Q2 2022 Cryoport Inc Earnings Call
Constant currency versus the as reported revenue growth.
So as reported 14% in constant currency, 18%, we have about roughly about 36% of our revenue is related to foreign currencies. So we certainly saw an impact in Q2 without that impact revenues would have been $66 1 million. So the $64 2 million.
So about $1 9 million.
Increase in revenues on a constant currency basis. So there is an impact that we do expect to see impact going forward into the second half of the year, obviously, nobody knows exactly where the exchange rates.
It will be in terms of the exchange rate impact on the various markets we've seen.
<unk> an impact on all three markets on the biggest part really being an animal health in Biopharma.
Got it that's helpful. And then my second question about clinical trial. It that's good to see.
Net adds in.
All across the board and we're just wondering just given the macro environment, if there's any potential cancellations or.
Curtailing, especially from small biotechs and.
Is it possible to give any color on just how many of these clinical trials and everything are with smaller biotechs Craig to big pharma.
We see no evidence of any deceleration as it relates to clinical portfolio activity within the.
Entities in the in the programs that we support to date, we've done an analysis internally and.
The programs that we support are very well supported from a cash position.
And so we have a high degree of confidence that we're not going to see any any negative impact related to any any sort of macro environment. In fact, the cell and gene space is still very robustly being invested.
There's a lot of investments going into this space as it relates to healthcare and biotech overall.
Okay. That's helpful. Thank you very much.
Thank you.
The next question comes from Jon <unk> of UBS. Please go ahead.
Hi, Thanks for taking my question maybe.
Maybe just a question on the commercial revenues continue to ramp year over year any way to provide some color on what you have and the outlook for the guidance on the second half of the year and how you see that ramping throughout 2002.
Yes.
Maybe before Mark's comments on it.
The revenue outlook, we don't give that granularity.
And revenues and we did provide guidance for the full year of $260 million to $265 million.
Do reiterate that guidance now as well.
Obviously, it is going to be a mix of the business units and of the.
Revenue driven by the growth and maturation of clinical trials and then ultimately the growth in the commercial commercial revenues as well.
Yes, just to add to that obviously, we've had a significant focus on building as robust of a clinical trial pipeline as we can.
And that has demonstrated the ability to transition to the commercial therapies, where we're currently supporting nine programs.
That's despite the fact that cell and gene is still very early in its development. We do anticipate commercial growth to continue and Theres a couple of different areas.
And reasoning behind that so first and foremost is where we're seeing continued expansion of approved therapies on a global basis launching in new countries and new geographies.
A lot of these therapies are also really pushing towards earlier line therapy and we're seeing.
Success in them moving from fourth line third line and now third line to second line treatment and there are also focused on expanding the number of indications.
We've also seen substantial.
Success on from a lot of the therapies that we're supporting now and that doesn't even include any new therapy launches. So I think the combination of these four things.
A very positive element and we will continue to drive growth in this space for us.
Got it appreciate the color and maybe just a follow up on the last comments there.
On allogeneic therapies are you anticipating any approvals in 'twenty two and can you just add some additional color on what you see or the opportunities around allogeneic.
Tom why don't you take that.
Hi, John .
Could be two aloes, maybe three hours accrued this year.
And if you recall, we're currently supporting a little bit more than 30% of our pipeline is low at this point.
Got it I appreciate the color and then I guess, maybe just one last one.
It sounds like the new paint facility is operational capacity.
Any additional color you can provide on how an MBA is recovering and maybe any insight into how the backlog is looking on that business.
Yes, he is doing fine at this point.
We will we are working hard throughout the rest of the year to make up.
<unk> capacity that we had the loss production we had in the first quarter.
But the plants working well and.
And B is doing very well.
Great. Thanks for the color and taking my questions.
Thank you thanks John .
The next question comes from Richard Baldry of Roth Capital. Please go ahead.
Thanks, Eric.
There was a question sort of outside of your own controls.
Curious what you think of the data in the growth rates for the commercial side of the business that I think I read is 22%. It seems to me that with the number of new indications coming online sort of the critical treatment protocols, there providing that.
Would have thought that would be growing significantly faster.
Is there something whether it's manufacturing capacities, otherwise that's holding that back and how do you think that will progress over sort of the near intermediate term.
Hey, rich, it's Tom I'll take a swing at it first and then maybe mark can add to it but you hit it on the head its manufacturing capacity.
Again, if you go back and look at Bristol Myers, just reported third quarter ahead of ours, a couple of days ago, they called it out again.
Fill demand.
Thankfully Gilead did increase their demand they opened up a new facility in Maryland that increase their capacity by 50%, but that's not fully up and running at full tilt.
And then more capacity is coming on hopefully as we speak here, we have a lot of customers building out. So that's the biggest thing today.
No I think you hit it right on the head I mean, there's two primary issues one is.
Final product manufacturing capacity, which.
A lot of these companies are bringing online.
Tom mentioned, the kite facility down in Frederick Maryland is one of them and the second is viral vector capacity.
And.
Lot of folks are starting to internalize viral vector production. So they have more control over the supply chain and eliminate that as a as a.
A barrier to.
Scalability.
Okay and could you talk maybe a little bit if not qualitatively or quantitatively qualitatively to the acquisition revenue impacts in the third and fourth quarter from your most recent deals is there any way to kind of get our hands around how large those entities were the head counts that those would have brought in and maybe back into some.
Concepts of the size of our own thanks, yes.
Yes, I mean, those are relatively small acquisitions, we I'll say, if you look at those acquisitions.
They certainly have a strategic component to them, but in terms of size. If you look at even the.
The acquisitions that we've talked about that we closed subsequent to quarter end.
We look at cell matters, very strategic acquisition, both a small acquisition and ultimately they're going to start generating revenues as part of a broader initiative.
We look at polar express in Spain, that's part of the expansion of credit.
Into the Spanish market that was an acquisition.
$1 5 million with an earn out so those are going to contribute some revenue. If you look at the acquisition that we closed.
In April <unk> coal.
In France they have.
<unk> contribution, which was less than $1 million a little over 500000 for the quarter for the quarter end.
Great. Thanks.
Sure.
Thanks, Rick.
The next question comes from Jan <unk> of B Riley Securities. Please go ahead.
Hi, Tim congratulations on impressive quarter, so maybe.
First question directly to generate when we look at the global footprint and we began to see some overlap locations between <unk> systems and the cryo cryo.
Oh PDP.
So maybe can you talk about the planning here either replicated. The success you have here in the U S to EU constant around numerous amortization you happened in the last couple mountainous.
Or do you plan to improve the synergy between these two segments in the U S. Here.
There's really no overlap comfort systems has a different mission and crowd PDP, which is a specialty carrier survey biopharma, but we are working on the synergies and we absolutely will improve them over time.
The other thing I'll just add to that is that we are focused on looking at opportunities for where it makes sense for co location.
And obviously cost management associated with co occupying common facilities as well as synergies associated with the business platform.
Both of those things are also significant factors in looking at.
That synergy activity.
Yes got it that's helpful and a full hour here is.
In the culinary resilient you mentioned some interest team matrix here in our call.
So quality audits.
Just curious is there improvement compared to first half all time to 'twenty, one and are these from the new customers are from existing customers.
It's a mix of new and existing but it grows all the time, because we keep growing our pipeline of business.
Something we thought was important we talk about quality a lot, but we really haven't disclosed anything and we thought it was important for the street our customers everyone that looks at these reports to see how dedicated we are globally.
Our quality team our quality systems our processes.
Yes, Thanks, and one last question from Us.
Since you guys reiterated guidance Gale 401 to two.
<unk> guidance is calculated based on your order book on the expectations and we have started to see some improvement how supply chain in the cell and gene therapy space like you mentioned Gilead has.
Great quarter.
Jessica.
Just wanted to check if there is any read through to you our order book the order book in the near term demand.
We think about the modeling.
Yes, I mean, just yes, obviously, if you look at the guidance, we're clearly looking at.
The supply chain issues, the foreign exchange and and we still feel very strong about the revenue.
Can achieve for the full year.
So hence we are reiterating that guidance.
Mark do you want to add the only thing I'll add is you asked about order book and so on.
Obviously, we do based our extrapolation based on client feedback and we try to get as much forecasting information as we can from our clients in particular as it relates to volume considerations around our service business and so we do take that into account as well.
And you have to again step back and look at where we are right now as a company the amount of clinical trials that we're supporting and being 626.
And the expected BLA filings MAA filings.
That will further contribute to those dynamics, although we have a very strong customer base.
Strong support of clinical trial portfolios.
Ultimately, we'll see.
Just in driving the revenue for the remainder of the year.
Great. Thank you for the additional color.
Thank you.
The next question comes from David Saxon of Needham <unk> Co. Please go ahead.
Yes, hi, everyone. Thanks for taking the questions and congrats on the quarter.
Maybe a follow up to the last question.
Yes got it does require some sort of acceleration into the back half, but you also have this.
$9 4 million of.
Revenue from the fire. So just wanted to see did you were you able to recapture that in the second quarter end.
What's the expectation for the cadence of recapturing.
Whatever is left of that $9 four.
Yes, no just that.
Very good question I think just to be very clear. If you look at the performance for Q2. This is not driven by recapture of revenue from the new print facility. This is really driven by growth in all of our business units, where we've seen very solid growth.
So in terms of recapturing the revenue from from Q1, as we mentioned that's going to happen over time.
As we brought the manufacturing facility in <unk>, which is one of three manufacturing facilities.
Biological solutions.
As that has ramped up obviously, we're going to continue to.
Serve decline base and recapture some of that revenue over the quarters. So the impact on Q2 is really a minimal of the growth is really driven by all of our Jones collectively.
Okay. So sorry, if I'm hearing that correctly.
It might.
Extend into 'twenty three.
No I think it's really more when when you look at when we say recapturing revenue I mean, that's.
Not an exact science right.
So you look at the revenue are bringing on and Thats driven by client demand certainly we had.
Ah.
Issue in Q1 through the fire damage and with the new credit facility being fully up and running again, we are recapturing some of that revenue, but I can't really quantify.
David We added a third shift in order to catch up that we didn't have before so.
We think we can catch up this year.
Okay got it.
And then my my second question just on margins.
Gross margin there were some sequential improvement which is good to see just wondering what youre seeing from an inflation perspective, and then whether or not you can take price at all to to offset any of that.
Thanks, so much.
Yes look.
Youre absolutely right gross margins, we have a really star strong sequential growth over Q1.
We do believe your margins have stabilized and we expect those to gradually improve overtime.
You have to also look at the types of investments, we're making and the expected growth that we're seeing in this market. So that will impact gross margins example is <unk>. So we.
Starting to ramp up our services, we had two facilities that were opened in Huston in Morris Plains in June .
Lions are now going through the processes and Youll start seeing the revenue come in through through those <unk> facilities as well so I would expect gross margins to improve.
In terms of the pricing we are looking like most companies looking at our pricing looking at adjusting our pricing we have made adjustments to our pricing and that's really an ongoing exercise.
As we review the <unk>.
Inflationary trends as well as foreign exchange trends.
Got it thank you.
The next question comes from Brandon Couillard of Jefferies. Please go ahead.
Hey, guys. This is Matt on for Brian Thanks for taking the question.
First one on sell matter the deal you hear this.
Weak, but you guys introduce new strategic partnership with them.
If you could talk a little bit about maybe what you learn partnership.
<unk> acquired yes. It was all planned and then kind of how do you expect this to impact your cryopreservation offering going forward. So maybe talk about the ability at all for you to expand the portfolio upstream a bit more.
Yes, so one of the things we're always doing is we're always critically evaluating the overall supply chain related to cell and gene distribution and one of the biggest pain points as moving upstream and that is the collection and processing related activities of <unk> and <unk> product as.
As well as the associated distribution requirements of moving fresh product all over all around the world.
It's been a pain point in the industry for the firm.
Last number of years.
We've got resounding feedback from initial engagement around this platform as well as industry feedback that this is a critical pain point that needs to be addressed.
This gives us a substantial opportunity to address that.
And will it will it will address the deficiency in the marketplace in general.
But it also provides the ability to de risk and improve product quality, which is a critical consideration in particular with the manufacturing variability that a lot of these companies are seeing based on the collection related activities in collection and processing activities. So.
So we think it's a significant opportunity.
And it's an opportunity to derisk it as an opportunity to to obviously present a platform that substantially improves the overall product quality thats going into the manufacturing centers.
That's the feedback that we're getting from the industry as well.
That's great and then following up to an earlier question on the two new facilities you guys opened.
Talk about kind of initial thoughts or reactions from your customer base.
Robert noted that a handful are going through their audit process.
Color on timing of that and then how you expect utilization that those two new facilities.
In the back half of the year.
Yes.
Is there any way to sorry, just handicap the potential revenue there now if we look out 12 to 18 months.
More normalized operations.
Yes. So there are there's already client activity, we're already supporting client clinical activity in both locations. So it's not that we've already gone through the process some of our clients actually audited the facilities pre completion to be able to move product in there as quickly as we can that being said obviously it takes time.
To build.
<unk> build out that backlog component tree associated with the storage and fulfillment related considerations and we're still bringing certain service services online in the <unk> services area with them. So not all the services are instantaneously operating because you have to go through regulatory processes.
From our perspective, it's probably a 12 to 18 month process before you get a full absorption of that of that those particular assets from a storage consideration Matt.
Matt one other thing to keep in mind is when if you think about allo allo getting approved and al will coming to market there arent any outflow approved yet.
So we have to be in our clients' demand has to be ahead of the curve. So they can be getting this into their filings that can be added in our facilities and everything else. So we have to be out ahead of this a bit we don't want to be too far ahead.
But we're really bullish on the <unk> the whole network of the global supply chain network, it's going to be a big factor for us moving forward.
Makes sense I'll leave it there. Thank you guys.
Thank you.
The next question comes from David Larsen of BTG. Please go ahead.
Hi can you just remind me what was the FX impact I think you said it was like a $2 2 million dollar revenue drag is that correct and then how quickly can you react.
To price. So if you are seeing inflation pressures with steel frame and semiconductors like how quickly do you actually see those higher costs coming through and then can you turnaround increased price like that scene monster areas like is there a quarter delay or a six months delay.
<unk>.
Yeah, no absolutely. So just in terms of the FX impact for the quarter was about $1 9 million for the six months above $2 8 million. So it did have an impact in spite of us showing record revenue for the second quarter. Obviously, if we didn't have the exchange rate impact it would have been still quite a.
Bit higher.
In terms of the supply chain and inflationary issues or trends.
Something is the balancing act that there is certainly a lag time between the time that we can implement pricing changes, which we have already done during Q1 as well.
And so youll see those kick in so the contractual arrangements they have to be put in place. So typically it will be more than a month lag time that youll see there.
Okay, and then the new product facility for NV.
Up and operational and at full capacity is that correct and it's my understanding there's three plants in all three of them have triple shifts going on at each of them to meet sort of this high level of demand is that is that the case.
The new practice facilities jazz three ships.
We don't normally comment on details about our operations New brand was an exception.
Because of the fire.
Other operations are operating at full capacity as well.
Yeah.
Okay and then just my last question I've been getting questions from investors around the competitive market.
Mike.
Any thoughts on like like <unk>. For example, I think they may have a relationship with thermo Fisher just any any broad thoughts on the competitive <unk>.
Environment. Thank you.
Yes, David this is.
This is.
Market of co optician, and you often are competing.
With entities that are your customers or your suppliers.
So.
That's the nature of the market in terms of of competition, it's a growing market.
I've said over and over we can expect competition on all fronts as the market grows and it definitely is growing in there.
They are small competitors, but we are the market leaders and we remain the market leaders and we're committed to continuing to be the market leaders.
Okay, great. Thanks very much.
Thank you.
Once again, if you would like to ask a question. Please press Star then one.
And our next question comes from Jacob Johnson of Stephens. Please go ahead.
Hey, Thanks, Good afternoon, I guess, a couple of follow ups on a couple of different things maybe first just follow up on Matt's question about the supply chain centers and thinking about the opportunity. There you guys have this todd.
Target for $2 to $28 million.
Revenue from our commercial therapy is there any way to tease out.
What the supply chain centers represent of that opportunity.
Jacob we don't comment on details of our operation So there.
These supply chain centers are significant to our strategy there were well thought out had been three years in the making they're up and running and customers already.
<unk> are already coming into the facility moving their products into the facility. So.
That's about as far as I can go with that Jacob except to tell you that theyre going to be significant and these are the first two supply chain centers of our global supply chain network. We have four more that we're discussing right now and you can expect to see a lot more activity in that area. Yes. The only thing I'll also add to that Jacob is obviously one of our core.
Strategies as revenue diversification of our existing relationships and expansion of services through acquisition and through New service platform.
<unk> is really focused around driving that that.
Basically if you look at it on a per patient basis, driving the percentage of revenue that we get out of out of each and every patient interaction that we have within our organization.
Okay.
Figured I'd give it a shot at that thanks for that and then Robert just on guidance.
Seen FX headwinds kind of intensified since you initially gave guidance and you reiterated it today I mean should we read that as you have a larger FX headwinds kind of operationally youre kind of increasing expectations or maybe there's some M&A flowing through there that's awesome offsetting some of the FX headwind, but I just wanted to kind of.
Pick your brain on on that.
No I think look I mean, we're clearly looking at as Marc mentioned bookings looking at our client base and forecasting.
We have and where we're really very immersed into the cell and gene therapy space covering a lot of companies in the portfolio as a clinical trial. So we have a lot of visibility having said that obviously if you look at risk faction of our few you'll see disclosed.
Foreign exchange translation supply chain risks than others, and we're trying to weigh that and see how that impacts our full year revenue guidance.
And we feel confident with the revenue guidance that we gave for the year.
It's based on the the views that we have run all the discussions that we have with our clients.
And again, the strong positioning in the market space with the clinical trials, we are supporting with MBE being the global leader for cryogenic Freezers and shipper systems.
Across VP, having a very strong presence and leadership in temperature controlled supply.
Courier specialty Courier solutions so.
So we have a number of revenue streams that all contributed to the full year guidance.
Okay. Thanks for that Robert I'll leave it there thanks.
Thank you. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Jerry Shelton for any closing remarks.
Thank you operator in closing first quarter 2022 was yet another quarter, demonstrating our leadership position in temperature controlled supply chain solutions for the life Sciences industry supporting our markets a biopharma animal health.
And reproductive medicine, and especially the lifesaving cell and gene therapies across the clinical and commercial spectrum, we're working hard to be the world's most comprehensive fully integrated commercially successful enabling companies to the life Sciences, our focus is on biotechnology and providing the industry a full fully.
<unk> supply chain platform from the earliest stages of research to the delivery of the and commodities in their final form.
<unk> is known for industry leadership, dependability, agility reliability innovation and excellence and we will strive to continue to achieve a growing essentially attitude to our markets. Thank you for joining us today. We appreciate your continuing support and interest in our company. We look forward to updating you on our.
Our progress again next quarter, we hope you have a good evening.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
[music].
Okay.
[music].