Thank you for standing by. This is the conference operator. Welcome to the Cryoport, Inc.'s First Quarter 2020 Earnings Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to question. [Operator Instructions] I would now like to turn the conference over to Todd Fromer, Managing Partner of KCSA. Please go ahead.

Thank you, operator. 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 occurring 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 team 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 experience 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 filed with the Securities and Exchange Commission. I would now like to turn the call over to Mr. Jerrell Shelton, Chief Executive Officer of Cryoport. Jerrell, the floor is yours.

Thank you, Todd. Good afternoon ladies and gentlemen. Thank you for joining us during this special time. Before we begin, I want to talk a moment about the actions, dedication, and commitment of our entire Cryoport team. Thanks to them, when the coronavirus pandemic was declared, we were ready with pandemic plans and actions to ensure the safety of our people and the integrity of our operations. Our entire global logistics network has not missed a beat. No shipments have been missed or delayed, and our operations have continued to function seamlessly. We do have some people working remotely with the aid of collaboration and communications technologies, and we have people working from offices while practicing the appropriate precautions. In total, our personnel have acted responsibly and taken the appropriate actions when necessary. I'm impressed by our team at large and the way we have planned, acted and controlled the effects of the COVID-19 pandemic. With me this afternoon is our Chief Financial Officer, Mr. Robert Stefanovich; and our Chief Commercial Officer, Dr. Mark Sawicki. As a reminder, we have uploaded our first quarter 2020 in review document to our website. It can be found under the Investor Relations section in the Events & Presentations section. This document provides a review of our recent financial and operational performance and general business outlook. If you have not had a chance to read it, I would encourage you to go to the website and download it. As with previous quarters, on this conference call, we will provide you with a brief general update. Then we'll move to addressing your queries regarding our company's results. We reported revenues of $9.8 million for the first quarter of 2020, an increase of 47% from the first quarter of 2019. This was primarily driven by record…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Puneet Souda of SVB Leerink. Please go ahead.

Hi guys. This is Scott Mafale on for Puneet. Thanks for taking the question. So, I want to dive a little bit more into the trial delays that you mentioned. Was curious if the rate of new pauses that you're seeing has been slowing in recent weeks. Or in other words, do you expect most of the trials that are going to be paused kind of already have been paused, and it's kind of behind you?

I think that's a question for Dr. Sawicki.

Yes. Thanks. We've actually seen the activity from our perspective bottom out, and we're already starting to see some improvement in volumes. So, obviously, we can't determine if that's going to be consistent over time. But we're cautiously optimistic that we're starting to come out of it.

Okay, got it. And it's great to see that you guys are involved in some COVID trials. Should we expect even more business from this moving forward? Is -- was this kind of just the beginning of it? And can we expect more of a tailwind as we move out throughout the year? Just any more commentary you can provide on that would be helpful.

Well, that's really hard for us to say in terms of -- you're asking if there's more support we can give to the COVID-19 issue. Is that what you're asking?

Yes, if you expect to maybe bring on any more trials from the six you mentioned?

Go ahead, Mark.

Yes, I mean, the bottom line is that we're constantly being requested by our portfolio companies to support different aspects. If any of them do make a determination to start additional programs, our expectation is that we will get them. So I mean, there's a net upside of six already. But obviously, our core activity of clinical trial and commercial activity, we haven't seen any material impact on the total number of trials that we're supporting from that perspective. So, we're still looking forward to three commercial filings, which already had six more this year. And we think that there's still going to be three commercial approvals and 13 filings next year. So, we're very positive.

Okay, got it. If I could just slip one more in on the international business. Could you just talk about maybe how the European business is doing and if you're running into any difficulty shipping internationally due to the restrictions? And just in general, just kind of speak about the state of the business over there. Thanks guys.

Mark, why don't you--

Yes, I mean, Europe is tracking very similar to the U.S. We saw an impact last month due to the activity due to COVID. With the countries over there starting to loosen up some of the restrictions, we are starting to see an increase in activity.

The next question is from Brandon Couillard of Jefferies. Please go ahead.

Thanks. Jerry, just the gross number of new clinical trial additions in Phase II, in Phase III were -- we've seen in some time. Are those mostly coming from existing clients or perhaps new clients that were in-sourced but are now outsourcing as they move into later stages? Any color you can share with some of those later-stage new adds?

I'll let Mark comment on that. It's -- but it's a combination and mostly from end clients, though, just it's a natural progression.

Yes. But to add on that, I mean, we have a very aggressive acquisition policy with our sales and marketing organization as a whole. So, our focus here is really on trying to capture as much market share over time that we can. And to represent that is we actually on-boarded 17 new biopharma clients in the quarter. So, I think that acquisition strategy is going well. And so as Jerry had mentioned, the adds in clinical trials has been a combination of that in-source activity as well as our existing client portfolio.

Any update you can share with us sort of with respect to cross-selling existing customers with asset--?

With what assets? I'm sorry, you cut out.

You think any progress or traction in terms of cross-selling existing customers with the newly acquired biostorage, bioservices business?

Yes, we have made progress there. Most of it has been using clients coming from Cryoport systems to Cryogene. So -- but yes, we're making progress and anticipate that continuing.

Okay. Lastly, nice progress with Kite. Any update on the Novartis side with KYMRIAH in terms of the contract renewal, which I think is a per-year term and maybe coming up for renewal soon?

Yes, Mark is working on that. Why don't you comment on it?

Yes, I mean, we're active in negotiation for that extension with Novartis, and we anticipate that we'll be able to announce something along those lines in relatively short time period.

Very good. Thank you.

The next question is from Paul Knight of Janney. Please go ahead.

Hey Jerry, on the 59 that were suspended in the quarter, is that largely academics doing this?

Mark, you don't have to answer so--

Yes. So, what we're seeing is, it's an accessibility issue at the clinical sites. So, in essence, you have announcements from folks like Fred Hutch and MD Anderson that they're not accepting and supporting any clinical activity because they're focused on COVID. So, the vast majority of what we're seeing is focused around clinical access of these programs into sites that are supporting COVID. But they are spread out across all phases. So, it's not anything particular to any given phase, demographic. It's spread out over Phase I, II, and III programs.

Yes. Are the six COVID trials within that gain in client numbers that you gave us, the total of 60 -- excuse me, 65?

No, they are not because they all initiated after the end of the first quarter.

Okay. Thanks. And then you had also previously announced, I don't think it's in the release, but you are hoping for five commercial approvals this year and 10 additional BLA filings in 2020. How do you feel about that now?

We've already had three filings this year to date that we're supporting, and we anticipate at least six more. So, I think we're relatively on track with those initial projections that we put out.

Okay, got it. And on the reproductive side of the business, can you talk about how things are going there, Jerry?

Yes, reproductive side of the business was the most impacted by the COVID pandemic because it's the most personal part of the business in many ways. It's -- we're transporting eggs and embryos and sperm of people. And so it was impacted. Some of the larger clinics actually suspended their operations for a month. They are now starting to come back to be active again and that we anticipate that business to recover as soon as practical. But it is in recovery stage now.

Okay. And then lastly, I know, obviously, airfreight's under pressure from the commercial airlines side. But I guess, FedEx and others are still operating, of course. But is the disruptions in commercial air travel affecting you at all?

No, and the reason is that we have a fantastic logistics department, and we've been able to establish workarounds and alternatives for -- without -- and so consequently, we haven't missed any shipments or missed any openings at all. We've -- it's due to our people, though. And you're right, it definitely has had an impact, and it's created a lot of work. But we've been able to handle that.

Okay. Thanks.

The next question is from Jacob Johnson of Stephens. Please go ahead.

Hey thanks. First, just on the renewal with Kite/Gilead. Does this change any of the economics of that agreement? Or should we just view this as sort of a three-year extension?

We view this as a three-year extension.

Got it. And then maybe following up on Paul's question there. Obviously, we've seen a pretty big slowdown in commercial air traffic. It seems like you've been able to mitigate it in the near term. But as we look out longer term, could there be some structural shift in the types of shipping lanes you were using?

No, we -- no. No, the short answer is no. Our logistics folks have it fully under control and do have a vision on what's happening in the future and so forth. We have constant dialogue going on.

Yes, I mean, obviously, our very strong relationships with the integrator in freight networks has allowed us to be very creative and flexible in ensuring that we can shift volume in -- from the consumer network into the freight network pretty seamlessly.

Got it. Thanks for that. And then final question, just on the operating expense line, can you give some additional color on the investments you're making there? And maybe particularly on the engineering side, is that related to the shipper itself or should we think of this more as sort of software work?

It's actually more broadly. I'm going to turn that to Robert, and he'll give you some more detail. But it's broader than just a shipper. So--

Yes, there's a number of significant initiatives that are underway and have been underway for a while now, and they all relate to broadening our solution and bringing it to the next level. So, we're having initiatives related to software, to communication, also some really significant potential advancements in the shipper technology. And then as we discussed last quarter, in addition to that, we are in the process of setting up two global supply chain centers, one in Houston and one in New Jersey. And in addition to that, we have expanded our sales force. We've restructured the sales organization now to really be regionalized and to handle the Americas, EMEA, and Asia-Pacific as we start expanding our reach and supporting a global client base.

Got it. Thanks a lot Robert and thanks for taking the question.

The next question is from Steve Unger of Needham. Please go ahead.

Great. Thanks. Hi everybody. I've been getting a lot of questions from investors regarding Cryoport and COVID-19 vaccine developers, specifically Moderna. Is there any comments you can make regarding your involvement in COVID-19 vaccines? And how -- and if so, how meaningful of a revenue opportunity is in this in the near-term?

Okay. So, it's really too early for us to comment in very much depth. These are in development right now, and they are vaccines and there are treatments that we're supporting. We -- it's a policy that we don't comment on anything specifically about any specific client. So, -- but as a group, that's what we are supporting. Mark, would you like to add to that?

Yes, I can add a little bit of color to that. So, the bottom-line is, as it relates to vaccines, we're obviously supporting six programs or COVID treatments -- we're supporting six programs in that space. But one of the things I can point out is, for example, our relationship with Lonza, we're supporting all logistics distribution of any product being manufactured in that physical -- in any of their locations. So, if they're going into third-party contract manufacturers, we will play a role in that.

Got it. And when it comes to the suspensions, I believe there was some impact in the first quarter. Are you able to quantify that? And what is your expectation then for the impact in the second quarter from the suspensions?

It's -- we haven't quantified that. And the suspensions, we -- some continued to exist, and some will start up again. I mean, look, this has to do with just the way that the particular trials are run, the access of patients to the points-of-care for their inoculations and so forth and staffing at the -- in some cases, at the facility. So, -- but so we haven't quantified it, and it's hard for us to tell you how that's going to unfold. We think it's loosening up, and we think that it will unfold here shortly. But we can't give you any more color on that right now.

Got it. Okay. And then lastly, just on the commercial therapies, is there a reluctance to get patients involved in either KYMRIAH or YESCARTA, whether it be in Europe or the United States, during this sort of heightened period of COVID-19?

No, the answer is no. Our commercial activity has absolutely stayed up. And we are saving a lot -- we're helping save lives throughout this whole tragic situation that we have going on with the pandemic. So, the short answer is no. There has been no reluctance in the commercial volume, as you could tell by our increase, has continued to stay up.

Excellent. Appreciate the answers. Thanks everybody.

The next question is from Andrew D'Silva of B. Riley FBR. Please go ahead.

Hey thank you. Good afternoon. Thanks for taking my question and also just glad to hear everybody sounds healthy and is doing well. First question is to get to COVID-19 ones out of the way. You previously mentioned the advanced therapy shipper. So, I was just curious if that became more of a talking point as you're talking to clients right now. And then just obviously, a lot of disruption from a macro standpoint. You have a significant amount of capital right now. Any new M&A opportunities pop up? Any ideas that maybe companies that are falling on a little bit harder times and looking to scale up with a partner?

So, Andy, the first question on the Cryosphere and the advanced -- was there an advanced therapy shipper?

Yes.

Yes, yes, yes. So, Mark should take that, and I'll take the last part.

Yes. So, the short answer is, yes, there is a defined interest -- increased interest in ATS, in particular because our ATS product line uses what we call our very clean patented validated cleaning methodology, which is the only methodology in the space that has a -- demonstrates a six-log reduction in contaminants, which, in doing, does include coronavirus in general. It hasn't been implicitly tested against COVID, but it has been tested against general coronaviruses. I'll let Jerry comment on the second piece.

Your second question was about acquisitions and our position. And the answer is we do have a strong pipeline, and we are looking at opportunities. But we have nothing underway at this particular time. But we definitely are looking at opportunities for companies that can further our mission and support our strategy and broaden our footprint -- in the footprint that we're in and in the adjacencies. So, that's where we are with that. Nothing underway right now, but we're actively looking.

Okay, great. And I was just spending some time combing through your website. I was just curious if you could expand upon some of the additional bioservices that you're trying to implement right now. Outside of storage, right, Cryogene, things like the regulatory QP services, packaging and leasing drug return, can you talk about how that would tie to logistics and -- well, go ahead.

Yes. Yes, I'll let Mark supplement this. But bioservices is -- we do have Cryogene, and that was the beginning. And then we're developing bioservices operations in the two new global supply chain centers that we're building in Morris Plains, New Jersey and Houston, Texas. Those facilities should be on line at the end of this year or first part of next year. But they'll be revolutionary-type facilities, providing kitting and labeling and supporting therapies in a way that they have never been supported before. So, that's in development. Those are -- those services, we don't offer today. It's evolutionary. The thing that we have today is biostorage primarily, and that is Cryogene. And we do -- we're looking at other services that we can offer there, but we -- that is in process. There's nothing particularly new about that. It's just biostorage operation handling precious specimens, et cetera. So Mark, you may want to comment further on that.

Yes, I mean, the whole point behind the bioservices competency is it's being driven by client request. We have very strong relationships with the portfolio. They -- we have a very strong track record of being able to effectively support their needs, and they've come to us and asked us to support the storage aspects, in particular, on the allogeneic side of the business. And a lot of the pending BLA filings in 2021, in particular, have an allogeneic bent to them. So, that's something that we've had significant requests on as well as expanded temperature ranges, which would also fall into that bioservices competency.

Okay. Okay, great. And you may have mentioned this. I was hopping between calls a little bit earlier. Do you know how many BLAs and/or MAAs are currently under review right now, so have already been filed?

Three. Three in 2020 to-date.

And how many more--

And we anticipate another -- approximately another six this year. I'm sorry, I said we anticipate approximately another six this year.

Do you know how many were outstanding from 2019?

From -- yes, three from 2019 as well, outstanding.

Okay. Okay, great. And just last question for me. As you integrate bioservices and just exclude Cryogene storage from that, just additional bioservices, is that something we should expect to result in just increased ASPs when we're talking about per shipment costs or how do you see that kind of falling over to the P&L?

It'll be supplementary to logistics. I mean, what we're getting ready for is allogeneic. We -- 30% of our trials are allogeneic. We know it's coming down the pathway, and it's going to come down quickly. And we'll be there to service that new category as it's commercialized.

Okay, great. Hey, thank you very much. Stay healthy and best of luck throughout 2020.

Thanks.

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

Thank you, operator. I'd like to close this call by highlighting that we are confident in our ability to adapt to the uncertainties and new challenges presented by the ongoing health-driven crisis. Our foundation is strong. Our expenses are carefully managed, and we continue to have confidence that, notwithstanding potential delays due to COVID-19, the regenerative medicine market will continue to mature and provide opportunities to Cryoport to further extend its market-leading position and build out its ecosystem of products, partners, processes, and systems. Most importantly, our relationships across-the-board are strong, and we are working harder than ever to prove ourselves as an outstanding partner to our clients during these difficult times. In closing, I'd like to extend our heartfelt thanks to all of our loyal shareholders for your ongoing belief in our business and our future. Until our next earnings call, we bid you a good evening.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.