Q3 2023 Thermogenesis Holdings Inc Earnings Call
Participants
Paula Schwartz; IR; Rx Communications Group
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 third quarter ended September 30, 2023.
As a reminder, this call is being recorded today.
I would now like to turn the conference call 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 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 call, November 13, 2023. If any portion of this call is being rebroadcast, retransmitted, or redistributed at a later date, ThermoGenesis will not be reviewing or updating this material.
Participating on today's call are Dr. Christian 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 today. We appreciate you taking the time to listen in. During the third-quarter and subsequent period, we continued to make significant progress in executing our plans to transform from a medical device company to an integrated contract development and manufacturing organization or CDMO for the cell gene therapy market.
To that end, we completed and officially launched our 35,500 square feet cGMP clean room suite in Sacramento. cGMP stands for current good manufacturing practice. Our 12 ReadyStart cGMP clean room suites are designed to meet the highest scientific quality and regulatory requirement for cell gene therapy field and will be ideal for early and mid-stage companies and institutions that are currently developing cell and gene therapies and advanced therapy medicinal products or ATMP.
We provide this turnkey solution to early and mid-stage life science and about pharmaceutical companies who look to jumpstart their R&D efforts and to scale up for clinical development quickly. Our goal is to establish solutions for customers in order to streamline the supply chain, increase manufacturing projectability, and manage overall risks while reducing overall costs.
As most of you know, for over 35 years, ThermoGenesis has pioneered the development and manufacturing of a series of innovative or automated technologies and products, especially for the cell banking and cell therapy industry. The driving force for us to transition into a CDMO is largely due to the continuous growth on personalized cell and gene therapies.
Since 2017, the FDA has approved six autologous CAR-T therapeutics. While CAR-Ts were initially authorized as the last resort for patients who did not respond to other therapeutic treatments, recent CAR-T trials has demonstrated that these treatments can surpass second-line standard-of-care options, suggesting that the scope of the application for CAR-Ts may expand in the future.
According to recent reports, the industry anticipates further FDA approvals, potential rate of 10 to 20 new cell therapies per year starting in 2025. At this very moment, there are over 350 US companies operating in the field of cell therapy, along with over 1,000 pipeline assets worldwide.
The ongoing surge in research and development is enabled by the remarkable potential that exists in the current commercialized therapies. As thousands of preclinical and clinical trials are currently underway for innovative cell therapies, there is increasing needs for dependable and quality CDMO cell manufacturing services.
Our CDMO services will provide clients with high-quality development and manufacturing capabilities, along cell and tissue processing development, quality systems, regulatory compliance, and other cell manufacturing solutions for the therapeutic candidates at different stage of development.
A crucial aspect of our plan is to leverage our proprietary, highly efficient semi-automated CAR-TXpress platform, which has already demonstrated the ability to significantly reduce processing time, improve cell recovery rates, and potentially lower the manufacturing cost associated with the cell gene therapies by up to 50%.
Additionally, our team's strong expertise in regulatory affair and product commercialization will help accelerate the development of our customers' products, allowing them to focus on their size while ThermoGenesis will manage the regulatory and quality compliance associated with running a cGMP facility. Utilizing our extensive and comprehensive knowledge and experiences in the cell therapy field, we aim to offer clients the advantage of our broad expertise across the manufacturing of many different cell types.
And with that, let me turn the call over to Jeff to hear the key financial results for the third quarter. Jeff?
Jeff Cauble
Thank you, Chris. A full discussion of our financials is available in the earnings release and 10-Q, so I'll just take a moment to review the key financial information for the quarter ended September 30, 2023. Net revenues were $2.2 million for the quarter, up approximately $100,000 from the same period as last year.
Current revenues continue to be driven by AXP disposable sales, which were up approximately $400,000 from the third quarter of last year. With the completion of our ReadyStart clean rooms in October, we will begin recording revenues from CDMO services in the fourth quarter.
Gross profit for the third quarter was $400,000 or 18% of net revenue, in line with our gross profit from the same period in 2022. We expect to see increases in our gross margin in 2024 as a higher percentage of our revenue is derived from CDMO services.
Selling, general and administrative expenses were $1.7 million for the third quarter as compared to $2 million for the same period last year. The decrease was driven by lower employee benefit and corporate expenses. Interest expense was $2.1 million for the third quarter as compared to $1.4 million for the same period in 2022. The increase was driven primarily by non-cash amortization expense in the current year.
For the quarter ended September 30, 2023, the company reported a comprehensive loss attributable to common stockholders of $3.6 million or $1.44 per share based on approximately 2.5 million shares outstanding. This compares to a comprehensive net loss of $3.2 million or $4.66 per share based on approximately 700,000 shares outstanding for the quarter ended September 30, 2022.
At September 30, 2023, the company had cash and cash equivalents totaling $4 million compared with cash and cash equivalents totaling $4.2 million at December 31, 2022.
This concludes our prepared remarks. So now we'd like to open the call for your questions. Operator?
Question and Answer Session
Operator
(Operator Instructions)
Sean Lee, H.C. Wainwright.
Sean Lee
Good afternoon, everyone, and thanks for taking my questions. My first question is on the response so far to the launch. So I was wondering how have you been marketing your CDMO services since its launch? And how would you gauge the response so far from the market?
Chris Xu
Hi, Sean. Thanks for covering our company. So we officially launched and had a ribbon cut event in October. And we have seen the clients start to move in this. And there's certainly, as you may aware, a nationwide shortage of CDMO facilities and services across the entire country. So there are increasing number of biotech and pharmaceutical companies looking for not only just the CDMO service, but also that has the full cGMP capability to help them develop and manufacture product candidates for clinical trials.
So we certainly -- with regards to how we market share this, the long-term goal is to use some of the huge suites by ourself by launching the service. But in the short term, we are actually engaging a few different agent and brokers in the laboratory space in the life science area where they see a clear shortage of such cGMP space, cGMP labs. And they are already helping marketing our newly opened facility nationwide.
And our financial end, I will probably -- I would leave that to Jeff where we probably start to recording the revenue in the fourth quarter.
Jeff Cauble
Yeah. That's correct. I mean, we do have several -- we're actively engaged with several customers right now on contracts that are in process. We have a couple that are finalized right now. So we do anticipate seeing some revenues this quarter. But lot of the companies are just be moving in; I think we'll see larger revenues again to hit in 2024.
Sean Lee
That's great to hear. Thank you for that. My next question is on the future direction. So you mentioned you have the suites ready. Would you be able to expand additional suites if you deem there is enough demand for it? And would these suites be able to be upgraded with the -- how would these suites be upgraded with the CAR-TXpress system?
Chris Xu
Okay. So currently, we have 12 cGMP suites. And just putting that into perspective, I mean, for instance, you see Davis as a major research organization. Their university has six GMP suites and many of the academic center has single manufacturer suites.
So that would put us in a pretty good shape, satisfying the needs of the market. We do have extra space that we can expand to building more of such GMP suites if needed.
With regard to whether we can upgrade this to CAR-T, currently, we design our cGMP in the highest-quality standards. These suites are ready to take CAR-T manufacturing as yet. So in that regard, we really don't have to upgrade them.
With regards to future, to lease out some of the GMP suite, it's really just so that we can use these extra space for the time being. The long-term goal yet actually, we leverage our proprietary manufacturing platform -- as you know, the CAR-TXpress platform -- which significantly reduce the manufacturing cost by 50%.
By providing a CDMO service ourselves, we can save our clients a lot more in term of the cell manufacturing needs. So that's the long-term goal; it's not just to lease ourselves by actually providing the drug manufacturing service for the cell gene therapy field.
Sean Lee
Thank you for the additional color. That's all the questions I have.
Chris Xu
Thanks, Sean.
Operator
And this concludes our question-and-answer session. I'd like to turn the conference back over to Dr. Xu for any closing remarks.
Chris Xu
Thank you, operator. We look forward to updating you on our progress during our year-end 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 your lines.
