Cytosorbents Corporation (CTSO) Earnings Call Transcript & Summary

Hi, everyone. Good morning. Welcome to the 2022 UBS Global Healthcare Conference. My name is Ben Bible, and really appreciate your time this morning. With us today to walk through the story is Phil Chan, CEO of CytoSorbents. Phil will take you through the story, and we'll do Q&A at the end. This is meant to be an interactive session. [Operator Instructions] Phil, thank you very much for making the trip today. The floor is yours.

Well, thank you very much, Ben. And thank you, and also UBS for this kind invitation to present here today. I'm excited to finally be in front of investors, not over Zoom, but actually in person, which is great. Today, I'd like to tell you about CytoSorbents NASDAQ-traded medical device company working to help treat life-threatening conditions in the ICU and cardiac surgery with our CytoSorb blood purification technology. I'm here today with my Chief Financial Officer, Kathy Bloch; and my Vice President of Investor Relations and Corporate Communications, Terri Anne Powers. As a publicly traded company, please let me remind you of our safe harbor statement for forward-looking statements. CytoSorbents is leading the prevention or treatment of life-threatening inflammation and other deadly conditions in the intensive care unit in cardiac surgery using CytoSorb blood purification. At a glance, CytoSorbents is a U.S.-based international medical device company, commercializing our EU-approved CytoSorb blood purification cartridge in more than 70 countries worldwide. We have $40.1 million in 2021 product sales, 80% product gross margins, $44.7 million in cash as of the end of the first quarter and more than 230 employees worldwide, roughly 60% here in the U.S. and 40% abroad. This year, we are celebrating actually 10 years of commercialization of CytoSorb with more than 170,000 cumulative devices utilized as of the end of the first quarter. And it has been used to treat cytokine storm and massive uncontrolled inflammation in a wide variety of life-threatening illnesses such as sepsis, COVID, shock, lung failure, pancreatitis and many others. But it's also been used to reduce other toxins, such as bilirubin in liver disease and myoglobin and trauma, and it's been used to remove blood thinners or antithrombotic drugs during cardiac surgery to try to reduce the risk of perioperative bleeding. We are partnered with some of the leading multinational corporations in the world, including Fresenius Medical Care, the largest dialysis company in the world; B. Braun, the third largest dialysis company in the world; Terumo Cardiovascular, one of the top 4 cardiac surgery companies in the world; and Biocon, the largest biopharmaceutical company in India. And we are now seeking dual U.S. FDA approvals for drug serve ATR, which is an equivalent polymer to CytoSorb to reduce perioperative bleeding during cardiac surgery by removing the leading blood thinners, Eliquis, Xarelto and Brilinta under FDA Breakthrough Device designation. We are currently -- have started the U.S. pivotal STAR-T and STAR-D randomized controlled trials that are both expected to complete in 2023 and are expected to support FDA marketing approval hopefully sometime in late 2023 or early 2024. And if we are able to obtain this should hopefully allow us to address a $1 billion total addressable market in the United States alone for the removal of blood thinners during urgent or emergent cardiothoracic surgery. Now we have used our own internal funds as well as funds from the government to the tune of $40 million in grants and contracts from the likes of DARPA, NIH, DoD and many other organizations to build out our pipeline of marketed products and products under development. On the left-hand side here, you can see our marketed products, which is CytoSorb. This is in 70 countries around the world where we'll be focusing on this today. But ECOS-300CY, which is a product for the ex vivo organ perfusion market for transplant, organ transplant. And then VetResQ, which is a product designed to help animals with critical illnesses. On the right-hand side, you can see a number of products that are under development with a particular focus on DrugSorb-ATR here in the United States for blood thinner removal. HemoDefend-BGA for the development of universal plasma and off-the-shelf plasma product that can be used regardless of blood type immediately on patients, for example, who suffer from trauma, for example, and then CytoSorb-XL, which is going to be a successor to CytoSorb. So what does CytoSorb do? And how does it work? So the CytoSorb absorber is based on a polymer technology that is a highly porous polymer bead that act like tiny sponges to remove harmful substances from blood. And here, you can see a cutaway of the device each device is filled with hundreds of thousands of these pores polymer beads roughly the size of a grain of salt. And on the right-hand side, you can see a schematic cutaway of the beads showing the porosity of these beads and the vast network of pores and channels in every single beam. The nice thing about our technology is that has massive surface area. In a single cartridge, we have 7 football fields of surface area on which to bind substances and toxins in the bloodstream. This is the subject of 21 issued U.S. patents and multiple patents issued and pending worldwide, and we manufacture not only the beads themselves from raw chemicals, but also do all the assembly of this device at our ISO 1345 certified facility in New Jersey. Now CytoSorb is fundamentally different from but complementary to dialysis technology. In that it can remove a broad range of dissimilar toxins that dialysis does not remove well. So CytoSorb works like the liver with some kidney function by the removal of large molecules and fat-soluble substances like cytokines, bacterial toxins, inflammatory mediators, liver toxins, proteins and peptides and fat-soluble drugs, whereas dialysis really works to replace the kidney removing small molecules and water-soluble substances like urea and metabolic waste products, electrolytes, water and also water-soluble drugs. Now the nice thing about CytoSorb is that it is plug-and-play with the existing blood pump machinery in a hospital today. And whether or not it's a dialysis or CRRT pump in the intensive care unit, continuous renal replacement therapy pump, whether or not it's an ECMO machine, extracorporeal membrane oxygenation machine that has been used to salvage thousands of COVID-19 patients who have failed mechanical ventilation and who would have otherwise died. It can be used in a stand-alone hemoperfusion pump that I'll be talking about in a moment, but also intraoperatively with a heart-lung machine called the cardiopulmonary bypass machine, as you can see here. CytoSorb targets deadly conditions that afflict millions of people. And this is one of the reasons why we believe that we are in the right place with the right time to help patients in great unmet medical need. Areas that we focus on, as I mentioned, are critical care. And this is where CytoSorb is removing the fuel to the fire of massive uncontrolled inflammation that is often associated with organ failure and death. These are in diseases like sepsis, influenza COVID, lung injury, trauma, complications of surgery, earn injury, cytokine release syndrome in CAR-T cell immunotherapy in other cancer immunotherapies, liver failure, pancreatitis and many, many other illnesses. But we also have a play in cardiothoracic surgery, where we are reducing inflammation in blood thinners targeting the reduction of complications of cardiac surgery such as life-threatening infection and sepsis bleeding, shock and many other complications. So here, you can just see some of them removal blood thinners, for example, treatment of patients who have infective endocarditis, infected heart valves and patients who are undergoing high-risk surgical procedures. Now we are riding many macro trends in health care. First of all, first and foremost, we are targeting mainly an aging population that is just getting older. Currently, today, there are over 1 billion people in the world over the age of 60. And in 25 to 30 years, that number will increase by 50%. These elderly patients are very prone to getting life-threading infection and sepsis from pneumonia, urinary tract infections, intraabdominal infections like a gall bladder infection, but also influenza and COVID, for example. But they're also hosted many other different problems, right? So structural heart disease, like valvular disease heart attacks, right, and myocardial and blocked coronary arteries. Trauma is a big one, right? And this is one where they fall down and break bones and damage muscles severely. Complications of surgery, organ transplant, as we talked about before and also complications of cancer immunotherapy as a treatment of cancer. Another application that -- another macro trend is the use of blood thinners. Surprisingly, millions of people worldwide are on blood dinners. In fact, 1 or 2 of you in this room may actually be on blood dinners as well because they are used as a mainstay treatment for the reduction in stroke and heart attack risk by thinning the blood. For example, patients with atrial fibrillation, right, which is very common amongst the elderly are now on lifelong therapy on Eliquis or Xarelto. That's why Xarelto why Eliquis is one of the top 10 pharmaceuticals in the world, and Xarelto not far behind it. But also Brilinta, which we'll talk about as well used in acute coronary syndrome or heart attack patients. Another major area is chronic liver disease. Surprisingly, chronic liver disease afflicts 1 in 11 people worldwide because of hepatitis because of alcoholism and because of obesity causing fatty liver. And this winds up causing fatty liver, fibrotic liver disease, cirrhotic liver, ultimately, often ending in hepatic carcinoma, hepatocellular carcinoma. And these are patients that we can help stabilize as they progress through their illness when they have acute exacerbations. And then another area is the area of the opioid crisis. As we all know, this is a big problem in the United States. People are shooting themselves up with dirty needles, injecting bacteria into their bloodstream that colonizes heart valves that ultimately leads to endocarditis. And this is a big problem where CytoSorb is being used to help stabilize them intraoperatively as well as postoperatively as well. So what is the company's business model and financial performance? So CytoSorbents has a strong hybrid sales model, again, where we sell in more than 70 countries around the world and have to date, utilized more than 170,000 devices across the markets worldwide in critical care and cardiac surgery. On one hand, we sell direct in 15 -- in 12 countries, including Germany, Austria, Switzerland, Belgium, Poland, the Netherlands, Denmark, Norway, Sweden, Luxembourg and most recently, the U.K. and in Ireland. And then we sell through distributors and strategic partners in more than 60 countries around the world, pretty much everywhere with the exception really of the continent of Africa. We're in some countries there like South Africa and also we're in many countries in Asia, but not yet in China and Japan. By market, roughly 2/3 of our business comes from critical care with roughly half of all of our business coming from sepsis. But 1/3 of our business currently comes from cardiac surgery and many different applications that we talked about before. And by geography, Germany currently accounts for roughly half of our business. Other direct countries account for 15% of our business. And last year, distributors and partners accounted for about 1/3 of our overall business. Now CytoSorb is a high-margin razor blade. As I mentioned to you, 80% product gross margins last year and in the first quarter of this year. So it is compatible with the razor blood pumps, as I mentioned before, found in hospitals today, high gross margins and the average direct selling price is about $1,000 a cartridge. You typically use 1 to 5 cartridges depending on the disease you're trying to treat. So someone in cardiac surgery, for example, might use 1 or 2 cartridges soon with life-threatening sepsis would use maybe 3 to 5 cartridges. Someone with COVID on ECMO might use 5 cartridges or more. And so in Germany, using Germany as a microcosm of the world. Germany has about 2,000 acute care hospitals, 400 of which are the size of like a Cornell weill or NewYork-Presbyterian or NYU Bellevue, for example. And each of these hospitals typically see 10% to 20% of their patient volume as sepsis. They either have sepsis when they get admitted or they develop sepsis while they're in ICU. So at 3 to 5 cartridges per patient, that's a revenue per patient of $3,000 to $5,000, putting a potential revenue per hospital at $1 million to $3 million for sepsis alone for one hospital, right? We've previously disclosed that we have one German hospital that already has sales of more than $1 million, broadly adopting the use of CytoSorb -- I apologize, broadly adopting the use of CytoSorb in critical care and cardiac surgery, helping to validate this revenue model and other hospitals are tracking along the same path, giving us visibility on future growth. Now this slide shows annual product sales and blended gross margins over time. And you can see that our growth has been quite predictable over time. Certainly, there was a major boost with COVID in 2020 and 2021. But as you can see here, a nice overall growth in product gross margins that have been expanding over time. This slide shows the contribution in the last couple of years of COVID versus what we call core sales. So blue in blue are our core non-COVID sales, our everyday business that we have in the ICU in cardiac surgery. But you can see that in 2020, we had $9.4 million in sales related to COVID. And as COVID severity waned and as more people got vaccinated. Naturally, the use of CytoSorb was less and that -- and our sales were less in 2021, but our core sales continued to grow $33.8 million, which was 13% over 2020. Sorry, it's not advancing. There we go. However, recent results reflect the impact of COVID. And on the upper left-hand side, you can see core sales versus COVID sales on a quarterly basis. And what -- and on the right-hand side, you can see in our major market of Germany, the high rates unprecedented rates of COVID, right, which had an impact on 50 -- roughly 50% of our sales. So the macro environment has been challenging in Europe and Germany. Core business has been stable on a constant currency basis, but Germany has been impacted by high rates of COVID, which has led to lower sales because COVID patients aren't as sick. You've seen the mortality go from roughly 1% to 15% at the beginning of the pandemic, not a 0.1%, right, which is more akin to what people have for seasonal influenza. And -- but yet the high rates of COVID caused a lot of hospitals to institute restrictions, resulting in limited elective surgeries. We saw staffing shortages across the board which resulted in lower ICU capacity and also led to restrictions of our sales people getting into hospitals and being able to sell. We also see an impact of Ukraine and the Russian war, which we expect to have less than a 4% impact on our sales overall, though, and also inflation in currency exchange volatility. However, we do anticipate that sales conditions to improve throughout the year. And as COVID likely burn itself -- burns itself out this year due to high rates of vaccination and natural immunity to become more like seasonal influenza. Core sales are expected to return to growth on a constant currency basis. So what are the catalysts for growth? So in 2022, we are well capitalized with $44.7 million in cash, and we'll continue investing selectively on priority programs. while taking proactive measures to significantly reduce our cash burn to end 2022 with more than $30 million in cash with the flexibility to add debt if needed. We have a $15 million term loan with Bridge Bank. Meanwhile, we are laser-focused on the following key objectives. First of all, open -- we are opening the U.S. market by obtaining FDA marketing approval for drugs were ATR to remove blood thinning drugs during cardiothoracic surgery through the STAR-T and STAR-D trials, if successful. Second, we are looking to restore growth of our core CytoSorb sales. Third, we are transitioning CytoSorb production to our new manufacturing facility and headquarters in Princeton, New Jersey this year. And fourth, we are forging and expanding new and existing strategic partnerships to maximize the synergy between our technology and those of our partners while creating new opportunities for growth. So the first milestone is to open the U.S. market by targeting FDA marketing approval via our STAR-T and STAR-D trials. So start -- so let's talk a little bit about the blood thinner market. CytoSorb has received EU approval. We already have EU approval for CytoSorb in the EU market to remove the 2 well-known blockbuster blood thinners, ticagrelor and rivaroxaban, again, use the millions of people around the world to reduce the risk of stroke and heart attack. Ticagrelor is used mainly in heart attack patients, rivaroxaban is used in patients with a history of heart attack or stroke or a history of history of atrial fibrillation. The problem is that patients that ultimately need to go into emergent or urgent cardiothoracic surgery for whatever reason. They don't have time to wash out the drug and stop taking the drug. They have to go into surgery right away. They are prone to bleeding and bleeding very badly with these blood thinners on board. The nice thing about CytoSorb is that it installs easily into a heart-lung machine, right? So while the operation is ongoing, the device is actually removing the blood thinner from the bloodstream, thereby reducing the risk of bleeding in these patients. And that's one of the reasons why we got EU approval for this. Very simple and straightforward approach, very easy to implement for the perfusionist. We believe CytoSorb can quickly become a cost-effective standard of care to prevent bleeding due to these blood thinning drugs and how of having a heart attack. You will immediately get loaded on to dual anti-platelet therapy, which is aspirin plus a super aspirin like Brilinta, right? They'll rush you to the cath lab, right? And 90% of patients will get a stent or some type of intervention. But 5% to 10% of patients will not be eligible for a stent and we'll need revascularization through CABG, coronary artery bypass graft surgery. Now these patients need to go to surgery. And if they go to surgery, within 1 to 5 days of getting loaded on that drug in the emergency room, they will have a very high risk of bleeding. These data are actually from the PLATO trial, which was the registration trial by AstraZeneca for Brilinta. And here, you're seeing in black ticagrelor in hatched Plavix, right, which is a competitor of it. And on the x-axis, you can see days from loading of the drug, 1, 2, 3 or 4 days. And you can see what the bleeding risk is if you have to go to surgery within 1 day of getting loaded on this drug, you have a 65% chance of having a major fatal or life-threatening CABG-related bleed, right? That's huge, right? And even if you wait 4 days, it's still almost 50%. And it only drops after 5 days, but you're still patient 1/3 of patients will have a major or life-threatening bleed. That is very high. So the next slide shows a seminal study done in Germany, one of the oldest cardiac surgery hospitals in Germany. And this was a retrospective study, looking at patients on CytoSorb during on these blood dinners, specifically ticagrelor or Brilinta and Xarelto. On the left-hand side, Brilinta on the right-hand side, Xarelto. And what you see is with or without CytoSorb intraoperatively. What are the bleeding complications. And what you can see here is on the left-hand side, in blue, is with CytoSorb black is without CytoSorb or that the procedure duration is 80 minutes less using CytoSorb because they're spending less time trying to achieve hemostasis. They're not -- these patients are not using. Second thing is that they believe less, and that's measured by the need for blood transfusions, far fewer patients required red cell or platelet transfusions, then patients that did not get CytoSorb. Chest tube drainage, which is a tube that sticks out of the chest, hooked up to suction wall suction in the days after an open heart surgery that is designed to drain fluid from the chest cavity. In the first day, it's typically bloody drainage, right? And it's a direct measure of bleeding. And you can see here that the bleeding chest drainage in the first 24 hours was much less 350 mLs versus almost 900 mLs without CytoSorb. And that led to fewer patients requiring needing to go back to surgery, right? Can you imagine a cardiac surgeon who has operated on a patient on these blood dinners. And day 3, they're still losing blood. And surgeon is asking themselves, did I nick something? Or is it the drug, but they often can't wait, so they often take them back to surgery, right? So with CytoSorb, they didn't have to take anyone back to surgery, whereas 1/3 of patients had to go back to surgery without CytoSorb. And that led to fewer days in the intensive care unit and a lower total length of stay. And you can imagine having to go back to surgery for a second time, where they -- first time they bound your chest, closed your chest with wire and now they have to undo that whole thing and do it all over again. That's a mess. No one wants that. Patient risk, doctor's time, hospitals cost and time. And on the right-hand side, you can see very similar results with Xarelto. And when health care economists, who advised NICE in the U.K. analyze these data, they said, even with the cost of the device, the U.K. health system would still save $5,000 converted into dollars. $5,000, if they use CytoSorb intraoperatively on these patients, right? And we think that in the United States, the cost will be even higher. So we are targeting U.S. FDA marketing approval with a product not called CytoSorb, but called DrugSorb-ATR that again uses a similar polymer technology to CytoSorb. And we are seeking the removal of Brilinta on one hand and also the direct oral anticoagulant Xarelto and Eliquis, on the other hand. We were awarded 2 FDA breakthrough device designation for this application, which puts us on a fast track to get this product pushed through the FDA because it is given to devices that address major unmet clinical needs. And in 2021, we began dual pivotal U.S. randomized controlled trials called the STAR-T trial, the C and timely removal of antithrombotic agents. In the first case, ticagrelor STAR-T and STAR-D for the direct oral anticoagulant Xarelto and Eliquis, each designed separately to support U.S. FDA marketing approval of drugs ATR. Each of these trials is expected to enroll only 120 patients across 30 centers. The primary endpoint is a reduction in perioperative bleeding versus standard of care alone. STAR-T is expected to achieve its first milestone of 40 patients this summer, at which point it will trigger the first data safety monitoring board analysis, and complete enrollment by March 2023 or 1st quarter of next year, and STAR-D is roughly 6 months behind. FDA marketing approval submission is expected within 3 to 6 months after completing enrollment. And if successful, we seek to establish drug serve ATR as a new global standard to reduce a broad range of blood thinners, a one-stop shop, if you will, during cardiothoracic surgery. Now when you look at the addressable market, it's a big market. Today, right away, if we got STAR-T was successful for removal of Brilinta or ticagrelor, that will result in what we believe would be a $250 million total addressable market initially. And as it would gain market share and as it comes off patent, it could grow to $500 million in a total market opportunity. And that could double with the addition of being able to remove Eliquis and Xarelto. It's a $1 billion total addressable market. And if we can port this over to all surgeries, not just cardiac surgery, but orthopedic surgery, neurosurgery and others, it could grow the market to twice that. So the second goal of ours is to resume CytoSorb sales. So I'm only going to highlight a couple of initiatives that we have. But this first one is essentially akin to a national account strategy. right? In the United States, if you want to get into Kaiser or HCA, for example, big hospital chains, you have to deal directly with the mother ship, for example. And that's exactly what we're doing in Germany, our major market, right? And you can see here the traction that we're getting in cumulative accounts this year alone, we've grown accounts from last year 62 that had preferred supplier agreements to now 108 this year alone. And what we announced last quarter is actually a big deal for us. We recently announced a new 3-year preferred supply agreement with one of the largest private hospital networks called Asklepios in Germany that has facilities across 14 states, including 70 acute care facilities, where we're only in 10 of them today. CytoSorbents now has preferred supply agreements with 3 of the largest hospital -- private hospital networks, including Helios -- Fresenius Helios and others. That opens up potentially 298 hospitals in those 3 groups alone. Second major initiative to increase sales is that we realigned our sales around 3 major verticals: critical care, cardiac surgery and liver and kidney, with dedicated resources and special knowledge in each of those groups to really drive this business across these 3 therapy areas. To give you an example of how this is working. On the right-hand side, upper right-hand corner, you see there are more than 80 heart centers in Germany. Because of our active outreach and our active sales efforts, we are now in the vast majority of these 80-plus accounts now. in Germany. It is being used widely in endocarditis. It is being used with ECMO and heart transplant. And it is also being used now for blood thinner removal. 50 centers are now using it in Germany for blood thinner removal. We just got approval of this in 2020. And on this graph below, you can see that since we did get this approval globally, we have now opened up more than 150 accounts that have now adopted the use of our therapy to remove blood dinners, anti-thrombotic agents during cardiothoracic surgery. Third major goal of ours is to transition to the new manufacturing facility. Our current manufacturing facility has roughly $80 million in capacity in terms of being able to support sales. But our new manufacturing facility based out of Princeton, New Jersey, has the ability to support $350 million to $400 million in sales, which is 5x our current rate. And it's expected because of volume manufacturing to be able to grow our already good product gross margins that are 80% to greater than 85%. And that's on a blended basis. That's mixing higher margin direct sales, lower margin distributor and partner sales 80%. Capital expenditures to build out this facility were relatively modest, less than $10 million, which is an excellent. And we've now completed construction with all equipment placed in qualified and have completed a favorable audit by our EU notified body and expect final certification in the next several months with the goal to begin manufacturing of CytoSorb in the second half of this year. This is just a -- sorry, I'm a little behind here. This is an exterior view of our Princeton facility, first look of part of the manufacturing plant. This is some of the communal areas, and this is some of the lab areas as well. Lastly, our goal is to create more partnerships, both expand existing ones and create new ones. Now one of the major initiatives that we have that is partner related, is to actually drive our stand-alone pump initiative, right? As I mentioned to you, this product is pump is plug-and-play compatible with the existing blood pumps in a hospital today. However, there are limited supply in hospitals. Only about 10% of patients require dialysis in the ICU, but these are big machines that require dialysis technician to run them. We believe that CytoSorb using -- we know that CytoSorb can be used with a simple blood pump, hemoperfusion machine, very small, very easy to use, low cost doesn't require train dialysis technician, and allows the rapid initiation of CytoSorb treatment without the patient needing to be in kidney failure. We believe this may help to reduce a treatment bottleneck at a number of centers due to the lack of machines and the lack of trained personnel and really help to drive this application. And we also believe that the simplicity of use could open up new applications, not just in the ICU but in the emergency room and surgery suites and many others. And this may ultimately help accelerate the adoption and use of CytoSorb to fuel future growth. So we have now launched a pilot hemoperfusion program. Cytosorbents importantly has executed an agreement with a major multinational blood purification machine provider to provide a hemoperfusion state-of-the-art chemo perfusion machine and accessories. CytoSorb has the ability to resell this equipment to customers. And while it's still in the early stages, initial results from this pilot have been promising. Our next steps are to continue to evaluate and refine the program to scale the business model more broadly beyond the pilot of 3 countries where it's currently in Germany, Austria and Luxembourg today to more countries, helping to hopefully drive the adoption of CytoSorb worldwide. So in summary, CytoSorbents has the potential to become a highly profitable performer in the therapeutic space with superior operating margins. We have a high-margin razor blade business model with excellent operating leverage and a solid track record of ex U.S. growth. We have a strong foundation and are well funded for potential future growth. with new existing clinical applications that address major unmet medical needs and we ride major trends in health care. We have extensive validation from physicians around the world, leading strategic partner with leading strategic partners, U.S. government agencies in the media. And we are really focused on key milestones that are expected to drive our current and future success, including U.S. FDA marketing approval with the success of the STAR-T and STAR-D trials. Return to sales growth of CytoSorb as COVID fades open our new manufacturing facility to increase capacity and gross margins; and finally, new partnerships and expansion of existing ones. With that, let me thank you very much. And Ben, I apologize for leaving so a little time for questions, but happy to take some time to do that.

Sure. Phil, thank you very much for the presentation. It's a fantastic story. [Operator Instructions] And I know we only have a few minutes left, so I will be quite efficient. I guess on the commercialization side, Phil, Germany has been a huge success. And I know you've mentioned going direct in the U.K. Is your plan to go direct in all major markets across Europe. And then ultimately, when you think of the U.S., have you guys started to formulate a strategy about how to tap the U.S. market post approval?

Yes. So I think that the U.K. was our next step into the major markets in Europe. We're in pretty much every country in the European Union today. When we go through distributors in France as well as Italy as well as Spain. And currently, those partners are doing well. So while things are going good, we're focusing our attention elsewhere to fixed markets that are in need that aren't being developed, the way that we see it, being necessary to develop them. In the United States, we believe that we will go direct actually in the United States because we have actually a lot of experience doing so. The United States for blood thinner removal is really focused on major metropolitan centers where we can target that easily with the direct sales force. But we also plan to add in a little bit of a hybrid approach with distributors in places where we can't reach easily and where our partners have an established network. And we actually did that in COVID under the FDA emergency authorization to be able to get our products out there. But we believe we have the right product, right, that is working. We have new leadership on the sales side in Europe, led by Vince Capponi, our Chief Operating Officer, and Jim Komsa, a veteran from VP from Medtronic and cardiac surgery who will now lead our U.S. operations. And so lots of good things to come.

Great. Maybe one more for me, but on the macro side. Obviously, everybody reads a lot about inflation and supply chains and staffing shortages. I guess, how is it affecting CytoSorbents. And then what are you doing to mitigate those challenges?

Yes. I mean inflation, as we all know, the CPI, I think, hit 8% in April and it's been challenging, right? So one of the major areas that we see an impact on our business is wage inflation. The market out there for people is very tight. We're often seeing 20%, 30% premiums over former salaries. We've had to increase the salaries of our existing staff to be able to remain competitive and prevent people from poaching our own people, for example, from a supply chain perspective. Fortunately, a lot of our materials are dual sourced from the United States. But we are a chemicals-based company after all and with the rising of oil that has the potential to impact us. But the nice thing about it is that we control our manufacturing with our manufacturing facility. We've been able to drive up our product gross margin to 80% without having to raise ASPs, right? And by going to the new manufacturing facility, we believe we can help to offset the rising cost of goods with greater manufacturing efficiency.

That's great. And I recognize we're out of time. So thank you very much, audience. And Phil, thank you for the time today and really educating us on the story and taking us through it.

Thank you so much.