Q3 2021 Cerus Corp Earnings Call
[music].
Good day, ladies and gentlemen, thank you for standing by and welcome to the <unk> Corporation third quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you will need to press. The Star then the one key on your touch some telephone.
Please be advised that today's conference is being recorded if you would go out offer assistance. Please press Star then zero.
I'd now like turn the conference I'll, let you go speaker host today.
Nothing of any senior director of Investor Relations.
Thank you and good afternoon.
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 Dot Sirius Dot com.
With me on the call are Obi, Greenman, Cerus, President and Chief Executive Officer.
Vivek Jairam and Sirius as Chief operating officer.
Kevin Green <unk>, Chief Financial Officer.
Carol Moore Cirrus as senior Vice President of regulatory affairs, and quality and Jessica Hanover, Fearsome Vice President of corporate Affairs.
Cirrus issued a press release today announcing our financial results for the third quarter ended September 32021, and describing the company's recent business highlights.
You can access a copy of this announcement on the company website at Www Dot Cirrus 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 are forward looking statements.
Examples of forward looking statements include those related to our future financial and operating results, including our 2021 product revenue guidance and goals operating expenses and.
Dissipated cash use from operations gross profits and gross margins as well as commercial development efforts.
Future growth and growth strategy.
Future product sales product launches ongoing and future clinical trials.
Ongoing and future product development, and our regulatory activities, including the timing of these events and activities.
These forward looking statements involve risks and uncertainty that could cause actual events performance and results to differ materially.
Identified and described in today's press release.
And under the risk factors in our forms 10-K for the year ended December 31 2020.
And 10-Q for the quarter ended September 30.
30th 2021, which we will file shortly.
We undertake no duty or obligation to update our forward looking statements.
On today's call will begin with some opening remarks from Obi.
Commercial update from Vivek, followed by Kevin to review our financial results.
We will conclude with commentary from Obi with an update on our pipeline recent announcements and closing remarks.
And now it's my pleasure to introduce Obi Greenman, <unk>, President and Chief Executive Officer.
Thank you, Matt and good afternoon, everyone.
Once again, we are excited to share our most recent quarterly results with you all.
Before I turn the call over to the they can Kevin to cover our third quarter results in more detail I wanted to provide a few opening comments.
2021 has truly been a breakout year for cirrus as.
Our annualized product revenue run rate continues to build momentum we saw in the first half of the year.
We continue to achieve major goals in 2021, both commercially and operationally.
And I am excited about the road ahead for the company going into 2022.
Since 2014, when the FDA first issued the draft guidance to address bacterial contamination and platelets.
We've been focused on making the case that our intercept blood system is a best in class offering to mitigate transfusion transmitted bacterial infection, while also providing a proactive solution to addressing blood safety and availability in general.
We have built a unique and strong position in transfusion medicine, which is the medical field. It takes a while to embrace innovation born when it does it establishes safety measures that endure.
Our Q3 and year to date results were driven by U S adoption of our intercept platelet platform, which enables strong blood center compliance with the FDA guidance that went into effect October one.
In parallel with the blood center benefits afforded by intercept.
U S hospital demand for pathogen reduced platelets continues to build given the logistical benefits of a single inventory a fresher platelets compared to managing inventories of platelets of various ages that are subjected to delayed release due to testing.
As you can see from this quarter's results our business in the U S has grown rapidly.
With all the work our team has done to get customers ready for the FDA compliance. We believe our current run rate is helping to establish pathogen reduction as a standard of care in the U S platelet market.
With intercept treated platelets now representing the majority of plants produced.
Last month at the virtual ABB annual meeting we were pleased to see our phase four Piper study presented as a plenary lecture.
Piper represents the largest study of platelet transfusions ever conducted and there is the latest in a robust growing evidenced based body of real world data for our technology.
With studies like this combined with over a decade of routine use experience in Europe, we are solidifying our safe strong safety and efficacy profile for intercept.
We believe such a strong body of evidence will allow us to realize continued growth on a global scale as we help deliver a new standard in transfusion medicine.
To that end cumulative kit sales for intercept platelets and plasma recently eclipsed 10 million doses globally is a remarkable accomplishment in our company's history and a reminder to all of us at cerus. The thousands of patients that receive intercept treated blood components every day.
In summary, we are honored to support our blood center customers and their daily efforts to secure the blood supply and we remain committed to our mission of making the intercept blood system. The global standard of care in transfusion medicine.
Following the vegan kevins remarks, I'll return to discuss our pipeline, which continues to make good progress and is positioning us for continued growth over the long term.
With that I'll turn it over to Vivek.
Thank you Obi and good afternoon, everyone.
The third quarter was indeed, a significant one for Sierra.
We are now officially a month beyond the FDA guidance compliance deadline and our results show that we have moved quickly to convert U S blood centers across the country the intercept blood system for platelets.
Even with the commercial success, we had last year and so far this year. We feel we can continue to increase our penetration in this key market as blood centers and their hospital customers realize the value of a single SKU patch and reduced platelet inventory.
Blood centers across the country has helped champion intercept as the preferred method for safeguarding platelets.
As these centers standardize on intercept they do so recognizing that our product offers protection from bacterial contamination as well as other known and emerging pathogens.
Our blood center customers can then offer these platelet units to hospitals with better pricing value and ultimately safety for patients as we continue to grow our presence we remain committed to continuing to be a valued partner safeguarding the platelet supply for many years to come.
Once again, we are pleased to report the largest product revenue quarter in the company's history.
Third quarter 2021 product revenue grew 53% year over year to $36 1 million on a sequential basis product revenues grew 15% in the third quarter when compared to the 35 point $31 5 million product revenue reported in Q2 of this year.
Drilling down to sales in our major geographies product sales in North America grew 146% versus the prior year period.
Product sales in EMEA grew 3% versus the prior year on a year to date basis, our North American product revenues for the first three quarters of 2021 were slightly higher than our year to date product revenues in the EMEA region.
Sales to the top five U S blood centers, which provide roughly three quarters of the country's platelet supply increased over 170% versus the third quarter of 2020 and grew by nearly $5 million sequentially.
Outside of the top five U S blood centers product sales increased over 50% when compared to the prior year period.
Turning to intercept fibrinogen complex our IFC the third quarter marked the first commercial sales of this product to hospital accounts.
Youll recall the launch of this product has been limited to five states in the U S. Thus far but I am pleased to report at four of our Blood Center production partners submitted their BLA during the quarter.
As such we look forward to rolling IFC out in a nationwide launch once these anticipated BLA is are in hand.
We've recently had some of our initial customers speak publicly about their rationale for use of early experiences with IFC.
At the recent society for the advancement of patient Blood management annual understand two of our hospital customers, Texas Children's Hospital, and Kaiser Permanente outlines the clinical need for IFC based on its pathogen reduced safety profile its ability to be readily available to treat bleeding events earlier.
And the lower risk of wastage compared to conventional cryoprecipitate.
With both a nationally recognized children's hospital and a major IDM, leading the way we continue to believe in the promise of this product to be a tremendous clinical utility and to help support our continued revenue growth in the years to come.
With that let me turn the call over to Kevin for a more detailed review of our financial results.
Thank you Vivek and good afternoon, everyone.
Sure My colleagues' enthusiasm and pride in the progress we've made and look forward to the progress we expect in making intercept treated blood components available to even more patients globally.
As Vivek mentioned in his remarks, we reported record product revenue during the third quarter totaling $36 1 million.
Representing a 53% increase compared to the third quarter of 2020.
And led by strong intercept platelet sales in the U S.
With year to date product revenues at the end of Q3.
Coming in only about $1 million shy of our full year 2020 product revenues.
Breakout year continues to demonstrate cirrus <unk> strong position in transfusion medicine.
Moving onto our calculated quite with dose growth globally, which as calculated depicts a 69% year over year increase and a 22% increase sequentially.
In terms of product mix for the quarter.
Sales of intercept kits continue to represent more than 90% of our Q3 product revenue.
Of that platelet kits represented over 80% of our total product sales underpinned by the steady EMEA market and growth in the U S market.
In addition to our product revenue and not included in our guidance government contract revenue totaled $6 million in Q3.
Comparatively government contract revenue totaled $5 6 million in the third quarter of 2020.
As we have stated previously government contract revenue was primarily comprised of BARDA reimbursement for Red blood cell clinical trials and to a lesser extent, our whole blood pathogen reduction contract funded by the FDA.
As patient enrollment under the BARDA trials and activity on the whole blood effort rail, we expect government contract revenue to increase.
Yeah.
Additionally, as we will discuss a little later.
This government contract revenue line is essentially an offset to a portion of our R&D spend.
Beginning next year, we plan to strip out both the expense and offsetting revenues in an effort to highlight the core business adjusted EBITDA metric that we are using to measure progress of our core business activities.
With that aside for the time being let's turn to product gross profit and gross margins.
Third quarter gross profit was the highest in the company's history at $18 5 million compared to $12 7 million during the prior year period.
The increase in gross profit was primarily driven by higher product sales.
Product gross margins for the quarter were 51, 3% compared to 53, 6% for the prior year period.
We're roughly flat when compared to our Q2 2021 product gross margins.
As was the case during the first half of the year and as we anticipated and forecast.
The year over year decline in our product gross margin percentage was driven primarily by unfavorable product mix associated with selling a higher volume of single dose kits versus the prior year period.
Today, our customers in the U S market predominantly use single dose kits, which carry a lower margin contribution than our double dose platelet kits.
Overtime, we expect that the U S market will use an increased number of double dose platelet kits.
I'd now like to discuss operating expenses, which totaled $35 $6 million during the third quarter and included $5 $9 million noncash stock based compensation.
During the third quarter, we continued to demonstrate the operating leverage of our business with total operating expenses up only 11% versus the prior year on a strong product sales.
Of the total Q3 operating expenses SG&A expenses accounted for approximately $24 million and were higher by about $4 billion compared to the prior year period.
The year over year increase in SG&A expenses was driven by costs associated with increased sales incentive compensation.
Research and development expenses for the quarter totaled $15 $3 million.
Compared to $15 9 million during the prior year.
During the quarter, we continued to advance a variety of pipeline projects.
<unk>, our U S red blood cell efforts and the OLED illuminator, along with increased stock based compensation costs.
However, offsetting the investments in these programs, we realized lower R&D costs associated with certain mature projects rolling off such as our Piper study and IFC, which is now perhaps development being commercialized.
On the bottom line reported net loss attributable to <unk> for the three months ended September 32021 improved when compared to the same period in 2020.
Net loss attributable Cirrus for Q3 totaled $12 4 million.
Or <unk> <unk> per diluted share.
Compared to $14 1 million or <unk> <unk> per diluted share for the prior year period.
With respect to our path towards achieving cash flow breakeven. We've remained focused during this pivotal year on driving operating leverage in the business, while continuing to invest in growth for both the short and long term.
As this remains a priority for us moving forward, we plan to provide more color on subsequent earnings calls beginning in 2022.
To help track of our progress towards cash flow breakeven using a pro forma measure, we're calling core business adjusted EBITDA.
Essentially this metric will highlight our operating income or loss, while adjusting out non core business activities, such as our government contract revenue in the <unk>.
Corresponding costs.
As well as noncash items, such as stock based compensation depreciation amortization and the line items below operating income.
Other income expense and income taxes.
In terms of our balance sheet, we ended the quarter in a strong position with approximately $120 million cash cash equivalents and short term investments on hand.
Cash used from operations for the third quarter was $6 6 million.
Which reflects the continued sequential improvement over the course of 2021.
As we continue to see robust demand from our customers, we remain committed to continuing to ensure our ability to supply customers and to support their ability to deploy intercept platelets for the blood supply.
To that end expanding access to our revolving line of credit and that facility will continue to play an important role.
Allow us to invest in the growth of the business without depleting our cash resources.
Moving on to product revenue guidance to round out 2021.
The strength of our business year to date.
With the visibility we have going into the balance of the year.
Have resulted in us increasing and also narrowing our full year product revenue guidance range to 127% to $129 million.
From the prior range of 118 to 122 million.
This new range reflects 38% to 40% growth when compared to 2020.
With that let me turn the call back over to Obi for some closing comments.
Thank you Kevin to wrap up today, we have a few updates regarding several of our pipeline initiatives.
First with respect to our seven day post collection storage claim for intercept platelets. We recently received questions from the agency regarding the submission.
<unk> plans to meet with them in the near term to discuss their feedback.
Given the fact that these questions have stopped the review clock the potential approval timing is no longer expected by December of this year.
With respect to our Red blood cell program I wanted to provide a quick update on a modular submission filing for CE, Mark, which you will recall, we completed with <unk> during the second quarter of 2021 multiyear vision continues its review.
Portion of our submission is now also under review by the Dutch competent authority CPG, rather than HRA or the Irish medicines Board as we initially anticipated. This change is due to the MTR transition related resource constraints.
By all European regulatory bodies, it could impact CE Mark timing.
Finally, I wanted to wrap up with some great news regarding the Esf's France's National Transfusion service I am pleased to.
<unk> announced that we have signed a multiyear contract extension with one of our most important customers and one of the most highly regarded institutions in the field of transfusion medicine.
<unk> has been a trusted partner to <unk> for more than a decade and began using intercept on 100% of its national platelet supply in 2017. In addition to treating a portion of its plasmid production.
With over 1 million platelet units transfused into arguably the world's most robust hema vigilant system.
The data supporting the strong safety profile of intercept platelets is significant.
We see this contract extension is an important validation of our mission as a company to support our customers and their effort to safeguard the safety and availability of the blood supply.
And it also validates the business model that we are building for the full intercept portfolio.
In closing our third quarter performance has established a clear path towards market leadership for intercept globally.
Our commercial progress is reshaping our growth trajectory in 2021.
As our top line 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.
Our product pipeline continues to advance as well with a number of important product launches anticipated during the coming few years.
With that let me turn it back over to the operator for Q&A.
Thank you ladies and gentlemen at this time I'd like to ask a question you will need to press. The Star then the one key on you touched on telephone to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
My first question coming from the lineup.
Josh Jennings with Cowen Your line is open.
Hi, good afternoon, thanks for taking the questions.
It's great to see another record quarter printed.
With the strength of the business the momentum of the business is seeing.
Just wanted to touch base on the sustainable growth trajectory and I think.
Have.
Got it.
Close to 40% revenue growth in product revenue growth in 2021.
Presents a challenging comp, but it seems there's a lot of layers to the growth story going forward as well.
Just wanted to touch base on your thoughts on the sustainable 20% plus revenue growth.
Trajectory going into 2022, and the 2023 and any any of those layers that you called out meaningful drivers as we head into 2022.
Well, thanks, a lot Josh really good question and I'll start and probably turn it over to Vivek halfway through so we still remain very optimistic about sort of the continued growth of the business as we get through 2021 and move into 2022, just given the size of the market.
The backdrop of the U S. Platelet market is that it typically is growing in that sort of the mid single digit range organically just given the demand for platelet components.
So that really puts a lot of pressure on both blood centers and hospitals to secure the supply.
And so having a product that.
Really is allows for a single inventory.
Yes.
<unk> Ku and allows for greater supply chain efficiencies.
But I think vivek and really maybe elaborate more on sort of what's going on specifically in the U S and with the American Red Cross.
Yeah, Thanks <unk> bin.
Thanks for the question Josh.
We feel very confident in our ability to.
Dane growth domestically and internationally.
We indicated.
In the prepared remark our progress with the Big five blood center families in the U S and again, they represent about three quarters of the market.
It has been really strong, but there's still plenty of headroom within that segment of the market and what we're seeing from hospital customers independent of who their blood supplier that they are expressing a clear preference for intercept.
Created platelets and so those two factors really gives us a lot of confidence there is plenty of room to run domestically. In addition, we continue to make investments in key international growth markets, which over the course of the next few years should allow us to have ongoing waves of growth in product adoption and fundamentally what we're focused on as an insurer.
<unk> had many patients who can have access to intercept in fact did.
Thanks, Thanks for that.
My follow up on.
IFC.
The cryo launches.
Early days, but just as you're seeing some of this early interest and demand creation.
Can you talk about the historic Tam assumption of $300 million in the United States that could could that Tam calculation get higher I think the cryo market is growing close to 20% at least last year and into this year and then maybe how that business model could evolve from these initial.
<unk> centers.
To incorporate some of it.
Bigger blood banks in the U S. Thanks for taking the questions.
Yes, Thanks, Josh again, I'll start and turn it over to Vivek to provide some additional context, so as far as the Tam for our intercept fibrinogen complex product, it's really calculate it on through the current use of crowd in the United States being roughly on the order of 750800.
1000 grams equivalents of fibrinogen.
Annually and that is growing its hard to get great numbers on that but it is over the last couple of years growing at least in the mid single or mid teens.
And Thats I think largely a function of the increase use of.
Viscoelastic monitoring.
<unk>.
Surgical procedures, and then trauma cases so.
We do see a growing demand for the early use of fibrinogen concentrates.
Tom.
Maybe just you could take the second half of Josh <unk> question.
Sure.
Now in terms of our launch and how we see progress evolving.
There are really three.
<unk> key dimensions to focus on increasing production with our production partners, making sure that their operations are appropriately organized such they can touch that they can meet the demand that we start to generate.
Working with them on.
L. A is another tool to ensure they can.
Provide product across state lines, and then really going in and qualifying demand at the hospital level educating them on the economics and path and we're making good progress across all of these fronts.
I would say is that COVID-19 in the context of hospital access does continue to be a bit of a headwind.
Different from our core business and that we are.
I'm responsible for the commercialization piece at the hospital and as you probably know from other companies you cover hospital access is still limited when compared to pre Covid days, but having said that.
The underlying clinical interest.
Feedback from initial user then the understanding of the importance of the <unk> tap in terms of taking any sort of economic or pricing concerns off the table really have proven out the initial hypotheses.
Laid out and so we feel very good about the fact that there is still.
Growth driver for our organization, but I think most importantly, this will be a tool that clinicians can use it.
The end of the day.
Eight patients by giving them earlier access to crop.
Great. Thanks again.
And our next question coming from the line of Brandon Folkes with Cantor Fitzgerald. Your line is now open.
Hi, Thanks for taking my questions and congratulations on a very good quarter.
I think earlier this year, we had talked about the blood shortage in the U S. So that's just get an update there and how do we think about that.
The impact on results.
Are there any catch up in the quarter or going forward, how do we think about that.
Potentially reversing.
And then maybe secondly, how should we think about gross margins trending from here just given the significant growth in the U S and the French contract. Thank you very much.
Okay. Thanks, a lot Brandon again I'll take the first half of that question and then Kevin maybe you can take the gross margin question and the second half.
Of our apply.
So with regard to the overall shortage of blood components in the United States.
That continues for those of you donate blood.
Get a daily reminder, to go in and donate.
Given the scarcity of blood components for Red cells, platelets and also plasma.
So I encourage you all to go and donate if if if.
You don't because it's very much needed.
We really don't see it having a sort of a lot of.
Creating a lot of variability within a quarter, just given sort of the growth trajectory. We've seen through the first three quarters this year and through the remainder of the year.
I think the concern really is around 10 basis can the overall platelet supply would be sustained.
With the sort of mid single digit growth in.
Demand that we're seeing.
That's a larger question, but I don't really think it has profound implications for serious in the at least the immediate term.
I think that's all.
For the first part of the question, Kevin you want to handle the gross margin evolution.
Yes sure.
So.
We expected as the U S was the major contributor for growth in 2021 to see kind of the 100 to 200 basis point pullback that we are seeing from last year with that said I expect more of the same.
For the balance of the year.
<unk> is an interesting question and how that will ultimately affect margins.
Youll recall that the <unk> has been a customer of ours for a number of years and so we're extremely.
With such.
Important large customers and longstanding customers.
Sign up with US again, it's something that we pride ourselves in not only on the science and the technology, but our ability to be good partners with with those customers and provide.
A world class level of customer service, so with that said.
We are.
As contracts come due seeing price increases.
And so I think that will be somewhat of an offsetting effects too.
The predominant use of single dose kits in the U S. So.
In summary, probably more of the same for the balance of the year.
Longer term, we will expect to get back to economies of scale.
To see some return to margin expansion.
Great. Thank you very much and congratulations again on a very strong quarter.
Thank you.
Our next question coming from the line of Mathew Blackman with Stifel. Your line is open.
Hi, good afternoon, everybody. Thanks for taking my questions, maybe Obi I wanted to start with you and ask you about your comment about intercept platelets, how being majority I think I heard you correctly. The majority of platelets produced in the U S. Any way you could at least maybe directionally break that penetration out by <unk>.
Red cross versus the.
Other big four versus sort of the other bucket that clearly just trying to get at how much more runway there still is.
And I guess the follow up to that is I mean in the past you've talked about standard of care being.
Something north of 50% it sounds like we're already there do you have any updated thoughts on where.
Intercept penetration could go in the U S. And then I do have one more follow up.
Yes. Thanks, I think those are good questions and historically, we have leased internally at cerus to find the standard of care being at least 50% I think that's an important.
Terminology that we use sort of globally, just because of the impact of being standard of care on other markets.
As you know we are the standard of care in many European countries and we do believe that that is highly influential.
For other markets as they look to safeguard their platelet supply.
In practice the standard of care, if you will and then I think even in the United States with the American Red Cross.
Moving towards their stated goal of getting to a 100% pathogen reduction because of the.
The ability to safeguard the blood supply with our technology that that also is a strong statement as far as the breakdown within the U S.
I think there's clearly a lot of room for us to grow.
The Red Cross has moved very quickly towards their stated objectives. So.
I would just say that theyre well above <unk>.
50%.
And moving.
Directionally towards their stated goal I don't know when they will actually achieve that in 2022 or maybe it's even 2023.
But.
From all signs the demand coming from the hospitals is great and they're trying to provide a single inventory to the to meet the hospital demand.
Thank you on a Friday provide any more color about what sort of going on at a macro level with the big five customers, maybe that provides a little bit more.
Perspective for Matt.
Sure I think you've covered it well first of all Matt Thanks for the question.
As indicated we really had.
Don and very intentionally a big five strategy trying to make sure that those larger customers had everything they needed from that deployment support standpoint and production support standpoint.
It really drives adoption of intercept and to date.
Feel like we've had some good.
Good early success, but.
Across all of those big Bad Blood Center families, including the Red Cross, there's still plenty of headroom the.
The Red cross dated in their open letter the thing and to being 100% by 2023.
There is still room to go there.
And there are probably a little bit ahead of the others and so I think when you think about the U S market you can sort of think about the big five leading the way and then the balance.
Heading in that direction, but.
Probably with more.
<unk>, which gives us more upside but.
Probably didn't you are in terms of specific breakdown by Big box Center, but.
I'd like to say, we believe there's still plenty of room progressed.
Alright, I appreciate that.
Have you I.
Wanted to ask about cryo EM.
Any early reads and I'm focused mostly in sort of on the sales force.
The depth and breadth of the sales force.
How much you need to invest you have the right people is it the right size. The sales force anything frankly may have learned on the commercial front.
And the new business model over the last several months. Thanks I appreciate it.
Yes, sure no problem happy to I mean.
No.
<unk> talked about in different industries.
That's the kind of productivity nightmare or thinking about.
Hi, you want to allocate the sales force across the country all of those things are considerations.
Variable here, that's probably the biggest wildcard had been trying to do all of that.
In the midst of Covid.
Especially early on when the hospital access.
For all intents and purposes shut down and now even though it's pretty restrictive launching a de novo product and that of itself is challenging that just created a much higher level of challenge, which is why I'm really excited about the receptivity that we had been seeing nonetheless, I think are at.
The salespeople that we've identified.
Good ability to identify the key decision maker as you can imagine it's not uniform per site and in many areas. There's a bit of a network should makers between clinical influencers than non clinician administrative as well currently.
So I think we have good understanding now whether it's at a single site or an integrated delivery network, who we need to influence to gain traction and then do we need to partner with to sign contracts.
A key piece is going to be production volumes with our partners, which is independent of the salesforce, but obviously, we want to make sure that we're not generating demand too far ahead of being able to produce products. So theres always that delicate balance we need to strike I think we will get even better understanding of.
Outreach once we get more access to asphalt customers that we can't necessarily access now because of some of the COVID-19 restrictions, but.
I think theres leverage for us both in terms of.
The sales force, we have partnering with blood Center production partners, and then potentially leveraging some of the folks we have on our platelet side.
As they're going out and connecting with hospitals, who are adopting intercept platelets. So it's still early on that and I apologize for the somewhat nebulous answer the question, but the fact is the hospital access piece that's been diminished during Covid really has created a situation where we need to get in a little bit more than we have been a lot of to and we're slowly starting to see that.
<unk> been up.
Alright I appreciate it. Thank you so much and congratulations guys.
Thanks, a lot Matt Thank you.
Our next question coming from the line of Jacob Johnson with Stephens, Inc. Your line is open.
Hey, Thanks, good afternoon, and congrats on nice quarter.
<unk> maybe for you I appreciate the update on seven day platelets.
The bigger question around seven day platelet approval I mean, how much more of the market will that open up for you I think the results you are putting up this year. It seems like you're already able to capture a decent amount of the market without.
The seven day label, just how incremental could that be from here.
Yes, I mean, it's obviously a difficult question to answer given the demand that we are seeing in sort of the receptivity.
To the product offering given its early earliest compared to the alternatives, especially when you're in a.
An environment, where there's not enough platelets, having that earlier product release is important.
In the same vein, though if you had a seven day label claim I think it does help hospitals manage their inventory.
More easily and so that's ultimately the goal.
Again.
Provide somewhat of a nebulous answers I just.
I'm not seeing it impact the demand.
Four.
Now into the future.
And that being said we.
Obviously.
Markets have seen the importance of a seven day claim for overall blood center operations, and just sort of facilitates.
Intercept becoming the standard of care much more quickly.
Got it got it.
We are hopeful Obi and then.
Maybe a follow up for Kevin or maybe others want to chime in on this Kevin just on the gross margin outlook I appreciate kind of.
Spec the status quo as we head into the fourth quarter.
On gross margins, but as we think about the gross margin expansion I think particularly from the U S market it'll be the shift to double dose kits. It sounds like you are optimistic about that occurring in the future, but any kind of timeframe or way to think about when we could see that shift occur in the U S.
You know I think.
It's happening, it's just happening a little bit slower so.
<unk>.
We see increased overall penetration in the U S margin in blood centers, then you start to look at ways to optimize their overall production will start to see it I don't know that were going to see well, we're not going to see it in the same depth to say <unk>, which is the majority of their overall production.
But we will see some incremental progress as we move forward here it will just be.
Less impactful than say the FFS was.
I think the other thing too.
To keep our eye on for margin expansion is.
Just some of the Cogs reduction initiatives that we had.
Our partners have been working on and we didn't see.
Very significant price reduction due to economies of scale. This year, we expect that we will.
Longer term and so that's something we're focused on and will continue to work.
Drive our cost and make our manufacturing processes are as efficient as possible while at the same time, ensuring our ability to meet global demand.
Got it thanks for taking the questions.
Thanks Jacob.
Our next question coming from the line of.
Mark Massaro with BTG Your line is open.
Thank you Ian on for Mike Thanks for taking my questions.
So any update on when you might complete enrollment for your Red blood cell studies.
Can you also give us an update on the timing for the expected launch of <unk>.
For Red blood cells.
Thanks.
Great. Thanks, so much.
I'll take the last part of your question first.
So.
Just right now as we mentioned in the call. We are working through the CE Mark approval process in Europe and that has transitioned to our competent authority, which is now the Dutch competent authority.
So just given some of the uncertainties around the MTR timing that could drift.
Beyond the second half of next year, but we're still anticipating a product launch in 2023.
And so everyone is very excited about the opportunity there just because of our ability to offer the full portfolio.
Intercept products.
Treat all transfused blood components.
And the.
The reception that we believe we will get from our existing customers of intercept platelets and plasma.
With regards to the phase III studies in United States. They do continue to enroll both recipe and radice.
It's been impacted a little bit by Covid.
And it's it's almost regional just where there has been.
Hi, <unk>.
Impacts of Covid on our hospitals, we have seen lower enrollment than we anticipated and we've seen in other sites sort of coming out of Covid. So.
With that overall mix, we hope to see improvement as we move into 'twenty.
2022, and be able to provide an update sometime in the first half of next year on where we think we are with regard to overall enrollment.
Timing and completion of the studies.
Okay awesome.
And then just a quick follow up.
We think about modeling international growth moving forward.
Alright, and just given that your question.
Are there any additional geographies and maybe enter that needle.
That same pace of growth internationally, and if you could touch on some of the key drivers there. Thanks.
Thank you Dan.
Handling that question.
Sure I'm happy to.
In terms of international growth kind of over a multi year horizon.
Earlier this year, we announced that our joint venture with China, and while that won't manifest in terms of revenue goes probably towards the outer end of the strategic planning period.
It's certainly a significant opportunity for us in terms of accelerating patient access to intercept similarly, we continue to make investments in the single largest opportunity in Europe, which is Germany, and we're seeing good progress there.
And we're.
Going to be seeing our initial revenue in Canada next calendar year, as well, which is a great significant market. So ultimately if you think about near term growth that's going to continue to be driven by U S. Platelets, but we believe that we're in.
Planting seeds that.
Should really flower and provide pretty meaningful growth opportunities for our entire global franchise over the course of the strategic planning period.
Thanks for taking the question.
Thank you.
Our next question coming from the line of Brian.
Silver Roger with H C. Wainwright your line is open.
Hi, This is <unk> dialing in for Hamzah <unk>.
For taking my question just a quick one from our end.
Can you comment on the whole blood market opportunity.
Various factors at play in the competitive dynamics in this space. Thanks.
I'm not sure I quite understood your quest.
Question, just because there was a break up in the line could you would you mind repeating it.
Sure sure so in your pipeline.
You mentioned the whole blood opportunity whole blood. So we just wanted to know.
Can you comment on the whole blood market opportunity and competitive dynamics in this space.
Okay. Thanks, so much for repeating that yes. So we have a whole blood program. That's been underway for some time with the Swiss Red cross and through their philanthropic.
<unk> fund.
That's really directed that blood transfusion in sub Saharan Africa and trying to.
Creative solution that addresses.
The need for whole blood in maternal hemorrhage and traumatic injury.
We also have a partnership with the U S. FDA the secured funding to look at next generation approaches to our intercept technology to treat a whole blood and then ultimately separate that into individual components and so that is underway as well as far as sort of the overall competitive landscape, we really don't see a lot of competition.
In that space.
But.
It is also sort of.
Outlier.
That's not the right word it's so.
So the secondary priority for us relative to our existing product portfolio for plants plasma.
Fibrinogen complex and red cells. So it's I guess, it's further down the line, but we are making progress in that area.
Alright, thank you.
Yes. Thank you.
I'm showing no further questions at this time I would now like to turn the call back over to Mr. Obi Greenman for any closing remarks.
Thank you well. Thank you again for joining us today and for your interest in Cerus, We look forward to speaking with you at the Stifel 2021, Virtual Health Care Conference later this month as well as the Stephens annual investment Conference next month, thanks for joining us on the call today.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
Okay.
[music].
Okay.
[music].
Yes.
[music].
Hi.
Yes.
Hi.
Yes.
[music].
Yeah.
Okay.
Yes.
[music].
And then.
Okay.
Great.
No.
Yes.
Yes.
Yes.
Yes.
The fiduciary rule.
Okay.
Okay.
[music].
Hum.
Yes.
Okay.
Okay.
[music].
Yes.
[music].