Asia-bound

Cytori licenses various Asia-Pacific markets to Lorem Vascular for up to $531 million

Jeffrey Bouley
SAN DIEGO—Early November saw Cytori Therapeutics and Lorem Vascular announce a partnership to commercialize Cytori Cell Therapy for the cardiovascular, renal and diabetes markets in China, Hong Kong, Malaysia, Singapore and Australia. Under the agreement, Lorem Vascular has committed to pay as much as $531 million in license fees, opening product purchase commitments and Cytori equity purchases. Cytori Cell Therapy is derived from the company’s Celution System, which enables access to a patient’s own adipose-derived regenerative cells at the point of care.
 
Lorem Vascular will pay as much as $500 million in fees for a 30-year exclusive license to Cytori Cell Therapy for all indications, except alopecia and aesthetics, in the licensed territories in the form of revenue milestones. The deal also calls for Cytori to receive $24 million in exchange for 8 million shares of Cytori common stock at $3 per share.
 
Just a few days after the announcement of the deal, Cytori announced that it had received the first $12 million installment from the equity agreement with newly formed Lorem Vascular, with the remaining $12 million to come within 60 days of the agreement.
In addition, Lorem Vascular will order $7 million in Celution devices and consumables. with a $2 million order placed immediately and a $5 million order to be placed following regulatory approval in China. Lorem and Cytori anticipate approval in 2014 for the regulatory plan they have implemented in China.
 
All this caused market-watchers to take notice. The Motley Fool, for example, noted Nov. 5 that “Shares of cell therapy company Cytori Therapeutics soared a whopping 70 percent on Tuesday after announcing an Asia-Pacific licensing deal with Lorem Vascular” and, after briefly describing the deal, wrote on its website, “Don't expect the operating momentum to slow anytime soon.” However, while that is a recognition of the energy around the deal itself, the analyst at the Motley Fool writing about the deal also noted, “Given today's staggering share-price surge, however, I'd wait for the extreme exuberance to fade before buying into that bull talk.”
 
A more definitively positive opinion came from analyst Joseph Pantginis at Roth Capital Partners, who wrote in a report, “The Asia-Pacific collaboration is very impressive in our belief, and should go far in establishing a meaningful foothold in the cardiovascular market, especially in China.” He also noted that Cytori could get a $10 million payment for every $50 million in gross Celution revenue reported by Lorem Vascular, and he kept a “Buy” rating on the company’s stock with a 12-month price target of $10 per share.
 
However, over at the website The Street, Adam Feuerstein suggested that Cytori had been excessively vague about Lorem Vascular’s full capabilities and wrote that the Asian partner company was set up only two weeks before the announcement of the deal by a Malaysian real estate developer, Kian Thiam “K.T.” Lim, whom Feuerstein indicated had no experience running a healthcare company.
 
“Cytori Cell Therapy will transform the way healthcare addresses the most costly and insidious diseases impacting healthcare today and well into the future,” said Lim, who is chairman of Lorem Vascular, in the official news release about the deal. “This therapy represents a front-line treatment modality that will serve as the centerpiece of our cardiovascular, renal and diabetes commercial activities across the region. Lorem Vascular will initiate an immediate launch in Hong Kong, Singapore and Australia. A subsequent launch in China and Malaysia is planned in 2014, pending regulatory approvals.”
 
“Through this agreement with Lorem Vascular, we have secured a committed partner to bring Cytori Cell Therapy to patients in countries where we have recently received, or are in the process of achieving, regulatory approval,” said Christopher J. Calhoun, CEO of Cytori. “With the Celution System now approved and available in more than 40 countries, we are uniquely positioned to expand our cell therapy brand by being first-to-market with cell therapy products in new geographies around the world. Lorem Vascular brings to Cytori the required resources, market knowledge, dedication and focus to commercialize this innovative treatment and pioneer the introduction of cell therapy products for patients with the most serious conditions.”
 
More than 230 million Chinese citizens have some form of cardiovascular disease, which is the country’s leading cause of death, accounting for more than 40 percent of all deaths, or three million people per year. Due to population growth and aging, the number of annual cardiovascular disease events in China is projected to increase by more than 50 percent during the next 15 years.
 
“Expanding in emerging markets throughout the world is critical to our mission and growth and partnerships such as this are a key driver of our approach,” said David Oxley, vice president for emerging markets at Cytori. “China is one of the three largest and highest-value medical markets in the world. A market penetration of less than 5 percent of the cardiovascular market alone represents millions of patients treated in the next 30 years, a multiple of billions in cost savings to the People’s Republic of China, and a transformation in the quality and standard of care. Today’s announcement with Lorem Vascular marks the beginning of an important partnership in transforming healthcare and will create long-term shareholder value.”

Jeffrey Bouley

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