- Cytomedix, Inc. (OTCBB:CMXI) (the "Company"), a leading developer of biologically active regenerative therapies for wound care, inflammation and angiogenesis, today announced financial results for the three and six months ended June 30, 2011.

Highlights for the second quarter of 2011 and recent weeks include:

• Second quarter 2011 revenues increased 22% to $1.39 million from $1.15 million during the second quarter 2010
• Closed two convertible note financings with new and existing investors, raising gross proceeds of $1.2 million at closing
• Negotiated a $1.3 million reduction of principal under the promissory note payable to Sorin USA arising from the acquisition of the Angel^® assets, by facilitating early retirement of the remaining $3.4 million principal balance in late April 2011 via a $2.1 million payment; the refinancing reduced the Company's debt service payments by $2.2 million over the then subsequent 12 months
• Announced the publication of positive data demonstrating that AutoloGel™ provides rapid improvement in healing of complex chronic wounds in the August 2011 edition of Advances in Skin and Wound Care
• Submitted reimbursement reconsideration request to the Centers for Medicare & Medicaid Services ("CMS") for autologous PRP gel
• Presented four posters and delivered one podium presentation highlighting the clinical merits of the AutoloGel™ System in wound management at the 24^th Annual Symposium on Advanced Wound Care and Wound Healing Society

Management Discussion

Martin P. Rosendale, Chief Executive Officer of Cytomedix, said, "We are pleased with the progress we made during the first half of the year toward attaining our corporate goals for 2011. We are particularly pleased with double-digit sales growth during the second quarter, as well as completing the transition of our acquisition of the Sorin assets. Importantly, we strengthened our balance sheet with the refinancing of the Sorin debt and raised additional capital that will support our efforts to continue to expand sales of the Angel and AutoloGel products.

"During the second quarter we filed our submission with CMS for reconsideration of Medicare reimbursement for AutoloGel in wound management. We are confident this submission provides compelling clinical and economic data to support a favorable reconsideration. While obtaining a favorable national coverage decision is an important long-term goal, we also continue to make progress expanding AutoloGel sales to Long Term Acute Care facilities, Veterans Affairs hospitals and other capitated reimbursement outlets, as evidenced by the growth in AutoloGel sales during the quarter.

"During the second quarter we also made progress expanding opportunities for AutoloGel in private-pay indications such as hair restoration and plastic surgery. In June, we launched AutoloGel into the hair restoration market and in July held our first webinar for these specialty plastic surgeons and generated strong product interest. Next month we will be exhibiting at the annual meeting of the International Society of Hair Restoration Surgery, where hair restoration specialist, Dr. Robert J. Reese, will moderate a panel discussion on the use of physiologically relevant concentrations of platelet rich plasma ("PRP") in hair restoration surgery. We expect that this meeting, along with other market promotions, will support a growing opportunity for Cytomedix.

"Angel is well positioned to build upon second quarter sales gains. The transition of this product acquisition is nearly final, and we now control the complete product cycle. This allows us to focus on maximizing sales and marketing efforts both in the U.S. and Europe. We are confident we will continue to increase sales with a growing customer base and product enhancements. Toward that end we will file a 510(k) application with the U.S. Food and Drug Administration for a bone marrow aspirate processing indication within the next week, which we expect will open new market opportunities and accelerate Angel's revenue growth. In addition, Angel is being used in the U.K. for aesthetic applications, where physicians are injecting PRP under the skin to facilitate skin rejuvenation. Angel PRP is also being used in fat transfer procedures to improve graft survival and aesthetic outcomes. These innovative applications represent development opportunities for future Angel indications.

"Positive clinical and economic data continue to form the backbone of our sales and marketing efforts. Moving forward we will continue to build on our clinical and scientific body of knowledge to support the expanded use of and indications for our best-in-class regenerative technologies in blood management and wound healing," concluded Mr. Rosendale.

Second Quarter Financial Results

Total revenues for the second quarter of 2011 were $1.39 million, a 22% increase over total revenues of $1.15 million for the second quarter of 2010. The increase was largely attributable to sales of the Angel System and higher AutoloGel System sales.

Gross profit for the second quarter of 2011 rose 63% to $755,000 from $462,000 for the same period in 2010, primarily due to higher product costs recognized in 2010 and the overall increase in product sales. The higher product costs recognized last year were primarily a result of the cost of logistics provided by Sorin during the transition period and the sale of inventory adjusted to fair value in accordance with purchase accounting rules.

Gross margin for the three months ended June 30, 2011 increased to 54% from 40% for the comparable 2010 period. The increase was due to various costs recognized in 2010 related to the purchase of the Angel product line, partially offset by additional costs necessary to support production since the Company took over the manufacturing of the Angel product line in 2011. Second quarter cash margin, after exclusion of $39,000 in patent amortization and $69,000 in depreciation, was 62%. Cash margin is a non-GAAP financial measure, most directly comparable to gross margin, and should not be considered as an alternative thereto. We define cash margin as gross margin exclusive of patent amortization and depreciation expense and it is a significant performance metric used by management to indicate cash profitability on product sales.

Second quarter 2011 operating expenses of $1.99 million decreased 1% compared with operating expenses of $2.02 million in the prior year's second quarter. This decline was due primarily to decreased legal and accounting costs recognized in 2011 compared with prior-year costs associated with the Company's April 2010 acquisition of the Angel and activAT® product lines, and lower research and development expense, partially offset by higher consulting costs in quality/regulatory, marketing, and European business operations, increases in salaries as the Company added sales and operations professionals to support and grow the Angel product line and modestly higher general and administrative costs.

Other income was $452,000 in the second quarter of 2011 as compared to other expense of $698,000 in the second quarter of 2010. The difference was primarily attributable to a gain in this year's second quarter from the Company's restructuring and early satisfaction of the Sorin note and a decrease in expense related to the fair value of derivative liabilities as the warrant provisions were amended, thereby eliminating the need for applying fair value accounting.

The net loss to common stockholders for the second quarter of 2011 was $878,000 or $0.02 per share, compared with a net loss to common stockholders of $4.29 million or $0.11 per share reported for the second quarter of 2010. The second quarter 2010 net loss includes a charge of $1.95 million, which represents the amortization of a beneficial conversion feature on the Series D preferred stock issued in association with the fundraise conducted in conjunction with the closing of the Sorin acquisition in April 2010. This was a non-recurring, non-cash book charge with no net effect on total shareholders' equity.

First Half Financial Results

Total revenues for the first six months of 2011 were $2.76 million, up 108% from total revenues of $1.33 million in the first six months of 2010. This increase was largely attributable to sales of the Angel System, which the Company acquired on April 9, 2010, and higher AutoloGel System sales, partially offset by the loss of royalty revenue due to the expiration of the underlying patent. For the first six months of 2010 royalty revenue was $115,000, representing final adjustments post patent expiration.

Gross margin on product sales for the first half of 2011 increased to 53% from 42% in the same period in 2010, primarily due to higher product costs recognized in 2010. The higher product costs were primarily a result of the cost of logistics provided by Sorin during the transition period and the sale of inventory adjusted to fair value in accordance with purchase accounting rules. Cash margin for the first half of 2011, excluding depreciation ($150,000), amortization ($78,000) and certain non-recurring adjustments in the first quarter of 2011 ($57,000), was 64%. Cash margin is a non-GAAP financial measure as described above.

Operating expenses for the first six months of 2011 increased 22% to $4.20 million from $3.44 million for the first six months of 2010.

The net loss to common stockholders for the first half of 2011 was $2.37 million or $0.05 per share, compared with a net loss to common stockholders for the first half of 2010 of $5.36 million or $0.14 per share. The net loss for the 2010 period includes a charge of $1.95 million, which represents the amortization of a beneficial conversion feature on the Series D preferred stock as described above.

Cash and Liquidity

Cash and cash equivalents as of June 30, 2011 were $302,000, compared with $639,000 as of December 31, 2010. The Company used $2.65 million to fund operating activities during the first half of 2011.

Andrew Maslan, Cytomedix's Chief Financial Officer, noted, "In April, we effectively reduced our debt service over the then subsequent 12 months by more than $2.2 million by facilitating early retirement of the remaining $3.4 million principal balance due to Sorin. In July we raised initial gross proceeds of $1.2 million with the closing of two convertible note financings."

"With the transition of the Sorin assets behind us and the successful integration of supply chain, quality control, customer service and logistics, we have begun to reduce costs, especially in areas of professional services, consulting and administrative expense. We expect further reductions in the second half of 2011 as we pursue our goal to reach operational cash flow breakeven in mid-2012," added Mr. Maslan.

During the second quarter, the Company drew down $800,000 under a committed financing arrangement with Lincoln Park Capital. To date in 2011, the Company has drawn down approximately $2.5 million and, within certain parameters, has access to an additional $8.4 million over the next 14 months under the agreement.

For additional information, please refer to the Company's quarterly report on Form 10-Q, filed with the Securities and Exchange Commission on August 15, 2010.

Conference Call

Cytomedix management will hold a conference call to discuss these results and answer questions beginning at 10:00 a.m. Eastern time on Tuesday, August 16, 2011. Shareholders and other interested parties may participate in the call by dialing 800-510-0146 (domestic) or 617-614-3449 (international) and entering passcode 89952627. The call will also be broadcast live on the Internet at www.streetevents.com, www.fulldisclosure.com and www.cytomedix.com.

A replay of the conference call will be available beginning two hours after its completion through August 23, 2011 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 59011849. The call will also be archived for 90 days at www.streetevents.com, www.fulldisclosure.com and www.cytomedix.com.

About Cytomedix, Inc.

Cytomedix develops, sells and licenses regenerative biological therapies primarily for wound care, inflammation and angiogenesis. The Company markets the AutoloGel™ System, a device for the production of autologous platelet rich plasma ("PRP") gel for use on a variety of exuding wounds; the Angel® Whole Blood Separation System, a blood processing device and disposable products used for the separation of whole blood into red cells, platelet poor plasma ("PPP") and PRP in surgical settings; and the activAT® Autologous Thrombin Processing Kit, which produces autologous thrombin serum from PPP. The activAT® kit is sold exclusively in Europe and Canada, where it provides a completely autologous, safe alternative to bovine-derived products. The Company is pursuing a multi-faceted strategy to penetrate the chronic wound market with its products, as well as opportunities for the application of AutoloGel™ and PRP technology into other markets such as hair transplantation and orthopedics while actively seeking complementary products for the wound care market. Additional information regarding Cytomedix is available at www.cytomedix.com.

Safe Harbor Statement

Statements contained in this communication not relating to historical facts are forward-looking statements that are intended to fall within the safe harbor rule for such statements under the Private Securities Litigation Reform Act of 1995. The information contained in the forward-looking statements is inherently uncertain, and Cytomedix's actual results may differ materially due to a number of factors, many of which are beyond Cytomedix's ability to predict or control, including among others, the likelihood of obtaining a positive reimbursement determination on the submission, the likelihood and the extent of beneficial effect of such determination on CMS costs and care, viability and effectiveness of the Company's sales approach and overall marketing strategies, the outcome of development or regulatory review of CT-112, commercial success or acceptance by the medical community, competitive responses, the Company's ability to raise additional capital and to continue as a going concern, and Cytomedix's ability to execute on its strategy to market the AutoloGel™ System as contemplated, the Company's ability to successfully integrate the Angel® and activAT® product lines into its existing business, to assume and satisfy certain liabilities related to the Angel® and activAT® product lines. To the extent that any statements made here are not historical, these statements are essentially forward-looking. The Company uses words and phrases such as "believes", "forecasted," "projects," "is expected," "remain confident," "will" and/or similar expressions to identify forward-looking statements in this press release. Undue reliance should not be placed on forward-looking information. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual events to differ from the forward-looking statements. More information about some of these risks and uncertainties may be found in the reports filed with the Securities and Exchange Commission by Cytomedix, Inc. Cytomedix operates in a highly competitive and rapidly changing business and regulatory environment, thus new or unforeseen risks may arise. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. Except as is expressly required by the federal securities laws, Cytomedix undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. Additional risks that could affect our future operating results are more fully described in our U.S. Securities and Exchange Commission filings, including our Annual Report for the year ended December 31, 2010, filed with the SEC and other subsequent filings. These filings are available at http://www.sec.gov.