Repligen Corporation

Good day, ladies and gentlemen, and welcome to Replige Incorporation's fourth quarter and 2020 earnings conference call. My name is Sarah, and I will be your coordinator. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by a zero. This event is being recorded. Please note that there will be a question and answer session following the company's formal remarks. 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 Repligen.

Sandra Newman Thank you, Sarah. Good morning, everyone. We appreciate you joining our call. This morning, we'll cover financial results and business highlights for the three-month and full-year periods ended December 31, 2020. We'll also provide financial guidance for the current year, 2021. 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 this 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 10-Q, the current report on Form 8-K, which we filed today, 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 also on SEC.gov. 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 gap 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. That's it for me. Now I'll call the turn call to Tony Hunt.

Great. Thank you, Sandra. And good morning, everyone, and welcome to our 2020 year-end update. We're really delighted with the way we finished off the year with 47% organic growth in the fourth quarter, 25% organic growth for the full year, and overall 2020 growth for the company coming in at 36%. As we all know, 2020 was a remarkable but challenging year where we observed accelerated demand for our products to support COVID-19 vaccine and therapeutic development. This came on top of very strong growth in non-COVID-related revenue, which grew 18% overall for the year. We were also able to complete a series of strategic acquisitions to advance our system strategy. In addition, we launched innovative new products. We continue to gain traction across our industry, including gene therapy accounts. I'm especially proud of how our team has risen to the challenges of 2020, showing a real drive to make a difference during the pandemic, making tremendous efforts to manufacture and deliver bioprocessing equipment and consumable products to our customers, and to scale our operations to keep pace with accelerating demand. Throughout the year, COVID-related orders increased, and by Q4, COVID programs accounted for 22% of our overall revenue, which is up sequentially from 15% in Q3. For the full year, COVID customers accounted for 13% of our revenue and 17 points of our 36% reported growth. Our order book also accelerated in the fourth quarter and finished the year up approximately 80%, with COVID programs contributing approximately half of this growth. Based on this order trend, we now expect COVID-related revenues to double from 46 million in 2020 to a range of 90 to 100 million this year, an increase from our previous projections of 50 to 70 million. Before jumping into our business highlights for Q4 in 2020, I want to spend a few minutes on the five strategic initiatives that we highlighted at the beginning of last year. Number one was around successful integration of seed technologies and expansion of their customer and application base. Second was around launching disruptive technologies from our R&D pipeline and expanding these technologies into new applications. The third one was around growing our gene therapy business by establishing our core technologies in viral vector manufacturing. Fourth, was around expanding our manufacturing capacity to support our business unit growth and our longer-term vision of attaining a billion dollars in revenue by 2025. And finally, number five was around adding new technologies through M&A with primary focus on building out our systems and fluid management portfolio. So let's start with C Technologies in our process analytics business. When we kicked off 2020, we set three goals for ourselves. We wanted to quickly onboard a team of 10 new salespeople to broaden our market presence across the regions, including going direct in Europe. We wanted to build a pipeline of new accounts and expand applications beyond maps into gene therapy. And finally, we wanted to focus on flow PPE. We wanted to demonstrate to customers the power of inline, real-time process monitoring and bring the next-gen flow technology to market. It's been an amazing year for our process analytics team. We hired and completed the onboarding of the commercial team in Q1. We focused on building the funnel with new accounts, which resulted in 50% of systems sold in the second half of the year coming from these accounts. We expanded the applications for our process analytics products into gene therapy with laser focus on viral vector analysis. Finally, the Flow BPE team moved more than 20 customers into clinical evaluations. At the same time, our R&D team delivered on advancing its next-gen Flow VBE technology, and we are now accepting orders for this instrument here in Q1. The business finished the year with pro forma growth of 30% and is on track for another strong year of growth in 2021 in the range of 20% to 25%. On the R&D front, our innovation engine continued to produce. We set a goal at the beginning of the year to launch five products and expand our technology adoption, especially in gene therapy. In filtration, we launched our Tangenex CS flat sheet cassettes into gene therapy. We ramped our marketing efforts for bench and process scale TFDF systems to significantly improve and simplify harvest clarification. And we completed R&D work on our next-gen ETF controllers. In proteins, we developed a ligand and resin for spike protein in under 10 months, working with Navigo GmbH and Pure Light Life Sciences. Finally, as mentioned earlier, in process analytics, we launched our next-gen flow VPE technology in the first quarter this year, which will be used for highly accurate inline protein concentration measurement. In gene therapy, the challenge in 2020 was really around gaining customer access and conducting evaluations during COVID. Our commercial and field applications teams were incredibly resourceful, and by the end of the year, we had firmly established OPUS prepack columns, TFDF, flat sheet cassettes, ATF, and BPE technology in viral vector manufacturing applications. Our products match up well with the needs of this customer base, which has resulted in robust demand. We added on average 10 to 15 new gene therapy customers per quarter in 2020, and we now have approximately 75 significant accounts adopting and implementing our technology. Even with some gene therapy customers shifting focus to COVID programs, which we exclude from our gene therapy revenues, we achieved approximately 30% growth from our $41 million base in 2019. In 2019 and 2020, we talked about the importance of capacity expansion, and the work done over the last two years really helped us as we were in the middle of a surge in demand. Having spent just over $26 million in 2020, we accelerated our capital investments. We will accelerate our capital investments in 2021 and expect to deploy $55 to $60 million as we build out our capacity, a major focus on our infiltration on single-use products. By mid-2021, we expect to have our European Centre for Pre-Pack Columns up and running. and to have significant capacity in our hollow fiber business. Finally, we plan to complete and build out an incremental 64,000 square feet of manufacturing space in Marlborough to support our TFF systems, ATF, and flat sheet cassette businesses. On the M&A front, we recognized back at the beginning of the year that our systems portfolio was gaining traction in the marketplace, especially for hollow fiber applications. We also realized that we were missing opportunities, especially in downstream apps where we did not have the breadth in our systems offerings to address customer needs. The acquisitions of Artisan, EMT, and NMS directly addressed these gaps with gold standard systems and consumables that truly extend our system offering to chromatography and downstream filtration. We now have a complete portfolio of systems and fluid management consumables, and our goal now is to invest in and expand our customer base as we roll these products out to our global commercial org. As we move into 2021, we will continue to be opportunistic on M&A, and we will focus on expanding our franchise footprint with differentiated technologies. So moving now to the fourth quarter and our business performance. As reported today, we had a record quarter with $108 million plus in sales. Each of our proteins, analytics, filtration, and chromatography franchises performed well and together delivered almost 47% organic growth in the quarter with our filtration business leading the way with approximately 60% organic growth. Our chromatography business was up over 20% for the quarter and finished the year up 14%. Within chromatography, our Opus revenues for the full year 2020 were up approximately 20% and column sales increased by 30%. With the investments we've made in 2019, our capacity increased significantly, and we now have best-in-class lead times for prepack columns in the industry. We continue to migrate customers to dropship resins, which has improved our overall margins, and we are very excited to bring additional capacity online in Europe in mid-2021. We believe this will position us well for the next three to five years, not only on the capacity front, but with respect to market opportunities. Finally, we're excited about the work we're doing with Navigo on the ligand development side, as this has resulted in new opportunities for us to deliver resins in our prepack column format, adding to the growth potential for our chromatography business. We expect chromatography will grow in the range of 30% to 40% in 2021. Our proteins franchise had a very strong quarter in Q4 and finished the year up 24%. This is the second year in a row where we've had 20% growth for this business. We started the year expecting the franchise to be down 15%, given the transition to in-house manufacturing of protein A ligands at Cytiva. With the onset of COVID, demand increased, and we saw across-the-board strength from our three main proteins customers, including increased demand from Cytiva, Milfor, and continued market traction for our NGL Impact A ligand, through the sale to PureLite's Jetta Day 50 resin. We expect 2021 to be another strong year for this franchise with growth in the range of 10 to 20%. Our filtration franchise was the big growth driver for Repligen in 2020, up greater than 60% in the quarter and up 46% for the year. We've benefited from continued traction at gene therapy accounts and COVID, where 60% of our total COVID revenues for the year came from our filtration portfolio. We are a key technology provider in many of the late stage and commercial vaccines and expect 2021 to be an exceptional year for filtration, given the strong order load and the overall global demand for our products. We expect the filtration franchise will grow in the range of 55 to 60% this year. Overall, we expect the company to grow at 37 to 43% in 2021, with organic growth in the range of 26 to 33%. We expect the first half to be very strong as many of our customers ramp up COVID manufacturing. As we move through the year, our strategic priorities will center on the following. Number one, we want to support ongoing demand for our customers while continuing to prioritize the health and safety of our employees. Number two, we want to build out capacity to support accelerating growth in our business. Three, we want to integrate artisan, EMT, and NMS. Four is around new product launches, including our spike protein resin, next generation flow VPE, and next gen TFF systems. And finally, we want to focus on continued traction in gene therapy. We believe we are well positioned to gain further market share in bioprocessing, relying on our strategy of growth through acquisition, continuous innovation, and expansion of our customer base. We believe that the M&As and highly differentiated new products developed and launched over the last 18 months will propel Repligen to above industry average organic growth over the next three to five years, and we have set our sights on achieving a billion in revenue by 2025. Before concluding, I wish to recognize our 1,100-plus employees around the globe. including our new colleagues at Artisan, EMT, and NMS for their commitment and leadership in 2020. I also want to thank our loyal shareholders and customers for their part in Refugee's success as we look forward to delivering another strong year here in 2021. Now I'd like to turn the call over to John for a report on the financial performance.