Repligen Corporation

Good day, ladies and gentlemen, and welcome to the Repligen Corporation's third quarter of 2021 earnings conference call. My name is Anthony and I will be your coordinator. 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 a question, There will be a limit of two questions at a time. To join the question queue, please press star then 1. To remove yourself from the queue, please press star then 2. 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, Anthony, and welcome to everybody listening in today. On this call, we'll cover business highlights and financial performance. for the three and nine-month periods ended September 30th, 2021. We'll also provide updates to our financial guidance for the year 2021. RepliGEN's president and CEO, Tony Hunt, and our CFO, John Snodgrass, will deliver our report and then address questions. 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 10-Q, the current report on Form 8-K, which we filed today, and other filings that we make with the Securities and Exchange Commission. 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 also 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 expense including R&D and SG&A, operating income and operating margin, other income and expense, 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 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 Q3 earnings call. As you saw in our press release this morning, we delivered another outstanding quarter and first nine months for the company. The effort from our global team has been exceptional, as we have focused on building out our workforce and manufacturing capacity and on integrating our four acquisitions since Q3 of last year. In the third quarter, revenue from COVID customers increased to 48 million, up sequentially from 45 million in Q2. We also had stellar organic growth for our non-COVID-based business, which was up 49% organically in the quarter and 37% year-to-date as both MAP and gene therapy account revenue accelerated. Strategically, during the third quarter, we executed on a number of agreements that strengthen and expand our proteins franchise. First, we signed a new four-year protein A ligand supply agreement with Cytiva, which extends out to 2025. Next, we developed and launched with Navigo and Purolite a new protein A ligand that is unique in the marketplace and solves for aggregation challenges associated with pH-sensitive antibodies. And finally, we acquired Appetite, a leading player in affinity ligand discovery and development, which builds off and complements the strategic partnership we have with Navigo. In terms of overall revenue, we delivered 89% growth in the quarter, including 77% organic growth to reach $178 million, driven by strength in the base business where gene therapy growth was a standout and from COVID programs. Our base business accounted for 67% of revenue and 42 points of our growth, with all four franchises delivering exceptional performance in the quarter and through the first nine months of 2021. As noted above, within our base business, gene therapy revenues were up over 50%, where our filtration franchise continues to see strong adoption of viral vector accounts. In addition, our gene therapy customer base continues to expand, which we see as a positive leading indicator for future growth. 16 new gene therapy accounts were added in the quarter and more than 50 have been added year to date. Based on these results, we now expect full year gene therapy revenue growth in the range of 30 to 40%, representing 11 to 12% of our overall revenue. COVID programs represented 27% of our overall revenue or 36 points of our total growth in the third quarter. COVID demand has been very consistent here in the second half of 2021. And we expect Q4 revenues for COVID to be very much in line with Q3. Finally, acquisitions made in 2020 and in 2021 represented over 7% of both third quarter and year-to-date revenue. All are tracking at or above our expectations, and we continue to make significant operational investments to increase overall capacity as we head into 2022. On the orders front, we continue to see strong momentum with orders up approximately 130% through the first nine months of this year. In the quarter, COVID orders represented over 40% of the order book as a number of our large COVID customers placed significant orders for next year. Our COVID order book for 2022 is now over 150 million and we are very much in line with our expectations. that COVID accounts will contribute at least $200 million in revenues for the company next year. Our base business orders were again very robust, with strength in ATF, artisan systems, hollow fibers, and Opus prepack columns. Given the strength in orders and overall revenue performance, we now expect 2021 to finish between $655 and $665 million, with COVID revenue in the range of $175 to $180 million. Our base business growth should be in the range of 37% to 39%, reflecting the strong adoption of our core technologies in bioprocessing. Before jumping into our quarterly results, I want to provide some commentary on our capacity expansion programs and our most recent acquisition of Avatide, which closed on September the 20th. Let's start with capacity. During Q3, we made significant progress building out additional capacity for the company. In France, Polymem is now fully online producing and shipping hollow fiber membranes, supporting our bioprocessing customers, with the first modules shipped in late Q3. We expect to continue to ramp up capacity at our Toulouse site over the coming months as more customers qualify in the products. In the Netherlands, our Opus Breda facility came online in Q3, and the first Opus columns were delivered to European customers in September, again putting us in a very good position for 2022, where EU customers will be able to drop ship resins to our Breda facility for column packing. Through the end of Q3, over 34 European customers had formally approved and accepted our Breda facility for the manufacturing of pre-packed columns. Finally, over the coming two quarters, we expect to add significant capacity in our Rancho Dominguez, California and Marlborough MASS sites to support our filtration franchises. Moving now to the acquisition of Avatide, an expert in affinity ligand discovery and development. This is a very important acquisition for us as it, one, strengthens both our proteins and chromatography businesses and strategically moves Repligen into affinity resin solutions for gene therapy, where we can leverage our commercial organization. And two, it builds off the excellent partnership we've established with Navigo GmbH and expands our ligand discovery and development engine Our goal over the coming months is to focus on launching differentiated new products into gene therapy, viral vector space, and building out our portfolio of affinity residents so we can compete more effectively in the rapidly emerging applications within bioprocessing. So moving now to our quarterly performance. The story of the quarter was the 49% non-COVID-based business growth and the continued strength of COVID accounts, which were up 247% year over year. Order load, as noted earlier, was exceptionally strong with our non-COVID accounts outpacing COVID demand. Infiltration, our business again more than doubled in Q3 compared to the third quarter of 2020. The strength infiltration was broad-based. Our ATF business is beginning to make some really inroads into gene therapy accounts where lentivirus and AEV customers are seeing the benefits of increased yields. Our crossflow holofibre and Tangenix flat cheek set businesses more than doubled in the quarter as we continue to see robust demand to support COVID vaccines along with accelerated adoption for non-COVID applications. We are especially happy with our new customer progress. For example, in our flat cheek set business, we added 36 customers with approximately one third of them coming from gene therapy. Finally, our systems business continues to perform well with strong market demand for our benchtop and cross-scale products. It was an important quarter for us as we launched a series of fully automated single-use systems supporting our Tangenix flat-sheet cassette franchise and a series of new artisan chromatography systems, which we expect to be drivers of growth for us in 2022. Based on strong Q3 performance, we now expect our filtration business to grow at 125% here in 2021. Moving to chromatography, our Opus prepack column business had an excellent quarter driven by gene therapy and COVID customers. We saw a nice uptick in demand through the first nine months for our Opus 80 columns as customers continue to implement our technology and late stage processes. We continue to transition customers to customer supplied resins and now almost 70% of Opus revenues are coming from columns. This will improve again in 2022 as our Breda facility is now online And as mentioned earlier, customers have qualified and accepted shipments from this facility. For the year, we anticipate the chromatography franchise will grow in the range of 40 to 45%. Our proteins business had another outstanding quarter with strength across the board in ligands and growth factors. We're pleased to have secured the long-term contract with Sativa on protein A ligands. And we look forward to the market impact of our protein A high pH resin developed with Navigo and new products to be developed and launched by Appetite. We now expect proteins to grow 40 to 45% here in 2021. Finally, our process analytics business continues to accelerate as customers adopt SoloVPE and FlowVPX. For the quarter, the business was up approximately 31% with new accounts again, accounting for almost 50% of the system sold. Within our analytics customer base, 60% of the growth is coming from the monoclonal antibody customers, with increasing contributions coming from new modalities in gene therapy, plasmids, and oligos. We anticipate growth of approximately 35% for this business in 2021. So overall, we had another outstanding quarter in Q3 with exceptional strength in our non-COVID-based business and consistent demand from our COVID account base. With strong order growth and new products entering the market, we're confident about our finish in 2021 and continued growth in 2022. We look forward to updating you on our progress through the year. And with that, I will turn the call over to John for the financial update.