NUO THERAPEUTICS, INC. The following discussion and analysis of the financial condition and results of
operations of
Special Note Regarding Forward Looking Statements
Certain statements, other than purely historical information in this Quarterly
Report (including this section) constitute "forward-looking statements".
Forward-looking statements are inherently subject to risks and uncertainties and
actual results and outcomes may differ materially from the results and outcomes
discussed in or anticipated by the forward-looking statements. Forward-looking
statements include, without limitation, any statement that may predict,
forecast, indicate, or imply future results, performance, or achievements, and
may contain the words "anticipate," "believe," "estimate," "expect," "intend,"
"will," "will be," "will continue," "will likely result," "could," "may" and
words of similar import. These statements reflect the Company's current view of
future events and are subject to certain risks and uncertainties as noted in
this Quarterly Report and in other reports filed by us with the
? our limited revenue base and sources of working capital;
? our limited operating experience;
? the dilutive impact of raising additional equity or debt;
? our ability to timely and accurately report our financial results and
prevent fraud if we are unable to maintain effective disclosure and internal
controls;
? acceptance of our product by the medical community and patients;
? our ability to obtain adequate reimbursement from third-party payors;
? our ability to contract with healthcare providers;
? our reliance on several single source suppliers and our ability to source
raw materials at affordable costs;
? our ability to protect our intellectual property;
? our compliance with governmental regulations;
? our ability to successfully sell and market the Aurix System;
? our ability to attract and retain key personnel, including our Chief
Executive and Financial Officer;
? our ability to successfully pursue strategic collaborations to help develop,
support, or commercialize our current and future products; and
? whether the OTC Markets Group will continue to enable shares of our common
stock to be quoted on a retail trading market and, if so, whether an active
trading market will develop.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results could differ materially from those anticipated in these forward-looking statements.
In addition to the risks identified under the heading "Risk Factors" in our Annual Report and the other filings referenced above, other sections of this report may include additional factors which could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
The Company undertakes no obligation and does not intend to update, revise or otherwise publicly release any revisions to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.
Business Overview
We are a regenerative therapies company focused on developing and marketing
products for chronic wound care primarily within the
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Our current commercial offering consists of a point of care technology for the
safe and effective separation of autologous blood to produce a platelet-based
therapy for the chronic wound care market. This offering is known as "Aurix" or
the "Aurix System". The FDA cleared the Aurix System for marketing in 2007 as a
device under Section 510(k) of the Federal Food, Drug, and Cosmetic Act
("FDCA"). Aurix is one of two platelet derived products cleared by the FDA for
chronic wound care use and is indicated for most exuding wounds. The advanced
wound care market, within which Aurix competes, is composed of advanced wound
care dressings, wound care devices, and wound care biologics, and is estimated
to be an approximate
The Aurix System produces a platelet rich plasma ("PRP") gel at the point of care using the patient's own platelets and plasma sourced from a small draw of peripheral blood. Aurix comprises a natural, endogenous complement of protein and non-protein signal molecules that contribute to effective healing. During treatment, the patient's platelets are activated and release hundreds of growth factor proteins and other signaling molecules that form a biologically active hematogel. Aurix delivers concentrations of the natural complement of cytokines, growth factors and chemokines that are known to regulate angiogenesis (i.e., the development of new blood vessels), cell growth, and the formation of new tissue. Once applied to the prepared wound bed, the biologically active Aurix hematogel can restore the balance in the wound environment to transform a non-healing wound to a wound that heals naturally.
In 2012, a Medicare National Coverage Determination ("NCD") from CMS reversed a
twenty-year old non-coverage decision for autologous blood derived products used
in wound care. This NCD allowed for Medicare coverage under the Coverage with
In
On
Although FDA cleared the Aurix System for marketing in 2007 under Section 510(k)
of the FDCA, CMS only established economically viable reimbursement for the
product beginning in 2016. For 2022, the Medicare national average reimbursement
rate for the Aurix System is
Our Strategy
Over the period from the cessation of normal operational activities in
In addition, the Company took actions during this period to address its capital
structure by eliminating both its debt and exchanging the Series A Preferred
Stock issued at the time of the
The Science Underlying Aurix/Platelet Rich Plasma
Normal Wound Healing
The science underlying wound healing is well-established. An immediate early event critical for wound healing is the influx of platelets to the wound site. Platelets bind to elements within damaged tissue such as collagen fragments and endogenous thrombin molecules and are activated to release a diversity of growth factors and other biomolecules from their alpha and dense granules (Reed 2000, Nieswandt, 2003). These biomolecules provide signals essential for biological responses regulating hemostasis and effective tissue regeneration.
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Table of Contents Chronic Wounds
Dysregulation of numerous cellular and biological responses contribute to the chronic wound phenotype. Chronic wounds have reduced levels of growth factors and concomitant decreases in cellular proliferation (Mast 1996). There is increased cellular senescence (Telgenhoff 2005), and there generally is a lack of perfusion that can inhibit the delivery of nutrients and cells required for regeneration (Guo 2010). As the body attempts to stave off infection, elevated concentrations of free radicals accumulate in the chronic wound and further damage surrounding tissue (Moseley 2004, James 2003).
Aurix Therapy
Aurix has been cleared by FDA as safe and effective with an indication for chronic wounds such as leg ulcers, pressure ulcers, and diabetic ulcers and other exuding wounds such as mechanically or surgically debrided wounds. The Aurix therapeutic is formed by mixing a sample of a patient's platelets and plasma with pharmaceutical grade thrombin and ascorbic acid. The thrombin activates platelets while ascorbic acid drives the synthesis of high tensile strength collagen, clears damaging free radicals and controls gel consistency. The topical dermal application of Aurix gel bypasses the lack of local perfusion to provide immediate signals for new tissue formation and ultimately healing.
The Efficacy of Aurix Relates to Biological Activity Released by Platelets
Regenerative Capacity
More than 300 proteins are released by human platelets in response to thrombin activation (Coppinger 2004). Important examples include vascular endothelial cell growth factor ("VEGF"), platelet derived growth factor ("PDGF"), epidermal growth factor ("EGF"), fibroblast growth factor ("FGF") and transforming growth factor-beta ("TGF-B") (Eppley 2004, Everts 2006). These proteins are critical for organized wound healing, regulating responses such as vascularization, cell proliferation, cell differentiation, and deposition of new extracellular matrix (Goldman 2004). Platelets also release chemokines such as Interleukin-8 ("IL-8"), stromal cell derived factor-1 ("SDF-1"), and platelet factor-4 ("PF-4") (Chatterjee 2011, Gear 2003) that control the mobilization and migration of stem cells and fibroblasts (Werner 2003 and Gillitzer 2001), which contribute to tissue regeneration.
Anti-infective Activity
Populations of bioburden in chronic wounds vary over time and wounds invariably retain or become re-infected with some level of bacteria that is detrimental to healing (Howell-Jones 2005). In addition to regenerative capacity, platelets release anti-microbial peptides effective against a broad range of pathogens including Methicillin Resistant Staphylococcus Aureus ("MRSA") (Moojen 2007, Jia 2010, Tang 2002, Bielecki 2007).
Clinical Efficacy
Multiple efficacy and effectiveness studies have been published in peer reviewed journals documenting the impact of using Aurix to treat chronic wounds. Key data include:
? In the published study of the clinical data collected during the CED
program for diabetic foot ulcers, Aurix demonstrated a significant time
to heal advantage compared to wounds treated with usual and customary
care (including any available advanced therapy). A higher percentage of
healing was observed across all wound severities (Wagner Grade 1-4) and
in a patient population with significant comorbidities. (Gude W, Hagan
D, Abood F, Clausen P: Aurix Gel is an Effective Intervention for
Chronic Diabetic Foot Ulcers: A Pragmatic Randomized Controlled Trial.
Advances in Skin and Wound Care, 2019; 32(9): 416-426.)
? In a double blinded randomized controlled trial, 81% of the most
common-sized diabetic foot ulcers healed with Aurix compared with 42% of
control wounds. Mean time to healing was six weeks. (Driver V, Hanft J,
Fylling, C et al.: A Prospective, Randomized, Controlled Trial of
Autologous Platelet-Rich Plasma Gel for the Treatment of Diabetic Foot
Ulcers. Ostomy Wound Management, 2006; 52(6): 68-87.)
? In 285 chronic wounds in 200 patients, 96.5% of the wounds had a
positive response within an average of 2.2 weeks with an average of 2.8
Aurix treatments (de Leon J, Driver VR, Fylling CP, Carter MJ, Anderson
C, Wilson J, et al.: The Clinical Relevance of Treating Chronic Wounds
with an Enhanced Near-physiological Concentration of Platelet-Rich
Plasma (PRP) Gel. Advances in Skin and Wound Care, 2011; 24(8),
357-368.)
? In a retrospective, longitudinal study of 40 Wagner grade II through IV
diabetic foot ulcers, most with critical limb ischemia, wounds increased
in size in the approximate 100 days prior to the initiation of
comprehensive wound care treatment. Upon treatment with debridement,
revascularization, antibiotics and off-loading, the wounds continued to
increase in size over a subsequent 75-day period. Once they were then
treated with Aurix, the wounds immediately changed healing trajectory
and 83% of the wounds healed with an average of 6.1 Aurix treatments per
wound (Sakata, J., Sasaki, S., Handa, K., et al. A Retrospective,
Longitudinal Study to Evaluate Healing Lower Extremity Wounds in
Patients with Diabetes Mellitus and Ischemia Using Standard Protocols of
Care and Platelet-Rich Plasma Gel in a Japanese Wound Care
Program. Ostomy Wound Management, 2012; 58(4):36-49.)
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Table of Contents Results of Operations
Comparison of Three Months Ended
The amounts presented in this comparison section are rounded to the nearest thousand.
Revenue and Gross Profit
There were no revenues or gross profit in the three months ended
Operating Expenses
Total operating expenses for the three months ending
Other Income (Expense)
There was no other income (expense) for the three months ended
Comparison of Nine Months Ended
The amounts presented in this comparison section are rounded to the nearest thousand.
Revenue and Gross Profit
There were no revenues or gross profit in the nine months ended
Operating Expenses
Total operating expenses for the nine months ended
Other Income (Expense)
There was no other income (expense) for the nine months ended
Liquidity and Capital Resources
Overview
As of
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Based on our current operating forecast, we believe that our existing cash and cash equivalents, after taking into consideration the capital transactions in 2022, will be sufficient to fund our operations through at least the next 12 months.
Financing and Related Developments During the Years 2019 through 2022
Spring 2019 Cessation of Normal Operating Activities
In
On
Senior Secured Note Issuance
On
In conjunction with the note issuance, the Company granted a first-priority
security interest in all the assets of the Company but fundamentally consisting
of the Aurix System asset including all regulatory files and approvals and
relevant intellectual property. The purchase agreements contained certain
representations, warranties and covenants by, among and for the benefit of the
respective parties. The purchase agreements also provided for customary
indemnification of the
The notes had a maturity date of
The use of proceeds from the Notes beyond the initial
Series A Preferred Stock Exchange Agreement
On
Pursuant to the Recap Agreement, the Company also issued to the
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Warrant Modification Agreement and Early Warrant Exercise
Effective as of
As of
2022 Capital Transactions
During the nine months ended
Cash Flows
Net cash provided by (used in) operating, investing, and financing activities for the periods presented were as follows:
Nine months Nine months
ended ended
September 30 , September 30,
2021 2020
Cash flows used in operating activities
- $ -
Cash flow provided by financing activities $ - $ -
Operating Activities
Cash used in operating activities for the nine months ended
Cash used in operating activities for the nine months ended
Investing Activities Investing Activities
There were no investing activities for the nine months ended
Financing Activities
There were no financing activities for the nine months ended
Inflation
The Company believes that the rates of inflation in recent years have not had a significant impact on its operations.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Critical Accounting Policies
Our consolidated financial statements included in Part I, Item 1 of this
Quarterly Report are prepared in conformity with
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