Q2 2023 Orgenesis Inc Earnings Call
Greetings and welcome to the old Genesis second quarter 2023 business update call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
That anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host David Waldman Investor Relations you may begin.
Thank you and good morning, everyone and welcome to the <unk> second quarter 2023 business update conference call on the call with US. This morning are very careful and Chief Executive Officer, and Youre, writing, our Chief Financial Officer. If you have any questions. After the call or would like any additional information about the company. Please contact crescendo communications at two one.
26711020. 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 as amended and section 21 E of the Securities Exchange Act 1934 as amended these forward looking statements involve substantial uncertainties risks and are based upon our 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 expectations 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 risks and uncertainties discussed under the heading risk factors in item <unk> 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 statements for any reason I'd now like to turn the call over to Regenesis CEO Mr. Eric Catherine. Please go ahead Bert.
Thank you David and thanks to everyone for joining us on our call today, we reported revenue of approximately $7 million for the second quarter of 2020 sleep, which reflects the continued activity of our point of care strategy. Most recently, we blended the point of care. So this has been there for more genesis to okta meal, which.
Reflects our focus on providing standardized decentralized cost effective development and production of advanced cell and gene therapies.
The ongoing expansion of all point of care strategy has been enabled in part by the recent investments for metal Mall capital. This capital allows us to increase our capacity and expand activity as well as the rollout of our point of care centers and deployment of our <unk> in the U S.
The reason all point of care business is resonating well in the industry and among those familiar with the industry is quite simple appoint appeal platform addresses many of the key challenges facing the industry, including capacity constraints and excessive cost.
Despite the fact that the autologous cell therapy market is valued at $13 billion and growing.
The centralized production approach is not a sustainable business model as illustrated by supply shortages high prices of products and limited availability of college and because of our experience in this business for the past 10 years, we recognize that fact before the rest of the industry well know things in the state.
Knowledge, the urgent need to shift production away from a centralized to decentralized model towards point of Q Hospital, and health systems can't afford to produce cell and gene therapies in a centralized manner. This is a fact and OXXO mail Oh, we blended service activity is the only provider that can also.
Today, we are also seeing growing like cognition and support for decentralized production of cell and gene therapies amongst the regulators, including the SBA, which had less decentralized manufacturing for the first time in the last guidance documents considerations for the development of chimeric antigen receptor called <unk>.
T cell products, which we believe comes as a response to the industry search for solutions in this space.
In fact, the least in the article and lobbyist Tech note that that's over 9900 cell therapy trials are currently really cool thing. They go on to point out that even if 5% to 10% of successful a significant number of cell therapies will be approved in the near future. This is extraordinary considering.
The average number of drugs approved over the last 10 years is around 40. They go on to know that the additional centralized C. D. M. O model is a capital intensive approach essentially a dead end and I quote economically it doesn't work the cost of centralized manual processes will keep therapies out of reach for patients.
Until they point out a recent example, which was bluebird bio's store often integral gene therapy folio Bliss blood disorder from the German market because it could not agree on a price with the house facilities. They conclude by saying this centralized approach also doesn't work from a clinical perspective because of the.
<unk> logistics time lags and failed batches. In contrast, we are poised to capitalize on this growing underserved market and have shown up closest well.
In a decentralized manner within the field of gene and cell and gene therapies, our processes apply to regenerative medicine in immuno oncology as well as other genetically modified cells. We are now expanding to new customers and more moving to more advanced clinical stages among existing ones.
As a result, we believe our model based on standardization of the production environment is uniquely positioned to address industry challenges.
Finally, innovative decentralized model, which lower cost streamlines logistics and expands capacity. In addition, we design them in a scalable modular format. So we can add capacity as the needs of the hospital of biotech companies expand.
This process is exactly the same regardless of whether the product is produced.
We have a GMT GMT team with significant practical experience overseeing the centers that is all people are working to implement advanced quality management Tonight solutions will also be opening a new G. M. P Silva St Rolling out a new GMP surfaces in the U S in the coming quarters.
In addition, <unk> can be deployed and operational and fleet of six months with an existing structure or disabled available outdoor space and production capacity can be easily scaled via deal additional units on pills, a fully integrated all in one bio processing production units that can be rapidly implemented as a spare.
And the light industrial clean almost two and a dip at the point of Q1 post children's implementation time of new capacity capacity food 24 months to fleet of six months. The interior can be purpose built to include GMP compliant production space was option for quality control loves our wheelhouse basis, we believe our strategy of <unk>.
Centralizing and harmonizing the supplier for cell and gene therapies will ultimately become the solution for this industry lowing cost streamlining logistics and accelerating development of therapies through onsite pulsing lose.
Ooh. These steps we are clearly executing all all strategy to make cell and gene therapy products and services more accessible affordable and available to patients.
Additional centralized models of production in terms of expenses our goal overtime is to reduce the cost of lease it'll be tens of thousands hundreds of thousands.
Those.
On a related note. It is important to point out that some of the growing pains. We went through to get where we are today. When we started out a point of kill strategy over three years ago decentralized production was a topic discussed as a distant option at industry events with various bioreactor companies taking initial.
Steps to provide systems for use in hospital cleaning we have already tried this approach and realize those this was important because it was not the full solution the industry needed.
Oh first clients were smaller earlier stage companies, but couldn't even access production capacity due to supply constraints in the market.
Lease and they were willing to take risk with US well. This was still in the early stage concept and recognize the value proposition, we would be able to also in terms of more lapping lower cost production, if and when successful.
But because many of these small companies where early stage and undercapitalized will also willing to provide greater fixed flexibility in payment terms and mutual support and working with them.
Will it all falls mills and we appreciate your support while we will still in the development stages.
This approach has impacted that accounts receivable, but we believe that we have achieved our goals and hopefully as these companies mature we hope to compete continue providing the products and more advanced clinical space. We have also advanced materials and a validated approach across several product types and can now work with.
Companies in this industry sustainable levels with the deconsolidation of up to a meal. We believe all decentralized service platform can now function as an independent entity as it continues to expand its reach globally.
It has been really blended as October Mailer was the name up tomorrow, but I think the unique characteristics of the octopus its capability to adapt and integrate a wide range of spaces, It's decentralized intelligence.
Octopus dissolves can actually think independently of the central Blaine the ability to regenerate go lives and the ability to reach out in all directions. The mill up all of the names come from the world keep meal, which signifies our ability to genetically modify yourself.
Because if they had stopped this has given us in the market. We have now proven our model and the mill is positioned as a clear leader in terms of providing decentralized services they're in.
Leslie itself is also much uli and cell and gene autologous therapies once considered almost a science fiction and now becoming a viable approach for therapeutic treatment with more and more snow beauty targeted a good example is the call or chimeric antigen receptor approach, which the patients immune cells are genetically mod.
So they may target a specific target.
Causal first used only to take blood cancer, making history by enabling unheard of clinical results and extremely old patients and have now expanded to multiple modalities, including autoimmune diseases and even cardiac disease.
As the number of therapies goes as more and more patients with wild. These treatments. It has become obvious that the industry must find solutions to reduce costs and enable capacity and we believe up to mail will play a significant significant pull in providing the solution.
Also once these customers start working with us as I have discussed in the past, we become central to the entire production process and regulatory approval. This leads to a long term collaborative relationship and into dependency as they pull vessel various stages of clinical trials, so do we and ultimately into.
Commercialization together.
I'll start process development capabilities, coupled with our growing GMP capacity enables us to decentralize the supply of cell and gene therapies in various regions.
But initially developing a little bus production pulses programmed into our biotech.
Gnostic and flexible all the production can be efficiently scaled and plants with the various locations and then the new network.
We have our initial locations, which is operated directly by us, but we have also identified regional partners to which we can work that can support the expansion of the network to meet local demand.
This allows us to live usually general overhead and expands our reach and providing decentralized.
It is also part of our strategy of providing a standard for the industry and utilizing available resource and integrating innovative technologies into the platform.
We have successfully implemented implemented a certified academic program to support additional equipment and performing multiple peptides for two additional sites for production stage products supplied at existing sites.
We continue to support the growth of found that smoke network, which now spans North America, Europe , and Asia, and the Middle East compromised with both point of care centers, which serves as a hub for the entire region in Europe , and Asia and the Middle East October realize already providing production foolishness. It does still setting up point of care centers and stuff.
Teach subs in the U S implementing procedures and GMP into international hubs.
In order to maintain okta mills value as an emphasis industry leader, it's must not to rush at the cost of not complying with the spin just quality requirements, but it can be no compromise on this issue as this both.
Illegal and unethical Butte.
The mill recently reached an important milestone in its collaborators.
Please stand by while we reconnect the speakers line my apologies for the inconvenience. Please standby everybody I'll reconnect the speakers line at this time once again please standby.
Yeah.
Barry Kaplan has rejoined Baird. Please proceed.
Yeah, sorry for being disconnected.
We recently reached an important milestone in our collaboration with the University of California Davis.
Specifically signed a partnership agreement to deploy on pills at UC Davis, another health kill universities within the state of California.
They are now setting up the first hub, which we expect will expand overtime, we believe that having UCD University.
David.
The other partner is also strong validation and is likely to enhance the sale process with other institutions as the mail expanded services across America.
This agreement sets out the stages approach, but we took the mill will install and operate on people enable the point of care platform to produce royalties at hospitals throughout California, and palling onsite production for clinical trials like cell and gene therapies in development at UC Davis as health Alpha stem cell clinic as well as mall.
The products to patients off the hospital.
Oh Genesis has also developed additional assets that are positioned to be integrated into a decentralized model. Once the unique assets has been developed by Nida biotech a wholly owned subsidiary and also the support of a prestigious EU glad we've.
We've seen an explosion in the markets in terms of new therapies utilizing induced pluripotent stem cells known as I P. S sees.
<unk> has developed a unique technology and capabilities to support production of autologous I P. S seafood beef, including using Microfluidic technologies and artificial intelligence.
Project is advancing rapidly and is already being integrated into areas such as neurological conditions diabetes and oncology. We are working in collaboration with several companies to integrate this for decentralized production. We believe that this will further propel and sustain our position as an innovative leader in the market. We also have other.
<unk> and therapeutic technologies, the state of Florida vectors and delivery technologies that have developed low cost capital and have developed low cost capital efficient business model to bring these technologies to market. These technologies target a broad array of indications for immuno oncology antiviral to metabolic and auto immune disease tissue.
You wanted the lead generation and more.
We are leveraging government grants and other sources of non diluted funding from regional pulse knows.
In order to advances more broadly our strategy involves in licensing technology from leading research centers hospitals and biotech companies industrializing them. So they can be utilized in a decentralized approach and out licensing them for devote to development partners benefitting from co development related payments.
By designing these technologies to be integrated into a decentralized point of care model. We believe these therapies and technologies can be advanced clinical trials with a lower cost than traditional ones by leveraging our network of academic institutes and health care systems around the world.
So it was this network, we are establishing key strategic partnerships and licensing arrangements for several of these assets and while our partners are responsible for funding development and clinical trials, we get paid for supporting the development message.
As these programs focused progress, we expect to increasingly benefit from revenue sharing and royalty agreements with our partners as we seek to advance with respect to filter through commercialization.
Our subsidiary colleagues Therapeutics continues to supply kind of self the medical Institute for total Pancreatectomy I left all of those plants known cases as previously announced legal passed an FDA inspection for the cycles of that just the tissue production establishment. Following this confirmation of the infrastructure design and production particles and building on and clean.
The man, we're now aiming to expand capacity in the U S and internationally in the EU legalize utilizing the expertise of full genesis to enable our regional production capacity and leverage against the dive clinical development. We also aim to expand into type one diabetes, a molecule valued at over 7 billion.
So to wrap up we continue to progress toward our goal of bringing life changing cell and gene therapy treatments to large number of patients that reduce cost under a decentralized strategy.
Following the successful sale of Master cell, we invested in the technology and methodology required for setting up a decentralized platform. We also invested in building out capacity for providing services in the U E U S and the middle East, which has generated revenue in the range of $45 million annually over the past two years.
We have now built up an independent service company OXXO mail, but following the investment for metal Mark is now expanding in the U S market.
Develop a pipeline of products in the diabetes field with colleagues all leading the way was kind of stuff.
The only provider then Liam boost at leading institutes in the U S with a goal of expanding its services, although decentralized approach both to additional regions and additional therapeutic modality modalities. We have developed a unique capability in the I P. S seasick field being integrated into therapeutic modalities, we have.
Developed an in licensed multiple technologies integrated into a point of skills therapeutic targets and developed in the partnerships and licenses, we believe that by partnering and bringing in financial support at the subsidiary level, we are optimizing shareholder value.
Importantly, we are still in the first inning and building value in the biotech market, either the silver or the solutions technology provider.
And that.
Sally.
Our solution and technology provider cannot be measured in months or quarters, no achieved in a year or two we believe we have a deep understanding of this industry.
And shippers industry group technology provider, a leading research Institute, we are always one step ahead and understanding what all of the industry needs and have developed solutions and services the targets such a requirement like master cell, whose value was not obvious the non into sleep quality. It may take time for the two.
Value of activities are fully life or Genesis is a company that has a goal of implementing amazing scientific achievements over the last decade into an industrial approach, enabling the patients who need these breaks loose to benefit from them.
We believe the tremendous economic value in advancing this capability both of them and as a technology provider and we have spared no effort to achieve these goals as quickly as possible in the last few years, despite extremely challenging economic conditions.
I am proud of our Michigan NFL teams achievement, we are providing this industry a strong foundation on which to grow and believe we will be the among the first to benefit from the schools up Tomorrow is the only company with full service capabilities to support LNG decentralized production.
In this regard we have positioned OXXO mail at the forefront of this industry. There are other companies some of them quite large that's developing technologies for decentralized production, but these are devices lock solution, which makes up two meal very unique these companies announcing the shift in the market and needed. These centralized service platform.
On which to integrate the equipment.
The house is the only platform that has already been incorporated into production and clinical to.
All that said, our first and foremost considerations of always being life saving therapies to market was driving value for our shareholders.
I believe we've built a scalable reoccurring revenue business model that will support the goals of the industry and the growing capacity requirements of our partners and customers, we hope to benefit from growth in high margin recurring revenue streams.
Just on future royalties and long term agreements contacts for industrializing and supplying the cell and gene therapies.
One final note I'd like to welcome Elliott Mall was recently appointed CFO for Genesis effective September 1st and it brings 16 years of accounting and corporate finance experience working with public and private companies specializing in the biotechnology and medical device manufacturing industry. We believe is the.
T J insight and experience will be invaluable as we enter our next phase of growth.
I would like also personally thank and expenses also still glad that you need a license deal with significant contributions following years of dedicated service.
We are always appreciative of their support.
Sort of all shareholders and investors and hope they appreciate the endless athletes, we invest and making all Genesis a best in class company.
We look forward to sharing more developments to be announced in the weeks and months ahead on that note I'd like now to turn the call over to new life and go Oh, Chief Financial Officer.
Thank you Barry.
Revenue for the three months ended June 32023 was 7 million compared to $7 2 million for the three months ended June 32022.
We recorded an increase in P. O T cell processing revenue in the amount of 375000 as a result of new signed cell processing contracts in the <unk> segment.
An increase in cell process development services revenue in the amount of $5 7 million offset by a decline in the POC development services revenue of $6 3 million mainly in the segment.
Cost of revenues for the three months ended June 32023 were $3 2 million.
Paired to $1 1 billion for the three months ended June 32022, representing an increase of 204%.
Increase was due to increased costs in New York numerous segment, including additional salaries professional fees raw materials and depreciation expenses incurred mainly related to higher cost of revenues of process development and P. O S. T cell processing, the revenues of which the increase.
Selling general and administrative expenses for the three months ended June 32023, 3 million compared to $2 8 million for the same period last year, representing an increase of 19%.
The increase in selling general and administrative expenses in the three months ended June 30, 22 compared to the three months ended June 30 of 'twenty. One is primarily attributed to an increase in salaries and related expenses professional fees and other general and administrative expenses in the segment due to the ramp up of activity offset by a decline in accounting and legal fees opera.
<unk> loss for the three months ended June 30, 23 was $3 3 million compared to $4 7 million for the same period last year net loss for the three months ended June 30th 23 was $3 seven a decrease of 33% compared to $5 5 million for the same period last year.
Prehensile loss attributed toward Genesis for three months ended June 30, It was 3.8 million, which included the translation adjustment due to deconsolidation of walk to mirror a 384000.
Comprehensive income.
Attributed to Noncontrolling interests of 466000.
We recorded a decrease of 35% and comprehensive loss attributed or Genesys, Inc. Compared to $5 seven by for the same period last year.
Liquidity, we ended the quarter with cash cash equivalents and restricted cash of approximately $1 2 million.
This does not reflect the most recent funding for middle market into Okta Mirror 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 P O care services.
It is important to note that while we still have significant influence over rock amira and still on approximately 75% following a deconsolidation the assets and liabilities of Okta Merit do not show up on our balance sheet.
We remain focused on carefully managing expenses for appeal care therapies through cost effective international partnering and licensing strategy and non dilutive grant funding.
Operator, we'll now open the call to questions.
Thank you the floor is now open for questions. If you would like to enter the queue to ask a question at this time. Please press star one on your telephone keypad.
Active listening on a speaker phone. This morning that you pick up your handset or asking your question to provide optimal sound quality. Once again. Please press star one on your telephone keypad at this time, if you wish to join the queue to ask a question. Please hold the moment, while we poll for questions.
And our first question. This morning is coming from Bruce Jackson from the Benchmark Company. Bruce Your line is live. Please go ahead.
Good morning, and thank you for taking my questions with regard to the University of California agreement. It looks like expanded during the quarter. So the first site was at UC Davis and I, just wanted to check and make sure I heard this correctly that there were there were two other sites that you were not working with them.
Do you have a rough idea of how many sites in total you could expand to.
Oh, so we we have our sites, but not in California.
Okay and Oh, that's it.
At the moment, we'll just focus on one site in California, because we it's better to validate that cycle, then expand I think in general that we're talking about five but again, let me just explain again that when you talk about a site okay. Aside conserve more.
People hospitals, okay multiple it can manage multiple on pure for multiple indications.
So one hub can host one on people cannot appeal.
And how much so it's really about you know regional each of you know you want these will be to get to the location.
Hmm.
A few hours away right. So don't think of a site is just one on fuel for a hospital that's kind of a misconception.
Okay. So the decides to get them out of different capabilities and they're not directly comparable is what you're getting at.
Yeah, Yeah. They can each side can increase capacity and for instance, all group.
I have several on peoples GOG getting different indication okay.
I'm, just giving me about at Apple, but it's it's not you know one site. The hospital. It doesn't work that way one side can can awful anything in the vicinity of a couple of hours away.
Okay, and then with Toby go on our past call you discussed that you might be able to take some of that capability to other international markets is that still the is that are you thinking about that yes.
Yes, yes, but we'd like to have grant funding support it we do have a good clear kind of trend is actually included you know, Belgium group at the moment. So we hope to utilize that to expand that European amount to the European market.
Yes.
Okay and then just last question about the salt process development services its been it's been ramping.
Well the the other the the pill care business has been kind of been.
Trailing off actually it's been kind of.
I guess the question here is with with the mix between those two businesses should we expect that the salt process development services are going to continue to to ramp.
So let me explain this okay. So that's why I and I've explained that I think I've mentioned this is another cold it's very difficult to.
Oh, two I'd say.
Kind of politician. This revenue in our business by quarter and we used to have the same issue, whose massive felt like because what happens is I mean for the past quarter or when you have a new customer you basically focus a lot on P. D. Now you finished let's say some oh affirmed phase all of a sudden production phase.
Now you're waiting for an existing customer for the next one so it's really actually reflects the fact that we've moved to a few several new customers more than anything else. Okay and it's it's just the timing issue in terms of you know this quarter happened to be this next quarter.
Maybe something else, so, but yes in general in concept, we want to maintain a strong post this development capability why because that each time build up the pipeline for new production capacities.
Hi, interconnected and even the line of what is actual production in what is considered.
Post this development is not that clear cut maybe producing batches, but for development lease until I believe and so it really reflects the fact in this last quarter of bringing in new customers that initially meet postal development.
Okay. That's helpful. Thank you for taking my questions.
Oh, you're welcome Bruce and thanks, as always kind of coming onto the call appreciate your input.
Yeah.
Thank you.
It remains open for questions at this time, if you would wish to ask a question you May press star one on your keypad to enter the queue. Once again that'll be star one at this time, if you wish to join the queue to ask a question.
And there are no further questions in queue at this time I would now like to turn the floor back to management for closing remarks.
I'd like to thank everyone for participating on our second quarter 2020 business update conference call. We are excited about the outlook for the business and appreciate the support of our shareholders. We look forward to providing further updates as we advance though therapeutics targeting <unk>.
And all of these pipeline expanding.
Our point of care platform and deploying our own truth worldwide. Thank you very much.
Thank you. 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.