Q2 2021 Cerus Corp Earnings Call
[music].
Ladies and gentlemen, and thank you for standing by and welcome to the Cerus Corporation's second quarter 2021 financial results Conference call. Please be advised that today's conference is being recorded and is now my pleasure to introduce mandatory on the senior director of Investor Relations. Please go ahead.
Thank you and good afternoon, I'd like to thank everyone for joining us today.
As part of today's webcast.
We are simultaneously displaying slides that you can follow.
You can access the slides from the Investor Relations website at IR docs here of Dot com.
With me on the call are Obi, Greenman, Cerus, President and Chief Executive Officer.
The 8 giron and tourist as Chief operating Officer Ken.
Kevin Green <unk>, Chief Financial Officer.
Carol more serious and senior Vice President of regulatory affairs and quality.
And Jessica Hanover tier since vice President of corporate Affairs.
<unk> issued a press release today announcing our financial results for the second quarter ended June 30 of 2021.
And describing our company's recent business highlights.
You can access a copy of this announcement on the company website at Www Dot Sirius Dot com.
I'd like to remind you that some of the statements we will make on this call relate to 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 the operating results, including our 2021 product revenue guidance and goals.
Operating expenses anticipated cash use from operations.
Gross profit and gross margins as well as the commercial development efforts.
Future growth and growth strategy future product sales product launches.
Ongoing and future clinical trials.
Ongoing and future product development and on a regulatory activities, including the timing of these events and activities.
These forward looking statements involve risks and uncertainties that could cause actual events performance and results to differ materially.
And our identified and described in today's press release and under risk factors and our form 10-K for the year ended December 31, 2020, and 10-Q for the quarter ended June 30 of 2021, which.
Which we will file shortly.
We undertake no duty or obligation to update our forward looking statements.
On today's call will begin with remarks from Obi, followed by Kevin to review our financial results.
We will conclude with commentary from Obi regarding recent announcements and update on our pipeline and closing remarks.
And now it's my pleasure to introduce Obi Greenman, Cerus, President and Chief Executive Officer.
Thank you, Matt and good afternoon, everyone hopefully you've had a chance to review our Q2 results from our earnings release, which we issued earlier today.
We're excited to share these results with you before Kevin and I provide greater detail around the second quarter I would like to begin with a few thoughts about our performance how we see the second half of 2021 shaping up and what we are focused on and in the near term and to help make our intercept offering and the new standard of care for platelet safety in the U S.
Our record second quarter results provide clear evidence that the intercept blood system for platelets has quickly become the preferred choice of both blood centers and the hospitals they serve.
Protecting the U S play of supply.
With our second quarter performance, our product revenue over the last 12 months is now north of $100 million a milestone for the company.
As we strengthen our leadership position.
Over other safety interventions for transfusion transmitted infections and the U S. We expect to realize continued meaningful revenue growth through the second half of 2021 and into 2020.2 and beyond.
Accordingly, we are raising our full year 2021 product revenue guidance to $118 million to $122 million up from our previous guidance of $110 million to $114 million.
The intercept adoption that we're seeing in the U S is unparalleled and is happening faster than we initially anticipated and.
And this era of pandemic preparedness, our pathogen and activation technology is creating a new standard of care with hospitals.
At leading U S blood centers like the American Red Cross and use of intercept for to protect the play of supply indicates a powerful endorsement of our technology that will help us continue to expand the reach of intercept.
At the ERC robust demand suggests their stated goal of moving toward a 100% pathogen reduced platelet supply is achievable based on the fact that their current run rate is now well above 50%.
Needless to say, we are thrilled with the level of intercept adoption and we saw in the second quarter and believe intercept treated platelets will soon be the standard of care and the United States.
Outside the U S. We have a long track record and some geographies like Switzerland, where the Swiss Red Cross was and early universal adopter of our technology, but significant greenfield opportunities in certain geographies remain.
And as an example, during the second quarter, we announced a contract with the Canadian blood services or CBS, which is the largest of 2 blood centers and Canada processing and roughly 2 thirds of the country's blood supply.
The CBS has said publicly it's the aim is to drive to full adoption of pathogen reduced platelets.
We are proud to partner with them over the next couple of years to make that of reality.
With a more than $1 billion global addressable market for intercept blood system for platelets alone.
We believe the opportunity relative to our current penetration remains significant and we intend to continue this commercial momentum.
As we've stated previously and because of our unique role and the blood components supply chain, we continue to prioritize our increase in production capacity and improve supply chain continuity.
As regions around the globe look to increase the safety of their platelet supply.
And adopt the intercept safety standard their reliance on Sirius is foundational for the operational excellence, we are committed to demonstrate.
With cumulative kit sales to treat over $9.4 million doses globally, and many thousands of patients transfused daily with intercept treated blood components, we realize the significance of this responsibility every day.
And empowers our team with great purpose and pride and demands of the investment we are making to the sustain this critical technology for the long term.
With the intercept fibrinogen complex product our IFC. We have also been hard at work on several fronts and we are aware of we expect it to be as this rollout has continued to build momentum over the last several months.
As we've stated previously the <unk>.
Hospital interest and engagement, we have seen around the product is positive.
And we are pleased to report that we have several hospital of customer contracts now signed and expect to begin ramping delivery of product to these early adopters through the back half of the year.
Among these initial accounts we are pleased that 1 of the early adopters as a large integrated delivery network variety and and 1 of our initial launch states.
Additionally, we are pleased to have recently added Florida to our launch footprint with the June announcement of lifestyles and IFC production partner.
We continue to target a nationwide IFC launch and the second half of 2020.2 falling our production partners receipt of BLA and to enable sales of IFC of cross state lines.
In addition to scaling up production of IFC and our production partners have also been preparing BLA submissions, which we anticipate being filed and Q3.
Finally on the reimbursement front, we are excited to announce this morning. The we have received a positive final decision from CMS for a new technology add on payment or and tap for IFC.
We applaud CMS for their decision to provide the incremental payment for IFC, which has an effective date of October 1.
Before I turn the call over to Kevin for a discussion on our financials I wanted to take a moment to talk about the blood shortage and the U S. A topic that has been and the news and and impacting the U S hospitals and patients over the last few months.
We have received some questions about how the shortage impacts our business I wanted to take this opportunity to provide perspective for our shareholders.
Clearly the supply of blood components is of critical cog and the health care delivery engine and any country and we believe the intercept platform is capable of helping to increase the availability of platelets and plasma and general.
And our intercept technology can also improved donor eligibility, but all of it in the need for certain donor deferrals like travel related deferrals designed to minimize the risk of malaria transmission.
Historically summer already tends to be a seasonally tight period for the blood supply and it appears to have started earlier and more severely than in years past, particularly in the shadow of the pandemic.
As has been reported hospital demand for blood products and the U S has rebounded.
But in many cases blood centers have struggled to keep up with this demand, particularly for red blood cells, leading to the deferrals of certain elective surgeries.
There's less flexibility for availability of platelet components since cancer patients are the most common recipients of platelet transfusions and delaying treatment is typically not a viable option.
Additionally, platelet components have a very short shelf life relative to other blood components. So making these units available for as long as possible alleviates, the potential burden and minimize the likelihood of waste and the system.
And with intercept platelets are true treated and can be made available much more rapidly after collection and with bacterial testing methods resulted in an effective increased shelf life duration that can reduce hospital waste.
Collectively these clinical and logistical benefits have for the first time and decades provided blood centers with the opportunity to price to price for value.
And with the confidence of hospitals will be receptive.
So in summary, while we do not believe our business will be impacted by the blood shortage, making headlines currently we joined ABB. The American Hospital Association, and our Blood Center and hospital of customers and urging all who are able to donate to do so.
This pandemic has changed the numeral aspects of our daily lives, but what it has not changed is the need for donors to provide continuously lifesaving blood products the contribute directly to patient care.
But the overall demand for blood components, rebounding, a sustainable and resilient and blood supply and necessitates the financial health of U S blood centers and their access to a solid donor pool.
With that let me turn the call over to Kevin for a more detailed review of our financial results.
Thank you Obi and good afternoon, everyone.
And there'll be discussed already we reported record second quarter 2021 product revenue of $31.5 million.
Of 46% increase from the $21.5 million recorded during Q2 of the prior year.
This represents the largest product revenue quarter and the company's history.
Global demand for intercept continues to increase.
For Q2, the calculated the number of treatable platelet doses increased 67% year over year.
In terms of product mix of the quarter kit sales represented 97% of our Q2 product sales.
Of the total kit sales.
And the kits accounted for approximately 91%.
The plasma kit sales accounted for the remaining 9%.
I'd like to spend some time speaking about our second quarter product sales by geography, beginning with North America.
Which was up 128 per se versus the prior year period.
The strength, we saw on the region was driven by robust demand for our platelet kits of the U S. As blood centers across the country continue to ramp with intercept.
Sales to the country's top 5 blood centers, which provide roughly 3 quarters of the U S platelet supply.
Grew 150% versus the second quarter of 2020.
Similarly, North American sales to blood centers outside of the top 5 U S. Blood centers were also up and the high double digits when compared to the prior year period.
We're working alongside each of our blood center customers and the U S. As rapid scale up efforts continued in Q2 approaching the FDA compliance deadline of October growth.
Moving to the EMEA region.
Sales and the region during the second quarter grew 12% versus the prior year.
We saw strong demand from some of the larger accounts and the region during the quarter as well and some puts and takes and sales timing during the quarter, which should provide a tailwind during the second half of 2021.
In addition to our product revenue and not included in our guidance government contract revenue totaled $6.3 million and Q2.
Comparatively government contract revenue totaled $5.3 million and the second quarter of 2020.
For the second half of 2021, we continue to anticipate government contract revenue will increase with patient enrollment per BARDA reimbursed clinical trials.
And as activity associated with the whole blood pathogen reduction contract funded by the FDA ramps.
Turning to product gross profit and gross margins.
Product gross profit during the quarter was $16.2 million compared.
Compared to $11.8 million during the prior year period.
The improvement in gross profit resulted from slightly less efficient product gross margins, which were 51.3 per cent for the quarter compared to 54, 9% per the prior year period.
The lower gross margin percentage was driven primarily by the continued strength of the our U S platelet business.
As we have previously stated our U S customers, mainly in the single dose platelet kits versus our EMEA customer base, which has a higher mix of double dose platelet kits.
Since our single dose platelet kits have a lower gross margin contribution compared to double dose platelet kits. This top line mix shift is driving the year over year variance.
Looking ahead, we expect that as the U S market seasons of bad our double dose kit sales and that market will also increase which will contribute to gross profit percentage of improvements.
In addition, we have the number of capacity and margin expansion activities underway, which.
Which we anticipate will provide a return to economies of scale and.
And the overall margin expansion, which we are accustomed to and expect to realize.
I would now like to discuss operating expenses, which totaled $36.8 million during the second quarter and included $5.8 million and noncash stock based compensation.
Of the total Q2 operating expenses.
G&A expenses accounted for approximately $19.8 million and were higher by about $3.6 million compared to the prior year.
Driven by increased sales force expenses associated with the launch of IFC.
Additionally, noncash stock based compensation costs and increases in certain vendor fees contributed to the year over year increase.
Research and development expenses for the quarter.
The $17.1 billion.
Compared to $15.6 million during the prior year.
During the quarter, we incurred increased research and development spending associated with the final 2 modules of our CE Mark submission for intercept red blood cells.
As well as ongoing costs associated with the U S Red blood cell program.
And preliminary development efforts associated with our next generation led based illuminator and other new products.
Reported net loss for the 3 months ended June 32021 increased when compared to the same period and 2020.
Net loss for Q2 totaled $15.4 billion or <unk> <unk> per diluted share.
Compared to $14.9 million or also <unk> per diluted share for the prior year period.
In terms of our balance sheet, we ended the quarter and a strong position with approximately $122.8 million of.
The cash cash equivalents and short term investments on hand.
As we previously mentioned the trailing 12 month revenue topped $100 million.
Allowing us to extend the interest only terms of our debt facility for an additional year.
In addition, we have achieved the predetermined milestone and unlocking the option that would provide additional capacity under our debt facility.
Cash used from operations for the second quarter was $8.7 million.
Representing a sequential improvement from Q1 cash used from operations of $18 billion.
With the demand we're seeing we've continued to invest and building inventory because we are focused on staying on top of product supply for our blood center customers around the globe.
We are highly focused on supporting the robust demand for our products with the continued emphasis on reaching cash flow breakeven.
As we discussed on our Q1 conference call, we see significant operating expense leverage opportunities that we believe will move us towards this goal over the next several quarters.
Moving on to product revenue guidance for 2021.
Clearly, we've exceeded expectations, thus far and the year relative to where we thought the business would be and our original plan.
With the realized commercial traction and the U S. Coupled with the visibility we feel we have heading into the back half of the year, we are raising our product revenue guidance range of $118 million to $122 million.
This new range reflects 28% to 33% growth when compared to 2020.
Finally, this increase and guidance continues to reflect a modest contribution from intercept fiber and Jen complex.
With that let me turn the call back over to Obi for some closing comments.
Thank you, Kevin and I want to wrap up with a few additional business updates.
And in addition to the strong commercial results the organization executed on several other fronts during the second quarter.
First in June we submitted the 7 day post collection storage claim for intercept platelets to FDA.
We continue to assume a 180 day review window, which would set us up for potentially receiving approval by the end of the calendar year.
As we said previously we believe the 7 day claims strengthens our already advantageous value proposition for U S blood centers and their hospital customers and we are hopeful that we will be able to add the additional 2 days of effective shelf life to intercept treated platelets later this year.
With our ongoing Red blood cell efforts. We also continue to advance the programs, particularly in Europe, where we submitted the final 2 modules for CE Mark during the second quarter.
You may recall and collaboration with our notified body last year, we opted the transition of our submission made under the medical device directive to the medical device regulation or MTR.
And I'm very pleased with the way our team has executed on the submission.
This is a significant accomplishment for the team and we look forward and introducing this offering to the EU market.
And the U S enrollment continues in our 2 phase III trials and while trends are still below pre COVID-19 levels. The continued to recover from what we saw last year.
Finally, looking ahead to ABB and October we were pleased to see the pathogen and activation is featured prominently during this year's plenary oral abstract session with half of the topics covered feature and presentations about intercept platelets and.
Clearly in a presentation of the Piper Phase 4 study, which is 1 of the largest studies ever conducted and transfusion medicine with over 2000 patients transfused during the 4 year period.
And at a high level and this study we did not observe any statistically significant differences and treatment related mortality pulmonary adverse events of blood component utilization.
And combination with the significant body of National Haimovitch Atlas data the continuous to be collected by our European customers. We think studies such as paper help underscore the impressive safety profile for our intercept system.
In closing our second quarter performance has established a clear path towards market leadership for intercept and our company on.
Our commercial success is reshaping our growth trajectory of Crs and 2021, accelerating our path to becoming a new global standard of care.
As our topline and continues to grow over the next several quarters. Our team is focused on driving sustainable growth, while also demonstrating our ability to achieve cash flow breakeven.
I look forward to updating you more on our progress over the back half of this year.
With that let me turn it back over to the operator for Q&A.
Thank you to ask a question you will need the press star 1 on your telephone and went to try your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Mathew Blackman with Stifel. Your line is open.
Good afternoon, everybody congrats on a really tremendous quarter.
I'm just kind of start with 2 questions actually both for Kevin.
And if I could start on how we should be thinking about the shape of the second half and obviously had a big step up from <unk> to <unk> and I'm trying to make sure we're thinking about the cadence and the back half correctly.
Correctly should we assume sort of a similar to June of <unk>, and then <unk> to <unk> sequential growth or for some reason going to be more front end loaded in <unk>, perhaps because of the timing of on the guidelines just just any help therapy I. Appreciate it and then I got 1 more follow up for any kind of.
Yeah sure no problem. Thanks, Matt.
You know historically Q3, especially and Europe's been 1 of the softer quarters, just given the holidays and that.
I don't know of any reason to believe that it'll be different so while we anticipate sequential growth I do think that the Q4 will be slightly stronger and Q3 and and part that's going to be driven by U S customers continuing to prepare for.
And for the compliance deadline, which is October 1.
And I guess I would also include some of cryo as well and perhaps in the fourth quarter of more so on the third does that also fair.
That's right, although you know and our prepared remarks, we continue to believe that the 2021 contribution from IFC will be modest and the low single digits. So not at all.
The.
The driver of revenue, but certainly we'll continue to gain momentum and we will see more and more transfusions with that product and.
And then just wanted to touch on the SG&A leverage and.
And maybe this is not the best way to think about it but if you just look sequentially you grew revenues by $8 million, but SG&A only went up about $600000. So is that all sort of pure leverage or and theres still some lingering deferred spending because of the pandemic and then and then Kevin and I have to ask it.
Could you expand a little bit on the comments you made I think sort of towards the ends and of that section you were talking about progress towards breakeven and I don't recall the exact language, but you mentioned something about over the next few quarters Im guessing you don't mean breakeven and that timeframe, but maybe just give us a sense of how we should be thinking about sort of of the trajectory towards breakeven does it become more visible over the next few quarters average.
Youre talking about or.
And any color on that would be helpful. Thanks.
Oh sure no problem so.
On the SG&A leverage component there.
There will be some residual deferrals and we've seen some residual deferrals.
Due to Covid, we're starting to see increased travel hospital access com.
Conference attendance more on line with what we had expected.
But at the same time, we've made some investments and the IFC business, which has that contributes should provide additional leverage by and large the team is largely built out.
And especially for those first 5 markets and for platelets and plasma so we feel very confident that.
That initial investment will result in the high degree of leverage and that's sustainable leverage for for quite some time.
As it relates to you.
The question regarding break EBIT and what we had said was over the next several quarters will gain visibility and moving that direction. It is a focus of ours as we've talked about over the past several quarters.
We're defining it as the core adjusted EBITDA, so backing out the.
Depreciation and amortization and the also noncash stock based compensation and really that allows us to isolate on the core business.
We're not giving guidance for 2022, obviously, but we expect that with that continued SG&A leverage a return to margin expansion and the economies of scale with the growth that we see not just for the U S platelet and plasma business, but also with contribution from cryo that will be and a strong position to to <unk>.
By some clarity and achieve that.
And that milestone which is again.
Kind of of our cash breakeven or core adjusted EBITDA as we're calling.
Thanks, Kevin really appreciate it.
Thank you. Our next question comes from Brandon Folkes with Cantor Fitzgerald. Your line is open.
Hi, Thanks for taking my questions and congratulations on the very good quarter and maybe just.
Any commentary you can talk about what you saw in July this year and.
Was it similar to yours and the cost of what are you seeing any disruptions at this stage and.
And then secondly, I think it's called out exactly blood centers are benefiting.
From pricing to the hospitals.
Does that provide you essentially any knock on the leverage around pricing and to shut down the line. Thank you.
Thanks, Brandon could you would you mind repeating the last part of your question I didn't quite hear it.
So I think you mentioned that blood centers and hospitals.
Hospitals all.
And kind of the.
It gave me the exact words, but I think you sort of planning along the lines of blood centers are benefiting.
And the hospitals, all prepaid price per <unk>.
The product at the stage.
And along those lines.
Does that provide you any potential pricing.
Flexibility around the intercept at any stage.
Yes, Thanks, I mean, I think both of those questions and ill defer to the vacant on I mean, just the.
I think the nature of your second part of your question was just around pricing for value and I think 1 of the key things of Sirius has enabled.
Understood and particularly here in the U S is realized.
And move away from commodity based pricing, which has really been challenging for them over the last decade of especially as the.
The demand for Red cells of the lease has declined as I mentioned on my prepared remarks, the stabilized we're actually starting to see.
The demand increase for Red cells, and then play as the sort of has a ongoing organic growth rate of sort of 3% to 5% of any given year.
But what we're seeing is that with the adoption.
Adoption of intercept the blood centers are able to.
The increase in their pricing for platelet components, given the value of conferred by the treatment with our technology and.
That's really helpful for the overall financial viability of the blood banking industry, and the United States or blood center business, and United States, but and maybe they can expand on that a little bit as it relates to sort of your question about pricing overtime as well as.
Your question around what.
We saw on July.
Yes.
Thanks Debbie.
Maybe for my own benefit.
A little bit more clarification on the question regarding July Brian and was there something specific you were curious to understand about the past month or I just want to make sure I'm answering your question correctly.
I mean, I'm, just trying to get some indication of the same quarter right sort of how you're seeing trends.
Just given we're 1 month into the quarter you just anything you can.
And you think it's worth highlighting and.
July and out of that.
Net.
That's helpful. I can certainly take a stab at that and feel free to ask clarifying questions should they come up maybe first with respect the pricing piggy backing a bit off of what that'll be mentioned.
1 of the things that we encountered very early on and the intercept of launches the.
Bit of reservation or hesitation on the part of the blood centers questioning whether the hospitals would be receptive to the idea of a higher price.
Got it and reduced platelet relative to the conventional platelet and you know what I can state with conviction now is the higher price pathogen reduced platelet is very much been accepted at the hospital level and blood centers, they're seeing thats really across the board.
Oftentimes when it comes to health care pricing.
And the of getting dominated by what I call. The acuity of the anecdote and you always hear about the customer who is pushing back on price, but you very rarely hear about the many customers for whom price isn't the issue, but they want value they want and safety and they wanted to be proactive about offering their patients the best possible clinical outcome and certainly.
With the pandemic, which.
We're still very much in.
And at the end that make the with the pandemic the idea of preparedness and providing the safest product.
The risen to the top and I think that instead.
And to the benefit of patchy and reduction of blood centers of seeing their ability to maintain a solid price on PR platelets and I anticipate that will continue to be the case with respect of July and really the quarter and general and then Kevin mentioned this.
The most encouraging as we saw continued adoption of intercept the.
Growth was driven by kit sales not device placements and so what youre seeing with that.
Our customers as they're purchasing kits, they're producing intercept products and those products are getting transfused at the hospital. So we exited the quarter with momentum and anticipate that will carry forward through the third quarter, that's reflected and the increased guidance, but fundamentally what's driving a lot of this is in addition to the strong partnership of the Blood Center.
Levels, we're seeing hospitals state.
A clear preference for pathogen reduced platelets as the manner in which the address guidance and so really the hospital demand continues to grow we've got the deadline coming up here on October 1, but we anticipate continued share growth and progress even after the deadline. So.
Our R&D was out of them about the second half of the year and continuing on remains very high.
Thank you that's very helpful. I appreciate all of the color.
Thanks, Brian.
And next question comes from Josh Jennings with Cowen and company. Your line is open.
Hi, guys. This is Eric on for Josh. Thank you for taking the question I wanted to ask you about the U S platelet market, you're obviously seeing great progress and the market considering.
The result that you delivered here into Q.
Looking at U S blood centers that fall outside of the Big 5 I believe they represent about 25 per cent of the market could you talk about how traction has been getting the smaller players to adopt and utilize intercepts there a little bit more difficult for us the tracks. So any detail you could share there would be helpful.
Yes. Thanks for the question, Eric Victor can I infer this 1 to use again.
Yes, absolutely happy to and happy to answer that.
The increase and penetration and traction across all blood centers and the U S. As we have stated on prior calls and <unk>.
Really as we've been executing.
About the course of the past few years, our focus has been on the big 5 blood center of families.
Largely because as you pointed out and your question they represent.
The 75% of nationwide platelet distributions. So you know as the thing goes do you want on sort of fish, where the where the fish are and that has been working well, but what I mentioned.
And the my prior response is what we're seeing is across the board and a strong hospital of preference for PR. So even those non non big 5 blood center of families and what they're hearing from their hospital customers as they prefer Apache and reduction is the way in which they address bacterial.
Guidance document and so that is having an effect in terms of the sub.
The other 25% on the market adopting PR, increasing the rate of adoption and so we see growth the really cross.
All blood centers and the U S and debt to the point I made earlier, that's why we expect kind of like to see accelerated their continued adoption of the U S, adding up to the October 1.
Deadline, but we anticipate continued share growth and capture beyond the compliance period ending into really the following year. So we're seeing good growth there, but we continue to focus on the top 5 because fundamentally getting them going and what's going to allow us to capture the largest percentage of the market.
That makes sense, thanks for sharing that on the red cell opportunity. It was great to see the you submitted the final modules of your CE Mark application.
And thinking about the U S. Red cell program could we get a quick refresh on where enrollment stands and the ongoing trials and then secondly are you able to share any estimates on when those trials could be nearing complete enrollment.
Thank you.
Yes, Thanks, Eric.
So obviously COVID-19 has made of challenging to enroll those studies over the last year and a half, but we are seeing a pickup and enrollment in both phase III studies.
And is also you may recall, we had a meeting with the FDA earlier and the year to talk about enrollment of chronic transfusion patients in the rate of studies. So.
That's been added to the redness studies scope and we are enrolling those patients as well.
It'd be great. If we could actually have an in person and investigators meeting to really sort of dial and exactly what the timeline looks like but it's been challenging to make that happen and we did have a virtual 1 last week and theres a lot of enthusiasm for how enrollment is picking up but it's still a little too early to sort of.
Provide.
And when we would complete enrollment and both of those phase III studies.
Understood. Thank you.
Yeah. Thanks, Eric.
Thank you. Our next question comes from Mark Massaro with BTG. Your line is open.
Hey, guys. Thanks for the questions and congrats on a really strong quarter.
Thanks.
I wanted to ask about the the timing of the CE Mark. So obviously you submitted the fourth and final module.
For Red blood cells, and Europe, I guess can you give us a sense for.
Just the planned rollout of Red blood cells, and Europe, I guess, what I'm asking for is.
Could that be.
Early 2022, or do you think that might be second half of the year and what are the puts and takes to the timing.
Yes. Thanks for the question Carol would you mind handling and so I think you are closest to sort of what the review time and it looks like with both the competent authority and notified body.
Sure I'd be happy to thanks for the question.
I think we're looking really at the second half of 2022 and here's the reason.
And multi.
The group effort. So we have our notified body, which is <unk> and we have a confident and authority and.
They both have to review and and there and.
And so they each have parts that they need to to handle and I think those all of the different reviews and then the.
The question and answer so that we can clarify any of the other questions. I think we believe that that will take until the second half of 2022 to complete that activity.
Okay, and then maybe Kevin just to clarify you raised the product revenue guidance by $8 million for the year.
You beat by almost $6 million and in Q2.
Is it fair.
You commented about typical seasonality in Q3, but XP.
The expectation for a strong Q4 is it reasonable for us to place the remaining $2 million.
For the year and each quarter, both Q3 and Q4.
Roughly speaking.
Yeah, I believe like I said I think the is that the Q4 will be slightly heavier than the Q3. So I don't know how you want to wake data and you know we're going to continue to see growth and the U S.
By way of blood centers, increasing consumption and in anticipation of the guidance document and then we'll probably see some softness.
Do.
Due to vacations and all of the normal seasonal stuff so.
We will see sequential growth Q2 to Q3, and then probably slightly stronger growth Q3, the Q4.
Okay, and congrats on the and tap.
And.
And caps are great but.
Sometimes.
The hospitals need of reminder, that the and tap exists. So can you just give us a sense for.
Any type of education efforts and.
Whether that's you're going direct and <unk>.
And just how do you go about.
Communicating this update to your to your core customer group and can you help us frame, obviously, we have the right, but help us sort of frame the impact to your business, especially in 2022.
Yes, thanks Mark.
The first part of that question and then ill turn it over to Jessica Jessica Hanover, Who's on the call with US today as well as she was really the architect for the.
And this and tap the submission on the back of our breakthrough device designation with the FDA.
Jessica also was very involved with establishing the P code for outpatient reimbursement of intercept platelet product and so and I think she'll be able to provide some color.
Around how we plan to address.
And then.
And at the hospital level of helping them with billing because of that clearly is a focus of ours.
Jessica do you want to jump in and answer Mark's question. Thanks.
Sure Yeah, Great question, Thanks for asking that.
Absolutely education is key on the reimbursement side and we certainly know that hospitals have many ways to that.
They can.
Do things and not and the best way. So we certainly do have an act of educational campaign.
Materials that outline exactly how and.
And they need to use the coating and instructions provided by Medicare and order it triggered the payment of the and tap on relevant patient population.
And as you already know we felt then and good infrastructure and the hospital setting already so we have the people that we need who can can provide that education and now.
Now a lot of the interactions have been virtual about we're moving back to face to face and that will really be essential not only focusing on the blood bank within the hospital and hospital, but also with the billing and the and charged.
Charge Master Department, So we have a and.
The comprehensive efforts too.
Make sure that hospitals are doing that right.
Yeah.
And Thats excellent maybe yeah go ahead sorry.
Just kind of hand, it over time of day for the second half of that of your of your question.
I think you covered it well, Jeff and the only thing that I would add as you know we had been the.
The securing the and tap has been part of our overall launch plan really since the beginning of this project and so certainly grateful the Jessica and the team for making this the reality, but 1 thing to keep in mind too is the getting broader and nationwide release, the DLA clearances and the rest of it would be Chris.
Nicole to extending the reach of our launch and certainly a core element of our marketing campaign and hospital awareness campaign, and it's going to be the and tap in part because youre looking not only of clinical value driver, but also a potential cost saving benefits to the hospital. So it really serves to further emphasize the value of the IFC product.
The clinicians as well as non clinical decision makers within the hospital.
Excellent and maybe 1 final question for me I know.
It's far too early for you to comment on 2022 growth or guidance or anything like that.
But at the same token no unexpected <unk> to grow of 46% year over year here. This quarter. So to some extent you will you will be going up against.
On some really strong comps.
As we as we think about 2022.
Consensus I think it was looking for 15% revenue growth and 2022 that seems achievable to me, but I was just curious if you could maybe just comment about how and how the difficult part of the strong comps might weigh into how you think about growth next year.
Thanks, Mark I'll start.
And then turn it over the big yen, just Bruce and maybe additional context, but I think 1 of the things that <unk>.
Busters and shareholders need to really focus on is the overall size of the U S market.
Being around $150 million and.
Absolutely larger as a function of the growth organic growth, we're seeing and the platelet market.
So you marry that with the fact that we believe are moving towards the standard of care, which we define as greater than 50% market share.
Over the coming quarters.
And so theres still a lot of room to grow and then the a b b came out with the survey.
In June that asked all of the hospitals that they serve are many of them.
And what their preference was as it related to being compliant with the FDA guidance on bacterial safety of platelets and it was clear there that the strong preference.
Was for pathogen reduced platelets and we're seeing those hospital customers.
Once they have implemented intercept platelets really having the demand to get to a 100%. So I think there are a lot of opportunities for growth and 2022.
Debt.
Or to be realized like any other color you want to add to that.
And I think you captured it well on that and.
And there'll be like the tell me and we're only as good as our last quarter. So now what other external expectations are of the expectations. He places on us and are always quite high but that notwithstanding and there'll be indicated they are clearly untapped opportunities both.
Both domestically as well as globally. When you think about further penetration of the intercept play.
Platelet technology as well as now really starting the process of <unk>.
<unk> <unk>, the both with the and tap and then eventually of the BLA and then hand, so we feel like there is.
Fertile ground to continue to promote and allow for penetration of intercept platelets and if anything the influence that some of these larger customers coming on board.
For example, the AARC of the influence they will not only domestically, but globally significant and so we feel confident that we have the people plans and strategies in place to continue to drive growth and now I think your points of fair, 1 and we certainly with the.
And with strong performance comes challenging comps, but I.
And I think we feel very confident that we have the ability to continue to post solid growth numbers and most importantly continue to provide access to safe blood products for the patients around the world.
Okay, great. Thanks again.
Thanks Mark.
Thank you. Our next question comes from Jacob Johnson with Stephens. Your line is open.
Yes.
And good afternoon, everybody and I'll add my congrats on the really strong quarter and maybe.
Maybe Kevin just on the gross margin side, you talked about maybe some of the the longer term opportunities on the gross margin side or maybe medium term, but and we think about the back half of this year.
And if U S mix if the U.
And is increasing as a percentage of your revenue mix should we assume that maybe gross margins could be even softer than they were this quarter or is there some kind of operating leverage as youll see on the gross margin side such that that maybe this is a floor for gross margins for the back half of the year.
Oh, yes. Thanks.
Think there's a ton of downside here for normal operations at the same time I don't think we're going to see the margins where they were last year.
But that was anticipated we knew there would be some softness.
And.
And the nature of early adopters and and the U S, which are predominantly single dose.
I do expect debt as that market matures, we will see more and more double dose kits will help support it and then.
Longer term I expect debt as we talk to our suppliers and plan for the.
The continued sustained growth, we're going to get back to economies of scale and see Cogs reduction initiatives.
And similarly.
Similarly, we're going to.
We're seeing commodity prices go up we're seeing costs go up across the board.
Similarly, our customers I think in certain geographies.
Should expect to see some modest price increases.
Got it that's helpful. Thanks for the Kevin and maybe sticking with you Kevin just 1 other question and.
And they have misheard or missed this but you mentioned I think in your prepared comments and some puts and takes and the EMEA region could you maybe just speak to those and maybe on the the the.
Takes side of things.
Can you talk about the the opportunity that you've seen the hint hint that debt in the back half of the year and EMEA.
Yeah, it's not all of that meaningful which is why he characterized and there's puts and takes.
You know there and it's really timing of orders so as we talked about in the past certain distributors order and kind of lumpy unpredictable.
Patterns and we saw some that we thought would happen in Q1 slipped to Q2 and similarly, some that we thought would be and Q2 are slipping into Q3. So.
I wouldn't I don't want to spend too much time, because I don't think it's.
The focal point of.
And we want to call your attention to which is really.
The U S growth and preparation for the guidance documents so.
It's nice, but not a huge driver.
Yes, and that makes sense, sorry to dwell on that and not the Hunter works and.
Lots of platelet kits I'll leave it there congrats on the quarter. Thanks again for taking the questions.
Thank you. Our next question comes from and Silver Archie with H C. Wainwright. Your line is open.
Hi, This is blue bar and dining and for Ron Suraj, you and thanks for taking my question. So I just wanted to touch up on your Canadian net services collaboration. So what are your preliminary thoughts and expectations regarding the Canadian blood transfusion market on.
And how long do you think it will take for the kind of the best services to adopt intercept fully.
Yes, thanks very much for the question so the.
And the in market for platelets is roughly around 180000 platelet doses annually, so pretty significant and.
CBS.
Produces roughly 2 thirds of the overall market. So the other major supplier and Canada as a group called hemoglobin <unk>.
Both are excellent organizations with a focus on patient safety.
And certainly given the history of of.
Of the Craver Commission findings back in the and.
And the Ninety's and early 2 thousands and they really are focused on being state of the art.
From a.
Blood components safety standpoint, so.
So the leadership there is the started implementation with intercept but really looking to secure and a 7 day label claim.
And we're hoping to file for some time next year, we've been working closely with health, Canada in that regard and and collaboration with the Canadian blood services and.
And then even of the stated.
Goal of getting to 100% once they get that claim so I can't give you a specific timing, but over the next couple of years, we believe that single organization with its history of moving quickly towards the state of the art technologies will be a meaningful customer for us.
Understood just 1 more from me so what are your thoughts on platelet demand growth in sales of land during.
The remainder of the year and maybe expectations for 2022 and are there any particular trend that is catching the attention.
And you said, Switzerland correct.
Yes, and so what you said, okay, yes, the Switzerland has been a customer of ours for over a decade now and that was really triggered from pediatric subjects fatality that they had over a decade ago and wanting to secure their platelet safety against that.
And I think it's been a wonderful partnership.
And its extended into trying to develop of whole blood pathogen.
And the activation technology.
Sub Saharan Africa through the Swiss Red Cross Foundation.
As far as the organic growth because we treated 100 per cent of the platelets in Switzerland.
And any growth coming out of that market really have to be sort of organic platelet demand.
<unk>, what we've seen is that we've seen sort of the <unk>.
<unk> level of of platelet demand there for over a decade now and the reason why I think that's interesting is that what we've been able to document through the Swiss Red Cross individual and system.
Is the the safety of of the intercept system, but also that it hasn't increased any platelet utilization at all so there's been no impact on platelet.
The utilization.
And that the intercept platelets are working well.
That's it from me Thanks for taking my question.
Thanks very much for the question.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to Obi Greenman for closing remarks.
Well. Thank you again for joining us today and for your interest and Cirrus and we look forward to speaking with you at the Cantor Fitzgerald Global Virtual Health Care Conference next month, if youre attending and I really appreciate your ongoing support of the company.
This concludes today's conference call. Thank you for participating you may now disconnect.
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