Ladies and gentlemen, thank you for standing by, and welcome to the Cerus Corporation's First Quarter 2021 Financial Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions] It is now my pleasure to introduce Matt Notarianni, Senior Director of Investor Relations. Please go ahead.

Thank you, and good afternoon. I'd like to thank everyone for joining us today. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at ir.cerus.com. With me on the call are Obi Greenman, Cerus' President and Chief Executive Officer; Vivek Jayaraman, Cerus' Chief Operating Officer; Kevin Green, Cerus' Chief Financial Officer; Carol Moore, Cerus' Senior Vice President of Regulatory Affairs and Quality; and Jessica Hanover, Cerus' Vice President of Corporate Affairs. Cerus issued a press release today announcing our financial results for the first quarter ended March 31, 2021, and describing the company's recent business highlights. You can access a copy of this announcement on the company website at www.cerus. com. I'd like to remind you that some of the statements we will make on this 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 2021 product revenue guidance and goals, operating expenses, anticipated cash used from operations and gross margins as well as 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, including 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 the risk factors in our forms 10-K for the year ended December 31, 2020, and 10-Q for the quarter ended March 31, 2021, 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 to provide the commercial update and Kevin to review our financial results. We will conclude with commentary from OBI regarding recent announcements and update on our pipeline and closing remarks. And now it's my pleasure to introduce Obi Greenman, Cerus' President and Chief Executive Officer.

Thank you, Matt, and good afternoon, everyone. I'm pleased to report our Q1 results, which I hope you've had a chance to review from our earnings release earlier today. Before Vivek and Kevin discuss some of our commercial and financial updates for the quarter in greater detail, I'd like to make a few remarks about the business and how we are thinking about the balance of the year. As you can see from our results, we are off to a strong start in 2021, building on the momentum our business had exiting 2020. INTERCEPT platelet adoption in the U.S. continued to be the driving force behind our revenue growth during the first quarter of 2021. With the FDA compliance deadline 5 months away, we are pleased to see customers moving, in many cases, more quickly than we had anticipated to ramp up production capabilities to provide INTERCEPT platelets to hospital customers across the country. On the therapeutics front, our commercial team responsible for our INTERCEPT Fibrinogen Complex product is making good progress at hospitals ahead of our first sales, and we will share more details with you later on this call. Our U.S. commercial team is executing well to support blood centers across the country as they prepare for compliance with the FDA guidance later this year, and Vivek will provide more perspective in his prepared remarks. Looking a little more closely at the Q1 product revenue, I'm proud to report that we are able to continue a pattern of consistent year-over-year product revenue growth that goes back multiple years now. Moving to our full year product revenue guidance, the momentum we saw in the market at the start of 2021 has been strong. And as a result, we are raising our 2021 product revenue guidance to a higher range…

Thank you, Obi, and good afternoon, everyone. As discussed, 2021 is off to a strong start, and I'm pleased to discuss the results of our first quarter with you today. As Obi mentioned, the commercial team in the U.S. is moving quickly and aggressively to offer the INTERCEPT Blood System for platelets to blood centers ahead of the FDA compliance deadline in October. Quarterly demand for INTERCEPT platelet kits during Q1 in North America grew 51% year-over-year. Specific to the top 5 blood centers in the U.S., which, as you will recall, are responsible for about 70% to 75% of the overall platelet supply in the domestic market, our Q1 sales to these customers increased 59% year-over-year. This is the third consecutive quarter of year-over-year growth above 50%, and it's clear evidence that we are building a significant presence in the U.S. platelet market ahead of the October 1 deadline. For our largest customer in the U.S., the American Red Cross, INTERCEPT adoption continues to grow rapidly, and over half of the platelets they produce are now INTERCEPT treated. The ARC continues to be a leader in the adoption of pathogen inactivation and is driving towards its stated goal of 100% pathogen-reduced platelets. Obi will share some more detail regarding our efforts to expand the approved shelf life for INTERCEPT platelets to 7 days from 5 days. But even with the current 5 day shelf life, we and our blood center partners clearly continue to see strong demand for INTERCEPT versus LVDS or large volume delayed sampling. In the EMEA region, first quarter reported product revenue increased 9% on a year-over-year basis. During the quarter, we saw contributions from our major customers in established markets in Western Europe as well as sales of illuminators in EMEA. Offsetting this growth, Q1…

Thank you, Vivek, and good afternoon, everyone. To recap what Obi mentioned, we reported first quarter 2021 product revenue of $23.4 million, a 26% increase from the $18.6 million recorded during Q1 of the prior year. Global demand for INTERCEPT continues to increase. For Q1, the calculated number of treatable platelet doses increased 13% year-over-year. In terms of product mix for the quarter, kit sales represented 95% of our Q1 product sales. Of those total kit sales, platelet kits accounted for approximately 90%, while plasma kit sales accounted for the remaining 10%.As Vivek mentioned in his remarks, Q1 again saw strong demand for INTERCEPT plasma outside of the U.S. In addition, we continue to see healthy placement of illuminator devices globally, which contributed about 3%. In addition to our product revenue and not included in our guidance, government contract revenue totaled $6.2 million in Q1. Comparatively, government contract revenue totaled $6 million in the first quarter of 2020. For the remainder of 2021, we expect government contract revenue to increase with patient enrollment for BARDA reimbursed clinical trials and as activity associated with whole blood pathogen reduction initiative funded by the FDA ramps. Now let's move the discussion to our reported gross margins. Gross margins for the quarter were 52.5% compared to 55.3% for the prior year period. The 280 basis point decline from the prior year was in line with our expectations and commentary we provided on our Q4 call in February. As a reminder, this expected dip was driven by the outpaced growth in the U.S. relative to our other commercial markets. As a general rule, U.S. customers and in particular, the American Red Cross, predominantly use our single dose platelet kits as opposed to EMEA customers who use more of our double dose kits. Our single dose…

Thank you, Kevin. Beyond the commercial progress, I would like to provide you with some insight into our pipeline initiatives. First, with respect to our efforts around 7 day INTERCEPT platelets in the U.S., our team has been working to complete the ongoing study and remains on track to submit the FDA -- to the FDA later this quarter. Assuming a 180-day review window, we hope to have approval by the end of the calendar year. Moving on to a quick update on our red blood cell program. I am pleased to share with you that the third module of our 4 part modular submission for a CE Mark was submitted last month, and we are on track to submit the fourth and final module by the end of Q2. As we have stated previously, based on our discussions with the regulatory authorities, we think a potential launch during the second half of 2022, focused on specific patient populations is possible. In the U.S., we continue to enroll patients in our Phase III ReCePI and RedeS studies and anticipate the enrollment trend to ramp throughout the year, assuming COVID-19 disruptions continue to abate. Another effort I wanted to take a moment to highlight is a clinical trial in which we are collaborating with the Coalition for National Trauma Research. The study is called PROPOLIS or the Plasma Resuscitation Without Lung Injury study. The focus of this study is on the use of INTERCEPT plasma as part of the resuscitation plan in the initial 24 hours of treatment for burn injuries versus current standard of care methods. It is still early days for this study, but I mentioned it because it highlights a potential use case for INTERCEPT plasma in the burn market, which has treatment challenges today with food resuscitation using crystalloid solutions and associated safety concerns. We appreciate the support of [CMTR] and look forward to updating you as this program moves forward at the 6 U.S. sites enrolling in the study. In closing, our first quarter was a solid start to this decisive year for Cerus. Our entire organization is aligned and focused on taking advantage of the unique opportunity we have with a truly differentiated product offering in a market that is rapidly adopting solutions against a near-term deadline. Our INTERCEPT fibrinogen complex launch continues to gain steam. The market reception for the product has been very encouraging as it relates to availability and operational ease of use for the transfusion service, and we are actively putting the various levers in place for this business to grow and succeed in 2021 and beyond. And finally, as I think about our results and the guidance we have updated on today's call, I am confident that the momentum in our favor, coupled with the strong recurring revenue nature of our business, will translate into solid top line growth for the full year. With that, let me turn the call back over to the operator for Q&A.

[Operator Instructions]. Our first question comes from Josh Jennings with Cowen.

Congratulations, a nice start to the year and the guidance revision. I wanted to ask about guidance to start off and a $4 million raise at the midpoint, you beat our estimate by about $2 million. So it suggests that trends are improving and you have more confidence at the beginning of the year, which makes a ton of sense, just considering like the procedure trends and your 1Q results. But I wanted to get a better understanding of what's driving that kind of better than B guidance rate, better than 1Q B guidance range in that $4 million range? Is it just anticipation of stronger -- are you seeing stronger trends in April of INTERCEPT platelet adoption? Is there anything incremental on the PR cryoprecipitate fibrinogen complex launch that you're adding into guidance? Anything you can parse out on the guidance revision would be fantastic.

Yes. Thanks, Josh. So the guidance revision largely driven off the performance of the business in the United States, but I'll turn it over to Vivek to provide maybe a little bit more context for that.

Sure. I'd be happy to. Your -- I think your sentiment is the correct one. We do have increasing confidence about the strength of our business in the U.S., but we have also seen strong contributions internationally. And so as we look out through the balance of the year, there are a few factors that are starting to converge that we think will create continued tailwinds for the business. The first in the U.S. is the fact that the guidance compliance deadline is approaching, and we see an increase in the production capability with respect to PR platelets at the big 5 blood centers. As we've discussed numerous times before, our focus strategically has been on partnering with the big 5 blood centers, making sure their operations team can produce PR slightly sufficiently and then assisting them where needed to engage and get their hospital customers on board. And the American Red Cross has certainly led the way, but we've seen great progress at the other 4 blood centers families as well. And so that's a driver that we see continuing to contribute throughout the course of the year. We do -- we are starting to see a bit of an increase in terms of hospital access in the U.S. as the COVID pandemic hopefully starts to sunset. And so customer access issues appear to be improving. And then we will, while we don't anticipate huge contribution this calendar year, we will start to see cryo commercialization contribute in the second half of the year, and that will certainly help the top line as well. So it's really a combination of all of those factors that give us confidence in terms of our ability to continue to post strong results and most importantly, provide these products and technologies to patients in need.

Thanks for those extra details. Maybe just one follow-up. It was great to see the untapped proposal and the recommendation by CMS for pathogen reduced cryofibrinogen complex. Just wanted to ask on the pricing that was mentioned in the document. It's around $3,900 per patient on average. Is that pricing kind of built into your TAM calculations of that $300 million plus TAM for PR CFC in the U.S.? Or is that a little bit of a stronger pricing level that's baked into that, TAM.

Yes, I'll start with the answer to that question, Josh, and then probably turn it over to Dr. Hanover, who's joined us on the call as well today. She's really the architect behind our global reimbursement strategy, but specifically around this New Technology Add-On Payment that we were happy to see the preliminary ruling on last week. So historically, I think the way we've talked about pricing on a per gram basis is that the INTERCEPT Fibrinogen Complex product would be somewhere at the midpoint between sort of conventional cryo, which on a price per fibrinogen, gram of fibrinogen is about $250 to $300 per gram versus the other end of the spectrum, which is fibrinogen concentrate, which is in the range of $800 to $900 per gram, that would be sort of somewhere in the middle of that. But Jessica can give you some more perspective on sort of what we put into the NTAP application and then sort of the implications of what that NTAP ruling, the preliminary ruling looks like. Jessica?

Yes, sure. I'm happy to. Thanks for the question. So following up on what Obi said, that is the pricing that we had proposed to CMS and our NTAP application. So we were pleased to see it reiterated at this preliminary stage of the decision. And that $3,900 per patient is the average based on what we anticipate Medicare patients would receive based on clinical studies that have been conducted in a similar patient population. And just a reminder that the Medicare population that we anticipate will be most applicable is more of a surgical population as opposed to a trauma population, which is usually in a younger patient group. So overall, the NTAP is applicable for Medicare patients and provides incremental reimbursement over a DRG based payment rate, which is the typical inpatient payment system that Medicare uses. And that's something that is not currently available, that incremental reimbursement is not currently available for conventional cryoprecipitate. So that's something we see that will be quite positive for hospitals as they're looking at bringing the new product in-house.

Josh, this is Kevin, if I could. I just wanted to circle back on your guidance question. I'm not sure if it was clear or not, but our thinking around the cryo or IFC contribution this year hasn't changed. And as a result, it's not the driver for the increased guidance. The increased guidance is really as Vivek described coming from U. S. and EMEA.

Excellent. And then just any recalculations of the cryo TAM? I think you guys have been at $300 million plus in the U.S. and is this pricing or any of your -- just the early days of getting approval and customer discussions, increased your optimism of that TAM or increased your -- or taking the calculation up to a higher level.

Yes. Thanks, Josh. It really hasn't. I mean, sort of that was in the range that we considered when we've talked about the TAM for INTERCEPT Fibrinogen Complex. I think the challenge still is just sort of that market organically is growing roughly sort of high single digits on an annual basis. And so when we, I think, put that TAM out there a couple of years ago, using roughly a sort of 750,000 gram equivalents so fibrinogen annually, that's likely gone up, and we're attempting to get better sort of real-time information for how large that market is today. But I think the NTAP preliminary ruling certainly provides us with more confidence in the market opportunity. As Jessica mentioned, this does provide hospitals with a payment per patient that is incremental to the DRG, and that doesn't exist for the other products right now. So I think it's really -- it's been very well received by customers thus far, even though it's only been a week.

Excellent. Well, Congrats on the entrance of your first therapeutic product in the marketplace, but I appreciate taking all the questions.

Our next question comes from Mathew Blackman with Stifel.

Just a couple from me. Obi, I was curious, you said -- and this is in relation to, I think, U.S. platelet adoption. You said there were some customers that perhaps are moving faster than you had anticipated. Could you expand on that a little bit? Are these the accounts that were sort of heading down the INTERCEPT path already, similar trajectory to Red Cross? Or are you seeing some acceleration in some of the accounts that may have been hedging a bit and dragging their feet a bit? Just any color there would be helpful. And then one follow-up.

Yes. Thanks, Matt. I'll start with the answer to that question and then turn it back over to Vivek as he really can provide the best sort of context for the U.S. market. But we are seeing beyond just the Red Cross, which is moving towards there 100% and really having a lot of success with their hospital or their key account discussions. But we're also seeing that translate to the other sort of 4 families of the big 5. And a few of them moving sort of quickly like the Red Cross. So I think that's what we -- I guess, I would say, was sort of unexpected starting the year. But Vivek, do you want to provide a little more color?

Sure, I'd be happy to. Hello, Matt. As Obi indicated, that certainly did play a role. I think another driver in terms of seeing accelerated growth is the COVID-19 pandemic did increase awareness of the need for safety and to be prepared. So a lot of the discussions we've been having about preparedness and being ready in front of an event started to really resonate because of what was going on. And you do start to see -- you have certain hospital customers that have multiple blood center suppliers. And if one of the blood center suppliers move to PR, they would start to put pressure on the other blood center supplier to offer PR products as well. And so you started to see a bit of a network effect start to take place where the more certain blood centers and hospitals started to adopt the technology, you sort of see almost keeping up with the Joneses types of effect that starts to dissipate across both the blood center and hospital markets. So we still have plenty of headroom and way to go in the U.S., but certainly, the rate at which things are trending gives us all reason for encouragement.

Okay. I appreciate that. I was wondering if there was a fear of missing out sort of phenomenon that was playing out perhaps. And maybe, Vivek, while I have you, just curious a little bit on cryo. Can you maybe give us a little bit more color on some of these conversations you've had? I appreciate its early days. I understand there's been significant interest. What's the pushback then, if any? And I guess, as you sort of work your way through this process, how quickly can these conversations turn into revenues? I'm just trying to understand how sort of long the lag or lead time, however you want to phrase it, would be sort of getting a new customer on board and generating revenues? Any sense of that turnaround time. That's it for me. Thanks.

Yes, of course, no, happy to answer that, Matt. And as you can appreciate seeing new product introductions in a variety of different markets, whether in med tech or pharma or other environment, there isn't a uniform answer necessarily to that question. What I can tell you is the preapproval market research that we did, customer sensing activity that gave us confidence that there would be strong clinical interest and reception. That has been validated by the conversations we've had with clinicians since approval. And so that was certainly very encouraging for us to hear, and that's been whether it's trauma docs or physicians who are cancer treaters who are responsible for blood center management within hospitals, that there's been uniform interest and enthusiasm for the product and recognition and understanding of its clinical value and application. The long pole in the tent, not surprisingly, is hospital contracting. And if a hospital is a standalone independent hospital or if it's part of the GPO or IDN or part of a larger family of hospitals, that really plays a role in terms of how long the process may take. And a number of these things, candidly, were put on hold in terms of new product introductions, the rest during COVID because that was such a big second time in terms of dominating attention at the hospital level. We're starting to see that dissipate and starting to see a healthier level of engagement and interest in cryo, but there isn't sort of a cookie-cutter single answer in terms of how long it takes to translate clinical interest into product ordering. But what I can tell you is, we have a few leading indicators that give us confidence that we're fairly close on that end. But it really is hospital by hospital in terms of getting that process, but they may give us confidence as there's consistent clinical enthusiasm and champions that we can identify in the individual institutions.

Our next question comes from Jacob Johnson with Stephens.

Congrats on nice start to the year. Maybe Obi, this first question. Can you just remind us, you called out $1.4 billion TAM today? Can you just roughly break that out between cryo, platelets, and plasma, as you sit here today?

Yes. I mean I wish I had that slide up that we have all the time. So maybe Kevin or Jessica can correct me if I get this wrong, but it's roughly $300 million we identified for the TAM for fibrinogen concentrates. And then the platelet and plasma opportunities are roughly equivalent in the markets where we currently sell. So I think the main point of that comment in the prepared remarks was we're right now providing guidance of $110 million to $114 million, but there's a lot of room to grow the business in the markets where we're currently approved and with the current product portfolio. That being said, once we get red cells approved and once we start expanding geographically into APAC and LATAM more aggressively, that really opens up the full $7 billion TAM.

Got it. Thanks Obi. And then, Kevin, you said to expect a similar dynamic for gross margins for the remainder of the year. Should we just assume kind of 52.5% or so for product gross margins throughout the rest of the year or any caution against that?

No, I think that's right. I mean, when we have the Q4 call, we kind of predicted this was going to happen. It's really a function of the growth coming from the U.S. and to the extent that it's overweight from the Red Cross, that's going to have an impact since they are single dose consumer. So we expected 200 to 300 basis points from last year's results, and that's what we're seeing. And we have no reason to believe that it's going to be different as we move forward, given our commentary on the revised guidance.

[Operator Instructions]. Our next question comes from Mark Massaro with BTIG.

This is Vivian on for Mark. So on cryo, I believe you mentioned a broad national launch post BLA approval sometime in 2021. Should we be expecting a Q1 2022 launch there? Or is it too early to call? And if you could also walk us through some of the steps involved in securing the BLA approval?

Yes. So the BLA submissions will take place sort of in the middle of this year, and we still anticipate that that will take 12 months unless it moves more quickly in that with the FDA. And again, this is the production partners, the blood centers that we've partnered with, they're going to be making that submission with our support. So that's underway right now as far as the submission process, but it hasn't -- they haven't submitted their BLAs yet. So that would sort of predict a middle of 2022 nationwide rollout. In parallel with that, in order to access some additional states that are significant and where patients -- there's obviously a clear unmet need for this product. We are looking and are in advanced discussions with additional production partners to add additional states over the course of the next several quarters. So that allows us to access those states in advance of the nationwide rollout in mid-2022.

And then if I could also ask how the partnerships in the LATAM region as well as China have been progressing, with ZBK specifically? And if you could provide an update on the NMPA in China?

Yes. I'll start there and maybe Vivek or Kevin can add because you guys are participating in this joint venture discussions more frequently than I am. But ZBK has proven to be a great partner thus far, and we're really excited to be working with them. Right now, the discussion really is around -- is what's the scope of a clinical trial that's required in China to provide that data that the NMPA is looking for with regard to transfusion in Chinese patients. To remind you, we did do a study historically in Hong Kong, it was a relatively large study in stem cell transplant recipients. And just looking at sort of the aggregate of not only our clinical data, our hemovigilance data from all the years that we've been on the market in Europe and the U.S. now, and that's significant, combined with that Hong Kong study and then what, if any, additional studies are required for that NMPA submission. Vivek, any other context you'd provide?

I think that kind of covers it by and large for China. I think that there was a question about LATAM as well. And just one point I'd make there is, we'll get announced in fairly recently securing a tender -- a couple of tenders in Brazil. The COVID impact in Latin America, in particular, Brazil has been pretty significant. So we have seen that as a bit of a headwind in terms of further penetration. Having said that, we continue to bring blood centers online across Latin America, but there's certainly been a headwind COVID related that we're facing in Brazil. But I think the China points will be captured well.

[Operator Instructions]. And I'm not showing any further questions at this time. I would now like to turn the call back over to Obi Greenman for any closing remarks.

Well, thank you all for joining us today. It's an exciting year for Cerus, and we look forward to updating you further on our Q2 call, which will likely be at the end of July. Thanks very much.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.