Thank you for joining us. This is the conference operator. Welcome to the Cryoport Inc. First Quarter 2022 Earnings Call. All participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for questions. I would now like to turn the conference over to Todd Fromer with KCSA. Please proceed.

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 file 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 us 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 our first quarter 2022 review document to our website. It can be found under Investor Relations in the Events and Presentations section. This document provides a review of our recent financial and operational performance and the 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. I will provide a brief update on the business and then move into answering your questions. Our first quarter was solid. Our financial results reflected continued growth and strong performance that was partially offset by the adverse impact of the fire at our New Prague, Minnesota manufacturing plant of approximately $9.4 million. We believe the impact from the fire is isolated to the first quarter, and we intend to recapture the revenue throughout the remainder of 2022. The plant is now operating at full capacity and the demand and backlog for our cryogenic equipment and systems continues to be very strong. During the quarter, our pipeline of potential commercial customers and return to medicine continued to grow with the total number of clinical trials supported by Cryoport reaching a record 609 trials at the end of the first quarter 2022, an increase of 12% over the first quarter of 2021 and 30% higher than the first quarter 2020. It is worth noting that a record 81 of these trials are now in Phase 3, up from 69 at the same time last year. Demand for our cryogenic equipment systems and services continues to be very strong. To meet the industry demand, we will be expanding capacities in all business units as well as growing our global footprint. The following are but a few examples. Next month, we will have the grand openings of two Global Supply Chain Centers, one in Houston, Texas; the other in Morris Plains, New Jersey. These new Global Supply Chain Centers are the beginning of a Global Supply Chain Center Network, which is complemented by our acquisition of Cell&Co, which is located in Clermont-Ferrand, France, and we'll be expanding to Paris. We will continue making acquisitions to expand our first choice courier network for biopharma. Our world-class biostorage platform will be expanded from Houston into San Antonio and Philadelphia. We will continue to increase our cryogenic systems manufacturing capacities, both incrementally and through plant expansions. These expansions will be augmented with the launch of multiple new services and products across our company such as the expansion of consulting services, the introduction of a fully validated Cryosphere, and a new model of the fusion cryogenic freezer. Through these and other initiatives, our vision of becoming the most comprehensive and compelling supply chain provider serving the life sciences industry is coming to fruition. We are further strengthening our position as the partner of choice for our markets, especially in supporting regenerative medicines from concept to market. Our global markets are facing many diverse challenges today. And while we are not totally immune to global macro conditions, we continue to see strong demand for our products, systems, and services. That is reflected in the guidance we have provided for full year 2022 revenue of $260 million to $265 million. This revenue guidance represents solid growth of 17% to 19% and is driven by current and expected demand across our business units. Further reflection of our confidence in our business outlook can be seen in the $100 million share repurchase program authorized by our Board of Directors. Through April 30th, we repurchased approximately $23 million in shares and remain in the market. Our financial position remains strong with approximately $600 million in cash to support our growing business. We see opportunities to continue executing our strategy of building the most comprehensive and compelling supply chain provider serving the life sciences industry through organic growth, acquisitions, and partnerships. Despite the current turmoil in the capital markets, we are well positioned to continue our track record of strong growth and market share gains for the foreseeable future. Now, we'll be happy to entertain your questions. So, operator, if you'll please open the lines for questions.

Certainly. We'll now begin the question-and-answer session. Our first question is from John Sourbeer with UBS. Please go ahead.

Hi, thanks for taking my question and congrats on the quarter and the initial guidance here for 2022. Just curious if you could elaborate on some of the puts and takes in the guidance for the year? And does that include any of the recapture of the MVE fire headwinds?

John, that's a good question. I'm going to turn that to Robert, Robert Stefanovich.

Yes. Yes. So, for the full year guidance, we have $260 million to $265 million. Just a couple of notes. One, that does include the revenue that we expect to achieve for the full year. So any revenue that we recapture from Q1 that resulted from the entire damage in New Prague is included therein. Also, if you look at the next nine months or the next three quarters, we're looking at about a 23% to 26% growth based on that annual guidance. So obviously, we are quite bullish about the prospects for full year 2022.

Got it. Can you provide some details about the fire in New Prague? Is the recapture related to recovering lost sales, or are there insurance payments involved? I'd like to understand how this will affect our revenue throughout the rest of the year.

Yes, John, we won't face a financial impact because the insurance will cover that. However, our manufacturing team is dedicated to recouping the $9.4 million to $9.5 million loss we incurred in the first quarter over the remainder of the year. The efforts to get the plant back online are progressing very smoothly. Everyone is truly committed to recovering the lost revenue and ensuring that our customers receive the same level of service they have enjoyed for the last 60 years.

Appreciate it. And then, I guess just lastly, public market biotech funding has been a little light year-to-date coming off of record years the last two years. Have you noticed any changes or impacts in your clinical trial business there just from maybe emerging biotech-type players?

Let me start the answer, and then I'll turn it to Mark Sawicki. We haven't really noticed any changes in our clinical trial activity. The number we report every quarter is a net number, reflecting both new starts and terminations of trials. So, the net number is what we report each quarter. As I mentioned earlier, we ended up with 81 of our 609 trials in Phase 3. Mark, would you like to add anything?

Yes, Jerry, thanks. I'll just add a little bit here. Yes. So if we actually take a look at our core competency as it relates to clinical support, we focus on the cell and gene space. In fact, the activity level there has been very strong, if not actually increasing a little bit. We think that there is a very deep pool of financing that's been afforded to these organizations. Many of them have multiple years of cash on hand and are well-established entities that have a deep pipeline. So we feel very, very bullish about the environment as evidenced by, obviously, our continued progress in the space and the progress overall.

Thanks for taking my question.

Thank you.

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

Hey, thanks. Good afternoon. Jerry, maybe just starting with the guidance issuance. Just philosophically, can you just speak to why you feel comfortable starting to issue guidance now? And in terms of the components for the year, what are you assuming for commercial biopharma revenues and, secondarily, MVE growth for the full year if you care to go into further detail?

Yes, that's a great question, Brandon. Up to this point, we haven't provided revenue guidance. However, we expect to achieve between $260 million and $265 million in revenue. Another important aspect is to provide the market with certainty and to convey our confidence. Given the current turmoil, it's easy to interpret things negatively, but we believe we are significantly undervalued in the market. We want to assure the market about our perspective on the year ahead. Those are the main points. Regarding MVE, we do not provide unit guidance, but I can say that our backlogs remain strong, and there has been no decline in demand. In fact, demand has remained robust for quite some time. Robert, would you like to add to what I've said?

Yes. Maybe just what you already said, and obviously, we're confident. We wanted to give investors and analysts kind of that level of confidence for 2022. You may recall, Brandon, in the past, we did talk about the business units really to reflect the acquisition of CRYOPDP and MVE and to look at organic growth versus the acquisitions. Now, this is really one operating platform with the businesses. So, we don't specifically talk about revenue guidance for MVE Biological Solutions or CRYOPDP, but both are expected to grow meaningfully and contribute to the overall results. As you would expect, Cryoport Systems in terms of growth rates is expected to lead the pack.

Yes, Robert, if you don't mind, I would like to add one more point. Brandon, I want to address your question about our commercial strategy. As you know, we take a portfolio approach to our clinical and commercial efforts. Historically, we've focused on expanding our clinical trial pipeline and supporting those launches commercially. This strategy has proven successful, and we anticipate ongoing commercial growth for four main reasons. First, we expect a continued increase in approved therapies available globally, evidenced by recent approvals from companies like Novartis and others. These approved therapies can enter earlier treatment lines; for instance, the Gilead/Kite product has progressed to second-line treatment, and BMS plans to file for second-line approval as well, which significantly broadens the patient population we can address. Additionally, these approved therapies are continually expanding their indications along with new therapy launches. Together, these four factors are very promising for us from a commercial perspective in the foreseeable future.

Got it, that's helpful. And then a follow-up on MVE, you mentioned supply constraints. Is that mainly a cost dynamic? Or is that also limiting your ability to ship product? And then secondly, you talked about in the packet expanding capacity in the U.S. Can you just be more specific about the timeline for that new capacity coming on board?

Yes. I mean, the capacity expansion is taking place as we speak on an incremental basis. I mean, we've added shifts. We've added people. We've rearranged some of the processes. So that's incremental, but we also are planning an actual plant expansion, and that will take a year or so. But it's in the process.

Got you. Okay. And then last one. Jerry, you've got $600 million cash on the balance sheet, not burning that much unlike a lot of other smaller companies. You put a little bit to work on the share repurchase front. But just curious to get an update on what you see in terms of the acquisition pipeline and where your priorities would be right now.

Well, the acquisition pipeline is made up of those areas that we've talked about in the past. Of course, we're filling in gaps. We do intend, as I mentioned in my remarks, to be the most compelling, most comprehensive supply chain support system for the life sciences in the world. Our acquisitions, strategic acquisitions take a much longer time, and they're rare. They don't come along every day. Tactical acquisitions, you've seen us make several of those, and you will see us continue to make tactical acquisitions. The one that we made just recently of Cell&Co is what I call a tactical acquisition with a strategic impact. It cut out a couple of years of development that we had to go through to qualify ourselves in EMEA because of its licensing and its position, so, and the competency of that staff. We have a robust acquisition pipeline. We're looking at a lot of opportunities in the space, and we're eager to announce them as they come along. Our cash reserves are very important to us, and we are always mindful that this is shareholder money. We are prudent in the way we allocate our cash, the way we invest our cash. We don't talk about spending cash. We talk about investing our cash because we're going to return on every dollar. We have a great outlook, and we're in a great position, and there's a strong position, but that's about as far as I can go in commenting on how we will be using that capital other than the repurchase we made on the stock.

Very good. Thank you.

The next question is from Puneet Souda with SVB Securities. Please go ahead.

Yes, Michael on for Puneet this morning. Congrats. Thank you for the question. My first one is about a recent proposal, policy proposal from CMS. We saw suggesting like a 3% decline in CAR-T reimbursement, which continues to be lower than hospital costs. So, overall, I was just wondering if the reimbursement update overall is changing your view on uptake for CAR-T in the market?

I will begin by addressing a couple of points before handing it over to Dr. Sawicki, who is more closely involved. This is a developing industry, and it’s important not to focus too narrowly on any specific aspect at this stage since it is still in its early stages. It has taken a considerable amount of time to reach this point, but we are still in the beginning phases. This doesn't concern us too much because the landscape is consistently evolving. Now, I will let Mark share his insights and observations about the market.

No, I think that Jerry is absolutely correct. Just to add to that. The biggest limitation on the space right now isn't reimbursement, it's honestly manufacturing capacity overall. A lot of our commercial clients are very candid about the impact and shortage of either drug product manufacturing capacity or viral vector manufacturing capacity. They're all investing substantially in this space as it relates to bringing new capacity online. From our perspective, that's the biggest impact on scalability is bringing that capacity online. The second is moving these products into earlier lines of treatment. The earlier that they bring them online, obviously, there's a cost justification that they can use as it relates to the overall spend against the patient demographic component. A lot of them are using that as an angle that addresses that reimbursement issue. So, from our perspective, that's a non-issue. It's really going to be the manufacturing capacity that has the biggest impact on adoption over the next couple of years.

Okay, thank you guys. That really helps. And then my other question is about the new Bioservice facilities. I was wondering if you had any updates on like the revenue ramp-up for these facilities? And I know last quarter, you said you're thinking 2023 is when they'll actually start meaningfully contributing to revenue. Just wanted to see if there's any update on the outlook?

I'm going to start the answer and then turn it over to Dr. Sawicki. When considering Bioservices, it's essential to understand that they function as Global Supply Chain Centers. This service is transformative, even if not everyone views it that way. Bioservices is integral to the supply chain center, providing top-notch logistics alongside offerings like biostorage, secondary labeling, kitting, and fulfillment, specifically designed for allogeneic products. Remember, approximately a third of our trials involve allogeneic products. So, this combination will deliver numerous services, with a focus on supporting allogeneic therapies as they launch in the market. Very few facilities are equipped to operate this way, and we are thrilled about these developments. The supply chain centers featuring Bioservices are just getting started, with grand openings in Houston and Morris Plains. Additionally, the Cell&Co, which I previously mentioned, will transition to this system as it already functions as a biostorage operation. Mark has plans for the Paris facility to integrate into this system as well. We expect to open more supply chain centers and build a global supply chain network, which is crucial. I estimate that we will ultimately establish 18 to 25 Global Supply Chain Centers worldwide, forming this network. Having such a network is powerful due to its redundancy, backup, and greater reliability, which reduces risk. I'll let Mark continue from here.

Yes, the only thing I'll add is that both of the facilities in the U.S. have their formal grand openings in June. However, there's already robust client activity related to bringing product and activity into both locations. Obviously, the timing and the reason that we were saying that you'll see a more material impact in 2023 is the validation and onboarding processes of moving clinical activity or commercial activity into a new space takes some time. This timing affords the quality systems and others from these organizations to make those transitions. But the client activity is extremely robust already in both facilities. We stand by the fact that these will be very actively and heavily used as these organizations complete their validation processes.

Okay. Thanks for the color there. Yes, thank you very much.

Thank you.

The next question is from David Saxon with Needham. Please go ahead.

Hi guys. This is Joseph on for David. Just one from us today. I appreciate you guys giving guidance. Maybe if you could add some more color on some of the other financial targets. You guys have talked about a 55% gross margin, 30% EBITDA margin. By 2025, you guys were talking about an ambitious target of $650 million to $750 million. I guess like where is the timeline for those different targets? And kind of what needs to happen, what's going to go into that over the next five or so years for that to happen?

I'll begin and then pass it to Robert. Our goal of $650 million to $750 million by 2025 still stands, and we see no reason to adjust it. We believe it is achievable, relying on both organic growth and acquisitions, as is typical for us. This will involve organic growth alongside strategic and tactical acquisitions, as well as partnerships and alliances to help us advance. Robert, you might want to add your thoughts on margins and other metrics.

Yes, no, just a few things. You're absolutely right, the target gross margin is 55%. The adjusted EBITDA is 30%. Again, you have to step back and look at where we are right now. In the early stages of the cell and gene therapy market, we are the leader in this space, and we're constantly expanding our solutions and with that, our revenue capture and then market share on a global basis. Supporting 609 clinical trials, the maturing of that clinical trial base with now 81 trials in Phase 3 is a significant number. We believe the result in commercial revenue that we can support will lead to expansion of margins, increase economies of scale, and drive the adjusted EBITDA bottom-line. Right now, we're still in that building phase. There are only a few commercial therapies in the market. You'll continue to see us build out the Global Supply Chain Centers that Jerry was talking about. In spite of that, we still keep a positive adjusted EBITDA for the quarter. We expect that to continue over time. We do think the aspirational target set about a year and a half ago is achievable, and we’re working hard to make that happen.

Okay. Thank you. That’s all.

Thank you.

The next question is from Paul Knight with KeyBanc. Please go ahead.

How was the performance of Cryogene in the quarter, Rob?

Good. I mean, the Cryogene continues to perform well from a service and solutions perspective. But I think more importantly is really to highlight the expansion plans that are underway. One, the expansion that already happened in terms of the footprint in Houston. And then second, as we talked about the expansion into other geographies, which includes two additional sites in Philadelphia and in Austin. This will further bring revenue capture. They have a very winning approach to the market in the Houston market, and we'll replicate that in those two additional locations. You should expect to see as those are put in place, there will be further revenue growth, profitable revenue growth from the Cryogene side.

How did CRYOPDP perform in the quarter?

All of the business units performed well. CRYOPDP had significant growth year-over-year and performed very well. You'll continue to see acquisitions that they've made in the past. You'll see more of those as they further expand their geographic footprint in key locations. Outside of the kind of one-time impact of the fire damage that impacted the MVE revenue, revenues were very strong for Q1.

The last question is about the attractive price you paid for the Cell&Co acquisition. What led to a revenue multiple that was lower than what we've seen previously?

Well, I think you're right. We do have a very disciplined approach in terms of acquisitions overall. So, you look at the Cell&Co acquisition, in particular, I think it was attractive, but it's really more the strategic element that Jerry was referring to related to Cell&Co that will bring value, much more significant value to Cryoport and the Cryoport family of companies. It's really just the approach we're taking. We're looking for strong leadership and entrepreneurial spirit, which the Cell&Co management team certainly brings to the table. They have all of the certifications required, which allows us to enter the European market probably two years sooner than we otherwise could have through an organic buildup, and that's probably a conservative view.

So Paul, I'll just add a couple of things there. Remember, a big portion of that purchase price is earn out. First, it met all of our financial hurdles, including our return on invested capital and return on investment criteria. It's an excellent acquisition with fantastic people.

And then last, would it be fair to assume that the pharma, biopharma clinical trial business revenue was up sequentially with your pickup in trial count?

Yes.

You're talking about the non-commercial, yes.

Yes.

Yes.

Yes. Absolutely.

The next question is from David Larsen with BTIG. Please go ahead.

Hi. Congratulations on what looks to me to be a pretty good quarter. Can you maybe just talk a bit about the impact of inflation that you're seeing on the business, specifically freight? Can you pass that through to your customers? And how quickly can you pass that through? And then also steel and then also any sort of technology components like semiconductors, in particular. And then related to inflation, just in terms of the timing of throughput in the labs, are you seeing clinical trial activity sort of just extending, which may lead to some sort of, I guess, extended timing to recognize certain pieces of your revenue? Just any color there would be helpful.

David, let me start by addressing the issue of inflation, which is my top concern. If not managed properly, it can lead to margin pressures. We are experiencing inflation across all areas, which affects us as it does everyone else. Our key materials include stainless steel, aluminum, and semiconductors, along with freight. We are able to pass freight costs through to our customers. We also implement price increases on other materials when necessary. We are monitoring price changes more frequently than ever before, with systems in place to alert our finance team at the first sign of a price increase. This allows us to adjust our pricing in response to inflation promptly. Depending on the situation, these price adjustments can be permanent or in the form of temporary surcharges. We are committed to managing these challenges proactively and intelligently, and so far, we have been successful in doing so. Robert, would you like to add anything?

Yes. Just to state a few more items and emphasize one that Jerry already mentioned is the transportation piece—it's covered. Our clients are paying that, so that is passed through. If you look at our gross margins, we believe gross margins have stabilized. We actually had a slight uptick sequentially over Q4 about 180. We expect margins to gradually improve over the coming quarters. As Jerry mentioned, if you look at MVE, they’ve improved slightly sequentially, but they’re still experiencing increased costs of raw materials and inventory. We build up inventory to have safety stock, so some of those costs will take time to pass through to clients, but we do expect that to continuously improve.

Then there was a clinical trial element to your question that Mark can answer, I think, David.

Yes, I think the only thing I’ll add to that is that we kind of addressed this earlier. We have not seen any slowdown in activity. We have not seen intentional extension of programs based on market conditions. The trial environment is still extremely robust and very strong. We haven't seen any impact on obviously the macro events or inflationary considerations that impact any of those things. The market seems to be extremely strong at this point in time from everything that we can see.

Okay, so the activity in like Shanghai and China, that's not having an impact on your business. Is that correct?

On a global basis, you can see, I mean, all three geographies continue to grow the total number of trials and trial count. We have not seen an impact from a geographic standpoint based on any macro environmental conditions at this point in time.

Mark is specifically referring to trials here as he's talking through that.

Right. Yes. So, yes, the activity is still very strong.

Okay, that's great. Thank you. And then it sounds to me like backlog and demand is still high. Pipeline growth is good, and you're adding capacity. I think you have three MVE biologic plants that are actually creating these products. Are you building another plant or are you adding on to one of those plants in order to add more resources?

David, that's certainly something we will consider in the future. However, my current focus is on improving asset utilization. If you have a plant operating on one shift, there's potential to operate it on two shifts, and then possibly three. There's also the opportunity to reengineer the plant or even expand it, which we are currently assessing at both facilities. When we do expand, we can often incorporate automation and other labor-saving methods. We are exploring all these options. The priority right now isn’t just to construct a new plant; it’s to enhance our asset utilization, and we haven't fully optimized that yet, so that remains our main focus.

Okay, and then just one more for me. With the $9 million in, I guess, delayed revenue, I would imagine some of your competition would be looking at that and trying to get in there and take some of that revenue. Just any thoughts on that? What has the competitive response been, if any? And just any color on sort of a competitive environment. I’ve gotten some questions from some investors around pricing and capabilities and so forth. Just any thoughts there would be helpful.

Yes, absolutely. It’s a really good question that I'm eager to address. MVE has spent 60 years becoming the preeminent supplier of cryo systems, cryogenic freezers, and doers in the world. It occupies a lot position for the highest quality and the fairest dealings of any supplier globally. Our customers have determined that they will ride through with us. It’s called some pain for some of them because we go through a robust distribution network globally. But they've stayed with us. I'm sure that the competition has benefited to some degree from the backlogs we have, but we have those backlogs because of the loyalty of our customers. Those customers are loyal because they know they're going to be dealt with fairly, and they're going to get the highest quality product. They're accustomed to those services. No one manufactures a product of higher quality than MVE.

Okay. Thanks very much. Appreciate it.

Our next question is from Yuan Zhi with B. Riley Securities. Please go ahead.

Thank you for providing the full year guidance here. So, maybe, Jerry, can you talk about the rationale to select New Jersey and Houston as your logistics centers? If you can talk about the existing customers and the potential customers that you guys can cover for those two centers, that would be great. And also for those two centers, will there be any difference in terms of services provided from them?

It's a really good question. As John Dillinger said when he was interviewed at one point, he said, why do you rob banks? And he said, that’s where the money is. The corollary to that is we're located in these places because in Morris Plains and in Houston, that's where the customers are. We have a huge following in the Houston area. All the major players in the pharmaceutical industry are right there around the Morris Plains area, which is important for us to be in those locations. It was a no-brainer. We already have Cryogene facility in Houston, so we can create a campus effect in the Houston area. Morris Plains is very close to the Livingston operation we have where we can better serve the customers. As far as the services from these centers, they'll be exactly the same. The SOPs will be the same. This is the network effect I was talking about earlier, where we provide redundancy and decrease risk. We're all about cell viability and about decreasing risk. We want to create that redundancy where if there's a catastrophic situation in one place, another node can take over and never miss anything, thus reducing risk by having a network. So, I'll let Mark comment further on that.

No, I think you articulated it really well. As we continue to build out this network, it provides organizations the ability to truncate supply chains and shorten them to get the product into the hands of the patient quickly. Some of these products have a very time-sensitive aspect to them, particularly, some of the newer allogeneic portfolios coming through where ours may make the difference between a successful or non-successful outcome for things related to spinal cord or cardio and other aspects. Having a network of facilities that can store and distribute these types of product lines will have substantial beneficial impact for our client base over time.

Got it. Thank you, Jerry and Mark. And another question I have is in the last two quarters, the quarter-over-quarter growth of cell and gene product sales were single digits. Recently, Novartis has mentioned that they have seen lower demand for their products. I'm just curious what kind of signals have you guys picked out from your customers? Have you seen maybe the order number in the third quarter and fourth quarter are relatively higher than the second quarter so far?

So, I'll start, and then I'll turn it to Mark. Remember, we are the gold standard in terms of clinical trials and support of the industry. It gives us a view that others don't have. Mark has mentioned that there's a manufacturing capacity constraint. I mentioned too that this is a nascent industry, it's at the very beginning. Nothing is a straight line in the development of the industry. There’s nothing concerning there to us. But we certainly can see how it could be concerning to others who may not be as involved in the industry and may look at it as being more mature than it actually is. It’s still in these very early formative stages; it's running short of manufacturing capacity. I'll turn it to Mark at this point.

Yes, Jerry is exactly right. The biggest issue here is manufacturing capacity issues. If you take a look at Gilead/Kite and Bristol-Myers, both of those folks have substantial additional manufacturing capacity coming online and have intimated that capacity constraints are restricting their ability to provide product for the addressable patient populations. Novartis has seen some loss in product revenue due to competitive factors, which they acknowledge. They've been really focused now on moving to the rest of the world because of those competitive factors. They've launched the new T-Charge platform, which they believe will reach substantial reduced manufacturing time, which will reduce cost and provide a larger volume of addressable product for patients potentially over time. Everything you're going to see over the next one to two years in this space from a commercial standpoint is going to be impacted by this capacity coming online as well as the move from third line to second line. Ideally, some of them are also starting to target moving from second line to first line, which will also have a significant impact on the addressable patient population.

Got it. And one last question from me. In terms of pressure from supply chains, I've seen you guys have a better gross margin in this quarter compared to last quarter. I'm just curious generally speaking, is it getting better in the first quarter and next quarter versus last year?

We can't say that it is actually getting better. What I can tell you is that we have an incredible sourcing team across all companies. They foresee forecast. We put the safety stocks in that Robert referred to earlier. We are in constant contact through our quality organization as well as our procurement organization. The world is not out of its supply chain issues yet, but I will tell you this: I think that the supply chain will work its way through all of the issues in the next couple of quarters. It'll take that long. The biggest issue right now in supply chain is containers; you know container availability is getting better. It's not where it needs to be by a long shot. Shanghai Harbor has many of the world's containers stuck. But it will work through. Our folks are on top of things, booking things in advance. We address every other problem straightforward. So, I guess the bottom-line is, I think it’s getting better, but we're not through it yet.

That’s a very helpful color. Thank you for taking my questions.

Yes.

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

Hey good evening. One bigger picture question, then I have a modeling follow-up. Just I want to talk about these supply chain centers. Thinking about those, I kind of think about the allogeneic opportunity. Obviously, you made two shipments with autologous, but—only one with allogeneic. But as we think about the potential volumes from allogeneic therapies and storage, kitting, packaging, can allogeneic therapy be a larger revenue opportunity for you all versus some of these autologous ones today?

Jacob, I want Mark to sort of educate you on a couple of things there because I think on the surface, I think you're exactly right in terms of what you might think on the surface about autologous versus allogeneic. The fact is allogeneic has to be distributed. So, it's a lot more work, a lot more things going on with allogeneic. In autologous, there are duplicate doses made. So, I won’t go any further. I’ll just turn it over to Mark because he knows a lot more of the detail. We’ll let you take it from there.

Yes, it’s a lot more complex than that. An allogeneic therapy can have as many SKUs on dose, but it could have as many as a dozen doses depending on the indication and therapy class that’s being addressed. You may have as few as one shipment, you may have as many as 12 based on the nature of the particular allogeneic therapy. But allogeneic also requires bulk storage, fulfillment, secondary labeling considerations, which provide, obviously, the supply chain centers have capacity to support each of those components from a drug product distribution basis. It doesn't mean that autologous never has those needs. One of the key elements around having a supply chain infrastructure is drug product importation and release for product manufactured in country A and dosed in country B. So, you have to go through a drug product release process, and that can only occur in a controlled environment. One of the drivers for the Cell&Co acquisition is the fact that we have QPs on staffing for drug product release for assets manufactured in the U.S. and released in Europe and could also support secondary labeling consultations for in-country labeling and language-related considerations. Many factors go into drug product distribution in this space. It's not as simple as autologous is manufactured in a manufacturer setting and shipped directly to patients. You do have backup doses, and you do have other related activities occurring. However, allogeneic does, in general, have higher demand need for a supply chain center based on long-term storage and fulfillment-related activities in general. Hopefully, that helps.

And then just for Robert, could you share your thoughts on the timing of receiving the insurance recoveries related to the MVE fire and when we can expect to see those reflected in the numbers?

I couldn't understand the first part. Were you referring to insurance?

Yes, insurance related to the MVE fire like the business disruption.

Yes, I mean, that’s an ongoing process. It covers inventory fixed assets, the business interruption. We have adequate coverage. We've already received, I think, around $8 million from the insurance so far. That's going very well. We're working hand in glove with the adjuster obviously there. Their interest was to get the plant up and running as quick as we can, and we have the same interest. That's going to happen over the next quarters. We're probably going to be able to close it all completely by the end of the year. But most of the work should be done within the second quarter, I think.

Okay, helpful. Thank you.

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

Thank you. Thank you for the conversations we just had. I think there were good questions and all illuminating. In closing, first quarter 2022 was yet another quarter demonstrating our leadership position in temperature control supply chain solutions for the life sciences industry, supporting our markets of biopharma, animal health, reproductive medicine, and especially life-saving cell and gene therapies across the clinical and commercial spectrum. Due to our comprehensive brand portfolio, growth initiatives, global reach, and talented employees located in 15 nations who flawlessly execute on our winning strategy daily, we believe 2022 will be another year of results reflecting outstanding growth. We want to thank you for joining us today. 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 have a good evening.

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