Q3 2022 Cytosorbents Corp Earnings Call
[music].
Please stand by.
Did they walk into the Cytosorbents Corporation third quarter of 2022 earnings Conference call. Today's call is being recorded at the request of the company.
At this time, all participants will be in a listen only mode.
At this time like to turn the conference over to Michel M. Monte. Please go ahead.
Thank you and good afternoon.
Formal remarks today, we will open the call for your questions. Please be advised that the call will be recorded at the company's request.
Joining me today from the company or Dr. <unk>, Chief Executive Officer.
<unk>, Chief operating officer and President.
Kathleen blocked.
Until officer.
Doctor If females video, Gary Chief Medical Officer.
Christians diner executive Vice President of sales and marketing.
And director of Cytosorb into Europe G M B, H and Christopher Creamer V P a business development.
Before I turn the call over to the Doctor can I'd like to remind listeners that during the call management's prepared remarks that 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 Securities Litigation Reform Act of 1995.
Actual results may differ friendly felt discussed today and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the S. E C.
Any projections as to the company's future performance represented by management include estimates debate as of November 3rd 2022, and we assume no obligation to update these projections in the future as market conditions change.
Today's call, we will have an overview presentation covering the operating and financial highlights for the third quarter by management. Following that presentation. We will open the line to your questions. During the lives Q&A session with the rest of the management team.
At this time, it's now my pleasure to turn the call over to the Doctor <unk>.
Thank you very much Michelle and good afternoon, everyone.
I'm, an operational standpoint, we've been making good progress.
We continue to celebrate our 10th year of commercialization of Cytosorb. We've had 186000 cumulative cytosorb devices utilized as of the end of the third quarter up from around 152000 last year.
Microsoft will discuss in his comments in greater detail to start <unk> trial is enrolling well can we expect to achieve the first milestone of 40 patients this month.
Puts us on track essentially complete the study by summer of next year.
Yesterday, we announced final key data from the USCC registry on 100 critically ill COVID-19 patients with refractory respiratory failure.
U S S. Most centers, where enhance lung rests with Cytosorb ecmo led to a 90 day survival of 74%.
Early intervention yoga better clinical outcomes.
During the third quarter, we achieved 13 45 certification of a Princeton New Jersey manufacturing facility.
We also had some excellent news on the reimbursement front with reimbursement of Cytosorb by the Israeli Ministry of health for Cardio thoracic surgery, which will go into effect in 2023 and reimbursement from the Turkish administrative health for critical care in cardio thoracic surgery application.
We recently announced to major awards for a few minutes LPGA product that enables universal plasma that could be given to any patient.
The Department of Defense has awarded US a $2 million to your award.
To develop commercial ready devices for preclinical coursing studies and.
And a $4.3 million three year award to customize a device to enable free striking universal plasma that could be used off the shelf for patients and trauma and.
Military service.
Finally, we announced the release of new cardiac surgery data at <unk>.
2022, highlighting new positive data using cytosorb interoperability during cardio thoracic surgery to improve outcomes and staff aureus, endocarditis heart transplantation and anti thrombotic drug removal and also receive a $282000 award from NIH, the tests, new and existing polymers preceded kind.
And Lps endotoxin removal to advance new treatments for deadly gram-negative sepsis.
With that I will now turn it over to Kathy block recover our financial performance for the quarter Kathy.
Thank you very much so and hello to everyone on the call today.
Will briefly review status seven third quarter financial results and in addition, I will provide an update around or working capital for 2022 and beyond.
Next slide please.
Total revenue, including product sales and grant income was $8.1 million in the third quarter of 2022 as compared to $9.8 million in the third quarter of 2021.
Product sales for the third quarter of 2022 was six $5 million as compared to $8.9 million in product sales in the same quarter in 2021.
The lower Euro dollar exchange rate negatively impacted 2022 sales.
$771000.
In addition, COVID-19, Cytosorb sales were negligible in the third quarter of the current year as compared to an estimated $1.1 million in COVID-19 product sales in the prior year.
Product sales continue to be negatively impacted by COVID-19 pandemic market restrictions on a constant currency basis. However, third quarter of 2022, Cor non COVID-19 sales for $7.2 million and this represents a 7% decrease from the seven point.
$8 million in core nine COVID-19 sales a year ago.
Our grant income was $1.6 million in the third quarter of 2022 as compared to $859000 in the prior year next slide please.
Looking at our quarterly sales trends over time broken down by core and COVID-19 sales. We can see that COVID-19 sales have declined to virtually zero in the last two quarters.
<unk> related sales were negligible in 2022 compared to $6.3 million in the year 2021 next slide please.
This slide is are trailing 12 months product sales graft and it breaks out our core versus our COVID-19 sales COVID-19 sales was seven $1 million in the trailing 12 months and it's September 30th 21.
<unk> $2 million and it's showing 12 month period and it's.
September 30th 2022, a decrease of approximately $5.1 million.
The decline in the Euro dollar exchange ratio negatively impacted sales and the trailing 12 months.
Remember 30th 2022.
Absolutely $2.7 million.
On a constant currency basis core product sales for the trailing 12 months ended September 30th 2022, where approximately $32.1 million, which is an eight per cent decrease core product sales of $34.8 million in the trailing 12 months period ended September 30th.
2021.
Near over year decrease in product sales is due to COVID-19 pandemic market driven conditions, although improving continued staffing shortages reductions in ICU bed capacity decreased elective surgical procedures hospital budgets and hospital restrictions continue to limit our acts.
The hospital personnel.
Also depicted on this chart on the Orange line.
Our our third quarter gross margins, which showed steady improvement from 2016 to 2021.
232022 product gross margin includes a one time charge of approximately $600000 because of inventory damaged due to a refrigeration equipment failure in the quarter.
By the way we are seeking to recover this lost through an insurance claim but the amount of the recovery has not yet been determined.
Excluding this nine recurrent charge our product gross margin for Q3 with 64% that's shown as the Orange Dot Dot in Q3 2022 bar.
The decrease in gross profit was due to devaluation of the euro compared to the U S. Dollar inefficiencies associated with lower production due to a decrease in sales in the process of relocating our production activities to our new facility, we do expect product gross margins to return to previous.
Levels as we complete the relocation to the new facility by the end of this year exit Rv's at the old facility, which expires December 31st 2022, and as we begin to recapture manufacturing efficiencies driven by improving market conditions and increased product demand.
Please.
Our cash burn for the third quarter of 2022 was approximately seven $8 million, which is higher than expected due to reductions in gross margins.
<unk> from a decrease in the Euro T U S dollar exchange rate lower sales and higher cost of sales.
Cause of inefficiencies associated with lower production, we ended the quarter with $24.2 million in cash and that includes 1.7 million of restricted cash given.
Given the headwinds of macro economic 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. They continue to experience challenges for the remainder of 2022 and possibly into 2023.
Or spend his laser focused on and fully aligned with our strategic priorities in particular efforts to support U S. F D a approval.
We remain actively engaged in making further reductions to our operating costs.
Use our future cash burn I'll say more about that in just a minute Ah cats cable here shows that we have approximately 52.1 million shares outstanding on a fully diluted basis now.
Back to our cash one way.
Next slide please.
As of September 30th 2022, we have $24.2 million in cash which includes restricted cash.
We intend to utilize a portion of our 15 million dollar desk facility to further bolster our working capital.
Proceeds from the alone along with our existing cash on hand are expected to provide funding for operating needs into 2024.
Cash conservation is however.
An important corporate priority and we are continuing to focus on controlling our expenses already this year, we've reduced overall headcount, including full and part time employees and consultants.
10%.
In addition, we've shifted our R&D personnel to grant funded programs.
Those programs have an extensive 1.2 million dollar backlog.
The focus of our clinical team on Star T and the paws of Star Gate will cut over $4 million from our 2023 operating expenditures and going forward, we expect to identify more opportunities for cost savings.
<unk> is focused on in full your lines with our strategic priority in particular are star T trial designed to support U S. F D a approval.
Our goal is through a combination of driving an increase in sales and gross margin.
Along with cost cutting measures to significantly reduce our cash burn and extend our operating runway.
So that concludes my remarks for today and at this time. It is my pleasure to turn the call over to our executive Vice President of sales and marketing Dr. Christian Stiner Christian. Please go ahead.
Yeah. Thank you Tracy.
Good afternoon to everyone from the United States.
To Europe .
Okay.
Caffeine.
[noise] situation.
Companies, especially also.
This is.
Shifting therapy approach remains challenging.
The last call.
Catch up.
Communications custom.
Customers to visit restrictions.
But you refuse to see.
And jewel or.
Community and Furthermore.
Currently.
Customers and partners from the market.
And very encouraging.
First lunches.
I wanted to give you a little more flavour, how the speed of the sizes of users community has developed.
I will show you how the enormous number of activities of our medical and commercial teams is fueling the excitement of both sides as well.
More and more.
From different.
Ts supporting us.
Involvement in specific projects to further develop or therapy is drawing.
I also want to emphasize some of our girls opportunities and initiatives such as the recent agreement was for dizziness.
And the therapeutic areas of critical care.
Kidney.
The importance of Austin alone blood pump strategy.
And some.
A new application fees.
Areas.
Excellent.
I have mentioned during the last call.
This meeting in July in Berlin.
After 10 years of market development.
Almost 300 key opinion leaders conditions and researches came from all over the world.
Advances new data and best practice of use of signs of therapy.
Presentation, so for major new datasets different clinical indications.
The highlights of this.
Scientific conference.
These applications included.
Okay.
Transportation.
Protection of kidney function during open heart surgery.
Protection.
Of lung transplants.
All these studies have been published on the progress.
Process to publication.
Also these positive clinical data on sizes abuse.
A different international conferences.
Another scientific event of similar importance has been organized and conducted by oil Italian partner.
Distribute are afraid to go.
Italy.
Again more than 300 participants from around 30 countries have had discussions focusing on charges of therapy.
Sean spun 12 and confusion.
Presentation more than 80 posters presented.
Trusting new data.
Excellent please.
The bigger audiences. However, obviously.
Mhm.
<unk> often conducted by the difference.
Societies.
Okay.
We were able to police many of the new studies of these big Congresses.
That included the CDC data.
As a conference in Boston.
<unk>.
And as a European society of intensive care medicine.
ICM Congress.
Prince.
Well she's medical officer.
Which gives you more influence you in a few minutes.
No cardiovascular therapeutic area to control study and heart transplantation patients and the big data set an objective.
F B.
As a new Congress.
Appeal Association of cardio thoracic surgeons.
Italy.
They're very new and exciting finding all shown at the highest.
Conference in Berlin.
It was founded treatments used to lower levels.
Levels. After for example.
Huh.
Protecting the kidneys.
Cute kidney failure.
And the earlier mentioned study on protecting lung transplants, which has been published in nature Communications.
Oh, it's presented as an ulcer transplants conference in Australia.
All these presentations of studies on using more discussions.
Eventually will lead to adoption.
European.
Excellent.
On this page.
Many more conferences symposia.
All the teams have promoted the therapy during the third quarter.
The smaller meetings and events give us more opportunity to.
Needs of users and give contact to possibly new customers.
This is just a selection.
More regional meetings, which have been visited since teams.
Stuff like this.
My last longer show you again, the selection of growth initiatives via continuously working on.
Is one six.
Global marketing agreement was presumes, Missouri.
We are convinced that sides of therapy as in tactics pending the dimensions of blood purification.
After our discussions FMC has started to agree with this new paradigm and wanted to add this to their customer offerings.
<unk> is now the featured solution for FMC customers remove side of the times.
Reuben Reuben from the blood of different of different patients.
He believes that this collaboration will amplify messages and increase.
Of sizes up therapy.
Network and brand of FMC obviously.
Increase our reach and give us access to new customers.
From the tools stand alone.
You're a student in the early stage of the rule out we are testing different offerings for our customers and are increasing the number of trance.
The strategy is clearly the potential to drive early and greater usage of Cytosorb.
Estimations, suggesting that this expensive.
Target market to a 30% to 40%.
Of all ICU patients.
Number three.
Therapy area of focus introduce here.
And live a kidney.
Lowering us to address except you as a customer and patient needs.
Example.
Be marketed.
The most capable easy to use.
Support therapy available on the market.
On the fifth of kidney diseases, we can now position cytosorb or microbe anemia.
Before.
Or partnerships asclepius on heels.
He doesn't asclepius of two of the largest private hospital networks in Germany.
These agreements in place is a pre requisite two business to do business in the hospitals of these chains and is opening doors too many new accounts. Please.
These hospital groups have a strong focus on reducing costs and improving clinical outcomes.
And five.
Additional application fees or therapeutic areas.
It's probably the most.
Most girls opportunities for the future because of the mechanism of action of this absorption therapy.
For the time being we need to focus and don't want to spread wide. However, the indications listed here are charging emerging and you will hear a little bit more about these during this call and of course in the future.
These indications include lung failure and lung dysfunction.
Australia and heart transplantation.
50 protection.
And last but not least transplant organ perfusion and protection.
Well the first one the lung failure and lung dysfunction.
He was he a little bit more from a doctor.
And about the transplant organ perfusion.
V P of business development elaborate a little bit more.
Cause this I want to head over to my colleague Dr.
Our Chief Medical Officer.
[noise].
Thank you Christian and good afternoon, everyone.
On today's clinical update.
Team will be visibility and prioritization.
The first slide with summary, slide an outline of the highlights of my presentation that will include.
30, as our lead horse to the U S market.
But we are now prioritising with all of our resources to ensure speedy execution.
Start the enrollment update showing an uptick in.
Now with our updated guidance that we project to hit milestone number one with 40 patients enrolled later this month.
We recently received F D a approval to expand start D C Canada.
With very high rates of <unk>.
And it was better visibility now.
Ultimate regular star T. We are projecting on the trial will complete next summer.
Meanwhile, started the activities will temporarily pause.
Greater focus will start to.
To preserve cash in the short term.
We will resume I'll start.
Crosses the finish line or other financial situation improves.
Would you ever comes first.
Or international Star Registry is enrolling fast.
Lighting, increasing penetration about the three Baltic removal.
Real world based on a dominant clinical and economic value proposition.
But I will share similar data on that topic later.
The constant stream of positive data with sadness or being collecting surgery Mturk Bulgaria's continue.
Right now we have over 20 original presentations of obligations already this year.
And most recently we presented the main results of our CPC registry of the European Society of intensive care medicine with excellent outcomes without pioneering enhanced low strategy, an enhanced level of that strategy, combining there'll be some sinus or plus <unk> in patients with severe respiratory failure otherwise.
Next slide please.
Now for the start the study specifically.
We are very encouraged by the enrollment pace of society and the increasing numbers of sites that are actively enroll.
We anticipate reaching 40 patients later this month.
[noise] trigger the first scheduled the assembly meeting.
And we anticipate for that to take place approximately two months later.
After we reach the enrollment target to allow for the 30 day forward to complete and put some beta period.
We will be issuing a press release when you hit the 40 patient. So please stay tuned.
We received F D a approval to expand the study to Canada and.
And we believe that this will be an additional obtained tailwind to enrollment based on the following.
First by casually using Canada as ubiquitous as.
Preferred agent for Acs treatment political.
So we anticipate high numbers of eligible patients to participate in the study.
Second.
Canadian sites are very high volume centers and have an excellent track record in Mexico.
See the surgery trials frequent even finishing his top enrollees in trials.
And third we are delighted to have Dr. Richard Woodlock as a principal investigator to Canada.
Dr. Whitlock is an internationally renowned investigator within established network of high performing sides of Canada that will all be included we will start to eat.
All operational steps to open Canada are actively progressing including the complete submission to help Canada.
With increased start the ability now we can projected timeline to milestone completion I saw was stable below.
Already mentioned that we anticipate hitting the first smile milestones later this month.
And we anticipate them project that we will lead to the enrollment number 80 patients.
That will trigger the second <unk> will be meeting in the interim analysis sometime in the spring of next year.
So the trial continued to is for 120 patient enrollment, we anticipate that to take place next summer.
Please.
<unk> is our fastest path for the U S market.
Based on the trial progress to date and some important market dynamics.
Increasingly apparent that we need to speed, it's execution and focus.
Our state.
The studies progressing well and with our full attention and all of our resources. We believe that we can further fuel this momentum and further speed up slightly execution.
The expansion to Canada is a positive development.
Resourcing has the potential to significantly further accelerating enrollment.
But they also have positive downstream implications for Canadian approval of drugs of APR.
In addition to the trial specific reasons to accelerate that are important market dynamics evolving, but make speed to market highly desirable for us to capitalize on the growing opportunity.
First the catalog go generic in 2000 2000 for.
This would likely to remove the high cost that is currently serving over key barrier to broader adoption.
Otherwise stated that calculate use is expected to grow with genetic availability.
Secondly, like calculus monotherapy is increasingly considered by cardiologist as a potentially better approach an aspirin for.
For cardiovascular protection in high risk patients.
The application of this treatment paradigm shift.
<unk> casually used could shift for being a drug prescribed for 12 months to actually becoming a lifelong therapy.
Simply put this move more patients treated for longer periods of time.
Also the <unk>.
Tension for first mover advantage in the market.
Although we always believe the drug removal is the preferred strategy drug reversal for preventive leading in these patients.
Some events that you have likely seen until recently would likely complicate the path forward potentially competitive technology and development ladies currently focusing on February virtual.
And finally.
Sue how this application.
The real world with abroad, and enthusiasm adoption for them by dramatic removal.
Or international Star Registry is ahead of schedule.
And as of today, we have enrolled in 125 patients already registry and we are already beginning the initial data readouts submission international conferences targeting presentation next year.
Excellent.
With our increased focus on accelerating star T for speedy completion.
He will shift from a parallel to a sequential execution of the two stars studies.
Accordingly, we are puzzle sporadic activities and.
And we will focus all of our resources on Star T execution.
It is very important to emphasize that there are no clinical a safety issue.
This is solely a business decision.
Will remain fully committed to start D and we will resume activities one start the crosses the finish line or when our financial position improves whichever comes first.
We anticipate that the sexual will have minimal impact on our open sites since almost all of them in fact more than 90% are also active in society and will now remain focus on accelerating enrollment in that trial.
We plan to take advantage of this pause to fine tune. The study based on learning to date and introduce analyst necessarily fixes to ensure that we will have speedy enrollment once the study resumed enrollment.
Finally, with the sequential execution of the Star trials, we will observe significant cost savings.
2023 estimated at approximately $4 million.
<unk>.
Shifting focus now from R. U S. S E trials.
We will spend the next couple of minutes reviewing the highlights of the exciting new data presented recently at major international conferences.
But we believe will be crucial catalyst and driving the growth of our <unk>.
The data in the next few slides were also discussed in greater detail in recent press releases.
There are also available.
For you to review.
Let's start with a brief overview of the presentations at the European Association of Cardio thoracic surgery.
October in Milan, Italy. This is the largest <unk>.
Confidence in cardiac surgery outside of the U S.
Major Forum.
Very exciting data being presented.
First multicenter report from Germany demonstrated.
The benefits of using Cytosorb in high risk patients undergo cardiac surgery for staff or even look at <unk>.
It is important to remind everyone that this type of endocarditis staffers endocarditis is the most serious type and is associated with significantly higher mortality rates from the other types of them at the latest.
The main observations from this study with a sinus or improve the postoperative course by reducing the need for major pressure support.
Maintain hemodynamics and these patients.
Significantly reduced both sexes related but also overall mortality.
In fact, the reduction in mortality was so profound that only five patients will need to be treated to prevent the death.
Moving around to talk to a vertical removal.
We're also presented on both the clinical but also the economic benefits with this application.
In addition to impressive and significant reductions in bleeding, including pure chance few huge let's choose just some drainage and elimination of the risks for repeat surgery to control bleeding.
The investigators executed the dedicated economic analysis.
So the total cost savings on 4200 Euro per case.
Lucy of of the cost of the device.
These cost benefits were primarily driven by reductions in operating times and also fueled they spending the ICU.
Finally, very exciting was the first ever presentation of randomized clinical trial data with heart transplantation from Hungary.
And that study the investigators were able to show that they use of Cytosorb was once again associated with a smoother postoperative course, and less frequent occurrence on postoperative visa pleasure.
That in turn translated into shorter times on mechanical ventilation.
Lower rates of acute kidney injury, and overall three and a half fewer days spent in the ICU.
With these type of data, we believe that our thoughts therapy offers a robust value proposition two heart surgeons around the world.
Sentiment was echoed during our interactions with a conference participants.
Slightly.
You've already heard about our exciting data from the CBC registry that was presented at the U S. B in society of intensive care Medicine, just a few days ago. Once again I'd like to refer you to a recent press release a discussion of the results in details.
But I'd like to share some highlights with you as well today.
As a reminder, the secrecy registry was executed in the United States under emergency use authorization for the treatment of critically ill COVID-19 patients with respiratory failure.
The final Davis said of the registry comprises over 100 of the Sickest type of COVID-19 patients.
Who required life support with extra portfolio membrane oxygenation, otherwise known them Ecmo.
Five large academic centers.
The clinical teams at those centers employ this strategy of enhanced Lola West Indies patients with a combined use of Cytosorb and eczema.
The rationale for this strategy.
Is that Ecmo use helps to rest of the lungs, and avoids ventilator induced lung injury.
Cynosure actively remove cytokines another inflammatory toxins.
Blood vessel injury and capillaries syndrome.
Key feature.
Yes.
The Gulf therefore of his enhanced low last strategy is to allow the lungs.
But also to heal.
We believe is the key to reverse.
Getting these patients of mechanical support would that more and mechanical explanation and ultimately allowing them to survive.
The secrecy registry reported excellent outcomes with high survival rates of 74% that compare favorably to survival would that <unk> as reported by the international also registry and specifically at 52% survival for U S patients from the registry.
An additional very important observation from the CBC registry data was that the game the boost benefits with this combined strategy.
<unk> should be started as early as possible and before irreversible organ damage is present.
We're very bullish on the CPC data for multiple reasons.
First this is the largest and only multicenter beta suicide, a surplus ecmo trumping all of the other information with this application.
Secondly, we excellent outcomes observed in the registry serve as validation of our enhanced Lola astrology.
And third we believe that these data are relevant to broader args, an excellent reason population.
Finally as Chris.
VP of business development will discuss in much greater detail in the next part of the presentation.
Exact same pathophysiological mechanisms at play that we believe support the benefit of our equals technology for organ preservation.
Next life.
So to summarize.
Next slightly.
<unk> is accelerating and we have a new tailwind coming with the Additionally, Canada.
With our increased visibility we project milestone number one to hit this month and milestone to entry next spring and summer respectively.
Feeding execution will start is our top priority will look to capitalize on favorable dynamics, both study related but also related dynamics.
We have a positive start D.
Increase our focus on site, but also contributes significant savings in 2023 estimated to be $4 million.
I start registries ahead of schedule demonstrating.
Demonstrating the increase adoption of dramatic removal of standard of care and real world practice.
In regards to a medical efforts.
Supporting our business remains a top priority therapeutic area medical teams.
And we anticipate increasing adoption of our therapy on the heels of the data, but I'd just review with you to multiple.
Presentations and publications all positive recently released.
And with that I would like to turn the call over to Chris.
Chris.
Thank you Mike.
I'd like to talk to you today about a new opportunity for Cytosorb ins technology in the field of transplantation.
There is a high demand for more transplants throughout the world.
Today more than 165000 people in the U S and Europe are on the transplant waiting list.
Unfortunately, the annual supply of donors is not keeping pace with that demand.
Each year, just over half the organs needed by patients on the waiting list.
Donated either by donation after brain death.
Donation after circulatory death, roughly 92000, oregon's or 55% of the overall need.
This organ donor shortage is expected to grow as demand for organs outweighs that supply.
On top of the supply demand imbalance, there's a low utilization rate of these donated organs due to the inherent limitations of cold storage.
And the resulting high rates of hyper inflammation.
Static cold storage the current standard presents physiologically adverse conditions for the Oregon, and often results in severe ischemia.
In addition, donor organs are often irreversibly damaged due to hyper inflammation.
Combined effects result, in very low utilization levels and today, only 10% to 30% of donor organs are utilized leading to a severe demand supply imbalance and organ transplants.
A new approach called ex vivo profusion or EVP aims to preserve or improve organs for transplant and increase the organ donor pool.
However, because EVP does not reduce hyper inflammation. It also.
Sent a new opportunity for Cytosorb technology to play an important role in Oregon transportation organ transplantation by mitigating cytokine release, and removing harmful inflammatory mediators.
Next slide please.
We now have publications documenting the youth and positive effects of side, Assortments technology, and ex vivo organ perfusion and transplantation across multiple solid organ types, including heart long kidney and liver.
Of note is the recent publication in nature Communications.
Leading scientific journals in the world on the reduction of primary wrapped dysfunction, using subtle kind of disruption during organ preservation and after lung transplantation.
This study looked at the use of cytokine adsorption with Cytosorb in a porcine Args's model.
Results of which mirror the benefits and positive results, we observed in the C. D. C registry that Mike has talked about.
In this study the lungs from 16 donor pigs were treated with or without cytosorb during ex vivo long profusion or <unk>.
And posts transplantation, using extra <unk> hemo profusion, the treatment with Cytosorb significantly decreased cytokine levels.
During Ethiopian decreased levels of immune cells post transplantation his.
Histology demonstrated fewer signs of lung injury across both treatment periods and the incidence of primary grabbed his function was significantly reduced among treated animals.
Overall cytokine adsorption with Cytosorb was able to restore lung function and reduced primary graph dysfunction and lung transplantation.
And the concluding remarks, the author stated that <unk> was cited swarm will quote increase the availability of donor lungs and increase the tolerability of donor lungs and the recipient.
Next slide please.
We are well positioned to move on this opportunity today with eco 300 C y.
[noise] equals 300, Cys swerving cartridge has similar cytokine and inflammatory mediators removal capability to cytosorb, but unlike cytosorb. It was specifically y-you approved in October 2020 to remove cytokines and inflammatory mediators during ex vivo organ perfusion for transplant.
When he used in the field of ex vivo profusion. The goal of equals 300 C Y is to limit to irreversible organ damage restore oregon function and to be used as a bridge to transplant by mitigating cytokine release and the harmful harmful inflammatory mediators.
In the competitive EVP market, we believe ego 300 C Y could provide clinically meeting meaningful benefits and be an important differentiator for X evil profusion product offerings.
As a proof of concept.
Cytosorbents is providing the equals 300 C Y cartridge on a non-exclusive basis under private label trading purse or two after radical for the youth with their per life ex vivo organ perfusion platform for kidney and liver transplant.
Confirmed interoperability and is currently available in Italy.
Next slide.
We believe that additional parking opportunities exist across the multibillion dollar organ transplant ecosystem for Cytosorb technology, both with our current partners as well as with additional new partners.
For example, the ex vivo opportunity has the potential to unlock new growth opportunities and it's relevant to our current partners like percentage medical care and Trumeau cardiovascular their provide products for transplant surgery as well as Oregon support therapy is like C. R. T for kidney support and Ecmo for heart and lungs support.
Like we just talked about egos 300 C. Y also has the potential to provide clinically meaningful benefits and to be an important differentiator in the highly competitive field of ex vivo profusion systems, where multiple companies are developing systems, and preserving or improving organs for transplant and increasingly organ donor pool.
Laughs it makes cytosorbents technology relevant to a wide range of additional new partners, including pharma and biotech companies with immuno suppressant and a mute.
Later therapies.
Organ procurement organizations like Nunez, <unk>, and others and new players in the surgical equipment in Oregon support feels like J fields, like J&J Medtronic and others.
That said we are very excited about these promising results and believe that the use of Cytosorb technology in ex vivo profusion will help to increase the poor viable organs for transplant and lead to better outcomes for patients undergoing organ transplantation.
Next slide please [noise].
I'd like to switch gears now and give a brief update on our global marketing collaboration with SMC Fmc's Global marketing efforts for Cytosorb are currently underway as a reminder, as part of our agreement FMC will will market Cytosorb as a feature technology for cytokine bilirubin.
And Mike Logan removal on it's critical care platforms worldwide that.
That said I'm pleased to report that Cytosorb can now be found on Fmc's corporate website at <unk> medical care Dot Com, where it's prominently featured in the acute blood purification section.
No. This is a separate site from the FMC North America site.
We're also working closely with SMC to prepare for multiple major international Congresses there.
There will be a number of key events in various regions throughout the world in Q4 and of course, the easy camp Congressman Brussels in March of next year, where we expect FMC to actively promote cytosorb.
Also I'm excited about several marketing initiatives go live on various social media platforms. In the next couple of weeks. Unfortunately, I can't say more about that right now, but I'm looking forward to it.
Overall, there's a lot of good stuff going on to increase the awareness and the impact of our Cytosorb marketing efforts and to bring the cytosorb message to a much broader audience that said I look forward to having more updates to talk about on future calls.
With that I'd like to conclude my remarks, and hand, it over to our President and Chief operating Officer, Vince could Pony Vince.
Thanks, Chris.
We continue to make progress both in our new facility relocation in startup as well as our R&D programs.
Q3, we received our Isa 13, 485 certificate for the new facility and prepare for our first polymerization trials and we fully expect to relocate the remaining operation to our new facility by the end of December .
In addition, we received two grants related to the hemo defend bgea products supporting preclinical animal testing and scale up of the technology next slide please.
Two three proved to be an excellent quarter for additional funding.
Funding with our Hema defend Bgea program with two new grants approved providing nearly $6.5 million in new funding.
Or he would defend BJ program will facilitate the development of universal plasma low titer whole blood and universal freeze dried plasma.
The military has shown significant interest in universal freeze dried plasma given the advantages of simple storage long shelf life and ease of transport key attributes required for military applications.
We believe the very attribute some military is interested in these new blood products will facilitate adoption and the civilian markets as well as as well and provide a significant opportunity in the future.
R R and D teams remain focused on advancing these programs to support the development and monitor monetization of these assets next slide please.
Our new I. So 13 45 certificate in hand, we now start to large task of beginning reregistration of Cytosorb in the 60 plus countries outside the E U.
A majority of the countries can be registered within three months notification.
But some countries may take as much as a year to do so.
We have <unk>, we have conducted a significant planning for this registration process and believe we are well prepared however, as with any regulatory process. There can be delays, but we do not believe this will occur.
Regarding polymer production scale up we have begun the process of running our polymer trials, having completed our initial validation work.
We believe based on early testing we are on track to begin producing from the new plan by the end of November and shut down of the existing facility by the end of December .
Improving operational efficiency and lowering product costs are key objectives, but during the month of September we an experienced an equipment failure, resulting in the loss of product.
We have an insurance claim which is currently under review and we believe we will be able to recover a portion of the loss.
We have resolve the problem, but our queue three product costs were adversely affected and impacted our product gross margins.
With the upcoming shutdown of the old facility, we expect to use our labor to help with the move even so we believe our queue for costs will be similar Q.
Q too.
Looking forward to 2000 twenty-three consolidation of all operations in to our new facility.
Expected recovery of core business, and resulting increase in unit demand will facilitate recovery of our gross margins back to previous levels of 80%.
And with increasing volumes, we expect we can exceed a gross margin of 80% as we go forward.
Next slide please.
Inflation remains a concern of all businesses. These days and we're no exception or polymer product is manufactured using oil derived raw materials and we've experienced a number of raw material price increases. In addition, we've also experienced transportation cost increases due to.
Increasing fuel prices, we recognize these trends early in COVID-19, pandemic and took sterckx steps to minimize the impact of by placing large orders of key raw materials with multiple releases and using ocean shipping where possible.
Both of these strategies has helped mute the impact of price increases and have not significantly affected our cost of goods sold.
In summary is our team.
In summary, as a team we should remain focus prepared for the drug zarb.
Launch advancing are R&D programs and consolidating our entire U S organization into our new facility.
This concludes my remarks, now I would like to turn it back to Phil Phil.
Thank you very much fence.
To summarize the key points at stake discussion first start keys enrolling well and we expect to achieve the first milestone of starchy. This month and are focusing our resources on driving this trial to completion, including adding Canadian centres, which we believe will accelerate enrollment as Mike is discussed.
Many reasons to prioritize in this trial.
Along these lines, we will also temporarily pause star D to focus on Starkey and save roughly $4 million in cost of 2023 are absolutely committed to star D and we'll resume at the appropriate time.
Our markets are facing numerous challenges related to the COVID-19 pandemic geopolitical uncertainty in the macroeconomic factors the third quarter sales reflects this in the traditional seasonal third quarter.
Recovery will likely be gradual but that said we have lots of reasons to be optimistic about an eventual return to growth first and maybe most importantly, we still have the excitement and energy amongst our users they're eager to learn about all the new advances in discoveries that we're making and putting that knowledge to work in their own practices.
And while we are working on many initiatives to drive sales and even growth in this challenging environment.
Cash preservation is paramount with the goal of adding nanday lose that by year end and actively controlling expenses by reducing or eliminating non-core non priority items.
Our new manufacturing facility is expected to be fully online by year end and we have high confidence and returning product gross margins to historic levels.
And finally, we have many exciting new areas of expansion with positive data to help drive future growth. These include the treatment of acute respiratory distress syndrome, liver dysfunction and failure anti thrombotic drug removal organ transplant ex vivo, Oregon perfusion and many others.
That concludes our prepared remarks, operator, if you would please open up the call to 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 let us know treat try equipment.
And we'll take our first question from Zack Weiner with Jeffries.
Hey, everyone. Thanks for taking the question.
Where it started on Germany and can you talk about performance.
<unk> and sales rep access as the chord progression any color you can provide on how things are trending in the early parts of the fourth quarter.
<unk>.
Christian would you like to comment on that.
Yeah sure.
Thank you for the question.
The situation I think is is generally unchanged from the last call in terms of.
ICU bits availability. So in general is the big hospitals have a reduction of ICU bit capacity.
About 25% to 35%, which is mainly based on the lack of personnel so because of the of the pandemic.
Lots of doctors and and healthcare professionals have quit.
Their duties and so it's very difficult for the hospitals to keep the capacity they have to pre pandemic.
This of course is impact on different obviously.
<unk>.
Impact on a patient can accept from other hospitals.
This is also impact on the.
Procedures the hospitals can perform.
And all these obviously all these processes are feeding.
Patient fun.
If you want to see so.
So that's why the number of patients.
Limited at the moment, and we hope that especially.
Especially the surgical programs revamping and and.
Reramping and growing up in the next few weeks or months.
So in general the situation.
Situation from the customer access has improved.
We have student not 100%.
A number of visitors as we had that an average before the pandemic.
[noise] damage.
Mainly because of certain regulations that you can enter hospital, it's only.
Fixed appointments, obviously, we have Ah those but in the past we also used cold calls.
Very much to go to different customers and potential customers.
Option is limited at the moment. It obviously also is impacting the acquisition of new customers.
Yeah. This is I think the general situation.
And.
Again, what has been said several times in this car.
It's it's.
Interesting that the visits via having into discussions really all of them the positive.
The the users are very much open and I'm happy to have these discussions again get you information about the therapy get new data and have these.
Discussions and otherwise this how to treat.
Patients better so the response from the from the from the customers and users is I would say 95% positive.
And also in the past you have discussed.
Complications, which man I'm favorite rural neutral and we could show in many discussions with the users that Ah those studies, often selecting the wrong patients or having the most up to date treatment regimen.
All these obviously can can lead to.
Ah less optimum outcome of these therapies.
We have initiated a number of.
Programs. For example, one is our economy I've talked about this right to patient right timing.
Right dosing and this.
Is focusing in addressing that.
The patient selection is clear and do you have the right patients which is.
Sick enough, but not too sick.
That the therapy is initiated early.
We have seen this in the CCC data again and.
And that the number of treatments per patient has to be adequate.
And this.
Leads more and more to you.
You.
Sappy regimen, and many indications and to believe it's too low.
I'm pretty sure.
This one time.
Yeah No. That's helpful. Thank you more <unk> in the decision on start D. I know you talked about synergies between the two trials and can you talk about how those synergies as there will be impacted with the paws of the <unk> trial.
And any rough timeline on when that trial will restart.
My guess would you like to take that.
Sure so.
So thanks for the questions.
The main synergies that most of our sites are actually giving both trials.
So in that regard.
The decision to pause spidey doesn't really impact.
We will continue the screaming enrolled but now be focused on one of the two trials.
We think that the.
The increased focus may also help enrollment inhibitions, obviously, our own increased focus basic began resources through the one trial right now.
The the title a resumption independent and two things primarily the completion will start to use them for the first time today, we kind of gave it pretty Ah Ah get a projection for that based on the increase visibility we have now.
And it also.
Revolves a little bit around the financial situations, so should that improve.
A head.
Citing completing there is a chance that we will initiate resume started earlier, but we more than likely we see these trials Napoli on sequentially instead.
Instead of being in parallel so adamant crossing Relining start we will resume started D again.
And we estimate that prescribed D. As we said today.
Here's some time next summer if we ended up going all the way to be mean to 120 patients.
That's helpful. One last one.
I know you guys have a lot going on the R&D in the pipeline and things of that nature.
Besides start.
Are there you know if you could pick one or two opportunities that you're most excited about most near term that could drive revenue.
What would those be in because of the size of those opportunities. Thanks, taking the questions.
You'll be you are into my kitchen.
Yeah.
So what do you heard today.
Many of the speakers from the management team that our application has very.
Broad range of applications that he can provide significant substantial important meaningful clinical benefits.
In that regard.
Executing two registries as you know in Europe , one called the Cosmos registry and the other one that I referenced today, the star registry, which are meant to gather real world data at all these applications, they're very broad in nature and will allow us to be able to get high fidelity outcome data across multiple robots.
Locations.
That type of data, which would be similar to the C. D. C data, we presented today will be very significant informing.
Our decision of what would be the next development targets following up by thrombotic removal, but.
For now.
You know absolutely laser focus is party and right behind in Star D.
We said it a few times a day I just wanted to emphasize once again, we are not walking away from society.
As a temporary pause based on the strategic considerations and business considerations, we discussed but we are completely committed to start. So we have two trials to execute and then by that time, we're hoping you were having a third one in the works, but for now I would just be trying to get some more data coming out of a registry to inform our next development.
Very helpful. Thanks for taking my question.
Thanks that next.
Next door here from Sean Lee with AC Wainwright.
Good afternoon, and thanks for taking my questions.
I was just wondering.
I think it'd be additional steps are taken to mitigate the effect of the inflationary environment. The pressures on the hospital budgets and also at the U S. You exchange rates since visa headwinds there'll be probably like taking a C. For the next six to 12 months.
Did you want to take that.
Yeah, Thanks to answer the question.
We've been very fortunate that we've been able to keep.
Keep costs down.
Some extent.
Uhm volume ordering especially on the production side.
So that's been helpful. We have seen increases in obtaining and retaining personnel, which we've been dealing.
Dealing with over the last nine months or so and then so I think you know with regards to the euro.
We think that we have a natural heads right because although our say.
Let's go down when the Euro goes down because of the exchange rate differences. We also have substantial expenditures in euros and those go down as well.
So so we we do feel that that that is probably the most effective hedge that we have and other financial instruments that we've looked at are extremely expensive to implement and require projecting cashflow switch at this early stage of our company.
In terms of product sales et cetera, and the difficult market conditions that we have right now we're we're not comfortable really doing that to a large extent.
Mmm I see thanks for the warm additional color.
My second question is on.
Last month.
<unk> declared bankruptcy and they have an agreement to sell their product the pan chassis Mac, which is.
For the mobile technical to another undisclosed.
Large farmer I'm just wondering whether this has any impact on your development timeline.
Oh, Thanks, very much Sean further question, maybe like if you'd like to take that.
Sure.
Yeah. Thanks for the question I alluded to this in our prepared remarks, but this is a very recent development.
<unk> bio.
They filed for bankruptcy.
Probably complicates the prompt.
For them and the cast members.
You know, we don't you've been charged.
Obviously, a direct analog do we believe we approaches are very different.
We.
Continued to strongly believe that when it comes to preventing bleeding a drug removal approach is a <unk>.
Better strategy that drug reversal, which would be a lot of these agents can do obviously, we don't have any data to support that we're basing it on mechanistic.
Approaches that are very different and we believe ours is.
Better and also of course by a real world experience in Europe .
Also so positive.
So in that regard based on the development study that they executed the reverse of trial they were targeting similar patients.
Trying to reverse psychology, I had a surgery to prevent bleed, while we obviously remove the drugs during surgery to reduce bleeding, so little different strategies, but to some extent.
That could be viewed as competitive so.
We think that furthers opens.
Opens up opens up the road for us.
And that's why we mentioned the first mover advantage probation for us.
The class was already filed the obligation of the FDA, So again without commenting too much of what the future looks like for them.
Would you view that also is an important dynamic.
In our favor moving forward.
Yeah Shaun.
Advantages that we have is that our technology can be incorporated during cardiac surgery and property Italy.
The heart lung machine circuit.
Luke drugs during the surgery and it's not limited to one specific drug in fact.
Drugs aren't HCR can remove.
Not just <unk> can remove the <unk>, we have data that I can remove the director I'm gonna inhibitors like Pradaxa. So we believe that this will be a one stop shop for.
Cardio thoracic surgery application to remove these blood thinners because it really doesn't matter what kind of blood thinner. It is provided that it's reversible.
Unlike the the.
A reversal agents the biological reversal agents were are extremely expensive have a very limited shelf life and it's very specific to a particular agent.
We have a shelf life of three years at room temperature.
And our product can be very easily integrated without any transition problems going from the surgery to the ICU or this is just one and done in surgery and it's over.
And it can be implemented very rapidly into the heart languishing. So we think that there's a lot of.
Advantages that we have over that and obviously.
We'll see how things play out for them, but we have always considered ourselves as a a unique solution to this very vexing problem.
I see thanks again for taking my questions.
Thanks very much.
Our final question will come from Josh Jennings with Cowan.
Hi, This is Brian here for Josh. Thank you for taking my questions.
I have two one star T related milestones if I could.
First I I wanted to ask specifically about the filing plan. So assuming you complete enrollment of Star T. Next summer is the plan to immediately make an F. D. A submission based on those results alone or is your plan to make the regulatory filing or I guess filing some.
Sometimes after some time after you complete a star D based on the two trials combined result.
Brian we consider these two very separate events. So one will be to one filing will be for the remote welltech Aguilar and to start <unk> trial will have all the data hopefully that will support that FTA marketing application.
And then start D, which would be for the removal of the Dell acts like Ella questions or Alto.
Would come later after we finish that trial.
And hopefully it will be used as just expand a label for drug store of APR.
Okay that makes sense and then I wanted to ask about the D. S. M. B reviews. So is the first review focus solely on the safety and is it. The second review that provides the opportunity to either re size the trial or concluded early just any details.
You can provide on the objectives of the two reviews would be really helpful and what if anything you intend to communicate to investors about each of the reviews finding so thanks again.
My guess would you like to cover that one.
Sure. Thanks, Okay first of all apologies.
<unk> provide that value my slides spent too much time, explaining but we have you know.
To pre specified actually three pre specified via can be meaningful trial. The first one is at 33 per cent of enrollment that's the one that's coming next.
Very close to and this will focus on safety.
Once we randomize.
The 48 patients in the study.
Then we will require the less same time to complete the study follow up which is about 30 days during that time clean the data convene the meeting had the meeting provide us back with a recommendation.
And then execute this study so.
Continue executing the study hopefully, but they have the <unk>.
Land for communications that first of all you will hear when when we hit the 40 patients and then the next.
A milestone would be when the assembly action can wounds holds its safety review and reports back with their findings.
The second one with his pre specified again two thirds enrollment after 80 patients are enrolled.
Buying safety.
To review again.
Upstate, but also a dedicated interim analysis.
That review the same group that the assembly will actually look at the efficacy.
The trial has after 80 patients by reviewing unblinded adjudicated data. So the execution of that Lady who is going to be operational overall complex, but the intent is that they they are able to take a look because if the efficacy is already established based on pre specified statistical boundaries.
Then the <unk> has the option to recommend that we stopped early for efficacy.
At the same time of course, they will leave you safety again.
So that's the second milestone that's when we hit 80 patients.
And then according to Windows reports come in from the <unk>, We'll we'll see where we will be in the trial would like be close to the finish line anyway. So we'll make that determination dead. So to summarize after 40 patients just safety.
After 80 patient safety and a former interim analysis and then the final of the Assembly review that would take place at what level of completing trial to give me a formal final review of the safety.
I hope that helps.
Yes, that's very clear thank you.
Yep.
And at this time I would like to turn it back to management for any additional closing remarks.
Thank you everyone for joining the call today, if you do have any other questions. Please feel free to reach out to Michelle M. K at M. Elmont, K a L. M O N T E at sight of service 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 everyone and connect.
[laughter]. Thank you that concludes our conference for today I'd like to thank everyone for their participation.
[music].