Delcath Systems - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered strong top-line and profitability: revenue $24.16M (+210% YoY), gross margin 86%, diluted EPS $0.07, and adjusted EBITDA $9.82M; U.S. HEPZATO KIT revenue was $22.5M and Europe CHEMOSAT revenue $1.7M.
• Results exceeded Wall Street consensus: revenue beat by ~$1.14M and EPS beat by ~$0.0467; beats were driven by consistent utilization (~2 treatments/month/site) across 20 active centers and expanding referral networks, while NDRA/340B impacts start in Q3 (ASP headwind). Estimates marked with * are from S&P Global.
• Guidance tightened: FY25 revenue nudged down to $93–$96M (from $94–$98M), gross margin maintained at 83–85%, and management expects positive adjusted EBITDA and cash flow in each quarter; YE active sites revised to 25–28 (from 30) due to large-institution onboarding complexity.
• Near-term catalysts: NDRA/340B implementation (50% kit mix at discounted pricing from 7/1), Phase II CRC first patient randomized, and CHOPIN randomized Phase II PFS readout at ESMO in October that could inform IO-combination strategies and adoption narrative.

What Went Well and What Went Wrong

What Went Well

• Strong growth and profitability: revenue $24.16M (+210% YoY), net income $2.70M vs loss a year ago, adjusted EBITDA $9.82M, operating cash flow $7.3M; cash/investments $81.0M, no debt.
• Commercial execution: 3 new U.S. centers activated (now 20 active) with ~2 treatments/month/site; sales force expanded to 6 regions and “hit their stride” per CEO.
• Strategic access progress: NDRA/340B participation commenced 7/1, enhancing coverage/access; management expects long-term volume tailwinds despite near-term ASP headwinds; ~50% of kits at 340B prices thus far.

Quote: “This quarter marks the fifth consecutive quarter of site and HEPZATO volume growth… average treatments were approximately two per month per center”.

What Went Wrong

• Site activation pace slower than prior expectations: YE active centers revised to 25–28 (vs 30), reflecting complex onboarding at large academic centers (e.g., perfusion services gating).
• Anticipated NDRA/340B ASP headwind: Q3 average revenue per kit expected to be 10–15% lower than Q2; volume may offset over time but quantification uncertain.
• Higher OpEx trajectory: R&D up 37% QoQ in Q2, with further 40% QoQ increase in Q3 and 25–30% in Q4; SG&A elevated by commercial expansion and stock-based comp, pressuring near-term margins even as EBITDA stays positive.

Transcript

Speaker 8

Morning, ladies and gentlemen, and welcome to the Delcath Systems' second quarter 2025 earnings call. All participants will be in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star key and then zero on your telephone keypad. Please note that this event is being recorded. I will now hand you over to Delcath Systems General Counsel, Mr. David Hoffman. Please go ahead.

Speaker 1

Thank you, and welcome to Delcath Systems' second quarter 2025 earnings call. With me on the call are Gerard Michel, Chief Executive Officer, Sandra Pennell, Chief Financial Officer, Kevin Muir, General Manager, Interventional Oncology, Vojislav Vukovic, Chief Medical Officer, and Martha Rouke, Chief Operating Officer. I'd like to begin the call by reading the Safe Harbor Statement. This statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurance that such expectations will prove to have been correct.

Actual results may differ in a material manner from those expressed or implied in forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, those contained in subsequently filed quarterly reports on Form 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events, or circumstances.

Our press release with our second quarter 2025 results is available on our website under the Investors section and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website. Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Speaker 0

Thank you for joining us today to review our second quarter's financial results and business updates. We continue to make steady progress in building our U.S. business. This quarter marks the fifth consecutive quarter of site and HEPZATO KIT volume growth. Quarterly revenue reached $24.2 million, an increase of over 20% compared to the first quarter of 2025, reflecting continued strong adoption. U.S. sales of HEPZATO KIT were $22.5 million, while CHEMOSAT Hepatic Delivery System sales in Europe were $1.7 million. In the second quarter, we generated $7.3 million in positive cash from operations, net income of $2.7 million, and adjusted EBITDA of $9.8 million. Additionally, we ended the quarter with no debt and approximately $81 million in cash and investments. We finished the second quarter with 20 trading sites, and during the quarter, we activated Northwestern Memorial Hospital, University of Miami Hospital, and University of Virginia Medical Center.

Additionally, 10 centers are currently accepting referrals while progressing through the required training and approval process. Crucially, we are scaling intentionally, targeting world-class cancer centers, which could attract patients in both our first ultra-orphan market, as well as partner with us as we look to expand the use of HEPZATO KIT into our pipeline indications, where there are larger patient populations with high unmet need. Based on the current pace, 25 to 28 operational centers are expected by the end of the fourth quarter. Although this is fewer than previously projected, active centers continue to treat patients at a consistent rate. The episodic pace of site openings reflects the complexities of working with large institutions for a novel product, which treats an ultra-orphan population. I am confident that we will continue to open sites, and we have set a goal of 40 sites by the end of next year.

To support the expanding number of both target sites and actively treating sites, as we outlined on the last few calls, we recently expanded our U.S. sales force from four to six regions, each staffed with a Liver-Directed Therapy Manager, Oncology Manager, and a Clinical Specialist. During the second quarter, average treatments were approximately two per month per center, with expectations for similar averages for the remainder of the year. Due to recent slower U.S. site activations, full-year revenue guidance has been adjusted to $93 to $96 million. Forecasts for 2025 gross margins remain between 83% and 85%, with continued positive non-GAAP-adjusted EBITDA and positive cash flow for the rest of the year. The total HEPZATO KIT treatment volume in 2025 is projected to increase by over 175% versus 2024. We have proceeded with plans to enter into the National Drug Rebate Agreement, or NDRA, with the U.S.

Department of Health and Human Services. The NDRA enables Medicaid and Medicare coverage for outpatient drugs, while requiring manufacturers to provide rebates to state Medicaid programs according to statutory formulas. Entering into the NDRA requires participation in the 340B Drug Pricing Program, which enables eligible hospitals to purchase HEPZATO KIT at reduced prices. Participating in these programs should increase market access and aligns with Medicaid and Medicare coverage requirements. Since July 1, 2025, HEPZATO KIT has been sold at 340B prices to eligible facilities, with approximately 50% of kits distributed being sold at the discounted price. For HEPZATO KIT, both rebate and discounts are 23.1% of the published WAC price. Earlier projections had suggested a larger proportion of centers qualifying as disproportionate share hospitals or DISH hospitals, but the actual list varies quarterly, and some customers with multiple facilities are purchasing via non-DISH facilities.

Volume distribution under the 340B program is expected to remain at roughly 50% for the next few quarters. In the third quarter, the estimated net effect will be a 10% to 15% reduction from the second quarter average revenue per HEPZATO KIT. This will be largely or partially offset by ongoing growth in volume. Looking beyond uveal melanoma, we are investing in further research and development for HEPZATO, as we believe HEPZATO and its underlying hepatic delivery system platform hold significant potential to benefit a wide range of patients with liver cancer. As discussed on previous calls, preparations are underway to conduct company-sponsored trials in liver-dominant metastatic colorectal cancer and liver-dominant metastatic breast cancer, both of which allow us to approach large markets with clear unmet need.

Both Phase II trials for these indications have received FDA clearance, and the colorectal trial has received CTA authorization in Europe and the UK. As a reminder, both Phase II trials will evaluate the safety and efficacy of HEPZATO KIT in combination with the standard of care versus standard of care alone in patients receiving third-line treatment for metastatic CRC and second or third-line treatment for patients with liver-dominant HER2-negative metastatic breast cancer. Each trial will enroll approximately 90 patients across 20 to 30 sites in the U.S. and Europe. Both trials have a primary endpoint of hepatic progression-free survival. We anticipate patient dosing for the metastatic colorectal trial to begin within weeks, with the first patient having been randomized just yesterday, and enrollment for metastatic breast cancer to follow in the first quarter of 2026.

For metastatic colorectal, we expect the release of interim data as early as the second quarter of 2027, with an anticipated release of primary endpoint results in mid-2028, with overall survival data expected to follow in 2029. For our metastatic breast cancer trial, we anticipate interim data release as early as the fourth quarter of 2027, with an anticipated release of primary endpoint results in mid-2029, with overall survival data expected to follow in 2030. We continue to have advisory board meetings with oncology subspecialties to prioritize our next set of indications to pursue. There is strong interest in intrahepatic cholangiocarcinoma and cutaneous metastatic melanoma, among others. Another potential area of development includes combination or sequence with immunotherapy agents such as immune checkpoint inhibitors. Preclinical studies suggest a strong rationale for combining HEPZATO KIT with immune checkpoint inhibitors to improve efficacy for patients with liver metastases.

Upcoming readouts from the randomized Phase II SHOPAN trial are expected to inform the feasibilities of these combination approaches. We look forward to the presentation of these results at the ESMO conference in October 2025. I'm really thrilled with how the team is executing on the clinical front, and we are well positioned to approach some exciting new opportunities in a host of cancer indications where we can leverage our footprint of sites to reach more patients and have some real impact to patient outcomes. With that, I will now hand the call over to Sandra for a detailed financial review.

Speaker 7

Thank you, Gerard. Revenue from our sales of HEPZATO KIT was $22.5 million, and CHEMOSAT Hepatic Delivery System was $1.7 million for the second quarter of 2025, compared to just $6.6 million for HEPZATO KIT and $1.2 million for CHEMOSAT Hepatic Delivery System during the same period in 2024. The second quarter shows growth of over 20% over the first quarter of 2025 in both revenue and volume of kits sold. We recognize gross margins of 86% in the second quarter, compared to just 80% for the same period in the prior year. Research and development expenses for the quarter were $6.9 million, compared to $3.4 million for the same period in the prior year. Selling, general, and administrative expenses for the second quarter were $11.4 million, compared to $6.8 million for the same period in the previous year.

Our second quarter 2025 net income was $2.7 million, compared to a $13.7 million net loss in the second quarter of the previous year. Non-GAAP positive adjusted EBITDA for the second quarter was $9.8 million, compared to an adjusted EBITDA loss of $0.8 million for the second quarter of 2024. We ended the quarter with approximately $81 million in cash and investments, and quarterly positive operating cash flow of $7.3 million, compared to $2.2 million operating cash flow in the previous quarter. As of today, we have no outstanding debt obligations and no outstanding warrants. As a reminder, the exercise of Series F warrants resulted in $16.2 million of funding in 2025. The warrants were issued in May of 2020 as a component of a private placement, had an exercise price of $10 per share, and expired on May 5th. We expect to remain cash flow positive throughout 2025.

Thank you all for participating today. That concludes our prepared remarks, and I'd ask the operator to open the phone lines for questions and answers. Thank you.

Speaker 8

Thank you. We will now be conducting the question and answer session. If you'd like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star and then two to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Marie Talbot of BTIG. Please go ahead.

Good morning. Thanks for taking the questions and congrats on yet another good quarter. Wanted to start here with a question about the NDRA program and what you are seeing. I know it's only been one month since that was activated, but what you are seeing so far in terms of awareness from centers, any tailwinds to volume that you're starting to see with this increased access, and how this might be playing into the revised guidance you gave us. If there's any details on the cadence you'd like to see for the next two quarters, that would be helpful for us as well.

Speaker 0

Sure. Marie, good to hear from you. Probably a little premature to say whether or not there'll be any tailwinds. Prior to us participating in the NDRA, we often, I think, always got questions from sites as to whether or not sites that were DISH hospitals as to whether or not we participated, and they were generally a little disappointed when we said no. Now they're happy that we are. In terms of any breaks being removed, I think that'll play out over a number of quarters before we can sort that out. In terms of getting to 25 to 28 centers by the end of the year, the pace of that, which I think you were asking to, I think we can do about one to one and a half per month for the balance of the year to get to that number.

Okay. That's really helpful. I wanted to check, I think I recall that your sales team, you were going through an expansion. Just want a progress update on how that expansion has been going, how you found productivity, how that is helping with perhaps utilization at the centers.

It is completed. As you probably remember, it's six regions now. We have three professionals or customer-facing people on the commercial side in each of those regions. One, his job or her job is to be at every treatment, a Clinical Support Specialist. Another job is to open the sites and kind of manage the sites, Liver-Directed Therapy Manager. The last is an Oncology Manager, and they're more like a typical pharmaceutical oncology rep. They're all in place. Obviously, there's always a little bit of growth pains as you realign territories, hire new people. I think about as well as one could be expected, and I think that they've all hit their stride at this point.

Oh, very good to hear. Thanks for taking the questions.

Speaker 8

The next question comes from John Newman of Canaccord Genuity. Please go ahead.

Hi, team. Thanks for taking my question and also congrats on a good quarter. Gerard, I just had a question on the NDRA program as well. We get a lot of questions from investors here. Just curious, over the long term, if you could talk about perhaps the potential for volume to expand and sort of why 340B is actually attractive to these hospitals. I think people are kind of looking at the very short term, but I'm just curious if you could comment on sort of the long-term potential opportunity here.

Speaker 0

Sure. I'm not surprised investors are hungry for more detail because most companies, when they launch, are either in this or out of this. You rapidly understand kind of what the average value per unit is, factoring in the various discounts. For us, we kind of stepped into it midstream because of some changes in, let's just say, guidelines from CMS and enforcement discretion, etc. We kind of were forced into it all of a sudden. I think net effect, what that means is two things. One is based on how things are running right now, and you know we're not that far into it, a month and change. We think about half of our sites will take it, half of our volume will take advantage of this statutory discount.

The net effect of that is probably a 10% to 15% reduction between the second quarter and the third quarter in terms of, you know, value per kit sold. Offsetting that is the more difficult thing to quantify, and that is, hey, to whatever extent were certain hospitals saying, "Look, we are just not going to make enough to cover our costs in certain types of patients," and either that would maybe limit their excitement to joining it, you know, to working with us, or more likely, and although one would hope this doesn't happen, I think there's occasionally some screening out of patients who might be underinsured.

When hospitals look at this on a portfolio basis with this 340B NDRA program, for a portion of their business, those that participate, they're now making a much larger margin, and on a portfolio basis, the product becomes a bit more attractive to them. Will I ever be able to say, you know, how much more business did we get because of it? No. Am I fairly certain that there will be increased volume to some extent if we could run, you know, parallel universe experiments? Yes, but I'm reluctant to try to quantify that. I think it'll be meaningful, but it will take a bit of time, you know, to probably materialize. That's a very long-winded answer, General. I hope that's helpful.

No, it is. This is a bit of a complicated topic that we're not used to hearing much about, but we appreciate all the detail here. Thank you.

Speaker 8

The next question comes from Chase Nachtrab of Craig-Hallum. Please go ahead.

Good morning, everyone. This is Jake on for Chase. Thanks for taking the questions. Just regarding the NDRA, are you guys seeing any increased urgency to get centers up and running or hearing anything from centers since joining the program?

Speaker 0

No. I think the reason for that is, although that might, to the extent that any in an existing center that's accepting referrals or is trying to get to the point where they'll accept referrals, to the extent that was good for revenue integrity folks, and there's different names in every hospital for it, but let's use that term, to the extent that they were a little reluctant or wondering, you know, how thin would the margins be or, you know, can they cover their costs? It's a much easier conversation to have for those that have DISH-eligible facilities. They are one of, and I probably not exaggerate when I say up to a dozen different gating items to get this thing approved in hospitals.

I don't think anyone's pulling us forward because they're saying, "Hey, we're going to make a lot of money." I'm thankful for that because at the end of the day, with a cancer treatment, you don't want that to be a driver on either end of the equation. No, I wouldn't say I see increased urgency in terms of, "Geez, look at this. This is much more, much better." At the end of the day, what drives us forward are physicians interested in doing the right thing by their patients and hearing from other docs that they're seeing, you know, extraordinary results in some patients, and then they just need to get through a lot of bureaucratic gating items.

Thank you. That was helpful. If we could just turn to R&D for a second. Now that trials are starting to spin up, can you give us some thoughts on how we should be thinking about R&D? How does that ramp and when the trials are going to fully get going in terms of spend and what we should be modeling for?

Sure. Sandra, can you help out with that?

Speaker 7

Absolutely. R&D increased already in Q2 over Q1 by about 37%. This is fully loaded with the stock comp in there. We can expect probably another 40% in Q3 increase as we start to really ramp up in CRC and NBC, and probably another 25% to 30% increase in Q4 over Q3. Overall, from 2024, this will result in a full year, probably about a 140% increase. This does include a significant increase in stock comp from prior year. Probably makes up about 20% plus of the balance in R&D in 2025.

Great. Thank you.

Speaker 8

The next question comes from Sudhan Laganathan of Stephens. Please go ahead.

Hi. Good morning, Gerard, Sandra, and the Delcath team. Congrats on another strong quarter, and thank you for taking my questions. First, I wanted to ask on the SHOPAN readout from ESMO. At what capacity can you market or educate physicians with the outcomes of the SHOPAN trial expected at ESMO Congress 2025 in October? Will this data be something your MSLs will be able to talk to or your sales reps will be able to talk to when meeting with prospective or existing active sites?

Speaker 0

Yeah, that's a great question that we've discussed internally. At a minimum, the MSLs will be able to talk about it. Whether the reps can talk about it, I think they can certainly share the publication. In terms of detailing and saying, "You know, this is the new treatment paradigm. You should sequence in this following manner," that's probably verboten. I think in terms of sharing a publication, if the docs ask about it, that's perfectly fine. Also, in terms of putting in touch with our MSLs, that certainly will happen. It's kind of a slight gray area because it is on-label to use this just for two or six, however you want, and the SHOPAN protocol of initially two. We'll probably try to stay somewhat on the conservative side and have most of the detailed conversations occur with the MSLs.

Got it. Great. Secondly, if I could ask, I think if I heard correctly, you made a slight adjustment to the number of active sites you're anticipating by the end of the fourth quarter to be 25 to 28 versus the prior guidance of 30 by the end of the year. Since you're also mostly retaining your product sales guidance ranges, does the continued strength really come from the number of treatments per site per month being at two or higher still for the existing vacuum sites and even the ones that are potentially coming on between now and the end of the year?

Yeah. When we first issued guidance just a couple of months ago, I think it's important for me to kind of share, and I've talked to a lot of you one-on-one about this, why we did that, share why we decided to issue guidance. When we, quite frankly, quickly found out that we needed to participate in the 340B Drug Pricing Program and NDRA due to some rule guideline changes, we realized that it'd be very difficult for investors and analysts to kind of tease apart what the heck does that mean. Now we have another variable, the discount, but also how many sites are participating in the discount. We also knew our volume was ahead of what consensus was out there on the street.

We thought it'd be possible, probably really prudent, even though I didn't want to issue guidance until starting next year because of the difficulty in predicting site activations. We thought it was best to kind of put some bounds out there to invest in the community, given this new kind of variable out there. With that said, if you're asking why it didn't come down more, which I think, we tightened it a little bit and moved it down slightly, yeah, we're doing okay. We are slightly over two treatments per center, which is great. Some of the centers that are coming on board, we think, will be higher volume centers as well. That gives us a fair amount of confidence as well in just a modest adjustment in the guidance.

Gotcha. That's great. On the last point, I'm assuming most or all of the adjustment from the product revenue guidance changes is coming from HEPZATO KIT and not from CHEMOSAT, and just wanted to see if that's the correct assumption to make.

All right. Let's see. You asked, is most of the growth coming from HEPZATO KIT, not CHEMOSAT Hepatic Delivery System?

Hepzato changes the changes in the range for the product revenue guidance range. Is that primarily due to changes in HEPZATO KIT expectations or CHEMOSAT?

A slight change in CHEMOSAT expectations and a change, I think both. Now, CHEMOSAT is tough because the N in terms of, you know, treating centers that really contribute to revenue is fairly small. I think three or four centers probably account for 70% of the business. A bunch of docs being out because they're sick, which actually happened at one of the sites in Germany, can really swing it around. I think two-thirds of the change is probably from HEPZATO and a third, give or take, from CHEMOSAT.

Great. Thanks. Again, congrats on the great quarter.

Speaker 8

The next question comes from Bill Morgan of Clearstreet. Please go ahead.

Good morning and thanks. Just looking, it's kind of a multi-part question on treatment rates at sites. You're currently at around two per month per center, and you've indicated that'll be similar through year-end. Do you see that changing meaningfully in the currently activated centers beyond this year, either up or down? As you grow to a target of 40 by the end of next year, given those are probably not the first 20 most attractive sites to add, do you expect them to have a lower treatment per month per center? Thank you.

Speaker 0

Yeah. In terms of the last point, less attractive because it's the next 20, I'm not sure about that. They may have less of a book of business of uveal melanoma patients, but you know, part of what we're going to do is build referral networks to those centers. One of the dynamics that we are aware of and are working on plans to deal with is some centers, some of the heavy volume centers run out of capacity. We kind of have two things to do there. One is keep that in mind as we're building referral networks, and centers that we know don't have enough slots to treat, we'll try to adjust that referral pattern to other centers that are under capacity. A second dynamic is to try to see if we can actually get centers to increase either room time or train a second team.

In some centers, it's room time. In some centers, it's just the team that's available. I know one center was treating at a rate that required some of the team members to come in on their days off. I think it's a testament to what they think of the therapy that they're willing to do that, but that's probably not sustainable. We're trying to see what we can do about getting more people trained up. That's kind of the dynamic in the growth. Some centers reach a cap, and either we need to refer, I won't say refer around them, but refer to other centers to the extent we can do that, or try to help them build a case that they can expand capacity. If we are successful in that, then I do believe we'll start seeing increasing growth beyond two in terms of on an average basis.

Thank you.

Speaker 8

The next question comes from Il Jin of Leid Law & Co. Please go ahead.

Good morning, and thanks for taking the questions. Congrats on the top line this quarter. Just a few quick ones. The first one is in terms of the ESMO presentation, to your best knowledge, what kind of data will be presented? That is the first one.

Speaker 0

Okay. You're talking about the SHOPAN trial at ESMO?

Yeah.

Broken up.

Yes, yes.

Okay. All right. Vojislav, do you mind responding to that?

Sure. Thanks for the question. The SHOPAN trial, just to remind you, is comparing the two treatments. One arm is the CHP alone, HEPZATO KIT CHEMOSAT, and the other is the sequential use of CHEMOSAT with Epinevo. The primary endpoint of the study is one-year progression-free survival. Our understanding is that the analysis is underway, and it is the intention of the investigators to present the primary endpoint results along with safety and secondary efficacy results at the ESMO conference. Okay. Great. That's very helpful. One other question here is that in terms of you going to reduce the center to be activated from 30 to 25, maybe 25 to 28, is there a specific reason for doing that? We just like to know a little bit of colors on that as well.

Sure. I'll say there's definitely not one specific reason. If it really, I wish there was. It would be easier to deal with, perhaps, but it really has to do with the complexity of activating these very large, most of them large academic centers. Kevin, do you mind just adding a little bit of color as to what's going on and just the center and the field force?

Speaker 6

Sure. I will. As Gerard mentioned in his comments, we're scaling intentionally, and our focus is activating the right site. That brings its own layer of complexity in the process. This HEPZATO KIT procedure sits outside traditional care pathways and conventional team structures. Their flexibility is crucial for us to open the sites. One example is perfusion. Perfusion is often the final hurdle before launch. It involves credentialing, scheduling integration, and alignment with surgical workflows. It's also one of our most crucial onboarding steps. Securing perfusion services is essential to procedural success, but it's not universally available. What we're having to do is go in to a number of these sites and contract with external providers of perfusion services. We've had a recent wave of success in signing some of these contracts. What we're seeing is kind of an alignment across the board with these hospitals.

I would expect that even though we dropped the guidance on the total number, I think we'll see a lot of the sites that we have been trying to get in that have significant patient volume opening in the near future.

Maybe just follow up on this way. In terms of this, because you mentioned securing the perfusion services, do you anticipate overall this will improve going forward? Make it less of a hurdle, for example, in the next year? Thanks.

Speaker 0

Yeah. I think it will help. I do, I will say, as Gerard mentioned, each one of these sites is kind of a unique beast. There's not one specific thing that holds up an account opening. Definitely, providing and securing perfusion services has been identified, and it's one of the things that we are tackling earlier in the site activation process now than we have been in the past.

Okay, thanks. Thanks a lot. Go ahead. I'm sorry.

I'm just going to have a little color on that. It's very unusual for a large academic center to say, "Sure. We're happy to work with you to contract with some other third party so we can have your product." In most cases, they tell you to just go, you know, pound sand. This is a testament to the fact that, you know, the docs want the product, and they're championing it for us and going through this issue. This really is, and I know investors and analysts have probably heard me, tired of hearing me say this, this is a very, very unique beast. It doesn't fit into so many different pathways, team structures, etc. The fact that we are getting it into these sites should tell you that there's something here. There's something real. It's been difficult to predict the pace, but we are getting in.

It just, you know, fits and starts in terms of just the various contracts and bureaucracies, etc., that we need to go through.

Okay. Great. I appreciate the detailed explanation. Again, congrats on the quarter.

Speaker 8

Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, you're welcome to press star and then one to place yourself in the question queue. The next question comes from Swayam Pacula of H.C. Wainwright. Please go ahead.

Thank you. This is OK from H.C. Wainwright. Good morning, Gerard and Sandra. Most of my questions have been asked. I just have one question. After working with different centers in terms of getting them trained and taking patients and going through the procedure, are you folks, do you have a system at this point where you think you can get through this onboarding and training process a little bit sooner than previously? The second part of the question is, now that you are on the 340B Drug Pricing Program, do you think some of the current centers could easily go beyond the average two treatments per month, to say closer to three by the end of this year?

Speaker 0

Yeah, let me start with the second question. I don't think that would be like a 50% increase in volume. I don't think we're going to see that through the NDRA, through, you know, the 340B Drug Pricing Program. I do think that it will lead to, on a portfolio basis, if hospitals realize, "Hey, you know, we are covering our costs," and then some, you know, it's a prudent thing to do for the institution not to put the brakes on occasionally. I think that'll go away. It'll be very hard for us to ever quantify that. I'm reluctant to do that. I'll say it certainly isn't going to hurt. Whether or not it's well over, you know, the revenue we lose per kit, hard to say. It may very well be.

I think what's good about it is it removes a conversation that perhaps was occurring in some of the centers. We're not privy to these conversations and it puts the bulk of the decision as to whether to use the product or not basically on how good will it be for the patient. That's a win. In terms of, "Hey, have you, you know, have we pulled together, you know, is there a process now, a template that we can go to the next set and get this done faster?" There certainly are some learnings, and I think Kevin just identified one. Perfusion, we found not in all the centers, but in a meaningful percentage. I don't know off the top of my head whether this, let's say, a third or so, perfusion became gating at the end. Kevin's team is getting ahead of that now.

Another thing that Kevin is going to start implementing is in some centers where it's more IR-driven and the oncologist is saying, "Sure," but isn't necessarily, you know, making the phone calls and walking the halls to try to get through some of these gating items. They're just kind of like, "Sure, I'll do it. I'll be part of it." Kevin is introducing, what I'll call oncology practice. He's going to make a point of trying to get oncologists at other sites that have seen, you know, very strong responses in their patients, try to get them to kind of proctor the oncologist as to what you can expect to see. Frankly, for the subset of sites where the oncologist isn't leading it, the IR is, so we can get both MDs to lead the charge. We're trying to tweak the process.

I'm reluctant to say, "Yeah, we're going to be 20% faster." It's obvious to be a little slight slowdown all of a sudden, and I didn't expect that. It's because each of these institutions is very different.

Okay. The last question for me is, now that you have a clinical program starting in Europe for the additional indication, do you see that helping out on the CHEMOSAT sales at all by any means, not only for the rest of the year, but in 2026? Are these two independent things that really should not or may not benefit the sales of CHEMOSAT?

Longer term, it will benefit. Europe was primarily driven by a small number of sites in Germany and one or two sites in the UK where they essentially, on their own, organically, the product was approved as a device, used it, became believers, and championed it within their own institutions. We had very little, very few clinical sites and participation in Italy, Spain, France, and most of those were IRs. To get a new cancer therapy utilized, you really need the oncologists on board. IRs are helpful, but to a large extent, and I hope they're not listening or hope they don't get angry with me, but they're subcontractors to the oncologists. Now, opening clinical sites for colorectal cancer, breast cancer, that will allow us to open sites in countries where we either have no sites, Italy, France, Spain, or currently have sites, but we can expand it.

Once we have those sites up and running in terms of, for the clinical trial purpose, and that's a huge, huge hurdle. It takes a lot of activation energy, some reason to open a site from the site's perspective. Once we have a site open, it'll be much, much easier to start talking to docs, mostly dermal oncologists, what they're called in Europe. It'll be much easier to have conversations with them and say, "Hey, look, at your center, you have this team that's doing this procedure. Why don't you steer some patients to that because the team's already trained?" Yes. The short answer to your question is yes, it will help CHEMOSAT sales, but it will take a period, of quarters to years to really make a material difference.

Thank you. Thank you, Gerard, for taking my questions.

Speaker 8

Thank you. Ladies and gentlemen, with no further questions in the question queue, this concludes the question and answer session. Thank you for attending, and you may now disconnect your lines.