Cryoport, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; filed March 13, 2019. This is an annual report, not a standalone quarterly filing. The company provides temperature-controlled logistics and related services to biopharmaceutical, reproductive medicine, and animal health markets. It reports one operating segment.
Financial results and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $19.63 million | $11.95 million |
| Gross profit / gross margin | $10.24 million / 52.2% | $5.97 million / 49.9% |
| Operating loss | $8.64 million | $7.89 million |
| Net loss | $9.56 million | $7.90 million |
| Basic and diluted loss per share | $0.34 | $0.34 |
| Cash used in operating activities | $3.35 million | $3.58 million |
- Revenue rose 64.2%. Biopharmaceutical revenue grew 80.8% to $16.48 million, reproductive medicine revenue rose 27.3% to $2.17 million, and animal health revenue declined 14.0% to $0.98 million.
- Gross margin improved by about 2.3 percentage points, reflecting higher volume and pricing adjustments, partly offset by start-up costs at new logistics centers.
- Operating expenses increased to $18.88 million from $13.86 million, including higher general and administrative, sales and marketing, and engineering and development costs. The 2018 net loss included $0.90 million of warrant inducement and repricing expense.
- At year-end, cash and cash equivalents were $37.33 million and short-term investments were $9.93 million; working capital was $48.71 million. Total assets were $56.62 million and stockholders’ equity was $38.55 million.
- Cash from financing was $38.53 million, including $15.0 million from convertible debt, net proceeds from equity issuances and warrant exercises. Investing activities used $12.88 million, including $9.92 million for short-term investments.
- The company had a $15 million senior unsecured convertible note, carried at $14.71 million net of discount, due December 14, 2023. It bears interest at the greater of three-month LIBOR or 2%, plus a 6% margin, and is convertible at an initial $13.11 per share, subject to adjustments.
- FY 2018 fourth-quarter revenue was $5.69 million, gross profit $2.82 million, operating loss $2.22 million, and net loss $2.26 million.
Changes, outlook, risks, and unusual items
- Growth was supported by more biopharmaceutical customers and clinical trials, plus commercial shipments for Novartis’s Kymriah and Kite/Gilead’s Yescarta. The company reported 357 supported trials in the Americas and EMEA at year-end, including 47 Phase III trials.
- New logistics centers in New Jersey and the Netherlands began operating in the third quarter of 2018. Management described continued investment in infrastructure, sales, technology, and service expansion, but provided no specific revenue, earnings, or cash-flow guidance.
- Management said additional capital may be needed before sustained profitability. Risks include continued losses, potential financing needs and dilution, slow customer adoption, reliance on third-party carriers and suppliers, customer concentration, regulatory requirements, product or shipment failures, cybersecurity threats, and competition.
- One customer represented 18.2% of FY 2018 revenue. Two customers accounted for 29.0% and 23.4% of year-end accounts receivable, respectively. The Zoetis agreement was extended through March 2019, and the company said it was discussing a further extension.
- The 2018 convertible note includes financial covenants and redemption provisions; a change of control or specified defaults may trigger redemption. Potential share issuance from options, warrants, and note conversion could dilute stockholders.
- The company adopted Topic 606 revenue recognition in 2018 and said the impact was immaterial. Auditors issued unqualified opinions on the financial statements and internal control; management reported effective internal controls and no material weaknesses.
- Management reported no known legal proceedings expected to have a material adverse effect and no off-balance-sheet arrangements. The company has incurred losses annually and reported an accumulated deficit of $141.0 million.
Investor facts to verify
- Whether rapid biopharmaceutical growth and clinical-trial activity convert into recurring commercial revenue and improved operating performance.
- Cash burn, investment spending, and liquidity needs relative to the company’s path to sustained profitability.
- Convertible-note terms, interest costs, covenant compliance, redemption exposure, and potential dilution from conversion and other equity awards.
- Revenue and receivable concentration, including the status of the Zoetis agreement and the largest customer relationships.
- Whether new logistics-center costs moderate as operations scale, and whether gross-margin gains persist.
- Any developments in carrier or supplier reliability, regulatory obligations, cybersecurity, litigation, or the company’s stated need for future financing.