Earnings Call Transcript - CTSO Q2 2024

Operator, Operator

Ladies and gentlemen, good afternoon, and welcome to the CytoSorbents Second Quarter 2024 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the company's request. At this time, I'd like to turn the call over to our moderator, Eric Ribner. Please go ahead, Mr. Ribner.

Eric Ribner, Moderator

Thank you, and good afternoon. Welcome to CytoSorbents' second quarter 2024 financial and operating results conference call. Joining me today from the company are Dr. Phil Chan, Chief Executive Officer; Vincent Capponi, President and Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Dr. Makis Deliargyris, Chief Medical Officer; Dr. Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of CytoSorbents Europe; and Christopher Cramer, Senior Vice President of Business Development. 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, and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. Any projections as to the company's future performance represented by management include estimates as of August 13, 2024, 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 first quarter of 2024 by Dr. Chan, Ms. Bloch, Mr. Capponi and Dr. Deliargyris. Following the presentation, we will open the line to your questions during the live Q&A session with the rest of the management team. And now it's my pleasure to turn the call over to Dr. Phillip Chan.

Phillip Chan, CEO

Thank you, Eric, and good afternoon, everyone, to the Q2 2024 earnings call. I would like to begin with our operating highlights for the quarter. First, we have delivered over 250,000 CytoSorb devices to date, contributing to saving numerous lives globally. In the second quarter, our total revenue rose by 5% to $9.9 million, with product sales increasing by 10% to $8.8 million, and our gross product margins remained strong at 75%. Notably, our operating loss in the second quarter fell by 48% to $3.4 million from $6.6 million the previous year. Following a $10.3 million equity raise in December 2023, we secured an additional $20 million credit facility with Avenue Capital Group, enhancing our balance sheet. After the quarter, we implemented further cost-saving measures projected to reduce annual expenses by an additional $5 million moving forward. Over the last five months, we have reduced our workforce by 17%. Our cash balance at the end of the second quarter stood at $14.9 million, with $8.5 million in unrestricted cash and $6.5 million in restricted cash. We are excited to introduce our new Chief Financial Officer, Peter J. Mariani, starting tomorrow, while we also announce the retirement of our current CFO, Kathy Bloch, as of the end of today. You will hear from both of them at the conclusion of this meeting. We are also preparing to submit marketing applications for the investigational DrugSorb-ATR system to the FDA and Health Canada in this third quarter. More details will be shared by Makis Deliargyris and Vince Capponi. Additionally, we completed our MDSAP audit, which is essential for Canadian commercialization. Data from our STAR registry was showcased at the EuroPCR 2024 Conference and was identified as a top five finalist in the best scientific abstract competition. Furthermore, we launched a new redesigned corporate and product website. Lastly, we introduced our CytoSorb, the MDR certified PuriFi hemoperfusion pump, having placed all 30 pumps from our original order with our OEM and anticipating the next order's delivery shortly. The feedback on the pump has been overwhelmingly positive, with users highlighting its ease of use, setup, and integration of our therapies. Now, I will hand it over to Kathy Bloch, our current Chief Financial Officer. Kathy?

Kathleen Bloch, CFO

Thank you, Phil, and hello to everyone on the call. Today, I will discuss our second quarter 2024 financial results, including revenues and gross margins. Additionally, I will provide an update on our working capital and cash runway. CytoSorb product revenue was approximately $8.8 million in the second quarter of 2024 compared to $8.1 million in the second quarter of 2023, an increase of approximately $800,000 or 10%. Second quarter 2024 grant revenue was approximately $1.1 million compared to approximately $1.3 million in 2023, and this decrease was due to the conclusion of several grants during 2023. Total second quarter 2024 revenue, which includes both product sales and grant revenue, was approximately $9.9 million as compared to $9.4 million in 2023. Product gross margins on devices and device accessories were 75% in the second quarter of 2024 compared to product gross margins of 74% in 2023. Next slide, please. For the first half of 2024, CytoSorb product revenue was approximately $17.8 million compared to approximately $16 million for the first half of 2023, which is an increase of approximately $1.8 million or 12%. First half 2024 grant revenue was $1.8 million as compared to $2.9 million, again, due to the conclusion of several grants in 2023. Product gross margins on devices and accessories were 74% in the first half of 2024 compared to 71% in the first half of 2023 as we continue to realize more operating efficiencies at our new manufacturing plant in Princeton, New Jersey. Next slide, please. The blue bars on this chart represent our annual product sales for the trailing 12-month period ending June 30 for each year from 2018 to 2024. We know that for the years 2020, 2021, and 2022, sales were very favorably impacted because CytoSorb is used to treat COVID-19 patients. This usage ceased following the containment of the pandemic in the years ending June 30, 2023, and 2024. If we take a look at the orange trend arrow, which tracks core non-COVID-19 revenue, we see that the post-COVID-19 12-month periods ending June 30, 2023, and 2024 continue to show positive growth in our core non-COVID-19 product sales. Our year-over-year trailing 12-month sales for the period ending June 30, 2024, increased by 9.5% compared to the trailing 12-month sales for the period ending June 30, 2023. Additionally, excluding the impact of the COVID-19 sales in 2020, 2021, and 2022, our overall CAGR for the six years ended June 30, 2024, is a respectable 11.2%. I also want to point out that the green line, which tracks our year-over-year gross margin, indicates a decline in 2022, while we transitioned manufacturing operations to our new facility. Our second quarter 2024 gross margins continue to show improvement at 75%, and these margins are approaching the levels that we had prior to our move to the new facility. With greater volumes, we expect to show further improvements in product gross margins as we continue to realize additional manufacturing efficiencies. Next slide, please. As of June 30, 2024, we have $14.9 million in cash, which includes $6.5 million of restricted cash and $8.5 million in unrestricted cash. We believe that unrestricted cash on hand is sufficient to fund the company's operations through the second quarter of 2025. We have been successful in our efforts to strengthen our balance sheet and reduce operating expenses. On our last call, we indicated that the company was actively pursuing alternative sources of capital. In June 2024, we entered into a loan and security agreement with the Avenue Group of Funds to provide a total of $20 million in debt financing. $10 million was immediately available under the facility and $5 million, which is included in our restricted cash, is subject to release by March 31, 2025, provided that the FDA has accepted the company's application for review with respect to DrugSorb-ATR and that the company has received a minimum of $3 million in net proceeds from the sale of its equity securities after the closing date. The restricted cash will be released on a dollar-for-dollar basis for equity raised between $3 million and $5 million. There's another tranche of $5 million, which may be dispersed at the company's request between July 1, 2025, and December 31, 2025, provided that the company receives FDA marketing approval of its DrugSorb-ATR application. Conservation of cash remains a top corporate priority. We have reduced our head count, adjusted our spending, and taken other measures to reduce our quarterly cash burn in 2024. Cost cuts taken previously have reduced our loss from operations from $6.6 million in the second quarter of 2023 to $3.4 million in the second quarter of 2024, a 48% decrease. In July of 2024, we enacted another round of cost cuts, which are designed to reduce the company's annual cash burn by an additional $5 million. That will conclude my remarks for today, and at this time, I'm delighted to turn the call over to our President and Chief Operating Officer, Vince Capponi. Go ahead, Vince.

Vincent Capponi, President and COO

Thank you, Kathy. I would like to cover the clinical aspects now.

Phillip Chan, CEO

Yes. I think Makis is on the call. Makis, would you like to take the first part of this?

Makis Deliargyris, Chief Medical Officer

Sure. Thanks, Phil. Thanks, Vince. Welcome to everybody on our call this afternoon. As you heard from Phil previously, the regulatory submissions for our investigational DrugSorb-ATR system are a top priority for the company. We are happy to report that we're on track according to previously stated timelines. The STAR-T clinical data were presented earlier this year, the top line results, and the filing data analysis have been completed. The clinical study report, which contains all this information, is in the final stages of development and publishing. This will represent the main source for the probable benefit to risk allowances that will be at the crux of our De Novo submission to the FDA. We also intend to include in the submission supportive supplementary data with the real-world evidence of ticagrelor removal during CABG that was presented at the STAR European Conference. I'm going to spend the next slide giving you a little bit more visibility on that data. The completion of the technical files is leveraging the electronic eSTAR platform. We are on track for the FDA de novo submission in September, with Health Canada submission leveraging the same platform to follow shortly after. Just as a reminder to our listeners, DrugSorb-ATR is an FDA breakthrough designated device, which means that its submission will be associated with a priority review. A recent analysis suggested that de novo applications of breakthrough designated devices have an estimated 25% faster review timelines compared to regular applications. Pending the FDA agreement of the de novo pathway submissions and the associated priority review of the breakthrough status of the DrugSorb-ATR device means that we could have a potential FDA decision within six to twelve months following submission. Next slide, please. Earlier this year, we had the privilege to present at one of the largest conferences in the world, the EuroPCR meeting held annually in Paris. During this meeting, with over 12,000 attendees, data from our STAR registry was selected for an oral presentation. The Scientific Committee awarded the STAR registry data a top five spot in their best scientific abstract competition. Why do we showcase the STAR registry data that we believe is going to be a supportive piece to our regulatory submissions? The removal of ticagrelor during cardiac surgery with cardiopulmonary bypass is an approved indication with CytoSorb since 2020 and is increasingly being used as the standard of care in many heart centers in Europe. We are systematically collecting high-fidelity data of this everyday real-world use of a device for the removal of ticagrelor. In the analysis, we had data from five different countries, 23 investigative sites, totaling 102 isolated CABG patients. This is a population that we have discussed previously will be the target intended population calculation for our submissions. These patients were operated on very soon since the last dose of ticagrelor on average of 22.8 hours. Guidelines recommend that these patients should wait for at least 72 hours, but with everyday practice, many times this is not feasible. The device was used for an average of 1.5 hours during the CPB run of the operation, which is almost identical to the time that we observed in STAR-T. Again, very comparable population and device use in these two data sets. What we presented in Paris was the fact that in the STAR registry, we observed bleeding rates that were substantially lower than those reported in the European CABG registry among patients on ticagrelor, being operated either very early within 24 hours or later on within 24 to 72 hours, but always not having completed the recommended washout. You can see the rates presented on the slide. In fact, the more patients who waited for at least a day before being operated, we observed a substantial reduction in severe bleeding to very low rates, equivalent to those seen in patients not operated or not anticoagulated during CABG operations. Importantly, none of these sites reported any device-related adverse events. The data from the eCABG registry represent a very good benchmark for us to compare the rates from the STAR registry. As previously noted, this was well received at the scientific conference, and we're very pleased to receive the designation as the top five finalist for best scientific abstract. With that, I would like to turn the call over to Vincent to give you a regulatory update.

Vincent Capponi, President and COO

Thank you, Makis. This is Vince Capponi, and good day to everybody. As Makis mentioned, the de novo timeline – we're in the final stages of assembling the technical file that will be submitted through the eSTAR program. I'm happy to say we're 75% complete with that file. We've concluded most of the engineering documentation and we're starting to complete the clinical documentation for that submission. Along with the submission in parallel, we are also preparing the Canadian submission, which we hope to have filed shortly after the eSTAR for FDA. It's very similar, so we believe we can do it in a relatively timely manner. Canadian approvals have generally in the past been a bit faster than U.S. FDA approvals. We can't protect that with 100% certainty, but we're hopeful for a quick approval through Canada. Next slide, please. Globally, from a regulatory standpoint as part of the preparation for the Canadian submission, we have completed the MDSAP audit, which is required for a Canadian submission. I'm happy to say that the audit went very well. It's currently under review, but we feel very confident that it will be approved for submission to Canada through the MDSAP program. With respect to MDR, which affects our European operations and the rest of the world, we are targeting a December 2024 submission to our notified body and have already requested the MDR audit for June of 2025. We're very confident based on our continued successful audits throughout the product lifecycle of CytoSorb that we will be able to achieve the MDR audit, meeting all the more extensive requirements than the MDD. Phil mentioned that the PuriFi pump registration was received in June. Working with our partner, Medica, we were able to complete that and receive the first 30 pumps. The second order will be coming in shortly, and we look forward to expanding that into the market. As Phil mentioned, it has received very good reception in the marketplace. Additionally, we have received, after over 1.5 years of effort, registration in Taiwan, and we're looking forward to breaking into that market. With that, I'll turn it back to you, Phil.

Phillip Chan, CEO

Great. Well, thanks, Vince. This year, we have worked diligently to execute upon a broad turnaround strategy that is dependent on obtaining a number of key objectives. You've heard today that, one, we continue to expect to submit our marketing applications to U.S. FDA and Health Canada for DrugSorb-ATR this quarter and have made excellent progress in parallel programs like MDSAP that are critical to commercialization. Secondly, we have strengthened our balance sheet with the addition of a new debt facility from Avenue Capital and believe that if we can hit our milestones, the $20 million in capital will get us to both Health Canada and FDA regulatory decisions. Third, we remain extremely committed to cutting costs to drive efficiency and be self-sustaining. Importantly, you heard that we have made excellent progress in reducing our operating loss and expect to see additional benefits from our most recently completed cost cuts. Fourth, our gross margins continue to be strong and are expected to expand as we grow the markets in Europe, certainly expected to expand further if we are able to drive U.S. FDA and Health Canada approval where the gross margins for DrugSorb-ATR are expected to be significantly higher than for CytoSorb. Lastly, we have put a lot of effort into increasing our core CytoSorb sales growth beyond the 25 million devices delivered to date. Finally, as you are aware, we have been positioning CytoSorbents for the next stage of growth, both our existing international franchise and the potential to open the U.S. and Canadian markets. This is why it has taken us so long to find the right CFO candidate to replace our esteemed retiring CFO, Kathy Bloch. Kathy has gone above and beyond the call of duty, selflessly returning from retirement last August to resume her former full-time CFO role and in the intervening 12 months, helping to secure the future of the company with two key financing transactions and orchestrating our cash conservation strategy. Her retirement announced today marks the conclusion of an outstanding CFO career. She will continue as a consultant to help manage the smooth transition with our newly appointed CFO, Peter Mariani. On behalf of everyone at CytoSorbents, we thank Kathy for more than 11 years of dedication and leadership at the company and wish her an enjoyable, relaxing, and well-deserved retirement. Let me turn the call over to Kathy for some final words. Kathy?

Kathleen Bloch, CFO

Thank you so much, Phil. I would like to take this opportunity to thank the Board of Directors, my colleagues on the management team, and really all the employees of CytoSorbents for their support and collaboration, which made my 11-year tenure as CFO quite enjoyable. I especially want to thank the finance and accounting team members who have supported me in the U.S. and in the EU. Thank you for your extraordinary dedication, talent, and contributions to the company. I wish everyone, including our new CFO, Pete Mariani, the best of success as we head towards the exciting upcoming job of commercialization of DrugSorb-ATR in the United States. Thank you all so much.

Phillip Chan, CEO

Thank you, Kathy. And with that, I'd like to welcome Pete Mariani to the CytoSorbents team. Pete is a seasoned and accomplished medical device CFO, who has many successes at high-growth publicly traded companies such as Axogen, Hansen Medical, and Guidant Corporation. His record speaks for itself. He has consistently demonstrated a disciplined and rigorous approach to financial management, operational excellence, and strategic development, both domestically and internationally, that aligns perfectly with our next phase of expected rapid growth. Importantly, CytoSorbents today shares many similarities to Axogen when Pete joined as CFO in 2016, including respect to its size, revenue base, U.S. market opportunity, and high-margin business model. He has proven his ability to fund, scale, and manage impressive growth. As we pursue U.S. and Canadian marketing approval for DrugSorb-ATR and drive our OUS business with CytoSorb, we believe Pete will be an outstanding fit where his deep global experience and insight are expected to be vital to our success. We are thrilled to have Pete join CytoSorbents and be a key member of the management team. I hope to reach out to many of you in the coming months to introduce Pete firsthand. With that, let me have Pete say a few words here as we wind up this call. Pete?

Peter Mariani, CFO

Thank you, Phil. I appreciate the warm welcome and the trust of the Board in creating this opportunity for me. It is great to be with all of you as investors today. I am excited to join CytoSorbents at this pivotal time in its history. I have had the great privilege to be part of some of the most significant advancements in medical technology over the years, including advancements in cardiac stents, cardiac rhythm management, medical robotics, laser cataract therapies, and, of course, nerve repair. CytoSorbents' blood purification therapy is a natural extension of this equipment, and I look forward to partnering to further develop, execute, and scale our long-term growth strategy and bring improved therapies to hospitals. I also look forward to meeting with many of you in the near future. Thanks again, Phil.

Phillip Chan, CEO

Thanks very much, Pete. That concludes our prepared remarks. Operator, please open the call up for the Q&A session. Just let me remind you, as Pete has not officially started until tomorrow, he will not be participating in the Q&A session. Operator?

Operator, Operator

Thank you. Your first question comes from the line of Michael Sarcone with Jefferies. Your line is open.

Michael Sarcone, Analyst

Good afternoon and thank you for the questions. To begin, congratulations to both Kathy and Pete. Kathy, it has been a pleasure working with you, and I wish you a wonderful retirement. Pete, I look forward to collaborating with you again. Now, I would like to ask either Phil or Makis about the progress with the FDA and Health Canada submission for DrugSorb. Could you provide an update on your feelings regarding approval and any recent discussions with the regulators, particularly the FDA?

Phillip Chan, CEO

Thanks very much, Michael. Makis, would you like to take that?

Makis Deliargyris, Chief Medical Officer

Sure. And thanks, Michael, for the question. As we have discussed previously, we feel that the STAR-T pivotal trial provides the necessary information to execute the benefit to risk analysis. I think as we highlighted in previous calls and stated during our corporate webinars, the STAR-T data has helped us identify more specifically the intended target population. We've identified that to be those patients undergoing coronary artery bypass operations and also the intended potential benefits associated with the use of the device. In that regard, we believe it can support a robust benefit/risk analysis as a standalone. Additionally, as I've shared today on the call, the accumulating evidence captured systematically in the high-quality registry such as the STAR registry will be an important supplement in our discussions with the agency. Having said that, anytime you submit an application, you have to wait for the review and the comments from the agency. We have not had any additional discussions with the agency since our last call. So there's no update on that front, but we do believe that the application will provide the necessary information for a very productive and collaborative interaction with the agency to allow them to proceed with the necessary benefit to risk analysis.

Michael Sarcone, Analyst

Got it. Thanks, Makis. So then maybe one or two for Kathy. Just on the gross margins. The press release today mentioned the line of sight to 80%. Can you talk about what gets us to 80% and what level of sales might get you there? The second part of that is more in the near term, how are you thinking about gross margins in the second half of '24?

Phillip Chan, CEO

Yeah. I think, actually, Michael, go ahead, please.

Kathleen Bloch, CFO

Yeah. So Michael, obviously, volume growth will increase our product gross margins, and they should grow rapidly. I expect that at 15% to 20% year-over-year growth, we should see approaching 80% or at 80%. It should be relatively straightforward. Of course, once we get approval in the U.S., the margins will be even higher. We'll see exceptional growth rates in our overall gross margins.

Phillip Chan, CEO

Got it. Sorry, go ahead.

Kathleen Bloch, CFO

I’m sorry, Michael. One of the people responsible for helping to drive our gross margins higher is Vince Capponi, our President and Chief Operating Officer. Maybe, Vince, you wanted to comment on how our manufacturing processes have improved and our confidence that we can get to that 80% on a blended basis.

Vincent Capponi, President and COO

Thanks, Phil. We have made many improvements in the last year in operations. We've reduced the labor requirement by almost 30% in part of the operation filling processes, helping offset some of the lower volumes. With the improvements that we're continually making here, we expect to continue seeing improving margins. But as Kathy said, it really depends upon volume as well. We need to keep in mind that as part of our cost control, we're lowering our inventories by slowing down production to conserve cash as we go through the FDA approval. So to Kathy's point, when we achieve the 15% to 20% growth rate, we certainly have line of sight to that 80% plus, and with approval for DrugSorb-ATR, with much higher ASPs than CytoSorb, we believe we will be able to contribute positively to that. It's also based on the mix of direct sales. The higher gross margin comes from direct sales versus distributor sales, which yield lower margins. So, again, while there are many factors, we are continuing to improve the operation. As Kathy mentioned, it's going to be dependent upon volume, but we have implemented several continuous cost improvements.

Michael Sarcone, Analyst

Great. Very helpful. Thanks for all the color.

Phillip Chan, CEO

Thanks very much, Michael.

Operator, Operator

And your next question comes from the line of Yuan Zhi with B. Riley. Your line is open.

Yuan Zhi, Analyst

Congrats on a good quarter and thank you for taking our questions. Kathy, congrats on the retirement, and Pete, welcome on board; it's an exciting time for you to join here at CytoSorbents. Phil, can you provide more color on the factors that pushed revenue growth in the second quarter? Do you see similar trends in Q3? Comments on volume versus price change would be helpful.

Phillip Chan, CEO

I think that in the second quarter, what we saw was strength in the distributor and partner channel. I think this coincided a little bit with the launch of our PuriFi pump. As we told you previously, the PuriFi pump is intended to help establish a blood purification infrastructure in countries lacking well-established dialysis infrastructures. This is typically found in our distributor territories, which include Germany, Italy, France, the U.K., and Spain, for example. So I think that particular channel performed well. Our hope is that the third quarter, typically a seasonal quarter for us due to holidays in Europe, will be respectable.

Yuan Zhi, Analyst

Any comments on the volume versus the price change year-over-year?

Phillip Chan, CEO

As Vince mentioned, the transfer prices to distributors are typically lower than our ASPs for direct sales. On the other hand, we benefit from lower costs of distributor sales because we don't incur the direct costs of a sales force ourselves. Our pricing has remained fairly stable across the board, both in transfer pricing and direct sale pricing. However, Q2 results indicated that the distributor channel was stronger for this quarter.

Yuan Zhi, Analyst

Got it. The following question is how will the delivery of the PuriFi pump contribute to revenue growth in Q3, either itself or by helping sales of CytoSorbents territories lacking infrastructure? Can you provide more color on that?

Phillip Chan, CEO

Yes. We have a different model for rolling out the PuriFi pump in different parts of the world. The aim is not necessarily to profit from the PuriFi pump itself. It's very much akin to a printer-cartridge model, where the printers are provided at a relatively low cost to drive disposable revenues of the disposal cartridges. This is similar to our approach with the PuriFi pump. The pump is intended to create a blood purification infrastructure, enabling the use of more CytoSorb devices. Moving forward, the primary goal is to drive CytoSorb volume rather than driving traditional hardware sales.

Yuan Zhi, Analyst

Yeah, got it. That's very helpful. Thank you.

Operator, Operator

And your next question comes from the line of Tom Kerr with Zacks Small-Cap Research. Your line is open.

Tom Kerr, Analyst

Good afternoon, everyone, and congratulations to Kathy. Thank you for your detailed explanations and prompt answers to questions; I appreciate it. Can you clarify the status of the Canadian submission? I initially thought it would be a joint submission, but now it seems it will occur after the FDA submission, making it a fourth-quarter event. I don't have the slides in front of me, but could you explain when we can expect the submission to the Canadian authorities?

Phillip Chan, CEO

What you heard us say today is that we expect to make both submissions in the third quarter, prioritizing the U.S. FDA application. While it's possible the Canadian submission could roll into the fourth quarter, that's not our goal.

Tom Kerr, Analyst

Okay. So it's possible the Canadian submission could roll into the fourth quarter, but that's not your goal, correct?

Phillip Chan, CEO

Yes. That's not the goal. We reiterate our guidance of third quarter submission for both.

Tom Kerr, Analyst

I apologize for the misunderstanding. I have a couple of financial questions. The R&D amount is down to $1.5 million; is this just a comparison to the STAR-T trials from a year ago, or is there something else impacting that figure?

Phillip Chan, CEO

There are a number of go ahead, Kathy.

Kathleen Bloch, CFO

Thanks, Phil. The largest impact is coming from the STAR-T trial completion. We're not incurring those hospital costs and patient costs associated with the trial. Our R&D efforts have also been strongly focused on grant-related activities, where personnel costs are funded through grants. We've prioritized those activities to cut back on any non-grant R&D costs, so both factors are contributing. The highest impact is from the STAR-T trial completion.

Tom Kerr, Analyst

Okay. Is that a good number to use for the second half of the year, $1.5 million per quarter?

Kathleen Bloch, CFO

Yes.

Tom Kerr, Analyst

One last big picture question for Phil or anybody. The Taiwan situation seems interesting. Can you talk about that and whether the size of that business could rival the size of the German market? Is it large enough to be comparable?

Phillip Chan, CEO

It remains to be seen. Taiwan is, as you may have read from the press release, a very large market and a big believer in blood purification. From an opportunity standpoint, it's very exciting. We're working through a distributor in Taiwan currently, who was helpful in securing the Taiwanese approval and registration. Time will tell how this will develop. We have a lot of hopes for Taiwan, but it's just one of many countries where we’re working to drive CytoSorb sales.

Tom Kerr, Analyst

Got it. Last financial question for me. You did receive the $15 million loan, right? It wasn't a subsequent event at the end of the quarter?

Phillip Chan, CEO

We closed the financing at the last day of the quarter. So it was a Q2 event on the financing.

Tom Kerr, Analyst

Thank you. That's all I have for today.

Phillip Chan, CEO

Thanks, Tom.

Operator, Operator

And your next question comes from the line of Sean Lee with H.C. Wainwright. Your line is open.

Sean Lee, Analyst

Hey, good afternoon, guys. Congrats to Kathy, and I wish you a happy retirement. Welcome, Pete. I look forward to working with you. Most of my key questions have been answered, but I'm just wondering; you mentioned doing R&D mostly on grants. I'm curious about the major projects we're working on that are grant-supported. Previously, you had worked on HemoDefend, and I was wondering whether that initiative is still ongoing and whether there are other products or projects we can look forward to.

Phillip Chan, CEO

The R&D programs we are currently funding are focused on HemoDefend-BGA and its applications for military, civilian, or industrial purposes. We are making excellent progress in this area and are continuing to explore additional funding opportunities. I believe we are very close to starting human testing. Vince, would you like to add anything about the HemoDefend program?

Vincent Capponi, President and COO

Sure, Phil. Thanks. So, Sean, it's nice to hear from you. We’ve made significant progress on the HemoDefend-BGA, as Phil mentioned. We are focused on a couple of different form factors to ensure we target the most accessible markets, including military and civilian. There are two key programs funded right now. A few other grants are in preparation to extend funding for commercialization through the support of a clinical trial and ultimately scaling for commercialization. We have a number of form factors, but really the two key form factors we're pushing forward aggressively relate to military applications and also the point of care, which could potentially feed into the freeze-dried plasma market. We’re collaborating with several parties in that area, as we believe we can provide significant value.

Phillip Chan, CEO

Thanks, Vince.

Sean Lee, Analyst

Great. Thanks for taking the questions.

Phillip Chan, CEO

Thanks, Sean.

Operator, Operator

And with no further questions at this time, I would like to turn the call back over to Dr. Phillip Chan for any additional or closing remarks.

Phillip Chan, CEO

Well, thank you, everyone, for joining the call today. If you do have any other questions, please feel free to reach out to me directly at cytosorbents.com as we manage this transition, and I'll hopefully reply to your questions where possible. Have a great evening, everyone, and thank you very much. Good night.

Operator, Operator

And ladies and gentlemen, that concludes our conference for today. We thank you for your participation, and you may now disconnect.