Full Press Release Details
CytoSorbents Corporation (NASDAQ: CTSO)
2015 Earnings and Operating Results
March 9, 2016 @ 4:45 pm Eastern
This official company transcript has
been edited for clarity and does not differ materially in content from the actual conference call except where noted. Slide numbers
have been inserted to allow readers to follow along with the associated presentation.
Good day, everyone and welcome to the
CytoSorbents 2015 Financial and Operating Results Conference Call. If you have a question during today's call, please press
the star key followed by the digit one on your touchtone phone and be sure your mute button is turned off to allow your signal
to reach our equipment. Today's call is being recorded. At this time, I'd like to turn the conference over to our
moderator, Lee Roth. Please go ahead.
Lee Roth - Moderator:
Thank you and good afternoon. Welcome to
CytoSorbents 2015 Operating and Financial Results Conference Call. Joining me today from the company are:
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 filings with the SEC. Any projections as to the Company's future performance
represented by management include estimates today as of March 9, 2016 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 financial and operating highlights for 2015 by Dr. Chan and Ms. Bloch. 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. Phillip Chan. Dr. Chan, go ahead, please.
Thank you very much, Lee, and welcome everyone
to the call this afternoon. We encourage all new investors to review our earnings release this afternoon and the investor presentation
on our website, which provides detailed background information about the Company. After a relatively short presentation, we will
open up to a live Q&A session. An official transcript of today's call will be available in the next week on our website
CytoSorbents is a leader in critical care
immunotherapy. We are leading the prevention or treatment of life-threatening inflammation in the ICU and cardiac surgery using
CytoSorb blood purification. CytoSorb removes the fuel to the fire of inflammation and targets the more than $20 billion
opportunity in critical care and in cardiac surgery. It is the only specifically approved extracorporeal cytokine filter in the
European Union and is clinically proven to remove key cytokines in the blood of critically-ill patients. It has a very broad indication
for use and is approved for use in any situation where cytokines are elevated. It works with standard dialysis and continuous renal
replacement therapy (CRRT) machines as well as heart lung machines that are found in hospitals today and is a plug-and-play cartridge.
CytoSorb also removes many other inflammatory mediators such as free hemoglobin, bacterial toxins, bilirubin, myoglobin, complement
and other factors that are driving an uncontrolled inflammatory response.
CytoSorb has been safe and well-tolerated
in more than 10,000 human treatments. And the goal of CytoSorb is to control the deadly inflammatory response in an effort
to try to prevent or treat organ failure, which is the leading cause of death in the intensive care unit today. In doing so, we
hope to be able to improve patient outcomes and survival, while decreasing the cost of ICU and patient care. We believe CytoSorb
is a very unique product that has the potential to revolutionize the treatment of many life-threatening illnesses seen in the intensive
care unit today, such as sepsis, ARDS, burn injury, trauma, pancreatitis, influenza, cytokine release syndrome in cancer immunotherapy,
and complications of cardiac surgery.
With that, let me turn it over to Kathy
Bloch to go over some of our operating and financial highlights, Kathy?
Thank you Phil, and good afternoon everyone.
For today's call, I will be providing an update regarding CytoSorbents 2015 financial results including product sales and
also an update around our working capital and cash runway. But before I go into these details, I would just like to say that we
had a really solid year from a financial standpoint, which concluded with ringing the NASDAQ opening bell to celebrate our one
year anniversary of being on the NASDAQ exchange.
We are also now classified as an accelerated
filer by the SEC. Today, we filed our annual report on Form 10-K. for the year ended December 31, 2015 in advance of the filing
deadline required for accelerated filers, which is March 15th.
Also, as required by the Sarbanes-Oxley
Act, and our annual financial audit for 2015, we have had our system of internal controls audited. I'm pleased to report
that our auditors have given their opinion that we have maintained, in all material respects, effective internal controls over
financial reporting. This should give our shareholders assurance regarding the reliability of our financial information and reports.
So with that, let us look at our year-over-year
CytoSorb product sales for the year
ended December 31, 2015 were approximately $4 million, which is a 29% increase over our product sales for the year ended December
31, 2014 of approximately $3.1 million. 2015 product sales were negatively impacted by approximately $637,000 as a result of the
declining exchange rate for the euro. In other words, if the Euro would have remained unchanged from 2014, 2015 product sales would
have been approximately $4.7 million, which is an increase of 49% over 2014 product sales.
Our grant revenue for 2015 was approximately
$748,000 as compared to approximately $987,000 in 2014.
We continue to experience strong gross
profit margins on product sales. Gross profit margins were approximately 64% for the fourth quarter of 2015 and approximately 62%
for the year ended December 31, 2015.
I want to turn to our fourth quarter 2015
product sales chart. Our product sales were $1.5 million, our best quarterly revenue ever. This is an increase of approximately
$624,000, or 72% over the fourth quarter 2014 product revenue, which was approximately $871,000.
This chart shows the Euro adjusted quarterly
sales of the company since we began commercialization of our product. The dark blue portion added to the top of the 2015 quarterly
bars adjust the sales for the four quarters of 2015, as if the Euro to dollar exchange rate was unchanged from the same period
in 2014. Our Euro-adjusted sales for the fourth quarter of 2015 were approximately $1.7 million or an annual run rate of approximately
$7 million. And we are seeing steady quarter-over-quarter improvements in direct sales both as a result of new customers, but also
from repeat orders from existing customers.
As we have said, we believe we are just
scratching the surface of our revenue potential and anticipate that revenues should continue to climb as direct sales continue
to grow, as existing distributors complete product registrations and generate repeat sales, and as additional distributors and/or
strategic partners come onboard in new regions. Furthermore, as we continue to develop clinical data from our registry, our investigator
initiated studies, and our FDA trial; we believe we will be able to accelerate acceptance and adoption of CytoSorb in the
Finally, I would just like to provide some
notes on our working capital position and cash runway. As of December 31, 2015, we had approximately $7.5 million in cash and short-term
investments. In addition, in January 2016, we received another $325,000 in funding from the sale of our NOLs through the New Jersey
Technology Business Tax Certificate Transfer Program. We believe that we have sufficient cash to fund our operations through 2016.
Now as we build sales and drive our operations
towards breakeven, helped by a highly profitable product with blended gross margins of 62% or better, we are exploring a number
of different funding sources in order to fund clinical activity that is intended to help drive CytoSorb as standard of care
and achieve United States regulatory approval. Consistent with our past history and overall philosophy, we look to do so in a financially
responsible way with the goal of limiting shareholder dilution.
As we have previously announced, our existing
$100 million shelf-registration gives us tremendous flexibility to raise capital under a wide range of financing options. We believe
that amount is in vast excess of what we will require. Of this, we have a $25 million controlled equity offering sales agreement
in place with Cantor Fitzgerald. During the fourth quarter of 2015, we raised approximately $225,000 in net proceeds at an average