Cytosorbents (CTSO) Teams up with Dr. Reddy’s (RDY) in South Africa

Cytosorbents Corp (NASDAQ:CTSO) announced yesterday before the market open that it had inked a new product distribution deal regarding its blood purification system, CytoSorb, with Dr. Reddy’s Laboratories Ltd (NYSE:RDY). The news drove Cytosorbents’ stock price 30 cents, or about six percent, higher before the market close – while Dr. Reddy’s American Depository Shares (ADSs) remained relatively flat.

“Dr. Reddy’s combines the strengths and resources of a large organization with the agility and experience required to introduce CytoSorb,” said Chris Cramer, Vice President of Business Development at CytoSorbents. “We look forward to supporting Dr. Reddy’s in South Africa and we are confident that this will lay the groundwork for an expanded partnership in the future.”

Under the specifics of the deal, Dr. Reddy’s has the sole rights to distribute CytoSorb in South Africa for intensive care, cardiac surgery, and other hospital needs in the African country. The contract, which extends for multiple years, remains subject to yearly minimum purchases of the product in order to keep exclusivity.

CytoSorb is CytoSorbents’ flagship product, and it was developed as a cytokine adsorber that reduces the amount of cytokines in the body if the body triggers a reaction during which too many are activated. Cytokines are immune cells that the body calls on to fight pathogens, but sometimes the immune response can be uncontrolled – and potentially deadly.

When too many cytokines are activated in a single location, something happens called a “cytokine storm” or “cytokine release syndrome” – which can create a lot of inflammation, organ failure and even loss of life. The condition can strike in a variety of both infectious and non-infectious diseases – like major burns or trauma, sepsis, pancreatitis and cancer. CytoSorb is also used during and following hear surgery to get rid of inflammatory mediators, like cytokines and hemoglobin, which can cause post-op issues.

CytoSorb has been used safely in over 20,000 patients since it was developed, and it has already been approved in the European Union for its use in literally any situation where cytokines are too high. South Africa represents a massive market opportunity for CytoSorb, with 55 million people living inside the small country. In addition, throughout the region there are widespread diseases like HIV and malaria – leaving the population especially vulnerable to sepsis.

Following yesterday’s announcement, Maxim Group’s Gabrielle Zhou reaffirmed a Buy rating on Cytosorbent’s common stock – and maintained her price target set at $10.00. The upside indicated is about 83 percent.

“Conclusion: Distribution has expanded sharply and now we can add South Africa to the growing list of 42 (other) countries,” Zhou told investors yesterday. “We also note the addition of several strategic partnerships such as with Terumo Cardiovascular (exclusive) in France, Denmark, Norway, Finland, Sweden and Fresenius Medical Care six countries and the list continues to expand.”

Earlier this month, HC Wainwright analyst Swayampakula Ramakanth lifted the firm’s previous $11.50 price target to $13.00 – after Cytosorbents announced its full-year fiscal 2016 financial results. Revenue during the 12-month period beat estimates, while the company’s net loss was worse than analysts were expecting. HC Wainwright’s upside, in this case, is nearly 140 percent.

The author of this article does not hold any positions in any of the stocks mentioned above.

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Tim is a contributing analyst for EconomicCalendar.com and specializes in equities trading and public offerings. He is a graduate of UCLA and began his career doing capital markets research for a top investment banking software provider.