Cerus Corporation (CERS) Q2 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Cerus Corporation Q2 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference Tim Lee, Investor Relations Director. Sir, you may begin.

Thank you, operator and good afternoon. I would like to thank everyone for joining us today. With me on the call are Obi Greenman, Cerus’ President and Chief Executive Officer; Dr. Richard Benjamin, our Chief Medical Officer; Dr. Laurence Corash, Chief Scientific Officer; Kevin Green, Cerus’ Chief Financial Officer; Vivek Jayaraman, our Chief Commercial Officer; and Carol Moore, our Senior Vice President of Regulatory Affairs and Quality. Cerus issued a press release today announcing our financial results for the second quarter ended June 30, 2018 and also describing the company’s recent business highlights. You can access the copy of this announcement on the company’s website at www.cerus.com. I would like to remind you that some of the statements we will make on the call relate to future events and performance rather than historical facts and are forward-looking statements. Examples of forward-looking statements include those related to our future financial and operating results including our 2018 financial guidance and goals, operating expenses and gross margins, commercial development efforts, future growth and growth strategy, future product sales, product launches, ongoing and future clinical trials, ongoing and future product development, and our regulatory activities as well as the timing of these events and activities. These forward-looking statements involve risks and uncertainties that can cause actual events, performance and results to differ materially. They are identified and described in today’s press release and under risk factors in our Form 10-K for the year ended December 31, 2017 and our Form 10-Q for the quarter ended June 30, 2018 which we will file shortly. We undertake no duty or obligation to update our forward-looking statements. On today’s call, we will begin with opening remarks from Obi, followed by Vivek, who will provide an update on commercial operations, Kevin will then review our financial results and finally Obi will conclude with closing remarks. And now, it’s my pleasure to introduce Obi Greenman, Cerus’ President and Chief Executive Officer.

Thank you, Tim and good afternoon. We are pleased to report another solid quarter in which we made good progress on the top line, on our pipeline and on the bottom line. From a top line perspective, our commercial momentum continued into the second quarter with our sales team delivering another strong performance. Vivek and Kevin will provide additional details in their respective sections, but at a high level, second quarter product revenue totaled $15.4 million, representing a 62% increase compared to the second quarter of 2017. With our solid first half performance and based on current visibility into our commercial prospects for the remainder of the year, we are raising our 2018 product revenue guidance range to $56 million to $58 million compared to our previous range of $53 million to $55 million. Our new guidance range represents growth of 29% to 33% over full year 2017 product revenue. Our increased revenue projections are the result of growing global demand for INTERCEPT. We believe demand has been driven by increasing awareness of the risks associated with transfusion transmitted infections and the benefits of pathogen reduction as the most clinically proven and comprehensive safety measure. The ability to preemptively address the risks of emerging pathogens was a factor in decision by the U.S. Navy Bureau of Medicine to mandate pathogen reduction technology for all apheresis platelets collected by the Navy Blood Program. The five sites around the globe expected to transition to routine use in the coming months in addition to the collection site at Walter Reed, we are proud to be able to assist the Navy Blood Program in their important mission. Even multiple state-of-the-art assays for an established transfusion transmitted pathogen can have limitations. A recent publication out of Europe documented 9 cases of hepatitis B transmission via blood components flight testing by highly sensitive nucleic acids and hepatitis surface antigen assays. Fortunately, the blood center in Slovenia has used the INTERCEPT system for platelets for over a decade now and this same study documented the prevention of hepatitis B transmission in 6 patients, who received INTERCEPT treated blood platelet components from donors with undetected hepatitis B infection. Beyond transfusion transmitted disease protection against emerging pathogens like Zika and Babesia, INTERCEPT also addresses the inherent deficiencies of the current blood testing paradigm. At a fundamental level, we believe there is a paradigm shift underway in reducing the infectious risks of transfusion. Blood centers, hospitals and clinicians are increasingly aware of the risks to the blood supply and are not asking if they can afford pathogen reduction, but instead can they afford not to offer pathogen reduction to help ensure the safest transfusions possible. For example, that the FDA’s recent Blood Products Advisory Committee meeting last month, the risk of actual contamination to the safety of the nation’s blood supply, it was clearly acknowledged. We believe that the FDA continues to have strong interest in adding additional safeguards for the U.S. platelet supply. It was also encouraging to hear speakers’ voice a sense of urgency in finalizing the guidance document. What is perhaps most interesting however is that we believe we are seeing product demand driven by medical community’s desire to improve patient safety now as opposed to a scramble to respond to a federal government mandate. This speaks to the compelling clinical utility and value that INTERCEPT offers. With that, let me turn it over to Vivek to provide an update on our Q2 commercial results. Vivek has now been with the company for almost 2 years and we are excited to see the impact of his leadership on the commercial organization. The global commercial team is aligned around our corporate mission and goals and is attracting the talent we need to scale for the opportunities ahead of us.

Thank you, Obi. I am pleased to report that customer interest in and adoption of INTERCEPT increased meaningfully in Q2. We experienced increased product demand in our Europe, Middle East and Africa regions or EMEA as well as in North America. While France and the U.S. drove the majority of our revenue growth this quarter, we were also pleased to see an increasing number of countries and customers adopt our technology around the world. In the U.S. the market demand for pathogen reduction is strengthening as our commercial team educates the blood transfusion community on the benefits of pathogen reduction. As Obi mentioned, we think that awareness of the risks of transfusion transmitted infections is increasing. As an example, a recent article in the morbidity and mortality weekly report, which is published by the Centers for Disease Control and Prevention, showcased the need for additional safety measures for platelets. The article highlighted that even when blood centers and hospitals followed the most current bacterial detection protocols, the risk of transfusion-related infections and fatalities persist. The article details two separate clusters of transfusion associated bacterial sepsis with split dose conventional platelets, one in Utah and the other in California. Despite utilizing current and safety measures, bacterial contamination of platelets from two separate donors resulted in three patient deaths and one additional case of severe sepsis. These events were avoidable. We believe that pathogen reduction offers significant advantages over bacterial detection technologies. As an example, pathogen reduction offers the ability to address a broader range of pathogens and preemptively reduce the risk from emerging pathogens for which detection tests are not currently available. With respect to commercial progress in the U.S., we now have over 50 blood centers producing in over 130 hospitals transfusing INTERCEPT platelets, 5 of our blood center customers have received BLA approvals and we are anticipating approval for 9 other centers over the coming quarters. As a reminder, blood centers typically supply hospital customers in multiple states and BLA approvals are a requirement for shipping blood components across state lines. It is our goal that all U.S. patients have access to the safest blood products possible and BLAs are critical for many blood centers to reach their full customer base. Given our steady progress developing the market, we expect U.S. demand for INTERCEPT platelets to strengthen and become a key growth driver for the company. We see evidence of clinical acceptance of and demand for pathogen reduction technology independent of the publication of an FDA guidance document. We believe accelerated product uptake is not dependent on the FDA issuing a final guidance document, but instead is driven by clinical demand for safe blood. Turning to our international opportunities, we continue our efforts in Germany to work with blood centers and the Paul Ehrlich Institute to garner regulatory approvals for customers to produce and provide INTERCEPT treated platelets to hospitals. We anticipate the hospitals will then be able to realize the operational benefit of another day of platelet shelf life, while also realizing the financial benefits of improved reimbursement all the while improving patient safety. The foundation we are laying in Germany this year is expected to translate into additional revenue for Cerus in 2019 and beyond. With an estimated 580,000 units of platelets produced annually, we believe Germany is the largest market opportunity for INTERCEPT platelets in Europe. Last quarter, our distributor in Poland was awarded 10 different INTERCEPT platelets by the Warsaw Blood Center, which is the largest blood center in Poland and an extremely influential reference account across Eastern Europe. By winning the tender, we create a foothold in a very important part of the world. The tender of what establishes a strong presence in the Polish market, which we estimate to be more than 100,000 platelet units transfused annually. Finally, in EMEA, France was once again the key contributor to our strong quarterly performance. As we noted during our Q1 conference call, EFS is now at 100% utilization, while the dual storage kit is now available in France, sales in Q2 were predominantly driven by the single-dose kit configuration. Given the cost and operational benefits of the dual storage kit, we anticipate EFS to shift a meaningful portion of their production to the DS format this year. While the EFS conversion to DS may provide an improved margin to Cerus this transition will likely impact revenue in the back half of 2018 and through 2019. Overall, we are enthusiastic about the full adoption we have seen in France and also in the accelerated uptake we are experiencing in the U.S. In summary, we believe we are well-positioned to drive INTERCEPT adoption on a global basis. Now, let me turn the call over to Kevin to provide an update on Q2 financial results.

Thank you, Vivek and good afternoon everyone. Today, we reported second quarter product revenue of $15.4 million, a 62% increase compared to the $9.5 million reported during Q2 of 2017. On a year-to-date basis, product revenue totaled $29 million, up 75% compared to the $16.5 million reported during the first half of 2017. Government contract revenue during the second quarter totaled $4 million compared to $1.7 million during the prior year period. On a year-to-date basis, government contract revenue was $7.5 million compared to $3.1 million during the 2017 period. Worldwide demand for INTERCEPT kits increased more than 70% when comparing Q2 of 2018 to the prior year period with the greatest percentage of growth coming from the U.S. When looking at the first half of 2018 compared to that of 2017, worldwide demand for INTERCEPT kits increased more than 80%. Platelet kit sales continued to increase their relative contribution to our overall product revenue, with platelet kits now accounting for approximately 90% of total product revenue compared to approximately 85% in the prior year. As Obi noted in his earlier remarks, given the outperformance in Q2 and our strong conviction in the commercial outlook, we are raising our full year product revenue guidance to a range of $56 million to $58 million from our previous range of $53 million to $55 million. Now, let’s turn from revenue to other second quarter results, starting with our reported gross margins. Gross margins on product sales for the quarter were 50% compared to 54% for Q2 of 2017. Year-to-date, gross margins were 48% compared to 51% during the first half of 2017. The year-over-year change in gross margins was largely attributable to the volume-based pricing associated with the current high volume customers who contributed meaningfully to our 2018 revenue. I would now like to discuss operating expenses, which totaled $24.3 million during the quarter compared to $23 million during Q2 of 2017. Specifically, SG&A expenses during the quarter accounted for $14.4 million compared to $14.1 million in Q2 of 2017 essentially flat year-over-year. Similarly on a year-to-date basis, SG&A spending in the first half totaled $28 million compared to $27.8 million during the first half of 2017. With our sales in back office teams largely in place for sometime now, we are continuing to realize the leverage of the business model with stable SG&A costs in a growing top line. And while we anticipate that we will continue to selectively add investments in SG&A, we expect those incremental SG&A investments to be modest compared to our anticipated top line growth. Research and development expenses for the quarter totaled $9.9 million compared to $8.9 million during the year prior. The increase was primarily tied to higher costs associated with the clinical development of the INTERCEPT red blood cell system for preparatory activities to launch both our planned CE Mark submission in Europe and our clinical activities in the U.S. On a year-to-date basis, R&D expenses totaled $19.3 million compared to $18 million in the prior year. As clinical activities tied to our U.S. red cell program progress and accelerate, we expect R&D expenses to increase with the corresponding increase in BARDA funded revenues. Operating losses during the second quarter were $12.6 million compared to $16.2 million for the second quarter of 2017. Throughout the first half, operating losses totaled $25.9 million compared to $34.3 million in the first half of 2017. Net loss for the second quarter narrowed to $13.3 million or $0.10 per diluted share compared to a net loss of $17.1 million or $0.16 per diluted share for the prior year period. Year-to-date, net loss also narrowed to $27.2 million or $0.21 per diluted share compared to a net loss of $35.7 million or $0.34 per diluted share in the first half of 2017. In terms of our balance sheet, we ended the quarter with approximately $112 million of cash, cash equivalents and short-term investments on hand. We believe that our business is at a positive inflection point and that we are well-positioned to execute on our business strategies to maintain and accelerate the global commercial momentum of INTERCEPT, advance our red cell program both in Europe and in the U.S., and lastly, bring pathogen reduced extended storage cryoprecipitate to hospitals and patients. With that, let me turn the call back over to Obi.

Thank you, Kevin. I want to conclude with an update on our pipeline programs. We expect these pipeline initiatives to be major revenue growth drivers in the years ahead. Starting with our red cell program in Europe, we are on track to file for the potential CE Mark approval of our red cell platform this calendar year and are engaging our notified body TUV in pre-submission meetings this month. In the U.S., we announced an additional $15 million in incremental funding from the Biomedical Advanced Research and Development Authority, or BARDA. These proceeds provide supplemental support for chronic and acute anemia studies. With this amendment, our total contract potential at BARDA now exceeds $200 million to largely fund the development effort and manufacturing scale up for the INTERCEPT red cell launch in the U.S. We also continue to advance our INTERCEPT pathogen reduced cryoprecipitate or cryo program, we are happy to report that we signed today our second regional partnership with the Blood Center of New Orleans. Launch planning is underway and there continues to be strong clinician interest in having this product readily available to treat critically bleeding patients. We have decided to leverage some capacity expansion changes for INTERCEPT plasma set in the U.S. and have chosen to aggregate those changes with the INTERCEPT cryosubmission into a single PMA amendment targeted in the second half of next year. With the anticipated 180-day review process, we expect commercial launch in 2020. As this opportunity takes shape, we look forward to providing future updates on the expansion of our manufacturing partnerships and launch preparation. This is an exciting time for Cerus as we push forward with our mission to make INTERCEPT the standard of care to improve the safety and availability of blood components around the world. As awareness of risks of bacterially contaminated blood components rises, we believe there is an increasing sense of urgency growing within the blood bank and community to improve safety. The current testing paradigm is not sufficient and patients and physicians deserve safer blood in an assurance that it will be there when they needed. We are confident that INTERCEPT is the best solution to address these concerns given its ability to treat both known and emerging pathogens with a single platform for multiple products. Furthermore, we are expanding our portfolio with pathogen-reduced all three major blood components with our planned CE Mark filing for the INTERCEPT red blood cell system later this year. In closing, I would like to acknowledge the efforts of the Cerus team. The year-to-date results are encouraging and are clearly the product of dedicated teamwork and strong cross-functional collaboration. I know that my colleagues share my conviction that our work is just beginning and that we have an important responsibility to ensure the smooth and rapid transition to a new standard of care in blood safety. Operator, please open the call for questions?

Thank you. [Operator Instructions] Your first question comes from Josh Jennings of Cowen. Your line is open.

Hi, good afternoon and congratulations on another strong quarter. I was hoping to start with the U.S. business in the platelet opportunity, I mean, despite the strength in the first half of the year, it seems that there still is a long way to go in terms of the runway here for the U.S. franchise, appreciate some of the data you shared in terms of the, I think 50 blood center customers, 130 hospitals are using INTERCEPT platelets, but can you give us an idea about where you think out how deep you believe penetrated the U.S. market, are we still in the single-digits here and then also just on the BLA side, five approvals, customer approvals, I guess what has been the delay, what has driven the delay and how confident are you that you can see those start to open up in the coming quarters?

Thanks, Josh. I will let Vivek handle these questions, because he is closes to it.

Yes. Josh thanks for the questions. In terms of market share in the U.S. or percent penetration, at this point in time, we are not reporting out those metrics, but I will maybe bring you back to comment we made few quarters back about working with the U.S. blood centers around optimizing their production and seeing them start to adopt these production optimization metrics into their practice and we are seeing now the levels of INTERCEPT they are producing and then subsequently the hospital demand they can meet really driving growth. And I would say we are still very much in the early days of that process, so there is a significant amount of headroom still left in the U.S. marketplace. On the BLA front, as mentioned, that’s going to be critical, because most blood centers do supply customers in multiple states and without the BLA are constrained in terms only being able to supply in those states where they manufacture. It’s probably imprudent for us to speculate on individual regulatory processes between the blood center and the FDA. But having said that, our deployment organization and teams working closely with the blood center is to ensure that whatever questions arise can be answered expeditiously and certainly the progress we have made with respect to receiving BLA to-date gives us reason for encouragement.

Excellent. And I just wanted to follow-up on the cryo opportunity, thanks for the updates there today. Maybe you can just help us more details in terms of the steps that are required, I think you are doing some in-vitro data generation and then anything else that needs to be done on your side before you can submit the supplemental filing? And then – and secondarily, just I think there was New England Journal of Medicine article last week about a mortality benefit being demonstrated by administering thought plans, trauma victims in lieu to a trauma center, just wondering if how big of the total FFP addressable market is, is that kind of pre-hospital trauma segment? Thanks again for taking the questions.

Yes, thanks Josh. I will deal with the first question and the turn over to Larry to talk about the New England Journal of Medicine article. So with regard to the class submission, basically it’s in vitro studies looking at the coagulation profile in the INTERCEPT crowd precipitant product. And so those studies are underway now. I think that the [indiscernible] is the timeline is really to get the stability data we need for the submissions. We have a lot of experience in doing studies like this for INTERCEPT plasma and as a reminder this is an amendment to the INTERCEPT plasma PMA and so it’s something that we are very familiar with. We have clear pathway defined with the FDAs to what’s required and it’s just completing our studies and getting the stability time points to be able to submit that amendment. And then the second question I will turn it over to Larry with regard to pre-hospital use of plasma and sort of the overall interest in trying to address trauma mortalities with early plasma and also with cryoprecipitate.

So, hemorrhagic trauma is the leading cause of death for people under the age of 45 in the United States. So, it’s a very significant population of patients and that article clearly showed a benefit for plasma pre-hospital. Other studies have shown that a critical component in plasma is fibrinogen and therefore we see the value in 5-day thought cryoprecipitate, which can be used pre-hospital to address the need to elevate fibrinogen levels as early as possible. So, we see this article as validation that earlier transfusion in pre-hospital has tremendous value to change outcomes for substantial population of patients.

Great. Thanks for those answers.

Thanks, Josh.

Thank you. Your next question comes from Drew Jones of Stephens Inc. Your line is open.

Thanks, guys. Good afternoon. Looking just trying to get a feel for maybe how conservative the guidance is for the back half of the year, maybe one way to do that would be if we could parse out the impact on French revenue from moving to dual kids from single-dose, is that something you can give us a little bit of a feel around?

Yes, Drew, I will turn that over to Kevin. I think he has got some insights on that.

Sure, Drew. So we mentioned on the Q1 call that we exited Q1 with a French 100%. In fact, we saw them continue with more utilization of INTERCEPT throughout the quarter. What we know is that we have begun selling the double-dose kits to the French starting in late Q2 and that continues into Q3. Their guidance to us is that they want to convert and be fairly aggressive with their conversion to the double dose platform. And so we feel that there will be impact to the top line as a result and so our guidance contemplates that impact.

Okay. And then thinking about other opportunities that are going to come online here, Germany obviously pretty sizable opportunity, when you look at kind of accreditation for centers there, is that something that looks like we are going to see revenue contribution in the first half of 2019 or is maybe that more of a second half of 2019 opportunity?

I will let Vivek handle that one.

Yes. So, I think we will start to see some modest revenue contribution in the first half, Drew and that will start to scale through the year as more centers come online. Again, similar to the question about BLA, it’s certainly been speculative when you are trying to weigh in on regulatory clearances, but our deployment organization regulatory teams there in Germany have been working very closely with the German blood centers to get those clearances and applications into the Paul Ehrlich Institute. So we feel confident that and frankly the extent of customer interest in working with us has been really encouraging, so we anticipate that we will start to see some of the impact of that in the first half part of year.

The other thing Vivek and I want to comment on is just the talent of the team that we have sort of recruited and the focus on the IMA submissions and so how we are facilitating that with blood centers?

Yes, that’s a good point. We have – since we learned of the increased reimbursement in Germany we have recruited really some strong cross-functional talent to the German team. So in the areas of regulatory affairs deployment in hospital sales and also continue to do a lot of work on the health policy and government advocacy side. And so our understanding of the clinician and hospital level interest and Intercept is growing that’s a significant margin really in the past quarter and a half and so it’s encouraging to as an aside to see the type of talent we continue to attract to the organization, because ultimately it’s our team on the ground in the different countries that are going to tell the tale and drive the results. And so we have been pleased with our newly hired German team to-date and that builds upon a strong group of employees that we have had in Germany for a period of time now.

Thanks, guys.

Thanks Drew.

Thank you. Your next question comes from Craig Bijou with Cantor Fitzgerald. Your line is open.

Thanks for taking the questions guys. I will maybe want to start with you and I appreciate your comments that the medical community is driving some of the demand for pathogen reduction, but I guess I wanted to see maybe kind of drill into your thoughts on the BPAC meeting from couple of weeks back and just kind of the tone of the meeting relative to prior meetings and then just of kind what you see as the next steps over the next 6 months and maybe into ‘19?

Thanks, Craig. I think my primary takeaway from it was that the primary culture of clearances has no longer seen us sufficient and that really was something that was strongly setup the meeting by all the participants, but since I wasn’t at the meeting and Richard and Carol and Larry were, maybe I can let them comment, because I think they had some key takeaways from the BPAC meeting.

Maybe I can step in. Thanks, Craig. It’s Richard Benjamin. I think the meeting reaffirmed the FDA’s intention to move forward with guidance, I think everyone in the room didn’t contest the issue that there was a real need that bacterial safety is an unmet need and there were many options discussed that gave us a great opportunity to present an update on what we have accomplished and that we can effect. So, I walked away with I think a positive view on the outcome.

This is Carol. I’d like to just go back and say that Cerus was invited to make a presentation as an expert in the area, which allowed us to provide some real clarity with regard to the data that we have and the value that we are seeing and the experiences that we are having in the market. And I think that was extremely helpful. It allowed us to answer questions on the product in the process. And to one question we were asked could we supply the entire market if there was a mandate to convert 100% to pathogen activation, we were able to address that positively saying that we could do that? And I think the meeting for Cerus was really verification of the fact that people are very interested in using the pathogen activated products, specifically INTERCEPT and that they do see this as an optimal solution although every blood centers going after about what they would like to do, I think that it continued to come up that we were a very good solution for the important questions of bacterial when it comes to treating platelets.

So, I think one of the notable aspects of this meeting was that prior to our presentation, five different groups presented five different solutions to enhance bacterial detection. None of which clearly demonstrated optimal performance and the statistician from BPAC commented on the limited amount of clinical data. In contrast, we presented a single solution for viruses, bacteria, parasites and white blood cells and extensive clinical data in Europe for more than 10 years showing the efficacy of the technology. So I think that it was a remarkable contrast to a single solution as opposed to multiple un-vetted solutions.

Great. Very helpful perspective. Kevin, maybe for you on the lower gross margin due to the lower selling prices for the higher volume, any color there, is that U.S. based, is that a Europe and then I guess just how – is that a new strategy and how big of a piece of your strategy will that be going forward?

So, historically, we have offered volume-based pricing to our distributors. As we have larger and larger customers signing up, we want to incentivize them to increase their penetration. And so it is not just a European or a U.S. metric, it really has to do with the size and purchasing power of certain customers and so it’s across multiple customers.

And then how does that evolve over time is part of the question, Kevin?

Well, as it evolves over time and as those customers contribute more and more to our top line, it will have an effect, but also as customers convert to the double dose, which is fairly nascent right now we see a pickup in gross margins.

I think the other part, I was sort of wanting to get up is just the price volume terms that we have with our existing manufacturers. As our volumes grow, we do expect to see any improvement in margins over time this is a function of scale.

Okay, great. Thanks for taking the questions.

Thanks Craig.

Thank you. [Operator Instructions] Your next question comes from Catherine Schulte of Baird. Your line is open.

Hey, congrats on the nice quarter and thanks for the questions. Just wondering first if you could talk about your progress with the American Red Cross, I’d love to get an update on how they are marketing INTERCEPT platelets today and how that’s changed over the last year or so?

Again, I will turn it over to Vivek since he is closest to the dynamic in the U.S.

Yes, thanks for the question Catherine. I would say that single biggest driver change has been really the rate at which they have adopted the production optimization steps of their manufacturing facilities and how that’s resulted in a pretty significant increase in the amount of INTERCEPT platelets that they are able to produce and then ultimately distribute to their hospital customers. So that’s been the single biggest driver of growth and there is still quite a bit of headroom there. They presented last year at the ABB about their intention to take on production optimization steps. And so the results we saw have seen with them to the first half this year, I think are the byproduct of those steps really starting to come into practice.

Okay, that’s helpful. And then can you get some commentary on how the 5 blood centers who have received their BLAs have ramped their volume since receiving those approvals and then what’s the status of American Red Cross BLA?

So, I will start with the American Red Cross deal. First, we know they are actively pursuing BLA clearance and we working with them on that. As with other regulatory situations related to a specific dialogue between them and the FDA is something to which we are not a party, but we know that continues to be something that’s considerable interest in them, because they do have many hospital customers that are in states outside where they do not currently have manufacturing facilities producing INTERCEPT. With respect to the blood centers that have received BLA is really what we are seeing now is them start to meaningfully send product out of state hospitals and few of them have similar to the Red Cross aggressively adopted the production optimization strategies and now they are being able to do sort of nicely tie supply and demand and for the others, they are in the process of picking up the production steps. So, we certainly see that we have both demand growing from the hospital side and supply growing from the blood center side and so the extent that we can knock on barriers that and facilitate tying those two things together, we are just trying to methodically go about the process.

Okay, great. And last one for me we have touched on the BPAC meeting, just curious if you had any conversations with the FDA. Since then, it seems like there was a push to potentially switch or go straight to a final guidance. So, any change on FDA thinking there?

This is Carol. Again, we talk to the FDA all the time about our ability to supply our progress towards expanding the utility of our license applications. We haven’t talked about the guidance document specifically, but because we are in such regular communication, they are fully aware of our capability and do not hesitate to reach out to us to ask questions, I think that might be helpful, I would say, prepare whatever additional remarks we are going to make on the guidance document.

Yes. I think it’s sort of imprudent for us to sort of speculate as to whether it’s going to come out as a final guidance or a revised draft as what is described in the current publication was for this year, they referenced a revised guidance document coming out this year, not a final.

Okay, great. Thank you.

Thank you.

Thank you. And I am showing no further questions at this time. I would like to turn the call back over to Obi Greenman for closing remarks.

Thank you. I would like to announce that we will be hosting an institutional investor meeting just after the ABB meeting on October 16 in Boston. Senior management will provide a comprehensive review of our commercial operations there and pipeline opportunities and several guest speakers will provide perspectives on their experience with the INTERCEPT blood systems and the evolving role of pathogen reduction in transfusion medicine. We hope to see many of you there and thanks again for joining the call today and for your interest in Cerus.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you all may disconnect. Everyone have a wonderful day.