Thermogenesis Holdings Inc (THMO) 2021 Q1 法說會逐字稿

Good day, and welcome to the ThermoGenesis Holdings' conference call and webcast to review the financial and operating results for the first quarter ended March 31, 2021. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your 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, May 13, 2021. 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 like to turn the call over now to Chris. Please go ahead.

Thank you, Paula, and thank you to everyone for joining the call this afternoon. We appreciate you taking the time to listen in and also apologize for my voice in the season -- allergy that's kicking.

So as you may know, this year is the 35th anniversary of the company since it was founded in 1986. A recent study by McKinsey found that the average lifespan of private companies are less than 10 years in the States and that of the company listed in Standard & Poor's 500 today is under 20 years.

Throughout our 35 years history, ThermoGenesis core competence has always been its ingenuity and its capability to create various sophisticated cellular processing medical devices. Our brand is well recognized by the cell banking industry. In fact, BioAarchive, our smart cryo-storage system is used to warehouse close to 90% of all US FDA-approved drug use cord blood units.

Today, the newly emerging immune cell banking industry, which allows individuals to store their healthy immune cells to be used for making potential cancer treatment, such as CAR-T therapies in the future, is viewed in the same way that cord blood banking was 30 years ago. Immune cell banking is technically challenged due to the traditional use of a labor-intensive manual cell processing technology and the dependency of the use of upgrading chemical reagent called [cycle] to help isolate the immune cell from blood.

ThermoGenesis demonstrated again its ingenuity and introduced the PXP-1000 system in 2020, which is an FDA 510(k) Class II medical device designed for isolating various cellular components from blood. This is the first-in-class system for the industry, which can process 300 ml blood in a fully closed GMP-compliant medical device. It averages 30-minute for each sample processed, reducing it from the current four-hour processing time, which would drastically reduce the time and cost and could make immune cell banking possible.

In February of 2021, the company completed the development of another new device, the PXP-LAVARE system, which is an optional reformulation accessory for cell therapy designed for use along with the PXP-1000 system. The GMP-compliant PXP-LAVARE allows for fast, automated, and reliable cell washing and cell reformulation, which are essential for all cell therapies regardless whether it is a stem cell therapy or immune cell therapy.

These newly introduced medical device systems will have significant impact for the future of immune cell banking and the immuno-oncology such as CAR-T therapies. With these new devices introduced lately, ThermoGenesis is proud to provide a full suite of automated solutions for cell banking, cell processing, and cell therapies, which includes: first, for cell processing and large-scale cell manufacturing, we offer the X-SERIES products for general laboratory use; and the PXP Series products for clinical-grade use, which includes the PXP-1000 for cell isolation and the PXP-LAVARE for cell washing and reformulation.

Both the X-SERIES and the PXP series products are part of our CAR-TXpress platform designed for large-scale cellular manufacturing for future cell and gene therapies. CAR-TXpress platform utilize our patent-protected buoyancy-activated cell sorting or the BACS technology, which is a new technology to locate the traditional magnetic beads-activated cell sorting or MACS technology developed 30 years ago. The CAR-TXpress platform would provide a highly efficient and cost-effective cell manufacturing solution for manufacturer, both CAR-T, CAR-NK, and other cell-based therapeutics.

Second, for cord blood banking applications, we offer the AXP automated cell separation system and the BioArchive smart cryopreservation system. These are the industrial leading processing and automated cryopreservation systems providing the ultimate performance and protection for today's high-valued cord blood cells for tomorrow's critical therapeutic needs.

Third, for point-of-care clinical applications, we offer the PXP point-of-care system, which is another 510(k) Class II medical device -- sorry, 510(k) medical device allows for rapid and automated processing of patient cells from peripheral blood or bone marrow at the point of care such as surgical centers or clinics.

In order to grow the company successfully, we'll have to undergo a critical corporate strategic shift to meet the trend of the future. ThermoGenesis is committed for another critical transition, moving from being a device-only company to one focused on providing comprehensive cellular manufacturing solutions including tools and services.

Let me describe further why we are doing that. It is well believed that cell and gene therapies such as the CAR-T therapy are posed to revolutionize the future of medical care and disease treatment. According to the latest report, to date, 20 cell therapies has been approved including five CAR-T therapies.

There are also over 1,000 active clinical trials of additional CAR-T therapies for various different cancers and another 1,000-plus clinical trials for stem cell therapies for regenerative medicine. The industry expects to see a wave of additional FDA approvals with as many as 10 to 20 new therapies each year starting from 2025, and this will likely to accelerate over time.

Cellular manufacturing is a critical bottleneck and unmet need for the industry. Currently, each of the five approved CAR-T therapies is extremely expensive, limiting patient access to these life-saving therapies given that they cost between $375,000 and up to $0.5 million per dose. The expense is directly related to the fact that these CAR-T therapies cost between $100,000 and $120,000 to just to manufacture a single dose.

For companies that are currently developing cell gene therapies including biotech companies and research institutes alike, manufacturing of GMP-grade cellular products to translate a cell-based drug from a biological concept to a scalable clinical treatment can be the largest challenge. Also, the contract manufacturing service or CDMO is essential for the success of these companies. Unfortunately, the surge in clinical activity has not been matched with an increase in CDMO production capacity.

According to the latest reports, even though over 65% of all cell gene therapies are all manufactured in outsource facilities, only 5% to 10% of the required commercial GMP manufacturing capacity exists in the marketplace creating a long backlog in the commercial manufacturing of any potential cell-based therapies. This situation is caused by low manufacturing efficiency and will only be exacerbated by the accelerated approvals of additional cell therapies in the next five years.

To address these issues, ThermoGenesis intends to utilize its highly efficient CAR-TXpress platform, which could significantly increase our processing efficiency by four to five-fold as compared to the traditional method and potentially decrease the manufacturing cost by up to 60% to 70%. Our goal is to launch CDMO service in a number of large global markets in addition to the US so that we can begin to help fulfill the enormous gap in demand that currently exists among both biotech companies and research institutions.

The CDMO market for cell therapy product is very segmented. Most players are still using traditional technologies that are considered to be low efficient and leads to high manufacturing cost. Given the strength of our CAR-TXpress technology platform and the breadth of our product base, this new CDMO-focused direction, which leverages the proprietary technologies that we already have, it should allow us to capture a much more substantial portion of the value we bring to the table for both potential customers as well as for our shareholders. We are very actively evaluating opportunities that can speed up our process to enter the CDMO service market, which we will update you all in our next conference call.

Going forward, we will continue to innovate internally. And we will be increasingly focused on the service side of the business, which is in line with our mission to increase patient accessibility and affordability to these life-saving cell and gene therapies. And with that, let me turn the call over to Jeff to share the key financial results from the first quarter. Jeff?

Thank you, Chris. Net revenues for the three months ended March 31, 2021, were $1.5 million as compared to $3.2 million for the three months ended March 31, 2020.

The decrease was driven by lower AXP disposable sales primarily due to the COVID-19 pandemic, which, as we've previously discussed, has had an impact on our revenues. As more vaccines are administered and the pandemic continues to subside in many countries, we anticipate revenues will begin to rebound in the second quarter of 2021, hopefully returning to pre-pandemic levels by the end of 2021.

Gross profit was $700,000 or 47% of net revenues for the three months ended March 31, 2021, compared to $1.5 million or 47% of net revenues for the three months ended March 31, 2020. The decrease was driven by the lower AXP disposable sales, offset by an increase in BioArchive device service revenue.

Sales, general, and administrative expenses for the three months ended March 31, 2021, were $2 million compared to $2.1 million for the three months ended March 31, 2020, a slight decrease of $100,000. The decrease was driven by lower legal and travel expense in the current quarter.

Research and development expenses were $400,000 for three months ended March 31, 2021, compared to $600,000 for the three months ended March 31, 2020. The decrease is driven by lower personnel expenses in the quarter ended March 31, 2021.

Interest expense for the three months ended March 31, 2021, was $1.5 million as compared to $3.5 million for the three months ended March 31, 2020, a decrease of $2 million. The decrease was driven by lower amortization of the debt discount related to the company's revolving credit agreement.

For the quarter ended March 31, 2021, the company reported a comprehensive loss attributable to common stockholders of $2.4 million or $0.21 per share based on approximately 11.4 million weighted average shares outstanding. This compares to a comprehensive net loss of $4.6 million or $1.11 per share based on approximately 4.1 million weighted average shares outstanding for the quarter ended March 31, 2020.

The company ended the quarter in a strong cash position with over $10 million on hand, an increase of $2.8 million from the end of last year. Working capital at March 31, 2021, was $6.4 million. This concludes our prepared remarks, so now we'd like to open the call to your questions. Operator?

(Operator Instructions) Sean Lee, HC Wainwright.

Good afternoon, guys, and thanks for taking my questions. My first one is on the existing blood banking business. So it's good to hear that you're starting to see some recovery towards the end of the first quarter. So I was wondering if you can comment on whether that trend has continued into the second quarter? And where do you see the most recovery? And which areas maybe still -- there's still been a lot of lackluster?

Yes. We have seen that trend continue going into the second quarter. And we do expect to see revenues start to come back close to the levels they were pre-pandemic. Ultimately, I think to get back to where we were in 2019, it will be at least by the end of this year before that happens.

Great. Thanks. My second question is on the newly launched PXP systems. Could you comment on what differences are there between that and the X-SERIES products? And how is it more advantageous? And what advantages does it have over existing products on the market?

Yeah, sure. So the PXP series of products are more designed for clinical use. And so originally designed for the point-of-care applications then further expanded to other area. So the key difference is the entire PXP series products are US FDA Class II cleared, which means they are of higher regulation, say, met higher regulation requirements.

The X-SERIES are for general laboratory use, so it has various different applications. Lots of them may be shared with the PXP series, but the regulatory clearance is slightly lower due to the different potential usage.

I see. Thanks. That's all I have.

Thanks, Sean.

Thanks, Sean.

Thank you. And this does conclude our question-and-answer session. So I'd like to turn the floor to Dr. Xu for any closing comments.

Thank you, operator. We look forward to updating you on our progress during our second-quarter 2021 call. And thank you to everyone who participated today and for your interest in ThermoGenesis Holdings. Thank you.

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