Cerus Corporation

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Cirrus Corporation second quarter 2022 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. Please be advised that today's conference is being recorded. I will now like to hand the conference over to your speaker, Mr. Matt Notarianni, Senior Director of Investor Relations. Mr. Notarianni, you may begin.

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.cures.com. With me on the call are Obi Greenman, Searson's President and Chief Executive Officer, Kevin Green, Searson's Chief Financial Officer, Vivek Jayaraman, Searson's Chief Operating Officer, Dr. Nina Musti, Sears' Vice President, Development, and Red Blood Cell Program Leader, Dr. Richard Benjamin, Sears' Chief Medical Officer, Carol Moore, Sears' Senior Vice President of Regulatory Affairs and Quality, and Jessica Hanover, Sears' Vice President of Corporate Affairs. Sears issued a press release today announcing our financial results for the second quarter ended June 30, 2022, and describing the company's recent business highlights. You can access a copy of this announcement on the company website at www.xeris.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 2022 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 initiatives, 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 Form 10-K for the year ended December 31st, 2021, and our Form 10-Q for the quarter ended June 30th, 2022, which we will file shortly. We undertake no duty or obligation to update our forward-looking statements. On today's call, We will also be discussing non-GAAP financial measures, including non-GAAP adjusted EBITDA. These non-GAAP measures should be considered a supplement to and not a replacement for measures presented in accordance with GAAP. For a reconciliation of non-GAAP financial measures to comparable GAAP financial measures, please refer to today's press release. We'll begin today with some opening remarks from Obie. followed by Vivek to discuss some recent business highlights, and Kevin to review our financial results. We will conclude with commentary from Obi with an update on our pipeline and closing remarks. And now, it's my pleasure to introduce Obi Greenman, Sears' President and Chief Executive Officer.

Thank you, Matt, and good afternoon, everyone. Reporting in our second quarter of 2022, I'm proud of the results our team has been able to deliver as we continue to expand patient access to blood components treated with our intercept blood system around the world. The interest level and understanding of the value of pathogen reduction continues to increase. Notably, earlier this summer, we were pleased to work on a study recently published in Transfusion, which concluded that a robust rollout of pathogen reduction for all blood components, such as the intercept blood system, could provide a way to increase donor retention, and improve blood product availability. The strong safety profile and track record the Intercept blood system has in routine use in many regions continues to reinforce the utility of pathogen reduction as a definitive safeguard. Earlier this summer, we eclipsed cumulative kit sales, which translates into more than 12 million Intercept-treated transfusible units of plasma, an increase of 2 million doses in less than a year. The strong revenue growth is expediting our pathway to cash flow breakeven as defined by our non-GAAP-adjusted EBITDA metric that we began providing on our Q1 call. Our rapid growth over the last few years means that we're now selling in a single quarter just slightly less than what we used to sell in an entire year as recently as 2017. It is a remarkable achievement for the company, yet there are significant growth opportunities for us in the quarters and years ahead as we seek to realize our mission of making Intercept the standard of care in transfusion medicine globally. After Vivek and Kevin provide some color on the quarter and how we see the balance of the year shaping up, I will wrap up with comments around some of our important product pipeline development efforts that will help us continue to realize our mission and the upside associated with the full Intercept portfolio for all blood components. We believe we have clearly established our leadership in the U.S. playlet market with North America product sales for the second quarter implying a $100 million annualized run rate. With our ability to continue to grow our presence in playlets in the U.S. and around the globe and create further awareness and increase penetration for intercept fibrinogen complex product in the U.S., we expect to deliver meaningful top line growth from those opportunities. And as we demonstrate this growth and couple it with our financial discipline, we see a clear pathway towards cash flow breakeven, which we believe will afford us the flexibility to self-fund future growth. And there's a marked change from our history of tapping the equity markets, which helped us establish our commercial footprint and funded manufacturing capacity and supply chain activities, all of which have contributed to help us realize our unique position in transfusion medicine and to secure our leadership in the field well into the future. I would now like to turn the call over to Vivek to discuss the second quarter revenue highlights.

Thank you, Obi, and good afternoon to everyone joining today's call. Product revenues for the second quarter of 2022 continued our trend of strong year-over-year performance of 30% for the quarter. As has been the case of the last several quarters, Our product revenue growth was led by strong demand for our flat-lit product offerings, particularly in North America, where sales increased 75% on a year-over-year basis and 15% sequentially. Additionally, North American product sales in Q2 included a modest contribution from Canada, which continues to be a geography we're excited to be finally serving with Canadian Blood Services at their facility in Ottawa. We look forward to expanding our presence in this market once we secure the necessary regulatory approvals from Health Canada, as we have previously discussed. Rounding out North America, we also recognize a modest contribution from Intercept Cybrenagin Complex, or IFC, in our second quarter product revenues. I'll discuss the status of our nationwide IFC launch a bit more shortly. In EMEA, excluding some significant currency headwinds that Kevin will touch on in his remarks, The business saw positive growth in the second quarter, led by sales across the Middle East region. Our ISB sales saw a sequential increase in the second quarter, but as expected, its contribution to our overall top line was modest and will likely remain so for the balance of the year. In launching this product, we continue to be pleased with the physician interest on the potential to improve outcomes in bleeding patients, and our focus on increasing market awareness and early hospital experiences with this product. The feedback to date from those using IFC has been uniformly positive, as they see clear benefits associated with the product's immediate availability and ability to reduce wastage rates. With that said, product uptake has been happening at a more measured pace than we initially expected due to the current challenging hospital environment resulting from COVID-related challenges such as short staff hospitals, and the difficulties with getting new products on board and institutions. Based on the clinician feedback our commercial team has received at hospital counts, we continue to see this product addressing a critical unmet need related to early availability of fibrinogen to improve patient outcomes and to ultimately help save lives in cases of massive hemorrhage. Our ongoing efforts to build a strong body of evidence around IFC's utility as a pathogen-reduced, longer shelf-life surrogate for conventional cryoprecipitate remains one of our top commercial priorities, and we're looking forward to seeing this business ramp in the back half of 2022 and beyond. I will now turn it over to Kevin to discuss our results and outlook in more detail.

Thanks, Vivek, and good afternoon, everyone. I'm pleased to walk through our second quarter results, which continue to demonstrate solid commercial execution and disciplined financial management. These results move us closer to our goal of reaching cash flow break-even in the near term, and are a testament to the commitment of the entire organization. As Vivek noted in his remarks, we posted strong second quarter 2022 product revenue of $41 million, which reflected year-over-year growth of 30% and was led by sales in North America during the quarter. The majority of this increase was led by sales across our US customer base. with sales to the top five blood center customers growing over 70% on a year-over-year basis, and other U.S. customers also growing more than 50% year-over-year. In EMEA, for about the second quarter and first half of the year, growth of the underlying business in these regions was offset by unfavorable foreign exchange rates, particularly with the recent move in the U.S. dollar versus the euro. Clearly, the persistence of the stronger US dollar is a factor we and many other companies are having to grapple with. However, the bulk of our manufacturing costs are also denominated in euros, creating a natural hedge that results in an offset to our COGS as reported in US dollars, muting the impact on the rest of our P&L. Moving on to our calculated platelet dose metrics, Our second quarter growth in the calculated number of treatable platelet doses reflects a 65% year-over-year increase in the U.S. and a 22% increase internationally. For the first half of the year, the number of doses has grown by 94% year-over-year in the U.S. and 25% internationally. In terms of product mix for the quarter, sales of Intercept disposable kits represented over 96% of our Q2 product revenue. In addition to our product revenue and not included in our guidance, government contract revenue totaled $6.6 million in Q2 versus $6.3 million for the prior year period. Turning now to our product gross profit and gross margins. Our second quarter product gross profit was $21.3 million compared to $16.2 million during the prior year period. an increase of over 30% year over year. Our continued product sales growth has been the primary driver of our increased product gross profit from the past several quarters, and Q2 saw a continuation of this trend. Product gross margins for the quarter were 51.9%, which increased 60 basis points when compared to the prior year period. While our mix of products continues to be heavily weighted toward our single-dose platelet kits, which has lower margins than our other product configurations, we are also beginning to see a return to economies of scale as we grow. Moving on, our second quarter operating expenses, which totaled $34.7 million, were $2.1 million lower than the prior year period and included $5 million in non-cash stock-based compensation. By specific expense type, Second quarter R&D expense totaled $15.2 million compared to $17.1 million during the prior year. Second quarter SG&A expense was $19.5 million and it was roughly flat versus the prior year period. Despite the inflationary macroeconomic environment, our business has continued to show its ability to grow while generating operating leverage. Having said that, we would expect to see some modestly higher expenses during the second half of the year, driven by higher labor costs, increased travel for customer and marketing-related activities, and higher prices from certain vendors. On the bottom line, reported net loss attributable to CERIS for the three-month end of June 30, 2022 nearly halved when compared to the same period in 2021. net loss attributable to SARIS for Q2 totaled $8.4 million, or 5 cents per diluted share, compared to $15.4 million, or 9 cents per diluted share for the prior year period. Moving on to our adjusted EBITDA metric, second quarter non-GAAP adjusted EBITDA totaled negative $2.4 million, compared to negative $8.2 million during the second quarter of 2021, and negative $3.7 million during the first quarter of this year. On a year-to-date basis, our non-GAAP adjusted EBITDA also improved in the first half of 2022 to negative $6.1 million, compared to negative $19.7 million in the first half of 2021. Now, turning to the balance sheet and cash flows, we continue to feel good about the strong and improving financial position we are establishing. driven by our continued commercial execution and disciplined expense management. We ended the second quarter with a strong cash position of $107 million of cash and cash equivalents on the balance sheet. In terms of cash utilization, I'm especially pleased with the performance we delivered in Q2, as our cash use from operations came in just shy of $350,000 for the second quarter, compared to $8.7 million during the prior year period. We continue to drive this organization towards sustainable top line growth while generating significant SG&A leverage, allowing us to invest in the deep pipeline to continue to expand and improve the intercept blood system over the long term. However, we've also not lost sight of our goals around cash flow breakeven and believe that they will be achievable in the near term. Wrapping up my prepared remarks, I'd like to spend a little time discussing our outlook for the back half of the year. Throughout the first half of 2022, we have demonstrated strong commercial execution in fulfilling robust global demand, despite the numerous economic and geopolitical headwinds around the globe. We continue to expect to deliver double-digit product revenue growth in the back half of the year, despite the continued downward pressure being caused by the strengthening U.S. dollar. As you know, The dollar is roughly at parity with the euro, and we expect this headwind to continue for our MIA revenues for the balance of the year. Balancing the strong demand for our products and the FX headwind, today we are reiterating our full year 2022 product revenue guidance range of $160 to $165 million, which reflects year-over-year growth in a range of 22 to 26%. With that, let me turn the call back over to Obi to provide an update on our pipeline, as well as a few closing comments.

Thank you, Kevin. Before we open up to questions, I wanted to provide a few updates on our product pipeline. First, our intercept red blood cell efforts continue to progress, especially with regard to the US Phase III trials required for a future PMA submission to the FDA. You will recall that we have two Phase III studies underway, Recipe, an acute anemia study enrolling complex cardiac surgery patients, and Redis, which includes both acute and chronic anemia patients. Enrollment for both of these trials has been challenged by the COVID-19 impact on hospitals and procedures over the course of the pandemic. But given some of the progress that we've been making so far this year, I'm pleased to be able to provide the following update today regarding our target for completing enrollment. For Recipe, our study was initially based on an enrollment endpoint of 600 patients as set by FDA to assess the change in serum creatinine 48 hours after surgery. However, following recent discussions with the FDA, we have determined that a study size of more than 292 patients transfused would be sufficient based upon efficacy in light of the blinded assessment of the primary endpoint event rate. Currently, we are targeting enrollment of 340 patients for adequate power of the study, and with enrollment ongoing across more than a dozen sites, we have enrolled and transfused more than 200 patients. Assuming no further setbacks akin to what we saw with COVID-19, we would expect a complete enrollment for RECIPE by the end of next year. As a reminder, one of the main challenges in this study is that for about every two patients enrolled in this study, Only one is transfused with either test or control red cells. Subsequent to the discussions with the FDA, we have reached agreement to fold in the red cell exchange sickle cell patients and other chronically transfused patients into our REDIS study, eliminating the need for a separate phase three study. While we are still activating new sites to participate in REDIS, specifically chronic anemia patient cohorts, we believe that enrollment could be completed for this study in As this trial is enrolling chronic anemia patients, the duration of REDIS will extend beyond this timeframe as patient participation in the study can extend beyond 10 months. In summary, we are pleased with the solid progress these trials are making and the collaboration with the FDA and U.S. BARDA to generate a robust data set for the anticipated PMA submission. Turning quickly to our European regulatory submission for intercept red blood cells, Earlier this summer, our competent authority in the Netherlands, CBG, informed us that they have started their review of our submission. You will recall our notified body, TUV, has reviewed our filing as well, which we submitted in four modules. So while this review is taking longer than we initially thought, we've seen good signs of progress over the last few months. As we discussed previously, The competent authority backlog due to the MDR regulatory transition in Europe has resulted in a slower than expected time to begin the review. With this process now underway, we look forward to working through any questions that arise and ultimately securing a CE mark approval under the new MDR to enable a product launch. With regard to the development of our LED illuminator, our team has continued to make progress over the course of the first half of 2022. in partnership with our contract manufacturing partner. For instance, we have recently placed orders for long lead time components for the LED illuminators that will be used to begin production of initial commercial LED instruments. Our LED illuminator will mark the first major upgrade of our illumination device in our company's history and is a key component of our future product portfolio, both new product iterations and new intellectual property. We are very pleased with the feedback to date from the blood centers that are conducting the validation studies required for the upcoming regulatory submission and look forward to updating you in the coming quarters. As many obstacles associated with the pandemic continue to wane during 2022, we remain focused on expanding access to intercept blood components around the globe and are executing in the face of significant economic turmoil, delivering strong growth and an improving financial profile for the business. Before I wrap up my prepared remarks, I would also like to welcome Dr. Hua Shan to our board. Dr. Shan has been an advocate for blood safety and pathogen reduction for many years and is truly a luminary in the field of transfusion medicine. We think Dr. Shan's expertise, forward thinking, and direct connection to the patients receiving blood components will make her a strong contributor to our board and to the fulfillment of our mission. As we expect our global footprint to expand over the coming years, both geographically with our China JV and with the introduction of our first-generation Intercept Red blood cell product, I'm confident that having Dr. Shan's unique perspective will provide us with invaluable guidance as we embark on these critical growth initiatives for the next decade. With our two most recent additions to the board, Ann Lucina and Dr. Hua Shan, we've added depth of expertise both in hospital operations, and in transfusion medicine. With that, let me turn it back over to the operator for Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone. Please stand by while we compile the Q&A roster. And today's first question will come from Mr. Blackman with Stifel. Please go ahead.

Good afternoon, everybody. Thanks for taking my questions. If I could, a couple for Kevin to start and then maybe a follow-up for Obi and or Vivek. Kevin, could you give us a sense of what the FX impact was on the top line in the quarter and any sense of how much incremental FX you're absorbing to keep the full year guidance intact?

Sure, Matt. So we had about a 6% headwind from FX for the quarter to date and more than that when we think about the full year. We gave guidance initially at a higher rate and certainly the FX rates as we expect them to be for the back half of the year are going to put some pressure on at least the top end of our guidance. We do feel that we have enough demand that we can harvest and cultivate to maintain guidance, and so we felt comfortable reiterating today.

And, Kevin, if I were to sort of guesstimate somewhere in the back half of the year, is it a couple million dollars of FX, incremental FX? I'm just trying to get a sense of sort of the strength of the underlying business as you're looking out to the second half of the year.

Yeah, I think, you know, if it's at parity, for sure, I think it could be, you know, more than a couple million, you know, probably three to four million. Obviously, we don't know where things are. But it's certainly, you know, when we look at the back half of last year, we were at rates in, you know, 117 to 114. And, you know, clearly, it's still a sizable portion of our business. And when the rates move to parity, it's going to have an impact. But, You know, the business is growing. We continue to sell kits to treat more and more platelet doses. And as you know, the U.S. is the largest driver of our growth this year. So from a bottom line impact, we're selling, you know, dollar kits to U.S. customers, but sourcing those in euros. So it will have a beneficial effect on the back half of the year as it pertains to the bottom line.

Hey, Guy, and then if I could follow up with you this. just how we should be thinking about the third quarter and seasonality. Another way to ask, I think if I look at consensus, it's, you know, roughly a flat product revenues versus what you just posted. Is that the right place to be?

Yeah. Thanks for the question, Matt. I'll let Vivek handle that one.

Hey, Matt. Thanks for the question. Appreciate your interest. You know, I think as you look into the second half of the year, as I mentioned previously, you know, there are, whether it's currency or continued access issues related to the pandemic and hospitals, there's certainly some headwinds that we're facing into. That being said, underlying project growth and the strength of the business continues to be robust. So, you know, I know I'll defer to Kevin. I know we don't really offer quarterly guidance, but I think there's confidence in the team we can continue to see product adoption, but there are some very real headwinds we face as we enter the second half of the year.

Yeah, the one other thing I'd note, Matt, is just, you know, as we went into Q3 last year, just to remind you, that was sort of going into the final guidance being issued. So, you know, there was clear sort of motivation by U.S. blood centers to act decisively in Q3. So that may be a little bit of pressure on Q3 seasonality, but I just wanted to highlight that.

Yeah, I appreciate that. And while I have you, I may sneak this in. I appreciated the update on the early IFC rollout. I'm just curious what you can do to accelerate adoption. Is it just a question of continuing to bang the drum? Do you need to increase spend or evolve the go-to-market strategy, which is obviously a little bit different than you guys operate today? Just any thoughts on how to sort of get that business accelerating. Thank you.

Yeah, thanks, Matt. I'll handle the first part of that question and then turn it over to Vivek on sort of what's happening in real time with the commercial team. As Vivek mentioned in the prepared remarks, there's clear interest from physicians and from our existing hospital customers. So we're seeing hospital customers saying, this is fantastic. We don't have to worry about thawing cryo, having it available for massive transfusion protocols. And so a lot of the thesis that the product was developed around is playing out You know, I'll let Vivek speak to sort of what's happening at the hospital level with regard to staffing and things like that, but we're clearly seeing the interest in the clinical benefit for the product, being able to provide fibrinogen early to bleeding patients who are being diagnosed with fibrinogen deficiency, as well as the operational benefits for blood centers and hospitals of not having to worry about wastage rates and or having to thaw a product in an expedited way to try and get into a coagulopathic patient. Vic, any other commentary you'd like to provide?

The only thing I'd add to that, and Matt, you're familiar with this when you talk about launching new products in other sectors as well, whether it's new product committees at hospitals or really influencing both the clinical decision makers as well as the financial and purchase administrators, the key for us is to continue to get as many of those opportunities to get in front of NPCs as possible in the queue those meetings and so forth have certainly slowed down a bit just because hospitals have been chronically short-staffed and then many hospitals they've put a freeze on new products for a little while but with that said the number the single best thing we can do is continue to get the product in the hands of clinicians and get those experiences and this is a product with its clinical applicability and and the unmet need that it addresses once physicians start to use it, the peer-to-peer networking component and word of mouth is really powerful. So it really is about continuing to put as many things in the queue as possible so that we can get in front of new product committees and driving that physician experience because what we're seeing here is every time the physician uses it, she really validates the power of the technology and it's really the best sort of awareness generation we can have. No, thank you.

Appreciate it.

Thank you. One moment for our next question. That will come from the line of Brandon Fulks with Cantor Fitzgerald. Please go ahead.

Hi, thanks for taking my questions, and congratulations on another very good quarter. Maybe just firstly on the financials. You know, the OPEX discipline has obviously been impressive the last couple of quarters. Actually saw a bit of a step down this quarter. So just any color in terms of how representative this quarter's SG&A is of maybe a go-forward level?

Yeah. Look, I think that's been a repeating theme that we've been highlighting is leveraging the business, and we expect that will continue. With that said, as we move into the back half of the year, cost of labor has gotten more expensive. Certain vendors... in the inflationary environment are asking for price increases, not unexpected and not unique to Cirrus, but we are managing it and don't feel like it's going to have a precipitous increase in our overall SG&A or R&D spend. With that said, I think in the prepared remarks I mentioned that we did expect some modest increase in the back half of the year, but certainly, you know, we muted relative to the top line growth.

Great, thanks. And maybe just for Vivek and following on from the earlier question, maybe just twofold on ISC. Granted, it's very early, but what is resonating most in terms of uptake so far? Is it the sort of early availability, lower wastage, just any color there would be helpful? And then secondly, we've heard from a number of companies launching products in the hospital of these challenges and sort of the lack of new adoption. What do you think changes that from your view? Is it just sort of getting past COVID? Is it returning to a normalized staffing environment? What do you think is the biggest catalyst to getting past that challenge for IFC? Thank you.

Yeah, thanks a lot, Brandon. I'll handle the last part of that question first and then turn the first part of that question over to Vivek. I think what is really going to drive momentum in the IFC business is awareness of other case studies at other hospitals where you're saving lives with this product. and you understand sort of the cost utility. And so that'll play out as a function of registry studies that we have commencing right now, as well as institutional case studies. So that's all very much in play right now, and I think that'll really start moving the market more meaningfully. Vivek, any other perspective on the first part of that question?

Yeah, you know, I think really for both parts of the question, the quick answer would be yes. depending upon the audience with whom you're communicating, the earlier availability really resonates. Similarly, if you're talking to a financial or administrative decision maker, having quantifiable information on reduction in wastage rates is definitely a very salient point for them as they are trying to handle increasingly challenging budgets. But I'd say the most visceral impact is any clinician who's had a untoward bleeding event, that stays with them really for the balance of their medical career. And being able to intervene in a way that ultimately is life-saving has a profound impact on them. And so, I mean, that's probably, you know, the visceral impact of being able to provide something to a patient in a timely manner that is in fact life-saving. You can't overstate the importance of that and how that resonates with the clinician and how they then communicate that to their peers. And so, you know, that's really what jumps out at folks. And one thing we need to continue to push into Obie's point, having case studies, white papers out of institutions that are starting to utilize the products and ultimately registry-based data, that's all going to come together to provide that sort of compelling rationale evidence to drive further adoptions. In terms of some of the broader headwinds that are impacting new technology adoption beyond ISV and really further areas, certainly COVID sunsetting, if that's the right word, or moving towards more of an endemic state will help if hospitals getting properly staffed so that they have the bandwidth to take on new technologies through the training, things of that nature will assist. But I think for us, fundamentally, just given the power of the technology, the more the more at-bats we get, we'll be able to overcome some of these things. And then you do start to see that peer-to-peer impact where certain institutions are offering IFC, others will want to be soft followers. But it's a unique, challenging time right now in terms of introducing new technologies just because of the overhang of COVID and inflationary issues and kind of the atypical employment environment. But I do think those things will subside. And the thing that's most encouraging to me is the underlying clinical utility and value of of IFC has not only been, you know, really proven valid, but I think strengthened during the course of our initial launch.

Thanks very much, both of you, and thanks for taking my questions, and congrats again.

Thanks. Thanks, Brandon. One moment for our next question. That will come from the line of Jacob Johnson with Stevens. Please go ahead.

Good afternoon, everyone. This is Mack on for Jacob. Just a couple of quick questions from me. I believe it was last quarter you had noted that the Chinese lockdowns had affected the preparation to submit the intercept platelets to this regulatory agency. Has there been any change to this, and is your timeline still intact?

Thanks, Mac. So quick answer to your questions. We're still on track for submitting to the NPA before the end of the year. And clearly, you know, the Chinese lockdowns around COVID have made managing the JV completely virtually, you know, challenging. And we would like to meet with them face-to-face at some point in the near term. But, you know, things are progressing.

Great to hear. And then also, you talked a little bit earlier about some impacts from the current inflationary environment. Can you talk a little bit more about the entire business as a whole in this current environment, what's being impacted, and then also your ability to pass on price to customers?

Yeah, Kevin, do you mind handling that?

No problem. Yeah, I mean, you know, increase in prices is something that we've we've talked about for quite some time. We've been on the market in Europe for over a decade, and we've seen fairly flat ASPs, and we're forwarding blood centers and hospitals to real benefit, both clinically and economically. And so I think it's natural that over time we're going to need to increase prices to them, not only in EMEA but globally. As far as the rest of the P&L is concerned, you know, we – do continue to work with our suppliers and vendors. We generally have language in there covering price increases, and we continue to manage it. So I think it will have, over time, we'll see some impact, but not anything that is alarming or causing us to recalibrate the timing for reaching our adjusted EBITDA neutrality metric. And we'll see what happens and how long that persists, but right now that's where our thinking is. Great.

Thanks for taking the questions. Thank you, Mac.

Thank you. As a reminder, if you have a question, please press the star 1 1 key on your telephone. Our next question will come from the line of Josh Jennings with Cowan. Please go ahead.

Hi, good afternoon. Thanks for taking the questions. I want to just ask about the reiteration of product revenue guidance. It seems like that represents still nice, strong momentum in the business, in the platelet business, as you've displayed with the two key results. You're absorbing a couple million in FX headwinds and maybe a slower start to IFC. But I guess my question is really just thinking about the intercept platelet business and and the momentum there. I mean, should we be thinking about that business exceeding internal expectations or the full year range exiting the first half and a slower IFC rollout kind of impacting the corporate-wide product revenue guidance as well as FX?

Well, I'm trying to assess what your question is there, Josh, but maybe if they can provide a little bit more color on sort of the ongoing play that demand for the second half.

Sure, I'd be happy to. I mean, I guess, and thanks for the question, Josh. The first thing that I have to say, and I think you can attest to this knowing Obi, that no matter how well we do, I don't know that we exceed his internal expectations. So, you know, I don't want that necessarily to be the benchmark. But joking aside, you know, we do see continued strength in the platelet franchise, both in the U.S. and internationally. And that's continues to be the U.S. platelet business, the single largest growth driver. And, you know, given customer adoption and their feedback in terms of their satisfaction with the technology and the process and also their hospital's receptivity to taking on PR platelets, we feel confident that we can continue to post strong results there. And certainly, you know, we want to be sober to the headwinds that are represented by currency and, you know, you know, we still believe that the underlying technology adoption and ultimately the IC adoption will propel us forward. So, you know, that really speaks to why we can maintain the current range, albeit, you know, there are some unanticipated headwinds that, you know, potentially, you know, that serve as potentially some compromise on the top end. But, you know, our business results continue to be fairly solid. I hope that helps clarify our thinking.

It does. It does. I'm sorry. I worded that question poorly. I was Really just trying to get at the strength of the platelet franchise, kind of absorbing the slowish IFC rollout and the FX headwinds. And so it sounds like that is the case. I also want to just think about the platelet business and intercept platelets and whether you're seeing a benefit in hospital staffing shortages just to know there's always a labor crunch, particularly in blood banks, but just with the incremental labor required for large volume delayed sampling and that approach. Have you guys been benefiting from that? And any updates on just the national platelet supply and how that's impacting the business as well?

Yeah, thanks for the question, Josh. So in general, we continue to see strong hospital demand.

the national platelet supply and how that's impacting the business as well.

Yeah, thanks for the question, Josh. So in general, we continue to see, you know, strong hospital demand for pathogen-activated platelets because, you know, essentially you've got an earlier release of product, and at the blood center level, you know, they have a single inventory that they've got to manage and get managed towards. So that really does have a resonance both at the blood center and at the hospital level towards it. that really does have a resonance both at the blood center and at the hospital level, and we continue to see that play out on a going-forward basis. I think as you look at the overall platelet supply, there is ongoing volatility there from a demand and supply standpoint, and so we do see some fluctuations from month to month. In general, though, we don't see the overall platelet demand you know, being that impacted in the U.S. at the moment. But it is sort of variable. I mean, I don't know if you donate playlets, but I'm constantly getting requests to go out and donate playlets yet again. So that's always my sort of barometer for, you know, what's going on with the playlet supply any given week or month. So hopefully that provides you some perspective. But I think in general, you know, what's unique about the U.S. still is compared to the European business where we have sort of a very binary adoption curve is that we have that in certain blood centers and hospitals, and yet it's continuing to evolve in others. And I think over time, just the overall safety and simplicity of intercept play, that's what went out.

Thank you, Obi. And just one last question. There's a transfusion article published, I think, American Red Cross representatives of the authors, but just suggesting that there's a signal that pathogen reduction could replace the deferrals and that testing for vector-borne pathogens. But just With that as the backdrop, my real question is, just made me think of just the Whole Blood initiative that you guys are pursuing, I think, getting funded. Any updates there, and then just any thoughts on this signal from the Transfusion Journal publication? Thanks a lot.

Yeah, thanks a lot, Josh. So I guess on the whole blood pathogen activation effort that we have, that we're pursuing in partnership with the FDA and their funding, that continues to progress. But I think what was really exciting about the update on this call, at least from my perspective, and maybe Richard can comment on this a little bit further, is just the progress that we're making on the intercept red cell studies and that overall program. Any additional comment you'd like to provide, Richard, there?

No, thanks, Obi. Yes, I think, you know, red cell clinical trials faced headwinds, seems to be the financial term, but COVID was certainly a headwind for clinical trials in general. And we are happy to be seeing the back of that and seeing enrollment pick up. And we encourage that we now think we can get the RECIPE trial done in 2023 and REDIS in 2024. And it's nice to be able to have some vision on post-COVID.

And that really speaks to the, you know, what the article was covering in transfusion from Dr. Sue Stramer about the potential utility of pathogen activation to address donor deferral criteria or future transfusion transmitted infections. I don't know, Richard, any other thoughts on sort of, you know, what that article was trying to convey?

I think it's very supportive. I think the general tone of the community, I believe that there is a community within transfusion medicine that is seeing the future within pathogen reduction, seeing the need to extend to red cells. Whole blood is something in the future, but maybe a bit further off. But IFC falls in there too. It's pathogen reduced. And don't forget plasma. in the U.S. is something that's been a forgotten part of the equation for too long.

Thanks, Richard. Thank you, Josh. Thanks a lot.

Thank you. And I'm showing no further questions in the queue at this time. I would now like to turn the call back over to management for any closing remarks.

Well, thank you all for joining us today and for your interest in Cirrus. Our employees across the globe have continued to execute at a high level with a shared goal of making Intercept a standard of care. We look forward to continuing to update you on our progress as our team continues to fulfill our mission, expand our future pipeline, and work to continue improving our financial profile. Thanks very much for joining us today.

This concludes today's conference call. Thank you for participating. You may now disconnect.