Q1 2024 Cryoport Inc Earnings Call

Participants

Todd Fromer; IR; KCSA Strategic Communications

Jerrell Shelton; Chairman of the Board, President, Chief Executive Officer; Cryoport Inc

Robert Stefanovich; Chief Financial Officer, Senior Vice President, Chief Administrative Officer; Cryoport Inc

Mark Sawicki; Senior Vice President, Chief Scientific Officer; Cryoport Inc

Matthew Stanton; Analyst; Jefferies Financial Group Inc.

David Larsen; Analyst; BTIG, LLC

Paul Knigh; Analyst; KeyBanc Capital Markets Inc.

Yuan Zhi; Analyst; B. Riley FBR, Inc

David Saxon; Analyst; Needham & Company, LLC

Presentation

Operator

Good afternoon and welcome to Cryoport Fourth Quarter and Full Year 2023 earnings conference call. All participants will will start in a listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. 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, on before I get started with this I just want to correct the record. This is the crowd for first quarter earnings conference call on. Before we get started, I would like everyone I'd like to remind everyone that this conference call contains certain forward-looking statements. All statements that address 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 and 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, and we do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future results 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 are 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 filed with the Securities and Exchange Commission and those described from time to time in other reports which we filed with the Securities and Exchange Commission.

Jerrell Shelton

It is now my pleasure to turn the call over to Mr. Jerry Shelton, Chief Executive Officer of Cryoport JERRY The floor is yours.
Thank you, Don. Good afternoon, ladies and gentlemen. Thank you for joining our first quarter earnings call today. With us this afternoon is our Chief Financial Officer, Robert on the Sofia, which our Chief Scientific Officer, Dr. Mark Sawicki, and our Vice President and Corporate Corporate Development and Investor Relations, Thomas sciences.
As a reminder, we have uploaded our first quarter 2024 and review document to our website that can be found under Investor Relations in the News and Events section. This document provides a review of our financial and operational performance and a general business outlook. If you've not had a chance to read it, I would encourage you to go to our website and download it. I will provide you with a brief update on our business, and then we will take your questions.
For the first quarter 2024, we continued to experience a difficult environment globally. Our quarterly results were disappointing across the board, particularly our life science products. However, as we said, as we said, when we initially provided our annual guidance, we anticipate our total revenue will progressively improve throughout the year and we maintain our full year revenue guidance of $242million to $252 million. I am sure some of you are asking what makes us confident?
Well, there are several things. For example, despite the near-term challenges, we are still quite positive based on the momentum we see we're seeing from our cell and gene therapy clients and from the growth of our BioStorage, both services revenue.
If you look at our results, you'll see that our first quarter commercial therapies grew nine and rose 9%, while BioStorage services revenue also rose with the same amount. Both these services areas should continue to be growth drivers for Cryoport in 2024 and beyond.
We're also encouraged by new client slated in the biopharma market and some positive signs recently in the cryogenic systems market. As I indicated, our Life Science Services revenue growth for the first quarter was softer than anticipated increasing 3% year over year. There is, however, a bright spot as the cell and gene therapy market seems to be gaining some momentum.
Again to date. This three year to date this to date, this year, three new therapies have been approved. Three existing commercial therapies were approved to move to an earlier line of treatment, and two therapies were approved to expand their label or geographic territory. By combining the expected revenue ramps of existing and new commercial therapies, we believe we should the revenue acceleration from our cell and gene therapy clients over the remainder of the year.
Currently, we think an additional 16 global regulatory filings we'll be completed before year end as of March 31of this year, Cryoport supported a total of 675 global clinical trials for a net increase of 23 clinical trials over the same time last year. As of quarter end, 77 of these trials were in Phase three along with 312 of them in Phase two.
As we have said before, our clinical trial portfolio represents a substantial long-term revenue growth opportunity for Cryoport as more therapies advance through the clinical trials toward commercialization.
Our outlook for the rest of the year with commercial therapies looks strong with potentially five additional new therapy approvals and three additional label or geographic expansion.
Turning to our Life Science products. Similar to last quarter, this business revenue was lower than in prior years. This is due to decreased demand for NVE. biological solutions cryogenic systems. This in turn was attributable to a continued slowdown in capital equipment investment that began last year.
Although global in nature as we have reported previously, the most severe pullback in demand continues to be in China. While we expect in the used cryogenic systems sales to be challenged throughout the remainder of this year as biotech funding, government budgets and academic budgets are constrained, we expect to see gradual improvement in demand in the ensuing quarters.
And VE. is a well-managed business, and we want to remind investors that even in this difficult time, it continues to produce free cash flow for our company. And the E is the leading manufacturer of cryogenic systems worldwide and we're confident in the long-term prospects of our products business and when demand normalizes, and we believe it will, we will benefit from our position as the global leader in this space.
In summary and to put it plainly, there is simply no other company with the extensive resources Cryoport has in providing a full array of innovative, reliable end to end supply chain solutions for the life sciences with advanced services products and information systems focused on reducing risk and located in 50 locations in 17 countries. Cryoport is well prepared to support the expansion of Life Sciences and especially the growing cell and gene therapy market based on our clients' forecasts and fueled by industry indicators for cell and gene therapies.
In the Life Sciences, we continue to build out services, products and infrastructure to prepare ourselves to provide comprehensive and dependable supply chain support for these life-saving treatments. However, considering the current macroeconomic challenges and their impact on our financial results, we are implementing a number of initiatives to drive toward positive adjusted EBITDA and cash flow in the near term.
These include improved alignment of our global organization production and our workforce, leveraging lower cost shared services, refining and reprioritizing planned initiatives and delays in capital spending as a result of reprioritization, all of which should positively impact the second half of 2024. We are mindful of our need to maintain a strong balance sheet to support our future growth. And we ended the quarter with $448.5 million of that cash balance, 448,500,000 cash balance.
This concludes my prepared remarks prepared remarks. Now we're going to be happy to take questions from you. Operator, please open the lines for question.

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star on your telephone keypad. And if you wish to cancel your request, please press star two. Your first question comes from Tejas Savant from Morgan Stanley. Your line is now open for Good afternoon, guys.

This is Edmund on pagers. Thank you for the time on. First question, could you guys provide some more color on how things play out and see what a customer stand today in terms of their need to expand their freezer case pack capacity and what the order books look like heading into the second half.

Jerrell Shelton

Okay. So can you just repeat repeat that question again, please?

After this one, Sanjay, this is Admin Re, but the question was on, could you provide some more color on how things played out at NVE. this quarter where the customer stands today in terms of their need to expand their freezer capacity and what the order books look like heading into the second half of '24.

Jerrell Shelton

Okay. That's a good question. And look at the eve of tracks of its orders and talks with the distributors and it's key, it's direct customers on a regular basis. And there's simply been some pullback in funding in government and institutions and business and that that seems to be breaking. We seem to be and we do know that in the last half or the second half of this quarter, we and this year we will have it looks like we have orders lined up for large pharma and for midsized bio repositories. And we think that there's some some government spending that will be on the last half. So we think we'll have a progressive improvement in the E and the M in the second half of the year.
They've got it back in a week.
The whole back initially be China and China. China is, you know, continues to be in recession. And we do not expect China to improve for the remainder of this year and probably into the next next year as there's been a reduction in biotech funding and there's been some breeder programs instituted by the government and all of that's affected our business. However, we do have initiatives to compete within China on a very effective basis for I remind you, though, China only accounts for about 5% of our total revenue at this point.

That's very helpful.
And then on a higher level question on some of the traditional logistics companies such as UPS have recently expressed an interest into expanding into the healthcare vertical.
Now, are there any opportunities for a company like Cryoport to work with those providers or do they represent more of a medium term competitive threat to the business model?

Jerrell Shelton

You know, over the recent time, UPS has become more of a competitor or tried to at least So we work with the integrators on a regular basis. And we have for 12 years since I took over the company, we've had strategic relationships with them, which we've talked about on a frequent basis.
In some cases, we work more closely than in others. Ups has been the most aggressive to their purchase of market, but they don't really pose a tremendous threat to us. We still use them as an integrator and many of our services.

Robert Stefanovich

They also use our equipment sets on a regular basis in conjunction with programs that they're supporting through their health care vertical.

Jerrell Shelton

That's an important point that's in the equivalent.

Got it. And then on one housekeeping question for the model. What percentage of the product revenue is from MB and what percentage is from Legacy FairPoint systems?

Robert Stefanovich

Robert, it's really yes. If you look at the product revenue, it's really the vast majority of them still in excess of 95% of the revenue is it related to MVE. cryogenic systems.

Got it.
Super helpful.
Thank you for the time.
Thank you.

Operator

Your next question comes from Matt Stanton from Jefferies your line.
Now we'll open.

Matthew Stanton

Thanks, Tom. Appreciate the color on focus near term on EBITDA and cash flow. Sounds like you have a number of initiatives in motion around that just help us quantify what the impact could start to look like to OpEx as we move into the back half of the year? Just trying to get a better understanding of what no total cost savings or improvements we could start to bake into the P&L here.
Thanks.

Jerrell Shelton

Yes, no, thanks for the question. Look, yes, at the current time, we actually just provide guidance related to our annual revenue. But with that said, I can provide a little bit of information. Overall, we have been and are taking continuously actions and review of our initiatives from our CapEx spending pushing out some of the CapEx spending that is not driving kind of near term revenue for is not critical to our near term initiatives.
Yes, if you look at the overall operating expense?
Yes, a couple of things. One, we've been building out our infrastructure over the last couple of years, as you know, and where we're looking to see leverage of that infrastructure and capabilities that we built out. We expect to have it substantially complete in 2026 as revenue grows. We're going to see better better operating leverage from the overall infrastructure that we set up.
In terms of the other specific question and and we are modeling out the second half of the year.
Yes, I would expect a drop in operating expense. I can't tell you exactly the percentage will provide some more clarity there, but certainly we do expect to see an impact in the second half.
Yes, on the on the operating expenses.

Matthew Stanton

Okay, thanks. That's helpful. And then maybe back over to the MV., you talked about how sales kind of remain challenging there and gradual improvement through the year. I think prior you guys had baked in kind of flattish growth in SMB for the year. Just given kind of the slower start, should we still expect MVE. to be flattish in '24 or is it down for the year? And I guess if it is now down in '24, what other areas are potentially offsetting that to reiterate the guide for the full year?

Jerrell Shelton

No, Matt, I think you can expect in the year to be flattish for 2024. And so you'll see that improvement in the last half, which will create that. And then I think we'll have some progression in 2025 on look, we run into a situation where the market pull back in the second half of 2023 have severely.
And that probably had to do with some extra capacity buildup from from COVID plus the economics and economic situation which caused people to pull back on, but and budgeted and government pulling back and so forth, but some of that's freeing up at some point, you have to have more capacity so on. So we do think it will be flattish in 2024 and improving in 25 gen.
The driver really for our for the revenue pressure in the second half of the year is related to our services offering and revenue.

Matthew Stanton

Great.
And maybe just one last quick one on the Phase three trials dropped to 77. I know you expect some normal kind of fallout in there? Any more color you can provide on just the gross and net numbers for Phase three in the quarter? And did it have any impact on 1Q revenue, given those programs are generally a bit more meaningful than some of the earlier phase programs?
Thank you.

Robert Stefanovich

Yes, we're still seeing a lot of churn as it relates to clinical trial activity. So if you drill into the flat sequential quarter, we actually saw 42 trial terminations and 20 of which were completed in 22 terminated those that were terminated in many cases were due to cash of those.
Obviously, you saw a drawdown of the phase some of the Phase three trials. We also added back 42 programs. Obviously, there's a lag period associated with those as they get up and running. But I think we did see an impact on a couple of the terminations and Phase three that did show some.
Obviously that had an impact on on where we thought we were going to see some accretive activity there. That was relatively flat. But the good thing is is that the new programs that are starting are really diversified and will start to contribute in the coming months.

Matthew Stanton

Thanks.
That's helpful.
Appreciate it.

Operator

Your next question comes from Puneet Souda from Leerink Partners. Your line is now open by.

This is Philip on for Preneed. Thank you for taking my question. And maybe just the high-level kind of question coming off a softer first quarter. You got an implied ramp in the second half. It's a bit steeper. But can you just maybe give a bit more color on sort of the levers that gives you confidence to reiterate your guidance kind of if you expect them to be to improve sequentially in the second quarter or if that still hasn't bottomed out or just kind of what are the different levers that will that will take us at low end versus kind of like the high end of the guidance?
Thank you.

Jerrell Shelton

It's pure. I'll start the answer, and then Robert and Mark may want to chime in with some other calls, but our Our outlook is based on the trends that we're currently seeing industry-wide as well as what we specifically are seeing from our cell and gene therapy clients.
If you take these factors into taking those factors into consideration and you know, we're confident as one can be given the current economic and geopolitical landscape for a number of clients with commercial therapies that are forecasting a second such a strong second half ramp. And we also are seeing a number of new therapies approved recently and there for AMP should contribute to our revenue growth later this year.
And then there's the biotech funding increasing dramatically in Q1, and we should see some impact from that later this year. And revenue products and services launched throughout the year, which bring in new revenue. So all in all, we believe that each of these businesses, each of our businesses will grow in 2024. As highlighted in the press release, our service business should lead the way, and I think Robert mentioned that a little bit earlier.
So Robert, would you like to know,

Robert Stefanovich

I think you mentioned most of it we do expect and progressive improvement and then you have survived, especially in the second half. And if you look at some of the core revenue drivers, commercial revenue, BioStorage five services revenue and even maybe a clarification on commercial revenue, you look at the commercial revenue growing 9% year over year. But we also take a look at the trailing 12 months revenue because you have some lumpiness there in terms of timing. So you look at 12 months over 12 months?
Yes, for Q1, over over the trailing 12 months last year, it grew by 27%. So if you look at that plus the additional BLA filings, MAA filings and expected accruals that we see this year. You'll see a continuous momentum that will keep driving the services revenue to meet or beat our revenue guidance for the year counting.

Mark Sawicki

Just to add to that, obviously, on a lot of our commercial folks have come out with some earlier line approvals, obviously BMS and J&J Sarepta and might have a significant expansion coming out after the end of the second quarter, all of which should contribute to increasing activity as it relates to commercial. And then obviously, the recent approvals for Iovance crisper, Vertex of liver, ImmunityBio and Atara are also going to start to contribute in a more meaningful way.

Got it.
That makes sense. Thank you. And then maybe just one follow-up housekeeping question. I guess I know you guys don't have too much exposure to China, but have you thought about kind of how much risk there is with the biosecurity Act and the retaliation to that for your business?
I'm going to disrupt the financial disruption there.

Jerrell Shelton

Yes, we have. We have we thought quite a bit about it and we studied China quite a bit look, China is the second most powerful country in the world and has more trading partners in the United States and extremely important country. And it's not going away and we have an investment in China. We have a plant in China and that plan is staffed by some very capable people.
And we have an initiative, you know, the team better in China for a given President. She's buying China of what's made in China. And so we'll be manufacturing freezers there in the future for for that Chinese market. But the Chinese market is there are some risks, but you have to pay attention to the rules of the game and play. There were not we're not going to go back to the 30s and 40s with China with China is here to stay and we have to learn how to work with that economy and assess the risk and can move forward.
We only have about 5% of our revenue exposure right now. But we think the potential there is substantial over time. It's an economic recession right now, but it will get out of that over over some period of time.
It.

Thank you so much. I'll hop back in queue.

Operator

Your next question comes from the customer, not SKI from UBS. Your line is now open.

Hi, this is Lucas on for Dan Leonard at UBS. I guess to start things off, you know, there's definitely been an increase in oil prices since the start of the year. Given that increase in costs, are you finding that you're able to pass that on to customers? And should we expect any kind of a margin impact there over the near term?

Jerrell Shelton

Things we know only extraordinary situations. We do have surcharges that we pass on where we pass on extra costs. So I do don't think you should expect margin impact from the petroleum increase.

Okay, thanks. And then just one more here. I guess going back to the China theme, you touched on it a bit. You initiatives you have to begin manufacturing locally a little more over there. Are there any updates you can provide on how that's progressing and when that new capacity come online?

Jerrell Shelton

Well, of course, it's a small initiative given the in-park tires entirety of our company. And we are not in any hurry to make that investment for us at this particular time, although that motion is still still so active. So you would see probably mid next year, you'd probably see made in China product coming out of the Chinese factory. In addition to DOORS, it would be freezers as well.

Okay.
Thanks.
That's all I had.

Jerrell Shelton

Thank you.

Operator

Your next question comes from David Larsen from BTIG. Your line is now open.

David Larsen

Hi.
Can you talk a little bit more about these cost reduction efforts? And I know that you've been very reluctant to reduce labor across your firm. That's certainly very admirable. But just any any more color there would be helpful.
Do you expect to become EBITDA positive by, say, 4Q of 24 or any sense for the number of positions that might be reduced or anything like that would be very helpful. Thank you.

Jerrell Shelton

I just want to make a couple of broad comments and then turn to Robert for more specific comments at David. First of all, we're not reluctant to on to adjust our business in any way, given circumstances after we have assessed and we take great pride in being responsible in the way we manage our business and the assets that belong to the shareholders of this company.
So it is artificial fiduciary responsibility to be keener to be responsible and ethical, and we take that very seriously. So so we're not dealing with things business ebbs and flows. And when it when it when it's appropriate, we adjust we adjust just as just as I said in the opening comments with those initiatives that I mentioned there that I give you a little bit more color on your on your specifics. I'll turn it to Robin.

Robert Stefanovich

Yes.
Look, I think in general, we certainly are working towards getting back to positive EBITDA from and that you're absolutely right. This is driven by some of the initiatives that we're taking related to cost reduction related to picking up on the top line revenue some.
So these are things that we always do, but didn't give you maybe a few data points. If you look at Q1, we had about eight a little bit over $8 million of cash burn. Of that, a little bit over $4 million was related to CapEx expenditures.
So we are moving out. So the CapEx as we mentioned earlier on the call just related to initiatives that are not high priority. Certainly, we're still making the investments in some of the key initiatives such as integrity. So the cryopreserved processing platform and other key key offerings that we've been working on that have partially been introduced into the market space.
And as you would expect with any company, especially a company that has done a number of acquisitions. We are looking to leverage our current capabilities and current resources.
So can we leverage shared services? Absolutely.
Yes, we can do that. Can we fine tune the resources that we have and streamline it.
Absolutely. Those are things that we have been working at over the last few months and that we have already started rolling out and that we expect to have an impact in Q2 for us, we are moving us into positive EBITDA, and we're certainly very focused on maintaining a strong balance sheet maintaining strong cash balance. And that, of course, feeds into that equation in terms of how we look at our operational capabilities and investments.

David Larsen

Okay. That's helpful. And then can you maybe talk a little bit about the revenue that's being generated from BioStorage bio services and also on Entegris so on and any update on storing allogeneic therapies? I know obviously a third of your trials are electronic in nature, but in terms of storing, was that actual cell tissue? And has that started yet any revenue coming from that yet?

Jerrell Shelton

I'll let Mark and Robert. Both may have some additional comments here. They will have some additional comments. And David, but Integra sale is not a subject right now for revenue, but because it won't be coming online until the last half of the year, and that will be the beginning of a ramp up.
And after that, you will see over time you will see in tech resale producing significant revenues for the Company. It's a service that's needed. The partnerships are coming along well, the factories are coming along well and we have great, great anticipation of seven tech resale in terms of a couple of the other things on bio services in particular, Mark can better comment on those services and how that's coming along.

Mark Sawicki

You have to focus on your specific question around allogeneic therapy as it relates to the need for storage and fulfillment related capabilities. So we have, obviously, as part of the infrastructure build over the last 1.5 built out of competencies for secondary labeling and packaging requirements, which are all a base need for an allogeneic therapy distribution.
Those are currently being used by both clinical and commercial clients and both in the U.S. as well as in Europe. So we've been very successful in transitioning that investment into into direct support of the cell and gene space itself.
Hello. Obviously, there's really the only real alloy product on the market right now is Atara, which is a low volume indication right now. So they're not going to be a significant financial impact on that in the short term. But there's also a contribution into BioServices over time for autologous therapies where they're supported. We're supporting back-up doses flows, other support element some, which also has the competencies over time to support additional revenues.

David Larsen

And lastly, maybe just that you were looking for $1 amount of bio services revenue grew 9% year over year to $3.5 million in the first quarter. But okay, I think that there were two large facilities that are fairly new that came online recently, one in Texas, one, New Jersey are those profitable?
Now?

Jerrell Shelton

Look, we're still in the early stages of our BioServices initiatives that both of those were introduced. And so where we're really working towards filling up and bringing up the revenue in BioStorage services. We're in the early stages here with Mark's talking about utilizing them for the commercial therapies. For example of this is all just now commencing.
And so we're not obviously not fully utilized at this point in time, David, remember, once we open those facilities and those facilities were opened in, I think it was June a year ago, Tom, so the it takes six, six, six to 18 months for clients to come in. They have to they have to do their audits and they do their trial runs and then they have to rearrange the traffic and they know what they're doing.
So so it's just now ramping up. It does about services. We always anticipated an exponential development. So I think we're still down there right around that point of inflection. And I think you'll see it picking up over time now and actually a lot of the

Robert Stefanovich

I just want to comment on it.So we have over the last 12 months in those facilities, we've actually on-boarded 27 clients.

David Larsen

Okay. And then just one more quick one. I think on last quarter's call, you talked about nine new therapies for 2024 and 17 filings in 2024. Does that mean nine new commercial therapies that you're supporting coming online in 2024? Or is that what that means? And how is that number as of today? Is it still nine in 17?

Jerrell Shelton

We have had so far this year, three new therapies get approved.
It's kept Gary, the crisper Virtex products and take the from Iovance and most recently a TiVo from immunity file in our reporting today, we're saying we can see five more new therapies approved this year. So that would give you eight. So but it has one, as I'll call it, pushed out. It hasn't gone away, it's probably going to be a 2025. And right now we're seeing 16 more filings in 2024.

David Larsen

Okay. Thanks very much. I'll hop back in the queue.

Operator

Your next question comes from Paul Knight from KeyBanc. Your line is now open.

Paul Knigh

Pilot market fiber question for you for starters and that is on the Phase three trial customer count one of the most in knows that press release, meaning up 5.6% is this SIGNIFICANT and that biotech getting some money and getting back into the trial and business early?

Mark Sawicki

Yes, while we are seeing a lot of new money money starting to come back into the space, some we still see a lot of volatility in churn as we had mentioned, we had a net add of 42 trials in the quarter with a net removal of 42 trials.
As you know, we always, you know, our whole focus is around playing the portfolio, which means the collective average so that we will have winners and losers as it relates to those. But as long as we're supporting the vast majority of those trials in this space and we're on the upside and we remain confident in that. And with the funding position seeming to stabilize and improving in Q1, obviously, we need to see if that's sustainable and that's a positive indicator.

Paul Knigh

And then I think this conference bill here with 8,000 employees, I mean, I think that's obviously a record and on employees but attendees in at the American Society of Cell and Gene Therapy right on.
Are you seeing an uptick in in potential customer interest?

Mark Sawicki

Yes.
I mean, there's a lot of new startups some. And so a significant percentage of those 40 new Pro 42 new programs came from new clients, which is a very good sign.

Paul Knigh

And then I'm wondering what I mean we talk about a $7.7 million EBITDA loss. What do you really want to run the business that Jerry and is out, is this a 30% EBITDA margin business or is it 25?

Jerrell Shelton

I think you know, we are our goals have not changed. I mean our goals are 55% or 60% gross margin and 30% adjusted EBITDA and our goals are not changed, and we do examine them often. So that's that's the metrics that you should be looking for from us.

Operator

Your next question comes from Yuen Shi from B. Riley. Your line is now open passenger booking our questions.

Yuan Zhi

So can you help us better understand the refinanced in biologics services in 1Q? Was it because of lower volume and how about the visibility and confidence in 2Q and beyond and right helpful. Mark's going to answer your question that this has to do with your view of the report that you put out just recently, I should note Mutamba $0.05 cents.

Robert Stefanovich

Are you repeat the question guys? Because I think I know where I am looking at here is I think I was a little garbled W, but you said biologic, Jerry, if I did, my service has no purchase of biologics you thought about or

Jerrell Shelton

what is it repeat?
The question.

Yuan Zhi

Yes. So can you help us unpack and understand the weakness in bio logistics services? Was it because of lower volume? And how about the visibility and confidence in 2Q and beyond, but okay, I harken.
I got it now.

Robert Stefanovich

Yes, you also buy logistics revenue was softer than anticipated because we saw those 42 trial terminations and many others were established programs. We have the active volume that was ongoing and those are those were replaced by 42 new starts. But those 42 new starts take time to ramp and so just because we onboard them in the quarter, usually it's one to two quarters later before we start seeing a contribution as it relates to financial contribution. So we'll see progressive improvement on that as those there as those new programs come online,

Yuan Zhi

Kardex and then and we have seen that it's dropping from the last quarter.
And I'm just curious, was it because of zoning of all other was because the a customer are just not there yet. There was demand softness, continued demand softness and again, mostly out of China. It was not cancellations of orders.
Got it. And one last one from us towards the goals to reduce on capital cost or reducing some cost in second half. I'm curious, will that impact the the revenue part because if you are cutting workforce in sales and sales, it could have certain degree of impact.

Jerrell Shelton

Now if you look at the actions that we're looking at here, related to, as I mentioned, some of the CapEx that we're moving out, these are not initiatives that will have an impact on our near term revenue, not the high priority initiatives that we're working on seamless.
Yes.
On the headcount review, this is not something that we expect to have any impact on our revenue as well as on our client relationships. Again, this is not what I see more as the organization Now taking a closer look, especially after the number of acquisitions that we've completed and then kind of refining and the organizational structure.

Yuan Zhi

Got it. Thanks for the Axerra. Helpful color.

Jerrell Shelton

Thank you.

Operator

Your next question comes from David Saxon from Needham. Your line is now open.

David Saxon

Great. Thanks and good afternoon.
And I've been in between calls. So I apologize it. And I apologize if I am repeating any questions, but Jerry, maybe I'll start with you. So on the fourth quarter earnings call back in mid-March, you did seem to confirm expectations for sequential growth from the fourth quarter into the first quarter. So over that two weeks before quarter end and were there any orders that got pushed out into the second quarter or what were the factors that drove the shortfall sequential growth?

Jerrell Shelton

We did. We did speak with confidence. So in all in the in the fourth quarter, we didn't know exactly how the first quarter was going. That was going to turn out. But what we didn't, we didn't say we were having a strong first quarter.
What we did say is we gave revenue guidance and we said we were progressively improved throughout the quarters and then the guidance came out higher than we expected it to come out, but it did come out that way.
And we did have we recognize the weakness in the marketplace at that time, and that's why we said we would have we would see a progressive improvement over the year, and I did confirm our guidance today. So that's that's what happened. There was nothing specifically that I can say other than the market was slow and we knew it was slow at the time and it was little bit slower than we anticipated. So we were disappointed in the first quarter, but Mark may have something to add to that as well?

Mark Sawicki

Yes, yes.
Yes.
Obviously, we don't give guidance right on a quarterly basis, and we're really looking at the entirety of the year itself. And as you know, across the board between ourselves and other players in the space, we do strongly anticipate a continuous progression in the second half of the year.
So you look at the uptake in consumables for the Life Sciences, that's a very strong indicator as it relates to pickup. And that was picked up in Q1, which does indicate development of therapies that will need via logistics and BioStorage through the rest of the year.
So in others, sequencing itself is sometimes difficult to ascertain because you can't have rollover from one quarter to the next question is things that come in towards the end of the quarter. If they even if they have a PO or something else that slips that you don't anticipate it can have a fairly significant impact on the end of quarter revenue. So we did see some deals and things like that slip out of the first quarter into the second quarter.

David Saxon

Okay.
And maybe, Mark, I'll follow-up some of the comments you just made. So I appreciate the cadence might be kind of difficult to predict, but I thought you said and you expect continuous improvement in the second half. So should we think about the second quarter being kind of flattish sequentially and then we see some sequential growth in the second half to get to the guidance range.
And then I'll just ask my second question on here. This might be for both Jerry and Robert and on bluebird Express. I'd love to hear how that integration is going. And then by my estimate, at least revenue contribution was around $3 million. Is that in the right ballpark? And is that a good base on that that we can see growth off of that?

Jerrell Shelton

I'll let I'll let Robert.
Can you maybe talk about the your first question?
Just if you look at what we experienced in Q3, Q4 of last year, we saw actually a slight improvement in Q4 and sales. Our outlook was the way we described it at year end. With that drop off as Tom mentioned, in particular in Asia Pac and in Q1.
So some of that was certainly unexpected. But what we did talk about is to see a progressive improvement throughout the year and that progressive improvement really weighted towards the second half of the year?
I can't give you specifics related to Q2, but I can give you those two data points as they're progressively improving and then weighted towards the second half of the year.

David Saxon

Okay.
Yes, that's super helpful. And then just on bluebird Express, if you could.

Jerrell Shelton

Yes, bluebird Express is integrating very well with Crown PDP. It's a small acquisition, but we as we have done business with bluebird Express for a number of years at Cryoport Systems and it's a known quantity is having a very positive impact. It knows the US market and it is having an impact on the development of grow PDP. We're opening three, three new logistics centers in the U.S. to build out that network. And I think we'll have a good year a proud PDP.

David Saxon

Okay. And so it sounds like $3 million might be the right ballpark
for gas stations, not maybe at a

Jerrell Shelton

For lower end, but I think for modeling purposes, let's line.

David Saxon

Okay.
Great. All right.
Thanks so much.

Jerrell Shelton

Thank you, Doug.

Operator

There are no further questions at this time. Speakers, please proceed with your closing remarks.

Jerrell Shelton

Okay. Thank you. Thank you for your questions and our discussions. Our first quarter results echoed a challenging global environment. So market improvements and margin improvements in our actions. We expect our results will progressively improve during the remainder of the year and based on the recent momentum we've seen with Cell and Gene Therapy approvals we are encouraged and feel confident in our full year 2024 revenue guidance.
Cryoport is well positioned to capitalize on the growth of the life sciences and particularly the cell and gene therapy industry as more therapies receive FDA approval and achieve commercialization. And our services and product initiatives take effect even with the current economic and geopolitical climate, the market is expected to expand substantially over the next few years, and Cryoport is built to support its rapid growth.
In summary, while our start in 2024 was softer than we would have liked, we will remain focused on our strategic priorities, continuing to expand our position in our top accounts, delivering innovation and differentiated new services and products and remaining diligent on cost controls and productivity improvements to support increases in margins as we move through 2024.
Thank you for joining us today. We appreciate your continued support and interest in our company. And we look forward to updating you on our progress again next quarter. We hope you have a good evening.
Thank you, operator.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.