Thermogenesis Holdings Inc (THMO) 2022 Q3 法說會逐字稿

Good day, and welcome to the ThermoGenesis Holdings conference call and webcast to review financial and operating results for the third quarter ended September 30, 2022. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to our host, Paula Schwartz of Rx Communications. Please go ahead.

Thank you, operator. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that might cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission.

The information presented today is time sensitive and is accurate only as of the date of this call, November 10, 2022. If any portion of this call is being rebroadcast, retransmitted or redistributed at a later date, ThermoGenesis will not be reviewing or updating this material. Participating on today's call are Dr. Chris Xu, Chief Executive Officer; and Jeff Cauble, Chief Financial Officer.

I'd now like to turn the call over to Chris. Please go ahead, Chris.

Thank you, Paula, and thank you to everyone for joining the call this afternoon. We appreciate you taking the time to listen in.

During the third quarter 2022, we continue to progress our transition to become a high-performance integrated CDMO for the cell gene therapy market. As announced in October, we completed a financing, raising aggregate gross proceeds of approximately $2.05 million, which will help to support the planned launch of our TG Biosynthesis Division.

As most of you know, for over 35 years, ThermoGenesis has pioneered the development and manufacture a series of innovative, automated technologies and products, especially for the cell banking and cell therapy industry. ThermoGenesis has been the provider of choice for automated cell processing and automated smart cryogenic storage technologies for some of the world's most important public and private cell banks.

Our BioArchive cryo storage system has warehoused close to 90% of all US FDA BLA-approved clinical grade cord blood units or CBUs, and our AXP system has been used to process well over 1 million samples from many institutes globally. In addition to our manufacturing know-how in cell and gene therapy, the intellectual properties we have amassed over the years is invaluable.

As more cell-based therapeutics, such as CAR-T cell therapies received FDA approval, the demand for manufacturing of these life-saving therapies continues to grow. As we speak, there are more than 350 US companies alone working in the cell therapy arena, and more than 1,000 pipeline assets are in clinical development globally, targeting a range of blood and solid tumors. The continued explosion in research and development is made possible by the incredible potential inherited in current commercialized therapies and the future possibilities provided by additional personalized cell gene therapies.

Since 2017, six autologous CAR-T therapy has been approved by the FDA. Recent reports show that the industry anticipates additional FDA approvals with as many as 10 to 20 new therapeutics each year, starting in 2025. At the same time, there remains a critical and growing unmet needs for manufacturing of these compact therapies due to the continued challenges created by the high production cost, technological inefficiencies, and limited global capacity.

Drug manufacturing today is still the largest component of the cost of CAR-T cell therapy with listing price ranging, as I mentioned many times, from $373,000 to $475,000, depending on the specific drugs and indications. Thus, there is a significant need for high-quality cGMP manufacturing at a reasonable cost.

These dynamics have led to a rise in CDMO partnership activities as more and more biopharmaceutical companies and other industrial participants recognize the urgency of the increased demand for cell therapies and the limited available good manufacturing practice facilities. Moving away from manual process will be the key to facilitating fast timelines in getting these life-saving drugs from banks to bedside.

Therein lies the opportunity for ThermoGenesis to play a crucial role in the availability and use of these emerging cell gene therapies in both the research and real-world clinical settings. In response to this tremendous backlog for those products at the research, clinical, and commercialization stage, as outlined earlier, ThermoGenesis is working to contribute by adding needed CGMP manufacturing space, promoting cost efficiency through automated and fast processing time, and providing comprehensive manufacturing services.

That said, we continue to make significant progress towards launching our TG Biosynthesis CDMO division and building out our approximately 35,000 square feet of laboratory and office space in Sacramento, California to create a state-of-art CGMP compliance facility with 12 CGMP cleanroom suites to support the industry's manufacturing requirements. As an integral part of this plan, we will leverage our proprietary high-efficiency semi-automated CAR-TXpress Platform, which has shown the ability to tangibly reduce processing time, improve cell recovery, and potentially cut manufacturing costs associated with CAR-T and other cell gene therapy by up to 50%.

The aim of the new division is to address the growing needs for world and integrated CDMO services by providing high-quality development and manufacturing capacity, selling tissue processing development, quality system, regulatory compliance, and other cell manufacturing solutions for clients with therapeutic candidates in various different stages of development.

In summary, ThermoGenesis has strong intellectual property, cutting-edge technology, and manufacturing service expertise. And we build out the ability to address scalable demands for access to state-of-the-art manufacturing capacities. We remain laser focused on launching the TG Biosynthesis Division and our CDMO services to customers in the cell and gene therapy field in the coming months.

And with that, let me turn the call over to Jeff to share the key financial results for the third quarter. Jeff?

Thank you, Chris. Net revenues were $2.1 million for the quarter ended September 30, 2022, as compared to $3.2 million from the same quarter last year. While the current quarter's revenues were lower, it was primarily just a timing difference related to AXP disposable sales to our distributor in China. In 2021, they placed an annual order in the third quarter. Following 2022, it was ordered in the second quarter. Overall, year-to-date sales have increased by almost $1 million from $6.9 million for the first three quarters of 2021 to $7.8 million this year.

Our gross profit for the quarter ended September 30, 2022 was $400,000 or 21% of net revenue compared to $1.1 million or 35% of net revenue for the quarter ended September 30, 2021. The decrease was driven by lower revenues in the current quarter and by higher costs from our AXP disposable contract manufacturer. Selling, general, and administrative expenses were $2 million for the quarter ended September 30, 2022, as compared to $1.7 million for the quarter ended September 30, 2021, driven by rent expense for the company's new CDMO facility.

For the quarter ended September 30, 2022, the company reported a net loss attributable to common stockholders of $3.2 million or $0.10 per share based on approximately 31.3 million shares outstanding. This compares to a net loss of $1.8 million or $0.15 per share based on approximately 11.9 million shares outstanding for the quarter ended September 30, 2021. The company ended the quarter with $3.9 million in cash.

This concludes our prepared remarks. So now I'd like to turn the call over to your questions. Operator?

(Operator Instructions) Sean Lee, H.C. Wainwright.

Hi, guys, good afternoon and thanks for taking my questions. I just have several. First is on the current business on the AOX. I was wondering -- you mentioned in your prepared remarks that the difference from last year was due to the timing of the bulk order from a distributor in China. I was just wondering how does that look like in the fourth quarter? Is that going to be normalized back to previous levels?

Yes. We -- the international sales will be roughly equivalent for the fourth quarter, but we do anticipate the year-over-year revenues will be up. We are seeing a fairly significant increase in our domestic revenues this year as opposed to 2021. A lot of factors they were lower in 2021, COVID was one, some just restocking issue amongst our distributors was another. But all that's kind of flushed itself out, and we're back on a normal trajectory with revenues increasing domestically. So we should see the full-year 2022 revenues be higher than 2021. .

Great. Good to hear that. Moving on to the CDMO business. I was just wondering what's the expected timing for -- when your manufacturing facility will be able to come online? And once it does, how much business per year do you expect you'll be able to handle at the new facility?

Sure. Hi, Sean. So with regards to CDMO operation, we are targeting to have the facility handing over to us in the first quarter next year, and we will start operating from there. And meanwhile, we have internal activities that's ongoing to address many of the quality system and also process development. The facility, once it's built, it contains 12 cGMP rooms. So the design capacity is about 10,000 doses per year. So that's the design capacity.

And with that said, those cGMP suites were mainly to build to manufacture two different products. One is the traditional non-gene-modified cell products such as mesenchymal stem cells and so on. And we target to launch those products at about in the range between $15,000 to $25,000 per dose range. But as we speak, nothing has been finalized. This is still in the final planning stage.

The other is the CAR-T therapy, which currently the market produce those CAR-T therapy at between $100,000 and $120,000 per dose, and that's the direct cost, which has been problematic. With our new cutting-edge technology, we hope we can launch the service at half of that price, but still quite significant in terms of revenue, hope for the company.

I see, I see. That was very helpful. My final question is also on the new facilities. So you mentioned the cost savings potential from the new facility compared to what companies are currently using. What about in terms of timing? Like how short -- what's the time savings with the new facility? And also, you mentioned that you could help improve the sale yields as well. So how does that look like?

Yes, sure. So the benefit of our proprietary system is that we can get a much higher yield initially and shorten the processing times. So when you have more stocking material, what's benefit to the patient is that it requires less doubling to get to the clinical dose. So those less doubling are beneficial not only in terms of its time saved, but probably more importantly from a scientific perspective. You've made the cell less exhausted or less anergic.

Because one thing that known to the field is that if you expand the cell too many times, and when you expand the cells too many times, what could cause issue to the cells are the cells become exhausted. And they undergo a process called apoptosis or anergy, which basically making those cells less physiologically active. And hopefully, with the new technology, we have more starting material. We can benefit the final production of the cell gene therapy by causing the cell less likely to be anergic or exhausted. Hopefully, it makes sense to you.

Yes, that was helpful. Thanks for the additional color and some questions I have.

All right. Thank you, Sean.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, operator. We look forward to updating you on our progress during our fourth-quarter 2022 call. And thank you to everyone who participated today and for your interest in ThermoGenesis Holdings.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.