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CERS: When FDA Approvals get markets excited without any valid reason for it

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Nice Headlines featuring FDA Approvals for CERSs INTERCEPT

Blood System (IBS) causing investors to lose sight of fundamentals.

- See you back to reality in 2015 once the XMAS insanity is over meaning

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CRES is a biomedical products company focused on developing and commercializing the INTERCEPT

Blood System to enhance blood safety. INTERCEPT Blood System has been demonstrated to inactivate a

broad range of viruses, bacteria and parasites that may be present in donated blood.

The company has worldwide rights for our INTERCEPT Blood System for three blood components: plasma,

platelets, and red blood cells.

Product or Product Candidate Under

Development Product or Development Status

INTERCEPT BloodSystemPlatelets

Commercialized in a number of countries in Europe, the CIS, the MiddleEast and selected countries in other regions around the world

United States: Phase III clinical trials completed; PMA filed; FDAsubstantive review of filing in process

INTERCEPT Blood

SystemPlasma

Commercialized in a number of countries in Europe, the CIS, the Middle

East and selected countries in other regions around the world United States: Approved on December 17, 2014

INTERCEPT BloodSystemRed Blood Cells

Phase I clinical trial completed in 2010; Phase III trials for acute anemiaand, separately, chronic anemia ongoing in Europe

United States: Phase II recovery and lifespan study in process and invitrostudies planned

Last week (December 17th, 2014), CERS announced that theFDA approved INTERCEPT Blood System

for PLASMAin the U.S. resulting in an increase of $85m (22.59%) in the Value of the Company. On Friday

the news of theFDA approval of INTERCEPT Blood System for PLATELETSsent the Price up another

10.39% at Open.

In 2013, CERS quantified the Global Market Potential for INTERCEPT Blood System as follows (Link):

DESPITE THE RECENT FDA APPROVAL, CRES WILL CONTINUE TO BE A LOSS GENERATING COMPANY FOR

THE FORSEABLE FUTURE
http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427500.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427500.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427500.htmhttp://www.cerus.com/files/2012_Cerus_Corp_Annual_Report.PDFhttp://www.cerus.com/files/2012_Cerus_Corp_Annual_Report.PDFhttp://www.cerus.com/files/2012_Cerus_Corp_Annual_Report.PDFhttp://www.cerus.com/files/2012_Cerus_Corp_Annual_Report.PDFhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427500.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htm

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Over the Past Decade, CERS has been commercializing its Products (IBS for Platelets + Plasma) in Europe,

CIS & ME, serving a $475m Potential Market (as defined/specified by the Company). Yet, Sales have been

Stagnant over the Last 3 years not even crossing the 10% Market Penetration Threshold.

01/29/2007, whenCERUS reported IBS receiving first approval in Germanyand Claes Glassell, president

and CEO commented: "This is a very important step for Cerus in commercializing the INTERCEPT blood

system in Germany, the largest national market in Europe."

If past Product Introduction Dynamics are representative of the Future, it looks like FDA approval(Approval 1: Dec. 17) of IBS for Plasma could results in $21m p.a. Additional Revenue for CERS (3-4

Years from now at a 10% Penetration rate, similar to the one achieved in Europe).

FDA green light for IBS for Platelets (Approval 2: Dec 19) could result in $24.5m p.a. additional revenue

for CERS (3-4 years from now at a 10% Penetration rate, similar to the one achieved in Europe).

It follows that the 2 FDA Approvals that Caused PPS to spike by as much at 45% will results in

Real/Likely Revenue increase for CERS being at < $50m p.a.($21m + $24.5m = $45.5m)

Of course, the bull thesis will be that IBS is the first/only Pathogen Reduction system approved in the

U.S.(by the FDA).

What people are probably missing here, is that the Approval of CERS IBS is a Paradigma shift within the

FDA and its way to look at PRT usage. This will likely results in other CERSs IBS competing Systems to

be approved for the U.S. Markets too (such as Mirasol from Terumo BCTseelink). The following article

gives an accurate overview on Pathogen Inactivation/Reduction Methods in Blood Products-Current

Yet, as you can see from the Table Above, as of 2013 Significant Product Revenue from Germany

(LARGETST NATIONAL MARKET IN EUROPE, according to CERS) is still Missing.
http://www.cerus.com/Investors/Press-Releases/Press-Release-Details/2007/Cerus-INTERCEPT-Blood-System-Receives-First-Approval-in-Germany/default.aspxhttp://www.cerus.com/Investors/Press-Releases/Press-Release-Details/2007/Cerus-INTERCEPT-Blood-System-Receives-First-Approval-in-Germany/default.aspxhttp://www.cerus.com/Investors/Press-Releases/Press-Release-Details/2007/Cerus-INTERCEPT-Blood-System-Receives-First-Approval-in-Germany/default.aspxhttp://www.aahi.org.ar/americas-blood-centers/ABC_Newsletter_2012_16.pdfhttp://www.aahi.org.ar/americas-blood-centers/ABC_Newsletter_2012_16.pdfhttp://www.aahi.org.ar/americas-blood-centers/ABC_Newsletter_2012_16.pdfhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://www.aahi.org.ar/americas-blood-centers/ABC_Newsletter_2012_16.pdfhttp://www.cerus.com/Investors/Press-Releases/Press-Release-Details/2007/Cerus-INTERCEPT-Blood-System-Receives-First-Approval-in-Germany/default.aspx

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Approaches and Perspectives. In the EU/CIS/MI Market CERS did fail to even reach a 10% penetration of

the Market Potential it discloses/ed to investors.

ANY REASON TO THINK THIS TIME IS / WILL BE DIFFERENT? Dont think so!

Even in the FDA Press Release (Approval 1:plasma on Dec. 16), Karen Midthun, M.D., director of theFDAs Center for Biologics Evaluation and Research implied that IBS is not UNIQUE!

The approval of devices li ke the I ntercept Bl ood System all ows blood establi shments to prepare plasma

that carr ies a lower ri sk of transmitt ing inf ectious pathogens through transfusion, said Karen Midthun.

Markets probably mislead by the FDA Headline: FDA approves firstpathogen reduction systemtotreat plasma (Link)

FirstMakes it sound like there is not viable alternative to treat plasma. Yet First only referred

to System. This does not mean that till before IBS approval Phatogen Reductions Methods couldno have been applied in the U.S.

The S/D{PI/PR by Solvent/Detergent (S/D)}treatment was first licensed by the US FDA in 1985 for use in

the manufacture of an anti-hemophilic factor (AHF) concentrate [3], and then applied in coagulation

factors and pooled plasma (Link)

One Disadvantage of the S/D Method is that: S/D cant inactivate non-enveloped virus, such as hepatitis

A virus (HAV) and parvovirus B19

How unfortunate IBS cant inactivate non-enveloped viruses either!

Cerus Corp. 2010 annual reportPage 14.
http://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://www.cerus.com/files/doc_financials/Cerus_2010_AR.PDFhttp://www.cerus.com/files/doc_financials/Cerus_2010_AR.PDFhttp://www.cerus.com/files/doc_financials/Cerus_2010_AR.PDFhttp://www.cerus.com/files/doc_financials/Cerus_2010_AR.PDFhttp://www.cerus.com/files/doc_financials/Cerus_2010_AR.PDFhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdfhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427111.htmhttp://omicsonline.org/last-line-to-secure-transfusion-safety-jaa.1000077.pdf

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Assumptions:

1.

Similar Penetrations pattern in U.S. as the one observed in EU,CIS and ME

2.

EU,CIS,ME 9.5% growth going forward (generousgiven market has already been penetrated)

3.

57% COGS

4.

5% increase in Research and Development Expenses

5.

Decline in S&G Expenses as % of Revenue (from 75.5% to 50%).

The bull thesis for Retail Investors:

The bull thesis Pushing CERS higher right now is best summarized by the following Seeking alpha

Article (Article here)released after Approval 1 (Dec 17):

Bottom li ne

Due to the approval of INTERCEPT in the U.S., Cerus is a strong buy. The shares will rise further

following the upcoming approval in 2015. The opening up of the U.S. markets will be a major revenueboost for the company. Any news in regard to U.S. distribution or collaboration can work as a positive

catalyst for the shares.

The opening of the U.S. markets will be a major revenue boost? Funny that in the article the market

potential has never been discussed. As shown previously U.S. Market is smaller than E.U. market

DESPITE FDA APPROVAL of IBS for PLASMA and Potential APPROVAL for IBS for Platelets

CERS WONT BE ABLE TO BREAK EVEN, NOR GENERATING PROFITS FROM

OPERATIONS
http://seekingalpha.com/article/2767415-cerus-soaring-on-fda-approval-of-intercepthttp://seekingalpha.com/article/2767415-cerus-soaring-on-fda-approval-of-intercepthttp://seekingalpha.com/article/2767415-cerus-soaring-on-fda-approval-of-intercepthttp://seekingalpha.com/article/2767415-cerus-soaring-on-fda-approval-of-intercept

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(per company filings) a larger EU market where CERS has even failed to reach a 10% penetration

rate after almost a Decade of Commercialization!

News in regard to U.S. distribution or collaboration? Yeah lets start to sell some hope why

not after all hope is what justify Valuation of Bio Companies ahead of Commercialization. Sounfortunate that at CERS we have 10 years of Commercialization with not much success in Europe

(or at least not enough success to justify current valuationsor to report any operating profits).

As stated before, CERS has gained almost 50% for the wrong reasons! The two FDA approvals for IBS

will likely never allow the company to post green numbers. Maybe If CERS expends to ASIA and

ROW it might Break Even but that a big IF especially by looking at the Companys

performance in the Market it has entered in the Past!

http://www.interceptbloodsystem.com/intercept-in-use/overview

10 Years in the business As of today Distributing the Product in plenty of Countries world -

wide and yet Just $36.1m in revenue and losing about $30m a year?

73% of CERS market potential is in the IBS for Red Cells which has however yet to be

approved and it does not look like about to happen anytime soon! Filing for CE Mark approval

anticipated in the second half of 2016 (Link)
http://www.interceptbloodsystem.com/intercept-in-use/overviewhttp://www.interceptbloodsystem.com/intercept-in-use/overviewhttp://www.marketwatch.com/story/cerus-reports-eu-phase-3-clinical-trial-of-intercept-red-blood-cells-met-primary-endpoint-2015-01-05http://www.marketwatch.com/story/cerus-reports-eu-phase-3-clinical-trial-of-intercept-red-blood-cells-met-primary-endpoint-2015-01-05http://www.marketwatch.com/story/cerus-reports-eu-phase-3-clinical-trial-of-intercept-red-blood-cells-met-primary-endpoint-2015-01-05http://www.marketwatch.com/story/cerus-reports-eu-phase-3-clinical-trial-of-intercept-red-blood-cells-met-primary-endpoint-2015-01-05http://www.interceptbloodsystem.com/intercept-in-use/overview

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Investors in CERS can be sure only of 1Thing:

Dilution Look at the Evolution of Number of Shares outstanding over the past 17 years.

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