Q4 2022 Orgenesis Inc Earnings Call
Greetings and welcome to the old Genesis 2022 year end business update conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Note. This conference is being recorded I will now.
I'll turn the conference over to your host David Waldman Investor Relations you may begin.
Thank you good morning, everyone and welcome to the <unk> year end business update conference call on the call with US. This morning are very capital and Chief Executive Officer, and Youre, writing, our Chief Financial Officer.
Have any questions. After the call would like any additional information about the company. Please contact Crescendo communications at 2126711020. This conference call contains forward looking statements, which are made pursuant to the safe Harbor provisions of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1930.
Four as amended these forward looking statements involve substantial uncertainties and risks and are based upon current expectations estimates and projections and reflects 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 expectations about future events. These future. 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 one a of our annual report on Form 10-K for the fiscal.
Year ended December 31, 2022, 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 I'd now like to turn the call over to Genesis CEO Mr. Barry Kaplan. Please go ahead Barry.
Thank you, David and thanks to everyone for joining us on our call today.
We are advancing the rollout with the Salt Genesis mobile processing units labs also known as Alan pools, which are fully integrated all in one bio processing units that can be rapidly implemented as a standardized industrial clean or most of them are at the point of care.
Our revenue for the fourth quarter of 2022 increased by 98% to $14 $6 million.
Bill to the same period last year. In addition would you still operating loss by 91%, which reflects so cost effective and scalable business model.
Our revenue has shifted to be more production base as we advanced products and process development to GMP production.
As we expand production and we hope to benefit from economies of scale with each point of care sites servicing several on fuels.
As we have discussed in the past the key to success in our point of care business is standardization proposals is exactly the same regardless like goddess of where the product is produced we believe our strategy of decentralizing the supply of cell and gene therapies based on standardization of some manufacturing production environment.
But ultimately it becomes a solution for this industry, enabling lower cost streamline logistics accelerated development.
And providing a scalable long term option to overcome the industry wide capacity constraints.
Utilizing our ample based approach we believe we are uniquely positioned to address the challenges of Covid centralized production also shorten the implementation time of new capacity from 18 24 months to sweetest six in terms of expenses. Our goal overtime is to reduce the cost of leasing with east tens of thousands.
Hundreds of thousands of dollars.
A recent news article in genetic engineering, and biotechnology, New stated that high production costs, all limiting patient access to cell and gene therapies. Additionally, an analysis by the Institute for clinical and economic review suggests the average cost of cell therapy treatment as $1 million.
So that's the only reason we believe our point of care post. This is a crucial step that it is necessary for cell therapy used to become widely available.
As a result, we believe our model is uniquely positioned to address these challenges facing the industry.
And capacity constraints in excess of cost.
We see this industry mature more and more products until the clinical stage. It becomes clearer that this industry must find solutions to reduce cogs costs, both from the development stage as well as the PON market approval.
Turning to cell and gene a public shelf industry leases through 2022, there were 27, FDA approved cell and gene therapies.
However, there are currently over 1500 ongoing clinical trials for cell and gene therapies registered with clinical trial stopped golf for this very reason, we would like to become an industry standard on which we can integrate new therapies in development.
Savings are costly need for each company to develop its own platform fueling all the expenses and risks involved we believe that utilizing an existing flexible platform available at multiple standardized location, we want and will enable therapeutic development companies to focus our efforts in clinic.
Development.
We continue to support our point of care centers, which are strategically located around the world and now span North America, Europe , Asia, and the Middle East, which service hubs for the entire region.
We appreciate the dedicated work of our teams across the globe.
Diligently work to implement our quality system and implement the GMP practices, we view all human resources, So greatest fastest and hope to continue to attract wonderful scientists from every nationality.
Our strategy is to qualify the production posted some one on one point of co location and then to add additional on People's under the same quality system and infrastructure. We have developed this approach based on a decade of experience in process development of such therapies and we are working closely with Lee filters from leading I could.
Demick Institute as well as somebody at the companies active in this space. We believe the pools are an important step to quickly expand our capacity and we look forward to expanding both the quantity and location of our system.
Since we have launched our point of care business. The feedback from the industry has been positive. We are all also seeing the regulatory agencies.
The issue of decentralized production of cell and gene therapies, which we believe comes as a response to the industry search for solutions in this space. The success of our point of care strategy has been enabled in part by the recent investment for minimal capital talks with a premier private equity firms.
Into a point of scale films subsidiary more Genesis LLC.
It is important to reiterate assistance action was met the mark value them, we'll Genesis subsidiary alone that's a pretty money valuation.
$420 million, which represents a significant premium to the market cap of the entire company.
This capital has allowed us to increase the capacity and then.
That's our go to market strategy.
Aim to accelerate the deployment of all throughout the global point of care network with a goal to expand capacity across a broad range of advanced cell and gene therapies.
We recently reached an important step in our collaboration with the University of California Davis.
Specifically, we signed an Mou with UC Davis to deploy all false accuracy Davis, another health care universities with the state of California.
We believe that having some of the thoughts really strong validation. This is likely to in handfuls and enhance our implication as well.
So as we expand our own people strategy across North America.
It is important to know that all business goes beyond the point of care services in terms of our point of care for people with pipeline.
We believe we developed a low cost capital efficient business model to bring these therapies to market in 2022 subsidiary Collegial Therapeutics supplied kind of south of five medical Institute supplying total Pancreatectomy ILEC auto class plan cases.
Production from the from this one site and able to go to achieve positive cash flow from operations in the fourth quarter for the U S. A separate businesses.
Additionally, legal paas and the FDA inspection of the Cytosorb registered tissue production establishment in February following the confirmation of the infrastructure design production protocols and building an increasing demand. We are now pursuing plans for site expansion in the U S and internationally.
You can it goes usefully utilizing the expertise of full Genesis.
They believe <unk> production capacity and leverage guidance to dive clinical development.
More broadly our strategy involves and licensing for peace from leading research centers hospitals, and biotech companies and alcohol licensing such products to pharma and biotech companies and consistence and standardized models in all location.
We provide these partners with development and supply services, while benefiting from service related payments.
At the same time, we are leveraging government grants and other sources of non dilutive funding from regional pulses analysis in order to advance such facility.
Using our point of care model. We believe these therapies can be advanced in clinical trials with the lower cost of traditional clinical claims by leveraging our network of academic institutes in health care health skill systems around the world.
I'll pause most of our customers have aligned interest with al and have committed to support the validation development clinical trial with advanced therapies utilizing our point of care platform within their respective markets.
As we've discussed in the past, we provide a felt with Muslim customers with development and supply centers.
Whether it is for our own products or for out licensing fees. We believe this approach is highly scalable and D risks developments outside support from our partners.
In this way we believe we can advance our development of point of view, so piece, which now spam immuno oncology antiviral metabolic autoimmune disease tissue regeneration and more.
Okay.
As an example, we recently reached an important milestone in collaboration with hospitality and some theaters riverstone.
In Madrid, Spain, and careful acoustics.
Specifically, we announced positive.
Preclinical is awesome input nasal administration of stem cell based on political.
Product with demonstrated over 50% tumor reduction.
Glioblastoma model and now.
This ability to do the liver stem cells to the buying through the blood brain barrier opens the possibility to a broad array of treatments.
Could it potentially be less invasive Lee administered.
The production of that stem cell phone.
Based on quality product.
Utilizing our hospital base stone.
We look forward to expanding our collaboration with <unk>.
On one final note. We recognize these are challenging times, both since financial marks us and for the company is developing the next generation of therapies, we believe that by offering a more cost effective dog a development pathway for these therapies.
Especially for company starting to optimize cash utilization, we can offer new cost efficient solution that will unlock value not only for genesis, but across the industry.
So to wrap up we believe the coming year could be transformative for Genesee. We believe we will building a sustainable revenue model that will allow us to support our global partners and customers wildly advanced products required regulatory stuff.
We expect to benefit from growth cooling revenue stream based both on services and on future royalties.
And in long term contracts for industrial lying in supplying these cell and gene therapies.
As metal Mark support we look forward to accelerating the rollout of all point scale strategy and deployment of our tools.
We share a vision of bringing breakthrough therapies to market in a cost effective way.
Ultimately benefit patients and hopefully save lives.
We look forward to sharing more exciting developments to be announced in the weeks and months ahead.
We hope will drive value for shareholders for years to come.
On that note I'll now turn the call over to new life and go how Chief Financial Officer.
Thank you Eric.
Revenue for the three months ended December 31, 2022 increased by 97, 7% to $13 6 million compared to $6 9 million for the three months ended December 31, 2021 revenue for the year ended December 31, 22 increased to $36 million compared to $35 5 million for 2021.
The growth in revenue reflects an increase in cell process development service and hospital services as a result of having signed new process development services agreements with third party customers, partially offset by a decline in P. O carrier development services now that we have completed the majority of performance obligations under the initial development contracts and two.
<unk> thousand 21.
Cost of revenues development services and research and development for the three months ended December 31, 2022 were $6 1 million and $27 1 million for the three and 12 months ended December 31, 2022, a decrease of 43% and 26% respectively over the same period last year.
In previous years, we made significant investments in research and development services, including in the development of several types of Biofuels the development of automated processing units and some processes.
Owned and licensed advanced therapies to enable commercial production and additional work that addresses peeled cured meats, while we continue to invest in these activities. The majority of development work on our <unk> has been completed thus, allowing us to deploy all fuels and various worldwide locations.
As a result, we saw a significant reduction in development and research and development service expenses.
Contracting professional and consulting services lab expenses and other research and development expenses.
Selling general and administrative expenses for the three months ended December 31, 2022 were $6 8 million compared to $2 7 million for the same period last year.
SG&A for the year ended December 31, 21 was $15 6 million as compared to $14 7 million for the year ended December 31, 2020, the increase in selling and general administrative expenses for both the quarter and full year 2022 was primarily attributable to an increase in professional services accounting and legal fees.
As a result of additional investment activities in 2022 compared to 2021 offset by a decline in salaries and related expenses.
We expect the growth in revenue in 2023, including contracts already in hand, we will cover R&D and SG&A expenses during 2023.
Operating loss for the three months ended December 31, 2022 was 627000.
Decrease of 91% compared to $6 9 million for the same period last year net loss for the three months ended December 31, 2022 was $1 3 million a decrease of 75% compared to $5 million for the same period last year.
Operating loss for the year ended December 31, 2022 was $8 6 million a decrease of 49% compared to $16 8 million for the same period last year.
Net loss for 2022 was $12 2 million a decrease of 33% compared to $18 1 million for the same period last year.
In terms of liquidity, we ended the year with cash and cash equivalents of approximately $5 3 million and restricted cash of $1 $1 million. We subsequently raised gross proceeds of $3 9 million through a registered direct offering and a 5 million three year convertible note, which we believe provides us additional flexibility to support our near and long term.
Capital needs at the parent company level.
At the same time, we believe the investment from metal Mark will enable the deployment of our <unk> to provide life changing treatments to large numbers of patients in the U S and all around the world.
Overall, we remain focused on carefully managing expenses and believe much of our upfront investments are behind us and expect future growth in revenue will offset our cash burn.
Operator, we will now open the call to questions. Thank you.
Certainly.
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.
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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for questions.
Your first question for today is coming from Bruce Jackson at Benchmark company.
Hi, good morning, and thank you for taking my questions.
Why don't you go into a little bit more detail about the University of California, Davis memorandum of understanding.
How long do you think it's going to take to get to a formal agreement.
Oh, well I don't know you know academic institutes they have little processes.
Well remember we already have existing.
Existing agreements. So we know the teams a little well and we're pushing ahead as quickly as we can.
I think if you will I think it's important for both.
Okay. Okay.
And then the arm pools have several different capabilities. I was also curious to know does the does the agreement cover your particular type of processing like adoptive cell therapy or cellular therapy processing or does it also include like gene therapy or some other types of.
Op your capabilities.
We the oculus quite flexible changing from a fellow of genetically modified cell is really just changing the equipment inside so.
It's really not.
An issue.
Sure.
We don't have to kind of pre defined let's say.
Okay and then.
And then can you help us with just a general sense of scale as opposed to give us a rough idea of how big this could get would it potentially go to the entire University of California system at some point.
Well I mean, the idea is to have this expands.
Not just one location, yes, and I think we'll start with one location take it from them.
As we usually do.
And we want to validate a location make sure all of us looking to suddenly need most of California, It's not just one site.
Okay.
And then if I could get getting one quick question about <unk>.
With the.
Sales to the five different.
Customers.
I'm assuming that those were after you got the FDA manufacturing.
Inspection behind you and could we expect.
Similar sales per quarter going forward or could it potentially expand off of.
The base that you established.
In the first.
So just two.
Because of Covid because of other things you know the FDA inspection of.
Of course, they have days of use your production files and everything.
It did not actually come to the site to do.
And for US It was important thing one of the validated so it's taken them maybe longer than we thought.
<unk> available to come to that site, but they became thing to draw that which gives us just gives us reassurance if we wanted.
Kate that side. Thanks, we can feel assured that the.
The pulse is the way we do this the way we produce this product is acceptable.
And and will audited by the regulator.
And and.
We know there is a need fulfill the sites, but you know.
That's kind of a point of care approach right. So we're working on one side now to start shipping this to sites that are very far away and it's not easy.
It's also very expensive.
So what we wanted to do is now that we validate dislocations that supply to these centers.
We can now.
Buildup and network of these so we can supply to additional centers.
Okay got it and then one last question for Neil wins, the case can be filed.
When do you expect the case to be filed tomorrow. Okay.
We'd like to make sure it's at the same or.
In that same 24 hour period for your earnings release Okay.
Okay Super that's it for me thank you.
Thank you.
Your next question for today is coming from William Jordan at TSA investment.
Yeah. Good morning first of all congratulations on the strong quarters, clearly you are making tremendous progress it seems that one of the challenges in the past was the capital to deploy the new bills.
Given the significant investment from metal Mark how do you see that impacting the business going forward.
Well, we first of all we appreciate that capital very much because it allows us to stick to our plan right and to make sure. We can continue.
To provide for all existing customer hopefully for new customers.
The production capacity that you need so that's very helpful.
What I would I think we can do is now is kind of grow with our customers and grow with industry.
And and having that capability to expand capacity is very important.
Because the one thing that our model allows us flexibility.
When you look at traditional kind of production night. The moment you want the moment between which you want to increase the capacity or if your customer wants until you can actually build out that new capacity is very long.
And one of the important things are now.
Roche is allowing that quick response time. So you don't have to plan fully use ahead did you have that ability to both flexibility to change location to change capacity.
And we believe that's one of the biggest issues is this industry. So that really allows us to kind of.
I would say validate.
This approach we have.
Great. Thanks keep up the good work.
Thank you.
Your next question for today is coming from Steve Waite at Kildare publishing.
Hey, good morning, good afternoon.
Barry just a question there seems to be this the centralized manner.
Manufacturers seem to be struggling.
A breakthrough medicines for example.
These guys have invested a lot of money in the centralized facilities.
We don't really have any customers I think youre, a decentralized model looks a lot stronger.
Can you just comment on perhaps why these centralized models are struggling today and why the decentralized model hazard.
Better chance of succeeding.
So first of all I wish all of them all.
Oh Tesla all companies providing capacity in this space.
Best of luck.
And and one thing for sure there's plenty of work for everyone does not even need to compete for such a lack of capacity out there.
And.
We want everyone to succeed with a centralized or decentralized.
And I think it's again, a timing issue okay. Because if you look and when you look at some of the stuff goes the industry's having and again. This is my assumption, but I think this is what I'm hearing from the industry right.
Traditionally if you want to build out capacity you have to plan that quite a long time had right. If you want to work for instance was though.
With a subcontractor.
Service provider you have to plan that well well in advance and not always all your plans that clear, especially if not if you on our clinical stage.
You need to secure them you need to secure space now as that space.
What happens is for new capacity being built it takes a long time until additional kind of companies get to that point will the plant exact much ahead okay.
I hope I'm clear.
Play of wellness.
Planning logistic issue. The other issue I think is that the industry is.
These are not exactly the easiest financial times and I think there's a big difference between committing to a large facility with a lot of you know.
Fund commitments than working with us right well the commitment of stage its very flexible so it's much easier to make a decision to work with us because an awful. When you know you can have that envelope maybe today here and then if you have a change of plans you can have a solution somewhere else. So PV allows our customers that quick.
Flexibility as times change as things change.
Again that is my assumptions.
But that's what kind of I feel from coming from the industry.
Thank you.
Thanks for the question.
Your next question for today is coming from James Watson, a private investor.
Hi, everyone I wanted to check with you.
Card receivables, because you'll be tickets and vishal. The goto revenues he has gone up quite a bit.
Just one the.
Would a collection B B program, if we do call. It always call review of both would be paying down debt.
Neil do you want to answer.
Sure.
When we collect receivables potentially yes, we paid down some debt, but Moreover, as you heard from our inflection point, we're at with our loss for the quarter.
<unk> hundred 27000 were at that point, where we want to keep feeding our growth and scalability. So we would be very selective about how we're going to use that outside of working capital.
Two used into pare down debt that will obviously be dependent on other.
Potential capital raising initiatives that are needed to do that when loans come due potentially if it could be extended so we want to be very careful about the deployment of capital based on now becoming <unk>.
Given the inflection point, where at knowing that we want to make sure. We continue to scale with this next phase of our evolution. Okay. So and we always and we are as far as from an EUR standpoint itself I mean, obviously, it's a very.
It's a very.
It's a balance sheet account that all companies monitor very carefully based on the economic environment same thing with US a lot of our clients are very good customers are very progressive and growing as well. So they're every every company. Likewise is affected by the market conditions, but we keep it obviously monitor that very closely especially too with regard to.
Our revenue and revenue recognition. So we believe we'll be successful in.
Our collection efforts and there are some balances that may extend beyond that we work with those customers, but so far everything is within a time period that we think we're going to collect but we look back to you, but we will be very careful about the deployment of it got to make sure we scaled back operations for growth Okay.
Excellent. Thank you and just a follow up question. So I think all of US who are running businesses, we all understand that the cardiac changed a lot.
What all self sustainability I think it's very important.
So I also understand that our Genesis as a growth company. So what's the current thinking model right now.
Next few quarters do we hope to operate at a breakeven level or some months. We asked you all key having some losses, because we are seeing the growth pace.
So I think well on the services side I mean, we're still growing right. I mean, we were committed to use that capital we got full quota.
That's the idea we want to maintain growth.
And that's kind of part of our business plan.
And as for the other.
<unk> of the business, what we really try to leverage as much as possible on grants and partnerships. We do have some commitments, but we are trying to keep them back.
Balanced as much as we can because obviously this is not the easiest time to collect catheter.
Got it got it.
So.
I think this is going to be.
A very difficult question, but.
Sure.
Because you know RJ this is right now.
Really.
<unk> business, providing new technologies, and we do not know what the possible profit margin that this company could produce let's say 345 years later when did this at a steady speed by perhaps no longer in a growth phase.
Is there any range of.
Our margins profit margins, you think it's possible for.
Artemis is to achieve.
Look we try to base our revenue on.
I'm pleased.
2% gross profit.
That's that's what we try to do at least.
And around 20, 25% EBITDA on the on our services.
When your deal was out licensing of therapies will have a completely different model likes I mean, you're just waiting for the upside.
So that's our goal.
We've as you can see from my financial our financial for the kind of maintain that.
That's kind of been our focus.
Got it got it.
Yes.
Can I just squeeze in one last question because.
I thought that fourth quarter, what's a very nice ramp up in revenue, but we would do a year to year comparison sort of flat flattish.
But for the coming few quarters, where are we see ourselves in terms of the demand for abuse or even.
Providing.
I don't think I mean, we are looking and we are expanding.
Regionally right.
So well.
We're putting a big focus this year on expanding capacity in the U S.
And.
So it's our hope.
Also expanding and a few other agents.
This is a claim in the U S. We've put a focus.
And and I hope that will allow us to grow.
That's that's that's the Golar fight that's why we're putting so much that slipped into this.
Got it thank you so much.
Thank you.
We have reached the end of the question and answer session and I will now turn the call over to management for closing remarks.
Yeah.
Thank you I'd like to thank everyone for participating on our year end business update conference call.
We are excited about the outlook for the business and appreciate the strong support of the south shore shales as well.
Forward to providing further updates as we advance our therapeutic pipeline expand our point of care platform and deploy on People's worldwide.
Q.
This.
<unk> today's conference and you may disconnect your lines at this time. Thank you for your participation.
Okay.