Q4 2021 Cryoport Inc Earnings Call
Good afternoon, and welcome to the cryo poor at fourth quarter and full year 2021 earnings conference call.
As a reminder, this call is being recorded it is my pleasure to turn the call over to Todd Fromer, President Casey S. A strategic communications. Please go ahead Sir.
Thank you operator before we begin today I would like to remind everyone that this conference call contains certain forward looking statements all statements that address our operating performance events or developments that we expect or anticipate occurring in the future are forward looking statements. These forward looking statements are based on management's beliefs and assumptions and not on information.
Currently available to our management team our management team believes that these forward looking statements are reasonable as well.
However, you should not place undue reliance on any such forward looking statements because such statements speak only as of the date, we do not undertake any obligation to publicly update or revise any forward looking statements, whether as a result, new information future events or otherwise except as required by law.
Forward looking statements are subject to certain risks and uncertainties that could cause actual results events and developments to differ materially from our historical experiences and our present.
So projections. These risks and uncertainties include but are not limited to those described in item one.
Risks factors elsewhere in our annual report on Form 10-K filed with the Securities and Exchange Commission and those described from time to time of reports, which we file with the securities and exchange condition. It is now my pleasure to turn the call over to Mr. Gerald Shelton Chief Executive Officer of Crab worked Jerry before yours.
Thank you Todd good afternoon, ladies and gentlemen, we appreciate your joining our earnings call today with me. This afternoon is our Chief Financial Officer Mr.
Mr. Roberts Jovanovich, our Chief Scientific officer, Dr. Mark Sawicki, our vice President of corporate development and Investor Relations Thomas Heinzen.
As a reminder, we have uploaded our fourth quarter 2021 in review document to our website. It can be found under Investor relations in the events and presentations section.
This document provides a review of our recent financial and operational performance and a general business outlook. If you have not had a chance to read it I would encourage you to go to our website and download it.
I will provide you with a brief update on our business and then we'll move on to answering your questions.
We continue to successfully execute by having a client focus.
Embracing innovation operating with excellence uncertainty and driving productivity.
In turn we delivered excellent results in 2021 as multiple engines of growth drove double digit gains in revenue.
This strong performance was fueled by new product and services geographic expansion and a sharpening of our competencies across all our industry, leading brands, specifically MBE and cryo PDP.
Having completed a financing in November we closed the year in the strongest position in our company's history with $628 million in cash cash equivalents and short term investments.
This positioned us well to continue investing in the business and delivering strong growth in the years ahead.
Our core business is strong and our teams.
Executing at a very high level.
This is reflected in our financial results with solid organic revenue growth of 34% in the first fourth quarter and total revenue of $222 6 million for the full year, which represents 183% year over year growth.
During the quarter, we on boarded 311, new pharma biopharma customers revenue from our eight commercial agreements ramped on a global basis.
We continued to build out our pipeline of potential commercial customers with our total number of regenerative medicine clinical trials supported reaching a record 602, an increase of 14% from 2020.
It's worth noting that a record 74 of these trials are now in phase III.
In recent months there have been a significant milestones accomplished in regenerative medicine markets around the world. A total of 11 crowd supported vla's or MAA as were filed in 2021 currently we anticipate an additional 19 filings.
And as many as four new therapy approvals and an additional six label or geographic expansion approvals in 2022.
Complementing this we expect an additional 12 filings in 2023.
Amongst other market drivers this growing pipeline reflects the rising activity in the cell and gene therapies market and the strong demand for our industry, leading comprehensive supply chain solutions for the life Sciences.
In short we believe the stage is set for cloud for two experienced significant growth in 2022 and beyond.
Expanding our geographic footprint was an important initiative in 2021, which we accomplished via acquisitions partnerships and business alliances.
As a result, we now operate 33 facilities in 15 countries covering key biopharmaceutical regions in the Americas EMEA and APAC.
Today, we are well positioned to support the increasing demands from our customers in the cell and gene therapy market throughout the world and we will continue to expand our capabilities competencies and footprint to meet the needs of this rapidly growing market we serve.
We're pleased with our 2021 results and we'll continue to sharpen our focus on the cell and gene therapy markets strengthening our brands with the ultimate objective of building out.
Our market share leadership, and achieving maximum value for our shareholders.
Now, we'll be happy to answer your questions. Operator, please open the lines for the participants.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question queue.
You May press star two if he would like to remove your question from the queue and for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please pull for questions.
Our first question comes from the line of Puneet <unk> with SBB you May proceed with your question.
Hi, Michael on for Puneet, Great quarter I, just wanted to ask quickly if you could offer some color on how LTE PDP performed and if you could also.
Guidance on growth expectations for the year I know you've spoken to 50% in the past is that something you expect to continue.
Okay.
Yes, Michael of course, we don't we don't give guidance, so, but I will comment on your question.
Oh PDP in MBE.
<unk> had excellent performance in.
During the year.
Performing into the mid twenties.
The mid Twenty's growth growth rate year over year, So we're very happy with their performance.
Great.
That other line.
Oh.
I was just going to add to it.
Look at the performance for the full year.
There is absolutely right. When you look at the Q4 as we did mention we had some slippage in revenue of about $2 million or into Q1, just because of transportation and scheduling challenges that we have.
So if you were to include that $2 million into our results also for Q to.
Q4, you will see strong double digit close to 20% growth rates quarter over quarter as well as scheduling he's referring to had to do with shipping purely it was finished goods that were not ship because a third party.
Ladies and transportation.
Got it.
Yes.
That kind of supply chain.
Hearing a lot about that from other companies.
I was wondering if.
You see that as an ongoing challenge.
And your other businesses.
If youre able to transfer any increases in freight prices seem to customer.
Yes, Michael.
We're not immune to the problems of the supply chain they've gotten to be.
Pervasive and worldwide. So we do see them continuing but they are not problems that we can't manage through the.
The most affected as MVA.
But.
These are manageable problems, we think they'll go on for another quarter or two but that time, we think the supply chain will be in better order.
Great. Thank you very much.
Our next question comes from the line of John Sour Beer with UBS. You May proceed with your question.
Congrats on the quarter and thanks for taking my question just curious public market biotech funding was pretty strong in 2022, maybe second best year ever, but it's been a little light year to date have you noticed any changes year to date in your clinical trial business or any color that you can provide on rfps or what portion of.
That trial businesses pre revenue biotech.
I'll, let Marc Dr. Squeaky answer that who is close to that market.
We haven't seen much but go ahead mark.
No activity has been robust we have not seen any real issue as it relates to clinical activity. I think you saw that we increased our overall clinical trial count to 602 programs overall, which is which is extremely positive and.
The companies in the cell and gene space are really well funded and continue to be well funded based on a record year.
Raising last year about 23 billion.
We're very confident that that will continue.
And if you drill down even a little bit further if you look at our current performance for <unk> systems, and Mark was referring to the 600 in two clinical trials, we had about a 34%.
Five year CAGR on clinical trial growth for the company and prescribed Port systems in particular look at the commercial Biopharma revenue increase in Q4 by about 44% the noncommercial Biopharma for cryo systems increased by 41%. So we're continuing to see significant growth.
In the Biopharma market, our overall revenue for Biopharma is about 80% of our total business. So.
So we're very bullish about the outlook going forward.
Maybe to put a bow on it just to Overkill. This question because I know the market's fixated on it John .
John and I do appreciate your firms conference call earlier today, which certainly seemed bullish from that key opinion leaders point of view.
We don't see any slowdown and then we looked at represent an icon in Charles River, and Liza and Danaher and others and they are not seeing it either cell and gene is just strong period.
Great.
That's good to hear and thanks color there I guess.
New contract wins continue to ramp there.
Can you talk a little bit of a competitive contract wins, you're seeing there. Thank.
Thank you are continuing to take share in any way to look at what you think your kind of normalized phase III market share might be if you kind of back out some of those COVID-19 trials.
Yes, I mean honestly the COVID-19 trials really have very very minimal impact on our overall portfolio. We do believe we're going to continue to capture share we've shown and demonstrated quarter after quarter year after year sure share capture in the <unk> space.
And as we continue to mature our platform.
And diversify it.
With acquisitions like MD and prior PDP, we believe that that's going to continue and if not have the opportunity to accelerate.
Yes.
Great and then last one for me just maybe following up on <unk> question earlier.
On the shipping issues do you think that theres going to be I guess additional maybe.
You have increasing yield impact.
Impact from that into the year into 2022 or is that more kind of <unk> <unk>, one time issue and then.
And just confirm theres been kind of no impact from any other areas.
The business there.
Well first of all there is no impact in any other part of the business but.
To answer your question I don't we don't foresee that happening this was situational because of the supply chain condition right now, but could it happen in the future certainly it could but we don't foresee that and certainly we're taking every event, we take extra caution to make sure that.
There is not a repetition of any event that we've experienced so far so I don't I don't think you can.
Youll see a disruption in the future and the backlog continues to be very very strong.
We are expanding our manufacturing capabilities to meet the demand. So I think that's important to note as well.
Great well, thanks for taking my questions and congrats on the quarter.
Thank you.
The next question comes from the line of David Saxon with Needham <unk> Co. You May proceed with your question.
Hi, good afternoon, and thanks for taking my questions. My first is just on the fourth quarter revenue I mean by our math.
Cryo PDP was up kind of in the mid teens range MBE backing out that $2 million headwind.
It was about the same and you indicated.
And in response to an earlier question.
These two assets were growing.
And a mid 20% range earlier in the year. So I was just wondering what caused the slowdown there in the fourth quarter and then kind of along the same lines.
<unk> revenue was kind of low single digits sequentially.
So just wondering if that was in line with your expectations and if so.
I guess when do you think.
That will start to see that sequential commercial revenue growth really start to accelerate.
I'll have one follow up.
Yes, maybe just to address the revenue growth your asset right overall year over year view, where it gets all the historic information.
The high Twenty's growth year over year bolstered by PDP and MBE, we did see somewhat of a slowdown not that significant but <unk> grew about 18% and without that slippage for <unk> grew about 21%. So there has been some some impact in Q4 just related.
Two the overall supply chain challenges inflationary trends and so forth.
Initiatives have been already implemented some of those uptake.
Place immediately solve those happened over time.
One example is certain price increases in terms of the commercial revenue I'll let.
Mark speak to the outlook for commercial revenue in the Q4 results.
Yes, Thanks Robert.
If you take a look at all of the <unk>.
Commercial customers commentaries and their conversations.
The biggest issue right now isn't demand its manufacturing capacity and so.
Demand is outstripping capacity at this point in time, there is a substantial amount of new capacity coming online and Kate is opening a new facility in Frederick Maryland, BMS is opening a huge facility outside of Amsterdam, Novartis is bringing the new Stein facility in Switzerland online those are going to have a significant impact on capacity constraints.
And once they open that will youll see youll see that ramp accelerate fairly significantly in the second line aspect here is the is the move from third line second line for <unk> and <unk>, which will also substantially increased the patient population the addressable patient population, which will also significantly increased.
<unk>.
On top of the capacity.
Spansion.
Okay got it thanks for that and then I.
I know you don't give guidance, but I'll take a shot at it so.
Just given that there is a wide range of estimates for 'twenty. Two just wanted to hear your comfort level with current consensus. According to my screen. It's around 270 do you think that adequate adequately reflects.
The net impact of the $2 million.
<unk> headwind in new Prague, and maybe.
Some of these capacity constraints you just mentioned.
Well in effect indirectly, you're asking us to give guidance, which we cannot do.
We can we can however, again, we can restate a few things.
One in terms of the revenue growth overall, yeah, we have put some aspirational goals in place for $2025 to reach $650 to $750 million that is still our goal.
And then in terms of starting to see some of the commercial revenue ramp over the next quarters in months and years. We also expect to see an improvement in gross margin to our target of 55% and adjusted EBITDA of 30% long term. So those are things that we still can.
Can reiterate.
And then again the market dynamics within Biopharma continue to be very strong we have that flywheel of clinical trials that continues to grow and disclose the trials continue to migrate from phase one to phase II in phase III, the phase III up to commercialization. So you have to understand we're at the very early stages of this market.
Maturing and commercial therapies coming to market.
Got it thanks, so much for taking the questions.
Welcome.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two if you would like to remove your question from the queue.
Our next question comes from the line of Brandon Boulevard.
With Jefferies. You May proceed with your question.
Alright, so much of that one.
Okay.
Yeah.
Wasn't sure if that was me or not.
Couple of a couple of questions guys.
I guess first Jerry.
Any.
Change in the tenor of your <unk>.
Conversations on the M&A front sort of given the volatility of the equity market more recently do you see that.
May be making some target assets a little more reasonable.
And maybe just an update kind of on the general thinking of priorities.
Yes Brendan.
It's good to hear from you.
We don't see anything as a result of the recent softening in the market.
And then certainly private companies are still holding values up but we do have a robust <unk>.
M&A pipeline and.
And we do pay close attention to the.
The workflows of our of our clients and we will continue to.
To look and entertain acquisitions.
US move forward in that assist our clients in their workflows.
But we do have a robust pipeline, we will continue to look at <unk> bio storage and.
Logistics and software and services and that sort of thing.
Nothing has changed for us.
Just to add to it.
We were smart and we're lucky in terms of.
Raising the funds when we did.
So we did the convertible we have now a strong cash balance of $629 million in cash and short term investments are very we're very well positioned to drive the organic growth to drive our initiatives such as the global supply chain centers engineering developments, such as the cryo sphere.
And then also continue the M&A strategy.
But the discipline the criteria that we've talked about in the past haven't changed in terms of the right corporate culture accretive.
Good fit.
For for the overall solution that we want to offer to the gene therapy space.
Okay.
And then you called out a few.
New initiatives on tap for 'twenty, two including the Cryo sphere, and then expanded bio storage services.
Is there any way to kind of do you think that those will be materially additive to incremental revenues in 'twenty, two and with cryo sphere can that'd be swapped out with existing commercial products, where is should we think about it as more of.
Or.
Solution that are likely to be adopted for earlier stage programs.
Yes, so we'll take those in turn so.
As it relates to the two global bio services centers that were that were opening one in new Jersey, one in Houston, Texas, They will be opening this quarter.
So the construction is complete we actually have Ceos on the facilities at this point in time and the audits are active so we will see a revenue contribution associated with those assets this year.
Obviously, it takes time to go through audit processes and things so the impact in 'twenty two.
It won't be a material impact I would say against the overall business, but in 'twenty three you'll start to see substantial contribution from those facilities as it relates to.
The historical prior Port systems business as it relates to cryo sphere. So <unk> itself is a next generation technology.
So in essence, it's been built and designed to provide substantial risk mitigation in the in the field and convey substantial benefits to our client base as it relates to securitization and user.
Usability mobility related considerations security and other things. So we think it's going to have very very strong adoption across the board and.
And in fact, we've already had a commitment on some of our commercial clients to transition product into that equipment over time. However.
The overall market is very very rapidly growing as we had mentioned we continue to pick up share. So the historical equipment will still have a significant utility and use. This is just on top of that so it will increase our overall capacity and give us a lot more flexibility long term.
Okay, that's great I'll hop back in the queue. Thanks.
Our next question comes from the line of David Larsen with BTG. You May proceed with your question.
Hi.
Robert can you talk a little bit about the SG&A costs, it looks like on a sequential basis.
They popped up.
A little bit higher than we had been modeling just any any color or thoughts there would be helpful. Thanks a lot.
Yes, Youre right you look at the increase in SG&A there.
A number of factors that play play a role there one we have continued throughout our business units to increase the resources and this is for a number of reasons. One is we are stepping up engineering and development work, we're adding resources, but more importantly, as we're getting ready to launch the <unk> centers.
Both in New Jersey, and in Texas, We've added resources for that purpose than as you would usually expect for year end. We typically also see additional costs related to solve the.
Implementation of Sox work and audit just because of the.
Added.
And the in crowd PDP business units, but overall, it's really adding capacity. If you look at the general performance from a from an operating perspective on a number of things one from an adjusted EBITDA perspective, we have about $19 million and adjusted EBITDA for the year compared to about breakeven last year.
We increased cash provided by operations by by $8 1 million, which is a $23 million increased compared to last year as well.
A number of things that are moving in the right direction, but at the same time again understanding that we are building out for what we expect a substantial increase in commercial activity over the next years that is part of the increase.
In SG&A expense.
Okay. Great. Thanks, that's very helpful. And then I noticed that there was like a 14% increase in the number of clinical trials, you're supporting but the organic revenue growth rate was.
Much higher than that.
What is driving what seems to be incremental in cells into those clinical trials or incremental revenue per person clinical trial, just any thoughts or color there would be helpful.
It's very very simple.
So the strategy of diversification of our revenue streams is paying off.
That's very very straightforward.
Okay.
Multiple wherever you can elaborate on shortly.
A little elaboration would be great.
Yeah.
So we're moving beyond strictly just transportation as it relates to support these clinical programs right and so historically, we've been packaging and distribution. We now are pulling in synergy related revenue out of the cryo PDP acquisition.
Our consulting business is maturing so folks are coming to us to support a lot more developmental work as it relates to clinical activity and so the average spend on a clinical trial for us is increasing and that's where you see that manifest acceleration.
I think another key point in there not to contradict market all because it's just additive is that the pipeline is maturing youre seeing ones turned into two is to turn into threes more patient population in the later stage trials.
Okay, great. Thanks very much.
Okay.
Okay.
At this time, we have reached the end of the question and answer session. I will now turn the call back over to Jerry for any closing remarks.
Thank you for your questions.
We appreciate them and closing 2021 was a very successful year for Crown Court.
With top with solid top line growth a record number of clinical trials being supported further expansion of our geographic footprint and a closing balance sheet, reflecting our strongest position in our company's history.
This was all due to our diverse brand portfolio.
<unk> global reach and talented employees who successfully.
Executing our winning strategy.
We believe 2022 will be another year of strong results. Thank you for joining US today. We appreciate your continuing support and interest in <unk> and we look forward to speaking with you regarding our progress again next quarter for now we bid you a good evening.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Okay.
Yeah.
Okay.
Okay.
Okay.