Cerus Corporation

Good day, ladies and gentlemen. Thank you for standing by. And welcome to the CIRS Corporation third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star, then the one key on your touch-tone telephone. Please be advised that today's conference is being recorded. If you recall operating systems, please press star, then zero. I would now like to hand the conference over to your speaker host today, Sir Matt Milteriani, Senior Director of Investor Relations.

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.cirrus.com. With me on the call are Obi Greenman, Cirrus' President and Chief Executive Officer, Vivek Jayaraman, Cirrus' Chief Operating Officer, Kevin Green, Cirrus' Chief Financial Officer, Carol Moore, Cirrus' Senior Vice President of Regulatory Affairs and Quality, and Jessica Hanover, Cirrus' Vice President of Corporate Affairs. Cirrus issued a press release today announcing our financial results for the third quarter ended September 30, 2021, and describing the company's recent business highlights. You can access a copy of this announcement on the company website at www.cirrus.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 are 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 the risk factors in our Forms 10-K for the year ended December 31, 2020, and 10-Q for the quarter ended September 30, 2021, which we will file shortly. We undertake no duty or obligation to update our forward-looking statement. On today's call, we'll begin with some opening remarks from Obie, a commercial update from Vivek, followed by Kevin to review our financial results. We will conclude with commentary from Obie with an update on our pipeline, recent announcements, and closing remarks. And now, it's my pleasure to introduce Obie Greenman, CIIRS's President and Chief Executive Officer.

Obie Greenman Thank you, Matt, and good afternoon, everyone. Once again, we are excited to share our most recent quarterly results with you all. Before I turn the call over to Vivek and Kevin to cover our third quarter results in more detail, I wanted to provide a few opening comments. 2021 has truly been a breakout year for Cirrus as our annualized product revenue run rate continues to build a momentum we saw in the first half of the year. We continue to achieve major goals in 2021, both commercially and operationally, and I'm excited about the road ahead for the company going into 2022. Since 2014, when the FDA first issued the draft guidance to address bacterial contamination in platelets, we've been focused on making the case that our Intercept blood system is a best-in-class offering to mitigate transfusion-transmitted bacterial infection, while also providing a proactive solution to addressing blood safety and availability in general. We have built a unique and strong position in transfusion medicine, which is a medical field that takes a while to embrace innovation, but when it does, it establishes safety measures that endure. Our Q3 and year-to-date results were driven by U.S. adoption of our Intercept Playlit platform, which enables strong blood center compliance with the FDA guidance that went into effect October 1st. In parallel with the blood center benefits afforded by Intercept, U.S. hospital demand for pathogen-induced platelets continues to build given the logistical benefits of a single inventory of fresher platelets compared to managing inventories of platelets of various ages that are subjected to delayed release due to testing. As you can see from this quarter's results, our business in the U.S. has grown rapidly. With all the work our team has done to get customers ready for the FDA compliance, we believe our current run rate is helping to establish pathogen reduction as a standard of care in the U.S. playlet market, with intercept-treated playlets now representing the majority of playlets produced. Last month at the virtual ABB annual meeting, we were pleased to see our Phase IV Piper study presented as a plenary lecture. Piper represents the largest study of playlet transfusions ever conducted and is the latest in a robust, growing, evidence-based body of real-world data for our technology. With studies like this, combined with over a decade of routine use experience in Europe, we are solidifying the strong safety and efficacy profile for Intercept. We believe such a strong body of evidence will allow us to realize continued growth on a global scale as we help deliver a new standard in transfusion medicine. To that end, cumulative kit sales for Intercept platelets and plasma recently eclipsed 10 million doses globally. It is a remarkable accomplishment in our company's history and a reminder to all of us at Cirrus of the thousands of patients that receive Intercept treated blood components every day. In summary, we are honored to support our blood center customers and their daily efforts to secure the blood supply, and we remain committed to our mission of making the Intercept blood system the global standard of care in transfusion medicine. Following Vivek and Kevin's remarks, I'll return to discuss our pipeline which continues to make good progress and is positioning us for continued growth over the long term. With that, I'll turn it over to Vivek.

Thank you, Obi, and good afternoon, everyone. The third quarter was indeed a significant one for Cirrus. We are now officially a month beyond the FDA guidance compliance deadline, and our results show that we have moved quickly to convert U.S. blood centers across the country to the intercept blood system for platelets. Even with the commercial success we had last year and so far this year, we feel we can continue to increase our penetration in this key market as blood centers and their hospital customers realize the value of a single SKU patch and reduced platelet inventory. Blood centers across the country have helped champion Intercept as a preferred method for safeguarding platelets. As these centers standardize on Intercept, they do so recognizing that our product offers protection from bacterial contamination as well as other known and emerging pathogens. Our blood center customers can then offer these platelet units to hospitals with better pricing, value, and ultimately safety for patients. As we continue to grow our presence, we remain committed to continuing to be a valued partner in safeguarding the platelet supply for many years to come. Once again, we are pleased to report the largest product revenue quarter in the company's history. Third quarter 2021 product revenue grew 53% year-over-year to $36.1 million. On a sequential basis, product revenues grew 15% in the third quarter when compared to the 31.5 million product revenue reported in Q2 of this year. Drilling down to sales in our major geographies, product sales in North America grew 146% versus the prior year period. Product sales in EMEA grew 3 percent versus the prior year. On a year-to-date basis, our North American product revenues for the first three quarters of 2021 were slightly higher than our year-to-date product revenues in the EMEA region. Sales to the top five U.S. blood centers, which provide roughly three quarters of the country's platelet supply, increased over 170 percent versus the third quarter of 2020 and grew by nearly $5 million sequentially. Outside of the top five U.S. blood centers, product sales increased over 50% when compared to the prior year period. Turning to Intercept Fibrinogen Complex, or IFC, the third quarter marked the first commercial sales of this product to hospital accounts. You'll recall the launch of this product has been limited to five states in the U.S. thus far, but I am pleased to report that four of our blood center production partners submitted their BLAs during the quarter. As such, we look forward to rolling IFC out in a nationwide launch once these anticipated BLAs are in hand. We've recently had some of our initial customers speak publicly about their rationale for use of and early experiences with IFC. At the recent Society for the Advancement of Patient Blood Management annual meeting, two of our hospital customers, Texas Children's Hospital and Kaiser Permanente, outlined the clinical need for IFC based on its pathogen-reduced safety profile, its ability to be readily available to treat bleeding events earlier, and the lower risk of wastage compared to conventional cryoprecipitate. With both a nationally recognized children's hospital and a major IDN leading the way, we continue to believe in the promise of this product to be a tremendous clinical utility and to help support our continued revenue growth in the years to come. With that, let me turn the call over to Kevin for a more detailed review of our financial results.

Thank you Vivek and good afternoon everyone. I share my colleague's enthusiasm and pride in the progress we've made and look forward to the progress we expect in making intercept treated blood components available to even more patients globally. As Vivek mentioned in his remarks, We reported record product revenue during the third quarter, totaling $36.1 million, representing a 53% increase compared to the third quarter of 2020, and led by strong intercept platelet sales in the U.S. With year-to-date product revenues at the end of Q3 coming in only about a million dollars shy of our full year 2020 product revenues, this breakout year continues to demonstrate Cirrus' strong position in transfusion medicine. Moving on to our calculated platelet dose growth globally, which, as calculated, depicts a 69% year-over-year increase and a 22% increase sequentially. In terms of product mix for the quarter, sales of intercept kits continue to represent more than 90% of our Q3 product revenue. Of that, Platelet kits represented over 80% of our total product sales, underpinned by the steady EMEA market and growth in the U.S. market. In addition to our product revenue and not included in our guidance, government contract revenue totaled $6 million in Q3. Comparatively, government contract revenues totaled $5.6 million in the third quarter of 2020. As we have stated previously, Government contract revenue is primarily comprised of BARDA reimbursement for red blood cell clinical trials and, to a lesser extent, our whole blood pathogen reduction contract funded by the FDA. As patient enrollment under the BARDA trials and activity on the whole blood effort ramp, we expect government contract revenue to increase. Additionally, as we will discuss a little later, Since this government contract revenue line is essentially an offset to a portion of our R&D spend, beginning next year, we plan to strip out both the expense and offsetting revenues in an effort to highlight the core business adjusted EBITDA metric that we are using to measure progress of our core business activities. With that aside for the time being, let's turn to product gross profit and gross margins. Third quarter gross profit was the highest in the company's history at $18.5 million compared to $12.7 million during the prior year period. The increase in gross profit was primarily driven by higher product sales. Product gross margins for the quarter were 51.3% compared to 53.6% for the prior year period and were roughly flat when compared to our Q2 2021 product gross margins. As was the case during the first half of the year, and as we anticipated and forecast, the year-over-year decline in our product gross margin percentage was driven primarily by unfavorable product mix associated with selling a higher volume of single dose kits versus the prior year period. Today, our customers in the U.S. market predominantly use single dose kits, which carry a lower margin contribution than our double dose platelet kits. Over time, we expect that the U.S. market will use an increased number of double-dose platelet kits. I'd now like to discuss operating expenses, which totaled $35.6 million during the third quarter and included $5.9 million in non-cash stock-based compensation. During the third quarter, we continued to demonstrate the operating leverage of our business, with total operating expenses up only 11% versus the prior year, on our strong product sales. Of the total Q3 operating expenses, SG&A expenses accounted for approximately $20.4 million and were higher by about $4 million compared to the prior year period. The year-over-year increase in SG&A expenses was driven by costs associated with increased sales incentive compensation. Research and development expenses for the quarter totaled $15.3 million compared to $15.9 million during the prior year. During the quarter, we continued to advance a variety of pipeline projects, including our U.S. red blood cell efforts and the LED illuminator, along with increased stock-based compensation costs. However, offsetting the investments in these programs, we realized lower R&D costs associated with certain mature projects rolling off, such as our Piper study and IFC, which is now past development and being commercialized. On the bottom line, reported net loss attributable to Cirrus for the three months ended September 30, 2021 improved when compared to the same period in 2020. Net loss attributable to Cirrus for Q3 totaled $12.4 million, or 7 cents per diluted share, compared to $14.1 million, or 8 cents per diluted share for the prior year period. With respect to our path towards achieving cash flow breakeven, we've remained focused during this pivotal year on driving operating leverage in the business while continuing to invest in growth for both the short and long term. As this remains a priority for us moving forward, we plan to provide more color on subsequent earnings calls beginning in 2022 to help track our progress towards cash flow breakeven using a pro forma measure we are calling Core Business Adjusted EBITDA. Essentially, this metric will highlight our operating income or loss while adjusting out non-core business activities, such as our government contract revenue and the corresponding costs, as well as non-cash items, such as stock-based compensation, depreciation, amortization, and the line items below operating income, namely other income expense and income taxes. In terms of our balance sheet, we ended the quarter in a strong position with approximately $120 million of cash, cash equivalents, and short-term investments on hand. Cash used from operations for the third quarter was $6.6 million, which reflects a continued sequential improvement over the course of 2021. As we continue to see robust demand from our customers, we remain committed to continuing to ensure our ability to supply customers and to support their ability to deploy intercept for platelets for the blood supply. To that end, expanding access to our revolving line of credit and debt facility will continue to play an important role and allow us to invest in the growth of the business without depleting our cash resources. Moving on to product revenue guidance to round out 2021, the strength of our business year to date, coupled with the visibility we have going into the balance of the year have resulted in us increasing and also narrowing our full-year product revenue guidance range to $127 to $129 million from the prior range of $118 to $122 million. This new range reflects 38 to 40 percent growth when compared to 2020. And with that, let me turn the call back over to Obi for some closing comments.

Thank you, Kevin. To wrap up today, we have a few updates regarding several of our pipeline initiatives. First, with respect to our seven-day post-collection storage claim for intercept playlets, we recently received questions from the agency regarding this submission and have plans to meet with them in the near term to discuss their feedback. Given the fact that these questions have stopped the review clock, the potential approval timing is no longer expected by December of this year. With respect to our red blood cell program, I wanted to provide a quick update on our modular submission filing for CE-MARC, which you will recall we completed with the TUV during the second quarter of 2021. While TUV continues its review, a portion of our submission is now also under review by the Dutch Competent Authority, CBG, rather than HPRA or the Irish Medicines Board, as we initially anticipated. This change is due to the MDR transition-related resource constraints faced by all European regulatory bodies and could impact CE mark timing. Finally, I wanted to wrap up with some great news regarding the EFS, France's national transfusion service. I am pleased to announce that we have signed a multi-year contract extension with one of our most important customers and one of the most highly regarded institutions in the field of transfusion medicine. The EFS has been a trusted partner to Cirrus for more than a decade, and began using Intercept on 100% of its national platelet supply in 2017, in addition to treating a portion of its plasma production. With over a million platelet units transfused into arguably the world's most robust hemovigilance system, the data supporting the strong safety profile of Intercept platelets is significant. We see this contract extension as an important validation of our mission as a company to support our customers in their effort to safeguard the safety and availability of the blood supply. And it also validates the business model that we are building for the full Intercept portfolio. In closing, our third quarter performance has established a clear path towards market leadership for Intercept globally. Our commercial progress is reshaping our growth trajectory in 2021. 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 break even. Our product pipeline continues to advance as well with a number of important product launches anticipated during the coming few years. With that, let me turn it back over to the operator for Q&A.

Thank you. Ladies and gentlemen, at this time, if you'd like to ask a question, you will need to press the star then the one key on your touch-down telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Now, first question coming from the lineup. Josh Jennings with Cohen. Your line is open.

Hi. Good afternoon. Thanks for taking the questions. It's great to see another record quarter printed. With the strength that the business, the momentum the business is seeing, I just wanted to touch base on the sustainable growth trajectory, and I think You guys have going to get close to 40% revenue growth and product revenue growth in 2021 presents a challenging comp, but it seems there's a lot of layers to the growth story going forward as well. And just wanted to kind of touch base on your thoughts on the sustainable 20% plus revenue growth trajectory going into 2022 and 2023 and any of those layers that you called out as the meaningful drivers as we head into 2022.

Well, thanks a lot, Josh. I think that's a really good question. And I'll start and probably turn it over to Vivek like halfway through. So, you know, we still remain very optimistic about sort of the continued growth of the business as we get through 2021 and move into 2022, just given the size of the market. I think the backdrop of the U.S. play the market is that it typically is growing in sort of the mid single digit range organically, just given the demand for play the components. And so that really puts a lot of pressure on both blood centers and hospitals to secure the supply. And so having a product that really allows for a single inventory, single SKU, it allows for greater supply chain efficiencies. But I think Vivek can really maybe elaborate more on sort of what's going on specifically in the U.S. and with the American Red Cross.

Yeah, thanks for the question, Josh. You know, we feel very confident in our ability to sustain growth both domestically and internationally. As we indicated in the prepared remarks, you know, our progress with the big five blood center families in the U.S., and again, they represent about three-quarters of the market, has been really strong, but there's still plenty of headroom within that segment of the market. And what we're seeing from hospital customers, independent of who their blood supplier is, is that they are expressing a clear preference for intercept-created platelets. And so those two factors really give us a lot of confidence. There's plenty of room to run domestically. In addition, we continue to make investments in key international growth markets, which over the course of the next few years should allow us to have ongoing waves of growth and product adoption.

Fundamentally,

What we're focused on is ensuring that any patients who can have access to Intercept, in fact, do.

Thanks for that. Just my follow-up on IFC, the cryo launches in the early days, but just as you're seeing some of this early interest and demand creation, can you talk about the historic TAM assumption of $300 million in the United States and could Could that TAM calculation get higher? I think the cryo market is growing close to 20 percent, at least last year and into this year. And then maybe how the business model could evolve from these initial five centers and to potentially incorporate some of the bigger blood banks in the U.S. Thanks for taking the questions.

Yeah, thanks, Josh. And again, I'll start and turn it over to Vivek to provide some additional context. So, you know, as far as the TAM for Our intercept fibrinogen complex product, you know, it's really calculated on sort of the current use of cryo in the United States being roughly on the order of, you know, 750,000 to 800,000 grams equivalents of fibrinogen annually, and that is growing. It's hard to get great numbers on that, but it is over the last couple of years growing, at least in the mid-teens, and that's, I think, largely a function of the increased use of fibrinogen viscoelastic monitoring in surgical procedures and in trauma cases. So we do see a growing demand for the early use of fibrinogen concentrates. Maybe just, Vivek, you could take the second half of Josh's question.

Sure, happy to. You know, in terms of our launch and how we see progress evolving, you know, there are really kind of three key dimensions to focus on increasing production with our production partners, making sure that their operations are appropriately organized such that they can meet the demand that we start to generate, working with them on VLA's and other tools to ensure they can provide product across state lines, and then really going in and qualifying demand at the hospital level, educating them on the economics, the end tap, and we're making good progress across all of these fronts. What I would say is that, you know, COVID in the context of hospital access does continue to be a bit of a headwind. You know, this is different from our core business and that we are responsible for the commercialization piece of the hospital. And as you probably know from other companies who cover hospital access is still limited when compared to pre COVID days. But having said that the underlying clinical interest, uh, feedback from initial users and the understanding of the importance of the NTAP in terms of taking any sort of economic or pricing concerns off the table really have proven out the initial hypotheses we laid out. And so we feel very good about the fact that this will be a growth driver for our organization. But I think most importantly, this will be a tool that clinicians can use at the end of the day to help save patients by giving them earlier access to cryo.

Great, thanks again.

And our next question coming from the line of Brandon Fox with Cancer. Chris Gerald, your line is open.

Hi, thanks for taking my questions, and congratulations on a very good quarter. I think earlier this year we talked about the blood shortage in the U.S., so let's just get an update there. And how do we think about that? the impact there on results, whether, you know, was there any catch up in the quarter or going forward? How do we think about the potentially reversing? And then maybe secondly, how should we think about gross margins trending from here, just given the significant growth in the U.S. and the French contract? Thank you very much.

Yeah, thanks a lot, Brandon. Again, I'll take the first half of that question. And then, Kevin, maybe you can take the gross margin question in the second half of our reply. So with regard to the overall shortage of blood components in the United States, that continues. For those of you who donate blood, you know, you sort of get a daily reminder to go and donate given the scarcity of blood components for red cells, platelets, and also plasma. So I encourage you all to go and donate if you don't because it's very much needed. You know, we really don't see it having a sort of a lot of – or creating a lot of variability within a quarter, just given sort of the growth trajectory we've seen through the first three quarters of this year and through the remainder of the year. I think the concern really is around can the overall playlet supply be sustained with the sort of mid-single-digit growth in demand that we're seeing? That's a larger question, but I don't really think it has profound implications for Cirrus in the at least immediate term. I think that's all I have for the first part of the question. Kevin, you want to handle the gross margin evolution?

Yeah, sure. No problem. So, you know, we expected as the U.S. was the major contributor for growth in 2021 to see kind of the, you know, 100 to 200 basis point pullback that we are seeing from last year. With that said, I expect more of the same for the balance of the year. The EFS is an interesting question and how that will ultimately affect margins. I think you'll recall that the EFS has been a customer of ours for a number of years, and so we're extremely proud when such important and large customers and longstanding customers sign up with us. Again, it's something that we pride ourselves in, not only on the science and the technology, but our ability to be good partners with with those customers and provide a world-class level of customer service. So with that said, we are, as contracts come due, seeing price increases. And so I think that will be somewhat of an offsetting effect to the predominant use of single-dose kits in the U.S. So in summary, probably more of the same for the balance of the year. And then, you know, longer term, we'll expect to get back to economies of scale and start to see some return to margin expansion.

Great. Thank you very much. And congratulations again on a very strong quarter. Thank you.

Our next question coming from the line of Matthew Blackman with Steeple, your line is open.

Good afternoon, everybody. Thanks for taking my questions. Maybe, Obi, I wanted to start with you and ask about your comment about Intercept platelets now being the majority. I think I heard you correctly, the majority of platelets produced in the U.S. Any way you could at least maybe directionally break that penetration out by Red Cross versus the other big four versus sort of the other bucket? Clearly just trying to get at how much more runway there still is. And I guess the follow-up to that is, I think in the past you've talked about standard of care being something north of 50%. It sounds like we're already there. Do you have any updated thoughts on where intercept penetration could go in the U.S.? And then I do have one more follow-up.

Yeah, thanks. I think those are good questions. And, yeah, historically we have, at least internally at Cirrus, defined the standard of care being something at least 50 percent. I think that's an important terminology that we use sort of globally just because of the impact of being standard of care on other markets. You know, as you know, we're the standard of care in many European countries, and we do believe that that is highly influential for other markets as they look to safeguard their playlet supply and practice the standard of care, if you will. And then I think even in the United States with the American Red Cross moving towards their stated goal of getting to 100% pathogen reduction because of the ability to safeguard the blood supply with our technology, that that also is a strong statement. As far as the breakdown within the U.S., I think there's clearly a lot of room for us to grow. The Red Cross has moved very quickly towards their stated objective, so I would just say that they're well above 50% and moving directionally towards their stated goal. I don't know when they'll actually achieve that in 2022 or maybe it's even 2023. But from all signs, the demand coming from the hospitals is great and they're trying to provide a single inventory to meet the hospital demand. Vivek, do you want to provide any more color about what's sort of going on at a macro level with the Big Five customers? Maybe that provides a little bit more perspective for Matt.

Sure. I think you covered it well. First of all, Matt, thanks for the question. As indicated, you know, we really had focused on and very intentionally a Big Five strategy, trying to make sure that those Larger customers had everything they needed from a deployment support standpoint, production support standpoint, to really drive adoption of Intercept. And to date, I feel like we've had some good early success. But across all of those big five blood center families, including the Red Cross, there's still plenty of headroom. The Red Cross stated in their open letter that they intend to be at 100% PR by 2023. So there's still room to go there. And they're probably a little bit ahead of the others. And so I think when you think about the U.S. market, you can sort of think about the big five leading the way and then the balance heading in that direction, but probably with more room to run, which gives us more upside. But probably demure in terms of specific breakdown by big five center, but suffice to say we believe there's still plenty of room for growth.

All right. I appreciate that. And Vivek, while I have you, I wanted to ask about Cryo and just any early reads. And I'm focused mostly sort of on the sales force, just the depth and breadth of the sales force, how much you need to invest. Do you have the right people? Is it the right size, the sales force? Anything, frankly, you may have learned on the commercial front and the new business model over the last several months. Thanks. Appreciate it.

Yeah, sure. No problem. Happy to. I mean, as you know, you know, we've talked about it in different industries in the past, absolutely time to productivity, certain measures, thinking about how you want to allocate the sales force across country. All of those things are considerations. The variable here that's probably the biggest wild card has been trying to do all of this in the midst of COVID. And, you know, especially early on when hospital access was, for all intents and purposes, shut down. And now even still, it's pretty restrictive. Launching a de novo product in and of itself is challenging. That just created a much higher level of challenge, which is why I'm really excited about the receptivity that we have been seeing nonetheless. I think the salespeople that we've identified have shown a good ability to identify the key decision maker. As you can imagine, it's not uniform per site. And in many areas, there's a bit of network of decision makers between clinical influencers and non-clinician administrators who ultimately hold the first strings. And so I think we have a good understanding now, whether it's at a single site or an integrated delivery network, who we need to influence to gain traction and then who we need to partner with to sign contracts. a key piece is going to be production volumes with our partners, which is independent of the sales force. But obviously we want to make sure that we're not generating demand too far ahead of being able to produce products. So there's always that delicate balance we need to strike. I think we'll get even better understanding of outreach once we get more access to hospital customers that we can't necessarily access now because of some of the COVID restrictions. But, you know, I think there's leverage for us both in terms of, the sales force we have, partnering with blood center production partners, and then potentially leveraging some of the folks we have on our platelet side as they're going out and connecting with hospitals who are adopting intercept platelets. So it's still early on that, and I apologize for the somewhat nebulous answer to the question, but the fact is the hospital access piece that's been diminished during COVID really has created a situation where we need to get in a little bit more than we've been allowed to, and we're slowly starting to see that open up.

All right, appreciate it. Thank you so much, and congratulations, guys. Thanks a lot, Matt. Thank you.

Our next question coming from the line of Jacob Johnson with Steven Singh. Your line is open.

Hey, thanks. Good afternoon, and congrats on this quarter. Obi, maybe for you, I appreciate the update on seven-day platelets, but I guess a bigger question around seven-day platelet approval. I mean, how much more of the market will that open up for you I think, you know, the results you're putting up this year, it seems like you're already able to capture a decent amount of the market without the seven-day label. Just how incremental could that be from here?

Yeah, I mean, it's obviously a difficult question to answer given the demand that we are seeing and sort of the receptivity to the product offering given its earlier release compared to the alternatives, especially when you're in a – an environment where there's not enough playlets, so having that earlier product release is important. In the same vein, though, if you had a seven-day label claim, I think it does help hospitals manage their inventory more easily, and so that's, you know, ultimately the goal. So, again, I, you know, provide somewhat of a nebulous answer because I just, you know, am not seeing it impact the demand, you know, for now and into the future. And that being said, we obviously in other markets have seen the importance of a seven-day claim for overall blood center operations and just sort of facilitates intercept becoming the standard of care much more quickly.

Got it. Super helpful, Obi. And then maybe a follow-up for Kevin or maybe others want to chime in on this. Kevin, just on the gross margin outlook, I appreciate kind of expect the status quo as we had in the fourth quarter on gross margins. But as we think about the gross margin expansion, I think particularly from the U.S. market, it'll be the shift to double those kits. It sounds like you're optimistic about that occurring in the future, but any kind of timeframe or way to think about when we could see that shift occur in the U.S.?

You know, I think it's happening. It's just happening a little bit slower. So as we see increased overall penetration in the U.S. market, and blood centers then start to look at ways to optimize their overall production. We'll start to see it. I don't know that we're going to see – well, we're not going to see it in the same depth as, say, EFS is, which is the majority of their overall production. But we will see some incremental progress as we move forward here. It'll just be, you know, less impactful than, say, the EFS was. And I think the other thing – to keep our eye on for margin expansion is just some of the COGS reduction initiatives that we and our partners have been working on. And we didn't see a very significant price reduction due to economies of scale this year. We expect that we will longer term, and so that's something we're focused on and will continue to work to drive our costs and make our manufacturing processes as efficient as possible. while at the same time ensuring our ability to meet global demand.

Got it. Thanks for taking the questions.

Thanks, Jacob.

Our next question coming from the line of Mark Massaro with BTIG. Your line is open.

Hey, guys. This is Vivian. I'm for Mark. Thanks for taking the questions. So any updates on when you might complete enrollment for your red blood cell studies? Could you also give us an update on the timing for the expected launch of Intercept for red blood cells in Europe as well as the U.S.? Thanks.

Great. Thanks, Vivian. So maybe I'll take the last part of your question first. So, you know, just right now, as we mentioned in the call, you know, we are working through the CE-MARC approval process in Europe. And that has transitioned to our competent authority, which is now the Dutch competent authority. So just given some of the uncertainties around the MDR timing, that could drift beyond the second half of next year. But we're still anticipating a product launch in 2023. And so everyone's very excited about the opportunity there just because of our ability to offer the full portfolio of of Intercept products to treat all transfused blood components and the reception that we believe we'll get from our existing customers of Intercept platelets and plasma. With regard to the phase three studies in the United States, they do continue to enroll both Recipe and Redis. It has been impacted a little bit by COVID, and it's almost regional, just where there's been high impacts of COVID on hospitals. We've seen, you know, lower enrollment than we anticipated, and we've seen other sites sort of coming out of COVID. So with that overall mix, you know, we hope to see improvement as we move into 2022 and be able to provide an update, you know, sometime in the first half of the next year on where we think we are with regard to overall enrollment timing and completion of the studies.

Okay, awesome. And just a quick follow-up, how should we think about modeling international growth moving forward, just given that EFS renewal? Are there any additional geographies to maybe enter that could enable that same pace of growth internationally? And if you could touch on some of the key drivers there. Thanks.

Thanks, Vivian. Vivek, would you mind handling that question?

Sure, I'm happy to. In terms of international growth kind of over a multi-year horizon. Earlier this year, we announced our joint venture with China, and while that won't manifest in terms of revenue, it goes probably towards the outer end of the strategic planning period. That's certainly a significant opportunity for us in terms of accelerating patient access to intercept. Similarly, we continue to make investments in the single largest opportunity in Europe, which is Germany, and we're seeing good progress there, and we're going to be seeing our initial revenue in Canada next calendar year as well, which is a pretty significant market. So ultimately, if you think about near-term growth, it's going to continue to be driven by U.S. platelets, but we believe that we're planting seeds that should really flower and provide pretty meaningful growth opportunities for our entire global franchise over the course of the strategic planning period.

Awesome. Thanks for taking the question.

Thank you.

Our next question coming from the lineup. We're answered by Subha Raju with HE Windward. Your line is open.

Hi, this is Bubal and dialing in from Subha Raju. Thanks for taking my question. Just a quick one from our end. Can you comment on the whole blood market opportunity, sort of various factors at play and the competitive dynamics in this space? Thanks.

I'm not sure I quite understood your question just because there was a breakup in the line. Do you mind repeating it?

Sure, sure. So in your pipeline, you mentioned the whole blood opportunity, whole blood. So we just wanted to know, can you comment on the whole blood market opportunity and competitive dynamics in this space?

Okay. Thanks so much for repeating that. Yeah, so we have a whole blood program that's been underway for some time with the Swiss Red Cross through their philanthropic humanitarian fund. And that's really directed at blood transfusion in sub-Saharan Africa and trying to create a solution that addresses the need for whole blood and maternal hemorrhage and traumatic injury. We also have a partnership with the US FDA that's secured funding to look at next generation approaches to our intercept technology to treat whole blood and then ultimately separate that into individual components. And so that is underway as well. As far as sort of the overall competitive landscape, we really don't see a lot of competition in that space. But, you know, it is also sort of an outlier. That's not the right word. It's a It's a secondary priority for us relative to our existing product portfolio for plaids, plasma, intercept fibrinogen complex, and red cells. So I guess it's further down the line, but we are making progress in that area. All right. Thank you. Yeah, thank you.

I'm showing up for the questions at this time. I would now like to send a call back over to Mr. Obie Grimm for any closing remarks.

Thank you. Well, thank you again for joining us today and for your interest in Cirrus. We look forward to speaking with you at the Stiefel 2021 Virtual Healthcare Conference later this month, as well as the Stevens Annual Investment Conference next month. Thanks for joining us on the call today.

Ladies and gentlemen, that ends our conference for today. Thank you for your participation. You may now disconnect.