Cytosorbents Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2024

There are 12 speakers on the call.

Operator

Great. Thank you.

Speaker 1

Ladies and gentlemen, good afternoon and welcome to the CytoSorbents Second Quarter 2024 Financial and Operating Results Conference Call. At this time, all participants are in a listen only mode. Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the company's request. At this time, I'd like to turn the call over to our moderator, Eric Rivner.

Speaker 1

Please go ahead, Mr. Rivner.

Speaker 2

Thank you, and good afternoon. Welcome to CytoSorbents' Q2 2024 Financial and Operating Results Conference Call. Joining me today from the company are Doctor. Phil Chan, Chief Executive Officer Vincent Capponi, President and Chief Operating Officer Kathleen Bloch, Chief Financial Officer Doctor. Micas De Lageris, Chief Medical Officer Doctor.

Speaker 2

Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of CytoSorbents Europe and Christopher Kramer, Senior Vice President of Business Development. Before I turn the call over to Doctor. 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.

Speaker 2

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 August 13, 2024, 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 Q1 of 2024 by Doctor. Chan, Ms. Bloch, Mr.

Speaker 2

Capote and Doctor. Delagiris. Following the presentation, we will open the line to your questions during the live Q and A session with the rest of the management team. And now it's my pleasure to turn the call over to Doctor. Philip Chan.

Operator

Well, thank you very much, Eric, and good afternoon, everyone, to the Q2 2024 earnings call. First, I'd like to go over our operating highlights for the quarter. First, more than a quarter 1000000 CytoSorb devices have been cumulatively delivered to date, helping to save many lives around the world. 2nd, in the Q2, total revenue increased 5 percent to $9,900,000 while product sales increased by 10% to $8,800,000 and gross product margins were solid 75%. Importantly, our 2nd quarter operating loss decreased 48% to $3,400,000 from $6,600,000 a year ago.

Operator

Following our $10,300,000 equity raise in December 2023, we secured an additional $20,000,000 credit facility with Avenue Capital Group, strengthening our balance sheet. And following the quarter, we completed additional cutbacks, expected to save an additional annualized $5,000,000 in expenses going forward. Over the past 5 months, we have decreased our workforce by 17%. Finally, our cash balance at the end of the second quarter was $14,900,000 including $8,500,000 in unrestricted cash and $6,500,000 in restricted cash. Today, we are pleased to announce the start of our new Chief Financial Officer, Peter J.

Operator

Mariani starting tomorrow and unfortunately, the retirement of our existing CFO, Kathy Block, as of the end of business today. You'll hear more from both people at the end of this meeting. We're also on track to send marketing applications in parallel for the investigational drug ZURB ATR system to FDA has a de novo application in Health Canada in this Q3 of this year. You'll hear more about that from both Mike Distella and Giras as well as Vince Capponi. In addition, we completed our MDSAP audit, which is a key requisite to Canadian commercialization.

Operator

Data from our STAR registry was presented at the EuroPCR 2024 Conference, where it was selected as a top 5 finalists in the best scientific abstract competition. And importantly, we launched a new redesigned modern consolidated corporate and product website. Lastly, we also launched our CytoSorb, our MDR certified Purify Hemoperfusion pump, placing in fact all 30 pumps from our original order with our OEM and are expecting delivery on the next order from our OEM very shortly. Importantly, the pump itself has received extremely well good reviews from users, citing it as very easy to use and easy to set up and easy to implement our therapies. With that, let me turn it over to Kathy Block, our current Chief Financial Officer.

Operator

Kathy?

Speaker 3

Thank you, Phil, and hello to everyone on the call. Today, I will discuss our Q2 2024 financial results, including revenues and gross margins. And additionally, I will provide an update on our working capital and cash runway. CytoSorb product revenue was approximately $8,800,000 in the Q2 of 2024 compared to $8,100,000 in the Q2 of 2023, an increase of approximately $800,000 or 10%. 2nd quarter 2024 grant revenue was approximately $1,100,000 compared to approximately $1,300,000 in 2023, and this decrease was due to the conclusion of several grants during 2023.

Speaker 3

Total Q2 2024 revenue, which includes both product sales and grant revenue, was approximately $9,900,000 as compared to $9,400,000 in 2023. And product gross margins on devices and device accessories was 75% in the Q2 of 2024 compared to product gross margins of 74% in 2023. Next slide, please. For the first half of twenty twenty four, CytoSorb product revenue was approximately $17,800,000 compared to approximately $16,000,000 for the first half of twenty twenty three, which is an increase of approximately $1,800,000 or 12%. First half twenty twenty four grant revenue was $1,800,000 as compared to $2,900,000 again due to the conclusion of several grants in 2023.

Speaker 3

And product gross margins on devices and accessories were 74% in the first half of twenty twenty four compared to 71% in the first half of twenty twenty three as we continue to realize more operating efficiencies at our new manufacturing bars on this chart represent our annual product sales for the trailing 12 month periods ending June 30 for each year 2018 to 2024. We know that for the years 2020, 2021 and 2022, sales were very favorably impacted because CytoSorb was used to treat COVID-nineteen patients. And of course, this usage ceased following the containment of the pandemic in the years ending June 30, 2023 2024.

Operator

If we take

Speaker 3

a look at the orange trend arrow, which tracks along core non COVID-nineteen revenue, what we see is that the post COVID-nineteen 12 month periods ended June 30, 2023 2024 continue to show positive growth in our core non COVID-nineteen product sales. Our year over year trailing 12 month sales for the period ending June 30, 2024 increased by 9.5% compared to the trailing 12 month sales for the period ended June 30, 2023. Additionally, excluding the impact of the COVID-nineteen sales in 2020, 2021 and 2022, our overall CAGR for the 6 years ended June 30, 2024 is a respectable 11.2%. I also want to point out for a moment that the green line, which tracks our year over year gross margins, indicates a decline in 2022, while we transitioned manufacturing operations to our new facility. Our Q2 2024 gross margins continue to show improvement at 75%, and these margins are approaching the levels that we had prior to our move to the new facility.

Speaker 3

With greater volumes, we expect to show further improvements in product gross margins as we continue to realize additional manufacturing efficiencies. Next slide, please. As of June 30, 2024, we have $14,900,000 in cash, which includes $6,500,000 of restricted cash and $8,500,000 in unrestricted cash. We believe that unrestricted cash on hand is sufficient to fund the company's operations through the Q2 of 2025. We have been successful in our efforts to strengthen our balance sheet and reduce operating expenses.

Speaker 3

On our last call, we indicated that the company was actively pursuing alternative sources of capital. And in June 2024, we entered into a loan and security agreement with the Avenue Group of Funds to provide a total of $20,000,000 in debt financing. Dollars 10,000,000 was immediately available under the facility and $5,000,000 which is included in our restricted cash is subject to release by March 31, 2025, provided that the FDA has accepted the company's application for review with respect to drug source ATR and that the company has received a minimum of $3,000,000 in net proceeds from the sale of its equity securities after the closing date. The restricted cash will be released on a dollar for dollar basis for equity raised between $3,000,000 $5,000,000 And then there's another tranche of 5,000,000 which may be dispersed at the company's request between July 1, 2025 December 31, 2025, provided that the company received FDA marketing approval of its drugstore ATR application. Conservation of cash remains a top corporate priority.

Speaker 3

We have reduced our headcount, adjusted our spending and taken other measures to reduce our quarterly cash burn in 2024. Cost cuts taken previously have reduced our loss from operations from $6,600,000 in the Q2 of 2023 to $3,400,000 in the Q2 of 2024, a 48% decrease. In July of 2024, we enacted another round of cost cuts, which are designed to reduce the company's annual cash burn by an additional $5,000,000 That will conclude my remarks for today. And at this time, I'm delighted to turn the call over to our President and Chief Operating Officer, Vince Capponi. Go ahead, Vince.

Speaker 4

Thank you, Kathy. So for the I'd like to cover the clinical

Operator

Yes, I think Mikus is on the call. Mikus, would you like to take the first part of this?

Speaker 5

Sure. Thanks, Phil and thanks, Vince. As you heard and welcome to everybody on our call this afternoon. As you heard from Phil previously, the regulatory submissions for our investigational drugstore ATR system is a top priority for the company. And we are happy to report that we're on track according to previously stated timelines.

Speaker 5

The Starkey clinical data were presented earlier this year, the top line results and the final data analysis has been completed. And in fact, the clinical study report that contains all this information is in the final stages of development and publishing. This will represent the main source for the probable benefit to risk analysis that will be at the crux of our de novo submission to the FDA. We also intend to include in the submission supportive supplementary data with the real world evidence of phytagro removal during CABG that was presented from the STAR registry in a recent European conference. And I'm going to spend the next slide giving you a little bit more visibility on that data.

Speaker 5

The completion of the technical files is leveraging the electronic eSTAR platform. And as already stated, we're on track for the FDA de novo submission in September with the Health Canada submission leveraging the same platform to follow soon thereafter. Just as a reminder to our listeners, drugs of ATR is an FDA breakthrough designated device, which means that each submission will be associated with a priority review. A recent analysis suggested that the novel applications of breakthrough designated devices have an estimated 25% faster review timelines compared to regular applications. And as such, pending the FDA agreement of the de novo pathway submissions and the associated priority review of the breakthrough status of the drug drug ATR device, this means that we could have a potential FDA decision within 6 to 12 months following submission.

Speaker 5

Next slide, please. Earlier this year, we had the privilege of being present and presenting at one of the largest cardiovascular conferences in the world, the Euro PCR meeting that is held annually in Paris. During this meeting with over 12,000 attendees, data from our Spinal Registry was selected for an oral presentation. And at the end of the conference, as Phil has already alluded to, the scientific committee awarded the scar registry data a top 5 spot in their final as a finalist in their best scientific abstract competition. So why do we show within the Star industry that we believe is going to be a supportive piece to our regulatory submissions.

Speaker 5

As you know, removal of ticagrelor during cardiac surgery with cardiopulmonary bypass is an approved indication with CytoSorb since 2020 and is increasingly being used as standard of care in many heart centers in Europe. In the SARS registry, we're collecting high fidelity data on this everyday real world use of a device for a Google or TACAGROLO. In the current analysis, we had data from 5 different countries, 23 investigative sites, totaling 102 isolated cab VEG patients. This is a population that we have discussed previously will be the target intended population for our submissions. These patients were operated very soon since the last dose of vaxaglilor on the mean of 22.8 hours.

Speaker 5

Just as a reminder, guidelines recommend that these patients should wait for at least 72 hours, but in everyday practice many times this is not feasible. So these patients were operated much shorter window compared to what the guidelines recommend. The device was used for an average of an hour and a half during the CPB run of the operation, which is almost identical to the time that we saw in STAR T, again, very, very comparable population and device use in these two data sets. What we did present in Paris was the fact that in the SPAL registry, we observed bleeding rates that were substantially lower than those reported in the European CABG registry among patients on TAKAGALOR being operated either very early within 24 hours or later on within 24 to 72 hours, but always not having completed the recommended washout. You can see the rates presented on the slide.

Speaker 5

And in fact, among patients who waited for at least a day before being operated, you will see a substantial reduction of severe bleeding to very, very low rates, equivalent to those seen in patients not operated not on pikagalov having CABG operation. Importantly, none of these sites are investigated reported any device related adverse events. The data from the eCABG registry represent a very good benchmark for us to compare the rates from the STAR registry. And as such, as noted previously, this was very well received at the scientific conference, and we're very pleased to receive the designation of the top five finalists for the scientific abstract. And with that, I would like to turn the call over to Vince to give you a regulatory update.

Speaker 4

Thank you, Mikas. This is Vince Capponi, and good day to everybody. As Mikas mentioned, the de novo timeline, we're in the final stages of assembling the technical file that will be submitted through the Estar program. At this point, we're I'm happy to say we're 75% complete with that file. We've concluded most of the engineering documentation and now starting to complete the clinical documentation for that submission.

Speaker 4

Along with this submission in parallel, we are also working on preparing the Canadian submission, which we hope to have filed shortly after the eSTAR for FDA. It's very similar, so we believe we can do it in a relatively timely manner. Hopefully also through the Canadian submission, generally speaking, Canadian approvals have generally in the past been a bit faster than U. S. FDA approvals.

Speaker 4

But of course, we can't predict that with 100% certainty, but we're hopeful that we will be able to be able to get a quick approval through Canada. Next slide please. Global from a global regulatory standpoint as part of the preparation for the Canadian submission, we have completed the MD SAP audit, which is required for a Canadian submission. I'm happy to say that the audit went very well. It's currently under review by DECRA, but we feel very confident that we will be approved for submission to Canada through the MDSAT program.

Speaker 4

With respect to MDR, which affects obviously our European operations and rest of world, we are targeting a December 2020 4 submission to our notified body and have already requested the MDR audit for June of 2025. We're very confident based on our continual successful audits throughout the product life cycle of CytoSorb that we will be able to achieve the MDR audit, again, meeting all the requirements, which are more extensive than the MDD, but we are very confident that we'll be able to achieve approval. As Phil mentioned, the purified pump registration was received in June. Working with our partner Medica, we were able to get that completed and able to receive the first 30 pumps. And we have the second order that will be coming in shortly here.

Speaker 4

And we are looking forward to again expanding that into the market. And as Phil mentioned, has received very, very good reception in the marketplace. On top of that, we've also received after over a year and a half worth of effort registration in Taiwan and we're looking forward to now opening up with that market. With that, I'll turn it back to you, Phil.

Operator

Great. Well, thanks, Vince. This year, we have worked diligently to execute upon a broad turnaround strategy that is dependent on attaining a number of key objectives. You've heard today that, 1, our guidance that we continue to expect to submit to our marketing applications to U. S.

Operator

FDA and Health Canada for drugs or ATR this quarter and have made excellent progress in parallel programs like MDSAT that are critical to commercialization, for example, in Canada. Secondly, we have strengthened our balance sheet with the addition of a new debt facility from Avenue Capital and believe that if we can hit our milestones, the $20,000,000 in capital will get us to both Health Canada and FDA regulatory decisions. 3rd, we remain extremely committed to cutting costs to drive efficiency and be self sustaining. Importantly, you heard that we have made excellent progress in reducing our operating loss and expect to see additional benefit from our most recently completed cost cuts. 4th, our gross margins continue to be strong and are expected to expand as we grow the markets in Europe and certainly are expected to expand further if we are able to drive U.

Operator

S. FDA and Health Canada approval where the gross margins for DrugServe ATR are expected to be significantly higher than for CytoSorb. And lastly, we have done a lot of work to try to increase our core CytoSorb sales growth beyond the quarter 1000000 devices that we've delivered to date. Finally, as you are aware, we have been positioning CytoSorbents for the next stage of growth, both our existing international franchise as well as the potential to open the U. S.

Operator

And Canadian markets. This is why it has taken us so long to find the right CFO candidate to replace our esteemed retiring CFO, Kathy Block. Kathy has gone above and beyond the call of duty, selflessly coming back from retirement last August to resume her former full time CFO role and in the intervening 12 months helping to secure the future of the company with 2 key financings and orchestrating our cash conservation strategy. With her retirement announced today, she caps an outstanding CFO career and will continue as a consultant to help manage the smooth transition of our newly appointed CFO, Peter Mariani. On behalf of everyone at Cytosorbents, we thank Kathy for her more than 11 years of dedication and leadership at the company as a trusted colleague and friend with so many contributions that have helped us achieve the success we have today and wish her an enjoyable, relaxing and well deserved retirement.

Operator

With that, I'd like to turn the call over back to Kathy to have some final words. Kathy?

Speaker 3

Thank you so much, Phil. I would like to take this opportunity to thank the Board of Directors, my colleagues on the management team and really all the employees of Cite de Cervantes for their support and collaboration, which have made my 11 year tenure as CFO so very enjoyable. I especially want to thank the finance and accounting team members who have supported me in the U. S. And in the EU.

Speaker 3

I would like to thank you for your extraordinary dedication, talent and contributions to the company. And I wish everyone, including our new CFO, Pete Mariani, the best of success as we head towards the exciting upcoming job of commercialization of DrugServe ATR in the United States. So thank you all so much.

Operator

Thank you, Kathy. And with that, I'd like to welcome Pete Mariani to the CytoSorbents team. Pete is the seasoned and accomplished Medical Device CFO whose many successes at high growth publicly traded companies such as AxoGen, Hanson Medical and Guiding Corporation speak for themselves. He has consistently demonstrated a disciplined and rigorous approach to financial management, operational excellence and strategic development both domestically and internationally that aligns perfectly with our next phase of expected rapid growth. Importantly, CytoSorbents today shares many similarities to AxoGen when Pete joined as CFO 16, including with respect to its size, revenue base, U.

Operator

S. Market opportunity and high margin business model. He has proven his ability to fund, scale and manage impressive growth. As we pursue U. S.

Operator

And Canadian marketing approval for DrugZorb ATR and drive our OUS business with CytoSorb, we believe Pete will be an outstanding fit where his deep global experience and insight is expected to be vital to our success. We are thrilled to have Pete join Cytosorbents and be a key member of the management team. And in the coming months, we hope to reach out to many of you to introduce you firsthand to Pete. With that, let me have Pete say a few words here as we wind up this call. Pete?

Speaker 6

Thank you, Phil. I appreciate the warm welcome. I appreciate the trust of you in creating this opportunity for me. It is great

Speaker 7

to be out with all

Speaker 6

of you as investors today as well. I am excited to join CytoSorbents at this pivotal time in its history. I've had the great privilege to be part of some of the most significant advancements in medical technology over the years, including advancements in cardiac stents, cardiac rhythm management, medical robotics, laser cataract therapies and of course nerve repair. CytoSorbents blood to further develop, execute and scale our long term growth strategy and bring improved hospitals. And of course, I look forward to meeting with many of you in the near future.

Speaker 6

Thanks again, Phil.

Operator

Thanks very much, Pete. That concludes our prepared remarks. Operator, please open the call up for the Q and A session. Just let me remind you as Pete has not officially started until tomorrow, he will not be participating in the Q and A session.

Speaker 8

Operator?

Speaker 1

Thank Sarcom with Jefferies. Your line is open.

Speaker 9

Hey, good afternoon and thanks for taking the questions. Just to start, congrats to both Kathy and Pete. Kathy, it's been great working with you. Hope you have a great retirement and Pete looking forward to working with you again. All right.

Speaker 9

So I guess the first one for I guess for either Phil or Mike is, you're on track for the FDA and Health Canada submission for drug Zorb. Can you just give us an update on how you're feeling about approval? Maybe can you give us an update on any conversations you've had with the regulators, particularly the FDA more recently?

Operator

Thanks very much, Michael. Mikus, would you like to take that?

Speaker 5

Sure. Thanks, Michael, for the question. As we have discussed previously, we feel that the START T pivotal trial does provide the necessary information to be able to execute the necessary benefit to risk analysis. And I think as we have highlighted in previous calls and stated in during our own corporate webinars is that the STRAT D data has helped us identify more specifically the intended target population. And as we discussed before, we have identified that to be those patients undergoing a coronary artery bypass operation and also the intended potential benefit associated with the use of the device.

Speaker 5

So in that regard, we believe that the stem cell can as a standalone can support a robust benefit risk analysis. In addition, as I've shared today on the call, the accumulated real world evidence that is now captured systematically in a high quality registry such as the style registry, we believe will be an important supplement in our conversations with the agency. Having said that, anytime you submit an application, you have to wait obviously for the review and the comments from the agency. We have not had any additional discussions with the agency since our last call. So there's no update on that front.

Speaker 5

But we do believe that the application will provide the necessary information for a very productive and collaborative interaction with the agency and to allow them to proceed with the necessary benefit to risk and health.

Speaker 9

Got it. Thanks, Mike. And then maybe 1 or 2 for Tassy. Just on the gross margins, the press release today mentioned the line of sight to 80%. Can you talk about what gets us to 80% maybe what level of sales might get you there?

Speaker 9

And then just kind of the second part of that is more in the near term, how are you thinking about gross margins in the second half of twenty twenty four?

Operator

Yes, I think actually Michael okay, Kathy, go ahead please.

Speaker 3

Yes. So Michael, obviously volume is going to any amount of volume growth is going to increase our product gross margins and they should grow up very rapidly. I expect that at 15% to 20% year over year growth, we should see approaching 80% or at 80%. So it should be relatively straightforward. Of course, once we get approval in the U.

Speaker 3

S, the margins will be even higher and then we would see like exceptional growth rates in our overall gross margins.

Speaker 9

Got it. Thanks.

Speaker 7

And, sorry, go ahead.

Operator

I'm sorry, Michael. I One of the people responsible for helping to drive our gross margins higher is Vince Capponi, our President and Chief Operating Officer. Maybe Vince, you wanted to give a little commentary on how our manufacturing processes have improved and our confidence that we can get to that 80% on a blended basis.

Speaker 4

Thanks, Phil. So we've made a lot of improvements in the last year in the operation. We've actually reduced the labor requirement by almost 30% in part of the operation, the filling processes to help offset some of the lower volumes that we've had. So with the improvements that we're continually making here, we expect that we're going to continue to see improving mind is that as part of our controlling cost, we're actually lowering our inventories. We're doing that by slowing down the production so that we can conserve the cash as we go through the FDA approval.

Speaker 4

So to Kathy's point, and when we get to the 15% to 20% growth rate, we certainly have a line of sight to that 80 plus percent, plus an approval, obviously, for drugs over ATR with much higher ASPs than the current CytoSorb will certainly contribute to that. But it's also based on the mix of the direct sales, the higher, if you will, gross margin direct sales versus distributor, which are lower margins than the direct. So again, there's a lot of factors in that, but what we're doing is we are continuing to improve the operation. And again, it's going, as Kathy mentioned, going to be very dependent upon volume, but we do have a number of cost improvements that we're slowly implementing in the process here to hopefully get us back to that 80% soon.

Speaker 9

Great, very helpful. Thanks for all the color.

Operator

Thanks very much, Mike.

Speaker 1

And your next question comes from the line of Yuan Xue with B. Riley. Your line is open.

Speaker 7

Congrats on a good quarter and thank you for taking our questions. Casey, congrats on the retirement and the pitch welcome on board, exciting time for you to join here at Recycler Resolvement. Maybe Phil, start with you. Can you provide more color what factors pushed the revenue to grow in Q2? And do you see similar trends in 3Q?

Speaker 7

Any comment on the volume versus the price change will be helpful.

Operator

Yes. I think that in the second quarter, what we saw was strength in the distributor and partner channel. I think that it coincided a little bit with the launch of our purified pump. And as we told you previously, the Purify pump is intended to help establish an infrastructure of blood purification capabilities in countries where they don't have well established dialysis infrastructures. And so this typically is found in our distributor territories that are not necessarily in Western Europe, for example, as with Germany and Italy and France and the UK and Spain, for example.

Operator

So I think that strength in that particular channel was good. And our hope is that our Q3, which is typically a seasonal quarter for us because of holidays in Europe will be a respectable quarter.

Speaker 7

Any comments on the volume versus the price trend year over year?

Operator

As Vince mentioned, the transfer prices to distributors are typically lower than our ASPs to for direct sales. But on the other hand, we benefit from having a lower cost of distributor sales because we don't incur those direct costs of a sales force ourselves. That being said, our pricing has been fairly stable across the board, both in transfer pricing as well as in direct sale pricing as well. But what you'll see from Q2 results is that the distributor channel was stronger for this quarter.

Speaker 7

Got it. And a following question is, how will the delivery of Purify pump contribute to the revenue growth in 3Q, either itself or helping the sales of CytoSorb being characterized without the infrastructure. Can you provide more color on that?

Operator

Yes. We have a different model for rolling out the purified pump in different parts of the world. And I think though the thing to keep in mind is that we're not looking to necessarily make money on the purified pump, right? This is very much the printer, printer cartridge model where the printers provided at relatively low cost with the goal of driving disposable revenues of the printer cartridge. This is very similar to our approach to the purified pump.

Operator

Again, the purified pump is there to establish this infrastructure of blood purification capabilities so that they can use more of our cytosorb devices. And so, I think moving forward, the goal is to really drive CytoSorb volume rather than a typical hardware company trying to drive sales from hardware, if that makes sense.

Speaker 7

Yes. Got it. That's very helpful. Thank you.

Speaker 1

Sure. And your next question comes from the line of Tom Kehr with Zacks Small Cap Research. Your line is open.

Speaker 8

Good afternoon, guys, and congratulations, Kathy, and thanks for all your detailed explanations and quick response to questions. So I appreciate it. Can you clarify I'm unclear on the Canadian submission because originally I thought it

Speaker 5

was going to be jointly.

Speaker 8

Now it's going to lead. Now it's going to happen after the FDA submission. So it's a 4th quarter event. I'm sorry, I don't have the slides in front of me, but can you clarify when that is expected to be submitted to the Canadian authorities?

Operator

Yes, I think that what you heard us say today is that we expect to get most of those submissions in the Q3 with the prioritization of course for the U. S. FDA application. So, I think that we remain on track to try to achieve that, but we certainly will be prioritizing the FDA submission first.

Speaker 8

Okay. So it's possible the Canadian submission could roll in the Q4, but that's not your goal, correct?

Operator

That's not yes, that's not the goal. And I think that we're reiterating our guidance of 3rd quarter submission for both.

Speaker 8

Okay. All right. Sorry, I misunderstood that. A couple of financial questions on the R and D down to $1,500,000 Is that just the comparison against the STAR T trials a year ago or is there anything else in there?

Operator

There is a number Kathy, you may be on mute. Please go ahead.

Speaker 3

Thanks, Phil. The largest impact is coming from the START T trial completion. So we're not incurring those hospital costs and patient costs that are associated with the trial. There have also been a strong focus of our R and D efforts on exclusively grant related activities, where their costs of those personnel are funded through the grants. So we have been prioritizing that, making sure that that is the focus of the team to try to cut down in any non grant R and D costs.

Speaker 3

So both of those are contributing, but the highest impact is coming from the SART T trial being complete.

Speaker 8

The comparisons, right. So is that a good number to use for the second half of the year, dollars 1,500,000 per quarter?

Operator

I think

Speaker 3

it is, yes.

Speaker 8

Okay. One last big picture question for Phil or anybody. The Taiwan thing seems Can you talk about that and what the size of that business could be or could it be the next Germany? Is it that big enough of a market?

Operator

Yes. I think it remains to be seen. I mean, Taiwan is, as you may have read from the press release, a very large market, and a big believer in blood purification. So from an opportunity standpoint, it's very exciting. We're working through a distributor in Taiwan currently.

Operator

And they in fact were helpful in getting the Taiwanese approval and registration. So time will tell to see how this will develop. And but we are we have a lot of hopes for Taiwan, but it's just one of many countries where we're working to drive CytoSorb sales.

Speaker 8

Got it. Last financial question for me. You guys did receive the $15,000,000 loan, right? It wasn't a subsequent event at the end of the quarter?

Operator

We closed the financing at the last day of the quarter. So it was a Q2 event. And the financing happened in the second quarter. Yes, that's correct.

Speaker 8

All right. Thank you. That's all I have for today.

Speaker 5

Thanks,

Speaker 1

Tom. And your next question comes from the line of Sean Lee with H. C. Wainwright. Your line is open.

Speaker 10

Hey, good afternoon guys. Congrats to Kathy and hope to wish you a happy retirement and welcome Pete. I look forward to working with you. Most of my key questions have been answered. But I just wondering, you were mentioning the doing R and D mostly on the grant.

Speaker 10

So I was wondering what are the key major projects that you are working on in terms of the grant supported ones? I know previously, you had worked on Tmall Defend with Pentagon. I was wondering whether that's still going on and whether there are other projects or product that we can look forward to? Thanks.

Operator

Sure. Thanks, Ron. Yes, the programs that R and D programs, preclinical R and D programs that are being funded right now really are focused on Hemodefend BGA and the use of Hemodefend BGA and, but in different form factors for either military, civilian or industrial usage. And I think that we're making excellent progress in that program. We continue to seek additional funding opportunities for that program and we're getting very close I believe to human testing.

Operator

So Vince, would you like to comment about the human defend program?

Speaker 4

Sure, Phil. Thanks. So Sean, I'd like to hear from you. We've made quite a bit of progress on the HemoDefend BGA, as Phil mentioned. There's a couple of different form factors that we're focused on to really get to what we think will be the most accessible markets, which would be the military and then ultimately the civilian.

Speaker 4

So those programs are there's 2 key programs that are funding that right now. We have a couple other grants that are in preparation right now to extend that funding further into commercialization through funding of a clinical trial and ultimately scaling for commercialization. But as Phil mentioned, there are a number of different form factors, but really the 2 key form factors that we're pushing forward very aggressively are related to the military application and then also what would be at the point of collection, which by the way will feed into potentially the freeze dried, if you will, plasma market. And we're working closely with a couple of people in that area as well, where we think we can provide some value. Thanks, Sean.

Operator

Thanks, Vince.

Speaker 8

Great. Thanks for taking my questions. Thanks,

Speaker 5

Sean.

Speaker 1

And with no further questions at this time, I would like to turn the call back over to Doctor. Philip Chan for any additional or closing remarks.

Operator

Well, thank you everyone for joining the call today. If you do have any other questions, please feel free to reach out to me directly at pchansidusorbents.com while we manage this transition and I'll hopefully be able to reply to your questions where possible. Have a great evening everyone and thank you very much. Good night.

Speaker 1

And ladies and gentlemen, that concludes our conference for today. We thank you for your participation, and you may now disconnect.

Speaker 11

Please wait. The conference will begin shortly.

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Earnings Conference Call
Cytosorbents Q2 2024
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