Orgenesis Inc.

Good morning, ladies and gentlemen, and welcome to the Origenesis third quarter 2021 business update call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

Thank you, Matthew. Good morning, everyone, and welcome to the Origenesis third quarter 2021 business update conference call. On the call with us this morning are Varad Kaplan, Chief Executive Officer, and Neil Reisinger, 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 212-671-1020. This conference call contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. These forward-looking statements involve substantial uncertainties and 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 call. We caution listeners that forward-looking statements or 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 the risks and uncertainties discussed under the heading Risk Factors in Item 1A of our annual report on Form 10-K for the fiscal year ended December 31st, 2020, and in our other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statement for any reason. I'd now like to turn the call over to our Genesis CEO, Ms. Varad Kaplan. Please go ahead, Varad.

Thank you, David, and thanks to everyone for joining us on our call today. Once again, we generated strong year-over-year revenue growth. Revenue for the third quarter increased over 400% or fivefold versus the same period last year. For the nine months, revenue increased to $28.6 million compared to $5.3 million for the same period last year. which we believe reflects both the progress and sustainability of our point-of-care strategy. Feedback from within the industry has been extremely positive, and we are now working with some of the leading research centers, hospitals, and biotech companies around the world, such as JHU and UC Davis in the United States. Our global network now spans North America, Europe, Asia, and the Middle East, compromised with 10 regional distribution partners. In addition to our strong IP, we have a distinct first mover advantage. We began planning and implementation of this strategy a number of years ago and have invested heavily in the platform. For this reason, we have established ourselves not only as a leader, but as a disruptor in the cell and gene therapy market. And although industry partners are catching on to what we've built, it's important to reiterate this strategy for investors. Currently, most cell and gene therapies are manufactured using centralized production, either through in-house production or through CDMOs, which is standard across the industry. Centralized production requires massive capital investments. It's very expensive to operate, and it takes years to make production online at meaningful scale. The current processes in place have resulted in major bottlenecks and capacity shortages, which is illustrated by the... extravagant cost of many of these therapies and ongoing manufacturing delays. A good example is CAR-T therapies, which have faced supply chain issues and can range in the hundreds of thousands of dollars per patient with a resistance from pain. However, by producing personalized cell and gene therapies at the point of scale, we are able to add new capacities within three to six months of when compared to CDMOs or internal house production may take up years to build up clean rooms. In terms of expenses, our goal over time is to reduce the cost of these therapies to tens of thousands versus hundreds of thousands of dollars. We recognize the challenges facing this industry early on. As a result, we've made the decision to sell our master cell subsidiary for approximately $300 million, which provided us over $100 million of non-diluted capital to grow our point-of-care platform. At the time of the sale, MasterCell revenues were roughly $30 million. To put this in perspective, the revenue from our point-of-care business was over $25 million for just the first nine months. We believed the transaction to sell MasterCell was the right decision at the time, and we are more convinced than ever in our new strategy, given the positive industry feedback. We believe that our point-of-care business is more advanced, cost-effective and scalable than any other solution in the market today. Let me explain why. Producing cell and gene therapies is an extremely complex multi-step process. Cells are highly sensitive to any changes in the environment and process, and producing cell and gene products must be done in a highly sterile environment since such products cannot be sterilized. Under our point-of-care model, We are also servicing our partners and customers through process development, which includes GMP-compliant process development, development of quality control methods, adaptation of the process to automation and closed-loop processing systems, qualification of the process combined with the utilized equipment, and integration of the combined system into our mobile processing units, the ampules, qualification of the entire system together. These stages are what we call and what we refer to as ampullization. Once this is completed, we can mobilize the ampule to the required production site and supply our ampules to the designated medical site. If more capacity is required, we can, at first step, add more isolated processing units in the same ampule. At a second stage, we can bring additional ampules to the same point of care center. And if required, expand to even more point-of-care centers, while with the goal of maintaining exactly the same environment and the same process. Current industry practice is quite different. It involves developing a process and implementing it in a clean room facility, in most cases involving many manual steps. Expanding production capacity or transferring production to another location is a lengthy and complex process. Building and qualifying new clean rooms and transferring products can take months and years. Producing products at the central location requires expensive and complex logistics of supplying source material from the patients and returning the final product to the patient location. By ampullizing the process, the initial effort may be slightly lengthier, but we now have a product that can be made at many locations, including close proximity to the clinical site, and we can then expand capacity quickly and efficiently. Since we have invested many years in partnering and co-development with automation solution providers, we have at our disposal a toolbox of systems that we can incorporate into the ampules. As we develop more point-of-care and therapeutic products, we become more efficient at this process. Since many of the products are a variation on the same theme, So though we may need to make modifications, we can still utilize many of the same components as we have developed in the past. The key to our success in our point-of-care business is standardization. The process is exactly the same. That's what we're aiming for, regardless of where the product is produced. For this reason, we have established training protocols. We have We are using audited and consistent suppliers and vendors of materials involved in production and quality control. We are implementing validated automated solutions that minimize human error. And we're taking advantage of closed units to control infections. Through standardization and a consistent processing environment, we can dramatically reduce costs. We believe our strategy of decentralizing the supply of cell and gene therapies based on standardization of the manufacturing environment will ultimately become the solution for this industry, enabling lower cost, accelerated development, and ultimately providing a scalable long-term option to overcome the industry-wide capacity constraints. We are also advancing our point-of-cure therapy, which now span immune oncology, antiviral, metabolic, autoimmune disease, tissue regeneration, and more. Our strategy involves in-licensing therapies from leading research institutes, hospitals, and biotech companies, and utilizing our partners and customers to out-license these products. We do so in return for future royalties, as well as exclusive service contracts for industrializing and supplying these cell and gene therapies. At the heart of our business model is being the optimal industrial partner. Whether we are providing our development and supply services to our partners and customers based on our licensed therapies or providing similar services to our customers for their own therapies, our role is always the same. To make these therapies available to a large number of patients to reduce costs through decentralized processing and supplying using the point-of-care platform. Unlike a traditional biotech with a handful of therapies in a pipeline which require constant investment in clinical trials, we continue to evaluate new therapies at all stages of development through our growing partnerships with research and commercial entities and hospitals and streamline the development of these products through our network, providing us with short-term income throughout the development stage and potential upside once they get market approval. We have built a robust therapeutic pipeline, which includes more than 30 advanced cell and potential gene therapies, and we continue to evaluate new technologies. The fact that we can combine our point-of-care network, our processing technologies, such as automation solutions and arm tools, with our clinical and manufacturing expertise, provides us a distinct advantage to partner through licensing and service models with biotech companies, research institutes, and hospitals, and then advances new and exciting therapies through the clinic much faster and cost-effectively than a traditional biotech. We continue generating revenue by ampulizing various cell and gene products and supplying such products at existing centers to our customers and partners. Our revenue contracts naturally flow from process development to tech transfer to batch supply. These are long-term contracts, and as our customers and partners advance the products, the supply requirements expand. We are still investing, although at a much reduced rate and expanding capacity. We're finalizing the setup for the Point of Clear Center, rolling out our ampoules, incorporating new technologies, and implementing our quality system. But we are minimizing these investments as we are seeing growing public and private interest in supporting local regional expansions and developments. So to wrap up, we are more enthusiastic than ever by the outlook for the business. Our point-of-care strategy is no longer a vision, but a growing reality. We're constantly incorporating new technologies, and we have a growing pipeline of cell and gene therapies for which we provide development and processing services. We have an expanding global network of point-of-care centers in which we provide GMP processors, utilizing our technologies and our tools. We have assembled some of the top talent in the industry. And in much the same way that Amazon and Tesla disrupt the growth of markets by investing in a scalable infrastructure and first-in-class technologies are going to disrupt the cell and gene therapy markets. We are building a sustainable revenue model that we believe will support the growth of the industry in general and the growing capacity requirements of our partners and customers. We believe providing such solutions will drive value for shareholders for years to come. On that note, I'll now turn the call over to Neil Eisenberg, our Chief Financial Officer.