On May 7, 2019 Cerus Corporation (Nasdaq: CERS) reported financial results for the first quarter ended March 31, 2019 (Press release, Cerus, MAY 7, 2019, View Source [SID1234535821]).

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Recent developments and highlights include:

Total first quarter revenue of $22.0 million
Record quarterly product revenue of $17.5 million, a 29% increase compared to the prior year quarter
Government contract revenue of $4.5 million
Worldwide disposable kit demand increased 35% from the prior year quarter
2019 full year product revenue guidance being raised to range of $71 million to $74 million from $70 million to $73 million
Regulatory feedback on INTERCEPT red cell CE Mark submission will add to the overall review period
Strengthened balance sheet with a $90 million new debt facility consisting of a staged $70 million term loan and a $5 million revolving line of credit, expandable up to $20 million
"Our first quarter results reflect the continued strong underlying demand by blood centers and hospitals for INTERCEPT treated components which provides lower risk of transfusion transmitted infections from both known and emerging pathogens," said William ‘Obi’ Greenman, Cerus’ president and chief executive officer. "The robust sales momentum we experienced in 2018 has extended into 2019 driven by further U.S. adoption in advance of an expected FDA final guidance document on bacterial risk control strategies for platelet collection and transfusion this year."

"We are continuing to progress our development programs and to enhance our capabilities surrounding quality, manufacturing and supply chain continuity. In Europe, recent discussions with our Notified Body for the INTERCEPT red blood cell CE Mark submission have provided us with additional information which we expect, however, will extend the review process. We are using this opportunity to take measures to enhance our supply chain security prior to the anticipated commercial launch," continued Greenman.

Revenue

Product revenue during the first quarter of 2019 was $17.5 million, compared to $13.6 million during the same period in 2018. Revenue growth in the quarter benefited from the volume growth in disposable kit sales in the U.S., and increased disposable kit sales in the Middle East, partially offset by product mix in France and the strengthening of the U.S. dollar relative to the Euro.

Government contract revenue from the Company’s Biomedical Advanced Research and Development Authority (BARDA) agreement was $4.5 million during the first quarter of 2019, compared to $3.5 million during the same period in 2018, as a result of increasing INTERCEPT red blood cell clinical and development activities. The total potential value of the current BARDA agreement is $201 million with $29 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 first quarter of 2019 were 52%, compared to 46% for the first quarter of 2018. Gross margins in the quarter benefited from economies of scale and lower pricing from our contract manufacturer, favorable product mix in France and overall increased demand for platelet kits.

Operating Expenses

Total operating expenses for the first quarter 2019 were $29.6 million compared to $23.0 million for the same period the prior year.

Selling, general, and administrative (SG&A) expenses for the first quarter of 2019 totaled $16.2 million, compared to $13.6 million for the first quarter of 2018. The year-over-year increase was primarily tied to investments in our manufacturing and supply chain capabilities. This focus and investment is consistent with our plan that is designed to ensure stability of supply, improved management of our supply chain and preparation for planned global growth of demand for our products.

Research and development (R&D) expenses for the first quarter of 2019 were $13.4 million, compared to $9.4 million for the first quarter of 2018. 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 cell system and activities related to the BARDA agreement.

Net Loss

Net loss for the first quarter of 2019 was $18.8 million, or $0.14 per diluted share, compared to a net loss of $13.9 million, or $0.11 per diluted share, for the first quarter of 2018.

Cash, Cash Equivalents and Investments

At March 31, 2019, the Company had cash, cash equivalents and short-term investments of $100.4 million, compared to $117.6 million at December 31, 2018.

At March 31, 2019, the Company had approximately $39.4 million in outstanding term loan debt compared to $29.9 million at December 31, 2018.

Revised 2019 Product Revenue Guidance

The Company currently expects 2019 product revenue to be in the range of $71 million to $74 million compared to our previous guidance range of $70 million to $73 million. The new guidance range represents 17% to 21% growth compared to 2018 reported product revenue.

QUARTERLY CONFERENCE CALL

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 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 3932269. The replay will be available approximately three hours after the call through May 21, 2019.