Q2 2020 Cytosorbents Corp Earnings Call
[music].
Good afternoon, and welcome to the Cytosorbents second quarter, 2020 financial and operating results Conference call.
At this time, all participants are they listen only mode.
Following the formal remarks.
In the call for your questions.
Please be advised to call will be recorded at the company's request.
At this time I'd like to turn the call over to our moderator Jeremy Feffer. Please go ahead Sir.
Sure and good afternoon, everyone welcome to Cytosorbents second quarter, Johnson, Twentys financial and operating results Conference call. Joining me today are Dr. Phillip Chan Chief Executive Officer.
Vincent.
Oh leach being off.
Definitely blocks Chief financial Officer.
Dr. CEMEA Stelea guitarist Chief Medical Officer, Dr. Christian Steiner.
Senior vials and marketing from Germany, Christopher Kramer, Vice President business.
Before I turn the call over to Dr. Chan I'd like to mindless nursed attachments prepared remarks may contain forward looking statements.
Which are subject to risks.
Management may make additional forward looking statements to your questions. Today. Therefore, the company claims protection under Safe Harbor.
Oh, it's contained a private Securities Litigation Reform Act at night, you're 95.
May differ from results discuss today and therefore, we refer you to a more.
Each upscale uncertainty and the company's filing filings with the S U shape.
And just to the company's future performance represented by management include estimates today as of August 4th 2020.
Assumes no obligation to update these project teams in the physicians change during today's call will have an overview presentation covering the operating and financial highlights for the second quarter by Dr. Chan and as block following that presentation. We will open the line to your questions. During the life today, especially with the rest of the management. This time, it's my pleasure to turn the call over to Dr.
So with jet so.
Thank you very much scare me and good afternoon, everyone.
We are very busy and productive record second quarter.
First.
What are 2020 total revenue grew 58% 9.8 million aquatic sales grew 61% to 9.5 million over the second quarter 2009 for.
Trailing 12 month product sales were a record $30 million.
Product gross margins were 70% in second quarter lower than 76% a year ago.
Due to a higher percentage of distributor sales over direct sales.
Our cost of ramped coordinating production.
What are the hallmarks of the second quarter without the U.S. after yake record emergency use authorization or you're right, there's quite a supreme and adult critic real Coker 90 patients with imminent or concurrent respiratory failure, enabling skills to all hot U.S. hospitals and generating approximately $667000 in U.S. right.
Yes.
We also achieved after a breakthrough designation for side occurred during the quarter to remove ticagrelor work going on pump urgent or emerging cardio thoracic surgery.
We also received you approval for Cytosorb to remove river Occident on park cardio thoracic surgery.
Well.
[noise] in May aren't Dr., xtremio stuff like Europe, better known as Mike has.
Started as Chief Medical Officer has done a fantastic job in a short time at the company.
We've also treated now more than 1200, Coke 19 patients, where the 30 countries and.
Here in United States.
We received 1.1, knowing the non dilutive funding.
Technology [laughter] transfer program.
We're also awarded a $2.9 million phase three.
Our contract to advance hemoglobin BG, a preclinical trials for universal plasma.
Treatment.
Finally, we expanded distribution to 65 countries, adding nine Latin American countries.
Our distribution network.
One of our most gratifying milestones out yesterday.
Starts is now celebrating the delivery of more than 100000, cytosorb treatments cumulatively today, the tens of thousands of patients treated in a wide variety of applications like many publication documenting the lives of Cytosorb has helped to say.
All of our supporters into the broader set of from family you have or sincere thanks for making your commitment.
For your commitment and contributions in helping to dance Cytosorb therapy.
Yeah, I repeat that is making a difference to people across the world.
[noise] the joint statement that we made in a press release yesterday, something my thoughts well I wanted to say that I've been blessed with that's gotten colleagues at the company, particularly on my management team with whom I've had the pleasure working closely with over the years to build this company.
I thought it would be sitting could turn it over to you didn't see a few words.
Upon this very significant occasion before we continue.
20 years off I'd like to invite Dr. Christian Steiner senior Vice President of sales and marketing managing director said its herpes Europe.
Whose passion for the therapy rivals my own to start.
Christian.
Yes, Thank you Phil.
Yeah, you set already some some technical myself.
My Name's Christian Steiner Senior Vice President says marketing on based in Berlin, Germany, and I'm heading from here the consideration cytosorb therapy from the beginning.
So what doesn't mean more than 100000 tons up treatment.
What doesn't need to me possible Oh.
Of course, this means that'd be have treated more than what we have treated tens of thousands of patients.
And every single one captisol how life threatening situation.
We don't know exactly the number.
What we know that each and every one of these loves helped by all sub precious.
And we are working hard every single day twin trees. This number.
So secondly, also more than 100000 promotion treatments.
Means that you have generated more than 90 million U.S. told us public company.
And then many this money has supported two booked this interdisciplinary commercialization structure behalf.
That's trade to the strong movement.
And also has built a van this off this sounds absorption.
When we started in 2012 nobody knew about the Sarpy.
I was actually driving your old in Germany to convince I see you talked us to get the Detroit.
Can see real setting and 65 countries.
Some markets. They just have started SBS helps Latin America.
Well, that's quite the normal hospitals with such as up Sarpy has already been comes done, though yeah and some indications.
And also sides absorption has been listed as a potential therapy into school with 10 dynamics in several countries and also by the board has organization.
I actually want to sing my teams here from Saddam's Europe, some Saddam, Switzerland, and subsystems Portland for the Amazing performance Stelmi not motivation and he doesn't during his journey.
Obviously also cost sending money in patients.
And so out last but not least.
If you look that's a verity of indications, which has amassed over these few years.
And also me I'm Lucky on an excellent.
I'm absolutely convinced.
This is the beginning of the big area.
And to be Blue change medicine.
Thank you.
<unk>.
Thank you very much Christian.
And let me please turn it over to advance our Chief operating officer and President <unk>.
But then you may need to come off mute.
Sorry about that takes [laughter], that's it's been a fantastic journey for all of US. It is rare opportunity be part of the growth stories, such a cytosorbents moving to product concept in the lab in the full commercial distribution.
We've done with Cytosorb.
We are changing medicine, we're providing lifesaving therapy as Christian mentioned, the battle deadly inflammation in recent label expansion for any platelet in antithrombotic drug removal well open new opportunities in North America through the breakthrough designation.
This recent financing, we're now going to be able to expand our current capacity that supports 80 million dollar business to wonder about 300 400 billion dollar business. Why we are aggressively pursue that next generation absorber. We're all looking forward to decide as youre back so.
It's been both an honor and privilege to work with so many talented people really on this project to bring us to this point in our development growth. After say, thank you to our engineering quality R&D and production teams draw your hard work you're perseverance just brought us this point.
Let's just say congratulations for a job well done.
Thanks, Bill back to you.
Great. Thank you and copy our Chief Financial Officer, Kathy block.
Oh, good afternoon, everyone and.
When I joined Cytosorb in more than seven years ago comedy was just beginning to commercialize cytosorb in Germany and to this day I can remember the excitement when an invoice would come from across the pond a we'd all.
And would ask how many devices. It is it a new hospital, where an existing customer with a repeat order.
So now today, the invoice register a sense electronically with dozens of invoices daily So we've come a long way and over the last few months, we've had the opportunity to bring cytosorb to the United States to assist in the treatment of severely LCOE good 19 patients.
And that it's been so gratifying for us and we've also come a long way in terms of the financial resources that we have available to meet our goal of bringing our life saving say just sort of technology to the world. When I joined the company in 2013, we had approximately $1.3 million in.
Cash.
We had to be very scrappy back then I think we're still scrappy. Today. However, following the completion of our recent equity financing, we now have more than 89 million in cash and I want to Echo, what Phil and Christian and Vince said about this because this capital is vital to our future success.
Will enable us to generate the clinical data required to obtain U.S.S.T.I. approval. It will further allow us to secure and expand our production capacity and Furthermore, drive worldwide sales and gross which will ultimately lead to operating profitability.
Yes, we've come a long way and that's because of all of my great colleagues and all the employees of Cytosorbents Corporation really all over the world and I'd like to send a sincere. Thank you everyone for all their hard work and dedication that is taking us taking us to this amazing milestones.
More than 100000, Cytosorb treatment worldwide, I'm privilege and honor to work alongside each of you.
This is only the beginning we have much more work to do in the future to ensure that our life saving technology can reach and help many more people throughout the world and I know you all join me in looking forward to even greater success is yet to come.
Thank you that's you Phil.
Thank you Kathy.
And I guess, Patrick I like your as our Chief Medical Officer I guess.
Thank you Chills, let me start off one of the personal note on the most recent addition to this management team all lead joined it just near three months ago, but I can tell you within those three months the developments in the excitement has been incredible you've already heard sort of the milestones that were achieved some very important developmental my mouth.
Storms, including the CE Mark approval, if one thats robotic removal that cogdell rivaroxaban specifically in do you.
The breakthrough designation by the FDA would that Cagliari global these are incredibly important accomplishments for the company, but that's the physician as an interventional cardiologist, having treating treated those patients first hand in seeing themselves from for major and often fatal bleeding complication, having cytosorb budget cleaning solution.
Really transformed the standard of care, that's what the management of these patients and I'm extremely excited I'm thrilled to be involved in all these incredible programs.
Recently, we also had the opportunity to engage with U.S. hospitals through the emergency use authorization and we already receiving incredible stories success stories from clinical teams throughout the U.S. would have been able to manage that often leasehold cytokine storm effectively with cytosorb in here. This patient stores have survived.
Because it didn't incredible.
Gradable feeling as a physician to be able to be part of such a wonderful story.
And then lastly, this past month, we had a first milestone review well, but pivotal refresh to a G.I. trials and the DMC. After a very thorough review of the safety data recommended the trial resumes again, giving us another path towards approval in the U.S.
Needless to say none of this would have been possible without the incredible commitment and dedication to very talented regulatory medical and clinical team subset of children's book in the United States in Europe.
Looking ahead, we remain very excited and the same talented teams I know ready and laser focus.
Pursue a top two priorities first digging U.S. approval cytosorb and second to execute an ambitious clinical trial program that will establish cytosorb across multiple indications as a standard of care in critical care medicine, cardiac surgery and drive the next hundred thousand treatments worldwide.
So thank you and back to you Phil.
Thanks, very much my guess and watch the not least our vice President business not me, Chris Cramer Chris.
Thanks, No 100000 treatments is a big accomplishment and I just wanted to echo the points made earlier by my colleagues.
Especially those recognizing and thanking all the patients the physicians our employees in the investors that have worked tirelessly to get us to this point.
And to talk about the role that strategic partners. It played in our journey.
Partners have and will continue to play an important role in the advancement of Cytosorb.
Good day, we're working with some of the largest and most well respected partners in the world, including Fresenius medical care to remain cardiovascular and Biocom.
Early on when you're just getting started when we are relatively unknown partners played an important role invalidating in building awareness of our technology.
And it's like Biocon in 2013, FMC, starting in 2014 entering though in 2016, where somebody really it's been leaders in cytosorb in their efforts to establish the therapy had been crucial to our success.
All of these partners he's been instrumental in helping us to launch in great Cytosorb.
In addition to sales partners. He played an important role and elevating the global brand awareness cytosorb through their involvement medical conferences symposia in their promotional efforts.
Last through their extensive physician relationships.
He'd be valuable contributions to our growing body of evidence by spearheading the development of clinical publications, which are essential to the advanced the bigger therapy.
Well I work isn't finished yet we're still in the early early stages of a much bigger opportunity I'd like to take a moment to thank our partners FMC Truman biocon.
For their ongoing support and I look forward to them continuing to play an important role in our future success.
Phil.
Thanks, very much Chris.
On behalf of the board of directors decide Assortments and the management team again. Thank you everyone who's been involved in the story.
We look forward to having many more successes to come.
With that on the next slide recently on July 24, 2020.
Landmark public offering up to 57, and a half million dollars.
Common stock with net proceeds of the company's $54 million raising our cash balance at roughly $89 million significantly strengthening our balance sheet.
This was led by Cowen and the lyrics with co manager B. Riley FDR, helping as well.
That's true a tremendous amount of interest from institutions in fast with participation from a solid core well regarded long term health care focused institutional investors.
And that's part of the financing and given our financial position, we agreed to not raise additional equity capital in other words, ATM financings or secondary public offerings for the next 90 days have no current plans to raise additional funds.
We've been often asked the question by many investors about why now.
Well the funding serves multiple purposes first it increases our institutional ownership with a core anchor of strong institutional investors.
It also provides growth capital to take advantage of.
Near term growth opportunities and to strengthen worldwide sales.
It also allows us to move forward with an expansion manufacturing that should take us to a capacity production as Vince mentioned, a $300 million to $400 million in sales, while allowing us to invest in automation and other improvements that are expected to improve product gross margins.
It is also expected to fund the company to expected GAAP profitability and provide financial stability in uncertain times.
It also enables us to vigorously pursue company sponsored clinical studies intended to drive Cytosorb as standard of care.
And it provides additional resources in addition to grant the contracts to fund development of our exciting pipeline.
But probably most importantly.
Why now is that it enables us to expand beyond today and unlock well, we believe is a very powerful and potentially lucrative U.S. opportunity.
[noise] today, our U.S. opportunity is really threefold what.
It is trying to help patients here in the United States, while helping increase the awareness of our product throughout.
Hospitals and medical communities throughout the country.
Second it involves a pivotal trial path with refresh to wake high.
Our 8-K I trial that is now are undergoing resumption.
Last but not least and what will focus on mainly today is the FDA breakthrough therapy designation.
For Cytosorb for the removal Ticagrelor major blood thinner used in the treatment of acute coronary syndrome.
And using our therapy to remove it during an emergency or urgent cardiac surgery.
[noise] to touch on Coke in 19, Cytosorb Cytosorb dalkon more than 1200 critically ill cover 90 patients in 30 countries around the world.
And if you look at our earnings press at least today, you'll see links.
Many covert 19 Webinars that's support a number of findings one is the reduction of cytokine storm in primetime eaters, such as I, all six church in CRP and others that is often attribute it or is often responsible thing considered responsible for those having the most severe and life threatening illness.
Yes.
She does also pointed to improve respiratory function in acute respiratory distress syndrome, and a winning a patients from mechanical ventilation and ecmo answered. It has also been associated with improved human genetics stability in a reversal of shock.
[noise] U.S. after an emergency use authorization enable kind of her pretty commercially sold to all hospitals in the U.S. for use in critically ill cover 19 patients 18 years that each are older.
We didn't or confirm respiratory failure.
That has led to.
You watch sales in the second quarter of $667000.
Primarily through inbound interest.
Far therapy from U.S. hospitals.
Now we are currently expanding U.S. commercialization efforts via distribution and internal resources to meet the current search Epicentral second cover 19 wave that is expected this winter.
And with the U.S., leading new and overall cases of covert 19 globally. The emergency use authorization is expected to remain through spring a 2021.
[noise], although kogan 19 has slowed in western Europe, it's surging elsewhere, where we continue to ship our therapy and we're preparing again for the second wave of what looks to be very challenging flu and covert mixed winter season.
We're also targeting data publication and capture via our CTC Coven 19 registry as well as our international Cytosorb registry.
There are number of and just to get her initiated studies that have been registered in clinical trials dot com and elsewhere that are also working to collect additional data.
In addition to ft, a emergency use authorization for Coca 19.
Cytosorb has also been recognized and many other countries around the World for example in China Blood purification is now in the handbook to treat side to kind of started in the handbook of covert 19 prevention and treatment.
Colombia Cytosorb is in the expert consensus in the Colombian journal of Nephrology.
In Great Britain Cytosorb is the subject to the medical I've, a medpac innovation briefing published by nice.
In Germany Cytosorb.
Has been the subject.
Of course is on the treating a severe coven 19 in intensive care medicine.
In India.
The D.C.G.I. has now approved cytosorb for approval.
For the treatment of Coven 19, and is now included into coping 19 expert management considerations guidelines.
Very recently Cytosorb has also been approved by the Ministry of Health of Israel.
Medical devices Division called aim our for the treatment of coping 19th.
Inside the started is also specifically you mentioned.
A in the Italian Russia, renal coping 19 task force recommendation Panamanian National guidelines on the treatment of adult coking 19 patients.
[noise] now is it on the next flight as.
Mike as mentioned refresh two is now being resumed and as he mentioned.
On July 20, Eightth, we announced that the refresh two data monitoring committee reviewed the data from.
And analysis done by our CRM and ourselves on the existing data that exists for the 153 patients, including the trial for gate, resulting in a favorable opinion on safety and a recommendation that the trial resumed its only minor modifications penny coping, making restrictions our goal is to get to study back on track and move.
Thanks to the scheduled interim analysis upon completing enrollment of 200 patients.
And now I'd like to talk about really what we believe is potentially one of the fastest.
At least extensive.
Hi, good visibility applications for potential U.S. approval that we have today.
And that is the removal of blood centers during cardio thoracic surgery, we talked about this I in bits and pieces over.
Over the past conference calls, but here are the stories laid out.
In one shot.
So earlier this year Cytosorb received European Union approval to remove two well known blockbuster blood Thinners anti thrombotic Stern cardio thoracic surgery. These agents are used in millions of patients to reduce the risk of stroke and heart attacks. The first one is ticagrelor, which is a blockbuster PQ Y 12 anti platelet agent.
That is often used in patients with acute coronary syndrome, who come in with signs and symptoms of having a heart attack.
And just try to protect the product has more than 1.6 billion in worldwide sales.
And Ah It is again use predominately for people going into the Cath lab to get a sense.
The second drug is rocks the band, which is a blockbuster factor kinase inhibitor also called a novel oral anti coagulate or no action.
It's more than $7 billion and she 2019th sales uses lifelong therapy in patients with ATRA fibrillation, but also in many other illnesses such as those with deep vein thrombosis or Pullman Arab light for does with severe peripheral artery disease.
The problem is that patients that require merchant or urgent cardio thoracic surgery on these blood thinners can develop potentially serious in life threatening peri operative bleeding.
Good thing about Cytosorb is that installed easily into a heart lung machine or cardiopulmonary bypass machine. That's blood flows through the cartridge. It removes these drugs rapidly during surgery and greater than 90% from whole blood in in cardiopulmonary bypass simulations to reversed or anti quite go into effect. We believe that cytosorb can quickly become a cost effect.
Standard of care to prevent bleeding do the anti thrombotic, helping to drive sales growth.
This slide shows that the risk of bleeding is high and cabbage patients on Ticagrelor.
Intertech Hurler registration Plato trial.
1584 patients under when cabbage surgery randomized between does either take hacker lower works competitor called Plavix work for also known as Clopidogrel.
And does patience.
With life, threatening bleeding or shown in this diagram.
Bleeding risk is high despite waiting up to seven days off the drug prior to surgery. So you can see that if patients need to go to emergency surgery right away after failing.
The Cath lab, and not being able to get a sense.
Their risk of a serious major or fatal life threatening bleeding.
Is up to 65% if they have to go to surgery that first day.
I had a those on tech haberler are the ones in the black bars and knows it with Plavix are the ones in the diagonal strike bars.
Well you can see however is that even when you wait.
For multiple days to allow the drug to wash out which is the only recommended way of dealing with reducing the bleeding risk that the bleeding risk is still extremely high.
So the good part about it is that cytosorb removes the drug rapidly and in a landmark study.
Done at the same York Hospital Sloppy as hospital in Hamburg, Germany.
They they demonstrated a reduction in bleeding complications and this is the study laid out it was in 55 consecutive patients.
Oh It was in 16 patients initially who did not use cytosorb and then after a certain point in time. They all you Cytosorb and these are patients who are either loaded on tech CAGR lore and had to undergo emergency surgery on the left hand side for had to go undergo emergency surgery I with River Roxanne.
Ban on board on the right hand side and what you can just see by comparing the two columns is that whichever bleeding complication, you look at whether or not its procedure duration the need for red cell or platelet transfusions.
Steve drainage, which is an indicator of continued bleeding complications or whether or not its resort cottigny into need to go back and re explore the chest cavity to figure out what is the leading orbitz stays in the intensive care unit or a total like the state you can see that those on Cytosorb <unk> remark.
A couple of the better than those without Cytosorb.
And these results have actually been been seen by many physicians using the therapy for the same application in many centers around Europe.
And then a separate analysis done in the United Kingdom. This is translated into a projected cost savings to the hospital of approximately $5000 per patient, including the cost of Cytosorb.
Now what this has all done as it has set the stage for potential ex today, the U.S. regulatory path given our ft. Eight breakthrough designation here in the United States as I mentioned before April Yucky granted breakthrough designation decide to search removed a CAGR lark during cardiopulmonary bypass and emerging or urgent cardio thoracic surgery.
Which highlights the unmet medical need recognized by the FDA.
But also helps to facilitate.
The path towards potentially U.S. After FDA approval, we're now in the process of defining the regulatory path for the therapy with the FDA, whether or not it's a five 10-K versus the de Novo five 10-K or pmeight, if a clinical trials needed competitors such as Portola that was recently acquired by Alexey on for $1.4 billion and.
Phase bio.
That is a public company that is still in the clinical trial phase they've established and after a precedent that surrogate markers such as platelet aggregation or factor can a activity can be used as a primary endpoint for FDA approval.
And then a sub study in the paper coming out of State York as Cluckey US Hospital in Hamburg, Germany for out of five where 80% of patients treated with Cytosorb had a rise in the EMEA or multiple electrode aggregate commentary I say that correlates with the restoration of platelet function, giving us additional visibility that if we were.
Were to pursue a trial that we could.
See a benefit here as well [noise]. Meanwhile, additional data is being collected a particularly from the UK ties are trial to obtain UK nice recommendation and the parallel study called a citation trial in Germany.
As well as a collection of real world experience via the Star, we're safe and timely and type thrombotic removal registry that is being set up an established.
Now for those of you has not yet had the opportunity to view the key opinion leader event on Cytosorb anti thrombotic remove all that we held a on July 13th last month I would urge you to view that and this is available it just click on the banner the front better on her home.
During the Cytosorbents Dot Com web page.
Well, what you'll here are some seminal discussions from leaders in the field, including Dr., Michael Gibson Dr., Robert story, and one of the ER and the chairman at Department surgery. At this club deals Clinic State York that out.
That was the pioneer and actually implementing this therapy for the removal of blood Thinners <unk>, a professor Michael Schmechel.
In a session hosted by our own Dr., Mike is still the gears.
Urge you to take a look at that that event, which really lays out the opportunity not just in in a cardiac surgery, but even beyond.
What is you may not have seen before is this slide and this basically highlights that today, if we were able to get U.S. regulatory approval.
We would have a total addressable market today of roughly $250 million based upon 50000.
Urgent and emergent cardiac surgeries in patients on Ticagrelor.
Assuming a 5000 dollar price point for the therapy.
However, we expect that to take care of our market share is expected to grow from today, because one it's going off patent in 2024 and price erosion from generic competition will will help drive adoption.
And also Cytosorb makes I care girls or reversible, giving it a very strong competitive marketing advantage versus other anti platelet drugs like plavix or clopidogrel, an Afghan also called Prasugrel that are non reversible.
So why would someone ever loads someone on a non reversible agent when a reversal agent is available.
And then last but not least.
This next slide shows what the current market opportunity is for Ticagrelor 250 million.
It could potentially expand to 50 million if ticagrelor begets take market share from its competitors, but now when you add on Ticagrelor and other no acts like river rocks abandoned it picks up and for example in cardiac surgery. It raises the the total addressable market to 500 million.
And.
If you watch the webinars, you'll see that the market for reducing bleeding risk in all surgery, not just cardiac surgeries is even greater at $1.5 billion and so here in the United States. This is just the opportunity here.
And it is supplemented by the massive opportunity in Europe and elsewhere as well.
So with that let me turn it over to Kathy off for the financial highlights Kathy.
Yes, Thank you Phil and my greetings again to everyone for today's call I'll provide an update regarding Cytosorbents second quarter 2020 financial results, including product sales progress and in addition, I'll provide an update around our working capital a recent equity raise and our cash runway next slide please.
Yeah.
So our product sales for the second quarter of Twentytwenty were a record $9.5 million, which represents our best quarterly product sales ever. This is approximately 62.7% increase over pratap sales of 5.9 million for the second quarter of 2019 and in addition, this spring.
Since the company's annual product sales run rate to approximately $38 million.
This increase in product sales in Q2 was driven by an increase in direct sales of approximately $1.7 million from both new customers and repeat orders from existing customers along with an increase in distributor sales of approximately $2 million.
And in addition, that's still noted we had our first sales of Cytosorb in the United States of approximately $667000 onto the emergency use authorization granted by the FDA.
For the quarter, although it's difficult to quantity quantify we estimate that approximately $2.4 million to $2.6 million worth of our product sales were due to the demand for cytosorb to treat Cove at 19 patients.
Our total revenue, which includes product sales and grant revenue was approximately $9.8 million for the second quarter of 2020 as compared to approximately $6.2 million for the same quarter of 2019, which represents an increase of 57%.
Our second quarter 2020, gross profit grew to $6.5 million, a 48% increase or $2.1 million over gross product gross product profit of approximately 4.4 million for the second quarter of 2019.
Our gross profit margins on product sales were approximately 70% for the second quarter of 2020 as compared to 76% for the second quarter of 29 kids, but if we exclude certain production costs associated with the ramp up that occurred during the quarter, our second quarter gross profit margins for 20.
20 are approximately 78% so still very healthy next slide please.
That will just turned to our six months financial results where product sales for the first half of 2020 were approximately 17.7 million, which is 69.5% increase over products sales of 10.4 million for the first half of 29 team.
And though it is difficult to quantify we estimate that approximately $3.9 million to $4.3 million worth of sales was due to demand for covance for cytosorb to treat.
If it 19 patients.
And this increase in sales that we saw was offset to some extent by decreases in south related to elective procedures because during the pandemic. Many hospitals hauled it elective surgery surgical procedures, such as in cardiac surgery, where cytosorb may have been used.
Next slide please.
Now looking at our quarter over quarter product sales.
Our Q2 2020 sales of $9.5 million represent a new record for quarterly product sales.
Given the order for patterns that we are currently experiencing we expect that to covert 19 pandemic will continue to have a positive impact on product revenues in the second half of 2020.
However, this may change, a with containment or the development others vaccine to.
We hold the pandemic.
Next slide please.
Looking at our trailing 12 months product sales as you can see from this chart overall, our annual product sales growth continues to exhibit a very strong growth trajectory and we expect continuation of this overall positive trend in the future as a result of our progress with regard to several factors including.
One expansion of our sales and marketing resources to increased public awareness of cytokine storm and the need to control. The overactive immune response in seriously ill patients, which is one of the benefits of cope at 19 to the company three organic growth in our existing.
The markets for increased international expansion insights about the continuing publication of new clinical data in a wide variety of applications and finally, we'll take a look at our working capital and cash runway next slide please.
As of June Thirtyth, Twentytwenty, we had approximately $35.1 million in cash.
In July we closed the sale of shares of our common stock and receive gross proceeds of approximately 57.5 million and after deducting expenses related to the offering we received total net proceeds of approximately $54 million, bringing our cash balances today to approximately 89.
$9 million, which the company expects will fund the company's operations well beyond the next 12 months.
As a result, the company has determined that the going concern risk disclosures that were previously included in our financial statements have been eliminated in the June Thirtyth 2020 financial statements.
And we believe that we have.
Fishing cash to fund our operations well into the future.
Briefly turning to our capital structure as of June Thirtyth 2020, we had approximately 42.3 million common shares outstanding on a fully diluted basis to wish which we added approximately 6 million shares in July as result of the equity offering, bringing our total fully diluted shares outstanding.
To approximately 48.3 million shares.
Phil I'd like to turn the call back to you at this point.
Exactly.
But if you're not historically given specific financial guidance on quarterly results until the quarter has been completed.
However, provided that the current order pattern continues and notwithstanding uncertainty related to the Coca 19 pandemic, we expect that the third quarter 2020 sales will be one of the company strongest quarters in terms of product sales.
That concludes our prepared remarks, operator, if you would please open the call up for the queuing they session.
Thank you.
As a reminder, if you have a question. Please press star one on your Touchtone phone.
Please make sure your mute button is turned off to allow your signal to reach our equipment.
One moment. Please go now poll for questions.
Our first question comes from Andrew Dsilva with B. Riley FBR. Please proceed with your question.
Good afternoon, Congrats on all the progress during the quarter had really impressive and I really what a difference a year makes I just just a few questions for me.
Just to start can you just help me understand what manufacturing looked like during the quarter and where you are currently in the third quarter.
I believe you were running near full capacity for at least part of a the second quarter, but obviously with margins are being compressed sequentially. They are there would appear to be some inefficiencies that were present can just let me know if the transient nature of covert 19, and the scale up made a made a challenging to me.
Any real time Cytosorb demand and if that's the case do you believe you worked out a lot of a lot of that here in Q3 as a second waves are starting to come up and various hotspot.
Yeah, I mean, I, what I would say is that Oh.
After receiving the emergency use authorization in April and having the pandemic religious hit us in March.
We've done actually had an outstanding job in ramping production to be able to grow product sells over 60% year over year this quarter.
Certainly a in order to do that we incurred lever a higher much higher labor costs in terms of overtime and.
And our other incentives or as well or there was also a increase in efficiencies. When you work at that route at that very high level for you know to and the tree that so rapidly.
But we fully expect that the gross margins will return.
To be expected or.
Levels that we've attained in the past roughly 80% pretty even higher going on in the future.
Great and then I was just or relates the transient nature of cover that indeed do you think now that we're in a Q3.
Your your even more equipped to handle the changes in hot spots in real time.
Yeah, I you know.
Coping 19 has is kind of engine usual pandemic in that it has spread throughout the world and and hits one place very hard but leaves that place you know within.
No two to three months and then goes onto attack. Another area of course, I think we're all expecting that a second wave a occurs.
I will will occur in the fall.
And I, probably and and.
The worst going into the the the winter season, and so from a manufacturing side, we've been planning for that eventuality and have been falling Ur cobot sales throughout the world I don't know, particularly you saw in the last quarter distributors or sales were very strong as.
As countries, where we have a independent distribution or partner sales have been hit a quite hard.
So a we fully expect to be prepared for that.
The second wave.
Okay, great to hear.
And.
As it relates the blood thinner opportunity has there been any interest or anything that you can talk about with astrazeneca or any I know that manufactures and.
Ah you expanded the label in Europe, Oh, and obtain breakthrough status domestically and then kind of tie into that.
How prevalent are pretty fusion that same cardiologists and entry and coordinating with Cytosorb.
If they're utilizing it a internationally is there any crossover with the removal of blood thinners.
He curious on how everything's kind of tying together, but bigger picture.
Yeah I in terms of your second question.
Yes, so cytosorb is being used with something called Ecmo extracorporeal membrane oxygenation.
This is anything that can oxygenated blood outside of your body when like chemical ventilation fails.
Sit on longer so disease that no matter, how what percent of oxygen you pump into the lungs, the person Oh, well still likely die because of poor gas exchange in the lungs.
And so turns out that those who are running ecmo.
Our often cardiac surgery, because enactment machine is very similar to a heart lung machine and an operating room and those are others, who are running at our also the perfusion, it's as well and so are you know these are the same people who are obviously operating on on patient.
<unk>, who are on blood centers as well so it provides actually a nice overlap in our Oh, we in our marketing efforts we certainly.
No. Many oh, the cardiac surgeons, who are out there running ecmo programs, but who are also operating on it on a daily basis as well and so its right straight within our our sales vertical.
I'm in your first question again, I am sorry.
Oh, just if any of that Oh, no outstanding catcher yeah.
Yeah, I'm not anything that we can comment on it the current time.
Okay, Okay, great and a allow I've got a few my questions I'll just ask one kick the rest offline.
How many hospitals right now would you estimate our at over $1 million a inside to start a sales and right now.
So we've not disclosed we've only disclose one customer that's got was over that level because it was a large percentage of our overall sales.
And when additional hospitals meet that requirement will disclose it.
Okay, Great <unk> best of luck on 40, Congrats again and all the progress this year.
Thanks, so much Andy.
Thank you.
Our next question comes from Josh Jennings with Cowen and company. Please proceed with your question.
Hi, good afternoon, thanks, Phil and catching congrats congrats on a record product sales quarter.
I wanted to just do you have multiple shots on goal here in terms of getting.
Full approval in the United States from the FDA.
Refresh to you also have the Ticagrelor movil indication.
And you have the way in hand for Cooper 19.
Critically acclaimed 19 patients is is there a path, but you can see may not be fully established but two for data accrual in quickly over 19 patients to potentially seeking approval pathway for that indication down the line here.
Yes.
Well I think that as we discussed before you know Coker 19 is just another viral pneumonia.
It causes it a typical acute respiratory distress syndrome phenomenon that as seen in other viral pneumonia is like.
Influenza. Her example.
Certainly different series Coker 19 in that.
There's often causing a hyper coaxial below the phenomenon.
The formation of tiny clots.
In the lungs as well.
But it's the same complications that covert 19 patients see whether or not its acute respiratory distress syndrome.
Or shock renal failure. These are all the same complications that we are treating today.
Bacterial and viral census patients.
So it's not so much that are you know, we're we're fixated on getting.
Covert 19 data, but it is actually trying to obtain data.
On complications of viral pneumonia is like Coca 19 that may help formed the basis of a U.S. regulatory approaching the future.
But at the current time, we're still in the process are working to gather data or trying to get a D. The numbers of patients that have been treated into or CTC registry and to be able to analyze that data.
In a way that is a presentable to the after Gary and so, but we're very committed to that process and there's a lot of.
Things happening in a company that are focused on trying to to get all that data all in one place.
[noise] now that makes sense, thanks for that and and just want to type kegler removal indication and the path forward.
For the U.S., you talked about potential 510, K., we've done over five 10-K or PMAG.
Now if T.A.
Decisions are always wild cards for everyone, but how optimistic are you that you could potentially see a past five 10-K path open up by the FDA either straight forward or de Novo.
And maybe when do you think minimal that decision be made by the two when will you know the path forward for Ticagrelor meaningful in the U.S.
So work in current discussions with the FDA now and it would be premature to speculate on what path that might be.
But I think that the goal is to a work.
Our our higher.
Program to really.
Our goal is to basically get that answer soon and so maybe Mike. It's if you want it to comment on.
On what that might look like.
Yeah. Thanks, Phil.
So you know this indication with somebody has been Mr. Li Yu and it was granted breakthrough designation to U.S. evolves cardiac surgery patients.
Due in large part you know we have gained some experienced in the population with a refresh two trial as well.
So we believe that you know going forward and no formal discussions.
About the breakthrough designation with some of the information safety data that's emerging from refresh to these are the kind of you know topics were actively discussion with the agency and based on that you know in <unk> in the very near future, we should be able to hubs you don't align path forward like like field said.
That alignment, we haven't game, yet, but wouldn't across some of had moved in discussions to lead to that clarity.
So.
I'm not sure there's like that and more to that but we're having some really.
What I think they're going to be very successful interactions with the agency or we should have you looked like clarity there you're asked the corporately. So.
Excellent maybe just one last question.
Get back in the queue, the CE Mark label extensions friendly thrombotic removal.
Can you talk a little bit about how that's playing out commercially so far I know, it's still early days, but.
Wanted to just put that put that on the table for you guys and thanks for taking the question.
Sure a Christian maybe you'd like to take that question.
Thank you could adjust sets you said, it's a it's very early full does it concern and Tom so for the law.
Label extension, the the rebalancing Obama <unk>.
This has happened on the in the Middle set you too.
So there was a <unk>, especially because of that make the most and low dose.
Excess problems to the hospitals couple of small tends to reduce dogs Mrs syndication.
The other one the revoke the bomb removal is on the CE Mark.
Little bit longer from Q1, and a they'd be have Uh huh successes.
Put something in Germany Me [noise] me, so roughly 90% of the Hobson's us.
And all those.
50% or using all have fused over these times all removal she got no.
Okay seasonally.
Many of them also regularly so let us go successes.
So the books infusion.
[laughter].
Great. Thanks again.
Thank you.
Our next question comes from Jason Mccarthy with Maxim Group. Please proceed with your question.
Hey, guys as my book, which on the line up.
Taking a question.
So.
Like I see you know, we're going into the third quarter and you said I mean, I know you don't give guidance, but you did say that you're expecting to be particularly strong order.
So.
I'd like to gauge your husband or clarity on <unk>.
Whether you're expecting to see someone of ever used impact of typical third quarter seasonality due to cold it.
Or if you're if you're still expecting that to.
Uh huh.
Well I think from a seasonality perspective, you know in certain parts of the world Cosan <unk> King has.
Temporarily I believe decrease as a problem. So for example, western Europe is I just wonder if those areas. However in other parts of the World Ur Cobot its surging as we mentioned in the press release today, it's it's in the Americas, It's a in southeast Asia, It's in Eastern Europe.
In Japan, and and other countries.
Oh in India, as well and so.
Covert 19 is not taking a holiday and Ah and again I think that cover 19 will as Kathy mentioned remain a catalyst here in the second half of the year [noise].
Now from a seasonality standpoint and from a.
Hey.
You know what we often see is a European slow down in July and August and so we're just at the beginning of August now, but again to our guidance you know should order patterns continue with what we've seen in July again, we expect this quarter could be amongst our best in terms of product sales.
Alright. Thank you and then just one more read one it's one of the to see what time period the 667000.
A U.S. Cove itself cover I know that you I was on or 13, but did sell start immediately or was there a bit of a lag or are you started actually making sales.
[noise] so prior to the way, we were actually donating devices under or a different path called expanded access pathway.
Also called emergency use or compassionate use a there was typically use as a therapy of last resort, but then after the you wait there was a a bit of a lag time on the order or for a couple of weeks as we geared up for commercialization or just to remind you. We are not a commercial organization here in the United States.
And it was through the collective effort as many of the company that we were able to meet the demand for the product share in the United States. So a as as we switch now to Q3, the focus will be less on a passive sales and more of a proactive outreach.
Using distributors and others to get out there, it's the market and to get out. These hospitals. What we find is that does hospitals that know about our product or actually a very enthusiastic about it and our goal is to continue to create awareness through an active marketing program.
Sure in the U.S.
Alright, Thank you very much and again congratulations on the on the corner.
Thanks, very much Michael.
Thank you.
Next question comes from Sean Lee with H.C. Wainwright. Please proceed with your question.
Oh, good afternoon, guys and thanks for taking my questions.
My first question is still on the manufacturing side. So at the end of Q1, you guys mentioned that you had to more than $2 million of backwaters order backlogs because of the manufacturing and with the ramping up of manufacturing. During Q2 was wondering whether you were able to clear also back orders and what would be the capacity.
Right now like <unk> annualized capacity right now so I just looks.
So I think that what we found was that there were a lot of said some of the backlog that we had came from countries, where covert peak actually very quickly and just happened in a number of Ah.
European countries for example, where either the the outbreak was not as bad as predicted for example in Germany.
Or where again Cove it a peak quickly and then and then a went away.
So so in fact some of those some of that backlog, we never had a chance to fulfill because.
Those devices were not needed at the end of the day.
But that being said you know in terms of capacity production you know we still remain at the you know a maximum capacity is about 80 million out at this facility.
We are looking to make some capital improvements to try to expand that a little further as we transition to a new larger facility.
But at the moment, we we are a week, we do have capacity continue to produce at about 8 billion and sales.
Oh, Great. All my second question is on the refresh to hit I said, so as him personally system you mentioned that.
The yes, I'd be has a green light decided to continue I was just wondering whether they recommended any changes to the protocol and how are you. What precautions are you gonna take to a restart this study well good identics still going on.
Sure.
Let me have Mike as comment on that like us.
Thanks, Phil.
So I'm going to start from the second part which is regarding to the pandemic.
And as you know, it's very different stories across different regions of the U.S. So in some areas you know the the impact of the pandemic now that's really not.
Not diminishing the load the clinical activities all resuming low in other areas a lot of the trials.
Had been put on hold secondary to the surges in cases, specifically in the south southeast Midwest. So it's going to be its I phone sites process understanding exactly what situation that are out there what the ryobi, saying regarding engaging no called the cold related.
Studies.
Regarding the first part of the question. The if you recall the study was put voluntarily on hold.
I'm really due to improvement in data monitoring and data quality. So I'd love to work that's been done over the past few months with what does sizable those gaps and make sure. There is no longer exists going forward and the DMC basically agreed on the modification some additional data collection. So there's no.
Protocol related recommendations that I made no more procedures study procedures that are changing except the tight at a milder data that's being collected so we view that as very minor not a big logistical hurdle for us or to get across to get the study going again.
Great. That's good you my final questions on the Hemodefend D. So the company was recently awarded a $4 million contract by debt on the defense to complete the clinical development and.
According to the the contractors for up to three years. So I was wondering is it going to take up that they use to develop hemodefend or can we expect that to maybe moving to clinical studies sooner.
[laughter] Vince would comment on that.
Sure.
Sean So you know for the BG product basically the you know that's different than the first team to defend product right, which is the one that we were working on previously with cobot, but you know with with this anti body group products.
You know I think I think it it it could get possibly to the clinic within the careers I don't know that's going to take that entire time.
But you know we're just in the early stages now with this.
Money to relates to drive that program cord.
No we had done some initial work in this area, but now with these finances.
I think that we're especially through the scrap we're in a position to really.
Move that program poor, but as you know, we're just all coming back from the R&D team.
It's coming back from Oh, you know or the timing and manufacturing during the cold period. So we're just starting to get those programs back up but we I think we can move that program.
Our board pretty aggressively.
Okay. That's good yeah, that's all I have thanks again.
Yeah, and maybe just a little color Sean <unk>. So you know the this program is actually now well funded a with the most recent announcement of or an additional 4.4 million in in a grant and contract funding.
So I think it's in everyone's best interest to try to accelerate this is as fast as possible.
And Ah Theres nothing Ah I don't believe that's contractual that prevents us from running faster in fact.
<unk>.
You know in discussions with a program managers they would actually prefer it. So if we can use that money really catalyze this program get a product to market fast.
You know that would definitely be oracle.
Sounds good.
Thank you.
No no further questions at this time I would like to turn the floor back over to management for any additional or closing remarks.
Well, thank you and everyone for your participation today, we're very excited about what the future may bring.
If you have any other questions. Please feel free to reach out to Jeremy Feffer at Germany at Lifesize Pfizer's.
And we'll try to respond to your questions where possible. We look forward to our next quarterly call. Thank you everyone have a good night.
Ladies and gentlemen, this concludes our conference for today I'd like to thank everyone for their participation.