Cerus Corp (CERS) 2003 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Cerus Corporation third quarter financial results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question andanswer session. At that time, if you have a question, please press the 1, followed by the 4 on your telephone. As a reminder, this conference is being recorded Thursday, October 30th, 2003.

I would now like to turn the conference over to Sylvia Wheeler, Director of Corporate Communications. Please go ahead.

Thank you. Good afternoon. Before introducing Stephen Isaacs, President and Chief Executive Officer of Cerus, I remind you that we will be making forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results described due to factors that include, but are not limited to, those discussed in our annual report on form 10-K and quarterly report on form 10-Q. To request copies of these documents, our press releases or our financials, please call 925-288-6156, or find them on our web site at cerus.com. I will now turn the call over to Steve.

Thanks, Sylvia. Good afternoon, everyone. Joining me on the call today are Gregory Schafer, our Chief Financial Officer and Dr. Larry Corash, our Chief Medical Officer.

I'll begin with a general business and commercialization overview, then Larry will go over our clinical and regulatory progress. Greg will then review our third quarter financial results, which were released earlier today. In closing, I'll speak to our plans going for forward and we will then open the call to questions.

Last quarter was a challenging one for Cerus. On today's call, I will review our announcements during the quarter, provide insight into what these events mean to the company and share our progress and continued vision for moving the company forward.

Let me start with three very positive developments developments. First, the French regulatory body has completed their review and notified Baxter that authorization for INTERCEPT platelets has been granted. Second, Japan has stepped up the pace of their evaluation of INTERCEPT platelets. And third, traction in Europe is beginning to take hold with INTERCEPT evaluation and validation studies in 42 blood centers located in 12 countries across Europe. We'll speak more about these positive developments later in the call. Let me turn to other recent events over the quarter.

In September, Cerus and Baxter halted the phase III red blood cell trials following an invitro antibody observation for red blood cells treated with S3o 3. The antibody observation was an unfortunate and unforeseen outcome which has had a significant impact on the program. I remind you that this observation does not impact our programs for platelets or for plasma. Larry will pro provide more details about the antibody and our objectives for the red cell program.

With the phase III 3 trial halted the infrastructure, manufacturing and vendor support for this program are no longer required. As a result, we have reduced expenses and restructured our operations to focus on commercialization of INTERCEPT platelets, INTERCEPT plasma, red blood cell research and our pipeline of therapeutics and vaccines. Greg will provide greater detail of the cash flow impact of the realignment.

We also announced earlier this month a loan dispute with Baxter Capital Corporation. Baxter Capital, a separate financial subsidiary of Baxter International provided a $50 million loan to Cerus at the beginning of the year. Under the terms of the loan, principal and interest are not payable until 2008. However, Baxter capital is seeking immediate repayment. Cerus disagrees with this position and as a result legal proceedings have been initiated by Baxter Capital to obtain repayment.

Meanwhile, we continue to work with Baxter's Transfusion Therapies Division under our agreement for INTERCEPT. It is important to note that the Transfusion Therapies Division is separate from, and not impacted by, the legal action on the loan. Baxter's third quarter earnings press release comments on the continuation of the collaboration and states that this lawsuit does not affect the current developments and commercialization agreements with Cerus. Indeed, we have experienced no change in the relationship. For example, Larry and I had a productive trip last week visiting several countries with Baxter's sales teams.

I'll now spend time reviewing our programs and reiterating the highlights that continue to make Cerus an attractive opportunity. The INTERCEPT blood system for platelets has been commercialized in Europe with Baxter Healthcare in charge of distribution, sales and marketing. Product revenue for the quarter were due to sales in Spain, Belgium, Italy and Norway. While an increase over last quarter, the revenue continues to reflect the seeding and awareness building face as we collaborate with Baxter to penetrate European markets with the INTERCEPT blood system for platelets.

As a mentioned earlier, Baxter's efforts have led to some very positive news in France. Baxter has been notified by the French regulatory bodies that the review of the INTERCEPT platelet marketing application is complete and the agency has granted authorization for the preparation, distribution and therapeutic use of the product. The authorization is subject to the publication of a decree in the official journal to register INTERCEPT platelets and to define their specifications, according to standard procedure. France is a significant market within Europe, representing approximately 15% of the total opportunity. While additional steps are required prior to commercial rollout in France, including setting up reimbursement, this approval for therapeutic use of INTERCEPT platelets was the most significant hurdle.

In addition to advances in France, Baxter is also reporting progress in other European countries. Centers in Spain began purchasing during the quarter under the 1.8 million euro purchase contract signed last quarter. We've now recorded sales from centers in Spain, Norway, Sweden, Belgium, Italy, Portugal and the United Kingdom. Meanwhile validation and experience studies are underway in several other centers. All of these factors indicate improved traction in Europe, which we believe can be leveraged over the next 12 months to gain commercial momentum.

At the same time launch is underway in Europe, a demand for pathogen and activation is emerging in Japan. As we projected last quarter, the Japan Red Cross and ministry of health began their evaluation of the INTERCEPT blood system for platelets. Their motivation and time line for INTERCEPT evaluation are fueled by widely reported failures of nucleic acid tests to detect hepatitis and HIV in thousands of blood donations. The opportunity for pathogen and activation in Japan is significant with over 700,000 platelet transfusions performed annually. We are aggressively working to capture this opportunity.

As platelet development is expanded and advanced in multiple geographies we are nearing commercialization with the INTERCEPT blood system for plasma. The environment in Europe favors the adoption of INTERCEPT plasma as many Ministries of Health require that plasma collections be either quarantined or treated with a pathogen inactivation method. However, quarantine practices are cumbersome and create inventory and storage challenges and no generally accepted pathogen inactivation method for plasma is currently commercially available.

In addition, many customers acknowledge the potential benefits of having both INTERCEPT platelets and INTERCEPT plasma available. As we pursue pathogen inactivation our pipeline in vaccines and immunotherapy continues to grow. We've expanded the scope of our research to address therapeutics for cancer and chronic viral infection as well as prophylactic vaccines for important infectious disease agents.

We anticipate several announcements in the next few quarters covering intellectual property, grant funding and publication to highlight our developing pipeline. I'll now turn the call over to Larry for a clinical and regulatory update.

Thanks, Steve. This quarter transfusion of INTERCEPT platelets in European clinical practice progressed. We have active centers in Italy, Spain, Belgium, Denmark, Norway and Sweden. Process validation studies continue in Germany and Austria.

Transfusion of INTERCEPT platelets has been well received by clinicians. We're observing acceptance of INTERCEPT pathogen inactivation as replacement for bacterial cultures, CMB testing and gamma irradiation, demonstrating the efficiency of the INTERCEPT system to improve the economics of transfusion safety.

A major step forward this Quarter, as Steve mentioned, was the approval of INTERCEPT platelets by the French authority,. That's the French Agency for Sanitary Safety of Healthcare Products. They've accepted our data based on 30 platelets units prepared at two centers as sufficient. The French agency will not require the second phase of process validation. Once the reimbursement negotiation process is complete, we will be able to sell INTERCEPT platelets directly to each of the 14 regional blood centers.

As the use of INTERCEPT platelets expands, we initiated a post marketing hemo-vigilance surveillance program to prospectively collect data on transfused patients. This activity is consistent with the objectives of the European Hemo-vigilance Network for Transfusion Safety and will extend the safety profile for INTERCEPT platelets as the broader patient population is transfused.

In conjunction with the introduction of INTERCEPT platelets, we initiated a pilot clinical study with one of our Nordic customers to evaluate extension of platelet storage from five to seven days. Based on prior invitro studies in several European centers, we're optimistic that platelet storage can be extended to seven days.

In the United States, as many of you know, we defined the two-step process regarding the clinical module in our PMA. After review with our external science advisory board, we submitted a supplemental clinical trial proposal to FDA and are in the midst of discussing the study which will use the commercial INTERCEPT processing.

The second step which involves additional analysis of data in the U.S. phase 3 trial is ongoing. The FDA requested an independent panel investments confirm initial analysis and observations.

This quarter we were contacted by the Japan Red Cross to set up three centers in Tokyo, [Eichi] and [Hokaito] for the evaluation of INTERCEPT platelets. This request was driven by recent reports of transfusion transmitted cases of HIV and hepatitis in Japan, despite the use of nucleic acid testing for all donors.

In addition, currently in Japan, platelets are licensed for 3 days of storage compared to 5 days in the United States and Europe. The Japan Red Cross is interested in the potential of INTERCEPT to extend platelet storage in Japan to five days. We believe this is achievable, given our experience with five-day storage in Europe and the United States. We installed the INTERCEPT platelet system in three Japan Red Cross centers and they have targeted completion of these studies by year end.

From November 1st to the 4th, we'll be presenting 10 papers at the American Association of Blood Banks meeting in San Diego. In addition, during the meeting, European blood banks from Switzerland, Austria, France and Germany, will be presenting data on their initial experience with INTERCEPT platelets. As more centers gain experience with INTERCEPT, we anticipate increases in the number of publications on the product which will broaden awareness and expand our thought leader network.

Turning to plasma, we continue to experience strong interest for INTERCEPT plasma in Europe, driven by the complementary effect of a common platform for treatment of plasma and platelets. Our invitro study with the Hematology Service at University College Hospital in London, to characterize the properties of INTERCEPT plasma for plasma exchanged therapy of[thrombotic thrombosetic hemaperfora] has been accepted for presentation at the American society of the hematology meeting later this year.

We completed invitro testing of the improved design for the INTERCEPT system for FFP. These studies demonstrated optimal removal of S59 and improved yields of coagulation factors. The improved configuration allows processing of up to 650 milliliters of plasma in a single treatment with flexibility to split the treated plasma into two or three individual doses. Recently we presented this system to a group of Italian customers and are targeting in vitro studies of this system with our European platelet customers earlier next year.

As announced during the quarter, Baxter and Cerus voluntarily halted the clinical trials of with INTERCEPT red cells after 2 of approximately,160 patients had positive cross-matches to S303 treated red cells. We observed no adverse health effects in these patients but took this step to ensure patient safety while we define the immunologic basis for this observation. Continued follow-up of these patients has shown no adverse health effects.

Cerus and Baxter scientists have formed a taskforce of internal and external members to conduct the required experiments. We reexamined archived serum samples from healthy subjects who had received multiple transfusions of S303 red cells in phase 1 and we confirmed that none of these subjects developed the antibodies to the S303 treated red cells.

We are now developing immunologic reagents in an mol model to explore potential mechanisms that may have led to the formation of the S303 antibodies in these two patients and to indicate potential solutions.

Our collaborative research program with the Department of Defense continues and we're in the advanced development phase of this program for the INTERCEPT plasma system. We received 6.2 million dollars in funding for continuation of research and blood safety, and are currently submitting a proposal for the next funding period. The armed forces deployment in Iraq continues to focus attention on the availability and the safety of blood for the military. With respect to our cellular immunotherapy vaccines and collaborative trial with the National Marrow Donor Program for matched, unrelated bone marrow transplantation has started enrollment. This program is fully funded by Department of Defense sources.

In addition, we've received funding under the NIH-SBIR program to support studies of helix technology for treatment of chronic [Grampher possess] disease. This is a serious complication arising in 30% of related match stem cell transplants and 78% of unrelated matched transplants. Our collaborative trial of a cellular vaccine against the Epstein-Barr virus has started enrollment at the Johns Hopkins University. Cerus provides no direct funding for this program.

The vaccines group has already reported significant progress with our proprietary platform for promoting cancer specific immune responses. The team has demonstrated the ability to prevent tumor progression in several preclinical animal models. The platform also has the potential to provide for more effective vaccines against significant infectious agents such as tuberculosis and anthrax. We look forward to reporting more on the progress of this team in the coming quarters.

These clinical trials and research studies emphasize the value of technology in the field of immunotherapy and we'll keep you posted on results as we move forward. Now Greg will review the financial results.

Thanks, Larry. Earlier today we announced the loss for the quarter of 64 cents per share, this compares with a net loss of $1.05 for the comparable period in 2002. The per share loss narrowed this past quarter due to an increase in development revenue from the Armed Forces Collaborative Agreement, reduced R&D investment in the red cell program, and an increased in the shares outstanding for the period.

Earlier this month we announced restructuring with the development programs and other expense reductions in the organization, including a reduction in the work force of approximately 25%. With the halting of the Phase III clinical trials, the red blood cell activity has been scaled back significantly both at Cerus and Baxter which will be reflected in our financial results going forward.

Our cash balance at the end of the quarter was $123.1 million compared with $64.3 million at the end of 2002. The increase includes $50 million drawn from the Baxter revolving loan facility in January of this year. As a conservative measure, we have classified the principal and interest from this loan as a current liability but our position is that neither are due until 2008. Our cash use from operations for the third quarter was approximately $12.9 millions, and we expect our current cash balance to be sufficient to support our planned development activities for at least the next 36 months.

We recorded 2.9 million in revenue for the quarter which included $24,000 from sales of INTERCEPT platelet system in Europe, an increase from the $8,000 of revenue we reported for the second quarter. We reported approximately $2.8 million of revenue for quarter derived from work performed under agreements with the U.S. Armed Forces. Going forward we expect to recognize a total of $7 million of funding under these agreements for the full year of 2003 and approximately $8 million for 2004.

Our R&D spending of $13.4 million is the decrease when come taird po last quarter due in part to the halting of the red blood cell clinical trial. As a result of the realignment and reduction for us, we expect our R&D spending to decrease significantly in the fourth quarter and into 2004 and expect our total R&D spending for the year to be approximately $55 million, for prior forecast for 2003 of 60 to $65 million.

G&A expenses reduced to 2.6 million for the quarter and we expect our G&A for the full year to be closer to $11 million from prior forecasts of $12 million and expect further reductions in 2004. Interest expense for the quarter is $1.1 million and included interest expense on the loan facility from Baxter.

We are currently in our annual planning process and looking forward our preliminary plan shows a significant reduction in R&D expense for next year combined with an increase and product revenue and development funding from the U.S. Armed Forces and other sources. As a result, we expect to cash use in 2004 of between 30 and $35 million, a reduction of approximately 50% from the 2003 plan of more than $60 million.

Now I'd like to turn it back to Steve for some concluding remarks and then we'll take your questions.

Thanks, Greg. Since the launch last year, Cerus's top priority has been to support Baxter's efforts in commercializing INTERCEPT platelets in Europe and successfully penetrating the $115 million European platelet market. Baxter's European regulatory and commercialization activities are beginning to bear fruit and they are reporting increased traction in Europe. While we realize it will take time for Baxter to achieve significant market penetration, we are highly confident of ultimate commercial success. Each quarterbacks Baxter continues to make progress in meeting the national regulatory requirements associated with the launch and reimbursement of a new and revolutionary blood safety product.

The regulatory news in France is exciting and illustrates how hands on experience through the product of the validation studies lead to regulatory authorization. Based on our discussion with Baxter, we estimate that the final steps prior to commercialization will take 6 to 9 months to get through. Based on these estimates, sales in France should make a significant difference in total INTERCEPT platelet sales in the second half of 2004. Meanwhile, we anticipate Baxter’s sales force will continue penetrating other markets and we will collaborate with them to gain additional licenses and clearances in other European countries.

For INTERCEPT platelets in the United States, Cerus and Baxter are conducting the initial -- the additional analysis of the sprint trial data. We're also working to gain agreement with the FDA on the protocol for the supplemental trial. Resolution of the protocol for the supplemental trial will dictate our timing for completion of the PMA. For the INTERCEPT plasma system, the current plan of targeting an INTERCEPT plasma regulatory submission in 2004 in Europe, followed by the submission of the PMA application.

As Larry mentioned for the red blood sell program, we began an evaluation of the antibody. Simultaneously, we're investigating process changes that is could prevent antibody formation. If these efforts are successful, we will proceed with discussions with the FDA concerning reinitiation of the red cell clinical trials.

While INTERCEPT remains our top priority, we're also pursuing the strategy of creating a pipeline for therapeutics and vaccines by leveraging our Helinx technology. Our strategy as to use dollars from a variety of funding sources including medical foundations, National Institutes of Health and the Department of Defense. These products will address critical disease targets such as cancer, chronic viral infections and other infectious diseases.

We look forward to providing you with important announcements in the area of intellectual property, external funding and peer reviewed journal publication over the next several quarters.

In closing, we offer a significant opportunity for growth with several promising programs. We are committed to our goals of improving blood safety and developing safer and more effective options for patients. We are addressing challenges head on and are dealing with the current situation proactively. We've made and will continue to make tough decisions to ensure the company's success and include realigning resources, significant cutting expenses and reducing our work force by 25%. Our strong cash position provides operational flexibility which should help us to surmount our current hurdles, meet our corporate objectives and build shareholder value.

We appreciate your support and keep you apprised of our progress. I'll now open your call to questions.

Thank you. Ladies and gentlemen if you would like to register a question, please press the 1, followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. If you are using a speaker phone, please lift your hand set before entering your request. Please -- one moment for the first question. The first question will come from the line of Ben Andrew with William Blair. Please proceed with your question.

Good afternoon. A couple questions. With the reduction in the staff, I assume a lot of that’s obviously is R&D and people associated with the red cell program as you mentioned. How quickly can you ramp that back up or should we read that that you don't expect to be in advanced clinical trials any time soon for red cells?

You know, I think we'll be able to ramp that back up as the need develops basically. You know, a lot of the people were involved in the red cell program. They were involved in activities having to do with clinical trials obviously, a lot of them were sort of CRA level, working with the sites, doing the data analysis and data transfer. Many were involved in supervising the synthesis of S303 in large quantities, things like that, so it's not a list that will be difficult to put back in place when the time comes.

But is it fair to say you probably won't be back into Phase III for 12 and maybe 24 months?

Well, the time timing is very difficult to pro district,. We need to understand the generation of the ant body. We were quite far downstream in the Phase III. Keep in mind that there was no clinical adverse events that went on with the antibody, it just sort of appeared and we're trying to understand the genesis, where it came from and then change the process accordingly to eliminate it's presentation. That could go fairly quickly or take quite a long time. Until we do the science behind it, we can't predict how long it will take.

Can you walk us through specific revenue assumption in '04 on products and also on the expense side?

On the product side, we're not giving guidance at this point just because we're still in the introductory stage. We do expect more revenue next year. Steve mentioned we got the -- we cleared the regulatory hurdle in France. We've also got large contract in place with Spain. So we see things moving, but with other revenue sources on the grant side, we do expect that to be even a bigger part of our funding next year, increasing to $8 million.

R&D, we're expecting between 30 and 35. G&A, we expect to bring down from the current year of 11 million, G&A tends to happen later in the planning process, and I should probably mention now that all of these are contingent on our plans going forward and being approved, et cetera. So, I think that should answer your question.

If I look at that and say okay, army contract of $8 million, 30 to 35, G&A, take Make up a number, make it 8 too 10, the R&D becomes roughly your burn. Are you continuing to accrue the interest on the Baxter loan you’ll assume? That will also impact the P& L?

Yeah, that would be accrued on the P&L but not be reflected in any cash flow statements. So, you're right. We expect our cash use next year to be between 30 and 35 million currently.

That's effectively your R&D. I'm not trying to back you into a corner, I'm trying to figure out where the revenue number is for products. Based on that quick look, it looks like you are assuming very little in the way of actual product revenue, something less than a couple million bucks?

I think with the numbers I've given you, Ben, there is a $5 million window there, so, I don't feel backed in a corner. We've talked about how we handle revenue, which is to give you specific developments as they occur and report the revenue as it is recorded. You know, Baxter is very sensitive about providing forecasts around revenue and their activities in Europe.

Last question and I'll jump off. I mean, Baxter's version or perspective that you are effectively in breach of contract on the loan, are there corollary type of breach of contracts provision on their side that are -- might help explain sort of some of their behavior here? Or is there an out for you guys, I guess is what I'm getting at, if they were to say, you know, we're backing way from development would that also then force, you know, not only repayment of the loan, but does that give you some sort of rights? I'm fishing for more provisions about that loan to understand better how we should read their demand for payment.

Well, first of all, Ben, there is no indication that Baxter is backing way from development whatsoever. As I said in the prepared remarks, Larry and I spent all last week in Europe and several different countries going to centers with their marketing folks and sales folks. You know, Greg Young, who is president of transfusion therapies on the Tuesday that the action taken, concerning the loan and told everybody it's basically business as usual and Al Heller did the same thing with respect to the exciting activity we're engaged in Japan.

We see, you know, these as two silos. Baxter Capital is a subsidiary of Baxter International, but it acts, in our view as a bank, and they make loans and there are terms to those loans, and we feel when we look at how the loan is secured, we feel good about that. They don't feel as good as we do, and that's really the basis for, you know, the request for repayment. And this is something that, you know, we feel -- we of course intend to pay the loan. We'll pay the loan back, we feel it should be paid back in 2008. The legal proceedings are away of, you know of getting at the positions of the two parties and it could be resolved that way. My gut is that we'll, you know, we'll resolve it in a less formal way.

Okay. Thanks.

The next question will come from the line of Glenn Reicin with Morgan Stanley. Please proceed with your question.

Good afternoon. On the platelet confirmatory trial. In the past you said you hoped to start that trial before the end of the year. Is that still intact?

It really depends on resolving the protocol that we're going to use. As we said, when we announced that we had to do the supplement tree trial, basically we're using the final version of the commercial device, you know, and there is some changes in that. It's the one that we're actually selling in Europe, and so we're looking at just what we need to do to get the FDA comfortable with that new device.

Obviously we had hoped that we had we had done in Europe was would be an out, but the FDA does wants additional clinical experience. So we are he talking about the inpoints of the trial, the statistical significance of the inpoints and that leads to a discussion of the size of the trial, and so, you know, if we're able to -- the sooner we can resolve that, the sooner we'll be able to start the trial basically. We’re in the midst of those discussions, they have the document in front of them. We're in active conversations with them. It really depends on when we get that done.

What's the best case, worst case?

Well, best case probably in terms of starting the trial would be not this year, simply because we have to resolve the issues pertaining to the protocol before we can actually, you know, obviously begin transfusions and since we're in late October, I think the best case would be early next year. We're also doing a data analysis, you know, some of the data, that's going along. So the start of the trial could parallel that analysis as well and be further into next year. So it just -- it really depends on getting this protocol settled with the agency.

You've been talking to the agency for a long time. Can you give us a flavor flavor of what the issues are?

Well, I really can't go into too much detail about what the issues are. They are really technical clinical-medical issues. But I will say that the trial, you know, whenever you do this type of trial, it's complex, there are many variables that have to be considered, you know, the patient population, the in points that you are going pick. That sort of thing. It just takes time to go through that and settle it. I mean, obviously we want to do -- we want to do a significant -- a trial that is significant but, you know, we don't want to do a large trial, and so we -- we're just looking at what those inpoints are, what the degree of significance needs to be given that we're just changing a couple of things in the disposable and we think it shouldn't be, you know, that complicated to show, and so we're just in the process of going through those discussions with the agency. We are using, you know, a broad opinion in the transfusion community on this, and it just takes some time to do.

It sounds like they are pushing for a bigger trial than 200 patients.

Well, it -- you know, the end won't be settled until we settle the end points and statistical significance. Depending on how that comes out it, could be bigger.

On the plasma front was there any change from the last quarter in terms of timing?

No, what we're looking at is getting the European submission in this year and that'll be followed by the PMA submission. We are prioritizing Europe Simply because in our visit to Europe and the feedback coming up from both Baxter and Cerus marketing is broad enthusiasm for plasma Europe. And it's a little bit different, mainly because, you know, Europe, five or six different countries, some of the major countries have requirements for pathogen inactivation or quarantine. That is not the case in the United States. We're focusing there and then we'll follow that with the U.S. application.

Okay. Two other questions. In Japan, this is the first time that I remember that you ever talked really about Japan, but I was hoping that you would be able to get to Japan in 2005 for platelets, 2006 for plasma based on your initial discussion with the Japanese authorities. What's the timing look like there?

Well, we actually coincidentally, have a group of Japanese there today we’re there in a couple weeksand we've been very active there. The timing really depends on how fast the Japanese Ministry of Health and the Japanese Red Cross are willing to move. Indications are now that they are moving -- willing to move quite rapidly. Their position in the past has been, you know, we really want you to have FDA approval and then we'll talk about what we want to you do here in terms of some clinical work and that sort of thing.

A lot of that seems -- seems to be going by the wayside because of the crisis in the blood supply in Japan, they've got thousands of infected units due to failures in that. This official government organization has directed the Japanese Red Cross and the Japanese Ministry of Health to look into this. We've met with very senior officials in Japan. We'll be back over there next month for a very major meeting with a lot of U.S. investigators going over and so on. And in fact, some of their people are going to be visiting our centers in Europe to take a look at the system. So, it is just hard to say. I think your numbers could happen, could be longer than that as well. It just depends on how fast they are willing to move.

When do you think you are going to come to us with some time lines?

We'll come to you -- we're coming to you with time lines right now on plasma. We're telling you, you know, we expect to file that application next year for Europe and follow up with the application in the U.S. You know, obviously we're launched in Europe for platelets. We will be, you know, as soon as we settle this protocol with the FDA, we can tell you more about time. It's hard to say time --

I was really talking about Japanese time lines.

I think within the next six months, I think this will clarify it. It may clarify more rapidly after this major meeting we're having in late December. You know, I -- again, I think within the next quarter or two, we'll be able to say much more about timing.

Final question for Greg. What were product revenues in the quarter?

Probably 24,000 for the quarter.

Okay.

That's our share. That's not the total product revenue that Baxter would obviously record that and they are allowing us to share that.

All right, and rest is the Armed Forces?

Right. Well Armed Forces and other [brands]-- so about $2.8 million.

What's your expectations in the fourth quarter, any materially different or no?

Well, we expect R&D to go down and we expect in the year at or under $55 million. And then G&A will be about 11 million for the full year.

What about for product sales?

Product sales, you know, we're hoping to continue the trend, but we're not making any specific forecasts at this time.

Okay. Thank you.

As a reminder, ladies and gentlemen, to register a question, please press the 1, followed by the 4 on your telephone.

Gentlemen, I’m showing no further questions. Please continue with your closing remarks.

Thanks you very much everybody, and we'll talk to you next quarter. Thank you.

Ladies and gentlemen that, does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.