On November 1, 2018 Cerus Corporation (Nasdaq: CERS) reported financial results for the third quarter ended September 30, 2018 (Press release, Cerus, NOV 1, 2018, View Source [SID1234530505]).
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Third Quarter Highlights and Recent Events
Third quarter product revenue of $15.4 million, a 43% increase compared to the third quarter of 2017
Year-over-year worldwide disposable kit volumes increased 85% in the third quarter of 2018
2018 product revenue guidance revised upwards to a range of $58 million to $60 million, representing an increase of 33% to 38% compared to 2017 product revenue
Notified TÜV SÜD in October of the Company’s request to file its planned CE Mark submission in 60 days for INTERCEPT red blood cells
Received FDA Breakthrough Device Designation for pathogen-reduced cryoprecipitate
"The market adoption of the INTERCEPT Blood System continues to be strong with third quarter product revenue totaling $15.4 million," said William ‘Obi’ Greenman, Cerus’ president and chief executive officer. "Year-over-year product revenue growth was driven by sales of INTERCEPT platelet kits and was broad based with all major geographic regions delivering gains. Given our strong year-to-date results and increasing visibility into our commercial pipeline, we recently revised our 2018 product revenue guidance to a range of $58 million to $60 million."
"In addition to our strong third quarter results, we recently notified TÜV SÜD, our Notified Body, of our request to file our CE Mark submission in 60 days for INTERCEPT red blood cells. Our red cell team is working diligently in preparation for the planned submission and is on track to deliver on this important milestone," continued Greenman.
A Notified Body is an organization accredited by a member country of the European Union to determine if a product conforms to predetermined standards.
Revenue
Product revenue during the third quarter of 2018 was $15.4 million, compared to $10.8 million during the same period in 2017. The increase in third quarter product revenue was led by gains in platelet kit sales, which were partially offset by a year-over-year decline in illuminator sales. Third quarter 2017 illuminator sales benefited from the initial instrument shipments pursuant to the Company’s expanded supply agreement with EFS, the French National Blood Service. Year-to-date product revenue totaled $44.4 million, an increase of 62% compared to the same period of the prior year.
Government contract revenue from the Company’s Biomedical Advanced Research and Development Authority (BARDA) agreement was $3.9 million during the third quarter of 2018, compared to $2.3 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 $11.4 million compared to $5.4 million in the first nine months 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. 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 2018 were 47%, compared to 50% for the third quarter of 2017. The change in gross margin was primarily attributable to lower selling prices associated with high volume customers, and to a lesser extent, the unfavorable impact of foreign exchange rates. Gross margins through the first nine months of 2018 were 48% compared to 51% in the same period of the prior year.
Operating Expenses
Total operating expenses were $24.8 million for the quarter ended September 30, 2018, compared to $20.1 million for the quarter ended September 30, 2017. Year-to-date, operating expenses totaled $72.2 million compared to $66.0 million in the same period of the prior year.
Selling, general, and administrative (SG&A) expenses for the third quarter of 2018 totaled $14.0 million, compared to $12.2 million for the third quarter of 2017. The year-over-year increase was primarily tied to higher commercial activity in the U.S. Year-to-date SG&A expenses totaled $42.0 million, compared to $40.1 million during the first nine months of 2017.
Research and development (R&D) expenses for the third quarter of 2018 were $10.8 million, compared to $7.9 million for the third quarter of 2017. The increase in year-over-year R&D expenses was primarily due to additional activities and costs tied to the development of INTERCEPT red blood cells, including preparation for the planned CE Mark submission, trials and activities in pursuit of FDA approval of INTERCEPT red blood cells and activities aimed at expanded label claims for INTERCEPT platelets and plasma. Year-to-date R&D expenses through the third quarter of 2018 totaled $30.1 million, compared to $25.9 million during the first nine months of 2017.
Net Loss
Net loss for the third quarter of 2018 was $14.2 million, or $0.11 per diluted share, compared to a net loss of $13.4 million, or $0.12 per diluted share, for the third quarter of 2017. Year-to-date net loss was $41.4 million, or $0.32 per diluted share, compared to a net loss of $49.1 million, or $0.46 per diluted share, in the first nine months of 2017.
Cash, Cash Equivalents and Investments
At September 30, 2018, the Company had cash, cash equivalents and short-term investments of $119.0 million, compared to $60.7 million at December 31, 2017.
At September 30, 2018, the Company had approximately $29.9 million in outstanding debt under its loan agreement with Oxford Finance compared to $29.8 million at December 31, 2017.
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 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 7095077. The replay will be available approximately three hours after the call through November 15, 2018.