Conor McNamara: Just on margins, can you comment on what the margins are on the proteins business and if there’s anything else as far as mix that impacted the gross margins this quarter? Equipment’s weak and consumables strong or anything else worth calling out as far as the margin mix?
Jason Garland: Look, the proteins is certainly above average. I think the other thing too to keep in mind is both on a year-over-year, first quarter to first quarter basis, $23 million of COVID sales at very high margins last year in the first quarter. And then when you look at it sequentially from fourth quarter 2023 to first quarter 2024, again, $8 million of COVID revenue in the fourth quarter at high margins. So I think it’s more of this COVID dynamic in terms of some of the margin changes you do on a comparable basis and less so maybe protein. But, certainly, that’s a drag for us as well through the year.
Conor McNamara: But the protein is above average. I guess that was the bigger question. So thanks for that.
Jason Garland: Yeah, absolutely.
Operator: And the next question comes from Matt Larew of William Blair.
Matt Larew: I’m sorry, another one on CDMOs. It sounds like – given, Tony, your comments around the lack of de-stocking, that it’s not sort of an inventory work done issue and maybe more of an activity issue, so I guess just curious, if you were to break out either your own orders or just conversations with CDMOs, is there any way to cut it from a modality perspective, early stage/late stage perspective, just to help maybe give us confidence on whether orders return throughout the year.
Anthony Hunt: At the CDMO level, Matt?
Matt Larew: Yes.
Anthony Hunt: For CDMOs, the question. Yeah. Look, as I said earlier, I think what we’re seeing is more lumpiness at the top accounts. And of course, we know that for the tier two, tier three CDMO players, the small biotech companies feed into that. And it’s encouraging to see the biotech funding returning, right? And it’s also encouraging to see that the industry had a strong start to the first quarter in terms of number of drugs approved, right? I think there were six mAbs, five biosimilars, there were three or four gene therapy drugs. So that’s actually at a pace that’s been better than we’ve seen in prior years. All of that is going to help the CDMO market, right? Because a lot of those smaller medium-sized biotech companies turn to the CDMO industry to do that.
And for us, like we were also encouraged when you look at the mAbs side, I think we’re in two-thirds of those mAbs that got approved with products from Repligen. So it’s, again, leading indicators that we like, and we’ll see as we go through the year how it all plays out.
Matt Larew: That comment actually maybe feeds into my next question, which is you referenced, in filtration non-COVID revenue up 10% driven by ATF. And you said spec’d into nine late stage and commercial processes since mid-2023. Could you maybe give us a little context in terms of that number relative to the total number of late stage commercial processes or perhaps how that number would compare to a typical year or a typical period in terms of your involvement in late stage and commercial with ATF?
Anthony Hunt: Yeah, let me start and I’ll have definitely Olivier talk through some of the nuances of the nine late stage drugs that we’re in. But ATF is – I would say that Repligen as a company, right, we have 35% of our revenue coming from commercial, 65% of our revenue coming from clinical. So we’ve been working obviously on many of these product lines, whether it’s ATF or it’s our consumables, like whole virus flat sheet cassette. So we would expect that we would see more approvals coming through. But that’s a high number of approvals to get in a short period of time. And I can say that just having worked myself at other companies in this industry over the last 25 plus years, but maybe, Olivier, do you want to speak a little bit to kind of how the nine split up between mAbs and vaccines, so people can get a sense of what we’re talking about?
Olivier Loeillot: I would just add that indeed we started that ATF journey several years ago and so on and it’s really great to see how we’re collecting the fruits right now because these nine projects we’ve been designing recently, which are anywhere between Phase 3 or commercial phase, are added to another set of tens of products where we were already designed in. And as Tony just mentioned, this is really across the board. It’s really from the vaccine side to monoclonal antibody, and more recently, indeed, within the cell and gene therapy arena as well. So we really have great traction, and the best is still to come for ATF because, indeed, when those products move towards commercialization, volume typically increase significantly.
Operator: And the next question comes from Matt Hewitt with Craig-Hallum Capital Partners.
Matthew Hewitt: Maybe first up, with the new bags that you’re launching, what will that mean for the Metenova single use technology? Has that been a gating factor and therefore getting the bags launched will mean that that can be a driver later this year or how should we be thinking about that?
Anthony Hunt: I’d say It’s not quite impacting Metenova yet. You kind of have to have the bags in the market. So when we did the FlexBiosys deal a year ago, the thought process was, hey, also accelerate the commercialization of a Repligen film/bag. So that’s what’s happened. The next phase actually does involve Metenova because we want to get out in the second half of this year, like this mixing technology, which would be single use mixer. Our Metenova marriage, as you might recall, has been very much a stainless steel repeat use type mixing technology. And so, now this gives us a single use mixing portfolio. But to be able to do that, you needed to have the bag. We have the bag. Now we marry it up with single use impeller technology from Metenova and we get that into the marketplace second half of the year.
Matthew Hewitt: Kind of separately here – and I realize the BIOSECURE Act, there’s still question where it’s going to go from here and even if it is ultimately made law that it’s really a zero-sum game for you. There’s already been some pharma companies that have come out and said that were already having discussions about moving some of our production around. Does that create a little bit of a lag where CDMOs in particular, but even pharma companies are trying to figure out, okay, well, if we have to move from CDMO A to CDMO B, but we don’t know the timing, is there any risk that that creates a timing lag? So maybe it exacerbates the lumpiness over the next couple of quarters, or how should we be thinking about that?
Anthony Hunt: And Olivier did a nice job of kind of giving everybody an overview of where the BIOSECURE Act is at. We just don’t know the answer. We’ve had lots of questions on this, as you can imagine, over the last couple of months. I think it’s a wait and see, but if it were to pass and there were changes, then, yeah, there would be some tech transfer lag that would probably happen. But let’s see how this all plays out. We’re focused on serving our customers and making sure we get products delivered on time with the highest quality. And if we’re in processes, we’ll stay in the processes. That’s our view.
Operator: And the next question comes from Paul Knight with KeyBanc Capital Markets.
Paul Knight: I know you haven’t been involved in GLP-1s. Is there any way you could be with product development? And then the last question or second question would be, what portion of the OPUS pre-packed column market, so to speak, is still homebrew? Half or what’s the level of that?
Anthony Hunt: That’s a great question on the pre-packed column. I would say that the vast majority of the – I’ll answer that question first. The vast majority of the CDMO side of the industry has moved to pre-packed columns. And I would say the smaller medium-sized biotech companies have also moved to pre-packed columns. I would say large pharma is a bit of a mixed bag. You have some large pharma companies that really embrace having the flexibility of getting pre-packed columns delivered when they need them. And you have still a significant number of pharma companies that – we know how to pack our columns, we pack it ourselves, we do a good job, we’re not interested. But it’s a bit of a slow grind. And one of the things that maybe Olivier can talk about is, with the implementation of our key account management structure, that is one of the focus areas that we have.
And maybe we’ll chat about that in a minute. But on the GLP-1s, we do play a little bit in it, but it’s just not big enough for us to call it out as meaningful. But you can imagine technology like our component side, mixing side of what we do in fluid management, there’s definitely some involvement there. We continue to look to see the areas where we can play. But for us, at least today, it’s not a big play. Maybe, Olivier, do you want to chat a little bit about how the [indiscernible] management team is focusing on the pharma side for pre-packed columns?
Anthony Hunt: Actually, and just maybe to add one point to your question on OPUS specifically, the big difference between CDMOs and pharma is pharma didn’t know in advance what product they would have to manufacture the next 12 months. CDMO don’t always know, which is why they love OPUS, because then they have a set of columns ready to use for whatever product they might catch in the next 6 to 12 months. But back to [indiscernible] management, as you know, we built that team about a year ago. We’re really happy about the progress we have on that side. And we are really covering both big pharma on one side and the top CDMOs as well on the other side, and to make sure we are capable to offer the A to Z offering we have in the portfolio today.
Operator: And then next question comes from Justin Bowers with Deutsche Bank.
Justin Bowers: A couple of questions. Just one on the CDMO comments and the sort of the lumpiness you’re seeing there, is that more around equipment sales or is it just fits and starts in terms of ordering patterns? And the gist of it is like, how close are we – or are we back to normal ordering patterns and is this just sort of like the post-COVID norm. The second part is on your comments about needing to see CapEx come back, is that more targeted towards CDMO or new builds or sort of replacements, just trying to get a sense on those areas?
Anthony Hunt: On the CDMO lumpiness, there’s definitely some capital equipment in there, but there’s also consumables. So you just can’t look at the data and say, oh, it’s all capital equipment. It’s a combination of both. So I don’t think it’s favoring one versus the other. The CapEx comeback, I think that’s more around dollars getting released. If you look at how last year played out on CapEx, we went back and looked at this. It was light in terms of CapEx for biotech pharma, CDMOs, in the first half of last year. And then there was a big step up in CapEx spend in the second half of the year. So that’s just a year ago. If you went back and looked at other years, Q1 does tend to be on the lighter side, but it typically picks up as you go through Q2 and into the second half of the year.
Justin Bowers: Just my follow up, can you remind us what sort of the revenue opportunity is and the scale up when you go from an early stage to like a late stage or commercial program, a la the nine programs you mentioned last year? Was there a book-to-bill for CGT that you could provide as well?
Anthony Hunt: Yeah, on the CGT new modality space, it was a little bit above 1. So, a nice quarter for that portfolio. It’s hard to put a dollar amount on when you go from a Phase 1 to 2 to 3 to commercial. But in general, the revenues tend to double, right? I think it’s not a bad way to kind of look at it. But, obviously, if you get into a more of a blockbuster drug and there’s high demand, it could be much higher than a factor of 2. It could be a factor of 4 between a Phase 3 and commercial. But typically, the revenues would double.
Operator: And the next question comes from Matt Stanton with Jefferies.
Matt Stanton: Maybe sticking with the theme of new modalities. Tony, two-parter for you, I guess. First, 1Q is up mid-teens. I think you’d be looking for 5% to 7% for the year. That’s still the right way to think about it or is there potentially upside there on the heels of a strong start here in 1Q? And I guess, why can’t that part keep up the pace we’ve seen, aside from maybe tougher comps in the back half of the year, and then just longer term stepping back? Any reason we can’t see a return to kind of healthy double-digit growth for this part of the market, given a softer period more recently. And then you talked about adoption of OPUS within this category. Are there any other parts of the portfolio you think are relatively under-indexed to the new modalities?
Anthony Hunt: Those are good few questions in that, but I’ll decipher and walk you through it. I would say that – good quarter, obviously, in Q1, obviously, double-digit growth, which is great. We’ve been pretty consistent, though, in saying that the new modality strength is coming from 2025 accounts. So it’s not like the whole new modality space – the long tail in new modalities really hasn’t caught up yet. So that – biotech investment that’s starting to pick up in the first quarter for the industry should have an impact, but it could be 9 to 12 months before anyone really sees that flowing into the manufacturing side of the equation. So I think we have to be a little careful that we don’t take Q1 and say, oh, look, we’re just going to take Q1 and annualize it because it really is driven by this sort of handful of accounts that we have that are scaling.
So that’s probably the important part. And I do think you’re right, the tougher comps in the second half of the year will definitely slow down the growth. Now last year, if you remember, we had essentially the same revenue in 2023 as we have in 2022 in the new modality space. That was actually a great result given how challenging, A, the space was, and B, the overall bioprocessing market. So I think we’re in the right range of what we said, in that 5% to 7% range. And I’d like to see another quarter or so before we say that that could be higher.
Matt Stanton: I guess just on the second part, longer term, is there anywhere the portfolio on the new modalities, you talked about adoption with OPUS, you really focused on other parts of the portfolio that are kind of under indexed and you may look to run the same playbook over the coming years here, specifically within the new modalities.
