CytoSorbents Q1 2026 Earnings Call - DrugSorb-ATR FDA Pathway Clarified Amidst Geopolitical Headwinds

Kathleen, Conference Call Operator: Afternoon, ladies and gentlemen, and welcome to the CytoSorbents’ first quarter 2026 earnings conference call. At this time, all lines are in listen-only mode. After the speaker’s remarks, there will be a question-and-answer session. If you wish to ask a question during the Q&A session, please press star one. As a reminder, this call is being recorded. Now I would like to turn the conference over to Pete Mariani, Chief Financial Officer. Please go ahead.

Pete Mariani, Chief Financial Officer, CytoSorbents: Thank you, Kathleen. Good afternoon, everyone. Welcome to CytoSorbents’ first quarter 2026 conference call. Joining me today is Dr. Phillip Chan, our Chief Executive Officer, and Dr. Efthymios N. 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. 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, May 13th, 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 30th, 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 financial results for Q1 2026 and provide a regulatory update on our process to obtain U.S. marketing and approval for DrugSorb-ATR. Following the presentation, we will open the lines to analysts for questions. Now I’ll turn the call over to Phil. Phil?

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: Thank you very much, Pete. 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. CytoSorb is not currently approved or cleared in the U.S. 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 increasing adoption in key accounts, particularly driven by an outstanding team. In Germany, sales declined mostly year-over-year. 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 re-accelerate growth. Distributor sales were flat overall but were negatively impacted by geopolitical disruption in the Middle East, particularly surrounding the US-Iran war, which delayed approximately half a million dollars 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, postsurgical 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 standalone 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.

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. 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 use 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 healthcare 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. Efthymios N. Deliargyris, our Chief Medical Officer, to discuss our clinical and regulatory progress. Efthymios?

Dr. Efthymios N. Deliargyris, Chief Medical Officer, CytoSorbents: 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 with 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 antiplatelet agents like BRILINTA that they take those medications either acutely to reduce risks of heart attacks or chronically to reduce the risks 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%-10% of patients are on chronic DOAC therapy at the time of surgery. Similarly, among heart attack patients who are treated with antiplatelet drugs like BRILINTA, about 5%-10% of them are not eligible for a stent and do require also urgent CABG surgery. The problem arises by the fact that these blood thinners, when present during surgery, this significantly and substantially increase the risk for severe, frequently life-threatening 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. This is far from a perfect solution. First of all, many patients simply cannot wait. Their 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. 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 drug-eluting balloon in BRILINTA, it is important to remind our audience that in August of 2025, we received the FDA decision on our 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 two 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 a 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 submission. 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 or early 2027. 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 intraoperative drug-eluting balloon use for ticagrelor removal is safe and can reduce the severity of bleeding after isolated CABG in patients operated within 2 days of drug discontinuation.

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 lost after surgery with the use of the device. Next slide. Today, we would also like to share an additional regulatory update and a potential second shot on 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 anticoagulants following initial marketing approval for ticagrelor removal. 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 drug-eluting balloon to remove DOACs during cardiac surgery. As we previously stated, tens of millions of these patients are on chronic or lifelong DOACs for diseases such as atrial fibrillation, deep venous thrombosis, or pulmonary embolism. In fact, ELIQUIS is the number seven pharmaceutical in the world with $14.4 billion in global sales in 2025, while XARELTO is also a blockbuster with $5.1 billion in sales in 2025. They are the market leaders of the category.

Potential FDA marketing approval for both BRILINTA and DOAC removal in cardiac surgery could expand the total addressable market for drug-eluting balloon to $500 million, up to $1 billion in the U.S. alone. Next slide, please. I’d like to share some exciting news about some upcoming presentations in two very important cardiovascular conferences. The evidence for base for antithrombotic removal in cardiac surgery continues to grow. 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-leading course in interventional cardiology, we have two 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 that the choice of P2Y12 and device use can make when it comes to bleeding. The second presentation is specifically on DOAC removal during CABG. This is gonna 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 requiring 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. We’re talking about the ticagrelor removal during urgent CABG, but this we’re comparing to hospitals who also use ticagrelor but do not use the device. Very sophisticated statistical methods are being employed on patient-level data to ensure these populations are appropriate for comparison. A very exciting analysis from a collection of German heart centers who have incorporated their device as part of their routine care to treat multiple different types of blood thinners. This analysis is not specific on any 1 blood thinner, but simply the strategy of using the device whenever patients on blood thinners require urgent CABG.

These analysis and these data are embargoed until the date of release at the conference, we cannot go into more details. 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 experienced with the use of our device as part of their protocols for patients on blood thinners. It’s important to note that it’s very difficult to get any analysis accepted. These are very competitive conferences, 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. Thank you for your attention. With that, I will turn it over to Pete now.

Pete Mariani, Chief Financial Officer, CytoSorbents: Thank you, Efthymios N. Deliargyris. 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 Phillip Chan noted, was $8.9 million, an increase of 2% over prior year and down 7% on a constant currency basis. As Phillip Chan 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.

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 US-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.

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 cost will continue to decrease sequentially as the 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. It’s primarily due to the non-cash impact of changes in foreign currency transactions year-over-year. However, adjusted net loss for the quarter, which removes the non-cash impact of foreign currency gains and losses and non-cash 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 non-cash impact of foreign currency gains and losses and non-cash stock compensation, improved to $2.2 million compared to an adjusted EBITDA loss of $2.7 million in the prior year. Our total cash equivalents and restricted cash was approximately $6.4 million on March 31st, 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. 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.

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: 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. 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 two FDA Breakthrough Device designations 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.

Kathleen, Conference Call Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have any question, please press star followed by 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling, please press star followed by 2. We’ll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Michael Sarcone of Jefferies. Please go ahead.

Michael Sarcone, Analyst, Jefferies: Hey, good afternoon, and thanks for taking our questions. Yeah, Phillip, 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 be included in your new De Novo submission. Can you maybe just talk about, you know, what are the various scenarios or forms that data could take and, you know, what would be the kinda requisite investment required on the part of CytoSorbents?

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: Thanks, Mike. Let me actually turn it over to Mikas to answer that question, and I can provide some additional color after that. Mikas.

Dr. Efthymios N. Deliargyris, Chief Medical Officer, CytoSorbents: Thanks, Phil. Michael, thank you for the question. Basically, the term mechanistic data refers to the fact that these are not clinical outcome data that we’re looking for. These are data to, you know, support the mechanism of action of the device. Now, these data are, in general, do not require the resourcing of running a clinical trial. I think that’s why we wanted to make that distinction. These are not clinical studies we’re being asked to run. It’s more of experimental designs that will provide this additional information. 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 as such.

Pete Mariani, Chief Financial Officer, CytoSorbents: We can’t comment with any more detail about what that data would look like. However, I just wanna make sure that, you know, it’s clear that these are not clinical studies that require, you know, a long duration of follow-up, you know, multiple patients or multiple sites working together.

Dr. Efthymios N. Deliargyris, Chief Medical Officer, CytoSorbents: heavy resources to support them. 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.

Michael Sarcone, Analyst, Jefferies: Okay. Again, I mean, I guess for my own understanding, could that include something like real world evidence or registry data from a single site? Like, is that something that could address something like this?

Dr. Efthymios N. Deliargyris, Chief Medical Officer, CytoSorbents: Yeah. I think it’s important to understand that these are not clinical outcomes we’re looking for, right? This is not necessarily to, you know, expand on the existing Real-World Evidence that we have. This is supplementary information around the mechanism of action of the device. These are not clinical outcome trials or experiments that we’re talking about.

Michael Sarcone, Analyst, Jefferies: Okay. I guess, you know, my second question or third technically, on the potential for, you know, expanding the label to DOAC, you know, 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 a best case scenario, you know, what do you hope the FDA kind of comes back with in terms of, you know, the easiest pathway or the most efficient pathway towards getting this expanded label?

Dr. Efthymios N. Deliargyris, Chief Medical Officer, CytoSorbents: I think that’s an excellent question, Michael. I think to be able to truly give you know, an answer that’s meaningful, that would have to happen after we actually 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, you know, real world experience with the device and some of the accumulating, you know, publications and data that are out there and see what they would need in addition to what we already have. They may not even need much more. We just don’t know how they’re gonna view the DOAC application in comparison. We do have clarity with ticagrelor and BRILINTA, but we wanna gain similar clarity with DOAC, and we wanna have that alignment early on.

That’s why now that we believe there’s substantial body of evidence already collected, we wanna be able to present to them so we can move forward in a timely fashion to be able to compile the necessary information and proceed with a parallel submission for DOAC removal.

Michael Sarcone, Analyst, Jefferies: Okay, great. Thanks a lot, Michael.

Dr. Efthymios N. Deliargyris, Chief Medical Officer, CytoSorbents: Thank you, Michael.

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: Thanks, Michael.

Kathleen, Conference Call Operator: Your next question comes from the line of Thomas Kerr. Please go ahead.

Thomas Kerr, Analyst: Good afternoon, guys. Just a couple of business questions. We don’t talk much about the Middle East business. Can you expand on that? You know, which countries? Is it all distributor business, or is there any direct sales in the Middle Eastern region? Just any more color on that.

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: Yeah. You know, last year we established our subsidiary in Dubai, U.A.E., and talked about the exciting opportunities in the Middle East, you know, 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. You know, 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.

The US-Iran war was unexpected and I think as you’ve seen, has many implications across the world economy and in particular the Middle East where, you know, there’s been a lot of near term uncertainty. You know, 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. We are planning to be ready to respond in that case. I would also note that, you know, a lot of the conflict creates a lot of injury to a lot of unfortunately, to a lot of people.

You know, that is exactly what our therapy is designed to help with. You know, we believe that everything that’s happening right now just makes it even more compelling of what our technology can help do.

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

Pete Mariani, Chief Financial Officer, CytoSorbents: Tom, we have inventory levels I think will continue to come down a little bit. I think that, instead of accelerating gross margins, I think they’ll be in that, you know, you know, 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. We have that opportunity to do so and, before we have to really accelerate revenue or, inventory production again. The organization, along with that, has taken out significant amount of costs and really reorganized the way they’re doing ordering and planning. I think that, we have an ability to see efficiencies through this time that may not

negatively impact margins, going forward.

Thomas Kerr, Analyst: Got it. Thanks. I’ll get back in the queue.

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: Thanks, Tom.

Kathleen, Conference Call Operator: Again, if you wish to ask a question, please press star one to join the queue. Your next question comes from the line of Sean Lee. Please go ahead.

Sean Lee, Analyst: Good afternoon, guys, thanks for taking my questions. 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 expects to growing the sales force there again. I was wondering, when do you expect the overall German market to inflect back to growth? What’s the expected cost of the sales expansion that you’re looking at?

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: I think that, you know, what we saw in the first quarter was very encouraging progress across the German organization. You know, again, we nearly matched sales from a year ago with a 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 fixed salary coupled with an opportunity to earn quite a lot of money on the upside with a higher variable component. In fact, most medical device companies do this across the board. It’s a way to be able to control that initial spend as the sales team gets up to speed and becomes productive.

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. You know, Germany is an 87 million population country. It’s huge. You know, 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. 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.

I think that’s what a lot of this operational efficiency, you know, driving, performance by metrics and, you know, strong leadership, is all about. That’s what, we’re encouraged by, the recent, progress that we’ve made.

Sean Lee, Analyst: Well, great. Thanks for that. My second question is on the direct sales outside Germany seems to grow really well with 13% this quarter. Maybe you could elaborate a bit on what’s the primary drivers behind this growth and why it’s so different from what we see in Germany, at least, in the previous quarters.

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: Well, I think that the First of all, I think that we have a lot of avid users in our direct territories, right? Historically, it’s been Germany, Austria, Switzerland, but you know, it has continued to progress to other countries like Poland and Netherlands and countries in the U.K. Such that, you know, we consider all the time about looking to increase the number of direct territories that we’re actually selling into. But I think that, you know, 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. 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, or 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. I think, you know, 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.

Sean Lee, Analyst: That’s very helpful. My last question is on the Middle East. You mentioned that there were half a million dollars of delayed distributor orders. I was wondering whether do you feel that that’s still recoverable either in Q2 or later this year? Do you expect to see a continued impact in the region as well?

Pete Mariani, Chief Financial Officer, CytoSorbents: Yeah, Sean. I think the answer to that is yes. I think we’ve had orders that were you know, 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, you know, 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. There’s just a growing amount of interest in this region.

We are confident that, you know, although I don’t expect a snapback, when things settle down, but, you know, over the months following stability in the Middle East, I think those distributors are gonna be ready to move and take inventory and start distributing again.

Sean Lee, Analyst: Great. Thank you for the additional clarity on that. That’s all I have. Thanks again for taking our questions.

Pete Mariani, Chief Financial Officer, CytoSorbents: Sure. Thanks for the question.

Kathleen, Conference Call Operator: There are no further question at this time. I will now turn the call back over to Phillip Chan for the closing remarks.

Dr. Phillip Chan, Chief Executive Officer, CytoSorbents: 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.

Kathleen, Conference Call Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you all for joining. You may now disconnect.