Good day, and welcome to the CryoPort Incorporated Second Quarter Fiscal 2017 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Todd Fromer with KCSA Strategic Communications. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today for CryoPort’s second quarter fiscal year 2017 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 our 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 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 filed with the Securities and Exchange Commission and those described from time to time in other reports which we file with the Securities and Exchange Commission. I would now like to turn the call over to Mr. Jerry Shelton, Chief Executive Officer of CryoPort. Jerry, the floor is yours.

Thank you, Todd. Good afternoon, ladies and gentlemen. Thank you for joining us today. With me this afternoon is our Chief Commercial Officer, Dr. Mark Sawicki, who will later during this call, will provide you with some context regarding our biopharma market and our expanding role within it. And Robert Stefanovich, our Chief Financial Officer, who will present our financial results for the second quarter of fiscal year 2017. Revenue for the second quarter of fiscal year 2017 was up 38% year-over-year. This growth was driven by a strong performance in the biopharma market, which grew 64% year-over-year. We continue to make great strides and improve our positioning in biopharma market with new client wins and further expansion within our current client base, supporting new trials and the temperature-controlled logistics for additional - fourth quarter additional biological materials. We also reached several notable operational achievements this quarter, including introducing new technological advancements in integrating our CryoPortal Logistics Management platform with the therapy scheduling platform in support of one of our client’s commercialization preparations. We also undertook several strategic marketing initiatives, which we view as investments in our future. From an industry perspective, whilst modestly, we’re pleased to win the 2016 Cold Chain Global Forum Excellence Award, which is the most prestigious award in the cold chain logistics industry. Later in this call, Dr. Sawicki will have further comments about our progress in growing our reputation as a best-in-class provider of cutting-edge cold chain logistics for life sciences industry. Throughout the second quarter, we continued to win new biopharma clients and advance with additional clinical trial progressions. We are now in late-stage negotiations with several clients who are in Phase III of clinical trials to support the commercialization of their respective therapies, which if successful, are expected to contribute significant revenue…

Thank you, Jerry. Jerry has highlighted our three markets; biopharma, animal health and reproductive medicine. While all of these markets are important to us, biopharma is by far the largest and has the most dynamic growth rate. Jerry has asked me to comment on it in further detail. We continue to see increasing levels of investment in the regenerative medicine market as innovative life science companies’ direct funds towards cell therapy, gene therapy and tissue engineering in the broader global regenerative medicines sector. This is not just a U.S. phenomenon, with global companies active in selling gene therapies and other regenerative medicines raising more than $3.5 billion in the first three quarters of 2016. In the most recent quarter, there were significant financing and deal-making activity among companies in this space, coupled with strategic partnerships and acquisitions. This has fueled continued growth in this sector, which we are seeing from both start-ups focused on regenerative medicine markets, as well as established multi-billion dollar biopharma companies as the continued focus on regenerative medicine becomes increasingly widespread. This is evidenced by Pfizer’s recent acquisition of Bamboo Therapeutics earlier in the quarter, providing an entry point for them in this space. Importantly, the market seems to be reaching an inflection point, so to speak, with several therapies approaching commercialization. This is an extremely exciting time for CryoPort, because as you may know, the specialized logistics needs for the shipping of commercialized products are much more extensive than they are for clinical trials, and therefore entail much more involvement and large revenue potential for CryoPort. I am pleased to report to you that we are currently in late-stage discussions with several clients, who are in late Phase III of clinical trials, two of which whom anticipate filing their biologic license applications in the coming…

Thank you, Mark. Now for a more detailed discussion of our financial report for the second quarter of fiscal year 2017, I'd like to introduce our Chief Financial Officer, Mr. Robert Stefanovich. Robert?

Thank you, Jerry. Good afternoon, everyone. I'll now review the financial results for the second quarter of our fiscal year 2017, provide some additional comments, and then turn the call back over to Jerry. Before I delve into the results, I wanted to draw your attention to an announcement we included in today's earnings release that our Board of Directors approved the change of the company's fiscal year-end from March 31 to December 31. We are doing this to align our business calendar with that of the majority of our clients in the life science industry and for more ease of reporting. As a result of the change, CryoPort’s quarterly reporting periods will be comprised of the calendar months ending March 31, June 30 and September 30. Now the year-end beginning this year will be December 31. Following the filing of this quarterly report on Form 10-Q, the company’s next periodic report will be filed on Form 10-K for the transition period from April 1, 2016 to the December 31, 2016. Now let's move on to our six months results. Net revenues for the six months period ended September 30, 2016, were $3.9 million, an increase of 35.8%, or $1 million, as compared to $2.9 million reported for the same period last year. As Jerry and Mark mentioned, the biopharma market continues to be the leading driver behind our current revenue growth. Revenues in the biopharma market increased by 61.5% over the prior-year to $2.7 million for the six months ended September 30, 2016, driven by an overall increase in the number of clients utilizing the company’s solutions, complemented by growth and frequency from current clients. We added 58 new biopharma accounts during the first six months of our fiscal year, further expanding our platform for future revenue growth. Revenue…

Thank you, Robert. I'd like to thank all of our long-term and loyal shareholders for supporting us during this exciting time in our development. CryoPort is well positioned to leverage the rapid growth in the biopharma companies with an excellent sales team in place, and an parallel offering which has high barriers - or provides high barriers to entry. Our advanced cryogenic logistics solutions are unmatched and we’re now recognized by a growing number of people as the gold standard for the shipment of invaluable biological materials. We are continually validating the effectiveness of our solutions through extensive testing and sales to major biopharmaceutical companies, and we have demonstrated our ability to win new clients. We are proud of the progress we have made to-date and will continue to push our revenue and manage cost and investments responsively as we embrace this exciting period of our company’s development. While we are proud of this progress, it's just the beginning. We believe that we are positioned to grow our revenue at an increasing rate as our diversified client base grows by adding life-saving therapies to the market and groundbreaking biologic research marches on in its progress. Further its applied to cure through - to cure or prevent cancer, malaria, leukemia, bio neoplastic diseases, infectious diseases and other heard before incurable maladies whether it is the development of therapies using T-cell, B-cell antibodies, lymphocytes, stem cells, genes or other cells, tissue or cellular components, CryoPort will continue to endeavor to evolve and keep base with industry needs by providing the most advanced technology-based solutions for temperature controlled logistics in the life sciences industry. We thank you for joining us today and we hope you found our call informative. We appreciate your support. We appreciate your confidence. That ends our formal remarks, and now I’ll return the floor back over to the operator for - and she’ll open the floor for questions.

Thank you. [Operator Instructions]. And we’ll pause for just a moment to allow everyone an opportunity to signal for questions. [Operator Instructions]. And we’ll go first to Brian Marckx with Zacks Investment Research.

Hi guys, and congratulations on the quarter. Very nice and great progress. Jerry, just for clarity on my end, Bristol-Myers is the large pharma client that you had referenced on prior calls. Is that right?

Yes, that's correct. Yes.

Okay. So I didn't catch all of your comments regarding that, and I apologize. But wondering if you could just go through again what your relationship is in terms of that, and then, when you think that that will start generating revenue?

Mark, I'm going to turn that question to you.

Sure, happy to answer that. So what we’re seeing is we've been asked to support the cryogenic component of one of their biologic blockbuster drugs. But the exact timing of the ramp-up of that support is going to be heavily dependent on us going through their regulatory and quality approval processes. Ultimately there will be - the ramp rate will be dictated by the progress and the expediency that we can move through those processes themselves. We are actively supporting certain aspects of the program, but it will ramp and additional components will be added as we clear these quality and regulatory hurdles.

Mark, when you talk regulatory, is it already FDA-approved?

This product is, but any time you change any support element of an approved or a clinical program, you have to do, what is known as, a bridging study. And in that bridging study, you have to validate that any change in protocols and that support have to be consistent. And so they have to conduct those types of elements to assuage the regulatory authorities.

Okay. So you will be - CryoPort will be involved in the shipping of the product to - from where to where? Can you just help me with that?

I can't tell you more than that at the moment. Sufficed to say, as I had mentioned, we are supporting the cryogenic component of it.

Okay.

But I haven't been given authority to disclose anything more than that from them at the moment.

Okay. Fair enough. Jerry, you talked about the contract manufacturing relationship as well. And wondering if you can talk a little bit more about that in terms of whether you’ve already commenced activity with the client, and then, how do you generate revenue? Is that on a per shipment basis, or is it, I guess, structured differently than that?

Well, the reason Lonza moved toward us are several. The contract manufacturing business is burgeoning right now, and Lonza is building a new plan on [indiscernible] public knowledge to handle their portion of the business. And so we have added and we’re looking at our solutions in the fact that we are more reliable than home-made solutions that we are more reliable and we’re more efficient as a matter of fact, that's why they chose us. And it will be - the model will be a combination of management fee and per shipment. That's the model.

And then timing of when you expect things to kick-off in terms of revenue generation?

Mark, would you comment on the timing?

Yes, certainly happy to. We are actually already starting to see a significant ramp in the support of that. And so I think we are going to continue to see a consistent scaling of that relationship as it directly correlates to their manufacturing activity. So as they bring more manufacturing capacity online, what we’re doing will increase a lockstep, so to speak. But we’re already supporting, as we have mentioned, all of the work that they purchased from Triangle Research Labs, as well as a significant proportion of all of their other cryogenic capabilities and we’re at a process of finalizing conversion on a number of other elements that will further accelerate that. But we’re already seeing a ramp on that revenue support.

Okay. And you guys have done a great job in terms of bringing on - obviously the clinical trial customer base growing there and you're in several Phase III relationships. So can you just talk about, is there anything - if and when one of these customers has a commercialized product and - for example, Kite. Is there anything significant that you need to do in terms of preparing to support the commercialization of the product?

Well, we are prepared. The way we’ve architected the company and the way we've approached the market is, what I call, in the athletic stance. And so the first thing is we engineered our solutions so that they are modular. So I think I’ve said before on the call, and maybe to you personally, we have 2,500 possible outcomes of solutions, so we don't have to bill the solutions from A to Z. We can bill it from M to N if we need to put something into place to modify a solution if it's very quick. We don't always know what the final detail is going to be on there, so we stand at the ready, but we’re quick. We don't have to do anything in particular. The other thing - other aspect of this to think about is this is - this science is not a small molecule, an old line science. It’s not - so there is a lot of development going on. The manufacturer sometimes comes in with new requirements and talks to us about changing our methodology or supporting them in a different way. But we think we are fully prepared. There will be no hold of it. They are very sensitive to meeting their timeframes. They want revenue coming in just as much as we do. So the answer is no, there is nothing - no big - no significant hurdle that we have to cross in order to able to serve those clients.

Okay. All right. That's all I had. Thanks a lot guys.

Thanks Brian.

[Operator Instructions]. And we'll go next to Brett Orr [ph], a Private Investor.

Good afternoon, gentlemen. I just had a little follow-up on the prior question about your commercial clients. So it sounded as this client relationship almost five months ago and we still have no foreseeable day at which revenues will be generated from this commercial relationship because of regulatory issues. For shipping solution, it just seems absurd to me.

It may seem absurd. I want Mark to comment on this, but it is not absurd at all. We deal - let me - I want to try and give you a full answer because as I certainly understand where you’re coming from is, as you look at things, you think well - a lot of this is passed, why haven't we seen something? We are dealing in science and we do not always have the control that we’d like to have because we do have to go through proof and progression and supplying data and there is a lot to getting a client on board. With that, I’m going to let Mark tell you in more detail what goes on there. But your question is a good question, and I appreciate it. Mark?

Yes, let me elaborate on that a little bit. So when you look at a filing document that goes into the FDA to support a clinical trial or a commercial BLA application, there is extremely detailed SOPs and procedures all the way down to, things that simple as the padding that goes the blood cassette where actually [ph] goes inside the dewar that goes inside a secondary packaging option which then goes out for distribution. And if you change something as simple as the padding of that particular package itself, the FDA requires you to demonstrate that that change does not adversely impact the quality of the material being transported. And so you may think that is absurd and ridiculous, which frankly if you look at it from a layman's perspective, I don't disagree with you. You take a look at and then you go why on earth would that matter? But for us to even do things as simple as converting them from an older model data logger or which looks at chain of condition, chain of custody to our new GPS-enabled data loggers, in many cases they have to actually do a study to demonstrate that that particular equipment doesn't adversely impact the product being transported. And what the FDA is concerned about because these things are all cryogenic in nature. Something as simple as the probe that goes inside the dewar to monitor the temperature provides - actually gives off heat. And so even things like the placement of that - let's call the thermocouple inside the dewar, the FDA wants to understand exactly where that is. And if that changes, you have to provide justification. So it can be very, very problematic. It takes time for them to actually go through and do those processes and they have to actually sometimes run what's called a bridging study to demonstrate parity. I hope that helps.

That does help. But let me ask you a follow-up question to that.

Sure.

So we have 16 Phase III trial customers currently. I'm not - I'm assuming a reasonably high proportion of those will be approved and raised to commercial status. So my question is - let's pick one of those at random unnamed and the BLA is approved by the FDA June 30 next year. Most pharma companies that I've been involved with are able to launch their product into the marketplace within 30 to 45 days subsequent to an FDA move to get application approval. Are you telling me that it's going to be months after an approval before one of your clients can be actively shipping the CryoPort solution because it's certainly not going to be [indiscernible].

So I'm not saying that at all, because you have to differentiate a clinical win transition versus something that we have supported all along. So those 16 Phase III trials that we were talking about, if one of those files, our solutions is already written into their documentation regulatory work for the FDA. So the minute that they can commercialize, we are already written into those protocols. There is no delay. However if somebody converts from an internal options, so they have their own fleet and they want to convert to a CryoPort fleet or they are using a third-party and they want to convert to a CryoPort party, and they are actively - all of that our other documentation in regards to processes toward option B are already in their procedures, they have to write and change that. That's why we've been very aggressively going after the clinical market because supporting on a clinical trial, the more that we get embedded early on, it provides that advantage from us from a support standpoint because we don't have to go through all these hurdles and jump through these hoops to support a program.

It makes sense. Sounds for an existing biological company to convert to CryoPort which explains what you’ve been unable to pick up any significant commercial already commercial business, none of these guys want to go through the time and expense of six to nine month bridging study/conversion process. So is it fair to say that the vast bulk of your business going forward will only emanate from your current stable clinical trial client relationship?

Absolutely not. If there is a significant inherent advantage to them to make that shifts and that was the reason that - let's take, BMS for example, they saw a significant benefit in the product that we had on the table. It conveyed to them and it does this in a marketplace, in many instances, we reduce the risk of the product during distribution. So for example, if we can reduce the failure rate on distribution of their drug product from 5% to 1%, think of the economic advantage for them. That's huge.

I understand, and that’s why I’ve been really disappointed over the last 18 months that you have not been able to collect any significant existing commercial business, i.e. take market share away from existing shipping applications with the exception of Bristol so far.

Well, and that's one of the reasons we conducted a study that we had. So the study itself - there is a paucity of scientific data in the marketplace that really demonstrates the advantage of conversion, and so we really wanted to justify. And then many times we’ll go in and sit down with the big pharma and they'll say show me the data, and we needed to generate the data to demonstrate that. We are currently doing that and having those exact conversations because we have a data to approve the benefit. Does that answer your question?

Yes, thank you.

Great.

And there are no further questions in the queue. I'd like to turn the conference back for any additional or closing remarks.

Well, again I want to thank everyone for joining the call. We really appreciate your support, and we look forward to continuing to make progress in the next call. Thank you very much.

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