Cytosorbents Corporation

Good afternoon, and welcome to the SIDO Sorbent's second quarter 2023 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, Taylor Devlin. Please go ahead, Taylor.

Thank you, and good afternoon. Welcome to Cytosorbent Second Quarter 2023 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, Interim Chief Financial Officer, Dr. Efthymios Deliogidis, Chief Medical Officer, Dr. Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of Cytosurbance Europe, GMBH, Christopher Creamer, Senior Vice President of Business Development, Dr. Irina Kulinic, Senior Vice President of Regulatory. 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 filing with the SEC. Any projections as to the company's future performance represented by management include estimates today as of August 1, 2023, 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 second quarter of 2023 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. And now it's my pleasure to turn the call over to Dr. Philip Chan.

Thank you very much, Taylor, and good afternoon. Today I have the pleasure of being able to update you on our most recent operational progress. We recently announced that the Pivotal Start T trial completed enrollment ahead of internal projections with strong performance amongst our 30 clinical centers in the United States and Canada. This followed the second independent data and safety monitoring board evaluation in June on unblinded safety data on 80 patients where the DSMB recommended completion of the trial without modification. In the second quarter of 2023, We achieved total revenue of 9.4 million, including product sales of 8.1 million versus 7.3 million in product sales a year ago, representing the third consecutive quarter of sequential product sales growth. Product gross margins grew 700 basis points to 74% from 67% a year ago. And we have now exceeded 212,000 cumulative human treatments delivered across 75 countries worldwide. We announced the appointment of Alex D'Amico as new Chief Financial Officer to start next week, August 7th, 2023. Alex brings 20 years of broad finance, SEC reporting, M&A, fundraising, and accounting experience to the company. And our outgoing Chief Financial Officer, Cathy Block, will stay on as a consultant and help to manage the transition. We also introduced Michael Batar as the new chairman of the board at the annual meeting in June. Michael has been a board director since 2015 and currently serves as a founder and partner of Quartz Advisory Group, a capital markets investment bank. Michael was also the former managing director of healthcare research at Jenison Associates, a very large family of funds with more than $175 billion in assets under management. Last but not least, we announced the Theranostic collaboration with Humetics. Humetics is the manufacturer of the EU-approved LymeX liver function test that is used in liver patients to evaluate the functioning of the liver. We announced a one-year joint marketing agreement where their sales force and ours in respective territories will cross-market Cytosorb as a superior extracorporeal liver support technology and LymeX as a unique liver function test. for the treatment of liver disease. As we've discussed previously, we are focused on three major objectives for 2023. The first is opening the U.S. and Canadian markets with DrugServe ATR. The second is a return to sales growth of Cytosorb. And the third is to reduce our cash burn and to have tight control over expenses. In terms of opening the U.S. and Canadian markets with DrugServe ATR, I would like to note again that DrugServe ATR and START-T, which stands for the Safe and Timely Antithrombotic Removal of Ticagrelor Trial, remains the core focus of our clinical efforts and the vehicle expected to open the U.S. and Canadian markets. This leverages two FDA breakthrough device designations for DrugServe ATR to remove blood thinning medications in patients undergoing cardiac surgery. One of these breakthrough device designations is for the removal of Berlinta commonly known as ticagrelor. And also, the second one is for the direct oral anticoagulants, of which Eliquis and Xarelto are the leading ones in that category. In addition, following independent data safety monitoring board review of the first 80 patients' safety data in the START-T trial and recommendation to continue the trial without modifications, we were pleased to announce that START-T enrollment has now completed. This helps to validate the decision to forego the interim analysis at 80 patients that we discussed on the last earnings call. And we expect that the trial to complete imminently following the last 30-day patient follow-up. We believe this sets us up for near-term milestones that are rapidly approaching, which is why I have this picture of a mirror that says objects in the mirror are closer than they appear. First, we expect to get the database locked in the next several months. followed by statistical data analysis. This should hopefully lead to top-line data targeted by year-end, and if positive, regulatory submission to U.S. FDA and Health Canada to follow. We also expect to present data at a major cardiovascular conference next year, and pending visibility, we plan to begin executing on our pre-commercialization strategy and begin building a direct sales and marketing infrastructure in 2024. One thing that we really haven't discussed extensively in the past are the dynamics that may actually help expand ticagrelor market share in the United States and Canada, but particularly in the United States. And more ticagrelor use means potentially more drugs or ATR use should we get approved. As we've discussed in the past, patients with acute coronary syndrome who come into the emergency room with signs and symptoms of having a heart attack often get dual antiplatelet therapy. This consists of aspirin plus one of the P2Y12 platelet inhibitors, such as Berlinta or Ticagrelor, Plavix or Clopidogrel, or Effiant, also known as Prasugrel. Berlinta has superior antithrombotic efficacy to Plavix, but Plavix is generic and cheap, and Berlinta today is still a branded drug. However, this is expected to change as Berlinta will go generic in 2024 to become just generic Ticagrelor with multiple competitors with tentatively approved abbreviated NDAs that have already been approved by the FDA. The price of Ticagrelor is expected to fall, potentially enabling market share gains against Clopidogrel and the more expensive branded Effiant. A recent publication in the well-respected journal JAMA Network Open highlights U.S. prescribing physician preference for ticagrelor versus other antiplatelet agents following acute coronary syndrome and percutaneous coronary intervention. In other words, for example, stent placement in more than 62,000 patients that were studied between 2010 to 2019. And what you can see in the graph in the lower right is that during that period of 2010 to 2019, that ticagrelor has steadily gained in prescribing preference for physicians following acute coronary syndrome and PCI to the point where now, or at least in 2019, 60.4% of patients who were intervened upon in the cath lab got ticagrelor or berlinta. While the rates of Plavix prescription have been going down to only about 30%, in 2019, and Prasugrel is a distant third at 10% of prescriptions, leading the authors to conclude that, to quote, ticagrelor has emerged as the most commonly prescribed P2Y12 platelet inhibitor. In addition, the approval of drugs or ATR would make ticagrelor the only one of these antiplatelet drugs to be reversible during CABG surgery. a potentially powerful marketing advantage to take market share. One can imagine, given that 5 to 10 percent of patients are not eligible for stent placement and wind up in surgery, that being able to reverse the drug used in dual antiplatelet therapy would be an extremely valuable marketing advantage that we could confer to Ticagrelor, and we believe that this will come to pass and be true. Ultimately, this sets us up for an initial market in the United States for removal of Berlinta in cardiac surgery patients of approximately 250 million. And if you add Canada, this increases the total addressable market to roughly 300 to 350 million in additional share against Plavix and . The numbers of patients on Berlinta or Ticagrelor in the future could rise to give us an opportunity of about a $500 million total addressable market. As we told you in the past, once STAR-T completed, we are looking to resume the STAR-D trial, which is looking at the removal of the direct oral anticoagulants, the factor Xa inhibitors, Eliquis and Xarelto. And if we are able to add on that indication, this could double our total addressable market to a billion dollars. And if we can now open it up for not just cardiac surgery, but to all kinds of surgeries, and also potentially being able to be used in the emergency room, we estimate that that could, again, double the total addressable market here in the United States. So a second major goal for the company is a return to sales growth for Cytosur. Again, this has been the third consecutive quarter of sequential product sales growth with 10% quarterly product sales growth year over year in the second quarter. We're seeing continued gradual recovery of hospital markets post-COVID, with continued strong customer engagement and enthusiastic response to our new data and marketing strategies. Our product gross margins rose 700 basis points to 74%, reflecting volume production from our new Princeton manufacturing facility, a trend consistent with prior guidance of returning to 75% to 80% quarterly base year. The following messages. One, that we need to be able to treat the right patient with the right timing and the right dose. And we also need to hit hard and hit early. And this incorporates our evolving understanding of how best to treat patients with cytosol. In particular, when cytosol is used early and aggressively in documented hyperinflamed we have seen some outstanding results. This includes the recently published CTC therapy registry results in the journal Critical Care, detailing the clinical outcomes in 100 critically ill COVID-19 patients with severe inflammation and refractory lung failure using Cytosorb with ECMO to achieve enhanced lung rest. Overall 90-day survival was high at 74%. And in the post hoc analysis, patients who were treated before the median treatment time of 87 hours had even higher survival at 82% compared to 66% survival in patients treated after 87 hours. In addition, those treated in the early group had significantly shorter median duration times on mechanical ventilation, ECMO on the, in the blue lower left-hand graph, mechanical ventilation in red, and ICU stay in green. Overall, our results compare favorably to the approximately 50% survival reported by ELSO, or the Extracorporeal Life Support Organization, and their COVID-19 registry survival data, where they looked at ECMO use alone in this population. Our data support the strategy of early combined use to treat severe ARDS, or acute respiratory distress syndrome, and refractory lung failure, and is a prime example of our hit early, hit hard treatment philosophy. To this end, our current company-sponsored trials, such as the PERSIS Refract Receptive Shock Randomized Control Trial and the International COSMOS Critical Illness Registry, incorporate our evolving understanding of how to achieve better and more consistent results with Cytosorb. We've also been working to drive earlier usage of Cytosorb in the appropriate patients through a number of different ways, including, for example, pursuing a theranostic strategy In other words, using a diagnostic test to guide patient selection and timing of cytosurgery therapy, as we're doing in our collaboration with humetics in the field of liver disease. We're also using a hemoperfusion machine, as we're doing with the Pure Adjust platform from Nikiso, that can run cytosurgery without needing to wait for patients to develop kidney failure and go on to the analysis. So with that, I'd like to turn it over to Kathy. to now cover financial highlights for the quarter. Kathy.