Today, CryoPort released a letter to shareholders (click HERE to read) from Mr. Peter Berry. While I am pleased to see that the Company is communicating with its shareholders, I am just not quite sure what the point of this particular letter was supposed to address.
In case you have not read it, the letter rehashed much of the same verbage from several prior press releases. Mr. Berry stated that the Company has made significant progress inroads with CRO's (Contract Research Organizations) and that the company has over $2 million in cash on hand which will be enough to support the CryoPort Express Shipper rollout, including manufacturing and recycling.
My first reaction to the shareholder letter is that there are probably not going to be many positives in the Q1 financials that are expected out later this week and this is an attempt to soften the blow.
My second reaction is that this is a method to buy time with shareholders. I understand that when dealing with large companies like FedEx or a big medical company there will be delays and this requires patience. I get that and I am remaining patient as I have been for a number of years.
These two reactions both get back to the same point: What is the point of the letter?
We know that the CryoPort Express Shipper has been completed since January 2007 ( Read January 8, 2007 Release).
We know that after receiving over $4M in net funding last fall, CryoPort started producing shippers ( Read Dec 6, 2007 Release).
We know that CryoPort is partnered up with FedEx (NYSE: FDX), (Read Dec 19, 2007 Release) so I think we can feel fairly comfortable that the product is legit.
We have known for a while that pilot programs were underway for pharmatceutical firms as of April 2007 (Read Apr 23, 2007 Release). Additionally, CryoPort started shipping stem cells for Celprogen in December 2007 (Read Dec 20, 2007 Release).
We know they were shipping internationally for Quest Diagnostics (NYSE: DGX) (Read Apr 17, 2008 Release).
We know that CryoPort received an additional $1.0625M in follow-on investment back in June 2008 (Read June 10, 2008 Release).
So where does all of this information leave investors? Well, I have a couple of items that I will be trying to answer in the near term. Since the company has received $5.0625 million in funding over the last 12 months, and according to Mr. Berry there is currently over $2 million on hand, what has been accomplished with the other roughly $3 million that has apparently been used? This company has always run on a pretty tight operational budget, so unless something has changed in the spending patterns, there should be something else that is absorbing a fair amount of cost. That should not be too hard to determine because CryoPort started manufacturing the express shippers approximately 9 months ago (see news link above). I expect to see some of that production begin to show up in the quarterly reports. If they are shipping pilot programs and manufacturing units as described in press releases and their regulatory filings, I would also expect to see some initial revenue figures begining to show up on the financial statements.
I get the impression that some investors want to see "big" results in the upcoming financials. Prior to the shareholder letter, I did not expect to see much. After the shareholder letter, I do not expect to see much. What is most important from my perspective is that the Company is moving in the right direction. If CryoPort has $2 million remaining of the money it raised over the past year as Mr. Berry stated, it would indicate that CryoPort has spent approximately $3 million over the last 10 months, translating into a burn rate of approximately $300k per month. Not to get down to specifics without all of the information, but that would leave about 6-8 months of operating capital remaining at the implied rate. Knowing Peter personally, I feel sure that it is being handled appropriately, but I also believe that the owners of the company (both my clients and others) have a right to know how their money is being spent. Since this has not been easy to determine, it will require a little more effort.
I am not sure as to when the Annual Shareholders Meeting will be scheduled (I would expect early fall), but I would hope that management will be prepared to clearly demonstrate to the owners as to how the company is progessing. I believe that being transparent with your investors is a trademark of all successful companies. I would also hope that by the time the meeting arrives there will be some significant developments that will give everyone a positive outlook.
Closing comments from today's press release: "In closing, I would like to thank all of our shareholders for their continued support and look forward to reporting significant sales events in the not too distant future. - Peter Berry"
At this point it is about measuring the performance and to do that we need actual data and hard numbers. Hopefully we will be getting them soon. The only questions remaining are what is "significant sales" and what is "not too distant future"? As soon as these questions are answered, along with some reasonable transparency to allow investors to properly evaluate the merits of this stock, I believe that the market will begin to recognize the extraordinary value that this company has in its future.
