Q4 2019 Earnings Call

Throughout the year our team continue to execute on our long-term growth strategy with m&a and warranty remaining at the core of our success in 2019. We completed our acquisition of Technologies establishing an important New Vertical for the company and process analytics our R&D team delivered tftf filtration technology that game-changing technology in a harvest start vacation an area that has seen little Innovation over the last ten to twenty years.

support

We are closed strategy and operational investments in 2019. We completed a series of financing that leave us with over $500 in cash at year-end and positions as well. They're looking back at the year. There were five key drivers of growth first as I mentioned we saw strong adoption that gene therapy accounts where we helped wage and efficiency improvements in viral Vector Manufacturing.

Gene therapy represents at approx 15% of our overall 2019 Revenue with filtration products accounting for 60% and chromatography products accounting for 35% of sales office into these accounts. We saw a fairly even split between CDMA and gene therapy developers at fifty two and forty eight percent of Revenue respectively and with a strong base of core customers Information Technology. We are really well positioned for growth in gene therapy.

Second we saw increased adoption of our Excel ATF products in both and -1 c train a traditional profusion applications. The expansion expansion of ATF application into that batch processes is a key growth driver for us as it is the Catalyst for sustained long-term growth north of 20% Third. We saw significant up to age r t f f systems portfolio where we put more focus on tying systems and consumables into targeted upstream and downstream applications.

we made the

Decision 12 months ago to focus on building out systems for rtff portfolio and not only has this team delivered on more traditional usdf applications, but they've also delivered on the development and launch gfdf technology in Fayetteville Harvest clarification. We saw accelerate adoption of our Opus pre-pack, a CDMA and farmer customers continue to wage scale and expand.

Combined with new demand for Oprah's and gene therapy. We delivered approximately 1400 comes to our customer base in 2019 up from seven hundred columns in 2018.

To ensure ability to stay ahead of demand we made significant investments in 2019 and here again in 2020 to expand our capacity and resources and opens production finally accept the overall strength of the biologics market where in the u.s. Alone 10U Mavs and to gene therapy drugs were approved in 2019.

With a rich pipeline of over a thousand biological drug candidates. The expectations are high for strong growth in the years ahead.

Before jumping into the quarter. I also wanted to highlight some of our key accomplishments in 2019.

Starting with C Technologies, which was our first acquisition in process Analytics.

During a seven months of C-TEC ownership in 2019. We focused our efforts on Commercial expansion are the acceleration and building out the financial team an employee implementing a company processes at Sea-Tac.

We successfully built out our commercial team but ten dedicated reps. We focused R&D efforts on accelerating next-gen flow vpe, and we completed the build-out of the finance Team of the Year. See Tech products contributed close to sixteen point four million in Revenue right in line with our 16 to $17 projection. We look forward to seeing the impact of our new commercial team in 1220 where we expect see Technologies to generate approximately 32 million dollars in Revenue.

moving out

2019 was a year where we made significant progress a key goal for US enter the year was to develop and launch dfdf technology. We did a very successful technical the products in September and then our systems team followed up with the development of benchtop and production scale systems, which will be launched here in q1.

We also made progress with our next-gen ATF controller, which is scheduled to launch in late q1 and Q2 in addition key products like Cs, and next-gen ligaments are reaching their final stages of product development and will soon be available in the marketplace.

From a capacity and infrastructure standpoint 2019 was a huge year for us. We increased our Opus capacity five-fold and have dedicated programs in place to expand again in twenty.

Our operations team also expanded and centralized manufacturing effects up in Marlboro and completed the phase one implementation of sap.

Financially we were able to raise close to five hundred million dollars in that through a series of equity and convertible debt financing again. Put it in a strong position for future. M&a.

I'm moving down to our Q4 results in full year 2019 performance as a reported today. We had a great quarter with sixty nine point five million dollars in sales. The story of the quarter was organic growth performance against difficult comes each of our proteins filtration and chromatography franchises performed. Well and together delivered 20% plus organic growth in the quarter cup twenty Thirty and forty percent organic growth respectively for the year.

Infiltration RXL ATF product line had a record year. Our customers scaled up into late-stage trials and we saw increased use of ATF + -1 c train applications be reflecting a broader application of the technology into that batch processes single-use ATF continue to perform well in 2019 with Revenue growth of 45%

A c s d e f f cassette business also had a very strong quarter in Europe over 25% The story continues to be around new accounts and key wins and gene therapy applications month or Hollow fiber portfolio. Also had a good quarter in Europe 30% with robust demand for single-use flow paths Hollow fiber modules and cross flow systems. We expect that are Hollow fiber business will have another strong year in 2020 and our overall filtration franchise will grow approximately 25%

Moving to, tography for our office business finished up over 30% for the quarter to fifty percent for the year. The story in the quarter was the continued adoption of her pre-packaged technology in CDM and gene therapy accounts, which now account for 20% of our Opus Revenue in parallel. We were able to improve our lead time significantly by bringing five new production Suites online and December 13th. We also saw accelerating adoption of focus eighty columns as customers put our technology into late-stage and commercial processes.

we expect

Continued momentum for Opus and twenty-twenty as our customers scale an expense.

We expect our Opus franchise to grow at or about 20% and overall chromatography at 15% and twenty twenty.

Are OEM proteins business performed? Well in Q4 and was up 20% for the full year led by strength and growth factors with 15% growth from Legends as mentioned wage 2019. We expect GE to transition to in house league and Manufacturing here in 20 20 creating a twelve to thirteen million dollar or four to five percent headwind for the company. We expect that may impact a look and we'll continue to gain traction the marketplace as customers implement this technology and early-stage clinical trials. So overall we expect the company to grow at fourteen fifty percent in twenty-twenty with Organic growth in the 10 to 14% range. We expect to be stronger than H1 as some of the larger scale of projects is in the second half of 2028 and like other companies. They won't take a few more months to understand what the long-term impact might be on overall company performance from the coronavirus in China and fiscal year. 2024 quarter one. Yep.

Maybe some shift in.

Into Q2 based on customer timing as we move into twenty-twenty our strategic priorities will Center on the following new product launches with the focus off have to have an ATF controllers expanding our Market presence in Harvest our vacation applications with TFT technology further expanding our Market presence in gene therapy through our participation and photography franchises broadening the customer base and applications for see Technologies implementing capacity expansion and operating margin Improvement programs and finally evaluation of an opportunity to supplement our organic growth in summary. We believe we are well-positioned to gain further share and by processing we believe that the blueprint we put in place of birth last five years around building out a world-class commercial team bringing disruptive Technologies to Market and supplementing our technology base with select days will be the Catalyst for growth over the Dead.

also

Some of the Investments we've made in R&D of the last three years. We expect 20/20 to be a milestone year for us in terms of product launches before concluding I wish to recognize our employees around the globe for their commitment and leadership in 2019. I also want to thank our loyal shareholders and customers for their parts and represents success and we look forward to another strong year for the company in Bayou processing without off of the call over to John for a more detailed financial report.

Thank you, Tony and good morning. Everyone today. We were recording or financial results for the fourth quarter and full-year 2019 as well as providing a our financial guidance for the year 2012 or unless otherwise mentioned all Financial measures discussed reflect non-gaap measures as you've seen in our press release this morning. We delivered strong financial performance for both fourth quarter and full-year 2019. We had another strong quarter with revenues of 69.5 million representing 34% reported growth and 21% organic growth.

For full-year 2019. We reported record revenue of 270.2 million the year-over-year increase of $76 million represents 39% overall growth including two counts of foreign currency headwind and 33% organic growth.

16 million or 8% of our Revenue growth was attributed to our June 2019 acquisition of see Technologies.

Operationally we continue to prioritize key areas of investments in the company in 2019 7% of Revenue supported Rd programs that continue to produce disruptive Technologies, like our new tftf platform that we launched in the second half of the year.

We also made important Capital investments in our manufacturing sites with the significant portion of our spend dedicated to increasing overall production capacity and expanding and upgrading righty systems and infrastructure.

Now to provide more insights into our overall financial performance.

As Tony mentioned earlier are direct-to-customer franchises continue to perform well or direct products represented 79% of the company's total revenue in the fourth quarter and 76% for the full year compared to 72% for full-year 2018.

On a regional basis for the full year preform a direct product Revenue growth was fairly consistent across the regions with approximately 30% growth in North America, Europe and Asia.

For the full year 2019 Asia represented 16% of direct Revenue while Europe and North America accounted for 28% and 56% respectively.

Now moving to our income statement.

Fourth quarter adjusted gross profit was 39.8 Million representing an increase of eleven point three million or 40% over the fourth quarter of 2018.

Or adjusted gross margin was 57.2% for the fourth quarter of 2019 compared to 54.8% for the same period in 2018.

The 240 basis point Improvement was driven by favorable Opus column to resin mix in our chromatography franchise and by increased demand for growth factor products in our proteins franchise.

Full-year 2019 adjusted gross profit of 154.1 million reflects an increase of 45.9 million or 42% compared to the full year of 2018.

Adjusted gross margin was 57% for the full year 2019 compared to 55.8% for 2018 with the 120 basis point increase driven by overall sales. I'm leveraging our factories our new C Technologies product line and favorable product mix partially offset by investments in capacity and operations.

With respect to operating expenses.

Adjusted research and development costs for the fourth quarter of 2019 were four point nine million compared to three million for the fourth quarter of 2018.

For the full year 2019 adjusted R&D expenses were eighteen point eight million compared to Fifteen point seven million in 2018.

Key drivers of the year-over-year increase with the timing of RC Technologies acquisition Investments and our next Generation filtration Technologies, as well as continued investments in early and programs.

Overall R&D expenses finish the year at 7% of Revenue.

Adjusted sg&a for the fourth quarter of 2019 was 22.2 Million compared to fourteen point four million for the fourth quarter of 2018.

Full-year adjusted sg&a was 71.8 million in 2019 compared to fifty three point 1 million in 2018.

The year-over-year increase and adjusted sg&a was related to the timing of RC Technologies acquisition and the build-out of our process analytics commercial team as well as expansions and enhancements office ilities IQ systems and Commercial team.

Now moving to adjusted earnings and eps.

And the fourth quarter 2019. Our adjusted operating income was 12.7 million a 15% increase compared to 11.1 million reported in the fourth quarter 2018.

Our adjusted operating margin was 18.3% compared to 21.3% for the fourth quarter of 2018.

Our operating costs during the fourth quarter of 2019 included approximately 1 million of non-recurring expenses mostly in it and recruiting.

For the full year 2019 or adjusted operating income with 63.5 million is 61% increase compared to thirty nine point four million for the full year of 2018.

Our 2019 full-year adjusted operating margin was 23.5% a 320 basis-point an improvement compared to 20.3% for the 2018. Reflecting a strong year of growth and operational execution in our business.

Adjusted net income for the fourth quarter of 2019 was 10.8 million an increase of 21% compared to eight point nine million in the same period in 2018.

Full-year 2019 adjusted net income was 52.5 Million an increase of 74% compared to Thirty Point 1 million for the full year 2018.

Adjusted EPS for the fourth quarter of 2019 increased to $0.20 per fully diluted share from $0.19 for the fourth quarter of 2018.

For the full year 2019 adjusted EPS increased to $1.07 up 62% from 66 cents in 2018.

A cash and cash equivalents which are metrics totaled $500 and twenty eight point four million at December 31st, 2019.

The full year 2019 we generated free cash flow of 44.1 million inclusive of 67.2 million of operating cash flow less twenty three point two million of capital investment primarily related to our facility and capacity expansion projects and it systems Investments.

Now moving to 20 20 for your guidance.

Our gaap to non-gaap reconciliations for a 2020 Financial guidance are included in the reconciliation tables in today's earnings, press release as previously mentioned unless otherwise noted bought a 2020 Financial guidance discussed will be non-gaap.

Please also keep in mind that our 2020 guidance may be impacted by fluctuations in foreign exchange rates beyond our current projection of a net zero impact on full-year sales and does not include the potential impact of any new acquisitions that the company May pursue.

Today we are setting our 2020 full year Revenue guidance a gap metric at 309 to 319 million reflecting growth in the range of 14 to 18 per month has reported and tend to 14% on an organic basis.

Or adjusted gross margin guidance for 2020 is 55 to 56% which reflects the impacts of expected headwinds from lighter GE volumes and Investment Banking facilities capacity it systems and Staffing to support expected strength and long-term market demand and overall growth.

Adjusted operating income is expected to be in the range of 70 to $74 million with adjusted operating margins in the range of 22 to 23% of revenue for the year.

We are expecting 2020 adjusted income tax expense of approximately 23% of adjusted pre-tax income which anticipates impacts from strong International Revenue growth and higher tax rate countries in Europe and Asia.

We're expecting full-year 2020 adjusted. Net income in the range of $57 to $60 million for the year.

And adjusted EPS in the range of $1.07 to $1.12 per fully diluted share.

Please note that our 2020 adjusted EPS guidance reflects a $0.09 dilution impact due to share count increases primarily related to our 2019 financing activities.

Our guidance reflects an estimated 53.4 million fully diluted shares outstanding for the full year an increase of approximately 4 million.

Adjusted ebitda is now expected to be in the range of eighty to eighty four million for the full year 2020 with depreciation and intangible amortization expenses expected to be approximately 15.5 and 15.5 million respectively.

the company again expects to invest an estimated 20 to 22 million in 20/24 capital expenditures as we proceed with our build-out of our openness manufacturing facility in Breda plan capacity expansions in our Massachusetts in California facilities, and with continued investments in sap

We expect 20/20 you're on cash and cash equivalents a gap metric to be in the range of 580 to $590 million with our capex investments being fully funded by gifts generation from our operations.

As you can see we've executed on another strong your performance in 2019, including making substantial investments in the company as part of our 2-year plan to prepare us for continued long-term growth.

This completes our financial report and I will now turn the call back to the operator to open the line for questions. Thank you. We will now begin the question-and-answer session to ask a question. You may press started in one on your touchtone phone. If you're using a speakerphone we ask you please pick up your handset before pressing the keys. If at anytime your question has been address you would like to withdraw your question, please press * then two months. And once again is a reminder in order to accommodate all individuals who wish to ask questions. There will be a limit of three questions at a time.

Today's first question comes from Denarius Steve hold please go ahead.

Thanks guys, maybe just to start on guidance twenty twenty 33% organic is a pretty big year. So obviously have a tough comp there when you look at the momentum that you're exiting 2019 with though. Can you just talk about the approach to the 2020 Outlook in terms of being conservative or or not conservative and then how you feel about just the shape of the business and the address that you have relative to this time last year when guided you I believe thirteen to Seventeen percent organic growth so less than half of what you ended up doing.

Yes, I understand. Yeah, I think in general, you know, we finished off the year that we had good momentum through the second half of the year. I think as we looked at our 2020 guidance, I think it was important for us to really gauge what was going on in each of the businesses, right and each of the divisions. So, you know within chromatography and filtration, we feel pretty good about our Bar opens business came off a massive year last year up over 50% or filtration product line also had a really really big year. So we've got really difficult comps in in twenty years. We expect that our filtration franchise will grow 25% We think that our Opus franchise will grow 20% plus, you know, our own proteins business is probably the the main head when that we have and so we know we have a 45% headwind going into twenty-twenty. So if you take our ten to fourteen percent guidance

have we

Have that headwind we would really be doing fourteen fifteen to nineteen percent. So we we think actually the guidance we're putting out there right now is very realistic off while we've we feel really good about our businesses really good about our products. We think this is the right guidance for us to your second part of your question about last year where we've decided, you know mid-teens and we came in at 30% I think the piece that really surprised us last year was the proteins business rated we had guided down 5% and it came in really strong. So if you take that out of the equation, it would really drop down the overall organic growth pretty significantly. So I think that was a big factor. I think the other Factor last year is that no one really in the industry predicted how fast the gene therapy Market was going to grow and I think we all kind of missed that a little bit and so that's kind of the explanation for last year.

Yes. Okay. That's actually my second question just on gene therapy. Is there some color you can give on just how you feel about the expansion in the evolution of that market in terms of new activity and the scale-up of project worth and I guess along those lines. I mean one of the things that it sounded like you were trying to stay grounded on last year was this idea that a lot of things went right in 2019 in that field and that that always doesn't happen face off. I don't always go to pay to Etc. So I guess the question is is you're sitting two months into the new year. How are you looking at things relative to the way that you would have hoped they would have my it been six to twelve months ago.

Yeah, I think.

You know when you look at how we finished in Q4, you know, the gene therapy customer base was again strong for us in terms of shipments in terms of orders as we walk. It's it's difficult for us to see much beyond the first half of the year. We know as I said earlier in my prepared remarks that we know there are some significant scale up programs that are happening in the second half of the year, but in general we haven't seen any slowdown in gene therapy and we're expecting gene therapy will drive will grow about 30% for us in in 2020.

Okay, it sounds like you give it a three questions here. So I'll take the opportunity. Maybe just on t f d f that sounds like it's one of the more meaningful products in their portfolio of these days. So what is the thought on just the industry? I'm coming around to the Dual filtration benefit that you get there. My sense is that that might take a year or two for that to RAM and be a material contributor. Is that the way that you're thinking about it? And then what does a Runway look like if you want it to be Beyond just this year and it's a 20 21 22 Yeah, I think yeah, that's spot on the it's going to take a couple of years 40 ft have to take off but we've got a significant number of Trials life here in q1. We expect it will generate a million dollars two million dollars in revenue for us this year. But every year going forward we expect that Revenue will double and so, it's not one of those product lines that we expect to grow at twenty twenty-five thirty percent. We expect that over the next few years. This is a technology that's going to scale quickly. But obviously we've got through the birth.

Or else we've got approved the technology we've done that so far but on a limited basis and I think we're very confident that the technology is going to be a key technology for us.

That's sad. Yeah, I wouldn't underestimate the rest of the product launches that were were bringing to Market this year. So we really are bringing innovation in ATF. We're bringing out the Next Generation flow VP technology in the second half of the year. We got new leggings coming through we got next Generation see us, really feel this year is a key or for us in terms of product launches that will set us up really well for 2021 and Beyond wage.

Understood. Okay. Thanks. Thanks. Next question today comes from south of SV learning, please. Go ahead. Yeah. Hi. Tony. Thanks for the question. So first one on if I could touch on c tech in terms of your expectation of the of that product after the increase in the sales force. When we look at the number you provided for for a 20 20 in light of sort of the growth that you've already seen in the business and what you're going to see dead and the second half acceleration just help us understand, you know, you know, why is that number a 420 C-TEC a little bit Conservative then I thought of you know, given the given the efforts of sales force behind and when can we realistically see acceleration in in that piece of the business?

Yes, so SeaTac, let's just to maybe.

Take a step back. So when we did the acquisition, we we really felt that you know, the second half of the year or the seven months of ownership. We would be somewhere between 16 and 17. And we came in at 16.4, you know long conversations with Craig and the team down in Bridgewater and it was pretty clear that as we did the deal that they were both at that inflection point where one sales person and you know Distributors around the world was just not going to be able to drive the growth that they had seen in Prior years. So they had a fairly slow first half of the year. So the $32 million dollar projection for us in twenty-twenty is 25% growth. So I think it's a really that's a really meaningful growth number for c tech know. I'm totally thrilled that we've been able to get 10-9 additional sales people on board by you know, the end of 2019 They're All Dead.

Setting up and running and we expect second half.

The year that see Tech will be stronger than the first top of the year in terms of Revenue and I think when we get later in the year when I have a much better sense of you know, twenty twenty one and twenty twenty-two how fast can this technology or product line growth? But we expect it's definitely a 20% plus grower going forward and it just really comes down now to not only how fast we can offer you the option of solo vpe outside North America, which is you know, predominantly where the technology is being sold over the last few years to also the rapid deployment of the office generation version of flow VP, which we are really bullish on and we think that's got a lot of potential especially in the outdoors.

Okay. Thanks. And then on on China if I could ask appreciate your comments on first quarter, but it was wondering what what's your supply chain exposure in China and Hong what's your expectation there for for for the next couple of quarters how that changes?

Yes.

We're on on the supply chain side. It's pretty minimal for us. We we don't have a lot of products that are coming into our supply chain that's made in China. So there are some but it's it's something in the grand scheme of things. So obviously we continue to manage that on the revenue side. It's really just dealing with potential shift as we finish our q1 and go up to and in general. Our exposure in China is about 5% of our Revenue which you know, if you just averaged it out over four quarters. It's about four million dollars I ordered.

Okay, and then last one if I could ask on gene therapy, obviously a strong business for you mentioned 15% of our oil make so when looking at the products and hardware needed to scale up in the scale up phase do you think you have the right optimal portfolio serving that market and and maybe if you could talk about the new product launches then it says little still early but 20/20 being an important here here here are number of those products going to serve that segment just help us understand how Revolution can continue to see them from the Acela and gene therapy expansion that's happening here and then Market.

yes, it's

we definitely play in both cell and gene therapy or

Predominantly in viral Vector manufacturing. So that's kind of the the focus area for us in terms of our current product portfolio. I think we actually are very well positioned obvious pussy for the last five six years almost all our conversations, you know at the investor level has always been around monoclonal antibodies and a little bit on vaccine a security over the last year gene therapy has become an important element for us and a factor for us. So if I look at the products that are coming through this year's probably the Cs, technology that is the flat sheet to set gamma irradiated that's going to be targeted right at our gene therapy customer base wage. Obviously, you know our filtration products as you can tell from the sixty percent of gene therapy revenue for us is coming from our filtration portfolio that anything we do on filtration is dead.

Have a an impact and benefit to the gene therapy customers.

And I was watching today cuz some Tycho Peterson of JPMorgan, please go ahead. Hey, good morning. This is Julia Alfred title. Thanks for taking question. So maybe you can only just to start off regarding the feasibility of the protein business in 2020. And obviously you had some heavy pull forward into the first half of year last year. So for 2020 should we expect to see if it's ready to mirror that of 2019 or do you expect the different pattern given the g e r m down? Thanks.

Yeah, I would say in General on a on how you would break up the quarters. Typically, you know Q too is stronger than q1q through Thursday and Q4 is maybe similar to q1 right? It's that's the way it's been for for the last number of years. I don't expect that that's going to change the difference is obviously that fact that you know, we will be seeing in our seeing, you know volume reduction, right and that's we're seeing that in q1 expect to continue to see that through the year, but we still believe that it'll be twelve thirteen dollars of a headwind by the time the year is done.

Okay. Thank you.

Okay.

And then regarding the capacity Ram could you give us a sense of how quickly will the new Opus capacity ramp up in twenty-twenty? And what should be the expected sort of margin Keaton's ask new capacities added in sales on the capacity side. I think the good news for us and for our customers is that you know, we really did, you know, you can see it now, right our number of columns doubled in terms of output in 2019. So fourteen hundred columns versus 750 we were going through 2019. We knew we needed to move quickly and sewing Q45 Opus Suites were brought online that essentially gives us additional capacity as we move into twenty-twenty or at least tons of come down significantly. We're in a much better position now than we were say a little over our little less than a year off.

I think

The big thing for us on margin is really being the shift that we saw in 2019 where customers in particular in North America have started to send, you know, chromatography residence to us. And so our oldest margins definitely improved in 2019. We expect that that's a trend that should continue in in 25 50 probably what we ended up in, you know, the Q3 Q4 combined where that we saw it real bump up. I think that's probably the levels that we're going to see and so Monday, we're not expecting that the new capacity that we're building out in 2020 will really come online until you know late Q3 and Q4. So what we're doing in Europe is really dead end of the year, you know, start up the additional sweets that we're going to build out here in Walton is really second half of the year. So we're our capacity expansion plans in twenty-twenty are really with an e

on twenty-twenty

1 and 20-22 not really on what's needed to make 20/20 is success.

That's very helpful. And then lastly a follow-up on gene therapy. I mean given, you know, there's a significant sort of gap between supply and demand in the industry. Are you am seeing that translating to increased pricing leverage on your end?

Our products, you know, we're if you look at how we price our products whether it's in mobs or gene therapy. It tends to be very much the same so there's really not a whole lot of pricing leverage that at least we're seeing at this point.

I don't think you.

I don't question comes from Paul night. It's Montgomery Scott, please go ahead.

How you doing, John? I didn't catch that capex number for a 20 20 20 to 22 million. Okay, and then totally dead.

Sorry, go ahead.

John oh, no. I say it's really, you know year or two of our of our capacity expansion program. So we expect the higher higher capex to go through 2020 and then she turned back down to two more normal levels in 2021.

And and Tony regarding Opus 80 and the commercial Market opening up. Does that make your Predictive Analytics easy? Is it a larger order? Is it a chunkier standby order? How how does Opus eighty help your predictability? Yep. So open has tracked very similarly to the Opus 60 products and the you know the first year you launch you get, you know, a handful of customers that jump in and say I need the the larger, so last year was actually a significant bump up and brought up to Sadie is done for us is really opened up phase three and some commercial opportunities. So while the revenue for a nope has a teacup is definitely more than what you would get for an opus forty five or sixty the repeatability of that order is not something that you would expect to see you're in you're out.

Because of customers are running these columns now for large number of Cycles.

So it's really think about our open Society columns is really replacing the last columns that would be used in phase three or commercial processes. So the expectation is that they'll behave and last month just like the normal length of time. You would expect to see it last column lasting so great to be in I think I've said this a few times over twenty nineteen. I think having Opus 80 in our portfolio has changed the way people think about pre-packed cons because now they know they can go at least for some processes all the way through to phase three and into commercial.

Okay, and then lastly the pure light relationship is at factory getting busy in England for Pure light. Can you tell ya I think it's I think it's still early days and in terms of the impact of their protein a residence, I I don't have the Insight on in terms of how busy the factory is. I will say that the activity in the field in terms of the valuations using the n g l impact has been really strong and I think the feedback from customers has been a good and we expect that, you know will see really good growth in in the leg and revenue in in 2020 versus 2019, but it's it's kind of a long process. It doesn't happen overnight. But we expect that. This is a a Lincoln that's going to be in the market and and combined with the pure light. Resin is a resin that's going to be in the market for for the Palm.

Future Okay. Bye.

Thank you.

Our next question comes from John trigger it William Blair, please go ahead.

Hi, thanks very much. Tony, given all the expansion in the pipeline for Virgina and cell therapy has your thoughts changed at all on over all piled processing market growth or you still viewing that kind of high single-digits. Yeah, I think it's I still think we view it in any given year is anywhere between you know, eight and twelve percent right? And it just depends on the year of whether it's 10:12 a.m. You're an eight percent year. So I think it's probably added a you know one to two points on to the overall Market. That's kind of our assessment.

Great. Thank you and maybe to clarify the way you guys are thinking about China. Are you assuming any hit in in factoring that into your guidance for about a year? Are you really just sort of assuming maybe a shift from q1 into Q2 or Q3?

Yeah, it's it hasn't changed our guidance for the year. But I think everybody is in the same sort of place right now, which is no one really knows how long this is going to last. So I think when we get to the Mets are earnings call, I think people will have a much better idea of what the impact is going to be in the first half. I think for us we clearly see it as a gift we've seen no orders getting canceled. It's more around, you know, companies are not up and running at full speed vs where they were in Q4 and so it's off that potential delay or shift from cue-to-cue to that that I think will happen for us and and, you know, depending on how basically what happens in the next few months will probably tell a little bit more of what's going to happen first half of this year versus second half of this year.

Okay, great. Thanks and then

One final one we hear that yields for gene therapy production are way below where monoclonal production is these days assuming you agree with that view. Do you have a role to play that when you sit down with clients? Do you have products that that you could plug in that will allow improvements on that front? Thanks. Yeah, that's that's almost the you know, when you talk to any customer support when they're looking at optimizing processes yield is is close to yield impurity or are the are the top two parameters that people are looking at it's probably a little a little unfair to say, you know, gene therapy yields are really poor and versus maps maps have been around since the 1990s. It's gone through thirty years of optimization. It's a really well understood manufacturing process. So the fact that the gene therapy manufacturing clients need improved yield is is really no surprise, but my expectation is with the tech month.

She's that are out there technologies that we had repligen have there.

Of the things that we can work on and you will see field Improvement happening in 2020 and then the next few years and if you went out twenty years from now, I'm sure gene therapy yields will be just as predictable as math fields are today.

Very helpful. Thank you.

Our next question comes from Matt Hewitt at craig-hallum Capital Grille, please go ahead. Good morning. Most of my questions have been answered but I do have one follow-up on Gross margins. I think Tony you were talking a little bit about how in North America you've got the customers now sending the residents directly to you. I'm just wondering as you get the expansion completed in Europe. Will there be an opportunity to do something similar there? And what could that mean to gross margins? Maybe not necessarily this year. But as we look at twenty twenty-one

Yeah, I mean that that's exactly what I think will happen. Is that once we build out in in Europe for Opus will get it'll be much easier for customers to to either Chef for transport residents. We're doing it today, but it's you know, logistically it's definitely a little bit more challenging versus if you have in country manufacturer in manufacturing or in region manufacturing wage, so that's that's that that'll definitely improve margins. I think the concert to that is of course, we're dealing with the the loss volume that's coming from GE. So that has some March and depression. So I'm at least in twenty-twenty the impact from GE is probably more than offsetting any goodness that's coming through on on something like opus.

Understood. Thank you.

And our next question comes from Silverado of HC Wainwright, please go ahead.

Good morning. This is Edward marks on 4rom. Most of our questions have been answered as well. But just one follow-up. Do you still expect to reach your long-term Revenue objectives based on this sort of organic growth in a scene in 2019 and then based on your guidance for 2020?

Yeah, I mean our long-term growth our Revenue projections are are definitely based on being in that 10 to 15% organic growth. But also supplementing it with Eminem So for us to get to where we believe we need to be is going to require additional m&a over the next few years. We also believe that the products that we're developing is Speck products that were launching here in 20 20 will allow us to grow at the higher end of our ten to fifteen percent long-term organic growth range, and we're not as relying reliant on a m&a is maybe we were in 2014-2015. But this reminds you know, when we were in 2014, we were saying 50 million to 200 to 250 million by 2020 were ahead of were ahead of that page. And you know, our expectation is that we're going to continue to execute on this blueprint great products in the marketplace very focused on Technology Innovation getting new products out and then Thursday.

select the mayonnaise as we go through the

two years

Excellent. Thank you.

I don't next question today custom Jacob Johnson and Stevens, please go ahead. Hey, thanks clearly a lot of growth coming and selling gene therapy just on capacity or the the Investments are making it an opus and and infiltration enough to handle kind of what you're seeing is you look at over the next couple of years or should we expect additional Investments here in the near future.

No, I think we're you know, we we took a a row step back and looked at what we needed to do back in, you know last year and we put a plan in place that goes out over five years off of the capacity expansion that's happening. This year is really geared towards it with the three to five-year Horizon. So, you know, we think we've got the right plan. Obviously it's based on where I think the Market's going to grow and which product lines are going to grow and what pace they're going to grow at but in general, I think we we feel like the the capacity expansion we're doing right now will keep us well ahead of demand off.

Got it, and then just just one more.

In proteins, how large is your growth factor business today? And and how should we think about the the growth and in that business with in proteins this year?

Yeah, it's been traditionally about one-third of our proteins business and it hasn't really changed that much and we expect you know, high single-digit to low double-digit growth for that business in the foreseeable future.

Got it. Thanks for taking question. I just kind of matching matching up Jacob more with market growth.

Got it. Thanks, Tony.

I don't next question today comes from Joe Munda first analysis, please go ahead Good morning Tony real quick. A lot of questions answered here, but one area of focus on Thursday to touch on was gene therapy. You talked about new customers coming on significant customers where it stands say first. Can you define what what is a significant customer how big wage then he talked a little bit about the growth. Perhaps new versus existing and give us some color there. Thanks.

yeah, so so

In general, you know, when we look at customers are significant customers are the ones who are scaling that are buying either, you know one product line at a fairly significant amount or there's multiple products in our portfolio. We haven't given out exactly what that revenue is, but it's it's definitely meaningful and significant for repligen, you know, obviously, when you look at our total revenue last year, you know fifteen percent of Revenue puts us at a little over forty million dollars. So you get a sense of what those fifty significant customers are contributing towards that forty million dollars. So we're excited about it. We think we have a really good base of of customers in gene therapy. We're working with the right folks. We also believe that when we look at the landscape, we're about twenty per-cent penetrated in the market. So it it also tells you a little bit about what the potential is in the future as dead.

as more and more

Um, you know gene therapy companies start to move from preclinical to phase one to phase two. So we're in a good position. We've got good products twenty per-cent penetrated got over forty million dollars in sales last year coming from Gene Thursday customers and and the right sort of mix of CMOS and gene therapy Developers.

Okay, and that's helpful and then in China, I know a couple of questions have been touching on it. But I'm sure the type of business that you're doing in China is that all products across the board? Is there a particular Focus area particular business line that could be potentially impacted any Clarity there would be great. So we sell all our products. There isn't one product in our portfolio that we're not selling to China. I think it's pretty cared. China is very similar to to all of Asia where our filtration portfolio has significantly more Revenue than any of our other businesses that said I think the our analytics business in SeaTac is doing very well over there and continuing to bring customers on board. We've been pretty odd that are free. Com business while we have good business in China and Asia. It's it's probably being a little harder to get the traction that we've seen in North America and Europe in in Asia that off.

the 3 pack on business

portfolio exposure

Okay, and then my my last question know you did talk about the long-term goal, and obviously m&a is going to play a role there. I mean to the degree you can talk about it, but the focus areas particularly in m&a, you know analytics has has been uh a nice driver for you, especially this year. I mean, can you talk a little bit about Assets in the space availability of those assets? Um, and um, you know, just a multiples you're seeing as far as what it takes to potentially acquire, um, you know assets in the space. Thank you.

Yeah, so 2020 is not that it's not much different than 2019 in terms of what assets are out there. I think anyone who plays in by a processing knows who the players are dead. It's all about forming relationships and you know going after the targets that we believe are the right targets for repligen. So there is no one area of focus for us. We're fairly often, you know just started a in analytics. So that's something the overtime that we will definitely build out. But obviously we're not, you know, we've not stopped looking in this town and chromatography space. So all all three areas for us are are important in terms of multiples. It just depends right so for you know, small companies that are low in Revenue then a probably depending on the type of Technology. If you've got Technology Innovation, then you're paying the high multiple if it's a you know, a more of a me to type product line than the multiples are going to be much log.

so it's mainly a filtration.

So, you know in general.

All the multiples something in that 6 to 10x range for a good company with good with good margins and and scaling. So that's our expectation. Is that took the types of companies? We're looking at it's going to be in that range 6 to 10 x Revenue.

Okay. Thank you.

And wait until the question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks. Great. Just like to thank everybody for joining us today. Look forward to catching up with everybody in May and will stop here. Thank you. Thank you, sir. Today's conference has not concluded. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.