Q4 2019 Earnings Call
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Thank you for standing by this is the conference operator welcome to the Cryoport Inc. for your 2019 earnings Conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation, there will be an opportunity to ask questions.
To join the question I'll tell you May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.
I would now like to turn the conference over to Todd Fromer, the managing partner Casey Sai. Please go ahead.
Thank you operator before we begin today I would like to remind everyone that this conference call contain 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 information currently available to our management team our management team believes 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 I.
As a result of new information 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 experiences and our present expectations or projections. These risks and uncertainties include but are not.
Limited to those described in item one a 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 other reports, which we filed with the Securities and Exchange Commission I'd now like to turn the call over to Mr., Charles Shelton, Chief Executive Officer of Cryoport Jerry.
The floor is yours.
Good afternoon, ladies and gentlemen, thank you joining us today with me this afternoon, Who's our Chief Financial Officer Mr. Robert.
And our Chief commercial officer Dr. Mark so.
As a reminder.
Our 2019 year his review document sure website.
In the Investor Relations section under events <unk> presentations.
Document provides or review, our recent financial and operational performance in a general business outlook.
I've not had a chance to <unk> I would encourage you got to the website.
I'm on it.
As with previous quarters on this conference call will you with a brief general update and then.
A question answer session, where we will address your issue regarding our Companys results.
After the uptake.
We reported record revenues of $33.9 billion for fiscal year 2009.
An increase of 73% for fiscal year 2008 G.
Strong result was driven partly by or commercial agreements sporting yes, just Honda and ours just jump right.
[laughter] $3 million in the 12 month period, an increase of 295% or 6.2 billion.
Our year.
Revenues from our commercial agreements.
No you're out what do you 20.
<unk> revenue.
A wash.
Oh, yes since.
Commencing during first quarter.
So oh.
Oh sports supported marketing authorization application.
Licensing applications.
During the fourth quarter of 2009 G.
<unk>.
Additional outward supported and Ace and B.L.A.'s. How this 2020 based on the journal information and forecasts the alliance for regenerative medicine.
This number cell and gene therapies in clinical trials increase we secure new clients and expanded our market share with the goal regenerative medicine market.
During our fourth quarter.
Total of 11 clinical trials.
Number of rejected.
<unk> clinical trials.
Or to a record.
The six of which 66 are currently in phase three.
357 trials that you the 2008 G.
47 were insane.
During the year or 200 advance our leadership position, we invested in enhancing our platform I energy storage market with the acquisition.
And watching the first ever Cryoport express and faster sugar product line, which guarantees shippers then use only for human use suite.
No I was 9% effectiveness.
It's interesting.
All the components in commodities as results of these investments last year.
Providing our global clients with an expanded.
Oh critical solutions setting.
Differentiated temperature control just isn't cloud storage servers.
Regenerative medicine market growing rapidly upward is developing a network partners processes and systems that support compliant unified ecosystem within life Sciences industry.
We have successfully successfully secured several top tier partnership she wants it.
Yes, it ever science and.
Other solutions into the life success industry by providing scandal standardize and compliance solutions focused on the supply chain.
Sure.
And Twentytwenty, we are continuing to expand our global supply chain network platform.
Sure you sort of life Sciences clearly.
Oh about Oh, well supply chain centers at worst place Your Jersey, Houston, Texas, We believe it or small business model and balance sheet has us well positioned for both continued organic growth.
Market, leading positions and superior technology platforms also give us your ability to scale, our operations and to expand our sport.
All the junkie lesson ecosystem as market continues to demonstrate.
He wrote.
I'll turn the call over to the operator, we'll open the telephone lines for your questions and our answers.
Thank you, we'll now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please.
Press Star then too well, we'll pause for a moment as collars join the queue.
Our first question comes from Brandon Cool yard with Jefferies. Please go ahead.
Hey, guys. This is not on for Brian. Thanks for taking my questions first one if we look at the clinical trial revenues or the non commercial Biopharma revenue was essentially flat in the second half of the universe. The first half the year, even though you added more than 20, new clinical trials in the first the first off just help us reconcile the trend.
Of your ongoing growth and support a clinical trials across the three phases is simply timing issues as the trials transition and ramp from their various clinical phases, and then as a follow up to that.
Ballpark revenue ranges are bands you have historically laid out by a clinical trial phase is still relevant today. Thanks.
Yes, so all of that.
Answer that I want to try that over to Mark So we're happy to answer questions.
Yeah. Thanks.
The bottom line on clinical trial activity and associated revenues that we use.
Trial as a pipeline for ultimately rental revenue I wish I apartment harder resi basis. So.
All right cycle.
Clinical does in its inherent age or have more volatility.
And the associated with.
Washington trials, Oh, you seen pages or terminations due to lack of Russia, which obviously we outline.
Any any earnings release.
Thanks, and then on the bias towards side, you know you've made some progress cross selling series. This in customer base, there and recently Onboarded several clients of the crouching platform curious if just can you just kind of provide any initial feedback what it is about their offering that's resonating with your customers and then anything you're penciling in.
For 2020 in terms of revenue synergies from crouching.
Sure. So yeah, we're actually seeing crossover between a mark.
Mrs, which is one of the recently for with the acquisition last year I mean, do believe that that will accelerate and this and this fiscal year.
The primary driver behind that is is false moving for James C rated or or.
Single supplier.
Well I change so they want to not only able to support the distribution aspects to our supply chain logistics platform, but also source.
Super Thanks.
The next question comes from Puneet Souda with SVB Leerink go ahead. Please.
Yes, hi, guys a thing so Jerry first one for you and maybe Mark can chime in into it to wanted to understand why commercial revenue.
Was the stepping down here when revenue for both the commercial therapies were up.
Can you provide maybe how much of that was the espeed driven or is there. Some other dynamics that a is that where unclear on and just wanted to understand if how's that shaping up and in the first quarter.
Oh, yes, because you're good question.
Commercial revenues as we reported.
Due to our categories.
As a nation in shipping related revenues in the second category of services, where for example, our customers assets or.
Good consulting relying validations are custom.
Secondary packaging or urban management.
Okay.
So.
The fourth quarter there was another drop.
Third quarter revenue as a result for the non shipping services related revenue drop.
And would you expect that to recover again here in the first quarter or what's your expectation on on that revenue or is that something we would you should expect the decline through the year.
No.
Constant flow and just just say.
No drop.
Last quarter, but is.
[laughter], there's constantly activity in these areas. It's just there's always a need here. This is evolving this.
Jason So it's just it's going to continue to Oh too.
No.
Yes.
Go ahead.
Yeah.
Yeah, the numbers will rebound.
Oh, sorry, I didn't catch that but can you repeat.
Yes, so the numbers will rebound.
Okay art work [laughter] different wages.
Yes.
Well I wish I had a proper one quarter in those numbers.
Okay Alright. Thank you on that and then on a clinical trials have a bigger question. I mean appreciate there were too high volume trials that.
Were impacting the quarter, but you know wanting to get a view into what you're seeing so far as you know in in the year or was that sort of onetime phenomenon. A one off phenomena that you that you saw here and I understand these are large clinical trials, but any any sense that you're getting in 2020.
So far on on.
Any other trials or a recovery in for a phase three trials.
Well I'll start and Mark.
We do have caused that we as we explained.
We will.
[laughter] last quarter, so no we don't anticipate.
Especially as the population grows in both.
Trials and commercial activity Mark would you like.
No I mean, he's absolutely right I mean, we're very bullish on on the overall clinical activity, we have always remains while the fourth quarter alone.
Excellent other tend to be filed this year and you know there's some very very aggressive financing activity in the space that you would have almost $10 billion raising any 19.
There's a lot of money in the space that will continue to support.
Yes.
Okay.
And then my last question is on and given the impact we're seeing here from current of ours.
What are you expecting for your European shipments given that this is largely shipping and logistics any anything we should note for the first quarter and and the first half of the year worse than the second half and how should we think about any any disruption or so far what's been.
What are you seeing in the market among your customers.
Well so far.
We're not seeing.
Yes.
So.
Oh, No 14 is our workers this trial certainly or is the APAC region.
Yeah, I don't see any trials being.
They are stop because the Paris.
We we like anyone else, we will have to see office Oh, we we don't see any notable you layer or stoppage at this.
But youre not expecting any disruptions from shipping purposes, and logistics in Italy, or Europe or any other locations.
Oh.
Yes.
Were subject to the same thing to say.
Issues that everyone else, we don't know how everything is going to <unk> well, what I can tell you for sure as we know we've had no impact up to this.
I can't tell you, what's gonna be happy happening over the next months.
Yes, let me just add to that briefly so one of the things we asking feedback is.
So why is coming back and yes, yes, where our AR and debt management strategy in essence.
What are the unique things at play Board has we have a downey leaking out all the Jerry mentioned in his opening remarks, yeah, just XR is down to five watts or basically 99.9.
Hi, 9%.
Adoption in.
Now let me see protocol has demonstrated ability to render outliers in active.
So it so just restaurant about or so to actually very positive thing for us.
Okay all right. Thank you.
Our next question comes from Paul Knight with Janney Montgomery. Please go ahead.
Hi, Jerry I know one the clinical trial, it's no surprise that the a number of phase one filings are slower.
A in the industry, while a commercial therapies seem to be the ramping a factor can you talk about a phase one isn't academics have limited budget.
What do you think you're the factors going on with the slower growth we're seeing from.
The industry on her on the phase one side.
Oh.
Works actually had a better position just happened.
Yes, so all the wheel factor in the maturation of the market you know early on when each therapies were starting to move into the market, obviously, they're going to move into a phase one situation now that the market is starting to mature LABA fall and studied themselves.
On the targeted interests next move into late stage worried a phase two trial for different indications immediately.
I actually think it's a demonstration of the.
In the market or something else.
And then we you know you're talking about your expansion in Houston, and Morris Plains, what kind of a capex do you need to do this year to achieve that level and then more specifically I understand you have storage in Houston, but what we want more planes facility what will be there will it be.
Storage could you just a little color on what.
What a global.
Logistics in or what it looks like and what it costs in your vision.
Yes, I'll turn the National Circuit, Robert just.
Your slate what these centers are these are global supply chain.
Oh Logistics center, all the supply chain centers services. So these two operations will well we rolled out.
For this year.
They will be.
We'll be in advance.
Events that are in our global supply chain network.
We'll offer services in addition to our World class advance.
So are you the investments we're making.
Yes, yes, as you remember in the past when we set up our logistics and Theres now that the Jersey, we have always applied investments.
And execute it all goes you look at these next phase, where we're setting up no two all supply chain centers here in the U.S. and use the new Jersey, we look at investments between three and $5 million. Yes, you are.
Slide four of those.
Size wise there between just seeing fight calls.
Oh, and they'll provide you'll services around our global logistics solutions as well as global lessors.
Okay. Thank you.
Our next question comes from Richard Baldry with Roth Capital Partners. Please go ahead.
Thanks.
Sort of following up on that will any of the operating costs are those facilities come on toward our earlier in the year or would those be coincident with the expected completions in the fourth quarter.
Yeah, so you'll see R&D costs.
So it will come in over the next couple of quarters as we start setting up the infrastructure building all facilities.
They'll go online in Q4, Oh, So that's why you should expect so cost is targeting.
Oh, the cost to sales as part of only operational global supply chains.
Hey, and when I look at the gross margins there are actually pretty strong in the quarter. Despite some revenue headwinds so.
Can you talk about where that strength came from whether it's on anything one time oriented or how we would see those trends playing out as revenue scale throughout 2020. Thanks.
Yes, you can't really see trends at this point, yes, because we're in the midst so building out infrastructure right, we've been able to maintain solid.
50, 50% to 53% gross margins.
So it's probably a trend there's not one time event that are impacting gross margin in Q4, our stated goal all so 60% in gross margin.
Okay next year, we're building out supply chain centers, we're not going to get there at that point in time, so you'll still see some up no smart ultimately as we can start leveraging.
So we have.
We'll see people's largest signs of to increase.
And I.
I understand you don't give guidance, but the the opex side has bounced around a little bit throughout 2019, <unk> strong quarters than some others in this been some one time docket things built in.
What should we look at as a normalized baseline as the fourth quarter, a good baseline to work from and work up from as you know scale the infrastructure to match the topline or how is it again is there any things are one time about the fourth quarter that wouldn't to make it if the baseline for 2020.
I think is compare 2019 2018.
We had about 30% to 37% growth.
Operating expenses.
It's going to continue as we are building out infrastructure. We're building our capabilities. So you will see increased operating expenses.
Okay.
Well.
Yes, I understand that again, we're still in the early phases.
Oh, we're building up based on the demand that we're seeing bravery, we're johnson drugs arts and patients.
Gross.
As markets.
That's why we're making these investments.
Hi, Jeff.
Okay last to be down to the extent you you have some insights.
How do you think about the likelihood that the next commercially approved therapies would either ramp sort of similarly to the first became the first two that have come before or do you think there were lessons learned in the industry that might accelerate that because people have done some larger scale trials is.
It easier to ramp faster ones Commercializations are approved sort of how do we gauge.
Assuming our when we watched some approvals how that commercial ramp will be versus the first two thanks.
Rich.
I'll turn it over to Mark is just a moment, but.
Hey.
Thanks, Randy exactly the same because they have different strategies are different companies and so I mean.
Well.
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It's going to be introduced in Vegas German right.
During the first and so as opposed to the United States and we don't expect the patient population is this is Dave as.
It's hard to do you really have to look at the therapies that mark will answer that.
Jerry definitely right I mean, the bottom line is that each of these are independent TV.
The one variable that is beneficial though is that a lot of the reimbursement structure is embedded in have been overtime as well as the manufacturing strategies in the regulatory guidance from the FDA continues to mature, which will provide them with a much better under.
Standing.
Which how to how to move forward from a commercialization standpoint.
And why do you guys. I also have what are called surplus set up ointments care.
So the end users are getting comfortable using them in understanding how to.
Ah introduce them to the to the patient population. So those are positive factors I think.
I will impact the overall gains of these all but well be independent dependence on how they roll them out on mobile basis population.
Thanks.
Our next question comes from Jacobs Johnson with Stephens, Inc. Please go ahead.
Hey, guys, it's actually Mason on for Jacobs.
I just have a two part question Jay can get your you.
Can you guys hearing.
Okay.
But not watch.
All right sorry about that so this is actually Mason on for Jacob.
I have a two part question first as it relates to.
Becoming regulation and draft guidance for the industry when could these guidelines be finalized.
And then second once finalized what needs to happen for these standards to become the norm and how likely are they did change behavior shipping methods.
That's a great question marks.
To answer that.
Yes, so clever guidance document defaults have been working through which is also receiving feedback Jews hearing bodies why has the Interstate 40 clients regenerative medicine. The other answer the foundation of.
Cellular therapy as the GE to 76.
Regulation or guidance document.
To be submitted to the FDA the second half of this year.
Correct.
We see generate you by the FDA and and having refinance around.
Regulatory requirements in early 2021.
Yes.
Hi.
We believe that guidance document because we're participating as construction will be very favorable to our systems and processes in particular compliance confined space.
Yes.
And the additional slipping a that we.
Provide for our clients in management is just.
In our systems.
So we're actually imports.
Got it thank you guys.
Thanks.
Our next question comes from Stephen Unger with Needham. Please go ahead.
Hi, good afternoon.
Nose to the.
The 32, new clients in the quarter, that's a big number and I was curious if that had an impact on the active trial numbers that you had a new have presented in the quarter or does that come in in 2020, and then when it comes to new.
Clients.
Wins are these coming in in the early phase two in the phase one or is this a cross.
The phases.
Yes, good question.
Average G R.
Yes, so honestly, what our key goals as they as an organization with the polls much share out of the market as we can.
And that share constitutes existing relationships and the expansion.
Alright, well, then those existing relationships as well as capturing new clients, either startups or clients have using cryoport traditionally.
So we're very active and capturing as any of those slices and yeah.
Yeah, I think that the increase in any rate customer acquisition is a testament to our platform and holds understanding the importance of compliance and Tracy.
We have from a logistics distribution standpoint.
So so thats obviously some of these drivers that we've seen this time assigning associated with clinical activity around those is very very.
Specific to again client some of them well and are already shipping from a clinical standpoint, others may not initiate clinical trials for six to nine was based on some of the pre trial activity and consulting work that needs to get done prior to initiating and all that.
Got it that's helpful. And then was there an impact in the quarter from the Lonza relationship.
And if not do you have some sort of way of characterizing.
The revenue impact that you expect.
From Lonza in 2020, that's primarily outside of clinical trial activity as my understanding.
We won't be giving guidance on.
What we can't as users.
We are continuing relationship with Lonza for several years and we.
Struck the special relationship, especially to say, we announced in special partnership wheelhouse.
Uh huh.
Last year during 2019.
And that relationship is developing very nicely all our teams on regular basis, and we actually started to see some commercial.
That's a that's a rollout is that's going to have a strategic impact for lines as well as for us.
Yes.
Other.
Nearly all the only other thing I'd add areas and we are already seen crossover revenue associated with.
That.
Relationship.
Late last year.
Obviously very early in the developed that but we are.
I'm confident that Oh, we will see accretive benefit out of that relationships like.
Got it Okay, and then I wanted to touch on the reproductive.
When me inception fertility what is your expectations for just your Reaper reproductive medicine business and had a good growth year. In 2019 is that you know that core growth then expected to continue and you layer on the.
The inception fertility impact.
So accelerated growth.
Yes. Good question is do we have.
Maybe.
Oh.
As for reproductive medicine.
You know here.
Before we have the bandwidth to.
It really flourish reproductive medicine or.
No, we're making investments in both of those resources.
And we just.
So we just you just on Floyd our first person in India for example to focus area.
They make no mistake, obviously really deal is a big.
Deal for us.
Arctic there.
Yes, just in the context, the prelude inception network is the largest lake network in the United States.
And so signing at all obviously every single transportation embedded personally entire network will be like five or more.
You believe that will have substantial upside on or on our idea numbers for 2020 or so.
Great.
Thank you very much.
Our next question comes from Andrew Dsilva with B. Riley FBR. Please go ahead.
Yeah. Thanks for taking my questions and I really started you touched on any of that I. Just let me now I've been hopping between a couple of calls.
But maybe can you can you elaborate a little bit on on the cadence and playing 19 and.
Wow Directionally, what you think we should.
Look outward and 2020.
I frankly as it relates to Biopharma growth do you think where the street as or where.
The growth rate you saw in previous years, it's kind of a a reasonable expectation has that happened they look at 20.
Okay.
Hi, Andrew your.
Oh.
I don't want to assume we heard your question, we did actually hear it very well.
Research your question.
Good to hear you very well.
Absolutely.
Can you haven't better right now.
Yes, hi, this better.
Okay. Good so.
Effectively what I was curious about Oh was when we look at the Biopharma cadence over 2019, and we think about 2020.
Should we.
Expect a similar growth trajectory and.
Do you feel comfortable kind of where consensus is as a whole.
Really any color on how biopharmx and shake out would be really useful just because there are several endpoints that could take place yeah.
Depending on how they go could be.
Hey significant variances.
Okay, I want to turn aftermarket yes. So.
Obviously the thing that we're looking after 2020 or the fact that we had five MH hey, well in the fourth quarter alone on our portfolio plants.
Lastly, the tiny those from a loss standpoint has an impact on the cadence for 2020.
We anticipate light you commercial launches this year as well as 10 additional layer in a filings.
Before so we're very bullish on here.
Obviously, the cadence it was so rollout will impact what else.
Okay, Okay fair enough and then.
Can you just touched on maybe expanding the offerings you referenced cryo settle before I was curious.
I didn't write that off things like that or are things that are being brought on.
So request from clients and if so theres been any success to date.
That you can highlight.
Well I think there were.
I've said this over and over there and our cost about expanding horizontally and vertically and if you just think about where we've been what we've talked about.
The acquisition last year segue into cloud services, We also announced show, which is which is picking up.
So hard it takes a while to get validated.
He will change there.
So is it is picking up and we expect a it we expect.
Things that would across show and expect that needs to grow.
In the future.
And.
So we.
Certainly our consulting just picking up because there are too.
Deal and equal.
Hi, guys that were just getting around escrow.
And then you see usually that's expanding the product weren't revolutionary proper express it yes therapy shipper I wish you know as the industry analysts or get such.
So so as those kinds of things, we're doing to expand our footwear. So we're removing on an incremental basis and then.
A very disciplined basis as well.
Okay. Great last question, we always talk about.
The total trials being a increasing year over year I am assuming those are just ongoing trials of your involving 436 can you maybe talk about how many trials you were just generally involved in because obviously some of them fell off a weren't successful I'm sure net gain.
Throughout the year, it's much more than 79.
My accurate and taking that.
Yes, you're right you don't take that.
Well the accurate that a lot as an example, I think you for there was a net increase in 11.
What I think we had almost three trials drop out over the quarter. So it wasn't a you know so net oh.
Yes. This wasn't a fortys prior to the terminations somewhere in that range and I don't have the numbers and probably but.
That's the best General.
Hey, what we see.
Okay. So I mean, you're really going.
Going through that they are evolving process, the continuing to grow even in a I think the fourth quarter.
Had an anomaly just when you look at them.
Market in general the macro trends that there was a lot more fall out or pushing towards getting things finish.
Then maybe in previous quarters in the year instead, you years, you're still even with that kind of frequency able to grow is that more indicative of just the market trend or and then my friend being gets more and more regenerative medicine.
And in selling gene therapy clinical trials coming under way or is that maybe a little bit more related to.
Earlier companies companies, you haven't worked but before just now understanding that the really important.
What you offer.
Oh evolve to be honest, if it does pulling share from other parties, it's our existing flight maturing.
But.
While activity in its nature all.
Oh visits experimental in nature are all strategy is around long term capture of share that drives commercial revenues from commercialization effects and so are you know.
We're really focused on building our share in this space and maintaining those relationships as they won through June towards commercialization and we're starting to see the fruits of that obviously with the slide.
While at the end of the year last year, we hit another 10. This year, we could theoretically you looking at going from two commercial therapies and supported Sninety. Two you know eight or nine or 10 I tend to want.
Okay, great. Thank you very much congrats on the progress and good luck in 2020.
Thanks very much.
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This concludes the question and answer session I would like to turn the conference back over to Jerry Shelton for any closing remarks.
Thank you operator.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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