Ladies and gentlemen, thank you for standing by and welcome to the Cerus Corporation Q1 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there'll be a question-and-answer session. [Operator Instruction] Please be advised that today's conference is being recorded. It is now my pleasure to turn the call over to your host Mr. Tim Lee. Please go ahead.

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, Cerus' Chief Financial Officer; Vivek Jayaraman, our Chief Operating Officer; Dr. Laurence Corash, our Chief Scientific 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 first quarter ended March 31, 2020 and also describing the Company's recent business highlights. You can access a copy of this announcement on the Company website at www.cerus.com. I like to remind you that some of the statements we will make on this call related to future event and performance, rather than historical facts and are forward-looking statements. Examples of forward-looking include those related to our future financial and operating results and including our 2020 financial guidance and goals, operating expenses and gross margins, commercial development efforts, future growth and growth strategy, future products sales, product launches, the impact of current and future products on blood center operations, 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 risk and uncertainty that could cause actual events, performance and results to differ materially. They're identified and described in today's press release and under risk factors in our Form 10-K for the year ended December 31, 2019, and our Form 10-Q for the quarter ended March 31, 2020 which we will file shortly. We undertake no duty or obligation to update our forward-looking statements. On today's call, we'll begin with opening remarks from Obi followed by Vivek, who will provide an update on commercial operations and our supply chain. Kevin will then review the financial results, and finally Obi will conclude with closing remarks. Many of the Cerus employees have been sheltering in place and working remotely, including most of us on the call today. We are dialing remotely to this call. So please excuse us for any lags or delays that may occur. And now, it's my pleasure to introduce, Obi Greenman, Cerus' President and Chief Executive Officer.

Thank you, Tim, and good afternoon. We appreciate your patience and dialing in today. The past several months have clearly been a challenging time for the world and for businesses due to the impact of the COVID-19 pandemic. Since our fourth quarter conference call in mid-February, we implemented our crisis management plans to ensure the safety of Cerus employees, the product supply to support our customers and the continuity of our operations. And at the same time, we've taken decisive action to help blood centers and National Transfusion Services ramp up the implementation of COVID convalescent plasma programs, provide a bridging therapeutic option to acutely ill patients in multiple countries until other therapies and vaccines are available. As of today, I'm happy to report that our thoughtful planning and our experienced team at Cerus have put us in a very strong position not only to effectively navigate this pandemic crisis, but also to reframe the opportunity set in front of us, given the increased focus on supply chain security for blood safety and availability. It's important to recall that the basic mechanism of action of our pathogen inactivation platform was designed to deal with the emerging pathogens --with emerging pathogens such as the SARS-CoV-2 virus. Working with our manufacturing partner Fresenius Kabi and with key sub suppliers such as Porex, part of the filtration group, we have increased our safety stock product inventory since the beginning of the year in anticipation of potentially increased demand. This resulted in first quarter product revenue of $18.6 million, which exceeded our internal expectations at the beginning of the year. While COVID-19 is having a profound impact on our blood center customers for both the supply and demand perspective, we are still seeing blood centers increase INTERCEPT orders in an effort to better safeguard…

Thank you for the kind remarks, Obi. Good afternoon, everyone. First, I want to express my sincere gratitude to Cerus employees worldwide for their unwavering commitment to ensure blood centers, hospitals and patients around the globe that access to INTERCEPT. Without their commitment during this time of crisis, particularly with so much of the disruption beginning as the first quarter was coming to a close, we would not have been able to deliver the top line results we're sharing with you today. As a result of the COVID-19 pandemic, blood donations and blood product use dropped sharply starting in mid-March and donors sheltered in place and as elected medical procedures were postponed. In addition, we started to hear about a slight decline in platelet utilization, even though platelets are primarily used in essential medical procedures. Nevertheless, as showcased by our strong Q1 results, global customer demand and adoption of INTERCEPT was robust. First quarter product revenue of $18.6 million exceeded our pre-pandemic internal plan, and the outperformance was broad based with encouraging results in all sales regions. We continue to see strong demand for INTERCEPT platelets in the U.S. Q1 2020 product revenue in North America was up 34% when compared to Q1 2019. As we’ve mentioned previously, the American Red Cross is leading the push to establish pathogen reduction as a standard of care with respect to platelet safety in the U.S. We are deeply grateful to the ARC for their strong partnership and their continued leadership and vigilance. In Q1 2020, product sales to the ARC increased at an even faster rate than those reported for overall North America. The ARC remains steadfast in their efforts to make INTERCEPT the third method for complying with the final FDA guidance on bacterial safety for platelets. As we've discussed previously,…

Thank you, Vivek, and good afternoon, everyone. Today we reported first quarter 2020 product revenue of $18.6 million, up 6% from the $17.5 million recorded during Q1 of 2019. Foreign exchange rates negatively impacted the year-over-year comparable results by approximately 2%. To evaluate our results without the impact of foreign currency exchange rates or product mix shifts, we track the calculated number of treatable platelet doses, which increase nearly 14% year-over-year. Platelet n kit sales accounted for approximately 90% of recorded product revenue, similar to the prior year period, making the treatable doses comparison a true barometer for the top line. We believe this metric is reflective of the underlying strength of our business. So we have not currently experienced the disruption to our commercial business. The COVID-19 pandemic has clearly created uncertainty for all businesses, including Cerus and our suppliers. While the crisis persists, we have less visibility into our full year outlook. But based on the current trends and the medically essential nature of transfused blood components, we are cautiously optimistic. Clearly, while there will be puts and takes, we expect our reported product revenue growth to accelerate driven by both increased demand for our platelet kids, and a renewed interest in our plasma product, in part driven by convalescent plasma. Accordingly, today, we are reaffirming our full year 2020 product revenue guidance range of $89 million to $93 million, representing growth of approximately 20% to 25%. Separately and not included in our guidance, government contract revenue recognized under our BARTER agreement totaled $6 dollars during the first quarter of 2020, compared to $4.5 million during Q1 of 2019. In the short-term, as a result of the current COVID-19 outbreak, most RedeS and ReCePI sites are temporarily suspending enrollment. Accordingly, we anticipate that we could see a decrease…

Thanks, Kevin. The COVID pandemic and the increased emphasis on supply chain security for blood centers. The relevance of our full INTERCEPT product portfolio has never been more important. I would like to provide an update on our two key development projects, pathogen reduced crowd precipitant and INTERCEPT red blood cells. As we announced on April 20, we amended our contract with BARDA for the Intercept RBC program to include another $40 million in funding to support our ongoing clinical trials and to further evaluate the efficacy of INTERCEPT, to inactivate SARS-COV-2. With the additional funding, the potential value of the contract now totals $124 million in non-dilutive capital. Marta has been a fantastic partner in our clinical development and manufacturing scale up activities. While enrollment in our Phase three U.S. studies has been impacted by the COVID-19 pandemic due to key hospital sites suspending research activities. We are planning to reinitiate site enrollment as quickly as possible. That said, some sites continue to enroll in both the ReDeS and ReCePi studies. And we've been notified by some additional sites that they are ready to initiate now. Europe, as a result of the COVID-19 pandemic, the implementation of the MDR regulatory pathway has been postponed to May of 2021. After discussions with our regulatory body TUV, we are moving forward with the transition to the MVR submission pathway for Intercept RBCs now so as to not delay it further. While we are still projecting a possible 2020 timeline for approval of the CE Mark. The overall timing will be better defined once we have clarity on the modular submission schedule under the MDR. We should have more visibility on our ability to compress the review timeline by our next quarterly call. To date, our submission dossier continues to dance and…

[Operator Instructions] Your first question comes from the line of Mathew Blackman from Stifel.

Hi, good afternoon, everyone. Thanks for taking my questions. I could start maybe -- a big picture question for Obi and even Vivek if you want to chime in. And you alluded to it in both of your prepared comments, but perhaps just to be more direct. As you think about your key growth drivers over the next several years. So U.S. platelet adoption, the pipeline, does COVID slow you down at all as you execute against those drivers, or maybe, in fact, could it potentially accelerate adoption of the portfolio as the value proposition becomes increasingly more compelling and obvious. And I've got a couple of follow-ups.

Thanks, Matthew. I'll start then probably turn it over to Vivek for maybe some more specifics on a country-by-country basis. So I think on the whole, clearly, yes, INTERCEPT was developed back in the early 90s to deal with the pandemic threats at that time of HIV and hepatitis in the blood supply. And there's been a number of pandemic threats over the last 25 years. And obviously, there'll be additional ones in the future. So I think what this highlights for Cerus is sort of, I guess, affirmation of the Company's mission and what we're trying to do to safeguard blood safety and availability globally. So I think it really just create an awareness opportunity for us to work with our blood center customers and those that were not our customers to understand sort of why this safeguards the overall blood supply chain. Clearly, I think there are some issues that we discussed in our prepared remarks around sort of how quickly hospitals come back online and start doing elective procedures and our ability to go out and talk to those hospitals sort of towards onboarding them. But on the margin, I'd say, this really sort of is an opportunity for Cerus to reframe its opportunity set. Maybe, Vivek, can give you some more specifics around the U.S. market and the markets in Europe.

Thanks, Obi, and thanks for the question, Matt. I think that Obi summarizes it well. If I take a step back and take the long view, I think that the situation with COVID-19 does help to further clarify the importance and the need for optimized blood safety. So I think it will serve to be a tailwind for us because as Obi indicated, our origin really deals with responding to a pandemic and as folks think about the importance of proactively implementing public, health and safety measures. I think we will see an increased interest in adopting pathogen reduction technologies. Acutely, though, I think visibility into the puts and takes are a little more difficult. We talked a bit about the impact commercially in the U.S in terms of being able to engage hospitals and visit them in person and that's a little bit cloudy now. Hospitals have been aggressively restricting visitors to focus on their COVID response. We're also actively managing the operation and supply chain component of our business. I think we feel like we're in pretty good position now. But as social distancing measures and things of that nature are implemented in areas where we manufacture, that all obviously have implications for our product supply and ultimately, our ability to provide product, I think in those cases we are in pretty solid shape and that’s reflected in our Q1 results and our decision to maintain our full-year guidance. But I think net of it, what you will see is a renewed interest in plasma, and we’re seeing that at a few key geographies in Europe and the U.S and that continued push forward to standard of care in the U.S in terms of our franchise.

All right, guys. I appreciate that response -- those responses. Maybe just to dovetail on that, the platelet demand. Again, in the U.S., it still sounds like Red Cross is a major driving force. You talked a little bit about some of your conversations with the other four, but is the major inflection for, we will call it, the other four, is it just a matter of time, or is there something specific that when you speak to them, they call out as a barrier to adoption? Of course, I'm talking beyond COVID. Is there anything in those conversations that consistently comes up as a reason why perhaps they're not moving as fast as the Red Cross? And then, one follow-up after that.

So I will let, Vivek, cover the specifics of the big five. One thing I wanted to point out for your previous question as well, Matt, is that, the guidance document that the FDA finalized around platelet safety in September of last year, really speaks to bacterial contamination risk alone. And so of all the options that were presented for blood centers to be compliant with that guidance document, the INTERCEPT technology is the only one that deals with future pandemic threats. So I think that's a really important thing to sort of recognize in the context of the FDA guidance compliance period. Maybe, Vivek, you can add some more color around how the big five are thinking about pathogen activation.

Sure. I think -- back to your question about -- for the other four of the big five, are there any particular sticky items or barriers to their adoption that are perhaps having to move more slowly than Red Cross. I think, first, the Red Cross candidly was the first to sort of think clearly and make a decision around what they wanted to do with pathogen reduction independence. So they got independent of the guidance document. So they communicated prior to finalization of the guidance document that they intended to move aggressively and make PR a strategic priority. So they had a bit of a head start. And as we've talked about in the past, there are regulatory items like securing BLA, things of that nature that on some level have a certain amount of lead time between submitting and then securing those clearances. So the other blood centers are working through those, or working through the operational activities and they're partnering with their hospital customers to get them onboard with INTERCEPT. Now for de novo hospital customers, with its de novo with respect to INTERCEPT platelets they’re dealing with the added challenge of trying to get attention and gain access to these sites in this COVID-focused environment, whereas the Red Cross had activated a number of hospitals prior to the pandemic and so now are moving towards driving them towards standard of care. So those are probably I wouldn't say there are any unique barriers necessarily. It's really a matter of just when they started in earnest relative to when the ARC started in earnest. But what's encouraging to me is the destination for all of them is clear to the same place which ultimately will be to a safe blood supply.

That's very helpful, as always. And then the last one here on the pipeline. How do we read the additional funding from BARDA for the red cell program? Is it simply, think of it as sort of an offset from what you need to spend, or could that incremental infusion of cash somehow accelerate your ability once the trials are back up and running, does it accelerate your time lines at all for being able to complete that trial now that you've got more additional funds? That's all I have. Thanks so much.

Yes. Thanks, Matt. The way I look at it is BARDA is very supportive of what we're trying to do with regard to getting the Red cell program to a PMA approval and have it available to safeguard the red cells supply in the United States. That was the overall mission from the inception of the collaboration. And they just saw that this was an opportunity to fund not only clinical trial activities, but also the SARS-COV-2 and activation work across the full INTERCEPT portfolio. So I think it's just a reaffirmation of their support for our endeavors and certainly in the context of this COVID-19 pandemic. The rationale for their support from the previous pandemic around -- epidemic, if you will, for around Zika. It's been supported in that regard.

All right. Thank you everyone.

I don't think it will fundamentally accelerate things, it just allows us to open sites and maintain the schedule.

Got it. Appreciate it. Thank you.

Your next question comes from the line of Josh Jennings from Cowen.

Hi, good afternoon. Thank you. And congratulations on the progress and thanks for the work your team's doing on the COVID convalescent plasma. Just wanted to start. We’ve heard -- some of our checks suggested that in the United States, in particular with electric procedures declining that hospital -- platelet demand from hospital customers to blood centers has declined. You guys are clearly on a different track than the overall platelet market in the United States from a platelet demand and maybe also in Europe? And could that be impactful.

Hi, Josh. Yes. Why don’t you handle that, Vivek?

Sure. I would be happy to. Hey, Josh. Thanks for the question. Yes, as I indicated in my comments earlier, really at the start, kind of the early mid March timeframe, we were hearing from our customers there are lot of concerns about probably a significant drop off in blood donors coming in, and then similarly, as they were trying to understand how their hospital partner is going to react, some concerns about the postponement in the elective procedures, having impact on the utilization of blood components. And there was an acute drop in the number of donors, which was fairly quickly followed by a pretty meaningful surge of folks going in and wanting to do their civic duty and donate blood. And while there -- while we have seen a reduction in blood product utilization to your point earlier, because that’s even for platelets as well. But seeing as you correctly summarized earlier, it's still the amount of headroom that we have in terms of increasing the percent of overall platelets that are PR treated provides us sufficient cover under which to grow. So we were able to do that. But I think it won't be, frankly, until we start to see the elective procedures come back, patients start to present back in both inpatient outpatient settings that will have a better sense of how platelet volumes, whether conventional or PR treated level are. But we certainly did see even for platelet components a bit of a drop off in terms of utilization due to the COVID-19 issue.

Great. Thanks for that. And just to follow-up on the red blood cell receptor platelet opportunity, we had a -- an expert consultant suggest that this pandemic could kind of lit a fire on the FDA and potentially spark an accelerated review pathway or expedited review, breakthrough designation or something along those lines. One is that. I know it's hard to call, but is that -- has there been any buzz around that? And then secondarily, just on the CE Mark path. Can we -- just want to make sure I'm clear on the description here. You guys are going to use the MDR pathway. But could we potentially see an approval timeline that's in front of that 2022 year, that's been put on the tape historically?

Yes. Thanks, Josh. I'll take a shot at that and maybe then turn it over to Carol for some comments around through how the FDA might look at this. We obviously have ongoing discussions with the FDA about what the clinical requirements are for an approval -- a PMA approval in the United States. And so that's a dialogue that's underway. I think right now, the general disposition of the FDA historically has been that they wanted to approve the product for all indications. And so, that required a fairly robust dataset to be able to do that. And so before I turn it over to Carol to answer sort of the specifics around what might be possible, I just -- I will cover the MDR question you had. So, I think as I discussed in the prepared remarks, we'll have more clarity around what the actual calendar looks like as far as the modular submission schedule for that MDR pathway by the next quarterly calls. I think it's probably safer to say, hey, we'll just give you an update in -- end of July or early August on that. But I think that we've had good discussions with TUV so far, and we'll just have to see sort of what their thoughts are on a timeline for that modular submission schedule, what they can handle and then ultimately what HPRA can handle, which is our notified body -- I'm sorry, competent authority for the submission. Carol, you want to comment anything on the FDA thinking in the context of COVID-19?

Well, I think, Obi, you've summed it up just right. I think that just the point that I would emphasize is that we are in constant discussion with the FDA about all of our products and opportunities that might exist. We are not shy about asking for out of the box considerations in terms of moving our products forward and obtaining the licenses as quickly as we can, or moving trying to do a part of our study pre license and consider collecting the rest of the study data post license so we don't have any of those paths solidified at this point. But it is an important effort that we maintained to continue to look at the global environment, especially as it impacts the U.S. patients and discuss those opportunities with FDA, and have them give us some feedback on their point of view. But I think Obi's point about seeking a license that covers all indications for red cells is important because that alone will save us time rather than doing individual studies. And so we are trying to keep that in balance with our requests for discussion and evaluation with FDA.

Understood. Thanks. And the last question just on similar type of questions, could COVID-19 -- could a pandemic spark regulatory decisions in other countries, but particularly want to focus on in Asia and China. China and Japan, specifically, has there been any movement there in terms of -- from Cerus or from regulatory bodies or key opinion leaders in those two countries to move forward with pathogen reduction adoption? Thanks a lot.

Yes. Thanks, Josh. So, obviously they're big markets in Asia and they've been hit hard by the COVID-19 pandemic. We are in ongoing discussions with potential joint venture partners in China and hope to be able to update you on the next couple of quarterly calls as it relates to that effort. Clearly, the blood supply in China also has to be safeguarded. And there's a realization by many large companies in China about the need to do that. So I'm optimistic, but would prefer to defer any additional comments until future quarterly calls. And then there's a number of other countries throughout the Asia Pacific region that are in contact with us about convalescent plasma. But I think the majority of our focus right now is still on the U.S and in EMEA, just given our supply chain and our ability to support those customers as the business grows. Thanks, Josh.

Thanks. Thanks a lot.

Your next question comes from the line of Jacob Johnson from Stephens.

Thanks. Maybe while we're on the regulatory front, just one quick one. I mean, with many hospitals dealing with the pandemic and focused on saving people's lives and a number of other things right now, is that -- is there any chance that the FDA guidance for platelet safety could get pushed back from the March deadline next year? I know they already gave the industry another 3 months versus what they initially proposed, but just any chance that, that could get pushed back just as a concession to the hospital industry?

Yes. Hi. Jacob, thanks for the question. So it's clearly a consideration we have. I think, Vivek sort of touched on this before when he was talking about the Red Cross is that it really doesn't drive sort of the Red Cross decision making per se. They've made a commitment to make INTERCEPT the standard of care to improve platelet safety. And then, I think the FDA has given blood centers initial 6 months on top of the 12 -- typical 12 months compliance period. So that extended from September of this year to March of 2021. I think it's possible that they'd say that they need additional time. I'm sure that some of the blood centers are saying that given the impact of this crisis. At the same time, from an FDA perspective, the reason why the guidance document is in place is that patients are dying from transfusion related sepsis for platelet transfusion. And so I think there's sort of an issue there. If you're trying to improve patient safety, you obviously want to be addressing the requirements in the guidance document. And then -- and as I initially commented, the one thing that we should highlight is that, of all the options in the guidance document, the only one that addresses SARS-CoV-2 or future pandemic threats is INTERCEPT. And so I think on the whole, even if the guidance were to be delayed, it puts us in even stronger position, this pandemic does.

Got it. Thanks, Obi. Maybe a question for Kevin. SG&A in the quarter was a bit lower than we expected. It sounds like maybe there's some savings from lack of trade shows, etcetera. Should we expect SG&A to kind of trend at these similar levels maybe in this next quarter, given that doesn't seem like life is going back to normal quite yet? And then similar on the R&D line, just given the pause in enrollment for clinical studies, is it fair to assume that maybe that trend is a little bit lower as well?

Yes, I think you're right on both accounts. Certainly in Q2, with the stay-at-home orders we're doing less traveling. There's not as many conferences and I think we could expect to see that clearly through May and maybe even beyond June. But after that, it really just depends on where everyone is and what the orders are in the pandemic stage. But we do expect ultimately to get back to business. On the R&D front, yes, I think there will be a pause right now in enrollment. But at the same time, what our teams are really focused on is utilizing their skills in other areas covered by BARDA and making sure that once the sites open back up, we're in a great spot to really accelerate and continue enrollment. So there'll be a little bit of a dip for a period of time, but we don't expect a significant dip or a longstanding issue with the overall program.

Great. Thanks for taking the questions.

Thanks, Jacob.

And I show no further questions at this time, I will turn the call back to Mr. Tim Lee for any closing remarks.

Great. Thanks everyone for joining us. Thank you again for joining us on the call today and your interest in Cerus. We are planning to hold our second quarter conference call in that late July, early August timeframe. In the interim, please don't hesitate to contact Investor Relations, should you have any questions. So thanks again. Bye, bye.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect.