Rapid Micro Biosystems, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Rapid Microbiosystems Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker, Mr. David Deichler with Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining Rapid Micro Biosystems' second quarter 2021 earnings call. I'm David Deichler from the Gilmartin Group. On the call from Rapid Micro, we have Rob Spignasi, Chief Executive Officer, and Sean Worches, Chief Financial Officer. Earlier today, Rapid Micro released financial results for the second quarter on June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For list and description of the risks and uncertainties associated with rapid and micro-risk business, please refer to the Risk Factors section of our Form S-1 filed with the Securities and Exchange Commission on July 12, 2021. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not guaranteed of future performance. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 26, 2021. Staffing micro-disclaims any intention or obligation accepted as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I'll turn the call over to Rob.

Thank you, David, and good afternoon, everyone. I'll begin my remarks with a review of financial and operational highlights for the second quarter, followed by an overview of our business and a significant opportunity we see in front of us. I'll then pass it over to Sean for a detailed financial review before we open the call up for questions. I'd like to start by saying that we're very excited to be speaking with you for the first time following our IPO on July 15th. We listed on the NASDAQ and raised approximately $165 million in net proceeds, including the underwriter's exercise of their over-allotment option. We'd like to thank everyone who supported us during our IPO. We are thankful for the hard work of our dedicated Rapid Micro team and for the support of our customers and shareholders. With the IPO now complete, we are better positioned than ever to execute on our strategy to accelerate the global adoption of our growth direct platform within biopharmaceutical manufacturing. We are pleased to report that we had a strong second quarter with reported commercial revenue of $5.7 million, representing year-over-year growth of 135%. This performance demonstrates continued robust adoption of our growth direct platform, with eight systems placed and 11 systems validated during the quarter. We also announced today that we expect our full year 2021 commercial revenue to be at least $24 million, which would represent growth of at least 70% compared to 2020. Additionally, we shipped our one millionth consumable since the launch of our current generation growth direct system. We are also very pleased to report that we are continuing to grow our team with the addition of great new talent across the company. During the second quarter, we expanded our board of directors and our executive leadership team to include a general counsel and vice president of R&D, as well as a new general manager in Asia Pacific. We believe these new additions to our team will expand our capability and support our growth and innovation goals. While we had a chance to tell our story to many of you through our IPO process, I'd like to take a few minutes today to provide a brief overview of our company, our end markets, and our product platform. For background and context, Rapid Microbio Systems is revolutionizing microbial quality control, or MQC, a critical regulated aspect of the global pharmaceutical manufacturing process and fundamental element of the global pharmaceutical quality control infrastructure. The $1 trillion global pharmaceutical market is undergoing tremendous change. growing at 7% per year to meet global demand for therapies, while transitioning from traditional small molecule modalities to advanced modalities, including biologics and cell and gene therapies. To meet the growing scale, complexity, capacity, and regulatory demands confronting global pharmaceutical companies, the future of pharmaceutical manufacturing depends on a massive deployment of automation and digital technologies. The MQC process includes a constant testing of raw materials, production environments, personnel, in-process materials, and final sterility testing of drug products from microbial contamination, such as bacteria, mold, and other harmful organisms. The MQC process is critical because it ultimately helps to ensure patient safety. A single drug production facility may conduct anywhere from tens of thousands to one million MQC tests per year. MQC testing is mandated and closely monitored by the FDA and other global regulatory agencies with serious regulatory and financial consequences for lack of compliance, including Form 483 observations, warning letters, or even consent decrees. The traditional method to conduct MQC testing is called growth promotion, where samples are manually collected on media plates by MQC specialists, manually processed, incubated, and then visually inspected for growing colonies and microorganisms. This labor-intensive manual method was developed about 100 years ago and has not fundamentally changed since. Today, well over 95% of global MQC testing still uses this legacy approach, despite growing costs, complexity, and risk posed by a non-automated process. The legacy MQC process is slow, requiring up to 14 days to deliver results. Second, the legacy process is entirely dependent on human labor for each of the 15 steps it involves. Third, the legacy process is subject to technician's fallibility, error, and even the potential for falsification of data. Finally, the legacy process is unsecured, which can result in noncompliance with data integrity regulations. These risks have spawned multiple real-world problems for pharmaceutical manufacturers, including long regulatory investigations, costly enforcement actions, and in some cases, substantial shareholder value destruction. For these reasons, a legacy manual MQC process has become less reliable as it is unable to match the growing scale and requirements of modern pharmaceutical manufacturing. We developed our technology to specifically solve this problem. Our growth direct platform is the only fully automated, high throughput, and secure MQC solution in the world. Developed with over 15 years of active feedback from our customers, we have made significant investments in difficult-to-replicate engineering improvements. These investments have resulted in a purpose-built, robust, and scalable solution to support the rapidly expanding demand for novel and complex therapeutic modalities, such as biologics, vaccines, cell and gene therapies, and sterile injectables. Our Go Direct platform is designed to fully automate and replace the traditional manual MQC process. Our proprietary technology works by replacing human counting of growing colonies with software and algorithm-driven detection and counting based on image analysis of natural microbial autofluorescence. Our system wraps this core detection technology with fully automated, high-volume, high-capacity walk-away robotic sample handling and incubation. lock behind a secure interface that enables compliance with data integrity regulations. Our technology delivers a speed, accuracy, scalability, and security required by advanced pharmaceutical manufacturing. Growth Direct accelerates timed results by several days, a 50% improvement over the traditional method. Growth Direct MQC testing is a simple two-step workflow, eliminating 85% of the manual steps of the traditional MQC process. Our customers benefit from the advantages of the Growth Direct system with accelerated time to test results, reduction of human errors, cost savings, data integrity compliance, and ultimately more efficient, higher capacity, and lower risk manufacturing operations. Moreover, the Growth Direct system is designed to absorb and automate the vast majority of daily MQC test volume in any pharmaceutical manufacturing facility and can be operated in fleets of multiple systems to scale with high-volume manufacturing. The microbial quality control test market is large. Globally, we estimate 350 million MQC tests are conducted annually in thousands of dedicated pharmaceutical manufacturing facilities, producing billions of doses of therapeutics every year. Based on a recent market research study we commissioned, we estimate our total addressable market, or TAM, to be approximately $10 billion in 2021 which we expect to grow at an 8% CAGR to over $14 billion by 2026. As we embed our products within global pharmaceutical manufacturing operations and begin to automate and digitize customer workflows, we believe our platform is exceptionally well-positioned to enable the future of quality control automation. The strength of our value proposition has attracted a top-tier customer base, including the majority of the global top 20 pharmaceutical manufacturers, as well as small and mid-sized customers. Our customers include manufacturers of biologics, small molecules, cell and gene therapies, 503B compounders, and personal care products. We have installed our systems across manufacturing site networks in North America, Europe, and Asia. To date, more than half of our global customer base has purchased multiple systems. many of which are installed across multiple manufacturing sites within a customer's network. We see significant opportunity to expand our market share within existing customers as well as acquire new customers. While we address all pharmaceutical modalities, we are especially strong in biologics and cell and gene therapies. Of note, 30% of all approved cell and gene therapies are currently using the Growth Direct system. As I mentioned earlier, We completed eight system placements and 11 system validations during the second quarter, bringing our cumulative totals to 103 systems placed and 63 systems validated. While we are excited about this initial start, we have significant commercial runway ahead. Our GrowthDirect platform drives multiple revenue streams via an attractive razor razor blade revenue model. Initial customer revenue begins with a capital equipment sale of the GrowthDirect system and associated lab information management system connection software, which provides customers a two-way secure and paperless data workflow. We then provide global support and validation services to help our customers install and validate the Growth Direct. Once a system is validated and transitions to routine use, each Growth Direct system starts to pull through increasingly high volumes of our proprietary and broad suite of consumables. As we add to our base of validated systems and utilization increases, we expect consumables will drive a substantial, recurring, and durable revenue stream with an attractive profitability profile. We also provide ongoing preventative maintenance services which drive recurring service revenue in addition to recurring consumable revenue. Looking forward, we're tremendously excited about the growth opportunities for our business. We're focused on the goal of standardizing the global microbial quality control test market on our GrowthDirect platform and ultimately delivering MQC automation more broadly across pharmaceutical manufacturing industry. We believe we are in a very strong position to capitalize on a large and growing market with low competitive intensity. We are leveraging our strategic advantage to accelerate strong commercial momentum, especially in a high-growth biologics and cell and gene therapy segments. Our growth strategy is clear. We continue to drive new customer adoption across the global pharmaceutical industry. We are expanding within our existing customers, placing more systems, expanding to new sites, and broadening the applications we deliver. We are targeting new geographies to include Asia Pacific, where we see substantial opportunity to build our commercial and operational footprint. And as we look to the future, we intend to launch new products spanning data, consumables, automation, and services that deliver integrated QC automation. We expect to grow our influence upstream and downstream within customer workflows and secure more customer share of wallet over time. We have well-established commercial teams in the U.S. and Europe with significant opportunity to continue to build these teams to drive future revenue growth. We see our investment in commercial infrastructure as a key driver to accelerated adoption in the U.S. and Europe, as well as geographic expansion to Asia-Pac. With our IPO proceeds, we are also increasing investment in research and development to accelerate innovation. In addition to organic investments for the future, we may also use M&A selectively to add complementary products and services to enhance our value proposition to customers. In closing, we have had a strong start to 2021, and we are very excited about our business going forward. We believe there is an exciting opportunity to own the microbial quality control space and define the future global standard. We look forward to updating you as we invest in and expand our business over the coming years. I'll now turn the call over to Sean to discuss our financial results. Sean?