Okay. Hello and good morning, everyone. Thank you for joining us at the 28th Annual H.C. Wainwright Global Investment Conference. My name is Sean Lee, and I am a senior biotech analyst at the bank. Joining me today for this next fireside chat is Mr. Phillip Chan, who is the CEO of CytoSorbents, and Mr. Pete Mariani, who is the CFO. CytoSorbents is known for developing novel blood purifiers for critical care, cardiac surgery, and other indications. The company is currently commercializing CytoSorb in Europe and other international markets and plans to file a de novo application for DrugSorb-ATR in the U.S. early next year. Without further ado, please welcome Phil and Pete.
Thanks, Sean.
Thanks very much, Sean.
Okay, Phil, to start us off and for the benefit of our audience today, who may not be familiar with CytoSorbents, could you provide a high-level overview of the company?
Sure. I am Dr. Phillip Chan. I am the CEO of CytoSorbents, been leading the company for about 18 years now. Our company is a NASDAQ-traded medical device company that specializes in blood purification to treat life-threatening illnesses in the intensive care unit, as well as in cardiac surgery. This is our flagship product here, CytoSorb. We manufacture this out of our ISO 13485 certified facility in New Jersey, and this is a product that we commercialize in 75 countries around the world based upon our EU approval. It has now accumulated more than 300,000 treatments to date. In the past trailing 12 months, it has generated $37.3 million in high margin sales of this product all over the world. In Q2, our gross margins were 73%. People call it a Brita filter for your blood.
It kind of belies, I think, the sophistication of the technology, but in every cartridge, there's hundreds of thousands of tiny porous polymer beads, roughly the size of a grain of salt, that help to extract toxic materials from the bloodstream, helping to control deadly inflammation and a lot of other problems that happen in critically ill patients. You set it up just like dialysis. It, in fact, is plug and play compatible with the existing blood pump infrastructure in a hospital today, whether or not it's a dialysis machine in the intensive care unit or heart lung machine, for example, in the operating room. Because of the success that we've had with that product to date, we are now nearing cash flow break even, which we expect to achieve in the second half of this year.
In the second quarter, we burned only about $200,000 in operating cash, if you subtract out restructuring charges, and we hope to get to that cash flow break even point second half of this year and then profitability, hopefully, in the near future. As Sean said, a third initiative of ours, value creating initiative, is to get a different product approved in the U.S. called DrugSorb-ATR. This is a device that is specifically designed to remove blood thinners during cardiothoracic surgery that can cause potentially serious or even fatal perioperative bleeding. There's currently no antidote for this today except to wait. We are currently in front of FDA looking to try to get this product approved, hopefully sometime mid-2027.
A fourth and final value proposition that we have is a product called HemoDefend, which is a preclinical program entering human clinical trials that is designed. It's a filter that is designed to create universal blood products that can be given to anybody regardless of their blood type. So simplifying the blood transfusion industry, particularly for plasma and platelets, down to a single, instead of A, B, AB, and O type blood products, we can make a universal blood product that can be given to anyone, thereby helping, hopefully, to save future costs in the industry. But also, if you think about the pre-hospital situation, emergency vehicles and emergency first responders, we have the ability to potentially give life-saving blood products to people in the field if this product gets developed, which would be really the holy grail of pre-hospital emergency response. So that's us in a nutshell.
Thank you for that, Phil. For the first part of our fireside, I'd like to focus on your existing commercial business. For over the last two years or so, the company's revenues have been going up and down, primarily as a result of challenges in the Germany direct sales market. What is the situation there right now, and what do you need still to do to achieve a turnaround?
Yeah, we have been actually working. We have a hybrid sales model where we sell direct in 10 countries in the European Union and then in 65 countries through distributors and partners like Fresenius Medical Care, one of the largest dialysis companies in the world, and other places in the world. Germany accounts for, in the last quarter, about 25% of our sales, and it has undergone a restructuring since early 2025, where we've really looked to revamp our entire sales approach in Germany to try to return Germany back to growth following the pandemic. During the pandemic, there was a lot of things that happened, including loss of a lot of healthcare workers, for example, ICU nurses, ICU healthcare workers, and because of that, the ICU markets have shrunk in Germany.
But we felt that we had the ability to take this into our own hands and improve our own sales approach. We've undergone a fairly broad restructuring where we've revamped leadership, we've implemented new key sales processes that were all designed to try to improve the efficiency and efficacy of our sales force, including, for example, new training, better medical marketing and messaging, the institution of more key performance indicators so that we have better visibility on what our salespeople are actually doing, and a number of other changes where we've now seen significant improvement in sales rep productivity.
But in that restructuring, we've had to shrink down the organization by a little bit more than 30%. We are now in the process of now rebuilding that organization, which we think is really now the key, now that the processes are all in place, the key to getting back to growth in Germany. We're well on our way to doing that. We're already seeing the benefits of that restructuring now.
Great to hear that. In contrast to Germany, we've seen pretty notable growth in the other direct sales in the international markets, especially over the last two quarters. Do you expect this growth to continue over the next couple of quarters? What are some of the pushes and pulls that will affect this trend?
Yeah. One of the reasons why we are very optimistic about our future sales growth is that the other parts of our hybrid sales model, where we are selling through distributors or we are selling direct through our own sales force in countries outside of Germany, is that actually they have been doing very well. Distributors in the last quarter grew 16%. Direct sales outside of Germany grew 9%, which is one of the reasons why we are so focused on getting Germany back to growth. It is a very dynamic business. There is a lot happening all over the world. One of our key growth initiatives was actually opening up the Middle East. In January 2025, based upon a tremendous amount of support and interest in the Middle East and the North Africa region, the MENA region, we opened up a new subsidiary in Dubai, U.A.E.
Unfortunately, as we all know, there was the Iran war that has happened that really destabilized, I think, the region and put a lot of uncertainty there, which made it difficult for us to really drive sales. But I think we have not lost focus there because we have been continuing to speak to clinicians. We have been continuing to drive support of our technology and also publicity of our technology in the area for these applications in critical care and cardiac surgery. We are cautiously optimistic about the second half year. We think that we will have some modest sales in the MENA region. But we think that we are well-situated for true growth in 2027.
I see. Also, finishing up on the existing commercialization, I have noticed that the company's gross margins have also improved steadily over the last couple of quarters. Can we expect this trend to continue? Also, do you have sufficient production capacity to support a future DrugSorb-ATR launch?
Yeah. We are actually very pleased by the underlying fundamentals of the improvement in gross margins. The team has done an excellent job over the past, I would say, last four quarters of adjusting production schedules, adjusting all the fundamentals of setting ourselves up and running much more efficiently. This second quarter, we delivered 73% gross margins. I think we are very pleased with that. We see the ability to continue to expand that with additional volume. To your point, yes, we have got a facility that can handle significant increase in volume just down in Princeton, New Jersey. I think we are well suited to not only drive additional growth in our core business, but add on the DrugSorb business when it comes.
Got it. For the next part, let's move on to the DrugSorb-ATR de novo resubmission, which I'm sure is the primary focus of a lot of investors right now. For those who may not be familiar, could you provide a quick outline of what the market opportunity is and why there
Sure
there's significant unmet need in this category?
Sure. You guys may be aware that tens of millions of people are on blood thinners around the world to reduce their risk of heart attack and stroke. In fact, you probably know someone, either a colleague, a friend, maybe even yourself, family member, is on a blood thinner like aspirin, like plavix, brilinta, eliquis, Xarelto . These are some of the most common pharmaceuticals actually in the world. Millions of people are on them, again, to reduce that risk of heart attack and stroke. The good thing is that they work very well for that indication. The problem is, if someone needs unscheduled surgery, particularly cardiac surgery, where, for example, 10%-15% of patients on these blood thinners often need emergent cardiac surgery. There is no antidote for the blood thinner today. The only antidote is time.
Just as if you were going to have elective surgery, your doctor would say, "Stop taking aspirin or the blood thinner five to seven days prior to your surgery so that you don't have a problem with bleeding." If you require, on the other hand, emergent surgery, that's a real problem. In fact, the rate of and the risk of severe or even fatal bleeding is extremely high. Different ways to measure it, but it can range from the order of 35%-65% of patients can have that type of massive, severe bleeding. Let me give you a use case because of one of the first drugs that we're targeting. One of them is called Brilinta. This is a class called a super aspirin. Basically, this is the major use scenario. Someone comes into the hospital with a heart attack.
You know that the conventional wisdom is call 911, take an aspirin. That aspirin is a weak antiplatelet agent that's supposed to prevent that clot in the heart artery from getting worse. In the emergency room, that's exactly what they give you. They give you aspirin, and they give you a super aspirin like Brilinta. Then all those people go into the cath lab, 90% will get a stent, but 5%-10% will not be eligible for a stent because of multivessel disease, the widow-maker left main disease. For example, maybe they perforated a coronary artery when they were trying to deploy the stent. Then those patients, now they have to undergo open heart, cardiopulmonary bypass, CABG surgery, coronary artery bypass graft surgery. If they go to surgery right away, they will bleed. It is not a bleeding that you can tie off or cauterize.
They just ooze from every surgical surface. Imagine this. If you've ever had a nosebleed that doesn't stop, imagine a six to eight-inch long incision in the chest and as deep. Basically, that doesn't stop bleeding. What we can do with our device is that we can actually accelerate the removal of the drug by binding the drug and eliminating it from the bloodstream and reducing bleeding risk. That's exactly what we've been able to demonstrate in a U.S. Canadian pivotal trial called the STAR-T Trial in the CABG subpopulation. We also have now real-world evidence augmenting that as well.
Okay. Thank you for that, Phil. The company previously guided to a new de novo submission in early 2027 under the Breakthrough Device designation. This is expected to include the STAR-T randomized data, the new patient-level real-world evidence, mechanistic data and usability data. Which of these components are ready today and which still needs to be done before then? Are there anything that could affect your timeline?
Yeah
push it further?
Yeah, in the CABG subpopulation, in the STAR-T trial, we demonstrated that basically there was a 58% relative reduction in serious and fatal bleeding risk. That meant that the number needed to treat was actually eigth patients treated with our device in surgery to avoid one major bleed. Just recently, within the past few weeks, data was presented at the European Society of Cardiology, one of the largest cardiovascular conferences in the world, where real-world data on four times the number of patients that were studied under the STAR-T pivotal randomized controlled trial in the U.S. and Canada came out, where the findings were very similar. There was a 37% relative reduction in risk using a different bleeding scale, and a number needed to treat of eight patients to avoid one major bleed. This is very consistent with what we had found previously in the STAR-T randomized control trial.
Taken together, that increases the number of patients to roughly about 250 patients that will be resubmitted to FDA, where FDA under a de novo submission, where the burden of approval has to show that the probable benefit outweighs the probable risk. FDA has granted us two FDA Breakthrough Device designation highlighting the great unmet medical need. They have previously judged that there are no major safety concerns with our device for this application, therefore the probable risk is low. Now with this new information that we're going to bring to them that they haven't seen before, we are going there with very strong data showing what we believe is a demonstration that the probable benefit certainly outweighs the probable risk for this great unmet medical need.
One thing that we still have to give them is some mechanistic data that they've requested, and we'll be working on that through the end of this year and hopefully have a new de novo submission ready to go by the beginning of next year. We expect under the standard de novo review time of about 150 days. We believe that that will actually be shorter based upon our discussions with FDA because they have agreed to focus only on the open remaining issues. Hopefully by mid-year we would hopefully have an FDA positive decision next year.
I see. Focusing on the new real-world evidence that was presented at the ESC conference, are these data the core of what you will be using in your resubmission package? How confident are you that these matched observational comparisons are sufficient to satisfy what the agency's request for clinical result data?
Yeah. The real-world analysis of these 200 patients is actually very robust. It actually matches patients on a number of different variables. The data on the use of our technology for the blood thinner Brilinta comes from our STAR Registry because CytoSorb actually has that approved indication already in Europe. We have been collecting data on that for a long time. The number of patients there is about 200 patients. We are patient-matching them based on variables like age and time from last dose of Brilinta, time on cardiopulmonary bypass. Key variables that can affect bleeding outcome, and matching them very closely on essentially twice the number of control patients from another published patient-level registry.
The data there, again, are very strong. What I would say about real-world evidence is that this is not a heavily curated population based on very specific inclusion/exclusion criteria. This is every day, people like you and me, going with this exact problem into hospitals, and we are seeing pretty much very similar benefits that we saw in our STAR-T Trial, which we feel very fortunate about and one of the reasons why we have confidence in our data.
I see. Yeah. Previously, you also mentioned that you were exploring using DrugSorb-ATR against other blood thinners.
DOACs like apixaban and rivaroxaban.
Yeah.
You doing the ESC presentation, it was suggested that there are plans to extend the real-world evidence studies to patients who are on these drugs. Do you believe these real-world data will be sufficient to progress in this second indication? Or do you believe the FDA will require additional clinical study results?
Yeah. The direct oral anticoagulants, like eliquis and Xarelto. Eliquis is the number seven pharmaceutical in the world, right? Lots of people are on these drugs. I think the important thing is that we recently met with FDA for a parallel submission for DrugSorb-ATR, specifically for the DOAC class of blood thinners. We came out of that meeting with very encouraging discussion with the FDA between our experts and theirs, and we are continuing to plan a parallel submission on that. We will have an update on that after we meet with FDA again in the very near term.
I see. To close us out, what is the company's operational cash burn, and what is the expected runway right now?
Yeah, we're pleased that we've been able to reduce cash burn fairly significantly, and we got to the point here in the second quarter where we only burned $200,000, net of $200,000 of restructuring. We've committed to running the business at cash flow breakeven and that we would get there here in the second half of this year. We'll continue to run the business at cash flow breakeven or better as we move forward.
Okay. Thank you.
Yeah.
Thank you again, Phil.
Thanks very much, Sean.
Thank you, Pete, for joining us.
Thanks, Sean.
Thank you, everyone.