On August 2, 2023 Cerus Corporation (Nasdaq: CERS) reported financial results for the second quarter ended June 30, 2023 (Press release, Cerus, AUG 2, 2023, View Source [SID1234633643]).

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Recent highlights include:

Second quarter 2023 total revenue of $47.7 million was comprised of total product revenue of $38.9 million and government contract revenue of $8.9 million.
Received positive feedback for INTERCEPT Red Blood Cells CE Mark submission in clarification meeting with EU competent authority, the Dutch Medicines Evaluation Board (CBG), supporting possible CE Mark approval decision under the EU Medical Device Regulation (MDR) in the second half of 2024.
Planned completion of Phase 3 ReCePI study enrollment in cardiovascular surgery patients this year, with top-line data readout expected in Q1 2024.
Awarded an additional $8.7 million in funding from the U.S. Department of Defense for continued development of lyophilized INTERCEPT Fibrinogen Complex (LyoIFC), increasing total contract value to $17.8 million.
Adjusting full-year 2023 annual product revenue guidance to the range of $160 million to $165 million from the prior range of $165 million to $170 million given the expected impact of a temporary reduction in U.S. platelet kit shelf life on customer ordering patterns, reduced platelet collections in key regions of EMEA, and new Russia sanctions.
Cash, cash equivalents, and short-term investments were $84.5 million at June 30, 2023.
"We are pleased with our recent progress for the INTERCEPT Red Blood Cell program in both the EU and U.S.," said William "Obi" Greenman, Cerus’ president and chief executive officer. "During the second quarter, we gained additional clarity to a potential CE Mark approval decision in the second half of 2024 and a top-line data readout from our U.S. Phase 3 ReCePI study expected in the first quarter of next year. Given ongoing enrollment in RedeS, our second U.S. Phase 3 study, we plan to begin a modular premarket approval (PMA) application submission to FDA in the second half of 2025, with a final PMA module submission planned for the second half of 2026."

"On the commercial front, with many of the challenges of the first half of the year behind us, we remain confident in our expectations for growth during the rest of this year and into 2024. We also continue to be committed to achieving adjusted EBITDA breakeven this year," continued Greenman. "Given some recent ordering pattern modifications related to a temporary INTERCEPT kit shelf-life change in the U.S. and platelet collection dynamics in parts of Europe, along with the impact of recent Russia sanctions, we are adjusting our full-year 2023 product revenue guidance down to a range of $160 million to $165 million. Despite the adjustment, we are not seeing a change in market share, and we believe new customers and new geographies will fuel growth going forward."

Revenue

Product revenue during the second quarter of 2023 was $38.9 million, compared to $41.0 million during the prior year period. While the Company did not see a decline in market penetration in the U.S., it did continue to see some inventory management at U.S. customer sites during the second quarter. In addition, reduced platelet collections in certain regions of Europe and new sanctions in Russia provided headwinds during the second quarter.

Second-quarter 2023 government contract revenue was $8.9 million, compared to $6.6 million during the prior year period. Reported government contract revenue in the second quarter 2023 increased versus the prior year period primarily due to funding associated with development of LyoIFC. In addition to this funding, the Company’s government contract revenue was comprised of funding associated with research and development (R&D) activities related to the INTERCEPT Blood System for Red Blood Cells as well as efforts related to the development of next-generation pathogen reduction technology to treat whole blood.

Product Gross Profit & Margin

Product gross profit for the second quarter of 2023 was $21.3 million, which is consistent with the prior year period. Product gross margin for the second quarter of 2023 was 54.9% compared to 51.9% for the second quarter of 2022 and continues to represent the expected benefit of the Company’s growth and efforts over the past several years.

Operating Expenses

Total operating expenses for the second quarter of 2023 were $41.9 million compared to $34.7 million for the same period of the prior year, reflecting a year-over-year increase of 21%.

Selling, general, and administrative (SG&A) expenses for the second quarter of 2023 totaled $20.5 million, compared to $19.5 million for the second quarter of 2022. The year-over-year increase in SG&A expenses for the second quarter was tied to increased sales personnel hired to accelerate adoption of INTERCEPT Fibrinogen Complex and, to a lesser extent, inflation.

R&D expenses for the second quarter of 2023 were $19.2 million, compared to $15.2 million for the second quarter of 2022. The year-over-year increase in R&D expenses in the second quarter was tied to increased activity for our government reimbursed programs. In addition, we realized increased costs associated with development of our next-generation illumination device and in conjunction with producing data, and regulatory interactions with respect to our existing products.

In order to align operating expenses with the operating environment and priority initiatives, the Company entered into a plan to restructure certain functions and reduce its real estate footprint during the most recently completed quarter. The plan resulted in a $2.1 million restructuring charge for the second quarter of 2023. As part of the plan, the Company expects to take an additional future charge at the time it ceases use of leased real estate contemplated under the plan. The Company estimates that the cumulative actions taken will result in annualized operating expense savings of approximately $10 million per year. The Company excludes the restructuring charge from its non-GAAP adjusted EBITDA measure presented below.

Net Loss Attributable to Cerus Corporation

Net loss attributable to Cerus Corporation for the second quarter of 2023 was $13.3 million, or $0.07 per basic and diluted share, compared to a net loss attributable to Cerus Corporation of $8.4 million, or $0.05 per basic and diluted share, for the second quarter of 2022.

Non-GAAP Adjusted EBITDA

Non-GAAP Adjusted EBITDA for the second quarter of 2023 was negative $4.7 million, compared to non-GAAP Adjusted EBITDA of negative $2.4 million for the second quarter of 2022. For additional information, please see definitions and the reconciliation of this non-GAAP measure to net loss attributable to Cerus Corporation accompanying this release.

Balance Sheet & Cash Use

At June 30, 2023, the Company had cash, cash equivalents and short-term investments of $84.5 million, compared to $102.2 million at December 31, 2022.

As of June 30, 2023, the Company had $55 million outstanding on its term loan and $16.5 million drawn on its revolving credit facility. The Company has access to another $20 million of term debt and $18.5 million under its revolving line of credit.

For the second quarter of 2023, net cash used in operating activities totaled $7.6 million as compared to $0.3 million during the prior year period. The increase in operating cash use was primarily related to increased operating expenses, including the Company’s restructuring plan and increases in net production of inventory. The Company expects to moderate production of inventory in the second half of 2023 and sell down or reduce the net amount of inventory it has on hand.

2023 Product Revenue Guidance

The Company is adjusting its previously stated product revenue guidance range. The Company expects full-year 2023 product revenue to be in the range of $160 million to $165 million, compared to its previous range of $165 million to $170 million, due to a temporary reduction in the U.S. platelet kit shelf life, a reduction in platelet collections in parts of Europe, and new Russia sanctions instituted during the quarter.

Quarterly Conference Call

The Company will host a conference call at 4:30 P.M. EDT this afternoon, during which management will discuss the Company’s financial results and provide a general business overview and outlook. To listen to the live webcast, please visit the Investor Relations page of the Cerus website at View Source

A replay will be available on Cerus’ website approximately three hours after the call through August 16, 2023.