Daphne Taylor - VP, Finance and Administration, CFO Mike Rice - President and CEO.

Jeffrey Cohen - Ladenburg Thalmann Peter Brophy - Platte River Capital.

Good day, ladies and gentlemen and welcome to the BioLife Third Quarter 2015 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instruction] As a reminder, this conference call is being recorded.

I would like to introduce your host for today’s conference, Ms. Daphne Taylor, Chief Financial Officer. Ma'am, you may begin..

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 third quarter of 2015. Today we issued a press release and filed our Form 10-Q quarterly report containing detailed results for the quarter.

This release and an updated investor presentation are available on the Investor Relations page of our Web site at biolifesolutions.com. 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, let me remind you that during the course of this conference call, we will make projections and other forward-looking statements regarding future events or the future financial performance of the company.

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 affect the company’s business and that qualify to be forward-looking statements made on this call, 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 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 thanks everyone for joining the call. With the first few quarters of 2015 on the book, I am very pleased to provide this business update and then take your questions.

I’ll start with an overview and update on the adaption of our bio-preservation media products and our three strategic markets of bio-banking, drug discovery and regenerative medicine.

As you have heard us communicate for some time now, the common use of traditional non-optimize selling tissue storage shipping and freeze for their home-brewed cocktails or commercial products results unlimited preservation efficacy, this means fewer cells survive the preservation interval and those are due are not in the best of health.

So the utility of these sales and research and clinical applications is limited. We’ve also shared with you that our proprietary CryoStor freeze media and HypoThermosol storage and shipping media are engineered to protect cells and tissues from the damaging effects of HypoThermosol storage freezing and fine.

As the regenerative medicine market has matured and transitioned from research to small scale clinical center trails to now a multi-center trails requiring validated preservation efficacy, transportation and cold chain logistics, we’ve established a very strong footprint as the premium supplier of bio-preservation tools in our strategic markets with a large majority of the private and public region med companies using our products.

We’re fortunate to have a marquee customer list. I’d like to provide some detail on how sales of our bio-preservation media products have ramped this year. As you may have read in our release today, we reached a new record high with revenue of 1.6 million for Q3.

Looking at our segment sales breakdown; we saw large year-over-year and sequential gains in bio-banking, specifically in sales to hair transplant physicians and cord-blood banks. We also saw solid increases in sales to distributors, cell suppliers and regenerative medicine customers.

We believe the regen med segment represents tremendous upside for BioLife with our products now baked into the manufacturing and clinical delivery processes of more than 200 preclinical validations and clinical trials of new cell and tissue based products.

To remind you of the level of investor interest in this space, I can point you to the recent issue alliance for regenerative medicine Q3 data report, which cites 9.3 billion in total funding in the space for the first nine months of 2015.

We believe that some of our customers could expect to receive BLA approval then commence commercial manufacturing in the second half of next year, and this will drive incremental demand for our bio-preservation media products. Our expectations are based on customer investor presentations, public disclosures and presentation of scientific conferences.

For example, the CAR-T Summit has being held today and tomorrow in Boston and we look forward to presentations by several customers at this key industry event.

I can also share that the number of customer audits of our quality and manufacturing systems has increased significantly in 2015 as many groups are progressing to later stage clinical trials and are reconfirming their decision to engage with us as a critical supplier.

We completed about 40 customer audits so far this year with no negative finding and quite a bit of very positive feedback. So we’re pleased about this and look forward to seeing our customers successfully navigate the clinical approval process and to turn up the manufacturing operations.

With about 25 customer Phase 3 trials underway, and about 80 Phase 2 trials ongoing, we’re optimistic about our future growth potential. To wrap up this discussion, I’ll give two examples of how we believe we can monetize our regen med franchise.

On the low solid with the cell therapy targeting a small addressable population of perhaps 20,000 patients using the 50% market share and $50 in BioLife revenue per patient, we could see 500k in annual revenue from this type of customer.

On the high side, with the major indication like heart disease with a customer treating less than 1% of addressable patients annually and using $100 in BioLife revenue per patient, we could expect to record 4 million to 5 million in annual revenue from this type of customer.

On balance, most of our customers targeting blood cancers, solid tumors, stroke, vision loss and joint disease, probably represent 500k to 2 million in annual revenue opportunities for BioLife. I am happy to share the interest by new pre-commercial companies to consider our part as very high.

This is due to our scientific presentations at key conferences, our sales and marketing activities, the work of our distributors, and referrals and recommendations by cell therapy CMOs and CROs. Now I’d like to provide an update on our recently launched biologistics cold chain management Software as a Service.

To recap for you, biologistics is our proprietary cloud based SaaS. Our platform combines the evo family of smart shippers that have integrated payload monitoring, GPS location tracking and cellular communications electronics with our simple to use yet very powerful cloud-hosted app.

Our app enables shippers of time and temperature sensitive biologic material to complete, monitor and document the critical steps in the pass out, distribution and patient delivery process with real time updates on the location of the container and critical biologic payload information such as temperature, pressure, humidity, shock and vibration.

Subscribers can also configure alerts for destination contacts for package approaching the delivery location, when it was delivered, when it was opened, and how much shelf life is remaining. This last alter is critical to ensure that time sensitive biologics are administered to the patient within the validated stability period.

Since our last call, we’ve been focused on completing thermal integrity testing of the 2 to 8 C evo smart shipper, refining the user experience in our app, and getting a limited number of evo shipped to U.S. and EU accounts. I am going to give some details on each topic.

First, the testing we’ve suggested to evo smart shipper 2 has confirmed that we have a very rugged and well performing reasonable container.

Against two industry accepted very challenging temperature profiles, those being into 70 summer heat profile and the ITS silver cold profile, evo provides 84 hours and 96 hours of payload temperature stability respectively.

This is really stellar performance and can enable worldwide distribution of time and temperature sensitive biologic materials, both starting to source materials and also manufactured cell based products.

However, we’ve learned from some early users that 72 hours of thermal autonomy is sufficient, and this has given us flexibility to offer larger payload area by reducing the space requirements of our proprietary cold stacks. I should remind you that the evo can only packed out or loaded in one orientation.

This is intentional to reduce pack on air, this is really important. Other more complicated shippers have prone to pack on airs which can render the temperature sensitive biologic unusable. Imagine the impact of dead cells arriving for use in a clinical trial.

For perspective, as you already take white paper on cold chain logistics sites human air as the root cause of 95% of fails in the cold chain with pack on air is being the primary contributor. Early user feedback on the design of evo is very positive. Next, regarding the user experience in our app.

We’re now scoping some additional work flows to support multiple line shipments and integration with third party logistics providers who may already have relationships with our regen med customers. It’s important that we offer options for our customers so we can fully participate in the cold chain ecosystem.

Lastly, we’ve deployed a limited number of evos, and continues to build the pipeline with a goal to increase our deployed base this quarter. Now I’d like to give some additional detail on pricing and how we compare to alternatives in the market.

Our subscription based pricing for the reusable evo smart shipper has a typical lower monthly cost for the longer term commitment. Since evo is reusable and we have simple return or reverse logistics built into our app, we use $200 per shipment as the price our customers will pay.

This includes the evo smart shipper and access to all the shipments monitoring, alerts and data storage features in our app. Conversely, a typical single use shipper with a data logger thrown in or using a monitoring service by a freight carrier runs about $300 per shipment.

And for comparison using a white glove courier service can range from $1,000 to more than $2,000 per shipment. So you can see we’re pricing our app in reusable evo smart shipper to compete on both ends. This is a high margin annuity and with 1,000 shippers deployed, we could see 6 million in annual revenue from biologistics.

We’re not quite ready to provide guidance on biologistics subscriber growth since we’re still in the early launch phase. But I am optimistic about how we can grow the business.

We believe that any organization that is transporting their shipping, time or temperature sensitive biologic material is a potential customer, and our initial focus is understandably on the regen med segment where we already have relationships and since the space is early in the use of cold chain logistics.

Our goal is to help our customers improve the quality of their therapy manufacturing and the clinical delivery processes with effective bio-preservation and cold chain logistics being two very complementary and critical components in the overall workflow continuum.

Now I’ll turn the call back over to Daphne to go over our financial results for the quarter, and to reconfirm our expectations for the rest of the year..

Thanks Mike. Third quarter 2015 revenue was $1.6 million, representing our highest revenue quarter for bio-preservation media products. For the nine months ended September 30th bio-preservation media product revenue was $4.5 million. This is up 32% from the same period last year.

In Q3 we saw consistent growth and sales to our customers in the regen med segment, which outpaced the same quarter of 2014 by 38%. We continue to expect fully year 2015 bio-preservation media product revenue to come in at 20% to 30% over last year, with significant growth from the franchise we’re building in regen med sector.

As Mike mentioned, we expect continue to deploy additional evos this quarter, and we will assist our customers with their validation processes. Once we’ve established more traction, we plan to provide you with meaningful metrics on the biologistics business. Gross margin in the second quarter was 60%. This is up significantly from 47% a year ago.

This increase reflects higher revenue from our media products business and improved utilization of our manufacturing facilities with increased production. We expect gross margin to continue to improve as the regen med sector matures and product demand increases. For the nine months ended September 30th gross margin was 58%.

At the mind point of the range and we expect for the full year at 55% to 60%, and we expect this to hold for Q4 and for the full year of 2015.

Operating expenses in Q3 were $2.3 million, slightly higher than Q2’s OpEx of $2 million with the only significant increase being that we recorded three months of expense related to the SAVSU joint venture participation fee. We expect to record the final three payments in Q4. Sales and marketing expenses increased only slightly over Q2.

We initially expected Q3 sales and marketing expenses to be higher due to launching the biologistics service. These expenses have been pushed out slightly and we now expect Q4 to have a modest increase. We expect G&A and R&D expenses to continue at about the same level in Q4 as compared to Q3.

In Q3 we used $1.6 million in cash as expected and we ended the quarter with $5.3 million. And we continue to believe we have sufficient cash to reach cash flow positive in 2016. And I will now turn the call back over to Mike..

Thanks again, Daphne. I’d like to close with some summary comments, and then we’ll be glad to take your questions. 2015 is shaping up to be a very solid year. We accomplished quite a lot and have been very focused on growing our bio-preservation media business and launching what we believe is a game changing cold chain logistics service.

While we like to add more biologistics subscribers on board at this point, it’s important that we engage completely with our new customers and their experience is very outstanding. We’re finding there are lot of nuances and validation requirements for cold chain management, but none of these are road blocks.

It’s going to take a while to get to the first few customer adoptions and I believe attraction will increase and this new business will develop nicely and be a significant revenue and earnings contributor.

We discovered several additional partnering opportunities for logistics providers and other disruptive service providers and I’ll be glad to share more details on these initiatives when more fully developed. Meanwhile the entire team here is focused on finishing Q4 2015 on a very strong note. I want to thank you for your interest in BioLife.

Now we’ll open the call for questions, Operator?.

[Operator Instructions] Our first question comes from the line of Jeffrey Cohen of Ladenburg Thalmann. Your line is now open..

So, firstly the margins, looks like you beat me again and you’re reconfirming 55 to 60.

Do you think that holds true through 2016 as well with the addition of the evo shippers?.

That’s a good questions Jeff. We haven’t just given 2016 guidance yet, but we are expecting as we said for the preservation media to hold out..

Okay, at those levels.

Mike you gave some numbers, can you just recap the number Phase 3s number, Phase 2s, and/or 1s, you said 20 [indiscernible]?.

And you’ll see this in the updated investor deck on our Web site today. So about 25 Phase 3, 80 Phase 2 and then I believe there are 40 and 40 or something like that. But we’re obviously more closely tracking the later stage clinical trials..

And so the evo shippers have officially been commercialized..

We shipped a modest amount and so this product and service has been launched but we are just imagine quite focused on building a really solid pipeline..

There are some out there, does that mean that any further design work on the units have concluded, and it’s locked in?.

I would say that the design of the evo today is sellable but there are, obviously, as you can imagine a number of improvements that we’re always thinking about. But what we have today is sellable and you can imagine a second generation device with some modest design improvement coming at some point..

And we probably then will also hear and see some software updates as well?.

You can imagine that will be a continuous process. If you’re in cloud computing, there is no way you can’t do that..

And would you expect to some of the early customers that are using the product, or already using your products, would that be the first course that you’re going after?.

Definitely. Our focus is on our current regen med customers for sure; we have relationships; they trust us; we’ve helped them optimize yield. And they’re already tuned to bio-preservation and really the criticality of yield and making sure that cells arrive alive.

So this is a natural that come back to them and introduce topic of improved cold chain and to move them away from beer coolers. And the analogy that I would ask you to think about is the beer cooler is the home brew on the media side. We’ve already proven we can affect the paradigm shift on the media side.

And the good news is at least in regen med there is a listening for innovations and improvements. So definitely want to move those customers away from shipping in beer coolers to a much better container..

Daphne, a couple of questions on the OpEx for the quarter, your commentary about one of the charges for the launch being one-time for Q3 and you expect some for Q4.

Is that under SG&A, can you review that for me?.

No, that’s in sales and marketing. We expected Q3 to be a little bit higher because we are expecting to have one-time bump related to the biologistics launch and the marketing around that. And we further split that and spread it out over Q3 and Q4. So we expect Q4 to be a little bit higher than we had originally anticipated..

And totals for that, is that like on the order of $200,000 or $300,000 in total between two quarters?.

We haven’t given exact guidance on that, but it’s in that neighbourhood..

Thank you. Our next question comes from the line of Devlin Mehalov of New Protocol Securities [ph]. Your line is now open..

First of all congratulations on a great quarter, the gross margins are -- remind me of the old days when this was totally HypoThermosol CryStor Company with the 60% plus gross margins. So I am very impressed that you’re able to achieve them once again at this stage of higher volumes.

And I wanted to call on you to going forward consider breaking down revenues as follow; maybe bunch of the legacy products, the ones that were just up here for the last few years under well bio-preservation media; and then the newly launched products probably in the separate line; and finally the evo shipper revenues in the third line.

The reason for that is very simple. I think you can clearly unlock shareholder value by showing the investment community how profitable the legacy business is, and it’s on a legacy because it’s been in existence for a long time, it’s growing good, very-very fast.

And then I would like to see the newly launched products, even though you mentioned in the past the niche, and this, and that, in the same breadth you also say that they address $2 million annually for the blood storage product.

And finally, there is a competitor out there in the shipper space that has shown some gross margins in the neighbourhood of 40% to 60% depending on their revenue levels.

And I would like to compare our shipper gross margins and revenues with theirs that company mind you, is valued at approximately the size of BioLife with less revenues and I would say poor operating results.

So if you start breaking these things up and commenting one by one I think that you will allow shareholder value that is not being appreciated right now.

What would you say?.

Well, first, I’d say thanks. It’s great feedback. We’ll take it under advice for sure and I think we were longing for the day when we’ve got traction in evo and biologistics, we can talk about that and it give some metrics in that, we’re not there yet.

But no doubt it’s a big enough initiative here at BioLife where we believe it will be meaningful to talk about that. So, that part I think is easier for us to project forward at some point we’ll start to do that. On the legacy products it’s not an reasonable request, we could be even more granular on segments.

But the caveat in that and this can get lost in the folks if you’re not in the region just like we are. There is a lot of seasonality to ordering.

And so the last we want to do is give too much granularity and then if the caveats are lost about seasonality or customer ordering patterns, then we get no benefit from that, in fact we get beat up for that. But all good feedback we’ll definitely take it under advisement..

Thank you [Operator Instructions]. And our next question comes from the line of Peter Brophy of Platte River Capital. Your line is now open..

A step back question in terms of, as hopefully some of your customers progress into IND filings, would it be your understanding that if they use your media storage that would get included in an FDA filing in that IND filings.

And furthermore, if a customer is also using the biologistic shipping service, would that also be something that would be included in a complete filing?.

Peter, great question to me, the answer is yes to both. You bet. Because the IND and then the subsequent BLA has the document all the reagents, whether they’re ancillary or recipient and also the validation profile for the distribution and the transportation of not only the source material but the final manufactured product from factory to the clinic.

So sure, the answer is yes to both..

And then just follow on what I’ve been reading about the CAR-T companies anyway adopting the factory model, centralized factory model. And that’s already begun.

And I guess the two that I’ve read about are tight for sure and assuming as you know it’s following soon, do you see this model being adopted across a lot of these immunology platforms, including in the some of the other T-cell, and I realized this is early in that game.

So there is the question with the factory model as a future model for across a wide range of these companies, is that a likely thing in your view?.

Peter, really a stood question in that, that question’s very nature is driving as you clearly know so much research and speculation on which companies are going to win, whether they are otologist therapies or allogeneic, who has the lowest cost of goods, so on and so forth.

But I think it’s a little too early to project what the predominant manufacturing model will be. I think it’s still up in the air.

But no doubt the last mile quality and distribution plays a big part in how many factories folks have to set up, what the shelf life of the product is, and then really another consideration is access to the source material.

If it’s not biologics product then you know where is the source material and the patient getting to a collection centre or getting to some facility where they can have the source material move from in the allogeneic side, it’s a little bit easier for sure. But nevertheless, I think the jury is out.

But it’s a hot topic at all of the conferences that we go to, there is always a session on single factory versus multiple factory and whether these are going to be produced locally in clinical centres or whether it’s going to be a factory that ships to the clinical centres.

So I think that you almost have to look at the companies on a one by one basis and figure out sensitivities of their cell types and the scarcity or the how sensitive their source material might be to try to get a handle on what might be the best mode for them to go, going forward.

But in the early days here, there are clinical centres manufacturing and then there are the CMOs doing a lot of the early work, whether the CMO staged in the middle there over the long term, post really approval, it’s hard to say.

You can imagine some companies wanted to take that back and if they’re successful building their own production facilities so they can have control and all those considerations..

Thank you. And at this time, I am showing no further questions in the queue. I would like to turn the call over to management for any closing remarks..

This is Mike again. So I’ll thank you all for joining this call, and we look forward to the next call, and happy holidays. Good evening..

Ladies and gentlemen, thank you for your participation on today’s conference. This concludes our program. You may now disconnect. Everyone have a great day..