Q1 2022 Cytosorbents Corp Earnings Call
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[music].
Good afternoon, and welcome to the vital Softbank Corp, first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode.
The formal remarks, we will open the call for questions. Please be advised that the call will be recorded at the company's request at this time I would like to turn the call over to our moderator Carrie Anne powers, Vice President of Investor Relations and corporate Communications. Please go ahead with powers.
Thank you Stacy good afternoon, welcome to the Cytosorb in its first quarter 2022 financial and operating results Conference call. Joining me today from the company is Dr. Phillip Chan, our Chief Executive Officer.
A pony President and Chief operating Officer, Kathleen Bloch, Chief Financial Officer.
Doctor Ischemia Steelier garrison, our Chief Medical Officer.
Dr. Christian Steiner executive Vice President of sales and marketing and managing director of Cytosorb is Europe .
Christopher Cramer, our 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 statements contained in the private six.
Verity of litigation Reform Act of 1995 actual results may differ from results discussed today and therefore, we refer to you. We refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC any.
Any projections as to the Companys future performance represented by management include estimates today as of May three 2022, and we assume no obligation to update these projections in the future. During today's call. We will have an overview presentation covering the operating and financial highlights for the first quarter of 2020 to by management following that presentation.
We will open the line to your questions with the management team.
At this time, it's now my pleasure to turn the call over to Dr. Phillip Chan Phil.
Yeah.
Thank you very much Terry and at the end of the first quarter more than 170000 cumulative cytosorb devices were utilized to date up 30% year over year.
The clinical trials and anti thrombotic removal continued to progress with the first patient enrolled in the start D trial in April of this year and what to start T trial progression towards its first enrollment milestone its first DSM bigger data safety monitoring board meeting with 40 patients are enrolled anticipated this summer.
We've talked previously about the U S. C. T C registry, but now new data from 56 U S critically ill patients being treated with Ecmo with Cytosorb at five major Ecmo centers under FDA emergency use authorization not only reiterate high survival of more than 70% of these patients.
Early intervention appears to also help improve lung function and get patients off of Ecmo.
Meanwhile, we are pleased to bring on MS. Jenny kin to the board of directors, the Vice President of Smart implants technology and data solutions at Zimmer Biomet and in the process of commercializing the world's first Smart me Judy.
<unk> brings a wealth of U S commercialization marketing and business development expertise to the board.
We also established our U K operating subsidiary and hired Sean Whitmore, formerly the country manager for UK and Ireland for a living Nova to do the same for US we intend to sell Cytosorb direct in the UK and Ireland part of our strategy to increase direct sales territories over time.
And finally, we successfully completed our European Union notified body audits of our new Princeton, New Jersey manufacturing facility in April with no major findings.
The facility is.
95% complete and full certification is expected to come in the coming months.
Allowing us to begin manufacturing and shipping cytosorb to customers all over the world.
From a sales perspective total revenue, which includes product sales and grant income of $8 7 million for Q1 of this year versus $10 6 million a year ago.
Product sales were $7 9 million in the first quarter of 2022 of which $7 6 million was core non COVID-19 product sales and <unk> 3 million was COVID-19 related.
There's $10 1 million and product sales last year of which $8 3 million was core and $1 8 million was COVID-19 related.
Gross margins remained healthy at 80% 300 basis points higher than last year.
First quarter 2022 core sales were stable and this is very important it was on par with the third quarter and fourth quarter of last year in terms of core sales.
And on a constant currency basis that reflects roughly 7% to 8% reduction in the euro to dollar exchange rate.
Adjusted core sales for this quarter for the first quarter of 2022 would have been $8 2 million comparable to $8 3 million in the quarter a year ago.
We had lower COVID-19 related revenue of only <unk> 3 million in the first quarter of 2022 compared to $1 8 million a year ago, which mainly accounts for the difference in product sales that you see.
Lower COVID-19 related sales reflects the decreased need for cytosorb due to the lower severity of COVID-19 illness related to rates of vaccination and natural immunity.
In the first quarter of 2022 as outlined by the light Blue vertical box that you see here overlaying. This these graphs.
Germany experienced the highest COVID-19 rates in the country since the pandemic began worsened by and Uba to variant surge falling her last earnings call that has delayed the recovery in Germany as well as ourselves.
First quarter 2022, Germany sales were $3 8 million versus $5 9 million a year ago, primarily affected by COVID-19 related issues at hospitals and in the early part of the second quarter.
The current quarter, we're seeing similar sales trends that we saw in Q1.
Fortunately cases, a rapidly declining just now breaking below 100000, new cases, a day and as you can see from the map of Germany on the top left the whole of Germany remains a hotspot, but it is getting better.
Vaccination rates at 77% of the population and natural immunity with one in three people in the country, having been infected with COVID-19 are high in the country and mortality remains low, which we believe portends an end to the pandemic very soon we.
We believe this year, where COVID-19 morphs into a less severe perennial disease like seasonal influenza.
Meanwhile, the picture similar around the world with decreases in new Covid cases in general, but certainly with certain hotspots like Europe .
Again, there are reasons to be optimistic about and entered the pandemic this year.
67% of the World population has now had at least one vaccine dose and 61% of fully vaccinated.
Major European countries have had high rates of vaccination in general greater than 70% as you can see on the right hand graph.
<unk> and natural immunity from infection.
As you can see from the far right hand corner of that table far right hand column of the table.
Mortality rates have dropped significantly in modern countries approximating that seen with seasonal influenza.
And importantly treatment of COVID-19 illness is better understood now with new drug strategies and in vaccines.
And in fact in many hospitals COVID-19 as an incidental finding in patients who are in the hospital for completely different reason.
But because of the trends we've been seeing since our last earnings call and guidance in particular, the surge in new VA to Covid cases in Germany late in Q1 that we believe has delayed the recovery in German hospitals in our German business, we're revising our guidance as follows.
We expect COVID-19 cases, and hospitalizations worldwide to continue to decline and expect to reach a more normalized operating environment as the year progresses because of this we expect continued and progressive improvement in our underlying core non COVID-19 business and expect growth in 2022 of core product sales on a constant currency basis.
Yes.
However, due to our limited visibility we are removing specific growth targets with plans to revisit. This later in the year when we have greater visibility.
This expectation assumes.
One a gradual recovery of normalized hospital activity in sales access in Germany, and other key countries to no major economic slowdowns are major surges in COVID-19 infections caused by new COVID-19 varies.
Three little to no contribution to sales from Russia, and neighboring countries that might be impacted by the war and.
And in 2021 sales from these geographies represented less than 4% of total product sales.
We also expect no escalate these expectations.
I assume no escalation of the Russia, Ukraine war to other countries.
And we expect limited COVID-19 related product sales in 2022 due to high rates of vaccination and natural immunity that have reduced the severity of COVID-19 illness and need for hospitalization ICU care and with it the use of Cytosorb in these patients.
That said, we are not just waiting for conditions to improve first of all we are well capitalized with $44 $7 million in cash to weather. This turbulence and uncertainty and we will continue investing selectively on priority programs, while taking proactive measures to significantly reduce our cash burn to end 2002.
Two with more than $30 million in cash with the flexibility to add debt if needed.
While we are laser focused on the following key objectives.
First opened the U S market by obtaining FDA marketing approval for drugs or an ETR to remove blood thinning drugs during cardio thoracic surgery through the Star T and Star D trials.
Is to restore growth of course Cytosorb sales.
Three is the transition cytosorb production to our new manufacturing facility in headquarters in Princeton, New Jersey, This year and.
And four to forge and expand new and existing strategic partnerships to maximize the synergy between our technology and those of our partners, while creating new global opportunities for growth.
During this presentation I've asked each person on the management team to provide additional color on these four goals.
Okay.
Meanwhile.
We are working to restore sales growth and are pushing forward on a number of key initiatives to drive improved results as the pandemic abates.
As well as future longer term growth.
First of all we have a strong customer base to resume sales growth from Christian will provide some color on this.
Second we have now established three distinct therapy divisions within our commercial operations, including critical care, cardiovascular and liver and kidney and other applications to develop these markets internationally under the leadership of dedicated medical and commercial subject matter experts, who will work closely.
With our sales teams to best serve the needs and interests of our customers.
Christian will discuss some of these.
These early successes of this initiative in his comments.
Third we have a growing strategy of exclusive hospital chain partnerships. We are now the preferred supplier of hemo surfing technology to the three largest private hospital chain in Germany, including as announced yesterday, our select yes clinic in T. M. P. H.
And finally, we have many new applications that we believe will drive usage of cytosorb across a broad range of different applications.
Some of the ones that we wanted to highlight.
And that we talk about in our press release, so I won't spend too much time on them, but it's the reversal of shock.
Which.
Has been found recently to afflict about 10% of ICU patients.
And those patients with septic shock.
And an additional 8% of patients admitted to the ICU.
Who develop shock at some point during their hospital stay with a very high mortality, 38% and this is something that cytosorb has been used for around the world to reverse and we believe that this will be a major application continues to be a major application for us going forward.
Second application is in the treatment of acute liver disease, where cytosorb was found to outperform the market, leading <unk> platform, which is manufactured by Baxter.
In the in vitro removal of many liver toxins that has had the added benefit of removing cytokines inflammatory mediators, while being much easier to use.
In fact in real World usage of Cytosorb has replaced Mars at many accounts.
With 111 people worldwide, who have chronic liver disease that may deteriorate and require hospitalization and blood purification.
Through our liver kidney division, we aim to drive Cytosorb as a therapy of choice in these patients.
And the final one that I want to highlight is in lung injury.
As I mentioned before our U S. DTC registry highlights the high survival critically ill COVID-19 patients with acute respiratory distress syndrome treated with Cytosorb and Ecmo under FDA emergency use authorization. We believe that these data demonstrate a therapeutic strategy of enhanced lung rads using the combined therapies that can be extra.
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What we believe is a very large market.
And then we have also examples of longer term growth initiatives first of all Chris well, Chris Our Vice President of business development will talk more about our Standalone blood pump business model strategy for driving usage of Cytosorb outside of standard dialysis machines that are found in the.
Little today.
Second Christian will talk more about expansion of direct sales port territory as we discussed with the expansion into the U K.
And finally, Mike will talk about our investment in many important clinical studies and give an update on these key studies in multiple clinical areas.
Together, we believe we have a very robust strategy to drive this company to success.
And we'll have some more comments in just a moment.
So with that I'd like to turn it over to Vince to provide a brief update on the manufacturing facility expansion.
Thank you Phil.
I'm happy to report we're on track with the build out of the new facility.
We've outgrown the existing facility and this move provides us much needed space and flexibility.
From a historical perspective, we started with just 2000 square feet and grown the operation to more than 22000 square feet by acquiring space in our business Park as it became available.
This type of growth led to limitations in material processing and the addition of personnel as we plan for eventual U S commercialization.
Our new facility on the other hand provides us the flexibility to add new product lines optimized process flow improved logistics and much needed office space.
We will begin the transition to the new site in May as the lease expires in the old facility, allowing us to eliminate this duplicative rent.
Startup of the new facility has progressed nicely. Despite the many delivery disruptions for construction material and supplies due to Covid and limited availability of trades to perform the construction.
The manufacturing facility is approximately 95.
Percent complete all equipment has been placed qualified and audited by our notified body with positive results.
We are very pleased with the outcome of the audit and our manufacturing quality product development and regulatory teams for this outstanding accomplishment.
We will begin production in Q2, releasing that product for sale. Once we've received the final updated site certificate.
With the site qualified we can now begin the process of bringing our administrative R&D and production personnel together into one location.
We will have accomplished our goal of increasing capacity, providing the infrastructure to lower costs as the business grows improve operational.
Fisher six and provide a new home for our future U S sales team as we commercialize drug Zorba ATR.
Have a couple of slides here I'd like to show you the new facility. The first slide is actually the outside of the new facility here in Princeton New Jersey.
Wait for it to come up.
Thank you.
This again, we began.
Began to occupy this facility last year in April with our biology team for coming here.
The second slide is our actually our new manufacturing suite.
And then the next slide is representative of a new break room that we built in this facility.
And finally, the next slide and final slide is a slide of our new R&D labs, where we've moved our begun to move over to the new facility.
We look forward to the next chapter in our development and with that I would now.
I'd like to pass over financial highlights to Kathy Bloch.
Thank you so much Vince and greetings to everyone on the call today I will briefly review Cytosorb in its first quarter financial results and in addition, I'll provide an update around our working capital and financial focus for 2022 next slide please.
Total revenue, which includes both product sales and grant revenue decreased by 18% to $8 $7 million in the first quarter of 2022 as compared to $10 6 million for the first quarter of 2021.
Product sales for the first quarter were approximately $7 $9 million, a decrease of 22% compared to product sales of $10 $1 million in the first quarter of 2021.
This was driven primarily by the expected drop in COVID-19 sales, which were approximately 300000 in the first quarter of 2022.
<unk>, one $8 million in the first quarter of 2021. In addition, the stronger dollar relative to the euro negatively impacted sales by approximately $552000.
At constant currency product sales in the first quarter were down.
16% year over year and this of course is primarily due to lower COVID-19 sales direct sales in Germany fell by approximately $2 million due to COVID-19, pandemic driven market conditions, which has already been discussed by Phil.
Grant revenue was $767000 compared to $455000 a year ago and product gross margins were 80% compared to 77% a year ago next slide please.
This slide looks at our first quarter product sales over time and I think this slide puts into perspective, the trends that we've observed in our product sales.
Nearly COVID-19, fueled sales sales growth surges in 'twenty, and 'twenty and 2021.
We experienced lower sales in the first quarter of 2022 due to a decline in severely ill COVID-19 patients and COVID-19 related hospital restrictions, especially in Germany, our largest market.
And even with these pandemic driven market conditions in place in the first quarter of 2022, we think it is important to note that compared to pre pandemic levels first quarter 2022 sales levels are still 73% higher than 2019 levels. That's a compound.
Annual growth rate of more than 20%.
Next slide please.
Looking at our quarterly sales trends over time broken down by core and non Covid and COVID-19 sales. We can see that COVID-19 sales have declined with only $300000 in COVID-19 sales in the first quarter of 2022.
Core non COVID-19 product sales were $7 $6 million in the first quarter compared to $8 $3 million in the prior year.
Constant currency core COVID-19 product sales were $8 2 million, which is roughly comparable to those in the first quarter of 2021.
Next slide please.
Turning to our trailing 12 month product sales, we can see the impact of declining COVID-19 sales in the last trailing 12 months period well also depicted on this chart. Our gross margins. That's the Green line and they have continued to improve over the years with the gross margin.
80% in the first quarter of 2022 next slide please.
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Regarding our working capital we ended the quarter with a healthy balance sheet with over $43 million in unrestricted cash I'll provide additional color on our expectations with regard to cash for the remainder of 2022 in a moment and our cap table indicates that we now have approximately 49.
One 6 million shares outstanding on a fully diluted basis next slide please.
Finally, I want to provide a few words on the actions that the company is taking to conserve cash until market conditions improve.
We have already started to implement cost cutting measures, which are designed to reduce planned quarterly cash spend by approximately $2 million per quarter for the remainder of 2022. These.
These actions include a company wide hiring freeze excluding essential hires that will be needed.
<unk> of the plant build out of office space.
Reductions in non grant R&D spending among others.
Our spend is laser focused and fully aligned with our strategic priorities those being.
Key clinical trials in particular, our star T and start D trials to support U S FDA marketing approval.
And marketing and the build out of our new manufacturing facility.
We expect to fund our operating needs and Capex with cash on hand, and we expect to end the year with as Phil said approximately $30 million in cash we also have financial flexibility if needed.
With $15 million available and debt financing from bridge bank.
That concludes my remarks for today and at this time, it's my pleasure to turn the call over to our executive Vice President of sales and marketing Dr. Christian Steiner to provide summary of sales and marketing update Cristian go ahead.
Okay.
Yes, Thank you Kathy.
Good afternoon to everyone from the America.
And good evening to Europe .
Yes.
So for that Spokeman Baltic already is continues to be a material impact of the pandemic situation on our business.
But importantly, as seen in the charts presented like Turkey. The business is thickness can be grown compared to the pre pandemic period.
I would like to build on that and provide some additional information regarding the stages of the business and this gives us confidence.
And the future growth opportunity once the pandemic right.
We see already my first flight.
And in this chart you can see the development of the number of active customers in our direct territories.
This number of active customers has increased by 20% to 25% in the first quarters of the pandemic and now stabilized on that level. Since then.
And although the number of purchased <unk> per customer has fluctuated because of the pandemic. We have observed the customer loyalty has significantly improved.
So sps shifting to more frequent in person events and meetings.
We're seeing increased customer excitement, we believe that post pandemic duals would start from that baseline.
That's right.
Higher customer satisfaction and loyalty.
Supported also by the fact that we have been able to consistently increase the number of customer hospitals, which are collaborating with us on an exclusive or preferred supplier contracts.
This number has more than tripled over the last year.
These contracts are improving our collaboration with single hospitals, and securing an appealing opportunity for further development and growth.
But more importantly.
Cruises or preferred supplier contracts with hospital chains or chasing groups open up access to thousands of additional accounts within these groups.
And Thats. An example next slide please.
Yeah.
I'd like to highlight the latest preferred supplier agreement that we have a point.
Our newest official partner and you have seen the press release.
As Clinton group, one of the biggest hospital chains in Germany.
Our fleet versus operating more than 170 hospitals and supporting all of the 16 Federal States of Germany and.
And all of those 170 hospitals 17.
The Texan.
With this last agreement that we have no exclusive or preferred supply agreements with the three biggest hospital networks and some of them.
These three groups alone include almost 300 acute care hospitals, all actual or potential customers whole puzzle.
And that's you know probably as both lifting flipping through already.
Already calibrated with a single Bill hospital in Hamburg.
Pardon me at the clinical application of our technology for the removal of Antithrombotic agents in the case of increased bleeding risk.
During cardiac surgery.
Talk about the structural ETR.
Next slide please.
[noise] fulfill it has explained already a little bit.
And has this cost that we have a steadiness three distinct therapy divisions within our commercial operations critical to.
Cardiovascular and.
In liver kidney.
As an example, we have successfully built the team supporting the cardiovascular therapeutic area.
No that's on the commercial side by an experienced marketing professionals, who joined us from a leading cardiovascular medical device company.
On the medical side. It is left by renowned Ptotic salesman coming directly from the University of Essen, Germany.
And while the medical team is laying the ground was extending and strengthening the Q I don't know and coordinating the scientific and medical development. The commercial team is translating this into improved techniques.
This includes for example, roadshows dedicated to Hudson does to increase the adoption rate for different cardiovascular applications.
You can see on this slide here on the upper right corner.
With 98% of the 83 cardiac surgery centers in Germany are our customers.
Almost almost 70% of these sites are using cytosorb for patients with infective endocarditis to remove excessive levels of publicly.
And more than 60% of the.
Right Paul.
Of the sites are already using technology or technology through antithrombotic agents during open heart surgery.
On the lower chart, you can see that on an international basis, the number of cardiac surgery centers using the technology for anti thrombotic drug removal has grown from two to three sites at the time of CE approval in Q1 2020.
More than 150 points today.
I think that illustrates that this is a very real acceptance limitation since we achieved that during the time of all these restrictions.
Next slide please.
Yeah.
The pandemic has restricted our ability to effectively work with our customers.
However, this has motivated us even more to focus on our key growth initiatives.
I want to summarize on this slide for you.
We are very confident that we will bring our increased active customer base as I have shown you to a new level of tons of usage once patient volumes return for a moment.
Our new supplier partnerships.
Have open access to a high number of potential new customers.
Of course, we will continue to work on additional partnerships.
The new therapeutic Arab teams with experts from the selected peers already accelerating the approach to the targets with the communities.
<unk> will continue to do so.
And on the sales structure side increased efforts to expand our territories will allow us to directly control the business.
Indication in training and of course overall customer relationships.
This will also lead to.
To increase gross margins.
Of last or last but not least we are also pursuing new market opportunities by extending the platform base that can be used for cytosorb.
Applications.
I would like to turn it over to Chris Cramer, our VP of business development, who will provide more details of this initiative.
<unk> initiated a new way to increase.
Two.
Cytosorb.
We will bring more reserves to the market to consume more reasonably.
Yes.
[laughter].
Thank you Christian I'd like to take a moment to talk about an exciting new growth opportunity with a standalone blood pump business model as Christian has just mentioned.
Yeah.
So we constantly listen to feedback from our customers and recently they told us that access to an extracorporeal platform can impact their ability to provide cytosorb therapy to their patients.
In particular, we heard about a couple of key challenges that if addressed could lead to greater usage of Cytosorb for example.
Today, most cytosorb treatments are delivered by our CRT. After the patient has experienced some form of kidney dysfunction or failure. However, many physicians have told us that they want to start cytosorb treatment prior to kidney failure and prior to the initiation of CRT.
This as you know is consistent with our guidance to start early with Cytosorb treatment.
Access to Cytosorb therapy can be challenging in certain regions, where CRT is limited due to the high cost of CRT treatments.
The lack of skilled nursing to deliver CRT or.
Or in cases that market clearance for CRT devices has not yet been obtained.
And then last in the future we could also benefit from our low cost easy to use platform to accelerate our hospital wide strategy outside of the ICU.
Having heard this we realize that providing customers with access to a low cost easy to use extra <unk> platform has the potential to accelerate the adoption of cytosorb and our current indications and could serve as the foundation for future new growth areas throughout the hospital.
Next slide please.
So in response, we took action earlier in the year and launched a pilot program to bring a low cost easy to use hemo profusion platform directly to our customers.
The company has executed an agreement with a large multinational extracorporeal machine provider to supply us with hemo perfusion machines and accessories.
So today, a multi country reseller agreement is in place.
We have the ability to provide chemo profusion machines tubing sets and field support to our customers.
We also have the ability to provide various business models that can be tailored to the market situation, whether it's buy leasing or other options.
While it is still in the early stages. The initial results from the hemo profusion pilot have been very promising machines.
Machines are being placed into accounts cytosorb is being used successfully across multiple indications and we're receiving consistently positive feedback from customers.
The next steps are to continue to evaluate and refine the program and to scale the business model more broadly both within and beyond the current set of countries in the pilot.
In closing, we're very excited about the new business model, we've created and the opportunity it represents to unlock and accelerate growth of Cytosorb therapy.
With that I'll turn it over to our Chief Medical Officer, Mike as failure to provide the clinical update Mike.
Provide an update on the progress made in our clinical studies.
And we have tried to maintain the same format in the slides you can be able to follow along the progress made since our last presentation.
Next slide please.
The theme that we outlined on the shareholder letter earlier. This year is the theme of execution and focus and that's exactly how we're approaching the execution of our global clinical plan and I'm happy to report that all seven programs, including three randomized clinical trials three registries and one pilot study are now active.
Three of those programs are being executed in the United States, including our pivotal start T and start D programs designed to support FDA marketing approval.
And COVID-19, CTC registry under the emergency use authorization granted to us by the FDA in 2020.
We have four programs that we're executing in Europe .
Our long awaited and kind of flagship program in critical care, which is a randomized clinical study called process targeting patients with refractory septic shock.
We have a pilot study in acute liver failure named Hep on fire and we have our two international registry, starting cosmos and you'll hear a little bit more about them in a little bit.
However, it's important to note that the star FDA programs remain our top priority and as you heard before from both Phil and Kathy we're allocating maximo resources to drive their execution.
As we are executing our trials around the world, we continue to see that institutions struggle with post pandemic effects.
Similarly relating to staff shortages and fatigue.
However, we are very encouraged that we also see that these same institutions are very excited about participating in the trials.
We're also have data readouts coming this year that we'll be presenting at international conferences, Phil already discussed some of the CTC data that's been presented already back in April at the International Symposium of intensive care and emergency Medicine and just later this week at the Euro also in London.
Well data on 56 patients demonstrated high survival improve lung function and potentially.
A reduced need for ecmo support on patients treated with Cytosorb.
What is important to note is that the CDC has completed enrollment has a 100 patient data set it will be have submitted that data for an international conference. Later this fall and also to be submitted for publication in a peer reviewed journal.
We also have data new data in the antithrombotic removal space for the first time ever we submitted to the European Society of Cardiology, which happens to be the largest cardiovascular conference in the world.
Data that show drug removal in vivo in patients undergoing cardiac surgery drug levels reduced by our device.
Next slide please.
Now, let's turn our focus on our top priority FTA program at the start team has started the trial.
As you've probably seen.
From a recent press release now both studies are active and enrolling patients in the U S.
We continue to see very very high levels of enthusiasm from use sensors desiring to participate in these trials and as such we approached the F D. A and expanded the studies to 30 sites.
Expanded both studies to now include 30 sites.
When it comes to start T. The majority of those sites already activated and enrolling in the trial.
What's important is that most of them over three quarters have also expressed their intent to participate in star D.
Demonstrating the broad.
Neat viewed by these institutions of people or antithrombotic that is not limited to just one agent, but expands beyond that cargo and also to the more frequently prescribed a class.
As stated previously we're dedicating maximum resources to ensure the momentum in the studies and timely execution.
We have initiated a nationwide star side Roadshow, where we're visiting in person decides addressing any open issues discussing with the principal investigators and the research team and we believe that's an important initiative to further drive the momentum that is building in the studies.
It will be hold hosting star investigator event at the upcoming American Association of thoracic surgery in Boston approximately two weeks from today.
When it comes to our projections, we're happy to reiterate our previous guidance that we project start to hit the first milestone this summer.
As you'll note on the table below these studies alright have identical prespecified milestone the first one is.
Is triggered by enrollment of the first 40 patients and that will then trigger the <unk> safety review.
To start the trial just started enrolling so it's a little too early to project, but we believe that these two trials continue to progress in a similar pace six months apart.
And as you can see in the table. Following the first milestone the second important milestone of the study will be triggered off the two thirds of the patients are enrolled and that would include a second the SNB safety review, but also the interim analysis and finally, the third milestone relates to the full completion with enrollment of 120 patients in each study.
Next slide please.
As we continue to execute these programs.
Also continue to believe that the antithrombotic removal application represents a very large commercial opportunity.
We we based on the following assertions.
First of all we're continuing to see very high levels of interest for this application across the board in hospitals around the world first of all in the United States for participation or start trials, but importantly, as you heard from Christian previously, we're seeing it in real world practice with increasing adoption of this context robotic removal.
Application of our technology as a standard of care in heart centers around the world.
Importantly, the body of evidence supporting the clinical benefits of this application continues to grow and consistently demonstrates superior results.
And safety.
We have a new publication from Germany that has now shown that bleeding reduction significant bleeding reductions can also be observed. When this device is used for anti thrombotic removal and aortic dissection surgery extending their previous data from coronary artery bypass grafting, where cabot's surgeries.
There was also a recent review article from Canada.
Address the large unmet need and highlighted that the the removal of anti thrombotic drugs during surgery as a novel solution that could solve this problem. Since currently there are no available solutions to the surgeons.
We also believe that the drugs over a T. R will be supported by a very robust value proposition and that in turn will support premium pricing.
Two highlights to mention our recently the Stanford buyer sensor for biodiesel <unk> published an article titled the need for accelerated Medicare coverage of innovative technologies.
Impact on patient access in the innovation ecosystem.
That was published in the journal of Health management policy and innovation.
Now what's important about this article this this article was based on a very extensive survey.
All of them across innovators investors policymakers, suggesting the need to support therapies that can be transformational breakthrough therapies that can also provide both clinical benefits and benefits to society.
And the reason that I'm mentioning this trial is because they highlight of drugs over a T. R. As the Prime example of how a breakthrough device can have impact on society positive impact on society and health economics.
As we're executing on trials within 10th of opening of the U S market.
We're also working on building internally the value proposition for drugs with ATR work, you would've recognized health economists to model the economic impact of introducing our device into heart centers and the potential cost savings that will support this value proposition.
And finally as you just heard from Chris. This recent initiative the hospital wide strategy is a very.
Exciting opportunity that will definitely apply to this application and we believe that I don't think thrombotic removal can extend beyond cardiac surgery and now to be offered to patients in other areas of the hospital, including the emergency room other non cardiac operating rooms, but also the cath lab and interventional suites.
Next slide please.
This is a similar table that you have seen previously that summarizes the current status of the remaining non FTA clinical programs, we've talked about the CTC registry already the highlight here is that there will be additional data readouts in 2022 on top of the one.
[noise] presented already in.
In April at ISI AC ideal also this week, we will have additional data readouts from the full 100 patient cohort later this year.
The process randomized clinical trial in septic shock is now actively enrolling in more than half of the targeted sites for this study.
We believe that will help enrollment and we are sticking with our previous guidance that the interim analysis will be executed.
Executed in 2023 that again will be triggered after half of the patients are enrolled in the trial.
The Hep on fire studies now actively recruiting and we're hoping that we will have the first patient recruited as soon and you will you can watch out for a press release to be issued once that happens.
This is a pilot study that started getting inclusion of 30 patients and as such we do also believe that we'll be able to complete this study in 2023.
And finally, our two international registries.
The Star Registry is a little bit ahead, its actively enrolling in three countries. While the Cosmos registry just received ethics approval and where the price of activating the initial sites.
We believe that the data readouts for both of these registries will start as early as 2023, and probably with the star registry coming out of the gates ahead of the cosmos, but not.
With a large spend between them.
Next slide.
Yeah.
So to summarize.
Institutions around the world are gradually recovering from Covid and although theres still facing.
Headwinds primarily relating to staffing shortages. They are very enthusiastic about participating in that study and we're very encouraged every time, we interact with them.
Our expert clinical team is laser focused on start the start the execution that clearly represent a top priority programs and have maximal resources allocated to them.
We are observing momentum that is building behind these studies and as such we reiterate our target of hitting the first milestone of 40 patients enrolled that will in turn triggered the first day SMB safety.
Safety review this summer and as stated previously we believe start D is coming behind start D with approximately six month window.
Process, a top priority and eagerly awaited randomized clinical study in refractory septic shock is now actively enrolling at the majority of its sites in Germany.
As we stated as I stated previously multiple data Readouts that look forward in 2022 highlighted by the full 100 patient cohort from the CDC registry, but also more data on antithrombotic removal.
And then finally, our two international registers, we believe we're going to turn out to be incredibly important programs that will be a real world evidence generation platforms. It will be reporting high fidelity data both in cardiac surgery and critical care and we expect those data readouts to begin as early as 2023.
And with that.
You for your attention and let me turn it over now to Phil for some concluding remarks.
Thank you Mike.
Sure holders ourselves, we understand that the macro environment and the stock price has created great uncertainty amongst investors. However, we firmly believe we are in an innovative and.
In a solidly financed pumping that can weather the current turbulence with a robust strategic and tactical plan.
Positions us well for both near term and long term success once the pandemic abates.
We believe the world has never needed a world class technology more and that we are on the cusp of significant value creation with a planned return to sales growth of Cytosorb and the goal of opening the U S market with drugs from HCR <unk>.
Though we know it's been challenging for you we thank you for your support.
Operator that ends our formal remarks, if you would please open the call for a question and answer session.
Thank you we will now be conducting a question and answer session.
I would like to ask a question. Please press star one on your telephone keypad.
Information Totowa indicate your line is another question here.
You May press star two if he would like to remove your question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the starkey.
Your first question comes from Frank <unk> with Jefferies. Please go ahead.
Hey, guys. Thank you for taking the question here I hope everyone's doing well.
Just a few for me.
I guess to start.
Can you touch on hospital access trends I guess, specifically in Germany.
Maybe more broadly in the EU towards the tail end of the quarter and into early Q2 here and what you sort of expect how you expect those to evolve for the balance of year and I have two more follow ups. After that if you will.
Sure. Thanks, Frank Let me turn it over to Christian to address.
That question Christian.
Yes. Thank.
Thank you for the question.
Yeah. It appears to be still a very challenging environment for the sales forces.
Hospitals are in.
In general more accessible, but because of the stuff shortage and Oh also decreased.
Decreased number four.
The Doctor.
It's still very difficult to.
To speak with the right people and.
To promote.
To draw people to the therapy.
But this is only one part of the situation.
Because of the pandemic behalf Mr. Jason.
A lot of ICU bed blocked for those patients.
And just imagine when there's and and room spend there two or three Beth Baum COVID-19 patient than the other two have to be blocked because of that.
Felicia this leads to a very.
Big shortage of ICU beds, which again.
Triggers the situations that elective surgeries for example, postponed because a few bets has to be available for such a good procedures.
So in general I think that's an improvement of the situation does it go.
<unk> slowly.
Half of our sales forces have more.
Face to face meetings as I've mentioned, we have more.
Local events, but also the regional and the national events are starting to pick up and that is an improvement visible.
But not to the extent that it hasnt before the pandemic.
Great great. Thank you for that.
Congrats on the preferred supplier agreement with <unk>.
Maybe touch on the significance of that agreement to the company.
And if you have from a quantitative or maybe even a qualitative standpoint, maybe size up the impact of of that agreement and are there any sort of pricing and volume.
I guess details there that you think are relevant here for investors to understand.
Okay.
Hi, Christian do you want to take that.
Yes, I can continue here.
Yeah, that's what I said, so I'm very pleased that we have made such progress.
The exclusive or preferred supplier agreements and.
As I have mentioned before these agreements with single hospitals of course.
Protecting the pounds and increasingly.
Collaborations with official level.
That became half the trains and stuff and so on that's all in the more efficiently.
Officially.
Compared to without the contracts and then of course.
As normal.
This high volumes of higher volumes and increased usage.
Also it has.
Benefits to the customer in terms of price although.
Yeah.
Trying to keep surprising as high as possible as you know the reimbursement systems.
Based on actual prices and.
And too much discounting.
Decreasing even reimbursement.
So this is.
This is true for the for the signal.
Hospital agreements, but more.
More importantly, I think the agreements with hospital chains or purchasing.
Brooks because these kinds of agreements.
A similar effect.
The hospital. Additionally, it's opening up the access to.
More accounts in this network and I think this is a big opportunity for us.
Because we are in these kind of networks or hospital chains are always.
Some of these patients and we can tap into this and develop.
Yeah more standardized use of cytosorb in those accounts.
Great. Thank you so much I just one last question. If you will here I'll jump back in queue. If you could just remind us on the expected final readout dates for the Star <unk> Rd.
Trial at this point I guess, given sort of a few items I guess a U.
You posted an interim analysis I'm wondering if that data is going to be presented and if youre sort of expecting that.
Towards the end of the year early next year and then on the 30 trials I guess, which is more specific to the time 30 sites expanding to 30 sites. That's more specific to the timing do you foresee any sort of impact or does expanding to 30 sites is that sort of net neutral on timing. Thanks, everyone. Appreciate it.
Thanks, Rick Mike would you like to take that.
Sure.
Thank you.
Questions. So you know the expanding the number of sites was primarily driven by multiple sites that wanted to participate in the trial and we felt that the initial number of 'twenty was really limiting the opportunity to engage with some of the top institutions in the country.
Now, having said that having more sites usually is a positive it's a tailwind towards enrollment. So we don't necessarily believe that changes the timetable dramatically, but if it does it's probably going to be for the better and in <unk>.
For helping us enroll faster.
Relating with the timing of completion as we have previously communicated we are executing these trials towards these milestones and that's why we are communicating their progress accordingly. So as we are in the beginning of this studies Star T has been enrolling for a few months, but start D. Literally had the first patient just a few.
Days ago, it's very hard to exactly project down the road. So we're looking for some visibility towards the first milestone and for the study. That's ahead would you start T. That's why we kind of put the timeline for that.
Once we get closer to that milestone and once we were able to meet it then I think it would be much easier to provide visibility about the following milestone which is the interim analysis that you alluded to.
So as of now it's hard to give you a timetable for the second milestone is we are putting all our effort in all our focus to getting to the first one first.
Yeah.
And I don't know was there another part of the question that was not answer or does that cover you.
Yeah.
That covers my questions.
Thank you again.
Yeah.
Your next question comes from Justin Walsh with B Riley Securities. Please go ahead.
Hi, Thanks for taking the question.
Just one for me today, maybe can you expand on the rationale behind establishing the new therapeutic area divisions, and how you anticipate that this could help improve or streamline operations.
Yeah.
Yeah, I think that.
Christian mentioned.
What we.
When we first started commercializing cytosorb, we were really focused on critical care.
And we learn fairly rapidly that there was a market pull for cardiac surgery and other applications and we had built the sales force from the beginning really focus on critical care and there are pros and cons of that approach, particularly when you begin bringing other verticals.
Into the mix like cardiac surgery.
<unk>.
You need a specialized role decks of contacts and there.
They're specialized knowledge that ICU focused salesforce for example, it doesn't have.
So.
What we've done is that we've ramped revamped our sales approach and now brought into play this multiple area vertical approach, where we have dedicated market experts.
And also on the side of commercialization, but also subject matter experts on the side of the clinical site to be able to.
And a very focused way develop these markets the way.
Are they.
They should be.
Again, a very optimized process.
So we think that this is going to have tremendous benefits for us going forward Christian has already talked to you about some of the initial.
The fruits of our labor.
For this approach, but we think that this is a strategy that will play well over.
The three major verticals, which is critical care cardiac surgery, and liver and kidney and we hope to share our successes with you in the future.
Great. Thanks for taking my question.
Sure.
Next question comes from exact Weiner with Jefferies. Please go ahead.
Hey, Thanks for taking the follow up from just a few one on the model here.
I understand kind of a tough environment with FX headwinds and various other things can you just give some color on where we should expect.
Gross margins going forward, you've seen they've hovered around that 80% Mark is that kind of where it will stay or should we see some margin expansion there.
Yeah.
Kathy.
Yeah. So I think I think in the near term, we will not be experiencing margin expansion as we bring up the new facility, but as the new facility comes up to scale and that should be towards the end of the year, what we should be operational there more into 'twenty two 'twenty three we should see.
Start to then again see improvements in our operating margin and they can be pretty dramatic as we move forward because the scale up is is essentially four to five times the.
The size batches that we've been working with previously so that labor and overhead gets spread over many the same amount of labor and overhead will be spread over many more devices.
Got it that's helpful and then I understand the commentary that you know more controlled spending and in the current environment can.
Can you just give a little color how we should how we should be thinking about the middle of the P&L over the next several quarters as <unk> 'twenty one.
The right way to think about sort of opex going forward or or.
Some other way to think about it.
Color there would be helpful. Thanks.
Yeah, I think that you know we're still working through all of the details that I think I would guide you that these decreases that we're seeing which will be fully effective by the end of this quarter. So.
I think we will see those fall into primarily the buckets of SG&A.
And then capital expenditures.
Okay. That's helpful. Thanks, so much have gone.
Thanks.
Next question comes from Danielle and healthy with SCP Securities. Please go ahead.
Hi, This is <unk> on for Danielle and thanks for squeezing me in here. So just one question for me.
Yeah I got here.
Tightening of spending and as it relates to our sales force development. What are your expectations. Given that you do also anticipate increase in person selling and you're also on the cost of the U S approval. So I guess you know what our expectation does that relate to salesforce it out over the near to medium term. Thanks.
I think some key hires that we still need to make but I think in general.
The sales teams and sales forces are all fully baked at this point.
We obviously want to manage risk and want to make sure that the sales develop the way that we anticipate before we add additional cost.
But I think that there will be some incremental spend there.
We expect to have some savings through attrition.
But in general.
That bucket is not expected to.
Increase that much.
Got it thank you.
Sure.
Next question comes from Josh Jennings with Cowen and company. Please go ahead.
Yeah.
Hi, This is Brian here for Josh Thanks for taking my questions.
Can I circle back to.
To the Hey, Phil how are you doing can I circle back to the the interim analysis for Star T. So just setting the.
The timing estimate relating to when you could conduct the interim analysis. Aside can you just clarify whether you intend to publicly announce those results or are those just going to be seen by the D. SMB alone.
Oh.
Great. Thanks for the question so the the interim analysis.
Is built with intent.
Looking.
The unblinded data by the D. S M B.
Based on pre specified boundaries for efficacy.
Which means that based on the you know really a really significant clinical benefits that we've observed in publications that are coming out of Europe .
We have our own estimations and the trials that tend to be Oh.
With fairly conservative, but there is a chance that the device will perform well beyond and above.
As estimates and in that regard the D. S. B will have the ability to look at that data earlier than the completion of the trial.
About 80 patients in two thirds of the enrollment and then is that efficacy is there based on the prespecified boundaries that already part of the interim analysis plan. The DSO come then come back and recommend potentially stopping the trial early for efficacy.
That's the intent of the interim analysis.
So the the the discretion is where the SMB because there will be the only ones having access to the data once.
Once the D. S it'd be makes a recommendation Ah obviously, we as a sponsor we will consider it and and at that time, we will obviously disclose a decision made on the trial.
Okay. So it could be released if stopped early for efficacy success and can you remind us whether the endpoints are being read for non inferiority versus standard of care or superiority.
No. This is a superiority trial.
Okay. Thank you and then just on the FDA submission itself have you gotten clarity from the FDA on the filing type whether it's a de novo five 10-K or a PMA and then whether you would file the two data sets together or separately. Thanks for taking all of these questions.
So I'm going to ask my colleague.
Mr risk component to also opine here.
But the the data says it will be provided to the F. D. A based on the timing of completion of the trials. So we don't have a prespecified plan of either giving them together and giving them an internationally. The fashion as you know both of these studies represent separate Ids investigational device exception protocols approved by the FDA and both of them are.
Also have received individual breakthrough designations. So we intend to proceed with the submission once the first trial was finished irrespective of how close the second trial is or not.
Relating to the regulatory pathway, let me pass it over to Vince. So he can answer that part of the question sure. Thanks, Mike.
Regarding the regulatory pathway basically the FDA will not opine on that until they've seen the entire dataset, primarily this is being driven by safety to determine what the appropriate pathways. So at this point until you know Mike. This concludes the trial and we provide the data package and of course, we will make our pre.
<unk>, what we believe the pathway is but that is always a negotiation with the FDA.
But that's that's really kind of the way it works.
Great. Thank you.
Thanks. Thank you there are no further questions I would like to turn the floor over to your Doctor chance for closing remarks.
Well. Thank you very much and thank you all for joining us on today's earnings conference call. We appreciate your participation.
Any other questions. Please feel free to reach out to Terry on power or is it he powers.
Surface Dot com and we'll try to reply to your questions as soon as we can thank you. Thank you all.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
Yeah.
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