Good day, ladies and gentlemen, and welcome to the Q2 2025 Earnings Conference Call for Cytosorbents Corp. This call is being recorded on Wednesday. I would now like to turn the conference over to Adanna Alexander, Investor Relations Consultant. Please go ahead.

Thank you, Sergio, and good afternoon, everyone. Welcome to Cytosorbents Corp Second Quarter 2025 Financial Results and recent Business Highlights Conference Call. Joining me today from the company for the prepared remarks are Dr. Phillip Chan, Chief Executive Officer; and Pete Mariani, Chief Financial Officer. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. The forward-looking statements we make reflect our views and estimates as of today, August 7, 2025, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the second quarter 2025. Following the presentation, we will open the line to analysts for questions. And now it's my pleasure to turn the call over to Dr. Phillip Chan. Phil?

Thank you very much, Adanna, and good afternoon, and welcome, everyone, to our second quarter 2025 earnings call. To summarize for those who are new to the company, CytoSorbents is a leader in the treatment of life-threatening conditions in intensive care units and cardiac surgeries through blood purification using our proprietary Sorbent bead technology. These beads are used in high-margin single-use cartridges that are compatible with existing hospital blood pump machines, such as dialysis, ECMO, and heart-lung machines. Our flagship product, CytoSorb, is approved in the European Union and is primarily used to treat severe conditions in intensive care units, including sepsis, septic shock, acute respiratory distress syndrome, liver failure, blood thinner removal, and infective endocarditis. CytoSorb is central to our international business, with nearly 300,000 devices used in over 70 countries, driving $35.6 million in product sales last year. Our second product, DrugSorb ATR, is an investigational device intended to reduce perioperative bleeding in cardiac surgery patients taking blood thinners, particularly Brilinta, during CABG surgeries. We are currently appealing decisions from both the FDA and Health Canada, and we expect final regulatory decisions later this year. Meanwhile, we continue premarket launch activities and plan to conduct a controlled market release at select cardiac surgery centers if approved. Today, I will discuss our financial performance in the second quarter and provide a regulatory update on DrugSorb ATR. We will also highlight our activities surrounding Sepsis Awareness Month in September and World Sepsis Day on September 13, addressing the roles CytoSorbents and our partners play in treating sepsis and septic shock, along with details about our World Sepsis Day Global webinar on September 10. Finally, Pete will give a more detailed financial update and discuss our progress in moving our core business toward near breakeven by the end of this year. In the second quarter of 2025, we reported product sales of $9.6 million, reflecting a 9% increase year-over-year and a 4% increase on a constant currency basis compared to the same period last year. We're seeing positive progress with our reorganization and strategic realignment of our German commercial team, which achieved a 22% growth year-over-year. Our direct territories also demonstrated strength, and our distributor sales reached near record levels. With Q2 behind us, we are satisfied with our early progress in Germany and believe it will lead to stronger execution and sales growth throughout this year and beyond. Our gross margin performance remained strong at approximately 71%. As Pete will outline later, operating expenses were slightly elevated due to specific strategic charges, but we are focused on decreasing core operating costs and boosting operational efficiencies to manage our core business toward near breakeven as we close 2025. Now for an update on DrugSorb ATR. Patients experiencing acute heart attacks are often prescribed blood thinners like Brilinta to improve outcomes, but this treatment poses significant challenges for those needing urgent CABG surgery due to the increased risk of serious bleeding. Typically, doctors must wait 3 to 5 days for the drug to clear before operating, but this wait can jeopardize the patient’s health. DrugSorb ATR is designed to address this gap by removing drugs like Brilinta from the blood during CABG procedures, thereby reducing bleeding risks and allowing timely surgeries. We believe DrugSorb ATR satisfies a critical unmet medical need in the U.S. and Canada, impacting tens of thousands of patients and presenting a market opportunity exceeding $1 billion as Brilinta becomes generic and DrugSorb ATR expands to other uses. Our technologies have shown effectiveness in reducing bleeding severity in CABG patients on blood thinners, which is a major global medical need. At the EuroPCR Congress in May, new comparative data from our STAR registry was presented, showing significant reductions in severe CABG-related bleeding rates and transfusion needs when using CytoSorb. The positive reception of such findings reflects growing clinical interest in addressing perioperative bleeding risks with our technology. I will now update our regulatory progress in North America. Earlier this year, we submitted a de novo application to the U.S. FDA and a medical device license application to Health Canada. After receiving FDA feedback, we resolved several issues, but the FDA issued a denial letter for our application. We are now in the appeals process and recently conducted an in-person hearing where we showcased our submission and received valuable input from FDA officials and expert witnesses. As a breakthrough device, we believe our application can address the remaining deficiencies, and we expect a conclusion by the end of August. Three outcomes are possible: full reversal of the denial, reversal with conditions, or upholding the denial. Concurrently, we are addressing feedback from Health Canada and have filed a request for reconsideration as part of their appeals process. Despite these challenges, we remain hopeful and anticipate final decisions from both authorities by the end of 2025, while actively preparing for a potential commercial launch in North America. Now, regarding CytoSorb, in the past quarter, we discussed potential growth catalysts for the product. This September, Sepsis Awareness Month and World Sepsis Day on September 13 highlight the urgent need for innovation in treating sepsis and septic shock. Sepsis affects approximately 49 million people globally each year, leading to around 11 million deaths, which is one in five global deaths. The mortality rates for septic shock are unacceptably high, indicating a critical need for better therapies that address the root causes of sepsis rather than just the symptoms. CytoSorbents has collaborated with global clinicians and scientists to advance sepsis treatment by augmenting antibiotics with the capabilities of CytoSorb, which targets the major drivers of septic shock. We believe this comprehensive approach is a significant advancement in treating septic shock. In our July 31 press release, we detailed substantial peer-reviewed literature supporting this multifaceted treatment strategy. Ultimately, CytoSorb facilitates key treatment goals, including managing inflammation, restoring blood flow, and preventing multiple organ failure, which is the primary cause of death in sepsis. Effective treatment requires early and intensive use of CytoSorb, similar to carefully guided antibiotic therapy. This year has seen numerous new studies affirming the efficacy of CytoSorb in septic shock. For example, a study from our international registry demonstrated a significant benefit in hemodynamic stability for patients treated with CytoSorb. Another large retrospective study showed that early treatment with CytoSorb notably increased survival rates in septic shock patients. A meta-analysis further confirmed that CytoSorb reduces in-hospital mortality rates. I also want to mention our World Sepsis Day Global webinar, which will take place on September 10, where I will host a session titled "Turning the Tide in Sepsis and Septic Shock." It will feature discussions on CytoSorb best practices and its effects in combating sepsis. With that, I will turn the call over to Pete for a financial update. Pete?

Thank you, Phil, and good afternoon, everyone. Today, I'll be reviewing our Q2 financial performance and sharing our outlook for the balance of 2025. Q2 revenue was $9.6 million, an increase of 9% and 4% on a constant currency basis compared to $8.8 million in Q2 of 2024. As Phil noted, our growth was led by 22% growth both year-over-year and sequentially in Germany, and continued strength in our other direct territories. Distributor sales were among our best ever, second only to a record Q2 in 2024. The realignment of our German commercial team and approach continues to be a key strategic initiative, and we are pleased with the progress we're making and expect that these actions will drive improved execution and results in the second half of the year. Gross margin for the quarter was 70.9%, which is consistent with Q1 and the full year of 2024 margins and lower than the 73.5% in Q2 of last year. The year-over-year decrease is primarily due to inventory write-offs in the period, and we expect inventory production volumes to continue to increase across the second half of the year to support growth in our core business and to prepare for the anticipated launch of DrugSorb ATR in the U.S. and Canada later this year. Q2 operating expenses were $10.4 million or approximately $300,000 and 3% over the prior year due primarily to items that are unique to the quarter, including costs associated with the rebuild of our accounting team and controlled deficiency mitigations of $400,000 following the passing of our controller in early Q1. Additionally, we had higher regulatory legal consulting expenses related to our DrugSorb ATR appeals in the U.S. and Canada of nearly $200,000 and costs associated with our German commercial restructuring of approximately $400,000. As discussed on our last call, we ramped up our DrugSorb ATR commercialization planning in the quarter, which accounted for approximately $350,000. These increases were mostly offset by lower R&D, royalties, and stock compensation totaling approximately $1 million. As a result, our Q2 operating loss was approximately $3.6 million for the quarter or flat year-over-year. We had net income for the quarter of $1.9 million or $0.03 per basic and diluted share compared to a net loss of $4.3 million or $0.08 per basic and diluted share in the prior year. However, after eliminating the impact of foreign currency changes and noncash stock compensation in both periods, the adjusted net loss for the quarter was $3.7 million or $0.06 per basic and $0.05 per diluted share compared to an adjusted net loss of $2.8 million or $0.05 per basic and diluted share in the prior year. Adjusted EBITDA loss for the quarter, which also excludes the impact of noncash stock compensation and changes in foreign currency, was $2.6 million compared to an adjusted EBITDA loss of $2.2 million in the prior year. Our total cash, cash equivalents, and restricted cash were $11.7 million on June 30 compared to $13.1 million at the end of the first quarter of this year and includes $1.7 million of proceeds from the sale of our 2023 and amended 2022 net operating loss and R&D tax credits from the technology business tax certificate transfer program sponsored by the New Jersey Economic Development Authority. Excluding the $1.7 million proceeds, our net cash burn in the quarter was approximately $3.1 million, inclusive of items unique to the quarter. Our debt balance remains at $15 million, and our debt facility provides for an additional $5 million tranche, which is available at our discretion upon FDA approval of DrugSorb ATR prior to December 31. As we look to the balance of the year, we continue to prioritize initiatives that drive revenue growth, improve our gross margins, and reduce costs to lead our core business toward cash flow breakeven as we exit 2025, allowing for investment in our North American commercial launch of DrugSorb ATR later this year and into 2026. And now let me turn the call back over to Phil.

Thanks very much, Pete. In summary, we believe CytoSorbents represents a clear and compelling value proposition. CytoSorb is a well-established, high-margin international business in critical care and cardiac surgery with strong momentum and clear pathways for growth. We're addressing major unmet medical needs with a proven scalable therapy, driving strong performance outside Germany while taking active steps to reignite growth in our largest market. With the goal of achieving near-term breakeven and long-term financial independence, we are strategically investing in growth, operational discipline, and global market expansion. Importantly, we remain fully committed to bringing DrugSorb ATR to the North American market. We're actively preparing for commercialization as we await regulatory decisions from the FDA and Health Canada, both expected in 2025. Because of that, we believe we are well positioned to unlock significant value in both our core and emerging businesses. With that, thank you very much for your patience and continued support. This concludes our prepared remarks. Operator, please open the line for questions. Thank you.

Your first question comes from Michael Sarcone from Jefferies.

Phil, I was hoping maybe you can give us some more color. Two regulatory agencies have now issued denials for your submissions and you continue to express confidence. Is there anything else you can give us to just kind of help us get some more confidence or kind of feel confident as you do that you're going to reach the approval goal?

Yes, Mike, thank you for your question. I believe that the appeals process was very beneficial for us because it allowed us to present the story of DrugSorb ATR and its role in minimizing the severity of perioperative bleeding in CABG patients during cardiac surgery. We highlighted the strengths of our application along with the support from external cardiac surgery experts, including one principal investigator from our study and a pioneer of this application in Europe, who provided testimony to the FDA, addressing both the review team and senior officials. As a result, we feel that we have put our best case forward and are now awaiting a response from the FDA, hopefully by the end of this month. Regarding Health Canada, one of the reasons we are waiting to finalize discussions with the FDA is to ensure that Health Canada benefits from FDA's insights before making their final decision in the appeal.

Got it. That's helpful. And maybe just a follow-up on Germany. It sounds like the changes you've made are bearing fruit. Maybe you can give us an update on how things are trending quarter-to-date and quarterly updates there would be helpful.

Mike, I’m sorry, I didn’t quite catch what you said about which sections of our business.

My apologies. I wanted to provide an update on Germany and how things are progressing so far this quarter. Your prepared commentary sounded quite positive regarding the organizational changes. I was curious about how that has been developing.

We see the reorganization as ongoing, and we have implemented various structural changes aimed at enhancing the efficiency of our German sales force and improving the performance of our German sales team. The results from the second quarter were very encouraging, with a 22% increase both sequentially and year-over-year. However, there is still more work to be done. We are confident that the adjustments we have made and continue to make will positively impact the company's overall operations.

Your next question comes from Tom Kerr from Saks Research.

Great results guys. One quick clarification on Canada, the 'request for reconsideration,' that's effectively the same as your FDA appeal? Or is there more something else in Canada to do?

Yes. We have submitted an intent for reconsideration. This will be followed at the appropriate time by a formal appeal document, leading to a formal appeals process similar to what we have done with the FDA. However, we plan to delay this until after the FDA decision, and Health Canada has agreed to that.

Got it. And can you refresh our memory on the commercial launch rollout once approved in the U.S.? Are we talking fast rollout, careful, cautious rollout? How would you define that?

I would categorize it as a deliberate rollout. We will concentrate on our clinical accounts, particularly those who participated in the clinical study, along with a few other interested parties to engage promptly in this process. In the first three to six months, it will be crucial for us to focus on those 22 accounts and a few additional ones to gauge the pace of the rollout. This includes how quickly we can access these accounts and reach a reorder point to see volume. I am quite satisfied with the progress, and I know Phil is as well. Our team has done commendable work, especially over the past three months, to establish a strategy that enables us to quickly enter and assess these accounts. I believe we have a product that will be well-received once we navigate through the FDA process.

Got it. Sounds good. Two more quick ones. That's great data on the sepsis and septic shock. But how does that translate to the business model? Is this a new line of business? Or does it just make CytoSor more marketable? How do you look at that affecting the business model?

Septic shock and sepsis and septic shock is one of the biggest applications in the ICU today. It accounts for typically 10% to 20% of all patients in the intensive care unit. They either have sepsis or septic shock when they enter the ICU or they get it while they're in the ICU. That's a big problem. It accounts for up to 15% of a hospital's operating budget, and it's a place where hospitals routinely lose money because of the ineffective treatment of sepsis and septic shock with standard of care therapies. Sepsis and septic shock has been a core application for CytoSorb since the beginning. We estimate that it accounts for a large majority of our critical care revenue because of all the things that we discussed in our press release on July 31 in our earnings call today as well. So it's a longstanding application, but we are still scratching the surface of this application. Where we are going right now, and this is one of the reasons why we're so excited is because we really do believe that with all of the data that have been published to date, we understand very well how to use our therapy best to achieve excellent outcomes in patients with sepsis and septic shock. Our goal will be to teach users how to achieve those results centered around the early aggressive treatment with the right duration with CytoSorb to achieve these treatment goals of controlling deadly inflammation, stabilizing the patient, helping to reverse capillary leak, and importantly, removing the fluid from the patient that is essentially drowning them from within. So it's a problem. It's a puzzle that no one has been able to solve over decades of research and trials, et cetera. We think that we are actually very close to helping physicians really figure out this puzzle. That's one of the reasons why we're excited to have this webinar and to talk more in depth about exactly what it is that we do.

Got it. That sounds great. That's kind of exciting for you guys. One more quick one, and I'll jump back in the queue. Sorry if I missed this in the prepared remarks about gross margins at 70.9%. Is that what we can expect in Q3 and Q4? Can you do better than that? How do we look at the gross margins for the rest of the year?

Well, gross margins have been in this range for a while. I think that we've got opportunity to ramp production faster and do some additional things to improve our efficiencies on the production floor that I think gives us the opportunity to see higher gross margins. Again, not disappointed with 71% gross margins to be sure. But we certainly have an opportunity, I think, with normal efficiencies to bring that higher. Secondly, with DrugSorb approval, we expect that to be a higher-margin product itself. So in time, I think we have the opportunity to see higher gross margins.

There are no further questions at this time. I will now turn the call over to management for closing remarks. Please go ahead.

Well, thank you, everyone, for joining the call today. If you do have any other questions, please feel free to reach out to us at [email protected]. We look forward to updating you in the next call. Have a great evening, everyone, and thank you very much. Have a good night.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.