Cerus Corporation (CERS) Earnings Call Transcript & Summary

We expect to report our preliminary voting results or, if available to us on a timely basis, our final voting results on a current report on Form 8-K to be filed with the SEC within 4 business days after the end of this meeting. If not earlier reported, we expect to report our final voting results in an amendment to our Form 8-K within 4 business days after the final results are known to us. This concludes the formal portion of today's meeting, and the annual meeting is now adjourned. With the official business of the shareholders meeting concluded, I would like to take the opportunity with you all here virtually today to share some of our thoughts around 2020, 2021, and the future of the company. Today, I will be joined by Vivek Jayaraman, our Chief Operating Officer; as well as Dr. Larry Corash, one of our Co-Founders and our Chief Scientific Officer. Before I begin, I would like to remind you that statements I make may reflect forward-looking statements, which are subject to a number of risks and uncertainties. For a detailed discussion of those risks, I encourage you to review them in our most recent forms 10-K and 10-Q on file with the SEC. Cerus' mission is to make our INTERCEPT Blood System the standard of care in transfusion medicine and thereby transform blood safety and availability globally. Since the HIV and hepatitis crises of the 1980s and 1990s, we have been at this for almost 30 years now, and we are proud of our market-leading position in the pathogen and activation space. Today, our products are sold in over 40 countries through a mix of direct and distributor sales channels, and we have a full portfolio of products either approved or in late-stage development to serve the transfusion medicine market. Within the transfusion medicine market, we believe we have established a strong moat that gives us a competitive advantage and simultaneously is attractive from a long-term investor perspective. In the pathogen and activation space, we serve a concentrated and very sticky customer base. These are the blood centers and national transfusion services that are responsible for collecting and distributing blood products to their customers, the hospitals. With our 2 decades of routine use, the safety and efficacy of our technology is proven, and we have established ourselves as the market leader in pathogen activation in multiple geographies. Our team brings many years of knowledge and experience in navigating a complex regulatory landscape for our products. And with that skill set, we have a robust product pipeline that we look forward to bringing to the market in the coming years. The most recent example being INTERCEPT fibrinogen complex, a therapeutic product that leverages our INTERCEPT technology to address a significant unmet need in the area of massive hemorrhage. Finally, we are constantly pursuing new geographies as evidenced by our recent China JV announcement and our news with Canadian Blood Services earlier this year. To help illustrate the reach of our INTERCEPT Blood System, we have tallied some statistics here that emphasize the scope of our commercial reach and daily impact on patients globally. With now over 9 million INTERCEPT-treated doses transfused and over 300 blood centers operating with our system daily, we are advancing towards a new standard of care that affords a proactive approach to blood safety and availability, especially in the context of this new era of pandemic preparedness. We talked about the global opportunity for INTERCEPT being close to $7 billion annually, which includes opportunities and geographies where INTERCEPT is not yet approved and pipeline opportunities like the INTERCEPT Red Blood Cells, which is under regulatory review in Europe and in late-stage clinical development here in the U.S. When considering our current portfolio of licensed products alone at the top portion of this slide, we believe the near-term opportunity for our business is about $1.4 billion annually. When compared to our last 12-month product revenue base, there remains a lot of untapped market available for INTERCEPT platelets, plasma and fibrinogen complex. As we grow our end markets through expanding geographically and launch INTERCEPT red blood cells, we continue to believe there is a significant runway for future revenue growth beyond our considerable near-term opportunities. As we've executed on the growth of the business, we think the improvements in our financial profile are just starting to be realized. We are a business with a heavy proportion of recurring revenues. We are seeing strong growth, particularly this year within the U.S., and we are delivering against a strategic plan that lays out a multiyear growth strategy. As we grow the top line, we expect additional margin and cash flow benefits to materialize to make us a self-sustaining enterprise. So in summary, we at Cerus are focused on building our leadership in this critical area of blood safety and availability. Our INTERCEPT platform for platelets has been gaining momentum in Europe and the U.S. as well as in emerging markets as we endeavor to become the standard of care. In particular, our position in the U.S. is strong, and we remain optimistic about our critical position in the market as we approach the FDA compliance deadline later this year. Finally, we remain financially disciplined, balancing investments in our pipeline and manufacturing capacity expansion, while supporting our commercial organization by having a robust supply chain and business continuity strategy. I would now like to turn it over to Vivek to provide some more color on our commercial efforts.

Thank you, Obi, and hello, everyone. It's my honor to spend some time talking with you today about our commercial positioning. I'll be focusing on INTERCEPT platelets and also discussing our launch of INTERCEPT fibrinogen complex, which is now underway in the United States. To begin, we ended 2020 with commercial momentum that drove 23% product revenue growth. This was led by our U.S. platelet business. In addition, the utility of INTERCEPT in the pandemic also favorably contributed to our results as convalescent plasma use, particularly in the EMEA region, drove some short-term demand for our intercepts plasma offering and also continue to highlight the importance of pandemic readiness with a focus on blood safety. For 2021, as you know, we expect product revenue to be in the range of USD 110 million to USD 114 million. And as you heard on our Q1 call last month, the momentum in the U.S. platelet market is really driving the results this calendar year. Finally, we are underway with our launch of INTERCEPT fibrinogen complex and expect revenue to begin contributing in the second half of 2021. I wanted to take some time to describe what is driving the INTERCEPT platelet adoption we are seeing and why we believe we are a superior solution with respect to blood safety. Starting with the unmet need we are addressing. Platelets today are stored for up to 5 days at room temperature. So in addition to the normal risks with various pathogens, bacterial contamination is a significant risk for these blood products. This was recognized early on by some of our European customers, notably in Belgium, France and Switzerland, who have now all moved to 100% INTERCEPT-treated platelet supply. As others have followed in the EMEA region, our annual revenue in this important geography is now over $50 million. In the U.S., we are approaching the standard of care for the platelet market as we implement INTERCEPT, and in particular, as we see progress with the top 5 blood center families. As you may recall, the top 5 blood centers are responsible for roughly 70% to 75% of the nationwide platelet supply. Altogether, the global opportunity for INTERCEPT platelets represents an approximately $1.3 billion addressable market, and we continue to make good progress towards standard of care in all the markets in which we operate. This slide lays out the FDA's guidance document, which is due to be final with respect to compliance in October of this year. Later this year, it is our intention to add a 7-day claim, which would further improve the availability of platelets by expanding the shelf price. We believe this will increase our positioning in terms of relative preference and superiority with respect to other options. We believe the INTERCEPT offering is well positioned versus any of the other single-step or 2-step strategies. Rather than simply testing to see if the unit is compromised, INTERCEPT offers broad pathogen inactivation, and as we saw with COVID-19, can offer protection from contaminants that are not yet known. This added benefit leads us to believe that we will continue to have a leadership position in the market as customers and hospitals see the value in the added safety and protection that INTERCEPT conveys. Now I'd like to spend a moment on our INTERCEPT fibrinogen complex product, which we are launching this year. Perhaps the most exciting thing about the INTERCEPT fibrinogen complex product is that we're clearly addressing a compelling clinical unmet need. Hemorrhage impacts patients regardless of age or gender. And while it does not occur in all trauma cases, cardiovascular surgeries, births or combat wounds, when it does occur, patient outcomes are severely negatively impacted. Hemorrhage shortens the time in which a health care provider can make a difference in a patient's outcome. In trauma, the #1 cause of the debt for adults under 45 years of age. 40% of deaths are the result of bleeding, the majority of which occur within 1.6 hours or less of a patient arriving at the hospital. Physicians need time to reduce negative outcomes. We received FDA breakthrough device designation late last year for our INTERCEPT fibrinogen complex product. The product uses our pathogen reduction technology and provides a fibrinogen-enriched blood component that has a 5-day shelf life once thawed. This compares very favorably to conventional cryoprecipitate, which must be used typically in a 4- to 6-hour window post thaw. As mentioned on the prior slide, in massive bleeding events minutes matter. So we're excited to be bringing a product to market that can be kept in inventory at room temperature and administered immediately for trauma or surgical patients when the acute need arises. INTERCEPT's fibrinogen complex does represent a different customer and go-to-market approach for us. I am pleased with the progress we are making in launching a therapeutics business division, and I feel confident that we're building the foundational capacity to serve this critical market. We have partnered with blood centers in 4 preliminary launch states to make the product and have a dedicated therapeutic sales team calling on identified hospital accounts. We are moving towards commercial sales beginning later this year in those initial launch dates and are anticipating a nationwide rollout next calendar year. In conclusion, we feel we have a unique opportunity in front of us, and we are focused on executing diligently from a commercial perspective. We look forward to sharing more about our success in the marketplace with these 2 products that I highlighted as well as for our full portfolio over the course of the coming quarters and years. I thank you for your continued interest and support for Cerus, and I appreciate your partnership as we all look to advance blood safety and make our mission a reality. With that, let me now hand the call over to our Co-Founder, Dr. Larry Corash.

Thanks, Vivek, and good morning and good afternoon to our shareholders. Thank you for joining. I want to start by spending a little time talking about where we've come from in building the company and our strategic vision for the INTERCEPT platform in the marketplace of the future. Blood transfusion is a critical part of health care. Patients believe that when they need a transfusion, it will be available and safe. This has not always been the case. In 1969, when I began to transfuse patients, we had one test for transfusion safety, the test for syphilis. We suspected other diseases like hepatitis and malaria were transmitted by transfusion, but we had a limited understanding. Over the next 50 years, we experienced how contamination of blood products by known and emerging microbes leads to serious health issues. In 1981, HIV shattered the world of transfusion safety. It taught us that donor screening and testing are inherently reactive strategies. The 4-year lag before we had an HIV test after the first cases resulted in many transfusion-transmitted infections and deaths. It was a global pandemic crisis. It stimulated Cerus' development of a proactive, always-on pathogen inactivation technology to reduce the risk of transfusion infections that is today the INTERCEPT pathogen reduction platform. Over the past 15 years, it proved its efficacy in West Nile, chikungunya, Ebola, Zika, yellow fever and dengue virus epidemics. SARS-CoV-2 showed us how rapidly an emerging pathogen can go global. Fortunately, this virus was not transfusion-transmitted, but INTERCEPT inactivation of coronaviruses enabled production of INTERCEPT convalescent plasma with our blood center partners in Europe and the U.S. COVID-19 demonstrated how rapidly the INTERCEPT platform can be used to support an innovative therapy. We are continuing innovation with INTERCEPT products to treat massive hemorrhage and severe burns. Our pipeline of approved products for platelets and plasma sets a standard of care to drive growth. Our novel therapeutics, INTERCEPT fibrinogen complex and pathogen-reduced plasma that's cryoprecipitated reduced, recently received regulatory approval in the U.S. These products will drive substantial growth over the next few years. Longer-term growth will be driven by the complete INTERCEPT product portfolio. The whole blood FDA contract for new compound development offers novel product potential. The next-generation LED Illuminator will improve the overall efficiency of the INTERCEPT platform. The red blood cell product completes the INTERCEPT portfolio, and it unlocks the largest global addressable market for our technology. Post CE Mark, our initial RBC launch will focus on critical intensive therapy patients, and we expect market adoption to ramp as we continue to grow the body of evidence and increase automation capabilities. Progress with red cells continues today in both the U.S. and Europe. As mentioned on our Q1 call, the third module of our 4-part modular submission for CE Mark registration was submitted in April, and we are on track to submit the fourth and final module by the end of this month. In the U.S., enrollment for our Phase III ReCePI and RedeS studies continues and is ramping at an improved rate versus last year when COVID-19 slowed enrollment. In summary, our future is bright with opportunity in a field where we lead the science. Thank you for your attention. To close out today's presentation, I will turn it back to Obi for some closing comments around the road ahead for Cerus.

Thanks, Larry. We view 2021 as a pivotal year for Cerus, and we are excited about the road ahead. We are rapidly moving the U.S. platelet market to INTERCEPT and have our sights on becoming the standard of care in the near term. Additionally, with the launch of INTERCEPT fibrinogen complex and our JV in China, we're putting pieces together that we expect will drive durable top line growth well into the future. While our focus today is on you, our shareholders, we are committed to a wide range of goals and stakeholders as we grow. We believe our commitments to innovation, driving top line growth through commercial execution, our customers and the patients they serve are key pillars of success. We are also committed and fortunate to have a diverse team behind these efforts as we grow as an organization. We look forward to continuing to foster an open and inclusive workplace. Finally, as global citizens, we want to make sure our growth ambitions are achieved in a sustainable way. So before adjourning the meeting, I wanted to close today with our mission. Our focus on safeguarding the blood supply is a job we are very passionate about. In the age of pandemic preparedness and a steady stream of new infections like Zika, COVID-19 and others, we believe our always-on technology will play a key role in keeping blood products safe for customers and needs. As we march forward, we are finding ways to leverage the INTERCEPT technology to offer useful therapeutic products that will expand our reach into new markets to address unmet needs.

I will now address the questions that were submitted by our stockholders that are germane to this meeting.

The first question, Obi, is if you could provide an update on the red cell program and submission efforts in Europe.

Yes. Thanks, Matt. As Larry mentioned in his commentary, we have submitted the third module already this quarter and plan to submit the fourth and final module of the CE Mark in Q2. And subsequent to that, it will be handed over from TÜV, which is our notified body to the competent authority review, which is the Irish HPRA. That review is expected to take -- I think it's 210 days or so, but it can be extended. So with that kind of timing, we're still on track for a possible approval in the middle of 2022.

And Obi, I'm showing no questions.

Great. Well, it appears there's no additional questions. Thank you again for your attendance at today's meeting and for your continued support of Cerus.