Q3 takeaways
Below are some of the highlights that were notable for me from the Q3 conference call:
Sales team restructuring including the increased headcount took some time this year to get into place due lengthly recruitment process to find the right people in a very tight labor market in Germany, and in Europe in general, as well as challenging labor laws. Even though the number of direct sales countries has doubled from 5 to 10, the increase and restructuring was not fully in place in time to impact 2019. These investments in sales infrastructure should start paying off starting in Q4 so 2020 should see a significant increase in direct sales and margins.
New Head of International Sales that focused on distributors and partners and regional managers that reside in their respective region, instead of trying to manage those territories from Germany. This should bolster distributor sales in my opinion.
Doubled the customer facing salespeople in Germany and subdivided it enabling the sales reps to focus in on core accounts driving adoption in those key accounts. The sales run rate is about $2 million in sales per rep in Germany so it is a no brainer to expand the sales force in Germany because the opportunity is so great.
The average number of CytoSorb cartridges per invoice continues to grow at many accounts, demonstrating increased usage and adoption.
When Fresenius Medical Care negotiated the transition of their European countries to CTSO in exchange for exclusivity for Mexico and South Korea they were left with quite a bit of European inventory. They continue to make good progress selling against that inventory, but until, they get registration in Mexico and South Korea they are holding off on ordering, because they cannot transfer their European inventory to those countries. On the positive side the other two distributors they said had too much inventory earlier this year, are ordering now and they are back to kind of their typical order pattern.
Fresnius Mexico management team is very engaged and the registration sounds like it is pretty I think we're pretty close to getting done, possibly by the end of the year. It's currenlty with the Mexican Health Authority right now. FMC Mexico has already a lot of pre-launch activities being run by the FMC Mexico organization so it must be close. A side benefit of FMC Mexico is it rolls up under FMC North America so the company gets now some interaction with Fresenius sales team here in the states.
The company is aggressively pursuing expansion of label for ticagrelor removal. This is similar to what was done with bilirubin and myoglobin reduction label expansion in 2018. They are hoping to hear back from the regulator soon on their assessment of our filing. However, it may take longer than the label expansion did back in 2018 however because of the transition that's occurring in Europe right now between MDD and MDR and they stated that all the notified bodies right now are pretty much overwhelmed with the amount of work they have. Having Tiacgrelor as an approved label together with published study out of Hamburg which included the cost modeling and economic benefits shown, should provide a huge opportunity in Europe.
Regarding ticagrelor removal, an interesting comment was made during the analyst Q&A. It was stated that during the presentation of the company's data at the European Cardiothoracic Meetings in Lisbon last month, one surgeon who had actually used the device on -- two patients as an off label use not associated the company, indicated that he was basically just "shocked by the traumatic improvement he saw in terms of patients bleeding".
The Hemodefend IDE is still being worked on, which is dissappointing, but they reiterated they intend to have it filed by the end of the year. The usual "completing all the engineering, validation, etc." reasons were referenced for the delay but they also mentioned the external testing they are doing at the multiple blood banks is still not complete. It sounds like the de novo 510k route is what is being targeted having only 20 patients to recruit, so potentially if they get the IDE filed in the next month and get the trial underway starting early January, it might be possible to get Hemodefend approved in 2020.
I tend to agree with other posters speculation that Mortenson's departure is linked to the recent changes to their clinical team, and potentially as a result of the slow recruitment and progress being made on REFRESH and on other clinical fronts.
For long term investors in this company despite how disappointing 2019 appears to be, the company made some key adjustments, strategic decisions and investments which should pay off next year I believe. This is still a young company which is experiencing growing pains and mistakes but the key for me is how they recognize adjust to those.
