Maravai LifeSciences Holdings, Inc.

Good day and thank you for standing by. Welcome to Maravai Life Sciences' first quarter 2022 earnings conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Deborah Hart, Head of Investor Relations. Deborah, please go ahead.

Thank you, Patrick. Good afternoon, everyone. Thanks for joining us on our first quarter 2022 earnings call. I'm joined today by Carl Hull, our Chairman and Chief Executive Officer, and Kevin Hurdy, our Executive Vice President and Chief Financial Officer. Our press release and the slides that accompany today's call are posted on our website and are available at investors.maravai.com under Financial Information, Quarterly Results. 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 remind you that the forward-looking statements that we make during today's call, including those regarding our best business goals and expectations for the financial performance of the company, are subject to risks 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 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. Reconciliation of GAAP to non-GAAP financial measures are included in the press release that we issued today. 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, but are intended to better enable investors to benchmark our current results against historical performance and the performance of our peers. I'll now turn the call over to Carl.

Well, thank you, Deb, and good afternoon, everyone. We appreciate having you join us for our call today. Let's start with our first quarter results on slide five, please. Moravai had a record quarter for the company as a whole and for each of our operating units. Today, we reported $244.3 million in revenue for the quarter, growing 65% compared to the prior year and up 7% sequentially over the fourth quarter. Our base business revenue which excludes clean cap revenue from COVID-19 vaccines, was up 25% over the prior year. Our adjusted EBITDA of $187 million was up 85% over the prior year, and we reported a record 77% adjusted EBITDA margin for the quarter. Our outstanding top line and adjusted EBITDA performance resulted in adjusted earnings per share of 54 cents per share for the quarter. We also have record adjusted free cash flows in the quarter of $182.5 million. So you can see that 2022 is off to an incredibly solid start. Our base business continues to deliver impressive growth across the board, reflecting strong demand for our products, on top of the COVID vaccine tailwinds we have experienced over the last two years. We have seen and expect to see continued momentum across our global customer base as mRNA research and cell and gene therapy development accelerates. Turning to slide six, growth across the nucleic acid production business was very robust and remains, I'd say, somewhat underappreciated by the broader market. Our nucleic acid production business had record revenue of $223.7 million in the first quarter, up 80% year over year, and up 5% sequentially. Excluding those COVID-19 related clean cap revenues, our base nucleic acid business grew a remarkable 55% year over year. We continue to focus on this base nucleic acid production business as a key driver of long-term value creation. Demand for our messenger RNA CDMO services is expected to consistently grow as we are uniquely positioned with the right toolkit to support an increasing number of these customers. And most importantly, 90% of our GMP services customers are incorporating CleanCap into their own products. We have also observed nice traction on the product side of the business as CleanCap and our other small molecules are incorporated into new programs by both existing and new customers. We have a unique opportunity to drive CleanCap inclusion across our growing messenger RNA customer base while providing other critical GMP raw materials and our newest technology to improve in vitro transcription reactions. These programs should continue to bring value to our customers and help improve the quality of manufactured messenger RNA for years to come. Turning to slide seven. We know that there's a great deal of focus on expectations for the balance of 2022 and for 2023 as it relates to demand for COVID-19 vaccines. The COVID-19 vaccine space remains highly dynamic with uncertainty around a number of variables, including the ultimate impact of vaccine hesitancy on worldwide demand for primary vaccines, the next variants of concern and their potential clinical severity, waning immunity and its impact on disease spread and severity, and what the ultimate end-user demand will be for boosters on an ongoing basis. Earlier this week, the senior leaders of the FDA, writing in the Journal of the American Medical Association, made the following points. First, it is now time to accept that the presence of SARS-CoV-2 is the new normal and that the virus will circulate globally for the foreseeable future. And secondly, the COVID-19 vaccine compositions will need to change annually for both primary and booster doses to reflect future variants that are then in circulation. The authors conclude by saying that, quote, society is moving towards a new normal that may well include annual COVID-19 vaccination alongside seasonal influenza vaccination, close quote. Those of you who have been following us for the last couple of years will recall that this is the exact scenario that we have predicted as the most likely long-term outcome following the peak pandemic years. Now we can't lose sight of the evidence that demand for the current versions of the vaccines is variable from period to period. And recent statements from our customers and other manufacturers with direct exposure to the COVID-19 market regarding their own uncertainties about future demand reflect some of this variability. We fully expect the demand for COVID-19 vaccines will continue to be a meaningful revenue contributor for Marabai going forward, even though the exact landscape for 2023, excuse me, remains unclear at this point. As for this year, we are maintaining our overall 2022 guidance for COVID-19 related revenue which is a combination of demand from commercialized and on-market products, later phase demand from potential new market entrants who are already Mar-a-Lago customers, and early development work that is being done by other customers for next generation vaccines, such as the previously announced collaboration between GSK and CureVac. This means that we are reaffirming our estimated growth rate in 2022 for COVID-19 clean cap revenues, which we provided to you on our year-end earnings call of 12% to 14% growth over 2021 levels. This is based on the current order book and material requirements from our biggest customers that helps determine our revenue forecast and manufacturing plans. And as we discussed in February, we say estimated growth here since CleanCap can be used interchangeably by our customers for different end uses. These figures represent just those orders that we believe are COVID-specific. So for the reasons cited above and others, we do not yet have a specific line of sight from our largest customers into 2023 and what their overall COVID-19 vaccine production levels are expected to be. As an example, Pfizer just commented that they expect that they will be in a position to provide 2023 revenue guidance for Comirnaty only during their fourth quarter earnings call. What we do know right now is that the development of new generations of COVID-19 vaccines continue up pace, with a particular focus on vaccinations and boosters for the youngest children and booster designs that include the most recent COVID variants of concern. And we still believe that the mRNA technology provides the most rapid and flexible platform for new vaccine development and real-time design modifications. Recognizing the longer-term COVID-19 vaccine demand is subject to a variety of factors, mostly outside of our direct control, we're focused on those things that we can control, expanding our product portfolio, market leadership, and customer-focused solutions, continuing to invest in operations, manufacturing, and people to support our base business growth, which we are truly excited about, and innovating in ways that will support our customers' rapidly evolving needs. Now, turning to slide eight, one of the reasons we are so bullish on our nucleic acid production business is our global blue chip customer base. Looking at our customers by category, they span the spectrum of drug discovery and development from innovative biotech companies to potentially transformative RNA manufacturing platforms to large pharma. Notably, in the large pharma category, we estimate that we are collaborating on at least one mRNA program with 18 out of the 20 top R&D spenders in 2021. As I've said before, we believe that mRNA and CLEAN-CAP are here to stay in a durable and meaningful way. Maravai is right in the thick of this action with a solid piece of the market for both infectious disease vaccines and mRNA therapeutics. Turning now to slide nine. Given that this is the time of year for several key cancer and oncology conferences, including AACR and ASCO, We thought we should highlight some of the exciting programs we are involved with that are tackling cancer treatment through the development of messenger RNA vaccines and therapeutics or through cell therapies utilizing messenger RNA technology. Through our work with an outside consultant, we've completed a deep dive into the preclinical and clinical trials that are underway. Of the 183 messenger RNA programs that we know are using CleanCap, Roughly 30% or approximately 50 of these programs are working on oncology therapeutics. These include preclinical and clinical trials for indications such as melanoma, pancreatic cancer, head and neck cancer, and other HPV associated cancers to name just a few. While these programs are still in their early days in preclinical through phase two trials, they provide an exciting roadmap for the future applications of messenger RNA. The other 110 mRNA programs using CleanCap include therapeutics for a number of human health issues, such as autoimmune diseases, cardiovascular disease, and metabolic disorders. And of course, this number includes messenger RNA vaccines for infectious diseases like influenza, shingles, Zika, and Ebola, as well as for additional coronavirus vaccines. Now turning to slide 10 in our biologic safety testing business, our products and services in this business support high growth markets in cell and gene therapy, vaccines, and biologics drug manufacturing. by providing process-related impurity analytics along with offering innovative viral clearance prediction solutions that help our customers ensure the safety of their biopharmaceutical products. Our first quarter revenue of $20.6 million set a new revenue record in biologic safety testing and was up nearly 17% from last year. This notably strong revenue growth was primarily driven by demand for our industry-leading CHO and E. coli host cell protein ELISA kits and our impurity testing kits, specifically our protein A portfolio, which saw strong growth in the quarter. We also had solid performance from our mock fee and automation product lines. We continue to gain new customers for the wide range of our biologic safety testing products. Additionally, a number of our customers entered into agreements with us to develop custom host cell protein assays to support their proprietary biologics programs. Notably, we just announced a further collaboration with Biotechni's Protein Simple business and the launch of the SimplePlex HEK293 3G assay for automated process and purity testing on the ELA immunoassay platform. This new assay provides an automation solution for fast and efficient bioprocess impurity testing. We plan to continuously innovate and scale our offerings in biologics to ensure superior technical support to offer the highest quality services and products and the most comprehensive catalog of products to meet our customers' needs. Now, moving on to slide 11 and some organizational updates. First, we are happy to welcome Deb Barbara to our leadership team. Deb joined us in April as Vice President, Strategy and Business Development, reporting to me. In this newly created role, Deb has responsibility for leading our global growth strategy and will drive the company's strategic and business development goals. Deb will also manage the company's mergers and acquisition function, including oversight of all equity investments, acquisitions, and integration planning for Maravai. For those of you not familiar with Deb, she has over 30 years of life sciences experience and a variety of business development roles. I look forward to her playing an incredibly important role on our team as Maravai continues to scale and differentiate itself as a trusted supplier of components, nucleic acids, and biologics assays for the life science industry. The integration of the MyChem acquisition is going well. We are actively merging their product development activities with TriLink's R&D and commercial teams. The addition of MyChem extends our capabilities in the manufacturing of critical raw materials that are used in cell and gene therapy, molecular diagnostics, and messenger RNA manufacturing. Third, we're committed to increasing our investment in messenger RNA innovation as we scale our R&D operations, facilities, and quality systems, and partner ever more closely with our customers. To this end, our facility expansion plans are progressing nicely, and Kevin will expand on this later in the call. Our nucleic acid production project nearby in San Diego, which we call the Flanders Site Expansion, is on schedule, and we expect to have occupancy for the Phase I of this project later this year with phase two occupancy in the first half of 2023. As a reminder, the first phase will provide us with an additional GMP manufacturing suite with two clean rooms. By moving some of our operations to the new Flanders site, we will further increase capacity for commercial clean cap production here at Water Ridge, expanding the rest of our small molecule platform and adding GMP API manufacturing capacity. Likewise, the biologic safety testing relocation from Southport to a new state-of-the-art facility in Leland, North Carolina is progressing nicely. The building is framed and work is moving towards a move-in date by the end of the year. This new facility more than doubles our operational square footage to support current and future growth. The fully customized design will provide room for a mass spectrometry center of excellence and specialized cell culture facilities. It will significantly increase our cold storage capacity while providing other R&D laboratory and automation upgrades. Extensive process flow analysis has been incorporated into the design process to optimize and enhance both our manufacturing and kit packaging operations. These new facilities are one example of how we continue to make investments to further accelerate growth in our base business. We also remain active in pursuing inorganic growth opportunities and look forward to being able to announce additional acquisitions sometime in 2022. We are committed to expanding our reach as a key specialized raw materials supplier, and we are actively working to expand our international footprint so that we may improve our ability to directly serve our global customer base. I'll now ask Kevin to cover our first quarter performance and some more details on our 2022 guidance. Kevin?