Yahoo Finance Cerus Corporation (NASDAQ:CERS) Q1 2024 Earnings Call Transcript
Cerus Corporation (NASDAQ:CERS) Q1 2024 Earnings Call Transcript May 2, 2024
Cerus Corporation misses on earnings expectations. Reported EPS is $-0.0532 EPS, expectations were $-0.04. Cerus Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Cerus Corporation First Quarter 2024 Earnings Conference Call. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jessica Hanover, Cerus Vice President of Corporate Affairs. Dr. Hanover, you may begin.
Jessica Hanover: Thank you, and good afternoon. I'd like to thank everyone for joining us today. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at ir.serus.com. With me on the call are Obi Greenman, Cerus' President and Chief Executive Officer; Vivek Jayaraman, Cerus' Chief Operating Officer; Kevin Green, Cerus' Chief Financial Officer; and Carol Moore, Cerus' Senior Vice President of Regulatory Affairs and Quality. Cerus issued a press release today announcing our financial results for the first quarter ended March 31, 2024 and describing the company's recent business highlights. You can access a copy of this announcement on the company website at www.cerus.com.
I'd like to remind you that some of the statements we will make on this call related to future events and performance rather than historical facts and are forward-looking statements. Examples of forward-looking statements include those related to our future financial and operating results, including our 2024 product revenue guidance, our expectations for operating cash flows and non-GAAP adjusted EBITDA performance and our expected expense levels, expected future growth and our growth trajectory, the availability and related timing of data from clinical trials, planned regulatory commissions and product launches, product expansion prospects and other statements that are not historical facts. These forward-looking statements involve risks and uncertainties that could cause actual events, performance and results to differ materially.
They are identified and described in today's press release, in our slide presentation and under Risk Factors in our Form 10-Q for the quarter ended March 31, 2024, which we will file shortly. We undertake no duty or obligation to update our forward-looking statements. On today's call, we will also be discussing non-GAAP financial measures, including non-GAAP adjusted EBITDA. These non-GAAP measures should be considered a supplement to and not a replacement for measures presented in accordance with GAAP. For a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures, please refer to today's press release and the slide presentation available on our website. We'll begin today with opening remarks from Obi, followed by Vivek to discuss recent business highlights, then Kevin to review our financial results and expectations for the rest of 2024 and lastly, closing remarks from Obi.
And now, it's my pleasure to introduce Obi Greenman, Cerus' President and Chief Executive Officer.
Obi Greenman: Thank you, Jessica, and good afternoon, everyone. I'd like to open the call by spending a few minutes reviewing our recent positive performance as well as looking ahead to the key milestones on path for the company. The first quarter of 2024 was an important one in the history of the company as we reported positive top line results from the Phase 3 ReCePI clinical trial, the first of our 2 U.S. BARDA funded trials for INTERCEPT red blood cells or RBCs. We are thrilled that ReCePI met its primary efficacy endpoint of non-inferiority of INTERCEPT RBCs compared to conventional RBCs in complex cardiovascular surgery patients. And while ReCePI was powered specifically for this primary efficacy endpoint, we are nonetheless also very pleased by the outcomes for the safety endpoints that we reported in March.
We recognize that there is great interest in the details of the ReCePI results and we look forward to being able to share more by way of media presentations and journal publications targeted for later this year once the publications have been accepted. As we continue to enroll the ReCePI study, our second U.S. BARDA funded Phase 3 trial for INTERCEPT RBCs, we view the ReCePI readout as meaningful for the overall RBC program in supportive of our planned launch in Europe. We are looking forward to meeting with the ReCePI trial investigators next month to review the findings from the study and to gain their insights into the opportunities for how to position this important data set with the transfusion medicine community. In summary, at this stage, the ReCePI data give us confidence in our INTERCEPT RBC program and we look forward to sharing more with you in 2024.
On the commercial front, we are increasingly confident in our expectations for 2024 and are reiterating our overall product revenue guidance of $172 million to $175 million inclusive of our INTERCEPT by bridging complex guidance of $8 million to $10 million. Vivek will provide color into the continued traction we see across our portfolio and geographies. Importantly, we also remain committed to adjusted EBITDA breakeven for the full-year 2024. Kevin will provide more insight into our pathway for continued improvement in this metric over time. I would like now to turn the call over to Vivek to discuss our commercial results and progress for the first quarter of 2024 as well as our outlook for the rest of the year.
Vivek Jayaraman: Thank you, Obi, and good afternoon to everyone. We continued our return to growth in Q1 2024. Across both product lines and geographic regions, we delivered strong performance in the quarter and I am pleased with the collaboration and execution of the global commercial team. In the U.S., our core platelet franchise is stabilizing and we witnessed a return to growth in our base U.S. business. Anecdotally, we are hearing from blood center customers that collections are slowly starting to recover and that platelet demand from their hospital customers remains strong. Furthermore, as we announced earlier, we received positive news from the FDA regarding our ability to increase platelet processing set shelf life. While our current forecast does not assume a major rebuilding of inventory at blood centers, the extended shelf life relieves a meaningful amount of pressure from our supply chain.
As we work to further increase shelf life on a going forward basis, we would expect to see the benefit across both inventory and service levels. Turning to our efforts internationally, our commercial team delivered a strong performance in the quarter, meeting the way with our continued progress in Canada in partnership with Canadian Blood Services, or CBS. CBS is nearing full implementation of INTERCEPT platelets across their network and pathogen reduction is now the standard of care for platelet safety in Canada. The validation efforts at Hema-Quebec are also going well. As a reminder, the Canadian market is split roughly 80/20 between CBS and Hema-Quebec. Earlier in the quarter, I had the opportunity to attend the annual MedLab Congress in Dubai.
Of note, I was pleased to see the strong interest in INTERCEPT across the Middle East. This region is a targeted growth area for our franchise. With a significant increase in healthcare investments in countries such as Saudi Arabia and a clinical focus on blood safety, we believe the Gulf region is an ideal area for market expansion. INTERCEPT is the only pathogen reduction system to be FDA approved and MDR cleared. We believe this regulatory distinction is a clear marker of advantage and really resonated with customers in the region. I'm encouraged by the ongoing cultivation of expansion prospects that will ensure growth for years to come. Our U.S. INTERCEPT Fibrinogen Complex, or IFC, delivered another strong quarter of growth in the period, and we feel confident in our ability to meet or exceed our full year revenue guidance for IFC.
During the quarter, we hosted a scientific advisory board meeting for IFC and the uptick in customer experience and enthusiasm for the product was notable. We are beginning to see clear examples of peer to peer marketing on IFC, which is an effective tool for new product adoption. During the quarter, we continued our strong push at clinical conferences and saw an increase in lead generation and physician attendance at our symposia. As noted in prior calls, we are actively partnering with several large blood centers to enable them to offer IFC directly to their hospital customers, and we experienced a notice step up in orders via the blood center channel. This is serving as a strong complement to our direct sales team who are now fully trained and are starting to see their hospital targets convert into ordering customers.
Most importantly, we continue to receive strong clinical support for the utility of IFC and for the patient benefit associated with earlier access to Fibrinogen. I look forward to providing more updates on our progress with IFC as well as our global commercial progress overall during future calls. I will now turn the call over to Kevin to review our financial results.
Kevin Green: Thanks, Vivek. Good afternoon and thank you all for joining us today. On today's call, I'll be discussing our financial results for the first quarter of 2024, highlighting the progress we made on the top-line, the bottom-line and the balance sheet. I'll also be providing some commentary on our positive financial outlook for the rest of the year. To start, we posted product revenue of $38.4 million for the first quarter of 2024. This represents year-over-year growth of 24%, demonstrative of our strong underlying growth in the business and ahead of our Q1 guidance provided back in January. North American platelet sales were the major contributor to our product revenue growth during the quarter. In the U.S., first quarter 2024 product revenues exceeded prior year levels by more than 40%.
As we anticipated, sales in Canada to Canadian Blood Services were also extremely strong and are now approaching nearly 100% adoption across their entire platelet production operation. In EMEA, first quarter product revenues were down 9% year-over-year and 8% compared to the fourth quarter of 2023. Certain delays in timing of order fulfillment primarily drove the decline, which is expected to reverse itself over the succeeding quarters. Year-over-year, FX rates provided a benefit for the EMEA business of around 1.1%. On a consolidated basis, FX provided a benefit of around 50 basis points when comparing Q1 2024 to that of the prior year period. As we mentioned on our last quarterly call, we are providing a quarterly breakout of IFC product revenue.
For Q1, we posted IFC revenue of $1.9 million, driven by increasing contributions from our national sales agreements with large U.S. blood center partners. As mentioned by Vivek, we believe the expanding recognition of IFC's clinical and operational utility will continue to drive the growth going forward. In addition to our product revenue and not included in our guidance, government contract revenue totaled $5 million in Q1 compared to $7.5 million for the prior year period. The completion of our U.S. Phase 3 ReCePI clinical trial was the primary driver for the decline. We expect this factor will result in government contract revenue remaining near Q1 levels until such time as our Turkish site begins enrollment for the RedeS trial. To remind you, included in our government contract revenue are the revenues recognized as reimbursement under our contract with BARDA, our agreement with the FDA to further whole blood pathogen reduction and our milestone-based agreement with the U.S. Department of Defense for lyophilized IFC.
Let's now turn to our product gross profit and gross margins. For first quarter, product gross profit was $21.3 million, compared to $17.3 million during the prior year period, an increase of 23% year-over-year. Product gross margins for the first quarter were 55.4%, relatively stable when compared to the prior year and Q4 2023. These results were consistent with our previous announced expectations and we continue to believe that we will achieve relative consistency in our gross margins this year. Moving on, our first quarter operating expenses, which totaled $34.3 million were $4.6 million lower than the prior year period of $38.9 million, a year-over-year decline of 12%. Q1 2024 operating expenses included $5.9 million in non-cash stock based compensation.
By specific expense type, first quarter R&D expenses totaled $14.5 million, compared to $17.4 million during the prior year period. This 17% decline was driven primarily by the completion of the ReCePI clinical trial and the effects of the restructuring implemented in June of last year. First quarter SG&A expenses were $19.8 million, compared to $21.6 million during the prior year period. The decline again driven by last year's restructuring. We believe this level of SG&A expense is sustainable for the remainder of 2024 and will allow us to drive our expected growth and to deliver against our revenue expectations. Let's now focus on the bottom line and non-GAAP adjusted EBITDA results. On the bottom line, reported net loss attributable to Cerus for the three months ended March 31, 2024 improved significantly when compared to the same period in the prior year.
Net loss attributable to Cerus for Q1 narrowed by 38% to $9.7 million or $0.05 per diluted share compared to $15.6 million or $0.09 per diluted share for the prior year period. On a non-GAAP adjusted EBITDA basis, Q1 2024 generated a much narrower loss of $2.7 million, compared to a loss of $9.8 million for the prior year period. As we look ahead to the balance of the year, we expect that as we deliver the top-line growth in our guidance and maintain stable gross margins and operating expenses, we expect to achieve at least breakeven non-GAAP adjusted EBITDA for 2024 as a whole. On the balance sheet and associated cash flows, we ended the first quarter with a cash position of $72.2 million of cash, cash equivalents and short-term investments on the balance sheet.
Importantly, as we previously announced was a possibility, we generated positive operating cash flows of $2 million for the first quarter, compared to cash used from operations of $8.5 million during the prior year period. With our expected top-line growth and anticipated declining inventory levels for the remainder of 2024, we continue to believe that with some possible quarterly fluctuations, we can potentially generate positive operating cash flows for 2024 as a whole. Turning now to our guidance. As Obi mentioned, we are increasingly confident in our growth expectations and as such we are reiterating our full-year 2024 product revenue guidance in the range of $172 million to $175 million, reflecting double-digit growth from last year. As we stated previously, we anticipate this growth to be fueled by the continued expansion of the INTERCEPT platelet business both in North America and in Europe as well as continued uptake of IFC in the U.S. We are also reiterating our full-year 2024 revenue guidance for IFC, which we continue to expect to be in the range of $8 million to $10 million, representing growth of roughly 25% to 50% for 2023 IFC sales.
I'd now like to turn the call back over to Obi for some closing remarks.
Obi Greenman: Thank you, Kevin. We are pleased with our momentum from the start of 2024 and we expect to see it carried through the rest of the year. The company is making strong progress towards our commercial pipeline and financial goals, allowing us to expand the access to and applicability of the INTERCEPT blood system on a global basis. Thank you for your continued interest in Cerus. I will now turn the call over to the operator for questions.
See also
20 Fastest Growing Fintech Companies In 2024 and
25 Most Profitable Companies in the US.
To continue reading the Q&A session, please click here.
