CytoSorbents Corporation Aktie

Good afternoon, ladies and gentlemen, and welcome to the Cytosorbents' First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

As a reminder, this call is being recorded.

And now I would like to turn the conference over to Pete Mariani, Chief Financial Officer. Please go ahead.

Thank you, Kathleen, and good afternoon, everyone. Welcome to Cytosorbents' First Quarter 2026 Conference Call.

Joining me today is Dr. Phil Chan, our Chief Executive Officer; and Dr. Makis Deliargyris, our Chief Medical Officer.

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. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. The forward-looking statements may make -- we make reflect our views and estimates as of today, May 13, 2026, and we assume no obligation to update these projections 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 the risks reported in our quarterly reports on Form 10-Q and in press releases and other communications to shareholders issued from time to time.

During today's call, we will have an overview presentation covering the operating and financial results for the first quarter of 2026 and provide 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.

And now I'll turn the call over to Phil. Phil?

Thank you very much, Pete, and good afternoon, everyone. Before I start, I'd like to remind everyone of the current regulatory status of our products. CytoSorb is commercially approved in the European Union and many international markets for multiple indications including cytokine removal, Bilirubin and Myoglobin removal and removal of certain antithrombotic agents during cardiothoracic surgery. However, CytoSorb is not currently approved or cleared in the United States or Canada outside of its prior emergency use authorization during COVID-19. Similarly, DrugSorb-ATR remains an investigational device and is not commercially approved in any geography at this time.

I'll begin with an operational overview of the quarter and our continued efforts to strengthen and streamline the business, while positioning the company for future growth. Cytosorbents today is built around a differentiated blood purification platform technology designed to remove harmful substances directly from the bloodstream in critically ill and cardiac surgery patients. What continues to make this business attractive is the combination of a high-value therapy with a highly scalable razor blade type recurring revenue model that integrates into the existing blood pump infrastructure in hospitals. Our core CytoSorb business continues to expand internationally, generating core product sales of more than $37 million in 2025 with over 300,000 devices used cumulatively in more than 70 countries around the world.

At the same time, DrugSorb-ATR represents a potentially transformational opportunity in cardiac surgery and blood thinner removal. We continue to believe the unmet need here is substantial. And importantly, we now have clear direction from FDA regarding the path forward. We will also discuss a potential parallel path to U.S. regulatory approval as well.

Turning to our first quarter performance. Revenue grew 2% year-over-year to $8.9 million, despite several temporary external headwinds. One of the most encouraging developments was the continued deceleration in our Direct International business outside Germany, which grew 13% year-over-year. We believe this reflects improving physician awareness, stronger execution and increased adoption in key accounts, particularly driven by an outstanding team. In Germany, sales declined mostly year-over-year. But operationally, we are actually very encouraged by the progress we're seeing. Our smaller and more focused commercial organization is executing better, productivity has improved and customer engagement has strengthened under new leadership.

As we stabilize the market, we plan to selectively rebuild portions of the sales force to expand coverage and reaccelerate growth. Distributor sales were flat overall, but were negatively impacted by geopolitical disruption in the Middle East, particularly surrounding the U.S. Iran war, which delayed approximately $0.5 million in expected orders, primarily affecting our Dubai subsidiary and portions of the broader EMEA region. From a margin perspective, gross margins remained strong at 69%. The modest decline versus last year was intentional as we strategically slowed production levels to reduce inventory and improve working capital efficiency.

Importantly, we continue to make operational improvements within manufacturing that we believe will support future profitability. One of the most important areas of progress for CytoSorb globally has been the continued refinement of how physicians use the therapy in clinical practice. Increasingly, we believe successful outcomes depend on identifying the right patient, initiating therapy at the right time and applying the appropriate treatment intensity or in other words, a dosing strategy. This evolving treatment paradigm is helping physicians optimize the use of CytoSorb across a wide variety of highly acute and often life-threatening conditions.

Today, CytoSorb is being used in many conditions, including septic shock, trauma, rhabdomyolysis, liver failure, acute respiratory distress syndrome, cytokine storm, many different types of infectious diseases, post-surgical complications, transplant medicine, pancreatitis and increasingly blood thinner removal during cardiac surgery, just to name a few. We are working to define what the right patient looks like in each of these situations. Meanwhile, we continue to teach centers that early intervention is critical to the success of our therapy.

This right timing is being enabled by our stand-alone PuriFi pump that enables easy treatment without a patient needing to be in renal failure on dialysis. We have placed more than 100 of these pumps internationally and believe it's an important part of our enablement strategy. Furthermore, just like antibiotics, to have the best outcome and to fully control the out-of-control inflammatory response users need to treat for the right duration and intensity. This right dosing is being facilitated by our recent launch of the HotSwap device, which enables the rapid exchange of CytoSorb devices. It continues to generate excellent reviews. As physicians gain more experience with the technology and treatment protocols continue to evolve, we believe this growing body of real-world experience strengthens both the clinical value proposition, the clinical conviction and the commercial opportunity for the platform.

In addition to the clinical performance, we continue to see growing evidence, supporting the economic value proposition of our CytoSorb therapy. This study from a Swiss high-volume center evaluated 246 septic shock patients and demonstrated important differences in outcomes between standard of care alone and standard of care plus CytoSorb therapy. Despite treating sicker patients at baseline, the CytoSorb group demonstrated significantly shorter ICU stays, shorter overall hospital stays and reduced ventilation times for survivors that averaged approximately each about 6 to 7 days.

Also, CytoSorb used significantly lowered nursing workload intensity. Importantly, these operational improvements translated into meaningful improved financial outcomes for the hospital system itself with significantly higher net earnings per patient case. We believe this type of data is increasingly important in today's health care environment where hospitals are under growing pressure to improve efficiency, optimize ICU resource utilization, reduce length of stay and manage staffing burdens. The ability to potentially improve both clinical and economic outcomes simultaneously remains an important differentiator for our technology.

At this point, I'll turn the call over to Dr. Makis Deliargyris, our Chief Medical Officer, to discuss our clinical and regulatory progress. Makis?

Thank you, Phil, and good afternoon to everyone joining our call. Before we move on to the regulatory updates, it's important to review, once again, the problem that we're trying to solve the DrugSorb-ATR. And that problem is blood thinners and cardiac surgery. As of today, tens of millions of patients worldwide are on this direct oral anticoagulants like Eliquis or Xarelto or anti-platelet agents like Brilinta that they take those medications either acutely to reduce risks of heart attacks or chronically to reduce their risk of stroke, new heart attacks or serious thrombotic complications. These patients, on an average, need surgery about 1% to 2% of them every year frequently emergent surgery, which usually is cardiac surgery since they suffer from cardiovascular disease.

Specifically, among all emergency cardiac procedures, about 5% to 10% of patients are on chronic drug therapy at the time of surgery. Similarly, among heart attack patients who are treated with anti-platelet drugs like Brilinta, about 5% to 10% of them are not eligible for a stent and do require also urgent CABG surgery. The problem arises by the fact that the blood thinners when present during surgery, this significantly and substantially increased the risk for severe frequently life-threat bleeding. Currently, the only option for these patients is to delay surgery for multiple days and to allow for drug clearance out of the body.

However, this is far from a perfect solution. First of all, many patients simply cannot wait. The situation is too acute, too critical, and they cannot afford multiple day delays and need to proceed for emergency surgery. Second, even among those who can wait, they are exposed to potentially additional complications during this waiting period, severe complications, including death, and at the same time, they're consuming valuable hospital resources like intensive care beds simply waiting for a drug to wash out. And this is where DrugSorb-ATR, a twice designated FDA breakthrough device, has the potential to address this pervasive and serious unmet medical need.

Next slide, please. In terms of our FDA regulatory update for DrugSorb-ATR and Brilinta, it is important to remind our audience that in August of 2025, we received the FDA decision or appeal of the original de novo submission. FDA upheld the prior denial decision and required additional information, primarily related to real-world evidence on clinical outcomes to support the company's desired label claim that would have to be included in a new de novo submission.

However, there were 2 very important and very positive outcomes of the appeal process and outlined the appeal decisions. First of all, FDA did not identify any issues with device safety, which is a key to the benefit risk ratio that FDA uses to judge for de novo approval. Second, it's our understanding that FDA agreed that the upcoming submission would be focused only on the remaining open items, potentially giving the opportunity for a focused and expedited review.

In January 2026, we held a formal pre-submission meeting with FDA and have since continued to have interactive discussions with FDA to confirm the requirements for the new de novo submission, including whether all the requested information would be needed in the submission itself or whether it could be a post-marketing requirement. During these discussions, FDA has requested that additional mechanistic data be included together with the real world evidence within the new de novo submissions.

Accordingly, we are evaluating the options to generate the additional mechanistic data which we plan to discuss with FDA and incorporate their feedback before completing the required work. This will likely delay the new de novo application submission to late 2026, early 2027. However, we now have a clear direction from FDA, and we plan to file as soon as possible. Following submission, a regulatory decision is typically expected within a 150-day review period, although timelines may be accelerated or extended based on the nature and scope of FDA interactions during the review process.

Next slide. Meanwhile, the main results of the STAR-T randomized clinical trial are now published and available online. In the paper that you see on the slide, the front page, the principal investigators of the study, together with the executive committee and the top enrollers summarize the main observation from the STAR-T trial. The paper is available online, open access, which means you can feel free to download it for free, and we urge you to do so and read it in great detail. However, we'd like to highlight the central message as the authors and the editors of the journal selected.

By the way, it's important to note that the journal that published the paper is the most read journal by American cardiac surgeons, the journal of thoracic and cardiovascular surgery. In the central message, the authors concluded that DrugSorb-ATR used for ticagrelor removal is safe and can reduce the severity of bleeding after isolated CABG in patients operated within 2 days of drug discontinuation. And what you see on the graph is a more than 50% reduction in the composite of severe bleeding events either defined by a standardized bleeding definition or via the volume of blood loss after surgery, with the use of the device.

Next slide. Today, we would also like to share an additional regulatory update and a potential [indiscernible] goal, specifically relating to the removal of DOAC. We have previously discussed our intention to pursue an expanded label for DrugSorb-ATR to include the removal of direct oral anticoagulations -- anticoagulants following initial marketing approval for ticagrelor removal. However, meanwhile, real-world evidence and publications continue to grow for the DOAC removal indications. As such, within the next 30 days, we plan to submit a separate pre-submission request to FDA to review the data that is currently available for the DOAC indication and determine what, if any, additional information may be required to support a parallel de novo submission for DOAC removal.

This strategy is consistent with the, already received, second FDA breakthrough device designation for DrugSorb-ATR to remove drugs during cardiac surgery. As we previously stated, tens of millions of these patients are on chronic or lifelong DOAC for diseases such as atrial fibrillation, deep venous thrombosis or pulmonary embolism. In fact, Eliquis is the #7 pharmaceutical in the world with $14.4 billion in sale -- in global sales in 2025, whereas Xarelto is also a blockbuster with $5.1 billion in sales in 2025, and they are the market leaders of the category. Therefore, potential FDA marketing approval for both Brilinta and DOAC removal in cardiac surgery could expand the total addressable market for DrugSorb-ATR to $500 million, up to $1 billion in the U.S. alone.

Next slide, please. Finally, I'd like to share some exciting news about some upcoming presentations in 2 very important cardiovascular conferences. The evidence base for antithrombotic removal in cardiac surgery continues to grow. And as such, we have been submitting original analysis to some of the most attended conferences worldwide. Specifically at the EuroPCR meeting that is taking place next week in Paris, which happens to be the world's leading course in interventional cardiology, we have 2 key presentations will be made on antithrombotic removal.

The first one titled Urgent CABG in ACS, impact of P2Y12 inhibitor choice and intraoperative hemoadsorption on perioperative bleeding, a propensity score matched analysis of real-world data. This is a comparison of strategies employed today in everyday practice. We're comparing outcomes from hospitals that use routinely ticagrelor and our device during urgent surgery versus the outcomes observed among hospitals who opt for a different antiplatelet drug, like clopidogrel or Plavix and they do not use the device. Using sophisticated statistical methods to ensure that the populations are comparable, we're able to see the difference -- the choice of P2Y12 and device use can make when it comes to bleeding.

The second presentation, specifically on DOAC removal during CABG. This is going to be the first data we present to this audience. And these are data that are coming from the STAR registry, again, showing that it's not just Brilinta, but also Eliquis and Xarelto that are frequently on board in patients required urgent CABG. Later this year, in Munich at ESC 2026, which is taking place at the end of August, which happens to be the world's largest cardiovascular conference. We have 2 additional analysis being presented on antithrombotic removal during cardiac surgery. Again, we're talking about the ticagrelor removal during urgent CABG, but we're comparing to hospitals who also use ticagrelor, but do not use the device.

Again, very sophisticated statistical methods are being employed on patient-level data to ensure these populations are appropriate for comparison. And then finally, a very exciting analysis from the collection of German Heart Centers who have incorporated their device as part of their routine care to treat multiple different types of blood thinners. So this analysis is not specific on any one blood thinner, but simply the strategy of using a device whenever patients or blood thinners require urgent CABG. Now this analysis and the data are embargoed until the date of release at the conference, so we cannot go into more details. But obviously, we're very excited about this release of this new data that we believe highlight the increasing adoption of our technology by leading Heart Centers in Europe and their enthusiasm around the reductions in bleeding they're experiencing with the use of our device as part of their protocols for patients from blood thinners. It's important to note that it's very difficult to get any analysis accepted, these are very competitive conferences. So I think that also shows the enthusiasm among the broader cardiovascular community even among those who do not have access to the device about learning the potential benefit of this novel solution in their everyday practice.

So thank you for your attention. And with that, I will turn it over to Pete now.

Thank you, Makis, and good afternoon, everyone. Today, I'll be reviewing the first quarter 2026 financial performance and important updates that continue to strengthen our business. First quarter revenue, as Phil noted, was $8.9 million, an increase of 2% over prior year and down 7% on a constant currency basis. As Phil noted, first quarter revenue includes approximately 13% growth of our International Direct markets, partially offset by lower revenue in our direct German market. Although our direct German sales were down over the prior year, we continue to see signs of improved leadership and sales processes, account targeting and customer engagement with a smaller and more focused team and plan to selectively expand this team to improve account coverage and drive growth across cardiac surgery and critical care.

And distributor sales were flat year-over-year as progress across several territories was offset by delayed distributor orders of approximately $500,000 in parts of the Middle East and neighboring regions due to geopolitical and economic instability related to the U.S. Iran war. This unexpected disruption has slowed the anticipated growth of our recently established subsidiary in Dubai, although we expect conditions to improve as the conflict stabilizes. Gross margins for Q1 was 69% compared to 71% in the prior year. The lower gross margin reflects a planned reduction in unit production in the quarter, which allowed us to improve working capital and cash burn by lowering inventory levels to $4.8 million at the end of the quarter compared to $5.3 million at the end of the year.

And operating expenses were $9.2 million for the quarter compared to $10.1 million a year ago. The year-over-year decrease reflects lower research and development and clinical project spend and other compensation costs reflecting initial benefits of our strategic headcount and cost reduction program implemented in the fourth quarter of last year. We expect the costs will continue to decrease sequentially as a full benefit of our cost reduction program develops across the next few quarters.

Our operating loss improved approximately 22% in Q1 to $3 million compared to $3.9 million in the prior year, reflecting the lower operating expenses. Net loss increased to $5.1 million for the quarter or $0.08 per share compared to a net loss of $1.5 million or $0.02 per share in the prior year and it's primarily due to the noncash impact of changes in foreign currency transactions over the year -- or year-over-year. However, adjusted net loss for the quarter which removes the noncash impact of foreign currency gains and losses and noncash stock compensation improved to $3.4 million or $0.05 per share compared to an adjusted net loss of $3.7 million or $0.06 per share in the prior year.

Adjusted EBITDA loss for the quarter, which also removes the noncash impact of foreign currency gains and losses and noncash stock compensation improved to $2.2 million compared to an adjusted EBITDA loss of $2.7 million in the prior year. Our total cash, cash equivalents and restricted cash was approximately $6.4 million on March 31 compared to $7.8 million at the end of the year. Total cash burn in the quarter improved to $1.1 million, excluding $300,000 of restructuring-related payments in the quarter. The improvement reflects the initial benefit of our cost reduction program and improved working capital dynamics in the quarter.

Fourth quarter of 2025, we implemented the strategic workforce and cost reduction initiative, reducing headcount by approximately 10%, while lowering operating and production expenses. The initial benefits of this program were reflected in lower operating expenses and improved margins in the first quarter, and we have continued to make additional operational improvements and taken further steps to reduce costs in the first quarter and believe these actions will continue to drive improvements in the coming quarters in support of our goal of achieving operating cash flow breakeven in the second half of the year.

Now I'll turn the call back over to Phil.

Thanks, Pete. Overall, while the first quarter included both macroeconomic and geopolitical challenges related to the U.S. Iran war. We believe the company continues to make meaningful progress across multiple fronts. Operationally, we are improving efficiency and stabilizing key markets. Clinically, the evidence base supporting both CytoSorb and DrugSorb-ATR continues to strengthen, and strategically, we now have greater clarity regarding the FDA pathway moving forward with a dual pathway potentially possible.

Overall, we believe Cytosorbents today represents a compelling combination of an established commercial platform business together with a potentially transformative regulatory growth opportunity. The core CytoSorb business continues generating recurring high-margin revenue globally across critical care and cardiac surgery. Meanwhile, DrugSorb-ATR provides potential long-term upside through 2 FDA breakthrough device designation, targeting large unmet needs in cardiac surgery patients on blood thinners. At the same time, we are remaining disciplined financially and operationally as we work towards achieving operating cash flow breakeven in the second half of this year.

We believe the company is becoming leaner, more focused, operationally stronger and better positioned for long-term sustainable growth and shareholder value creation. With that, thank you again for joining us today and for your continued support of Cytosorbents. Operator, we are now ready to begin the question-and-answer session.

[Operator Instructions]

Your first question comes from the line of Michael Sarcone of Jefferies.

Yes, Phil, thanks for the update around DrugSorb and the regulatory environment. I was wondering if you could elaborate more. You talked about the FDA is requesting additional mechanistic data being included in your new de novo submission. Can you maybe just talk about what are the various scenarios or forms that, that data could take. And what would be the kind of requisite investment required on the part of Cytosorbents.

Yes. Thanks, Mike. Let me actually turn it over to Makis to answer that question, and I can provide some additional color after that. Makis?

Yes. Thanks, Phil. And Michael, thank you for the question. So basically, the term mechanistic data refers to the fact that we're moving -- these are non-clinical outcome data that we're looking for. And these are data to support the mechanism of action of the device. Now these data are, in general, do not require the resourcing of running a clinical trial, and I think that's why we wanted to make that distinction. These are non-clinical studies we're being asked to run, it's more of experimental designs that will provide this additional information. So we are assessing the options that we have right now in exactly what type of experiments can we generate the information.

We're working together with FDA to finalize those designs. We don't have them finalized yet. And as such, we can't comment with any more detail about what that data would look like. However, I just want to make sure that it's clear that these are non-clinical studies that require a long duration of follow-up, multiple patients or multiple sites working together, and therefore, heavy resources to support them. So once we have more clarity and we're able to come to an alignment with FDA. I think at that time, we would potentially disclose more information around the design of these experiments.

Okay. And I mean -- but I guess for my own understanding, could that include something like real-world evidence or [indiscernible] data from a single site? Is that something that could address something like this?

Yes. I think it's important to understand that these are non-clinical outcomes we're looking for, right? So this is not necessarily to expand the existing real-world evidence that we have, this is supplementary information around the mechanism of action of the device. So these are not clinical outcome trials or experiments that we're talking about.

And then I guess, my second question or third technically, on the potential for expanding the label, the DOAC, I guess what is your hope you submitted for kind of a pre-submission meeting with the FDA to review some of the data. In the best case scenario, what do you hope the FDA kind of comes back with in terms of the easiest pathway and the most efficient pathway towards getting this expanded label?

I think that's an excellent question, Michael. But I think to be able to truly give you an answer that's meaningful, that would have to happen after we meet with the FDA. What we're saying today on the update is that we believe we have enough information to go ahead in front of them and basically leverage some of the real-world experience with the device in some of the accumulating publications and data that are out there and see what they would need in addition to what we already have, that may not even need much more. We just don't know how they're going to view the DOAC application in comparison.

We do have clarity with ticagrelor and Brilinta, but we want to gain a similar clarity with DOAC and we want to have that alignment early on. And that's why now that we believe there's a substantial body of evidence already collected. We want to be able to present to them so we can move forward with [indiscernible] in fashion to be able to compile the necessary information and proceed with the parallel [indiscernible] submission for DOAC removal?

And your next question comes from the line of Tom Kerr.

A couple of business questions. We don't talk much about the Middle East business. Can you expand on that? Which country? Is it all distributor business? Or is there any direct sales in the Middle Eastern region? Just any more color on that.

Yes. Last year, we established our subsidiary in Dubai, UAE and talked about the exciting opportunities in the Middle East, particularly in large countries like Saudi Arabia, where if you look at the historical publications coming out of the Middle East, Saudi Arabia, for example, has been one of the thought leaders in the use of our therapy in COVID and initially, but also in other applications. But the Middle East is a broad territory, and we believe that there's actually a lot of opportunity given the general wealth in the region and the high quality and standards of medical care. Now obviously, the U.S. Iran war was unexpected. And I think, as you've seen, has many, many implications across the world economy and in particular, the Middle East, where -- there's been a lot of near-term uncertainty. However, despite some of the back and forth that has gone on, on a daily basis in that region, we do feel that this conflict is temporary and that ultimately, a resolution to these issues will be found.

And we are planning to be ready to respond in that case. And I would also note that a lot of the conflict creates a lot of injury to a lot of -- unfortunately, to a lot of people. And that is exactly what our therapy is designed to help with. And so we believe that everything that's happening right now just makes it even more compelling of what our technology can help do.

Got it. All right. That makes sense. One more finance question. On the gross margins in inventory, sorry if I missed this, but are the inventory levels where you want to be? Or will there be continued sort of drag on gross margin this quarter or next quarter?

Yes, Tom, we're -- we have inventory levels, I think, will continue to come down a little bit. So I think that instead of accelerating gross margins, I think they'll be in that -- we did 69% this quarter. I mean we could be in that high 60s, low 70s here until we balance this out a bit more. But we have that opportunity to do so and before we have to really accelerate revenue or inventory production again.

But the organization, along with that, has taken out a significant amount of costs and really reorganized the way they are doing ordering and planning, and I think that we have an ability to see efficiencies through this time that may not negatively impact margins going forward.

[Operator Instructions]

And your next question comes from the line of Sean Lee.

I just have a couple on the commercial side. With regards to Germany, you mentioned that you're seeing good signs of a turnaround and expect to growing the sales force there again. So I was wondering when do you expect the overall German market to inflect back to growth? And what's the expected cost of the sales expansion that you're looking at?

Yes. I think that what we saw in the first quarter was very encouraging progress across the German organization. And again, we nearly matched sales from a year ago with smaller, more focused sales force. The way that we have sourced our headcount in Germany and in many other countries, is that it is typically a lower variable. I mean, a lower fixed salary, coupled with an opportunity to earn quite a lot of money on the upside with a higher variable component.

In fact, many -- most medical device companies do this across the board. But it's a way to be able to control that initial spend as the sales team gets up to speed and becomes productive. So we believe that out of the gate, those sales reps will be able to pay for themselves, with just the initial business that they're doing. And as they become much more productive, they'll help to contribute to the overall growth of the organization. Germany is an 87 million population country, it's huge. And it has many hospitals around 1,900 hospitals within the country, and it's a lot of work for a small sales team to cover.

And so I think we truly believe that there's a lot of opportunity as we begin to reshape our commercial organization in Germany to really just get beyond treading water and staying even to actually returning to growth. But I think that's what a lot of this operational efficiency, driving performance by metrics and strong leadership is all about. And that's what we're encouraged by the recent progress that we've made.

Great. My second question is on the -- well, the direct sales outside Germany seems to grow really well, with 13% this quarter. So maybe you could elaborate a bit on what's the primary drivers behind this growth? And why it's so different from what we've seen in Germany, at least in the previous quarters?

Well, I think that the -- first of all, I think that we have a lot of avid users in our direct territories, right? So historically, it's been Germany, Austria, Switzerland, but it has continued to progress to other countries like Poland and Netherlands and countries in the U.K, such that we consider all the time about looking to increase the number of direct territories that we're actually selling into. But I think that they benefit from growing on a smaller base of revenue, but I do believe that it's really based upon the leadership as well as the individual team effort in individual countries that is driving that growth.

And they're just very scrappy about how they approach market development. They are very hands on, very in touch with their customers, looking to exploit -- not exploit, but actually really teach all the different strategies and all the different applications that are well known to more developed countries like Germany, Austria and Switzerland. And so I think the teams are doing well, and we continue to work to try to improve operational efficiency even in these teams, and we think that will also have paid dividends in the future.

My last question is on the Middle East. So you mentioned that there were $0.5 million of delayed distributor orders. I was wondering whether you feel that that's still recoverable either in Q2 or later this year? And do you expect to see a continued impact in the region as well? .

Yes, Sean, I think the answer to that is yes. I think we've had orders that were -- we had orders that were submitted and needed to be canceled at the last minute and orders under development that did not come in during the month of March. Those are all reflective of the development work our team is doing in the Middle East to get those, in some cases, new distributors and in others existing distributors, up and running and focused on the business. We've seen a lot of increased activity at conferences across the Middle East, a lot of excitement of physicians across the Middle East in these conferences.

And there's just a growing amount of interest in this region, and we are confident that although I don't expect a snap back when things settle down. But over the months, following stability in the Middle East. I think those distributors are going to be ready to move and take inventory and start distributing again.

There are no further questions at this time. I will now turn the call back over to Phil Chan for the closing remarks.

Well, again, everyone, we appreciate your support of the company and look forward to updating you on our continued progress throughout the year. We look forward to giving you an update, hopefully, on the regulatory process in the near future. Thank you again. And if you have any questions, please feel free to reach out to [email protected], and we'll try to answer those questions as best we can. Thank you so much. Have a good night.

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the Cytosorbents Fourth Quarter and 2025 Full Year Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, March 25, 2026.

I would now like to turn the conference over to Pete Mariani, Chief Financial Officer. Please go ahead.

Thank you, Vincent, and good afternoon, everyone. Welcome to CytoSorbents' Fourth Quarter and Full Year 2025 Conference Call. Joining me today is Dr. Phillip Chan, our Chief Executive Officer.

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. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. The forward-looking statements we make may reflect our views and estimates as of today, March 25, 2026, and we assume no obligation to update these protections -- or projections 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 31, 2025, and as updated on risks reported in our quarterly reports on Form 10-Q and in press releases and other communications to shareholders issued from time to time.

During today's call, we will have an overview presentation covering the operating and financial highlights for the fourth quarter and full year 2025. Following the presentation, we will open the lines to analysts for questions.

And now I'll turn the call over to Phil. Phil?

Thanks, Pete. Before we begin, I'd like to point out our regulatory disclaimer on both CytoSorb and DrugSorb-ATR. Cytosorbents is built around a differentiated blood purification platform designed to remove toxins and harmful substances from the bloodstream in critically ill patients. Our business is anchored by a high-margin recurring revenue model where our disposable cartridges drive ongoing utilization and by a broad and growing clinical footprint with more than 300,000 treatments delivered globally across 70 countries. In addition, our DrugSorb-ATR program represents a significant pipeline opportunity with the potential to open the U.S. market and meaningfully expand our addressable opportunity. Taken together, this gives us both a strong foundation and meaningful upside.

As I mentioned in the press release, 2025 was a transitional year for the company, during which we made measurable progress across four key priorities. We focused on driving sales growth, particularly outside of Germany, while taking the necessary steps to reposition Germany for long-term success. At the same time, we continue to build and leverage a growing body of clinical evidence to support broader adoption. We also advanced DrugSorb-ATR through the FDA regulatory process and strengthened our balance sheet while aligning our cost structure to support a path to cash flow breakeven. While the year was not without its challenges, we believe these actions have positioned us well heading into 2026.

Turning to sales performance. Full year 2025 sales revenues increased 4% to $37.1 million, representing record core product sales. This growth was driven primarily by strong performance in our international markets, where direct sales outside of Germany increased 13% to $8.6 million and distributor sales grew 11.4% to $16.5 million. Together, these channels accounted for approximately 68% of total revenue, highlighting the increasing diversification of our business. This strength was partially offset by a 10% decline in Germany to $11.8 million, reflecting the near-term impact of our restructuring efforts.

On the profitability side, we continue to see strong gross margins, reaching 71% for the full year and 74% in the fourth quarter, driven by manufacturing efficiencies.

In Germany, our focus has been on building a more scalable and execution-driven commercial organization. We have strengthened leadership and accountability, implemented more structured sales planning and performance tracking, improved customer targeting and key account focus, enhanced training and development of the sales team and optimize the allocation of resources. At the same time, we are simplifying our message around a core clinical framework of treating the right patient at the right time with the right dose. Encouragingly, we are already seeing early signs of improvement in the first quarter of 2026 from our team in Germany, including increased engagement and pipeline activity, and we expect gradual and sustained improvement over the course of the year.

Now turning to PuriFi. PuriFi is an important strategic initiative aimed at expanding access and utilization. It is a stand-alone hemoperfusion pump that allows CytoSorb therapy to be delivered without reliance on existing dialysis infrastructure. To date, we have placed more than 100 units globally. This system enables earlier intervention, particularly in patients who are not yet requiring continuous renal replacement therapy or dialysis and expands access in regions with limited dialysis infrastructure. Over time, we expect PuriFi to drive incremental disposable usage, improve adherence to optimal treatment protocols and strengthen our installed base.

HotSwap is a newly launched innovation designed to simplify and accelerate cartridge exchanges. It addresses a real workflow challenge in the ICU by enabling faster and safer device changes, minimizing blood loss during exchanges and supporting more frequent cartridge changes, which may improve efficacy. Feedback from clinicians and nurses has been very strong, particularly following ISICEM, our conference last week. We see this as a practical innovation that enhances usability, supports better outcomes and ultimately drives adoption.

Now turning to how we're leveraging new clinical data to drive adoption and sales growth. Clinical evidence continues to be a major driver of adoption. We're seeing a steady flow of peer-reviewed publications, increasing real-world validation and broadening applications across critical care. In Sepsis and Septic Shock, a multinational survey of more than 400 physicians, showed that over 75% are adopting blood purification with CytoSorb as one of the most commonly used modalities today. Across multiple studies, CytoSorb has been associated with significant reductions in inflammatory markers, reduced vasopressor requirements, improved organ function and signals towards improved survival. Importantly, treatment strategy matters, and our focus is on helping clinicians apply therapy more effectively using the framework of right patient at the right time with the right dose. We believe this is the key to driving consistent outcomes and ultimately, utilization and growth.

At ISICEM or the International Symposium of Intensive Care and Emergency Medicine, one of the leading global critical care conferences in the world, we saw strong scientific engagement, high clinician interest and very positive feedback on both CytoSorb and our new innovations. You can see just some of the pictures that we -- our team took from our booth and from our symposium here on this page. This reinforces that we are increasingly becoming part of the clinical conversation in critical care.

Now turning to obtaining marketing approval and opening the U.S. market for DrugSorb-ATR. As we've discussed in the past, DrugSorb-ATR addresses a clear and urgent unmet need. Patients on blood thinners such as ticagrelor or Brilinta who require urgent CABG surgery face either a high risk of bleeding or delays that can increase mortality. DrugSorb-ATR enables rapid intraoperative drug removal, which has the potential to improve both safety and outcomes. We estimate an initial market opportunity of more than $300 million, expanding to over $1 billion over time as indications broaden.

In 2025, we made important progress with the FDA. While our initial De Novo submission was denied, the appeal outcome provided two critical positives. One, there were no concerns regarding device safety; and two, there was alignment that a new submission can focus only on the remaining open items. Following this, we held a formal pre-submission meeting in January of this year and are actively working with FDA to finalize the requirements. We believe this positions us for a more streamlined and targeted resubmission, and we'll provide timing guidance once those requirements are fully defined.

Meanwhile, the STAR-T randomized controlled trial has now been published in a leading journal. In fact, the JTCVS is the leading cardiothoracic journal in the United States. The key takeaway is that DrugSorb-ATR was safe and reduces the severity of bleeding in high-risk CABG patients. This represents an important milestone supporting the clinical case for potential market authorization.

In parallel, real-world data from the STAR Registry continues to build. Across studies, we are seeing low rates of severe bleeding, minimal need for reoperations and no device-related safety concerns. Importantly, these outcomes are being observed even in high-risk real-world settings, reinforcing the external validity of the data. At the same time, clinical adoption in Europe continues to expand and antithrombotic removal is increasingly becoming standard practice in leading centers.

With that, let me turn it over to Pete to go over the financials in more depth. Pete?

Thank you, Phil, and good afternoon, everyone. Today, I'll be reviewing the full year and fourth quarter 2025 financial performance and important updates that continue to strengthen our business and our outlook for 2026.

Starting with our full year 2025 financial performance. Full year 2025 revenue was $37.1 million, up 4% compared to a year ago and flat on a constant currency basis. This growth was led by double-digit growth in two of our teams, including a 13% increase in direct international sales outside of Germany to $8.6 million, an 11.4% increase in distributor sales to $16.5 million. And together, these teams account for approximately 68% of our business. This was offset by the 10% reduction in Germany sales to $11.8 million, reflecting the near-term impact of our proactive restructuring of the German sales operation and the implementation of strategies that we -- are expected to drive more consistent and scalable growth in the future. As Phil noted, we are encouraged by the early signs of improvement in these initiatives and expect incremental improvements across the year.

Gross margin was 71% for the year compared to 70% for 2024. Total operating expenses for the year were relatively flat at $41.2 million and included $2.5 million lower R&D spend as a result of lower clinical and other project spends, offset by $1.9 million increase in SG&A, primarily related to higher corporate spend in early '25 as well as spend related to the regulatory and commercial activities for DrugSorb-ATR in the U.S., also offset by lower noncash stock comp and royalty costs. Operating expenses also included a $500,000 restructuring charge taken in Q4 related to our workforce and cost reduction program.

Operating loss for 2025 improved by 10% to $14.7 million compared to $16.5 million in 2024, reflecting higher revenue and improved gross margin. Adjusted net loss was $14.2 million or $0.23 per share compared to an adjusted net loss of $12.7 million or 23% share (sic) [ $0.23 per share ] in 2024. And adjusted EBITDA loss for 2025 improved by 9% to $10.5 million.

Now turning to Q4 revenue. For Q4 '25, revenue was $9.2 million, an increase of 1% year-over-year and down 8% on a constant currency basis compared to a year ago. Gross margin for Q4 '25 improved to 74%, up from 71% in Q4 of '24 and reflecting improved operating efficiencies, which resulted in a $1.3 million sequential increase in inventory levels. Although higher inventory levels added to our cash burn in the quarter, the combination of improved operating efficiencies and higher inventory levels is allowing us to further reduce our anticipated production spend in 2026.

Operating expenses were $11.4 million for the quarter compared to $10.1 million a year ago. The increase was led by a $500,000 restructuring charge taken in Q4 as a result of our workforce and cost reduction program as well as an increased cost related to the DrugSorb application-related expenses and other administrative costs unique to the quarter. The restructuring charge includes approximately $400,000 of cash-based severance-related charges and $100,000 of other noncash charges.

Operating loss in Q4 was $4.6 million compared to $3.7 million in the prior year, and net loss improved to $5.5 million for the quarter or $0.09 per share compared to a net loss of $7.6 million or $0.14 per share in the prior year. Adjusted net loss for the quarter was $4.3 million or $0.07 per share compared to an adjusted net loss of $1.7 million or $0.03 per share in the prior year. And this prior-year amount includes a net income tax benefit accrual of $1.7 million, which we recorded in Q4 of '24 from the sale of our net operating loss and R&D credits.

Adjusted EBITDA loss for the quarter was $3.2 million compared to an adjusted EBITDA loss of $2.4 million in the prior year.

Our total cash, cash equivalents and restricted cash was $7.8 million on December 31 compared to $9.1 million at the end of September. The net increase of $1.3 million includes new debt proceeds received in November of $2.5 million, offset by net operating cash burn in the quarter of $3.8 million. However, this operating burn includes an increase in net working capital of approximately $1.9 million in Q4, including a $1.5 million increase in inventory and accounts receivable and a $400,000 increase in net other assets and liabilities.

The impact of our workforce and cost reduction program has allowed us to lower our cash burn, and we continue to adjust and reduce our operating and production costs as we begin 2026. As a result, we expect operating cash burn to continue to decrease as these working capital dynamics normalize over the first half of the year and now expect to be operating cash flow breakeven in the second half of 2026.

And we are pleased with the operating and structural improvements that are making -- that we are making across the company to drive improved execution at the top line and provide more rigorous ROI focus on our spend. We believe these improvements set us up nicely to continue driving growth across our core business, allow us to achieve cash flow breakeven in the second half of 2026 and continue to support our application for U.S. market approval of DrugSorb-ATR.

And now I'll turn the call back over to Phil.

Thanks, Pete. In closing, we are exiting 2025 with a growing and increasingly diversified core business, strengthening clinical evidence supporting adoption and early signs of a turnaround in Germany with a path forward for DrugSorb-ATR. At the same time, we have lowered our cost structure, strengthened our balance sheet and established a realistic path to cash flow breakeven in 2026.

Looking ahead, our priorities continue to be to drive consistent revenue growth, to execute the Germany turnaround, to advance DrugSorb-ATR towards FDA market authorization and to achieve cash flow breakeven. We believe these steps position us to create meaningful long-term value.

Now with that, we thank you for your attention, and we'll now open the line for questions. Operator?

[Operator Instructions] Your first question comes from Michael Sarcone with Jefferies.

Just to start, again, on the FDA regulatory process and the submissions. Could you just help us think about how you're thinking of the time lines over the next few months? And what are kind of the guideposts we should be looking out for?

Yes, Michael. Mike, thanks for the question. I think where we are right now is that we continue to be in interactive discussions with the FDA. And as I mentioned in my comments, we're trying to ensure that we're on the same page with FDA before we actually submit. We believe this will streamline the process and ensure that we're addressing FDA's concerns where necessary. So I think that we're currently in that process. And when we have some better visibility on the completion of those discussions, we'll let our shareholders know.

Got it. And just a follow-up there. I mean, I guess, how confident are you that you'll be able to get on the same page with the FDA around the concerns that need to be addressed? What's the risk where -- or what's the risk of you and the FDA not really coming to a consensus agreement there?

Yes. I mean, I think that after the appeal decision last year that we had worked with FDA to try to define a regulatory path forward. And we believe that, that is still the regulatory path that we're going to be pursuing, but there are additional details around that, that we are working to define with FDA just to ensure that we're on the same page. So again, when we have some better visibility and clarity on finalizing those discussions, we'll let everyone know.

Got it. Okay. And then maybe just last one for me. It sounded like you're starting to see some early signs of improvement in the German markets. Maybe you can give us a little more color there on what you're seeing and how things are trending so far through the first quarter.

Yes. I think that one of the key things that we tried to enact last year was, one, kind of a leadership change overall in the organization and a realignment of folks under that new reporting structure. Second thing is a much more proactive approach towards developing the market, relying less on opportunistic sales and really focused on methodical sales development that we believe will result in a much more predictable and -- predictable forward momentum in sales and visibility in sales.

So we have a very strong program in place right now. It's taken a little longer than we had hoped to get off the ground, but I think that's the nature of the beast. But I think what we're very encouraged by is that the team has really pitched in here, embraced the things that we want to change, and I think they're seeing the benefits of that.

Next question comes from the line of Tom Kerr with Zacks SCR.

A couple -- one really quick follow-up on that last Germany question. Last quarter, we gave -- or you guys gave a baseball analogy, you were in the middle innings of getting all that work done and showing results. Are we in the later innings of that now?

Yes, we believe we are. I think that a lot of that organizational structure is in place right now such that we expect to see incremental improvement over time. Now it's not going to happen suddenly as there's still a lot of work to do. But I think a key issue in setting -- in putting this restructuring in place was to get it all implemented and executed upon, right? So that strategy and that plan is in place, and it's now about executing on that, and that's what we're focused on doing right now. And Q1 was a very nice show by the team.

All right. So the eighth inning. Okay. On the gross margin question, you said improved production spend in 2026, getting more efficient there. But does that mean the gross margins can improve from the solid 74%? Or do we look at 2026 as another just a 74%, 75% gross margin year?

Well, we've been running low 70s, 70%, 71%. So we're going to be happy -- we had a great quarter in Q4. we'll be happy keeping it in the -- getting above 71%, 72%, 74% here consistently. That's what we're looking for. And so that's where we want to stay in the near term. Do we have opportunities to continue to go above that? Of course, we do. But that's going to be relevant on a couple of things, including increased volumes. So I think we're well positioned. The team has done a nice job. But I would think about it in that low 70% range for a while until we actually demonstrate something better than that.

Got it. And can you give a little more color on the PuriFi pump strategy? Or more in terms of -- is there a real revenue model there? Does that become a separate material product revenue source? Or how do we look at that?

Well, I think as how we look at that business is very similar to the printer cartridge business, right, where you subsidize the cost of the machine in exchange for disposable revenue in the future. And the disposables here are CytoSorb outside of the United States and VetResQ inside the United States. And so right now, we're not looking at material contributions of the pump because we have many different ways that we're financing that pump through rentals, through subsidies and other things, through outright sales. But longer term, we expect that to begin to translate, particularly as we grow that blood purification infrastructure, particularly in distributor countries where they don't have that capability but want that capability. And we expect that to drive unit volume increases in our disposables like CytoSorb going forward. So it's an investment strategy for the company at the current moment with hopefully a much larger payout in the future.

Your next question comes from Sean Lee with H.C. Wainwright.

My first one is on the pathway to breakeven. So with your commitment to get to operating breakeven by the second half of the year, beyond the head count reduction so far, what exactly has to happen before you guys can get there?

Well, there's -- we put the head count reductions in place in Q4. We took other cost reduction initiatives in Q4 that will play out through the first quarter. Some of that stuff you don't turn off on a dime, right? So there's -- we're seeing reductions in those spend, like, for instance, Q1, we had some commitments that we would not have gotten out of, but we've got the ability to continue to reduce spend.

And so this is an incremental piece for us. We've -- as we started the year, and I talked a little bit about our inventory levels being higher and our production efficiencies being higher, that -- when you put those in the model, it says you can really think about a lower production level in the first half of the year that continues to drive cash flow efficiencies and allow the inventory to get sold and turn into cash in the first half of the year and continue to manage the working capital through that time frame. So I think we're on a good path to get there. It -- take a little bit longer than what we initially thought, but I think we're going to be in a good place.

Great. That's very helpful. My last question is on the DrugSorb-ATR resubmission. So considering that this is the second go around with the FDA, what, I guess, derisking steps are you already taking with this new submission process such that we're much more likely to be getting a positive outcome this time?

Yes. I think that we think about it very much the same way, Sean. We know that this is our second time out. We've actually -- this was a path suggested by FDA, but we obviously don't want another denial, right? And so we've been very cautious and conservative to make sure that we are well aligned with FDA that there are no surprises. And I think this is a bit of the ongoing discussions that we're having with FDA right now where we want to make sure that when we do submit, that we have everything that we need for FDA to make that decision in a positive way.

So I think we appreciate our shareholders' patience with the process. We know we had talked about trying to submit at the end of March. But I think that we think it's more prudent, rather than to rush it, to try to drive more certainty in the process so that we don't get surprised like we were last year. So that's kind of where we are at the moment. And as I mentioned to Mike earlier, we will absolutely update folks as we get better clarity on the timing of this process.

There are no further questions. Please continue.

Okay. Great. Well, we thank everyone for their participation today, and thanks for joining us. If you have any additional questions, please contact us at [email protected], and we look forward to the next update. Have a good evening, everybody. Good night.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, Dr. Chan. Phil, are you ready?

Yes, whenever you are, Jason. Thank you.

Good. Good morning, everyone. My name is Jason Kolbert. I am the senior biotechnology analyst, really the senior health care analyst at D. Boral Capital. One of the companies that I've been following for, got to be 10, maybe even 15 years, right, Phil?, is CytoSorbents. I'm fascinated by the company in part because, believe it or not, I have a background in chromatography going back many, many years.

And when Phil first introduced the concept of what he was trying to achieve, it just made really good sense. From a mechanism of action from how the product works, the idea of a chromatic graphic-like filtration just made sense. Since that time, the company has made tremendous progress with two key products, CytoSorbents or CytoSorb and DrugSorb. One of the products removes deleterious bands of cytokines from the blood, and the other one actually can remove drugs. And in the case of what CytoSorbents is focused on today, blood thinners.

The company, like all microcap companies, biotech companies, in particular, has had its share of hiccups. This is brand-new science and technology. It is an ever-evolving regulatory landscape. And it makes sense for us to do a check-in with Dr. Chan and understand kind of where the company is today, what are the next key events that investors should be focused on? And how will the company navigate their way through both the fact that they have revenues that they're pushing towards breakeven that they're managing both the distributor network, direct sales and the idea of launching a product in the U.S. And I think when we talk about that -- Pete, great to see you; their CFO, Pete Mariani, who has a lot of experience. Both of these guys, tremendous experience to understand the challenges of financing a company in the given environment.

My advice to investors will be kind of the same thing that I hope to say when we close this call, and that is stay the course. You've been following this company for a long time. We are so close right now. That's my feeling that we are on the verge of success on multiple fronts. And I see the first success as paving the way for multiple other successes as we see the broad utility of a device like this that perfectly fits in the existing medical/surgical/emergency room paradigm, right? There are many, many indications. But for today, we're going to focus on a couple of them.

So with that said, Dr. Chan very interested to hear what you have to say, your overview. I'll introduce you briefly, which is just, wow!, Yale-trained physician, residency at Harvard, internal medicine. I always love when I get to interact with management teams that are professionally trained because when you speak we can just hear, right, that it's from the direct experience. And I think that will come out during this webinar.

So thanks, everyone, for joining us. Dr. Chan, please take it away.

Well, Jason, first of all, thank you. Those are very kind comments and certainly appreciate your invitation today to this fireside chat as well as D. Boral and their invitation.

So just to give you a little bit of background, as you mentioned, CytoSorbents is a NASDAQ-traded medical device company that specializes in blood purification to treat life-threatening illnesses in the intensive care unit as well as cardiac surgery. Our technology is based on a highly porous polymer bead, roughly the size of a grain of salt. Each of these beads has millions of pores and channels in them that allow them to extract toxic materials from blood and bodily fluids very efficiently, all without the need for any type of affinity agent, no antibodies, no biologics, no ligands of any kind. It's all solid-state porous polymer chemistry.

And the nice thing about this technology -- and this is CytoSorb, our flagship product. Nice thing about the technology is that it's plug-and-play with the blood pumps that are found in hospitals today, whether or not it's a dialysis pump or in the intensive care unit, extracorporeal membrane oxygenation machine that oxygenates blood when mechanical ventilation fails; very relevant for today's discussion, the heart-lung machine used in the operating room for open heart surgery and just even a simple hemoperfusion machine, our therapy works on that equally as well.

Now as you mentioned, there are really 2 major parts of our business. Our flagship product, CytoSorb, is sold in more than -- is EU approved and sold in more than 70 countries around the world. It has generated more than 300,000 human treatments to date across, again, more than 70 countries as a way to treat deadly inflammation and high levels of toxic substances in a wide variety of illnesses, such as sepsis and septic shock, burn injury, trauma, pancreatitis, liver failure. You name the illness, there's often a reason why CytoSorb can be used.

In particular, we're expanding to liver failure. We're expanding to trauma and importantly, to blood thinner removal for which CytoSorb already has an approval to date, and we'll talk a little bit more about that in a minute. But as you mentioned, it is our core business, generating about $37 million in trailing 12-month revenue as of the end of the third quarter. This is a high-margin razor blade in someone else's razor business. Our product gross margins are about 71% on a trailing 12-month basis with the potential to be even higher, particularly as we bring, hopefully, the U.S. to the market. And so very excited about that part of our business.

Second part of our business is, as you mentioned, a product that is currently investigational in the United States called DrugSorb-ATR that we are working to try to get approved through the de novo application process, and we'll talk more about that. But what that device does is it tries to address a major problem in modern medicine today in patients who are taking blood thinners. There are millions of people out there taking blood thinners. You your listeners probably are either on them or know someone on a blood thinner like Eliquis, Xarelto, Brilinta, Plavix, Pradaxa.

People are on these blood thinners to reduce their risk of heart attack and stroke. And -- but if they need unscheduled surgery, particularly cardiac surgery, since most of these patients are vasculopaths, they have atherosclerotic disease, and they are likely to need cardiac surgery, they'll bleed. And particularly if they don't have time to stop taking the drug, which is the only way to reduce that bleeding risk. And we will talk a little bit more about that application today, but FDA has granted us 2 FDA breakthrough device designations for this application, highlighting the major unmet medical need out there that basically says that there are no approved products or products that effectively deal with this problem of perioperative bleeding. And what our technology does is that we remove the drug, we reduce the bleeding risk. It's very simple. So we'll talk a little bit more about that.

And then finally, a third part is our pipeline. And we're excited by that, too. We have 2 approved products, one called VetResQ, which is CytoSorb for animals and dealing with the fact that 1 in every 10 households today have a dog, for example, that are prone to illness. We also have a product called ECOS-300CY that is there to help integrate into machines from TransMedics, from XVIVO, other folks that are focused on solid organ transplantation where we connect right into that system and can remove cytokines and inflammatory toxins that compromise the function of those organs such that we can recondition those organs to be ready to go, to be implanted into patients, helping to address a major unmet medical need of or short -- solid organ shortages.

And then finally, we have a product called HemoDefend-BGA that is designed to create universal plasma. Plasma is a life-saving blood product that is often used in trauma patients. And we can actually create a product called Universal Plasma that can be given to anybody regardless of blood type. And when combined with freeze-dried plasma technology, we actually hope to be able to bring that product into every first responder vehicle in the world as a way to resuscitate trauma patients in the field as well as potentially in the hospital. So that's our core -- that's our business overview and happy to talk about anything that you wish, Jason.

So I think what we'd like to do now is focus a little bit on DrugSorb, kind of where is DrugSorb? And I guess it's important to talk a little bit about what are you doing in Europe? What are you selling in Europe today versus what is the focus on DrugSorb? And then we're going to get into your most recent regulatory interactions and what you think the regulatory pathway is forward. It seems to me that, that's the most critical event for the company over the next 12 to 18 months.

Sure. Yes. So what we're selling today in Europe is predominantly CytoSorb. It makes up the vast bulk of our revenue. And it is focused on really 2 verticals. One is critical care, which accounts for roughly 2/3 of all of our sales internationally and about 1/3 in cardiac surgery. In critical care, again, we're dealing -- our technology is specifically dealing with trying to treat life-threatening massive inflammation that results in high mortality and death -- high mortality and morbidity in patients with life-threatening critical illnesses like the ones we talked about earlier.

And in cardiac surgery, the applications are often in high-risk cardiac surgery where they're on the table for a long time, which causes a lot of inflammation. We're also treating lots of patients with endocarditis, which is an infection of the heart valve. This is a big problem in the United States due to IV drug abuse, but also prosthetic heart valves in elderly patients, very prone to getting infected. So that's another major area.

And then another major area, as I mentioned, is the removal of blood thinners that are causing potentially fatal or near-fatal bleeding in patients because there is currently no antidote out there today, and we provide that antidote with our device.

Different product, though, right, DrugSorb versus CytoSorb?

That's right. So CytoSorb has that indication today in Europe. And in the United States, DrugSorb uses an equivalent polymer technology, but with a specific application that we seek for blood thinner removal in patients undergoing, particularly CABG surgery.

Right. And so there's a lot of strategy -- regulatory strategy in what you're talking about. But let me kind of step back and ask kind of a really basic question. How is it possible that CytoSorb is approved being used, being sold in Europe, but it's not available for those indications in the U.S.?

No, it's a great question. I think that in Europe, we actually pursued CytoSorb with the indication as a tool indication, first to remove cytokine storm and to treat deadly inflammation. So that is our indication: to reduce cytokines in inflammatory diseases; to remove bilirubin, for example, in acute liver disease; to remove myoglobin in acute trauma; and to remove blood thinners in patients undergoing cardiothoracic surgery.

In the United States, FDA has a higher standard where they are looking for rather than a tool indication, they're looking for a treatment for a disease. And for example, a therapy for the treatment of sepsis that reduces 30-day all-cause mortality, which is a very high bar, which no company has really been able to hit throughout decades of research and development. So we decided to try to get into the U.S. market in a more straightforward way focused on the removal of blood thinners and the reduction in perioperative bleeding risk.

And as I mentioned before, there's lots of different blood thinners out there, many different classes, right? There's the antiplatelets agents like aspirin, Plavix, Brilinta, Effient; there's the direct thrombin inhibitors like Pradaxa; and then there's the blockbuster drugs used predominantly to treat patients with atrial fibrillation, but also peripheral vascular disease and other things. These are called the direct oral anticoagulants like Eliquis and Xarelto. Eliquis, I think, is a top 10 pharmaceutical in the world and blood thinners in general are one of the biggest categories of pharmaceuticals in the world. So what we focus -- so we can remove all of those agents.

What I hear you saying is that the regulatory complexities between Europe and the U.S. are quite different and that the U.S. requirements wants you to be very indication-focused and the complexities of running that kind of trial like, for example, sepsis or liver failure, you talk about bilirubin removal. That's a very complex trial to run because as we know, sepsis is a tricky disease, right? And people, unfortunately, when they become septic, the clock is ticking.

So from a regulatory strategy point of view, it made more sense to focus on DrugSorb in the U.S. and take advantage of the fact that you're not only selling product in Europe, but accumulating data in Europe. Is that fair?

Absolutely. That's exactly right. And for the first drug that we are talking...

One more quick thing, which is establishing the safety profile. So how important is the safety profile in your discussions with U.S. regulators? They -- how aware are they of the patient data experience that you have? And how many patients have actually used the product so far?

Well, CytoSorb was actually given emergency use authorization by FDA during COVID, recognizing the long history of usage in Europe, and this was used around the United States, actually commercialized and sold for the treatment of COVID. And for another day, we can talk about our results in COVID, which were outstanding, where 73% of patients, the sickest of the sick patients survived with our therapy.

In terms of DrugSorb ATR...

By the way, that's huge, Phil. I mean that's huge. So you would think that the combination of European experience, COVID experience would create a very positive regulatory framework for approval today. How has that influenced your regulatory discussions with the agency?

Well, I think FDA has always been very supportive of the technology and particularly in COVID. I think we were one of the first therapies to receive FDA breakthrough, one of the first -- actually the second by 12 hours, blood purification technologies, to receive FDA emergency use authorization. And so I think that -- FDA, I think, sees the promise of this. But again, running a large-scale randomized controlled trial requires an immense amount of resources and funding, et cetera, and takes a long time.

And again, we opted to choose a more straightforward path, but still addressing a large unmet medical need. Like we -- we'll talk today a little bit about the use in one particular blood thinner called Brilinta that already has an immediate market opportunity for us of -- total addressable market opportunity of about $300 million that could grow to over $1 billion over time as we add on additional blood thinners and as we add on additional surgeries. So very exciting opportunity and addressing, again, a big unmet medical need. So maybe we could talk about that a little bit and the use case of Brilinta. So...

And just one quick question. There are no reversal agents that can be administered for these thinners. Is that right?

So in catastrophic bleeding for the DOACs, there is a product called Andexxa that is approved, but that has -- comes with high risk. There's a roughly 17% risk of rebound heart attack and stroke. So you're trying to reverse a blood thinner, but then it is associated with a high risk of new onset heart attack and stroke. So it's for people undergoing -- for people with like a GI bleed or massive trauma from a car accident, it makes sense, right? Otherwise, they're going to bleed out.

Because when you're on a blood thinner, it's like being a hemophiliac, right? You just ooze and bleed. So in those high-risk scenarios, it makes sense. But for cardiac surgery: one, Andexxa cannot be used in cardiac surgery because it interferes with the anticoagulation that is necessary to put someone on a heart-lung machine blood pump; and two, the goal here, you don't want to cause additional heart attack in stroke, right? Because that's what you're trying to treat a heart attack typically or some other event. And so that is not an eligible therapy.

So American Heart Association and American College of Cardiology say that the only really effective therapy for reducing the bleeding risk is to stop taking the drug, let it wash out of the system for 3 to 5 days at a minimum to reduce that bleeding risk. The problem here is that in most patients, that need unscheduled surgery. So something happens. And now they need to go to the hospital.

Yes, I don't want to wait 3 to 5 days to have a potential heart attack or a bypass or a CABG procedure. Oh my God! I would think there's a lot of mortality associated with trying to just keep a patient stable, plus what's the cost of that waiting 3 to 5 days? Do they wait in the hospital?

Yes. They wait in the hospital, particularly if they're severely ill, they wait in the ICU at $6,000 a day. So you're talking about $18,000 to $30,000 of waiting just to wash out a drug, right? Or in the step down at $4,000 a day or in a hospital ward at $2,000 to $3,000 a day. These patients are waiting at risk something bad can happen and has happened during this interim period of waiting, but it also clogs up and takes a valuable resources in the hospital. So it's a big problem, right?

So -- but coming back, I think for your viewers, I think I can communicate, I think, the use case of this for the drug that we're going after first, which is the drug Brilinta, also known as ticagrelor. So someone's having a heart attack, right? The conventional wisdom, call 911, take an aspirin, right? Aspirin is a weak antiplatelet agent that prevents platelets from sticking together, making that clot in the coronary artery worse, right, to prevent that from getting worse. And it's actually been shown to improve outcomes.

And that's exactly what happens when the patient goes to the emergency room. They get loaded on aspirin and a super aspirin and the 3 types of super aspirins are Brilinta, Plavix and Effient. But Effient and Plavix bind irreversibly to the platelet, you can't reverse it. Brilinta comes on and off the platelet, and we have the opportunity to grab the drug and remove it to reverse the bleeding risk. So all these patients are now loaded on the super aspirin. They go to the cath lab. 90% of them will get a stent, but 5% to 10% won't be eligible for a stent because they have multivessel disease. They have left main artery disease. They may have had a complication putting in the stent, causing a dissection of the coronary artery. They may have intractable ischemia or blood pressure.

These patients now need to go to urgent or emerging coronary artery bypass graft surgery, better known as CABG surgery. And -- but they can't, right, because they just got loaded on this blood thinner in the emergency room. And if they go there, all the data show that there's a high rate, anywhere from 30% to 65% rates of potentially severe to fatal bleeding, right? This is really serious stuff. And when you talk to cardiac surgeons, they do this all the time. They have to take patients to the surgery, but they hate it. And every cardiac surgeon that we've talked to has a horror story where a patient -- they couldn't close the patient because they were bleeding so badly, so they had to ship them to the ICU, where they had to take a patient back to the OR after thinking they had solved the bleeding to try to figure out why they kept losing blood or the patient that drain the hospital's blood bank of that patient's blood type. These are all...

I mean you just made me realize that there are 2 different things happening here at the same time. The emergency room comes in and kind of standard protocol gives them a platelet blocker. And then it turns out that they need surgery. And so that platelet blocker just kind of -- forgive the language, but kind of screwed them in terms of the surgery. So -- and yes, very interesting. So from a regulatory point of view, how do you get DrugSorb? How do you -- what are regulators looking for to demonstrate that DrugSorb is the answer to this problem?

So we have pursued what's called the de novo 510(k) path. So as you are aware, there are 3 paths for medical devices. There's a 510(k) path where a product is already approved and exists on the market and you use it as a predicate for your approval, very easy, straightforward process...

Your product is equivalent or maybe even better than the existing product?

That's right. And then on the other end of the spectrum is a PMA or premarket approval pathway where it's a high-risk device like an implantable defibrillator, for example. And there, the bar is extremely high, and they're very focused on efficacy.

Risk versus benefit?

But sitting right in the middle is a de novo 510(k) and de novo means new, right? It means that there is no predicate. Nothing exists on the market that does what you do. But on the other hand, your device is a low to moderate risk device that does not qualify for -- does not need a PMA path, but it's not also as simple as a 510(k) and that's where we are. And the standard for authorization under the de novo is that the probable benefit has to outweigh the probable risk. That is what the standard for approval is. And that is what our job is to demonstrate to the FDA.

Good. So let's get into probabilities of success and kind of what data you have today. And I think the first question I have is what are the risks, right? What are the risks that if I run a patient's blood through this cartridge that there'll be some kind of effect or side effect -- unwanted side effect? And how are you able to demonstrate that, that's manageable?

So first of all, we -- for our technology, we have more than 300,000 human treatments where the device has been safe, particularly in post-market surveillance, first of all.

Second of all, in the specific application of cardiac surgery, multiple randomized controlled trials have been used where our therapy has been used in open heart surgery where there are no safety concerns. And in particular, in this blood thinner application, our STAR-T trial, randomized controlled trial, which was a 140-patient randomized controlled trial in the United States and Canada, involving about 30 centers that showed no significant safety risk. And importantly, FDA has acknowledged the fact that they see no safety issues with our device.

So coming back to this concept that the probable benefit has to outweigh the probable risk. When the probable risk is low, acknowledged by FDA, it is a low to moderate risk device. That means that the probable benefit that needs to be shown is not this high bar, but is a much lower bar, but we would contend that our data would suggest that, in fact, that effect is actually quite strong. And maybe I can tell you a little bit about the STAR-T trial, randomized controlled trial and kind of maybe give a little history on what it is that we've done.

So the STAR-T trial, again, 140-patient randomized controlled trial in the United States and Canada, 30 centers, where the primary -- the goal of the therapy was to be used intraoperatively during open heart surgery either with CytoSorb or without CytoSorb in patients undergoing urgent or emerging cardiac surgery, where the last dose of the drug was 2 days ago -- within 2 days ago.

And basically, the primary endpoint was looking at a composite, a hierarchical composite of all aspects of perioperative bleeding. And when I say hierarchical, it means that you first start with fatal bleeding, then you compare severe bleeding, then moderate bleeding and then mild bleeding, right? So you're looking at the full gamut of perioperative bleeding.

And we use something called a win ratio, a statistical analysis to evaluate patients that were in those various buckets, very powerful statistical analysis method that is used now widely in a number of major trials throughout the world, a validated mechanism. And so what we found was that our trial, we actually included all comers. So we included not only our main use case patients, which are the CABG patients undergoing a heart -- who've had a heart attack and now need urgent CABG and need to go to surgery, but we also included high-risk surgeries as well, people who had like -- they thought they were having a heart attack, but we were really having an aortic dissection, right? Or they thought they were having a heart attack, but actually the heart valve blew out, and now they need a heart valve replacement.

These are much more serious surgeries. The data would absolutely suggest higher-risk patients, higher bleeding rates. And unfortunately, in our trial, we had an imbalance of those types of patients where more of them were in the treatment arm than in the control. There was another imbalance also where there were more patients...

It was a very noisy trial, right?

It was not the optimal trial, let's put it that way.

Right. Because it's impossible to predict if somebody is having an aortic dissection, what factor blood loss was versus the anatomical challenge that the surgeon faced?

Yes. So just to put it in a perspective, when you're doing a coronary artery bypass graft surgery, you're not actually cutting into the heart. What you're doing is you're bypassing surface coronary arteries and where the blood loss is coming from is the incision in the chest cutting down into the heart and just all that oozing from all that surface area. But when you talk about an aortic dissection, you're talking about cross clamping the aorta, cutting out the aorta, putting in a graft, cutting open for valve replacement, the heart, putting in -- you're actually cutting into the heart, much different profile. So they bleed a lot more.

And the problem was is that in a randomized controlled trial, the 2 arms should be equal, but we had an imbalance. And so we missed the primary endpoint. That was one of the major causes of missing the primary endpoint. But when we looked at a...

And by the way, just -- I mean, that's what punished the stock, right? Missing that endpoint and a lot of investors here, well, you missed an endpoint, therefore, the product doesn't work, and they kind of move on. But that's not at all the case here. You have to go and look at what happened. And again, I just want to remind people, it's not a question of whether this cartridge works. It's a question -- in this case, I would argue it's not the product that failed. It was the clinical trial, the design of the trial maybe or just kind of the -- I mean, in a perfect world, obviously, you run a huge end value. You spend tons of money. It takes lots of time, but it reduces the noise level. And this is the challenge in the microcap world is you have to get by with moderate resources. You try to optimize the end value the best you can. But one of the factors going into that equation is how much -- what kind of resources and time you have. And unfortunately, that does sometimes result in a trial that gets results that are mixed?

Yes. And I think -- but I think the positive thing coming out of the study is that in a prespecified subgroup analysis, which is the use case of the patient, right, which is the patient who actually had a heart attack, who had to go to urgent emergent surgery, that -- actually in that prespecified analysis, we actually demonstrate a statistically significant reduction in the severity of bleeding, such that in the presentation by one of the principal investigators, Dr. Michael Mack, these are luminaries in the field of cardiac surgery trials, right?

So our principal investigators were Dr. Michael Mack; Dr. Michael Gibson, who is involved in pretty much every blood thinner trial to date; and Dr. Richard Whitlock, who is the leader of cardiothoracic surgery trials in Canada. But in their analysis that they presented at AATS in a supplementary analysis where you look at patients who either by definition have serious bleeding or who have lost at least 20% of their blood volume in the first 24 hours, the relative risk reduction was more than 50%, the absolute risk reduction was 16%, which provided a number needed to treat of 6 patients to prevent serious bleed, right?

And if you just put some -- the NNT into perspective of some very common things that people know about. For example, statins and Lipitor, for example, right, to prevent -- in a general population, you need to treat 100 patients to reduce nonfatal -- over 5 years to reduce nonfatal heart attacks, for example. Even in high-risk patients, that number is still 15% to 20%, right -- an NNT of 15% to 20%, right, or blood thinners to prevent heart attack and stroke, right? This is what we're talking about. Very common, but that NNT is 50 to 200 patients to prevent one heart attack or stroke.

So when you're talking about an NNT of 6, that is quite powerful. And importantly, I think the real-world evidence coming from Europe all suggests that, that relative reduction is on the order of 30% to 50%, very consistent, showing our registry now, for example, that has in Europe that's collecting high-quality, high-fidelity data, 30 centers among 6 countries: Germany, Austria, Switzerland, Belgium, U.K. and Sweden. So high-quality cardiac surgery centers. When they use our therapy in these patients on blood thinners, consistently, they have low serious bleeding risk, right? And so all this data is out there helping to support the fact that our -- exactly what our STAR-T trial concluded -- our randomized controlled STAR-T trial concluded, which is low severity of bleeding risk, right?

Where does that leave you with regulators then? So from just listening to you, first of all, I hear your enthusiasm. I know your interpretation of the data is genuine. And it seems since we established safety, and it seems to me in a prespecified subgroup, you absolutely showed a clear signal. And it sounds like regulators are familiar, right, with the product and with kind of the bleeding risk and the risk associated with waiting, what happens now going forward?

So many of your viewers may have followed the story for a while. And 2025 was a bit of a disappointment for us in that we went to the FDA, not only with the STAR-T trial data, but also initial data from our STAR registry from the European Union where, again, we're collecting this high fidelity data. And at the end of the day, it just wasn't enough, right? That FDA, I think, said that you missed your primary endpoint that we need to see more data to support your indication of -- that you seek of reducing the severity of perioperative bleeding related to the drug Brilinta in CABG patients.

Now I think, though, that the upside of everything that we've done with FDA this year has been the following. One is that FDA continues to be extremely collaborative with us, actually resolving the majority of issues in our first de novo submission that we submitted in September of 2024. We knocked out pretty much most of those issues, including FDA's acknowledgment that I mentioned before of safety, right? They see no safety issues with our device, which is, again, that probable benefit outweighs the probable risk equation for the de novo. But what they said is that we need more data, right? And so they told us that they did not say that we needed to do another randomized controlled trial. We believe that...

By the way, that's -- I'd like to stop you right there. That is a key, key point. So short of not doing another trial, what do you do?

Well, I think that the de novo guidance as well as the breakthrough device guidance as well as the least burdensome guidance all state that for safe devices, you are able to -- FDA has set a precedent for shifting the burden of evidence for efficacy to the post market, meaning that you get a product, they will approve the product and then you do some type of post-market registry or some other study where your product is in the market, you're getting sales, you're doing all that. But you're also collecting data -- high-quality data on efficacy and safety in the post market. And so that path exists.

And we believe that if the FDA -- that is a tried and true path that we could go on. But I think that what FDA -- after the last meeting that we had with the FDA, what they said was, we don't see any safety issues with your device. We need more data. So submit a new de novo submission because the way the FDA works is that once you submit for the de novo, you can't put any more new information in there, right? The last time we submitted -- the first time we submitted the de novo was September 2024.

In the meantime, if you look at all of our press releases, all the conferences that have been done, there's been a lot of real-world evidence that has been presented outside in the community. The community is extremely receptive to our -- these data. We've gotten -- our speakers have gotten awards for this. There's a real strong interest in trying to solve this problem internationally. And we haven't been able to give them that data before, right?

So what they've said to us is they said, come back with a new de novo and put that data in there so that we can see and evaluate all that data. And what that means is that, that's exactly what we're going to do. But importantly, the thing that they said to us is that they agreed with us. They said, look, we said -- we've done a huge analysis of the original de novo submission. We knocked out all these issues, including safety. Can we focus on just the remaining issues that are outstanding in the new submission. And based on our understanding and our discussion with them, they said yes, right? So that is very good, right?

So now what do we do? We are now -- we have now submitted our pre-submission document to FDA. What is a presubmission document? Just what it says. -- before you file the official de novo, you're going to file a pre-submission document where you're laying out what -- the company is laying out what we are going to submit in the de novo. We expect to have that meeting in January. We actually have a date now set. And we hope to align with FDA on what it's going to take and how we analyze the data, the real-world evidence, et cetera, such that we can satisfy FDA's requirement for this additional efficacy data. And we'll know a lot more detail after we come out of that meeting.

So once we do that, our goal is to submit our de novo as quickly as possible. Technically, if FDA took all the time, it would be 150 days because we're a breakthrough device, we are eligible for priority review. They have also said to us that they are not interested in a full-blown rehash of the submission that we're going to focus on specific items. Hopefully, we will be done earlier than later and be approved sometime mid-2026 or maybe even sooner.

Good. And I just -- I wanted to hear you say that. So we're actually looking at potential product approval in 2026. A new trial is not required. You're basically submitting a supplemental data package, right, to the original -- I understand it's a new application, but it's just -- it's the supplemental data that kind of shows -- demonstrates the efficacy and safety is not the issue. You don't have a safety hurdle here. That's very exciting.

I don't think this is well understood by people. And I think that my challenge as an analyst is to help people understand that I think the risk reward ratio here is very favorable. Pete, what may be holding some people back is everybody is always worried about financings and financial overhang. So can you talk a little bit about kind of your thinking in terms of how the company manages through the next 12 months, while you're kind of hunting for this value inflection?

Look, at the end of the day, you have to get there. And the value will come. And I think sometimes we get lost a little bit in the equation of dilution versus appreciation, right? But with that said, as the CFO, I'm sure you think about this every day?

No, that's right. And look, from the beginning of the year, we've been talking about -- our plan was to bring our core business to cash flow breakeven as we were exiting this year and getting into 2026. And we looked at this a couple of different ways. One was what if we do get DrugSorb approval in '25. And then we also had a contingency plan that what if this gets pushed out a few quarters.

And so we were prepared as we came through the end of this year to take another cut at our expenses in the organization, make sure that we're driving -- continuing to drive efficiencies in the organization. And we have taken some steps that will bring the company to cash flow breakeven in the first quarter. We were very pleased to be able to get a refinancing of our -- or an amendment of our credit agreement with Avenue Capital. We ended up giving us another $2.5 million of cash immediately. And importantly, it also extended our interest-only period another 6 months.

So now we've got a full 12 months of interest only during 2026. And then we have -- that agreement also gives us an additional $2.5 million and a further extension of our interest-only period of another 6 months once we get DrugSorb approval.

So you put all this together, and we're going to be running this business at cash flow breakeven. We'll have single-digit millions of cash on the balance sheet, and we're going to have flexibility with our debt agreement as we move towards approval to maintain financial independence as we're going through this process with the FDA. And then I think once we get FDA approval, it gives us the opportunity to be opportunistic about where we go from there from a longer-term financing perspective.

Well, and one of the things we haven't talked about is the potential for nondilutive capital, both -- from all kinds of places, but also partnering, right? And -- but I'm also thinking you have so much experience with what you've accomplished in Europe that I'm sure it's very tempting to think, well, can we launch this ourselves?

Yes. And I think from a commercial perspective, we are absolutely focused on launching this ourselves in a pilot phase in the U.S. We've got talent in the organization who has done a lot of work and is getting us ready. And once we get approval, we'll begin a very targeted, thoughtful launch process focused on our clinical sites and a handful of others who have shown interest.

We're going to be able to get in those sites, I think, very quickly. We've seen tremendous interest. This is a significant problem. As Phil has outlined really well, this is a significant problem for these surgeons. And if they have an opportunity to normalize one of these surgeries with our product, and get this -- instead of this being a mess for 3- to 4-hour surgery that they can get back to a 60- to 90-minute normal CABG surgery, I think we're going to find a lot of interest very quickly.

But again, we're not going to get out in front of ourselves on this. We're going to focus on our pilot accounts. I think we can get a lot of success in the first 3 to 6 months, and that's going to give us the opportunity to titrate how quickly we go with this launch and consider any potential opportunities if those make sense for us as well.

Phil, having known you for quite a while, I've always considered you to be conservative, right, in how you look at things and kind of preparing. It's -- one of the things I really enjoyed when we started talking this morning was you talked about the pipeline. And so approval here really kind of sets the stage for physician familiarity and kind of shifting almost a little bit of the medical paradigm around everything from liver failure to sepsis, and it's just let's get some experience here in this indication. But this really is a pipeline in a product? Good?

Yes. No, absolutely. Absolutely. We're very excited by the opportunities that are in front of us. And hopefully, we'll have some success to report to investors soon.

Good. Well, so I'll be working very closely to kind of follow the company. I'm going to try to stay in contact with you much more frequently here because I think 2026 is going to be the -- I believe, as an analyst that this is the year of CytoSorbents. And so you've been watching the stock for years, now is the time to stay focused. I want to thank Dr. Chan and Pete, thank you so much for joining me this morning and for kind of just sharing your outlook as we approach a new year. Thanks, guys, and I wish everybody a happy holidays.

Thanks so much, Jason.

Thank you. Thank you all.

Take care. Happy holidays, everyone.

Bye-bye.

Good afternoon, ladies and gentlemen, and welcome to the CytoSorbents Corp. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 13 of 2025.

I would now like to turn the conference over to Adanna Alexander, Investor Relations Consultant. Please go ahead.

Thank you, Chloe, and good afternoon, everyone. Welcome to CytoSorbents' Third Quarter 2025 Financial Results and recent Business Highlights Conference Call. Joining me today from the company for the prepared remarks are: Dr. Phillip Chan, Chief Executive Officer; and Pete Mariani, Chief Financial Officer.

Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from results discussed today. The forward-looking statements we make may reflect our views and estimates as of today, November 13, 2025, and we assume no obligation to update these projections in the future as market conditions change.

During today's call, we will have an overview presentation covering the operating and financial highlights for the third quarter 2025. Following the presentation, we will open the line to analysts for questions. And now it is my pleasure to turn the call over to Dr. Phillip Chan. Phil?

Thank you very much, Adanna, and good afternoon, everyone. CytoSorbents continues to make solid progress as we execute on our long-term growth strategy. Our company is built around a platform blood purification technology designed to remove harmful substances and toxins from the bloodstream. We have 2 main products that leverage our proprietary polymer bead technology.

CytoSorb is used to treat life-threatening conditions in the ICU and during cardiac surgery and DrugSorb-ATR, our investigational device designed to reduce the severity of perioperative bleeding in patients on antiplatelet therapy and other blood thinning therapy. CytoSorb is now approved in the European Union and available in more than 70 countries with nearly 300,000 treatments performed to date. Trailing 12-month core product sales reached a record $37 million as of September 30, 2025, supported by strong execution across our global network.

Our strategy remains centered on 5 key initiatives. The first is to return to higher growth in our core CytoSorb business. The second is to obtain marketing approval and open the U.S. market for DrugSorb-ATR. The third is to achieve near-term cash flow breakeven and future profitability. The fourth is to continue to strengthen the balance sheet. And fifth is to increase and maximize shareholder value.

Let's start with an update on our core CytoSorb business. By the way, someone on the line is not on mute. Please go on mute.

In the third quarter of 2025, revenue was $9.5 million, up 10% from $8.6 million a year ago or 4% on a constant currency basis. This performance was led by record sales in our distributor territories and strong results in our other direct markets. Gross margin remained strong at approximately 70% compared to 61% in the third quarter of 2024. While we've made meaningful structural progress in Germany, we recognize that consistency remains an area of focus. We believe our ongoing work will lead to stronger performance in 2026.

On a trailing 12-month basis, core product revenue grew to $37 million, up from $33.8 million a year ago. Breaking that down further, distributor and partner sales grew 14% to $15.6 million. Direct sales outside Germany rose approximately 24% to $8.8 million, and Germany declined modestly by 3% to $12.6 million. Overall sales growth, including Germany, in the past trailing 12 months was 9%. And excluding Germany, growth was a stronger 17%. This is the reason why we are in the process of restructuring our sales team and sales approach in Germany.

In Germany, we have built a strong foundation with established clinical centers, device reimbursement and experienced sales talent. Our focus now is to strengthen leadership, improve sales processes and accountability, enhance training and sharpen account targeting, particularly among key accounts. We're simplifying our message to emphasize right patient, right timing and right dosage, which we believe will improve adoption and consistency going forward.

We continue to see real-world evidence and clinical validation from leading institutions around the world that support the value of CytoSorb therapy in critical care and cardiac surgery. We would encourage investors to explore our corporate website where there is a wealth of clinical data and information supporting the broad use of CytoSorb in a wide range of applications in critical care and cardiac surgery. You can see here just some of the recent webinars that we've had, particularly turning the tide in sepsis and septic shock, which you can find on the Investor web page as well as a white paper talking about the broad application of CytoSorb in the treatment of septic shock.

Our next major initiative is to obtain marketing approval and open the U.S. market for DrugSorb-ATR. Our FDA breakthrough designated device DrugSorb-ATR is designed to remove blood thinners such as Brilinta from the bloodstream. These blood thinning drugs improve outcomes in cardiac -- in heart attack patients that can cause severe bleeding during urgent coronary artery bypass graft surgery.

Unfortunately, patients often cannot wait the required 3 to 5 days for drug washout, leaving surgeons with a difficult risk-benefit trade-off. DrugSorb-ATR is designed to solve this unmet medical need, representing an initial $300 million market opportunity that could exceed $1 billion as Brilinta becomes generic and as we expand to additional indications.

Now to give you an update on our FDA regulatory timeline. Following our FDA appeal decision on August 20, the agency upheld the denial of our original de novo submission. But importantly, they confirmed that there were no safety issues with the device. And two, they indicated that the review of a new submission would focus only on the remaining open items from the first application. Because of this, on November 7, 2025, we filed a formal pre-submission meeting request with supporting documentation and anticipate a pre-submission meeting will be held in either late 2025 or early Q1 of '26 to confirm FDA requirements for the new de novo application.

We expect to file a new de novo filing in the first quarter of 2026, which will include robust analysis of real-world data demonstrating DrugSorb-ATR's effectiveness in clinical practice that was not available with the first submission and was not eligible for inclusion in the prior review and appeal. We anticipate mid-2026 regulatory decision following a typical 150-day review process, and this review may be expedited as DrugSorb-ATR is still an FDA breakthrough device eligible for priority and interactive review.

So with that, let me turn it over to Pete Mariani to go over financial highlights and some additional key initiatives. Pete?

Thank you, Phil, and good afternoon, everyone. Today, I'll be reviewing our third quarter financial performance and important updates that strengthen our balance sheet and our outlook through 2026. First of all, revenue was $9.5 million, an increase of 10% and 4% on a constant currency basis compared to $8.6 million in the third quarter of 2024. As Phil noted, our growth was led by record sales in our distributor territories and strong sales in our other direct markets. Now this sales growth was partially offset by a decline in our direct German market, where we continue to make progress with the reorganization of our team and are confident that this work will lead to stronger execution and improved performance in 2026.

Gross margin for the quarter was 70%, which is consistent with our recent history and an improvement over the 61% in the prior year and the prior year's gross margin were negatively impacted by a planned reduction in unit production to rebalance inventory, coupled with a short-term manufacturing issue, which was resolved in the third quarter of 2024.

Q3 operating expenses were $9.5 million for the quarter, an improvement of 6% compared to prior year. The decrease was led by a $900,000 reduction in R&D expenses following the completion of certain projects and other cost reductions implemented last year and partially offset by a $400,000 increase in SG&A expenses. The increase in SG&A was led by regulatory spending related to DrugSorb-ATR filings and initial commercialization expenses in anticipation of DrugSorb approval and launch, offset by lower compensation and royalty expenses in the quarter.

Given that we now expect DrugSorb approval in mid-2026, the company has taken steps to reduce these commercialization expenses as part of our strategic workforce and cost reduction program.

Our Q2 operating loss improved to approximately $9.2 million from $4.8 million in the prior year. And net loss was $3.2 million for the quarter or $0.05 per share compared to net loss of $2.8 million or $0.05 per share in the prior year. However, after eliminating the impact of foreign currency changes and noncash stock compensation in both periods, adjusted net loss for the quarter improved to $2.6 million or $0.04 per share compared to an adjusted net loss of $4.5 million or $0.08 per share in the prior year.

Adjusted EBITDA loss for the quarter, which also excludes the impact of noncash stock compensation and changes in foreign currency, improved to $2 million compared to an adjusted EBITDA loss of $3.6 million in the prior year.

Our total cash, cash equivalents and restricted cash was $9.1 million on September 30 compared to $11.7 million at the end of the second quarter of this year, reflecting net operating cash burn of $2.6 million in the quarter.

One of our key strategic priorities has been to ensure that our core business is running at cash flow breakeven as we enter 2026. We are pleased with the improvements in operating margins and cash burn over the past year. However, we have determined that the pace of our operating improvements needs to accelerate in order to achieve this important goal. As a result, we have implemented a strategic workforce and cost reduction program. This initiative follows a comprehensive review of company's cost structure and operating model.

The actions taken include a workforce reduction of approximately 10% as well as reductions across production and operating expenses, which we believe will allow us to achieve cash flow breakeven beginning in Q1, and do so while continuing to fund key growth initiatives, including regulatory approval and launch of DrugSorb-ATR in the U.S. We expect to record a charge of up to $900,000 that will include severance and other charges related to the restructuring.

Additionally, we are pleased to announce that we have amended our loan and security agreement with Avenue Partners effective today, November 13. The amended terms provide for immediate funding of $2.5 million of new capital as well as an extension of the interest-only period to December 31, 2026. The amendment also provides for an additional $2.5 million of capital, along with an additional 6-month extension of the interest-only period to June 30, 2027, both upon FDA approval of DrugSorb-ATR in 2026.

The company issued warrants to Avenue Capital to purchase 1.4 million shares of the company's common stock for cash at an exercise price of $0.70, which expire on November 13, 2030, and the number of warrants and exercise price is fixed. The amendment requires the company to maintain certain operating cash burn targets until U.S. FDA marketing approval of DrugSorb-ATR is achieved. So we're pleased to be able to complete this timely amendment to our credit agreement. We appreciate the partnership with Avenue Capital Partners, and we look forward to continuing to execute our strategy.

And finally, we are pleased with the structural improvements we are making across the company to drive improved execution at the top line and provide a more rigorous ROI focus on our spend, leading to improved margins and cash burn. We believe that these improvements will continue to drive efficiencies and allow us to achieve cash flow breakeven beginning Q1 of 2026.

We believe these improvements, along with our amended credit agreement, further strengthen our balance sheet with the liquidity and flexibility to continue driving growth across our core business and pursue what we believe is a derisked plan to U.S. marketing approval of DrugSorb-ATR in mid-2026.

And now, I'll turn the call back over to Phil.

Thanks, Pete. And now I'll cover briefly the last key initiative, which is to increase and maximize shareholder value. To summarize, CytoSorbents has a clear and compelling value proposition. We have a proven international business generating $37 million in annualized high-margin product sales. We have a scalable recurring revenue model, a razor blade and other people's razor business model that's very attractive, a promising U.S. regulatory path for DrugSorb-ATR and a strengthened balance sheet following our credit amendment and cost reductions.

We're pleased with our recent execution against our key initiatives and are confident that these actions will enable us to drive towards profitability and long-term shareholder value creation. We very much appreciate your patience and continued support.

And finally, before we move to Q&A, I'd like to take a moment to recognize and honor Dr. Robert Bartlett, our former Chief Medical Officer for 10 years and the Father of Extracorporeal Membrane Oxygenation that has saved more than 100,000 lives around the world since its inception. Dr. Bartlett's vision and contributions to this field and to CytoSorbents have left a lasting legacy. Please see our recent press release highlighting his many contributions to the world.

That concludes our prepared remarks. Operator, please open the line for questions. Thank you.

[Operator Instructions] There are no questions at this time, please continue.

We have a question from Tom Kerr from Zacks Small-Capital Research.

This is actually Brian Lantier. Tom is triple booked this afternoon, but he wanted me to jump on the call quickly and ask if you could clarify a little bit about where you see the gross margin in Q4 and 2026. Do you feel like it's sort of normalized now around the 70% level?

Thank you, Brian. Well, Pete, do you want to go at that?

Well, we -- go ahead. Yes, sure. Yes, Brian, look, we are pleased with the 70% level that we've been able to execute. I do think that we've got opportunities to continue to see improvement. Some efficiencies have begun to come into the [ plant. ] We're seeing consistency there. And certainly, as we move towards higher volumes and eventually with DrugSorb approval, we do see possibilities for extension of -- or expansion of gross margin in the future.

Okay. Great. And have you shared any either internal or external milestones or guideposts that we can sort of look to, to see progress on the German sales force restructuring to see that it's having the effect that you're looking for?

Yes. I think that it's a little too soon to say, as I mentioned in my remarks, that it's still a work in progress. But I do think that we are seeing by following certain metrics that we follow improvements in rep performance and efficiency, et cetera. I think that ultimately, we believe that will translate into improvements in sales and returning Germany back to growth. But hopefully, you'll be able to see that in future quarters.

Okay. Great. And maybe just to satisfy my own curiosity, can you differentiate a little bit between a pre-submission package that you're going to submit to the FDA and the actual full application that you'll be submitting in 2026?

Sure. The pre-submission package or the pre-submission meeting is designed to get on the same wavelength as FDA. And so that we understand what FDA's concerns are. We understand what guidance -- to be able to incorporate FDA guidance into our de novo submission when we finally submit so that there are no surprises.

And in the pre-submission document, we lay out basically our strategy of what we are planning on doing. We'll be asking for FDA feedback during the meeting on those; and then, again, taking all of that and putting that into the final de novo submission.

And again, I think that we're excited by the opportunity to be able to present data that has been out there and also new analyses that no one has even seen, of course, based upon FDA feedback as well to be able to demonstrate to FDA this probable -- that the probable benefit outweighs the probable risk or that the benefit-to-risk ratio is a positive one, which is the basis of the de novo marketing authorization. So we're very excited that we've now put in for this pre-submission and hope to stay on schedule to be able to submit that de novo in the first quarter of next year.

Great. And I guess one last one, and then I'll open it back up for anyone else. Any feedback from the World Sepsis Day webcast that you had?

Yes. We've actually had excellent response from that webcast internationally. The statistics are very promising. And I think the important part is that we're getting the message out there that CytoSorb is not just a blood filter to treat cytokine storm.

What we've been able to demonstrate and what our collaborators and researchers around the world have been able to demonstrate is that by controlling that cytokine storm, it has broad-ranging effects on the pathophysiology of sepsis and septic shock, helping to ameliorate organ dysfunction and organ failure and importantly, allowing clinicians the next step of getting the fluid, which is essentially drowning the patient from the inside out, out of the patient, which they typically cannot do because of that severe inflammation that is happening.

So the feedback that we've gotten so far has been outstanding. And this is actually going to be -- it is one of the focuses of our sales teams around the world to continue highlighting really the significant amount of data that has been generated in the area of sepsis and septic shock and help clinicians solve this critical problem for their patients.

There are no questions at this time. Please continue.

Well, thank you, everyone, for joining the call today. If you do not have any other questions, please feel -- if you do have any other questions, please feel free to reach out to us at [email protected]. We look forward to updating you in the next call. Have a great evening, everyone, and thank you very much. Have a good night.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a wonderful day.

Good day, ladies and gentlemen, and welcome to the Q2 2025 Earnings Conference Call for Cytosorbents Corp. [Operator Instructions] This call is being recorded on Wednesday. I would now like to turn the conference over to Adanna Alexander, Investor Relations Consultant. Please go ahead.

Thank you, Sergio, and good afternoon, everyone. Welcome to Cytosorbents Corp Second Quarter 2025 Financial Results and recent Business Highlights Conference Call. Joining me today from the company for the prepared remarks are Dr. Phillip Chan, Chief Executive Officer; and Pete Mariani, Chief Financial Officer.

Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. The forward-looking statements we make reflect our views and estimates as of today, August 7, 2025, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the second quarter 2025. Following the presentation, we will open the line to analysts for questions. And now it's my pleasure to turn the call over to Dr. Phillip Chan. Phil?

Thank you very much, Adanna, and good afternoon, and welcome, everyone, to our second quarter 2025 earnings call. As a quick summary for those who are new to the company, CytoSorbents is a leader in the treatment of life-threatening conditions in the intensive care unit in cardiac surgery through blood purification and the removal of harmful substances from blood with our proprietary Sorbent bead technology. Cartridges filled with these beads are high-margin single-use disposables that are plug-and-play compatible with existing blood pump machines in the hospital, such as dialysis, ECMO and heart lung machines.

Our technologies are used in a broad number of blood purification applications, specifically CytoSorb, our flagship product, which is approved in the European Union, is used primarily to treat life-threatening conditions in the intensive care unit in cardiac surgery such as sepsis and septic shock, acute respiratory distress syndrome, liver failure, blood thinner removal and infective endocarditis, just to name a few. CytoSorb is the anchor of our core international business with over -- with nearly 300,000 devices utilized to date in more than 70 countries worldwide, which drove $35.6 million in core product sales last year.

Our second product, DrugSorb ATR is an investigational FDA breakthrough designated medical device intended to reduce the severity of perioperative bleeding in patients undergoing cardiac surgery due to blood thinning drugs. We're initially focused on the blood dinner Brilinta, also known as ticagrelor in patients undergoing CABG or coronary artery bypass graft surgery. Currently, we are navigating the appeals process with both FDA and Health Canada with final regulatory decisions expected this year. Meanwhile, we continue conducting premarket launch activities and if approved or authorized, plan to quickly begin our controlled market release at hand chosen cardiac surgery centers.

Today, I will summarize our financial performance in the second quarter and follow that with a regulatory update on DrugSorb ATR. Next is part of our activities surrounding sepsis awareness month in September and World Sepsis Day on September 13. We will talk about the leadership role that Cytosorbents and its collaborators are playing in the treatment of sepsis and septic shock and give you information on our World Sepsis Day Global webinar on September 10. Finally, Pete will provide a more detailed financial update and discuss our progress in driving our core business to near breakeven by the end of this year with sufficient cash to fund our company initiatives.

In the second quarter of 2025, we reported product sales of $9.6 million, representing a 9% year-over-year increase and up 4% on a constant currency basis compared to the same period last year. We're making encouraging progress with our proactive reorganization and strategic realignment of our German commercial team, which grew 22% year-over-year and sequentially in the quarter. Our other direct territories also saw continued strength, and our distributor sales were among the best ever, second only to our record second quarter last year. With Q2 behind us, we are pleased with our initial progress with our German reorganization and remain confident it will lead to stronger execution, improved performance and more robust sales growth in our overall business this year and beyond.

Gross margin performance remained solid, holding steady at approximately 71%. And as Pete will review later, operating expenses were slightly higher in the quarter due to a few unique operating and strategic charges, but we remain committed to reducing core business operating costs and driving operational efficiencies to manage our total core business towards near breakeven as we exit 2025.

Now for a quick update on DrugSorb ATR. Acute heart attack patients are often given blood thinners like Brilinta to help improve outcomes and prevent further clotting events. However, while Brilinta can be life-saving, it also creates a dangerous challenge for patients who require urgent coronary artery bypass or CABG surgery. Because Brilinta significantly increases the risk of serious, even life-threatening bleeding during surgery and after surgery, doctors must typically wait 3 to 5 days for the drug to wash out of the patient's system before operating. But in many cases, these patients simply can't wait. They are still having a heart attack and delaying surgery increases the risk of severe complications, including sudden cardiac death, for example. This also leads to higher costs, longer ICU stays and inefficient use of hospital resources.

This is the critical gap that DrugSorb ATR is designed to fill. DrugSorb ATR is a breakthrough designated device that's specifically engineered to remove drugs like Brilinta from the blood during procedures such as CABG surgery, helping to reduce the risk of bleeding, enabling patients to get the surgery they need it when they need it. We believe DrugSorb ATR addresses a serious and growing unmet medical need in the U.S. and Canada, impacting tens of thousands of patients each year with an initial opportunity of more than $300 million and the potential to exceed $1 billion in sales as -- in total market opportunity as Brilinta becomes generic and DrugSorb ATR expands to additional uses. This device represents a compelling opportunity to improve patient care and drive long-term growth.

Our company and technologies continue to demonstrate and be recognized for our ability to reduce the severity of bleeding in CABG patients caused by blood thinners such as Brilinta that represents a major global unmet medical need. At the EuroPCR Congress in May of this year, the world-leading course in interventional cardiovascular medicine with over 12,000 attendees, Professor Robert Story presented new comparative data from our STAR registry. The analysis included 150 CABG patients on Brilinta who were treated with CytoSorb compared to 644 controlled patients from a recently published meta-analysis who underwent CABG on Brilinta without CytoSorb.

Key findings from the analysis showed that the use of CytoSorb was associated with a highly significant 2/3 reduction in the rates of severe CABG-related bleeding, 78% reduction in the need for large transfusion events that required 5 or more units of packed red blood cells and a 58% reduction in the need to go back to the operating room to find out why the patient keeps bleeding. Also in May, at the 73rd International Congress of the European Society for Cardiovascular and Endovascular Surgery, Professor Matthijs Tillman received the Best Oral Presentation Award for his talk entitled Early CABG with Intraoperative Hemoabsorption in patients on ticagrelor real-world data from the STAR Registry. These presentations and the positive response by their peers reflect the growing clinical interest in the use of CytoSorb for managing perioperative bleeding risk in patients undergoing CABG surgery on blood thinners and continues to strengthen the value of our technology in real-world settings.

I will now provide an update on our regulatory progress in North America. Earlier this year, we submitted a de novo application to the U.S. FDA and a medical device license application to Health Canada, both of which -- actually, this was -- I apologize, this was late last year, we submitted these applications, both of which included data from our STAR-T randomized controlled trial and real-world evidence from the STAR registry. Following an interactive review with the FDA, we were able to resolve many of the issues raised. However, in April, the FDA issued a denial letter for our de novo request. In response, we pursued the formal appeals process and conducted an in-person hearing with the FDA last month. This hearing included a comprehensive presentation of our de novo submission with participation from senior FDA officials, the original FDA review team, our company leadership, regulatory counsel from our regulatory council, Duval & Associates and expert testimony from our external cardiac surgeon experts.

As a designated breakthrough device, we continue to believe the remaining deficiencies in our de novo application can be effectively addressed and that our device meets the benefit to risk criteria for authorization under this pathway. We expect the FDA appeal process to conclude by the end of August. There are 3 possible outcomes. The original denial may be reversed outright and may be reversed with specific conditions or it may be upheld.

In parallel, we continue to work with Health Canada following their notice of refusal issued in June which identified certain deficiencies in our submission. As part of Health Canada's prescribed reconsideration process, essentially an appeals process, and after discussions with Health Canada, the company has filed a Level 1 request for reconsideration. And with agreement from Health Canada, we plan to pursue the review following the completion of the company's review with the U.S. FDA. Despite these regulatory challenges, we remain optimistic. We continue to anticipate final decisions from both the FDA and Health Canada before the end of 2025 and are actively preparing for a potential North American commercial launch.

Now a CytoSorb update. So in the last quarter review, we discussed a number of catalysts for CytoSorb growth. That said, we're excited to come back to one of our core applications and highlight how CytoSorb is helping to turn the tide of sepsis and septic shock. Sepsis is a complex and life-threatening medical condition that occurs when the body's inflammatory response to a serious infection spirals out of control. This runaway response is driven by excessive levels of cytokines, often called a cytokine storm as well as bacterial toxins and many, many other inflammatory mediators.

If left unchecked, this massive inflammation can progress to septic shock, a severe and often fatal complication marked by circulatory collapse a lethal drop in blood pressure and widespread organ dysfunction caused by the failure to deliver oxygenated blood to organs. This inflammation can also drive a system crash of problems, including capillary leak and fluid overload, frequently ending in multi-organ failure and death. The global burden of sepsis is staggering. Each year, approximately 49 million people are affected worldwide and an estimated 11 million people die as a result. That's 1 in 5 deaths globally from any cause -- underscoring the scale and urgency of this problem.

Despite advances in supportive care such as antibiotics, intravenous fluids, vasopressors and mechanical life support like mechanical ventilation and dialysis, mortality from sepsis and septic shock remains unacceptably high. Septic shock, for example, has an initial mortality of 30% to 50% that can escalate quickly to up to 100% with multiple organ failure and other complications. With the exception of antibiotics, most standard of care therapies are focused on treating the symptoms rather than treating the underlying inflammation driving the condition. That is why there's a critical and growing need for better therapies that go beyond supportive care to directly address the root causes of sepsis and septic shock and improve patient outcomes. As I mentioned before, September is sepsis awareness month and September 13 is World's Sepsis Day, important events that shine a spotlight on this often overlooked global crisis. They also highlight the urgent opportunity to innovate in a space where better solutions are desperately needed.

For more than a decade, CytoSorbents has worked with clinicians and scientists from around the world to advance the treatment of sepsis and septic shock by complementing traditional antibiotics with the broad spectrum capability of CytoSorb. While antibiotics fight the infection, CytoSorb broadly targets the other key drivers of septic shock, including severe inflammation driven by cytokine storm and bacterial toxins, the fuel to the fire of inflammation, if you will, as well as circulatory collapse, capillary leak, fluid overload and organ failure, just to name a few. We believe this dual approach when combined with standard of care therapy, represents a paradigm shift in how to treat septic shock, emphasizing early, intensive and sufficiently long CytoSorb treatment, much like the principles guiding effective antibiotic therapy.

In our July 31 press release entitled CytoSorbents leads a new era in sepsis treatment, we highlight the substantial body of published peer-reviewed literature that supports a comprehensive multifaceted approach to treating the underlying core problems in septic shock. But at the end of the day, what matters is that CytoSorb is enabling the achievement of core treatment goals in septic shock to help patients stabilize and recover. These include breaking the vicious cycle of uncontrolled inflammation, reversing shock and restoring oxygenated blood flow, promoting the repair of leaky blood vessels and allowing the active removal of excessive fluid and reducing fluid overload in organs that is essentially drowning the patient from inside out.

Ultimately, these are all helping to prevent or treat multiple organ failure, which is the main reasons why patients die from sepsis and septic shock. But a great therapy used the wrong way is not going to have the desired effect, but that is why we continue to educate users that treating inflammation with CytoSorb is the same as treating the infection with antibiotics. You need to treat early, intensively. And just because the patient looks or feels better, you don't stop until you have completed the full course of treatment. We believe that this is the key to driving CytoSorb to outstanding clinical outcomes and standard of care.

This year has been an outstanding year for new publications related to the use of CytoSorb in septic shock. These publications continue to validate the treatment concepts that we've just discussed. The first publication is from FRR and participating investigators in our international critical care registry called COSMOS. Data from the first 150 patients was recently published where 58% had septic shock and show clearly in a statistically significant way, the benefit of using CytoSorb in these patients when comparing hemodynamic stability, fluid balance and lung function before and after treatment. Overall mortality in these patients was lower than what was predicted by standardized and established critical care scores.

Another important paper was published by Brlot and colleagues, demonstrating that in their large retrospective study in 175 septic shock patients treated with CytoSorb, the early and intensive treatment with CytoSorb double survival expectations and the more blood volumes you treat with CytoSorb, the higher the likelihood of survival. To drive the point home, the first meta-analysis in 744 septic shock patients, of which 449 were treated with CytoSorb was published by Steinhl and colleagues from the well-respected Cheritee Berlin Hospital in Germany. Their results showed that not only did CytoSorb reduce in-hospital mortality, but it also reduced by more than half 28- to 30-day all-cause mortality compared with septic patients who did not receive CytoSorb therapy.

And that brings me to a plug for our World Sepsis Day Global webinar that I will be hosting entitled -- turning the Tide in Sepsis Septic shock, Real-World Insights with CytoSorb. This will happen on Wednesday, September 10, at 11:00 a.m., and webinar registration is required. The link is in our press release -- earnings press release today. This special session will feature physician user guests discussing CytoSorb therapy best practices and its impact in the fight against sepsis. With that, I will now turn it over to Pete to give a financial update. Pete?

Thank you, Phil, and good afternoon, everyone. Today, I'll be reviewing our Q2 financial performance and sharing our outlook for the balance of 2025. Q2 revenue was $9.6 million, an increase of 9% and 4% on a constant currency basis compared to $8.8 million in Q2 of 2024. As Phil noted, our growth was led by 22% growth both year-over-year and sequentially in Germany and continued strength in our other direct territories. And distributor sales were among our best ever, second only to a record Q2 in 2024. The realignment of our German commercial team and approach continues to be a key strategic initiative, and we are pleased with the progress we're making and expect that these actions will drive improved execution and results in the second half of the year.

Gross margin for the quarter was 70.9%, which is consistent Q1 and full year of 2024 margins and lower than the 73.5% in Q2 of last year. The year-over-year decrease is primarily due to inventory write-offs in the period, and we expect inventory production volumes to continue to increase across the second half of the year to support growth in our core business and to prepare for anticipated launch of DrugSorb ATR in the U.S. and Canada later this year.

Q2 operating expenses were $10.4 million or approximately $300,000 and 3% over the prior year due primarily to items that are unique to the quarter, including costs associated with the rebuild of our accounting team and controlled deficiency mitigations of $400,000 following the passing of our controller in early Q1. Additionally, we had higher regulatory legal consulting expenses related to our DrugSorb ATR appeals in the U.S. and Canada of nearly $200,000. -- and costs associated with our commercial -- our German commercial restructuring of approximately $400,000.

And as discussed on our last call, we ramped up our DrugSorb ATR commercialization planning in the quarter, which accounted for approximately $350,000. These increases were mostly offset by lower R&D, royalties and stock comp totaling approximately $1 million. As a result, our Q2 operating loss was approximately $3.6 million for the quarter or flat year-over-year. And we had net income for the quarter of $1.9 million or $0.03 per basic and diluted share compared to a net loss of $4.3 million or $0.08 per basic and diluted share in the prior year. However, after eliminating the impact of foreign currency changes and noncash stock compensation in both periods, adjusted net loss for the quarter was $3.7 million or $0.06 per basic and $0.05 per diluted share compared to an adjusted net loss of $2.8 million or $0.05 per basic and diluted share in the prior year.

Adjusted EBITDA loss for the quarter, which also excludes the impact of noncash stock compensation and changes in foreign currency, was $2.6 million compared to an adjusted EBITDA loss of $2.2 million in the prior year. Our total cash, cash equivalents and restricted cash was $11.7 million on June 30 compared to $13.1 million at the end of the first quarter of this year and includes $1.7 million of proceeds from the sale of our 2023 and amended 2022 net operating loss and R&D tax credits from the technology business tax certificate transfer program sponsored by the New Jersey Economic Development Authority. Excluding the $1.7 million proceeds, our net cash burn in the quarter was approximately $3.1 million, inclusive of items unique to the quarter.

Our debt balance remains at $15 million, and our debt facility provides for an additional $5 million tranche, which is available at our discretion upon FDA approval of DrugSorb ATR prior to December 31. And as we look to the balance of the year, we continue to prioritize initiatives that drive revenue growth, improve our gross margins and reduce cost to lead our core business toward cash flow breakeven as we exit 2025 and allowing for investment in our North American commercial launch of DrugSorb ATR later this year and into 2026. And now let me turn the call back over to Phil.

Thanks very much, Pete. In summary, we believe CytoSorbents represents a clear and compelling value proposition. CytoSorb is a well-established, high-margin international business in critical care and cardiac surgery with strong momentum and clear pathways for growth. We're addressing major unmet medical needs with a proven scalable therapy, driving strong performance outside Germany while taking active steps to reignite growth in our largest market.

With the goal of achieving near-term breakeven and long-term financial independence, we are strategically investing in growth, operational discipline and global market expansion. Importantly, we remain fully committed to bringing DrugSorb-ATR to the North American market. We're actively preparing for commercialization as we await regulatory decisions from the FDA and Health Canada, both expected in 2025. Because of that, we believe we are well positioned to unlock significant value in both our core and emerging businesses. With that, thank you very much for your patience and continued support. This concludes our prepared remarks. Operator, please open the line for questions. Thank you.

[Operator Instructions] Your first question comes from Michael Sarcone from Jefferies.

Phil, I was hoping maybe you can give us some more color. Two regulatory agencies have now issued denials for your submissions and you continue to express confidence. Is there anything else you can give us to just kind of help us get some more confidence or kind of feel confident as you do that you're going to reach the approval goal?

Yes. Mike, thanks for the question. I think that the appeals process was a very good event for us because it allowed us for the first time to really lay out the story of DrugSorb ATR and its impact on reducing the severity of perioperative bleeding in CABG patients in cardiac surgery, highlighting the strengths of our application, coupled with the support of external cardiac surgery experts, one who was a principal investigator of the study and one who was one of the pioneers of this application in Europe who came to give testimony to the FDA, not only the existing review team, but FDA senior officials. Because of that, we believe that we have put forth our best foot forward here, and we await a response from FDA, hopefully, by the end of this month. Now for Health Canada, we believe that -- and one of the reasons why we are waiting to conclude the FDA discussions is to ensure that Health Canada has the benefit of FDA's perspective before making their final decision in appeal.

Got it. That's helpful. And maybe just a follow-up on Germany. It sounds like the changes you've made are bearing fruit. Maybe you can give us an update on how things are trending quarter-to-date and quarterly updates there would be helpful.

Mike, in which sections of our business, I apologize, you were -- I couldn't quite hear.

My apologies. Just an update on Germany and how things are trending so far quarter-to-date. Your update -- your prepared commentary sounded pretty positive just on the organizational changes. I was just wondering how that's going so far.

We view the reorganization as a work in progress. And clearly, there are some structural and other things that we have been enacting that are intended to ultimately improve the efficiency of our German sales force and the effectiveness of our German sales team. And so second quarter results were very encouraging, showing a 22% increase sequentially as well as year-over-year. But we -- there's still more work to do. And -- but ultimately, we believe that the changes that we've made and continue to make will have a positive effect on the company's operations overall.

Your next question comes from Tom Kerr from Saks Research.

Great results guys. One quick clarification on Canada, the "request for reconsideration, that's effectively the same as your FDA appeal? Or is there more something else in Canada to do?

Yes. That -- what we have filed is an intent for reconsideration. That will be followed at the appropriate time with a formal appeal document, and it will then lead to ultimately what is essentially a formal appeals process like we have done with FDA. And so -- but again, we are -- and we're looking to push that off until after an FDA decision and Health Canada has agreed to do that.

Got it. And can you refresh our memory on the commercial launch rollout once approved in the U.S.? Are we talking fast rollout, careful, cautious rollout? How would you define that?

Yes. I think I'd classify it as purposeful rollout. We're going to be focused on our clinical accounts, the folks who participated in the clinical study and probably a handful of others that we know that are -- have shown interest and would like to be engaged with this process quickly. And I think it's going to be really important for us in the first 3 to 6 months to focus on those 22 accounts plus a handful of others that we will also roll in. and understand the pace of that rollout. So how quickly are we able to get access to the account? How quickly are we able to get to a reorder point and see volume in those accounts. I'm pretty pleased with the work. I know Phil is too. We're all pleased with the work that our team has done here, especially in the last 3 months or so to lay out a strategy that would allow us to effectively get in and evaluate these accounts quickly. And I think we've got a product that's going to be well received once we get through the FDA.

Got it. Sounds good. Two more quick ones. And that's great data on the sepsis and septic shock. But how does that translate to the business model? Is this a new line of business? Or does it just make CytoSor more marketable? How do you look at that affecting the business model?

So septic shock and sepsis and septic shock is one of the biggest applications in ICU today. It accounts for typically 10% to 20% of all patients in the intensive care unit. They either have sepsis or septic shock when they enter the ICU or they get it while they're in the ICU. That's a big problem. It accounts for up to 15% of a hospital's operating budget, and it's a place where hospitals routinely lose money because of the ineffective treatment of sepsis and septic shock with standard of care therapies. Sepsis and septic shock has been a core application for CytoSorb since the beginning. We estimate that it accounts for a large majority of our critical care revenue because of all the things that we discussed in our press release on July 31 in our earnings call today and on this -- and in the earnings release today as well.

So it's an old, but still scratching the surface of this application. And where we are going right now, and this is one of the reasons why we're so excited is because we really do believe that with all of the data that has been published to date that we understand very well how to use our therapy best to achieve excellent outcomes in patients with sepsis and septic shock. And I think that our goal will be to teach users how to achieve those results and again, centered around the early aggressive and of the right duration treatment with CytoSorb to try to achieve these treatment goals of controlling deadly inflammation, stabilizing the patient, helping to reverse this capillary leak and importantly, get that fluid off of the patient that is essentially drowning them from within. So it's a problem. It's a puzzle that no one has been able to solve over decades of research and trials, et cetera. But we think that we are actually very close to helping physicians really figure out this puzzle. And that's one of the reasons why we're excited to have this webinar and to talk more in depth about the -- exactly what it is that we do.

Got it. That sounds great. That's kind of exciting for you guys. One more quick one, and I'll jump back in the queue. Sorry if I missed this in the prepared remarks about gross margins at 70.9%. Is that what we can expect in Q3 and Q4? Can you do better than that? How do we look at the gross margins for the rest of the year?

Well, gross margins have been in this range for a while. And I think that we've got opportunity to ramp production faster and do some additional things to improve our efficiencies in the production floor or on the production floor that I think gives us the opportunity to see higher gross margins. Again, not disappointed with 71% gross margins to be sure. But we certainly have an opportunity, I think, with normal efficiencies to bring that higher. And then secondly, with DrugSorb approval, -- we expect that to be a higher-margin product itself. So in time, I think we have the opportunity to see higher gross margins.

There are no further questions at this time. I will now turn the call over to management for closing remarks. Please go ahead.

Well, thank you, everyone, for joining the call today. If you do have any other questions, please feel free to reach out to us at [email protected]. We look forward to updating you in the next call. Have a great evening, everyone, and thank you very much. Have a good night.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.