Q3 2020 Cerus Corp Earnings Call

Thursday Thursday

Ladies and gentlemen, thank you for standing by and welcome to Serious corporations third quarter Financial results conference call at this time. All participants are in a listen-only mode after the speaker presentation. There will be a question-and-answer session to ask a question during the session. You will need to press star one on your telephone. If you require any further assistance, please press * 0 month. It is now my pleasure to introduce investor relations director Tim Lee. Thank you operator. Good afternoon. I'd like to thank everyone for joining us today, cast we are simultaneously displaying slides that you can follow you can access the slides from the investor relations website at ww.w.

With the end the call or over agreement serious as president and chief executive officer, Victor Ramen Operating Officer, Kevin Greene serious as Chief Financial Officer and Carol more serious as senior vice president of Regulatory Affairs and quality serious issued a press release today and answer your financial results for the third quarter ended September 30th, 2018 in describing the company's recent. This is highlights. You can access a copy of this announcement on the company website at www.sedar.com.

I'd like to remind you that some of the statements will make on this call to let the future events and performance rather than historical facts and our forward-looking statements examples of forward-looking statements include those related to our future financial and operating results, including our 2020 Financial guidance and goals are pretty expensive and dissipated cashiers from operations and gross margins as well as a development efforts future growth and growth strategy. Use your product sales product launches ongoing and future clinical trials ongoing feature product development in our regular activities and clean the timing of these events and activities these forward-looking statements involve risks and uncertainties that can cause actual events performance and results to differ materially, they're identifying with today's press release and under risk factors and our form 10-K for the year ended September 31st, 2019 and our form 10-q for the quarter ended September 30th 2020, which will file shortly.

We undertake no Duty or obligation to update our forward-looking statements on today's call Will begin with opening remarks followed by the vague to provide the commercial update care of in Terms of financial results followed by Obi with a development pipeline update and closing remarks. And now it's my pleasure to introduce o b Greenman serious as president and chief executive officer. Thank you Tim. Good afternoon everyone. We are pleased to report another quarter of record product Revenue totally twenty three point six million dollars driven by strong commercial execution with games and both North America and the American markets robust top-line performance in the quarter was complimented by continued progress in our development programs on all fronts in particular. We are eagerly awaiting the birth anticipated approval decision on pathogen reduced precipitated fibrinogen complex or PR cryo, which we think could happen next month later in the call. I'll share with them.

With the compliance. For the FDA guidance document on the bacterial safety of platelets coming to a close in five months. We are seeing increasing adoption of our technology by both blood center and Hospital customers in the US.

As we have previously noted we think most of us but centers and hospitals will gravitate towards single step methods either pathogen inactivation or lvds large volume delayed sampling comply with the guidance our discussions with Blood Centers and hospitals indicate that rather than the 2-Step option the single step method provides the operational benefits and he's of availability When comparing intercept to lvds. We think our technology offers several advantages such as replacement of gamma radiation CMV serology testing and zika virus testing which gives us conviction in our belief that nurse stepped will become the standard of care the vehicle provide additional details on the US play that market during his prepared remarks by now. Hopefully, you have had a chance to review our press release detailing our third quarter results while the COVID-19 pandemics has had an impact on our business. I continue to be impressed with how the series team is navigating.

our pre-launch activities in preparation for the anticipated approval for PR Christ

These challenges in support of our customers and they're increasing needs to secure the safety of the blood supply as we head into the winter months. We are seeing a substantial rise in the daily COVID-19 cases hospitalizations both here in the US and abroad this surge could impact the availability of blood donors and Staffing that donor centers in light of the uncertainty as to where and when the page nineteen surge will Peak we are narrowing or full year twenty-twenty product Revenue guidance range from $89 to $93 billion to $8,991 billion dollars there for the implicit price range for Q4 product Revenue would represent year-over-year fourth quarter growth between 21 and 30% and solid sales momentum heading into 2021 with that. Let me turn the call over to the vehicle from a more detailed review of our commercial operations.

Thanks, it'll be and good afternoon first month. And those are North America and in their region North American platelet hit demand increased almost 90% year-over-year And approximately 30% sequentially as adoption of Interest platelets continue to increase we are happy to report meaningful year-over-year increases in our Q3 product sales to four out of the five largest plus internet works in the US these gains by the American one out of the 22 American Red Cross sites are making pathogen reduced platelets.

As the FDA guidance compliance. Near the close at the end of March 20-21. We believe that the overall economic and operational challenges of lvds are increasing not being understood by u.s. Blood Centers and hospitals when compared to the relative ease of use and added-value conferred by Pastor reduced playlist the recent virtue AABB annual meeting earlier this month highlighted the added relevance of pathogen reduction for protecting the Integrity of the blood supply as Blood Centers consider their COVID-19 experience and Lessons Learned towards future pandemics.

We expect us demand for Interceptor Advantage when compared to lvds extending shelf-life beyond the current five days as the potential for better Inventory management and lower.

For ways to trade the COVID-19 and Emmett has made it challenging to roll our 7-Day study at the place. We'd like so we are now in the final stages of conducting the study at both clinical trials. We are now planning for a first-quarter 2021 p.m. A submission with a possible FDA approval in the third quarter of 2021.

We believe that this label expansion as substantial value from the perspective of both blood center manufacturers and transfusing hospitals particularly as these stakeholders learn to deal with the application that the FDA bacterial safety guidance.

In the entire region the commercial organization delivered another solid quarter with reported product revenue of 13% on a year-over-year basis increasing product revenues and France and Portugal or key contributors. We are also pleased to see the momentum for passion and activation in Germany that we strived earlier this year has now translated into incremental fraud to sales this quarter of the calculated number of treatable playlist based on sales improved in the quarter contributing to the regional growth compared to the year of your decline. We experienced in the second quarter.

Plasma kit sales were once again a driver for a man sales growth due in part to continued demand for pathogen and activated COVID-19 convalescent plasma or CCP month since the COVID-19 demek is taken Rude. The series team has partnered with blood centers around the world and in total have helped to establish 94 new center of the manufacturer of intercepts ECP while we continue to believe that the recent sales contributions from CCP manufacturer transitory. We see this as a spotlight on the needs of preparedness and of course that will help convert these customers into long-term intercept users fundamentally. We believe that supporting the CCP efforts of our blood center customers and their life Partners is the right thing to do.

With that I will turn the call over to Kevin for a review of the third quarter financials.

Thank you for bacon. Good afternoon, everyone.

Today, we reported third-quarter 2020 product revenue of 23.6 million dollars which represents a 31% increase from the $18 recorded during birth last year.

The first nine months of 2020 product Revenue totaled sixty three point seven million dollars up 19% compared to the fifty three point seven million dollars reported during the prior years.

Global demand for intercept continue to increase during the third quarter.

Calculated number of treatable plate that goes is in Cosmic. It's accounted for approximately 18% Largely driven by the demand for pathogen and activated CCP.

In addition to our product revenue and not included in our guidance government contract Revenue told a five point six million dollars in 16.9 million dollars off the three and nine month periods ended September 30th 2020 respectively.

Comparatively government contract Revenue told a four point eight million dollars and thirteen point six million dollars for the corresponding prior year.

Going forward we expect government contract Revenue will continue to increase as barter reimbursed clinical trial activities have returned to enrolling patients. And as we begin working on our whole blood initiative funded by the FDA.

No, let's move the discussion to our reported gross margins.

Gross margins for the quarter were 54% compared to 58% for the prior year.

Gross margins during the quarter were negatively impacted by a non routine. Charge of approximately $870,000 or 3.7 percentage points of Revenue off due to certain inventory components that failed to meet the company's quality standards.

That. Charge was partially offset by economies of scale and lower per-unit costs as a result of our increased manufacturing volumes and the benefit of foreign exchange.

On a year-to-date basis gross margins were 55% and consistent with the levels reported during the first nine months of 2019. We continue to expect gross margins off in the mid-fifties for the balance of the year.

I know like to discuss operating expenses, which total thirty two point two million dollars during the quarter and we're largely unchanged compared to the prior-year.

The total Q3 operating expenses sg&a expenses accounted for approximately 16.3 million dollars and were relatively flat compared to the prior-year off.

For the first three quarters of 2020 sg&a spending told them forty eight point three million dollars down compared to $49 reported during the first three quarters of 2019 the slight decline in sg&a expenses during the nine-month period was primarily due to lower travel and marketing related expenses as a result of the COVID-19 pandemic.

Research and development expenses for the quarter totaled fifteen point nine billion dollars and remained relatively flat compared to the 16.1.