Cytosorbents Corporation
Q3 2014 Earnings Call Transcript

Published: 13 Nov 2014

[Operator:]

Good day, everyone and welcome to the CytoSorbents 2014 Third Quarter Financial and Operating Results Conference Call. Today’s call is being recorded. At this time, I’d like to turn the conference over to our moderator, Ms. Amy Vogel. Please go ahead, Amy.

[Amy Vogel:]

Thank you, operator and good afternoon. Welcome to CytoSorbents' third quarter 2014 operating and financial results conference call. With us today are, Dr. Phillip Chan, Chief Executive Officer and President; Vincent Capponi, Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Dr. Christian Steiner, VP of Sales and Marketing from Germany; and Chris Cramer, VP 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 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 filing with the SEC. Any projections as to the company's future performance represented by management include estimates today as of November 12, 2014, and the company assumes no obligation to update these projections in the future as market conditions change. During today's conference call, we will first have an overview presentation covering the financial and operational highlights for the quarter by Dr. Chan and Ms. Bloch. We again have taken everyone's submitted questions and will do our best to address them in the presentation and also in the Q&A with management to follow. Thanks everyone again for participating. If we do not answer your question, we would ask that you contact the company directly after the call today. At this time, I would like to turn the call over to Dr. Phillip Chan. Please go ahead, Dr. Chan.

[Phillip Chan:]

Thank you very much, Amy, and thank you everyone for joining the call today. It's a pleasure to be here and welcome. As usual, following a short introduction for new and potential investors with some recent operational highlights, Kathy will go over our financial progress for the third quarter of 2014. We will then discuss at length our plan to up-list at the NASDAQ Capital Market, answer some frequently asked questions and review the actions for which we are seeking shareholder consent. Then the rest of the management will have their remarks that incorporate answers to many of the questions we have received from our analysts and shareholders. An official transcript of today's call will be available in the next few days on our Web site at www.cytosorbents.com. If we can fast-forward to Slide 4. CytoSorbents is an emerging leader in the $20 billion critical care immunotherapy space and we are leading the prevention or treatment of life threatening inflammation in the intensive care unit. Now most of us know that inflammation plays a protective in the body protecting us against injury and infection. But most of us may not know that inflammation actually plays a major role in nearly every known disease. These can be life threatening conditions like sepsis and trauma, autoimmune diseases like rheumatoid arthritis and psoriasis, heart disease, peripheral artery disease, cancer, cancer cachexia, neurodegenerative diseases such as Alzheimer’s and MS and many others. The problem is that uncontrolled inflammation wreaks havoc on the body and can be deadly. The real problem is that severe inflammation can drive organ failures. An organ failure occurs when vital organs like the lungs, the heart, the kidneys, the liver, when they stop working and that is incompatible with life. Organ failure causes nearly half of all deaths in the ICU today, but little can be done to treat or prevent it. And that is where we come in. CytoSorb removes the fuel to the fire of inflammation and represents a powerful immunotherapy tool to control inflammation. CytoSorb is approved in the European Union as the only specifically approved extracorporeal cytokine filter and is clinically proven to reduce key cytokines in blood in critically ill patients. And we are approved for use in any situation where cytokines are elevated and has been also been safe in more than 3,500 human treatments. There have been no serious device related adverse events reported. Now the heart of our technology is a highly biocompatible, very porous, state-of-the-art polymer bead that acts like a tiny sponge to remove harmful substances from blood. If you magnify these beads up close, they are roughly the size of a grain of salt and each bead has millions of pores and channels that are capable of removing substances from blood. Big things like cells cannot get into the pores and thereby go around the beads, very small things wind up going through the beads but appropriately sized molecules will get trapped in the vast network of pores and channels in every single bead and permanently eliminated from blood. Our technology is protected by 32 issued U.S. patents and multiple applications pending. We manufacture these beads at our ISO 13485 certified facility in New Jersey, and in fact this is one of the highest-grade medical sorbents on the medical market today. The goal of CytoSorb is to try to prevent or treat organ failure, again the leading cause of death in the intensive care unit. Our goal is to hopefully improve patient outcome and survival while decreasing cost of ICU and patient care. Because we sit at the nexus of inflammation in so many of the diseases that you see in this slide as well as many others, we truly do have the potential to revolutionize critical care medicine. Now CytoSorb is available for sale in all 28 countries of the European Union and is currently marketed in 19 countries around the world. We sell the product direct in Germany, Austria and Switzerland with our direct sales force and we have now established distribution in the U.K., Ireland, Netherlands, Turkey, Russia, India, Taiwan, most of the countries of the Middle East covering a total of approximately 1.7 billion lives. We are currently expanding to other EU countries and countries outside the EU that will accept the CE mark approval. I am pleased to say that we have now achieved registration of CytoSorb in Saudi Arabia and are now waiting formal Saudi FDA approval following some initial field tests by the ministry of health. We have also been fortunate to have received a tremendous amount of monetary support for our technology. More than $15 million has gone into the development of this technology. First of all, DARPA, which is the leading research agency of the department of defense that has been responsible for such innovations as the Internet, global positioning satellites, robotic surgery and wheelchairs that can climb stairs, they awarded us a $3.8 million five-year contract as part of their Dialysis-Like Therapeutics program to treat sepsis and they have tested us with removing cytokines and pathogen derived toxins. We are currently in year three of that program. The U.S. Army also awarded us a Phase I and Phase II SBIR contract valued at $1.15 million for trauma and burn injury research with our technology. U.S. Air Force is funding a 30-patient randomized controlled human pilot study in trauma valued at $3 million. This FDA approved trial has begun enrollment. The U.S. Department of Health and Human Services awarded us a $0.5 million grant because of the potential of our technology to save lives and reduce cost under the QTDP program. One of our major collaborators at NIH received a $7 million five-year grant to pursue innovations around our technology for the treatment of sepsis. And last but not least, we were awarded a Phase I SBIR grant by NHLBI, National Heart, Lung and Blood Institute, to advance our HemoDefend platform for the purification of blood transfusion products to try to improve the quality and safety of blood transfusions. Now more recently, we were the winner of the GREAT Tech awards. In October, CytoSorbents was awarded the U.K. GREAT Tech awards for health, sponsored by the United Kingdom Trade and Investment Group and the British Consulate in New York. The GREAT Tech award selected one winner from one of six categories from a pool of more than 130 high growth companies from New York, New Jersey, Pennsylvania and Connecticut, and we were recognized for our innovative and potentially revolutionary blood purification technology that could help save lives and reduce the high cost of ICU care. As part of the award the company will receive assistance, access and resources to expand into the U.K. further with its distributor LINC Medical. And the importance of this is that the U.K. is the third largest medical device market in the European Union. We also were pleased to have launched the international CytoSorb Registry that is now available in both English and German and is currently active with registrants that are submitting their data online. The English version is currently under beta testing and will be active -- and will go live in January. We also established a world class Cardiac Surgery Advisory Board in the United States. It consists of major leaders in the area of cardiac surgery from around the country in such places as University of Kentucky, Michigan, Houston, University of Michigan, Cleveland Clinic Foundation, Columbia University and the University of Pittsburgh Medical Center. This Group has helped us modify our clinical trial protocol in cardiac surgery where we are looking to use CytoSorb intra-operatively in a heart-lung machine bypass circuit to help try to reduce contaminants that are inflammatory mediators that are generated during cardiac surgery in order to try to prevent post-operative complications such as organ dysfunction and organ failure. We are currently on track to submit our IDE application to run this pivotal trial, hopefully to submit by the end of 2014 and begin the trial next year. We are also pleased to announce an expansion of our Biocon partnership. Chris Cramer will go into greater depth into this in his comments. But according to Biocon, hundreds of patients have now benefitted from CytoSorb therapy and orders from Biocon continue to increase. We have now expanded the agreement beyond sepsis in now all critical care applications as well as cardiac surgery with a focus on trying to control the systemic inflammatory response syndrome that is responsible for causing organ dysfunction and organ failure in many patients. And this partnership continues to be focused on India and select emerging countries. We have negotiated a co-development agreement where Biocon has committed to conduct and publish results from multiple investigator initiated studies and patient case studies and Biocon will continue to market CytoSorb with their critical care antibiotics as the most comprehensive treatment of sepsis. I think very importantly, Biocon has also agreed based on their results and their sales to date, to increase annual minimum sales targets which should result in significantly increased sales of CytoSorb over the life of the agreement. We are also pleased to announce our first cardiac surgery partnership. Following significant due diligence, we have entered into an initial partnership with a top four global medical device company in cardiac surgery and other cardiovascular diseases to use CytoSorb intra-operatively during cardiac surgery in the country of France. The partnership has already begun and is expected to continue over a total of six-month evaluation period to determine the various market parameters, to obtain clinical data and to build key opinion leader support in France. Following a successful evaluation the two parties plan to jointly determine how to expand upon both the size and geographic footprint of its partnership. France is currently the second largest medical device market and one of the highest volume cardiac surgery markets in the European Union. To give you an idea of which are the top cardiac surgery companies in the space, these include Medtronic, Sorin, Maquet as well as Terumo. And last but not least, I think there were a number of questions around Ebola, HemoDefend and our cardiac surgery study. So I wanted to give everyone a quick update. In terms of Ebola, CytoSorbents is currently in five of seven major hospitals in Germany that are prepared to accept Ebola patients. We have communicated with these hospitals and providers in these hospitals and have made CytoSorb an option to potentially treat patients should they wind up being admitted to these hospitals. We have also had communications with the World Health Organization, the Centers for Disease Control, the FDA, the National Institutes of Allergy and Infectious Disease, [indiscernible] of the Department of Defense, treatment hospitals in the United States and others. Ebola patients have undergone dialysis, a critical proof of concept for CytoSorb uses. To date, CytoSorb however has not been used to treat Ebola patients. In terms of HemoDefend, at the recent American Association of Blood Bank Conference in Philadelphia, data from the RECESS trial, where new blood, meaning less than 10-day old blood versus old blood, meaning blood greater than 21 days old, was given to patients undergoing complex cardiac surgery. The data from the RECESS trial showed that the age of blood had no statistically significant impact on progression to organ dysfunction or death. Although this was not what we expected to see, we do not believe this diminishes the potential value of HemoDefend to improve the quality and safety of blood by removing contaminants that can cause transfusion reactions. In fact, HemoDefend may have significant applications in other blood transfusion products where the need is potentially even greater than that seem to impact red blood cells. We currently await subgroup analysis, particularly in patients receiving more units of blood than average or patients undergoing more complex types of surgeries where there is a higher risk of hemolysis and injury, as well as a breakdown of the very high serious adverse event rate approaching 50% in this trial, in these patients undergoing complex cardiac surgery. We also await the results of the able trial, a Canadian based trial, where fresh versus standard issue blood has been given to critically ill patients. That trial has been completed and we have heard that the results may be released at either the American Society of Hematology meeting in December of this year or the Society of Critical Care Medicine Conference in January of 2015. While we wait for these, we continue to HemoDefend development. And last but not least, in cardiac surgery we have multiple studies, investigator initiated studies ongoing at Hamburg, Vienna, Cologne and others, some of which are expected to be completed in the next several months provided that enrollment continues during the holiday season. Once we have data from that we will be pleased to share that with the group. So with that, let me turn it now over to Kathy Bloch, our Chief Financial Officer, who will cover Q3 2014 operating and financial highlights. Kathy?

[Kathleen Bloch:]

Thank you, Phil, and good afternoon everyone. For today's call I will be providing an update regarding primarily CytoSorbent's revenues. For the quarter ended September 30, 2014, we have achieved record CytoSorb quarterly sales of $1 million. This is the first time in our company history and is in fact a 406% increase over product sales of approximately $204,000 in the same period of 2013. In fact, the quarterly sales of $1 million have exceeded CytoSorb sales for the entire year of 2013 which were $822,000. And our product gross margins for Q3 2014 were approximately 65%. Then for the nine months of 2014, our total revenue was approximately $3.2 million which is an increase of 111% compared to total revenues of approximately $1.5 million for the first nine months of 2013. CytoSorb product sales fueled this increase in total revenues with $2.3 million in sales in the first nine months of 2013 which is a 346% increase from $508,000 in CytoSorb revenue in the first nine months of 2013. Our grant income for the nine months ended September 30, 2014 was approximately $985,000 which is tracking similar to our grant income of approximately $1 million for the nine months ended September 30, 2013. For the first nine months of 2014, our blended gross margins were approximately 44% and our CytoSorb product gross margins were approximately 66%. So let's look at the company's historical quarterly sales for each of the last nine quarters since we began commercialization of CytoSorb in late 2012. With our record third quarter product sales of more than $1 million, the company has posted what is its fifth consecutive quarter of double-digit quarter over quarter growth. Our quarter over quarter growth between the third quarter of 2014 and the second quarter of 2014 was actually 56%. And our current annual run rate is now in excess of $4.1 million as compared to an annual run rate of approximately $814,000 approximately one year ago. So next we will look at our chart which summarizes our trailing 12 months of CytoSorb product sales, and once again it continues to demonstrate the positive trend that sales are taking overall. So sales for the 12 months ended September 30, 2014 were approximately $2.6 million as compared to the sales for the 12 months ended September 30, 2013 of approximately $406,000. So this represents an increase of more than $1.3 million or a year-over-year product sales increase of 331%. Now with regard to expectations, sales momentum remains strong. The company has always stated that sales growth would be achieved as a result of its revenue multipliers. The first being the direct sales team reaching down past the key opinion leaders directly to the treating physicians in the ICUs. Second, we are in multiple ICUs in each treating hospital. Third, we are being used for many different applications, including sepsis, cardiac surgery, pancreatitis, burn injury, to name a few. Fourth, repeat orders from existing distributors, and fifth, the establishment of new distributor relationships in new territories. So at September 30, 2014 our balance sheet remains secure with $7.8 million in cash and short-term investments and we are continuing to execute on our stated path for the commercialization of CytoSorb. And now I would like to turn the call back to Phil to discuss the benefits of the up-listing. Phil?

[Phillip Chan:]

Well, thank you very much, Kathy. Now I would like to go into more detail about the planned up-listing to the NASDAQ Capital Market. A quick summary of the approvals we were seeking in our recently sent proxy statement. I also want to clear up some misperceptions about some of these issues and answer number of frequently asked questions concerning the planned reverse split. Now as we have said before, we believe that there are many potential benefits of up-listing. First and foremost, we believe that up-listing to the NASDAQ Capital Market will increase our visibility in the investor community. Currently many institutional investors, because our stock is under a dollar on the OTC bulletin boards, cannot invest in our company for a number of restrictive reasons. We believe that these reasons would go away once we do an up-listing and that they would no longer be restricted from owning our shares. We also believe that our analyst coverage and the news releases will be more impactful. Many of the analysts currently that cover our stock are focused predominantly on institutional investors who cannot currently own our stock. Now that we would, if we are successful in up-listing, we believe that this analyst coverage would be much more impactful. Another potential benefit of up-listing is increased liquidity for investors. As I will show you some data in just a moment, the average daily trading volume increased by three times in the three months following in OTC to NASDAQ national market up-listing. In addition, the median stock appreciation of 2013 up-listed NASDAQ companies was 69% in 2013 and the median stock appreciation of 2014 OTCBB to NASDAQ up-listed companies was 15% in 2014. Now these are based on historical data, past results do not predict future performance and we cannot predict the performance of our stock post split or post up-listing. And we can also provide no assurances that our application for listing to the NASDAQ Capital Market will be accepted. However, we are in the midst of this currently and we are very encouraged by our potential to be up-listed by the end of the year. Another positive benefit is that, many shareholders who currently buy and sell our stock have found it very difficult to find brokers who will accept stock certificates. In fact this is the case for most OTC bulletin board companies. This problem would significantly go away with an up-listing to a national market. This has been a chronic problem for many people and the source of great frustration in owning our company. Another potential benefit of up-listing is increased credibility. As we all know credibility is extremely important amongst investors, strategic partners, journalists as well as customers. Along with the NASDAQ up-listing, we are subject to very rigorous governance standards, SEC reporting and Sarbanes-Oxley compliance the standards. Also we believe that by up-listing to a national market we can eliminate the perceived stigma of being a "penny stock". And finally, another potential benefit of up-listing is the potential for lower cost of capital and less shareholder dilution. As a national listed company, we would have many more options to raise capital at attractive rates. Now on this slide we are basically just looking at some data provided by NASDAQ where it's showing the average daily volume in the three months prior to an up-list, or an upgrade as they call it, from the OTC bulletin boards to the NASDAQ, and then the average daily volume three months after the upgrade. And you can see that there is a threefold increase in trading volume, supporting the notion that there would be increased liquidity following an up-listing. Also if you look at the next several slides, what you see here is the class of 2013 OTC upgrades to the NASDAQ, and again, the median stock appreciation for these companies was 69% in 2013. Once our slide deck is published you will be able to see these data in greater detail. And for the 2014 class of OTC upgrades to the NASDAQ, again, the median stock appreciation was 15% through October 2014. So the question many have asked is, why are we up-listing now? And the answer to that is, that CytoSorbents is an evolving company whose fundamentals continue to improve. We believe our profile compares favorably to other recent up-listed healthcare companies. What I have done here is list many of the features of our company and put it all on to one slide so that investors can see the tremendous progress that we have made. First of all, CytoSorb is approved in the European Union with direct sales and distribution in 19 countries worldwide and growing. We address a massive multibillion-dollar market opportunity, addressing a major unmet medical need of critical care, as well as cardiac surgery. We have demonstrated strong growth with total revenues, trailing 12-month revenues of $4.1 million of which $2.6 million are CytoSorb sales. As Kathy mentioned, we have now exhibited five quarters of double-digit increases in CytoSorb sales and we have now had our first $1 million sales quarter in Q3 of 2014. We have solid product gross margins of 65% and we now have cash and short-term investments of approximately $7.8 million. We now have 45 employees across our U.S. corporation and our subsidiary in Berlin, Germany. This is tremendous growth from where we were just three years ago. We are currently vertically integrated and we are an ISO 13485 certified medical device manufacturer producing our polymer as well as our CytoSorb cartridges out of our New Jersey facility. We have now had strategic partnership with Biocon in India focused on India and select emerging countries. And we have now established an initial partnership with a major cardiac surgery device company for a first initial valuation in France. We have 40+ investigator initiated studies being planned with many enrolling, Christian will talk about this in a little bit, and more than 150 key opinion leaders. The United States cardiac surgery pivotal trial IDE application will be filed soon. And we also have a trauma trial here also enrolling. We have had a tremendous amount of technology validation by major government organizations including DARPA, the U.S. Army, the U.S. Air Force, NIH and NHLBI. And we have been able to attract a world-class trauma as well as cardiac surgery, as well as sepsis advisory board to help advise the company. Last but not least, we are currently covered by four analysts from Brean Capital, H.C. Wainwright, Merriman Capital and Zacks. Our goal was to have the fundamentals and progress in place to warrant and maintain NASDAQ listing and to be able to attract institutional investors and we believe that our company is well-positioned to do this now. Now with that, let me turn it back over to Kathy who will briefly describe the tremendous progress we have made on the path of up-listing. Kathy?

[Kathleen Bloch:]

Thanks, Phil. We have been very busy here at the company preparing for the up-listing. In the previous conference call we told you a little bit about the progress we have made which included choosing DLA Piper as our legal advisor. We also adopted a code of business conduct and ethics as well as an insider trading policy, both of which are required governance items for the major exchanges. And we have also recently established NASDAQ compliant committees of our Board of Directors and we have adopted charters for each committee, also required. In addition, since our last call we have simplified our capital structure with the conversion on October 9, 2014 of 100% of our series A and series B preferred shareholders to common shareholders. This was a very important step in the up-listing process, since we believe most institutional investors prefer to invest in a company that does not have preferred shares with priority interest. Of course it is also necessary for us to complete a reverse stock split to bring our stock price to the minimum price required by NASDAQ for up-listing companies. And in that regard, on November 6, 2014 we filed our proxy with the consent solicitation to our shareholders asking that they approve five actions recommended by our board of directors. Phil will talk more about those later. Going into the up-listing, we have the benefit of analyst coverage by Brean, H.C. Wainwright, Merriman and Zacks. And, as Phil previously discussed, we are at a point in time where we have made significant operating progress, most importantly the increase in CytoSorb sales. Yesterday we filed our application to up-list to the NASDAQ National Market. NASDAQ has already assigned us a listing analyst and they have begun their review process. And the two remaining steps towards the up-listing are currently underway. We have selected a consultant who will assist us with the documentation and testing of our system of internal controls, another requirement for a company traded on a major exchange, and we are continuing investor outreach in an attempt to generate interest in our stock, particularly among institutional investors. And based upon all of this progress, we believe we are in a strong position to execute the up-listing before the end of this year. Phil?

[Phillip Chan:]

Thank you very much, Kathy. I would also note that we do not believe that the up-list is a singular event. We absolutely plan to support the company following the up-list with a very defined strategy. Following the up-list we have several goals. First is to continue to drive growth in CytoSorb sales. We will continue to build key opinion leaders support, drive deep into accounts, expand to multiple indications in multiple ICUs within each hospital. We plan to continue geographic expansion with new distributors and strategic partners. Drive country by country product registrations and also invest in the support infrastructure of both direct and distributed this sales. We also plan to continue to pursue strategic partnerships for CytoSorb and for our pipeline. We also plan to prioritize clinical data with build out of our clinical trial capability, start of the U.S. pivotal cardiac surgery trial, obtain data from investigator initiated studies, make progress in our U.S. Air Force funded trauma pilot and other funded studies, as well as continue to build upon the data being held by the CytoSorb registry. We also continue to aggressively plan to spread the word on CytoSorbents via meetings with institutional investors, investor conferences, additional analyst coverage and an upgraded PR strategy. We also plan to aggressively pursue research grant programs in new product development. Now, all of you have now been sent a consent solicitation statement seeking your approval of five proposals needed to up-list. Your vote is required before December 1, 2014. The first item is to approve a 25

[Amy Vogel:]

Thanks Dr. Chan. Over the last week we’ve collected a number of questions from investors. Our first question is for Christian. Christian, could you please give us an update on the development of the commercialization of CytoSorb?

[Christian Steiner:]

Yes, certainly, thank you, Amy. First of all we are very excited and proud that we have reached this milestone exceeding $1 million in terms of product revenue for one quarter. This was a major effort of the sales team and reflects our progress in the commercialization of our CytoSorb therapy. The success is based on the strong reorder business in our direct sales and excellent progress of our distribution partners. Both in old and new markets. The growth of our unit sales was even higher than our dollar revenue suggests since the euro to dollar exchange rate went down and the majority of our business is done in euros. Commercialization includes a massive amount of effort in addition to the [extra sales] [ph] process. For example, it has been very difficult to find and hire the right sales reps that are best suited for our direct business. However, we have seven reps currently and we will have 10 reps at the beginning of the new year as planned. We are also adding new support people to our sales department as well as leadership on the distribution side to allow us to grow faster and to help manage our rapidly increasing distributor business. Training and education of new sales personnel and new distribution partners and continued education of the current sales force is critical. In the past quarter alone, we have conducted for multiple day training sessions at our Berlin offices, and five training sessions at distributors. Clinical data is critically important for the further development and commercialization of the therapy. As Philip mentioned before, we are pleased with the launch of our international CytoSorb Registry after [ethics] [ph] board approval and successful beta testing completion. The study project is now running at many and many Germany speaking centers have started using the registry. The English platform is in Beta testing and the launch officially in early January 2015. Many international [sites] [ph] have already announced their interest to participate. The investigator initiated trial is also a very important part of our strategy to generate additional clinical data. Of the more than 40 studies being planned, 11 trials are actively recruiting patients and another 6 to 8 studies will start recruitment within the next several weeks. More than 20 other projects are either in preparation or in [ethics] [ph] committee review. To speed up and oversee the development in this field, we have hired a European Medical Director will start on the first quarter of 2015. Reimbursement is also very important in establishing new therapies and usually requires both medical as well as health economics evidence. We are actively seeking to improve the reimbursement situation in many of our markets. All this work normally is not visible to the public but is expected to lead us to new performance levels in the coming weeks, months and quarters.

[Amy Vogel:]

Thanks, Christian. Can you elaborate a little bit more on the progress with the distribution business?

[Christian Steiner:]

Sure. We continue our aggressive geographic expansion in the EU and in countries outside of Europe that accept European regulatory approval and we will have more to discuss before the end of the year. One of the challenges we face is the transfer of knowledge about how to best use CytoSorb. We have begun to formalize this during our distributor trainings. This has worked very well with our partners in India and Turkey for example. In India, we recently organized a roadshow together with Biocon, where one of our experienced key opinion leaders from Germany was able to present to more than 350 thought leaders in India in a multicity lecture series. We already had more than 70 cities, sites I mean, in India before the roadshow and we look forward to see how this number will grow as a result of our marketing efforts as well as the increased number of applications including cardiac surgery that Biocon will go after following the announced partnership expansion. As Phil mentioned, another major success was the registration of CytoSorb in Saudi Arabia after long and demanding process. We have already trained the sales team of our partner, Techno Orbits and CytoSorb has been used to now treat the first patients in the field test by the ministry of health. Pending this evaluation, we expect to obtain approval that will extend throughout the Gulf Cooperation Council countries of the Middle East. Amy?

[Amy Vogel:]

Thanks, Christian. Can you also comment on the acceptance of the CytoSorb therapy by key opinion leaders?

[Christian Steiner:]

Yes, of course. As you can remember, from the beginning we have [counted] [ph] and reported a number of key opinion leaders that were using or were committed to using our CytoSorb therapy in patients care or in clinical studies. I think we have now outgrown this way of measuring our progress since we can now see the growing acceptance from the number of treatments, reorders and projects we are doing. It is clear that the current acceptance is based on high interest and especially because of the positive experiences users are seeing with our CytoSorb therapy. Nevertheless, we know that we owe the medical community hard data and medical evidence, so we are working on this. While we are very focused on the German speaking community in the beginning since this is covered obviously by the direct sales team, we are now starting to have more projects prepared on an international basis. This could only be achieved with the help of our success so far.

[Amy Vogel:]

Thank you. And one last question for you. Germany university hospitals have traded a number of Ebola patients. Was any of these patients treated with CytoSorb?

[Christian Steiner:]

No, not as of now. Germany does have seven centers, approximately 50 ICU beds where the equipment is adequate and the personnel have been trained and educated to treat Ebola patients. Five of these university hospitals are already using CytoSorb in different indications. All sites are informed about availability of the therapy and the current state of knowledge. However, it is of course solely a decision of the treating medical doctors on what therapy is applied to have these patients suffering from such a terrible disease. But we have received positive feedback from a number of doctors at these sites who think that our cytokine reduction approach makes a lot of sense. Amy?

[Amy Vogel:]

Thanks so much, Christian. Another topic on people's minds is the progress regarding the new manufacturing facility. Vince, can you provide us an update?

[Vincent Capponi:]

Thanks, Amy. As I mentioned in previous quarterly updates, we had initiated a number of infrastructure upgrades to accommodate further growth within our existing facility. These upgrades would allow us to increase production capacity within our current manufacturing facility with minimal cost. We have now completed those infrastructure upgrades and have begun the process of hiring manufacturing personnel to complete a second shift. The addition of a second shift provides additional capacity to bridge our transition from the current location into a new facility. Since our last meeting we have identified and contracted with an engineering firm for the new manufacturing, R&D and corporate center. We are completing the initial engineering phase of the project focusing on the manufacturing and office layout, while concurrently working with our recently signed real estate broker to identify a new site. Our objective is to identify an existing facility that will not require extensive modification to keep costs down and expedite facility renovations to allow for occupancy in a timely manner. The new facility is a progression step to a final manufacturing facility and is expected to be able to meet our production needs for the next several years while increasing operational efficiency and helping us to work through any scaling issues.

[Amy Vogel:]

Thanks so much, Vince. Now a question for Chris. Chris, can you tell us more about the recent Biocon partnership expansion announcement. What's changing and what can we expect from the partnership moving forward?

[Chris Cramer:]

Thanks, Amy. Biocon has been an exceptional partner and I am very excited about our expanded relationship. Let me just add some color commentary to what Phil talked about earlier in the call. As you know, we initiated our relationship in September 2013 to launch CytoSorb in India and select emerging markets to enable physicians to treat sepsis. As Biocon began working with its customers, it became very clear that they were increasingly identifying other conditions where very high levels of cytokines have also been known to cause organ failure. In particular, we saw a broader opportunity to treat patients experiencing a systemic inflammatory response syndrome, also known as SIRS, brought about by a cytokine storm. SIRS is caused by a wide range of life-threatening conditions seen in the intensive care unit. It can also because by surgical interventions, particularly cardiac surgery. Throughout my discussions with Biocon, we identified an opportunity to address this market need and felt strongly that we could accelerate product adoption by continuing to build the CytoSorb clinical evidence base. That said, there are several important new developments to highlight. First, the approved applications have grown to encompass all critical care applications in the intensive care unit. While sepsis will continue to be a strategic focus, Biocon will now also promote CytoSorb for a broad range of conditions involving the SIRS response, including lung injury, postoperative SIRS, pancreatitis, burns, trauma and tropical diseases such as dengue fever and malaria, to name a few. Additionally, because Biocon has a strong cardiac care commercial organization and CytoSorb can be used to attempt to control inflammation associated with cardiac surgery, Biocon will now promote CytoSorb for inter-operative use during cardiac surgery. Finally, Biocon will take a leadership role in developing new clinical evidence by coordinating and publishing results from multiple investigator initiated trials and patient cases studies. To ensure that we have a voice in guiding these studies, these efforts would jointly be -- will be jointly overseen through a clinical trial steering committee consisting of representatives from both companies. So let me take a moment to explain what this means and how this will benefit CytoSorbents. First, these are large markets and we will now have the ability to help more patients. For example, there are more than 1 million new cases of severe sepsis in India each year. Cardiovascular disease is also a major problem. About 100,000 cardiac surgery procedures are performed in India each year. This number is expected to grow rapidly as, according to the World Health Organization, it's a small fraction of the 2.5 million patients in India that are in need of heart surgery. Next, top line product revenue will benefit. Given the strong market demand, we have agreed to increase the annual minimum sales targets which will result in significantly increased revenue to CytoSorbents. Lastly, new clinical evidence will be created. Biocon will lead these efforts using their resources and key opinion leaders in its network. These are costs that CytoSorbents otherwise would have borne. Also the results of these studies and publications will support product adoption not only in the Biocon territory but will also benefit CytoSorb sales efforts elsewhere. Overall, I believe this is a major step forward in advancing our partnership and it sends a strong signal about the future of CytoSorb. I look forward to taking our relationship with Biocon to the next level.

[Amy Vogel:]

Chris, you recently announced an initial partnership with a leading global medical device company in the treatment of cardiovascular disease. Can you talk about the goals of this initial partnership and what it means for CytoSorbents?

[Chris Cramer:]

Yes. Cardiac surgery is a large and strategically important opportunity for the company. There are about 1.5 million cardiac procedures performed each year worldwide and the number of people suffering from cardiovascular disease is growing. Similar to the ICU conditions that CytoSorb can be used for, high risk cardiac surgery patients may routinely suffer the same harmful effects of excess inflammation that if left untreated can cause organ injury. We are very excited because we believe CytoSorb holds the promise to improve patient safety while decreasing serious complications and their high associated cost, particularly in those undergoing complex cardiothoracic procedures. Because of the nature of this partnership, we jointly agreed with the partner not to disclose their name at this time. While we cannot mention them by name, suffice it to say we are an excellent company working with one of the leading global medical device companies in the treatment of cardiovascular disease. They are known throughout the world for their long tradition of innovation and have influenced nearly all of the modern equipment used by cardiothoracic surgeons and their teams today. Under the terms of this agreement, the partnership will commence with an initial market evaluation period to determine various market parameters, obtain clinical data and build key opinion leaders support in France. Following a successful evaluation, the parties would jointly determine how to expand upon both the size and geographic footprint of the partnership. The focus of this initial collaboration will be to introduce CytoSorb to and work with some of the top cardiac professionals in France. Currently we are working with the partner to simultaneously register the product in France and to start educating select KOLs on our product. Over the coming months we will work with these physicians to implement CytoSorb in their clinical practice and gain valuable insights. The experience gained during the market evaluation period will enable us to build support for CytoSorb and strategically position it for success in the intra-operative cardiac surgery market. I am confident that with the positive evaluation in France, we will be able to broaden our relationship with this partner. At such time in the future, we will be able to release more information about this partnership.

[Amy Vogel:]

Thanks so much, Chris. While we seem to have covered the major questions, Dr. Chan, do you have any closing remarks for us?

[Phillip Chan:]

Thank you, Amy, and thank you everyone for participating on the call today. If you have any additional question, feel free to forward them to Ms. Amy Vogel at [e-mail], and we will try to address them in our next update or sooner. Thank you, again and have a great evening.

[Operator:]

Thank you. That does conclude our conference for today. I’d like to thank everyone for their participation and have a great day.