Q3 2020 Biolife Solutions Inc Earnings Call

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That's the question during the session you will need to press star one on your telephone.

I would now like to turn the call Richard Baldry degree. Thank you you may begin.

Thank you Sandy good afternoon, everyone and thank you for joining us for the Biolife Solutions Conference call to review, the operating and financial results for the third quarter of 2020.

Earlier. This afternoon, we issued a press release, which summarizes our financial results for the three and nine months ended September Thirtyth.

As a reminder, during this call we may make certain projections and other forward looking statements regarding future events or 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 qualify as forward looking statements I refer you to our periodic and other public filings filed with the SEC.

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.

The company assumes no obligation to update any projections or forward looking statements, except as required by law.

The media customers in Q3, including goal Therapeutics, Margaret Therapeutics Nano Ghost Nutracea Therapeutics, Nerikes therapeutics, Santa biotechnology stability biologics and Convivio biotechnology.

Also in the quarter, we process to 22, New U S. FTA Master file request to support the use of RFID preservation media products, and new cell and gene therapy clinical trials.

Some of these new master file request submitted by Amnio technology, a video biomedical key artist pharma kite pharma legend biotech Mustang bio knackwurst to Lars Therapeutics and free Umbra immunologic.

We now estimate that our media products have been used in more than 450 customer clinical applications, where.

We're following potential approvals for several customer therapies over the next few quarters and we'll update you on future calls about potential revenue contributions from approved 17 therapies that our media products are incorporated in.

Overall, our media franchise is very strong and we continue to take share from the homebrew paradigm as it relates to human clinical applications for.

For the first nine months of 2020, some key customers that drove or 25% year over year over year immediate revenue growth included Elgin <unk>.

Bluebird bio Celgene, Johnson, Juneau, kite pharma, Knackwurst and squeezed biotechnologies.

Automated thall revenue and evil Cole chain management subscription revenue, we're in line with our reduced expectations due to COVID-19 impact on in person sales meetings, we gain a seven new thoughts our customers and five new Evo customers are Evo called Jane management platform is now used in more than 100 clinical trials.

It's important to note that these are all early face trials. So the shipment volume is low and hence the revenue is still relatively small.

Regarding the commercial cell therapy company that has been validating are evoked platform I'm very pleased to report that this works has been successfully completed and we're working to gain approval to disclose the company name and other details.

Turning to our Cvs freezer franchise I'll remind you that COVID-19 is impacted us in two ways and.

And travel and onsite visited restrictions at customer and prospects sites.

And also a delay and approvals for large capital equipment purchases disc.

Despite this environment, we gained 23, new customers that purchased freezers or related to rent necessities in the third quarter.

Cvs customers in Q3 include asked bio and live in Therapeutics, Novavax and Neupogen.

Other key customers that bought Cvs price in 2020 include actresses Blue Rock therapeutics.

Celgene fade therapeutics tight pharma Lanza and VW are.

Product development on to new freezer platforms is continuing and we anticipate launches in Q1, we're also making good progress to vertically integrate and use our talented design and engineering teams at CBS to manufacture the Evo drive a for shippers for our whole chain management platform.

We expect introduce Cvs may doers in the first half of next year.

Now I'll talk a bit about <unk> safe as you know we close the acquisition of size safe on October 1st.

<unk> serves the Biopharma in southern gene therapy industries by providing outsourced or off site controlled and monitored storage of customers temperature sensitive biologic materials.

This division of Biolife is led by dynamic leader, Gary Richardson Who's built a remarkable company anchored by quality service and high trust relationships with customers are spent quite a bit of time getting to know Gary in the business and I can relay that icy tremendous potential for this new Biolife service offering.

A few weeks ago, we issued a press release about size safe landing of nearly 3 million dollar contract with a large pharma company for COVID-19 vaccine storage.

This company also uses our bio preservation media.

I'm glad to update you with news at this contract value has already increased and we can scale the service offering fairly quickly to support additional companies with storage needs related to COVID-19 vaccines.

We are currently investing in sycee to support additional storage capacity and several new locations near strategic centers of cell and gene therapy development <unk> global logistics hubs to support commercialization of new therapies.

I'll conclude my remarks, with some comments on our ongoing M&A activity continue.

Continue to pursue additional opportunities to operate acquire or invest in novel potentially disruptive technologies that fit very well in our portfolio and that would expand are offering an increase our value proposition for cell and gene therapy developers and the broader buyer production tools market, we expect to announce additional transactions in the next few months.

Now I'll pass the call back to Rutgers on our financials for Q3 rod. Thanks.

Thanks, Mike [noise] revenue for the first quarter totaled $11.3 million, representing 71% increase over last year's third quarter revenue of six 6 million.

Media revenue for the third quarter of 2020 was seven $4 million with 66% of total revenue, representing an increase of 22% compared to last year.

Orders revenue was also included 277000 of sales related to the automated thought product line 494000 of ego cool chain related revenue and three $1 million in freezers and accessories.

While Q3 freezer revenue was up 27% sequentially over Q2, we believe both the thigh and freezer product lines will continue to face some covid related headwinds through at least the balance of this year.

Revenue for the nine months ended September 30th 2020 totaled 33 4 million an increase of 75% over the same period in 2019.

Media revenue for the first nine months of 2020 increased 25% to $22.8 million compared to the same period last year.

We believe that the year to date comparison is the best reflection of how media revenue is growing as it smooths out the quarterly Lumpiness, we witness throughout 2019 and earlier this year.

Are adjusted gross margin for the third quarter was 57% compared with 69% last year.

For the nine months adjusted gross margin was 60% compared to 71% in the same period last year.

The decrease in adjusted gross margin for both periods reflects the lower margin profile of the automated thought evo in freezer product lines.

Adjusted operating expenses for Q3 of 2020 totaled six $8 million compared with four $6 million in Q3 of 2019.

For the nine months adjusted operating expenses total 19, 3 million compared with $11.8 million in the same period last year.

The increase in both periods was primarily driven by additional expenses related to the acquisitions made in the second half of 2019 as well as an increased head count and stock based compensation.

Necessarily to support our overall growth objectives.

Strategy.

Now I'd like to turn the call back over to Mike.

Thanks again Rod in summary, we logged another very solid quarter, and we look forward to further execution consolidating the tool space to drive growth. We very much appreciate the opportunity to serve the cell and gene therapy space and are focused on building biolife into a much larger class defining company.

Now I will turn the call back over to the operator to take your questions Sandy.

Yes, and as a reminder, if he would like to ask a question.

One on your telephone again press Star one on your Thompson, if you would like to ask a question, we'll pause for just moved into composite acuity avastin.

Okay.

Okay.

Okay.

Okay.

For our first question is from Christian <unk> from Collyn Cincinnati Your line is open.

Great Hi, Mike and Rob Thanks for taking my question Hi, Chris This thank you.

Like just to start on the media business, if I look at the progression of new customer ads I think it was 16 in Q1 14, Q2, and 21 Q3, so really encouraging graph in spite of various travel restrictions. So that you know with that mind can you give a sense of how you're driving solid new customer adds during this period.

And could you also share how the new customer pipeline or funnel is tracking for the next few quarters.

Well I can certainly take the first part Chris So with media. The sales dynamic is different you know, we're really been able to leverage and take advantage of much broader exposure and awareness of wireless stores, specifically as it relates to it and optimize tool for cell and gene therapy clinical trials and commercial production and all the work we've done over the last nearly 15.

In years to go that quality reputation and those personal relationships.

In large part driven by our Chief Scientific officer, and SVP Dr. Avi Matthew So he's really connected he does a great job taking care of customers and prospects and that word of mouth is really paid off in particularly as people move from company to company and they take that knowledge of a positive experience at cost or from their former gig to wherever they are going to land or whether new.

Job might be so thats its really helpful. It's much less dependent.

In person sales presentations about that due to this just this fantastic tail when we've got of clinical customers and scientific evidence and nearly 500 articles on our web site. So the dynamic there is vastly different from going into the pitch a freezer that might have a three or $400000 price tag and not me want to get into a facility.

Because people aren't there they got severe or strict traveled to visit a restriction. So a completely different dynamic there that will get many many inbound inquiries from media. We haven't asked the scientist a button on our web site, which.

Allows folks to ask maybe in some other folks personally a specific questions to their applications and and clearly thats paying off in converting some of those inquiries into into customers. So thats been really really helpful. A lot of leverage there. Nevertheless, you know we continue to invest in additional sellers got a couple openings right now for a more use space. These days.

Revenue in sales folks who can at least present the entire portfolio. So we're going to continue to do that to make sure that we can keep keep up with the pace of new companies and opportunities.

Chris to the part of your second term.

Half of the question about the pipeline will I think.

We want to speak to the here and now what we know about is we know orders and we know master file a request right and an abbey through his.

Discussions email and verbally with new prospects in some of the sellers. They have some look into you know who might be adopting coming down the road, but nothing that we would want to monetize or get into the habit of monetizing I think as it goes right now that the flow of new customers is just phenomenal and we think we're taking share from homebrew. So you know our numerator in that equation you know we're adding.

More clinical trials faster than the number of trials is growing and particularly in the oncology space with some type of T cells to treat various cancers. So that's what I can say on that the question.

Okay. That's fair and then congrats on the Eagle validation work he shared with his customers converting over exclusively to eagle or the diversifying their supply base.

Okay, great. Thanks for taking my question, Sir you're welcome.

Next we have Jacob Johnson from Stevens Jacob your lines open.

Hey, guys. This is mason on for Jacob Hey, Medicine.

Hey, So just a couple of quick ones for me for your media business could you remind us where manufacturing capacity stands and how much does that does a new line costs and how much revenue would would that bring online.

Okay go ahead rock yeah. So our current capacity is somewhere in the neighborhood of as round numbers $40 million to $50 million as we sit today and as we sit today is two a septic clean rooms in Bothell, Washington, running one shift.

Just one question around the cross selling opportunity I think I think Weve. This has come up on calls previously are you prepared to disclose which customers by which lines what that by one two or three or four.

Where are we on that or is there anything you can provide in terms of insight around that yes.

Yes, great Great question, Tom So not yet you know still looking to integrate some of the various CRM system. So we can have a holistic dashboard view of that so we can speak to that.

Really good question they are different sales different decision makers.

The types of customers are as you know from the recent press release of Biopharma Company, who is looking to have some off site storage for COVID-19 vaccines right and I mean, we think that could be just a really unfortunate what I really phenomenal opportunity for the company no doubt not only with this company or this customer with others of that ilk. So.

What's going on there there are some of gene therapy companies, who are doing some planning for off site storage and then the traditional biopharma companies, who have other temperature sensitive biologic material, where they are either looking to derisk by having not all their eggs in one basket.

Or they just out of internal capacity and so it's a it's a lease space or.

Build a building and buy freezers and hire people to manage that space kind of decision for them build Dubai and so <unk>.

<unk> safe and Gary in particular have done a great job.

Articulating a value proposition and then proving it over time through through performance that it does make really good sense for many of these companies to outsource.

Yeah.

That's great. Thanks, so much for the questions taking the questions you're welcome.

Next he had anything.

From that Kingdom.

HM HM HM.

I wanted to be on the line for a J and thanks for taking my question.

Given potential synergy that exists between pumping biogenic systems in Cyprus I was just wondering if the buys large space.

That you guys were particularly focusing on on building up.

Most definitely but we're going to be pretty picky about it.

We're not looking to turn <unk> into sort of a generic by our repository space.

That's fairly well dominated and there's a lot of companies doing that we want to be focused on biopharma 17 therapy. So we can stay close to the the core group of customers that we have in common and really leverage everything in the offering to them. These types of customers through a lot of hard work not only from Gary and his team but from.

Dr. Matthew here and the rest of us biolife over the last many years, we built some great relationships built on trust and performance in these companies want to buy more stuff from us. So we're going to go for it I mean, we're going to find more ways to to add value and derisk their processes and.

And take take much better care of them, even though we're doing that great right now but.

A preference for people wanted to do business with Biolife versus in some cases much much larger companies. So that's the opportunity in front of us hence the reason that we're driving this M&A strategy.

Great. Thanks, and then just one other quick question here, so just as the <unk>.

And then it continues to sort of on call here I just wanted to see if you could.

Some color on which product line, thank will continue to be sort of impacted.

Yeah go ahead, Rob the rap, it's all about Capex list prices and selling prices and that right. Yeah. It's the it's just basically be automated THAAD device and the freezer line. Although again the freezer line made a nice come back <unk> was a very tough quarter for the freezer's because there's a lot of logistics involved in delivering those.

And because they are large and so a lot of customer sites were simply closed in queue to that opened up in Q3, hence the 27% sequential increase in freezer revenue from key to key three but there's no doubt that the sort of attenuated selling process, which has to be done over zoom.

Is definitely impacting the.

The uptake of that so so those are the two product lines that are going to be impacted.

Great. Thanks for the additional color appreciate it.

You're welcome.

Next we have.

Mark Weisenberger from.

Kennedy Martin.

Yep. Thanks. Good afternoon. Appreciate you taking the question.

Following up.

Following up on that last question may be can you talked about the budgets across your cell and gene customers are you hearing that covid disrupted spending earlier in the year and maybe there's some money left over that does need to be put to work before the year end and where would you expect those incremental dollars to fall within your operations, yeah, not not so much as a tree.

<unk> certainly in some specific cases, we've heard that but we've also heard in other cases continued delays delays and being able to accept freezers and to make some other decisions in that regard. So I wouldn't say that directionally, we see a trend in that regard.

Understood.

With regards to <unk> it looks like they're operating across all their facilities at around kind of alcohol at 53% utilization and in 2019, there were EBIT margin yellow around 18% can you talk about the operating leverage as as the business scales and kind of wonder if some expectations for step.

The state margins for that business.

Yeah go ahead, right I'm not sure if what marks referencing and some details. Let's go ahead, yes, Mark I think that.

Until we issue the audited financial statements, which there'll be coming out shortly here.

I want to defer that question because as we talked about.

The company has not been.

Historically, keeping their books according to gap.

And so.

So again as I mentioned earlier, we're just not going to get get out over the tips of our ski season, and disclose some things that our customer pending customer.

Would be upset about so we're going to treat that with the utmost respect and again when we can get some approval to make some selective disclosures, we're going to do that but you can hear in my voice on logistics static and the way. The validation was completed it was a ton of work by this customer one of our carrier partners and also a bunch of people here at Meyer life, including some round the clock and seven.

<unk> Avenue and basically recurring revenue. So the thing that's a little tougher to peg is when the new customers will be coming on board. So there will be some stair step increases in the revenue, but not seasonally related more just about the timing of landing a customer in signing that contract.

Okay. It makes it makes so much you bet.

And the next thing you have car bring friend North named capital market quality of lines open.

My question.

Follow up with respect.

Life.

Hoping your loved ones can stay safe and healthy during this pandemic and we look forward to speaking we do during our follow up calls and when we report our full year 2020 results Goodnight.

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