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Cytori to Acquire Proprietary Nanoparticle Development Platform to Enhance Regenerative Medicine Leadership Position

Jan 19, 2017

Proposed Acquisition of Azaya Therapeutics Assets Would Broaden Pipeline with Two Oncology Drugs for Large, Underserved Markets

SAN DIEGO, Jan. 19, 2017 (GLOBE NEWSWIRE) -- Cytori Therapeutics, Inc. (NASDAQ:CYTX) (the “Company” or “Cytori”) today announced it has entered into a definitive agreement (the “Purchase Agreement”) to acquire certain assets from privately held Azaya Therapeutics Inc., a leader in the research, development and manufacturing of nanoparticle and protein-stabilized liposomal therapeutics (the “Acquisition”). The Acquisition is subject to customary closing conditions, including obtaining third party consents and approvals and obtaining the approval of Azaya’s stockholders, and is expected to close on or prior to February 28, 2017.  The Acquisition, if consummated, would provide Cytori with a proprietary liposomal nanoparticle technology platform that would expand and complement the Company’s leadership position in regenerative medicine.

Under the terms of the Purchase Agreement, at the closing of the Acquisition (the “Closing”), Cytori will issue $2 million in Cytori common stock up front, 25 percent of which will be subject to a 15-month escrow, and will also pay off approximately $2 million of Azaya’s trade payables. At the Closing, Cytori will also assume the obligation to make additional future payments to Azaya based upon (i) the achievement of certain commercialization milestones, (ii) receipt of revenue from certain licensing, sale or other transactions involving certain assets acquired from Azaya, and (iii) the achievement of certain product revenue goals. Under the terms of the Purchase Agreement, Cytori’s aggregate commercialization milestone payment obligations to Azaya will not exceed $16.25 million, and its aggregate royalty payment obligations to Azaya based on product revenues will not exceed $100 million.  Further, Cytori’s obligation to pay Azaya certain license/sale or other transfer fees based on payments made to Cytori by the licensee, purchaser or other transferee of the assets will not exceed $50 million.  Cytori will also undertake certain obligations pertaining to the registration of the shares issuable to Azaya at the Closing.  Additionally, the Acquisition includes related intellectual property and a portfolio of investigational oncology therapies developed to meet the needs of large, underserved patient populations. Finally, at the Closing, Cytori will enter into a five-year lease for Azaya’s state-of-the-art, protein-stabilized nanoparticle manufacturing and development facility located in San Antonio, Texas, that has recently been upgraded in anticipation of commercial scale-up and manufacturing.

“Azaya’s technology and intellectual property present an exciting opportunity to marry Cytori’s cell therapy technology, which is currently in late-stage clinical trials, to a clinically proven and patented off-the-shelf pharmaceutical delivery system directly applicable to regenerative medicine,” said Marc H. Hedrick, M.D., President and Chief Executive Officer of Cytori. “We are working diligently with Azaya to consummate the Acquisition so that we can exploit the inherent unique synergies that are present and which we believe will allow Cytori to leap forward in its intended development of next-generation, ‘druggable’ regenerative medicine products. In addition, the Acquisition allows Cytori to cost-effectively expand our clinical pipeline with two promising oncology drugs that potentially have sizable, near-term, global licensing and revenue opportunities.”   

Nanoparticle technology and liposomes have been used for over 20 years to improve delivery of a variety of pharmaceutical payloads throughout the body, due to liposomes’ ability to stabilize therapeutic compounds, overcome cellular and tissue uptake challenges, and improve biodistribution of compounds to target sites in vivo. The most common use of liposome is for the targeted delivery of cytotoxic drugs to tumors. Cytori research suggests that nanoparticle liposomal technology may be useful to deliver targeted regenerative therapies to sites of acute or chronic injury.

“This nanoparticle technology would provide Cytori with 2 new compounds that we believe are immediately partnerable on a global basis and one that has successfully completed all its clinical evaluation and that we expect could be launched in Europe in 2019,” said John Harris, General Manager of Cell Therapy and Regenerative Medicine at Cytori. “The Cytori and Azaya teams have been working together on this contemplated asset acquisition for a number of months, have complementary skill sets and, upon closing of the asset acquisition, are ready to move this program rapidly to key milestones in both the oncology and regenerative medicine space. Simultaneously, we will be focused on realizing the full clinical and commercial potential of our lead product, HABEO™ Cell Therapy (formerly ECCS-50), initially for treatment of scleroderma and planned readout mid year.”

As previously announced, the STAR (Scleroderma Treatment with Celution Processed Adipose Derived Regenerative Cells) trial of HABEO Cell Therapy completed enrollment ahead of schedule in June 2016. A readout of primary endpoint 12-month data is expected in mid-2017, which may inform a Pre-Market Approval (PMA) submission to the U.S. Food and Drug Administration.

Azaya Therapeutics is based in San Antonio, Texas and has developed two nanoparticle drugs that have shown promise in their respective clinical programs to date.  ATI-0918, the lead clinical candidate in the Azaya oncology portfolio, is an off-patent, complex, generic nanoparticle liposomal formulation of doxorubicin hydrochloride, a widely used chemotherapeutic agent often used to treat breast cancer, ovarian cancer, multiple myeloma, and Kaposi’s sarcoma.

"The proposed transaction with Cytori will put Azaya and its stockholders in a position to benefit from potential global commercialization of our ATI-0918 generic liposomal doxorubicin product that has been shown to be bioequivalent to Johnson & Johnson’s branded product in Europe, as well as further the clinical development of ATI-1123, our proprietary liposomal encapsulated docetaxel,” said Mr. John Kerr, Azaya's Chairman. “In addition, this transaction provides Azaya's stockholders, through Azaya’s ownership of Cytori shares, the ability to participate in any future success of Cytori's regenerative medicine portfolio."

In a completed clinical trial, ATI-0918 demonstrated bioequivalence to the reference drug for doxorubicin in Europe (marketed by Johnson & Johnson as Doxil® and Caelyx®).  Cytori expects to begin manufacturing preparation of the drug upon closing the Acquisition and plans to file for EU regulatory approval of ATI-0918 in early 2018, and to seek commercialization partners for the drug. The Company is considering a follow-on study to demonstrate the bioequivalence of ATI-0918 to the reference drug in the U.S. (marketed by Sun Pharma as Lipodox).

According to independent industry research*, the doxorubicin market is expected to grow to approximately $1.4 billion worldwide by 2024 and has been underserved in recent years. Marketed generic formulations of doxorubicin have experienced frequent supply disruptions due to manufacturing issues at facilities outside of the U.S. Cytori intends to manufacture ATI-0918 in the acquired facility, which is located in San Antonio, Texas.

The Azaya portfolio also includes ATI-1123, a patented, nanoparticle-stabilized liposomal formulation of docetaxel, one of the most profitable and widely used chemotherapy agents with a current worldwide market of $1.3 billion. Azaya reported positive safety results for ATI-1123 in its Phase 1 study of 29 patients with solid tumor cancers who failed other therapies. After the Closing, Cytori, through partners, plans to proceed with Phase 2 clinical studies of ATI-1123 in multiple indications.

“As we look ahead in 2017 and beyond, Cytori is preparing for transformative growth driven by a broadened pipeline of specialty-pharma oriented therapies that carry the potential bring value to patients, physicians and shareholders,” noted Dr. Hedrick. “Over the past 2 ½ years, Cytori has strengthened its pharmaceutical development and manufacturing expertise at both the management and board levels to provide the competency and breadth of experience to identify and execute on strategic partnerships such as the transaction with Azaya. We are working to close this transaction with Azaya promptly.  We look forward to providing additional financial guidance and commentary on the transaction in due course.”

Investor Conference Call Webcast
Cytori will host an investor update conference call at 8:30am EST today to further discuss the company’s announcement. The webcast will be available live and by replay two hours after the call and may be accessed under “Webcasts” in the Investor Relations section of Cytori’s website. If you are unable to access the webcast, you may dial in to the call at +1.877.402.3914, Conference ID: 56963876.

About Cytori Therapeutics
Cytori Therapeutics is a specialty pharmaceutical company and global leader in regenerative medicine. In January 2017, the Company signed a definitive agreement to acquire substantially all of the assets of privately-held Azaya Therapeutics Inc., a leader in the research, development and manufacturing of nanoparticle and protein-stabilized liposomal therapeutics (the “Acquisition”). Subject to and contingent upon consummation of the Acquisition, Cytori Therapeutics intends to leverage multiple synergistic technologies and a broad product pipeline including late-stage autologous cell therapies from adipose tissue to treat a variety of medical conditions and liposomal nanoparticle-formulated therapies for the treatment of certain types of cancers. Data from preclinical studies and clinical trials suggest that proprietary Cytori Cell Therapy™ technologies and products may provide benefits across multiple disease states by improving blood flow, modulating the immune system, and facilitating wound repair, and can be made available to the physician and patient at the point-of-care. Upon completion of the Acquisition, the Company plans to maximize its proprietary liposomal nanoparticle technology to market complex generic formulations of widely used chemotherapeutic agents to meet the needs of a large, established, and underserved oncology market. For more information visit www.cytori.com.

About Azaya Therapeutics 
Azaya Therapeutics, Inc. is an oncology company focused on developing more effective cancer treatments through its novel nanotechnology platform. Azaya’s patented Protein Stabilized Liposomes™ (PSL) platform allows for high-dose delivery of potent cytotoxics with potentially lower side effects. 

Cautionary Statement Regarding Forward-Looking Statements 
This press release includes forward-looking statements regarding events, trends and business prospects, which may affect our future operating results and financial position. Such statements, including without limitation, statements regarding: anticipated closing of the Acquisition; potential benefits to Cytori, Azaya and their respective stockholders resulting from consummation of the proposed Acquisition (including benefits arising out of possible synergies between Cytori’s and Azaya’s technology platforms and intellectual property, and potential benefits Azaya’s stockholders may realize by reason of their ownership of Cytori stock); Cytori’s intended development of next-generation, ‘druggable’ regenerative medicine products; anticipated cost-effective expansion of Cytori’s clinical pipeline with ATI-0918 and ATI-1223; access to licensing and revenue opportunities after closing of the Acquisition; anticipated markets for ATI-0918 and ATI-1123; timing for submission of regulatory filings for ATI-0918; expected commercial launch timeframes (which launches are subject to regulatory approvals and other conditions precedent) and the global scope of such commercial launches; conduct of possible follow-on studies in the U.S. for ATI-0918; anticipated development efforts for ATI-1123; Cytori’s anticipated clinical pipeline (including ATI-0918 and ATI-1123); Cytori’s potential access to future capital to develop the acquired assets, including ATI-0918 and ATI-1123; and expected impact of the Acquisition on Cytori’s operation, financial condition and assets.  Some of these risks and uncertainties include, but are not limited to: the possibility that the Acquisition will not close and Cytori will not acquire Azaya’s assets; unanticipated clinical, regulatory, commercial or other hurdles or uncertainties in developing, manufacturing and commercializing Azaya’s assets, including ATI-0918 and ATI-1123; any inability to identify and realize potential synergies between Cytori’s and Azaya’s technologies; inability to access capital to develop the acquired assets on terms acceptable to Cytori; potential negative market reaction to the Acquisition; unforeseen costs and expenses relating to the acquired assets that may exert significant pressure on Cytori’s human, technical and financial resources, including its ability to fund development and commercialization of its clinical pipeline, including ATI-0918 and ATI-1123; failure to find suitable financing to operate Cytori’s business as currently contemplated after consummation of the Acquisition; risk regarding identification of suitable partnering candidates for ATI-0918 or ATI-1123; technical capabilities risks, including the ability to successfully obtain and maintain sufficient drug development and manufacturing expertise; risks relating to review by the European Medicines Agency (EMA) of the ATI-0918 marketing authorisation dossier and related EMA application requirements;  inherent risk and uncertainty in the conduct of clinical trials and clinical trial results (including Azaya’s previously conducted bioequivalency  trial for ATI-0918); risks in the collection of clinical data, final clinical outcomes risks; risks regarding protection of intellectual property rights, including protection of know-how and other trade secrets relating to manufacture of ATI-0918 and ATI-1123; competitive risks, including risk associated with commercializing a generic drug (ATI-0918) competitive with drugs offered by potentially much larger companies with greater technical, financial and human resources;  risks regarding dependence on third-party performance, and performance and acceptance of Cytori’s products in the marketplace; as well as other risks and uncertainties described under the heading "Risk Factors" in Cytori's Securities and Exchange Commission Filings on Form 10-K and Form 10-Q. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made.

* Grand View Research report, “Liposomal Doxorubicin Market”, 2016.

Cytori Therapeutics, Inc.
Tiago Girao, +1 (858) 458.0900
ir@cytori.com

Source: Cytori Therapeutics