Daphne Taylor - CFO Mike Rice - President and CEO.

Jeffrey Cohen - Ladenburg Thalmann Vesselin Mihaylov - Newport Coast Securities Brian Marckx - Zacks Investment.

Good afternoon ladies and gentlemen, and thank you for standing by. Welcome to the BioLife Solutions Full Year and Fourth Quarter 2014 Financial Results Conference Call. At this time, all participants will be a listen-only mode. Later, we will be taking and instructions will be given at that time.

I would now like to turn the conference over to Daphne Taylor, BioLife Solutions' Chief Financial Officer. Please go ahead..

Thank you operator and good afternoon everyone. Thank you for joining us this afternoon for the BioLife Solutions conference call and webcast to review the financial results for the fourth quarter and year ended on December 31st 2014. Today we issued a press release and filed our Form 10-K Annual Report containing detailed results for 2014.

This release is available on the Investor Relations website -- on our website at www.biolifesolutions.com as well as on various financial Web sites. As a reminder this call is being recorded and also broadcast live on our Web site. A replay of the webcast will be available through the same link for 90 days.

Before we get started, we'd like to remind you that during the course of this conference call, we may make projections and other forward-looking statements regarding future events or the future financial performance of the Company.

These include without limitation statements regarding future operating results, growth opportunities and other statements that reflect BioLife's plans, prospects, expectations, strategies, intensions and beliefs. These statements are subject to many risks and uncertainties that could cause actual results to differ materially from expectations.

For a detailed discussion of the risks and uncertainties that effect the Company's business and that qualify to be forward-looking statements made on this call, we refer you to the company's periodic and other public filings filed with the SEC, including the Forms 10-K for the fiscal year ended December 31, 2014, and the Form 8-K filed today.

Company projections and forward looking statements are based on factors that are subject to change and therefore these statements speak only as of the date they are given. The Company assumes no obligation to update any projections or forward looking statements except as required by law.

Now I'd like to turn the call over to Mike Rice, President and CEO of BioLife..

Thank you Daphne and thank you everyone for joining the call. Following our business update and review of BioLife's fourth quarter and full year 2014 performance we'll be glad to take your questions.

I would like to begin today's call by reminding you of where we were at the end of 2013, so I can put into context what we accomplished last year with continued focus on execution throughout the year. At the end of 2013 we had about $150,000 of cash and $12 million of debt.

In the fourth quarter of 2013 we reported core product revenue of $1.2 million with our products incorporated in about 100 regenerative medicine clinical trials and we were highly dependent on one low margin contract manufacturing customer for about half of our revenue. Throughout 2014 we transformed BioLife in many ways.

During the last year we significantly improved our balance sheet by adding sufficient cash and eliminating all debt, creating a more viable company with much less revenue concentration and assets to further position the company for growth.

We grew our core bio-preservation media business with the addition of at least 75 new regenerative medicine clinical trials using our products, we added customers in each strategic market segment and we doubled distributor revenue from 2013.

In addition to driving continued adaption of our proprietary bio-preservation media products we expanded our bio-preservation tools portfolio with the addition of new aseptic process friendly packaging which enables closed sterile processing of cell based medicines.

We also set the stage for potentially very strong growth by forming a joint venture with SAVSU Technologies a supplier of precision controlled temperature containers for thermally sensitive biologic payloads.

We believe the SAVSU EVO smart container coupled with a new software as a service business model we are creating in the form of Biologistex service could become the new standard for improved monitoring management of the Biologistex at temperature sensitive shipments. I would like to tell you more about the EVO smart container.

This new shipping container with a significantly improved industrial design offers several unique advantages over traditional polystyrene foam shippers and vacuum panel insulated containers, including extended payload temperatures stability, improved durability, a much simpler [pack up] procedure and embedded electronics that monitors several critical payload parameters and store and transmit this important shipment data to the [cloud].

We're building a very powerful frontend web app for our customers to use to monitor and manage the shipments of their life saving and very expensive biologic payloads.

We have several unique software features in the app that will enable a greatly improved experience for our customers, downstream clinicians and potentially even patients at some point in the future. We see the regenerative medicine market as our initial opportunity for EVO in Biologistex.

Independent market research firms estimate that the worldwide spend for [coal change] shippers and instruments could reach $5 billion by 2018. We believe our potential addressable portion of this market is several $100 million.

Potential additional markets include temperature sensitive vaccines and pharmaceuticals, bio-banking specimens for personalized medicine and a veterinary medicine. We expect to start delivering EVO shippers to our [data] customers in the next three to six months and expect commercial shipments to begin in the latter part of the year.

We do not currently have any planned deployments in Q1. As we've indicated before, this solution will be marketed as software as a service, it will have a monthly cost which covers use of the reusable shipper and unlimited access to the data service similar to a cell phone contract.

We expect the contract term to be 12 to 24 months with monthly pricing to be finalized at the conclusion of the beta program and we look forward to providing more guidance on adoption and financials from this new business later this year. Now I would like to refresh you on our strategic markets.

The regenerative medicine market continues to be the most strategic market for our core bio-preservation media products. Our clinical grade bio-preservation media products are well known as best in class in this space and are incorporated in over 175 clinical trials covering all the major clinical indications being investigated.

Our continued success in driving adoption is founded on two key differentiators. First, our products are optimized for low temperature biology and provides significant yield and shelf life improvements for our customers as compared to using traditional home brew preservation cocktails and other commercial yet not optimized formulas.

These yield and shelf life improvements can be easily monetized by our customers, and while our products are premium priced, the value added significant and in some cases maybe a primary detriment of commercial success.

On the evidence front you may have seen the press release we issued last week about our new published study at the Mayo Clinic using our CryoStor self-freeze media as the vehicle solution for cells ingested in the hearts of pigs a model of cell based cardiac regeneration.

The takeaway from this study was no observed mortality or toxicity from the procedure which supports in acceptable safety profile for use in pediatric clinical trials. The other factor is the quality and regulatory foot print we've established for our clinical grade bio-preservation media products.

A combination of GMP manufacturing, ISO 1345 certification, the use of highest available grade components, no use of animal human serum or protein and FDA master files has established our products as best in class with performance and quality attributes that are highly aligned with our customers' commercial and regulatory requirements.

With the combination of our proprietary bio-preservation media products and new Biologistex Cold chain management service, we will serve the entire bio-preservation continuum in this segment, needle to needle from the time starting material is removed from the patient until derived and manufacturing therapy is administered to the same or a different patient.

In the more traditional drug discovery in bio-banking markets we continue to gain new customers including cell suppliers, core blood banks and hair transplant physicians.

These traditional markets are immediately accessible and we'll focus on growing our business in these segments while the regenerative medicine market continues to develop and mature. We also plan the market to EVO smart container and Biologistex service in these segments. Turning to contract manufacturing.

As we've communicated while the regen med market is maturing we're seeking additional contract manufacturing opportunities that are aligned with our capability and expertise to leverage our manufacturing capacity. We've previously discussed Somahlution in our contract to make their DuraGraft storage media.

This customer is in the process of attaining FDA approval for DuraGraft, which impacts the startup of our production. In Q4 of 2014 we completed most of the validation work to Somahlution which resulted in non-recurring revenue of $210,000.

We look forward to being able to drive more information on forecasting for this contract when it becomes available. Now I'll turn the call back over Daphne to go over our detailed financial results for the quarter and to provide some estimates for 2015..

Thanks Mike. Revenue was $1.7 million in the fourth quarter which included another quarter of record proprietary media revenue of $1.5 million and a $200,000 related to our contract manufacturing customers that Mike just discussed. Core proprietary product revenue was up 17% over Q4 and up 21% over the same quarter last year.

While our core product revenue was up this quarter, total revenue declined 27% from the fourth quarter of 2013, with no contract manufacturing being reported from our previous significant contract manufacturing customer since Q1 of 2014. For the year we reported revenue of 6.2 million this includes 1.3 million in contract manufacturing revenues.

Core product revenue increased to 4.9 million for the year and grew 25% over 2013 which is in line with our expectation. Gross margin in Q4 was 60% compared with 40% in the fourth quarter of 2013 and 47% growth in the third quarter of 2014.

The significant improvement was driven by the increase in our higher margin core products revenue and the high margin on the one-time feasibility revenue from our new contract manufacturing customers. Gross margins for the year was 49% compared to 42% in 2013.

We reported a consolidated net loss in the fourth quarter of this year of approximately $1 million compared to about $0.5 million in the fourth quarter of 2013, a 900,000 in a third quarter this year. With most of the net loss increase being driven by higher operating expenses.

Included in our consolidated net loss was $83,000 in cost attributable to SAVSU interest in our joint ventures, this represents 48% of the net loss of the joint venture for the quarter.

Net loss for 2014 was 3.3 million compared to 1.1 million in 2013, again driven by the significant reduction in revenue offset by higher gross margin but impacted by significantly higher operating expenses in 2014. I would like to provide a little more color on the operating expense increases.

First, related to the joint venture agreement we find with SAVSU. In Q4 we reported $250,000 in amortization of the participation fee to be paid to SAVSU for entering into the JV agreement with us. For the year this was an expense of 333,000.

We've now recorded four of the 12 monthly amounts with 700,000 expected to be expensed over the next eight months. This is recorded in G&A expense. For the year the increasing G&A expenses also included higher corporate cost including Director's fees, Investor Relations consulting and corporate insurance.

In R&D our cost increased significantly in Q4 compared to the same quarter in 2013 with investments primarily being made with additions to our R&D team and resulting payroll increases.

We also recorded higher cost related to evaluating new technology for our core products and some consulting related to the development of our Biologistex service products. This was during Q4 and for the whole year with the majority of the increase coming from Q4.

Sales and marketing cost increased due to our ramp up in sales and marketing personnel for the $100,000 and higher personnel cost in Q4 and $300,000 for the year. We also increased spending on trade shows with 50,000 more in Q4 compared to Q4 of 2013 and 100,000 more for the year compared to the last year.

We ended the quarter with cash and cash equivalents of $10 million burning about a 1 million in Q4 compared to 900,000 last quarter. For 2015, we expect to continue to grow our proprietary revenue by 20% to 30% per year with some potential lumpiness during the quarter so as our customers move through their trials.

We are not yet in a position to provide guidance or estimates for Biologistex or some [illusion] products as it's soon to do so at this time. We expect to see additional improvements in gross margin for the full year 2015 and report overall gross margin in the range of 50% to 60%.

We will continue to use cash in 2015 and expect our net loss to increase as we invest in the Biologistex joint venture prior to significant commercial adoptions. We believe that the cash we have on hand now is more than sufficient to cover our needs for 2015. I'll now turn the call back over to Mike..

Thanks Daphne. Overall, like the first nine months of last year Q4 was a building quarter. We view 2015 as another critical growth, investment and execution period for BioLife.

We're focused on driving adoption of our core products, successfully launching our game changing Biologistex Cold Chain management service and securing and completing additional contract manufacturing projects with good economics. Thanks for your interest in BioLife. I look forward to future updates on our next call.

Now we'll open the call for questions.

Operator?.

[Operator Instructions] Our first question comes from the line of Jeffrey Cohen from Ladenburg Thalmann, your question please..

Yes you can, I'm doing just fine.

So, could you talk about the margins a little bit so you had 210,000 in contract revenue which would have brought the margins for the quarter down even from that 60% down to call it 54.5% but you're guiding towards 50% to 60% that seems high to me which is good news but could you explain a little bit was there some additional utility that you derived out of the fourth quarter going forward on the gross margins?.

Well, actually Jeff, the 200,000 was fairly high margin revenue so, it wasn't really contract manufacturing so to speak it was a feasibility study that we entered into this to start the contract manufacturing relationship..

Okay, so you feel good about 50 plus percent?.

Yes..

Well, let's clarify Jeff, this wasn't production revenue so let's be sure that we're not walking away saying that we think that the margin on production orders will be 50%, okay?.

Okay, so if there is a tremendous amount of contract revenue during 2015 that could in fact bring margins down through that 50% to 60% range lower?.

Well we're giving a range so we think we've got ourselves covered there, yes..

Okay, got it.

Can you give us any color at all on some illusion?.

Specifically, what do you mean?.

Approvals, timeline, launch commercialization..

Jeff, regarding their approval, they're U.S. launch, we can't speak to that. We're the contract supplier to them, we know some things that we can't disclose publically but really the only thing we'd be able to say is whatever they've announced publically regarding anticipated dates for approval, the ramp up or what have you.

I will say just that, if they get the approval and the market adoption is in line with what they're estimating or forecasting and this will be a nice contract to BioLife, it will be meaningful revenue with meaningful gross margin associated with it..

Okay, got it and could you talk about the SAVSU JV and the ramifications that Daphne just went through on the OpEx line, so Daphne you said there is 700,000 over the next eight months that's under G&A correct? And 330,000 is already paid down, paid for?.

Right..

Okay, so OpEx looks like it would be closer to call it 7.5 million as opposed to 6 million for 2015, is that safe to say in total?.

We expect to see some increases that we're not going to guide to an exact number. The main increases are going to be in area of sales and marketing where we're going to substantially increase with the Biologistex launch and bring on some additional sales people..

Got it and one more if I may.

Michael little more color on Biologistex as far as the beta program, can you give us any numbers or any further color on activity currently or expected for the first half of the year?.

Yes, not specific Jeff. But I can speak to some really critical and very valuable feedback that we received from going out and having a lot of conversations with potential users.

And frankly that's been official for us, it has resulted in some delays in getting this thing more fully developed but we've learned a lot and we're making several enhancements to both the EVO shipper and also the web based application in the back end database. And so I am glad we did that.

Little disappointing that we're not a little bit further ahead but now we know what design enhancements on both software and hardware need to be and we're well on the path to getting those done, and it makes really good sense that we're deploying in this regard and I am happy to have receive that feedback..

Our next question comes from the line of Vesselin Mihaylov from Newport Coast Securities. Your question please..

I wanted to ask you about this new product that just came in.

you indicated that you would be taking quarters for studying in the middle of March, not that it's the middle of March are we still on track to start taking revenues for this and maybe recognize some in the first quarter?.

So you're speaking of the [celltheon] media products that we disclosed, that we were launching, correct?.

Correct..

Yes, I am happy to tell you we received several orders and we also have just a nice bit of interest being generated from the various clinical centers around the world who are still suffering through the shortage of using formally which were approved drug products [irrigation] and the fusion products off label to cross sell the following [power] preservations.

So we're making the exact same formula, it's not labeled as a drug product but it's being evaluated and validated in these various customer quality systems.

So we shipped several orders and we'll report some revenue at least we'll cut some, I am not sure if we'll break it out when we actually disclose the Q1 results but it's been a nice uptick, good to see..

So should we expect that, I mean I am looking to your gross margin guidance, should we expect that the gross margins on this product are comparable to what you have on the proprietary products?.

Not at all.

Actually you have to consider that, we're competing against the former approved drug products, salient solution, Dextran and Dextrous, Dextran and sodium chloride which as you can imagine being produced by three very, very high volume manufacturers and the price per mil of those products in the marketplace for the approved drug versions are in the $0.10 to $0.15 per mill and our products are significantly more expensive, for the most part due to the fact that we're not going to make it in those sorts of volumes.

And those manufactures have had many years to build up manufacturing infrastructure and to burden the cost down on a price per bag basis. So the margins for us are not nearly in the range that we're enjoying with our proprietary preservation media products.

But we're happy to do it, we're helping our customers out, we're not losing money on this revenue line and we're happy to make sure that as long as customers have demand for this and the shortage exists then we can do something to help through this jam..

Next question is regarding a topic we've discussed in the past, whereby significant amount of these customers in the cell trials are going from Phase 2 to Phase 3. And we will expect -- personally I was expecting to see a more significant uptick in revenue growth as Phase 3 usually involves minimal patients and doses and so on.

So I was looking just looking for an order of magnitude higher revenue increases going forward as these through progress.

Are you being conservative with the guidance that you just gave or am I missing something?.

No Vess you're asking the exact right question and we are being careful in how we're guiding to the increase anticipated for core proprietary products.

And as you can imagine, I know you know this there are many variables that effect customers ordering product from us, the variability and patient enrollment size, their customers' financial conditions, many, many things that all trickle down into when they'll actually place orders for our products.

So we're being pretty thoughtful on how we're guiding that..

So just last thing, I want to ask you about is consists of a few questions. So let me start with a little preface, couple of years ago we had a company indeed that had a lot of debt and $50,000 of cash in the bank at the end of each quarter, because I am a shareholder, so I know.

[Indiscernible] it was a cash flow positive company, when we were living on a short shoe string so to speak the company was at least temporarily cash flow positive, say for debt it looked like a growing concern.

Now we're spending a lot of money on this new Biologistex venture and in my estimate it's a little bit behind schedule probably five to six months from what we were hearing last year. And yes I am hearing that you are saying it's a huge opportunity in the future but I haven't heard any numbers.

My question to you is this, when we were raising this capital last year, was this part of the plan to really spend all this money on Biologistex or was this something that you came up after that? Because my thinking was hey, here we have a cash flow positive company, now we have eliminated the debt, we have a huge war chest of cash and maybe if we just keep growing the core business we're going to be a profitable cash flow generating business and the profits can be invested in new ventures but what we have right now is -- I don't know why we lost that big contract last year but it was loan gross margin.

What we have right now is spending a whole lot of cash on Biologistex, my question is again, did you come up with this idea before the refinancing and recapitalization of company or after that?.

Definitely after that and let me just provide a little more color on the loss of the ORS contract which as you remember in 2013 was perhaps half the revenue.

It is my belief that we completed our financing earlier and transformed the company's financials we perhaps might still be a supplier to them so all things considered a timeline for them to make a decision to switch to another manufacturer, I can easily understand that may have been their position.

I will say though that's, that throughout the equity raise and then speaking about use of proceeds it was really about sales and marketing and new initiatives to grow the business faster. Now, Biologistex is a big deal for us, it's a significant investment.

We're heavily invested both with time, personnel, commitments and finances with SAVSU to make this a success and to this day I believe it's going to transform not only BioLife but also Cold Chain management particularly in regen med and if not into some other market segment so this is a really transformational potential opportunity for us and I'm happy with the way we spent the money and I think we're being very mindful of the cash that we have but nevertheless this is going to take some money to get this thing off the ground, no doubt..

So, I haven't been able to see the cash flow statement yet on the SEC website, how much cash was burned during cash from operations as well as capital expenditures combined, can you give me that number please?.

Total operating cash [indiscernible]..

Okay, that's good for starters..

Yes, operating cash was 3.2 million roughly..

3.2 million negative?.

Right..

Okay, so, according to your guidance I'm looking that probably another 4 million will be burned this year so to speak or spent 30% higher than the 3 million, is that kind of -- am I correct on that one?.

It will be up to about 4 million, yes..

Okay, so we got to be last with roughly 5 million if everything else is equal at the end of the year. My question is, I heard that we may expect initial commercial revenues from Biologistex at the end of the fourth quarter -- I mean in the fourth quarter of this year.

The way you see things right now is this is the fourth quarter or somewhat this year that basically the bottom or the biggest kind of cash burn and then we start burning less cash and we can start extrapolating getting to cash flow positive because we'll be down to that rates just four more quarters maybe five more quarters of cash, so unless the company starts burning less cash going forward I'm talking Q1 2017 or Q1 2016 then people will start thinking, do we have enough cash to last for another year?.

Yes, it's a good analysis you're doing Vess, I think what we just want to say now is that we believe we have enough cash to satisfy our needs, what we publish even the more granularity in terms of quarter-by-quarter so we're confident we've got enough cash to do what we need to take us through the launch of Biologistex and then some, so that's probably where we should just constraint our comments to..

[Operator Instructions] Our next question comes from the line of Brian Marckx from Zacks Investment, your question please..

Hi Daphne, hi Mike.

Can you talk about R&D expectations, R&D expense expectations in 2015? I know Daphne talked about Q4 sounding like it could have been somewhat of an anomaly based on certain expenses, can you kind of give me some sort of guidance in terms of what you expect in 2015 for R&D expense?.

Yes, I can so, in R&D what I said is we made a bunch of investments in our R&D team by hiring a few people that personnel is pretty well set in that department now and we wouldn't expect to see that number move much.

The onetime cost that we had in Q4 I'd say could potentially recur over the next couple of quarters, this is kind of depending on how certain projects that we're looking at are going..

Okay, all right and while we're on operating expenses can you remind me how the operating expenses are funded in the JV, it was minor stating that BioLife funded the sales and marketing in the JV reimburse BioLife, is that accurate?.

That is kind of accurate. BioLife is funding all of the cost of the JV and as soon as the JV starts to make money and generate cash all of that funding will be repaid to BioLife so if BioLife generating a loan basically from the JV right now for all of the products..

And on Biologistex, is there anymore you can talk about relative to the overall kind of status I guess of the business. Is it actually functioning? Do you have the ample inventory is the software platform complete or sales people making calls and knocking on doors, et cetera.

Anything more you can kind of talk about relative to the current status of the business?.

A little bit more Brian, so we've been pretty active in talking to a number of perspective users of the EVO shipper and the Biologistex web app. We're actively recruiting sorting out how many sellers and where they go and what the territories look like and so on so forth.

You can imagine there is a lot of critical timing about that to get people onboard early enough to get fluent but not too early where they're sitting around wondering how they're going to make money so on a so forth.

The software development is going very well, we have a very capable local software development company as our partner and they have done stuff like this for other customers and I am just really excited about that.

I will say that one of the reasons we're a bit behind in terms of the software development relates to IP and as you guys know you never get a little bit on front of yourselves and start to market things that might be patentable.

So we have a number of innovations, potential inventions that relate to both the EVO and also the software application that in combination may have novelty.

And so we've working hard to figure out what we can file and we definitely want to file it before we start to let some of those details off publically, which I think again another reason it's been worked the way to gather this critical feedback..

Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to management for any further remarks..

Thank you operator, thank you everyone thanks for your interest in BioLife. I am very, very excited about 2015, we're sitting on a wonderful opportunity we have our arms around it. We know what we need to do, the team is very enthusiast.

There is a nice buzz here of activity and people very dedicated to doing what they can do with their small teams and all boil up to execution and that's the name of the game for us this year, both in terms of continuing adoption of core products, getting Biologistex to the game changing solution which we think it will be to the extent we can find and engage an additional contract manufacturing jobs with good economics.

Again like I said we're going to do that so I see 2015 as a banner year for BioLife. Thank you very much..

Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day..