PROSPECTUS
SUPPLEMENT
(To
Prospectus dated June 5, 2006)
100,000
Shares of Common Stock
$4.87
per share
________________
We
are
offering to sell to The Regents of The University of California, or The Regents,
100,000 shares of our common stock pursuant to this prospectus in consideration
for certain amendments to our patent license agreement with the Regents.
We will
not receive any cash proceeds from the sale of shares under this prospectus.
The
last reported sale price on the Nasdaq Global Market of our common stock
on
September 26, 2006 was $4.87 per share.
________________
This
investment involves a high degree of risk. See “Risk Factors” on page S-4 of
this prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The
date of this prospectus supplement is September 26, 2006.
TABLE
OF CONTENTS
PROSPECTUS
SUPPLEMENT
PROSPECTUS
You
should rely only on the information contained in or incorporated by reference
into this prospectus supplement and the accompanying prospectus. We have
not
authorized any other person to provide you with different information. If
anyone
provides you with different or inconsistent information, you should not rely
on
it. We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. The information in this prospectus
supplement and the accompanying prospectus is accurate only as of the date
it is
presented. Our business, financial condition, results of operations and
prospects may have changed since these dates.
S-1
This
prospectus supplement and the accompanying prospectus dated June 5, 2006
are
part of a “shelf” registration statement on Form S-3 we filed on May 15, 2006
with the Securities and Exchange Commission and that was declared effective
by
the Securities and Exchange Commission on June 5, 2006. By using a “shelf”
registration statement, we may sell shares of common stock, preferred stock,
warrants, to purchase common stock and/or depositary shares as described
in the
accompanying prospectus from time to time in one or more offerings up to
a total
of $50,000,000.
These
documents contain important information you should consider when making your
investment decision. The accompanying prospectus provides you with a general
description of the securities we may offer. This prospectus supplement contains
information about the common stock in this offering. This prospectus supplement
may add, update or change information in the accompanying prospectus. You
should
rely only on the information contained in this prospectus supplement, the
accompanying prospectus or incorporated by reference into this prospectus
supplement and the accompanying prospectus. We have not authorized anyone
to
provide you with any other information.
This
prospectus supplement does not constitute an offer to sell, or a solicitation
of
an offer to buy, the securities offered hereby in any jurisdiction where,
or to
any person to whom, it is unlawful to make such offer or
solicitation.
The
information contained in this prospectus supplement is accurate only as of
the
date of this prospectus supplement and the accompanying prospectus, regardless
of the time of delivery of this prospectus or of any sale of securities.
S-2
|
Common
stock offered by us pursuant to this prospectus
|
100,000
shares
|
|
|
Common
stock to be outstanding after this offering
|
15,725,170
shares
|
|
|
Offering
participants
|
This
offering is being made solely to The Regents of the University
of
California (“The Regents”).
|
|
|
Use
of proceeds
|
We
will receive no cash proceeds from this offering. The shares
to be sold
under this prospectus are being offered in consideration for
certain
amendments embodied in a September 26, 2006 amendment and restatement
of
our patent license agreement, originally dated October 16, 2001, with
The Regents.
|
|
|
Nasdaq
Global Market symbol
|
CYTX
|
|
|
Risk
factors
|
This
investment involves a high degree of risk. See “Risk Factors” on page S-4
of this prospectus
supplement.
|
The
number of shares of common stock to be outstanding after this offering is
based
on 15,625,170 shares outstanding as of June 30, 2006 and excludes, among
other
things:
| · |
2,918,255
shares of common stock sold by us in August 2006 at a price of $5.75
per
share; and
|
| · |
options
outstanding on June 30, 2006 to purchase a total of 6,144,536 shares
at a
weighted-average exercise price of $4.63 per
share.
|
S-3
An
investment in our common stock offered through this prospectus supplement
and
the accompanying prospectus involves certain risks. Before making an investment
decision, you should carefully consider the risks set forth below and set
forth
under the caption “Risk Factors” in our filings with the Securities and Exchange
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, which are incorporated by reference herein.
We
will need to raise more cash in the future
As
of
June 30, 2006, we had $9,343,000 of cash, cash equivalents and short-term
investments; we have always had negative cash flows from operations. Our
regenerative cell business will continue to result in a substantial requirement
for research and development expenses for several years, during which it
could
bring in no significant revenues. There can be no guarantee that adequate
funds
for our operations from any additional debt or equity financing, our operating
revenues, arrangements with distribution partners or from other sources will
be
available when needed or on terms attractive to us. The inability to obtain
sufficient funds would require us to delay, scale back or eliminate some
or all
of our research or product development programs, manufacturing operations,
clinical studies or regulatory activities or to license third parties to
commercialize products or technologies that we would otherwise seek to develop
ourselves, thus having a substantial negative effect on the results of our
operations and financial condition.
Subsequent
to the second quarter of 2006, we raised $16,800,000 by selling 2,918,255
shares
of our common stock at $5.75 per share under a shelf registration
statement.
We
have never been profitable on an operational basis and we will have significant
operating losses for at least the next several years
We
have
incurred net operating losses in each year since we started doing business.
These losses have resulted primarily from expenses associated with our research
and development activities and general and administrative expenses.
Development-stage losses related to our development of regenerative cell
technology are expected to keep us in a loss position on a consolidated basis
for several years. We anticipate that our recurring operating expenses will
be
at high levels for the next several years, due to the continued need to fund
our
clinical research program as well as additional preclinical research. We
expect
to continue to incur operational losses in our spine and orthopedics business
at
least through the end of 2006, and the amount of future net losses and time
necessary to reach operational profitability in that business are somewhat
uncertain.
Our
business is high-risk
We
are
focusing our resources and efforts primarily on our regenerative cell technology
and its development-stage cash needs. This is a high-risk strategy because
there
can be no assurance that our regenerative cell technology will ever be developed
into commercially viable products (commercial risk), that we will be able
to
preclude other companies from depriving us of market share and profit margins
by
selling products based on our inventions and developments (legal risk), that
we
will be able to successfully manage a company in a different business than
we
have operated in the past (operational risk), that we will be able to deliver
regenerative cells into the body to achieve the desired therapeutic results
(scientific risk), or that our cash resources will be adequate to develop
the
regenerative cell technology until it becomes profitable, if ever (financial
risk). We are using our cash in one of the riskiest industries in the economy
(strategic risk). This may make our stock an unsuitable investment for some
investors.
S-4
The
financial risk in this strategy is significant, particularly since our
bioresorbable products are not currently independently cash-flow-positive.
Although we eliminated the negative cash flow of the early commercialization
stage of the (non-Japan) Thin Film business by selling that business to MAST
in
May 2004, even our core spine and orthopedics implants business fell back
into a
negative cash flow position in 2004 due to the sharp reduction in orders
from
and sales to Medtronic. This trend continued in 2005 despite stocking orders
for
the new MYSTIQUE™ line and since then the orders and sales have again declined
sharply.
We
must keep our joint venture with Olympus operating
smoothly
Our
regenerative cell business cannot succeed on the current timelines unless
our
joint venture collaboration with Olympus goes well. We have given
Olympus-Cytori, Inc. an exclusive license to our regenerative cell therapeutic
device technology for use in future generation devices. If Olympus-Cytori,
Inc.
does not successfully develop and manufacture future generation devices for
sale
to us, we may not be able to commercialize any device or any therapeutic
products successfully into the market. In addition, any future disruption
in or
breakup of our relationship with Olympus would be extremely costly to our
reputation, in addition to causing many serious practical problems.
We
and
Olympus must overcome contractual and cultural barriers as we work together.
Our
relationship is formally measured by a set of complex contracts, which have
not
yet been tested in practice. In addition, many aspects of the relationship
will
be essentially non-contractual and must be worked out between the parties
and
the responsible individuals over time. The Joint Venture is intended to have
a
long life, and it is difficult to maintain cooperative relationships over
a long
period of time from a far distance in the face of various kinds of change.
Cultural differences, including a language barrier to some degree, may affect
the efficiency of the relationship as well.
Olympus-Cytori,
Inc. is 50% owned by us and 50% owned by Olympus. By contract, each side
must
consent before any of a wide variety of important business actions can occur.
This situation possesses a risk of potential time-consuming and difficult
negotiations which could at some point delay the Joint Venture from pursuing
its
business strategies.
Olympus
is entitled to designate the Joint Venture’s chief executive officer and a
majority of its board of directors, which means that day-to-day decisions
which
are not subject to a contractual veto will essentially be controlled by Olympus.
In addition, Olympus-Cytori, Inc. will need more money than its initial
capitalization in order to finalize development of and production of the
future
generation devices. If we are unable to help provide future financing for
Olympus-Cytori, Inc., our relative equity interest in Olympus-Cytori, Inc.
may
decrease.
Furthermore,
under a License/Joint Development Agreement among Olympus-Cytori, Inc., Olympus,
and us, Olympus will have a primary role in the development of Olympus-Cytori,
Inc.’s future generation devices. Although Olympus has extensive experience in
developing medical devices, this arrangement will result in a reduction of
our
control over the development and manufacturing of the future generation
devices.
We
rely on Medtronic to distribute a majority of our current biomaterials products,
but Medtronic’s level of commitment to our products is
doubtful
We
have
limited control over sales, marketing and distribution of our biomaterials
products. Our strategy for sales and marketing of our bioresorbable products
included entering into an agreement with Medtronic, a company with a large
distribution network, to market many of our current and certain future products
incorporating our technology. The sale of hard-tissue-fixation bioresorbable
implant products to our distribution partner, Medtronic, has constituted
the
majority of our revenues.
S-5
We
remain
significantly dependent on Medtronic to generate sales revenues for all of
our
spine and orthopedics bioresorbable products. The amount and timing of resources
which may be devoted to the performance of Medtronic’s contractual
responsibilities are not within our control. There can be no guarantee that
Medtronic will perform its obligations as expected or pay us any additional
option or license fees. There is also no guarantee that it will market any
new
products under the distribution agreements or that we will derive any
significant revenue from such arrangements. Medtronic’s sale of our products to
end customers in 2004 and 2005 and the first half of 2006, and its rate of
product orders placed with us in the same periods, disappointed our expectations
with the exception of 2005 stocking orders for the new MYSTIQUE™ line. 2004 and
2005 results and the first half of 2006 were exceptionally weak, and we are
significantly disappointed with the marketing efforts of Medtronic for our
non-MYSTIQUE™ products at this time. We recorded an inventory provision for
slow-moving non-MYSTIQUE™ inventory in the second, third and fourth quarters of
2005.
Our
dependence upon Medtronic to market and sell our bioresorbable products places
us in a position where we cannot accurately predict the extent to which our
products will be actively and effectively marketed, depriving us of some
of the
reliable data we need to make optimal operational and strategic decisions.
The
consequent lack of visibility is evidenced by the withdrawal of our announced
financial guidance for 2004, and our results falling within the lowest range
of
our guidance for 2005. The results of this business line so far in 2006 have
been below our internal expectations. Although the business is not succeeding
as
we had hoped, we performed an analysis and determined that none of the related
assets are impaired.
The
prices which Medtronic pays us are fixed (pending biannual price reviews
in
January and July of each year), based on a percentage of Medtronic’s historic
selling price to its customers. If our costs increase but our selling prices
remain fixed, our profit margin will suffer.
Medtronic
owns 6.4% of our stock, which may limit our ability to negotiate commercial
arrangements optimally with Medtronic. Although Medtronic has exclusive
distribution rights to our co-developed spinal implants, it also distributes
other products that are competitive to ours. Medtronic might choose to develop
and distribute existing or alternative technologies in preference to our
technology in the spine, or preferentially market competitive products that
can
achieve higher profit margins. We suspect that this has in fact been
happening.
There
can
be no assurance that our interests will coincide with those of Medtronic
or that
disagreement over rights or technology or other proprietary interests will
not
occur. The loss of the marketing services provided by Medtronic (or the failure
of Medtronic to satisfactorily perform these marketing services), or the
loss of
revenues generated by Medtronic, could have a substantial negative effect
on our
ability or willingness to continue our spine and orthopedics biomaterials
business. Indeed, even with Medtronic in place it seems the problems we have
experienced may be intractable, and we are considering the possibility that
the
business cannot succeed under our stewardship. Accordingly, we are considering
the possibility of divestment or other strategic alternatives for the
business.
Senko
has
not yet begun to distribute our Thin Film products in Japan; but if and when
they do, we cannot be assured that they will be successful.
We
have a limited operating history; our operating results can be
volatile
Our
prospects must be evaluated in light of the risks and difficulties frequently
encountered by emerging companies and particularly by such companies in rapidly
evolving and technologically advanced fields such as the biotechnology and
medical device fields. Due to our limited operating history, and the development
stage status of our regenerative cell business, comparisons of our year-to-year
operating results are not necessarily meaningful and the results for any
periods
should not necessarily be relied upon as an indication for future performance.
Since our limited operating history makes the prediction of future results
difficult or impossible, our recent revenue results should not be taken as
an
indication of any future growth or of a sustainable level of revenue. Operating
results will also be affected by our transition away from our revenue generating
medical device business and the focus of the vast majority of our resources
into
the development-stage regenerative cell business.
S-6
Moreover,
our operating results can vary substantially from our previously published
financial guidance (such as occurred in the second quarter of 2004), from
analyst expectations and from previous periodic results for many reasons,
including the timing of product introductions and distributor purchase orders.
Also, the 2002 sale of our CMF bone fixation implant and accessory product
line,
which had represented a large portion of our revenues, plus the 2004 sale
of our
(non-Japan) Thin Film surgical implants for separation of soft tissues, have
distorted and will distort quarterly and annual earning comparisons through
2004, 2005 and 2006. Earnings surprises can have a disproportionate effect
on
the stock prices of emerging companies such as ours. Also, our stock price
is
likely to be disproportionately affected by changes which generally affect
the
economy, the stock market or the medical device and biotechnology
industries.
From
time
to time, we have tried to influence our investors’ expectations as to our
operating results by periodically announcing financial guidance. However,
we
have in the past been forced to revise or withdraw such guidance due to lack
of
visibility and predictability of product demand. This lack of visibility
and
predictability of product demand for our bioresorbable implant products is
likely to occur in the future as well.
We
are vulnerable to competition and technological change, and also to physicians’
inertia
We
compete with many domestic and foreign companies in developing our technology
and products, including biotechnical, medical device, pharmaceutical and
biopharmaceutical companies. Many of our competitors and potential competitors
have substantially greater financial, technological, research and development,
marketing and personnel resources than we do. There can be no assurance that
our
competitors will not succeed in developing alternative technologies and products
that are more effective, easier to use or more economical than those which
we
have developed or are in the process of developing or that would render our
technology and products obsolete and non-competitive in these fields. In
general, we may not be able to preclude other companies from developing and
marketing competitive regenerative cell therapies or bioresorbable products
that
are similar to ours or perform similar functions.
These
competitors may also have greater experience in developing therapeutic
treatments, conducting clinical trials, obtaining regulatory clearances or
approvals, manufacturing and commercializing therapeutic or biomaterials
products. It is possible that certain of these competitors may obtain patent
protection, approval or clearance by the U.S. Food and Drug Administration
“FDA”
or achieve commercialization earlier than we, any of which could have a
substantial negative effect on our business. Finally, Olympus, Medtronic
and our
other partners might pursue parallel development of other technologies or
products, which may result in a partner developing additional products that
will
compete with our products.
We
also
compete with other types of regenerative cell therapies such as bone marrow
derived cell therapies, and potentially embryonic derived therapies. Our
biomaterials business competes with manufacturers of traditional
non-bioresorbable implants, such as titanium implants. Doctors have historically
been slow to adopt new technologies such as ours, whatever the merits, when
older technologies continue to be supported by established providers. Overcoming
such inertia often requires very significant marketing expenditures or
definitive product superiority.
We
expect
physicians’ inertia and skepticism to also be a significant barrier as we
attempt to gain market penetration with our future regenerative cell products.
We believe we will need to finance lengthy time-consuming clinical studies
(so
as to provide convincing evidence of the medical benefit) in order to overcome
this inertia and skepticism.
S-7
Our
regenerative cell technology products are pre-commercialization, which subjects
us to development and marketing risks
We
are in
a relatively early stage of the path to commercialization with many of our
products. We believe that our long-term viability and growth will depend
in
large part on our ability to develop commercial quality cell processing devices
and to establish the safety and efficacy of our therapies through clinical
trials and studies. We are presently pursuing regenerative cell opportunities
in
cardiovascular disease, spine and orthopedic conditions, gastrointestinal
disorders and new approaches for aesthetic and reconstructive surgery that
may
require extensive additional capital investment, research, development, clinical
testing and regulatory clearances or approvals prior to commercialization.
There
can be no assurance that our development programs will be successfully completed
or that required regulatory clearances or approvals will be obtained on a
timely
basis, if at all.
The
path
to commercial profit from our regenerative cell technology is unclear even
if we
demonstrate the medical benefit of our regenerative cell technology in various
applications. There is no proven path for commercializing the technology
in a
way to earn a durable profit commensurate with the medical benefit. Most
of our
cell-related products and/or services are at least three to five years
away.
Moreover,
the successful development and market acceptance of our technologies and
products are subject to inherent developmental risks, including ineffectiveness
or lack of safety, unreliability, failure to receive necessary regulatory
clearances or approvals, high commercial cost and preclusion or obsolescence
resulting from third parties’ proprietary rights or superior or equivalent
products, as well as general economic conditions affecting purchasing patterns.
There can be no assurance that we or our partners will be able to successfully
develop and commercialize our technologies or products, or that our competitors
will not develop competing technologies that are less expensive or otherwise
superior to ours. The failure to successfully develop and market our new
regenerative cell technologies would have a substantial negative effect on
the
results of our operations and financial condition.
We
have limited manufacturing experience
We
have
no experience in manufacturing the Celution™ system at a commercial level, and
although Olympus is a highly capable and experienced manufacturer of medical
devices, there can be no guarantee that the Olympus-Cytori joint venture
will be
able to successfully develop and manufacture the Celution™ system in a manner
that is cost-effective or commercially viable, or that development and
manufacturing capabilities might not take much longer than currently anticipated
to be ready for the market.
In
the
event that the Olympus-Cytori joint venture is not successful, Cytori may
not
have the required level of technical ability or other resources to self
manufacture commercially viable devices, and in any event this failure would
substantially extend the time it would take for us to bring a commercial
device
to market. This makes us significantly dependant on the continued dedication
and
skill of Olympus for the successful development of the Celution™
system.
In
addition, the future of our biomaterials business success is significantly
dependent on our ability to manufacture our bioresorbable implants in commercial
quantities, in compliance with regulatory requirements and in a cost-effective
manner. Production of some of our products in commercial-scale quantities
may
involve unforeseen technical challenges and may require significant scale-up
expenses for additions to facilities and personnel. There can be no guarantee
that we will be able to achieve large-scale manufacturing capabilities for
some
of our biomaterials products or that we will be able to manufacture these
products in a cost-effective manner or in quantities necessary to allow us
to
achieve profitability. Our 2002 sale of CMF production assets to Medtronic
and
our 2004 sale of the (non-Japan) Thin Film product line deprived us of some
economies of scale in manufacturing. Current demand for spine and orthopedics
products from Medtronic is so low that economies of scale are lacking in
regard
to that product line as well.
S-8
If
we are
unable to sufficiently meet Medtronic’s requirements for certain products as set
forth under its agreement, Medtronic itself may then manufacture and sell
such
product and only pay us royalties on the sales. The resulting loss of payments
from Medtronic for the purchase of these products may have a substantial
negative effect on the results of our operations and financial
condition.
We
have to maintain quality assurance certification and manufacturing
approvals
The
manufacture of our bioresorbable products is, and the manufacture of the
Celution™ system for regenerative cells will be, subject to periodic inspection
by regulatory authorities and distribution partners. The manufacture of devices
and products for human use is subject to regulation and inspection from time
to
time by the FDA for compliance with the FDA’s Quality System Regulation “QSR”
requirements, as well as equivalent requirements and inspections by state
and
non-U.S. regulatory authorities. There can be no guarantee that the FDA or
other
authorities will not, during the course of an inspection of existing or new
facilities, identify what they consider to be deficiencies in our compliance
with QSRs or other requirements and request, or seek, remedial
action.
Failure
to comply with such regulations or a potential delay in attaining compliance
may
adversely affect our manufacturing activities and could result in, among
other
things, injunctions, civil penalties, FDA refusal to grant pre-market approvals
or clearances of future or pending product submissions, fines, recalls or
seizures of products, total or partial suspensions of production and criminal
prosecution. There can be no assurance that we will be able to obtain additional
necessary regulatory approvals or clearances on a timely basis, if at all.
Delays in receipt of or failure to receive such approvals or clearances or
the
loss of previously received approvals or clearances could have a substantial
negative effect on the results of our operations and financial
condition.
We
depend on a sole source supplier for our crucial raw material for our
bioresorbable products
We
currently purchase the high molecular weight, medical grade, lactic acid
copolymer used in manufacturing most of our bioresorbable products, from
a
single qualified source. Although we have a contract with B.I. Chemicals,
Inc.,
which guarantees continuation of supply through August 15, 2007, we cannot
guarantee that they will elect to continue the contract beyond that date,
or
that they will not elect to discontinue the manufacture of the material.
They
have agreed that if they discontinue manufacturing they will either find
a
replacement supplier, or provide us with the necessary technology to
self-manufacture the material, either of which could mean a substantial increase
in material costs. Also, despite this agreement they might fail to do these
things for us. Under the terms of the contract, B.I. Chemicals, Inc. may
choose
to raise their prices upon six months’ prior notice which may also result in a
substantially increased material cost. Although we believe that we would
be able
to obtain the material from at least one other source in the event of a failure
of supply, there can be no assurance that we will be able to obtain adequate
increased commercial quantities of the necessary high quality within a
reasonable period of time or at commercially reasonable rates. Lack of adequate
commercial quantities or the inability to develop alternative sources meeting
regulatory requirements at similar prices and terms within a reasonable time
or
any interruptions in supply in the future could have a significant negative
effect on our ability to manufacture products, and, consequently, could have
a
material adverse effect on the results of our operations and financial
condition.
We
may not be able to protect our proprietary rights
Our
success depends in part on whether we can obtain additional patents, maintain
trade secret protection and operate without infringing on the proprietary
rights
of third parties.
S-9
Our
regenerative cell technology license agreement with the Regents of the
University of California contains certain developmental milestones, which
if not
achieved could result in the loss of exclusivity or loss of the license rights.
The loss of such rights could significantly impact our ability to continue
the
development of the regenerative cell technology and commercialize related
products. Also, our power as licensee to successfully use these rights to
exclude competitors from the market is untested. In addition, further legal
risk
arises from a lawsuit, filed by the University of Pittsburgh naming all of
the
inventors who had not assigned their ownership interest in Patent 6,777,231
to
the University of Pittsburgh, seeking a determination that its assignors,
rather
than the University of California’s assignors, are the true inventors of Patent
6,777,231. We are the exclusive, worldwide licensee of the University of
California’s rights under this patent, which relates to adult stem cells
isolated from adipose tissue that can differentiate into two or more of a
variety of cell types. If the University of Pittsburgh wins the lawsuit,
our
license rights to this patent could be nullified or rendered non-exclusive
with
respect to any third party that might license rights from the University
of
Pittsburgh, and our regenerative cell strategy could be impacted.
We
have
various U.S. patents for the design of our bioresorbable plates and high
torque
screws and devices and we have filed applications for numerous additional
U.S.
patents, as well as certain corresponding patent applications outside the
United
States, relating to our technology. However, we believe we cannot patent
the use
of our lactic acid copolymer for surgical implants, nor are many of our
particular implants generally patentable.
There
can
be no assurance that any of the pending patent applications will be approved
or
that we will develop additional proprietary products that are patentable.
There
is also no assurance that any patents issued to us will provide us with
competitive advantages, will not be challenged by any third parties or that
the
patents of others will not prevent the commercialization of products
incorporating our technology. Furthermore, there can be no guarantee that
others
will not independently develop similar products, duplicate any of our products
or design around our patents.
Our
commercial success will also depend, in part, on our ability to avoid infringing
on patents issued to others. If we were judicially determined to be infringing
on any third party patent, we could be required to pay damages, alter our
products or processes, obtain licenses or cease certain activities. If we
are
required in the future to obtain any licenses from third parties for some
of our
products, there can be no guarantee that we would be able to do so on
commercially favorable terms, if at all. U.S. patent applications are not
immediately made public, so we might be surprised by the grant to someone
else
of a patent on a technology we are actively using. As noted above as to U
Pitt
lawsuit, even patents issued to us or our licensors might be judicially
determined to belong in full or in part to third parties.
Litigation,
which would result in substantial costs to us and diversion of effort on
our
part, may be necessary to enforce or confirm the ownership of any patents
issued
or licensed to us or to determine the scope and validity of third party
proprietary rights. If our competitors claim technology also claimed by us
and
prepare and file patent applications in the United States, we may have to
participate in interference proceedings declared by the U.S. Patent and
Trademark Office or a foreign patent office to determine priority of invention,
which could result in substantial costs to and diversion of effort, even
if the
eventual outcome is favorable to us.
Any
such
litigation or interference proceeding, regardless of outcome, could be expensive
and time consuming. We have been incurring substantial legal costs as a result
of the University of Pittsburgh lawsuit, and our president Marc Hedrick is
a
named individual defendant in that lawsuit because he is one of the inventors
identified on the patent. As a named inventor on the patent, Marc Hedrick
is
entitled to receive from the Regents of the University of California up to
7% of
royalty payments made by us to the Regents of the University of California.
This
agreement was in place prior to employment with us.
S-10
In
addition to patents, which alone may not be able to protect the fundamentals
of
our regenerative cell and bioresorbable businesses, we also rely on unpatented
trade secrets and proprietary technological expertise. We rely, in part,
on
confidentiality agreements with our partners, employees, advisors, vendors
and
consultants to protect our trade secrets and proprietary technological
expertise. There can be no guarantee that these agreements will not be breached,
or that we will have adequate remedies for any breach, or that our unpatented
trade secrets and proprietary technological expertise will not otherwise
become
known or be independently discovered by competitors.
Failure
to obtain or maintain patent protection, or protect trade secrets, for any
reason (or third party claims against our patents, trade secrets or proprietary
rights, or our involvement in disputes over our patents, trade secrets or
proprietary rights, including involvement in litigation), could have a
substantial negative effect on the results of our operations and financial
condition.
We
may not be able to protect our intellectual property in countries outside
the
United States
Intellectual
property law outside the United States is uncertain and in many countries
is
currently undergoing review and revisions. The laws of some countries do
not
protect our patent and other intellectual property rights to the same extent
as
United States laws. We currently have pending patent applications in Europe,
Australia, Japan, Canada, China, Korea, and Singapore, among
others.
We
are, and Olympus-Cytori, Inc. will be, subject to intensive FDA
regulation
As
newly
developed medical devices, ours as well as Olympus-Cytori’s regenerative cell
harvesting, isolation and delivery devices and our bioresorbable implants
must
receive regulatory clearances or approvals from the FDA and, in many instances,
from non-U.S. and state governments, prior to their sale. Ours as well as
Olympus-Cytori’s current and future regenerative cell harvesting, isolation and
delivery devices and bioresorbable implants are subject to stringent government
regulation in the United States by the FDA under the Federal Food, Drug and
Cosmetic Act. The FDA regulates the design/development process, clinical
testing, manufacture, safety, labeling, sale, distribution and promotion
of
medical devices and drugs. Included among these regulations are pre-market
clearance and pre-market approval requirements, design control requirements,
and
the Quality System Regulations / Good Manufacturing Practices. Other statutory
and regulatory requirements govern, among other things, establishment
registration and inspection, medical device listing, prohibitions against
misbranding and adulteration, labeling and post market reporting.
The
regulatory process can be lengthy, expensive and uncertain. Before any new
medical device may be introduced to the United States market, the manufacturer
generally must obtain FDA clearance or approval through either the 510(k)
pre-market notification process or the lengthier pre-market approval application
“PMA” process. It generally takes from three to 12 months from submission to
obtain 510(k) pre-market clearance, although it may take longer. Approval
of a
PMA could take four or more years from the time the process is initiated.
The
510(k) and PMA processes can be expensive, uncertain and lengthy, and there
is
no guarantee of ultimate clearance or approval. We expect that some of our
future products under development as well as Olympus-Cytori’s will be subject to
the lengthier PMA process. Securing FDA clearances and approvals may require
the
submission of extensive clinical data and supporting information to the FDA,
and
there can be no guarantee of ultimate clearance or approval. Failure to comply
with applicable requirements can result in application integrity proceedings,
fines, recalls or seizures of products, injunctions, civil penalties, total
or
partial suspensions of production, withdrawals of existing product approvals
or
clearances, refusals to approve or clear new applications or notifications
and
criminal prosecution.
S-11
Medical
devices are also subject to post-market reporting requirements for deaths
or
serious injuries when the device may have caused or contributed to the death
or
serious injury, and for certain device malfunctions that would be likely
to
cause or contribute to a death or serious injury if the malfunction were
to
recur. If safety or effectiveness problems occur after the product reaches
the
market, the FDA may take steps to prevent or limit further marketing of the
product. Additionally, the FDA actively enforces regulations prohibiting
marketing and promotion of devices for indications or uses that have not
been
cleared or approved by the FDA.
Our
current medical implants are at different stages of FDA review. We currently
have 510(k) clearances for a wide variety of bioresorbable surgical implant
products and we are constantly engaged in the process of obtaining additional
clearances for new and existing products. There can be no guarantee that
we will
be able to obtain the necessary 510(k) clearances or PMA approvals to market
and
manufacture our other products in the United States for their intended use
on a
timely basis, if at all. Delays in receipt of or failure to receive such
clearances or approvals, the loss of previously received clearances or
approvals, or failure to comply with existing or future regulatory requirements
could have a substantial negative effect on the results of our operations
and
financial condition.
To
sell in international markets, we will be subject to intensive regulation
in
foreign countries
In
cooperation with our distribution partners, we intend to market our current
and
future products both domestically and in many foreign markets. A number of
risks
are inherent in international transactions. In order for us to market our
products in Europe, Canada, Japan and certain other non-U.S. jurisdictions,
we
need to obtain and maintain required regulatory approvals or clearances and
must
comply with extensive regulations regarding safety, manufacturing processes
and
quality. For example, we still have not obtained regulatory approval for
our
Thin Film products in Japan. These regulations, including the requirements
for
approvals or clearances to market, may differ from the FDA regulatory scheme.
International sales also may be limited or disrupted by political instability,
price controls, trade restrictions and changes in tariffs. Additionally,
fluctuations in currency exchange rates may adversely affect demand for our
products by increasing the price of our products in the currency of the
countries in which the products are sold.
There
can
be no assurance that we will obtain regulatory approvals or clearances in
all of
the countries where we intend to market our products, or that we will not
incur
significant costs in obtaining or maintaining foreign regulatory approvals
or
clearances, or that we will be able to successfully commercialize current
or
future products in various foreign markets. Delays in receipt of approvals
or
clearances to market our products in foreign countries, failure to receive
such
approvals or clearances or the future loss of previously received approvals
or
clearances could have a substantial negative effect on the results of our
operations and financial condition.
We
depend on a few key officers
Our
performance is substantially dependent on the performance of our executive
officers and other key scientific staff, including Christopher J. Calhoun,
our
Chief Executive Officer, and Marc H. Hedrick, MD, our President. We rely
upon
them for strategic business decisions and guidance. We believe that our future
success in developing marketable products and achieving a competitive position
will depend in large part upon whether we can attract and retain additional
qualified management and scientific personnel. Competition for such personnel
is
intense, and there can be no assurance that we will be able to continue to
attract and retain such personnel. The loss of the services of one or more
of
our executive officers or key scientific staff or the inability to attract
and
retain additional personnel and develop expertise as needed could have a
substantial negative effect on our results of operations and financial
condition.
S-12
We
may not have enough product liability insurance
The
testing, manufacturing, marketing and sale of our regenerative cell and
bioresorbable implant products involve an inherent risk that product liability
claims will be asserted against us, our distribution partners or licensees.
There can be no guarantee that our clinical trial and commercial product
liability insurance is adequate or will continue to be available in sufficient
amounts or at an acceptable cost, if at all. A product liability claim, product
recall or other claim, as well as any claims for uninsured liabilities or
in
excess of insured liabilities, could have a substantial negative effect on
the
results of our operations and financial condition. Also, well-publicized
claims
could cause our stock to fall sharply, even before the merits of the claims
are
decided by a court.
Our
charter documents contain anti-takeover provisions and we have adopted a
Stockholder Rights Plan to prevent hostile takeovers
Our
Amended and Restated Certificate of Incorporation and Bylaws contain certain
provisions that could prevent or delay the acquisition of the Company by
means
of a tender offer, proxy contest or otherwise. They could discourage a third
party from attempting to acquire control of the Company, even if such events
would be beneficial to the interests of our stockholders. Such provisions
may
have the effect of delaying, deferring or preventing a change of control
of the
Company and consequently could adversely affect the market price of our shares.
Also, in 2003 we adopted a Stockholder Rights Plan, of the kind often referred
to as a poison pill. The purpose of the Stockholder Rights Plan is to prevent
coercive takeover tactics that may otherwise be utilized in takeover attempts.
The existence of such a rights plan may also prevent or delay the change
in
control of the Company which could adversely affect the market price of our
shares.
We
pay no dividends
We
currently do not intend to pay any cash dividends for the foreseeable
future.
S-13
We
will
receive no cash proceeds from this offering. The shares to be sold under
this
prospectus are being offered in consideration for certain amendments embodied
in
a September 26, 2006 amendment and restatement of our patent license agreement,
originally dated October 16, 2001, with The Regents.
For
purposes of determining the value of the non-cash consideration that we are
receiving in this offering, we have valued the stock being offered at $4.87,
or
the “deemed offering price,” which was the closing price for our common stock on
the Nasdaq Global Market as of the date of this prospectus supplement. Using
this value, an investment of our common stock in this offering will subject
to
dilution to the extent of the difference between the deemed offering price
per
share and the net tangible book value per share of our common stock after
this
offering. We calculate net tangible book value per share by dividing the
net
tangible book value, tangible assets less total liabilities, by the number
of
outstanding shares of our common stock.
Our
net
tangible book value at June 30, 2006, was $(24,295,000), or $(1.55) per share,
based on 15,625,170
shares
of our common stock outstanding as of that date. After giving effect to the
sale
of 100,000 shares of common stock by us at a deemed offering price of $4.87
per
share, our net tangible book value as of June 30, 2006, would have been
approximately $(23,808,000), or $(1.51) per share. This represents an immediate
increase in the net tangible book value of approximately $.04 per share to
existing stockholders and an immediate dilution of approximately $6.38 per
share
to investors in this offering. The following table (which takes no account
of
any other shares issued after June 30, 2006) illustrates this per share
dilution:
|
Offering
price per share
|
$
|
4.87
|
||||
|
Net
tangible book value per share as of June 30, 2006
|
$
|
(1.55
|
)
|
|||
|
Increase
in net tangible book value per share after this offering
|
$
|
0.04
|
||||
|
Net
tangible book value per share after this offering
|
$
|
(1.51
|
)
|
|||
|
Dilution
per share to new investors
|
$
|
6.38
|
This
offering is being made directly by us, without an underwriter or placement
agent, to The Regents of the University of California (the “Regents”). We
propose to sell the securities offered under this prospectus for non-cash
consideration consisting of an amendment to certain terms to our patent license
agreement with The Regents. Additional information regarding our agreement
with
The Regents and the amendment to this agreement can be found in our periodic
reports filed with the U.S. Securities and Exchange Commission. (See
“Incorporation of Certain Information by Reference.”) The Regents may assign
some of the securities to inventors of the underlying technology, including
our
president Marc Hedrick.
The
transfer agent for our common stock is ComputerShare Investor Services,
LLC.
Our
common stock is traded on the Nasdaq Global Market (formerly known as the
Nasdaq
National Market) and the Frankfurt Stock Exchange under the symbols “CYTX” and
“XMPA”, respectively.
S-14
The
validity of the common stock offered by this prospectus supplement has been
passed upon for us by Heller Ehrman LLP, San Diego, California.
S-15
PROSPECTUS
$50,000,000
Common
Stock
Preferred
Stock
Depositary
Shares
Warrants
__________________________
We
may
offer and sell an indeterminate number of shares of our common stock, preferred
stock, depositary shares and warrants from time to time under this prospectus.
We may offer these securities separately or as units, which may include
combinations of these securities. We will describe in a prospectus supplement
the securities we are offering and selling, as well as the specific terms
of the
securities. This prospectus may not be used to offer or sell any securities
unless accompanied by a prospectus supplement.
We
may
offer these securities in amounts, at prices and on terms determined at the
time
of offering. We may sell the securities directly to you, through agents we
select, or through underwriters and dealers we select. If we use agents,
underwriters or dealers to sell the securities, we will name them and describe
their compensation in a prospectus supplement.
Our
common stock is quoted on the NASDAQ National Market and the Frankfurt Stock
Exchange under the symbols “CYTX” and “XMPA”, respectively. On June 2,
2006, the last reported sale price of our common stock on the NASDAQ National
Market was $8.00 per share.
__________________________
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning
on Page 6.
__________________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is June 5, 2006
TABLE
OF CONTENTS
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
You
should rely only on the information contained or incorporated by reference
in
this prospectus. We have not authorized anyone to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not making an offer to sell or seeking
offers
to buy these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained or incorporated
by
reference in this prospectus is accurate as of the date on the front cover
of
this prospectus only. Our business, financial condition, results of operations
and prospects may have changed since that date.
i
This
prospectus is part of a registration statement on Form S-3 that we filed
with the United States Securities and Exchange Commission, or SEC, utilizing
a
“shelf” registration process. Under the shelf registration process, we may offer
and sell shares of our common stock, preferred stock, depositary shares and/or
warrants to purchase our common stock, preferred stock or depositary shares
with
a total value of up to $50,000,000 from time to time under this prospectus
at
prices and on terms to be determined by market conditions at the time of
offering. This prospectus provides you with a general description of the
securities we may offer. Each time we use this prospectus to offer securities,
we will provide a prospectus supplement that will contain specific information
about the terms of that offering, including a description of the specific
amounts, prices and other important terms of the offered securities, including,
to the extent applicable:
·
designation
or classification;
·
aggregate
offering price;
·
conversion,
exchange or exercise prices and terms, if applicable, and, if applicable,
any
provisions for changes to or adjustments in the exercise prices or terms
and in
the securities or other property receivable upon conversion, exchange or
exercise;
·
other
rights, if any; and
·
important
federal income tax considerations.
A
prospectus supplement may include a discussion of risks or other special
considerations applicable to us or the offered securities. A prospectus
supplement may also add, update or change information contained in this
prospectus. If there is any inconsistency between the information in this
prospectus and the applicable prospectus supplement, you must rely on the
information in the prospectus supplement. Please carefully read both this
prospectus and the applicable prospectus supplement together with additional
information described under the heading “Where You Can Find More Information”.
This prospectus may not be used to offer or sell any securities unless
accompanied by a prospectus supplement.
The
registration statement containing this prospectus, including exhibits to
the
registration statement, provides additional information about us and the
securities offered under this prospectus. The registration statement can
be read
at the SEC website or at the SEC’s public reading room mentioned under the
heading “Where You Can Find More Information”.
We
may
sell the securities directly to or through underwriters, dealers or agents.
We,
and our underwriters or agents, reserve the right to accept or reject all
or
part of any proposed purchase of securities. If we do offer securities through
underwriters or agents, we will include in the applicable prospectus
supplement:
·
the
names
of those underwriters or agents;
·
applicable
fees, discounts and commissions to be paid to them;
·
details
regarding options granted to them to purchase additional securities, if any;
and
·
the
net
proceeds to us.
Common
Stock.
We
may
issue
shares of our common stock from time to time. Holders of our common stock
are
entitled to one vote per share for the election of directors and on all other
matters that require shareholder approval. Subject to any preferential rights
of
any outstanding preferred stock, in the event of our liquidation, dissolution
or
winding up, holders of our common stock are entitled to share ratably in
the
assets remaining after payment of liabilities and the liquidation preferences
of
any outstanding preferred stock. Our common stock does not carry any preemptive
rights enabling a holder to subscribe for, or receive shares of, any class
of
our common stock or any other securities convertible into shares of any class
of
our common stock, or any redemption rights.
Preferred
Stock.
We
may
issue
shares of our preferred stock from time to time, in one or more series. Under
our amended and restated articles of incorporation, our Board of Directors
has
the authority, without further action by shareholders, to designate up to
5,000,000 shares of preferred stock in one or more series and to fix the
rights, preferences, privileges, qualifications and restrictions granted
to or
imposed upon the preferred stock, including
1
dividend
rights, conversion rights, voting rights, rights and terms of redemption,
liquidation preference and sinking fund terms, any or all of which may be
greater than the rights of the common stock. Our Board of Directors has adopted
a stockholder rights plans which is described in greater detail in this
prospectus under “Description of Capital Stock—Series RP Preferred Stock
Purchase Rights”.
We
will
fix the rights, preferences, privileges, qualifications and restrictions
of the
preferred stock of each series that we sell under this prospectus and applicable
prospectus supplements in the certificate of determination relating to that
series. We will incorporate by reference into the registration statement
on
Form S-3 of which this prospectus is a part the form of any certificate of
determination that describes the terms of the series of preferred stock we
are
offering before the issuance of the related series of preferred stock. We
urge
you to read the prospectus supplement related to the series of preferred
stock
being offered, as well as the complete certificate of determination that
contains the terms of the applicable series of preferred stock.
Warrants.
We
may
issue
warrants for the purchase of common stock, preferred stock and/or depositary
shares in one or more series, from time to time. We may issue warrants
independently or together with common stock, preferred stock and/or depositary
shares, and the warrants may be attached to or separate from those
securities.
The
warrants will be evidenced by warrant certificates issued under one or more
warrant agreements, which are contracts between us and an agent for the holders
of the warrants. In this prospectus, we have summarized certain general features
of the warrants. We urge you, however, to read the prospectus supplement
related
to the series of warrants being offered, as well as the complete warrant
agreement and warrant certificate that contain the terms of the warrants.
Any
warrant agreement and warrant certificate containing the terms of the warrants
being offered will be incorporated by reference into the registration statement
on Form S-3 of which this prospectus is a part from reports we file with
the SEC.
Depositary
Shares.
We
may
elect
to offer fractional shares of preferred stock rather than full shares of
preferred stock and, in that event, will issue receipts for depositary shares.
Each of these depositary shares will represent a fraction, which will be
set
forth in the applicable prospectus supplement, of a share of the applicable
series of preferred stock.
Any
depositary shares that we sell under this prospectus will be evidenced by
depositary receipts issued under a deposit agreement between us and a depositary
with whom we deposit the shares of the applicable series of preferred stock
that
underlie the depositary shares that are sold. We urge you to read the prospectus
supplement related to any depositary shares being sold, as well as the complete
deposit agreement and depositary receipt. A complete deposit agreement,
including a form of depositary receipt, and supplements to those forms
containing the terms of any depositary shares that we sell under this prospectus
will be incorporated by reference into the registration statement on
Form S-3 of which this prospectus is a part from reports we file with the
SEC.
2
We
are a
biotechnology company that specializes in the discovery and development of
cell-based regenerative medicine therapies. Our goal is to advance adipose
stem
cell therapies into and through clinical trials and commercialize these
therapies through an innovative cell processing system. The therapeutic
indications we are focused on currently include cardiovascular disease,
gastrointestinal disorders, spine and orthopedic repair, and aesthetic and
reconstructive surgery. To facilitate the processing and delivery of adipose
stem and regenerative cells, we have designed the proprietary point-of-care
Celution™ system to isolate and concentrate a patient’s own regenerative cells
in real-time in approximately one hour.
To
broaden and accelerate our development efforts, we are seeking co-development
partnerships with pharmaceutical, medical device or biotechnology companies.
Moreover, we are searching for partners who can help identify drugs, proteins
or
genes that when combined with adipose stem and regenerative cells enhance
or
stimulate certain select properties. For example, we may seek to identify
a drug
that when mixed with adipose stem and regenerative cells directs specific
cells
to turn more quickly and efficiently into blood vessels.
We
also
have a business unit that operates under the name MacroPore Biosurgery. This
business consists of two product families and we currently derive the majority
of our revenue from this unit. The HYDROSORB™ family of bioresorbable spine and
orthopedic implants is distributed worldwide exclusively by Medtronic, Inc.
(“Medtronic”) who owned 1.0 million shares in Cytori, or 6.5% of our total
shares outstanding as of December 31, 2005. Our Thin Film product line will
be marketed exclusively in Japan by Senko Medical Trading Co. (“Senko”)
following approval of the product in Japan. The potential revenues and profits
from the MacroPore Biosurgery division would be used by us to support the
research and development of our cell-based therapeutics.
Adipose
Stem Cell Technology
Adipose,
also known as fat tissue, is considered the richest and most accessible known
source of stem and regenerative cells. Peer reviewed research demonstrates that
the mechanisms by which adipose stem and regenerative cells act are through
the
release of growth factors as well as other healing and repair mechanisms
that
occur naturally in the body. Additionally, isolated stem cells in adipose
tissue
have been shown to differentiate into multiple cell types, including muscle,
bone, fat, cartilage and nerve. The major advantages of adipose tissue as
a
source of regenerative cells, which distinguishes it from alternative cell
sources, include:
·
Yield:
A meaningful dose of regenerative cells can be isolated in approximately
one
hour without cell culture (repeated cell replications).
·
Safety:
Patients receive their own cells (autologous-use) so there is no risk of
immune
rejection or disease transmission.
·
Versatility:
Stem cells from adipose tissue impart benefit through multiple
mechanisms-of-action.
The
Celution™ System was designed to automate our proprietary process and methods
for separating, isolating and concentrating a high yield of stem and
regenerative cells from adipose. Our goal is to introduce the first system
that
can enable real-time cellular therapy at the bedside. In 2005, we completed
the
development of the engineering and design for the Celution™ Clinical, which is
the version of Celution™ System that will be used to conduct clinical trials in
Europe and Japan to investigate clinical applications for adipose stem and
regenerative cells. We received European regulatory clearance for the Celution™
Clinical through the receipt of a CE Mark in January 2006.
Regenerative
Medicine Technology Collaboration
In
November 2005, we formed a 50:50 joint venture, Olympus-Cytori, Inc.
(the “Joint Venture”), with Olympus Corporation (“Olympus”) to develop and
manufacture future generation devices based on our Celution™ System. Olympus, a
worldwide leader in the development of innovative medical products, will
contribute its expertise in engineering, manufacturing and servicing of
sophisticated Celution™ System associated and disposable products, enabling us
to increase our focus on the development of therapeutic applications for
adipose
stem and regenerative cells. Key provisions of the agreement
include:
·
Olympus
paid $30 million to the Joint Venture for its 50% interest therein;
3
·
We
licensed our tissue processing device technology, including the Celution™ System
and certain related intellectual property, to the Joint Venture and received
an
initial $11 million payment and our 50% interest in the Joint
Venture;
·
Upon
our
receipt of a CE Mark for the first generation Celution™ System in
January 2006, we became entitled to and subsequently received an additional
$11 million milestone payment from the Joint Venture; and
·
The
Joint
Venture obtained exclusive rights to develop, manufacture and supply the
devices
for all therapeutic applications solely to Cytori at a formula-based transfer
price and Cytori will maintain marketing rights to the devices for all
therapeutic applications of adipose stem and regenerative cells.
In
a
separate agreement entered into in February 2006, we granted Olympus an
exclusive right to negotiate a commercialization collaboration for the use
of
adipose stem and regenerative cells for a specific therapeutic area outside
of
cardiovascular disease. In exchange for this right, we will receive a
$1.5 million payment from Olympus, which is non-refundable but may be
applied towards any definitive commercial collaboration in the future. As
part
of this Agreement, Olympus will conduct market research and pilot clinical
studies in collaboration with us over a 12- to 18-month period for the
therapeutic area.
Additionally,
we entered into a definitive common stock purchase agreement with Olympus
in
May 2005. As part of that agreement, Olympus purchased 1.1 million shares,
representing 7.2% of our outstanding common stock as of December 31, 2005,
and received an option to purchase up to 2.2 million additional shares at
$10.00
per share through December 2006. If Olympus chooses to exercise that
option, it would hold up to a 19% ownership interest in our outstanding common
stock. Olympus also has a right, which it has not yet exercised, to designate
a
director to serve on our Board of Directors.
Before
we
begin to realize appreciable product revenues from our Celution™ System, and
ultimately achieve consistent profitability on a quarterly and annual basis,
we
believe we will first need to successfully conduct controlled, randomized
clinical trials in specific therapeutic areas to demonstrate the benefits
of
using adipose stem and regenerative cells. In 2006, we intend to initiate
clinical safety studies for our investigational adipose stem and regenerative
cell therapies for treatment of ischemic heart disease in Europe, which may
include myocardial infarction and/or congestive heart failure, as well as
for
applications in reconstructive surgery in Japan. Additionally, we continue
to
support pre-clinical research in indications both within and outside these
areas.
Beyond
our existing arrangements with Olympus, we are seeking additional co-development
partnerships with pharmaceutical, medical device or biotechnology companies.
Moreover, we are searching for partners who can help identify drugs, proteins
or
genes that when combined with adipose stem and regenerative cells enhance
or
stimulate certain select properties. For example, we may seek to identify
a drug
that when mixed with adipose stem and regenerative cells directs specific
cells
to turn more quickly and efficiently into blood vessels.
Bioresorbable
Technology
Our
MacroPore Biosurgery unit develops and manufactures innovative bioresorbable
surgical implants. Any cash flows that we may realize from MacroPore Biosurgery
would be used to support the development of our adipose stem and regenerative
cell therapies.
The
unit’s product lines include:
·
HYDROSORB™
bioresorbable spine and orthopedic surgical implants, which are marketed
worldwide by Medtronic and accounted for 100% of our product revenues in
2005;
and
·
Thin
Film
bioresorbable surgical implants (includes SurgiWrap™ bioresorbable products),
which are used for soft tissue indications.
In
2004,
we disposed of our rights to the Thin Film product line other than in Japan.
In
Japan, the products will be distributed exclusively by Senko following our
receipt of a regulatory clearance for them from the Japanese Ministry of
Health,
Labour and Welfare. We expect regulatory clearance to be received in
2006.
Both
bioresorbable product lines are made from a polylactide copolymer composed
of
lactic acid similar to that which occurs naturally in the human body. The
polymer implant maintains its strength during the healing process,
4
while
slowly breaking down in the body through hydrolysis. The polymer fragments
into
single lactic acid molecules and the lactic acid molecules are then metabolized
into carbon dioxide and water, and released from the body through the lungs
and
kidney. By polymerizing lactic acid and taking advantage of thermoplastic
properties, we can create bioresorbable products that can be easily shaped,
sized and applied to varying anatomical structures.
Other
Information
Our
business was initially formed as a California general partnership in
July 1996. We incorporated in the State of Delaware in May 1997. In
July 2005, we changed our name from MacroPore Biosurgery, Inc. to
Cytori Therapeutics, Inc. to better reflect our focus and significant
progress in the development of regenerative therapeutics. Our offices are
located at 3020 Callan Road, San Diego, California 92121, and our telephone
number is (858) 458-0900. Additional information about us can be found on
our
website at www.cytoritx.com and in our periodic and current reports filed
with
the SEC. Copies of our periodic and current reports are available at the
SEC
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549,
and online at www.sec.gov and our website, www.cytoritx.com. Other information
contained in or that can be accessed through our website is not part of this
prospectus or any prospectus supplement. Unless context requires otherwise,
as
used in this prospectus, the terms “Cytori”, “we”, “us”, and “our” refer to
Cytori Therapeutics, Inc., a Delaware corporation.
This
prospectus may refer to brand names, trademarks, service marks or trade names
of
other companies and organizations, and these brand names, trademarks, service
marks and trade names are the property of their respective holders.
5
Investment
in our common stock and/or warrants involves a high degree of risk. Before
making an investment decision, you should carefully consider the risks and
uncertainties described under the heading “Risk Factors” in the applicable
prospectus supplement, together with all of the other information appearing
in
this prospectus or incorporated by reference into this prospectus and any
applicable prospectus supplement, in light of your particular investment
objectives and financial circumstances before you invest in our securities.
If
any of these risks actually occurs, our business, financial condition, results
of operations and future growth prospects would be materially adversely
affected. The trading price of our securities could decline due to any of
these
risks, and you may lose all or part of your investment. This prospectus,
any
prospectus supplement and the information incorporated by reference into
this
prospectus and any prospectus supplement also contain forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including the risks so mentioned.
This
prospectus, any prospectus supplement and the documents incorporated by
reference herein include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements that are not
purely
historical fact are statements that could be deemed forward-looking statements,
including without limitation statements regarding our expectations, beliefs,
intentions or strategies regarding the future. You can generally identify
forward-looking statements as statements containing the words “believe”,
“expect”, “may”, “will”, “anticipate”, “intend”, “estimate”, “project”, “plan”,
“assume” or other similar expressions, although not all forward-looking
statements contain these identifying words. All statements contained or
incorporated by reference in this prospectus and any prospectus supplement
regarding our future strategy, plans and expectations regarding the
commercialization of our products, future operations, projected financial
position, estimated future revenues, projected costs, future prospects and
results that might be obtained by pursuing management’s current plans and
objectives are forward-looking statements.
You
should not place undue reliance on our forward-looking statements because
the
matters they describe are subject to known and unknown risks, uncertainties
and
other unpredictable factors, many of which are beyond our control. Our
forward-looking statements are based on information currently available to
us
and speak only as of the date on the cover of this prospectus, the date of
any
prospectus supplement or, in the case of forward-looking statements incorporated
by reference, as of the date of the filing that includes the statement. New
risks and uncertainties arise from time to time, and it is impossible for
us to
predict these matters or how they may affect us. Over time, our actual results,
performance or achievements will likely differ from the anticipated results,
performance or achievements that are expressed or implied by our forward-looking
statements, and such difference might be significant and materially adverse
to
our security holders. Except as required by law, we assume no obligation
to
update or revise the forward-looking statements in this prospectus after
the
date of this prospectus or the date of any prospectus supplement, even if
subsequent events cause us to become aware of new risks or cause our
expectations to change regarding the forward-looking matters discussed in
this
prospectus. We have identified some of the important factors that could cause
future events to differ from our current expectations and they are described
in
this prospectus and supplements to this prospectus under the heading “Risk
Factors”, as well as in our most recent annual report on Form 10-K and any
current report on Form 8-K filed subsequent to our most recent annual
report on Form 10-K, all of which you should review carefully. Please
consider our forward-looking statements in light of those risks and
uncertainties as you read this prospectus and any prospectus supplement.
You are
cautioned not to place undue reliance on such forward-looking
statements.
We
will
retain broad discretion over the use of the net proceeds from the sale of
our
securities offered hereby. Except as described in any prospectus supplement,
we
currently anticipate using the net proceeds from the sale of our securities
hereby to fund the commercial development of our investigational adipose
stem
and regenerative cell therapies for cardiovascular disease, gastrointestinal
disorders, spine and orthopedic repair, and aesthetic and reconstructive
surgery, including related pre-clinical research, clinical trials, other
research and development expenses and general administrative expenses. The
amounts and timing of the expenditures may vary significantly depending on
numerous factors, such as the progress of our research and development efforts,
regulatory approval
6
status
of
our Celution systems, technological advances and the competitive environment
for
our products. We may also use a portion of the net proceeds to acquire or
invest
in complementary businesses, products and technologies. Although we have
no
specific agreements, commitments or understandings with respect to any
acquisition, we evaluate acquisition opportunities and engage in related
discussions with other companies from time to time.
Pending
the use of the net proceeds, we intend to invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
We
may
offer shares of our common stock, preferred stock, depositary shares and
warrants to purchase our common stock, preferred stock or depositary shares
with
a total value of up to $50,000,000 from time to time under this prospectus
at
prices and on terms to be determined by market conditions at the time of
offering. Each time we offer these securities, we will provide a prospectus
supplement that will describe the specific amounts, prices and other important
terms of the offered securities.
Common
Stock
The
following description is a summary of the material terms of our common stock,
our preferred stock and our rights agreement. Because it is only a summary,
it
does not contain all of the information that may be important to you.
Accordingly, you should read carefully the more detailed provisions of our
amended and restated certificate of incorporation, our bylaws, as amended,
and
our rights agreement, each of which has been filed with the SEC, as well
as
applicable Delaware law.
As
of
March 31, 2006, there were 15,564,038 outstanding shares of our common
stock, which excludes:
·
6,049,001
shares of our common stock issuable upon the exercise of options granted
to our
directors, employees and consultants outstanding at March 31, 2006, at a
weighted average exercise price of $4.44 per share;
·
2,511,700
shares of our common stock reserved for future issuance under our equity
incentive plans but not yet subjected to options as of March 31,
2006;
·
2,872,834
shares of treasury stock; and
·
2,200,000
shares of our common stock issuable upon the exercise of an option issued
in
May 2005 to Olympus Corporation, at an exercise price of $10.00 per
share.
Holders
of our common stock are entitled to one vote per share on all matters to
be
voted upon by our stockholders. Subject to the preferences that may be
applicable to any future shares of preferred stock outstanding, the holders
of
common stock are entitled to receive ratably such dividends, if any, as may
be
declared by our Board of Directors out of funds legally available therefor.
In
the event of liquidation, dissolution or winding up of us, the holders of
common
stock are entitled to share ratably in all assets remaining after payment
of
liabilities, subject to the prior liquidation rights of any future shares
of
preferred stock outstanding. The holders of common stock have no preemptive,
redemption, conversion, sinking fund or other subscription rights. The
outstanding shares of common stock are, and the shares offered by us in this
offering will be, when issued and paid for, fully paid and nonassessable.
The
rights, preferences and privileges of holders of common stock are subject
to,
and may be adversely affected by, the rights of the holders of any preferred
stock which we may designate and issue in the future.
Preferred
Stock
The
following description of preferred stock and the description of the terms
of a
particular series of preferred stock that will be set forth in the related
prospectus supplement are not complete. These descriptions are qualified
in
their entirety by reference to the certificate of designation relating to
that
series. The rights, preferences, privileges and restrictions of the preferred
stock of each series will be fixed by the certificate of designation relating
to
that series. The prospectus supplement also will contain a description of
certain United States federal income tax consequences relating to the purchase
and ownership of the series of preferred stock that is described in the
prospectus supplement.
7
As
of
March 31, 2006, there were no shares of preferred stock outstanding. The
Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or
more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon the preferred stock. Any or all of these rights may be
greater than the rights of the common stock.
The
Board
of Directors, without stockholder approval, can issue preferred stock with
voting, conversion or other rights that could negatively affect the voting
power
and other rights of the holders of common stock. Preferred stock could thus
be
issued quickly with terms calculated to delay or prevent a change in control
of
us or make it more difficult to remove our management. Additionally, the
issuance of preferred stock may have the effect of decreasing the market
price
of the common stock.
The
prospectus supplement will specify:
·
the
maximum number of shares;
·
the
designation of the shares;
·
the
annual dividend rate, if any, whether the dividend rate is fixed or variable,
the date dividends will accrue, the dividend payment dates and whether dividends
will be cumulative;
·
the
price
and the terms and conditions for redemption, if any, including redemption
at our
option or at the option of the holders, including the time period for
redemption, and any accumulated dividends or premiums;
·
the
liquidation preference, if any, and any accumulated dividends upon the
liquidation, dissolution or winding up of our affairs;
·
any
sinking fund or similar provision and, if so, the terms and provisions relating
to the purpose and operation of the fund;
·
the
terms
and conditions, if any, for conversion or exchange of shares of any other
class
or classes of our capital stock or any series of any other class or classes,
or
of any other series of the same class, or any other securities or assets,
including the price or the rate of conversion or exchange and the method,
if
any, of adjustment;
·
the
voting rights; and
·
any
or
all other preferences and relative, participating, optional or other special
rights, privileges or qualifications, limitations or restrictions.
Preferred
stock will be fully paid and nonassessable upon issuance.
Series RP
Preferred Stock Purchase Rights
On
May 28, 2003, we adopted a stockholder rights plan, or Rights Plan. The
description and terms of the rights issuable under the Rights Plan are set
forth
in a Rights Agreement between us and Computershare Trust Company, Inc., as
rights agent, dated as of May 29, 2003. Under the Rights Plan, we
distributed one Series RP preferred stock purchase right for each share of
common stock outstanding at the close of business on June 10,
2003.
If
a
person or group of affiliated or associated persons acquires 15% or more
of our
common stock in a transaction not pre-approved by our Board of Directors,
each
right will entitle its holder, other than the acquirer, to receive upon exercise
the number of shares of our common stock (or, in certain circumstances, of
one
one-thousandths of a share of preferred stock or other of our securities)
having
a value equal to two times the right’s then-applicable purchase price (initially
$25.00 per one-thousandth of a share of Series RP preferred stock). In
addition, if an unapproved party acquires 15% or more of our common stock,
and
we are later acquired by the unapproved party or in a transaction in which
all
of our stockholders are not treated alike, stockholders with unexercised
rights,
other than the unapproved party, will be entitled to purchase common stock
of
the merger party or asset buyer with a value of twice the exercise price
of the
rights. Each right also becomes exercisable for one one-thousandth of a share
of
our Series RP preferred stock at the right’s then current exercise price 10
days after an unapproved person or group of affiliated or associated persons
commences, or announces an intention to make, a tender offer or exchange
offer
that, if completed, would result in the unapproved party acquiring 15% or
more
of our common stock. We may redeem the rights for a nominal amount before
an
event that causes the rights to become exercisable.
8
Until
a
right is exercised, the holder thereof, as such, will have no rights as a
stockholder of us, including, without limitation, the right to vote or to
receive dividends. While the distribution of the rights will not be taxable
to
our stockholders, stockholders may, depending upon the circumstances, recognize
taxable income should the rights become exercisable or upon the occurrence
of
certain events thereafter. As long as the rights are attached to the shares
of
common stock, we will issue one right with each new share of common stock
so
that all shares of our common stock will have attached rights. The rights
will
expire on May 29, 2013, unless earlier redeemed by us.
On
May 12, 2005, we amended the Rights Plan to change the threshold at which
the rights separate from the common stock, from 15% to 20%, in the case of
one
of our stockholders, Neil Gagnon, either individually or together with his
affiliates, including without limitation Gagnon Securities LLC and its
affiliates (all together “Gagnon”). The effect of this amendment is to enable
Gagnon to safely increase his beneficial ownership to above 15% (although
not to
above 20%) without thereby triggering distribution of the rights.
The
Rights Agreement, specifying the terms of the rights, including the form
of
Certificate of Designation, Preferences and Rights of our Series RP
preferred stock as an exhibit thereto, is attached as an exhibit to our
registration statement on Form 8-A filed with the SEC on May 30, 2003
and is incorporated herein by reference. Amendment No. 1 to Rights
Agreement, dated as of May 12, 2005, between us and Computershare Trust
Company, Inc., as rights agent, is attached as an exhibit to our current
report on Form 8-K filed with the SEC on May 18, 2005. The foregoing
description of the rights is qualified in its entirety by reference to the
Rights Agreement, as amended, and the exhibits thereto.
Anti-Takeover
Provisions
Rights
Agreement
The
rights described above under the heading “Description of Capital Stock—Common
Stock—Series RP Preferred Stock Purchase Rights” above have certain
anti-takeover effects. The rights will cause substantial dilution to a person
or
group that attempts to acquire a significant interest in us on terms not
approved by our Board of Directors.
Certificate
of Incorporation and Bylaws
Preferred
Stock. Under
our
amended and restated certificate of incorporation, our Board of Directors
has
the power to authorize the issuance of up to 5,000,000 shares of preferred
stock, 4,990,500 of which remain undesignated, and
to
determine the price, rights, preferences, privileges and restrictions, including
voting rights, of those shares without further vote or action by our
stockholders. The issuance of preferred stock may:
·
delay,
defer or prevent a change in control;
·
discourage
bids for our common stock at a premium over the market price of our common
stock;
·
adversely
affect the voting and other rights of the holders of our common stock;
and
·
discourage
acquisition proposals or tender offers for our shares and, as a consequence,
inhibit fluctuations in the market price of our shares that could result
from
actual or rumored takeover attempts.
Special
Meeting Requirements. Our
bylaws provide that special meetings of our stockholders may only be called
at
the request of our president, chief executive officer or chairman of the
board
or by a majority of our Board of Directors.
Advance
Notice Requirement. Stockholder
proposals to be brought before an annual meeting of our stockholders must
comply
with advance notice procedures. These advance notice procedures require timely
notice and apply in several situations, including stockholder proposals relating
to the nominations of persons for election to our Board of Directors. Generally,
to be timely, notice must be received at our principal executive offices
no
later than the date specified in our proxy statement released to stockholders
in
connection with the previous year’s annual meeting of stockholders, which date
shall be not less than 120 calendar days in advance of the date of such
proxy statement.
9
Indemnification.
Our amended and restated certificate of incorporation and our bylaws, as
amended, provide that we will indemnify our officers and directors against
losses as they incur in investigations and legal proceedings resulting from
their services to us, which may include service in connection with takeover
defense measures.
We
have
entered into indemnification agreements with each of our directors and executive
officers to give such directors and officers additional contractual assurances
regarding the scope of the indemnification set forth in our certificate of
incorporation and to provide additional procedural protections. We also intend
to enter into indemnification agreements with any new directors and executive
officers in the future.
The
above
provisions may deter a hostile takeover or delay a change in control or
management of us.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Computershare Investor
Services, LLC.
Listing
Information
Our
common stock is quoted on the Nasdaq National Market and the Frankfurt Stock
Exchange under the symbols “CYTX” and “XMPA”, respectively.
Warrants
The
following description, together with the additional information we include
in
any applicable prospectus supplement, is only a summary of the material terms
and provisions of the warrants that we may offer under this prospectus, which
consist of warrants to purchase common stock, preferred stock and/or depositary
shares in one or more series. Warrants may be offered independently or together
with common stock, preferred stock and/or depositary shares offered by any
prospectus supplement, and may be attached to or separate from those securities.
While the terms we have summarized below may generally apply to any future
warrants we may offer under this prospectus, we will describe the particular
terms of any warrants that we may offer in more detail in the applicable
prospectus supplement. The terms of any warrants we offer under a prospectus
supplement may differ from the terms we describe below.
We
will
issue the warrants under a warrant agreement which we will enter into with
a
warrant agent to be selected by us. We will file forms of the warrant agreements
and the related warrant certificates for each type of warrant we may offer
under
this prospectus with the SEC and such documents shall be incorporated into
this
registration statement on Form S-3 of which this prospectus is a part. We
urge you to read the applicable prospectus supplements related to the warrants
that we issue under this prospectus, as well as the complete warrant agreements
and related warrant certificates that contain the terms of the
warrants.
We
use
the term “warrant agreement” to refer to any of these warrant agreements. We use
the term “warrant agent” to refer to the warrant agent under any of these
warrant agreements. The warrant agent will act solely as an agent of ours
in
connection with the warrants and will not act as an agent for the holders
or
beneficial owners of the warrants.
General
We
will
describe in the applicable prospectus supplement the terms relating to a
series
of warrants. If warrants for the purchase of common stock, preferred stock
or
depositary shares are offered, the prospectus supplement will describe the
terms
of such warrants, including, to the extent applicable:
·
the
offering price and the aggregate number of warrants offered;
·
the
total
number of shares that can be purchased if a holder of the warrants exercises
them and, in the case of warrants for preferred stock or depositary shares,
the
designation, total number and terms of the series of preferred stock that
can be
purchased upon exercise or that are underlying the depositary shares that
can be
purchased upon exercise;
10
·
the
designation and terms of any series of preferred stock or depositary shares
with
which the warrants are being offered and the number of warrants being offered
with each share of common stock, preferred stock or depositary
share;
·
the
date
on and after which the holder of the warrants can transfer them separately
from
the related common stock or series of preferred stock or depositary
shares;
·
the
number of shares of common stock or preferred stock or depositary shares
that
can be purchased if a holder exercises the warrant and the price at which
such
common stock, preferred stock or depositary shares may be purchased upon
exercise, including, if applicable, any provisions for changes to or adjustments
in the exercise price and in the securities or other property receivable
upon
exercise;
·
the
date
on which the right to exercise the warrants begins and the date on which
that
right expires;
·
federal
income tax consequences of holding or exercising the
warrants; and
·
any
other
specific terms, preferences, rights or limitations of, or restrictions on,
the
warrants.
Until
any
warrants to purchase common stock, preferred stock or depositary shares are
exercised, holders of the warrants will not have any rights of holders of
the
underlying common stock, preferred stock or depositary shares, including
any
rights to receive dividends or to exercise any voting rights, except to the
extent set forth under “Warrants—Warrant Adjustments” below.
Exercise
of Warrants; Amendments; Supplements to the Warrant
Agreements
We
will
describe in the applicable prospectus supplement the manner in which a holder
of
warrants may exercise them and the manner in which we may amend or supplement
a
warrant agreement.
Warrant
Adjustments
The
applicable prospectus supplement will indicate the circumstances under which
the
exercise price of, and the number of securities covered by, a common stock
warrant, preferred stock warrant or depositary share warrant may be adjusted
proportionately if we subdivide or combine our common stock, preferred stock
or
depositary shares, as applicable.
Depositary
Shares
The
following is only a summary of the general terms and provisions of the
depositary shares that we may offer. The specific terms of any depositary
shares
that we may offer will be described in the applicable prospectus
supplement.
We
may
offer fractional shares of preferred stock rather than full shares of preferred
stock and, in that event, will issue receipts for depositary shares. Each
of
these depositary shares will represent a fraction, which will be set forth
in
the applicable prospectus supplement, of a share of the applicable series
of
preferred stock. The depositary shares will be evidenced by depositary receipts
issued under a deposit agreement. Depositary receipts will be distributed
to the
holders of the depositary shares that are sold in the applicable offering.
We
will file the complete deposit agreement, including a form of depositary
receipt, with respect to any depositary shares we offer under this prospectus
with the SEC and such documents shall be incorporated into this registration
statement on Form S-3 of which this prospectus is a part. We urge you to
read the applicable prospectus supplements related to the depositary shares
that
we issue under this prospectus, as well as the complete deposit agreement
and
the form of depositary receipt that contain the terms of the depositary
shares.
Subject
to the terms of the deposit agreement, each holder of a depositary share
will be
entitled, in proportion to the applicable fraction of a share of the preferred
stock underlying the depositary share, to all of the rights, preferences
and
privileges, and be subject to the qualifications and restrictions, of the
preferred stock underlying that depositary share.
11
We
may
sell the securities covered by this prospectus from time to time. Registration
of the securities covered by this prospectus does not mean, however, that
those
securities will necessarily be offered or sold.
We
may
sell the securities separately or together:
·
through
one or more underwriters or dealers in a public offering and sale by
them;
·
directly
to investors; or
·
through
agents.
We
may
sell the securities from time to time:
·
in
one or
more transactions at a fixed price or prices, which may be changed from time
to
time;
·
at
market
prices prevailing at the times of sale;
·
at
prices
related to such prevailing market prices; or
·
at
negotiated prices.
We
will
describe the method of distribution of the securities and the terms of the
offering in the applicable prospectus supplement.
Any
public offering price and any discounts or concessions allowed or re-allowed
or
paid to dealers may be changed from time to time.
If
underwriters are used in the sale of any securities, the securities will
be
acquired by the underwriters for their own account and may be resold from
time
to time in one or more transactions described above. The securities may be
either offered to the public through underwriting syndicates represented
by
managing underwriters or directly by underwriters. Generally, the underwriters’
obligations to purchase the securities will be subject to conditions precedent
and the underwriters will be obligated to purchase all of the securities
if they
purchase any of the securities. We may use underwriters with whom we have
a
material relationship. We will describe in the applicable prospectus supplement,
naming the underwriter, the nature of any such relationship.
We
may
authorize underwriters, dealers or agents to solicit offers by certain
purchasers to purchase the securities from us at the public offering price
set
forth in the prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. The
contracts will be subject only to those conditions set forth in the applicable
prospectus supplement, and the prospectus supplement will set forth any
commissions we pay for solicitation of these contracts.
We
may
enter into derivative transactions with third parties or sell securities
not
covered by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates, in connection
with those derivatives, the third parties may sell securities covered by
this
prospectus and the applicable prospectus supplement, including in short sale
transactions (short sales of the securities covered by this prospectus may
not
be made before the effective date of the registration statement on Form S-3
of which this prospectus is a part as a sale is deemed to occur at the time
such
short sale is made). If so, the third party may use securities pledged by
us or
borrowed from us or others to settle those sales or to close out any related
open borrowings of stock, and may use securities received from us in settlement
of those derivatives to close out any related open borrowings of stock. The
third party in such sale transactions will be an underwriter and will be
identified in the applicable prospectus supplement or in a post-effective
amendment.
Underwriters,
dealers and agents may be entitled to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments made by the underwriters, dealers or
agents, under agreements between us and the underwriters, dealers and
agents.
We
may
grant underwriters who participate in the distribution of securities an option
to purchase additional securities to cover overallotments, if any, in connection
with the distribution.
Underwriters,
dealers or agents may receive compensation in the form of discounts, concessions
or commissions from us or our purchasers, as agents in connection with the
sale
of securities. These underwriters, dealers or agents
12
may
be
considered to be underwriters under the Securities Act. As a result, discounts,
commissions or profits on resale received by the underwriters, dealers or
agents
may be treated as underwriting discounts and commissions. The prospectus
supplement will identify any such underwriter, dealer or agent and describe
any
compensation received by them from us. Any public offering price and any
discounts or concessions allowed or re-allowed or paid to dealers may be
changed
from time to time.
Unless
otherwise specified in the related prospectus supplement, all securities
we
offer, other than common stock, will be new issues of securities with no
established trading market. Any underwriters may make a market in these
securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Any common stock sold pursuant to a
prospectus supplement will be listed on the Nasdaq National Market or whatever
other market or exchange is then our principal U.S. market or exchange. We
may
apply to list any series of preferred stock, depositary shares or warrants
on an
exchange, but we are not obligated to do so. Therefore, there may not be
liquidity or a trading market for any series of securities.
Any
underwriter may engage in overallotment transactions, stabilizing transactions,
short-covering transactions and penalty bids in accordance with Regulation
M
under the Exchange Act. Overallotment involves sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids
to
purchase the underlying security so long as the stabilizing bids do not exceed
a
specified maximum. Short-covering transactions involve purchases of the
securities in the open market after the distribution is completed to cover
short
positions. Penalty bids permit the underwriters to reclaim a selling concession
from a dealer when the securities originally sold by the dealer are purchased
in
a covering transaction to cover short positions. Those activities may cause
the
price of the securities to be higher than it would otherwise be. If commenced,
the underwriters may discontinue any of the activities at any time. We make
no
representation or prediction as to the direction or magnitude of any effect
that
such transactions may have on the price of the securities. For a description
of
these activities, see the information under the heading “Underwriting” in the
applicable prospectus supplement.
Underwriters,
broker-dealers or agents who may become involved in the sale of the common
stock
may engage in transactions with and perform other services for us in the
ordinary course of their business for which they receive
compensation.
To
the
extent required, this prospectus may be amended and supplemented from time
to
time to describe a specific plan of distribution.
The
legality of the issuance of the common stock being offered hereby will be
passed
upon by Heller Ehrman LLP, San Diego, California.
The
consolidated financial statements and financial statement schedule of Cytori
Therapeutics, Inc. as of December 31, 2005 and 2004, and for each of
the years in the three-year period ended December 31, 2005, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as
experts
in accounting and auditing. Our report on the consolidated financial statements
refers to the Company deriving a substantial portion of its revenues from
a
related party.
We
are
subject to the informational requirements of the Securities Exchange Act
of
1934, as amended, or the Exchange Act, and in accordance therewith file annual,
quarterly and current reports, proxy statements and other information with
the
SEC. Our filings are available to the public over the internet at the SEC’s
website at www.sec.gov and at our website at www.cytoritx.com. You may also
read
and copy, at prescribed rates, of any document we file at the SEC’s Public
Reference Room located at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room.
13
The
SEC
allows us to incorporate by reference into this prospectus the information
contained in other documents we file with the SEC, which means that we can
disclose important information to you by referring you to those documents.
The
information in this prospectus supersedes information incorporated by reference
that we have filed with the SEC before the date of this prospectus, while
information that we file with the SEC after the date of this prospectus that
is
incorporated by reference will automatically update and supersede the
information in this prospectus. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part
of this prospectus. We incorporate by reference the documents listed below
and
any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, until the
offering is completed:
(1)
Annual
Report on Form 10-K for the fiscal year ended December 31, 2005, as
filed on March 30, 2006;
(2)
Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006, as filed on
May 15, 2006;
(3)
Current Reports on Form 8-K, as filed on May 26, 2006 and May 31,
2006;
(4)
The
description of our common stock contained in our registration statement on
Form 10/A, as filed on July 16, 2001;
(5)
The
description of our Series RP Preferred Stock Purchase Rights contained in
our registration statement on Form 8-A, as filed on May 30, 2003,
including any amendments or reports filed for the purpose of updating the
description; and
(6)
All
documents we file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended, after the date of this
prospectus and before termination of this offering.
Upon
written or oral request, we will provide without charge to each person to
whom a
copy of this prospectus is delivered a copy of the documents incorporated
by
reference herein (other than exhibits to such documents unless such exhibits
are
specifically incorporated by reference herein). You may request a copy of
these
filings, at no cost, by writing or telephoning us at the following
address: Cytori Therapeutics, Inc., 3020 Callan Road, San Diego,
California 92121, Attention: Chief Financial Officer, telephone:
(858) 458-0900.
14
100,000 Shares
Common
Stock
______________________________________
PROSPECTUS
SUPPLEMENT
______________________________________
September
26, 2006