Aegis Capital Initiates Cryoport (CYRX) at Buy; Sees as Emerging Player in Cold Chain Logistics Segment
Aegis Capital starts coverage on Cryoport (Nasdaq: CYRX) with a Buy rating and $8 price target.
Analyst Ashok Kumar offered the following rationale:
- Market for Temperature Sensitive Healthcare Products: The total market for life science materials requiring cold chain logistic services was $ 209 billion in 2012. IMARC forecasts this market to grow at a CAGR of around 6%, during 2012-2018 to reach $303 billion by 2018.
- Global Healthcare Cold Chain Logistic Services Market: The global market for healthcare cold chain logistic services was $ 7.3 billion in 2012. IMARC forecasts this market to growing at a CAGR of around 8% during 2012 – 2018 to reach $11.4 Billion by 2018
- Market Drivers: The market for cold chain logistic services is currently driven by the following factors: strong sales growth of products – biopharmaceuticals, vaccines and clinical trial materials – requiring cold chain logistics- and outsourcing trends in research and manufacturing. Another growth driver is the globalization of clinical trials requiring safe and efficient logistics.
- Regulatory Trends: Strict regulatory guidelines around the world which ensures that manufacturers and transporters are compliant with regulatory requirements for storage, handling, and distribution of temperature sensitive material. Having a documented chain of custody and chain of condition for the material shipped is of growing importance for quality assurance and regulatory compliance.
- Cost Adders: Healthcare product manufacturers are willing to bear the high costs associated with cold chains as the cost of temperature excursions in temperature-sensitive materials can be much higher.
- Legacy Solutions: Cold chain packaging and transportation is primarily done by using Dry Ice, Liquid Nitrogen and Gel Packs. Dry Ice and Liquid Nitrogen can be efficiently used for the storage of products at subzero temperatures. But these two methods can lead to health hazards if improperly handled. Gel Packs currently represent the most popular method to store products at different temperature ranges with minimal risk of any hazard. But none of these methods are suitable for cryopreservation and the related cryogenic logistics market for life sciences. Cryopreserved material should be stored and shipped below the glasspoint, generally below -130°C to prevent degradation and loss of efficacy. Dry Ice and Gel Packs do not have that capability. Furthermore Liquid Nitrogen (compared to the Dry Vapor LN2 provided as part of the Cryoport solution) is classified as ‘hazardous’.
- Well positioned in Life Sciences cold chain: Cryoport is the leading provider of advanced cryogenic logistics solutions. The company has 350 customers having shipped in and out of over 90 countries and is currently supporting 45 clinical trials. Cryoport has established strategic partnerships, referred to as powered by CryoportSM, with FedEx, DHL and UPS to support their cryogenic logistics market initiatives. The company has the ability to leverage existing platform and technologies to expand globally.
Source: Street Insider