Q2 2024 Cytosorbents Corp Earnings Call

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Speaker Change: Great. Thank you.

Operator: Please wait; the conference will begin shortly. Please wait; the conference will begin shortly. Please wait, the conference will begin shortly. Ladies and gentlemen, good afternoon, and welcome to the Cytosorbents second quarter 2024 financial and operating results conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Ladies and gentlemen, good afternoon, and welcome to the Cytosorb in second quarter, 2024 financial and operating results Conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: Following the formal remarks, we will open the poll for your questions. Please be advised that the call will be recorded at the company's request.

Operator: Following the formal remarks, we will open the poll for your questions. Please be advised that the call will be recorded at the company's request. At this time, I'd like to turn the call over to our moderator, Eric Ribner. Thank you. Good afternoon.

Speaker Change: At this time I'd like to turn the call over to our moderator Eric Roegner. Please go ahead Mr. Weber.

Eric Ribner: Welcome to Cytosorbents' second quarter 2024 Financial and Operating Results conference call. Joining me today from the company are Dr. Phil Chan, Chief Executive Officer, Vincent Capponi, President and Chief Operating Officer, Kathleen Bloch, Chief Financial Officer, Dr. Micah Deliargyris, Chief Medical Officer, Dr. Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of Cytosorbents Europe, and Christopher Kramer Senior Vice President of Business Development

Eric Roegner: Thank you and good afternoon, welcome to Cytosorb into the second quarter 2024 financial and operating results conference call.

Speaker Change: Joining me today from the company are Doctor, Phil Chan Chief Executive Officer.

Speaker Change: Hint Compony, President and Chief operating Officer, Kathleen Bloch, Chief Financial Officer, Dr. Mike Village Harris, Chief Medical Officer, Dr. Christian Steiner Executive Vice President of sales and marketing and managing director of Cytosorb into Europe, and Christopher Cramer.

Christopher Cramer: Senior Vice President of business development.

Eric Ribner: Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainty. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Speaker Change: Before I turn the call over to Dr. Chan I'd like to remind listeners that during the call management's prepared remarks may contain forward looking statements, which are subject to risks and uncertainties management may make additional forward looking statements in response to your questions. Today. Therefore, the company claims protection under the Safe Harbor.

Speaker Change: For forward looking statements contained in the private Securities Litigation Reform Act of 1995 actual results may differ from results discussed today and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC any projections as to the company's future performance reps.

Eric Ribner: Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. Any projections as to the company's future performance represented by management include estimates today as of August 13, 2024, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the first quarter of 2024 by Dr. Chan, Ms. Bloch, Mr. Capponi, and Dr. Deliargyris.

Speaker Change: Does it by management include estimates today as of August 13th 2024, and we assume no obligation to update these projections in the future as market conditions change.

Speaker Change: During today's call, we will have an overview presentation covering the operating and financial highlights for the first quarter of 2024 by Dr. Chan Ms Bloch, Mr. <unk> and Dr. Dale Jerious. Following the presentation, we will open the line to your questions. During the live Q&A session with the rest of the management team and now it's my pleasure to turn the call.

Eric Ribner: Following the presentation, we will open the line to your questions during the live Q&A session with the rest of the management team. And now it's my pleasure to turn the call over to Dr. Phillip Chan. Well, thank you very much, Eric, and good afternoon, everyone, for the Q2 2024 Earnings Call.

Speaker Change: Over to Dr. Phillip Chan.

Speaker Change: Okay.

Phillip Chan: Well, thank you very much Eric and good afternoon, everyone to the Q2 2024.

Phillip Chan: Earnings call.

Phillip Chan: First, I'd like to go over our operating highlights for the quarter. First, more than a quarter million Cytosorb devices have been chemically delivered to date, helping to save many lives around the world. Second, in the second quarter, total revenue increased 5% to $9.9 million, while product sales increased by 10% to $8.8 million, and gross product margins were a solid $75 million. Importantly, our second quarter operating loss decreased 48% to $3.4 million from $6.6 million a year ago.

Speaker Change: First I'd like to go over our operating highlights for the quarter.

Speaker Change: First more than a quarter million cytosorb devices, I think cumulatively delivered to date, helping to save many lives around the world.

Second in the second quarter total revenue increased 5% to $9 $9 million, while product sales increased by 10% to $8 8 million and gross product margins.

Speaker Change: 75%.

Speaker Change: Importantly, our second quarter operating loss decreased 48% to $3 4 million from $6 6 million a year ago.

Phillip Chan: Following our $10.3 million equity raise in December 2023, we secured an additional $20 million credit facility with Avenue Capital Group, strengthening our balance, and following the quarter, we completed additional cuts. Each of these panelists mentioned the challenge that we face in this pandemic, something that we know, today, will not make any sense. Finally, our cash balance at the end of the second quarter was $14.9 million, including $8.5 million in unrestricted cash and $6.5 million in restricted cash.

Following our $10 $3 million equity raised in December 2023, we secured an additional $20 million credit facility with Avenue capital group strengthening our.

Speaker Change: Our balance sheet.

Speaker Change: Following the quarter, we completed additional cutbacks expected to save an additional annualized $5 million of expenses going forward over the past five months, we have decreased our workforce by 17%.

Speaker Change: Finally, our cash balance at the end of the second quarter was $14 9 million, including $8 5 million in unrestricted cash and $6 $5 million in restricted cash.

Phillip Chan: Today we are pleased to announce the start of our new Chief Financial Officer, Peter J. Mariani, starting tomorrow, and unfortunately, the retirement of our existing CFO, Kathy Bloch, as of the end of business today. You'll hear more from both people at the end of this meeting. We're also on track to send marketing applications in parallel for the Investigational Drugs Reserve ATR system to FDA as a de novo application in Health Canada in the third quarter of this year.

Speaker Change: Today, we are pleased to announce.

Speaker Change: The start of our new Chief Financial Officer, Peter game Mariani, starting tomorrow.

Speaker Change: Fortunately the retirement of our existing.

Speaker Change: CFO Kathy Bloch.

Speaker Change: At the end of business today.

Speaker Change: You'll hear more from both.

At the end of this meeting.

Speaker Change: We're also on track to spend marketing applications in parallel for the investigational drugs or the HR system.

Speaker Change: Is it de Novo application and how Canada in this third quarter of.

Speaker Change: This year.

Phillip Chan: You'll hear more about that from Mike Estella-Giris as well as Vince Capponi. In addition, we completed our MD-SAP audit, which is a key requisite for Canadian commercialization. Data from our STAR Registry was presented at the EuroPCR 2024 conference, where it was selected as a top five finalist in the Best Scientific Abstract competition.

Speaker Change: Hear more about that from both.

Vince: <unk> as well as Vince component.

Vince: In addition, we completed our MD SAP audit, which is a key requisite just Canadian commercialization.

Vince: Data from our Star Registry was presented at the Euro PCR 'twenty 'twenty four conference where was selected as a top five finalists in the best scientific abstract competition.

Phillip Chan: And importantly, we launched a new, redesigned, modern, consolidated corporate and product website. Lastly, we also launched our Cytosorb, our Purify, MDR-certified Purify Hemoperfusion, Placing, in fact, all 30 pumps from our original order with our OEM and are expecting delivery on the next order from our OEM very shortly. Importantly, Pumped itself has received extremely good reviews from users.

Vince: And importantly, we launched a new redesigned modern consolidated corporate and product website.

Vince: Lastly, we also launched our Cytosorb are purify MTR certified purified chemo prestige and pump.

In fact, all 30 pumps from our original order with our OEM. They are expecting delivery on the next order from our OEM very shortly.

Vince: Importantly, the steep.

Vince: <unk> itself has received extremely well good reviews from users second.

Kathleen Bloch: I signed it as very easy to use and easy to set up, and easy to implement. Now, with that, let me turn it over to Kathy Bloch, our current Chief Financial Officer. Thank you, Phil, and hello to everyone on the call. Today, I will discuss our second quarter 2024 financial results, including revenues and gross margins. Additionally, I will provide an update on our working capital and cash runway. Cytosorb product revenue was approximately $8.8 million in the second quarter of 2024 compared to $8.1 million in the second quarter of 2023, an increase of approximately $800,000 or 10%. Second quarter 2024 grant revenue was approximately $1.1 million, compared to approximately $1.3 million in 2023, and this decrease was due to the conclusion of several grants during 2023.

Vince: Second it is very easy to use and easy to set up.

Vince: And easy to implement our therapies.

Vince: With that let me turn it over to Kathy Bloch, our current Chief Financial Officer Cathy.

Kathleen Bloch: Total second quarter 2024 revenue, which includes both product sales and grant revenue, was approximately $9.9 million, as compared to $9.4 million in 2023. And product gross margins on devices and device accessories were 75% in the second quarter of 2024, compared to 74% in 2023. Next slide, please. For the first half of 2024, Cytosorb product revenue was approximately $17.8 million, compared to approximately $16 million for the first half of 2023, which is an increase of approximately $1.8 million, or 12%. First half 2024 grant revenue was $1.8 million, as compared to $2.9 million.

Kathy Bloch: Thank you, Phil and Hello to everyone on the call today, I will discuss our second quarter 2024 financial results, including revenues and gross margins and Additionally, I will provide an update on our working capital and cash runway.

Kathleen Bloch: Again, due to the conclusion of several grants in 2023. And product gross margins on devices and accessories were 74% in the first half of 2024 compared to 71% in the first half of 2023, as we continue to realize more operating efficiencies at our new manufacturing plant in Princeton, New Jersey. Next slide, please. The blue bars on this chart represent our annual product sales for the trailing 12-month periods ending June 30 for each year 2018 to 2024.

Kathleen Bloch: We know that for the years 2020, 2021, and 2022, sales were very favorably impacted because Cytosorb was used to treat COVID-19 patients. And, of course, this usage ceased following the containment of the pandemic in the years ending June 30th, 2023, and 2024.

Speaker Change: Cytosorb product revenue was approximately $8 8 million in the second quarter of 2024 compared to $8 1 million in the second quarter of 2023, an increase of approximately $800000 or 10%.

Speaker Change: Second quarter 2024, Grant revenue was approximately $1 1 million compared.

Speaker Change: Compared to the approximately $1 3 million in 2023 and this.

Speaker Change: Increase was due to the conclusion of several grants during 2023.

Speaker Change: Total second quarter 2020 for revenue, which includes both product sales and grant revenue was approximately $9 9 million.

Speaker Change: As compared to $9 4 million in 2023 and.

Speaker Change: And product gross margins on devices and device accessories with 75% in the second quarter of 2024 compared to product gross margin of 74% in 2023.

Speaker Change: Next slide please.

Speaker Change: For the first half of 2024.

Speaker Change: Product revenue was approximately $17 8 million compared.

Compared to approximately $16 million for the first half of 2023, which is an increase of approximately $1 8 million or 12%.

Speaker Change: First half 2024 grant revenue was $1 $8 million.

Speaker Change: As compared to $2 9 million.

Speaker Change: Again.

Speaker Change: Due to the conclusion of several grants in 2023 and product gross margins on devices and accessories with 74% in the first half of 2024 compared to 71% in the first half of 2023 as we continue to realize more operating efficiencies at our new <unk>.

Speaker Change: Manufacturing plant in Princeton, New Jersey next slide please.

Speaker Change: The blue bars on this chart represent our annual product sales for the trailing 12 month periods ending June 30 for each year 2018 to 2024.

Speaker Change: We know that for the years 2000, 22021, and 2022 sales were very favorably impacted because cytosorb is used to treat COVID-19 patients and of course this new states.

Speaker Change: Following the containment of the pandemic in the years ending June 32023 and 2024.

Kathleen Bloch: If we take a look at the orange trend arrow, which tracks along core non-COVID-19 revenue, what we see is that the post-COVID-19 12-month periods ended June 30, 2023, and 2024 continue to show positive growth in our core non-COVID-19 product sales. For example, our year-over-year trailing 12-month sales for the period ending June 30, 2024 increased by 9.5% compared to the trailing 12-month Additionally, excluding the impact of COVID-19 sales in 2020, 2021, and 2022, our overall CAGR for the six years ended June 30, 2024 is a respectable 11.2%.

Speaker Change: If we take a look at the Orange trends are out which tracks along core non COVID-19 revenue what we see is that the post Covid 1912 months periods ended June 32023, and 2024 continue to show positive growth in our core non COVID-19 patent product sales.

Speaker Change: Our year over year trailing 12 months sales.

Speaker Change: For the period ending June 32024 increased by nine 5% compared to the trailing 12 months sales for the period ended June 32023.

Speaker Change: Excluding the impact of the COVID-19 sales in 'twenty, 'twenty 2021, and 2022, our overall CAGR. So the six years ended June 32024.

Speaker Change: Respectable 11, 2%.

Kathleen Bloch: I also want to point out for a moment that the green line, which tracks our year-over-year gross margin, indicates a decline in 2022 while we transition manufacturing operations to our new facility. However, our second quarter 2024 gross margins continue to show improvement at 75%, and these margins are approaching the levels that we had prior to our move to the new facility. With greater volumes, we expect to show further improvements in product gross margin as we continue to realize additional manufacturing efficiencies. Next slide. As of June 30, 2024, we have $14.9 million in cash, which includes $6.5 million of restricted cash and $8.5 million of unrestricted cash.

Speaker Change: I also want to point out for a moment that the green line, which tracks our year over year gross margins indicate a decline in 2022, while we transitioned 90 factoring operations to our new facility or.

Speaker Change: Our second quarter 2020 for gross margin continue to show improvement at 75% and these margins are approaching the levels that we had prior to our move to the new facility.

Speaker Change: With greater volumes, we expect to show further improvement in product gross margins as we continue to realize additional manufacturing efficiencies next slide please.

Speaker Change: As of June 32024, we have $14 9 million in cash, which includes $6 5 million of restricted cash and $8 5 million in unrestricted cash we believe that unrestricted cash on hand is sufficient to fund the company's operations through the second quarter of 2020.

Kathleen Bloch: We believe that unrestricted cash on hand is sufficient to fund the company's operations through the second quarter of 2025. We have been successful in our efforts to strengthen our balance sheet and reduce operating expenses. On our last call, we indicated that the company was actively pursuing alternative sources of capital, and in June 2024, we entered into a loan and security agreement with the Avenue Group of Funds to provide a total of $20 million in debt financing.

Speaker Change: Five we.

Speaker Change: We have been successful in our efforts to strengthen our balance sheet and reduced operating expenses on our last call. We indicated that the company was actively pursuing alternative sources of capital and in June 2024, we entered into a loan and security agreement with the Avenue group of funds to provide a total of 20 million.

Speaker Change: In that financing 10 million was immediately available under this facility and $5 million, which is included in our restricted cash is subject to re leased by March 31, 2025 provided that the FDA has accepted the company's application for review with respect to drug served 88.

Kathleen Bloch: $10 million was immediately available under the facility, and $5 million, which is included in our restricted cash, is subject to release by March 31, 2025, provided that the FDA has accepted the company's application for review with respect to DrugSorb ATR and that the company has received a minimum of $3 million in net proceeds from the sale of its equity securities after the closing date. The restricted cash will be released on a dollar-for-dollar basis for equity raised between $3 million and $5 million.

Speaker Change: And that the company has received a minimum of $3 million in net proceeds from the sale of its equity securities. After the closing date the restricted cash will be released on a dollar for dollar basis for equity rates between 3 million and $5 million and then there's another tranche of $5 million, which may be disbursed at the company's <unk>.

Kathleen Bloch: And then there's another tranche of $5 million, which may be disbursed at the company's request between July 1, 2025 and December 31, 2025, provided that the company receives FDA marketing approval for its DrugSorb ATR application. However, conservation of cash remains a top corporate priority.

Speaker Change: Between July one 2025 and December 31, 2025 provide us at the company received received FDA marketing approval of its strengths or ACR application.

Speaker Change: Conservation of cash remains a top corporate priority, we have reduced our head count adjusted our spending and taking other measures to reduce our quarterly cash burn in 2024.

Vince Capponi: We have reduced our headcount, adjusted our spending, and taken other measures to reduce our quarterly cash burn in 2024. Cost cuts taken previously have reduced our loss from operations from $6.6 million in the second quarter of 2023 to $3.4 million in the second quarter of 2024, a 48% decrease. In July of 2024, we enacted another round of cost cuts, which are designed to reduce the company's annual cash burn by an additional $5 million. That will conclude my remarks for today. And at this time, I'm delighted to turn the call over to our President and Chief Operating Officer, Vince Capponi. Go ahead, Vince.

Cuts, taking previously have reduced our loss from operations from $6 $6 million in the second quarter of 2023.

Speaker Change: $3 4 million in the second quarter of 2024 or 48% decrease in.

Speaker Change: In July of 2024, we announced another round of cost cuts, which are designed to reduce the company's annual cash burn by an additional $5 million.

Speaker Change: And that will conclude my remarks for today and at this time I'm delighted to turn the call over to our President and Chief Operating Officer, Vince Cassone go ahead Vince.

Vince Capponi: Thank you, Kathy. So for the clinical, I'd like to cover the clinical. Yeah, I think Mikas is on the call.

Vince Cassone: Thank you Kathy.

Vince Cassone: So for the I'd like to tie the clinical.

Speaker Change: Yes, I think it might just us on the call like Us would you like to.

Speaker Change: Thank you.

Speaker Change: The first part of this.

Efthymios Deliargyris: Mikas, would you like to take it? The first part of this. Sure, sure. Thanks, Phil. Thanks, Vince. As you heard, and welcome to everybody on our call this afternoon, as you heard from Phil previously, the regulatory submissions for our investigation of the run short ATR system are a top priority for the company. And we are happy to report that we are on track according to previously stated timelines. The STAR-T clinical data was presented earlier this year, the top-line results and the final data analysis have been completed, and, in fact, the clinical study report that contains all this information is in the final stages of development and publication.

Speaker Change: Sure sure. Thanks, Joe Thanks, Vince.

Speaker Change: As you heard.

Speaker Change: And welcome to everybody on our call. This afternoon.

Speaker Change: You heard from Joe previously.

Speaker Change: Inventory submissions for our investigational drugs of Herc system is a top priority for the company.

Speaker Change: And we are happy to report that we were able to track. According to previously stated timeline.

Speaker Change: The Star key clinical data were presented earlier this year the topline results of the final data analysis will be completed and in fact, the clinical study report that contains all this information is in the final stages of development of publishing.

Efthymios Deliargyris: This will represent the main source for the probable benefit-to-risk analysis that will be at the crux of our de novo submission to the FDA. We also intend to include supportive supplementary data with the real-world evidence of ticagrel removal during cabbage that was presented from the Star Registry at a recent European conference, and I'm going to spend the next slide giving you a little bit more visibility on that data.

Speaker Change: This will represent the main source for the probable benefit to risk analysis that will be at the crux of our de novo submission to the FDA.

We also intend to include in the submission.

Speaker Change: Wanted supplementary data with real world evidence.

Speaker Change: CAGR removal doing cabbage that was presented from the star registry their eastern European Conference spend.

Speaker Change: <unk> spent the next slide giving you a little bit more visibility on that data.

Efthymios Deliargyris: The completion of the technical files is leveraging the electronic e-start platform, and as already stated, we are on track for the FDA de novo submission in September, with the Health Canada submission leveraging the same platform to follow soon thereafter. Just as a reminder to our listeners, ATR is an FDA breakthrough-designated device, which means that its submission will be associated with a priority review. A recent analysis suggested that NOVA applications of breakthrough-designated devices have an estimated 25% faster review timeline compared to regular applications.

Speaker Change: The completion of the technical files, leveraging their electronic <unk> platform.

Speaker Change: As already stated we are on track for the FDA did note with submission in September.

Ken: Ken This submission leveraging the same platform to follow soon thereafter.

Ken: Okay.

Speaker Change: Rinder to our listeners.

Speaker Change: <unk> is an FDA breakthrough designated device, which means that any submission will be associated with a priority review.

Speaker Change: A recent analysis suggested that de novo applications of our breakthrough designated devices have an estimated 25% faster review timelines compared to regular applications.

Efthymios Deliargyris: And as such, pending FDA agreement on the de novo pathway submissions and the associated priority review of the breakthrough status of the drugs in the ATR device, this means that we could have a potential FDA decision within 6 to 12 months following submission. Next slide, please. Earlier this year, we had the privilege of being present and presenting at one of the largest cardiovascular conferences in the world, the European PCR meeting that is held annually in Paris.

Speaker Change: And as such pending the FCA agreement of the de Novo pathway submissions.

Speaker Change: And the associated priority review of the breakthrough status.

HCI device. This means that we could have the potential FDA decision within six to 12 months following submission.

Speaker Change: Next slide please.

Efthymios Deliargyris: During this meeting with over 12,000 attendees, data from our style registry was selected for an oral presentation. And at the end of the conference, as Phil has already alluded to, the scientific committee awarded the star registry data a top five spot as a finalist in their best scientific abstract competition. So why don't we show this in the style registry that we believe is gonna be a supportive piece to our regulatory submissions? As you know, removal of tachycardia during cardiac surgery with cardiopulmonary bypass is an approved indication with Cytosorb since 2020 and is increasingly being used as standard of care in many heart centers in Europe.

Speaker Change: Earlier this year, we had the privilege of being present and presenting on one of the largest cardiovascular purposes in the world. The PCR meeting held annually in Paris.

Speaker Change: This meeting with over 12000 attendees data from our solid registry, which selected for an oral presentation.

Speaker Change: And at the end of the call.

Speaker Change: So as Jo has already alluded.

Speaker Change: Moving to the.

Speaker Change: The scientific committee awarded.

Speaker Change: The Star Registry data a top five spot in their final as a pilot.

Speaker Change: <unk> competition.

Speaker Change: So why do we show.

Speaker Change: Within the Starwood industry, but we believe it's going to be supportive piece to our regulatory submissions.

Speaker Change: As you know we will have that CAGR during cardiac surgery.

Speaker Change: Cardiopulmonary bypass in some approved indication with Cytosorb with 2020.

Speaker Change: <unk> is increasingly being used as standard of care in many heart centers in Europe.

Efthymios Deliargyris: In the star registry, we're collecting high-fidelity data of this everyday, real-world use of a device for a Google attack algorithm. For the sake of analysis, we had data from five different countries, 23 investigative sites, totaling 102 isolated CABBIDS patients.

Speaker Change: In the smaller this year you were collecting high fidelity data every day.

Speaker Change: Use of the device for removal of that CAGR War.

Speaker Change: In the care of analysis, we had data from five different countries 23 investigator sites totaling 102 isolated cabbage patients.

Efthymios Deliargyris: This is a population that we have discussed previously and will be the target intended population for our submissions. These patients were operated on very soon after the last dose of Facagulor, on a mean of 22.8 hours. Just as a reminder, guidelines recommend that these patients should wait for at least 72 hours, but in everyday practice, many times this is not feasible.

Speaker Change: This is a population that we have discussed previously will be the target intended population submissions.

Speaker Change: These patients were operated very soon.

Speaker Change: Those <unk> are.

Speaker Change: The $22 eight hours.

Speaker Change: A reminder, guidelines recommend that these patients should wait for at least 72 hours.

Speaker Change: And everyday practice many times. This is not feasible. So these patients were operated a much shorter window compared to what the guidelines recommend.

Efthymios Deliargyris: So these patients were operated on in a much shorter window compared to what the guidelines recommend. The device was used for an average of an hour and a half during the CPB run of the operation, which is almost identical to the time we saw in STAR-T. Again, very, very comparable population and device use between these two datasets. What we did present in Paris was the fact that in the Star Registry, we observed bleeding rates that were substantially lower than those reported in the European Cabbage Registry among patients with tachycardia being operated either very early, within 24 hours, or later on within 24 to 72 hours, but always not having completed the recommended washout.

Speaker Change: The device will be used for an average of one nine and half the CPB run the operation, which is almost identical to the time that we saw it will start.

Speaker Change: Very very comparable population and device used in these good dataset.

Speaker Change: Well, we did present in Paris was the fact that in the Star registry, we observed bleeding rates.

Speaker Change: Were substantially lower than those reported in the European cabbage registry low patients qualify cargo are being operated.

Speaker Change: Early within 24 hours.

Speaker Change: Later on within 24 to 72 hours, but always more having completed the recommended washout.

Efthymios Deliargyris: You can see the rates presented on the slide, and in fact, among patients who waited for at least a day before being operated on, you will see a substantial reduction in severe bleeding to very, very low rates, equivalent to those seen in patients not on tachycardia having a cabbage operation. Importantly, none of these sites or investigators reported any device-related adverse events.

Speaker Change: You can see the rates presented on the slide.

Speaker Change: Back to more patients who are waiting for at least a day before being operator, you would see a substantial reduction of severe bleeding to very very low rates equivalent to those small indications not operated well in the <unk> level, having a cabbage operation.

Importantly, none of these sites and investigators reported any device related adverse events.

Efthymios Deliargyris: The data from the eCABG registry represents a very good benchmark for us to compare the rates from the STAR registry, and as such, as noted previously, this was very well received at the scientific conference, and we're very pleased to receive the designation of the top five finalists for the best scientific abstract. And with that, I would like to turn the call over to Vince to give you a regulatory update. Thank you, Mikas. This is Vincent Capponi, and good day to everybody.

Speaker Change: The data from the cabinets registry represent a very good benchmark for us to compare the rates from the Star registry such as noted previously this was very well received.

Unknown Executive: and ladies and gentlemen, good afternoon and welcome to the Cytosorbent Second Quarter, 2024 Financial and Operating Results Conference call. At this time, all participants are in a listen only mode. Following the formal remarks, we will open the call for your questions.

Speaker Change: Scientific conference, we were very pleased to receive the designation.

Speaker Change: As for our best scientific abstract.

Speaker Change: And with that I would like to turn the call over to Vince.

Unknown Executive: Please be advised that the call will be recorded at the company's request. At this time, I'd like to turn the call over to our moderator, Eric Ribner.

Vince Cassone: Give you a regulatory update.

Vince Cassone: Thank you Mike.

Vince Cassone: This is a component.

Vince Cassone: Good day to everybody.

Vince Capponi: As Mikas mentioned, the de novo timeline, we're in the final stages of assembling the technical file that will be submitted through the eSTAR program. At this point, we're, I'm happy to say, 75% complete with that file. We've concluded most of the engineering documentation and are now starting to complete the clinical documentation for that submission. Along with the submission, in parallel, we are also working on preparing the Canadian submission, which we hope to have filed shortly after the E-STAR for FDA.

Eric Ribner: Please go ahead, Mr. Ribner.

As Mike has mentioned the de Novo timeline.

Eric Ribner: Thank you and good afternoon. Welcome to Cytosorbent's Second Quarter, 2024 Financial and Operating Results Conference call. Joining me today from the company are Dr. Phil Chan, Chief Executive Officer, Vincent Capponi, President and Chief Operating Officer, Kathleen Bloch, Chief Financial Officer, Dr. Micah Deliargyris, Chief Medical Officer, Dr. Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of Cytosorbents Europe, and Christopher Kramer, Senior Vice President of Business Development. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties.

Speaker Change: We're in the final stages of assembling the technical file that will be submitted through the star program. At this point, we're I'm happy to say, we're 75% complete with that file we've concluded most of the engineering documentation and <unk>.

Speaker Change: Now starting to complete the clinical documentation for that submission along with the submission in parallel we are also working on preparing the Canadian submission, which we hope to have filed shortly after the start for FDA is very similar so we believe we can do it in a relatively timely manner.

Vince Capponi: It's very similar, so we believe we can do it in a relatively timely manner. Hopefully, also through the Canadian submission. Generally speaking, Canadian approvals have in the past been a bit faster than U.S. FDA approvals, but of course, we can't predict that with 100 percent certainty, but we're hopeful that we will be able to get a quick approval through Canada.

Speaker Change: Hopefully also through the Canadian submission generally speaking Canadian approvals have generally in the past been a bit faster than U S FDA approvals, but.

Eric Ribner: Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the private security's litigation reform act of 1995. Actual results may differ from results discussed today, and therefore we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the FCC. Any projections asked of the company's future performance represented by management include estimates today as of August 13th, 2024, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the Operating and Financial Highlights for the first quarter of 2024 by Dr. Chan, Mrs. Bloch, Mr. Cappoti and Dr. Deliargyris.

Speaker Change: We can't predict with 100% certainty, but we're hopeful that we will be able to be able to get a quick approval through Canada.

Speaker Change: Next slide please.

Vince Capponi: Next slide, please. Globally, from a global regulatory standpoint, as part of the preparation for the Canadian submission, we have completed the MD-SAP audit, which is required for a Canadian submission. I'm happy to say that the audit went very well.

Speaker Change: Global from a global regulatory standpoint, as part of the preparation for the Canadian submission.

Speaker Change: We have completed the MD SaaS.

Speaker Change: Audit, which is required for a Canadian submission I'm happy to say that the audit went very well.

Vince Capponi: It's currently under review by DECRA, but we feel very confident that we will be approved for submission to Canada through the MD-SAP program. With respect to MDR, which affects obviously our European operations and the rest of the world, we are targeting a December 2024 submission to our notified body and have already requested the MDR audit for June of 2025. We're very confident, based on our continual successful audits throughout the product lifecycle of Cytosorb, that we will be able to achieve the MDR audit, again, meeting all the requirements which are more extensive than the MDD, but we are very confident that we'll be able to achieve approval. As Phil mentioned, the purified pump registration was received in June.

Speaker Change: It's currently under review by Dec, Rob, but we feel very confident that we will be approved.

Speaker Change: Sure.

Speaker Change: Submission to Canada through the <unk> program.

Speaker Change: With respect to MTR, which affects obviously our European operations.

Speaker Change: And rest of World, we are targeting a December 2020 for submission to our notified body.

Unknown Executive: Following the presentation, we will open the line to your questions during the live Q&A session with the rest of the management team.

Speaker Change: And have already requested the MTR audit or June of 2025.

Phillip Chan: And now it's my pleasure to turn the call over to Dr. Philip Jett. Well, thank you very much, Eric, and good afternoon, everyone, to the Q2 2024 earnings call. First, I'd like to go over our operating highlights for the quarter. First, more than a quarter-million-sided sort of device has been chemically delivered to date, helping to save many lives around the world. Second, in the second quarter, total revenue increased 5 percent to 9.9 million dollars while product sales increased by 10 percent to 8.8 million and gross product margins were solid 75 percent.

Speaker Change: Confident based on our continuous successful audits throughout the product lifecycle of Cytosorb.

Speaker Change: That we will be able to achieve the MTR audit.

Speaker Change: Again meeting all the requirements, which are more extensive than the MTBE, but we're very confident that we'll be able to achieve approval.

Speaker Change: As Phil mentioned, the purified pump registration was received in June.

Vince Capponi: Working with our partner, Medica, we were able to get that completed and able to receive the first 30 pumps, and we have the second order that will be coming in shortly here, and we are looking forward to, again, expanding that into the market. As Phil mentioned, it has received very, very good reception in the marketplace. On top of that, we've also received, after over a year and a half of effort, a registration in Taiwan, and we're looking forward to now opening up to that market. With that, I'll turn it back to you. Great Well, thanks, Vince.

Speaker Change: Working with our partner Medica, we were able to get that completed and able to receive the first 30 pumps and we have the second order that will be coming in.

Phillip Chan: Importantly, our second quarter operating loss decreased 48 percent to 3.4 million from 6.6 million a year ago. Following our 10.3 million dollar equity raised in December 2023, we secured an additional 20 million dollar credit facility with Avenue Capital Group strengthening our balance sheet. And following the quarter, we completed additional cutbacks expected to save an additional annualized $5 million in expenses going forward. Over the past five months, we have decreased our workforce by 7. 15%. Finally, our cash balance at the end of the second quarter was 14.9 million, including 8.5 million in unrestricted cash and 6.5 million in restricted cash.

Speaker Change: Shortly here.

Speaker Change: We are looking forward to.

Speaker Change: Expanding that into the market and as Bill mentioned.

Bill: Has received very very good reception in the marketplace on top of that we've also received after over a year and a half worth of effort registration in Taiwan, and we're looking forward to now opening up with that market.

Bill: With that I'll turn it back to you Phil.

Phil Chan: Great well thanks Dennis.

Phillip Chan: This year we have worked diligently to execute upon a broad turnaround strategy that is dependent on attaining a number of key objectives. You heard today that one, our guidance that we continue to expect to submit to USFDA and Health Canada for drug-absorbed ATR this quarter. And we have made excellent progress in parallel programs like MD-SAT that are critical to commercialization, for example, in Canada. Secondly, we have strengthened our balance sheet with the addition of a new debt facility from Avenue Capital and believe that if we can hit our milestones, the $20 million in capital will get us to both Health Canada and FDA regulatory decisions. Third, we remain extremely committed to cutting costs to drive efficiency and be self-sustaining.

Phil Chan: This year, we have worked diligently to execute upon a broad turnaround strategy that is dependent on obtaining a number of key objectives, you've heard today that one our guidance that we continue to expect to submit to.

Phillip Chan: Today, we are pleased to announce the start of our new chief financial officer, Peter Jay Mariani, starting tomorrow. And unfortunately, the retirement of our existing DNFO, Cappy Block, as of the end of business today.

Speaker Change: Our marketing applications to U S FDA and health, Canada for drugs or HR. This quarter and have made excellent progress in parallel programs like <unk> that are critical to commercialization for example in Canada.

Speaker Change: Secondly, we have strengthened our balance sheet with the addition of the new debt facility from Avenue capital and believe that if we can hit our milestones to $20 million in capital will get us to both health, Canada and FDA regulatory decisions.

Phillip Chan: We'll hear more from both people at the end of this meeting. We're also on track to sit marketing applications in parallel for the investigational drug reserve APR system, the FDA, as a de novo application in how Canada in this third quarter of this year. We'll hear more about that from both Mike Estell and Iris, as well as Vince Capone.

Third.

Speaker Change: We remain extremely committed to cutting cost to drive efficiency and be self sustaining and importantly, you heard that we have made excellent progress in reducing our operating loss and expect to see additional benefit from our most recently completed cost cuts.

Phillip Chan: Importantly, you heard that we have made excellent progress in reducing our operating losses and expect to see additional benefit from our most recently completed cost cuts. Fourth, our gross margins continue to be strong and are expected to expand as we grow the markets in Europe, and certainly are expected to expand further if we are able to drive U.S., FDA, and Health Canada approvals, where the gross margins for drugs or ATR are expected to be significantly higher than for cytosorbs.

Phillip Chan: In addition, we completed our MD SAP audit, which is a key requisite to Canadian commercialization.

Phillip Chan: Data from our start registry was presented at the EuroPCR 2024 conference, where it was selected as a top five finalist in the best scientific abstract competition.

Speaker Change: First our gross margins continue to be strong and are expected to expand as we grow the markets in Europe.

Speaker Change: And certainly are expected to expand further if we are able to drive U S FDA and health, Canada approval, whereas at gross margins for drug serve HR are expected to be significantly higher than for cytosorb.

Phillip Chan: And importantly, we launched a new redesign, modern consolidated corporate and product website. Lastly, we also launched our PURIFI-MDR-certified PURIFI chemo-perfusion pump, placing in fact all 30 pumps from our original order with our OEM, and are expecting delivery on the next order from our OEM very shortly. Importantly, the pump itself has received extremely well good reviews from users, citing it as very easy to use and easy to set up, and easy to implement our therapies.

Phillip Chan: And lastly, we have done a lot of work to try to increase our core Cytosorb sales growth beyond the quarter million devices that we've delivered to date. Finally, as you are aware, we have been positioning Cytosorbents for the next stage of growth, both in our existing international franchise, as well as the potential to open the U.S. and Canadian markets. This is why it has taken us so long to find the right CFO candidate to replace our esteemed retiring CFO, Kathleen Bloch.

Speaker Change: And lastly, we are have done a lot of work to try to increase our core cytosorb sales growth beyond the quarter million devices that we've delivered to date.

Speaker Change: Okay.

Speaker Change: Finally, as you are aware, we have been positioning site assortments for the next stage of growth both our existing international franchise as well as the potential to open the U S and Canadian markets. This is why it has taken us so long to find the right CFO candidate to replace our steamed retiring CFO Kathy Bloch.

Kathleen Bloch: With that, let me turn it over to Cathy Block, our current financial officer, Cathy. Thank you, Phil, and hello to everyone on the call. Today, I will discuss our second quarter, 2024 financial result, including revenues and gross margins. And additionally, I will provide an update on our working capital and cash runway. I just heard product revenue was approximately 8.8 million in the second quarter of 2024, compared to 8.1 million dollars in the second quarter of 2023, an increase of approximately $800,000 for 10%.

Phillip Chan: Kathy has gone above and beyond the call of duty, selflessly coming back from retirement last August to resume her former full-time CFO role and, in the intervening 12 months, helping to secure the future of the company with two key financings and orchestrating our cash conservation strategy. With her retirement announced today, she caps an outstanding CFO career and will continue as a consultant to help manage the smooth transition for our newly appointed CFO, Peter Mariani.

Speaker Change: Jackie has gone above and beyond the call of duty Selflessly coming back from retirement last August presume performer full time CFO role and in the intervening 12 months, helping to secure the future of the company with two key financings and orchestrating our cash conservation strategy.

Speaker Change: With her retirement announced today to caps, an outstanding CFO career, and we will continue as a consultant to help manage the smooth transition to our newly appointed CFO Peter Mariani on behalf of everyone at site Assortments, we thank cathy for more or more than 11 years of dedication and leadership at the company as a trusted colleague and.

Phillip Chan: On behalf of everyone at Cytosorbents, we thank Kathy for her more than 11 years of dedication and leadership at the company as a trusted colleague and friend with so many contributions that have helped us achieve the success we have today and wish her an enjoyable, relaxing, and well-deserved retirement. With that, I'd like to turn the call over back to Kathy so she can have some final words.

Kathleen Bloch: Second quarter, 2024 grant revenue was approximately $1.1 million, compared to approximately $1.3 million in 2023, and this decrease was due to the conclusion of several grants during 2023. Total second quarter, 2024 revenue, which includes both product sales and grant revenue, was approximately $9.9 million, as compared to $9.4 million in 2023. And product gross margins on devices and device accessories with 75% in the second quarter of 2024, compared to product gross margins of 74% in 2023.

Speaker Change: Friend with so many contributions that have helped us achieve the success we have today.

Speaker Change: Sure and enjoyable relaxing and well deserved retirement.

Speaker Change: With that I'd like to turn the call over back to Cathy to have.

Speaker Change: Some final words Kathy.

Kathleen Bloch: Oh, thank you so much, Phil. I would like to take this opportunity to thank the Board of Directors, my colleagues on the management team, and really all the employees of Cytosorbents for their support and collaboration, which have made my 11-year tenure as CFO so very enjoyable. I especially want to thank the finance and accounting team members who have supported me in the US and in the EU. I would like to thank you for your extraordinary dedication, talent, and contributions to the company.

Cathy: Thank you so much Phil.

Cathy: I would like to take this opportunity to thank the board of directors Michael.

Cathy: My colleagues on the management team and really all of the employees at <unk> for their support and collaboration which have made my 11 year tenure as CFO, so very enjoyable.

Speaker Change: I, especially want to thank the finance and accounting team members.

Kathleen Bloch: Next slide, please, for the first half of 2024, Cytosorb product revenue was approximately $17.8 million compared to approximately $16 million for the first half of 2023, which is an increase of approximately $1.8 million or 12%. First half 2024 grant revenue was $1.8 million as compared to $2.9 million again due to the conclusion of several grants in 2023 and product growth margins on devices and accessories were 74% in the first half of 2024 compared to 71% in the first half of 2023 as we continue to realize more operating efficiencies at our new manufacturing plant in Princeton, New Jersey.

Speaker Change: It may in the U S and in the EU well I'd like to thank you for your extraordinary dedication talent and contributions to the company.

Kathleen Bloch: And I wish everyone, including our new CFO, Pete Mariani, the best of success as we head towards the exciting upcoming job of commercialization of drugs or of ATR in the United States. So thank you all so much. Thank you, Kathy. And with that...

Speaker Change: And I wish everyone, including our new CFO Pete Mariani.

Speaker Change: It's a success as we head towards the exciting upcoming job of commercialization of John served ACR in the United States. So thank you all so much.

Pete Mariani: Thank you Kathy.

Pete Mariani: And with that.

Phillip Chan: I'd like to welcome Pete Mariani to the Cytosorbents team. Pete is a seasoned and accomplished medical device CFO whose many successes at high-growth publicly traded companies such as Oxygen, Hanson Medical, and Guiding Corporation speak for themselves. He has consistently demonstrated a disciplined and rigorous approach to financial management, operational excellence, and strategic development both domestically and internationally that aligns perfectly with our next phase of expected rapid growth. Importantly, Cytosorbents today shares many similarities to Oxygen when Pete joined as CFO in 2016, including with respect to its size, revenue base, U.S. market opportunity, and high-margin business model.

Speaker Change: I would like to welcome Pete Mariani with Cytosorb and his team Pete is a seasoned and accomplished medical device CFO.

Speaker Change: Any successes at high growth publicly traded companies such as ask Jim Henson Medical and guide incorporation speak for themselves. He has consistently demonstrated a disciplined and rigorous approach to financial management operational excellence and strategic development, both domestically and internationally that aligns perfectly with our next phase of expected.

Kathleen Bloch: Next slide please. The blue bars on this chart represent our annual product sales for the trailing 12 month periods ending June 30th for each year 2018 to 2024. We know that for the years 2020, 2021 and 2022, sales were very favorably impacted because Cytosorbents used to treat COVID-19 patients and of course this usage ceased following the containment of the pandemic in the years ending June 30th, 2023 and 2024. If we take a look at the orange trend arrow which tracks along core non-COVID-19 revenue, what we see is that the post-COVID-19 12 month periods end at June 30th, 2023 and 2024 continue to show positive growth in our core non-COVID-19 product sales.

Speaker Change: Rapid growth.

Speaker Change: Shortly cytosorb is today sure has many similarities to oxygen when Pete joined as CFO.

Speaker Change: In 2016, including with respect to its size revenue base U S market opportunity and high margin business model. He has proven his ability to fund scale and manage impressive growth as.

Phillip Chan: He has proven his ability to fund, scale, and manage impressive growth. As we pursue U.S. and Canadian marketing approval for DrugSorb ATR and drive our OUS business with Cytosorb, we believe Pete will be an outstanding fit where his deep global experience and insight are expected to be vital to our success. We are thrilled to have Pete join Cytosorbents and be a key member of the management team. And in the coming months, we hope to reach out to many of you to introduce you firsthand. With that, let me have Pete say a few words here as we wind up this call.

Speaker Change: As we pursue U S and Canadian marketing approval for drugs are of HCR and drive our <unk> business with Cytosorb, We believe Pete will be an outstanding fit where his deep global experience and insight is expected to be vital to our success. We are thrilled to have Pete joined side Assortments and be a key member of the management team.

Speaker Change: And in the coming months, we hope to reach out to many of you.

Speaker Change: To introduce you firsthand to Pete with that let me have Pete.

Speaker Change: Few words here as we wind up this call peak.

Kathleen Bloch: Our year over year trailing 12 month sales for the period ending June 30th, 2024 increased by 9.5% compared to the trailing 12 month sales for the period end at June 30th, 2023. Additionally, excluding the impact of the COVID-19 sales in 2020, 2021 and 2022 are overall keger for the six years end at June 30th, 2024 is a respectable 11.2%. I also want to point out for a moment that the green line which tracks our year over year gross margins indicates a decline in 2022, while we transition manufacturing operations to our new facility.

Pete Mariani: Thank you, Phil. I appreciate the warm welcome. I appreciate your trust in me for creating this opportunity for me.

Pete Mariani: Thank you Phil I appreciate the warm welcome I appreciate the trust you.

Pete Mariani: It is great to be out with all of you as investors today as well. I am excited to join Cytosorbents at this pivotal time in its history. You know, I've had the great privilege to be part of some of the most significant advancements in medical technology over the years, including advancements in cardiac stents, cardiac rhythm management, medical robotics, laser cataract therapy, and, of course, NERVR. Cytosorbents blood purification therapy is a natural extension of, and I am looking forward to partnering to further develop, execute, and scale our long-term growth strategy and bring improved. I look forward to meeting with many of you in the near future.

Pete Mariani: <unk>.

Pete Mariani: Sure.

Speaker Change: Creating this opportunity for me.

Speaker Change: It is great to be out with all of you as investors today as well.

Phillip Chan: Thanks again. Thanks very much, Pete. That concludes our prepared remarks. Operator, please open the call up for the Q&A session. Just let me remind you, as Pete has not officially started yet until tomorrow, he will not be participating in the Q&A session. Operator.

Speaker Change: Im excited to join China Assortments at this pivotal time in history.

Speaker Change: I've had the great privilege to be part of some of the most significant advancements in medical technology over the years, including advancements in cardiac stents cardiac rhythm management medical robotics laser cataract therapies and of course nerve repair.

Speaker Change: Cytosorb is blood purification therapies is a natural extension.

Speaker Change: And I am looking forward to partners.

Kathleen Bloch: Our second quarter, 2024 gross margins continue to show improvement at 75% and these margins are approaching the levels that we had prior to our move to the new facility. With greater volumes, we expect to show further improvements in product gross margins as we continue to realize additional manufacturing efficiency. As of June 30th, 2024, we have 14.9 million in cash, which includes 6.5 million of restricted cash and $8.5 million in unrestricted cash.

Speaker Change: Further develop execute and scale, our long term growth strategy.

Speaker Change: <unk> improved.

Speaker Change: Hospitals.

Speaker Change: And of course, I'll look forward to meeting with many of you in the near future.

Phil Chan: Thanks again Phil.

Pete Mariani: Thanks, very much Pete.

Speaker Change: That concludes our prepared remarks, operator, please open the call up for the Q&A session.

Speaker Change: To remind you as Pete has not officially started until tomorrow, he will not be participating in the Q&A session.

Speaker Change: Operator.

Operator: Thank you.

Operator: Thank you. At this time, if you have a question, please press star 1 on your touchtone phone. If you would like to withdraw your question, press star 1 again. Please make sure that your mute button is turned off to allow your signal to reach our equipment.

Speaker Change: At this time, if you have a question. Please press star one on your Touchtone phone.

Kathleen Bloch: We believe that unrestricted cash on hand is sufficient to fund the company's operations through the quarter of 2025. We have been successful in our efforts to strengthen our balance sheet and reduce operating expenses. On our last call, we indicated that the company was actively pursuing alternative sources of capital. And in June 2024, we entered into a loan and security agreement with the avenue group of funds to provide a total of 20 million in debt financing.

Speaker Change: If you would like to withdraw your question Press Star One Inc. Second time please.

Speaker Change: Please make sure that your mute button is turned off to allow your signal to reach our equipment.

Operator: And again, it is star number one if you would like to ask a question. And your first question comes from the line of Michael Sarkone with Jeffreys. Your line is open.

Speaker Change: And again it is star one if you would like to ask a question.

Speaker Change: And your first question comes from the line of Michael Sarcone with Jefferies. Your line is open.

Michael Sarkone: Hey, good afternoon, and thanks for taking the questions. Just to start, congratulations to both Kathy and Pete. Kathy, it's been great working with you. I hope you have a great retirement, and Pete, I'm looking forward to working with you again. All right, so the first one for, I guess, Phil or Mike is, you know, you're on track for the FDA and Health Canada submission for DrugZorb. Can you just give us an update on how you're feeling about approval?

Michael Sarcone: Hey, good afternoon, and thanks for taking the questions.

Michael Sarcone: Just the star Congrats to both Cathy Cathy it's been great working with you all of you have a great retirement and Pete looking forward to working with you again.

Kathleen Bloch: 10 million was immediately available under the facility and 5 million, which is included in our restricted cash, is subject to release by March 31st, 2025, provided that the FDA has accepted the company's application for review with respect to drug source ATR and that the company has received a minimum of 3 million in debt proceeds from the sale of its equity securities after the closing date. The restricted cash will be released on a dollar-for-dollar basis for equity raised between 3 million and 5 million.

Michael Sarcone: Oh.

Speaker Change: Alright, So I guess the first one for I guess for either sale or or Mike as you are on track for the FDA and health, Canada submission for drugs or can you just give us an update on how youre feeling about approval, maybe can you give us an update on any conversations you've had with the regulators, particularly the FDA more recently.

Phillip Chan: Maybe you could give us an update on any conversations you've had with the regulators, particularly the FDA, more recently? Thanks very much, Michael. Micah, would you like to take that?

Michael Sarcone: Yes.

Michael Sarcone: Thanks, very much Michael.

Kathleen Bloch: And then there's another tranche of 5 million, which may be dispersed at the company's request between July 1st, 2025 and December 31st, 2025, provided that the company received FDA marketing approval of its drug source ATR application. Conservation of cash remains a top corporate priority. We have reduced our head count, adjusted our spending, and taken other measures to reduce our quarterly cash burn in 2024. Crosscuts taking previously have reduced our loss from operations, from $6.6 million in the second quarter of 2023 to $3.4 million in the second quarter of 2024, a 48% decrease.

Michael Sarcone: Mike would you like to take that.

Efthymios Deliargyris: Sure, and thanks Michael for the question. As we have discussed previously, we feel that the STAR-T pivotal trial does provide the necessary information to be able to execute the necessary benefit-to-risk analysis. And I think, As we have highlighted in previous calls and stated during our own corporate webinars, the STAR-T data has helped us identify more specifically the intended target population, and as we discussed before, we have identified that to be those patients undergoing a coronary artery bypass operation and also the intended potential benefit associated with the use of the device. So in that regard, we believe that the state itself can, as a state alone, support a robust benefit-risk analysis.

Michael Sarcone: Sure.

Michael Sarcone: Thanks, Michael for the question.

Speaker Change: As we have discussed.

Speaker Change: Previously we feel that.

Speaker Change: Let's start the pivotal trial does provide the necessary information to be able to execute the necessary benefit to risk analysis and think.

Kathleen Bloch: In July of 2024, we enacted another round of cost cuts, which are designed to reduce the company's annual cash burn by an additional $5 million.

Speaker Change: We haven't highlighted in previous calls and stated.

Speaker Change: No.

Speaker Change: Our corporate global knowledge is that south deep data has helped us identify.

Speaker Change: More specifically, we intend to target population and as we discussed before we have identified that could be those patients undergoing coronary artery bypass operation and also maybe dependent.

Speaker Change: Potential benefit associated when they're using the device.

Speaker Change: So in that regard we believe that.

Speaker Change: Hello.

Vincent Capponi: That will conclude my remarks for today, and at this time, I'm delighted to turn the call over to our president and keep operating officer, Vince Capponi. Go ahead, Vince. Thank you, Kathy.

Kevin Kevin as a stand alone can support a robust benefit risk analysis.

Efthymios Deliargyris: In addition, as I shared today on the call, the accumulating real-world evidence that is now captured systematically in a high-quality registry such as the STAR Registry will, we believe, be an important supplement to our conversations with the agency. Having said that, anytime you submit an application, you have to wait, obviously, for the review and the comments from the agency. We have not had any additional discussions with the agency since our last call, so there's no update on that front, but we do believe that the application will provide the necessary information for a very productive and collaborative interaction with the agency and allow them to proceed with the necessary benefit-risk analysis. Thanks, Micah. So then, you know, maybe one or two for Taffy.

Speaker Change: Additionally, as I say today on the call the accumulated in the real world evidence that is now capturing systematically.

Speaker Change: High quality registry.

Speaker Change: Registry, we believe will be an important supplement.

Speaker Change: In our conversations with the agency.

Speaker Change: Having said that.

Vincent Capponi: So, for the, I'd like to borrow the clinical. Yeah, I think Micis is on the call.

Speaker Change: Yeah.

Speaker Change: Anytime you submit an application you have to wait obviously pulled the total review and the comments from the agency we have not had any additional disk.

Efthymios Deliargyris: Micis, would you like to take the first part of this? Sure, thanks, Phil. Thanks, Vince.

Speaker Change: Discussions with the agency since our last call.

No.

Speaker Change: Update on that.

Efthymios Deliargyris: As you heard, and welcome to everybody on our call this afternoon. As you heard from Phil previously, the regulatory submissions for our investigation will venture aTR system as a top priority for the company. And we are happy to report that we will track according to previously stated timelines. The start key clinical data will be presented earlier this year. The top line results and the final data analysis has been completed. And in fact, the clinical study report that contains all this information is in the final stage of development and publishing.

Speaker Change: But we do believe that the application will provide the necessary Inc.

Speaker Change: Information flow.

Speaker Change: Productive and collaborative.

Speaker Change: Interactions with the agency and to allow them to proceed with the necessary benefit risk analysis.

Speaker Change: Got it thanks, Mike and then maybe one or two for Cathy just on the gross margins.

Kathleen Bloch: Just on gross margins, the press release today mentioned the line of sight to 80%. You know, can you talk about what gets us to 80%, maybe what level of sales might get you there? And then, just kind of the second part of that is more in the near term. How are you thinking about gross margins in the second half of 24? Yeah, I think, actually, Michael...

Speaker Change: This release today mentioned line of sight to 80% can you talk about.

Speaker Change: What gets us to 80%, maybe what level of sales might get you. There and then just kind of the second part of that is more in the near term. How are you thinking about gross margins in the second half of 'twenty four.

Efthymios Deliargyris: This will represent the main source for the probable benefit to risk analysis that will be at the crux over the novel submission to the FDA. We also intend to include in the submission supportive supplementary data with the real world evidence of a high category removal during cabbage that was presented from the start as a senior recent European conference. And I'm going to spend the next slide giving you a little bit more visibility on that data.

Speaker Change: Yes, I think actually Michael.

Kathleen Bloch: Okay, Kathy, go ahead. Yeah, Michael, obviously, volume is going to, any amount of volume growth is going to increase our product growth margins, and they should grow up, go up very rapidly. I expect that at 15 to 20% year-over-year growth, we should see approaching 80% or at 80%. So it should be relatively straightforward.

Speaker Change: Okay. Kathy go ahead please.

Kathy Bloch: Yeah. So Michael obviously volume is going to any any amount of volume growth is going to increase.

Our product gross margins and that they should grow up fill up very rapidly.

Efthymios Deliargyris: The completion of the technical files is leveraging the electronic e-star platform. And as already stated, we will track for the FDA to novel submission in September with the health care and the submission leveraging the same platform to follow sooner after. This is a reminder to our listeners, dogs of aTR is an FDA breakthrough designated device which means that its submission will be associated with a priori review. A recent analysis suggested that the novel applications of breakthrough designated devices have an estimated 25% faster reviewed timelines compared to regular applications.

Speaker Change: Expected at 15% to 20%.

Speaker Change: Year over year growth, we should see approaching 80% or at 80%.

Kathleen Bloch: Of course, once we get approval in the U.S., the margins will be even higher, and then we will see exceptional growth rates in our overall growth margins. Got it. Thanks, Andy.

Speaker Change: It should be relatively straightforward of course once we get approval in the U S. The margins will be even higher and then we would see exceptional growth rates in our in our overall gross margins.

Efthymios Deliargyris: And as such, pending the FDA agreement of the demobil pathway submissions and the associated priority review of the breakthrough status of the drums of aTR device, this means that we could have the potential FDA decision within six to twelve months following submission.

Speaker Change: Got it thanks.

Speaker Change: Oh, sorry, guys.

Vince Capponi: I'm sorry, Michael. You know, one of the people responsible for helping to drive our gross margins higher is Vince Capponi, our President and Chief Operating Officer. Maybe Vince, you wanted to give a little commentary on how our manufacturing processes have improved and our confidence that we can get to that 80% on a blended basis. Thanks, Phil. So we've made a lot of improvements in the last year in the operation; we've actually reduced the amount of Cytosorbents to help offset some of the lower volumes that we've had. So, with the improvements that we're continually making here, we expect that we're going to continue to see improving margins. But as Kathy said, it's really dependent upon the volume as well.

Speaker Change: Michael.

Speaker Change: <unk>.

Speaker Change: One of the people responsible for helping to drive our gross margins higher <unk>, our president and Chief operating officer.

Speaker Change: Maybe Vince you wanted to give a little commentary on.

Speaker Change: On her.

Speaker Change: Our manufacturing processes have improved.

Speaker Change: And our confidence that.

Vince Cassone: We can get to that 80% on a blended basis.

Vince Cassone: Thanks, Phil.

Speaker Change: So we've made a lot of improvements in the last year and the operation we've actually reduced.

Efthymios Deliargyris: Next slide please. Earlier this year we had the privilege of being present and presenting on one of the largest cardiovascular purposes in the world, the UROPCR meeting that is held annually in Paris. During this meeting with over 12,000 attendees, data from our staff registry was selected for an oral presentation. And at the end of the conference, as Phil has already alluded to, the scientific committee awarded the Star Registry data at top five spot in their final, as a pilot in their best scientific abstract competition.

Speaker Change: The labor requirement by almost 30% and part of the operation to filling processes.

Speaker Change: To help offset some of the lower volumes that we've had so far.

Speaker Change: With the improvements that we're continually making here.

Speaker Change: We expect that.

Speaker Change: Going too.

Speaker Change: Continue to see improving margins, but as Cathy said, it's really dependent upon the volume as well.

Vince Capponi: I think the other thing we need to keep in mind is that as part of our controlling costs, we're actually lowering our inventories. We're doing that by slowing down production so that we can conserve cash as we go through FDA approval. So to Kathy's point, when we get to the 15% to 20% growth rate, we certainly have a line of sight to that 80-plus percent, plus approval, obviously, for drugs over ATR with much higher ASPs than the current Cytosorb. We'll certainly contribute to that. And it's also based on the MIPS of direct sales, the higher, if you will, gross margin of direct sales versus distributor sales, which are lower margins than the direct.

Cathy: The other thing we need to keep in mind is that as part of our controlling costs, we're actually lowering our inventories and we're doing that by slowing down the production. So that we can conserve the cash.

Efthymios Deliargyris: So, what do we show within the Star Registry that we believe is going to be a supportive piece to our regulatory submissions? As you know, removal of that cargo word during cardiac surgery with cardiovascular bypass is an approved indication with Cytosorb 2020. And it increasingly being used as standard of care in many parts centers in Europe. In the Star Registry, we're collecting high fidelity data of this everyday real world use of the device for a Google of that cargo word.

Kathy Bloch: As we go through the FDA approval, so to Kathy's point and when we get to the 15% to 20% growth rate. We certainly have line of sight to that 80 plus percent.

Kathy Bloch: And approval, obviously for drugs or ATR with.

Kathy Bloch: With much higher.

Kathy Bloch: Asps than the current Cytosorb will certainly contribute to that but it's also based on the mix.

Kathy Bloch: The direct sales are higher if you will gross margin direct sales versus.

Distributor, which are lower.

Kathy Bloch: Margins in the direct so again theres a lot of factors in that but what we're doing is we are continuing to improve the operation and again, it's growing as Kathy mentioned, whether it be very dependent upon volume, but we do have a number of.

Efthymios Deliargyris: In the care analysis, we had data from five different countries, 23 investigated sites, totaling a 102 isolated cabbage patients. This is a population that we have discussed previously will be the target intended population for our submissions. For these patients, we're operated very soon since the last dose of that cargo word, or the mean of 22.8 hours. Just as a reminder, guidelines recommend that these patients should wait for at least 72 hours.

Vince Capponi: So again, there are a lot of factors in that, but what we're doing is we are continuing to improve the operation, and again, it's going, as Kathy mentioned, going to be very dependent upon volume, but we do have a number of cost improvements that we're slowly implementing in the process here to hopefully get us back to that 80% soon. Great, very helpful. Thanks for all the color.

Kathy Bloch: Cost improvements that were.

Kathy Bloch: Slowly implementing in the process here, so I hope hopefully get us back to that 80% soon.

Speaker Change: Great very helpful. Thanks for all the color.

Michael Sarcone: Thanks, very much Michael.

Phillip Chan: Thanks very much. And your next question comes from the line of Yuan Zhi with B Riley, your line. Congratulations on a good quarter, and thank you for taking our questions. Casey, congratulations on the retirement, and Pete, welcome on board. Exciting time for you to join here at Cytosorbents. Maybe Phil, I'll start with you.

Speaker Change: And your next question comes from the line of <unk> <unk> with B Riley Your line is open.

Efthymios Deliargyris: But in every day practice, many times this is not feasible. So, these patients were operated much shorter when they were compared to what the guidelines recommend. The device was used for an average of an hour and a half during the C2B run of the operation, which is almost identical to the time we saw in Star T. Again, very, very comparable population and device use in these two data sets. Where we present in Paris was the fact that in the Star Registry, we observed bleeding rates.

Speaker Change: Congrats on a good quarter and thank you for taking our question.

Speaker Change: Congrats on the retirement and the ph welcome onboard exciting time for you to draw here after et cetera, and maybe if ill start with you can you provide more color what factor.

Yuan Zhi: Can you provide more color, what factors pushed revenue to grow in the second quarter, and do you see similar trends in 3Q? Any comments on volume versus price change? Yeah, I think that in the second quarter, what we saw was strength in the distributor and partner channel. I think that it coincided a little bit with the launch of our purified pump. And as we told you previously, the purified pump is intended to help establish an infrastructure of blood purification capabilities in countries where they don't have well-established dialysis infrastructures. And so this typically is found in our distributor territories that are not necessarily in Western Europe, for example, as with Germany and Italy and France and the U.K. and Spain, for example.

Phillip Chan: So I think that the shrink in that particular channel was good, and our hope is that, you know, our third quarter, which is typically a seasonal quarter for us because of holidays in Europe, will be a respectable quarter. Any comments on the volume versus the price change? year-over-year. You know, as Vince mentioned, the transfer prices to distributors are typically lower than our ASPs for direct sales. But, you know, on the other hand, we benefit from having a lower cost of distributor sales because we don't incur those direct costs of a sales force ourselves.

Speaker Change: Revenue to grow in the second quarter and do you see similar trends in <unk> and then comment on the volume versus the price change will be helpful.

Efthymios Deliargyris: Now, we're substantially lower than those reported in the European cabbage registry, among patients on that cargo word, being operated, either very early within 24 hours or later on, within 24 to 72 hours, but always not having completed the recommended washer. You can see the rates presented on the slide. And in fact, the most patients who waited for at least a day before being operated, you will see a substantial reduction of severe bleeding to very, very low rates equivalent to those seen in patients not operated or not on the cargo level, having a cabbage operation. Importantly, none of these sites are investigated and reported in device-related adverse events. The data from the cabbage registry represent a very good benchmark for us to compare the rates from the Star Registry.

Phillip Chan: That being said, our pricing has been fairly stable across the board, both in transfer pricing as well as in direct sale pricing as well. But what you'll see from the Q2 results is that the distributor channel was stronger for this quarter. Got it. And the following question is, how will the delivery of the purified pump contribute to the revenue growth in 3Q, either by itself or by helping the sales of cytosorbent characteristics without the, Can you provide more color?

Speaker Change: Yes, I think that in the second quarter.

Speaker Change #100: We saw was strength in the distributor and partner channel.

Speaker Change #101: It coincided a little bit with the launch of our purified pump and as we told you previously the purified pump is intended to help establish an infrastructure of.

Speaker Change #100: <unk>.

Speaker Change #100: Blood purification capabilities.

Speaker Change #100: In countries, where they don't have well established dialysis infrastructures and so.

Speaker Change #100: This typically.

Speaker Change #100: Is found in.

Speaker Change #100: Our distributor territories that are not necessarily.

Speaker Change #100: In Western Europe for example, as with Germany, and Italy and France.

Speaker Change #100: The U K and Spain for example.

Vincent Capponi: And as such, noted previously, this was very well received at the scientific conference, and we're very pleased to receive the designation at the top five final, it's for the best scientific And with that, I would like to take a call over to Vince to give you a regulatory update. Thank you, Mikeus. This is Vince Capponi and the data everybody. As Mikeus mentioned, the Denobo timeline, we're in the final stages of assembling the technical file that will be submitted through the Start program.

Speaker Change #100: So I think that.

Speaker Change #102: Shrink in that particular channel was good.

Speaker Change #102: And our hope is that.

Speaker Change #102: Our third quarter.

Speaker Change #102: Which is typically a seasonal quarter for us because of.

Speaker Change #102: Holidays in.

Speaker Change #102: Europe will be.

Speaker Change #102: A respectable quarter.

Speaker Change #103: Any comments on the volume versus the price trend.

Speaker Change #104: Year over year.

Speaker Change #104: Yes.

Vincent Capponi: At this point, we're happy to say we're 75% complete with that file. We've concluded most of the engineering documentation and now starting to complete the clinical documentation for that submission. Along with the submission in parallel, we are also working on preparing the Canadian submission which we hope to have filed shortly after the E-Star for FDA. It's very similar so we believe we can do it in a relatively timely manner. Hopefully also through the Canadian submission, generally speaking Canadian approvals have generally in the past been a bit faster than US FDA approvals. But of course, we can't protect that with 100% certainly, but we're hopeful that we will be able to be able to get a quick approval through Canada.

Vince Cassone: As Vince mentioned.

Speaker Change #105: The <unk> the transfer prices to distributors are typically lower than our asps to for direct sales.

Vince Cassone: But on the other hand, we benefit from having a lower cost of distributor sales because we don't incur those direct costs of our sales force ourselves.

Speaker Change #106: That being said our pricing has been fairly stable across the board both in transfer pricing as well as in.

Speaker Change #106: Direct sale pricing as well.

Speaker Change #106: But what Youll see from Q2 results is that.

Speaker Change #106: The distributor channel was stronger.

Speaker Change #106: For this quarter.

Speaker Change #107: Got it and a following question is how will the delivery of our <unk> com contributed to the revenue growth rate Q, either yourself or how can the sales of Cytosorb green territories without the infrastructure can you provide more color on that.

Vincent Capponi: Next slide please. Global from a global regulatory standpoint, as part of the preparation for the Canadian submission, we have completed the empty SAP audit which is required for a Canadian submission. I'm happy to say that the audit went very well. It's currently under review by Decra, but we feel very confident that we will be approved for submission to Canada through the MBSAP program. With respect to MDR, which affects obviously our European operations and rest of world, we are targeting a December 2024 submission to our notified body and have already requested the MDR audit for June of 2025.

Phillip Chan: Yes, um, you know, we have a different model for rolling out the purified pump in different parts of the world. And I think, though, the thing to keep in mind is that we're not looking to make money on the purified pump. This is very much the printer-printer-cartridge model, where the printer is provided at a relatively low cost with the goal of driving disposable revenues from the printer cartridge.

Speaker Change #107: Yes.

Speaker Change #108: We have a different model for rolling out the purified pump in different parts of the world.

Speaker Change #109: And I think the thing to keep in mind is that we're in.

Not looking too.

Speaker Change #109: Necessarily.

Speaker Change #109: Make money on the purified pump Bryan this is very much the printer printer cartridge model, where the printers provided at relatively low cost.

Speaker Change #109: With the goal of driving disposable revenues as the printer cartridge. This is very similar to our our approach to the purified pump again, the purified pumped is there to establish this infrastructure blood purification capabilities does that they can use more of our cytosorb devices and so on.

Phillip Chan: This is very similar to our approach to the purified pump. Again, the purified pump is there to establish this infrastructure of blood purification capabilities so that they can use more of our cytosorb devices. And so, I think moving forward, the goal is to really drive Cytosorb volume rather than, you know, a typical hardware company trying to drive sales from hardware.

Vincent Capponi: We're very confident based on our continual successful audits throughout the product life cycle of cytosorb that we will be able to achieve the MDR audit again meeting all the requirements which are more extensive than the MDD. But we are very confident that we'll be able to achieve approval.

Speaker Change #109: I think moving forward.

Speaker Change #109: Ah.

Speaker Change #109: The goal is to really drive cytosorb volume rather than.

Speaker Change #109:

Speaker Change #109: Typical hardware company trying to drive sales from hardware if that makes sense.

Vincent Capponi: As Phil mentioned, the purified pump registration was received in June. Working with our partner Medica, we were able to get that completed and able to receive the first 30 pumps. And we have the second order that will be coming in shortly here. And we are looking forward to again expanding that into the market. And as Phil mentioned, it has received very, very good reception in the marketplace.

Speaker Change #110: Got it that's very helpful. Thank you.

Speaker Change #110: Sure.

Yuan Zhi: And your next question comes from the line of Tom Kerr with Zach's Small Cap Research. Your line. Good afternoon, guys, and congratulations, Kathy, and thanks for all your detailed explanations and quick response to questions.

Speaker Change #110: And your next question comes from the line of Tom.

Speaker Change #111: Care with Zacks small cap research your line is open.

Tom Care: Good afternoon, guys and congratulations Kathy and thanks for all your detailed explanations and quick response to question. So I appreciate it.

Tom Kerr: Can you clarify? I'm unclear on the Canadian submission because, originally, I thought it was going to be jointly submitted. Now it's going to happen after the FDA submission. So it's a fourth quarter event. I'm sorry. I don't have the slides in front of me.

Tom Care: Can you clarify I'm unclear on the Canadian submission because originally I thought it was going to be jointly now it's going to happen after the FDA submission.

Vincent Capponi: On top of that, we've also received after over a year and a half worth of effort registration in Taiwan. And we're looking forward to now opening up with that market.

Speaker Change #113: A fourth quarter event I'm, sorry, I don't have the slides in front of me, but can you clarify when that is expected to be submitted to the <unk>.

Phillip Chan: With that, I'll turn it back to you, Phil.

Phillip Chan: But can you clarify when that is expected to be submitted to the Canadian Authority? Yeah, I think that what you heard us say today is that we expect to get both of those submissions in in the third quarter with the prioritization, of course, for the U.S. FDA application. So, you know, I think that we remain on track to try to achieve that, but we certainly will be prioritizing the FDA submission first. Okay, so it's possible the Canadian submission could roll out in the fourth quarter, but that's not your goal, correct? That's not, yes, that's not the goal.

Speaker Change #114: Canadian authorities.

Phillip Chan: Great. Well, thanks, Vince. This year, we have worked diligently to execute upon a broad turnaround strategy that is dependent on attaining a number of key objectives. You've heard today that one are guidance that we continue to expect to submit to our marketing applications to U.S. FDA and help Canada for drugs or H.R. This quarter and have made excellent progress in parallel programs like MDF that are critical to commercialization, for example, in Canada.

Speaker Change #115: Yes, I think what you heard US say today is that we expect to get both of those submissions in in the third quarter with the prioritization of course for the U S FDA application.

Speaker Change #114: No.

I think that we remain on track to try to achieve that.

Speaker Change #116: We certainly will be prioritizing the FDA submission first.

Speaker Change #117: Okay. So it's possible that Canadian submission could roll in the fourth quarter, but that's not your goal correct.

Phillip Chan: Secondly, we have strengthened our balance sheet with the addition of a new debt facility from Avenue Capital and believe that if we can hit our milestones, the $20 million in capital will get us to both health Canada and FDA regulatory decisions. Third, we remain extremely committed to cutting costs to drive efficiency and be self-sustaining. Importantly, you heard that we've made excellent progress in reducing our operating loss and expect to see additional benefit from our most recently completed cost cuts.

Speaker Change #117: Yes, that's not the goal and I think that where we.

Phillip Chan: And I think that we're reiterating our guidance for the third quarter submission. Okay. All right. Sorry, Mr. Jennings did that.

Speaker Change #117: We are reiterating our guidance of.

Speaker Change #117: Third quarter submission for both.

Tom Kerr: A couple financial questions on the R&D down to 1.5 million. Is that just the comparison against the STAR-T trials a year ago, or is there something else in there?

Speaker Change #118: Okay, Alright, sorry, I misunderstood that.

Speaker Change #119: Couple of financial questions on the R&D down to $1 5 million is that just the comparison against the 30 trials a year ago or was there anything else in there.

Kathleen Bloch: Um, you know, there's been a number of... Kathy, you may be on mute. Please go ahead. Oh, thanks, Phil. You know, the largest impact is coming from the STAR-T trial completion, so we're not incurring those hospital costs and patient costs that are associated with the trial. There have also been, there's also been a strong focus of our R&D efforts on exclusively grant-related activities, where their costs of those personnel are funded through the grant, so we have been prioritizing that, making sure that that is the focus of the team to try to cut down on any non-grant R&D costs. So, both of those are contributing, but the highest impact is coming from the STAR-T trial being complete. The comparisons, right?

Speaker Change #120: Yes, Sir.

Speaker Change #120: Number.

Cathy: Okay go ahead Cathy.

Phillip Chan: Fourth, our gross margins continue to be strong on our expected to expand as we grow the markets in Europe and certainly are expected to expand further if we are able to drive U.S. FDA and help Canada approval where the gross margins for drugs or H.R, will be significantly higher than per side of sort. Lastly, we have done a lot of work to try to increase our core side of sort sales growth beyond the quarter million devices that we've delivered to date. Finally, as you are aware, we have been positioning side of sorbans for the next stage of growth, both our existing international franchise as well as the potential to open the U.S, and Canadian markets.

Cathy: Kathy you may be on mute. Please go ahead.

Kathy Bloch: Thanks, Phil.

Speaker Change #121: The largest the largest impact is coming from.

Speaker Change #121: T trial completion, so we're not incurring those.

Speaker Change #121: Hospital costs and patient costs that are associated with the trial. There has also been Theres also been a strong focus of our R&D efforts on exclusively grant related activities.

Speaker Change #121: Are there cost of those personnel are funded through the grant so we have been prioritizing that.

Speaker Change #121: Making sure that that is a focus of the team to try to cut down in any any.

Phillip Chan: This is why it is taking us so long to find the right DFO candidate to replace our esteemed retiring CFO back in block. Kathy has gone above and beyond the call of duty, selflessly coming back from retirement last August, resumed her former full-time CFO role and then the intervening 12 months helping to secure the future of the company with two key financing and orchestrating our cash conservation strategy. With her retirement announced today, she caps an outstanding CFO career and will continue as a consultant to help manage the smooth transition of our newly appointed CFO, Peter Mariani.

Speaker Change #121: Any non grant R&D costs. So both of those are contributing but the highest impact is coming from that.

Speaker Change #121: Our key trial being complete.

Kathleen Bloch: So, is that a good number to use for the second half of the year, $1.5 million per quarter? I think we did, yeah. One last big picture question for Phil or anybody: the Taiwan thing seems interesting. Can you talk about that, what the size of that business could be, or could it be the next Germany?

Speaker Change #122: The comparisons right. So is that a good number to use for the second half of the year $1 5 million per quarter.

Speaker Change #122: Yes.

Speaker Change #122: Okay.

Speaker Change #123: One last big picture question for Phil or anybody the Taiwan thing seems interesting can you talk about what the size of that business could be or could it be the next Germany.

Tom Kerr: Is it that big enough of a market? Yeah, I think it remains to be seen. I mean, Taiwan is, as you may have read from the press release, a very large market and a big believer in blood purification. So from an opportunity standpoint, it's very exciting. We're working through a distributor in Taiwan currently, and they, in fact, were helpful in getting Taiwanese approval and registration.

Speaker Change #123: Big enough of a market.

Phil Chan: Yes, I think it remains to be seen I mean, Taiwan is.

Phillip Chan: On behalf of everyone at side of sorbans, we thank Kathy for more than 11 years of dedication and leadership at the company as a trusted colleague and friend with so many contributions that have helped us achieve the success we have today and wish her an enjoyable, relaxing and well-deserved retirement.

Speaker Change #125: As you may have read from the press release, a very large market.

Speaker Change #126: And a big believer in blood purification, so from an opportunity standpoint.

Speaker Change #126: Very exciting we're working through a distributor in Taiwan currently and.

Kathleen Bloch: With that, I'd like to turn call over back to Kathy to have some final words Kathy. Thank you so much Phil. I would like to take this opportunity to thank the Board of Directors, my colleagues on the management team and really all the employees at side of sorbans for their support and collaboration which have made my 11-year tenure as CFO so very enjoyable. I especially want to thank the finance and accounting team members who have supported me in the US and in the EU would like to thank you for your extraordinary dedication, talent and contributions to the company.

Speaker Change #126: In fact were helpful in getting their Taiwanese.

Speaker Change #126: Approval and registration.

Phillip Chan: So time will tell to see how this will develop. And we have a lot of hopes for Taiwan, but it's just one of many countries where we're working to drive cytosorbs. Got it. Last financial question for me. You guys did receive the $15 million loan, right? It wasn't a subsequent event?

Speaker Change #126: So.

Speaker Change #126: Time will tell to see how this will develop and.

Speaker Change #126: We are.

Speaker Change #126: We have a lot of hopes for Taiwan, but it's just one of many countries where were working to drive cytosorb sales.

Speaker Change #127: Got it last financial question for me you guys did receive a $15 million loan right. It wasn't a subsequent event.

Tom Kerr: At the end of the quarter. We closed the financing on the last day of the quarter, so it was a Q2 event, and the final champion of the second quarter. All right, thank you. That's all I have for today. And as a reminder, it is star number one if you would like to ask a question. And your next question comes from the line of Sean Lee with H.C. Wainwright, your line.

Speaker Change #127: At the end of the quarter.

Speaker Change #128: We closed the financing at the last day of the quarter. So it was a Q2 event.

Speaker Change #129: On the financing.

Speaker Change #130: In the second quarter, Yes, that's correct.

Speaker Change #131: Alright. Thank you that's all I have for today.

Kathleen Bloch: And I wish everyone, including our new CFO, Pete Mariani, the best of success as we head towards the exciting upcoming job of commercialization of drug serve ATR in the United States. So thank you all so much. Thank you, Kathy.

Tom Care: Thanks, Tom.

Speaker Change #132: And as a reminder, it is star one if you would like to ask a question.

Speaker Change #133: And your next question comes from the line of Sean Lee with H C. Wainwright. Your line is open.

Sean Lee: Hey, good afternoon, guys. Congratulations to Kathy and wish you a happy retirement. And welcome Pete; I look forward to working with you. Most of my key questions have been answered, but I'm just wondering, you were mentioning doing R&D mostly on grant funding, so I was wondering what are the major projects that you are working on in terms of the grant-supported ones? I know that previously, you worked on HEMO descent with the Pentagon.

Sean Lee: Hey, good afternoon, guys, congrats to Kathy and wish you a happy retirement and.

Phillip Chan: And with that, I'd like to welcome Pete Mariani to the Cytosorbents team. Pete is the season in the complex medical device CFO whose many successes at high growth publicly traded companies such as oxygen, Hanson Medical, and guiding corporation, beat for themselves. He has consistently demonstrated a disciplined and rigorous approach to financial management, operational excellence, and strategic development both domestically and internationally that aligns perfectly with our next phase of expected rapid growth.

Speaker Change #135: Welcome to <unk> look forward to working with you.

Speaker Change #136: Most of my key questions have been answered, but I just wondering.

Speaker Change #137: You were mentioning the leaking R&D, mostly on the <unk>. So I was wondering.

Speaker Change #138: What are the.

Speaker Change #139: Major projects that Youre working on in terms of video quite supported ones. I know previously you had been worked on chemo sensitive Pentagon I was wondering whether that's still going on.

Speaker Change #140: Whether there are other.

Phillip Chan: Importantly, Cytosorbents today shares many similarities to oxygen when Pete joined as CFO in 2016, including with respect to its size, revenue base, US market opportunity, and high margin business model. He has proven his ability to fund, scale, and manage impressive growth. As we pursue US and Canadian marketing approval for Drugsurb ATR and drive our OUS business with Cytosorb, we believe Pete will be an outstanding fit where his deep global experience and insight is expected to be vital to our success. We are thrilled to have Pete join Cytosorbents and be a key member of the management team. And in the coming months, we hope to reach out to many of you to introduce you firsthand to Pete.

Speaker Change #140: Projects with product that we can look forward to.

Sean Lee: I was wondering whether that's still going on and whether there are other projects or products that we can look forward to. Thanks. Sure. Thanks, Sean. Yes, the programs that... R&D programs, and preclinical R&D programs that are being funded right now really are focused on hemodefend BGA and the use of hemodefend BGA, but in different form factors for either military, civilian, or industrial usage.

Speaker Change #140: Sure.

Thanks, Sean Yes.

Speaker Change #141: The programs that.

Speaker Change #141: R&D programs preclinical R&D programs that are being funded right now.

Speaker Change #141: Really are focused on chemo defend PGA and the use of <unk> PGA and.

Speaker Change #141: But in different form factors for either military civilian or industrial usage.

Phillip Chan: And I think that we're making excellent progress in that program. We continue to seek additional funding opportunities for that program, and we're getting very close, I believe, to human testing. So thank you. Vince, would you like to comment about the Human Defend Program?

Speaker Change #141: And I think that we're making excellent progress in that program. We continue to seek additional funding opportunities for that program.

Speaker Change #141: And.

Speaker Change #141: But we're getting very close I believe too.

Speaker Change #141: Human testing so.

Peter Mariani: With that, let me have Pete pay a few words here as we wind up this call. Pete. Thank you, Phil. I appreciate the warm welcome. I appreciate the trust of you for creating this opportunity for me. It is great to be out with all of you as investors today as well.

Vince Cassone: Vince would you like to comment about the human fed program.

Vince Capponi: Sure, Phil, thanks. So, Sean, good to hear from you. We've made quite a bit of progress on the HemaDefend BGA, as Phil mentioned. You know, there are a couple different form factors that we're focused on to really get to what we think will be the most accessible markets, which would be the military and then ultimately the civilian.

Vince Cassone: Sure Phil Thanks, So Sean to hear from you.

Vince Cassone: We've made quite a bit of progress on the Hema defend PGA as Phil mentioned.

Vince Capponi: So those programs are, there are two key programs that are funding that right now. We have a couple other grants that are in preparation right now to extend that funding further into commercialization through funding of a clinical trial and ultimately scaling for commercialization. But as Phil mentioned, there are a number of different form factors, but really, the two key form factors that we're pushing forward very aggressively are related to the military application and then also what would be at the point of collection, which, by the way, will feed into the freeze-dried, if you will, plasma market, and we're working closely with a couple of people in that area as well, where we think we can provide some value.

Vince Cassone: Just a couple of different form factors that we're focused on to really get to.

Peter Mariani: I am excited to join Cytosorbents at this pivotal time in history. You know, I've had the great privilege to be part of some of the most significant advancements in medical technology over the years, including advancements in cardiac stints, cardiac rhythm management, medical robotics, laser cataract therapies, and of course, nerve repair. Cytosorbents blood purification therapies is a natural extension of this and I am looking forward to partner further develop, execute, and scale our long-term growth strategy and bring approved. And of course, I look forward to meeting with many of you in the near future. Thanks again, Phil. Thanks very much, Pete.

Speaker Change #142: What we think will be the most accessible markets, which would be the military and then ultimately the civilian.

Speaker Change #143: So those programs are theres two key programs that are funding that right now we have a couple of other grants that are in preparation.

Speaker Change #143: Now to extend that funding.

Speaker Change #143: Further into commercialization through funding.

Speaker Change #143: Funding of a clinical trial and ultimately scaling for commercialization, but it's.

Phil Chan: As Phil mentioned.

Phil Chan: There are number of different form factors, but really the two key form factors that were pushing forward.

Phil Chan: We're aggressively are related to the military application and then also what would be at the point of collection.

Phil Chan: Collection.

Speaker Change #144: Which by the way will feed into potentially the freeze dried.

Speaker Change #145: It will plasma market and we're working closely with a couple of people in that area as well, where we think we can provide some value.

Unknown Executive: That concludes our prepared remarks.

Unknown Executive: Operator, please open the call-up for the Q&A session. Just let me remind you, as Pete has not officially started until tomorrow, he will not be participating in the Q&A session. Operator. Thank you. At this time, if you have a question, please press star one on your touchtone phone. If you would like to withdraw your question, press star one a second time. Please make sure that your mute button is turned off to allow your signal to reach your equipment. And again, it is star one if you would like to ask a question.

Sean Lee: Thanks, Sean. Thanks, Dave. Great. Thanks for taking my class. And as a reminder, it is star number one if you would like to ask a question. And with no further questions at this time, I would like to turn the call back over to Dr. Phillip Chan for any additional questions. Well, thank you, everyone, for joining the call today. If you do have any other questions, please feel free to reach out to me directly at pchan at cytosorbents.com while we manage this transition.

Thanks, Sean Thanks, guys.

Speaker Change #146: Great. Thanks for taking my questions.

Sean Lee: Thanks, Sean.

Speaker Change #147: And as a reminder, the star one if you would like to ask a question.

Speaker Change #147: Okay.

Speaker Change #148: And with no further questions at this time I would like to turn the call back over to Dr. Phillip Chan for any additional or closing remarks.

Phillip Chan: Well. Thank you everyone for joining the call today, if you have any other questions. Please feel free to reach out to me directly at Pete Shannon that Cytosorb is dot com, while we manage this transition and I'll hopefully be able to reply to your questions where possible and have a great evening, everyone and thank you very much.

Michael Sarcone: And your first question comes from the line of Michael Sarcombe with Jeffries. Your line is open. Good afternoon and thanks for taking the questions. Just the star congrats to both Kathy and Pete. Kathy has been great working with you. Hope you have a great retirement and Pete looking forward to working with you again.

Phillip Chan: And I'll hopefully be able to reply to your questions where possible. Have a great evening, everyone, and thank you very much. Good night.

Speaker Change #148: Yeah.

Operator: Ladies and gentlemen, that concludes our conference for today. We thank you for your participation, and you may now go on. Please wait; the conference will begin shortly. Please wait; the conference will begin shortly. Please wait; the conference will begin shortly. Please wait; the conference will begin shortly.

Speaker Change #149: And ladies and gentlemen that concludes our conference for today, we thank you for your participation and you may now disconnect.

Efthymios Deliargyris: All right, so I guess the first one for I guess for either Phil or Mike is, you know, you're on track for the FDA and Health Canada submission for drug's or can you just give us an update on how you're feeling about approval. Maybe can you give us an update on any conversations you've had with the regulators, particularly the FDA more recently. Thanks very much, Michael. Michael, would you like to take that?

Please wait the conference will begin shortly.

Yes.

Speaker Change #149: Okay.

Speaker Change #149: [music].

Speaker Change #149: Yes.

Efthymios Deliargyris: Sure. Thanks, Michael, for the question. As we have discussed previously, we feel that the starting pivotal trial does provide the necessary information to be able to execute the necessary benefit to risk analysis. I think as we have highlighted on previous calls instead. What we did during our own corporate webinars is that the study data has helped us identify more specifically the intended target population, and we've discussed before we have identified that to be those patients undergoing a coronary or a high class operation, and also the intended potential benefit associated with the user device.

Speaker Change #149: Yes.

Speaker Change #149: Yes.

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Speaker Change #149: Yes.

Speaker Change #149: Yes.

Speaker Change #149: [music].

Speaker Change #149: Yes.

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Efthymios Deliargyris: So in that regard, we believe that the state itself can, as a state, we don't can support ever less benefit risk analysis. In addition, as I said today, on the call, the accumulating available evidence that is now captured systematically in a high quality registry, such as the style registry, we believe it would be an important supplement in our conversations with the agency. Having said that, anytime you submit an application, you have to wait obviously for the review and the comment from the agency.

Speaker Change #149: Yeah.

Speaker Change #149: Okay.

Speaker Change #149: Okay.

Speaker Change #149: Yes.

Speaker Change #149: [music].

Speaker Change #149: Yes.

Efthymios Deliargyris: We have not had any additional discussions with the agency since our last call. So there's no update on that. But we believe that the application will provide the necessary information for a very productive and collaborative interaction with the agency. And to allow them to proceed with their necessary benefit to us now.

Speaker Change #149: Yes.

Speaker Change #149: Okay.

Speaker Change #149: Okay.

Michael Sarcone: Thanks, Mike.

Kathleen Bloch: So then maybe one or two for TAPE. Just on the gross margins, the press release today mentioned a line of sight to 80%. You know, can you talk about what gets us to 80% maybe what level of sales might get you there. And then just kind of the second part of that is more in the near term. How are you thinking about gross margins in the second half of 24? Yeah, I think I'll actually Michael.

Kathleen Bloch: Okay, Kathy, go ahead, please. Yeah, so Michael, you know, obviously volume is going to any any amount of volume growth is going to increase our product gross margins and that they should grow up, go up very rapidly. I expect that at 15 to 20% year over year growth, we should see approaching 80% or at 80%. So it should be relatively straightforward. Of course, once we get approval in the US, the margins will be even higher.

Kathleen Bloch: And then we would see like exceptional growth rates in our overall gross margins. Thank you. I'm sorry, Michael. One of the people responsible for helping to drive our gross margins higher in Vincent Capponi, our President and Chief Operating Officer, maybe Vince, you wanted to give a little commentary on how our manufacturing processes have improved and our confidence that we can get to that 80% on a blended basis. Thanks, Phil. So we've made a lot of improvements in the last year in the operation.

Kathleen Bloch: We've actually reduced the labor requirement by almost 30% in part of the operation, the filling processes to help offset some of the lower volumes that we've had. So with the improvements that we're continuing making here, we expect that we're going to continue to see improving margins, but as Kathy said, it's really dependent upon the volume as well. I think the other thing we need to keep in mind is that as part of our controlling costs, we're actually lowering our inventories.

Kathleen Bloch: We're doing that by slowing down the production so that we can conserve the cash as we go through the FDA approval. So to Kathy's point, and when we get to the 15 to 20% growth rate, we certainly have a line of sight to that 80 plus percent plus an approval, obviously, for Drugs or ATR with much higher ASPs than the current side is normal. Certainly, contribute to that. It's also based on the mix of the direct sales, the higher, if you will, gross margins, direct sales versus distributor, which are lower margins than direct.

Kathleen Bloch: So again, there's a lot of factors in that, but what we're doing is we are continuing to improve the operation. And again, it's going as Kathy mentioned going to be very dependent upon volume, but we do have a number of cost improvements that we're slowly implementing in the process here to hopefully get us back to that 80% soon.

Vincent Capponi: Great, very helpful. Thanks for all the color. Thanks very much, Michael.

Yuan Zhi: And your next question comes from the line of you on she with B Riley. Your line is open. Congress on a good call to her and thank you for taking our questions.

Vincent Capponi: Kathy, congrats on the red caravan and the peach. Welcome on board. Exciting time for you to join here at the federal Sorbonne. Maybe if you'll start with you, can you provide more color? What sector pushed the revenue to grow in setting second quarter and do the similar trends in 3Q? Any comments on the volume versus the price change will be helpful. Yeah, I think that in the second quarter, what we saw was strength in the distributor and partner channel.

Vincent Capponi: I think that it coincided a little bit with the launch of our purified pump. And as we told you previously, the purified pump is intended to help establish an infrastructure of blood purification capabilities in countries where they don't have well-established dialysis infrastructures. And so this typically is found in our distributor territories that are not necessarily in Western Europe, for example, as with Germany and Italy and France and the UK and Spain, for example. So I think that strength in that particular channel was good.

Vincent Capponi: And our hope is that our third quarter, which is typically a seasonal quarter for us because of holidays in Europe, will be a respectable quarter. I need to comment on the volume, we're surprised to hear a little bit earlier. You know, as Vince mentioned, the transfer prices to distributors are typically lower than our ASPs for direct sales, but on the other hand, we benefit from having a lower cost of distributors sales because we don't incur those direct costs on the sales force ourselves.

Vincent Capponi: That being said, our pricing has been fairly stable across the board, both in transfer pricing, as well as in direct sale pricing as well, but what you'll see from Q2 results is that the distributor channel was stronger for this quarter.

Vincent Capponi: Got it, and the following question is, how will the delivery of Q5 pump contribute to the revenue growth in the rate queue? Is there a sell for helping the sales of Cytosorbents periferates without the infrastructure? Can you prevent more color from that? Yes, you know, we have a different model for rolling out the purify pump in different parts of the world, and I think, though, the thing to keep in mind is that we're not looking to necessarily make money on the purified pump, right?

Vincent Capponi: This is very much the printer, printer cartridge model where the printers provided at relatively low cost with the goal of driving disposable revenues of the printer cartridge. This is very similar to our approach to the purified pump. Again, the purified pump is there to establish this infrastructure of blood purification capabilities so that they can use more of our Cytosorb devices. And so, I think moving forward, you know, the goal is to really drive Cytosorb volume rather than, you know, a typical hardware company trying to drive fails from hardware, if that makes sense. Yes, got it. That's very helpful. Thank you. Sure.

Thomas Kerr: And your next question comes from the line of Tom Carr with Zack Small Cap Research. Your line is open. Good afternoon, guys, and congratulations, Kathy, and thanks for all your detailed explanations and quick response to questions, so I appreciate it. Can you clarify? I'm unclear on the Canadian submission because originally, I thought it was going to be jointly. Now, it's going to happen after the FDA submission. So it's a fourth quarter event.

Thomas Kerr: I'm sorry, I don't have the slides in front of me, but can you clarify when that is expected to be submitted to the Canadian authorities? Yeah, I think that what you heard us say today is that we expect to get both of those submissions in in the third quarter with the prioritization, of course, for the US FDA application. So, you know, I think that we remain on track to try to achieve that, but we certainly will be prioritizing the FDA submission first.

Thomas Kerr: Okay, so it's possible the Canadian submission could roll in the fourth quarter, but that's not your goal. Correct? Yes, that's not the goal, and I think that we're reiterating our guidance of third quarter submission for both. Okay, all right, sorry, let's answer that. A couple financial questions on the R&D down to 1.5 million. Is that just the comparison against the Star T trials a year ago, or is there anything else in there?

Thomas Kerr: Um, you know, there's been a number. Okay, Kathy, please. Kathy, you may be on mute, please go ahead. Oh, thanks. So, you know, the largest, the largest impact is coming from the Star T trial completion, so we're not incurring those hospital costs and patient costs that are associated with the trial. There have also been, there's also been a strong focus of our R&D efforts on exclusively grant related activities where there are costs of those personnel are funded through the grant, so we have been prioritizing that.

Thomas Kerr: That's making sure that that that is the focus of the team to try to cut down in any, any aren't any non grant R&D costs, so both of those are contributing, but the highest impact is coming from the Star T trial being complete. The comparisons, right, so that a good number to use for the second half of the year 1.5 million per quarter. What I think it is. Yeah, yeah. One last big picture question for Phil or anybody, the Taiwan thing seems interesting.

Thomas Kerr: Can you talk about that? What the size of that business could be or could it be the next Germany? Is it that big enough of a market? Yeah, I think it remains to be seen. I mean, Taiwan is, as you may have read from the press release, a very large market and a big believer in blood purification, so from an opportunity standpoint, it's very exciting. We're working through a distributor in Taiwan currently, and they in fact were helpful in getting the Taiwanese approval and registration.

Thomas Kerr: So time will tell to see how this will develop, and we are, we have a lot of hopes for Taiwan, but it's just one of many countries where we're working to drive service ourselves. Got it. Last financial question for me. You did receive a $15 million loan, right? It wasn't a subsequent event at the end of the quarter. We closed the financing at the last day of the quarter, so it was a Q2 event in the second quarter. Yes, that's great. All right. Thank you.

Unknown Executive: That's all for today. Thanks.

Sean Lee: And as a reminder, it is star one, if you would like to ask a question, and your next question comes from the line of Sean Lee with HC Wainwright, your line. Hey, good afternoon, guys.

Sean Lee: Congrats to Kathy and hope you were a happy retirement, and welcome, Peter. I look forward to working with you. Most of my key questions have been answered. I just wondering, you are mentioning the, doing R&D mostly on the ground. So I was wondering, what are the major projects that you are working on in terms of the great supported ones? I know previously, and you had the work done, he must have sent with the pending luck.

Sean Lee: Does your name, whether that's going on and whether there are other projects or projects that we can look forward to. Thanks. Sure. Thanks, Sean. Yes, the programs that R&D programs, pre-clink R&D programs are being funded right now, really are focused on human-offend BGA. And the use of FEMA to send BGA, but in different form factors for either military, civilian, or industrial usage. And I think that we're making excellent progress in that program. We continue to seek additional funding opportunities for that program. And we're getting very close, I believe, to human testing.

Efthymios Deliargyris: So this, would you like to comment about the Human Offend Program? Sure, Phil, thanks. So Sean, they're here for me. We made quite a bit of progress on the Human Offend BGA, as Phil mentioned. You know, there's a couple different form factors that were focused on to really get to what we think will be the most accessible markets, which would be the military and then ultimately the civilian. So those programs are, there's two key programs that are funding that right now.

Efthymios Deliargyris: We have a couple other grants that are in preparation right now to extend that funding further into commercialization through funding of a clinical trial. And ultimately scaling for commercialization. But as Phil mentioned, you know, there are a number of different form factors, but really the two key form factors that we're pushing forward very aggressively are related to the military application. And then also what would be at the point of collection, which, by the way, will feed in to potentially the freeze-dried, if you will, plasma market. And we're working closely with a couple of people in that area as well, where we think we can provide some value. Thanks, Sean. Thanks.

Unknown Executive: Thank you, my questions. Thanks, Sean. And as a reminder, to star one, if you would like to ask a question.

Phillip Chan: And with no further questions at this time, I would like to turn the cloud back over to Dr. Philip Chan for any additional or closing remarks. Well, thank you, everyone, for joining the call today. If you have any other questions, please feel free to reach out to me directly at pchan at cytosorbans.com while we manage this transition. And I'll hopefully be able to reply to your questions where possible. Have a great evening, everyone. And thank you very much.

Unknown Executive: And ladies and gentlemen, that concludes our conference for today. We thank you for your participation and you may now disconnect. Please wait. The conference will begin shortly. Thank you.