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Edited Transcript of BLFS.OQ earnings conference call or presentation 14-May-20 8:30pm GMT

·30 mins read

Q1 2020 Biolife Solutions Inc Earnings Call Bothell Jul 2, 2020 (Thomson StreetEvents) -- Edited Transcript of Biolife Solutions Inc earnings conference call or presentation Thursday, May 14, 2020 at 8:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Michael P. Rice BioLife Solutions, Inc. - President, CEO & Director * Roderick de Greef BioLife Solutions, Inc. - CFO, COO & Secretary ================================================================================ Conference Call Participants ================================================================================ * Blair Daniel Cohen H.C. Wainwright & Co, LLC, Research Division - Associate * Carl Edward Byrnes Northland Capital Markets, Research Division - MD & Senior Research Analyst * Christopher Edmund Hillary Roubaix Capital, LLC - CEO * Jacob K. Johnson Stephens Inc., Research Division - Analyst * Marc Wiesenberger B. Riley FBR, Inc., Research Division - Associate * Paul Richard Knight Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst * Suraj Kalia Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst * Thomas Flaten Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to today's First Quarter 2020 BioLife Solutions, Inc. Earnings Conference Call. (Operator Instructions) As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Roderick de Greef, Chief Financial Officer. Please go ahead, sir. -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [2] -------------------------------------------------------------------------------- Thank you, Jonathan. Good afternoon, everyone, and thank you for joining us for the BioLife Solutions conference call to review the operating and financial results for the first quarter of 2020. Earlier this afternoon, we issued a press release, which summarizes our financial results for the 3 months ended March 31. As a reminder, during this call, we may make certain projections and other forward-looking statements regarding future events or the future financial performance of the company. These statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. For a detailed discussion of the risks and uncertainties that affect the company's business and that qualify as forward-looking statements, I refer you to our periodic and other public filings filed with the SEC. Company projections and forward-looking statements are based on factors that are subject to change, and therefore, these statements speak only as to the date they are given. The company assumes no obligation to update any projections or forward-looking statements, except as required by law. During the call, we will speak to non-GAAP or adjusted results. Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in the press release we issued this afternoon. These non-GAAP or adjusted financial metrics should not be viewed as an alternative to GAAP. However, in light of our M&A activity, we believe that the use of non-GAAP or adjusted metrics provides investors with a clearer view of our current financial results when compared to prior periods. Now I'd like to turn the call over to Mike Rice, President and CEO of BioLife. -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thanks, Rod. Good afternoon, everyone. Thank you for joining our call. Despite significant COVID-19 related disruption to our operations in Q1, the team performed flawlessly, delivering record revenue and gaining 40 new customers in a very challenging environment. For the last month or so of the quarter, we had our team members either working from home, part of an essential reduced on-site workforce or not working. Through all the transition to get our customer support teams up and running remotely, we stayed in close contact with our customers and shipped more media products than in any other period in BioLife's history. Many of our biopreservation media customers responded to our proactive outreach and placed a safety stock or replenishment orders, so their cell and gene therapy research and development projects could continue unabated during the coronavirus pandemic. While it's clear that cell and gene therapy clinical trials have been significantly affected by the reallocation of hospital beds to COVID patients, our customers are planning for success and clearly demonstrated through their order volume that our media products are considered mission-critical to their cell and gene therapy manufacturing workflow. In retrospect, the business continuity plans we began to put in place 2 years ago, which included off-site media product inventory storage, proved well thought out. Turning now to Q1 revenue. We finished at $12.2 million, which was 111% growth over Q1 last year and 47% sequential growth over the fourth quarter of 2019. Biopreservation media sales were the key driver in Q1, with $8.7 million in revenue, representing 50% year-over-year growth and 67% sequential growth over Q4 last year. We gained 16 new biopreservation media customers that placed first time orders in Q1. Some notable new accounts include Cellphire, GenIbet, PACT Pharma, Sanofi, [Travera], Vascugen and Ventria. We also processed 13 additional U.S. FDA master file cross-reference request for the use of CryoStor or HypoThermosol in human clinical trials of cell and gene therapies. We estimate that our media products have been used in over 400 customer clinical applications. I'm also pleased to tell you that we're supplying a proprietary biopreservation media products to several customers working on cell-based treatments or vaccines for COVID-19. Turning to an update on our ThawSTAR line of automated water-free thawing products for frozen biologics. Q1 revenue was in line with our expectation at just under $400,000. In the first quarter, we shipped the first batch of our new ThawSTAR CB product. This new product is designed to safely automate the thawing of biologic material frozen in cryo bags. We also gained 6 new ThawSTAR customers, including Alvotech, AC Therapies, Notch Therapeutics and Honeycomb Biotechnologies. With our evo Cold Chain management platform, including smart shipping containers and the evo.is cloud app, we continue to gain traction in the cell and gene therapy space, with our courier partners adding 10 new customers in Q1. We are now supporting nearly 100 cell and gene therapy clinical trials with our evo platform through our relationships with 2 of the largest specialty couriers serving the regen med space. While Q1 revenue remained modest at $435,000, as customer use ramps up, we are seeing increased inbound interest in evo platform and are continuing to support existing product validations by leading cell and gene therapy companies. This activity has been impacted by COVID-19, resulting in delays in completing the transition to evo, but we're confident that this will emerge as a strong competitor to the existing non-optimized shipping containers and information systems in use. On our last product revenue stream, the Custom Biogenic Systems, or CBS line, we booked a revenue of $2.7 million in the quarter. This was slightly below our plan, but as capital equipment, some customers could have delayed large purchases due to cash conservation plans during the COVID pandemic. Q1 CBS revenue included product shipments to several of the leading cell and gene therapy companies, many of whom also use our media, thaw and Cold Chain management products. We gained 8 new CBS freezer customers with 2 notable accounts being Lacerta Therapeutics and NexImmune. For perspective, our freezer customer base now totals more than 750 accounts and includes many of the leading cell and gene therapy developers and pharma companies, such as AbbVie, Astellas, Bellicum, Celgene, Fate, Fisher Scientific, Fujifilm, Glaxo, Hitachi, Juno, KITE, Lonza, Mayo, Norwest, Orchard, Precision Bio, Sigma and Sorrento. I'd now like to give an update on our intellectual property estate. In the first quarter of 2020, we were granted 3 new patents related to our Cold Chain management technologies. This brings our total of issued patents to 50, with 34 additional pending patent applications submitted and in the review process. Before I turn the call back over to Rod, I'll provide some comments on the new growth capital investment we announced today by existing shareholder, Casdin Capital. We're fortunate to have a growth equity partner in Casdin Capital that enables us to strengthen our balance sheet, to aggressively grow our portfolio of high-value bioproduction tools and services targeting the cell and gene therapy market. We believe that through a combination of internal innovation, acquisitions, co-investments and licensing of external assets, we have a strategy to significantly expand our business over the next few years. We're committed to playing a role in consolidating the bioproduction tool supplier space and anticipate continuing to jointly identify targets with Casdin that may lead to additional co-investments or outright acquisitions with their financial support. Now I'll pass the call back over to Rod to present our financials for Q1. Rod? -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [4] -------------------------------------------------------------------------------- Thanks, Mike. Revenue for the first quarter totaled $12.2 million, as you mentioned, representing 111% increase over last year's first quarter revenue of $5.8 million. Media revenue for the first quarter of 2020 was $8.7 million or 71% of total revenue and represented an increase of 50% compared to the last year, largely driven by the buying behavior Mike alluded to earlier. This quarter's revenue also included $394,000 of sales related to the automated thaw product line; $438,000 of evo Cold Chain related revenue; and $2.7 million in freezers and accessories. All of these revenue streams were acquired subsequent to the first quarter of 2019. Our adjusted gross margin for the first quarter of this year was 64.1% compared with 71.5% last year. The decrease in adjusted gross margin for the first quarter reflects the lower margin profile of the automated thaw, evo and freezer product lines, which accounted for 29% of revenue compared with media-only revenue last year. Adjusted operating expenses, excluding cost of revenue, for Q1 totaled $6.4 million compared with $3.3 million in Q1 of 2019. The increase primarily reflects the fact that this quarter was the first full quarter of operating expenses related to the acquisitions we made last year, and secondarily to increased headcount and stock-based compensation expense necessary to support our overall growth. Adjusted operating profit for the first quarter of 2020 was $1.4 million compared with adjusted operating profit of $774,000 in the first quarter of 2019. Our adjusted net income for the first quarter of 2020 was $1.4 million or $0.06 per share compared with adjusted net income of $942,000 or $0.04 per diluted share in the same period last year. GAAP net income for the first quarter included $21.9 million of other income related to the change in fair value of outstanding warrants, whereas GAAP net income in the first quarter of 2019 included other expense of $19.7 million also related to the change in the fair value of outstanding warrants. Adjusted EBITDA for the first quarter was $2.9 million, which was an increase of 110% compared with $1.4 million in the same period last year. For both periods, adjusted EBITDA equaled 24% of revenue. Our cash balance at March 31 totaled $6.4 million. We believe that this amount, when added to the $20 million in capital we're receiving from the placement of common shares to Casdin Capital, will be sufficient to fund our operations as well as provide additional capital to take advantage of any strategic operation -- opportunities that may arise. Finally, in addition to the 1.9 million shares issued to Casdin in the private placement, we entered into an agreement with our 2 large Swiss warrant holders to immediately exercise all of their warrants on a cashless basis, resulting in the issuance of 2.7 million shares and the elimination of 3.9 million warrants. This puts our total issued and outstanding share count at 25.8 million and 29.1 million on a fully diluted basis. Now I'd like to turn the call back over to Mike. -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- Thanks, again, Rod. In summary, we demonstrated solid execution in Q1 and drove the business to record revenue and an impressive adjusted EBITDA margin, demonstrating the operating leverage we envisioned as the enterprise scales. We built a highly valued business as a supplier of critical, class defining bioproduction tools for cell and gene therapy manufacturing. COVID-19 continues to create uncertainty on how the rest of 2020 will play out, but we're focused on the things we can control in serving our customers. I will turn the call back over to the operator to take your questions. Jonathan? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from the line of Paul Knight from Janney Montgomery. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [2] -------------------------------------------------------------------------------- Mike, what was the portion of the revenue from stocking orders? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Paul, we don't have complete visibility. Some POs came in and said COVID-19 related, but not all. It's probably $1 million to $1.5 million, maybe it's $2 million. We're not exactly sure, but that's probably a decent guess. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [4] -------------------------------------------------------------------------------- Is it $1 million to $ 1.5 million, [like that?] -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- Something like that or $1.5 million to $2 million, in that range. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [6] -------------------------------------------------------------------------------- Okay. And then regarding... -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [7] -------------------------------------------------------------------------------- Sorry. That's not on my end. Sorry about that. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [8] -------------------------------------------------------------------------------- And then regarding CBS, can you talk about how things are going in the April period? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [9] -------------------------------------------------------------------------------- Somewhat, Paul. I guess I could say that as capital equipment, that's big-ticket items. And so we are seeing some delays in closing period from quotes and all that. On the media side, the quarter-to-date has started out relatively strong, and so fingers crossed on that in how the quarter is going to end up. But there definitely is a different buying behavior on the capital equipment side versus the reagents. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [10] -------------------------------------------------------------------------------- What's your CBS's service? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [11] -------------------------------------------------------------------------------- Very little. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [12] -------------------------------------------------------------------------------- Okay. Is it cap equipment? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [13] -------------------------------------------------------------------------------- Yes. On the big -- on the freezers and then the other related accessories are obviously not capitalized. But there's a decent accessory business, but most of the revenue comes from the big item, yes. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Our next question comes from the line of Suraj Kalia from Oppenheimer. -------------------------------------------------------------------------------- Suraj Kalia, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [15] -------------------------------------------------------------------------------- So Mike, in terms of the -- now that you guys have anniversaried the last 3 acquisitions, can you help us in terms of what optimization has been done on the sales force side of the equation? What else remains to be done as we progress through FY '20? Any color would be great. -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [16] -------------------------------------------------------------------------------- Sure, Suraj. Really good question. So we've analyzed across the line now the various external distributors, the indirect partners who have been repping the various lines, particularly at CBS. And the strategy that we have is to optimize and deploy the best resources based on market segments. And so the CBS crew was selling into cell and gene therapy, into biopharma and some other ancillary markets. We're obviously looking to maximize our own media relationships, which are the strongest, and leverage those for direct selling. So it's a process that will unfold over the next several quarters. On the marketing side, we have several initiatives underway to expose the entire new customer base to all the products in the portfolio. Obviously, travel is difficult now to get on site in many places. But nevertheless, the inbound interest and the referral leads we're getting from people have been really quite remarkable. So more work to do in that regard, but we've got a good plan. And we look forward to really leveraging those relationships and maximizing that cross-selling opportunity that's there. -------------------------------------------------------------------------------- Suraj Kalia, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [17] -------------------------------------------------------------------------------- Got it. And keeping on that theme, Mike, obviously, there has been an infusion of new investment. I guess one question is, are there any inorganic opportunities that you have already identified, which is driving this decision? And second subpart of that question for Rod specifically is, what is the current ownership stake of Casdin, if you don't mind my asking? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [18] -------------------------------------------------------------------------------- Sure, Suraj. Good question. I'll take the first part, and then I'll let Rod answer the second part. My part is yes, there are some near to midterm opportunities, really shouldn't get into the size of opportunities or technologies, but there is some definitely some activity underway. And to the other question about, well, is that all there is. We're opportunistic. We see what fits. And clearly, this infusion of capital is helpful. It may not be helpful enough for larger opportunities. And if so, then we'll be opportunistic to make sure that we can fund those, should those arise. Rod? -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [19] -------------------------------------------------------------------------------- They're going to be right at around 18.4% of the issued and outstanding shares, Suraj. -------------------------------------------------------------------------------- Suraj Kalia, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [20] -------------------------------------------------------------------------------- Got it. And Mike, you said, if I heard you correctly, about $1.5 million, $2 million was sort of the pull-through into Q1 demand COVID related for media. How did the remaining 3 buckets stack up for ThawSTAR, evo and CBS? Were there any unusual ordering patterns? Or were they somewhat depressed maybe in CBS? I guess, my point being, were there any offsetting factors? Or could there be -- was there more impact, just the media itself? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [21] -------------------------------------------------------------------------------- A little bit difficult to know in that the CBS revenue comes through distributors, Suraj, but the media where we have the direct relationships and the closest relationships, it's -- while not perfect, we certainly have more clarity. So really -- nothing really outstanding on the thaw side, the evo line or on the freezer side. The media is where we definitely saw customers responding to our outreach and making sure that they had enough media to make sure their clinical progress could continue. -------------------------------------------------------------------------------- Suraj Kalia, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [22] -------------------------------------------------------------------------------- Got it. And finally, I'll hop back in queue, forgive me, I'll squeeze one in. Any update on the big fish you guys were swimming for on the evo side of the equation? I guess you guys had made some brief comments last quarter, I believe, it was that you're 80% there. Any updates there? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [23] -------------------------------------------------------------------------------- Sure. Thanks for asking. Yes, pertinent. Yes, still on track. COVID has caused some delays and some of the validation work, but still on track and checking in regularly with this account to make sure that we understand what they're going through and providing all the support we can. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Our next question comes from the line of Jacob Johnson from Stephens. -------------------------------------------------------------------------------- Jacob K. Johnson, Stephens Inc., Research Division - Analyst [25] -------------------------------------------------------------------------------- I guess first question, obviously, strong start to the year. But is there any way to estimate how -- any impacts you're seeing from the late clinical trials in 2Q, if at all? And does this vary by product line? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [26] -------------------------------------------------------------------------------- Yes. Jacob, you were breaking up a little bit on our side, but I think we got it. Really hard to try to assess impact on clinical trials. I think based on some of the safety stock replenishment ordering, we could infer from that, the customers fully expect that as beds get freed up, they'll be back in business and enrolling at the pace that they were before this whole thing started. So if anything, just a validation that our stuff is really, really important. It's critical, and they had to have it to make sure that they could continue on. As far as how the rest of the year will shake out with that, anybody's crystal ball is as good as anybody else's at this point, right? -------------------------------------------------------------------------------- Jacob K. Johnson, Stephens Inc., Research Division - Analyst [27] -------------------------------------------------------------------------------- Got it. And then just one other question for me. Really strong gross margins in the quarter. Could we just tuck that up to a good media sales quarter? Anything else to call out on the gross margin line? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [28] -------------------------------------------------------------------------------- No. I think that's exactly it, Jacob, is that the percentage of revenue that we got from the higher level of media revenue with the higher margin definitely played a positive role on that. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- Our next question comes from the line of Raghuram Selvaraju from H.C. Wainwright. -------------------------------------------------------------------------------- Blair Daniel Cohen, H.C. Wainwright & Co, LLC, Research Division - Associate [30] -------------------------------------------------------------------------------- This is Blair calling on for Ram. Just a few for me. Could you provide a rough update -- or an update on the rough percentage of your customers that have directly been impacted by COVID-19 restrictions in their clinical development programs? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [31] -------------------------------------------------------------------------------- Sure. 100%. Any customer that was running a clinical trial on the cell and gene therapy has clearly been impacted to some degree. None have not been impacted to any degree. They've all been impacted to some degree. I'm not sure I can get any more granular than that, Blair. -------------------------------------------------------------------------------- Blair Daniel Cohen, H.C. Wainwright & Co, LLC, Research Division - Associate [32] -------------------------------------------------------------------------------- Okay. And just qualitatively, are you seeing any impact of COVID-19 related restrictions on FDA review time lines, particularly those pertinent to manufacturing processes for cell and gene therapy products? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [33] -------------------------------------------------------------------------------- Well, there's no doubt the FDA is marshaling resources to evaluate cell and gene therapy based treatments or vaccines for COVID. But for the other stuff, the normal cell and gene therapy stuff targeting the other clinical disease states, we haven't seen any. Whether that's going on or not, it could be, but we haven't seen any. -------------------------------------------------------------------------------- Blair Daniel Cohen, H.C. Wainwright & Co, LLC, Research Division - Associate [34] -------------------------------------------------------------------------------- Okay. And then just last one for me. Is your business being impacted at all by the significant reduction in airline flights and the effect that may have in on ship and logistics? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [35] -------------------------------------------------------------------------------- That's a great question. And I would say, no. Through our courier partners, they have been very creative and they have found other ways to get this very temperature and time set with biologic material pushed around, whether it was through the cargo's part of commercial flights versus -- or cargo-only flights, but not to this point. In fact, some courier partners are reporting that their business has increased dramatically because the treatment location for some medicines that they have been shipping has transitioned from the hospital to the patient's home. I'm not talking about cell-based therapies, I'm talking about other types of medicine that are cold chain dependent or time or temperature sensitive. So yes, they've certainly figured it out. -------------------------------------------------------------------------------- Blair Daniel Cohen, H.C. Wainwright & Co, LLC, Research Division - Associate [36] -------------------------------------------------------------------------------- Perfect. And if I can just get one more in. How defensible do you think the evo.is cloud application from an intellectual property standpoint is? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [37] -------------------------------------------------------------------------------- I love that question, not just because I'm an inventor on some of the patents, but definitely, we've got a bunch of novel processes and functional areas in the evo.is, and that really differentiated from the other alternatives that are out there. So we'll continue to write and submit patents on as much of as we can. As you may know, software patents are really hard to get. We have been successful, I think, with 3 or 4 so far. And so we're going to keep at that. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Our next question comes from the line of Thomas Flaten from Lake Street Capital. -------------------------------------------------------------------------------- Thomas Flaten, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [39] -------------------------------------------------------------------------------- Just 2 for me. The -- with respect to the capital infusion, I know there's a question about inorganic opportunities. Are there organic opportunities you think you might deploy some of the capital at? Are there growth opportunities inside the business that could be assisted by that? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [40] -------------------------------------------------------------------------------- There are, although I would say that the use of cash will be modest. Rod, you can go ahead. -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [41] -------------------------------------------------------------------------------- Yes. I think it's really about continuing to build out the sales and marketing effort throughout the organization and get that integrated. That's really where the internal opportunity would be, Thomas. -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [42] -------------------------------------------------------------------------------- For deploying that cash, right? -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [43] -------------------------------------------------------------------------------- Yes, yes. -------------------------------------------------------------------------------- Thomas Flaten, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [44] -------------------------------------------------------------------------------- Yes. Got it. And then with respect to broadening the portfolio across all the customers, do you -- can you either qualitatively or quantitatively speak to the extent to which you've seen the ability to cross-sell products between customers? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [45] -------------------------------------------------------------------------------- Yes. At least, at this point, it will have to be in a qualitative perspective. We're doing okay at that. We can certainly do better. And we have a significant project underway with Salesforce.com to make sure that we've got good visibility and the right tracking analytics and all that, so we can really measure how our activities and campaigns are going. But it's certainly my intention that we'll be able to give some quantitative granularity on that in coming quarters. -------------------------------------------------------------------------------- Operator [46] -------------------------------------------------------------------------------- Our next question comes from the line of Marc Wiesenberger from B. Riley FBR. -------------------------------------------------------------------------------- Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [47] -------------------------------------------------------------------------------- I'm wondering if you could provide some insight into the discussions you're having with your distributors and maybe how the discussions relative to their geography and the activity they're seeing across the globe. -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [48] -------------------------------------------------------------------------------- Marc, well, we're certainly talking to them. I'm really not sure how I could limit my comments without getting into a little too much of inside baseball. But no doubt, the distributors are after it, and we've signed some new distributors. We're evaluating all the distributors for productivity, but this is a product line that's highly valued. To the extent they're concerned about competing against us, I guess, all I can say is that it's a really target-rich environment. There are a lot of prospects. We don't have a lot of channel conflict. And our distributors, at least the top 4, who have worldwide footprints in terms of where there's sellers and support areas, now they're doing fantastic. It's really phenomenal. -------------------------------------------------------------------------------- Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [49] -------------------------------------------------------------------------------- Understood. You talked about maybe potential CapEx spending slowdown related to the freezers. Can you also add some color on potential, the delay in CapEx, maybe because of the new freezers that might be coming out later in the year and anticipating that? And what's the kind of mix there? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [50] -------------------------------------------------------------------------------- Yes. Good question. Really related to COVID right now as opposed to people just waiting to get the next improved model. We've got a lot of stuff going on, a lot of conversations underway. And these are big projects, and these are expensive products. So there's a lot of work that has to happen, both on our side as well as the customers with site assessments and then fact acceptance testing -- site acceptance testing and so on and so forth. So they're long term, and we don't really sense right now that many of these opportunities are being delayed or customers are waiting because they just want to hang out for the next rendition that might be coming up here. -------------------------------------------------------------------------------- Marc Wiesenberger, B. Riley FBR, Inc., Research Division - Associate [51] -------------------------------------------------------------------------------- Understood. And last one for me. In light of kind of the global supply chain disruptions and your contract manufacturers in China making the dewars and potentially moving that to Detroit, has that been -- that thought process been accelerated? And kind of what's the progress on that front? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [52] -------------------------------------------------------------------------------- Yes. Thanks for asking. Rod, you can go ahead on that one if you want. -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [53] -------------------------------------------------------------------------------- Yes. So it is definitely the plan for 2019. It's going to happen toward the end of the year. We've not had any supply issues with dewars coming out of China today, at least. And we have, what we believe, is adequate inventory in Albuquerque for the next couple of quarters. We do have some units that are on order to come in throughout the summer, but we have no indication that there's anything that would prevent those from coming in. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- Our next question comes from the line of Christopher Hillary from Roubaix Capital. -------------------------------------------------------------------------------- Christopher Edmund Hillary, Roubaix Capital, LLC - CEO [55] -------------------------------------------------------------------------------- I wanted to ask just part of the broader discussion about having more of the health care supply chain domestic. Are there certain areas that you think would be a particular interest to the company to either expand or invest in? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [56] -------------------------------------------------------------------------------- Definitely. Yes, and I'll try to be just broad as opposed to being too specific, so we don't tip our hand to other folks who might be shopping for the similar assets or something. But really, broadly speaking, Chris, our interest is looking at the cell and gene therapy manufacturing workflow, which starts with the acquisition of some starting material from a patient that which gets moved to some factory where someone makes a dose out of it. Then that manufactured dose gets moved back to a clinic, where it's administered to a patient, and whether we're talking about autologous therapies or allogeneic, for that matter. So really, anything that's used in that continuum that I just described is of interest. Now several of those segments are supplied by really large companies that have really good solutions, so we're obviously not going to be poking around there. But there's enough opportunity here, we believe, around the edges and coming in towards the center there, where there are some disruptive innovative technologies that, we believe, over time could really start to command some decent market share. So that's what we're focusing on. Now that could be in the form of reagents, containers, devices, analytics instruments, product contact layers, you name it, so anything in that continuum. There's a lot of stuff that's used in the manufacture of a cell and gene therapy and a lot of areas that really have not been optimized for a while. And innovation can certainly play a key to reduce cost and also improve quality for our customers. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- Our next question is a follow-up from the line of Paul Knight from Janney Montgomery. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [58] -------------------------------------------------------------------------------- Rod, have you -- is your K filed now? -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [59] -------------------------------------------------------------------------------- No, we are on track, Paul, to file tomorrow. Kind at 5:00 Eastern is the target, and it's a pretty hard stop for us. So we're -- we've got all hands on deck trying to make that happen with our new auditor, BDO. So fingers crossed. -------------------------------------------------------------------------------- Paul Richard Knight, Janney Montgomery Scott LLC, Research Division - Former MD, Head of Healthcare Research & Senior Equity Research Analyst [60] -------------------------------------------------------------------------------- Okay. And the adjustments effectively will all hit on the other line item or below operating income. Is that correct? -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [61] -------------------------------------------------------------------------------- Yes. For the most part, that is correct. There's some small adjustments that will flow through, but they're not material in any way. -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- Our next question comes from the line of Carl Byrnes from Northland Capital. -------------------------------------------------------------------------------- Carl Edward Byrnes, Northland Capital Markets, Research Division - MD & Senior Research Analyst [63] -------------------------------------------------------------------------------- I was just curious, going back to potential acquisition opportunities, do you see the environment maybe becoming a little more wholesome or wider? And any thoughts in terms of what the valuations may be? If CapEx -- like for example, CapEx may be under pressure, would there be potential opportunity to take other acquisitions, and the valuations may come in would be more compelling? -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [64] -------------------------------------------------------------------------------- Perhaps, Carl. I think that every company is reacting to this COVID environment and trying to figure out what it means to them. And some companies have assets that may not be able to be fully utilized or marketed, depending on how those companies are reacting and what's going on in their world. We don't know that. Each case is different. I don't think we've got a strong signal right now that valuations are through the roof nor are they significantly depressed. So things are status quo from our view. Rod, do you want to add anything to that? -------------------------------------------------------------------------------- Roderick de Greef, BioLife Solutions, Inc. - CFO, COO & Secretary [65] -------------------------------------------------------------------------------- No, I think that's right. And it's just really about keeping an eye out for what's happening. And things definitely will be impacted if this issue of COVID continues throughout the year. We would expect some impact on valuations. -------------------------------------------------------------------------------- Operator [66] -------------------------------------------------------------------------------- I'm not showing any further questions in the queue at this time. I'd like to hand the program back to Mike Rice, CEO, for any further remarks. -------------------------------------------------------------------------------- Michael P. Rice, BioLife Solutions, Inc. - President, CEO & Director [67] -------------------------------------------------------------------------------- Thanks again, Jonathan. Thanks again, everyone, for your interest in BioLife. Please let's stay safe, and we look forward to speaking with you during our follow-up calls and when we report our Q2 results. Goodnight. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.