Cytosorbents Corp (CTSO) 2020 Q4 法說會逐字稿

Good afternoon, and welcome to the CytoSorbents 2020 Financial and Operating Results Conference Call. (Operator Instructions) 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, Amy Vogel. Please go ahead, Ms. Vogel.

Thank you, and good afternoon. Welcome to the CytoSorbents 2020 Financial and Operating Results Conference Call. Joining me today from the company are Dr. Phillip Chan, Chief Executive Officer; Vincent Capponi, President and Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Dr. Efthymios Deliargyris, Chief Medical Officer; Dr. Christian Steiner, Executive Vice President of Sales and Marketing and Managing Director of CytoSorbents Europe GmbH; Christopher 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 filings with the SEC. Any projections as to the company's future performance represented by management include estimates today as of March 9, 2021, 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 2020 by Dr. Chan, Dr. Makis Deliargyris, Chris Cramer and Ms. Bloch. Following the presentation, we will open the line to your questions during the live Q&A session with the rest of the management team.

At this time, it's now my pleasure to turn the call over to Dr. Phillip Chan.

Thank you very much, Amy, and good afternoon, everyone. Despite the backdrop of COVID-19, we had an outstanding 2020. We announced record 2020 CytoSorb sales of $39.5 million versus $22.8 million in 2019, a 73% increase. We also announced record Q4 2020 product sales of $11.5 million versus $6.6 million a year ago, a 74% increase. Our blended product gross margins were a record 82% in the fourth quarter and 76% for the year. We had a solid balance sheet with $71.4 million in cash as of the end of the year and no long-term debt.

And we delivered more than 121,000 cumulative CytoSorb cartridges to date, which was up 51% from 80,000 a year ago, with distribution across 67 countries. In addition, we treated more than 5,000 COVID-19 patients in more than 30 countries, including here in the United States, under FDA Emergency Use Authorization granted in 2020. We received EU approval to remove ticagrelor and rivaroxaban during emergent or urgent cardiothoracic surgery, and we are also granted FDA Breakthrough Designation for the removal of ticagrelor for this application.

We also received European Union approval for our new product called the ECOS-300CY cartridge to remove inflammatory toxins during ex vivo perfusion of solid organs for organ transplant. And we also were awarded $8.4 million in contracts from the DoD to complete HemoDefend-BGA preclinical development that will enable universal plasma as well as whole blood transfusions.

One of the topics that we wanted to cover today is our sales growth strategy in the new normal. With our strong financial performance and solid cash position, coupled with solid current and anticipated demand for CytoSorb, we're executing a number of key initiatives to drive growth. First, it is to maximize what remains of the COVID-19 opportunity. And then it is to return to our pre-COVID-19 growth strategy, where we will be focused on achieving solid growth in product revenue while replacing COVID-19 sales, prioritizing the path to U.S. regulatory approval of CytoSorb based on ticagrelor removal in cardiothoracic surgery, execute on a new clinical -- our new clinical strategy in the United States and in Europe, expand our manufacturing facility to accommodate a peak capacity of $350 million to $400 million in sales, begin building out our U.S. commercialization team in anticipation of a potential U.S. approval and also driving to GAAP profitability.

For today's discussion, given that the last 3 bullets are further out, we will focus on the first 4 bullets. First, let's talk about the status of COVID worldwide. After many weeks of decline, cases of COVID-19 have plateaued worldwide, as you can see from the lower right-hand corner graph. What we've seen in the last few weeks has been a resurgence of COVID, particularly in Europe, as you can see by the darker and darker red countries, as well as in Latin America. This may be because of virus variants, so we believe that COVID-19 is still expected to contribute to revenue, particularly in the first half of the year.

In the United States, it's a similar story. However, as you can see here, COVID-19 has gone down quite dramatically. The -- on the left-hand side is a heat map of the United States in early December of 2020. And you can see -- and these represent new cases of COVID-19. And in March 2021, you can see that the activity is significantly less in the United States. And this is represented by the graph on the upper right-hand corner, where you have seen also another significant decline since January of the case -- of the new cases, daily new cases.

But what you can see also in the last couple of weeks has been a plateauing of the curve. And with now the reopening of many states where they have now recommended doing away with masks, this may actually begin to rise again. We just don't know. But that decrease in the number of new cases was also correlated in the middle graph with the cases of new deaths reported per day, now around 2,000 a day, and also by a significant decline in hospitalizations to less than 50,000, which is a positive thing.

This has been in the environment of more vaccine availability. On the lower right-hand side, you can see where we currently are. Less than 20% of the population is currently vaccinated now. But based upon projections of 1 million to 2 million new vaccinated people every day, our -- the hope is that we will get to potential herd immunity, which could happen around somewhere between 60-plus percent of the population either having been infected or vaccinated. Now the new variants may throw a twist into this because some of the new variants can actually escape potential immunity given by vaccinations and by prior infection, but this is something that we'll have to wait and see.

Our first objective is to achieve solid growth in non-COVID sales, so after COVID is done. Our underlying non-COVID-19 core business grew 32% last year and accounted for 76% of our sales. COVID-19 sales were estimated at about 24%. This is important because it shows the health of our core non-COVID businesses and increases the visibility on our potential to continue growing this year. We plan to accomplish this in a number of different ways.

First of all, we have significantly expanded our European sales team now at 95 people. Germany represents 51% of our overall product sales, followed by other direct territories where we have salespeople that represents about 17% of our product sales in 2020. And distributors and strategic partners accounted for 32% of our product sales. In Germany, we've seen that the rep productivity actually is quite good at approximately $1.2 million per rep in 2020 despite no traditional sales. Prior to COVID, the rep productivity with 8 reps was about $1.8 million per rep. So although we've dropped down a little bit, I think that the fact that they are already so productive is a very good sign.

A second focus will be to go back to sales processes that work. First of all, in-person selling to customers, in-person trade shows at medical conferences and clinical symposia, in-person training as well as a strong push on marketing activities. We benefited across the world because COVID-19 has raised awareness of CytoSorb for our therapy as a treatment of hyperinflammation and cytokine storm.

Next, we want to maximize our existing applications. We are continuing to see strength in sepsis and septic shock and many other critical care illnesses such as acute respiratory distress syndrome and lung injury, trauma, burn injury, pancreatitis and many others. And we also have about 1/3 of our overall usage historically has been in cardiac surgery, particularly in high-risk surgery and many other applications such as endocarditis and others. And last but not least are post-surgical applications. And this is one of the reasons why the reduction in elective surgeries caused by COVID hurt us in 2020. But as these procedures and the subsequent complications that often occur after these procedures, such as postoperative sepsis and other complications, we believe that this will be, again, another driver to get us back to where we want to be on the growth curve for our non-COVID business.

And then last but not least, we are going to maximize new applications. And one of those applications is something that we'll be focused on today -- in today's call, particularly on the clinical side. But this is to leverage our EU approvals to remove ticagrelor and rivaroxaban in emergency or urgent cardiothoracic surgery. We -- last year, we did not have an opportunity to maximize sales of this because of significant inability to get into hospitals, to talk to surgeons, a significant decrease in cardiac surgery workflow as well as a decrease in the effectiveness of medical conferences that were held virtually.

But we also have other applications as well. These are just some of them. The liver disease, we believe, will be one of the -- a major growth driver in the future. And Makis will be discussing momentarily the HepOnFire study that we plan to start later this year as well as new applications in ECMO. And we've seen, particularly here in the United States, but also elsewhere around the world, the concurrent use of CytoSorb with ECMO has helped many patients get off mechanical ventilation as well as decannulated from ECMO. And we hope to be able to demonstrate this in the future, particularly in the early intervention of patients who are hyperinflamed.

So with that, let me turn it over to Makis to discuss the clinical update and particularly prioritizing U.S. approval and executing the global clinical strategy. Makis?

Thank you, Phil, and good afternoon, everyone. I'd like to spend the next few minutes giving you an update on our clinical progress and the clinical programs we're running, obviously, with the priority on U.S. approval, as Phil already mentioned.

So some highlights first relating to the execution of the clinical plan that we discussed on previous earnings calls. Over the past few months, we have been scaling up our clinical, operational capabilities. We hired 8 new clinical experienced members to the team in 2020 in an effort to execute our studies in a cost-efficient and timely manner with increasing sponsor involvement. We will continue that expansion of the team in 2021. A very important addition worth mentioning is David Cox, our new VP of Global Regulatory, who dramatically increases our bandwidth when it comes to our regulatory submissions.

Going forward, we will focus on generating rigorous, adequately powered, multicenter, company-sponsored trials. These are the trials that will help us get us regulatory approvals and establish our treatments as standard of care and inclusion in treatment guidelines. We will do so by partnering with top academic institutions and world-renowned investigators. And we will take a complementary approach of RCTs, randomized clinical trials, registries but also real-world evidence and health economic projects since the ability to demonstrate the value proposition is critical in the adoption of our device.

As Phil mentioned, the COVID-19 pandemic had an impact on all aspects of the business, including in our clinical operations. There's no surprise that multiple clinical programs around the world suffered during the pandemic, and we experienced similar headwinds. And we saw that in 2 different ways: either delayed or paused enrollment of studies not related to COVID, a specific example for us was the TISORB study that's executed in the U.K. that suffered from nationwide lockdowns in the U.K.; but we've also witnessed the prioritization of COVID-related clinical research and the delay in review by the Ethics Committees and the IRBs of non-COVID-related clinical studies.

We now have an updated path to FDA approval, clearly prioritizing the ticagrelor removal during cardiac surgery application. We will be executing a U.S. IDE study, and I will spend a few minutes a couple of slides later to give you a little bit more detail. That is our top priority in 2021. However, we're also resuming the REFRESH II-AKI trial, which a lot of you have been following for a while, and we believe that soon will be enrolling patients again.

And finally, we will be pursuing a Breakthrough Designation for direct oral anticoagulant removal as well in a very similar fashion to the Breakthrough Designation that was granted to us for ticagrelor removal.

Finally, on the investigator-initiated trial side, we are still awaiting the REMOVE readout. This is another example of how COVID-19 impacted the ability to monitor size, retrieve the data and actually perform the necessary analysis for the top line results. But we do expect that to be reading out very soon.

On this next slide, there is a summary of the clinical programs that are active or will become active in 2021. You will see on this slide that the programs are categorized based on different colors relating to our cardiovascular applications and our critical care applications. We also want to demonstrate that we're taking a multidisciplinary, complementary approach to our clinical plan that includes and prioritizes RCTs, but we'll also be executing on registries and the necessary complementary studies to provide either pilot efficacy data or mechanistic evidence for our applications.

Starting on the blue on the cardiovascular side. On the top left -- on the top of the RCT column, you will see the Safe & Timely Antithrombotic Removal Ticagrelor or STAR-T study. This is going to be the IDE study executed in the U.S., focusing on ticagrelor removal in patients undergoing emergent or urgent cardiothoracic surgery. We expect that the IDE will be approved during the second quarter, and we're doing all the necessary work in the background to have the study started in the third quarter of 2021.

As noted already, we are resuming the REFRESH II-AKI trial this is also a U.S. IDE trial focusing on the reduction of postoperative acute kidney injury. And we also believe that this study will be actively enrolling in the second quarter of this year.

We recently announced that we're launching the Safe & Timely Antithrombotic Removal, STAR, registry in Europe. This is going to be an international registry. We're focusing on 4 countries initially: the United Kingdom, France, Germany and Austria. But we plan to expand as the use of CytoSorb for antithrombotic removal in real-world practice also expands. And we're estimating to be capturing and enrolling patients again in the second quarter of this year.

Finally, we have 2 single-arm studies looking at generating data, pharmacokinetic and pharmacodynamic data in ticagrelor removal, the CyTATION and TISORB studies. CyTATION is finally up and running. We had some delays in the review process by the IRBs in Germany due to COVID-19, but I'm happy to report that the study is actually actively enrolling patients. TISORB, the enrollment has greatly suffered from COVID-19 with the rolling lockdowns. One is still in place in the U.K. and all non-COVID-related research are deprioritized. We are under review for the best path forward for the study and awaiting further guidance from the regulatory authorities in the U.K.

And finally, this year, we plan to also initiate a similar single-arm PK/PD study now providing mechanistic data for rivaroxaban removal. We believe that the study will also be up and running before the year-end in 2021.

Moving on now to our critical care programs. And first is the PROCYSS study. PROCYSS is going to be a multicenter, randomized clinical trial that we're going to execute in Germany, looking at the ability of CytoSorb to provide hemodynamic stabilization in patients with refractory septic shock. We're able to submit the protocol for IRB review, which is still ongoing, but we do believe we will be able to initiate the study and start enrolling patients in the third quarter of this year.

The CTC registry is active in the United States. We now have 6 ECMO centers contributing. And we're in the process of putting together the initial experience in the publication, and we'll be submitting that in the near future. In the EU, we're expanding this registry, and we'll also be transitioning it to a more general critical care registry, the CTCC, CytoSorb Therapy in Critical Care, since we do believe that in the foreseeable future, COVID-19 will no longer have as great of an impact, and we want to be able to have a platform to capture the use of our device across critical care indications.

And finally, and you heard that from Phil earlier, we will be executing a pilot multicenter single-arm study in patients with alcoholic hepatitis who are suffering acute-on-chronic liver failure. This is important as we do believe that CytoSorb has an excellent profile in providing benefit through both hyperinflammation reduction but also removal of liver toxins that play a critical role in the pathophysiology in these patients. The protocol is currently being finalized. We are planning for IRB submission in Q2 and the beginning of the study by the year-end of 2021.

And this is the last slide on the clinical side. But as Phil previously mentioned, our top priority this year will be focusing on the U.S. IDE trial. The IDE submission is imminent, and we believe that we will have the review completed and approved IDE in the second quarter of 2021. The objective of the study will be to demonstrate the clinical benefits of intraoperative ticagrelor removal. The approach will be a multicenter study targeting high-volume U.S. cardiac surgery programs.

Importantly, we have already identified, approached, discussed, presented the study and received agreement for most of the sites that will be necessary to execute the study. We will be sponsoring the study, and the operational side will be handled by a combination of the CytoSorb's clinical team plus a CRO to assist us with the operational side. We have secured world-renowned principal investigators on an executive committee that will be overseeing the trial.

And as stated already, the ID submission is imminent. We anticipate approval in the second quarter. And we're doing all the necessary steps in the background, working in parallel work streams to be able to initiate the study and start enrolling patients in the third quarter of 2021.

And with that, I'd like to turn it back to Phil.

Thank you very much, Makis. Now turning it over to Chris. One of the questions that we've been getting a lot of is about our new partnership with B. Braun, which was just announced very recently.

Chris, could you please give an overview of our partnership there? Thank you.

Sure. Thanks, Phil. I'm very excited to welcome our newest partner, B. Braun, to the CytoSorbents partner network. This agreement represents a strategic win for the company by extending our marketing efforts for CytoSorb to a larger audience, ensuring ongoing access to the B. Braun OMNI platform and helping to validate and differentiate CytoSorb versus competing technology.

Privately held and based in Melsungen, Germany, B. Braun is one of the leading health care companies in the world. With operations in 64 countries and over 64,000 employees, B. Braun develops medical devices, pharmaceutical products and services for users around the world. In 2019, it generated sales of EUR 7.5 billion.

B. Braun Avitum, the renal therapies division, manufactures and distributes products for patients with kidney disease, including continuous renal replacement therapy or CRRT, dialyzers, needles and syringes and chronic and acute hemodialysis systems like the OMNI and the OMNIset bloodline pictured here on this slide. Amongst top players like Baxter and Fresenius Medical Care, B. Braun is recognized as a global leader in renal replacement therapy and intensive care medicine. B. Braun is the market leader in South America and has a strong presence in hospitals throughout the world.

Next slide, please. In February 2021, CytoSorbents and B. Braun executed a global co-marketing agreement officially adding B. Braun to our partner network. I'm proud to say that along with FMC, CytoSorbents is now partnered with 2 of the largest and most respected strategic partners in acute care. The goal of this partnership is to leverage the world-class marketing and sales organizations of B. Braun and CytoSorbents to significantly increase the visibility and awareness of CytoSorb and OMNI, promote access to care for critical care physicians using CytoSorb and OMNI and to generate new sales leads for CytoSorb and OMNI.

As part of the program, B. Braun and CytoSorbents will conduct joint marketing activities and customer training at major medical conferences throughout Europe, Asia Pacific, Latin America, the Middle East and Africa to promote the use of the combined technologies. Additional regional co-marketing events will be coordinated in countries where the companies are actively commercializing their respective technologies. The United States is specifically excluded.

B. Braun will supply the market with OMNI and OMNIset Plus while CytoSorbents and its network of direct sales, strategic partners and distributors will continue to supply the market with CytoSorb.

Last, let me just mention that this agreement does not alter our relationship with FMC. Our partnership with FMC remains active, and we will continue to work with them as usual in Europe, Mexico, South Korea and other parts of the world.

In closing, we're very excited about our new partnership with B. Braun and expect the relationship to help advance our CytoSorb commercial efforts and promote access to care for patients and physicians. That's it for now, and I look forward to having more updates on our progress on this topic for future earnings.

Before handing it back to Phil, I wanted to give just a quick summary of all of our partnership efforts. Today, we're partnered with 4 of the largest and most successful health care companies in the world. In the acute care space, we're working with 2 of the top 3 players in B. Braun and FMC. As we just talked about, B. Braun is the newest addition to our partner network via a global co-marketing agreement. FMC remains a long-standing partner of CytoSorbents since 2014. They currently distribute CytoSorb in 6 countries, including Colombia, Czech Republic, Finland, France, Mexico and South Korea. We also have a co-marketing agreement in place to promote the combined use of FMC's multiFiltrate acute dialysis platform and CytoSorb.

On the cardiac side, we're working with Terumo Cardiovascular. Terumo signed with us in 2016 for the distribution rights in cardiac surgery in France and Nordic countries. In 2020, we expanded our partnership with Terumo when they became our distributor in 10 states here in the U.S. under our Emergency Use Authorization for CytoSorb in COVID-19 patients.

Finally, Biocon was our first partner signing one of the earliest distributors of CytoSorb dating back to 2013. Biocon maintains the exclusive distribution rights for CytoSorb in India and Sri Lanka.

Overall, as you can see, we're in a very good company with our strategic partners. In 2021, we'll continue to invest in our partner relationships and look for opportunities to grow these relationships with the ultimate goal of driving commercial adoption of CytoSorb.

With that, I'll hand it back to you, Phil.

Thank you very much, Chris, for that overview. Now I'll turn it over to Kathy to talk about 2020 financial highlights. Kathy?

Thank you, Phil, and greetings to everyone. For today's call, I'll provide an update regarding CytoSorbents fourth quarter and full year 2020 now audited financial results. In addition, I'll provide some color around our working capital and cash runway.

CytoSorb product sales for the fourth quarter of 2020 were approximately $11.5 million, which represents a 74% increase when compared to product sales of approximately $6.6 million for the fourth quarter of 2019. The fourth quarter of 2020 represents a new company record for quarterly product sales. It should be noted that the increase in the average euro to dollar exchange rate did have a positive impact of approximately $800,000 on the fourth quarter 2020 sales.

Our total revenues, which include product sales and grant revenue, were approximately $12 million for the fourth quarter of 2020 as compared to approximately $7.4 million for the fourth quarter of 2019, representing an increase of approximately 61%.

Q4 2020 gross profit grew to approximately $9.4 million, an increase of approximately 77% over gross profits of Q4 2019. And as Phil mentioned, importantly, our gross profit margins on product sales were a record high 82% in the fourth quarter of 2020 compared to 80% for the fourth quarter of 2019.

Next slide, please. Now turning to our annual results for 2020. Product sales for 2020 were approximately $39.5 million, representing a 73% increase over product sales of $22.8 million for 2019. And this increase was driven by an increase in direct sales of approximately $8.9 million, and additionally, an increase in distributor sales of approximately $7.8 million. We also benefited from our first sales of CytoSorb in the United States under EUA, Emergency Use Authorization, for the treatment of COVID-19 patients.

Those sales contributed $1.3 million of product revenues in 2020. 2020 grant revenue was approximately $1.6 million compared to $2.2 million in 2019 grant revenue. And 2020 gross profit was approximately $30 million, an increase of $12.4 million or 70% greater than 2019 gross profit.

Next slide, please. Next, we'll take a peek at our quarter-over-quarter product sales. We've already stated that Q4 represented another record quarter. It is also significantly higher than Q3 2020 sales of $10.2 million. That's a 12.5% quarter-over-quarter increase in sales.

Next slide, please. This chart also shows our quarterly product sales. However, it breaks it out between our COVID-19 sales and our core non-COVID-19 business in critical care and cardiac surgery. And while it's difficult to quantitate, we did a detailed analysis and came up with estimates that our Q4 2020 product sales related to the treatment of COVID-19 patients were approximately $2.5 million, and total 2020 sales to treat COVID-19 patients were approximately $9.4 million or about 1/4 of our revenues for 2020.

There's no doubt that COVID-19 had a positive impact on our 2020 revenues, but we note that our underlying core non-COVID business in critical care and cardiac surgery grew 32% in 2020. The COVID-19 benefit to sales was offset to some extent by decreases in sales which were related to elective procedures, which were avoided or postponed during the pandemic such as -- particularly in cardiac surgery, where CytoSorb might otherwise have been used. As a result, as the COVID-19 pandemic is contained, elective surgeries are expected to increase, and we expect to benefit from improvements in our core non-COVID-19 business.

Next slide, please. Turning now to our year-over-year product sales chart. We can see that year-over-year product sales continue to grow. And just as important, also shown on this chart is a solid green line, which represents our product gross margins. And as you can see, we have also continued to improve product gross margins over the year with our Q4 2020 product gross margins now at 82%. And with these greater than 80% gross margins that we are now routinely experiencing, we can expect to observe further improvements in operating results as sales revenues grow.

Next slide, please. This last slide will take a look at our working capital. As of December 31, 2020, we had a healthy $71.4 million in cash. In the fourth quarter of 2020, we additionally paid off our $15 million term loan with Bridge Bank, and we simultaneously entered into an agreement with Bridge Bank where we retain the ability to draw down $15 million in term loan debt should we wish to exercise this option in the future. We also recently received approval of the sale of our 2019 New Jersey net operating loss and R&D tax credits, and this will generate cash proceeds of approximately $1.1 million, which is expected to be received in the next few weeks.

Our 2020 cash burn from operating and investing activities was approximately $7.3 million. And with our $71.4 million of cash, we believe we have sufficient liquidity to provide for the continued commercialization of CytoSorb as well as our robust clinical trial strategy.

Finally, with regard to our capital structure as of December 31, 2020, we have approximately 48.6 million common shares on a fully diluted basis.

And that concludes my report, and I'd like to turn it back to Phil.

Thank you very much, Kathy. CytoSorbents has not historically given specific financial guidance on quarterly results until the quarter has been completed. However, provided that the current order pattern continues and notwithstanding uncertainty related to the COVID-19 pandemic, we expect that product sales for Q1 of this year will exceed those of Q1 of last year. We also expect that 2021 will represent another year of growth.

That concludes our prepared remarks. Operator, if you will, please open up the call for the live Q&A session.

(Operator Instructions) We'll take our first question today from Josh Jennings with Cowen and Company.

It's clear that COVID-19 utilization -- drove utilization in 2020 and may create a comp headwind as you're heading through 2021. Any way you can just help us think about -- I know there's a lot of unknowns around with the pandemic, but how trends have gone so far in the first quarter? And then maybe just help us think about the offsets. I think you called out return of elective procedures. There'll be more utilization. We have to think that with the increased utilization for COVID cases, critical care clinicians are more comfortable using CytoSorb in the inflammatory pathophysiologic states. You've got the ticagrelor indication in a couple of countries over in Europe. Are there any other layers of growth that you would call out that will help offset any decrease in the COVID utilization channel?

Yes. Thanks, Josh. And I think that the point that we've been trying to get across is that the underlying core business that is non-COVID is very healthy. Again, it's 76% of our total product sales for last year. Even with all the disruption that COVID caused, as Kathy mentioned, we still actually showed 32% growth. And so that was actually very nice growth alone. And on top of that, it was supercharged by COVID-19.

That being said, I think that we've had a lot of growth initiatives that we had been putting into place prior to COVID, and our goal is to work on those now. And I mentioned a lot of those already in the presentation.

But maybe to give a little bit more color, Christian, would you mind maybe giving some commentary?

Yes. Thank you, Phil, and thank you, Josh, for the question. As has been said already by Phil and also by Kathy, the year 2020 was very challenging, but nevertheless, it was very successful. So it was very challenging for the commercialization teams because they were access and travel restrictions. And as has been said as well, there were less patients in our core business fields.

And so the 2020 was the very -- the most successful year with record sales and so on. And this was the result of all the work in the years before. It was not just accidentally because of the pandemic. And this is reflected by the growth we had despite having treated less patients in our core business fields -- or less than we could have treated.

So the year 2021, I think, will be challenging as well, but it will benefit from 2020. So I have a number of points I want to share with you. Number one, there is increased awareness. And this will, of course, help to support the core applications. This increased events is, one, on the treatment core, which is systemic information, but also on the therapy CytoSorb.

Number two, the sales forces and support teams are really ready and motivated and trained to go out again and see the existing and new customers. This was not possible in the last year. And there are still a lot of restrictions for our salespeople to meet customers and to look for new customers in the hospitals.

Number three, the pandemic has forced us to additionally have digital sales platforms developed. And this, of course, we will not stop when the pandemic will stop. We will use these formats in the future as well, and these will support the normal sales work with the one-to-one meetings or in-person meetings.

Number four, and this has not been underlined enough, I think. We have an expanded footprint from 2020. We have 10 more countries where we have registrations now, and we have 2 more countries with Emergency Use, which is the U.S.A. and Canada.

Fifth, I think it is very important to say that the body of evidence has grown and the body of experience. And the start of the massive clinical programs, as described by Makis, in our core business fields will feed the movement and the enthusiasm of the community.

And sixth, the further development of growth driving additional fields, as has been mentioned by Phil, will also support and catalyze the growth. And these segments are, for example, the ATR segment, antithrombotic removal currently for ticagrelor and rivaroxaban. Just to give you an example, 90% of the heart centers in Germany are customers of ours, and 50% of those are already using CytoSorb in this indication after only 1 year of -- after the approval. Similar is true for, for example, Sweden, which has one of the highest adoption rates of ticagrelor. There, we have 90% penetration in the hospitals or heart centers in Sweden.

Second, the liver segment. As Phil pointed out, liver diseases will be, in the future, a very important and prominent segment of growth. And for the short term, the goals are to replace currently used liver support techniques and, of course, also develop major indication fields.

And the third segment, which is going to be very important as a new segment, is the ECMO segment. As you know, we have used -- we have treated patients in this segment in the past. But in the last year, we have gained many, many experiences and many lessons we have learned in terms of patient selection and how to conduct a therapy.

And just to give you a little bit more color, I want to give you one of many cases as an example. So the -- this case report is from a small hospital in the south of Germany with a tiny ICU with less than 10 ICU beds. It has been a new customer last year. They only have one ECMO machine, and they never have used CytoSorb before. They had an initial training in summer but experienced -- but they have got an experienced Head of Department coming from Munich University, which was one of the advantageous situations.

So the patient was the mother of 2 in her late 30s. And they have shown up with a [PO2] gradient COVID-caused lung failure or ARDS accompanied by massive systemic inflammation and cardiovascular failure. The treating team thought that she had very little chance to survive, but they have immediately started ECMO plus CytoSorb. 3 days of continuous treatment brought or led to hemodynamic stabilization and, at the end, led to a weaning of ECMO. So the patient could get off the ECMO circuit, and she survived the acute life-threatening phase with this ECMO plus CytoSorb.

Unfortunately, this patient caught a second hit, a so-called second hit and bacterial infection leading to septic shock with massive hyperinflammation, lung and cardiovascular failure. So again, very little chances to survive the second hit. However, they started again very early the combination of CytoSorb and ECMO and have treated continuously 5 kinds of treatments. This has led to cardiovascular stabilization. The patient regained lung function and had an overall improvement with the result of getting weaned from ECMO, was discharged from ICU and discharged from hospital. And the patient is now in rehab with no long-term neurologic or kidney dysfunctions.

So this is kind of showing that we had many lessons we have learned during the last year, which we can, of course, apply for this year. And this -- for example, from this patient, patient selection is really key. It has to be patients with proven systemic hyperinflammation with hemodynamic instability and initial organ failures. We have to initiate the treatments early, and we have to dose the CytoSorb treatment adequately. And this, at the end, will lead to success in those kind of patients.

Yes, I think the situation in 2021 will be challenging. But I think also we are prepared much better than so many others. And it will be much better than for us than for many other medical device companies. I think that will be more catalyzing than slowing down effects. And as I said before, the commercialization teams are really motivated and are waiting to get out.

And last but not least, I think the massive investments of energy, money and manpower into the clinical programs will generate the fuel for sustained long-term growth in the future. I hope this is answering most of the questions, Josh.

Yes. No. Thanks for reviewing all those layers and providing all that extra detail. One -- just one follow-up, Phil. Just -- congratulations on all the progress on the movement with the FDA, on the cusp of the IDE approval for ticagrelor removal. I just wanted to hear your updated thoughts on the cardiac surgery indication now that REFRESH II trial is going to be in the process of restarting. And how do you see the U.S. regulatory time line for cardiac surgery compared to the U.S. time line for ticagrelor removal in terms of -- if things go smoothly from here, any time line you can share for potential U.S. approvals for those 2 indications?

Yes. Thanks very much, Josh. I think that what we're focused on right now is that the ticagrelor removal application is the shortest -- what we believe is the lowest risk and fastest route to commercialization in the United States. And that's why we'll be taking the top priority in our clinical program.

Now REFRESH II is -- has enrolled 153 patients into a 400-patient study. And it's just about to get going, again, as Makis had mentioned. And so that trial will be -- the completion of that trial is expected to be later out than what we should be able to do with ticagrelor. I think the good part about ticagrelor removal is that this has the potential to be a very rapid study, again, intervention during the surgery and then a relatively short follow-up period with hopefully very clear endpoints.

But again, as we as we finalize and hopefully get the IDE approved by the FDA, we'll come back with more detail on the size of that study. And then we'll also be able to estimate better the timing of that study as well.

And our next question is from Anthony Petrone with Jefferies.

Congratulations to everyone. Maybe to start, Phil, with the CTC registry. You mentioned in the prepared slides that a publication in the U.S. is being prepared at the moment. So maybe just a little bit of timing update on the CTC registry publication in the U.S. and then how we should be thinking about that trial expanding into Europe. And as we think about 2021, under a scenario where that data is positive, how do we think about potentially that adding to COVID-related sales in 2021 and maybe offsetting some of that headwind? And I'll have a few follow-ups.

Yes. I'll turn it over to Makis -- Thanks, Anthony. I'll turn it over to Makis for some additional color on that. I think that the good part is that the CTC registry has been enrolling relatively quickly. It's been doing so, I think, based on enthusiasm by centers but also by active management by the current clinical team, which I think is very good. I think that we've been accumulating, particularly in ECMO -- in many cases of ECMO and CytoSorb, again, as a way to rest the lungs and promote lung healing to try to resolve the very significant lung injury that occurs in these patients.

And again, prior to COVID, CytoSorb had already been used in thousands of ECMO treatments. And to Christian's point, it is one of the reasons why we were able to get really going very rapidly here in the COVID pandemic.

But in terms of talking about the implications of any type of analysis, let me turn it over to Makis, who can give a little additional color. Makis?

Thank you, Phil. Anthony, thanks for the question. So I just wanted to mention, in addition to the CTC data coming out of the U.S., we have a substantial experience now from around the world. And there's been publications coming out from different countries reviewing those outcomes. And we have internally formed a task force, and we're collating all the international experience. And we plan to submit for a review manuscript, looking at the ex U.S. experience with COVID-19, which is in numbers far greater than the one in the U.S.

Now regarding the CTC registry, as Phil mentioned, we are seeing that the use of CytoSorb under the EUA is frequently favored in patients on ECMO simply because it does allow for this unique therapeutic strategy of allowing for lung injury. And we are focusing on getting -- on capturing that experience and getting in the publication. We do believe we're approaching now the numbers that are -- would constitute a meaningful experience. And we do plan, like I said, to submit in the very near future.

Now we are we're going to be part of a pure review process that, in some regard, it's hard to estimate, but most of the journals have been working pretty quickly when it comes to COVID-19-related research. So we're hoping we might get some sort of an expedited 4 to 6 weeks review versus the traditional 2 to 3 months review. So it's hard to exactly give you a time line, but we're working very hard to throw it over the wall at one of those journals and hopefully ask them to have an expedited review. So we're optimistic that come late spring, early summer, we should have that data out, maybe even sooner based on the willingness of the journal to work with us to publish quickly.

That's helpful. And maybe a couple of follow-ups. Second one on the data front would just be the specific time lines on REMOVE endocarditis. I know you said that that's coming relatively soon. That sounds like potentially that's a first half event. Or is it more like mid-'21?

And then just in terms of Germany, maybe a high-level update on how many of the 400 mid-sized hospitals with a big focus on sepsis, where that penetration sits heading into 2021. And as you think about now that 20-person sales force being in a position now to sort of proactively go after accounts potentially post shutdowns in Germany, how should we be expecting 2021 to play out in terms of new center adds? And then as a quick follow-up to that, just on the penetration front on existing accounts, how should we be thinking about how that will trend in 2020?

So I'll just give you a quick answer about REMOVE, and then I'll turn it over probably to Christian to give you the answers related to penetration in Germany. So REMOVE is a German government-funded trial and run independently by an academic research organization. So in that regard, we don't have any involvement at any level, and therefore, we're just basically waiting for updates ourselves. Our understanding is that all the COVID-19-related updates, [I mean it] took us to where we are now, but now we're really, really close. So we do anticipate it would be in the first half of this year for every information we're getting from the investigators that should be having the data, the top line results by the first half of this year.

Christian, you want to take the second one?

Yes. Well, Christian, let me turn it over to you in a second. Yes. I think in terms of -- we've not disclosed -- we're in hundreds and hundreds of hospitals throughout the country. These are large university public hospitals. These are mid-tier hospitals, and these are many small hospitals as well. And so this number continues to grow. Actually, last year, however, most of our orders, I think, in our existing business in Germany was related to reorders given that our sales reps were not able to go out there and open new hospitals. Christian mentioned that there were some, but I think the vast majority of the revenue came from reorders.

Maybe Christian, you can comment on that.

Yes. Phil, this is actually right. The situation led -- or the circumstances led to the situation that it was very difficult to recruit or acquire new customers. Those who were in the process quite advanced and sometimes have the opportunity to treat COVID patients, they could be turned into customers and also successfully, as reflected by the example I just have given. But in general, I think the acquisition of new customers was very difficult and was far below what we have experienced in the past and also what we have expected for last year without COVID because, as you said already, Anthony, the sales force was increased massively towards the beginning of 2020.

Actually, the sales force is a mix of actually sales representatives and support personnel like perfusionist for cardiac surgery field and application specialists for cardiac and critical care business. So it's a very nicely functioning team, and I expect a lot of new customers for this year. But also, I expect that we will regain customers we have -- I wouldn't say lost last year, but because of the slowdown or the shutdown of different elective programs, there were just no patients in certain departments. And so these departments have not [opened] over last year or maybe over some of the quarters. So I expect strongly that they go online again when they get the patients coming from these different fields.

And our next question is from Danielle Antalffy with SVB Leerink.

The next question will be from Andrew D'Silva with B. Riley Securities.

Congrats on the progress last year. So just a few quick ones. When you're looking at international health systems and hospitals and new customers that were established due to COVID-19, anecdotally, is there like material evidence of use for CytoSorb in other indications not related to COVID-19? Basically, are clinicians understanding CytoSorb's benefits and overlaps as it relates to just critical care in general?

Yes. Andy, I think that's absolutely right. What we've seen, particularly in distributor territories where we've opened up new accounts, for example, in Latin America, Middle East and other areas, is that COVID was really the catalyst to get people to try the therapy. But once they understood the concept of what it was trying to do in terms of reducing hyperinflammation, reducing cytokine storm and reducing the severity of organ injury and organ failure, I think that this has translated into their interest in using it for other things such as sepsis, right, that is not related to COVID and other applications.

Maybe, Christian, I don't know if you can provide maybe some examples of that.

Yes. I think it's difficult. It's right, what you said. Everything is right, what you said. And it's difficult to pick out 1 or 2 examples. I think it's -- Latin America, in general, is showing exactly this happening. But also markets like, for example, Iran, which was a very strong market last year, has shown the same. Once the users are understanding what is possible, they intellectually translate this into other indications.

And this is not just true for the users. This is also true for our sales partners because, obviously, they want to build their business as well and get their investments returned. And so they -- once they understand that there's a profound advantage for the user and the patients, they can go into other indications, and that's exactly what they do.

Great. Great. Useful context. And then obviously, the pandemic spurred a lot of R&D in biopharma as it relates to therapeutics that can treat various aspects of the disease. And I was curious with the evolution of the space over the last 12 months now, have you seen anything that materially changes the competitive landscape for CytoSorb as it would have been this time last year?

Yes. I think that as the concept of cytokine storm and hyperinflammation became readily apparent, basically, many companies just came out of the woodwork with potential immunomodulatory therapies. The most promising ones that have come out, I think CytoSorb is one of them. But certainly, the use of dexamethasone in COVID-19-related ARDs was demonstrated to show benefit. But still, even with the use of dexamethasone, a mortality of 29%, we're nearly every -- 1 out of every 3 people die -- have died in on mechanical ventilation in the intensive care unit despite steroids. There's still considerable room for improvement.

The only other immunomodulator that has demonstrated a small benefit is the -- is tocilizumab, which is an IL-6 receptor antagonist. Now this is a biologic that is designed to block the activity of an important cytokine but only one -- literally more than 100 cytokines that regulates the immune response. And in this particular study, the early -- the use of tocilizumab helped shave off, I think, 4 percentage points or so, 4, 5 percentage points in the recovery study off of mortality.

What that showed, I think, is that, one, the concept of antagonizing cytokines can work. But two, given the magnitude, the relatively low magnitude of that effect, that -- and what we've seen in sepsis and many other critical illnesses is that IL-6 is antagonizing one cytokine. It's just not good enough. And I think that is the value of a broad spectrum absorber such as CytoSorb, it not just removes IL-6 very efficiently but removes a wide variety of inflammatory mediator cytokines, bacterial exotoxins, a lot of other molecules that can stimulate inflammation. And that's why I think CytoSorb has kind of carved its place out, particularly to those patients who were very critically ill.

So the rest of it is interesting but unproven. And I think that there's not much out there else that was out there. I mean there was a new study, I think, that came out on Luvox, which is an antidepressant and that -- for a very mild disease or people with very mild disease that seem to potentially prevent the progression of it, I think, in 2 small studies. And I think that, that is -- remains to be seen. But I think for those who are really in jeopardy of death, for example, you really need big guns. And that's what CytoSorb represents.

Okay. Perfect. Useful. A couple of follow-ups. Just as it relates to the blood thinner opportunity internationally, let's just use a market, Germany, for example. How do you expect the label expansion to translate to a commercial rollout as we start seeing your sales team being able to actually get feet on the ground again? And maybe compare it to some of the other label expansions you've had, whether it be with bilirubin, and why you maybe think this one would be able to accelerate faster or slower versus others you've seen in the past?

I think that in Germany, in particular, we're in most of the major heart centers today but not necessarily for this application. We've been -- this CytoSorb has been used -- in use over the years, particularly for high-risk surgery and other applications. And we were only -- we only got the approvals last year for the removal of ticagrelor and rivaroxaban. And we have not really been able to fully exploit that -- those approvals and launch this in the proper way to really drive sales.

And so I think that's the opportunity that we have in 2021 when COVID goes away and when surgical volumes begin to improve. I think that this is a market where we've heard from many, many surgeons, it's a big pain point for them and -- because of postoperative bleeding complications, really mars what was technically a perfect surgery. And we believe that this can rapidly become standard of care for this particular application. And we believe that it will penetrate this market much more rapidly than other applications that we've had, for example, in myoglobin removal for trauma or bilirubin removal for liver disease.

So I think that's -- what you're hearing, I think, from me and what you've heard from Makis is that this is a very compelling application, and this is one of the reasons why we believe that we can -- once we get going, we can capture the market in Europe and Germany. Obviously, it's one of the largest cardiac surgery countries in all of Europe. They do the majority of CABGs actually. And this is a scenario where ticagrelor is typically used.

And then in the United States as well, it's a big market for us. And again, I think the enthusiasm that we've seen going out to clinical trial centers to participate in this IDE study that we're looking to submit imminently is yet another indicator of the potential here in the United States.

Okay. And last question is just for Kathy. As far as the B. Braun margin profile, should we expect that to be fairly similar to other strategic partnerships and distribution agreements? And then the fourth quarter saw a fairly significant uptick in legal expenses and SG&A, but there wasn't really as much stock-based comp and noncash compensation. So I was wondering if there was any sort of onetime expenses that were in there that we should be thinking about? Or as we go into the first part of 2021, is that the expense rate we should really build off of?

Andy, let me just take the second one first because it's easy. There's really not any onetime legal SG&A things. I think we did point out, we made a lot of a lot of progress on some really important hires, including our new CMO, Makis, and also our VP of Regulatory that we brought in the first quarter of this year but we were recruiting for. So we did have some onetime recruitment fees that we won't expect to recur. I think you can get that in the MD&A as to the amount of that.

We did have, in total cash compensation, which is noncash stock compensation, 2 categories for the year -- I don't know what the fourth quarter impact is, but for the year, the total of RSUs awarded to our executives, which we use as a form of compensation, and then also the stock compensation expense related to the options that we give out was about $4.7 million. So hopefully, that will help you with it.

In terms of the B. Braun agreement, I think it's a -- has the potential to be a much broader driver of revenue. We'll have to see how it goes. It's new in that we're co-marketing in many, many territories versus the distributor -- the partner agreements that we've had in the past are generally limited in the territories with which we're working with those partners.

Our next question is from Sean Lee with H.C. Wainwright.

So my first question is on the PROCYSS RCT study. So could you provide some more color on the design of study? And what are its goals? Is it looking to set up some results for a future U.S. study?

Yes. Thanks, Sean. Makis, would you like to comment on that?

Sure. Thanks, Phil. So the PROCYSS study is a multicenter, randomized clinical trial. We're targeting between 20 to 30 sites in Germany. But it's still a pilot study. We have been continuously receiving feedback from the use of CytoSorb, but one of the most consistent clinical benefits is the ability to provide rapid hemodynamic stabilization, which you can imagine is a key clinical goal in these people with septic shock and requiring multiple basal pressures to maintain their blood pressure.

So this is something that we want for the first time to test in a rigorous, adequately powered way in a multicenter fashion. And that's what the PROCYSS study will focus on. However, in addition to that, we're also going to look at other important clinical outcomes in that study, including ICU and ventilator-free days. We're also going to obviously track mortality in this population. So in that regard, the idea behind PROCYSS is that it will be a definitive study in providing the evidence that we can produce rapid hemodynamic stabilization but also a pilot study to inform potentially a larger RCT looking at more traditional clinical outcomes in sepsis and shock.

Great. That was very helpful. My second question is on the HepOnFire. So the liver failure seems to be another indication that you guys are pursuing this year. So I was wondering if you could provide some of the rationale behind that or what the design of the study could be and what the treatment is like for liver failure right now. And how does CytoSorb fit into that?

I'll let Phil chime in as well on this, but let me give you a couple of specific pieces about HepOnFire. So HepOnFire is also going to be a pilot study but much smaller. PROCYSS is estimated to be in the 160-patient range. The HepOnFire will be substantially smaller. And it's a single-arm study. It's not a randomized clinical trial.

But the idea is that you will recruit patients that have underlying liver dysfunction primarily related to alcoholic liver disease but are in the midst of an acute exacerbation, where in addition to the inability of the liver to clear the toxins and the accumulations of these toxins, you have this simultaneous hyperinflammatory response. So the idea is that CytoSorb would go there and target both of these main drivers of morbidity and mortality in that population.

So the background hypothesis is actually very strong. And the idea is that we'll be able to show both the biomarker modifications in this population but also track the course of traditional risk course used in these populations and demonstrate that these patients do better than what is currently the standard of care of treatment in that population. So it's meant to be a pilot study, but we feel very strongly about the application based on the pathophysiological substrate of where CytoSorb should be able to generate a lot of benefit.

I don't know, Phil, do you want to add any color to that?

Yes. I mean liver dialysis has been out there for a while. MARS was actually -- remains one of the leading liver dialysis platforms in the world, but it hasn't really fulfilled its commercial potential because I think it's difficult to use. It's a multi-cartridge system. And it does not, as Mike has said, it may -- it removes liver toxins, but it doesn't remove the inflammatory toxins that are often driving a lot of the reasons why that person is in the hospital in the first place and having such a bad exacerbation of their chronic liver disease.

And so I think that CytoSorb, in a head-to-head study with MARS that was published earlier this year, actually demonstrated actually superiority in the ability to remove different things. And some of those things include, for example, we can remove bilirubin extremely well. We can remove ammonia, bile acids and a number of different things that are related to the pathophysiology of liver disease.

And so where we're going now though is that we believe that CytoSorb actually has a single cartridge system, easy to implement, can potentially become the leader in this field. And that's one of the reasons why we're really excited by the opportunity and one of the reasons why we're pushing forward with the single-arm HepOnFire study. But also, we'll be pushing forward on the application for commercial sales because if you are someone who believes in liver dialysis, we believe that there's a lot of advantages of CytoSorb over existing albumin-based therapies like Prometheus and MARS and SPAD and others.

And our next and final question is from Danielle Antalffy with SVB Leerink.

Sorry about earlier. Can you hear me now?

Yes, we can.

Okay. Perfect. Sorry about that. So I'm not sure if this question is for you, Phil or Kathy. But just curious how sustainable the gross margin profile is in the near term as the global ramp progresses and, just over the near to medium term, what the drivers are of operating leverage. And then one quick follow-up.

Sure. Maybe, Vince, you can comment on sustainability of margins and where those are going. And then I'll cover maybe the operating leverage question.

All right. Thanks, Phil. Thanks, Danielle, for the question. So Danielle, it is sustainable. Clearly, we are continuing to improve the efficiency you saw in Q4. And as we go to the next scale, we'll be able to improve that efficiency even further. The thing we always have to keep in mind, obviously, is volume, which has a big component of that, as well as product mix between the more efficient -- the more revenue efficient direct sales versus distributor sales. So we believe it's sustainable, and we can continue to drive the gross margin forward.

In addition to that, we're obviously looking at other second-generation devices, which will be more efficient to assemble and be more audit -- more capable of being automated to be able to drive the volume with less labor and, therefore, better cost. Phil?

Yes. When we discuss our operating margins, we think we can be among the best in the industry, right? So medical device margins, as you know, kind of are in that range of 15% to 20% operating margins. And some players like Edwards are in the 30%, but they've been as high as 50% in the past. And we believe that we're bringing a lot of innovation to the table that has tremendous value clinically. And we believe we have an excellent business model where we can be on the high end of that 30% to 50% operating margin range.

When you think about the kind of levers that we can pull on how we try to optimize our operating margins and improve our operating leverage, there's really a number of big buckets, right? So one is, obviously, top line growth. And if everything goes well, we believe that 30% to 50% top line growth is possible. And if we get U.S. approval, we could potentially even exceed that growth rate.

The second thing is that from a gross margin perspective, it's really based on a number of things. One is ASPs, right? So currently, our ASPs are relatively fixed. But in the United States, however, which is a fairly virgin territory, we believe that the ticagrelor application could potentially command a much higher ASP than we're currently receiving in Europe because of the -- if we're able to demonstrate the health economic benefits of decreased bleeding risk and other types of decreased stay in ICU, et cetera, et cetera. This could have the overall effect of actually increasing our ASPs over time, which is a major component of gross margins.

And then as Vince mentioned, at 82% blended product gross margin, that mix is higher-margin direct sales and lower-margin distributor sales. This is actually really high for any company in the health care space, right? So when you look at the pharma industry, they're kind of in that 70% range in gross margins, and -- but our margins that could potentially exceed 85% this year are more in the biotech range of 80% to 90%.

So as Vince mentioned, where the kind of beneficiaries of all the cost downs because we are the manufacturer of the device. We think that scale, particularly moving to a new facility that may have a capacity of about $400 million in annual sales, that's going to allow for -- at a relatively modest CapEx, that's going to allow for increased efficiencies and another drop in COGS. And then as Vince mentioned, we'll also be introducing more auto information, which will also help to decrease our COGS as well.

And then the last big bucket is really control of operating expenses. What we already said is that our reps in Germany are doing about -- our reps and specialists are doing about $1.2 million in sales. But we've already seen that one hospital can be $1 million to $3 million for sepsis alone. And because of that, we believe that the productivity of a rep could actually be quite high, could actually be potentially above $5 million a rep, right? And so the more that we can maximize the productivity of our sales team, I think the better control we'll have over our operating expenses, and that just ultimately feeds into the model.

I think that also we've been able to offset the cost of innovation through grants and -- government grants and contracts, which we've done very effectively. We have a hybrid sales model, where we go direct and certainly would benefit from higher margins in direct sales. But we also don't have to shell out the infrastructure to go -- to have this reach across 67 countries. That will likely continue.

And then last but not least, what Chris was talking about, leveraging the infrastructure partners and their resources is another way that we can help to control our operating expenses. So I think that there's a lot of reasons why this is -- we believe this is actually a superior business model that has the potential for very significant profitability and cash flow. I think that's one of the reasons why we're so excited by it.

Okay. That's helpful. And then just a quick question. I appreciate this will be dependent upon timing. So I'm going to ask the question this way. And once you do secure U.S. approval, how we should think about the ramp trajectory and how much you can leverage your -- the existing hospital -- or the current hospital experience in light of COVID in the U.S. to drive a potentially faster ramp than maybe a normal product launch.

Yes. Thanks, Danielle. I think that we brought on some great resources. Vince is leading U.S. commercialization. We've now brought on Jim Komsa, who is VP of U.S. sales and marketing. And I think the goal going forward is to try to find the best model to get the greatest coverage at the -- at the lowest cost. We have the resources to go direct throughout the entire country. But that may not be the ultimate strategy because we know that the unit volume, the patient -- the surgical volume is often highest in metropolitan centers, and we can absolutely focus in these areas while using distribution elsewhere to help supplement that.

And we've been working with some great partners under the FDA Emergency Use Authorization for COVID-19 in the United States, and they may be in the mix. And so we'll see. But that being said, the opportunity to penetrate this market rapidly, we believe, is very strong provided that we have a successful study, and we have the compelling both clinical and health economics data and make that happen.

At this time, I would like to turn it back to management for any additional or closing remarks.

Well, thank you, everyone, for joining today's call. If you have any additional questions, please reach out to Amy at avogel@cytosorbents.com, and we'll try to reply to your questions where possible. Thanks very much.

Thank you. That concludes our conference for today. I'd like to thank everyone for their participation, and have a great evening. Thanks.