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Cold-Chain Logistics Provider Cryoport Lands $25M

Cryoport Inc. (Nasdaq: CYRX) is not the only one excited about the outlook of biotech companies and their cell and gene therapy pipelines—and the services used to transport their ultra-sensitive materials from place to place.

The Irvine-based cold-chain transportation logistics provider landed a $25 million investment from New York-based healthcare investment firm Petrichor Healthcare Capital Management last week.

It’s a significant amount for Cryoport, which has a market value of $300 million, and posted $5.3 million in revenue last quarter.

Shares of Cryoport jumped about 8% on news of the investment, which saw Petrichor buy $10 million of Cryoport stock at $10 a share, and also fund a $15 million note, which is convertible into Cryoport stock at a price per share of $13.11.

Shares stood at around $10.25 as of Friday for the microcap company, which makes lightweight and reusable shipping containers that keeps stem cells, tissues, and other materials used by life sciences and biotech companies in cold temperature for up to 10 days. It works with FedEx Corp., DHL and UPS for much of its shipping needs.

It also provides end-to-end services spanning from storage, ordering, fulfillment, continuous tracking and monitoring to documentation.

Petrichor, which was formed last year, has executives who have been involved in 75 investments representing more than $5 billion in invested capital.

Cryoport “is uniquely positioned in the cell and gene therapy temperature-controlled logistics space, which we believe is poised for considerable expansion,” said Tadd Wessel, Petrichor’s founder and managing partner.

Of note, Cryoport services the two biggest CAR-T cell therapy developers, Novartis AG (NYSE: NVS) and Gilead Sciences Inc. (Nasdaq: GILD).

The two own the first two FDA-approved CAR-T cell therapies, targeting patients with B-cell lymphoma, a type of blood cancer in the lymph nodes.

Novartis received FDA approval for Kymriah in August last year and several months later, Foster City-based Gilead got the nod for Yescarta.

Cryoport is the sole temperature-controlled logistics provider for both therapies.

“We see [Cryoport] as a leader in the life sciences logistics space at a time of great change and innovation in biopharmaceutical therapy,” added Bruce Keogh, a member of Petrichor’s advisory board and a recent appointee to the board of directors of U.K.-based nonprofit Cell and Gene Therapy Catapult.

Paul Knight, an analyst at Janney Montgomery Scott LLC that covers Cryoport, noted that the logistics firm now supports 295 clinical trials and two commercial therapies.

He also said the company is likely to benefit from its new partnerships with large pharma logistics providers World Courier Group Inc. and McKesson Specialty Health, a division of McKesson Corp., as well as its work in establishing industry standards with its “Chain of Compliance” program ahead of future regulations.

“We estimate 33% growth in FY19,” Knight wrote in a recent report.

M&A

Cryoport Chief Executive Jerrell Shelton told the Business Journal last month that the company would likely be on the lookout for acquisitions next year.

He said at the time that it’s looking for acquisitions that “[fill] out our vision of our specialty logistics mandate for serving the life sciences … information-type companies and software, and storage, fulfillment … Anything that’s in that logistics chain is something we are interested in.”

Last week’s deal should hasten that type of deal-making.

Shelton said proceeds from Petrichor’s investment will be used to support growth as well as “the pursuit of targeted, strategic acquisitions.”

Petrichor was launched in January last year. Wessel has over 19 years of experience in healthcare finance and was an ex-managing director at New York-based healthcare fund OrbiMed Advisors LLC.

In 2017, Petrichor received $100 million in anchor capital from Archean Capital Partners, a private market investment platform established by Veritable LP and Moelis Asset Management LP.

Shelton noted that the healthcare investment firm “worked with us to structure this transaction to minimize dilution to our shareholders while providing substantial capital to support our long-term growth strategy.”

Biotech Boom

Biopharma—supporting cell therapy, gene therapy, tissue engineering and other regenerative medicine—is the main driver for Cryoport’s business. The segment generated $4.5 million of revenue for the quarter ended on Sept. 30, with other units, reproductive medicine and animal health, reporting $584,000 and $229,000, respectively.

Cryoport currently has 38 trials in the third phase. That number is up from 195 clinical trials from the same quarter a year ago.

Cryoport estimates annual revenue of $15,000 to $75,000 for every Phase I trial, $75,000 to $150,000 for every Phase II trial and up to $1 million for every Phase III trial where its customers are actively enrolling patients.

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