2016 North American Cell Therapeutics
Technology Innovation Award

2016

BEST PRACTICES RESEARCH

Contents
Background and Company Performance ........................................................................ 3
Industry Challenges .............................................................................................. 3
Technology Attributes ........................................................................................... 3
Conclusion........................................................................................................... 8
Significance of Technology Innovation .......................................................................... 9
Understanding Technology Innovation .......................................................................... 9
Key Benchmarking Criteria .................................................................................. 10
Best Practice Award Analysis for Cytori ....................................................................... 10
Decision Support Scorecard ................................................................................. 10
Technology Attributes ......................................................................................... 11
Future Business Value ......................................................................................... 11
Decision Support Matrix ...................................................................................... 12
The Intersection between 360-Degree Research and Best Practices Awards ..................... 13
Research Methodology ........................................................................................ 13
Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best
Practices ................................................................................................................. 14
About Frost & Sullivan .............................................................................................. 15© Frost & Sullivan 2016

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Background and Company Performance
Industry Challenges
Cell therapeutics is one of the principal areas of regenerative medicine, which — after
more than two decades of basic research — is considered a remarkable innovation in
medical care. Regenerative medicine encompasses principles of stem cell technology andtissue engineering and combines advanced biomaterials with small molecules and biologics
to either replace or regenerate human tissues and organs and restore their functions.
Beyond the treatment of acute injuries, chronic diseases, and congenital malformations,
regenerative medicine opens a plethora of opportunities in therapeutics across multiple
fields of research, including difficult-to-treat diseases and impaired tissues. Although still
demanding more specialization on the part of both scientists and clinicians, regenerative
medicine is expected to address the most serious challenges related to current medical
therapies.
In March 2015, the European Commission, following a recommendation from the European
Medicines Agency (EMA) Committee for Orphan Medicinal Products, issued orphan drug
designation to autologous adipose-derived stromal vascular cells for the treatment ofscleroderma. Beyond the advance towards commercialization, the designation allows for
tracking and collecting key program data and documentation to provide valuable insights
concerning the demand for and use of adipose-based cell therapy platforms.
The competitive landscape for regenerative medicine is complex. Among the key
competitive strategies that industry participants adopt to effectively address challenges
and stay ahead of the competition is partnering with companies from other geographies.
Japanese companies look attractive due to the changes in healthcare regulatory
landscape. Mergers and acquisitions also are gaining momentum to penetrate newcustomer niches and/or regions.

Technology Attributes
Criterion 1: Industry Impact
For more than a decade, Cytori Therapeutics has been advancing in the field of
regenerative medicine. Its proprietary Cytori Cell TherapyTM platform has become theleading technology to enable the research and practice of cellular therapies that harness
the potential of stem and regenerative cells from adipose tissue. Cytori was the firstcompany to introduce a technology platform that uses cells from adipose tissue. The
company is strongly positioned with a product development pipeline covering a broad
spectrum of therapeutic areas including orphan and rare diseases, genitourinary disorders,
orthopedics, cardiovascular disease, and acute and chronic wound care.
Cytori strengthened its global patent portfolio in Japan and Europe in 2015 and 2016. The© Frost & Sullivan 2016

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company now has 89 global patents — 12 of which are in Japan and 8 in Europe — and 77
pending applications globally. As a late-stage cell therapy company, Cytori has focused on
the development of autologous cell therapies from adipose tissue to treat a variety of
medical conditions. Its cellular therapeutics platform exploits the unique attributes oflivingcells

derivedfromapatient’s

adiposetissue,known

asAdipose-Derived

Regenerative Cells (ADRCs) or Stromal Vascular Fraction (SVF) cells. Cytori Cell Therapy™
is for investigational use in the United States. Several preclinical studies and clinical trials
have demonstrated the platform’s capacity to promote healing by improving blood flow,
modulating the immune system, and facilitating wound repair.
Criterion 2: Product Impact
The major impact of Cytori’s innovative technology platform is based on the use of humanadipose tissue as the raw material to develop cellular therapy models. Human adipose
tissue is a unique reservoir of multiple types of cells, including several involved in healing.
The Cytori Cell TherapyTM platform avoids adverse effects typically associated withallogeneic cell or tissue transplantation, such as immunological rejection or diseasetransmission, eliminating the need for immunosuppressant drugs.
Cytori Cell Therapy™ is prepared on-site from a patient’s own adipose tissue using Cytori’s
fully automated Celution® System device, proprietary enzymes, and sterile consumable
set allowing administration of therapeutic cells to the patient either the same day of theextraction or after cryopreservation.
The Celution System family is expanding with new products and next-generation devices,
single-use consumables, and related instrumentation around the regenerative medicine
sphere.
Criterion 3: Scalability
Cytori’s approach to cell therapy permits a distributed manufacturing approach in which
the cell therapy product is prepared at or near the patient’s bedside rather than relying on
large

scale

centralmanufacturing.

This

allowsforeasy

scalability;acenter’s

manufacturing capacity can be doubled by simply adding a second device at very low costcompared to doubling the capacity of a conventional cell processing center (CPC). Totallycommitted to establish Cytori Cell TherapyTM as the first cell therapy to market for thetreatment of impaired hand function in scleroderma, Cytori is undertaking important
initiatives to advance clinical and translation research in the next 2 to 3 years. Its STAR
trial in the United States will assess both safety and efficacy for the single administrationof ECCS-50, the product candidate developed via the Cytori Cell TherapyTM platform, toscleroderma patients with affected hands and fingers. Initiated in mid-2015, the 48-week,
randomized, double blind, placebo-controlled, phase III pivotal clinical trial completed
enrollment in June 2016 with a total of 88 patients.

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In addition to this lead program, in late 2014, Cytori received investigational device
exemption approval from the US Food and Drug Administration (FDA) for the ACT-OA knee
osteoarthritis phase II study. The study is fully enrolled with 94 randomized patients.
This product has also advanced in the pipeline outside the US. Cytori in December 2015
submitted an expanded application for orphan medicinal product designation for ADRCs forthe treatment of systemic scleroderma, highlighting Cytori’s timely approach to obtainprotocol assistance from the EMA in the advancement of its ECCS-50 development
program in Europe for scleroderma, while facilitating full marketing authorization for the
ECCS-50-based therapy under EMA’s centralized procedure.
Also, in collaboration with the Biomedical Advanced Research Development Authority at
the US Department of Health and Human Services, Cytori in 2013 began the developmentof a new therapy for thermal burns due to radiation.
Cytori’s Celution® Systems can operate in over 50 countries within the appropriate
national or regional approvals, clearances, or registrations for research and commercial
customers.
Criterion 4: Visionary Innovation
Cytori’s focus on use of non-cultured cells as a basis of Cytori Cell Therapy™ represented
a true paradigm shift over the prevailing wisdom at the time. When Cytori began on thispath it was almost universally believed that this type of cell therapy required substantial
cell culture to generate a homogeneous stem cell population. Cytori believed that thisprocess was not only unnecessary, it was actually detrimental to the safety and efficacy
profile of the product in that culture-based expansion eliminated therapeutically-capable
cells from the product. Over time this belief has been vindicated as several head-to-headpreclinical studies have shown superiority of the non-cultured product in terms of efficacy,
cost, and time-to-treatment.
This innovative approachalso createda platformwiththe potential

to provide

therapeutically-active cells for an array of disease and injury states. Following the orphan
drug designation for Cytori Cell Therapy™ in the treatment of impaired hand function inscleroderma in April 2015, Cytori promptly set the basis for the commercialization of its
pipeline in Europe starting with a Managed Access Program (MAP) as a prelude to
anticipated European Marketing Authorization for the product. In July 2015, a late stage
clinical trial of Cytori Cell Therapy™ was started in stress urinary incontinence (SUI) trial
following radical prostatectomy for prostate cancer. Cytori Cell Therapy™ is also in use inJapan for osteoarthritis under Japan’s ‘Act on the Safety of Regenerative Medicine’enacted in late 2014. This has been instrumental in enabling the company to go a stepbeyond its North American competitors.

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Criterion 5: Application Diversity
Cytori’s goal is to deliver single and definitive treatments that eliminate the need for
frequent re-treatments and the shipment of cells to off-site facilities. This process
innovation involves the harvest of cells in the hospital and on-site processing to ensure amore convenient delivery of medicine. Cytori has established stringent safety protocols in
the use of ADRCs in its pre-clinical and clinical studies.
Cytori’s pipeline comprises ECCS-50 for scleroderma associated hand dysfunction; ECCO50 for knee osteoarthritis; ECCI-50 for urinary incontinence; DCCT-10 for cutaneousradiation and thermal injury; all of them tested in pre-clinical and/or clinical trials
conducted in the United States, Europe, and/or Japan.
Criterion 6: Financial Performance
Numerous companies have started to penetrate the cell therapeutics market by developing
culture media

andreagents for regenerative medicine, to thenadvance inthedevelopment of cell-based medicines using somatic stem cells. One of their main goals isthe development of cell-based medicines using stem cells. In the long term, the impact ofstem cell-based therapies is expected to significantly drive the market and advance theacceptance of stem cell therapeutics worldwide.
Development of regenerative medicine’s practical use and market diffusion is expected toaccelerate the course of business — especially focused on stem cells — in the next 2 years.
Regulatory uncertainties have declined significantly in the North American market, allowing
great transparency for Cytori’s strategic business development. This has facilitated bothresearch and commercialization relationships, with a foundation of solid clinical data
consciously compiled and generated for global visibility and transparency.
Cytori is commercializing Cytori Cell and Tissue Banking platform to hospitals, clinics,
tissue banks, and stem cell banking companies, involving a network of distributors anddirect sales representatives across North America, Europe, Japan, and China. Cytori has
designed three configurations for specific regional bases: cell banking, cell and adipose
tissue banking, and adipose tissue banking. Cytori is in charge of manufacturing andsourcing the necessary equipment for its operations, including cryopreservation chambers,cooling and thawing devices, cell banking protocols, and the proprietary software anddatabase application.
Criterion 7: Customer Acquisition
Cytori has extended its commercialization branches outside the United States, to Western
Europe, the Middle East, Asia-Pacific (especially Japan and China), and Latin America.
Principal products include consumables and reagents related to the Cytori Cell TherapyTM
platform; sales to hospitals, clinics, and researchers are through direct representatives,© Frost & Sullivan 2016

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distributors, and partners.
Its customers include Bimini Technologies LLC, which in 2013 it granted a global exclusive
license to use Cytori’s devices and consumable products for hair applications. Through thisagreement, Cytori also embraces the needs of the aesthetics cash-pay market segment.
Bimini’s wholly owned subsidiary, Kerastem, is conducting an FDA-approved phase II
clinical trial in the United States for applying Kerastem’s solution to treat female and malepattern baldness. Kerastem Hair Therapy is CE approved for use in patients with alopecia
in Europe and Japan.
Cytori granted Lorem Vascular an exclusive license in all fields of use (excepting hairapplications subject to the Bimini agreement) of Cytori’s products for sale in China, Hong
Kong, Malaysia, Singapore, and Australia.
Cytori also manufactures its own products at its headquarters in San Diego, CA, and in
Wales, United Kingdom. Cytori’s manufacturing facilities are periodically inspected byregulatory authorities and distribution partners and complies with FDA Quality System
Regulationand equivalent requirements of state and non-US regulatory authorities, suchas a notified body in Europe.
Its suppliers include Roche Diagnostics for Celase and Intravase reagents that are used todigest patients’ autologous adipose tissue. The agreement runs through December 2020,
with a potential 5-year renewal period.
Criterion 8: Technology Licensing
Cytori’s success strongly depends on its intellectual property portfolio, which comprises
the Celution® Systems and the Cytori Cell TherapyTM platform. By taking the necessary
precautions to operate without infringing on the proprietary rights of third parties, Cytori
leverages patents, trade secrets, copyrights, trademark laws, andconfidentiality,

licensing, distribution, and supply agreements to consolidate and protect its proprietary
rights.
Cytori has the exclusive worldwide license of the Regents of the University of California’s
rights to a portfolio related to isolated adipose-derived stem cells.
Criterion 9: Brand Loyalty
Stem cell research is booming, and competition is intensifying. Legislation varies strongly
by region. The reimbursement process for regenerative medicine is not yet wellestablished, and there is lack of insight on the cost-effectiveness of treatments toguarantee routine commissioning. As a result, Cytori faces increased competition frompharmaceutical, biopharmaceutical, medical device, and biotechnology companies, as wellas academic institutions, research centers, and governmental agencies worldwide. Most
industry branding initiatives are related to sourcing adult stem and regenerative cells from© Frost & Sullivan 2016

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a broad spectrum of tissues, including bone marrow, placental tissue, umbilical cord andperipheral blood, and skeletal muscle.
As more companies enter the cell therapy field, Cytori is forced to compete across multiple
areas. Most of its brand loyalty strategies, including technology licensing agreements andmanufacturing and distribution collaborations, attempt to address concerns about equity
and capital, clinical trial sites and enrollment, corporate partnerships, commercial market
share, and skilled and experienced workers.
Criterion 10: Human Capital
Cytori encourages its employees to be a part of every milestone. Among its 80 full-time
employees, 60% — 9 in manufacturing and 39 in research and development — aredevoted to technological innovation. Six employees are in sales and marketing, and 26
are in management, finance, and administration, while independent contractors support
specific operations. Cytori is fostering real-world feedback through its growing global
network of researchers, life scientists, and clinicians with the aim of establishing an open
dialogue about cell therapeutics research and development. Its talented, creative, resultsdriven culture fosters an exciting work environment that emphasizes the achievement of
extraordinary milestones.

Conclusion
Cytori is devoted to the development of cellular therapeutics in the field of regenerative
medicine. Its Cytori Cell TherapyTM platform exploits the unique attributes of ARDCs forrepair and healing. With a strong intellectual property portfolio of 89 patents, a broad
spectrum of pre-clinical and clinical trials, and an extensive network of distribution andcommercialization partners, Cytori has become a global leader in the cell therapeutics
market.
With its strong overall performance, Cytori Therapeutics, Inc. has earned Frost &Sullivan’s 2016 Technology Innovation Award.

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Significance of Technology Innovation
Ultimately, growth in any organization depends upon finding new ways to excite themarket, and upon maintaining a long-term commitment to innovation. At its core,technology innovation or any other type of innovation can only be sustained withleadership in three key areas: understanding demand, nurturing the brand, anddifferentiating from the competition.

Understanding Technology Innovation
Technology innovation begins with a spark of creativity that is systematically pursued,
developed, and commercialized. That spark can result from a successful partnership, aproductive in-house innovation group, or the mind of a singular individual. Regardless ofthe source, the success of any new technology is ultimately determined by its
innovativeness and its impact on the business as a whole.

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Key Benchmarking Criteria
For the Technology Innovation Award, Frost & Sullivan analysts independently evaluated
two key factors—Technology Attributes and Future Business Value—according to thecriteria identified below.
Technology Attributes
Criterion 1: Industry Impact
Criterion 2: Product Impact
Criterion 3: Scalability
Criterion 4: Visionary Innovation
Criterion 5: Application Diversity
Future Business Value
Criterion 1: Financial Performance
Criterion 2: Customer Acquisition
Criterion 3: Technology Licensing
Criterion 4: Brand Loyalty
Criterion 5: Human CapitalBest Practice Award Analysis for Cytori
Decision Support Scorecard
To support its evaluation of best practices across multiple business performance
categories, Frost & Sullivan employs a customized Decision Support Scorecard. This tool
allows our research and consulting teams to objectively analyze performance, according to
the key benchmarking criteria listed in the previous section, and to assign ratings on thatbasis. The tool follows a 10-point scale that allows for nuances in performance evaluation;
ratings guidelines are illustrated below.
RATINGS GUIDELINESThe Decision Support Scorecard is organized by Technology Attributes and Future
Business Value (i.e., the overarching categories for all 10 benchmarking criteria; thedefinitions for each criteria are provided beneath the scorecard).

The research teamconfirms the veracity of this weighted scorecard through sensitivity analysis, which
confirms that small changes to the ratings for a specific criterion do not lead to asignificant change in the overall relative rankings of the companies.

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The results of this analysis are shown below. To remain unbiased and to protect theinterests of all organizations reviewed, we have chosen to refer to the other key players
as Competitor 2 and Competitor 3.
DECISION SUPPORT SCORECARD FOR TECHNOLOGY INNOVATION AWARD
Measurement of 1–10 (1 = poor; 10 = excellent)Technology Innovation

Technology
Attributes

FutureBusiness Value

AverageRatingCytori

9.8

9.8

9.8

Competitor 2

6.3

5.7

6.0

Competitor 3

4.0

3.6

3.8

Technology Attributes
Criterion 1: Industry Impact
Requirement: Technology enables the pursuit of groundbreaking new ideas, contributing
to the betterment of the entire industry
Criterion 2: Product Impact
Requirement: Specific technology helps enhance features and functionality of the entire
product line for the company
Criterion 3: Scalability
Requirement: Technology is scalable, enabling new generations of products over time,with increasing levels of quality and functionality
Criterion 4: Visionary Innovation
Requirement: Specific new technology represents true innovation based on a deep
understanding of future needs and applications
Criterion 5: Application Diversity
Requirement: New technology serves multiple products, multiple applications, andmultiple user environments

Future Business Value
Criterion 1: Financial Performance
Requirement: High potential for strong financial performance in terms of revenues,
operating margins and other relevant financial metrics
Criterion 2: Customer Acquisition
Requirement: Specific technology enables acquisition of new customers, even as itenhances value to current customers
Criterion 3: Technology Licensing
Requirement: New technology displays great potential to be licensed across many sectors
and applications, thereby driving incremental revenue streams© Frost & Sullivan 201611

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Criterion 4: Brand Loyalty
Requirement: New technology enhances the company’s brand, creating and/or nurturing
brand loyalty
Criterion 5: Human Capital
Requirement: Customer impact is enhanced through the leverage of specific technology,translating into positive impact on employee morale and retention

Decision Support Matrix
Once all companies have been evaluated according to the Decision Support Scorecard,
analysts can then position the candidates on the matrix shown below, enabling them tovisualize which companies are truly breakthrough and which ones are not yet operating atbest-in-class levels.
DECISION SUPPORT MATRIX FOR TECHNOLOGY INNOVATION AWARDHigh

Future Business Value

CytoriCompetitor 2Competitor 3

Low
Low

Technology Attributes© Frost & Sullivan 2016

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The Intersection between 360-Degree Research and Best
Practices Awards
Research Methodology
Frost & Sullivan’s 360-degree researchmethodology

represents

theanalytical

360-DEGREE RESEARCH: SEEING ORDER IN
THE CHAOS

rigor of our research process. It offers a
360-degree-view of industry challenges,
trends, and issues by integrating all 7 of
Frost & Sullivan's research methodologies.
Too

often,

growthcompanies

decisions

understanding

of

make

based

on

their

importantanarrow

environment,

leading to errors of both omission andcommission. Successful growth strategies
are founded on a thorough understandingof market, technical, economic, financial,customer, best practices, and demographic
analyses. The integration of these researchdisciplines into the 360-degree researchmethodology
platform

providesforanbenchmarking

evaluationindustryplayers and for identifying those performing at best-in-class levels.

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BEST PRACTICES RESEARCHBest Practices Recognition: 10 Steps to Researching,
Identifying, and Recognizing Best Practices
Frost & Sullivan Awards follow a 10-step process to evaluate award candidates and assess
their fit with select best practice criteria. The reputation and integrity of the Awards are
based on close adherence to this process.
STEPOBJECTIVE

Monitor,

Identify award recipient
candidates from around theglobe• Conduct in-depth industry
research• Identify emerging sectors• Scan multiple geographies

Pipeline of candidates who
potentially meet all bestpractice criteria

Perform comprehensive,
360-degree research on all
candidates in the pipeline• Interview thought leaders
and industry practitioners• Assess candidates’ fit with
best-practice criteria• Rank all candidates

Matrix positioning all
candidates’ performance
relative to one another1 target, andscreenKEY ACTIVITIESOUTPUT

2

Perform
360-degree
research

3

Invitethought
leadership in
best
practices

Perform in-depth
examination of all candidates• Confirm best-practice criteria• Examine eligibility of all
candidates• Identify any information gaps

Detailed profiles of allranked candidates

Initiate
research

Conduct an unbiased
evaluation of all candidate
profiles• Brainstorm ranking options• Invite multiple perspectives
on candidates’ performance• Update candidate profiles

Final prioritization of alleligible candidates andcompanion best-practice
positioning paper

5

Assemble
panel ofindustry
experts

Present findings to an expert
panel of industry thought
leaders• Share findings• Strengthen cases forcandidate eligibility• Prioritize candidates

Refined list of prioritizedaward candidates

6

Conduct
globalindustry
review

Build consensus on award
candidates’ eligibility• Hold global team meeting toreview all candidates• Pressure-test fit with criteria• Confirm inclusion of alleligible candidates

Final list of eligible award
candidates, representing
success stories worldwide

7

Perform
quality check

Develop official award
consideration materials• Perform final performancebenchmarking activities• Write nominations• Perform quality review

High-quality, accurate, andcreative presentation of
nominees’ successes

8

Reconnectwith panel ofindustry
experts

Finalize the selection of thebest-practice award recipient• Review analysis with panel• Build consensus• Select winner

Decision on which company
performs best against all
best-practice criteria

9

Communicate
recognition

Inform award recipient ofaward recognition• Present award to the CEO• Inspire the organization forcontinued success• Celebrate the recipient’s
performance

Announcement of award
and plan for how recipient
can use the award toenhance the brandUpon licensing, company
may share award news withstakeholders and customers• Coordinate media outreach• Design a marketing plan
• Assess award’s role in future
strategic planning

Widespread awareness ofrecipient’s award statusamong investors, media
personnel, and employees

4 director
review

10

Take
strategic
action© Frost & Sullivan 2016

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