Cesca Therapeutics Inc. (NASDAQ:KOOL) Q1 2019 Earnings Conference Call May 14, 2019 4:30 PM ET
Paula Schwartz - Managing Director, Rx Communications
Chris Xu - Chairman and Chief Executive Officer
Jeff Cauble - Principal Accounting Officer
Conference Call Participants
Good day, and welcome to the Cesca Therapeutics Conference Call and Webcast to Review Financial and Operating Results for the First Quarter Ended March 31, 2019. As a reminder, all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions] As a reminder, today’s conference call is being recorded.
At this time, I’d like to turn the conference call over to your host, Paula Schwartz of Rx Communications. Please go ahead.
Thank you, operator. This conference call contains forward-looking statements within the meaning of the Federal Securities Laws. The Company’s actual results may differ materially from those projected in the 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, May, 14, 2019. If any portion of this call is being rebroadcast, retransmitted, or redistributed at a later date, Cesca will not be reviewing or updating this material.
Participating on today’s call are Dr. Chris Xu, Chief Executive Officer; and Jeff Cauble, Principal Accounting Officer.
And now I will turn the call over to Chris. Please go ahead.
Thank you, Paula, and thank you to everyone for joining us this afternoon both on the phone or via webcast. We appreciate you taking the time to listening.
Given that we’ve provided a thorough update on many of our most recent achievements during our year-end call, that was not too long ago, I will try not to be too repetitive today.
We have completed a company reorganization at the beginning of the year, so that we can focus on expanding the visibility and revenues of our not wholly-owned device subsidiary ThermoGenesis and to solidify our goal as one of the key players actively supporting the cellular processing needs of the cell-based therapeutic markets.
We have made significant progresses towards that goal in recent months and I will take a few minutes to bring you up-to-date afterwards, I will turn the discussion over to Jeff for a review of our financial results.
Briefly, the mission of ThermoGenesis is to develop and market a fully integrated suite of highly differentiated automated devices and technologies for used in different settings of cell-based therapies. To be more specific, this includes stem cell banking, point-of-care applications and large-scale cellular manufacturing of immunotherapy drugs, including of course, the very exciting area of CAR-T cells.
ThermoGenesis is fully focused on the continued development and commercialization of our three key technology platforms, namely the CAR-TXpress technology platform and the X related X series products for large-scale manufacturing of CAR-T therapies.
Our AutoXpress technology platform or AXP for stem cell banking and storage and POCXpress technology platform or PXP for rapid processing of autologous peripheral breadth of the marrow derived stem cell at the point of care including surgical centers and clinics.
Towards that end, in early April, we announced the registration and availability in filing of our next-generation FDA clearance AXP II System for Cord blood processing, as well as our PXP System, a component of the POCXpress platform, again, for point of care harvesting of stem cell from bone marrow.
The AXP System has been the global gold standard and the number one stem cell banking technology on the market since it was launched and we are excited to make the improved AXP II system available in increasing number of countries.
According to the published market study, the global stem cell and cell therapy markets are still growing rapidly and Asia Pacific region is actually expected to be among one of the highest growth rate bridges within the cell therapy market between the year 2018 and 2025, driven by increasing investments by cell therapy developers, as well as growing demands from consumers for information and access to new, advanced therapeutic options.
Our expansion into Southeast Asia opens key opportunities as we anticipate healthy demand for these systems among hospitals, clinics and GMP Certified labs. Our expansion into Thailand came on the heels of approval from Health Canada to market PXP, our automated cell processing platform to be used at the point-of-care which we announced in February.
The achievement of this milestone allows customers in this important bridging to utilize a system that provides the industry’s highest cell recovery rates at 97% with minimal red blood cells and granular size contamination and which have proven to be important for various clinical applications.
Finally, and most recently, in mid-April, we announced the release of the Enhanced X-MINI CD3 Selection Kit for the biomedical research markets.
The Enhanced Reagent Kits gives clinician the ability to select CD3 positive target cells from prepared mononuclear cell samples or from whole blood efficiency. The Enhanced X Mini Kits uses ThermoGenesis proprietary Buoyancy-Activated Cell Sorting or XBACS technology which allows separation of cells using microsized bubbles.
The BACS technology is a new addition to the true existing cell sorting technologies in the market, namely, the Magnetic Activated Cell Sorting or MACS technology and the Fluorescence Activated Cell Sorting or FACS technology.
ThermoGenesis is the first in the market to commercialize BACS technology in our CAR-T Express platform and related X Series products. XBACS technology has the advantage of easier to use and higher throughput compared to existing cell sorting technologies. The Enhanced X Mini Kit comes with the X Mini Pressor to eliminate the XBACS reagents buoyancy during the final processing steps.
Overall, the release of the Enhanced X Mini Kits increase the range of research applications and potential customers for our growing rate of cutting-edge tools and most importantly provides real value-add to the marketplace.
Additional kits will be released to enable the selection of numerous other cell types needed for various applications further expanding the application of ThermoGenesis proprietary XBACS technology.
As for the CAR-T cell therapeutic market, broadly we remain extremely encouraged by the range of new potential life saving cellular drugs in the preclinical and clinical developments and by the distinct advantages of our CAR-T Express platform can bring to this important highly personalized new therapeutic fields.
I have noticing our - higher quote and no doubt, you may have all read about the biggest hurdle of these promising new CAR-T therapeutics if the exceptionally high cost of manufacturing of these personalized CAR-T cell drugs, a major impediment to both development and patient access.
Once again, putting it into perspective, the U.S. Center for Medicare and Medicaid Services or CMS recently estimated that the price for CAR-T cells cancer treatments including the cost of a hospital stay can amount to more than $1 million per patient. The manufacturing cost alone could reach $100,000 to $120,000 range. The European market faces similar challenges.
As I mentioned on our year end call, in the summer of 2018, the European Commission declined the recommendation coverage for a major pharmaceutical company’s CAR-T gene therapy to treat – to aggressive forms of breast cancer due to what they deemed as unjustifiable cost.
That said, based on the clinical efficacy of today’s three FDA approved CAR-T therapy to save end-stage patients lives some of whom face no remaining options. It is clear that research in this area must continue. And that automation in the manufacturing process is an important component for cost reduction and offer eventual success.
As manufacturing become more automated, it will enhance the manufacturing efficiency and help to reduce the cost burden associated with these treatments. The benefit to manufacture more efficiency is to reduce the cost of cellular drugs is the main inspiration of our CAR-T Express platform.
Clearly, we believe that our three proprietary technology platforms and associated tools, as well as planned future enhancements and our new introductions can successfully meet the challenges facing the cell therapy markets by providing solutions that lead directly to more efficiency – to more efficient manufacturing and higher quality therapies.
At this stand, our CAR-T Express platform incorporating our proprietary XBACS technology permits the isolation, purification and activation of T-Cells in about one to two hours compared to six to eight hours required with magnetic field technology, reducing manufacturer variability and significantly improved cellular cover rates.
At the point-of-care, that the PXP System allows clinicians to isolate autologous stem cell at patients’ bedside within only 45 minutes. And bottom-line, that the benefits we are bringing to the markets are substantial. In our quest to provide superior solutions, we have also taken steps as I noted in the past calls to make it easier for customers to use our CAR-T Express Systems in their clinical trials.
Notably, while not a requirement, a device most of all now resides with the FDA for the X-LAB automated cellular processing device. This allows principal investigators to include the system in their R&D filing. As of the end of the first quarter, there were more than 20 institutionally users that have purchased our CAR-T Express or X Series products and more than dozen are still evaluating.
We are glad to see the increased number of institutes that have adopted our systems in developing their next-generation of cell-based therapeutics. Despite the challenges we faced with respect to the company’s current market valuation, we are fully committed to our mission and through the execution of our growth strategy, which is to becoming the leading automated solution provider for cell-based therapeutics, I want to note that, many of the steps we have taken including most importantly, the reorganization of the company into two distinct divisions, the Device division being ThermoGenesis.
And our clinical divisions were done with goal to maximize the value of ThermoGenesis, achieving cash positive status by year end and concurrently, building back values for our shareholders. This remains a top priority. As already noted, the market for cell-based therapies is enormous and we truly believe that our proprietary technology and the related through those in our – can let us to become a significant player in the market.
We look forward to continuing to expand our reach and to keeping you updated on our progress. And with that, let me turn the call over to Jeff to share some very positive financial results from the first quarter. Jeff?
Thank you, Chris. Net revenues for the first quarter of 2019 were $3 million, up from $1.9 million in the first quarter of last year, an increase of 58%. Device segment revenues increased across all product lines. AXP revenues increased as the company’s distributors in China and Europe, both purchased more disposables. BioArchives and CAR-T Express sales also increased.
Gross profit for the first quarter of 2019 was $1.3 million, or 42% of net revenues, compared with $352,000, or 19% of net revenues for the first quarter of 2018. The gross profit margin increase was driven by reduced overhead expenses as a result of the June 2018 reorganization and lower disposable cost and price efficiencies from contract manufacturers.
Sales and marketing expenses were $341,000 million, for the quarter ended March 31, 2019, compared with $325,000 for the same period last year. The slight increase was driven by customer samples and demo-related expenses.
Research and development expenses for the first quarter of 2019 were $563,000, versus $1 million for the first quarter of 2018. The decrease was driven by a reduction of personnel cost as a result of the June 2018 reorganization and reduced spending on R&D projects.
General and administrative expenses was $1.3 million, compared to $2.2 million last year, a decrease of 44%.. The decrease was also driven by a decline in personnel cost related to the June 2018 reorganization and a reduction in legal, and other employee-related costs.
For the quarter ended March 31, 2019, loss from operations was $906,000, as compared to $3.3mln for the first quarter of 2018, a 72% decrease over prior period comparable. This represents an increase of profitability from operations of $2.4 million for the first quarter for the prior year.
For the first quarter of 2019, we reported a net loss attributable to common shareholders of $1.9 million or $0.08 per share based on 24.6 million weighted average common shares outstanding.
This compares to a net loss attributable to common shareholders of $3 million or $0.27 per share based on 11.1 million weighted average common shares outstanding for the first quarter of 2018. At March 31, 2019, we had cash and cash equivalents totaling $2.2 million compared with $2.4 million at December 31, 2018.
This concludes our prepared remarks. So we now like to open the call to your questions. Operator?
Thank you all for participating in the earnings call this afternoon and I look forward to the next update in the next quarter. Thank you.
Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending today’s presentation. You may now disconnect your lines.