Repligen Corporation

Good day, ladies and gentlemen, and welcome to Replegent Corporation's fourth quarter of 2021 earnings conference call. My name is Chad, 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. Please note that there will be a question and answer session following the company's formal remarks. To ask a question, you may do so by pressing star then one on your telephone keypad. In order to accommodate all individuals who wish to ask questions, there will be a limit to two questions at a time. Please also note today's event is being recorded. I would now like to turn the call over to your host for today's call, Sandra Newman, Head of Investor Relations for Repligen. Please go ahead.

Thank you, Chad. Welcome to everyone listening in today. On this call, we'll cover business highlights and financial performance for the three and 12-month periods ended December 31st, 2021. We'll also provide financial guidance for the current year, 2022. 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 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, 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 Replicant'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, contingent consideration, 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 Replicant'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.

Great. Thanks, Sandra. Good morning, everybody, and welcome to our 2021 year-end update. We are delighted with the way we finished off the year with 69% organic growth in the fourth quarter, 71% organic growth for the full year, and overall 2021 growth for the company coming in at 83%. Our base business continues to deliver above-market growth with 42% growth in the quarter and 38% for the year. reflecting accelerated demand for our products on top of COVID tailwinds. Overall, 2021 was an outstanding year for the company as we continue to execute on our core business strategy of enabling our bioprocess customers with highly differentiated technologies. So let's cover some of the key highlights. On the M&A front, we strengthened our market position in filtration with the Polymem deal, in proteins with the Avatide acquisition, and in fluid management with the BioFlex Solutions deal. We are well positioned as we enter 2022 to take additional market share with strong brand recognition, a reputation in our industry as the innovation leader in bioprocessing, and a growing portfolio of new products, many targeting gene therapy. Operationally, we increased our capacity between three and nine fold across all our major product lines. This allowed us to support in a very meaningful way the ongoing fight against the pandemic with the company delivering approximately $190 million in product to the leading COVID vaccine manufacturers. The increased capacity also supported our base business growth, which was exceptional, with adoption by gene therapy customers being a key driver of this growth. Our total addressable market increased significantly from 3.7 billion in 2020 to over 8 billion in 2021, driven by COVID market expansion, base business acceleration, and M&As that have allowed us to expand our markets. Finally, 2021 was all about increased commitment in the area of safety, sustainability, and DEI. We published our first sustainability report in Q4. Some highlights in the report include a reduction in carbon emissions of 12% versus our baseline year in 2019, the conversion to 100% renewable energy at four key sites, and the launch of our diversity and inclusion initiative. In 2022, we will focus our efforts on DEI initiatives, moving to 100% renewable energy at additional sites, packaging, and single-use recycling programs. Before jumping into our business highlights for Q4 and full year, I want to spend a few minutes on the strategic initiatives that we have highlighted at the beginning of the year. Number one was around building out our capacity to support our business unit growth. Number two was around increasing our market traction in gene therapy, Three was around launching disruptive technologies from our R&D pipeline. And four was around integrating EMT, NMS, and Artisan into Repligen. So let's start with our progress on capacity. Our goal, like many of our peers, was to rapidly expand capacity across our product lines. The progress we made was significant, especially in the area of filtration, where the combination of PolyMEM acquisition and the expansion programs at our Rancho site increased our hollow fiber capacity over nine fold. We also brought our European Opus manufacturing facility online. And by the end of 2021, 90% of our European customers had qualified in Breda for production of prepack comms. Much of what we accomplished last year came from a combination of increased efficiency and expansion of our workforce. In 2022, we expect to spend an additional 60 to $70 million to complete the majority of our site and capacity expansion plans. This includes adding more filtration space in Rancho and Marlborough and opening up our first assembly center for fluid management in Hopkinton, Mass. In cell and gene therapy, we increased our market presence with overall growth close to 40% for the year, driven by our filtration and process analytics portfolios and increased traction in Asia. We successfully focused our efforts on acquiring new customers, adding about 50 new accounts during the year. We finished 2021 with approximately 100 significant accounts, up from 70 in 2020. With our gene therapy application center up and running and a focus in the industry on scale-up, we expect growth to be north of 30% here in 2022. New products continue to be a core pillar in our overall strategy. In 2021, our R&D team delivered on three key programs. The first was around launching the Flow VPX platform, which is a GMP-compliant inline analytics system, which has been quickly adopted by our customer base on the manufacturing floor. Second was working with Navigo and Purolite Life Sciences to launch the industry's first protein A resin to effectively purify pH-sensitive monoclonal antibodies, overcoming aggregation challenges. And the third was around optimizing our artisan custom systems to deliver on a portfolio of standardized chromatography systems. We expect 2022 to be another strong year for R&D as we focus on launching a family of AAV resins, which we announced earlier this week, and expanding our artisan family of filtration systems, reinforcing our position in bioprocessing as the innovation leader. Finally, on the integration front, we successfully completed the integration of EMT, NMS, and Artisan into Repligen. The combined business performance came in as expected, up approximately 26% on a pro forma basis, while contributing in a very meaningful way to the manufacturing of internal Repligen products. The integration of EMT and Artisan was a key focus for us in 2021, with the build-out of both our Clifton Park, New York, and Waterford, Ireland sites to address the growing need for single-use flow paths in our industry. With the addition of BioFlex solutions in late 2021, we now have a broad portfolio of fluid management products, and we plan to move these products into a new franchise for the company here in 2022. So moving now to Q4 and full-year business performance. As reported today, we hit a record quarter with nearly $187 million in sales and overall growth of 72%. with all four franchises delivering exceptional performance in the quarter. Within our base business growth, gene therapy revenues were up 85% in the quarter and approximately 40% for the year, reinforcing our market position and demonstrating accelerated traction for our products, especially in the second half of last year. COVID-related revenues also increased in the quarter, driven by increased demand from COVID vaccine customers and increased production output coming from our PolyMEN facility. COVID demand accounted for 33% of our revenue, our 34 points of total revenue growth in the quarter. For the year, COVID revenues increased to 190 million, representing 28% of our overall revenue. We continue to see strong demand from our COVID customer base and expect that COVID accounts will contribute 200 to 220 million in revenues for the company this year. On the orders front, we finished the year up approximately 80% year on year, with base business orders growing at 40%. In the quarter, base business orders were up over 20% off a tough comp in Q4 of 2020. Sequentially, COVID orders were down following a stellar Q3 when the majority of COVID orders for 2022 were placed. Our COVID order book for 2022 is now over $180 million and very much in line with our expectations for the year. So moving to franchise-level performance, whereas of this report, we are placing revenue from Avatide and Affinity Resins, which to date have been in chromatography, into our Proteins franchise to better align with our Affinity Leggings business. Our chromatography franchise will now consist of Opus prepack comms, Artisan Chromatography Systems, and Eliza Kits. Our chromatography business had a solid quarter and was up 29% for the year, excluding the contribution from Avatide and Affinity Resins, and up approximately 40% if these products were included. Within chromatography, our Opus revenues for full year 2021 increased by 22%. In the quarter, And throughout the year, we have seen strong demand for our largest Opus 80 columns, as more customers put Opus into late stage in commercial processes, including COVID vaccines. But the main challenge we are dealing with continues to be the extended lead times on resin availability from the top suppliers. We expect that the resin supply issue will improve as we move through 2022, which will accelerate growth for Opus in the second half of this year. We expect our chromatography franchise to grow in the range of 25 to 30% for 2022. Our proteins franchise had another strong quarter and finished the year up 48% with avatide and affinity resins included and approximately 40% excluded. 2021 was a pivotal year for us as we executed strategically on many fronts. First, we signed a new supply agreement with Cytiva Second, we developed a new ligand and launched our NGL high pH resin with Purolite. And third, we acquired Avatide, increasing our affinity content. In 2022, we expect that demand from Cytiva will decrease and will be mostly offset by Avatide revenue and continued traction in the marketplace for our NGL ligands. Overall, we expect proteins to be a down approximately 5% in 2022. Our filtration franchise was the big growth driver for Repligen in 2021, up more than 100% in the quarter and over 130% for the year. The story of the quarter and the year was the continued momentum in the marketplace for our flat sheet cassette, hollow fiber, and systems products. Key highlights in the quarter included the launch of our new Crossflow FS system for flat sheet cassettes, the stacking in of XLATF into multiple next-generation commercial drugs, and the acceleration in gene therapy demand. For the year, we saw significant growth in COVID vaccine revenues, which comprised about 40% of our overall franchise revenue. With strong momentum in the marketplace, we expect the filtration franchise will grow in the range of 25% to 35% in 2022. Finally, our process analytics franchise had an outstanding quarter and year in 2021. Revenue growth was over 50% for the quarter and 44% for the year. The expanded commercial team has focused on new account development, which represented approximately 60% of Q4 revenues and driving our VPE technology into new application areas, especially in cell and gene therapy. We continue to be encouraged by the adoption of Flow VPX and we expect 2022 to be another strong year for analytics with growth of approximately 25%. Overall, we expect the company to grow at 19% to 24% in 2022, including strong base business growth of 20% to 22% and organic growth in the range of 18% to 22%. As we move through the year, our strategic priorities will center on the following. Number one will be around building out our capacity to support accelerating growth in our businesses. Number two will be around successfully integrating Polyman, Avatide, and BioFlex solutions. Number three will be around launching new products, including AAV resins and Artisan TFF systems. And finally, number four will be on continued traction at cell and gene therapy accounts. We believe we are well positioned to gain further market share in bioprocessing over the next three to five years, and we are confident about hitting our goal of a billion dollars by 2024. Before concluding, I wish to recognize our 1,800-plus employees around the globe, including our new colleagues at Polymem, Avatide, and BioFlex Solutions for their commitment and leadership last year. I also want to thank our loyal shareholders and customers for their part in Repligen's success as we look forward to delivering another strong year here in 2022. Now I'd like to turn the call over to John for a report on our financial performance.