On November 3, 2016 Cerus Corporation (NASDAQ: CERS) reported financial results for the third quarter ended September 30, 2016 (Press release, Cerus, NOV 3, 2016, View Source [SID1234516264]).
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Recent developments include:
The U.S. Food and Drug Administration’s (FDA) revised recommendations for protecting blood components from Zika virus was expanded to recommend use of pathogen reduction technology and/or an investigational blood screening test to all U.S. blood centers.
The first Cerus U.S. blood center customers have submitted biologics license applications to the FDA to request allowance for the interstate transport of INTERCEPT-treated platelet components.
Hemolife Fundacion Banco Nacional de Sangre became the first blood center to enter into routine use with the INTERCEPT Blood System in Colombia.
Cerus’ global commercial leadership was strengthened with the appointment of Vivek Jayaraman as chief commercial officer.
"U.S. momentum continues to build, with the number of customers initiating INTERCEPT production accelerating from just three at the beginning of the year to 17 customers to date. With another 22 contracted customers slated to begin production, we are in a healthy position for growth," said William ‘Obi’ Greenman, Cerus’ president and chief executive officer. "Beyond platelets and plasma, we are also moving forward with activities related to our red cell program, with plans to submit for European CE Mark approval and to initiate a U.S. Phase III trial."
Revenue
Product revenue for the third quarter of 2016 was $10.2 million, up 26% from the $8.0 million recognized during the same period in 2015. The increase in reported product revenue for the quarter was primarily driven by a year-over-year increase in INTERCEPT disposable kit demand of 30% in our EMEA and U.S. commercial regions. Product revenue for the first nine months of 2016 was $27.1 million, up 10% from the first nine months of 2015, driven primarily by increased kit sales in our EMEA region and sales to U.S. customers.
Revenue from our Biomedical Advanced Research and Development Authority (BARDA) agreement for the three and nine months ended September 30, 2016, was $0.3 million. We did not recognize any revenue from our BARDA agreement during the three and nine months ended September 30, 2015.
The Company continues to expect 2016 global product revenue in the range of $37 million to $40 million with anticipated growth supported by new business opportunities in both its European and U.S. markets.
Gross Margins
Gross margins on product revenue for the third quarter of 2016 were 46%, compared to 31% for the third quarter of 2015. Gross margins on product revenue for the first nine months of 2016 were 46%, compared to 30% for the first nine months of 2015. Gross margins on product revenue for the three and nine months ended September 30, 2016, increased primarily due to the Company’s disposable kit manufacturing agreement with Fresenius Kabi AG, entered into during the fourth quarter of 2015, and efficiencies realized in 2016 related to inventory management.
Operating Expenses
Total operating expenses for the third quarter of 2016 were $19.2 million, compared to $18.7 million for the third quarter of 2015. Total operating expenses for the first nine months of 2016 were $59.0 million, compared to $53.3 million for the first nine months of 2015. Selling, general and administrative expenses increased for the three and nine months ended September 30, 2016, primarily due to increased spending related to selling and marketing activities associated with the commercialization of INTERCEPT in the U.S. market. Research and development expenses drove the majority of the reported increase for the nine months ended September 30, 2016, primarily due to activities associated with clinical development of the red blood cell system, the pursuit of potential premarket applications supplement approvals for the platelet and plasma systems and the initial activities under the BARDA agreement.
Operating and Net Loss
Operating losses during the third quarter of 2016 were $14.3 million, compared to $16.2 million for the third quarter of 2015, and $46.3 million compared to $46.1 million for the nine months ended September 30, 2016 and September 30, 2015, respectively.
Net loss for the third quarter of 2016 was $14.4 million, or $0.14 per diluted share, compared to a net loss of $15.7 million, or $0.17 per diluted share, for the third quarter of 2015. Net loss for the first nine months of 2016 was $49.4 million, or $0.49 per diluted share, compared to a net loss of $41.1 million, or $0.48 per diluted share, for the same period of 2015.
Net loss for the third quarter of 2015 was positively impacted by the mark-to-market adjustments of the Company’s previously outstanding warrants, which resulted in non-cash gains of $1.1 million and $4.7 million during the third quarter of 2015 and first nine months of 2015, respectively. The Company has no remaining outstanding warrants and as such, does not expect mark-to-market adjustments going forward.
Cash, Cash Equivalents and Investments
At September 30, 2016, the Company had cash, cash equivalents and short-term investments of $81.2 million compared to $107.9 million at December 31, 2015.
At September 30, 2016, the Company had approximately $19 million in outstanding debt under its loan agreement with Oxford Finance.