Welcome to the Cryoport First Quarter 2023 Earnings Conference Call. Our host today is Todd Fromer from KCSA. I will now hand the call over to Todd Fromer. You may begin. 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 does believe that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance. Such statements speak only as of the date we 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 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 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 file with the Securities and Exchange Commission. I will now 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, Robert Stefanovich, who is joining us remotely as he just discovered he contracted the COVID virus, and 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 2023 in 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 financial and operating 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’ll provide a brief update on the business, and then we’ll move on to your questions and our answers. Cryoport reported first quarter results today with revenue of $62.8 million. This represents top line growth of 20% or 22% at constant currency, which was fueled by continued demand for our temperature control supply chain solutions for the life sciences. We achieved double-digit growth in each of our markets, including biopharma, reproductive medicine and animal health. We continue to produce consistent growth in biopharma with revenue increasing 19%. The regenerative medicine market continued its momentum in 2023 and drove commercial revenue growth of 28% for the first quarter. Patient demand has been robust in cellular therapy and continues to outpace commercial cellular therapy supply, which is restricted by the industry’s current manufacturing capacity constraints. Having said that, we continue to see biopharma companies and CDMOs working to increase capacities, for example, Kite Pharma has announced plans to expand its global cell therapy supply chain operations located in Frederick, Maryland, with a 70,000 square foot warehouse adjacent to its existing facility for the purpose of centralizing its raw material storage and testing. As industry manufacturing capacity has increased to meet demand, Cryoport is in an excellent position to benefit from the anticipated growth in the cell and gene therapy industry with our advanced temperature-controlled supply chain solutions as well as our continued investment in new technology and facilities to support this demand. Turning to Animal Health, revenue increased 30% year-over-year. This growth was driven by the rising animal population, increased demand for animal protein, and increased ownership of companion animals in developed and emerging markets. These favorable trends are driving greater demand for therapeutic innovation in this industry. We’re seeing higher activity from top global animal health pharmaceutical companies and Cryoport is well positioned to serve the supply chain needs of this industry. We believe Animal Health is a solid market and has significant growth potential for the future. We also see significant growth potential in the reproductive medicine area, which grew 12% for this quarter. This market is primarily driven by IPO technology advancements and a rising number of fertility clinics supporting increasing fertility across the globe due to demographic and environmental challenges to childbearing. Cryoport is strengthening its presence here, and our growth during this quarter was primarily driven by our continued progress in contracting with key reproductive clinic networks, as highlighted in our recent announcements regarding our support for Inception fertility and Boston IVF. Cryoport Systems reproductive medicine solutions, which are sold under the brand name CryoStore. Our financial performance for the first quarter reflected the strength and dedication of our team around the world. The saying goes, you are only as good as your people. And at Cryoport, we believe that. The results also reflect the breadth of our diversified operations, the depth of our technologically advanced supply chain solutions as well as the strength and potential of the end customers we serve. Looking to the months ahead, recognizing current manufacturing capacity constraints for cell and gene therapies and macroeconomic headwinds, we plan to continue our momentum through the remainder of 2023. We expect to benefit from attractive trends and medical advancements that are driving growth in the cell and gene therapy industry. As of the end of the first quarter, Cryoport supported 10 commercial therapies and a total of 652 clinical trials globally, with 82 of these in Phase 3. We expect up to an additional 18 anticipated application filings, 10 new therapy approvals, and an additional 11 label or geographic expansion approvals in 2023. We are a clear leader in the development of advanced temperature control supply chain solutions for the life sciences industry, and we intend to further enhance our competitive advantages by remaining at the forefront of innovation. Along those lines, we recently launched the Cryoportal Version 2 logistics management system. The Cryoportal Version 2 is an ISPE GAP 5 validated solution and provides many new features and enhancements. In fact, to our knowledge, it is the first ISPE GAP 5 validated logistics management system serving the life sciences industry. This month, we began rolling out our next-generation Cryoport Elite Shipper line, beginning with the Elite Ultra Cold. The Elite Cryosphere will follow with introduction near year-end. These cutting-edge advanced therapy shippers will provide additional derisking longer-term temperature hold times, more advanced communication features, and new security controls for our customers. We are pleased with the early feedback on the launch of the Elite Ultra Cold. Customer feedback has been quite positive. SkyTrax condition monitoring system, a revolutionary condition monitoring system is scheduled for release by year-end. This sophisticated technology platform is a generational leap to an advanced condition monitoring system that supports temperature ranges from control room temperatures to cryogenic temperatures inclusively. Turning to CRYOPDP. We continue to build out one of the world’s most advanced global biopharma logistics networks. This includes increased build-out in the United States and further expansion in India, Ireland, Japan, the Philippines, Poland, and Spain. Additionally, Cryogene, our biostorage operations will be expanding into the San Antonio and Philadelphia regions during the course of the year. In addition to these activities, we also continue to increase our growth prospects through other means, such as our partnerships with Syneos, which provides for integration with our new IntegriCell platform. This platform that is IntegriCell is intended to supply autologous and allogeneic cell therapies, a standardized apheresis collection process and end-to-end cryopreservation services for leukapheresis derived therapies. We are very excited about IntegriCell and believe it has potential to be transformative for the cell and gene therapy industry. In summary, through our many actions, our teamwork, and our commitment to make sure that Cryoport can deliver the best solution, supporting temperature-controlled supply chain solutions for the life sciences, which in turn support life-saving cell and gene therapies, Cryoport is stronger than ever before. I want to thank you and open the floor for questions. Operator, please open the lines.

Thank you. Our first question today comes from Puneet Souda with SVB Securities.

Yes, hi guys. Thanks for taking my question. So first one on MVE and CRYOPDP, I don’t know if you had provided that and I apologize if I missed that number. And just given the sort of evolving macro environment here in biotech funding, is there any change to the sort of the low teens, I believe, for MVE and PDP growth expectations for this year? Are you seeing any change in the demand in the business there for the cryogenic products as well as the shipping services?

Is this Puneet? Puneet, these are good questions. And look, we are not immune to macroeconomic headwinds. And so we see some mixed activity going on and nothing that I can firmly identify and tell you that there is anything disruptive or so forth, but we are not immune to those general conditions. MVE is returning to normal mix and normal production levels. CRYOPDP is also currently working at normal production levels, what we had forecasted. And Cryoport Systems is moving along very nicely as is Cryogene. So across the board, we have our fingers crossed. We’re optimistic that our guidance will continue to be exactly what it is and what we’ve reiterated this quarter.

Okay. That’s helpful. And maybe if I could just follow up on the overall, the biotech funding environment has been tougher. Just wondering what your conversations have been on the CDMOs and that might be seeing some of this and directly with the emerging biotechs. In the past, you’ve called out some headwinds related to customers trying to preserve capital. We saw some attrition here in Phase 1 trials in the quarter as well. So just curious to hear what you’re hearing with the earlier-stage biotechs. And maybe a question for Mark if he is there, it’s more on business development activities. Can you give us sort of what you’re hearing from the customers?

Yes. I’ll start off, Puneet, and then turn it to Mark. But look, the things that we’ve said before, we continue – and what I just said to your earlier question, the macroeconomic environment is unclear. If anyone has clarity on it, I would certainly like to hear it because I don’t have it, and I don’t see it. So that is how do you face it. So in some places, you’re doing well, some places you’re not doing so well. Sometimes you get encouragement, sometimes you get discouragement. It’s not – it’s just probably a magnification of normal business times. But as I said earlier, MVE has returned to its normal mix of products and our discussions with customers that you asked about indicate there is some reservation about starting new trials, perhaps. But most of our contraction was in Phase 2. It wasn’t in Phase 1 this time. So it’s mixed. And so I’ll turn it to Mark, who is closer to the marketplace.

Overall, I think what you’re seeing is that folks are really focusing on their winners and really driving those programs that have the highest probability to monetize as quickly as possible. And so we do see a consistent progression of programs through the pipeline. We see Phase 1s going to Phase 2. Phase 2s going to Phase 3. We see a robust filing activity. And what we anticipate is continuing to see that robust activity throughout the balance of the year. So I don’t think it’s necessarily a negative environment. I think the environment is really focused around putting their cash against those programs that will have the quickest return on investment. That’s what I think we’re seeing for the market. Our contract partners all have a very, very optimistic view of the cell and gene space overall. So I don’t think that from a contract research or manufacturing standpoint, there’s any reservation around the cell and gene space right now.

And I’d just add one other thing in here, Puneet, for you for some more color. The Q1 review piece that you may not have had a chance to go through. But in Q1, of the 37 trials that topped out, 21 of those trials were completed versus 16 terminated. So that’s a good sign because those trials can move on to the next phase. So that’s the maturation that Mark was talking about. And the number of adds we had in the first quarter was 35 and the number of adds we had in the fourth quarter of last year was 31. So we are still seeing new trials come in and new trial starts and the good news is the pipeline keeps maturing.

So the activity is still there. They are just focusing it.

Got it. That’s helpful. And if I could just squeeze a last one in around commercial, we are hearing about capacity expansion efforts for capacity expansions around cell therapies among some of the larger companies maybe or the larger companies are seeing projects from some of the smaller companies just because they have larger resources and capacities in terms of cell therapy. So are you – maybe this is a question for Mark. Are you seeing any upside from that? What are your expectations for the commercial expansion of the existing therapies through the year? Thank you.

So Puneet, I think the best thing to do is to take a look at Page 4 in our quarter end review. There is a really good chart in there that really starts to – it clearly conveys the impact on volume and revenue associated with additional capacity coming online. You can see that very clearly when Kite brought their site in Maryland online. It more than doubled their volume in a very, very short period of time. And we know that, obviously, there are very active efforts ongoing with both Janssen and BMS around additional capacity, bringing that online to support their product lines. As soon as that capacity comes online, we wholeheartedly anticipate seeing that similar cadence.

You also may have seen just – I think it was early this week or late last week, J&J/Janssen/Legend did a deal with Novartis, whereby Novartis is going to be making product for J&J/Legend/Janssen.

Out of the facility in Moore Plains.

Yes, the Legend one was what I was referring to. Okay. Alright. Great, guys. Thanks so much.

Thanks.

Your next question will come from Brandon Goulard with Jefferies.

This is Matt on for Brandon. Robert, maybe start on gross margins. Revenue was up a couple of million dollars quarter-over-quarter, but gross margins actually contracted a bit here. Can you just provide a bit more color on what drove that? It sounds like you’re still seeing some elevated costs tied to the supply chain. And then any color around gross margins moving through the rest of the year should Q1 be the low point? And when do you expect those supply chain headwinds to hopefully abate?

Well, that’s a great question. I do want to give some clarity on that because if you look at the gross margins for the quarter compared to last year’s quarter, it’s a slight improvement for the overall gross margin. If you look at the services margin, we actually have an increase from 43.1% to 46.8%. This is about 3.6 percentage points positive. So we’re seeing a little bit of operating leverage on the services side, both for Cryoport Systems as well as for CRYOPDP’s business. If you look at the product side, that’s really a one-time impact. So you see a drop, which is really unusual for the MVE business from 42% to 38%. And we expect to only see that in Q1. That’s specifically related to unfavorable manufacturing variances as a result of inflationary pressures as well as building up safety stock during the second half of the year which was only partially offset by favorable product mix that Jerry was mentioning. So this is something that we only expect in Q1. We expect that to normalize in Q2 and for the rest of the year. So again, positive upside on the services, if you look at Q1 compared to the previous margin for Q1 of last year and Q4. And really an unusual one-time event for MVE related to the buildup of safety stock in the latter part of last year.

Thanks. That’s really helpful color. And then I know you guys don’t talk maybe as much about specific companies, but you mentioned it in the 1Q recap, Sarepta has been the new share a lot, their potential regulatory approval. Just given kind of the evolution of the portfolio and how it expands over time, any chance you could provide some color on where exactly you potentially serve them today, whether it’s on collection, fulfillment, storage, where you might be supporting them?

Yes. We do have a relationship with Sarepta. It’s not public knowledge, exactly what we’re doing for them. I honestly can’t tell you the extent of what that relationship is. I do think that it will become clear in the next couple of months for you guys.

Okay. Thanks. And then maybe one for Jerry, as we approach the 1-year anniversary in June of the formal opening of the two new global logistics facilities in New Jersey and Texas. Just talk about how your progress has trended at those centers now that you’ve got a few quarters under your belt, where utilization is today and the various services you expected to have been brought online there? Are those all fully up and running today? Thanks.

Yes, absolutely. They are a part of Cryoport Systems. So I’m going to defer to Mark in just a moment. But basically their own schedule, it does take time to get facilities of this nature up to full capacity but we’re making a lot of progress. Mark, do you want to add to that?

No, Jerry is absolutely right. The facilities are fully open. They are operational. The assets are averaging over one audit a week right now, which is a very, very good indication of onboarding client activity. And so if you take a look at that, there is a cycle time obviously associated with onboarding based on going through the supplier approval process. And that robust of an audit schedule is extremely positive.

Super. Thank you.

Your next question will come from John Sourbeer with UBS.

Hi, thanks for taking the question. I think you serve currently one allogeneic therapy. There is potential for a couple of additional approvals here throughout the year. Just any color, if you look back on just currently, where you’re serving on some of those additional revenue opportunities there given some of the allogeneic therapies and how you see that potentially playing out here over the next year?

Yes. I mean, as you can see in our activity, I mean over 30% of our portfolio is allogeneic at this point in time, which is a very, very good ratio. And a fairly significant number of those are in late-stage clinical getting ready to initiate obviously, commercialization activity as well as Atara, which we’ve historically supported and do support their commercial launch activity.

Okay, got it. I guess, digging in further on those commercial revenues and adding on to what Puneet asked earlier. I guess when you talk to your CDMO partners or pharma biotech partners I guess how do you think that this is going to ramp over the next 12 months with some of that capacity coming online?

Yes, the overall portfolio, or our allogeneic portfolio?

Yes, the overall portfolio, yes.

Yes. I mean, it’s directly related to the overall manufacturing capacity. And so basically, you have a couple of different factors at play here, right? You’ve got manufacturing capacity in any of the markets that they have been launched or they have reimbursement agreements with that particular entity, it’s going to be strictly a capacity play. Obviously, when you’re looking at other environmental factors where they may not have regulatory approval yet or they are trying to drive to an earlier line approval status, those will have more complex ramp considerations, which will play into reimbursement as well as the overall patient – addressable patient population. Obviously, moving from fourth line to second line, like BMS just announced in Europe is a huge contributor to demand and will absolutely drive significant ramp once that new capacity they are building out comes online.

Maybe just to add to it, if you look at the commercial revenue for Cryoport Systems, you noted in our earnings release, we mentioned that the commercial revenue grew year-over-year by about 28% and sequentially over Q4 about 19%.

Right. I appreciate it. And then last one here on my end. Any thoughts around capital deployment, M&A? You’ve done a couple of tuck-in deals when opportunities are out there, what you’re seeing on valuations?

We’re constantly looking at acquisitions and deployment of capital for the benefit of the company that’s – it’s a constant thing. So all I can say about that.

Maybe just to add to it for investors, we are obviously really well positioned. We have a very strong balance sheet. We have convertible notes at very, very good interest rates. So we’re well positioned both to drive organic growth as well as to continue looking at acquisition opportunities.

Thanks.

Your next question will come from David Larsen with BTIG.

Hi, congrats on a good quarter. Can you talk about the MVE and demand for large freezers? How is that trending? Thanks very much.

Yes, the mix is pretty much back to normal, David.

Okay. So I mean, we saw really good growth in product revenue, I think, up almost 40% year-over-year. So, the mix is back to normal and demand and shipments for large freezers has stabilized, right?

Yes. That’s – we had a good quarter.

Okay. And then is there any impact to the end of like the public health emergency that’s concluding in May? On the hospital side, we’re seeing acute care volumes are up significantly year-over-year. I mean, is that having any impact on your business overall, like access to the clinical trial sites or anything like that, is that noticeable or not really?

Not really, David.

Yes, we haven’t noticed any impact on that.

Okay. And then just any color on the Cryoportal Version 2 logistics management platform book capabilities will this bring to your business? Any color there would be very helpful.

Yes. So we actually launched that on Monday of this week. So the implementation is ongoing. And so it’s been rolling out into our clients and obviously, supporting our activity moving forward. So, one of the biggest – there are a couple of big implementation changes with the V2. So first and foremost, is the GAP 5 validated product, which is a – it basically significantly enhances the regulatory data security of the platform itself. And it will have a lot stronger analytics built in. And so it’s indexable and has the ability to do complex assessment of the data in the system. And the reason that we’re doing this is that we’re seeing a significant increase in requests and of our clients that want to integrate with the platform and tie the transportation data to the patient outcomes data. And so they want to have that conduit and the ability to analyze that data more effectively than the historical platform. As well as it’s also going to ultimately be much more amenable to mobile systems, remote security considerations around product security, as well as providing a wider variety of implementation on a platform basis with all the new products that we’re rolling out. So there’s a whole host of different elements that tie into it.

Okay. Great. Thanks. And then I think, Robert, you mentioned something about building up safety stock on the MVE side. Can you just provide any more color around that? Like are you facing any inflation headwinds on the MVE side for the cost of like raw materials or semiconductors or steel or freight? And are you raising prices to help offset that? And if so, are those price increases being received well by the market? Are you able to get price to maintain margin?

Robert, let me just start off with that. First of all, David, at MVE, we have a paradigm of pricing that includes surcharges and sometimes they are temporary charges. And so we have price increases, and we have surcharges, we have temporary charges. And so it depends on the cost of the element. And that was at a high point earlier on. It’s no longer as significant. We have had to – what Robert was referring to is we have had to increase our raw material inventory because there is some overhang in the supply chain from COVID. And so we did – in order to get economics on the material and to obtain the right materials, we did increase our inventory slightly. We went from 60 days to 90 days. So it was an increase. We don’t really have pricing pressures there. We have no resistance in the market because we explain our pricing and why we have the sub-charges, we have the temporary charges or we have the price increases. So Robert, do you want to add to that?

No. The only thing I wanted to clarify, what I was referring to was really last year, the buildup of safety stock and that kind of bled into Q1. And that had an impact and kind of like a one-time impact on margins in Q1. So that was really my reference. It was really related to the second half and the fourth quarter of last year.

Okay. Thanks very much. Congrats on a good quarter.

Thank you.

Thank you.

Your next question will come from Paul Knight with KeyBanc Capital.

This is for Mark, I believe. One of these constraints, I think, was the FDA and they – I know under PDUFA 7 or 9, they have increased staffers. Do you think that was an issue? It seems like it was Mark. And is this getting resolved on the FDA side?

You’re talking about from an approval standpoint? Yes. I mean there was definitively a bottleneck on that side. So yes, I do think that will have a positive impact.

It takes a while, I’m assuming to get this kind of rolling at the FDA, right?

Yes, it’s not instantaneous. But basically, what it’s doing though is it’s increasing the throughput, right. And so they are going to – it’s going to take time for them to work down that backlog. But yes, the additional staffing at the FDA will assist in acceleration.

I believe in the January presentation and FDA did, they had a goal to double their staff. I don’t know where they are in that process, but they know they have to add heads to deal with not only what’s there, but this wave of therapies that are trying to get through. And new trial starts as well.

Yes. We did see four applications in the first quarter with one of our additional filing after quarter end. So, there is activity moving through.

Okay. And then you talked to this issue of capacity. We follow some CDMOs as well. Is it an issue of physical capacity and enough of it, or is it the understanding on how to produce and scale some of these therapies? Is it enough lab hoods or is it they just are trying to figure out how to get it done in mass?

Yes. So, the short answer is it’s both, right. So, one is just raw physical space to manufacture product. The second is efficiencies within the clean room environment. And so you will see that some of the biggest drivers against capacity are – they are moving from open systems to closed systems in a clean room environment, which really increases their ability to process and push additional volume through the same square footage. So, ultimately, you get both benefits. Hopefully, too Paul, you will see ALO starting to pick up. And there you can raise these therapies in batches.

Paul, just to correct you, they don’t stock – customers don’t stock freezers or we don’t stock freezers or dewars. It doesn’t operate that way, but Jerry can answer. Paul, the long-term growth rate of freezers is going to be related to the long-term growth of biology in general, particularly the life sciences. So, the question is, at what rate are the life sciences going to grow in their applications because that’s who we serve. I mean if you manufacture your samples, you manufacture commercial product and it’s cellular, you need MVE and there is no way around it. So, our guess there is 10% to 12%.

Got it. Okay. Thank you.

Your next question comes from David Saxon with Needham & Company.

Great. Hi everyone. Thanks for taking the questions. Maybe I will start on PDP. In the script, you talked about building out the PDP footprint in the U.S., which I believe kind of drives a lot of the revenue synergies you talked about when you acquired them. So, I guess I wanted to ask what specifically drives those synergies? And is that something you can benefit from later in ‘23, or does that take longer to capture?

Yes. So, the synergies themselves are tied around a couple of things. One is density and the ability to be able to support high touch, white glove service, right. So, all of the activity that systems historically has had is high touch service. It’s not a FedEx where you stick it in a box and throw it into a queue and it shows up three days later. These are tracked. They are basically – there needs to be a custody of the product at all times based on the value of it and the sensitivity of it. And the timelines are extremely tight as it relates to managing that product life cycle. So, as we are building out the asset and competency of CRYOPDP in the states, all of those elements have to be met for any geography that they step into. So, we are actively working on that. We are actively building out staff. We are building out capacity. We are building out infrastructure and informatics to be able to support that. And it is having bearing as CRYOPDP is getting written into an increasing number of filings that we support on an accelerating basis. So, as that continues to build out, that number will continue to accelerate.

Got it. That’s super helpful. A lot has been asked on MVE as it relates to the freezer portfolio. So, I wanted to ask on the dewars side, how is demand trending there?

The trend is doing very well on the dewar side. The dewar side is manufactured in the New Prague plant, which is at record production. And in fact, we have an expansion going on at that plant now.

Okay. Got it. And then maybe last one for me. Can you just talk about CapEx for the year? How should we think about cash burn and kind of the path to cash flow profitability? Thanks so much.

We don’t look at it as cash burn. We don’t look at anything in that way. We look at it as investment, and we are investing in the future. And our CapEx has been substantial for the last 2 years or 3 years, and it will continue to be this year. So, nothing unusual in the CapEx area. All of these projects that we have going on, we will have industry impact. We recently looked at our income statement because it gets distorted because of some of the projects that we have going on. We did a peel back firm that our core business was strong, and it is. And then we reaffirmed the financials and the returns around each of the projects we have going on. You have heard about a few of the cloud tracks. You have heard about Cryosphere. You have heard about the Elite line. You have heard about the Cryoportal Version 2 that we just launched. There are those kinds of things that we continue to work on. You also could go to the Verio. You could go to the Fusion. But capital investment will – we have a secret project called Project Kona that we are undertaking. But all of these things are industry-moving. And you can depend on us investing in projects where we get a return, a great return.

Yes. Maybe just to add to it, I mean obviously, where we are trying to seize the opportunity that lies ahead of us. We have some really strong roles within the supply chain for cell and gene therapies. We are building out the supply chain capabilities within our companies to really capture additional revenue. Like I had mentioned on the services side, you see a little bit of operating leverage in terms of increasing gross margins, and we are trying to balance that. So, we look at adjusted EBITDA. Adjusted EBITDA was positive, increased both over Q1 of last year as well as over Q4. We have positive cash from operating activities for the quarter. So, we are trying to balance it, but like Jerry said, we are, at the same time, making investments in building out our capabilities and capacity to handle the increase in commercially available therapies.

Great. Thank you.

And we will go next to Jacob Johnson with Stephens.

Hey. Good afternoon everybody. I feel like I should ask about Project Kona, but I am guessing you wouldn’t answer that question.

I knew you would ask about the secret.

You mentioned it, Jerry. You opened the door. Maybe just one starting on China, we have heard in some of the reports the last couple of weeks, some weakness in that region. Just curious kind of what you are seeing there.

On China? Okay. So, I just wanted to clarify. Look, China is a different part of the world. It’s a different economy. It has a curtain around it, so to speak, not the iron curtain, but it has somewhat of a curtain around it. We operate very successfully in China. Out of our China operations, we serve the domestic market as well as foreign markets, and we also manufacture components and accessories in that plant. But we do very well. That operation is doing very well. And we will expand our presence in China in all of our areas of business at some point.

Okay. Thanks for that Jerry. And then just going back to kind of the macro and the growth drivers this year, Jerry, you mentioned kind of a challenging macro, a solid start to the year here. But to get to the guidance for the year, revenue has to continue to improve sequentially throughout the year. And I guess as I am thinking about kind of MVE, which would stabilize this quarter, can you just talk about some of the key kind of growth drivers off of 1Q that gets you to the guidance for the year?

Yes. Well, the markets, primarily, I mean the cell and gene therapy market is forecast to grow at 25% per year for the foreseeable future, depending on who you – who and what you look at. But our confidence is based on the careful analysis of all of our businesses. And we budget from the bottom up. So, we have visibility on all of our revenue streams, Jacob. We think that our cell and gene therapy revenue will step up. We are launching new products and services, and they will bring in new revenue, and we are confident, frankly, that our company will grow across the world.

Okay. And maybe just last question. Just you mentioned IntegriCell in your prepared comments, but we haven’t really talked about it much during Q&A, just curious kind of any color on how that effort is going?

That effort is in its infancy, and it takes a while to build a platform like IntegriCell out. We have two plants being built, one in Liege, Belgium and one in Houston, Texas. They are not quite yet validated, but they will be this year. But it will take a couple of years to roll it out. And Mark, you may have some more comments on that.

Yes. So, as Jerry had mentioned, we are nearing completion of the construction phase. We have to go through validation activity to get them obviously, GMP approved. We anticipate that will happen sometime in the end of this year, and we will be starting to contribute revenue – nominal revenue very late this year and increasing revenue into 2024. But this is a – as Jerry said, this is a long-term play. So, one of the areas we have been talking a lot about capacity. As the manufacturing capacity comes online, you are going to have a significant barrier as it relates to patient availability and the ability to collect the material that’s going to go into the manufacturing process. So, having a scalable competency to collect material to support all of this capacity coming online is going to be a critical consideration. And so we have to build this in order to support all of that expansion in the future. So, that’s one of the reasons that we are obviously doing this, and we are doing it in advance of that capacity coming online. So, it’s ready and waiting for that capacity as it starts to emerge.

Perfect. I will leave it there. Thanks guys.

Thank you.

And this concludes today’s conference call. Thank you for attending.