Good day, ladies and gentlemen, and welcome to the Cerus Corp. Q2 2015 Earnings Conference Call. At this time all participants are in a listen-only-mode. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Ms. Lainie Corten. Ma'am, you may begin.

Thank you, Chenoy. Good afternoon. And 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; and Carol Moore, our Senior Vice President of Regulatory Affairs and Quality and also Larry Corash, our Chief Scientific Officer. Cerus issued a press release today announcing our financial results for the second quarter ended June 30, 2015, 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 2015 revenue guidance; expectations for future demand and revenue growth; operating expenses; sufficiency of cash; foreign exchange rates; Cerus' U.S. commercialization theme; customer implementation and the timing thereof; customer support initiatives, U.S. customer contracts, the timing of U.S. revenues; Cerus' ability to address cost concerns; resumed sales growth in Europe, including revenue inflection points and new customers; expected or anticipated regulatory submissions and approvals and the timing there as, including U.S. label extension submissions and a potential CE Mark submission for and approval of the red blood cell system and approved marketing hemovigilance program; commercial launch of new products, including the red blood cell system or in new territories; access to debt financing; Cerus' planned Phase IV study, including the timing and scope thereof, and FDA guidance document and the timing thereof and the timing of implementation of a new quoted federal regulations on blood component preparation and its impact on blood center operation. 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 10-Q filed with the SEC on May 8, 2015, under the heading Risk Factors. 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 commentary from Obi, who will review the company's recent achievements, followed by a review of the Q2 financials results from Kevin and conclude with final remarks from Obi. And now it's my pleasure to introduce Obi Greenman, Cerus' President and Chief Executive Officer.

Thank you, Lainie. I would like to begin today's call with an update on the US launch. In July Cerus achieved a significant milestone with Suncoast Blood Bank becoming the first Cerus customer to produce pathogen reduced platelet components for routine use in the continental US. We understand that the marvelous [ph] blood bank plans to begin a distribution this quarter. Supporting the deployment of INTERCEPT into blood centers and the subsequent distribution of INTERCEPT treated platelet and plasma components for hospitals will likely be the focus of our efforts in the US over the foreseeable future. While we are benefiting from the expertise provide through our medical science liaison or MSL team at the hospitals, we expect to further improve integrative support of US blood centers over time. We see this as a true partnership approach, whereby blood centers may realize operational benefits, better margins for their products and an improved product offering in a competitive market. We now have a total of 5 US contracts in place, collectively these 5 blood centers produced approximately 53,000 units of platelets and 63,000 units of plasma annually. Our most recent additions are UNYTS, pronounced Unyts and also Bonfils Blood Center. It’s important to note that Bonfils is an affiliate of blood systems, the second largest blood center operator in the US. There continues to be strong interest in INTERCEPT across the US and we plant o announce new customer contracts as they are signed. We believe that extending our US products specifications to enable routine use across all blood center operations remains a key success factor for expanding the INTERCEPT use. As we mentioned on our Q1 call, the filing for INTERCEPT platelets and 100% plasma was submitted to the FDA in late Q1. We recently received questions from FDA and…

Thank you, Obi. This afternoon, we reported Q2 revenue of $8.8 million. Year-over-year this represents an increase of 32% in kit demand, and a 3% increase in revenue as reported in U.S. dollars. This difference between reported growth and kit demand compared to revenue growth results primarily from weakness in euro compared to the US dollar. Revenue for the first half was driven primarily by European and Middle Eastern markets with reported revenue therefore negatively affected by a 19% weakening of the average euro rate compared to the US dollar in Cerus's reporting currency. As Obi mentioned, Cerus has now signed the first 5 customer contracts with blood centers in the United States, representing a future opportunity of approximately 45,000 INTERCEPT kits annually. We believe we'll be adding new contracts throughout the year and see the next 12 to 18 months as the market development period for the United States. By this, we mean that we don’t expect to have full clarity on US kit demand until we gain further experience with both blood center implementations and hospital up tick. Blood center implementation can take some time, as can the regulatory approval necessary to shift treated products across state lines and the steps necessary for a hospital to adopt the product. Some blood centers are waiting for our approval for platelets in a 100% plasma in order to initiate implementation. All of these are important factors and how quickly the US market will develop. Therefore, we reiterate our 2015 revenue guidance of $36 million to $38 million based on our core European and Middle Eastern markets. This guidance anticipates demand growth of approximately 15% to 20% in those markets, offset by the impact of an expected weak euro to dollar exchange rate compared to last year. Our 2015 guidance also…

Thank you, Kevin. I'd like to provide two final updates regarding our new chief medical officer and also the red blood cell development program. Last month Dr. Richard Benjamin, joined Cerus as our Chief Medical Officer, Richard was formerly the longest CMO of the American Red Cross, overseeing donor and patient safety issues related to their blood collection and transfusion since 2006. He is one of the world’s foremost experts on blood safety and has been strong advocate for the implementation of pathogen reduction. We believe Richard's prior participation as an investigator in our US Phase III studies for INTERCEPT platelets, plasma and red blood cells they can uniquely qualify to assume leadership of the global clinical strategy for INTERCEPT, with a particular focus on our red cell program, as well as on the Phase IV PIPER study in the US. We've also continued to benefit from Larry Corash's accumulated wisdom and experience as he focuses his time on the chief scientific officer role going forward. Turning to the red blood cell program. In late June Cerus participated in the International Society of Blood Transfusion meeting in London, where investigators presented our Phase III acute red blood cell transfusion study results. It was very exciting to see the amount of interest generated by our red cell program and the final piece to complete the INTERCEPT portfolio for platelets, plasma and red cells in the European market. Our manufacturing stability studies are ongoing and the team continues to plan for a potential CE Mark filing in the second half of next year, with approval projected to take approximately 12 months. In conclusion, we made significant progress this quarter on the US, continued to advance the red cell program and resumed our revenue growth in our core European and Middle East markets. We believe that we are well capitalized for success and look forward to a busy and productive second half of 2015. Operator, please open the call for questions.

Thank you. [Operator Instructions] And our first question comes from Jeff Elliott of Robert W. Baird. Your line is now open.

Yes. Thanks for the question and congrats on the progress. Obi, do you have any color you can share on what you're seeing as far US hospital demand, either from your experience with Suncoast or the market research study you did?

Yes. I think we do see that a lot of the interest coming out of the AABB Symposium in April and subsequent article in the New England Journal of Medicine. Its sort of continuum of interest and I think that FDA guidance document which would assume point of release testing for products over the [indiscernible] is really something that the hospitals are focused on, as far as something that they like to avoid. The other thing that we're seeing from hospitals is just the interest in having a fresher cleaner product because of the possibility of releasing platelets earlier with INTERCEPT adoption.

Got it. And is there any update on just European new contracting activity. I know there is different – there is an UK tender, there is some business in France, and renewals there. Is there any update you can provide there?

Yes. So [indiscernible] we're seen is that the routine use in sites in Belgian Red Cross have been routine now for I guess through the second quarter and then that’s going by, as well as new sites in the Nordics and also in Austria. So we try to see customers going through routine use and new customers. With regard to the larger inflection points, the UK tender process is still ongoing and it will be issued in Q3. How that proceeds and whether it proceeds to the timing as Rich [ph] communicated is sort of TBD, theoretically that tender would be awarded by the end of the year and then a validation would be undertaken prior to routine use of monetization, routine use of the product with implementation by NHSBT. And then in France our contract with EFS expires in October and so we do anticipate a new contract coming into play before that and the scope of that contract is also still to be discussed.

Great. And one last one here. It looks like Dr. Benjamin is really great hire. But did that impact your just potential discussions with the ARC in anyway, I mean, is there any potential blow back from that hiring?

No, I think the filling [ph] has been, it’s been a big advantage, but I think also the experience we've had with the true study in Puerto Rico has been really helpful for our overall relationship with America Red Cross. I think it’s given us unique insight into how the America Red Cross assesses new technologies and incorporates new technology into their operations. And so now that we've been working them for over a year, I think that’s really sort of what the - what ARC relationship with Cerus is all about. In fact though we hired Richard, I think is only additive.

Okay. Great. Thanks, guys.

Thank you. And our next question comes from Drew Jones of Stephens Incorporated. Your line is now open.

Thanks. Good afternoon, guys. Obi, do you have visibility to see, is Suncoast able to charge a premium on the treated platelets they are releasing into the market?

Yes.

Any color on how much.

I don’t think I am ready to say that. It’s more of something I'd rather ask Suncoast to communicate. But it is premium and they are looking at substituting for CMB and gamma radiation. So it’s not an insignificant premium.

Okay. And then do you guys have any insight into what the revised FDA draft guidance may or may not say, when it comes out later this year?

We really don’t have any visibility into that other than what was mentioned during the comment period. So as I think Drew they were comments made from a different groups including AABB, Americas blood centers, as well as American Red Cross and all those were really sort of encouraging that the FDA mandate one or two options - one of the two options, so either point of release testing or INTERCEPT.

And then last from me, is just trying to find out the outpatient opportunity when we look at platelets, what percentage of that market is outpatient and can you give us an update on where we stand for potential reimbursement there?

Yes. I think that the outpatient transfusion of platelets at least is in the range of 25 and we've heard up to 80 percentage at certain hospitals, just depends on where you at in the country. And with regard to outpatient reimbursement codes, we filed for a P code early in the year, that we should have resolution on before the end of the year. And then in addition to that the ARC, ABC, America’s blood centers and AABB all supported a q code filing as well as a temporary tone. So there sort of multiple ways that we might be able to secure and billing codes to before the end of the year.

Thanks, guys.

Andrew, thanks.

And our next question comes from Zarak Khurshid of Wedbush. Your line is now open.

Great. Hey, guys. Good afternoon. Thanks for taking questions. I was wondering if you could provide a little more color on the Middle East, it sounds like maybe that region is accelerating, any thoughts on what's driving the strength there?

I would say that still a market that we don’t have a ton of visibility into outside of our routine use in Kuwait where it’s been in routine use for many years for platelets and many years also for plasma. With regard to other key markets there like Saudi Arabia and I think they are heavily influenced by FDA approvals, although that being said I just don’t have great visibility in what the impact is going to be for the Saudi, MOH and how they are going to look at this. I mean I think there is possibility for the Saudi's to take a more active role and sort of driving for standardization around pathologization of blood components. But that’s - I think we accept to see how that plays out. I don’t if that answers your question Zarak or not.

Yes. No, I get it. And then can you describe maybe your ongoing conversations with ARC and some of the other top five blood centers with another quarter under your belt just love to hear kind of the tone of the conversations and maybe what some of the push back is on INTERCEPT?

Yes. So I think a lot of its driven by the hospitals demand, so the customers at the blood centers. And so they are getting request from - larger blood centers are request about having the availability of INTERCEPT for our PIPER study, as well as for other individual studies in the interface for setting. And so with that, the blood centers are trying to figure out how they are going to be able to supply the customers that have requested the product. I think when you look at the larger centers I mean, in response to Jeff's initial question, I think the relationship with the America Red CROSS is good and the experience we've had in Puerto Rico in the context of the true study has been invaluable. So that’s a good proxy for how things might proceed with the America Red Cross. But as we think – we think we discussed before does take some time to implement new technologies, just given the size of their operation. But that being said, they are trying to be responsive to their customers demand for INTERCEPT. And then as I mentioned on the scripts, Bonfils is an affiliate of blood systems and we think that’s also a good proxy for the interest that blood systems might ultimately have and I think they are also looking to respond to their customer’s demands.

Got it. And then maybe if you could provide us a little more of an update on the progress in Spain and Portugal and how you are feeling about kind of the direct efforts there? Thanks.

Given how long we've been at this, that will be moving to a direct model in mini markets over time and ultimately we have to think with the launch of the red cell system, that’s also a decision we'll have to make at some time in the near term here. With regard to the specific transition from Grapples [ph] I think its going well. We are selling into Spain. It is a very competitive market place, but at the same time we believe we have a very competitive product offering and by being able to go direct we have more flexibility in meeting customer’s demands in the context of these tenders.

Okay. Thanks.

Thanks, Zarak.

Thank you. And our next question comes from Joshua Jennings of Cowen and Company. Your line is now open.

Hi, good evening and thank you. I guess, where to start to off, it maybe hard, it will be for you to speak for Dr. Benjamin. But his coming on board seem like a great validation of INTERCEPT platform, not just play with some plasma, but also a future of the red blood cell platform as well. But maybe you could help us understand kind of how those discussions went in terms of bringing him on board and what is if you can, were the drivers for him to jump shift from ARC and join the Cerus team?

Yes. I mean, I can speak at a high level, I think I don’t want to get into specifics about what Rich's mottos might have been at given time. But I think our fundamental needed Cerus was we wanted to deepen the bench strength we have for clinical operations, given expanding efforts we have in the US, but also our intention on really moving the red cell program forward. And Larry and the clinical team here were stretched and so it’s really procured us that we were able to look – engage Richards interest on coming to Cerus and now we have a really great team here execute going forward. It’s been great to see Larry and Richard collaborating on future strategy and the overall team responding to Richard coming on board. I think with regard to the America Red Cross, I think Richard was there for a long time and I think we just sort had a discussion sort of in the second quarter around here he knows that’s something that you might be interested in and he said yes, and so and proceeded from there.

I will add that his perspective speech in New England Journal of Medicine really clearly raised out how it looks at this technology.

Thanks. Is it safe to make the read through that about his optimism for the red blood cell platform as well?

I think every thing that he said in that speech in New England Journal of Medicine applies to pathogen in activation reduction technologies in general. He is been engaged in this field for a long time, first on the academic side and then on the public service side. And I think he is got a enormous breadth of experience. He has looked at every technology that’s come into the arena. So he said it all in that perspective speech, it’s worth reading again.

Understood. Thank you for that. And just on the hospital customer demand generation front. If we think about this revised draft guidance being issued, how are you guys thinking about that creating higher possible customer demand? Do you think that will be enough early on or the writing will be more on the wall or do we need to wait for the final guidance document to be issued next year before you start to see an up tick from that specific angle in hospital customers demand?

As I mentioned before, I think it’s somewhat of the continuum where you have certain folks who really want to get front of this and realize what's coming and others who really see the need to do something about bacterial contamination today. I think maybe Larry give you some perspective on what's happening at the [indiscernible] one of the premier hospitals in the country and then what they do try and ensure platelet safety.

So Memorial today is doing what's known as ramp stand on all of the platelet products that they purchase from outside of their own cell collection facility. That means they have to staff 24x7 to have a qualified micro biologist, do a micro staff examination for bacteria, a technique that has limited sensitivity. But that’s the length to which they are going and I think that gives you a signal that people know that the current methodologies are not sufficiently protective.

Great. Thanks. And one of my last question for Obi is, it was addressed to a degree in an earlier question, but just if you could give us an idea about the sales frontal with blood centers, how that’s shaping up and formulating today versus last quarter when we were on this earning call and how much progress do you guys made in those discussions? Thanks.

Yes. Thanks, Josh. I think its been great to have the commercial team finally together and have all those sales people on board now and so that’s really leading to a ramp and the discussion is just because historically over the last I'd say six months we haven’t had the capabilities to address all of the increase actually. So I think there will be as Kevin mentioned in his remarks, during his scripted remarks that is he it does take some time get blood centers on bard, sign the contract initially they typically don’t sign a contract unless need business and then beyond that transitioning from a sign contract into routine use and then distribution to the hospitals does take some time. We're happy with other commercial team executing and how the funnel is developing and we'll just be updating as we sign new contracts throughout the year.

Great. Thanks again.

Thanks, Josh.

And our next question comes from Thomas Yip of MLV & Company. Your line is open.

Hey, guys. Thank you so much for taking my questions and congratulations to Dr. Benjamin on the new appointment. Can you remind us of this global Phase IV PIPER study just want to find out how many blood centers are required or is that even a requirement and how do you think in terms of the timeframe after that begins in by year end?

Yes. why don’t I turn that over to Larry, I think your questions is been around what's the scope of the PIPER study, when they suppose to initiate and how long it will likely last?

Yes.

So the PIPER study is a post marketing safety surveillance study, its part of our commitment to FDA, it’s a typical type of post marketing commitments that required for these types of innovative products. It will enroll in total of 1500 patients in each group, so 3000 patients all together who need platelet transfusions and we think that we'll use 15 to 20 centers, participation is voluntary people can use the technology without being into PIPER study. We have some centers that are doing that already. And so we anticipate two to three years to complete the study because it is a fairly substantial size study.

Okay. And also wondering so how does this Phase IV study, does that play into each blood centers individual preparation process and hospital role out as [indiscernible]

Well the PIPER study has created a lot of interest because people want to participate in it. So the clinical services at various hospitals are going to their blood centers and asking for the product to participate in the study. So that’s a very important aspect because it gives us access to the treating hematology oncology physicians which allows us to educate them too the product. Our MSLs have been spending a lot of time in all the major medical centers around the United States presenting the data for INTERCEPT and educating them to the potential clinical benefit of using this technology. So we see that as a great opportunities to introduce the product into the United States.

Okay. Thanks. I just have one final question, and is relating to the second quarter gross margin, from what you described earlier it seems that the really the impact on foreign exchange rate, simply related to reporting in US currency and also some inventory write down. Am I right that they total to about 17% impact and therefore and that does impact gross margin in second quarter should be around 37 to 38%?

Yes. Thomas, thanks. In my prepared remarks I described the two major drivers which were FX, the write down and then some additional payments for minimums that we have with our suppliers, all told, if you script those out and then we also had a couple of customers incentives primarily around the Belgium Red Cross which they went into routine use in Q2 which was attributing point for us to provide an incentive for them to hit that our margins would be about 40% if you script out all of those this particularly items.

Okay. Thanks. Thank you for the clarification. And thank you once again for taking my questions.

Thanks, Thomas.

And our next question comes from Caroline Corner of Cantor Fitzgerald. Your line is now open.

Hi, guys. Congratulations on the progress this quarter. Apogees I am jumping between calls, in case any thing is been asked already. But you mentioned earlier that you received some questions on the FDA regarding the INTERCETP Platelets and 100% plasma can you tell us a little bit about the scope of what those questions are?

Yes. Thanks, Caroline. It was partly only around active [indiscernible] studies so they wanted to see some additional pathogens covered and so we'll be working on that over the coming months and they also wanted to see some additional in feature [ph] data on platelet function and so that’s something that we'll also working on over the course f the next several months. Yes, some of that we actually can hopefully generate through our ongoing routine use in Pure Rico.

Okay. Very good. And then the other approvals and extensions that you are filing fro the extension around the shelf [ph] life and the triple dose platelet set, are those which you plan to submit in 2016 which one do you think are really important from the moving then needle when you are talking to your hospitals customers and the blood centers?

They all are important but one that I think is most important is just the triple dose because a large proportion of I'd say between 10 to 20% of [indiscernible] platelet collection and certain large centers in the US are collected in the triple dose format and so while blood centers maybe decide to move forward with INTECETP without that set. I think what we are now seeing is that if there are sufficient hospitals demand that they are worried they are not going to meet that demand unless they have the ability to treat triples. And so that’s what I would is from perspective that the number one priority.

Okay. Very good, that’s helpful. Thanks. and then the last one from me, CMS is been proposing some cuts for reimbursement pricing on blood product and that looks like it affects some of the value add premium products out there the gamma radiated et cetera I realize its not going to likely affect your chances of getting your P code or Q cord but can you talk a little bit about how you're kind sizing up this the CMS proposals of these cuts?

Yes. I think that that’s something that the blood banks community is certainly taking on head on in a sense that they don’t think its justified based upon what component cost are and what the pricing should be to hospitals. So I think that that’s something we'll get resolved in the course of next quarter or two but it also something that I imagine or I undersand that they are actively trying to address with CMS.

Okay. Very good. Thanks.

Thanks, Caroline.

And our next question comes from George Zavoico of Jones Trading. Your line is now open.

Hi. Good afternoon. Hi, Obi, Larry and Lainie and Carol.

Hi, George.

Quick question about the UK presentation on there obviously - you mentioned that it was pretty well received, could you just brief a review whether I think you made all your end points that there were no red flags, everything was pretty much as expected was there any additional comments you might add to the outlook for that product?

Larry, do you want to handle this?

Yes. I think that we met the primary end point that was specified for that trial and we were very satisfied, it was well received in the European community and its part of the package that will support our CE Mark registration.

Okay. Good. With regard to any such on your components, you mentioned so in euro, are you considering perhaps other manufacturing options, perhaps even moving some manufacturing in the US and this will also be I guess, in regard to the potential decreasing demand as the US market ramps up?

I think at a high level we've got sufficient capacity at our production facility at France to last us for sometime and obviously we're looking at how we would be able to expand either our relationship with CMS or with other manufacturers as we get beyond that. But I think for the immediate term we're covered.

Okay. Good. And finally, you guys mentioned before I mean, [indiscernible] winding down and [indiscernible] in Saudi Arabia Middle East, any updates on what's going on in West Africa and Middle East in that regard for the release of new pathogen?

I think Larry can probably give you update, really good presentation at International Society Blood Transfusion meeting in London. Larrry, can update on>

Yes. so interestingly enough, I was on the phone yesterday with somebody from Iberia actually the epidemic has broken out again in minor areas in West Africa, so its not over yet. [indiscernible] from Belgium presented a overview of the plasma transfusion study and we now know that at least in Genia [ph] about a 120 patients received the treated plasma and they are analyzing the data now but one of the most important comments was that the INTERCEPT plasma was safe for use and so we are pleased to hear that and we're looking forward to the data.

Okay. And then what Maurice [ph] anything Maurice?

The only thing to say [indiscernible] problem that persist and similar to the corana [ph] virus is that we worked with it before and show that we can inactivate, so I think its an example of emerging pathogen that we've attract and it clearly has the potentials for being transported to different locations. So I think everybody is tracking it looking to see the ultimate impact.

Okay. All right, thanks. And thanks for taking my questions and look forward to continuing progress.

Thanks, George.

And I am showing no further questions at this time. I will now like to turn the call over to Mr. Obi Greenman for closing remarks.

Thank you, Chenoy. And thank you all for joining us today. We look forward to updating you again on our Q3 call in November.