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Is Cytori Therapeutics Inc (NASDAQ:CYTX) Dressing Itself Up For A Buyout?

Is Cytori Therapeutics Inc (NASDAQ:CYTX) Dressing Itself Up For A Buyout?
Written by
Chris Sandburg
Published on
September 7, 2017
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At the end of July, we urged our readers not to write off Cytori Therapeutics Inc (NASDAQ:CYTX) in this piece. The company had had a pretty rough year to date, falling from highs in February at just shy of two dollars a share to end of July lows in and around $0.45 a piece and was, at the time, reeling from a seeming failure of its lead development program. CYTX Daily ChartWe weren’t pitching for a quick turnaround or a total recovery but we did suggest that the program haven't necessarily failed outright (there was a predefined subgroup of patients for which the drug in question seemed to work pretty effectively) and a couple of catalysts set to hit the press before the end of the year that had the potential to spark some speculative interest in the company and help lift it off lows.It's been about a month since we put forward this argument and, as yet, we are yet to see it validated. Right now, Cytori goes for a little over $0.32 a share having traded relatively flat throughout the majority of August and early September.At the end of last week, however, management put out a press release detailing a corporate restructuring and cost saving plan and, while it's not one of the catalysts we suggested might get things moving, there's no reason to suggest that it might not be able to do the job we were looking for.To briefly outline the plan, the restructuring is expected to reduce the company's workforce by around 50% and – and this is the real reason behind the action – significantly reduce the company's quarterly cash burn.Management is also brought some advisors, TAP Advisors, on board to help oversee the restructuring and to help put together a plan with which the company can move forward into the latter half of 2017 and beyond.So what's the real story here?Well, a reduced quarterly cash burn removes some of the dilution risk associated with an exposure to the company at current prices, but there's still very little cash on hand and what we think is happening here is management is dressing up Cytori for a buyout. The company did allude to this in the most recent press release, but the comment was nothing more than the standard "including a sale of the Company, a reverse merger, a business combination or a sale, license or other disposition of corporate assets of the Company" boilerplate line.The development program that we said might still have a chance as part of our previous coverage could be far more interesting to a company with deeper pockets (one that can expand on the current program and investigate the subgroup for which the drug seems to work in a little more detail), so if this is true, a buyout or some form of partnership is far from out of the question.A buyout will obviously come at a premium to current price, meaning there might be some reward on offer on a punt in anticipation of said action. A partnership would bring with it an injection of capital that would serve to alleviate the above-mentioned dilution risk in return for the foregoing of some portion of future revenues – assuming the drug is approved longer-term – which we see as a pretty reasonable trade-off.This is all speculative, of course, and whatever happens, Cytori is going to have to get some capital from somewhere if he wants to see out its lead program to completion. The downside risk is that the company will just dump shares on the market to raise said capital but, at this end of the sector, this is a risk that most investors are familiar with.Bottom line: things are changing and, if the change plays out as expected, we could be looking at a long term bottom for Cytori.Check out our previous coverage of CYTX here. We will be updating our subscribers as soon as we know more. For the latest updates on CYTX, sign up below!Image courtesy of Caroline Davis2010 via FlickrDisclosure: We have no position in CYTX and have not been compensated for this article.

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