Good day, and welcome to the Cryoport, Inc.'s Second Quarter 2020 Earnings Results Call. Today’s conference is being recorded. At this time, I like to turn the conference over to Mr. Todd Fromer. Please go ahead, sir.

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. We appreciate you joining our earnings call today. With me this afternoon is our Chief Financial Officer, Mr. Robert Stefanovich; our Chief Commercial Officer, Mark Sawicki; and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. As a reminder, we have uploaded our second quarter 2020 presentation on 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. I'd like to start this call by stating that our second quarter results reflect the strength and resilience of our company, where we saw continued year-on-year growth despite the challenging environment caused by the COVID-19 pandemic. Thanks to the tireless work of our colleagues around the world, we continue to successfully navigate the external realities, and we remain focused on our mission of supporting life and health by delivering reliable and comprehensive temperature control supply chain solutions for the life sciences industry through our innovation, advanced technologies and global supply chain network. We reported revenue of $9.4 million for the second quarter of 2020, an increase of 11% compared to the second quarter of 2019. Our growth was primarily driven by revenue from our commercial agreements with Gilead's YESCARTA and Novartis' KYMRIAH, which contributed $2.6 million in the second quarter of 2020, representing a 38% increase compared to the second quarter of 2019. In addition, bioservices revenue was $1.3 million as compared to $600,000 last year, which was represented by revenue from a partial quarter, being the quarter in which Cryogene was acquired. Although 56 clinical trials were suspended during the second quarter due to the COVID-19 pandemic, we are pleased that only three remain suspended as of the end of the second quarter, as sponsors worked hard to get their clinical trials restarted. None of the remaining trials, to our knowledge, had been terminated. We continue to see momentum in the life sciences industry as the development of regenerative therapies accelerates and demand for our temperature control supply chain solutions intensifies. Both Gilead's YESCARTA and FedEx renewed their agreements with Cryoport for temperature control solutions during the second quarter. The FDA approved TECARTUS manufactured by Gilead's Kite, which brings the number of commercial regenerative therapies we support to four: KYMRIAH by Novartis, YESCARTA and TECARTUS by Gilead's Kite, and ZYNTEGLO by Bluebird Bio. We also support Maraleucel developed by Bristol Myers Squibb, which was recently validated by the European Medicines Agency. Through our innovation, advanced technology and global supply chain network, Cryoport has achieved a leading position providing temperature control supply chain support capabilities for the life sciences industry, especially for the fast-growing, high-value, life-saving cell and gene therapy market. In continuation of building our global alliances and further extending our leadership position in the industry, we have signed a new partnership with Medipal Holdings, one of the leading pharmaceutical distributors in Japan, to provide an integrated distribution solution for specialty cell and gene therapies. This special partnership is an important step that helps us grow our services in the APAC region and supplement our Cryoport Express global supply chain network. In closing my comments, I would like to mention our successful convertible debt offering of $111 million. With this addition, our balance sheet is robust and provides us with significant flexibility to continue to develop our Cryoport Express global supply chain network, invest in the development of our advanced technologies, further develop competencies within our team, and position us for acquisitions that are either supplementary or complimentary to our market footprint. Now, I'd like to turn the call back to the operator to open the telephone lines for your questions.

Thank you. Our first question comes from Puneet Souda with SVB Leerink. Please go ahead.

Hi guys. This is Scott Mafale on for Puneet. Thanks for taking the question. So, I want to get in first with the commercial business. It's great to see TECARTUS add to the firm in terms of the products you're supporting. And life-saving cells advancing closer to commercialization, given the dynamics between the ramp-up of these two products and the host of BLA you guys talked about in the past and you're monitoring, how should we think about the commercial business in the second half and into 2021, just the overall trajectory of that business?

That's a great question for Dr. Sawicki.

Thanks, Jerrell. Yes, so obviously, as these products launch, let's start with TECARTUS. From our perspective, I think that we will absolutely see revenue associated with TECARTUS in this fiscal year, and I think the ramp-up will be slightly faster than you would have seen from either YESCARTA or KYMRIAH. Probably top out a little bit less than YESCARTA and KYMRIAH at this point in time. As it relates to ZYNTEGLO, I think that's going to be a bit slower. In fact, it’s probably be nominal revenue associated with this year, and we'll start to see contribution in 2021 in a meaningful way.

Okay, got it. Thank you for that. And I appreciate the incremental color on the COVID trials that you guys are supporting. Just as we look out into the future quarters and into 2021, should we expect Cryoport to participate if there's a large scale commercialization of one of these vaccine candidates? Do we expect Cryoport to be there in supporting that rollout?

I think Dr. Sawicki is going to answer that.

Yes, let me provide a brief overview. From our viewpoint, the logistical support for COVID-19 vaccines under Operation Warp Speed is currently in a state of flux, and the plans are not yet finalized. Unfortunately, there remains a considerable amount of confusion regarding the coordinated vaccine rollout in the United States at this time. Most likely, we will see many companies involved in this effort, making it quite complex. Our aim is to participate, although we cannot reveal details due to confidentiality agreements. At this moment, it's too early to provide any definitive information. Supporting 30 or 50 patient clinical programs is one thing; figuring out how to support and treat a global population is quite another.

Absolutely, okay. I appreciate that. And just lastly, on the clinical trial business, I'm sure you guys have seen, in recent months, there's definitely been an uplift in capital funding for the biotech market. How does this impact your views of the clinical trial business? And are you seeing more activity at the top of the funnel just as these trials start to begin and move into the point where you guys could support them? Thanks.

We're seeing a lot of activity. Mark, do you want to comment on that?

Yes, I mean, we're very bullish, obviously, on the clinical trial space and regenerative medicine. The industry continues to put a substantial amount of assets into the space. I think the Alliance for Generic Medicine just published a report today that shows that year-over-year financing for the first half of the year is up 120%. We expect upwards of another six BLA or MAA filings this year and upwards of 17 next year. So we're very excited about the space.

Great, that's all for me. Thanks, guys.

And our next question comes from Jacob Johnson with Stephens. Please go ahead.

Hey, thanks. Maybe following up on a couple of those questions. How should we think about the long-term growth of your clinical trial revenues? I mean, how much of this will be driven by just clinical trials advancing through the process versus just an overall increase in the number of trials that you're supporting?

Jacob, I didn't quite understand your question. Could you rephrase that?

Yes, how should we consider the long-term growth of your revenues from clinical trials? Is there a way to evaluate that growth, or is it too reliant on the progression of trials and the number you can add each quarter, making it a complex figure for someone like me?

Jacob, it’s not a simple number. The trials are going to continue. We're just in those very early stages of this industry. So trials will continue to trial. And of course, our revenue goes up as trials advance, if they get to the next stage. That's why we report net numbers because there's a lot of activity and trials to call out. And then there are ads, and we report the net number of ads that we have each quarter. Tom, do you want to comment further on that?

Yes, it's a blend. So it is maturation of current trials. It is the addition of new trials. And you have things that nobody sees coming into it like these COVID trials that came out of nowhere with the pandemic all of a sudden. So it's going to be a confluence of factors. The great thing is it's not just domestic; it's globally we've seen the pickup in Europe. And now we also report on the pickup in the APAC region. The only other thing I'd add is the diversification of revenue streams associated with our clinical pipeline. So as we continue to roll out our bioservices and other temperature ranges and product lines, our average share of that spend will increase over time.

Got it, I appreciate the tag team answer there. And then I attended a webinar with Dr. Sawicki where he presented alongside with Lonza a week or two ago. I guess the CDMOs continue to expand in the cell and gene therapy space. Are they focusing more on their cold chain logistics efforts? It certainly seems like Lonza is. And then maybe as a follow-up, could you just give an update on how the relationship with Lonza is progressing?

Yes, I think obviously, the fact that we are co-presenting content to the market demonstrates the strength of that relationship. We continue to work towards maturing that relationship. Our perspective is that that industry is critical to the development of the space in ensuring that the space can meet the projections from a volume standpoint over time. And so, our goal is to have very strong relationships with the CDMO industry.

Great. I'll leave it there. Thanks for taking the questions. Thanks, guys.

And our next question comes from Steve Unger with Needham. Please go ahead.

Great. Hi, everyone. First question.

Hi, Steve.

Hi. Could you provide more details about the Medipal relationship and its significance? Is it a different kind of relationship for you since it involves broad distribution of products? Is that applicable to cold chain across the board, or is it limited to cryogenic only? What are the implications of this partnership? Are you beginning to see revenues from it?

No, it's across the board. But each region, remember, as we divide the world into three regions, into the EMEA, like most companies, into EMEA, the Americas and Asia Pac. Asia Pac is beginning to develop, and you'll see a lot more activity in the future. You've seen our trials go up, and there'll be other trials. It's important that we expand our network in that region. Expanding in that region has its own peculiarities and so forth. Medipal is one of the strongest wholesalers, drug wholesalers in Japan. So partnering with Medipal gives us a stake in the ground, so to speak, in Japan, which is complimentary to our global supply chain network that we're building out. So the arrangement, you could look at as a joint venture, you could look at an independent operation, or you could look at Lonza. What we have here is an alliance, a partnership with Medipal that we believe will be quite good for both of us.

And when do you think you'll start to see revenues from that relationship?

Well, that will take some time. We have just signed the agreement. We have to develop our plan. So I can't tell you exactly when that will happen, Steve.

Yes, I would like – this is Tom. Just to point out two things. One, that KYMRIAH is now approved in Japan, and Novartis also has clinical trials now that will be going on in APAC. So the demand will be driven by the customers more than the alliance or partnership. Does that make sense?

Yes, it does. Okay. And then could you just talk about the change that occurred with YESCARTA? I understand they are now able to manufacture in Europe. What are the implications for your commercial revenues? It sounds like you're flipping from international shipments to more domestic European shipments?

Steve, that's a really good question, and it's one that certainly we are prepared to answer. So Mark, would you comment on that?

No, you're exactly right. We view this as a very positive development. The bottom line is these companies are working tirelessly to increase their manufacturing capacity on a global basis. So long-term, it's going to provide substantial upside from a volume standpoint and be able to support the European markets very effectively. In the short term, obviously, you have a transition from complex international shipments to more straightforward domestic shipments, which has a short-term impact on revenue.

Yes, okay. And then finally, just on TECARTUS, is there an investment that you need to make, primarily in distribution centers or mostly distribution centers? Is there anything else that needs to occur to get that relationship up and running?

No, not at all. I mean, that's what we're built for. So we are ready for TECARTUS and its volume.

Absolutely, okay. Thank you very much.

Thank you, Steve.

Thanks.

And our next question is from Andrew D'Silva with B. Riley FBR. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. And sorry, I had trouble getting on the call, so maybe you answered a couple of these questions, but just to start, Bristol Myers Squibb had an announcement about liso-cel. Was it a little different than most of those kinds of announcements typically? Could you maybe give a bit more clarity on where that is in the regulatory process? And is it something viable for late 2020 or early 2021?

Yes, Tom, why don't you take that?

Yes, you are correct. It was a confusing news release that we had to read over a few times. Their submission to the EMA has been validated, and now it's in the review process before hopefully getting approved later this year or early next year.

Okay, that's much more clear. Okay, great. And then as it relates to the I-CELL, cell therapy transportation standards, were those the same standards you were referencing earlier in the year that you were helping draft or were involved in at least the process while they were drafting it? And if so, could you give just a little bit of color on specifically some of the aspects of it that are really fine-tuned to what you've learned as the leading logistics for cryogenic shipments?

Yes, actually, Mark and some of our other colleagues participated on those panels, and we were delighted to be in a position to be able to supply some points of view and information, but Mark can comment specifically on your question.

Yes, so ISO/TC 276, which is what we had talked about in previous calls, was the working group associated with developing the recommendations for ISO. ISO just launched that regulatory platform which they call ISO 21973. The key element behind ISO 21973 is it introduces within the logistics space a lot of traceability requirements or recommendations for traceability, which is similar to our chain of compliance that we've been discussing, which includes traceability on the equipment, traceability in all the calibration and usage history, traceability on the cleaning validation and recommended cleaning protocols, all of which are things that we do and differentiate ourselves in the marketplace. So we do believe that those recommendations are going to create a higher barrier to entry for potential competitors in the future.

Interesting, okay. And so, this is a little bit off the path, but if you recall, a couple months ago, Novartis was talking about developing a potential gene therapy vaccine. I have no doubt that these regulations are closer to cell therapies, but would you expect that gene therapy vaccine to follow some of these cell therapy transportation standards being cryogenic in nature, or will they have to go through dry ice?

The standards are currently recommendations. We hope that in the future, the FDA will adopt them, as they have already been presented with these recommendations. Until regulatory bodies globally approve these standards, they remain as recommendations. Regarding the Novartis product for a COVID vaccine, trials have not yet begun, so it’s premature to discuss its shipping. I believe Novartis is providing technology, but an academic institution will manage the trial's design and implementation.

Okay, I hope it's perfect. And then my last question is just related to the commercial revenue. Is there a reason that it didn't really align with the increase in sales? I recognize during the quarter there was just the change in location for manufacturing for Gilead, or were there some other nuances that resulted in your commercial revenue declining, but their commercial revenue sequentially increasing?

Yes, it's definitely related to the change in manufacturing location.

Okay, perfect. Thank you very much, and best of luck going forward.

Thank you, Andy.

And our next question is from Brandon Couillard with Jefferies. Please go ahead.

Thanks. Good afternoon. I think you guys launched the CRYOSHUTTLE, the way we launched the CRYOSHUTTLE offering sometime around late Q2 in early June. Can you walk through what that offering does for you, initial demand and feedback, and where it's offered globally, whether it's just in the U.S. or does it also include some parts of Europe?

The CRYOSHUTTLE helps de-risk the process for our customers because we keep our products under our control for a longer period of time. But Mark, do you want to comment further on the CRYOSHUTTLE advantage to the clients?

Yes, so in that sense, what we've done is we put a surface fleet proximal or within each of our logistics centers. We have a surface fleet in Irvine, we have a surface fleet in Livingston, we have a surface fleet in Houston, and we have a surface fleet in Amsterdam at this point in time. What it does is it provides our partners the ability to utilize that surface fleet instead of local third-party couriers who in many cases are untrained with the equipment and don't understand it. So instead of hiring a third-party courier to do that, they utilize our equipment and our trained drivers. We have more control and flexibility over how our equipment is being delivered into those locations within an approximate distance of our facilities. Adoption is growing very strongly; we see a significant continuous increase in the parties that are utilizing it, and we think that will continue in the foreseeable future. So Brandon, with CRYOSHUTTLE we've improved reliability, decreased risk, and by improving reliability, we have cost advantages built in as well. The fewer people that handle it, the less risk in the process. It's an important service.

That's it. Your issue, at a high level, revolves around your share of trials, which keeps increasing, including nearly two-thirds of all Phase 3 trials. I'm interested to know if you see any sort of limit or point at which companies will continue to manage some of the logistics in-house, and how much higher you believe your share can rise with the ongoing outsourcing trend.

Yes, we won't rest until we're at 100%. We think there's ample room for continuous improvement in that and overall share in the marketplace. I think the market demonstrates continuous adoption of our platform, and in many cases we have clients coming to us versus us chasing them down. So we think there's still significant room for improvement and continual capture of share.

Brandon, remember that we are expanding our footprint. We are a different company now. When you first began covering us, our facilities underwent numerous changes in terms of services and products. We are a dynamic, growing company, and our footprint will evolve. There will be more trials, and we are the market leader in terms of market share. We gained some market share this quarter, and we plan to continue gaining market share each quarter. This indicates our ability to grow and maintain our position in the market. That's our key focus.

Okay, guys. Thank you.

It appears there are no further questions at this time. I'd now like to turn the conference back to Mr. Jerrell Shelton for any additional remarks.

Thank you, operator. When I took over the leadership of this business eight years ago, I had a vision, and since that day, our team has been delivering on it. Every passing day, our collective commitment grows stronger, as we believe that by providing reliable, advanced, and comprehensive temperature control supply chain solutions, our clients and the industry will continue to place their faith in us. Through the sustained efforts of our colleagues around the world, we have established the leading temperature control supply chain services company supporting regenerative medicine globally. Through our innovation and execution, we have earned the respect of our clients and consequently have a loyal client base. Our second quarter results reflect this strength and resilience. We're pleased to report continued year-over-year growth despite the challenging environment. We continue to execute on our organic initiatives and growth initiatives to build out our infrastructure in anticipation of our future, including investment in software infrastructure, additional new competencies, new advanced technology products, and the Cryoport Express global supply chain network. Each of these endeavors collectively further extends our capabilities within the life sciences industry's requirement for precision temperature control supply chain solutions and support. The number of cellular and gene therapy trials will continue to grow, and a greater number of commercial therapies will be coming to market on an accelerating basis for many years to come. To continue to support the life sciences industry and prove our leadership position, we're forever committed to proactively strengthening our core competencies and effectiveness. Thereby, we believe that we will continue to release strategic value that will further enhance our position in the life sciences industry and consequently, economic value to our shareholders. Until our next earnings call, we bid you a good evening. Thank you.

And this concludes today's call. Thank you for your participation. You may now disconnect.