Q4 2020 Cytosorbents Corp Earnings Call
Good afternoon, and welcome to the Cypress Cytosorb into 2020 financial and operating results conference call. At this time all participants are in a listen only mode. Following the formal remarks, we will open up the call for your questions. Please be advised that the call will be reported at the company's request at this time I'd like to turn the call over to our moderator Amy Vogel. Please.
Having this level.
Thank you and good afternoon welcome to the Cytosorb in 2020 financial and operating results Conference call. Joining me today from the company are Doctor felt Chan Chief Executive Officer, then check Pony, President and Chief operating Officer.
Kathleen Bloch Chief Financial Officer Doctor are females Deli Airgas, Chief Medical Officer, Dr. Christian Steiner Executive Vice President of sales and marketing and managing director of Cytosorb bench Europe G. M B, Christopher Cramer VP of business development.
Before I turn the call over to Dr. Chan I'd like to remind listeners that during the call management's prepared remarks may contain forward looking statements, which are subject to risks and uncertainties management may make additional forward looking statements in response to your questions. Today. Therefore, the company claims protection under Safe Harbor for forward looking statements.
In the private Securities Litigation Reform Act of 1995 actual results may differ from results discussed today and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC.
Projections as to the company's future performance represented by management include estimates today as of March 9th 'twenty 'twenty, one and we assume no obligation to update these projections in the future as market conditions.
During today's call, we will have an overview presentation covering the operating and financial highlights for 'twenty 'twenty My Doctor Chan Doctor might cause failure garish, Chris Cramer on MS. Bloch. Following the presentation, we will open the line to your questions. During our lives Q&A session with the rest of the management team.
At this time, it's now my pleasure to turn the call over to Dr. Phillip Chan.
Thank you very much Amy and good afternoon, everyone.
Despite the backdrop of COVID-19, we had an outstanding 2020.
Its record 2000, Twenty's Cytosorb sales of 39, and a half million versus $22 8 million in 2019, 73% increase.
The announced record Q4, 'twenty 'twenty product sales up $11 5 million.
$6 6 million a year ago, a 74% increase our blended product gross margins were a record 82% from the fourth quarter.
76% for the year.
We had a solid balance sheet with 71 4 million on cash I stopped at the end of the year and no long term debt.
And we delivered more than 121000 cumulative cytosorb cartridges to gate.
Which was up 51% from 80000, a year ago with distribution across 67 countries.
In addition, we treated more than 5000, COVID-19 patients in more than 30 countries, including here in the United States under FDA emergency use authorization granted in 2020.
We received EU approval from a spectacular on rivaroxaban or emergent urgent cardio thoracic surgery and we were also granted FDA breakthrough designation for the removal of Thai cargo bar for this application.
We also received European Union approval for a new product called the East Coast 300, white cartridge to remove inflammatory toxins during ex vivo perfusion of solid organs for organ transplant.
And we also were awarded $8 $4 million on contracts from the guilty to complete.
He must fan D. G. A preclinical development that will enable universal plasma as well as whole blood transfusions.
Okay.
One of the topics that we wanted to cover today is on <unk>.
<unk> growth strategy, let me normal.
With our strong financial performance and solid cash position, coupled with solid current and anticipated demand for Cytosorb and are executing a number of key initiatives to drive growth.
First it is to maximize what remains of the COVID-19 opportunity.
And then it is to return to our pre COVID-19 growth strategy, where we will be focused on achieving solid growth in product revenue, while replacing COVID-19 sales.
Prioritizing the path to U S regulatory approval of Cytosorb based on aggregate removal and cardio thoracic surgery.
Execute on a new clinical our clinical strategy in the United States and in Europe.
Spanner manufacturing facility to accommodate a peak capacity of $350 million to $400 million on sales.
Begin building out our U S commercialization team in anticipation of a potential U S approval.
And also driving to GAAP profitability.
For today's discussion given that the last three bullets.
Further out we will focus on the first four bullets.
First of all talk about the status of Covid worldwide.
After many weeks of decline cases of COVID-19, apart. So worldwide as you can see from the lower right hand corner graph.
What we've seen in the last.
Few weeks has been a resurgence of COVID-19, particularly in Europe as you can see by the darker and darker red countries.
As well as in Latin America, this maybe because of the virus variants.
So we believe that COVID-19 is still expected to contribute to revenue, particularly in the first half of the year.
In the United States.
It's a similar story however, as you can see here.
COVID-19 has gone down quite dramatically.
On the left hand side and say map of the United States in early December.
2020, and you can see and these represent new cases of COVID-19 in March 'twenty 'twenty, one you can see that.
The activity is significantly less in United States and this is represented by the cross on the upper right hand corner.
Where you have seen also another significant decline since January of the case of the new cases, a day only new cases, but.
But what you can see also in the last couple of weeks, there's been a plateauing of the curve.
And with now the reopening of many states, where they now recommended doing away with masks.
This may actually begin to rise again.
We just don't know.
That decrease in the number of new cases was also correlated in the middle graph with the cases on mute deaths reported per day on.
Now around 2000 a day.
And also by eight.
Climate hospitalizations.
On the left with 50000, which is a positive thing.
This has been in the <unk>.
Environment oven of more vaccine availability on the lower right hand side, you can see where we currently are.
Less than 20% of the population is currently vaccinated now, but based upon production on one to 2 million new vaccinated people every.
Every day.
Our hope is that we will get you on a herd immunity, which could happen around.
Somewhere between 60 plus percent of the population either having been infected or vaccinated.
No new variants may throw a twist incidents because some of that variance.
Can actually escape potential immunity given by vaccinations on by prior infection, but this is something that we'll have to wait and see.
Okay.
Our first.
Our first objective.
Right.
Is to achieve solid growth in non COVID-19 sales.
So after Covid is done on underlying non COVID-19 core business grew 32% last year and accounted for 76% of ourselves COVID-19 sales were estimated at about 24%. This is important because it shows the health of our core non Covid business is.
It increases the visibility on our potential to continue growing this year.
We plan to accomplish this in a number of different ways first of all we've significantly expanded our gross sales team now with five people.
Germany represents 51% of our overall product sales followed by other direct territories, where we have salespeople that represents about 17% of our product sales from 2020 from distributors and strategic partners accounted for 32% of our product sales.
In Germany, we've seen that the rep productivity actually is quite good on approximately $1.2 million per rep. In 2020, despite additional cells prior to COVID-19.
On the Rep productivity was a bet with eight reps was about 1.8 million corrupt.
So, although we've dropped down a little bit I think that the fact that they are already so productive it's a very good sign.
Our second focus will be to go back on sales processes that work first of all in person selling to customers in person trade shows at medical conferences and clinical symposia in personal training as.
As well as a strong push on marketing activities.
We benefited across the world because COVID-19 has raised awareness of Cytosorb.
For our therapy as a treatment of hyper inflammation and cytokine storm.
Next we want to maximize their existing applications, we are continuing to see strength in sepsis and septic shock and many other critical care illnesses, such as acute respiratory distress syndrome, and lung injury trauma burn injury pancreatitis and many others and we also have about a third of our overall usage historically has been in.
Cardiac surgery, particularly in high risk surgery.
And many other applications, such as endocarditis and others.
And last but not least for post surgical applications and this is one of the reasons why.
The reduction in elective surgeries caused by Covid hurt us in 2020, but as these procedures and the subsequent complications that often occur. After these procedures such as post operative sepsis and other complications.
We believe that this will be again, another driver to get us back to where we want to be on the growth curve for non COVID-19 business.
And then last but not least we are going to maximize new applications and one of those applications.
Applications are something that will be focused on today and todays call, particularly on the clinical side, but this is a leverage on.
Our EU approvals to remove high CAG alert and Rivaroxaban.
An emergency or urgent cardio thoracic surgery.
We lost you, we do not have an opportunity to maximize sales.
That's because of.
Significant inability to get into hospitals to talk to certain <unk>.
A significant decrease in.
Cardiac surgery, a workflow as.
As well as a decrease in the effectiveness of medical conferences that were held virtually.
But we also have other applications as well. These are just some of them. The liver disease. We believe will be one of our major growth driver in the future on Microsoft won't be discussing momentarily.
The Hep on fire study that we plan to start later this year.
As well as new applications, and Ecmo and we've seen particularly here in the United States, but also elsewhere around the world to.
The concurrent use of Cytosorb with Ecmo.
<unk> has helped many patients get off of mechanical ventilation as well as be candidly, they're perfect well and we hope to be able to demonstrate this.
The future, particularly in the early intervention of patients who are hyper can claim.
So with that let me turn it over to Mike to discuss the clinical update.
Particularly prioritizing U S approval and executing the global clinical strategy like this.
Yeah.
Thank you Phil.
And good afternoon, everyone I'd like to spend the next few minutes, giving you an update or a clinical progress on the clinical programs. We're running obviously with a priority on U S approval as Phil already mentioned.
So some highlights first relating to the execution of the clinical plan that we discussed on previous earnings calls.
Over the past few months, we have been scaling up our clinical operational capabilities we have.
Eight new clinical experienced members to the team in 2020.
In an effort to execute our studies in a cost efficient and timely manner with increasing sponsor involvement.
We will continue that expansion of the team in 2021.
A very important addition to worth mentioning is David Cox, our new VP of global regulatory who dramatically increases our bandwidth when it comes on a regulatory submissions.
Going forward, we'll focus on generating rigorous adequately powered multi center company sponsored trials.
These other trials that would help us get us regulatory approvals and establish our treatments are standard of care and inclusion and treatment guidelines.
We will do so by partnering with top academic institutions and the walgreen now on the investigators.
And we will take a complementary approach of Archie Ts randomized clinical trials registries, but also real world evidence and health economic projects since the ability to demonstrate the value proposition is critical and the adoption of our profit by device.
Yeah.
As Phil mentioned from the COVID-19 pandemic had impact on all aspects of the business, including clinical operations.
There's no.
There's no surprises on multiple clinical programs around the world suffered during the pandemic and we experienced similar headwinds.
And we saw that in two different ways, either delayed or pause enrollment of studies not related to Covid. Specific example for US was the tight zone study, that's actually get into the U K that suffered from nationwide lockdowns and the U K.
But we've also witnessed the.
On the.
Organizational COVID-19 related clinical research and the delay in review by the ethics committees in the I R. B's of non Covid related clinical studies.
We now have an updated path to FDA approval, clearly prioritizing the debt kagler removal during cardiac surgery application.
We will be executing on U S. IDE study and I will spend a few minutes a couple of slides later to give you a little bit more detail that is on top priority in 2021.
However, we're also resuming the refresh two K 8-K, I trial, which a lot of you have been following for a while and we believe that soon we will be enrolling patients again.
And finally, we will be pursuing a breakthrough designation for direct oral anticoagulant removal as well in a very similar fashion to the breakthrough designation that was granted to us what that guy can live anymore.
Finally on the investigator initiated trial side are we are still awaiting the removed readout. This is another example of how COVID-19 impacted the ability to monitor size to retrieve the data and actually perform the necessary analysis for the top line results, but we do expect that.
To be reading out very soon.
Yeah.
Well. This next slide there's a summary on the clinical programs that are active or will be active in 2021.
You will see on the slide that the programs are categorized on our based.
Based on different colors relating to our cardiovascular applications from that critical care applications.
We also demonstrated that we're taking a multi disciplinary complementary approach to our clinical plan that includes and prioritizes our C. Ts, but we'll also be executing on registries and the necessary complementary studies to provide either pilot efficacy data or mechanistic evidence for applications.
Starting on the Blue on the cardiovascular side on the top left on the top of the RCT column, you will see the safe and timely antithrombotic removal type CAGR, Laura or start T study.
This is gonna be the I D study execute into the U S.
Focusing on debt cargo removal in patients undergoing emergent urgent cardio thoracic surgery.
We expect that the idea would be approved during the second quarter.
We're doing all the necessary work in the background to have this study started in the third quarter of 2021.
As noted already we are resuming the refresh two 8-K a trial. This is also a U S. IDE trial, focusing on the reduction of postoperative acute kidney injury.
We also believe that this study will be actively enrolling in the second quarter of this year.
We recently announced that we're launching the safe and timely antithrombotic removal Star registry in Europe. This is going to be an international registry, we're focusing on four countries initially the United Kingdom, France, Germany, and Austria, but we plan to expand the use of.
Oh Cytosorb for antithrombotic removal in real World practice also expands.
The meeting to be capturing and enrolling patients again in the second quarter of this year.
Finally, we have two single arm studies looking at generating data pharmacokinetic and Pharmacodynamic data, indicating a low removal the citation types from studies.
Citation X finally up and running we had some delays in the review process by the Arab ease in Germany due to COVID-19, but I'm happy to report that the study is actually actively enrolling patients.
Ty Zerbe the enrollment is greatly suffered from COVID-19 are where they're rolling Lockdowns. One that's still in place in the U K and all non Covid related research and deep prioritize.
We are under review for the <unk> Best path forward for this study and awaiting further guidance from the regulatory authorities in the U K.
And finally this year, we plan to also initiate a similar single arm PK PD study no providing mechanistic data for Rivaroxaban removal.
We believe that this study will also be up and running before the year end in 2021.
Moving on to our critical care programs and first is the process study.
Proteus is gonna be a multicenter randomized clinical trial that will go to executing Germany looking at the ability of cytosorb to provide hemodynamic stabilization in patients with refractory septic shock.
We were able to submit the protocol for IRB review, which is still ongoing but we do believe we will be able to initiate the study and started rolling patients from the third quarter of this year.
The C. P C searched our registry is active in the United States. We now have six most centers contributing and with the process of putting together the initial experienced from the publication it would be submitting debt in the near future.
Andy you were expanding this registry it will also be transitioning it to a more general critical care registry. The C. T. C. C C cytosorb therapy in critical care since we do believe in the foreseeable future COVID-19 will no longer have as great of an impact and we want to be able to have it.
Platform to capture.
Use of our device across critical care indications.
And finally, you heard that from Phil earlier, we will be executing a pilot multicenter single arm study in patients with alcoholic hepatitis who are suffering an acute on chronic liver failure.
This is important we do believe that Cytosorb has an excellent profile, you're providing benefit through both hyper inflammation reduction, but also removal of liver toxins to play a critical role in the pathophysiology in these patients.
The protocol is currently being finalized.
We are planning for IRB submission in Q2, and the beginning Oh the study by the year end of 2021.
Yeah.
And Oh. This is the last slide on the clinical side, but as.
As Phil previously mentioned, our top priority this year will be focusing on the U S. I D trial.
Yes.
B I D submission is imminent and we believe that we will have the review completed and approved IV in the second quarter of 2021.
The objective of this study will be to demonstrate the clinical benefits of intra operative that geiger low removal.
The approach will be a multicenter study.
Getting high volume a U S cardiac surgery programs.
Importantly, we have already identified.
Approached discussed presented the study and agree and received agreement from most of the size that would be necessary to execute this study.
We will be sponsoring the study and the operational side would be handled by a combination of the cytosorb as clinical team plus a C. R O a.
Hum.
To assist us with the operational side, we have secured world renown principal investigators shouldn't executive committee there'll be overseeing the trial.
And as stated already the I D submission is imminent, we anticipate approval in the second quarter and we're doing all the necessary steps in the background on working part a little work streams to be able to initiate the study started rolling patients in the third quarter of 2021.
And with that I'd like to turn it back to Phil.
Thank you very much my guess.
I'm now turning it over to Chris one of the questions that we've been getting a lot of it is about our new partnership with B Braun.
Just announced very recently on Chris could you. Please give an overview of our partnership there. Thank you.
Sure. Thanks, Phil I'm very excited to welcome our newest partner B Braun to decide Assortments partner network.
The agreement represents a strategic win for the company by extending our marketing efforts for Cytosorb to a larger audience.
Ensuring ongoing access to the B Braun Ami platform and.
Helping to validate and differentiate cytosorb versus competing technologies.
Privately held and based on those who can Germany B Braun is one of the leading health care companies in the world.
With operations in 64 countries and over 64000 employees.
B Braun develops medical devices pharmaceutical products and services free users around the world.
In 2019, we generated sales of 7.5 billion euros.
B Braun and beat them, they read them, the renal therapies division manufactures and distributes products for patients with kidney disease.
Including continuous renal replacement therapy or C. R. A T dialyzer is.
Needles, and syringes, and chronic and acute hemodialysis systems like the army and the Ami said bloodline pictured here on the slide.
Amongst top players like Baxter and Fresenius medical care B Braun is recognized as a global leader in renal replacement therapy in intensive care medicine.
We brought on is the market leader in South America and has a strong presence in hospitals throughout the world.
Exactly.
In February 'twenty, 'twenty, one sorry to soybeans and B Braun executed a global co marketing agreement officially adding B Braun to our partner network on.
Proud to say that along with FMC Cytosorb into has now partnered with two of the largest and most respected strategic partners in acute care.
The goal of this partnership is to leverage the world class marketing and sales organizations, a b Braun inside assortments to significantly increase the visitor to be on visibility and awareness of Cytosorb in army promote access to care for critical care physicians using cytosorb assortment army.
And to generate new sales leads precise assortment Amit.
As part of the program B Braun inside Assortments will conduct joint marketing activities and customer training at major medical conferences throughout Europe Asia Pacific Latin America, the Middle Eastern Africa to promote the use of the combined technologies.
Additional regional co marketing events will be coordinated in countries, where the companies are actively commercializing the respective technologies.
States specifically excluded.
B Braun will supply the market with army and Amie said, plus while Cytosorb and its network of direct sales strategic partners and distributors will continue to supply the market with Cytosorb.
Last let me just mentioned that this agreement does not alter our relationship with FMC.
Our partnership with FMC remains active and we will continue to work with them as usual on Europe, Mexico, South Korea, and other parts of the world.
In closing, we're very excited about our new partnership with B Braun.
And expect the relationship to help advance our cytosorb commercial efforts and promote access to care for patients and physicians.
That's it for now and I look forward to having more updates on our progress on this topic for future earnings.
Before handing it back to Phil I wanted to give just a quick summary of all of our partnership efforts.
They were partnered with for the largest and most successful health care companies in the world.
In the acute care space, we're working with two of the top three players can be brought on an S. M C.
As we just talked about B, Brian is the newest addition to our partner network via a global co marketing agreement.
FMC remains a long standing partner of Cytosorb in since 2014 day.
Currently distribute cytosorb in six countries, including Colombia, Czech Republic, Finland, France, Mexico, and South Korea.
We also have a co marketing agreement in place to promote the combined use of Atkins who's multi filtrate acute dialysis platform and cytosorb.
On the cardiac side, we're working with true Moe cardiovascular true most side with us in 2016, so the distribution rights in cardiac surgery in France, and Nordic countries. In 2020, we expanded our partnership with true when they became our distributor in 10 states here in the U S under emergency use authorization for Cytosorb on COVID-19.
Yeah.
Finally, biochar on was our first partner signing one of the earliest distributors of Cytosorb dating back to 2013.
Viacom maintains the exclusive distribution rights for Cytosorb in India, and Sri Lanka.
Overall as you can see we're in very good company with our strategic partners in 2020. One we will continue to invest in our partner relationships and look for opportunities to grow these relationships with the ultimate goal of driving commercial adoption of Cytosorb.
With that I'll hand, it back to you Phil.
Thank you very much Christopher that overview.
Now I'll turn it over to Kathy to talk about 'twenty 'twenty financial highlights Kathy.
Thank you, Phil and greetings to everyone.
Today's call I'll provide an update regarding cytosorb in fourth quarter and full year 2020, now audited financial results. In addition, I'll provide some color around our working capital and cash runway.
Yeah.
So I just sort of product sales from the fourth quarter of 2020 were approximately $11.5 million, which represents a 74% increase when compared to product sales of approximately $6 $6 million for the fourth quarter of 2019, the fourth quarter of 2020 represents.
New Company Records for quarterly product sales it should be noted that the increase in the average euro to dollar exchange rate did have a positive impact of approximately $800000 on the fourth quarter 2020 sales.
Our total revenues, which include product sales and grant revenue were approximately $12 million for the fourth quarter of 'twenty 'twenty as compared to approximately $7 $4 million for the fourth quarter of 2019, representing an increase of approximately 61%.
Q4, 'twenty 'twenty gross profit grew to approximately $9.4 million an increase of approximately 77% over gross profit of Q4 2019, and as Phil mentioned importantly, our gross profit margins on product sales were a record.
Hi, 82% in the fourth quarter of 'twenty 'twenty compared to 80% for the fourth quarter of 2019 next slide please.
Now turning to our annual results for 2020 product sales for 2020 were approximately $39 $5 million, representing 73% increase over product sales of $22.8 million for 2019.
This increase was driven by an increase in direct sales of approximately $8 $9 million and Additionally, an increase in distributor sales of approximately $7.8 million.
We also benefited from our first sales of Cytosorb in the United States under EUA emergency use authorization for the treatment of COVID-19 patients those sales contributed $1 3 million of product revenues in 2020.
'twenty 'twenty grant revenue was approximately $1.6 million compared to $2.2 million in 2019 Grant revenue.
And 'twenty 'twenty gross profit was approximately $30 million, an increase of $12.4 million were 70% greater than 2019 gross profit next slide please.
Yeah.
Next we'll take a peek at our quarter over quarter product sales.
I'll restate it that Q4 represented another record quarter and it's also significantly higher in Q3 2020 sales of $10 2 million, that's a 12.5% quarter over quarter increase in sales next slide please.
This chart, which also shows our quarterly product sales. However, it breaks it out on between our COVID-19 sales and our core nine non COVID-19 business in critical care and cardiac surgery and while it's difficult to quantitate, a we did a detailed analysis.
And came up with estimates that our Q4 2020 product sales related to the treatment of COVID-19 patients were approximately $2 $5 million.
And total twenty-twenty cells to treat COVID-19 patients were approximately $9 $4 million or about one fourth of our revenue is for 'twenty 'twenty. There's no doubt that COVID-19 has had a positive impact on our 2020 revenues, but we know that our underlying core non COVID-19 busy.
In critical care and cardiac surgery grew 32% in 'twenty 'twenty.
The COVID-19 benefit to sales was offset to some extent by decreases in sales, which were related to elective procedures, which were avoid it were postponed during the pandemic such as particularly in cardiac surgery, where cytosorb may might otherwise have been used as a result, as the COVID-19 pandemic is contained.
Elective surgeries are expected to increase and we expect to benefit from improvements in our core non COVID-19 business next slide please.
Turning now to our year over year product sales chart.
We can see that year over year product sales continue to grow.
<unk>.
Just as important also shown on this chart is the solid Green line, which represents our product gross margins and as you can see we have also continued to improve product gross margins over the year with our Q4 2020 product gross margins now at 82%.
And with these greater than 80% gross margins that we are now routinely experiencing we can expect you observe further improvements in operating results as sales revenues growth next slide please.
This last slide we will take a look at our working capital as of December 31st 2020, we had a healthy $71.4 million in cash in the fourth quarter of 2020, we Additionally paid off our $15 million term loans with bridge bank and we simultaneously entered into an agreement with bridge bank.
We retain the ability to draw down $15 million in term loan debt should we wish to exercise this option in the future.
We also recently received approval of the sale of our 2019, New Jersey net operating loss and R&D tax credits and this will generate cash proceeds of approximately $1.1 million, which is expected to be received in the next few weeks.
Our 2020 cash burn from operating and investing activities was approximately $7.3 million.
And.
With our $71 4 million of cash we believe we have sufficient liquidity to provide for the continued commercialization of cytosorb as well as our robust clinical trial strategy finally with regard to our capital structure as of December 31, 'twenty 'twenty, we have approximately $48 six.
Common shares on a fully diluted basis and that concludes my report and I'd like to turn it back to Phil.
Thank you very much Kathy.
So net of service has not historically given specific financial guidance on quarterly results until the quarter has been completed however provided that the current order pattern continue notwithstanding on several key related to the COVID-19 pandemic, we expect our product sales for Q1 of this year will exceed those of Q1 of last year. We also.
I expect that 'twenty 'twenty, one will represent another year of growth.
That concludes our prepared remarks, operator, if you will please open up the call for the live Q&A session.
Thank you and as a reminder, if you do have a question press star one on your telephone keypad.
Please make sure you mute please make sure your mute button is turned on to allow you to signal to.
To reach our equipment and we will take our first question today from.
Josh Jennings with Cowen and company.
Hi, good afternoon, Phil in the subsurface team. Thanks for all the details on the update its clear that the COVID-19 utilization drove utilization in 2020 and may create a comp headwind as you're as you're heading through 2021 any way you can just help us.
Think about I know, there's a lot of unknowns around with the pandemic, but without trends have.
Gone so far in the first quarter.
And then maybe just help us think about the offsets I think you'd called out the return of elective procedures there'll be more utilization you have to we'd have to think that you can work with.
The increased utilization for Covid cases critical care conditions are more comfortable using cytosorb and inflammatory pathophysiological states. So you've got to take CAGR low or indication a couple of countries over in Europe with any other layers of growth that you would call out there that will help offset any decrease in the COVID-19 utilization channel.
Yeah, Thanks, Josh and you know I think that you know the the point that we've been trying to get across is that the underlying core business that is non COVID-19. It's very healthy again at 76% of our total product sales for last year, even with all the disruption that COVID-19 caused as Kathy mentioned.
Are we still actually showed 32% correct.
So that was actually very nice growth.
Alone on top of that it was supercharged by COVID-19.
Being said I think that we we've had a lot of hot.
Gross initiatives.
That we had been putting into place prior to Covid and our goal is to work on those now and I've mentioned a lot of those already in the presentation, but maybe you could give a little bit more color Chris.
Christian would you mind, maybe giving some commentary.
Yes, Thank you Phil.
Thank you Gil supposed to crush it.
Yes. It has been set already by our children also about Cassie.
The year 'twenty 'twenty was very challenging but nevertheless, it was very successful. So it was very challenging for the commercialization teams because they are accessed and travel restrictions and as it has been said or as well they've got less patients in our coal business peers.
And.
So.
The 'twenty 'twenty, what's the price that the most successful year with record sales and so on and this was the result of all the book and day, Yes before it was not just the accidentally because of the pandemic.
This is reflected by the growth we have despite having treated less patients in our core business feels it's well less than we could have treated.
So as the year 'twenty 'twenty, one and I think it'll be challenging yourself, but it will benefit from 'twenty to 'twenty.
So I have a number of points I want to share a assume number bump this increased demand this and just.
We will of course help them.
To support the qualifications. This interest of men's is one on the.
On the treatment corn, which is a systemic inflammation, but also on the therapy cytosorb.
Number two the sales forces and support teams are really ready and motivated and trained to go out again and see the existing and new customers. This was not possible in the last year.
There's still a lot of restrictions forces people to meet customers.
And to look for new customers in the hospitals.
Number three the pandemic has forced us to additionally pass digital series platforms.
<unk> developed.
And this of course, we will not stop them when the pandemic gross stuff people use these formats in the future is small in diesel.
So part of the normal says book was the one to one meetings so to increase our in person meetings.
Number four and this has not been.
Uh huh.
Underlined enough I think we havent expanded footprint from 'twenty to 'twenty, we have 10 more countries, but we have registration snow and we have two more countries was eventually use which is C U S a and Canada.
Because I think it is very important to say that the body of evidence has thrown in the body of experience.
And the start of the massive clinical programs is.
Destroyed by Microsoft and.
In our coal business physical seat the movement into the community.
And six depends on the development of gross driving additional fee as it has been mentioned by Phil also.
Supporter.
And capitalize the growth in these segments are quite simple the ATR segment.
It's from Baltic is moving.
Country faulty cooking on true ups upon just to give you on an example, 90% of the Hudson to from Germany.
Customers are false and 50% on those are already using touches all interest education after only one year.
Of after the approval.
Some of those true for example, Sweden, but just one of the highest.
Adoption rates of Chicago law, they have we have 90% penetration.
Penetration in the hospital, so Hudson does.
In Sweden.
Second deliver segment.
As Phil pointed on liver diseases flu b in the future a very important on permanent thickening of growth.
For the short term that goes on to replace currently used liver support techniques.
And of course also develop a major indications.
And to start segment, which is going to be very important as it is a new segment as well segment. As you know we have used we have treated patients from the segment on the past, but in the last year. We have gained many many experiences and many lessons we have learned in terms of patient selection and.
How to conduct a therapy.
Just to give you a little bit more color.
I want to give you one on many cases.
Hum.
So that this this case report is from a small hospital in the social Germany. This is tani ICU was less than 10, a few bets.
It.
It has to be in the new customer last year.
They only have one ecmo machine and they never have you touched on before they.
They had an initial training and some of them, but the experienced but they have got an experienced head of department coming from Munich University, which was a one off.
Advantages sits.
Situations.
So the patient both a mother of two in her late thirties, and if shown up as a pro gradient COVID-19 cost lung failure on D. S.
Yes.
Accompanied by massive systemic inflammation and cardiovascular failure.
The treating team so I'll touch on a very little chance to survive, but they have immediately started a small plus cytosorb.
Three days of continuous treatment brought on led to him on a named sterilization and at the end.
<unk> led to a feeling of ecmo sort of patient could get off the ecmo. So good and she survived to acute life threatening piece.
This ecmo plus signs up.
Unfortunately this patient.
Call. It a second debt so called second hit and the bacterial infection, leading to septic shock with massive type information lung and cardiovascular failure.
So again very little chance to survive the second debt.
However, they started again very early the combination of Cytosorb and Ecmo.
And have treated tediously price cytosorb treatments.
This isn't that true cardiovascular hospitalization.
Patients seek range lung function and had an overall improvement was the result of getting green from Ecmo.
Was discharged from ICU and discharged from hospital.
On the patients knowing rehab the snow.
Long term neurologic.
Kidney dysfunction.
So this is kind of showing.
It had been the many lessons we have learned.
During the last year, which we kind of call supply for this year and just spout something from this patient is.
On a patient selection is really key it has to be patients with a proven systemic on hyper inflammation.
Hemodynamic instability and initial organ failures, we have to initiate the children's early.
And we have to dose the cytosorb treatment.
And just at the end will lead to success in those kinds of patients.
Hum.
Yes, I think the situation in <unk> 'twenty 'twenty, one will be challenging, but I think also be up your pet much better than so many on this end.
It will be much better at full force on for many other medical device companies.
I think that will be more capitalizing on slowing down effects.
And as I said before the commercial comes on recent teams on really motivated and operating together.
But on this I think the massive investments energy money on menthol it into the clinical programs.
They generate the fuel for sustained long term growth in the future.
I hope this answering.
Most of the questions Josh.
Yes, no. Thanks for reviewing all those layers and I'm proud of all the extra detail on one just one follow up on Phil.
Just congratulations on all the progress on the debt.
The movement with the F T a b on the cusp of.
Of the I T E approval on for Tycho Galore and move on I just wanted to.
Hear your updated thoughts on on the on cardiac surgery indication now that refresh two trial is going to be in the <unk>.
So restarting.
And then how do you see the U S regulatory timeline for cardiac surgery compared to the U S timeline for tight cagny removal in terms of things go smoothly from here.
Any time line you can share from potential U S approvals for those two indications thanks for taking the questions.
Yeah, Thanks, very much Josh.
You know I think that what we're focused on right now is that.
On the tech aggregate removal application is the shortest what we believe is the lowest risk and fastest route to commercialization in the United States and that's why we'll be taking the top priority.
In our clinical program now refresh two is has enrolled 153 patients into a 400 patient study.
And it's just about to get going again, as Mike had mentioned and so on that trial will be a link the completion of that trial is expected to be later on out there not from what we should be able to do with Teck can't go there I think the good part about <unk> of our removals debt. This has the potential to be.
He is very rapid study.
Again, our intervention during the surgery and then a relatively short follow up period.
You know with the hopefully very clear end points, but again as we.
As we finalize and hopefully get the IDE approved by the FDA will come back with more detail on the size of that study and then we'll also be able to estimate better on the timing of that study as well.
Understood makes sense, thanks again Phil.
Thanks, very much Josh.
And our next question is from Anthony Petrone with Jefferies.
Oh, Thanks, Congratulations everyone I hope everyone is staying healthy maybe just start Phil with the CTC registry you mentioned in the prepared slides that a publication in the in the U S is being prepared at the moment. So maybe just a little bit of timing update on the C. T C.
Registry publication in the U S. And then how we should be thinking about that trial expanding into Europe.
And as we think about.
2021.
Under a scenario where that data is positive how.
How do we think about potentially that adding to COVID-19 related sales in 'twenty 'twenty, one and maybe offsetting some of that headwind on all of a few follow ups.
Yeah, I'll I'll turn it over to Mike. Thanks, Anthony I'll turn it over to Mike is for some additional color on that.
You know I think that the good part is that the C. T. C registry has been enrolling relatively quickly it's been.
Doing so I think based on enthusiasm by centers, but also by active management by the current clinical team, which I think is very good.
I think that you know we've been.
Only thing, particularly in Ecmo, many cases of Ecmo in Cytosorb again, as a way to rest the lungs and promote long healing to try to resolve the very significant lung injury that occurs in these patients.
And Hum again prior to Covid Cytosorb has already been used in thousands of Ecmo treatments.
Hi, Christians point is one of the reasons why.
You know, we've we were able to get really going very rapidly here in the Covid pandemic.
But in terms of talking about the implications of.
Any type of analysis, let me turn it over to Mike is here.
Uh huh.
Give a little additional color my guess.
Thank you Phil Anthony Thanks for the question.
So it just wasn't mentioned in addition to the C. D C data coming out of the U S. We have a substantial experience now from around the world and there's been publications coming on from a different countries. You know are reviewing those outcomes and Oh, we have internally formed a task force at work co lead.
<unk> all the international experience that we plan to submit for a review manuscript look at the ex U S experience from COVID-19, which is a number is far greater than the one on the U S. Net.
Regarding the C. D C registry as Phil mentioned, we are seeing you know that the use of Cytosorb under the EUA is frequently favorite in patients on Ecmo.
Simply because it does allow for this unique therapeutic strategy of allowing for lung injury, and we are focusing on getting on capturing that experience and getting them in a publication. We we do believe we approaching now the numbers that are you know what would constitute a meaningful.
It wouldn't do play a like I said to submit.
In the very near future and now we are.
You know, we're gonna be a part of a peer review process that in some regard do you know it's hard to estimate but you know most of the journals have been working pretty quickly when it comes to COVID-19 related research. So we're hope people might get you know some sort of an expedited you know four to six weeks review versus the traditional on two to three month review so.
It's hard to exactly give you a timeline, but we're working very hard to you know to throw it over the wall on one of those journals and hopefully ask them to have an expedited review. So we're optimistic that you know come late spring early summer, we should have that data out and maybe even sooner based on you know are the willingness of the journal to work with us to publish quickly.
That's that's helpful and maybe a couple of follow ups second one on the data from would just be the specific timelines on remove endocarditis I know you said that that's come in relatively soon is that it sounds like potentially that's a first half event or is it more like mid mid 'twenty one.
And then just in terms of Germany, maybe a high level update on.
How many of the four hundreds mid size hospitals with a big focus on sepsis, where that penetration sits heading into 2021 and.
And as you think about now that the 20 person sales force.
Being in a position now to sort of proactively go after accounts potentially post.
Shutdowns in Germany, how should we be expecting 2021 to play out in terms of New center adds.
And then you know as a quick follow up to that just on the penetration from existing accounts.
How should we be thinking about how that will trend in 2020. Thanks.
So I'll just give you a quick answer about removing then I'll turn it over probably to Christian to give you the answer related to penetration in Germany. So you don't remove is a is the German government funded trial and run independently by an academic research organization. So in that regard you know we don't have any more.
At any level and therefore, we just basically waiting for updates ourselves.
Our understanding is that all of the COVID-19 related updates.
Delays took us to where we are now but now we're really really close so we do anticipate that it would be in the first half of this year for every information we're getting from the investigators there shouldn't be.
Having the data the topline results by the first half on this year.
Christian you want to take the second one.
Yeah, Hi, well Christian let me turn it over to you in a second yeah I think in terms of we've not disclosed on you know where.
Hundreds.
Hundreds of hospitals throughout the country. These are large university public hospitals. These are mid tier hospitals and these are many small hospitals as well and so on.
This number continues to grow actually last year. However, most of our orders I think on or in our existing business in Germany was related to Reorders.
Given that you know our sales reps were not able to go out there and open a new hospitals.
Chris You mentioned that there were some but I think that the vast majority of the revenue came from Reorders, maybe a crystal you can comment on that.
Yeah.
Yes, Phil this is actually right the situation, let's Oh, the circumstances led to a situation that are supposed to very difficult to to recruit or acquire new customers. Those who were in the process are quite advanced.
And sometimes have the opportunity to treat COVID-19 patients they could be turned into customers and are also successfully is.
Reflected by the example, I just have a given.
But in general I think the acquisition of new customers growth was very difficult and was far below what we have experienced from the past and also what would be expected for last.
Last year without Covid.
Because as you said already on some need the sales force.
Increased massively.
On towards the beginning of 'twenty 'twenty actually the sales force is it's a mix of actually since representatives and our support personnel.
Confusion as to pulse on it so from your fears.
And our application specialist.
Oh got it.
The condo interest would you care business. So it's a.
It's a very nice new functioning team and I expect a lot of new customers for this year, but also I expect that we will regain customer.
Hi.
I wouldn't say lost last year, but because.
The slowdown at all but shut on different electric programs.
Just no no patients themselves and departments and so these departments have not all of that Oh over last year or maybe some of them to call us.
I expect a strongly that day they go online again.
When they get the patients coming from these different yes.
Thanks again.
Yeah.
For example in there.
Our next question is from Danielle, it's healthy with SBB Leerink.
Daniel Your line may be muted.
Unfortunately, we're not receiving any audio from her show. The next question will be from Andrew Desilva with B Riley Securities.
Hey, good afternoon, congrats on on our progress last year in that thank you very much for taking my questions. So just.
Just a few quick ones when you're looking at.
At International Health systems, and hospitals and a.
New customers that were established due to COVID-19, it's.
Anecdotally is there.
Cereal evidence of use or cytosorb in other indications not related to COVID-19, basically our clients clinicians understanding.
Cytosorb is benefits and overlaps are as it relates to just critical care in general.
Yeah, you know what and.
I think that's absolutely right.
What we've seen particularly in distributor territories, where we opened up new accounts for example on Latin America.
Middle East and other areas.
Is that Covid was really the catalyst to get people to try to the therapy, but once they understood. The concept of what it was trying to do in terms of reducing hyper inflammation, reducing cytokines storm on reducing the severity of organ injury.
In Oregon failure.
You know I think that this has translated into their interest in using it for other things such as sepsis right that is not related to COVID-19 and other applications.
Maybe I'm a Christian I don't know if you can provide maybe some examples of that.
Yes, I think it.
It's difficult it's right on what you said everything is relative uncertainty it's difficult to pick on one or two examples.
I think it's Latin America in general is showing exactly this.
Happening.
But also markets are like for like somebody round, which was a very strong market last year has shown the same once the the users oh on the spending once it's possible the intellectually translate this into other indications and this is not just true.
For the user. This is also true for our sales partners, because obviously they want to build their business as well and to get the investments are returned and US all day once they understand that there is a profound.
Hum advantage.
Hold on for the use on the patients. They can go into other indications on that's exactly what they do.
Great Great useful context, and then.
Obviously that the pandemic.
Spurred a lot of R&D.
And biopharma as it related therapeutics that can treat various aspects of the disease and I was curious you know what the evolution of the space over the last 12 months now.
Have you seen anything debt.
Materially changes the competitive landscape.
For Cytosorb.
As it would have been this time last year.
Yeah, you know I think that as the concept of cytokines storm on hyperinflation.
Okay readily apparent basically many companies just came out of the woodwork with potential immuno modular Tory therapies.
You know the the most the most promising ones that have come out.
I think cytosorb is one of them.
But you know certainly the use of dexamethasone in COVID-19 related <unk>, yes.
Was demonstrated to show benefit, but still even with the use of dexamethasone on mortality, 29%, where nearly every one out of every three people die have died in on mechanical ventilation and touches carrying it despite steroids.
There's still considerable room for improvement.
The only other immuno modulator that has demonstrated a small benefit is key is the silicon map, which is an IL six receptor antagonist.
Now this is a a a a biologic that is designed to block.
Block the activity of an important cytokines, but only one of you know literally more than 100 cytokines that regulate the immune response.
And in this particular study to early the on the use of a citizen map helped shave off I think four percentage points or so four five percentage points.
In the recovery study off of mortality, but that showed I think is that won the concept of antagonizing cytokines can work.
But too given the magnitude to the relatively low magnitude of that effect.
That.
And what we've seen in sepsis and in many other critical illnesses that IL six is it antagonizing one cytokines, it's just not good enough.
That is the value of a broad spectrum, Ed Zorba, such Cytosorb and not just from most IL six very efficiently over.
Moves a wide variety of inflammatory mediators cytokines natural exit toxins a lot of other molecules that can stimulate inflation.
And and and that's why I think you know cytosorb.
Has has kind of carpets place out in and particularly those patients who are were very critically ill. So are the rest of it is.
It is interesting but unproven.
And I think that you know, there's there's not much out there els that that was out there I mean, there was a.
A new study I think that came out on a.
On Luvox, which is an antidepressant and you know that from a very mild disease or people with very mild diseases seem to potentially prevent the progression of it.
I think in two small studies and I think debt that is remains to be seen.
But but I think for those who are really in jeopardy of death for example.
Are you really need big guns, and that's what Cytosorb represents.
Okay perfect useful a couple of work on follow ups I'm, just as it relates to that there's a blood thinner opportunity internationally.
Like what just use a market Germany for example.
How do you expect the the label expansion to translate well to a commercial rollout is as we start seeing your sales team being able to actually get feet on the ground again and maybe.
Parity at some of the there label expansions, you've had well whether it be with bilirubin and and why you maybe think this one would be.
Be able to accelerate faster or slower versus others, you've seen in the past.
I think that Hum in Germany in particular, we're in most of the major heart centers today.
But not necessarily for this application call. We've been you know this cytosorb has been used and used over the years.
Particularly for high risk surgery and other applications.
And.
You know we were only we only got the approvals last year for the renewable type CAGR and Rivaroxaban.
And we have not really been able to fully exploit that those approvals and launches in the proper way.
To really drive sales and so I think that's the opportunity that we have in 2021, when COVID-19 goes away and when.
On a surgical volumes.
Begin to improve.
You know I think that this is a market where we've heard from many many surgeons, it's a big pain point for them.
And because of postoperative bleeding complications are really Mars, what was technically a perfect surgery.
And we believe that this can rapidly become a standard of care for this particular application.
And it's and we believe that it will.
Penetrate this market.
Much more rapidly than other applications that we've had for example in myoglobin removal for trauma or billing or weren't been removal for for for liver disease. So I think that's debt you know what you're hearing I think from me.
And what you've heard from my guess is that you know this is a very compelling application and this is one of the reasons why we believe that.
You know we can once we get going we can capture the market in Europe and in Germany, obviously, he's one of the largest cardiac surgery countries in all of Europe. They do are the.
The majority of cabbages actually and.
And this is a scenario where <unk> typically used.
And then Hum in the United States as well, it's a it's a big market for us and.
Again, I think the enthusiasm that we've seen going out to clinical trial centers to participate in this on a ite's study that where we're looking to submit imminently.
It is just yet another indicator of the potential here in the United States.
Okay and the last question is for Kathy.
As far as the B Braun a margin profile should should we expect that to be fairly similar to our other strategic partnerships and distribution agreements and then you know that.
The fourth quarter.
A fairly significant uptick.
And the legal expenses and our SG&A, but there wasn't really as much stock based comp and on a non cash compensation. So I was wondering if there was any sort of one time.
<unk> expenses that were in there that we should be thinking about or if if as we go into the first part of 2021 is that the expense weighted which you really build awesome. Thank you very much.
Hi, Andy Let me just take the second one first because it's easy there's really not any one time legal SG&A things I think we did point out we made a lot of a lot of progress on some really important hires including our new.
C N now my guess and also our V. P of regulatory so we brought in the first quarter of this year, but we were recruiting for so we did have some one time recruitment fees that we wont expect to recur I think he can get that in the MD&A as to the amount of that we did have in total cash cost.
<unk>, which is noncash stock compensation two categories.
For the year I don't know what the fourth quarter impact is but for the year on the total of our S use awarded to our executives, which we use as a form of compensation and then also the stock compensation expense related to the options that we give out it was about $4 7 million. So hopefully that will help you with it.
You know in terms of the B Braun agreement I think it has the potential to be a much broader.
Driver of revenue, we'll have to see how it goes it's it's new in in that we're co marketing in many many territories versus the distributor partner agreements that we've had on the cats are generally limited in the territories with which we're working with those partners.
Okay. Thank you very very much best of luck going forward this year.
Thanks, Andy.
Yeah.
And our next question is from Sean Lee with H C. Wainwright.
Hi, guys. Thanks for taking my questions. So my first question is on the AR process RCT study. So could you provide some more color on the design of study and what are its goals is it looking to set up some results for our future U S study.
Yeah. Thanks.
Sean on Microsoft would you like to comment on that.
Sure. Thanks, Phil.
So the prostate study is a multi center randomized clinical trial with <unk>.
Targeting between 20 to 30 sites in Germany.
But it's still a pilot study are we you know we have been Oh.
Continuously receiving feedback from the use of Cytosorb, but one of the most consistent clinical benefits is the ability to provide rapid hemodynamic stabilization would you can imagine is a key.
Clinical goal in these people with sepsis and septic shock and you know requiring multiple basic pressures to maintain their blood pressure. So this is something that we want for the first time to test in a rigorous adequately powered way in a multicenter fashion and that's what the process study will focus on.
But in addition to that we're also going to look at other.
Important clinical outcomes in that study, including ICU and ventilator free days, we're also gonna obviously tracked mortality in.
In this population so in that regard you know the idea behind processes that he will be a definitive study and providing the evidence that we can produce rapid hemodynamic stabilization, but also a pilot study to inform potentially larger RCT are looking at more traditional clinical outcomes.
On a in sepsis in shock.
Yeah.
Oh great.
Very helpful.
Yeah.
My second question is on the had pumped fire. So the liver failure seems to be another indication that you guys are pursuing this year. So I was wondering if you could provide some of the rationale behind that on what the design of the study could be and what the treatment. It's like for liver failure right now and how does title so it would fit into that.
Yeah.
And I'll, let Phil chime in as well on this but let me give you a couple of specific pieces about hep on fire. So happened fiery. It's also gonna be a pilot study, but much smaller you know proceeds estimated to be 160 patient range. The hep on fire will be substantial.
Smaller into single arm studies non randomized clinical trial.
But the idea is that you will recruit patients that have you know underlying liver dysfunction, primarily relating to alcoholic liver disease, but are on in the midst of an acute exacerbation, where in addition to the inability of the liver to clear the toxins from the accumulation. So I'll just talk since you have this simultaneous hyper inflamed.
Total response.
So the idea is that Cytosorb would go there and target both of the main drivers of morbidity and mortality in that population so that the.
The backward on you know hypothesis is actually very very strong.
And the idea is that we'll be able to show. Both you know the biomarker modifications to this population, but also track the course of traditional risk scores. She used in this populations and demonstrate that these patients do better than what is currently the standard of care of treatment population. So it's meant to be a pilot study.
But we feel very strongly about you know the application based on the pathophysiological you know substrate, a worst cytosorb should be able to generate a lot of benefit.
On a field that you want to add any color to that.
Yeah, I I mean, you know liver dialysis has been out there for a while on Mars. It was actually it remains one of the leading liver dialysis platforms in.
In the world, but it hasn't really fulfilled its commercial potential because I think it's difficult to use its a multi cartridge system.
And and it does not as Micah said it may it removes liver toxins, but it doesn't remove the inflammatory toxins that are often driving.
A lot of the reasons why that person is in the hospital on the first place and having such a bad exacerbation of their chronic liver disease.
And so I think that Cytosorb in a head to head study with Mars Oh that was published earlier. This year are actually demonstrated actually superiority and ability to remove different things.
And you know some of those things in Cleveland for example.
We can remove bilirubin extremely well we can remove ammonia.
Bile acids, and a number of different things that are related to the pathophysiology of liver disease.
And so.
Where we're going now though is that we we believe that Cytosorb actually has a single cartridge system easy to implement can potentially become the leader in this field and that's one of the reasons why we're really excited by.
The opportunity in one of the reasons why we're pushing forward with the single arm have on fire study, but.
But also will be a.
Pushing forward on the application.
For our commercial sales because you know if you want if you are a someone who believes in liver dialysis.
We believe that Theres, a lot of advantages of cytosorb over existing albumin.
Albumin therapies like Prometheus and.
Mars and spat and others.
I see thanks for the additional color that's all I have.
Thank you Sean.
And our next and final question is from Danielle, it's healthy with SBB Leerink.
Hey, good afternoon, everyone sorry about earlier can you hear me now.
Yes, we can okay, perfect sorry about that so I am not sure. If this question is for you sell or Kathy, but you know just curious how sustainable the gross margin profile is in the near term as the global ramp progressive and just over the near to medium term what the drivers are.
Our operating leverage and then one quick follow up.
Sure you know.
Maybe Vince you can comment on.
Staying ability of margins and where those are going on and then I'll cover maybe the operating leverage question.
Alright, Thanks, Phil Thanks, Danielle for the question. So so Danielle is sustainable clearly you know we are continuing to improve the efficiency you saw our Q4 and as we go to the next scale, we'll be able to improve that efficiency. Even further the thing we always have to keep in mind, obviously is volume.
Has a big component of that as well as you know product mix between the more efficient the more.
Sure revenue efficient direct sales versus distributor sales. So we believe its sustainable and we can continue to drive the you know the gross margin for an addition that we're obviously looking at other second generation devices, which will be a more efficient too.
It won't be more audits more capable been automated to be able to drive volume with less labor and therefore, a better cost Phil.
Yeah.
When we when we discuss our operating margins, we think that we can be among the best in the industry right. So the medical device markets as you know kind of where in that range of 15% to 20% operating margins.
In some places like Edwards are in the 30%, but they've been as high as 50% in.
In the past and we believe that we're bringing a lot of innovation to the table that has a you.
You know a tremendous value clinically.
And we believe we have an excellent business model, where we can be on the high end of that 30% to 50% operating margin range.
You know when when you think about the kind of levers that we can pull on how we try to optimize our operating on our operating margins and improve our operating leverage.
No there's really a number of big buckets right. So one is obviously top line growth and.
If everything goes well, we believe that 30% to 50% top line growth is possible.
And if we get U S approval are we could potentially even exceed that growth rate.
Thing is that you know from a gross margin perspective.
You know, it's really based on a number of things one is on Asps.
S piece right. So currently our asps are relatively fixed.
But in the United States, However, which is a fairly Virgin territory.
We believe that the Tyco gorilla application could potentially command a much higher ASP.
And we're currently receiving in Europe because of the if we're able to demonstrate the health economic benefits of decrease bleeding risk and and other types of decrease stay in the ICU et cetera et cetera.
You know this could have the overall effect is actually increasing our asps over time.
Which is a major component of of.
Gross gross margins and then you know as Vince mentioned, you know at 82%.
Blended product gross margins that mix as higher margin direct sales on lower marks on distributor sales on this is actually.
You know really high for any company in the health care space right.
Right. So you know when you when you look at.
The pharma industry, they're kind of in that 70% range and gross margins and you know, but our margins you know that could potentially exceed 85% this year or more into the biotech.
On a range of 80% to 90%.
So you know as Vince mentioned, where the where the kind of beneficiaries of all the costs down because we are the manufacturer of the device.
We think that our scale, particularly moving to a new facility that may have a capacity of about 400 million in annual sales that's going to allow for a you know at a relatively modest capex that's going to allow for.
Increased efficiencies and in another drop in Cogs.
And then as Vince mentioned, our will also be introducing more automation, which will also you know helped to decrease our cogs as well.
You know and then the last big bucket is really control of operating expenses.
You know what we what we already said is that you know are our reps on Germany, arguing about our reps in and.
Our specialists are doing about $1 2 million in sales.
But we've already seen that one hospital can be a $1 million to $3 million for sepsis alone.
And because of that we believe that the productivity of a rep could actually be quite high could actually be potentially.
About $5 million of Rep, right and so the more that we can maximize the productivity of our sales team.
I think the better the feed to better control will have over our operating expenses and that just you know ultimately feeds into the model.
You know I think that also you know we've been able to offset the.
The cost of innovation through grants and in government grants and contracts, which we've done very effectively.
Have a hybrid sales model, where you know we go direct and certainly would benefit from higher margins.
Margins in direct sales, but we also don't have to shell out the infrastructure to go to to to have this reach across 67 countries.
That will likely continue and then last but not least you know what what what Chris was talking about.
Leveraging the infrastructure partners and their resources is another way that we can help to control our operating expenses. So.
Think that Theres a lot of reasons why this is we believe this is actually a superior business model that has the potential for you know.
On a very significant profitability and cash flow I think that's one of the reasons why we're so excited by it.
Okay. That's helpful. And then just a quick question I appreciate that but this will be dependent upon timing. So I'm going to ask the question. This way and once you do secure U S approval, how we should think about.
Ramp trajectory and how much you can leverage your the existing hospital or the current hospital experience in light of Covid in the U S to drive a potentially faster ramp than maybe a normal product launch. Thanks. So much.
Yeah. Thanks, Danielle you know I think that.
We brought on some great resources Vince.
U S commercialization.
Now brought on Jim Comstock, who is VP of IR.
U S sales and marketing and.
I think the goal going forward as it is to try to find the best model to get the greatest coverage at the.
Now at the at the lowest cost we have the resources to go direct throughout the entire country.
But that may not be the ultimate strategy because a we.
We know that the unit volume the patient the surgical by it.
It is often highest in metropolitan centers, and we can absolutely focus in these areas well using distribution elsewhere to help supplement that and you know we've been working with some great partners under the FDA emergency use authorization for COVID-19 in the United States.
And they may be are they may be in the mix and so we'll see but that being said you know are.
The opportunity to penetrate this market is is a rapidly is is we believe is very strong provided that you know we have a successful study and we have the compelling clinical and health economics day in and make that happen.
Thank you.
Thanks very much.
At this time I'd like to turn it back to management for any additional or closing remarks.
Well. Thank you everyone for joining today's call. If you have any additional questions. Please reach out to Amy at a vocal E V O O G E. L F cytosorb with Dot Com and we'll try to reply to your questions where possible. Thanks.
Very much.
Thank you that concludes our conference for today I'd like to thank everyone for their participation and have a great evening.
Yeah.