CryoPort, Inc.

Good afternoon, and welcome to the CryoPort Fourth Quarter and Full Year 2021 Earnings Conference Call. As a reminder, this call is being recorded. It is my pleasure to turn the call over to Todd Frommer, President, KCSA Strategic Communications. Please go ahead, sir.

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 of these statements, whether as a result of new information or future events or otherwise, except as required by law. In addition, these statements are subject to certain risks and uncertainties that could cause actual results, events and development 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, elsewhere in our annual report on Form 10-K, filed with the Securities and Exchange Commission, and those described from time to time in other reports which we file with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Mr. Gerald Shelton, Chief Executive Officer of Cryoport. Jerry, the floor is yours.

Thank you, Todd. Good afternoon, ladies and gentlemen. We appreciate your joining our earnings call today. With me this afternoon is our Chief Financial Officer, Mr. 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 2021 in-review document to our website. It can be found under Investor Relations in the Event and Presentation sections. This document provides a review of our recent financial and operational performance and a general business outlook. If you have not had a chance to read it, I would encourage you to go to our website and download it. I will provide you with a brief update on our business, and then we'll move on to answering your questions. We continue to successfully execute by having a client focus, embracing innovation, operating with excellence and certainty, and driving productivity. In turn, we delivered excellent results in 2021 as multiple engines of growth drove double-digit gains in revenue. This strong performance was fueled by new product and services, geographic expansion, and a sharpening of our competencies across all our industry-leading brands, specifically MVE and Cryo PDP. Having completed financing in November, we closed the year in the strongest position in our company's history with $628 million in cash, cash equivalents, and short-term investments. This positioned us well to continue investing in the business and delivering strong growth in the years ahead. Our core business is strong and our team is executing at a very high level. This is reflected in our financial results with solid organic revenue growth of 34% in the fourth quarter and total revenue of $222.6 million for the full year, which represents 183% year-over-year growth. During the quarter, we onboarded 311 new Pharma BioPharma customers. Revenue from our eight commercial agreements ramped on a global basis. We continued to build out of pipeline of potential commercial customers, with our total number of regenerative medicine clinical trials supported reaching a record 602, an increase of 14% from 2020. It's worth noting that a record 74 of these trials are now in phase three. In recent months, there have been significant milestones accomplished in regenerative medicine markets around the world. A total of 11 crowd support supported BLAs or MAAs were filed in 2021. Currently, we anticipate an additional 19 filings and as many as four new therapy approvals and an additional six label or geographic expansion approvals in 2022. Complementing this, we expect an additional 12 filings in 2023. Amongst other market drivers, this growing pipeline reflects the rising activity in the cell and gene therapies market and the strong demand for our industry-leading, comprehensive supply chain solutions for the life sciences. In short, we believe the stage is set for Crowdport to experience significant growth in 2022 and beyond. Expanding our geographic footprint was an important initiative in 2021, which we accomplished via acquisitions, partnerships, and business alliances. As a result, we now operate 33 facilities in 15 countries, covering key biopharmaceutical regions in the Americas, EMEA, and APAC. Today, we're well positioned to support the increasing demands from our customers in the cell and gene therapy market throughout the world, and we'll continue to expand our capabilities, competencies, and footprint to meet the needs of this rapidly growing market we serve. We're pleased with our 2021 results and will continue to sharpen our focus on the cell and gene therapy markets, strengthening our brands with the ultimate objective of building out our market share leadership and achieving maximum value for our shareholders. Now, we'll be happy to answer your questions. Operator, please open the lines for the participants.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Puneet Sudha with SVB. You may proceed with your question.

Hi, you have Michael on for Puneet. Great quarter. I just want to ask quickly if you could offer some color on how NBE and credit PDP performed, and if you could also guide us on growth expectations for the year. I know you've spoken to 50% in the past. Is that something you expect to continue?

Yeah, Michael, of course, we don't give guidance, but I will comment on your question. Cryo PDP and MVE had excellent performance during the year, performing into the mid-20s, you know, the mid-20s growth rate year over year. So we're very happy with their performance.

Great.

I was just going to add to it, if you look at the performance for the full year, you're absolutely right. If you look at the Q4 performance, we did mention we had some slippage in revenue of about $2 million for MBE into Q1 just because of transportation and scheduling challenges that we have. So if you were to include that $2 million into our results also for Q2, On Q4, you'd see strong double-digit, close to 20% growth rates quarter over quarter as well.

Yeah, that scheduling he's referring to had to do with shipping purely. It was finished goods that were not shipped because of third-party delays in transportation.

Got it. I guess I can talk on supply chain. I know we've been hearing a lot about that from other companies. I was wondering if... You see that as an ongoing challenge for MDE and your other businesses, and if you're able to transfer any increases in rate pricing to customers?

Yeah, Michael, we're not immune to the problems of the supply chain. They've gotten to be pervasive and worldwide. So we do see them continuing, but they are not problems that we can't manage through. The most affected is MVE, but these are manageable problems. We think they'll go on for another quarter or two. By that time, we think the supply chain will be in better order.

Great. Thank you very much.

Our next question comes from the line of John Sauerbeer with UBS. You may proceed with your question.

Congrats on the quarter, and thanks for taking my question. Just curious, you know, public market biotech funding was pretty strong in 2022, you know, maybe second best year ever, but it's been a little light year to date. You know, have you noticed any changes year to date in your clinical trial business or any color that you provide on RFPs or what portion of that trial business is pre-revenue biotech?

I'll let Mark, Dr. Sawicki answer that. He's close to that market and we haven't seen much, but go ahead, Mark.

Yeah, no, you know, activity has been robust. We have not seen any real issue as it relates to clinical activity. I think you saw that we increased our overall clinical trial count to 602 programs overall, which is extremely positive. And, you know, the companies in the cell and gene space are really well funded and continue to be well funded based on a record year of fundraising last year of about $23 billion. So we're very confident that that will continue.

And if you drill down even a little bit further, you look at our current performance for Cryoport systems, and Mark was referring to the 602 clinical trials, and we had about a 34% five-year CAGR on clinical trial growth for the company. And for Cryoport systems in particular, look at the commercial biopharma revenue increased in Q4 by about 44%. The non-commercial biopharma for Cryoport systems increased about by 41%. So we're continuing to see significant growth in the biopharma market. Our overall revenue for biopharma is about 80% of our total business. So we're very bullish about the outlook going forward.

Maybe to put a bow on it, just to overkill this question, because I know the market's fixated on it, John. And I do appreciate your firm's conference call earlier today, which certainly seemed bullish from that key opinion leader's point of view. But we don't see any slowdown. And then we looked at Repligen and Icon and Charles River and Lonza and Danaher and others, and they're not seeing it either. Celengene is just strong, period.

Great. That's good to hear, and thanks, Colin. I guess just on new contract wins, continue to ramp there. Can you talk a little bit about competitive contract wins you're seeing there, and do you think you're continuing to take share in any way to look at what you think your kind of normalized phase three market share might be if you kind of back out of some of those COVID trials?

Yeah, I mean, honestly, the COVID trials really have very, very minimal impact on our overall portfolio. We do believe we're going to continue to capture share. We've shown and demonstrated quarter after quarter, year after year, share capture in the cell and gene space. And as we continue to mature our platform and diversify it, you know, with acquisitions like MV and Cryo PDP, we believe that that's going to continue and, if not, have the opportunity to accelerate

Great. And then last one for me, just maybe following up on the MBE question earlier, you know, just on the shipping issues, you know, do you think that there are going to be, I guess, additional maybe, you know, or even increasing yield impacts from that into, you know, the year, into 2022? Is that more kind of a 4Q thing, one-time issue? And then, you know, it just confirmed there's been kind of no impacts in any of the other areas of the business there.

Well, first of all, there's no impact in any other part of the business. And to answer your question, we don't foresee that happening. This was situational because of the supply chain condition right now. But could it happen in the future? Certainly it could, but we don't foresee that. And certainly we're taking, at every event, we take extra caution to make sure that there's not a repetition of any event that we've experienced so far. So I don't think you'll see a disruption in the future.

Yeah, and the backlog continues to be very, very strong for MBE. We are expanding our manufacturing capabilities to meet the demand, so I think that's important to note as well.

Great. Well, thanks for taking my questions, and congrats on the quarter.

Thank you. The next question comes from the line of David Saxon with Needham & Co. You may proceed with your questions.

Hi. Good afternoon, and thanks for taking the questions. My first is just on the fourth quarter revenue. I mean, by RMATH, cryo PDP was up kind of in the mid-teens range. MBE, you know, backing out that $2 million headwind was about the same. And you indicated in response to an earlier question, you know, these two assets were growing. kind of mid-20% range earlier in the year. So I was just wondering, you know, what caused the slowdown there in the fourth quarter? And then kind of along the same lines, commercial revenue was up kind of low single digits sequentially. So just wondering if that was in line with your expectations, and if so, I guess, when do you think that we'll start to see that sequential commercial revenue growth really start to accelerate? I'll have one follow-up.

Yeah, maybe just to address the revenue growth, you're absolutely right. Overall, year over year, if you want to look at all the historic information, it's in the high 20s growth year over year, both for private PDP and MBE. We did see somewhat of a slowdown, not that significant, but private PDP grew about 18%, and without that slippage for MBE, MBE grew about 21%. So there has been some impact in Q4 just related to the overall supply chain challenges, inflationary trends and so forth. Initiatives have been already implemented. Some of those take place immediately. Some of those happen over time. One example is certain price increases. In terms of commercial revenue, I'll let Mark speak to the outlook for commercial revenue Q4 results.

Yeah, thanks, Robert. You know, if you take a look at all of the, you know, our commercial customers' commentaries and their conversations, the biggest issue right now isn't demand, it's manufacturing capacity. And so, you know, demand is outstripping capacity at this point in time. There's a substantial amount of new capacity coming online. You know, Kite is opening a new facility in Frederick, Maryland. BMS is opening a huge facility outside of Amsterdam. Novartis is bringing the new Stein facility in Switzerland online. Those are going to have a significant impact on capacity constraints, and once they open, you'll see that ramp accelerate fairly significantly. The second line aspect here is the move from third line to second line for Yaskarta and Brionzi, which will also substantially increase the patient population, the addressable patient population, which will also significantly increase demand on top of the capacity expansion.

Okay, got it. Thanks for that. And then I know you don't give guidance, but I'll take a shot at it. So, you know, just given that there's a wide range of estimates for 22, just wanted to hear your comfort level with current consensus. According to my screen, it's around 270. Do you think that adequately reflects you know, the net impact of the $2 million MBE headwind, the new Prague, and maybe, you know, some of these capacity constraints you just mentioned?

Well, in effect, indirectly, you're asking us to give guidance, which we cannot do. We can, however, again, we can restate a few things. One, in terms of the revenue growth overall, you know, we have put some aspirational goals in place for 2025 to reach 650 to 750 million. That is still our goal. And then in terms of starting to see some of the commercial revenue ramp over the next quarters and years, we also expect to see an improvement in gross margin to our target of 55% and adjusted even of 30% long term. So those are things that we still can reiterate. And then, again, the market dynamics within biopharma continue to be very strong. We have that flywheel of clinical trials that continues to grow, and these clinical trials continue to migrate from phase one to phase two and phase two to phase three up to commercialization. So you have to understand we're at the very early stages of this market maturing and commercial therapies coming to market.

Got it. Thanks so much for taking the questions.

Welcome. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. Our next question comes from the line of Brandon Bullard with Jefferies. You may proceed with your question.

All right. Butchered that one. Wasn't sure if that was me or not. A couple of questions, guys. I guess first, Jerry, you know, any change in the tenor of your conversations on the M&A front or given the volatility of the equity market more recently, do you see that maybe making some target assets a little more reasonable and maybe just an update kind of on general thinking and priorities?

Yeah, Brendan, it's good to hear from you. We we don't see anything as a result to the recent softening in the market, you know, and then certainly private companies are still holding values up, but we do have a robust M&A pipeline, and we do pay close attention to the workflows of our clients, and we will continue to, you know, to look and entertain acquisitions that help us move forward and that that assist our clients in their workflows. But we do have a robust pipeline. We'll continue to look at bio storage and logistics and software and services and that sort of thing. But nothing has changed for us.

And I think just to add to it, we were smart and or lucky in terms of raising the funds when we did. So we did the convertible. We have now a strong cash balance of $629 million in cash and short-term investments. They're very well positioned, one, to drive the organic growth, to drive our initiatives, such as the global supply chain centers, engineering development, such as the cryosphere, and then also continue the M&A strategy. But the discipline, the criteria that we've talked about in the past haven't changed. in terms of the right corporate culture, accretive, a good fit for the overall solution that we want to offer to the cell and gene therapy space.

Okay. And then you called out a few new initiatives on tap for 22, including the cryosphere and then expanded biostorage services. Is there any way to kind of – do you think that those – will be materially additive to incremental revenues in 22. And with cryosphere, can that be swapped out with existing commercial products, or should we think about it as more of a solution that's more likely to be adopted for earlier stage programs? Thanks.

Yeah, so we'll take those in turn. So, you know, as it relates to the two global bioservices centers that we're opening, one in New Jersey, one in Houston, Texas, they will be opening this quarter. So the construction is complete. We actually have COs on the facilities at this point in time and audits are active. So we will see a revenue contribution associated with those assets this year. Obviously, it takes time to go through audit processes and things, so the impact in 22 won't be a material impact, I would say, against the overall business, but in 23, you'll start to see substantial contribution from those facilities as it relates to the historical cryoport systems business. As it relates to cryosphere, so cryosphere itself is a next-generation technology, and so in essence, It's been built and designed to provide substantial risk mitigation in the field and convey substantial benefits to our client base as it relates to securitization, end user usability, mobility-related considerations, security, and other things. So we think it's going to have very, very strong adoption across the board. And, in fact, we've already had a commitment on some of our commercial clients to provide to transition product into that equipment over time. However, you know, the overall market is very, very rapidly growing. As we had mentioned, you know, we continue to pick up shares. So the historical equipment will still have a significant utility and use. This is just on top of that. So it'll increase our overall capacity and give us a lot more flexibility long term.

Okay, that's great. I'll hop back in the queue. Thanks.

Our next question comes from the line of David Larson with BTIG. You may proceed with your question.

Hi. Robert, can you talk a little bit about the SG&A costs? It looks like on a sequential basis they popped up a little bit higher than what we had been modeling. Just any color or thoughts there would be helpful. Thanks a lot.

Yes, you're right. You look at the increase in SG&A. There are a number of factors that play a role there. One, we have continued throughout our business units to increase the resources. And this is for a number of reasons. One, as we're stepping up engineering and development work, we're adding resources. But more importantly, as we're getting ready to launch the bioservices centers, both in New Jersey and in Texas, we've added resources for that purpose. Then as you'd usually expect for year end, we typically also see additional costs related to some of the implementation of SOC's work and audit just because of the added MBE and cryo PDP business units. But overall, it's really adding capacity. If you look at the general performance from an operating perspective, a number of things. One, from an adjusted EBITDA perspective, We have about 19 million in adjusted EBITDA for the year compared to about break even last year. We increased cash provided by operations by about 8.1 million, which is a $23 million increase compared to last year as well. So there's a number of things that are moving in the right direction. But at the same time, again, understanding that we're building out for what we expect a substantial increase in commercial activity over the next years, that is part of the increase. in an SG&A expense.

Okay, great. Thanks. That's very helpful. And then I noticed that there was like a 14% increase in the number of clinical trials that you're supporting, but the organic revenue growth rate was much higher than that. What is driving what seems to be incremental infills into those clinical trials or incremental revenue per clinical trial. Just any thoughts or color there would be helpful.

Yeah, it's very, very simple. So the strategy of diversification of our revenue streams is paying off. That's very, very straightforward.

Okay. Multiple revenues.

Do you want me to elaborate on it for you?

Sure. A little elaboration would be great.

Okay.

So we're moving beyond strictly just transportation as it relates to support of these clinical programs, right? And so we, you know, historically we've been packaging and distribution. We now are pulling in, you know, synergy related revenue out of the cryo PDP acquisition, uh, our, our consulting businesses maturing. So folks are coming to us to support a lot more developmental work as it relates to clinical activity. And so the average spend on a clinical trial for us is, is increasing. And that's, that's where you see that, that manifests, uh, acceleration.

I think another point in there, not to contradict Mark at all, because it's just additive, is that the pipeline is maturing. You're seeing ones turn into twos, twos turn into threes, more patient population in the later stage trials.

Okay, great. Thanks very much.

At this time, we have reached the end of the question and answer session, and I'll now turn the call back over to Jerry for any closing remarks.

Thank you for your questions. We appreciate them. In closing, 2021 was a very successful year for Crawford, with solid top-line growth, a record number of clinical trials being supported, further expansion of our geographic footprint, and a closing balance sheet reflecting our strongest position in the company's history. This was all due to our diverse brand portfolio, wide global reach, and talented employees who successfully are executing our winning strategy. We believe 2022 will be another year of strong results. Thank you for joining us today. We appreciate your continuing support and interest in Crowdport, and we look forward to speaking with you regarding our progress again next quarter. For now, we bid you a good evening.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a great day.