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INITIATION REPORT

Please see the second to last page and last page of this document for important disclosures. 1

CytoSorbents Corporation (CTSO/OTC) July 24, 2012

Jonathan Aschoff, (212) 702-6652 [email protected]

Innovative Technology Addressing A Large Unmet Need - Initiating Coverage With A Buy Rating And A $0.50 Target Price

Investment Summary

We are initiating coverage of CytoSorbents with a Buy rating, as we believe that the present valuation of the company does not reflect the CytoSorb opportunity. Our 12-month target price of $0.50 is based on a DCF analysis, using a 40% discount rate and a 5x multiple of the terminal value for the projected 2019 EBITDA of $183 million that fully factors in the cash needed to get to profitability. CytoSorbents is focused on the development of blood purification products, and primary product CytoSorb will address the severe sepsis and septic shock patient population. From the initial pivotal European trial, there appears to be a significant effect from CytoSorb during the first 14 days of treatment, and we believe that we will continue to observe a mortality benefit in future trials.

The nearest term catalyst for CytoSorb is the interim Phase 2b data that is expected by YE12, which could immediately boost sales of CytoSorb, given that it is already approved in the E.U. CytoSorb is now in use at a few institutions under the direction of influential physicians, and we view the interim YE12 Phase 2b duration ranging data to be a powerful driver that could potentially enable CytoSorb to generate significant sales. Although not powered for statistical significance the interim data should confirm the initial Phase 2 results and potentially demonstrate a reduction in mortality over a longer period. Additionally, we view the revenue generated prior to data from a large Phase 3 trial to somewhat de-risk the financial health of the company.

There is a significant need for new sepsis treatments. Each year, there are more

than 200,000 deaths in the U.S. due to severe sepsis and septic shock, with 30% of severe sepsis patients and 50% of septic shock patients dying. Current therapies are supportive care that often sustains the life of patients, but that do not prevent or treat organ failure. In fact, patients who recover from sepsis may have permanent organ damage, much of which may be avoided with CytoSorb. Furthermore, sepsis patients consume a significant portion of healthcare resources; costs for just one hospital stay typically exceed $30,000. Consequently, if CytoSorb can continue to show a reduction in the length of an ICU stay, there should be a significant economic rationale that would induce hospitals to use CytoSorb. In its European Phase 3 trial, CytoSorb was able to show an almost 4-day reduction in ICU stay for patients in the CytoSorb arm compared to control.

The CytoSorb market opportunity is large and growing. The U.S. incidence of

patients with severe sepsis is about 949,000, of which about 51% are admitted to the ICU, and about 17% are ventilated in intermediate care or received care in a coronary care unit. Accordingly, there are about 650,000 patients in the initial target market for CytoSorb in the U.S. alone. We therefore project worldwide peak sales to exceed $500 million at what we view to be a relatively low adoption rate.

Initiating Coverage at Buy Target Price: $0.50

Price $0.12 52-Week High/Low $0.30 - 0.07 Shares Outstanding (mm) 194.87 Market Cap. (mm) $22.60 Average Daily Volume (000) 433.66 EPS FY11A FY12E FY13E Mar $(0.01) $(0.01)A - Jun $(0.01) $(0.01) - Sep $(0.01) $(0.01) - Dec $(0.01) $(0.01) - FY $(0.05) $(0.05) $(0.07) Prior - - - Consensus - - - P/E NM NM NM FY Rev. $36,078 $129,231 $4,782,276

Source: BigCharts.com

mailto:[email protected]

Brean Murray, Carret & Co. Equity Research 2

INITIATION REPORT CytoSorbents Corporation (CTSO/OTC)

Investment Thesis

We believe that the present valuation of CytoSorbents does not reflect the opportunity that exists for future CytoSorb sales. CytoSorb is approved in the E.U., and is now in use at a few institutions under the direction of influential physicians, and we view the interim YE12 Phase 2b duration ranging data to be a powerful driver that could potentially enable CytoSorb to generate significant sales should the data demonstrate a reduction in mortality. We are therefore initiating coverage of CytoSorbents with a Buy rating and 12-month target price of $0.50, based on a DCF analysis, using a 40% discount rate and a 5 multiple of the terminal value for the projected 2019 EBITDA of $183 million.

CytoSorbents is focused on the development of blood purification products, and primary product CytoSorb will address a large unmet need where few alternatives exist, which is the severe sepsis and septic shock patient population. From the analysis of the initial pivotal European trial, it is apparent that there was a significant effect from CytoSorb in the first 14 days of treatment, and we believe that the generation of duration ranging data is part of the best development path for CytoSorb. The incidence of patients with severe sepsis is about 949,000 (0.3% of the population), of which about 51% (485,000) are admitted to the ICU, and about 17% are ventilated in intermediate care or received care in a coronary care unit. Thus there are about 650,000 patients in the initial target market for CytoSorb in the U.S.

CytoSorbents is in a unique position to accelerate the sales of CytoSorb in the E.U. immediately after trial data is generated. The interim YE12 Phase 2b trial data will be available to the E.U. salesforce upon its release, and if positive will give physicians a reason to utilize the product more aggressively. CytoSorbents will be generating Phase 3 data from 2013 to 2016, but at the same time is also able to make progress country by country regarding reimbursement in Europe and enlist additional distributors. Additionally, we view the revenue generated prior to data from a large Phase 3 trial to somewhat de-risk the financial health of the company. We also expect there to be a significant amount of data generated by investigator sponsored trials in the next few years, which collectively with formal trial data could place CytoSorbents in a solid negotiating position prior to final Phase 3 data, and could enable a robust U.S. launch.

There is a significant need for the development of sepsis treatments, as more than 200,000 deaths occur each year due to severe sepsis and septic shock, with 30% of severe sepsis patients dying, and about 50% of patients with septic shock dying from the condition. Current therapies are supportive care that often sustains the life of patients, but they do not prevent or treat organ failure. Patients who recover from sepsis may have permanent organ damage, much of which may be avoided with CytoSorb. Therefore we are confident that clinical demand exists in this significantly large patient population. Furthermore, patients with severe sepsis and septic shock require a great deal of hospital resources in the ICU alone, and if CytoSorb can continue to show a reduction in the ICU length of stay (LOS), there should also be a significant economic justification to further induce hospitals to demand CytoSorb. Generally speaking, severe sepsis patients have a hospital LOS of 3 to 5 days longer than a comparable patient, and in the European Phase 3 trial, CytoSorb was able to show an almost 4 day reduction in the ICU stay for patients in the CytoSorb arm compared to control (23.8 versus 27.5 days).

We believe that CytoSorb could be the best-in-class product for the treatment of severe sepsis and septic shock. Presently, no products preventing organ failure in sepsis patients exist in the U.S. market. Furthermore, CytoSorb’s ease of initial use without significant upfront costs should facilitate its market adoption. CytoSorb connects seamlessly to a dialysis machine with only an in and an out connection. In addition, the window of opportunity is relatively large for the optimal time to use CytoSorb, as its use would still be applicable 3 days after diagnosis, by contrast to some competitors whose ideal window of opportunity is narrower, often passing before the patient seeks treatment.



Exhibit 1: Catalyst Calendar

Source: Company documents, Brean Murray Carret & Co. estimates

Valuation

We derive our target price of $0.50 through a DCF analysis, using a 40% discount rate and a 5x multiple of the projected 2019 EBITDA of $183 million as the terminal value fully factoring in the cash needed to get to profitability. CytoSorbents has a clear value-added pipeline with products to treat large patient populations, where few alternatives exist. We have a high degree of confidence that CytoSorb will be approved, but we maintain a 40% discount rate, as there are risks associated with FDA approval, competition, market adoption, as well as liquidity concerns.

Sepsis Backgrounder

Sepsis is the systemic inflammatory response of the body, which is presumed to be due to an infection, although the detection of an infection or any bacteria is not necessary for a diagnosis of sepsis. Bacteria in the blood or an infection of any kind is only detectable about 50% of the time. It is diagnosed by two or more symptoms as shown in Exhibit 2 below. Severe sepsis is the existence of sepsis and organ dysfunction, and septic shock requires the existence of sepsis and refractory hypotension (low blood pressure that does not respond to treatment). Another way to look at septic shock is as severe sepsis with cardiovascular failure. The systemic inflammatory response of sepsis causes the over production of cytokines, which in turn causes a cascade of events including microvascular injury that leads to decreased oxygen delivery causing organ dysfunction. The consequences of sepsis are an extended hospital stay of about 8.4 days on average and a high mortality rate that approaches 50% in the case of septic shock. Additionally, patients with severe sepsis and septic shock are some of the most expensive patients to treat, something we expand upon in the economic section below.

Exhibit 2: The Presence of 2 or More of the Following Are an Indication of Sepsis

1) A temperature greater than 38ºC (100.4ºF) or less than 36ºC (96.8ºF)

2) A pulse rate greater than 90 beats/min

3) A respiratory rate greater than 20 breaths/min

4) WBC count greater than 12,000/mm3 or less than 4000/mm3

Source: Ann Emerg Med. 2006;48:28-54

Timing Compound Event IndicationYE12 CytoSorb Interim resul ts from Phase 2b tria l Seps is1H13 CytoSorb Top-l ine resul ts from Phase 2b tria l Seps is2013 CytoSorb Ini tiate U.S. Phase 3 tria l Seps is2H15 CytoSorb Top-l ine resul ts from Phase 3 tria l Seps isYE15 CytoSorb Fi le PMA with the FDA Seps is2016 CytoSorb Approval and product launch Seps is



Exhibit 3: Sepsis Disease Progression

Source: Ann Emerg Med. 2006;48:28-54

Current Therapies

The current therapies for severe sepsis are inadequate and non-specific, focusing on supportive care that helps to keep a patient alive, but not preventing or treating organ failure. Specifically, the publicly recognized therapies for severe sepsis/septic shock include early goal-directed therapy (EGDT), appropriate and timely antimicrobial therapy, source control, corticosteroids, and low-tidal volume mechanical ventilation for patients with acute lung injury. The severe sepsis protocol developed by Surviving Sepsis Campaign classified EGDT, antimicrobial therapy, and source control as the sepsis resuscitation bundle that should be performed within the first 6 hours of identification of severe sepsis. Corticosteroids and low-tidal volume mechanical ventilation constitute the sepsis management bundle and may be completed within the 24 hours of identification of severe sepsis.

• EGDT is a combination of therapies aimed to increase oxygen delivery and maintain normal physiologic parameters. Specifically, in order to achieve a normalized central venous pressure (CVP), patients are treated with fluid resuscitation. To maintain the mean arterial pressure (MAP), patients are treated with vasoactive agents. To maintain the hematocrit level, blood transfusions are given. To maintain a ScvO2 of 70% or greater, patients may be intubated, sedated, and paralyzed as necessary, and inotrope therapy can be used. Overall, it has been shown that EGDT therapies are able to reduce the mortality rate by 20%.

• Appropriate and timely antimicrobial therapy means that the administration of “appropriate” empirical antimicrobials should be as soon as possible to optimize pathogen killing. Additionally, rapid identification of the source of the infection enables the elimination of the infection through drainage or excisional debridement.

• Corticosteroid and low-tidal mechanical ventilation therapies are designed for a subset of severe sepsis patients. Corticosteroid should be given to sepsis patients with inadequate adrenal reserve. Clinical trials demonstrated that the administration of corticosteroids resulted in an absolute reduction of the 28-day mortality rate of only 10%. However, the use of routine corticosteroid supplementation for sepsis remains limited as the adrenal reserve level is difficult to measure. In practice, a low-dose of corticosteroid is given to mechanically ventilated septic shock patients with organ dysfunction requiring vasopressors, as they are most prone to adrenal insufficiency; further corticosteroid treatment is carried only in patients with adrenal insufficiency.



• Low tidal volume mechanical ventilation is more effective for sepsis patients with acute lung injury (ALI), as high tidal volume has been associated with injurious lung stretch and release of inflammatory mediators in a sepsis patient that is already fighting inflammation. Conventional tidal volume uses 12ml/kg based on ideal body weight, while low-tidal volume uses 6ml/kg or can be as low as 4ml/kg based on ideal body weight. Studies have confirmed that the low-tidal volume mechanical ventilation is able to reduce the 28-day mortality rate by 8.8% compared to the conventional tidal volume mechanical ventilation. Moreover, low tidal volume mechanical ventilation is also used for treating acute respiratory distress syndrome (ARDS), in addition to ALI.

Despite the protocol of Surviving Sepsis Campaign, the protocols for severe sepsis differ across countries. EGDT is widely used in the U.S., while an endotoxin adsorber (polymyxin B hemoperfusion) therapy is common in Japan. At its core, the endotoxin adsorber therapy is a “blood filtering” concept, similar to the concept of CytoSorb, and may be superior to the resource-intensive and therefore costly approach of EGDT.

Market Potential The potential market for those hospitalized with sepsis is significant, with an annual incidence of about 1.4 million patients in the U.S. Even though we believe that the majority of these patients would be candidates for CytoSorb, if only for a relatively short treatment duration, we are focused on the highest need patient population having severe sepsis that are either admitted to the ICU or ventilated in intermediate care. The incidence of patients with severe sepsis is about 949,000 (0.3% of the population), of which about 51% (485,000) are admitted to the ICU, and about 17% of the severe sepsis patients are ventilated in intermediate care or received care in a coronary care unit. Thus there are about 650,000 patients in the initial target market for CytoSorb in the U.S., and we expect a high demand given the unmet need in sepsis treatment. With similar assumptions for the E.U. market there are about 1 million patients in the severe sepsis market that are either admitted to the ICU or ventilated.

Based on the pricing expectations given by the company of $3,500 per treatment regimen, and our peak market penetration assumptions, we estimate that CytoSorb could generate about $250 million in total worldwide revenue for CytoSorbents in 2019. The current treatment regimen utilizes one CytoSorb column per day for 7 days, at $500 per column. For patients with cytokine storm, this treatment regimen can be expanded over the critical 28 day period. Thus with an inflation adjusted annual average treatment cost of about $4,200, and a 5% penetration rate to the 689,000 patients in 2019, CytoSorb could generate about $150 million in revenue in the U.S., with CytoSorbents receiving about $30 million in revenue, based on a 25% total royalty rate with 5% in royalties paid to other parties. We are projecting that CytoSorbents will obtain a marketing partner for the U.S., but CytoSorbents sees a much different marketing paradigm in the E.U. Specifically, CytoSorbents plans to utilize full service distributors in the E.U. in combination with its own salesforce. In order to remain conservative, we project the distributor in the E.U. to get about 30% of the economics initially, and then this should decrease to 25% as the total annual revenue becomes greater than $100 million. Additionally, CytoSorbents plans to maintain control of the German market with its own salesforce, as the company is becoming well established in the German market. Thus we project that CytoSorb to generate about $300 million in E.U. revenue in 2019, based on a 9% penetration rate and inflation adjusted pricing of $4,300 per treatment. With 75% of the economics in 2019, we forecast CytoSorbents to receive about $220 million in revenue from E.U. sales. CytoSorb’s approval in the E.U. and its ongoing marketing effort stands to benefit if the current and future trials produce positive survival data, as there would be little delay in marketing positive data to hospitals and KOLs there.

Economics. CytoSorb demand should be high given its potential to save lives and reduce the treatment cost for severe sepsis patients. Severe sepsis is highly prevalent within ICUs and is associated with extended LOS and high costs. It is estimated that 51% of patients with severe sepsis received ICU care, 11% received care in a coronary care unit, and 6.2% were ventilated in an intermediate care unit. The national hospital costs for patients with severe sepsis were as high as $16.7 billion in 2001. Beyond the direct costs associated with sepsis there is also the value associated with the reduction in mortality. Severe sepsis is a common, expensive, and frequently fatal condition, with as many deaths annually as those from acute myocardial infarction.



We first highlight the fact that the patients and doctors highly value a reduction in mortality, and we anticipate any product enabling a significant reduction in mortality to be highly demanded. Taking into consideration the early ad-hoc data shown by CytoSorb, and the fact that there were total deaths due to sepsis of 215,000 in 1995 and that the hospital mortality rate is >30% with severe sepsis and approaches 50% for patients with septic shock, we believe that CytoSorb will be in high demand even if the cost associated with CytoSorb increase the current cost associated with sepsis treatment. However, we believe that CytoSorb’s ability to reduce organ failure in sepsis patients will offer a win-win to the patients and the hospitals with the reduction in ICU stay and an overall reduction in the LOS in the hospital. There were about 621,000 patients that were hospitalized with sepsis in 2000, and in 2008 the amount of hospitalized patients with sepsis almost doubled to 1.14 million. This is by contrast to no increase in the incidence of the overall hospitalization rate during this period. Notably, those hospitalized for septicemia or sepsis had an average LOS that was 75% longer than those hospitalized for other conditions. The LOS for severe sepsis patients ranges from 8 days to 13 days, and is generally 3 to 5 days longer than a comparable patient, with most of that hospital stay spent in the ICU. Some sources show the more costly ICU sepsis patients to have an average LOS of 23.3 days. Furthermore, the costs associated with the average hospitalization of severe sepsis patients ranged from $29,762 to $38,569 depending on the treatment protocol used. Another source determined that the average total cost to be $38,304 in survivors, and $49,182 in non-survivors. Regardless of the exact amount, it is easy to see that the overall cost associated with sepsis patients is high for just one hospital admittance. Equally as important as the cost of additional days in the hospital is the fact that occupying a hospital bed can cause a lower flow of surgeries to run through the hospital, thus reducing the high-margin operating room time.

As ICU care is extremely labor-intensive, the personnel costs (for nurses, physicians, technicians, and assistants) constitute a large portion of the total ICU costs and consume 45 to 60% of the total ICU budget. Other fixed costs are not as significant to the overall cost of the patient stay, such as the non-clinical support services, equipment, rent, and maintenance costs. The remainder of the ICU cost is associated with the different drugs used. With CytoSorb, the LOS for patients with severe sepsis should be shortened, and as a result, the personnel costs and the total ICU cost should be lower as well as the cost associated with necessary medication. Early indications show that a 2 to 4 day reduction in ICU stay may be possible when organ failure is no longer a concern. The potential downside for a product launch such as that expected for CytoSorb is that there is a time lag when dealing with the drug and device adoption policies of hospitals. Specifically, it may take anywhere from 3 to 9 months to have the product approved for use by the hospital. This is the major factor for determining the demand of CytoSorb during the initial product launch. Moreover the interim Phase 2b trial data from the trial in Germany should be available by YE12, and bolster the E.U. demand, as it is expected to more clearly communicate how to use the product and potentially show an improved 28 day survival rate over placebo. Additionally, the many investigator-sponsored trials in the E.U. should continue to demonstrate the effectiveness of the product and improve demand over 2013. Thus when CytoSorb is launched in the U.S. there will not only be Phase 3 data to support the launch, but many investigator sponsored trials should have also been completed. Additionally, many institutions in the E.U. should have had a lot of experience with, and data from, the product, to which U.S. doctors will be able to refer during the product launch in the U.S. If CytoSorb is ever adopted as standard of care in the E.U. we expect significant demand also in the U.S.



Exhibit 4: Hospitalizations for Sepsis Directly, and for Sepsis as a Secondary Indication

Source: CDC/NCHS, National Hospital Discharge Survey, 2000-2008

Exhibit 5: Average Length of Hospitalization

Source: CDC/NCHS, National Hospital Discharge Survey, 2000-2008

Exhibit 6: Sepsis ICU Use and LOS Versus Patients Without Sepsis in Patients With Pneumonia

Source: Arch Intern Med. 2007;167(15):1655-1663

Characteristics All (N=1886) Severe Sepsis No Severe Sepsis Dead at 90 d Alive at 90 dHospital LOS, d 7.3 (SD = 5.0) 10.3 (SD = 6.7) 6.0 (SD = 3.3) 11.1 (SD = 7.3) 10.0 (SD = 6.5)

ICU use 302 224 78 75 148Mechanical ventilation use

132 132 0 52 79

Severe Sepsis OutcomeCommunity Acquired Pneumonia



Exhibit 7: Sepsis ICU Use and LOS Versus Patients Without Sepsis

Source: Mol Med 2009;15(11-12) 438-445 CytoSorb Background

CytoSorb is approved in the E.U. to be used whenever cytokines are elevated, and clinically proven to reduce the cytokine levels in patients with septic shock. The reduction in the cytokine levels of sepsis patients has enabled CytoSorb to obtain a statistically significant improvement in survival in high risk patients. CytoSorb is essentially a filter that can be used with pre-existing dialysis machines, and can treat the total blood volume 20-30 times over during each 6-hour treatment cycle. Treatment with CytoSorb usually lasts 7 days and uses 7 cartridges. Exhibit 9 below shows the size range for cytokines that CytoSorb is able to filter out of the blood. CytoSorb’s utility to reduce cytokine levels may also have broader applicability to prevent organ damage in general by treating the underlying cause which is systemic inflammatory response syndrome, but we expect the U.S. drug label and the most consistent demand to be in patients with sepsis and thus we remain focused on the sepsis market for valuation purposes.

Exhibit 8: The CytoSorb Device

Source: Company documents Exhibit 9: Cytokine Size Range for Exclusion With CytoSorb

Source: Company documents

Characteristics All Yes NoHospital LOS, days 7.3 (SD = 4.8) 9.9 (SD = 6.6) 6.0 (SD = 2.9)ICU use, n 151 111 40Mechanical ventilation, n

60 60 0

Severe Sepsis



Ongoing Clinical Progress and Upcoming U.S. Pivotal Trial in Sepsis patients

CytoSorbents is continuing CytoSorb clinical development with a duration ranging trial in Germany to determine the optimal treatment for critical care patients that have a high risk of mortality. The control arm for this trial is a historical control utilizing the matched pair patient data from the initial trial, thus we expect the enrollment criteria to be the same. The initial trial in Germany showed robust efficacy over the first 7 days of treatment and the 7 days that followed, by contrast to the control arm, but since the survival benefit appeared to taper off after 14 days, it seems that a PRN usage, longer usage, or re-administration might yield the best result. This duration-ranging trial is expected to give data that will enable the proper design of the U.S. Phase 3 trial, and hopefully a look at the potential 28-day survival with a more realistic usage of CytoSorb. The CytoSorb arms for this trial include a 24 hour continuous usage arm that lasts for 7 days, and a 6-hour per day arm that continues until the patient experiences improvement in organ function. Each CytoSorb column lasts for approximately 6 hours, and due to the self regulating process of CytoSorb, it is only able to remove 30-50% of cytokines at a time, which means that continued usage should not cause potential safety problems from the over removal of cytokines. Data from this trial is expected by YE12. CytoSorb will also be evaluated in the treatment of trauma, where injured muscles release toxins that can be removed by CytoSorb.

Although the design of the potential Phase 3 trial in the U.S. is still in the conceptual stage, we anticipate the trial to include patients with a high level of cytokines, as well as patients age 65 and older. We project enrollment of more than 200 patients and a 28-day reduction in mortality as the primary endpoint with a 90 day reduction in mortality as either a co-primary endpoint or a secondary endpoint. Ultimately the reduction in mortality data should drive approval and sales of CytoSorb. CytoSorbents has an investigational device exemption (IDE) from the FDA, which will need to be modified for the future Phase 3 trial, but we do not see this as much of a hurdle. We anticipate Phase 3 enrollment to begin in mid-2013, and for the trial to take about 2 years. Therefore, we forecast the U.S. launch to take place in 2016, even if granted Fast Track and Priority Review.

Pivotal European trial in Sepsis patients

CytoSorbents enrolled 100 patients in its pivotal E.U. trial that ultimately randomized 43 sepsis patients for evaluation of efficacy (18 treatment arm; 25 control arm). More patients would have been evaluable for efficacy in this trial if it was not for a mistake with the randomization at one of the clinics that caused an imbalance in the severity of illness enrolled between the arms. All of the patients had severe sepsis and most had septic shock (94% treatment; 100% control). Moreover, the patient severity was such that many were experiencing multiple organ failure at trial entry. The primary endpoint was the reduction in IL-6 levels over the 7 day treatment period, which was met with 49.1% of CytoSorb patients achieving an IL-6 reduction (p=0.01). Notably, other cytokine reductions were observed, with a reduction in MCP-1 of 49.5% (p=0.002), a reduction in IL-1ra of 36.5% (p=0.001), and a reduction of IL-8 of 30.2% (p=0.002) (Exhibit 10). This trial was not powered to detect a survival benefit, but a post-hoc analysis was done, and showed that the greater than 65-year-old patient population had a statistically significant reduction in 14 day mortality, with 100% survival in the treatment arm and 64% in the control (p=0.04; n=21; Exhibit 11). Also, patients with highly elevated IL-6 or IL-1ra levels had a notable reduction in the 28-day mortality, with 100% survival in the treatment arm and 37.5% in the control (n=14; Exhibit 12). Thus it appears that it is possible that if used properly, CytoSorb could provide a longer term reduction in mortality, and possibly halt organ damage, hence the initiation of the Phase 2b duration ranging trial. The secondary endpoint of a reduction in ventilation was almost met with only 33% of ventilated CytoSorb patients on ventilation at day 28, compared to 88% of control patients remaining on ventilation at day 28 (p=0.09; n=14; 6 treated, 8 control; Exhibit 13). Importantly, there was almost a 4 day reduction in the ICU stay for patients in the CytoSorb arm compared to control (23.8 versus 27.5 days). This reduction in ICU time represents about $10,000 of saved hospital cost.



Exhibit 10: Pivotal European Trial Efficacy Analysis


Exhibit 11: Reduction in 14-Day Mortality for Those ≥ 65 Years or Older




Exhibit 12: Treatment Improved Mortality in Patients With High Cytokine Levels


Exhibit 13: Treatment Reduced Need for Ventilation in Patients With High Cytokine Levels




Exhibit 14: Improvement in Organ Dysfunction


Competitive Landscape for CytoSorb

Presently, antibiotics and antivirals are used to treat mild and moderate sepsis, and most drugs developed for sepsis have been unsuccessful at treating severe sepsis because they can only reduce a single cytokine or inflammatory mediator. Consequently, there have been relatively few clinical trial attempts to cure severe sepsis and no currently approved products to treat severe sepsis or septic shock in the U.S. Eli Lilly’s Xigris was withdrawn from the market in 2011 due to the lack of efficacy, and Toray’s Toraymyxin is used in Japan and Europe but is undergoing clinical trials in the U.S. Other drugs or devices are still under development.

Xigris was previously used for the treatment of severe sepsis in a narrow patient population, and was designed to inhibit the coagulation cascade associated with sepsis. To further highlight the difficulty of treating severe sepsis, the post marketing trial of Xigris failed to show a reduction in mortality at 28 or 90 days, as the data show the 28-day mortality rate to be 26.4% versus the placebo mortality rate of 24.2%, as well as a similarly equivalent mortality rate for the 90 day comparison versus placebo.

Toraymyxin is a polymyxin B hemoperfusion column for the treatment of severe sepsis, where it has been shown to remove 90% of circulating endotoxins in the blood stream. Endotoxin, is essentially an initiator or stimulant of cytokines in the immune system, and originates from the outer cell wall of Gram-negative bacteria. The reduction of endotoxin has to be done before the overstimulation of cytokines takes place, because reduction of endotoxin post cytokine production will not reduce cytokines and correspondingly will not reduce the effects of severe sepsis. By contrast, CytoSorb has a window of opportunity of up to 3 days where dramatic benefits can potentially be achieved.

Toraymyxin has been approved and marketed in the E.U. and Japan since 2002 and 1994 respectively, and Spectral Diagnostics Inc. holds the exclusive rights for Toraymyxin in the U.S. and Canada. Spectral is conducting a Phase 3 trial (EUPHRATES) for severe sepsis and septic shock. Although we believe the EUPHRATES trial has a high probability of success, we also believe that the logistical issues of clinical use of Toraymyxin may cause Toraymyxin to be less applicable than CytoSorb because a cytokine storm could be well underway at the time of hospital admittance. Our optimism for the trial’s success is due to the results of the primary clinical trial of Toraymyxin (EUPHAS), which demonstrated a reduction in the 28-day mortality of 21% in patients with severe sepsis and/or septic shock caused by an intra-abdominal gram-negative infection. Specifically, the 28-day mortality was 32% in the Toraymyxin arm and 53% in the placebo arm.

The only other product of which we are aware (approved in the E.U.) is the LPS Adsorber device (by Alteco Medical), which was approved in 2005 and widely marketed in the E.U. Essentially, the LPS Adsorber competes with Toraymyxin, as it is also designed to reduce the blood level of endotoxin in a sepsis patient.



Other blood purification devices under development include:

• Cascade Hemofiltration (by Gambro Lundia AB): the cascade hemofiltration system is designed to remove middle molecular weight peptides without removing beneficial small molecules including antibiotics, vitamins etc. The Phase 3 trial is ongoing and has a primary endpoint of the number of days without catecholamines at day 28. This endpoint appears to be relevant because Gambro appears to be targeting those with acute renal failure.

• Ultraflux EMiC2/Ultraflux AV1000S (by Fresenius): Ultraflux EMiC2 is continuous hemodialysis using an "enhanced middle molecule clearance" membrane, while Ultraflux AV1000S is continuous hemofiltration using a standard membrane, and both products are targeted to patients who need continuous renal replacement therapy. In the Phase 2/3 trial sponsored by Fresenius and completed in 2011, researchers examined the clearance of multiple middle molecules as the primary endpoint for both Ultraflux EMiC2 and Ultraflux AV1000S, but to date no results have been published regarding this trial.

Other drugs under development include:

• CytoFab (by AstraZeneca): CytoFab is an anti-TNF-alpha polyclonal antibody fragment that binds to human TNFα. The Phase 2 trial is ongoing in patients with severe sepsis and septic shock via the intravenous administration of CytoFab. The primary endpoint is the effectiveness of CytoFab measured by ventilator free days, and the reduction in mortality at days 7 and 28 are secondary endpoints. Given that CytoFab only targets one cytokine, we believe that its utility will be limited.

HemoDefend HemoDefend is CytoSorbent’s blood purification device used for blood transfusion and was first launched at the AABB conference in October 2011. The product utilizes a mixture of adsorbent polymer beads that remove contaminants such as antibodies, cytokines, toxins, bioactive lipids, free hemoglobin, and other inflammatory mediators from packed red blood cells (pRBCs). It can be implemented either as an in-line filter between the blood bag and the patient or as “Beads in a Bag”. The latter is a patent-pending treatment configuration where beads are placed directly in a blood bag for the continuous purification of blood throughout the entire storage period.

In the U.S., more than 40,000 units of blood are transfused every day (Source: American Red Cross) and nearly 5 million people receive blood transfusions every year. Transfused blood can be either whole blood or specific blood components such as red blood cells, platelets, plasma, and cryoprecipitate, but red blood cells are the major transfused product. Shortly after transfusion or some time later, patients may experience adverse reactions ranging from fever (1 in 8 transfusions) to more serious but rare illness like transfusion related acute lung injury (TRALI). By removing contaminants from the donor’s blood, HemoDefend may relieve fever and prevent potential life-threatening complications.

In addition to reducing the risk of transfusion reactions, HemoDefend could extend blood shelf life. According to American Red Cross, most donated red blood cells must be used within 42 days of collection, within 5 days for platelets, and within up to one year for plasma and cryoprecipitate if stored frozen. It is speculated that blood deteriorates over time and that “old blood” or long storage blood causes more adverse events than “new blood.” Two ongoing clinical trials (RECESS in the U.S. and ABLE in Canada) are examining the difference between the effects of transfusing “new blood” and “old blood.” If this speculation is confirmed by the trial results, HemoDefend could reduce contaminants in old blood and extend shelf life.

Although HemoDefend has only completed a pre-clinical proof of concept study and is not yet approved in any markets, it can potentially fill in a blank in the blood transfusion market. Current blood purification products for blood transfusion either target white cells only (Pall Corporation, Terumo-BCT, Hemerus Corporation, and others), or employ a costly blood washing technology. HemoDefend’s simple concept and easy treatment configuration create a competitive advantage in the market and particularly appeal to military and developing countries. CytoSorbents seeks to out-license HemoDefend to a strategic partner, but could continue developing HemoDefend until outlicensure.



BetaSorb BetaSorb employs the same adsorbent technology as CytoSorb and HemoDefend, but uses a physically different polymer that targets mid-molecular weight toxins such as beta2microglobulin (β2M) for the treatment of chronic kidney disease (CKD). These toxins having negative health implications cannot be efficiently removed by traditional high-flux hemodialysis.

In 1999, Fresenius Medical Care entered into an exclusive, long-term profit-sharing plan with CytoSorbents and obtained global marketing and distribution rights for BetaSorb and any similar products intended for the treatment of kidney failure. Since then, BetaSorb has been tested in four small-scale clinical trials in Europe and in the U.S. but has not been approved in any market. As the reimbursement for dialysis became less attractive and the regulatory pathway was longer and more complex, the company decided to shift its focus to acute care and critical care devices. It may resume clinical trials of BetaSorb after the commercialization of CytoSorb.

Intellectual Property

CytoSorbents owns a patent portfolio of 29 U.S. patents, and multiple ex-U.S. counterparts including pending worldwide patent applications. The patents not only cover the device and polymer materials, but also provide protection for applications and processes. CytoSorbents has repeatedly defended its patent portfolio, however, a law suit with Purolite, resulted in a settlement that gives CytoSorbents only 18 years of exclusive rights to certain adsorbent polymers.

Financial Outlook Revenue. Our projected product sales are entirely due to sales of CytoSorb for the severe sepsis patient population, and primarily from the E.U. market. All potential upfront payments and milestones from potential partnerships, as well as any revenue generated from HemoDefend and BetaSorb are left as possible upside. We expect YE12 clinical data to drive E.U. sales in 2013 and for Phase 3 data (expected in 2015) to drive even greater sales in 2015 and beyond with full reimbursement in major E.U. markets. Additionally, we forecast U.S. approval in 2016. The total effect is a potential inflection point in sales in 2016.

We view the initial marketing efforts and sales of CytoSorb to be a solid marketing head start to what we view as a fully loaded marketing campaign in 2015 in the E.U. and 2016 in the U.S. The E.U. distributors should be in place, and the KOLs should also have sufficient knowledge of the product, thus once again there should be limited headwinds in 2016 and beyond in the E.U.

For the U.S. market, we are projecting a partner to market CytoSorb, and a total royalty of 25%. After CytoSorbents pays a 3% royalty to Ms. Montiel for her early role as an angel investor, and a 2% royalty to Purolite from a patent settlement, we anticipate CytoSorbents’ net royalty to be 20% from the U.S. market. We are forecasting the royalties owed to Ms. Montiel and Purolite from the E.U. market to flow through the COGS line. We also anticipate a slow U.S. launch of CytoSorb due to the need of the hospitals to review and approve CytoSorb, and as a result, we anticipate 2018 to be the first full year of unencumbered sales of CytoSorb in the U.S.

Expenses. Our assumptions for COGS include only the costs to produce CytoSorb for the E.U. market, due to our projection of a U.S. marketing partner who would bear the cost of U.S. CytoSorb production. As previously mentioned, CytoSorbents pays a 3% royalty to Ms. Montiel and a 2% royalty to Purolite which flows through the COGS line from the E.U. sales. Until 2014, we are expecting high COGS, as CytoSorb is being manufactured on a small scale and without sufficient capacity utilization. CytoSorbents is able to expand the current manufacturing facility and is contemplating building a much larger manufacturing facility in future years. The building of a new facility would take 2 years, and the company also has the option of using a contract manufacturer, both of which could reduce COGS if there is greater CytoSorb demand, which we forecast to occur in 2016. Therefore, we are projecting COGS of 40% through 2015, with the eventual decrease to 20% in 2017 as economies of scale are observed.



Our R&D projections are primarily affected by the potential U.S. Phase 3 trial. CytoSorbents believes that it can complete the Phase 3 trial for $8 to $12 million, and we are more conservatively projecting the trial to cost about $15 million with $3 million of additional R&D expenses occurring in 2013, about $7 million of additional R&D expenses occurring in 2014 and the remainder in 2015 as the trial wraps up and the data are analyzed. We do not forecast there to be any additional large Phase 3 trials in the next few years. Our projected 2012 sequential increase in R&D is due to the addition of 3 to 4 R&D personnel this year. Additional R&D spending is due to CytoSorbents sponsoring independent research.

The increase in SG&A spend is due to the addition of up to 3 more sales people for Germany in 2012 for a total headcount of 20 to 25 by YE12. By our estimates and the company patterns, we anticipate that CytoSorb will hire about a 50 person salesforce for the E.U. market in total, and unless sales warrant, we do not expect the salesforce to grow much from there. We have conservatively forecasted 10 sales representatives to be hired in 2013 and 15 to 20 to be hired in 2014, with the remainder hired in 2015. These projections assume positive interim Phase 2b data that enables significant marketing and positive Phase 3 data in 2015. The legal expenses that are broken out of the SG&A are due to the new patent filing activity and the defense of existing patents.

The preferred stock dividend shown on the income statement is a non-cash expense that has been paid quarterly in shares. The fair value of the preferred stock dividend is based on the five-day volume weighted average price of actual closing market prices for CytoSorbents’ common stock. Therefore we have forecasted the expense of the preferred stock dividend to increase, as we expect future stock price increases. We also expect the preferred stock dividend to continue to be paid in shares over 2013 and the corresponding dilution and increase in preferred stock. The actual preferred stock dividend in 2011 was $3,087,000, and is estimated to increase to $22,302,422 in 2017. We expect that all the preferred shares will be converted into common shares or bought back by the company on or before 2017. Therefore, we forecast the preferred stock dividend to be gone after 2017.

Bottom line. We project CytoSorbents to be profitable in 2016, due primarily to E.U. sales. The projected 2016 diluted share count takes into consideration future capital raises, the conversion of the preferred A stock, preferred B stock, the convertible notes, and all the warrants and options, which we project to be in the money in 2016. The large share count of greater than 500 million shares in 2016 may be a bit conservative; however, the preferred B’s convert to almost 200 million shares as they stand now (Exhibit 15). Furthermore, due to tax loss carryforwards, we are not projecting a full tax rate until 2020.

Exhibit 15: Potential Future Dilution From Debt or Pseudo Debt

Source: Company documents, Brean Murray Carret & Co. estimates

Balance Sheet. CytoSorbents ended 1Q12 with $1.8 million in cash, and we assume that CytoSorbents will have to utilize one of its many sources of cash to raise more capital. We anticipate that the treatment duration ranging trial, which is expected to read out by YE12, will enable significant financing, which is why we have projected only a $3 million capital raise in 3Q12 that will fund operations through data release.

The company issued 24-month promissory notes in 2010 and 2011, respectively in the aggregate principal amount of $1,335,250 and $1,250,000, and 12-month promissory notes in 2012 in the aggregate principal amount of $700,000. All of the three promissory notes bear an interest rate of 8% per annum that is normally paid in stock and not cash. Moreover, there is a significant conversion rate of the notes to stock, and we do not believe that there is much if any risk of the company’s total debt of about $2 million posing a problem. Note holders can convert outstanding principal and interest into common stock at any time at a price of $0.10 per share for 2010 and 2011 notes, and $0.15 per share for 2012 notes. Preferred stock dividends are also normally paid in stock (preferred stock) and not cash.

Source of convers ion Shares/Value ('000)Common shares converted ('000)

Preferred A 1,483 14,833 Preferred B 67 184,908 Convertible note 1,453$ 14,530 Tota l 214,271



Risks

Development. CytoSorb’s products may not prove effective in future clinical trials.

Market adoption. CytoSorb’s products may not achieve approval or market adoption, based on our expectations, which could negatively impact share price.

Business development. CytoSorb may not attract a partner for any of its unpartnered programs, thereby reducing our revenue expectations and increasing our expense assumptions.

Competition. CytoSorb’s competitors could win approval for products that out compete those developed by CytoSorb, or could win partnerships also sought by CytoSorb.

Financial risk. CytoSorb may not have enough cash to fund future operations and, as such, is heavily reliant on outside sources of financing, be it dilutive or in the form of non-dilutive from current and future partners.

High stock price volatility. This risk is common among developmental-stage biotechnology and healthcare device companies.



CytoSorbents CorporationIncome StatementFiscal Year ends December(in 000, except per share items)

2010A 1Q11 2Q11 3Q11 4Q11 2011A 1Q12A 2Q12E 3Q12E 4Q12E 2012E 2013E 2014E 2015E 2016E 2017E

CytoSorb 17 24 35 53 129 4,782 11,834 36,602 85,191 147,251

Total Revenue 36 36 17 24 35 53 129 4,782 11,834 36,602 85,191 147,251

COGS 12 12 10 12 18 27 66 2,391 4,733 14,641 25,159 27,792

R&D 1,757 759 855 780 495 2,888 643 708 814 936 3,100 6,201 10,852 9,224 8,947 9,216

Legal, financial and other consulting 307 99 68 94 82 343 161 166 171 176 675 742 816 898 988 1,087

SG&A 759 270 192 352 416 1,230 269 283 317 364 1,234 3,701 8,513 12,769 14,046 15,591

Total Operating Expenses 2,824 1,128 1,114 1,226 1,005 4,473 1,084 1,169 1,319 1,503 5,075 13,035 24,914 37,532 49,140 53,686

Operating Income (2,824) (1,128) (1,114) (1,226) (968) (4,437) (1,067) (1,145) (1,284) (1,450) (4,946) (8,253) (13,081) (930) 36,051 93,565

Interest income (expense), net (85) (86) (227) (503) (229) (1,045) (359) (370) (381) (393) (1,503) (1,549) (1,595) (1,643) (1,692) (1,743)

Pretax income (2,909) (1,215) (1,341) (1,729) (1,197) (5,482) (1,427) (1,515) (1,665) (1,843) (6,449) (9,802) (14,676) (2,572) 34,359 91,822

Provision for income tax (benefit) 1,718 22,956

Net Income (2,909) (1,215) (1,341) (1,729) (1,197) (5,482) (1,427) (1,515) (1,665) (1,843) (6,449) (9,802) (14,676) (2,572) 32,641 68,867

Preferred stock dividend (2,177) (742) (878) (735) (733) (3,087) (664) (599) (717) (1,312) (3,291) (7,146) (11,548) (16,735) (23,382) (22,302)

Net income available to common shareholders (5,086) (1,956) (2,219) (2,464) (1,930) (8,569) (2,091) (2,114) (2,382) (3,154) (9,741) (16,948) (26,224) (19,308) 9,258 46,564

EPS (0.05) (0.01) (0.01) (0.01) (0.01) (0.05) (0.01) (0.01) (0.01) (0.01) (0.05) (0.07) (0.09) (0.06) 0.03 0.14

EPS diluted, GAAP (0.05) (0.01) (0.01) (0.01) (0.01) (0.05) (0.01) (0.01) (0.01) (0.01) (0.05) (0.07) (0.09) (0.04) 0.02 0.09

Shares Outstanding Basic/Diluted 98,095 133,098 159,137 168,231 180,475 160,235 181,151 190,760 228,912 233,490 208,578 256,839 295,365 330,808 335,771 340,807

Diluted shares outstanding 98,095 133,098 159,137 168,231 180,475 160,235 181,151 190,760 228,912 233,490 208,578 256,839 295,365 500,000 507,500 515,113

Source: Company reports, Brean Murray, Carret & Co. estimates



CytoSorbents CorporationBalance SheetFiscal Year ends December(All amounts are actual)

2010A 1Q11 2Q11 3Q11 2011A 1Q12A 2Q12E 3Q12E 2012E

Current assets:Cash and cash equivalents 1,055,669 2,436,465 3,416,525 2,296,147 1,186,653 1,803,049 634,545 2,315,050 811,956 Accounts receivable, net of allowance for doubtful accounts of $-0- 36,078 39,790 36,788 42,044 56,497 Inventories 186,339 431,022 468,563 444,913 409,438 356,225 Prepaid expenses and other current assets / Rev 344,536 34,057 35,613 33,516 43,728 47,068 36,681 34,521 45,040

Total current assets 1,400,205 2,470,522 3,452,138 2,516,002 1,697,481 2,358,470 1,152,927 2,801,053 1,269,718 PPE fixed assets, net 144,146 138,175 139,104 144,576 155,067 148,222 140,811 154,892 170,381 Other assets 267,575 266,340 271,235 273,857 269,994 277,411 285,733 294,305 303,134

Total assets 1,811,926 2,875,037 3,862,477 2,934,435 2,122,542 2,784,103 1,579,471 3,250,250 1,743,234 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) - Current liabilities: -

Accounts payable 817,701 767,227 832,620 784,357 675,160 647,522 628,096 609,253 590,976 Other accrued liabilities 401,418 462,824 585,960 566,212 558,466 453,973 580,100 560,550 552,881 Convertible notes payable, net of debt discount 238,015 294,323 1,147,323 863,028 578,733 1,322,883

Total current liabilities 1,219,119 1,230,051 1,418,580 1,588,584 1,527,949 2,248,818 2,071,225 1,748,536 2,466,740 Long-term liabilities:

Convertible notes payable, net of debt discount 1,077,388 493,844 526,554 224,818 276,250 - - - - Total long-term liabilities 1,077,388 493,844 526,554 224,818 276,250 - - - - Total liabilities 2,296,507 1,723,895 1,945,134 1,813,402 1,804,199 2,248,818 2,071,225 1,748,536 2,466,740 Stockholders' equity (deficit): -

10% Series B Preferred Stock, Par Value $0.001, 200,000 shares authorized at December 31, 2010 and 2009, respectively 61 62 64 66 65 67 69 70 72 10% Series A Preferred Stock, Par Value $0.001, 12,000,000 shares authorized at December 31, 2010 and 2009, respectively 5,826 5,773 1,377 1,412 1,447 1,483 1,520 1,558 1,597 Common Stock, Par Value $0.001, 500,000,000 shares authorized at December 31, 2010 and 2009, respectively 122,838 139,577 165,869 172,283 177,626 189,843 193,640 232,368 237,015 Additional paid-in capital 83,375,544 86,950,809 89,914,220 91,575,243 92,696,747 94,991,947 96,075,302 100,411,849 101,336,098 Accumulated deficit (83,988,850) (85,945,079) (88,164,187) (90,627,971) (92,557,542) (94,648,055) (96,762,284) (99,144,132) (102,298,289)

Total stockholders' equity (deficit) (484,581) 1,151,142 1,917,343 1,121,033 318,343 535,285 (491,754) 1,501,714 (723,506) Total liabilities and stockholders' equity (deficit) 1,811,926 2,875,037 3,862,477 2,934,435 2,122,542 2,784,103 1,579,471 3,250,250 1,743,234



Important Disclosures

Ratings and Target Price History

Priced as of market close 7/23/12.

At the time this report was published, Brean Murray, Carret & Co., LLC made a market in the securities of CytoSorbents Corporation

In the normal course of its business, Brean Murray, Carret & Co., LLC does and intends to seek compensation for investment banking and/or non-investment banking services from the companies in its coverage universe. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decisions. Non-U.S. research analysts that may have contributed to this report are not registered/qualified as research analysts with the FINRA.

The research analyst(s) or research associate(s) principally responsible for the preparation of this research report has received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues. The compensation is determined exclusively by research management and senior management (not including investment banking).

Brean Murray, Carret & Co. Stock Rating System

Buy - Expected to appreciate by at least 10% within the next 12 months. Hold - Fully valued, not expected to appreciate or decline materially within the next 12 months. Sell - Expected to decline by at least 10% within the next 12 months.

Oct 2010 Apr Jul Oct 2011 Apr Jul Oct 2012 Apr Jul 00.20.40.60.811.21.41.61.82

Brean Murray, Carret & Co. ratings for CTSO (CYTOSORBENTS CORP)Closing Price Jul 23, 2012: $0.12

07/24/12B:$0.12T: $0.5

Legend: © Investars.comB=Buy, T=Price Target

Initiated/Resumed Positive

New rating scale: Sep 18, 2006: Buy, Hold, Sell, Not Rated



# of Securities % of Total Securities

# of IB-Related Securities in Past 12 mos. % of Total Securities

BUY 129 54.89% 11 8.53% HOLD 52 22.13% 3 5.77% SELL 7 2.98% 0 0% NOT RATED 47 20% 1 2.13% TOTAL 235 Note : Stock price volatility may cause temporary non-alignment of some ratings with some target prices.

Valuation Methodology and Risks

CytoSorbents Corp. (CTSO): We derive our target price of $0.50 through a DCF analysis, using a 40% discount rate and a 5x multiple of the terminal value for the projected 2019 EBITDA of $183 million. Risks to the achievement of our thesis include: (1) development risk; (2) market adoption; (3) business development; (4) competition; (5) financial risk; and (6) high stock price volatility.

Analyst Certification

I, Jonathan Aschoff, hereby certify that the views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers referred to in this document. The analyst and associate analyst further certify that they have not received and will not be receiving direct or indirect compensation in exchange for expressing the recommendation contained in this publication.

Disclaimers

Some companies that Brean Murray, Carret & Co., LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Brean Murray, Carret & Co., LLC research reports may not be suitable for some investors. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein, based on their specific investment objectives, financial status and risk tolerance. This report may discuss numerous securities, some of which may not be qualified for sale in certain states and to certain categories of investors. Readers are advised that this analysis report is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data on the company, industry or security discussed in the report. Designated trademarks and brands are the property of their respective owners. Past performance is no guarantee of future results. Any opinions expressed herein are statements of our judgment as of the date of publication and are subject to change without notice. Entities including but not limited to the Firm, its officers, directors, employees, customers, affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and from time to time may increase or decrease such position or take a contra position. The Firm (or persons related thereto) may make a market in the securities mentioned herein, and may from time to time perform investment banking or other services for, or solicit investment banking or other business from, and may have other relationships with any company mentioned in this report. Brean Murray, Carret & Co., LLC is a member of SIPC, FINRA, licensed with various state securities regulatory authorities, and a registered U.S. Broker-Dealer. No part of this report may be reproduced in any form without the express permission of Brean Murray, Carret & Co., LLC. Additional information is available upon request.

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