Business Update Call 9/20/12:
By Brian Marckx, CFA
CryoPort (
CYRX
)
held a business update call yesterday (9/20/2012), providing an
overview of the status of operations including the sales/marketing
focus, FedEx relationship, financial and shipping metrics, and
offering some general outlook guidance. Management's candor
in answering the relatively lengthy list of questions from various
participants on the call was a breath of fresh air and noticeably
different from the past (prior to the recent management
changes). While there were no significant surprises relative
to our expectations, there were some new revelations that we think
bode well for further progress in developing the customer base and
growing revenues. Highlights of the call included;
Revenue / Shipments / Financials
- Shipments grew from about 450 in Q4 to 560 in fiscal Q1
(latest qtr)
- Sequential revenue growth is expected for the foreseeable
future with fiscal Q3 expected to show a more substantial
up-tick
Customers
- Had about 100 customers (some of which may only make 1
shipment/mth, others may make 30 shipments/mth) as of fiscal Q1 -
expect this to continue to grow sequentially
- Have about 30 customers that are now in some stage of
validation
- Have not lost a customer - customers continue to be very
sticky
- Key diagnostic company expects to start regular shipping with
CYRX in early 2013
Sales / Mktg
- Management acknowledged mistakes had been made in the past in
qualifying customers and in identifying the low hanging
fruit. Instead of a one-size fits all solution, CYRX's
sales/mktg focus is now centered on a more tailored approach
based on customer needs
o In addition to their full-service offering
(containers and tracking/logistics) CYRX will now also offer the
option of just the outsourced logistics/tracking to customers that
wish to use their own (or another provider's)
o CYRX will introduce a much small dewar
(container) later this year. The smaller container will hold
up to 6 vials (compared to the larger containers which hold 75 and
500 vials) and is expected to be popular with customers with lower
volume shipments. The smaller dewar is also much easier for
customers to store onsite and quickly reuse than is the larger
containers
o Management noted that they've learned from
mistakes made in the past where they had identified what they
thought could be high volume croygenic shipping customers and only
after long validation periods did it become apparent that some of
these prospects mostly shipped biological material that required
cold but not necessarily cryogenic shipping (we assume that this
has now been sufficiently addressed)
- CYRX sales targeting is now heavily focused on biotech and
pharmaceutical companies and less so on CRO's.
Biotech/pharma offers a more consistent and regular shipping base
than do CRO's, the shipping demand from which is largely
dependent on clinical trials - which can be lumpy and not in the
direct control of the CRO
FedEx
- CYRX management's day-long meeting with
FedEx (
FDX
)
in April was very productive and helped build on recent changes
which CYRX believes will spark a greater rate of sales generated
through their partner
- One of these critical changes (which had been announced
previously) allows FedEx customers to access CYRX's CryoPortal
directly through the FedEx website interface - prior to this
customers had to access the CryoPortal separately which sales
reps reported was a hindrance for customers. The interface
update also now allows FedEx sales reps the ability to track
their CryoPort-related sales information and metrics - which
potentially helps incentivize sales efforts as it provides easier
insight relative to commissions. The portal interface
should be fully operational in October
- CYRX management clearly indicated that they believe sales via
FedEx will begin to show much more promise than what has been the
case in the past, which by all accounts have been
disappointing
Cash / Financing
- Management remains focused on controlling costs and limiting
cash burn
- Expect to need financing by Q1 2013 (in-line with our prior
expectations). Considering various options to do so.
We note CYRX and their investment bank (Emergent Financial) have
been very successful in raising capital when needed in the
past
- Management estimates they could reach cash flow positive at
about 5k shipments/month - which is about 1/2 the shipping
volume that they had previously thought it would take.
Management thinks it's possible they could reach cash flow
positive in about 18 months
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