Q3 2024 Cerus Corp Earnings Call
The
Speaker Change: Good day ladies and gentlemen, thank you for standing by. Welcome to the Sir's Corporation 3rd quarter 2024 earnings conference call.
Speaker Change: at the time of all participants are an illistened only mode. After the speaker's presentation, they'll be a course in an answer session.
Speaker Change: To ask a question during the session you depressed star 1, one on your telephone, you will then hear an automated message advising your hand is raised. To withdraw your question please stress star 1, one again. Please be advised so these conferences are being recorded. I would like to hand the conference over to Jessica Hanover, Dr. Hanover, you may begin.
Speaker Change: Thanks for watching.
Jessica Hanover: Thank you and good afternoon. I'd like to thank everyone for joining us today.
Speaker Change: As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at IR.serus.com.
Speaker Change: With me on the call, our O.B. Greenman, Sarah's President, and Chief Executive Officer, Vivek Jayaraman, Sarah's Chief Operating Officer, Kevin Green, Sarah's Chief Financial Officer, and Carol Moore, Sarah's Senior Vice President.
Speaker Change: Here's Issue to Press release today announcing our financial results for the third quarter and is September 30, 2024. And describing the company's recent business highlight.
Speaker Change: You can access a copy of this announcement on the company website at www.ferice.com
Speaker Change: I'd like to remind you that some of the statements we will make on this call relate to future events and performance, rather than historical facts, and our forward-looking statements.
Speaker Change: Examples of forward-looking statements includes those related to our future financial and operating results, including our 2024 Product Revenue Guidance, our expectations for operating hash flows.
Speaker Change: and non-gap adjusted e-visile performance in our expected expense levels, expected future growth and our growth trajectory. Our product supply expectations and abilities to meet customer demand.
Speaker Change: The potential value of an anticipated activity to be funded under our new Florida agreement, planned regulatory submissions and product launches, products expansion prospects, and other statements that are not historical facts.
Speaker Change: These forward-looking statements involve risks and uncertainty that could cause actual events for performance.
Speaker Change: and Results to differ materially. They are identified and described in today's press release in our slide presentation and under risk factors in our form can cue for the quarter ended September 30th, 2024, which we will file shortly.
We undertake no duty or obligation to update our forward-looking statements.
Speaker Change: On today's call, we will also be discussing non-gapsian initial measures, including non-gaps adjusted ebica.
Speaker Change: These non-gap measures should be considered a supplement to and not a replacement for measures presented in accordance with Gap.
for reconciliation of non-gap financial measures to the most comparable gap financial measures. Please refer to today's press release and the slide presentation available on our website.
will begin today with opening remarks from OB followed by the day to discuss recent business highlight, then Kevin to review our financial results and expectations for the rest of 2024, and lastly, closing remarks from OB.
Speaker Change: and now it's my pleasure to introduce Obey Greenman, Tira Suts President and Chief Executive Officer.
Thank you Jessica and good afternoon everyone.
Obey Greenman: I would like to open the call with the review of our strong quarterly performance on both commercial and financial fronts.
Speaker Change: as well as our increasingly positive outlook for the full year 2024.
Speaker Change: Our North American business drove our Q3 product revenue result and our Intercept by branch and complex or IFC business. In the US, gaining momentum at the same time that we are increasing supply capacity for the product.
Speaker Change: will provide additional coloring in his remarks.
For this trajectory, you're a raising our product revenue guidance to account for the positive trends in both these business segments.
We are also executing on the potential measures that we have been targeting for the full year, both on the bottom line, as well as operating task flows, as you will hear from Kevin shortly.
With the growing scale of our business, the leverage of our business model and the discipline around our operating expenses.
We've been able to consistently deliver against our quarterly financial targets.
Speaker Change: At a high level, and on the heels of the annual meeting of the Association for the Advancement of What and About Therapies, or ABB, earlier this month, is gratifying to see how pathogen and activation has become increasingly ubiquitous across the transducers and services in the US and in multiple geographies.
from both centers that may be factored pathogen and activated components, the hospital clinicians who transfuse them.
Speaker Change: and sitting in the plenary session at the Houston Convention Center with thousands of ABB meeting participants, listening to the presentation of the positive rest of the Phase 3 clinical trial data was truly a rewarding experience.
The further acknowledgment from the recent up to $248 million barba contract designed to see the intercept RBC program through potential regulatory approval and product launch only added to the collected enthusiasm from our blood center customers for the rest of the data.
Meanwhile, the need for pathogen and activation is ongoing. Since our last quarterly call, when we noted the rise in banking transmission in the US and Europe, multiple US public health officials have released notifications.
Speaker Change: regarding the rise in the incidence of two emerging Arthropod born viruses.
Eastern, Equind and Supply, the Spires, or EEV, and Orapu's Fires, or Orapv.
Together, EEEV and Traveller-Landard Oral V cases have been recorded in 12 states and U.S. territories today.
Speaker Change: CDC and FDA recommend donor referrals for those recently diagnosed with these viruses, reminding our community that the potential exists for the disruption of our local blood supplies.
and while there remains no evidence of transfusion transition today, the similarities of or of the to the Zika virus epidemic and the new evidence of vertical transmission argue that precaution and preparedness are warranted.
On the development front, as we announced earlier this month, in Europe, we are closely collaborating with our notified body, T-E-V-S-U-B, to define our strategy for a potential new and enhanced Seemark submission for intercept red blood cells or R-R-V-C's.
As we noted before, while we were just a plan that our intercept RBC filing was not approved by our company authority, we are closely assessing the potential to include data from both recipe and red-esquinnable trials in the future filing, with the intent to seek a broader patient indication for the product candidate.
In the U.S., we're moving full speed ahead after extending our partnership with Barnabh, which is designed to fund further development, regulatory activities, and ultimately anticipated commercial readiness initiatives for intercept RBCs.
We've also recently completed our regulatory submission to TUD for our LED Elimator in Europe. Marking the next step in our effort to make this next-generation technology platform available to our customers in our geography.
Speaker Change: Based upon extensive feedback from our customers,
We believe that this new platform is equally awaited and will provide multiple benefits.
for the production of Intercept Treated Plays and Plasma in routine.
With that, I will now turn the call over to Vivek to discuss our commercial results and progress for the 3rd quarter of 2024, as well as our outlook for the last three months of the year.
Thank you, LB and good afternoon, everyone. Entering 2024, we committed to return to growth across our commercial organization.
As we exit the first half of 2024, we were back on the growth trajectory and I'm pleased to report that we continued that trend in the replay completed third quarter.
As the prior period in 2024, the strength of our U.S. platelet franchise led the way and we continue to see encouraging growth in our U.S. ISC business.
With respect to U.S. platelets, we estimate that nearly 2-3 are developed platelets distributed to U.S. hospitals or patch-in-redoops.
We continue to make good headway with customers, both less enters and hospitals, who are ranting their adoption of intercept play with. While holding strong with customers who are already at 100% intercept play with adoption.
We believe the marketplace used Intercept Creative Playlist as these data stops in the application. And this was supported by Plenary Presentations, posters and some closely active these at the annual AABD meeting earlier this month.
The peer-to-peer interaction and support of Intercept, the adoption was incredibly encouraging to witness. Our team simply had to facilitate introductions and the number of eyes-allium Intercepts played with users in attendance with significant.
Speaker Change: The dynamic also played out with international markets where we saw a good number of Canadians, Middle Eastern and European customers at the meeting and they too were eager to share their positive experiences with Intersection.
and the other.
Last quarter, we saw continued adoption of ISC within the U.S. As we have discussed in past, poorly called, we are closely monitoring demanding creases and working hand-in-glows with our Bless-in-R production partners to ensure they can deliver sufficient supply.
We were pleased to see the issuance of three new BLA approvals in the third quarter. This will enable broader interstate shipment of ISC and enable us to meet demand at many hospitals do not currently have an ISC-producing blood center in their state.
As with Pierre Flatlet, the recent A.V.B. meaning was great to try further education and awareness of life.
Speaker Change: Of note, we hosted a scanning room only workshop where the head of laboratory services are armed to a shop for the own St. Louis Missouri described how they chose to adopt ISC 100% and the pathway they took together.
Most encouragingly, she laid out the operational financial benefit above and beyond the third clinical utility that they've experienced in deciding to go all in on ISD.
We are encouraged by the Advanced RISC and we continue to see an increase of inbound inquiries about the products.
Looking outside of the US, we experienced expectance news and now the enemy of franchise and things slowed down over the summer holiday period. Most notably in July and August.
Nonetheless, we continue to encourage and progress in our key goes to growth geographies and are excited about the process for intercept, adoption and key strategic markets.
We will keep you posted as we make progress on key international market development initiatives.
Lastly, I want to thank and acknowledge our Global Supply Channel logistics team who continue to navigate challenges situations while ensuring that customer impacts is mitigated. Despite the recent non-forcure strike along the US Eastern Seaboard, we were able to meet all customer requests within Q3.
As we discussed earlier this year, the supply chain team did fantastic work helping to navigate any concerns with short data products and ensure that customers were not only getting products but also able to distribute to their hospital customers in a timely manner.
Speaker Change: So, logistics teams are always behind the curtain and rarely recognize, so I want to be explicit in my gratitude for all the work they do to support the global sales team and most importantly our blood center and hospital customers.
As evidenced by raising our products revenue guidance for this whole year, we are confident that our business is once again on a growth trajectory.
What's most exciting is to see both existing and new customers realize that clinical benefits of past roomduction and become advocates for the technology.
Speaker Change: I look forward to ufting you on our continued progress and I thank you for your support of and interest in our efforts.
I'd like to hand the call over to Kevin to update you on our financial results.
Speaker Change: Thanks for the day.
Speaker Change: Good afternoon and thank you all for joining us.
On today's call, I'll be discussing our financial results for the third quarter of 2024.
As we near the end of the year, I'll also provide some color related to our strong progress in the financial goals we set out as it's beginning to get a year.
Speaker Change: To start, we post in Product Revenue of $46 million for the third quarter of 2024.
This represents year over year growth of 16% and brings product revenue for the first nine months of the year to $129.5 million.
Up 18% in the prior year period.
Speaker Change: [inaudible]
In the US, third quarter 2024 product revenues exceeded prior to your levels by 17%.
with Canadian Blood Services now at 100% entering the third quarter.
Sales in this geography were an important contributor to our year-over year growth as well.
Speaker Change: In a Mia, third-quarter product revenues were relatively stable to a slightly higher compared to the prior year period and to the second quarter of 2024.
Speaker Change: FX rates provided a slight tail wing for the immune business of around 1% over the prior year period.
on a consolidated basis. FX race were less impactful than a fitting the top line results by approximately 40 basis points.
Also, for Q3, we posted ISC Product Revenue of $2.3 million.
Up from $1.7 million in the prior year period.
Speaker Change: driven by more standing orders and depth within existing accounts.
In addition to our product revenue and not including in our guidance.
and Kevin McContract revenue totaled $4.6 million in Q3 compared to $7.5 million for the prior year period.
The completion of our US Phase 3 Recipe Clinical Trial was the primary driver's in the decline.
Speaker Change: As we look ahead, we expect government contract revenue will increase from Q3 levels due to a variety of factors.
including enrollment ramping up its site participating in our Redis Clinical Study.
Activity supporting our new Barton contract.
Speaker Change: which will overlap with the prayer contract.
Speaker Change: and the ongoing development work with other government agencies.
As a reminder, included in our government contract revenue are the revenues recognized as reimbursement under our contracts with Barda, are agreement with the FDA to further hold blood pathogen reduction.
and our milestone-based agreement with the U.S. Department of Defense from my authorized IFC.
Turning now to our product growth profit in gross margins.
Our third quarter, product rose profit was $26.2 million, compared to $21.8 million during the prior year period. An increase of 20% year old rear.
Speaker Change: Productuous margins for the third quarter were 56.9%.
Speaker Change: Up 200 basis points from the 54.9% reported in Q3 of last year and the 54.7% from Q2 of this year.
Speaker Change: The Improvement and Gross margins was primarily driven by lower product costs.
and Lower Supply Chain Costs for Warehouse in the Upright.
Speaker Change: Absent any unanticipated factor, we continue to expect that Gross margins will remain relatively close to Q3 levels for the balance of the year.
Speaker Change: Moving on.
Our third quarter operating expenses, which total $31.8 million, were down 8% from the $34.5 million of Q3 of 2023.
Included in the operating expenses for Q3 of last year were $1.6 million of restructuring charges.
which were not incurred in the current year of quarter.
Speaker Change: Q3 2024 operating expenses included $5.8 million in non-cash stock-based compensation.
Vivek specific expense type, third quarter R and the expense is total $14 million, compared to $16.8 million during the prior year period.
Similar to our Q1 and Q2 results, this 17% decline was driven primarily by the completion of the recipe clinical trial and the effects of the restructuring implemented mid-year last year.
While we don't expect significant movement in our R&D expenses for the fourth quarter, we would expect to see a modest increase as run a site's ramp enrollment, and as we begin activities covered under our new bar to contract.
1.5 million dollars, compared to $16.2 million dollars during the prior year period.
We continue to generate increasing levels of leverage from our S.T.N.A expenses.
We expect that to continue and do not anticipate significant swings in SGNate for the remainder of 2024.
Speaker Change: Let's now focus on the bottom line in non-gapagested ebit downsides.
On the bottom line, reported NetLoss attributable to Sarah's for the three months ended September 30, 2024, improved significantly when compared to the same period in the prior year.
Net loss attributable to Serus for Q3, narrowed by 60% to $2.9 million or $2 per downloader chair, compared to $7.3 million or $4 per downloader chair for the prior year period.
As the measure of the operating levers were generating, the net loss for Q3 was less than our non-cached spot-based compensation meant previously.
suggesting that the business is making significant strides operationally.
Speaker Change: from the non-gapodjusted ebitapasas.
It's huge 3 is 2024 generated a positive, adjusted EBITDA, $4.4 million. Compared to a loss of nearly $1 million for the prior year period.
For the nine months that it's September 30, we have now turned the corner and have posted positive adjusted the dock of $2.5 million here a day.
We're pleased with the adjusted EBITDA result and are increasingly confident in our ability to deliver a positive and adjusted EBITDA for 2024 as a whole.
As we look ahead, we expect more of the same, with the expected growth contemplating in our revised guidance, a continued focus on generating leverage from our operating expenses.
and Stable Gross Marglings, which are all expected to contribute to the anticipated achievement of our 2020 or adjust at eBidoccle.
Speaker Change: On the balance sheet and associated cash flows, we ended the third quarter with a cash position of $75.6 million cash, cash equivalence and short term investments on the balance sheet.
Speaker Change: Operationaly, we continue to deliver positive operating cash flows.
Speaker Change: But the third quarter we generated positive operating cash flows of $4.1 million.
Speaker Change: compared to cash used for the operations of $10.5 million during the third quarter of 2023.
Cash flow from operations for the nine months that did September 30, 2024, total $6.4 million, compared to cash used for operations of $28 million in the prior year period.
We will continue to focus on our cash flows as we work to improve the health of our balance sheet.
Turning now to our guidance.
As you heard from both OV and Vivek, we are increasingly confident in our top line at this point in the year, and so we are raising our full year 2024 product revenue guidance to the range of $177 to $179 million.
Speaker Change: from our prior range of 175 to 178 million dollars.
Speaker Change: In tandem, we're raising the bottom end of our full year 2024 IFC Red New Guidance.
to a new range of $9.10 million.
from 8 to 10 million dollars.
With that, I'd now like to turn the call back over to Obi for some closing remarks.
Obi: Thank you, Kevin. We are very pleased to be continuing to execute on the ambitious goals we've set out at the beginning of the year.
With two months left in 2024, we feel confident about where we stand, relative to these goals. And we're looking forward to sharing our expectations for 2025 with you in just a couple of months.
Most importantly, we know that our growth as a company is a direct reflection of the confidence that our customers have in service and the inner set technology.
Speaker Change: and the Naval Intations across the globe to have access to safe blood when they need it most and creating a new standard of care in Trans fusion medicine.
Speaker Change: is an honor to partner with our customers as well as organizations like US, Florida as we continue to focus on meeting this need.
Thank you for your continued interest in Siris. I will now turn the call over to the operator for questions.
Speaker Change: Thank you ladies and gentlemen, if you have a question or a comment at this time, please press star 1 and 1 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 1 and 1 again. We'll pause for a moment while we compile our queue when they roster.
Speaker Change: I'm sorry.
Speaker Change: Our first question comes from Ross Osborne with Can't DeVitcial. Your line is open.
Speaker Change: I hope you guys, this is Matthew Park on Thurros. Thanks for taking the questions tonight. I just want to start off talking about the IFC business here.
Now that you've added on an additional 3BLA approvals, UN for State-needing additional manufacturing capacity to meet the strong demand, or do you feel comfortable at current levels?
Speaker Change: Thanks for having me with a big U.N. Enlist.
and I'm sure we have it to you. Thanks for the question. You know, we continue to work with.
Blood Center to add.
Manufacturers for IFC and as demand grows, demand to save will continue to grow to apply as well.
Speaker Change: The addition of the three of BLAs and the Porter's only significant to ensure that.
We can continue the needs that a demand that we're seeing growing, but we anticipate that demand will continue to grow and as such will continue to recruit partners with more blood centers for these five things.
Great, that makes sense and then I guess just one more from me.
with the LED illuminator.
I'm you guys noticed and are obviously, I even got unpause the feedback from a, a, b, b. What does the timeline look like for receiving an approval decision here? And is there a replacement timeline with the legacy device? Thanks.
Speaker Change: Thanks, Matthew. So we're going to be targeting a launch for the LED elevator in your M in 25. So we really see this sort of a foundational new platform for our business and for the use of plants and plasma in blood centers.
Right now the assumption is that we'll be growing this out across multiple customers throughout 2025 and 26 in Europe.
and then we're still in the process of putting together a PMA submission in the United States for the LED millimeter. This likely to take place more than 20, 20, six-time friend.
So overall we're really excited about getting this product to market. It's been a partnership with a lot of our Bud Center customers in the development of this program. And it really also is an important.
Eliminant of our innovating on the technology going forward allowing us to improve the process in the future.
Got it. That's it for me. Congrats again on the quarter. Thanks, Matthew. One moment forward. Next question.
Speaker Change: Our next question comes from Matt Blappin with the fill your line is open.
Hi guys, this is Colin on format. I wanted to start with a couple on IFC, and what's driving the recent momentum and guidance range. Is this growth primarily from new customers or going deeper into your existing accounts or both?
Speaker Change: How should we think about the number of accounts you guys are in today versus potential opportunity for what's out there.
Speaker Change: Thanks.
Thanks for the question. Would you have my take this one as well? Sure. I'd be happy to. So, thanks to the questions, growth is coming folks from deaths within existing customer as well as in as well as in the customer acquisition.
Speaker Change: We have to make that roughly 50% of these years.
Cosmours Rad and Discalendar years. So those are new customers but then those that started last year or weeks.
Speaker Change: Many of them started in one.
Clinical Area the hospital and as they generated.
has it into the value of IFC that sort of moved out to other clinical departments and then there are certain institutions. I reference barns, tuition, saying, was earlier than an hour, 100%. I see across all of their clinical departments. So we're seeing good growth in both areas and for our...
Speaker Change: Sales Organization and our production partners really devoted to this on getting distinct customers to 100% and then continuing to fill that on all with new hospital targets and new hospital care getting onboarded as each month passes. So it's great to see because we think that provides a significant difference.
Speaker Change: provides us to continue with significant runway for this therapeutic category.
Speaker Change: Thank you, that's really helpful and it does look like I have seen going to exit the year and around a three to four million dollar quarterly run rate.
How should we be thinking about IFC in 2025? What are the key growth drivers for next year in particular? And is something in the $15 million range of reasonable starting points for the full year? Number, thank you.
Thanks to all of us, we're not going to be providing guidance today on the call for ISC revenue in 2025, but I think we're making you give a little bit more color on why we believe there's momentum growing just based upon the progress we're seeing and are now increasing and building this supply that demand.
So I think the driver's remains largely the same.
Speaker Change: We referenced the fact that three BLA's were issued for production partners on last quarter. There's a little bit of ramp up time once they get to BLA to increase their manufacturing base and start to distribute products, but all of that will drive growth that also gives.
Speaker Change: Both the blood centers and our team's greater conviction around opening a few accounts so they know it's worth
and the final five will be there. So, that will continue to drive the therapy adoption in Topland Gross in the 2025. And then what we're seeing as well, if you think about what hospital.
Speaker Change: went through with COVID in terms of budget crisis and really having.
and the many initiatives that are happening in the past, they were really loads to take on new projects.
and certain hospitals were covered in a fast array. Well, we're seeing now as more hospitals feel like they're in a stronger...
Financial position and fully staffed and they are amenable to.
Speaker Change: Starting taking on new projects like I have seen and that does tilt with what they are hearing in conferences but they are recently.
attended AABB where they're seeing podium presentations about the technologies. The only things are dealt telling the other to create what we believe are meaningful tailwinds the morning our business.
I appreciate the additional color. I'll hop back and thank you.
Thank you one moment for our next question.
Speaker Change: yeah
The next question comes from Jacob Jarton with Steven's Reliance Alvin
Hey, thanks. And I'll let go of my congrats on the quarter and a preemptive apologies for the another 2025 question after the youth mentioned that you'll address that in a couple months.
and maybe a bit nippy. But if I look at kind of the midpoint of the guidance, what it implies for for cute, it implies kind of a mid single digit growth rate in the fourth quarter.
Again, understanding too early to guide to 2025, but could you maybe just frame up why or why it not? That's the best jumping off point for next year and ISE may be the answer, but just any thoughts there.
Speaker Change: here
Yeah, I mean, I think as we were looking at the guidance for this quarter, you know, two months left in the year, we just really wanted to provide our best sort of projection for what the growth looked like for the remaining two months. But I think Vivek can sort of give you a sort of a perspective on sort of why we did that and sort of the optimism going into 2025.
Yeah, I think you captured most of it. I mean at this point, you know, with October nearly done in two months remaining we have
Good insight into
Speaker Change: what orders are out there, what new accounts will open. Things will slow down a little bit as we head into the holidays, so some of those de novo account openings may move to early 2025. But fundamentally, if you look at
Speaker Change: Inventory levels with our key customers as well as the feedback we're getting from hospitals about their initial experiences with ISC. All of these things right now are
which is what gives us confidence about how we'll close the year and the fact that we'll have a bit of a tailwind entering into 25. Not to be too demure, but as mentioned earlier, I think we'll reserve a more detailed discussion.
Speaker Change: from about 25 outlook until early next year. But what's encouraging to me is we had committed to returning to growth this year after a challenging 2023. We sort of put the
Speaker Change: foundational pieces in place with our Q1 and Q2 performance and then we were able to add another solid quarter here in the third quarter and we're sort of heads down sprinting to do it again in Q4.
Speaker Change: Thank you.
Got it. Thanks for that. And then, Obi, just on this next-gen Illuminator, you mentioned some good feedback from customers and their interest in it. Can you just talk about the value proposition of this
Next Gen Illuminator for your customer base as we think about adoption upon potential approval.
is, you know, our supply chain continuity and also the performance of our system.
Speaker Change: because as you might imagine, since they've adopted our technology at 100% in many markets.
Speaker Change: If for whatever reason, you know, our supply chain wasn't solid, and that means both, you know, on the kit side, but also on the operational side.
side with the device that would shut down their blood supply. Historically, we've had a very reliable system with the current INT100 luminator and then moving into a new
platform, if you will, with this LED-based illuminator, we had to have something that was equally robust but also provided them with the assurance that this is something that they can
Speaker Change: Yeah.
rely on day in day out. And so as we were developing this with their input, we were really looking at how do we make it easier for them to use as they're processing hundreds of units of planets and plasma every day?
and then, you know, sort of.
just thinking about in the context of decades, how do we have something that they feel is state-of-the-art and is not going to create problems for them in the future with regards to supply chain continuity?
So, the great thing about it is just the throughput and ease of use feedback that we've gotten now as we've had numerous discussions with the European customers who will be receiving the LED limiter in 2025.
The feedback is uniformly positive and it's just it's easier for them from a staffing and
and day-to-day operational perspective.
And then I also mentioned this, you know, I do think it's a foundational platform for how we evolve the technology going forward that was built into it so that we have flexibility on how to improve the system.
Speaker Change: and iterate on sort of the process, if you will, so that we ultimately have something that increases ease of use, but ultimately potentially impacts our COGS profile as well.
Got it. Super helpful. I'll leave it there. Thanks for taking the question. Thanks, Jacob.
Speaker Change: One moment for our next question.
Our next question comes from Joshua Jennings with TD Cowen. Your line is open.
Hi, good afternoon. Thanks for the questions.
Joshua Jennings: It's great to see continued momentum.
Two follow-ups, one on IFC, sorry if I didn't capture this, but just wanted to get a sense of the rollouts of future BLA approvals. Are there any other blood center partners that are, or BLA's are pending? Should we expect more BLA approval announcements in the next 6-12 months?
Yeah, thanks Josh. And again, I'll turn it over to Vivek for a couple of summaries too.
So, we do have other blood center production partners who are in the process.
Speaker Change: with the pulling together.
Speaker Change: BLA applications, up-to-date timing.
Speaker Change: That can vary, but we do anticipate more BLAs that come through.
Speaker Change: 25 and beyond. And so what's most exciting about the recent approvals is, you know,
Speaker Change: You know, we believe that they're, with these approvals, they're sufficient capacity.
in terms of production headroom to allow us to continue to be aggressive in terms of driving demand. And that was something that we were always laser focused on because we knew when
Speaker Change: for you guys.
papers that were being submitted for publication and the podium presentations that were being accepted, that there was going to be a flurry of new information released, both single-center experience as well as broader data sets that supported ISEs. We wanted to make sure that we were in a position that we could offer up the product once new people would start to say, hey, I want to bring that into my institution. So we'll continue to monitor this and
and work in the last step to make sure, you know, one thing doesn't run too far ahead of the other. But right now we feel like we're in a pretty solid position.
Excellent, and just wanted to
just get a refresh on ASP for the LED illuminator and just thinking about once once that approval hits.
There is this replacement cycle kicking in. Will that have an impact on gross margins? I believe this is a gross margin accretive system, but I just wanted to check that box. Thanks for taking the questions. Yeah, thanks a lot, Josh.
Thanks, Josh. We haven't really commented. I think it's a bit premature since we don't have approval yet for the LADD Illuminator.
with that said.
The technology is newer, the COGS will be slightly higher, and as a result, we expect the ASPs will be slightly higher. As far as a booster to overall gross margins, I think in and of itself, you shouldn't expect that.
You know, the margins on that product will be neutral to our current margin business. However, it does provide us with a platform for.
future growth, geographical expansion, and in the future, you know, potentially product iterations because of that platform. So hopefully that answers your question.
And just one quick thought just on the IP side, this just kind of extends.
Speaker Change: So that IP protection timeline, that's my understanding too, but can you just refresh that? Thanks. Thanks again.
Yeah, clearly there's a lot of IP that we've developed for this system over the course of the last five years, and it does extend, I think, the mode that we're building for the business.
Speaker Change: And it's obviously IP that we filed globally as well, so it improves the IP profile for the product for our global business.
Great, thanks, Toby. Yeah, thanks a lot, Josh.
One moment for our next question.
Speaker Change: Thank you.
Our next question comes from Mark Massar with BTIG, your line is open.
Hey guys, this is Vivian on for Mars. Thanks for taking the questions.
Vivian: So just on the government contract revenue, I heard your remarks on why I-23 was a little bit light.
how should we just think about the run rate or a good baseline here? And I just wanted to clarify the newer BARDA contract should flow into our models more so looking at 2025. Thanks.
Thanks a lot, Vivian. And Kevin, do you want to handle that? Sure. Yeah, Vivian.
Kevin Green: So, let's take the 2015 contract in isolation. We had...
year-over-year lighter revenues because of the study completion as the new sites with Redis begin, well they have begun, but as they ramp up production we expect that the revenues and the expenses associated will ramp up over the course of the next.
Speaker Change: 12 to 15 months.
Speaker Change: At that same time, you know, less so in Q4, but really in 2025, activities under the new 2024 BARDA contract will begin in earnest.
There's 32 million committed over several years. We're not getting guidance on that. The activity certainly will start in 2025, and we'll ramp up. At the same time,
The REST trial will complete, the 2016 contract will conclude, and then we'll be at a more plateaued level with ongoing initiatives under the new agreement.
Speaker Change: And then just one on the bottom line, I think Justin Iveda beat us, he felt some nice leverage there.
It looks like you did maintain the foliar guidance on that front, which seems a little bit conservative, maybe. Is there any reason for that trend to change, looking at Q4, or just, I guess, what's driving the conservatism there? Thanks.
Yeah, Vivian.
Well, our guidance was neutrality, and we're tracking just slightly better than that, as you pointed out. No real reason for the conservatism, other than there's a lot of moving parts, and we don't want to get out ahead of ourselves. What we do expect is that, with the increased revenue guidance,
Speaker Change: We would expect, obviously, growth there, sustaining our gross margins and continued leverage in operating expenses. There is variability in operating expenses and margins, as you know, though, so we really want to hedge that as much as possible. But we are trending in the right direction and are optimistic about the future.
Perfect. Thanks for taking the question.
Thank you. One moment for the next question.
Speaker Change: Our next question comes from Bill Bolna with Craig Hellam. Your line is open.
Bill Bolna: Hey guys, a little bit of a similar question to what you just got but but not in the context of guidance just
Kevin, can you help us think about sort of the sustainability, you know, of the cash flow from from this point forward? Obviously, there'll be quarterly...
variability given working capital and whatnot but you know are we are we sort of tracking to a you know a 16 million cash flow run rate? What are what are sort of the puts and takes as we move forward here?
Yeah, thanks, Bill. I'm going to ask you to go back to our...
Q4 slash Q1 calls.
Where we thought we would end this year was having the opportunity.
That's all happening. In addition, we felt like we had built so much inventory over the course of 2023 that we'd be in a position where we could convert some of those components and raw materials into finished kits without having to replenish that, and that would help.
the cash flows. That certainly has played out as you look at our balance sheet. We also said at that time in 2025,
We'll have to rebuild the working capital in the inventory to meet growing demand, but we also expect that the business will be at a run rate where those investments in working capital will be offset with just natural operating bottom line.
I don't want to comment on what you should expect as far as cash flow generation long-term, just the qualitative levers that we're looking at and that we're pulling to make sure that we're managing things appropriately and that our balance sheet remains healthy.
And do we think of, you know, in terms of product development of tech...
Speaker Change: Do we think of that as almost being, you know, to what degree is that fully funded because of your BARDA relationship and to what degree do you bear the burden of additional R&D expenses?
Well, it's certainly a significant, you know, almost a majority of our R&D expenses are funded by BARDA. That's especially true today with multiple BARDA agreements.
have the whole blood initiative with the FDA and the lyophilized IFC. So that is a major component of our overall R&D expense. The remaining items are initiatives that are foundational to our future growth and revenue trajectory like the LED illuminator.
Speaker Change: I expect that that mix will continue as we move forward. We don't think there's going to be drastic swings in R&D expense as we move into 2025, but we're not done planning and we're not providing guidance today.
Speaker Change: Okay, and then just other, you know, and again, not guidance, but other uses of cash that we should be thinking about going forward in terms of, you know, capital expense or
Speaker Change: Yeah.
et cetera.
Speaker Change: Well, clearly the working capital items that we commented on, we maintain the revolving letter credit for that exact reason. It's down year over year as we ended 1930-1924.
We'll continue to look at the opportunities to leverage that and offset any balance sheet cash that we would have to fund for that. And then beyond, probably CAPEX on COGS reduction initiatives and capacity expansion initiatives.
Lastly, I'd say, you know, geographic expansion to the extent that we have the opportunity to expand geographically placed devices, you know, those are all time return investments that we think would be beneficial to shareholders.
Speaker Change: Okay, thanks a lot.
Speaker Change: Thanks a lot, Bill. And I'm not showing any further questions at this time. I'd like to turn the call back over to Obi for any closing remarks.
Well, thank you all again for joining us today and for your interest in Cirrus. Later this year, we'll be participating in investor conferences hosted by Stiefel, Stevens, and Craig Hallam, after which we look forward to speaking with you again in the new year. Thanks again.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
and the Oblique Forever move. Sleep well. The world's tired of sleeping. Let's generator up for some sleep.
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