BioLife's Disappointing Quarter Masks A Much Better Future

Summary

• The company produced a disappointing Q3, with one-off issues at two customers shaving $1 million off revenue and organic growth slowing down to 15%.
• However, investors should not be too worried about that, as the company keeps adding dozens of new customers each quarter - over 400 in total - and growth will come back.
• In the meantime, acquisitions are leveraged to ramp up sales quickly, building a much more substantial company and thus increasing the wallet spend of customers.

We hold shares of BioLife Solutions (NASDAQ:BLFS) in the SHU portfolio and are still sitting on considerable profits, but the shares have retreated quite a bit lately.

We can sort of live with the market reaction to BioLife's third-quarter figures, which were indeed disappointing. The company's organic growth in preservation media was just 15% in Q3, and quite frankly, we cannot remember a quarter with such little growth.

In part this was due to two one-off events, with important customers shaving off nearly $1 million from Q3 revenues (the two customers have resumed normal order patterning in Q4). But even if this had not happened, organic growth would have been just 25%, at the low end of expectations and too low for the share price not to be affected given the high valuation multiples (see below).

Another way of looking at the company

But there is another way of looking at this. In Q3, BioLife also raked in 62 new customers, 41 of which are new cell and gene therapy customers, and the company processed another 18 new FDA master file cross-reference requests supporting customer use of its preservation media in pending human clinical trials.

Every quarter, the company increases its customer lists by the dozen, and this is now totaling over 400 customers. That is, every quarter the universe from which customers emerge to bigger tests and eventually get FDA approval and go commercial gets bigger and bigger.

And it's in going commercial where the real money is for BioLife, as that usually brings an order of magnitude or more in scale compared to clinical trials.

Revenue growth in Q3 (which isn't yet included in the figure) was 25%, so it's back to historical trends. The growth spurt in 2018 was on the basis of a customer going commercial, YESCARTA from Gilead (

Analyst’s Disclosure:I am/we are long BLFS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.