Good day ladies and gentlemen and welcome to the Cerus Corporation Fourth Quarter and Full Year Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Tim Lee, Investor Relations Director. Sir, you may begin.

Thank you, operator and good afternoon. I'd like to thank everyone for joining us today. With me on the call are Obi Greenman, Cerus' President and Chief Executive Officer; Vivek Jayaraman, our Chief Commercial Officer; Kevin Green, Cerus' Chief Financial Officer; and Carol Moore, our Senior Vice President of Regularly Affairs and Quality. Cerus issued a press release today announcing our financial results for the fourth quarter and year ended December 31st, 2017 and also describing the company's recent business highlights. You can access the copy of this announcement on the company website at www.cerus.com. I'd like to remind you that some of the statements we will make on this call relate to future events and future performance, rather than historical facts, and are forward-looking statements. Examples of forward-looking statements include statements related to our 2018 product revenue guidance, gross margins, operating expenses, cash burn, and sufficiency of cash, future product sales, mix and volume, future regulatory related events, including the issuance of a final guidance document, clinical trials and other product development activities, including respect to cryoprecipitate, activities with respect to our red cell program, our commercial goals and initiatives, including new contracts, customer activity under existing contracts and hospital implementation, the potential approval of our red cell product in Europe and the U.S. and commercial launch thereof, and the timing of the foregoing events and activities. These forward-looking events -- these forward-looking events statements involve risks and uncertainties and could cause actual events and performance and results to differ materially. These risks and uncertainties identified and described in today's press release and under risk factors in our Form 10-K for the year ended December 31st, 2017 that we expect to file shortly. We undertake no duty or obligation to update any forward-looking statements we make today. This call will be archived temporarily on our website and will not be updated during that time. On today's call, we'll begin with opening remarks from Obi, followed by Carol, who will provide an update on our clinical programs, then Kevin will review Q4 and full year financial results, and finally, Obi will conclude with closing remarks. And now, it's my pleasure to introduce Obi Greenman, Cerus' President and Chief Executive Officer.

Thank you, Tim. In 2017, Cerus made significant progress both commercially and on our development programs. I would like to review our key achievements for 2017 and how these position the company for continued growth in 2018 and beyond. In July of 2017, we signed a contract with the French transfusion service or EFS, for their nationwide conversion to INTERCEPT platelets. The EFS contract has the potential to be largest revenue-generating contract signed to-date by the company and France is the second largest market for platelet components in Europe, representing an annual opportunity greater than $20 million. Revenue contribution from our expanded supplier agreement with EFS was a contributing factor to our strong year end finish with record product revenue of $16.2 million. In addition, growth from France, we saw notable revenue gains in Portugal, Kuwait, and the U.S. In the United States, we made solid progress in 2017 with full year kit revenue more than doubling year-over-year, demonstrating growing hospital demand for INTERCEPT platelet components. We currently have 37 blood centers actively distributing INTERCEPT platelets and an additional 22 under contract. Three of our customers have received BLA approvals and are now shipping pathogen-reduced platelets into other states. Six other blood centers are awaiting BLA approvals, including the American Red Cross. So, the FDA has not indicated when it plans to publish our final bacterial safety guidance document. The agency took two actions in Q4, which indicated that bacterial safety of platelets remains a top priority. For first in December, the FDA issued a draft guidance document on implementation standards for pathogen reduction in U.S. We believe this signals the FDA support and clarifying any uncertainties about INTERCEPT implementation and guidance for the replacement of other interventions, as blood centers began a broader rollout of the technology. The standards…

Thank you, Obi. Progress on the red cell -- on the regulatory submission pathway for Cryo products has continued and we are encouraged by the in-vitro data being generated. The INTERCEPT Cryo program builds upon our PMA approval for the INTERCEPT plasma and therefore, will be submitted as a supplement to that file. We are planning this submission in the first half of 2019 and expect approximately six months for FDA review. This could translate into a potential approval decision in the latter half of 2019 or early 2020. Moving on to our red cell program, in January, we reported positive topline results from SPARC, our Phase III study in thalassemia major patients. During the course of this study, over 1,000 units of INTERCEPT-treated red cells were transfused in 81 patients in a setting of repeated exposure and there were no red cell antibodies specific to the INTERCEPT-treated red cells detected. This study successfully met all of its efficacy and safety endpoints, which we believe speaks favorably to the safety profile of INTERCEPT-treated red cells in general, as well as to the support of chronic anemia, in particular. We continue to expect to file our red cell CE Mark in the second half of this year. With our UPLC assay development completed, we are now in the process of transferring the assay to a contract testing lab for validation. Our final step in order to complete the submission will be retesting of the validation lots and release of commercial components. Our new UPLC assay is robust and reproducible. And we are confident that we solved the methodology issues related to release of manufactured products. Turning to the U.S., our red cell program continues to advance in the clinic. In November, the FDA approved our IDE protocol for the Phase III RECIPE study in cardiac surgery patients. We are now initiating contracts with study sites and starting to work through the hospital IRB approval process. We expect to initiate the study this summer with an anticipated 15 to 20 clinical sites participating in this study. With regard to RedeS, our ongoing U.S. Phase III red cell trial, enrollment continues at a modest pace, due to the lasting impact of hurricane damage in Puerto Rico. We expect to see the rate of enrollment pickup as we expand to new sites in the continental U.S. in the coming months. As you recall, our U.S. red cell development program is primarily funded via our contract with BARDA. We are encouraged to see that the President's proposed fiscal 2019 budget holds funding for BARDA largely unchanged. In addition, our pathogen reduction technology was specifically highlighted as a priority investment in their efforts to respond effectively to the epidemic threat of emerging infectious diseases. With that, let me turn it over to Kevin to review the financial results for the fourth quarter and full year 2017.

Thank you, Carol, and thanks to everyone on the call today for your time and interest in Cerus. Earlier this afternoon, we reported Q4 2017 product revenue of $16.2 million compared to $10.1 million for Q4 of 2016. For the full year 2017, product revenue was $43.6 million, up 17% from 2016. These results exceeded our expectations and were above the high end of our revenue guidance, previously set at $41 million to $43 million. Underlying the year-over-year Q4 revenue growth was an increase in demand for our kits, primarily platelet kits. Conversely, illuminator sales during fourth quarter of 2017 were down relative to the prior year as Q4 2016 was a record quarter for U.S. illuminator placement. For the full year, demand for INTERCEPT kits increased 21%. We are encouraged by the growth in demand for INTERCEPT kits, which we view as an important metric by which we measure our progress. During the fourth quarter, we received initial kit orders from our Q3 agreement with EFS and completed the initial placements throughout France. Initial kit orders from EFS were higher than our expectations. And while we are encouraged by these orders, we believe there was some level of inventory destocking. We continue to expect that EFS will be in routine use nationwide during the base contract period. Based on our current outlook for 2018, we are reaffirming our previously provided product revenue guidance of $51 million to $53 million, which represents 17% to 22% growth over 2017. Beyond product revenue guidance and not included in our guidance is, of course, the government contract revenue, we recognized from our BARDA agreement. That government contract revenue totaled $2.4 million for the fourth quarter and $7.8 million for the full year 2017. Now, I'd like to turn the discussion to gross margins.…

Thank you, Kevin. Since taking over the commercialization rights from Baxter and establishing our own commercial team initially in Europe and now in U.S., we worked diligently to realize the paradigm shift required to make INTERCEPT the standard-of-care. INTERCEPT platelets and plasma are now being routinely used in over 30 countries globally and INTERCEPT platelets have become the standard-of-care in Belgium, Switzerland, Iceland, Kuwait, Austria, and soon France and Qatar as well. Reduction in the risk of bacterial contamination of platelet component is a strong driver for change -- changes in practice. Lately, we have focused our discussion on the FDA and its pending guidance document, but this bacterial contamination issue has had significant impact across the European markets as well. Today, almost half of all platelets transfused in Europe have been added safety measure of either being tested for bacteria or treated with the pathogen-reduction process. Pathogen reduction is the preferred safety measure with INTERCEPT being the clear market leader for those blood centers that have chosen pathogen reduction. We believe this momentum in Western Europe will continue and look forward to leveraging Germany's newly established national reimbursement program for pathogen reduction to establish INTERCEPT as a standard-of-care in this market over the next several years. We're also well-positioned to continue expanding INTERCEPT using the United States, independent of future regulatory policy, but with the final FDA guidance document as a compelling potential catalyst. As I look out to 2018, I'm excited about where we're headed as a company. We're making tangible progress in all key areas, the topline, the pipeline, and the bottom-line. Looking at the topline, as evidenced by the robust sales momentum we experienced during the fourth quarter, we anticipate strong revenue growth in 2018, led by expected gains in France and the U.S. with additional…

Yes sir. [Operator Instructions] And our first question comes from the line of Catherine Schulte from Baird. You may begin.

Hey guys. Thanks for the questions. I was just wondering can you give us a more in-depth status update on France. There are a number of EFS sources out there that suggest there may already be a nationwide implementation. So, what does ordering suggest so far? And what are your thoughts on how EFS contributes throughout the year?

I'll turn that over to -- hi Catherine, I'll turn that over to Kevin just to cover sort of how we're thinking about our guidance for the year.

Yes. Thanks Catherine. Well, what we know is that the illuminators have been deployed to all sites in France and that at some level they are producing INTERCEPT platelets. Our guidance contemplates some uncertainty because, as you know, there are no minimums and we really don't have a lot of history with the order patterns in the EFS, and we do believe there is some initial stocking. We also know that they plan to convert to the double-dose platform. What we don't know in that regard is when they're going to do it and at what level. And so our guidance contemplates all of that.

Okay. And then as we think about how BLAs might impact demand, can you give any anecdotal commentary on, if and how, utilization of the three blood centers has changed since they received their BLAs?

Yes. Thanks Catherine. So, I think, obviously, the biggest impact of the BLA approvals will be on the American Red Cross, given their nationwide distribution network and their dependence on shipping or exporting platelet components from one state to another. We do know of the three that have been approved. They are shipping products out of state. So, it does provide the ability to sort of supplement demand from hospitals otherwise wouldn't have access to INTERCEPT platelets. But I think that the clear example is that Yale had been struggling to get to a 100%, and they -- Rhode Island, for example, can ship now from Rhode Island into Connecticut to be able to address that known demand. So, we imagine that, that will continue to grow and are looking forward to the other six blood centers who are still waiting their BLA approvals to get them.

Okay. And then last one from me. Can you just give us a snapshot of where you are with the American Red Cross and share any plans they have for further conversion this year and any initiatives that they might have for driving hospital demand?

Yes. Thanks Catherine. I'll turn that over to Vivek, because he is closest to it.

Thanks Obi. So, we continue to make great progress with the American Red Cross. I think we all view them to be as a strong partner and probably one of the earliest adopters in terms of buying the pathogen-reduction technology and making it a strategic initiative for their organization. So, if you'll recall, last year, at the Annual AABB Meeting, there was a forum that was [Indiscernible] symposium, where the AABB -- excuse me, the ARC presented and there they talked about production modification steps that they've incorporated across their currently active INTERCEPT-producing sites, they ramp up the volume of product that they can manufacture. And what was really encouraging is they've seen the ability to deliver capture rates in terms of INTERCEPT production that are north of 75%. So, we're really encouraged by the progress that we're making. Obi alluded to the BLA debt spending. Clearly, that will allow them to support their hospitals that reside in States where there aren't manufacturing facilities. But we continue to place a significant amount of organizational attention and investment in ARC and I think we're currently pleased with the progress we're making.

Great. Thank you.

Thanks Catherine.

And our next question comes from the line of Sung Ji Nam from BTIG. You may begin.

Hi, thanks for taking the questions. I was wondering, do you anticipate the illuminator placement to pick up once you get the additional BLAs approved or your customers' BLAs approved, especially from the ARC?

I don't think that would be some I would focus on. I think that a lot of the Red Crosses have existing illuminators at the production sites. I think the one thing that they have to determine once the BLAs are in place is that throughput sufficient. So one could imagine that they would be adding additional illuminators, should the production volumes go up. But what we're most excited about -- so the ongoing same-store sales growth and then bringing on new sites as the hospital demand is increasing in the United States.

Okay. Thank you. And then, I know it's been only a couple of months since your SPARC data readout, but I was wondering if you could provide any incremental feedback you're getting from your potential customers or existing customers? I know you mentioned that you're in active discussions with a lot of them.

Yes. I think that the nice thing is those customers that have converted over to a 100% INTERCEPT platelets and I listed them in the prepared remarks. In general, what we see is an incredibly strong advocacy and support of the availability of INTERCEPT red cells once it's approved. So, what I mean by that is they are looking to be early adopters because they've essentially taken on the concept that pathogen activation provides the ultimate safeguard for blood safety and availability. And the thing that they generally worry about most on a daily basis are red cells just given the volume is 10 times that of platelets generally for a blood center. So, I think, it's nice to see the data was so positive. And we'll look forward to getting to the CE Mark submission and then continue the dialogue with those existing INTERCEPT customers.

Okay. And then finally, I was wondering if you might be able to provide any update on some other tender processes that might be in the pipeline? Thank you.

Thanks. I think, obviously, there's a lot of tenders that are under way at any given point in time. But we're somewhat reluctant until those have been issued and awarded to comment on them, given the past history. So, I think we're encouraged by the tenders that are in play. At the same time, I don't think it's something we're going to be commenting on over the course of this year.

Okay. Thank you.

Thanks.

And our next question comes from the line of Josh Jennings from Cowen. You may begin.

Josh, you there?

You may be on mute.

I'm sorry, I was on mute. I apologize. Congratulations on the fourth quarter results and all the progress. I'd like to just -- wonder if I could start by asking about Germany deposit [Indiscernible] decision. How you're thinking about the strategy within Germany with that now in place? And any color on potential ramp would be helpful. Thanks.

Thanks Josh. We all are very much encouraged by the national reimbursement that was put in place as of the beginning of this year; it was announced in the fourth quarter. And that reimbursement anticipates a 20% premium for INTERCEPT platelets over conventional products. So, a very healthy reimbursement premium. The focus of our efforts, this year, will be on getting in, what are called, MAAs that we submit -- that we don't submit, actually our blood center customers submit to the Paul-Ehrlich-Institut, which regulates blood products in Germany. And that process, we estimate to take about nine to 12 months. So, I think the other thing to note is that there has been strong interest, and we're already -- from the German Red Crosses that make up about 45% of the market in Germany. And then, also a number of the different university blood centers and also private blood centers. And so we're very much focused on that as an organization. We are looking to deploy our deployment resources to be able to help facilitate the MAA submissions as quickly as we can. There's already sort of a backlog from scheduling that. So, I think that's a good sign as we look at the schedule that's required to help these blood centers get their MAAs in. But really, I think this is going to be a revenue growth story in 2019 as opposed to 2018. And just trying to work through the regulatory process in Germany this year and get as many of those blood centers with their MAAs in and then, hopefully, approved going into the first part of 2019.

Great. Can you just remind us what the market opportunity is in Germany for INTERCEPT platelets?

Yes, it's about -- its north of $30 million annually. So there's about, I would say, close to 600,000 platelet units a year. So sort of two times the size of the French market, but we believe they'll be using a lot more double and triple-dose sets in Germany, just given the way they collect products and the nature or the specifications of platelet doses in Germany. So, about -- I look at $30 million annually is the opportunity.

Great. And one last question on the cryoprecipitate product line. I think I heard that it will be a supplemental filing, any other details in terms of the requirements? And what type of data you would need to put forward in that supplemental filing?

Yes, thanks, Josh. I'll let Carol address that question.

Thanks for the question. So, it is a supplement to our plasma PMA and we met with the FDA last year to discuss what was necessary to bring that forward for approval and FDA gave us some additional data requirements for some laboratory studies and some in-vitro testing. And we're in the process of doing that at this point and everything is looking good at this time.

Thank you. And our next question comes from the line of Craig Bijou from Cantor Fitzgerald.

Hi guys, thanks for taking the questions. I guess a couple of follow-ups. One, I guess, Kevin, on the guidance. You guys put up 60% growth -- product revenue growth in Q4. And obviously, there's some stocking that you called out. But you did have a tougher comp from illuminator sales in Q4 of 2016. So, when we look at 2018 and the guidance around 20%, I know you're being a little cautious on France. But I mean is there anything else that we should be thinking about? Or is it just a little bit of conservatism as you're looking -- as we start the year here?

Thanks Craig. The other -- I think the other thing you didn't mention, in Q4 2017, we had, what I would call, some anomalous orders. We had a new distributor in Italy with some initial purchases. We had a bolus of sales in Portugal as well as Kuwait and then we had, of course, the illuminator sales in France. And so that sort of skews the Q4 results and I wouldn't use that as a baseline for 2018. As we look to 2018, again, we're really confident and encouraged by the EFS decisiveness. But there is still some uncertainty into -- we want to be cautious until we have more history with their ordering patterns. And in the U.S., we're extremely encouraged by the same-store sales and growth. But we don't have a guidance document and there is a lot of work to do absent that guidance document. So, our -- we feel our guidance at this point is very balanced.

Okay. Thanks. And I guess, just in terms of cadence of growth throughout the year. With the stocking orders in Q4, should we anticipate normal seasonality that what you've seen in the past? Or I guess any color on how we should think about the cadence throughout the year?

Yes. Q1 is generally a tough comp. Historically, there are some one-time orders like we saw, a lot in this last Q4. And you can't rely on those in the beginning of the year as we turn the calendar. So, that's likely to play out, but also factored into our overall annual guidance.

Okay. And one last one. Just wanted to ask about cash burn assumptions in 2018. And what you're expecting there?

Yes. So, I think similar to what we've mentioned in the past with the topline growth, improvement in margins, and utilization of existing employees on the BARDA initiatives, we expect that we'll be able to end 2018 averaging around $10 million per quarter, which is down from the $12.5 million to $15 million that we saw in 2017. And that's ultimately what we're managing to.

Great. Thanks for taking the questions.

Thanks Craig.

Thank you, Craig.

I'm showing no further questions at this time. I would now like to turn the back -- I would now like to turn the call back to speakers for any closing remarks.

Well, thank you all for joining us today and for your interest in Cerus. We will be presenting at the Cowen and Company's 38th Annual Healthcare Conference next week in Boston and look forward to seeing many of you in person at that time. Our first quarter call will be in early May and we look forward to updating you then. Thanks very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.