To Our Stockholders:
We are pleased to report ThermoGenesis had a very productive second quarter of fiscal 2010, marked by improved financial results and the completion of a new and enhanced distribution agreement with GE Healthcare for the Company’s AXP® AutoXpress™ (AXP) product line.
Our performance demonstrates we are continuing to make great strides in our strategy to achieve leadership in the adult stem cell processing and storage markets. The key components of this strategy include:
· Realizing growth in existing indications and markets with our core offerings and expanding our geographic presence of these core products;
· Expanding our bone marrow franchise in both orthopedics while targeting new indications;
· Adding new distributors in key geographies outside the U.S., such as Europe and the Far East;
· Launching line extensions of our existing technology into markets, such as Platelet Rich Plasma (PRP) and adipose; and
· Divesting non-core businesses and outsourcing product manufacturing to streamline operations and improve gross margins, while continuing the successful management of operating expenses.
Our revenues of $6.0 million for the second quarter of 2010 represent a sequential increase of 15 percent (vs. the first quarter of 2010). A primary contributor was a 16 percent sequential increase in disposable revenues, driven primarily by sales of AXP disposables. We have made steady gains in our revenues over the past three quarters, as sales have grown from $4.0 million in the fourth quarter of fiscal 2009 to $6.0 million in the second quarter of fiscal 2010.
We reduced our net loss from $3.1 million to $1.5 million over the same period. While realizing increased revenues and gross margins, we continue to manage our operating expenses. We are on track to break even in the third quarter and achieve profitability in the fourth quarter of fiscal 2010.
Our new agreement with GE Healthcare, which runs through July, 2012, includes provisions for incremental investments by GE Healthcare in marketing and market research, and mutual incentives related to sales expansion, product quality and delivery. This agreement provides continuity for our existing customers, and for the number of cord blood banks currently conducting evaluations of the AXP system with GE Healthcare.
We are in discussions with several major distributors that may be interested in selling our AXP product line in geographies not currently covered by GE Healthcare. A few of these potential partners have also expressed interest in marketing and selling our MarrowXpress™ (MPX™) and Res-Q™60 BMC (Res-Q) offerings, products which are used to process stem cells from bone marrow aspirates. This allows us additional reach into markets beyond orthopedics.
In the meantime, our initiative for the MXP and Res-Q in the orthopedic market with Celling Technologies continues to go well as we look to increase the penetration of their customer base and expand its presence within the U.S. We are hopeful Celling will begin its enrollment process for the clinical evaluations of the MXP and Res-Q Systems during the third calendar quarter of this year.
During the quarter, we also achieved progress with research and development programs that are serving our line extension strategies, including:
· Filing of a 510(k) with the FDA, seeking market clearance for the use of our Res-Q technology in the preparation of PRP from peripheral blood. PRP delvers a rich content of growth factors to enhance wound healing. We have demonstrated in our laboratories that the Res-Q technology is well suited for the preparation of PRP and we are excited about the potential of this market opportunity. If we receive clearance from the FDA, we hope to launch this product by the end of calendar 2010.
· Ongoing enrollment in our critical limb ischemia, or CLI, trial with the University of Naples in which the MXP is being used to process bone marrow aspirate to prepare stem cell concentrates. Approximately one-fourth of the “up to 30 patients” planned for the studies have now been enrolled.
· Progressing toward a mid-calendar 2010 initiation of the clinical phase of our development program with adipose tissue with the GID Group. GID’s principals are plastic surgeons who are pioneering the use of adipose tissue as a rich source of adult stem cells for the regeneration and repairing of body tissues.
Finally, we continue to advance our key operational initiatives. We have successful in outsourcing the manufacturing of the ThermoLine product line. We have also made progress with the divestiture of the CryoSeal business and believe we will complete the sale transaction by the end of the current fiscal year.
We look forward to continuing our success during the balance of fiscal 2010 as we focus on delivering a continuing improved financial performance, expanding the scope of our current offerings and realizing the value of our product pipeline. Thank you for your support of the company.
J. Melville Engle
Chief Executive Officer