Cytosorbents Corporation

Good afternoon, ladies and gentlemen, and welcome to the Cytosorbents Corp. 4th Quarter and Full Year 2024 Financial Assaults and Recent Business Highlights Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Monday, March 31, 2025. I would now like to turn the conference over to Donna Alexander. Please go ahead.

Thank you, John, and good afternoon, everyone. Welcome to SIDA Sovereign's fourth quarter and full year 2024 financial results and business highlights conference call. Joining me today from the company for the prepared remarks are Dr. Philip Chan, Chief Executive Officer, and Pete Mariani, Chief Financial Officer. 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 the 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 our performance represented by management, which includes estimates today as of March 31st, 2025, 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 fourth quarter and full year 2024. Following the presentation, We will open the line to analyst questions during the live Q&A session. And now, it's my pleasure to turn the call over to Dr. Philip Chan. Phil?

Thank you very much, Adana, and good afternoon, and welcome everyone for our fourth quarter and full year 2024 earnings call. Thetasorbents is a leader in the treatment of life-threatening conditions in the intensive care unit and cardiac surgery through blood purification and the removal of harmful substances from blood with our proprietary Sorbents bead technology. Partridges filled with these beads are high-margin single-use disposables that are plug-and-play compatible with existing blood pump machines in a hospital, such as dialysis, ECMO, and heart-lung machines. Our technologies are used in a broad number of blood purification applications. Specifically, Cytosorb, our flagship product, which is approved in the European Union, is used primarily to treat life-threatening conditions in the intensive care unit and cardiac surgery, such as sepsis, acute respiratory distress syndrome, or ARDS, and liver failure. Cytosorb is the anchor of our core international business with over 270,000 devices utilized to date in more than 70 countries worldwide and drove 35.6 million in core product sales in 2024. Our second product, Drugsorb ATR, is an investigational FDA breakthrough designated medical device intended to reduce the severity of perioperative bleeding in patients undergoing cardiac surgery due to blood thinning drugs. We were focused initially on the blood thinner, Berlinta, in patients undergoing coronary artery bypass graft or CABG surgery. In September and November of 2024, we submitted marketing applications to both FDA and Health Canada respectively for this application and expect regulatory decisions from both agencies this year. We'll talk more about this opportunity in just a moment. 2024 was a strong year of progress. We closed out 2024 on a high note, delivering a 25% increase in fourth quarter product revenue compared to the prior year, reaching $9.2 million and notched a total of $35.6 million in product revenue for the full year, representing 15% year-over-year growth. Driven by 28% growth in direct sales outside of Germany and 22% growth in distributor and partner sales, which was partially offset by flat growth in direct sales in Germany for the year. These results were obtained through disciplined execution of our growth strategy in international markets. Our product gross margin remained healthy at 71%, reflecting the strength of our underlying razor blade in someone else's razor business model and as a vertically integrated U.S. manufacturer of our therapies. On the regulatory front, we continue to make significant progress in bringing our drug-served ATR therapy to market. The FDA has accepted our de novo application, and we are now in interactive review, an important step towards potential U.S. marketing approval. Additionally, we submitted our medical device license application to Health Canada following MD-SAP certification, and this is now in advanced review. We remain on track to receive regulatory decisions from both FDA and Health Canada in 2025. Meanwhile, our financial position was further strengthened last year through our $20 million debt facility with Avenue Capital Group that we consummated in June of 2024. And more recently, our successful shareholder rights offering, which has raised total net proceeds of $7.3 million to date, including the exercise of the Series A right warrant. This offering also enabled the release of $5.5 million in restricted cash, resulting in a total liquidity increase of $12.3 million. We're thankful to our dedicated shareholders for their support in this offering. As of December 31, 2024, our total cash and cash equivalents were $9.8 million. And on a pro forma basis, including the benefit of the rights offering, our total cash position was approximately $17 million. Pete will go over our operating metrics in greater detail. But overall, we were pleased that in 2024, we significantly improved our financial performance and move closer to our goal of getting our core business to near cash flow break even by the end of 2025 through a combination of sales performance, product gross margins, effective cost controls, improved operating efficiencies, and focused cash management. Now we'll turn to a Cytosurf update. As I mentioned, our core business grew 15% in 2024 with more than 35% million in high-margin Cytosorb sales. One of the main reasons that Cytosorb usage continues to grow is because it targets massive inflammation, which is at the heart of most critical illnesses. Inflammation is the body's normal response to injury and infection, but in life-threatening illnesses, severe inflammation driven by cytokine storm can cause a chain reaction of problems that can end in organ failure and death. This deadly inflammatory response can rapidly lead to a host of problems, such as life-threatening low blood pressure, called shock, leakiness of blood vessels, essentially drowning a patient from the inside out, called capillary leak syndrome, the death of cells of the immune system causing immune dysfunction, direct tissue damage, hypercoagulability, cell-mediated injury, microvascular dysfunction, and other problems, ultimately leading to a system crash and the failure of vital organs like the heart, lungs, kidneys, and liver. The worse the inflammation, the worse the disease, and the worse the outcome. Cytosorb works to control this deadly inflammation and has demonstrated the reversal or prevention of many of these complications. Cytoserve is expanding the dimension of blood purification by helping to treat critical illnesses where massive inflammation plays a deadly role, which occurs in an estimated 40 to 60% of patients in the intensive care unit. These are diseases like septic shock, acute respiratory distress syndrome, trauma, burn injury, severe pancreatitis, acute liver failure, COVID, and the flu. This is a much larger market than the 10 to 15% of patients in the intensive care unit that have kidney failure which is what the main blood purification players like Fresenius, Baxter that is now Vantiv, Bebron, and others currently target. Because of this, we have the potential to significantly increase our leadership in critical care. Treating critically ill patients is very challenging, and so many factors play into why these patients live or die. However, one thing is clear. The fire of severe inflammation spreads rapidly in the body via cytokine storm and other mechanisms, And if you don't treat it early or aggressively enough, just like a real fire, it can get out of hand and become impossible to control, leading to organ failure and death. This is why we have been pushing our message of treating the right patient at the right time with the right dose of Cytosorb. This means treating the patients with severe inflammation early and aggressively with Cytosorb. And in doing so, the therapy helps to break the vicious cycle of deadly inflammation reverse the instability like shock, and helps to restore or preserve organ function while removing other harmful substances. This message is helping to drive optimized treatment strategies, improve patient outcomes, and accelerate adoption of Cytosort. For example, at this month's International Symposium of Intensive Care and Emergency Medicine Congress in Brussels, Professor Berlotte, Giorgio Berlotte, and colleagues from Italy presented compelling new data from 175 patient retrospective study on septic shock and multi-organ failure. They concluded that early and intensive treatment with Cytosorb led to a statistically significant doubling of survival compared to predicted mortality. These results, now accepted for publication in the Journal of Intensive Care Medicine, reinforced previously published findings from our Cytosorb Therapy in COVID-19 Registry, also called our CTC Registry, in the journal Critical Care, that early and intensive treatment is associated with high survival and shorter time on mechanical support. In training users how best to treat patients, we believe this will yield better outcomes, which drives greater usage and ultimately more sales. Looking forward, we're encouraged by our commercial progress, but are prioritizing a return to sales growth in Germany, our largest market, which was flat for the second year in a row. Entering 2025, we initiated a reorganization of our direct sales team and strategy in Germany, including a rebalancing of territories and hospital accounts with the goal of restoring sales growth through deeper customer engagement, more effective market development, and improved sales representative productivity. Because of the effect of these changes, we expect a short-term disruption in Germany sales that will result in a modestly lower product sales overall for the first quarter of 2025 compared to a year ago. However, we expect these actions will result in growth in Germany ultimately and improve results in the second half of this year with the intent to manage our total core business towards near break-even. Now, let's turn to DrugServe ATR. The DrugServe ATR opportunity with regulatory approvals has the potential to drive strong near-term growth opportunities in the United States and Canada to address perioperative bleeding caused by blood thinners like Berlinta, also called Ticagrelor generically from AstraZeneca, in coronary artery bypass or CABG surgery, an area where we have FDA breakthrough designation. Berlinta, a wildly used antiplatelet blood thinner, is often given to heart attack patients to reduce the heart attack from getting worse. Most patients will receive a stent, but in the five to 10% of patients who are not eligible for a stent will require bypass graft surgery. The current guidelines require a three to five day washout of the drug to prevent perioperative bleeding complications. However, in patients who are still having a heart attack, this can lead to longer hospital stays, higher costs, and increased risks. DrugServe offers a unique win-win-win solution to this problem, whose goal is to enable safe and timely CABG surgery by reducing serious bleeding risks and reducing hospital costs. For patients, it gets them to definitive surgery without having to wait, while reducing the risk of serious bleeding caused by Berlinta. For surgeons, They tell us that they hate uncontrolled bleeding in patients caused by these blood thinners and each has horror stories about operating on a patient on blood thinners or having patients bleed out in recovery. DrugServe ATR is seamlessly and easily integrated by the perfusionist into the heart-lung machine during surgery. And while the surgery is ongoing, the device is continuing to remove free drug from the patient and reducing serious bleeding both intraoperatively and postoperatively. And for hospital administrators, It's a resource utilization story. Having patients wait three to five days to wash out blood thinners in the ICU, step down ICU, or hospital ward is expensive. For example, a three to five day wait in the intensive care unit can be $18,000 to $30,000 just to wait. And patients who have bleeding complications are taking up ICU recovery beds and are a bottleneck to new surgical patient throughput, which, given that open heart surgery is one of the biggest revenue drivers in a hospital, directly impacts hospital revenues. Finally, adverse events like bleeding after cabbage surgery can negatively impact a hospital's CMS quality star rating that affects reimbursement and is used to market itself against competitive medical programs in the area. We estimate the total addressable market for drug-served ATR in the U.S. and Canada will grow from 300 million today to over a billion as Berlinda becomes generic, DrugServe ATR establishes Berlinta as the only reversible oral antiplatelet, and we expand into other blood thinners and surgical applications potentially in the future. As we wait for decisions from FDA and Health Canada, we are actively preparing for the potential commercial launch of DrugServe ATR in the United States and Canada. With FDA breakthrough device designation, DrugServe ATR is uniquely positioned to address the critical issue of perioperative bleeding caused by blood thinners like Berlinta in patients undergoing CABG surgery. Our market analysis suggests a US and Canadian total addressable market opportunity of $300 million today, which could exceed a billion dollars as Berlinta becomes generic and DrugServe ATR expands into additional indications as we mentioned before. If approved, we plan to initiate a controlled market release at key clinical trial sites that would allow us to get real-world feedback, validate assumptions, and refine our commercial strategy before expanding to a broader national launch. We are also bolstering our market presence through clinical research and thought leadership. Over the next several months, we will showcase impactful new data at major cardiovascular conferences that underscore the clinical benefit of blood thinner drug removal during cardiothoracic surgery. At the American College of Cardiology conference in Chicago that just concluded today, the largest cardiovascular event in North America, STAR-T principal investigator Dr. Michael Gibson just presented an important pooled data analysis from the STAR-T trial and the International STAR Registry, demonstrating that the bleeding reductions after CABG surgery observed in the controlled STAR-T trial also extend into real-world clinical practice. At the Society of Cardiovascular Anesthetologists' 47th annual meeting in Montreal in April, Dr. David Mazur, a pioneer in perioperative blood conservation and a star key executive committee member, will lead a roundtable discussion on the integration of drug-served ATR perioperative blood management protocols. At EuroPCR in Paris this May, Professor Robert Story will present what we believe to be some of the most compelling blood thinner removal evidence to date. comparing bleeding rates after CABG in Berlinta patients operated with or without our device. This latest analysis, with updated data from the STAR registry, clearly demonstrates the significant bleeding reductions associated with the use of our device in contemporary real-world practice. At the Canadian Society of Cardiac Surgery Conference in Montreal in May, Dr. Richard Whitlock, the STAR-T Canadian Principal Investigator, will host on the STAR-T study results outlining DrugServe ATR's clinical and economic value proposition in Canadian hospital practice. And finally, at the European Society of Cardiology Heart Failure Meeting in Belgrade in May, a new study will be presented demonstrating how DrugServe ATR successfully prevented bleeding complications in patients on Berlinta and other direct oral anticoagulants undergoing emergency complex heart surgery. So with that, I will now turn it over to Pete to give the financial update. Pete?