Repligen Corporation

Good day, ladies and gentlemen, and welcome to Repligen Corporation's third quarter of 2020 earnings conference call. My name is Danielle, and I will be your coordinator. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. In order to accommodate all individuals who wish to ask questions, there will be a limit of two questions at a time. I would now like to turn the call over to your host for today's call, Sandra Newman, Head of Investor Relations for Refugen. Please go ahead.

Thank you, Danielle. Good morning to all of our participants. We really appreciate you joining our call. This morning, we'll cover financial results and business highlights for the three and nine-month periods ended September 30th, 2020. We'll also provide revised financial guidance for the year 2020. President and CEO Tony Hunt will cover business updates and our CFO, John Snodgrass, will cover our financial results and guidance. As a reminder, the forward-looking statements that we make during the call, including those regarding our 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 risks related to our business is included in our annual report on Form 10-K, our quarterly reports on Form 10Q, the current report on Form 8K, which we filed this morning, and other filings that we make with the SEC. Today's comments reflect management's current views, which could change as a result of new information, future events, or otherwise. The company does not obligate or commit itself to update forward-looking statements except as required by law. During this call, we're providing non-GAAP results and guidance. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to Repligen's website and on sec.gov. The non-GAAP figures in today's report include the following. Revenue growth at constant currency, gross profit and gross margin, operating expenses, including R&D and SG&A, operating income and operating margin, income tax expense, net income, and earnings per share, as well as EBITDA and adjusted EBITDA. These adjusted financial measures should not be viewed as an alternative to GAAP measures, but are intended to better enable investors to benchmark Repligen's current results against historical performance and the performance of peers when evaluating investment opportunities. Now I'll turn the call over to Tony Hunt.

Thank you, Sandra, and good morning, everyone. Quarter three was another outstanding quarter for the company as we continued to execute on both our financial and strategic goals. The effort from our global team through the first nine months of 2020 has been exceptional. As demand has accelerated, we have focused on increasing capacity across many sites, delivering on key R&D programs and executing on three acquisitions. To support our continued growth, we added talent across the organization and we are now approaching 1,000 full-time employees. a 30% increase since January 1. In terms of overall revenue growth, our businesses delivered over 35% growth in the quarter, including 31% organic growth to reach $94.1 million, driven by strong demand from COVID and gene therapy programs. We estimate that COVID programs accounted for approximately 55% of our revenue growth for the third quarter and 35% to 40% of our revenue growth through the first nine months. while non-COVID-related growth was approximately 16% during the quarter and 17% to 18% for the year to date. So a really strong 2020 thus far, and we're really proud to be involved in the hard work being done worldwide to fight the pandemic. From an orders perspective, total orders were up approximately 80% in Q3, with COVID programs accounting for approximately half of this increase. Through the first nine months, order growth was greater than 50%, with COVID programs again accounting for approximately 40% of the increase. Based on continued strong performance in our core markets and increased demand from COVID customers, we now expect to end the year with overall revenues up 29% to 30% and organic growth in the range of 23% to 24%, with a strong order load heading into 2021. As you saw last week, We've also executed on our strategic goals with the closing of our acquisition of non-metallic solutions and the announcement of our intent to acquire artisan bio-solutions. The non-metallic solutions, our NMS deal, further strengthens our supply chain and gives us core competency in plastic fabrication and assembly, as well as rotor molding. When combined with engineered molding technology and our ProConnex businesses, we now have a deep portfolio of products focused on fluid management, which is critical to the performance of single-use systems. The proposed Artisan BioSolution deal expands our current systems portfolio with gold standard technology, infiltration and chromatography that complements our flat sheet cassette and Opus prepack column product lines. As with many of our acquisitions, the main focus will be on building out the commercial organization developing the sales funnel, integrating the operations into our global manufacturing network, and investing in select R&D programs to further expand and differentiate this unique offering. We expect Artisan to contribute $33 million to $36 million in revenue in 2021 and anticipate that the Artisan business will be breakeven on an adjusted EPS basis in 2021 and accreted in 2022. In summary, these acquisitions really complement each other and help to strengthen our existing filtration, chromatography, and process analytics franchises. A combination of Artisan, EMT, and NMS significantly expand our single-use systems and flow path portfolio well beyond hollow fibers and into downstream chromatography, flat sheet filtration, and buffer and media prep. These acquisitions in the longer term also position us very well as our industry pivots to downstream continuous manufacturing. We look forward to closing the artisan acquisition here in Q4 and to reporting out on our progress as we move forward. So moving now to Q3 results. As reported today, we had a record quarter with 94 million in sales and adjusted operating margins north of 28%. The story of the quarter was again the COVID impact on all our franchises and the continued traction for our products at Gene Therapy Accounts. As noted earlier, COVID revenue in the quarter accounted for about half our growth or approximately 14% of overall revenues. We now expect COVID impact for the full year to represent 10% of total REVs. Our non-COVID markets continue to perform well with organic growth in the quarter at 17% as customers continue to implement and scale our technologies in CoreMAP and buy similar applications. In addition, we continue to see strength in gene therapy accounts, where non-COVID revenues were up greater than 30% in the quarter and through the first nine months of 2020. We remain on track to achieve over 30% growth in gene therapy for this year. Turning to our franchises, our process analytics business continues to gain momentum, up approximately 30% in the quarter, There has been an accelerated adoption of flow VPE as customers implement this highly differentiated technology for downstream filtration and chromatography applications. To further strengthen our market position, we are now completing beta testing on our next-gen flow VPE systems and software, and we will be accepting orders by the end of the year. Last quarter, I talked about the expanding applications for VPE technology in gene therapy. Over the last four months, we are seeing clear traction at these accounts as solo VPE technology gets adopted to measure viral titers, plasmid concentration, and to determine empty versus full capsid ratios. Overall, we now expect analytics business to deliver close to $33 million in revenues for the year, slightly ahead of our predictions back in July. On the proteins front, we had another strong quarter with key players and ligands contributing to the franchise growth which came in close to 20%. We now expect our proteins franchise to be up another 5 to 10 points to a range of 15 to 20% by the end of the year as orders continue to increase with growth factor and COVID demand being key drivers. In related advances, we were really pleased to announce on the 1st of October the successful development of an affinity ligand targeting the spike protein through our partnership with Navigo Proteins in Germany. We are now scaling up this ligand in manufacturing and anticipate having an affinity chromatography resin in the market in early 2021 for potential use in the purification of COVID-19 vaccines. Our chromatography franchise continues to be driven by our Opus product line. The prepack column unit volume growth in the quarter was really impressive, upgraded than 40%, as our lead times have come down dramatically. based on capacity expansion and manufacturing investments we've made over the last 12 months. While we did not see any significant demand for OPAS for COVID programs in Q2, Q3 was a different story. Many of our CDMOs and BioPharm customers involved in COVID programs are turning to quick switch over prepack columns as they gear up for production, creating an increase in demand for both resins and our OPAS columns. We observed this demand starting in mid to late Q3, and this is carried over into order four. Our filtration portfolio also had an exceptional quarter with all product lines contributing to the franchise growth in excess of 50%. As we discussed last quarter, we anticipated that our Excel ATF business would pick up in the second half of 2020 as manufacturing campaigns that were delayed in Q2 due to COVID came back online. And we did, in fact, actually observe a significant uptick in activity for ATF and Q3, especially at CDMOs and large pharma accounts in Asia. Our flagship cassette business also had an excellent quarter with gene therapy and COVID accounts driving performance. As demand for our flagship cassettes has increased, we've invested and expanded our capacity in Marlborough, which puts us in a strong position as we finish off 2020 and move into next year. Our hollow fiber systems with ProConnect flow paths and modules also delivered an excellent quarter as customers continue to scale and implement this technology across many processes. Finally, EMT is off to a solid start with strong order demand since we completed our acquisition of the company back in July. Since then, we have invested in and increased overall capacity. We've brought onboard commercial expertise to drive the adoption of the portfolio. setting the stage for increased adoption of EMT silicon tubing and custom component products. So in summary, we've had an excellent quarter and first nine months in 2020. We have delivered on our financial goals, executed on three important acquisitions that strengthen our single-use portfolio and broaden our systems offering. We've also invested in people and infrastructure to ensure our ability to meet demand for our products. We've introduced exciting new products to improve the process of manufacturing biologics, and we remain committed to inspiring advances in bioprocessing through constant innovation. With a healthy balance sheet, we continue to invest in our people, our products, and our facilities to meet the demand of the bioprocessing market. And as we move through the final quarter of 2020, our focus will be accelerating the build-out of capacity to support the increased demand for our products, finalizing our new product launches, and supporting the integration and success of EMT, NMS, and Artisan. With that, I'll hand it over to John for a financial update.