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Cerus Corporation (NASDAQ:CERS)
Q3 2019 Earnings Call
Oct 30, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the Ceres Third Quarter 2019 and FDA Guidance Update Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Tim Lee.

Tim Lee -- Investor Relations Director

Thank you, operator, and good afternoon everyone. I'd like to thank everyone for joining us today. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at www.cerus.com/ir. With me on the call are Obi Greenman, Cerus' President and Chief Executive Officer; Dr. Laurence Corash, Co-Founder and Chief Scientific Officer; Kevin Green, Cerus' Chief Financial Officer; Vivek Jayaraman, Cerus' Chief Commercial Officer; and Carol Moore, our Senior Vice President of Regulatory Affairs and Quality.

Cerus issued a press release today announcing our financial results for the third quarter ended September 30, 2019 in describing the company's recent business highlights. You can access a copy of this announcement on the company's website at www.cerus.com.

I'd like to remind you that some of the statements we will make on this call relate to future events and performance, rather than historical facts, and are forward-looking statements. Examples of forward-looking statements include those related to our future financial and operating results, including our 2019 financial guidance and goals, operating expenses and gross margins, commercial development efforts, future growth and growth strategy, future product sales, product launches, ongoing and future clinical trials, ongoing and future product development, and regulatory activities, as well as the timing of these events and activities. These forward-looking statements involve risks and uncertainty, that can cause actual events, performance results to differ materially. They are identified and described in today's press release and under Risk Factors in our Form 10-K for the year ended December 31, 2018 and our Form 10-Q for the quarter ended September 30, 2019, which we will file shortly. We undertake no duty or obligation to update our forward-looking statements.

On today's call, we will begin with opening remarks from Obi, followed by Larry to review the FDA guidance document. Followed by Vivek to provide an overview of our Commercial Strategy. Kevin to review our financial results, and then Obi with closing remarks.

And now it's my pleasure to introduce Obi Greenman, Cerus' President and Chief Executive Officer.

William M. Greenman -- President and Chief Executive Officer

Thank you, Tim, and good afternoon everyone. With the finalization of the FDA guidance document and coming off of a very successful [Indecipherable] for Cerus, we believe that we are well positioned to deliver on a new standard-of-care for platelet transfusion safety in the U.S. The FDA action to finalize this guidance is not only a watershed moment for transfusion medicine with regards to patient safety, but it is also a major blood safety policy event, that has relevance for how global regulatory bodies ensure the safety of platelets.

In the U.S., by the end of the 18 month compliance period, the requirement is that every single one of the 2.6 million platelet units collected each year in the U.S. to be held to a new standard of safety. One could view this is an obsolescence initiative for all U.S. blood centers and that conventional platelets as currently prepared today, will be obsolete in 17 months.

Immediately after the release of the final FDA guidance, the leadership of the American Red Cross validated the important role that INTERCEPT will play in their operations, by issuing an open letter to the U.S. healthcare community about their intention to make INTERCEPT platelets broadly available to their hospital customers. They have stated that 'the growing expansion of pathogen reduction technologies grant hospitals and blood providers economical offsets, while making safer and ready to transfuse products available for patients. Pathogen reduction is the preferred approach of the American Red Cross, for enhancing the safety and availability of platelets for transfusion.'

The purpose of this final FDA guidance document is to provide clear direction to blood centers and hospital transfusion services about how they can meet the requirements specified in the FDA Code of federal regulations, to ensure that the risks of bacterial contamination of platelets are adequately controlled. After several draft versions of the guidance and multiple Blood Products Advisory Committee meetings on the topic, the FDA finalized the guidance to address fundamental concerns about platelet transfusion safety. The guidance contains complicated culture based and secondary rapid testing methods as an alternative to pathogen reduction, even if those testing options require considerable operational and logistical efforts to undertake.

With the final guidance document now in place in the U.S., we believe the overall simplicity of the INTERCEPT technology, combined with its broad spectrum of protection against current and emerging pathogens in the blood supply, sets the stage for a multi-year cycle of sales growth. As a foundation for this expected growth in the U.S. business, we are pleased to report another strong quarter of sales execution, with reported revenue growth across all major geographies, despite the currency headwinds. Third quarter product revenue totaled $18 million, a 17% increase on a reported basis, with the U.S. market, leading the growth.

Having just returned from the AABB meeting in Texas, we thought it would be worthwhile to have our Founder and Chief Scientific Officer, Dr. Larry Corash walk you through the different options available to blood centers. And to illustrate the advantages of INTERCEPT over the other strategies for the reduction of bacterial contamination risks detailed in the final FDA guidance document. Following Larry, Vivek will provide a framework for our commercial strategy for the next 17 months, and the discreet actions we are taking to help our customers with this transition.

Laurence M. Corash -- Chief Scientific Officer

Thanks Obi and good afternoon. On the next slide, this final guidance is important in defining a new U.S. standard of care in platelet transfusion safety. Similar to that achieved in France, Belgium, Switzerland, Austria and Kuwait. The guidance has been vetted by the transfusion medicine community, and it defines specific procedures for each option. Each approach will impact blood center and hospital operational logistics, costs, and regulatory compliance. These factors will determine customer decisions to achieve compliance by the deadline of March 31st, 2021. Today, the majority of U.S. blood centers and hospitals are not in compliance. Hence action must be taken.

The final guidance is a single document in U.S. blood transfusion safety, and it makes a compelling case for the clear advantages of INTERCEPT. The only option with safety, logistic, and economic benefits beyond reducing the risk of bacterial infection.

On the next slide. let me start by outlining the landscape. The FDA has defined two strategies, with options to address bacterial contamination. Single step options in the top section and two step options in the lower section. The two step strategies are complex and require multiple procedures, some in the blood center and some in the hospital, in order to release platelets for transfusion. The timing days shown by the top blue bar from day zero to day seven, marks the timeline for collection, preparation, and transfusion of platelets using the various options.

Today, I will focus my comments on apheresis platelets, as they account for 90% of the market. And on the single step strategy options, as they are the most attractive for hospitals and blood centers. I will address specific questions on the two-step strategies during Q&A.

On Slide 7, to understand the guidance, I'm explaining that specific terms, important for understanding the various options. Collection time, is the time when an apheresis platelet collection is initiated, and it starts the dating period for expiration of platelets. The day of collection is day zero. Expiration is the last day platelets can be transfused either three, five or seven days after initiation of collection.

Hold time is the period during which platelets are quarantined, prior to sampling for bacterial culture, and 12 hours after culture, before they can be released for transfusion. This is required to improve the limited sensitivity of bacterial culture testing. There is no hold time for INTERCEPT platelets, as bacterial testing is not required for INTERCEPT.

Available transfusion times, are the days after release from bacterial testing for pathogen reduction, that the platelets can be transfused. Available transfusion time is more relevant than the expiration day, as all culture testing options require hold times that decrease available days for transfusion. Sample volumes are the sample amounts taken for bacterial testing, and thus not available for transfusion.

On slide 8, the guidance specifies a sample volume of 16 milliliter for platelet container in two bottles for aerobic and anaerobic culture, versus the pre-guidance routine sample of 8 milliliter for aerobic culture only. All cultures must be monitored until the end of expiration of the platelet product.

Now on slide 9, let's focus on the single step strategy options. At AABB we received feedback from hospitals indicating they prefer ready-to-use platelets that do not require added technical procedures at the hospital. This is only possible using the single step strategy options. Hence, we expect the majority of the market to opt for a single step strategy.

There are three options available under the single step strategy. The first option is the only FDA-approved pathogen reduction system INTERCEPT. This option has no hold time delay, the earliest release time and available time for transfusion is 5 to 5.5 days shown by the green bar. The guidance states that centers already using INTERCEPT pathogen reduction need to do no more. They are in compliance.

The other two options requiring bacterial culture testing are Large Volume Delayed Sampling or LVDS, with either 36 or 48 hour hold times after collection, and 12 hours of culture incubation, before released for transfusion. LVDS requires a 16 milliliter sample for each platelet unit, thus for double and triple dose collections, the total loss is 32 and 48 milliliters respectively. The volume loss will impact collections flip [Phonetic] rates and the number of available platelet doses. With the LVDS options, the earliest possible times for transfusion are 48 to 60 hours after collection, leaving a maximum available transfusion time of 5.5 days, similar to the available transfusion life of INTERCEPT, but at the expense of fresh platelets and with more technical procedures

With LVDS after release, all bacterial culture is must be monitored until expiration. This will require investment in capital equipment and personnel to manage the increased number of cultures. When a positive culture is detected, the hospitals must withdraw all the split platelet components associated with the positive culture. If any of these platelets have been transfused, primary care physicians must be alerted, patients informed, and clinical evaluations performed, hich may require patient blood cultures, or prescription of prophylactic antibiotics. Each of these procedures impacts logistics, adds cost and creates anxiety for patients.

Lastly, why LVDS seven day option is listed in the guidance, the culture device for this option is not currently FDA approved. INTERCEPT offers the following clear advantages over LVDS bacterial testing. First, on slide 10, this shows the experience from a case study conducted at the U.S. Tertiary Care Academic Medical Center. The line in orange shows that the majority of INTERCEPT platelets were transfused on day one and two, in comparison to the bacterial tested platelets in blue, which were largely transfused on days four and five.

Fresh platelets provide better clinical responses. Notably, this study compared INTERCEPT to conventional bacterial culture, with LVDS bacterial testing, the average age of platelets at transfusion will be older than five days. Secondly INTERCEPT provides more comprehensive safety than bacterial testing. INTERCEPT inactivates bacteria, T-cells, viruses and parasites. With INTERCEPT, blood centers can reduce costs by stopping the gamma irradiation, CMV serology, and tests for Zika and Avizia.

As shown on slide 11, blood centers using INTERCEPT have the most favorable key metrics, with no hold time, shortest delay to transfusion,5 to 5.5 days available for transfusion, and no follow-up on bacterial cultures.

Given the added benefits of INTERCEPT, blood centers have been able to charge a premium for INTERCEPT platelets. It is unclear if a premium can be charged for LVDS platelets, as this is not a new product, only a more tested platelet component. The value of INTERCEPT has been validated in routine use over the last decade in Europe, by national blood centers for whom patient safety, cost and logistics were the primary factors in choosing INTERCEPT. INTERCEPT's prospective ready to use single step technology provides blood centers and hospitals the most cost effective means to improve multiple aspects of patient transfusion safety.

With that let me turn the call over to Vivek for an overview of our commercial strategy, with the guidance document now in hand.

Vivek K. Jayaraman -- Chief Commercial Officer

Thank you, Larry, and good afternoon everyone. As Obi mentioned, we are encouraged by the continued strong customer uptake of INTERCEPT, as demonstrated by our top line results in Q3 2019. Furthermore, the issuance of the final FDA guidance document does validate our belief that INTERCEPT will become the standard of care. I agree with Obi and Larry that the publication of final guidance is a pivotal event. Ultimately this will accelerate a change in the standard of care with respect to bacterial safety measures for platelets, and I believe that INTERCEPT will prove to be the preferred method by which both blood centers and hospitals achieve compliance.

Last week at the AABB meeting, I had the opportunity to speak with executives from each of the five largest U.S. blood centers. The centers combine to serve over 70% of the U.S. platelet market. Clearly, despite being debated and modified over the past several years, the issuance of a final guidance on September 30th, took them all a bit by surprise. Fortunately for us, the AABB meeting offer an excellent point in time opportunity to engage with the centers, gain a better understanding of how they plan to address the guidance, and assure them that we are well positioned to partner with them to incorporate INTERCEPT into their center, as their primary approach to compliance.

While the guidance readiness of each organization varies, I came away confident that pathogen reduction will be the preferred approach at both the blood center and hospital level. For the blood centers, INTERCEPT offers the ability to release platelets earlier, provide hospitals with an innovative solution that addresses more than simply bacteria, and accordingly, realize a price uplift, which will improve their platelet margins and economics.

From a hospital perspective, with INTERCEPT, they will receive a transfusion ready product with limited to no operational impact, and most importantly, a technology with a global track record of clinical evidence in support of patient safety. As we have previously noted, the American Red Cross has fully embraced pathogen reduction as their preferred option, and has proactively communicated that to the U.S. Healthcare community. Fundamentally, they say that their approach to guidance starts with patient safety as their primary motivation, and as such INTERCEPT is their clear choice.

During the AABB, we held the pathogen reduction networking meeting with representatives from the five largest blood centers, and it was very encouraging to see the ARC continuing to take a strong leadership position with respect to adoption of pathogen reduction technologies.

With 17 months remaining in the compliance period, we are working diligently with our blood centers, partners to ensure that patients gain access to the safest blood available. Much of this work has been under way for quite some time. More specifically, we are focused on the following key actions between now and year-end.

First, starting with the big five blood centers, we are working to understand the desired INTERCEPT production level by Q1 2021, and making sure to secure commitments and allocate kit supply accordingly.

Second, we are working closely with blood centers to help align their production with hospital demand, in order to optimize efficient distribution and use of PR platelets.

Third, utilizing our deployment team, we are actively mapping INTERCEPT production processes and blood center operation, in order to optimize compatibility with current platelet collection or modify collection and production processes as needed, to enable maximum INTERCEPT production.

Four, led by our hospital sales team, we are formalizing the hospital targeting and onboarding schedule to streamline the transition to INTERCEPT platelets during the compliance period.

Fifth, we have prepared and are actively providing educational materials and economic models to facilitate hospital contracting for their INTERCEPT platelets and to address questions from non-clinical decision makers who are motivated to ensure that their hospital can quickly and economically achieve compliance.

These are just a few examples of the work streams in which the commercial team is actively engaged. In parallel, our operations team has spent the better part of the past 12 to 18 months ensuring that we are guidance ready. For example, we have enhanced our supply chain with both increased inventory levels on hand, along with expanded disposable kit manufacturing capacity, should we see a significant spike in customer demand.

While it is still very early in the compliance period, we are encouraged by the initial indications from our blood center customers and the hospitals that they serve. Coming out of the ABB, it was clear that one step solutions are preferred, and of those one step solutions, INTERCEPT confers the greatest benefits to all key stakeholders.

Looking outside of the U.S., we believe that final FDA guidance does have implications for platelet safety policy worldwide. Many regions, for example, the Middle East, take their cue with respect to production and quality standards from the AABB. Given the guidance document, those AABB standards will soon reflect the new best practices in place to comply with the FDA guidance. In addition, the economic benefits and ease of use will be further validated in the context of the coming broad U.S. INTERCEPT experience. When combined with our experience in France, as well as other countries that have adopted INTERCEPT at 100%, we believe that pathogen reduction continues to make strong progress toward becoming the global standard of care.

With our current fourth quarter outlook, 2019 topline revenue will be more than two times that of 2016 sales. Across the world, many more patients now have access to INTERCEPT, and the safety benefits that it provides. Looking forward, I am confident that we have a technology platform that can drive compelling growth, and even more importantly, we have the people and plans in place to make that growth a reality. These are certainly very exciting times at Cerus.

With that, let me now hand it over to Kevin, to review our financial results.

Kevin D. Green -- Vice President, Finance and Chief Financial Officer

Thank you, Vivek, and good afternoon everyone. Today we reported third quarter 2019 product revenue of $18 million, up 17% from the $15.4 million recorded during Q3 of last year. The strength of the U.S. dollar relative to the Euro continues to be a headwind, which impacted the year-over-year growth by approximately 5%. On a year-to-date basis, product revenue totaled $53.7 million, up 21% compared to the $44 million reported during the first nine months of 2018. Similar to the quarterly revenue results, year-to-date product revenues compared to 2018 were impacted by approximately 6%, due to the strengthening of the U.S. dollar relative to the Euro.

Global demand for INTERCEPT continued to increase. The calculated number of treatable platelet doses increased nearly 20% year-over-year. On looking at growth through the first three quarters, the worldwide calculated number of treatable platelet doses increased over 30%.

In terms of product mix sold during the quarter, platelet kit sales accounted for approximately 85% of revenue. During the quarter, we did see slightly more of the later sales than usual, with incremental placement spread globally.

The underlying momentum in our business is running ahead of plan and is expected to accelerate further. However, the FX headwinds we are facing are persistent. As such, we are reaffirming our full year product revenue guidance range of $72 million to $75 million, which represents an 18% to 20% growth rate compared to 2018 product revenue.

Government contract revenue totaled $4.8 million and $13.6 million for the three and nine month periods ended September 30, 2019 respectively. These are both up from the $3.9 million and $11.4 million reported during the comparable periods in 2018.

Now let's move the discussion to our reported gross margins. Gross margin on product sales have been continuing to improve throughout 2019. For the quarter, gross margins were 58% compared to 47% for the prior year period. The significant improvement was attributable to economies of scale and lower per kit COGS, resulting from the increased volume of kits manufactured. Additionally, gross margins improved as a result of the favorable product mix shift to double dose platelet kits in France and to a lesser extent, favorability in FX rates.

On a year-to-date basis, gross margins were 55% compared to 48% during the first nine months of 2018. We expect gross margins will be sustainable in the mid 50s for the balance of the year.

I'd now like to discuss operating expenses, which totaled $32.2 million during the quarter compared to $24.8 million during Q3 of 2018. Of the total, SG&A expenses during the quarter accounted for $16.1 million compared to $14 million during Q3 of 2018. The increase was driven from investments we have made in our supply chain capabilities, which will allow us to more efficiently and effectively supply the expected ramp in demand for INTERCEPT kits.

In addition, SG&A expenses were higher during the current period, due to the initiated preparatory activities for our anticipated U.S. pathogen reduced cryoprecipitate launch, as well as higher non-cash compensation costs.

On a year-to-date basis, SG&A spending during the first nine months totaled $49 million compared to $42 million during the first three quarters of 2018. We expect SG&A to remain stable for the balance of the year and looking ahead, we expect to drive leverage.

Research and development expenses for the quarter totaled $16.1 million compared to $10.8 million during the prior year. The increase in R&D expenses was largely due to product enhancement initiatives and activities tied to label claim expansion, including extended shelf life of INTERCEPT platelets and our triple dose platelet kits.

In addition, development activities to support our anticipated PMA supplement for pathogen reduced cryoprecipitate, as well as activities tied to the development of our red blood cell program, drove portions of the increase in R&D. On a year-to-date basis, R&D expenses totaled $43.9 million compared to $30.1 million during the prior year period. Net loss for the third quarter totaled $18 million or $0.13 per diluted share compared to a net loss of $14.2 million or $0.11 per diluted share for the prior year period. Year-to-date, net loss was $54.3 million or $0.39 per diluted share compared to a net loss of $41.4 million or $0.32 per diluted share during the first three quarters of 2018.

In terms of cash used from operations; during the third quarter, we have a special one-time milestone payment to Fresenius Kabi of $6.2 million, which was contractual and has been accrued since 2015. In addition, we continue to invest in working capital, namely inventory in anticipation of the increased demand.

Going forward we expect this bill to normalize and grow in line with sales. Therefore, on a pro forma basis, without the investments in working capital from both accounts receivable and inventory and excluding the one-time payment, cash used from operations during the third quarter totaled $11.4 million. Looking ahead to the fourth quarter, we expect cash use from operations to be closer to $10 million. We ended the third quarter with $85.1 million of cash, cash equivalents and short-term investments on hand, which we believe is sufficient to fund operations for at least two years and provide ample runway to execute on our strategy. In addition, we have increased borrowing options on our debt facility and revolving line of credit.

With that, let me turn the call back over to Obi for some closing comments.

William M. Greenman -- President and Chief Executive Officer

Thank you, Kevin. I'd like to take a few minutes to provide an update on our two key development programs, pathogen reduced cryoprecipitate and our red blood cell program in Europe and here in the U.S. First, with regard to our cryo PMA supplement, we are tracking on plan for an FDA submission in the first half of 2020, under our Breakthrough Device Designation. Based on that timing, we expect a possible regulatory approval in the second half of 2020. In parallel with these efforts, we are building out the infrastructure and a small team to be able to launch the product successfully, within the level one and two trauma hospitals in the states initially, where we have our manufacturing partnerships. Interest in this product continues to be strong for the treatment of major bleeding events at hospitals.

Turning to our red blood cell program; we're making progress in our effort to validate a new [Indecipherable] supplier. Vendor qualification is on track for the first half of 2020, As it relates to our CE mark submission, the file is still under review at TUV, our notified body, and we are in the process of closing out sections of our submission review. At this juncture, we still expect our CE mark review to transition to the medical device regulation process in mid-2020 from the current Medical Device Directive, and as such, we anticipate our final approval timing to be in the 2022 timeframe, unless we realize opportunities to compress the NVR review timing.

In the U.S. enrollment in our two Phase 3 studies RedeS and ReCePI, continues with our goal of getting 10 sites up and enrolling in the ReCePI study by the year-end this year. We are tracking to deliver on that goal.

With the final guidance document setting the pace and tempo for our INTERCEPT platelet adoption in the U.S. over the coming 17 months, and our planned INTERCEPT cryo launch in the second half of next year, 2020 is shaping up to be a great year for Cerus. While we have a lot of work to do over the coming period in 2020 and 2021 to help our customers manage the transition to FDA guidance compliance, our mission to make INTERCEPT the standard of care in the U.S. is more clearly defined enrollment than ever. We take comfort in talent of our customer facing team to execute on this plan, and our historical track record in facilitating nationwide conversions like in France in the end of 2017.

I believe its important to convey the optimism the Cerus team has coming out of the AABB meeting. All subset of blood centers and hospitals are still developing the strategy for being compliant with the final guidance. Majority of blood centers have put a stake in the ground, around the central role that INTERCEPT will play in their operations. The onus is now clearly on the Cerus team to help them maximize their production of INTERCEPT platelet components, and to facilitate the hospital adoption to ease the transition to a new standard of care in platelet safety. We're looking forward to a strong close to the year.

With that let me turn it back to the operator for Q&A.

Questions and Answers:

Operator

[Operator Instructions]. Your first question comes from the line of Craig Bijou from Cantor Fitzgerald. Craig. Your line is now open.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Great. Good afternoon, guys. Thanks for taking the questions. Let me, start with the guidance. And just a couple on that. One, just kind of wanted to see if you guys were surprised by anything that ended up in the final guidance? And then secondly, from your early discussions, and I know you guys have plans to have more discussions and work with some of the centers, but I was wondering if you could maybe provide some details on what you're hearing from the blood centers that the key decision points, what are their concerns, how are they weighing the different options?

William M. Greenman -- President and Chief Executive Officer

Great. I will handle the first part of that question, Craig, and then let Vivek handle the second part. So as far as being surprised by the guidance, I don't think we were, definitely reflected by the previous draft. The one thing to take note of, is they did drive distinctions between the one step and the two step processes that Larry outlined during the prepared remarks, and I think clearly coming out of AABB, there was a strong preference for the one-step processes, because the hospitals really don't want to undertake any additional manipulations of the platelets. So I think that was -- it was good that the FDA outlined the various options. So clearly -- such that there wasn't any confusion. Maybe Vivek could handle the second part of the question about what came out AABB with regards to key customers?

Vivek K. Jayaraman -- Chief Commercial Officer

Sure. Thanks for the question, Craig. As we've indicated in the past and perhaps the thing that continues to be most encouraging is, for some time now, even prior to the guidance on file, the American Red Cross has stated that pathogen reduction technologies not from those are a strategic priority for them. So when you think about the ARC, it represents nearly 40% of the total US markets. So out of the gate, you are talking about 40% of the market that is clearly behind our technology. Similarly, we had number of meetings with executives from the big 5 blood centers and across the board, we have heard from the Board, for an interest in adopting PR technology. I think the thing that folks are trying to work through now, is understanding, OK, what are the underlying mechanics that allows us to make those real. So what are the operational things that we need to put in place from a production standpoint, so that we can maximize INTERCEPT production. Hard when you think about our hospital contracting and that working with hospitals, so that they can onboard products. So they are in a number of workstream that blood centers will need to go through and hospitals as well, to sort of adopt to this new standard. But certainly I came out of that meeting, and I think my colleagues would agree feeling really excited about our ability to offer INTERCEPT to more patients here in the U.S.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Got it. That's very helpful. And then just as a follow-up on that, you guys have talked about the ARC and obviously, they've been at the forefront of adopting INTERCEPT. Its their preferred approach, as evidenced by the open letter. So that's been driving a lot of your U.S. platelet growth for the last several quarters. So just wanted to get your thoughts, is there -- can that accelerate from this point going forward, so you can actually see even stronger growth out of the ARC than you have over the last several quarters?

Vivek K. Jayaraman -- Chief Commercial Officer

I think that can. Obviously, as we get further granularity into where they want to produce more platelets and what hospital customer demand they want to address first, we'll have a better understanding of that. But certainly there is headroom within the ARC to drive accelerated growth and I do believe that, they will serve as a marker that others will follow as they think about adopting faster testing technologies. There is certainly headroom for us to drive, not only US growth, but more specifically growth within the ARC.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Great, thanks. I'll hop back in the queue.

Operator

Your next question comes from the line of Matthew Blackman from Stifel. Matthew. Your line is now open.

Matthew Blackman -- Stifel -- Analyst

Good afternoon, everyone. Thanks for taking the questions. We're all sitting here trying to take through a framework for how the next 17 months could play out, just as you are, and so maybe just in the simplest terms, should we think about a potential adoption acceleration being more back-end loaded over the next 17 months, as you said, work through education and contracting and training, etcetera. Could it be more balanced over the period with let's say the big 5 existing customers with existing INTERCEPT infrastructure perhaps ramping faster over that time horizon?

William M. Greenman -- President and Chief Executive Officer

Yeah, clearly, I think that the blood centers will be looking how do they meet the compliance timeline. So I think in that context, it will be more back-end loaded. I think we do feel like there will be an acceleration throughout the period, as sort of the momentum from increasing the overall capacity of INTERCEPT production allows for broader fulfillment at the hospital level. And what we heard distinctly from the hospitals that have decided to adopt INTERCEPT, is they'd like to be at 100%. And so they may not get there by the time -- by the end of the compliance period, but that's where they want to go. And clearly, as more capacity comes into the system, you'll see an acceleration. So the answer to your question, completely, I think it will be more back-end loaded. But definitely an acceleration throughout the period.

Matthew Blackman -- Stifel -- Analyst

Okay. Then just a couple of quick follow-ups. How important is it now for you to get double sets approved in the U.S.? Is that at all a gating factor for some of these sites and can you remind us of the timing of approval there, and then just one more follow-up after that?

William M. Greenman -- President and Chief Executive Officer

Yeah, so just to be clear, we do have approvals for both single and double sets today. And so what you are probably alluding to, is the triple storage kit that we have approved in Europe. We are anticipating that that will be filed -- be submitted for approval during the compliance period, actually in the second half of next year. So I think it won't be a factor. But ultimately what we've seen, even with the large blood centers like the American Red Cross, is that they are able to get close to 70%, 80% compatible with INTERCEPT, and maybe even beyond that, independent of the TS kit availability. So I think throughout the compliance period, and as I mentioned before, we should have this at the back end of the compliance period, it will -- we don't think that will be gating [Phonetic].

Matthew Blackman -- Stifel -- Analyst

Okay. And then the last question on the red cell program in Europe. I may be reading a bit too much into your comments Obi, but I think you said first half '20 now for qualification of a new supplier, and I think in the past, you sort of said it as a mid 2020 timeframe. So did I hear that right, or am I just overthinking? And if that's the case, is it moving a little bit faster?

William M. Greenman -- President and Chief Executive Officer

I think it's moving quickly, but I think what we said in the prepared remarks, maybe I misspoke mid 2024, having that validated for our CE Mark submission. So I think it is moving quickly. We have two suppliers that I've mentioned historically on previous calls, that we are qualifying. But we're happy with the progress we've made today.

Matthew Blackman -- Stifel -- Analyst

All right, guys. I'll get back in queue. Thank you so much.

William M. Greenman -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Josh Jennings from Cowen. Josh, your line is now open.

Unidentified Participant

[Indecipherable] on for Josh. Appreciate the question. So on the pipeline for seven day INTERCEPT platelets, can you remind us of the -- just the regulatory pathway there and timing of approval? And I guess, how derisked is that approval pathway, just considering the experience you have already had in Europe thus far?

William M. Greenman -- President and Chief Executive Officer

Maybe I'll answer the first part of that question and let Larry comment just about the experience that we've had with the day six and seven-day products in Europe for many, many years. Right now we're anticipating to file for that approval or submitting that day six-seven claim in the second half of next year. We'd anticipate right now, without any cost [Indecipherable] would be about 180-day review period. So again an approval within the sort of timeframe of final compliance. So we think that's a nice added benefit. That being said, as Larry outlined in the call, from an overall platelet cell side perspective, we think we've got a strong position relative to the other options outlined in the guidance document, just because of the early release the product and that leading to a 5 to 5.5 day shelf life for INTERCEPT. Maybe Larry, a few comments about just the experience we've had in Europe with the day 7 products?

Laurence M. Corash -- Chief Scientific Officer

Yeah Josh we've gained valuable experience, particularly in Switzerland, where 7 day INTERCEPT platelets had been in use for quite some time. We just published a paper led by Andy Buser from the Basel Red Cross in transfusion, showing first of all, that with the INTERCEPT, they are only transfusing about 16% of day-7 platelets, but these platelets are clinically effective. And so that experience really supports what we will do in the United States.

Unidentified Participant

Great. Thank you.

Operator

Your next question comes from the line of Catherine Schulte from Baird. Catherine, your line is now open.

Catherine Schulte -- Baird -- Analyst

Hi, thanks for the questions. First, you mentioned some incremental illuminator placements in the quarter. Any specific geographies to highlight for those new placements?

William M. Greenman -- President and Chief Executive Officer

No, not really. They were scattered really throughout the globe, nothing in particular. It just was a little bit higher than historically given, that platelets were 85% of our revenues.

Catherine Schulte -- Baird -- Analyst

Okay. And then we found in tenders that it looks like you guys were awarded earlier this month in Slovenia, that could contribute $4.5 million to $5 million spread over the next five years. Is this a new customer win, or just an extension of an existing customer?

William M. Greenman -- President and Chief Executive Officer

Its actually a customer we have had on board for about a decade now. So it was one of the earlier adopters of INTERCEPT, and I think we were just happy that their sort of experience with INTERCEPT throughout that period has been favorable, and their customers would like to continue on. I think they were looking maybe to expand in one other small site within Slovenia, but I think we've had roughly -- close to 100% of that market for some time.

Catherine Schulte -- Baird -- Analyst

Great, thank you.

William M. Greenman -- President and Chief Executive Officer

Thanks Catherine.

Operator

Your next question comes from the line of Jacob Johnson from Stephens. Jacob Your line is now open.

Jacob Johnson -- Stephens -- Analyst

Hey thanks. In the press release you guys talked about platelet doses increasing 70% in the U.S. this quarter. Just interested how that compares to last quarter, or is there any way you could sort frame up that performance relative to your recent experience? Just interested to know how much of an uptick in demand you saw this quarter?

William M. Greenman -- President and Chief Executive Officer

Yeah I mean as far as platelet doses relative to kits, it's fairly consistent. The U.S. continues to grow proportionately. So the growth that we reported this quarter as far as number of doses consumed is healthy, and we expect will accelerate as we move forward.

Jacob Johnson -- Stephens -- Analyst

Got it and then obviously a lot of focus on the potential for top line growth following the guidance, but could you guys just remind us about the outlook for gross margins, as revenues grow. Should we see additional margin expansion opportunities on that line and do you need to make any SG&A investment to support the growth outlook?

Kevin D. Green -- Vice President, Finance and Chief Financial Officer

Well, we've been making investments to ensure that we can supply the uptake, and we'll continue to do that. But as far as margin expansion, I think in our prepared remarks, we said we expect that we would be in the mid 50s for the balance of the year, as we move into 2020 and of course it's all a function of the top line revenue growth and economies of scale.

Jacob Johnson -- Stephens -- Analyst

Okay, got it. And then just last quick question for me, the American Red Cross. I think there is 13 of 17 BLAs last quarter, any update on that?

William M. Greenman -- President and Chief Executive Officer

I believe there are still at 13. That's not really a driver right now, as far as their overall availability of platelets being shipped out of state; because the 13 sites that currently have their BLAs are -- most of them are big net exports. So I think we won't see additional BLAs throughout the remainder of the year, and into early next. They currently have -- I think they have roughly around 22 production sites. So I think they're getting up to -- I guess full capacity with regard to the sites that they have brought online, and then it's just within those sites, what the overall compatibility looks like and how they drive the capacity to be able to meet the hospital demand that's coming.

Jacob Johnson -- Stephens -- Analyst

Got it. Thanks for taking the questions.

William M. Greenman -- President and Chief Executive Officer

Yeah. Thank you, Jacob.

Operator

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Tim Lee.

Tim Lee -- Investor Relations Director

Thank you again for joining us today and for your interest in Cerus. Next month, we will be participating in the Stephens Conference in Nashville and the Stifel Healthcare Conference in New York. And we hope to see many of you there in person and also as a reminder, today's slides will be available on our website after the call. Thanks very much.

Operator

[Operator Closing Remarks].

Duration: 48 minutes

Call participants:

Tim Lee -- Investor Relations Director

William M. Greenman -- President and Chief Executive Officer

Laurence M. Corash -- Chief Scientific Officer

Vivek K. Jayaraman -- Chief Commercial Officer

Kevin D. Green -- Vice President, Finance and Chief Financial Officer

Craig Bijou -- Cantor Fitzgerald -- Analyst

Matthew Blackman -- Stifel -- Analyst

Unidentified Participant

Catherine Schulte -- Baird -- Analyst

Jacob Johnson -- Stephens -- Analyst

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