BioLife Solutions Inc (BLFS) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the Q4 and full year 2019 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, Mr. Roderick de Greef, Chief Financial Officer. Thank you. Please go ahead.

Thank you, Jimmy. Good afternoon, everyone. And thank you for joining us for the BioLife Solutions conference call to review the operating and financial results for the fourth quarter and full year 2019. A few minutes ago, we issued a press release which summarizes our financial results for the 3 and 12 months ended December 31, 2019. As a reminder, during this call, we will make certain projections and other forward-looking statements regarding future events for the future financial performance of the company. These statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. For a detailed discussion of risks and uncertainties that affect the company's business and that qualifies 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 and guidance. 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 provides 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, President and CEO of BioLife.

Thanks, Rod, and good afternoon, everyone. Thank you for joining our call. 2019 was a remarkable year for BioLife on several fronts. We generated record revenue, saw our media products embedded in 69 additional clinical applications, gained nearly 200 new customers, and through our acquisitions, transformed the company from a single product supplier to a multi-solution provider of class-defining bioproduction tools to the high-growth cell and gene therapy market. We were early to realize that the base of bioproduction tools suppliers is highly fragmented and also that cell and gene therapy developers are in desperate need of much better solutions in biopreservation, storage, cold chain management and thawing.

Before we dive into the details of how our business performed in 2019 and what we expect for 2020 and beyond, I'd like to share some information about how we're managing through the current COVID-19 situation. Our corporate headquarters and biopreservation media production facility and warehouse are located in Bothell, Washington, just a few miles from the epicenter of the corona outbreak in the U.S.

Over the last several weeks, we've been assessing a number of potential risks to our business, including team member health and attendance, critical suppliers, including some in China, inventory levels and our travel and visitor policies. To reduce exposure risk for our team members and visitors, we're following the recommendations of the county health authorities. And out of an abundance of caution, this week commenced the work from home directives through the end of March for all team members in the Seattle area, except those in customer care, production, QC and senior management. As with any contagious illness, any team members that exhibit symptoms have been directed not to come to work. We believe we have sufficient media inventory to meet at least 6 to 9 months of previously forecasted demand. Our top priority is doing all we can to maintain the health of our team members in all locations and then to satisfy customer demand for our products. The COVID-19 event is dynamic. We're watching this very closely and working proactively to reduce any potential impact on our business.

I'd like to start off with a recap of our value proposition to companies in the regenerative medicine space, which is comprised of cell and gene therapy and tissue engineering companies. The Alliance for Regenerative Medicine, or ARM, estimates there are nearly 1,000 companies conducting about 1,000 clinical trials of these novel treatment modalities. In 2019, $10 billion was invested in this space. So far, there have been just a few approvals, and it's important to remember that we're early in the progression of the market. But there is an important dynamic you've heard me talk about several times. The reimbursement environment for our customers has evolved into a pay-for-response or pay-on-cure paradigm with payment predicated on an initial and sustained patient response.

This reality, coupled with a very fragile and sensitive state of biologic source material and manufactured cell and gene therapies is driving companies to reassess traditional tools and to consider best practices in biopreservation and cold chain management.

There are at least 3 environmental factors that can render a cell and gene therapy unfit to administer to a patient. These are suboptimal preservation media, temperature excursions during storage or transport and uncontrolled thawing. Any of these conditions can result in a nonviable dose, which if given to a patient, may fail to elicit the desired therapeutic response. And again, in today's reimbursement environment, result in nonpayment.

Fortunately, we have products in our portfolio to address all 3 of these detrimental conditions. With this background, I'll expand on our biopreservation media franchise. Our flagship product CryoStor, a cell freeze media, was invented several years ago by a small group of scientists, including our Chief Scientific Officer, Dr. Aby J. Mathew. Aby and his colleagues were among the first groups to observe and publish on preservation-induced cellular stress. And based on their findings, they engineered and optimized preservation media that even today, continues to outperform the traditional home-brewed cocktails and other commercial formulations. This improved preservation efficacy, evidenced by increased viability and functional recovery of sales intended for clinical use, along with our quality management system and production processes has enabled us to drive CryoStor and our companion storage media HypoThermosol to be embedded in around 400 customer clinical applications. CryoStor is used by KITE Pharma for their approved YESCARTA CAR T-cell therapy and by bluebird bio for ZYNTEGLO.

Some of our other notable clinical customers include: Adaptimmune, Allogene, Celgene, Cellectis, Editas, Fate, GamidaCell, Janssen, Juno, IOVANCE, Norwest, Orchard, Sangamo, Rubius and Community. We also support several other customers directly and through the leading CMOs, including Hitachi, KBI, Lonza, MaSTherCell and WuXi. Furthering our reach into the cell and gene therapy space are some of our distributors, including Thermo Fisher, MilliporeSigma, STEMCELL Technologies and VWR.

In 2019, we processed an additional 69 U.S. FDA master file cross-reference letters for the use of CryoStor or HypoThermosol in clinical trials. We're closely tracking 7 potential 2020 customer regulatory approvals that use CryoStor. These are bluebird bio for ZYNTEGLO in the U.S., Celgene/Juno for liso-cel in the U.S., Gilead/KITE for KTE-X19 in the U.S. and Europe, Novartis/AveXis for ZOLGENSMA in Europe and Japan, and Orchard for OTL-200 in Europe.

Lastly, bluebird bio, IOVANCE and Orchard have disclosed 5 additional potential regulatory filings in 2020. So it's clear we're strongly entrenched in both the autologous and allogeneic cell and gene therapy workflow streams, and despite the last 2 fairly soft quarters of media revenue, we've built a great base of sticky customers that will continue to fuel our growth.

On that point, it's worth reminding everyone that most of our media revenue is generated from a small group of late-stage customers. Our other 400 or so early stage media customers don't use as much product. So the lumpiness we saw in 2019 is a factor that we expect to continue for some time until some of the customers I mentioned previously get over the goal line and their demand increases to support commercial operations. We continue to add media customers and are taking share from homebrew and other non-optimized commercial preservation media products.

Here's an overview of revenue for Q4. Q4 total revenue was $8.3 million, an increase of 52% over the same quarter in 2018. Q4 media revenue was $5.2 million, down 5% year-over-year. Two media customers were down $1 million versus their Q4 forecast. One is a direct customer, whose production demand was lower, so they consumed existing media inventory. The other was a large distributor that was down about $500,000 against their Q4 forecast. But for the year, this customer was up 76% versus 2018. And last year, they shipped our media products to more than 1,700 different end users. Here again, the impact of concentrated revenue is clear. Q4 revenue from our thaw, evo and freezer products all met or exceeded our internal projections. Rod will speak to full year 2019 revenue in his remarks.

This is a good point to segue into our M&A strategy. We're in the early part of the S-curve of cell and gene therapy adoption, but its future growth is clear. To support this growth, the industry needs a trusted supplier that can provide a portfolio of risk-mitigating bioproduction tools. Last year, we embarked on a plan to diversify our media revenue and to become this trusted supplier. We assembled a portfolio of class-defining products that can help our customers ensure they don't administer a nonviable dose and risk therapeutic failure and economic loss. I'm very glad to share that through our acquisitions of Astero Bio, SAVSU Technologies and Custom Biogenic Systems, we're now supplying a much larger number of cell and gene therapy companies with at least one product in our portfolio.

The first complementary products we acquired were the ThawSTAR line from Astero Bio in April last year. Astero had developed a proprietary, automated, water-free thaw product for cell and gene therapy's frozen and cryogenic vials. Since the acquisition, we've shipped over 300 ThawSTAR vial products to a growing list of companies, dozens of which also use our media, evo and freezer products. At the time of the acquisition, the team at Astero had also started development of an automated water-free thawing product for larger dose, cell and gene therapy's frozen and cryobags. This product, branded as ThawSTAR CB, is now finished and is launched at the Phacilitate Cell and Gene Therapy Conference in late January this year. Our team has delivered a truly innovative, simple-to-use thawing product that can reduce the risk inherent in using a traditional water bath, including contamination and overthawing, both of which can lead to scrapping the dose or administering a dose that poses risk for the patient. We recently booked our first orders for ThawSTAR CB.

Also in 2019, we purchased the remainder of SAVSU Technologies that we didn't already own. The evo platform, developed over the last few years by SAVSU, is a class-defining cold chain management solution for high-value temperature-sensitive cell and gene therapies. This innovative solution includes a family of cloud-connected shipping containers, covering the entire temperature spectrum and a cloud application that enables our courier partners and end users to set up, manage and monitor shipments and receive shipment status alerts about the condition of the payload and potentially harmful environmental stresses the payload has been subjected to. This platform is completely in line with and supports our mission to supply risk-mitigating bioproduction tools to the regen med market.

Since the start of our courier-partner relationships, they've completed over 1,000 shipments with evo containers for about 100 different customers. Some notable customers include AveXis, who uses our evo dry ice, smart shipper for every dose of their ZOLGENSMA gene therapy; Autolus using an evo dry vapor shipper for their AUTO1 CAR T-cell therapy for ALL; and Janssen using an evo dry vapor shipper for use in their JNJ-4528 CAR T-cell therapy for multiple myeloma. Other customers that have used the evo platform include Adaptimmune, Celyad, CRISPR, Mustang Bio and [Cellartis]. One of our key objectives in evo adoption is to take share from the incumbents serving the major CAR-T cell developers. I'm glad to report that we've made real progress toward this goal. We look forward to providing an update on this in the coming months. In retrospect, it's clear that the evo platform was subjected to a much more rigorous set of validation criteria than the current dry vapor shipper in use. We believe that no other commercially available dry vapor shipper can meet these stringent requirements.

I'll end my remarks about the evo platform by reminding you that BioLife is not a logistics company. To the contrary, we've partnered with the best logistics companies in the world that have decades of experience and a worldwide sales, marketing and operational logistics footprint to serve the cell and gene therapy space.

Our role is to supply the evo platform for the couriers and then to provide stellar technical support to them and their end users to ensure a positive experience.

One last note on the evo platform. Our liquid nitrogen dry vapor shippers are currently sourced from China. We have a project underway to qualify our Custom Biogenic Systems' Detroit Area production facility as a secondary supplier. CBS has been manufacturing LN 2 dewars for years, and this was another strategic driver for that acquisition.

Turning now to our acquisition of CBS. We completed this in November last year. And so far, we're on track with our integration plans, and the business is performing well and as we expected. Rod will provide details of revenue guidance for CBS during his remarks. The CBS deal also completely supports our mission. We're already seeing leverage across the portfolio. Key CBS customers include AbbVie, Astellas, Fate, Fisher Scientific, Fujifilm, Glaxo, Hitachi, Juno, KITE, Lonza, Mayo, Norwest, Precision Bio, Sigma and Sorrento.

That's a wrap of our M&A activity and how we see the acquired businesses contributing to our objective of reaching $100 million in revenue. The guidance we issued today clearly speaks to our confidence to be able to achieve this goal in the next few years. This year, we're focused on integrating to leverage our resources. We are pursuing some additional M&A targets in 2020, and we'll update you as appropriate.

Now I'll pass the call back to Rod to present additional financials for Q4 and the full year 2019 and our guidance for 2020. Rod?

Thanks, Mike. Starting with our quarterly results. Total revenue for the fourth quarter of 2019 reached $8.3 million, representing a 52% increase over last year's fourth quarter revenue of $5.5 million. This quarter's revenue included $5.2 million in media sales, $480,000 of sales related to the automated thaw products, $481,000 of evo-related revenue and $2.1 million in freezers and accessories we acquired from CBS last November. Total revenue for the full year of 2019 was $27.4 million, up 39% over revenue of $19.7 million in 2018. Media revenue for the full year of 2019 was $23.4 million, up 18% over 2018.

During the full year, media sales faced some headwinds with 2 of our top 10 direct customers coming in $2.5 million less than in 2018. Excluding these 2 customers, 2019 media revenue grew 44% over 2018. One final comment on revenue. On an unaudited pro forma basis, and that is assuming we owned all the revenue streams for all of 2019, total revenue for the full year would have been approximately $37.7 million.

The adjusted gross margin for the fourth quarter of 2019 was 65% compared with 69% last year. The decrease in gross margin for the fourth quarter reflects the lower margin profile of the evo and freezer product lines as expected. Adjusted gross margin for the full year of 2019 was 69%, which was essentially flat compared with 2018.

Adjusted operating expenses for Q4 of 2019 totaled $5.5 million compared with $2.7 million in Q4 of 2018. Adjusted operating expenses for the full year of 2019 totaled $17.1 million compared with $9.9 million in 2018. The increase in adjusted operating expenses for both periods is primarily the result of the acquisitions of Astero, SAVSU and CBS, and secondarily to increased headcount and stock-based compensation expense necessary to support our overall growth.

Adjusted operating loss for the fourth quarter of 2019 was $163,000 compared with adjusted operating income of $1 million in the fourth quarter of 2018. Adjusted operating profit for the full year of 2019 was $1.8 million compared to $3.7 million in 2018. Adjusted net loss attributable to common shareholders for the fourth quarter of 2019 was $74,000 or essentially $0.00 per diluted share compared with adjusted net income attributable to common shareholders of $1.1 million or $0.04 per diluted share in the same period in 2018. For the full year of 2019, adjusted net income attributable to common shareholders was $2.3 million or $0.08 per diluted share compared with $3.6 million or $0.15 per diluted share in 2018.

I should note that GAAP net income and EPS for the fourth quarter included a onetime acquisition-related tax benefit of $1.5 million based on relieving our tax provision allowance. Adjusted EBITDA for the fourth quarter of 2019 totaled $1.4 million compared with $1.5 million in the same period in 2018. For the full year, adjusted EBITDA was $5.7 million compared to $5.5 million in 2018. We ended 2019 with $6.4 million in cash, which we believe is sufficient to fund our operations for at least the next 12 months.

With respect to our current outlook for 2020, we have updated the preliminary guidance we provided last November and now expect total revenue for 2020 will be between $48 million to $53 million, reflecting year-over-year growth of 75% to 94% on an as-reported basis, and approximately 30% to 40% on a pro forma basis. We have lowered our revenue guidance for the evo product line by $2 million to $3 million for 2020 to reflect the delays we have seen in the final validation of the technology by a large commercial cell therapy company.

We estimate that media revenue will grow between 20% to 30% and account for approximately 55% of total 2020 revenue, with CBS freezer line accounting for 35% and the evo and thaw product lines each contributing approximately 5% of revenue.

The last comment regarding revenue guidance is that we expect to see sequential revenue increases throughout the year with an estimated 40% of total 2020 revenue coming in the first half and the remaining 60% in the second half of the year. Our adjusted gross margin for 2020 should fall between 58% to 62%, given the lower margin profile of the evo and CBS product lines. However, we expect sequential increases in gross margin throughout the year as higher-margin products are introduced at CBS and the benefits of leverage are realized. We expect approximately $500,000 of acquisition-related inventory step-up charges to increase COGS in Q1 and Q2 of this year.

We expect 2020 operating expenses to be in the range of $28 million to $30 million, inclusive of $2.8 million of intangible asset amortization expense. We believe that operating expenses will remain relatively flat on a quarterly basis throughout the year. Finally, we expect to be positive on the operating net income and EBITDA lines on a GAAP and a non-GAAP basis for the full year of 2020 and exit the year with an adjusted EBITDA margin of 20% to 25%. Finally, we currently have 20.8 million common shares issued and outstanding and a fully diluted share count of 27.5 million.

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

Thanks, again, Rod. In summary, 2019 was a pivotal year and we effectively transformed the company and have built a solid foundation for future growth. COVID-19 is a wildcard of unquantifiable magnitude and duration. We're running the business to achieve success in 2020 despite this factor.

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

(Operator Instructions) Our first question comes from Paul Knight with Janney Montgomery.

Mike, could you talk to the distributor relationship? They are down in your comments in the press release. Is there an alternative being provided by that distributor? And can you talk -- is there a competitive situation we should be aware of?

Paul, really good questions. No, none whatsoever. This distributor grew phenomenally year-over-year. They pushed the product to nearly 2,000 different end customers. So it's really just a question of their internal forecast ability and how they're going to perform against that. They're normally pretty good, but in this particular quarter, they surprised us. But nevertheless, if you look at the year in total versus the year before, they're just killing it. We're really pleased with the relationship.

And then the direct stage customers that were down $2.5 million in '19. Are they at 0 now? I mean, what's the magnitude of those large customers now? And what do you expect out of them in 2020?

Yes. I can just -- I can speak to one, particularly, Paul, and I can't name them, but we expect that they're going to double revenue in 2020 versus what they did in 2019. And that's based on some later part of the year, potential approvals, and they're ramping up their inventory to meet that anticipated demand.

And the other one, Paul, we're assuming, for internal purposes, a 0 from that customer, although we will definitely get some orders from them. But given their miss in the last -- in 2019, we're not confident of taking a forecast from them at this point.

Yes. And just to tag on to that, that doesn't mean that there's something wrong with their therapy or they're going out of business. To the contrary, they're just burning through existing inventory that they had ordered previously.

And you're guiding the media growth of 20% to 30%. What -- can you split that? What do you think your -- without commercial approval, what do you think that customer base grows at? Or do you -- can you split it and do you split it out like that?

We really don't split it out like that, Paul. We do a bottoms-up of the top 50 customers, many of which we do have forecasts for from 4 to 6 quarters out, and then we look at the historical trends of the balance of the customers. But quite frankly, the top -- that top 50 accounts for about 2/3 of the revenue. So we've identified those that have -- are in the late stage. And I think that the lower end reflects delays on the part of that clinical process and the higher end of that range would reflect on-time delivery and reasonable uptake.

Yes. And I think, Paul, I would add that with the pending 7 potential approvals this year that use the media, which is going to take us a few quarters to see those approvals get gained and then see how those customers behave in terms of their demand. So I would anticipate next year with those, plus some others, we'll be in a better position to split that out and to answer your question with some detail regarding how much media is coming from approved products versus non approval of the whole clinical trial basket of customers, okay?

Our next question comes from Suraj Kalia with Oppenheimer & Co.

Can you hear me all right?

Suraj, you're a little bit light. I think we're getting it, but a little bit light.

Can you hear me now?

That's worse.

Let's try this, Suraj. We can hear you.

Okay. I'll just go ahead and hopefully --

so, Mike, the slowdown on the media side, as you said, it has been going on for a few quarters now. Obviously, there are different dynamics. Just to follow up on Paul's comments, is there -- can you frame this within the context of inventory in the field? I guess is there some other excess inventory that could be absorbed that could progress, let's say, into Q1? That is one thing.

And the second part of my question is, the slowdown has happened before Coronavirus. Are you building in a buffer for FY '20 vis-a-vis coronavirus, everything going on, because relative to our numbers for FY '20, media is basically the entire delta? Any help there would be great.

Yes, sure. Thanks, Suraj. Well, I think it's important to remind the listeners of a tidbit that Rod mentioned. And that is, ex the 2 customers that were down, the rest of the customer base grew at 44%, which is really encouraging. And it speaks to all the customers we're adding, the master files we're adding. But again, as a basket, they're early so they don't buy as much as the later-stage companies. I think the lesson from a look-back perspective is this, with such concentrated revenue from a small number of customers in late stage, they were going through their own sort of analysis to figure out how much they were going to need. They didn't have a perfectly crystal ball anyway in terms of their clinical trial enrollment or even after approval, the pace at which physicians would prescribe these novel therapies. Layer into that some potential production issues they may have had or not and other reimbursement challenges, all the kind of stuff, to my mind, just swirl together to say, they did the best they could. They gave us a forecast that they thought they were going to need. And all these other factors came into place, which caused them to not have to consume as much. So there's that side of it.

And Rod, you can speak to the second part of Suraj's question. What are we doing with regard to corona to build a buffer to make sure we have plenty of demand or inventory of media?

Yes. I think just to elaborate on those 2 customers. One, we have a level of confidence that I might just refer to increasing orders through the second half of the year then based on their clinical activity. And the other, I mentioned that we're just assuming 0. So we don't see any downside, if you will, from the 0 piece.

In terms of the coronavirus, Suraj. We have not factored anything specific into these numbers because it's just impossible to try and come up with some 5% factor or 10% factor. So we've gone with what we think is our best estimate based on all the information we have, which includes a lot of customer forecasts, and we're just going to have to watch it as it evolves dynamically. Anything else, I think, would be completely arbitrary on our -- from our perspective.

Got it. Rod and Mike, the evo validation by the large customer. If there is a delay, that should be fine. But how confident are you of switching over this customer?

Suraj, I can say that I'm personally involved in managing that relationship at the highest level, and I've seen the internal validation documents that specify the evo product by name. I'm also aware of this customer's potential filing amendment schedule, which will also cite the evo technology platform by name. And so I'm feeling really -- and we as a group are feeling very confident that after the countless hours of validation work this customer and a courier partner have put into this relationship and this project, which is -- it's not minimal by any means, this is a big deal for them. They've got real pain they're trying to alleviate and to solve and some real problems with the incumbent. That -- this is -- there's a high degree of confidence that we are going to win this opportunity. It's just -- and we're a lot closer now than we ever have been. It's a little too soon now to speak to the details, but personally, I'm feeling very confident that the evo technology platform is shining and is completely outperforming the current technology in use.

And just to be clear, FY '20, you'll have not factored in contribution from a potential partnership that could move the needle quickly. Am I right in saying that?

Yes, that's a fair comment. If it happens, it will happen in the back half of the year, call it Q4, it would start. And so given the monthly rental model, the actual impact on overall revenue is going to be de minimis in 2020.

The other aspect of it, Suraj, was that we expect that the validation from this particular customer will sort of loosen the flood gates, if you will, for a lot of other customers who are waiting in the wings to see somebody big validated. It's not that different from when KITE started to utilize CryoStor and we had a huge number of companies pile on based on that validation of that marquee customer.

Fair enough. And final question, Rod. Gross margin guidance for FY '20 seems a little lighter than what we were forecasting. Can you just give us the moving parts on this? Obviously, there are 4 different businesses. What's moving in it from the 62% of the low 60s to the 58% to 62%. If you could kind of parse that out, that would be great.

You bet. Thanks, Suraj. The fundamental driver there is the lower revenue associated with evo, which has a negative impact on the gross margin because the gross margins are generated based on capitalizing overhead on a per unit basis. And the fewer units we're producing, getting out into the field, the higher cost, if you will, is there. Also, we've been reasonably conservative on the CBS product line. I think we can do better. I think we saw a little bit of that in Q4. But I don't want to go out and pin our hat on that yet. So as we see things evolve throughout the year, we'll definitely try to move that number up based on actual results.

Our next question comes from Jacob Johnson with Stephens.

Mike and Rod, hope you and your employees are staying safe. First question, just on guidance really quickly. I just want to make sure I'm thinking about this the right way. The base for the entire reason for the adjustment in guidance related to lower assumptions around evo?

It's exactly that same number. We were at 50% to 56%. We're now at 48% to 53%, reflecting a $2 million to $3 million drop in the evo revenue guidance.

Got it. And then, Mike, you mentioned taking share from incumbents in evo. I imagine it's still kind of early to project these things. But how much share could you take from one of these incumbents, if you win some of that business?

That's a great question, Jacob. Well, we have a really good visibility into who's using the various incumbents, and there are just 2 or 3. Not many people are self-managing fleets of dewars. So the universe of competitors is quite small, and we have a good sense of who is using who. But we really believe that the evo platform is class-defining. It is the next state of innovation in terms of cold chain management for these really expensive temperature-sensitive shipments of both biologic source material and the manufactured doses. And frankly with the pay-for-response or pay-on-cure paradigm reimbursement environment our customers are now having to deal with, you can imagine that one lost shipment or one dose that has to be scrapped is one too many to speak nothing of the patient impact. So there's real pain out there. These developers are in desperate need of better solutions. So we're bullish about how the evo adoption will grow once this sort of pipeline or lynchpin catalytic conversion can be talked about. But nevertheless, despite that, evo was used with at least another 100 customers who are all in their own gestation stage of clinical trials. And so we look for each of those customers uses to ramp up over time as they progress through later phases of clinical trials and certainly as they get approved. So it's all -- it's really kind of predicated on, at least optically, being able to talk about this win. But in the background, we've got a lot of really great opportunities.

Got it. And then last question. I'd just be interested, I'm not sure where you are in the process, but could you update us on the efforts to manufacture the evo shippers at the CBS facility. Just remind us sort of what the time line might look like there? And then is there a good potential for this to lower some of the cost of producing evo shippers?

Yes. So relative to the last part of your question, Jacob. Yes, we believe there could be a material cost savings on that. We kicked off the plan mid-February. It's going through a formal product development process that's got multiple folks from both Detroit and Albuquerque and here in Bothell involved on the team. And we expect the product to come out of the Detroit factory at the end of Q4. It could happen a little bit earlier, but that's kind of our planning time window.

Our next question comes from Thomas Flaten with Lake Street Capital Markets.

Just 2 for me. Mike, in your prepared remarks, you mentioned that you had some Chinese suppliers. Could you add some more color to that, maybe quantify or qualify what that means relative to your overall supplier base and what the impact might be?

Sure, Tom. It relates to supplies used in the media manufacturing. And Rod, any additional color you can speak to would be helpful.

Yes, you bet. I think, Tom, I don't know, you may not have been following us long enough. But over the last sort of 18 months, we've continued to articulate a strategy and objective of putting aside, building and putting aside off-site at least 6 months of finished goods inventory at the time, thinking about the risk of this being an earthquake zone as opposed to a viral zone. But nevertheless, the product is outside in Reno at a GMP warehouse. In addition to that, we have about a quarter's worth of finished goods here in Bothell. And in particular, the one ingredient raw material that we get out of China we have just over a year's worth of raw material of that specifically because it comes out of China. And so that's really the only piece. We also found that gloves and masks were something obviously coming out of China. So we stocked up on those and have about a year's worth, either in-house or on the way relative to the utilization we have in the manufacturing process of those items.

That's great. And then switching over to CBS. From loosely speaking, it was about a flat year to 2019 over 2018 for CBS, but the guidance implies pretty substantial growth around 50% at the midpoint or so. Can you talk a little bit about that -- what those drivers are? I know there's some higher-priced units coming out, but kind of a mix of your sales force versus new products?

Yes, you bet. It's really -- CBS historically has been focused on a relatively passive sales and marketing approach using distributors. We've added a handful of direct sellers who are going to focus a large amount of their time on that marketplace in that product line. And we think that alone will have a significant increase in revenue in 2020, say, let's say, maybe half of the increase we're looking for with the balance coming from new products that John Brothers and his engineering team there have underway, which will be launched in the second half of the year.

Our next question comes from Jason McCarthy with Maxim Group.

Everyone, it's Dave, on the line for Jason. I was hoping you could shed some color just in a general sense on the potential impact that the coronavirus may have, perhaps on the cell therapy clinical trials, enrollment, possible supply chain disruption, as well as your customers' exposure to China and how this may impact you guys moving into 2020? I know you guys -- I think, I believe, someone else asked a question regarding the coronavirus impact and you guys mentioned that this wasn't specifically factored into your numbers right now. But if you could maybe provide just a general overview of this. And I have 2 additional questions after that.

Sure, Dave. I'll take that one. So based on our planning, we think we've got a really good sound business continuity plan and effort to engage at various levels based on triggers and how we see things unfolding, including rotating folks through here, so they're not all in the plant at the same time and other risk-mitigating plans.

Now with respect to customer demand for media. Earlier this week, we sent a communication advising our customers where we're located and to ask them to reassess their inventory levels so on and so forth. We've seen some orders in response to that, not at the point to quantify what that means to us over to a baseline. But there's no doubt there's been some pretty strong reaction to that, and that's driving increased demand, so they have some safety stock, if you will. We haven't heard anything from customers saying, "Hey, corona is going to decrease clinical trial enrollment, which would then translate into a decreased demand for media products." So nothing yet. Although we are trying to keep in touch with our main customers to ask these questions. So that's that side. And Rod, just to speak to the evo and the freezer side as well, at least at this point, it's all planning to be cautious, but no negative trends or indicators that we've seen so far from the field.

No, we've got no feedback from the field about any kind of impact at this point. But as we all know, it's dynamic and it's fast-moving. So we're -- again, we're just going to have to play it by ear. I think from a supply standpoint, we're okay. And it really remains to be seen whether there's going to be a demand impact of all of this.

Yes, that's right. Earlier today, the governor, you probably read, has banned all public events of over 250 people. That doesn't affect the plant here. Workplaces are exempt, we don't meet that trigger anyway. And so in terms of keeping the plant open and running, we think we're in good shape, we have good practices and for hygiene and keeping folks away from the plant if they are sick. So we continue to make product. We're building against the production schedule. And so, so far, so good. But as Rod mentioned, very dynamic. And unfortunately, the magnitude and duration of this thing just can't be quantified at this point. But I think we're doing all we can to make sure we can mitigate any impact on the business.

Great. And just a couple other additional questions here. I wanted to hear your thoughts on the potential application of cell therapy itself in coronavirus treatment. For example, the other day, we heard that Mesoblast will be developing a Mesenchymal stem cell therapy targeting the respiratory component of the coronavirus pathology. Do you think that the entry of cell therapy companies into the coronavirus space could potentially be a larger opportunity for you guys given the logistical and shipping needs that we would see with widespread shipment or, sorry, distribution?

Yes, really good question, Dave. So initially, I would say that any application of cell or gene therapy to target corona either as a vaccine or as a treatment will be small-scale in hospitals in the form of clinical trials. We know of at least 1 customer that we believe has confirmed their use of our media in a cell-based clinical trial treating at least the acute respiratory distress syndrome -- symptom related to corona, but it remains to be seen. There's a lot of interest in that regard. There's now publication, but also some pressure on the use of NK cells and MSCs to treat corona, again, either as treatment or as a vaccine. So we'll be following that closely. We are in pretty good contact with most of the clinical customers. So -- but early days here, but no doubt, there's a high degree of interest to think about that as a potential treatment modality and/or vaccine.

Great. And just one last question here. Could you provide some granularity on the number of late-stage customers you guys have as well as the number of customers that you guys have with the pivotal readouts coming out in 2020?

Yes. So I think, Dave, I'll just remind the listeners that because we sell to distributors, we really just -- we don't have full clarity on who the distributors clinical customers are. In some cases, we do because we provide some scientific or tech support. But in other cases, we know we're not because we get some counts, and we're just not plugged in there. And so what I'm about to say are just estimates, but there are nearly 400 clinical applications using the products. The number of master file cross-reference requests is the most prudent and direct evidence we have that, that number of pending clinical trials will be increasing as those trials get underway. And that's been growing over the last 3 to 4 years at a really strong clip. But nevertheless, the Phase III count, it's dozens of Phase III trials. There are many more in the Phase II and many more in Phase I as we go that way. So that's where we are with that. But no doubt that we built a great base of clinical customers. And in addition to the 7 potential approvals this year and the 5 additional filings, there are many other customers who will have readouts. And it's a good question. I'll see if I can follow-up. I'll go back to the ARM full year 2019 data report. In fact, I might want to wait until they publish their Q1 because they will have a slide in there that will have potential data readouts by clinical phase for the regen med space, and I'll cherry-pick off who our customers are. So you could look to that as a potential update from us on our Q1 call.

Our next question comes from Raghuram Selvaraju with H.C. Wainwright.

This is Edward Marks on for Ram. I appreciate you guys taking the question. A couple of broader ones from us. Firstly, are you seeing any attractive acquisition targets after a big year last year? And just wondering if you're planning to pull the trigger on anything near term? And if so, in what general area are you thinking about?

Yes, this is Mike. So as I mentioned, there are some additional M&A activities underway. I could just speak in limited remarks. They're in the tool space. I'll just keep it to that point. Anything more, we'll probably be too revealing. But no doubt, some additional activity. And at the right time, if we get some of those done, and we'll be really excited to share that, you bet.

Perfect. And then secondly, just wondering what the status is of the revenue diversification effort, and specifically, what percentage of your company's revenue base is currently accounted for by the largest customer. And how do you envision this evolving going forward?

Yes. So we've had, as I mentioned, on the media side, this kind of concentration where the top, let's just say, 20 or so customers can account for 50% or more of media revenue. The concentration is less on the ThawStar product line and the CBS product line. It's pretty concentrated relative to evo in that there's just a handful of courier partners that we have as customers. However, that's mitigated by the fact that they obviously have a number of end-user customers. So that's some diversification there.

I think that one of the reasons behind the overall M&A strategy that we embarked on was to derisk that media customer concentration. And if you think about the fact that just out of the shoot in 2020, we're expecting media to be just over half the business right there, we've already accomplished a significant amount of diversification from a customer perspective.

And our next question comes from Marc Wiesenberger with B. Riley FBR.

How many new regenerative medicine customers did you get in the fourth quarter?

Yes, Marc, this is Mike. Boy, I just had the number, just a minute ago. Just give me a second, I'll see if I can pull that out. And, Rod, is that disclosed in the press release?

We typically do.

Yes. Stand by for a second, Marc.

All right.

Well, for the year, it's 69 additional clinical trials and 200 new customers. Most of them -- the bulk of them in regen med, the vast majority of those.

But Marc, I know we've got our call coming up after this. So I'll have the number for that call, all right?

Okay, sure. With regards to the evo shippers. As you're looking to take share, what are some of the pain points that you're solving relative to incumbents that your customers are specifically talking about?

What a great question, Marc. So it really relates to 2 areas of risk. The first is poor performance in maintaining the health and vitality of these really precious biologic materials, either the source material or the manufactured dose. And the current shippers really haven't been innovated for 50 years or so, maybe not that long, but clearly, they're ripe for innovation. And so what can happen using the traditional shippers is the cells of the gene therapy can get jostled around inside due to insufficient insulation. It can be exposed to temperature excursions. In fact, the traditional shippers, if they're tipped on their side, they start to warm up and the cells can be exposed to a hazardous or a complete detrimental temperature, which can render them unusable.

Now the evo dry vapor shipper, the DV line, DV for dry vapor, has a number of innovations which can solve that or at least reduce the potential for that, including some patent-pending features around both the can itself, the dewar and also the smart cap, which is the lid for this shipping container.

Additionally, we have a price advantage in that we're not a logistics play. So the cost of leasing or renting the evo container is built into the courier charge per shipment that they charge the developer or the end customer. And we know based on how we've done market assessments that we do have a cost advantage, which should hopefully put the couriers in a cost advantage as well as they respond to RFPs and putting quotes out and winning the business with these leading cell and gene therapy companies.

And then lastly, I would speak to the evo.is. So the evo.is is the cloud-based application that all these shipping containers talk to. And they're continually spinning out their data of location and payload temperature and ambient temperature and various alerts that can help the couriers and the end users surveil the condition of the shipment not only how soon it's going to arrive, but other factors that would be very helpful to help them intercede if something goes awry, but also to help them plan patient administration and logistics. And so there are a number of features in the evo.is, some of which are patented through a granted patent application that we received, which are very unique and innovative and it really put the evo.is apart from the other portals that folks have been using for a while. So all things together, it's really about protecting the precious biologic payload better, and then there's a cost advantage. And then there's the whole IS, IoT component of the evo.is, which is really state of the art.

That's really helpful. And along the same lines, as you work with the specialty couriers, are you advising them on what additional instructions to take precautions in cleaning them and maintaining in light of the coronavirus? And could that potentially impact shipments or delay -- cause any delays?

Yes, good question. I think the comment I would make, Marc, is that our courier partners are experts in this. They've been doing this for years. And despite some competitive noise that our couriers don't know what they're doing. And so you want to stick with a particular incumbent. That's ridiculous. These couriers know what they're doing. And they have validated SOP cleaning procedures, procedures to check the temperature performance of the evo dewars to recharge the liquid nitrogen and so on and so forth. So I think all that stuff completely wired in, but we're certainly available to help them do that. In fact, training is a big part of the component of our service offering, and that's been recognized as how we can stand apart.

That's very helpful. And one more for me. I'm wondering if you could talk about the cash position, maybe expected burn in 2020. And you did talk about some potential M&A and how would you think about funding those?

Yes, great. So Rod, you can speak to both of those, if you like.

Sure. I think on the M&A side, it's going to be a combination of cash and stock. It completely depends on the deal itself. I think with respect to just operating, we may dip down to $4 million or so throughout the year, but that would be the anticipated low point. So we feel very comfortable with the cash balance that we have.

And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Mike Rice, CEO, for any closing remarks.

Thanks, Jimmy. And thanks again, everyone, for your interest in BioLife. Stay safe. We look forward to speaking with you during our follow-up calls and when we report our Q1 results. Good night.