This morning ACM Global Central Lab, a large Rochester, N.Y.,-based central lab services company with significant global reach, announced the launch of CryoPort Inc.'s (CYRX.OB) shipping container for its cryogenic shipping needs.
ACM's central lab services caters to lab testing for global clinical trials in over 60 countries. The company notes that it perform more than 13 million tests per year and has worked with more than 6,000 sites.
In this morning's press release ACM noted that it validated CryoPort's shipping container with almost 600 specimens over multiple shipping lanes, which included destinations in India, China, Southeast Asia and Europe. Tracy Hendershott, ACM's Global V.P. of clinical trials, referenced lower costs of shipping (including eliminating the need to re-ice during transport, a requirement with dry ice containers) as one of the major benefits of CryoPort's container.
We view this agreement as a significant milestone for CYRX. As we detailed in our initiation report on CYRX, feedback from customers that had tried CryoPort's container (and shipping service) had been overwhelmingly positive, yet adoption up to that point had been slow going. The issue did not appear to be lack of customer satisfaction, but was instead getting a prospective customer to give it a try. CryoPort had also noted that prospective customers wanted to have (sometimes lengthy) multiple trial runs with the containers before signing on. This deal with ACM validates not only the high customer satisfaction but also that CryoPort's upfront investments (in time and money) in demonstrating the benefits of their container/service to prospective customers will eventually pay off (Ms. Hendershott praises CryoPort for being "extremely collaborative in complying with ACM's stringent validation efforts").
We also theorized that despite CryoPort having a significantly better system of shipping frozen materials (especially relative to the industry-standard dry-ice method) that a better mousetrap often does not result in rapid acceptance. Staying the course is often viewed as a safer bet than trying something new for fear that the "something new" will provide no meaningful benefit, cause disruptions or be costly. It is easier for customers to adopt a new way of doing things (i.e. - CryoPort's container) after it has been tested and proven (i.e. - "let someone else be the guinea pig" mentality). Having a company of ACM's significance validate the benefits of CryoPort's container/service makes it much easier for other prospective customers to get comfortable that trying the "something new" (i.e. - CryoPort's container) will indeed provide meaningful benefits such as lower costs, less hassle and less risk of specimen spoilage.
This collaboration could be a real catalyst in breaking open the floodgates for CryoPort. The first glimpse of the newlyweds together should be at the 9th Annual Central Labs Conference in Boston next week, which both CryoPort and ACM are expected to be attending.
FedEx and DHL have already endorsed CryoPort's system. Having ACM on-board adds further support that CryoPort's system will be the future for shipping biological material at cryogenic temperatures.
We cover CryoPort with an Outperform rating and $3.85 price target.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.