Cytori - Crohn's Disease = Payday??

Today, Cytori Therapeutics expanded its Celution® System CE Mark and received additional indications-for-use for:

• Breast reconstruction;

• Repair of soft tissue defects, and

• The facilitation of healing certain types of wounds, such as those resulting from Crohn’s disease

...more good news for a company that appears to be somewhat unappreciated by the market.

The most interesting aspect of the release, in my humble opinion, was the approval related to Crohn's disease. What makes this so interesting, you ask? Aside from the obvious therapeutic value and potential revenues of a multi-billion dollar disease, this is one indication that we actually have a comparable benchmark that investors can look at to gauge value.

In December 2009, Athersys (ATHX) and Pfizer reached an agreement on the stem cell therapy Atherys had been developing for the same disease. Only Athersys was seemingly years away from commercialization at the time. Here are the salient excerpts form the press release:

Athersys, Inc. (Nasdaq:ATHX) announced today that it has entered into an agreement with Pfizer Inc. (PFE) to develop and commercialize MultiStem(R) for the treatment of Inflammatory Bowel Disease ("IBD").... Under the terms of the agreement, Athersys will receive an up-front cash payment of $6 million from Pfizer, as well as research funding and support during the initial phase of the collaboration. In addition, Athersys is also eligible to receive milestone payments of up to $105 million upon the successful achievement of certain development, regulatory and commercial milestones. Pfizer will have responsibility for development, regulatory and commercialization and will pay Athersys tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, Athersys may elect to co-develop with Pfizer and the parties will share development and commercialization expenses and profits/losses on an agreed basis beginning at phase III clinical development.

Inflammatory Bowel Disease is a group of inflammatory and autoimmune conditions that affect the colon and small intestine, typically resulting in severe abdominal pain, weight loss, vomiting and diarrhea. The most common forms of the disease include Ulcerative Colitis and Crohn's disease, which are estimated to affect more than two million people in the U.S., major European countries and Japan. Chronic IBD can be a severely debilitating condition, and advanced cases may require surgery to remove the affected region of the bowel, and may also require temporary or permanent colostomy or iliostomy. In many cases, surgery does not achieve a permanent cure, and patients suffer a return of the disease.

Ok, so Pfizer paid Athersys $6,000,000 up front and agreed to pay up to a total of $105,000,000 if Athersys reached certain milestones. Nice deal is for a stem cell therapy that appears to be several years away from commercialization. By the way, Athersys soared form $1.00 to $6.25 on the news.

So back to Cytori, and again, let me stress that this is just one therapy in a platform of potential therapies. Well, if Athersys got such a sweet deal on the long term potential of a Crohn's disease therapy, what is Cytori's CE Mark for commercialization in 35 countries worth TODAY??? I don't KNOW but it sure seems pretty lucrative. Go ahead and due your own due diligence and and let me KNOW what YOU think!