Cold-chain logistics provider Cryoport Inc. is getting a warmer reception on Wall Street.
Despite a slide over the summer, stock of the Irvine-based company (Nasdaq: CYRX), which provides temperature-controlled containers and related shipping services to biopharmaceutical companies, has increased in value 55% in the past year, giving it a market capitalization of nearly $325 million.
The increase came as it garnered more business from big-name pharma giants, including Novartis AG (NYSE: NVS), Gilead Sciences Inc. (Nasdaq: GILD), and others focused on the growing regenerative medicine segment, which involves replacing, engineering or regenerating human cells, tissues and organs.
The companies need to safely store and ship stem cells and related products, and that’s where Cryoport comes in. Its custom-built, aircraft-grade transportation containers use liquid nitrogen vapor to keep materials at specific temperatures for up to 10 days. It’s partnered with FedEx, DHL and UPS for much of its shipping needs.
The company recently reported revenue of $5.3 million for the quarter ended on Sept. 30, up 14% year-over-year.
Clinical Boost
Chief Executive Jerrell Shelton said in the company’s November earnings call that the growth “was driven by a record 37 new clinical trial agreements.”
There’s no sign of the momentum slowing. “In fact, 38 clinical programs that we support are already in phase three trials, the final phase before commercialization,” he said.
More growth appears likely.
The global regenerative medicine market, at $18.9 billion two years ago, is projected to grow to over $66 billion by 2022, according to market research report firm ReportsnReports.com.
Cryoport currently supports 295 clinical trials led by other firms, including the 38 in third-phase trials.
That’s up from 195 clinical trials a year earlier.
“We have by far the largest market share in this space throughout all the phases,” said Chief Commercial Officer Mark Sawicki on the earnings call.
Firms like Novartis and Gilead require more global transportation support following Food and Drug Administration approval of their CAR-T cell therapies, in which a patient’s T cells—an immune system cell—are taken from the blood, altered in the laboratory, and reintroduced into the patient in order to attack cancer cells.
Basel, Switzerland-based Novartis received FDA approval of therapy Kymriah in August 2017, and several months later, Foster City-based Gilead got the nod for Yescarta.
The first two FDA-approved CAR-T cell therapies target patients with B-cell lymphoma, a type of blood cancer in the lymph nodes.
Cryoport is the sole temperature-controlled logistics provider for both therapies.
It’s bringing additional logistics centers to support future expansion. Last month it announced the grand opening of a center in Livingston, N.J., and a location in Amsterdam.
The facilities complement its existing logistics center and headquarters in Irvine, a 27,600-square-foot facility where about 60 people work.
The company is “hiring across the board for the foreseeable future,” Shelton told the Business Journal last week. It also anticipates opening additional logistics centers, which “will be customer-driven,” he said.
Reproductive
Biopharmaceutical-related sales accounted for the bulk of the company’s recent growth, though other business segments’ sales are projected to increase.
The biopharmaceutical segment generated $4.5 million in revenue in the latest quarter.
Its two other units, reproductive medicine and animal health, reported $584,000 and $229,000, respectively.
The reproductive medicine market increased 42.7% from a year earlier, and Vice President of Corporate Development Thomas Heinzen said the company is ramping up investment in the opportunity.
“This started as a little thing inside our company [in 2010] … Earlier this year we said, if we are going to do this, we should make it our own, not B-to-B, but B-to-C.”
The unit will hire more sales and customer-support staff for the consumer-driven business line, separate from Cryoport’s existing sales team.
Shannon Curiel, senior director of business development and director of sales of reproductive medicine, said that the potential parents that make up that market are “highly discriminating” and require a high level of customer service.
“When it comes to reproductive medicine,” Heinzen said, “you need that extra touch with intended parents … they ask different questions, and you have to hold their hands a little.”
Cryoport launched CryoStork a year ago to provide reproductive-related services, such as in vitro fertilization treatments logistics, to patients and clinics.
The assisted-reproductive technology market was valued at $2.2 billion in 2016 and is projected to reach $3.8 billion by 2024, according to Transparency Market Research.
The number of in vitro fertilization cycles supporting this market is growing at a rate of approximately 15% per year, Shelton pointed out. He said while the end users are different, the need for its technology is the same—“embryos, eggs are some of the most sensitive materials in the world.”
“We anticipate growth consistent with the market and to eventually exceed the industry’s growth rate as we capture an increasing market share,” he said.
M&A
While company executives say they believe the regenerative medicine and reproductive medicine industries will continue to grow, they’re not ruling out other avenues of expansion.
In particular, Cryoport’s Shelton said they don’t discount acquisitions to expand capabilities.
He said 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.”
The acquisition target can also be a horizontal growth play, such as biostorage services and fulfillment providers, according to Shelton.
There are 892 cell therapy, gene therapy, tissue engineering and other regenerative medicine therapeutics developers worldwide, according to a recent quarterly report by the Alliance for Regenerative Medicine. That’s up from nearly 700 companies two years ago, Shelton noted.
Cryoport estimates annual revenue of $15,000 to $75,000 for every first-phase trial it works on; $75,000 to $150,000 for every second-phase trial, and $200,000 to $1 million for every third-phase trial whose administrators are actively enrolling patients.
Technology
“Cryoport is a microcap company, which involves high risk,” wrote Janney Montgomery Scott LLC analyst Paul Knight. He noted the company, while “still in its infancy,” has emerged as “the leader in cryogenic logistics” providing innovative solutions.
Cryoport provides full-service biomaterial transportation, which involves storage, order fulfillment, shipping, continuous tracking and monitoring, documentation assistance, and round-the-clock customer support.
Its shipping containers are designed to protect samples and shipments by maintaining optimum temperatures, and come with condition monitoring system SmartPak II, which provides continuous real-time data using GPS and advanced integrated monitoring.
Cryoport Express uses liquid nitrogen dry vapor, maintaining minus 150 Celsius for up to 10 days; Cryoport C3 maintains a temperature of 2 to 8 degrees Celsius for up to 96 hours.
