BioLife Solutions Inc (BLFS) 2021 Q2 法說會逐字稿

Good day, everyone. And thank you for standing by. Welcome to the second quarter of 2021 BioLife Solutions Inc. Earnings Conference Call.

(Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, the Chief Financial Officer, Mr. Roderick de Greef. Please go ahead, sir.

Thank you, Delfin. Good afternoon, everyone, and thank you for joining our second quarter earnings call. Earlier this afternoon, we issued a press release, which detailed our financial results and operational highlights for the 3 and 6 months ended June 30, 2021.

As a reminder, during this call, we may make certain projections and other forward-looking statements regarding future events or the future financial performance of the company or its acquisitions. These statements are subject to risks and uncertainties that may 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 qualify forward-looking statements, 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 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.

During this call, we will speak to non-GAAP or adjusted results. Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in the press release we issued this afternoon. These non-GAAP or adjusted financial metrics should not be viewed as an alternative to GAAP. However, in light of our M&A activity, we believe that the use of non-GAAP or adjusted metrics provide investors with a clear view of our current financial results when compared to prior periods.

Now I'd like to turn the call over to Mike Rice, BioLife's Chairman and CEO.

Thanks, Rod, and good afternoon, everyone. Thank you for joining our call. Joining Rod and I today is Dusty Tenney, President and Chief Operating Officer. After my remarks, Dusty will provide an update on key initiatives he is managing, targeting integration and revenue and cost synergies. Then Rod will present our financials for Q2 and the first half of 2021 and speak to another guidance increase we are making for 2021 based on our recently announced acquisition of Sexton Biotechnologies. After that, we'll be glad to take your questions.

Okay. So turning to our Q2 highlights. We sustained our strong momentum from Q1 with top line revenue of $31 million. This was up 215% versus Q2 last year and 85% above Q1 this year. It's important to note that organic revenue was up 49% versus Q1 last year and specifically our Biopreservation media franchise grew 45% year-over-year.

In Q2 we gained nearly 200 new customers across our 3 product and services platforms, including Media, Freezers and Thaw Systems and Storage and Cold Chain services. This compares to 80 new customers in Q1 and 213 in 2020. So I'm very pleased with the team's execution to quickly capture more customers in the high growth cell and gene therapy or CGT market.

Now I'll make some qualitative comments about our 3 revenue platforms and let Rod speak to the financial metrics for each. In Q2, we gained 22 new media customers, including Ansun BioPharma, Axolotl Biologix, BioNTech, Cellgorithmics, Acceleron, IconOVir, Mono Therapeutics, Quell Therapeutics and Wugen.

We also received confirmation that our media products will be used in an additional 13 clinical trials for new cell and gene therapies and 1 additional BLA filing from customers, including bluebird bio, Cellenkos, Deverra therapeutics, Fujifilm, Iovance, Myeloid Therapeutics, NeoProgen, Novartis, Sigilon Therapeutics, Lion TCR and Wugen.

We estimate that our biopreservation media products have been incorporated into more than 500 customer clinical applications. Of these, our media is used in 6 approved therapies, YESCARTA and TECARTUS from Kite; Breyanzi and Abecma from BMS, and ZYNTEGLO and SKYSONA from Bluebird. CryoStor is also used in 3 new therapies that could get approved in the next few quarters. These include Omidubicel from GamidaCell, cilta-cel from Janssen and eli-cel from bluebird. We continued to believe that our media franchise's sticky, marquee customers is the engine that we can leverage to market our biopreservation tools and services portfolio to.

Our Freezers and Thaw Systems platform performed well in Q2 despite having to work through some supplier issues. This platform includes CBS liquid nitrogen freezers, Stirling Ultracold mechanical freezers and our ThawSTAR line of automated water-free thawing systems.

We gained 155 new customers for this platform, including 129 now using Stirling freezers, 16 now using CBS freezers or accessories, and 10 now using ThawSTAR systems. Notable new freezer customers include A2 Biotherapeutics, Bloodworks Northwest, Catalent, Neurona Therapeutics, Roche Tissue Diagnostics and Sarepta. New thaw customers include Alloy therapeutics, Capsida Biotherapeutics, KSQ Therapeutics and TriLink BioTechnologies.

And our final of 3 revenue platforms, Storage and Cold Chain services, which includes evo, cold chain rentals, and SciSafe storage services, we gained 26 new customers in the platform and expect demand for all platform solutions to remain strong for the rest of 2021.

For our Storage Services platform, we continued to make good progress to build out and validate 2 new facilities, 1 in the U.S. and 1 in Europe, with both expected to come online before the end of the year.

With our evo Cold Chain management platform, I'm very pleased to report that in Q2 we processed nearly 1,000 shipments of critical starting material and/or manufactured cell and gene therapies for about 140 new end customers.

The evo DV10 Smart Shipper and evo.is Cloud App were both also used in more than 100 shipments of an approved CAR T cell therapy for the notable customer we've been referencing for some time now. These were all in 1 geography and we expect additional countries to come online over the next few months.

We're all very pleased to have the opportunity to partner with this pharma company to enhance the transportation of a lifesaving cell therapy. This customer also uses our Biopreservation media and several clinical trials of new cell therapies.

Finally, we recently received an order for nearly 200 evo Smart Shipper systems from a new courier customer and partner. This customer is a top-3 specialty logistics carrier serving the cell and gene therapy space. We're working through the execution of final documents and training to support this carrier's sales, marketing and support activities. Deployment is expected to be completed over the next 3 to 4 quarters.

I'd now like to spend a few minutes speaking about our just announced acquisition of Sexton Biotechnologies. Recall that following its spin-off from Cook Regentec in September 2019, BioLife and Casdin Capital made seed investments in Sexton to fund the company's growth plans. We've noted the progress that Sean Warner and the entire team have made in increasing awareness in the CGT space for Sexton Solutions and driving product adoption. It's clear that Sexton is at an inflection point with their products embedded in more than 50 cell and gene therapy clinical trials, strong momentum and a great opportunity for high growth. Since their products are so synergistic with our biopreservation media platform, we decided to acquire the company now to leverage all of BioLife's resources and relationships to accelerate growth.

At a high level, Sexton's portfolio can be divided into 3 platforms: first, differentiated cell culture media in the form of Human Platelet Lysate products or HPL, which are increasingly being used as a non-protein-based replacement for animal or human-derived serum media; second, automated fill and finish machines, which automate several steps in the manufacturing process; and third, CellSeal vials, a proprietary primary package solution for manufactured cell and gene therapies.

Sexton has about 150 active customers using at least 1 solution with some notable customers being Athersys, Bristol Myers Squibb, who uses the CellSeal vials to package their approved Breyanzi CAR-T cell therapy, Cartesian therapeutics, Orbsen and TC BioPharm.

With the acquisition of Sexton, we welcomed 20 dedicated and very capable new team members to the BioLife family, including 4 additional scientific sellers.

In our upcoming worldwide sales meeting later this month, we will train our now 35 person strong global sales team on all of our platforms to further generate cross-selling opportunities. From this point forward, we will report Sexton revenue in our cell processing platform that also includes biopreservation media.

In summary, Sexton is a great example of how our accelerated investment partnership with Casdin Capital works to bring in another high-value asset to the BioLife enterprise.

Now I'll turn the call over to Dusty to give you an update on integration and some of the identified revenue and cost synergy initiatives he is leading. Dusty?

Thanks, Mike. In Q2, integration efforts have moved from planning to execution. We've systematically focused our efforts on 3 areas of synergy: growth, cost and systems. For growth energy, we have moved forward to enable our sales team to cross-sell while rationalizing and expanding our distribution partners. Further, we are strategically working to expand into geographies where we are underrepresented, given the size of opportunities within these end markets.

On the cost synergy front, we have identified opportunities to leverage our supply chain spend, optimize and more efficiently utilize facility space, while continuing to realize the benefits between and across our business platforms with equipment and products to provide complete solutions for our customers.

To complement the identified growth and cost synergies, we are embarking on a phased rollout of an enterprise-wide ERP system that will deliver significant efficiencies across the business platform and underlying support infrastructures.

Finally, with all the demand that Mike has discussed, we have taken proactive steps to add and train critical resources to support the capacity requirements that will continue to meet customer demand across all of our platforms. We look forward to providing quantification of these initiatives on a future call as we make continued progress.

Now I'll turn the call over to Rod.

Thanks, Dusty. I'll start off with a brief review of our financial results for Q2 '21 and then make some comments about the Sexton transaction we announced earlier this week.

Revenue for the second quarter totaled $31.2 million, representing a 215% increase over 2020 second quarter revenue of $9.9 million. Organic revenue growth for the second quarter was 49%, driven by biopreservation media revenue of $9.7 million, which was up 45% over the second quarter of '20.

Revenue from Freezers and Thaw systems for Q2 was $17.6 million, including a May and June revenue contribution from Stirling of $13.3 million. Revenue from Storage and Cold Chain services for Q2 was $3.9 million, inclusive of a $3.1 million contribution from SciSafe, which we acquired in Q4 of last year.

Revenue for the 6 months ended June 30, 2021, totaled $48.1 million, an increase of 118% over 2020 6-month revenue of $22.1 million. Biopreservation media revenue for the first 6 months of '21 increased 21% to $18.6 million, reflecting a challenging Q1 comparison last year, which included $1.5 million to $2 million of COVID-related demand pull forward. We expect to see full year '21 media growth in the mid- to high 20% range.

Our adjusted gross margin for the second quarter of '21 was 43% compared with 57% last year. For the first 6 months of '21, adjusted gross margin was 47% compared with 61% in the same period last year. The decrease in adjusted gross margin for both periods reflects the lower margin profile of the product lines we acquired in '20 and '21. We believe that in Q3 or Q4, adjusted gross margin will begin to show modest sequential increases, which should continue into '22 and beyond as we execute toward a mid-term gross margin target of plus 50%.

Adjusted operating expenses for Q2 of '21 totaled $13.3 million compared with $6.1 million in Q2 of last year. For the first 6 months of '21, adjusted operating expenses totaled $22.2 million compared with $12.5 million in the first 6 months of last year. The increase in both periods was primarily driven by additional operating expenses related to the acquisitions made in '20 and '21 as well as increased headcount and stock-based compensation expense necessary to support our overall growth objectives.

Our adjusted operating income for the second quarter of '21 was $65,000 compared with an operating loss of $510,000 last year. Our adjusted operating income for the first 6 months of '21 totaled $560,000 compared to $910,000 in '20. Our adjusted net loss for the second quarter of '21 was $56,000 or $0.00 per share compared with an adjusted net loss of $492,000 or $0.01 per share in '20.

For the first 6 months of '21, adjusted net income was $422,000 or $0.00 per diluted share compared with adjusted net income of $952,000 or $0.02 per diluted share in '20.

Adjusted EBITDA for the second quarter of '21 increased 208% to $3.7 million compared with $1.2 million in last year's second quarter. For the first 6 months of '21, adjusted EBITDA increased 59% to $6.5 million compared with $4.1 million in the same period in '20.

Our cash balance at June 30 was $76 million, down from $89 million at March 31. The decrease in cash is a result of increased accounts receivable related to the timing of certain revenue coming in later in the quarter, reductions in Stirling accounts payable balances and capital expenditures related to the expansion of our U.S. biostorage facilities and the establishment of our first international facility in the Netherlands. We expect our cash balance to remain relatively stable for the rest of the year.

Now I'd like to make a few comments on our recently announced acquisition of Sexton. This is an all-stock transaction, which valued the company at $30 million or approximately 5x '21 revenue. Given BioLife's ownership position, the consideration paid for the shares we don't already own will be $24 million, paid through the issuance of approximately 506,000 shares of our common stock.

We expect Sexton's full year '21 revenue to come in between $6 million and $6.5 million, up from approximately $2.8 million in 2020. Assuming the transaction closes on September 1, Sexton is expected to contribute $2 million to BioLife's revenue in Q3 and Q4 and $8 million in 2022. We expect approximately 2/3 of Sexton's future revenue will be comprised of recurring HPO media sales and consumable CellSeal vials and accessories, with the balance coming from their automated fill equipment.

Sexton's gross margin in '21 is expected to be in the mid-40s, ultimately climbing into the mid-50s within the next 2 years based on increased revenue levels. We expect the acquisition to be modestly accretive to adjusted EPS next year.

I'll conclude my remarks with our revenue guidance for 2021. Beginning in Q3, we will report revenue in 3 product categories: cell processing platform, which will include the Sexton product line as well as our biopreservation media; Freezers and Thaw systems, which includes our CBS and Stirling freezers and the ThawSTAR product line; and storage and cold chain services, which includes our evo cold chain and biostorage services.

Total revenue for 2021 is expected to be in the range of $108 million to $117 million, reflecting year-over-year revenue growth of 125% to 143%.

Revenue for 2021 is expected to be comprised of the following: cell processing platform revenue, including $2 million of Sexton revenue is expected to be between $40 million and $42 million, reflecting growth of 29% to 36% over 2020 and accounting for approximately 36% of total revenue.

Freezers and Thaw system revenue is expected to be between $55 million and $59 million, accounting for approximately 51% of total revenue. Storage and cold chain services revenue is expected to be between $13 million and $16 million, accounting for approximately 13% of total revenue.

Finally, in terms of our new share count, taking into consideration the 506,000 shares, which will be issued in connection with the Sexton transaction, we will have 41.2 million shares issued and outstanding and 43.2 million shares on a fully diluted basis.

Now I'd like to turn the call back over to Mike.

Thanks, Rod. I'd like to summarize 3 key takeaways from Q2. First, we had sustained product demand across all of our platforms. The strong demand has carried through to today, roughly the midpoint of Q3. Next, we have another great addition to our portfolio and a growth catalyst with the acquisition of Sexton. The products are a perfect fit, and the team is first-class all around. Finally, with Dusty's integration and synergies initiatives, we can see a clear pathway to reaching our aspirational goals of $250 million in revenue and an adjusted EBITDA margin of 30-plus percentage points over the next 3 to 4 years.

Now I'll turn the call back over to the operator to take your questions. Delfin?

(Operator Instructions) And here's our first question, opening up the line of Mr. Jacob Johnson of Stephens.

Congrats on nice quarter. Maybe first question for Mike or Rod. There's a pretty big pickup in rental revenues sequentially. Rod, you gave us SciSafe revenue. So if you back into it, it looks like evo had a pretty strong quarter. You talked about, I think, 1,000 shipments during the quarter, Mike. Can you just talk about how evo did in the quarter? And maybe how we should think about revenues from that business going forward, acknowledging that you don't guide by line item?

Yes. I'll make some qualitative comments, and then Rod, whatever you want to do on the quantitative side is fine. But Jacob, great question. Yes, we are clearly seeing much more momentum and adoption of evo from the current courier base. With the new courier that I just announced that's coming online here, we would expect a significant contribution from them. They're very well entrenched, 1 of the top 3. So all in all, the awareness of the evo platform, not only the unique capabilities of the DV10 Smart Shipper, but also the unique software attributes of the evo.is Cloud App are -- they're being recognized and appreciated.

So all the efforts we've made over the last several years to train these courier sales teams to help them with market materials, to support their depot teams to better qualify and charge and characterize the performance of the evo system are paying off. So very bullish about this, and it's clear now, despite a competing container and company being in the incumbent driver seat for the last several years, it's just clear to us that there's room for more than one. And as I mentioned on previous calls, we would expect that similar to this approved cell therapy company, who is now shifting a significant portion of shipments away from the incumbent to the evo, that other companies will do that as well as a de-risking measure, and we're glad to be there.

It's been a long time to see this fruition of the evo platform being adopted. But super glad we made the acquisition and kudos to Bruce McCormick and Dana and all the folks in SAVSU who had this idea and got it to a certain point, and it's been a great fit. And again, really bullish about the opportunity.

Rod, you can just speak or not speak about Jacobs' question on the revenue modeling for that.

Yes. I think, Jacob, you've obviously backed into the Q2 evo side of the revenue within that bucket. And we really want to try and stay away from providing guidance for each and every product line we have. And so what I would say is that it has been performing well, and we expect it to perform well throughout the balance of the year, which is as far as we're looking out, particularly based on the 200 new units that are going out.

Got it. And then maybe on the Sexton deal, Mike, can you just talk about the synergies that exist between the cryopreservation media you have and the fill/finish work and the vials that Sexton provides, how related are those 2 products?

Thanks for picking that up, Jacob, exactly. In most or many cases, it's the same users, the same buyers, the same decision-makers. So in the workflow, now with the Sexton acquisition in the portfolio, now we've moved up in the workflow, whereas cryo is pretty much toward the end just before final packaging. So now we're up a few steps in that protocol in a network flow of customer engagement. And again, same people, same labs, same building, so I think it's highly synergistic, and we're going to leverage that to the fullest extent possible.

We've got a ton of relationships, and we've got great technical and scientific support in the form of Dr. Aby Matthew and now with Sean Werner, another PhD, who can be just ambassadors and champions to help customers optimize using their systems. I think it's going to be fantastic.

Got it. And if I could just sneak in one more on Sexton, Mike. I guess, when I think about cell and gene therapy, you see a lot of bags in the industry, but you see vials everywhere else in the biopharma world. Can you just talk about the landscape, I guess, for vials versus bags in cell and gene therapy and where that is today and maybe where it could go in the future? And maybe if you want to speak to why Breyanzi chose to use the CellSeal vial.

Yes, right on, right on. Really intuitive questions. So traditionally, in the cell therapy space, as a holdover from stem cell transplants, the packaging was bags, right? But there are smaller infusion volumes that lend itself to a vial where there's less waste. You can dose titrate based on the patient's weight, and crack as many vials as you need to. There could be less risk of losing the entire shipment in a bag versus sending vials in more than 1 shipment. So it really depends on the infusion volume-based on the clinical indication or application. And again, we could see -- we would expect that there could be a decent shift away from bags, the traditional sort of stem cell transplant bags to a proprietary optimized vial such as CellSeal. So that's where it's going. But again, predicated based on total infusion volume, right?

Got it. That makes sense. Congrats on nice quarter.

We have our next question, Mr. Max Masucci of Cowen.

Congrats on a great quarter. So can you just give us a bit more detail around the specific drivers of the inflection in new customer wins in Q2 and maybe your expectations around the pace of new customer wins going forward? Or if you'll be shifting your focus towards expanding these relationships with new and existing customers?

Right on, Max. I think that we're both right and lucky in a lot of ways here because there's so much activity in the cell and gene therapy space. We're leveraging our media customers to expose them to the other parts of the portfolio, selling them thaw, selling them freezers, asking the questions about do they need to outsource biologic storage services, which would be a great play for Gary and the team at SciSafe. Now we've got the entire temperature continuum covered with freezers, both mechanical at Stirling and LN2 with CBS. So all in all, just a great opportunity for us, Max, to again, go back to those core, very sticky media customers and have different conversations. So I would expect the sort of pace of new customers to increase or at least be maintained for the rest of the year.

For example, the Stirling team of 20-plus sellers, and including a very strong relationship they have with the VWR Avantor team, which has, as you know, many, many dozens of feet on the street. This is a force multiplier opportunity for us and an advantage that we've got. So telling a lot of stories here in a good way in forming relationships. And again, I'd expect the pace to at least be maintained, if not to continue.

Great. Maybe just one more basic question here. You have pretty healthy beat versus consensus here in Q2. Just curious if there are any one-timers or larger nonrecurring orders in the quarter that can just help us think appropriately about the implied guidance for the second half of the year? And just any other swing factors to the second half guide? I think that would be great.

Super. Rod, why don't you take that? And I can follow up if needed.

Yes, sure. Max, I think that we've been working a bit of backlog off at the Stirling side of the business, and that certainly helped the quarter. We've got more of that coming. But I think the guidance we gave out is specific. Really, the only change we gave out was the addition of the $2 million from Sexton that we expect to have hit. The rest of it, we left stable, and we did that purposefully because there may be some seasonality in Q3. And so I think we're going to revisit the guidance for the balance of the year as we get to the end of Q3 and see how we did there. But right now, we're feeling pretty bullish about Q3. And so just stand by.

And our next question is from Mr. Paul Knight of KeyBanc.

Mike, could you talk, is there -- I know it's hard to quantify COVID that investors always ask, or is there a change in momentum on any demand on the coded side? And then this next question, I think, is really for Dusty in terms of Stirling and Catalent, that agreement. Is that over a multiyear period? Some color around the timing of that relationship?

Paul, good to hear your voice. Dusty, I think I'll ask you or Rod to speak to either your specific knowledge of COVID-related revenue on freezers. And Rod, you could speak to the total industry. You could follow up on the Catalent part of the question.

Specifically around Stirling, right?

Yes.

Okay. So Paul, thanks for the insight there. So as we look at the overall demand profile, sort of cutting through some of the data and some of the interactions that we've had, there's been a natural extension that I think we're all sort of seeing in the market. But to the extent of what we currently see directly related to COVID base revenue, it's about 10 -- about 10%, 15%. So we're actually starting to see some recovery in a couple of the end markets that we had in the past, just by virtue of the impacts of COVID in the academic and the government sector that's ultimately supporting that. So about 10% to 15% is sort of tied with the COVID piece.

Yes. And then Paul, I'll just jump in the last part. On the media thaw side, really no COVID bump whatsoever. It's all just great organic growth from the traditional applications we've got in cell and gene therapy in the broader biopharma space. As you know, there is some COVID revenue coming from our storage services business, we don't quantify that or we don't talk about what's in certain locations due to some security aspects, but there's some of that for sure. And then there's a healthy amount of non-COVID revenue as well from the storage side.

Dusty, you want to speak to the Stirling.

Yes. So just to sort of pick up on the Catalent arrangement, Paul. The dynamics of arrangement is basically a long-term agreement. And as you're probably well aware, Catalent continues to build out CGT capabilities on a global basis and by virtue of intent relationships that we've been building on over time, we're going to be carrying forward with those relationships in these expanding geographies that primarily is in Asia Pacific, but they've identified some other build-outs in key geographies here in the U.S. as well.

So it is a long-term agreement. It is an agreement that standardizes on the Stirling platform, as has been previously communicated.

And then lastly, a question on the sales force integration with CBS Stirling. Where are we with that Dusty?

I would say we're in early innings. Over the last couple of months, a lot of introductory aspects that have taken place with each of the respective team members being brought across. We've got some initial training that's taking place. We have a sales meeting that Mike talked about here at the end of August, Paul, and we're bringing that team together. So there's high expectations. There's a lot of synergy. As Mike has mentioned before, a lot of the similar customers that we're interfacing with, that not only need biological storage, but they also need to expand to cover the cell and gene therapy space with our LN2 platforms. And it's a great opportunity for us to leverage the sales team who are already connecting with those respective customers. And then ultimately, building on top of that is the great distributors that we have in play as well. So early names, but we're making some good traction, and we'll continue to provide further updates with very specific examples here as we move forward and bring those teams together.

And our next question is from Lake Street Capital, Mr. Thomas Flaten.

Let me add my congrats on the quarter as well.

Thank you.

A quick question on Sexton. Specific to the HPO and the CellSeal vials. Are those DMF incorporated?

Yes. There are master files at the FDA. I want to say for both, but I'll follow up for a completely accurate question. But I know there are DMFs. They're just general master files for, if not all, then most of the Sexton portfolio products, yes.

Got it. And then on the expansion of the SciSafe facilities, could you just talk a little bit about what you expect them to do for the business? Is it about attracting new customers or better serving existing customers? Or perhaps it's a blend of both?

Good question. Yes, generally speaking -- again, I can't get too specific. But generally speaking, we're just reacting to an opportunistically strategically locating facilities where we know there's demand. We typically open a new facility with an anchor customer and then bring in new business around that to fill out the capacity. But it's a very frothy space right now, Thomas, and glad that we've got Gary and the team in the business and very focused on these first to what I would assume to be several more facilities over time.

(Operator Instructions) And for the next question, Mr. Marc Wiesenberger of B. Riley Securities.

Mike, the old way to think about BioLife as a pure media company was we could expect kind of certain revenues from a customer in Phase 1 and then Phase 2 and Phase 3, and ultimately with approved therapy. But you alluded to earlier that you've kind of moved up the chain and the workflow. So with all the new offerings, can you give us an update on how we should think about the customer kind of economics as they move through the clinical process relative to when you were pure media play?

Sure. And I know that you get it, Marc, that the discrete purchases of freezers, they have a long lifetime. So that's kind of a onetime shot or every so many years shot. The media, more recurring revenue, obviously, both BioLife Media and Sexton Media, the CellSeal vials as a consumable, so that's a recurring revenue stream, that would go the ThawSTAR as a fixed piece of capital. But in terms of trying to quantify that, we're working hard to get that model together. We don't have enough end yet to kind of feel confident to put even some ranges out about that, but we will in a future call, and we'll try to help you guys understand in a typical customer journey, in a typical application, what things might look like. And our goal is obviously to be able to articulate what we think the TAM and the SAM are for each of those product portfolios and what we would expect to reach in terms of our aspirational market shares over time.

Okay. Fair enough. Another kind of high-level one. Clearly, the challenge in the -- in processing -- an early process for cell and gene therapy manufacturing is still evolving. So maybe help us understand your vision for the future a little better, incorporating Sexton and some of the other products in the portfolio, but also with kind of what flexibility and dynamism does BioLife have in place to adapt to the changes maybe on an organic basis and not purely the inorganic side, but with the capabilities you've built up in-house?

I like that question for sure. The jury is obviously out about a couple of factors, right? One would be the timing of and the magnitude of the shift from autologous to allogeneic therapies, right? Clearly, if that becomes a significant shift, that will be great for patients in terms of access to therapies and great for a company like BioLife that is supplying tools that if they're not used, generally speaking, they're used in every single manufacturer dose, so we'll benefit from the up tip in the number of doses that are manufactured. Pretty bullish about that transition at some point.

The other is, what's going to happen with the initiatives to decentralize manufacturing and to enable the Fred Hutch's, Dana-Farber's or even community hospitals to make their own cell therapies.

I'm not nearly as optimistic that that's going to be a reality here anytime soon. Just based on the capital investments required, the talent that you have to acquire and then retain, the quality systems that you have to put in place. So as a potential headwind, we're not too worried about that at its core mark, the basis is that all these therapies because they're biologic material, they're both time-sensitive and temperature sensitive. So they need to be handled very preciously and carefully the entire time they're outside the body. So our ability to adapt would be all about different container sizes, different volumes, not so much different variance of media because what we have now works really well. So we don't need to get into that game of a custom media for each customer's application.

Thankfully, the broad-based utility of the CryoStor and HypoThermosol platforms have now proven themselves for many, many years. But nevertheless, to use your word of flexibility, we want to be nimble, so we can respond to different packaging requirements. We look at other tools that we could either acquire or develop in-house that would, again, further cement our position as a trusted partner with these companies.

There are several other parts of the workflow where we don't participate at all. And we're obviously cognizant of who those players are and how embedded their respective technologies are. So we'll be careful about sort of picking our sleep points. But so far, everything we brought into the portfolio now Sexton being the 6th company in the last 30 months or so, it's all fitting very nice with no overlap and just a lot of leverage opportunities.

Great. Very helpful. And then just a final one for me. You guys called out freezers did well even after having a deal with, I think you said some supplier issues in the quarter. Previously, you called out that -- with regards to Stirling, there is some 3Q seasonality. I'm wondering if you could just talk about the supplier issues that you experienced in the quarter, what you think will happen in the third quarter? And should we maybe expect a little bit larger or an exacerbated 3Q seasonality and maybe a larger bump into Q4 with regards to Stirling?

Yes. Rod, you can take that and we can fill in, but there's not too much we can say on that. Yes.

Yes. I think from a seasonality perspective, we -- the guidance we've given for the back half of the year is what it is. The question is going to be, is the summer -- Q3 summer doldrums, is that going to impact the freezer sales? Or is it going to come in, is going to be driven by people having to spend money at the end of Q3, et cetera. So there will be some. But I think if you want to be safe, it would be simply to take our guidance and split it between those 2 quarters as it relates to the freezer piece.

Yes. And Dusty, maybe without getting specific on suppliers, maybe you could just talk to how that's probably not an unexpected manifestation of the great demand and pushing so much more product to the factory?

Yes. I think there's a couple of different dynamics. And clearly, volume has a big component there. And we've all been faced with a variety of different commodity-related aspects that have impacted us. We've worked through those. We've got not only primary channels, but we have secondary channels to take care of the supply constraints that sometimes ends up having some impact on the business. But we've navigated those, and I think we've got good line of sight, as Rodan noted in relationship to the outlook that's been provided.

And here's our last question coming from Suraj Kalia of Oppenheimer.

So Mike, a high-level question, and I'll ask it slightly differently. So the BioLife story over the years has morphed essentially into an M&A-driven strategy. And I'm curious, you and I talked years ago on the average revenues per customer per quarter. And I'm just asking the same question a little differently. Help us understand to the best you can, where are we in terms of this metric today? And also, if you could just tack on to that, how does customer overlap look like? And how does the Venn diagram? What should we think of the Venn diagram, let's say, 18 months from now?

Yes. Suraj, well, it's still early, and the revenue is still fairly concentrated in each of the 6 platforms. So it's not like we can speak of averages because it is pretty weighted of some large contributors who are at later stage. And then all of these hundreds and hundreds of other customers who are earlier in their clinical pipelines, some are even preclinical. They haven't even started a Phase 1 trial yet. But just the sheer number of customers, Raj, that we're acquiring every quarter, both direct and then to what extent we have visibility from the distributors, it's pretty mind-boggling.

One of the benefits of the ERP system last year and that Dusty described is to have much better visibility on a per customer example of what all they're using, what the order patterns are. So we have visibility to monetize those trends. And right now, it's very discrete. There are different systems, a lot of manual systems and number of crunching going on. So we really can't speak to a typical customer revenue journey on an annual basis yet, because it's really all over the map.

Here's one thing that I would say, though. Of the 6 approved cell gene therapies that we have media in, you know that we've talked about potential media revenue from an approved therapy in a range of $0.5 million to $2 million annually. I can't tell you that with just a couple of exceptions, all of those customers that I mentioned earlier are at or near exceeding the high end of that revenue range on an annual basis. So that thesis is holding. It's still too small of an end though for us to think about revising the range. We need a few more wins in some time with those newly approved customers to see how it tracks out. But so far, that narrative is really holding. So that's pretty cool.

Got it. And final 2 questions for Rod, if I may. So Rod, any update on the Stirling manufacturing efficiency road map, because gross margin took quite a bit step down. And I understand one of your goals is to get gross margins up, especially at Stirling. So if you could walk us through that. Also, Rod, the $108 million lower end of revenue guidance, I understand the breakup of the different components. But fundamentally, what was the consideration? Is this just conservative because implied growth is quite a bit of stepped up?

Sure. So again, I think that on the Stirling side, so the margin expansion that is going to drive us to the sort of 50-plus target that we talked about is going to primarily come from both CBS and Stirling. At the CBS side of things, it's going to be driven primarily by the leverage of a pretty significant amount of fixed costs by increased revenue.

There will be some cost savings on some new product introductions. But in particular, the high-capacity rate freezer, which is what we've talked about last quarter, we shipped the first one, has $0.5 million ASP and a gross margin that's significantly in excess of the rest of the freezer line. So that's going to be driving the margin expansion at CBS.

With respect to Stirling, it's really going to be driven by a couple of things. One is the overall leverage that we'll get on the fixed cost base there, although that won't be as significant as CBS. It's going to come from also the benefit of purchasing, as an example, steel for both CBS and the Stirling product line, so that we will have some benefit of the purchasing power there. But the primary driver on gross margin expansion for Stirling is going to be the lower cost of goods, lower bond associated with the new product introductions that will come out within the next 12, 18, 24 months and slightly higher ASPs based on the benefit and features of those new products. So that's sort of how that works out.

With respect to the guidance, we took a hard look at the low end of our guidance. We could have tightened the range up a bit. However, the seasonality comments I made with respect to the -- in particular, the freezer business in Q3 and Q4, we just felt, in part, to be conservative that we'd leave the range exactly as it was at the end of Q1 and simply increase it by the expected contribution from the Sexton acquisition.

Thank you for your questions, and that puts an end to our Q&A session. Now I would like to turn it over to our Chairman and CEO, Mr. Mike Rice.

Thank you, Delfin, and thanks, everyone, for your interest in BioLife. We've built a high-performance team here, and I'm proud of the people working here and their commitment to serving customers and also the indirect role that our solutions play in saving or improving the lives of patients around the world. I'm looking forward to sharing our Q3 results with you. Good night.

And that concludes today's conference call with BioLife. Thank you, everyone, for your participation. You may now all disconnect.