Q1 2024 Earnings Summary
- Cryoport expects strong revenue acceleration in the second half of the year, driven by new commercial therapies, clients' forecasts, and recent approvals, including therapies from BMS, J&J, Sarepta, Iovance, CRISPR/Vertex, Bluebird, ImmunityBio, and Atara. This momentum is expected to contribute significantly to revenue growth.
- BioStorage/BioServices revenue grew 9% year-over-year to $3.5 million in the first quarter, and with two new facilities in Texas and New Jersey onboarding 27 clients over the last 12 months, these services are expected to be key growth drivers for Cryoport in 2024 and beyond.
- Cryoport is targeting 55%-60% gross margins and 30% adjusted EBITDA, demonstrating strong profitability potential. The company is implementing initiatives to reduce costs, improve alignment, and leverage shared services to drive towards positive adjusted EBITDA and cash flow in the near term.
- Significant Trial Terminations Leading to Softer Revenue in Biologistics Services: The company experienced softness in biologistics revenue due to the termination of 42 clinical trials, many of which were established programs with active volume. Although these were replaced by 42 new starts, the new programs take time to ramp up, potentially impacting near-term revenues.
- Continued Demand Softness in MVE Cryogenic Systems Business, Especially in China: Cryoport is facing decreased demand for its MVE Biological Solutions cryogenic systems, particularly due to a slowdown in capital equipment investment in China. This ongoing softness in demand could negatively affect the company's revenues moving forward.
- Implementation of Cost-Cutting Measures Including Workforce Reductions: To drive towards positive adjusted EBITDA, the company is implementing cost reduction initiatives such as reducing its workforce, delaying capital spending, and leveraging lower-cost shared services. These measures indicate pressures on profitability and may impact future growth and operational capabilities.
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Cost Reduction and EBITDA Outlook
Q: Can you discuss cost reduction efforts and EBITDA outlook?
A: Management is working towards achieving positive EBITDA, aiming for 55-60% gross margin and 30% adjusted EBITDA margin. They are implementing cost reduction initiatives, including workforce reductions, leveraging shared services, refining priorities, and delaying non-essential CapEx. In Q1 2024, cash burn was a little over $8 million, with over $4 million related to CapEx. These actions are expected to positively impact the second half of 2024. -
Revenue Guidance and Confidence
Q: Can you explain confidence in meeting full-year guidance despite Q1 softness?
A: Despite a disappointing Q1, management maintains full-year revenue guidance of $242 million to $252 million. They expect revenue to progressively improve throughout the year, driven by growth in cell and gene therapy clients, with five additional new therapy approvals anticipated and an increase in biotech funding. They believe each business segment will grow in 2024. -
MVE Performance and China Impact
Q: What's the outlook for MVE and impact of China market?
A: MVE cryogenic systems revenue declined due to continued demand softness, especially in China, caused by decreased capital equipment investment and economic recession. Orders were not canceled, but demand decreased. Management expects a gradual improvement in MVE demand in the second half, anticipating MVE revenue to be flattish in 2024. China accounts for about 5% of total revenue, and no improvement is expected there this year. Plans are underway to begin local manufacturing in China by mid-next year to better compete. -
BioServices and New Facilities
Q: Are the new Texas and New Jersey facilities profitable now?
A: The two new facilities opened in June last year are still in the early stages and not yet fully utilized. It takes 6 to 18 months for clients to onboard, conduct audits, and begin operations. Over the last 12 months, they have onboarded 27 clients at these facilities. BioServices revenue grew 9% year-over-year to $3.5 million in Q1 2024. -
New Therapy Approvals and Revenue Impact
Q: What are expectations for new therapy approvals and revenue impact?
A: So far this year, three new therapies have been approved, with potentially five more approvals expected in 2024, making a total of eight new therapies. Existing therapies have also received approvals for earlier lines of treatment or expanded labels. Combined with expected revenue ramp from these therapies, they anticipate revenue acceleration from cell and gene therapy clients in the remainder of the year. -
Clinical Trial Pipeline Status
Q: What is the status of the clinical trial pipeline?
A: As of March 31, 2024, Cryoport supports 675 global clinical trials, a net increase of 23 trials year-over-year. There are 77 Phase 3 trials and 312 in Phase 2. They experienced 42 trial terminations, with 20 completed and 22 terminated, mainly due to cash constraints. They also onboarded 42 new programs, many from new clients, which will start contributing to revenue in the coming months. -
Target Margins
Q: What are your target margins in a few years?
A: Management's goals are 55-60% gross margin and 30% adjusted EBITDA margin. These goals have not changed, and they examine them often. -
Competition from UPS
Q: Does UPS's expansion into healthcare logistics pose a threat?
A: UPS has become more of a competitor, but Cryoport still works with integrators like UPS. They don't see UPS as a significant threat, and note that UPS uses MVE equipment in their healthcare vertical. -
Bluebird Express Acquisition
Q: How is the Bluebird acquisition progressing? Revenue contribution?
A: Bluebird Express is integrating well with CRYOPDP and positively impacting the business. They are opening three new logistics centers in the U.S. to build out the network. Revenue contribution is around $3 million, possibly at the lower end. -
Order Delays and Q1 Softness
Q: Did order delays contribute to Q1 softness?
A: Yes, some purchase orders slipped from Q1 into Q2, affecting revenue. The market was slower than anticipated, but management expects progressive improvement throughout the year.