ThermoGenesis Holdings, Inc.
Q3 2020 Earnings Call Transcript

Published: 12 Nov 2020

[Operator:]

Good day and welcome to ThermoGenesis Holdings Conference Call and Webcast to review the financial and operating results for the third quarter ended September 30, 2020. As a reminder this call is being recorded. I would now like to turn the conference over to our host, Paula Schwartz, Rx Communications. Please go ahead.

[Paula Schwartz:]

Thank you, Operator. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that might cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission. The information presented today is time-sensitive and is accurate only as of the date of this call, November 12, 2020. If any portion of this call is being rebroadcast, retransmitted or redistributed at a later date ThermoGenesis will not be reviewing or updating this material.

[Chris Xu:]

Thank you, Paula, and thank you to everyone for joining the call this afternoon. We appreciate you taking the time this evening. During the third quarter of 2020 as COVID 19 cases continue to escalate worldwide, we continue to evaluate our strategies to cope with the global pandemic. Meanwhile, we continue to serve our global customers in the cell gene therapy field by providing them with the cutting edge tools to meet with their cell processing needs. As a reminder for the past 20 years, the company's core business competence resides in its leadership and ability to develop cutting-edge tools and systems for the cell processing in the cell gene therapy field and our products include the CAR-TXpress platform based on the latest highly innovative buoyancy activated cell sorting technology. So the BACS technology is our patent protected high efficiency cell sorting technology using lipid micro-bubbles instead of the traditional magnetic beads activated cell sorting or MACS. The BACS technology is the key component of the CAR-TXpress platform, which is intended to address the critical unmet need for large-scale cellular manufacturing for the cell-based therapies. The CAR-TXpress system itself is a multi-modular base system that offers customers a streamless solution for cell processing, selection, washing, reformulation and query preservation. Providing a comprehensive and commercial viable cell manufacturing solution for CAR-T, CAR-NK and other cell-based therapeutics. Two, the AXP, BioArchive platform, which is a leading automated cell processing and smart cloud storage platform for clinical biobanking. The AXP system represents a significant advancement in the automated cord blood processing allowing for fast automated and high quality stem cell enrichment from cord blood. The BioArchive system is the industrials leading smart query preservation system providing the ultimate performance and protection for today's high valued cells for tomorrow's critical therapy needs. And three, our PXP platform for point-of-care applications which allows for rapid and automated processing of autologous cells from peripheral blood or bone marrow at the point of care which are such as surgical centers or clinics. It also allows isolation offer different cell fractions from the blood simultaneously.

[Jeff Cauble:]

Thank you, Chris. Net revenues for the three months ended September 30, 2020 were $2.4 million, compared to $4.1 million for the three months ended September 30, 2019, a decrease of $1.7 million or 42%. The decrease was driven by lower AXP disposable and CAR-TXpress sales. The COVID-19 pandemic appears to be the main driver of the decline, as fewer cord blood units are being stored globally during the pandemic. Gross profit was $1.5 million or 64% of net revenues for three months ended September 30, 2020 compared to $1.9 million, or 47% of net revenues for the quarter ended September 30, 2019, a decrease of about 400,000. The decrease was driven by the decline in AXP disposable and CAR-TXpress sales as partially offset by refunds of approximately 800,000 for testing kits, reducing the inventory reserves from the prior quarter. Sales and marketing expenses were 539,000 for the three months ended September 30, 2020, as compared to 502,000 for the three months ended September 30, 2019, an increase of 7%. The increase was driven by accrued expenses related to the company's short term incentive program and consulting expenses. These increases were partially offset by lower stock compensation, and the quarter ended September 30, 2020. Research and Development expenses were 750,000 for the three months ended September 30, 2020 as compared to 584,000 for the three months ended September 30, 2019 an increase of 166,000 or 28%. The increase was driven by development expenses for the COVID-19 cartridge reader. General and administrative expenses for three months ended September 30, 2020 were $1.3 million, compared to $1.1 million for three months ended September 30, 2019, an increase of 150,000 or 15%. The primary driver of the increase was accrued expenses related to the company's short term incentive program and severance.

[Operator:]

And the first question comes from Sean Lee with H.C. Wainwright.

[Sean Lee:]

My first one is on the company's traditional cell therapy and blood banking business. So we've seen a significant impact from the COVID pandemic for the last several quarters. And while there is some hope coming along with the vaccine developments, it is - the pandemic is expected to last for at least several more quarters. So I was wondering whether the company has any plans with new products or new business strategies that could help turn this around?

[Chris Xu:]

Hi, Sean. Thanks for bringing this up. And yes in the cell gene therapy, is our bread and butter and it's our core competence for the past 20 years. We have a significant advantage in this field. And not only with regards to the cord blood banking industry which as you referred to was impacted by the COVID-19. However, there is also a surge in the global research on the immunotherapy market, especially for CAR-T, CAR-NK. And that the need is very significant. There is a significant unmet need to manufacture those cells with the much higher efficiency and with lower costs. And that turn out to be a very significant unmet need.

[Sean Lee:]

Sounds great. Do you have an approximate timing for when the company expects to go into the full service business?

[Chris Xu:]

We have - the company is a device company historically. And we have the infrastructure, we have the technology, we want to explore the various different ankles that are including the resource that the teams and the customer, how we can best position ourselves in using this to tackle into the service, which actually creates a much higher margin. So at this moment, I think it's a little bit too early to release the full strategy, but that's certainly on our radar screen. And I hope to update our investors, our shareholder, and everybody in the near future.

[Sean Lee:]

My last question is on the COVID-19 testing products. I think last month, the company received a patent for a test reader as well. So I was wondering, so how have the commercialization efforts been going on that front? If you can provide some metrics for that? And also, where do you expect it to go over the next one to two quarters? Thanks.

[Chris Xu:]

And the entire diagnostic field that the landscape is changing. So it changes from just looking for people searching for antibody tests. Now more and more require for antigen tests, and lot more also require for a combination of antibody and antigen tests. Each test has a different ankle to address whether somebody has the infection, ongoing infection, or has the response towards the virus. And currently lots of unmet needs for those tests. And that's why we developed this reader. So the reader is a facilitator. So that's how we see this. Yet how current assay which just give a yes or no answer is that the reader may help you to elevate to the next stage. So it's almost we are - we open this board so that other tasks can be bundled with the reader. So we open up a technology potentially for our internal use, and also for co-development with other test developers.

[Operator:]

Thank you. And that does conclude the question-and-answer session. So I'd like to turn the call back over to Dr. Xu for any closing comments.

[Chris Xu:]

Thank you, operator. We look forward to updating you our progresses in the coming months, and thank you to everyone for participating on today's call and for your interest in ThermoGenesis Holdings. And thank you all and stay safe.

[Operator:]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.