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Analyst Blog

Business Update Call 9/20/12:

By Brian Marckx, CFA

CryoPort ((CYRX)) held a business update call yesterday (9/20/2012), providing an overview of the status of operations including the sales/marketing focus, FedEx relationship, financial and shipping metrics, and offering some general outlook guidance.  Management's candor in answering the relatively lengthy list of questions from various participants on the call was a breath of fresh air and noticeably different from the past (prior to the recent management changes).  While there were no significant surprises relative to our expectations, there were some new revelations that we think bode well for further progress in developing the customer base and growing revenues.  Highlights of the call included;
     
Revenue / Shipments / Financials

  • Shipments grew from about 450 in Q4 to 560 in fiscal Q1 (latest qtr)
  • Sequential revenue growth is expected for the foreseeable future with fiscal Q3 expected to show a more substantial up-tick


Customers

  • Had about 100 customers (some of which may only make 1 shipment/mth, others may make 30 shipments/mth) as of fiscal Q1 - expect this to continue to grow sequentially
  • Have about 30 customers that are now in some stage of validation
  • Have not lost a customer - customers continue to be very sticky
  • Key diagnostic company expects to start regular shipping with CYRX in early 2013

Sales / Mktg


  • Management acknowledged mistakes had been made in the past in qualifying customers and in identifying the low hanging fruit.  Instead of a one-size fits all solution, CYRX's sales/mktg focus is now centered on a more tailored approach based on customer needs

o    In addition to their full-service offering (containers and tracking/logistics) CYRX will now also offer the option of just the outsourced logistics/tracking to customers that wish to use their own (or another provider's)
o    CYRX will introduce a much small dewar (container) later this year.  The smaller container will hold up to 6 vials (compared to the larger containers which hold 75 and 500 vials) and is expected to be popular with customers with lower volume shipments.  The smaller dewar is also much easier for customers to store onsite and quickly reuse than is the larger containers
o    Management noted that they've learned from mistakes made in the past where they had identified what they thought could be high volume croygenic shipping customers and only after long validation periods did it become apparent that some of these prospects mostly shipped biological material that required cold but not necessarily cryogenic shipping (we assume that this has now been sufficiently addressed)
 

  • CYRX sales targeting is now heavily focused on biotech and pharmaceutical companies and less so on CRO's.  Biotech/pharma offers a more consistent and regular shipping base than do CRO's, the shipping demand from which is largely dependent on clinical trials - which can be lumpy and not in the direct control of the CRO

FedEx


  • CYRX management's day-long meeting with FedEx ((FDX - Analyst Report)) in April was very productive and helped build on recent changes which CYRX believes will spark a greater rate of sales generated through their partner
  • One of these critical changes (which had been announced previously) allows FedEx customers to access CYRX's CryoPortal directly through the FedEx website interface - prior to this customers had to access the CryoPortal separately which sales reps reported was a hindrance for customers.  The interface update also now allows FedEx sales reps the ability to track their CryoPort-related sales information and metrics - which potentially helps incentivize sales efforts as it provides easier insight relative to commissions.  The portal interface should be fully operational in October
  • CYRX management clearly indicated that they believe sales via FedEx will begin to show much more promise than what has been the case in the past, which by all accounts have been disappointing

Cash / Financing


  • Management remains focused on controlling costs and limiting cash burn
  • Expect to need financing by Q1 2013 (in-line with our prior expectations).  Considering various options to do so.  We note CYRX and their investment bank (Emergent Financial) have been very successful in raising capital when needed in the past
  • Management estimates they could reach cash flow positive at about 5k shipments/month  - which is about 1/2 the shipping volume that they had previously thought it would take.  Management thinks it's possible they could reach cash flow positive in about 18 months


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