Maravai LifeSciences Holdings, Inc.

Good day, and thank you for standing by. Welcome to the Q3 2021 Merify Life Sciences Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentations, there will be a question and answer session. To ask a question during that session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any assistance during the call, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Deborah Hart. Ms. Hart, you may begin.

Thanks, Chris. Good afternoon, everyone. Thanks for joining us on our third quarter 2021 earnings call. Our press release and the slides that accompany today's call are posted on our website and are available at www.investors.maravai.com under financial information, quarterly results. On today's call, we will cover our financial results and business highlights, and we'll provide updated financial guidance. As you can see on slide two, Carl will first provide you with a business update, and Kevin will review our financial results and guidance. We will then open the call for questions following the prepared remarks. On slide three, we will remind you the forward-looking statements that we make during this call. including those regarding our business goals and expectations for the financial performance of the company, are subject to risk and uncertainties that may cause actual events or results to differ. Additional information concerning these risk factors is included in the press release we issued earlier today, as well as those that are more fully described in our various filings with the FCC. Today's comments reflect our current views, which could change as a result of new information, future events, or other factors. and the company does not obligate or commit itself to update these forward-looking statements, except as required by law. During this call, we will be using non-GAAP measurements of certain of our results and in providing guidance. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted to the MARAVI website and as filed in our 8K with the FCC and available through EDGAR. The metrics we will be discussing in today's call include net income, adjusted EBITDA, income tax expense, and adjusted earnings per share. These adjusted financial measures should not be viewed as an alternative to GAAP measures that are intended to better enable investors to benchmark our current results against historical performance and the performance of peers. Now I'll turn the call over to Carl.

Well, thank you, Deb, and good afternoon, everyone. We appreciate having you join us for our call today. Before we get started with our third quarter results, I'd like to let you know that today we published our inaugural Environmental, Social, and Governance Report, highlighting what we've accomplished to date and our long-term commitment to creating a sustainable future. The report touches on many of the themes we value and the impact our culture has on our business performance. You can find the report on the investor section of our website. We look forward to engaging with you on how we continue to integrate ESG principles into our operating decisions. On slide five, you'll see some of the highlights from the report. Throughout our organization, we think and act sustainably by using ethical business practices that ensure safety, efficiency, and social responsibility in a manner that protects our employees, communities, shareholders, and the environment. I'm particularly proud of our team for actively embracing and enhancing inclusion and diversity initiatives, and of the fact that we were recently added to the State Street Global Advisors Diversity Index. We recognize we are in the early portion of a continuous journey, and we look forward to periodically sharing updates on our progress. Now, let's turn to our third quarter on slide six. I'd like to remind you that our third quarter results include two months of contribution from our protein detection business, which was divested effective September 2nd. Maravai had another super solid quarter, growing 133% compared to the prior year, reaching $204.8 million in revenue. Our trailing 12-month revenue reached a record high of $669.1 million. Our adjusted EBITDA of $156 million grew 169% over the prior year. Our top-line performance and consistent profitability resulted in adjusted diluted earnings per share of 44 cents per share. Cash at the end of September was $547.9 million, and total gross debt was $545.5 million. bringing us to a positive net cash position for the first time in Maravai's history. We have had an incredible year in our first calendar year as a public company, as our numbers will attest. It is clear that momentum continues to build across our global customer base as mRNA research and development progresses to the forefront of modern medicine. Turning to slide seven, Growth in nucleic acid production, in particular, remains very robust. Our nucleic acid production business had revenue of $182.9 million, up 170% year over year. Demand for clean cap mRNA continues to be strong in all areas. Clean cap reagents themselves and custom mRNA constructs using both our development and GMP services. We, of course, see significant clean cap demand related to the development and production of mRNA COVID-19 vaccines. Our customers are working diligently to both increase the global supply of the initial vaccines and to prepare for potentially emerging variants. Let's get into this in a little more detail. Let me begin by saying that we strongly believe we'll continue to see durable demand for CleanCap for the foreseeable future for a number of the reasons cited on slide eight. First, just under 40% of the global population has been fully vaccinated as of this week, meaning that more than half the people in the world are still in need of the primary vaccine. Second, vaccine labels are expanding to younger populations. including ages 5 to 11, as is now occurring in the United States. Third, there are increasing recommendations worldwide for the use of a third dose of vaccine as a so-called booster. Just yesterday, Pfizer asked the FDA to extend the booster authorization to all adults. And now there are growing calls to use mRNA vaccines to complement an initial adenovirus or viral vector vaccine, such as from J&J or AstraZeneca. Finally, we can also foresee the need for an annual booster or periodic maintenance vaccine recommendation as the pandemic moves into an endemic phase over time. In fact, here in the U.S., the federal health guidelines already recommend a fourth dose for those who are immunocompromised, which should be administered six months after they receive their third dose. As most of you know by now, we have solid forward-looking visibility into the revenues for CleanCap that are provided to COVID vaccine manufacturers under formal supply agreements. As we look at that book of CleanCap orders already in hand and that are included in our preliminary 2022 guidance, we now have POs for over three quarters of the expected 2022 COVID clean cap revenue. Therefore, our current expectation is that our COVID-19 related clean cap revenue will increase in 2022 by somewhere between five and 10%. Using the midpoint of our revised 2021 guidance for COVID-related clean cap, that would imply further revenue growth of roughly $25 million to $50 million attributable to COVID clean cap in 2022. Now, it seems apparent from all of the market activity that we saw last Friday that some investors hold a view about vaccine revenue durability that is somewhat at odds with the one I just outlined for you. All I can tell you is that our guidance is based on quite tangible things, those forward POs that I referred to, for example. We clearly see a bit of a disconnect here that I'd like to dive further into. An effective public health response to a pandemic as disruptive as this one requires a multi-pronged approach that includes effective diagnostics, therapeutics and vaccines. Paxlovid, which has been in the news recently, is a treatment to be administered once someone has already contracted the virus. We don't necessarily see any connection between the development of a potentially beneficial antiviral therapy and the number of vaccine doses that will be administered over time protect against acquiring and spreading that same virus. These are really two different things and quite likely will exist at two dramatically different price points. Let me give you a historical example on slide nine. We have a pretty good precedent to refer to here with the seasonal flu and Tamiflu. Tamiflu was introduced to a great deal of fanfare back in 1999. Its effectiveness at reducing flu complications, hospitalizations, and deaths in at-risk patients was well established. It shortened the duration of the disease in many patients and also lessened its severity in others. Sound familiar? Its first major test came during the H1N1 or swine flu pandemic of 2009-2010, as you'll see on this slide. During that flu season, 114 million doses of flu vaccine were distributed in the U.S. That was also the peak year of Tamiflu sales worldwide, at over $3 billion, as I recall. The very next year, when there was a somewhat star-crossed universal H1N1 specific vaccination campaign in the U.S., the number of flu vaccines administered hit a then record 155 million doses, which we can think of as a pandemic-style vaccination high. Since the slight retreat in the number of vaccines the following year, as flu returned to a more normal endemic phase, demand for vaccines has increased consistently. In 2020 to 2021, the U.S. distributed almost 194 million flu vaccines, a 70% increase in the decade following that original H1N1 pandemic. And throughout that entire decade, there was an affordable, approved treatment for the flu widely available. One did not substitute for the other. As an aside, I should also note that the number of flu tests taken annually in the U.S. increased 2.5-fold during the period from just 2010 to 2015, according to the CDC. So it's quite reasonable for us to recognize that diagnostic tests, effective antivirals, and vaccines will all continue to be elements of our public health response to COVID. And while each of us on this call probably can't wait to grab a blister pack of Paxlovid to keep in our backpacks as we travel, that will in no way substitute for being fully vaccinated as the most effective way for society to combat this disease. Now turning to slide 10 and our non-COVID-19 related pipeline. Although the current large scale COVID-19 vaccine demand overshadows much of the progress we are seeing with non-COVID-related mRNA programs. The pipeline for these non-COVID-related vaccines and therapeutics is impressive. All told, over 85% of our mRNA development customers using CleanCap are working on non-COVID-19 programs that range from vaccines for oncology, influenza, and other infectious diseases, to mRNA therapeutics for, again, oncology, monoclonal antibody-based therapies, and protein and enzyme replacement therapies. As mRNA technology has now been proven out, we're also seeing more active GMP mRNA programs entering the clinic, which provides us with the opportunity to provide additional GMP services. The majority of these programs are still in phase one, So the capacity investments that we are currently making and that we outlined for you on our last call will allow us to support this demand and to transition to Phase II clinical material and beyond over the next few years. We expect continued growth in the broader vaccine and therapeutic pipeline as mRNA-focused R&D accelerates in real time. To wrap up the nucleic acid production highlights, we are seeing very strong growth in the base nucleic acid business beyond just our COVID vaccine clean cap sales. This base business, which consists of custom oligos, NTPs, plasmids, standalone messenger RNA, messenger RNA with clean cap, and clean cap demand for non-COVID vaccine applications grew approximately 50% for the nine-month period. Now turning to slide 11 in our biologics safety testing business, which supports high-growth markets in cell and gene therapy, vaccines, and biologics drug manufacturing. Here we set the global gold standard in host cell protein and process-related impurity analytics, along with offering innovative viral clearance solutions that ensure the safety of biopharmaceutical products. Our third quarter revenue of $16.6 million in BST is up 18% from last year, with year-to-date growth of 29%. All regions, North America, Europe, and APAC, delivered strong growth, including 49% year-to-date growth in the Asia-Pacific region, which has become a focal point for biosimilar development. In BST, we see strength from both our biopharma and CDMO activities with an increase in the number of drugs in preclinical development and in clinical trials. We saw a strong demand for all categories of kits during the quarter from generic host cell protein assays to other ELISA and purity detection kits to custom HCP assay development and to orthogonal mass spectrometry-based services that promote the use of our HCP kits. This business is extremely sticky, as most biopharma companies will keep using the same qualified assay kits as their drugs move through the development process and into commercial manufacturing. Biologic safety testing continues to be a very attractive space for Maravai. We plan to continuously innovate, scale our offerings, ensure superior technical support, and offer the highest quality services and products, and the most comprehensive catalog of products to meet our customers' needs. Moving on to slide 12. We'll be hosting our first Investor R&D Day on January 28th, and hope you can all join us for this virtual event. Deb will be providing more details and registration information as we get a little closer. We look forward to an engaging event and to introducing you to other members of the MARAVI team. Turning now to slide 13, I'll ask Kevin to cover our third quarter performance, along with our updated guidance for 2021, and to provide our initial revenue expectations for 2022. Kevin?