Q4 2019 Earnings Call
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Thank you operator and good afternoon.
Good thank everyone for joining us today.
With me on the call it will be agreement Sears, President and Chief Executive Officer, Kevin Green, Here's a chief Financial Officer, Carol Moore for senior Vice President regulatory affairs and falling.
He was issued a press release today announcing your financial results.
Well you're ended December 31st when you 19.
So it is pregnant can be recent business highlights.
You can access a caucus announcement.
Like Www Dot Cirrus Dot com.
I'd like you might you see this demons will make on this call relate to future events.
Rather than historical facts and our worship distinct.
Examples of forward looking statements include those leads were use your financial operating results.
Sure, we 20 financial gains and.
Operating expenses gross margins.
Great development efforts.
Future broken ground strategy future products Ddos product launches.
Back to create future products of blood center operations ongoing future clinical trials.
Ongoing feature product development and are ready to wear activities as well as the timing of these events and activities.
These forward looking statements involve risks and uncertainties that can cause actual events or results could differ materially.
They are identified described in today's press release and under risk factors one okay for the year ended December 31st lien 19, which we'll own shortly.
Undertakes no duty or obligation to update or where do you see.
On today's call will begin with open from watching a movie well by Kevin will provide a detailed financial review detailed review of our financial results and with Ob body closing remarks, and now it's my pleasure to introduce Lehman.
<unk> Chief Executive Officer.
Thanks, Tim Good afternoon, everyone and thank you for joining us on the call.
As a result of me all parts of the entire Cirrus team 2019 was noticed that out your commercially.
We finished 2017 with the highest quarterly product revenue ever reported a 20 points out $20.9 million of 27% compared to the fourth quarter of 28.
For the full year revenue totaled 74.6 million doors at the top end up our revenue guidance range of 72 million to $75 million.
Over the past three years, we have doubled or product revenue.
Even more importantly.
No, but approximately 7 million translatable units of intercept platelets and plasma ship worldwide. We are still early in the global adoption rep.
Yes, the issuance of the final guidance on.
Joel said.
Number of last year.
You asked <unk> blood centers and hospitals have until the end of March 2021 implement procedures to safeguard their plans apart.
We are well positioned to hope our blood center customers in the U.S. through the Romanian 13 months of the compliance period for the FDA guidance documents.
And providing the proactive benefits conferred by robust pathogen reduction technology.
There is that also allows blood centers through these third point of the products at least they see earlier compared to the other options before my guidance.
I see wireless logistics of delivering products to hospitals.
We were able to demonstrate cost savings, but he's making certain blood center processes.
And I say such as gamma radiation.
Same futurology testing.
Zika virus testing redundant.
Thereby minimizing the number of product codes and eliminate facility procedure costs.
Well you anticipate an updated approvals for extended they thinks label claim.
And our triple stored set for platelets, we believe it enters the value proposition.
For blood centers will be made even more compelling.
In terms of you its market share.
Based on our fourth quarter domestic product revenue, we estimate that we exited 2019 at approximately 15% market penetration compared to 11% in fourth quarter 20 eating.
During 2018 number U.S. treatable platelet doses.
Shipped increased nearly increased nearly 80% compared to the prior year.
This leaves us with a substantial untapped U.S. market opportunity.
Sure 2020, we expect our U.S. market penetration to increase meaningfully and the ramp in adoption to continue even past the compliance period.
2020 will also be defined by the anticipated launch or pathogen reduced crowd precipitous product in the U.S.
We are tracking on plan summit RPM is supplement in the first half of this year, which translates into a potential approval by yearend.
This fall we plan to submit for a new technology, I don't payment or intact for pathogen radius cryo well the centers for Medicaid and Medicare Medicare and Medicaid services or CMS.
Given the FDA breakthrough device designation awarded the pathogen reduced costs.
We're optimistic that we will receive and then top approval in 2021, which we believe me we facilitate market adoption beyond the products intended impact on clinical outcomes for trauma.
Cardiovascular surgery maternal hemorrhage patients.
The potential 300 plus million dollar U.S. market from having to describe a precipitous and its likely impact on credit we'd be willing patient survival outcomes as a whole team of serious incredibly excited about the anticipated product launch.
Finally, we made meaningful strides last year with regard to our intercept red cell program. Both in the context of the CE Mark review process and the phase three clinical studies in the U.S. when the qualification studies on our GMP with bio lots from our news supplier is expected to be completed in the second quarter, we plan to turn his transition or.
CE Mark submission, the new medical device regulation or MPR pathway and the second quarter.
At this juncture, we continue to believe CE Mark approval for Red blood cells. They 2022 event until we have more visibility into the new MPR process, we're working diligently to compress that timeframe and are optimistic.
With that let me turn it over to Kevin for a detailed review of our Q4 and full year financials.
Thank you Bobby and good afternoon, everyone.
Today, we reported fourth quarter 2019 product revenue of $20.9 million up 27% from the $16.5 billion recorded during Q4 2000 movie.
For the full year organic revenue totaled $74.6 billion, an increase of 23% compared to $60.9 billion reported 2008.
These results are unchanged from the preliminary full year results, we announced in early January.
In terms of product mix sold during the quarter.
Lately kit sales accounted for approximately 85% a reported product revenue.
Looking ahead to 2020.
We expect robust platelet count growth.
Given largely from increased utilization of intercept a U.S. blood centers as they take action to comply with the FDA guidance document.
Accordingly, we expect full year 2020 product revenue will be in the range of 89 $93 million representing growth of approximately 20% to 25%.
[noise] government contract revenue totaled $5.6 million in $19.1 million during that three in 12 month period ended December 30, Onest 2018, respectively.
From the 3.7 million in $15.1 million reported during the comparable periods of 2018.
Increased enrollment in our Red has been recipe studies.
Repertory activities for additional clinical activity as well as CMC and in vitro development drove the increase and are expected to continue through 2020.
Now, let's move the discussion to our reported gross margins.
For the quarter gross margins were 56% compared to 49% for the prior year period.
Significant improvement in gross margin was attributable to be economies of scale.
Lower per Kid Cogs, resulting from increased volume is manufactured to meet current and expected growth in demand for our products.
Additionally, gross margins improved as a result of the favorable product mix shift to double dose platelet kits in France.
For the full year gross margins were 55% compared to 40 presented during 2020.
We expect gross margins will be relatively stable in the mid 50% range as we look ahead to 2020.
I'd now like to discuss operating expenses.
Totaled $33.6 million during the quarter compared to $27.3 million during Q4 2000.
For the full year 2019.
Operating expenses totaled $126.6 million compared to $99.4 million during 2018.
The investments we've made initial DNA and R&D during 2019.
Allows to maximize the growth opportunity in 2020 and beyond.
Of the total operating expenses as gene expenses during the quarter accounted for $17.2 billion compared to $14.8 million during Q4 2018.
The increase was driven from investments we've made in our supply chain capabilities.
We continue preparatory activities for anticipated U.S. pathogen reduced our precipitate launch as well as higher non cash compensation costs.
For the full year, SGT spending totaled $66.2 billion compared to $56.8 million during 2018.
We are committed the generating leverage from our SGN investments.
One thing disciplined NSG, they've been with investment activities that lead revenue generation.
Oh.
Turning now to R&D expenses.
Research and development expenses for the quarter totaled $16.4 million.
Compared to $12.4 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 our triple set for platelets as well as our six seven day label claim.
In addition development activities to support our anticipated PMT supplement for pathogen reduced purposes.
As well as activities tied to the development of our Red blood cell program drove portions of the increase in R&D.
For the full year, R&D expenses totaled $60.4 million compared to $42.6 million during the prior year period.
Looking ahead, we anticipate higher R&D spending in 2020 due to expected increases in BARDA related activities and the ongoing development of our triple set for the us market.
Seven day label claim in the MDD, the MTR cut over for our products.
As a reminder, BARDA related R&D expenses are reimbursed as government contract revenue.
Now, let's look at the bottom line.
Net loss for the quarter totaled $16.9 million or 12 cents per diluted share compared to a net loss of $16.2 billion or also 12 cents per diluted share for the prior year period.
For the full year net loss was $71.2 billion or 51 cents per diluted share compared to a net loss of $57.6 million were 44 cents per diluted share for 2018.
As previously mentioned, we've made investments that will create a platform for us to make intercept the standard of care and which will feather down as we complete certain R&D activities.
I'd like to make a few comments about our balance sheet.
We ended 2019 with $85.7 million of cash cash equivalents in short term investments on air.
To supplement that balance earlier this year, we completed a public offering of common stock.
Using gross proceeds of $63.3 million.
With the FDA guidance document finalized and a balance sheet that allows us to make intercept the preferred choice for U.S. blood centers.
And to launch our current precipitate product Cirrus is extremely focused on executing to profitability.
With the completion of the recent offering and given the opportunities in front of US. We believe we can attain profitability during their strategic planning period.
We're confident in our ability to continue growing not only the topline but to ensure quality of supply and continued gross margin improvement.
At the same time many of our current non BARDA research and development programs are expected to be complete in the near term lowering R&D costs.
And of course, we have a tremendous opportunity to increase the leverage from our SGN expense.
With that let me turn the call back over to Ob for some closing comments. Thanks, Kevin before I wrap the call I wanted to briefly briefly comment on the recent outbreak of the co bit 19 virus, which originated a new on China.
Whether corona buyers like Sars Mers Ur Cobot 19, our mosquito borne buyers like Zika chicken vignette and west Nile, the only real surprise would be to not have another one in the near future.
As we have frequently with as these pathogens make their presence known quickly and with impact near the human toll of morbidity and mortality and the reverberation onto style infrastructure.
The average required by health care providers across the globe, they address in immerging pathogen or monumental in their scope.
Amongst many critical parameters safety and availability of blood and as components for transfusion are fundamental to a vital health system and to ensuring positive outcomes were seriously ill and injured patients.
Blood transfusion has been noted is one of the most common procedures administered in hospital it to a impossible in patients.
And in many cases and nothing short of lifesaving.
Cancer patients who received the vast majority of all Transfuse platelet products.
Particularly susceptible to infectious risk due to their underlying disease and aggressive treatment protocols.
Immerging pathogen pose an ongoing threat to the safety and availability of the blood supply.
Well travel and train have historically been the primary means by which immerging pathogens move dynamically across the world.
Rapid urbanization over the last century has also introduce large numbers of people to previously undeveloped areas.
Diseases to move into older urban areas, where population density has increased.
Changes in rainfall temperature and seasonal patterns have been shown to contribute to expanded better populations and ranges.
Two factors that may allow diseases, the spread into areas, where weather or elevation may have previously served as a protective barrier.
Our older but supplies as helping to protect society. It simultaneously median protection from pandemic risks.
Recognized by the inclusion of Blood Center considerations, and then pandemic at all houses preparedness and advancing innovation that.
Simon the law last June in the United States.
Along these lines the European center for disease prevention, and control or you see DC convened a panel of experts last April to discuss emerging infectious threats and the role of pathogen reduction to protect the blood supply.
Several examples decided in which pathogen reduction has been deployed to maintain and protect the critical supply platelets.
To address the impact of in Immerging pathogen on the blood supply adequately and rapidly you must apply all available tools at our disposal.
Started approvals can help screen out potentially impacted donors, let's have a grave impact on availability and regional self sufficiency during an epidemic.
Testing can screen out in fact in products, but tests with appropriate sensitivity and specificity are not readily available and emergency situation.
Pathogen reduction and proactively address a vast number of pathogens.
Strategically deploying all three safety measures allows for addressing all the needs of the blood supply keeping blood components save and readily available.
It's kind of multi pronged approach for splits saving availability is our best chance satisfy the need for the sustained preparedness espouse by the public health community.
In closing I want to take a moment the thank all Cirrus employees, who helped make 20 nineteena success.
And for their continued passion for our mission to make intercept the global standard of care.
Our hard work in the termination made possible achievement of many important milestones in 2019.
Going forward all the great things that we will realize together in 2020.
Operator, please open the call for questions.
Thank you.
As a reminder to ask a question need to press star one on you touched on telecom to draw. Your question. Please press the pound cake.
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Our first question comes from Matthew Black White House Black with Stifel. Your line is open.
Hi, good afternoon, everyone. Thanks for taking the questions. It didn't sound like Vivek was there and the the roll call that that Tim did so maybe if you could.
Tackle I've got a couple of questions with a follow up.
But could you just maybe talk in more detail in general about the level of blood Center preparedness today versus say September thirtyth.
We all know that Red Cross has been added the curve, but I'm also curious how the other big for tracking and then couple of follow ups on that.
Yeah that's value.
Yes, the Red Cross continues to be at the forefront with regard to their overall strategy for being compliant with the final FDA guidance document so.
I think that they will continue to view the front runner just given their their history of working with us.
With regard to the median for the big five button or sort of a spectrum of preparedness on their part.
Certain blood centers.
I think farther along than others.
Only comes down to our they sort of trying to determine what their blood centers will our mid or hospital customers will get versus react into what the hospital demand is and I think thats really comes down to having a strategy by which you go to your hospital customers and said, we believe that pathogen reduction is.
Our preferred option and here's the value proposition associated with the increased price relative to the other options that are put forth and the final guidance document.
Okay that that actually lends itself well to follow up which was when you spend a lot of time talking about blood bank preparedness, but how are you guys. Specifically also approaching and engaging the hospital when customers how are those conversations going on you mentioned it but are you still.
Seeing the ability for for banks to drive premium pricing with the with the platelet product.
Yes, I think again, yes go into the Red Cross as an example, just given how far along they are with regard to their overall plan strategy. It really is a partner an effort between Cirrus American Red Cross we have a dedicated team that works with the American Red Cross bump on the hospital ferrous side as far as bringing onboard.
Intercept platelets discussing the value proposition with those hospital customers and why we believe there's an economic justification for increasing pricing given the benefits conferred by pathogen reduction on the other options.
One of those been increase plant itself one of our earlier leaves the platelets.
And the ability to to standardize the platelet components of the hospital, who receives we have fewer and fewer codes, thereby making it easier for hospitals to haven't transfusion ready product.
I think the central theme, there is having a treated pipe versus past and product and then we also have a deployment team that works closely with the American Red Cross.
Not only on the production side.
And how quickly they can ramp their intercept platelet production, but also the hand.
To the hospital customers.
All right and one last quick question any update on the number of approved delays in the U.S. and that's all I had thanks, so much guys.
Yes. Thanks.
We're still at around 15, we've got 19 Red Cross blood centers that are using intercept out of there I think totaled 22, so drilling the overall feel a approval process is not rate limiting us quite with regard to.
Most of our key customers and we don't expected to be throughout 2020.
Thanks again guys. Thanks.
Thanks.
Our next question comes from Bank of Johnson of Stephens. Your line is open.
Hey, Thanks for taking the questions Kevin I think in the past you've given us some color around.
Volume growth in the quarter, clearly pretty standout quarter for product revenues today I'd be interested if you share any sort of color about the the volume trends you saw in the fourth quarter.
Yes.
So for the quarter kit volume was was quite robust if you compare that to Q4 of the prior year.
Good growth was up around 32%.
For the full year.
Not too dissimilar.
Closer to 25%.
Got it did that's helpful. And then just Kevin sticking with you on the guidance for this year can you just walk us maybe through the puts and takes so that particularly it sounds like this will probably be largely driven by U.S. platelet kits, but did the same any contribution from cryo maybe.
Towards the back ended the year and then any any countries. We should be aware of that are contributing to the guidance.
Yes, so most of the growth.
The vast majority of the Grove, who will be driven from us platelets no. That's not to say that there won't be growth in other areas, but relative to the growth that we're expecting from the us it will be modest.
There is no cryo revenue modeled into our guidance.
We do expect to submit the first half of this year.
And assuming.
Reasonable questions in response times could have approval by the end of the year, but we didn't factor in any revenue into our guidance from crowd precipitous.
Got it.
Thanks for taking the questions.
You're welcome thank you.
Thank you actually any color guys question. Please press Star then one.
Our next question comes from Josh Jennings of Cowen Your line is open.
Hi, This is there a call for Josh you guys hearings.
Yes, Ken.
Great.
Just looking your opportunities in Europe, what sort of contributions you guys thinking.
Could come out of Germany at 2020.
Yes, so yeah, I think Germany continues to be somewhat of a slow ramp relative to what we still are similar to what we saw the us.
There are a lot of.
What are called M&A is that are approved or in the process of being approved right now by the Polaroid Institute, which is the regulatory body that approves German blood centers.
You implement new manufacturing methods are I guess essentially is.
Well in products in Germany, and regulators biologics by the pie and so those are all coming together, we do have hospital or I'm, sorry blood center contracts that are in place and are in discussion and then the mechanics of how the existing reimbursement that's in place actually translate into hospital.
Payments to the blood centers for the products is something that we're working through today.
So there's a dedicated zeros team working on this we are optimistic about the long term opportunity to Germany represents but in the context of 2020 guidance is not something that we think it's going to be delivering meaningfully it's more of a 2020 122 of that.
Great. Thank you that's very helpful. And then looking into two phase three studies you guys have ongoing for red blood cell.
Previously mentioned, a gold having 10 sites up and running for recipe by year end I'm, just wondering how progress.
On that goal has been and then any common on enrollment would also be helpful. Thanks for the question.
Yeah. So as you mentioned, we have two phase three studies that are enrolling United States, one is called Radisys and the other ones recipe.
The rather study is enrolling.
Really quickly.
And we will continue throughout this year, so we're optimistic about.
Moment in that study and recipe enrollment is starting to ramp as well.
We have actually.
Enrolled.
10, plus sites in in 2019, and our expanding number sites.
Over the next several quarters, so with the additional sites that are coming onboard I think we're targeting more at the 15 for this year.
Well should we should see an increased.
Pace of enrollment for the rest to study in 2020.
Thank you.
Thank you.
I'm showing no further questions at this time, let's turn the conference back over to only agreement for any closing remarks.
Thank you all for again for joining us today and for your interest in serious we will be participating in two upcoming investor conferences next month.
First will be up before is annual Cowen Healthcare conference in Boston next month.
And we'll also be BTI GE Snowbird, Utah Conference in March we look forward to see many of you there in person thanks very much.
Ladies and gentlemen.
Today's conference.
We all disconnect have a great okay.
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