Cryoport, Inc. (NASDAQ:CYRX) Q3 2023 Earnings Call Transcript

Cryoport, Inc. (NASDAQ:CYRX) Q3 2023 Earnings Call Transcript November 9, 2023

Operator: Good afternoon and welcome to Cryoport Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I will now turn the call over to your host, Todd Fromer from KCSA Strategic Communications. Please go ahead.

Todd Fromer: Thank you, operator. Before we begin today, I would like to remind everyone that this conference call contains certain forward-looking statements. All statements that address our operating performance, events or developments that we expect or anticipate occurring in the future are forward-looking statements. These forward-looking statements are based on management’s beliefs and assumptions and not on the information currently available to our management team. Our management team believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise, except as required by law.

In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, Risk Factors, and elsewhere in our annual report on Form 10-K filed with the Securities and Exchange Commission and those described from time to time in the other reports, which we file with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Mr. Jerrell Shelton, Chief Executive Officer of Cryoport. Jerry, the floor is yours.

Jerrell Shelton: Thank you, Todd. Good afternoon ladies and gentlemen. We appreciate you joining our earnings call today. With us this afternoon is our Chief Financial Officer, Robert Stefanovich; our Chief Scientific Officer; Dr. Mark Sawicki; and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. As a reminder, we have uploaded our third quarter 2023 and review document to our website. It can be found under Investor Relations in the Events & Presentations section. This document provides a review of our financial and operational performance and general business outlook. If you have not had a chance to read it, I would encourage you can go to the website and download it. I will provide a brief update on the business and then we will move on to answering your questions.

Earlier today, we reported third quarter results that were consistent with our expectations as discussed on our last earnings call, taking into account current and well-known global economic and geopolitical challenges. Having said that, we are continuing to see solid and sustained demand from our key life sciences and cell and gene therapy customers despite the current macroeconomic climate. What I mean by that is, when you take a close look, you will see that our quarterly results contain some very promising growth points, including a notable increase in commercial and cell and gene therapy revenue. In fact, commercial revenue increased 54% on a year-over-year basis and 52% sequentially. At the same time, our bioservices revenue increased 26% year-over-year.

Regarding cell and gene therapy, Cryoport Systems grew 10%, both on a year-over-year basis and a quarter-over-quarter basis. All this growth was driven by the sustainable demand we saw during the quarter and that we are continuing to see from advanced therapy manufacturers. We also continued to increase the number of clinical trials supported. During the quarter, we added a net 27 trials year-over-year, this brings our global clinical programs to a record total of 670, with 81 of these trials being in Phase III, a total of 6 Cryoport-supported BLA, MAAs were filed during the quarter. Looking ahead, during the remainder of 2023, we expect up to an additional 5 anticipated application filings and 1 new therapy approval. We think our MVE Biological Solutions order intake has begun to stabilize.

MVE’s results this quarter were in line with our expectations and our current guidance reflects this. During the quarter, MVE and some 70% of – with some 70% of the world market continues to produce healthy financial metrics. So we remain quite confident about our long-term market outlook and the recovery of our China market as the country, despite its current economic lows, is a hot bed for the life sciences. Alongside our operating results during the third quarter and in the recent weeks, we have continued to execute on our corporate strategy to accelerate our long-term growth through our innovation department – development projects and small strategic and smart strategic acquisitions and partnerships. For example, this includes our collaboration with the Cell and Gene Therapy Catapult, the premier cell and gene therapy manufacturing innovation center in Europe, to provide integrated logistics support for its Stevenage Manufacturing Innovation Centre in the United Kingdom.

Further this partnership from its location on the Catapult site will provide other opportunities within the Stevenage bioscience cluster. This collaboration establishes our UK logistics center, which will – our first UK logistics center, which will further support our European expansion. We recently completed the acquisition of Tec4med Lifesciences, a technology spinoff of the Technical University of Darmstadt, located in Darmstadt, Germany. Tec4med provides next-generation pharmaceutical supply chain visibility by integrating advanced condition monitoring, cloud and artificial intelligence solutions. We are excited about integrating Tec4med’s cutting-edge technology for comprehensive monitoring in real time across all Cryoport companies.

By doing so, we will expand our digital supply chain solutions offerings and be able to provide our life sciences clients with even greater condition monitoring options, logistics management capabilities and customer support. With these latest developments and our leading market positions, we have even greater belief that our long-term growth prospects are solid. There is no other organization in the life sciences with the breadth of capabilities Cryoport has in providing robust dependable end-to-end supply chain solutions. Today, CRYOPDP is the world’s third largest specialty couriers serving the life sciences, covering over 220 countries and territories. MVE Biological Solutions is the world’s largest manufacturer of vacuum-insulated products and cryogenic systems, and is the preferred brand for academic, government and life sciences companies worldwide.

Cryoport Systems supports approximately 70% of all the cell and gene therapy clinical trial market, and as we continue building out our global supply chain solutions, that share continues to grow even in a challenging environment. And Cryogene is one of the industry’s most trusted and specializing in the secure storage of biological specimens and supporting MD Anderson, Baylor, Texas Children, Atara, Lanza, Star and many others. Cryoport is poised to capitalize on the continued growth of the life sciences and especially the cell and gene industry, as more therapies make their way towards commercialization over these coming years. Even with today’s economic and geopolitical environment, the cell and gene therapy industry is expected to grow at a 10-year compounded annual growth rate of approximately 20%.

This concludes our prepared remarks and now that I’d be happy to take your questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from Paul Knight from KeyBanc. Your line is now open.

Paul Knight: Hi, Jerry. Congratulations on the quarter. The vertex sickle cell anemia therapy, I think you’ve mentioned that in the past, what level of involvement will you have there, is my first question? And then the second question is, if you look back on the MVE, which had its period of softness, but it seems to be stabilizing. Was it kind of overstock globally and then what portion was just tighter CapEx budgets? Thanks.

Jerrell Shelton: Paul, if I understood that, I’ll take the second question first and then turn the first question to Mark on sickle cell. MVE is in a solid position. I mean it’s hard for us to dissect exactly how much was overstocking and how much exactly what happened in the market except for the conservatism and capital expenditures amongst our customer base. And then, of course, we have to pull back in China, which we think will stabilize. So we think we’re in a stable position going forward on MVE, as order intake is stabilized. It looks like it’s in good order. And hopefully, China has hit its bottom, and we’ll be coming back up. There couldn’t be much further impact on us. Our China revenue in total this year, or this quarter rather, is around 4%. So it’s not going to be any kind of a significant – China effect going forward, from this point forward, and we think it’s stable. So does that answer your question, Paul?

Paul Knight: Yes, very useful. Thanks. I mean, I guess the bottom line is we are getting past it.

Robert Stefanovich: Yes. And maybe let me just add real quick to MVE, because I think sometimes people overlook that in spite of the revenue level right now in Q2 and Q3, if you look at our product revenue for Q3, the product revenue gross margin is at 45% and the MVE business has been very profitable driving good positive adjusted EBITDA and cash flow.

Paul Knight: Okay, good. Yes, thanks.

Jerrell Shelton: And your first question was on sickle cell, Dr. Sawicki will answer that.

Mark Sawicki: Yes, Paul. So we actually had 6 BLA filings, the portfolio of companies that were completed in the quarter, which includes Abeona, ImmunityBio, ROCCAT, the CRISPR Vertex program, as well as the label expansion for BREYANZI, all of which we are playing a role and obviously, if they are approved and the commercial launch activity of it. We can’t disclose exactly what we’re doing due to confidentiality, but we will play a role in all of those products, assuming that they come to fruition. So the story is even broader than just the Vertex – CRISPR Vertex product because we’re seeing an acceleration in the commercial filing and activity space, which we think is going to continue to drive that, that strong performance we had in our commercial revenue for the quarter.

Paul Knight: And is that filing data in the prior press releases, Mark?

Jerrell Shelton: In prior press releases as it relates to?

Thomas Heinzen: The answer. We haven’t disclosed it until this report. It’s on – in the review that we posted on our website.

Paul Knight: Sorry. So sorry for saying some questioning so much front end, but – so we might – we have 6 BLAs in Q3, 5 in Q4. What do you think will end up within a range of this year versus last?

Mark Sawicki: Tom has that data handy, he tracks it really detailed. Tom, you got those stats in front of you?

Thomas Heinzen: Let me make sure I understand your question. Are you asking how many filings for the year or how many potential approvals for the year?

Paul Knight: I think filings is a common terminology, you used, Tom, right. So the 11 we will have here in Q3 and Q4 and then the question really is the number of BLAs and MAAs total this year versus last?

Thomas Heinzen: It is higher. Although it is to be candid lower than what we are forecasting at midyear. A few filings have slipped out into 2024 where we expect 20 filings now that we have visibility on in 2024. So there were about 4 or 5, if I remember correctly, that slipped from 2023 into 2024. The good news is on the approval side for those in 2024, we do have 4 already that have PDUFA dates or FDA dates for decisions in early 2024.

Paul Knight: Okay, thanks.

Operator: Your next question comes from David Saxon from Needham. Your line is now open.

David Saxon: Great. Good afternoon guys. Thanks for taking my questions and congrats on the quarter. I did want to just ask a follow-up on the NPE order comments. So what exactly are you seeing stabilize? Like are the orders looking to be flat more sequentially? Are you seeing things have improved to be flat on a year-over-year basis? And then is this worldwide, including China or specific to certain regions?

Jerrell Shelton: David thanks for the question. I mean we monitor a lot of metrics at MVE. And what I was referring to is the order intake is stabled out, it’s flattened out and we think that it will continue to be stabilized.

David Saxon: Okay, alright. So I guess, stable flattened out from the second quarter into the third into the fourth. And then I’ll just ask my – okay. Okay. That’s perfect. And then you obviously noted strength in commercial revenue. That was up fairly significantly in Bioservices solutions. And you said in the document that you posted that it’s continued into the fourth quarter. So can you characterize what you’re seeing? Are trends accelerating into the year-end? Are they just kind of stable but continuing to be strong? And then are there any reasons why that wouldn’t continue into at least the first half of next year? Thanks so much.

Jerrell Shelton: Go ahead.

Mark Sawicki: Yes. So I’ll comment on that. On the bioservices side, things are very, very consistent and strong. We obviously opened the two new facilities in Houston and New Jersey last year. We’ve actually onboarded 29 new clients into those facilities over the last 18 months, which is a very, very strong base. And this is in addition to a very, very strong demand for the – from the Cryogene asset as well. So that’s very, very positive. On the commercial side, as Tom had mentioned, filing activity is very strong. we see line of sight on a significant increase in the number of approvals and multiple of these products should be fairly decent volume, which will continue to contribute to, obviously, our contribution from a commercial revenue standpoint into ‘24.

Robert Stefanovich: Yes. Maybe just to add, if you look at the Q3 performance in commercial revenue, we’ll always have some timing where you have a little bit more revenue in one quarter than the other. But we do expect to see growth overall ongoing in commercial revenue. With that in mind that you’ll have some quarters that are higher just because of maybe a greater portion of product-related sales versus service-related sales.

David Saxon: Okay. Great. Thanks so much for taking my questions.

Operator: Your next question comes from John Sourbeer from UBS. Your line is now open.

John Sourbeer: Good evening and congrats on the quarter. Thanks for taking the questions. Just maybe to dive in a little bit more on the commercial revenues. Nice growth in the quarter, up 50% year – over 50% year-over-year. I guess any additional details, I guess, you can provide there on this? Is this additional services you have with some of the previously approved product or is there a ramp from some of the newly approved products here? Just any additional color you could provide on that?

Mark Sawicki: Yes. The bottom line is we saw contributions from all. You’re seeing additional uptake in revenue acceleration out of our portfolio of existing products and, obviously, our support of the Sarepta product has also been a nice contributor to that number for the quarter.

John Sourbeer: Thanks. And then I guess, just any color on CRYOPDP in the quarter and how the rollout is going there in the U.S.?

Jerrell Shelton: The CRYOPDP is doing well. The rollout is, we had to make some adjustments in the U.S., and we’ve made those adjustments, and we see that rollout being a continuous smooth rollout.

John Sourbeer: Thanks. And I guess last one here on my end. Just any additional color you provide on like demand trends across large pharma, maybe emerging biotech. I know the total clinical trials are up year-over-year, but have you noticed any just changes in customer behavior then given some of the funding environment or just broader macro pressures?