Cryoport, Inc.CYRXNASDAQ
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Operator: "
Jerrell Shelton: "
Robert Stefanovich: "
Mark W. Sawicki: "
Thomas Heinzen: "
Todd Fromer: " Kanan, Corbin, Schupak & Aronow
Kyle Crews: " UBS Investment Bank, Research Division
David Saxon: " Needham & Company, LLC, Research Division
Puneet Souda: " Leerink Partners LLC, Research Division
Matthew Stanton: " Jefferies LLC, Research Division
Subhalaxmi Nambi: " Guggenheim Securities, LLC, Research Division
David Larsen: " BTIG, LLC, Research Division
Mason Carrico: " Stephens Inc., Research Division
Operator: Good afternoon, and welcome to Cryoport's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this call is being recorded. I will now turn the call over to your host, Todd Fromer from KCSA Strategic Communications. Please go ahead.
Todd Fromer: Thank you, operator. Before we begin today, I would like to remind everyone that this conference call contains certain forward-looking statements. All statements that address our operating performance, events or developments that we expect or anticipate occurring in the future are forward-looking statements. These forward-looking statements are based on management's beliefs and assumptions and not on information currently available to our management team. Our management team believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, Risk Factors and elsewhere in our annual report on Form 10-K to be filed with the Securities and Exchange Commission and those described from time to time in the other reports which we file with the Securities and Exchange Commission. As a reminder, Cryoport has uploaded their third quarter 2025 in review document to the main page of the Cryoport Inc. website. This document provides a review of Cryoport's financial and operational performance and a general business outlook. Before I turn the call over to Jerry, please note that because of the strategic partnership that has been established with DHL Group and related sale of CRYOPDP to DHL, CRYOPDP's financials, which were previously a part of Cryoport's Life Sciences Services reportable segment are now presented as discontinued operations. Cryoport previously provided quarterly historical information on this basis for fiscal year 2024 and our first quarter 2025 in review document, which remains available on the Cryoport, Inc. website. This information is intended to support the financial modeling efforts of those needing this information. Please note that unless otherwise indicated, all revenue figures discussed today will refer to continuing operations. This includes Cryoport's fiscal year 2025 revenue guidance. It is now my pleasure to turn the call over to Mr. Jerrell Shelton, Chief Executive Officer of Cryoport. Jerry, the floor is yours.
Jerrell Shelton: Thank you, Todd, and good afternoon, everyone. With us this afternoon is our Chief Financial Officer, Robert Stefanovich; our Chief Scientific Officer, Dr. Mark Sawicki; and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. During the third quarter, we continued our strong momentum, delivering double-digit growth in both our Life Sciences Services and Life Sciences Product segments. Notably, revenue from our support of commercial cell and gene therapy grew 36% year-over-year to $8.3 million, driven by the continuing global adaptation of these life-saving therapies. It is imperative that the growth of the -- it is impressive rather it is impressive that the growth of the regenerative therapies market, which we believe is still in very early stage of development, has remained resilient despite ongoing challenging macroeconomic, political and geopolitical backdrops. Within Life Sciences, revenue increased 16% year-over-year and represented 55% of our total revenue from continuing operations for the quarter. This included a 21% increase in the BioStorage - Bioservices revenue, underscoring the persistent demand for our integrated platform. Driving this growth is the rising prevalence of chronic and rare diseases, prevalence of chronic and rare diseases, coupled with continued advancements in cell and gene therapies targeting solid tumors and autoimmune diseases. We also are encouraged by signs of stability in our life sciences product market, where revenue grew 15% year-over-year, driven by improved demand for our market-leading cryogenic systems. In the third quarter, we expanded our product portfolio with the launch of MVE Biological Solutions next-generation SC4/2V and SC4/3V vapor shippers. These cryogenic systems models have been redesigned, utilizing innovative technologies to offer customers added protection during extended or challenging shipments and include several key advancements designed to enhance the performance and reliability. MVE's newly designed condition monitoring solutions for these doors are integrated with each unit, combining our trusted cryogenic systems with advanced real-time condition monitoring technology supplied by Tacromed, another Cryoport company. These innovations reflect MVE's unwavering commitment to support the life sciences with advanced intelligent connected assets to safeguard vital biological materials. Beyond our core systems and services, we are progressing on a number of other growth initiatives designed to better serve our clients and diversify our revenue streams. These initiatives include the onboarding of our first clients for IntegriCell, our cryopreservation services located in Liege, Belgium and Houston, Texas. These cryopreservation services are designed to address a critical aspect in optimizing the supply chain for the development and commercialization of cell-based therapies through high-quality standardized cryopreserved starting materials. We're excited by IntegriCell's recent progress as it moves forward to become a significant revenue and profit generator. Additionally, in late October, we opened the logistics portion of Cryoport Systems' new state-of-the-art global supply chain center at the Charles de Gaulle Airport in Paris, France. This 55,000 square foot facility provides us with increased ability to serve our clients in the European and global markets. It is designed to support complex life sciences life sciences supply chain needs, including biologistics, bioservices and future cryopreservation services. An official grand opening is scheduled -- is to celebrate the launch of this facility will be held on November 20 with Bioservices opening in mid-2026. In addition, we are also advancing toward opening a global supply chain center in Santa Ana, California, which is expected to come online in the second half of 2026. This facility will consolidate 3 existing locations and feature next-generation technology to optimize operations and client support. Complementing all of these activities, we have begun implementing our recently established strategic partnership with DHL Group. Due to the -- to DHL size, this strategic relationship will take some time. And when completed, it will enhance our positioning in the APAC and EMEA regions and reshape our competitive profile within the industry by leveraging DHL's global scale and capabilities. Regenerative medicine has been advancing steadily, largely driven by the expanding pipeline of regenerative therapeutics entering clinical development and commercialization. Despite any short-term headwinds, cell and gene therapies have continued to enter and move through the clinical pipeline, which should ultimately result in growing revenue from commercially supported therapies. Cryoport's temperature control supply chain solutions are supporting the largest portfolio of clinical and commercial gene therapies in the world with a record total of 745 global clinical trials and 83 of these in Phase III, representing approximately 70% of the cell and gene therapy clinical trials. In the third quarter, 4 BLA MAA filings occurred and 3 more were filed in October. For the remainder of 2025, we anticipate up to an additional 7 application filings, 1 new therapy approval and 2 additional approvals for label or geographic expansions or moves to earlier lines of treatment. Of course, the timing of these filings may be impacted by the current government shutdown of the FDA in the United States. While global trade conditions remain dynamic, Cryoport did not experience any new material impact from tariffs in the third quarter. Furthermore, we have, of course, taken steps to diversify our supply chain to mitigate potential impacts that could come as a result of tariffs, impacts not covered by these mitigations are covered by surcharges. With the strong momentum we have achieved year-to-date and our progress across the board, we are updating our full-year 2025 outlook for total revenue from continuing operations to the range of $170 million to $174 million. Our team is dedicated to building long-term value for our shareholders. Cryoport is maintaining and growing its competitive differentiators as the only pure-play end-to-end temperature-controlled supply chain platform that supports the largest portfolio of clinical and commercial cell and gene therapies globally. This concludes my remarks. So I'll now ask the operator to open the lines for your questions.
Operator: [Operator Instructions] Your first question comes from the line of Kyle Crews from UBS.
Kyle Crews: Congratulations on the quarter. Maybe just to start, the high end of the guidance implies a sequential decline in revenues. At the same time, you're seeing positive momentum across the entire business. You have an increased number of commercial therapies supported higher number of clinical trials, and you've launched new products within MDE. Can you help us reconcile that with the implied sequential decline in guidance? And then for a second question, can you discuss if the recent release of the triple FDA draft guidance is that support making clinical trials easier has resulted in an uptick in clinical trial interest at your company?
Jerrell Shelton: Well, you had a lot of questions in there. And I think Robert will start answering your financial questions, and Mark will address your FDA question.
Robert Stefanovich: Yes. Look, you're certainly right in terms of how you phrased the question. Given all the macro uncertainties right now, we think it's a responsible guide. It balances the momentum that we are seeing versus the macro conditions, such as the current government shutdown and the ever-changing tariff landscape. I think we've managed it to date very well. And we're obviously, of course, focused on profitable and disciplined growth. If you look at the revenue guidance and the increase in revenue guidance represents about 8% to 11% revenue growth over the prior year from continuing operations. But as you said, at the same time, we continue to be very bullish on our market-leading position. We feel that our long-term growth rate will be close to that of the cell and gene therapy market, as you can see in our Q3 performance, and as more and more commercial therapies come to market. In fact, if you look at our commercial revenue right now, it's already a fairly significant portion of our total revenue. I think it's roughly about 18%, 19% of total revenue. So we're trying to balance those 2 parts. One, the cautious view on the macro uncertainties, but at the same time, we are very bullish in terms of the outlook and bullish in terms of finishing the year strongly.
Jerrell Shelton: Mark, do you want to answer the FDA portion?
Mark W. Sawicki: Sure. Assuming you're referring to the REMS requirement, is that correct?
Kyle Crews: No. They recently released 3 new draft guidances related to clinical trials. Yes.
Mark W. Sawicki: Yes. So obviously, yes, some of the draft guidance announcements that you're talking of that came out recently, some of them are targeting some generic small molecule programs. Those don't have a significant bearing on our market. Those that are aimed at the orphan markets and those that are focused on driving biologics approvals much more quickly, are impactful to us and our clients, and we do believe that those will help drive more activity in the future from a BLA standpoint. Just turning to REMS because I think it's important to understand that one, too. So the REMS requirement, which has also one that's been announced, will have an even more impactful positive impact for us as it will drive the implementation and utilization of cell therapies into the community care setting. And I think if you look at both BMS and J&J's CARVYKTI revenue in Q3, both of them had very strong growth. And in fact, CARVYKTI folks even came out and said almost 80% of the patie.
Kyle Crews: Great. And then maybe just one last one. Can you discuss whether you're seeing increasingly different trends within gene therapy and cell therapy within the broader cell and gene therapy market?
Mark W. Sawicki: Yes. I mean, obviously, there's a little bit of tentativeness around financing in the gene therapy space because of some of the challenges that have been seen, but that doesn't impact the long-term opportunity. And so there are still a lot of new start-ups in the gene therapy space. There's a lot of activity and investment that's going into the gene therapy space. But obviously, the lion's share of funding at this point is still going into the cell therapy side of things. And obviously, with the number of potential approvals moving forward later this year. We've got another potential, as Jerry mentioned in his introductory comments, and potentially another 7 filings this year, and potentially even another 1 new and 2 supplemental approvals this year. So there's very strong activity in the cell therapy space as well.
Thomas Heinzen: Just to round that off, Mark, just would point out in our review piece, we broke down by percentages the clinical trial portfolio that we have. And the number of gene therapies in there is a single-digit percentage, and the number of vaccines is even smaller. It's like 3%. So we're much more exposed to the cell therapy side of the world.
Operator: Your next question comes from the line of David Saxon from Needham.
David Saxon: Congrats on another strong quarter here. Maybe, Robert, I'll start with you. I didn't hear anything on EBITDA guidance. I think the expectation is to reach profitability on a quarterly basis sometime this year. So is that still the expectation? And then how should we think about profitability as it relates to 2026? Could you see that on a full-year basis? Or are there any meaningful investments we should be aware of?
Robert Stefanovich: Yes. No, thank you. As you can see from our '25 performance to date, the adjusted EBITDA, we improved it by over $10 million for the first 9 months, bringing our adjusted EBITDA loss in Q3 to $600,000. So we are getting very, very close to getting and crossing the line to positive adjusted EBITDA. From a cash flow perspective, cash flow from operating activities was positive for the quarter. We had about $2.2 million positive cash flow from operating activities. And we think we can get to positive EBITDA. We're very close to it as early as year-end. That was our target. At the same time, I do want to highlight, we're obviously trying to balance some of the growth initiatives that we have with driving towards solid positive EBITDA. There are some specific client-driven growth initiatives that we have, including the global supply chain center that we're opening in Paris this month, as well as the IntegriCell platform that we started out a while back. And those, in some cases, require some upfront investments. So that's really balancing those 2 parts, but we're certainly making very strong progress towards that goal. And overall, we like our momentum. We like the positioning that we're in, and our teams are working towards executing on that goal. In terms of profitability itself and crossing the line of profitability, we have not given guidance. Our main focus is really on executing on our initiatives, driving positive EBITDA, and obviously creating that pathway to profitability.
Jerrell Shelton: David, you've heard us talk about the pathway to profitability before, and we certainly are on that pathway to profitability. And as Robert points out, we're moving toward positive adjusted EBITDA. And so we think possibly we can get there in the fourth quarter and certainly early next year. And that's a surrogate for cash flow. But remember, we have a number of facilities, which I went over in my opening comments. I just mentioned a couple of examples, a number of capital investments taking place. We know that those are the right capital investments. We vetted them thoroughly. We know that they're the right thing to do for the future. But as we're building those out in today's accounting, it does affect your income statement. So our pathway to profitability includes all the things that Robert said, plus building out those facilities and then starting to experience the operating leverage that comes with getting those facilities up and running and utilized.
David Saxon: Jerry, maybe my second one is for you. Just on product, that growth really improved versus kind of the first half. So maybe talk about what's driving that strength? How much of that is market versus some of those new products you called out, maybe driving some mix benefit? And then in terms of the backlog, I guess, can you talk about that at least qualitatively? And then what level of visibility does that give you into the product growth outlook as we head into 2026?
Jerrell Shelton: David, we talked about backlog a lot during the COVID period because we had an extraordinary period. But we don't talk about backlog now as much because we are on more normal -- we're in a more normal market, which is about a 6- to 8-week lead time. It's no longer 6 months or a year lead time. It's back to the normal, which is about 6 weeks lead time. So we do monitor our sales trends. We do monitor our order intake, and that order intake does give us indication that the market is beginning to stabilize. And of course, government shutdown hasn't helped us there any, but it still continues to go on. It hasn't helped us because it does slow down the government sales that are associated. But so we're doing well in terms of the industry and the stabilization. There was no impact on the new things that I talked about in my comments and opening up. No revenue coming in from that. It wasn't time. It does take time for these things to get out. The 3 -- the 2 doors that were developed with the integrated condition monitoring at MVE are focused on the animal health business. And so that's a seasonal business, and there will be an uptake there. But we have a number of things going on at MVE. Does that answer your question, David? Or is there other parts to it?
David Saxon: That was super helpful. I guess maybe if I could rephrase it, like how -- the market has been stable year-to-date. I guess as we think about our models for 2026, like do you -- is making the assumption that, that continues a fair assumption? And then with, I guess, those product launches in the animal health space, maybe some increased demand across the other end markets, like maybe how should we frame or how would you frame product growth potential for 2026?
Jerrell Shelton: I would look at it with stability and use a very high single-digit growth rate.
Operator: Your next question comes from the line of Puneet Souda from Leerink Partners.
Puneet Souda: So maybe first one on some of the cell therapy exits that we have seen. I mean you're delivering relatively strong growth. Some of it is comps, but some of it is just overall market stability, which you talked about. But just trying to understand if you could contrast with what we're seeing, Takeda exiting its allogeneic programs, Galapagos is winding down their programs. Novo is divesting its cell therapy assets. Are you seeing any downstream impact from those exits on your pipeline or the service demand overall? And then within that, as Jerry said, high single-digit growth -- is that still something you -- I mean, is that you're contemplating into 2026 and '27, just given sort of these exits? And maybe just provide us any context for backfilling some of these programs that might have been lost.
Jerrell Shelton: Yes, Puneet, we're honored that you're on the call because we thought you might miss it because of conflicts. But let me start, and then Mark will add to what I have to say. First of all, the 9%, I said high single digits, so you said 9%, that's fine. But that supplies to MVE product segment and you mix product and services. And so in the Service segment, where you have Galapagos, you've cited and some of the other activity that's happened, that's -- that's normal to me. You should probably know this, but it's normal to have puts and takes. And people make their investments and other -- and sometimes they can support them financially going forward. Sometimes they can't. Sometimes they're rationalizing what they're doing, and we have no insight on that. What we do know is we are continuing to grow. We continue to see robustness. We have an increase in the clinical trials that we support with 83 being in Phase III. I think it was 83 in Phase III. And we're doing well, and we see a continued buoyancy in the market. This science is not going to stop. It's going to change the way medicine is practiced around the world. It just takes time. And it has had some headwinds, but it's buoyant, it's strong, and we're growing, and we intend to continue to. Do you want to add to that?
Mark W. Sawicki: I think you answered it pretty well. The only thing I would just add is Jerry is right. I mean, I think some of the changes that you mentioned are really strategic portfolio decisions. I don't think they're market-driven decisions. There's also other companies that are putting a lot more money into and expanding their programs from a top 5 pharma standpoint. So we don't have a level of concern around that. As Jerry had mentioned, very strong pipeline activity, very strong activity from a regulatory standpoint. As we had mentioned, upwards of another 7 filings this year, upwards of potentially another 25 filings next year. So there's a lot of activity in the space, which will continue to expand the number of commercialized therapies and the revenue associated with those therapies as the market matures.
Thomas Heinzen: [Indiscernible]. Could I thing in there just to pile on?
Mark W. Sawicki: Yes, Tom, please.
Thomas Heinzen: Just to point out, September funding in biopharma was quite strong, and October was the best month of the year so far. We had over 20 IPOs and follow-on offerings of greater than $100 million in October alone. So some of the programs you mentioned are falling off, but certainly other ones are coming in up and taking the place.
Puneet Souda: On the government shutdown piece and the implied 4Q guide, I'm just trying to understand how should we think about the segments within the guide for the fourth quarter, Bioogistics versus BioStorage, Bioservices versus the MVE Life Sciences product line. Maybe just help us understand -- how should we think about modeling each of those, if you could provide some segment commentary? And just maybe just if you could pinpoint in the government shutdown exactly, I mean, what are customers telling you? What are some of the worries here if this shutdown extends into December?
Jerrell Shelton: On the first part of your question, Puneet, it depends on what you think about the government shutdown. Frankly, the government shutdown is temporary. Right now, you can't make a filing, you can't pay your fees for a filing. But that's going to end soon. It can't go on forever, and there's an election coming up, which I think will motivate a political end to the shutdown. And then we'll see some things open up. We'll see things start to move through, and we'll catch up. So it's not going to last forever. The government shutdown is. And again, under the backdrop we've had, we've shown substantial growth in spite of any headwinds there. Mark, do you have anything to add to that?
Mark W. Sawicki: Yes, I think you answered it well. I mean, yes, from a service standpoint, we haven't seen any impact other than the delay in filing activity, which they just can't do because they can't pay -- as Jerry mentioned, their filing their application fees. That's the only impact that we've seen is there may be a short-term delay in some of the filing activity, but the service activity still remains very robust. And then just looking at Q4 without going into too much detail, obviously, we expect year-over-year increase on the services side. On the product side, it largely depends on timing, especially if you look at some of the larger freezer orders or even some of the potential delays in government shutdown, that they could just have an impact on timing of whether those are going to come in, in Q4 or be shifted in Q1.
Jerrell Shelton: That's because they're capital expenditures and somebody has to sign off on them. Does that help you?
Puneet Souda: Yes.
Operator: Your next question comes from the line of Matt Stanton from Jefferies.
Matthew Stanton: Maybe one for Mark. Just on the commercial trends, you're tracking up over 30% here year-to-date. It sounds like you saw some approvals here early in the quarter to continue more filings and then I think next year, '25, which is a big number. Can you just talk about the durability of the growth in terms of what you're seeing here from customers? And as we think about that kind of 30% plus, how you feel about that on the commercial side into '26? And I mean, is there opportunity for that to accelerate even further if some of these things kick in on REMS or some of these filings kick in, and to your point earlier, start to get signed off and get out there? But just talk about the kind of growth algorithm on the commercial side.
Mark W. Sawicki: Yes. I think as you focus, you're going to focus on two things. One is the existing therapies as they mature, they move to earlier line and they go through global expansion. And as we had mentioned earlier, I mean, both BMS and Janssen and J&J have come out with very positive comments around growth and their data -- their financial data supports that. [ Janssen ] said their goal is 10,000 doses by year-end and 20,000 patients by the end of 2027, which is a substantial increase. And then you have the newer therapies as they launch, they're also expecting significant ramps. Vertex has come out and said they expect to see CASGEVY start to ramp more significantly. And then we have other data on some of these earlier launches, so which most of it has come out at or ahead of guidance. So if you take those in addition to the new filing activity, we think it will remain robust in '26 and beyond.
Matthew Stanton: Great. And then, Robert, maybe just to go back and know a few times just on the 4Q ramp. I mean, I know last quarter, you guys were kind of saying 4Q probably higher than 3Q, part of that seasonality. Obviously, 3Q came in better than we expected. Is it fair to say that the sequential quarter-over-quarter implied 4Q, I mean, the government shutdown, maybe some of the timing you talked about, I mean, is that kind of a low single-digit million impact tied to those and maybe erring on the side of conservatism? Just kind of thinking about three months ago, 4Q higher than 3Q and now we have kind of the opposite playing out. And maybe just confirm there was nothing kind of that fell in 3Q that you had previously expected to fall in 4Q.
Robert Stefanovich: No, no, there's not. But you already really framed it. Yes. I think it's really balancing that and looking at our guidance. Certainly, we have upside potential, no question. But given some of the uncertainties, we felt that that guidance kind of reflects where we stand right now to acknowledge some of those other aspects that we discussed earlier.
Operator: Your next question comes from the line of Subbu Nambi from Guggenheim.
Subhalaxmi Nambi: You recently announced the Cryoport Systems received ISO certification. Could you speak to what this means in terms of your customer win rate or any competitive dynamics? How meaningful is this?
Jerrell Shelton: I want Mark to speak to that. But in addition to that ISO, we've also won an award or two and certainly one that we're proud of, and we did help on that ISO. So Mark, take it away.
Mark W. Sawicki: Yes. So ISO 21973, which is really around the governing of handling of cell therapy-based materials is what we received that certification in. We are the first entity that has received a formal ISO certification. Others have claimed that they have compliant with it, but we actually have received a certification from the ISO governing body related to that. Yes, on a global basis. So what it really does is it reinforces us as the best-in-class and the gold standard as it relates to the management of these therapies on a global basis and reinforces, obviously, the quality paradigm that we have. And I think as you look at our growth as it relates to commercial revenue as well as our clinical trial adds, the market continues to respond very favorably to that as they continue to put a larger share of the overall clinical trial count as well as the commercial activity into our portfolio. So we believe that will be a continued positive influence on decision-making by our clients and sponsors.
Jerrell Shelton: You might mention that award that we won also.
Mark W. Sawicki: Yes, we actually won two awards, CPHI award, which is one of the larger chemical industry awards for excellence of supply -- temperature control supply chain solutions. And then we also won another one from a biotech agency, which also reinforces that in the quarter. So I think the markets are absolutely responding to our platform is best-in-class.
Subhalaxmi Nambi: That's great. Any updates you can share on how you're progressing with your China first strategy? What milestones can we expect as we look to growth in that region for you guys?
Jerrell Shelton: We have not assumed any growth in China for the -- will not be assuming any growth in 2026. There's no change right now. We do have some efforts underway. It does take time to implement strategies of that nature. And we hope by 2027, it will be -- certainly one thing, we cannot ignore China. It is an advanced country. It has a very big population, and it has resources and it can move very quickly. So we will continue to work on our China strategies, but we don't have anything we can report right now.
Subhalaxmi Nambi: Perfect. And last one for me. Is there a potential for a catch-up heading into 2026, just given the environment is improving, something that you touched on previously?
Jerrell Shelton: You're talking about a catch-up in terms of--- What are you talking about, Subbu, in terms of catch-up?
Subhalaxmi Nambi: Catch-up as in ordering. Just do you anticipate there could be some sort of catch-up orders next year?
Thomas Heinzen: I think she's referring to the product side, guys.
Robert Stefanovich: Yes. When you talk about the products, I think what we said is it's really stabilizing. I don't think we can speak of that at this point in time. And in general, conceptually, obviously, more and more material is being developed that requires cryogenic storage and MVE being the largest global provider of storage and cryogenic systems, certainly, we will be the first beneficiary of that. But at this point, it's just stabilization of the market that we can see.
Operator: Your next question comes from the line of David Larsen from BTIG.
David Larsen: Congratulations on another very good quarter. It looks like the number of clinical trials, the growth rate year-over-year was the highest it's been in like 2.5 years. And just any thoughts on The Big Beautiful Bill Act, reductions in Medicaid enrollment, reductions in exchange enrollment, maybe as high as 10% or 30%. Does that matter or not? Any thoughts on payer mix? Are most people getting cell and gene therapies? Are they covered by commercial plans, not Medicaid and exchanges? Just any thoughts there would be helpful.
Mark W. Sawicki: Yes. I personally don't think it's much impact at all. The vast majority of therapies, by understanding, are not being covered by public funds. They traditionally are typically private plans that are reimbursement at this point.
David Larsen: Okay. And then are there -- do you have any concerns around drug pricing like with price caps due to the Inflation Reduction Act or rebate flow limits on price increases? Has that entered into any conversations at all or not?
Robert Stefanovich: No, cell and gene therapies are exempt from all of that, Dave.
Mark W. Sawicki: Yes. I was going to say the same thing. As said, yes, I mean, the White House has actually come out in support of cell and gene and their interest in continuing to support it in an aggressive manner. And there is -- they are exempt from some of those pricing constraints that the White House is currently working through.
Robert Stefanovich: They're also not impacted by any tariff talk either.
David Larsen: Okay. Great. So minimal regulatory risk heading into '26. Fantastic. And then in quarters past, you talked about the growth in number of clients at these bio storage facilities, I think, in New Jersey and also like allogeneic storage. Any color there in terms of like capacity or number of client growth?
Mark W. Sawicki: Yes. I mean we're still continuing to onboard a significant number of clients at those sites, both existing and new clients. And so that rate continues to be very robust as evidenced by the sales data that we put forth publicly. So we anticipate continued growth in the Bioservices area into '26 based on that.
Jerrell Shelton: By the way, David, this is not a singular thing. It's not a singular strand. I mean our -- we built these on a strategic basis. We built them to support our clients and to create more of a one-stop shop and because clients actually prefer doing business with less vendors and especially one that they can trust. So it's kicking in, and our clients are beginning to take hold of our BioStorage Bioservices operations within Cryoport Systems.
Mark W. Sawicki: Yes. We're averaging almost 2 audits a week at this point. So that's obviously a significant volume of new workflow that's coming into the facility.
Jerrell Shelton: So you're witness a strategy play out right now.
David Larsen: Great. One more quick one. IntegriCell, I get questions on that all the time. Just any more color there would be helpful. It sounds like you're building a new facility. Is that going to support global efforts for . IntegriCell? And do you have revenue coming in for that business yet or not? Just any more color would be helpful.
Jerrell Shelton: Well, let me start, and Mark can give you more detail. But IntegriCell is another strategic endeavor, and we do have a network in mind, but we are carefully going into the development of IntegriCell. As Mark said earlier, we have revenue coming in at both locations. But I want to see those locations closer to cash flow to positive cash flow before we add other operations. We do have plans for other operations. They will be added. The network will work. All the information that we've gotten so far is very encouraging. And now we're on the uptick by getting customers, clients and revenue coming through those 2 facilities. And I'll just turn it to Mark after that.
Mark W. Sawicki: Yes, Jerry, as Jerry -- what Jerry said is exactly right. We opened those facilities at the end of Q3 last year. And the tech transfer process takes time because it's part of the production process. So there's regulatory activity that needs to occur for adoption. But we have completed our first tech transfers from both biotech and top 10 pharma, and we have started to generate revenue from both sites, both the site in Belgium as well as the site in Houston, Texas. And our expectation is that it will -- revenue will ramp modestly in '26 with a significant ramp, almost in a hockey stick modality post '26.
Operator: Your next question comes from the line of Mason Carrico from Stephens Inc.
Mason Carrico: Robert, maybe just a quick one on margins. Just as this new facility comes online, can you just walk us through how the start-up costs and the ramp and timing have been factored into your model and just how you expect that to influence margins over the next few quarters?
Robert Stefanovich: It's a very good question. And it's again one of those balancing acts because you're absolutely right. We have new facilities going online. [indiscernible] went online, as Mark mentioned. We have a Global Supply Chain Center in Paris by the Charles de Gaulle Airport going online with the official opening being in in a few weeks from now. At the same time, we are seeing some operating leverage already of the existing facilities, and that allowed us to show gross margins reaching 48% and even higher on the service side in particular. We do typically have start-up costs that we run the SG&A. But then as we open the facilities, you'll see some impact on the margins. So while we see operating leverages in some of the existing facilities that are driving higher margins, you'll have some margin depression by these new facilities coming online and starting to see revenue ramp over time. So that's -- as we start and really '26, '27 is really about that operating leverage, really about driving utilization of the existing footprint -- global footprint that we have that will ultimately drive the gross margins. Our target is 55% gross margins overall and a 30% EBITDA margin. And obviously, there's still some time to go to get to the gross margins, but we'll see that operating leverage kick in later in 2026.
Mason Carrico: Appreciate that. And just touching on those long-term margins. Can you just highlight your thinking in terms of timing around those as well? I know it's been a longer-dated proposition. I just kind of want to get your updated thoughts there.
Robert Stefanovich: Yes. We're not giving guidance on that at this point in time because it's really -- if you look at the cell and gene therapy market, it is still a fairly new market when it comes to actually commercialization of therapies. So we want to see more progression and more therapies come to market. But we're clearly on that pathway, as you can see in terms of the significant improvements to adjusted EBITDA as a first indicator, and we'll certainly drive that further into '26 and '27.
Operator: There are no further questions at this time. Turning over back to Jerrell Shelton, your line.
Jerrell Shelton: Well, thank you very much, and thank you for your questions and our discussions. In closing, in the third quarter, we continued to see strong momentum in our business. This included double-digit revenue growth in both our core business segments. Our Life Sciences Services segment, the key driver of our future growth, grew 16% year-over-year, driven by 21% increase in BioStorage Bioservices revenue and a 36% increase in commercial cell and gene therapy support. We also continue to see further steadiness in our Life Science product business, where revenue grew 15% for the quarter. Cryoport is positioned as the critical temperature-controlled supply chain company supporting the life sciences that derisk the end-to-end delivery of cell and gene therapies worldwide. Thank you for joining us today. We appreciate your continued support and interest in our company and look forward to speaking with you again when we report our fourth quarter and our full year financial results.
Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect.