Q3 2023 Cerus Corp Earnings Call

November 2, 2023

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Good day and thank you for standing by welcome to Sirius Corporation Second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one.

On your telephone you will hear a message of dicing. Your hand this race to withdraw the question simply press Star one again please.

Please be advised that today's conference is being recorded I would now.

Like to turn the call over to Jessica Hanover, Vice President of corporate Affairs.

Thank you and good afternoon.

I'd like to thank everyone for joining us today as part of today's webcast. We are simultaneously displaying slides that you can follow you can access the slides from the Investor Relations website at IR Dot Cirrus dotcom.

With me on the call are Obi Greenman, Cerus, President and Chief Executive Officer, the victory of Ramen Cirrhosis, Chief operating officer, and Kevin Green terraces, Chief Financial Officer.

Cerus issued a press release today announcing our financial results for the third quarter ended September 32023, and describing the company's recent business highlights you can access a copy of this announcement on the company website at Www Dot Dot com.

I'd like to remind you that some of the statements we will make on this call related to future events and performance rather than historical facts and are forward looking statements.

Samples are forward looking statements include those related to our future financial and operating results, including our updated 2023 product revenue guidance, our Q4, adjusted EBITDA commitment and our expected expense inventory and margin profile expected future growth and our growth trajectory.

<unk> future product sale, the availability and related timing of data from clinical trials and other statements that are not historical facts.

These forward looking statements involve risks and uncertainties that could cause actual events performance and results to differ materially. They are identified and described in today's press release and under risk factors in our Form 10-Q for the quarter ended September 32023, which we will file shortly we undertake no.

Duty or obligation to update our forward looking statements.

On today's call. We will also be discussing non-GAAP financial measures, including non-GAAP adjusted EBITDA.

These non-GAAP measures should be considered a supplement to and not a replacement for measures presented in accordance with GAAP for a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. Please refer to today's press release.

We'll begin today with opening remarks from Obi, followed by Vivek to discuss recent business highlights.

Kevin to review, our financial results and expectations for the rest of 2023 and Ob with closing remarks.

And now it's my pleasure to introduce Obi Greenman, Cerus, President and Chief Executive Officer.

Thank you Jessica and good afternoon, everyone.

I'd like to provide some commentary about the progress we are continuing to make this year both on the commercial front and in the pipeline.

During the third quarter, we reached and surpassed the $15 million Mark for sales of usable doses for intercept kits since our initial launch of the system I am very proud of this important milestone, particularly with respect to the global patient impact this figure represents.

Thousands of patients in countries around the world that receive intercept treated components every day.

Accordingly, as we cross was $15 million in chip sales milestone. We are also approaching the milestone of adjusted EBITDA breakeven in this quarter, even as we invest in the geographic expansion of our business and our R&D pipeline to sustain our growth long term.

Indeed, we are pleased to report that our top line performance stabilized in Q3, returning to the levels of Q3, 2022 and showing growth from the prior quarter.

We expect to see our growth trajectory accelerates into the double digits as we exit 2023 and move into 2024.

Three weeks ago, I, and many colleagues and customers attended our industry's top conference. The ABB annual meeting in Nashville. The first time. It has been held in person since 2019, and notably since the FDA guidance for bacterial safety went into effect now two years ago.

I was particularly struck by the pervasive and positive sentiment around pathogen reduction.

The intercept blood system for platelets has clearly been established as an essential tool for safeguarding the blood supply here in the U S.

Meeting sessions covering IFC were also well attended with standing room, only audiences and overall awareness and interest in the product was very high.

The Sunday morning, all session scheduled by ABB meeting organizers transfusion medicine leaders from both equally southwestern and Stanford medical centers highlighted the realized benefits of IFC adoption in their practice and.

In particular.

<unk> enabled streamlined operations significantly reduce wastage and much faster availability for patient transfusion.

These centers are staffed with time from physician order to delivery since the implementation of IFC.

Demonstrated marked improvements in the range of 50% to 70%.

Moreover, what intercept platelets before IFC now allows hospital transfusion services to strengthen their collaboration with their hospital conditions to improve patient care.

Historically the hospital blood Bank May have had to say no given the challenges of providing conventional cryo now they can say, yes to a demanding physicians with <unk> patients, particularly when every minute counts.

Given growing interest in partnerships with blood centers for IFC. We continue to believe this product and it's compelling value proposition will be meaningful to our growth trajectory.

Moving on to our pipeline and in particular, the intercept red blood cell RBC program.

Q3 as planned we completed enrollment in the BARDA funded phase III recipe trial in cardiovascular surgery patients.

321 patients were transfused are evaluable in the study.

We continue to anticipate database lock and the initial top line data readout from this trial in Q1 of 2024 are.

Our second phase III trial readiness continues to enroll as expected as well recently.

Recently, the study's data safety monitoring board or <unk> met and express no safety concerns regarding the study to date and recommended continued enrollment.

The study's enrollment is now focused on the collect transfusion patient population encompassing sickle cell is all senior patients. In addition to oncology patients with anemia.

The most recent investigators meeting for the <unk> study held prior to the ABB annual meeting there.

There was an enthusiasm for completing this last phase of the study in a timely way, which is now possible with the full support of the program by BARDA.

I would like now to turn the call over to Greg to discuss the third quarter commercial highlights and the outlook for the remainder of the year.

Thank you Obi and good afternoon, everyone.

And there'll be mentioned, we posted a sequential uptick in total product revenue for the third quarter of 2023, returning to the levels of Q3 2022.

On a global basis, we saw our platelet franchise stabilize that in third quarter and are now witnessing a return to growth as we move through the fourth quarter and towards the year end.

While some headwinds persist I am encouraged by the momentum we see with our global sales team and their continued engagement with our blood Center and hospital customers with a focus on ensuring that patients gain access to the state this blood components as possible.

With respect to the recently completed third quarter, we experienced a strong bounce back in our U S. Platelet franchise inventory levels across our key U S customers have stabilized and we're seeing a small upward trend in platelet utilization.

As we work to resolve product, adding issues, we are seeing a return to more consistent ordering patterns, our deployment customer care and supply chain organizations continue to work closely with the operations groups and our blood Center partners to ensure that hospitals remain well serviced and that ultimately pathogen reduced platelets are getting to patients in need.

As Obi noted the prevailing sentiment around pathogen reduced platelets at the recent ABB meeting was quite positive and intercepts leadership position in platelet safety in the U S continues to gain strength with each passing quarter.

Outside of the U S. We have seen platelet volumes in France, and Belgium stabilized consistent with the first half of the year recall that these markets are 100% intercept countries and we continue to receive their high praise for the quality and efficacy of our technology.

We are seeing good growth in new regions, such as the Middle East and Canada geopolitical concerns and the middle East and Eastern Europe do pose a bit of a watch out but we are working closely with our distributor partners and blood center customers to ensure we can effectively meet their needs.

We are particularly encouraged by our continued momentum in Canada Canadian Blood services. Our CBS has continued to make strong progress in the rollout of intercept platelets with vessel deployment of intercepted Cbs's Vancouver site in September over 40% of Cbs's platelet Theyre now intercept treated we expect that by the end of this year.

This number will have grown such that the majority of platelets transfused in Canada will be patch and reduced with the intercept blood system.

We remain on track for completion of the Cvs rollout in the first half of next year. Additionally, the ongoing validation of intercept platelets by Hema, Quebec, representing a quarter of the Canadian market and the only other blood provider outside of Cvs and the country continues to advance.

We are proud of the partnerships we have built in Canada that are enabling patient access to pathogen reduced platelets.

Turning to our U S. IFC franchise, we are starting to realize the benefit are fully staffed and trained hospital sales organization we've.

We've seen a significant step up in in person hospital sales call peer to peer networking events and engagement and clinical conferences, including the recently completed society for the advancement of patient blood management for staff and the trauma Anesthesiology Society or task on meeting.

Clinician interest and enthusiasm for IFC as high and anecdotal experiences from early adopters like Stanford and Murray and Ohio State are resonating across the country. Furthermore, we deepened and expanded our IFC partnerships with large blood center customers during the quarter and are beginning the process of training their sales team.

In order to expand hospital outreach and access.

As we move further into the fourth quarter and approach year end the momentum behind the U S. IFC business is palpable and growing.

I will now turn it over to Kevin to discuss our results and outlook in more detail.

Thank you Vivek and good afternoon to everyone listening.

On today's call I'll be discussing our financial results for the third quarter as well as our product revenue guidance for these days.

I'm also going to spend some time discussing our unwavering commitment to achieving adjusted EBITDA breakeven in Q4 of this year and we'll lay out the detailed success factors that will drive our expected achievement of that goal.

I'll start with our topline revenue results.

We posted third quarter 2023 product revenue of $39 $8 million.

With a return to the historical levels posted during the third quarter of 2022.

And up 2% sequentially from Q2.

In the U S product revenues were down 6% year over year.

Sequentially, we saw 3% growth from Q2.

In EMEA product revenues were up 4% year over year and around 1% compared to the second quarter of this year.

Year over year FX rates provided a benefit for the EMEA business of around 800 basis points.

In addition to our product revenue and not included in our guidance government contract revenue was up 10% and totaled $7 5 million in Q3 compared to $6 8 million for the prior year period.

Included in our government contract revenue are the revenues recognized as reimbursement under our contract with BARDA.

Our agreement with the FDA to further whole blood pathogen reduction.

And our milestone based agreement with the U S Department of defense for Bio IFC.

Let's now turn to our product gross profit and gross margins.

Our third quarter product gross profit was $21 8 billion.

Consistent with the prior year period.

Product gross margins for the quarter were 50, 490%.

Fairly stable when compared to the prior year and Q2, especially when considering the impact of FX rates.

We expect the remainder of the year to be reasonably consistent with current margin levels.

Moving on our third quarter operating expenses, which totaled $34 5 billion.

For $1 $6 million lower than the prior year period.

Q3, 2023 operating expenses included $4 million and noncash stock based compensation.

By specific expense type third quarter, R&D expense totaled $16 8 million compared.

Compared to $16 $2 million during the prior year period.

During the quarter, we saw increased R&D activity associated with our next generation of illuminator, along with increases in our BARDA agreement for intercept treated red blood cells.

Third quarter SG&A expense was $16 2 million compared.

Compared to $19 9 million during the prior year period.

The decrease in SG&A expense was tied to our June restructuring and decreased non cash stock based compensation.

Also included in our operating expenses for the third quarter was a restructuring charge of $1 $6 million related to office leases.

As you can see from our operating expense declines the impact of our June restructuring starting to be realized.

On the bottom line reported net loss attributable to <unk> for the three months ended September 32023 improved when compared to the same period in the prior year.

Net loss attributable to <unk> for Q3 totaled $7 3 million or <unk> <unk> per diluted share compared to $8 5 million or <unk> <unk> per diluted share for the prior year period.

Despite the incremental $1 6 million recorded as an adjustment to our restructuring our reduced operating expenses were the largest factor for the improved bottom line.

Moving onto our adjusted EBITDA metric.

Third quarter non-GAAP, adjusted EBITDA improved by 64% to a negative $1 million compared.

Compared to a negative $2 $7 million during the third quarter of 2022, and a negative $4 $7 million during the second quarter of this year.

On the balance sheet and associated cash flows we ended the third quarter with a strong cash position of $79 million of cash cash equivalents and short term investments on the balance sheet.

In terms of cash utilization or cash used from operations was $10 5 million for the third quarter.

<unk> to $2 $1 billion during the prior year period.

We expect cash used from operations to narrow significantly as we move ahead.

While we implemented a number of measures in Q3 aimed at right sizing our inventory levels over time, we continued to see an increase of inventory during the third quarter.

We expect the measures implemented to take effect during the fourth quarter and well into 2024.

Allowing us to sell down that inventory levels and generate cash inflows.

As we announced earlier today, we are adjusting our full year 2023 product revenue guidance to a range of $155 million to $158 million.

This is primarily due to the delayed execution of the downside national IFC sales agreement.

That said this new guidance range implies a strong sequential performance for the business in Q4 of this year aligned with our expectations for growth.

Throughout the year, we've been steadfast in our pursuit of reaching adjusted EBITDA breakeven this year.

Before turning the call back over to Obi for closing remarks, I'd like to walk you through the detailed factors that we expect will allow us to realize this goal for Q4.

First as we've been foreshadowing over the past several quarters and consistent with our guidance, we expect to see significant growth on the top line during the fourth quarter.

Second our margin profile has remained stable despite a rise in USD euro rates, which most of our cost of products sold as nominated from.

And we expect margins will remain relatively stable in Q4.

Finally, as we saw during the third quarter, we expect our operating expenses will continue to come down as we realize the full effect of our restructuring efforts.

The combination of these factors provides us with a strong confidence in the expected success of reaching adjusted EBITDA breakeven in Q4 and laying a foundation for continued financial improvement.

With that I'd now like to turn the call back over to Obi for closing remarks.

Thank you Kevin while 2023 has been a challenging year, we remain confident in both the near term growth trajectory and the longer term prospects for <unk>.

During the third quarter, we started to see a return to topline growth, which continues as we move through the fourth quarter.

We made strong progress on key pipeline activities, which bodes well for future technology adoption.

Finally from a bottomline perspective, thanks to the entire team's focus we are poised to hit our goal of adjusted EBITDA breakeven in the fourth quarter of this year.

The <unk> team has proven quite resilient in the face many challenges and I appreciate everyones unwavering focus on our mission to help safeguard the global blood supply. Thank.

Thank you for your continued interest in <unk> I will now turn the call over to the operator for questions.

Thank you.

We will now open the line for questions and as a reminder to ask a question press Star one one.

Standby.

I call your name.

One moment. Please that is star one one if you have a question.

Okay.

And our first question is from the line of Matt Blackman with Stifel. Please proceed.

Hi, This is Emily on for Matt.

And just on the Red blood cells in Europe, I'm wondering if we're still on track there for second half 'twenty for CE, Mark and if so just how do we think through the adoption curve for that product in.

Particular places where you have strong presence now in France, and Belgium, what does the demand look like there.

Thanks, a lot Emily for the question. So we as we discussed on our last call we're planning to respond to the <unk>.

Questions, which is our competent authority competent authority and the <unk>.

<unk> and.

Q4 of this year and then we are still on track.

For a possible approval in the second half of next year.

As it relates to demand, we've actually done a number of.

Interviews with various customers who are currently using the intercept platelet system and there is strong interest from our existing customers.

Particularly on a focus on replacing gamma radiation of red cells, which leads to shorten shelf life of red cells.

Two weeks compared to a normal 42 day shelf life for Red cells.

So we're looking to rollout that product then post approval initially in the context of the Hema Vigilance study that's being required by <unk>.

Notified body in Europe.

And then ultimately to a broader rollout.

Across multiple countries.

Just to remind you there are going to be some in country approvals required in countries like France, Germany and Switzerland.

Mark will allow us to commercialize elsewhere without additional regulatory approvals.

Great. Thanks, and just one more if I could.

Platelet rollout in other geographies I'm wondering if there's any update on Germany and kind of how far along you are there and then the longer term prospects, China, South Korea et cetera.

Yes. Thanks for that question. So obviously, Germany has been a long story.

They are very influenced by what's happening around them.

Pacifically in the dock region.

You've got Austria, now, which is almost at a 100% intercept platelets, Switzerland.

Obviously, France and so we are.

Annually filing MAA is in partnership with our Blood Center partners in Germany, and those are getting approved.

We're still working through sort of the reimbursement slash value justification at the hospital level.

But we are optimistic about 2024, and 2025 and beyond just given the overall.

Use of intercept platelets across Europe.

Beyond Germany.

Obviously, a big focus of ours is the.

The approval process in China.

And NPA submission and review is still underway nothing has really changed from the previous quarter comments on that but we are on track for what we.

We expected out of that process.

And then obviously a number of different opportunities around the globe that we'll comment on when we have.

Something more to say.

Great. Thank you.

Thanks Amy.

Thank you and again if you do have a question simply press star one to get into Q1.

One moment for our next question.

And he is from the line of Jacob Johnson with Stephens. Please proceed.

Good afternoon. This is Mac onto Jacob.

Just quickly I appreciate the directional commentary on <unk> in 2024.

And understanding it's too soon to guide here.

But how much of a headwind will inventory management be in 2023.

And just just trying to thinking about this from a comp perspective, if these revenues return next year.

Yes, thanks for the question.

Don't know if you think would you like to try and address that just I think the questions relates to the current shelf life of the kits and sort of our progress and working through that with our customers.

Sure I'd be happy to in terms of shelf life, serving as a headwind through 2024 and as we indicated previously we believe most of those issues are now behind us and that platelet levels are stabilizing book from a collections perspective, but also from an inventory management perspective.

And our blood center customers. So we don't anticipate that being a headwind as we enter into 2024 and <unk>.

We will continue to work to <unk>.

Increased shelf life on a going forward basis, as we get real time data so.

As we look towards.

To finish it this quarter and the beginning of next calendar year, we anticipate that those headwinds through the royalty relief at this point.

Thank you.

And just quickly it sounds like you're making good progress on IFC as well with the commercial strategy in place how should we think about the uptake of that product in the coming years and what we're doing.

One of the key milestones you are keeping an island.

Yes. Thanks again for that question Victor I think thats up here as well so I'm not sure yes happy to address that one of the key milestones was getting under contract that the large blood centers here in the U S. We're currently under contract for ISC with Blood center that represent roughly 60% of the craft precipitate market in the U S.

The key thing now is just continuing to.

Translate clinician level demand into committed hospital interest and having the ability for those hospitals to receive product from their blood supply. Their current supplier is a huge enabler in that regard. So we feel pretty enthusiastic about that business given the combination of these key contracts at a nominal executed fully.

Staffed and trained hospital Salesforce, that's getting in and having a number of meetings with clinicians and directly with hospitals and then the continued sort of clinical uptake in peer to peer marketing opportunities. We see as we bring more hospitals on board in terms of IFC users. So on balance the combination of all those factors leads us to be very.

Optimistic about this business heading into next calendar year.

Thanks for taking my questions.

Thank you and as a reminder, if you do have a question simply press star one one to get into queue.

I don't see any further questions in queue I would like to turn the call over to Obi Greenman for Clos.

Closing comments.

Well. Thank you again for joining us today and for your interest in Cerus, we look forward to updating you on our continued progress this year and next thanks very much.

And with everything you for participating in today's conference you may now disconnect.

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Good day and thank you for standing by welcome to <unk> Corporation second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one one.

Your telephone Youll hear a message advising your hand this waste.

To withdraw your question simply press Star one again please.

Please be advised that today's conference is being recorded I would now like to turn the call over to Jessica Hanover, Vice President of corporate Affairs.

Thank you and good afternoon.

Like to thank everyone for joining us today as part of today's webcast. We are simultaneously displaying slides that you can follow you can access the slides from the Investor Relations website at IR Dot Crs Dot com.

With me on the call are Obi Greenman, Cerus, President and Chief Executive Officer, Victor You Raman Crs's, Chief operating officer, and Kevin Green terraces, Chief Financial Officer.

I would like to remind you that some of the statements. We will make on this call related to future events and performance rather than historical facts and are forward looking statements.

<unk> forward looking statements include those related to our future financial and operating results, including our updated 2023 product revenue guidance, our Q4, adjusted EBITDA commitment and our expected expense inventory and margin profile.

Expected future growth and our growth trajectory.

<unk> future product sale, the availability and related timing of data from clinical trials and other statements that are not historical facts.

Duty or obligation to update our forward looking statements.

On today's call. We will also be discussing non-GAAP financial measures, including non-GAAP adjusted EBITDA.

We'll begin today with opening remarks from Obi followed by the bank to discuss recent business highlights.

Kevin to review, our financial results and expectations for the rest of 2023, and Ob with closing remarks and <unk>.

Now, it's my pleasure to introduce Obi Greenman, <unk>, President and Chief Executive Officer.

Thank you Jessica and good afternoon, everyone.

I would like to provide some commentary about the progress we are continuing to make this year both on the commercial front and in the pipeline.

During the third quarter, we reached and surpassed the $15 million Mark for sales of <unk> doses for intercept kits since our initial launch of the system I am very proud of this important milestone, particularly with respect to the global patient impact this figure represents.

Thousands of patients in countries around the world that receive intercept treated components everyday <unk>.

Importantly, as we cross was $15 million in kit sales milestone. We are also approaching the milestone of adjusted EBITDA breakeven in this quarter, even as we invest in the geographic expansion of our business.

Our R&D pipeline to sustain our growth long term.

Indeed, we are pleased to report that our topline performance stabilized in Q3, returning to the levels of Q3, 2022 and showing growth from the prior quarter.

We expect to see our growth trajectory accelerates into the double digits as we exit 2023 and move into 2024.

I was particularly struck by the pervasive and positive sentiment around pathogen reduction.

Blood system for platelets has clearly been established as an essential tool for safeguarding the blood supply here in the U S.

Meeting sessions covering IFC were also well attended with standing room, only audiences and overall awareness and interest in the product was very high.

The Sunday morning, oral session scheduled by ABB meeting organizers transfusion medicine leaders from both ETE southwestern and Stanford medical centers highlighted the realized benefits of IFC adoption in their practice.

In particular, ISC enabled streamline operations significantly reduce wastage and much faster availability for patient transfusion <unk>.

These centers have assessed the time from physician order to delivery since the implementation of IFC.

Demonstrated marked improvements in the range of 50% to 70%.

Moreover, like intercept platelets before IFC now allows hospital transfusion services to strengthen their collaboration with their hospital clinicians to improve patient care.

Given growing interest in partnerships with blood centers for IFC. We continue to believe this product and it's compelling value proposition will be meaningful to our growth trajectory.

Moving onto our pipeline and in particular, the intercept red blood cell RBC program in Q3 as planned we completed enrollment in the BARDA funded phase III recipe trial in cardiovascular surgery patients.

321 patients were transfused and are Evaluable in the study.

We continue to anticipate database lock and the initial top line data readout from this trial in Q1 of 2024 are.

Our second phase III trial readiness continues to enroll as expected as well recently.

Recently, the study's data safety monitoring board or <unk> met and express no safety concerns regarding the study to date and recommended continued enrollment.

The study's enrollment is now focused on the call that transfusion patient population encompassing sickle cell and thalassemia patients. In addition to oncology patients with anemia.

The most recent investigators meeting for the <unk> study held prior to the ABB annual meeting there.

There was an enthusiasm for completing this last phase of the study in a timely way, which is now possible with the full support of the program by BARDA.

I would like now to turn the call over to Blake to discuss the third quarter commercial highlights and the outlook for the remainder of the year.

Thank you Obi and good afternoon, everyone and there'll be mentioned, we posted a sequential uptick in total product revenue for the third quarter of 2023, returning to the levels of Q3 2022.

On a global basis, we saw our platelet franchise stabilize that in third quarter and are now witnessing a return to growth as we move through the fourth quarter and towards the year end.

With respect to the recently completed third quarter, we experienced a strong bounce back in our U S. Platelet franchise inventory levels across our key U S customers have stabilized and we are seeing a small upward trend in platelet utilization.

As we work to resolve product, adding issues, we are seeing a return to more consistent ordering pattern, our deployment customer care and supply chain organizations continue to work closely with the operations groups at our blood Center partners to ensure that hospitals remain well serviced and that ultimately pathogen reduced platelets are getting to patients in need.

We are seeing good growth in new regions, such as the Middle East and Canada geopolitical concerns and the middle East and Eastern Europe, <unk> is a bit of a watch out but we are working closely with our distributor partners and blood center customers to ensure we can effectively meet their needs.

We are particularly encouraged by our continued momentum in Canada Canadian Blood services. Our CBS has continued to make strong progress in the rollout of intercept platelets with the successful deployment of intersected Cbs's Vancouver site in September over 40% of Cbs's platelet Theyre now intercept treated we expect that by the end of this year.

This number will have grown such that the majority of platelets transfused in Canada will be patch and reduced with the intercept blood system.

We are proud of the partnerships we have built in Canada that are enabling patient access to pathogen reduced platelets.

Turning to our U S. IFC franchise, we are starting to realize the benefit are fully staffed and trained hospital sales organization we've.

Clinician interest and enthusiasm for ISC is high and anecdotal experiences from early adopters like Stanford Emory and Ohio State are resonating across the country. Furthermore, we deepened and expanded our IFC partnerships with large blood center customers during the quarter and are beginning the process of training their sales team.

<unk> in order to expand hospital outreach and access.

As we move further into the fourth quarter and approach here and the momentum behind the U S. IFC business is palpable and growing.

I will now turn it over to Kevin to discuss our results and outlook in more detail.

Thank you Vivek and good afternoon to everyone listening.

On today's call I'll be discussing our financial results for the third quarter as well as our product revenue guidance for these days.

I'm also going to spend some time discussing our unwavering commitment to achieving adjusted EBITDA breakeven in Q4 of this year and we will lay out the detailed success factors that will drive our expected achievement of that goal.

I'll start with our top line revenue results.

We posted third quarter 2023 product revenue of $39 8 million.

With a return to the historical levels posted during the third quarter of 2022.

Up 2% sequentially from Q2.

In the U S product revenues were down 6% year over year, but sequentially, we saw 3% growth from Q2.

In EMEA product revenues were up 4% year over year and around 1% compared to the second quarter of this year.

Year over year FX rates provided a benefit for the EMEA business of around 800 basis points.

In addition to our product revenue and not included in our guidance government contract revenue was up 10%.

<unk> totaled $7 5 million in Q3 compared to $6 8 million for the prior year period.

Included in our government contract revenue are the revenues recognized as reimbursement under our contract with BARDA.

Our agreement with the FDA to further whole blood pathogen reduction and are milestone based agreement with the U S Department of defense for bio IFC.

Let's now turn to our product gross profit and gross margins.

Our third quarter product gross profit was $21 8 million consistent with the prior year period.

Product gross margins for the quarter were 54, 9%.

Fairly stable when compared to the prior year and Q2, especially when considering the impact of FX rates.

We expect the remainder of the year to be reasonably consistent with current margin levels.

Moving on our third quarter operating expenses, which totaled $34 5 billion.

For $1 $6 million lower than the prior year period.

Q3, 2023 operating expenses included $4 million and noncash stock based compensation.

Hi specific expense type third quarter, R&D expense totaled $16 8 million compared to $16 $2 million during the prior year period.

During the quarter, we saw increased R&D activity associated with our next generation of illuminator.

Along with increases in our BARDA agreement for intercept treated red blood cells.

Third quarter SG&A expense was $16 2 million compared.

Compared to $19 9 million during the prior year period.

The decrease in SG&A expense was tied to our June restructuring and decreased non cash stock based compensation.

Also included in our operating expenses for the third quarter was a restructuring charge of $1 6 million related to office leases.

As you can see from our operating expense declines the impact of our June restructuring just started to be realized.

On the bottom line reported net loss attributable to <unk> for the three months ended September 32023 improved when compared to the same period in the prior year.

Net loss attributable to <unk> for Q3 totaled $7 3 million or <unk> <unk> per diluted share compared to $8 5 million or <unk> <unk> per diluted share for the prior year period.

Despite the incremental $1 6 million recorded as an adjustment to our restructuring our reduced operating expenses were the largest factor for the improved bottom line.

Moving onto our adjusted EBITDA metric.

Third quarter non-GAAP, adjusted EBITDA improved by 64% to a negative $1 million compared to.

A negative $2 $7 billion during the third quarter of 2022, and a negative $4 $7 million during the second quarter of this year.

On the balance sheet and associated cash flows we ended the third quarter with a strong cash position of $79 million of cash cash equivalents and short term investments on the balance sheet.

In terms of cash utilization or cash used from operations was $10 5 million for the third quarter compared to $2 $1 billion during the prior year period.