Cerus Corporation Reports First Quarter 2014 Results

  Cerus Corporation Reports First Quarter 2014 Results

Business Wire

CONCORD, Calif. -- May 1, 2014

Cerus Corporation (NASDAQ: CERS) today announced financial results for the
first quarter ended March 31, 2014.

“The first quarter results were in-line with our expectations and reflect the
impact of the strategic decisions announced last quarter designed to improve
future sales in certain markets covered by distributors. We expect that our
direct sales efforts and transition to new distributors will begin to
contribute to sales growth in the second half of the year. As a result, we
continue to feel comfortable with our 2014 annual revenue guidance of $38 -
$40 million,” said William 'Obi' Greenman, Cerus’ president and chief
executive officer. “In addition, maturing opportunities in other regions and
steady progress with the FDA review of our plasma and platelet PMA submissions
remain a primary focus and give us reason to be optimistic for the remainder
of the year.”

Revenue

Product revenue for the first quarter of 2014 was $7.9 million, a 19% decrease
from the first quarter of 2013. The decrease in product revenue was driven by
sales declines for both disposable kits and illuminators in several key
distributor markets. This decline was expected by us and was incorporated into
our annual revenue guidance of $38-$40 million for 2014.

Gross Margins

Gross margins on product sales for the first quarter of 2014 were 47%,
compared to 48% for the first quarter of 2013. The first quarter of 2014 was
our first quarter operating under the new terms of our amended agreement with
Fresenius-Kabi, the manufacturer of our disposable kits. The amended agreement
is expected to provide more stability in per unit costs for our cost of goods
sold than we previously experienced. In addition, under the new terms, we
expect a more efficient supply chain as Fresenius-Kabi will be sourcing and
purchasing work-in-process for certain components from us.

Operating Expenses

Total operating expenses for the first quarter of 2014 were $12.9 million,
compared to $9.6 million for the first quarter of 2013. The increase in
operating expenses was related to development costs incurred in connection
with the support of the PMA submissions for both our platelet and plasma
products, selling, general and administrative expenses incurred in
anticipation of a potential U.S. launch of the INTERCEPT System and increased
costs associated with our ongoing red blood cell clinical studies, both in
Europe and the U.S. We expect to continue making focused investments
throughout 2014 as visibility into the PMA approval process and subsequent
possible commercial launch for our platelet and plasma products potentially
becomes more certain. We may also decide to improve the speed of enrollment
for our European red blood cell clinical trials and to accelerate the
license-enabling manufacturing and development work needed to prepare for a
potential CE mark regulatory submission.

Operating and Net Loss

Operating losses during the first quarter of 2014 were $9.2 million, compared
to $5.0 million for the first quarter of 2013. The lower revenues and
increased operating expenses realized during the first quarter of 2014
relative to the same period in 2013 were the primary drivers for the higher
operating losses. Operating losses are expected to continue through the second
quarter as we move to a direct sales model in certain regions that have
historically been serviced by distributors, bring new distributors online and
as we continue to pursue potential FDA approval for the platelet and plasma
products in the U.S.

Net loss for the first quarter of 2014 was $0.2 million, or $0.12 per diluted
share, compared to a net loss of $10.3 million, or $0.17 per diluted share,
for the first quarter of 2013. Net losses were impacted by the mark-to-market
adjustments of our outstanding warrants to fair value, which resulted in
non-cash gains of $9.0 million during the first quarter of 2014 compared to
non-cash losses of $5.1 million during the comparable period in 2013.

Cash and Investments

At March 31, 2014, we had cash, cash equivalents and short-term investments of
$48.3 million compared to $57.7 million at December 31, 2013. Cash used during
the first quarter is typically higher than in other quarters due to the
paydown of prior year-end accruals.

Other Recent Highlights

  *Medical Device License Application submitted to Health Canada for
    INTERCEPT plasma
  *INTERCEPT plasma PMA review remains in progress with an FDA approval
    decision expected later this year
  *INTERCEPT platelet regulatory submissions for the U.S. and Canada are
    expected to be completed in Q2
  *Initial funding for whole-blood pathogen inactivation project to provide
    safer blood for Sub-Saharan Africa, a collaboration between the Swiss Red
    Cross and Cerus
  *Frank Witney appointed to Cerus Board of Directors

QUARTERLY CONFERENCE CALL

The Company will host a conference call and webcast at 4:15 p.m. Eastern time
today to discuss its financial results and provide a general business overview
and outlook. To access the live webcast, please visit the Investor Relations
page of the Cerus website at http://www.cerus.com/ir. Alternatively, you may
access the live conference call by dialing 866-235-9006 (U.S.) or 631-291-4549
(international).

A replay will be available on the company’s web site, or by dialing
855-859-2056 (U.S.) or 404-537-3406 (international) and entering conference ID
number 1351152. The replay will be available approximately three hours after
the call through May 14, 2014.

ABOUT CERUS

Cerus Corporation is a biomedical products company focused in the field of
blood safety. Cerus currently markets and sells the INTERCEPT Blood System for
both platelets and plasma in Europe, the Commonwealth of Independent States,
the Middle East and selected countries in other regions around the world. In
the United States, Cerus is seeking regulatory approval of the INTERCEPT Blood
System for plasma and platelets. The INTERCEPT red blood cell system is in
clinical development. See http://www.cerus.com for more information.

INTERCEPT and the INTERCEPT Blood System are trademarks of Cerus Corporation.

Forward-Looking Statements

Except for the historical statements contained herein, this press release
contains forward-looking statements concerning Cerus’ products, prospects and
results, including statements concerning Cerus’ expectations regarding its
2014 revenues and future sales growth, the anticipated impact resulting from
strategic changes to Cerus’ distributor relationships, including Cerus’
expectation of sales growth resulting therefrom in the second half of 2014,
Cerus’ expectations regarding the length of time it expects to experience
increased operating losses, the potential approvals by the FDA of the modular
PMAs for the INTERCEPT Blood System for plasma and platelets, expected
regulatory submissions for and FDA approval decisions related to the INTERCEPT
Blood System for plasma and platelets and the timing thereof, a potential CE
Mark regulatory submission for the red blood cell system and the anticipated
benefits of potential additional investments in support thereof, the potential
launch in the U.S. of the INTERCEPT Blood System for plasma and platelets,
future operating expenses, research and development activity and expenses in
support of Cerus‘ regulatory submissions, the expected financial and other
impacts from Cerus’ amended agreement with its manufacturer of disposable
kits, and the future development of the INTERCEPT Blood System for red blood
cells. Actual results could differ materially from these forward-looking
statements as a result of certain factors, including, without limitation:
risks associated with the commercialization and market acceptance of, and
customer demand for, the INTERCEPT Blood System, including the risk that the
negative sales impact from the strategic changes to Cerus’ distributor
relationships could last longer or be more severe than anticipated and that
Cerus may not experience any sales growth in the second half of 2014; the
uncertain and time-consuming development and regulatory process, including the
risks that Cerus may encounter unanticipated difficulties complying with the
prescribed submission timing or other modular PMA requirements related to the
INTERCEPT Blood System for plasma or for platelets or that Cerus‘ PMA
submissions might not be approved by the FDA in a timely manner or at all, and
the risk that additional investments in Cerus’ European red blood cell
clinical trials may not accelerate the timeframe in which Cerus could
potentially submit a CE mark for regulatory submission, the timing and
occurrence of which remain substantially uncertain; adverse market and
economic conditions, including adverse fluctuations in foreign exchange rates;
Cerus’ reliance on third parties to market, sell, distribute and maintain its
products; Cerus’ ability to maintain an effective manufacturing supply chain;
as well as other risks detailed in Cerus’ filings with the Securities and
Exchange Commission, including Cerus’ Annual Report on Form 10-K for the year
ended December 31, 2013 filed with the SEC on March 7, 2014. Cerus disclaims
any obligation or undertaking to update or revise any forward-looking
statements contained in this press release.


CERUS CORPORATION
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
                                                    
                                                      Three Months Ended
                                                      March 31,
                                                      2014        2013
                                                                   
Product revenue                                       $ 7,866      $ 9,733
Cost of product revenue                                4,157      5,090   
Gross profit on product revenue                         3,709        4,643
                                                                   
Operating expenses:
Research and development                                4,642        2,700
Selling, general and administrative                     8,236        6,853
Amortization of intangible assets                      50         50      
Total operating expenses                               12,928     9,603   
Loss from operations                                    (9,219 )     (4,960  )
Non-operating income (expense), net                    9,032      (5,241  )
                                                                   
Net loss before income taxes                            (187   )     (10,201 )
Provision for income taxes                             38         51      
Net loss                                              $ (225   )   $ (10,252 )
                                                                   
Net loss per share:
Basic                                                 $ (0.00  )   $ (0.17   )
Diluted                                               $ (0.12  )   $ (0.17   )
                                                                   
Weighted average common shares outstanding used for               
computing net loss per share:
Basic                                                   72,088       59,730
Diluted                                                 75,158       59,730


CERUS CORPORATION
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
(in thousands)
                                                              
                                                    March 31,   December 31,
                                                     2014        2013
                                                                 
Cash, cash equivalents, and short-term investments   $  48,255   $   57,676
Accounts receivable, net                                4,943        6,125
Inventories                                             11,307       13,063
Prepaid expenses and other current assets               2,574        1,290
Property and equipment, net                             3,166        2,189
Goodwill and intangible assets, net                     2,610        2,660
Other assets                                           372         378
Total assets                                         $  73,227   $   83,381
                                                                 
Accounts payable and accrued liabilities             $  12,331   $   15,487
Deferred revenue                                        279          181
Debt - current                                          3,268        3,366
Warrant liability                                       11,356       20,390
Other non-current liabilities                          1,126       1,162
Total liabilities                                       28,360       40,586
Stockholders’ equity                                   44,867      42,795
Total liabilities and stockholders’ equity           $  73,227   $   83,381

Contact:

Cerus Corporation
Kevin D. Green, 925-288-6138
Vice President, Finance & CFO
 
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