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The Cytosorbents story continues to grow with the company announcing the "launch" of HemoDefend for application in the blood transfusion process.

Long followed by VFC's Stock House for the market potential of its blood purification technology, Cytosorbents happened upon a blockbuster event earlier this year when the European medical regulators granted CE Mark Approval CytoSorb in the treatment of indications where high cytokines are present in the bloodstream.

That news sent company shares into the forties, but that spike did not last and CTSO is again back to trading in the teens. Some out there are skeptical of the CytoSorb technology, given the small size of the European trial, while others recognize that it is going to take time for this small company to launch its newly-approved device in the methodical manner outlined by the CEO months ago.

Other investors won't get too excited until a product is brought before the FDA for approval, and in the case of CytoSorb, it's likely the FDA will require another trial.

With all that said, the commercialization plan is under way in Europe, with the first phase taking place in Germany, according to comments by CEO Phillip Chan. The CytoSorb road show is also in full effect. With the product approved and ready for commercialization, the push will now be to gain acceptance by the medical community and continue to gather data supporting the positive trial results. That will help to give the company a leg up when looking to apply for additional approvals.

In order to support commercialization, however, and the future studies that will most likely be needed for further approvals - think FDA - the company is going to need to come by some more cash. Investors of these small companies are often worried about dilution, stock offerings and warrants that are generally not favorable to the small investor in these situations, and that could be part of the reason why the CTSO share price is sitting in the mid teens right now.

Cytosorbents looks to be playing a different approach to help alleviate some of those investor concerns.

A Monday morning press release informed the investment community that the company is looking to out-license some of its technology, which - if a licensing partner is found - will potentially enable Cytosorbents to secure a nice up-front payment in addition to identifying a future revenue stream outside of CytoSorb.

The technology being introduced is HemoDefend, a purification technology platform intended for use in blood transfusion applications. In the introductory PR relating to the launch of this technology, Dr. Chan had, in part, this to say: "Our new HemoDefend purification technology platform represents a unique, easy to use, robust solution to potentially improve the quality and safety of blood by reducing transfusion reactions, extending its useful life, and preventing adverse consequences sometimes associated with administration of older blood."

According to statistics supplied by the Red Cross, blood transfusions take place at the rate of about 30 million transfusions per year in the US. Adverse events occur for roughly 5-10% of those transfusions, leaving a huge market opportunity for HemoDefend.

Cytosorbents plans on presenting this technology at San Diego's AABB (formerly known as the American Association of Blood Banks) conference CTTXPO from October 22-25, and one can only assume that the search for a licensing partner is in motion.

Since the product is not FDA approved, a deal including a possible up-front payment with future royalties is most likely being sought by Cytosorbents. Included in any such deal could be milestones, such as specific sales milestones and/or an FDA approval milestone.

Any such deal would help to stabilize the still speculative nature of an investment in CTSO and fund future R&D while the CytoSorb ramp-up in Europe takes place.

Monday's press release also has "looking for government money" written all over it.

HemoDefend's potential military applications are noted, as well as its potential use in developing nations - both are markets largely-supported by government dollars and could bring in some nice revenue streams through contracts and/or grants.

The PR also specifically identified the benefits of HemoDefend against 'Mad Cow Disease', another potential source of government dollars.

Should any of these scenarios materialize into grants or contracts, then there's another non-dilutive revenue flow that will lessen investor worries about significant dilution.

It's easy to become focuses on the day-to-day dealings of an investment - everyone's looking for tomorrow's big payback today - but this is a case of looking at the big picture and developing an entry/exit strategy based on the whole look.

Cytosorbents has an approved product in CytoSorb that, regardless of how slowly or not, is being marketed and commercialized in Europe, starting with Germany. The company managed to secure that approval before the full trial results were in, which should be deemed as highly encouraging. Any additional data being tracked from commercial applications will also be tracked and potentially used to support and FDA approval, or other approvals around the globe.

HemoDefend is another product that could enter into a very significant market. Even if Cytosorbents can out-license the technology as planned and only take in a portion of what the partner does, this revenue stream could be huge to satisfying investor concerns of dilution while also funding the CytoSorb commercialization and future R&D.

Much speculation has been given to a potential partner for CytoSorb, but a partner is landed for HemoDefend, then Cytosorbents may be banking on keeping any and all CytoSorb profits for itself.

Keep an eye on this story, it may be slowly-evolving, but the pieces of the puzzle are being put in place for this company to potentially become a big player in blood treatment/purification.

Disclosure: Long CTSO.

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