Q2 2021 Repligen Corp Earnings Call
Good day, ladies and gentlemen, and welcome.
From 2 the replica and corporations second quarter of 2021 earnings Conference call. My name is Matt and I will be your coordinator all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero. Please note that there will be a question and answer session. Following the company's formal remarks.
In order to accommodate all individuals who wish to ask questions. There will be a limit of 2 questions at a time to ask a question you May Press Star then 1 on a touchtone phone to withdraw your question. Please press Star then 2 please note. This event is being recorded.
I'd now like to turn the call over to your host for todays call Sondra Newman head.
Head of Investor Relations for replica and please go ahead.
Thank you Matt good morning to everyone on the call. We appreciate you joining again this morning, we will be covering financial results and business highlights for the 3 and 6 month periods ended June 30th 'twenty 'twenty..1 we'll also update our financial guidance for.
Current year.
We've got president and CEO, Tony Hunt, who will cover business updates and our CFO, John Snodgrass will cover our financial results and guidance.
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 or.
Are subject to risks and uncertainties that can 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 filed today and other filings that we make with the Securities and Exchange Commission.
And today's comments reflects 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.
GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to Replicants website and on SEC Dot 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 other income and expense 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 replicants current results against.
Against historical performance and the performance of peers, when evaluating investment opportunities now I'll turn the call over to Tony Hunt.
Thank you Sondra and good morning, everyone and welcome to our Q2 earnings call.
We're very pleased with our performance on the second quarter and through the first half of 2021 on <unk>.
Ported organic revenue.
Growth of 69% year over year, along with significant margin expansion reflects the outstanding efforts by our entire team as we focus on capacity expansion on capital projects programs to meet accelerating demand on fast tracking the hiring of more than 300 people completing the next phase implementation of F 18, while delivering critical products.
Thanks to our expanding customer base.
We also executed on our M&A strategy, adding an important pillar and hollow fiber technology towards class growing filtration franchise.
As noted in prior quarters, we continue to see very positive performance on our non Covid base business, which was up 35%.
66% of revenue and 31 points of total growth.
As another strong COVID-19 quarter, which represented 27% of our revenue are 42 points of our total growth.
Finally revenue from acquisitions, we made in 2020, namely artisan and E M T and N. A mass represented 7% of our revenue.
On 13 points of growth.
We continue to be encouraged by the sustained strength and our non COVID-19 business for all our franchise continued to perform above our expectations.
Led by our filtration franchise, which was more than doubled through the first 6 months of 2021.
On the orders front we.
Continued to see strong momentum with orders up approximately 140% and the first half of this year compared to 2020 as customers continued to fill out the order book for the second half of 2020, 1 and first half of 2022.
And the quarter Covid orders represented 28% of the order book.
Given.
Given the strength and orders and overall first half revenue performance. We now expect 2021 to finish between 625 and $645 million with Covid revenue coming in between 170 and $180 million.
Our base business growth should be north of 30%, reflecting the strong adoption of our core technologies and bio processing.
Walking into 2020, 2 we are increasing visibility into demand from Covid accounts with orders currently being placed for next year.
While there are still more accounts have yet to place orders or Covid order book has filled up to greater than $100 million over the last few months and we expect that COVID-19 revenues in 2022 will be approximately 2.
$200 million.
Before jumping into the quarterly results I want to provide some commentary on our acquisition of polygon and update on the performance of Emt and a mess and artisan on a progress report on our capacity expansion plans.
And as announced on the first of July we closed on the acquisition of polymer and and expert.
Spurt and hollow fiber manufacturing spending industrial from bio processing markets.
This is a very important acquisition for us as it provides us with 3 main benefits 1 a meaningful and immediate 2 to 3 fold increase and overall hollow fiber membrane and module and capacity to and innovator and membrane.
And with strong synergies and bio processing applications, and finally, 3 and incredibly talented team with a strong cultural alignment with Rutledge and.
We have worked with the team at polymer them over the last year and they are now producing hollow fiber modules for our bioprocess and customer base as we ramp up our overall and.
Develop and shrink production for filtration products.
Looking to the future and overall integration objectives or goals are to continue to support poly Mems industrial customer base to increase capacity on broader commercial reach to accelerate the R&D pipeline with a focus on innovation and membranes and modules and to expand their.
And our manufacturing footprint to support bio processing demand.
We expect their industrial business will grow in the range of 15% annually and the bioprocess business will roll into our filtration franchise supported by our commercial channel.
With respect to E M T and the messenger.
S and artisan, we're extremely pleased with overall performance and the first half of 2021 as our commercial organization has moved quickly to integrate these products into our systems and fluid management portfolio.
The performance reflects the strong fit with our overall bio processing business and the speed of integration into Rutledge.
And which has gone well.
We expect that these businesses will be at or above the high and over 43 million to $46 million guidance range by the end of the year.
We also expect polymer to contributed $3 million for the second half of 2020.1.
As noted in May our number 1 priority continues to.
Building out capacity to support accelerating demand across all of our businesses are.
Our operations team continues to do an outstanding job and this is clearly reflected and the margin performance in Q2, as we have systematically added capacity for opus pre packed columns hollow fibers flat sheet cassettes and systems.
And supports our long term growth targets and ensure that we have ample production capacity. We recently signed a lease for 64000 square foot facility and Hopkinton mass and we are set to build out a 33000 square foot LEED silver certified building and Waterford, Ireland that was developed by the Irish Industrial development Agency.
And it is very close to our artisan headquarters.
Both the Hopkinton and waterless sites will become centers of excellence for Assembly.
And which include pro connex flow paths for our systems.
In addition, the Hopkinton plant will support our expansion plans for affinity ligand product lines and is already set up to support.
E coli and manufacturing.
We are making quick progress and expect both facilities to come online and in 2022.
Coupled with our ongoing 67000 square foot expansion and Marlboro and we will be well positioned to support our growth for the next 5 years.
So moving now to our quarterly performance.
That's the story of the quarter was the 35% non COVID-19 base business growth and the continued strength that COVID-19 accounts.
Order volumes as noted earlier was exceptionally strong with our non COVID-19 accounts contributing greater than 70% of this overall demand.
And filtration and our business more than doubled in Q2.
And through the first 6 months of 2021.
The strength and filtration was broad based.
Our ATF business doubled in the quarter with Asia, and now representing more than 30% of these sales.
We saw strong demand for our single use ATF devices, and COVID-19 applications as well as and gene therapy for ATF as fast.
Becoming the standard for viral vector intensification.
And our flat sheet cassette business, our non Covid account revenue was up over 60%, reflecting best in class lead times as we have rapidly built out our capacity here in 2021.
Our hollow fiber business on the systems side was up approximately 100.
Percentage driven by the strong demand for our bench top hollow fiber systems and.
And finally, we were able to add and some new vaccine and diagnostic wins, which will help bolster revenues and the second half of this year and then into 2022.
For the full year, we continue to expect our filtration business to double.
Moving to chromatography, our opus pre packed column business had an excellent quarter, driven by gene therapy, and Covid customers, who continued to implement prepacked columns and to their manufacturing process.
As our customer base continues to adopt and implement opus.
We are delighted that our breeder facilities now.
And ready to package chip columns here in Q3.
This will give our European customer base, our local manufacturing hub and we will make it much easier for these customers to ship chromatography resins to rutledge and per column packing.
For the year, we anticipate that the chromatography franchise will grow and the range of 35.
On line, 5%.
Yes.
Our OEM proteins business had another strong quarter as we have seen an uptick in demand for protein a ligands and growth factors.
With a strong order book in Q3 and continued strength forecasted true to the end of the year. We now expect proteins to grow north of 30% this year.
And finally, our process analytics business continues to accelerate as customers adopt solar VP and new accounts and flow PPE and to process analytic technologies or P. A T applications for.
And for the quarter the business was up greater than 40% very similar to our results and Q1 with new accounts.
To 4 and accounting for almost 50% of the systems sold.
Our flow <unk> system was officially launched and the quarter and we are seeing high interest and strong adoption of this technology and applications ranging from chromatography to fill finish.
And as customers look to get accurate real time protein concentration data on the manufacturing.
During floor for their targeted drugs.
We expect that the first half momentum will carryover into the second half and we now anticipate growth and the range of 30% to 35% for the year.
So overall, we had another outstanding quarter, and Q2, where we had really good balance between our COVID-19 and non COVID-19 accounts.
A GAAP execution operationally, which drove the significant margin be.
We are especially encouraged by our base business growth, which we anticipate will be north of 30% this year.
And with additional capacity coming online and new products continuing to hit the market excellent performance by our recent M&A as the future is.
And we continue to execute on our long term growth targets.
We are now revising with the goal of surpassing $1 billion.
And revenue in 2024.
And we look forward to updating you on our progress through the year and with that I'll turn the call over to John for the financial update.
Thank you Tony and good morning, everyone.
Today, we are reporting our financial results for the second quarter of 2021, as well as updating our financial guidance for the year.
Unless otherwise mentioned all financial measures discussed reflect adjusted non-GAAP measures.
And as shared in our press release. This morning, we again delivered record revenue and strong earnings growth.
For the second quarter 2021.
We are also seeing significant intake supporting our outlook for the second half of 2021 and into 2022.
As Tony highlighted our base business continues to perform very well up 35% year over year and contributing 31.
1 points to overall revenue growth of 86%.
The strength of our base business, which excludes COVID-19 related revenue and the inorganic M&A revenue.
And was driven by across the board gains and each of our 4 product franchises.
We also continue to see robust sales and orders from our Covid related business.
Contributed 42 points to overall revenue growth and the second quarter.
Finally, and organic growth from our 2020 acquisitions of Emt NMS and artisan drove 13 points of the 86% growth and the second quarter.
Overall, we continue to benefit from an acceleration and demand for our products.
<unk>, which from a robust biologics market that continues to pivot towards more flexible and efficient manufacturing solutions.
During the second quarter, our operational focus was on capacity expansion integrations of our 2020 acquisitions and the completion of deal related activities for our polymer.
<unk> acquisition that closed on July 1.
We also completed phase III of our SAP implementations with our Sweden, Germany, and flipped and Park, New York locations going live in May.
On the hiring front, we've continued to expand our R&D and global commercial teams and operating infrastructure.
<unk> during the first half of 2021, we added over 300 individuals to our team a 30% increase from year end 2020.
These operational investments are key to supporting the acceleration of growth across all of our product lines as we focus on driving best in class lead times.
Now shifting.
For our second quarter 2021 revenue commentary.
On our top line, we generated record revenue of $163 million and the second quarter of 2021, representing reported growth of 86% and organic growth of 69%.
Included in our reported growth figures as a 5 point.
Tailwind from foreign exchange.
Overall, the composition of our second quarter revenues includes our base business, representing 66% of total revenue.
Covid program revenues, representing 27% and our 2020 acquisitions contributing about 7%.
And.
Complementing our revenue growth, we continue to see excellent orders traction and each of our product franchises with overall order growth of nearly 140% through the first half of 2021.
In terms of regional revenue growth for our direct products and the second quarter, we continued to see very positive momentum.
Revenues from Asia rest of World were up more than 115% led by the strength of our filtration products and China Korea and India.
Europe grew at greater than 170% and the quarter and our North America region also continued to perform well with revenue growth of greater than 70%.
As it relates to direct product revenue composition for the second quarter of 2021, North America represented 42% with Europe, and Asia, representing 36% and 22% respectively.
Now moving down our income statement.
Adjusted gross profit increased.
$2.101.1 million and the second quarter of 2021 and.
And increase of $50.1 million or <unk>, 98% versus the second quarter of 2020.
Adjusted gross margin increased to 62% and the quarter compared to 58, 2% from the same period and 2020.
This 380 basis point improvement reflects benefits from positive volume leverage higher column versus resin content of our opus product line.
And the timing of planned expense increases and facilities equipment, depreciation and head count additions tied to our capacity expansion initiatives.
Based on the strength of our year to date 2021 performance and our expectations for a strong second half of the year, we are increasing our full year adjusted gross margin guidance to 59% to 60% up from our prior anticipation of 57% to 58%.
We will now transition down the P&L.
To adjusted operating expenses.
Adjusted research and development expenses increased to $8 million and the second quarter of 2021 compared to $4.1 million and Q2 of 2020.
R&D dollars continue to be directed towards expanding our global R&D team capabilities and systems and filtration.
<unk> membranes and gene therapy.
We also increased spend on key R&D programs spanning our 4 product franchises with the goal of launching several new products and the next 12 months.
Second quarter 2021, adjusted SG&A expenses were $36.4 million or.
22, 3% of revenue compared to $21.2 million or 24, 3% of revenue for the 2020 period.
The increased SG&A spend on a dollar basis was related to the timing of our 2020 acquisitions plus investments in personnel and occupancy and depreciation expenses.
And now moving to adjusted earnings and EPS.
Second quarter 2021, adjusted operating income was $56.6 million versus $25.5 million reported and the second quarter of 2020 and increase of $31.1 million or 122%.
Second quarter adjusted.
<unk> operating margin was 34, 7% and improvement of 550 basis points compared to 29, 2% and the 2022nd quarter.
Adjusted operating margin expansion and the second quarter of 2021 reflects the impact of strong volume leverage with our revenue growth accelerating faster than our capacity.
And it investments.
Based on our first half of 2021 performance and the expected strength of our markets and operational performance for the second half we are increasing our full year adjusted operating margin expectations to 29% to 31% up from our prior outlook of 27% to 28%.
And related adjusted net income was $44.9 million and the second quarter of 2021, representing an increase of $22.4 million or <unk>, 99% versus $22.5 million and the 2020 period.
Our strong growth and operating performance and the quarter was partially offset by a higher adjusted income tax rate of $19.
1.3% compared to the 9.1% adjusted tax rate from the second quarter, and 2020, which benefited from unusually high stock vesting and exercise impacts.
Adjusted EPS increased to 79 per fully diluted share and the second quarter of 2021 compared to 42%.
And the 2020 period.
And increase of 37 or 87%.
Our cash and cash equivalents, which are GAAP metrics total $734 million at June 32021.
We will now transition to our 2021 full year guidance.
Our GAAP to non-GAAP reconciliations for our 2021 full financial guidance are included in the Reconceived ciliated and tables in today's earnings press release as previously mentioned unless otherwise noted all 2021 financial guidance guidance discussed will be non-GAAP.
Please also keep in mind.
'twenty, 1 guidance may be impacted by fluctuations in foreign exchange rates beyond our current projection of a 3% tailwind on full year sales and.
And does not include the potential impact of any future acquisitions that the company may pursue.
Based on the continuation of our robust bio processing market.
And the strong operational execution and our business, we are increasing our 2021 full year revenue guidance, a GAAP metric by $57.5 million at midpoint up to $625 million to $645 million.
This represents reported growth and the range of 71 to 76.
That our total.
And organic growth of 57% to 62%.
We are increasing our 2021 adjusted gross margin guidance to 59% to 60% up 2 points from our previous guidance range of <unk>, 57% to 58%.
We are raising our adjusted.
<unk> operating income guidance by $35.5 million at midpoint to a range of $192 million to $197 million.
And boosted our and boosting our adjusted operating margin range by 250 basis points at midpoint to the range of 29% to 31% of revenue for the year.
With respect to adjusted other income and expense, we are increasing expense to $2 million from our prior guidance of $1 million related to transactional foreign exchange exposure are realized and the first and second quarters of 2021.
We.
And you do expect full year 2021, adjusted income tax expense.
It offers to be approximately 19% of adjusted pre tax income.
This guidance assumes an adjusted tax rate of 21% for the second half of 2021.
And does not consider the potential impact of additional employee stock transactions, which we expect to be modest for the remainder of the year.
We are raising our adjusted net income expectations for full year of 2021 by $28 million at midpoint to the range of $154 million to $158 million and we are boosting our adjusted EPS range expectations by 50.
And to $2.71 to $2.78.
Per fully.
Expense share.
Our adjusted EPS guidance reflects an estimated 57 million weighted average fully diluted shares outstanding for the year.
Our full year 2021, adjusted EBIT range is being increased by $34.
5 million at midpoint.
To the range of $210 million to $215 million with depreciation and intangible amortization expenses expected to be approximately $19 million and $21.3 million respectively.
The company continues to expect to invest $60 million into capital expenditures.
Diluted in 2021, consistent with our previous guidance.
This includes key capacity expansion initiatives port filtration, and chromatography and proteins portfolios as well as continued SAP system implementation investments.
Inclusive of the compensation paid for our <unk> acquisition.
<unk> and closed on July 1, we expect year end cash and cash equivalents and GAAP metric to be and the range of $740 to $750 million with our capex investments being fully funded by cash generation from our operations.
This completes our financial report and guidance update.
And which and I will now turn the call back to the operator to open the lines for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your touch 10 Fad.
If you are using a speaker phone please pickup your handset before pressing the keys.
And anytime you question and that's been addressed and you would like to withdraw your question.
And please press Star then 2.
In order to accommodate all individuals who wish to ask questions. There will be a limit of 2 questions at a time.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from <unk>.
Date here, yes with Stifel. Please go ahead.
Hi, Good morning, guys, congrats on the quarter and sorry for the cold here.
John wanted to start with the gross margin performance and the margin guide for the year.
And well above what we were looking for for the quarter, how should we think about the impact of just.
And the leverage on the higher.
Dan and human capacity changes versus the timing element on I think payment that you mentioned and if I look at the gross margin outlook for the year and kind of looks like you need to do.
Dip down a couple of hundred basis points in order to get to the middle of the 59% to 60% range. So is there something discrete there and.
To what extent should we kind of think about nuclear.
Volume and forward at the gross margin line.
So I can give you a good overview of that Dan for Q2, obviously, we're at 62% adjusted gross margin and then year to date, we're at about 68% so.
As a result of the first half performance, we did see very nice volume leverage we also saw.
<unk> benefits that we touched on within our Opus product line.
Well as a high degree of volume from from proteins and filtration, which was favorable from a mixed perspective and in the first half.
You know as we as we look at this we've raised our overall guidance by about 2 points up from that 57%.
And to 58% up to 59% to 60 and.
And what this implies actually for the second half as a mid point of gross margin for the second half of the year of 50, 58% to 58, 5% and that range and.
And.
So what we expect to see for the second half of the year, It's just a number of investments.
And that we've been making throughout the year, but should intensify.
With our expanded footprint with more depreciation expenses and more head count expenses as we come through the second half of the year, but definitely a little dip down, but 58, 3% or 58, 5% is pretty form level for the second half compared.
And historical historical margins we've had.
Okay and any thought on on next year, I mean, I know, we're not there yet, but just given where you you went through this quarter and any sort of level set where where you might come back to for 2020.2.
Yeah, It's you know a lot's going to depend on on volumes and and what.
And we're able to see coming into the revenue forecast, it's a little bit early to say that but I would say Dan if we're finishing the year second half of the year and that 58% to 58, 5%.
And that's probably likely a good starting point for the year and hopefully it will ramp up a bit through the year.
Yep.
Okay, Thanks, a bunch and.
Tony maybe just 1 for you obviously pretty strong performance on the non Covid business to your point can you just maybe walk through some of the factors that you think are driving acceleration.
And when it comes to.
Clinical development and advancement phase, 1 to twos twos and threes larger orders I mean, I know you've mentioned about mentioned selling.
And capabilities when it comes to the portfolio.
Curious to get your thoughts on what you think is driving the acceleration there and then along those lines and 1 of the other things that you've mentioned you just referenced anyways and it's just that some of the Covid work that you've done from the government and that you've been obligated to do has at times and put a bit of a constraint on the non COVID-19.
Business at some point so is there anything to read into the results here that says that maybe that's easing a bit or is it just.
Sort of a different dynamic altogether.
Yeah, Steve I mean.
And when you look at the overall performance in Q2 and honestly when you look at it for a full year for projecting out now 30% growth.
The non Covid business. It is across the board and we're really pleased with the filtration portfolio. When you look at our hollow fiber.
Module and CLEC at our systems.
The flagship cassette business.
On the artisan systems that we've now added and all of those have really.
<unk> added to the to the overall growth.
I think it's more of a reflection of the work that's being done over the last 4 or 5 years, we have a pretty healthy funnel of early stage to mid stage opportunities that continue to move through the clinical pipeline and I think ATF is a great example.
For the last maybe 5 plus years ATF, we've lots of phase 1 phase 2 we've seen a lot more companies bring the technology through to phase III commercial and we've definitely benefited from that other product lines.
Our analytics business up 40% again year over year.
This is Jeff.
I think the focus on putting our commercial organization in place. So if I had to summarize I would say is the investment we've made and commercial over the last few years to really.
Make our territories and little smaller a little bit more focused and then I would say over the last 12 months it's the.
Just when we made and capacity that many of our product lines. We've really got ahead of the capacity challenge and we're benefiting a little bit from sort.
Sort of shorter lead times.
Okay Super Thank you Tony.
Our next question will come from.
Puneet <unk> with SBB Leerink. Please go ahead.
Okay, great Thanks and.
Tony Congrats on the strong quarter here.
First 1 on Covid, and the $170 million to $180 million.
And I know and historically, you have said that that could potentially be from.
Invest new vaccines and the 200 million number that you are giving for 2022 that wouldn't be from sort of new vaccines and therapies that are and the phase II phase III trials right now.
But at this point we have seen.
Significant adoption of mrna based vaccines.
And so and the proteins and <unk> have lagged a bit.
Or had limited traction and not so remarkable data. So when you look at this number and our 2022 and it's great to see that it's up.
As you pointed out even before.
And just trying to understand is that.
Is that just still from the new vaccines that could emerge.
Bid or is it just the expansion of the current volumes and just wondering if you're baking any boosters and to that as well.
And maybe start with the last question.
Yes, when you look at next year on Covid, obviously, the last I would say 4 to 8 weeks, we've seen a significant number.
And there has come in and.
For 2022.
And so that's why we have well over $100 million and.
And booked orders for next year coming from.
The <unk>.
Commercial vaccines that were and.
Which is the majority and we are definitely on the therapeutics.
And as well, but the majority of our revenues coming from vaccines.
I think in terms of companies that are <unk>.
Phase II phase III.
I think their orders really go out to the end of this year, but we have forecast of where we think people are going to be next year. So we feel confident about the $200 million number puneet we think.
<unk> halfway through the year, we're well over 50% and what we see as the order book for Covid for 2022.
And we think that that's that's a fair reflection of where we think COVID-19 is going to be on the $170 million to $180 million. This year.
Again, some of the revenue and the second half of the year, it's definitely coming from.
And from phase, 2.3 and and potentially commercial drugs or commercial vaccines.
And expect that.
Most of our large customers have placed third quarters for this year, So I think thats a pretty solid number.
Got it Okay. That's very helpful and then.
On the capacity side of things, obviously, youre seeing youre pointing to higher demand here continued strong.
Acceleration and the market and the capacity expansion.
Could you, maybe just give us a sense of sort of.
And where the sentiment sits today.
We've seen and industrial.
And expansion across the industry and across repetition and capacity so far your capex commitment is now.
Remains the same so and we saw our peer announced this morning, a significant capacity expansion too. So maybe if you could give us.
Your view and just.
Nude capacity.
<unk> expansion as we go into 2022 and.
And just sort of trying to get a sense of we have seen.
Nude expansion and demand and this market are we reaching some of those peak levels.
At this point in time.
And to get a sense of that thank you.
Yes, I don't think roughly.
And is doing anything different than any of our peers right everybody is expanding capacity everybody is investing and you saw the announcement. This morning from from some of our peers in terms of what they're doing we've seen this over the last 4 or 5 months.
We're investing about $100 million and capacity expansion programs I think.
And when you look out for we're trying to go in terms of capacity plans and what we've done just in the last month and a half in terms of.
Taking a lease on the hopkinton facility.
Also.
And doing a lease.
On the on the Waterford building that gives us.
Tremendous capacity.
In 2022, and now on top of that we've got the Marlboro building you shouldn't discount the fact that polymer and is an immediate capacity play for us as well because on the hollow fiber side. We've gone ahead and acquired a company, we really like their technology, we like what they have in terms of manufacturing capabilities.
And we get immediate boost and capacity so our view of the world is.
You have to you have to have.
Really good lead times and.
And everybody on our industry is working towards that goal I don't think theres and over.
Capacity right now or is that for.
Don't know.
<unk> are high and so I don't think anyone can really predict that but our order books have been good I think everybody else and the industry is indicating their order books are also very strong. So I think there's a high degree of confidence that this.
Growth that we're all seeing is going to go well into 2022.
Okay.
Great Thanks for that.
Our next question will come from John Kreger with William Blair. Please go ahead.
Thanks, very much and Tony could you just expand a little bit more on the lead time comment that you. Just made if you kind of reflect back a couple of years ago, and and a more sort of normal market environment, what would sort.
Typical competitive lead times, and then versus what where they're running now and then maybe as a follow on I know Paul and then you talked about.
Gaining a competitive advantage and the hollow fiber area again can you just sort of talk about what your lead times were before that deal. Thanks.
And so on the lead times. If you went back a few years ago I think if this was a consumables. Obviously you have some consumables that are off the shelf, but I would say 6 to 12 week lead times pretty.
Pretty common in our industry and then on capital equipment, it could be anywhere from 9 weeks too.
Yes, 15, and 16 weeks I would say when COVID-19 hit pretty much lead times doubled and in some cases went out even further than that across our industry.
We've worked really hard to.
To keep our lead times and <unk>.
Short as possible some sometimes that works.
Right, sometimes where challenge even on the supply side. Great example, is our prepacked columns, we have just great capacity right now, but theres still some constraints on the industry on supply of chromatography resins. So that's a little bit outside our control, but I think in general.
Every product line on our portfolio is at a different stage.
Jim its journey in terms of where we want to get to lead times, but we're trying to get back to.
Lead times that we had 3.4 years ago when it comes to poly ma'am.
I think the impact of poly Mem will really be felt in 2022 right.
Right now, we're just going through the integration piece.
There are online and producing fibers and modules for us and they will drive down lead times, when we get into next year, which will be back to more normal ranges that I spoke about earlier.
Great. Thanks, and then maybe just a follow up for John.
Margins would suggest snap not much of this.
But are you seeing any sort of supply chain constraints that are limiting your ability to.
Ramp capacity on on schedule.
And I think the most significant supply chain constraint that we have is the is the resins situation for opus that Tony talked about.
And.
We like everybody else are hiring a lot of people. So there is some.
And there is definitely.
Under supply and over demand on the on the personnel side.
But we continue to work through it like our competitors do and.
We've been able to pretty much overcome any major major issues, but.
There is there is definitely pent up.
Too much too much demand not enough supply and.
And there is there is a little bit of inflation that we're absorbing but.
And that's the same as all of our competitors.
But nothing show stopping there.
Great. Thank you.
Our next question will come from Julia.
Quinn with J P. Morgan. Please go ahead.
All of the model.
Welcome to cobalt.
And on local maybe Mala.
And 1 other clothing.
And all.
Scott both deposits.
And turns off on you on EPS.
And as previously noted that comes from those are all.
White and bad I'm curious if you've also seen increased customer doing what's working and we thought of this or if you expect the pandemic to have an impact on the customer dual sourcing behavior in the future I'm basically trying to understand what this could mean in terms of creating incremental opportunities for our religion and.
You have to learn a little.
<unk> was a little hard but this is youre asking the question on increased dual sourcing dual sourcing benefits and.
And so.
I would say that right now.
And if a customer has a supply issue there are definitely going to look at dual sourcing there's.
Oh about it Julien so.
It just really depends on the product line.
I think that our customer base.
Realizes after going through the first year and a bit of COVID-19 that having multiple suppliers is only a benefit.
And you'll you'll always have primary supplier, but.
No that will be opportunities for <unk>.
Companies that have not been that accounts to be able to come in as a second supplier.
Especially when some of the products might have long lead times.
Great.
And then in relation to reason kind of.
Can you talk about Robert Jan has exposure to all.
Alzheimer Therapeutics, and you know how big the opportunity can be.
Okay.
2 I'm, sorry, 2 summers Alzheimers yeah.
On the I would say and it's early days on all timers I think when we look at it.
At.
Accounts and we look at it.
Accounts really from how do we get platform into an accounts. So we don't worry about the individual drug I think as a class of drugs around all timers begins to take off you'll see multiple companies.
Moving forward with phase III commercial approvals it will start to move through the CD and Moe type organization.
Since that traditionally happens with with large blockbuster drug and so I think roughly 2 and will get its fair share.
But I think our number 1 priority is really around.
Penetration of accounts and getting and as platform technology, whether it's on <unk>.
ATF technology or its opus pre packed columns.
Comms or it systems, that's always been our approach we don't really look at a drug by drug and in fact, most of our customers don't really talk about which drugs here and they just talk about what's required and youre in a phase 1 or a phase 2 or you used as a platform across multiple.
And multiple.
Drugs.
And I say you got it thank you.
Our next question will come from Jacob Johnson with Stephens. Please go ahead.
Good morning, guys, maybe a question on the gene therapy side as it relates to viral vector yields I.
I think they're relatively low today, but everybody seems to be working on kind of optimizing those workflows.
How do you see that trending Tony and and maybe what opportunity and what opportunities does it present for you. It seems like ATF is benefiting here.
Yeah. So the viral vector side look I would say that almost every company is looking to optimize their manufacturing process our processes and.
And yield is king and if you can improve yields then youre going to get a fair evaluation on an opportunity to move into.
Many of these men and many of these drugs so from a rutledge and perspective I would say that.
And our upstream portfolio of Ats and <unk>.
Workflow.
And is really well positioned to focus on what you just referred to as viral factory yield improvements and that's something that we've been working on over the last couple of years. We've definitely made some progress we've had some nice wins and but there are other technologies out there as well that people will evaluate but we feel pretty.
Pretty bullish about.
The impact of HFC FTF from this space.
Got it thanks for that Tony and then just on the fluid management capabilities you added.
I think emt and NMS deals can you just remind us of the strategy here it seems like that.
Is that could be important, especially and cell and gene therapy customers look to.
Vela clothes manufacturing processes is that a piece of it or maybe it's broader than that.
Yes, when you look at I think its all centered on our system strategy, which obviously in 2017, we did the spectrum deal.
Something gave us the hollow fiber systems from bench top all the way to production by acquiring artisan last year, we added in.
High pressure.
On the <unk> pump systems for downstream.
Chromatography systems with low hold up volumes and other systems for media.
Proppant for viral filtration.
So.
When you think about consumables around systems.
A lot of cut.
Customers use what we call and fluid management flow paths. So when we talk about <unk>, that's kind of a perfect example of hollow fiber module with.
The whole.
Fluid management components added into it so as we.
Think about fluid management, where thinking about fluid management around the systems, we have as opposed to selling and the flow paths independent of our systems and now we do that but I think our goal is to is to have the.
Slow patch sold with our systems and so the customers have and ability to get not only the system to do the work, whether it's upstream or downstream, but also the fluid management components that go side by side with it.
Got it thanks for taking the questions Tony.
Our next question will come from Matt.
Hewitt with Craig Hallum Capital Group. Please go ahead.
Good morning, and congratulations on the strong quarter on just a couple from me on regarding some of the newer products specifically flow V. P. X last quarter was the launch you you commented that it was off to a very strong start just curious and we can get an update there and then.
And regarding the COVID-19, spike protein a affinity resin and that was being evaluated have you seen any orders come in for that and and how is that looking thank you.
Yeah, and maybe start with the spike Spike protein resin Ah Yeah, we definitely have had orders through the first half of the year and we'll have more orders and the second half.
We said I think the spike resin world play a role and next generation vaccines. So not I wouldn't expect a whole lot of revenue from from that product and in 2020, 1 and we'll see where we get 2 and 2022 on the flow V. P. X I think this is a technology very like.
No.
The excitement that we feel around T. F. D up we have the same level of excitement around flow V. PX, we think that P. E. T technologies are definitely on the rise and customers. Our customers are definitely looking to get real time process monitoring data, that's what flow vps.
<unk> brings to the equation.
And we've seen really nice adoption of the of the new product through the first half of the year expected to accelerate further as we go through 2021 and 2022 and we think we're at right at the beginning of the journey of finally seeing P. A T technologies get adopted.
<unk>.
And bio processing, which sets up a very long runway for products like flow V. PX as we go through the next few years.
That's great. Thank you.
Our next question will come from Paul Knight with Keybanc. Please go ahead.
Hi, Tony on the capacity expansion.
And earlier.
Is it the <unk>.
Water for it is that the existing prebuilt.
IDB facility, there and then on the French acquisition. It sounds like you are ramping very quickly what's enabling that.
Yes, so maybe start with the French acquisition, Paul the polymer.
And you mean facility was already set up in terms of their manufacturing capabilities to pivot to making bioprocess seeing fiber and modules. So they had a lot of core competency that complement and exactly what we have so because we've been working with them for the best part of the year really.
Really the first half of this year has been around ramping up their manufacturing and quantifying it in and then working with our customers to qualify and a second supplier.
Or for membranes and modules and that's exactly what we've been doing through the first half and we're starting to ship.
Modules to our customers here and in Q3.
In terms of the Waterford site.
It's the.
It's an idea building brand new building, it's very close to the artisan headquarter is probably about 3 or 4 kilometers away. Our goal Paul would be over the next 12 months to build that out as a European assembly centers, so not only.
Will it make the flow paths for.
Say, the artisan skids and it'll also make flow paths for what we call. The <unk> product line. So I think it's a it's a it's really an important addition for us because we feel like we need dual manufacturing, especially.
Especially for.
European and North America customers. This gives us the European centre of excellence.
For our robots and fluid management products and expect that that will come online in 2022.
And lastly, Tony.
And with industry growth, perhaps 20% and you're well above that is it.
And all of the products like ATF do you think that kind of thinking is clear.
Yeah look I would say that everybody in bioprocess, saying has great products and their portfolios that are growing probably close to where we're growing I just think we're.
Sure.
A smaller company with very focused highly differentiated technology. So we havent moved into the commodity side of bio processing I think that's our differentiator I mean, all our products are technology leaders and for the most part actually market leaders where we.
We play I think that allows us to.
Basic.
Accelerate our growth I think the other part is that and when you look at our pipeline I think we probably we don't have as many products R. R.
Customers, who have our put our products into commercial.
<unk> processes, we've got a big customer base that are using our products and phase 1 phase II phase III, we definitely have commercial wins, but as those products come through.
And then the consumables associated at the commercial level definitely become an accelerator of growth for us. So I think that's part of why we're growing.
And above the market growth rate.
Thanks.
Again, if you have a question. Please press Star then 1 our next question will come from Ram <unk> with H C. Wainwright. Please go ahead.
Alright, thanks, very much for taking my questions both related to Covid can.
Commercial meant on what the implications might be for future approvals of boosters or the main marketed COVID-19 vaccines, the extent to which this might impact durability recurrence on the COVID-19 revenue front and also if you could comment on the COVID-19, and therapeutic sides what category.
Lori of Covid, 19, and COVID-19 and therapeutic.
Likely to be the most significant long term driver of revenues and <unk>.
And these specifically in the context of the fact that it appears to be the.
And the case that with these new variant strains and the high likelihood is that COVID-19 is on its way to becoming endemic.
On the therapeutic side I would say that.
I really can't comment on which therapeutics are going to be the major drivers of growth. The way. We look at it is the majority of companies that are working on therapeutics and vaccines. We are working with them. They are using our products I think we benefited over the last year.
Okay.
More on the vaccine side, because the volumes have been high and we've had the right technology at the right time to be able to work with those customers to move forward I think there will be opportunities for us on the therapeutic cited above and beyond what we're doing today.
In terms of the boosters.
I think it's a little early I think that decision on on when boosters.
And if and when boosters get approved will happen later this year and you can see that there is different parts of the world that have all have.
Different opinions on it and I think Europe is very much and in favor of putting boosters into the equation.
I don't think boosters have become part of the <unk>.
Long term planning in terms of <unk>.
Volume and revenue.
And so it boosts who's got approved I would see it as an upside to overall market demand as we move through 2022 and 2023.
Great Thanks, and congratulations on the quarter.
Yes, thanks, Rob.
Our next question will come from Brandon courtyard with Jefferies. Please go ahead.
Hey, Thanks, Good morning, Tony can you comment there about.
And forward your $1 billion revenue target.
Sure.
And Thats all.
Great and just curious.
Comment on the.
On.
And now with Covid revenue that might be.
So included in that number as you kind of look out a few years.
Yes, it's definitely an organic and organic number that gets us to the $1 billion and.
And in 2024.
When we look at.
We're going to be next year with <unk>.
Couple of hundred million dollars and Covid revenue you can see.
And that getting to $1 billion by 2024, given the sort of portfolio of products that we have the growth trajectory that we're on with those.
We feel pretty confident that that's something that we can accomplish and achieved and on.
And what we do deals between now and then yes, I'm sure, we will and that will kind of add to the overall overall number.
And the second part brand and again I'm, sorry, do you would you repeat it.
Yes, I guess, just if you care to comment I think on kind of the magnitude of.
I would rather.
Yeah.
And that might be influencing that 2024 built.
Oh, Yeah, Yeah, Yes, we go through the next few years I think it's a little it's a little unclear I think we're trying hard to give people a view of 2022 right now and I think that 2023.2020 for demand.
And we'll definitely depend on.
What's the effectiveness of the vaccine how long the antibodies last and our booster is going to be required I think all of those play a big role and 2023 and 2024, but.
And you think COVID-19, it's around 4 for the foreseeable future.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Tony Hunt for any closing remarks.
Just like to thank everybody for joining us. This morning preceded all the questions and look forward to catching up with everybody at the end of the year and.
Thank you again.
Yeah.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.