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spk08: Ladies and gentlemen, thank you for standing by and welcome to the Sears Corporation's second quarter 2021 financial results conference call. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Matt Notoriani, Senior Director of Investor Relations. Please go ahead.
spk13: Thank you and good afternoon. I'd like to thank everyone for joining us today. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at ir.serious.com. With me on the call are Obi Greenman, Sears' President and Chief Executive Officer, Vivek Jayaraman, Sears' Chief Operating Officer, Kevin Green, Sears' Chief Financial Officer, Carol Moore, Sears' Senior Vice President of Regulatory Affairs and Quality, and Jessica Hanover. Sears is Vice President of Corporate Affairs. Sears issued a press release today announcing our financial results for the second quarter ended June 30th, 2021, and describing our company's recent business highlights. You can access a copy of this announcement on the company website at www.sears.com. 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. Examples of forward-looking statements include those related to our future financial and operating results, including our 2021 product revenue guidance and goals, operating expenses, anticipated cash use from operations, gross profits and gross margins, as well as commercial development efforts, future growth and growth strategy, future product sales, product launches, ongoing and future clinical trials, ongoing and future product development, and our regulatory activities, including the timing of these events and activities. These forward-looking statements involve risk and uncertainty that could cause actual events, performance, and results to differ materially. They are identified and described in today's press release and under risk factors in our Forms 10-K for the year-end of December 31, 2020, and 10-Q for the quarter-end of June 30, 2021, which we will file shortly. We undertake no duty or obligation to update our forward-looking statements. On today's call, we'll begin with remarks from Obie, followed by Kevin to review our financial results. We will conclude with commentary from Obie regarding recent announcements and update on our pipeline and closing remarks. And now, it's my pleasure to introduce Obie Greenman, Sirius' President and Chief Executive Officer.
spk02: Thank you, Matt, and good afternoon, everyone. Hopefully you've had a chance to review our Q2 results from our earnings release, which we issued earlier today. We're excited to share these results with you. Before Kevin and I provide greater detail around the second quarter, I would like to begin with a few thoughts about our performance, how we see the second half of 2021 shaping up, and what we are focused on in the near term to help make our intercept offering the new standard of care for playlet safety in the U.S. Our record second quarter results provide clear evidence that the Intercept blood system for platelets has quickly become the preferred choice of both blood centers and the hospitals they serve for protecting the US platelet supply. With our second quarter performance, our product revenue over the last 12 months is now north of $100 million, a milestone for the company. As we strengthen our leadership position, over other safety interventions for transfusion transmitted infections in the U.S., we expect to realize continued meaningful revenue growth through the second half of 2021 and into 2022 and beyond. Accordingly, we are raising our full year 2021 product revenue guidance to $118 to $122 million, up from our previous guidance of $110 to $114 million. The intercept adoption that we are seeing in the U.S. is unparalleled and is happening faster than we initially anticipated. In this era of pandemic preparedness, our pathogen inactivation technology is creating a new standard of care with hospitals. At leading U.S. blood centers, like the American Red Cross, use of Intercept to protect the platelet supply indicates a powerful endorsement of our technology that will help us continue to expand the reach of Intercept. At the ARC, robust demand suggests their stated goal of moving toward a 100% pathogen-reduced platelet supply is achievable based on the fact that their current run rate is now well above 50%. Needless to say, we are thrilled with the level of intercept adoption we saw in the second quarter and believe intercept-treated platelets will soon be the standard of care in the United States. Outside the US, we have a long track record in some geographies like Switzerland, where the Swiss Red Cross was an early universal adopter of our technology. But significant greenfield opportunities in certain geographies remain. As an example, during the second quarter, we announced a contract with the Canadian Blood Services, or CBS, which is the largest of two blood centers in Canada, processing roughly two-thirds of the country's blood supply. As CBS has said publicly, its aim is to drive to full adoption of pathogen-reduced platelets. We are proud to partner with them over the next couple of years to make that a reality. With a more than $1 billion global addressable market for intercept blood system for platelets alone, we believe the opportunity relative to our current penetration remains significant, and we intend to continue this commercial momentum. As we stated previously, and because of our unique role in the blood component supply chain, we continue to prioritize our increase in production capacity and improve supply chain continuity. As regions around the globe look to increase the safety of their platelet supply and adopt the Intercept safety standard, their reliance on Cirrus is foundational for the operational excellence we are committed to demonstrate. With cumulative kit sales to treat over 9.4 million doses globally and many thousands of patients transfused daily with Intercept treated blood components, we realize the significance of this responsibility every day. It empowers our team with great purpose and pride and demands the investment we are making to sustain this critical technology for the long term. With the Intercept Fibrinogen Complex product, or IFC, we have also been hard at work on several fronts, and we are where we expected to be as this rollout has continued to build momentum over the last several months. As we have stated previously, the hospital interest and engagement we have seen around the product is positive. To that end, we are pleased to report that we have several hospital customer contracts now signed and expect to begin ramping delivery of product to these early adopters through the back half of the year. Among these initial accounts, we are pleased that one of the early adopters is a large integrated delivery network, or IDN, in one of our initial launch states. Additionally, we are pleased to have recently added Florida to our launch footprint with the June announcement of LifeSouth as an IFC production partner. We continue to target a nationwide IFC launch in the second half of 2022, following our production partners' receipt of BLAs to enable sales of IFC across state lines. In addition to scaling up production of IFC, our production partners have also been preparing BLA submissions, which we anticipate being filed in Q3. Finally, on the reimbursement front, we were excited to announce this morning that we have received a positive final decision from CMS for our new technology add-on payment, or NTAP, for IFC. We applaud CMS for their decision to provide this incremental payment for IFC, which has an effective date of October 1st. Before I turn the call over to Kevin for a discussion on our financials, I wanted to take a moment to talk about the blood shortage in the US, a topic that has been in the news and impacting US hospitals and patients over the last few months. We have received some questions about how the shortage impacts our business, so I wanted to take this opportunity to provide perspective for our shareholders. Clearly, the supply of blood components is a critical cog in the healthcare delivery engine in any country, and we believe the Intercept platform is capable of helping increase the availability of platelets and plasma in general. Our Intercept technology can also improve donor eligibility by alleviating the need for certain donor deferrals, like travel-related deferrals designed to minimize the risk of malaria transmission. Historically, summer already tends to be a seasonally tight period for the blood supply, and it appears to have started earlier and more severely than in years past, particularly in the shadow of the pandemic. As has been reported, hospital demand for blood products in the U.S. has rebounded, but in many cases, blood centers have struggled to keep up with this demand, particularly for red blood cells, leading to the deferrals of certain elective surgeries. There is less flexibility for availability of platelet components, since cancer patients are the most common recipients of platelet transfusions, and delaying treatment is typically not a viable option. Additionally, platelet components have a very short shelf life relative to other blood components, so making these units available for as long as possible alleviates a potential burden and minimizes the likelihood of waste in the system. With Intercept, platelets are treated and can be made available much more rapidly after collection than with bacterial testing methods, resulting in effective increased shelf life duration that can reduce hospital waste. Collectively, these clinical and logistical benefits have for the first time in decades provided blood centers with the opportunity to price for value, with the confidence that hospitals will be receptive. So in summary, while we do not believe our business will be impacted by the blood shortage making headlines currently, we join ABB, the American Hospital Association, and our blood center and hospital customers in urging all who are able to donate to do so. This pandemic has changed innumerable aspects of our daily lives, but what it has not changed is the need for donors to provide continuously lifesaving blood products that contribute directly to patient care. With the overall demand for blood components rebounding, a sustainable and resilient blood supply necessitates the financial health of U.S. blood centers and their access to a solid donor pool. With that, let me turn the call over to Kevin for a more detailed review of our financial results.
spk03: Thank you, Obi, and good afternoon, everyone. As Obi discussed already, we reported record second quarter 2021 product revenue of $31.5 million, a 46% increase from the $21.5 million recorded during Q2 of the prior year. This represents the largest product revenue quarter in the company's history. Global demand for Intercept continues to increase. For Q2, the calculated number of treatable platelet doses increased 67% year-over-year. In terms of product mix for the quarter, kit sales represented 97% of our Q2 product sales. Of the total kit sales, platelet kits accounted for approximately 91%, while plasma kit sales accounted for the remaining 9%. I'd like to spend some time speaking about our second quarter product sales by geography, beginning with North America, which was up 128% versus the prior year period. The strength we saw in the region was driven by robust demand for our platelet kits in the US, as blood centers across the country continue to ramp with Intercept. Sales to the country's top five blood centers, which provide roughly three quarters of the US platelet supply, grew 150% versus the second quarter of 2020. Similarly, North American sales to blood centers outside of the top five U.S. blood centers were also up in the high double digits when compared to the prior year period. We were working alongside each of our blood center customers in the U.S. as rapid scale-up efforts continued in Q2, approaching the FDA compliance deadline of October 1st. Moving to the EMEA region, sales in the region during the second quarter grew 12% versus the prior year. We saw strong demand from some of the larger accounts in the region during the quarter, as well as some puts and takes in sales timing during the quarter, which should provide tailwind during the second half of 2021. In addition to our product revenue, and not included in our guidance, Government contract revenue totaled $6.3 million in Q2. Comparatively, government contract revenue totaled $5.3 million in the second quarter of 2020. For the second half of 2021, we continue to anticipate government contract revenue will increase with patient enrollment for barter-reimbursed clinical trials and as activity associated with whole blood pathogen reduction contract funded by the FDA ramps. Turning to product gross profit and gross margins. Product gross profit during the quarter was $16.2 million compared to $11.8 million during the prior year period. The improvement in gross profit resulted from slightly less efficient product gross margins, which were 51.3% for the quarter compared to 54.9% for the prior year period. The lower gross margin percentage was driven primarily by the continued strength of our US platelet business. As we have previously stated, our US customers mainly use single-dose platelet kits versus our EMEA customer base, which has a higher mix of double-dose platelet kits. Since our single-dose platelet kits have a lower gross margin contribution compared to our double-dose platelet kits, this top-line mix shift is driving the year-over-year variance. Looking ahead, we expect that as the U.S. market seasons a bit, our double-dose kit sales in that market will also increase, which will contribute to gross profit percentage improvements. In addition, we have a number of capacity and margin expansion activities underway, which we anticipate will provide a return to economies of scale and overall margin expansion, which we are accustomed to and expect to realize. I'd now like to discuss operating expenses, which totaled $36.8 million during the second quarter and included $5.8 million in non-cash stock-based compensation. Of the total Q2 operating expenses, SG&A expenses accounted for approximately $19.8 million and were higher by about $3.6 million compared to the prior year, driven by increased Salesforce expenses associated with the launch of IFC. Additionally, non-cash stock-based compensation costs and increases in certain vendor fees contributed to the year-over-year increase. Research and development expenses for the quarter totaled $17.1 million, compared to $15.6 million during the prior year. During the quarter, we incurred increased research and development spending associated with the final two modules of our CE-MARCC submission for intercept red blood cells as well as ongoing costs associated with the U.S. red blood cell program and preliminary development efforts associated with our next generation LED-based illuminator and other new products. Reported net loss for the three months ended June 30th, 2021 increased when compared to the same period in 2020. Net loss for Q2 totaled $15.4 million or nine cents per diluted share compared to $14.9 million, or also 9 cents per debited share for the prior year period. In terms of our balance sheet, we ended the quarter in a strong position with approximately $122.8 million of cash, cash equivalents, and short-term investments on hand. As we previously mentioned, the trailing 12-month revenue topped $100 million, allowing us to extend the interest-only terms of our debt facility for an additional year. In addition, we have achieved the predetermined milestone, unlocking the option that would provide additional capacity under our death facility. Cash use from operations for the second quarter was $8.7 million, representing a sequential improvement from Q1 cash use from operations of $18 million. With the demand we are seeing, we have continued to invest in building inventory as we are focused on staying on top of product supply for our blood center customers around the globe. We are highly focused on supporting the robust demand for our products with a continued emphasis on reaching cash flow breakeven. As we discussed on our Q1 conference call, we see significant operating expense leverage opportunities that we believe will move us towards this goal over the next several quarters. Moving on to product revenue guidance for 2021. Clearly, we've exceeded expectations thus far in the year relative to where we thought the business would be in our original plan. With the realized commercial traction in the U.S., coupled with the visibility we feel we have heading into the back half of the year, we are raising our product revenue guidance range to $118 to $122 million. This new range reflects 28% to 33% growth when compared to 2020. Finally, this increase in guidance continues to reflect a modest contribution from Intercept Fibrogen Complex. With that, let me turn the call back over to Obi for some closing comments.
spk02: Thank you, Kevin. I want to wrap up with a few additional business updates. In addition to the strong commercial results, The organization executed on several other fronts during the second quarter. First, in June, we submitted the seven-day post-collection storage claim for intercept platelets to FDA. We continue to assume a 180-day review window, which would set us up for potentially receiving approval by the end of the calendar year. As we said previously, we believe the seven-day claim strengthens our already advantageous value proposition for U.S. blood centers and and their hospital customers. And we are hopeful that we will be able to add the additional two days of effective shelf life to intercept treated platelets later this year. With our ongoing red blood cell efforts, we also continue to advance the programs, particularly in Europe, where we submitted the final two modules for CE-MARC during the second quarter. You may recall, in collaboration with our notified body last year, we opted to transition our submission made under the medical device directive to the Medical Device Regulation, or MDR. I'm very pleased with the way our team has executed on this submission. This is a significant accomplishment for the team, and we look forward to introducing this offering to the EU market. In the US, enrollment continues in our two phase three trials, and while trends are still below pre-COVID levels, they continue to recover from what we saw last year. Finally, looking ahead to AABB in October, we were pleased to see that pathogen inactivation is featured prominently during this year's plenary oral abstract session, with half of the topics covered featuring presentations about intercept platelets, including a presentation of the PIPER Phase IV study, which is one of the largest studies ever conducted in transfusion medicine, with over 2,000 patients transfused during a four-year period. At a high level in this study, we did not observe any statistically significant differences in treatment-related mortality, pulmonary adverse events, or blood component utilization. In combination with the significant body of national hemovigilance data that continues to be collected by our European customers, we think studies such as PIPER help underscore the impressive safety profile for our intercept system. In closing, Our second quarter performance has established a clear path towards market leadership for Intercept and our company. Our commercial success is reshaping our growth trajectory at Cirrus in 2021, accelerating our path to becoming a new global standard of care. As our top line continues to grow over the next several quarters, our team is focused on driving sustainable growth while also demonstrating our ability to achieve cash flow breakeven. I look forward to updating you more on our progress over the back half of this year. With that, let me turn it back over to the operator for Q&A.
spk08: Thank you. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Matthew Blackman with Stifel. Your line is open.
spk09: Good afternoon, everybody. Congrats on a really tremendous quarter. I'm just going to start with two questions, actually, both for Kevin. Maybe if I could start on how we should be thinking about the shape of the second half. Obviously, we had a big step up from 1Q to 2Q, and I just want to make sure we're thinking about the cadence in the back half correctly. Should we assume sort of a similar 2Q to 3Q and then 3Q to 4Q sequential growth, or for some reason could be more front-end loaded in 3Q perhaps because of the timing of the guidelines. Just any help there would be appreciated. And then I've got one more follow-up for you, Kevin.
spk03: Yeah, sure. No problem. Thanks, Matt. You know, historically Q3, especially in Europe, has been one of the softer quarters just given the holidays. And I don't have any reason to believe that it'll be different. So while we anticipate sequential growth, I do think that the Q4 will be slightly stronger than Q3. And In part, that's going to be driven by U.S. customers continuing to prepare for the compliance deadline, which is October 1st.
spk09: And I guess it would also include some cryo as well, perhaps, in the fourth quarter, more so in the third. Is that also fair?
spk03: That's right. Although, you know, in our prepared remarks, we continue to believe that the 2021 contribution from IFC will be modest in the low single digits. So not a a major driver of revenue, but certainly will continue to gain momentum, and we'll see more and more transfusions with that product.
spk09: And then just wanted to touch on the SG&A leverage, and maybe this is not the best way to think about it, but if you just look sequentially, you grew revenues like $8 million, but SG&A only went up about $600,000. So is that all sort of pure leverage, or are there still some lingering deferred spending because of the pandemic? And then, Kevin, I have to ask you, Could you expand a little bit on the comments you made? I think sort of towards the end of that section, you were talking about progress towards breakeven. I don't recall the exact language, but you mentioned something about over the next few quarters. I'm guessing you don't mean breakeven in that timeframe, but maybe just give us a sense of how we should be thinking about sort of the trajectory towards breakeven. Does it become more visible over the next few quarters? Is that what you're talking about? Or, you know, any color on that would be helpful. Thanks. Oh, sure. No problem.
spk03: So on the SG&A leverage component, there will be some residual deferrals. We've seen some residual deferrals due to COVID. We're starting to see increased travel, hospital access, conference attendance, more in line with what we had expected. At the same time, we've made some investments in the IFC business, which, as that contributes, should provide additional leverage to By and large, the team is largely built out, especially for those first five markets and for platelets and plasma. So we feel very confident that initial investment will result in a high degree of leverage, and that's sustainable leverage for quite some time. As it relates to your question regarding break even. What we had said was over the next several quarters, we'll gain visibility and move in that direction. It is a focus of ours, as we've talked about over the past several quarters. We're defining it as a core adjusted EBITDA, so backing out depreciation, amortization, and also non-cash stock-based compensation. And really, that allows us to isolate on the core business We're not giving guidance for 2022, obviously, but we expect that with that continued SG&A leverage, a return to margin expansion, and economies of scale with the growth that we see, not just for the U.S. Platinum and Plasma business, but also with contribution from Cryo, that we'll be in a strong position to provide some clarity and achieve that milestone, which is, again, kind of a cash flow. breakeven or core-adjusted EBITDA as we're calling it. Thanks, Kevin. Really appreciate it.
spk08: Thank you. Our next question comes from Brandon Foulkes with Cantor Fitzgerald. Your line is open.
spk04: Hi. Thanks for taking my questions and congratulations on a very good quarter. Maybe just any commentary you can talk about what you saw in July this year? Was it similar to years in the past, or are you seeing any disruptions at this stage? And then secondly, I think it called out that the blood centers are benefiting from pricing to the hospitals. Does that provide you potentially any knock-on leverage around pricing for Intercept down the line? Thank you.
spk02: Thanks, Brandon. Would you mind repeating that last part of your question? I didn't quite hear it.
spk04: So I think you mentioned that blood centers, hospitals are kind of, I think, forgive me for the exact words, but I think you said something along the lines of blood centers are benefiting and hospitals are prepared to pay a premium for product at this stage, something along those lines. Does that provide you any potential pricing flexibility around Intercept at any stage?
spk02: Yeah, thanks. I mean, I think both those questions I'll defer to Vivek on. I mean, I think the nature of your second part of your question was just around pricing for value. And I think one of the key things that Cirrus has enabled blood centers to do, particularly here in the U.S., is realize a move away from commodity-based pricing, which has really been challenging for them over the last decade, especially as demand for red cells, at least, has declined. As I mentioned in my prepared remarks, that's stabilized. We're actually starting to see demand increase for red cells. And in plants, it sort of has an ongoing organic growth rate of sort of 3% to 5% in any given year. But what we're seeing is that with the adoption of Intercept that blood centers are able to increase their pricing for platelet components given the value conferred by treatment with our technology. And that's really helpful for the overall financial viability of the blood banking industry in the United States or blood center business in the United States. Maybe Vivek can expand on that a little bit as it relates to sort of your question about pricing over time, as well as your question around what we saw in July.
spk07: Thanks, Obi. Just maybe for my own benefit, a little bit more clarification on the question regarding July. Brandon, was there something specific you were curious to understand about the past month or I just want to make sure I'm answering your question correctly.
spk04: Well, just, you know, I mean, I'm just trying to get some indication of the third quarter, right? Sort of how you've seen trends. So just given we're one month into the quarter, just anything you can, you know, you think is worth highlighting in July?
spk07: No, that's helpful. I can certainly take a stab at that and feel free to ask clarifying questions should they come up. Maybe first with respect to pricing, piggybacking a bit off of what Obi mentioned. You know, one of the things that we encountered very early on in the Intercept launch is a bit of reservation or hesitation on the part of the blood centers questioning whether the hospitals would be receptive to the idea of a higher price caps and reduced platelet relative to a conventional platelet. And, you know, what I can state with conviction now is a higher-priced pathogen-reduced platelet has very much been accepted at the hospital level, and blood centers are seeing this really across the board. You know, oftentimes when it comes to health care pricing, you end up getting dominated by what I call the tyranny of the anecdote. You always hear about the customer who is pushing back on price, but you very rarely hear about many customers for whom price isn't the issue, but they want value, they want safety, and they want to be proactive about offering their patients the best possible clinical outcome. And certainly with the pandemic, which, you know, we're still very much in a pandemic, with the pandemic, the idea of preparedness and providing the safest product has risen to the top. And I think that is to the benefit of patron reductions of blood centers have seen their ability to maintain a solid price on PR platelets, and I anticipate that'll continue to be the case. With respect to July and really the quarter in general, I think Kevin mentioned this, what was most encouraging is we saw a continued adoption of Intercept. The growth was driven by kit sales, not device placements, and so what you're seeing with our customers is they're purchasing kits, they're producing Intercept products, and those products are getting transfused at the hospital, so we exited the quarter with momentum, and I anticipate that will carry forward through the third quarter that's reflected in the increased guidance. But fundamentally, what's driving a lot of this is in addition to the strong partnership at the blood center levels, we're seeing hospitals state a clear preference for pathogen-reduced platelets as the manner in which they address guidance. Really, the hospital demand continues to grow. We've got the deadline coming up here on October 1st, but we anticipate continued share growth and progress even after the deadline. So, you know, our enthusiasm about the second half of the year and continuing on remains very high. Thank you. That's very helpful. I appreciate it. Thanks, Brad.
spk08: Thank you. Our next question comes from Josh Jennings with Cowan & Company. Your line is open.
spk11: Hi, guys. This is Eric. I'm for Josh. Thank you for taking the question. I wanted to ask about the US platelet market. You're obviously seeing great progress in the market considering the result that you delivered here in 2Q. But looking at US blood centers that fall outside of the big five, I believe they represent about 25% of the market. Could you talk about how traction has been getting those smaller players to adopt and utilize intercepts? They're a little bit more difficult for us to track, so any detail you could share there would be helpful.
spk02: Yeah, thanks for the question, Eric. Vivek, can I defer this one to you again?
spk07: Yeah, absolutely. Happy to answer that. You know, we saw increase in penetration and traction across all blood centers in the U.S. as we have stated in prior calls and really as we've been executing throughout the course of the past few years. Our focus has been on the big five blood center families, largely because, as you pointed out in your question, they represent approximately 75% of nationwide platelet distribution. So as the saying goes, you want to sort of fish where the fish are, and that has been working well. But what I mentioned in my prior response is what we're seeing is across the board a strong hospital preference for PR. So even those non-Big Five blood center families, what they're hearing from their hospital customers is, they prefer pathogen reduction as the way in which they address the bacterial guidance document. And so that is having an effect in terms of the other 25% of the market adopting PR, increasing their rate of adoption. And so we see growth really across all blood centers in the U.S. And to the point I made earlier, that's why we expect not only to see accelerated or continued adoption in the U.S. heading up to the October 1st, deadline, but we anticipate continued share growth and capture beyond the compliance period ending into, you know, really the following year. So we're seeing good growth there, but we continue to focus on the top five because fundamentally getting them going is what's going to allow us to capture the largest percentage of the market.
spk11: That makes sense. Thanks for sharing that. On the red cell opportunity, it was great to see that you submitted the final modules of your CE-MARC application. Thinking about the U.S. red cell program, could we get a quick refresh on where enrollment stands in the ongoing trials? And then secondly, are you able to share any estimates on when those trials could be nearing complete enrollment? Thank you.
spk02: Yeah, thanks, Eric. You know, so obviously COVID has made it challenging to enroll those studies over the last year and a half. But we are seeing a pickup in enrollment in both Phase III studies. As also you may recall, we had a meeting with the FDA earlier in the year to talk about enrollment of chronic transfusion patients in the REDIS study. So that's been added to the REDIS study scope, and we are enrolling those patients as well. I think it would be great if we could actually have an in-person investigators meeting to really sort of dial in exactly, you know, what the timeline looks like. But, you know, it's been challenging to make that happen. We did have a virtual one last week. I think there's a lot of enthusiasm for how enrollment's picking up, but it's still a little too early to sort of provide clarity on when we would complete enrollment in both those phase three studies.
spk11: Understood. Thank you. Thanks, Eric.
spk08: Thank you. Our next question comes from Mark Massaro with BTIG. Your line is open.
spk12: Hey, guys. Thanks for the questions, and congrats on a really strong quarter. Thanks. I wanted to ask about the timing of the CE mark. So obviously you submitted the fourth and final module for red blood cells in Europe, I guess. Can you give us a sense for just Just the planned rollout of red blood cells in Europe, I guess what I'm asking for is, could that be, you know, early 2022, or do you think that might be second half of the year? And what are the puts and takes to the timing?
spk02: Yeah, thanks for the question. Carol, would you mind handling this? I think you're closest to sort of what the review timing looks like with both the competent authority and notified body.
spk01: Sure, I'd be happy to. Thanks for the question. think we're looking really at second half of 2022. And here's the reason, you know, it's a multi group effort. So we have our notified body, which is TUV, and we have a competent authority, and they both have to review it. And so they each have parts that they need to handle. And I think those, all of the different reviews, and then the question and answers so that we can clarify any of their questions. I think we believe that that will take until the second half of 2022 to complete that activity.
spk12: Okay. And then maybe, Kevin, just to clarify, you know, you raised the product revenue guidance by $8 million for the year. You beat by almost $6 million in Q2. Is it fair, you know, you commented about typical seasonality in Q3, but expectation for a strong Q4. Is it reasonable for us to place the remaining $2 million, you know, for the year in each quarter, both Q3 and Q4, just roughly speaking?
spk03: Yeah, like I said, I think that Q4 will be slightly heavier than Q3. So I don't know how you want to weight that. We're going to continue to see growth in the U.S. just by way of blood centers increasing consumption in anticipation of the guidance document. And then we'll probably see some softness due to vacations and all the normal seasonal stuff. So We'll see sequential growth Q2 to Q3, and then probably slightly stronger growth Q3 to Q4.
spk12: Okay, and congrats on the NTAP. You know, I think NTAPs are great, but, you know, I think sometimes, you know, hospitals need a reminder that the NTAP exists. So can you just give us a sense for, you know, any type of education efforts and whether that's, you know, you going direct and, you know, just how do you go about – communicating this update to your core customer group? And can you help us frame, obviously we have the rate, but help us sort of frame the impact to your business, especially in 2022?
spk02: Yeah, thanks, Mark. I'll handle the first part of that question and turn it over to Dr. Jessica Hanover, who's on the call with us today as well. She was really the architect for This end tap submission on the back of our breakthrough device designation with with the FDA Jessica also was very involved with, you know, establishing the P code for outpatient reimbursement of intercept play that product. And so I think she'll be able to provide some color around, you know, how we plan to address You know that at the hospital level, helping them with billing because that clearly is a focus of ours. Jessica us jump in and answer more questions. Thanks.
spk06: Sure. Yeah, great question. Thanks for asking that. Absolutely, education is key on the reimbursement side, and we certainly know that hospitals have many ways that they can do things not in the best way. So we certainly do have an active educational campaign. We'll have materials that outline exactly how they need to use the coding instructions provided by Medicare in order to trigger the payment of the NTAP on relevant patient populations. And as you already know, we've built a good infrastructure in the hospital setting already, so we have the people that we need who can provide that education. Now a lot of the interactions have been virtual, but we're moving back to face-to-face, and that will really be essential, not only focusing on the blood bank within the hospital, but also with the billing and the charge master departments. So we have a comprehensive effort to make sure that hospitals are doing that right. That's excellent.
spk12: Yeah, go ahead. Sorry. Okay.
spk06: I was just going to hand it over to Vivek for the second half of your question.
spk07: I think you covered it well, Jessica. The only thing that I would add is the securing the NTAP has been part of our overall launch plan really since the beginning of this project. And so certainly grateful to Jessica and the team for making this a reality, but one thing to keep in mind too is getting broader nationwide release via DLA clearances and the rest are going to be critical to extending the reach of our launch and certainly a core element of our marketing campaign and hospital awareness campaign is going to be the end tap in part because you're looking not only at clinical value driver, but also potential cost saving benefits to the hospital. So it really serves to further emphasize the value of this IFC product both to clinicians as well as non-clinical decision makers within a hospital.
spk12: Excellent. And maybe one final question for me. I know it's far too early for you to comment on 2022 growth or guidance or anything like that. But, you know, at the same token, no one expected you to grow 46% year over year here this quarter. So, you know, to some extent you will be going up against, you know, some really strong comp as we think about 2022. You know, consensus, I think, was looking for 15% revenue growth in 2022. That seems achievable to me, but I was just curious if you could maybe just comment about how the difficult or the strong comps might weigh into how you think about growth next year.
spk02: Thanks, Mark. I'll start and then turn it over to Vic again just for some maybe additional context. But I think one of the things that investors and shareholders need to really focus on is the overall size of the U.S. market being around 150 million and possibly larger as a function of the organic growth we're seeing in the playlet market. So you marry that with the fact that we believe we're moving towards the standard of care, which we define as greater than 50% market share, You know, over the coming quarters. So there's still a lot of room to grow. And then the ABB came out with a survey in June that asked all the hospitals that they serve or many of them. You know what their preference was, is it related to being compliant with the FDA guidance on bacterial safety of platelets. And it was clear there that the strong preference was for pathogen-reduced platelets. And we're seeing, you know, those hospital customers, once they've implemented intercept platelets, really having a demand to get to 100%. So I think there are a lot of opportunities for growth in 2022 that, you know, are to be realized. Vic, any other color you want to add to that?
spk07: No, I think you captured it well. I mean... as Obi liked to tell me, we're only as good as our last quarter, so whatever their external expectations are, the expectations he places on us are always quite high, but that notwithstanding, as Obi indicated, there are clearly untapped opportunities both domestically as well as globally when you think about further penetration of the intercept platelet technology as well as now really starting the process of launching IFC, both with the NTAP and then eventually the BLAs in hand. So we feel like there's fertile ground to continue to promote and allow for penetration of intercept platelets. And if anything, the influence that some of these larger customers coming on board, for example, the ARC, the influence they wield not only domestically but globally is significant. So we feel Confident that we have the people, plans, and strategies in place to continue to drive growth. Now, I think your point's a fair one. We certainly, with strong performance, come challenging comps, but I think we feel very confident that we have the ability to continue to post solid growth numbers and, most importantly, continue to provide access to safe blood products for patients around the world. Okay, great.
spk12: Thanks again. Thanks, Mark.
spk08: Thank you. Our next question comes from Jacob Johnson with Stevens. Your line is open. Yep.
spk10: Hey, good afternoon, everybody, and I'll add my congrats on a really strong quarter. Maybe, Kevin, just on the gross margin side, you talked about maybe some of the longer-term opportunities on the gross margin side or maybe medium-term, but as we think about the back half of this year, If the U.S. is increasing as a percentage of your revenue mix, should we assume that maybe gross margins could be even softer than they were this quarter, or is there some kind of operating leverage you'll see on the gross margin side such that maybe this is a floor for gross margins for the back half of the year?
spk03: Yeah, thanks. You know, I don't think there's a ton of downside here for normal operations. You know, at the same time, I don't think we're going to see, you know, the margins where they were last year. But that was anticipated. We knew there would be some softness. The nature of early adopters in the U.S., which are predominantly single dose, I do expect that as that market matures, we'll see more and more double dose kits will help support it. And then, you know, longer term, I expect that as, you know, we talk to our suppliers and plan for you know, continued sustained growth. We're going to get back to economies of scale and see COGS reduction initiatives. And, you know, similarly, we're going to, you know, we're seeing commodity prices go up. We're seeing costs go up across the board. Similarly, our customers, I think, in certain geographies should expect to see some modest price increases.
spk10: Got it. That's helpful. Thanks for that, Kevin. And maybe sticking with you, Kevin, just one other question, and I may have misheard or missed this, but you mentioned, I think, in your prepared comments some puts and takes in the EMEA region. Could you maybe just speak to those? And maybe on the takes side of things, can you talk about the opportunity that you seem to hint at in the back half of the year in EMEA?
spk03: Yeah, you know, it's not all that meaningful, which is why it characterizes as puts and takes. You know, it's really timing of order. So as we've talked about in the past, certain distributors order in kind of lumpy, unpredictable patterns. And, you know, we saw some that we thought would happen in Q1 slip to Q2, and similarly some that we thought would be in Q2 or slip into Q3. So, you know, I don't want to spend too much time because I don't think it's the focal point that, you know, we want to call your attention to, which is really the U.S. growth and preparation for the guidance document. So, you know, it's nice, but not a huge driver.
spk10: Yep, no, it makes sense. Sorry to dwell on that, not the 100% plus platelet kit. I'll leave it there. Congrats on the quarter. Thanks again for taking the questions.
spk08: Thank you. Our next question comes from Ram Selvaraju with H.C. Wainwright. Your line is open.
spk05: Hi, this is Bubalan dialing in for Ram Selvaraju, and thanks for taking my question. So I just want to touch upon your Canadian Blood Services collaboration. So what are your preliminary thoughts and expectations regarding the Canadian blood transfusion market, and how long do you think it will take for the Canadian Blood Services to adapt intersexfully?
spk02: Yeah, thanks very much for the question. So the Canadian market for platelets is roughly around 180,000 platelet doses annually, so pretty significant. And CBS produces roughly two-thirds of the overall market. So the other major supplier in Canada is a group called HemoQuebec. Both are excellent organizations with a focus on patient safety, certainly given the history of of the craver Commission findings back in the in the 90s and early 2000s that they really focused on on being state of the art from a blood component safety standpoint. So the leadership there is started implementation with intercept, but does really looking to secure a seven day label claim. that we're hoping to file for sometime next year. We've been working closely with Health Canada in that regard and in collaboration with Canadian Blood Services. And they have a stated goal of getting to 100% once they get that claim. So I can't give you a specific timing, but, you know, over the next, couple of years, we believe that that single organization with its history of moving quickly towards a state-of-the-art technologies will be a meaningful customer for us.
spk05: Understood. Just one more from me. So what are your thoughts on plate demand growth in Switzerland during the remainder of the year and maybe expectations for 2022? And are there any particular trend that is catching your attention?
spk02: You said Switzerland, correct? Is that what you said? Okay. Yeah, so Switzerland's been a customer of ours for over a decade now, and that was really triggered from pediatric septic fatality that they had over a decade ago and wanting to secure their planet safety against that. I think it's been a wonderful partnership. It's extended into trying to develop a whole blood pathogen activation inactivation technology for Sub-Saharan Africa through the Swiss Red Cross Foundation. As far as the organic growth, because we treat 100% of the platelets in Switzerland, any growth coming out of that market would really have to be organic platelet demand. Interestingly, what we've seen is that we've seen sort of a static level of planet demand there for over a decade now. And the reason why I think that's interesting is that what we've been able to document through the Swiss Red Cross human vigilance system is is the safety of the intercept system, but also that it hasn't increased any playlet utilization at all. So there's been no impact on playlet utilization, meaning that the intercept playlets are working well.
spk05: That's it from me. Thanks for taking my questions.
spk02: Yeah, thanks very much for the question.
spk08: Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Ovi Greenman for closing remarks.
spk02: Well, thank you again for joining us today and for your interest in Cirrus. We look forward to speaking with you at the Cantor Fitzgerald Global Virtual Healthcare Conference next month if you're attending, and I really appreciate your ongoing support of the company.
spk08: This concludes today's conference call. Thank you for participating. You may now disconnect.
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