Q3 2021 Cryoport Inc Earnings Call
Do reliance on any such forward looking statements because such statements speak only as of the date when <unk>, we do not undertake any obligation to publicly update or revise any forward looking statements whether as a result of the new information or future events or otherwise except as required by law.
In addition forward looking statements are subject to certain risks and uncertainties that could cause the actual results events and developments to differ materially come on historical experience and hope rising expectations or projections. These risks and uncertainties include but are not limited to those described in item one a risk factors and elsewhere.
Report on Form 10-K filed with the Securities and Exchange Commission and those described from time to time and the other reports, which we filed with the Securities and Exchange Commission it.
It is now my pleasure to turn the call over to Mister General Shelton, Chief Executive Officer of Cryoport, Jerry the floor is yours.
Thank you John good afternoon, ladies and gentlemen.
We appreciate you joining our earnings call today with me. This afternoon is our chief commercial Officer, Mister Roberts Jovanovich her chief scientific officer, darker Marksville, Ricky and our vice President of corporate development and Investor Relations Thomas Heinzen.
As a reminder, we have uploaded the third quarter 2021 and review the document to our website. It can be found under Investor relations and the events and presentations section. The document provides a review of our recent financial an operation no performance and in general business outlook. If you have not had a.
Chance to read it I would encourage you to go to our website and downloaded.
Now for a brief update followed by your questions regarding our third quarter results I'm.
I am happy to report that our third quarter was the fifth consecutive record quarter for Cryoport strong demand coupled with superlative execution from our team drove or solid performance in the quarter and we are firmly on track to deliver record revenue for the full year.
During the third quarter, we added 38, new customers at crowd Port systems, which is double the prior quarter's wins revenue from our eight commercial agreements increased 44% year over year, while cryo PDP added 72, new customers during the quarter.
<unk> percent over the third quarter of 2020.
In closing we're proud of our performance the momentum we are seeing in our business.
Our strong results through 2021 are a testament to our strategic resource allocation superb execution of our talented teams of employees and ever improving capabilities.
It is our it is our really.
Excuse me and it is our relentless pursuit of superb execution and innovation continues to set us apart and support our leadership position.
Operator, please open the line for questions.
Certainly and ladies and gentlemen, if you would like to register for a question you can do so by dialing one followed by the Florida on your telephone keypad right now Youll hear three towns to acknowledging requests once again to queue up for questions. Please dial one followed by the four on your telephone keypad or right now.
Okay.
All right. Our first question coming from the line of John Sarah Beer from UBS you May now proceed.
Yeah.
Hi, Thanks for taking my question.
So I guess you know new wins were up around two times from the prior quarter in total trials were up mid teens year over year can you maybe talk a little bit about some of the competitive contract wins and do you think that cryo poor systems is currently taking share from competitors.
No John that's a good question and doctors a wiki is best suited to answer that question Mark.
Yes, Thanks, Gary.
I think we're absolutely still pulling share from the market.
Our goal ultimately is to continue to increase our overall market in particular in the cell and gene space. You know the 38 wins to US as is significant and in particular as you're coming out of a co cobot lull as it relates to new business development. So we're very very.
Comfortable that we are pulling share.
Got it I appreciate that.
I think gross margins declined around 70 bps can you talk maybe about any of the the impact youre seeing there from supply chain issues or inflation that is impacting the margins.
Yes, it's a good question.
Thank Robert is best suited for that Yeah first off we are supply chain companies. Obviously, we're very in tune with that and very focused on that.
If you look at the third quarter. Our primary objective during the third quarter was really wanted to ensure minimal disruption to our client base, which we did very successfully.
And then to continue to drive market share and revenue, which allowed us to drive that record revenue for the quarter.
Having said that obviously like all companies, we've experienced supply chain challenges such as increased cost of suppliers and transportation costs.
We're very much focused on that we have now clear line of sight into the supply chain to ensure that we have the resources and capacity for our expected growth for the next quarters. So we believe that the Q3 was really the peak.
The supply chain challenges, having said that obviously this is an ongoing issue that we're very much focused on we would expect that to improve over the next couple of quarters.
Got it I guess and then just last question here.
Since acquiring cryo PDP, you've done a couple of tuck in deals there and in Europe and Australia.
And any thoughts on opportunities, where there could be potential for our new geographies for our tuck ins there.
Okay.
But any anything any opportunities in terms of the the growth expectations in those regions Rfps.
This new region, you might be looking at or do similar to the deals that you did in Belgium and in Australia.
Now let me explain that we are looking in all regions, we divide the world into the Americas, EMEA and APAC and so we're looking at all regions of higher the highest growth region. We're looking at right now for the future is of course APAC, we think that the China market is really interesting and.
The new companies.
Companies being formed in the space.
I think there is quite a big.
Pipeline or indeed that the FDA in the <unk> in the J D. A China version, we're we're a little bit behind on and we'd see those coming through so I don't think we're going to see a slowdown at all it seems to be picking up as evidenced by our forecast of BLA as in Emma as in 2022.
Mark you have any further thoughts.
No I think Tom's exactly right now in fact, I don't I don't see any lingering impact.
Or delays associated with with Covid related activity everything's back to.
Pre pre COVID-19 levels in fact, as Tom had mentioned.
The activities actually stronger at this point in time, so we're very confident.
<unk> on your future.
Great. Thanks for taking the question congrats again on the quota.
Thank you.
Alright. Our next question comes in from the line of Brendan courtyard from Jeffries you may not proceed.
Hey, guys. This is Matt on for brand to thanks for taking my question maybe to jump back over to the APEC region. You know clearly an area of focus for you guys can you just talk about the market share dynamics. There for you and how that compares to maybe the U S or our yard up and then in terms of competition and some of the key markets, there like Korea, and China you've talked.
About you know local players worse kind of internal homebrew with some of these customers you know what's the competitive dynamic there today. Thanks.
Oh come at first and then I'll, let Marc.
I'm at Matt, but.
Looked at the the these are developing this is a developing regions the Asia back region, and we have initiatives going on in in China and in.
Japan and uncertain, we have locations of course in in Singapore, and then North Korea, and then Australia. So so we were in tune with what's going on but it is developing and there is local competition.
Competition in each of those areas, but nothing is set right now and.
In terms of full support of the industry uncertainty, we are serving the industry I mean, serving those countries.
<unk> market going forward. Thanks.
Sure.
I think that if you want to go.
Go ahead, Mark Alright, yes. So as you guys are aware, obviously, we've been building out what we call our supply chain centers, which include a full bio services competency and one of the reasons that we've done this is to be able to support the staging of allogeneic volumes as it relates to batch manufacturing distribution.
And so you know one of the tie ins to this is having the ability to support that that local storage and distribution on a regional basis for our clients you know as well as building the infrastructure and the inventory through you know obviously, you know MTB biological solutions for for the aluminum aspect of that.
Tribunal and scale of processes. So.
We're absolutely entertaining and in preparing for it and we do have the infrastructure in place to be able to support any of these launches as they move forward.
Super Thanks.
Yeah.
Alright next question coming from the line of Paul Knight from Keybanc You May now proceed.
Hi, guys.
The.
Back out obviously shows very good core growth on our logistics.
The acquired businesses would it be fair to say that there.
Similar to <unk>, meaning up about 20% organically is that in the ballpark and then it does look like they were kind of flattish sequentially is there any seasonality in those acquired businesses that create that kind of sequential flow that would be kind of my first.
<unk>.
I think ill just add just to address the.
The performance of the.
NBA biological solutions Scribed, PDP yesterday, right, both had actually very significant growth compared to their historic performance and actually well above the number that you mentioned, so very very strong performance by both business units and continuing very strong demand both for for MB biological solutions freezer.
And cheaper solutions on a global basis as well as <unk> services.
If you look at the revenue being flat compared to the very strong record revenue. They had in Q2 you are right.
It's hard for us to say that seasonal certainly there were some <unk>.
Supply chain related delays that we experienced during Q3 as I mentioned earlier that had some impact on the revenue, but overall again, it's very very strong performance and we see that strong performance continuing into Q4 and beyond.
Paul the growth numbers.
We're almost almost not quite but almost double what you said.
And the backlog in the EU has a record backlog so.
We're in great shape with both of those businesses are doing extremely well.
Obviously, a good market for them, but it seems like the sales integrations working could you talk about.
You know they must be you must be pulling in.
Cross selling is out of that.
Where are you at with that and what's going on with that Jerry.
Integrations are little bit different than other companies.
We operate as an operating holding company.
And we do get synergies from one from the other referrals one from the other we have a very tight team our culture is as throughout the company and not just in one company, but throughout the company. So thats taking place in a very nice way and so we do get referral business one to the other.
And it's working very nicely the integration is working nicely as it is or the.
The synergies that we promised between crowd PDP and <unk> systems.
In.
Getting ready to file.
So we're very very bullish because of that.
Okay. Thanks.
Yeah.
Okay.
Yeah.
Alright next question coming from the line of David Larsen from B T. I G. You May now proceed.
Hi, congratulations on another very good quarter.
Can you just talk a little bit more about the supply chain pressures that you saw in <unk>. I think you mentioned that <unk> is the peak you would expect for inflation and then in terms of like inventories did have you purchased.
Maybe a year of inventories ahead or have you locked in pricing for a year's worth of supply within N V E. Any additional color there would be very helpful. Thank you.
Sure David.
We first of all we.
And in an environment like this we have we haven't really had an environment like this for 40 years and I remember the 70 is very well and exactly how that played out and.
This is a fast moving environment with price increases and with mis deliveries trouble labor market et cetera et cetera.
Anyway, we embrace that and we certainly are increasing our safety stocks I can't tell you that one product.
Uniformly a year across everything, but we certainly are increasing safety stocks were meeting.
This increases.
And head on and we negotiate where we can.
But it's very hard to get any kind of a of an agreement today.
Our forward pricing for any length of time.
The trash.
Transportation will peak.
Underway for for expansion in the future so.
Great Great teamwork, great teams, and we're working working down that backlog, which we need to work down so that we can give better customer response.
Who are loyal customers.
And then just one more for me in terms of like the <unk> and the MAA is that.
Filed for 2021.
I had thought that it was going to be 21 in 2021 and has that declined to 13 with some of those pushing into 2022.
The short answer is yes, it's come in some of it was pushed out.
Some there was one that voluntarily withdrew.
So it's a mix.
And some of it I think in the last quarter, we moved it from 21 down to 19, and now 19 down to 13.
Oh, Okay, and then just one more I'm sorry in terms of the competitive wins, you're obviously, taking a lot of sure can you give a little more detail on exactly why you're winning in the market and what differentiates you from your your peers and then are you also able to take price.
Thanks.
Mark you want.
Yeah, I'm happy too so why do we pull share.
Therapies, maybe relative to the pace of the FCA.
When when do you think you'll start seeing commercial revenue there and lastly, how important is the Chinese market, specifically to reaching that that five year revenue targets you put out a while back of $6 50 to 750.
Yeah, Mark do you want to take that question alright donor surely.
Short answer is we're already seeing commercial revenue out of APAC in particular out of the Japan market the.
William market, the Singapore market. So we are already seeing commercial revenues manifesting out of the commercial.
Therapies that we're supporting.
We believe that that's going to continue to aggressively expand and what are the reasons that we're looking at China as hard as we are right now is because a lot of that expansion in particular from our portfolio expansion basis for these existing therapies in the China market, which obviously portends to be a significant market.
But we also have substantial assets and infrastructure in countries like Korea through cryo, PDP, and and and and you know in India, which allows us long term to be able to expand it to into the vast majority of APAC seamlessly.
So hopefully that answers your questions.
But we have things under control, we think we have things visibility and line of sight, So and when we say when Robert was saying.
It's Pete.
That's our best judgment at this point.
And but we know how to handle most of the things that we are that we are that we are facing and I don't know that there is any of that I would say most I think theres nothing we face that we haven't been able to handle so.
We do anticipate improvement, but I'll, let Robert talk with you more about that yes, and just you have to look as a team we're not reacting to what's transpiring I think even on the last call. We said, we're well aware of some of the challenges that the global industry is facing so I think the takeaway really is that.
We have action items, we have.
Actions underway to address the.
The issues that we're aware of.
First and foremost again is to drive market share drive revenue and ensure that we have the redundancies not.
Not to have any any disruption.
And we're confident that we can manage that well.
It's shown by the results of this quarter.
And again I think you can expect a strong fourth quarter moving forward as well.
Great. Thanks, so much and congrats on the quarter.
Thank you. Thank you.
Just a quick reminder, for everybody if you'd like to register for a question you can do so by dialing one four that's one followed by the four on your telephone keypad.
And our next question is coming from the line of Jan <unk> from B Riley you May now proceed.
Congratulations team on another outstanding quarter. Thank you for taking our questions.
Ill.
So first a quick falloff R&D supply chain issue you match on supply chain issue with <unk> E business and can you comment on how does that have any impact either segment, our business, including <unk> system and the cryo PDP.
I think again, what we've seen if you look at margins and margin development. The margins on the other businesses more were not that significant it was really mostly if you look at MB biological solutions business related to specific equipment.
<unk> and transportation costs that.
We experienced a higher level of pricing that does not mean that the other business units are not impacted at all but that's where we saw a more significant impact.
For the quarter as you can see on the on the product revenue and related margins.
So I think that's all we can comment at this point in time.
Being a more comprehensive solution and mark was referring to kind of the quality aspect of having everything in one hand, where we're providing a full service to our client base and to cry Port systems client base. So that's well underway and we've seen that progress over the last three quarters, that's really when we're talking about.
Ross selling or synergy revenues between the two companies offering a comprehensive solution.
Yes, Scott I also think your customer referrals between the businesses as well.
Yes.
Yes, that's all I have thank you.
Thank you. Thank you.
Thank you.
All right. Our last question for today comes from the line of Jacob Johnson from Stephens You May now proceed.
Hey, good.
Good evening everybody.
Maybe.
First question just on <unk> can you talk about and kind of following up on the last question can you just talk about your ability to sell and be in the cell and gene therapy, and maybe kind of what youre seeing in that end market in terms of the cold chain Buildout, that's going on right now.
Jacob.
And we do sell into the cell and gene therapy business, we sell under Biopharma pharma, Biopharma and reproductive medicine, and we saw across the board in the life Sciences, but MBE.
MBE, we sell through a distributor network.
We don't sell.
Directly is through a distributor network that we sell on a global basis. So.
Yes.
That's how we how we conduct our business it can be.
Got it thanks for that Jerry and then.
Just on kind of like the regulatory backdrop for shipping and handling. These advanced therapies I think a couple of quarters or maybe a year ago. There were some guidelines are some best practices or some ISO something or the other that came out that kind of highlighted the value proposition of what you guys. Do you can you just kind of update us.
On anything we need to be paying attention to on kind of the regulatory aspect.
Of of handling and shipping these therapies I guess in the U S and maybe abroad as well.
Yeah, we actually.
Participated in developing that ISO standard and Mark has some commentary on it I'm sure.
Yeah. We did we contributed to the development of 21 970 pretty standard that went out in 2020.
That standard is continuing now to start to eat into.
Intercollegiate into.
And a very exciting future for crowd port.
We're glad you could join US today and we appreciate your continuing support and interest in our company.
We look forward to updating you on our programs again on our progress again next next quarter and we look forward. We hope you all have a great evening operator.
Thank you, Sir and ladies and gentlemen that will conclude the conference call for today. Thank you very much for your participation and you may now disconnect your lines. Thank you.