Repligen Corporation

Good morning and welcome to the RepliGen 2022 second quarter conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. In order to accommodate all individuals who wish to ask questions, there will be a limit of two questions at a time. Please know this event is being recorded. I would now like to turn the conference over to Sondra Newman, Head of Investor Relations for Repligen. Please go ahead.

Thank you, Renan, and welcome to our second quarter report. On this call, we'll cover business highlights and financial performance for the three and six-month periods ended June 30th, 2022. We'll also provide updates to our financial guidance for the full year 2022. Revlogen's President and CEO, Tony Hunt, and our CFO, John Snodgrass, will deliver our report and then we'll open the call up for Q&A. 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're filing 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 to Revlichen'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 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 Q2 earnings call. We are very pleased with our performance in the second quarter and through the first half of 2022, with quarterly revenue coming in at $208 million and first half revenues reaching $414 million. Similar to Q1, our base business continues to perform well, finishing up 41% for the quarter and 39% through the first six months of the year. Our filtration and chromatography businesses were the major drivers of this growth, with robust demand in our core monoclonal antibody and gene therapy markets. Gene therapy growth, which excludes COVID-related revenue from these accounts, was up almost 70% in the quarter, representing 15% of total revenue with strong contribution across our direct product lines. This places us in a very good position to finish the year above our 40% growth target for gene therapy, or over 105 million in related revenue. A key concern during the quarter was the situation in China and our ability to not only ship product into the region, but also transact with our customers for future orders. Our China business entered the quarter up 36% on revenues and up 18% on orders versus prior year. This is a direct result of the outstanding effort by our team there as they worked through numerous logistic issues associated with the pandemic while still delivering an excellent quarter for the company. As discussed on our Q1 call, we saw a predicted drop off in COVID revenues in the quarter, down 21%. In terms of pacing, we still expect second half of the year COVID revenues to be down 30 to 40% versus first half. with full-year COVID revenues now expected to come in at $140 to $150 million, slightly down from our estimate on our Q1 call. From an orders perspective, we had another strong quarter, especially for our base business, which was up 14% year-on-year and 18% year-todays. Book-to-bill and total orders through the first half of the year was just below 1, while base business orders were above 1. Based on overall performance of our base business and a strong order book, we are updating our revenue guidance for the year. We are now projecting revenues in the range of 790 to 810 million for total revenue growth of 18 to 21%. We're increasing guidance for base business growth to 31 to 33% from our previous 24 to 31%. And we anticipate organic growth in the range of 19 to 22%. Before transitioning to the business unit highlights for the quarter, I want to spend a few moments discussing new product market traction and the progress we've made on capacity expansion. From a new product perspective, we had an excellent start to 2022 with the 12 products developed and launched last year. New product revenues accounted for 4% of our sales in the first half, led by our artisan chromatography and flat sheet cassette systems. Within our affinity portfolio, our Protein A, high pH ligand and resin sold through Ecolab is performing well for pH sensitive antibodies and a number of customers are now scaling up. In addition, our Avapur AAV portfolio of Infinity resins launched in the first quarter of this year are going through the sampling and evaluation phase of market seeding and adoption with very positive feedback on performance. Overall, we are very pleased with our new product adoption which validates the approach we have taken in R&D over the last five years, which is to focus on differentiated and disruptive technologies as core to our product development strategy. From an operations perspective, we have completed the hollow fiber expansion in Rancho, increased our filtration capacity in Marlborough, and opened up our new assembly center in Hopkinton. Q3 will focus on bringing this capacity fully online. With lead times down to pre-COVID levels, we are seeing share gain wins, especially in our filtration portfolio. We have another 12 months of capacity expansion programs lined up, which will position us well for the next five years as we support our growing customer base. Moving now to our quarterly performance. The story of the quarter was the 41% base business growth and the continued strength across the regions in our filtration and chromatography franchise. In filtration, Our business was up more than 40% in the second quarter and 50% through the first six months of this year, compared to the same periods in 2021. The strength infiltration was broad-based, led by our hollow fiber product lines. Our TFDF business accelerated up greater than 80% in the first half of the year. With more customer sites opening up, we've been able to conduct a significant number of field trials focused on process intensification. The interest in TFDF is accelerating for use in the production of monoclonal antibodies, MAP fragments, viral vectors, and exosomes. As customers scale and implement the technology, we fully expect that TFDF will be a key driver of growth for our filtration business going forward. Our ATF business had a strong orders and revenue quarter as customers continue to evaluate, implement, and scale the technology across multiple modalities. And finally, our hollow fiber systems business was upgraded in 30% driven by strong demand for both our bench top and process scale systems. For the year, we are increasing our guidance for filtration business to 24 to 28% growth up from our previous guidance of 19 to 24%. Moving to chromatography, our Opus prepack column product line had an excellent quarter driven by MAPS and gene therapy customers This business is off to a very strong start in 2022, with a 50% increase in demand for large-scale columns. In Europe, approximately 90% of our customers have now qualified in our Breda facility for prepack columns. We also continue to be encouraged by the split of residents and columns in our overall business, with columns now representing 70% of Opus revenues. Finally, we are seeing some positive signs of improved resident supply which should result in a strong second half for Opus. For the year, we anticipate that the chromatography franchise will grow in the range of 25 to 30%. Our proteins business had a solid quarter, but as anticipated, this franchise was down year and year with very tough comps for both ligands and growth factors. As discussed in our Q1 call, Cytiva continues to reduce their external demand in line with the agreement we signed in 2021. Our NGL family of ligands continue to perform well in the marketplace and we are encouraged by the traction we're seeing. We continue to expect proteins to be down approximately 10% here in 2022. Finally, our process analytics business continues to perform well as we focus our efforts on Flow VPX adoption. Flow VPX sales were up almost 40% year on year and approximately 60% in the first six months of 2022. Pipeline opportunities continue to expand, so our expectation around growth remains at 25% for the year. So overall, we had another outstanding quarter in Q2. We are very encouraged by our base business growth, which we anticipate will be above 30% this year. With additional capacity coming online, new products continuing to hit the market, excellent performance by our recent M&As, the future remains bright as we continue to execute on our strategic initiatives for the company. 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.