Cerus(US:CERS)2020-02-21 21:20PART I Business Cerus Corporation develops and commercializes the INTERCEPT Blood System for blood safety, with platelet and plasma systems commercialized and red blood cell system in late-stage development - The company's core focus is the development and commercialization of the INTERCEPT Blood System to reduce blood-borne pathogens in donated blood components11 Product Development Status | Product System | Status | | :--- | :--- | | Platelets & Plasma | Commercialized in the U.S., Europe, CIS, Middle East, and other regions. Received FDA approval and CE Marks. Refiling for CE Mark under new Medical Device Regulation (MDR) is planned | | Red Blood Cells | Currently in development. Two Phase 3 clinical trials (RedeS and ReCePI) are ongoing in the U.S. European Phase 3 trials are complete, but CE Mark approval under the new MDR is not expected until 2022 | - Manufacturing is outsourced to third parties, with a sole-source reliance on Fresenius Kabi AG for disposable kits for the platelet and plasma systems38 - The market is highly concentrated, with key customers including the American Red Cross in the U.S. and national blood services like Établissement Français du Sang (EFS) in France4650 Risk Factors The company faces significant risks including dependence on INTERCEPT Blood System commercial success, low market adoption, financial losses, extensive regulation, and BARDA funding dependency - The company's business is substantially dependent on its ability to successfully commercialize the INTERCEPT Blood System for platelets and plasma in the U.S. market100 - Broad market adoption is not guaranteed and is affected by factors such as cost, perceived efficacy, operational integration challenges for blood centers, and competition from alternative technologies107108114 - The company has a history of substantial losses and expects losses to continue due to high R&D and SG&A expenses, with profitability dependent on widespread commercial adoption which may not occur123 - Cerus and its products are subject to extensive and rigorous regulation by the FDA and foreign authorities, with the red blood cell system requiring significant additional testing and development before potential approval132143 - A significant portion of funding for the red blood cell system's development comes from a BARDA agreement, which can be reduced, delayed, or terminated, posing a risk to the program's continuation165 - The company relies on a complex manufacturing supply chain with a number of third-party suppliers, many of whom are sole suppliers for specific components, exposing Cerus to significant supply chain risks194195 Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments290 Properties Cerus Corporation's headquarters and R&D are in a leased 84,631 sq ft facility in Concord, California, with a European office in Amersfoort - The main corporate headquarters and R&D facility is an 84,631 sq. ft. leased space in Concord, California291 - A separate leased facility in Amersfoort, the Netherlands, supports European sales and administration291 Legal Proceedings The company reports no legal proceedings to disclose for the period - The company has no legal proceedings to report292 Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable293 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cerus Corporation's common stock trades on Nasdaq under CERS, with no dividends paid or planned, and a 5-year performance graph provided - The company's common stock trades on the Nasdaq Global Market under the ticker CERS295 - Cerus has not paid dividends and does not plan to in the foreseeable future297 5-Year Cumulative Total Return on Investment ($100) | Year | Cerus Corporation | Nasdaq Biotech Index | Nasdaq Index | | :--- | :--- | :--- | :--- | | 2014 | $100.00 | $100.00 | $100.00 | | 2015 | $101.28 | $111.42 | $105.73 | | 2016 | $69.71 | $87.26 | $113.66 | | 2017 | $54.17 | $105.64 | $145.76 | | 2018 | $81.25 | $95.79 | $140.10 | | 2019 | $67.63 | $119.17 | $189.45 | Selected Financial Data This section summarizes five years of financial data (2015-2019), showing consistent product revenue growth, increasing government contract revenue, and annual net losses Selected Consolidated Statements of Operations Data (in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Product revenue | $74,649 | $60,908 | $43,568 | $37,183 | $34,223 | | Government contract revenue | $19,125 | $15,143 | $7,758 | $2,092 | $— | | Loss from operations | $(66,226) | $(54,988) | $(57,530) | $(61,447) | $(61,075) | | Net loss | $(71,244) | $(57,564) | $(60,585) | $(62,906) | $(55,868) | | Net loss per share (Basic) | $(0.51) | $(0.44) | $(0.56) | $(0.62) | $(0.58) | Selected Consolidated Balance Sheets Data (in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash, cash equivalents and short-term investments | $85,718 | $117,577 | $60,696 | $71,628 | $107,879 | | Working capital | $77,772 | $94,224 | $66,767 | $67,217 | $108,544 | | Total assets | $165,535 | $163,460 | $98,244 | $103,476 | $139,402 | | Total stockholders' equity | $57,052 | $84,519 | $38,940 | $57,787 | $94,765 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 2019 financial performance, noting a 23% total revenue increase, significant R&D and SG&A expense rises, a $71.2 million net loss, and reliance on future financing and BARDA funding Revenue Performance (2017-2019) | Revenue Source | 2019 | 2018 | 2017 | % Change (2019 vs 2018) | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $74,649 | $60,908 | $43,568 | 23% | | Government contract revenue | $19,125 | $15,143 | $7,758 | 26% | | Total revenue | $93,774 | $76,051 | $51,326 | 23% | - The 2019 product revenue increase was primarily due to sales volume growth of disposable kits in the U.S. and the Middle East336337 - Research and development expenses increased by 42% in 2019 to $60.4 million, driven by product enhancements, BARDA-related activities, and development for extended-storage cryoprecipitate350 - Selling, general, and administrative expenses increased by 16% in 2019 to $66.2 million, due to higher stock compensation and investments in supply chain and commercial launch preparations354 - Net cash used in operating activities increased to $65.8 million in 2019 from $31.2 million in 2018, mainly due to higher operating expenditures and a one-time $6.1 million payment to Fresenius370 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates and foreign currency, with hypothetical increases impacting 2019 net interest expense by $0.4 million and foreign exchange by $1.0 million - The company's primary market risks are interest rate risk and foreign currency risk390393 - A hypothetical 100 basis point increase in interest rates would have increased 2019 net interest expense by approximately $0.4 million due to variable-rate debt392 - A hypothetical 10% unfavorable change in foreign currency exchange rates at year-end 2019 would have negatively impacted annual financial results by $1.0 million, as many international sales are denominated in Euros394 Financial Statements and Supplementary Data This section indicates consolidated financial statements, notes, and the independent auditor's report are included in Item 15(a) - The consolidated financial statements and the independent auditor's report are located in Item 15(a) of the Form 10-K395 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported395 Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019397 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019400 - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019401405 Other Information The company reports no other information for this item - None412 PART III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Information for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and principal accountant fees, is incorporated by reference from the 2020 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2020 Proxy Statement414415418 - The company has adopted a Code of Business Conduct and Ethics, which is available on its website416 PART IV Exhibits and Financial Statement Schedules This section contains the company's consolidated financial statements for the fiscal year ended December 31, 2019, the independent auditor's report, and a comprehensive list of filed exhibits - This section includes the audited consolidated financial statements for the three years ended December 31, 2019, and the independent auditor's report424461 - A comprehensive list of exhibits filed with the report is provided, including material agreements related to manufacturing, supply, and financing430431434 2019 Key Financial Statement Balances (in thousands) | Account | Amount | | :--- | :--- | | Total Assets | $165,535 | | Total Liabilities | $108,483 | | Total Stockholders' Equity | $57,052 | | Total Revenue | $93,774 | | Net Loss | $(71,244) | Form 10-K Summary The company indicates that there is no Form 10-K summary provided - None458