Thank you for being here. Welcome to Cryoport, Inc.'s First Quarter 2020 Earnings Call. All participants are in listen-only mode and the conference is being recorded. There will be a chance for questions after the presentation. I will now hand the floor over to Todd Fromer, Managing Partner of KCSA. Please continue.

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 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 revenues from our commercial agreements supporting Gilead's YESCARTA and Novartis' KYMRIAH, which contributed $2.9 million in the first quarter of 2020, representing a 110% increase compared to the first quarter of 2019. In addition, bioservices revenue was $1.3 million and not included in last year's numbers. We are pleased to report that in April, Gilead renewed its agreement with Cryoport, which covers Gilead's entire portfolio of therapies in development as well as YESCARTA for our temperature-controlled solutions. We expect the ongoing rollouts of both YESCARTA and KYMRIAH to patients in the Americas, EMEA, and APAC to drive continued ramp in activity, as related to our agreements supporting these commercial products. Two Cryoport-supported therapies filed for commercial approval during the first quarter of 2020 and a third filed subsequent to the quarter end, demonstrating the continued focus in the biopharma market on bringing these potentially life-saving therapies to market, even with the current challenges and uncertainties resulting from the COVID-19 pandemic. As providers of mission-critical logistics solutions to the healthcare industry, we are carefully monitoring the spread of COVID-19 and any potential impact it may have on our clients. While we have experienced minimal disruption to our commercial portfolio resulting from the COVID-19 pandemic, a meaningful number of our clinical trials we support have been temporarily paused. We are pleased that none of our trials, to our knowledge, have been terminated as a result of COVID-19. As I said at the beginning, I am proud of our great team of leaders who have implemented multiple business mitigation plans, and I am confident in our ability to navigate the uncertainties plaguing the world and our markets today. As a business that is a lynchpin in the life sciences industry and one that prides itself on supporting resilient supply chains, mitigating risk and having best-in-class validated cleaning and disinfection processes that ensure effectiveness, we are fortunate to have continued business and to have considerable resources at our disposal, allowing us to continue to operate during this time. We have not laid off any employees as a result of the pandemic and expect to immediately be in a position to ramp up our support on paused trials as soon as they are restarted, new trials as they begin and, of course, commercial products as soon as they're approved. In the meantime, we will do everything in our power to contribute to the fight against COVID-19. For Cryoport, this means that we are currently providing comprehensive logistics support for six clinical trials that are potential COVID-19 treatments and vaccines. As the life sciences industry leader in temperature-controlled logistics and biostorage of life-saving advanced cell and gene therapies, vaccines and other fragile and high-value biologics, we are proud to be in a position to use our expertise to support the development of these much-needed therapies and vaccines. Fortunately, we are also supported by a strong balance sheet, along with long-term agreements providing vital solutions to the life sciences and healthcare industry. We benefit from an exceptionally loyal client base, which we attribute to our consistent performance, unparalleled experience, which includes partnering with industry leaders and pioneers and our cutting-edge solutions based on the most advanced technologies. As a result, we can be confident in our future, and we will continue to execute on our plans to expand our capabilities in anticipation of the expected growth in demand for our supply chain solutions. Now, I'd like to turn the call over to the operator to open the telephone lines for your questions.

Thank you. We will now begin the question-and-answer session. 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, I understand. It's great to see you're involved in some COVID trials. Should we expect even more business from this in the future? Was this just the beginning? Can we anticipate more growth as the year progresses? Any additional insights you can share would be appreciated.

Well, it's difficult for us to say if there's additional support we can provide for the COVID-19 issue. Is that what you are 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, kind of speak about the state of the business over there. Thanks, guys.

Mark, could you share your thoughts?

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. The number of new clinical trial additions in Phase II and Phase III has been the highest we've seen in some time. Are these mostly from existing clients, or are they new clients that were in-sourced and are now outsourcing as they move into later stages? Any insights you can provide on these later-stage additions?

I'll let Mark comment on that. It's primarily a combination from end clients, and 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 onboarded 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 have been a combination of that in-source activity as well as our existing client portfolio.

Any update you can share regarding cross-selling to our 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 in this area. Most of it has involved clients transitioning from Cryoport systems to Cryogene. We expect this progress to continue.

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 a 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 need to answer that.

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 or demographic. It's spread out over Phase I, II, and III programs.

Yes. Are the six COVID trials included in the increase in client numbers that you mentioned, a total of 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, the reproductive part of the business was the hardest hit by the COVID pandemic because it is very personal. We handle the transportation of eggs, embryos, and sperm. Some of the larger clinics even paused their operations for a month. They are now starting to resume activities, and we expect that business to recover as soon as possible. Currently, it is in a recovery stage.

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, we have a fantastic logistics department that has enabled us to find workarounds and alternatives. As a result, we haven't missed any shipments or openings at all. This success is thanks to our team. You're right that it has had an impact and created a lot of extra work, but we have managed to handle it.

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. The short answer is no. Our logistics team has everything completely under control and has a clear vision of what the future holds. We maintain constant communication.

Yes, our strong relationships with integrators in freight networks have allowed us to be very creative and flexible in ensuring that we can shift volume from the consumer network into the freight network quite 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 broader than just a shipper. I'm going to turn that over to Robert, and he'll provide more details.

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.

Thank you. Hello everyone. I've received numerous inquiries from investors about Cryoport and its relationship with COVID-19 vaccine developers, particularly Moderna. Can you provide any insights into your participation in COVID-19 vaccines? Also, how significant is the revenue potential from this in the short term?

It's too early for us to comment in detail. These projects are currently in development, including vaccines and treatments that we're supporting. We maintain a policy of not discussing specific clients. However, as a group, this is what we are supporting. Mark, do you want to add anything?

Yes, I can provide some details on that. In terms of vaccines, we are currently involved in six programs related to COVID treatments. One important aspect to mention is our collaboration with Lonza, where we are assisting with the logistics and distribution of all products manufactured at their facilities. This means that if they engage third-party contract manufacturers, we will also be involved in that process.

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?

We haven't been able to quantify that yet. Some suspensions are still in place, while others are set to resume soon. This situation relates to how specific trials are conducted, patient access to vaccination sites, and staffing levels at some facilities. We believe the situation is improving and will evolve shortly, but we can't provide additional details at this moment.

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 remained strong. We are saving many lives during this tragic situation with the pandemic. So, the short answer is no. There has been no reluctance in the commercial volume, as indicated by our continued increase.

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 is about the Cryosphere and whether there was an advanced therapy shipper.

Yes.

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

Yes, there is a defined interest in ATS, especially because our ATS product line utilizes our patented validated cleaning methodology, which is unique in demonstrating a six-log reduction in contaminants, including general coronaviruses. It hasn't been specifically 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. We have a strong pipeline and are exploring opportunities, but there is nothing in progress at this time. However, we are actively looking for companies that can help us further our mission, support our strategy, and expand our presence in our current areas and adjacent markets. So, that’s our status on that. Nothing is underway right now, but we are actively searching.

Okay, great. I was exploring your website and I'm interested in hearing more about the additional bioservices you are currently working on. Besides storage and Cryogene, such as the regulatory QP services, packaging, and drug return leasing, could you explain how these tie into logistics? Please go ahead.

Yes, I'll have Mark add to this. We have Cryogene, which was our initial step into bioservices, and we are now developing bioservices operations at two new global supply chain centers we're establishing in Morris Plains, New Jersey, and Houston, Texas. These facilities are expected to be operational by the end of this year or early next year. They will be groundbreaking, offering kitting and labeling services that will support therapies in a completely new way. Currently, our primary service is biostorage through Cryogene. While we are considering additional services, we are still in the process of developing those offerings. Our current focus is on biostorage, which involves managing valuable specimens. Mark, feel free to add more details on this.

The main purpose of our bioservices competency is to respond to client requests. We have established strong relationships within our portfolio and have a proven history of effectively meeting their needs. Clients have approached us specifically for support in storage, especially concerning the allogeneic side of the business. A significant number of the upcoming BLA filings in 2021 are focused on allogeneic therapies. We have received considerable requests related to this, as well as for expanded temperature ranges, which also pertain to our 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 approximately another six this year.

Do you know how many were outstanding from 2019?

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 will be an addition to our logistics. What we are preparing for is allogeneic products. Thirty percent of our trials involve allogeneic approaches. We anticipate that this will advance rapidly, and we will be ready to support this new category as it becomes 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.