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Q2 2023 Thermogenesis Holdings Inc Earnings Call

Participants

Paula Schwartz; IR; Rx Communications Group, LLC

Chris Xu; CEO; ThermoGenesis Holdings, Inc.

Jeff Cauble; CFO; ThermoGenesis Holdings, Inc.

Sean Lee; Analyst; H.C. Wainwright & Co., LLC

Presentation

Operator

Good day, and welcome to the ThermoGenesis Holdings conference call and webcast to review financial and operating results for the second quarter ended June 30, 2023. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host, Paula Schwartz of Rx Communications. Please go ahead.

Paula Schwartz

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 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 call, August 10, 2023. If any portion of this call is being rebroadcast, retransmitted, or redistributed at a later date, ThermoGenesis will not be reviewing or updating its materials.
Participating on today's call are Dr. Chris Xu, Chief Executive Officer; and Jeff Cauble, Chief Financial Officer. I would now like to turn the call over to Chris. Please go ahead.

Chris Xu

Thank you, Paula, and thank you to everyone for joining the call this afternoon. We appreciate you taking the time to listen in. During the second quarter, we continued to make progresses to transform from a medical device company to a CDMO cell manufacture for the cell and gene therapy market. Through which, we will leverage our unique and proprietary automated and semi-automated cell processing technologies, including the CAR-TXpress platform.
We are getting close to completion of the 12 ReadyStart current Good Manufacturing Practice suite or GMP suite at our 35,000 square feet GMP facility in Sacramento. These class-7 cleanrooms are designed for early-stage businesses and organizations striving to speed up the process to bringing novel cell gene therapies to clinical trials.
Our priority is to provide customers with solutions that optimize these supply chain, increasing manufacture [predictability], and manage overall risk. We have started advertising this turnkey solution to early-stage life science cell gene therapy companies, whose team want and need to expedite their development efforts from early 9 GMP-grade research.
We have continued to draw interest from potential customers for the state-of-art ReadyStart cGMP unit, which remain on target for availability, which is later this year. As most of you know, for over 35 years, ThermoGenesis has been spearheaded the advancement and production of a variety of revolutionary automated technologies and products tailored for the cell banking and cell therapy sector.
Indeed, ThermoGenesis has been the top choice for automated cell processing and state-of-art smart cryogenic storage technology for numerous renowned public and private cell banks globally. Our BioArchive file storage system has safeguarded nearly 90% of all US FDA BLA-approved clinical-grade core blood units or CBUs while our AXP system has been utilized to handle well over a million samples for approximately 130 institute globally.
In addition to our expertise in manufacturing cell gene therapies, the intellectual properties we have acquired over the years is extremely valuable. The driving force behind our transition to a CDMO is the ongoing growth and the industry emphasis on the potential of personalized cell gene therapies.
Since 2017, FDA has approved six autologous CAR-T therapeutics, which have demonstrated unprecedented efficacy in patients with B-cell malignancy and multiple myeloma. Although CAR-Ts were initially authorized as the final result for patients who did not respond to alternative treatments, recent trials have demonstrated their ability to outperform second line stand apart -- a standard of care's options.
This suggests that the scope of applications for CAR-T therapies may expand in the future. Recent result -- recent reports indicate that the industry expects additional FDA approvals with potential 10 to 20 new CAR-T therapies approved for commercialization each year starting in 2025.
As I have noted previously, with the rise in FDA-approved and regenerative medicine treatments and CAR-T therapies, there is an increasing need for the production of these life-saving therapies. Presently, there are over 350 US companies exclusively focused on cell therapy research and development. And there are more than 1,000 pipeline asset in clinical trials worldwide, specifically targeting a wide range of blood and solid tumors.
This exponential growth in R&D is being abled by the remarkable potential inherited in already available therapies, alongside the promising prospect provided by personalized cell and gene therapies. With thousands of preclinical and clinical trials currently being conducted, there is an unprecedented demand for high-quality and reliable CDMO services.
Moreover, as I have noted many times, approved CAR-T cell therapies in the US tends to pass between approximately $373,000 to $475,000 per dose, making them one of the most expensive drug classes on the market. Significantly, the manufacturing cost for just one dose of some CAR-T therapeutics exceeds $100,000, with 79% of which attribute it to label -- to labor and GMP facility expenses.
Given these dynamics, developers needs to tackle the issue of producing high-quality clinical-grade cell therapies at a commercial scale, which will enable more patients to benefit from these revolutionary treatments. We strongly believe that the CAR-TXpress platform we have, holds the potential to considerably reduce processing time, enhancing cell recovery rates, and effectively lowering the manufacturing cost for CAR-T and other cell gene therapies.
Through our CDMO services, we offer a high-quality development and manufacturing capacities as well as cell and tissue processing development quality system, regulatory compliance, and other cell manufacturer solutions for clients with therapeutic candidates in different stage of development. As mentioned, an integral aspect of this plan is leveraging our proprietary high efficient CAR-TXpress platform, which has demonstrated its ability to significantly reduce processing time, enhancing cell recovery rate, and potentially, cut manufacturing costs associated with CAR-T and other cell gene therapies by up to 50%.
Additionally, by utilizing our comprehensive cell therapy portfolio, we intend to provide clients with the benefit of our extensive expertise in variety of cell types such as chimeric antigen receptor T cells, TCRT, and tumor-infiltrating leukocytes, natural killer cells, and including other cells such as inducible pluripotent stem cells and mesenchymal stem cells. Our all-encompassing ReadyStart cGMP suite provide a versatile solution, allowing companies to reach their projected milestone faster and more efficiently.
Additionally, our team's expertise in regulatory affair and product commercialization should accelerate the development of our customers' product, allowing them to focus on their research while we manage the regulatory and quality compliance aspect associated with operating cGMP unit. In the second quarter, we invited two additional member to our Board of Directors, Dr. Biao Xi and Dr. James Xu.
Biao is a highly regarded life-science executive with extensive expertise in biopharmaceutical research and drug development. And James brings strong legal IP and business acumen, including more than 25 years in the field of patent, corporate law, and tax law. Their contributions are highly valuable to the company. And with that, let me turn the call over to Jeff to hear the key financial result for the second quarter. Jeff?

Jeff Cauble

Thank you, Chris. A full discussion of our financials is available in the press release and 10-Q. So I'll just take a moment to review key financials for the quarter ended June 30, 2023. Net revenues were $2.3 million for the quarter, as compared to $3 million in the second quarter of last year. The decrease was driven by a large AXP purchase -- AXP disposable purchase from our distributor in China last year, which was offset by increased domestic AXP disposable and BioArchive device revenue in the second quarter of this year.
Selling, general, and administrative expenses were $1.8 million for the quarter ended June 30, 2023, as compared to $2 million for the same period last year. The decrease was driven by lower employee benefit and decreased legal expenses in the second quarter of this year.
For the quarter ended June 30, 2023, the company recorded a comprehensive loss of $2.3 million or $0.91 per share based on approximately 2.5 million shares outstanding. This compares to a comprehensive loss of $2.7 million or $8.98 per share based on approximately 300,000 shares outstanding for the quarter ended June 30, 2022.
At June 30, 2023, the company had cash and cash equivalents totaling $4.5 million compared with cash and cash equivalents of $4.2 million at December 31, 2022.
This concludes our prepared remarks. And now we'd like to open the call to your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Sean Lee, H.C. Wainwright.

Sean Lee

Good afternoon, Chris and Jeff, and thank you for taking my questions. My first question is on the GMP facility. So what remains to be done before they would be open for business, should we say, and be ready to have the first customers?

Chris Xu

Hi, Sean. Thanks for the question. So we have completed a majority of the infrastructure buildout and what's remaining is just to have the facilities certified by -- for ISO. And we are really in the last step -- last few steps. So we are actually very actively having customers pouring the facilities and having ongoing discussions with customers. It (multiple speakers) be opening state.

Sean Lee

Okay. Do you have any potential leads on customers so far? And when do you estimate we can see the first one move in?

Chris Xu

Yeah, we are actively discussing with various different customer in the cell gene therapy and also in other life science fields that require GMP facility. So we may have customers moving as early as towards the end of the third quarter or very early fourth quarter. So we definitely see the growth of interest.

Sean Lee

Great. For these facilities, you mentioned they're used for cell therapies. In particular, are there specific types of cell therapies they will be well suited for?

Chris Xu

Yes, this entire facility is highly specific and very specifically designed for cell and gene therapies because traditionally, for pharmaceutical industry and the cleanrooms tend to be large and allows big equipment to be put in to produce batches of drug. And each batch can be thousands of a patient.
Actually, each batch could be millions of a patient, and that's the historic way of producing drugs with cell and gene therapy. And that change the practice entirely because cell and gene therapy are very personalized and very individual.
So each drug is specifically produced for that particular patient. So you can see this as one drug, one patient. So the facility is designed into small GMP unit, almost like a beehive and that allow individual drugs -- individual personalized cell gene therapy can be produced in each unit. And you can produce as many batch as it allows and allow the quick turnover for each individual item medicine. So this facility is particularly designed for that purpose, and there are such a shortage of facility design for cell gene therapy at this moment.

Sean Lee

Thanks for that, and that's very helpful. My last question is on the potential revenues we can see from this [30]. What are -- what's the average revenue we can expect to see from each one of these suites? And what are your key costs for maintaining this?

Chris Xu

So currently, we run 12 GMP unit, and each unit average 500 square feet size. For that 500 square feet that the average market cost, if it's available -- mostly are not available because of the big demand, and the average cost per 500 square feet GMP suite is about $75,000 to $150,000 per month. So basically, we have 12 GMP unit on hand.

Jeff Cauble

Sean, I mean, on an annualized basis, I mean, we're looking at roughly $1 million per suite, and the cost per suite are fairly minimal to us because most of the expenses -- the companies are coming in and renting the room, I mean, so realistically, we're looking at a pretty small number probably $50,000 to $100,000 per room on an annualized basis and expenses for us.

Sean Lee

Yeah. And that's very helpful. Thanks to Chris, and thanks, Jeff. That's all I have.

Chris Xu

Thanks, Sean.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remark.

Chris Xu

Thank you, operator. We look forward to updating you our progresses during our third-quarter 2023 call, and thank you to everyone who participated today and for your interest in ThermoGenesis Holdings.

Operator

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

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