Q4 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue just standby. Thank you for your patience.
[music].
Thank you for standing by welcome to the Q4 in full year 2019, Biolife solutions Inc. earnings Conference call. At this time, all participants are going to listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded if you're acquiring you further assistance. Please press Star then zero.
I'd like to hand, the conference over to your Speaker today Mr. Roderick degree Chief Financial Officer. Thank you. Please go ahead.
Thank you Jamie good afternoon, everyone and thank you for joining us for the Biolife Solutions Conference call to review, the operating and financial results for the fourth quarter and full year of 2019.
Few minutes ago, we issued a press release, which summarizes our financial results for the three in 12 months ended December 31st in 2019.
As a reminder, during this call we will make certain projections and other forward looking statements regarding future events, where the future financial performance of the company. These statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations.
For a detailed discussion of the risks and uncertainties that affect the company's business and that qualifies forward looking statements I refer you to our periodic another public filings filed with the FCC.
Company projections and forward looking statements are based on factors that are subject to change and therefore these statements speak only as of the date there given.
The company assumes no obligation to update any projections or forward looking statements, except as required by law.
During this call, we will speak to non gap or adjusted results and guidance reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in the press release, we issued this afternoon.
These non-GAAP or adjusted financial metrics should not be viewed as an alternative to gap. However in light of our M&A activity. We believe that they use of non gap, where adjusted metrics provides investors with a clear view of our current financial results when compared to prior periods.
Now ill turn the call over to Mike Rice, President and CEO about life.
Thanks, Rod good afternoon, everyone. Thanks for joining our call.
2019 was a remarkable year for buyer life on several fronts.
We generated a record revenue.
Saar media products embedded in 69 additional clinical applications.
Again, nearly 200 new customers.
And through our acquisitions transformed the company from a single product supplier to a multi solution provider of class defining buyer production tools to the high growth cell and gene therapy market.
We were early to realize that the base of Bioproduction tool suppliers is highly fragmented.
And also that someone gene therapy developers are in desperate need a much better solutions and viral preservation storage Coltrane management and following.
Before we dive into the details of our business performed in 2019, and what we expect for 2020 and beyond I like to share some information about how we're managing through the current cobot 19 situation.
Our corporate headquarters and borrow preservation media production facility in warehouse are located in Bothell, Washington, just a few miles from the epicenter of the Corona outbreak in the U.S.
Over the last several weeks it when assessing a number of potential risk to our business, including team member health and attendance critical suppliers, including some in China inventory levels and our traveling visitor policies.
To reduce exposure risk for our team members and visitors were following the recommendations are the county health authorities and out of an abundance of caution. This week commenced to work from home directive through the end of March for all team members in the Seattle area, except those end customer care production.
You see and senior management.
As with any contagious illness any team members that exhibit symptoms had been directed not to come to work.
We believe we have sufficient media inventory to meet at least six to nine months of previously forecasted demand.
Our top priority is doing all we can to maintain the health of our team members and all locations and then to satisfy customer demand for our products.
The Cobot 19 event is dynamic we're watching this very closely and working proactively to reduce any potential impact on our business.
I'd like to start off with a recap of our value proposition to companies and the regenerative medicine space, which is comprised of seven gene therapy and tissue engineering companies.
The alliance for regenerative medicine or arm estimates there are nearly 1000 companies conducting about 1000 clinical trials of these novel treatment modalities.
In 2019 $10 billion was invested in the space. So far for event just a few approvals and it's important to remember that we're early in the progression of the market.
But there is an important dynamic you've heard me talk about several times.
The reimbursement environment for our customers has evolved into a pay for response or pay on chair paradigm with payment predicated on an initial and sustained patient response.
This reality, coupled with the very fragile insensitive stayed a biologic sourced material and manufactured cell and gene therapies is driving companies to reassess traditional tools and the consider best practices and buyer preservation borrow preservation.
And cold chain management.
There are at least three environmental factors that can render a seller gene therapy unfit to administer to a patient. These are suboptimal preservation media temperature excursions during stores or transport and uncontrolled following.
Any of these conditions can result in a non viable dose, which have given to a patient may fail to elicit the desire therapeutic response and again in today's reimbursement environment resulted in non payment.
Fortunately, we have products in our portfolio to address all three of these detrimental conditions.
Well this background I'll expand on our buyer preservation media franchise.
Our flagship product Criteo store, a self freeze media was invented several years ago by a small group of scientist, including our Chief Scientific Officer, Dr. AB Jay Matthew.
He and his colleagues were among the first groups to reserve and publish on preservation induce cellular stress.
And based on their findings, they engineered and optimize preservation media that even today continues to outperform the traditional homebrew cocktails and other commercial formulations. This improved preservation efficacy evidenced by increased viability and functional recovery of sales intended for clinical use along with our quality management system and production.
Processes has enabled us to drive cryo store in a companion storage media hypothermia, so to be embedded in around 400 customer clinical applications.
Carl storage used by kite pharma for their approval Skarda car T cell therapy, and by Bluebird Bio force in Tech low.
Some of our other notable clinical customers in food Adaptimmune Ll gene Celgene Cellectis Editas fate damita, So Johnson, Juneau, Biovance, Markwest Orchard, Sangamo Rubiales and community.
Also support several other customers directly and through the leading Cmos, including Hitachi KBR Lonza master cell and Wishy.
Furthering our reach into the cell and gene therapy space or some of our distributors, including Thermo Fisher Millipore Sigma stem cell technologies and VW are.
In 2019, we process, an additional 69 us Ftn Master file cross reference letters for the use of cryo store or hypothermia salt in clinical trials.
We are closely tracking seven potential 2020 customer regulatory approvals that use Carlo store.
These are Bluebird bio force integrity with the US Celgenes last you know for at least to sell in the U.S. Gilead tight for K T X 19 in the us and Europe Novartis last of excess forsell, gentlemen, in Europe, and Japan and Orchard for OTI, All 200 in Europe.
Lastly, Bluebird bio I O Vance and Orchard have disclosed five additional potential regulatory filings in 2020.
So it's clear were strongly entrenched in both the autologous and allogeneic cell and gene therapy workflows streams and despite the last two fairly soft quarters of media revenue, we built the Greg base of sticky customers that will continue to fuel our growth.
On that point, it's worth reminding everyone that most of our media revenues generated from a small group of late stage customers are other 400, or so early stage media customers don't use as much product. So the lumpiness. We saw in 2019 is a factor that we expect to continue for some time until some of the customers I mentioned previously good over the goal line and their demand increase.
Just to support commercial operations, we continue to add media customers and are taking share from homebrew and other non optimized commercial preservation media products.
There is an overview of revenue for Q4.
Q4, total revenue was 8.3 million an increase of 52% over the same quarter in 2018.
Q4 media revenue was 5.2 million down 5% year over year to media customers were down 1 million versus their Q4 forecast one was a direct customer whose production demand was lower so they consumed existing media inventory. The other was a large distributor that was down about 500 K against their Q4 forecast, but for the year.
This customer was up 76% versus 2018 and last year, they shipped our media products to more than 1700 different end users.
Here again, the impact of concentrated revenue is clear.
Q4 revenue from our thought evil and freezer products, all met or exceeded our internal projections, Rob will speak to full year 2019 revenue in his remarks.
This is a good point, a segue into our M&A strategy.
We're in the early part of the S curve of cell and gene therapy adoption, but its future growth is clear to support this growth the industry needs a trusted supplier that can provide a portfolio a risk mitigating bar production tools last year, we embarked on a plan to diversify our media revenue and to become this trusted supplier.
We have somewhat a portfolio of class defining products that can help our customers ensure they don't administer a non viable dose and risk therapeutic failure and economic loss I'm very glad to share that through our acquisitions of a stereo bio subsea technologies and custom biogenic systems are now supplying a much larger number of cell and gene therapy companies with.
At least one product in our portfolio.
The first complimentary products, we acquired where the fast start aligned from a sterile bio in April last year. The sterile had developed a proprietary automated water free thought product for cell and gene therapies frozen and cryogenic vials.
Since the acquisition, we've shipped over 300 foster vial products to a growing list of companies dozens of which also use our media evil and freezer products.
At the time with the acquisition the team at Estero had also started development of an automated waterfront falling product for larger dose so on gene therapies frozen in cardio bags.
This product branded as fast RCB is now finished was launched at the facilitates cell and gene therapy conference in late January this year. Our team has delivered a truly innovative simple to use falling product that can reduce the risks inherent and using a traditional water bath, including contamination and over following both of which can lead to scrapping the dose.
Or administering a dose that poses a risk for the patient we recently booked our first orders for thought star CV.
Also in 2019, we purchased the remainder of subsea technologies that we didnt already own.
The evil platform developed over the last few years biceps, who is a class defining cold chain management solution for high value temperature sensitive cell and gene therapies.
This innovative solution includes a family of cloud connected shipping containers covering the entire temperature spectrum and the cloud application that enables our courier partners and end users to set up manage and monitor shipments and receive shipments status alerts about the condition of the payload and potentially harmful environmental stresses the payload has been subjected to.
This platform is completely in line with and supports our mission to supply risk mitigating bar production tools to the region met market.
Since the start of our carrier partner relationships that completed over 1000 shipments with Eagle containers for about 100 different customers.
Some notable customers include of excess who uses our evo dry ice smart shipper for every dose of there's will Jonsman gene therapy, our list using an evil drive a per shipper for their auto one car T cell therapy for AOL and yachts and using an evil drive vapor shipper for use in their JNJ four or five to eight car T cell therapy for multiple myeloma.
Other customers that have used to Eagle platform include Adaptimmune sell you add CRISPR Mustang bio and provide us.
One of our key objectives and evil adoption is to take share from the incumbent serving the major car T cell developers Im glad to report that we've made real progress toward this goal, we look forward to providing an update on this in the coming months.
In retrospect, it's clear that the Eagle platform was subjected to a much more rigorous set of validation for our tier than the current private for shipper and use we believe that no other commercially available drive a per ship or to meet these stringent requirements.
I will then my remarks about the Eagle platform by reminding you that Biolife is not a logistics company to the contrary, we partnered with the best logistics companies in the world that have decades of experience and a worldwide sales marketing and operational logistics footprint to serve the cell and gene therapy space.
Our role is to supply the evil platform for the couriers and then to provide stellar technical support to them and their end users to ensure a positive experience.
One last note on the evil platform, our liquid nitrogen driving for shippers are currently sourced from China, We have a project underway to qualify our custom biogenic systems Detroit area of production facility as a secondary supplier CBS or the manufacturing I want to do is for years and this was another strategic driver for that acquisition.
Turning now to our acquisition of CBS. We completed this November last year and so far we're on track with our integration plans in the business is performing well and as we expected.
I will provide details of revenue guidance for CBS during his remarks.
CBS deal also completely supports our mission, we're already seeing leverage across the portfolio key CBS customers include Abbvie as Stellus fate Fisher scientific Fuji film Glaxo, Hitachi Juneau, Kite Lonza Mayo non quest precision bio SYGMA and sorento.
That's a wrap of our M&A activity and how we see the acquired businesses contributing to our objective of reaching 100 million in revenue.
The guidance, we issued today clearly speaks to our confidence to be able to achieve this goal in the next few years.
This year, we're focused on integrating to leverage our resources.
We are pursuing some additional M&A targets in 2020 of up and we'll update you as appropriate.
Now ill pass the call back to rock to present additional financials for Q4, and the full year 2019, and our guidance for 2020, Rob Thanks, Mike starting with our quarterly results total revenue for the fourth quarter of 2019 reached 8.3 million, representing 52% increase over last year's fourth quarter revenue.
5.5 billion.
This quarter's revenue included 5.2 million in media sales.
480000 of sales related to the automated thought products.
481000 of Eagle related revenue and 2.1 million in freezers and accessories, we acquired from CBS last November.
Total revenue for the full year 2019 was 27.4 million up 39% over revenue of 19.7 million in 2018.
Media revenue for the full year of 2019 was 23.4 million up 18% over 2018.
During the full year media sales faced some headwinds with two of our top 10 direct customers coming in 2.5 million less than in 2018.
Excluding these two customers 2019 media revenue grew 44% over 2018.
One final comment on revenue on an unaudited pro forma basis and that is assuming we owned all the revenue streams for all of 2019 total revenue for the full year would've been approximately 37.7 million.
The adjusted gross margin for the fourth quarter of 2019 was 65% compared with 69% last year.
The decrease in gross margin for the fourth quarter reflects the lower margin profile of the evil and freezer product lines as expected.
Adjusted gross margin for the full year of 2019 was 69%, which was essentially flat compared with 2018.
Adjusted operating expenses for Q4 of 2019 totaled 5.5 million compared with 2.7 million in Q4 of 2018.
Adjusted operating expenses for the full year of 2019 totaled 17.1 million compared with 9.9 million in 2018.
The increase in adjusted operating expenses for both periods is primarily the result of the acquisitions of the sterile SAP, Sue and CBS and secondarily to increased head count and stock based compensation expense necessary reduce to support our overall growth.
Adjusted operating loss for the fourth quarter of 2019 was 163000 compared with adjusted operating income of 1 million in the fourth quarter of 2018.
Adjusted operating profit for the full year of 2019 was 1.8 million compared to 3.7 million in 2018.
Adjusted net loss attributable to common shareholders for the fourth quarter of 2019 was 74000, where essentially zero cents per diluted share compared with adjusted net income attributable to common shareholders of 1.1 million or four cents per diluted share in the same period in 2018.
For the full year of 2019, adjusted net income attributable to common shareholders was 2.3 million or eight cents per diluted share compared with $3.6 million or 15 cents per diluted share in 2018.
I should note that GAAP net income and yes for the fourth quarter included a one time acquisition related tax benefit of 1.5 million.
Based on relieving our tax provision allowance.
Adjusted EBITDA for the fourth quarter of 2019 totaled 1.4 million compared with 1.5 million same period in 2018.
For the full year adjusted EBITDA was 5.7 million compared to 5.5 million in 2018.
We ended 2019 with $6.4 million in cash, which we believe is sufficient to fund our operations for at least the next 12 months.
With respect to our current outlook for 2020, we've updated the preliminary guidance. We provided last November and now expect total revenue for 2020 will be between 48 to 53 million, reflecting year over year growth of 75% to 94% on an as reported basis and approximately 30% to 40% on it.
Pro forma basis.
We have lowered our revenue guidance for the evil product line by two to 3 million for 2020 to reflect the delays we have seen in the final validation of the technology by a large commercial cell therapy company.
We estimate that media revenue will grow between 20% to 30% and account for approximately 55% of total 2020 revenue with CBS freezer line accounting for an of 35% and the evil and thought product lines, each contributing approximately 5% of revenue.
The last comment regarding revenue guidance is that we expect to see sequential revenue increases throughout the year with an estimated 40% of total 2020 revenue coming in the first half and the remaining 60% from second half of the year.
Our adjusted gross margin for 2020 should fall between 50% to 62% given the lower margin profile of the evil and CBS product lines. However, we expect sequential increases in gross margin throughout the year as higher margin products are introduced at CBS and the benefits of leverage are realized.
We expect approximately 500000 of acquisition related inventory step up charges to increase Cogs in Q1, and Q2 of this year.
We expect 2020 operating expenses to be in the range of 28 $30 million inclusive of 2.8 million of intangible asset amortization expense.
We believe that operating expenses will remain relatively flat on a quarterly basis throughout the year.
Finally, we expect to be positive on the operating net income and EBITDA lines on a GAAP and non-GAAP basis for the full year of 2020.
And exit the year with an adjusted EBITDA margin of 20% to 25%.
Finally, we currently have 20.8 million common shares issued and outstanding and a fully diluted share count of 27.5 million.
Now I'd like to turn the call back over to Mike.
Thanks again Rod in summary, 2019 was a pivotal year, we effectively transform the company and they built a solid foundation for future growth over 19 has a wildcard of unquantifiable magnitude and duration or running the business to achieve success in 2020. Despite this factor I will turn the call back over to the operative ticket.
Questions Jimmy.
Thank you as a reminder, if you'd like to ask question. You can press Star then one on your touched on telephone to withdraw your question press. The pound key please standby will be compiled the Q1 day roster.
Our first question comes from Paul Knight with Janney Montgomery. Your line is now open.
Hey, Mike could you talk to the.
Diabeter relationship they are down in your comments in the press release is there an alternative being provided by that distributor and can you talk is there a competitive situation, we should be aware of.
Yes, Hi, Paul really good questions no none whatsoever. This distributor drew.
Phenomenal year over year, they pushed a product to know a 2000 different and customers. So it's really just a question of their internal forecast ability and how they're going to perform against that the norm look pretty good but in this particular quarter and they surprised us but nevertheless, if you look at the year.
In total versus the year before I, just killing it we're really pleased with the relationship.
And then the the direct stage customers that were down two and a half million in 19 or are they at zero now I mean whats the magnitude of those large customers now and what do you expect out of them in night 2020.
I can you just I can speak to one, particularly Paul and I can't name them, but we expect if they're going to double revenue in 2020 versus what they did in 2019 and Thats based on some later part of the year I'll put potential approvals and they're ramping up the inventory to meet that anticipated demand and the other one Paul.
We're assuming for internal purposes.
Zero from that customer, although we will look we will definitely get some orders from them, but given their miss in the last in 2019 were not confident of taking a forecast from them at this point, yes, and just to tag on to that doesn't mean that there's something wrong with their therapy or then going at a business through the contract there just burning through existing inventory that.
Good ordered previously.
And you are guiding the media growth of 20% to 30%.
Can you split that Neil what do you think youre.
Without commercial approval, what do you think that customer base grows at view can you split it and do you split it out like that.
We really don't split it out like that Paul we do a bottoms up of the top 50 customers many of which we do have forecasts for from four to six quarters out.
And then we look at the historical trends of the balance of the customers, but quite frankly, the top that top 50 accounts for about two thirds of the revenue. So we've identified those that have are in late stage and I think that.
The lower end reflects delays on on the part of that clinical process and the higher end of that range would.
Reflect on time delivery and reasonable uptake.
And I think Paul I would add that what the pending seven potential approvals this year that use the media.
Which is going to take us would be quarters to see those approvals get gained and then see all those customers will behave in terms of their demand. So I would anticipate next year with those plus some others will be interpreted position split that out and to answer. Your question was some detail regarding how much media is coming from approved products versus non approval for the whole clinical trial basket of customers. Okay.
Great. Thanks sure.
Thank you. Our next question comes from Serasa call later with Oppenheimer and company. Your line is now open.
Good afternoon, gentlemen, can you hear me all right.
Sure right here, a little bit light I think we're getting hit but a little bit light.
Yes.
Oh, that's worse.
Yes.
Well.
Let's try this Roger we can area.
Okay I'll just go ahead.
So Mike.
Yes.
No doubt the media site.
You said it is going on for a few quarters now.
Obviously.
Yes.
Just to follow up for the wallboard Paul's comments.
Yes.
Can you.
Yes.
In the context inventory.
I guess is that some other.
Excess inventories that.
Could be absorbed that's good.
Progress, let's see Q1 that is one thing.
Part of my question is slow down this happened before Corona wires.
Building in a buffer.
Twinkie.
Corona virus.
Going on.
Relative to our numbers.
Basically the entire delta.
Yes.
Yeah sure. Thank thanks Raj will I think it's important to remind the listeners of although tidbit that rod mentioned in that is X. The two customers that were down the rest of the customer base grew at 44%, which is really encouraging unit speaks to all the customers for adding the master files were adding but again as a basket in their early.
Okay. So they don't buy as much as the later stage companies I think the the lesson as from we'll look back perspective business.
It was such Cosford revenue from a small number of customers in late stage, they were going through their own sort of analysis to figure out how much they were going to need they didnt have a perfectly a crystal ball anyway in terms of their a clinical trial enrollment or even after approval the pace at which physicians would prescribed these novel therapies.
Layer into that some potential production issues. They may have had or not and other reimbursement challenges all the kind of stuff to my mind, just swirled together to say they did the best they could they gave us a forecast that they thought they were going to need and all these other factors came into place which caused him to not have to consume as much. So there's that side of it and rod you can speak to the.
Second part of psoriasis question on what are we doing with regard to Corona to build a buffer to make sure. We have plenty of demand an inventory of media, yes, I think just to elaborate on those two customers. One we have a level of confidence that.
Mike just referred to increasing orders through the second half of the year.
Based on their clinical activity and the other I mentioned that were just assuming zero. So we don't we don't see any downside if you will from the zero piece.
In terms of the Corona virus surcharge, we have not factored anything specific into these numbers, because it's just impossible to try and and come up.
5% factor or 10% factor. So we've gone with what we think is our best estimate based on all the information we have which includes a lot of customer forecasts.
And we're just going to have to watch it as as it evolves dynamically.
Anything else I think would be arbitrary on our from our perspective.
Got it.
Ron and Mike.
Validation by large customer.
If that is delayed.
That should be that should be fine but.
How confident you switching over this customer.
So Raj I can say that I'm personally involved and managing that relationship with the highest level and I've seen the internal validation documents that specify the evil product by name.
Also aware of this customer's potential.
Filing amendment schedule, which will also sites evil technology platform by name and so I'm feeling really in whereas a group we're feeling very confident that after the countless hours of validation work this customer and a carrier partner put into this relationship and this project which is.
It's not minimal by any means this is a big deal for them and got real pain, they're trying to alleviate and to solve and some real problems with the incumbent.
At this is.
This is a high degree of confidence that we are going to win this opportunity. It's just it and were a lot closer now than we ever have then it's a little too soon to speak to the details, but personally I'm feeling very confident that the evil technology platform is shining and it's completely outperforming the current technology and use.
It just to be clear.
No.
Third contribution from a potential partnership.
We moved the needle quickly.
Right.
Yes, that's that's a fair comment if it happens it'll happen in back half of year call at Q4, it would start and so given the monthly rental model the actual impact on overall revenue.
It's going to be de Minimis in 2020, the other aspect of its Raj was that we expect that the validation from this particular customer will.
Sort of loosen the floodgates, if you will for a lot of other customers who are waiting in the wings to see somebody big validate it's not that different from when kite.
Started to utilize Crouse store and we had a huge number of companies pylon based on that validation of that marquee customer.
Fair enough and final questions Rod.
Guidance for it.
In a seems a little lighter than what Weve a forecasting can you just give us the moving parts and there is obviously the did for different businesses.
What's moving from.
Two of those IXYS does a 50 to 62 issue.
Our set out that would be great. Thanks for taking my question you bet. Thanks Raj the fundamental driver there is the lower revenue associated with Eva which has a negative impact on the gross margin because the gross margins are generated based on.
Capitalizing overhead on a per unit basis, and the fewer units were producing getting out into the field.
The higher cost if you will is there also we've been reasonably conservative on the CBS.
The product line I think we can do better I think we saw a little bit of that in Q4.
But I don't want to go out and Pinner had on that yet so as we see things evolve throughout the year, we'll we'll definitely try them to move that number up.
Based on actual results.
Thank you.
Thank you. Our next question comes from Jacob Johnson with Stephens. Your line is now open.
Hey, thanks for taking the questions.
Mike.
Hi, Jacob.
Okay, and hope you and your employees are staying safe.
First question just just on guidance really quickly just to make sure I'm thinking about this there anyway.
The base for the entire reason for the the adjustment and guidance related to lower assumptions around Eva.
It's exactly that same number we were at 50 to 56 were now at 48 to 53, rep, reflecting a $2 million to $3 million drop in the though.
Our revenue guidance got it thanks for that right and then.
Mike you mentioned, taking share from incumbents and even though.
I imagine, it's still kind of early the project these things, but how much share could you take from one of these incumbents if you win some of that business.
That's a great question Jay could well you know we have a really good.
Oh visibility into who is using the various incumbents and there are just two or three no not many people are self managing fleets of do or so.
A universal competitors is quite.
Quite small and we have a good sense of who's using who but we really believe that the iva platform as class defining it is the next state of innovation in terms of cold chain management for these really expensive temperature sensitive shipments of both biologic source material and the manufactured doses and frankly, what to pay for response or picture paradigm reimburse.
Current environment, our customers are not having to deal with you can imagine that one loss shipment or one dose it has to be scrapped as one too many to speak nothing of the patient impact so theres real paying out there. These developers are in desperate need a better solutions. So no. We're bullish about how the evil adoption will grow once this.
Sort of pipe cleaner or linchpin catalytic conversion can be talked about but nevertheless, you know despite that you've always used with at least another 100 customers are all in their own gestation stage of clinical trials and so we look for each of those customers usage to ramp up over time as they progress through later phases of clinical trials and certainly as they get approach.
So no. It's all it's really kind of predicated on at least optically being able to talk about this win what in the back from we've got a lot of really great opportunities.
Got it thanks for that Mike and then last.
Last question.
Just to be interested I'm, not sure where where you are in the process, but could you update us on the efforts to manufacture the Eva shippers that that the CBS facility just remind us what are what the timeline might look like there and then.
Is there the potential for this led to lower some of the cost of.
Producing Eva shippers.
Yes, so relative to last part of your question Jacobs, Yes, we believe there could be a material cost savings on that.
We kicked off the plan.
Mid February it's going through a formal product development process that Scott.
Multiple folks from both Detroit in Albuquerque, and here in Bothell involved on the team and.
We expect that product to come out of the Detroit factory at the end of Q4 could happen a little bit earlier, but that's that's kind of our planning time window.
Got it great. Thanks for taking the questions.
You're welcome Jeff Thank you.
Thank you. Our next question comes from Thomas Flatten with Lake Street Capital Markets. Your line is now open.
Great. Thanks for taking the question just two for me Mike in your prepared remarks, you you mentioned that you had some Chinese suppliers could you add some more color that maybe quantify or qualify what that means relative to your overall supplier base and what the impact might be.
Sure Tom relates to supply is used in the media manufacturing and brought any additional color you can speak to would be helpful. You bet I think Tom I don't know you made I've been following us long enough, but over the last sort of 18 months, we continued to articulate a strategy. It objective of putting aside building and putting aside off site at lease.
Six months of finished goods inventory.
At the time thinking about the risk of this being an earthquake zone as opposed to a viral zone.
But nevertheless, the product is outside in Reno and a GMP warehouse. In addition to that we have about a quarter's worth of finished goods here in bothell and in particular, the one ingredient raw material that we get out of China. We have just over a year's worth of raw material of that specifically because it comes out.
China, and so thats really the only piece. We also found that gloves and masks were something obviously come out of China. So we stocked up on those and have about a year's worth either in house or on the way relative to the utilization we have in the manufacturing process of those items.
That's great and then switching over to CBS.
From loosely speaking it was about flat year to 2019 over 2018 for CBS, but the the guidance implies pretty substantial growth around 50% at the midpoint or so.
Can you talk a little bit about that what those drivers are I know, there's some some higher price units coming out, but kind of a mix of your salesforce versus versus new products.
You bet, it's really CBS historically has been focused on.
Relatively passive sales and marketing approach using distributors. We've added a handful of direct sellers, who are going to focus a large amount of their time on that marketplace in that product line and we think that alone will have a significant increase in revenue in 2020 say lets say maybe.
Half of the increase we're looking for with the balance coming from new products that John brothers in his engineering team there have underway, which will be launched in the second half of the year.
Great. Thanks, Thanks, so much thanks Tom.
Thank you. Our next question comes from Jason Mccarthy with Maxim Group. Your line is now open.
Hi, everyone. It's Dave on the line for Jason Thanks for taking my questions.
Today I was hoping you could have hi.
You said some.
Color just in a general sense on the potential impact that the car buyers Hackbright may have perhaps on a on the sell cell therapy clinical trials enrollment.
Well supply chain disruptions on as well as your customers exposure to China and have this may impact to guide moving into 2020, I know you guys I think probably someone else asked the question regarding according Clarkson.
As mentioned specifically factored into your your numbers right now, but if you could maybe provide just a general overview.
And at two additional questions after that.
Sure Dave I'll take that one so you know based on our planning we think we've got a really good sound business continuity.
Planning effort to engage at various levels based on triggers and how we see things unfolding, including.
Rotating folks through here so not all in the plants at the same time and other risk mitigating plans.
Now with respect to customer demand for media in the early this week, we sent the communication advising our customers, where we are located in to ask them to reassess their inventory levels. So on and so forth. We've seen some orders in response to that not other point to quantify what that means to us over the baseline, but there's no doubt theres been some pro.
The strong reaction to that that's driving increased demand. So they have some safety stock. If you will we haven't heard anything from customers, saying, Hey, Corona is going to.
Decreased clinical trial enrollment, which would then translate into a decreased demand for media product. So nothing yet although we are trying to keep in touch with our main customers to ask these questions. So that's that side and rod just to speak to the evil in the freezer side as well at least at this point, it's all planning to be cautious, but no negative try.
Sensor indicators and what we've seen so far from the field no. We've gotten no feedback from the field about any kind of impact at this point, but as we all know its.
Dynamic in its fast moving so.
Again, we're just going to have to play it by year.
I think from a supply standpoint, we're okay.
And it's really remains to be seen whether there was going to be a demand impact of all of this yes, that's right earlier today.
The governor you've probably read has banned all public events of over 250 people that doesnt affect the plant here workplaces are exempt we don't read that trigger anyway, and so in terms of keeping the plant open and running we think we're in good shape, we have good practices and for hygiene and keeping folks away from the plant if they are.
Six so we continue to make product we're building against a production schedule and so so far so good but as rod mentioned very dynamic and unfortunately, no. The magnitude in duration of this thing just can't we quantified at this point, probably I think we're doing all we can to make sure we can mitigate any impact on the business.
Great. Thanks for that couple other additional questions here.
I wanted to hear thoughts on the central application of a cell therapy salt increment of ours treatment for example of the other day, we heard that.
So blessed to be developing a mesenchymal stem cell therapy targeting the respiratory component of the corner buyers pathology.
The thing that the entry of cell therapy companies into the car buyer space could potentially be larger opportunity for you guys given the logistical and shipping needs that that we would see what though widespread shipment.
Oh I'm sorry.
Yes, really good question, Dave. So you know initially I would say that any application of seller gene therapy to target Corona, either as a vaccine or as a treatment will be small scale in hospitals in the form of clinical trials.
We know of at least one customer that we believe as confirmed their use of our media in a cell based clinical trial treating at least.
The acute respiratory distress syndrome, a symptom related to Corona.
Remains to be seen there's a lot of interest in that regard this theres now.
No.
Publication, but also some pressure on the use of NK cells and MSC is to treat corona again, either as treatment or as a vaccine. So what we following that closely we are in pretty good contact with most of the clinical customers. So but early days here, but no doubt there is a high degree of interest to think about that as a potential treatment modality and our vaccine.
Great. Thanks, and just one last question here could you provide some granularity on the number of late stage customer you guys have as well as the number of.
You guys have with pivotal readouts coming out in 2020.
Yes, so I think.
I'll just remind the listeners that you know because we sell through distributors, we really just we don't have.
For clarity on who the distributors clinical customers are in some cases, we do because we provide some scientific protect support but in other cases, we know we're not because we get some counts and we were just not plugged in there and so.
One of about to say are just estimates, but there are nearly 400 clinical applications using the products.
The number of Master file cross reference request as the most.
Prudent and direct evidence we have that that number of pending clinical trials will be increasing as those trials get underway and that's been growing over the last three to four years at a really strong clip, but nevertheless, the phase three count you know it's dozens of phase three trials. There are many more in the phase two and many more in phase one as we go that way.
So that's where we are with that but no doubt we built a great base of clinical customers and in addition to the the seven potential approvals this year and the five additional filings there are many other customers who will have read outs and it's a good question I'll see if I can follow up I'll go back to the.
Arm full year 2019 data report in fact, I might want to wait until they publish their Q1, because they will have a slide in there that will have.
Potential data Readouts bye.
By clinical phase for the region met space and I'll Cherry pick off who our customers are so you could look to that as a potential update from us on our Q1 call.
Great guys. Thanks, a lot nice day, thank you our best to Jason.
Thank you. Our next question comes from Raghuram Selvaraju with HC Wainwright. Your line is now open.
Good afternoon. This is Ed remarks on for Rob I. Appreciate you guys, taking the question a couple of broader ones from us.
Are you seeing any attractive acquisition targets that are big year last year, and just wondering if you're planning to pull the trigger on anything near term and if so what general area are you thinking about.
Hi, Ed Yes. This is Mike so.
As I mentioned there are some additional M&A activities underway.
I can just speak and limit remarks are there in the tool space I'll just keep it to that point anything more were probably be two revealing.
But no doubt some additional activity and at the right time, if we get some of those done than when we really excited to share that you bet.
Perfect and.
And then secondly, just wondering what the status is that the revenue diversification effort.
And specifically what percentage of your company's revenues based is currently account for the largest customer and how do you have vision is evolving going forward.
Yes, So we've had as I mentioned on media side.
Kind of concentration where the top let's just say 20, or so customers can account for 50% or more of media revenue the concentration is less.
On the cost our product line and the CBS product line is pretty concentrated relative to even though in that theres just a handful of courier partners that we have as customers. However, that's mitigated by the fact that they obviously have a number of end user customers. So that that's some diversification there.
I think that one of the reasons behind the overall M&A strategy that we embarked on was to de risk that that media customer concentration and if you think about the fact that.
Just added to shoot in 2020 were expecting media to be just over half the business right. There we've already accomplished a significant amount of diversification.
From a customer perspective.
Makes sense for me. Thank you guys. Thank you very much.
Thank you and our next question comes from Mark Weisenberger with B. Riley FBR. Your line is now open.
Thank you very much how many new regenerative medicine customers did you get in the fourth quarter.
Yes, Hi, Mark This is Mike Oh Boy I just had the number just just a minute ago, just give me a second I'll see if I can pull that out.
And Rod is that disclosed in the press release.
We typically do.
Standby for SEC Mark.
Well for for the year, it's 69 additional clinical trials and 200, new customers mature bulk of them in region med of shares or any of those but mark I know, we've got our call coming up after this all have the number for that call alright, Okay sure.
With regards to the evil shippers as you're looking to take share.
What are some of the pain points that you're solving relative to the incumbents that your customers are specifically talking about.
What a great question marks so it really rate it really relates to a two areas of risk. The first is.
No core performance and maintaining the.
The health and vitality of these really precious biologic materials into the source material or the manufacturer dose and the current shippers really haven't been innovated for 50 years or so maybe not that long, but clearly the right for innovation and so what can happen using the traditional shippers is.
The cells of the gene therapy can get jostling around inside due to.
Insufficient insulation it can be exposed to temperature excursions in fact, the traditional shippers if theyre tipped on their side they start to.
Warm up and the sales can be exposed to a hazardous waste or a complete detrimental temperature, which can render them unusable now the evault driving for shippers. The Dv line Dv for dry vapor has a number of innovations, which can solve that or at least reduce the potential for that including some patent pending features around both the candidate.
So if the newer and also the smart cap, which is the lid for this shipping container.
Additionally, we have a price advantage in that.
We're not a logistics play so the cost of leasing or renting the evil container is built into the courier charge per shipment that they charged to the developer or the end customer and we know based on how we've done market assessments that we do have a cost advantage, which would hopefully with the occurs in a cost advantage as well as they're responding to RFP season, you know.
Putting closeout and winning the business with these leading cell and gene therapy companies and then lastly, I would speak to the evolved that I asked so the evil I asses. The cloud based application that all the shipping containers talk to and continually spitting out their data of location and payload temperature and ambient temperature and various alerts that can help the couriers end to end users.
Surveil the condition of the shipment.
Only house and it's going to arrive at other factors that will be very helpful to help them intercede if something goes awry, but also to help them plan patient administration in logistics and so there were a number of features in the last several which our patented through a granted patent application that we received which are very unique and innovative and really.
Put the voice us apart from the other portals that folks have been using for a while so all things together, it's really about protecting the precious biologic payload better than as a cost advantage in that theres. The whole is aiotv component to the White House, which is really stated the higher.
That's really helpful. Thank you and along the same line as you work with the specialty carriers are you advising them on with additional instructions to take.
Precautions and cleaning them and maintaining in light of the krona virus and and could that potentially impact shipments are delayed.
Cause any delays.
Yes. Good question I think the comment I would make mark is that our carrier partners are experts in this they've been doing this for years and despite some competitive noise that that our careers don't know what they're doing and so you want to stick with a particular incumbence. That's ridiculous. These curious know what they're doing and they have validated SLP cleaning procedures procedure.
It is too.
It's Chuck the.
The temperature performance of the year of the evildoers to recharge and liquid nitrogen so on and so forth so regardless stuff completely wired in but we're certainly available to help them do that.
In fact training is a big part of a component of our service offering and Thats been recognized as how we can stand apart.
That's very helpful. Thank you and one more for me I wondering if you could talk about the cash position maybe expected earn in 2020 and you talked about some potential M&A and how would you think about funding those thank you.
Yes, great. So Roger you can speak to both as if you like sure I think on the M&A side, you know, it's going to be a combination of cash and stock at to completely depends on the deal itself.
I think with respect to just operating.
We may we made dip down to 4 million or so.
Throughout the year, but that would be the anticipated low point. So we feel very comfortable with the cash balance that we have.
Great. Thank you very much.
You bet.
Thank you and Im showing no further questions in the queue at this time I'd like to turn the call back to Mike Rice CEO for any closing remarks.
Thanks, Jimmy and Thanks again, everyone for your interest in Biolife stay safe, we look forward to speaking with you during our follow up calls and when we report our Q1 results good night.
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