Q3 2019 Earnings Call
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Www, Sears Dot com slashed IR.
With me on the call for OTI agreement, Sears, President and Chief Executive Officer.
Hi, good loans grass co founder and Chief Scientific Officer.
Kevin Green Sears is a chief financial officer.
The Big Jeronimo Sears is chief commercial officer in Carol Moore, our senior Vice President regulatory affairs and calling.
Shares issued a press release today announcing your financial results for the third quarter ended September Thirtyth, we 19.
Thirdly companies recent business highlights you can access a copy of this announcement on the company's website at www I'm serious dot com.
I like to remind you that some of this team is who make on this call.
Your business performance.
Rather than historical facts and our forward looking statements.
Examples of forward looking statements, including those related to or future financial and operating results, including or we Nike natural games angles operating expenses.
Good morning.
Development efforts future growth strategy future product sales.
Watches ongoing in the future events problems.
I'm going into future product development regulatory activities as well as the timing of these events and activities.
These forward looking statements involve risks and uncertainties that can cause actual events performance results to differ materially.
They are identified described in today's press release in under risk factors in our Form 10-K . The year ended December 31st when he.
Thank you for the quarter ended September Thirtyth, we 19, which we will follow shortly we undertake no duty or obligation theater, we're in the team.
On today's call will begin with opening remarks from Ob followed by Larry do you guys talked.
Ladies they provide an overview of our commercial strategy.
Kevin Reevey or financial results and then it will be the closing remarks.
Now, it's my pleasure to introduce movie Greenman, Sears is president and Chief Executive Officer [laughter]. Thank you, Tim and good afternoon, everyone. When the Finalization of the FDA guidance document and coming off of a very successful HBV million for service.
We believe that we are well positioned to deliver on a new standard of care for platelet transfusions saved in the U.S.
The FDA action to finalize this guidance is not only a watershed moment for transfusion medicine.
To patient safety, but it is also a major blood safety policy event that has relevance for how global regulatory bodies, ensuring the safety of platelets.
And the U.S. by the end of the 18 month compliance period requirement is that every single one of the 2.6 million play what you ask what each year in the U.S. to be held to a new standard of safety.
What can view this as an awful lot of things initiative for all U.S. blood centers and the conventional platelets as currently prepared today will be obsolete and 17 months.
Legally onto the release of the final into guidance the leadership of the American Red Cross the holiday and the important role that herself will play and their operations. What gives you an open letter to the U.S. health care community about their intention to make intercept platelets broadly available to their hospital customers.
He stated that quote the growing expansion of pathogen reduction technologies grants hospitals, and blood providers, economical offsets or making safer and ready to transfused products available for patients.
Pathogen reduction has been preferred approach of the American Red Cross for enhancing the safety and availability of plans for transfusion input.
The purpose of the final FDA guidance document is to provide clear direction to blood centers at Hawesville transfusion services about how they can meet the requirements specified in the FDA coda federal regulations to ensure that the risk of bacterial contamination of platelets are adequately controlled.
After several drop versions of the guidance and multiple blood product Advisory Committee meetings on the topic you have to finalize the guidance to address fundamental concerns about platelet transfusions safety.
The guidance contains complicated culture based and secondary rapid testing methods as an alternative to pathogen reduction even if those testing options require considerable operational and logistical efforts undertake.
Well the final guidance document now in place in the U.S., we believe the overall simplicity of the intercept technology combined with its broad spectrum protection against current and emerging pathogens and the blood supply sets the stage for a multi year cycle a sales growth.
As a foundation for this expected growth in the U.S. business. We're pleased to report another strong quarter sales execution with reported revenue growth across all major geographies, despite a currency headwind.
Third quarter product revenue totaled $18 million, a 17% increase on a reported basis, where the U.S. market leading the growth.
Having just returned from the HBP meeting in Texas, we thought it would be worthwhile to hover founder and Chief Scientific Officer, Dr., Larry Corash walk you through the different options available to blood centers that illustrate the advantages of intercept over the other strategies for the reduction of bacterial contamination risk detailed in the final Ftn Guy.
Documents.
Following and Larry Vic will provide a framework for our commercial strategies for the next 17 months and the discrete actions, we're taking to help our customers with this transition.
Thanks, Toby and good afternoon.
On the next slide.
This final guidance is important in defining a new UN standard of care and platelet transfusions safety.
Similar to that achieved in France, Belgium, Switzerland.
Stria and Kuwait.
The guidance has been embedded private transfusion medicine community and it defines specific procedures for each option.
Each approach will impact once centre and hospital operational logistics costs and regulatory compliance.
These factors will determine customer decisions to achieve compliance.
Deadline of March 30, Onest 2021.
Today, the majority of U.S. blood centers in hospitals are not in compliance.
Hence action must be taken.
The final guidance is this something with argument in U.S. blood transfusion safety and it makes a compelling case with a clear advantages of intercept.
Only option with safety logistic and economic benefits beyond reducing the risk of bacterial infection.
On the next slide let me start by outlining the landscape.
The FDA has defined two strategies with options to address bacterial contamination.
Single step options in the top section.
And to step options in the lower section.
The two cents strategies are complex and require multiple procedures. Some important center and some in the hospital in order to really split was for transfusion.
The timing Davies shown by the top Blue bar from day zero today, seven marks the timeline for collection preparation and transfusion platelets using the various options.
Today I'll focus my comments on Athree says platelets as they account for 90% of the market.
And on the single step strategy options as they are the most attractive for hospitals and blood centers.
I will address specific questions on the two step strategies during Q1 and.
On slide seven so understand the guidance are explained this specific terms important for understanding the various options.
Collection time is the time when an eight freezes platelet collection is initiated and it starts the dating period for exploration of platelets. The data collection is day zero.
Expiration is the last day platelets can be transfused, either three five or seven days actor initiation of collection.
Hello time is the period during which platelets requiring team prior to sampling for bacterial culture and 12 hours after culture before that can be released for transfusion.
This is required to improve the limited sensitivity of bacterial culture testing.
There is no time for intercept platelets and spectral testing is not required for intercept.
Available transfusion times are the days after release from bacterial testing for pathogen reduction.
The platelets can be transfused.
Available transfusion time is more relevant than the expiration date.
Thats all culture testing options require hold times that decrease available days for transfusion.
Sample volumes are the sample amounts taken for bacterial testing and boss not available for transfusion.
On slide eight.
The guidance specifies a sample volume of 16 million liters per plate with container into bottles for aerobic anaerobic culture.
Versus the pre gardens routine.
Sample of eight new leaders for aerobic culture only.
All cultures must be monitored until the end of exploration.
Platelet product.
Now on slide nine let's focus on the single step strategy options.
As a BBB, we receive feedback from hospitals, indicating they prefer ready to use platelets, but do not require added technical procedures that the hospital.
This is only possible using the single step strategy options.
Since we expect the majority of the market for.
For a single step strategy.
There are three options available under the single step strategy.
First option is the only FDA approved pathogen reduction system intercept this option has no home time delay the earliest release time and available time for transfusion is five to five and a half days shown by the Green bar.
The guidance states fifth centers already using intercept pathogen reduction need to do know more they are in compliance.
The other two options requiring bacterial culture testing, our large volume delayed sampling or it will be DS with either 36 or 48 hour hold times after collection and 12 hours of culture incubation before release for transfusion.
And we'll be DS requires a 16, new leader sample from each platelet unit, that's for double and Triple dose collections. The total loss is 32 and 48 millimeters respectively.
The volume loss will impact collection split rates and the number of available platelet doses.
With the Lpgs options.
Early as possible times for transfusion, our 40 to 60 hours after collection, leaving a maximum available transfusion time of five and a half days similar to the available transfusion life of intersects but at the expense, our fresh platelets and with more technical procedures.
With the Lvs after release, all bacterial culture is must be monitored until exploration.
This will require investment and capital equipment and personnel to manage the increased number of cultures.
When a positive culture is detect to hospitals must withdraw all the split platelet components associated with the positive culture.
If any of these platelets have been transfused primary care physicians must be alerted patients informed and clinical evaluations performed which may require patient blood cultures, where prescription a prophylactic antibiotics.
Each of these procedures impacts logistics adds cost and creates anxiety for patients.
Lastly, why Lpgs seven day option is listed in the guidance the culture device for this option is not currently FDA approved.
Intercept offers the following clear advantages over it will be spectral testing.
First on slide 10.
This shows the experience from a case study conducted a U.S. tertiary care academic medical center for wind in Orange shows that the majority of intercept platelets, we're transfused on day, one and two in comparison to the bacterial tested platelets in blue which were largely transfused.
On days four and five.
Fresh platelets provide better clinical responses, notably this study compare intercept to conventional bacterial culture with lvs bacterial tests paying the average age of platelets at transfusion will be older than five days.
Secondly, intercept provides more comprehensive safety been bacterial testing intercept in activates bacteria.
He sells viruses and parasites with the intercepts blood centers can reduce costs on stopping dammit irradiation, CMB surajit and test for Zika and the Bcf.
As shown on slide 11.
One centers using intercept have the most favorable key metrics with no hold time.
Shortest delayed to transfusion.
Five to five and a half days available per transfusion and no follow up bacterial cultures.
Given the added benefits of intercept blood centers have been able to charge a premium for intercept platelets.
It is unclear if a premium can be charge for lpgs platelets. As this is not a new products only a more tested platelet components.
The value of intercept has been validated in routine use over the last decade in Europe by National blood centers for whom patient safety cost and logistics were the primary factors in choosing intersect.
Intercepts prospective ready to use single step technology provides blood centers in hospitals, but most cost effective means to into multiple aspects of patient transfusion safety.
With that let me turn the call over debate for an overview of our commercial strategy with the guidance document now in hands.
Thank you Larry and good afternoon, everyone. As already mentioned, we are encouraged by the continued strong customer uptake of intercept as demonstrated by our topline results in Q3 2019.
Furthermore, the issuance of the final FDA guidance document the validate our belief that nurse up will become the standard of care.
I agree with Adobe and Larry that the publication of final data into the pivotal event. Ultimately this will accelerate a change in the standard of care with respect to bacterial safety measures for platelets and I believe the interest that will prove to be a preferred method by which but blood centers and hospital achieve compliant.
Last week at the Abbey meeting and the opportunity is equally executives from each of the five largest us blood center.
The center combine to serve over 70% of the U.S. platelet market.
Clearly despite being debated and modified over the past several years the issuance of a final guidance on September thirtyth them, all a bit by surprise.
Fortunately for us the HBV meeting offer an excellent point in time opportunity to engage with the centered in a better understanding of how they plan to address the guidance and assure them that we are well positioned to partner with them that incorporate intercept in that Theyre center as their primary approach to compliance.
Okay.
While the guidance readiness of each organization varies I came away confident that pattern reduction will be the preferred approach at both the blood Center and hospital level.
For the blood centers intercept offers the ability to relief platelets earlier provide hospitals with an innovative solution that addresses more than simply bacteria and accordingly realize the price uplift with will improve their play the margins and economics.
From a hospital perspective with entered that they will receive the transfusion ready product with limited to know operational impact and most importantly, a technology with a global track record of clinical evidence in support of patient safety.
As we have previously noted the American Red Cross as fully embraced pathogen reduction as their preferred option and as proactively communicated that the U.S. healthcare community.
Fundamentally they that their approach to guidance starts with patient safety as their primary motivation and as such intercept and they are clear choice.
During the Amy we held a pathogen reduction networking meeting with representatives from the five largest blood centers and it was very encouraging to see the air think continuing to take a strong leadership position with respect to adoption at that the new production technologies.
What 17 months remaining of the compliance period, we're working diligently with our blood centers partners to ensure that patients gain access to the safest blood available much of this work has been underway for quite some time.
Specifically, we are focused on the following key action between now and year end.
First starting with the big five blood centers, we are working to understand the desired airsep production level by Q1, 2021, and making sure to scare commitments and allocate kits supply accordingly.
Second we are working closely with blood centers to help align their production with hospital the man in order to optimize efficient distribution and use of PR platelet.
Third utilizing our deployment team we are actively mapping intercept production process season Blood center operation in order to optimize compatibility with the current platelet collection or modify collection in production process isn't needed to enable maximum intercepts production.
Fourth led by our hospital Theres team, we are formalizing the hospital targeting and Onboarding schedule and streamline the transition to intercept platelets during the compliance period.
Fifth we have prepared and are actively providing educational materials and economic models to facilitate hospital contracting for intercept platelets and to address questions from Nonclinical decision makers are motivated to ensure that their hospital can quickly and economically achieve compliance.
These are just a few examples of the work streams in which the commercial team is actively engaged.
In parallel our operations team has spent the better part of the past 12 to 18 month, ensuring that we our guidance ready.
For example, we've enhanced our supply chain with but increased inventory levels on hand, along with expanded disposable kit manufacturing capacity should we see a significant banking customer demand.
While it is still very early in the compliance period. We are encouraged by the initial indications for our blood center customers and the hospitals that they serve coming out of the HBV. It was clear that one step solutions, our preferred and of those ones that solutions intercept confirms the greatest benefits to all key stakeholders.
Looking outside of the U.S., we believe that final FDA guidance does have implications for platelets safety policy worldwide.
Many regions for example, the middle East take their key with respect to production and quality standards from the HBV.
Given the guidance document those HBV standards will assume reflect the new best practices in place comply with the FDA guidance.
In addition, the economic benefits and ease of use will be further validated in the context of the coming broad U.S. intercept experience.
When combined with our experience in France, as well as other countries that have adopt to intercept at 100%. We believe that pathogen reduction continues to make strong progress towards becoming the global standards of care.
With our current fourth quarter outlook 2019, topline revenue will be more than two times that of 2016 sale.
Across the world many more patients now have access to intercept and the safety benefits that it provides.
Looking forward I am confident that we have a technology platform that can drive compelling growth and even more importantly, we have the people and plans in place to make that grow the reality is there certain nearly very exciting time the thesis.
With that let me now handed over to Kevin to review our financial results. Thank you for me and good afternoon, everyone.
Today, we reported third quarter 2019 product revenue of $18 billion up 17% from the $15.4 million recorded during Q3 of last year.
The strength of the U.S. dollar relative to the euro continues to be a headwind.
Which impacted the year over year growth by approximately 5%.
On a year to date basis product revenue.
Totaled $53.7 million.
21% compared to the $44 million reported during the first nine months of 2018.
Similar to the quarterly revenue results.
Year to date product revenues compared to 2018 were impacted by approximately 6% due to the strengthening of the U.S. dollar relative to the euro.
Global demand for intercept continue to increase.
The calculated number of treatable fleet with doses increased nearly 20% year over year.
I'm looking at growth through the first three quarters the worldwide calculated number of treatable fleet with doses increased over 30%.
In terms of product mix sold during the quarter.
Platelet kits sales accounted for approximately 85% of revenue.
During the quarter, we did see slightly more limited or sales unusual.
Incremental policemen spread globally.
The underlying momentum in our business is running ahead of plan.
And is expected to accelerate further.
However, the FX headwinds we are facing our persisted.
As such we are reaffirming our full year product revenue guidance range of 72 million to $75 million, which represents an 18% to 20% growth rate compared to 2018 product revenue.
Government contract revenue totaled $4.8 million and $13.6 million for the three and nine month period ended September Thirtyth 2019, respectively.
These are both up from the 3.9 million and $11.4 million reported during the comparable periods in 2018.
Now, let's move the discussion to our reported gross margins.
Gross margins on products sales have been continuing to improve throughout 2019.
For the quarter gross margins were 58%.
Compared to 47% for the prior year period.
The significant improvement was attributable to economies of scale and lower per kit Cogs, resulting from the increased volume of kits manufactured.
Additionally, gross margins improved as result of the favorable product mix shift helpful to double dose platelet kits in France.
And to a lesser extent favorability in FX rates.
On a year to date basis gross margins were 55% compared to 48% during the first nine months of 2018.
We expect gross margins will be sustainable in the mid fifties for the balance of the year.
I'd now like to discuss operating expenses, which totaled $32.2 billion during the quarter compared to $24.8 million during Q3 2018.
In addition, machining expenses were higher during the current period due to the initiated preparatory activities for our anticipated us pathogen reduced crown precipitate launch as well as higher noncash compensation costs.
On a year to date basis SGT spending during the first nine months totaled $49 million.
Appeared to $42 million during the first three quarters of 2018.
We expect SG me to remain stable for the balance of the year Im looking ahead, we expect to drive leverage.
Research and development expenses for the quarter totaled $16.1 billion.
Compared to $10.8 million during the prior year.
The increase in R&D expenses was largely due to product enhancement initiatives and activities tied to label claim expansion.
Including extended shelf life of intercept platelets and our triple dose platelet kits.
In addition development activities to support our anticipated Dnbi supplement for pathogen reduced purposes precipitated as well as activities tied to the development of our Red blood cell program drill portions of the increase in R&D.
On a year to date basis.
R&D expenses totaled $43.9 billion compared to $30.1 million during the prior year period.
Net loss for the third quarter totaled $18 million or 13 cents per diluted share.
Compared to a net loss of $14.2 million or 11 cents per diluted share for the prior year period.
Year to date net loss was $54.3 million.
Or 39 cents per diluted share compared to a net loss of $41.4 billion were 32 cents per diluted share during the first three quarters of 2018.
In terms of cash used from operations.
During the third quarter, we have a special onetime milestone payment to Fresenius kabi of $6.2 billion, which was contractual and has been accrued since 2015.
In addition, we've continued to invest in working capital needs.
Namely inventory in anticipation of increased demand.
Going forward, we expect this bill to normalize and grow in line with sales.
Therefore on a pro forma basis without the investments in working capital from both accounts receivable and inventory and excluding the onetime payment parachutes from operations during the third quarter totaled $11.4 million.
Looking ahead to the fourth quarter, we expect cash used from operations to be closer to $10 million.
We ended the third quarter with $85.1 billion cash cash equivalents in short term investments on here.
Which we believe is sufficient to fund operations for at least two years and provide ample runway to execute on our strategy.
In addition, we have increased borrowing options on our debt facility and revolving line of credit.
With that let me turn the call back over to movie for some closing comments. Thank you Kevin. Please take a few minutes to provide an update on our two key development programs pathogen reduced craft precipitous and our red blood cell program in Europe and here in the us.
First with regard to our cryo PMA supplement are tracking on plan for an FDA submission in the first half 2020 under our breakthrough device designation.
Based on that timing, we expect a possible regulatory approval in the second half 2020.
In parallel with these efforts we are building up the infrastructure and the small team to be able to launch the product successfully within the level, one and two trauma hospitals in the states initially where we have our manufacturing partnerships.
Interest in that this product continues to be strong for the treatment of major bleeding events at all hospitals.
Turning to our Red blood cell program, we're making progress in our effort to validate a newcomer to file will define supplier.
Better qualification is on track for the first half for 2020.
As it relates to our CE Mark submission the file still under review at TV or notified body and we are in the process of closing out sections of our submission review.
At this juncture, we still expect our CE Mark review to transition to the medical device regulation process in mid 2020 from the current medical device directive and as such we anticipate our final approval timing to me and the 2022 timeframe unless we realize opportunities to compress the MTR review timing.
In the U.S. enrollment in our two phase three studies readiness and recipe continues with our goal of getting 10 sites up and rolling in the recipe study by the year end of this year.
We are tracking deliver on that goal.
Well the final guidance documents setting the pace and tempo for intercept platelets option in the us over the coming 17 months at our plan crop intercept CRO watching the second half of next year 2020 is shaping up to be a great year for cerus.
While we have a lot of work to do over the coming period in 2020, and 2021 to help our customers manage the transition to the FDA guidance compliance.
Our mission to make intercept the standard of care in the U.S. is more clearly defined enrollment than ever.
We take comfort in town of our customer facing team to execute on this plan and our historical track record in facilitating nationwide conversions like in France.
Let me end of 2017.
I believe it's important to convey the optimism the Sears team has coming out of the HPV me.
Ill subset of blood centers at hospitals are still developing a strategy for being compliant with the final guidance.
Majority of blood centers have put a stake in the ground around the central role, but intercept will play in their operations.
The onus is now clearly on the Zerust team to help them maximize their production of intercept platelet components and the facilitate the hospital adoption is a transition to a new standard of care and play the safety.
We're looking forward to a strong close to the year with that let me turn back to the operator for today.
Ladies and gentlemen, if you have a question at this time. Please press the star and did the number one key on your touched on calix selling if your question has been answered or you wish to remove yourself from the Q. Please press the pound.
Another reminder, please limit one question per participant to respect the timeframe.
If you have a follow up question simply press Star one again typically back on Q. Thank you Bill, possibly just a moment to compiled the culinary roster.
Your first question comes from the line of crack these years from Cantor Fitzgerald cracked your line is now open.
Great. Good afternoon, guys. Thanks for taking the questions.
Let me, let me start with the guidance and just just a couple on that one just kind of wanted to see if you guys were surprised by anything that in ended up in the final guidance.
Then secondly.
Early discussions and I know you guys have plans to have more discussions and work with some of the centers, but was wondering if you could maybe provide some details on what you're hearing from the blood centers that the key decision points what are their concerns how are they way in the different options.
Great I'll handle the first part of that question Craig of them, but a vacant while the second part so in as far as being surprised by in the guidance I don't think we were definitely reflected the previous graft and one thing that to take note of as they did draw distinctions between the one step at a two to two set processes.
Larry outlined during the prepared remarks, and I think it clearly coming out of HBV. There was a strong preference for the ones that process is because the hospitals really don't want to undertake any additional manipulations of the platelets and so I think that was it was good the VF day outlined various options. So clearly.
Such that there wasn't any confusion, maybe they want to handle the second part of that question about what came out a review with regard to the key customers sure. Thanks The question Brian .
As we've indicated in the past and perhaps the thing that continues to be most encouraging is for sometime now even prior to the guidance on file the American Red Cross has stated that pattern reduction technology is not from those are a strategic priority for them.
We think about the NRC represents nearly 40% of totally off market. So I didn't get you talking about 40% of the market that.
Clearly behind our technology. Similarly, we had number of meaning executives from the big by blood centers and now across the board, we heard from or foreign interest and adopting our technology I think the thing that folks are trying to work through now his understanding of what are the underlying mechanics that allowed us.
To make those real so what are the operational.
Thing that we need to put in place from a production standpoint that we can maximize intercept production how do we need to think about our hospital contracting and working with hospitals. They cannot more products. So there are in a number of work stream that blood centers on any go through and hospitals as well to sort of adopted this new standard but.
Certainly I came out of that meeting and I think my colleagues that of green feeling really excited about our ability to offer intercept the more patients anyway.
Got it.
Helpful. And then just as a follow up on that did you guys you've talked about the A.R.C. and obviously they have been at the forefront of adopting.
Intercept so it's their preferred approach.
By the open letter so.
That's been driving a lot of your U.S. platelet growth for.
The last several several quarters. So just wanted to get your thoughts is there.
You cannot accelerate from this point.
You know going going forward. So you can actually see even stronger growth out of their season, you have over the last several quarters.
I think that that can obviously as we get further granularity into where they want to produce more platelets and what hospital customer demand they want to.
Address first we'll have better understanding of that but certainly there and headroom what the within the our seed to drive accelerated growth and I do believe that they will serve as a marker that other as full follow as I think about.
Adopting pathogen reduction technology. If there is certainly headroom for up to drive not only us growth, but more specifically growth within the air thing.
Great. Thanks, I'll hop back into queue.
Okay.
Your next question comes from the line of Matthew Akman from CFO , Matt. Your your line is now open.
Hi, good afternoon, everyone. Thanks for taking the questions.
We're all sitting here trying to think through a framework for how that the next 17 months could play out just as you are and so maybe just in a simple as terms should we think about a potential.
The option acceleration being more backend loaded over the next 17 months as you as you said work, you education, and contracting and training et cetera could it be more balanced over the period with let's say the big five existing customers with existing intercept infrastructure, perhaps ramping faster over that time horizon.
Yes, clearly I think that the blood centers will be looking how do they meet the compliance timeline. So I think in that context and will be more backend loaded and I think we do feel like there will be an acceleration throughout the period as sort of the momentum from increasing the overall capacity of intercept production allows for broader fulfilled.
And at the hospital level and what we've heard distinctly from the hospitals that have decided to adopt intercept as I'd like to be a 100%.
And so they may not get there by the time by the end of the compliance period, but thats, where they want to go and clearly as more capacity comes into the system, you'll see an acceleration so to answer a question concurrently and I think it will be more backend loaded, but definitely an acceleration throughout the period.
Okay. Then just a couple of quick follow ups. How important is it now free that to get double sets approved in the U.S. is that at all a gating factor for for some of these sites and can you remind us the timing of approval there and then just one more follow up after that.
Yes. It has been clear we do have approvals for both single and double sets today and so.
When you are probably alluding to is the triple storage kit, we have approved in Europe .
We are anticipating that that will be filed the submitted for approval during the compliance period actually in the second half of next year.
So I think it will be a factor, but ultimately what we've seen even with the large.
Blood centers like the American Red Cross is that they are able to get close to you know 70, 80%.
Possible within or south and maybe even beyond that independent of the Ts kit availability. So I think throughout the compliance period and as I mentioned before we should have this is the back end of the compliance period.
It will we don't think that will be getting.
Okay and then the last question on the Red cell program in Europe , I may be reading a bit too much into your commentary, but I think you said first half 20 now for qualification.
Supplier and I think in the past hit it sort of said and as a mid 2020 timeframe. So should I hear that right or am I was just over thinking and if thats. The case is is it moving a little bit faster.
Well I think it's moving quickly about I think when we set of prepared remarks, maybe I missed this spoke with mid 2024, having that validated for our CE Mark submission. So.
So I think it is moving quickly we have two suppliers of mentioned historically on previous calls that we are qualified.
But we're happy with the progress we've made today.
All right guys I'll get back in queue. Thank you so much.
Thank you.
Your next question comes from to life, Josh Jennings from Cowen Josh Your line is now okay.
I say pull on for Josh appreciate the question. So on the pipeline for seven day intercept platelets can you remind us of.
Yeah, just to regulatory pathway, there and timing of approval and I guess.
Oh de risked is that approval pathway just considering experience you already had in Europe . This far.
Ill answer the first part of the question, let Larry commented about the experience we've had with the six and seven day products in Europe . Many many years right now we're anticipating to file for that approval or the summit in that.
Say six seven climate in the second half of next year, we'd anticipate right now without any clock stops you about 180 180 day review period, So again and approval within the sort of timeframe of final compliance. So we think thats a nice added benefit.
That being said as Larry outlined in the calling up from an overall play that shelf by perspective, we think we've got a strong position relative to the other options outlined in the guidance documents just because the earlier at least the product and that lead into a five to five and have the shelf life for intercept maybe Larry the few comments about just the experience weve.
In Europe with a day seven products.
Josh we gained valuable experience and particularly in Switzerland, where seven day intercept platelets had admitted used for quite some time, we just published a paper.
Led by Andy Boozer from the Basel Red Cross in transfusion, showing first of all that with the intercept.
There are only trans using about 16%.
Okay, seven platelets, but these platelets are clinically effective and so that's that experience really supports what we'll do in the United States.
Great. Thank you.
Thanks very much.
Your next question cautioned a lot of Catherine sheltered from Baird. Katherine Your line is now open.
Hi, Thanks to the question.
First you mentioned some incremental illuminator placements in the quarter any specific geography is to highlight for those new placements.
No not really they were.
Spattered really throughout the globe nothing in particular.
It just was a little bit higher than historically, given the platelets for 85% of our revenues.
Okay, and then we signed a tender that it looks like you guys were awarded earlier this month in Slovenia that could contribute four and a half to $5 million spread over the next five years is this a new customer win or just an English as an extension of an existing customer.
It's actually because we've had onboard fruit.
On a decade Vasco is one of the earlier adopters of intercept and I think we were just happy that they're sort of experience with intercept throughout that period has been a has been.
Severable and there.
Customer they would like to continue on.
There were there were looking maybe to expand the one other small site within Slovenia, but I think we've had roughly or cost 100% of that market for sometime.
Great. Thank you.
Thanks Catherine.
Your next question comes from the line of Jacobs Johnson from Stephens Chicken. Your line is now okay.
Hey, Thanks, a in the press release, you guys talked about platelet doses, increasing 70% in the U.S. This quarter just interested how that compares to last quarter or is there any way you can sort of frame up that performance relative to your recent experience just interested to know how much of an uptick in demand you saw this quarter.
Yes, I mean as far as platelet doses relative to kids, it's fairly consistent the us continues to grow proportionately. So.
If the growth that we reported this quarter.
As far as number of doses consumed is.
Is healthy and we should expect will accelerate as we move forward.
Got it and then obviously a lot of focus on the potential for topline growth following the guidance, but could you guys just remind us about the outlook for gross margin.
As revenues grow should they should we see additional margin expansion opportunities on that line and do you need to make any M&A investments to support the growth outlook.
Well, we've been making investments to ensure that we can supply the uptake.
And we'll continue to do that but as far as margin expansion things in our prepared remarks, we said, we expect that we would be in the mid fifties for the balance of the year as we move into 2020 of course, it's all a function of the topline revenue growth.
Adam you scale.
Okay got it and then just just last quick question for me a the American Red Cross I think Dave 13 of 17, B.L.A.'s last quarter any update on that.
I believe there's still a 13, that's not really a driver right now as far as their overall availability of platelets.
And shipped out of state.
Because the 13 sites that currently have their bill as are our most of their big net exports.
So I think we will see additional delays throughout the remainder of the year.
And into early next they currently have I think there roughly around 22 production side, So I think they're getting up to.
Two I guess full capacity with regard to the sites have begun brought online and then it's just within those sites what the overall compatibility looks like and how they drive the the capacity to be able to meet the the hospital demand is coming.
Got it thanks for taking the questions.
Yes, Thank you Jay.
I'm showing no further questions at this time I would like to turn the conference back to Mr. Kim Lee.
Okay, well. Thank you again for joining us today and for your interest in service next month, we will be participating in the Stephens conference in Nashville, and the Stifel Healthcare Conference in New York.
We also see many of you there in person and also as reminder, today's slides will be available on our website. After the call. Thanks very much.
Ladies and gentlemen. This concludes today's conference. Thank you for participation and have a wonderful day you may all disconnect.