Ladies and gentlemen, thank you for joining us for the Cryoport, Incorporated Third Quarter 2021 Earnings Call. During this call, all participants will initially be in listen-only mode, followed by a question-and-answer session. Please note that this event is being recorded on November 4, 2021. I would now like to hand the call over to Mr. Todd Fromer, President of KCSA Strategic Communications.

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 that 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 or 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 the other reports which we filed with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Mr. Jerrell Shelton, Chief Executive Officer of Cryoport. Jerry, 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 Scientific Officer, Dr. Mark Sawicki; and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. As a reminder, we have uploaded the third quarter 2021 in review document to our website. It can be found under Investor Relations in the "Events and Presentations" section. The document provides a review of our recent financial and operational performance and a general business outlook. If you’ve not had a chance to read it, I would encourage you to go to our website and download it. Now, for a brief update followed by your questions regarding our third quarter results. I’m happy to report that our third quarter was the fifth consecutive record quarter for Cryoport. Strong demand coupled with the supremacy of execution from our team drove our solid performance in the quarter and we are firmly on track to deliver record revenue for the full year. During the third quarter, we added 38 new customers at Cryoport Systems, which has doubled the prior quarters with new wins. Revenue from our eight commercial agreements increased 44% year-over-year while CRYOPDP added 72 new customers during the quarter. The number of clinical trials we support increased 13% year-over-year in organic growth from Cryoport Systems and CRYOGENE developed or delivered a 38% year-over-year revenue increase. Cryoport on the whole performed well in third quarter with CRYOPDP and MVE Biological Solutions delivering solid growth that was well above their historical growth rates. Cryoport is setting the pace for the cell and gene therapy supply chain through our deep expertise and comprehensive solutions. Our pipeline of commercial customers is the largest in our history. We’re now supporting 582 regenerative medicine clinical trials with 70 of them in Phase 3, approximately 30% of our pipeline is allogeneic, of which 32 are in Phase 3. We’re currently supporting eight commercial therapies and regenerative medicine. For the remainder of this year, we anticipate up to another four MAA or BLA submissions for Cryoport supported products. In 2022, we’re looking for up to 21 additional filings. On the financial front, our total revenue in the third quarter of 2021 was a record $56.7 million, up from $11.2 million in the same period of the prior year. On an organic basis, that is without acquisitions, this translates into 38% year-over-year growth. Overall, we had a revenue increase of 371% over the third quarter of 2020. In closing, we’re proud of our performance. The momentum we are seeing in our business, and our strong results through 2021 are a testament to our strategic resource allocation, superb execution of our talented teams of employees, and ever-improving capabilities. It is our relentless pursuit of superb execution and innovation that continues to set us apart and support our leadership position. Operator, please open the line for questions.

Our first question is from John Sourbeer from UBS. You may now proceed.

Hi, thanks for taking my question. New wins were up around two times from the prior quarter and clinical trials were up in the teens year-over-year. Can you maybe talk a little bit about some of the competitive contract wins? And do you think that Cryoport Systems is currently taking share from competitors?

John, that’s a good question. Dr. Sawicki is best suited to answer that question. Mark?

Yes, thanks, Jerry. Yes, I think we’re absolutely still pulling share from the market. That’s our goal; ultimately, to continue to increase our overall market, in particular in the cell and gene space. The 38 wins to us is significant, especially as you’re coming out of a COVID low in terms of new business development. We’re very, very comfortable that we are pulling share.

Got it. I appreciate that. I think gross margins declined around 70 basis points. Can you talk maybe about any of the impacts you’re seeing there from supply chain issues or inflation that is impacting the margins?

Yes, that’s a good question. I think Robert is best suited for that.

Yes. First off, we are a supply chain company. So obviously, we’re very in tune with that. We’re very focused on that. I think if you look at the third quarter, our primary objective during the third quarter was really to ensure minimal disruption to our client base, which we did very successfully. We experienced supply chain challenges, such as increased costs of suppliers and transportation costs. We’re very much focused on that. We have no clear line of sight into the supply chain to ensure that we have the resources and capacity for our expected growth for the next quarters. So we believe that Q3 was really the peak of the supply chain challenges. Having said that, this is an ongoing issue that we’re very much focused on. We expect that to improve over the next quarters.

Got it. I guess this is the last question here, since acquiring CRYOPDP, you’ve done a couple of tuck-in deals there in Europe and Australia. Any thoughts on the opportunities where there could be potential for new geographies for tuck-ins there?

In any thinking, any opportunities in terms of the growth expectations in those regions?

Or just new regions you might be looking at or to do similar to the deals that you did in Belgium and in Australia?

No, let me explain that. We’re looking at all regions. We divide the world into the Americas, EMEA, and APAC. The highest growth region we’re looking at right now for the future is, of course, APAC. We think that the China market is really interesting, and it’s going to be large. We have several initiatives going on there. So we’re looking globally, regionally, and have a particular focus on Asia-Pacific at this point.

Yes. In the past, we’ve talked about our M&A strategy, which includes more of these tuck-in acquisitions that you’ve seen with the Belgium and Australia acquisition, as well as potentially other strategic opportunities.

Got it. Congrats on the quarter and thanks for taking my questions.

Thank you.

Thank you.

Thanks. Our next question is from Chad Wiatrowski from SVB Leerink. You may now proceed.

Hi guys, congrats on the quarter. Real quick, can you provide any color on Delta-driven clinical trial delays seen around the space as of recent? Have you seen any impact in certain geographies? If so, where do you see this trending in FY2022?

I think Tom is on top of that, so he can give you some insight there.

Actually, that, and Mark can echo this after I finish, but we’ve seen a good clinical trial count add, just like we’ve added new customers in the quarter at a good pace. We haven’t seen a slowdown. I know some of the reports are out there, but if you look at the overall macro trends, the amount of money in the space, and the amount of new companies being formed in the space, I think there’s quite a big pipeline of INDs. We’re a little bit behind on, and we see those coming through. So I don’t think we’re going to see any slowdown at all. It seems to be picking up as evidenced by our forecast of BLAs and MAAs in 2022. Mark, you have any further thoughts?

No, I… Tom’s exactly right. In fact, I don’t see any lingering impact or delays associated with COVID-related activity. Everything’s back to pre-COVID levels. In fact, as Tom mentioned, the activity is actually stronger at this point in time. So we’re very confident in the near future.

Great. Thanks for taking the question and congrats again on the quarter.

Thank you.

Our next question coming from the line of Brandon Couillard from Jefferies. You may now proceed.

Hey guys, this is Matt on for Brandon. Thanks for taking the question. Maybe I’d jump back over to the APAC region; clearly, an area of focus for you guys. Can you just talk about the market share dynamics there for you and how that compares to maybe the U.S. or Europe? And in terms of competition, in some of the key markets there, like Korea and China, what’s the competitive dynamic there today?

I’ll comment first. And then I’ll let Mark comment, Matt. But look, APAC is a developing region. We have initiatives going on in China and Japan, and we have locations, of course, in Singapore and Australia. We’re in tune with what’s going on, but it is developing and there is local competition in each of those areas, but nothing is set right now. We’re looking for more domestic support in growing the domestic business as well. It’s absolutely a focus for us. Mark, do you want to add to that?

Yes, absolutely. If you take a look at our numbers, our APAC numbers are up from a clinical trial standpoint about 35% year-over-year. We are seeing acceleration in that activity. The biggest challenge associated with APAC, in particular China, where the majority of clinical programs are running, has traditionally operated under the Ministry of Health mandate, which has looser regulations compared to formal bodies like the Chinese FDA or the U.S. FDA. As these programs mature, they’re starting to evaluate and look at things such as supply chain under a much more rigorous regulatory format. We’re seeing the increased demand as these transition over to more traditional programs, which we anticipate will accelerate.

It’s really helpful. You noted in the release that about 30% of pipelines are allogeneic, which is on par historically, but given the development in that space with 32 Phase 3 clinical trials, can you just update us on how you’re thinking about serving the allogeneic market going forward and if some of the moves you’ve made over the past few years have positioned you better to serve that market?

Sure. I can take that if you want, Jerry. As you’re aware, we’ve been building out what we call our supply chain centers, which include a full bio services competency. One of the reasons that we’ve done this is to support the staging of allogeneic volumes as it relates to batch manufacturing distribution. We’re preparing for it, and we do have the infrastructure in place to support any of these launches as they move forward.

Yes. Hi guys. The backlog obviously shows very good core growth on logistics. Would it be fair to say that the acquired businesses are up similar to Q2, meaning up about 20% organically? Is that in the ballpark? And then, does it look like they were kind of flattish sequentially? Is there any seasonality in those acquired businesses that create that kind of sequential flow?

Yes. Just to address the performance of MVE Biological Solutions and CRYOPDP, you are absolutely right. Both had significant growth compared to their historic performance, well above the number you mentioned. It’s hard for us to say whether that’s seasonal; there were some supply chain-related delays that we experienced during Q3 that impacted revenue. Overall, it’s been a very strong performance and we see that continuing into Q4 and beyond.

All the growth numbers were almost not quite, but almost double what you said. We have a record backlog, so we’re in great shape, but both businesses are doing extremely well.

It seems like the sales integration is working. Can you talk about what’s going on with that?

We do get integrations that are a bit different from other companies where we operate as an operating holding company. We do get synergies from one another. Our culture is throughout the company, not just in one section. So that's taking place in a very nice way. We get referral business between the two, and it’s working nicely.

You mentioned possible 21 BLA filings next year; that was about 14 the last time you reported. Is that a good read-through?

Yeah, the numbers are accelerating.

We see an acceleration in that. A lot of programs that have had delays for various reasons are starting to pull forward. There’s a significant bolus of activity on longstanding clinical portfolio companies that are now getting ready to file. We’re very bullish because of that.

Can you talk more about the supply chain pressures you saw in Q3? You mentioned Q3 as the peak for inflation. Have you purchased a year of inventory ahead or locked in pricing for a year?

We’re increasing our safety stocks. I can't tell you that it's uniformly a year across everything, but we’re definitely meeting price increases head-on and negotiating where we can. Our team is equipped and highly trained, and we're facing the supply chain issues effectively. I think our team is doing a fantastic job in managing through it.

Let me just add one point there; we’re ensuring that we have supplier redundancy in our platform, which gives us more flexibility as it relates to material procurement.

So MVE was operating at maximum capacity. Can we assume those productivity levels have been maintained? Is there any slowdown due to supply chain concerns?

Both plants are adding extra shifts. We have tactical plans to improve capacity within the plant and strategic plans for future expansion. Great teamwork, and we’re working down that backlog to improve customer response.

What about the BLAs and MAAs filed for 2021? Have those numbers declined?

Yes, some were pushed out and one was voluntarily withdrawn. It’s a mix. We moved them from previous estimates down to a more accurate projection.

Can you provide details on why you’re winning in the market, and are you able to take prices?

We are the only fully integrated supply chain entity in the cell and gene space. This allows us to control the quality platform and better manage risk. This is a significant driver for market share. Our focus is around a platform that eliminates risk, and we don’t have an interest in commoditizing our space.

As Mark just explained, we execute in a way that's superlative compared to others in the industry. It’s a compelling formula when the customer looks at Cryoport.

Thank you.

Next question coming from the line of David Saxon from Needham. You may now proceed.

Maybe just talk about the APAC region and the pace at which regulatory bodies in APAC are moving to approve cell and gene therapies. How does that compare to the FDA, and how important is the Chinese market to reaching that five-year revenue target of $650 to $750 million?

Mark, do you want to take that question? It’s right down your alley.

We’re already seeing commercial revenue out of APAC, particularly from the Japan, Australia, and Singapore markets. We believe this will continue to expand aggressively. The expansion in China is significant for our portfolio, which is why we are focused there; it’s a substantial market.

That was helpful. On the gross margin metric, it sounds like there’s residual impact in Q4. Should we be thinking somewhere in between the second quarter and the first half?

Regarding the Cryosphere, it will be launched in the first half of the year, targeting the first quarter of 2022. It’s a revolutionary shipper and has been well received.

The headwinds globally will not seize immediately. We are taking measures to address the issues and ensure we drive market share and revenue.

Thanks so much, and congrats on the quarter.

Our last question for today comes from the line of Yuan Zhi from B. Riley. You may now proceed.

Congratulations team on another outstanding quarter. I have a few questions. Can you comment on how supply chain issues are impacting your segments, including Cryoport Systems and CRYOPDP?

Margins on other businesses were not significantly impacted. It was mostly related to supply chain challenges specifically within the MVE Biological Solutions business. We are rolling out several initiatives from a supplier and pricing perspective and are confident in achieving our gross margin targets over time.

We also see customer referrals between the businesses as well.

That's all I have. Thank you.

Thank you.

Thank you.

We have no further questions in queue. I’ll turn the call back over to Jerry Shelton for closing remarks.

Thank you for your questions. In closing, I’d like to say that we are confident about our future. As a mission-driven business, we will continue to focus on growth and the creation of long-term value for all of our stakeholders. The strong results we have delivered this year, the progress that we have made against our strategic plan, and the initiatives we have underway may pretend a very exciting future for Cryoport. We’re glad you could join us today, and we appreciate your continuing support and interest in our company. We look forward to updating you on our progress again next quarter. We hope you all have a great evening.

Thank you, sir. And ladies and gentlemen, that will conclude the conference call for today. Thank you very much for your participation, and you may now disconnect your lines. Thank you.