Cytosorbents Corporation

Good afternoon and welcome to SIDO's Second Quarter 2022 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Following the former 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 CITUS Servant Second Quarter 2022 Financial and Operating Results Conference Call. Joining me today from the company are Dr. Philip Chan, Chief Executive Officer, Vincent Caponi, Chief Operating Officer and President, Kathleen Block, Chief Financial Officer, Dr. Efemios Deliar-Garris, 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 plan of 1995. Actual results may differ from the 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 as of today, August 2nd, 2022, 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 second quarter by management. 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 continue to make progress in the second quarter. First, as of the end of the second quarter, more than 179,000 cumulative cytosol devices have been utilized, up from more than 143,000 last year. Next, we announced today the signing of an expanded global marketing agreement with Fresenius Medical Care, where cytosol will become a featured blood purification therapy on Fresenius Medical Care's critical care platforms. We also entered into a three-year supplier agreement with the Sklepios Group, one of the largest private hospital operators in Germany. We partnered with Nikiso to distribute the Pure Adjust Hemoperfusion blood pump and supplies in a total of 14 countries, a key part of our standalone machine strategy to expand the market for our products. We also hosted the 2020-22 Cytoserve World Users Meeting that highlighted the broad market potential of Cytoserve as an interdisciplinary therapeutic approach for a wide range of life-threatening illnesses. And finally, we relocated and established our company headquarters and manufacturing in Princeton, New Jersey, in what was a great day for employees and our company. From a financial standpoint, total revenue, which includes product sales and grant income for the second quarter of 2022, was 8.5 million versus 12 million in the second quarter a year ago. Product sales were 7.3 million which was mainly core with negligible COVID-19 sales, compared to 11.4 million in product sales in the second quarter a year ago, of which 9.7 million was core and 1.7 million was COVID-19 related. Despite the drop in product sales, as you can see from this table, it's important to note that Q2 2020-22 core sales were stable with the prior three quarters on a constant currency basis, reflecting a 12% reduction in the euro to dollar exchange rate year over year, where adjusted core sales would have been $8.2 million. So clearly not the growth we are seeking. The results have been stable despite continued softness in the German market. Turning to Germany in the second quarter of 2022, Germany began a slow recovery from the worst COVID-19 infection surge of the pandemic, while dealing with yet another surge in new cases during the quarter, driven by the BA.5 variant. We continue to see the fallout of COVID in the German market with continued staffing shortages, budget issues, elective procedure restrictions, and continued but improved visitation restrictions. In addition, fatigue and poor morale amongst many healthcare providers continues. During the second quarter, for example, there was an 11-week healthcare worker strike in Western Germany that affected all of the university hospitals that serve a region That is home to 20% of Germany's population, postponing more than 10,000 surgical procedures and closing hospital wards. Needless to say, our sales in this region were very weak. Second quarter 2022 Germany sales were 3 million versus 6.1 million a year ago, reflecting many of the hospital related challenges that I just mentioned. However, we believe the alarm of COVID in Germany is beginning to fade due to the current low severity of illness of recent strains and that businesses, including hospitals, are adjusting and moving forward without major restrictions, as we've seen in the U.S. market. Although not yet showing up in our numbers, we see early but encouraging signs of improvement, including more customer visits in Germany during the quarter, continued strong positive support from customers, where the feedback on lower orders in Germany have been primarily due to hospital challenges such as staffing shortages, budgets, ICU capacity, and lower numbers of severely ill patients, a significantly increased flow of positive data on cytosol across both critical care and cardiac surgery, greater in-person attendance of healthcare providers at conferences, and improved cross-functional synergy within our company based on our new therapy area vertical strategy and leadership. And importantly, there have been recent developments that have the potential to drive future sales. For example, We have recently announced a preferred supplier agreement with the Sklepios Group, one of the largest private hospital networks in Germany, making Cytoserve available to all 170 healthcare facilities in the network without restriction. We also have had positive early response to our standalone blood pump strategy with our new partner Nikiso, intended to drive easy and earlier Cytoserve use and expand the market for blood purification, particularly in patients who need our therapy but do not yet need dialysis. with numerous equipment trials occurring or scheduled. And finally, as Chris will discuss in greater detail today, we announced a new expanded global marketing agreement with Fresenius, the market leader in dialysis worldwide with headquarters and a world-class sales and marketing team within Germany.