Aug 9, 2020
Operator
Good day, and welcome to the Cryoport, Inc.' s Second Quarter 2020 Earnings Results Call.
Today’s conference is being recorded. At this time, I like to turn the conference over to Mr.
Todd Fromer. Please go ahead sir.
Todd Fromer
Thank you, operator. Before we begin today, I would like to remind everyone that this conference call contains certain forward-looking statements.
All statements that address our operating performance, events or developments that we expect or anticipate occurring in the future are forward-looking statements. These forward-looking statements are based on management's beliefs and assumptions and not on information currently available to our management team.
Our management team believes these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made.
We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from our historical experience and our present expectations or projections.
These risks and uncertainties include, but are not limited to, those described in Item 1A, risk factors and elsewhere in our Annual Report on Form 10-K filed with the Securities and Exchange Commission and those described from time -to-time in other reports, which we filed with the Securities and Exchange Commission. I would now like to turn the call over to Mr.
Jerrell Shelton, Chief Executive Officer of Cryoport. Jerrell, the floor is yours.
Jerrell Shelton
Thank you, Todd. Good afternoon ladies and gentlemen.
We appreciate you joining our earnings call today. With me this afternoon is our Chief Financial Officer, Mr.
Robert Stefanovich; our Chief Commercial Officer, Mark Sawicki; and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. As a reminder, we have uploaded our second quarter 2020 [Technical Difficulty] website.
It can be found under the Investor Relations section in the Events & Presentations section. This document provides a review of our recent financial and operational performance and general business outlook.
If you have not had a chance to read it, I would encourage you to go to the website and to download it. As with previous quarters, on this conference call, we will provide you with a brief general update.
Then we'll move to addressing your queries regarding our Company's results. I'd like to start this call by stating that, our second quarter results reflect the strength and resilience of our company, where we saw continued year-on-year growth despite the challenging environment caused by the COVID-19 pandemic.
Thanks to the tireless work of our colleagues around the world, we continue to successfully navigate the external realities and we remain focused on our mission of supporting life and health by delivering reliable and comprehensive temperature control supply chain solutions for the life sciences industry through our innovation, advanced technologies and global supply chain network. We reported revenue of $9.4 million for the second quarter of 2020, an increase of 11% when compared to the second quarter of 2019.
Our growth was primarily driven by revenue from our commercial agreements with Gilead's YESCARTA and Novartis' KYMRIAH, which contributed $2.6 million in the second quarter of 2020, representing a 38% increase when compared to the second quarter of 2019. In addition, bioservices revenue was $1.3 million as compared to $600,000.last year, which was represented by revenue from a partial quarter, it was the quarter in which Cryogene was acquired.
Although 56 clinical trials were suspended during the second quarter due to COVID-19 pandemic, we are pleased that only three remains suspended as of the end of the second quarter as sponsors worked hard to get their clinical trials restarted and patients treated. None of the remaining trials to our knowledge had been terminated.
We continue to see momentum in the life sciences industry as the development of regenerative therapies accelerates and demand for our temperature control supply chain solutions intensifies both Gilead's YESCARTA and FedEx renew their agreements with Cryoport for temperature control solutions during the second quarter. The FDA approved to TECARTUS manufactured by Gilead's Kite, which brings the number of commercial regenerative therapies we support to 4 KYMRIAH by Novartis YESCARTA and TECARTUS by Gilead's Kite and ZYNTEGLO by Bluebird Bio.
We also support Maraleucel developed by Bristol Myers Squibb, which was recently validated by the European Medicines Agency. Through our innovation, advanced technology and global supply chain network Cryoport has achieved a leading position providing temperature control supply chain support capabilities for life sciences industry, and especially for the fast growing, high value, life saving cell and gene therapy market.
In continuous of building our global alliances and further extending our leadership position in the industry. We have signed a new partnership with Medipal Holdings, one of the leading pharmaceutical distributors in Japan to provide an integrated and distribution solution for specialty cell and gene therapies.
This special partnership is an important step that helps us grow our services in APAC region, and supplement our crowd Cryoport Express global supply chain network. In closing my comments, I would like to mention our successful convertible debt offering of $111 million, with this addition, our balance sheet is robust and provides us with significant flexibility to continue to develop our Cryoport Express global supply chain network to invest in the development of our advanced technologies to further the development of competencies within our team, and to position us for acquisitions that are either supplementary and or complimentary to our market footprint.
Now I'd like to turn the call over to the operator to open the telephone lines for your questions.
Operator
Thank you. [Operator Instructions].
And our first question Puneet Souda with SVB Leerink. Please go ahead.
Unidentified Analyst
Hi guys. This is Scott Mafale on for Puneet.
Thanks for taking the question. So, I want to --.
Hey, how are doing Jerry. So I want to get in first with the commercial business.
It's great to see TECARTUS add to the firm in terms of the products you're supporting. And life-saving cell advancing closer to commercialization, given the dynamics between the ramp up of these two products and the host of BLA you guys talked about in the past and you're monitoring, how should we think about the commercial business in 2H and into ‘21 just the overall trajectory of that business?
Jerrell Shelton
That's a great question for Dr. Sawicki.
Mark Sawicki
Thanks, Jerrell. Yes, so obviously, as these products launch, let's start with TECARTUS.
From our perspective, I think that we will absolutely see revenue associated with TECARTUS in this fiscal year and I think the ramp up will be slightly faster than you would have seen from either YESCARTA or KYMRIAH. Probably top out a little bit less than YESCARTA and KYMRIAH on a [indiscernible] at this point in time.
As it relates to ZYNTEGLO, I think that's going to be a bit slower. In fact, it’s probably be nominal revenue associated with this year.
And we'll start to see contribution in 2021, I think in a meaningful way.
Unidentified Analyst
Okay, got it. Thank you for that.
And I appreciate the incremental color on the COVID trials that you guys are supporting, just as we look out into the future quarters and into 2021, should we expect Cryoport to participate if there's a large scale commercialization of one of these vaccine candidates so we expect Cryoport to be there in kind of supporting that, that rollout?
Jerrell Shelton
I think Dr. Sawicki going to answer that.
Mark Sawicki
Yes, let me just kind of give you a little bit of a high level here. So from our perspective the logistic support for COVID-19 vaccines that are part of operation warp speed are in a fluid state, and the plans are far from done or completed at this point in time, unfortunately, there still is a significant amount of confusion around the coordinated vaccine rollout in the United States at this point.
So that’s -- most likely we're going to have a lot of companies supporting this effort, it's going to be convoluted in -- we will -- and from our perspective, our goal is to be involved. We can't disclose obviously, due to confidentiality, what we're doing with whom, but it's too early to kind of tell you anything definitive at this point in time.
And it's one thing to support 30 or 50 patient clinical program, it's quite another to figure out how to support and treat a global population to this point.
Unidentified Analyst
Absolutely, okay, I appreciate that. And just lastly on the clinical trial business, I'm sure you guys have seen, in recent months, there's definitely been an uplift in capital funding for the biotech market.
How does this kind of impact your views of the clinical trial business? And are you seeing more kind of activity at the top of the funnel just as these trials start to begin and kind of move into the point where you guys could support them?
Thanks.
Jerrell Shelton
We're seeing a lot of activity. Mark, do you want to comment on that?
Mark Sawicki
Yes, I mean, we're very bullish obviously, on the clinical trial space and regenerative medicine, the industry continues to put a substantial amount of assets into the space. I think the alliance for generic medicine just published a report today that shows that year-over-year financing for the first half of the year up 120%.
And we expect upwards of another 6 BLA or MAA filing this year and upwards of 17 next year. So we're very excited about the space.
Unidentified Analyst
Great, that's all for me. Thanks, guys.
Operator
And our next question comes from Jacob Johnson with Stephens. Please go ahead.
Jacob Johnson
Hey, thanks. Maybe following up on a couple of those questions.
How should we think about the long-term growth of your clinical trial revenues? I mean, how much of this will be driven by just clinical trials advancing through the process versus just an overall increase in the number of trials that you're supporting?
Jerrell Shelton
Jacob, would you -- did you -- I didn't quite -- we didn't quite understand your question, Jacob. Could you rephrase that?
Could you rephrase it?
Jacob Johnson
Yes, I'm just -- how should we think about like the long-term growth of your revenues from clinical trials? I mean, is there a way to think about the long-term growth of that or is it just so dependent on trials progressing and how many you can add in a quarter that it's maybe not as simple number for people like me?
Jerrell Shelton
Jacob, it’s not a simple number. And the trials are going to continue.
We're just in those very early, early stages of this industry. So trials will continue to trial.
And of course, our revenue goes up as -- in trials as trials do advance, if they get to the next stage. That's why we report net numbers because there's a lot of activity and trials to call out.
And then there are ads, and we report the net number of ads that we have each quarter. Tom, do you want to comment further on that?
Thomas Heinzen
Yes, it's -- it is a blend. So it is maturation of current trials.
It is the addition of new trials. And you have things that nobody sees to come into it like these COVID trials that came out of nowhere with the pandemic all of a sudden.
So it's going to be a confluence of the factors. The great thing is it's not just domestic, it's globally we've seen the pickup in Europe.
And now we also report on the pickup in the APAC region. And the only other thing I'd add is the diversification of revenue streams associated with our clinical pipeline.
So as we continue to roll-out our bioservices and other temperature ranges and product lines, our average share of that spend will increase overtime.
Jacob Johnson
Got it, I appreciate the tag team answer there. And then I attended a webinar with Dr.
Sawicki, where he presented alongside with Lonza a week or two ago, I guess the CDMOs continue to expand in the cell and gene therapy space. Are they focusing more on their cold chain logistics efforts?
It certainly seems like Lonza is and then maybe as a follow up, you just get an update on how the relationship with Lonza is progressing?
Jerrell Shelton
Yes, I think obviously, the fact that we are co-presenting content to the market demonstrates the strength of that relationship. We continue to work towards maturation that relationship.Our perspective is that that industry is critical to the development of the space into ensuring that the space can meet the projections from a volume standpoint overtime.
And so, our goal is to have very strong relationships with the CDMO industry.
Jacob Johnson
Great. I'll leave it there.
Thanks for taking the questions. Thanks guys.
Operator
And our next question comes from Steve Unger with Needham. Please go ahead.
Steve Unger
Great. Hi, guys.
First question --
Jerrell Shelton
Hi, Steve.
Steve Unger
Hi. Could you just give us some more color on the Medipal relationship and the significance of -- sort of the -- it's a different type of relationship for you as my understanding in that it's broad distribution of products is that cold chain across the border is cryogenic only and then what are the implications do you actually start to see revenues?
Jerrell Shelton
No, it's across the Board. But each region remember, as we divide the world into three regions into the EMEA, I mean like most companies into to EMEA, the Americas and Asia Pac and Asia Pac is beginning to develop, then you're going to see a lot more activity in the future.
You've seen our trials go up and there'll be other trials. It's important that we expand our network in that region in -- expanding in that region -- it has its own peculiarities and so forth.
Medipal is one of the strongest wholesalers, drug wholesalers in Japan. So -- and they have some distinctive capabilities and to partner with Medipal gives us a stake in the ground so to speak in, in Japan, which is complimentary and to our global supply chain network that we're building out.
So it -- the arrangement and you could look at a JV, you could look at an independent operation or you could look at [Lonza]. So and here this -- what we have here is an alliance a partnership with Medipal, that we that we think is going to be quite good for both of us.
Steve Unger
And when do you think you'll start to see revenues from that relationship?
Jerrell Shelton
Well, that that will take some time. We have just signed the agreement.
We have to develop our plan. So I can't tell you exactly when that will happen, Steve?
Thomas Heinzen
Yes, I would like – this is Tom. Just to point out two things.
One, that KYMRIAH is now approved in Japan. And Novartis also has clinical trials now that will be going on in APAC.
So the demand will be driven by the customers more than the alliance or partnership. That make sense?
Steve Unger
Yes, it does. Okay.
And then could you just talk about the change that that occurred with YESCARTA, I understand their manufacturing now they're able to manufacture now in Europe and those implications for your commercial revenues. It sounds like you're flipping from international shipments to more domestic European shipments?
Jerrell Shelton
Steve, that's a really good question. And it's one that certainly we are prepared to answer.
So Mark, would you comment on that?
Mark Sawicki
No, you're exactly right. We view this as a very positive development.
The bottom line as these companies are working tirelessly to increase their manufacturing capacity on a global basis. So long-term, it's going to provide substantial upside from a volume standpoint and be able to support the European markets very effectively.
In the short-term, obviously, you have a transition from complex international shipments to more straightforward domestic shipments which has a short-term impact on revenue.
Steve Unger
Yes, okay. And then finally, just on TECARTUS is there investment that you need to make either -- I guess, primarily and as far as distribution centers or mostly distribution centers, but anything else that that needs to occur to get that relationship up and running?
Jerrell Shelton
No, not at all. I mean, we're -- that's what we're built for.
So we are ready for TECARTUS and TECARTUS volume.
Steve Unger
Absolutely, okay. Thank you very much.
Jerrell Shelton
Thank you, Steve.
Steve Unger
Thanks.
Operator
And our next question is from Andrew D'Silva with B. Riley FBR.
Please go ahead.
Andrew D'Silva
Hey, good afternoon. Thanks for taking my questions.
And sorry, I actually had trouble getting out of the call so maybe answered to couple of these questions, but just to start, Bristol Myers Squibb had an announcement about liso-cel and was it a little different than most of those kinds of announcements make typically, could you maybe give a little bit of clarity on where that is in the regulatory process? And is it something viable for late 2020 early 2021?
Jerrell Shelton
Yes, Tom, why don't you take that?
Thomas Heinzen
Yes. And you're right.
It was a confusing news release that we had to read over a few times. So the -- their submission for at the EMA has been validated.
And now it's in the review process before hopefully it gets approved later this year or early next year.
Andrew D'Silva
Okay, that that's much more clear. Okay, great.
And then as it relates to the I-CELL, cell therapy transportation standards, were those the same standards you were referencing earlier in the year that you are helping draft or were involved in at least the process while they were drafting it. And if so, could you give just a little bit of color on specifically some of the aspects of it that are really fine tuned to what you've learned as the leading logistics for cryogenic shipments?
Jerrell Shelton
Yes, actually Mark and some of our other colleagues participated on those panels and we were delighted to be in a position to be able to supply some points of view and information, but Mark can comment specifically on your question.
Mark Sawicki
Yes, so ISO/TC 276, which is what we had talked about in previous calls was the working group associated with developing the recommendations for ISO, ISO just launched that regulatory platform which they call ISO 21973. And the key element behind ISO 21973 as it introduces within the logistics space, a lot of traceability requirements or recommendations for traceability, which is similar to our chain of compliance that we've been talking through, which includes traceability on the equipment, traceability in all the calibration and usage history, traceability on the cleaning validation and recommended cleaning, protocol -- validated cleaning protocols, all of which are things that we do and differentiate ourselves in the marketplace.
So we do believe that those recommendations are going to create a higher barrier to entry for potential competitors in the future.
Andrew D'Silva
Interesting, okay. And so, this is a little bit [indiscernible] path, but if you recall, maybe a couple months ago, Novartis is talking about developing a potential gene therapy vaccine.
I have no doubt that these regulations are closer to cell therapies, but would you expect that that gene therapy vaccine to follow some of these cell therapy transportation standards being a cryogenic data or will they have to go through dry ice?
Thomas Heinzen
First half -- Andy it’s Tom here. The standards are recommendations for now.
And hopefully in the future, the FDA will they've already been presented these recommendations. So until these standards are adopted by regulatory bodies around the world, it's a recommendation.
So that's first half. That Novartis product on a vaccine hopefully for COVID hasn't even started trials yet.
So it's a little early to comment on how it'll ship and I believe Novartis is contributing technology, but it's an academic institution that's going to control the design of the trial and how it's implemented.
Andrew D'Silva
Okay, I hope it's perfect. And then my last question is just related to the commercial revenue.
Is there a reason that it didn't really align with the increase in sales that -- Can you -- I recognize during the quarter because of just the change in location for manufacturing for Gilead or were there some other nuances that resulted in your commercial revenue in terms of declining, but their commercial revenue sequentially increasing?
Jerrell Shelton
Yes, Its definitively related to the change in manufacturing location.
Andrew D'Silva
Okay, okay. Perfect.
Thank you very, very much and best of luck going forward.
Jerrell Shelton
Thank you, Andy.
Operator
And our next question is from Brandon Couillard with Jefferies. Please go ahead.
Brandon Couillard
Thanks. Good afternoon, I think you guys launched the CRYOSHUTTLE, the way we launched the CRYOSHUTTLE offering sometime around late 2Q in early June, you kind of walk through what that offering does for you initial demand and feedback and where it's offered globally, whether it's just in the U.S.
or it also include some parts of Europe?
Jerrell Shelton
The CRYOSHUTTLE is de-risk the process with our customers, it's because we keep our, products under our control for a longer period of time. But Mark, do you want to comment further on the CRYOSHUTTLE advantage to the clients?
Mark Sawicki
Yes, so in that sense, what we've done is we put surface fleet proximal or within each of our logistics centers. So we have surface fleet in Irvine.
We have surface fleet and Livingston, we have surface fleet in Houston and we have surface fleet in Amsterdam at this point in time. And what it does is it provides our partners the ability to utilize that surface fleet instead of local third-party couriers who in many cases are untrained with the equipment and don't understand it.
And so instead of hiring a third -party courier to do that they utilize our equipment and our trained drivers and we have more control and flexibility over how that that our equipment is being delivered into those locations within approximate distance of our facilities. Adoption is growing very strongly, we see significant continuous increase in the parties that are utilizing it and we think that will continue in the foreseeable future.
So Brandon, we've got CRYOSHUTTLE we've improved the reliability, we decreased the risk and by improving the reliability, we have some cost advantages that are built into that as well. And the less people are handling it again, you're de-risking the process.
It's an important service.
Brandon Couillard
That's it. Your problem -- kind of at a high level, if we look at the share -- your share of trials, which continues to much higher include it almost two-thirds of all Phase 3 trials, curious if you perceive some type of ceiling or level at which companies will just continue to do a portion of the logistics and house and how much higher you think your share can continue to go as far as the outsourcing trend?
Jerrell Shelton
Yes, we won't rest until we're at 100%. We think there's ample room for continuous improvement in that and overall share in the marketplace.
I think the market demonstrates continual adoption of our platform. And there's many cases we have folks coming to us versus us chasing them down.
So we think there's still significant room for improvement then continual -- capture of share.
Mark Sawicki
Brandon, remember, we're also expanding our footprint. We're quite a different company.
When you first started covering us the person used in our facilities, you would see a lot of changes in terms of our services, our product we're a growing company, we're dynamic, and so the footprint will change. There'll be more and more trials and of course, in terms of market share, we are the leader will we have some room to go and market share and we did gain some market share this quarter, and we intend to gain market share every quarter.
So that means that we're going to grow -- we're going to -- we're in a position to grow and to keep up and to claim that space. That's what it's all about for us.
Brandon Couillard
Okay, guys. Thank you.
Operator
It appears there are no further questions at this time. I'd now like to turn the conference back to Mr.
Jerrell Shelton for any additional remarks.
Jerrell Shelton
Thank you, operator. When I took over the leadership of this business eight years ago, I had a vision and since that day, our team has been delivering on it.
Every passing day, our collective commitment grows stronger, as we believe that by providing reliable, advanced and comprehensive temperature control supply chain solutions, our clients and the industry will continue to place their faith in us. Through the sustained efforts of our colleagues around the world, we have established the leading temperature control supply chain services company supporting regenerative medicine globally.
Through our innovation and execution, we have earned the respect of our clients and consequently have a loyal client base. Our second quarter results reflect this strength and resilience.
And we're pleased to report continued year-over-year growth despite the challenging environment. We continue to execute on our organic initiatives and growth initiatives to build-out our infrastructure in anticipation of our future, including investment and software infrastructure, additional new competencies, new advanced technology products, and the Cryoport Express global supply chain network.
Each of these endeavors and these endeavors collectively further extend our capabilities within the life sciences industry, requirement for precision temperature control, supply chain solutions and support. The number of cellular and gene therapy trials will continue to grow and a greater number of commercial therapies will be coming to market on an accelerating basis for many years to come.
To continue to support the life sciences industry and prove our industry position leadership position, we're forever committed to proactively strengthening our core competencies and effectiveness. Thereby we believe that we will continue to release strategic value that will further enhance our position in the life sciences industry and consequently, economic value to our shareholders.
Until our next earnings call, we bid you a good evening. Thank you.
Operator
And this concludes today's call. Thank you for your participation.
You may now disconnect.