Thermogenesis Holdings Inc (THMO) 2012 Q1 法說會逐字稿

Good afternoon and welcome to the ThermoGenesis fiscal year 2012 first-quarter conference call and webcast.

Some of the statements made during this conference which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in those statements, including but not limited to certain delays beyond the Company's control with respect to market acceptance of new technologies and products, delays in testing and evaluation of products, initiation and successful completion of clinical trials for new claims on existing products, capital resources required to fully execute on business plans, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.

(Operator Instructions). For your information, this conference is being recorded.

I would now like to turn the conference over to Matthew Plavan, CFO and Executive Vice President of Business Development. Please go ahead.

Thank you and good afternoon, everyone. With me today is Mel Engle, Chairman and Chief Executive Officer. Mel will review key events of the Company since our last call and provide an update on our growth strategies. I'll follow up with a discussion of our financial results for the quarter, and then I'll open up the call to you guys -- you all for questions.

Since the moderator was kind enough to take us through the forward-looking statements, I'll just turn the call over to Mel now.

Thanks, Matt, and good afternoon, everyone.

In the past eight weeks since we last spoke, ThermoGenesis has made progress in several key areas, including the realization of an important regulatory milestone for AXP in China and the further advancement of our clinical evaluation initiatives. We have had encouraging discussions with potential partners for Res-Q and platelet-rich plasma, or PRP, and believe we will have our first agreement in this market within the next few weeks, and I will cover this later in the call.

At the same time, however, the macroeconomic environment that impacted our Company during fiscal 2011 has continued to affect our business. Our total revenues for the quarter were $4.9 million, versus $7 million in the first quarter a year ago and $5.4 million in the prior quarter. As a reminder, however, our results for the first quarter of fiscal 2011 included approximately $1 million in AXP inventory build by GE Healthcare. As we indicated at that time, this would not -- this would be a nonrecurring event.

We experienced softness in our BioArchive device revenues due to the global debt crisis and AXP sales were affected by increased competitive activity in the U.S. and European cord blood markets.

We had hoped to have regulatory approval for the AXP in China by now, and I'll comment on that later.

In India during the quarter, Fenwal placed an AXP and BioArchive system at a leading center, and this is an important first step in our program to develop that market.

Encouragingly, our gross margins improved as a percentage versus both a year ago and the prior quarter as we continued to realize the benefits of improved manufacturing efficiency, enhanced product quality, and lower AXP disposable product costs from our supplier. As a result, despite roughly $500,000 of lower revenues in the first quarter of fiscal 2012, our net loss of $1.2 million was approximately the same as the prior quarter.

Turning to key operational activities, amongst our most important accomplishments was the acceptance of our submission for approval of AXP by the State Food and Drug Administration, or the SFDA, in China. This milestone represents the successful completion of product testing and the administrative acceptance of the filing. The last cog in this process, a final technical review, is now underway. This step occurs prior to in-country registration approval and commercial sales in China. We are hopeful we will have this approval by the time of our next call.

Turning to our bone marrow business, we are pleased with the progress being made by our Res-Q distribution partner in the United States for orthopedic indications, Celling Technologies. They're gaining additional traction in the market and are helping to foster expanded utilization amongst existing centers.

The critical limb ischemia, or CLI, evaluation we're conducting for Res-Q with Totipotent in India has now enrolled nearly half of the expected patients. Enrollment should be completed by January of 2012. The CLI evaluation for Res-Q in China with Dr. Gu has been approved by the Chinese authority, and three patients have been enrolled to date. We expect enrollment of approximately 25 patients to occur during calendar-year 2012.

In our CLI trial for MXP -- for our product MXP in Naples, Italy, seven of the 13 patients enrolled have completed the 12-month evaluation and three have completed their six-month evaluation.

Finally, the Res-Q evaluation being conducted by Celling Technologies with UC Davis has enrolled and treated 11 of 20 planned patients with more in the queue. This study is exploring the use of Res-Q in the development of stem cell therapy for non-union long bone fractures.

As we look at growing ThermoGenesis in the future, we are focused on the execution of our growth strategy, which includes, first, growing our core business by expanding both into new geographies and new indications by maximizing our global sales and distribution efforts. Second, accelerating business development efforts and creating product development partnerships, technology acquisitions, and strategic alliances. And third, expanding the volume of clinical data to demonstrate the efficacy and value of our products to facilitate adoption for current and future indications.

Beginning with our core businesses, we are hopeful that a rebound in the U.S. and European cord blood markets will occur in the second half of our fiscal-year 2012 as we begin to capitalize on growing international interest in both our cord blood and bone marrow products, particularly in markets such as China and India. We believe China is a significant market opportunity for both our cord blood and bone marrow products. We have established a strong initial presence in the Chinese market, beginning with our distribution agreement with Fenwal.

Fenwal has formed a joint venture with Golden Meditech in China to focus on blood collection and transmission products, which we believe provides Fenwal a distinct in-country competitive advantage.

Additionally, we have three cord blood bank customers in China, including Beike Biotechnology Company, Nanshan Memorial Medical Institute, and BoyaLife. BoyaLife is our largest operating cord blood center in China -- our largest customer in China, sorry.

Upon [SFD] approval, the adoption of the AXP processing system will enable these and future customers to substantially scale their processing operations in a closed sterile system to meet growing customer demand and to achieve important quality accreditations from industry organizations.

With respect to business development, we continue to make progress in developing new commercial relationships, having reached the definitive agreement stage for advanced discussions with potential collaborators. As we have discussed previously, this is a key aspect of our growth strategy. We believe there are meaningful opportunities to extend our commercial reach and technical capabilities through collaborations with other players in our space, including product development opportunities, expanded distribution capabilities, licensing arrangements involving our technology, or by utilizing the complementary technology of others.

To this end, we are optimistic we will see the results of our efforts in the form of a newly-announced partnership within the second fiscal quarter.

Finally, as I mentioned earlier, we expect data from our ongoing clinical evaluations to be available during the balance of fiscal 2012. Thank you again for joining us today, and I'll now turn the call over to Matt.

Thank you, Mel.

As Mel mentioned previously, revenues for the first quarter of fiscal 2012 were $4.9 million versus $7 million in the first quarter a year ago and $5.4 million in the prior quarter.

Our revenues for the quarter versus a year ago reflect the AXP inventory build by GEHC, General Electric Healthcare, that occurred last year, as well as continued slowness in the U.S. and European cord blood markets.

Along with a lot of other companies who are participating in global markets, we're experiencing the impacts of the global debt market and the debt crisis on capital purchases. As a result, we've experienced a significant reduction in the BioArchive device revenues. We had sold four in this quarter versus seven in the first quarter a year ago.

Gross margins for the quarter were 41% versus 37% in the first quarter a year ago and 35% in the prior quarter, as we continue to achieve improvement in this area despite lower revenues. The increase in gross margin is due primarily to lower product and rework costs as we realize ongoing improvements in manufacturing efficiency.

Operating expenses in the quarter were $3.2 million versus $2.7 million a year ago and $3 million in the prior quarter. Our SG&A expenses increased approximately $400,000 due to higher stock-compensation expense related to annual option awards granted to our independent Board members and restricted stock to key employees.

In addition, patent fees increased approximately $100,000 versus a year ago. Research and development expenses increased approximately $200,000, reflecting increased clinical evaluation activity, a lot of which Mel spoke about earlier, and the hiring of a new Director of Regulatory Affairs.

Net loss for the quarter was $1.2 million, or $0.07 a share, compared to a net loss of $68,000, or zero cents per share, in the first quarter of fiscal 2011.

Turning to the balance sheet, our cash position at the end of the quarter was $10.8 million versus $12.3 million at the end of fiscal 2011.

Our use of cash for operations during the quarter was $1.5 million. Our backlog at the end of the quarter was $1.7 million, of which $1.4 million represents orders from Asahi for CryoSeal devices and disposables.

Turning now to the near-term outlook for the business, we expect second-quarter revenues to be between $4 million and $5 million. The reason for such a wide range in this estimate is because although our pipeline of BioArchive leads remains healthy, predicting the timing of these orders by quarter is proving more difficult as the uncertainty in the global market continues.

Thank you again for joining us today, and now we'll open the call up for your questions.

(Operator Instructions). This concludes our question-and-answer session. I would like to turn the conference back over to Mel Engle for any closing remarks.

Thank you. Matt and I appreciate your participation on this call and look forward to either seeing you or speaking with you before our next call. Thanks very much.

This concludes the ThermoGenesis fiscal-year 2012 first-quarter conference call and webcast. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.