Market Overview

Cerus Corporation Reports Second Quarter 2018 Results

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Product revenue increases 62% compared to 2017

Full-year product revenue guidance increased to a range of $56
million to $58 million from $53 million to $55 million

Cerus Corporation (NASDAQ:CERS) announced today financial results for
the second quarter ended June 30, 2018, and raised its full year
guidance for product revenue.

Second Quarter Highlights and Recent Events

  • Second quarter product revenue of $15.4 million, a 62% increase
    compared to the second quarter of 2017
  • Year-over-year worldwide disposable kit volumes increased over 70% in
    the second quarter of 2018
  • Cash, cash equivalents and short-term investments of $111.9 million at
    June 30, 2018
  • Amended agreement with the Biomedical Advanced Research and
    Development Authority (BARDA) for an additional $15 million in funding
    bringing the total potential contract value to over $200 million
  • Expanded cryoprecipitate manufacturing collaborations with the
    addition of The Blood Center of New Orleans

"The commercial momentum we experienced at the beginning of the year
continued throughout the second quarter with product revenue totaling
$15.4 million, exceeding our expectations," said William ‘Obi' Greenman,
Cerus' president and chief executive officer. "Given the first half
outperformance and based on current visibility into our commercial
pipeline, we are raising our full year product revenue outlook to a
range of $56 million to $58 million compared to our previous guidance
range of $53 million to $55 million."

"We believe strong sales performances in France and with the American
Red Cross are setting the stage for further market expansion and revenue
growth," continued Greenman. "Furthermore, we think that awareness of
the benefits of pathogen-reduction is increasing, as evidenced by the
discussions during the recent U.S. Food and Drug Administration's Blood
Products Advisory Committee Meeting."

During the quarter, the Company's development programs continued to
progress, and the Company anticipates submitting for CE Mark approval of
the INTERCEPT red blood cell system later in 2018. In addition, the
Company expanded its cryoprecipitate manufacturing collaborations with
the addition of The Blood Center of New Orleans.

Revenue

Product revenue during the second quarter of 2018 was $15.4 million,
compared to $9.5 million during the same period in 2017. The increased
product revenue was driven by quarter-over-quarter increases across all
major product categories led by global platelet kit demand. Year-to-date
product revenue totaled $29.0 million, an increase of 75% compared to
the same period of the prior year.

Government contract revenue from the Company's BARDA agreement was $4.0
million during the second quarter of 2018 compared to $1.7 million
during the same period in 2017, as a result of increasing INTERCEPT red
cell clinical and development activities. Year-to-date government
contract revenue totaled $7.5 million compared to $3.1 million in the
first half of 2017. BARDA is part of the Office of the Assistant
Secretary for Preparedness and Response within the U.S. Department of
Health and Human Services.

Gross Margins

Gross margins on product revenue during the second quarter of 2018 were
50%, compared to 54% for the second quarter of 2017. The change in gross
margin was primarily attributable to lower selling prices associated
with high volume customers. Gross margins through the first half of 2018
were 48% compared to 51% during the first half of 2017.

Operating Expenses

Total operating expenses were $24.3 million for the quarter ended June
30, 2018, compared to $23.0 million for the quarter ended June 30, 2017.
Year-to-date, operating expenses totaled $47.4 million compared to $45.9
million in the same period in the prior year.

Selling, general, and administrative (SG&A) expenses for the second
quarter of 2018 remained relatively flat at $14.4 million, compared to
$14.1 million for the second quarter of 2017, as the Company continued
to realize leverage from its existing commercial and back-office
investments. Year-to-date SG&A expenses totaled $28.0 million compared
to $27.8 million during the first half of 2017.

Research and development (R&D) expenses for the second quarter of 2018
were $9.9 million compared to $8.9 million for the second quarter of
2017. The increase in year-over-year R&D expenses were primarily due to
increased activities and costs tied to the development of INTERCEPT red
blood cells, including preparation for the planned CE Mark submission,
and pursuing expanded usage claims for INTERCEPT platelets and plasma.
Year-to-date R&D expenses through the second quarter of 2018 totaled
$19.3 million compared to $18.0 million during the first half of 2017.

Operating and Net Loss

Operating loss during the second quarter of 2018 was $12.6 million,
compared to $16.2 million during the second quarter of 2017.
Year-to-date operating loss was $25.9 million compared to an operating
loss of $34.3 million in the same period of the prior year.

Net loss for the second quarter of 2018 was $13.3 million, or $0.10 per
diluted share, compared to a net loss of $17.1 million, or $0.16 per
diluted share, for the second quarter of 2017. Year-to-date net loss was
$27.2 million, or $0.21 per diluted share, compared to a net loss of
$35.7 million, or $0.34 per diluted share, in the first half of 2017.

Cash, Cash Equivalents and Investments

At June 30, 2018, the Company had cash, cash equivalents and short-term
investments of $111.9 million, compared to $60.7 million at December 31,
2017.

At June 30, 2018 and December 31, 2017, the Company had approximately
$29.8 million in outstanding debt under its loan agreement with Oxford
Finance.

QUARTERLY CONFERENCE CALL

The Company will host a conference call and webcast at 4:15 P.M. EDT
this afternoon, during which management will discuss the Company's
financial results and provide a general business overview and outlook.
To access the live webcast, please visit the Investor Relations page of
the Cerus website at http://www.cerus.com/ir.
Alternatively, you may access the live conference call by dialing (866)
235-9006 (U.S.) or (631) 291-4549 (international).

A replay will be available on the Company's website, or by dialing (855)
859-2056 (U.S.) or (404) 537-3406 (international) and entering
conference ID number 8278017. The replay will be available approximately
three hours after the call through August 16, 2018.

ABOUT CERUS

Cerus Corporation is a biomedical products company focused in the field
of blood transfusion safety. The INTERCEPT Blood System is designed to
reduce the risk of transfusion-transmitted infections by inactivating a
broad range of pathogens such as viruses, bacteria and parasites that
may be present in donated blood. The nucleic acid targeting mechanism of
action of the INTERCEPT treatment is designed to inactivate established
transfusion threats, such as hepatitis B and C, HIV, West Nile virus and
bacteria, as well as emerging pathogens such as chikungunya, malaria and
dengue. Cerus currently markets and sells the INTERCEPT Blood System for
both platelets and plasma in the United States, Europe, the Commonwealth
of Independent States, the Middle East and selected countries in other
regions around the world. The INTERCEPT red blood cell system is in
clinical development. See http://www.cerus.com
for information about Cerus.

INTERCEPT and the INTERCEPT Blood System are trademarks of Cerus
Corporation.

Forward Looking Statements

Except for the historical statements contained herein, this press
release contains forward-looking statements concerning Cerus' products,
prospects and expected results, including statements concerning Cerus'
adjusted 2018 annual product revenue guidance; the potential contract
value of Cerus' amended agreement with BARDA; the potential to avoid
septic platelet transfusions with the INTERCEPT Blood System; the
potential to expand the usage claims for the INTERCEPT Blood System;
Cerus' planned INTERCEPT red blood cell system CE Mark submission and
the anticipated timing thereof; and other statements that are not
historical facts. Actual results could differ materially from these
forward-looking statements as a result of certain factors, including,
without limitation: risks associated with the commercialization and
market acceptance of, and customer demand for, the INTERCEPT Blood
System, including the risks that Cerus may not (a) meet its adjusted
revenue guidance for 2018, (b) grow sales in its European markets,
including in France, and/or realize expected revenue contribution
resulting from its European market agreements, and/or (c) realize
meaningful revenue contributions from U.S. customers in the near term or
at all, particularly since Cerus cannot guarantee the volume or timing
of commercial purchases, if any, that its U.S. customers may make under
Cerus' commercial agreements with these customers; risks associated with
Cerus' lack of commercialization experience in the United States and its
ability to develop and maintain an effective and qualified U.S.-based
commercial organization, as well as the resulting uncertainty of its
ability to achieve market acceptance of and otherwise successfully
commercialize the INTERCEPT Blood System for platelets and plasma in the
United States, including as a result of licensure requirements that must
be satisfied by U.S. customers prior to their engaging in interstate
transport of blood components processed using the INTERCEPT Blood
System; risks related to Fresenius Kabi's efforts to assure an
uninterrupted supply of platelet additive solution (PAS); risks related
to how any future PAS supply disruption could affect INTERCEPT's
acceptance in the marketplace; risks related to how any future PAS
supply disruption might affect current commercial contracts; risks
related to Cerus' ability to demonstrate to the transfusion medicine
community and other health care constituencies that pathogen reduction
and the INTERCEPT Blood System is safe, effective and economical; the
uncertain and time-consuming development and regulatory process,
including the risks (a) that Cerus may be unable to comply with the
FDA's post-approval requirements for the INTERCEPT platelet and plasma
systems, including by successfully completing required post-approval
studies, which could result in a loss of U.S. marketing approval for the
INTERCEPT platelet and/or plasma systems, (b) related to Cerus' ability
to expand the label claims and product configurations for the INTERCEPT
platelet and plasma systems in the United States, including for
INTERCEPT-treated extended storage cryoprecipitate from plasma, which
will require additional regulatory approvals, (c) that Cerus may be
unable to file for CE Mark approval of the red blood cell system in
Europe on the anticipated timeframe or at all, and even if filed, Cerus
may be unable to obtain CE Mark approval, or any other regulatory
approvals, of the red blood cell system in a timely manner or at all,
(d) that Cerus may be unable to submit its planned PMA supplement to the
FDA for INTERCEPT-treated extended storage cryoprecipitate from plasma
on the anticipated timeframe or at all, and even if submitted, Cerus may
be unable to obtain FDA approval, or any other regulatory approvals, of
INTERCEPT-treated extended storage cryoprecipitate from plasma in a
timely manner or at all, (e) that applicable regulatory authorities may
disagree with Cerus‘ interpretations of the data from its clinical
studies and/or may otherwise determine not to approve Cerus' regulatory
submissions in a timely manner or at all, and (f) that anticipated
clinical trials of the INTERCEPT Blood System may not be initiated on
the anticipated timing or at all, or if initiated, may be extended,
delayed, suspended or terminated, including as result of safety
concerns; risks associated with the uncertain nature of BARDA's funding
over which Cerus has no control as well as actions of Congress and
governmental agencies which may adversely affect the availability of
funding under Cerus' BARDA agreement and/or BARDA's exercise of any
potential subsequent option periods, such that the anticipated
activities that Cerus expects to conduct with the funds available from
BARDA may be delayed or halted and that Cerus may not otherwise realize
the total potential value under its agreement with BARDA; risk related
to product safety, including the risk that the septic platelet
transfusions may not be avoidable with the INTERCEPT Blood System; risks
related to adverse market and economic conditions, including continued
or more severe adverse fluctuations in foreign exchange rates and/or
weakening economic conditions in the markets where Cerus sells its
products; Cerus' reliance on third parties to market, sell, distribute
and maintain its products; Cerus' ability to maintain an effective
manufacturing supply chain, including the ability of its manufacturers
to comply with extensive FDA and foreign regulatory agency requirements,
and Cerus' ability to maintain its primary kit manufacturing agreement
and its other supply agreements with its third party suppliers; the
impact of legislative or regulatory healthcare reforms that may make it
more difficult and costly for Cerus to produce, market and distribute
its products; risks related to future opportunities and plans, including
the uncertainty of Cerus' future capital requirements and its future
revenues and other financial performance and results, as well as other
risks detailed in Cerus' filings with the Securities and Exchange
Commission, including Cerus' Quarterly Report on Form 10-Q for the
quarter ended March 31, 2018, filed with the SEC on May 8, 2018. Cerus
disclaims any obligation or undertaking to update or revise any
forward-looking statements contained in this press release.

 
CERUS CORPORATION
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
 

2018

      2017     2018       2017  
Product revenue $ 15,420 $ 9,525 $ 28,984 $ 16,531
Cost of product revenue   7,720     4,360     15,050     8,054  
Gross profit on product revenue   7,700     5,165     13,934     8,477  
Government contracts revenue   4,047     1,667     7,502     3,095  
Operating expenses:
Research and development 9,881 8,891 19,318 18,041
Selling, general and administrative   14,437     14,145     28,044     27,828  
Total operating expenses   24,318     23,036     47,362     45,869  
Loss from operations (12,571 ) (16,204 ) (25,926 ) (34,297 )
Non-operating (expense) income, net   (652 )   2,997     (1,128 )   2,527  
Loss before income taxes (13,223 ) (13,207 ) (27,054 ) (31,770 )
Provision for income taxes   59     3,876     113     3,911  
Net loss $ (13,282 ) $ (17,083 ) $ (27,167 ) $ (35,681 )
 
Net loss per share:
Basic $ (0.10 ) $ (0.16 ) $ (0.21 ) $ (0.34 )
Diluted $ (0.10 ) $ (0.16 ) $ (0.21 ) $ (0.34 )
 
Weighted average shares outstanding used for calculating net loss
per share:

 

 

Basic 131,352 105,044 128,101 104,308
Diluted     131,352       105,044       128,101       104,308  
 
 
CERUS CORPORATION
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
(in thousands)
 
 

    June 30,    

 

December 31,

2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 14,305 $ 13,683
Short-term investments 97,605 47,013
Accounts receivable 11,388 12,415
Inventories 12,930 14,457
Other current assets   4,970   2,330
Total current assets 141,198 89,898
Non-current assets:
Property and equipment, net 2,157 2,119
Goodwill and intangible assets, net 1,751 1,852
Restricted cash and other assets   6,740   4,375
Total assets $ 151,846 $ 98,244
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 23,815 $ 22,686
Debt - current 3,572 -
Deferred product revenue - current   676   445
Total current liabilities 28,063 23,131
Non-current liabilities:
Debt - non-current 26,262 29,798
Manufacturing and development obligations - non-current 5,748 5,766
Other non-current liabilities   1,329   609
Total liabilities   61,402   59,304
Stockholders' equity   90,444   38,940
Total liabilities and stockholders' equity $ 151,846 $ 98,244

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