Cytosorbents Corp. 2026 Q2 Earnings Call

Good afternoon, everyone. Welcome to Cytosorbents' second quarter 2026 conference call. Joining me today is Dr. Philip Chan, our Chief Executive Officer, Dr. Mikas Deliargyris, our Chief Medical Officer. During today's call, we will have an overview presentation covering the operating and financial highlights for the second quarter of 2026 and a review of our four key drivers of value creation, including a regulatory update on our process to obtain U.S. marketing approval for DrugSorb-ATR. Following the presentation, we will open the lines to analysts for questions. Before I turn the call over to Phil, 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.

The company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. The forward-looking statements we make today may reflect our reviews and estimates as of today, August 6, 2026. We assume no obligation to update these obligations in the future as market conditions change. We encourage investors to review the risks discussed in our annual report on Form 10-K, filed with the SEC on March 30, 2026, and as updated by risks reported in our quarterly reports on Form 10-Q and in press releases and other communications to shareholders issued from time to time. In addition, for a reconciliation of non-GAAP measures, please refer to today's press release and the corporate presentation on the investor section of the company's website. Now I'll turn the call over to Phil.

Phil? Thank you very much, Peter.

Thank you very much, everyone, for joining today. Turning to our operational update, when I think about the second quarter, one word comes to mind, progress. While we recognize that our share price continues to reflect skepticism regarding our ability to execute, we believe the company today is materially stronger than it was just one year ago. Over the past year, we have fundamentally reshaped our organization. We've significantly reduced our operating cost structure, improved manufacturing efficiency, strengthened our commercial organization, advanced our regulatory programs, and substantially reduced our operating cash burn. Importantly, these improvements are not theoretical. They are now being reflected in our financial performance. Before discussing the quarter, I'd like to remind investors what Cytosorbents has become. We've built a proprietary blood purification platform based on our highly engineered polymer technology. Today, this platform supports two major franchises.

First is our commercial CytoSorb business, which has now generated over 300,000 treatments in more than 70 countries and continues to produce high-margin recurring revenue. Second is DrugSorb-ATR, our investigational cardiovascular device, which we believe has the potential to open an entirely new U.S. growth engine. Together, these businesses provide us with both a growing commercial presence around the world. I believe this slide summarizes the quarter very well. Revenue remains stable at approximately $9.6 million. Gross margins improved to 73%, representing continued manufacturing excellence. Most importantly, operating cash burn declined to approximately $200,000, excluding restructuring costs, bringing us substantially closer to our objective of achieving operating cash flow breakeven. These improvements did not occur by chance. They reflect disciplined execution across manufacturing, commercial operations, expense management, and cash management.

Collectively, they position the company significantly better than we were 12 months ago. Although we're pleased with our operational progress, we recognize that investors ultimately care about value creation. We believe Cytosorbents now has four largely independent opportunities to create meaningful shareholder value over the next 6-18 months. The first is to achieve operating cash flow breakeven. Second is to return our core CytoSorb business to sustainable revenue growth. Third is opening the U.S. market through DrugSorb-ATR, and finally, unlocking the strategic value of our HemoDefend-BGA franchise. Each of these initiatives can independently create value, but together they represent a compelling pathway to fundamentally strengthening our company. I'd like to now turn the call over to Pete Mariani to discuss our progress towards operating cash flow breakeven.

Pete? Thanks, Phil. Achieving operating cash flow breakeven has been a key objective for us, and we're pleased with the continued progress toward this goal in the quarter, including an increase in gross margins to 73%, a 27% reduction in operating loss, and a 38% improvement in adjusted EBITDA loss.

Importantly, a reduction in our operating cash burn to $200,000, excluding restructuring payments. These gains reflect disciplined execution across our organization, including manufacturing optimization, improved working capital management, commercial execution, and tighter cost controls. As a result, we remain on track toward our objective of achieving operating cash flow breakeven in the second half of this year. This slide shows the positive 12-quarter trend line noting the improvement in negative free cash flow, which we define as total cash used in operating activities plus cash used in investing activities, and demonstrates the meaningful progress towards this important objective.

We believe that achieving cash flow profitability is important because it fundamentally changes the company's financial profile. Every dollar of operating cash burn eliminated reduces future financing needs, strengthens our balance sheet, increases strategic flexibility, and allows a greater proportion of future growth to accrue to shareholders. Although important work remains, we believe that progress achieved over the past year demonstrates that this strategy is working and that we remain on path to achieving our goal of becoming operating cash flow breakeven in the second half of this year.

Phil? Thanks, Pete. Now we get to our value driver number 2, which is returning the CytoSorb business back to growth.

Our commercial strategy remains focused on returning CytoSorb to consistent growth. This quarter, growth was driven primarily by our distributor network, which was up 16% year-over-year, and direct sales outside of Germany, which was up 9% year-over-year. Germany remained challenged following our restructuring due to headcount restrictions. The smaller organization is becoming increasingly productive. We've strengthened leadership, improved execution, and intend to selectively hire three to five additional sales representatives through early 2027 to restore country coverage. Outside Germany, we're encouraged by continued momentum. Geopolitical instability temporarily affected our Middle East business, physician interest remains strong, and we continue to believe that this region represents meaningful future upside. Commercial success ultimately depends upon consistent physician education.

Our strategy continues emphasizing the right patient at the right time with the right dose. We're also seeing growing physician interest across multiple critical care and cardiac surgery applications, while continuing to introduce our HotSwap technology, which further expands our platform capabilities by enabling the switch out of the device more frequently. The feedback on our PuriFi platform continues to be very positive, and the placement of these machines continues to grow. This is a platform that is intended to help centers use our therapy earlier, and in doing so, collectively be able to drive the treatment of the right patient at the right time with the right dose. With that, I'd like to now turn it over to Dr. Mikas Dellagioras to talk about the third value driver, which is opening the U.S. market through DrugSorb-ATR.

Mikas? Thank you, Phil, good afternoon to everyone on the call.