Q4 2024 Cytosorbents Corp Earnings Call
But that's your noon, ladies and gentlemen, and welcome to the disciples Sorbets Corp, fourth quarter and full year 2024 for natural at Salt and recent business highlights conference call at.
Unknown Executive: Good afternoon, ladies and gentlemen, and welcome to the Cytosorbents Corp. 4th Quarter and Full Year 2024 Financial Assaults and Recent Business Highlights Conference Call.
Unknown Executive: At this time, all lines are in a listen-only mode.
At this time all lines are in a listen only mode.
Unknown Executive: Following the presentation, we will conduct a question-and-answer session. If at any time during this call, you require immediate assistance, please press Star-0 for the operator.
Following the presentation, we will conduct a question and answer session.
Any time during this call you had acquire immediate assistance. Please press star zero for the operator.
Unknown Executive: This call is being recorded on Monday, March 31, 2025.
This call's being recorded on Monday March 31st 2035.
Adanna Alexander: I would now like to turn the conference over to Adanna Alexander. Please go ahead.
Speaker Change: I'd now like to turn the conference over to Don Alexander. Please go ahead.
Speaker Change: Thank you John and good afternoon, everyone. Welcome to Cytosorb, Inc, fourth quarter and full year 'twenty 'twenty four financial results and business highlights conference call. Joining me today from the company for the prepared remarks are Dr. Phillip Chan, Chief Executive Officer, and Pete Mariani, Chief Financial Officer.
Adanna Alexander: Thank you, John, and good afternoon, everyone. Welcome to Cytosorbents' fourth quarter and full year 2024 financial results and business highlights conference call.
Adanna Alexander: Joining me today from the company for the prepared remarks are Dr. Phillip Chan, Chief Executive Officer, and Pete Mariani, Chief Financial Officer. 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.
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.
Speaker Change: 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.
Adanna Alexander: Therefore, the company claims protection under the Safe Harbor 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 our performance represented by management, which includes estimates as of March 31, 2025, and we assume no obligation to update these projections in the future as market conditions change.
Speaker Change: Actual results may differ from results discussed today, and therefore, we refer you to a more detailed discussion of our performance represented by management, which includes estimates.
Speaker Change: March 31st 2025, and we assume no obligation to update these projections in the future as market conditions change.
Adanna Alexander: During today's call, we will have an overview presentation covering the operating and financial highlights for the fourth quarter and full year 2024.
Speaker Change: During today's call, we will have an overview presentation covering the operating and financial highlights for the fourth quarter and full year 'twenty 'twenty four following the presentation. We will open the line to analyst questions. During the live Q&A session and now it's my pleasure to turn the call over to Dr. Phillip Chan Phil.
Adanna Alexander: Following the presentation, we will open the line to analyst questions during the live Q&A session.
Phillip Chan: And now, it's my pleasure to turn the call over to Dr. Phillip Chan. Thank you very much Adanna and good afternoon and welcome everyone for our fourth quarter and full year 2024 earnings Cytosorbents is a leader in the treatment of life-threatening conditions in the intensive care unit and cardiac surgery through blood purification and the removal of harmful substances from blood with our proprietary SorbentBeat technology. Cartridges filled with these beads are high-margin, single-use disposables that are plug-and-play compatible with existing blood pump machines in a hospital, such as Dialysis, ECMO, and heart-lung machines. Our technologies are used in a broad number of blood purification applications.
Speaker Change: Yeah.
Speaker Change: Thank you very much it Donna and good afternoon, and welcome everyone for our fourth quarter and full year 2024 earnings call.
Speaker Change: Cytosorb is a leader in the treatment of life threatening conditions in the intensive care unit and cardiac surgery through blood purification and the removal of harmful substances from blood with our proprietary sorghum beet technology.
Speaker Change: Parker gets filled with these beads are high margin single use disposables that are plug and play compatible with existing blood pump machines and hospital, such as dialysis Ecmo and heart lung machines.
Speaker Change: Our technologies are used in a broad number of blood purification applications specifically.
Phillip Chan: Specifically, Cytosorb, our flagship product, which is approved in the European Union, is used primarily to treat life-threatening conditions in the intensive care unit and cardiac surgery, such as sepsis, acute respiratory distress syndrome, or ARDS, and liver failure. Cytosorb is the anchor of our core international business with over 270,000 devices utilized to date in more than 70 countries worldwide and drove $35.6 million in core product sales in 2024.
Speaker Change: Specifically cytosorb, our flagship product, which is approved in the European Union is used primarily to treat life threatening conditions in the intensive care unit and cardiac surgery, such as sepsis acute respiratory distress syndrome, or a R. D S and liver failure.
Speaker Change: Cytosorb is the anchor of our core international business with over 270000 devices utilize to date and more than 70 countries worldwide and drove $35 6 million in core product sales in 2024.
Speaker Change: Our second product drugstore of ATR is an investigational FDA breakthrough designated medical device intended to reduce the severity of perioperative bleeding in patients undergoing cardiac surgery due to blood thinning drugs were focused initially on the blood thinner brilinta in patients undergoing coronary artery bypass graft or cabot's surgery.
Phillip Chan: Our second product, DrugZorb ATR, is an investigational FDA breakthrough designated medical device intended to reduce the severity of perioperative bleeding in patients undergoing cardiac surgery due to blood thinning drugs. We were focused initially on the blood thinner, Berlinta, in patients undergoing coronary artery bypass graft or CABG surgery. In September and November of 2024, we submitted marketing applications to both FDA and Health Canada, respectively, for this application and expect regulatory decisions from both agencies this year. We'll talk more about this opportunity in just a moment.
Speaker Change: In September and November of 2024, we submitted marketing applications to both FDA and health, Canada, respectively for this application and expect regulatory decisions from both agencies this year.
Speaker Change: Talk more about this opportunity in just a moment.
Speaker Change: Okay.
Speaker Change: 2024 was a strong year of progress we closed out 2024 on a high note delivering a 25% increase in fourth quarter product revenue compared to the prior year, reaching $9 $2 million and notched a total of $35 6 million in product revenue for the full year representing 15%.
Phillip Chan: 2024 was a strong year of progress. We closed out 2024 on a high note, delivering a 25% increase in fourth quarter product revenue compared to the prior year, reaching $9.2 million and notched a total of 35.6 million in product revenue for the full year, representing 15% year-over-year growth, driven by 28% growth in direct sales outside of Germany and 22% growth in distributor and partner sales, which was partially offset by flat growth in direct sales in Germany for the year. These results were obtained through disciplined execution of our growth strategy in international markets. Our product gross margin remained healthy at 71%, reflecting the strength of our underlying razor blade in someone else's razor business model, and as a vertically integrated U.S.
Speaker Change: Sent year over year growth driven by 28% growth in direct sales outside of Germany.
Speaker Change: 22% growth in distributor and partner sales, which was partially offset by flat growth in direct sales in Germany for the year.
Speaker Change: These results were obtained through disciplined execution of our growth strategy in international markets. Our product gross margin remained healthy at 71%, reflecting the strength of our underlying razor blade in someone else's razor business model and as a vertically integrated U S manufacturer of our therapies.
Phillip Chan: manufacturer of our therapies.
Speaker Change: On the regulatory front, we continue to make significant progress in bringing our drugs are of ATR therapy to market.
Phillip Chan: On the regulatory front, we continue to make significant progress in bringing our drug reserve ATR therapy to market. The FDA has accepted our de novo application, and we are now in interactive review, an important step towards potential U.S. marketing approval. Additionally, we submitted our medical device license application to Health Canada following MD-SAP certification, and this is now in advanced review. We remain on track to receive regulatory decisions from both FDA and Health Canada in 2025.
Speaker Change: FDA has accepted our de Novo application and we are now an interactor review an important step towards potential U S marketing approval.
Speaker Change: Additionally, we submitted our medical device license application to health, Canada falling empty SAP certification and this is now an advanced review we remain on track to receive regulatory decisions from both FDA and health, Canada in 2025.
Phillip Chan: Meanwhile, our financial position was further strengthened last year through our $20 million debt facility with Avenue Capital Group that we consummated in June of 2024, and more recently, our successful shareholder rights offering, which has raised total net proceeds of $7.3 million to date, including the exercise of the Series A Right Warrant. This offering also enabled the release of $5.5 million in restricted cash, resulting in a total liquidity increase of $12.3 million. We're thankful to our dedicated shareholders for their support in this offer. As of December 31st, 2024, our total cash and cash equivalents were $9.8 million, and on a pro forma basis, including the benefit of the rights offering, our total cash position was approximately $17 million.
Speaker Change: Meanwhile, our financial position was further strengthened last year through our $20 million debt facility with Avenue capital group that we consummated in June of 2024.
Speaker Change: More recently, our successful shareholder rights offering which has raised total net proceeds of $7 $3 million to date, including the exercise of the series a REIT warrant.
Speaker Change: This offering also enabled the release of 5.5.
Speaker Change: $5 million in restricted cash, resulting in a total liquidity increase of $12 3 million.
Speaker Change: We are thankful to our dedicated shareholders for their support in this offering.
Speaker Change: As of December 31, 2024, our total cash and cash equivalents.
Speaker Change: <unk> $9 8 million and on a pro forma basis, including the benefit of the rights offering our total cash position was approximately $17 million.
Phillip Chan: Pete will go over our operating metrics in greater detail. But overall, we were pleased that in 2024, we significantly improved our financial performance and moved closer to our goal of getting our core business to near cash flow break-even by the end of 2025 through a combination of sales performance, product gross margins, effective cost controls, improved operating efficiencies, and focused cash management.
Speaker Change: People go over our operating metrics in greater detail, but overall, we were pleased that in 2024, we significantly improved our financial performance and move closer to our goal of getting our core business to near cash flow breakeven by the end of 2025 through a combination of sales performance product gross margins effective cost.
Speaker Change: <unk> improved operating efficiencies and focused cash management.
Speaker Change: Now, we'll turn to our Cytosorb update.
Phillip Chan: Now we'll turn to a Cytosorb. As I mentioned, our core business grew 15% in 2024 with more than $35 million in high-margin Cytosorb sales. One of the main reasons that cytosorb usage continues to grow is because it targets massive inflammation, which is at the heart of most critical illnesses. Inflammation is the body's normal response to injury and infection, but in life-threatening illnesses, severe inflammation driven by cytokine storm can cause a chain reaction of problems that can end in organ failure and death. This deadly inflammatory response can rapidly lead to a host of problems, such as life-threatening low blood pressure, called shock, leakiness of blood vessels, essentially drowning a patient from the inside out, called capillary leak syndrome.
Speaker Change: Okay.
Speaker Change: As I mentioned, our core business grew 15% in 2024 with more than $35 million in high margin Cytosorb sales.
Speaker Change: One of the main reasons that Cytosorb usage continues to grow it's because it targets massive inflammation that.
Speaker Change: Which is at the heart of most critical illnesses.
Speaker Change: Inflammation is the body's normal response to injury and infection, but in life threatening illnesses severe inflammation driven by cytokines storm can cause a chain reaction of problems that can and an organ failure and death.
Speaker Change: Steadily in inflammation.
Speaker Change: From an inflammatory response can rapidly lead to a host of problems such as life threatening low blood pressure called shock leakiness of blood vessels, essentially drowning a patient from the inside out called capillary leak syndrome.
Phillip Chan: the death of cells of the immune system causing immune dysfunction, direct tissue damage, hypercoagulability. cell-mediated injury. microvascular dysfunction and other problems. Ultimately, leading to a system crash and the failure of vital organs like the heart, lungs, kidneys, and liver. The worse the inflammation, the worse the disease, and the worse the outcome. Cytosorb works to control this deadly inflammation and has demonstrated the reversal or prevention of many of these complications. Cytosorb is expanding the dimension of blood purification by helping to treat critical illnesses where massive inflammation plays a deadly role, which occurs in an estimated 40 to 60% of patients in the intensive care unit.
Speaker Change: The depth of cells of the immune system, causing immune dysfunction direct tissue damage hyper quagga ability.
Speaker Change: Cell mediated injury.
Speaker Change: Microvascular dysfunction and other problems.
Speaker Change: Ultimately leading to a system crash and the failure of vital organs like the heart lungs, kidneys and liver the worst the inflammation the worst the disease and the worst the outcome.
Speaker Change: Cytosorb works to control this deadly inflammation and has demonstrated a reversal or prevention of many of these complications.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Cytosorb is expanding the dimension of blood purification by helping to treat critical illnesses, where massive inflammation plays a deadly role which occurs in an estimated 40% to 60% of patients and the intense.
A care unit. These are diseases like septic shock acute respiratory distress syndrome trauma burn injury severe pancreatitis acute liver failure COVID-19 and the flu.
Phillip Chan: These are diseases like septic shock, acute respiratory distress syndrome, trauma, burn injury, severe pancreatitis, acute liver failure, COVID, and the flu. This is a much larger market than the 10 to 15% of patients in the intensive care unit that have kidney failure, which is what the main blood purification players like Fresenius, Baxter, that is now Vantiv, B. Braun, and others currently target. Because of this, we have the potential to significantly increase our leadership in critical care. Treating critically ill patients is very challenging, and so many factors play into why these patients live or die. However, one thing is clear.
Speaker Change: This is a much larger market than the 10% to 15% of patients in the intensive care unit. They have kidney failure, which is what the main blood purification players like Fresenius Baxter that is now vantiv be brought in others currently target because of this we have the potential to significantly increase our leadership in critical care.
Speaker Change: Treating critically ill patients is very challenging and so many factors play into why these patients live or die. However, one thing is clear.
Phillip Chan: The fire of severe inflammation spreads rapidly in the body via cytokine storm and other mechanisms, and if you don't treat it early or aggressively enough, just like a real fire, it can get out of hand and become impossible to control, leading to organ failure and death. This is why we have been pushing our message of treating the right patient at the right time with the right dose of cytosorbents. This means treating the patients with severe inflammation early and aggressively with cytosorbs. And in doing so, the therapy helps to break the vicious cycle of deadly inflammation, reverse the instability-like shock, and helps to restore or preserve organ function while removing other harmful substances.
Speaker Change: The fire of severe inflammation spreads rapidly in the body via cytokine storm and other mechanisms. If you don't treat it early or aggressively enough just like a real fire. It can get out of hand and become impossible to control leading to organ failure and death.
Speaker Change: This is why we have been pushing our message of treating the right patient at the right time with the right dose of Cytosorb.
Speaker Change: This means treating the patients with severe inflammation early and aggressively with cytosorb and in doing so the heritage therapy helped to break the vicious cycle of deadly inflammation reverse the instability like shock and helps to restore our preserve organ function, while removing other harmful substances.
Speaker Change: This message is helping to drive optimized treatment strategies improve patient outcome and accelerate adoption of cytosorb.
Phillip Chan: This message is helping to drive optimized treatment strategies, improve patient outcomes, and accelerate adoption of cytosorbents.
Speaker Change: For example, at this month's international symposium of intensive care and emergency Medicine Congress in Brussels, Professor Bear load, Georgia bear load and colleagues from Italy presented compelling new data from 175 patient retrospective study on septic shock and multi organ failure. They concluded that early and.
Phillip Chan: For example, at this month's International Symposium of Intensive Care and Emergency Medicine Congress in Brussels, Professor Berlote, Giorgio Berlote, and colleagues from Italy presented compelling new data from 175 patient retrospective study on septic shock and multi-organ failure. they concluded that early and intensive treatment with Cytosorb led to a statistically significant doubling of survival compared to predicted mortality. These results, now accepted for publication in the Journal of Intensive Care Medicine, reinforce previously published findings from our Cytosorb therapy in COVID-19 registry, also called our CTC registry, and the journal Critical Care, that early and intensive treatment is associated with high survival and shorter time on mechanical support.
Speaker Change: Intensive treatment with Cytosorb led to a statistically significant doubling of survival compared to predicted mortality.
Speaker Change: These results now accepted for publication in the journal of intensive care Medicine reinforced previously published findings from our Cytosorb therapy, and COVID-19 registry also called our CTC registry and the journal critical care that early and intensive treatment is associated with high survival and shorter time on mechanical support.
Speaker Change: And training.
Phillip Chan: in training. users how best to treat patients, we believe this will yield better outcomes, which drives greater usage and ultimately more safety.
Speaker Change: Users how best to treat patients. We believe this will yield better outcomes, which drives greater usage and ultimately more sales.
Speaker Change: Looking forward, we're encouraged by our commercial progress, but are prioritizing a return to sales growth in Germany, our largest market, which was flat for the second year in a row entering 2025, we initiated a reorganization of our direct sales team and strategy in Germany, including a rebalancing of territories and hospital accounts with it.
Phillip Chan: Looking forward, we're encouraged by our commercial progress, but are prioritizing a return to sales growth in Germany, our largest market, which was flat for the second year in a row. Entering 2025, we initiated a reorganization of our direct sales team and strategy in Germany, including a rebalancing of territories and hospital accounts with the goal of restoring sales growth through deeper customer engagement, more effective market development, and improved sales representative productivity. Because of the effect of these changes, we expect a short-term disruption in Germany sales that will result in a modestly lower product sales overall for the first quarter of 2025 compared to a year ago.
Speaker Change: Goal of restoring sales growth through deeper customer engagement more effective developed market development and improved sales representative productivity.
Speaker Change: Because of the effect of these changes we expect a short term disruption in Germany sales that will result in a modestly lower product sales overall for the first quarter of 2025 compared to a year ago. However, we expect these actions will result in growth in Germany, ultimately and improved results in the second half of this year with the intent to man.
Phillip Chan: However, we expect these actions will result in growth in Germany ultimately and improved results in the second half of this year with the intent to manage our total core business towards near breakthrough.
Speaker Change: Our total core business towards near breakeven.
Speaker Change: Now, let's turn to drugs are of ATR.
Phillip Chan: Now, let's turn to DrugSorbHQ. The Drugstore of ATR opportunity with regulatory approvals has the potential to drive strong near-term growth opportunities in the United States and Canada to address perioperative bleeding caused by blood thinners like Berlinta, also called Ticagrelor generically from AstraZeneca, in coronary artery bypass or CABG surgery.
Speaker Change: Okay.
Speaker Change: The trucks are of a pure opportunity with regulatory approvals.
Speaker Change: Potential to drive strong near term growth opportunities in the United States and Canada to address perioperative bleeding caused by blood Thinners like Brilinta also call type CAGR lower generically from Astrazeneca.
Speaker Change: In coronary artery bypass or cabot's surgery, an area, where we have FDA breakthrough designation.
Phillip Chan: An area where we have FDA breakthrough designation. Berlinta, a wildly used antiplatelet blood thinner, is often given to heart attack patients to reduce the heart attack from getting worse. Most patients will receive a stent, but the 5% to 10% of patients who are not eligible for a stent will require bypass graft surgery. The current guidelines require a three to five day washout of the drug to prevent perioperative bleeding complications. However, in patients who are still having a heart attack, this can lead to longer hospital stays, higher costs, and increased risk. DrugZar offers a unique win-win-win solution to this problem, whose goal is to enable safe and timely CABG surgery by reducing serious bleeding risks and reducing hospital costs.
Speaker Change: Brilinta a widely used anti platelet blood thinner is often given a heart attack patients to reduce the heart attack from getting worse, most patients will receive a stead, but in the 5% to 10% of patients who are not eligible for <unk> will require bypass graft surgery. The current guidelines require a three to five day washout.
Speaker Change: Of the drug to prevent perioperative bleeding complications however in patients who still are however in patients who are still having a heart attack. This can lead to longer hospital stays higher costs and increased risks.
Speaker Change: Drugs are offers a unique win win win solution to this problem, whose goal is to enable safe and timely cabot's surgery by reducing serious bleeding risks and reducing hospital costs.
Speaker Change: For patients that get them too definitive surgery without having to wait while reducing the risk of serious bleeding caused by brilinta.
Phillip Chan: For patients, it gets them to definitive surgery without having to wait, while reducing the risk of serious bleeding caused by Burlinta. For surgeons, they tell us that they hate uncontrolled bleeding in patients caused by these blood thinners, and each has horror stories about operating on a patient on blood thinners or having patients bleed out in recovery. DrugServe ATR is seamlessly and easily integrated by the perfusionist into the heart-lung machine during surgery. And while the surgery is ongoing, the device is continuing to remove free drug from the patient and reducing serious bleeding, both intraoperatively and postoperatively.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: For surgeons, they tell us that they hate uncontrolled bleeding in patients caused by these blood thinners and each has horror stories about operating on a patient on blood thinners were having patients bleed out in recovery.
Speaker Change: Drugs are ATR as seamlessly and easily integrated by the perfusion is into the heart lung machine during surgery and while the surgeries ongoing the devices continuing to remove free drug from the patient and reducing serious bleeding, both intra operatively and post operatively.
Phillip Chan: And for hospital administrators, it's a resource utilization story. Having patients wait three to five days to wash out blood thinners in the ICU, step-down ICU, or hospital ward is expensive. For example, a three to five day wait in the intensive care unit can be $18,000 to $30,000 just to wait. And patients who have bleeding complications are taking up ICU recovery beds and are a bottleneck to new surgical patient throughput, which, given that open heart surgery is one of the biggest revenue drivers in a hospital, directly impacts hospital revenue. Finally, adverse events like bleeding after CABG surgery can negatively impact a hospital's CMS quality star rating that affects reimbursement and is used to market itself against competitive medical programs in the area.
Speaker Change: And for hospital administrators, it's a resource utilization story, having patients wait three to five days to wash out blood centers in the ICU Step-down ICU or Hospital award is expensive for example, a three to five day weight in the intensive care and it can be 18 to $30000 just to wait and patients who are bleeding complications.
Speaker Change: Taking up ICU recovery beds and are a bottleneck to new surgical patient throughput, which given that open heart surgeries. One of the biggest revenue drivers in a hospital directly impacts hospital revenues.
Speaker Change: Finally adverse events like bleeding after cabinet surgery can negatively impact a hospitals CMS quality star rating that affects reimbursement and is used to market itself against competitive medical programs in the area.
Speaker Change: We estimate the total addressable market for drugs are of ATR and the U S and Canada will grow from $300 million today to over 1 billion as Brilinta becomes generic drugs are of HR establishes brilinta is the only reversible oral anti platelet and we expand into other blood thinners and surgical applications potentially in the future.
Phillip Chan: We estimate the total addressable market for drug-absorbed ATR in the U.S. and Canada will grow from 300 million today to over a billion as Berlinta becomes generic, drug-absorbed ATR establishes Berlinta as the only reversible oral antiplatelet, and we expand into other blood thinners and surgical applications potentially in the future. As we wait for decisions from FDA and Health Canada, we are actively preparing for the potential commercial launch of DrugServe ATR in the United States and Canada.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: As we wait for a decision from FDA and health, Canada. We are actively preparing for the potential commercial launch of drugs or <unk> in the United States and Canada with FDA breakthrough device designation drove serve HR is uniquely positioned to address the critical issue of perioperative bleeding caused by blood thinners like Brilinta and <unk>.
Phillip Chan: With FDA breakthrough device designation, DrugServe ATR is uniquely positioned to address the critical issue of perioperative bleeding caused by blood thinners like Berlinta in patients undergoing CABG surgery. Our market analysis suggests The U.S. and Canadian total addressable market opportunity of $300 million today, which could exceed a billion dollars as Berlenta becomes generic and DrugServe ATR expands into additional indications as we mentioned before. If approved, we plan to initiate a controlled market release.
Speaker Change: Patients undergoing <unk> surgery, our market analysis suggests.
Speaker Change: A U S and Canadian total addressable market opportunity of $300 million today, which could exceed $1 billion as brilinta becomes generic drugs or ACR expand into additional indications as we mentioned before if approved we plan to initiate a controlled market release.
Speaker Change: Our key clinical trial sites that would allow us to get real world feedback validate assumptions and refine our commercial strategy before expanding to a broader national launch.
Phillip Chan: at key clinical trial sites that would allow us to get real-world feedback, validate assumptions, and refine our commercial strategy before expanding to a broader national launch.
Phillip Chan: We are also bolstering our market presence through clinical research and thought leadership. Over the next several months, we will showcase impactful new data at major cardiovascular conferences that underscore the clinical benefit of blood thinner drug removal during cardiothoracic surgery.
Speaker Change: We are also bolstering our market presence through clinical research and thought leadership.
Speaker Change: Over the next several months, we will showcase impactful new data at major cardiovascular conferences that underscore the clinical benefit of blood thinner drug removal during cardio thoracic surgery.
Speaker Change: At the American College of Cardiology conference in Chicago that just concluded today the largest cardiovascular event in North America Starkey principal investigator Dr. Michael Gibson, just presented an important pool data analysis from the Star T trial, and the international Star registry, demonstrating that the bleeding reductions after cabinet surgery.
Phillip Chan: At the American College of Cardiology Conference in Chicago that just concluded today, the largest cardiovascular event in North America, STAR-T principal investigator, Dr. Michael Gibson, just presented an important pooled data analysis from the STAR-T trial and the International STAR Registry, demonstrating that the bleeding reductions after CABG surgery observed in the controlled STAR-T trial also extend into real-world clinical practice. At the Society of Cardiovascular Anesthesiologists 47th Annual Meeting in Montreal in April, Dr. David Mazur Pioneer in Perioperative Blood Conservation, and a Starkey Executive Committee member will lead a roundtable discussion on the integration of drugs for ATR, perioperative blood management protocol.
Speaker Change: Observed in the controlled Star T trial also extend into real world clinical practice.
Speaker Change: At the society of cardiovascular and Thats apologists, 47th annual meeting in Montreal in April Dr. David Mazer <unk>.
Speaker Change: The pioneer in Perioperative blood conservation to start key Executive Committee member will lead a round table discussion on the integration of drugstore of ATR.
Doctor of blood management protocols.
Phillip Chan: At EuroPCR in Paris this May, Professor Roberts' story will present what we believe to be some of the most compelling blood thinner removal evidence to date, comparing bleeding rates after CABG and Berlinta patients operated with or without our device. This latest analysis, with updated data from the Star Registry, clearly demonstrates the significant bleeding reductions associated with the use of our device in contemporary real-world practice. At the Canadian Society of Cardiac Surgery Conference in Montreal in May, Dr. Richard Whitlock Starkey Canadian Principal Investigator will host on the STAR-T study results outlining DrugSorb ATR's clinical and economic value proposition in Canadian hospital practice.
Speaker Change: At Euro PCR in Paris dismay, Professor Robert story will present, what we believe to be some of the most compelling blood thinner removal evidenced to date comparing bleeding rates after cabbage and brilinta patients operated with or without our device. This latest analysis with updated data from the star registry clearly demonstrates this.
Speaker Change: Significant bleeding reductions associated with the use of our device and contemporary real world practice.
Speaker Change: At the Canadian Society of cardiac surgery conference in Montreal in May Dr. Richard Whitlock.
Speaker Change: <unk> key Canadian principal investigator will host.
Speaker Change: On the Star T study results outlining drugs are atr's clinical and economic value proposition and Canadian Hospital practice and finally at the European Society of Cardiology Heart failure meeting in Belgrade and May 30.
Phillip Chan: And finally, at the European Society of Cardiology Heart Failure meeting in Belgrade in May, a new study will be presented demonstrating how DrugSorb ATR successfully prevented bleeding complications in patients on Berlinta and other direct oral anticoagulants undergoing emergency complex heart surgery.
Speaker Change: Study will be presented demonstrating how drugs are of ATR successfully prevented bleeding complications and patients on brilinta and other direct oral anticoagulants undergoing emergency complex heart surgery.
Speaker Change: So with that.
Pete Mariani: So with that, I will now turn it over to Pete to give the financial update. Thank you, Phil. And good afternoon, everyone.
Speaker Change: I will now turn it over to Pete to give the financial update Pete.
Pete Mariani: Thank you Phil and good afternoon, everyone.
Pete Mariani: As we get started today, I wanted to note our 8k filing this afternoon disclosing that we had identified misstatements in inventory and non cast stock compensation for restricted stock units in a previously issued financial and that we are restating our 2023 annual and quarterly reports and our 2024 quarterly reports in today's 10K final. More specifically, we identified an overstatement of inventory as of December 31 of last of December 31st of 2023 of $304,000 and an understatement of non-cash stock compensation expense of $435,000 for 2022. as well as incorrect accounting entries to the related balance sheet account.
Pete Mariani: As we get started today I wanted to note. Our 8-K filing this afternoon disclosing that we had identified misstatements and inventory and noncash stock compensation for restricted stock units and our previously issued financial statements and the we are restating, our 2023 annual and quarterly reports and our.
Pete Mariani: 2024 quarterly reports in todays 10-K filing.
Pete Mariani: More specifically, we identified an overstatement of inventory as of December 31 of last year.
Pete Mariani: Of.
Pete Mariani: December 31, 2023 of $304000 and an understatement of noncash stock compensation expense of 435000 for 2023.
Pete Mariani: As well as incorrect accounting entries to the related balance sheet accounts.
Pete Mariani: The misstatement of non-cast stock compensation also impacted earlier periods, but that impact was determined to be immaterial and did not require restatement of those earlier reports. The misstatements have now been corrected in today's 10-K filing and are more fully described in Note 12 of our audited financial statement. Additionally, the errors in accounting for restricted stock units have led to a determination of a material weakness in our internal controls over financial reporting, which we have also disclosed in Item 9A of today's 10-K. We are committed to completing remediation of this material weakness as quickly as possible and expect enhancements to be fully implemented during this calendar year.
Pete Mariani: The Ms statement of noncash stock compensation also impacted earlier periods, but that impact was determined to be immaterial and did not require a restatement of those earlier reports.
Pete Mariani: The misstatements have now been corrected in todays 10-K filing and are more fully described in note 12 of our audited financial statements.
Pete Mariani: Additionally, the errors and accounting for restricted stock units have led to a determination of a material weakness in our internal controls over financial reporting, which we have also disclosed in item nine <unk> of today's 10-K, we are committed to completing remediation of this material weakness as quickly as possible.
Pete Mariani: We expect enhancements to be fully implemented during this calendar year.
Pete Mariani: And now turning to the quarter.
Pete Mariani: And now turning to the quarter, product revenue was 9.2 million, an increase of 25% compared to 7.3 million in 2023. This growth was driven primarily by strength in our direct countries, other direct countries, and distributor sales, and partially offset by flat growth in Germany. Grant income was approximately $1 million compared to $1.3 million in 2023. This decrease was due to the conclusion of several grants over the last 12 months. We have historically reported grant income as a component of total revenue and cost of revenue, as well as a reduction of the related research and development expense.
Pete Mariani: Product revenue was $9 2 million, an increase of 25% compared to $7 3 million in 2023. This growth was driven primarily by strength in our direct countries other direct countries and distributor sales and partially offset by flat growth in Germany.
Pete Mariani: Grant income was approximately $1 million compared to $1 $3 million in 2023. This decrease was due to the conclusion of several grants over the last 12 months.
Pete Mariani: We have historically reported grant income as a component of total revenue and cost of revenue as well as a reduction of the related research and development expense.
Pete Mariani: We are now adopting a standard accounting convention of reporting revenue to only include product sales and will now report grant income solely as a reduction of related research and development expense. We believe this is a more common standard across medtech companies and improves comparability of our financial results. If we had continued to our historical reporting, total revenue, including product revenue and grant income in Q4 2024, would have been $10.1 million, an increase of 17% compared to $8.7 million in Q4 of 2023. The financial tables in this press release include a reconciliation of previously reported amounts including the impact of this and other reclassifications.
Pete Mariani: We are now adopting a standard accounting convention of reporting revenue to only include product sales and will now report grant income solely as a reduction of related research and development expense we.
Pete Mariani: We believe this is a more common standard across med tech companies and improves comparability of our financial results.
Pete Mariani: If we had continued to our historical reporting total revenue, including product revenue and grant income in Q4, 2024 would have been $10 1 million, an increase of 17% compared to $8 7 million in Q4 of 2023.
Pete Mariani: The financial tables in this press release include a reconciliation of previously reported amounts, including the including the impact of this and other reclassifications.
Pete Mariani: Gross margins for the quarter was 71% compared to 61% in Q3 of 2024 and 68%.
Pete Mariani: Gross margins for the quarter was 71% compared to 61% in Q3 of 2024 and 68%. in Q4 of 2023. This improvement reflects a return to more normalized production levels in our state-of-the-art manufacturing facility in Princeton, New Jersey, which, as a reminder, is designed to support commercial growth as we continue to support our international critical care business and the rollout of drug sorb ATR in the US and Canada.
Pete Mariani: In Q4 of 2023.
Pete Mariani: This improvement reflects a return to more normalized production levels in our state of the art manufacturing facility in Princeton, New Jersey, which as a reminder is designed to support commercial growth as we continue to support our international in critical care business and the rollout of drug Zorba ETR in the U S and Canada.
Pete Mariani: Q4, operating expenses decreased 30% year over year to $10 2 million driven primarily by the completion of the Star T trial, and the impact of cost cutting efforts implemented over the previous year, including a 22% reduction in head count as a result operating loss.
Pete Mariani: Q4 operating expenses decreased 30% year over year to $10.2 million, driven primarily by the completion of the STAR-T trial and the impact of cost-cutting efforts implemented over the previous year, including a 22% reduction in headcount. As a result, operating loss improved 61% year over year to $3.7 million. Adjusted EBITDA loss for the quarter, which excludes the impact of non-cash stock compensation and changes in foreign currency, improved by 70% to $2.4 million compared to an adjusted EBITDA loss of $8.1 million in the prior year, driven by revenue growth and the reduction of operating expenses. That loss for the quarter was $7.5 million or $0.14 per share compared to $6.1 million or $0.13 per share.
Pete Mariani: Improved 61% year over year to $3 7 million.
Pete Mariani: Adjusted EBITDA loss for the quarter, which excludes the impact of noncash stock compensation and changes in foreign currency improved by 70% to $2 4 million compared to an adjusted EBITDA loss of $8 1 million in the prior year driven by revenue growth and the reduction of operating expenses.
Pete Mariani: Net loss for the quarter was $7 5 million or <unk> 14 per share compared to $6 1 billion or <unk> 13 per share.
Pete Mariani: net loss in the prior year. An adjusted net loss for the quarter, which also excludes the impact of non-cash stock compensation and changes in foreign currency, improved to $1.7 million, or $0.03 per share, compared to an adjusted net loss of $7.8 million, or $0.17 per share in the prior year. Our revenue growth and cost-cutting efforts have resulted in lower cash burn with $2.5 million used in the quarter compared to $2.7 million in the previous quarter and well below the $6.5 million used in the fourth quarter of 2023. Effective cash management continues to remain a top priority as we drive revenue growth and further efficiencies in that result in our core business approaching break-even in the second half of this year, allowing for investment in our North American commercial launch of Drugzorb ATR.
Pete Mariani: Net loss in the prior year.
Pete Mariani: Adjusted net loss for the quarter, which also excludes the impact of noncash stock compensation and changes in foreign currency improved $1 7 million or <unk> <unk> per share compared to an adjusted net loss of $7 8 million or seven <unk> per share in the prior year.
Pete Mariani: <unk>.
Pete Mariani: Our revenue growth and cost cutting efforts have resulted in lower cash burn with $2 5 million used in the quarter compared to $2 7 million in the previous quarter and well below the $6 5 million used in the fourth quarter of 2023 effective cash management continues to remain a top priority as we drive revenue growth.
Pete Mariani: And further efficiencies in that result.
Pete Mariani: That result in our core business approaching breakeven in the second half of this year, allowing for investment in our North American commercial launch of drugs Orb ATR.
Pete Mariani: We were also pleased to have successfully executed our shareholder rights offering, and we raised total net proceeds of $7.3 million to date from the offering, and including the exercise of the Series A right warrant. This raise allowed for the release of $5 million of restricted cash on our balance sheet, and combined, increased our available liquidity by $12.3 million. The Series B right warrant remains outstanding through April 10th, and we are evaluating the option of providing a 30-day extension to this warrant through May 10th of this year. As a result, our pro forma balance of cash, cash equivalents, and restricted cash on December 31st of 2024, after giving effect to the rights offering and the exercise of the Series A right warrants as if it had occurred on December 31st of 2024, would have been approximately $17 million, including unrestricted cash of approximately $15.5 million.
Pete Mariani: We were also pleased to have successfully executed our shareholder rights offering we raised total net proceeds of $7 3 million to date from the offering including the exercise of the series a REIT warrant. This raise allowed for the release of $5 million of restricted cash on our balance sheet and combined increased our.
Pete Mariani: Available liquidity by $12 3 million.
Pete Mariani: The series B right warrant remains outstanding through April 10th and we are evaluating the option of providing a 30 day extension to this warrant through may 10th of this year.
Pete Mariani: As a result, our pro forma balance of cash cash equivalents and restricted cash on December 31 of 2024, after giving effect to the rights offering and the exercise of the series a REIT warrants as if it had occurred on December 31, 2024 would have been approximately $17 million.
Pete Mariani: Including unrestricted cash of approximately $15 5 million.
Pete Mariani: This gives us a solid balance sheet to support the business through expected regulatory decisions and launch of the DrugZorb ATR and into 2026. Additionally, our loan agreement provides for a second tranche of $5 million, which may be drawn at the company's request in the second half of 2025, provided the company receives FDA marketing approval of its DrugSorb ATR application.
Pete Mariani: This gives us a solid balance sheet to support the business through expected regulatory decisions and launch of the drug Zorba ATR and into 2026.
Pete Mariani: Additionally, our loan agreement provides for a second tranche of $5 million, which may be drawn at the company's request in the second half of 2025 provided the company receives FDA marketing approval of its drug Zorba ATR application.
Pete Mariani: And turning to the full year of 2024 financial results product revenue was $35 6 million, an increase of 15% compared to $31 1 million in 2023. The growth was also driven by strength in our other direct countries and international distributors, while being partially offset by <unk>.
Pete Mariani: In turning to the full year of 2024 financial results, product revenue was $35.6 million, an increase of 15% compared to $31.1 million in 2023. The growth was also driven by strength in our other direct countries and international distributors while being partially offset by flat growth in Germany. Grant income for the year was $3.6 million compared to $5.3 million in 2023. As I stated earlier, we are now reclassifying grant revenue or grant income out of revenue and reporting it solely as a reduction of R&D expense for 2023 and 2024 and will continue to do this going forward.
Pete Mariani: Flat growth in Germany.
Pete Mariani: Grant income for the year was $3 6 million compared to $5 3 million in 2023 as I stated earlier, we are now reclassifying grant revenue or grant income out of revenue and reporting it solely as a reduction of R&D expense for 'twenty, three and 'twenty four and we'll continue to do this going forward. However.
Pete Mariani: However, if the company had continued its historical reporting, total revenue, including product revenue and grant income, would have been $39.2 million, an increase of 8% compared to $36.4 million in 2023. Gross margin was 71% for the year and consistent with that of 2023. Operating loss for 2024 improved by 47% to $16.7 million compared to $31.9 million in 2023, reflecting higher revenue and a 22% reduction in operating expenses. 2024 Adjusted EBITDA loss improved by 56%. to $11.5 million, and adjusted net loss improved to $12.7 million, or $0.23 per share, compared to an adjusted net loss of $27 million, or $0.61 per share in 2023.
Pete Mariani: If the company had continued its historical reporting total revenue, including product revenue and grant income would have been $39 2 million, an increase of 8% compared to $36 4 million in 2023.
Pete Mariani: Gross margin was 71% for the year and consistent with that of 2023 operating loss for 2024 improved by 47% to $16 7 million compared to $31 9 million in 2023, reflecting higher revenue and a 22% reduction in operating.
Pete Mariani: <unk>.
Pete Mariani: 2024, adjusted EBITDA loss improved by 56%.
Pete Mariani: $211 5 million and adjusted net loss improved to $12 7 million or <unk> <unk> per share compared to an adjusted net loss of $27 million or <unk> 61 per share in 2023.
Pete Mariani: We have entered 2025 with strong momentum and a clear strategy for sustainable growth.
Pete Mariani: We have entered 2025 with strong momentum and a clear strategy for sustainable growth. As Phil mentioned, we are seeing strength in our developing clinical data and driving optimized treatment strategies. We are making changes in Germany that we believe will return that market to growth, but will result in modestly lower product sales in the first quarter. And we remain committed to strengthening our core international business, which delivered double-digit growth in 2024 with over 70% gross margin. as we approach break even in the second half of 2025. We are confident that we are well capitalized through DrugSorb ATR North American regulatory decisions and launch and end to 2026.
Speaker Change: As Phil mentioned, we are seeing strength in our developing clinical data and in driving optimized treatment strategies, we're making changes in Germany that we believe will return that market to growth, but will result in modestly lower product sales in the first quarter and we remain committed to strengthening our core international business, which delivered double digit.
Speaker Change: Growth in 'twenty, four with over 70% gross margins.
Speaker Change: As we approach breakeven in the second half of 2025.
Speaker Change: We are confident that we are well capitalized through drug Zorba ATR, North American regulatory decision to launch and into 2026 now let me turn the call back over to Phil.
Phillip Chan: Now, let me turn the call back over to Phil. Thanks, Pete.
Phil: Thanks Pete.
Phil: Before my question.
Phil: Okay.
Phil: Go ahead before we conclude I want to say a few words about Jim case, and our vice President and corporate controller, who passed away unexpectedly from natural causes during the first quarter for those of US who knew Jim professionally he was an outstanding controller with tremendous knowledge and experience and a fierce dedication to our business who have contributed greatly.
Phillip Chan: Before we conclude, I want to say a few words about Jim Kaysen, our Vice President and Corporate Controller, who passed away unexpectedly from natural causes during the first quarter. For those of us who knew Jim professionally, he was an outstanding controller with tremendous knowledge and experience and a fierce dedication to our business, who contributed greatly to the growth and success of this company over his 10-year tenure. He was a great team player with a great sense of humor and a consummate professional who, through his expertise and poise, was the bedrock of our finance and accounting team for the past decade.
Phil: To the growth and success of this company over his 10 year tenure. He was a great team player with a great sense of humor, and a consummate professional who through his expertise in poise was the bedrock of our finance and accounting team for the past decade.
Phillip Chan: We thank Jim for all that he has done for Cytosorbents.
Phil: We thank Jim for all that he has done for Cytosorb ins.
Speaker Change: We believe we have a clear and compelling value proposition with Cytosorb, we have established a substantial international high margin core business in critical care and cardiac surgery that has tremendous growth potential with a massive total addressable market in attacking major unmet medical needs.
Phillip Chan: We believe we have a clear and compelling value proposition. With Cytosorb, we have established a substantial international high margin core business in critical care and cardiac surgery that has tremendous growth potential with a massive total addressable market and attacking major unmet medical needs. We are now amassing new data to be able to teach users how to teach the right patient at the right, how to treat the right patient at the right time with the right dose of cytosorb. With better clinical outcomes, we believe this will translate into greater usage and adoption in many different applications and ultimately help to accelerate sales.
Speaker Change: We are now a massive new data to be able to teach users how to teach the right patient at the right how to treat the right patient at the right time with the right dose of Cytosorb with better clinical outcomes. We believe this will translate into greater usage and adoption in many different applications and ultimately help to accelerate sales we saw.
Phillip Chan: We saw good growth last year, led by significant growth in direct sales outside Germany and in distributor and partnership sales. And we are taking active measures to restore Germany back to growth, and if successful, has the potential to get us back to even better financial performance. The important part is that the growth in product sales moves our core business closer to our goal of near break-even by the end of 2025, and ultimately, greater financial independence.
Speaker Change: Good growth last year led by significant growth in direct sales outside Germany and in distributor and partner sales.
Speaker Change: And we're taking active measures to restore Germany back to growth and if successful has the potential to get us back to even better financial performance. The important part is that the growth in product sales moves our core business closer to our goal of near breakeven by the end of 2025, and ultimately greater financial independence.
Phillip Chan: Not being yet factored into our story is the potential for drug-served ATR. We are currently conducting a host of pre-launch activities and are actively sharing our positive data in reducing serious bleeding events in CABG patients on Berlinta at many important cardiovascular conferences. As we wait for FDA and Health Canada decisions, if positive, we plan to be in a position to open the U.S. and or Canadian markets for the first time and start with controlled market releases and accelerate from there into an initial estimated $300 million market for Burlington Cabbage Surgery that could grow beyond a billion dollars over time.
Speaker Change: Not being yet factored into our story is the potential for drugs are of ATR. We're currently conducting a host of prelaunch activities and are actively sharing our positive data in reducing serious bleeding events and cabbage patients on brilinta at many important cardiovascular conferences.
Speaker Change: As we wait for FDA and health, Canada decisions, if positive we plan to be in a position to open the U S and our Canadian markets for the first time and start with controlled market releases and accelerate from there into an initial estimated $300 million market for brilinta in Cabot surgery that could grow beyond $1 billion over time.
Phillip Chan: We are excited about how our story may unfold in 2025 and are grateful for all of your support.
Speaker Change: We're excited about how our story manned fold in 2025 and are grateful for all of your support.
This concludes our prepared remarks operator, please open the line for questions. Thank you.
Unknown Executive: This concludes our prepared remarks.
Unknown Executive: Operator, please open the line for questions. Thank you.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone.
Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please lift the handset before pressing any key. One moment, please, for your first question.
Speaker Change: You will hear a prompt that youre kind of spin raised.
Speaker Change: Should you wish a decline from the polling process. Please press star followed by the number.
Speaker Change: If you're using a speaker phone please lift the handset before pressing any keys.
Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question comes from the line of Michael Sarcone from Jefferies. Your line is now open.
Michael Sarcone: Your first question comes from the line of Michael Sarcone from Jeffreys. Your line is now open. Good afternoon and thanks for taking the questions. I guess just to start, hello, for DrugSorb and the regulatory process, you know, have you seen any impacts from the new U.S. administration just on, you know, regulator staffing and I guess, you know, what gives you confidence that you can continue to reiterate, you know, you'll see clearance by year-end? Yeah, hi, Mike. Thanks for the question. Although there's been a lot of uncertainty related to the cuts to HHS, which include the FDA, these cuts, from what we understand, are not targeting review personnel.
Michael Sarcone: Good afternoon, and thanks for taking my questions.
Speaker Change: I guess, Jim I'll start.
Michael Sarcone: Hello for drug blurb in the regulatory process.
Michael Sarcone: Have you seen any impact from the new U S administration just on.
Michael Sarcone: Regulator staffing and I guess, we will.
Michael Sarcone: Gives you confidence that you can continue to reiterate youll see clearance by year end.
Speaker Change: Yeah, Hi, Mike. Thanks for the question, although there's been a lot of uncertainty related to the cuts to HHS, which include the FDA. These cuts from what we understand are not targeting review personnel. This was specifically DT.
Phillip Chan: This was specifically detailed in a number of reports. Okay, got it.
Michael Sarcone: Detailed in a number of reports.
Speaker Change: Okay got it and then just.
Pete Mariani: And then just, you know, when you do get clearance, you talked about a controlled launch before ramping to a full commercial launch. Can you just give us a sense of, you know, what are the key things you'll you'll be looking for? And how that may impact how you hone your commercial strategy?
Speaker Change: When you do get clearance you talked about a controlled launch before ramping to a full commercial launch can you just give us a sense of.
Speaker Change: What are the key things, you'll you'll be looking for.
Speaker Change: And how that May impact how you on your commercial strategy.
Pete Mariani: Yeah, I'm Mike, it's Pete. We're getting we've got a great opportunity with these clinical sites. We've got surgeons who are used to the product and want the product. And what we're interested in learning is just some of the basics of how to get into the hospital, get onto their list and get ordered. We're interested in learning how quickly we can get through back committees. And then we want to see how these surgeons fit this into their normal pattern of usage. These are things we can evaluate very quickly with these clinical sites that have already started, and allows us to, you know, learn quickly and then titrate the launch up as we see success in those Got it.
Speaker Change: Yes.
Pete Mariani: Hi, Mike its Pete.
Pete Mariani: We're getting we've got a great opportunity with these clinical sites. We've got surgeons, who are used to the product and want the product and what we're interested in learning is just some of the basics of how to get into the hospital to get onto their lift and get ordered we're interested in learning how quickly we can get through Vac committees.
And then we want to see how the surgeons fit this into their normal pattern of usage. These are things. We can evaluate very quickly with these clinical sites that have already started and allows us to learn quickly and then titrate the launch up as we see success in those sites.
Speaker Change: Got it that's helpful. Thanks, Pete and I guess just last one.
Pete Mariani: That's helpful. Thanks, Pete.
Unknown Executive: And I guess just last one. for me.
Speaker Change: For me.
Sean Lee: Can you give us the latest and greatest on your thoughts on what kind of or size commercial organization you might need to fully commercialize, particularly in the US? You want? Well, I think from our perspective, we see ourselves moving towards the sales force between 15 and 25 over time. But again, what's really important for us, and it could go larger than that, obviously, longer term, but in the near term, we want to see effectively getting very sticky accounts early and seeing those accounts continue to use and grow that usage, not just one surgeon, but across multiple surgeons across the whole account.
Speaker Change: Can you give us the latest and greatest on your thoughts on.
Speaker Change: What kind of or sized commercial organization, you might need to fully commercialize, particularly in the U S.
Speaker Change: Well I think from our perspective, we see ourselves moving towards the Salesforce between 15, and 25 overtime, but again, what's really important for us and it could go larger than that obviously longer term, but in the near term we want to see effectively.
Speaker Change: Getting very sticky accounts early and seeing those accounts continue to use and grow that usage not just one surgeon, but across multiple surgeons across the whole account and so we can determine the rate at which we ramp those up and we will learn the effectiveness of each of these reps and we'll learn the ability to add them over time, but.
Pete Mariani: And so we can determine the rate at which we ramp those up. And we'll learn the effectiveness of each of these reps. And we'll learn the ability to add them over time. But I think over the near term model, Once we move into a more full commercial launch, we're looking at in the neighborhood of 15 to 25. And I think, Mike, we're looking also to supplement that potentially with potential distributors throughout certain parts of the country where it doesn't make sense to necessarily have a direct sales rep. And during the COVID pandemic, we've actually created a number of very strong relationships with some of these distributors distributing our product for the COVID pandemic.
Speaker Change: I think over the near term model.
Speaker Change: Once we move into a more of a full commercial launch we're looking at in the neighborhood of 15% to 25 and I think Mike were looking also to supplement that potentially with.
Speaker Change: Potential distributors throughout certain parts of the country, where it doesn't make sense to necessarily have a direct sales rep. During the COVID-19 pandemic, we've actually created a number of very strong relationships with some of these distributors distributing our product for the Covid pandemic and so.
Pete Mariani: And so I think it'll be a bit of a hybrid approach.
Speaker Change: It'll be a bit of a hybrid approach.
Unknown Executive: Very helpful. Thanks, Phil. Thanks, Pete. Yep. Thanks, Mike.
Pete Mariani: Very helpful. Thanks, Tom Thanks, Pete.
Mike: Yep Thanks, Mike.
Speaker Change: Thanks, Mike.
Sean Lee: Your next question comes from the line of Sean Lee from HC Wainwright, your line is now open. Hi, good afternoon, guys. And thanks for taking my questions. My first question is just on the cytosol market. So could you give us a bit more color on what were the main growth drivers behind the high growth that we see in sales outside Germany as well as distributors? And why did that not apply to the German market? Yeah, I think that in international direct sales outside of Germany, you know, we've seen continued momentum. A number of our countries have demonstrated strong growth and adoption for specific applications that seem to be driving this growth.
Speaker Change: Your next question comes from the line of Sean Lee from H C. Wainwright. Your line is now open.
Sean Lee: Hi, good afternoon, guys and thanks for taking my questions.
Sean Lee: My first question.
Sean Lee: Just on the.
Speaker Change: Cytosorb market, so could you give us a bit more color on.
Speaker Change: What was the main growth drivers behind the.
The high growth that we see sales I'll say, Germany use those distributors and why does that not apply to the German market.
Yeah.
Speaker Change: Yes, I think that in.
Speaker Change: In.
Speaker Change: International direct sales outside of Germany.
Speaker Change: We've seen continued momentum a number of our countries have demonstrated strong growth and adoption for specific applications that seem to be driving this growth and they've been able to get reimbursement for some of these applications and or tender order.
Phillip Chan: And they've been able to get applications and, and they've been very successful at that in certain countries. For distributors and partners, I think it's a matter of incubation time. What we've seen is that, as you know, we have a broad number of distributors around the world, but these markets have been incubating over time with greater and greater numbers of physicians using our product and much more activity on a local level in terms of marketing and conferences and peer-to-peer support. And so, I think that's been the story there, but I think importantly, coming back to this messaging of right patient, right time, right dose, this is something that users understand, right?
Speaker Change: Payments for these applications and they've been very successful at that in certain countries.
Speaker Change: For distributors and partners I think it's a matter of incubation time, what we've seen is that as you know we have a broad number of distributors around the world.
Speaker Change: But.
Speaker Change: These markets have been incubating over time, with a greater and greater numbers of physicians using our product and.
Speaker Change: Much more activity on a local level in terms of marketing and conferences and peer to peer support.
Speaker Change: And so I.
Speaker Change: I think thats.
Speaker Change: It's been the story, there, but I think importantly, coming back to this messaging of right patient right time right dose. This is something that users understand right and by shifting the concept of treating these patients from a therapy of last resort to really a proactive therapy.
Phillip Chan: And by shifting the concept of treating these patients from a therapy of last resort to really a proactive therapy, treating them upfront and aggressively is making a big difference. And I think that is flowing through those particular verticals. You know, in Germany, I think that we Germany's the largest medical device market in in Europe. And you know, in a very important country for our company. You know, as we've detailed many times, it has had its share of its own issues, particularly post-COVID hangover issues and the loss of ICU nurses and decreased ICU beds, resulting in decreased patient throughput and other things.
Speaker Change: Treating them upfront and aggressively is making a big difference and I think that is flowing through those those particular verticals.
Speaker Change: In Germany, I think that.
Speaker Change: Germany is the largest medical device market in in Europe.
Speaker Change: And Ah.
Speaker Change: And a very important.
Speaker Change: Country for our company.
Speaker Change: As we detailed many times has had its share of its own issues, particularly post COVID-19 hangover issues and the loss of ICU nurses and decreased ICU beds.
Our resulting in decreased patient throughput and other things and so although that has been improving that still remains an issue and there is also other things like a hospital reform and other things that are making its way through the system that.
Phillip Chan: And so although that has been improving, that still remains an issue. And there's also other things like hospital reform and other things that are making its way through the system that is causing some level of uncertainty. But that being said, we can control the things that we can control. on Facebook. I'm sorry, Sean. Apologies, I thought I was, I might have been cut off for a minute. I thought you finished answering already. Oh, no, I'm sorry, Sean. Not yet.
Speaker Change: Is causing some level of uncertainty, but that being said, we can control the things that we can control.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: I'm sorry, Sean.
Speaker Change: Apologies I thought.
Speaker Change: I might've been cutoff.
Speaker Change: You finished answering already.
Speaker Change: Oh, no I'm sorry, Sean.
Speaker Change: Not yet, but I think that what we see as an opportunity to optimize our sales approach and.
Sean Lee: But I think that what we see is an opportunity to optimize our sales approach. And that was really the basis of the reorganization. This is something that we can control directly. And we think that this is going to have significant benefits in this reorganization, particularly in the second half of the year, which is really where it's going to count. And so I think taking a little bit of short term pain for long term gain is really our goal. Great, thank you for that.
Speaker Change: And that was really the basis of the reorganization. This is something that we can control directly and we think that this is going to have significant benefits.
Speaker Change: And this reorganization, particularly in the second half of the year.
Speaker Change: Which is really.
Speaker Change: Where it's going to account and so I think taking a little bit of short term pain for long term gain is really our goal.
Speaker Change: Okay, great. Thank you for that.
Pete Mariani: My last question is on the operational side. I think you mentioned that the company is targeting near cash break-even in the core business by the end of this year. So I was wondering if you can provide a bit of color on what metrics do you need to hit to reach that break-even in terms of revenues and gross margins and such? Yes, Sean, we, as you know, we're not giving specific guidance, but I can tell you we, to hit that number, we see continued revenue growth from here. Not a lot of revenue growth is needed, but if we have just good, solid revenue growth and continue to drive 70% plus gross margins, we'll continue to drive efficiencies through the rest of the business and begin to see cash burn continuing to come down to lower levels than we have right now.
Speaker Change: My last question is on the operational side I think you mentioned that the.
Speaker Change: Companies targeting near cash breakeven in the core business by the end of this year. So I was wondering if you can.
Speaker Change: That added color on what metrics do you need to hit to reach that breakeven in terms of.
Revenues and gross margins and such.
Okay.
Speaker Change: Yes, Sean.
Speaker Change: As you know, we're not giving specific guidance, but I can tell you we to hit that number we see.
Speaker Change: <unk> revenue growth from here.
Speaker Change: Not a lot of revenue growth as needed, but if we have just good solid revenue growth and continue to drive 70% plus gross margins will continue to drive efficiencies through the rest of the business.
Speaker Change: And begin to see cash burn continuing to come down to lower levels than we have right now, but again moving it towards moving the core business towards cash flow breakeven in the back half of the year is an important goal for us as it allows us to free up investment for the drugs Orb launch.
Pete Mariani: But again, moving it towards, moving the core business towards cash flow break-even in the back half of the year is an important goal for us, as it allows us to free up investment for the drug sorbents.
Speaker Change: Hi, great. Thanks for that and that's all I have.
Sean Lee: Great. Thanks for that, Pete.
Unknown Executive: That's all I have.
Speaker Change: Thanks.
Tom Kerr: Your next question comes from the line of Tom Kerr from Jack's Small Cat Research. Your line is now open. Good afternoon, everyone. Just a quick, quick clarification on that last question on the breakeven. That assumes no drug sorb ATR revenues domestically or Canada. Is that correct? assumes, no, that's correct. When we talk about core business, we're saying core business exclusive of DrugsOrb at all. We want the core business to be able to run towards breakeven. So new investment can go towards DrugsOrb.
Speaker Change: Your next question comes from the line of Tom <unk> from Zacks small cap research. Your line is now open.
Speaker Change: Good afternoon, everyone.
Speaker Change: Hey, Tom just a quick.
Speaker Change: Quick clarification on that last question on the breakeven.
Speaker Change: That assumes no drug survey TR revenues domestically with Canada is that correct.
Speaker Change: Yes.
Speaker Change: Assumes no that's correct what I when we talk about core business.
Speaker Change: Saying.
Speaker Change: Core business exclusive.
Speaker Change: Drugs or at all we want the core business to be able to run towards breakeven. So new investment can go towards drugstore.
Pete Mariani: Just being hypothetical, the second part of the question is, if you get early FDA clearance, the commercialization takes a relatively quick time, and you could get drug revenues in the fourth quarter. I mean, does that change the profitability? probability level or is it possible? You know what I'm getting at? Yeah, well, what I would expect is in the early quarters of the Drugzorb launch, the Drugzorb business would not be immediately profitable, right? Because we're going to be investing in commercial capabilities. So what I'm saying is, if we get Drugzorb revenue going in those quarters, we'll be able to leverage the expense we need to continue to drive that growth, but we'll have the cash available to do that because we've run the core business towards breakeven.
Speaker Change: It would be hypothetical the second part of the question is if you get early FDA clearance. The commercialization takes a relatively quick time.
Speaker Change: And you could get drug ARP revenues in the fourth quarter I mean does that change the profit.
Speaker Change: The building level or is it possible.
Speaker Change: Okay.
Speaker Change: You're giving up.
Speaker Change: Yeah, well, what I would expect is in the early quarters of the drugs or launch the drugstore business would not be immediately profitable right, because we're going to be investing in commercial.
Speaker Change: Capabilities.
Speaker Change: So what I'm, saying is.
Speaker Change: If if we get drugs or revenue going in those quarters.
Speaker Change: We'll be able to.
Speaker Change: Leverage the expense, we need to continue to drive that growth, but we will have the cash available to do that because we've run the core business towards breakeven.
Tom Kerr: Got it.
Speaker Change: Got it so 2026 could be a very nice year going forward in terms of margins.
Tom Kerr: So 2026 could be a very nice year going forward in terms of margins, if everything gets approved. Yes. Yes, we could.
Speaker Change: He gets approved yes, yes, we could.
Phillip Chan: Just going back to FDA real quick, can they, I forget, can they ask for anything else at this point? More data, clarifications, or is the only thing left to clearance? Now, you know, as I mentioned, as an FDA breakthrough device, we're currently in an interactive review of our de novo application for drug sorb with FDA, which highlights that back and forth, more informal nature of the interaction. And we continue to work collaboratively with FDA to respond to their questions. So, and we're also in an advanced review with Health Canada for the same. And we expect to continue to have regulatory decisions.
Speaker Change: Just going back to FDA real quick can I forget can they ask for anything else at this point more data clarifications or is the only thing left to Clarence.
Speaker Change: Yes.
Speaker Change: I mentioned as an FDA breakthrough device. We're currently an interactor review of our de Novo application for drugs or with FDA with <unk>.
Speaker Change: Highlights that back and forth more informal nature of the interaction.
Speaker Change: And we continue to work collaboratively with FDA to respond to their questions. So.
Speaker Change: And we're also in advanced review with Health, Canada for the same and we expect to continue to have regulatory decisions. This year.
Phillip Chan: So you have interactive discussions with them. It's not just like a one-time AAR or anything like that. Okay. With FDA, that's correct, as a breakthrough designated. Got it, got it.
Speaker Change: So you have interactive discussions with them, it's not just like a onetime.
Speaker Change: Or or anything like that okay with FDA, that's correct as a breakthrough designated device.
Speaker Change: Got it got it all right one last quick financial one on the pro forma cash of $17 million.
Tom Kerr: All right, one last quick financial one. The pro forma cash of $17 million does not include the Q1 2025 burn. So we can assume that maybe cash as of today, and you obviously don't have to say exactly, is 14, 15 million in that range. Yeah, it's less than 17. Okay. All right. Just want to make sure that wasn't included in there. All right.
Speaker Change: It does not include the Q to Q.
Speaker Change: Q1 2025 burn.
Speaker Change: So we can assume that.
Speaker Change: Maybe cash as of today and you obviously, you don't have to say exactly as 14.
Speaker Change: $3 million in that range.
Speaker Change: Yeah.
Speaker Change: [laughter], yes less than 17.
Speaker Change: Hey.
Speaker Change: [laughter].
Alright, just want to make sure that wasn't included in there alright, that's all I have.
Unknown Executive: That's all I have for right now. Thanks. Okay. Thanks, Tom. There are no further questions at this time.
Speaker Change: That's all I have for right now okay.
Speaker Change: Okay. Thanks, Tom.
Speaker Change: There are no further questions at this time I will now turn the call over to Dr. Phillip Chan. Please continue.
Phillip Chan: I will now turn the call over to Dr. Phillip Chan. Please continue. Well, thanks, everyone. We appreciate you joining the call today.
Phillip Chan: Well. Thanks, everyone. We appreciate you joining the call today. If you do have any other questions. Please feel free to reach out to us at IR at Cytosorb <unk> Dot Com, we look forward to updating you in the future have a great evening, everyone and thank you very much have a good night.
Unknown Executive: If you do have any other questions, please feel free to reach out to us at IR at Cytosorbents.com. We look forward to updating you in the future. Have a great evening, everyone, and thank you very much. Have a good night.
Unknown Executive: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].