Q4 2023 Cerus Corporation Earnings Call

March 5, 2024

Mode.

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I would now like to hand, the conference over to Jessica Hanover, Cirrus, Vice President of corporate Affairs.

Dr. Hanover, you may begin.

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 theorists dot com.

Good day, ladies and gentlemen, thank you for standing by and welcome to the Cirrus Corporation fourth quarter and full year 2023 earnings conference call.

With me on the call are Obi Greenman, Cerus, President and Chief Executive Officer Jay.

At this time all parties participants are in a listen only mode.

<unk> Raman cirrhosis, Chief operating officer, Kevin Green, <unk>, Chief Financial Officer, and Carol Moore, Cirrhosis, Senior Vice President of regulatory affairs and quality.

After the speaker's presentation, there will be a question and answer session.

I ask a question during the session you will need to press star one one on your telephone.

We'll then hear an automated message advising your hand is raised.

Cerus issued a press release today announcing our financial results for the fourth quarter and year ended December 31, 2023, and describing the company's recent business highlights you can access a copy of this announcement on the company website at Www Dot <unk> Dot com.

To withdraw your question. Please press star one one again.

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

I would now like to hand, the conference over to Jessica Hanover, Cirrus, Vice President of corporate Affairs Dr.

Jessica Hanover: Dr. Hanover, you may begin.

Jessica Hanover: 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 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.

Examples of forward looking statements include those related to our future financial and operating results, including our 2020 for product revenue guidance, our expectations for Bottomline and non-GAAP adjusted EBITDA performance and our expected expense levels expected future growth and our growth trajectory the availability and <unk>.

Jessica Hanover: With me on the call are Obi, Greenman, Cerus, President and Chief Executive Officer J.

Speaker Change: <unk> Raman cirrhosis, Chief operating officer, Kevin Green, <unk>, Chief Financial Officer, and Carol Moore, Cirrus as senior Vice President of regulatory affairs and quality.

<unk> timing of data from clinical trials and other statements that are not historical facts.

Speaker Change: Cerus issued a press release today announcing our financial results for the fourth quarter and year ended December 31, 2023, and describing the company's recent business highlights you can access a copy of this announcement on the company website at Www Dot <unk> Dot com.

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 our slide presentation and under risk factors in our Form 10-K for the year ended December 31, 2023, which we will file shortly.

Speaker Change: 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.

We undertake no duty or obligation to update our forward looking statements.

Speaker Change: Examples of forward looking statements include those related to our future financial and operating results, including our 2020 for product revenue guidance, our expectations for Bottomline and non-GAAP adjusted EBITDA performance and our expected expense levels expected future growth and our growth trajectory the availability.

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 and the slide presentation available on our website.

<unk> and related timing of data from clinical trials and other statements that are not historical fact.

Speaker Change: These forward looking statements involve risks and uncertainties that could cause actual events performance and results to differ materially.

We'll begin today with opening remarks from Obi followed by Vivek to discuss recent business highlights then Kevin to review, our financial results and expectations for the rest of 2024, and lastly closing remarks from Obi.

Speaker Change: They are identified and described in today's press release, and our slide presentation and under risk factors in our Form 10-K for the year ended December 31, 2023, which we will file shortly.

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

Speaker Change: We undertake no duty or obligation to update our forward looking statements.

Thank you Jessica and good afternoon, everyone I'd like to open the call by saying a few minutes, reflecting on 2023 as well as our expectations for 2024.

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

Speaker Change: non-GAAP measures should be considered a supplement to and not a replacement for measures presented in accordance with GAAP.

During the fourth quarter of 2023, we surpassed 16 billion more for cumulative chips sold for transfused will intercept platelet and plasma doses.

Speaker Change: For a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. Please refer to today's press release and the slide presentation available on our website.

This is a significant figure, particularly with respect to the absolute number of patients who received understood treated blood components on a daily basis across the globe.

Speaker Change: We will begin today with opening remarks from Obi followed by Vivek to discuss recent business highlights then Kevin to review, our financial results and expectations for the rest of 2024, and lastly closing remarks from Obi.

It also represents the ever growing and significant role played by our pathogen inactivation technology in the evolving healthcare landscape.

The importance of irrelevance of pathogen inactivation. We're also visible during a special webinar in January of this year hosted by Yale University, The American Red Cross and the association for the advancement of blood and bio therapies for ABB.

Speaker Change: And now it's my pleasure to introduce Obi Greenman, <unk>, President and Chief Executive Officer.

William M. Greenman: Thank you Jessica and good afternoon, everyone I'd like to open the call by saying a few minutes, reflecting on 2023 as well as our expectations for 2024.

The event was focused on addressing and security.

With speakers from blood centers, such as the American Red Cross and Canadian blood services as well as from hospitals, the military and government organizations.

William M. Greenman: During the fourth quarter of 2023, we surpassed the 16 million Mark for cumulative chips sold portraits usable intercept platelet and plasma doses.

In addition to the recognition of the growing demand for platelets in the face of blood supply vulnerabilities.

It is a significant figure, particularly with respect to the absolute number of patients who receive intercept treated blood components on a daily basis across the globe.

It is also clear that pathogen inactivation has become a foundational aspect of today's transfusion medicine landscape.

William M. Greenman: And it also represents the ever growing and significant role played by our pathogen inactivation technology in the evolving healthcare landscape.

It is this dynamic that drives our excitement about the continued potential for the intercept business.

Both in the U S and across the globe.

William M. Greenman: The importance of relevance of pathogen inactivation. We're also visible during a special webinar in January of this year hosted by Yale University, The American Red Cross and the association for the advancement of blood and buyout therapies for ABB.

We anticipate the near future that would be driven by both international expansion of intercept platelets as well as an increasing growth trajectory for intercept fibrinogen and complex or IFC and the U S.

<unk> will provide additional commentary on our commercial expectations. Following my introductory comments.

William M. Greenman: The event was focused on addressing player in security.

William M. Greenman: With speakers from blood centers, such as the American Red Cross.

We ended 2023 on several high notes posting double digit sequential growth for the fourth quarter.

William M. Greenman: In Canadian blood services, as well as from hospitals, the military and government organizations.

Narrowing GAAP net loss attributable to Sirius.

William M. Greenman: In addition to the recognition of the growing demand for platelets in the face of blood supply vulnerabilities.

And importantly, delivering positive non-GAAP adjusted EBITDA for the first time.

William M. Greenman: It is also clear that pathogen and activation has become a foundational aspect of today's transfusion medicine landscape.

For our 2020 for product revenue guidance announcement earlier this year, we expect to post year over year double digit growth along with sustaining if not improving bottom line results.

William M. Greenman: It is this dynamic that drives our excitement about the continued potential for the intercept business.

Kevin will provide more details in his comments following <unk>.

William M. Greenman: Both in the U S and across the globe.

I would now like to turn the call over to <unk> to discuss our commercial results and progress for the fourth quarter and full year 2023, along with color on the outlook for 2024.

William M. Greenman: Anticipate the near future to be driven by both international expansion of intercept platelets as.

William M. Greenman: As well as an increasing growth trajectory for intercept by bridging complex or IFC and the U S.

Thank you Obi and good afternoon, everyone.

William M. Greenman: Vivek will provide additional commentary on our commercial expectations. Following my introductory comments.

There'll be indicated we delivered strong sequential and year over year growth in the fourth quarter of 2023. This growth was driven by our platelet franchise globally as well as encouraging progress within our U S IFC business.

We ended 2023 on several high notes posting double digit sequential growth for the fourth quarter.

Inventory levels at most of our Blood Center partners stabilized, we witnessed a return to more typical ordering manufacturing and reordering patterns. Furthermore, we saw growth in both existing accounts as well as a meaningful step up in new account activation, notably in our IFC business.

William M. Greenman: Narrowing GAAP net loss attributable to <unk> and.

Vivek: And importantly, delivering positive non-GAAP adjusted EBITDA for the first time.

Vivek: For our 2020 for product revenue guidance announcement earlier this year, we expect to post year over year double digit growth along with sustaining if not improving bottom line results.

<unk> franchise delivered strong growth across the globe in the U S. We believe that most of our customers are properly adjusted their intercept inventory in light of product gating issues and are now ordering at Morgan system rates.

Vivek: Kevin will provide more details in his comments volumes VIX.

Kevin D. Green: I would now like to turn the call over to the bank to discuss our commercial results and progress for the fourth quarter and full year 2023, along with color on the outlook for 2024.

As we make progress on a real time aging studies.

I am confident in our ability to extend platelet kit shelf life. While we are not currently assuming material uplift in revenue associated with increased stating we do believe this will likely lead to more comfort at the blood center to hold inventory.

Thank you Obi and good afternoon, everyone.

Kevin D. Green: There'll be indicated we delivered strong sequential and year over year growth in the fourth quarter of 2023.

We continue to see positive traction at our blood center customers and believe intercept remains the leading technology for platelet safety in the U S. Our early experience in 2024 suggests that our U S. Platelet franchise is poised for solid growth this calendar year.

Speaker Change: This growth was driven by our platelet franchise globally as well as encouraging progress within our U S. ISP business with inventory levels at most of our blood Center partners stabilized we witnessed a return to more typical ordering manufacturing and reordering patterns. Furthermore, we saw growth in both existing accounts as well as a meaningful step up in new account activation.

Internationally Canadian blood services CBS is closing in on completing its relative NSF places across its entire production operation in the fourth quarter Cvs completed its implementation of intercept for whole blood derived platelets, which included its largest site in brompton and the greater Toronto area.

Notably in our IFC business.

Speaker Change: Our platelet franchise delivered strong growth across the globe in the U S. We believe that most of our customers are properly adjusted their intercept inventory in light of product gating issues and are now ordering it more consistent rate as we make progress on a real time aging studies, we remain confident in our ability to extend platelet kit shelf life, while we are not currently assuming material.

With this activity now more than 85% of Cvs platelet units issued to hospitals or intercept treated in other words. The majority of platelet doses issued the hospitals in Canada are now intercept treated Cvs remains on track to complete the transition to 100% intercept platelets in the first half of this year as it implements intercept phase III.

Speaker Change: Uplift in revenue associated with increased stating, we do believe this will likely lead to more comfort at the blood center to hold inventory.

Speaker Change: We continue to see positive traction at our blood center customers and believe intercept remains the leading technology for platelet safety in the U S. Our early experience in 2024 suggests that our U S. Platelet franchise is poised for solid growth this calendar year.

Platelets, the three sites two of which are already producing whole blood intercept platelets.

Meanwhile, handle Quebec, which produces approximately 25% of Canada split with supply continues to advance its validation of intercept platelets.

Speaker Change: Internationally Canadian blood services CBS is closing in on completing its relative intercept places across its entire production operation in the fourth quarter CBS completed its implementation of intercept for whole blood derived platelets, which included its largest site in brompton and the greater Toronto area.

Q4, 2023 was a strong quarter for our U S. ICD business, we gain commitment from blood centers to distribute ISC, while starting commercial use at a number of influential hospitals, our field sales organization meaningfully increase their inaugural engagement and we were able to host effected peer to peer educational forums at both key Congresses.

Speaker Change: With this activity now more than 85% of CBS platelet units issued to hospitals or intercept treated in other words. The majority of platelet doses issued the hospitals in Canada are now intercept treated Cvs remains on track to complete the transition to 100% intercept platelets in the first half of this year as it implements intercept phase III.

And then one offsetting for hospitals.

Real World use of IFC continues to grow and it has been encouraging to see the clinical enthusiasm for the offering.

This momentum has continued through the first few months of 2024, and we feel confident in our ability to deliver compelling growth with our IFC business.

On a going forward basis, we will provide you with more detail on the progress we are making with IFC and I am confident you will gain a greater appreciation for why we are excited about this business.

Speaker Change: Platelets at three sites two of which are already producing whole blood intercept platelets.

Speaker Change: Meanwhile, Hema, Quebec, which produces approximately 25% of candidate split with supply continues to advance its validation of intercept platelets.

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

Speaker Change: Q4, 2023 was a strong quarter for our U S. IFC business, we gain commitment from blood centers to distribute ISC, while starting commercial use at a number of influential hospitals, our field sales organization meaningfully increase there in hospital engagement and we were able to host effected peer to peer educational forums at both key Congresses.

Thank you Bill and Hello to everyone listening.

On today's call I will be discussing our financial results for the fourth quarter and full year 2023.

As well as our product revenue guidance for 2024.

Beyond the line item components of our P&L I'll be providing a breakdown on our important fourth quarter achievement of narrowed GAAP net loss attributable to serious coupled with reaching our target of <unk>.

Speaker Change: And then one offsetting for hospitals.

Speaker Change: Real World use of IFC continues to grow and it has been encouraging to see the clinical enthusiasm for the offering.

non-GAAP adjusted EBITDA breakeven.

This achievement marks the first time in the company's history of delivering positive adjusted EBITDA.

Speaker Change: This momentum has continued through the first few months of 2024, and we feel confident in our ability to deliver compelling growth with our IFC business.

We're committed to sustaining if not improving from this measure for the full year 2024 as well.

Speaker Change: On a going forward basis, we will provide you with more detail on the progress we are making with IFC and I am confident you will gain a greater appreciation for why we are excited about this business.

As pre announced in January we posted product revenue of $46 8 million for the fourth quarter of 2023.

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

Representing year over year growth of 6%.

And up 18% sequentially from Q3.

Kevin D. Green: Thank you, Bob and Hello to everyone listening.

Full year 2023 product revenues of $156 $4 million were as expected down 4% year over year and in line with our guidance.

Kevin D. Green: On today's call I will be discussing our financial results for the fourth quarter and full year 2023.

Kevin D. Green: As well as our product revenue guidance for 2024.

Kevin D. Green: Beyond the line item components of our P&L I'll be providing a breakdown on our important fourth quarter achievement of narrowed GAAP net loss attributable to serious coupled with reaching our target of <unk>.

In the U S fourth quarter 2023 product revenues exceeded prior year levels.

Importantly, fourth quarter U S product revenues were up sequentially by 22% from Q3.

Kevin D. Green: non-GAAP adjusted EBITDA breakeven.

Kevin D. Green: This achievement marks the first time in the company's history of delivering positive adjusted EBITDA and we are committed to sustaining if not improving during this measure for the full year 2024 as well.

In EMEA.

Third quarter product revenues were up 3% year over year.

At around 2% compared to the third quarter of 2023.

Year over year FX rates provided a benefit for the EMEA business of around 430 basis points.

As pre announced in January we posted product revenue of $46 8 million for the fourth quarter of 2023.

On a consolidated basis.

Kevin D. Green: Representing year over year growth of 6%.

<unk> provided a benefit of around one 3% when comparing Q4 2023 to that of the prior year period.

Kevin D. Green: And up 18% sequentially from Q3.

Kevin D. Green: Full year 2023 product revenues of $156 $4 million were as expected down 4% year over year and in line with our guidance.

Little to no impact on the full year comparative results.

In addition to our product revenue and not included in our guidance government contract revenue totaled $6 6 million in Q4 compared to $7 3 million for the prior year period.

Kevin D. Green: In the U S fourth quarter 2023 product revenues exceeded prior year levels.

Kevin D. Green: Importantly, fourth quarter U S product revenues were up sequentially by 22% from Q3.

The conclusion of enrollment and our recipe study is the primary driver for the slight decline.

Kevin D. Green: In EMEA.

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

Kevin D. Green: Quarter product revenues were up 3% year over year.

Kevin D. Green: At around 2% compared to the third quarter of 2023.

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

Kevin D. Green: Year over year FX rates provided the benefit for the EMEA business of around 430 basis points.

Our milestone based agreement with the U S Department of defense.

<unk> optimized IFC.

Kevin D. Green: On a consolidated basis.

Kevin D. Green: <unk> provided a benefit of around one 3% when comparing Q4 2023 to that of the prior year period.

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

Our fourth quarter product gross profit was $26 million.

Kevin D. Green: Little to no impact on the full year comparative results.

Compared to $24 5 million during the prior year period.

Kevin D. Green: In addition to our product revenue and not included in our guidance government contract revenue totaled $6 6 million in Q4 compared to $7 3 million for the prior year period.

Increase of 6% year over year.

Product gross margins for the quarter were 55, 5%.

Relatively stable when compared to the prior year and up slightly from Q3.

Kevin D. Green: The conclusion of enrollment and our recipe study is the primary driver for the slight decline.

These results are consistent with our expectations and our previous remarks during prior quarter calls.

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

Q4, 2023 margins improved over 2022 levels, primarily due to increased volumes and lower inventory costs compared to the prior year offset by net foreign exchange rate impact on our reported margins.

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

Our milestone based agreement with the U S Department of defense for.

Kevin D. Green: <unk> optimized IFC.

Kevin D. Green: Let's turn now to our product gross profit and gross margins.

Moving on our fourth quarter operating expenses, which totaled $31 $6 million were over $10 million lower than the prior year period of $41 8 billion.

Kevin D. Green: Our fourth quarter product gross profit was $26 million.

Kevin D. Green: Compared to $24 5 million during the prior year period.

24% decline.

Kevin D. Green: An increase of 6% year over year.

Q4, 2023 operating expenses included $4 9 billion noncash stock based compensation.

Kevin D. Green: Product gross margins for the quarter were 55, 5%.

Kevin D. Green: Relatively stable when compared to the prior year and up slightly from Q3.

By specific expense type.

Fourth quarter R&D expense totaled $14 3 billion compared.

Kevin D. Green: These results are consistent with our expectations and our previous remarks during prior quarter calls.

Compared to $18 6 million during the prior year period.

The impact of our June 2023 restructuring continued to result in lower ongoing costs.

Kevin D. Green: Q4, 2023 margins improved over 2022 levels, primarily due to increased volumes and lower inventory costs compared to the prior year offset by net foreign exchange rate impact on our reported margins.

Bind with lower costs associated with the recipe trial enrollment completion.

Ongoing R&D expenses included but were not limited to work under our government contracts.

Kevin D. Green: Moving on our fourth quarter operating expenses, which totaled $31 6 million Rover $10 million lower than the prior year period of $41 8 billion.

<unk> Merck pursuit for our Red blood cell program.

Development work on our next generation of Illuminator.

Going change control work and interactions with regulatory agencies.

Kevin D. Green: 24% decline.

Kevin D. Green: Q4, 2023 operating expenses included $4 9 billion.

Beyond R&D fourth quarter, SG&A expenses were $17 3 million compared to $23 2 million during the prior year period.

Kevin D. Green: Noncash stock based compensation.

Kevin D. Green: By specific expense type.

Similar to the R&D drivers SG&A costs were lower year over year.

Kevin D. Green: Fourth quarter R&D expense totaled $14 3 billion compared.

Kevin D. Green: Compared to $18 6 million during the prior year period.

Part due to the impact of our June 2023 restructuring as well as lower non restructuring related compensation costs.

Kevin D. Green: The impact of our June 2023 restructuring continued to result in lower ongoing costs.

We continue to expect that the financial benefit from our restructuring will provide at least $10 million in annualized savings relative to expense levels at the time of the restructuring.

Kevin D. Green: Bind with lower costs associated with the recipe trial enrollment completion.

Kevin D. Green: Ongoing R&D expenses included but were not limited to work under our government contracts.

Let's focus on the bottom line non-GAAP adjusted EBITDA results, which are perhaps the strongest financial results that we have to talk about on today's call.

Kevin D. Green: CE Mark pursuit for our Red blood cell program.

Kevin D. Green: Development work on our next generation of Illuminator.

Ongoing change control work and interactions with regulatory agencies.

On the bottom line reported net loss attributable to <unk> for the three months ended December 31 2023.

Kevin D. Green: Beyond R&D fourth quarter, SG&A expenses were $17 3 million compared to $23 2 million during the prior year period.

<unk> significantly when compared to the same period in the prior year.

Net loss attributable to <unk> for Q4 totaled $1 3 million.

Kevin D. Green: Similar to the R&D drivers SG&A costs were lower year over year.

Or a penny per diluted share compared to $13 6 million or <unk> <unk> per diluted share for the prior year period.

Kevin D. Green: Part due to the impact of our June 2023 restructuring as well as lower non restructuring related compensation costs.

These results are also directly reflected in our non-GAAP adjusted EBITDA measure.

Kevin D. Green: We continue to expect that the financial benefit from our restructuring will provide at least $10 million in annualized savings relative to expense levels at the time of the restructuring.

As you can see from the results and which I'm happy to announce we surpassed our goal of breakeven and in fact generated almost $5 million of positive non-GAAP adjusted EBITDA.

Kevin D. Green: Let's focus on the bottom line non-GAAP adjusted EBITDA results, which are perhaps the strongest financial results that we have to talk about on today's call.

When compared to negative $3 7 million for the fourth quarter of 2022 and negative $1 million. During the third quarter of 2023. This result is an improvement of over $8 million and $5 million respectively.

Kevin D. Green: On the bottom line reported net loss attributable to <unk> for the three months ended December 31 2023.

Kevin D. Green: <unk> significantly when compared to the same period in the prior year.

This is a significant milestone in our history.

While we're clearly pleased with the results we are committed to sustaining if not improving upon it for 2024.

Kevin D. Green: Net loss attributable to <unk> for Q4 totaled $1 3 million.

Kevin D. Green: Or a penny per diluted share compared to $13 6 million or <unk> <unk> per diluted share for the prior year period.

As we had predicted the combination of strong growth in our top line, coupled with stable margins and closely managed operating expenses allowed us to surpass non-GAAP adjusted EBITDA breakeven in the fourth quarter.

Kevin D. Green: These results are also directly reflected in our non-GAAP adjusted EBITDA measure.

Kevin D. Green: As you can see from the results and which I'm happy to announce we surpassed our goal of breakeven and in fact generated almost $5 billion of positive non-GAAP adjusted EBITDA.

While we may have some fluctuations from quarter to quarter. This year, we expect that with our product revenue guidance, coupled with stable and perhaps slightly improving gross margins.

Continued leverage from the business and close management of operating expenses will support potential improvement on this measure for 2024.

Kevin D. Green: When compared to negative $3 7 million for the fourth quarter of 2022 and negative $1 million. During the third quarter of 2023. This result is an improvement of over $8 million and $5 million respectively.

On the balance sheet and associated cash flows we.

We ended the fourth quarter with a cash position of $65 $9 million of cash cash equivalents and short term investments on the balance sheet.

Kevin D. Green: This is a significant milestone in our history.

Kevin D. Green: While we're clearly pleased with the results we are committed to sustaining if not improving upon it for 2024.

In terms of cash utilization or cash used from operations was $15 2 million for the fourth quarter compared to $1 8 million during the prior year period.

Kevin D. Green: As we had predicted the combination of strong growth in our top line, coupled with stable margins and closely managed operating expenses allowed us to surpass non-GAAP adjusted EBITDA breakeven in the fourth quarter.

As we've spoken about in the past we saw significant increases in working capital use specifically with increased inventory levels.

Kevin D. Green: While we may have some fluctuations from quarter to quarter. This year, we expect that with our product revenue guidance, coupled with stable and perhaps slightly improving gross margins.

During Q4, we also made a conscious decision to pay down our payables due.

As we now look to 2024, we expect that with the anticipated increase in revenues, we will work down our inventory balances maintain payable levels near December 2023 levels and manage other working capital line items.

Kevin D. Green: Continued leverage from the business.

Kevin D. Green: Close management of operating expenses will support potential improvement on this measure for 2024.

Kevin D. Green: On the balance sheet and associated cash flows.

We expect that these initiatives and results will translate into improvements in operating cash flows for 2024.

Kevin D. Green: Ended the fourth quarter with a cash position of $65 $9 million of cash cash equivalents and short term investments on the balance sheet.

And could potentially result in positive operating cash flows for the year.

Kevin D. Green: In terms of cash utilization or cash used from operations was $15 2 million for the fourth quarter compared to $1 8 million during the prior year period.

Turning to our guidance.

As we pre announced in January we expect full year 2020 for product revenue guidance to be in the range of $172 million to $175 million, reflecting double digit growth from 2023.

Kevin D. Green: As we've spoken about in the past we saw significant increases in working capital use specifically with increased inventory levels.

We anticipate this growth to be fueled by continued expansion of the intercept platelet business, both in North America and Europe.

Kevin D. Green: During Q4, we also made a conscious decision to pay down our payables due.

Kevin D. Green: As we now look to 2024, we expect that with the anticipated increase in revenues, we will work down our inventory balances maintain payable levels near December 2023 levels and manage other working capital line items.

As well as continued uptake the IFC and the U S.

As Vivek mentioned, we firmly believe in our prospects for IFC evidenced by our commercial sales agreements with large national blood providers as well as the growing utilization in recognition of the product benefit and an increased number of U S hospitals.

Kevin D. Green: We expect that these initiatives and results will translate into improvements in operating cash flows for 2024 and.

For the first time, we are now providing annual revenue guidance for IFC.

Kevin D. Green: And could potentially result in positive operating cash flows for the year.

Which for 2024, we expect to be in the range of $8 million to $10 million.

Kevin D. Green: Turning to our guidance.

Kevin D. Green: As we pre announced in January we expect full year 2020 for product revenue guidance to be in the range of $172 million to $175 million, reflecting double digit growth from 2023.

Going forward on a quarterly basis, we plan to breakout IFC revenue on a comparative basis to provide visibility into our progress towards our guidance.

I would now like to turn the call back over to Obi for some closing remarks.

Kevin D. Green: We anticipate this growth to be fueled by continued expansion of the intercept platelet business, both in North America and Europe.

Thank you Kevin for the first two months of 2024 in the Rearview mirror, we remain positive about the rest of the year ahead of us.

Kevin D. Green: As well as continued uptake the IFC and the U S.

With respect to the recipe trial. The first of two BARDA funded U S phase III trials for intercept red blood cells, we continue to anticipate providing the topline readout after the data on blended near future.

Kevin D. Green: As Vivek mentioned, we firmly believe in our prospects for IFC.

Kevin D. Green: Evidenced by our commercial.

Between continued momentum in our commercial business and increased visibility into our pipeline and we look forward to providing you with updates throughout the year.

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

As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your.

Your question. Please press star one again.

Thanks, Dan by while we compile the Q&A roster.

Yes.

Our first question will come from the line of Jacob Johnson with Stephens.

Hey, good.

Good afternoon everybody.

Congrats on the quarter.

Maybe starting off on IFC, good to see the $8 million to $10 million expectation in 2024.

Maybe just for reference could you kind of give us what that was in 2023 and then this.

This continues to hit its stride can you just remind us the potential Tam for this offering and how we should think about the three to five year outlook.

For the IFC ramp.

Thanks Jacob.

Thanks, a lot I'll, let him take this.

Hey, Thanks, everybody. Thanks for taking the question.

That.

Guidance range for 2024.

On a 30% to 50% growth rate versus prior year I think in the past we've talked about the Tam for the business being on the order of $2 million to $300 million part of it is going to be a function of.

The blood center channel picks up the product and we sell through blood centers can be a combination of direct sales to hospitals and then all of the sales through blood Center partners, but what I think is most encouraging for us as we announce the collaboration with large blood centers at the end of last year. We saw those first orders come through and through the first few months of 2024.

We're seeing continued pickup in new hospital activation. So I think we're all encouraged about the growth prospects for this franchise.

Got it thanks for that Vivek, and then maybe Kevin for you.

Good to see that positive EBITDA in the quarter.

You mentioned kind of sustaining if not improving that I guess kind of as we're thinking about 2024 is a reasonable assumption positive EBITDA for the entire year kind of like <unk> or could we see even kind of EBITDA would be positive on a quarterly basis. If you could help us on that side of things.

So our guidance our top line guidance doesn't necessarily suggest linearity. So there is some chop to it for the balance of the year, we do expect and are targeting.

At least.

Neutrality, if not improvement from Q4 levels. So I think we've got a lot of reasons too.

Believe that that is very doable and while we may see some choppy quarter to quarter I think for the balance of the year, we're moving in the right direction there.

Got it thanks for that Kevin and then thanks for taking the questions.

Thank you thanks Jay.

Our next question will come from the line of Emily Christie with Stifel.

Hi, Good afternoon, just a couple for me.

We state that the transparency on the IFC business, that's great just.

Just on international it sounds like Canada is on track with expectations can you talk to any other geographies that might be notable in 2020 for like if we should expect meaningful contribution from Germany, and then maybe if there's an update from China from the regulatory situation there.

Targeting.

At least.

Neutrality, if not improvement from Q4 levels. So I think we've got a lot of reasons to.

Great. Thanks, Emily OLED. So they can take the first part of that question and then I'll answer the China one.

Believe that that is very doable.

Sure. Thanks for the questions Emily.

While we may see some choppy quarter to quarter I think for the balance of the year, we're moving in the right direction there.

A lot of the growth that we're expecting this year is a combination of.

Got it thanks for that Kevin and then thanks for taking the questions.

<unk> depth with existing customers the growth opportunities in geographies, where we've already started so you referenced.

You bet. Thank you thanks Jay.

Our next question will come from the line of Emily Christie with Stifel.

Canada, we certainly are anticipating.

<unk> progress in Germany, We also believe that the middle East that was recently.

Hi, Good afternoon, just a couple for me I appreciate the transparency on the IFC business Thats great.

The med last Congress in Dubai, there are great growth opportunities there and they tend to draft off of what the U S. FDA does in terms of the blood banking community in that region. So we feel like there are meaningful pools of growth across the globe in terms of our platelet business in that has referenced.

On international it sounds like Canada is on track with expectations can you talk to any other geographies that might be notable in 2020 for like if we should expect meaningful contribution from Germany.

And then maybe if there's an update from China from the regulatory situation there.

Earlier in the call the U S. ISP business will start to be a meaningful growth driver as well so it's really a combination.

Great. Thanks, Emily OLED as I take the first part of that question and then I'll answer the China one.

But fundamentally what we're seeing as we're going deeper with customers and there is still significant headroom for growth.

Sure. Thanks for the questions Emily.

Are a lot of the growth that we're expecting this year.

Maybe I'll kick it back to you regarding China, yes, thanks, a lot vivek, so regarding China, we've submitted.

The combination of <unk>.

<unk> depth with existing customers the growth opportunities in geographies, where we've already started so you referenced Canada, we certainly are anticipating.

Two the NPA last year as you recall in our.

In the process of receiving questions and feedback from the MTA is a little delayed start of this year, just because of the lunar new year.

Continued progress in Germany, We also believe that the middle East has recently.

Medlar Congress in Dubai, there are great growth opportunities, there and they tend to draft off of what the U S. FDA does in terms of the blood banking community in that region. So we feel like there are meaningful pools of growth across the globe in terms of our platelet business in that's referenced.

But it is underway to date, we don't have any indication of a clinical trial the necessary, but we're not complete with the NFPA review yet.

Okay, great and if I could just sneak one more in.

Talk a lot about pricing, but I'm wondering how we should be thinking about pricing power in both new markets and in those where you have high penetration rates already.

Earlier in the call the U S. IFC business will start to be a meaningful growth driver as well. So it's really a combination of factors, but fundamentally what we're seeing as we're going deeper with customers and there is still significant headroom for growth.

Yes, Thanks, Emil again, I'll turn it back over to Vic.

Sure, Yes, we've seen stable to slightly increasing pricing in light of.

I'll kick it back to you regarding China, yes, thanks, a lot vivek, so regarding China, we've submitted.

In place and other things.

We feel really good about the pricing discipline that we've been able to execute on a global basis.

Two the NFPA last year as you recall.

And are in the process of receiving questions and feedback from the MTA is a little delayed the start of this year, just because of the lunar new year.

Given the benefits of pathogen reduction and certainly the clinical benefits of IFC, we've been able to have more discussions on clinical utility and value then going in and competing against price I mean hospitals.

It is underway to date, we don't have any indication of a clinical trial the necessary, but we're not complete with the NFPA review yet.

Certainly have budgetary constraints aren't under pressures, but I think the global sales team has been disciplined in terms of ensuring that we're realizing value for the offering we are bringing.

Okay, great and if I could just sneak one more in we don't talk a lot about pricing, but I'm wondering how we should be thinking about pricing power in both new markets and in those where you have high penetration rates already.

Great. Thanks, so much for the question, yes, Thanks a lot.

Our next question will come from the line of Mark Massaro with BTG.

Okay. Thanks, Amit again, I'll turn it back over to Vivek.

Sure Yes.

Okay.

We've seen stable to slightly increasing pricing in light of <unk>.

Mark Your line is now open.

In place and other things.

This is David on for Mike Thanks for taking the question.

Feel really good about the pricing discipline that we've been able to execute on a global basis.

23 guide it looks like it calls for a bounce back in Cleveland and the U S business.

I just wanted to confirm what's excluded from your guide.

Have you seen sources of potential upside.

And then maybe if you could also touch on any seasonality, we should be modeling going back.

Certainly have budgetary constraints or hunter pressures, but I think the global sales team has been disciplined in terms of ensuring that we're realizing value for the offering we are bringing.

Yes, Thanks, a lot Vivian so they can turn it back over to you but.

First place to answer that question.

Yes, no problem I'm sorry, the first part of that question cut out on my end could you repeat that or maybe it would be if you compare for instance.

Great. Thanks, so much for the question yeah. Thanks, a lot.

Our next question will come from the line of Mark Massaro with BTG.

Okay.

Thank you.

Okay.

Uh-huh just the puts and takes in the 'twenty guidance seasonality as well.

Mark Your line is now open.

Okay fair enough.

I think as we mentioned earlier.

This is Dan on for Mark Thanks for taking the question.

We're seeing sort of a stabilization.

22, part guide it looks like it calls for a bounce back in platelets in the U S business.

Strengthening across our business, but we have not modeled in in terms of embedded in our guidance as an example.

I just wanted to confirm what's excluded from your guide and where Youre seeing as far as you said.

Restocking of inventory levels that blood centers as we see improved.

Potential upside.

And then maybe if you could also touch on any seasonality, we should be modeling that.

Shelf life in the U S.

Yes.

Nor have we.

Speaker Change: Yes, Thanks, a lot Vivian so they can start to turn back over to you, but you are best placed to answer that question.

Modeled in any accelerated assumptions around the recovery of platelet donors.

Vivian: Yes, no problem I'm sorry, the first part of that question cut out on my end could you repeat that or maybe it would be if you compare for instance.

Europe, and the U S, which leads to overall growth in the platelet market. So what we are.

Really focusing on as we were kind of hand in glove with the blood center operations folks and our deployment teams, we're seeing continued ramp up in.

Vivian: Okay.

Speaker Change: Thank you.

Speaker Change: Yes, just the puts and takes in the 'twenty guidance seasonality as Bob.

Intercept platelet production and then continued pass through the hospitals and then on the IFC side, we're seeing a fairly methodical and strong ramp up of new hospitals, and then when we get into hospitals.

Speaker Change: Okay fair enough.

I think as we mentioned earlier.

Jessica Hanover: We're seeing sort of stabilization and strengthening across our business, but we have not modeled in in terms of embedded in our guidance. As an example, a restocking of inventory levels that blood centers as we see improved.

In our particular clinical disciplines.

High risk Ob as an example, once you get a couple of clinicians with experience of the product to see that product being adopted.

Other clinical centers in the hospital and see us gaining depth. There. So those are the sort of some modeling assumptions that underpin our current growth assumptions in the guidance for the full year.

Jessica Hanover: Shelf life in the U S.

Jessica Hanover: Nor have we.

Jessica Hanover: Modeled in any accelerated assumptions around the recovery of platelet donors.

Speaker Change: Europe, and the U S, which leads to overall growth in the platelet market. So what we are.

But we've tried to really.

I think the silver to the challenges we've had historically been recognized we've got a few tailwind right now at our back which is which is a good place to be.

Really focusing on as we work kind of hand in glove with the blood Center operations folks and our deployment teams, we're seeing continued ramp up in Austin.

Okay.

That's perfect. Thank you and then just a follow up.

Speaker Change: Intercept platelet production and then continued pass through the hospitals and then on the IFC side, we're seeing a fairly methodical and strong ramp up of new hospitals, and then when we get into hospitals.

The rescue study, which I think should be reading out shortly here.

Can you just remind us what your expectations are there and just how that's tracking.

Speaker Change: And a particular clinical disciplines say high risk Ob as an example, once you get a couple of clinicians with experience with the product, we see that product being adopted.

Yes. Thanks, a lot. So the database is locked for the recipe study. So we shouldnt be unwinding that data in the near term as far as the study design. It's just to remind you all that it's a non inferiority study design in cardiovascular surgery patients many of whom are on bypass.

Speaker Change: Other clinical centers in the hospital and see us gaining depth there. So those are the.

Speaker Change: Some modeling assumptions that underpin our current growth assumptions in the guidance for the full year, but.

With our acute kidney injury endpoint.

And that was modeled after after after a bunch of publications in cardiovascular surgery recipients, who had AK and high rates typically who are getting transfused, who typically are.

Speaker Change: But we've tried to really.

Speaker Change: I think the silver to the challenges we've had historically been the recognized we've got a few tailwind is right now at our back which is which is a good place to be.

The rate of in the range of 28% to 30%.

Okay.

Speaker Change: That's perfect. Thank you and then just.

And then margin and then if you already for the study between test and control is 50%.

Speaker Change: A follow up.

Speaker Change: This study, which I think should be reading out shortly here.

Can you just remind us what your expectations are there and just how that's tracking.

Great. Thanks, so much taking the questions. Thanks very much.

Speaker Change: Yes, Thanks a lot.

That concludes today's question and answer session I would like to turn the call back to Obi Greenman for closing remarks.

Speaker Change: So the database is locked for the recipe study so we should be unwinding that data in the near term as far as the study design. It's just to remind you all that it's a non inferiority study design.

Well. Thank you again for joining us today and for your interest in Cerus, we will be presenting tomorrow at the <unk> 44th annual Healthcare conference and we look forward to sharing our progress with you throughout 2024.

Cardiovascular surgery patients many of whom are on bypass.

Speaker Change: With our acute kidney injury endpoint.

This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: And that was modeled after after after a bunch of publications in cardiovascular surgery recipients, who had AK and high rates typically who are getting transfused.

Speaker Change: Right in the range of <unk>.

Speaker Change: 8% to 30%.

Speaker Change: And the margin there if youre already for the study between test and control is 50%.

Speaker Change: Great. Thanks, so much taking the questions. Thanks very much.

Speaker Change: That concludes today's question and answer session I would like to turn the call back to Obi Greenman for closing remarks.

William M. Greenman: Well. Thank you again for joining us today and for your interest in Cerus, we will be presenting tomorrow at the TD Collins, 44th annual Healthcare conference and we look forward to sharing our progress with you throughout 2024.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.