Q3 2020 Thermogenesis Holdings Inc Earnings Call

Good day and welcome to the Summer Johnson's Holdings Conference call My past review, the financial and operating results for the third quarter ended September Thirtyth 2020.

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There will be an opportunity to ask questions.

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[laughter] during the conference call. Please see <unk> pressing star and then zero.

As a reminder, this call is being recorded.

Oh, just like converts over to our host.

And that whole Schwartz Rx Communications. Please go ahead.

Thank you operator. This conference call contains forward looking statements within the meaning of the federal Securities laws. The company's actual results may differ materially from those projected in the forward looking statements I.

Additional information concerning factors that might cause actual results to differ materially from.

And those in the forward looking statements.

Contained in the company's periodic reports filed with the Securities and Exchange Commission.

The information presented today is time sensitive and is accurate only as of the date of this call November 12, 2020, if any portion of this call is being rebroadcast retransmitted or redistributed at a later date thermogenesis will not be reviewing.

I think we're updating this material participating on today's call are Dr., Chris Hsu, Chief Executive Officer, and Jeff called <unk>, Chief Financial Officer, I'd now like to turn the call over to Chris. Please go ahead Chris.

Thank you Paula and thank you to everyone for joining the call. This afternoon.

We appreciate you taking the time to be seen.

During the third quarter off Twentytwenty as Koby 19 comps as Koby 19 cases continue to escalate worldwide. We continue to evaluate our strategies to cope with the global pandemic.

Meanwhile, we continue to serve our global customers the cell gene therapy.

By providing them with the cutting edge tools to meet with their cell processing needs.

Instead reminder, for the past 20 years, the Companys coal business competence resides seeing its dealership and the ability to develop cutting edge tools and systems for the cell processing in the south.

[noise] therapy field.

And our products include the car T Express platform based on the latest high the innovative buoyancy activated sell sulking technology.

That's a backs technology is our patent protected high efficiency cell salting technology.

In lepton micro bubbles instead of the traditional magnetic beads activated cell sorting or Max.

The facts technology is the key component of the Carty Express platform, which is intended to address the critical unmet need for large scale cellular manufacturing.

<unk> for the cell based therapies.

The Kake Express system itself is a multi module or a base the system that offers customers a gi stream this solution.

Your cell processing selection washing the formulation and quiet preserved.

I mean.

Providing a comprehensive and commercial viable several manufacturing solution for car key car NK and other cell based therapeutics.

To the XP bio archive platform.

Which is a leading automated.

You know processing and smart file storage platform for clinical biobank.

The Eightci system represents a significant advancement in the automated corporate processing.

LOL youthful fast automated and high quality stem cell enrichment.

Brown coal production.

The ball archive system is the industrial Stephen small qual preservation system, providing the ultimate performance and protection for today's high valued sells for Tomorrow's critical therapy needs.

And three.

Our PSP platform for point of care applications.

Which allows for rapid and automated processing of autologous cells from peripheral Brad all bone marrow at the point of care.

Which such as surgical centers all clinics.

He also allows isolation off a different cell fraction from the blood simultaneously.

For example, the simoes simultaneous isolation of a convalescent plasma and the immune cells.

This robust product line with a strong focus seemed to.

Cell gene therapy markets has made some within this is a market either in automated cell processing technology for cell banking and cell therapies.

Our new is the platform the car T Express system significantly increased the cell processing efficiency, thus reduce.

As the cell processing time and cost.

We are further exploring strategies to initiate our own commercial manufacturing service using the Carty Express system in the year of Twentytwenty one.

As many companies have recently reported.

Our core business was also affected by the Kobe 19 pandemic.

The Cobi 19 has had a significant impact on the cord blood banking industry as a whole.

Resulting a fewer corporate units being stored grow body. During this time.

Additionally, with many countries and states on Lockdown, some customers have up to consumes their existing safety stock of our Xcede disposables instead of placing new orders during the third quarter.

That said, we do expect sales of our core products.

Products to increase back to their pre pandemic level after the house emergency subsides.

It is important to note that our long established expertise combined with the unique flexibility of our technology platform has enabled us.

To also respond quickly to the urging market needs related to the global pandemic.

Towards that end over the last over the past few months, we continued working with our joint venture partner immune site to mobile to mobilize.

We're knowledge base and grow our resources in the medical technology field to evaluate a range of solutions to fight COVID-19.

We continue to refine our strategy to address unmet medical needs with the development of both prevent Kevin therapeutic treatment.

Our the disease.

During the third quarter, we entered into a definitive agreement with bile share to healthcare limited to market under the symbol GNSS brand, a SaaS coal to IGPM IBG antibody test kit.

With.

He has already received emergency use authorization around the use of da.

The antibody test kit is designed to identify COVID-19, IDN slash atg antibodies using a single drop their top brands from the individual who has encountered the virus in the past.

Yes, and developed an antibody response.

Antibodies as you know our proteins to help fight infections and per byte protections against Green vaccines, therefore comfort immunity.

We also recently were just.

I'd say Pat came from the United States patent and trademark office for our new test reader technologies, which improves the speed and accuracy of the lateral throat immuno assay to detect koby 19 antibodies buyer in buy in instant digit readout.

This eliminates human error us and reduce the possibility of false negative or false positive results.

We believe this could potentially change the low alpha and rapid surgical testing and public health monitoring during the COVID-19 crisis.

In summary, we've.

Continue to explore and execute strategy to become a market leader in automated cell processing tools and services.

Two two.

To provide for the cell gene therapy market.

While also evaluating a range of some.

Solutions to fight the global COVID-19 pandemic.

We are also continuing to explore opportunities to co develop too.

Three in license and to acquire additional innovative products and solutions, which would be synergistic.

We grew our current portfolio of products.

And with that let me turn the call over to Jeff to share the key financial results from the third quarter.

Jeff.

Thank you Chris.

Net revenues for the three months ended September Thirtyth 2020 for 2.4 million.

Compared to $4.1 billion for the three months ended September Thirtyth 2019.

Crease of $1.7 million or 42%.

Decrease was driven by lower XP disposable and party express sales.

The COVID-19 pandemic appears to be the main driver of the decline as fewer cord blood units are being stored.

Hopefully during the pandemic.

Gross profit was $1.5 million or 64% of net revenues for the three months ended September Thirtyth 2020, compared.

Compared to $1.9 million or 47% of net revenues for the quarter ended Sept 30 at September Thirtyth 2019 decrease of about 400000.

The decrease was driven by the decline in XP disposable Carty express sales as partially offset by refunds approximately 800000 for testing kits, reducing the inventory reserve from the prior quarter.

Sales and marketing expenses were 539000 for the three months ended September Thirtyth 2020.

Compared to 500.

For 2000.

It's ended September Thirtyth 2019.

An increase of 7%.

The increase was driven by accrued expenses related to the company's short term incentive program and consulting expenses. This.

These increases were partially offset by lower stock compensation.

In the quarter ended September 32020.

Research.

Under development expenses were 750000 for the three months ended September Thirtyth 2020, as compared to 584000. The three months ended September Thirtyth, 2019, and increase of 166000 or 28% the.

The increase was driven by development expenses for the COVID-19 cartridge reader.

General and administrative.

Trade of expenses for the three months ended September Thirtyth 2020 were $1.3 million compared to $1.1 million for three months ended September Thirtyth, 2019, and increase of 150000 or 15%.

The primary driver of the increase was accrued expenses related to the company's short term incentive program et cetera.

Interest expense was.

Each of the months ended September Thirtyth, 2020 was $1.5 million compared to $1.2 million for three months ended September Thirtyth 2019 for an increase of 343000.

The increase was driven by additional interest expense and amortization of the debt discount related revolving credit agreement with Boyalife asset holding too.

For the quarter ended September Thirtyth 2020, the company reported a comprehensive loss attributable to common stockholders of $2.5 million or 37 cents per share based on 6.7 million weighted average basic and diluted common shares outstanding this.

This compares to a comprehensive net loss of $2.3 million or 78 cents.

As per share based on 2.9 million weighted average basic and diluted shares outstanding for the quarter ended September Thirtyth 2019.

Adjusted EBITDA loss for the quarter ended September Thirtyth 2020 was $672000 as compared to adjusted EBITDA income of 125000 for the quarter.

At September 32019.

Decrease of almost 800000.

The adjusted EBITDA decrease was driven by lower gross profit accruals for the company short term incentive program and increased R&D expenses.

At September Thirtyth 2020, the company had cash and cash equivalents totaling $4.4 million.

Compared with $3.2 million at December 31, 2019.

Working capital improved to $7.1 million at September 32020, as compared to $3.2 million at December 31, 2019.

This concludes our prepared remarks, we'd now like to open the call to your questions operator.

Yes. Thank.

And we will now begin the question and answer session.

A question Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick on her handset before pressing the keys to try a question. Please press Star then two at this time, we will pause momentarily to assemble the roster.

And the first question comes from Sean Lee.

With H.C. Wainwright.

Good afternoon, Chris and Jeff and thanks for taking my questions Mike.

My first one is Uh huh.

My first one so on the Companys traditional cell therapy, and blood banking business. So we've seen a significant impact from the Kobe pandemic.

For the last several quarters and ER.

While there is some hope coming along with the vaccine development. It is dependent makes its expected to last for at least several more quarters. So I was wondering whether the company has any plans with new products or new business strategies I could help turn this around.

Hi, John Thanks, a lot.

Thanks for bringing this up and yes, saying that cell gene therapy is our bread and butter and that's our core competence for the past 20 years, we have a significant advantage in this field and not only with regards to the corporate bank.

Industry, which after you referred to was impacted by the Cobi 19. However, juries also a surge in the global research on the immune those are key markets, especially for car T car NK and the need is very.

Very significant there is a significant unmet need to manufacture so salads with that but with much higher efficiency and the with lower cost and that turned out to be a very significant unmet need.

So.

Yes, many of the listen there was aware.

So that our company has launched Karachi express pretty much a year ago RIDEA into in 2019 and with this product and we have the research grades as that distributed through corny, but yes, we are.

Also referred to in just the interest earning call we intend to two.

Look into strategies to launch our own food.

Foodservice two to manufacture that the car T. The car and K two to meet the market need and does that we're presenting a not only a few.

Huge market opportunity, but also a huge business opportunities that could transform that accompanied in future and we were very seriously look into that.

Sounds great do you have an approximate timing for.

When the company expects.

Going to the full service business.

We have but the company is a device company historical rate.

And though we tap the infrastructure we have the technology.

We want to explore.

Thanks to the various different ankles, so increasing the resource the teams and the customer how we can best position, our self and using this tool to tackle into the service, which actually creates a much higher margin. So.

Though at this moment I think it's a little bit too early to to release, the full strategy, but that but thats certainly on our radar screen and I hope to update.

Our investors, our shareholder and everybody in that in the near.

So future.

I see thanks for that.

Last question is on the Kobe 19 testing.

Products.

I think last month the company received a patent for a test reader as well so I was wondering.

So how have the commercialization efforts in.

On that front, if you can provide some metrics for that and also where do you expect it to go over the next one to two quarters. Thanks.

Mhm.

Sure. Thanks, again, a sanction for the crushing.

And the entire diagnostic field that the landscape is changing.

Cooking so it changes from just looking for people searching for antibody test now more and more require for encouraging test and lot more also require for a combination of antibody and encouraging Tas each test has a different and.

Ankle to address whether somebody has to impacting ongoing factory or has that response towards the virus.

And it's currently lots of.

Unmet need for those tests and that's why we developed this.

Say this reader so.

The reader is a facilitator so thats, how we see this yet how ups current AFE safe, which just give a yes or no answer that they read there may help yet to elevate to the next page. So its almost we are we open this fall.

Or so that other test can be can be can can be bundled with the reader. So we opened up a technology potentially for our internal use and also for co development with other test developers and certainly we are also.

Looking to.

Different grant opportunities to support additional use alpha OSAT share read read technologies. So again this.

Bye-bye those through three different ankle as you can see that the business model may be.

Or slightly different and I think it's a yet to be.

And yet to wait and see how those different.

Collaboration or internal development pans out.

With the ongoing pandemic accuracy that everybody aware in.

As we called out to the entire nations that covenant in case just escalating.

A tremendous stake so so with all those but it's almost fell within each year.

Cope with such changes occur.

Accordingly, and we we are opened this past warm to allow.

Like others potentially to collaborate with us.

I see thanks, and just more color that's all I have.

Thanks, John.

Thank you.

And that does conclude the question and answer session. So I would like to turn the call back over to Dr. schuh for any closing comments.

Thank you operator.

We are looking we look forward to updating you on our progress in the coming months us and thank you to everyone for participating on today's call and for your interest in somewhat NSS holding and thank you all and stay safe.

Thank you the conference has now concluded thank.

You for attending today's presentation you may now disconnect your lines.