Q3 2021 Cytosorbents Corp Earnings Call
Yeah.
Good afternoon, and welcome to the Cytosorb in third quarter 2021 financial and operating results conference call. At this time, all participants are in a listen only mode.
Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the company's request at this time I'd like to turn the call over to our moderator to Riyadh powers, Vice President of Investor Relations and corporate Communications. Please go ahead Ms powers.
Thank you, Dave and good afternoon, and evening to everyone that is listening welcome to the Cytosorb in third quarter, 2021 financial and operating results call.
Joining me today from the company are Dr. Phillip Chan.
Cytosorb and Chief Executive Officer.
Vincent kept pony, our president and Chief operating officer.
Kathleen Bloch, our Chief Financial Officer.
Doctor S females, Mike as Steelier Garrett Chief Medical Officer.
Dr. Christian Steiner executive Vice President of sales and marketing and also managing director of Cytosorb into Europe.
And finally, Christopher Cramer, Vice President 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.
It's contained 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 Securities and Exchange Commission.
Any projections as to the company's future performance represented by management include estimates today as of November 4th 2021, and we assume no obligation to update these projections in the future.
During today's call. We will also have an overview presentation covering the operating and financial highlights for the second for the third quarter by management. Following that presentation. We will open up the lines for your questions with the management team at this time, it's now my pleasure to turn the call over to Dr. Phillip Chan go ahead Phil.
Thank you very much Karen.
As we have discussed in a number of recent press releases. The past several months have brought us are sure challenges, but also opportunities.
We'll have more detail in the upcoming slides, but here's a quick overview.
As we disclosed earlier last month total third quarter 2021 revenue was $9 8 million, including sales of $8 9 million with healthy blended product gross margins of 82% combining higher direct sale margins with lower distributor margins, we closed the quarter with a solid cash balance of $61 million and no debt.
On the operational side, we opened the U S start T pivotal trial with the first patient enrolled into the study.
Hershey, Maryland, just recently, we also received a second breakthrough device designation. This time for the removal of the direct oral anti Coagulants. All my questions are also very encouraging.
Cardio thoracic surgery or seats for FDA approval to initiate and start the pivotal trial for this application.
Span of only three months.
In September we announced topline data from our U S Cytosorb therapy, and COVID-19, where CTC registry reporting high survival amongst 52 consecutive teachings on Cytosorb and Ecmo for five major U S.
Most centers.
Last month preliminary results from the long awaited remove endocarditis study evaluating the use of cytosorb of infective endocarditis or neutral, but showed a favorable adverse event profile and again validating the ability of cytosorb to remove cytokines.
We are pleased to report that Cytosorb has now distributed more than 70 countries with a recent expansion to Thailand on the Ukraine and.
Overall more than 152000 cumulative cytosorb treatments have been utilized to date.
Up 38% year over year.
As we've done since the pandemic began I would like to now give a quick overview of what we're seeing with COVID-19.
Second quarter earnings call in early August.
It's particularly relevant this quarter due to the impact of COVID-19 on our financial results, especially in Germany.
The United States' COVID-19 has migrated from the South East where dealt with adult ovarian Trophy second we're searching the country to date.
The Western U S in Alaska.
According to the CDC Delta continues to account for 99% of New U S infections.
Date of those eligible 12 years of age or older 68% of people are fully vaccinated with 78% with at least one dose.
Overall, 58% of the entire population vaccinated.
With the recent FDA approval and CDC recommendation of the lower dose Pfizer vaccine for children five to 11 years of age representing about 8% of the U S population. The total vaccinated population is expected to go up significantly.
What I'd like to point out on this slide.
The lower right hand figures on knee daily COVID-19 cases more red.
And then how the graphs of hospitalizations and deaths.
New cases from a relative proportion standpoint, the graphs look very similar.
Hi, Nick cases yields high hospitalization and deaths and we'll come back to this as it relates to Germany.
That said in terms of worldwide COVID-19 cases, COVID-19 continues to migrate now impacting countries like the U K and Germany, as well as eastern Europe and Russia.
[noise] markedly after lagging the U S. In terms of vaccinations in early August the percentages are fully vaccinated people in major EU countries generally surpassed the U S. As you can see in the lower left corner and again in the lower right you can see the relative proportionality of new cases and deaths.
Finally, turning to Germany, I'd like to point out a few things that highlight what happened to us in the third quarter and where we are today.
Chart shows new cases of COVID-19 in Germany in the bottom graph shows deaths in Germany.
First on the peripheral vertical line, you can see where.
Where we were when we provided guidance in early August where the rates of new COVID-19 cases and deaths were very low.
Coupled with an initial lifting of restrictions in Germany and increased sales meetings, we were optimistic for a return to our core non COVID-19 business in Germany.
Or rapidly over the course of weeks the rates of new cases jumped significantly, prompting hospitals to continue or reinstate read or restrictions on elective procedures.
Limit outside visitors, including sales reps and to.
The reserve I see I see resources already stretched thin.
Shopping shortages for pending critically ill COVID-19 patients.
But during Q3 the numbers of critically ill patients expected did not materialize.
Looking at these graphs, you can see something very different compared to the U S and the major surge in Germany in the fourth quarter of last year, the death rates or proportional to these new cases as you can see from these two graphs.
And as we've seen in the United States as well however in the subsequent search earlier this year in Germany. The numbers of deaths were disproportionately low and then with this last wave the numbers of deaths, reflecting ICU patients and severity of illness was very low despite the third largest peak in new cases in Germany.
In fact, this dislocation of high numbers of new cases below numbers of deaths is the same trend we observe in other major EU countries, including the UK, France, Italy and Spain.
This is likely partly attributed to increase vaccination rates and the lower severity of illness, among those vaccinated as well as the age of those getting sick.
So how does this dynamic affect us in Q3.
As we have previously discussed during the pandemic core sales lost to COVID-19 restrictions. We're typically replaced by COVID-19 sales in Germany. However, in the third quarter because of increased restrictions that decreased core non COVID-19 sales in the low severity of COVID-19 illness, which decreased COVID-19.
<unk> related sales all happening in a traditionally seasonal third quarter it led to weakness in Germany.
In the past months Theres been a sudden spike in COVID-19 cases in Germany with ICU, starting to fill up with COVID-19 patients and deaths increasing sharply we're monitoring the situation closely to assess what impact positive or negative.
Our business in Q4, but let me turn it over to Christian to give more color on what happened in Germany in the third quarter and how we're managing around the uncertainty.
Related to COVID-19, this quarter Christian.
Yeah. Thank you Phil.
Good afternoon to the us from Poland, Germany, and good evening to Europe.
Across London.
For the third quarter traditionally a challenging one due to vacation time in Europe.
And this year, especially due to still existing COVID-19 related restrictions.
Despite this at the time of our second quarter earnings report.
I'm really confident.
So good growth within our core business and some additional although declining COVID-19 business.
However, the new.
Started in August in Europe, and in Germany.
This led to.
Increased restrictions on hospital and customer access and to another slow down or stop of elective surgery programs.
As explained earlier total that's disease severity.
The mold infections did not result in more critically ill patients ineligible for Cytosorb therapy.
Time.
Because of this situation and the resulting physicals and alcohol business across all geographies with only 3% and there wasn't enough additional COVID-19 related business competitively.
Our business in Germany was particularly impacted was the 24% decrease in sales.
Also in Germany right.
I'm not affected or not to the same extent.
Next slide please.
And the current postponed to the macro environment remains challenging in Germany.
It's still also indicated currently we are seeing an increase in COVID-19 cases, and driving some of ICU patients.
As long as we are starting to see increase in Cytosorb. All this for those COVID-19 patients.
We have a similar situation in many markets, but the impact of Cytosorb has been most relevant in Germany.
We expect the environment to get better over time, but the pace of improvement is difficult to predict.
Yeah.
Based on what we are currently seeing we believe that we are on track to meet our fourth quarter product revenue guidance.
Several medical conferences have been conducted by different organize this in September and October although it was relatively low attendance.
This led to a moderate increase of our marketing efforts and activities next slide please.
In this context I want to highlight the sizes oculus meetings, we have prepared for our customers and potential sizes Arbutus one for international audience in October and one for German speaking users in November.
Next slide.
The eighth International Cytosorb users meeting was conducted in Berlin, Germany, one week ago.
We had a fantastic lineup of more than 20 international opinion and thought leaders in critical care medicine to give their lectures and discuss the benefits of using cytosorb in different indications.
More than 400, doctors and health care professionals from around 60 different countries.
Our hybrid events.
Key opinion leaders stated that based on the experience and the current body of evidence Cytosorb has a favorable safety profile.
In addition, they suggested that benefits and therapeutic effects are reproducible when patient selection.
Timing and dosing are appropriate.
It was really an exciting and inspiring atmosphere and everyone was focused on how to bring cytosorb use to the next level.
Next one please.
So it is arms is tackling the current uncertain environment by applying a two track strategy.
One we are targeting to critically ill COVID-19 patients with another promotional campaign, which particularly focuses on the right patient selection and appropriate timing and dosing of the treatments.
And second at the same time, we are pursuing the continued development and expansion of our core indications and the fears of critical care.
Cardiovascular.
And live is a pump therapy.
We are also increasing and adjusting our marketing and promotional efforts to address the current additional challenges.
We do this by facilitating non traditional customer meetings to see doctors and cytosorb users where they are available.
This can be for instance outside the hospitals after work at scientific seminars journal clubs Roundtable discussions and all of us.
Also holding additional educational meetings and trainings, both virtually and in person to ensure appropriate attendance.
All of these efforts are in direct response to the current pandemic situation in which we still must operate.
At the same time, we are also continuing to invest in our business to drive medium and long term growth.
We are pursuing initiatives to optimize our sales force not only in Germany, but also in the other geographies.
We've worked to increase utilization in existing clinical applications and launch new ones.
And we also intend to expand our reach into additional direct territories over time.
And to the awesome and interest in tons all remain high and we are absolutely focused on bringing back our German business to our usual growth rates, but implementing measures to drive longer term developments.
But first I will turn the call over to what Chief Medical Officer. Dr. T meal Spike is still there give us an update on our clinical program Microsoft.
Thank you Christian.
And good afternoon, and good evening to everyone on the call.
In the next few minutes I will be providing an update on the progress of our global clinical programs.
Next slide please.
As you have seen from our recent press releases, we have made significant progress you know clinical trials in support of FDA marketing approval.
The startup T study once I calculate removal received full FDA approval in July triggering study start up activities.
Site activation has begun in September and we are already enrolled the first patient in October.
Our primary focus now is to continue.
You bring up study sites.
And we currently have six sites activated.
We plan to provide enrollment updates computer in future earnings calls.
To start this study when it picks up in an area where oxygen removal moved in a very rapid manner from the application for breakthrough designation that was submitted in July and was granted by FDA in August immediate.
The immediate submission a b I D application and full FDA approval of the political in October.
This accelerated timeline is consistent with the efficiencies we expect it to observed based on the similarities of the Star T D.
These studies.
The first central IRB approval has already been received and we are now focused on engaging with sites.
Many of which are already part of Star T.
With a target of enrolling the first patient in this study early next year.
The refreshed to AK ice study has resumed enrollment with 15 sites activated.
The momentum we saw in enrollment over the summer has slowed significantly in September and October are surging COVID-19 numbers have led to deferrals of elective cardiac surgeries.
As of today. The study has enrolled 178 patients with 111 of them in the randomized cohort.
The timing to interim analysis is entirely dependent on enrollment and as such may be delayed as a result of the COVID-19 impact.
As we have previously disclosed we continue to view the antithrombotic removal indications as the most expedited and lowest risk paths to FDA approval.
Next slide please.
Yeah.
We have also made significant progress in our remaining clinical programs listed on this slide.
The studies highlighted in green.
Really active and we anticipate that the two studies in light blue will be active by the end of the first quarter next year.
The German process randomized controlled multicenter study in patients with refractory shock is a top priority program evaluating hemodynamic stabilization in patients with severe sepsis.
We are happy to report that the trial is now actively recruiting.
Next steps include continued site activation and enrollment.
The German single Center Citation study on site Kagler removal is also actively recruiting at all three German sites and we recently added a fourth site in Luxembourg.
Next steps include continued enrolment in this study.
The Hep on fire studying patients with liver failure is also a German multicenter study the recently received ethics approval.
Next steps include activation of study sites.
With a target of first patient enrolled early next year.
The next three studies listed on the slide our old registries.
First is the U S. CTC registry that includes critically ill COVID-19 patients when ecmo treated under the FDA emergency use authorization.
Topline results were presented in August it will be discussed in more detail on my next slide.
We expect that data outputs from CPC to continue in 2022.
The Star Registry is an international registry, capturing real world evidence or anti thrombotic removal.
Currently the study is active in the United Kingdom, and Germany with their first patients already enrolled.
We plan to expand the registry in additional EU countries in 'twenty, two including but not limited to Austria, Belgium, the Netherlands and Sweden.
The final program listed on the Slide is the international Cosmos registry designed to capture real world evidence with the use of Cytosorb among a broad range of critical care applications.
Protocol has been finalized and next we will be seeking ethics approval in Germany with other EU countries to follow.
The target completion dates for these programs are listed on the last call them.
However, as noted on the bottom of the slide we continue to experience significant COVID-19 related challenges that uncertainty to our timetables.
What's worth noting is that in addition to the acute effects associated with limited hospital capacity or restricted access to research personnel.
We're also seeing evidence that many institutions around the world are also suffering from the long effects of the pandemic that include staff fatigue high rates of turnovers and difficult.
Teasing with hiring new staff.
Next slide please.
Okay.
Since our last earnings call New Cytosorb data were released in COVID-19 and endocarditis.
First in COVID-19, the topline U S. Multicenter CTC registry results were presented at the international symposium of intensive care and emergency medicine.
The data were 52 consecutive patients treated with Cytosorb, while on a license life support with Ecmo at five major U S centers.
And showed high 90 day survival rates of 73%.
For context, the 90 day survival in the North American cohort over the International Ecmo also registry is 50% that is an over 5000 patients as of October 30th this year.
The CTC data had been very well received and are expected to drive cytosorb usage, and COVID-19, plus ecmo worldwide.
Future CTC analysis will aim at better defining the optimal use of cytosorb with ecmo and identify potential additional clinical and economic benefits.
Second.
Datasets and endocarditis were presented at the European Association of cardio thoracic surgery less than a month ago.
The results presented at the meeting were mixed.
First the German remove randomized study in 282, all comer endocarditis patients did not meet the primary endpoint of changes sofa score with the use of Cytosorb.
However, our second observational study from Nuremberg, Germany in 195 patients with left sided endocarditis showed reduction in sepsis related mortality with Cytosorb.
Importantly, both studies declared that the intra operative use of the device was safe with the same adverse event rates as the standard of care, meaning the control arm, where the device was not used.
We intend to work closely with the investigators of both studies to further analyze the data and potentially inform future endocarditis studies.
We do believe that the safety data for both studies bode well for the same exact intraoperative device used in our FDA trials.
Next slide please.
In summary in.
In the past 12 months, we have scaled up our clinical capability significantly to support execution over our global clinical plan comprising of nine company sponsored clinical studies.
We have made significant progress on our path to U S. Marketing approval that is focused on the Olympics robotic removal opportunity with it to F. D. A approved randomized control double blind start T and started the trials.
Outside the U S. We are focused on generating data in several critical care applications, including sepsis and liver failure among others.
Finally, we expect to have seven of these programs actively recruiting by the end of this year with all nine being active in recruiting by the end of the first quarter of 2022.
And with that I'd like to turn the call over to our Chief Financial Officer, Kathy Bloch Kathy.
Thank you so much like it and greetings to everyone on the call today.
Today, I'll be providing a summary of cytosorb in third quarter 2021 financial results I will also reiterate our fourth quarter and full year 2021 guidance.
And then finally I'll provide an update around our working capital and cash runway.
So let's start with product sales for the third quarter, which were approximately $8 $9 million, a decrease of 13% as compared to $10 $2 million last year.
This outcome was driven by lower COVID-19 related sales and slower year over year growth in our core non COVID-19 sale of approximately 3%.
Product sales in Germany were $3 $7 million down, 24% compared to product sales of $4 $8 million in Germany last year. This of course, a matter upon which hill and Christian have already provided substantial color changes.
Changes in the Euro to dollar exchange rate had little impact on year over year product sales. Our income from grants was approximately $859000. That's an increase from prior year grant revenues of $301000 and our total revenue, which includes both product sales and grant revenue.
Decreased by 7% to $9 $8 million in the third quarter.
<unk> to $10 $5 million in the third quarter of last year.
Product gross margin remains a robust 82% from Q3, 2021 compared to 74% for Q3 'twenty 'twenty.
Next slide.
Here, we'll have a look at quarterly product sales trends over time and for this analysis, we've broken out our COVID-19 product sales from our core non COVID-19 product sales for.
For the third quarter of 2021 our COVID-19 sales were estimated to be approximately $1.1 million, which is in fact, the lowest quarterly COVID-19 sales we've reported since the beginning of the pandemic in the first quarter of last year.
Our core non COVID-19 sales were $7 $8 million growing 3% compared to last year's seven $5 million in sales.
Slide please.
Luckily flat compared to 2020 product revenue of $39.5 million and wallet is difficult to predict 2021, Cor nine Soviet product revenue is expected to be approximately $33 million to $34 million for the current year versus $30.1 million.
In 2020.
And based on what we are seeing so far this quarter. We remain confident that these results are achievable.
Next slide please.
As of September 30th 2021, we have approximately $61 million in cash on hand.
During the third quarter of 2021, we continue to invest in mission critical activities, including a planned increase in spending on our clinical trials as well as activities associated with the build out of our new manufacturing plant. We are also preparing to invest in the U S commercialization filled out.
Which will be required to support sales and marketing activities. Once F. D. A marketing approval is received we believe we have sufficient liquidity to support these investments which are expected to drive our growth in the future and now I'd like to turn the call back to Phil Phil.
Q&A session. Thank you.
Certainly and thank you as a reminder, if you do have a question that is one four on your Touchtone phone. Please make sure. Your mute button is turned off to allow your signal to reach our equipment. Once again that is one four on your touchtone phone.
Our first question comes from the line of Danielle and healthy with SBB Leerink. Your line is open.
Hi, guys I didn't play out on for Danielle.
Two questions here I think first yes.
One thing can you guys talk about some of the trends you've seen Oh, you asked and even within the U S. A in the first few weeks of the quarter as it relates to Covid and I. Appreciate that you guys can't give guidance, but directionally how are things tracking as we head into 2022.
Yeah, I think that our Crystal had commented on Europe in particular, Germany, where the rising rates of Covid have translated into increased ICU.
<unk> usage.
And more ICU patients.
Beginning of an increase in sales of Cytosorb related to those COVID-19 patients.
I think that it depends really on where in the world, you're talking about and where COVID-19.
Has been increasing.
We've been seeing a increased cytosorb sales for COVID-19 in.
In the United States last quarter.
Just to give you maybe some perspective you know when we gave our guidance back in August on the remaining.
To the the staff being exhausted, sometimes retiring early and then having difficulty rehiring so in that regard.
Do see that even you know in the Star T and start D startup activities, having said that we're progressing we're making progress as I mentioned, we already have six active sites and we'll continue to move forward activating more and more so we're uncertain what the exact impact on enrollment will be we'll have better visibility when we have more sites active and will be.
To track the rates of enrollment in our stated on the prepared remarks, we plan to announce on future earnings calls you know the trends in enrollment.
To your second point, there's a great overlap between Star T and start D on every level, including participating sites.
So we do believe that we'll be able to deliver this.
Started this study in the first quarter of next year as we had previously targeted for start D. We do believe we'll get the first patient in early next year.
Great. Thank you.
Yeah.
Okay.
And our next question comes from Josh Jennings with Cowen Your line is open.
Hi, This is Brian in for Josh. Thank you for taking my questions.
I wanted to start with a clarification question on the Covid conditions in Germany in the guidance.
Are you assuming that more normal ICU conditions return fairly quickly in November in order to achieve the sequentially similar product sales in the fourth quarter and I'm asking because it visually the fourth quarter already looks similar to what you faced in the third quarter in terms of Covid impact and I assume there could be pressure again in December.
Or following what's normally the flu season. So that's my first question I have a follow up if I can.
So I'll turn it over to Christian in a moment, but I think the fourth quarter differs from the third quarter and that the third quarter.
Ah is a traditionally seasonal quarter affected by a European vacation schedules, where many people leave for vacation in July and August I, including health care workers and so it's typically a slower quarter, whereas the fourth quarter is typically our strongest quarter.
So the fee, obviously and all the market is that a another wave of COVID-19 patients.
Is stressing the health care system too much so that the available number of ICU beds.
Is is too low and that the patient cannot be treated.
Appropriately so that's fine.
The beef of Covid infection started in Q3, a lot of ICU beds.
You bet, Matt resolved for Covid patients.
As you know there is always a lack also between infection and hospitalization and then another one towards ICU a dependency.
So.
As I said already before them that there are more ICU patients COVID-19 patients now and so also be happy to see that the the pattern of these patients.
Has it changed over the last year. So there are now a dedicated COVID-19 centers or sites COVID-19 patients or kind of concentrated and they're treating all the COVID-19 patients another hospitals.
On standby.
That is one thing and another thing is that over the last 12 months. The German health system has has lost.
It had to be.
Really rescued with financial aid from the from the German government earlier, this year and they're very motivated to try to lift these restrictions right, but given the current surge in COVID-19 right now we cannot predict when those restrictions will end, but we do know that I think are they're they're they're equally.
Motivated as we are to have those restrictions and and to get back to business as usual.
Okay. Thank you and on the U S clinical program for an anti thrombotic removal I realized start to use a few months ahead of star D, but given the similarities in the trial designs and the overlap in the participating sites and investigators is it your plan to make us.
Single F D. A submission for both indications and if not should we expect the roughly four months difference in the trials progress now to persist into the study's completion and the subsequent filings.
Yeah.
Yes, that's a good question, Mike do you want to take that.
Yes.
Feel free to reach out to Carrie Ann powers that he powers outside it's sort of it's dot com and we'll try to reply to your questions as soon as we can.
Thank you.
Thank you that concludes our conference for today I'd like to thank everyone for their participation have a great evening.
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