BioLife Solutions Inc (BLFS) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioLife Solutions Q1 2015 earnings conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, BioLife Solutions' Chief Financial Officer, Daphne Taylor.

Ms. Taylor, you may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us this afternoon for the BioLife Solutions conference call and webcast.

During this call, we will discuss our financial results and operational highlights for the first quarter of 2015.

Today, we issued a press release and filed our Form 10-Q quarterly report containing detailed results for the quarter. This release is available on the Investor Relations page of our website at biolifesolutions.com, as well as various financial websites.

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, let me remind you 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 qualify to be forward-looking statements made on this call, I refer you to our periodic and other public filings 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.

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

Thank you, Daphne, and thanks, everyone, for joining the call. Following our business update, we'll be glad to take your questions.

I want to start off with a recap of the regenerative-medicine market and our place in the supply chain as a critical tools provider, then I'll share some data to help you understand why this is a very strategic market for BioLife.

The regen-med industry is comprised of clinical centers and private and public companies commercializing cellular and gene therapies and engineered tissue products intended to treat and, in some cases, cure the leading causes of disability and death throughout the world.

Yesterday, the Alliance for Regenerative Medicine, or ARM, as the entity is known, published their quarterly data report for the first quarter of 2015.

According to ARM, there are 580 regenerative-medicine companies worldwide, and investor interest in the space is very strong.

In the first quarter of 2015, ARM reports the total amount of funds raised by these companies was $2.7 billion, an increase of 135% from the same quarter last year.

A major focus of regenerative-medicine clinical trials is the use of cellular immunotherapies, such as CAR T cells and other types of T cells in various cancer indications.

This is great news for patients and also for BioLife, as many of our customers are in the cellular immunotherapy space and they have raised significant amounts of cash to support their clinical trials, where our products are used to preserve starting biologic material such as peripheral blood or bone marrow and also the manufactured cell products that are administered to patients.

I encourage you to read this report, which can be found on the ARM website at alliancerm.org.

Regenerative medicine represents the most strategic market segment for our proprietary clinical-grade biopreservation media products. Our CryoStor and HypoThermosol brands are well-known as best in class in the space and are now incorporated in over 185 free clinical validation projects and clinical trials covering all the major clinical indications being investigated.

We estimate our products are embedded into about 75 clinical trials of new cellular immunotherapies. As of the January 2015 update we provided, we believe our products are embedded in about 20 Phase III trials and about 80 Phase II trials.

The impact of regulatory approval and at-scale commercial manufacturing of any customer application varies by patient population and the dosing regimen.

For example, future-approved cellular therapies for heart failure, using a very conservative estimate of 1% market share, could represent multi-million-dollar annual revenue increases for BioLife.

Relatively smaller clinical indications, where cellular therapies could capture higher market share based on clinical efficacy, could represent $1 million annual revenue increases.

You should know that even with our premium pricing supported by improved preservation yield data, the cost of our products as a percentage of the manufactured cellular product COGS is minimal.

We know that biologic-based drug development is challenging, risky and expensive for our customers and not even a majority of the 185 cell therapy candidates our products are used with will get approved and manufactured in high volumes. However, some certainly will, and this could start happening by the end of 2016, especially in the cancer immunotherapy segment.

We're a critical tools provider to this market segment. With the combination of our proprietary biopreservation media products and our new complementary cloud-based biologistex Cold Chain Management service, which I'll speak to next, we can serve and optimize the entire needle-to-needle biopreservation continuum in this segment from the time starting material is removed from a patient until a manufactured cell therapy is administered to the same or a different patient.

In summary, we believe that the franchise customer base we've built in the space is a strategic asset and that the regen-med market has the potential to derive significant increases in BioLife revenue, earnings and enterprise value.

Let me expand on this and connect our success with biopreservation media adoption to what we consider to be an equally significant opportunity to drive complementary innovation and quality improvements in Cold Chain biologistex management of cells and tissues. This applies to starting material and manufactured products and therapies.

As you know, for the last few quarters, we've been preparing for the full commercial launch of what we believe will be an industry-changing biologistex management solution.

With SAVSU as our JV partner supplying their leading-edge EVO, a smart precision thermal shipper, and BioLife funding the development of a new cloud-hosted management app and database, we have an opportunity to empower our customers to self-manage the biologistex of their high value and, in many cases, life-saving biologic payloads, including the same cellular therapies being preserved using BioLife biopreservation media products.

We firmly believe that more data creates more value for our customers and that the EVO smart shipper and our simple yet very powerful logistics app will improve the quality of our customers' delivered practices and ultimately help downstream caregivers improve the clinical delivery of biologic-based medicine.

Let me just say our offering goes well-beyond simple location-based tracking of a shipment. We believe the user experience will be stellar.

Our go-to-market strategy for biologistex is that this is a SaaS, or software-as-a-service, business model. The reusable EVO smart shipper and cloud app are two perfectly matched components in our offering that will shift value creation from expensive courier services back to our customers.

I'm really pleased to let you know that we believe several design aspects of EVO and our app are novel, and we have an IP plan in place.

We also believe that the aggregation of biologistex data and the analytics tools we're developing for our customers will both play a big part in our value creation and value capture in this opportunity.

Independent market research firms estimate that the worldwide spend for Cold Chain shippers and instruments could reach $5 billion by 2018. We believe our potential addressable portion of the market for small payload shippers is several hundred-million dollars.

We expect to fully commercialize biologistex early in the second half of this year and to report revenue from the service in the third quarter.

As you can imagine, for competitive reasons, until commercial launch, we can't disclose proposed pricing or our unit forecast for our biologistex offering, but we plan to speak in more detail about this on future calls.

I'd like to now give a brief update on our new cell-thawing media products that we launched in the first quarter. I'm happy to report that about 20 different stem cell transplant clinical centers have ordered these products, mostly in small volumes for their validation and support of a switch to our own dextran-based solutions.

The North American market has about 150 cell transplant centers, and using an estimated 20,000 annual procedures, this is about a $2 million addressable market for BioLife. Not a huge opportunity, but several of our new customers for these products are the leading stem cell transplant clinical centers in the US, so we're glad to be able to support their important clinical practice, and are pleased that the quality of our products is recognized.

Turning to contract manufacturing, we previously discussed Somahlution and a manufacturing services agreement we executed with them to produce what would be an FDA-approved tissue storage media under contract.

We heard from them recently that their clinical trial is not progressing as they expected and they advised us not to complete any additional work. Disappointing news, but this is the nature of medical device regulatory approvals.

Based on this, we don't expect any additional revenue from Somahlution.

Meanwhile, we continue to identify and vet new potential contract manufacturing opportunities that could be highly aligned with our capabilities and capacity.

Now I'll turn the call back over to Daphne to go over our detailed financial results for the quarter and to provide our expectations for 2015.

Thanks, Mike.

First quarter 2015 revenue was $1.5 million, up 30% from the first quarter of last year. Nearly all of Q1 revenue was realized from sales of our core proprietary biopreservation media products.

This was the strongest quarter in company history for core product revenue. And for the full year of 2015, we expect 20% to 30% growth in core product revenue over 2014.

Gross margin in Q1 was 59%. This is up from last year, when our product mix included a significant amount of low margin contract manufacturing revenue.

For the full year of 2015, we expect gross margin to be in the range of 55% to 60%.

Operating expenses in Q1 of 2015 were $2 million. These were in line with Q4. The increase in expenses over Q1 of last year is due to investments in head count and spending related to the development and commercialization of our biologistex Cold Chain Management service that Mike just referred to.

We expect G&A and R&D expenses both to continue at about the same pace for the rest of the year, with a ramp down in G&A as we complete the JV participation payments to SAVSU by the end of Q4.

We also expect sales and marketing expenses to increase in Q2, and then to level out later this year after the full launch of our biologistex service.

In Q1 of 2015, we used $1.3 million in cash. We ended the quarter with $8.6 million.

We plan to use about half of our current cash in the next three quarters, commercializing our biologistex service, and expect to end the year with approximately $4 million in cash. Furthermore, we expect that we will have sufficient cash to reach positive cash flow and we do not expect to need to raise additional operating cash in 2015 or 2016.

And with that, I will turn the call back over to Mike.

Thanks again, Daphne.

I'd like to close with some summary comments about where we are and how we see our future potential.

This is a really exciting time at BioLife. Our entire team is focused and totally engaged on continuing to build our brand and customer base in our strategic markets.

The new team members we hired to support biologistex bring excellent domain knowledge about Cold Chain Management and opportunities for even more innovation.

We believe strongly that just as we were successful moving the regen-med market away from home-brew and other poor performing preservation media, we can repeat this high value customer engagement and consulting experience by exposing risks in current Cold Chain Management practices and driving adoption of our cloud-based biologistex app and the EVO smart container.

Ultimately, my vision for BioLife in our tools offering is that both will be catalysts for real improvements in biologic-based medicine. We take our role as a critical tool supplier very seriously, and believe customers, patients, shareholders and our team members will all benefit from the work we do.

Thank you for your interest in BioLife. I look forward to reporting on our progress during future calls.

Now we'll open the call to questions. Operator?

Thank you. (Operator Instructions) One moment for questions.

Our first question comes from Jeffrey Cohen.

Oh, hi, Mike and Daphne. Can you hear me okay?

Yes. Hi, Jeff.

Hi, Jeff. How you doing?

I'm doing just fine. So just a few questions. Can you talk about, Daphne, I guess, the R&D for the balance of 2015? Can you talk about the number for Q1 and how that may look for the next three quarters, particularly in light of the -- the news on Somahlution?

Sure. Well, R&D, first of all, doesn't have a lot of Somahlution expenses in it, so -- the $322,000 that we had in Q1 -- we're thinking that the rest of the year is going to be about in that same neighborhood.

Okay. About the same? And could you talk about, Mike, of those 80 Phase IIs and 20 Phase IIIs, how many do you expect to read out during 2015?

None.

Do you have any -- none? None of the IIs, either?

Pardon me?

None of the Phase IIs or IIIs?

Sorry -- did you say read out, Jeff? Sorry. You broke up a little bit. Did you say read out?

Yes. Yes. Do you expect any data in the marketplace?

Yes, I think a small handful, Jeff. I think so. And then clearly, as we get into, you know, Q4 this year and the first couple quarters of next year, particularly in cellular immunotherapy, we should be seeing some data read outs from some key customers.

Okay, got it. And, Daphne, you said gross margins in the neighborhood of 55% to 60% for the balance of 2015?

Yes, that's right.

Okay. And could you talk just from a 30,000-foot standpoint as far as -- what do you expect -- there's no guidance, but you previously talked about a top line growth rate?

Yes. Well, we reiterated our expectation for proprietary revenue growth of 20% to 30% over last year.

Okay. So that --

We haven't given any guidance on the biologistex yet.

Okay. But 20% to 30% still holds?

Yes.

Okay. And the EVO smart shipping market -- do you expect to be out of the marketplace selling this year, in 2015?

Definitely, Jeff. Definitely.

Okay.

We're very excited about it; yes, very excited about it.

Not second quarter, third quarter?

Well, as we mentioned just a few minutes ago, we expect to report some revenue from that service line in the third quarter.

Third quarter? Perfect. Okay, I got it. Thanks very much for taking the questions.

You're very welcome. Yes.

Thank you. (Operator Instructions) I am not showing any more questions at this time.

All right. This is Mike. Thank you, everyone, for joining us on today's call. Good evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect.

Everyone, have a great day.