Cytosorbents Corporation

Good afternoon and welcome to the CITOS Sorbent's first quarter 2021 financial and operating results conference call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the company's request. At this time, I'd like to turn the call over to our moderator, Amy Vogel. Please go ahead, Ms. Vogel.

Thank you and good afternoon. Welcome to the CITOS Sorbent's first quarter 2021 financial and operating results conference call. Joining me today from the company are Dr. Philip Chan, Chief Executive Officer, Vincent Caponi, President and Chief Operating Officer, Kathleen Block, Chief Financial Officer, Dr. Efemios Deliorgieris, Chief Medical Officer, Dr. Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of Cytosorbents Europe, GMBH, and Christopher Kramer, Vice President of Business Development. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today, and therefore we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. Any projections as to the company's future performance represented by management include estimates today as of May 4, 2021, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the first quarter by Dr. Chan and Ms. Block. Following that presentation, we will open the line to your questions during the live Q&A session with the rest of the management team. At this time, it's now my pleasure to turn the call over to Dr. Philip Chan.

Thank you very much, Amy, and good afternoon, everyone. We had another productive quarter in the first quarter of 2021. with Cytosurf sales of 10.1 million, up 24% from 8.2 million a year ago, with the core underlying non-COVID business accounting for 82% of sales and 27% growth year over year. We believe that sales would have been higher... One moment. We believe that sales would have been even higher if not for broad restrictions and lockdowns throughout Europe and other countries that impacted sales activities also rapidly declining new COVID-19 cases globally in the first two months of the quarter. Blended product gross margins were 77% in the first quarter of 2021 versus 76% in the first quarter of 2020, excluding non-recurring one-time items in the first quarter of 2021 that Kathy will detail later on in her presentation. Product gross margins were 81%. We also ended the quarter with a solid balance sheet with $68.5 million in cash and no long-term debt. During the quarter, we delivered greater than 131,000 cumulative cytosol cartridges to date, which is up 49% from 88,000 a year ago, with distribution across 67 countries. We also treated more than 5,750 COVID-19 patients cumulatively now in more than 30 countries, including here in the United States under FDA emergency authorization granted in April of 2020. We also, during the quarter, entered into a global co-marketing agreement with B. bronavitam, third largest dialysis company in the world and a division of bbron with 7.5 billion euros in worldwide sales and during the quarter we also and just recently we received fda ide conditional approval to begin the u.s start t trial with first patients targeted for the third quarter of this year in the first quarter the korean ministry of food and drug safety kmfts also approved cytosol for all equivalent eu approved indications in korea It has a population of 52 million in South Korea in collaboration with our partner, Fresenius Medical Care. Health Canada also authorized Cytosur for use in hospitalized COVID-19 patients in Canada with a population of about 38 million people. During the quarter, we also appointed two industry veterans with strong medical device backgrounds that will help us guide future success in the future. The first is James Kamsa, who was appointed Vice President of U.S. Sales and Marketing was formerly a Vice President of the Restorative Therapies Group and Pain Group at Medtronic, and also formerly a Vice President of the Northeast Cardiac and Vascular Group at Medtronic, so knows the cardiac surgery area extremely well. Dr. David Cox joined us as Vice President of Global Regulatory Affairs. He was formerly the Vice President of Regulatory Affairs for the Tissue and Regenerative Technologies Division at Integra Life Sciences. We also accelerated our clinical marketing of Cytosorb with in-depth webinars in a wide variety of different areas, most notably as a liver dialysis therapy in patients with liver disease and in cardiac surgery applications, particularly antithrombotic removal. Last but not least, we signed our lease for our new Princeton, New Jersey headquarters and began building out our new manufacturing facility that is expected to support sales of roughly $350 to $400 million in sales and potential product gross margins in excess of 85%. During the quarter, we also opened a new site of service logistics hub in Berlin, Germany, an expanded warehouse and distribution facility to accommodate our current and future growth. So let's talk a bit about what COVID-19 is doing worldwide and how this relates to our business. As we presented in our last earnings call on the upper left-hand side, this was the activity of COVID in March of 2021. We were just starting to see a surge in activity in Latin America as well as in Europe. Fast forward that by two months, you can see that the numbers of new cases have grown dramatically in South America, in Europe, in the Middle East, as well as we've all heard in India, where they are experiencing roughly 350,000 new cases a day. On the lower right-hand side, you can see the numbers of new cases of COVID-19 worldwide. Within the green bars is the first quarter. And what you can see here is that in the first two quarters, after peaking very early in January, the cases of COVID dropped quite dramatically in the first quarter to roughly 300 or so thousand cases a day. I think that a lot of people had a lot of optimism regarding the availability of vaccines and did not think that COVID-19 would be much of a problem anymore. But as we cited in the last earnings call, we started to see a plateauing. And sure enough, towards the end of the quarter, you can see the rapid rise in new cases of COVID-19 worldwide. And that has helped fuel a strengthening of our Cytosaur business related to COVID-19 across our business areas. So we expect that COVID-19 is expected to contribute to product sales in the second quarter of 2021 and likely for the remainder of the year. But the magnitude may depend on multiple factors, including rates of vaccination. In the United States, it's a very different story. As you can see, in early March, there was a scattered low-level activity throughout the country. And even in early May, although there were some hot spots like Michigan and Oregon and also Washington State, you can see, generally speaking, the rates of COVID-19, new cases have been relatively flat. And you can see that in the upper right-hand corner in the red graph, where you can see that the numbers of new cases have kind of plateaued. But the rates of hospitalization and death, fortunately, have dropped dramatically. And although it may not have been the case previously, it is likely the case now that vaccinations are having finally an impact, with 32% of the U.S. population fully vaccinated, or 106 million people with 45% or 148 million people with at least one dose. A total of 247 million doses have been administered in the U.S. to date. And this contrasts to even large countries like Germany, one of the leading healthcare countries in the world, with only 8% of their population fully vaccinated, or 6.6 million, with 28% with at least one dose, or roughly 23, 24 million people. And the numbers get even worse when you look worldwide. only 3.6 percent of the world's population are fully vaccinated and you can see that the united states accounts for more than a third of all of the patients fully vaccinated worldwide and only 7.8 percent have at least had one dose or 609 million people so this next slide coming back to the slide that i presented in the last earnings call We can safely say that we are not quite in the new normal yet. COVID continues to delay our pre-COVID-19 growth strategy. But that being said, you can see what we've accomplished in the first quarter. We are certainly not standing still, and we are working diligently in the background on making sure that we return to our non-COVID-19 growth business as soon as possible. To give you more color, on our clinical activities, let me turn it over now to our Chief Medical Officer, Dr. Micah Stille, yours. Micah.