Cerus Corporation (NASDAQ:CERS) Q1 2023 Earnings Conference Call May 4, 2023 4:30 PM ET Company Participants Jessica Hanover – Vice President-Corporate Affairs Obi Greenman – President and Chief Executive Officer Vivek Jayaraman – Chief Operating Officer Kevin Green – Chief Financial Officer Conference Call Participants Brandon Folkes – Cantor Fitzgerald Matt Blackman – Stifel Operator Good day, and welcome to the Cerus Corporation’s First Quarter 2023 Earnings Conference Call. At this time all participant ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: to Commission File Number 000-21937 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, pa ...

Cerus Corp (NASDAQ:CERS) Q4 2022 Earnings Conference Call February 28, 2023 4:30 PM ET Company Participants Joel Trujillo - Senior Director, IR William Greenman - President, CEO & Director Vivek Jayaraman - COO Kevin Green - VP, Finance & CFO Carol Moore - SVP, Regulatory Affairs, Quality & Clinical Conference Call Participants Mathew Blackman - Stifel, Nicolaus & Company Jacob Johnson - Stephens Inc. Brandon Folkes - Cantor Fitzgerald Joshua Jennings - Cowen and Company Operator Good day, ladies and gentle ...

60 See Note 7, Debt, in Part IV, Item 15, "Exhibits and Financial Statement Schedules" of this Annual Report on Form 10-K for more information on the debt under our Term Loan Credit Agreement and the Revolving Loan Credit Agreement. Critical Accounting Policies and Management Estimates Results of Operations Cost of Product Revenue Research and Development Expenses uncertainties associated with the successful completion of our research and development projects, which risks and uncertainties are discussed in ...

Financial Data and Key Metrics Changes - Product revenue for Q3 2022 was $39.6 million, representing a year-over-year growth of 10% [27] - Net loss attributable to Cerus narrowed by $3.9 million or 32% compared to Q3 2021, totaling $8.5 million or $0.05 per diluted share [38] - Non-GAAP adjusted EBITDA losses were reduced to negative $2.7 million, compared to negative $5.6 million in Q3 2021 [39] Business Line Data and Key Metrics Changes - Sales of INTERCEPT platelet kits in the U.S. grew by 22% year-over-year, with overall product revenue growth driven primarily by this segment [28] - EMEA product sales were $13.1 million, down 12% year-over-year due to currency headwinds and seasonal demand fluctuations [21] - Sales of INTERCEPT disposable kits represented over 94% of Q3 product revenue [31] Market Data and Key Metrics Changes - The calculated number of treatable platelet doses increased by 22% year-over-year in the U.S. and 13% internationally [31] - The strong U.S. dollar negatively impacted EMEA sales, contributing to a 6% top-line headwind year-over-year [27][30] Company Strategy and Development Direction - The company aims to achieve cash flow breakeven and is focused on scaling manufacturing capacity while advancing its product pipeline [12][10] - Cerus has secured Health Canada approval for a 7-day platelet shelf life, which will facilitate broader deployment of INTERCEPT across Canadian blood centers [44] - The company is committed to advancing transfusion medicine through innovative product development, including LyoCryo for ambient temperature stability [48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite global macroeconomic challenges, highlighting strong customer demand [12][17] - The company anticipates continued growth in product revenues, with guidance for 2022 product revenues in the range of $160 million to $162 million [42] - Management noted that the strong U.S. dollar is expected to continue impacting revenues into 2023 [30] Other Important Information - Government contract revenue totaled $6.8 million in Q3, up from $6 million in the prior year, including a new award from the Department of Defense [32] - The company ended Q3 with $103.8 million in cash and cash equivalents, indicating a strong financial position [41] Q&A Session Summary Question: When does the company expect to reach cash flow breakeven? - Management indicated that while they are close to breakeven, they are not providing a specific timeline but expect continued progress [54][55] Question: What is the strategy for market penetration in the U.S. platelet market? - Management noted that the greatest opportunity lies in increasing utilization among current users, while also targeting new blood banks [58][59] Question: What are the potential penetration rates for INTERCEPT in Canada? - Management expressed optimism about capturing a significant portion of the Canadian market, particularly with Canadian Blood Services [63][65] Question: What factors are contributing to gross margin expansion? - Management highlighted economies of scale, product mix improvements, and the impact of foreign exchange rates as key contributors to gross margin growth [66][67]

Regulatory Approvals and Product Development - The INTERCEPT Blood System has received regulatory approvals including FDA approval in the U.S. and CE Certificates of Conformity in the EU, allowing marketing in multiple countries[105] - The company plans to commercialize the INTERCEPT Blood System for red blood cells, which is currently under development, with a CE Mark application resubmitted in June 2021[107] - In June 2022, the company extended its agreement with BARDA through December 2025, providing funding for the development of the red blood cell system and related clinical programs[110] - The INTERCEPT Blood System for Cryoprecipitation received FDA approval in November 2020, with the first sale of IFC to a hospital customer completed in 2021[111] - The company is facing potential delays in clinical trials for the red blood cell system due to the COVID-19 pandemic, which could impact regulatory approval timelines[109] - The company is working with blood centers to produce and sell finished IFC, which requires site-specific licenses from the FDA for broader distribution[111] Financial Performance - Product revenue for the three months ended September 30, 2022, was $39,571,000, a 10% increase from $36,131,000 in the same period of 2021, driven by sales volume growth in disposable platelet system kits[132] - Total revenue for the nine months ended September 30, 2022, reached $136,994,000, reflecting a 25% increase compared to $109,430,000 for the same period in 2021[132] - Government contract revenue for the three months ended September 30, 2022, was $6,772,000, a 13% increase from $5,970,000 in the same period of 2021[132] - The company anticipates continued growth in product revenue for INTERCEPT disposable kits due to expected expansion of U.S. sales and increased market acceptance[132] Funding and Capital Requirements - The total potential funding opportunity under the BARDA agreement could reach up to $245.9 million through December 31, 2025, contingent on meeting certain milestones[124] - The company has a five-year agreement with the FDA for the development of next-generation compounds, with a total potential contract value of $11.1 million[125] - The company entered into a two-year agreement with the U.S. Department of Defense for the development of pathogen-reduced, lyophilized cryoprecipitate, with a total potential contract value of $9.1 million[125] - The company has borrowed capital and may seek additional funding through various agreements, which could include restrictive covenants and potential dilution for shareholders[112] - Economic conditions and the COVID-19 pandemic have created uncertainty regarding the availability of additional capital, potentially affecting liquidity[113] - The company may need to obtain additional funding to complete development activities for the red blood cell system necessary for regulatory approval in the EU[115] - The company anticipates significant funding under its agreement with BARDA, but this is subject to risks including potential termination of the agreement and funding availability[161] - The company may need to obtain additional funds for development activities related to the red blood cell system if costs exceed expectations or delays occur[163] Cost Management and Expenses - The company is focused on managing growth and associated cost increases while transitioning to a direct sales model in certain international markets[102] - The company faces potential increases in business costs due to rising labor rates, transportation costs, and global supply chain constraints[115] - Research and development expenses increased by 6% to $16,220 for the three months ended September 30, 2022, compared to $15,288 in 2021, but decreased by 5% for the nine months to $45,493 from $48,119[139] - Selling, general and administrative expenses were $19,908 for the three months ended September 30, 2022, a slight decrease of 2% from $20,357 in 2021, while for the nine months, expenses increased by 2% to $60,175 from $59,285[142] - Total non-operating expense, net, was $(1,007) for the three months ended September 30, 2022, a 19% improvement from $(1,238) in 2021, while for the nine months, it increased by 60% to $(4,849) from $(3,033)[144] - Interest expense rose by 10% to $(1,406) for the three months ended September 30, 2022, compared to $(1,279) in 2021, and increased by 15% for the nine months to $(4,134) from $(3,589)[146] Cash Flow and Working Capital - Cash and cash equivalents, short-term investments, and restricted cash totaled $105,825 as of September 30, 2022, down from $131,644 as of December 31, 2021[150] - Net cash used in operating activities decreased to $(23,859) for the nine months ended September 30, 2022, from $(32,700) in 2021, attributed to increased product sales and gross profit[152] - Net cash provided by investing activities was $1,081 for the nine months ended September 30, 2022, a significant decrease from $52,978 in 2021, due to higher investment purchases[153] - Net cash provided by financing activities decreased to $3.735 million for the nine months ended September 30, 2022, down from $22.196 million in the same period of 2021[154] - Working capital decreased to $69.712 million as of September 30, 2022, compared to $108.546 million on December 31, 2021, primarily due to cash usage for product enhancements and inventory increases[154] Investment and Market Risk - The investment policy focuses on preserving principal and liquidity while maximizing returns on marketable securities[165] - There were no material changes to market risk disclosures during the nine months ended September 30, 2022[166] - The company expects to incur additional research and development costs for regulatory approvals and new product development, influenced by inflationary pressures and macroeconomic factors[140] - The company expects to continue investing in capital purchases and manufacturing capacity expansion to support ongoing and proposed studies[155] - Long-term capital requirements will depend on the success of sales efforts and the timing and costs of clinical trials and development activities[155] Shareholder Information - The company has sold 0.4 million shares of common stock under a Sales Agreement for net proceeds of $3.1 million, out of a potential $100 million[160] - The company did not record any credit losses during the three and nine months ended September 30, 2022, and 2021, respectively[165]

Financial Data and Key Metrics Changes - Product revenues for Q2 2022 reached $41 million, reflecting a year-over-year growth of 30% [26] - Net loss attributable to Cerus for Q2 2022 was $8.4 million, a significant reduction from $15.4 million in the same period of 2021 [35] - Non-GAAP adjusted EBITDA improved to negative $2.4 million in Q2 2022, compared to negative $8.2 million in Q2 2021 [36] Business Line Data and Key Metrics Changes - North American product sales increased by 75% year-over-year, significantly contributing to overall revenue growth [18] - The calculated number of treatable platelet doses grew by 65% year-over-year in the U.S. and 22% internationally for Q2 2022 [29] - INTERCEPT disposable kits accounted for over 96% of Q2 product revenue [30] Market Data and Key Metrics Changes - EMEA region experienced positive growth despite currency headwinds, particularly in the Middle East [20] - The strengthening U.S. dollar posed a 6% headwind to top-line revenue for the quarter [57] Company Strategy and Development Direction - The company aims to make INTERCEPT the standard of care in transfusion medicine globally, with a focus on expanding patient access [10] - Plans to self-fund future growth as the company approaches cash flow breakeven [16] - Continued emphasis on building a strong body of evidence around INTERCEPT Fibrinogen Complex's utility [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit product revenue growth in the second half of 2022 despite economic headwinds [40] - The company reiterated its full-year 2022 product revenue guidance range of $160 million to $165 million, reflecting year-over-year growth of 22% to 26% [41] Other Important Information - The company is progressing with its INTERCEPT red blood cell efforts, with ongoing Phase III trials [42] - The review process for the European regulatory submission for INTERCEPT red blood cells has commenced [49] - Dr. Hua Shan was welcomed to the Board, bringing expertise in blood safety and pathogen reduction [54] Q&A Session Summary Question: What was the FX impact on the top line in the quarter? - The company experienced about a 6% headwind from FX for the quarter, with expectations of 3 to 4 million dollars in incremental FX impact for the back half of the year [57][58] Question: How should the third quarter be viewed in terms of seasonality? - Management indicated that while there are headwinds, underlying product growth remains robust, and they do not provide quarterly guidance [60][62] Question: What is resonating most in terms of uptake for IFC? - Early availability and lower wastage rates are key factors driving interest among clinicians [73][75] Question: What changes are expected to accelerate adoption of IFC? - The company aims to increase awareness through case studies and registry data, while overcoming staffing challenges in hospitals [78] Question: Are timelines for submitting INTERCEPT Platelets to the NMPA still intact? - The company remains on track for submission before the end of the year despite challenges from COVID lockdowns [81] Question: How is the inflationary environment impacting the business? - The company is managing price increases and does not foresee alarming impacts on reaching adjusted EBITDA neutrality [83]

Regulatory Approvals and Product Development - The INTERCEPT Blood System has received regulatory approvals including FDA approval and CE Certificates for its platelet and plasma systems, allowing sales in multiple regions including the U.S. and Europe[107] - The red blood cell system is still in development, with a CE Certificate application submitted in December 2018, and a decision is not expected for at least another 12 months[109] - In June 2022, the company extended its agreement with BARDA through December 2025, providing funding for the development of the red blood cell system and related clinical programs[112] - The INTERCEPT Blood System for Cryoprecipitation received FDA approval in November 2020, with the first sale of IFC completed in 2021[113] Financial Performance - Product revenue for the three months ended June 30, 2022, was $40,999, a 30% increase from $31,484 in the same period of 2021, driven by sales volume growth in disposable platelet system kits[133] - Total revenue for the six months ended June 30, 2022, was $90,651, representing a 34.6% increase from $67,329 in the same period of 2021[133] - Government contract revenue for the six months ended June 30, 2022, was $12,208, slightly down from $12,466 in the same period of 2021, indicating stability in government contracts despite COVID-19 impacts[134] Cost and Expenses - Cost of product revenue for the three months ended June 30, 2022, was $19,718, a 29% increase from $15,323 in the same period of 2021, primarily due to increased sales volume and foreign exchange impacts[135] - Gross margin on product sales was 52% for both the three and six months ended June 30, 2022, consistent with the same periods in 2021[135] - Research and development expenses decreased by 11% to $15,216,000 for the three months ended June 30, 2022, compared to $17,083,000 for the same period in 2021[139] - Selling, general and administrative expenses remained relatively flat at $19,532,000 for the three months ended June 30, 2022, compared to $19,758,000 for the same period in 2021, but increased by 3% to $40,267,000 for the six months ended June 30, 2022, compared to $38,928,000 for the same period in 2021[142] Cash Flow and Liquidity - Total cash and cash equivalents decreased to $32,309,000 as of June 30, 2022, from $48,759,000 as of December 31, 2021[151] - Total short-term investments decreased to $74,738,000 as of June 30, 2022, from $80,600,000 as of December 31, 2021[151] - Net cash used in operating activities improved to $(21,801,000) for the six months ended June 30, 2022, compared to $(26,118,000) for the same period in 2021[154] - Working capital decreased to $85,393,000 as of June 30, 2022, from $108,546,000 as of December 31, 2021, primarily due to cash usage for product enhancements and inventory[156] Funding and Capital Needs - The company has borrowed capital and may seek additional funding through various agreements, which could involve restrictive covenants and potential dilution for shareholders[114] - The BARDA agreement could provide up to $246.5 million in funding through December 31, 2025, contingent on meeting certain milestones[126] - The company expects to receive significant funding under the agreement with BARDA, but this is subject to various risks, including the ability to achieve required milestones and potential termination of the agreement[163] - The company may need to obtain additional funds to complete development activities for the red blood cell system necessary for potential regulatory approval in the EU[168] Market and Economic Conditions - Economic conditions, including inflation and rising interest rates, may negatively affect the company's liquidity and operational costs[115] - The company faces potential cost pressures due to inflation, increased transportation costs, and supply chain inefficiencies, which could impact future gross margins[135] - The general economic environment and uncertainty associated with the COVID-19 pandemic have led to a decline in available government funding, impacting the company's revenue and cash flows[163] Operational Challenges - The company is facing potential delays in clinical trials due to the COVID-19 pandemic, which could impact the timeline for regulatory approvals[111] - The company is actively monitoring the impacts of the COVID-19 pandemic on its operations, which may affect product revenues and clinical trials[130] - The company continues to invest in inventory to meet future demand and mitigate supply chain disruptions[139] - The company may need to curtail planned development or commercialization activities if unable to raise additional capital due to volatile global financial markets[165] Shareholder Considerations - The company has sold 0.4 million shares of common stock under the Sales Agreement for net proceeds of $3.1 million, out of a potential $100.0 million[162] - The company may experience substantial dilution if it raises additional capital by issuing equity securities[161] Interest and Non-Operating Expenses - Interest expense increased by 18% to $(2,728,000) for the six months ended June 30, 2022, compared to $(2,310,000) for the same period in 2021[147] - Non-operating expenses increased by 114% to $(3,842,000) for the six months ended June 30, 2022, compared to $(1,795,000) for the same period in 2021[144] Foreign Exchange and Hedging - The company does not currently enter into any hedging contracts to mitigate foreign exchange fluctuations, which could materially affect future results[164]

Financial Data and Key Metrics Changes - Product revenues for Q1 2022 reached $37.4 million, reflecting a year-over-year growth of 60% [25] - Gross profit for Q1 was $19.4 million, an increase of 58% year-over-year compared to $12.3 million in the prior year [29] - The net loss attributable to the company for Q1 2022 decreased to $12.3 million or $0.07 per diluted share, compared to $17.5 million or $0.10 per diluted share for the same period in 2021 [33] - The company raised its 2022 product revenue guidance from $157 million to $164 million to a new range of $160 million to $165 million, indicating a year-over-year growth of 22% to 26% [37] Business Line Data and Key Metrics Changes - Strong growth in the U.S. platelet business, which was up over 130% year-over-year [14] - The calculated number of treatable platelet doses in the U.S. increased by 141% year-over-year, while international growth was 28% [28] - Sales of INTERCEPT disposable kits represented nearly 98% of Q1 product revenue [28] Market Data and Key Metrics Changes - North America led sales growth with a 130% increase year-over-year, with Q1 revenue in North America nearly matching total global product revenue from Q1 2021 [26] - EMEA region saw an 11% year-over-year growth, and 19% growth when excluding negative foreign currency impacts [27] Company Strategy and Development Direction - The company is focused on establishing a new safety standard in transfusion medicine, expanding access to INTERCEPT treated blood components [10] - Plans to diversify growth with the nationwide launch of INTERCEPT Fibrinogen Complex (IFC) across the U.S. [15] - The company aims to increase manufacturing capacity to meet growing demand and improve cost profiles through new agreements [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for INTERCEPT products despite geopolitical and economic uncertainties [13] - The company is optimistic about the future growth trajectory, particularly with the anticipated increase in demand for Fibrinogen and the successful rollout of IFC [17][39] - Management highlighted the importance of the American Red Cross contract extension for future demand forecasting and operational planning [20][51] Other Important Information - The company reported a non-GAAP adjusted EBITDA of negative $3.7 million for Q1 2022, an improvement from negative $11.5 million in Q1 2021 [35] - Cash and cash equivalents at the end of Q1 2022 stood at $108.6 million, indicating a strong cash position [36] Q&A Session Summary Question: FX impact in Q1 and guidance adjustments - The FX impact for Q1 was approximately $1 million, with adjustments made in the new guidance to account for currency fluctuations [48] Question: Red Cross contract implications - The contract extension with the American Red Cross enhances demand management and operational planning, providing greater visibility for future growth [49][51] Question: International market opportunities - The company is pursuing opportunities in Canada and Germany, with expectations for progress in these markets over the next few years [61][62] Question: IFC launch timeline - The IFC product is expected to gain traction in 2023, with ongoing efforts to engage hospitals and clinicians [64][66]

Regulatory Approvals and Product Development - The INTERCEPT Blood System has received regulatory approvals, including FDA approval in the U.S. and CE Certificates for Class III products in the EU, and is marketed in multiple regions including the U.S., Europe, CIS, the Middle East, and Latin America [113]. - The INTERCEPT Blood System for Cryoprecipitation was approved by the FDA in November 2020, with the first sale to a hospital customer completed in 2021 [119]. - The red blood cell system is still in development, with CE Mark approval application resubmitted in June 2021, but a decision is not expected for at least another 12 months [115]. - The company has extended its agreement with BARDA through December 2023, which provides funding for the development of the red blood cell system and related clinical programs [118]. - The ongoing COVID-19 pandemic has caused delays in clinical trial enrollment for the RedeS and ReCePI studies, potentially affecting the timeline for regulatory approvals [117]. - The company may need to conduct additional randomized controlled clinical trials for existing or new products if funding from BARDA is insufficient [123]. Financial Performance - Product revenue for the three months ended March 31, 2022, was $37,444 thousand, a 60% increase from $23,379 thousand in the same period of 2021, primarily due to growth in disposable platelet system kit sales to U.S. customers [138]. - Total revenue for the three months ended March 31, 2022, was $43,020 thousand, up 46% from $29,566 thousand in the same period of 2021 [138]. - Cost of product revenue increased to $18,076 thousand for the three months ended March 31, 2022, a 63% increase from $11,095 thousand in the same period of 2021, driven by higher sales volume and foreign exchange impacts [140]. - Gross margin on product sales was approximately 52% for the three months ended March 31, 2022, compared to 53% in the same period of 2021, affected by product mix and increased freight costs [140]. - Government contract revenue for the three months ended March 31, 2022, was $5,576 thousand, a 10% decrease from $6,187 thousand in the same period of 2021, primarily due to reduced activity under government contracts amid the COVID-19 pandemic [139]. Operational Challenges and Costs - The company anticipates increased costs due to inflationary pressures, supply chain constraints, and rising transportation costs, which may impact liquidity and operational plans [121]. - The company is actively monitoring the impacts of the COVID-19 pandemic on its operations, which may affect product revenues and clinical trials [135]. - Selling, general, and administrative expenses increased by 8% to $20,735,000 for the three months ended March 31, 2022, compared to $19,170,000 for the same period in 2021, primarily due to increased hiring and stock-based compensation [147]. - Total non-operating expense, net rose significantly by 159% to $(2,360,000) for the three months ended March 31, 2022, compared to $(912,000) in the prior year, driven by increased interest expense and other losses [148]. - Interest expense increased by 42% to $(1,380,000) for the three months ended March 31, 2022, compared to $(972,000) in 2021, primarily due to a higher underlying balance from the Term Loan Credit Agreement [151]. Cash Flow and Funding - Cash and cash equivalents decreased to $38,372,000 as of March 31, 2022, from $48,759,000 as of December 31, 2021, reflecting ongoing operational cash usage [155]. - Working capital decreased to $106,153,000 as of March 31, 2022, from $108,546,000 as of December 31, 2021, primarily due to cash usage for product enhancements and commercial initiatives [160]. - Net cash used in operating activities increased to $(21,456,000) for the three months ended March 31, 2022, compared to $(17,455,000) in the same period of 2021, attributed to timing of payments and inventory purchases [156]. - The company expects to continue making investments in inventory to meet future demand and ensure component availability [156]. - The company has sold 0.4 million shares of common stock under a Sales Agreement for net proceeds of $3.1 million, with the potential to issue up to $100 million [164]. - The company’s ability to obtain expected funding under its agreement with BARDA is subject to various risks, including the potential for funding termination and the impact of the COVID-19 pandemic on clinical studies [165]. - The company may need to obtain additional funds for development activities related to the red blood cell system and other products if costs exceed expectations or delays occur [168]. Investment and Market Risks - The investment policy focuses on preserving principal and liquidity while maximizing returns on the marketable securities portfolio [171]. - Cash and cash equivalents are currently invested in money market funds and interest-bearing accounts with financial institutions [171]. - Money market funds are classified as Level 1 in the fair value hierarchy, indicating active market availability [171]. - Available-for-sale securities related to corporate debt and U.S. government agency securities are classified as Level 2 in the fair value hierarchy [171]. - No credit losses were recorded during the three months ended March 31, 2022, and 2021 [171]. - Adverse global economic conditions may negatively impact the market values of potential investments [171]. - There were no material changes to market risk disclosures during the three months ended March 31, 2022 [173].