Maravai LifeSciences Holdings, Inc. (MRVI) Earnings Call Transcript & Summary

Hi, I'm John Sourbeer. I cover life sciences, diagnostic tools and pharma services at UBS. Excited for our next fireside chat. We have Maravai. And with us is Kevin Herde, CFO. Great. Welcome, Kevin.

Thanks, John.

Great. So -- and also a reminder, if anyone in the audience has any questions, you can send it through and we have the iPads up here, and we can take them as well. So I guess to start off on COVID, you provided CleanCap guidance this year, 12% to 14% growth. Any update on where this stands on what is contracted and kind of what is driving the guidance for the year?

Yes, certainly, John. I mean I think the way we put together our long-term contracts and our contracts with our customers for CleanCap gives us advance visibility. Basically, we're more or less locking them into the next 6 months and then have various degrees of binding commitments from them for the next quarter after that. So as we sit here today, based on what we've shipped and the POs we have in hand, we have well over 80% of that guidance for 2022 already locked in. So we feel real good about that 12% to 14% growth number for the COVID-related CleanCap for the year.

Great. And I guess just to maybe even expand on that anymore and Pfizer is your largest customer, I guess, just talk a little bit on how that's locked in. And then are the -- when do these become maybe take-or-pay or minimum volumes on the contracting?

Yes. So they're all take-or-pay within that 9-month binding window. We work with our customers, again, to get a rolling forecast. Going forward, we asked for about a year to -- just so we can plan accordingly, then they have to -- we lock them in at various percentages starting in month 9 and again supported with POs basically, usually from the 6 months down to 1 month. So it's a good ongoing dialogue between our commercial team and their supply chain, looking at forward-looking demand and locking that in, which again puts us in a really good place to go ahead and confirm our guidance for 2022.

Great. And a question I receive a lot, and I know it's early, but looking to 2023, any color you can provide? And I guess kind of where do you see that demand for COVID solutions going just given the vaccination rates globally, boosters and maybe in expanding this to younger age?

Yes. I think there's a couple of things there. I think specifically, we really have to follow the lead of our customers. I think they're talking about what they see for '22 and are not guiding to '23 yet and neither are we. I think generally speaking, there's a variety of things going on. I think that we're all looking forward to understanding kind of the FDA guidance as it relates to addressing variance of concern. I think we believe that the right course of care for the vaccines will be to modify the existing vaccines to address the Omicron or other variants. And it will probably be very analogous to what we see with annual flu. One of the great things with mRNA is its ability, obviously, to tweak towards variance of concern or other different sequences very quickly. And we think, obviously, mRNA is a very safe and effective way of going after viral targets like this. So we think we'll look to see where that guidance comes, and I think that will do the next round of probably development and hopefully approval and get that out there to be effective. Generally, outside of that, I think longer term, we're looking at what the age population is. I think we've seen that with some of the additional boosters in some of the younger demographics now and that helps drive additional demand for our customers. And then it's really geographical expansion. I think you see 2 sides of that coin. One is I think there's logistical challenges in getting shots into arms in some countries. And I think we're still looking at unique ways of addressing that. Our customers, both CureVac and BioNTech, are looking at container-based manufacturing and other things that are closer to the patient to help with that long term. I think those are great investments and very innovative. And then we have large populations that aren't using mRNA. Certainly, China comes to mind. Our customer, BioNTech has a relationship with Fosun, a Chinese-based company, and that we're working with them. And hopefully, at some point in time, companies -- countries that haven't adopted mRNA realize that, that's the best way to protect the population. So that would be obviously a potential large upside to this. So those are all the different dynamics that -- I think they're going to drive demand here over the next couple of years to whenever this, ultimately, we believe, settles into an endemic demand and becomes part of the base business.

And I guess just one follow-up on that and specifically on China. Does Maravai currently support with the -- or with CleanCap any of the additional Chinese manufacturers that are out there?

We do have some additional Chinese customers that we sell directly to. Certainly, their progress and where they are as far as that opportunity is not something we're privy to. The most publicly visible one is still the Fosun relationship.

Great. And I guess just maybe moving on to some of the base business. Could you talk a little bit on the non-COVID biologics opportunity and some of the products you serve outside of CleanCap?

Yes. I think for us, that's -- the most exciting thing for us is really looking at the application of our technologies for all these other indications. So we've been working with our marketing consultants and our teams to understand where is our product going generally. And so when you look at that, we're involved in 183 discrete programs that's using our CleanCap capping technology for mRNA. And of that, about -- I think it's about 1/3 of those programs are in the vaccine area, but only about 20 of those, where roughly 60 vaccine programs are involved in, are COVID-related. So there's a lot of other vaccine programs that are ongoing and then we're excited about those opportunities. After that, you see the mRNA therapeutics. We're excited about how our customers are moving that forward. A lot of those are in the oncology space. And then we support a lot of other technologies, all of the various generations of CRISPR, TALENs, zinc-fingers and a lot of other approaches to mRNA that make up that overall class of products that we're tracking. Right now, most of those are early stage and early days. We're aware there's only one on market today. We all know what that is. And a majority of those programs, we're working with our customers on. They're still in that preclinical phase, so there's a nice long-term opportunity here as that pipeline evolves over the next few years.

And I guess just maybe just touching even a little more on just that non-COVID CleanCap opportunity. When you look at therapeutics that could be used in that, what is the volume comparison maybe of capping that's used versus like a vaccine?

Yes, that's a great question. So right now, the -- when we're looking at vaccines, you're taking a relatively small amount of mRNA that are going into a vaccine to trigger a prophylactic type of response to help you with what you're looking to protect. When you're looking at trying to generate a more targeted response in the body for a therapeutic purpose, whether it's gene replacement or gene editing or something that's trying to address something more serious, you could have several thousandfold the amount of mRNA administered over the course of the year because you'd be putting in not just an initial dose but then you'd be redosing very consistently over the course of that care. So as we look at the therapeutic approach, it could be, like I said, up to 1,000 times-fold what the vaccine would look like just to trigger that additional body -- the additional response within the body to generate the proteins you need to fix what you're looking to fix. So it's an interesting dynamic. Obviously, certain things have various -- much smaller populations, but we'll need a much more kind of active ingredient, if you will, versus the vaccine side, which is much broader population-wise with a small amount of active mRNA.

And I guess just -- you've provided a number of programs that you served there, just in the non-COVID CleanCap space. Any way to frame kind of the maturity of some of these programs and maybe when you think they could be coming?

Yes. I think certainly, we have the on-market program now. I think we're working with our customers, and our customers are working on numerous additional COVID programs to, again, address variance and other approaches, hopefully, to generate more effective vaccines as far as targeting variants and as far as the length of the response. After that, I think the next application of mRNA broadly will be in flu and other respiratory vaccines. And those are -- some of those are advancing into Phase III as we sit here today. Most of the pipeline is still in the preclinical phase of that roughly 180 programs that we know that we're involved in. About 2/3 of those are still in the preclinical phase. So it's still really early days for this class of technology. It's something we're monitoring very quickly. I think you'll see '24, '25, '26 start to be some of the prime time for some of these things. And the biggest thing that I think all of us in the industry are really waiting on is the regulatory and approval approach here. I think we see how quickly we can get things done with mRNA, how safe it can be, how effective it can be. It will be interesting to see what sort of regulatory time lines we then move into after the sort of warp speed activity we did for COVID. Will it be at the traditional length? Or will it be somewhere -- and we think it's probably going to be somewhere in between. I think the regulators understand the efficacy and the safety profiles of this platform technology, and we think that will enable more speed to market for some of these effective mRNA-based therapies and other vaccines.

And I guess just digging in a little bit more -- further on some of that non-COVID nucleic acid business. Maybe beyond CleanCap-ping, can you just remind us, maybe before we dig into some of the financials on that, but what other products does [ Maravai ] serve within that portfolio?

Yes. So there's a lot of different products within the nucleic acid production segment, everything from basal gous to core chemistry to providing critical raw materials for manufacturers, those are NTPs, another type of products. The biggest and fastest grower for us within that non-CleanCap segment is really our mRNA services, sort of CDMO business for our customers, where we're making highly modified mRNAs along with the Cap, if they want the CleanCap attached to it, and helping them move those programs forward. In fact, that class of people that are working with us has grown roughly 70% year-over-year as far as a number of customers working with us for modified mRNAs with CleanCap. And those are some of the leading indicators that we look at as far as the momentum of the business and what that's going to predict as far as revenue potential going forward.

And I guess just for trajectory this year, how do you see that business growing this year? And can you just kind of update us on the cadence on that growth?

Yes, if you look at our guidance, we see that kind of core nucleic acid production base business growing roughly 50%, which is obviously very strong. I think the market growth for mRNA services right now is a little bit lower than that, but it's a very strong market growth. Across the nucleic acid production segment, you have various components, but all of them are kind of growing in that 10% to 15% from the basal gous on some of the other components, a little bit faster on mRNA services that we're participating in and plasmids and other raw material inputs just because of the overall demand that's coming in and the amount of attention and funding that's going into mRNA. I think if you look at the top 20 biggest spenders in pharmaceuticals and other health care spending across biotech, where 18 of those top 20 are current Maravai customers.

And I guess you touched on it, maybe just a little bit more on the plasmid side. Any update on that and a way to -- just to size how that business is growing?

Yes. I think demand for plasmids is a big part of the industry right now. I mean these are the precursors, the building blocks that you need to make this technology a reality. There are certain people in the industry that have done a great job with it. We provide an offering there. It's a fairly limited offering just for sort of our customers at a certain scale, which is much smaller than some of the industry leaders. But it's a nice asset to have. It's something that we're evaluating, whether we grow and invest there to address that. Ultimately, I think people that are going to win here over time, in mRNA, are going to have a couple of core capabilities. One is offering a wide breadth of the end product. If you look at -- for example, I think Pfizer's quoted, they have to go to over 80 different vendors to get their end solution, not a sustainable supply chain over time. We hear that from our voice of customer. We love you guys. You guys do a great job. We have CleanCap and your technical expertise. We'd like you to do more for us. And so we're going to try and consolidate through either organic investment or M&A opportunities, get more of that offering from the front-end raw materials all the way through the delivery or the -- which is traditionally LNPs, but there's other delivery mechanisms out there that are very interesting as well. Once you broaden across that horizon, you can provide more of that end product to your customer. And I think that's going to allow us to not only grow with the market, but also grow with our individual clients and get a greater share of their wallet.

Great. And I guess just speaking on cell and gene therapies. There also are some CleanCap applications for those type of therapeutic classes. As well, just any additional details that you can provide on that? And where do you see that opportunity growing?

Yes. I mean cell and gene therapy applications are very interesting. I think that mRNA technologies generally also support that class, the protein replacement, the generation of those proteins are an important part of what our technology can do. And that's the nice thing about it, again, whether it's in a vaccine, whether it's in therapeutics or whether it's doing other activities to help support protein cell and gene therapies. These are nice tools to have for our customers, and we certainly can support them in a lot of different manners as we go through this. And I think that's -- a big part of the opportunity there is some of the unique things that, that segment of this broader market is doing right now.

Great. So I guess kind of putting things together, I guess, how would you frame -- or what do you see your backlog where it is currently just for the non-COVID piece in the nucleic acid business?

Yes. I mean we see a great opportunity there. I think we continue to work really closely with those customers. And there's a couple of things that are important to us and our customers. And that is not only the work they're doing in preclinical and target discovery and technology and looking at different approaches using mRNA, but then it's moving up that quality ladder. And that's one thing that we've always been investing is to make sure we can have products available to our customers and also make that transition from an RUO-type product to a GMP level type of quality level. That's extremely important, and that's why we work with our customers to get them into our GMP clean rooms to understand their gating and their phasing and schedule that out. And so we have good visibility on that pipeline going forward for those GMP customers since they need to kind of reserve those slots. And that really looks out for several quarters and gives us good predictability with our business.

And I guess maybe specifically just to CleanCap, have you noticed there any changes in the competitive environment there? And can you talk about maybe who are some of the top competitors?

Yes. Well, CleanCap is really in a class of its own. Certainly, it's the high-volume chemical capping. We have a very strong IP that's issued and extends for a very long time. And certainly, we feel great about the intellectual property estate in defense of that IP. The next most used method for capping is enzymatic capping. And that's what other people in the industry -- Moderna and others use that sort of approach, and it's fine. I think it creates capped mRNA. We believe CleanCap is superior for numerous reasons. But -- and I think our customers have proven that out, and we feel really good about the uptick and the number of customers and people moving to and adopting and sticking with CleanCap. And we think there will be continued conversion from both enzymatic methods as well as ARCA, which, as you know, is not really scalable over time, and that will only increase our market share for capping as we move forward. And again, we don't see an imminent threat to our CleanCap franchise for any other technologies.

Great. And just looking at the macro in the inflationary environment, have you noticed any inflationary pressures on the business? And then maybe capping this because of the COVID piece, but beyond that, how does pricing levels been this year?

Yes. I think luckily for us, our raw material inputs are very well defined. And we've been able to leverage our scale to actually drive those prices down over the last couple of years. So from a raw material input component perspective, we have not seen increases. About 75% of our inputs from our supply chain are actually here in domestic in North America, so not a lot of international exposure either, which has been helpful and very helpful to our supply chain and our ability to meet demand for our customers. As we look at the overall cost profile, certainly, the inflationary pressures we see most applying to us is in the labor space. That's about -- 2/3 of our cost structure is labor-related, and that's certainly something that we're addressing head on. I mean we're constantly looking at the market and making sure that we're rewarding our employees appropriately and in line with market and that has ratcheted up over the last 12 months or so, but it's important in there. That's really the key to our success also, so it's something we're very happy to make adjustments to keep and attract talented employees. Outside of that, as we look at that overall cost makeup, we do take some price each year. It's maybe 2% to 3% of our growth. We do not have necessarily a traditional pricing structure in that a lot of our services business are kind of job-dependent quotes, if you will. So we'll take our cost structure at a given time, ask our customer what -- how much product they need, at what quality level they need it and when do they need it. We'll run our margin calculators and quote them a price for a job, and that will take into consideration our current cost structure. And because of that dynamic, we're able to kind of real time price adjust to our cost structure and maintain our margin profile.

Great. And then I guess as you provided a lot of color on the beginning on maybe some of the COVID CleanCap lead times. But just in general, can you talk about -- given some of the supply chain pressure, what are you seeing on lead times with customers? And have these changed at all over the last 12 months?

No. I think the one thing that's been -- that's helped us differentiate ourselves is our capacity. We've always been able to meet our customers' demands because of our highly automated facility that we put in place at the end of 2019, which was obviously a very good timing for the purposes of high volumes for CleanCap. But most of our customers really -- it is -- has been about the quality, the technology and how quickly can you get it to me. So we haven't seen our time lines for our customers change. If anything, they continue to accelerate as they get more back on core mission. I think there was certainly a move to address COVID, certainly with the customers or customers that weren't able to operate towards their core programs because their labor force wasn't in place because of the pandemic. Now they're getting back on core mission, and we're seeing an acceleration of those customers and their demands for their programs, which is great for us.

And actually, I have a question here from the audience. And you mentioned the IP around CleanCap. But can you also talk a little bit about how CleanCap is more superior than other capping methods such as enzymatic capping?

Yes. So -- and I'm getting a little bit away from my CFO shoes here. But my understanding here, and I think this is what our customers tell us as well, is the key advantages are -- really, it is a co-transcriptional cap. So it's done during the transcriptional phase of manufacturing, you don't need a separate step. And this allows for a very streamlined manufacturing process. So if you're capping with enzymatic approaches, you have to do it as a separate manufacturing step, introducing a separate biological element in the enzymes and then you have to do a filtration stuff after that. All of that adds time, it adds cost and it impacts yield. Ultimately, what you want is the most amount of capped mRNA and the least amount of contaminants or double-stranded mRNA. CleanCap is the most elegant and effective way of getting to that end point. And when you look at the overall cost, including the different methods you need and the different steps you need for enzymatic capping, it ends up being the most cost-effective way to cap as well. And I think our customers are proving that out, and that's why we see such a loyalty to CleanCap to customers and a lot of interest from those that have used other methods.

Great. And one piece of the business we haven't touched on is the Biologics and Safety Testing (sic) [ Biologics Safety Testing] business. Can you remind us what is the outlook there for 2022?

Yes. So that's a great business for us. It's been historically growing close to 20%. The market there is probably in the 10% to 12% growth. So we've been outpacing the market historically. And that's really for a few different reasons. One is we have a tremendous breadth of offerings across a lot of different wholesale protein and other contaminants. We have -- gosh, I think we have more than the next 3 or 4 third-party competitors combined as far as the number of different kits we offer, when we also do custom kits for our customers. Right now, this year, we're guiding to kind of that low to mid-teens growth, a little bit lower than where we have been historically. A few headwinds in that business. One is certainly the region in which we sell. A lot of the biologics and biosimilars are done in the China and Asia Pac region and certainly, that area has been impacted by the pandemic and what's going on in China that impacts the output of biologics and biosimilars and these kits are used to detect the overexpression of those host cell proteins. And so that is a little bit of a headwind this year versus historical growth. And then secondarily, we had some business in Russia and we shut that down. So that will impact the growth a little bit this year as well.

And that long-term opportunity with the business there and the profile, maybe just -- could you elaborate a little bit on that and kind of where do you see the organic growth within the business and potential for new products?

Yes. I think there's been a couple of things that have driven growth. This is a market that has consistently grown 10% to 12% and will continue. And so we'll be at least at that at the low end. I think we've been executing more growth in that in Biologics Safety Testing because of a few factors. Again, the great offering we have, but also our services business, and we're able to provide additional services over and above just looking at the host cell contaminants. But also looking at [ a -- for reflex, too, and ] mass spec and help our customers look at all the different contaminants that can potentially be in their product and providing that. That's driven some additional incremental revenues. We're also looking at other contaminants outside of the HCPs. So you're looking at endonuclease, you're looking at Protein A. That's been a big grower for us as well. And then lastly, we've seen a nice customer segment growth in the CDMO segment. I think you're seeing as more and more companies migrate to using some of the larger CDMOs in the industry, those CDMOs, by default, want to use sort of the gold standard, if you will. And that's what the Cygnus branded kits are in this industry for wholesale protein detection. And so that channel has been growing. I think it grew roughly 40% last year for us. So you're seeing, again, that outstrip the market because of people going to CDMOs, and those CDMOs really not wanting to use home brews or other nascent tests. They want to use the FDA-recognized kind of standard, and that's really Cygnus.

Great. And I wanted to also dig into a little bit on some of the capacity build-out. But maybe before then, there was an announcement yesterday on -- with the DoD, just can you kind of recap that and what was that opportunity there?

Yes. Very exciting for us. The DoD through BARDA and Health and Human Services have agreed to partner with us and help fund our further expansion in San Diego for our nucleic acid production business. That press release was issued yesterday morning. That will give us roughly a 50% offset to about an $80 million investment in expansion for our capabilities, for our new facility that we are already planning on moving forth throughout the rest of this year and into the early part of next year. So as we incur those expenses, both for capital as well as some of the labor and other parts related to program management and planning and bringing that facility online, we're going to be able to bill and recover about half of that. And through that, it's really both a validation of, I think, our approach to putting in infrastructure and being able to really offer a high-quality facility that can scale, increase our capacity and be available for, unfortunately, what will likely be additional needs to address viruses and other things that mRNA is perfectly suited to address. And that's just going to be part of what we're going to be faced with for the next couple of decades, if not longer.

And was there any part of -- I guess, contractual agreements on supply with the DoD a part of that?

So basically, yes. Basically, how these work is they will help fund and then they have some priority access to the facility and its resources and some most favored nation pricing to the extent there's something that the government needs us to do to protect us from a pandemic or some sort of other viral outbreak in which the mRNA capabilities or small molecule manufacturing capabilities will be well suited to.

And then so I guess just maybe kind of moving back to kind of big picture, can you just run through kind of what are the current capacity expansions, what's being built out and how is that expanding across maybe additional service lines this moment?

Yes, certainly. Our current primary facility that we brought online at the end of 2019 in San Diego, we've completely now built out. And with that complete build-out, it will provide roughly close to $1.5 billion of potential output if we were running that 7 days a week with all of our shifts. And we're obviously not there yet, but we have that potential. Bringing on our second site, which is a couple of miles away in 2 specific buildings on a single site there, we'll be able to increase that. And the total throughput from asset production after that will be close to $2 billion of potential output. That both incorporates CleanCap, which we'll have at our existing facility and this new facility to have some redundancy as well as what we plan on doing for some of the other core raw materials and other inputs, NTPs and other types of core products for us as well as additional GMP capabilities for our customers. So a tremendous infrastructure that we're building, and it's really again, to stay ahead of where we see demand. And that's really been one of the things that we've done very well over the years is look forward 2 or 3 years to see where is the market demand going to be? What do we need to start now to make sure we're able to be there? And we've been able to do that very successfully. And I think a lot of times, you don't -- last thing you want to do is play catch up and then not be able to meet your customers' demand because if you don't meet their demand, they're going to look for someone else to do it. And we've always been able to meet demand and be there for our customers and staying ahead of that is important. And again, we see this industry mRNA technologies, nucleic acid production technology, support of biologics and gene and cell therapy has a tremendous growth segment of the market in health care, and we believe that it's going to be a very meaningful contributor to newly approved drugs or therapies for a long time now, and we're going to be really well positioned to be a key provider of those technologies.

And I guess you mentioned that $2 billion of available capacity kind of heading into next year. I guess any color or thoughts on what are, say, the time lines to fill that capacity?

Yes, that's a great question. I think certainly, when we moved into our facility in the end of 2019, just months ahead of being contacted by BioNTech to ramp up and then ultimately, Pfizer, which ramped up for COVID, and we had no idea that was coming. So we had built that to grow into this opportunity over a long period of time that's come very quickly. I think it's -- and what's really going to drive that revenue over time is going to be really 2 different things. One, it's going to be how many additional mRNA vaccines are approved where COVID settles out from an endemic perspective and these other large population vaccines that our customers are working on to address seasonal flu, RSV, things like malaria, HIV, HPV, melanoma, et cetera, large populations. And I think the timing of that is, in our view, it's not if, it's just when. I think you'll see mRNA technologies replace historical vaccine-based technologies, and I think that will come very steadily over the next 5 years. After that, it's going to be about the progression of this therapeutic pipeline that we're supporting. Tough to tell right now, certainly, because it's early days, and it's -- a lot of these things are in preclinical. But I think that, again, over the next 3, 4, 5 years, you're going to start seeing these roll off at a pretty steady cadence. And that, I think, will as we -- if we're back here in 3 or 4 years, we'll probably be talking about the next building and $3 billion of capacity because we see a tremendous opportunity.

Great. And I guess just maybe putting this together, when you think about capital deployment, where do you see the other opportunities maybe within M&A or share repurchase?

Yes. I think capital deployment for us is really in 3 buckets. It's organic investment, which we've continued to do at Maravai and for all of our subsidiary companies. It's interesting. We came out of a private equity model, as many of you know. And for us, it was a unique approach in that we've always invested in every asset that we acquired. We never modeled a cost synergy. It was about fueling these founder-based companies with great technologies in great markets with great products and amplifying their growth and potential, and that's worked out extremely well. And that's with both people, it's with infrastructure, it's with go-to-market strategies, it's with facilities. So the organic piece is going to continue to be a big part of what we do. And then obviously, inorganically bringing more of these technologies or companies into the fold, just like our MyChem acquisition that we've done this year, a vendor of ours and has some really unique approaches to how you deliver really the high purity, all of those, and we're really happy with how that's progressing. And so M&A in the space, primarily focused on nucleic acid production and again, to get that breadth of offering for our customer or additional technologies. It's hard to find something that's accretive to our margins, given where they are, so it's more about strategic fit for our customers and technologies. And then lastly, and not necessarily separate from our ability to do the first 2 would be additional financial ways of returning capital. We have not done that yet. I think we're pretty early in our public life cycle to look at that and see a lot of opportunities in the first 2 buckets. But it's certainly on the table and given our strong balance sheet and cash flows, it's something that we evaluate and discuss with our Board regularly.

And I guess just maybe following up on that, on the MyChem deal, I think that was closed in the first quarter. Just any update there on how things are going. And what is included in the outlook there for the year?

Yes. Look, I think it's a great acquisition for us. It was a vendor of ours, so it further secures our supply chain. They had some really proprietary methods in their manufacturing process that we're actually applying to our core processes now. So we kind of pulled them into our operations a little bit. And that's really the key focus there is getting these technologies to get the best quality products out to our customers. They also had an incremental overlapping book of business with some of our existing customers, so we're folding that in. And then they had an increment of customers that we didn't have that's very interesting to us, and we're pursuing those relationships. So it's a nice contribution to the business, not overly large for the year. Some of that revenue is related to us, so I think it's consolidated. But again, their capabilities are really helpful and again, providing that total service and providing that high-quality output and the integration is done really smoothly. It's a really good group. And their physical proximity to where we are in San Diego is certainly helpful as well.

And I guess just any technologies for inorganic opportunities that you think would be complementary or areas you could be looking at?

Yes, we're looking at everything. And I think we have a very active business development team and corporate development team. We just added a new resource there picking up Deb Barbara from Thermo to join the team, and she's leading that charge and has a lot of fresh ideas for us. So I think we're continuing to be excited about the M&A space, and we continue to look to execute to apply our cash flows and our strong balance sheet to good opportunities to further our growth. And I think that there's a lot of things that we're looking to take action on, and we're very active.

Great. And before we run out of time, I did want to touch on the margins. 71% margins are pretty great. Just how sustainable do you think these margins are? And is there any differential from the COVID to the non-COVID margin?

Yes, sure. Look, I think that we do have exceptional margins, there's no doubt about it. And a lot of that has been driven by the demand for CleanCap certainly. But I -- not getting ahead of ourselves and not wanting to project forward past this year, I can just tell you that when you look back at the business, 2018, 2019, this business did mid-40% EBITDA margins. When you look at the first quarter of 2020, right before COVID, we were mid 50% EBITDA margins for the full year of 2020, when we had about $150 million or so of total CleanCap contribution, including some COVID, we had a 60% EBITDA margin. So very strong base business even before this upswing that's taken us up into the 70s. And I think those are reasonable posts to look at as far as where this company can be from a longer-term perspective.

That's great. And maybe just to touch on it, you did mention China. But just maybe talk about just maybe any impact there beyond the biologics businesses with [ the line down ].

Not really. I think that's the part that impacts us most directly. Overall, about a little less than 10% of our business is in the Asia Pacific market. Most of our business is being generated in the EU because of our relationships with Pfizer and BioNTech in that area. But our regional relationships are great. I don't think we're going to see other than the direct impact on Biologics Safety Testing, which is meaningful to that business but not tomorrow but as a whole. We're not seeing any other geographical pressures that are going to impact our ability to deliver against our 2022 guidance.

And I guess just building on that, any areas where you see opportunities for geographic expansion?

Well, yes, I think one of the areas -- and when we look at M&A and we look at organic investments, it will be geographically. We have all of our facilities in the United States. I think that's been an area of opportunity for us. We've done well with our facilities here. We control them. And I think we were able to produce good quality. But ultimately, I think as you grow as a company, and we're still relatively young and small, that international presence for our commercial team and for operations is where you'll want to also start seeding some of these locations. So as we look at both our buy versus build and M&A opportunities and being able to check off the international bucket is certainly on the list. But ultimately, we're going to be focused on the right assets and the right acquisitions, and we are very disciplined in our diligence and what we're going to do, and we're not going to chase an asset or just check a box because it's in a different country. It's got to be the right fit for our strategy and what we're trying to get accomplished.

Well, maybe just to wrap things up here, Kevin, what do you think is the key takeaway you want to leave investors with on the story?

Yes. I think the key thing for us is that this is a platform technology. We don't have a single product that says COVID on it. CleanCap is an mRNA capping technology. It's certainly been used for this tremendous solution to the pandemic and for our customers. But over time, it's about the overall mRNA opportunity. CleanCap is a differentiator in the marketplace. So our other services, our people, our capabilities and capacity. And as we look forward, just looking at all of these programs, the growth in the number of customers for our base business and that trajectory, that's what we're really playing for, to be able to support customers, whether it's via pandemic or for other advancements in mRNA puts us very squarely in the right spot. And then we're going to continue to invest in that long-term opportunity.

Great. Well, Kevin, thank you for joining us today, and thank you, everyone, in the audience for listening in.

Great. Thanks, John.

Thanks.