Cesca Therapeutics' (KOOL) Management on Q4 2017 Results - Earnings Call Transcript

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About: Cesca Therapeutics Inc (KOOL)
by: SA Transcripts

Cesca Therapeutics Inc (NASDAQ:KOOL) Q4 2017 Earnings Conference Call September 19, 2017 4:30 PM ET

Executives

Glenn Garmont - Rx Communications

Vivian Liu - Chief Operating Officer

Jeff Cauble - Principal Accounting Officer

Analysts

Operator

Good day everyone and welcome to the Cesca Therapeutics Fiscal 2017 Financial Results Conference Call and Webcast. As a reminder, all participants will be in a listen only mode. [Operator Instructions] This conference call is being recorded. I would now like to introduce your host for today’s conference, Glenn Garmont of Rx Communications. Please go ahead.

Glenn Garmont

Thank you, Austin. This conference call contains forward-looking statements within the meaning of federal securities laws. The company's actual results might differ materially from those projected in these 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 conference call, September 19, 2017. If any portion of this call is being rebroadcast, retransmitted, or redistributed at a later date, Cesca will not be reviewing nor updating this material.

Participating on today's call are Vivian Liu, Chief Operating Officer; Phil Coelho, Chief Technology Officer of ThermoGenesis, a main subsidiary of Cesca; and Jeff Cauble, Principal Accounting Officer. Please proceed Vivian.

Vivian Liu

Thank you, Glenn. Good afternoon everyone and thank you for joining us. I’ll start by providing a strategic and operational update for the quarter, and then Jeff will follow with a review of the financials. Since our last quarterly update, I am pleased to say that we have continued to make great strides toward transferring Cesca into a leader in the evolving field of automated point-of-care cellular therapy.

Most notably, in July, we acquired substantially all of the cellular processing assets of privately held SynGen. This acquisition perfectly complements our broad portfolio of systems of cellular processing, biobanking, and point-of-care therapeutics, and provides us with a new capability that were fully integrated will position Cesca as a key player in the rapidly emerging CAR-T field.

What is CAR-T? It is being described as a fifth pillar of cancer treatment that involves engineering a patient's own immune cells to identify molecular changes that occur in the cancer cells and then to attack those cells. There are manufacturing challenges that face current developers of CAR-T therapies.

According to FiercePharma, current CAR-T manufacturing process development time or what the industry calls vein-to-vein time for the patients can take from two to three weeks and up to $800,000 per patient. Here at Cesca, we are developing a new automated platform called CAR-T Express to enable developers to manufacture high quality, clinical grade CAR-T cells in a closed system at a faster and robust scale to provide these ground breaking treatments to as many patients as possible.

With the recent approval of the first CAR-T cell therapy and literally hundreds more in various stages of development, we believe speed, consistency, and cost will be critical success factors. We also believe that Cesca’s automated solutions will address many of the challenges facing the industry and we are currently in active discussions with several leading CAR-T developers.

Concurrent with our acquisition of SynGen, Phil Coelho, SynGen’s Co-Founder and Chief Technology Officer joined the Cesca team as Chief Technology Officer of our ThermoGenesis device division. As we noted on our last call in April, we established ThermoGenesis as a subsidiary that operates as a separate entity with a focused management team, but remains to be the true growth engine of the company.

We know Phil very well as he also founded ThermoGenesis before a merger with TotipotentRX to form the current Cesca back in June 2013. Phil is a well recognized and respected innovator in the field of cellular processing with many issue patents to its credits, including several that are key to our differentiated technology platforms. The addition of Phil, together with several other talented managerial staff from SynGen rounds out a highly capable management team that can achieve a new strategic vision for the company.

In addition to the asset acquisition, we consolidated the pipelines from SynGen and ThermoGenesis. Our current device product line-up includes the AutoXpress or AXP, it’s a proprietary automated system for the isolation and collection of stem cells from cord blood and peripheral blood. The second is PXP. For the rapid automated processing of autologous, peripheral, or bone marrow derived stem cells for cell based therapies at point-of-care situations such as hospital operating rooms or doctor’s clinics.

Next is CAR-T Express, which is the corner stone of a broad immuno-oncology offering that if we envision will include everything from off-the-shelf cellular processing systems to highly customized contract manufacturing and co-development programs. With CAR-T Express, we will be able to address such each of our customers unique automation needs. And, finally BioArchive, an automated single cassette-based cryogenic system used for the cryopreservation and storage of cord blood stem cell as well as CAR-T cells.

Our cellular processing solutions offer several distinct advantages in the marketplace, including hands free operation, high volume processing, and recovery rates that are among the highest in the industry. A key goal that we have established since Chris took over the [indiscernible] as CEO last year and I joined the company as COO this past February was to ignite faster growth in existing markets while pursuing new regional opportunities.

To that end, we recently signed a marketing and distribution agreement with Boyalife WSN, an affiliate of Boyalife Group, which is also the majority shareholder of Cesca. The agreement leverages Boyalife Global reach in several of the world’s fastest growing economies, including India, and most notably China where a significant percentage or CAR-T clinical trials are ongoing.

The advantages of this agreement are two-fold. First, it enables us to expand our cord blood business into a new fast growing market; at the same time it allows us to expand our collaborative network with CAR-T developers in these regions. Singapore, Indonesia, and the Philippines are also covered in this Boyalife agreement and we’re working to add additional territories.

Now turning to our second division, which is our clinical development program, our lead program is evaluating its derivative of our autologous cell-based therapy to treat patients with critical limb ischemia or CLI why. CLI is a severe form of peripheral artery disease and late stage patients suffering with this condition typically have no remaining treatment options other than amputation.

As we noted on our third quarter call, our early CLI feasibility study yielded very promising results with 17 study participants experience improved wound healing, rest pain, and six-minute walk distance along with a significant reduction in intermittent claudication pain. We obtained FDA approval for an IDE supplement for our revised CLI trial design.

Given that our near-term strategic focus is on growing our ThermoGenesis device business and developing CAR-T Express, our goal is to find a strategic partner to further advance as promising new therapeutic option. We continue to have discussions with potential partners and will provide a further update when development warrants.

In closing, I believe the progress that we have made in recent months set us up for a transformative and successful year ahead.

And with that, I’ll turn the call over to Jeff for a more detailed review of the financials. Jeff?

Jeff Cauble

Thank you, Vivian. Before we begin the financial details, I would like to discuss the upcoming change to our fiscal year. Recently, our Board of Directors approved the change to our fiscal year-end from June 30 to December 31. As a result, in addition to the 10-K filed today for the 12-months ended June 30, 2017, we intend to file a 10-Q for the three months ended September 30, 2017 as we would normally do, followed by a transition Form 10-K for the six months ended December 31, 2017. Moving forward, beginning in 2018, our fiscal year will end on December 31.

Now turning to the financial results. Net revenues for the 12 months ended June 30, 2017 were $14.5 million, compared to $11.9 million for the 12 months ended June 30, 2016. The increase was primarily a result of shipments of AXP disposables to a single end-user customer and distributors in China and Europe, as well as the shipment of two additional BioArchive systems versus fiscal 2016.

Gross profit for the 12 months ended June 30, 2017 was 5.8 million or 40% of net revenue, compared to $2.7 million or 23% net revenue for the corresponding 2016 period. The increase in gross profit percentage was primarily due to higher average sales prices, product mix, and a reduction in overhead cost during the year ended June 30, 2017.

Sales and marketing expenses for the 12 months ended June 30, 2017 were $1.5 million, compared to $2.1 million for the comparable period in 2016, a reduction of $617,000 or 29%. The decrease was primarily due to lower personnel costs resulting from the company's September 2016 sales re-organization. Research and development expenses for the 12 months ended June 30, 2017 were $2.5 million, compared to $3.2 million for the same period in 2016.

The decrease is primarily due to lower personnel costs resulting from the company's September 2015 restructuring initiatives as well as a reduction in rent expense as a result of consolidating the company's US operations into its Rancho Cordova facility.

General and administrative expenses for the 12 months ended June 30, 2017 were $11 million compared to $8.2 million for fiscal 2016. The increase was a result of higher legal fees, as well as severance and related costs. At June 30, 2017, the company had cash and equivalents of $3.6 million and working capital of $6.7 million, compared to cash and equivalents of $5.8 million and working capital of $7.3 million at June 30, 2016.

Additionally, during the current quarter, our board approved a $5 million increase to the unsecured line of credit backed by Boyalife Investment Fund II allowing us to draw up to $10 million. This facility provides us with a non-dilutive source of funds that we can use to support our growth initiatives. As of June 30, 2017, we had drawn down $3.5 million of the $10 million now available.

That concludes our prepared remarks, and now we would like to open the call up your questions. Operator?

Question-and-Answer Session

Thank you. [Operator Instructions] At this time I am showing no question, so I would like to turn the conference back to Vivian Liu for any closing remarks.

Vivian Liu

Thank you everyone. For joining us this quarter, and we look forward to speaking with you and sharing additional progress during our next call. Take care.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.