CYRX - Cryoport: A Strong Player In Cold-Chain Logistics With Solid Growth Prospects

2023-07-04 21:42:13 ET

Summary

• Cryoport, Inc. is well-positioned to benefit from the growth in the cell and gene therapy industry due to its dominant position in the cold-chain logistics market and potential for substantial revenue growth.
• The company's global presence and focus on proximity to manufacturing locations, along with strategic acquisitions, have expanded its market presence and boosted demand for its services.
• I view the stock as a buy and have an end of year price target of $25 on the stock.

Thesis

I maintain a positive view on Cryoport, Inc. ( CYRX ) due to its dominant position in the cold-chain logistics market, extensive range of services, significant potential for substantial revenue growth, and capable management team. As the field of cell and gene therapy experiences an increase in regulatory filings and approvals, CYRX is well-positioned to benefit from the overall growth in the industry. Additionally, CYRX can capitalize on strategic mergers and acquisitions in the cold-chain solutions sector that complement its existing cryogenic offerings. I anticipate the commercialization of more cell and gene therapies to drive accelerated revenue growth for Cryoport. I view the stock as a buy and have a price target of $25, based on a forward EV/sales multiple of 4x applied to the 2024 revenue estimate.

Demand Remains Strong for Products

CYRX's management has emphasized the significant market potential in its cryogenic cold-chain solutions. The MVE Biological Solutions business, a leading manufacturer of cryogenic equipment for life sciences storage and transportation, is experiencing strong demand in its Georgia, New Prague (Minnesota), and Chengdu (China) facilities. To meet the increasing demand, additional shifts have been added to several facilities. China is particularly important for CYRX as the Asia Pacific ((APAC)) region continues to exhibit robust demand. CryoPDP, specializing in customized global cryogenic transport and logistics for sensitive shipments, is also experiencing strong global demand, especially in the APAC region. The acquisitions of F-Airgate in Belgium and CTSA in Australia have further boosted this demand. F-Airgate has enabled CYRX to expand into Belgium's growing biotech corridor following Brexit, while CTSA has enhanced the company's market presence in Australia. The management has highlighted the promising market opportunity for Novartis' Kymriah® therapy, among the eight commercial therapies supported by CYRX in Australia. Rather than focusing solely on care sites, CYRX prioritizes proximity to manufacturing locations. With recent acquisitions, CYRX has expanded its global market presence to encompass 33 facilities across 16 countries.

Growing Market Provides Room for Growth

Investing in Cryoport offers a way to capitalize on the rapid expansion of the cell and gene therapy markets without the risks associated with specific bio-pharmaceutical products or companies. It also allows investors in healthcare technology or healthcare services to gain exposure to this thriving sector. Cryoport specializes in the transportation of ultra-cold and frozen cell and gene therapy products to various healthcare facilities, including hospitals and clinical trial sites. These therapies often require extremely cold temperatures to maintain their effectiveness. As the demand for cell and gene therapy solutions continues to rise, alongside advancements in biotech, the demand for Cryoport's services is expected to grow steadily. The cell and gene therapy market is experiencing significant growth, estimated to grow at a CAGR of 39% during 2022 to 2030. This market has been referred to as the "new frontier" for the pharmaceutical industry, and as it expands, the need for supply chain solutions, such as those provided by Cryoport, will expand as well. With more products entering the market, the demand for temperature-controlled shipping capabilities will continue to rise.

CYRX's Remains Well-Positioned in the Growing Market

Cryoport stands out to me because it is a leading company in the cold-chain logistics sector and is well-positioned to establish its dominance. The company's primary focus on shipping aligns well with the global demand for clinical trials and cell and gene therapies. Having a presence across different regions of the world gives Cryoport a competitive advantage. With locations in the United States, Europe, Asia, and Australia, Cryoport is fully prepared to cater to a global customer base. Manufacturers in this industry prefer working with logistics companies that have physical proximity to patients. Particularly in the case of cell and gene therapy, the timely delivery and careful handling of packages are of utmost importance. Cryoport's extensive network of approximately 38 locations worldwide enables them to provide exceptional services to the life sciences industry. I appreciate the global presence of Cryoport as a logistics company, particularly considering its vital role in handling highly sensitive cell and gene therapy products that can be life-saving for patients.

Valuation

I believe that Cryoport should trade at a slight premium to the sector due to several factors: the high visibility into its revenue growth, the strong demand for cell and gene therapy in the market, and the pipeline of upcoming commercial and new product launches for the business. My end-of-year price target of $25 is based on a forward EV/sales multiple of 4x applied to the 2024 revenue estimate .

Risks

Cryoport faces stringent guidelines for the successful delivery of cryogenic material due to the nature of its shipping solutions. Any flaw in the process could result in the destruction of biologics within shipments, leading to negative impacts on the company's revenues and reputation. Moreover, the competitive nature of the market puts pressure on Cryoport's engineers and designers to quickly develop new products and solutions, which increases the risk of undetected defects. If product recalls or failed shipments occur, Cryoport could face litigation risks, damage to its reputation, and lost revenues. Moreover, operating in the highly regulated life sciences industry, Cryoport encounters challenges when clients decide to switch distribution providers. The transition process involves extensive audits, a review of Cryoport's procedures, and qualification as a reputable vendor, which can often take several months. This extended adoption time for new customers hinders Cryoport's ability to generate revenues quickly.

Conclusion

I remain bullish on CYRX due to its dominant position in cold-chain logistics, comprehensive range of services, significant growth potential, and capable management team. As the field of cell and gene therapy experiences more regulatory filings and approvals, CYRX is well-positioned to benefit from the overall industry growth. Additionally, CYRX can leverage its existing cryogenic offerings by pursuing strategic mergers and acquisitions in the cold-chain solutions space. I view the stock as a buy and have an end-of-year price target of $25 on the stock.

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