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spk11: Good afternoon and welcome to CryoPort's fourth quarter and full year 2023 conference call. All participants will start in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. As a reminder, this call is being recorded. I would now like to turn the call over to your host, Todd Frohmer from KCFA Strategic Communications. Please go ahead.
spk01: Thank you, operator. Before we begin today, I would like to remind everyone that this conference call contains certain forward-looking statements. All statements that address our operating performance, events, or developments that we expect or anticipate occurring in the future are forward-looking statements. These forward-looking statements are based on management's beliefs and assumptions and not on information currently available to our management team. Our management team believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events, and developments to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include but are not limited to those described in Item 1A, Risk Factors, and elsewhere in our annual report on Form 10-K filed with the Securities and Exchange Commission. and those described from time to time in the other reports which we filed with the Securities and Exchange Commission. With nothing further, it is now my pleasure to turn the call over to Mr. General Shelton, Chief Executive Officer of Crowdport. Jerry, the floor is yours.
spk00: Thank you, Todd. Good afternoon, ladies and gentlemen. Thank you for joining our earnings call today. With us this afternoon is Chief Financial Officer Robert Stavanovich, our Chief Scientific Officer, Dr. Mark Sawicki, and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. As a reminder, we have uploaded our fourth quarter and full year 2023 and review document to our website. It can be found under Investor Relations in the News and Events section. This document provides a review of our financial and operational performance and a general business outlook. If you've not had a chance to read it, I would encourage you to go to our website and download it. I'll provide you with a brief update on our business and then we'll move into answering your questions. Today, we reported total revenue of $233.3 million for fiscal year 2023, which was within our guidance range. 2023 turned out to be a challenging global operating environment, which impacted revenue across all of our business units. Product revenue was lower than historical levels, even as MBE revenue began to stabilize in the last quarter of the year. At the same time, in 2023, we saw further growth in service revenue as it became a greater part of our business. Our service business is the core driver of our growth, generating over $144 million in revenue, which represents 62% of our total. As part of this growth, we had a year-over-year growth in biostorage bioservice revenue of 45% and commercial cell and gene therapy revenue of 33%. As of December 31, 2023, we supported a record of 675 clinical trials worldwide, a net increase of 21 clinical trials over last year, with 82 of these in Phase 3 as well as 311 in Phase 2. I think it's important to point out that our clinical trial portfolio constitutes a significant long-term revenue growth opportunity for CryoPORT as most therapies proceed through clinical trials toward commercialization. We currently support 14 commercial therapies, up from 10 the prior year. We expect the number to grow again this year, driven by an anticipated 17 application filings and an anticipated nine new therapy approvals. In fact, we have already had two new therapies approved and one BLA filing this year. So we're off to a pretty good start. Product revenue in 2023 was lower than historical levels. As reported previously, our MBE biological solutions revenue began to stabilize in the latter part of the year. Putting these short-term anomalies in perspective, MBE is a global leader in the manufacture of cryogenic systems. It is a resilient business And through cost controls, it has been able to maintain strong margins and generate considerable cash flow for our company. We remain confident in MVE and its future. I think the cell and gene therapy industry is still in a nascent stage that will develop in a way that will transform the way we practice medicine for the betterment of mankind. The actions we take daily are to support that vision, not just for the short term, but for the longer term as well. To that end, a few of the actions we took during 2023 to further position ourselves for continued growth and industry leadership included making targeted investments in our business and forming strategic relationships with respected partners. For example, we acquired Bluebird Express, a provider of time-sensitive domestic and international transportation services with the intent to strengthen Cryo PDP's USA rollout. We also completed the acquisition of Tech for Med Life Sciences, a technology company that provides next-generation communication and condition monitoring technology for the life sciences. It is through tactical investments with strategic impacts such as these that we have had over the years expanded our solutions beyond logistics and transformed our company into a robust platform of temperature control supply chain solutions for the life sciences with a focus on cell and gene therapy. We pay attention to the development of our ecosystem and to that end, we developed additional strategic partnerships in 2023, including forming a new collaboration with Cell and Gene Therapy Catapult Network in Stevenage, England, to provide integrated logistic support to its Manufacturing Innovation Center. Through this partnership, we are establishing our first UK logistic center to support cell and gene therapy clinical trials and future commercial growth throughout Europe. Stevenage is located in the center of the Golden Triangle, arguably the most cell and gene therapy concentrated activity in all of Europe. We also expanded our relationship with NMDP Biotherapies, formerly known as Be the Match Therapies, in which it will be leveraging our new IntegraCell platform in support of allogeneic donor recruitment, collection, and cryopreservation. In AsiaPak, we developed a strategic partnership with Nippon Express, headquartered in Tokyo, which will build onto our growing APAC presence and bolster our temperature control supply chain solutions worldwide. Our business development activities included welcoming a number of key new clients from which revenue will ramp up over time. For example, Sarepta's gene therapy, Alvitas, for the treatment of Duchenne muscular dystrophy has ramped up treating patients much faster than Wall Street had predicted. And by June of this year, Sarepta may receive a label expansion for Alvitas that removes all the current age restrictions. Other positive client developments that have continued into 2024 include the FDA's commercial approval of Iovance Biotherapy's MTAGV therapy for advanced melanoma, the FDA's commercial approval of CRISPR and Vertex of Cascavi for the treatment of sickle cell and beta thalassemia, and the FDA's acceptance for priority review of Adaptimune's biologic license application for Alfamacel, an investigational engineered T cell therapy for advanced synovial sarcoma. As these and other anticipated therapies are introduced into the market and begin to ramp up, our commercial revenue will grow, driving further growth in logistics and bioservice revenue. We continue to set a new standard for the cell and gene therapy industry as evidenced by the launch of innovative and revolutionary products and services, including the Crowdport Elite line of shippers, which include the Crowdport Elite Ultracol-80 shipper. These cutting-edge shippers are setting a new bar, exceeding industry standards temperature hold times and providing additional risk mitigation. Our advanced integrated technologies enable data management and transparency verified through our chain of compliance service platform. With product introductions like these, we continue to expand our end-to-end solutions for the care and transport of cell and gene therapies. The developments and actions I've outlined today are just a few examples of solid foundation CryoPort continues to build to support our long-term growth strategy. Growth in the cell and gene therapy market alone, along with other sectors of the life sciences, paused over the last year or so, but we expect 2024 to show progressive improvement throughout the year. Therefore, we're providing a full year 2024 revenue guidance in the range of $242 million to $252 million. As we move through 2024, we will continue to focus on leveraging our growth drivers and strengthening the our industry-leading brands to better serve our clients while capitalizing on the growth of the cell and gene therapy industry as more of these lifesaving therapies receive regulatory approval globally. We believe 2024 will be a year of progressive advancement in our business with stronger overall growth in our service business. That concludes my prepared remarks. Now we're happy to take your questions. Operator, please open the lines for questions.
spk02: Thank you.
spk11: Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. If you would like to withdraw from the question queue, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys.
spk02: One moment, please, for your first question. Your first question comes from Puneet Sudha of LeRinc Partners. Your line is already open. Puneet Sudha of LeRinc Partners.
spk00: Puneet, you're not coming through clearly. Puneet, I can't understand your question.
spk02: Operator, why don't you go to the next question? Puneet, why don't you try to fix your situation and hop back in?
spk11: Okay, Puneet, you can try to recue. Your next question comes from David Saxon of Needham. Your line is already open.
spk04: Oh, great. Hi, guys. Good afternoon. Thanks for taking my questions. Hopefully, you can hear me a little better. I wanted to, okay, great. So, you know, the comments around MBE stabilizing in the fourth quarter, It sounds like the rest of the portfolio is seeing growth. So I wanted to ask about the cadence of revenue throughout the year. You know, looking back, you do typically grow sequentially off the fourth quarter. So, you know, with kind of what you saw in the fourth quarter, should we think about that trend continuing and, you know, seeing growth sequentially in the first quarter or and any reaction to consensus at around $62 million for the first quarter, and then all of the quick follow-up.
spk00: David, as you know, we don't give quarterly guidance, but I think the assumption about your trend, I think, is fine. What we suggested and I tried to suggest in my comments was progressive improvement throughout the year. The industry did take a haircut for the past couple of years. in terms of funding and in terms of growth and so forth. But we think that's coming back. We think the funding is off to a good level. As I mentioned, we've got a couple of therapies already approved, and we think we're off to a good start. So we think we'll be progressively better throughout the year.
spk09: And we mentioned the services revenue being really the growth driver. So if you look at the 23 performance and two of the critical revenue streams, that we've seen significant growth in both on the commercial revenue side, where we've seen growth of 33% year-over-year and actually 36% in Q4, or the bio-storage, bio-services revenue, where we've seen, again, 45% year-over-year growth. So those are some of the leading service revenues that we also expect to continue to grow in 24 as well.
spk00: And, David, we'll have progressive improvement at MBE, too. I mean, MBE is a great business. It owns the dominant share of the market, and it is a great business. It's the number one cryogenic systems manufacturer in the world, and it's highly lauded, and there is need for biologic storage all around the world. And so that will come back. It just comes back. It will come back over time.
spk04: Okay, all super helpful, so thank you for that. And then I wanted to ask on the P&L, specifically the gross margin, you know, it was fairly stable through the third quarter and then, you know, came down a bit in the fourth. So what happened during the quarter to cause that sequential contraction? And then for 2024, you know, how should we think about the gross margin? for this year. Thanks so much.
spk09: Yeah, again, on gross margin, you're right. If you look at overall gross margins, we ended Q4 at 42.6 versus a 43.8%. And we've seen services revenue being relatively flat year over year, and then seeing a little bit more of a dip on the product side. You know, in some instances you'll have in Q4 kind of additional kind of cost increase, the amount of initial true-ups. So I would expect some of that to alleviate, you know, going forward in Q1 and beyond. But I would expect, you know, for modeling purposes, more of a stabilization of gross margin, you know, again, also with increase in our business increasing progressively throughout the year.
spk02: Great. Thank you so much.
spk11: Your next question comes from Tejas Savant from Morgan Stanley. Your line is already open.
spk10: Hey, guys. Hey, guys. Good evening. Jerry, one for you on the guide. Just curious about what exactly are you baking in for the biopharma funding recovery? Are you essentially assuming current demand conditions continue through the rest of the year? Or are you baking in, you know, something like a recovery in the back half beyond just, you know, easier comps? And then similar sort of question on the China situation as well. I mean, clearly was a weak geography for you in 23 as it was for a lot of other life science companies. Are you baking in some sort of a recovery there in MBE into the guide in the back half?
spk00: Tejas, in terms of the overall funding for biopharma, for biotech, and especially for cell and gene therapy, we think that we'll be improving on a progressive basis throughout the year. All this is notwithstanding any geopolitical unrest or geopolitical tilting or anything, but we think given the situation that we have right now, it'll be progressing on a progressive basis. As regard to China, China's in a depression, in a recession. And it could be a depression, but I think it's in a recession right now. And it's going to remain in a recession for a while. We don't depend on China for, you know, a lot of our volume. I mean, it's less than 4% of our total revenue. It is a more significant part of MBE's revenue. But we're taking action at MBE to do a couple of things. One, we will be manufacturing freezers domestically in China. That will take about a year to implement, but we will be manufacturing them in China and meeting to meet President Xi's 2025 initiative of making China buy in China. We're happy to do that. That plant has produced freezers in the past, and we have the capacity to ramp up freezer manufacturing in China. So we think that will help alleviate part of the situation. But China, the pressure on China is going to continue for a while. We don't see China recovering this year for sure.
spk13: Hey, Jerry, just one thing on the bioservices or the biopharma funding situation. So I just want to make sure everybody's aware. Obviously, the improvement in funding for the biopharma space is a long-term benefit for us because it recapitalizes a lot of the portfolio and allows them to reinitiate clinical programs. But that's not an instantaneous benefit. The benefit is really focused around what Jerry had mentioned in his opening comments is is all of the new and the approval activity. You know, we see upwards of another nine therapies that may be approved this year. And so that's where you're going to start to see that significant improvement and contribution later in the year, as well as the diversification of revenue into the bioservices space, as we had already mentioned, as well as that commercial revenue piece.
spk10: Got it. That's super helpful. And then just speeding back the layers at MBE a little bit, Jerry. Can you share some color on what the order book sort of looks like, how month-over-month things have trended there? You've consistently talked of margins holding up really well in that business, even with the top-line headwinds. Do you envision a situation where you need to perhaps lean in on that pricing lever a little bit more in 24 to help nudge high-end freezer sales? And then any color on that $50 million non-cash impairment on MBE in the quarter? Thanks.
spk00: Well, yeah, I'll answer the first part, and Robert can answer the latter question. We don't actually comment on details on any of our business units, so I don't really want to comment on those. I can tell you that the margin has to do with superlative management. Our management team at MBE does an incredible job of managing manufacturing operations and the cost to be in line you know, more with revenue. And so in terms of leaning on a price lever, we are always looking at our pricing. We annually, we look at our pricing and we look at it more frequently if we have a have need to, but I don't think we'll be leaning on that lever in any disproportionate way. MVE is a healthy business. It's doing well, even under these conditions. It continues to generate cash flow. It's a strong business. And it is the dominant player in cryogenic systems manufacture, controlling some 65, 70% of the market. And so we're very confident in MVE. I'm not concerned. We're in this business for the long term. We're not in it for the short term. Now, Robert can comment on your question regarding goodwill impairment.
spk09: Yeah, absolutely. Obviously, this is your standard accounting approach. So when you look at the non-cash impairment charge and the reduction in goodwill related to MBE Biological Solutions, the acquisition that we completed in Q4 of 2020, this is really based on the drop in revenue that we've seen in Q2 of 23. which continued kind of more or less flat, you know, for Q3 and Q4 because it was leveled out. And with that, we had to adjust our financial modeling and do a quantitative impairment assessment. And that led to that one-time charge reducing the goodwill. No other goodwill or intangible assets, you know, were considered impaired. So that's really, you know, the explanation.
spk10: Got it. That's super helpful. And then one final one for you, Jerry. I know you were at Advanced Therapy Week conference in Miami. Just any color on just customer feedback and traction there? And as you talk to them about perhaps some of your upcoming products or recently launched products, whether it's the HV3 shipper or perhaps the Fusion 2.0, et cetera, where do you sense the most unmet need and excitement? And where do you see the most traction over the next couple of years for you guys?
spk00: You know, Tejas, it's a really good question, but it's a very complicated answer in the sense that we have 20-some-odd initiatives going on inside the company right now building out for the future. And we are constantly reprioritizing to meet market needs as they come up. The HV3 shipper is going to be a fantastic addition to our product line because it will reduce the total cost of shipping for the manufacturers. The fusion line, as it's developed, and especially as we develop the 800 series, the smaller series, will open up markets that we've never been in. It'll open up second and third floors. The Broad Institute, for example, to cite just one customer that I think we can cite, bought fusions because of the plumbing issues. They could use it flexibly on on higher floors. And so that's a very exciting product. The Vario, which is an energy-efficient unit, can be dialed up and down for different temperature ranges from minus 20 all the way up to cryogenic temperatures. We have IntegraCell coming on where we're going to be furnishing optimized cryoprocessed apheresis which will be standard and standardized, and it will be producing more robust material. It will be crowd-preserved to allow manufacturers to insert the materials when they need, when they want to, as opposed to when they have to, you know, being fresh material. It will be crowd-preserved. It will expand manufacturing capacity. It will improve the quality of the therapies. It will be more consistent. And this is another, you know, standard setting thing that we're doing. We're opening up this gene therapy business, minus 80, with the Crawport Elite Ultracol. You know, so it goes on and on. And, you know, we just bought tech from Ed, which I mentioned in my comments, is an incredible communications and temperature monitoring system. that will start over time to tie all of our companies together and give us the most complete chain of compliance in the world. It'll be terribly exciting as it gets into that process. So those are just a few of the things. And we have levels of priority. It's not just one priority. It's levels of priority as we serve the industry. We're rolling out, of course, cryo PDP in the United States. It already has a number one footprint in Asia Pac and also in EMEA. And we're just now rolling it out in the United States. It's been underway for a while. We acquired Bluebird to accelerate that. We're opening up, you know, operations to, you know, to supplement that and to build out, continue to build out that operation. So we have a host of things going on that are meeting, that are not only meeting the industry, but anticipating where the industry will be and help enabling it to, you know, to grow and to prosper. And that's both in cell and gene therapy.
spk10: Got it. Appreciate the color, guys, and best of luck with the year.
spk00: Thank you very much, Tejas.
spk11: Your next question comes from Puneet. Tudor of leering partners, your line is already open.
spk03: Okay. Yeah, I guess. Hopefully you can hear me. Okay. Yeah, much better for me. All right. So just if you can help me a little bit on the, on, on the guide, I mean, it came in on the lower end of the guide in itself. That was flat for the year. you are seeing some improvement in MBE, as you pointed out, in sequential improvement, but China is still not improving. So, you know, sort of taking all that in, I guess, you know, my main question is, you're implying about a 6% growth this year in 24. What is actually sort of embedded in that guide? What are the levers that you think push that six percent growth potentially higher? And is there or is there enough, you know, sort of like a better word, conservatism baked into that?
spk00: Well, you know, we did take a conservative approach. We looked at all of our business units and we built our our forecast from the ground up. And certainly we think that there are some upsides that that that could happen. And, you know, this year, There could be more therapies approved. Our existing therapies could ramp quicker, both of which I alluded to a little bit earlier. Some of our introductions of products this year could be adopted much quicker than we forecast. So we definitely have upside, but we wanted to be conservative. We're not interested in disappointing anyone, and our business plan is around that. Robert, would you like to comment any further on that?
spk09: No, no, I just, you know, echo what Jerry said. You know, if you look again at the outlook for 24 and you look at what we've achieved in some of the key areas in 23, you can see the continuum of services revenue growing, in particular, you know, the commercial revenue, in particular, the biostorage bioservices revenue. And those are really some of the leads. Like Jerry mentioned, there's a few new initiatives that are coming online this year. And if they ramp faster, that can contribute to more and more revenue. Again, we certainly took a conservative look. You know, if you talk to other companies in the life science tool space, you'll hear them say, you know, they're being cautiously optimistic. And we are as well. But, you know, that's kind of where we stand.
spk03: Okay. That's helpful. And then just following up on cryo-PDP as well, I mean, the combined cryo PDP and MBE is still, I believe, more than 60% of your revenue. You know, could you maybe just elaborate a bit on, should we start thinking about the normalized sort of growth rate at MBE similar to what you acquired it when, you know, at the time of acquisition, correct me if I'm wrong, it was low single digit to maybe mid single digit and cryo PDP was not far from that. So, Maybe just help us understand what's the normalized sort of growth rate we ought to be thinking for these two businesses.
spk00: You know, once MDE starts to fall out, and I don't pair these businesses together. They're totally different businesses, and they're totally different parts of the market with totally different missions. So I'll take them one at a time. On MVE, I think once it pulls out of this low, I think you will be able to assume the growth rates are maybe even a little bit better than single digits, maybe in the low double digits once it's out of this low. You know, so what created the low and what created this? We do have some hypotheses. You know, and I've mentioned in the past that, you know, there was – There was a pullback on capital expenditures. Well, we've all known that because the economy has been in a cautious mode for over a year with the overall global activities and capital budgets have been affected. But I also think that this is an hypothesis on my part. This is not factual, but it is an hypothesis that there was a little bit of a buildup during the COVID period of time of capacity, and that capacity is being filled up now. Once that's being filled up, you'll see the normal rates. Look, biological material is being produced all of the time, and it's being produced in great quantities all the time. It has to be stored, and there's no way to avoid it. Cryogenics are the way that you store that material. So it will come back, and we're very confident in MVE, its position in the market, its products, the way it serves the market, and its long-term prospects. They're We think they're outstanding. And there will be new products and new services coming out of MVE over time as well, and some diversification of revenue streams over time. As far as cryo PDP goes, cryo PDP is the world's third largest specialty courier serving biotech or biopharma. It is rolling out in the United States. We've been in that process now for a while. But we did buy Bluebird Express in order to accelerate that process. We've had 10 years experience with Bluebird Express at Cryoport Systems. We know the quality of that operation and its people. And so we know it's a great addition. And we continue to build out in the United States. We will find, you know, that we will find, you know, momentum in the United States as we build out, you know, the structure. and as Bluebird has some impact on that growth in the United States. So I think that the growth rates there will be, you know, a little bit in excess of what they were. They will still be in the low single digits, you know, once it finds its footing in the United States. Other parts of the world are doing fine.
spk02: You mean low double digits, Jerry, not low single digits? Yes. Sorry, just clarifying.
spk12: He said low single digits, and that's what he meant, Mark.
spk03: Sorry, just clarifying. That's low single digits for the U.S. part of the business and double digits for international?
spk02: Yes, yeah, yeah, exactly.
spk03: Okay. Just last question, if I may. You know, the Alabama IVF decision, Can you outline what's the impact for you and what changes you have to bring about in your network for that?
spk00: Alabama was not a big impact on us. We got more publicity than we did anything else out of Alabama. We do ship in and out of Alabama, and when the Supreme Court ruled as it did, we suspended shipments until we could understand the situation. we suspended business there, both for MVE and Cryoport Systems as well as Cryo PDP. So we did suspend business there until we got a clear reading. Then a new law was passed, and we opened up Alabama again. So we're doing business in Alabama. Things are business as usual in Alabama at this point, but we certainly are monitoring that situation just in case, you know, there's a change of mind. in that state. But it did create a lot of publicity.
spk02: Okay. Thank you, guys.
spk11: Your next question comes from John Sarbeer of UBS. Your line is already open.
spk07: Good evening, and thanks for taking the question. I just want to dig in a little bit more on the commercial revenues. I think they slowed quarter over quarter. Any additional details you can provide there on the quarter? And then also, how do you think about this high level this ramps out over the next year, given some of the recent approvals and the outlook for approvals in 2024?
spk00: Well, John, let's let Robert start with giving you some factual information. And then I'd like for Mark to comment on what's happening in the market, because what's happening in the market is pretty exciting.
spk09: Yeah, and the latter probably is the most important, because those are some of the drivers for the revenue in 2024 and beyond. But if you look at the commercial revenue, and I think I mentioned on the last quarterly call, when you look at our quarterly revenue, look at a trailing 12 month average. But where you look at even the full year or the Q4 commercial revenue round, it's in the 33 to 36% growth year over year. So we continue to see strong growth in commercial revenue. It's now 22 million. of total revenue. So it's starting to become a more substantial portion of our services revenue, and we expect that to continue. Mark, do you want to talk about some of the market dynamics that we're seeing?
spk13: Yeah, absolutely. Thanks, Robert. Yeah, so as Robert has said, I mean, you know, looking at this on an aggregate 12-month basis is extremely important because anytime you have new therapy launches, there's some volatility in the early phases. They start to ramp. However, you know, the law of aggregation is what we're really looking at here, you know. We're seeing very, very strong approval activity. And in fact, I think between, you know, the end of 23 and 24 may be the strongest 18 months in the history of the cell and gene space from an approval standpoint. There are three BLA filings completed in Q4, which is the adaptive immune immunity to bio and autoless. One new approval in Q4. We've already had two new approvals in Q1. Another 17 possible filings in 2024, of which one has already been filed. We are projecting the potential of nine new therapies in 2024, plus potentially another two already commercialized products getting earlier line approval, which will substantially increase the addressable patient population, five label expansions. And so there's a ton of activity, and we already see the potential for another 11 possible filings in 2025. So that's the huge driver. And I think if you look at it overall, the growth rate there is going to be consistent with where the market has been and with our numbers, some of the numbers that Robert had presented for the foreseeable future.
spk07: Thanks for those details. And I believe a portion of the convertible debt is due next year. The company has a strong cash position on the balance sheet. Just any color, maybe for Robert, just on the company's financing plans going forward?
spk09: Yeah, absolutely. So we're in a strong position. We have a strong balance sheet with strong cash as of the December end. The convertible debt, really, the substantial portion of the convertible debt is due December of 2026. So we still have some time. As you recall, in 2003, we did buy back Some of the convert, you know, for us about 25 million, and we, there was about 31 million, and we paid about 25 million in cash for that. So we had about, you know, 5.7 million gain just because of the transaction. And we'll continue to look at some of the convert buyback. We're looking at, you know, the longer-term strategy that we're still mapping out, but at this point in time, we're in a good position As you recall, the convert has, you know, 0.75% interest and, like I said, is due in December of 26. So, we still have some time to evaluate the best options for that.
spk07: Thanks. And then, last question I had was on IntegraCell and the Leukephoresis collection. Just a point of clarification, is that currently live and then just Outlook for that segment for the year?
spk02: No, it will become live in the last half of the year. Got it. Thanks for taking the question.
spk13: Thank you.
spk11: Your next question comes from Brandon Colliard of Jefferies. Your line is already open.
spk06: Thanks. This is Matt on for Brandon. Appreciate all the call already on 24. I guess maybe for Jerry or Robert, just talk a little bit about your guidance philosophy and visibility in 24. You know, I think historically you've had the most visibility in crowd port systems, but from where we sit today, just the level of visibility you have across systems, MBE, PDP, and crowd gene. And can you also just remind us how much of the MBE business goes through distributors today? Thanks.
spk09: Yeah, no, absolutely. You know, like we said, you know, we did take, you know, a conservative view at creating the estimates for the year. We do have, you know, forecasts from our clients, especially for Clyford Systems, in terms of what their expectations are. We did try to do a bottoms-up, you know, for our services and our product revenue to determine, you know, the revenue guidance for the year. Clearly, as Jerry already mentioned, for MDE, we have to take a very conservative look at growth. Over the last three quarters, it's been pretty much the same level after that drop from Q1 to Q2. So we are taking a very conservative approach in terms of the ramp on the product revenue side. Clearly, like we mentioned, there's some upside opportunity on the services side driven by the cell and gene therapy approach. market in particular, both, you know, on the commercial revenue side as well as on the biostorage bioservices side. But that's really how we approached it. And, you know, we're hoping, obviously, that we'll be able to exceed, you know, the estimates.
spk00: And, Brandon, your last part of your question was how much of the e-business is through distributors, and that's 70, about 70, 75%.
spk06: Thanks and then you guys spiked out in the deck of the 950 or so industry clinical trials cryoport supporting 675 or 70% of those. Is there scope for that to go higher over time or is there kind of a theoretical limit we should think about in terms of market share for those industry clinical trials? Thanks.
spk13: Mark, I'm going to turn that to you. Sure. Yeah, I mean, we're obviously always trying to capture more share. You know, the biggest driver for share capture for us over the next 12 to 18 months in this space is going to be around the negative 80 space. We launched the Elite Ultra Cold product the middle of last year. We're already seeing substantial pickup with that product line. And historically, without a negative 80 offering, our are in a penetration in gene therapy distribution that was managed via negative 80 was minimal. And so there's some nice opportunity for upside in that space. On the cryo side, obviously, moving from a 70% market share much higher is more of a challenge. So most of that growth will come out of the market dynamics and our continued drive to capture as much of that portfolio as we can. The bigger thing to think about is obviously the drive into maintaining that 70-plus percent market share into commercial, which we've had a very, very good track record of doing.
spk06: Thanks. And one last quick one for Jay. We'd just love to get your updated thoughts on how you're thinking about profitability. Clearly, you've laid out a lot of growth areas that you're investing in, but as we look out into 2025 and beyond, how do you think about balancing some of those growth investments and looking to turn profitable on an adjusted EBITDA basis. Thanks.
spk00: Well, the way I think about them, Brian, is all the projects that we undertake, all the initiatives that we have going on, they withstand financial scrutiny and they are accretive. And so, as I said earlier, we constantly are reprioritizing those initiatives, and they will start to roll out just as the elite ultra coal just rolled out. You'll see the HB3 rolling out soon. You'll see Integra sell at the last half of this year, and you'll see more progress on the fusion product and so forth. So I think very positively about them. They're going to have a revenue impact. They're going to have profitability impact. Super. Thank you. Thank you, Brandon.
spk11: Your next question comes from David Larson of BTIG. Your line is already open.
spk14: Hi. I think I heard you say in your prepared remarks that you were generating some revenue from allogeneic services. I think you said a client was storing some product in anticipation of allogeneics. And I thought I heard you also say that they were using IntegraCell Did I hear that correctly? And just any thoughts there on the progress that allogeneics are making in the market would be very helpful. Thank you.
spk13: Yeah, so we're already supporting a fairly large portfolio of allogeneic therapies. You know, they constitute nearly 30% of our overall portfolio, so it's a substantial number of products. And that product, you know, those activities go from, like you said, storage through distribution as it stands today. IntegraCell, as Jerry had mentioned, the doors are not open there on those facilities. They'll open the second half of this year. However, we're already very heavily engaged with our clients. We already have clients going in and auditing the facilities even before the doors are open. And we have the relationship that Jerry also mentioned as prepared remarks with the NMDP or National Marrow Donor program which we're teaming up with them where they're going to be managing all the donor recruitment and we'll be doing all the cryopreservation through our facility in Houston for the United States on behalf of NMDP. And that's all focused around allogeneic contribution.
spk14: Okay, great. And then what should we expect for commercial revenue growth going forward? Is 30 to 40 percent per year reasonable, and how would you expect these new therapies that are now commercially available to ramp in terms of, you know, revenue contribution? Any thoughts there would be great. Thank you.
spk13: Yeah, I guess I can comment. Yeah, so from my perspective, the easiest way for you guys to look at the ramp associated with any given therapy is to go through the analyst reports for those therapies and for those companies, right? They do a lot of diligence on the space, and come back and provide their guidance as it relates to projected ramp. We do get forecasts from all of our clients as it relates to commercial, but it's not something that we can disclose publicly. However, with the portfolio that's in place today and all of the filing activity that we see ongoing through late 23 and through 24, I think the rates that you guys have been seeing historically and that we saw in Q4, 33% year over year, that 30 plus range is probably in a reasonable expectation for commercial revenue for the next couple of years.
spk14: And then just one last quick one. Demand for large freezers within MVE, just any more color there would just be very helpful. Thanks again.
spk00: Our demand at MBE is normalized. It's no different than historical patterns with the mix, David.
spk14: Okay, thanks a lot. I'll hop back in the queue.
spk00: Thank you. Thank you.
spk15: Thanks.
spk11: Your next question comes from Yuan Zee of B Riley Securities. Your line is already open.
spk15: Thank you for taking our questions. I'm Jerry. Probably there are 10 biotech companies pivoting cell therapy from cancer treatment to autoimmune disease. I'm curious if these applications or clinical trials in autoimmune disease have meaningfully helped the cryoport system so far.
spk12: They're in clinical trials mostly, but we do see a lot of promise there. Obviously, it's an area where the market's looking a lot at is how CAR-Ts are expanding beyond oncology. A lot of promise there. We're seeing some of the results of the early trials, phase one, phase two, come out with promise. So there's upside there. Absolutely looking at it, and it is part of our clinical trial pipeline. Got it.
spk15: Another question is related to your recent acquisitions. Can you share any update from the integration of Bluebird Express
spk02: as well as tech format since the acquisitions.
spk00: Well, the Bluebird fit like a hand in glove because we've known Bluebird for a long time. So it's in process. There's nothing more to say about that, that it's in process and that the integration of the operations are moving along very, very well.
spk08: And then Tech4Med. Tech4Med.
spk00: Oh, you mentioned Tech4Med as well. Yeah. What was your question about? Okay, so Tech4Med is quite interesting. Tech4Med is a German company that we acquired. It offers communication and temperature monitoring systems that are quite advanced. And that, too, is in process. It's being... We're looking at the impact that Tech4Med has on our SmartPak, I mean on our SCOTRAX condition monitoring system project, and most likely those two will be moving, you know, intersecting and moving together because there's some software advantages there. And also I think that, you know, Tech4Med has, it stands independently as well, so it's got independent orders coming in. And then I think, thirdly, I think it will serve as an integrating tool, as I mentioned in my comments earlier, throughout the company over time. So it will take some time to do all these things, but we are really excited about Tech4Med. Got it.
spk13: Thanks for the additional. Yeah, the industry feedback on Tech4Med has been resoundingly positive as well.
spk02: Got it. Thanks for the additional, Carter, there, and that's all my questions. Thank you. Your next question comes from Paul Knight of KeyBank.
spk11: Your line is already open.
spk05: Hi, Jerry. You had mentioned the 70% market share. I mean, what's the alternative? I guess if they do it themselves or another commercial vendor, what's the biggest piece of that 30? Is it themselves or
spk00: Mark them or what? No, that's a global basis, Paul. So you have one large lower-end manufacturer in China. You have a large lower-end manufacturer in India. And then you have one smaller operation in Germany. And then you have a number of small operations that kind of are like job shops.
spk12: I think he was talking about clinical trial percentage, not MBEs.
spk00: I thought you were talking about MDE. Yeah. Okay. On clinical trials, I'm going to turn that to Tom because he's the expert on clinical trials.
spk12: Thanks, Jerry. There are alternatives. We're not a monopoly out there. There is competition. It's the same competition that's been around for years. It's some of our partners that we go to work with every day, especially couriers that are using either MDE's product or somebody else's. to compete with us, but we stand on our merits. We stand on the quality of our product, our market-leading position, all of our commercial customers, our chain of compliance, and everything else we do. That's what separates us.
spk13: Yeah, and that 70% is in reality higher than that because we do have a lot of the specialties that subcontract equipment through us. for programs that they're supporting that we don't have visibility on. So the effective number is going to be higher than that 70%. We just don't know that exact number.
spk05: Okay. And then on animal health was down year over year. Could you comment on that? And then MBE is down year over year, but you're saying what, that's stabilizing at its juncture?
spk09: Yeah, animal health and MBE are directly correlated. So you look at the product size of the markets, the reduction in revenue or the drop in revenue is really driven by the drop in MBE revenue. So animal health and biopharma both have been impacted by MBE and what we've seen in Q2 throughout the remainder of the year.
spk02: Okay, thank you. Thank you.
spk11: There are no further questions at this time. I would hand over the call to Jerry Shelton, the CEO. Please go ahead.
spk00: Thank you for your questions and our discussions. In closing, our 2023 results were within our guidance range and our expectations. While product revenue was lower than historical levels, MVE revenue began to stabilize in the latter part of the year, and that has continued into early 2024. Services revenue continued to become a larger part of our business, led by growth in biostorage, bioservices, and commercial cell and gene therapy. We think 2024 will be a year of progressive advancement as more therapies move toward commercialization. In addition to our operating results in 2023, we continue to make strategic investments and establish important relationships to drive our long-term growth. We signed a number of new clients and bought new products and services to market. All of these actions continued to expand our ability to serve the cell and gene therapy industry globally and open up new revenue streams. Barring any geopolitical breakdown, we think our outlook of a progressively improving market in 2024 is well-founded. As an established industry leader that leads the way in providing vital supply chain support to the life sciences industry, we intend to continue to grow in importance and to benefit from the growth of the cell and gene therapy industry as it becomes an even greater proportion of our business. Thank you for joining us today. We appreciate your continuing support and interest in our company. We look forward to updating you on our progress again next quarter. We hope you have a good evening.
spk11: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
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