Q2 2020 Biolife Solutions Inc Earnings Call
Welcome to the Biolife solutions second quarter 2020 Conference call. My name is Rebecca and I'll be your operator for today's call. At this time all participants are in listen only mode, where do we will conduct a question and answer session. During the question and answer session. If you have a question. Please press Star then one how your section.
On phone.
Please note that this conference is being recorded I will now turn the call over to rhetoric decrease Chief Financial Officer, you may begin Sir.
Thank you Rebecca good afternoon, everyone and thank you for joining us for the Biolife Solutions Conference call to review, the operating and financial results for the second quarter of 2020.
Earlier. This afternoon, we issued a press release, which summarizes our financial results for the three and six months ended June Thirtyth.
As a reminder, during this call we may make certain projections and other forward looking statements regarding future of.
Your financial performance of the company.
These statements are subject to risks and uncertainties that may cause actual results could 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 and other public filings filed with the FCC.
Company projections and forward looking statements are based on factors that are subject to change. Therefore, these stable 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 the call, we will speak to non-GAAP or adjusted results reconciliations of GAAP to non gap or adjusted financial measures 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 the use of non gap or adjusted metrics provides investors with a clear view of our current financial results when compared to prior periods.
Now I'd like to turn the call over to Mike Rice, President and CEO of biologics.
Thanks, Rod and good afternoon, everyone. Thanks for joining our call.
Q2, with another quarter of solid execution and growth.
Right the challenges all of us are facing due to covert 19.
We grew topline revenue by nearly 50% generated positive adjusted EBITDA gain of 48, new customers and just after the ended the quarter completed an oversubscribed 86 million dollar follow on offering strengthen our balance sheet for further M&A activity.
We're in a good place serving the cell and gene therapy industry is rewarding we're building a great business, Robert the leading brand with our media products and our leveraging our media customers to expose our expanded portfolio to the region that space.
We're now well capitalized to continue to build for a bigger and more profitable future a region much space as white Hot right now with 10 billion raised by companies in the first half of 2020.
Now I'll provide some Q2 highlights for each product line.
Provide preservation media in Q2 revenue was up 5% year over year end up 27% year over year for the first two quarters of 2020.
Recall that in Q1 this year response to our customer outreach program, we booked about 1.5 to 2 million and cobot related safety stock orders.
Media order so far in Q3 are strong we.
We gained 14, new media customers in Q2, including Caribou Bio Sciences, immuno Aktiv and data Minerva Biotechnologies and the operation also in the quarter, we processed 14, new Usftwo Master file request to support the use of our by preservation media products and new cell and gene therapy clinical trials.
We now estimate that our media products are used in our plan to be used in about 450 customer clinical applications.
Relevant to the current pandemic, we have at least seven customers using our media in at least nine planned or current clinical trials of Coburn 19 therapies or vaccines.
These include EBITA biomedical Capricor Cartesian therapeutics, so lycos miler therapeutics neo for Gen vet stem and vitro biopharma.
Regarding use of our media products and approved cell therapies Im glad to confirm that Gilly at kite uses cryo store in there recently approved to cartus for relapsed or refractory mantle cell lymphoma.
This is in addition to kites longstanding use of cryo store in your Skarda.
Also Bristol Myers Squibb Bluebird bio filed for approval of it kept the Jane Vic Lasalle also known as 80 sell or BB 21, 21, as a treatment for multiple myeloma. If approved this will be the first car T cell therapy to treat the second most common form a blood cancer Karl stores used in the manufacturer BB 21 21.
I'll remind you the cost or is also used in Lisa so cell therapy for relapsed refractory large b cell lymphoma from Juno Celgene BMS revise PDUFA date for Lisa sell this November 16th Carter stores also use in tech low from Bluebird, we have so many shots on goal here with our base with Celgene therapy customers.
Many of you remember that former FDA achieve Scott got Lee predicted in January 2019 that by 2025. The agency will be approving between 10, and 27 gene therapy products annually. This all points to tremendous upside for buyer life.
Automated thought revenue and evil cold chain revenue were on plan in Q2, we gained five you thought star customers and six new vivo customers working with our Courier partners, we jointly driven adoption of the Eagle platform to now be supporting over 100 clinical trials. Its important to note that these are all early phase trials. So the.
It is low and hence the revenue is relatively small, but we're confident evil platform will emerge as a leading coltrane management preference and the cell gene therapy space and notably.
We continue to support and approved cell therapy company in their evaluation. So far the validation work is on track and we believe if we win this customer similar to how our media products were broadly adopted after Kate Juneau and others adopted this cold chain customer win could greatly accelerate adoption of evil platform in the cell and gene therapy space.
Turning to our CBS freezer franchise over 19 has impacted us in two ways and traveling onsite visitor restrictions that customer prospect sites and also a delay in approvals for large capital equipment purchases. Despite this environment. We gained 23, new customers that purchased freezers or related racks necessities and the second quarter.
Sure.
Product development on two new freezer platforms is continuing and we anticipate launches late in Q4 or in Q1 will also making good progress to vertically integrate and use our foundry fcbs to manufacture the evo dry vapor shippers for our cold chain management platform.
We expect to offer CBS may doors in the first quarter of next year.
I'll conclude my remarks, with a recap of our funding activity. This year with a follow on 20 million investment from cast and capital in May and the 86 million dollar oversubscribed public offering we completed just after the end of Q2 buyer life is in great shape to continue to consolidate the southern gene therapy Bioproduction tool space.
We're actively engaged in additional M&A and investment discussions and look forward to sharing the details when we can.
Now I'll pass the call back over to Rod to present, our financials for Q2, Rob.
Thanks, Mike revenue for the first quarter totaled 9.9 million, representing a 48% increase over last year's second quarter revenue of 6.7 million.
Media revenue for the second quarter of 2020 was 6.7 billion or 67% of total revenue, representing an increase of 5% compared to last year.
Year over year growth in the media revenue.
It was impacted by the significant pull forward in demand we realized in the first quarter related to our customers building safety stock.
This quarter's revenue also included 376000 of sales related to the automated thought product line 439000 of Ebo cold chain related revenue and 2.4 million and freezers and accessories.
We believe revenue from our thoughts and freezer product lines was negatively impacted by cobot 19 related delivery delays and capital equipment order postponements something that we expect will continue through the balance of the year.
Revenue for the six months ended June Thirtyth 2020 totaled 22.1 million an increase of 77% over the same period in 2019.
Media revenue for the first six months of 2020 increased 27% to 15.3 million compared to the same period last year.
Our adjusted gross margin for the second quarter of this year was 57% compared with 72% last year.
For the six months ended June Thirtyth, adjusted gross margin was 61% compared to 72% in the same period last year.
The decrease in adjusted gross margin for both periods reflects the lower margin profile.
They did thought vivo and freezer product lines, which accounted for 33 and 31% of total revenue respectively.
In addition in anticipation of growth in in the product lines. We acquired last year. We've also increased our fixed manufacturing overhead at our Ebo and freezer operations.
Adjusted operating expenses for Q2 totaled 6.1 million compared with 3.8 million in Q2 of 2019.
For the six months ended June 32020, adjusted operating expenses totaled 12.5 million compared with 7.2 million in the same period last year.
The increase in both periods is primarily driven by additional expenses related to the acquisitions made in 2019 as well as an increased headcount and stock based compensation expense necessary to support our overall growth.
Adjusted operating loss for the second quarter of 2020 was 510000 compared with an adjusted operating income of 993000 in the second quarter last year.
Adjusted operating income for the six months ended June 32020 totaled 906000 compared to 1.8 million in the same period last year.
Our adjusted net loss for the second quarter of 2020 was 492000 or one cents per diluted share compared with adjusted net income of 1.1 billion or four cents per diluted share in the same period last year.
For the six months ended June 30, adjusted net income was 952000 or two cents per share compared with 2.1 billion or 11 cents per share and the same period last year.
Adjusted EBITDA for the second quarter totaled 1.2 million compared with 1.9 million the same period last year.
For the six months ended June 30, adjusted EBITDA totaled 4.1 million compared with 3.3 million for the same period last year.
Our cash balance at June Thirtyth was 30 million taking into account the public offering we closed in July which provided approximately 80 million in net proceeds we now have in excess of $100 million of cash on the balance sheet.
In terms of our share count taking into consideration the shares issued into July offering. We currently have 32 million shares issued and outstanding and 35 million shares on a fully diluted basis.
Finally, despite the challenging operating environment, we believe that our first half financial results, which includes 77% year over year revenue growth.
Media revenue growth of 27% and adjusted EBITDA of 4.1 million continues to support the rationale underlying our overall growth strategy.
The recent capital raises provide us with the financial flexibility to continue to pursue strategic opportunities as they arise now I'd like to turn the call back.
Thanks again Rod in summary, we continue to execute and create value for our customers and shareholders. In this challenging covered era. The businesses on a solid foundation and our presence as a leading cell and gene therapy bar production tool supplier of continues to expand.
We look forward to further execution of consolidating tools space to drive growth.
Now I'll turn the call back over to the operative take your questions Rebecca.
Thank you we will now begin questions. A question answer session. If you have a question. Please press Star then one and you touched on some if you wish to be removed from the Q. Please press the pound signed by the Heskey, if you're using a speaker phone you may need to pick up the handset first for pressing the numbers.
Once again, if you have a question. Please press Star then one.
And our first question is trending Jacob Johnson from Stephens. Your line is open.
Hey, Thanks, guys for taking the questions and congrats on nice quarter.
Yes.
Hey, what's with the approval of take cards is this largely a media opportunity or could other parts of your business benefit from this approval.
Yes. Good question Jacobs. So initially media, yes, but of course, we continue to to offering to present, all the parts of the portfolio to our current customers and gilliam tight as a strategic customer so we'll be having those conversations.
Got it and then maybe a high level follow up on that.
Can you just as we think about a wave of commercial approvals of the cell and gene therapies. How do you think about the initial ramp as these therapies I imagine it varies by the indication and the customer, but but any color on that.
Well you answer that for yourself you about it does vary much very on the indication of coupled with the coincident. So how while these companies can align the following things that I'll have to happen you know to converge to achieve commercial success and that's about manufacturing capacity.
The reimbursement strategy and then finally, the training ramp for the clinical centers to administer the particular biologic solve all the stuff goes well and I would expect and we'll see things going faster than the initial ramp obvious Garda in Cumbria, what's really the two pipe cleaner applications that we've all been studying offer.
Quite some time got it thanks for that and just one last one maybe for Rod can you just expand on the increased manufacturing overhead is this largely due to the CBS deal or there's some other areas, where you are adding capacity right now.
Yes, I think it's less to do with capacity as it is to do with beefing up the quality control side of the manufacturing processes, both in Detroit and in Albuquerque.
They were running a little bit on lean side, we have a pretty high bar with respect to quality and we want to make sure that our quality system is consistent throughout all of our operation and so it's really that.
Thats driving that increase.
Great and that makes sense, thanks for taking the questions and congrats on the quarter.
Thanks for taking up.
And then next question is found Mark we've been rigor your line is open.
Thank you good afternoon.
Hey, Mark wondering long period I.
Im wondering if you could provide maybe a little bit more detail on a potential timeline or the qualification and ultimate kind of acceptance of the evil platform and then as we think about that would that be more of a partnership or cryogenic transportation or dry ice transportation.
Yes, good questions Mark I think.
We will just be really careful we say here because this is a highly competitive environment as you can imagine.
The outlook evaluations plus validation work continues there's some work to do here, which we think will get completed in all in the next few months and then ill pass that how soon the adoption or the transition to the evil might occur of remains to be seeing but we're confident that we're going to witness assuming the rest of the work in our goes as we expected to and.
Well look forward to updating as we have more details.
That's helpful. Thank you and just one more from the I guess now with this really expanded war chest you have in terms of how you would look to deploy the money should we be thinking about maybe you doing one large deal or may be multiple deals and then would you be looking to add scale to current operations.
With some complementary offerings or completely new offerings to the to the portfolio. Thank you, yes Super Super question, Mark you better in the short answer is all of the above and when we can be more specific about that we will but everything that you mentioned is certainly up for consideration.
Got it will look forward here and more thank you.
Thanks, Bob.
Our next question is from Carl Bernstein. Your line is open.
Great. Thanks for the question and congratulations on the water.
Hi, Thanks Carl.
Okay.
The CBS numbers look really good but I'm wondering if you're experiencing using any.
Capex deferrals and if so if you had come quantum or have any feel for when those.
Pickup borders and she will be held back orders will come online. Thanks.
Yeah, I wish we had a better crystal ball call really you know we had one large freezer order that got delayed we're working hard to see if we can pull that in in this quarter, but who knows and might it might get pushed even farther but thats a significant order amount no doubt the two things that I cited in my remarks are.
Inability or restricted ability to travel to get on site to actually do what we would normally do in sales and a highly consultative process for a technical sale like a freezer, which includes everything from the once they fall in love with the freezer or is it going to go with that fit what kind of plumbing and exhausted electrical utilities have to happen so lot of stuff, but the customer has a new first to.
Ready to receive in addition to our own factory acceptance testing and wants to get it there on site acceptance testing, which meters out how we can build for the various stages of the project, but it's been challenging for sure as far as when things are going to open up again, Thats anybody's guess that depends on which part of the country there in and what to particular covance.
Incidents rates are in there the restrictions from the local health authorities were doing as best as we can in this virtual mode and hopefully this new normal is not going to last too much longer, but we'll see right.
That's great to them as it stands the number the numbers for the quarter good anyway.
I'm just thinking that.
When.
When things do open up Theres, probably a pretty pretty healthy backlog of business there.
While we are certainly doing everything we can to prospect and to to get the product as opposed to all of our captive customers as well as the folks in the space, We don't use media and so thats. The order were attacking this in media customers first and then not media customers, who don't know us as well.
Great. Thanks.
Local thank you thanks Carl.
Once again, if you have a question. Please press Star then one.
Ian we have a question from Cory Deutsche Bank. Your line is open.
Hey, Hey, I mean, how you guys doing congratulate Icore order.
Thank you.
Could you.
Provide a bit further color.
Kind of the M&A landscape and just given.
Current circumstances and that net income holes in this quarter, how you guys have.
Ultimately decided that now is a is a good times kind of roll up some more of the space.
Sure I'll take the first part Rob maybe you can answer the financial impact So Corey I think what I'll do I'll start off and just repeat what are we looking at right.
So, let's just say that in the cell and gene therapy bar production tool space. Maybe there are 150 companies that are selling something in order to these companies that.
That are in our wheel house here and you know a year and a half about two years ago, we decided to to just dissect that someone gene therapy manufacturing workflow and do as many discrete chunks of types of work as we could whether it's the acquisition of the source material the moving of the source material from patient to the factory and then once it gets there.
Everything around cell expansion purification transfection, all the stuff, but it takes to turn into a final dose and the storage of that dose until it's time to get shipped back to the factory than what's it shipped into once it gets their houses thawed, then underneath that layer Corey we started to put company names in there that have technologies that fit or satisfy that particular part of the workflow. So.
That's really the roadmap that we're following our it's not too hard to figure out and that's a reasonable way, it's kind of attack it and so there there are still more than a handful of targets that are of interest to us either for outright acquisitions, if not some in the early stage seed investments for what we would consider to be novel that potentially very disruptive technology. So that's.
So we're going about it in terms of right now and why now.
Well.
We're a relatively small company there are certainly consolidators at much higher levels of a layer cake in this ecosystem, who are continuing to consolidate and with much larger bite sizes. So we're going to do everything we can to grow this enterprise smartly as quickly as we can so we can continue to add shareholder value and thats really the the goal there around with respect to him.
Net income whole as he described that you want to make any comment on that Corey when you say whole what do you mean by that.
When you think about the net loss.
The endpoints for.
Well, yes, but of that 16.4 Corey.
Want to say 14 plus million of that let me just gets to the page.
Yes, 16.4 of the 16.4 has to do with this change in the value of our warrants okay. The warrant liability. So it's got nothing to do with the operating.
Side of business and on top of that since 98% of the warrants have been converted in Q2 on a cash as basis, we're not going to be seeing the swings anymore below the line there but in terms of overall what are sort of criteria is with respect to the impact on net income is that we definitely want.
To see something that's going to be accretive on an adjusted basis.
Within a 12 to 18 month period, and if it doesnt meet that criteria, we may well just make a minority investment in sort of put it on the bench until it gets to that that help that level.
Yes, I mean, let them here guys that I think you guys have done a tremendous job in terms of rolling up the space. When you think about its own gene therapy landscape and the incredible Tailwinds and just the robust growth of pipelines and.
Products coming to treat.
Commercialize I think you guided to pick and shovel play have positioned yourself incredibly well in that color on the 16.4 million.
Million dollars is very helpful. Because now.
It gives me a lot more clarity in terms of how you're positioned that I'm excited here about the future so great job and congratulations on an awesome quarter.
Thanks appreciate your interest and support Corey.
And our last question a chunk of Johnson your line is open.
Hey, just one quick follow up last year, you had some lumpiness in the media business.
Finally, a strong first half in that business line. It sounds like this is continuing but as we look into the back half of the year just any other color on on your expectations for media revenues.
Yes, not not really not at this point Jacob I'll, just reiterate what I said during my prepared remarks in that and also far here, we are a little bit less than halfway through the quarter of Q3 and media orders are strong. So hopefully that will be sustained and we'll have some really good news to report for the full quarter of media sales.
Got it thanks for taking all the questions. Thank you.
We have no further questions at this time ill now turn the call back over to migrate.
Thanks, again, Rebecca and thank you everyone for your interest in Biolife. We hope you in your loved ones can stay safe and healthy and we look forward to speaking with you during our follow up calls and when we report our Q3 results good night.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.