Good day and welcome to the Cryoport Incorporated Fourth Quarter and Fiscal Year 2016 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Garth Russell with KCSA Strategic Communications. Please go ahead, sir.

Thank you. Good afternoon everyone and thank you for joining Cryoport's fourth quarter and fiscal year 2016 conference call. Before we begin today, I would like to remind everyone that this conference call contains certain forward-looking statements. All statements that address operating performance, events or developments that we expect or anticipate to occur in the future are forward-looking statements. These forward-looking statements are based on management's beliefs and assumptions and not on information currently available to our management team. Our management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We do not undertake any obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from our historical experiences and our present expectations or projections. These risks and uncertainties include but are not limited to those described in Item 1A risk factors and elsewhere in our annual report on Form 10-K and those described from time to time in other reports which we file with the SEC. Now, I'd like to turn the call over to Jerry Shelton, Chief Executive Officer of Cryoport. Jerry, the floor is yours.

Thank you, Garth, and good afternoon, ladies and gentlemen. Thank you for joining us today. With me this afternoon is our Chief Commercial Officer, Dr. Mark Sawicki, who later during this call will comment on our growing position in the biopharma market and our Chief Financial Officer, Robert Stefanovich, who will present our financial results for the fourth quarter and fiscal year 2016. Over these past few quarters, we've seen a significant ramp in new business opportunities with a dynamic mix of new and existing clients in our biopharma and reproductive medicine segments. This market traction is being driven by the work of our capable sales and marketing teams supported internally by innovative engineering, operations, logistics, and client care staff. In addition, we implemented new management initiatives including the launch of our consulting and advisory services for biopharma clients. Revenue recognition from our pipeline of new clients is in its early stages and reflected in our reported results today. However, it is important to note that the revenue we have recognized so far is just the tip of the iceberg as we work with clients moving through clinical trials to commercialization. In the past few quarters, we have experienced some shorter-term pain to put us in a strategic position for longer term gains. This short term pain was mainly due to the long sales lead time in the ramp periods for many of our current opportunities. These lead times were strategic accounts that can be upwards to nine to twelve months before initial revenue is recognized due to the validation, audit, and approval processes we will serve through specifically with each new client. It is noteworthy that those biopharma accounts in our revenue pipeline, several have advance through initial clinical trial stages and are now while in Phase 3 planning…

Thank you, Jerry. It is a pleasure to have the opportunity to speak with you today. My objective for this call is to provide you a synopsis of the current biopharmaceutical market, how it has evolved over the last 12 months and give you an understanding of its business impact related to Cryoport's recent announcements and how they fit into our strategy to engage the market and drive revenue in the current fiscal year. As mentioned previously, biopharma and more specifically regenerative medicine represents the future of healthcare. There are now more than 685 companies involved in gene and cell therapies worldwide supporting more than 669 clinical trials including 68 Phase 3 programs and the number of new entrants continues to accelerate. This activity is being reinforced by significant financing activity to the tune of more than $10 billion in 2015 alone according to the Alliance for Regenerative Medicine. In addition, many of the industry leaders are investing significant resources into the development of scalable regenerative therapy platforms, an example of the recent GE investment of $40 million into the Center for Commercialization of Regenerative Medicine in conjunction with the Canadian Government. In addition, Lanza [indiscernible] have all announced significant investments in the expansion of manufacturing capacity to support the anticipated demand. Cryoport has been very active in client engagement in this space. We have expanded the number of clinical trials we support to 78 including 13 Phase 3 trials which is nearly 12% of the total clinical market in this space and 19% of the Phase 3 pipeline. This is in addition of 29 new clinical programs over the last six months. Some of the programs recently announced include Perseus PCI, International Stem Cell and ImmunoCellular Therapeutics, all of which have engaged Cryoport to support their cryogenic logistics needs…

Thank you, Mark. For a more detailed discussion of our financial results for the fourth quarter and fiscal year 2016, I’d like to introduce our Chief Financial Officer, Robert Stefanovich. Robert?

Thank you, Jerry. Good afternoon everyone. I will now review our fiscal year financial results, provide some additional comments, and then turn the call back over to Jerry. As a reminder, our fourth quarter and fiscal year ended March 31, 2016. Now to our fourth quarter results, our net revenues for the fourth quarter ended March 31, 2016 were $1.6 million an increase of 29.7% or 357,000 as compared to $1.2 million reported for the same quarter last year. This growth was driven by our biopharma segment which increased by 46.8%, $4.3 million to $1.0 million compared to 690,000 for the prior year fourth quarter. Revenue in the reproductive medicine market increased by 12.3% from 294,000 to 331,000 for the three months ended March 31, 2016. Our reproductive medicine revenue was impacted by third quarter events that I will discuss during the review of our annual results. Our revenue in animal health remained flat at approximately $200,000 for the three months ended March 31, 2016 compared to the same period of the prior year as a result of temporary reduction in production volume from one of our larger clients. Gross margin for the three months ended March 31, 2016 was 37.4% as compared to 30.9% for the three months ended March 31, 2015. This is an improvement of over 7 percentage points and reflects several management initiatives to drive margin growth towards our target of 60%. Operating expenses increased $1.1 million for the three months ended March 31, 2016 or 55.4% as compared to the three months ended March 31, 015. This increase is primarily due to non-cash equity based compensation charges, recruiting charges and salaries incurred as a result of expanding our sales force and increased marketing activities. Net loss attributable to common stockholders for the three months period…

Thank you, Robert for your very comprehensive report. In closing, I would like to call the attention of our shareholders as well as other interested parties that are on this call to the special nature of Cryoport and its solution of supporting the life sciences industry. We are pioneers in this fast moving and growing and evolving life sciences industry. In this age of biology development, we are distinguished by being advanced and to our knowledge and for the time being unique in our capabilities. We support research, development and coming commercial products that are slated to change the course of healthcare and impact almost every aspect of humanity. It is a special place and we have a special mission to fulfill. The interaction with our clients and the life sciences industry at large, we know that the market, with its evolving precision logistics requirements is beginning to recognize Cryoport with these advanced technologies and growing reputation for reliability as the preferred solution. One of the key things that is useful for shareholders to understand in practical terms about our increasing pipeline of clients is exactly how our increasing number of trials impact Cryoport over time. Clinical trials as they relate to progression generally in for revenue ramp moving through the clinical stages of development through commercialization. For example, revenue to Cryoport for Phase 1 trials might typically range from $15,000 to $75,000 annually. For Phase 2 $50,000 to $150,000 and for Phase 3 $200,000 to $1 million and for commercialization $3 million to $20 million plus. So you can readily see why I say we’re just at the tip of the iceberg. These next 12 to 18 months, there is a number of these late-stage clinical trials moved to commercialization will be very exciting for Cryoport and its shareholders.…

Thank you, Jerry. Operator, if you could instruct the callers how to ask questions that will be great.

Thank you. [Operator Instructions] And we’ll take our first question from Brian Marckx with Zacks Investment Research.

Hi, good afternoon guys. Jerry, you had mentioned on the Q3 call that, that much of the difference in the revenue, what you expected in fiscal 2016 at that time versus what you had expected and guided to earlier in the year and was essentially delayed versus lost for lack of a better term, is that your expectation currently?

Yes Brian, and that's what I meant to infer by my comments earlier, that’s exactly right. We did have in that mix of things at that time; one, we did have a failure or two in terms of progression, but in terms of the population, nothing changed in terms of our long term forecast, because we had risk adjusted all of our forecasting. But the supposition that you just made, the quote from our earlier reference to my earlier call is absolutely correct.

Okay, great. And then gross margin, which was particularly strong in the quarter, congratulations on that, Robert you talked a little bit about kind of what was behind that, but if there is any more specifics that you can offer and is that a level that you would expect to, that you can build from in 2017 with higher revenue numbers?

Brian, let me address that, but before Robert talks there and then just a moment. You have to understand and certainly many of our shareholders understand we are a developing business, and we are a fee-for-service business, and we have taken actions to close some gaps, to reduce costs. As I said, every morning our warehouse people huddle [ph] to figure out how they can improve process and reduce cost. So, we are working on both sides of the equation, but this is just the beginning. It's - there is nothing - this is not a business that has been in existence for a long period of time or a product line that has been around for a long period of time. It is a process and it is a march forward as we achieve our revenue goals to broaden the - and accelerate our gross margin to our gross margin goal. Robert, I'll let you add anything if you’d like, I just wanted to make those comments.

Yes, you already covered it, I mean, our target is still 60%, we’re working towards that. Like Jerry said, we’re in the growth phase. There is a number of initiatives, some of them we could implement very quickly, others will still take time to see them reflected in our gross margin, but our target is still the 60%. As we get different revenue streams, that will play a role as well and then you should expect to see management's effort to continue to work on that.

Right.

Yes, so – I certainly understand that you guys are putting together the formula to grow the business for the long term. Obviously shareholders are okaying may be possibly which shorter term, and so operating expenses are also -- and I understand you have to invest to grow. So, your operating expenses continue to grow relative to revenue. You are bringing on a few different new service-oriented products I guess, and so may be if you could just kind of talk about what we should expect in terms of operating expenses with the current business and then any incremental expense related to the new businesses?

As we grow Brian, you can expect operating expenses to grow, that is the bottom line. Everyone would like to hear that operating expenses are going to truncate or they are not going to advance or they are not – this is just not true.

Well, relative to revenue, relative to revenue.

Well, it is cash flow breakeven, they will start to receive, but you have to look at that too on a set of [indiscernible] situation that is, where as if nothing changed versus growth. So in the future, I think what we’ll try to do is separate operating expenses related to existing business versus growth, but we will be investing in growth for some period of time. We have a big footprint to cover. We are a logistics company and so that’s broad and the demands, the customer demand is broad, and so we’ll be fulfilling that and we will be growing and what we probably should try to do and I don’t know, Robert can comment on this, but he is trying to figure out how we can kind of give an indication of the operating expenses related to growth versus operating expenses related to the stabilized business.

Okay.

Yes, and may be, let me just add to that. I mean, if you look at our organization, we’re actually trying to keep the organization very lean, but if you look at the programs that we are currently supporting and being in discussions with commercial stage companies that are getting ready to commercialize their therapies, we need to have the right resources in place to handle those requests for information and proposals. If you look at fiscal 2017, we don’t expect a large increase in headcount, but you will certainly see, as an example, increased need for additional Cryoport Express Shippers of different sizes as well as secondary packaging, increase of temperature monitoring systems based on the expected demand from our client base.

And software expenditures Robert, as well as personnel gaps that we have to fill in various countries.

Yes, okay that actually leads me into my next question, it has to do with your Phase 3 trials and kind of segue into commercialized products. So the infrastructure that you have now, the infrastructure and products, particularly the size of your shippers are those sufficient to support a commercialized product, say the commercialized vaccine versus that vaccine in its Phase 3 trial?

Well Brian, I am going to turn this over to Mark to answer that in more and from his point of view, but you implied in your assumption is that we are a one trick pony. We have a constant development effort going on to meet client demands, we are customer driven. This is not a business that you take it or leave it. We answer customer demand. So, as we move forward, we have packaging and development right now and in testing for some of the applications that you were inferring, but Mark, you may have something to add to that.

Yes, so when you look at a commercialized product or product that moves towards commercialization, you have to look at the evolution of the packaging itself. So, as they go through early clinical phases, they are very risk averse and they go with a very conservative packaging configuration that is the lowest risk from a failure standpoint as many bells and whistles as possible on monitoring and other aspects. As they move to commercialization, they want typically a customized piece of equipment that obviously takes into account commercial launch costs, cost to goods, cost to delivery very significant consideration. Henceforth, one of the primary reasons we initiated this consulting division that you heard and had Jerry talk about a bit was that in most of these commercialization conversations that we have, they want customized equipment for that commercial launch and the relationship with Taylor Wharton as well the combination with our consulting division is in direct response to that request. The good thing is that, the relationship with Taylor Wharton provides us the ability to very, very rapidly scale our equipment base to support an increasing volume from tens or hundreds to tens of thousands.

Okay, great. And Jerry, my question wasn’t kind of geared towards one portfolio, it was actually more geared towards were these new relationships and these new businesses somewhat related to a potential commercialized product, particularly the Worthington partnership that you entered into. So that’s...

It’s a good question.

Yes, let me just respond to that very quickly. One of the things you have to keep in mind here is, having a company the size of Cryoport actually gets requests from very large pharmas to actively compete for a formal request for proposal. This isn’t a trivial exercise. This is an exercise that they do a tremendous amount of due diligence on their side to even ascertain who is going to be included in that active bidding process itself. So, for us to be, to actually have a commercial product now through our large biopharma and be heavily engaged in multiple others through that formal RP process is a testament to the way that they perceive Cryoport in the marketplace.

Okay. Great, one last one, is there anything more you can talk about in terms of what exactly your role is with the big pharma $4 billion product that you referenced?

We will have to wait on that until we are a little bit further along and we try to make everything public that we can, but we have to have approval from our client base. So that’s a new relationship. As I said it’s only two weeks old. We just signed it two weeks ago, so we have to let that mature little more before we can say anything else about it.

Okay, great thank you and congrats on the progress.

Thank you, thank you.

[Operator Instructions] We’ll take our next question from David Halperin with Stifel.

Hello everybody. I’ll go through these very quick. I’ve got some easy questions. First of all Robert, could you just quickly give me what the share count was, I missed that when you were going through it?

Yes comp stock outstanding is $15.1 million.

$15.1 million, thank you. And Jerry, you talked about increased sales force, how many are we at now?

We have eight in total.

Eight total, thank you.

Yes, we have one in the EU. We have five territories in south sales IVO and of course Dr. Sawicki.

Okay. Got it and Mark, a question for you, you said that the animal health science there was a loss of large customer, is that permanent or is that customer likely to come back or even increase their business in the foreseeable future?

No we didn’t lose the customer, we had - that customer, one of our largest customers in that space had a production issue with one of their facilities that impacted their volumes going out to third parties. That has subsequently resolved itself and we’re actively engaged with other parties and we believe that we’ll be able to have additional relationships of that nature during this fiscal year.

I mean in the coming quarter or later in the year?

I mean I can’t get into specifics around timing yet.

Sure, fair enough.

It’s obviously dependent on when they sign on the dotted line.

Okay and back to Jerry, well actually I wanted to pick up real quickly where Brian left off, you said we have - we’re only two weeks into this relationship and you can’t really talk about the big pharma company yet, but is that likely to start showing up in the next quarter or again is this something for much further down the calendar year of fiscal 2017?

No, as Mark said, it is a commercial product and so it will begin to show up soon.

Okay and can you give a quick snapshot of - we only have three more days left in the quarter, what is our estimated cash position as we’re coming into the end of the quarter? We’ve picked up 2.5 million gross in the April warrants, 1.3 million gross in the rights offering, 2.8 million at the end of March, roughly where are we at?

Yes, Robert?

Yes, so we are following the option that we completed, our cash position is about $4.5 million.

Okay. Thank you. So we’re not likely to see anything about a growing concern and the current 10-Q is going to be coming out right, or 10-K?

Robert, take that one too.

Yes, we will still have growing concern in the language. We had discussions with our auditors about that, so that will still be part of our audit report and the 10-K that we will file tomorrow.

Okay, it will show up in the 10-K. Got it.

Yes, yes.

And last question I guess Jerry for you, you said you won’t give us forward guidance for fiscal 2017, but again given that we’re only three days away, are you willing to give it? You did say that in your prepared statement that Q1 2017 is already ahead of Q1 2016. Can you give us some percentage 30% ahead, 50% ahead, 100% ahead, can you give us any color?

No, not right now. I’m not going to be in the guidance business again. I got my nose bloodied last year and probably should not have given, well I shouldn’t have given guidance. So I only want to stay with that policy of not providing guidance.

Okay, fair enough. I think I hit all my questions, so thank you everybody.

Thank you, David. Thank you.

We will take our next question from [Anthony Gulof], Private Investor.

Yes hi, good morning gentlemen. My concern essentially is, I appreciate the business. I have been following the company for at least eight years. I’ve been studying it and I’m just wondering at what point in time are we going to actually be profitable?

Robert, would you like to take that?

Yes, I mean, we expect in terms of getting to profitability and cash flow breakeven, it has to be a quarter that’s in the $14 million to $16 million annualized revenues, so that is really, it is a little higher than we thought in the past, but that is about $14 million to $16 million in annualized revenues at which point we should reach cash flow breakeven.

If this is the situation, why don’t we try to balance general and administrative expense more in line and more proportionate with the revenues? I mean, when does it actually…

Anthony, you would kill the company and you will kill its future. I mean, sure if you want to make this absolutely totally efficient, shut it down. I mean you would kill the company if you balanced it right now. What Robert was referring to Anthony is what the steps that it takes to build a company and the only reason we're up from 12 to 14 to Robert's estimate of 14 to 16 has to do with overhead that we had to put on in order to accommodate the new therapies that are coming. And the new therapies that are coming are, well they are huge, they are huge, I mean that's all I can say. This is about building a company and it is not a zero sum game. It is not a mathematical game. It is about building a company. Mathematics has to do with it and I do appreciate what you are saying, but we cannot do it that way.

Well, it just seems, it seems with the equity in the company of $3 million I'm just wondering how many quarters like this can we take before we're in deficit again?

Well, we have to worry about that constantly and but this is not a distribution business like a nut and bolt type business, it is a different kind of business and it is a very exciting business and there is a lot of value to be created here as…

I take this forward to be fantastic, but if we continue at this rate, you take another 2.7 million next quarter and then the quarter after, I mean you are into negative territory here. I am just wondering, I mean you've got to balance it a little bit.

Yes, yes and I appreciate your comments and your thoughts.

Okay, thank you.

That does conclude our question-and-answer session for today. At this time, I'll turn the conference back to management for any additional or closing remarks.

Well, thank you very much everyone, thank you for all your questions and especially thank you for taking the end of your day to hear what we had to say and for the dialogue and for the questions. I really appreciate your interest and we all are working hard for you the shareholders and we look forward to reporting to your at the end of the next quarter. Thank you very much.

This does conclude today's conference. Thank you for your participation. You may now disconnect.