Cytosorbents Corporation

Good afternoon, and welcome to Citrus Orbit's fourth quarter and full year 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 would like to turn the call over to our moderator, Terry Ann Powers, Vice President of Investor Relations and corporate communications. Please go ahead, Ms. Bowers.

Thank you, Sherry, and good afternoon. Welcome to Cytosorbent's fourth quarter and full year 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. Efthymios Deliorgieris, Chief Medical Officer, Dr. Christian Steiner, Executive Vice President of Sales and Marketing and 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 March 8, 2022, 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 financial highlights for the fourth quarter and full year 2021 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 very much, Terri-Ann. Despite pandemic headwinds, 2021 was a good year with sales growth driven by increased Cytosar utilization and advancement of key objectives. Total revenue grew 5%, product gross margins improved to 80%, and we ended the year with a strong balance sheet with approximately $54 million in cash and no debt. We made significant progress on our U.S. antithrombotic removal clinical programs with the launch of two pivotal randomized controlled trials, the STAR-T and the STAR-D trials, evaluating the intraoperative use of DrugSorb ATR during urgent cardiothoracic surgery to remove certain blood thinners under two FDA breakthrough device designations. We also invested in key people and processes to ensure focus on our critical care and cardiac surgery application to position the company for sustained future revenue growth. Meanwhile, we continued to drive awareness of Cytosorb through company and investigator-initiated presentations and publications. And although it seems like we just recently celebrated the milestone of 100,000 cumulative devices utilized, as of the end of 2021, there have now been more than 162,000 cumulative cytosurge devices utilized, up 34% over the end of 2020. Finally, we have been extremely focused on allocating our capital towards priority programs, which include our company-sponsored clinical trials, our sales and marketing infrastructure, and our new manufacturing facility build out. As we've done in prior earnings calls, I'd like to provide our view of the COVID-19 pandemic, given the ebb and flow of its impact on our business. As you can see from the world maps on the new COVID cases in November of last year on the top left, and on the current map on the top right, the Omicron variant led to a dramatic surge in COVID-19 cases, particularly in the US, Europe, and the northern parts of Asia. However, as you can see on the bottom right, although there were high rates of COVID, the severity of illness has dropped significantly and sequentially with every new wave, with peak mortality rates of about 2.3% globally a year ago compared to only 0.4% now. This is likely due to the fact that on the lower left, approximately 65% of the world population has now had at least one vaccine dose, and 58% are fully vaccinated. Compare this to November 2021 when only 28% of the world population had one vaccine dose and only 14% were fully vaccinated. You can see in the table that in most major countries in Europe, like the United Kingdom, France, Spain, Italy, and Germany, the rates of full vaccination are very high in the range of about 73 to 83%. In terms of Germany, New cases of COVID-19 have only just recently peaked, resulting in many of the same trends we saw late last year to persist in the country, including hospital restrictions on sales reps and other outsider visits, decreased elective procedures, decreased ICU capacity, and other factors. What you see in this graph is that the peak mortality has dropped dramatically from early 2021, where 3% of patients who got COVID-19 died, to now only 0.1% peak mortality. This 0.1% mortality is typical of what we typically see with seasonal influenza. But we expect that new cases in Germany to drop rapidly soon, like you can see here with the other major EU countries, at which point we believe our core business will begin to pick up. Already Germany has announced its intent to lift most social restrictions this month. As with many companies, we are currently navigating through global uncertainty. The good news is that we expect that the COVID-19 pandemic will likely burn out in 2022. Are we out of the woods yet? Probably not. But we'll likely see minor spikes in COVID-19 as restrictions like masks are lifted. But we believe the pandemic is likely coming to an end this year due to the natural history of viral pandemics, the very high current rates of vaccinations and natural immunity, and the decreased severity of illness globally. Yes, they'll likely be other COVID-19 variants, but they'll more likely be like the seasonal flu, some worse than others, where most people have mild to moderate disease. From the perspective of the Russian-Ukraine war, we believe we currently have limited exposure with less than 4% of our 2021 product revenues coming from the region. Overall, we expect continued and progressive improvement throughout the year in our core non-COVID-19 business, with 20% or more growth, over 33.8 million in core non-COVID-19 sales in 2021, which assumes a recovery of normalized hospital activity and sales access in Germany and other key countries, no major economic slowdowns caused by new variants of COVID-19, and little to no sales from Russia, Ukraine, and neighboring countries. Also, because of the trajectory of the COVID-19 pandemic worldwide, we expect limited COVID-19-related sales in 2022, as the severity of COVID-19-related illness, hospitalizations, critical illness, and deaths have dropped significantly. That said, we are focused on driving our 2022 strategic priorities. As you'll hear in more detail from the management team momentarily, we have four key priorities. The first is to advance the high priority start T and start D US clinical trials in pursuit of US FDA marketing approval. The second is to manage our business and resources to achieve 20% or more growth in core Cytoserb sales in 2022. The third is to complete the build out and begin commercial Cytoserb production out of our new manufacturing facility in New Jersey by the second half of 2022. This is intended to increase Cytoserb production capacity to support annual product sales of up to 400 million a year and also to improve product gross margin. And finally, our fourth major priority is to expand both new and existing strategic partnerships to maximize the synergy between our technology and those of our partners while creating new opportunities for global growth. So with that, let me turn it over to Kathy to discuss our fourth quarter and full year 2021 financial performance. Kathy?