ThermoGenesis Holdings, Inc. (THMO) on Q1 2023 Results - Earnings Call Transcript
Operator: Good day, and welcome to the ThermoGenesis Holdings Conference Call and Webcast to review Financial and Operating Results for the First Quarter ended March 31, 2023. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the conference over to our host, Paula Schwartz of Rx Communications. Please go ahead.
Paula Schwartz: 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 15, 2023. 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 now like to turn the call over to Chris. Please go ahead, Chris.
Chris Xu: Thank you, Paula, and thank you to everyone for joining the call this afternoon. We appreciate you to take the time to listen in. During the first quarter, we are making progress towards executing our plans to transform from a medical device company to an integrated contract development and manufacturing organization, or CDMO, for the cell and gene therapy market. In March 2023, we closed a $3 million private placement, which will help support the planned launch of our CDMO business. The goal is to leverage our unique and proprietary automated and semi-automated cell processing technologies, including the CAR-TXpress platform to manufacture future cell and gene therapies cheaper and more efficiently. To that end, we have made significant headway building out a 12-unit ReadyStart cGMP suites at our 35,500 square foot facility in Sacramento. These class-7 cleanrooms are designed to meet the highest scientific quality and regulatory requirements that will be ideal for the early-stage companies and institutions developing next generation of cancer medicines, such as CAR-T cell therapy and to accelerate drug candidates into connect quicker and safer. Our goal is to establish solutions for customers in order to streamline the supply chain, increased manufacturing predictability and manage overall risk. We have begun to market this turnkey solution to early-stage life science cell and gene therapy companies, who are looking to jump start their development efforts and scale up in the same facility. We expect the ReadyStart cGMP suites to be available for these - to customers in the second or third quarter of this year. As you may know, for over 35 years, ThermoGenesis has pioneered the development and manufacturing of a series of innovative automated technologies and products specifically for the cell banking and cell therapy industry. In fact, ThermoGenesis has been the leading provider of choice for automated cell processing and automated smart cryo storage technologies for some of the world's most important public and private cell banks. Our BioArchive smart bio storage systems has warehoused close to 90% of all U.S. FDA, BLA approved clinical grade cord blood units or CBUs, and our AXP system has been used to process well over a million samples from well over 100 institutes globally. In addition to our manufacturing know-how in cell and gene therapies, the intellectual properties that we have amassed over the years are invaluable. Driving our ship to a CDMO, large part is the continued growth of the industry focusing on the potentials for personalized cell and gene therapies. Since 2017, 6 autologous CAR-T cell therapies have been approved by the FDA. CAR-T cell therapies were approved as the last line of defense for those patients, who did not respond to other therapeutic options. More recently, there have been several CAR-T trials that have shown that such therapies can outperform second-line or standard of care options, indicating that the applications for CAR-T cell therapy may expand it in the future. Recent reports show that the industry anticipate additional FDA approvals with as many as 10 to 20 new cell therapies potentially being approved for commercialization annually, starting in 2025. With more cell therapies, such as CAR-T cell therapies received FDA approval, the demand for manufacturing of these life-saving therapy continues to grow. As we speak, there are more than 350 U.S. companies alone working in the cell therapy arena and more than 1,000 pipeline assets in clinical development globally targeting a range of blood and solid tumors. While a majority of these innovative research were driven by small to medium-sized biotech companies and medical research centers, the demand for third-party manufacturers continue to grow. Each of our well-income processing ReadyStart cGMP suites will provide a flexible option, enabling small to medium-sized companies to achieve their anticipated milestone faster and more efficiently. Additionally, our team's strong expertise in regulatory affairs and product commercialization will help accelerate the development of our customers' products, allowing them to focus on their science, while ThermoGenesis will manage the regulatory and quality compliance associated with running a GMP facility. With ThermoGenesis' strong intellectual property positioning, cutting-edge technology and manufacturing service expertise, our new facility will have the ability to address the increased demand for cell and gene therapy manufacturer capabilities. We will remain focused on launching the CDMO service and ReadyStart cGMP units to customers in the cell and gene therapy field in the next few months. And with that, let me turn the call over to Jeff to share the key financial results for the first quarter. Jeff?
Jeff Cauble: Thank you, Chris. A full discussion of our financials is available in our 10-Q, so I will just take a moment to review key financials for the quarter ended March 31, 2023. Net revenues for the quarter were in line with the first quarter of last year at $2.6 million. Product mix was slightly different with higher domestic AXP disposable sales and BioArchive service revenue in the current year. Gross profit for the quarter was $1.1 million or 43% of net revenue compared to $900,000 or 35% of net revenues for the first quarter of 2022. The increase was driven by lower inventory reserves in the current year. Selling, general and administrative expenses were $1.8 million for this quarter, as compared to $1.7 for the first quarter last year. The increase was driven by rent and operating expenses for our new CDMO facility offset by lower personnel expenses. Interest expense was $3.9 million for the quarter, driven by noncash amortization expenses related to the company's convertible notes. For the quarter, the company reported a comprehensive loss of $5 million or $4 [ph] per share based on approximately 1.3 million weighted average shares outstanding. The company ended the quarter with cash and cash equivalents of $5.9 million as compared with cash and cash equivalents of $4.2 million at December 31, 2022. This concludes our prepared remarks. So now we'd like to open the call to your questions. Operator?
Operator: Thank you [Operator Instructions] Our first question comes from Sean Lee from H.C. Wainwright. Please go ahead.
Sean Lee: Good afternoon, guys. And thanks for taking the question. The - I was wondering if you could provide some more color on the CDMO facility. Now that it's almost up and running, how does your pricing compared to similar facilities in the - on West Coast?
Chris Xu: Hi, Sean. Thanks for the questions. And currently, the entire CDMO demand - the demand for CDMO facilities are pretty high in the entire United States. And many of the facility require up to 12 or even more 12 to 18 months waiting period. So the average pricing for the industry also is quite significant. We are priced ourselves comparably to what's offered in industry with some of the initial promotion. But I think what we offer is a missing capacity that the industry currently is lacking. And these facility are very ideal for small to medium-sized company, and we have seen an influx of companies and visitors exploring these options. And our apps will be coming out this coming week - actually this week through Science Magazine. So I think even with a very comparable pricing to our competitors, it's really the missing capacities that we offer. So that's in high demand.
Sean Lee: That's good to hear. In terms of capacity then, what - how many doses are we talking about if all 12 of these rooms [ph] are being used?
Chris Xu: We intend to use that through a mixture of developing our own manufacturing service and meeting out extra space to outsiders. If we use the entire manufacturer suite for ourselves, we are talking about probably close to 10,000 dose of GMP [indiscernible] clinical ready cell and gene therapy a year.
Sean Lee: Okay. That's good enough. My last question is, as you mentioned, I've seen some of your marketing efforts already other way as well. I was wondering whether you've had some comments or questions coming from potential customers on the facility or how to improve it?
Chris Xu: Actually, the feedback are very positive in a way that in our facility, we have the mixture of high-end ReadyStart cGMP suite and also the common lab that developed can be used to develop the cell therapies, which is more of a generalized wet lab. So having capacity of both in the same facility is really ideal for the entire industry for many of the companies. We are actually - as we are aware of probably the only one in the region or even in the nation that is providing such a combination, so people seem to do like this.
Sean Lee: Okay. That's good to hear. That's all the questions I have. Thanks, again, Chris.
Chris Xu: Great. Thanks, Sean.
Jeff Cauble: Thanks, Sean.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Chris Xu for any closing remarks.
Chris Xu: Thank you, operator. We look forward to updating you on our progress during our second quarter 2023 call, and thank you to everyone who participated today and for your interest in ThermoGenesis Holdings. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
