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Cytosorbents Corp (CTSO) Q4 2018 Earnings Conference Call Transcript

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Cytosorbents Corp  (NASDAQ: CTSO)
Q4 2018 Earnings Conference Call
March 07, 2019, 4:45 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the CytoSorbents 2018 Financial and Operating Results Conference call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the Company's request. At this time, I'd like to turn the call over to our moderator, Jeremy Feffer. Please go ahead, sir.

Jeremy Feffer -- Investor Relations

Thank you, Roy and good afternoon. Welcome to CytoSorbents 2018 Financial and Operating Results Conference Call. Joining me today from the Company are Dr. Phillip Chan, Chief Executive Officer and President; Vincent Capponi, Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Dr. Eric Mortensen, Chief Medical Officer; Dr. Christian Steiner, Senior Vice President of Sales and Marketing from Germany; and Chris Cramer, Vice President of Business Development.

Before I turn the call over to Dr. Chan. I'd like to remind listeners that during the call management's prepared remarks may contain forward-looking statements which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today.

Therefore, the Company claims protection under Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today and therefore we refer you to a more detailed discussion of these risks and uncertainties in the Company's filings with the SEC. Any projections as to the company's future performance represented by management include estimates today as of March 7th, 2018 and we assume no obligation to update these projections in the future as market conditions change.

During today's call, we will have an overview presentation covering the operating and financial highlights for 2018 by Dr. Chan and Ms. Bloch. Following that presentation, we will open the line to your questions during the live Q&A session with the rest of the management team. At this time, it's my pleasure to turn the call over to Dr. Phillip Chan. Phil?

Phillip P. Chan -- Chief Executive Officer and President

Thank you very much, Jeremy, and good afternoon everyone. Among the highlights from our earnings press release earlier today, we are pleased to report that we achieved greater than 56,000 CytoSorb treatments delivered cumulatively, up from 35,000 a year ago. We also recorded annual total revenue of $22.5 million and product sales of $20.3 million with a mix of strong direct and distributor and partner activity in a total of 53 countries. We've increased that number to 55 with the addition of Mexico and South Korea, with our partner Fresenius Medical Care just recently.

We also achieved blended product gross margins of 74% for 2018, up 300 basis points from 71% in 2017. These blended gross margins are expected to rise to greater than 80% on a quarterly basis later this year propelled by the launch of our new manufacturing facility in June of 2018. We are well capitalized with a healthy cash balance of $22.4 million at the end of 2018, providing sufficient working capital into 2020. Amongst the various highlights, we were cited by the Deloitte 2018 Fast 500 as one of the fastest growing companies in North America for the second year in a row. And again we were added to the Russell 2000 Small Cap and Russell 3000 Indexes.

In terms of an update of our clinical trials. Our U.S. REFRESH II pivotal trial remains on track. This is a 400-patient randomized controlled trial, multi-center study, targeting the reduction of post-operative acute kidney injury using CytoSorb during complex cardiac surgery. The trial has now enrolled 56 patients with the recent increased to 21 initiated clinical trial sites with another eight undergoing start-up activities. We are targeting 200 patients enrolled total in the next 12 months and an interim analysis for safety and futility shortly thereafter.

(inaudible) endocarditis investigator-initiated trial funded by the German government is also making very good progress. This is a 250-patient randomized controlled trial evaluating the safety and efficacy of CytoSorb to improve organ dysfunction when used interoperatively during valve replacement for valve -- for infective endocarditis. Recently the Scientific Advisory Board and Data Safety Monitoring Board recommended continuation of the trial following an interim analysis on the first 50 patients, focused on inflammatory mediators, including cytokines. This trial recently passed the midway point with 130 patients enrolled at 13 centers.

And finally, the HemoDefend pivotal trial is a pivotal trial evaluating a point-of-care filter that is designed to remove non-infectious contaminants from transfused packed red blood cells. This pivotal trial has been delayed due to the sale and loss of key technical personnel at our main part supplier. However, we are working diligently with the new team at the supplier to reprioritize our project and we'll update investors on the timing of this trial soon.

With that I'd like to turn the call over to Kathy for our financial overview. Kathy?

Kathleen Bloch -- Chief Financial Officer

Well, thank you, Phil, and good afternoon everyone. For today's call, I'll provide an update regarding our full year and fourth quarter 2018 financial results including product sales progress. And in addition, I'll provide an update around our working capital and cash runway. So starting with Q4 comparative revenue results, CytoSorb's product sales for Q4 2018 were approximately $5.5 million, which represents a 27% increase over product sales of approximately $4.3 million for Q4 of 2017.

This increase was driven by an increase in direct sales from both new customers and repeat orders from existing customers, along with an increase in distributor sales. The decline in the average euro to dollar exchange rate had a negative impact of approximately $189,000 on Q4 2018 sales. Total revenues, which includes product sales and grant revenue was approximately $6.1 million for Q4 2018, as compared to approximately $4.6 million for Q4 2017 an increase of approximately 31%.

Q4 2018 gross profit grew from approximately $4 million, an increase of approximately 18% or roughly $600,000 over gross profit of approximately $3.4 million for Q4, 2017. And our gross profit margins on product sales were 75% for Q4 2018, which is in fact the highest quarterly growth gross profit margin on product sales in our history. This compares to 72% for the fourth quarter of 2017 and this is primarily as a result of the manufacturing efficiencies that were achieved at our new production facility.

And we'll look at our comparative annual revenue results. Product sales for 2018 were approximately $20.3 million, a 51% increase over product sales of $13.4 million for 2017. Both direct and distributor sales increases were the major contributors to our year-over-year product revenue growth. Also approximately $792,000 of this growth in product sales was due to an increase in the average euro to U.S. dollar exchange rate for 2018 versus 2017.

Our grant revenue was approximately $2.3 million for 2018, which is an increase of 27% over grant revenue of $1.8 million for 2017 and our total revenues including product sales and grant revenue were approximately $22.5 million for 2018, as compared to total revenue of $15.2 million for 2017, an increase of approximately 49%. Our gross profit was approximately $15 million, an increase of $5.4 million or 56% over gross profit of $9.6 million in 2017. And our overall gross profit margins on product sales for the year were approximately 74% as compared to 71% for 2017. As I mentioned, this is as a result of the production efficiencies that are being achieved.

Next, we'll look at our quarter-over-quarter product sales, Q4 2018 product sales of $5.5 million were a new record in quarterly product sales. And as I mentioned earlier, the fourth quarter 2018 reported sales would have been even higher, if not for a negative impact from the decline in the average euro to dollar exchange rate. That being said, our track record of 26 consecutive quarters of year-over-year sales increases continue. Next, let's look at our trailing 12 months products sales, which we have always said we believe provides the best representation of our overall sales growth. Note that over the past three years, the Company has achieved a 71% compound annual growth rate. And overall, as you can see when you look at the chart annual product sales exhibits a very strong growth trajectory and we expect continuation of this trend into the future.

I also want to say a few words about the achievement of operating breakeven on a quarterly basis, which we have defined as operating results excluding non-cash expenses, and clinical trial costs. And in fact, we came very close last year, with a couple of quarters missing by only a few hundred thousand dollars. And at the point, the reason that we're always talking about operating breakeven was that we wanted to demonstrate just how profitable our business could be at a relatively low revenue number.

In Q4 2018, however, we began to shift to a more aggressive growth mode because we believe with faster top line growth and high profit margins we are experiencing, which are expected to further improve in 2019. We can expect improvements in operating results and increased generation of cash. One such example of this investment strategy was recent expansion of our direct sales efforts from five to 10 countries with the addition of the direct sales territories of Poland, the Nordics and the Netherlands. Please be assured, however, that we will continue to manage our spend in a very responsible and deliberate manner.

And then finally, turning to working capital and our cap table. As of the end of 2018, we remain very well capitalized with approximately $22.4 million in cash, which we believe provides a solid foundation for the Company. During 2018, we were able to generate capital through the use of our, the aftermarket equity facility with Cantor Fitzgerald. We sold approximately 1.5 million shares at an average sales price of $9.61 with net proceeds generated of approximately $14.1 million. The ATM does provide an efficient and cost effective way for us to raise funds for the Company.

We believe that this existing cash runway will allow us to meet our operating and clinical needs into 2020. And just briefly on our capital structure as of December 31st, 2018, we have approximately 36 million common shares on a fully diluted basis. And that concludes my report. So I'd like to turn things back to Phil at this time. Phil?

Phillip P. Chan -- Chief Executive Officer and President

Thank you very much, Kathy. Historically, we have not given specific financial guidance on quarterly results until the quarter has been completed. However, in the short-term, we expect that Q1 2019 product sales will exceed Q1 2018 product sales. And in 2019,we expect to achieve blended product gross margins of great -- of 80% on a quarterly basis. Longer term, we are targeting significant and sustained sales growth and GAAP profitability. As we continue to see the massive unmet medical needs in critical care and cardiac surgery. We strongly believe that we are in the right place with the right therapy at the right time to make it happen. And we appreciate your continued support.

That concludes our current prepared remarks and I would now like to open it up for a live Q&A session.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator instructions) Our first question comes from the line of Josh Jennings with Cowen & Company. Please proceed.

Joshua Jennings -- Cowen & Company -- Analyst

Hi, good afternoon and congratulations on -- on the 2018 results. Quite a year. I hope to start off -- thanks for the guidance for 2019 on the gross margin line and I was just hoping to better understand where gross margins can ultimately get to, 80% is the target for 2019. How should we think about the longer-term gross margin trajectory?

Phillip P. Chan -- Chief Executive Officer and President

Sure. Well, thank you, Josh. And that 80% is actually a blended gross margin between higher margin direct sales and lower margin distributor and partner sales. And that implies, that the direct gross margin is actually significantly higher than 80%. But with that said, let me turn it over to Vince and Kathy to perhaps give a little bit more color on, why we feel confident about achieving this objective this year and also what are some of the levers that can be pushed to be able to drive us potentially even higher. Vince? Vince, you may be on mute.

Vincent Capponi -- Chief Operating Officer

Sorry about that. Hi, Josh. So, we believe we can exceed the 80% gross margin. And there's a couple of things that will factor into that. Obviously, it's product mix as Phil mentioned, the mix between direct and distributor sales. But in addition to that is also as we go to additional scale, going even beyond where we are now, will gain even further efficiencies. So it can go -- I would say, significantly higher from where it is now, but we really need to go to the next scale to drive that or drive more direct sales.

Joshua Jennings -- Cowen & Company -- Analyst

Thanks.

Phillip P. Chan -- Chief Executive Officer and President

That helps?

Joshua Jennings -- Cowen & Company -- Analyst

It does and maybe just a follow-up, Phil. Thinking about, I guess the update on the Switzerland code in the value assignment (ph) process, have you seen any impact there yet or how are you thinking about the impact in 2019? And then also similar question just on earlier in 2018, the expansion of the EU label to include reductions in of bilirubin, myoglobin for acute (ph) liver disease and severe trauma. Any impact you've seen or how should we think about going into -- heading into '19 with that label expansion?

Phillip P. Chan -- Chief Executive Officer and President

Yeah, so for the Switzerland procedural code, just like the German code, we are waiting for reimbursement assignment. So our value to be dedicated to that procedural code, that can take anywhere from six to 12 months to obtain, and we know that's currently in an active process, right now. So when we know, we'll definitely let investors know when that hits. So the impact on 2019 financials is currently unclear. That being said, sales continue in Switzerland, even without that reimbursement designation, just have to see how 2019 turns out.

In terms of the label expansion that included the removal of bilirubin as well as the reduction in myoglobin for the treatment of acute liver disease and severe trauma. The value of having this particular label expansion is really on reimbursement and that being said, we have seen a lot of interest in the use of CytoSorb as the next generation liver dialysis therapy, unlike existing liver dialysis therapies that exists on the market today that typically just remove bilirubin and bile acids and some other liver toxins.

CytoSorb is very unique because it not only removes those, but it also removes cytokines and other inflammatory mediators that are often the root causes of acute on chronic liver disease, these acute exacerbations that chronic liver disease patients often run into during the course of their illness. And so in terms of the impact on 2019 sales, it's too soon to say, but what we do know is that there is a lot of interest -- a lot of people looking to use this in substitution of other types of dialysis therapies, but we'll hopefully have a little bit more visibility on that later this year.

Joshua Jennings -- Cowen & Company -- Analyst

Thanks for that. And my last question and congrats on the progress enrolled in REFRESH II. I wanted to ask about the, remove trial, could those results get you an indication in Europe and then also maybe if you could just talk to us about, how you're thinking about the endocarditis indication and just sizing up the potential opportunity? Thanks a lot for taking all the questions.

Phillip P. Chan -- Chief Executive Officer and President

Absolutely. Well, I think, in Europe, we are already approved to actually treat patients undergoing cardiac surgery as well as endocarditis because of our broad label, which is -- our technology is actually a tool to remove cytokines. A cytokines absorber for use in any situation where cytokines are elevated. And so currently today, CytoSorb is being used on label for the -- during open-heart surgery for infective endocarditis, again on label. So that being said, what we expect out of the removed trial, if it is successful is just to be -- just to drive really usage of standard of care in these types of surgeries. And as we've discussed a number of times before, endocarditis surgery and valve replacement surgery is very complex, has a high expected mortality of somewhere on the order of 15% to 20% and is associated with a host of problems, including hemodynamic instability during the procedure, and after the procedure and a host of other adverse events that can often be fatal. And so with the blooming opioid crisis, that this issue has gotten much more relevant. In the United States, the incidence of infective endocarditis has historically won on the order of 10,000 to 15,000 cases a year.

However, with the opioid crisis, it's really being viewed as a growing epidemic with many major hospital centers doing 100 to 200 of these valve replacement endocarditis surgical procedures -- valve replacement surgical procedures every year. And it's only becoming more and more of a problem. In fact, the New York Times did an article on this exact problem of infective endocarditis and the recidivism that often occurs in patients who get one surgery for endocarditis, but then continue injecting IV drugs and wind up getting a second infection on a prosthetic heart valve, which were the mortality is even higher than for native valve and the estimate that the cost per case is approximately $150,000 per case. So using a product that is several thousand dollars to try to reduce a lot of the complications of this illness could well be worth it. And for that reason, we believe that it can become, if the trial is successful and if we have other successes and other studies that are ongoing, we believe that it can become standard of care relatively quickly.

Joshua Jennings -- Cowen & Company -- Analyst

Okay, thanks again, and thanks for the clarification of the endocarditis being on label.

Phillip P. Chan -- Chief Executive Officer and President

Thank you.

Vincent Capponi -- Chief Operating Officer

Thanks Josh.

Operator

Thank you. Our next question comes from the line of Jason McCarthy with Maxim Group. Please proceed.

Jason McCarthy -- Maxim Group -- Analyst

Hey guys, thanks for taking the question. So related to the Fresenius collaboration expansion, I'd like to see, if you could provide some more clarity on the timelines for launch in those countries. And then also what kind of market opportunity those 2% given the large combined population of over 180 million?

Phillip P. Chan -- Chief Executive Officer and President

Thanks, Jason. Chris, would you like to take this one.

Christopher Cramer -- Vice President of Business Development

Yeah, sure. Thanks, Phil. Hi, Jason, this is Chris Cramer. Thanks for the question. For the first question about market clearance. I think that you know each country -- I think you're referring to Mexico and Korea -- South Korea, each country has it's own -- OK -- each country has its own health authority processing timelines for registration and currently our regulatory experts are reviewing their requirements and we started to compile the registration dossier in collaboration with the FMC regulatory teams and the other hand, the review time by the health authorities can be variable, but we expect to have more feedback after the submission of these dossiers and I think once we have the feedback from the health authorities will be sure to pass it along to everyone. So I think that's in process as we speak.

As far as the opportunity, Korea and Mexico are large and strategically important markets for CytoSorb and together they represent about 181 million people, with about 129 million in Mexico and 52 million in Korea, and in each country, there is a large unmet burden of disease, hundreds of thousands of lives are lost from hyper-inflammatory conditions due to lack of effective therapies each year in both of these countries. As such, we believe it is a critical role for CytoSorb. In particular, we see a growing demand for CRT treatments for acute kidney injury and cytokine removal in acute care.

On top of that FMC has a very strong and motivated commercial organization in both countries. The partnership itself is fully backed by senior leadership at the highest levels in both the FMC Mexico and FMC Korea organization. And this ensures that the CytoSorb sales and marketing efforts are properly resourced and supported. FMC has a strong commercial presence and organization both countries with sales. Marketing and medical affairs resources introduce new therapies and we have assigned dedicated international sales resources to support the market launches. I think we're very confident following market clearance, will be strong. Market launch coming from both FMC sales teams in both countries.

Jason McCarthy -- Maxim Group -- Analyst

And yes, thank you. And then just as a quick follow-up. I'd like to see, if you guys could talk about some of the regulatory pathway new development strategy for expanding the use cases for CytoSorb. I know you guys discussed on a previous question that the label in Europe is pretty broad for pretty much any situation where cytokines are elevated. So I'm wondering how you would position CytoSorb the treatment for something like say cytokine release syndrome and CAR T? Would you look at additional trials to prove its usefulness an indication or would this be more of a marketing effort?

Phillip P. Chan -- Chief Executive Officer and President

Yeah, I think in terms of that particular application, we are seeing a lot of strong interest both in the United States, among leading investigators in the CAR T-cell immunotherapy space to demonstrate the potential utility of CytoSorb in treating cytokine release syndrome, but with the approvals of Kymriah and Yescarta in the European Union. We've been in close contact with some of the leading centers that were involved in those approvals in Europe and there is also a very strong interest to evaluate the therapy.

At the moment it's -- at the moment, our experience is limited in the treatment of cytokine release syndrome specifically. Although, we've mentioned before that we have more than a dozen cases now of the treatment of secondary HOH or Haemophagocytic lymphohistiocytosis, which is very similar to CRS. And in fact, recently in December there were say, a young patient 13 years old with refractory acute lymphocytic leukemia, who actually was not on CAR T cell immunotherapy, but was being treated with biologics therapy and develop the cytokine storm, essentially cytokine release syndrome that persisted for weeks and sent this person into multi organ failure with an IL-6 of greater than 200,000 and again (inaudible) should have an IL-6 of less than 10. So this was true cytokine storm, and in fact with the treatment of -- with the treatment of CytoSorb, they were actually able to bring her rapidly out of cytokine release syndrome and she went on to recover. So we feel very confident, that this is a true application for us and as that market develops, we hope to simultaneously gain further experience and be able to report that to the public.

Jason McCarthy -- Maxim Group -- Analyst

Okay, thank you very much for taking the questions. And congratulations on the quarter.

Phillip P. Chan -- Chief Executive Officer and President

Great. Thank you very much. Thanks, Jason.

Operator

Thank you. Our next question comes from the line of Brian Marckx with Zacks Investment Research. Please proceed.

Brian Marckx -- Zacks Investment Research -- Analyst

Hi, Phil. Congrats on the quarter and in the year. Phil, I think you previously -- relative to HemoDefend, I think you had previously mentioned that you had hoped, if everything went well that you could start a pivotal study this year in Q2, can you talk about how the manufacturing delays may impact the timeline?

Phillip P. Chan -- Chief Executive Officer and President

Sure. Vince, would you like to take that question?

Vincent Capponi -- Chief Operating Officer

Sure. Hi, Brian. This is Vince. So here's what's happened in the last several months, we've been experiencing delays from this key part supplier, that's responsible for actually all the HemoDefend parts. They were recently required by another company and the results of that acquisition, they actually -- it happens in many M&A activities, a number of the key personnel were actually let go that were working on the product and this has impacted the timeline. So in revising kind of our tables and forecasting instead of those first half we're looking for a second half submission. I've been in constant contact with these folks and obviously even in the acquiring company to get them to focus on our projects. So just talking to one of the senior engineers today actually. We are hopeful that they will be getting these parts to shortly to be able to carry the project forward, because it's really the polymer is ready, it's just been matter of getting the parts in-house. So it's really going to be more of a second half type event with respect to submissions to the FDA.

Brian Marckx -- Zacks Investment Research -- Analyst

Okay. And then in terms of Poland and the Netherlands, in terms of your direct sales efforts. Has that already launched or is that in process of launching and then do you have a sense of how many people you need to have to service those territories?

Phillip P. Chan -- Chief Executive Officer and President

So, Christian, would you like to take that one?

Christopher Cramer -- Vice President of Business Development

Yeah, sure. Yeah, as you said, we have added the number of direct sales territories and as always, we start with a relatively small number of direct sales reps and building the relationships to the big centers, the KOLs and so on. And with the growing business obviously we are dividing territories and adding more sales reps to get to the same variety of indications as we saw for example in Germany. So in all the countries, except Poland, we have already started the activities and the sales have started to have an impact on the results. In Poland, we are having the team already signed and we are going to start in Q2. Hope this answers your question.

Brian Marckx -- Zacks Investment Research -- Analyst

Yes, it does. Thanks, that's all.

Christopher Cramer -- Vice President of Business Development

All right, thank you.

Phillip P. Chan -- Chief Executive Officer and President

Thanks, Brian.

Operator

(Operator Instructions) Our next question comes from the line of Sean Lee with HC Wainwright. Please proceed.

Sean Lee -- H. C. Wainwright & Company -- Analyst

Hi guys, congratulations on a great year and thank you for taking my questions.

Phillip P. Chan -- Chief Executive Officer and President

Sure, thanks Sean.

Sean Lee -- H. C. Wainwright & Company -- Analyst

My first question is on the REFRESH study, in the opening remarks, you said that you expect to reach 200 patients enrolled in the next 12 months, which would trigger an interim analysis. So, could you provide a little more color on what this interim analysis would comprise of? Is it just a DSMB decision or would we get any data releases? And would they look at just safety or both safety and efficacy?

Phillip P. Chan -- Chief Executive Officer and President

Thanks, Sean and Eric, would you like to take that one?

Eric Mortensen -- Chief Medical Officer

Sure, no problem. Sean, thank you for the question. The interim analysis at 200 patients is intended to -- we have an ongoing DSMB I should note that, we are continuously looking at safety throughout the program. We will also have a Clinical Events Committee because we really want to make sure that we're getting, as much as possible a uniform (inaudible) assessment to events to minimize the potential risk of buyers that may come from sites.

We got what we examined at the time of the interim analysis, we'll be looking at both safety as well as efficacy. But we -- if we continue on our expectations it's not to release any efficacy data in order to avoid potentially contaminating the study's conduct, since it obviously becomes very difficult if you're seeing a positive result to justify putting patients in the control arm. We do have the capacity depending upon the strength of the results to potentially terminate the study for a very positive result, but that will require a very strong p-value (ph) that we have been discussed with our DSMB to indicate whether we felt that it was appropriate to continue patients on the control group. Does that answer your question.

Sean Lee -- H. C. Wainwright & Company -- Analyst

Yes, that's correct. Thanks for the additional color. My second question is on the split between distributor and direct sales and how each part is growing. Could you provide a little bit more color on that, like, what percentage of your sales came from direct sales last year? Was it distributor and how did that compare to 2017?

Phillip P. Chan -- Chief Executive Officer and President

Sure. Kathy, would you like to take that one.

Kathleen Bloch -- Chief Financial Officer

Yes, sure. So Sean, one thing that I would tell you is, if you look at our Form 10-Q, we have a very robust revenue disclosure that breaks down the direct sales from the distributor sales, so you can use that to exactly answer your question, I will say that we've had -- we have had double-digit increase in both direct and distributor sales.

Sean Lee -- H. C. Wainwright & Company -- Analyst

I see. Were there any territories that were going particularly well or are there any that you think could definitely do a bit better in 2019?

Phillip P. Chan -- Chief Executive Officer and President

So, I guess. Yes, so I think also, just to add to Kathy's comments, I think what you'll see is the direct sales accounts for roughly 72% of our total product sales and the balance is for international distributors and partners and that's remained fairly constant over the past couple of years, it's roughly been three to one right. Three quarters of our sales are direct and the quarter is distributors. And the fact that ratio has been stable suggests that both buckets, both the direct sales as well as international sales are growing at roughly same rate.

So that being said, there is always more work to do and we certainly have a lot of countries that are outperforming and doing very well and we certainly have others that could use some help. And I think that part of the growth strategy in 2019 is to really go back and put a significant amount of effort and resources toward making sure that all the drivers of our revenue are working well, and so that includes not only our direct sales, but also our international sales as well. And I think that -- we remain very committed to this hybrid sales model, where we're mixing direct and indirect sales. And we hope to demonstrate how that's working in 2019.

Sean Lee -- H. C. Wainwright & Company -- Analyst

I see. Thanks for the healthy response. That's all I have and thank you for taking my questions.

Phillip P. Chan -- Chief Executive Officer and President

Thanks, Sean.

Operator

Thank you. Our next question comes from the line of Andrew D'Silva of B Riley FBR. Please proceed.

Andrew D'Silva -- B Riley FBR -- Analyst

Good afternoon. Thanks for taking my questions. And my apologies. I was hopping between calls and did miss the beginning of the Q&A, so just let me know if it was answered. I'll go back and review the transcript. But I just -- for the first question, as far as the total distributors that you're currently working with and countries you're in, I know you've historically had two numbers, one being the number of countries that you're actually selling into and the other being countries that you've established partnerships in, but aren't actually selling product yet in. Can you give me the breakout of what that is?

Phillip P. Chan -- Chief Executive Officer and President

We haven't broken that out for a while, Andy, and we don't have that number handy. But, I guess what I would say is that the majority of our distributors have been contributing to revenue. We have certain countries that are still -- we're still working on registration for example, like Israel and of course the new territories like Mexico and South Korea. But I would say that the majority of the countries have been moving along and we have strong expectations for them in 2019.

Andrew D'Silva -- B Riley FBR -- Analyst

Okay, got it. And just looking at the history between a direct sales and indirect sales through distributors strategic partners. Obviously, many more countries are going through the partnership route through the sales channels versus their direct sales, but the overwhelming majority is always been primarily at Germany and the surrounding regions that you sell directly. How do you bridge that gap, so that the other countries are able to fill in or at least get some closer to the direct sales countries? And is it related to more data or it just a situation where it's never really going to get there all the way or likely at least? And you're more likely to start investing in new direct sales opportunities across different regions and similar to what you announced earlier in the week?

Phillip P. Chan -- Chief Executive Officer and President

I think that the direct sales benefit from the fact that we as a Company have a singular focus, which is the sale of CytoSorb. We have a lot of resources and a lot of experience from our direct sales territories to be able to bear -- bring to bear on those markets and of course those, the margins are significantly higher in our direct sales territories than they are in our indirect and distributor and partner territories. That being said, distributors, we benefit from that -- from distributors and by leveraging their infrastructure, their contacts within various countries.

And of course give up some margin for that benefit, but there we do not have direct contact with the customers and distributors often have multiple products in product line that they are also trying to sell. So, we typically don't have the singular focus that we benefit from indirect sales.That being said, we are actively working to make sure that channel is humming along and we do a lot of training. We do -- we have a lot of communication with these sites -- with these distributors and we work actively to make sure that the data that we have is available to them for their sales process. So we don't ever expect them to perform the same way as our direct sales territories, but it is a way to blanket the world, so to speak. Again, we are now in 55 countries around the world without incurring the massive infrastructure costs that are associated with that type of coverage.

Andrew D'Silva -- B Riley FBR -- Analyst

Okay, got it. Just a couple more quick questions from me. So just from the competitive landscape, Baxter's oXiris product fairly recently got approval for cytokines as well. I was curious as to how you're viewing the competition and then has there been any sort of immaterial impact that you've noticed through that and if so, what are you essentially trying to do to counter that this point?

Phillip P. Chan -- Chief Executive Officer and President

I think of the various competitive threats out there. Baxter has the -- one of the leading dialysis players in the world in critical care, is probably the most relevant. Of course, we are partnered with Fresenius Medical Care, which is the largest dialysis company in the world and the number one or number two player next to Baxter in critical care all over the world. That being said, Baxter acquired Gambro, which was the second leading dialysis player in the world. A number of years ago and inherited their acute care product line, which included oXiris septeX (ph) and a number of other acute care products. OXiris was launched by Gambro back in 2009 initially as an endotoxin filter.

They had actually marketed another product called septeX a high molecular weight cutoff filter for the removal of cytokines, but septeX was ultimately not a successful product and then ultimately is not being actively marketed anymore. And oXiris also, despite being marketed for gram-negative sepsis as an endotoxin filter was also not highly successful and always in the shadow of another product called Toraymyxin, which was and I believe still remains the leading endotoxin removal filter out there, but Toraymyxin has had issues because of a number of failed pivotal studies demonstrating no mortality benefit of endotoxin removal. That being said, recently, I think they expanded Baxter through some in-vitro data expanded the label of oXiris to include cytokines and all I would say is that just because you have a label for reduction in cytokines doesn't mean that it will actually work.

And I think the clinical does very long-term clinical experience, 10 years of oXiris being in the market is perhaps indicative of the efficacy that the fact that it has not really taken off as a therapy is a reflection of its efficacy. So I think, yes, it creates some market confusion, some market noise, but I think that as that plays out, I think that we will see how we do against them, so.

Andrew D'Silva -- B Riley FBR -- Analyst

Okay, great. Great and thank you for the color. And the last question, and I know the previous caller kind of touched on a little bit, but I'm just curious as far as with Kymriah and Yescarta starting very early to be used in Europe. I think there is total of three or four patients last year treated. Is there a way for us to think about how you're positioned to be utilized alongside them for CRS? I mean are you partnered with any of the hospitals or health centers that are actually capable at this point of even providing the treatment across (ph) the patients yet or has there been any discussion that you can share to provide color on it?

Phillip P. Chan -- Chief Executive Officer and President

The short answer to that is yes, in terms of collaborations rather than partnerships. I think that there's a lot of interest to collaborate with us on clinical studies looking to evaluate CytoSorb as a therapy to treat cytokine release syndrome, particularly as a rescue therapy when standard treatments fail, like tocilizumab and steroids. We continue to maintain that steroids could potentially be harmful in patients undergoing CAR T-Cell immunotherapy, both for the CAR T-Cell immunotherapy itself, but also potentially for the patient. And at the end of the day, what we're looking to do is evaluate this in the clinical trial setting as a way to establish the value of this therapy in this particular indication, which again we have a lot of clinical -- there's a lot of reasons why we believe that this could be successful.

Andrew D'Silva -- B Riley FBR -- Analyst

Okay. But you are partnered -- you are -- some of your hospital customers are actually hospitals that are currently able to provide CAR T-therapy to patients, because I know there is an issue with a lot of facilities, not actually being properly equipped or certified registered to be able to actually provide that service?

Phillip P. Chan -- Chief Executive Officer and President

Yes, that is correct.

Andrew D'Silva -- B Riley FBR -- Analyst

Okay. Wonderful. Thank you so much for answering my questions and best of luck going forward in 2019.

Phillip P. Chan -- Chief Executive Officer and President

Great, thank you, Andy.

Operator

Thank you. And at this time, I would like to turn it back over to management for additional or closing remarks.

Phillip P. Chan -- Chief Executive Officer and President

Well, thank you everyone for participating in today's call. If you have any questions please reach out to Jeremy Feffer at jeremy@lifesciadvisors.com and we will try to reply to your questions where possible. Thank you very much, everyone and have a good night.

Operator

Thank you. That concludes our conference for today. I'd like to thank everyone for their participation. Have a great evening.

Duration: 48 minutes

Call participants:

Jeremy Feffer -- Investor Relations

Phillip P. Chan -- Chief Executive Officer and President

Kathleen Bloch -- Chief Financial Officer

Joshua Jennings -- Cowen & Company -- Analyst

Vincent Capponi -- Chief Operating Officer

Jason McCarthy -- Maxim Group -- Analyst

Christopher Cramer -- Vice President of Business Development

Brian Marckx -- Zacks Investment Research -- Analyst

Sean Lee -- H. C. Wainwright & Company -- Analyst

Eric Mortensen -- Chief Medical Officer

Andrew D'Silva -- B Riley FBR -- Analyst

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