Cryoport (CYRX) is running investors down a path that’s getting colder and darker by the second.
The Irvine, California company provides refrigerated shipping containers for the healthcare industry’s vaccines and other biological items. It doesn’t make money doing that … Never has.
The company discloses: “ substantial doubt regarding the Company’s ability to continue as a going concern.”
The company’s viewpoint is here. Meanwhile, TheStreetSweeper lists the current Cryoport issues most likely to ice investment portfolios:
*1. Overdone Ballyhooing
When a small company isn’t busy making money – and Cryoport is losing millions – it’s tempting to brag about how things might be, someday, if only …
Cryoport, its fans and more blatant promoters are promoting what isn’t. And they seem somewhat successful in convincing others that Cryoport will benefit from any biopharma wins. Here’s a recent Twitter sampling:
*2.Taking The Bad
If Cryoport wants to try to align itself with what might someday be advances for drug developers (examples are here : Cryoport provides logistics solution and services for Kite Pharma’s lead clinical program in cancer immunotherapy, here : Cryoport to support ProMab Biotechnologies’ Car-T cell preclinical services and here : $CYRX clients $KITE and $NVS continue to push the envelope…), the company also has to take the bad.
Cryoport had been trying to convince investors that it could potentially supply refrigeration services at a commercial level for Kite Pharma.
But nobody hyped Kite’s May 8th disaster.
A patient died after taking Kite Pharma’s investigational drug. Though Kite’s KTE-C19 had been accepted for FDA review in April, the death may obviously doom both Kite and any associated hoped-for Cryoport benefits.
Cryoport has invested a lot of hope and hype in Kite and/or Novartis getting FDA approval for hematological cancer drugs. But Cryoport stock is way ahead of itself and the regulatory process.
It’s all too iffy as FDA approval is definitely not a given. Even if approval occurs, commercial manufacturing is still a very long, bumpy road. Manufacturing problems aren’t unusual and can plague even bigger companies. Portola’s anticoagulant drug solution looked like it was a shoo-in. But Portola was unpleasantly surprised last year when the FDA issued a CRL or complete response letter. The reason: manufacturing problems and the need for additional data.
Meanwhile, Juno Therapeutics serves as a chilling cautionary note. Last November, Juno voluntarily put a study on hold following two more deaths of patients in leukemia drug trials, bringing the total up to five.
Alongside tragic human consequences, Juno’s stock price plummeted and has not recovered. The former $54 stock now trades around $23.
(Source: Yahoo Finance, TheStreetSweeper)
*3. Ice Princess
Though Cryoport will likely see its own dramatic stock drop, the company may eventually cold-shoulder investors again by selling stock.
Just three months ago, desperate for operating cash, the company sold 5.5 million shares of stock … For far less than what the stock was fetching.
The stock traded for $3.53 to $3.91 per share in late March. But Cryoport (which knew its book value per share was only 32 cents) sold stock for little more than half the going price. Just $2 per share.
Days before the bargain-basement raise, auditors warned the company might not continue operating and likely had only enough operating cash through September.
Still, the lack of self-confidence and dilution on top of the greater than $10 million net loss in nine months stunned the market. The stock helicoptered down by more than 40%.
(Source: Yahoo Finance, CYRX Feb. 1-May 1)
*4. Buying Time, Selling Stock
Though the details were surprising, the raise itself was not. Every few months, Cryoport sells stock, often at a discount:
2016 Stock Sales
*April 2016 – 2.02 million shares sold, warrants’ exercise price reduced to $1.25 per share. ($2.5 million proceeds)
*June 2016 – 841,873 shares sold at 85% of 5-day average ($1 million proceeds)
*October 2016 – 2.47 million shares sold, plus 617,694 supplemental warrants ($3.7 million proceeds)
Cryoport filings state:
“Historically, we have financed our operations primarily through sales of our debt and equity securities.”
So, the company is buying time. With its ~$2 million quarterly cash burn rate, more raises loom at some point if Cryoport hopes to move forward.
But any true forward movement will likely be hampered by competitive issues …
*5. Competitive Disadvantages
Cryoport’s performance in everything from income to cash flow compares poorly with industry peers such as TFI International and ArcBest Corp.
Yet Cryoport investors are paying dearly for these disadvantages … more than 11 times sales. Investors are buying rivals’ stock for less than 1 times sales.
(Source: Yahoo, TheStreetSweeper)
Cryoport management’s effectiveness is terrible:
Management is handing investors a performance that is 96% less effective than all rivals in the container and packaging industry.
*6. A Cold Look: Institutional Interest
Even though the stock is well below the 2005 trading range …
… big institutions give the stock nothing more than a cold stare. Institutional ownership is below 9%.
*7. Executive Pay: Not Frozen In Time
Indeed, along with the overall pathetic performance figures, net losses were about 39.75% worse last year …. Yet company executives are staying warm with an 80% heftier compensation package:
The two officers – the Chief Executive Officer and the Chief Financial Officer – raked in over $4 million.
Investors who’ve taken this cold, dark pathway should be ready to throw Cryoport into one of its sub-zero storage containers. TheStreetSweeper expects a drop of 25% as this stock falls back into a long, deep freeze.
* Important Disclosure: The owners of TheStreetSweeper hold a short position in CYRX and stand to profit on any future declines in the stock price.
* Editor’s Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to firstname.lastname@example.org.