J&J unit and Par settle patent infringement litigation

First quarter 2009 product revenues consisted of $1.3 million in Celution System sales in Europe and Asia and the recognition of $0.6 million from the installation of a StemSource Cell Bank in Japan. Gross profit for the first quarter was $825,000, against $93,000 in the first quarter of 2008.

Cytori’s first quarter sales reflect the progress the Company has made since it introduced its regenerative medicine product line early last year, said Christopher J. Calhoun, chief executive officer for Cytori. We achieved a significant year over year increase in product revenues based on a diverse mix of orders between the Celution(R) System and StemSource(R) Cell Bank sales in Europe and Asia and we believe we are on track to meet our $10 million revenue projection for 2009. During the remainder of the year, we anticipate revenues to be driven by increased interest in the Celution(R) system from cosmetic and reconstructive surgeons in Europe and Asia, the achievement of periodic international StemSource orders, and the introduction of the StemSource(R) research products in the United States through GE Healthcare.

During the first quarter of 2009, Cytori reduced total operating expenses to $6.4 million, as against $9.2 million for the same period last year. This decrease is due to a reduction in research and development and general and administrative expenses and recognition of a gain from the change in fair value of warrant liability, offset by a planned increase in sales and marketing expenses. This trend is expected to continue due, in part, to further cost containment measures enacted in March 2009 and which are expected to take full effect in the second quarter of 2009. These measures include continued reduction in research and development, as resources have been shifted to managing the sales and marketing activities of our distribution partners.