Q2 2022 Cytosorbents Corp Earnings Call
Good afternoon, and welcome to Cytosorb in second quarter, 2022 financial and operating results conference call. At this time all participants are in a listen only mode. Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the company's request.
This time I'd like to turn the call over to our moderator.
Please go ahead in this phone call.
Thank you and good afternoon welcome to the Snyder's starting in second quarter 2022 financial and operating results Conference call. Joining me today from the company are Dr. Phillip Chan Chief Executive Officer, Vincent could Pony, Chief operating officer unprecedented Kathleen Bloch Chief financial.
Officer Doctor a female steelyard Garrett Chief Medical Officer, Dr. Christian Steiner Executive Vice President of sales and marketing and managing director of Cytosorb into Europe G. M B, H and Christopher Cramer, Vice President of business development.
Before I turn the call over to Doctor 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.
This is harper for forward looking statements contained in the private Securities Litigation Reform Act.
1995, something make additional actual results may differ from the results discussed today and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC.
Any projections as to the company's future performance represented by management include estimates as of today August 2nd 2022 and we assume no obligation to update these projections in the future as market.
During today's call, we will have an overview presentation covering the operating and financial highlights for the second quarter by management. Following that presentation. We will open the line to your questions. During the live Q&A session with the rest of the management team at this time, it's now my pleasure to turn the call over to Dr. Phillip Chan.
Yeah.
Thank you very much Amy and good afternoon, everyone.
We continue to make progress in the second quarter first as of the end of the second quarter more than 179000 cumulative cytosorb devices had been utilized up for more than a 143000 last year.
Next we announced today the signing of an expanded global marketing agreement with Fresenius Medical care, where cytosorb will become a future blood purification therapy on first studies medical care as a critical care platforms.
We also entered into a three year for its supplier agreement with the Scorpio group one of the largest private hospital operators in Germany.
Partnering with the Keystone to distribute the pure just chemo perfusion blood pumps and supplies and a total of 14 countries. It keep part of our Standalone machine strategy to expand the market for our products. We also hosted the 'twenty 2022 cytosorb world users meeting.
That highlight at the broad market potential of Cytosorb as an interdisciplinary therapeutic approach for a wide range of life threatening illnesses.
Finally, we relocated and established our company headquarters and manufacturing and Princeton New Jersey.
What was a great day for employees and our company.
From a financial standpoint, total revenue, which includes product sales and grant income for the second quarter of 2022 was $8 $5 million versus $12 million in the second quarter, a year ago product sales were $7 3 million, which was mainly core with negligible COVID-19 sales compared to 11 point.
$4 million in product sales in the second quarter, a year ago of which $9 7 million was core and $1 7 million was COVID-19 related.
Despite the drop in product sales as you can see from this table. It's important to note that Q2, 'twenty 2022 core sales were stable with the prior three quarters on a constant currency basis, reflecting a 12% reduction in the euro to dollar exchange rate year over year, where adjusted core sales would have been $8 two.
Million dollars.
But clearly not the growth we are seeking.
The results have been stable despite continued softness in the German market.
Turning to German turning to Germany in the second quarter of 2022, Germany began a slow recovery from the worst COVID-19 infection surge of the pandemic, while dealing with yet another surge of new cases during the quarter driven by the P. A five variant.
Continue to see the fallout of Covid in the German market with continued staffing shortages budget issues electric procedure restrictions.
Improved visitation restrictions.
In addition, fatigue and poor morale amongst many health care providers continues during the second quarter. For example, there was an 11 week health care worker strike in Western Germany that affected all of the University hospitals that serve a region that is home to 20 per cent of Germany's population corresponding more than 10000 surgical procedures in clothing.
Hospital wards Needless to say our sales in this region were very weak.
Second quarter 2022, Germany sales were 3 million versus $6 1 million a year ago, reflecting many of the hospital related challenges that I. Just mentioned however, we believe the alarm of Covid in Germany is beginning to fade due to the current low severity of illness or recent strains that businesses, including hospitals or adjust.
Sting and moving forward without major restrictions as we've seen in the U S market.
Yeah.
Although not yet showing up in our numbers, we see early but encouraging signs of improvement.
Leading more customer visits in Germany. During the quarter continued strong positive support from customers or is it feedback on lower orders in Germany had been primarily due to hospital challenges such as staffing shortages budgets ICU capacity and lower numbers of severely ill patients.
Our significantly increased flow of positive data on cytosorb across both critical care and cardiac surgery.
Greater in person attendance of health care providers at conferences.
And improved cross functional synergy within our company based on our new therapy area vertical strategy and leadership.
And importantly, there have been recent developments that have the potential to drive future sales.
For example, we have recently announced a preferred supplier agreement with the Scorpio group one of the largest private hospital networks in Germany, making cytosorb available to all 170 health care facilities in the network without restriction.
We also have had positive early response to our stand alone blood pumped strategy with our new partner Nicky So intended to drive easy and earlier cytosorb use and expand the market for blood purification, particularly in patients who need our therapy, but did not yet in the dialysis with numerous equipment trials occurring or schedule in.
And finally as Chris will discuss in greater detail today, we announced a new expanded global marketing agreement with Fresenius the market leader in dialysis worldwide with headquarters and a world class sales and marketing team within Germany.
In summary, we continue to be laser focused on our 2022.
<unk> objectives. These include one opening in the U S market by obtaining FDA marketing approval for drugs Arb HCR to remove blood thinning drugs during cardio thoracic surgery through our start T and start D trials.
To restoring growth of Cytosorb.
Three transitioning full cytosorb production to our new manufacturing facility in Princeton, New Jersey, this year and for forging and expanding new and existing strategic partnerships to maximize the synergy between our technology and those of our partners, while creating new global opportunities for growth.
He said Nicky so are just two examples of this.
Today, you'll hear more detail on each of these areas from each person on the management team and will specifically discuss key issues, such as cash and cash burn and product gross margin.
With that I will turn the call over to Kathy for our financial overview of Kathy.
Thank you, Phil and Hello to everyone on the call today.
I will briefly review Cytosorb in second quarter results in my remarks today and in addition, I will provide an update around our working capital and cash for the remainder of 2022 next slide please.
Total revenue, including product sales and grant income was $8 $5 million in the second quarter 2022, as compared to $12 million in the second quarter of 2021.
<unk> sales for the second quarter of 2022 were $7.3 million as compared to $11 $4 million in sales in the same quarter of 2021.
The lower euro to dollar exchange rate negatively impacted sales by $840000 in the second quarter of 2022. In addition, COVID-19.
COVID-19 sales were negligible in the second quarter of 2022 as compared to an estimated one 7 million until that 19 product sales in 2021.
Net sales were $3 $4 million lower in the second quarter of 2022 due to continuing COVID-19 pandemic market restrictions and also unfavorable currency conversion as previously discussed our grant income was $1 $2 million in the second quarter of 2022.
So compared to $659000 for the prior year quarter.
And our second quarter 2022 product gross margins were 67% compared to 82% for the second quarter of 2021 due to inefficiencies caused by the necessary production shutdowns, which were associated with the relocation to our new production facility I'll speak more about that.
Next slide please.
Looking at our quarterly sales trends overtime broken down by core and COVID-19 sales, we can see that the COVID-19 sales have declined to virtually zero in the most recent quarter and as Phil discussed earlier.
Constant currency core sales for Q2 2022 were comparable to the average currency adjusted core sales in the prior three quarters.
Next slide please.
Turning to our trailing 12 months of product sales graph, which breaks out core versus COVID-19 cells. COVID-19 sales were $8 8 million in the trailing 12 months ended June 30th 2021.
As compared to $3 $1 million in the trailing 12 months period ended June 30th 2022 which is a decrease of approximately $5 $7 million.
Additionally, the decline in the euro to dollar exchange rate negatively impacted sales in the trailing 12 months ended June 30th 'twenty 'twenty. Two this was by approximately $1.6 million.
On a constant currency basis core product sales for the trailing 12 months ended June 30th 2022 we're approximately $32 $3 million, which is a 6% decrease from core product sales of $34.5 million in the previous year.
Also depicted here on the chart on the Orange line or our second quarter gross margins, which showed steady improvement from 2017 to 2021 and then in the second quarter of 2022 product gross margins were 67% that's the Orange circle.
As shown in the bar for the trailing 12 months ended 20.
'twenty two.
And this is due to the necessary production shut downs associated with the relocation of our new production facility.
We do expect product gross margins to return to their previous levels as we complete the relocation of the new facility expected by the end of this year.
As we exit our lease at the old facility, which expires December 31, 2022, and as we begin to recapture manufacturing efficiencies driven by improving market conditions and increased product demand next slide please.
Yeah.
We ended this quarter with $31.9 million in cash, which includes $1 $7 million of restricted cash.
Additional color on our expectations with regard to cash for the remainder of 2022 in just a moment.
And our cap table shows that we have approximately $49 4 million shares outstanding on a fully diluted basis next slide please.
Our cash burn for the second quarter 2022 with approximately $12 $9 million, which is quite high compared to our historical average cash burn of approximately $5 $7 million per quarter, which is what we experienced for the previous five quarters. So I would like today.
To explain a few of the material factors occurring in the quarter that influenced the burn.
Second quarter 2022 included nonrecurring expenditures of $4 $8 million, which were related to the construction capital improvement and other costs associated with the build out of our new manufacturing facility.
As of June 31st 2022, most of the costs associated with the new facility have now been incurred except for an estimated at approximately $300000 in additional cost which remain to be paid over the rest of 2022.
In addition, inefficiencies caused by the production downtime associated with the relocation.
Two our new production facility Unfavourably impacted our cash burn in the quarter by approximately $1 million.
And then in addition grants and accounts receivable grew by $600000 over the quarter.
So excluding these aforementioned factors our burn for the second quarter of 2022 would have been approximately six and a half million dollars.
Next slide please.
So in addition to the items impacting our cash burn which were already mentioned we have also strategically increased our inventory levels. During the first half of 2022 in anticipation of production downtime associated with the relocation of our manufacturing facility.
By the end of 2022 we expect to reduce our inventory by approximately $1 million, which will provide a source of working capital in the future.
And with the completion of our new manufacturing facility. Our spend is laser focused on and fully aligned with our strategic priority those being key clinical trials in particular, our star T and Star D trials to support U S. FDA marketing approval and also sales and marketing.
In our last quarterly call, we announced that we have taken measures to reduce our quarterly cash burn by $2 million per quarter in Q3, and Q4 of 2022.
And we are currently actively engaged in making further reductions to our operating cost to reduce our future cash burn these reductions have not yet been fully quantified we're working on that with.
With the headwinds, we're experiencing of macroeconomic and geopolitical uncertainty that are out of our direct control, including a recovery of the German markets, we expect that our business and in particular product sales may continue to be challenging for the remainder of 'twenty 'twenty. Two we believe we will be able.
To fund our operating needs with cash on hand, and we expect to continue to end the year, having approximately $30 million in cash.
This will include borrowing a portion of the debt available to us under the bridge bank loan commitment.
This concludes my remarks for today.
At this time.
My pleasure to turn the call over to our executive Vice President of sales and marketing Dr. Christian Steiner Cristian go ahead.
Yes. Thank you Casey this is Christian Steiner, calling from Poland and Germany.
Good afternoon, everyone to the United States and good evening to Europe .
S. We have heard from children chassis is the macroeconomic situation for the whole medical device industry.
And also for our company remains challenging due to the changes in the health care systems.
These include shortage of trained personnel.
A different allocation of resources and funds compared to the pre pandemic times.
Yeah.
Furthermore, we have to catch up for all the Mrs Communications with our customers and potential users due to visit restrictions lack of opportunities to educate at conferences and other events.
Training and services, which could not be conducted.
However, the response, we have received from our users customers partners and the market is widely positive and very encouraging although not yet translated into growing seats of all sides of therapy.
Most luxuries.
My first slide shows a list of all key initiatives, which I have presented to you at the last earnings call and I want to give you an update for each of these different points.
This was mainly include number one details on the development of our customer base and the only direct sales markets.
And second what the progress has been accused therapeutic areas of critical care.
Customer and liver kidney.
And then and number three to six the changes and expansion to improve our sales structure and processes with new partnerships and expansion of own dark shields footprint, and our recently announced standalone sides little treatment and same with the fusion platform strategy.
Next slide please.
The other chart of this slide shows that the number of active customers in the dark markets has not changed over the last few quarters.
So transparent with area represents the time of the pandemic, which is still ongoing.
The current special situations in Europe in Germany is characterized by a shortage of personnel looked ICU beds and limited patient numbers as it has been also reported to play other medical device companies.
This led to a slight decline in the number of buying customers unless applications and those accounts in Q2.
However, the better accessibility of all customers doctors and health care professionals resides at for example in the 42% increase of visits.
So as territories compared to Q1, that's shown in the lowest shops.
But the chart also shows that we need another increase of 47% to get to the average quarterly visit numbers before the pandemic.
One must understand that he could not visit and train many users and customers on cytosorb therapy for almost two and a half years.
The reestablishment of a rocky relationships and reading you should eat of trainings and mitigate discussions bring back a lot of enthusiasm and excitement for this therapy.
We have experienced this excitement and pulse on movement firsthand. That's all about Jesus meeting on July 2nd in Berlin, Germany, marking the 10th anniversary of Cytosorb therapy commercialization.
Next slide please.
This brings us to the second important topic on what progress have you made with a focus on the key therapeutic areas.
Almost 300 key opinion leaders clinicians and researchers came from all over the board specifically 40 countries to discuss advances new data and best practices on the use of all sizes I'm sorry, Pete.
It has been the common understanding that this is very important to select the right patient.
Stopped early and treat aggressively and supposedly treat long enough to ensure the best therapeutic results.
These are the lessons learned from studies that have not met the design end points in the past.
Yeah.
Data and results of four new studies have been presented at the vote users meeting and will be published in the next weeks and months.
These publications of new positive clinical data of the fuel for all commercialization and see its engine.
That's an enormously full pipeline of new evidence and data reaching to be published and all three T therapeutic areas of critical care cardiovascular liver kidney.
Dr. <unk>, our Chief Medical Officer, who will give you a more detailed overview later in his presentation.
One study, which also has been presented by professor Alessandro instead, a devoted user.
This meeting is Meanwhile, published in the prestigious journal Nature Communications.
Beautiful shown in an animal model that the quality and usability of transplant organs.
This case pick lungs.
It's also the extra transplantation kenzie can be dramatically improved by using our absorption technology doing ex vivo lung perfusion.
And this weeks after the vote users meeting the clinical evaluation of that approach has been started in the human trials.
Most of the developments on the field of transplant organ preservation and reconstitution have led us to decide to make further efforts to advance or special product.
Cost 300 C Y which is approved in the CE market for this application.
Relevant factors for this decision of the recent successes of our technology and the possibility of contributing to the alleviation of the worldwide all consultants.
The highest priority in introducing Cytosorb therapy, however is to deliver the best possible product to the clinicians to really make a difference with their patients.
That includes on one hand side.
We always enable them to maximize their therapy results right.
Right patient right timing right dosing as a cough or initiatives to give us the best treatment guidance and train users to tailor therapy. According to the patient diagnosis and condition.
Alison Lewis therapy that would be the final designs.
On the other hand, we want to provide the best technological solution.
The excellent safety record the ease of use and the blood purification performance.
Sizes all are unique.
The removal of specific substances, which normally you have taken the one from the blood.
Liver and part of the kidneys.
What efficiency performed but stomach dialogues as approaches yeah.
Adding a new dimension to blood purification.
Morris you set up your opportunities continue too much.
Next slide please.
On this page I have summarized the remaining initiatives for my first one.
A three.
S. We have outlined during the last earnings call them partnerships is an exclusive or preferred supplier. This hospital a hospital chains play a key role in our direct markets.
You have announced a partnership with at least of slip deals one of the biggest hospital chains in Germany last time, but they're constantly in discussions and negotiations ongoing in the background.
We will update you when we have fun lifestyles.
Reimbursement on the other hand has a similar importance into context.
And it's even more difficult to achieve however, we hope to have further updates shortly.
At full.
We have recently reported the establishment of our U K subsidiary is part of the voluntary since expansion strategy now.
Now we can update you that the UK subsidiary is fully operational and embedded in our corporate financial and T systems.
We have received the first direct orders and are planning for more.
Five.
We have started another girls initiative recently, which is O a standalone platform synergy.
This means that we can position our own blood pump was the customers that this is in addition to the existing platforms in the hospital, which we routine routinely are using this.
This creates different advantages and independents as well as therapy opportunities in several settings as we discussed last time.
Now that the availability of our solution was a partner in the keys or could be expanded to 14 countries.
Establishing all necessary sees enough to say its processes.
There's a very strong interest and we were able to stop quite a number of equipment trials already.
Our scheduling others.
Six.
Last but not least I want to give a progress update in regards to us is partnerships.
Of course, there are always discussions and negotiations ongoing into different markets.
Want to maximize the performance of our partners like building a fruitful postural your relationship for both sides.
One partnership is and will be very relevant for us and this is a new expanded partnership with Fresenius medical care.
Which will be explained to you in more detail, but truth streamer or VP of business development in a few minutes.
I just want to point out again that we have the technology in our hands that is opening up a new dimension in blood purification.
The combination of size as long as the technologies of FMC to treat many more.
More opportunities for both companies for the treating doctors and has kept professionals.
And of course for the patients.
And last slide please.
Yeah.
To summarize I can say that we are still facing a challenging environment on all be to get back to pre pandemic close rates.
However, we see encouraging indicators and exciting responses from the markets, which we believe will push us forward to new heights in this piece of commercialization.
This includes a much improved accessibility of all customers.
Also we are experiencing is starting pull effect from the medical scientific community.
More and more research groups and conditions request to colorbreed incumbents their own projects and ideas.
This also led to a nicely food pipeline of new positive evidence, which will be published within the next weeks and months.
And we are also progressing was on a standalone platform strategy and see a growing demand.
And we have created new opportunities with our extended partnership with FMC Andrew.
Infosys. It is my pleasure to hand over to Chris Cramer VP of business development Kris.
Chris.
Thanks, Christian we're very excited about today's announcement with Fresenius medical care.
The world's leading provider of products and services for patients with renal diseases.
Which we believe takes our partnership to the next level.
The new agreement Leverages Fmt's global marketing horsepower, while positioning cited as the feature blood purification therapy.
On their critical care platforms.
This agreement preserves a commitment from both parties and ensures an ongoing and consistent level of marketing promotional activity and messaging in support of Cytosorb by FMC.
To go beyond the prior co marketing agreements and a number of important ways.
That said, let me take a moment to describe in more detail what's included and how it will help to increase awareness and accelerate adoption of cytosorb.
As well as provide the foundation to innovations.
The new global marketing agreement encompasses multiple collaboration designed to seize new sales opportunities.
And jointly develop future innovation.
A key aspect to agreement is that FMC will be responsible for executing a world wide.
Excluding the United States for the marketing and promotion of Cytosorb in combination with its critical care products.
These events.
We'll utilize our highly visible and prominent marketing channels, including various FMC led in person virtual social social media and web based marketing programs, featuring Cytosorb and will highlight the cooperation.
Companies are critical care.
For example, 13 major international Congresses in all regions of the world. Excluding the U S had been identified where FMC will execute excited to work focused marketing and promotional events.
In addition, I believe marketing and promoting cytosorb on its critical care platforms.
Another key aspect of these campaigns will be about making cytosorb a featured therapy for the removal.
<unk> bilirubin and myoglobin.
The process is similar to hemodialysis mastered by Fresenius medical care to treat kidney failure, which removes accumulated small to medium sized waterside like yours toxins from the bloodstream. However.
However, cytosorb adds the ability to remove large molecules and toxins that are poorly removed by hemodialysis combined the two therapies work together in a complementary manner should provide treatment for them because of conditions in the intensive care unit.
That said, we believe that Cytosorb adds a powerful new dimension of blood purification to Fmc's critical folio and this will play an important role in differentiating cytosorb in the market with customers and against competing blood purification technologies.
Next slide please.
Serving as an important foundation of the program yes.
He is committed to continue to certify compatibility between Cytosorb and he's critical care platforms.
With the ability to seamlessly integrate cytosorb.
With the F. M C multi filtrate pro acute dialysis platform that is routinely used throughout the world. Today. This plays an important role in ensuring to care.
Ensuring access to care for Cytosorb and demonstrates our commitment to providing the highest quality solutions for our customers.
Also we have agreed to form a joint innovation P group capitalize on near term commercial opportunities like this indication specific marketing campaigns.
Penetrating competitive accounts and winning tenders.
We will also leverage this working group to identify and bring to market future new product offerings and solutions in the critical care space.
We believe that by working together, we have the potential to unlock new opportunities and create sustained growth for both companies.
Finally in consideration of the contributions by FMC to this collaboration we've agreed to subsidize a portion of the marketing cost through a royalty payment of zero, 9% of net cytosorb sales.
Based on estimates Cytosorb device sales in the intensive care unit on FMC platforms again, excluding the United States.
So in summary, this new global marketing agreement enables us to communicate the benefits of Cytosorb broadly and consider to more customers throughout the world and to execute targeted marketing and <unk>.
Marketing and promotional campaigns in collaboration with FMC.
As a result, we believe program will help increase awareness and accelerate the adoption of Cytosorb.
In addition, we will work continue to work closely with FMC to ensure that we maximize our near term commercial impact.
To win new business and grow sales and to jointly develop future in it.
That we can maintain and extend our leadership position in the peer space.
Thank you for you and that concludes my remarks, and with that I'll turn it over to our Chief Medical Officer of females Gilead Yours.
Yes.
Yeah.
Thank you, Chris and congratulations on the very exciting news for Zynga as partnership.
Good afternoon, everyone and thank you for joining our second quarter earnings call.
For the next few minutes I will provide me with updates of our clinical studies and will also review with you a long list of recent positive data Readouts that we believe will serve as catalysts to our business.
On the political front, we continued to make progress executing our studies.
Now shifting our focus to driving enrollment.
Who execute these studies, we are working with major academic institutions around the world.
We continue to observe across the board the long lasting impacts of the pandemic on these sites specifically relating to stuff will start staffing shortages.
Having said that we have made strong process progress in the first phase of execution by getting the majority of the sites participating in our studies up and running.
Accordingly, we are now shifting our focus and resources for the second execution phase of these studies, which is enrollment.
Our SBA programs, let's start tend to start these studies remain our top priority.
And our clinical teams are now laser focused on driving enrollment in both of these studies it.
There'll be more to come on these two studies on the next slide.
Importantly, one of our programs.
P. C registry is now completed and we are executing the third phase centered on data Readouts and publications.
We also made significant progress in generating new positive data in support of our business.
These efforts are led by our global Medical Affairs team that are now fully integrated within the therapeutic area or verticals that you already heard from Christian referenced earlier.
As noted on this slide 13, new or original publications already out this year.
And we expect this number to continue to grow with more papers coming out before the end of the year.
We're also targeting major international conferences with original new data Readouts with seven presentations scheduled within the next few months.
Polluting presentation of the value.
Our proposition of antithrombotic removal in Germany at the European Society of Cardiology in August .
Route data with early initiation of Cytosorb together with Ecmo.
It will be presented at the also meeting in September .
And two very exciting new data.
Data releases at the European Association of Cardio thoracic surgery later in October .
In a randomized clinical trial of a heart transplantation and the main results from the C. D. C registry data on acute liver failure and more data in septic shock.
Next slide please.
Yeah.
Turning now our attention to our FDA studies start T and start D. We are happy to report that both studies have at least 20 sites active and.
And recruiting patients into the studies.
To add sites to both studies two in total.
Well.
It's not helping our operational plan resources and focus has shifted from study start up activities to activities driving enrollment.
We're starting to see T I reference focus on helping sites.
Densify eligible patients into that category.
Playing to add the remaining sites from Tiger Tiger Little Hotbeds.
The regions with that category is the dominant agent used in acute coronary syndrome treatment protocols.
Well start D well, but we're still early in the process. We continue to see strong interest for drugs or a T. R.
We are encouraged by the high numbers of cardiac surgery patients from docs that are reported by the participating sites.
As we have previously communicated.
Both studies are targeting three pre specified milestones with the first one being the DSM V Safety review after 30 after 40 patients are enrolled.
Well start Pete we expect these milestones to be reached in the next few months.
Well start date has noted already we're still a little bit early in the process, but now we're actively collecting screening log data from sites that should help us gain better visibility of steady progress, but also inform us on strategies to drive enrollment.
Next slide please.
Let's shift now to our non FTA programs.
As noted already the CTC registry is now completed and data Readouts are ongoing.
Interim results on the first 52 patients had been previously presented and published.
And next we will be reporting the final results on 100, ecmo patients treated with Cytosorb at the upcoming European Society of intensive care Medicine meeting in October .
These final results have also been submitted for publication.
Next is process.
Randomized clinical trial in patients with septic shock.
The study is now actively enrolling with the majority of sites open and actively recruiting patients.
We continue to project.
But the milestone of the interim analysis that will be triggered after 80 patients enrolled will be reached in 2023.
Moving onto the Hep on fire single arm pilot study in patients with acute liver failure, we have experienced delays.
And as such we are now exploring options to optimize the execution of the study and plan to relaunch it early in 2023.
Moving on now to our two international registries.
Our Star Registry has made significant progress.
Now actively enrolling patients in four European countries, including the UK, Germany, Austria Luxemburg.
Well, we will be expanding to additional countries before the end of the year.
Based on the brisk enrollment pace to date, we anticipate multiple data readouts at major international cardiac surgery purposes in 2023.
And the problem with the Cosmos registry.
I'm happy to report that he is also now actively enrolling patients in Spain.
We're still targeting to open in Germany, as a second country and.
Enrolled into the study.
Although early in the process and without great visibility yet on the enrollment pace, we're still continuing to project. The Cosmos will also be providing data readouts in 2023.
Looks light sweep.
I would not I would now like to turn our attention to the long list of new positive data readouts with the use of our technology across multiple clinical indications and applications.
This work has been prioritized by our global medical teams in collaboration with some of the most renowned international key opinion leaders have produced is very impressive inventory of publications.
The current slide summarizes the outputs in critical care and liver and kidney therapeutic areas.
Ooh aggregate six original papers have already been published this year and are shown in green on the table.
Three more papers have been accepted for publication and are currently Empress.
These are shown in light blue.
And as noted already there are four original data presentations at upcoming National Congresses that are highlighted in blue in this table.
You will note that these new data span across a multitude of disease states, including sepsis and septic shock.
At the end of acute pancreatitis liver failure.
Prominent use of Cytosorb device with Ecmo.
We have also recently published the comparative analyses between Cytosorb in a competitive device.
Demonstrating that our technology provides more efficient and profound cytokine removal.
Finally, although the majority of clinical evidence still originates from Germany. Please note that we now have contributions from multiple different geographies the.
The U S, France and India.
All the all the published papers listed here are peer reviewed index journals and as such Theyre all available lives.
We are of course more than happy to provide copies of these papers upon request.
Next slide please.
Similar to the previous slide what you see here is a summary of meal positive evidence that has been generated with cardiovascular applications.
In aggregate.
Seven original papers have been published this year and once again, they're noted and really highlight on this table.
There's three more papers have been submitted for publication and are shown here.
Cool.
The blue entries represent the three original presentations at upcoming conferences, including the health economic analysis for anti thrombotic removal demonstrating significant cost savings from the German market.
Does it will be presented at the European Society of Cardiology meeting in August .
And the very exciting randomized clinical trial results with Cytosorb heart transplantation.
At first data set of its kind that will be presented at the European Association of cardio thoracic surgery.
In October .
Together with an additional of its old dataset at the same meeting in patients undergoing surgery or stopped a little farquhar endocarditis.
Once again, you will note that these data in the majority of our originating from Germany.
You also see contributions from U S Canada.
The randomized clinical trials already mentioned is original one from Hungary.
And as Christian already discussed we have an incredibly exciting study published from Sweden in lung transplantation pigs.
And with no scientific journals, which none other than nature communications.
You can see that the evidence is mounting so the benefits and value with the use of our technology for onsite somebody drug removal and high risk endocarditis surgery.
However, we are equally excited about the new emerging evidence and heart and lung transplantation that we believe represent a new and exciting areas of growth for our technology.
Once again, all the published papers.
U S externals, and as such and as such they're available online.
Again, we are more than happy to provide copies upon request.
Next slide please.
So in conclusion we.
We have made progress in our clinical programs and are now shifting our focus from phase one startup activities. The phase two activities that will drive enrollment.
The SBA programs start to give you may not top priority. Both are actively now enrolled over 20 sites.
We anticipate accelerated enrollment going forward with a critical mass of sites now activated and our operational shift in focus to enrollment.
Our EU programs are also progressing with process star and Cosmos, leading the way.
Kept on fire at the other hand, we're undergoing optimization will be lots of them, but there's probably 2023.
And finally large large number of positive publications and peer reviewed journals and more positive data Readouts Carlo I think their national Congresses should create significant tailwind for our critical care cardiovascular and liver and keep them luggage.
Thank you for your attention and with that I would like to turn over the call to our president and Chief operating officer, that's supposedly.
Thank you Michael Thank you might guess.
Q2 marked an additional progress towards consolidating our operations into the New College Road facility.
<unk>, 31st we closed our original Deer Park facility.
Housed our administrative R&D and device manufacturing operation.
In June we received we achieved another milestone with the first saleable devices being produced from the new facility.
The polymer are still being produced in our second location in Deer Park, we expect to decommission. This plant by the end of December and relocate the remaining operation to our new facility.
This will mark a significant milestone, bringing the entire U S. Based cytosorb is team into one location.
Next slide please.
During this transitional phase, we experienced a four week shutdown to relocate and commission our existing fill lines and the new facility as well as relocate our R&D labs are production and R&D teams came together to make this move happened in a very short period of time, helping to pray costs.
By utilizing our own personnel.
As expected we experienced higher cost in this transitioning period and this transition every period due to lower production outputs and less overhead absorption. We expect our cost will be higher through the end of the year as we continue to carry rents for both the deer Park polymer production facility.
And our new facility.
In 'twenty to 'twenty, three we expect gross margins to return to previous levels as we complete the relocation to the new facility and could begin to capture manufacturing efficiencies driven by elimination of duplicate rent and increased product demand as a result of improving market conditions.
As the volume increases we will continue to see improvements in gross margin much in the way we observed for cytosorb at the previous scale.
Next slide please.
Yeah.
As we follow along with our clinical progress and Star T and started D. We are making initial preparations for the potential drug Zorba ATR launch.
We have assembled a dedicated launch team focused on completing those key items in support of regulatory filings and clinical outreach initiatives.
These include product branding defining product configurations identification of accessories, and establishing product usability through our star clinical sites in.
In addition, our commercial team is actively engaged with our clinical group to identify new potential study sites. We recently attended the American Association of thoracic Surgeons, where we actively engage with researchers to explore their interest in participating in the star trials. In addition to support.
Our star clinical site identification. These early commercial activities will establish the necessary contacts to allow rapid access to the market once approved.
This approval has been achieved next slide please.
In summary, as a team we are focused on launching drugs or a T R into the market and the fastest most efficient way possible.
Thank you. This now concludes my remarks, and I would like to turn it back to Phil Phil.
Thanks, very much Vince in summary, we're navigating through this period of uncertainty with a focus on tight fiscal management.
And our key priorities to reiterate these are one restoration of sales growth.
To our U S clinical programs start can't start D and potential future FDA approvals three fully opening our new manufacturing facility in Princeton, New Jersey, and four new partnerships to drive credit.
Although there's always more work to do we believe this strategy will result in a stronger company poised to take Cytosorb to the next level of growth.
That concludes our current prepared remarks, operator, please open the call up for the Q&A session.
Thank you as a reminder, if you do have a question. Please press star one on your Touchtone phone. Please make sure. Your mute button is turned off to allow your signal to reach our equipment.
Our first question is from Zack.
With Jefferies. Please proceed with your question.
Hey, Thanks for taking my questions.
Just wanted to start with hospital trends in Europe , and particularly in Germany. I know you guys talked a bit about it on the call and then just if you could give a bit more color as to the.
Some of the potential revenue that was lost due to the strike in Germany.
Thanks.
Yeah.
Christian would you like to comment on that a hostile situation in Germany.
Yeah. Thank you very much thanks for the question.
Yeah. The as you say, there's a number of our effects, which play into this business in Germany.
One of course is a the recent strike in the hospitals and it's called North Rhine Westphalia, That's one of the biggest states of Germany with around 20% of the population.
And this obviously has impacted Oh wow.
Business significantly so all the all the big hospitals, meaning university of hospitals and all the hospitals was more than 1000.
Hospital beds have been Don just to emergency.
Procedures and operations and this obviously has a big impact on our business.
And then secondly of course, yeah kind of.
We have kind of relaxed restrictions regarding the hospital access however, now in second quarter and also known in South Dakota. The problem is that many of the the stuff members are infected.
Often this leads to a restricted or reduced.
Operational for the hospitals.
Well, they're just these are the main.
Points I think are regarding the business in Germany.
Does that answer your question.
It does its very helpful.
And then just one on the start to start the trials.
I know you've talked about in the past some overlap in terms of hospitals are in those trials can you talk about you know what percentage of sites that are enrolled.
Our overlapped or essentially are doing both start Tien start D and some of the synergies that we should expect due to that overlap and then I guess just Uh huh.
How we should think about timeline of those trials.
For taking the questions.
I think that Mike would you like to take that.
Sure.
Thanks, and thanks for the question are we now as I mentioned on the Cogs have the bulk of the sites in both sites activated and approximately 80% maybe a little over 80% are participating in both trials. So that actually exceeds our initial plan of having about two thirds of the sites overlapping we now have over 80 per.
Sent overlap.
And the type of synergies that we expect a part of those synergies we already experience in the startup phase.
We saw the execution of contracts.
The latter be submissions moving at a faster pace, we started D than it did with star T based on the pre existing rewards.
As we are moving now in phase two are driving enrollment of these studies example of the synergies of course include that anytime we engage with the sites. We can now talk about both trials.
Instead of having to visit separate sites and discuss individual each study and so.
The second thing rules that in addition to to be executed in the same location. We studies that also basically identical in the study related procedures.
So educating the sites ensuring they're executing according to the protocols now applies to both trials.
And then finally, you know the feedback we're getting from sites is once they start enrolling.
I see that both the study itself was studied it laid the procedures are not difficult to execute and the familiarity with it you by smoking says, we believe that that will accelerate their ability to recruit and both of these trials.
And then finally, you know the source of these patients although many of them all coming through the emergency room on multiple occasions. These patients are also referred from outside hospitals.
So being able to participate in both studies that increases the capture radius for these hospitals familiar sorting centers based on the fact that it now can target patients of multiple agents and they'll just like tableau or dogs.
So I hope that answers your question.
There was a relating to the synergies and then the last part if I remember it was a if we can provide you know give you an update about the progress in the studies.
I think when you already provided some you know.
Our comments on the state of execution. We are now we are actively now shifting from the start up phase to helping sides identify eligible patients and educate decides where they where they intent.
Improving enrollment.
You also heard commentary both from Christian and.
And myself about the lasting impact of the pandemic on besides that we certainly saw that during the startup phase that besides are still struggling to fill positions.
For their staff that were lost during the pandemic.
So again, we are targeting.
Targeting the first milestone.
We'll start T to be coming in the next few months and then hopefully in the near future with the new information coming from screening logs from Star D is its beginning enrollment we shouldn't be.
A little more visibility on the path forward for the second part D as well.
Very helpful. Thanks for taking the questions.
Our next question is from Josh Jennings with Cowen. Please proceed with your question.
Hi, This is Brian here for Josh Thanks for taking my questions.
Okay.
I wanted to start with just the sales expectations embedded in the guidance now so you referenced some improvements in key markets I recognize there are a lot of variables affecting the guidance currently but can you frame, how you're thinking about the back half of the year compared to the first half 'twenty two sales and maybe even not the.
The sequential trends for the third and fourth quarter and how these could compare to those in a typical year.
Yeah, Brian . Thank you very much yeah, as we discussed in our last call, we actually withdrew our yearly guidance.
Based on the.
A number of variables out there that we have little control over.
N D. A slow recovery of the German market I think what you're hearing from us today is that.
We are seeing early but encouraging improvement in our core markets.
It has not yet translated as of the end of the second quarter into improvements in our financial results and we're cautious about the second half.
Particularly given that the third quarter is typically seasonal with.
With Oh.
Casings, and where many people across Europe are on pick I'm going on vacation in July and August .
So Q4 typically is our strongest quarter of the year, we expect that that will be the case again this year, but we are taking a wait and see attitude, but in the meantime, again tightly controlling our financial.
<unk> costs and.
And our cash.
Cash and conserving cash while we're actively pursuing the things that will help drive our business going forward.
Okay. Thank you and I wanted to follow up with maybe a more specific question about the start trial timeline. So you'd previously outlined some some timelines for finishing enrollment for both studies is it safe to assume that both trials are generally tracking within three months of these prior enrollment targets and.
Just any anything you can help with how you're seeing enrollment trends at already activated clinical sites. Thanks again for taking the questions.
Sure Mike did you want to comment on that.
Sure so starting from the back end of the question the the three months.
Window based on what do we have communicated previously yes, we think that still applies and based on that guidance today. The start will be the first trial to hit that first milestone.
The enrollment pace, we believe will track the number of sites activated. So we we expect low moving forward to have enrollment pick up simply as a function of having the bulk of the sites activated while than previous months.
We were working with fewer sites open started do you still early as I mentioned so the the enthusiasm obviously is a positive sign that we're seeing from sites and the fact that early evidence coming from their school all it seems that they do see these patients, but we don't have enough data yet to be able to provide you with an estimated timetable.
First I D.
Sounds to hitting its first milestone.
Once we achieve the first milestone, which one third of enrollment.
We will obviously be tracking towards the second important water, which is the interim analysis.
And we think you know.
We'll have better visibility towards that at our next earnings.
Earnings call.
Yeah.
Our next question comes from Sean Lee from H C. Wainwright. Please proceed with your question.
Good afternoon, guys and thanks for taking my questions.
First of all I'd like to congratulate you on the New group came in with Fresenius I was wondering if you could provide some more color on how.
How much sales as FMC responsible for right now for you guys and what do you expect this growth can get to with the new agreement in place.
Yeah, Hi, Sean.
I'll, let Chris comment on this a little bit, but you know today most of our sales are either driven by us directly in our direct sales territories or by our independent distributors.
In other countries around the world, we have a co marketing agreement with Fresenius that has existed for a.
Previously.
But it is not a targeted.
Targeted agreement that we have now where fresenius is now.
Actually financially incentivized to Q.
Two.
To drive marketing of Cytosorb and also.
We did not have at that time.
This commitment to make Cytosorb, a featured blood purification therapy for their local cytokines, myoglobin and and bilirubin.
We think that the new agreement well has a crystal ball.
It's a much bigger win win for both companies.
It represents an increasing commitment for both sides.
I move for the partnership and are in a very constructive and positive way and believe that because it is a global partnership.
Where it extends everywhere with the exception of the United States that it has that capacity given that Fresenius is the number one or number two player in critical care around the world in terms of placement of their machines in terms of their sales force and marketing presence that it has the potential to really drive.
Uh huh.
Cytosorb in the future.
But again, they will be doing marketing, we will be doing the selling but we think that that will be a great mix.
Maybe I'll turn it over to Chris to maybe.
Maybe for some additional color Chris.
Yeah. Thank you Phil I think that was a good yeah, I think that the big drivers here number one.
She had mentioned.
Oh good.
We really haven't had the same to customers until we had before so a big part of really what we're doing is trying to get the cytosorb message out to users number two I think really piggy backs on piggyback on what Mike had mentioned is that we've got new data coming out and.
You know there really isn't a better way to kind of bring this new data to two customers than having.
Having a power and megaphone that FMC brings to this <unk>.
<unk> plus Congress has lined up where we're going to have a chance for them to really kind of supplement what our sales and marketing team is doing and I think this innovation group was the last piece that I just wanted to mention that I think could have an impact on sales and there is a.
Component. There is also a near term component to that.
And we've talked about designing really indication specific marketing campaigns and you can you can think about the therapeutic areas that we play in right now.
In areas like sepsis, and maybe liver, where we think we can really make some headway.
And that message out.
And really discussing how we penetrate.
We're competitive accounts, where it's in the best interest for both of them too to really access those accounts and of course, winning tenders and I think there's a lot of things we can do in combination with the collaboration.
Can help accelerate sales.
So I hope that answers your question.
That was very helpful. Thanks, My second.
Question is on the Star Kids study Ah trials with tier two planned interim Readouts a D. S. M D reviews, we see.
See any data releases at those times.
Yeah the.
Thanks for the question. So the first milestone is a safety review so in that regard the D S and B will review the blinded data.
On an unblinded data it will provide us with a recommendation.
Relating you know the status of the study continue or required potential modifications.
The second analysis after 80 patients. So two thirds of through enrollment includes both a second safety review. So they will repeat the similar kind of exercise that they do have to 40 patients, but they would also.
The pre specified criteria evaluate efficacy. So he is no longer just a safety review.
Based on those results on unblinded data the D S and people will come back with a recommendation of whether to continue the study or stop the study based on the efficacy results are they have already reviewed.
At that point, we will communicate the D. S M B recommendation.
And according to what that recommendation is for example, if the studies stopped.
Perfect.
That will suit their follow with the release of the data used to study is gonna be completed the studies ongoing.
Ongoing we will remain blinded to the data and we will not be releasing any data until the study completion.
I hope that answers the question.
Yes that was helpful and my final question is on the potential commercial launch of the drug swap in the U S. So I see that you guys already started some preparations.
To that end. So I was wondering whether you've decided to do an independent launching direct sales or through partners or some sort of a hybrid model.
Hi, Yeah, Vince did you want to comment on that sure.
Sure Phil I'll do that so we're looking at doing a hybrid model you know clearly there are certain markets that would be best serviced by distributors.
Were there other areas geographic areas, where we intend to go.
Direct and a part of the outreach program that we were going through right now working with clinical is helping us get an understanding of you know who are going to be key players and what markets. We're.
We're also doing a significant amount of market research to understand where you know the largest amount of taikang floors being used within the country, which will also help us Sean identify where we wanted to go direct.
Oh I see.
Yep.
That's all I have thanks again for taking my questions.
Thanks, Sean.
At this time I would like to turn it back over to management for any additional or closing remarks.
Well thank.
Thank you very much everyone.
The call today, if you do you have any other questions. Please feel free to reach to reach out to Amy Vogel at H B O G E. L. F I could start with dot com and we'll try to reply to your questions where possible. We look forward to our next quarterly call. Thank you very much.
Thank you that concludes our conference for today I'd like to thank everyone for their participation.
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