We believe that 2008 should be an exciting year for Cytori Therapeutics, Inc. (CYTX) as the company has begun to record product sales revenues from early-adopter Celution System placements in Europe and Asia. Ultimately, the clinical data will determine the pace at which product sales ramp in the next several years.
We have been encouraged by the small clinical data seen so far using Cytori's technology. Data from the ongoing VENUS, PRECISE, and APOLLO trials in 2008/2009 will be the key to reaching profitability perhaps in 2011.
There are several reasons that investors should own Cytori. The company is a leader in adipose-derived stem cells and already recording revenues from sales of the Celution System. Management's guidance is for product sales between $10 and $12 million, right in-line with our thinking at $11.48 million.
We like the fact that the majority of the regulatory risk has been cleared. Most biotechnology investors have to get past significant clinical trial risk, then filing risk, and then wait for an FDA / EMEA decision. Cytori is in an enviable position where they can generate clinical data that could have an immediate impact on sales of already approved products.
That is a benefit over most biotechnology companies, but still doesn't alleviate the clinical trial risk. Until we see data from RESTORE-2, VENUS, PRECISE, and APOLLO it is difficult to forecast the ramp in product sales. That being said, third-party stem cell research has the potential to drive sales of Cytori's products. Also, as academia and private organizations expand their stem cell platforms there exists significant opportunity for Cytori to receive revenues form Lonza and Invitrogen.
We think 2008 has the potential to be a very exciting year for Cytori and we encourage investors to stay-tuned. Right now we see $8 as fair-value based on $276.7 million in revenues in 2012 generating $2.17 in EPS. We apply an industry-like 25x multiple and discount back to present day at 35%.
Read the full analyst report on CYTX.
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