CTSO - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to the CytoSorbents First Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on [Thursday, May 8, 2025] (ph). I would now like to turn the conference over to Mr. Adanna Alexander. Please go ahead.

Thank you, Constantine, and good afternoon, everyone. Welcome to CytoSorbents' first quarter 2025 financial results and recent business highlights conference call. Joining me today from the company for prepared remarks are Dr. Phillip Chan, Chief Executive Officer; Dr. Makis Deliargyris, Chief Medical 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, May 14, 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 first quarter 2025. Following the presentation, we will open the line to analysts for their questions. And now, it is my pleasure to turn the call over to Dr. Phillip Chan. Phil?

Thank you very much, Adanna. Good afternoon, and welcome, everyone, to our first 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 ICU and cardiac surgery such as sepsis, acute respiratory distress syndrome, liver failure, blood thinner removal and infective endocarditis. CytoSorb is the anchor of our core international business with over 270,000 devices utilized to-date in more than 70 countries worldwide and drove $35.6 million in core product sales in 2024. 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 are focused initially on the blood thinner Brilinta in patients undergoing coronary artery bypass grafting, or CABG, surgery. And in September and November of 2024, we submitted marketing applications to both FDA and Health Canada, respectively. Makis will have some updates on the status of these applications later. Given that we just had a broader update on the company in our end-of-year earnings call a month-and-a-half ago, today's agenda will just focus on the three main areas where we are concentrating our efforts. I will discuss our core CytoSorb business and highlight key catalysts for growth. Makis and I will then cover the regulatory status and activity of DrugSorb-ATR in the U.S. and Canada to outline our plans going forward. And then, Pete will go over our progress and our goal to have our core business near breakeven by the end of this year with sufficient cash to fund our company initiatives. Let's turn to CytoSorb. In the first quarter of 2025, we reported product sales of $8.7 million, representing a 3% year-over-year decline. However, when adjusted for constant currency, sales were approximately the same compared to the same period last year. International distribution and other direct sales markets delivered strong performances, helping to offset temporary disruptions in our German direct sales segment. These disruptions were anticipated as they stem from the strategic reorganization and realignment of our German sales team and the go-to-market approach, initiatives we believe are essential for positioning this critical market for renewed growth. Our goal is to return Germany to growth in the second half of 2025 following two years of flat annual performance. We are confident that the changes underway will yield long-term benefits. Meanwhile, gross margin performance remained solid, holding steady at 71%, blending higher-margin direct sales with lower-margin distributor sales, which is consistent with the 2024 average, reflecting ongoing discipline in our end-user pricing and manufacturing cost controls. We expect gross margin expansion this year with smoother manufacturing operations and increased production volume. Importantly, as Pete will discuss later, we continue to make meaningful operational progress across the organization, moving steadily towards our goal of reaching near breakeven by the second half of 2025. CytoSorb is a powerful blood purification technology designed to remove a wide range of harmful substances that can severely damage the body. It is particularly effective in treating critically ill patients by targeting the overwhelming inflammatory response, often referred to as a cytokine storm that drives many life-threatening conditions. This uncontrolled inflammation is a major cause of patient instability, organ failure and death, and is estimated to affect 40% to 60% of ICU patients suffering from conditions that we talked about before, such as septic shock, severe infections, including COVID-19, flu, pneumonia and postsurgical infections, ARDS, trauma, burns, pancreatitis and many others. Caring for critically ill patients is complex with many variables influencing outcomes. However, one thing is certain, if severe inflammation is not addressed quickly and aggressively, it can spread like wildfire throughout the body, becoming nearly impossible to control. That is why CytoSorb is focused on early targeted intervention, what we call treating the right patient at the right time with the right dose. By intervening early in patients with signs of severe inflammation, CytoSorb helps break the vicious cycle of runaway immune activation, stabilizes patients in shock, supports organ function and removes other harmful substances from the blood. This proactive approach offers a powerful tool in the fight against some of the most challenging and deadly conditions in the intensive care unit. In fact, the use of CytoSorb in treating critical illness closely parallels treatment guidelines for antibiotics. For the best clinical outcomes, CytoSorb must be used early, aggressively and consistently just like antibiotics. Even if a patient shows signs of improvement, it's crucial to continue therapy until the full course is complete. The objective is not just to control inflammation, but to reduce it to a safe level, much like extinguishing a wildfire, which can take days to fully subside. We believe strongly this new simplified messaging will help drive broader adoption of CytoSorb by driving more effective patient treatment. This is expected to strengthen physician confidence, generate more positive word of mouth in clinical publications and ultimately support the development of standard treatment guidelines and broad global uptake. There are clearly many catalysts for future growth, but some of the ones that we are focused on now are: One, publicizing compelling new data in core applications. New clinical and real-world data strengthens our value proposition, drives adoption and supports guideline inclusion, positioning us for accelerated growth in key markets. In particular, in the near future, we will be discussing a number of powerful studies highlighting the successful use of CytoSorb in one of our largest markets, the treatment of septic shock. Second is simplified impactful customer messaging. As stated just before, easy to remember impactful guidance to users can yield many benefits, including better patient outcomes, greater physician confidence and broader adoption. Third is returning German sales to growth. Germany is the largest medical device market in the European Union with high strategic importance and accounts for approximately 40% of our sales. At flat growth over the past several years, this has held back our growth overall despite strong gains in other parts of our business. Although there are a number of macro factors that have impacted this market since the pandemic, we believe our efforts to better optimize our German sales team, our sales strategy and our medical messaging is under our direct control and can reinvigorate sales in the country to contribute to our growth overall. And lastly, expansion via our Dubai subsidiary. Dubai is a vibrant epicenter of healthcare business in the Middle East. Establishing this hub is expected to accelerate access to high-growth markets in the Middle East and Africa, enabling faster market entry, stronger partnerships and regional revenue diversification. With that, I would like to transition now to discuss DrugSorb-ATR. Acute heart attack patients are routinely treated with blood thinners like Brilinta, also known as ticagrelor, to improve clinical outcomes. However, while these medications save lives, they also present a significant challenge when patients require urgent CABG surgery. Brilinta can lead to serious and potentially life-threatening bleeding complications during and after surgery. The only current solution is a drug washout period of three to five days to reduce bleeding risk. Unfortunately, time is a luxury many of these patients do not have. Rushing to surgery can lead to major bleeding if performed too soon, while delayed surgery can result in devastating complications, such as sudden death if the procedure is postponed while the patient is still experiencing a heart attack. These delays are also costly and strain hospital resources. To address this critical and widespread clinical problem, we have developed DrugSorb-ATR, an FDA breakthrough designated device. DrugSorb-ATR is specifically designed to remove blood thinners like Brilinta from the bloodstream, enabling safer, timelier surgeries. This innovation targets a serious unmet medical need affecting tens of thousands of patients each year in the United States and Canada, representing an initial market opportunity of over $300 million, one we estimate could grow to more than $1 billion if approved and used in different indications. To give you an update on the regulatory status of DrugSorb in the United States and Canada, I've asked our Chief Medical Officer, Dr. Makis Delagiris, to provide additional clarity on the strength and status of our application and path moving forward. Makis?

Thank you, Phil, and good afternoon to everyone on the call. As most of you know, in the second half of last year, we submitted a de novo application to FDA and a medical device license application to Health Canada, supported by the STAR-T randomized clinical trial data and real-world evidence from the STAR registry. The FDA review process has been interactive with many issues discussed and resolved. However, on April 25, 2025, the FDA issued a denial letter citing remaining open issues. Following the issuance of the letter, we met with the FDA and had the opportunity to discuss these remaining issues and gain better clarity. We continue to believe that our submission package and data are strong and that the remaining issues can be resolved. After consulting with our regulatory counsel, we concluded that the most direct path forward is the filing of a formal appeal, which needs to happen within 60 days of receipt of the FDA letter. Once the appeal is filed, the process is prescribed and includes a formal hearing that will be attended by the company and our regulatory counsel, DuVal & Associates, the FDA review team, additional FDA senior officials and external clinical experts, such as cardiac surgeons, to provide expert testimony. The appeal decision is estimated approximately 60 days after the filing date, and there are three potential outcomes: first, the original decision is upheld and the de novo authorization is denied; second, the original decision is reversed and the de novo authorization is granted; and finally, a third option, where the original decision is reversed and the de novo authorization is granted, but under certain conditions that will need to be satisfied. Switching now to Canada, our medical device license application remains in advanced review. Health Canada recently indicated that they're experiencing delays and the review times are extending beyond their target timelines. They did reaffirm, however, the commitment to issue a decision to our application as soon as possible. We, therefore, continue to expect final regulatory decisions, both in the U.S. and Canada in 2025. The evidence based on blood thinner removal during cardiac surgery continues to grow. Our international STAR registry now has 28 heart centers actively recruiting in six countries, including Germany, the United Kingdom, Belgium, Austria, Sweden and Switzerland, and has enrolled over 600 subjects to-date. The registry includes many types of surgeries, but we have focused our initial analysis on CABG. Last year, we presented data at EuroPCR on 102 CABG patients on ticagrelor and showed that device use resulted in fewer severe bleeding events compared with what would be expected according to historical benchmarks. These results were published earlier this year, and the paper is available online and with open access, so anyone can download it for free. This year, again at EuroPCR, which is taking place in Paris next week, we are presenting another real-world analysis, this time, comparing bleeding rates after CABG between patients on ticagrelor operated with the device and patients on ticagrelor operated without the device. Details of the data are embargoed until the time of presentation, but what we can say is that we are very excited that we now have very compelling evidence of the device's effectiveness in reducing ticagrelor-related CABG bleeding in the real world. We also have a new publication this year on the removal of direct oral anticoagulants, or DOACs for short, during CABG that also showed lower-than-expected bleeding rates. This paper is also available online with open access, so anyone can download it for free. Overall, our real-world results consistently show that the device is effective in reducing severe bleeding complications in patients on blood thinners undergoing CABG. Importantly, the device is also safe for patients and easy to use by surgical teams. To-date, we have zero device-related adverse events and zero device deficiencies reported in the STAR registry, results that echo the clean safety we observed in STAR-T to everyday use in the real world. We continue to believe that our technology that enables blood thinner removal during cardiac surgery has a powerful value proposition for patients, surgeons and hospitals, and we are very encouraged by the growing adoption of the device as part of standard of care at heart centers around the world. With that, I would like to turn it back to Phil now.

Thanks, Makis. As we await regulatory decisions from both the FDA and Health Canada, we're proactively preparing for the potential commercial launch of DrugSorb-ATR in the U.S. and Canada. With the FDA's breakthrough device designation, DrugSorb-ATR is uniquely positioned to help address the critical challenge of perioperative bleeding in patients on blood thinners like Brilinta undergoing CABG surgery. Upon potential approval or authorization, our initial focus will be a controlled market introduction at select clinical trial centers. This phased approach will enable us to gather real-world data and valuable insights, confirm key assumptions and optimize our commercialization strategy ahead of a broader national rollout. We remain deeply committed to bringing DrugSorb-ATR to the North American market, where it represents a meaningful advance in the care of CABG patients facing life-threatening bleeding while on Brilinta. Momentum continues to build on the technology with growing awareness of DrugSorb-ATR's potential and compelling new European data emerging in 2025. As Makis has highlighted, these real-world findings consistently demonstrate reduced bleeding and highlight the device's promise in helping surgeons address a significant and persistent clinical challenge. We are thrilled to welcome Tom Shannon to the CytoSorbents team as Vice President of Marketing for North America, a big move as the company gears up for the potential launch of DrugSorb-ATR in the United States and Canada, pending market authorization. Tom is a global strategic marketing executive with over 25 years of experience bringing cutting-edge cardiovascular and critical care technologies to market and knows how to build momentum around major product launches. Tom has held leadership roles at multinational corporations like Medtronic, Fresenius and Getinge as well as Genesee BioMedical, where he helped launch dozens of products and drove consistent growth. For example, he helped launch the market-leading CardioHelp ECMO platform used around the world at Getinge in patients with refractory lung failure that was also used routinely with CytoSorb during the pandemic to salvage patients who otherwise would have died of COVID-19. Tom also brings hands-on clinical experience, having worked for over a decade as a cardiovascular perfusionist. Tom will be leading the marketing strategy for DrugSorb-ATR, which is designed to help reduce serious bleeding risks in heart surgery patients taking Brilinta. In the very short time he has been with the company, we have already been impressed with his deep expertise and operational efficiency that we believe makes him the right person to help CytoSorbents successfully enter the North American market with this important new therapy when the time comes. Now, I'll turn it over to Pete to give a financial update. Pete?

Thank you, Phil, and good afternoon, everyone. Today I will be reviewing our Q1 financial performance, including the strengthening of our balance sheet and our outlook for 2025. Revenue was $8.7 million, a decrease of 3% and flat on a constant currency basis compared to $9 million in Q1 of 2024. As Phil noted, we had strong revenue growth in our distributor and other direct European markets, and that growth was offset by declines in our largest market in Germany. The realignment of our German commercial team and approach is a key strategic initiative, and we are pleased with the progress we're making and expect these actions will drive improved execution and results in the second half of the year. Gross margin for the quarter was 71%, which is consistent with our full year '24 and lower than the 76% in Q1 of 2024. The year-over-year decrease was primarily due to a 23% reduction in the number of units produced in Q1 of this year compared to 2024 and partially offset by an 11% reduction in production costs year-over-year. We expect that production volumes to increase across the year to support growth in our core business and to prepare for the anticipated launch of DrugSorb-ATR in the U.S. and Canada later this year. Q1 operating loss improved by 17% to $3.9 million in the current year compared to $4.7 million in 2024, driven primarily by a 12% reduction in operating expenses to $10.1 million in Q1 of this year compared to $11.5 million last year. The decrease was driven by a 26% reduction in R&D expenses following the completion of our STAR-T trial, as well as lower spend in other clinical projects and the impact of cost-cutting efforts implemented over the previous year, including a 15% reduction in headcount. Net loss for the quarter was $1.5 million or $0.02 per share compared to $6.1 million or $0.11 per share in the prior year. Eliminating the impact of foreign currency changes and non-cash stock compensation in both periods, adjusted net loss in the quarter was $3.7 million or $0.06 per share, which is consistent with an adjusted net loss of $3.7 million or $0.07 per share in the prior year. Adjusted EBITDA loss for the quarter, which also excludes the impact of non-cash stock compensation and changes in foreign currency, improved by 17% to a loss of $2.7 million compared to adjusted net loss of $3.3 million in the prior year, driven by the reduction in operating expenses. Now, we're pleased to have successfully executed our shareholder rights offering, inclusive of the exercise of the Series A right warrant, which raised total proceeds of $6.8 million, net of all related expenses, including banking, legal and transfer agent fees. This raise also allowed for the release of $5 million of restricted cash on our balance sheet. And combined, the raise increased our available liquidity by $11.8 million. And as a reminder, in early April, we provided a 60-day extension of the Series B right warrant, which will now expire on June 10 of this year. Our total cash, cash equivalents and restricted cash was $13.1 million on March 31 compared to $9.8 million at the end of the year. The increase reflects the net $6.8 million raised in the offering and is net of cash used in the quarter of $3.7 million, which includes disbursements that are unique to the first quarter of approximately $900,000. Additionally, as previously announced, on April 21, we received an additional $1.7 million from the sale of our 2023 and amended 2022 NOLs and R&D credits from the Technology Business Tax Transfer Program sponsored by the New Jersey Economic Development Authority. The program allows technology and biotech businesses with net operating losses to turn their tax losses and credits into cash to buy equipment or facilities or other allowable expenditures. We intend to utilize the funding to help drive ongoing growth, including preparations for the anticipated launch of DrugSorb-ATR in the U.S. and Canada, scaling up manufacturing in our Princeton facility and supporting other key strategic initiatives. Additionally, our loan agreement provides for a second tranche of $5 million, which may be drawn at our request in the second half of 2025, provided the company receives FDA marketing approval of its DrugSorb-ATR application. The strengthening of our balance sheet, together with our initiatives to reduce cost, manage cash has provided a solid foundation where we will drive continued growth and further cost efficiencies that we believe will result in our core business approaching cash flow breakeven in the second half of the year, allowing for investment in our North American commercial launch of DrugSorb-ATR later this year and into 2026. Now, additionally, I wanted to introduce you to Melanie Grossman, our new Vice President and Corporate Controller. Melanie joined us in April and brings over 25 years of accomplished finance and accounting leadership in global publicly traded and private companies. She began her career as an auditor with E&Y, and her healthcare experience includes roles with Stryker, Byram Healthcare and Vaxxinity. She has excellent experience across areas -- all areas of finance and accounting, including SEC reporting, systems, processes and controls as well as financial planning, analysis and strategy. We're pleased to welcome Melanie to the team and are looking forward to her many contributions as we continue to scale our operations for profitable growth across the organization. And now, let me turn the call back over to Phil.

Thanks, Pete. We believe our value proposition is both strong and highly differentiated. With CytoSorb, we have built a robust high-margin international business in critical care and cardiac surgery, markets with vast unmet needs and enormous potential for growth. Our foundation is solid, and we are now focused on generating new clinical data to help guide physicians in optimizing CytoSorb use, treating the right patient at the right time with the right dose. We believe that improving clinical outcomes will drive broader adoption across a range of indications, ultimately accelerating product utilization and revenue growth. Last year, we saw encouraging momentum, particularly from strong direct sales outside of Germany and solid performance by our distributor and partner network. We are also taking proactive steps to reignite growth in Germany. If successful, this could significantly strengthen our overall financial performance. Importantly, continued growth in product sales brings us closer to our goal of near breakeven by the end of 2025 and sets the stage for long-term financial independence. What is not yet fully reflected in our growth story is the exciting potential of DrugSorb-ATR. We are working diligently on driving positive regulatory decisions from both FDA and Health Canada this year. In the meantime, we are actively preparing for launch, building awareness with positive real-world clinical data, corroborating the significant reduction in serious bleeding events in CABG patients on Brilinta seen in our pivotal trial and presenting at major cardiovascular conferences. While we await regulatory decisions from FDA and Health Canada, a positive outcome could unlock our first commercial access to the United States and Canadian markets. We expect to begin with a controlled market release and scale up from there. The initial addressable market, again, is estimated at $300 million for Brilinta in CABG surgery that could eventually exceed $1 billion with broader indications for use. With that, on behalf of the team at CytoSorbents, we thank you for your attention and continued support. That concludes our prepared remarks. Operator, please open the line for questions. Thank you.

[Operator Instructions] Your first question comes from the line of Mr. Michael Sarcone from Jefferies. Please go ahead.

Good afternoon, and thanks for taking our questions, and thanks for all the detail you provided.

Hi, Mike.

Just to start -- hey, Phil, understanding you're going to submit for an appeal of the FDA letter, I guess, can you talk about your level of confidence that we can get this over the finish line and get clearance? And then, as my follow-up to that, just when you think about the various scenarios, in the worst case, if you appeal and it gets denied, where do we go from there? Thank you.

Sure. Makis, why don't you take that question?

Yeah. Thanks, Michael. So, as we stated in our prepared remarks, we feel very strongly about the strength of our submission. We feel that the data in CABG from the STAR-T trial are compelling. And as I showed you and discussed previously, our real-world performance of the device has been excellent so far and very well-received by practicing clinicians. We, therefore, believe that our chances during this appeal process are good, and we discussed this with our regulatory council who agree with us, and therefore, we're taking this path as the most expedited way to resolve this. Now, on your second part of your question, what we can tell you is that there's always an opportunity should the appeal process not be successful to continue with a new de novo submission utilizing a very large portion of the original submission, and therefore, resulting in a much more truncated review time and review items that are remaining since many of the items were resolved during the initial submission.

Got it. That's very helpful. Thank you. And I guess in that latter scenario, Makis, would you have to run another trial and generate more data or would you not have to do that?

Although in general, we have not discussed the details of the remaining deficiencies outlined on the letter we received from FDA, I think we can announce that we have not received a request for an additional trial. So, we believe that the remaining issues can be resolved with the existing data at hand.

Got it. Very helpful. Thank you.

Your next question is from the line of Sean Lee from H.C. Wainwright. Please go ahead.

Hey. Good afternoon, guys, and thanks for taking the questions.

Hi, Sean.

Hi. My first one is on the various -- registry as well as the data that you've been presenting. Will these results help in any way with your marketing or reimbursement in Europe?

The clinical data is always the core of the discussion around the value of any introduced medical technology, the drugs or devices. So, the strongest your clinical proposition, the more powerful your value proposition. So absolutely, we plan to leverage this clinical data to support reimbursement and health technology assessment decisions over in the EU.

Are there any current discussions going on in countries outside of Germany?

In relation to?

Reimbursements, I mean. I know that your -- the reimbursement is mostly focused on Germany and surrounding countries. I was wondering for the broader reimbursement you use, especially during cardiac surgery, is there broader discussions on that?

Yeah. I think that cardiac surgery is where the data are simpler and clearer, and we absolutely have active discussions going on to try to obtain reimbursement in that area. In fact, in places like the United Kingdom, cardiac surgery is one of the top applications that's driving revenue in that territory, for example.

I see. Yeah, thanks for the additional color. That's all the questions we have.

Thank you, Sean.

[Operator Instructions] Your next question comes from the line of Mr. Tom Kerr from

Hey, everyone. This is Michael Kim filling in for Tom Kerr. Some of our questions have been asked and answered, but we did have a couple more. Just first, curious if there are any other European markets that might be showing promise for the CytoSorbent device besides Germany?

Yeah, I think that we're making good progress in the Big 5. We go direct in the U.K. We go direct in Germany. We work through distributors in Italy and Spain/Portugal. And in France, it's kind of a hybrid approach with partners and our own direct sales. So, from that standpoint, I think our progress is going actually quite well. And then, obviously, in the other European territories, I think that we're making good progress as well. We have decided to pull back in Scandinavia, favoring a distributor-focused approach in that territory, given the types of volumes in that part of the world. But that being said, we are seeing good momentum in other countries around the EU as well as outside of the EU.

Got it. That's helpful. And then, any updates on other products in development besides CytoSorbents and DrugSorb-ATR?

Well, right now, the big fish on the plate is DrugSorb-ATR. And so, we're uniquely and solely focused on driving that to the finish line. So, I think that when -- we obviously have other technologies like HemoDefend-BGA that we'll hopefully be talking about in the future, but for right now, we are uniquely and singularly focused on DrugSorb-ATR.

Got it. Thanks for taking our questions.

Sure. Absolutely.

Your last question is a follow-up from the line of Michael Sarcone from Jefferies. Please go ahead.

Hey, thanks again. Just had a follow-up on Germany. You talked about aiming to accelerate or get back to growth in the second half. I guess, what kind of visibility do you have into the conditions there? And again, we would just like to hear how you're thinking about your level of confidence in being able to reaccelerate growth in Germany.

Yeah. As I mentioned in my remarks, and I mentioned last time that Germany faces -- is the largest market -- medical device market in the European Union, but as such, faces some unique challenges. And so, there's been issues related to the pandemic and the pandemic hangover that we've talked about extensively in the past. There is the new issue of hospital reform that is happening. And this is being slowly rolled out throughout Europe, where they're going to be focused more on quality measures to drive reimbursement rather than pay for procedure measures to pay for reimbursement. And that, again, we believe, favors our technology given that our technology is designed to get patients -- to keep patients from getting so sick and getting them out of the hospital as quickly as possible, which I think is the major tenet of the hospital reform that's taking place in Germany. But that being said, we can always be doing better in our own execution of sales. And I think that is what our reorganization and new efforts at trying to drive operational efficiency at our German subsidiary. And I think that these changes are something that we can control that we have -- are actively implementing. And we believe that the results of these changes that started at the beginning of the first quarter will flow through, and ultimately, we'll see benefits in the second half of this year. Already in Q2, we're seeing promises -- promising developments that would suggest that we're making progress.

Great. Thanks, Phil.

Sure.

There are no further questions at this time. I'd like to turn the call over to Dr. Phil Chan for closing comments. Sir, 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 future. Have a good evening, everyone, and thank you very much. Have a great night.