On August 2, 2018 Cerus Corporation (Nasdaq: CERS) reported its financial results for the second quarter ended June 30, 2018, and raised its full year guidance for product revenue (Press release, Cerus, AUG 2, 2018, View Source [SID1234528344]).

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Second Quarter Highlights and Recent Events

Second quarter product revenue of $15.4 million, a 62% increase compared to the second quarter of 2017
Year-over-year worldwide disposable kit volumes increased over 70% in the second quarter of 2018
Cash, cash equivalents and short-term investments of $111.9 million at June 30, 2018
Amended agreement with the Biomedical Advanced Research and Development Authority (BARDA) for an additional $15 million in funding bringing the total potential contract value to over $200 million
Expanded cryoprecipitate manufacturing collaborations with the addition of The Blood Center of New Orleans
"The commercial momentum we experienced at the beginning of the year continued throughout the second quarter with product revenue totaling $15.4 million, exceeding our expectations," said William ‘Obi’ Greenman, Cerus’ president and chief executive officer. "Given the first half outperformance and based on current visibility into our commercial pipeline, we are raising our full year product revenue outlook to a range of $56 million to $58 million compared to our previous guidance range of $53 million to $55 million."

"We believe strong sales performances in France and with the American Red Cross are setting the stage for further market expansion and revenue growth," continued Greenman. "Furthermore, we think that awareness of the benefits of pathogen-reduction is increasing, as evidenced by the discussions during the recent U.S. Food and Drug Administration’s Blood Products Advisory Committee Meeting."

During the quarter, the Company’s development programs continued to progress, and the Company anticipates submitting for CE Mark approval of the INTERCEPT red blood cell system later in 2018. In addition, the Company expanded its cryoprecipitate manufacturing collaborations with the addition of The Blood Center of New Orleans.

Revenue

Product revenue during the second quarter of 2018 was $15.4 million, compared to $9.5 million during the same period in 2017. The increased product revenue was driven by quarter-over-quarter increases across all major product categories led by global platelet kit demand. Year-to-date product revenue totaled $29.0 million, an increase of 75% compared to the same period of the prior year.

Government contract revenue from the Company’s BARDA agreement was $4.0 million during the second quarter of 2018 compared to $1.7 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 $7.5 million compared to $3.1 million in the first half 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.

Gross Margins

Gross margins on product revenue during the second quarter of 2018 were 50%, compared to 54% for the second quarter of 2017. The change in gross margin was primarily attributable to lower selling prices associated with high volume customers. Gross margins through the first half of 2018 were 48% compared to 51% during the first half of 2017.

Operating Expenses

Total operating expenses were $24.3 million for the quarter ended June 30, 2018, compared to $23.0 million for the quarter ended June 30, 2017. Year-to-date, operating expenses totaled $47.4 million compared to $45.9 million in the same period in the prior year.

Selling, general, and administrative (SG&A) expenses for the second quarter of 2018 remained relatively flat at $14.4 million, compared to $14.1 million for the second quarter of 2017, as the Company continued to realize leverage from its existing commercial and back-office investments. Year-to-date SG&A expenses totaled $28.0 million compared to $27.8 million during the first half of 2017.

Research and development (R&D) expenses for the second quarter of 2018 were $9.9 million compared to $8.9 million for the second quarter of 2017. The increase in year-over-year R&D expenses were primarily due to increased activities and costs tied to the development of INTERCEPT red blood cells, including preparation for the planned CE Mark submission, and pursuing expanded usage claims for INTERCEPT platelets and plasma. Year-to-date R&D expenses through the second quarter of 2018 totaled $19.3 million compared to $18.0 million during the first half of 2017.

Operating and Net Loss

Operating loss during the second quarter of 2018 was $12.6 million, compared to $16.2 million during the second quarter of 2017. Year-to-date operating loss was $25.9 million compared to an operating loss of $34.3 million in the same period of the prior year.

Net loss for the second quarter of 2018 was $13.3 million, or $0.10 per diluted share, compared to a net loss of $17.1 million, or $0.16 per diluted share, for the second quarter of 2017. Year-to-date net loss was $27.2 million, or $0.21 per diluted share, compared to a net loss of $35.7 million, or $0.34 per diluted share, in the first half of 2017.

Cash, Cash Equivalents and Investments

At June 30, 2018, the Company had cash, cash equivalents and short-term investments of $111.9 million, compared to $60.7 million at December 31, 2017.

At June 30, 2018 and December 31, 2017, the Company had approximately $29.8 million in outstanding debt under its loan agreement with Oxford Finance.

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 8278017. The replay will be available approximately three hours after the call through August 16, 2018.