Q3 2022 Orgenesis Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the old Genesis third quarter, 2022 business update call.
At this time, all participants have been placed on a listen only mode and the floor will be open for questions and comments. After the presentation. It is now my pleasure to turn the floor over to Mr. David Waldman Investor Relations, David the floor is yours.
Thank you and good morning, everyone and welcome to our Genesis in third quarter 2022 business update conference call on the call with US. This morning are very Kaplan, Chief Executive Officer, and Youll, writing, our Chief Financial Officer do you have any questions. After the call would like any additional information about the company. Please contact Crescendo communications that you want to 67 11020.
This conference call contains forward looking statements, which are made pursuant to the safe Harbor provisions of section 27 of the Securities Act of 1933 at <unk>.
And in section 21 E of the Securities and Exchange Act of 1934 as amended these forward looking statements involve substantial uncertainties and risks and are based upon current expectations estimates and projections and reflect our beliefs and assumptions based upon information available to us at the date of this conference call. We caution listeners that forward looking statements are predictions based on our current expectation.
About future events. These forward looking statements are not guarantees of future performance and are subject to risks uncertainties and assumptions that are difficult to predict our actual results performance or achievements could differ materially from those expressed or implied by the forward looking statements. As a result of a number of factors, including but not limited to the risks and uncertainties discussed under the heading risk factors in item <unk> of our annual report on.
<unk> Form 10-K for the fiscal year ended December 31, 2021, and in our other filings with the Securities and Exchange Commission, we undertake no obligation to revise or update any forward looking statement for any reason now like turn the call over to our Genesis C. Atmospheric Kaplan. Please go ahead Barry.
Thank you, David and thanks to everyone for joining us on our call today.
We've made significant progress in advancing the rollout of all point of care platform and we are very pleased to report another quarter of solid loving us $8 million in all progressing and now expansion in the U S.
We have invested much asphalt until the fall capitalizing activities in order to protect shareholders and preserve our capital structure with that background I'm really happy to report that we completed the lease and financing.
Point of care services business, well recently for point of care services subsidiary more Genesis L. L C.
I think it's important to note this transaction value. This one subsidiary alone at the pre money valuation of $125 million we should.
That's a significant premium to the market cap of one time company.
For those of you who may have been skeptical of a new business model. We believe this investment for middle market.
Private equity so it sounded to independently manage the Morgan Stanley capital partner funds is a significant validation of our business model.
Conducted extensive due diligence classes with investment, which I believe is a benefit to the company.
We believe this investment provides the necessary funding to accelerate the rollout of our point of care services business, while minimizing dilution to existing stockholders is given the current state of the public markets.
I'd also like to point out that this is a similar strategy to the one we pursued with master. So for those of you who've been involved with a genesis for some time, you'll recall, we bought in the U S private equity for them as a strategic investor into a C D moved business.
Ultimately we sold this business for over 300 million to the benefit of all parties involved we are pursuing a similar strategy Suez private equity investment. The major difference here is that though revenues on all of the on par with where we will when we sold master. So we believe that the point of care services business will generally.
Substantially more value for the company and that we are providing a unique service for this expanding industry.
Our point of care platform addresses many of the key challenges facing the industry, including capacity constraints excessive cost.
As a result, we believe our model is uniquely positioned to address industry challenges.
Highly innovative decentralized model, which lost cost streams lines logistics and expand capacity.
Since launching off point of killed the feedback from the industry has been positive and now with men amongst support we believe we have the resources to Alex accelerates its business.
As we have discussed in the past the number of advantage to point to a point of care system.
Such as short setup times, they have a small footprint and the lowest cost of production through automated operations streamline logistics in parallel processing and.
In addition, we design them, a scalable and modular format. So we can add capacity as the needs of hospital of biotech companies expand.
<unk> shortens implementation time of new capacity from 18, 24 months as clean rooms requires to approximately three to six months.
We believe our strategy of decentralizing and unitize the supply of cell.
Cell and gene therapies based on standardization of the manufacturing environment could ultimately becomes a solution for this industry knowing the cost to fulfill peaceful onsite booth thing. It makes me a little bit more broadly available to patients.
Our goal overtime is to reduce the cost of these therapies to tens of thousands hundreds of thousands of dollars. We believe this is a crucial steps necessary for cell therapies to become widely available.
Our global supply network now spans North America, Europe , Asia, and the Middle East compromise of point of care centers, which feels as hub for entirely.
We now have on People's deployed in Europe , and the Middle East and a set of point of care centers and teach a club in the U S.
As previously discussed we expanded our collaboration with Johns Hopkins to establish a new point of care Center also known as the Moon incentive for cell therapy manufacturing construction of the new point of care centers will be funded in part by a $5 million gone from the state of Maryland.
I'll post this development services all of the active on site, we could not even envision a better path of John Hopkins as one of our first strategic collaboration we believe in having them as a partner as strong validation and isn't likely to enhance the sales forces with other institutions as we expand across North America.
All that being said it's important to note that all business goes beyond the point of care services in terms of point of careful therapeutic pipeline.
We have developed a low cost capital efficient business model to bring these therapies to market. We now have a dozen distinct therapeutic programs within our pipeline in various stages of development.
These snoopys span a broad array of indications for immuno oncology antiviral metabolic and auto immune diseases and more.
Designing these therapies from the ground up using all point of care model. We believe these therapies can be advanced in clinical trials with a lower cost than traditional clinical development.
By leveraging our network of academic institutions and whole school systems around the world.
Susan Snap work, we all establishing peace strategic partnership and licensing agreement to fund the development of Actavis and while our partners are responsible for funding development and clinical trial, we get paid for performance.
As these programs move into commercialization phase, we would benefit from revenue sharing and royalty agreements with all partners.
In addition, we have a strong track record of securing non.
They need to grant funding to fill that accelerates the development of these programs, we believe that our ability to secure funding makes these snoopys, even more attractive for potential partners and licenses.
We then work with us who all stages of development lifecycle.
We can basically provide them, a plug and play and roadmap, including manufacturing clinical and regulatory as well as those licenses.
Also flew these partnerships and prudent cash management, we have dramatically reduced all of <unk>.
G&A by 49% and on net loss by 86% for the third quarter of this year over the same period last year. As a result, we achieved nearly breakeven income from operation for the third quarter of 2022.
At the heart of our business model. Our goal is to provide life changing treatments to large number of patients and reduce cost within the point of care setting.
We've also built.
Well, thus the pubic pipeline leveraging of the government grants and other sources of non diluted funding from regional partners and also while out licensing therapies to regional distribution fathers and benefiting from two of us related payments.
We're more of an advanced <unk> about the outlook of the business as we have built a scalable they are killing recurring revenue business model. We believe our model is uniquely positioned to support the growth of the industry and the growing capacity requirements of our partners and customers.
I would like to thank all followed a wheelchair hold that sort of stuck with us and believe our best days lie ahead, we look forward to sharing more exciting developments to be announced in the weeks and months ahead.
On that note I'll now turn the call over to Neal I think Chief Financial Officer.
Yeah.
Thank you.
Our revenues for the three months ended September 32022 were 8 million compared to $8 7 million for the three months ended September 32020.
The decrease was attributable mainly to a decline in POC development services as a result of our having completed the majority of performance obligations under the POC development services contracts in 'twenty one during.
During 'twenty two we started recognizing revenue from cell processing, which comprised $2 4 million of the revenue for the three months ended September 32022.
As we moved into the second phase of our rollout our ability to grow revenue has been limited by capital constraints as Eric mentioned earlier, we believe the capital infusion by Middle Mark will enable us to accelerate the rollout of our acute care services.
Cost of revenues development services and research and development for the three months ended September 32022, 7 million as compared to 10 million for the three months ended September .
September 30 of 2021, representing a decrease of 53%.
The change is contributing to the decrease during the quarter were attributable to decreased $2 7 million in sub contracting professional consulting service fees and a decrease of $2 1 million on other research and development expenses.
SG&A for the three months ended September 30, or 22 were $3 1 million compared to $6 1 million for the same period last year, representing a decrease of 49%.
The decrease in SG&A in the three months ended September 32022, compared to the comparable period last year is primarily attributable to a decline in salaries and related expenses, which was offset by an increase in accounting and legal fees.
Operating loss for the three months ended September 32022 was 7000 compared to $7 7 million.
Same period last year net loss for the three months ended.
At September 30 of 2022 was $1 4 million a decrease of 86% compared to $10 1 million for the same period last year.
As you can see we remain focused on carefully managing expenses at the same time, we believe the investment from middle market will enable us to accelerate the rollout of our point of care services. We also.
Yeah.
Are able to contain cost per appeal care therapy store or an international partnering and licensing strategy, coupled with non dilutive grant funding.
With liquidity and current assets, we ended the period with approximately $3 million of cash and cash equivalents. This does not include our most recent funding for middle market of approximately $30 million that was received subsequent to the end of the quarter.
We look forward to benefiting from this recent investment in advancing our collaboration with them to expand our Geo care services.
Operator, we'll now open the call to questions.
Thank you very much ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone handset. We also outpacing. Your question you. Please pickup your handset if you're listening on a speaker phone to provide optimal sound quality.
Coffee poll for questions.
Thank you. Your first question is coming from Bruce Jackson of the benchmark company.
His life.
Hi, good morning, and thank you for taking my questions.
So congratulations on the the Middle March transaction and the creation of more Genesis.
I was wondering if you could give us some examples of.
How you've been capital constrained in the past and how the new capital is going to help you.
<unk> grew a little bit faster and get more arm pools out there.
Yeah, I'm I think I'm you know, it's very much Catholics related right.
When we set up a new one pill set up a new point of care side, though is it's not a huge investment, but there isn't investments, though we need to hire a few more people and of course, you cannot commit to.
<unk> doing work in the food and Legion [laughter], if you're not sure you can you have the capital to to the place that equipment and to set up the.
So I think.
In terms of just being a responsible service provider we have to be careful not to take on contracts, we cannot too and now having that capability will allow us to expand.
Especially with a focus on the U S side, because as you remember we began activities.
Europe , and Middle East and in Asia, and I think it's important for us to expand our capacity and Oh, just ability to provide services in the U S.
And then in the in the past.
Yeah.
Given out the number of on pools that have been active I was just curious if you could share with us how many you have up and running now.
So.
Tell me the tooth [laughter] I don't want to say number because they haven't okay. Okay. That's fine.
And I don't want to say, an incorrect number, but it's less about and I think that's important to understand so I'm glad you brought up the question, it's less about how many on fuels.
How full or how fully the utilization in each arm fuel is kind of done. So I mean, the non fuel can do let's say it can depend batches you can make a 50 batches or point of care Center, and Oh point of Kiss hub.
As David likes to call them they can provide.
<unk> services to one on pillar two uncles of Freon pills.
So it's really about making sure that the capacity we have is fully utilized and to make sure that.
Adding additional capacity then sets the stage for additional revenue.
Okay got it and then last question for me you kind of touched on the the therapeutic pipeline, where there any highlights from our pipeline that you'd like to discuss any any of the projects that made notable progress.
Progress during the quarter.
Well you know most of the boutiques are either preclinical or in different stages of clinical development and I don't think there's anything that's been kind of dramatic in terms of you know finishing of phase one all finishing a phase two or something like that but I.
Can't say, they're progressing very nicely and I think we will have more benefit from and tunes, even I'm hopeful even in terms of just payments.
Next to you, but I think the team has done a tremendous job in really kind of progressing things.
And keeping to the timeline and making sure. We can also utilize the grant funding because that is of course connected disease. You know the fact that we are doing the development at the quiet timeline. So I think things are suddenly on cools and.
And I'm I'm really hoping that in the next you will see more and more news coming out on the therapeutics.
Great. Okay. Thank you very much for taking my questions and congratulations on all the progress.
Thank you thanks for always being at the calls please share it.
Thank you very much. Your next question is coming from Calvin Sito is a private investor Calvin Your line is life.
Hey, Barry Congratulations on the Great results I think this quarter was really impressive in terms of how the costs are being managed.
Could you run us through how was it bigger chief where their head count is being reduced because I see that these are turnaround in financial results is really a very impressive.
So look you know we've been building a business. It takes time it takes investments and I think I've mentioned this in other calls as well.
No.
Need to run batches before you actually make them you need to train people you need to push things ahead. It takes time to find distribution and licensing partners all season.
<unk> activities they require capital light.
And I think what we will have now or what we are seeing now is as you know.
No the the.
The benefits from our past investments.
Because even if we licensed this therapy, there's still some work to be done on it before we can license it out and even if we set up a point of care hub. It takes time until that becomes utilized but I think we have at the moment put in you know what we needed to.
This level of revenue.
And and I'm very happy that we now have the mental mark funds that will allow us to expand.
And close a business.
That's kind of you know, it's just a matter of I think maturity off the business in some ways.
Got it got it I wont go up question. So I think it's really impressive what how yes.
Net investment from.
Our partners I think also validated that.
The business model, so humid day rehab.
Enthused at all cash.
How should we think about that.
The profitability level Argentous issue should we expect the business to expand aggressively yet you know there'll be some losses in the next few quarters. All you would wander business, who operate on a breakeven level.
So I think it's also a matter of demand and planning.
Full.
Will we have the capital I think we should go I think even I mean this is an industry that is the.
Neat solutions site, and we have a great opportunity to be.
Trailblazer here due to shows this can be done to provide solutions.
And you see the need the lovely place on the globe wherever you go you see companies hospitals need a solution and.
And if we have the chance to grow and expand and provide that solutions and now it's time to do it not wait [laughter].
Because if.
If we have customers who were.
One hour service, we should certainly supply.
So it's really the it's really about how fast we can supply demand and how we can go but of course, I mean, I think company doesn't want to lose money neither do we.
And unless we have an initial kind of focus of investment I think we'll try to maintain uncles.
Alright got it.
Just one last question I noticed in our revenue breakdown the cell processing revenue.
<unk> grown a law if I may.
Wrong, its somewhere above 2 billion. So am I right to say that this is the recurring portion of the business.
Yes that is really occurring and as we spoke in the past I'm, hoping more.
Will shift.
As eventually we go.
And I also think you know the fact that we have such strong post this development capabilities is actually because most companies or hospitals or almost any anybody who works in the field before you start generating the reoccurring revenue of you know.
The postal thing you need that post this development.
And the fact that we can.
Band and do post this devotion to then shift towards is something that I think is very important for our business model that you know.
Companies are hospitals don't have to come to us when the all of you got a full solution, but we can also provide that.
That support to move from kind of more research to development and then to actual post dosing.
Alright got it so I guess.
Three things really stood out for me this quarter I think number one you've got to shop with US revenue has grown a lot. So the reoccurring portion is really great I think it gives you.
Is it the earnings piece of BG <unk>.
<unk> achieved a near breakeven right I think that's fantastic.
Boys that you've gotten a huge investment but met about partners.
I think a lot of companies. These days are being stop off capital bought.
In our situation. It seems like we are you know are.
Inject that we've a lot of capital really to expand so I think it makes me even more excited for the journey ahead.
Thanks for the great work and are looking forward to the next quarters results.
Thank you very much.
Thank you very much there appear to be no further questions in the queue I'll now hand back over to management for any closing remarks.
So I'd like to thank everyone for participating on our third quarter update conference call. We are really excited about the outlook for the business and appreciate the strong support of our shareholders and we look forward to providing further updates as events on our therapeutic pipeline expand our point of care plan.
Phone and deploy on tooth worldwide. Thank you.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.