$CYRX Revenue +48%, Momentum Continues Into 2016

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CYRX: 2015 Revenue +48%, Momentum Continues Into 2016

OBB:CYRX

Q4 / FY Fiscal 2015: 48% FY Revenue Growth, GM Widening. We Think Revenue Steepens Further in 2016…

CryoPort Inc (CYRX) announced results for their fiscal 2015 fourth quarter and full year ending March 31, 2015.  Q4 revenue was up 44% yoy and 23% sequentially from Q3 and came in just about dead-on with our estimate.  For the full year, CYRX saw revenue climb 48% to $3.9M, up from $2.7M in fiscal 2014.  Revenue has now increased on a yoy basis for fourteen straight quarters and nine of the last ten quarters on a sequential comparison.

Importantly the sources of the revenue growth appear to be sticky with management pointing to a combination of an increase in the number of customers and growth in the frequency of shipments as drivers of the top line.  Segmentation-wise, the reproductive medicine market, an industry which some sources say will grow as much as 20%+ over the next several years, has been an especially important contributor to both CYRX’s customer count as well as ramp in utilization.  And as we have pointed out in the past, CYRX’s disaggregation into customizable services offerings has broadened the scope of their capabilities and clearly been a key to scoring new customer wins and added fuel to their recent success. 

And as we explained in our prior update earlier this month (and which we included below), new customer accounts, budding demand from the broadening in customer segmentation (such as from animal husbandry) and entry into additional geographies have the potential to add another layer of meaningful revenue in the very near term.  One area in particular that may hold enormous promise is in cancer immunotherapies which has recently garnered a tremendous amount investment and interest in by life sciences companies.  CYRX continues to be aggressive in going after these and other new opportunities as they arise.  As a reminder, the company recently brought on board a highly experienced chief commercial officer and five new sales directors to help exploit these opportunities. 

Financials

Q4 revenue of $1.2M was up 44% yoy and 23% sequentially and inline with our $1.2M estimate.  This marks the fourteenth straight quarter of yoy revenue growth and sequential growth over nine of the last ten quarters.  In addition to the top line, gross margin has also been expanding and came in at 31% in Q4 (slightly better than our 29% estimate) and 30% for the entire 2015 fiscal year.  This compares to 17% and 16% for the year-earlier respective comparable periods.  In fact the 31% in the most recent period was the biggest GM in company history.  We continue to expect further GM widening with top line growth.

Q4 OpEx were almost $2.1M, up meaningfully from $1.6M in Q3 as well as the $1.4M in the year-earlier comparable period.  The jump in OpEx is entirely from SG&A and mostly relates to the recent new hires related to sales and marketing.  As noted, these additional personnel were brought on to further exploit existing and future revenue opportunities and we continue to expect to see additional operating leverage in fiscal 2016 and beyond. 

Q4 net income and EPS (pro forma for the 1 for 12 reverse split), excluding non-cash preferred stock conversion charge, were ($2.0)M and ($0.41), compared to our ($1.5)M and ($0.31) estimates. 

CYRX exited the fiscal year with $1.4M in cash and equivalents.  Subsequent to year-end the company raised an additional $4.6M via the issuance of preferred shares. 

On May 19th CYRX affected a 1 for 12 reverse stock split. The company will also seek to uplist to NASDAQ.

Operational Update: CYRX Brings on Several New Accounts, Expands Services and Enters New Territories…

Activities at CYRX have heated up even more over the last few months and have included consummation of new customer relationships, expansion of others, the introduction of new services and products and entry into at least one new geographical territory.  Interest in CYRX’s services continues to come from several segments including in-vitro fertilization, cell-based therapies and animal husbandry, areas where CYRX has recently seen increasing demand for their cryogenic shipping solution. 

And in addition to growth in customer segmentation, CYRX is also seeing increasing demand for its various service offerings – from logistics to containers to its full turnkey solution.  This broadening in both the types of customers that are increasingly showing interest coupled with demand across their menu of offerings is highly encouraging.  It also further demonstrates that the company’s recent shift from a one-size-fits all approach focused on only a select end-user profile to more of an ala-carte services and product menu appropriate for a much broader customer base is paying significant dividends.

New or expanded relationships that have been recently entered into include:

– Expanded relationship with Sanaria, a biotech focused on the development and production of malaria vaccines.  CryoPort is working with Sanaria to provide cold-chain shipping of its vaccines for clinical trials as well as for clinical use in Africa.  Vaccines must be kept at specific temperatures in order to maintain their integrity.  CYRX’s shipping solution provides unparalleled durability, holding time and temperature maintenance, which are all critical for shipping vaccines internationally and particularly to remote parts of Africa with harsh conditions and where Malaria is most problematic 

– Kite Pharma (KITE), a $2.5B biopharma developing novel cancer therapies, will use CYRX’s cryogenic shipping and logistics for clinical trials of its lead candidate, KTE-C19, a CAR-T cell therapy for non-Hodgkin’s lymphoma 

– CYRX expanded their relationship with Fred Hutchinson Cancer Research Center whereby the company will now support more of the cancer center’s labs.  CYRX is specifically involved in Fred Hutch’s research on cord blood transplants and trials for cell-based therapies 

– CombiMatrix (CBMX), a molecular diagnostics company focused on prenatal and postnatal genetic testing, entered into an agreement for CYRX to provide logistics support for distribution of its recently launched IVF genetic test, CombiPGS.   CombiPGS targets physicians and will be used prior to implantation to assess the embryos for chromosomal abnormalities.

As noted, CYRX has made a strong and dedicated move towards the opportunities in in-vitro fertilization.  This relationship with CBMX, as well as their recent entry into Nepal with a focus on IVF, are their most recent efforts in this space.  We continue to view IVF as holding potential to become a significant driver of demand for CYRX’s cryogenic shipping and logistics. 

– Roslin Cells, a major U.K.-based developer of cell therapies, chose CYRX to provide logistics for its pluripotent stem cell reprogramming service 

– CYRX will be providing logistics support for Capricor’s multi-site clinical trials for its lead candidate CAP-1002, being developed for treatment of cardiovascular disease 

– Yancey Farms, (per the company’s website) “one of the oldest and most respected warmblood breeders in the United States”, chose CYRX to ship equine semen for artificial insemination of top German sport horse stallions.  Judy Yancey, the founder of the Farm, was the first person to import and market frozen horse semen in North America – which we think provides credibility to the trustworthiness they place in CYRX shipping capabilities. 

And anecdotally, we see this as a vote of confidence in CYRX’s capabilities and the quality of their shipping and logistics.  Maintaining the integrity and safety of prized and expensive stud horse semen is important and provides piece of mind and assurance that the sample has not been compromised in any way.

In March CYRX announced introduction of “Vet Secure” a tamper-proof lock on its shippers which international shipping regulations require for shipment of animal husbandry products (such as horse semen) 

– CYRX will be supporting NeoStem’s (NBS) late stage clinical trial for its lead cancer candidate, NBS20, which is being developed for the treatment of metastatic melanoma.  The NBS20 program has been granted FDA Fast Track status and Orphan Drug designation  

In addition to these new and expanded customer relationships, CYRX has made recent headway elsewhere as well.  This includes the recent entry into Nepal to support the burgeoning demand for IVF services in that country which is coming from both the Nepalese population as well as from medical tourism. 

The company also recently launched a new services offering.  In February the company announced the introduction of services to aid in the relocation of facilities used for cryogenic sample collections.  CYRX, which will leverage their logistics capabilities, expertise and shipping resources, has already been engaged by a “leading research laboratory and IVF clinic” to provide relocation assistance. 

We are maintaining our Buy recommendation.  See below for free access to our most recent report on CYRX. 

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