Good day ladies and gentlemen and welcome to the Quarter 4 2013 Cytomedix earnings conference call. My name is Caroline and I will be your operator for today. (Operator Instructions).
And now I would like to turn the call over to Mr. Michael Wood, Managing Director of LifeSci Advisors. Please go ahead.
Michael Wood – Managing Director of LifeSci Advisors
Good morning. This is Michael Wood with LifeSci Advisors. I’d like to thank you for participating today’s Cytomedix fourth quarter 2013 earnings conference call. Joining me from the company this morning are Martin Rosendale, Chief Executive Officer; Steve Shallcross, Chief Financial Officer and Dean Tozer, Chief Commercial Officer.
Here is an outline for today’s call. First, Marty will provide an update on the recent Deerfield financing announced last night, AutoloGel launch initiatives as well as research and development activities. He will then hand over the call to Steve who will provide you with a summary of fourth-quarter and full-year 2013 financial results. Then Dean Tozer, newly appointed chief commercial officer of the company will join the call. Finally, Marty will conclude with an outlook for early 2014 before opening the call to questions.
After the market closed yesterday, Cytomedix announced financial results for the fourth quarter and full year 2013. If you have not yet received this newsletter or if you like to be added to the company’s distribution list, please call LifeSci Advisors in New York at 646-597-6992 and speak with Paul Arndt.
Before we begin today’s call, I would like to caution that comments made during the conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Cytomedix. Actual results could differ materially from those projected. I encourage you to review the company’s filings with the Securities and Exchange Commission including without limitation the company’s Forms 10-K, 10-Q including the most recently filed 10-K which identify specific risk factors that may cause actual results or events to differ materially from those described in the forward looking statements.
Furthermore the content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast Tuesday, April 1, 2014. Cytomedix undertakes no obligations to revise or update any statements that reflect events or circumstances after the date of this conference call.
I’d now like to turn the call over to CEO Martin Rosendale.
Martin Rosendale – CEO
Thank you, Michael. Good morning everyone and thank you for joining us. I am Martin Rosendale, Chief Executive Officer of Cytomedix. First of all, this morning, we are very pleased to announce that we have entered into financing agreements with the Deerfield Management Company and the Anson Group. Under the terms of the Deerfield financing, they are providing us with up to $35 million in funding under a convertible debt financing. This facility provides us with an initial draw of $9 million at closing and we will receive a further $26 million monthly… have received authorization by our shareholders to increase our authorized capital stock at a special shareholder meeting.
The tranche structure of this financing will also allow the company to evaluate the RECOVER-Stroke study data and under specific circumstances related to the study results allow the company to elect to pursue alternative financing options in lieu of taking the second tranche.
Concurrent with the Deerfield financing, the Anson Group has agreed to provide an additional $2 million in equity funding. This financing arrangement in total gives us the resources to execute on our plan of building a profitable and successful commercially focused wound care business through 2015. We’re happy to have Deerfield as a partner and encouraged by the confidence both Deerfield and Anson have shown in the potential of AutoloGel. Steve will provide more details in his discussion later on.
Regarding AutoloGel, our main focus is now the commercial launch of our wound care product under the Coverage with Evidence Development program. The AutoloGel system is our proprietary point of care device for the production of the platelet-based bioactive therapy for the management of wounds. It’s been cleared by the FDA for use at a variety of existing wounds and we are in the process of launching it now with Medicare coverage and sufficient payment into the estimated $3.4 billion US chronic wound market.
We had to go through a fairly lengthy process to get the appropriate reimbursement coverage but we are pleased with the final decision by CMS in November 2013 regarding payment regulations for the hospital outpatient prospective payment system and the Medicare physician fee schedule.
To remind you, coverage with evidence development or CED is a program under which CMS agrees to provide reimbursement for certain products and services such as AutoloGel while at the same time generating additional clinical data to demonstrate the impact of health outcomes.
The reimbursement code assigned to AutoloGel under the CMS final decision allows for reimbursement at a national average rate of $411 per treatment. The payment decision which came into effect on January 1 this year significantly expands the coverage for AutoloGel and allows providers in the outpatient setting to treat a broad patient population with a variety of wounds. We believe these outcome provide Cytomedix with a substantial and economically viable business opportunity and we are now in a position to sell AutoloGel into this market at attractive gross margins.
For the Medicare physician fee schedule which covers AutoloGel used in physicians’ offices and which represents a separate market from the outpatient setting, the final payment rule was consistent with those initially proposed by CMS in July of last year.
The Medicare administrative contractors or MACs have been directed to set the payment rates for claims for AutoloGel based on the claims and invoices that are submitted by healthcare providers. This effectively allows the individual contractor to determine the level of reimbursement.
With favorable reimbursement in place and the ample financial resources we are now in a position to undertake a major launch in wound clinics. We’ve begun treating Medicare patients and our current focus is on completing the CED requirements. Our launch strategies are focused on key high density markets that we believe will offer the greatest revenue generating options. We have been recruiting for and building out our commercial team to support market requirements and CED activities.