Repligen Corporation

Good day, ladies and gentlemen, and welcome to Repligen Corporation's third quarter of 2024 earnings conference call. My name is Chad 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 that there will be a question and answer session following the company's formal remarks. To accommodate all individuals who wish to ask questions, There will be a limit of two questions at a time. To ask a question, you may press star then one on your touchtone phone. Please note, this event is being recorded. I would now like to turn the conference over to Sondra Newman, Head of Investor Relations. Please go ahead.

Thank you, and welcome to our third quarter of 2024 report. On this call, we will cover business highlights and financial performance for the three- and nine-month periods ending September 30, 2024, and we'll provide financial guidance for the full year, 2024. Joining us on the call today are Repligen's President and Chief Executive Officer, Olivier Liao, and our Chief Financial Officer, Jason Garland. 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 quarterly reports on Form 10Q, our annual report on Form 10K, and our current reports on 8K, including the report that we are filing 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 financial results in the guidance, unless otherwise noted. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to Ropelagin's website and on SEC.gov. Adjusted non-GAAP figures in today's report include the following, base revenue and organic revenue growth, cost of goods sold, gross profit and gross margin, operating expenses, including R&D and SG&A, income from operations and operating margin, tax rate on pre-tax income, net income, diluted earnings per share, EBITDA, adjusted EBITDA, and adjusted EBITDA margins. These adjusted measures should not be viewed as an alternative to gap measures, but are intended to best reflect the performance of our ongoing operations. Now I'll turn the call over to Olivier.

Thank you, Sandra. Good morning, everyone, and welcome to our Q3 earning calls. I'm very pleased to report strong third quarter results. Excellent team execution coupled with improving market conditions has enabled us to deliver 10% year-over-year sales growth and 6% order growth, with order spacing above sales by 4%, despite the seasonality headwinds we typically see in the third quarter. Most of the momentum we have seen in quarter two has carried into quarter three. In fact, we saw sequential improvements with our non-COVID sales of 3% versus last quarter and orders of 2%. We were especially encouraged to see a strengthening CDMO business, which is a great indicator of the overall industry health. This business rebounded nicely and reached its highest revenue level in the last 18 months with all those dollars trending ahead of sales through the first nine months. Pharma and consumables continued to show solid sales and order growth, and we grew our opportunity funnel for equipment. It was a record revenue quarter for new modalities, where we're tracking to the highest annual revenue and order intake to date. At the franchise level, filtration-led in revenue growth and chromatography delivered an exceptional quarter for orders. In total, for the nine months year-to-date, our orders are up 8%, and if you went through protein, up 14%. During the third quarter, we managed to build backlog for the future. In addition, our order funnel is very healthy, setting us up for a solid exit to the year. Overall, we are really happy with the progress we're seeing as we continue monitoring micro-level trends with China, cap expanding, and biotech funding. With this positive context, we are narrowing the range and confirming the midpoints of our full-year revenue guidance. We now expect to finish 2024 with revenue in the range of 630 to 639 million. For clarity, this includes close to 7 million of incremental revenue following our 8K filing in September. Jason will provide an update on the related restatement process But please note that all of the figures being reported today do include the impact of this shift in revenue timing. Let us now deep dive a bit in the quarter and our year-to-date performance. Pharma delivered a solid growth in Q3, with revenue up mid-single digits year-over-year. Others were also strong at the highest level since 2021 and held high single digits sequentially, but flat year-over-year on the task comp in Q3 2023. Others came primarily from our top biopharma customers. Year-to-date, our pharma revenues are up high single digits and others are up mid-teens. More importantly, pharma order dollars are tracking 12% above revenue in the quarter. CDMO revenues and orders grew approximately 20% year-over-year. CDMO sales are now back to 2022 levels, and our order intake year-to-date is at high single digits. In fact, over the last two quarters, orders are at mid-teens versus the same six-month period last year. It is good to see the activity level at some of our top 10 CDMOs picking up again, and particularly at those where we have put a key account manager in place. In Q3, we also saw a more even distribution of orders coming from both larger Tier 1 and the smaller Tier 2 CDMOs. We look forward to getting further confirmation in the first quarter, but the situation has really improved from a year ago. Moving to consumables and equipment performance, consumable momentum is still strong, with revenues up 10% year over year and at their highest level in the last five quarters. Consumable orders were at the highest level they've been since Q1 of 2022, high teens year-to-date, which furthers our belief that this talking is indeed behind us. We continue to gain market share in capital equipment despite the challenging environment. Our sales were at mid-single digits year-on-year and low single digits sequentially. Sales and orders are now at mid-to-high single digits year-to-date. While equipment orders have been slower to recover, we could not be happier with the funnel we have for our systems. For example, several big pharma companies are adopting our P&T technology integrated with these systems to improve their productivity. In particular, these companies are platforming our system for new modalities. Speaking about new modality business, we delivered another great quarter. We set up more than 20% year-over-year. In fact, quarter three was the highest revenue quarter ever for new modalities. Our orders were also up low double digits compared with quarter three of 2023. What is driving our success in this area is innovation and continued adoption at our top 20 accounts. It's become even more clear to me that Repligen has the best, most advanced portfolio of products to serve this important market. Our strategy to develop and launch tailored solutions for the different new modalities is very successful, and with the expected rapid growth of this market, we are ideally positioned. Our pending acquisition of Tanti will also enable us to develop unique and innovative verification solutions for that market segment. As a person of total revenue, new modalities continue to increase, tracking to 20% for the full year compared with 18% in 2023. From a regional performance point of view, we are really happy about the progress we are seeing in the Americas and Asia, including China. America revenues were up mid-teens in Q3, while Asia X China was up more than 40% in Q3. China remains a big headwind for us this year and will only represent about 4% of our 2024 revenues. Asia will remain a critical focus for growth for us in 2025. Let us now deep dive into our third quarter franchise performance. Starting with our largest franchise filtration, Q3 has been another successful quarter. Revenues were up mid-teens year-over-year and around 10% year-to-date. Orders were flat year-over-year on very tough comps, but up high single digits sequentially and up greater than 10% year-to-date. Our ETF revenues are up more than 50% this quarter as we capitalize on our ETF late-phase design-ins and significant consumable uptick. Our ETF technology was also designed into another blockbuster map during the quarter. Our filtration systems portfolio is gaining market share at several large pharma accounts. In fact, we are starting to be platform at some of these accounts, which will help us to generate ongoing growth thanks to the recurring nature of the associated consumables. Another reason for the positive traction is that we are seeing the integration of FlowVPX technology with our filtration system at several accounts, creating a new market need for this differentiated technology combination. Finally, our transgenic flagship cassette portfolio grew greater than 15% this quarter, driven by large pharma wins. And with a strong funnel, we continue to work on several large-scale opportunities for the future. Moving to chromatography, we are very encouraged by our performance in quarter three. While revenue was down on a very tough comp, it was an exceptional quarter for orders, which were up 35% year-over-year. In fact, the last two quarters have been record quarters for orders intake, driven by increased demand for both large-scale and small-scale opus columns. Though protein remained the roughly 32 million headwind for the year, the franchise had a strong quarter overall, with sales of 15% versus Q3 2023 and orders flat. Ligon revenues and orders were as expected, with strength in growth factors and habitat programs. Our habitat customers' ligand funnel has strengthened over the last 12 months as more customers implement this solution for custom and catalog products. We're excited about the addition of Stanti to our portfolio and hope to close this deal here in the fourth quarter. The goal will be to launch some disruptive solutions into the new modality space as we move into 2025. The work we are doing with Habitat 20 new modalities, combined with our mass collaboration, positioned us well to move beyond the known headwinds here in 2024 and reestablish growth for our protein business. Finally, process analytics also had a strong quarter with 7% top-line growth and 6% order growth. Our FlowVPX solution for measuring protein concentration drove the overall business growth across all modalities and compensated for a more difficult business environment for standalone systems. So our franchise did well across the board. Our unique and innovative products, combined with a successful implementation of our tier count strategy and focus on new modalities, is generating a lot of new business opportunities for RepriGen. As I wrap, I also wanted to share another highlight of the quarter. On September 23rd, we had the grand opening of the Repligen Training and Innovation Center in Wadsham called ARTIC. This dedicated space showcases all of our Repligen bioprocessing technologies with product exhibits, purpose-built ZMO areas, and technical training space, all designed to provide our customers with pre- and post-sale support and hands-on experience with our technologies. Every week, we're adding customers willing to open new doors to expand our business. This is reflected in our 50% plus probability funnel, which is 30% greater than prior year. So in summary, I'm very pleased with the momentum we saw in quarter three and believe we are well positioned for achieving our full year goals. We are very encouraged by our order strength over the last nine months and the 10% year-on-year revenue growth in quarter three. with improving CDMO and capital equipment markets and continuous strength in pharma, consumable and new modalities. We're excited about our markets and the future as we move into 2025. Finally, I really want to thank our entire EPIGEN team for delivering such a strong quarter. Over the last 6 to 12 months, we have added several experienced leaders and talented people to an already high-performing team, and therefore we are excited and confident about the future of our company. It has also been a real pleasure meeting many of you over the past couple of months. I've enjoyed sharing my vision for the ongoing success of RepiGen and look forward to our discussion in the months ahead. With this, I will hand over to Jason for the financial update.