Q1 2025 Maravai Life Sciences Holdings LLC Earnings Call
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Please standby we're about to begin.
Good afternoon, everyone and welcome to the more of I Life Sciences, Q1, 2025 results earnings call. At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You May Register to ask a question at any time by pressing star one on your telephone keypad, we ask that you.
Speaker Change: These limit yourself to one question and one follow up after todays call is being recorded and if you should need any operator assistance during the call today. Please press star Zero now at this time I'll turn things over to MS. Deb Hart head of Investor Relations. Please go ahead ma'am.
Deb Hart: Good afternoon, everyone. Thanks for joining us for our first quarter 2025 earnings call.
Deb Hart: Press release, and the slides accompanying today's call are posted on our website and available at investors.
Dot com.
Deb Hart: As you can see from our agenda for today on slide two trade will first provide you with a business update and Kevin will review, our financial results and guidance. Thank you Pascal our chief commercial officer will join the call for the question and answer session. Following the prepared remarks.
Speaker Change: During today's call management will make forward looking statements and refer to GAAP and non-GAAP financial measures. It is possible that actual results could differ from management's expectations.
Speaker Change: We refer you to slide three for more detail on forward looking statements and our use of non-GAAP financial measures.
Speaker Change: Our just issued press release provides reconciliations to the most directly comparable GAAP measures and we also pest reconciling schedule to the IR website. Please also refer to the SEC filings for additional information on risks and uncertainties that may impact, our operating results performance and financial condition.
Trey: Now I'll turn the call over to Trey.
Trey: Thank you Deb and good afternoon, everyone. We appreciate having you join us for the call today.
Trey: I will summarize our Q1 revenue results and provide commentary on tariff and trade dynamics I'll, then showcase some of the innovative technologies, we've launched and share of business updates, including progress on the integration of our two recent acquisitions before handing the call back over to Kevin.
Let's start with our first quarter results on slide five.
Trey: Today, we reported $47 million in revenue for Q1.
Trey: This exceeded the range of expectations, we shared with you during our fourth quarter conference call and we're pleased with the base business growth of more than $4 million from the fourth quarter of 'twenty four.
Trey: As a reminder, our base business excludes any revenue for high volume clean cap for commercialized vaccines, which we have not included in the forecast for 2025.
Trey: Our nucleic acid production or any P segment had revenue of $29 million in Q1, an increase of $1 million from the $28 million of base and a P revenue in Q4 2024.
Trey: The biologic safety testing segment or BST revenue was $18 million in the first quarter up 3 million over Q4 dollars 24, and flat to Q1 'twenty four.
Trey: Q1 was the strongest quarter for our BSG business last year.
Trey: Revenues by customer type in Q1 were 29% Biopharma, 28% life science, and diagnostics, 6%, academia, 7% CMO and 30% through distributor.
Trey: Our revenue by geography was 62% North America 15.
Trey: 15%, EMEA, 15% Asia Pacific and 8% in China.
Trey: Please move to slide six and we'll discuss the potential impact of tariffs and trade tomorrow by.
Trey: This issue continues to be a very dynamic situation as it is within our industry and the broader global economy.
Trey: A reminder, here that our manufacturing footprint per train link sickness, and <unk> is 100% U S based.
Trey: From a cost of goods standpoint, the vast majority of our supply chain is also use space and our team is currently working to investigate tier two and tier three supply inputs to assess potential risks and mitigate wherever possible.
Trey: I'd like to point out that our strategy of having an integrated vertical ecosystem for genomic medicines and our napp segment has prepared us for this potentiality.
Trey: Through the acquisitions, we've made over the last several years, beginning with Mike him, which is U S based chemistry inputs and R&D, continuing with Alpha <unk>, which is U S based enzyme production and R&D.
Trey: Most recently with molecular assemblies, which is U S based DNA production and the technology platform.
Trey: We have pursued a vertical integration strategy for reasons of quality differentiation speed and total product cost.
Trey: Due to the critical participation trailing played in the pandemic response out of that necessity. We had also begun supply chain security work during the pandemic.
Trey: From an input cost perspective, we have therefore been in process to minimize imported inputs for the last several years.
Trey: For those items, which still come from other countries, we've been actively validating alternate suppliers and working with vendors.
Trey: To date, we have not seen any material impact from tariffs on inputs, but we continue to work on the situation daily.
Trey: On the export side, our BSG business has the majority of our China exposure with $3 8 million or 21% of the reported $18 million in BSG revenue from Q1.
Trey: Coming from China.
Based on the work we've done to date, we believe we have mitigated our first half impact from China tariffs and we're working closely with our distribution partners to further mitigate potential impacts in the second half.
Trey: Kevin will go into more detail on our Q1 results and our mitigation efforts for potential tariffs later in the call.
Trey: We remain keenly focused on our return to growth strategy and building a diversified predictable franchise as a life science tool provider and clinical partner.
Trey: To enable long term sustainable growth for our business, we continue to place prudent educated bets and expand our product and services portfolios.
Trey: We expect to further advance our market leadership in genomic medicines and drive the introduction of scientific innovation in ways that support and accelerate our customers' program to build long term value across <unk>.
Trey: Yeah.
Trey: To the point on our portfolio expansion and business diversification, let's turn to slide seven for some updates in our nucleic acid production segments.
Trey: Okay.
Trey: And our trailing discovery product portfolio.
Trey: Very excited to launch a new technology to enhance mrna performance, our poly a plus line.
Trey: Mrna through its natural design as a linear molecule, meaning that it has a beginning a front end.
Trey: And the backend.
Trey: The information that sits between those bookends is the genetic code that is specific to the protein the mrna will express and the natural process called translation.
Trey: Recent research and clinical development have demonstrated the importance of various modifications through chemical or in somatic methods across the entire mrna sequence from cap to tail and everything in between.
Trey: Can result in translational activity being enhanced while reducing.
Trey: In eight Immunogenicity risks.
Trey: Trialing Screencap technology was developed to be the gold standard for the cap.
Trey: Or to protect and enhance the front end of the mrna molecule.
Trey: Intuitively protecting both ends of the molecule is critical from the perspective of extending the stability and longevity of the mrna.
Trey: With that in mind traveling has developed a proprietary tool kit of poly a tail modifications to protect and enhance the back into the molecule, which in early data have shown in vitro and in vivo to both increase protein expression and extend duration of expression of the mrna molecule in certain circumstances we.
Trey: Believe that simultaneously optimizing both the cap and the tail or the beginning in the end.
Trey: We will enhance the potency of the molecule to expand the potential use of mrna in the next generation of genomic medicines.
Trey: We demonstrate the impact of this enhancement on slide eight where picture speaks a thousand words.
Here you can visually appreciate the extension of expression pattern of a fluorescent reporter gene in mice, who have been injected with mrna with and without the new tail modification.
Trey: Combination of the <unk> cap with the modified tail results in an extension of the standard kinetic expression profile.
Trey: Inclusion of these modifications into an mrna product could potentially expand its clinical application and the therapeutic window is being considered.
Speaker Change: This new technology, which is patent pending is now available as a service offering from train link and we will be presenting it at an industry conference in San Diego next week.
Speaker Change: Turning to slide nine for some further AAP innovation highlights I am pleased to announce that our trailing discovery unit now offers high fidelity HPLC purified guys for CRISPR.
Speaker Change: Trailing golfers custom individualized discovery guide Rnas designed to advance CRISPR based cell and gene therapies through high purity processes expanded modifications and links up to 160 basis.
Speaker Change: With over two decades of DNA and RNA manufacturing experience. Our guide RNA synthesis services are customizable featuring process development and consulting support from our all ago experts.
Speaker Change: Our guide Rnas, which have improved impurity and expanded modification capabilities are preferred by CRISPR cell and gene therapy customers for preclinical projects and are often ordered in combination with high fidelity mrna also from Trialing discovery.
Yeah.
Speaker Change: We've enhanced our Oligos business with the recent acquisition of molecular assemblies assets, which closed in Q1, we.
Speaker Change: We have completed the chemistry tech transfer and are already producing oligos over 200 basis.
Speaker Change: This technology is well suited to moving to 400 basis and beyond which can enable an enhanced several applications.
Speaker Change: The integration is ahead of schedule and we're very pleased with the high purity results from our early synthesis fronts not only does this expand our all ago product portfolio. As planned we are on track to vertically integrate this process by using our own chemistries enzymes and proprietary technologies as inputs to provide significant cost of good.
Speaker Change: The benefit that we can pass on to our customers.
Speaker Change: These long Oligos inputs will also be used to create DNA templates for our mrna production.
Speaker Change: We have officially launched our process development services. This is something we've done informally for our customers on a project to project basis and have built on that successful foundation to offer a formal service to all customers.
Speaker Change: With the acquisition of <unk> bio, we now offer adaptive machine learning Doa optimization strategies for faster and more efficient identification of optimal reaction conditions are.
Speaker Change: Our process development services include bespoke mrna sequences and manufacturing optimization, including codon optimization and Ut are tuning to boost in vivo expression.
Speaker Change: Design of experiment studies to meet manufacturing targets and scale up support for our clinical customers.
Speaker Change: This will help our customers confidently move from product inception through clinical development, all while leveraging our full suite of tailored analytical services and we believe these services can bring real value to our customers.
Speaker Change: We continue to leverage the synergies between try and link and Alfa designed by launching additional IGT enzymes to improve the mrna workflow and provide additional cost benefits through vertical integration.
Speaker Change: During the first quarter, we had 30 trailing customers also order IV T enzymes through our cross selling efforts.
Speaker Change: Our innovation engine is strong in both NSP and BST more on BST in a few slides.
We intend to launch many additional products as we move forward and we are engaging more deeply with customers as we support their research programs with custom construct.
Speaker Change: We also continue to bolster our market leadership in the mrna and genomic medicine space through strategic partnerships and clean cap license and supply agreements.
Speaker Change: We have signed five additional license and supply agreements for clean cap year to date, bringing our total to 48.
Speaker Change: Our licensees represent global customers spanning the spectrum from large pharma to innovative biotech and the mix of clinical commercial academic CMO enablement and nucleic acid manufacturing platforms.
Speaker Change: Donnelley, we are proud of our 18 current academic innovation partnerships and collaborations that allow us to maintain cutting edge science and research by fostering these relationships, we were able to provide foundational support to universities enhancing our synergistic research. While additionally, assisting these entities to navigate current funding challenges.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: We believe that investing in new products and services and partnering with leading industry and academic partners is a key driver for creating long term value.
Speaker Change: We are in an exceptional position to win customers early for product and technology adoption and grow with them as their programs advance through the clinic.
Speaker Change: Let's turn to slide 10 for an update on the pipeline for preclinical and clinical programs.
Speaker Change: Yes.
Speaker Change: Following our Q4 call we received positive feedback from many of you regarding the business intelligence tool, we have developed to track mrna and guide RNA pipeline progression.
Speaker Change: You may recall that we identified approximately 1500 discovery and development stage candidates currently in the pipeline we track.
Speaker Change: And that through the end of 2024 477 of those programs were in the clinic.
Speaker Change: Today, we're showing updated insights from the pipeline database in response to some follow up questions. We received last quarter, particularly around the program attrition and exit velocity.
Speaker Change: Yes.
Speaker Change: The data continues to show sustained investment and interest in early stage research and.
Speaker Change: In Q1 alone 95, new preclinical programs were added in 2014 programs advanced into clinical development.
Speaker Change: 91, preclinical programs were discontinued or became inactive during the quarter.
Speaker Change: While attrition is a natural part of the process the overall trend across discovery and clinical remains positive.
Speaker Change: We continue to see estimated net growth in the development pipeline with clean cap customers representing over 35% of these programs.
Speaker Change: Although not all preclinical drug assets are publicly disclosed and captured in our data for.
Speaker Change: For the programs that are covered in our data more than 25% advance into the clinic.
Speaker Change: Let's turn to slide 11, and our biologics safety testing business updates under the munis technologies brand.
Speaker Change: As with the nucleic acid segment, we continue to innovate to bring improved products and services to market that support our customers and.
Speaker Change: Collaboration with the Trialing team Cigna expanded the accuracy of host cell DNA quantification portfolio with two additional kits.
Speaker Change: We now have analytics in this portfolio for show E coli in all human cell lines.
Speaker Change: All kits and the accuracy portfolio contained <unk> clean energy technology building on the collaboration between our two brands.
Speaker Change: A new kit was also added to the Mark V product line, the RV LP inactivation kit like.
Speaker Change: Like the original Mark V. RV LP kit. It lets researchers include viral clearance testing early in the development and optimization of their manufacturing processes.
Speaker Change: By integrating viral analytical studies early companies can streamline development timelines and move more confidently into clinical and commercial manufacturing.
Speaker Change: We also recently developed process specific host cell protein analytics for one of the world's top three biologic CDM OS supporting their two premium Cho cell line based development and manufacturing activities.
Speaker Change: <unk> biopharma companies rely on the CD ammo for their clinical program development.
Speaker Change: Similar to our approach in the EAP segment, we expect to continually enhance our BST offerings to provide exceptional technical support services and a comprehensive catalog of products to meet our customers' needs.
Speaker Change: <unk> consistently supports and advances technologies to enhance safety and help accelerate the progress of new therapeutic monoclonal antibodies biosimilars cell and gene therapies through the development and regulatory approval process.
Speaker Change: We're very proud that sickness kits continue to have a 100% participation rate and support the safety testing of all 24 of the 24, FDA or EMA approved car T cell and gene therapies.
Speaker Change: Before I turn the call over to Kevin I'd like to mention that later this week, we'll be publishing our 2020 for sustainability report.
Without question, our commitment to sustainability goes hand in hand, with achieving our company's long term strategic objectives.
Speaker Change: On Slide 12, you will find a preview of the report this new report covers the 2024 calendar year and provides an expansive look into our evolving sustainability program with tangible examples of how we're making a positive impact and positioning our business for sustainable growth.
Speaker Change: Along with the safety and quality of our products, we take pride in our sustainability advancements.
Speaker Change: We are working diligently to enhance transparency for our customers and investors.
Speaker Change: And to build the infrastructure necessary to return to growth in a socially and environmentally responsible manner.
Speaker Change: This team has accomplished significant work today and we are committed to being responsible corporate citizens. We look forward to keeping you informed about our journey.
Speaker Change: Moving to slide 13, I'll now ask Kevin to provide more details on our first quarter performance and our expectations for the balance of the year Kevin.
Speaker Change: Good stuff thanks track as.
Speaker Change: As mentioned I will summarize our financial results for Q1, and then discuss our reaffirmed financial expectations for the full year and leaving some prepared remarks as it relates to some of our actions that we believe help mitigate risk related to global tariffs and trade economics.
Speaker Change: Let's start with the Q1 financial results on slide 14.
Speaker Change: As Trey mentioned, our revenue for the quarter was $47 million, our GAAP net loss of four non controlling interests was 53 million for the first quarter of 2025.
Speaker Change: This compares to a GAAP net loss before noncontrolling interests of $23 million for the comparable first quarter of 2024.
Speaker Change: Adjusted EBITDA, a non-GAAP measure was a negative $11 million for Q1, 2025% compared to a positive $8 million for Q1 2020 for.
Speaker Change: This adjusted EBITDA result was roughly in line with our internal forecast for the quarter.
Speaker Change: As we discussed in our Q4 call our overall cost structure impacting adjusted EBITDA before the variable cost of revenues is around $200 million a year and our overall variable cost of revenues is generally in the 10% to 12% range based on the product mix and other factors in any given period.
Speaker Change: Ah stay breakeven annual revenue total for US is currently around $225 million or thereabouts.
Speaker Change: On a quarterly basis, all other things being equal that is about $56 million and revenues to be at an adjusted EBITDA breakeven point on a consolidated basis.
Speaker Change: With the quarter of $47 million that would imply an adjusted EBITDA expectation about negative $9 million or so in Q1, we printed a negative $11 million and adjusted EBITDA in.
Speaker Change: In the quarter, the product gross margin and mix within nap drove cost of sales slightly unfavorable to our internal forecast.
Speaker Change: Overall, our adjusted EBITDA margin in any given quarter will vary based primarily on revenues given the high proportion of short term fixed labor and facility related costs and the high correlation of adjusted EBITDA to revenue performance over these cost levels.
Speaker Change: We continue to be focused on driving base business revenue growth each quarter to return <unk> to.
Speaker Change: To sustainable levels of profitability.
Speaker Change: We believe the collection of assets, we have compiled and our world class facilities and capacity provided an opportunity to do just that.
Speaker Change: That having been said, we also remain cognizant and focused on the need to also effectively manage the cost component of this equation and continue to drive process efficiencies and constantly evaluate options to right size our cost footprint.
Speaker Change: Moving to slide 15 in EPS basic and diluted EPS for the first quarter was a loss of 21 per share compared to a loss of <unk> <unk> per share in the first quarter of 2024.
Speaker Change: Adjusted EPS in Q1, 2025 was a loss of <unk> <unk> per share in line with our expectations for the quarter.
Speaker Change: Let's advance the balance sheet cash flow and other financial metrics on slide 16.
Speaker Change: We ended the quarter with $285 million in cash and $298 million in long term debt.
Speaker Change: For Q1, 2025 cash used in operations was $9 million compared to $8 million in Q1 2024.
Speaker Change: On the investing side of the ledger, we saw net cash outflows of $23 million, mostly representing a $19 million of cash out for the acquisitions of <unk> bio and molecular assemblies, plus $4 million of net capital expenditures consistent with our expectations for the quarter.
Speaker Change: As a reminder, we see full year capital expenditures between 15 million to $20 million for the full year of 2025, mostly tied to expanding the capabilities our enzyme business within the next day.
Speaker Change: As Trey mentioned, we are very pleased with the integration of our two recent acquisitions and continue to demonstrate that our ability to operationalize acquired companies and assets quickly is a core competency at Nomura.
Speaker Change: The investing activities in Q1 through our acquisitions and expanding our enzyme capabilities our investments, we see as providing future returns for marathon.
Speaker Change: These are both thoughtful and intentional moves to allow us to increase our internal vertical supply chain and operating capabilities.
Speaker Change: When combined with the chemistry inputs acquired with Mike Kim.
Speaker Change: The combination of our investing activities over the past few years is much more overall control over our product inputs.
Speaker Change: When you combine this with the efforts to secure multiple qualified vendors for each critical raw material debt.
Speaker Change: We focused on as a result of the pandemic and Biosecurity considerations.
Speaker Change: And an ever improving position to mitigate risks tied to supplier costs and dependencies.
Speaker Change: As we sit here today to the first third of 2025, we are not yet incurred any direct costs.
Speaker Change: Associated with the tariffs.
Speaker Change: As a reminder, with the exception of the <unk> bio based in Italy, all of our facilities are U S based.
Speaker Change: Direct supply chain is mainly from U S sourced vendors.
Speaker Change: That's the numbers.
Speaker Change: Depreciation and amortization was $13 million in the quarter, which is in line with our expectations and guidance, which was 50% to $55 million on an annual basis.
Speaker Change: Interest expense net of interest income was $4 million in the quarter in line with our quarterly expectation based on our annual guidance of 14 million to $16 million stock based compensation and noncash charge was $10 million for the quarter.
Speaker Change: We ended Q1 with 144 million class a shares outstanding and 111 million class B shares outstanding for a total of 255 million shares outstanding at the end of March on an asset fully converted basis.
Speaker Change: Basic and diluted shares used in the GAAP calculation or solely represented by the weighted average shares due to the loss position and totaled $143 million in the quarter.
Speaker Change: Total diluted shares used for the adjusted EPS totals in the quarter were $255 million in line with our expectations and guidance consistent with prior quarters.
Speaker Change: Next to slide 17, and the discussion on segment performance in the quarter.
Speaker Change: Our nucleic acid production segment, which includes both our discovery and GMP products and services market under trailing Glenn Research and <unk> brands and also include the integration and consolidation of our efficient a bio acquisition as at the end of February had revenues in the first quarter of $29 million and adjusted EBITDA and <unk>.
Speaker Change: At $9 million.
Speaker Change: This negative adjusted EBITDA margin was anticipated based on the lower revenue level over our cost base, which is predominantly reflected in this segment given the large cost base of manufacturing operations and our water Richard Flanders sites and the fact that the revenues in the quarter at no contributions from high volume clean cap demand for vaccines.
Speaker Change: Our biologics safety testing segment, which includes products from our statements brand had revenues of $18 million in the first quarter and adjusted EBITDA of $13 million of continued strong and consistent adjusted EBITDA margin of 70%.
Speaker Change: As detailed in these segment results the combined adjusted EBITDA of our operating segments. Prior to our corporate shared services was 4 million for Q1 2025.
Speaker Change: Corporate shared service expenses impacting adjusted EBITDA, which includes centralized functions such as human resources finance and accounting legal information technology, and the incremental expenses associated with being a public company totaled $14 million in the first quarter.
Speaker Change: This amount reflects a decrease of $2 million from the comparable first quarter of 2024 and is down $4 million from the first quarter of 2023 based on our focused cost actions.
Speaker Change: Let's turn to slide 18, and our revenue expectations.
Speaker Change: We are off to a solid start in 2025 financial results aligning with our internal forecasts are strategic achievements are positioning us for growth in our base business enhancing our distinctive portfolio of high value quality assets and helping to further reduce potential risks associated with global trade concerns.
Speaker Change: Based on Q1 results and our current assessment of the likely range of revenue outcomes, we remain comfortable with the existing 2025 total revenue range of 185 million to $205 million.
Speaker Change: As for the cadence of estimated revenues, we anticipate Q2 to likely continue this trend of sequential base business growth and see a range of $45 million to $50 million of revenues for Q2.
Speaker Change: At the midpoint, that's implied expectation of $47 5 million in revenues for Q2, we put the first half of 2025 at about $95 million.
This results in an expectation that our second half of 2025 will be $100 million at the midpoint of our full year revenue guide.
Speaker Change: We are forecasting a slight second half increase based on our risk adjusted visibility to the GMP pipeline and the expected benefits from investments in both new products and our recently acquired assets that roll up into our Napp segment.
Speaker Change: At this stage, we still do not have any guaranteed purchase orders for high volume clean cap from our historical top customers that have commercially approved vaccines.
Speaker Change: We continue to monitor and hold discussions with these customers on a regular commercial cadence.
Speaker Change: At this stage, our 2025 guidance remains tied solely to our base business expectations.
Speaker Change: In addition to holding our full year 2025 revenue guidance ranges.
Speaker Change: 2025 also holds the following unchanged expectations.
Speaker Change: Interest expense net of interest income between $14 million and $16 million depreciation.
Speaker Change: Depreciation and amortization between $50 million and $55 million.
Speaker Change: Equity based compensation, which we show as a reconciling items from GAAP to non-GAAP EBITDA to be between $45 million and $50 million.
Speaker Change: Is it fully converted diluted average weighted share count for the year at 256 million shares.
Speaker Change: And finally total net capex of $15 million and $20 million in 2025, and we foresee that capex decreasing even further in 2026.
Speaker Change: Overall, a solid start to the year.
Trey: I'll now turn the call back over to Trey for some closing remarks.
Trey: Thanks, Kevin.
Trey: So to wrap up on slide 21, we had a good start to the year and are on track with the revenue guidance range that we communicated during our Q4 and year end call.
Trey: Moreover, I continues to evolve from 2022, we're almost 70% of revenue was driven by Covid vaccines to our reset year here in 2025 with no high volume clean cap in our forecast.
Trey: The post pandemic reorientation has been challenging compounded by the recent headwinds for our industry and for the global economy.
Trey: We will continue to pay close attention to the rapidly shifting trade dynamics and endeavor to minimize the impact to our company our customers and stakeholders.
Trey: As Kevin mentioned in his remarks, we're continuously assessing our cost structure and have supported our commercial R&D and IP related investments by offsetting expenses in other areas.
Trey: We have a strong $285 million cash position, which is more than enough to manage the reset period.
Trey: Through all of this we remain focused on building for the long term.
Trey: <unk> has a unique opportunities to be a meaningful global player in our space.
Trey: While managing in the near term, we continue to make prudent opportunistic investments to enable our long term strategic vision.
Trey: I would now like to turn the call over to the operator to open the line for your questions. Thank you.
Speaker Change: Certainly thank you Mr. Martin, ladies and gentlemen at this time, if you would like to ask a question. Please press star one on your telephone keypad. We ask that you. Please limit yourself to one question and one follow up also you may remove yourself from the queue at any time by pressing star to once again Thats Star one to ask a question. We will go first this afternoon to Dan areas.
Trey: Stifel.
Dan Areas: Hi, guys. Thanks for the questions here Trey in your prepared remarks, you spoke to a mix of new trials and then some that got mix, which I think was basically a wash for the quarter. What does your Intel tell you about the focus areas for the new trials and then Conversely, the ones that are being discontinued why are those.
Trey: Going away.
Trey: And within that as sort of a question about how comfortable you are with the idea that pipeline narrowing isn't something that we're starting to see creep back into the conversation as the financing and funding landscape stays the way.
Trey: That it is.
Trey: Sure Dan Thanks for that well the there was a bit of a nuance there.
Trey: The preclinical which.
Trey: It's harder for us to of course fully quantify.
Trey: Was relatively flat, but the clinical actually had ads.
Trey: And this one way to look at that is that it may be a manifestation of people focusing on later stage projects and based on conservatism with their own funding.
Trey: Making sure that they go with their latest stage ideas.
Trey: The modalities, we reported on those last quarter.
Trey: And we show a continuing evolution away from obviously COVID-19, but also infectious disease vaccines writ large to all of the different modalities and target areas that mrna supports we continue to see that happening obviously, it's only been a few months here but.
Trey: As things enter the clinic.
Trey: I would say the breadth and diversity of their targets continues to expand.
Trey: So we haven't we are seeing to be clear clinical <unk>.
Trey: Expansion.
Trey: And what we reported here over the last few months is that preclinical was flat.
Speaker Change: Okay. That's helpful. And then if we just think about the next 12 or 18 months, what do you see as the biggest driver of incremental demand here both on the clean cap and the BSG side is it new business wins within the portfolio is at the progression of the clinical pipeline as we move from phase one of <unk>.
Speaker Change: As to two to three or is it some other factor here I guess I'm just trying to like take a high level view of the model and think about how we go from where we are today to something in the mid term.
Speaker Change: Sure.
Speaker Change: We don't obviously expect that high volume clean cap is zero forever.
Speaker Change: But until people give us firm commitments on that.
Speaker Change: Obviously choose to stay conservative there.
Speaker Change: From an expansion perspective, you're exactly right we've presented in prior quarters.
Speaker Change: Anonymised examples of how our customer progression.
Speaker Change: Through phase one two and so on can lead to significantly larger.
Speaker Change: <unk>.
Speaker Change: It's just from a reagent purchase perspective.
Speaker Change: And of course now we have it hasnt even been a year since we opened the Flanders to service facility, which means that we have.
Speaker Change: We have the opportunity here with comps here quarter over quarter to make significant strides.
Speaker Change: With our clients and our partners in the production of the mrna itself I mean, a big part of this story here for us is going from being a bulk reagents supplier.
Speaker Change: To supplying hopefully all of the inputs and.
Speaker Change: Where possible the service of actually producing the drug substance so.
Speaker Change: To your point, it's all of those things.
Speaker Change: Clinical progression for someone who is just a bulk purchaser of reagent.
Speaker Change: It leads to a larger Po, but we hope to do much more than that.
Speaker Change: Okay.
Speaker Change: Thank you. We'll go next now to Conor Mcnamara of RBC capital markets.
Conor Mcnamara: Hey, guys. Thanks for the questions I appreciate it.
Speaker Change: I appreciate all the color you gave on tariffs.
Conor Mcnamara: And to play that out as clearly as possible.
Conor Mcnamara: If you look at kind of the medium term and maybe longer term is there any opportunity for you to take share.
Speaker Change: 100% of manufacturing is done in the U S have you started to see.
Conor Mcnamara: Either.
Conor Mcnamara: Folks coming to you to build out at all alter.
Conor Mcnamara: Alternative suppliers or.
Speaker Change: Is that something that you see as a potential opportunity.
Conor Mcnamara: We do.
Speaker Change: It's been obviously, a high turbulence environment lately.
Conor Mcnamara: <unk>.
Conor Mcnamara: We do see a renewed interest.
Conor Mcnamara: Yes.
Speaker Change: And the story, we have which is when you tour Flanders, which you and several of the analysts have been able to do.
Speaker Change: You get to see a chemical production site, where inputs are made under GMP and then the next building where those inputs are used.
Speaker Change: For the production of the mrna drug substance so not only are.
Speaker Change: Are you seeing the assembly of the substance, but you can actually see the inputs in the supply chain is literally next door.
Speaker Change: So it's a really.
Speaker Change: From one aspect of the tariff and trade conversation, it's a really it's really be fitting our story.
Speaker Change: But obviously.
Speaker Change: Mrna is strong globally, and we want to make sure. We ensure continued access to Europe.
Speaker Change: To APAC every everywhere because mrna as a modality is not going away globally, and we see a tremendous amount of interest there. So we have plenty of strength in the vertical supply chain that we've hit on a lot today.
Speaker Change: But we endeavor to also have the best access possible to those other markets and so we are definitely trying to take a global view there.
Speaker Change: Okay. Thanks for that and then just on end markets. If you could comment at all what you're seeing from customers.
Speaker Change: If I look at the Biopharma customers and uncertainty around drug pricing and then on your academic and government. Although it's a small piece of the business. There's been some NIH proposals that would.
Speaker Change: Potentially cut a lot of there.
Speaker Change: The ability to spend so just what have you seen from those two customer sub segments recently with new U S policy being proposed in coming out if theyre buying patterns have changed during the conversations have changed in recent months. Thank you.
Speaker Change: Sure.
Speaker Change: I appreciate the question I think I will use the opportunity to hand, it to our chief commercial officer, who is on the line from many many times zones away Becky are you there.
Becky: Hi, great. Thanks.
Becky: Yes, thanks for the question.
Speaker Change: Certainly.
Speaker Change: It's Ed.
Speaker Change: So rather dynamic environment.
Speaker Change: Our customers are certain.
Speaker Change: The changes within.
Speaker Change: The government entities as it relates to funding grant renewals.
Speaker Change: And to be honest, it's a very mixed bag.
Speaker Change: Got it.
Speaker Change: Comments that customers have secured their funding for the next 10 years. It may feel really confident in that.
Speaker Change: <unk> ability to continue there.
Speaker Change: Mark.
Speaker Change: We also do see customers that are delaying decision, making based on their ability to secure their funding, but it's not a train them from narrow mission.
Speaker Change: Hi.
Speaker Change: I think that we also hear around regulate.
Speaker Change: The regulatory authorities, yet and I think there are some confidence that if people are already in those conversations that they feel pretty good about the contacts and where the trajectory of those programs are.
Speaker Change: As it relates to Boston patterns honestly on the ADP business, we see we've seen an increase in our run rate business.
Speaker Change: But at a lower dollar so that to me feels.
Speaker Change: Feels like.
Speaker Change: People are can serve or maybe doing smaller experiments on that kind of R&D side, but there, but the work is continuing and so.
Speaker Change: I think we have a lot to offer there with our new product introduction, our ability to sell the workflow.
Speaker Change: And be able to scale, how customers with different pricing pressures and so those are some of the tactics that we're using to.
Speaker Change: And to secure new customer acquisition and base business growth.
Speaker Change: So that's a little bit of a flavor of what's happening in the field.
Speaker Change: Great. Thanks for all that.
unknown: Thank you we'll go next now to Dan Leonard of UBS.
Speaker Change: Yes.
Dan Leonard: Thank you.
Dan Leonard: A question related to counters right there.
Dan Leonard: I appreciate the revenue Pie chart detail.
Dan Leonard: But I didn't see any government piece, there and I just hope to clarify do you have any government work, whether it be BARDA or otherwise that we should be mindful of and I guess that could be either direct exposure or indirect exposure through one of your biopharma customers.
Sure well direct exposure no we definitely had quite a bit of work with part of when we were building that facility over the last couple of years.
Dan Leonard: The new facility that BARDA has pandemic access too.
Dan Leonard: Pandemic preparedness program access.
Dan Leonard: That all that work has been satisfied all the money has been received and so on we don't have any direct assistance through NIH.
Dan Leonard: As you go through the broader value chain.
Dan Leonard: A lot of work is indirectly supported by NIH.
Dan Leonard: But at the first and second derivative level, we have no direct NIH support the BARDA program is closed.
Dan Leonard: And our relatively small academic exposure is actually something we hope to increase over time here, it's only four 5% at this point.
Dan Leonard: And there isn't any BARDA or otherwise exposure through that Biopharma section of your business.
Dan Leonard: With that I would call that second secondary or tertiary.
Dan Leonard: Not that we directly know of.
Dan Leonard: We have not to the point as Becky was making earlier.
Dan Leonard: We've not heard that someone has delayed our program for reasons like that.
Dan Leonard: Okay, that's great.
Dan Leonard: Yes, certainly keeping our eyes open.
Dan Leonard: And in another clean up on the DST revenue it was higher than we were modeling and I am curious if theres any seasonality there at a point to or if that $80 million per quarter figure is a good figure to use going forward.
Dan Leonard: Yes, typically Q1 is a high point it does they do have a cyclical.
Dan Leonard: I would say peak usually around Q1.
Dan Leonard: And I would say more generally that last year, the falloff in the conservatism and the BSP market, we felt that in Q2 and three.
Dan Leonard: So yes, the deltas would look to be better but Q1 is.
For Q2, and three respectively, but the Q1 is typically.
Dan Leonard: The high point.
Dan Leonard: Yes, I'll just expand on that a little I'll just expand on that a little bit Dan. It's Kevin here, a couple of things because we had a solid China quarter at PST.
Dan Leonard: We did $3 8 million in China, VST that was actually the second highest revenue number from China in the last nine quarters.
Dan Leonard: So that was positive and then as Trey said generally our revenues follow the biologics manufacturing development cycles. So in the first quarter. There is typically more of those since they are generally open most of the quarter and.
Dan Leonard: The fourth quarter, you get close to the holidays quality certain shutdowns for cleaning and maintenance of Pms, then you start getting rolling holidays, and other parts of the world et cetera, So that first quarter, that's most manufacturing.
Dan Leonard: Manufacturing days ends up picking up some volume from the slowdown at the end of the year and then again, we had a strong China quarter. So those those three components generated strong quarter, but we would expect it to seasonally dip a little bit I wouldnt call. It seasonality per se, but it's just a little bit of timing related to some of the factors I mentioned.
Speaker Change: Understood. Thank you both.
Dan Leonard: Okay.
Thank you well go next now to teahouse Savant at Morgan Stanley.
Speaker Change: Hey, guys good afternoon, and thanks for the time.
Speaker Change: I'll just follow up on on your comments there Kevin on China. The strength that you guys saw in BSD.
I mean outside of the typical sort of <unk> and <unk> stepped down was there any pull forward benefit on just some of the chatter around tariffs and geopolitics et cetera.
Speaker Change: Just curious as to why you decided to not sort of beacon <unk> upside into the guide just yet is it just conservatism is there a pull forward just some color on that will be great.
Speaker Change: Yes, I mean as you know we worked through distributors ex U S for the BST business side, we have a real close relationship and have had distributor in China, specifically and as rest of the U S. Ex U S for quite a while.
Speaker Change: I would think that they were making sure they've got what they needed in the first quarter I don't know if I'd call. It pull forward per se, but I think they were certainly monitoring the situation closely.
Speaker Change: Met with them actually in North Carolina.
Speaker Change: Again, so we have very close relationship there we did give them a bit shipment early in April to solidify the second quarter, there and I think given the events of this weekend I think.
Speaker Change: Hey.
Speaker Change: <unk> come down a little bit weak.
Speaker Change: Continue to call that flat for the year and I think thats consistent with what our distributors are saying, so not a growth vector in China, but.
Speaker Change: In an overall flat business and thus far as we sit here today, it's been very consistent with our expectations.
Speaker Change: Got it and then just a couple of longer term ones on the end markets here. So first I mean on the pharma side of things do you expect any tailwind from this push for re shoring I mean, obviously.
Speaker Change: It feels like it's some ways outs not sort of a 2025 dynamic perhaps into 26 and beyond is that a dynamic that you guys are.
Speaker Change: Looking to capitalize on and then.
Speaker Change: Conversely on the academic side of things in that earlier question around just the shift in NIH priorities and budgets and so on.
Speaker Change: One of the things we wonder about is the shift away from infectious disease could we see that sort of weakness play out.
Speaker Change: For you guys with a lag perhaps not in your academic customer base, which is pretty small, but further down the road on the biopharma side of things on the on the biotechs.
Speaker Change: Yeah, Thanks, Hey ask we all.
Speaker Change: I'll start with the latter question.
Speaker Change: We have we showed last quarter that the total share of our program tracker for infectious disease continues to go.
Speaker Change: To go down.
Speaker Change: Which we think generally is just more a statement of the maturity of the mrna and the CRISPR space.
Speaker Change: As different.
Speaker Change: All of these.
Speaker Change: Go into later phase clinic, and so on and of course, the Covid push.
Speaker Change: It continues to wane.
Speaker Change: To your first question the yes.
Speaker Change: The unique position we're in.
Speaker Change: <unk> is unique because it certainly it goes sort of counter to the past decade plus.
Speaker Change: Manufacturing optimization.
Is that we now have our <unk> and GMP chemistry.
Speaker Change: Enzyme production and <unk> and GMP mrna production.
Speaker Change: In the U S with the U S supply chain.
Speaker Change: And for the four depending on how this goes and again there were dynamics that have happened yesterday and this morning. So this is as fluid as a situation gifts.
Speaker Change: But.
Speaker Change: We think that those are good things to have and I'm I'm appreciative that the.
Speaker Change: The board and those that preceded me had the foresight to start reinvesting the COVID-19.
Speaker Change: And the pandemic proceeds and these capabilities, which took two to three years to build.
Speaker Change: But now as you all know on the call. They are online they are functioning they're contributing and we're glad to have them in this trade environment for sure.
Speaker Change: Yes.
Speaker Change: Got it appreciate all the color. Thank you.
Speaker Change: Thank you we'll go next now to Matt Stanton of Jefferies.
Matt Stanton: Thanks, maybe one for you you guys spiked out the five new license and supply agreements for clean cap in the quarter, bringing a total of 48 any more color in terms of types of customers, where you saw those those wins and just maybe stepping back a little bit now that we're at 48.
Matt Stanton: In <unk> supply and license agreement can you talk about your ability to diversify your customer customer base here and then any success you've seen kind of cross selling the broader <unk> portfolio. I think you called out a few in your prepared remarks, but any more color just kind of driving portfolio adoption across some of those newer supply agreements on the upside to the broader portfolio.
Matt Stanton: Thank you.
Speaker Change: Sure why don't I, while we still have Becky.
Speaker Change: Becky do you want to take the latter question with the actually you can take both Becky is intimately involved in our licensing but.
Speaker Change: Latter question was.
Speaker Change: I'm, sorry can you repeat.
Speaker Change: Matt.
Speaker Change: Yes.
Speaker Change: Yes.
Or was there a strong kind of for some of the newer supply agreements from the clean cap customers just your ability to kind of cross sell the broader portfolio. So im sorry, and then yes.
Yes, sorry.
Becky: Ross selling his early go ahead Becky.
Speaker Change: Yeah.
Speaker Change: So the bill license agreements are a good indication of the adoption and commitment by our customers tail have a long view on taking clean cap into the clinic and then beyond into commercial and so what that allows us to do is have supply agreements in.
Speaker Change: Track, our adherence to those things and we've had some very good adherence in Q1, meaning what are customers gave us a nonbinding forecast came to fruition in two binding forecast and that does allow us as we have.
Speaker Change: Very much tuck in 'twenty for the ability to monitor and sharp and manage.
Speaker Change: Our supply agreements and and have that very good rigor with customers. It has helped us to stay on track to our forecast for that GMP raw material supply as well as your other question, which is where else do we see those supply agreements with <unk>.
Speaker Change: See those supply agreements in our OEM business, so that might not necessarily be GMP grade materials, but again, it's the cadence of that business is also through supply agreements and so we do see that.
Speaker Change: As the diversification because many of those OEM customers are either life science customers with diagnostic application.
Speaker Change: Or a next gen sequencing application and this is where really that try Lang our design.
Speaker Change: Portfolio comes together.
Speaker Change: Which I think kind of fit into your next question around cross selling.
Speaker Change: And what we've done is re Oregon is our sales team here in 2025 to be very focused on.
Speaker Change: Customer segmentation diagnostics therapeutics and <unk>.
Speaker Change: <unk>.
Speaker Change: Next Gen sequencing and we've seen some really great.
Speaker Change: Opportunities.
Speaker Change: Like.
Speaker Change: Ways for us to get into RSP is where we haven't had that opportunity.
Speaker Change: Ways for us to cross sell and up sell you might be selling one item like an enzyme or one item like a custom chemistry, and our ability to broaden that and increase our value to those customers.
Speaker Change: So that is definitely our commercial strategy.
Speaker Change: Okay.
Speaker Change: Okay. That's very helpful. Thank you and then maybe just sorry go ahead sorry.
Speaker Change: Oh I was just going to give you a little more follow up there.
Speaker Change: Of the five we mentioned there is an academic theres a CMO there are two innovative clinical licenses and an OEM supply license. So.
Speaker Change: Pretty diverse group, even within the five there.
Speaker Change: Sure.
Speaker Change: Thanks appreciate that color and then maybe just on longer term around market share dynamics, you kind of mid <unk> today.
Speaker Change: Some are preclinical and the clinical side you guys have been innovating here new products also I think you'd be Queen perhaps you could just kind of premium product, our premium pricing and maybe a tougher pricing environment.
Speaker Change: Larger pharma looking to push on supplier. So just how do we think about evolution of competitive dynamics and kind of where you think market share can go for clean cap overtime here. Thanks.
Speaker Change: You bet.
Speaker Change: It definitely obviously pre pandemic the mrna reagent and service market was.
Speaker Change: Mostly try and link honestly.
Speaker Change: And so it definitely is a more competitive space both on the <unk> of discovery side as well as the G&P side.
Speaker Change: We know that and I think we embrace that and that's why you see kantar.
Speaker Change: Continued push for technology development and enhancement.
Speaker Change: Reality is that Covid era programs, we're scaling.
Processes people had been working on for five to 10 years.
Speaker Change: And sometimes more.
Speaker Change: And this is a period not only of reset from.
Speaker Change: From the pandemic and the volumes of infectious disease vaccine, but also people would have the opportunity to test new innovations.
Speaker Change: We we know and embrace that people will not use the same reagents they use five years ago.
Speaker Change: We will not use the same processes. They use five years ago and that ultimately the cost of mrna needs to come down to habit.
Speaker Change: Take its rightful place as a ubiquitous platform in medicine.
Speaker Change: So we are embracing that through as you've heard a couple of times today through vertical supply, which gives us the opportunity to enable that.
Speaker Change: And embrace a lower cost point that still has plenty of margin.
Speaker Change: But also to be enabling for every aspect of the inputs, but also the workflow optimization itself, which manifests itself through our service category.
Speaker Change: So I agree that Thats the way the market will go and we like our position to to embrace that.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Thank you. We'll go next now to Brandon <unk> of Wells Fargo.
Speaker Change: Hey, Thanks, Good afternoon, guys I'll squeeze one in here.
<unk> tried to give some update on how the blenders.
Speaker Change: <unk> are filling out and your visibility there and then Kevin on the margins.
Speaker Change: Should we expect.
Speaker Change: Q2, EBITDA to be similar to the first quarter I E. Do you expect a more normalized mix on a similar revenue base and given BST might step down in terms of revenue should we expect gross margins to kind of fall sequentially as well. Thanks.
Speaker Change: Yes, I'll take the second part of that question first yes, generally Glenn is going to be it's going to be a combination of revenues.
Speaker Change: I would say its revenue scale that drops.
Speaker Change: Bottom line pretty substantially certainly a little bit of drop on on sequential BST revenues will pressure.
Speaker Change: I would look more towards the overall revenue balance we don't see the cost profile.
Speaker Change: Of course of the year.
Speaker Change: Yeah.
Brandon: And then Brandon I'll take the first half so Flanders fill out.
Service is exciting for us not only because the service. It takes advantage of our long experience in mrna, but also of course, our vertical inputs.
Brandon: Play into that side as well.
Brandon: But its mostly from a predictability perspective, we like it because it has the highest actual visibility and customer intimacy, we get to know exactly what's going on with the program and why and so forth, but it also gives us visibility usually two to three quarters in advance.
Brandon: One of the reasons that you've seen the cadence.
Brandon: Our guidance this year.
Brandon: We knew of course that Q1 would be lower and we have things scheduled and we have mentioned in prior calls the way that they sometimes can move out for for reasons beyond our control.
But we we like the visibility there we have capacity.
Brandon: To handle anything that comes and.
Brandon: <unk>.
Brandon: Your point is a big reason for the way that we have laid out the cadence of our year.
Brandon: Okay.
Brandon: Okay. I think we might have time for we'll squeeze one more in just to try to give more focus on opportunity here.
Speaker Change: Certainly Mr. Martin will take that question now from Matt Hewitt of Craig Hallum.
Matt Hewitt: Good afternoon. Thanks for taking the question sneaking me in.
Matt Hewitt: Might be a little bit of a stretch here, but with the fda's push about a month ago to shift away from animal testing towards AI and some of these other new modalities does that create any potential tier one for a fifth CNA and what are you hearing with that new product just launched what are you hearing from <unk>.
Customers initially thank you.
Matt Hewitt: Sure. Thank you Matt.
Speaker Change: We are really excited about it <unk> just closed it.
Matt Hewitt: Couple of months ago and.
We are very focused on the primary driver for that was just the new design environment, it's going to give to all of our customers in the discovery space, but yes.
Matt Hewitt: The exciting unknown is how far we can take the machine learning capabilities that they bring to us.
Matt Hewitt: We have kept the whole team, we intend to keep investing in that side of it.
Matt Hewitt: Early days, we have provided service for process optimization and Trialing for many years and <unk> was founded to do what we described in the call here today, but.
Matt Hewitt: But I see AI generally in the field driving.
Matt Hewitt: Driving much much more.
Matt Hewitt: The work and to your point.
Matt Hewitt: Two model.
Matt Hewitt: <unk> systems without animal testing using cell testing.
Matt Hewitt: It's there is no way I can imagine doing it without some significant AI driven.
Matt Hewitt: Assistance to predict biological system reaction without having the full biological system.
Matt Hewitt: Okay.
Speaker Change: That's great. Thank you.
Speaker Change: Okay with that I know, we're at time I appreciate everyone's staying all the way through.
Speaker Change: Thank you all for joining us for our call today I'll just wrap here by saying that we are executing on our return to growth strategy.
Speaker Change: Through innovation through customer intimacy and through enablement.
Speaker Change: Year to date, we've introduced significant innovations to the market and they further extend our leadership across the genomic medicine workflows and continue to advance our differentiation within our <unk> segment.
Speaker Change: We're pleased with the integration process and progress of our recent acquisitions.
Speaker Change: And we will continue to add important partnerships to enable our space in the months and quarters going forward here.
Speaker Change: We remain confident in the unique value, we provide our customers for the life changing developments of the next generation of medicines and diagnostics and finally, we remain committed to building a strong foundation for long term sustainable growth of our businesses and look forward to keeping you updated on our progress in the coming months.
Speaker Change: So thanks, everyone for joining us and have a great evening.
Speaker Change: Okay.
Speaker Change: Thank you Mr. Martin again, ladies and gentlemen that will conclude today's <unk> life Sciences Q1, 2025 results earnings call again, thanks, so much for joining US everyone and we wish you all a great day Goodbye.
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