Good day, ladies and gentlemen. Thank you for standing by. And welcome to the Cerus Corporation Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the conference over to your host, Lainie Corten. 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; Richard Benjamin, our Chief Medical Officer; and Carol Moore, our Senior Vice President of Regulatory Affairs & Quality. Cerus issued a press release today announcing our financial results for the third quarter ended September 30, 2016 and also describing the Company's recent business highlights. You can access a copy of this announcement on the Company website at cerus.com. I'd like to remind you that some of the statements we will make on this call relate to future events and future performance, rather than historical facts and are forward-looking statements. Examples of forward-looking statements include, statements related to our 2016 guidance with respect to revenue gross margin and cash burn, future product sales and volume, future regulatory related event, clinical trials and other product development, our commercial goals and initiative, including the potential approval of our red cell product in Europe and the US, and commercial launch thereof and the timing of the foregoing events and activities. These forward-looking statements involve numerous risks and uncertainties that could cause actual events, performance and results to differ materially. The risks and uncertainties are identified and described in today's press release and under Risk Factors in our Form 10-Q for the quarter ended June 30, 2016, and our Form 10-Q for the quarter ended September 30, 2016 that we expect to file shortly. We undertake no duty or obligation to update any forward-looking statements we make today. On today’s we'll begin financial results from Kevin, followed by an INTERCEPT red cell update from Richard and finally concluding remarks from Obi. And now it’s my pleasure to introduce Kevin Green, Cerus, chief financial officer.

Thank you, Lainie and good afternoon, everyone. This afternoon we reported Q3 product revenue of $10.2 million, a 26% year-over-year increase. The reported product revenue growth was driven by disposable kit demand that is up approximately 30% year-over-year, primarily from the EMEA region and INTERCEPT sales in the United States. Product revenue was $27.1 million year-to-date, up 10% compared to the first nine months of 2015 and was driven by both increased EMEA kit sales in the rollout to US customers. As a reminder from our last earnings call, we have begun reporting BARDA contract revenue separately from product revenue and product gross margins. Accordingly, we have not and will not be including any BARDA revenue in our annual product revenue guidance. Our 2016 product revenue guidance is predicated on second half growth from US sales, as well as potential new business opportunities in the EMEA region. As we expected, US sales began to accelerate in the third quarter, as a growing number of centers, including the American Red Cross install the system and furthermore moved into routine production serving their first hospital. Certain steps in this initial handoff of INTERCEPT between the blood center and hospital require careful coordination and thus the pattern of each blood centers, early kid orders is variable. Outside of the US we await the outcome of several contracts that could have a significant impact to our top line in 2016 and beyond. Therefore, we have conservatively decided to leave our revenue guidance broad at their previously stated range of $37 million $40 million for the full-year. Now turning from revenue to other Q3 results. Gross margins on product revenue for the third quarter were 46% compared to 31% in the third quarter of 2015. Similarly, year-to-date gross margins were 46% compared to 30% during…

Thank you, Kevin. The Cerus team has recently returned from AABB meeting in Orlando, which is the largest blood banking conference in the world. I'd like to share some observations and review some of the information presented there. One topic of significant interest throughout the meeting was bacterial sepsis. Institution of severe sepsis has inpatient quality measure by CMS, has heightened awareness of paper transfusion as one source of infection. Attendees were sensitive to the pending FDA guidance regarding bacterial contamination and the role that pathogen reduction may claim protecting patient. The general session on pathogen reduction was oversubscribed and each presentation on the topic was well attended. The senates [ph] of the Zika virus epidemic and the impact to blood safety was clearly a second hot topic throughout the conference, multiple speakers review the current state of knowledge regarding the spread of Zika, expanding knowledge about the course of infection, the risks to pregnant women and developing fetuses and initial bank experience, and combined with the FDAs final Zika guidance has updated in August. I'm sure you’ve heard the CBC recent statement that controlling the spread of Zika is extremely difficult, leading to the expectation that Zika will become endemic to this hemisphere. These statements underscore why it was necessary for the FDA to act rapidly and decisively to introduce safety measures to protect the blood from virus. Nevertheless blood centers are finding it difficult to meet the implementation deadline and are expressing concern about the need to rely on investigational Zika test. Many have already initiated testing, but some of those scrabbling to meet the November 18 deadline for full nationwide compliance. And finally, is into a heightened interest in INTERCEPT red cell, as blood centers anticipate the value of prospect to blood safety measures that could obviate…

Thank you, Richard. At AAB last week in Orlando, we were gratified to see extensive interest in INTERCEPT and also a broad awareness of the many US blood centers who have embraced this new technology over the past year. As we so often focus on a quarter-to-quarter progress it’s easy to lose sight of how far we've come and so an event like AAB finds an opportunity to step back and take a longer view and hear our customers describe their progress. For example, during a keynote session on pathogen reduction, the head of the transfusion service of US NIH clearly explained his institutions rationale for implementing INTERCEPT and the very positive experience that they now have routing use. In October of 2015 at the previous ABB meeting, we featured the first three blood centers to initiate INTERCEPT platelet production and boasted a modest pipeline of additional new contracts. This year, however, we have customers in every region of the United States and throughout the audience attending Europe, Orlando meeting, providing a tangible demonstration that pathogen reduction has truly arrived in the US. Full nationwide availability of INTERCEPT platelets is now on the horizon with large blood services beginning to produce INTERCEPT across multiple manufacturing sites and with the first five BLAs submitted. These developments indicate that there will be an increase in supply of INTERCEPT platelets available across the US in 2017 and 2018. As a largest customer globally, the American Red Cross is a critical account blood [ph] growth in the US market. In just the last three months, the Red Cross has expanded from an initial implementation at their manufacturing facility in North Carolina and now producing INTERCEPT platelets in Maryland and Connecticut as well. We understand that New York is likely to become their foresight to…

[Operator Instructions] Our first question coming from the line of Josh Jennings with Cowen and Company. Your line is open

Hi. Thanks and good afternoon. I was hoping to start off with some - just asking question about demand, in that AABB and to check for last few months, it’s become clear to the bottleneck for US platelet adopted is moved from the hospital customer to the blood bank to some degree. And can just help us - if you have some details maybe around the building hospital customer, I know you address Obe in some of your prepared remarks, but any more color, I mean, my understanding there is some hospital out there that are looking to move a 100% INTERCEPT platelets as soon as they can and also how us see the manufacturing step up in INTERCEPT play that’s evolving as these blood centers?

Yes. Thanks, Josh. It’s a great question. Really the struggle right now with adoption in the US is the supply demand equation. So you have hospitals that you want to go and then they typically want go 100% once they have made a decision because they're concerned about the ethics of being of partial adoption. And so then you get into a situation where the large hospital customers or blood centers need to be fulfilled at a 100% and then that automatically sort of constrains the initials - the initial ability of those blood centers to supply all the demand. And so I think what we'll see them would be –I sort of alluded to in the prepared remarks that with the BLAs coming through next year that will expand the export market and allow for some ability to fulfill that unfulfilled demand. I think the - just the general rollout of the technology going for – or implementations going forward will help immensely as well. We're still relatively early in stage with American Red Cross, we're just three sites in production, but they are expanding that rapidly and the same is true for other large blood center networks in the US, as they get increased production and we work with them to deploy the technology effectively how they will quickly be able to get north of 50% of production. I think the – as I alluded to, triple source set does have an impact on certain large blood center operators like the American Red Cross and so their ability to get to 100% percent production will be somewhat constrained, but we're working towards solving that problem and as I mentioned, we have submitted for approval of that set in Europe and we'll plan to do so submit for approval in the US in 2017. Josh, clear…

I am sorry. Yes, thank you for that answer. I am on immune, I apologize. Just on the international business. I was hoping to just see if there was any update on the SOUTH AFRICA tender process and then also on the decision in France that's untapped [ph] for INTERCEPT versus bacterial culture adoption?

Yes, both of those are still very much in play and we are very optimistic about those outcomes. But I think timing is still DVD and so it could happen this year or could dripped in the next. But I think we still have some more months left here. So we will remain optimistic.

Great. And then just any other regulatory reimbursement decisions on the upcoming in any other countries that could be impactful for 2017?

Nothing in EMEA, I think nothing is like specific reimbursement or tenders, we e do have a lot of opportunities in the Middle East and elsewhere. And so we'll continue to try and move those opportunities forward.

Great. And just my last question, as we look out into 2017 and the US platelet ramp, you've outlined a great download in your prepared remarks. But just in terms of timing is how should we be thinking about those important catalyst which you outlined, including the BLA submission process, particularly by the American Red Cross and also bacterial detection guidance finalization by the FDA, should we think those as first half of '17 events or second half '17 event in terms of those being triggers for increased utilization in INTERCEPT sales?. Thanks for all the answers.

Thanks, Josh. So obviously the biggest impact on the rate of adoption will be the final FDA guidance document. As you recall, the second draft, to say of the revised draft of the guidance document was issued in March, you know, typically the he FDA would look to take action on that in a sort of a 12 month time frame, but we really don't know, I mean, sometimes it can take a shorter period of time, ultimately this about patient safety and so we would hope that would be driving the decision on the timing. With regard to BLA's, I think that will likely be a second half of 2017 event, largely because of we just don't know what the timing will be for the FDA review of the BLAs that the blood centers have estimated to date. Thanks.

Our next question coming from the line of Bryan Brokmeier with Cantor Fitzgerald. Your line is open.

Hi, good afternoon. A few weeks ago you announced that community blood center in Wisconsin had completed the BLA submission and I believe just now and then also during your prepared remarks you referenced up multiple BLA's mission? How many have been submitted so far and is the Red Cross one of those?

Yes. Thanks, Bryan. So we have five that have been submitted so for now and another five are in the queue. So, to date, the Red Cross is yet to submit their BLA, but they are certainly dependent upon their national distribution network. And so this is a priority for them.

Okay. And are the other customers that recently adopted in the USA, are they utilizing INTERCEPT for just for platelets or they using it for both platelets and plasma?

Right now the focus is really been on platelets and I think that's just inline of getting prepared for the timing of the final bacterial guidance document with platelets. There is interest in plasma, but these blood centers clearly looking at sort of doing this sequentially. And they've also been somewhat preoccupied with the recent FDA guidance around Zika testing and Zika - addressing the Zika risk. And so that - that there is been timeline to be compliant with that guidance of November 18. So that’s been somewhat of a fire drill for many blood centers.

Great. And the - if you look at the US opportunities that you had at the beginning of the quarter that you thought would be near-term placement. Did you see any delays or anything sort of changes in the timelines off from those states that the FDA deemed at high risk for Zika?

I think they were really preoccupied with been able to address the guidance document because we don't have the three red cells approved yet. In the US that their focus went to the implementation of the investigational matt [ph] assay. So I don't think I would be able to attribute any kind of acceleration of the pace of adoption to Zika, really the main takeaway I would have from the whole Zika crisis is that the FDA can act decisively and the blood centers realize that and they’ve been given a long heads-up around what the FDA ultimately looks back to address the actual contamination of platelets.

Okay. Thanks a lot.

Thanks, Bryan.

Thank you. Our next question coming from the line of Thomas Yip with FBR. Your line is open.

Hi, everyone. Good afternoon and great to see INTERCEPT continuous progress in both US and ex-US markets. I have a couple of question I think it's mostly for Kevin. First of all, in the prepared remarks you mentioned that there are some significant ex-US contracts, can you just give us sense what general region are they in, or and are they new customers or existing customers?

So, thanks, Thomas. We expect that the ex-US business will grow and it’s not specific to any particular region. We expect that the Middle East will continue to grow. We mentioned that the French contract, as well as the South African tender, but we've also been signing up distributors in Latin America and Asia Pacific as well. So I think all of those are regions and customers that will ultimately contribute to grow.

Okay. And those will be new customers or they just new contracts with existing customers?

Many are new customers. In the case of France, we've been selling into continent of France into one region, so that would be an existing customer that would roll out the technology more broadly.

Okay. Thanks. Thanks for that. I guess, I'll switch gears for US market, you mentioned that 22 customers currently under contract will begin to kind of begin to adopt INTERCEPT, do you expect that rate of adoption to be mostly weighted on the first half of '17 or the second half of 017?

I think the way you might look at it is, those 22 customers under contract are going to be deploying the technology and getting into routine use. So I don't think there will be meaningful drivers in the immediate term for revenue growth. And you know, though I'll say largest customer in the US is the American Red Cross and that's the customer that really will plan to scale their activities over the course of 2017. And we also have another 16 blood centers in routine use, and they are not at anywhere close to 100% production either. So there is a lot of areas for growth in the US going into 2017.

Okay. Thanks for clarifying. One final question regarding gross margins, from what understand gross margin improved because ex-US markets stabilized greatly in 2016, so how should we think about gross margin in 2017 as US customers begin to come on board?

So it's a – for us expansion from margins is really a volume basis. And so as we're selling into more regions and as the customers that have signed up contracts and come online continue to consume and increase their demand of the disposable kits that will drive lower and lower per unit costs for us, which will obviously then extend our mark.

Okay. That makes sense. Thanks again for taking my questions and looking forward to learning more of INTERCEPT.

Thanks, Thomas.

Thanks, Thomas.

Thank you. And our last question for today coming from the line of Emily Stent with Robert W. Baird. Your line is now open.

Hey, guys. Thanks for talking the question. First off just touching on, could breakout what FX was in the quarter?

As far as the impact to top line, almost negative to both, yes, I mean, it was almost negligible. I think if you look current quarter compared to last quarter it was both at on average 1.11, so almost no effect.

Okay, perfect. And then I wonder if you could walk me through, how is the American Red Cross roll out gone and comparison to what your original expectations were?

Yes, it’s basically on track. I think the supply demand equation I mentioned during Josh's question, it continues to be something that we have to work through and for an organization like the American Red Cross they are very dependent upon the network effect been able to provide components to their key hospital customer. So I think as we scale the number of production sites with the Red Cross going in 2017, some of the near-term supply demand imbalances will be mitigated.

Okay, perfect. And then, I guess final one, I know you talked on this today already, but overall commentary you've been getting from hospitals regarding the final guidance document. Obviously the most recent one was published in March, but how do your conversations with hospitals been going since March through now that whether they are choosing to implement point of release testing or INTERCEPT treated products?

In general, hospital decide on using INTERCEPT as a function of the demand from the transiting [ph] physician, its somewhere driven by the impending final guidance document but others are just wanting to have a prospective safety measures and addresses a number of things that as me mentioned in the prepared remarks, it can be addressing Zika or can be for pediatric hematologist, oncologist who can having something to address the CMV infections, a number of physicians have experienced [indiscernible] totalities over the course of their careers and this was mentioned specifically during the ABB by a physician out of Denver, and that's what drove that institution to implement something so that they won't put in patients at risk. I think in general relevant to point of issue tests, hospitals would like to have a transfusion ready component, they don't want to do additional modifications of the hospital site, now whether that's radiation or trying to find CMV seronegative units or the concept of doing of point of issue tests to be able to release the product. So in general we see strong demand for INTERCEPT.

Okay. Great. That’s all I had on my end. Thanks for the questions and nice quarter.

Thanks, Emily.

Thank you. I'll now turn the conference back over to Mr. Obi Greenman for closing remarks.

Thank you all for joining us today and for your interest in Cerus. As evident from our conversations during AABB and pathogen reduction is inclusion as a fundamental component of blood safety policy is clear and Cerus is committed to lead the effort to drive patient access to safe blood. We look forward to updating you on our Q4 call in early March. Thanks very much.

Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.