Small-Cap Research. Cytori Therapeutics, Inc. (CYTX-NASDAQ) CYTX: Expecting A Better 2012 UPDATE SUMMARY DATA ZACKS ESTIMATES

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1 Small-Cap Research January 13, 2012 Jason Napodano, CFA scr.zacks.com 111 North Canal Street, Chicago, IL Cytori Therapeutics, Inc. CYTX: Expecting A Better 2012 Current Recommendation Outperform Prior Recommendation Neutral Date of Last Change 06/23/2008 Current Price (01/13/12) $2.55 Target Price $5.00 (CYTX-NASDAQ) UPDATE Earlier in the week we sat down with management to receive a brief update on the current business fundamentals at Cytori. Since the end of the third quarter 2011, management has received European CE Mark approval on the new Celution One system, currently being used in the phase 3 ADVANCE program in Europe. With respect to ADVANCE, management remains focused on bringing centers online before they drive enrollment in The U.S. IDE application was filed late last year and we anticipate management being in a position to being the IDE program this summer. We think the stock is under-valued here and we are expecting a better performance in Our target is $5. SUMMARY DATA 52-Week High $ Week Low $1.97 One-Year Return (%) Beta 1.76 Average Daily Volume (sh) 397,458 Shares Outstanding (mil) 55 Market Capitalization ($mil) $143 Short Interest Ratio (days) Institutional Ownership (%) 20 Insider Ownership (%) 2 Annual Cash Dividend $0.00 Dividend Yield (%) Yr. Historical Growth Rates Sales (%) 51.4 Earnings Per Share (%) Dividend (%) P/E using TTM EPS P/E using 2011 Estimate P/E using 2012 Estimate Risk Level Type of Stock Industry ZACKS ESTIMATES Average, Small-Growth Med-Biomed/Gene Revenue (in millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) A 2.1 A 1.6 A 2.5 A 10.6 A A 2.4 A 2.1 A 2.4 E 8.3 E E 2.8 E 3.0 E 3.2 E 11.7 E E Earnings per Share (EPS is operating earnings before non recurring items) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) $0.06 A -$0.12 A -$0.23 A -$0.18 A -$0.60 A $0.23 A -$0.10 A -$0.15 A -$0.19 E -$0.70 E $0.18 E -$0.18 E -$0.19 E -$0.19 E -$0.73 E $0.63 E Copyright 2012, Zacks Investment Research. All Rights Reserved.

2 WHAT S NEW Financial Review On November 3, 2011, Cytori reported financial results for the third quarter Total revenues in the quarter were $2.1 million, below our expectations for revenues of $2.4 million. The lower-than-expected revenues came from a drop off in Japan and Europe, mostly driven by difficult economic times and exogenous events, such as the tsunami and the financial crisis, and a shift in focus to the hospital-based medical market in the European G5 countries. Specifically, Cytori is focusing its existing Soft Tissue Repair business on breast reconstruction following partial mastectomy and non-healing complex soft tissue wounds and away from cosmetic augmentations. The aesthetic focus has shifted to PureGraft and the company s next-generation Celgraft product which management calls a marriage of both the Celution and PureGraft technologies tailored for plastic surgeons. Ultimately, we believe this will be a good move for the company, as Celgraft seems to have the right mix of price and usability for producing a concentrated fat graft. However, in the near-term, revenues may suffer as a result of the transition. That being said, we think the base business is nearing breakeven levels. Cash burn for 2012 on the core commercial business in Europe and Asia should be low single digits. Revenues Q Comps Installed Base Reported Zacks Est. Q Q Revenue Systems (cumulative) Consumables Shipped Consumable Re-Orders % Re-Orders 57% 65% 74% 73% Utilization Rate 1.3x 1.3x 1.4x 1.6x Cytori sold only 7 revenue generating systems in the third quarter, bringing the total installed base to 176 units in approximately 30 countries worldwide. This was dead-on with our forecast, and flat sequentially with the second quarter Cytori sold 224 consumable units in the quarter 2011, also dead-on with our expectations for 225. Yet, despite meeting expectations, both system and consumable sales are far below the run-rate from 2010 and posted in the first quarter System utilization rate (consumables / units installed) remains among the lowest we ve seen it since Cytori launched the Celution System in Management noted that 20% of the installed base is responsible for 80% of the consumable use. It is clear that a large percent of units placed are generating little to no revenues due to reimbursement issues. This is something to watch as Cytori rolls out the Razor & Blade model and coverage improves. Of the consumables sold, reorders accounted for 57% in the third quarter (129 units). The launch of PureGraft has clearly shifted aesthetic and elective use away from Celution. Cytori sold 883 PureGraft units in the third quarter This was below our expectations for 1,000 units and far below the 1,309 sold in the second quarter. PureGraft launched in April 2010 and has seen strong (pent-up) demand since the launch. The company has sold 4,882 PureGraft units so far. In our view, the PureGraft opportunity is just taking hold, with significant potential outside the U.S. still to come. Eventually, management hopes to increase revenues and margins in the coming quarters through the launch of the new Celgraft product, a marriage of the Celution and PureGraft technologies. To date, a total of seven StemSource banking centers have been installed. Rolling Five Quarter Installed Base Q Q Q Q Q Revenue Systems (sold / placed) Revenue Systems (cumulative) Consumables Shipped Consumable Re-Orders StemSource Cell Banks PureGraft Shipped Total for 2010 Zacks Investment Research Page 2 scr.zacks.com

3 Making Progress Net loss for the third quarter totaled $8.3 million, or $0.15 per share. Despite the lower-than-expected revenues, net loss was actually better than expected on lower overhead (SG&A) and R&D. Additionally, as Cytori s stock price goes down, the fair value of the warrant liability decreases and becomes a recordable gain on the income statement. This also contributed to the better-than-expected reportable loss. Net cash used in the third quarter totaled $7.9 million, essentially in-line with our expectations for burn of $8.0 million. Cytori remains far from the infection point we ve been writing about for the past several quarters. A deal notwithstanding, it does not look like we will see profitability anytime soon. We note that Japan was a major negative impact earlier in the year, and now there are troubling signs in Europe. Management must continue to invest in big indication clinical trials, like ADVANCE, because the existing soft tissue indications are not enough to drive the business to profitability alone. The ADVANCE program in Europe will cost an estimated $15 to $20 million over the next two years. We expect the ATHENA trial in the U.S. will cost $10 million. Update From Europe With respect to reimbursement in the medical setting, Cytori has obtained European regulatory approvals for breast reconstruction and fistulous wounds, successfully completed a Phase IV post-marketing trial for breast reconstruction and has been working with payor groups in G5 markets (UK, France, Germany, Italy, Spain) to ensure adequate financial reimbursement. Significant progress has been made in the U.K., where the British National Innovation Center (NIC) issued a favorable cost-effectiveness assessment to the National Institute for Health and Clinical Excellence (NICE). The next step in the UK is for Cytori to apply to NICE for formal product specific certification of clinical and economic benefit. We expect the filing around February NICE typically takes 9-12 months to respond. A positive outcome will facilitate use of the Celution System and related consumables for breast reconstruction across the UK in both private and National Healthcare System hospitals on an individual basis. This alone may be enough to drive profitability for Cytori s commercial franchise in Europe. Formal reimbursement coding for national coverage would then follow in the next few years. To support these efforts, management presented the full 12-month outcome data from RESTORE-2 at the British Oncoplastic Reconstructive Breast Society meeting in September Celution has already been included in the British surgical, reconstructive and aesthetic society guidelines. Cytori also submitted the manuscript from RESTORE-2 for peer-review publication. RESTORE-2 was a 71-patient prospective 12-month breast reconstruction study were a cell-enriched graft was prepared by first extracting each patient's own stem and regenerative cells from their fat tissue using Cytori's Celution 800/CRS System, and then combining these cells with the fat graft, all in the same surgical procedure. Physician satisfaction rates at month twelve were 85%. Patient satisfaction rates were 75%. Both were consistent with reported six month satisfaction results. Physician and patient satisfaction criteria encompassed functional and cosmetic outcomes, namely breast deformity, breast symmetry, appearance of scarring, and skin pigmentation. Cytori plans to publish the comprehensive data in a peer-review journal later in Related efforts are underway in the other G5 countries, and we expect management to update investors are further details become tangible and reportable. Unfortunately for management, the process is quite fragmented and will take substantial time and effort, especially in Germany and France where individual reimbursement codes must be obtained for each region or even laboratory within the region. Similar procedures are also being sought in Japan, where management submitted Celution for approval to the Ministry of Health, Labour and Welfare (MHLW) during the third quarter Cytori continues to seek CE Mark approval in the EU for no option chronic myocardial ischemia (NO-CMI). On the third quarter call, management noted no meaningful barriers to approval. The application was submitted to the EU Notified Body in the second quarter 2011 and is currently under review. According to management, there are two key aspects of the review, a technical aspect and a clinical aspect. It seems as through the technical aspects (the enzymes and the system itself) have been worked out and discussions have moved to the clinical data from PRECISE. We expect the back-and-forth to continue into 2012, but it is possible we could see EU NO-CMI CE Mark in the second quarter We estimate that are over 2 million NO-CMI patients in the G5 countries that could benefit from Cytori s device. Zacks Investment Research Page 3 scr.zacks.com

4 PRECISE was a multi-center 27 patient, double-blind, placebo-controlled, dose-escalation study in patients with chronic myocardial ischemia. To qualify for the study, patients must have a left ventricle ejection fraction (LVEF) below 45% and be classified by CCS at II-IV or NYHA II-III. Patients with severe valvular disease, atrial fibrillation, or ACS / MI in the past 30 days were excluded. We encourage investors to view the full data from PRECISE in our previous reports. With respect to the ADVANCE trial, enrollment is ongoing at 4 centers in Europe. An additional 20 centers are in the process of coming online. The goal is to include up to 35 centers total. Management s focus is securing country approvals followed by site initiation. We expect aggressive patient enrollment to commence once a critical mass of trial centers are up and running. That might not be until 2013 however. From a continuity standpoint, management would like to see diversification and distribution around the centers. The focus today is on getting centers to come online. Driving enrollment will come once critical mass has been established. In total, we are expecting up to 360 patients. Full enrollment should occur by the end of the year 2013, with data 6- months later around mid However, management has built the trial design for a planned interim update after the first 120 patients. There is always a chance the statistical significant looks strong enough after only 120 patients that management can pursue regulatory filings earlier than expected. However, as of now we expect regulatory filings late 2014 and a decision in 2015 on CE Mark. ADVANCE is a randomized, placebo controlled, double-blind trial that will enroll up to 360 patients with STelevation myocardial infarction (STEMI) into one of three cohorts, 20 million ADRCs, 30 million ADRCs, or control (saline solution). The increased dose group at 30 million cells from the 20 million used in the phase 2 APOLLO program is particularly intriguing. Dr. Duckers, principal investigator from APOLLO, believes that higher doses can be safely administered and will increase response. The primary endpoint of ADVANCE is the reduction of infarct size at six months (the same as APOLLO) as measured by cardiac magnetic resonance imaging (MRI). This is the most predictive measure for future adverse clinical outcomes such as recurrent heart attack, hospital admission for heart failure, or death. We have seen significant research that backs-up this claim. This physiological endpoint will serve as the key regulatory hurdle for EU label expansion. Major adverse cardiac and cerebral events (MACCE) will be followed out to 12 months. Additionally, pharmaco-economic (healthcare cost effectiveness) data and healthcare utilization metrics will also be collected during the trial. The goal of the study is to expand the Celution One CE Mark to include acute heart attack claims and to provide economic data to justify its implementation and reimbursement. We believe data from APOLLO gives excellent proof-of-concept for ADVANCE. Management presented 18-month follow-up data from APOLLO in June Results showed the mean reduction in infarct size at 18-months held for the cell-treated group, in contrast to the placebo where patients saw a diminishing treatment effect even with standard of care. The reduction in left ventricular infarct size (LVIS) was statistically significant for the cell group from baseline to 18-months (p<0.05), but was not statistically significant for the placebo. Statistically significant improvements in blood flow through and premature ventricular contractions also held with strong advantage for the cell treated group at 18-months. The APOLLO trial, although very small at only 24 patients, was a Home Run in our view. Cytori has submitted the manuscript from APOLLO to publication in a peer-review journal. APOLLO was a 14 patient (10 on ADRC / 4 control), double-blind, placebo-controlled, safety and feasibility study in Europe designed to evaluate the use of ADRCs as a treatment in patients with acute myocardial ischemia. The entry criteria was that patients must have de novo acute MI with a left ventricle ejection fraction (LVEF) between 30% and 50% (normal is around 60%). Patients were treated within 24 hours of the event. Herein lays the key advantage in the cell therapy market for Cytori. ADRCs created by Celution One are both real-time (like allogenic off-the-shelf therapies similar to Athersys, Pluristem or Osiris) and autologous (similar to Aastrom Bio or Dendreon). Cytori s technology combines the best of both strategies in our view. Finally, in late November 2011, Cytori received CE Mark approval for the next-generation Celution One device developed through the joint venture with Olympus. Celution One was designed specifically for the hospital as a platform device with potential life-critical applications across multiple specialties. Celution One offers key improvements including greater cell yield, greater range of processing volumes and faster processing times, increasing the versatility and efficiencies of potential treatments. Additionally, it contains new features for improved operator ease-of-use. We see approval of Celution One in Europe is an important achievement that lays the foundation for further growth in the European hospital market. We note that Celution One will be used in the above ADVANCE phase 3 trial. Zacks Investment Research Page 4 scr.zacks.com

5 Update From The U.S. In the U.S., Cytori held a pre-ide meeting with the U.S. FDA during the third quarter At the meeting, management presented a pre-clinical and clinical package and proposed a general outline for a prospective, randomized, double-blind, placebo-controlled pilot IDE study (phase 1/2) trial ATHENA. We expect the design of ATHENA will be similar to the PRECISE program conducted in Europe, only potentially larger (40-60 patients in 3-5 centers) and longer (12 months). The IDE application was filed on December 12, Management expects a few rounds of negotiating with the FDA before the final protocol is agreed upon. If all goes well, Cytori should be in position to start the IDE trial in the third quarter Meanwhile, similar to the compassionate use potential in Europe based on PRECISE, Cytori believes there is a potential path forward in the U.S. under the FDA s Humanitarian Device Exemption (HUD) protocol. HUD is a device that is intended to benefit patients by treating or diagnosing a disease or condition that affects or is manifested in fewer than 4,000 individuals in the U.S. per year. To obtain approval for HUD, Cytori must file a humanitarian device exemption (HDE) application. HDE is similar in both form and content to a premarket approval (PMA) application, but is exempt from the effectiveness requirements of a PMA. An HDE application is not required to contain the results of scientifically valid clinical investigations demonstrating that the device is effective for its intended purpose. The application, however, must contain sufficient information for FDA to determine that the device does not pose an unreasonable or significant risk of illness or injury, and that the probable benefit to health outweighs the risk of injury or illness from its use. Cytori believes that they can seek approval for the Celution System under an HDE for a pediatric orphan indication known as Parry-Romberg's Disease that is characterized by facial wasting in teenage girls for which there is no good treatment. Management is presently in dialogue with the FDA on the filing. Besides the HUD pathway, Cytori remains confident that the traditional 510(k) pathway remains a viable approach for its tool claims for Celution System s tissue processing technology. This would be a similar approach to what management did in Europe, gaining approval for a broad-scale use and then coming back with indication-for-use filings and PMAs at a later date. We expect an update on these filings throughout Emerging Markets In Emerging markets, PureGraft remains the key focus for management by partnering with select distributors and seeking local regulatory approvals. PureGraft s low cost and effective design allows management to target markets that are far below being able to afford full Celution Systems. We are expecting PureGraft approval in Japan shortly. India remains a key focus area for management going forward. We note that Cytori employs 40 sales and marketing professionals worldwide, more than half of which are in Asia and Europe. In September 2011, Cytori entered into a Celution System agreement with Apollo Hospitals, one of Asia's largest private healthcare groups, to offer the technology initially at select cosmetic surgery centers in India. We view Apollo as a core customer around which Cytori can build a successful commercial business in India. Finding Cash Remains Key Focus Cytori s cash position stood at $40.8 million at the end of the third quarter In September 2011, Cytori expanded an existing loan facility with GE Capital, Healthcare Financial Services, Oxford Finance Corp and Silicon Valley Bank by extending the maturity date from June 2013 to March 2015 and by increasing the funding facility from $20 million to $25 million. Principal repayments begin in September The funds will be used to support ongoing clinical development and commercialization activities in the U.S., Europe, and Asia. The term of the $25 million loan is 3.5 years at 9.9% with an additional $1.25 million due at final maturity. As part of the amendment, Cytori issued warrants to the lenders to purchase million shares of Cytori's common stock exercisable at $3.01 per share. Zacks Investment Research Page 5 scr.zacks.com

6 PROJECTED FINANCIALS Cytori Therapeutics, Inc. - Income Statement Cytori Therapeutics 2010 A Q1 A Q2 A Q3 A Q4 E 2011 E Q1 E Q2 E Q3 E Q4 E 2012 E 2013 E 2014 E Product Revenues $8.3 $1.4 $2.4 $2.1 $2.4 $8.3 $2.6 $2.8 $3.0 $3.2 $11.6 $16.7 $21.3 YOY Growth 41.4% -39.9% 15.3% 40.5% 0.9% 0.6% 90.9% 16.1% 40.6% 33.3% 39.6% 43.6% 28.0% Development Revs $2.4 $1.2 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.1 $0.1 $0.5 YOY Growth -73.3% -42.4% 57.1% -92.3% % -99.2% % % % #DIV/0! 400.0% 0.0% 400.0% Total Revenues $10.6 $2.6 $2.4 $2.1 $2.4 $8.3 $2.6 $2.8 $3.0 $3.2 $11.7 $16.8 $21.8 YOY Growth -27.9% -41.1% 15.4% 35.0% -5.4% -21.6% 0.1% 15.6% 40.3% 33.3% 40.5% 43.2% 30.3% Cost of Sales $3.9 $0.8 $1.1 $0.9 $1.0 $3.9 $1.1 $1.2 $1.3 $1.3 $4.6 $6.2 $7.3 Product Gross Margin 52.7% 38.2% 54.0% 55.9% 58.0% 53.0% 58.0% 58.0% 58.0% 58.0% 60.0% 63.0% 66.0% SG&A $23.6 $6.8 $7.9 $7.2 $8.0 $29.8 $7.6 $8.0 $8.2 $8.4 $32.2 $35.0 $40.0 % SG&A 222.2% 260.7% 324.6% 334.5% 333.3% 357.7% 292.3% 285.7% 273.3% 262.5% 275.2% 208.8% 183.2% R&D $9.7 $3.0 $3.1 $2.8 $3.5 $12.4 $3.5 $3.6 $3.8 $4.0 $14.9 $18.0 $20.0 % R&D 91.2% 117.3% 126.8% 132.3% 145.8% 149.5% 134.6% 128.6% 126.7% 125.0% 127.4% 107.4% 91.6% Other Expense ($1.3) $3.2 ($5.2) ($1.0) $0.2 ($2.8) $0.4 $0.6 $1.0 $1.2 $3.2 $1.0 $1.0 % Other -11.8% 122.5% % -45.2% 8.3% -34.0% 15.4% 21.4% 33.3% 37.5% 27.4% 6.0% 4.6% Operating Income ($25.3) ($11.2) ($4.4) ($7.8) ($10.3) ($35.0) ($10.0) ($10.6) ($11.3) ($11.7) ($43.2) ($43.4) ($46.4) Operating Margin % % % Interest & Other Net ($2.2) ($0.8) ($0.8) ($0.5) ($0.3) ($2.4) ($0.3) ($0.3) ($0.3) ($0.3) ($1.0) ($1.0) ($1.0) Pre-Tax Income ($27.5) ($12.1) ($5.1) ($8.3) ($10.6) ($37.4) ($10.3) ($10.9) ($11.6) ($12.0) ($44.2) ($44.4) ($47.4) Taxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Tax Rate 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Net Income ($27.5) ($12.1) ($5.1) ($8.3) ($10.6) ($37.4) ($10.3) ($10.9) ($11.6) ($12.0) ($44.2) ($44.4) ($47.4) YOY Growth Net Margin % % Reported EPS ($0.60) ($0.23) ($0.10) ($0.15) ($0.19) ($0.70) ($0.18) ($0.18) ($0.19) ($0.19) ($0.73) ($0.63) ($0.63) YOY Growth % -0.3% Fully Diluted Shares Source: Zacks Investment Research, Inc. Jason Napodano, CFA Copyright 2012, Zacks Investment Research. All Rights Reserved.

7 HISTORICAL ZACKS RECOMMENDATIONS DISCLOSURES The following disclosures relate to relationships between Zacks Investment Research ( ZIR ) and Zacks Small-Cap Research ( Zacks SCR ) and the issuers covered by the Zacks SCR analysts in the Small-Cap Universe. ZIR or Zacks SCR Analysts do not hold or trade securities in the issuers which they cover. Each analyst has full discretion on the rating and price target based on their own due diligence. Analysts are paid in part based on the overall profitability of Zacks SCR. Such profitability is derived from a variety of sources and includes payments received from issuers of securities covered by Zacks SCR for non-investment banking services. No part of analyst compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in any report or blog. ZIR and Zacks SCR do not make a market in any security nor do they act as dealers in securities. Zacks SCR has never received compensation for investment banking services on the small-cap universe. Zacks SCR does not expect received compensation for investment banking services on the small-cap universe. Zacks SCR has received compensation for non-investment banking services on the small-cap universe, and expects to receive additional compensation for non-investment banking services on the small-cap universe, paid by issuers of securities covered by Zacks SCR. Non-investment banking services include investor relations services and software, financial database analysis, advertising services, brokerage services, advisory services, investment research, and investment management. Additional information is available upon request. Zacks SCR reports are based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed by Zacks SCR Analysts are subject to change. Reports are not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks SCR uses the following rating system for the securities it covers. Buy/Outperform: The analyst expects that the subject company will outperform the broader U.S. equity market over the next one to two quarters. Hold/Neutral: The analyst expects that the company will perform in line with the broader U.S. equity market over the next one to two quarters. Sell/Underperform: The analyst expects the company will underperform the broader U.S. Equity market over the next one to two quarters. The current distribution of Zacks Ratings is as follows on the 1052 companies covered: Buy/Outperform- 15.9%, Hold/Neutral- 76.4%, Sell/Underperform 6.0%. Data is as of midnight on the business day immediately prior to this publication. Copyright 2012, Zacks Investment Research. All Rights Reserved.