Cerus - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 total revenue was $56.751M, with product revenue up 9% YoY to $50.809M and IFC revenue ~$3.0M; product gross margin compressed to 53.9% on FX and freight costs.
• FY 2024 goals achieved: positive non-GAAP adjusted EBITDA ($5.732M FY; $3.274M in Q4) and four consecutive quarters of positive operating cash flow ($4.9M in Q4).
• FY 2025 product revenue guidance reiterated at $194–$200M (IFC $12–$15M), with gross margin expected in the mid-50s and SG&A rising modestly with leverage.
• Commercial momentum: global platelet adoption (Canada 100% PR), rising IFC demand aided by new BLAs enabling interstate shipment; EMEA product revenue up 16% YoY in Q4.
• Estimates comparison unavailable: S&P Global Wall Street consensus data could not be retrieved at time of analysis; beat/miss not presented [GetEstimates errors].

What Went Well and What Went Wrong

What Went Well

• Platelet franchise growth and international strength drove Q4 product revenue +9% YoY; EMEA up 16% YoY, North America up 6% YoY.
• IFC adoption inflecting: Q4 IFC revenue ~$3.0M (vs $2.3M PY) with BLAs enabling interstate shipments; “clinicians highly value earlier access to fibrinogen”.
• Cash flow and profitability metrics improved: Q4 positive operating cash flow ($4.9M); FY positive adjusted EBITDA ($5.732M) beating “breakeven” objective.
• Quote: “Our exceptional fourth quarter performance capped a year of significant growth… rising clinical demand for our IFC product” — CEO Obi Greenman.

What Went Wrong

• Product gross margin declined to 53.9% in Q4 (from 55.5% in Q4 2023) due to stronger USD, expedited freight and higher discard rates for certain products.
• Government contract revenue fell to $5.942M (vs $6.574M PY) tied to completion of U.S. Phase 3 ReCePI RBC trial; annual government contract revenue -31% YoY.
• Q4 GAAP net loss widened slightly YoY to $(2.521)M, EPS $(0.01), with SG&A up on non-cash stock comp and a ~$2M Q4 catch-up accrual.

Transcript

Operator (participant)

Good day, ladies and gentlemen. Thank you for standing by, and welcome to Cerus Corporation's fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Nipur Livik, Cerus' Investor Relations Advisor. Ms. Livik, you may begin.

Nipur Livik (Head of Investor Relations Advisor)

Thank you, and good afternoon. 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 ir.cerus.com. With me on the call are Obi Greenman, Cerus' President and Chief Executive Officer; Vivek Jayaraman, Cerus' Chief Operating Officer; Kevin Green, Cerus' Chief Financial Officer; and Carol Moore, Cerus' Senior Vice President. Cerus issued a press release today announcing our financial results for the fourth quarter and year-ended December 31st, 2024, and describing the company's recent business highlights. You can access a copy of this announcement on the company 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 2025 product revenue guidance, our expectations for bottom line and non-GAAP-adjusted EBITDA performance, our operating expense and gross margin expectations, and our expectation for positive operating cash flows for 2025, expected future growth in our growth trajectory, a potential new and enhanced CE mark submission for Intercept Red Blood Cells, and other statements that are not historical fact. These forward-looking statements involve risks and uncertainties that could cause actual events, performance, and results to differ materially. They are identified and described in today's press release, in our slide presentation, and under risk factors in our Form 10-K for the year-ended December 31st 2024, which we will file in the coming days. We undertake no duty or obligation to update our forward-looking statements.

On today's call, we will also be discussing non-GAAP financial measures, including non-GAAP-adjusted EBITDA. These non-GAAP measures should be considered a supplement to and not a replacement for measures presented in accordance with GAAP. For a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures, please refer to today's press release and the slide presentation available on our website. We will begin today with opening remarks from Obi, followed by Vivek to discuss recent business highlights, then Kevin to review our financial results and expectations for the rest of 2025, and lastly, closing remarks from Obi. It is my pleasure to introduce Obi Greenman, Cerus' President and Chief Executive Officer.

Obi Greenman (President and CEO)

Thank you, Nipur, and good afternoon, everyone. I'd like to open the call by spending a few minutes reflecting on our strong performance in 2024, as well as our expectations for full year 2025 as we continue to establish our INTERCEPT Blood System as a standard of care in transfusion medicine. 2024 was a milestone year for the company and its long history in that we successfully achieved positive adjusted EBITDA for the full year. Building off of this will allow us to invest in the continued growth of our business globally and our full INTERCEPT portfolio and product improvements. Our year-over-year double-digit product revenue growth for 2024 was fueled by continued expansion in our global platelets business, along with the rising demand in our INTERCEPT Fibrinogen Complex, or IFC, business in the U.S.

Vivek will provide further insights into the strong demand we are experiencing in the IFC market, where we are providing an important and timely intervention for patients with major bleeding complications. This momentum underscores the critical importance of INTERCEPT-treated blood components and highlights the growing impact of our pathogen inactivation technology across transfusion services in the U.S. and internationally, from blood centers that manufacture pathogen inactivated components to the hospitals and clinicians who transfuse them. For the fourth quarter and full year 2024, we executed our financial strategy effectively, delivering strong bottom line performance and robust operating cash flows. As Kevin will detail shortly, key year-over-year financial highlights include double-digit growth, a narrowed GAAP net loss attributable to the company, and positive non-GAAP adjusted EBITDA.

With that strong foundation and in line with our 2025 product revenue guidance announced earlier this year, we anticipate year-over-year growth of 8-11% while focusing on the forward health of our bottom line results. On the development front, in Europe, we are continuing to collaborate closely with our notified body, TUV SUD, on a potential new and enhanced CE mark submission for Intercept Red Blood Cells, or RBCs. We plan to have a more detailed update on these developments as those plans solidify in the coming months. I would like now to turn the call over to Vivek to discuss our commercial results and progress for the fourth quarter and full year 2024, along with color on the outlook for 2025.

Vivek Jayaraman (COO)

Thank you, Obi, and good afternoon, everyone. As we entered 2024, we committed to a return to top-line growth. While at that time, we believed in our ability to deliver compelling growth, we were not without headwinds. We started the year with six-month shelf life on platelet kits in the U.S., and most of our IFC production partners had yet to receive BLA clearance to enable them to transport IFC across state lines. Thanks to the solid performance of the cross-functional Cerus team, combined with strong partnership with our blood center customers, we were able to successfully address many of these challenges and meet our commitment by delivering 15% top-line growth compared to 2023. In addition, we made meaningful progress on key strategic commercial initiatives that will set the stage for compelling growth for the balance of this decade.

We delivered strong results in the fourth quarter of 2024, driven primarily by growth and demand for our US IFC business, as well as our global platelet franchise. In particular, we saw strong contributions from our international markets. As an example, Canadian Blood Services is now at 100% PR adoption for their platelet production. Overall, our core platelet market stabilized, and we witnessed a normalization in donor trends in 2024, which were previously headwinds in 2023. In addition, we made meaningful progress on several of our key growth initiatives. As we start 2025, we are seeing signs of strong platelet traction across our global franchise. As reported last quarter, we had an excellent showing at the annual AABB meeting, which took place in Houston, Texas, in October. As we predicted, the interest we witnessed at AABB translated into a spike in inbound inquiries, both from hospitals and blood centers.

During the quarter, a few of our blood center IFC production partners received BLA approvals and are in the process of ramping up manufacturing volumes to meet increased IFC demand. As real-world experience with IFC grows, we are continuing to see that our assumed value proposition is being validated. Clinicians highly value earlier access to fibrinogen, and hospital blood banks greatly appreciate the reduction in both product wastage as well as reduced time from order to availability. We exited 2024 with strong momentum in our IFC franchise, and our acute focus is to ensure that production volumes ramp up in order to meet growing demand. As we begin 2025, and as stated in our preliminary revenue guidance, we expect to continue to deliver compelling top-line growth.

This growth is expected to come from strength in our global platelet franchise as we anticipate share capture in the U.S. and further expansion internationally. We exited 2024 with real momentum in our U.S. IFC business, and with line of sight into expanded manufacturing capacity, we are confident in our ability to meet the growing clinical demand we are experiencing in the IFC franchise. As we look forward in the year, we are excited to launch the new INT200 Illuminator in EMEA and reaffirm our commitment to new product innovation in this market. This project is a result of close collaboration with and input from our blood center partners, and we can't wait to deliver this to them. The outlook for 2025 is exciting, and we look forward to updating you on our progress during future quarterly calls.

I'm grateful to the global and commercial and operational teams at Cerus for their strong performance in 2024. It is great to be back on a growth trajectory, and we are poised to continue to do so moving forward. Most importantly, it is very rewarding that our efforts are helping to ensure that more patients around the world are gaining access to safer blood products. I will now turn it over to Kevin to discuss our financial results and outlook in more detail.

Kevin Green (CFO)

Thanks, Vivek, and hello to everyone listening. On today's call, I'll be discussing our financial results for the fourth quarter and full year 2024, as well as our product revenue guidance for 2025. Finally, I'll highlight some of the key success factors that we are focused on as we move forward, building off a 2024 solid base toward continued financial improvement over the long term. As pre-announced in January, full year 2024 product revenues were $180.3 million, ahead of our latest 2024 product revenue guidance and representing 15% growth year-over-year. For the fourth quarter of 2024, we posted product revenue of $50.8 million, representing year-over-year growth of 9%. EMEA platelet sales, as well as growth from US platelet sales, drove the bulk of our product revenue increases this quarter. While our platelet franchise drove much of the growth, we also realized IFC sales expansion.

The IFC business was up almost 30% when comparing the fourth quarter of 2024 to the prior year. Full year 2024, North American product revenues were up 23% over 2023 levels, and fourth quarter 2024 product revenues exceeded prior year levels by 6%. This growth was driven largely by increased penetration at the top US blood center organizations, where we continue to see significant growth opportunities for INTERCEPT uptake. In EMEA, fourth quarter product revenues were up 16% year-over-year. When looking at Q4 2024 over the prior year, FX rates provided a slight headwind for the EMEA business of around 80 basis points. On a full year basis, FX rates had little impact on our EMEA business.

On a consolidated basis, FX provided a headwind of around 20 basis points when comparing Q4 2024 to that of the prior year period, and little to no impact on the full year comparative results. Beyond our platelet and plasma franchises, for the full year, IFC sales were up over 2023 levels by 42% to $9.2 million. For Q4 2024, we posted IFC product revenue of roughly $3 million, up from $2.3 million in the prior year period, driven by more standing orders and depth within existing accounts. In addition to our product revenue, and not included in our guidance, government contract revenue totaled $21.1 million for 2024, compared to $30.4 million for 2023, and $5.9 million in Q4, compared to $6.6 million for the prior year period.

Consistent with dialogue in prior quarters, the completion of our U.S. phase III recipe clinical trial was the primary driver for the decline. As we look ahead, we expect to continue delivering on our contracts with the federal government and advancing patient access to safe blood components. Turning now to our product gross profit and gross margins. For the full year, product gross profit was $99.5 million, up from the $86.4 million for 2023. Our fourth quarter product gross profit was $27.4 million, compared to $26 million during the prior year period, an increase of 5.5% year-over-year. Product gross margins for the year as a whole were consistent at 55.2%, within 10 basis points of 2023 levels. For the fourth quarter, product gross margins were down slightly to 53.9% from the 55.5% reported in Q4 of last year.

The slight decline in gross margins was driven by a number of individually small items, including a stronger US dollar in Q4, freight costs to expedite product shipments into the US, and higher-than-expected discard rates for certain products. As we look ahead to 2025, we expect product gross margins will generally remain in the mid-50s. There are several factors that could drive quarterly variability, including but not limited to: foreign exchange rates, product mix, production costs of IFC to meet increasing demand, economies of scale in production volumes, and the timing of COGS reduction initiatives coming online. Moving on, for the year, operating expenses were down more than 8% to $134.8 million, compared to $146.9 million for 2023. Our fourth quarter operating expenses, which totaled $34.8 million, were up from the $31.6 million in Q4 of 2023. Q4 2024 operating expenses included $5.5 million in non-cash stock-based compensation.

By specific expense type, 2024 R&D expenses were down 13% to $58.9 million from $67.6 million in the prior year. Fourth quarter R&D expenses totaled $15.4 million, compared to $14.3 million during the prior year period. The increase in our R&D expenses for the fourth quarter can be attributed to work on our LED-based illuminator, including submission for CE marking, RETUS site ramp enrollment, and activities covered under our new BARDA contract. 2024 SG&A expenses were relatively flat at $75.9 million from $75.5 million. Fourth quarter SG&A expenses were $19.3 million, compared to $17.3 million during the prior year period. During the quarter, we recognized a cumulative catch-up of certain accrued expenses that had artificially distorted our SG&A expenses for the quarter.

As we look ahead to 2025, we expect that SG&A expenses will go up modestly from 2024 levels, primarily as a function of cost of living and inflationary impact. With that said, we are not planning on significant new investments and expect that we will continue to see compelling leverage from our SG&A spend relative to the expected revenue growth. Let's now focus on the bottom line and non-GAAP adjusted EBITDA results. On the bottom line, reported net loss attributable to Cerus for 2024 improved by 44% to $20.9 million from $37.5 million for 2023. For the three months ended December 31st, 2024, net loss attributable to Cerus was $2.5 million, or a penny per share, compared to $1.3 million, or also a penny per share for the prior year period.

As a measure of the operating leverage we are generating, the net loss for Q4 and the full year was less than our non-cash stock-based compensation. Beyond the achievement of double-digit top-line growth, as Vivek mentioned, and suggestive of the leverage we are generating, we are pleased to announce the achievement of another one of our stated 2024 objectives: positive adjusted EBITDA of $5.7 million for the year. This represents a significant improvement over the negative $10.7 million for the prior year. Q4 2024 was the third straight quarter of generating positive adjusted EBITDA, which was $3.3 million, compared to a positive adjusted EBITDA of $4.7 million for the prior year period. While we are thrilled with this achievement, we plan to build off of this strong foundation and expect our positive adjusted EBITDA will be durable.

Underpinning our confidence, we expect that, as suggested by our 2025 product revenue guidance, coupled with planned gross margins in the mid-50%, close management, and continued leverage of operating expenses, we will maintain or improve on this measure for 2025. On the balance sheet and associated cash flows, we ended the fourth quarter with $80.5 million of cash, cash equivalents, and short-term investments on the balance sheet. Operationally, we posted our fourth consecutive quarter of positive operating cash flows. For the fourth quarter and full year 2024, we generated positive operating cash flows of $4.9 million and $11.4 million respectively, compared to cash used for the operations of $15.2 million and $43.2 million for the fourth quarter and full year 2023 respectively.

Although we expect to make working capital investments in support of our growing business, namely finished goods inventory and receivables, we expect to generate continued positive operating cash flows for 2025. On that note, I'd now like to turn the call back over to Obi for some closing remarks.

Obi Greenman (President and CEO)

Thank you, Kevin. With the first two months of 2025 almost behind us, we remain positive about the rest of the year ahead of us. Our growth reflects the confidence and trust our customers place in Cerus and the INTERCEPT technology, which addresses a significant unmet need in blood safety and availability, with a total addressable market estimated to exceed $7 billion annually. While we have realized strong revenue growth for both our platelet and IFC products, we are sub-10% penetrated in those markets globally, meaning there is a lot of runway for continued revenue growth for our existing licensed INTERCEPT product portfolio. With our first-mover advantage, superior technology, and strong barriers to entry, we are setting a new standard in transfusion medicine. Our concentrated and expanding customer base allows us to drive significant leverage from our SG&A, generating a strong recurring revenue stream.

With a solid financial profile and a mature pipeline, I believe Cerus is well-positioned for continued success. Thank you for your continued interest in Cerus. I will now turn the call over to the operator for questions.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Joshua Jennings with TD Cowen. Your line is now open.

Josh Jennings (Analyst)

Hi, good afternoon, and thanks for taking the questions. Congratulations on the strong performance in 2024. I was hoping to just start on IFC, you know, the foundation for that franchise continues to build. Seems like it's on the cusp or beginning to inflect just in terms of adoption and utilization, just customer demand. I was hoping you could just walk us through the steps that are left before kind of full U.S. market access is unlocked. Then kind of secondary to that, just your state of optimism that Cerus can capture, you know, up to 50% of a multi-hundred million dollar U.S. market opportunity in front of you with IFC.

Kevin Green (CFO)

Thanks a lot, Josh, for the question. Vivek, would you like to cover that question?

Vivek Jayaraman (COO)

Sure, I'd be happy to. Good to hear from you, Josh. Thanks for the question. You know, I think you categorized the state of the market well. I mean, we're excited about the increase in demand, the validation we received coming out of AABB, both on the podium and in peer-to-peer discussions, was certainly a strong boost and added to the momentum we saw at the end of the year and entering into 2025. In parallel, as we mentioned, we received BLAs at a couple of our production partner sites, which will enable them to transport product across state lines. That'll unlock demand in states where there wasn't previously an in-state manufacturer. In terms of thinking about how we unlock the market and continue to drive forward progress, you know, the key things are making sure we constantly balance demand and supply.

As we're seeing demand spiking, it's nice to have avenues with which supply can grow. I think as we add that with continued real-world experience, maturing clinical evidence, those are the factors that are going to continue to allow us to penetrate this market. Certainly the user experience and what we're seeing where hospitals may bring it in into one clinical category and then it fairly quickly diffuses across the institution, that gives us confidence that the broad market opportunity that IFC presents is, in fact, realizable.

Josh Jennings (Analyst)

Excellent. Maybe one just follow-up on just the China opportunity. I know you have a JV. I think we talked a little bit about this earlier in January. Just, but you know, the next steps to unlocking that China TAM, which is a meaningful piece of that $7 billion global TAM that you referenced in your prepared remarks, Obi, maybe just the outlook there and when Cerus could start seeing the China franchise contribute revenues.

Obi Greenman (President and CEO)

Yeah, thanks, Josh, for the question. Yeah, we are expecting an NMPA approval, you know, sometime this year. Subsequent to that Chinese approval, there will be sort of a provincial reimbursement process that we estimate will take about a year to complete. We are actively discussing with various provincial blood centers in China their interest, and that'll continue on until the NMPA approval happens.

It is really just sort of, you know, how do we sequence the rollout once we have that provincial reimbursement in place. It is not going to contribute meaningfully to revenue this year, but, you know, once that provincial reimbursement is in place, once we have the approval and then the provincial reimbursement is in place, we do see that being a very meaningful market opportunity for the company and allows us to continue to penetrate the platelet market that we mentioned in the prepared remarks is, you know, we are still sub-10% globally. There is a lot of continued opportunity for the platelet business. Thanks, Josh.

Josh Jennings (Analyst)

Thanks, Obi.

Operator (participant)

Thank you. Our next question comes from the line of Jacob Johnson with Stephens. Your line is now open.

Jacob Johnson (Analyst)

Hey, thanks. Good afternoon, everybody. This one's probably for Vivek. Just Vivek, you mentioned on IFC bringing on additional supply to meet demand. Can you just talk about that dynamic? As we think about the outlook for $12 million-$15 million of IFC revenue this year, how much of that's predicated on additional supply coming online? Do we need to, you know, is there any timing to that that we need to think about as we think about IFC revenues playing out throughout the year? Thanks.

Vivek Jayaraman (COO)

Great. Yeah, thanks for the question. You know, with respect to the benefit of having the BLAs and that impact on supply, what that enables us to do is it allows us to address demand that we have known for some time exists in states without an in-state manufacturer. So now those hospitals have an avenue to access IFC, and the blood centers that have the BLAs in hand are now operationalizing that license so that they can ramp up supply and meet that hospital demand. As we contemplated guidance for the year, we went into the year with a line of sight into having sufficient manufacturing supply to meet demand, but we're going to continue to work on increasing supply because we continue to see demand increase as well.

We feel that with the progress we're making, we'll be in a good spot where supply shouldn't be a constraint on a going forward basis.

Jacob Johnson (Analyst)

Got it. That's helpful. Maybe, Kevin, one for you just on product gross margins. I heard kind of mid-50% for the year. You called out some kind of couple of items in Q4 that kind of bit you. Can you just talk about whether it's US dollar, freight costs, discard rates, IFC investments, just any of those that we should be monitoring or keeping in mind this year that could kind of repeat from Q4 or any that were kind of isolated to Q4? Just how should we think about gross margins this year? Thanks.

Kevin Green (CFO)

Yeah, Jacob, thanks for the question. I think most of those items that I called out for Q4 were episodic. We do not expect them to last. The one watch-out I would say is FX rates. If the dollar continues to strengthen relative to the euro, obviously that is going to have an impact across our P and L. What I would say is, since most of our product is sourced in euro, as the US becomes a bigger and bigger contributor to the top line and the dollar strengthening, we actually see a bottom line benefit, but it does obviously have a negative impact on our revenue line. That is the one watch-out that obviously we do not have absolute control over. As far as shipping costs, the ancillary product where we saw some discards, those are truly episodic. We do not expect those to continue.

Jacob Johnson (Analyst)

Okay, that's helpful. I'll leave it there. Thanks for taking the questions.

Kevin Green (CFO)

Thanks, Jacob.

Operator (participant)

Our next question comes from the line of Ross Osborne with Cantor Fitzgerald. Your line is now open.

Ross Osborne (Analyst)

Hey, guys. Thanks for taking our questions. Maybe just one clarifying question on the SG&A guidance. I believe you said slightly up in 2025 relative to 2024. Does slightly up include the one-time item that occurred during the fourth quarter, or is it slightly up versus an adjusted number?

Kevin Green (CFO)

Yeah, I think it's—Ross, sorry, I was going to take that, Obi, if that's okay.

Obi Greenman (President and CEO)

Yeah, no, please, sorry.

Kevin Green (CFO)

Yeah, so we're really talking about 2024 as a whole. I think clearly we saw this cumulative catch-up. I'd characterize it as probably a roughly a $2 million impact for the quarter that was anomalous. Where we're going to see, you know, continued growth is really from inflationary pressures. We're not making significant investments, as we mentioned, incremental investments, but we expect that we'll be able to generate continued leverage with those investments relative to the top line growth. It is really a comment that was predicated on 2024 as a whole rather than a specific quarter.

Ross Osborne (Analyst)

Okay, sounds great. Sorry, jumping around a bit, I heard the comments around China, but with regards to Brazil, can we walk through that commercialization timeline and the steps you need to take there?

Kevin Green (CFO)

Yeah, Vivek, would you like to cover that?

Vivek Jayaraman (COO)

Sure. As you're aware, we currently are commercial in the private sector in Brazil, but that's a small portion of the market. We're in the process of applying to gain access to the public sector, and that's really a combination of health ministry or a distributor partner and us putting together a dossier and then receiving approval from the government agencies to gain access to the public sector. That process is ongoing, and we would anticipate hearing from them later this year. From there, it really becomes about operationalizing the rollout. Working with our distributor's employment organization, getting devices into the market, and kind of rolling it out there. That's dissimilar from what happened in France, but the first step really is awaiting a decision from the government, which we anticipate would happen at some point later this calendar year.

Ross Osborne (Analyst)

Got it. Thanks for taking our questions.

Kevin Green (CFO)

Thank you, Ross.

Operator (participant)

Our next question comes from the line of John Wilkin with Craig-Hallum. Your line is now open.

John Wilkin (Equity Research Analyst)

Hey, guys. I just wanted to ask, it looks like platelet growth in North America started to slow down pretty meaningfully in the quarter. I was just wondering if that's due to just tougher year-on-year comps now after some very easy ones early in the year, or are there other reasons driving that?

Obi Greenman (President and CEO)

Yeah, Kevin or Vivek, would you guys like to take that?

Vivek Jayaraman (COO)

Sure, I'd be happy to jump in, and Kevin certainly weigh in if you have any other thoughts. It had a little bit to do with comps. We also, you know, one of the things that we had talked about potentially addressing when we came towards—we knew we were going to have a shelf life issue through the balance of this year. We knew that there was some stocking taking place at the end of last year, and so that we would seek to get to more normal inventory levels through the course of 2025. We potentially thought we might do that towards 2024, but we did not. We continue to capture share in the North American market through the course of 2024 and anticipate doing so in 2025.

If you think about underlying adoption trends and where our business is heading, that continues to be a strengthening business for us. There was really no underlying issue within our North American platelet franchise. We certainly benefited from a full year of 100% with Canadian Blood Services. You will see that as Héma-Québec comes on board, you will see a little bit of growth in Canada, but fundamentally, we anticipate the U.S. market will continue to capture share.

John Wilkin (Equity Research Analyst)

Got it. Thanks. That's helpful. Any other updates around other specific countries or geographies that are maybe in the early stages or potentially adopting INTERCEPT in the near future?

Vivek Jayaraman (COO)

Sure. You know, as we've talked about previously on this call, we've got a joint venture partnership in China. There are some steps that we need to walk through there, but we're encouraged by not only the progress we're making, but the caliber of our partner, as well as the level of clinical interest and enthusiasm in that marketplace. I think we've mentioned previously that it's early days for us in terms of progress in Germany. That represents the single largest remaining market in Western Europe. We recently had a number of our folks at the annual Med Lab Congress in Dubai, and the market opportunity for us in the Middle East, in particular in Saudi Arabia, continues to be quite strong. There's quite a bit of investment in healthcare happening in the kingdom, and they tend to mirror off of AABB and FDA standards.

There's a lot of awareness of interest and enthusiasm to adopt INTERCEPT. Those would be some examples of geographies where we feel there's a reasonable path towards growth, and that could represent growth drivers through the balance of, you know, really over the course of the next couple of years.

John Wilkin (Equity Research Analyst)

Great. Thanks, guys.

Obi Greenman (President and CEO)

Yeah, thank you, John.

Operator (participant)

Thank you. As a reminder, to ask a question at this time, please press star 11 on your touchstone telephone. Our next question comes from the line of Mark Massaro with BTIG. Your line is now open.

Vidyun Bais (Analyst)

Hey, guys. This is Vidyun from Mark. Thanks for taking the questions, and congrats on a nice quarter. Could you just discuss in terms of the major—the five major blood centers in the U.S.? I think I heard you call out that you drove some increased penetration there. Could you just walk us through what the level of penetration stands at currently and just how you're thinking about that remaining opportunity? Thanks.

Obi Greenman (President and CEO)

Thanks, Vidyun. Vivek, this is another one for you, I think.

Vivek Jayaraman (COO)

Thanks, Obi. Thanks for the question, Vidyun. You know, there continues to be upside with US blood centers, in particular with the—you know, as we see consolidation of markets, some of the larger blood center families. I think today we've provided share levels at those centers, with the exception when the American Red Cross announced of their own volition publicly their intention to move to 100% PR. Really, out of respect for those centers, we sort of keep that information internal.

What I can say is, if you just look at our overall penetration in the U.S. and where the opportunities exist, as well as what we're seeing in terms of continuing maturity of our real-world evidence in support of INTERCEPT, it is not only in the context of compliance with the bacterial guidance in the FDA, but more importantly, in terms of pandemic preparedness and other financial and operational benefits that confer to the blood centers. We're seeing continued inbound inquiries from blood centers to adopt INTERCEPT, which is why even long past the guidance compliance period, we're seeing share capture and increased PR penetration in the total market. It was a big contributor to 2024 performance, and we anticipate that being the case as well in 2025.

Vidyun Bais (Analyst)

Perfect. Thanks for the color there. Just one on the government contract revenue. I understand you guys do not guide to this. I think it came in a little bit above our model in the quarter. Do you think that $5.9 million would be a good run rate for 2025, or were there any one-timers in that, Vivek?

Obi Greenman (President and CEO)

Yeah, thank you. Kevin, do you want to cover this one?

Kevin Green (CFO)

Yeah, sure.

Yeah, Vivian. I don't know that it's a good baseline for 2025. As you'll recall, we were awarded a 2024 BARDA agreement late in the year. Some of those activities have started, but they're not really contributing meaningfully towards the overall government contract revenue. We do expect in 2025 that all of the awards will be running concurrently and that we'll see a bump up in the overall government contract revenue and the initiatives that we're spending on those contracts. I wouldn't model it off of Q4. I think it's going to continue to grow as those initiatives kick in and contribute.

Vidyun Bais (Analyst)

Okay, great. Thanks so much for taking the questions.

Kevin Green (CFO)

Thank you.

Operator (participant)

Thank you. I am currently showing no further questions at this time. I would like to hand the call back over to Obi Greenman for closing remarks.

Obi Greenman (President and CEO)

Thank you all again for joining us today and for your interest in Cerus. Next month, we will be participating in the 45th Annual TD Cowen Healthcare Conference, and we look forward to sharing our progress with you throughout 2025. It should be a great year. Thank you.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect.