REPLIGEN CORP Q3 FY2024 earnings call

• Olivier Loeillot mentioned strong third quarter returns with 10% year-over-year sales growth and 6% order growth, orders pacing above sales by 4% despite Q3 seasonality. Most of the momentum from quarter two carried into quarter three. - CDMO business rebounded, reaching its highest revenue level in the last 18 months with orders dollars trending ahead of sales through the first nine months. - Pharma and consumables showed solid sales and order growth, and equipment opportunity funnel was healthy. New modalities had a record revenue quarter, tracking to 20% of total revenue for 2024. - Filtration franchise had mid-teens Y/Y revenue growth, ATF revenues up over 50% in Q3. Chromatography had strong orders despite revenue down on tough comp. - Opened Repligen Training and Innovation Center in Waltham. - Jason Garland provided details on restated financials for past six quarters, including GAAP to non-GAAP reconciliations.

Pharma: In the third quarter, revenue grew by mid-single digits year-over-year. Orders were strong, reaching the highest level since 2021, with high-single digit sequential growth but flat year-over-year compared to the third quarter of 2023. Year-to-date, pharma revenues are in the high single digits and orders are in the mid-teens. CDMO: Revenues and orders grew approximately 20% year-over-year. CDMO sales have returned to 2022 levels, and year-to-date order intake is in the high single digits. Over the last two quarters, orders are up mid-teens versus the same six-month period last year. Consumables: Consumable revenues were up 10% year-over-year and at their highest level in the last five quarters. Consumable orders were at the highest level since Q1 of 2022, up high teens year-to-date. Equipment: Sales were at mid-single digits year-on-year and low single digits sequentially. Sales and orders are now up mid to high single digits year-to-date. New Modalities: Delivered another great quarter with sales up more than 20% year-over-year. Quarter three was the highest revenue quarter ever for new modalities. Orders were also at low double digits compared with quarter three of 2023. New modalities are tracking to 20% of total revenue for the full year compared with 18% in 2023. Filtration: 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. ATF revenues were up more than 50% this quarter. Chromatography: Revenue was down on a very tough comp, but orders were at 35% year-over-year. Process Analytics: Had a strong quarter with 7% top line growth and 6% order growth.

• Full-year 2024 revenue guidance revised to $630 million to $639 million, including ~$7 million incremental revenue from September 8-K filing. - Adjusted gross margin range revised to 49.5% to 50.5% due to restatement impact. - Adjusted income from operations expected to be between $80 million to $85 million or 12.5% to 13.5% adjusted operating margin rate. - Adjusted EBITDA margins expected to be in the range of 17.5% to 18.5% for the year. - Adjusted net income guidance $85 million to $89 million, adjusted diluted earnings per share $1.50 to $1.58. - Fourth quarter implied adjusted operating margin is a small step up from Q3, with volume leverage expected to offset gross margin mix headwind.

Forward-looking statements are subject to risks and uncertainties such as those related to business goals and financial performance differing from expectations. Risks related to the business are included in quarterly reports on Form 10-Q, annual report on Form 10-K, and other current reports on 8-K, including the report filed today and other SEC filings. Uncertainties in China market performance, biotech funding trends, and clinical trial starts could impact the business.

Q: Can you walk through some of the assumptions behind the fourth quarter revenue ramp?

A: Olivier Loeillot said quarter four is typically the highest quarter due to seasonality, and orders have been growing consistently throughout the year with a book-to-bill around 1 or above, and October was a strong month.

Q: Can you speak to funnel velocity for equipment?

A: Olivier Loeillot stated that deals entering the funnel can take 3 to 6 months to close for smaller scale hardware and 6 to 9 months for larger scale. The ARTeSYN portfolio has helped regain market share, and big pharma companies are platforming Repligen's systems for new modalities.

Q: What suggests the CDMO picture improvement is more sustainable?

A: Dan Arias asked about CDMO picture sustainability, and Olivier Loeillot replied that CDMO orders are up mid-teens vs same two quarters last year, sales back to 2022 levels, and both large and small CDMOs are showing good performance, with key account management covering four CDMOs and seeing improvement.

Q: How much of new modality business is overlap with CDMOs?

A: Puneet Souda asked about overlap, and Olivier Loeillot said there's no exact number, but many significant new modality customers are CDMOs, and about 65% of overall business is in clinical phase with some moving to later phases.

Q: Thoughts on M&A approach?

A: Puneet Souda asked about M&A approach, and Olivier Loeillot said M&A is critical, looking for unique technologies that complement portfolio, with Tantti acquisition as an example of complementary technology.

Q: Current thoughts on China business and BIOSECURE Act impact?

A: Matt Larew asked about China and BIOSECURE Act, and Olivier Loeillot said China revenue is a small portion, but rest of Asia is doing well. Stimulus for bioproduction equipment in China and BIOSECURE Act are expected to have positive impacts, with some small CDMOs in US benefiting from BIOSECURE Act.

Q: What's seen in clinical demand?

A: Jacob Johnson asked about clinical demand, and Olivier Loeillot said emerging biotech has been a concern with biotech funding and clinical trial starts down, but hoping for improvement in next few quarters.

Q: Q4 implied base revenue growth ex-COVID and op margin?

A: Conor McNamara asked, and Olivier Loeillot said ex-COVID, Q4 revenue growth expected in 12% to 13% range; implied op margin for Q4 is just over 15%.

Q: Competitive wins for large pharma platform wins?

A: Conor McNamara asked, and Olivier Loeillot said a bit of both, with new systems for new modalities having limited competition initially but gaining market share as customers realize the value of features like FlowVPX.

Q: System strategy and consumable recurrence?

A: Evan Stock asked, and Olivier Loeillot said systems generate future recurrence sales of consumables, with customers benefiting from efficient processes and productivity, leading to gaining market share.

Q: ATF in blockbuster drug and opportunity?

A: Evan Stock asked, and Olivier Loeillot said ATF can be used at early and late phases, was designed into a blockbuster mAb, and sales grew >50% in Q3 with strong funnel for future opportunities.

Q: Expectations for 2025 growth compared to 2024 halves?

A: Matthew Hewitt asked, and Olivier Loeillot said anticipate further growth in first half of 2025 vs second half of 2024, back to normal pre-COVID visibility with typical 4 months backlog.

Q: M&A for operating margin improvements?

A: Subbu Nambi asked, and Olivier Loeillot said look for technologies that complement portfolio, add to A to Z offering, and bring financial benefits including margin improvement.

Q: Dynamic growth drivers for 2025?

A: Paul Knight asked, and Olivier Loeillot said ATF with design-ins providing tailwind, systems with improved CapEx funding, and proteins with Avitide/Tantti product offering.

Q: Cell and gene therapy portion of revenue?

A: Paul Knight asked, and Olivier Loeillot said new modalities including cell and gene therapy make up 18% to 20% of total revenue, with 2024 at upper end of range.

Q: Q4 momentum and new product launches?

A: Matt Stanton asked, and Olivier Loeillot said strong start to Q4, new products like RS10, FlowVPX, and Tantti-Avitide resin showing good traction, with next year expected to be exciting with new launches.