C3 to sell CellSpray, close US offices after review

Perth-based burns treatment developer Clinical Cell Culture Ltd, or C3, announced it will close its American offices and sell its CellSpray technology after completing a strategic review of its options.

C3 chief executive Bob Atwill will resign from the board, after 10 months in the role, to be replaced by chief financial officer Andrew Cannon, who will also retain his financial responsibilities.

In an announcement released today, the company said it would put all sales of the CellSpray solution on hold as it sought a suitable licensor, as well looking for partnership or corporate activity opportunities for its ReCell cell harvesting device.

C3 plans to pursue major cuts in its operating costs, aiming to halve its current $800,000 monthly cash burn. It will also postpone future research and development, and implement a "significant" reduction in employee numbers.

The company said the cost cutting would enable the company to maximise commercial opportunities for ReCell, which it sould was the action necessary to maximise its cash reserves and shareholder value.

Meanwhile, C3 continues to seek approval from the US Food and Drug Administration, experiencing delays in patient recruitment for trials - which have in turn kept the company from announcing a definitive date for final approval.

The company, co-founded by high profile burns specialist Fiona Wood, launched the review after announcing an expected revenue downgrade from $5-$7 million to around $1.1 million in February

At the time, the company said its lower-than-expected sales and approval delays had kept it from the target, identifying the trends as being of concern to the company.

C3 made a loss of $5.4 million in the first half of the 2006-2007 financial year.

Shares in the company fell 10.3 per cent to close at 6.1 cents each.

The full text of a company announcement is pasted below

The Board of Directors of Clinical Cell Culture today announced the results of a Strategic Review of the Company's short and medium term strategic options.

This follows the announcement made on 19 February 2007 when the Company issued revised guidance to the market in relation to revenue targets for the 2007 financial year.

C3 Chairman Dalton Gooding said the Board had completed a thorough review of the short and medium term strategic options in order to ensure that its cash resources are focused on maximising returns for shareholders.

Key decisions from the review include:

• Major cuts in operating costs and a reduction in monthly cash burn of more than 50%
• Continued focus on building sales in a selected number of high potential approved markets where ReCell is already approved for sale. This will involve funding of a limited direct approach in certain markets
• Putting on hold the sales of CellSpray and CellSpray XP and identifying suitable licensors of the technology
• Active evaluation of partnership or corporate activity with ReCell to maximise its global commercialisation potential
• Closure of the C3 Americas sales office in Florida pending FDA regulatory approval
• Postponement of future R&D activity
• Significant reduction in employee numbers.

Mr Gooding also announced that Chief Executive Officer Bob Atwill has resigned from the Company by mutual agreement with the Board.

C3's Chief Financial Officer Andrew Cannon has been appointed to the role of CEO effective immediately and will retain his CFO responsibilities.

Mr Gooding thanked Mr Atwill for his work on behalf of the Company and wished him every success with his future endeavours.

"The Board has great faith in Andrew to implement the revised commercialisation strategy and ensure we maximise our cash resources," said Mr Gooding.

Mr Gooding said the slower than expected reorder rates for both ReCell and CellSpray had necessitated a full review of the Company's operations.

"The Board continues to believe in the commercial potential of the technology. The slower than expected sales are timing issues and not a reflection of deficiencies in the technology," said Mr Gooding.

The decision to put on hold sales of CellSpray and CellSpray XP reflects the low level of reorders and the high monthly fixed costs of production.

CellSpray® is a valuable technology and excellent patient outcomes have been achieved. The Board believes that successful market penetration will not be achieved using current limited resources. A suitable licensor of the technology with an established infrastructure would provide the opportunity to maximise the value in this technology.

A number of potential partners have already been approached as part of C3's US market strategy. These discussions are ongoing and other recent opportunities will be evaluated against key criteria for maximising shareholder value.

As a result of the Review, the Board has also committed to a number of cost-cutting initiatives. Company employees will be significantly reduced and future R&D activity will be postponed.

The decisions to reduce the headcount of the Company have not been taken lightly, but the Board believes these actions are in the best interests of the Company and its shareholders.

The effect of these cost-cutting initiatives will be to reduce the monthly cash burn of the Company by more than half from its current level of approximately $800,000 per month. This is designed to ensure the Company has the cash resources necessary to maximise the commercial opportunities for ReCell.

FDA Trial

The Company continues to experience delays in patient recruitment in the FDA trial. In order to accelerate recruitment, additional trial sites are being investigated. C3 is also in discussion with the FDA to amend the trial protocol which will increase the potential number of patients to be included under the trial.

As a result of the uncertainty that has arisen with patient recruitment under the trial, it is not possible to put a definitive date on when final approval will be received. The Company will report to the market on progress under the trial in due course.

The US market remains key to the commercial success of the Company and the Board is committed to the conclusion of the current trial.

The delays in patient recruitment and the impact on regulatory approval has resulted in the decision to close the C3 Americas office.

Mr Gooding said the Board had been faced with some difficult decisions. However, he said the Board was also determined to take the action necessary to maximise the Company's cash reserves and shareholder value.