Thermogenesis Holdings, Inc. (NASDAQ:THMO) Q4 2021 Earnings Conference Call March 28, 2022 4:30 PM ET
Company Participants
Paula Schwartz – Rx Communications, IR
Chris Xu – CEO
Jeff Cauble – CFO
Conference Call Participants
Sean Lee – H.C. Wainwright & Co.
Operator
Good day. And welcome to the ThermoGenesis Holdings Conference Call and Webcast to Review Financial and Operating Results for the Year-ended December 31, 2021. As a reminder all participants are in a listen-only mode. There will be an opportunity to ask questions at the end of today’s presentation. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to turn the conference over to our host today, Paula Schwartz, of Rx Communications. Please go ahead.
Paula Schwartz
Thank you, operator. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company’s actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that might cause actual results to differ materially from those in the forward-looking statements is contained in the company’s periodic reports filed with the Securities and Exchange Commission.
The information presented today is time-sensitive and is accurate only as of the date of this call, March 28, 2022. If any portion of this call is being rebroadcast, retransmitted or redistributed at a later date, ThermoGenesis will not be reviewing or updating this material.
Participating on today’s call are Dr. Chris Xi, Chief Executive Officer and Jeff Cauble, Chief Financial Officer.
I’d now like to turn the call over to Chris. Please go ahead.
Chris Xu
Thank you, Paula. And thank you for everyone to join us for our fiscal year 2021 earnings call this afternoon. We appreciate you taking the time to dial in. For the past two years, our industry and the entire world have been affected by the COVID-19 global pandemics. We are happy to see that we are now getting close to the end of that. And our customers and our clients are rebounding in many aspects. As for ThermoGenesis, we are not only taking this opportunity to grow our existing business, but also to get ready to transform the company into a new direction for its future growth.
Ever since we established in 1986, for more than 30 years, ThermoGenesis has always been focused on the development and production of cutting edge automated cell processing medical devices for the cell banking and cell therapy industry. For example, we have supplied many automated cell processing and cryogenic storage technologies to world’s major public and private corporate banks. Our BioArchive smart cloud storage system warehoused close to 90% of all U.S. FDA biological license application of BLA-approved clinical grade Cord Blood units. Our AXP system has processed more than 1.2 million samples worldwide since its launch in nearly 40 countries and 140 institutes. And in the last — in the past two years, we’ve continued to develop more FDA-approved medical devices for point of care clinical applications, and for large scale cell therapy manufacturing.
These intellectual properties, proprietary technologies in know-hows are invaluable assets to the company.
In the past five years, cell therapies have become the next pillar of medicine. In 2017, the U.S. FDA approved the first CAR-T cell therapy, Kymriah, which uses patients — which uses cancer patient’s own immune cells and turned that into a cell therapy for the treatment of acute lymphoblastic leukemia. The CAR-T cell therapy demonstrated close to 90% response rate in the relapsed and refractory cancer patient group. Or in other word patients who have failed chemotherapy, radiation and all other therapeutic options. By the end of 2021 FDA has approved five CAR-T therapies for various forms of blood cancers. And globally, there were over 1200 CAR-T cells related clinical trials registered on the National Institute of Health’s website, targeting a variety of blood and solid tumors.
One of the major issues with using cell therapy products from bench to bedside has been the manufacturing bottleneck. The heterogeneous and personalized nature of the cell therapy product has introduced manufacturing and scaling up complexities that are not seen with the traditional pharmaceutical products. A significant number of cell therapy based companies are seeking external service provider for their cell manufacturing needs. We believe that we can leverage our extensive IP and proprietary cell processing technologies to more effectively address our manufacturing needs.
With that set, ThermoGenesis plans to launch its own contract manufacturing service for cell therapy products, leveraging our significant amount of IP and proprietary technologies in the cell processing and cell manufacturing field. By doing so, we are transforming thermogenesis from a traditional medical device company to a contract development and manufacturing organization, or CDMO for cell therapy manufacturing.
The company plans to develop and operate the CDMO business through a newly formed division named TG Biosynthesis. TG Biosynthesis intends to provide high quality development and manufacturing capacities, cell and tissue processing development, quality system, regulatory compliances and other cell manufacturing solutions for clients with therapeutic candidates in various stage of preclinical or clinical development.
As you may have seen in our press announcement and10-K filed today, which is March 28 2022, ThermoGenesis entered into a licensing and technology assess agreements with Boyalife Genomics for a license in the U.S. to use Boyalife Genomics patents, and know-hows related to cell processing and manufacturing, Boyalife Genomics is an affiliate of our Chairman and CEO, Dr. Chris Xu, and his China-based cell manufacturing organization that has developed substantial manufacturing technologies related to cell manufacturing services.
Also, on March 24, 2022, ThermoGenesis entered into a long-term lease agreement with Z3 Investment, another affiliate of our Chairman and CEO to these approximately 35,500 square feet of space in Sacramento, California to build out a current good manufacturing practice or GMP compliant cell manufacturing facility with 12 CGMP cleanroom suites. The planned build out is expected to complete in six to nine months. We are targeting to launch our CDMO service to customers by the end of 2022. We look forward to reporting more of this exciting transformation in the coming months.
And with that, let me turn the call over to Jeff to share the key financial results for the year 2021. Jeff?
Jeff Cauble
Thank you, Chris. Net revenues were $9.3 million for the year ended December 31, 2021 a tricky decrease of $450,000 or 5% as compared to 2020. The decrease was primarily driven by a decline in CAR-TXpress revenues offset by increase in BioArchive service revenue and AXP sales.
Gross profit was $3.5 million or 38% of net revenues for the year ended December 31, 2021 as compared to $1.3 million or 13% of that revenues for the year ended December 31, 2020. The increase was due to lower inventory reserves in the year ended December 31 2021.
Selling, general and administrative expenses were $8.5 million for the year ended December 31, 2021 as compared to $7.7 million for the year ended December 31, 2020. The increase was driven by stock compensation expense, offset by a decrease in legal and other expense reductions.
Research and Development expenses were $2.2 million for the year ended December 31 2021 as compared to $2.5 million for the year ended December 31 2020. The decrease was driven by lower salaries and benefits and was offset by increased compensation expense. Interest expense declined $1.8 million to $6.1 million for the year ended December 31 2021, as compared to $7.9 million for the previous year. The decrease was driven by lower unamortized debt discount of the beneficial conversion factor associated with revolving credit agreement with Boyalife Asset Holdings.
For the year ended December 31 2021, the company reported a comprehensive loss attributable to common stockholders of $11.4 million or $0.96 per share, based on approximately 11.8 million weighted average basic and diluted common shares outstanding. This compares to a comprehensive net loss of $16.3 million or $2.60 per share, based on approximately 6.3 million weighted average basic and diluted common shares outstanding for the year ended December 31, 2020.
At December 31 2021, the company had cash and cash equivalents totaling $7.3 million, compared with $7.2 million at December 31, 2020. Working capital was $8.6 million at December 31 2021, as compared to $9.2 million at December 31 2020.
This concludes our prepared remarks. And now we’d like to open the call to your questions. Operator?
Question-and-Answer Session
Operator
We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Sean Lee with H.C. Wainwright. Please go ahead.
Sean Lee
Good afternoon, Chris and Jeff. And thank you for taking my question. Very good to see that CDMO project is moving forward. I was wondering if you could provide some more details regarding the how you would take this project. So first of all, what is the — what exactly are the know-how is such that Boyalife is providing to you?
Chris Xu
Thanks, Sean. Very nice talking to you again. So the cell manufacturer requires a accumulative knowledge, which including some of the knowledge that company has, and also some of the licensing technology from Boyalife, which including but not limited to the enzymatic combination, cocktail process of tissue and potential application, shipping logistics.
So I think we are in a very good position is that we not only have the capacity to provide this service, but also to provide proprietary service that put us ahead of our competitors.
Sean Lee
Thanks. Then, in terms of location, then you’re set on Sacramento. So what made you decide there? And what is the area that you’re most excited to serve? Is it just the U.S.?
Chris Xu
So the location — that the current location which is, by the way, 35,000 next to our existing operation. We choose our location carefully, because by being close to our existing facility, that allows lots of synergistic effects to take place. We can leverage our existing staff, which including quality regulatory, and also allows us to build out future talent pool since we are in Sacramento, and also the place where UC Davis locates. And there are several major University in town.
So with location, certainly, we’re not just servicing California, we are servicing the entire U.S. And actually we are servicing globally, because currently one third of the clinical trials in cell gene therapy are from U.S., U.S. developers and the two thirds are from overseas. And many of those oversea biotech company who are developing cell gene therapies, yes, they intend to file R&D in the U.S. They have to then have the cells manufactured locally according to U.S. regulation. And one of the major clients, which we already seen coming are from overseas developers trying to enter the U.S. market.
Sean Lee
I see. Thanks for that. Final question is the 12 cleanrooms that are at this facility, what kind of proof of this activity [ph] once you have it up and running? And do you need to hire a lot of additional staff in the second half of the year to get this running?
Chris Xu
Yeah. So to give you a perspective, 12 GMP unit, historically rate, yep. It’s, for example, used to manufacture CAR-T therapies with previous technology, prevailing technology will roughly give you a throughput of one dose per unit per day. So –but that’s not what we are doing here. Luckily, we have the CAR-TXpress, which is a proprietary manufacturing platform that will report the throughput of that.
So all in all, with 12 GMP unit here, we are talking about roughly 10,000 clinical dose per year, [Indiscernible], which is a quite significant amount.
Sean Lee
Those are very helpful. For the second part of the question. Do you expect the major to staff expansion in the second half of this year?
Chris Xu
Sorry, can you repeat that?
Sean Lee
I think your recruitment drive towards in the middle and later half of this year?
Chris Xu
Yes. We have a very excellent talent pool with the company who are very experienced in regulatory and quality and in FDA compliance. With the new CDMO service we are taking additional staff. We are recruiting additional staff that will build up, build out those CDMO services. So yes, the answer — short answer is yes, we are expanding our staff.
Sean Lee
Great. Thanks again for taking my questions.
Jeff Cauble
Thanks, Sean.
Operator
This concludes our question and answer session. I would like to turn the call back over to Mr. Chris Xu for any closing remarks. Please go ahead.
Chris Xu
Thank you, operator. We look forward to updating you our progress during our first quarter 2022 call. And thank you to everyone who participate today and for your interest in ThermoGenesis Holding.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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