Q3 2021 Rapid Micro Biosystems Inc Earnings Call

November 12, 2021

Yeah.

Good day and welcome to rapid micro Biosystems third quarter 2021 earnings call. At this time, all participants are in listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask a question. During this session. So please press Star then one on you just had some telephone.

And he wants to require assistance during the call. Please press star zero to reach an operator.

As a reminder, this call is being recorded.

I'd now like to turn the call over to David Blackman from the Gilmartin Group you may begin.

Good morning, everyone and thank you for joining rapid micro Biosystems third quarter 2021 earnings call I'm, David like listening to you Martin.

On the call from rapid microbial, perhaps didn't Watson Chief Executive Officer, John <unk>, Chief Financial Officer Yesterday evening Rapid micro released financial results for the third quarter ended September 32021 copy of the press release is available on company's website before.

Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements, including but not limited to statements related to rapid micro's financial condition expectations for business development and growth customer interest and adoption of the gross direct system and potential impact of COVID-19 on rapid micros business actual results may differ materially.

From those expressed or implied by forward looking statements due to a variety of factors for a list and description of those risks and uncertainties associated with the micros business. Please refer to the risk factors section of our form S. One filed with Securities and Exchange Commission on July 12, 2021, we urge you to consider those factors you should be aware of those statements should be considered estimates only and are not a guarantee.

<unk> future performance.

Conference call contains time sensitive information is accurate only as of the live broadcast today November 12, 2021 rapid micro disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

I will turn the call over to Rob.

Thank you David.

Good morning, everyone and thank you for joining us to review our third quarter 2021 results I will begin today's call with an overview of our operating results and key growth objectives.

I'll then pass it over to Sean for a detailed financial review before we open the call up for questions I'd like to start by saying how pleased I am with our third quarter performance. We delivered total company revenue of $6 9 million.

With commercial revenue coming in at $6 $3 million, we made good progress executing across our strategic initiatives to accelerate the global adoption of the growth direct system with 10 system placements during the quarter, bringing our total systems place to 113.

We continue to establish ourselves as the market leader in automated microbial quality control or MQ see within biopharmaceutical manufacturing globally I'll now provide an update on some of the progress. We've made recently on our strategic growth objectives since becoming a public company in July we've accelerated investment to drive.

Customer adoption global expansion and product development to support our growth plans, we hired life Sciences veteran Andy Keys as Chief commercial officer during the quarter. Andy was most recently the SVP of global commercial operations at <unk>, where he led sales and service operations globally and he is now lead.

Our sales service and validation teams worldwide, we're thrilled to have him onboard at rapid micro and excited to have him lead the expansion of our commercial teams.

Pharmaceutical customers recognize that our purpose built technology is designed to overcome challenges associated with the outdated manual and QC method.

The growth <unk> has the speed accuracy, and scalability and security required for advanced pharmaceutical manufacturing customers value or the growth of Rx efficiency and time to result, which we highlighted in a poster presentation at the 2021 Parenteral Drug Association pharmaceutical Microbiology conference in October.

The time to result data presented demonstrate that the growth direct delivered environmental monitoring results in approximately 72 hours versus five to seven days using the traditional manual testing method. This strong value proposition along with other strong value drivers allows us to attract a top tier customer base.

Including the majority of the global top 20 pharmaceutical manufacturers.

During the quarter. We also continued to invest in product innovation to expand application of the growth direct. This includes our rapid sterility application, which is in development and was recently profile that PDA in October.

Rapid sterility testing is critical not only in their manufacturing of biologics and sterile injectables, but also vaccines and cell and gene therapies.

With our growth direct system customers will be able to significantly reduce time to result for final sterility testing at this very important stage of production, which will accelerate the release of final product to patients.

When using the growth are at customers can ship quality product more rapidly with fewer bottlenecks improve data integrity and less potential waste.

We are encouraged by the positive interest we have already received an anticipation of the severity applications upcoming data in 2022.

Italy, We also advance new product development programs focused on expanding our solution within customers quality control workflows. For example, our program focused on differentiating among categories of organisms by advanced software developments to our core vision system is proceeding well and the growth of <unk> will be the first.

Automated rapid MTBC product able to differentiate organism types, we expect to begin beta in 2022 with this exciting new offering.

Operationally, we continue to build robustness and continuity across our manufacturing and supply chain network.

For example, our new consumables manufacturing site in Lexington, Massachusetts is currently under construction and will be operational in 2022.

In summary, I am extremely proud of our achievements in the quarter. Despite some COVID-19 related headwinds we continued to invest in building a solid business foundation and laying the groundwork for long term growth as we look ahead, we remain very excited about the growth opportunities for our business. Furthermore, with the proceeds from our IPO in July.

Along with the repayment of our outstanding term debt during the quarter, we have the capital and financial flexibility to accelerate our growth initiatives to drive long term value for our stakeholders I will now turn the call over to Sean to discuss our financial results Sean.

Thanks, Rob good morning, everyone.

Last night, we reported total revenue for the third quarter of $6 $9 million, an increase of 31% compared to $5 2 million for the same period last year.

Commercial revenue was $6 3 million representing growth of 27% over the third quarter last year within commercial revenue product revenue of $4 $8 million increased 19% over Q3 last year consumables revenue grew more than 200% versus Q3 last year as a result of newly validated customer systems coming online and <unk>.

<unk> utilization by some existing customer systems over the past year.

From a system standpoint, as Rob mentioned, we placed 10 systems in the quarter. This compares to <unk> 11 system placements in Q3 last year as a reminder system placements in Q1 and Q2 last year were negatively impacted due to widespread COVID-19 related border closures and customer site access limitations. Following the outbreak of the pandemic in March 2020 as.

We moved into the second half of last year. Some of these limitations started to ease and we were able to place several systems that had been delayed from the first half with customers in Q3 and Q4.

While system placements have historically been and continue to be subject to quarterly variability due a number of factors.

Unique dynamics last year resulted in an unusually low number of system placements in the first half and a correspondingly unusual rebound in second half placements.

Specifically, we placed five systems in the first half of 2020 compared to 21 systems in the second half, including the 11 placements in Q3 that I mentioned earlier this unusual COVID-19 related trend significantly impacts quarterly growth rates, when comparing 2021% to 2020.

Service revenue was $1 5 million in the third quarter up 65% compared to the same period last year.

This increase was due to higher revenue from validation services and to a lesser extent recurring service contracts during the quarter. We completed the validation process on five new systems, bringing the cumulative number of validated systems in the field at the end of Q3 to 68.

This result reflects several system validation that shifted from Q3 into Q4 due to COVID-19 related access challenges at some customer sites as well as the more pronounced impact from the summer holiday season since the beginning of Q4, we've completed those shifted validation and are also on track with our Q4 plan for new validation.

Recurring revenue, which includes consumables and service contracts was $2 2 million in the quarter, representing an increase of 154% compared to Q3 last year. This performance was driven by the very strong growth in consumables I mentioned earlier as well as solid growth in revenue from service contracts as we continue to grow our base of validated systems.

To finish up on revenue non commercial revenue related to our contract with BARDA with zero point $6 million in Q3, this year compared to zero point $3 million in the third quarter of 2020 in.

In late September we were notified by BARDA that they had approved a zero point $4 million final adjustment to closeout, our previous contract, which we recorded as incremental noncommercial revenue in the quarter. As a reminder, we do not anticipate noncommercial revenue from our current contract with BARDA continuing beyond 2021.

Moving on to gross margins product margins were negative $1 5 million or negative 31% in Q3 compared to negative $1 4 million or negative 34% in the same period last year.

On a percentage basis gross margins improved as a result of volume leverage from higher revenues in the quarter.

Service margins were essentially breakeven in the third quarter compared to zero point $1 million or 14% in Q3 last year with the difference due mainly to recent investments in new field service and validation head count to support higher service activity.

Moving down the P&L total operating expenses were $10 8 million in the third quarter, consisting of $3 $1 million in sales and marketing $2 4 million and R&D and $5 $3 million in G&A. This.

This compares to total opex of $6 2 million in the third quarter of 2020.

The year over year increase was due to higher sales and marketing spending driven by increased investment in head count and higher G&A expenses related to our transition to a public company.

Net loss in the third quarter of 2021 was 25.0 million. This includes the impact of an $8 $2 million charge to adjust the fair value of our outstanding preferred stock warrants prior to their conversion into series a common stock warrants in connection with the IPO of $3 $1 million charge related to the repayment of our term debt.

And as <unk> $8 million charge to other expense related to an exit fee payment to our former lender that was triggered by our IPO.

This compares to a net loss of $8 5 million in the third quarter of 2020.

Net loss per share attributable to common shareholders was 71.

In Q3, 2021 as compared to $30 eight in the prior year.

As a reminder, the number of weighted average common shares outstanding in Q3. This year was materially higher than Q3 last year because of the conversion of our outstanding preferred stock to common stock in connection with our IPO in July this accounts for a substantial portion of the decrease in net loss per share between the periods.

With respect to noncash expenses and Capex depreciation and amortization expense was 0.4 million stock comp expense was <unk> 6 million and Capex was <unk> 5 million in the third quarter of 2021.

We ended the third quarter with approximately $220 million in cash and cash equivalents as Rob mentioned earlier, we fully repaid our outstanding term debt during Q3, which will eliminate approximately <unk> 8 million and interest expense each quarter starting in Q4.

Now shifting to guidance, we continue to expect our full year 2021 commercial revenues to be at least $24 million representing growth of at least 70% compared to 2020 on a sequential basis. We currently expect our commercial revenues to increase gross margins to improve in opex spending to increase in Q4.

Engaging on site with our customers is the most effective way to sell growth direct systems and efficiently move them through the validation process and into routine use.

<unk> to note that the current environment continues to present transitory challenges and uncertainty related to the timing of business activity due to COVID-19 related customer access limitations, we are actively managing the business to navigate through these challenges and mitigate their impact.

That concludes our prepared remarks. So at this point, we will now open the call up for questions operator.

As a reminder to ask a question. Please press Star then one.

If your question has been answered and you'd like to remove yourself from the queue press the pound key.

First question comes from Tycho Peterson with Jpmorgan. Your line is open.

Yes, Hi can you hear me okay, yes.

Yes, Hey, Tycho Tycho so on the validation you did take a step down here can you I know you talked about typically second half stronger than the first half, but can you maybe just talk a little bit more about what youre seeing in the market. How much of this is the COVID-19 impact how much is there any supply chain impact here and have things picked up.

A bit since the end of the quarter.

Yes, its Sean here Tycho.

In terms of validation I think I covered some of it on the prepared remarks, and we have had some customer situations, particularly coming out of Q3 kind of latter part of Q3.

Into Q4 were.

Access has tightened a bit and we've had.

Impact of that of the validation from Q3 to Q4 was really a couple of different customers where.

Things changed a bit due to COVID-19 and our ability to get those systems validated and get over the finish line in Q3 pushed into Q4 now as we said.

Every one of those validation that we didn't get done in Q3 that we had anticipated has already been done in Q4, and we're making good progress and on track with our Q4 validation. So again. This is all timing that we're seeing at this point we believe so.

<unk> said that looking at Q4, the environment I think is continuing with what we've seen over the past couple of months now so at this point, that's what we're assuming we're going to see for the near term.

Not really seeing anything thats, showing that we're going to move materially positively or negatively from a COVID-19 standpoint, right. Now so we're watching that very closely as we have been but the environment did change a little bit late in Q3, and Thats carried forward into Q4, so far.

And is it fair to say then that because of timing you don't really see an impact on 2022 consumable numbers.

When you look ahead.

Yes, I mean, we're still working on the plan for next year I think once the system's validated that starts our activity working with the customer move them into routine use which is really the ultimate driver of consumable also.

As things slipped a little bit it could have some impacts in terms of when new customers get up into routine use but we will talk more about our expectations for consumables next year, when we get to giving guidance for next year.

And then on stability you highlighted the beta launch coming next year can you just talk a little bit about how you think about the initial rollout of sterility.

Yeah, Tycho, it's Rob so.

With regard to rollout im not sure youre prone to full commercial rollout.

That will come later in the development <unk>.

Sequence, but the next major step is a beta launch if you will which will be.

With we're working now with several large global Biopharma customers, who would beta test.

Are really application provides feedback and then subsequent to that in later periods. We would we would execute a full commercial launch of the of the product.

But the beta is scheduled for 2022.

Okay last one on SG&A, you said actually increased head count as you are scaling up here can you just give us a sense here, where you are from a rep standpoint, and how you're thinking about SG&A for 2022.

Yes, so we have a.

As you heard in the prepared remarks, we've hired a new chief commercial officer, Randy Keys, we have.

Our focus investment effort across.

Broadly commercial and.

Not only in sales and marketing, but a global service as well. So we are ramping head count I think we've mentioned in previous.

The discussions that we're roughly planning to double head count across our commercial operations throughout the year and we'll continue that growth going into into 2022, we see that as a key element in.

Driving growth going forward.

Okay. Thank you.

Sure. Thank you.

And next question comes from Tejas Savant with Morgan Stanley. Your line is open.

Hey, guys. Good morning, and thanks for taking the question Jack.

Rob off defense systems, you placed in the third quarter can you just elaborate on how many were with the same customer in terms of multi unit orders and how many customers we're new into the into your installed base mix.

Yeah, Hey, Josh the other placements.

These were all sales to existing customers.

Got it.

And then on the backlog I mean anything you can share. It makes in terms of large multiunit orders that we should be thinking about heading into 'twenty two.

Yes broadly.

Broadly.

Backlog I think we referred to as a funnel.

Consistent with previous discussions so it's a good mix of new and existing customers the placements in this quarter notwithstanding.

And there are.

As we continue to grow our business plan out and we continue to sell not only to existing customers, but large and even medium sized new customers. There are increasing conversations about large multiunit orders going forward. So we do expect that to be a feature of that being said as we expand I think it's important to note as we expand our commercial <unk>.

Operations as we just touched on we do see opportunity for mid sized customers and small customers as well in all our geographies, especially as we as we ramp our or our number of heads in the field.

Got it.

And then Rob on the global focus on supply chain CRA across your customer base.

Ensuring uninterrupted supply of reagents and consumables et cetera are you seeing customers, particularly the ones who are new to the growth direct system.

A little bit more gun shy. If you will is placing an order with you in light of.

The lack of redundancy in your consumable supply capabilities just yet.

I don't know if I would use the word gun shy per say to be fair. It is it is a discussion and.

But I think as we mentioned in previous periods as well, what we we work with customers on.

A stocking plan, so we and we walked them through our inventory approach as well so we hold upstream raw goods.

Material and inventory to absorb any upstream supply chain shocks and we also maintain downstream finished goods inventory as well.

Our various stocking location. So this tends to get customers comfortable Moreover, as I mentioned in my.

In my prepared remarks, we're also building out our secondary manufactured consumables manufacturing site.

Blessington, Massachusetts area, which provides continual continual.

Continuity and business continuity within our system. Once it is online and we're also I think I mentioned as well in previous discussions. We're also looking at given our strong base of customers in Europe.

In future periods, a consumables manufacturing capability in that region as well.

Got it that's helpful.

And then on the.

On the Covid resurgence that youre seeing.

Any impact on lengthening sales cycles and on a somewhat related note.

These supply chain cost pressures are you seeing any signs of inflation and is the expectation. So that on the gross margin line you can hit sort of a breakeven around the middle of next year or could we see that pushed out a little bit because of some cost specials.

Yes, I'll start with the commercial side and then Sean can dive into the.

On the cost side, yes, so COVID-19 COVID-19 is.

Impeding our ability to get on site.

In certain situations to engage with our customers and Sean mentioned that is.

That is the best way to interact with customers not only on validation.

But sales as well so we do see we do see some speed.

Speed and timing impact on our sales and validation processes. So I think it's more of.

I would say.

Mattikalli.

I don't see massive changes to our sales our broad sales cycle, but.

Customer situations, specifically can be impacted by our ability and our being impacted just a bit more of a difficult and uncertain operating environment, giving site access issues and we're seeing some uneven unevenness from.

Whether it's country to country or more specifically customer to customer about about how sites are able to get access now we're executing through that.

And more broadly are there.

End market demand is very strong and the value proposition is resonating strongly but we do we do have this call. It COVID-19 friction that we're that we're executing.

Executing through currently.

I think I'd add to that just that.

As we see it at this point at least.

The market is still the market, we believe it to be.

The opportunity is as good or better than we have always thought it is and.

This is really just we're talking about timing so we're managing it extremely actively.

Doing everything we can.

They are a bit of ebbs and flows to it.

Last year was obviously, a very big flow and it up from that and we're seeing different ways in different places to Rob's point about customers and geographies being impacted in different ways at different time. So again, it's something we are hyper focused on it at this point in managing this as best as we can and I think we're doing a pretty good job at it.

And then China.

Yes, and on the gross margin point.

I was going to hit that so you asked about inflation and gross margin I'd say, we are seeing some inflationary impacts I think we talked about it in the past around.

Mainly freight some materials a bit on labor.

We are working.

To manage those internally.

I think as we look out we don't expect that to change much in the near term.

Everybody saw the inflation report yesterday, so everybody has got their eye on this topic.

Having said that we are doing a lot of things internally too.

Offset that or do better than that in terms of what we expect for product cost next year and obviously, we have other larger programs that we're pursuing to get significant amounts of cost out. So I think as we look at 2022, we're putting a specific plan together around execution on that given the current environment for next year, but at this point, we still believe 2022 will be.

A year that as our commercial base that we will flip to positive gross margins during the year.

Got it Super helpful. Thanks, guys.

Thank you. Thank you.

Our next question comes from Mac Masucci, Max Masucci with Cowen and company. Your line is open.

Hi, Thanks for taking the questions.

So nice to see the sales leadership over the past few quarters hires coming from companies with a strong track record of execution like thermo and <unk>.

I would imagine that adding more manpower should be helpful. On the sales front, but curious to hear how the new hires can help to move the needle for existing customer growth just under the land and expand strategy given the relationships that these recent hires may have or any expertise they bring to rapid in terms of.

Expanding from within.

Yeah. Thanks, Thanks for the question Max Yes, sure that's part of the plan as you may imagine.

So to your point we've hired.

From companies that have a strong hitch.

History and.

Record of commercial execution also from from our market generally so we are our leadership does have connections.

And relationships within our industry globally, not only expertise and building teams and executing commercial plans, but also has which is important customer relationships around the world, especially in and not only in our large customers, but some of our other segments as well and as we look at channel potential channel partnerships.

Relationships and capability and expertise there as well so I view it as a broad a broad skill set and relationships that that will benefit rapid micro.

Great and then if we just separate.

Hey, biologics and cell and gene therapy customers would be great to hear.

And if theres any what the portion of customers in each category that are ordering one type of tests consumable versus those that have extended their ordering and adopted two or three of the launch test consumables. So it can get a bit more detail around the adoption trends for the broader product portfolio.

Yes, so again broadly the.

We're we're focused and have a heavier proportion of sales generally into.

Biopharma broadly to include to include biologics and cell and gene therapy.

So with regard to the applications you see environmental monitoring be adopt being adopted.

Broadly generally and you'll probably see a bit more of a adoption with some of our water and bio burden applications.

And biologics initially, but we expect to expand that to this LNG portfolio overtime as well as the case may be.

I'm not sure that's fully answered in our CMO.

<unk> is well I view that as a good they're largely manufacturing biologics and cell and gene therapies on behalf of their customers. So I view that as a.

A similar segment and the and our sales into that segment from an application portfolio generally reflects what I just mentioned.

Great nice to hear about the new capability to differentiate between categories of organisms.

This is more of an enhanced software capability that analyzes data generated by your launched test consumables or is there a new consumable for this application I would imagine that capability is being developed based on customer feedback showed just be curious to hear how it how it could compare to some of the existing solutions.

So I need to be a little careful regarding where we are in.

Development, Max and IP considerations.

Yes, it will work with our current consumables.

And it's.

The best way I can put it for now and we'll provide additional detail on subsequent.

Conversations.

Advancements to our core vision system.

Through two broadly I'll call it software and.

As you know our strategy is to is to leverage our platform technology upstream and downstream and provide more.

Solutions and data to our customers. So currently we detect contamination. We enumerated this capability within software will give us will give us the ability to provide additional enhanced information to customers. For example, we can give customers a steer on.

A test by test basis, whether or not for example, mold is present.

Alright.

Differentiate between mold and bacteria for example, and I won't go into great detail, but.

Some customers that's a very valuable.

Accelerated insight if theres, a mold present and in operation and the way that works today is that.

That's usually an offline.

<unk> stream process that can take I can take several days in the manual method to get a result, not only the manual method, but all of the subsequent analysis. So our vision would be to be able to capture more of that workflow and give it all to the customer.

Much more quickly again under the ages of our of our value prop, which is speed and data integrity and accuracy. So it's a very very exciting capability, we're working on.

Great I appreciate you taking the questions.

Thank you Sir.

Again to ask a question. Please press Star then one our next question comes from Dan Arias with Stifel. Your line is open.

Hey, good morning, guys. Thanks, Rob just looking at the different account types. These are can you touch on the <unk>.

Workflow intensity difference that you see for cell and gene therapy applications.

Versus small molecule and just whether you are starting to see some of those LNG guys pull ahead and contribute more.

On the greater number of tests that they might do.

I think thats one of the ways that consumables utilization is expected to go up there so sort of checking in on what.

What youre seeing.

Really the case, Dan, yes, so cell and gene therapy, especially autologous cell therapy. For example, quick turnarounds of lot of interventions very fast processing high test volume.

Much different environment than than some small molecule.

Chemical synthesis processes. So it is a.

It's a faster higher.

Test density type of environment. Some of the biologics I would say fall into that category as well with cell and gene therapy is really the.

The pinnacle for us with regard to that.

Fast turnaround.

<unk> incredibly.

A high focus on test volume and a premium on speed and accuracy.

Okay, and then just maybe to go back to the validation topic. When you look at the sales funnel that you have right now maybe ex the COVID-19 impact what are the expectations for validation timelines just knowing that you.

You have this funnel of new customers and those folks tend to take longer but also you have these things that youre looking to do to shorten that process. So where do you see those two things netting out over the next 12 months.

I think over time Dan.

With both of the things you mentioned mix between new and existing customers.

And.

The advancements that we expect to make progress we expect to make in shortening the process overall.

That over time, we'd expect that those timelines to come in right. So not at a point, where we can be specific about that right now, but we are definitely investing time and resources into different ways that we can streamline that process speed that process for whether it be a new customer or an existing customer.

If there is opportunities with both to overtime bring those timelines and get those systems up and running through validation faster.

Yeah, Okay that was actually going to be my follow on China.

The team dedicated do installations of getting accounts up and running.

Is that expected to grow and where does that sit in terms of the investment in sort of the strategic priorities that you guys have.

Yes, I think we talked in the prepared remarks about investment in field service and validation folks I mean, they are really the kind of on the ground hands and feet that are doing the work.

We are investing a bit in incremental resources, who will be focused more on process management and looking at these opportunities to streamline. So we've made some investments that already we would expect to make a bit more investment in that next year I would expect.

So it is an area, where we're devoting dedicated resources.

Okay Super Thank you.

Thanks.

There are no further questions I'd like to turn the call back over to Rob <unk> for closing remarks.

Well, great well, thank you for joining us today on our third quarter earnings call. We appreciate your interest in our company next week were attending the Stifel Healthcare Investor Conference and look forward to speaking with many of you there.

This concludes the conference you may now disconnect everyone have a great day.

Okay.

Yes.

Okay.

[music].

Okay.

[music].

Good day and welcome to rapid micro Biosystems third quarter 2021 earnings call. At this time, all participants are all listen only mode.

After the Speakers' presentation, there'll be a question and answer session.

To ask a question. During this session you will need to put Star then one on this had some telephone.

And then he wants to require assistance during the call. Please press star zero to reach an operator.

As a reminder, this call's being recorded.

I'd now like to turn the call over to David Blackman from the Gilmartin Group you may begin.

Good morning, everyone and thank you for joining rapid micro biosystems third quarter of 2021 earnings call I'm, David My question for Martin on.

On the call for rapid microbial Bob stigma, Chief Executive Officer, Shaun <unk>, Chief Financial Officer yesterday evening.

<unk> financial results for the third quarter ended September 32021 copy of the press release is available on the company's website.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements, including but not limited to statements related to rapid micro's financial condition expectations for business development and growth customer interest and adoption of the graph direct system and the potential impact of COVID-19 on rapid micros business actual results may differ materially.

From those expressed or implied by forward looking statements due to a variety of factors for a list and description of those risks and uncertainties associated with that the micros business. Please refer to the risk factors section of our form S. One filed with Securities and Exchange Commission on July 12, 2021, we urge you to consider those factors you should be aware of those statements should be considered estimates only and are not a guarantee.

<unk>.

I will turn the call over to Rob.

Thank you David.

Good morning, everyone and thank you for joining us to review our third quarter 2021 results I will begin today's call with an overview of our operating results and key growth objectives.

And then pass it over to Sean for a detailed financial review before we open the call up for questions.

I'd like to start by saying, how pleased I am with our third quarter performance, we delivered total company revenue of $6 $9 million with commercial.

Actual revenue coming in at $6 $3 million, we made good progress executing across our strategic initiatives to accelerate the global adoption of the growth direct system with 10 system placements during the quarter, bringing our total systems placed a 113.

We continue to establish ourselves as the market leader in automated microbial quality control or M. QC within biopharmaceutical manufacturing globally I'll now provide an update on some of the progress. We've made recently on our strategic growth objectives since becoming a public company in July we've accelerated investment to drive <unk>.

Adoption.

Global expansion and product development to support our growth plans, we hired life Sciences veteran Andy Keys as Chief commercial officer during the quarter. Andy was most recently the SVP of global commercial operations at Quad Terex, where he led sales and service operations globally and he is now leading our sales service and validation.

Teams worldwide, we're thrilled to have him on board at rapid micro and excited to have him lead the expansion of our commercial teams.

Biopharmaceutical customers recognize that our purpose built technology is designed to overcome challenges associated with the outdated manual and QC method.

The growth <unk> has a speed accuracy and scalability and security required for advanced pharmaceutical manufacturing customers value or the growth of Rx efficiency and time to result, which we highlighted in a poster presentation at the 2021 Parenteral Drug Association pharmaceutical Microbiology conference in October.

The time to result data presented demonstrated that the growth direct delivered environmental monitoring results in approximately 72 hours versus five to seven days using the traditional manual testing method.

Our strong value proposition along with other strong value drivers allows us to attract a top tier customer base, including the majority of the global top 20 pharmaceutical manufacturers.

Rapid sterility testing is critical not only in their manufacturing of biologics and sterile injectables, but also vaccines and cell and gene therapies.

When using the growth are at customers can ship quality product more rapidly with fewer bottlenecks improve data integrity and less potential waste.

We are encouraged by the positive interest we have already received an anticipation of the <unk> applications upcoming data in 2022.

Additionally, we also advanced new product development programs focused on expanding our solution within customers quality control workflows. For example, our program focused on differentiating among categories of organisms by advanced software developments to our core vision system is proceeding well.

And the growth of <unk> will be the first automated rapid mtc product able to differentiate organism types. We expect to begin beta in 2022 with this exciting new offering.

Operationally, we continue to build robustness and continuity across our manufacturing and supply chain network.

For example, our new consumables manufacturing site and lessons in Massachusetts is currently under construction and will be operational in 2022.

Now I'll turn the call over to Sean to discuss our financial results Sean.

Thanks, Rob good morning, everyone.

Last night, we reported total revenue for the third quarter of $6 $9 million, an increase of 31% compared to $5 2 million for the same period last year commercial revenue was $6 3 million representing growth of 27% over the third quarter last year within commercial revenue product revenue of $4 8 million increased 19.

Percent over Q3 last year consumables revenue grew more than 200% versus Q3 last year as a result of newly validated customer systems coming online and increased utilization by some existing customer systems over the past year.

As we moved into the second half of last year. Some of these limitations started to ease and we were able to place several systems that had been delayed from the first half with customers in Q3 and Q4.

While system placements have historically been and continue to be subject to quarterly variability due a number of factors. The unique dynamics last year resulted in an unusually low number of system placements in the first half and a correspondingly unusual rebound in second half placements specifically, we placed five systems in the first half of 2020 compared to 21 systems in the <unk>.

Second half, including the 11 placements in Q3 that I mentioned earlier this unusual COVID-19 related trend significantly impacts quarterly growth rates, when comparing 2021% to 2020.

Service revenue was $1 5 million in the third quarter up 65% compared to the same period last year. This increase was.

Q3 2021 Rapid Micro Biosystems Inc Earnings Call

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