ThermoGenesis Holdings, Inc.
Q4 2020 Earnings Call Transcript

Published: 17 Mar 2021

[Operator:]

Good day and welcome to the ThermoGenesis Holdings Conference Call and Webcast to review Financial and Operating Results for the Year Ended December 30, 2020. As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host, Paula Schwartz of Rx Communications. Please go ahead, ma’am.

[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, March 17, 2021. 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 this call this afternoon. We appreciate you taking the time this evening. 2021 is the company’s 35th year anniversary. For more than three decades, ThermoGenesis has proven its leadership position to develop and produce a long list of cutting edge automated technologies and products for the cell banking and cell therapy field. Some of these, such as the market best selling AXP devices and the BioArchive System have been broadly adopted by leading stem cell banks and medical institutes around the world. Our BioArchive, a smart crowd storage system that once was used to warehouse close to 90% of all FDA approved drug use cord blood units, has shown by far to be the best device for cell survival for long-term cell storage. We believe it will gain new applications and new life in the era of CAR-T therapies by becoming the best choice of cloud storage for high value clinical cell therapy products. Just as a reminder, in 2020, ThermoGenesis markets a range of automated technologies and products for cell banking, cell processing and cell therapies, which includes for large scale cell processing and bio-manufacturing, we offer our X-SERIES laboratory grade products, which include the X-LAB for cell isolation, the X-WASH for cell washing and the X-MINI for high efficiency small scale cell purification. Our PXP Series of clinical grade product, which including the PXP-1000 for cell isolation and PXP-LAVARE, a newly approved product for cell washing and new formulation and our CAR-TXpress Platform for large scale bio-manufacturing, which utilize our patent-protected, buoyancy-activated cell sorting, or BACS technology instead of the traditional magnetic beads activated cell sorting, or the MACS technology. The CAR-TXpress Platform will provide a comprehensive and cost effective cell manufacturer solution for both CAR-T, CAR-NK and many other cell based therapeutics. And for clinical biobanking applications, we offer that AXP II automated cell separation system, which we launched recently to replace the market best selling AXP system. This represents a significant advancement in automated cord blood processing and utilized by a list of largest cord blood banks around the world, including the cord blood registry in the U.S. and the global cord blood bank and the global cord blood corporation outside the U.S.

[Jeff Cauble:]

Thank you, Chris. As we have previously discussed, fewer cord blood units were stored globally in 2020 due to the COVID-19 pandemic impacting our cord business. Net revenues were down 25% to $9.7 million for the year ended December 31, 2020. The decrease was primarily due to fewer AXP disposable and BioArchive device sales. We do expect these revenues to rebound increasing back to pre-pandemic levels after the health emergency subsides. Our gross profit was $1.3 million for the year, a decrease of $4.4 million or 78%. The decline was primarily due to a disposition expense of approximately $2.8 million for the remaining inventory of COVID-19 testing kits purchased in the second quarter.

[Operator:]

Thank you. And the first question will come from Sean Lee with H.C. Wainwright. Please go ahead.

[Sean Lee:]

Good afternoon, Chris and Jeff and thanks for taking my questions. My first question is on the ongoing pandemic and its effect on the business. So with vaccine efforts in full swing in most countries around the world, have you seen any rebound so far in your cord blood business and when do you expect business levels could potentially return to pre-pandemic levels?

[Chris Xu:]

So yes, thank you, Sean. And I will take a try to answer your question. Yes, with the global pandemic and has been a year since the start of the pandemic, we start to see gradually some of our uses of our technologies start to rebound. And the rebound is quite imbalanced in between different countries. So, U.S. is on the verge of a rebounding in lots of those cord blood business side, but we anticipate probably there is going to be another quarter or two before we actually can materialize these rebound numbers.

[Sean Lee:]

I see. Thanks for that. And my second question then is on the Corning partnership, I was wondering if you can provide some metrics on how that’s going so far? For example, have any significant clients signed on to the CAR-TXpress or are there any clinical studies that currently use the system? And finally, can you expect any milestone payments in Corning in the next 12 months?

[Chris Xu:]

Okay, I will take a try. And for Corning, certainly, Corning is the main market leader for our X-SERIES of products and we have grabbed that last year – middle of last year as they start the full launch of the product and we can see that in their website and all their media campaigns. So very importantly is that this launch processing is in the middle of COVID global pandemic so that certainly we can see it may affect Corning’s efforts in launching this in different regions, but we are optimistic. And in this regards, we are more providing a supporting low, we let the Corning to be the main driver for this X-SERIES of products. So, at this moment, I think we are yet to see what the number would look like in the post-COVID era. Jeff, if you have anything to add?

[Jeff Cauble:]

Yes, no, I agree. I think once Corning’s sales team is able to get out and go visit these customers and do some demos, I think we will really start to see some significant adoption of the technology. I think that’s where the real value is, is where customers can see what it can do for them and how much we – how much existing customers like it, we expect new customers to like it as well and then once they are able to go up and do the demos, we will see those customers begin to adopt, but we are still not quite there yet. I mean you got to get to a point hopefully very soon where they can go up and kind of hit the streets and start visiting the customer sites. For your second question, no, we don’t anticipate any additional milestone payments this year. We did receive the $2 million payment in 2019, but we don’t anticipate any new ones this year.

[Chris Xu:]

Sean, let me add a few additional comments so that you understand that the company’s strategy on this entire platform related to CAR-TXpress. So, we have the X-SERIES product line, which is designed for laboratory use. And the intention is to expand to expose this technology to more labs around the world. So, Corning is really a great partnership around that with their penetration in medical laboratory in general. So, the company however is not to impact and the company is focused on its own efforts, which is providing the service and we are using our higher end clinical grade, the PXP series, which deliver a clinical manufacturer service, as I alluded to, in the earning call earlier, that is where we see a significant unmet need for the entire cell gene therapy field and not only so that the market is tremendously bigger than the device itself and the potential margin is also much, much more significant. I think ThermoGenesis with its own proprietary technology really has a competitive advantage in moving into that direction. So hopefully we can update you and/or our shareholder with more exciting news in that direction, especially this is the 35th year that we are in this field. I felt that this new strategic direction is going to revolutionize and revive this company to be a significant player in this area.

[Sean Lee:]

I see. That was helpful. Maybe to elaborate a little more on this topic then, in terms of the goal – your goal of having becoming a service provider in cell processing. So, what’s the approximate timeline you are targeting for this service? And also are you looking to launch in the U.S. first and then move to other geographies or do you have another marketing mind to go first I mean?

[Chris Xu:]

Yes. Great question. And the cell gene therapy is number one, they are considered drugs. It’s a cell based drug as compared to chemical drugs compared to protein drugs. The difference in cell drug compared to others is that cell drug tends to have to be manufactured locally it’s not like aspirin, which you can manufacture in, for instance, Pittsburgh and ship through globally everywhere. Cell gene therapy, you have to be manufactured in close proximity to your patient. So, our intention is to launch a global CMO and CDMO business in major, major countries or regions, probably not starting with covering everywhere, but we are very actively looking to strategies by either co-partnering, by partnering or acquire service capacity to enable us to move into that direction quickly. So, to your short answer, it’s already a long answer, but basically, we are looking at this opportunity as a global opportunity. And that the key issue is we are quite different than any other ones saying they can move into the contract manufacturer area. The difference is we assume again as it’s moving through this area with a strong patent-protected proprietary technology that delivers high efficiency and low manufacturer costs. That could be a strong competitive advantage for us to move into this field.

[Sean Lee:]

Thank you, Chris. That’s all the questions I have.

[Chris Xu:]

Thank you, Sean.

[Jeff Cauble:]

Thank you, Sean.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Chris Xu for any closing remarks. Please go ahead, sir.

[Chris Xu:]

Thank you, operator. We look forward to updating you on our progresses during our first quarter 2021 call and thank you to everyone who participated today and for your interest in ThermoGenesis Holdings. Thank you.

[Operator:]

The call has now concluded. Thank you for attending today’s presentation. You may now disconnect.