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Why Cerus Corporation is Soaring Today

By Brian Feroldi – Nov 4, 2016 at 12:18PM

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Shareholders cheer the blood-transfusion specialist's third-quarter earnings report.

What happened

After reporting third-quarter results, shares of Cerus Corporation (CERS 5.69%), a biomedical products company focused on safe blood transfusions, rose by 16% as of 11:30 a.m. EDT on Friday.

Image source: Getty Images.

So what

It looked like an upbeat report all around. Here are the highlights:

  • Product revenue jumped by 26% to $10.2 million. The increase was caused by a 30% uptick in demand for the company's Intercept disposable kits.
  • Gross margin for the quarter came in at 46%, far higher than the 31% produced in the year-ago period. Management credited the gains to its manufacturing agreement that was signed with Fresenius Kabi AG late last year.
  • Operating expenses only grew by 2.7% to $19.2 million. The bulk of the increase was driven by selling and marketing activities related to the rollout of the Intercept system in the U.S. 
  • Net loss for the period was $14.4 million, or $0.14 per share. That was down from the $0.17 loss that was reported in the year-ago period and came in lower than the $0.17 loss that analysts had projected.
  • The company's cash balance at quarter end was $81.2 million.

Traders appear to be reacting favorably to the news of a lower than expected loss.

Now what

Looking a bit beyond the numbers, Cerus had a handful of other positive developments occur during the quarter that it shared with investors.

First, the FDA announced that it has revised its recommendations for protecting blood components from Zika virus. The agency's new recommendation calls for the use of pathogen reduction technology in all U.S. blood centers, which could spark future demand for Cerus' system.

Next, management announced that 17 customers in the U.S. are now initiating Intercept production, which is up sharply from the three blood centers that it had at the beginning of the year. In addition, another 22 contracted customers are expected to begin production soon.

Finally, the company continues to make progress on its red cell system, which should be submitted for European CE Mark approval soon. The company also plans to initiate a Phase III trial in the U.S.

All in all, Cerus' results show that it is well positioned for fast growth in the years ahead, so it's easy to understand why shares are roaring higher on Friday.

Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

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