Cerus Corporation (CERS) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Cerus Corporation Fourth Quarter 2014 Results Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to Lainie Corten, Investor Relations for Cerus. Ma'am, you may begin.

Thank you, operator, and good afternoon. I'd like to thank everyone for joining us today. With me on the call are Obi Greenman, Cerus' President and Chief Executive Officer; Kevin Green, our Chief Financial Officer; Nina Mufti, our Vice President of Development; Carol Moore, our Senior Vice President of Regulatory Affairs, Quality and Clinical; and also Larry Corash, our Chief Medical Officer. Cerus issued a press release today announcing our financial results for the fourth quarter and year ended December 31, 2014, and describing the company's recent business highlights. You can access a copy of this announcement on the company website at cerus.com. I would like to remind you that during this call, we will be making forward-looking statements regarding the company's expectations for its products, prospects and future results, including full year and first quarter 2015 revenue guidance; expectations for future demand and revenue growth; expectations for future costs, operating expenses, gross margins and foreign exchange rates; expectations for the company's U.S. commercialization efforts, including label claim extensions and customer implementation and the timing thereof; expectations for resumed sales growth in Europe, including revenue inflection points and new customers; expected or anticipated regulatory submissions and approval, including a potential CE Mark submission for and approval of the red blood cell system and the timing thereof; commercial launch of new products, including the red blood cell system or in new territories; clinical trial activities; access to debt financing; INTERCEPT availability under IDEs; and strategic changes to Cerus' distributor relationship. The company's actual results may differ materially from those suggested by forward-looking statements the company will be making, and the company assumes no obligation to update guidance or other forward-looking statements. I call your attention to the disclosure in the company's SEC filings, in particular in Cerus' current report on Form 8-K filed with the SEC on January 5, 2015, under the heading Risk Factors and Exhibit 99.1 to that Form 8-K. This call will be archived temporarily on our website and will not be updated during that time. On today's call, we'll begin with financial results from Kevin, followed by an update from Nina on our red cell development program. We'll conclude our prepared remarks with commentary from Obi, who will review the company's 2014 achievements and provide an outlook for 2015. And now it's my pleasure to introduce Kevin Green, Cerus' Chief Financial Officer.

Thank you, Lainie. This afternoon, we reported Q4 revenue of $9.7 million, up approximately 5% from the $9.2 million reported in Q4 the prior year and representing growth in kit demand of more than 10% over those same periods. The Q4 2014 reported revenue was consistent with our expectation that revenue would be impacted by the weakening euro exchange rate relative to the U.S. dollar. Over the course of the past 6 months of 2014, the euro-USD rates fell by more than 11%. Nevertheless, demand for our single-use kits remained relatively consistent throughout Q4 despite headwinds in certain distributor regions. Full year 2014 revenue was $36.5 million, within our revised guidance of $36 million to $38 million. Year-over-year, 2014 revenue was down approximately 8%, driven by the temporary disruption to sales as we transition to a direct sales force in certain southern European territories. That transition had the effect of reducing year-over-year demand for INTERCEPT kits by approximately 5%. With the recent approvals of both our platelet and plasma products by the FDA, we have signed up 2 early adopters and have begun marketing INTERCEPT in the United States. We see 2015 as a market development year for the U.S. and expect to gain experience selling the value of INTERCEPT and in turn, learning how quickly blood centers are able to implement and introduce the product. Therefore, we are providing 2015 revenue guidance for our core European and Middle Eastern markets of $36 million to $38 million. Our revenue guidance for the European and Middle Eastern markets is based on our anticipation of approximately 15% to 20% growth in kit demand in those markets despite weakness in the Russian market, which have historically represented approximately 10% of our revenue. Offsetting the anticipated 15% to 20% growth in kit demand, we expect to see a relatively weak euro to U.S. dollar exchange rate. We are also providing Q1 revenue guidance today. While we typically do not provide quarterly guidance and do not plan on this becoming the norm, historically, we see a sequential decline in Q1 revenues and this coming quarter is expected to be consistent with that trend. Furthermore, the euro-U.S. dollar exchange rates have continued to decline from the average rates realized in Q4 of 2014. Accordingly, we are guiding to expect at least a $2 million drop in Q1 revenue from Q4 2014, driven by a weakness in the Russian market and, to a lesser extent, lower euro-U.S. dollar FX rates. We remain confident in our revenue growth over the longer term with the potential for major inflection points from adoption in pivotal markets like the U.S., France and the U.K. We anticipate providing revenue guidance adjustments in our quarterly earnings calls as we recognize revenues outside of the core European and Middle Eastern markets. In addition, we will provide revenue guidance adjustments if we are able to realize revenues from those inflection points sooner than expected or for assumptions regarding kit demand growth or exchange rates require adjustments as the year progresses. Transitioning back to 2014 results. Gross margins for the full year were 42%, relatively stable compared with the gross margins of 2013. In the fourth quarter, gross margins were 32% compared to 47% in the prior year. Gross margins for the fourth quarter were impacted by the exchange rate fluctuations in the euro relative to our reporting currency, the U.S. dollar. Most of our inventory is procured in euro and those sales are also made in euro, creating a very efficient cash flow hedge. However, as reported in U.S. dollars under GAAP, revenues were recorded in U.S. dollars at the foreign exchange rates in effect at the time of sale, whereas the cost of products sold, or COGS, is recorded at the historical foreign exchange rates in effect at the time the inventory was purchased. We noted a significant deterioration in the euro relative to the U.S. dollar in the latter half of 2014, which is impacting reported margins for the fourth quarter. Most of the inventory purchased in that period has not yet been sold. It's important to note that without the effect of foreign exchange rates, our gross margins in euro have been relatively consistent throughout 2014 and are expected to expand with volume in the Middle Eastern and European markets. That current or similar euro to U.S. dollar exchange rates and as we see revenues from outside the European and Middle Eastern markets in non-euro denominations, we would expect to see some expansion of our reported gross margins. Our product mix continues to be in line with our expectations, with disposable kits representing over 90% of annual sales. Turning now to operating expenses. Total operating expenses for Q4 were $15.9 million, relatively flat sequentially and up from $12.1 million during Q4 of the prior year. Total operating expenses for 2014 were $59.7 million compared to $45.4 million for 2013. The increase in operating expenses for both Q4 and 2014 were driven by regulatory efforts in support of our PMA filings culminating in the FDA approval for INTERCEPT platelets and plasma in December of 2014. In addition, we began incurring costs associated with our ongoing IDEs for chikungunya and dengue as well as to treat convalescent plasma from previously infected Ebola patients. As we continue to make incremental investments in our North American commercial launch team and as we incurred increased development cost for the red blood cell program. Looking ahead, we anticipate operating expenses will increase as we complete the build-out of our commercial team for the American markets as we initiate and enroll patients for our required post-marketing hemovigilance studies in the United States and as we undertake the CMC activities necessary to expedite our CE Mark registration for INTERCEPT red cells. Net losses for the quarter were $20 million or $0.25 per diluted share after taking into account the dilutive impact of the mark-to-market value of outstanding warrants. Comparatively, net loss was $5.9 million or $0.10 per diluted share in Q4 of 2013. For the year, net losses were $38.6 million or $0.60 per diluted share compared to $43.3 million or $0.64 per diluted share in the prior year. The reported net loss for Q4 2014 was impacted by noncash charges of $6.6 million from the warrant accounting. For the year, operating results were impacted by noncash gains of $7.7 million. Of the $5.7 million warrants previously outstanding, $2.4 million warrants were exercised at the end of August, with the remaining $3.3 million warrants expiring in November of this year. Now looking at the balance sheet. We ended 2014 with cash and short-term investments of $51.3 million compared to $47.6 million at the end of September. In January 2015, the company completed a public offering of common stock raising more than $75 million after offering expenses. Our Oxford Finance credit facility provides up to $20 million in additional term loans, $10 million of which is conditioned upon achieving consolidated trailing 6-month revenues at specified levels. The strong year-end balance sheet, coupled with the proceeds from the January offering and the funds available under our credit facility, position the company well to execute on our initiatives, including the launch of the INTERCEPT in the United States and potentially bringing the red blood cell product to market in the EU. Looking ahead, with our current revenue guidance and expected spend on initiatives, we anticipate cash used for operating activities will increase in 2015 to an average of $12 million to $13 million a quarter, up from the approximately $10 million a quarter we experienced in 2014. With that, I'd like to turn the call over to Nina, who will provide an update on our red cell development program.

Thank you, Kevin. In late December, we announced that our U.S. Phase II study to evaluate RBC survival successfully met the primary end point and the FDA criteria for 24-hour recovery for red cell components. In early January, we announced the results of our European Phase III acute anemia trial. The primary efficacy end point was equivalent of mean hemoglobin content between INTERCEPT RBCs and conventional RBCs, which was successfully met. The study also evaluated secondary efficacy end points and demonstrated that the INTERCEPT red blood cells are suitable for transfusion based on the standard in vitro measurements. There were no statistical differences in the adverse event rate between recipients of INTERCEPT-treated and controlled RBCs, and no patients exhibited an immune response to the INTERCEPT-treated RBCs. The results from both of these studies, along with all of the clinical studies previously completed for INTERCEPT red cell blood cell components, will be included in the CE Mark application to support the safety and efficacy of the product. Our development focus for 2015 will be on completion of in vitro studies to support product claims and the chemistry, manufacturing and control for CMC activities required to support the registration. The CMC activities, including manufacturing of registration batches and initiating stability studies, are rate-limiting for the CE Mark submission targeted for mid-2016. We estimate approximately 1 year for the regulatory review with a CE Mark approval possible as early as mid-2017. In addition to the CE Mark registration activity, we will continue the chronic anemia Phase III trial in Europe to support a potential product launch and plan to design a Phase III trial to support potential U.S. licensure. The CE Mark registration and additional clinical experience in chronically transfused patients would give EU customers the opportunity to have pathogen inactivation technology for all said components. The CE Mark registration would also facilitate future Phase IV studies in regions that recognize the CE Mark. And now I'd like to turn the call over to Obi.

Thank you, Nina. In the past several months, we have delivered 2 FDA approvals along with our first 2 U.S. customers, 2 successful red blood cell clinical trials and over $75 million capital rates to strengthen our balance sheet. This has been a transformational period for the company. We entered 2015 with new major markets to pursue and a strong balance sheet to support the commercial and development activities necessary for success. I would like to start with our outlook on the U.S. market. The platelet and plasma FDA approvals exceeded our expectations in terms of both approval timing and also the strength of our initial label claims. We had anticipated the approvals would -- might be staggered by at least 1 quarter or 2. But instead, we received approvals for both products within the same week. Our label claim -- label indications are very broad, with no clinical indication exclusions and specifically recognize INTERCEPT's value in reducing the risk of transfusion-transmitted infections, sepsis and transfusion-associated graft-versus-host disease. The extensive European and the vigilance data for both products is also referenced in our labels. The strength of our label claims puts us in an excellent position to replace current safety practices like bacterial detection, which is an important element of the value proposition for pathogen reduction. Now that we are approved, we can work with our early adopters to potentially influence the language of safety standards to recognize the clinical and economic value of INTERCEPT. Blood centers have some flexibility to make replacements immediately with updates to their establishment licenses, but we believe that it will be important to have specific language and industry guidelines like FDA guidance documents and the AABB standards. We'll provide updates as we see these changes incorporated, but are encouraged by the recent FDA draft guidance document which emphasizes the risks associated with bacterial contamination of platelets and the need to mitigate this risk. U.S. blood centers produce blood components in a large variety of ways. And while our label claims are broad, we will continue to expand our processing specifications to provide optimal flexibility, as we have done successfully in Europe. For platelets especially, there are a series of important product extensions planned. Later this year, we expect an FDA approval to broaden our claims to allow treatment of apheresis platelets prepared in 100% plasma. Over the course of 2016, we plan to seek approval for additional label claims for extended storage for platelets for up to 7 days as well as a new processing kit for triple-dose collections. INTERCEPT platelet pricing and reimbursement are also important considerations for both blood centers and hospitals. As a medical science liaison, our MSL team has become active in the market. We have realized that a significant proportion of platelet transfusions are now taking place on an outpatient basis rather than an inpatient setting with reimbursement under the DRG system. We have submitted for INTERCEPT T codes and will be very active over the next several years to support establishment of specific reimbursement for INTERCEPT components at a premium price. Precedents exist within the existing hit picks or T code systems for premium platelet pricing. As we have announced, we signed contracts with 2 U.S. blood centers already, and we believe we will add additional U.S. contracts throughout the year. One thing that is important to understand about these U.S. contracts is in contrast to our experience in Europe, the contracts do not specify ramps to 100% implementation over a defined period. We do not want a requirement for volume commitments to be a barrier to rapid decision making. For these reasons, we see 2015 as a market development year for INTERCEPT in the U.S. We expect to have our first kits available in the March time frame, allowing early adopters to start producing their first units as early as Q2. Based on our experience in Europe, we would expect it could take us in at least 1 quarter or 2 to work through implementation and basic production validations. This would then allow them to begin distribution in-state -- through in-state hospitals, customers first, for centers with significant interstate distribution. They would also be completing applications to update their FDA establishment licenses a process, which we are hoping to be streamlined by working with the FDA to provide a standardized template for these applications. There are a number of factors that may influence how quickly the product is adopted in the U.S. by both blood centers and hospitals. We will be in a better position to provide projections on the rate of U.S. market adoption late in the year once we have several quarters experience with our early adopters. As a final update to the U.S., I am pleased to share that the American Red Cross in Puerto Rico has implemented the INTERCEPT system and processed their first unit of INTERCEPT platelets earlier this week. We look forward to working with them as they ramp up production and begin distributing INTERCEPT platelets to hospitals participating in the planned chikungunya IDE study. Turning now to Europe. We have completed the Grifols distributed transition and look forward resuming sales growth. We remain optimistic about the potential for major revenue inflection points such as additional adoption in France or a U.K. decision to implement pathogen inactivation. We are continuing to add new customers and are gratified to see both the Karolinska and Flemish Red Cross blood centers transitioning smoothly into routine use. Importantly, the implied validation associated with the recent FDA approvals should support broader global adoption of INTERCEPT in the years to come. Another important aspect of our European marketing effort this year will be preparing for the potential future launch of INTERCEPT red cells. This product would complete our portfolio of European products and finally enable INTERCEPT users to protect transfusion recipients across all 3 components. This would represent an important evolution of our European sales and marketing effort over the next 2 years. We are excited about our prospects as we build the market in the U.S. and sales growth in Europe and also look forward to a potential INTERCEPT red cell CE Mark approval. Operator, please open the call for questions.

[Operator Instructions] And our first question comes from the line of Jeff Elliott of Robert W. Baird. Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division: Obi, you mentioned in your comments that you're confident that you'll sign additional U.S. customers this year. I guess, can you give any color there on what gives you confidence? And are there any that you're prepared to announce tonight?

Yes, we're not obviously announcing any new customer contracts today. But we have a lot of discussions underway and it's been great to see the U.S. commercial team so engaged so quickly after the FDA approvals. And I think it really did validate our decision to put that team in place throughout 2014. The one thing I'd say is that sort of different than our European experience is that we do have a lot of inbound calls, which is nice. It's not a traditional sort of sales effort. And I think, in general, we're just very optimistic about how the market perceives the value of INTERCEPT and specifically how smoothly things are going with the initial customers and also with the American Red Cross. Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division: Got it. And given the insight into the timing of the potential FDA guidance on bacterial protection.

Yes. I think, right now, there are responses being received by the FDA. Cerus is submitting as well. And I think that the final guidance document was likely not going to come out until 2016. Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division: Got it. Is there a hard time frame which they have to publish that? Or is it more open-ended?

There's really no hard time frame. I mean -- so I think as we saw with the draft guidance document last year that it was part of their queue of guidance documents that they were planning to publish, and we didn't see it until December. And I think now that's it's been published now, have to get to the final guidance document and there's really no defined timing. I think that is obviously of interest to the blood bank community and other bodies like the AABB and ABC groups. And I think this is the first time that the FDA has taken a position on bacterial contamination of platelets since the AABB took a position in 2004 with the 5.1.5.1. Standard. Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division: Yes, you mentioned AABB. I saw that the February issue of their news update seems very supportive. I guess, what's been the response that you've gotten from AABB? And I guess slots on the timing. It seems that they've been very supportive of the technology, but it seems like there may be additional updates they have to provide to make some of the blood centers comfortable. Perhaps on a, I guess, the response from them and what kind of time frame are you talking about to get their guidance documents updated?

So as you probably know, Jeff, the 5.1.5.1. Standard already has an activation of bacteria as a way to meet the requirement. So theoretically, they don't have to update their standards. I think what we are seeing is just a -- the influence of this FDA draft guidance document in parallel with our approvals, leading to sort of global blood safety policy discussions as well as U.S. blood safety policy discussion. And so I think what you'll see over the course of the next 2 to 3 quarters is increased visibility into a desire to do something about bacterial contamination of platelets. And now we are a core part of that discussion.

And our next question comes from the line of Zarak Khurshid of Wedbush Securities.

Is there a point where you think there would be a critical mass of small blood centers that could, as customers, which could weigh positively on American Red Cross?

Well, I think the one thing to note is that it is a very competitive marketplace for blood components and specifically for platelet components. And so to the extent that possible customers really feel that this is an important measure to improve the safety of the blood supply, I think that the American Red Cross might feel even more compelled to adopt the technology in those markets for risk of losing market share. That being said, I think -- and if you look at it holistically, the decisions made by the larger blood services like the American Red Cross, New York Blood Center, Blood Systems and others, seem to have a disproportional weight in sort of setting standards. [indiscernible]

Okay. And then just curious what sort of pushback you're seeing from customers, if any, at this stage? And are the cost effectiveness abstracts from last year helping get customers over the finish line?

Yes. I mean, obviously, costs in this current health care environment is something that comes up frequently. And so the ability for hospitals to absorb additional expense is something that is of concern to blood centers and hospitals. And so I think what we're going through is a process of what's the value proposition to the blood center and also what's the value proposition to the hospital. And I think we have a very compelling arguments for both of those constituents. Also, as I mentioned in the prepared remarks, the one thing that's been surprising to us is how many platelet transfusions are now occurring in the outpatient setting. And we believe that this is a function of disproportionate care hospitals acquiring community oncology practices and a lot of the treatment of hemat [ph] patients, at least for a period of it, is in the outpatient setting. And therefore, that allows for a reimbursement via the T code system to be established. And also as I mentioned, there are precedents for premium price, platelets products is part of that. So that's something that we're all over. We've submitted the T codes for both INTERCEPT platelets and plasma and look forward to trying to help blood centers and hospitals secure better reimbursement for their products.

Understood. And then last one, you mentioned the additional expansion in the U.S. How many people do you have currently dedicated to U.S.? And how many more people do you need to hire to address this market effectively?

Thanks, Zarak. So right now, we have about 20 folks, and they're made up of sales folks deployment, MSL, our medical science liaison team, marketing, customer service. We're planning to add about 10 additional folks to fill out that team. We think that we can do a great job servicing the market with a team of that size.

And our next question comes from the line of Josh Jennings of Cowen & Company.

Obi, I just wanted to just follow up on your comments about the reimbursement via the T code system in the outpatient setting. And you talked about some precedents that they had gotten premium-priced platelet products. Can you just talk about what those precedents were and how much of a premium? And is that a nice comfort zone where it would make it a no-brainer for these hospitals to adopt a premium-priced INTERCEPT kit? Or they're turning their platelets into a premium-priced unit by adopting INTERCEPT?

Yes. So I think, as I said, roughly 25% to 40% may be occurring in the outpatient setting. So it doesn't completely solve the reimbursement challenges for hospitals, but it certainly would go a long way. Going to precedents, if you look at the existing T codes, they exist. For gamma irradiated, it's CMV seronegative product. The price or the reimbursement rate is roughly $660 a unit. And so if you think of the average platelet price in the United States being $525 or so, that's a significant premium, obviously, for just those 2 benefits. We obviously think we can offer a lot more benefits than just those 2. I think the other thing to note is just the potential implications of an earlier release of INTERCEPT-treated platelet components allowing for an extra day of shelf life. And if you think about the implications for a hospital and platelet supply logistics and overall wastage rates, I think there's a real value there as well. Obviously, the biggest impact would come from sort of the final draft or final FDA guidance document that recommends a point of release test for day 4 and day 5 platelets. And I -- removing that necessity is something that really drives the value for INTERCEPT.

Absolutely. And then just on the DRG side, is there a path to get an add-on code for INTERCEPT platelets? Or how is that -- is there any path there for improved reimbursement outlook on the DRG side?

Typically, blood components transfusion in inpatient setting are part of the DRG market basket. And so it's sort of hard to get incremental reimbursement for that DRG code just because blood components are a part of that overall payment. So I think that's what's been proved -- that's what's proved challenging in the past for blood centers and hospitals.

Okay. And then, Kevin, in the 15% to 20% kit growth assumption within your guidance, can you tell us what's baked in there that's driving that nice acceleration? I assume a portion of that is just the easier comp in the first half from the sales force re-org that you guys have pulled off. But just some of the other tailwinds that you're incorporating into that kit growth guidance for Europe and Middle East?

Yes. Absolutely, Josh. So you're right, as southern Europe fully transitions to the direct model, we will pick up growth in the kit demand over 2014. And then beyond that, there are customers coming online such as Red Cross Flanders that will move in to full routine production, which will give us some tailwind. And then other strategic accounts, such as Obi mentioned earlier in the prepared remarks, Karolinska in Sweden. So the combined effect of those gives us confidence and makes up that 10% to 15% growth in kit demand.

And so that doesn't bake in any assumptions for new country regulatory approvals?

It does not.

Okay, great. And just can you quantify the hit from Russia? I mean, that's a combination of volume as well as the ruble depreciation. And 10% of your business, is that -- how big of a hit is that in terms of your assumption within the 2015 guidance?

Well, there is certainly a hit. We saw it really in Q4 and expect that, that will continue. We don't expect that the market will completely evaporate, but we do expect headwinds. And it is a function of oil prices, as you know. The ruble has devalued to the euro, and then euro has weakened against the U.S. dollar. So again, I think we believe in that market. We believe that there will be continued sales, just not as strong as the 10% historical growth or 10% historical [indiscernible]

Okay. Just with the red blood cell data that's come out and the path to CE Mark, I was just hoping you guys could just readdress just the market opportunity there. I know you've historically had some assumptions baked in. But if there had been any changes and maybe just to lay out the red blood cell opportunity international as well as in the U.S.

Yes, we don't really see a impact on the overall supply of red cells in Europe or demand for red cells in Europe. It's roughly 17 million red cells. And obviously, patient blood management has impacted transfusion rates in certain countries. So you'll see that market declining in places like Switzerland and in other countries, whereas you see it actually increasing in countries where there's sort of evolution of their health care system or their modernization of the health care system at the time.

And just lastly, just on the FDA draft guidance for bacterial detection. Could be there be a next iteration of the draft now that with pathogen inactivation and the INTERCEPT system approved? Or should we not expect that and just have to wait till final guidance is issued some time in '16?

My assumption -- or our assumption is that you'd have to wait for the final guidance. So they'll be incorporated in the comments and then, ultimately, the final guidance would come out. Is that correct, Carol?

Yes.

And our next question comes from the line of Caroline Corner of Cantor Fitzgerald. Caroline V. Corner - Cantor Fitzgerald & Co., Research Division: With regard to your new customers, can you give us an update on how they are doing regarding coming online? I think you mentioned before that you expect the kit supply sales to start in the March-April time frame. Is that still the case?

Yes, that's right. That's still the case. So we had to get the label put on the kit, so we couldn't -- prior to the approval, we couldn't start making the kits. And then we're anticipating that they would be available in the United States in the March-April time frame. Once that they're available, we have to undertake the process validations. So it's still a 1 to 2 quarter event. If they're shipping products in-state, if they're shipping it out of state, then that has to go through FDA approval process for their establishment license amendment. Caroline V. Corner - Cantor Fitzgerald & Co., Research Division: Okay. And then you mentioned that you're trying to get several label improvements for the platelet kits over the next year. How much of a difference you think those label extensions will make to the sales efforts? Specifically there, you mention the triple-dose kits. Is that something that you think customers really need in order to adopt the system? Or is that just a case of your continuing to build customer rapport and that's just something additional that you'll have down the road?

I would say, our larger goal is to make INTERCEPT the standard of care in transfusion medicine. And so that implies that you may treat 100% of their platelet doses. I think the incremental or the amendments that we plan for the label that allows for broader processing specifications allows us to get to that 100%, but it will take some time for our customers to go to 100%. And so just having the triple-dose collection set is important for them, but it doesn't preclude their starting earlier and providing their hospital customers with INTERCEPT platelets and plasma earlier. Caroline V. Corner - Cantor Fitzgerald & Co., Research Division: Okay. And then you mentioned a weakness in the Russian market in the press release, and that's been going on for a bit of time now. What's it going to take to reignite that market again? I know there's a lot of Illuminators out there, but is there anything specifically that you see on the horizon that might change that?

Yes, I think that -- we obviously have a focused effort there to help our distributors perform. We're also looking at ways to incorporate pathogen inactivation into sort of national health care guidelines within Russia. But really being able to speculate on when that growth is going to pick back up is really a geopolitical question, so I don't think we can address that today.

And our next question comes from the line of Thomas Yip of MLV & Co.. Thomas Yip - MLV & Co LLC, Research Division: First, I just want to fully understand the impact of foreign exchange rate in the fourth quarter. So from what I understand, and as you pointed out in the press release, revenue is booked at the exchange rate at the time of sale. So given the weak euro, that translate into a lower U.S. dollar amount. And -- but on the other hand, the cost of goods is recorded at the exchange rate at the time of purchase, which means that euro was comparatively stronger. Therefore, the dollar amounts will also be higher. So to me, it is really a 2-front -- there's 2 impacts, 2 separate effects by the exchange rate. Did I get it right?

Yes, yes, yes. You're right, Thomas. So as the euro-dollar rates declined, that impacts our current period revenues. And as you will note, we do carry a fair amount of inventory for a couple of reasons: one, to continue growing the business and ensure that we're able to meet future customer demand; and two, in many territories, the blood centers rely on INTERCEPT for their blood safety, and there is no choice. And so we want to make sure that for any unforeseen manufacturing incident, for any disruption in transportation, that we've got sufficient level of inventory. And so that means that we carry roughly 6 months' worth of inventory to satisfy existing and future demand. And when you think back about where the exchange rates were at the time we bought that inventory 6 months ago, they're closer to the $1.37 range as opposed to the current quarter or Q4 average of $1.24. So that effect right there is 10%. But as I mentioned in the prepared remarks, we sell in euro, we also buy our product mainly in euro. So there's a very effective use of the euros that we have on our -- or within our cash accounts. Thomas Yip - MLV & Co LLC, Research Division: Okay. Yes, that helps. I am just wondering whether you guys have looked at the gross margin, if you assume a stabilized current exchange rate. Or is that too challenging to -- or impossible to do?

Well, what we've tried to convey is the kit demand growth and -- as a metric for constant currency. So our remarks discussed the 15% to 20% growth in kit demand, which really should be telling to the health of the business. In fact, if you look at 2014, our direct customers were up considerably over 2013, and that's largely validates our decision to move to a direct model in the southern European region. And we expect that trend will continue in 2015. Thomas Yip - MLV & Co LLC, Research Division: Okay. Yes, I think that's the number of kits, so it's definitely a variable matrix to measure performance. So I have just one last question. Can you just remind us what are the next steps in -- for rep sales for the U.S. approval market?

So Thomas, you're asking about the timing for the [indiscernible] pathway for red cells in the U.S., is that right? Thomas Yip - MLV & Co LLC, Research Division: Yes, in Europe as well. Because I just know that the CE Mark, not U.S. approval, that's already to start in '16.

That's right. We didn't speak to the U.S. approval pathway. Our intent is to conduct the studies required to have a discussion with the FDA about the Phase III clinical trial design this year. And with regards to red cells in Europe, Nina covered that in her prepared remarks around planning to submit the CE Mark in mid-2016.

And our next question comes from the line on Zarak Khurshid of Wedbush Securities.

So what was the revenue contribution from Russia or CIS in Q4 and '14? And then what are you exactly saying about where it goes in '15? Is it essentially going to get cut in half?

Yes, I don't have the exact Q4 in 2014. I opt 2014 was just under 10% and really weakest in Q4, to be honest with you. So your assumption on where it goes from here is a speculation. We do think that there's a significant impact. So if your assumption is half, I think that's appropriate. We'll have more visibility, I think, beyond Q1 as we continue to work with our distributor and look at what happens in that market.

Got it. And so the Q1 impact, I think you said $2 million. What's sort of the breakdown geographically? Or is it sort of spread across most of Europe?

It is spread across. I think the biggest concentration of that decline is the Russian market. We don't expect much contribution in Q1 from that market. And then furthermore, if you look at where the FX rates are as an average in Q4 relative to where we are today at the spot rate, they're down 10%. And obviously, that has a fairly significant impact on our reported revenues.

Sure. And then wanted to ask a similar question related to southern Europe. So how did that trend Q4 versus Q3? Is that rebounding consistent with hitting some of your prior comments? And do you see that getting back to sort of the prior steady-state levels or even higher through the course of '15? And I know the FX is complicated there, too, but maybe you'd talk about kind of kit demand in that region as well as revenue contribution.

I don't think we have the spread of our kit demand today by the Iberian region. But just at a high level, Zarak, we basically has -- it has been a little bit delayed from what we expected. We have signed up customers since the Grifols transition, but it is slower than we initially anticipated. So that does contribute a little bit to the guidance for Q1. But also in sort of going Q1, Q2, we think we will be back on track at some point and just happy with the progress the team has made thus far. There are a lot of opportunities there, and just making sure that we're competing effectively in that market.

Okay, so you're saying you're happy with the progress, but it's not as good as you're -- I guess, thinking previously, how should we think about it for '15? I mean, is it -- like, I guess, just could you quantify kind of percent-wise? Is it -- is that region going to be up 20%, you think, in '15? Or maybe flattish year-over-year?

Well, it's certainly relative to what it did last year. It's going to be up. I just -- I mean, we should probably take this offline, I just don't have the numbers in front of me right now. So...

Ladies and gentlemen, this concludes the question-and-answer session for today's call. I'd now like to turn the call back over to Mr. Obi Greenman for any closing remarks.

Well, thank you, all, for joining us today. We look forward to updating you again on our Q1 call in May. Thanks a lot.