On October 30, 2019 Cerus Corporation (Nasdaq: CERS) reported financial results for the third quarter ended September 30, 2019 (Press release, Cerus, OCT 30, 2019, View Source [SID1234550032]).
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Recent developments and highlights include:
FDA issued its final guidance document on strategies to mitigate the risk of bacterial contamination in transfused platelet components
Total third quarter revenue of $22.8 million
Quarterly product revenue of $18.0 million, a 17% increase compared to the prior year quarter
Government contract revenue of $4.8 million
Worldwide demand for INTERCEPT continued to increase; calculated number of treatable platelet doses increased nearly 20% worldwide compared to the prior year quarter
2019 product revenue guidance reaffirmed at $72 million to $75 million, up 18-23% over 2018, driven by strong global demand for INTERCEPT platelets
Over 20 posters and abstracts presented at the 2019 AABB Conference, highlighting the clinical and operational benefits of INTERCEPT
"The recent finalization of the FDA guidance document is great for patients, transfusion medicine and Cerus," said William ‘Obi’ Greenman, Cerus’ president and chief executive officer. "INTERCEPT is uniquely positioned to provide a solution for blood centers to comply with the final guidance that confers optimal operational simplicity, clinical efficacy, and economic value to blood centers and hospitals. In this regard, the American Red Cross and many other large U.S. blood centers have stated that pathogen reduction is their preferred solution to safeguarding the platelet supply."
"We have built a strong foundation of awareness for INTERCEPT as evidenced by another quarter of strong commercial execution with the calculated number of treatable platelet doses in the U.S. up nearly 70% compared to the prior year. With this solid base of existing blood center customers scaling their production of INTERCEPT platelets, we are ramping our efforts to support U.S. blood centers and hospitals to be compliant with the FDA’s final guidance document by the end of Q1 2021," continued Greenman.
Revenue
Product revenue during the third quarter of 2019 was $18.0 million, compared to $15.4 million during the same period in 2018. Revenue growth in the quarter benefited from continued demand for INTERCEPT platelet kits in the U.S. and the timing of large plasma kit orders in EMEA, which were partially offset by the conversion to our double dose platelet kits in France and a 4% negative impact of foreign currency exchange rates. Year-to-date product revenue totaled $53.7 million, an increase of 21% compared to the same period in 2018.
Government contract revenue from the Company’s Biomedical Advanced Research and Development Authority (BARDA) agreement was $4.8 million during the third quarter of 2019, compared to $3.9 million during the same period in 2018, as a result of increasing INTERCEPT red blood cell clinical and development activities. Year-to-date government contract revenue totaled $13.6 million compared to $11.4 million in the first nine months of 2018. The total potential value of the current BARDA agreement is $201 million with $39 million recognized as revenue to date.
BARDA is part of the Office of the Assistant Secretary for Preparedness and Response within the U.S. Department of Health and Human Services. The development of the INTERCEPT red blood cell program has been funded in whole or in part with Federal funds from the Department of Health and Human Services; Office of the Assistant Secretary for Preparedness and Response; Biomedical Advanced Research and Development Authority, under Contract No. HHSO100201600009C.
Gross Margins
Gross margins on product revenue during the third quarter of 2019 were 58%, compared to 47% for the third quarter of 2018. The increase in gross margin was tied to economies of scale realized for our cost of goods sold, favorable platelet product mix, namely the French conversion to double dose platelet kits and additional manufacturing efficiencies. Gross margins during the first nine months of 2019 were 55% compared to 48% reported in the same period the year prior.
Operating Expenses
Total operating expenses for the third quarter of 2019 were $32.2 million compared to $24.8 million for the same period the prior year. Year-to-date, operating expenses totaled $93.0 million compared to $72.2 million for the first three quarters of 2018.
Selling, general, and administrative (SG&A) expenses for the third quarter of 2019 totaled $16.1 million, compared to $14.0 million for the third quarter of 2018. The year-over-year increase in SG&A expenses was tied to increased non-cash stock compensation, higher investments in our supply chain capabilities and focused investments on preparatory activities for our anticipated cryoprecipitate launch. Year-to-date SG&A expenses totaled $49.0 million compared to $42.0 million for the first nine months of 2018.
Research and development (R&D) expenses for the third quarter of 2019 were $16.1 million, compared to $10.8 million for the third quarter of 2018. The increase in year-over-year R&D expenses was largely due to product enhancements and initiatives for expanded label claims, development activities to support our anticipated cryoprecipitate PMA supplement, as well as additional activities tied to the development of our INTERCEPT red blood cell system. Year-to-date R&D expenses totaled $43.9 million compared to $30.1 million for the first nine months of 2018.
Net Loss
Net loss for the third quarter of 2019 was $18.0 million, or $0.13 per diluted share, compared to a net loss of $14.2 million, or $0.11 per diluted share, for the third quarter of 2018. Year-to-date net loss was $54.3 million or $0.39 per diluted share compared to $41.4 million, or $0.32 per diluted share in the first nine months of 2018.
Cash, Cash Equivalents and Investments
At September 30, 2019, the Company had cash, cash equivalents and short-term investments of $85.1 million, compared to $117.6 million at December 31, 2018.
At September 30, 2019, the Company had approximately $39.4 million in outstanding term loan debt and $5.0 million of borrowings under its revolving loan credit agreement, compared to $29.9 million in outstanding term loan debt at December 31, 2018.
2019 Product Revenue Guidance
The Company reaffirms its 2019 product revenue guidance to the range of $72 million to $75 million. The guidance range represents 18% to 23% growth compared to 2018 reported product revenue and is based on the strong global demand for INTERCEPT platelet kits.
QUARTERLY CONFERENCE CALL AND WEBCAST
The Company will host a conference call and webcast 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 and view the presentation slides, please visit the Investor Relations page of the Cerus website at View Source 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 2392137. The replay will be available approximately three hours after the call through November 13, 2019.