Good afternoon, welcome to the CytoSorbents first quarter 2023 financial and operating results conference call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the company's request. At this time, I would like to turn the call over to our moderator, Taylor Devlin. Please go ahead, Taylor.
Thank you and good afternoon. Welcome to CytoSorbents first quarter 2023 financial and operating results conference call. Joining me today from the company are Dr. Phillip Chan, Chief Executive Officer, Vincent Capponi, President and Chief Operating Officer, Kathleen Bloch, Interim 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 Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Actual results may differ from results discussed today, 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 today as of May 2, 2023, we assume no obligation to update these projections in the near future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the first quarter of 2023 by Dr. Chan and Ms. Bloch. Following that presentation, we will open the line to your questions during the live Q&A session with the rest of the management team. Now it's my pleasure to turn the call over to Dr. Phillip Chan.
Thank you very much, Taylor. Good afternoon, everyone. First of all, it's my pleasure to be here today to discuss some of our recent operating highlights. First, we surpassed 200,000 cumulative CytoSorb treatments across 75 countries after achieving the 100,000 treatment milestone less than three years ago. As of the end of the first quarter of 2023, the number was more than 203,000 cumulative treatments worldwide. Next, the pivotal STAR-T trial achieved its second milestone of 80 patients enrolled on schedule after achieving the first milestone of 40 patients enrolled in November of 2022. This triggered a second independent data and safety monitoring board review that is expected to initiate shortly and be complete in the next few months.
The first quarter of 2023 was a solid quarter with total revenue of $9.4 million, including product sales of $7.9 million, representing sequential growth from both Q4 last year and from a year ago on a currency-adjusted core basis. This was the first time in the past five years that first quarter core sales exceeded a typically strong Q4. We also ended Q1 2023 with a healthy cash balance of $20.7 million. Al Kraus, our Board Chairman, announced his retirement at the end of his term next month after 20 years of leadership with the company. Michael Bator, a current Board Director, will succeed him as Board Chairman, pending the results of the upcoming annual meeting in June.
We recently highlighted a key publication in Critical Care, definitively underscoring the power of CytoSorb to reduce cytokine storm during systemic hyperinflammation caused by a key toxin called endotoxin that is responsible for inflammation in half of sepsis cases in a well-controlled human study. Finally, we hosted a successful and highly attended research symposium at the International Symposium of Intensive Care Medicine and Emergency Medicine, or ISICEM 2023, one of the premier, most influential critical care conferences in the world, highlighting data using CytoSorb to treat cytokine storm and inflammation in diseases such as sepsis, shock, and ARDS. As we discussed in the shareholder letter at the beginning of the year, in 2023, we are focused on three major objectives.
The first is opening the US and Canadian markets, the second is a return to sales growth, and third is a reduction of our cash burn with a tight control over expenses. For the sake of today's call, we will keep our prepared remarks limited to each of these three areas. We're happy to take questions on any subject in the Q&A session. First, allow me to provide a little more color on our objective to open the U.S. and Canadian markets with DrugSorb-ATR. As many of you are aware, DrugSorb-ATR and STAR-T remains the core focus of our clinical efforts and the vehicle expected to open the U.S. and Canadian markets. We've received two FDA Breakthrough Device designations for DrugSorb-ATR to remove blood thinning medications that can increase the risk of perioperative bleeding in patients undergoing cardiothoracic surgery.
STAR-T enrollment is now in the last third of the trial. Enrollment has been brisk and has recently outpaced our own internal projections. Since recently announcing the achievement of 80 patients enrolled, the study continues to enroll well. Nearly all trial sites are enrolling, with strong contribution by both US and Canadian centers, and there is high enthusiasm for the study by all trial centers. We are pushing to complete STAR-T enrollment by this summer, with top line data expected as soon as possible and before the end of the year. If positive, this would trigger regulatory submissions to both US FDA and Health Canada.
In parallel to the clinical program, we're also executing on our regulatory strategy that at this stage includes strengthening the regulatory team, planning for regulatory future submissions to both U.S. FDA and Health Canada, and driving interdepartmental alignment and responsibilities to meet our regulatory objectives and timelines. Finally, we are waiting on an update from CMS on their transitional coverage of emerging technologies, or TCET proposal that could provide four years of coverage to relevant approved Breakthrough Devices such as DrugSorb-ATR. Although we discussed the rationale of deciding to forego the interim analysis of 80 patients in the last earnings call and again in the recent press release on achieving the second enrollment milestone of 80 patients in the STAR-T trial, allow me to give some additional color.
As discussed recently, the rapid pace of enrollment of STAR-T led us to elect to forego a formal interim analysis on the first 80 patients. To fully understand this decision, it's important to clarify that the original intent of this interim analysis was to provide the opportunity to stop the trial early, an important option if enrollment was expected to be slow or delayed. The current enrollment pace is brisk, and our projections suggest that the trial will likely be completed by the time a formal interim analysis, that by the way, requires fully monitored, clean, locked, and adjudicated data, would have been completed. A trial that is fully enrolled cannot be stopped early, making an interim analysis of no value. Because of that, we are now focusing our efforts on the final analysis.
We believe it's also important to emphasize that there are no other considerations or information underlying this decision, and that the STAR-T study data remains fully blinded. The next milestone for STAR-T is the second independent data safety monitoring board safety evaluation after the first 80 patients, which we expect to be completed in the next few months. As previously disclosed, the DSMB recommendation after the safety evaluation of the first 40 patients was to continue the study as planned without modification. Let's switch to the second key milestone for 2023, which is a return to sales growth. We witnessed sequential growth in the first quarter of 2023 in terms of product sales compared to the fourth quarter of 2022, and an 8% quarterly core product sales growth year-over-year, which we believe is an encouraging sign.
We are seeing strong customer engagement, excellent feedback on our most recent clinical and scientific data, and a trend of improvement in our hospital markets in core countries. Healthcare worker staffing continues to remain an issue. In Germany, for example, which accounts for roughly 40%-50% of our total product revenue, the number of ICUs reporting normal operating conditions is now higher than those under full restrictions, which has fallen by about 25%. Meanwhile, COVID-19 admissions to the ICU have dropped significantly, raising the prospect that ICU beds reserved for COVID-19 patients will be released, adding to ICU capacity. This is expected to translate into the ability to admit more non-COVID patients to the ICU and to do more surgical operations where patients need to recover in the ICU, such as cardiac surgery. These are all drivers of our business.
Among many of our growth initiatives, we have also increased the number of accounts in German private hospital networks by 50% in 2022 compared to 2021 based on our preferred supplier agreements. Finally, in the 1st quarter of 2023, demand for CytoSorb was brisk. Working down our finished goods inventory, we are currently now ramping production out of the new manufacturing facility, which is in full mode production, with the goal of meeting demand and replenishing inventory. With that, I'd like to turn it now over to Kathy to discuss our financials and our third key objective. Kathy?
Thank you, Philip. Greetings to everyone on the call today. Today I will review first quarter 2023 financial results. Additionally, I'll comment on our cash runway and cash burn. Total revenues, which include product sales and grant revenue for the first quarter of 2023 were $9.4 million as compared to total revenue of $8.7 million in the first quarter of 2022. Product sales for the first quarter 2023 were $7.9 million, approximately the same as the prior first quarter prior year first quarter product sales. There were no COVID-19 product sales in the first quarter of 2023, as compared to approximately $300,000 of COVID-19 product sales in the first quarter of 2022.
Foreign exchange rate changes negatively impacted first quarter 2023 sales by approximately $349,000. We note that on a constant currency basis, Q1 2023 core non-COVID-19 product sales were $8.3 million, which is an increase of $635,000, or 8.3% from the prior year. First quarter 2023 product gross margins were 68%, compared to 80% for the first quarter of 2022. The decline in product gross margins was due to the start-up of our new manufacturing facility. First quarter grant revenues were $1.5 million, compared to approximately $767,000 in the same quarter of the prior year. Next slide, please. This slide shows our trailing-12-month product sales broken down by COVID-related and non-COVID-related core product sales.
As you can see, over the past 12 months, COVID-19 sales have been de minimis. Core sales have declined over the immediately prior 12-month period due to difficult market conditions, such as a shortage of healthcare workers, fewer hospital beds, and less surgical procedures, and other factors that we've previously discussed in prior earnings calls. Gross margins declined in Q1 2023 due to start-up activities associated with our new manufacturing facility. We do note that we believe this is a temporary situation impacting Q1 2023, and we fully expect our gross margins to return to 75%-80% or even better over the remainder of 2023 as we scale up production to meet growing sales demand. Next slide, please. This next chart depicts our quarter-over-quarter product sales, also broken down into COVID-19 related and core non-COVID-19 related product sales.
What I think is worth noting about this chart is that the last two quarters, we've demonstrated sequential quarter-over-quarter growth in product sales. We believe this increase in sales is due to improvements in the marketplace, including our sales team's ability to now better access healthcare workers in the hospitals and a return to face-to-face discussions with physicians in the market. As a result, we are cautiously optimistic that with continuing market improvements, we expect to see further increases in product sales in the coming quarters of 2023. Next slide, please. I'd like to wrap up today's remarks with some comments about our cash and cash runway. As of March 31st, 2023, we had approximately $20.7 million in cash. This includes $1.7 million of restricted cash.
This also includes the $5 million of loan proceeds received from our debt facility in December 2022. Cash on hand provides a runway of more than one year of operating cash flow. As Philip talked about earlier, the third key objective is to reduce cash burn and tightly control expenditures, and I'd like to spend a little time on that. Cash burn in the first quarter of 2023 was approximately $3.1 million, compared to a cash burn of $9.1 million in the first quarter of 2022. Some of the ways that we've been able to reduce our cash burn include, last year, we had a 10% reduction in worldwide staffing, and we implemented a company-wide wage and hiring freeze, excluding certain essential hires.
We have de minimis capital expenditure needs in 2023 now that we've completed our new facility build-out. We also had reductions in non-grant R&D spend, among other items. Most importantly, we developed a very strict 2023 budget, prioritizing spend in key programs and pipeline products. Now, the cash burn may increase very slightly during the year because we need to build additional inventory to support sales. Our growth margins should also begin to improve with the scale up of production, and that should offset some of the increase in cash burn. As we move forward in 2023, our spending is fully aligned with our strategic priorities, in particular, our STAR-T clinical trial designed to obtain US FDA marketing approval. That concludes my remarks for today, so at this time, I would like to turn the call back to Philip. Philip?
Great, Kathy. Thank you. We believe CytoSorbents' 2023 is a rapidly evolving story, making excellent progress on the key objectives we have covered today. We have a strong management team to lead, a fantastic employee base to drive, and a solid cash balance to fund the timely execution of these. Last but not least, I would like to take a brief moment to thank two key people who have helped to lead this comp the past many years and have been integral to the successes that we have achieved to date. The first is Al Kraus, CEO of CytoSorbents for five years prior to my tenure and Chairman of the Board for the past 15 years. The second is our very own Kathy Bloch, who has served as our Chief Financial Officer for the past 10 years and now serves as our Interim CFO.
I've already highlighted some of Al and Kathy's many accomplishments and shared my thoughts on each of them in press releases announcing their individual retirements. I just wanted to thank each of them on behalf of the board of directors, the management team, the entire company, both here in the United States and abroad, and all of our shareholders for all of their many contributions and years of dedication and hard work to the success of the company. We've enjoyed every minute of working with the both of you and wish you a wonderfully happy and healthy retirement. Operator, that concludes our current prepared remarks. Please open the call up to the Q&A session.
Thank you. As a reminder, if you do have a question, please press star one on your touchtone phone. Please make sure your mute button is turned off to allow your signal to reach our equipment. Please wait while we assemble our roster. Our first question comes from Tom Kerr with Zacks Investment. Please go ahead.
Hi, everyone. A couple quick questions. Can you explain on the German hospital situation where the COVID beds are converting to ICU beds? Does that happen quickly over time, or is that something we won't see through the end of the year? How does that progress?
Currently there's a mandate that requires hospitals to allocate beds to potential COVID-19 patients. That means that they also have to reserve nursing care to be able to man those beds. Staffing becomes a major issue in, when hospitals are required to have these COVID reserved beds. With the COVID pandemic winding down, and what we've seen is that the number of ICU admissions related to COVID has dropped dramatically, not just in Germany, but all throughout Europe and in fact, here in the United States as well. We think that bodes well to the mandate being lifted. We don't know exactly when that will happen, but I think there's been discussion that this is probably something that will happen later this year.
Is that a certain % that just automatically goes away under that mandate? Or a certain number of beds?
In many cases, it's been 10% of available ICU beds have been reserved for COVID.
Got it. That's encouraging. A couple line items on the grant income throughout the rest of the year. Is that something we can expect in the same range, maybe in the $1 million-$1.5 million per quarter?
Yes, Tom, I think you can expect that. I think you can expect that. All of our R&D people are devoted to our grants. We have a really large backlog in excess of $10 million right now. I think that will continue through 2023 and into 2024.
Okay, good. On the R&D spending line, I thought that was gonna go down a little bit, but is the $4.2 million a good quarterly run rate, or does that get reduced as well towards the end of the year as part of the cost savings initiative?
Kathy, you're on mute.
Yeah. Somebody's on mute.
Kathy?
I'm afraid Kathy lost her connection.
Okay. Well, we'll follow up with you after the call with that information.
Okay. I'll hop back in the queue for now. That's all I had. Thanks.
Thanks, Tom.
Next question comes from Sean Lee with H.C. Wainwright. Please go ahead.
Good afternoon, guys, and thanks for taking my questions. My first question is on the STAR-T study. It's great to see that the enrollment is going well. With the results that we can expect later this year, what could you give some more details on what kind of top-line results we can expect in terms of metrics and such? Would there be any longer-term follow-up that will come later?
Thanks, Sean. Efthymios, would you like to take that one?
Yes. Thanks. Thanks for the question. Just as a quick reminder, the design of STAR-T includes a follow-up of 30 days. That's one of the benefits to us saying that we are targeting top-line results by the end of this year. The follow-up's so short, that will allow us then to move on to the next stage, which is obviously cleaning and monitoring all the data, locking the database, and executing the statistical testing and the overall analysis. The follow-up is short. Therefore, the top-line results will represent the final results. There's no long-term follow-up associated with the design of the study.
The study itself is powered to look at clinical bleeding of endpoints that measure the amount of blood loss and potential bleeding complications that happen around the time of the index operation that these patients are having. When we talk about top-line results, we will be communicating the primary endpoint of the study, which is reduction in clinical bleeding.
Great. Thanks for the clarification. My second question is on the finance side. With the inflationary pressures that we've seen so far over the last year as well as the currency translation headwinds, I was just wondering, have you done any price increases on CytoSorb in the last year? How easy is it to raise the price to counter some of these headwinds if you need to with regards to your reimbursements?
Thanks, Sean. Christian, would you like to take that one?
Yes, sure. Good evening, everyone, and good afternoon to you. Yes, indeed, we have, of course, thought about price increases, and we have initiated this already in last year. Obviously, it takes a while that the price increases push through in all the different markets. We are on a good way, and I think we can see the effect already in the next quarters.
I see. Thanks. That's all I have.
At this time, I would like to turn the call back to management for any additional or closing remarks.
just a further clarification, Tom. you know, the numbers for the emergency reserve COVID beds is actually a third of the of the current beds. There's roughly about 20,000 beds either occupied or free currently and about 8,000 emergency reserve beds. Right. It's roughly about a third of the available beds. I apologize for that error. In any case, thank you everyone for joining the call today. If you don't have any other questions, please feel free to reach out to Kathy Bloch at kblock@cytosorbents.com, and we'll reply to your questions where possible. We look forward to the next quarterly call. Thank you very much.
Thank you. That concludes our conference for today. I'd like to thank everyone for their participation.