Cytosorbents Corporation Q4 FY2025 earnings call

2025 was transitional year with progress in key priorities. Focused on driving sales growth, building clinical evidence, advancing DrugSorb ATR, strengthening balance sheet. In Germany, focused on building scalable commercial org. Purify is strategic initiative with over 100 units placed. HotSwap is new innovation with strong feedback. Clinical evidence drives adoption, ISICM had positive engagement. DrugSorb ATR made progress with FDA, STAR - T trial published with positive results.

2025 full year sales revenues increased 4% to 37.1 million. Growth driven by international markets: direct sales outside of Germany up 13% to 8.6 million, distributor sales up 11.4% to 16.5 million, accounting for approx 68% of total revenue. Germany sales down 10% to 11.8 million. Full year gross margin 71%, Q4 74%. Purify has over 100 units placed globally. HotSwap innovation has strong clinician feedback.

Expect operating cash flow break even in the second half of 2026.

Risks related to regulatory approval uncertainty, market competition, clinical adoption progress.

Q: Good afternoon, and thanks for taking the questions. Just to start, again, on the FDA regulatory process and the submissions, could you just help us think about how you're thinking of the timelines over the next few months and what are kind of the guideposts we should be looking out for?

A: Yeah, Michael. Mike, thanks for the question. I think where we are right now is that we continue to be in interactive discussions with the FDA, and as I mentioned in my comments, we're trying to ensure that we're on the same page with FDA before we actually submit. We believe this will streamline the process and ensure that we're addressing FDA's concerns where necessary. So I think that we're currently in that process, and when we have some better visibility on the completion of those discussions, we'll let our shareholders know.

Q: And just to follow up there, I mean, I guess how confident are you that you'll be able to get on the same page with the FDA around, you know, the concerns that need to be addressed? You know, what's the risk where or what's the risk of, you know, you and the FDA not really coming to a consensus agreement there?

A: Yeah, I mean, I think that after the appeal decision last year that we had worked with FDA to try to define a regulatory path forward, and we believe that that is still the regulatory path that we're going to be pursuing, but there are additional details around that that we are working to define with FDA just to ensure that we're on the same page. So, again, when we have some better visibility and clarity on finalizing those discussions, we'll let everyone know.

Q: Okay. Thanks, Phil. And maybe this last one for me. It sounded like you're starting to see some early signs of improvement in the German markets. Maybe you can give us a little more color there on what you're seeing and how things are trending so far through the first quarter.

A: Yeah, I think that... You know, one of the key things that we tried to enact last year was, one, kind of a leadership change overall in the organization and a realignment of folks under that new reporting structure. Second thing is a much more proactive approach towards developing the market, relying less on opportunistic sales and really focused on methodical sales development that we believe will result in a much more predictable and predictable forward momentum in sales and visibility in sales. So we have a very strong program in place right now. It's taken a little longer than we had hoped to get off the ground, but I think that's the nature of the beast. But I think what we're very encouraged by is that The team has really pitched in here, embraced the things that we want to change, and I think they're seeing the benefits of that.

Q: Hi, guys. One really quick follow-up on that last Germany question. Last quarter, you guys gave a baseball analogy. You're in the middle innings of getting all that work done and showing results. Are we in the later innings of that now?

A: Yeah, we believe we are. I think that a lot of that organizational structure is in place right now, such that we you know, expect to see incremental improvement over time. Now, it's not going to happen suddenly, as there's still a lot of work to do, but I think a key issue in setting, in putting this restructuring in place was to get it all implemented and executed upon, right? So that strategy and that plan is in place, and it's now about executing on that, and that's what we're focused on doing right now, and, you know, Q1 was a very nice show by the team.

Q: On the gross margin question, you said improved production spend in 2026, getting more efficient there. But does that mean the gross margins can improve from the, you know, solid 74? Or do we look at 2026 as another just a 74%, 75% gross margin year?

A: Well, we've been running low 70s, 70, 71%. So we're going to be happy. We had a great quarter in Q4. We'll be happy keeping it in the, getting above 71, 72, 74% here consistently. That's what we're looking for. And so that's where we want to stay in the near term. Do we have opportunities to continue to go above that? Of course we do. But that's going to be relevant on a couple of things, including increased volumes. So I think we're well positioned. The team's done a nice job. But I would think about it in that low 70% range for a while until we actually demonstrate something better than that.

Q: And can you give me a little more color on the purified pump strategy or more in terms of is there a real revenue model there? Does that become a separate material product revenue source? Or how do we look at that?

A: Well, I think as how we look at that business is very similar to the printer-printer cartridge business, right, where, you know, you subsidize the cost of the machine in exchange for disposable revenue in the future. And the disposables here are Cytosorb outside of the United States and VetRescue inside the United States. And so, you know, right now we're not looking at material contributions of the pump because we have many different ways that we're financing that pump through rental, through rentals, through subsidies and other things, through outright sales. But longer term, we expect that to begin to translate, particularly as we grow that blood purification infrastructure, particularly in distributor countries where they don't have that capability but want that capability. And we expect that to drive unit volume increases in our disposables like Cytosorb going forward. So it's an investment strategy for the company at the current moment with hopefully a much larger payout in the future.

Q: Hey, good afternoon, guys, and thanks for taking our questions. My first one is on the pathway to breakeven. So with the commitment to get to operating breakeven by the second half of the year, beyond the headcount reduction so far, what exactly has to happen before you guys can get there?

A: Well, we put the headcount reductions in place in Q4. We took other cost reduction initiatives in Q4 that will play out through the first quarter. Some of that stuff you don't turn off on a dime, right? So we're seeing reductions in those spend, like for instance, Q1, we had some commitments that we would not have gotten out of, but we've got the ability to continue to reduce spend. And so this is an incremental piece for us. As we started the year, and I talked a little bit about our inventory levels being higher, and our production efficiencies being higher, when you put those in the model, it says you can really think about a lower production level in the first half of the year that continues to drive cash flow efficiencies and allow the inventory to get sold and turn into cash in the first half of the year and continue to manage the working capital through that timeframe. So I think we're on a good path to get there. It take a little bit longer than what we initially thought, but I think we're going to be in a good place.

Q: My last question is on the drugstore ATR resubmission. So considering that this is the second go around with the FDA, what, I guess, de-risking steps are you really taking with this new submission process such that, you know, we're much more likely to be getting a positive outcome this time?

A: Yeah, I think that we think about it very much the same way, Sean. You know, we know that this is our second time out. We've actually, this was a path suggested by FDA, but we obviously don't want another denial, right? And so we've been very cautious and conservative to make sure that we are well aligned with FDA, that there are no surprises. And I think this is a bit of the ongoing discussions that we're having with FDA right now, where we want to make sure that when we do submit, that we have everything that we need for FDA to make that decision in a positive way. So I think we appreciate our shareholders' patience with the process. We know we had talked about trying to submit at the end of March, but I think that we think it's more prudent, rather than to rush it, to try to drive more certainty in the process so that we don't get surprised like we were last year. So that's kind of where we are at the moment. And as I mentioned to Mike earlier, we will absolutely update folks as we get better clarity on the timing of this process.