Good afternoon, and welcome to CytoSorbents third quarter 2023 financial and operating results conference call. [Operator Instructions]. Please be advised that the call will be recorded at the company's request. At this time, I'd like to turn the call over to our moderator, Taylor Devlin. Please go ahead, Taylor.

Thank you and good afternoon. Welcome to CytoSorbents' third quarter 2023 financial and operating results conference call. Joining us today from the company are Dr. Phillip Chan, Chief Executive Officer; Vincent Capponi, President and Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Dr. Efthymios Deliargyris, Chief Medical Officer; Dr. Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of CytoSorbents Europe GmbH; Christopher Cramer, Senior Vice President of Business Development; and Dr. Irina Kulinets, Senior Vice President of Regulatory. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today, and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. Any projections as to the company's future performance represented by management include estimates as of today, November 9, 2023, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the third quarter of 2023 by Dr. Chan and Ms. Bloch, as well as an update regarding the STAR-T clinical trial by Dr. Deliargyris. Following their presentation, we will open the line to your questions during the live Q&A session with the rest of the management team. And now it's my pleasure to turn the call over to Dr. Phillip Chan.

Thank you very much, Taylor, and good afternoon, everyone. As I discussed in our earnings press release today, our core business is built upon our EU approved flagship CytoSorb blood purification therapy used in more than 221,000 human treatments with more than $205 million in sales to date, including $31.4 million in the last 12 months alone. CytoSorb addresses multibillion-dollar markets in critical care and cardiac surgery in 75 countries worldwide by treating deadly inflammation and other life-threatening conditions. These are common everyday ICU conditions like sepsis, trauma, burn injury, respiratory failure, liver failure, and complications of surgery where mortality is high despite standard therapies. With the world struggling in the aftermath of the pandemic with war, natural disasters, and illness, we believe our life-saving therapy has never been more relevant. The DrugSorb-ART antithrombotic removal system is our other focus, having completed the US and Canadian pivotal STAR-T trial that was designed to demonstrate a reduction in perioperative bleeding in patients undergoing cardiothoracic surgery on Brilinta, also known as ticagrelor. Brilinta is increasingly the super aspirin blood thinner of choice for patients suffering from a heart attack or receiving a cardiac stent. Should the data, which currently remain blinded support US FDA and Health Canada regulatory approval, we'd open up an estimated $650 million total addressable market in these two countries alone, where we expect rapid adoption and strong user demand, reflecting our FDA breakthrough designation. We believe we've made excellent progress on both of these programs so far this year and are specifically pleased to report a 20% product sales growth in Q3 of this year versus a year ago that Kathy will discuss in more detail and our nearing database lock of the pivotal US and Canadian STAR-T trial and data analysis before year end. The goal for…

Thank you, Phil, and greetings to everyone on the call today. For the quarter ended September 30, 2023, total revenue, which includes product sales and grant revenue was $8.8 million as compared to total revenue of $8.1 million in the third quarter of 2022, an increase of approximately 9%. Product sales for the third quarter 2023 were $7.8 million as compared to approximately $6.5 million in the third quarter of the prior year, representing an increase of approximately 20%. Third Quarter 2023 product gross margins were 72% compared to 55% for the third quarter of 2022. This predicted improvement in gross margins is expected to continue as we ramp up production at our new facility in Princeton, New Jersey. Our third quarter grant revenue was $1.1 million compared to $1.6 million in the same quarter of the prior year. It's lower because of the recent completion of several grants. Next slide, please. For the nine months ended September 30, 2023, total revenue was $27.7 million, an increase of approximately 9% over the $25.3 million in total revenue for the same period of 2022. Product sales for the nine months ended September 30, 2023, were $23.7 million as compared to approximately $21.7 million in the first nine months of 2022. And grant revenue was $3.9 million in the first nine months of 2023 compared to $3.6 million in the same period of 2022. Next slide, please. Now this chart depicts our trailing 12 months product sales broken down into COVID-19 related and core non-COVID-19 related product sales. Core product sales are $31.4 million in the trailing 12 months ended September 30, 2023, which is slightly higher than core product sales of $29.4 million in the prior year. And while it is gradual, we are continuing to see improvements in the marketplace,…

Thank you, Kathy. As I've mentioned before, I'd like to reiterate our value proposition. Today CytoSorb drives our growth. CytoSorb forms as the company's foundation with an EU approved product that's sold around the world has generated approximately $205 million in sales since launch, has a high margin --. It's a high-margin razor blade business model with historically high blended product gross margins that makes higher margin direct sales with lower margin distributor and product sales -- and partner sales. We have strong validation by customers, partners, and government agencies and current sales support near breakeven, less clinical trial costs, which we believe helps to derisk the company and the investment opportunity. We believe CytoSorb represents the fuel for future strong anticipated growth targeting the $20 billion to $30 billion worldwide total addressable market of major unmet medical needs in critical care, cardiac surgery as well as liver and kidney disease. We believe this gives CytoSorbents the potential upside of a biotechnology company with a lower risk profile of a high-margin medical device company with bill. That said, CytoSorb and DrugSorb could soon be dual growth engine for the company. STAR-T has now completed and is heading to database lock with initial data analysis expected this year. International usage and trial safety to date gives us confidence. If STAR-T be successful and DrugSorb-ART achieves US FDA and Health Canada regulatory approval, we intend to commercialize DrugSorb-ART in both the US and Canada. They potentially major second engine of growth working in Canada with CytoSorb to drive sales. DrugSorb-ART is expected to have a higher ASP and product gross margin then CytoSorb and would open an expected US and Canadian TAM of $600 million to $650 million for Brilinta alone, where we expect significant penetration, given the major unmet need indicated by our FDA breakthrough device designation. And with CytoSorb and DrugSorb-ART driving sales, we expect to drive accelerated sales growth of the company with the goal of profitability soon thereafter. With that, that ends our formal remarks. Operator, please open up the line for the Q&A session.

[Operator Instructions]. And we will take our first question from Yuan Zhi with B. Riley.

Thank you for taking our questions. And congrats on a good quarter. On the STAR-T file . The component two of the complete anapoint, can you talk about how did you arrive at the assumption of 40% UDPB Class II events in the control arm versus 24% in the DrugSorb-ART? Was it based on data from the open label trial or was it from real-world experience? Thank you.

Yes, Yuan, thank you very much. And thanks again for your recent analysis of the potential success of this STAR-T trial that you published recently. Let me turn that over to Makis?

Yes. Thank you, Phil, and thank you, Yuan, for the question. So as we have previously shared the baseline risk for bleeding complications in patients undergoing surgery, while on ticagrelor without completing the washout period exceeds 50% as shown in the PLATO trial. Therefore, we started from that number and took a discount in relation to the control on bleed rates that we're some for STAR-T trial and as you correctly noted, that it's 40% of the protocol state. Regarding the treatment effect size with the use of DrugSorb-ART, we had to rely on the existing literature, which at the time represented the experience as published by , we showed reductions exceeding 50% in some of the components of the UDPB primary endpoint, including transfusions . On that effect size, we again took a discount and assumed for the purposes of the trial at 40% reduction which has led to a very adequately powered trial with the power of achieving 98%.

Got it. And then a follow-up question on the STAR-T trial. So for the analysis timeline, can you talk about how long does it take for the database lock the analysis? Basically, can you talk about your confidence to share that data by year end, which is very important to the stock?

Yes. Thank you for the question. I think as Phil presented in the prepared remarks, the process leading to database lock is progressing well. And as we already stated, we think the lock is actually bearing. Once that happens, then the analysis process begins, which by itself requires time. It's not an instantaneous process results. During this time, all the parties remain blinded. Regarding the release of the data, we plan to follow the conventional roads of reviewing the data internally, but also considering the submission for a major cardiovascular conference. Should we proceed that route, we would have to then obey the requirement relating to the embargo and the silent period of this conferences, when they consider original results of presentation. However, as Phil again stated in the prepared remarks, we believe that by the end of this year, we will be able to provide to the public -- make a public press release with our initial assessment of whether we believe the data will allow us to proceed to the next step, which is basically the submission to the FDA.

Got it. That's all from me. Thank you.

Thank you.

And we will take our next question from Tom Kerr with Zacks Investment Research.

Good afternoon, guys. Any update on the European ICU bed market, particularly in Germany? Has that opened up anymore?

Thanks, Tom, let me have Christian address that issue question. Christian? Christian, I think you may still be on mute. Well, Tom, let me try to address that question. So if you -- we follow very closely what's called the DIVI Registry, which is published by the German intensive care unit society in Germany, where they actually look at open beds, free beds, occupied beds, and beds that are still reserved for emergency purposes for COVID. And what we have seen is that the availability of ICU beds continues to be low, which I think speaks to the muted market in Germany. I think that it is much better than it had been particularly during COVID, where there was very tight ICU bed availability, but limited ICU beds overall. And I think that this is helping to drive our recovery in terms of German sales. But also I think this phenomenon is happening around the world, which is why we believe that our sales have stabilized this year and are in the phase of recovery with the potential to help grow next year.

Okay. Thanks for that color. And a couple of financial questions. The quarterly burn rate expected to be around the same in the mid $4 million range, or does it go up or down the next let's two to three quarters?

Kathy, would you like to answer that?

I would. I think that right now as we're wrapping up our STAR-T trial, for the fourth quarter is probably going to be similar to what we've experienced in the early quarters because we have a lot invoices from our CRO with whom we're working, et cetera, for the closing processes. I think that we have been taking cost containment measures at CytoSorbents across our organizations and that you should see lower burn rate beginning with the New Year 2024. That will change again when we start up our STAR-D trial later in 2024 because that will add additional clinical cost.

But the submission on the START-T does it maintain or increase the burn rate in the first couple of quarters or is that a low cost type activity?

That's no as expensive as the clinical study itself, and that will be done.

Right. Okay. One more financial one, why would you guys look for equity offering if you have a ATM equity program in place or is that the same thing you're talking about?

We're really talking about any type of --. Go ahead.

Oh, sorry. No, I think one of the values of doing a standard equity offering is to bring new investors around the table and introduce the story to new investors. And so I think that was part of the goals and try to do that. I think with the ATM -- it is a very useful and good vehicle that we've used previously very successfully. But the goal here was in front of data to basically have more investors focused on near term catalysts. So -- but I think as Kathy mentioned, that we decided to not pursue that avenue and focused more on less or non-dilutive forms of financing for the moment given market conditions.

Got it. And there's still roughly $23 million availability on the ATM, if I recall, if necessary.

That's correct.

That's approximately correct.

Okay. That's all I have for now. Thank you.

Thank you, Tom.

And we will take our next question from Sean Lee with H.C. Wainwright.

Good afternoon, guys, and thanks for taking my questions. My first one is on the START-T. So with the potential for data by the end of this year and the regulatory submission next year, what needs to be done before you can file for submission? And in terms of commercialization, have you done any -- started building out any structures in the US?

Irina, would you like to take that?

Yeah, sure. In terms of submission to Food and Drug Administration it is quite a sensitive document, which would be based on our results of clinical trials, STAR-T clinical trial as well as all extensive preclinical and manufacturing package, which we're developing as listed. The last piece of information, of course, would be a clinical study report, which will be at the heart of this submission. It will be submitted at some point early in 2024 based on availability of clinical study report. Phil, would you take the second part of the question?

Yeah, Sean, if you could just repeat that second part please.

Yes. I was just wondering what preparations have you made so far in terms of for commercialization in the US, assuming that the study and the submission goes well. Yeah. So Vincent, would you like to take that question?

Sure. Thanks, Phil. Sean, thank you for the question. So there's a couple areas that we've already started preparation and one is in the manufacturing facility. So we're preparing that facility to meet all the requirements within FDA. So any potential inspections, et cetera, that were up to snuff with everything. And we're completing, obviously all our validations, et cetera, necessary to produce DrugSorb-ART. On the commercial side, we've hired Jim Komsa, under Vice President of Sales and Marketing; and Scott Brown, our Director of Marketing and Senior Director. And we've already developed the go-to-market plan with phase gating with respect to bringing on the resources to build the infrastructure versus we'll work on back office first, which is again building all the essentially customer services that are training and like. And then we'll focus on sales as we near closer to approval. We've not pulled the trigger on those additional hires yet. Obviously, we're waiting till we get the readout. And then based on that will determine when we'll start bringing those hires in. That answer your question?

Yes, that's very helpful. I've had a follow up for the START-T, I know you guys have a CE Mark approval for ticagrelor removal already in Europe, would the results from this T -- from STAR-T be useful for you to secure reimbursement in the major European countries?

Absolutely, Sean. I think that was part of the goal. I think we talk about opening up this $650 million TAM in the United States and Canada. But in fact, the data given that DrugSorb-ART uses an equivalent polymer technology, the CytoSorb that data would be directly transferable potentially to the world market with high-quality, randomized, controlled trial data that should hopefully support, not only clinical usage but also reimbursement as well. And so certainly, we believe that will be the case.

Great. That's all I have. Thanks again for taking my questions.

Thanks, Sean.

[Operator Instructions]. And we will take our next question from Josh Jennings with TD Cowen.

Hi, good afternoon and thanks for the questions. Wanted to ask about potential reimbursement for DrugSorb and how you envision coverage in the early commercial period after approval. Will that be reimbursed through DRG? And is with breakthrough designation, can you -- are you anticipating a filing for an end cap and potentially having the technology add-on payment in place for launch or shortly thereafter?

Yes. No, thanks, Josh. That -- it's a good question. As we've discussed in the past, at a very base case, we could certainly fall under the DRG because what we are trying to do is actually reduce significant costs from either waiting in the intensive care unit, or in the hospital to wash out the drug, or by reducing significant bleeding complications that are common in cardiac surgery patients undergoing surgery with these blood thinners on board. I think that we, however, seek line item dedicated reimbursement for this and as you say, because of the breakthrough device designation, it gives us the ability to file for the end cap or new technologies add-on payment as a separate reimbursable payment for hospitals, and we are currently pursuing that with consultants. There's also another program that we've discussed in the past called TCET program or the transitional coverage for emerging technologies program. And this is a program that was proposed by CMS or Medicare & Medicaid and just actually put out for public commentary. And that commentary period is over and we're waiting for the final version of that program. But that program is designed to -- for breakthrough device designated devices that are applicable to Medicare patients. so elderly patients essentially, which CytoSorb and DrugSorb absolutely is given that it's typically the elderly population that are having heart attacks and are having open-heart surgeries for that problem. And that is designed to guarantee coverage of breakthrough device designated product, devices that qualify for at least three years after FDA approval. So we're absolutely tracking all of these areas currently and opportunity to spend.

Great. Thanks for that. And just I think the press release your team has called out a TAM for DrugSorb for the ticagrelor removal indication. The US and Canada, around $650 million. It seems like a little bit of a tick-up. Is there any new market analysis or is that the addition of Canada into that TAM. But just wanted to just regroup on the TAM that you guys are putting forward for ticagrelor removal indication? Thanks so much.

Yeah, that -- absolutely, it's an -- I'll have Micah's comment on this because it was his team that actually led that market analysis. But it's very interesting. Canada is a country that uses ticagrelor very frequently. Even though Canada has a smaller population than the United States, it represents a substantial market. Effient, which is one of the competitors is no longer distributed in Canada. I think Eli Lilly was the company that was initially distributing it. And Plavix and the Canadian guidelines has highlighted that Brilinta is the preferred drug over Plavix based on clinical outcomes in these surgical patient. So the ticagrelor is actually used quite widely in Canada. And in particular, the use of dual anti-platelet therapy is widely used as well, given that it's often used as a temporizing measure to help try to improve clinical outcomes while patients are traveling to -- from faraway distances to major cardiac centers in major cities within Canada. So it does represent a very exciting market for us. And I'll turn it over to Micah to comment and maybe you can comment on contribution to the STAR-T trial. Makis?

Yes. Thank you, Phil. Yes, just exactly as Phill said, there's a system of care in Canada that's very harmonized across the country. National protocols, the national guidelines tend to be universally followed which is a little different than a very regional kind of practice that was seek in the US, where you can see variability in different geographic regions and between academic versus nonacademic centers. Canada, it tends to be a more universal treatment approach. And with ticagrelor, comparing the highest recommendation that has been adopted in the treatment protocols of acute coronary syndrome. So very high penetration, dominant position of ticagrelor in Canada. And then what we knew was happening based on this information, we validated in the STAR-T trial. The enrollment rate and if you follow the trial closely, you saw that we did a really a very high pace towards the end, and we finished the trial actually with extra patients ahead of our own internal projections. That was because of the numbers that came in from Canada. So those patients are abundant. Their institutions are -- have very high volume, so they encourage them almost on a daily basis. They have patients like these that they need to do work around the delays. So the trial was very popular, the patients were abundant, and the enrollment rates were very . We think the addition of Canada, our initial TAM analysis brings the substantial upside that you see in the subtext of your question that you noted.

Appreciate it. Thank you.

And we have no further questions at this time. I will now turn the call back to Dr. Phillip Chan for closing remark.

Well, thank you, everyone, for taking the time to get on this call today. Hopefully, it was a productive session for you. We look forward to the next update on the next call. Thanks so much, everyone. Have a good night.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.