Cytosorbents (CTSO) Prelim. Q3 Revenue Misses Consensus
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CytoSorbents Corporation (NASDAQ: CTSO), a leader in the treatment of life-threatening conditions in intensive care and cardiac surgery using blood purification via its proprietary polymer adsorption technology, announces preliminary third quarter financial results and revised second half and full year 2021 product revenue guidance, primarily reflecting pandemic-driven adverse market conditions in Germany.
Preliminary Third Quarter 2021 Financial Information
- Total revenue, including product sales and grant income, for Q3 2021 was $9.7 million, down 8% compared to $10.5 million in Q3 2020.
- Q3 2021 CytoSorb product sales were $8.9 million, down 13% compared to $10.2 million in Q3 2020.
- Q3 2021 product sales in Germany are estimated to be $3.7 million, a decrease of $1.1 million or 24%, from product sales of $4.8 million in Germany in Q3 2020.
- Core non-COVID-19 product sales for Q3 2021 were approximately $7.8 million, up 4% from approximately $7.5 million in Q3 2020.
- Estimated product sales related to COVID-19 were $1.1 million in Q3 2021 versus approximately $2.7 million in Q3 2020.
- The Company has a strong cash balance of $61.0 million at September 30, 2021 and no debt.
(Consensus sees Q3 revenue of $12 million)
The third largest wave in new COVID-19 cases in Germany, driven by the Delta variant, accelerated through August and, after peaking in mid-September, has continued to date. This prompted many hospitals throughout Germany to reduce elective surgical procedures, to reserve ICU beds, and to either maintain or reinstitute restrictions such as visitation rights to non-essential visitors, in preparation of COVID-19 hospitalizations. However, unlike prior waves in Germany, the rates of severe COVID-19 illness requiring ICU care, and death have been disproportionately very low. This is being partly attributed to high rates of vaccinations that are associated with reduced severity of illness, reduced need for hospitalization, and risk of death.
These macro factors negatively impacted our critical care and cardiac surgery markets in Germany, resulting in lower-than-expected sales of CytoSorb during the third quarter. Specifically, there were:
- Fewer critically ill COVID-19 patients on mechanical ventilation and ECMO, and fewer core non-COVID-19 patients undergoing elective surgeries with complications such as sepsis where CytoSorb is often used.
- Increased hospital restrictions resulting in decreased access of sales representatives to hospitals and fewer sales meetings with physicians.
- Continued reduced ICU capacity that impacted the numbers of ICU patients, compounded by staffing shortages as fatigued healthcare workers (particularly ICU nurses) left to pursue other opportunities, and as patient safety laws decreased the number of ICU patients a nurse is allowed to manage.
Quarterly results were further exacerbated by a greater-than-normal seasonal third quarter impact of European summer vacations.
A recent survey conducted by BVMed (Association of German Medtech Companies) of 110 Medtech companies in Germany published this month highlights that our experience is not unique. Based on the most cited reasons presented in the chart entitled, "Biggest Sales Hurdles in Germany in the Second Coronavirus Year," 62% of Medtech companies cite postponed elective interventions, 59% cite declines in patient numbers in hospitals, and 55% cite reduced contact to customers and/or patients.
Dr. Christian Steiner, Executive Vice President of Sales and Marketing of CytoSorbents, stated, "At the time of our prior guidance in the first week of August, new COVID-19 infections from the Delta variant in Germany were still low. Following strong results from the first half of this year, we believed our core non-COVID-19 sales would continue to increase, encouraged that German hospitals were continuing to lift restrictions and elective surgeries were increasing. However, within the span of weeks, rates of new COVID-19 cases accelerated in Germany, and changed the macro business outlook significantly. The convergence of the multiple challenges outlined above during a traditionally seasonal third quarter unexpectedly amplified the negative aspects of the pandemic on our business. We believe many of these roadblocks are outside of our control, driven by the COVID-19 pandemic. And while it is difficult to predict how fast the business environment will improve, we are diligently working in the background to improve the things we can control, to position our business for a return to sales growth. Some examples include continuing to diversify our sources of revenue, maximizing existing clinical applications while launching new ones, executing on our clinical trial strategy, investing in and expanding our direct sales territories, and optimizing our sales force and access to physicians and hospitals."
Dr. Phillip Chan, Chief Executive Officer of CytoSorbents stated, "At the beginning of 2021, we highlighted that our challenge for the year was to replace COVID-19 revenue with core non-COVID-19 revenue. We predicted that as vaccinations rose, the rates of COVID-19 and usage of CytoSorb to treat COVID-19 would drop, but this would allow us to resume our core non-COVID-19 business. In the first half of 2021, we made good progress towards this goal, despite previously discussed challenges of this transition. As we begin the traditionally strong fourth quarter and busy winter season for ICU admissions, we believe these macro factors will likely take some time to resolve, particularly ICU capacity issues, hospital restrictions, and the direction and impact of the COVID-19 pandemic, hence our revised guidance for the remainder of 2021. We are fortunate to have a solid cash balance to weather the near-term uncertainty and are working to keep tight control of our expenses, while prioritizing generation of the next level of clinical data with seven Company-sponsored clinical studies, including four randomized controlled trials, expected to be active by the end of this year. Meanwhile, we plan to make the most of our opportunities in Germany, while diversifying and augmenting our efforts in new and existing direct sales countries and distributor/partner channels."
Dr. Chan concluded, "Meanwhile, we remain laser-focused on our U.S. regulatory program for the removal of antithrombotic drugs, or blood thinners, during cardiothoracic surgery. We have already initiated our U.S. STAR-T pivotal randomized controlled trial (RCT) to remove ticagrelor during open heart surgery, and today have announced, that just two months after receiving FDA Breakthrough Device Designation for DrugSorb-ATR to remove apixaban (Eliquis®, Bristol-Myers Squibb/Pfizer), and rivaroxaban (Xarelto®, Janssen/Bayer) during urgent cardiothoracic surgery, the FDA has now fully approved the start of our STAR-D pivotal RCT to do the same. These accomplishments highlight the sense of urgency and priority we have placed on these programs. If both studies are successful, we believe they can be major catalysts for potential revenue growth as we seek FDA marketing approval for this approximately $1 billion total addressable U.S. market opportunity."
Revised 2021 Product Revenue Guidance
The macro environment of the global COVID-19 pandemic continues to add uncertainty to the Company's sales outlook, especially since we are unable to predict the course of the pandemic or predict what impact, if any, the COVID-19 pandemic may have on global sales for the remainder of the year.
We believe the revised guidance below is achievable, as in deriving the revised fourth quarter and full year product revenue outlook, we have assumed no improvement in the COVID-19 pandemic-related environment observed during the third quarter of 2021. In addition, we do not have full visibility into the potential impact of the recently released data from the REMOVE study, as full study results are not yet available. Though we believe that CytoSorb will continue to be used in selected infective endocarditis populations, we have included a potential negative impact to sales in our guidance. As a result, the Company now expects:
- Q4 2021 product revenue similar to Q3 2021 product revenue of $8.9 million, suggesting approximately $17.8 million in second half product sales, down 17% from first half 2021 products sales, as compared to previous expectations of higher second half 2021 product sales compared to first half 2021 product sales.
- Full year 2021 product revenue of at least $39.3 million, roughly flat compared to 2020 product revenue of $39.5 million. While difficult to predict, 2021 core non-COVID-19 product sales are expected to be approximately $33 to $34 million for the year versus $30.1 million in 2020.
Third Quarter 2021 Results Call Information
CytoSorbents will report third quarter 2021 operating and financial results after the market close on November 4, 2021. CytoSorbents' management will host a live conference call and presentation webcast at 4:30 p.m. Eastern the same day.
Conference call details:Date: Thursday, November 4, 2021Time: 4:30 p.m. EasternToll free: 1-877-521-4127International: 1-212-231-2930Conference ID: 21998483Live presentation webcast: https://viavid.webcasts.com/starthere.jsp?ei=1505348&tp_key=fc4e9855a2
It is recommended that participants dial in approximately 10 minutes prior to the start of the call.
A simultaneous live webcast can be accessed via the following audio feed: https://viavid.webcasts.com/starthere.jsp?ei=1505348&tp_key=fc4e9855a2
An archived recording of the conference call will be available under the Investor Relations portion of the company's website at https://cytosorbents.com/investor-relations/financial-results/
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