Full Press Release Details
Corporation (NASDAQ: CTSO)
2016 Earnings and Operating
Results Conference Call
3, 2017 @ 11am 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
day everyone and welcome to the CytoSorbents Fiscal 2016 Financial and Operating Results Conference Call. Today's call is being
recorded. And at this time I'd like to turn the conference over to our moderator, Amy Phillips, Please go ahead.
Amy Phillips - Moderator:
Thank you and good morning. Welcome to
CytoSorbents 2016 Financial and Operating 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 3, 2017, 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 2016 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 Amy. Good morning and
welcome everyone to the call.
CytoSorbents is a leader in critical care
immunotherapy. When we talk about immunotherapy, we are talking about manipulating the immune response to fight illness.
There are more than $100 billion in sales
of immunotherapy products on the market today, ranging from things that are designed to stimulate an underactive immune response
such as vaccines and cancer immunotherapies, including CAR T-cell immunotherapies, for example. And at the other end of the spectrum,
they also include things that are designed to try to quell an overactive immune response such as drugs and biologics that help
treat diseases like asthma, allergy, anaphylaxis, as well as autoimmune diseases. But where there is a major unmet medical need
today in modern medicine, is in the treatment of life-threatening massive inflammation seen in the intensive care unit (ICU) and
this is exactly where CytoSorb and our company are well positioned. We are leading the prevention or treatment of life threatening
inflammation in the ICU and cardiac surgery using our CytoSorb blood purification technology.
It is an unfortunate fact that millions
of people die every year of uncontrolled deadly inflammation from life-threatening illnesses such as sepsis, which is the overzealous
immune response to a life-threatening infection and is one of the top ten killers around the world afflicting 30 million people
and killing approximately 10 million of them each year. It also includes many other diseases and conditions such as trauma, burn
injury, cytokine release syndrome due to cancer immunotherapies, liver failure, surgical complications, pancreatitis, lung injury,
complications of influenza, and many other illnesses where inflammation plays a detrimental role. And this is what CytoSorb was
designed to address. CytoSorb removes the fuel to the fire of inflammation and targets a $20 billion opportunity in critical care
and cardiac surgery. It is the only specifically approved product in the European Union to reduce cytokines and it is approved
for use in any situation where cytokines are elevated.
CytoSorb is particularly good at removing
a broad range of inflammatory mediators, not just cytokines, including things like free hemoglobin, bacterial toxins, myoglobin,
and activated complement, for example. And very important to our business model is that we are a plug-and play cartridge that works
with standard dialysis and heart-lung machines found in most hospitals and operating rooms today. So far, CytoSorb has been safe
and well-tolerated in more than 20,000 human treatments, which is up from 9,000 a year ago, and our goal is to try to control this
deadly inflammation as a way to prevent or treat organ failure; and in doing so improve patient outcomes and survival, while decreasing
the crushing costs of ICU care. In more than 20,000 human treatments that have been performed so far, this has been one of the
things that we have been seeing. Because of this, we believe that we are standing at the edge of a potential true revolution in
critical care medicine.
So, with that, I'd like to turn it over
to Kathy to discuss the financial highlights for the fourth quarter and full fiscal 2016 year. Kathy?
Kathleen Bloch - CFO:
Thank you, Phil and good morning everyone.
For today's call I will be providing an update regarding CytoSorbents' December 31, 2016 financial results including our
product sales progress and an update around our working capital and cash runway.
Turning to our annual financial results,
CytoSorbents product sales for the year ended 2016 were $8.2 million, an increase of 103% over 2015 product sales of approximately
$4 million. Grant and other income grew 77% from $748,000 in 2015 to $1.3 million in 2016, and our total revenues, which includes
product sales and grant income, increased by 99% to $9.5 million for the year 2016 as compared to $4.8 million for 2015.
Now we'll take a look at our quarter-over-quarter
product sales. Our fourth quarter 2016 product sales of approximately $2.6 million represents our best quarterly product sales
ever. This was an increase of 22% over the previous quarter and is in fact our seventh consecutive period for which we have reported
quarter-over-quarter product sales growth. It is also our sixth consecutive quarter of record sales. And with $2.6 million in quarterly
product sales, our annual run rate at the end of 2016 now exceeds $10 million.
With regard to our annual product sales
growth, we remain very pleased with the overall trajectory we are experiencing. Our compound annual growth rate, CAGR, was 115%
over the last three years. I also want to note that the drop in the Euro in late 2014 had a dampening effect on our 2015 and 2016
reported product sales. If the dollar to euro exchange rate had remained unchanged from 2014 when it was approximately $1.329 to
1, our 2016 reported sales in dollars would have been approximately $9.7 million, and the three year CAGR would have been
For the past two years, we have guided
that sales of CytoSorb in Germany represented more than half of our product sales. With our 2016 annual report on Form 10-K; for
the first time, we are presenting a breakdown of our revenues in Germany and then the rest of our territories. Germany's product
sales were $545,000 in 2013, our first full year of commercialization. In 2014 direct sales increased by $860,000 [to $1.4 million];
then in 2015 direct sales increased by $948,000 [to $2.4 million]. In 2016, direct sales in Germany more than doubled, increasing
by $2.6 million or 112% [to a total of $5.0 million]. And you can see from this chart a clear inflection upward in Germany's product
sales that occurred in 2016.
This is because in Germany we've established
strong key opinion leader support, we've received recognition and support from the major-medical societies, we have established
reimbursement, and we have a strong sales and marketing presence. Germany is the market that we've been in the longest and we believe
it provides a prototype as to how we might expect our other territories to develop overtime.
And next, we present a summary of our worldwide
sales where we've layered CytoSorb product sales in the countries outside of Germany - that is the orange area on this chart on
top of the sales in Germany in blue. Of the 37 countries where we currently have distributors or partners, only about a dozen have
been actively commercializing CytoSorb in their territories for two years or longer. These non-German markets in general remain
in the early stages of development. As we have seen in Germany, we experienced modest increases in sales in the early years of
commercialization, and then sales accelerate with more time in the market.
Outside of Germany 2016 sales, sales in
the territories outside of Germany were $3.2 million, which is an increase of $1.5 million or 91% over the prior year. So, while
these other territories are not as mature as Germany, we expect that over time these other territories should develop similar growth
patterns with sales acceleration that we have seen in Germany. As we develop these existing markets, remember we are continuing
to add new distribution in new countries.
Let's look at the world map and here we've
highlighted the 42 countries where we are selling direct or through distributors. And I would just like to mention a few significant
drivers of sales for 2017. First, effective January 1, 2017, we've received a dedicated reimbursement code for CytoSorb in Germany.