Repligen Corporation

Good day, ladies and gentlemen, and welcome to Repligen Corporation's first quarter 2021 earnings conference call. My name is Ailee, 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 zero. Please note this event is being recorded. Following the company's formal remarks, there will be a question and answer session. 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.

Thank you, Eileen. Good morning, everyone. We appreciate you joining us this morning in a busy season. We'll be covering today our financial results and business highlights for the three-month period ended March 31st, 2021. We'll also update our 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 report 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 are 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. 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, and welcome to our Q1 earnings call. We are delighted with our performance in the first quarter of 2021, where a combination of accelerating demand from COVID accounts and robust demand for non-COVID business drove our overall performance. For the quarter, revenue was up 88% coming in at $142 million, with organic growth up 69% versus Q1 2020. COVID-related programs made up approximately 25% of our revenue and 46 points of our total growth. Revenue from acquisitions we made in 2020, including Artisan, accounted for over 14 points of overall growth. Finally, we were especially pleased by the performance of our base business, which accounted for 27 points of our growth and approximately 68% of our revenue, reflecting continued strong demand for our products. As noted in our February call, the strength in orders that we saw in Q4 last year carried over into 2021 with an exceptional quarter in orders, driving not only our revenue beat, but also our increased guidance. Orders for the quarter were up more than 150% versus prior year, with customers now planning out into the second half of this year. Based on these developments, we now expect to finish the year with revenues in the range of $565 to $590 million. We anticipate COVID vaccine and therapeutic programs will contribute approximately 25 to 27% of overall revenue, and our non-COVID-based business to grow at or above 20%. Before jumping into our quarterly results, I want to provide a progress update on our strategic initiatives for 2021. Our number one priority, as it has been for the last 12 plus months, is building out our capacity to support accelerating demand across all of our businesses. As you know, our industry is seeing unprecedented demand for bioprocessing products, so it's critical that we stay ahead of this curve. Our operations team has done an outstanding job over the last year, as we have more than doubled, and in some cases, tripled our capacity and output across many of our product lines. For example, our overall capacity in flat sheet cassettes and hollow fiber products has more than doubled in this time period. On the chromatography front, we are in the final stages of completing our expansion in Breda for Opus prepack columns, which will immediately add four suites for Opus production and an additional four fully built to support future capacity needs. We expect this facility to come online in early Q3, offering customers local production in Europe. Finally, we plan to invest $55 to $60 million in CapEx programs here in 2021, as we build out capacity for flow path assemblies, filtration and chromatography systems, and flat sheet and hollow fiber product lines. We expect many of these programs to be completed in the second half of this year through to mid 2022, securing manufacturing capability to support the company as we scale to our goal of a billion dollars in revenue by 2025. Our second initiative is around integrating Artisan, EMT, and NMS into Repligen. It's been a busy first four months for our team as we evaluated the commercial and operational needs of these businesses. We have made good progress on building out the commercial teams with the addition of sales talent to support both the chromatography infiltration systems that we gained through these acquisitions, as well as the significant component portfolios at these companies. Operationally, we focused on integrating EMT and Artisan Waterford, our two centers of excellence for flow path assemblies, and expanding manufacturing capacity across this network. All three acquisitions are tracking at or above our plan for 2021, with Artisan having a very good quarter for revenue and orders. We're very confident in our guidance of 33 to 36 million for Artisan here in 2021. Finally, one of the real benefits of doing these deals is that we now have critical mass on the fluid management side of bioprocessing and a sustainable consumable stream as we move further into chromatography and filtration workflows. Our third initiative is around new product launches. Again, a strong start to the year for us with the launch of our spike protein resin, single-use ATF lab controllers, and next generation FlowVPE, which is called FlowVPX. We are very encouraged by the initial reaction to these product launches, with strong orders and shipments for FlowVPX following the technical launch of the product, and a rapid acceleration in the number of evaluations for the spike resin by many of the leading players in protein-based vaccines. Finally, our fourth initiative is focused on traction and gene therapy. Our commercial and field applications team were busy in Q1, adding in 17 new accounts and delivering another quarter of very robust orders. With a strong order load, we are on track for another good year in gene therapy with expected growth in the range of 25 to 30%. So moving now to our quarterly performance. The story of the quarter with the continued strength of COVID vaccine accounts and the 31% base business growth for the non-COVID customer segment of our franchises. Order load, as noted earlier, was exceptionally strong, with our non-COVID accounts contributing approximately two-thirds of this overall demand. Infiltration of our overall business more than doubled with across-the-board strength for all our product lines. The demand for our ATF devices, flat-sheet cassettes, and hollow fiber modules continues to strengthen as COVID vaccine and therapeutic manufacturers scale up here in 2021, and MAB and gene therapy accounts continue to implement these technologies and clinical processes. For example, our ATF business doubled as we have a number of late stage customers scaling the technology into commercial processes, in addition to COVID wins where ATF is used to boost bioreactor yield. Finally, our filtration systems business had an outstanding quarter with key benchtop and process scale systems, including the artisan filtration portfolio, up over 100% pro forma. This reflects the differentiation we have in the marketplace with our hollow fiber portfolio, which is now even further differentiated with the addition of the artisan single-use system. Our filtration portfolio is also capturing new opportunities. For example, in CHO and gene therapy applications, we continue to be encouraged by the performance and the adoption of our tangential flow depth filtration technology, or TFDF, which is on track to double again here in 2021. In next generation COVID vaccines, our products are getting specified into upstream and downstream parts of the workflow. We expect any significant revenue impact from these activities to be seen in the second half of 2021 and into 2022. Given the overall strength in orders, and capacity projections for the year, we are raising our guidance for our filtration business, which we now expect to essentially double here in 2021. Moving to chromatography, our Opus prepack column business had an outstanding quarter on orders and a solid quarter on revenue, despite the limited availability of chromatography resins from suppliers in our industry. We expect that the resin delivery situation will improve as we go through the year as more capacity comes online. As mentioned earlier, We are very encouraged by the early evaluation results of her spike resin and expect we'll see a pickup in orders as we go through 2021. Overall, we still anticipate the chromatography franchise to grow in the range of 30 to 40% this year. Our OEM proteins business also performed well with strengthened ligands and growth factors. The momentum we observed in 2020 on ligands has carried over into this year with robust demand for our products from our key partners as the market demand for protein A resins remains high. For the year, we now expect proteins to grow in the range of 20 to 30%. Finally, our process analytics business had an excellent start to the year, up over 40% year on year. We're clearly seeing the impact of our global commercial team with over 50% of instruments and consumables sold coming from new accounts. We saw an uptick in demand in Q1 at many of the companies supporting COVID manufacturing as solo VPEs were implemented into the testing process for these drugs. Our expectations for this business remains very positive with anticipated growth at the high end of the range of 20 to 25%. So overall, we are off to an excellent start to the year with strong execution at an operational, financial, and strategic level. Our team remains focused on the key priorities, which is really namely capacity expansion to meet increased demand and thus minimize lead times the integration of Artisan, EMT, and NMS to expand our premier systems offering, the development and launch of differentiated new products, and winning new opportunities in the marketplace. We continue to be well positioned to attain our long-term growth targets, and we're optimistic about the future. Our performance would not be possible without our exceptional employee base. and we continue to bring new talent into the organization, and we expect to add 300 to 400 individuals during the first half of this year. Through the dedication and commitment of the entire Repligen team over the last 15 months, we've been able to deliver essential bioprocessing products and to build and prepare our operations for continued growth. We look forward to updating you on our progress through the year, and with that, I'll turn the call over to John for a financial update.