BioLife Solutions, Inc.
Q1 2016 Earnings Call Transcript
Published:
- Operator:
- Good day, ladies and gentlemen, and welcome to the BioLife Solutions First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Mr. Roderick de Greef, Chief Financial Officer. Sir you may begin.
- Roderick Greef:
- Thank you, Amanda. Good afternoon everyone and thank you for joining us for the BioLife Solutions conference call to review the operating and financial results for the first quarter of 2017. Earlier this afternoon, we issued a press release which summarizes our results for the three months ended March 31. This release is available on the Investor Relations page of our website at biolifesolutions.com. As a reminder, this call is being recorded and also broadcast live on our website. A replay of the webcast will be available through the same link for 90 days. Before we get started, I would like to remind everyone that during the course of this conference call, we will make projections and other forward-looking statements regarding future events or the future financial performance of the company. These statements are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. For a detailed discussion of the risks and uncertainties that affect the company’s business and that quality as forward-looking statements made on this call, I refer you to our periodic and other public filings filed with the SEC. Company projections and forward-looking statements are based on factors that are subject to change and therefore, these statements speak only of as of the date they are given. The company assumes no obligation to update any projections or forward-looking statements except as required by law. Now I’d like to turn the call over to Mike Rice, President and CEO of BioLife.
- Michael Rice:
- Thank you, Rod, and good afternoon everyone. We appreciate your interest in BioLife and we are very pleased to report on and discuss a very strong quarter of operational and financial performance. We continued to execute our growth plan in the first quarter and believe that 2017 will be a transformational year for BioLife, our customers, and shareholders. Q1 order volume and total revenue from our strategic market segments were strong. Total revenue was $2.4 million, a 28% year-over-year increase and Q1 2017 was our seventh consecutive quarter of record biopreservation media revenue. I’ll start off with a review of Q1 sales to regenerative medicine customers and recap our unique value proposition for this segment to reinforce what we see a tremendous opportunity for growth. Q1 was our second consecutive quarter with at least $1 million in regen med segment revenue. Year-over-year segment revenue increased 51%. The use of living cells and tissues to treat the leading causes of disability and death continues to grow rapidly and this is driving demand for biopreservation tools that can extend out of body shelf life to enable worldwide distribution. Our proprietary CryoStor and HypoThermosol preservation media products offer significant improvement in survival and functional performance of living cells and tissues. We are in a great position as a sole source supplier. As you have heard us report our products have been used in more than 250 regenerative medicine applications including multiple Phase 3 clinical trials. We have other later-stage customers including Kite Pharma, and Kolon Life Sciences that have already submitted regulatory filings and are awaiting approval for their cell and gene therapies. I should remind you that a majority of the immunotherapy companies conducting clinical trials of CAR-T and other T-cells to treat and potentially cure patients with blood cancers and solid tumors use our products to preserve the starting material and/or final manufactured cell products. We believe our annual revenue opportunity for a typical cell therapy candidate if approved, ranges from $500,000 to $2 million. In the first quarter of 2017, we gained 36 new direct customers, including first time direct orders from 20 new regenerative medicine customers. Some key regen med customers include, Adaptimmune, Asterias, Bellicum, Bluebird Bio, Capricor, Dana-Farber, Cellerant, Celyad, City of Hope, Fred Hutch, Gamida Cell, Immatics, Karos Pharma, Kite Pharma, Kolon Life Sciences, Mayo Clinics, Newron, Sotio and Tissue Genesis. We believe this marquee customer list represents a significant growth opportunity. Also in the first quarter of 2017, we saw a 200% increase in revenue from the leading cell therapy contract manufacturers, compared to Q1 2016 and expect continued leverage and pull-through from this customer type as their businesses expand to meet the demand for manufactured cell therapies. Key cell therapy CMO customers include Adicet, Cell Therapy Catapult, Lonza, MaSTherCell, Pharma Cell, PCT and WuXi. Turning to our indirect sales channel with our distributor network, Q1 2017 revenue was up 20% compared to 2016. This was driven by increased orders from distributors, supplying early-stage researchers and some clinical end-users in the regen med space. We provide a high level of support to our distributors and their end-users with clinical applications and in some cases, we drop ship to the end-users, so we have good visibility on the reach of this channel. Key distributors include Thrermo Fisher, Sigma, STEMCELL Technologies and VWR. We expect continued growth from these customers throughout the rest of 2017. Lastly, I would like to give an update on the ISCT Conference that was held in London last week. This was the 25th Annual Meeting of the International Society for Cellular Therapy. BioLife has been a major supporter, presenter, and exhibitor of this event and society for more than ten years. We captured 60 qualified leads at the booth and so our products referenced in posters by Asymptote, recently acquired by GE, by Brooks Automation in an expansion of research presented last year on the evo Smart Shipper and CryoStor and in a poster by the University of Washington. Also at the conference, our joint venture partner SAVSU launched the new Smart evo dry vapor shipper, a cloud-connected liquid nitrogen or LN2 doer that completes the evo product line with all shipping temperatures now served by an evo model. We can now compete across the entire workflow to capture some of the spend or traditional liquid nitrogen shippers and the only cloud-connected LN2 shipper currently in the market. Now I will turn the call back over to Rod to present financial highlights for Q1 2017.
- Roderick Greef:
- Thanks, Mike. As you noted, biopreservation media revenue for the first quarter of 2017 reached a record $2.4 million, representing a 28% increase over the first quarter of last year. The gross margin for the first quarter was 61%, compared to 58% last year. The increased margin compared to 2016 is primarily a result of normal fluctuations in our production volumes. Operating expenses this quarter totaled $1.9 million, compared to $2.6 million for the same period in 2016. This 26% decrease in operating expenses is primarily the result of restructuring our joint venture with SAVSU Technologies, which occurred at the end of last year. The operating loss for the quarter was $464,000, a 69% decrease, compared to $1.5 million last year. The net loss for the period was $870,000, a 42% decrease compared to $1.5 million last year and the net loss for quarter one includes a $229,000 non-cash charge related to the equity method accounting treatment of our investment in SAVSU Technologies. For the quarter, we realized an adjusted EBITDA of negative $45,000, compared to a negative $1 million last year. Our cash balance at the end of the first quarter was $2.3 million, compared to $1.4 million at December 31, 2016 and cash used by operations for the quarter was $169,000, compared to $1.6 million last year. With respect to our outlook for the full year of 2017, we reaffirm the guidance we released in January and expect that our biopreservation media revenue will grow 20% to 25% from last year and exceed $10 million for the full year with gross margin coming in between 55% and 60%. We expect operating expenses for the full year to fall in the range of $8 million to $9 million and we anticipate achieving positive quarterly adjusted EBITDA by the end of the year. Now I would like to turn the call back over to Mike.
- Michael Rice:
- Thanks, again, Rod. This is a very exciting time and BioLife is well positioned as a sole source supplier of proprietary clinical-grade reagents used in the manufacturing of several late-stage cell therapies. We are on track to achieve the guidance we issued for 2017 operational and financial performance. Like to again thank you for your interest and support of BioLife. Now I will turn the call over to the operator to take your questions. Amanda?
- Operator:
- [Operator Instructions] Our first question is from the line of Gabrielle Zhou of Maxim Group. Your line is open.
- Gabrielle Zhou:
- Hi, guys. Thank you for taking my question and congrats.
- Michael Rice:
- Hi, Gabrielle.
- Gabrielle Zhou:
- Hi, congratulations on a great quarter.
- Michael Rice:
- Thanks very much.
- Gabrielle Zhou:
- So, can you discuss the media requirements for cell therapy as they are approaching approval, in particular the first quality therapy and what does each approval means in terms of potential revenue to BioLife?
- Michael Rice:
- Okay. Thanks, Gabrielle. Mike here. Great questions. So, this is how it goes and where we fit. There are preservation medias required in the movement in the preservation of the starting source material, be it a Leukapheresis, Apheresis collection, perhaps in some cases, a bone marrow transplant to get it from the patient to the factory and that’s what we play. We have an opportunity there in the front-end. The culture media, growth media, feeder and supplements that are going on to culture up the dose and make the dose, we don’t play, that’s not our business, but we do play downstream once the dose is manufactured to make sure that’s based in the correct type of media, again, our CryoStor, our HypoThermosol during the transport from the factory back to the patient. We believe, Gabrielle, that we can monetize any particular cell therapy opportunity if approved in a range of annual revenue for BioLife of $500,000 to $2 million.
- Gabrielle Zhou:
- Great. Thanks for the detailed question. So I do have a follow-up. So, can you provide some guidance about how many companies are transitioning to Phase 3 studies in this year and next year? And how many are approaching beyond its filings and potential approvals in the next one to two years?
- Michael Rice:
- Yes, this is the million dollar question we get while you are asking and we are not the experts. I would refer you to the Alliance for Regenerative Medicine or ARM and the alliancerm.org website and they publish a quarterly data report and also they’ve recently published their full year 2016 report which will show a listing of the clinical trials by stage, funding and other key metrics for this segment. So ARM is really the go to source for that type of data.
- Gabrielle Zhou:
- Gotcha. Great, thank you and congratulations again.
- Michael Rice:
- Thank you.
- Roderick Greef:
- Okay, thanks.
- Operator:
- Thank you. And our next question is from the line of William March of Janney. Your line is open.
- William March:
- Hey guys. How are you?
- Michael Rice:
- Hi, Bill. How are you doing?
- William March:
- Doing well. First, could you maybe just talk about the CryoStor and HypoThermosol products? Maybe just the difference between the two and which one you are seeing more demand from customers right now?
- Michael Rice:
- Yes, great. Thanks for asking me to clarify. So it really depends on the temperature range the media is used in, Bill. So, HypoThermosol is a storage and shipping media. It’s used to transport cells and tissues in really a refrigerated temperature mode or a specific 2 to 8 C temperature range. CryoStor on the other hand is a freeze media that’s used when the living biologics are actually frozen and they are frozen during storage and/or transport. So CryoStor is a companion formula, it’s not exactly the same stuff. But, again, proprietary. As far as demand, CryoStor tends to outsell HypoThermosol somewhat, but we do see strong demand for both, because they both have their place and the workflow continuum depending on the temperature range that customers need to move this stuff around and/or store it up.
- William March:
- Got it. And then, you highlighted seen increased demand from CMOs, and then also from some distributors. Are you selling direct into the CMOs? And maybe just, overall, are you seeing more set or higher growth from direct versus distributor sales? What’s going on there?
- Michael Rice:
- Yes, right, well done, good questions. So, what’s been really great is that, the number of cell therapy CMOs has grown now throughout the world over the last few years there has been some investment, some consolidation. You might remember recently, PCT did a deal and in the first quarter of 2017, we had significant growth, 200% up over the same quarter in 2016. We do sell directly to the CMOs. The distributors don’t sell the CMOs, that would be a little convoluted from a supply chain. But we also sell directly as you know, to many, many end-user customers. The customer base is over 550 with a large majority concentrated in the regen med space. So, we got the channels covered up nicely.
- William March:
- Great. And last one from me. Just on improved margins, it’s just two things maybe, it’s about 200 basis points of cell improvement on the gross margin side, is that just volume leverage and how should we think about that for the rest of the year? And then just on the operating side of things, after exiting the JV, the OpEx has come down maybe is this the right runrate for the rest of the year? Thanks guys.
- Michael Rice:
- Thanks, Bill.
- Roderick Greef:
- Thanks, Bill. So with respect to gross margin, if you take a look back at the last six quarters or so of operations, we’ve run a gross margin that ranges between 56% and 61%. And that’s really the fluctuation is due to production volume levels that are based on order rates et cetera and batch sizes, things like that. So, there is some natural fluctuation in our production and because so much of our cost of goods is fixed which then gets capitalized into inventory as those units are then sold, the more – that fluctuation in volume definitely impacts the margin. So, what I would say is that, the 61% is in the range we expect. I think you will start to see some operating efficiencies that would actually play into that margin. Once that margin hits in the mid-60s, then I think you will know that we’ve gone from a normal range to outside of that range in a positive manner. We’ve guided 55% to 60% for the year. We’d like to end up on the high side of that range. With respect to operating expenses, you correctly pointed out that the exit from our JV really resulted in the bulk of the reduction in operating expenses year-over-year. This is – I wouldn’t say a baseline of operating expenses. Again, we guided 8 to 9 which is, call it, 2 to 2.3 per quarter. We do have some fluctuations there on a quarterly basis as well. Q2 is a little bit heavier from a marketing perspective, things like that. So I think our range of 8 to 9 is really what you should expect for the year.
- William March:
- Thanks guys.
- Roderick Greef:
- You bet. Thank you.
- Operator:
- Thank you. [Operator Instructions] And I am showing no further questions at this time. We like to turn the call back over to Mike Rice, President and CEO for closing remarks.
- Michael Rice:
- Thanks, Amanda. Thanks again everyone and good afternoon, good evening.
- Operator:
- Ladies and gentlemen, thank you for your participation in today's conference. This does concludes the program, you may now disconnect. Everybody have a great day.
Other BioLife Solutions, Inc. earnings call transcripts:
- Q4 (2024) BLFS earnings call transcript
- Q1 (2024) BLFS earnings call transcript
- Q3 (2023) BLFS earnings call transcript
- Q2 (2023) BLFS earnings call transcript
- Q1 (2023) BLFS earnings call transcript
- Q4 (2022) BLFS earnings call transcript
- Q3 (2022) BLFS earnings call transcript
- Q2 (2022) BLFS earnings call transcript
- Q1 (2022) BLFS earnings call transcript
- Q4 (2021) BLFS earnings call transcript