If you are looking for one of the biggest biotechnology losses of the week so far, look no further than Cytori Therapeutics Inc (NASDAQ:CYTX). The company closed out last week at around $1.10 a share. By market open on Monday, Cytori went for around $0.40 apiece and remained pretty much flat on the open to close out the session at $0.48 a share.The decline comes on the back of the company putting out data from one of its lead investigations and – as readers might have guessed – the data not hitting press as Cytori or its shareholders might have hoped it would.Markets are asking the question – is there any value in picking up exposure at current prices or is this an asset (and in turn, a company) to write off for now?Here is our answer to that question.The trial was rooted in a drug called Habeo that attempts to use what are called dipose-derived regenerative cells (ADRCs), which are living cells that are present in an adult human’s own adipose tissue, to help regenerate healthy tissue in conditions associated with cell degeneration. The company removes these cells from the patient using liposuction, adds them to a liquid suspension and then concentrates them into a substance that can be reintroduced into the body by way of subcutaneous injection.In this instance, the target indication was scleroderma, which is a rare and chronic connective tissue disease generally classified as an autoimmune rheumatic disorder. It's characterized by significant hand dysfunction, and this latter characterization played a key role in the trials determinant outcome.So, specifically, the company injected its Habeo therapy into a total of 88 patients with scleroderma, including 51 patients with a type called diffuse cutaneous and 37 with another type called limited cutaneous scleroderma. These patients were then followed up at 24 and 48 weeks' post-treatment to see if their scleroderma had improved, using a scale called the Cochin Hand Function Score (CHF score) to judge improvement.As per the latest data, the drug failed against its primary endpoint (an improvement from baseline based on the above-mentioned CHF score) at both 24 weeks and 48 weeks.So, not great.It's not all bad, however. The company did manage to show some degree of improvement (a statistically significant one at that) in one of the subgroups of patients – the patients with the diffuse cutaneous form of the disease.This part is important: if this improvement was recognized after the trial as part of a post completion analysis, we would write it off entirely. However, this was a prespecified subgroup and – while the drug didn't work across the entire population – the company was able to show that it might work in a certain group of patients and, for us, that's enough to warrant some degree of optimism, especially at current bargain bin prices.Of course, if the company is going to recover any of the lost strength, it's going to need a catalyst, so where is that coming from?Well, this trial was in the US but there is also a very similar trial currently underway in Europe. The trial in question, called SCLERADEC-II, is a 40 patient study looking at the same patient population. if the data shows that the drug works in the diffuse subset of the population in this trial, or in other words, if it supports the efficacy readout in this population that we just got from the US study, there's a good chance we will see this company start to pick up some of its lost strength.Sure, markets are disappointed with Cytori's seeming failure to target the entire scleroderma population, but if it can target a subsection, then there is still a fair amount of value in its primary asset. An estimated 300,000 Americans have scleroderma, about one-third of whom have the systemic form of the disease, known as systemic sclerosis (SSc). SSc is further broken into the two above noted categories – diffuse cutaneous and limited cutaneous SSc. Diffuse scleroderma (what we're interested in here) accounts for between one-third and one-half of all cases of systemic sclerosis. Using these numbers, there are around 30,000-50,000 US patients that this drug seems to work for and approximately twice that in Europe.To answer the question, then, yes, there's still plenty to be optimistic about for Cytori and we're looking to the outcome of SCLERADEC-II as a potential gap-closing catalyst as and when it hits press.We will be updating our subscribers as soon as we know more. For the latest updates on CYTX, sign up below!Image courtesy of Danny Chapman via FlickrDisclosure: We have no position in CYTX and have not been compensated for this article.
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