Cytosorbents Corporation (CTSO) Earnings

Management highlights

### Core Commercial Business Progress - Core Cytosorb product is commercially approved in the EU and over 70 international markets for multiple blood purification indications, but not currently approved in the U.S. or Canada outside of expired COVID-19 emergency use authorization. - The business operates a high-margin, scalable recurring razor-blade model integrated with existing hospital blood pump infrastructure; cumulative usage exceeds 300,000 devices globally, with 2025 full-year core sales of over $37 million. - After streamlining to a smaller, more focused commercial organization in Germany under new leadership, management reports improved productivity, customer engagement, and execution, with plans to selectively rebuild the sales force to reaccelerate growth. - Direct international sales outside Germany grew 13% year-over-year, driven by stronger physician adoption, improved execution, and effective team performance. ### Clinical Protocol and Product Improvements - Management is advancing a refined treatment paradigm focused on identifying appropriate patients, initiating therapy early, and applying optimal treatment intensity (dosing) to improve patient outcomes. - Over 100 standalone Purify pumps have been placed internationally, enabling easy Cytosorb use for patients not on dialysis, supporting early intervention. - The recently launched Hotswap device, which enables rapid Cytosorb device exchange to support appropriate dosing, has received positive clinician feedback. - New real-world evidence from a Swiss high-volume center shows Cytosorb use in septic shock patients reduces average ICU and hospital length of stay by 6-7 days, cuts ventilation time, lowers nursing workload, and improves net earnings per patient for hospitals, strengthening the combined clinical and economic value proposition. ### Clinical and Regulatory Progress for DrugSorb ATR - DrugSorb ATR is an investigational device designed to remove blood thinners (antiplatelet agents and direct oral anticoagulants/DOACs) from the bloodstream during urgent cardiac surgery, addressing a large unmet need for patients who cannot wait days for drug clearance to proceed with surgery. - Main results of the START-T randomized clinical trial for ticagrelor (Brilinta) removal have been published open-access in the *Journal of Thoracic Cardiovascular Surgery*, showing intraoperative DrugSorb ATR use is safe and reduces severe bleeding events by more than 50% after isolated CABG in patients operated within two days of drug discontinuation. - After an August 2025 FDA appeal upheld a prior denial of the de novo submission for ticagrelor removal, the agency identified no safety concerns (a key component of the approval benefit-risk assessment) and confirmed the next submission will only need to address remaining open items, enabling a potentially focused, expedited review. - Management plans to submit a separate pre-submission request to FDA within 30 days to evaluate a parallel de novo submission for DOAC removal, leveraging existing real-world evidence and the existing second FDA breakthrough device designation for this indication; approval for both indications would expand the U.S. total addressable market to $500 million to $1 billion. - Multiple new abstracts analyzing DrugSorb ATR real-world and clinical data have been accepted for presentation at two leading global cardiovascular conferences (Europe PCI 2026 in Paris and ESC 2026 in Munich), demonstrating growing community interest in the technology. ### Operational Cost Management - A strategic headcount and cost reduction initiative implemented in Q4 2025 (reducing headcount by ~10%) delivered initial year-over-year operating expense reductions in Q1 2026, with full benefits expected to roll out over coming quarters. - Management intentionally slowed production in Q1 2026 to reduce inventory levels from $5.3 million at end-2025 to $4.8 million at end-Q1, improving working capital efficiency and reducing cash burn.

Guidance

- The additional mechanistic data required by FDA for the new DrugSorb ATR de novo submission for ticagrelor/Brilinta removal will push the submission timeline to late 2026 or early 2027. A regulatory decision is typically expected within 150 days of submission, though timelines may vary. - Management reaffirms the target of achieving operating cash flow break-even in the second half of 2026, as full benefits of the company's cost reduction program are realized. - Gross margins are expected to remain in the high 60% to low 70% range as inventory levels are gradually reduced further before production is ramped up again to support revenue growth. - Following stabilization of geopolitical conditions in the Middle East, management expects delayed $500,000 in orders will be recovered over subsequent months as distributors resume purchasing.

Segment performance

Cytosorbents reports total Q1 2026 revenue of $8.9 million, a 2% year-over-year increase. Direct international business outside Germany grew 13% year-over-year, contributing ~54% of total Q1 revenue. Direct Germany sales declined year-over-year, offsetting some of the international direct growth, and represented a minority share of total revenue. Distributor sales were flat year-over-year, with a $500,000 delay in expected Middle East orders due to geopolitical conflict. Gross margin for the quarter was 69%, down 200 basis points from the prior year. Operating expenses were $9.2 million, a 9% year-over-year decrease. Operating loss was $3 million, a 22% improvement from the prior year's $3.9 million operating loss. Net loss was $5.1 million ($0.08 per share), while adjusted net loss (removing non-cash foreign exchange and stock compensation impacts) improved to $3.4 million ($0.05 per share) from $3.7 million ($0.06 per share) in Q1 2025. Adjusted EBITDA loss improved to $2.2 million from $2.7 million year-over-year. Cash, cash equivalents and restricted cash totaled $6.4 million at quarter end, with total cash burn of $1.1 million (excluding $300,000 in restructuring payments).

Risks & headwinds

- Geopolitical instability related to the U.S.-Iran war disrupted Middle East distribution operations, delaying $500,000 in expected Q1 2026 orders and slowing growth of the newly established Dubai subsidiary; continued conflict could create further near-term uncertainty and revenue delays in the region. - DrugSorb ATR remains an investigational device with no commercial approvals globally, and the FDA approval process is uncertain: even with clear direction, there is no guarantee that the additional required data will satisfy FDA requirements or result in approval. - The German market remains in a stabilization phase after commercial restructuring, and sales growth may not resume as expected even after selective expansion of the sales force. - Cash reserves totaled $6.4 million at the end of Q1 2026, leaving the company reliant on progress toward cash break-even and regulatory milestones to maintain operations without additional financing.

Analyst Q&A

• Q: Can you elaborate on what the FDA-requested additional mechanistic data for the DrugSorb ATR de novo submission entails, and what level of investment will be required? /

  A: Mechanistic data is not clinical outcome data, but instead supplementary information supporting the device's mechanism of action. It does not require large, resource-intensive new clinical trials with long follow-up periods or multiple trial sites. Management is currently assessing experimental design options in discussion with FDA, and will share more details once plans are finalized.\n\nQ: What is the best-case outcome for the upcoming DOAC indication pre-submission to FDA? / A: Management is seeking early alignment with FDA on what additional data, if any, is needed beyond the already accumulated body of real-world evidence and published data for DOAC removal. It is possible that FDA will not require substantial new data, allowing for an efficient parallel submission process, but no assumptions are made ahead of the meeting with the agency.\n\nQ: Can you provide more detail on Cytosorbents' Middle East business, including structure and impact of the current conflict? / A: Cytosorbents established a Dubai subsidiary last year to pursue opportunities across the Middle East, including large markets like Saudi Arabia that have a history of early adoption of Cytosorb therapy. The U.S.-Iran war created near-term uncertainty and delayed $500,000 in orders, but management views the conflict as temporary, and notes the increased need for trauma care created by the conflict further underscores the value of Cytosorb's technology in the region.\n\nQ: When will the German market return to growth, and what will be the cost of expanding the sales force there? / A: Q1 performance was encouraging, with the smaller, streamlined sales force nearly matching prior year sales. New sales reps are hired with a compensation structure that has low fixed costs and high variable incentive compensation, so reps are expected to pay for themselves quickly as they become productive. Germany has 1,900 hospitals, so there is substantial untapped opportunity for growth after the restructuring, and management expects to return to growth as coverage expands.\n\nQ: Will the delayed $500,000 in Middle East orders be recovered in future quarters? / A: Management expects the delayed orders will be recovered after the region stabilizes. While an immediate snap-back is not expected, distributors will resume purchasing and bring in inventory once conditions improve, and underlying physician interest in Cytosorb products remains high in the region.