Cytosorbents Corporation

Good afternoon and welcome to Cytosurban's second 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, Terri-Ann Powers, Cytosurban's Vice President of Investor Relations and Corporate Communications. Please go ahead, Ms. Powers.

Thank you very much, Maria, and good afternoon and evening to everyone. Welcome to the Cytosorbent Second 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. Estimio Stelior-Guerras, Chief Medical Officer, Dr. Christian Steiner, Executive Vice President in Sales and Marketing, as well as Managing Director of Cytosorbents Europe, 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 August 3rd, 2021, and we assume no obligation to update these projections in the future. During today's call, we will have an overview presentation covering the operating and financial highlights for the second quarter by management. Following that presentation, we will open the line to your questions with the management team. At this time, it's now my pleasure to turn the call over to Dr. Philip Chan. Phil, go ahead.

Thank you, TeriAnn, and good afternoon, everyone. We had a busy and productive second quarter, As we got it during the last call, we received full FDA IDE approval to begin the US STAR-T trial with the DrugSERP ATR antithrombotic removal system, with first patient enrollments targeted for this quarter and study completion expected in 2022. We're very excited to begin enrolling this trial soon and are on track to do so. By the end of the quarter, we had delivered more than 143,000 cumulative Cytosorb cartridges to date, up 43% from 100,000 a year ago, with distribution across 68 countries. We've also treated more than 6,500 COVID-19 patients across more than 30 countries since the pandemic began, including here in the U.S. under FDA emergency use authorization granted in April of 2020. Cytosorb was registered and became commercially available in Singapore for all equivalent European Union indications, bringing the total number of countries where Cytosorb is distributed now to 68 countries. We also appointed Terri-Ann Powers as Vice President, Investor Relations and Corporate Communications at the start of June. Although here for just two months, Terri-Ann has done a great job of getting up to speed and making vital contributions to the company. She's now in the process of proactive investor and stakeholder outreach to build investor awareness and support of our company as we drive to continue significant sales growth abroad and work to open up the valuable U.S. market in the future. If you've not already met her, please feel free to reach out to her in the near future. Finally, as you saw from the cover slide in last Friday's press release, because of many of you, we successfully completed the Mission 100,000 international fundraising campaign to raise $100,000 for the global humanitarian organization CARE to fight the spread of COVID-19. We matched your generous donations, that of our friends, our business partners, our employees, and our shareholders, one for one. And last Friday at NASDAQ in New York Times Square, Vince, Kathy, and I were proud to present a $100,000 check to Chris Noble from CARE and simultaneously ring the opening bell with Chris at the NASDAQ's opening bell ceremony. From a financial standpoint, we also had a strong quarter. Total second quarter 2021 revenue was $12.0 million versus $9.8 million a year ago, a 23% increase. Second quarter 2021 product sales were $11.4 million versus 9.5 million a year ago, a 19% increase. Importantly, our core non-COVID-19 sales in the second quarter of 2021 grew a very healthy 38% year over year and accounted for 85% of our product sales. Blended gross margins were also 82% in the second quarter of 2021 versus 70% a year ago. And finally, we closed the quarter with a solid balance sheet of $65.6 million in cash and no long-term debt. Turning to COVID-19, as we've done throughout this pandemic, we believe the following information will be helpful in putting our guidance into perspective. COVID-19, driven recently by the Delta variant, has been evolving very rapidly with significant changes week to week. Here in the United States, we're in the midst of a fifth wave and seeing a rapid rise in new cases in southern, central, and southeastern states. Florida and Texas currently account for about a third of all new cases in the United States. Not surprisingly, 97% of new serious infections are unvaccinated. And although breakthrough infections in most vaccinated people have been mild to moderate so far, we are hearing that in some places like Florida, the new epicenter of the pandemic in the U.S., there is an increasing number of vaccinated people who are being hospitalized. Currently, the highly contagious Delta variant accounts for 83% of new U.S. infections, But recently, the Lambda strain has been found in Florida and can actually evade immunity from current vaccinations. And even booster shots are not expected to improve immunity to resistant strains like Lambda. In hard-hit areas like Florida and the South, hospitalization utilization is high, though death rates are still relatively low, though are expected to follow the curve of new cases. Internationally, COVID-19 continues to cycle through countries driven by new variants like the Delta variant and unvaccinated people. Outside of the U.S., we're seeing new surges in the U.K., Spain, Portugal, France, Russia, the Middle East, Southeast Asia, and South Africa. The good part is rates of vaccinations continues at a rapid clip. The chart on the lower left is the percentage of patients who are fully vaccinated, percentage of the population who are fully vaccinated or partially vaccinated in the entire population of key countries as of last week. And these numbers have actually increased by two to three percentage points as of this week, just to give you an idea of how fast the vaccinations are happening. Note that the roughly 50% vaccinated number in the U.S. is the entire population, whereas the number you often hear President Biden quote is 70% of the adult U.S. population. So 50% is everyone. The increasing rates of vaccination are obviously positive that will help reduce the severity and incidence of COVID-19 infections around the world. Therefore, those people who need ICU care. However, many, many people are still not vaccinated and are at high risk and could feel further waves of infection. So if you haven't already done so, please get vaccinated. Again, the risk of death of those getting COVID-19 is still about 2%. Roughly one in 50 people will die. and many more will be hospitalized and seriously ill. With now 4.2 million deaths worldwide and just about 200 million documented infections worldwide, it still needs to be taken very seriously. With the state of COVID-19 pandemic in mind and the countervailing effect of vaccinations on one hand decreasing infection and allowing us to get back to business versus new infections by new variants in unvaccinated people causing regional spikes in infection, we expect second half 2021 product revenue to be greater than product revenue in the first half of 2021. We expect continued strong growth in core underlying non-COVID sales with at least 30% year-over-year growth in the second half of 2021, as well as at least 30% year-over-year growth in the full year core underlying non-COVID product sales. And lastly, due to the uncertainty regarding the course of the COVID-19 pandemic, including vaccination rates and virus variant trends, we are unable to predict the level of COVID-19 sales in the second half of 2021. And to be conservative, we expect COVID-19 related sales to be less than 1 million in the second half of 2021. Turning to why we believe our core sales will continue to grow, It's the one-year anniversary of our secondary public offering where we raised $57.5 million. We have not been sitting idle on this cash, but rather using it to invest in key areas to drive our business. First, as Micah will detail later, we have been significantly expanding our clinical team and capabilities to support our company-sponsored studies as we know that data will drive adoption and sales. At the end of 2021, we expect to be enrolling seven different company-sponsored studies including the key STAR-T trial here in the United States. We have also been hiring aggressively, both here in the US and also in Europe, to support our current and future expected growth, now with more than 210 people company-wide, with most of the resources focused on sales, marketing, and manufacturing, as well as leveraging grant income to hire in for R&D. Next, you can see in these pictures our new headquarters based in Princeton, New Jersey, and future home to our new manufacturing facility, that will enable us to produce enough product to support 350 to 400 million in sales. Things are on track to have this facility up and running by the end of 2022, if not sooner. This is expected to have a significant impact on increasing scale and manufacturing efficiencies and improving our blended product gross margins, which were already among the highest in the industry at 82% last quarter. To support our sales, we've also invested in a new site assortment logistics hub in Germany. that will enable us to continue serving the world with our products. We've also made significant investments into our non-grant-funded pipeline, such as the ECOS 300CY cartridge for ex vivo organ perfusion for transplant that received EU approval last year, as well as other products like Cytosorb XL, Vet Rescue, and others. We also used our funds to retire our long-term debt that has eliminated our long-term interest expense, and it has given us a lot of financial flexibility. We've also increased production and increased our inventory to be able to respond rapidly to surgeries in demand for our product. And finally, we continue to expand internationally. We are also moving concurrently in parallel with the U.S. dual regulatory path substantial FDA marketing approval and have been steadily preparing for U.S. commercialization of drug-absorbed ATR with key hires and initiatives. Now, for more detail on the clinical program, Let me turn it over to our CMO, Dr. Efthymios Delideris, to give more detail on our progress. Mikus?

Thank you, Phil, and good afternoon and good evening, everyone. It was less than a year ago that we first disclosed our new clinical plan that was designed to deliver on two critical objectives. First, to obtain FDA marketing approval in an ecstatic fashion. and second, to generate the clinical data that will drive future growth on multiple clinical applications. As you heard from Phil, to deliver on both of these objectives, we are focusing our efforts on robust company-sponsored studies, and we're investing heavily in all the necessary resources to ensure the timely and rigorous execution. For example, just in the last year, we have more than doubled the size of our global clinical team and I'm happy to report that we're already observing significant executional efficiencies in both time and cost. So in the next few minutes, I'll review with you the progress we have made on our programs so far this year, and we'll also outline the upcoming key clinical milestones for the remainder of the year. We continue to focus on the dual path strategy to FDA marketing approval. Our top priority is the START-T study that will investigate the ability of the drug-sourced ATR system, ATR standing for anti-thrombotic removal, to reduce post-operative bleeding in patients undergoing cardiothoracic surgery on ticagrelor. We have made significant progress with the STAR-T study so far, including receiving the full FDA IDE approval in early July to execute a double-blind randomized clinical trial that will enroll 120 patients at 20 U.S. sites. The primary endpoint of the study will focus on measuring clinically meaningful bleeding outcomes postoperatively in patients undergoing surgery while on ticagrelor. For more details on the study design and some of the study endpoints, please review our listing on clinicaltrials.gov. The principal investigators of the study are two luminaries of cardiovascular medicine, Dr. Michael Mack, cardiothoracic surgeon, and Dr. Mike Gibson, an international cardiologist. Together with our principal investigators, we have engaged with a large number of sites and we are happy to state that in the second quarter we have identified all the target sites that will be required to execute the study. We have encountered a very high degree of enthusiasm by these US institutions since the this as a major unmet medical need and are excited about participating in a trial that might produce a novel breakthrough solution. We have began contracting and submitting to IRBs across all these institutions, making a lot of progress in a lot of the sites already completed and beginning the site activation and site initiation visits, which happened by the end of July. We had our first investigator meeting on July 14th. and we remain on target to enroll the first patient during this third quarter of 2021. The manuscript focusing on the methods and the design characteristics of the STAR study has been submitted for publication. Finally, based on our current projections, we believe that the STAR study will be able to complete in 2022. Moving to our second study for a dual path to FDA approval, the REFRESH2-AKI study. We also made substantial progress in the second quarter. The study successfully resumed its activities and is actively enrolled in patients at the majority of the study sites, and we believe that the remaining of these sites for the study will be active by the end of the year. The next important milestone for Refresh2 is the interim analysis, and we anticipate that to take place in the second half of 2022. As Phil has stated previously, and we have disclosed already in our previous press releases, we believe that STAR-T represents the lowest risk and fastest path to FDA marketing approval. And in addition, it also sets precedent for future trials to expand the anti-thrombotic removal opportunity beyond .

Next slide, please.

2021 is a year rich in clinical milestones across the board of our clinical programs. We're employing a complementary approach to data generation, utilizing randomized clinical trials, just as the START-T and REFRESH-2 studies are just reviewed, but also registries and single-arm studies. On this table, you see a summary of all the studies that are co-recorded according to the therapeutic area between cardiovascular and critical care and also according to the milestones they achieved during this year, 2021. You will note in the first half of this year, we executed on all the previously announced milestones, including receiving the full FDA approval for START-T, resuming and actively enrolling patients in Refresh-2, enrolling the first patient in citation in the first quarter, and continuing enrollment in site activation for citation in the second quarter, which is ongoing, We're moving forward with the STAR registry. We have already submitted to the ethics committees in Germany and the UK, and we expect that soon we'll receive approval and we'll be able to begin data entry in the third quarter. The process randomized clinical study in Germany, a multicenter study looking at refractory shock and the ability of a cytosurge device to provide hemodynamic stabilization has received ethics approval. All clinical sites have been identified. We're in the process of contracting them, and we believe that we'll be able to enroll patients towards the end of the third quarter or the beginning of the fourth quarter of this year. Moving on to the Hepon-Phar single-arm study, which is, again, a multicenter study in Germany. We anticipate that we'll be able to submit to ethics committees during the third quarter, get the sites activated, and target a first patient in before the end of the year. And finally, our CTC registry in COVID-19 has completed enrollment and the top line results have been submitted for publication and in addition have been accepted for a presentation at the upcoming International Symposium of Intensive Care and Emergency Medicine that will be held between August 31st and September 3rd in Brussels where the top line results of the CTC will be released. All in all, the full clinical plan, all the clinical programs have either achieved or are on track to hit the 2021 milestones. And as you see on this table, every single study will be actively enrolled in patients by the end of 2021. And with that, I would like to turn it over to my colleague, Cathy Block.

Thank you, Micah. Good afternoon and good evening, everyone. For today's call, I will provide an update regarding Cytosorbent's June 30th, 2021 financial results, as well as some comments around our working capital position and cash runway. Next slide, please. Product sales for the second quarter of 2021 were approximately $11.4 million, an increase of $1.8 million, or 19% over second quarter 2020 product sales. of approximately $9.5 million. This increase was primarily driven by an increase in direct sales of approximately $1.5 million, as well as an increase in distributor sales of approximately $353,000. Grant revenue was $659,000 in the second quarter, as compared to $275,000 in 2020. as execution on our grant contracts returned to normal patterns during 2021, as compared to 2020 when our R&D employees were tasked with assisting in the ramp-up of production to meet the surge in demand for Cytosorb resulting from the COVID-19 pandemic. Total revenues, which includes product sales and grant income, increased by 23% to $12 million for the second quarter as compared to $9.8 million for the same quarter of 2020. In our second quarter 2021, gross profit rose to $9.3 million, which is an increase of approximately $2.8 million, or 42% over gross profit of $6.5 million in 2020. Second quarter product gross margins were 82% as compared to 70% in 2020. And this was due to manufacturing efficiencies achieved in 2021, but also because certain ramp-up expenses occurred in 2020 did not recur in 2021. Next slide, please. Turning to our six-month financial results, product sales for the first half of 2021 were approximately $21.5 million, which is an increase of approximately 22% over product sales of $17.7 million for the first half of 2020. And total revenues were approximately $22.6 million for the first half of 2021, as compared to $18.5 million for the same period in 2020, an increase of approximately 22%. Next slide, please. So here we'll look at our quarterly product sales. And we've broken this chart down into our core non-COVID-19 product sales shown in the blue and our COVID-19 product sales shown in the green and those COVID-19 product sales began to occur in the first quarter of 2020. We estimate that second quarter 2021 product sales related to COVID-19 were approximately 1.7 million dollars compared to an estimate of approximately 2.5 million dollars of COVID-19 sales in the second quarter of 2020. Now, if we exclude our COVID-19 sales and look at our core non-COVID-19 product sales for the second quarter of 2021, these were approximately $9.7 million, which represents our highest ever core quarterly sales results. Second quarter 2021 core product sales of $7.9 million represents an increase of approximately $2.7 million or 38% over our core product sales of approximately $7 million in the second quarter of 2020. But most importantly, we are very pleased to be able to report that our core non-COVID-19 product sales demonstrate a pattern of continuous sustained growth throughout this period. Next slide, please. And this is our trailing 12 months product sales. And as you can see from this chart, we continue to maintain strong year-over-year product sales growth and also growth margin growth. As of June 30th, 2021, our trailing 12-month product sales were approximately $43.3 million, which is an increase of approximately $13.3 million, or 44% over trailing 12-month product sales of $30 million one year ago. our gross margins grew to 82% in the second quarter of 2021. We note that the company, subject to adjustments for non-recurrent items, has been able to achieve consistent year-over-year improvements to our gross product margins for each of the past five years. And not only that, but the second quarter of 2021 represents our third consecutive quarter of 80% or higher product gross margins. We also note that our compound annual growth rate, or CAGR, was 35% over the past three years, and we are continuing to observe a very positive trajectory here. Next slide, please. Now, turning to our working capital and cash runway. As of June 30, 2021, we had a robust cash balance of approximately $65.6 million. Now, we have experienced a quarterly cash burn of approximately $3 million in each of the first two quarters of 2021. Notably, excluding our clinical trial activities and non-cash expenditures, such as stock option expense, second quarter of 2021 was our sixth consecutive quarter of generating positive EBITDA. That means that were it not for clinical trials, our operations are generating positive cash flow. Of course, we will continue to invest in clinical trials because they are expected to produce a substantial return on investment and drive our future product sales growth. We believe we have sufficient liquidity to provide for the planned expansion of manufacturing capabilities, the continuing commercialization of Cytosorb, and execution of our robust clinical trial strategy. We further believe we have adequate capital funding to allow us to continue to operate without any need for additional capital right through to the achievement of GAAP operating cash flow breakeven and giving our outstanding business model with our 80 plus percent gross margins. Once we reach GAAP operating cash flow breakeven, 40 to 50 cents of every incremental sales dollar is expected to fall to operating profit. Our $150 million shelf registration was scheduled to expire in August 2021 And we filed a new $150 million shelf registration, and that became effective with the SEC on July 27, 2021. Our at-the-market or ATM facility also expired concurrently with the shelf registration, and we will be renewing the ATM facility as well. These actions simply represent good corporate governance practices. We have no need or intention to raise capital in the near term. Briefly turning to our capital structure, as of June 30th, 2021, we have approximately 50.5 million common shares outstanding on a fully diluted basis. And that concludes my remarks. And at this time, I'm pleased to turn the call over to Dr. Christian Steiner so that he can provide some color on the product sales landscape. Christian, please go ahead.

Yeah, thank you very much, Cathy. First slide, please. So good afternoon from Berlin, Germany to everyone on the call in America. Good evening to Europe and good morning to Asia Pacific. I want to give you a little bit more color on what has been presented in terms of numbers and international commercialization. If you look at this chart again, we can see a constant incline of the core non-COVID related business represented by the blue columns with almost no or only a marginal growth slowdown during the pandemic. This is a remarkable development despite and during the pandemic restrictions, which includes a restricted access to customers, the stop of many elective surgery programs, and the fear of patients to go to hospitals. Next slide, please. However, the COVID-related restrictions and challenges for our commercialization forces have declined. The access to our customers has significantly improved. As an example, the appointment frequency of our direct sales forces has been less than 25% compared to the pre-pandemic times in Q1, improved to less than 50% in Q2, and is starting to go towards the 75% mark since the beginning of Q3. We experienced a real surge of interest for our cytosol therapy with an improving situation, and this includes interest for the cytosol itself and all information around it, but also for study and registry participation. We are starting to see momentum in the time-consuming new customer acquisition and especially also of the revitalization of pre-pandemic business relationships. Furthermore, we see a back to normal with elective surgery programs, This is especially significant in the, for us, very important cardiac surgery segment. More than 75% of the cardiac surgery centers in Germany have started their programs again, from less than 40% during the pandemic. The waiting lists have become long, so heart centers are striving to somehow manage this, sometimes with massive expansion of their schedules. Other surgery segments are less aggressive due to the still limited ICU availability mainly due to some remaining restrictions and additionally the vacation time in European markets. Last but not least, in general, the ICU capacities for non-COVID patients are rising back to normal and patients are less afraid to go to hospitals in emergencies and also plan and undergo elective surgical procedures they need. Summarizing, we can say that the situation to do business has significantly improved, and we hope that even new variants and increased infection numbers won't turn this back. I have to mention one more thing here. Of course, we do have differences in different geographies. However, everything said is representing our most important markets. Next slide, please. So this leads me to my last summarizing slide. We can conclude that the non-COVID-related business is healthy. and continues to exhibit strong growth despite all pandemic restrictions. Q2 2021 represented a record quarter with a 38% year-over-year growth in our core business, which included indications in critical care, mainly our bread-and-butter business with cytokine storm and septic shock patients, in the cardiovascular segment with different indications in cardiothoracic surgery and cardiology, and on the field of liver support therapy. I personally am expecting a continued strong growth in this core non-COVID business, which might potentially be supported by some additional COVID cases. But obviously, we all want this pandemic to be finished at one point. So we are ready to take the next steps and fight all possible challenges. Thank you very much for your attention. And with this, I'm handing back to Phil.

Thank you, Christian. And finally, to summarize, we believe we have the appropriate strategy and team in place to drive this company to become one of the leading U.S. medical device companies in terms of growth and profitability. We have a strong experience management team with a continued addition of key talent to support growth initiatives. We're well capitalized to support planned investments in manufacturing capacity, clinical programs, and commercialization efforts for the coming years. We expect to drive continued growth in ex-U.S. markets driven by geographic expansion, existing high-growth applications such as sepsis, cardiac surgery, and liver disease, label additions, and potential additional partnerships. We plan to open the U.S. markets via a targeted dual path to U.S. FDA marketing approval with many clinical milestones expected in 2021. Our focus continues to be on the removal of Ticagrelor during cardiothoracic surgery as the initial targeted indication. We continue to develop other product lines utilizing Cytosorbent's proprietary polymer technology platform, and we strive for operational excellence to support improved efficiency and profitability. And finally, we are working to achieve our goal of rapid growth and gap operating cash flow profitability in the next two years. That ends our formal prepared remarks. I would now like to open it up for Q&A. Operator?

Thank you. As a reminder, if you do have a question, that is star one on your touch tone phone. Please make sure that your mute button is turned off to allow your signal to reach our equipment. We will take our first question today from Danielle Antelfi with SVB Learing. Please proceed with your question.

Hey, good afternoon, everyone. Thanks so much for taking the question, Terri-Ann. Congratulations, and really looking forward to working with you more. Just a quick question on the commercialization update. Dr. Steiner, thank you so much for all that color. I guess my question is, and I'm not asking for specific guidance, but just directionally speaking, I mean, obviously very strong core growth this year, albeit off of, you know, arguably possibly somewhat suppressed space in 2020, although it's hard to tell you, we're just launching. So, you know, if you're talking about over 30% growth, 38% growth in the quarter, over 30 percent growth in the back half of the year if we look ahead to 2022 i mean it feels like with momentum building you're still not even at 100 from an appointment perspective it feels like you should be able to continue that growth momentum just curious about any comments you can make directionally on 2022 and then i have one follow-up for kathy on on margins sure thanks danielle um i believe that that is true um and we we believe collectively that

the pieces are in place to be able to drive that type of growth, including next year. Maybe, Christian, is there something else that you want to maybe add there?

Yeah, I think this is exactly the point I wanted to bring across. And despite we are not giving forward-looking statements, but, yeah, I think if we look at the charts and see what could happen and what has not happened last year, there might be this conclusion.

I guess another way to say it is there's no reason to think momentum would slow going into 2022 in Europe from a commercialization perspective.

I mean, I think not withstanding COVID-related issues. If this continues to trend in a positive way and we don't have multiple additional waves of, you know, resistant variants, I think that that's our expectation. I mean, I think if you look at the graph that we presented earlier that combines core as well as COVID-19 sales, you can see that the blue bar, the trend line, is very consistent. And I think that we expect that that core growth will continue.

Yeah, okay. If not, it's not. Okay, perfect. Thank you for that. And Kathy, just a quick follow-up for you on gross margins. I mean, another quarter of gross margins well ahead of our expectations. And I believe consensus the street as well. So just curious if you could talk about how your, you know, if your view on how quickly you can ramp gross margins with the new manufacturing facility opening has changed. And even if you can sort of commit to a long-term margin target, I mean, it feels like above 80, maybe even 85% is right, but would love to hear whatever you can tell us on that front. Thanks so much.

Sure, Danielle. Thank you. Yes, we're very excited, and I pointed out today that our gross margins, it's not just a one-off, but they've exceeded 80% for three consecutive quarters now. So we think we've gotten over the ramp-up pains, and we're doing very well operating at this capacity. We're not expecting large improvements in our gross margin until the new facility is up and running, which is expected to be fully operational by the end of 2022, then I think that we will see gross margins. Once that gets up and running and we start to get greater volumes through there, I think we'll start to see gross margins in excess of where we've been experiencing in the last three quarters. I won't commit on exactly where yet, but I think it'll be quite favorable.

Okay, thank you so much.

Thanks, Danielle.

Our next question is from Anthony Petrone with Jefferies. Please proceed with your question.

Thanks, and I hope everyone's doing well. Congratulations on a strong first half here. I'll go back to the Dr. Stein's comments on at least 30% on the ex-COVID business heading into the second half of the year. The first half was up about 32%. sort of in line with that trajectory, just trying to get an idea of the moving parts between REP productivity in Germany, how much of that is factored in there, distributor purchasing, and maybe just the normalization of procedure volume trends. And then a quick follow-up on where the REP headcount was exiting 2Q and where that's gonna head in the back end of the year in terms of new additions, and then I'll have one follow-up on trials.

Yeah, so I'll let Christian comment on the first part of that. I think that from a sales perspective, in Germany, we've kept actually the headcount the same. We are making sure that coming out of just the increased restrictions in the March time period when we had that last wave in Germany, that things are going to get back on track the way that Christian has predicted. before making additional investments there. But I think our goal has been to continue to put monies towards expansion of our direct sales forces in different countries, which includes not only sales reps, but also other resources to help drive sales and business activity. Christian, maybe do you want to comment on the first part of that, of Anthony's question?

Yeah, Anthony, thank you for the question. Yeah, I think if you look at the past year and the pandemic time, we can really see that, of course, big segments of our core business has been negatively impacted, which obviously includes every surgical or post-surgical indication because all these elective surgery programs went down. to secure ICU beds for COVID patients. So if this comes online and we see momentum, that especially in cardiac surgery, we come back to a normal, this obviously will have a positive impact. Also, septic shock patients, there's a number of effects we cannot exactly foresee, but during the time when all the beds were reserved for COVID patients. There might have been less septic shock patients, what we normally see, either past surgical procedures or even due to bacterial pneumonia and so on. What has been stable through the pandemic was apparently the liver business, and we just have started to build this and we are expecting good progress here. And also the emergency indications were, of course, relatively stable. Those, for example, after trauma or burn accidents, and also those in cardiac surgery based on the antisembolic removal indication. I don't know whether this is already satisfying your question.

That's very, very helpful. And to follow up on Star T, I was just wondering what the expectation is for cartridge utilization in that trial, and should we expect to see that show up in revenues actually as the trial is enrolling and going through the 120 patient target enrollment? And then when you look at the completion date for 2022, The short outcomes windows make sense. It's 48 hours to two weeks. I'm just wondering what the targeted timing for completion, for enrollment completion is. Should we expect that that would be done by the fourth quarter of this year? Thanks again.

Micah, would you like to take that?

Sure. Thanks, Anthony, for the question. So the STAR-T is an investigational device exemption trial. And as you know, we do not have FDA marketing approval in the U.S. We only have the emergency use authorization. So our sales in the U.S. are relating to COVID-19 use under the EUA. The STAR-T study, therefore, the devices will be provided by the sponsor, by us, as part of this investigational study. So this will not have any reflection on sales. And this is a U.S.-only trial. STAR-T will be executed in the United States. So relating to the enrollment of the study, we're hoping that in this quarter we'll begin enrolling patients and we'll certainly communicate that milestone when we hit it, the first patient into the study. And then by having in the next few months all the sites active, we target all the study sites to be active by the end of this year, we believe that enrollment will continue in a robust pace. However, we only have projections right now. The more accurate timetable we'll be able to provide to you once the enrollment begins and we actually see how the sites are performing. And of course, notwithstanding any additional new or worsening COVID-19 related delays. Overall clinical research is coming back. post-pandemic, but it's not quite to pre-pandemic levels yet. So we're hoping that a positive trend will continue that will help the study enroll, but I think for a more accurate timetable, we'll have to wait once the study is up and running and we have a better idea of the enrollment rates.

Thank you.

Our next question is from Josh Jennings with Cowan. Please proceed with your question.

Hi, this is Brian here for Josh. Thank you for taking my questions. I wanted to start with a few on Refresh 2. Can you remind us of the possible outcomes associated with the interim analysis? I'm wondering whether this is primarily a test of whether the trial is appropriately sized, or if it's more than that, can you just outline the outcomes that we could possibly see with that analysis? And then also, just in terms of the order of the data milestones between the two U.S. trials, are we likely to get the interim analysis of REFRESH-2 before the STAR-T results? And I have a separate question on STAR-T if I can.

Sure. Thanks, Brian. Micah, would you like to take that?

Yes, sure. Thank you. So, the interim analysis for REFRESH-2 will inform you know both the ability of the study to continue at the current sample size however will also inform potentially the option for stoppage according to what the unblinded results by the DSMB will be reviewed or you know for your efficacy or futility the the start key study again will have a much better idea of the projected timelines and once the study is up and running. But what we have communicated today is that we would expect both of those milestones to complete in 2022, meaning both the interim analysis for Refresh 2 and actually the study completion for the START-T study as well.

Okay, that's very helpful. And then on STAR-T, based on your conversations with the FDA to date, will the U.S. filing likely consist solely of the results of STAR-T for the clinical component, or will the submission include data from some of the other clinical efforts you're conducting now for ticagrelor removal?

Um, so, so yeah, so, so the start T study, uh, is to a large part, the design of the study is the output of the discussions we've been having with the FDA already. And I don't know if you had a chance to review, uh, what would disclose so far, but it would be focusing on clinical outcomes, uh, uh, which is, you know, clinically meaningful outcomes in postoperative bleeding. We should be able to provide a pretty thorough assessment of risk benefit, which basically is the most important aspect of, of, of a marketing application. Having said that, it is routine practice to include, you know, supplementary data that may have been generated during the course of the next year and that might also provide additional evidence of either efficacy or safety. And in that regard, you know, if we believe that we have additional information to start key, we will be providing that to the agency as well. However, the study itself is meant to be able to support a robust benefit-risk assessment.

Makes sense. Thank you.

Yep. Thanks, Brian.

Our next question is from Andrew DeSilva with B. Riley & Co. Please proceed with your question.

Good afternoon. Thanks for taking my questions. A couple quick ones for me. I'll start with the CE mark for Ticagrelor and River Roxaban. I was really just curious if you're seeing any inadvertent marketing taking place with pharma, either AstraZeneca or Bayer. Obviously, the benefit of having a reversal therapy at prophylactic provides an increased safety benefit for those drugs. So I'm curious if that's resonating with pharma in any way yet.

Crystal, would you like to comment on that? And it's my knowledge because of a variety of different factors, including the COVID-19 pandemic. We've not heard that yet. It hasn't been used in that kind of volume to have heard that yet, but Christian is closer. Christian?

Yeah, thank you, Andrew, for the question. So what we see actually is occasionally that the users are suggesting that there might be a closer collaboration. Of course, also from the field people from different companies, but there's apparently no deeper collaboration at the moment. So, yeah, I mean, the users are happy that they have the safety net now, and the use in the big cardiac surgery centers is increasing. We have a number of sites where this is used regularly to have the safety and to avoid bleedings.

Okay, useful, thank you. And just from listening to everyone, there just appears to be a much higher degree of confidence for STAR-T, not just in your ability to generate positive safety and efficacy data, but the ability to enroll patients and complete the study faster than, say, other studies like Refresh2. I was curious, in your own words, what was really driving that increased confidence

for this study and indication.

Micah, would you like to give some commentary?

Sure. Thank you. Yeah. So, you know, everything starts with the unmet need. You know, this is something that is not a rare event. As these antithrombotic drugs are increasingly being prescribed for a multitude of cardiovascular applications, the millions and millions of patients out there that are on them, and when they present with an acute problem and they need an operation, it's literally a nightmare for surgeons. So they have been dealing with this their whole careers without a solution to help them, dealing with this surgical bleeding that's very, very difficult to manage. So when you provide a solution that can actually remove what is at the center of the problem, which is the drug causing this excess bleeding, they immediately become extremely enthusiastic about having such a solution in their hands. When we approach surgeons, when we approach clinical centers, what we routinely hear are things like, this would be a no-brainer in clinical practice if you guys can actually remove this drug during surgery. Now, that tells us that, first of all, for the clinical study, there will be excitement in enrolling patients. And as you know, that's one of the most important things that drives a successful clinical study, when the investigators, the principal investigators, The executive committee, the site investigators, they're all enthusiastic behind the trial. And we see that when we engage with them. The second part of the confidence comes with the fact that this is a marketed application in Europe. And this is being used every day in heart centers. We've seen data that are being published, but we're also talking to customers. And they tell us that they see this incredible reduction in the bleeding associated with these antithrombotic drugs during cardiac surgery. They're telling us routinely the device is working. So we have excellent feedback from real-world use. We have some published data, not a lot yet, but more and more are coming. And the STAR registry, which is another one of our programs, will contribute even more in the future. And then again, the interactions we're having with the sites and the investigators and the level of enthusiasm that we're encountering make us confident that we'll execute the study and that the device, the drugs or ATR system, will perform hopefully as well in the trial as it does in real-world use.

Perfect. Thank you. Last two questions.

I'll just lump them together. First one, just how many patients have been enrolled and refreshed to date? And then in the U.S., for various specialties, it seems like the summer is going to be busier than usual just due to the backlog of procedures that were delayed due to COVID. And I was curious if you were seeing similar tailwinds in Germany and other key regions during the third quarter. Also, if you could just reference the massive amount of flooding in Germany, if that's impacted anything in your opinion.

Michael, do you want to take the first part?

Yeah. So when it comes to Refresh 2, as of the last update, we have enrolled 168 patients in the study.

Thank you. And Christian, would you like to comment on the German floods?

I actually could not really understand the question. Can you please repeat?

Just as a relatively large-scale disaster, has it impacted our operations or sales in any significant way?

And also, just in the U.S., there seems to be a lot of specialties that that are going to be busier during the summer just because of backlog of procedures that were delayed due to COVID. And I was just wanting to know if that same tailwind was being seen in Germany and other, you know, relevant regions for you.

Okay. If I have understood correctly that whether the elective surgery decline over the COVID is now compensated, is this the right question? It's very difficult to understand.

The third quarter is typically a lull, right? It can be pretty volatile just based on the holidays and everything that takes place in the summer in Europe. So I was curious just because there's a lot more reopenings going on and people are getting vaccinated. If you're seeing the summer turning out to be more busy than it would typically be because of those dynamics, And then just tying in the weather-related aspects in Germany, since that's such an important market for you.

Yeah, got it now. So there's two different effects, or maybe even more. One is absolutely right. You are right with the surgical programs. They get online again. They have long waiting lists from this time when the programs were down. And the sites or the centers try to really cope with that and provide try to maximize their throughput as much as possible. So this obviously could have a positive effect on what we are doing. On the other hand, there's also an effect additionally to the vacation time we normally see in Europe, mainly in the South European countries, but also in Switzerland and Germany. We have the situation that, you know, over the last 15 to 18 months, The ICU doctors have kind of worked like 24-7. And there is a certain exhaustion of these doctors and personnel, not just doctors, of course. And they really take the vacation and do the full vacation what they deserve. So there is a number of different effects coming into place. your judgment on the surgical programs, I can absolutely confirm.

Great.

Thank you very much. I'll hop back in queue. Thank you.

Our next question is from Arthur Heath with HC Wainwright.

Please proceed with your question.

Hey, good afternoon, everyone. This is Arthur for Sean Lee. Thanks for taking my question. Most of my questions are being answered. I'm just curious regarding... And congrats on the product launch in Singapore. I'm just curious if you guys could give us more color on your business strategy more broadly in the region.

That would be helpful. Thank you.

You know, Arthur, I think that... What we've demonstrated in the past has been registration of the product in a number of different South Asia and Southeast Asian countries in Malaysia, in Vietnam, in South Korea, in Singapore, in Hong Kong. And we're slowly moving into that area. I think that we have a broader strategy of obviously going after some of the big countries particularly like Japan and China, et cetera. Those are ongoing as part of our strategy.

Thank you for that. Sure.

Okay.

At this time, it appears that there are no other questions, so I'd like to turn it back to management for any additional or closing remarks.

Well, thank you, everyone, for joining us today on today's earnings call. We appreciate your participation. If you do have any other questions, please feel free to reach out to Terri-Ann Powers at tpowers.cituservants.com, and we'll try to reply to your questions as soon as we can. Thank you, everyone. Have a good night.

Thank you. That concludes our conference for today. I'd like to thank everyone for their participation. Have a great evening.