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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:              to             

Commission File Number 000-21937

 

CERUS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

68-0262011

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1220 Concord Avenue, Suite 600

Concord, California

 

94520

(Address of principal executive offices)

 

(Zip Code)

 

(925) 288-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class 

Trading Symbol

Name of Each Exchange on Which Registered 

Common Stock, par value $0.001 per share

CERS

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

Non-accelerated filer

  

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES      NO  

As of July 21, 2020, there were 166,171,328 shares of the registrant’s common stock outstanding.

 

 

 

 


CERUS CORPORATION

FORM 10-Q

For the Quarterly Period Ended June 30, 2020

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (unaudited)

1

 

Condensed Consolidated Balance Sheets – June 30, 2020 and December 31, 2019

1

 

Condensed Consolidated Statements of Operations – Three and six months ended June 30, 2020 and 2019

2

 

Condensed Consolidated Statements of Comprehensive Loss – Three and six months ended June 30, 2020 and 2019

3

 

Condensed Consolidated Statements of Stockholders’ Equity – Three and six months ended June 30, 2020 and 2019

4

 

Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2020 and 2019

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

70

Item 3.

Defaults Upon Senior Securities

70

Item 4.

Mine Safety Disclosures

70

Item 5.

Other Information

70

Item 6.

Exhibits

71

 

 

SIGNATURES

72

 

 

 

 


PART I: FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CERUS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,900

 

 

$

34,986

 

Short-term investments

 

 

101,570

 

 

 

50,732

 

Accounts receivable

 

 

17,624

 

 

 

16,882

 

Inventories

 

 

18,425

 

 

 

19,490

 

Prepaid and other current assets

 

 

6,452

 

 

 

6,018

 

Total current assets

 

 

178,971

 

 

 

128,108

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

14,534

 

 

 

14,898

 

Goodwill

 

 

1,316

 

 

 

1,316

 

Operating lease right-of-use assets

 

 

13,768

 

 

 

14,122

 

Intangible assets, net

 

 

31

 

 

 

132

 

Restricted cash

 

 

2,460

 

 

 

2,435

 

Other assets

 

 

4,414

 

 

 

4,524

 

Total assets

 

$

215,494

 

 

$

165,535

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

18,831

 

 

$

22,185

 

Accrued liabilities

 

 

16,865

 

 

 

20,951

 

Debt – current

 

 

4,950

 

 

 

5,017

 

Operating lease liabilities – current

 

 

1,793

 

 

 

1,613

 

Deferred product revenue

 

 

706

 

 

 

570

 

Total current liabilities

 

 

43,145

 

 

 

50,336

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Debt – non-current

 

 

39,500

 

 

 

39,414

 

Operating lease liabilities – non-current

 

 

17,611

 

 

 

18,406

 

Other non-current liabilities

 

 

713

 

 

 

327

 

Total liabilities

 

 

100,969

 

 

 

108,483

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

166

 

 

 

144

 

Additional paid-in capital

 

 

994,682

 

 

 

906,905

 

Accumulated other comprehensive income

 

 

1,125

 

 

 

114

 

Accumulated deficit

 

 

(881,448

)

 

 

(850,111

)

Total stockholders' equity

 

 

114,525

 

 

 

57,052

 

Total liabilities and stockholders' equity

 

$

215,494

 

 

$

165,535

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

1


CERUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Product revenue

 

$

21,503

 

 

$

18,209

 

 

$

40,114

 

 

$

35,713

 

Cost of product revenue

 

 

9,705

 

 

 

8,111

 

 

 

18,025

 

 

 

16,543

 

Gross profit on product revenue

 

 

11,798

 

 

 

10,098

 

 

 

22,089

 

 

 

19,170

 

Government contract revenue

 

 

5,324

 

 

 

4,266

 

 

 

11,354

 

 

 

8,727

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

15,618

 

 

 

14,417

 

 

 

31,428

 

 

 

27,857

 

Selling, general and administrative

 

 

16,112

 

 

 

16,740

 

 

 

32,025

 

 

 

32,901

 

Total operating expenses

 

 

31,730

 

 

 

31,157

 

 

 

63,453

 

 

 

60,758

 

Loss from operations

 

 

(14,608

)

 

 

(16,793

)

 

 

(30,010

)

 

 

(32,861

)

Non-operating expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gain (loss)

 

 

273

 

 

 

105

 

 

 

50

 

 

 

(57

)

Interest expense

 

 

(929

)

 

 

(1,150

)

 

 

(1,864

)

 

 

(4,074

)

Other income, net

 

 

460

 

 

 

337

 

 

 

611

 

 

 

759

 

Total non-operating expense, net

 

 

(196

)

 

 

(708

)

 

 

(1,203

)

 

 

(3,372

)

Loss before income taxes

 

 

(14,804

)

 

 

(17,501

)

 

 

(31,213

)

 

 

(36,233

)

Provision for income taxes

 

 

67

 

 

 

61

 

 

 

124

 

 

 

121

 

Net loss

 

$

(14,871

)

 

$

(17,562

)

 

$

(31,337

)

 

$

(36,354

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.09

)

 

$

(0.13

)

 

$

(0.19

)

 

$

(0.26

)

Weighted average shares used for calculating net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

164,383

 

 

 

138,281

 

 

 

160,894

 

 

 

137,698

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

2


CERUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

UNAUDITED

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(14,871

)

 

$

(17,562

)

 

$

(31,337

)

 

$

(36,354

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on available-for-sale investments, net of taxes

 

 

1,248

 

 

 

161

 

 

 

1,011

 

 

 

372

 

Comprehensive loss

 

$

(13,623

)

 

$

(17,401

)

 

$

(30,326

)

 

$

(35,982

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

3


CERUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

UNAUDITED

(in thousands)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2019

 

 

144,291

 

 

$

144

 

 

$

906,905

 

 

$

114

 

 

$

(850,111

)

 

$

57,052

 

Issuance of common stock from public offerings, net of offering costs

 

 

17,867

 

 

 

18

 

 

 

67,094

 

 

 

 

 

 

 

 

 

67,112

 

Issuance of common stock from exercise of stock options,

   vesting of restricted stock units, and ESPP purchases

 

 

1,803

 

 

 

2

 

 

 

1,191

 

 

 

 

 

 

 

 

 

1,193

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,754

 

 

 

 

 

 

 

 

 

3,754

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(237

)

 

 

 

 

 

(237

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,466

)

 

 

(16,466

)

Balances as of March 31, 2020

 

 

163,961

 

 

 

164

 

 

 

978,944

 

 

 

(123

)

 

 

(866,577

)

 

 

112,408

 

Issuance of common stock from public offering, net

   of offering costs

 

 

1,471

 

 

 

1

 

 

 

9,428

 

 

 

 

 

 

 

 

 

9,429

 

Issuance of common stock from exercise of stock options and

   vesting of restricted stock units

 

 

580

 

 

 

1

 

 

 

1,604

 

 

 

 

 

 

 

 

 

1,605

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,706

 

 

 

 

 

 

 

 

 

4,706

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

1,248

 

 

 

 

 

 

1,248

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,871

)

 

 

(14,871

)

Balances as of June 30, 2020

 

 

166,012

 

 

$

166

 

 

$

994,682

 

 

$

1,125

 

 

$

(881,448

)

 

$

114,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2018

 

 

136,853

 

 

$

136

 

 

$

863,531

 

 

$

(281

)

 

$

(778,867

)

 

$

84,519

 

Issuance of common stock from exercise of stock options,

   vesting of restricted stock units, and ESPP purchases

 

 

965

 

 

 

2

 

 

 

682

 

 

 

 

 

 

 

 

 

684

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,878

 

 

 

 

 

 

 

 

 

2,878

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

211

 

 

 

 

 

 

211

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,792

)

 

 

(18,792

)

Balances as of March 31, 2019

 

 

137,818

 

 

 

138

 

 

 

867,091

 

 

 

(70

)

 

 

(797,659

)

 

 

69,500

 

Issuance of common stock from public offering, net

   of offering costs

 

 

1,978

 

 

 

2

 

 

 

9,834

 

 

 

 

 

 

 

 

 

9,836

 

Issuance of common stock from exercise of stock options and

   vesting of restricted stock units

 

 

265

 

 

 

 

 

 

558

 

 

 

 

 

 

 

 

 

558

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,139

 

 

 

 

 

 

 

 

 

3,139

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

161

 

 

 

 

 

 

161

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,562

)

 

 

(17,562

)

Balances as of June 30, 2019

 

 

140,061

 

 

$

140

 

 

$

880,622

 

 

$

91

 

 

$

(815,221

)

 

$

65,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

4


CERUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(31,337

)

 

$

(36,354

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,488

 

 

 

1,112

 

Stock-based compensation

 

 

8,460

 

 

 

6,017

 

Non-cash operating lease cost

 

 

619

 

 

 

796

 

Loss on sale of available-for-sale securities

 

 

261

 

 

 

 

Loss on disposal of property and equipment

 

 

 

 

 

14

 

Non-cash interest expense

 

 

237

 

 

 

247

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(742

)

 

 

(4,680

)

Inventories

 

 

962

 

 

 

(3,977

)

Other assets

 

 

140

 

 

 

1,817

 

Accounts payable

 

 

(3,186

)

 

 

3,229

 

Accrued liabilities and other non-current liabilities

 

 

(4,644

)

 

 

(3,410

)

Manufacturing and development obligations

 

 

 

 

 

(38

)

Deferred product revenue

 

 

136

 

 

 

167

 

Net cash used in operating activities

 

 

(27,606

)

 

 

(35,060

)

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(907

)

 

 

(6,516

)

Purchases of investments

 

 

(76,871

)

 

 

(27,728

)

Proceeds from maturities and sale of investments

 

 

25,998

 

 

 

43,000

 

Net cash (used in) provided by investing activities

 

 

(51,780

)

 

 

8,756

 

Financing activities

 

 

 

 

 

 

 

 

Net proceeds from equity incentives

 

 

2,797

 

 

 

1,270

 

Net proceeds from public offerings

 

 

76,595

 

 

 

6,783

 

Net (payment on) proceeds from revolving line of credit

 

 

(67

)

 

 

4,496

 

Proceeds from loans

 

 

 

 

 

39,433

 

Repayment of debt

 

 

 

 

 

(31,045

)

Net cash provided by financing activities

 

 

79,325

 

 

 

20,937

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(61

)

 

 

(5,367

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

37,421

 

 

 

31,587

 

Cash, cash equivalents and restricted cash, end of period

 

$

37,360

 

 

$

26,220

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

5


CERUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

 

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include those of Cerus Corporation and its subsidiary, Cerus Europe B.V. (together with Cerus Corporation, hereinafter “Cerus” or the “Company”) after elimination of all intercompany accounts and transactions. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring entries, considered necessary for a fair presentation have been made. Operating results for the three and six months ended June 30, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or for any future periods.

These condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019, which were included in the Company’s 2019 Annual Report on Form 10-K, filed with the SEC on February 21, 2020. The accompanying condensed consolidated balance sheet as of December 31, 2019, has been derived from the Company’s audited consolidated financial statements as of that date.

Use of Estimates

The preparation of financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to the nature and timing of satisfaction of performance obligations, the timing when the customer obtains control of products or services, the standalone selling price (“SSP”) of performance obligations, variable consideration, accounts receivable, inventory reserves, fair values of investments, the allowance for credit losses, stock-based compensation, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, accrued liabilities, and incremental borrowing rate, among others. The Company bases its estimates on historical experience, future projections, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions.

Revenue

Revenue is recognized by applying the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company’s main source of revenue is product revenue from sales of the INTERCEPT Blood System for platelets and plasma (“platelet and plasma systems” or “disposable kits”), UVA illumination devices (“illuminators”), spare parts and storage solutions, and maintenance services of illuminators. The Company sells its platelet and plasma systems directly to blood banks, hospitals, universities, government agencies, as well as to distributors in certain regions. The Company uses a binding purchase order or signed sales contract as evidence of a contract and satisfaction of its policy. Generally, the Company’s contracts with its customers do not provide for open return rights, except within a reasonable time after receipt of goods in the case of defective or non-conforming product. The contracts with customers can include various combinations of products, and to a lesser extent, services. The Company must determine whether products or services are capable of being distinct and accounted for as separate performance obligations, or are accounted for as a combined performance obligation. The Company must allocate the transaction price to each performance obligation on a relative SSP basis, and recognize the product revenue when the performance obligation is satisfied. The Company determines the SSP by using the historical selling price of the products and services. If the amount of consideration in a contract is variable, the Company estimates the amount of variable consideration that should be included in the transaction price using the most likely amount method, to the extent it is probable that a significant future reversal of cumulative product revenue under the contract will not occur. Product revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those products or services. Product revenue from the sale of illuminators, disposable kits, spare parts and storage solutions are recognized upon the transfer of control of the products to the customer. Product revenue from maintenance services are recognized ratably on a straight-line basis over the term of maintenance as customers simultaneously consume and receive benefits. Freight costs charged to customers are recorded as a component of product revenue. Taxes that the Company invoices to its customers and remits to governments are recorded on a net basis, which excludes such tax from product revenue.

6


The Company receives reimbursement under its U.S. government contract with the Biomedical Advanced Research and Development Authority (“BARDA”) that supports research and development of defined projects. See “Note 10. Development and License Agreements—Agreement with BARDA”. The contract generally provides for reimbursement of approved costs incurred under the terms of the contract. Revenue related to the cost reimbursement provisions under the Company’s U.S. government contract are recognized as the qualified direct and indirect costs on the projects are incurred. The Company invoices under its U.S. government contract using the provisional rates in the government contract and thus is subject to future audits at the discretion of government. These audits could result in an adjustment to government contract revenue previously reported, which adjustments potentially could be significant. The Company believes that government contract revenue for periods not yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement. Costs incurred related to services performed under the contract are included as a component of research and development or selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. The Company’s use of estimates in recording accrued liabilities for government contract activities (see “Use of Estimates” above) affects the revenue recorded from development funding and under the government contract.

 

Disaggregation of Product Revenue

Product revenue by geographical locations of customers during the three and six months ended June 30, 2020 and 2019, were as follows (in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Product revenue: