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

Welcome to our next fireside chat here with Maravai LifeSciences, excited to have Trey Martin, CEO; and Kevin Herde, CFO with us today. I'm John Sourbeer, one of the UBS life sciences analyst. Joining me today is Liza Garcia, my co-coverage.

So Trey, I think this might be the first fireside chat you've done since taking over officially as the CEO role. Congrats there. Maybe just high level here, while the first time in the fireside chat. Can you provide some color on your vision for Maravai's portfolio of assets. Do you see any change in strategy? How are you viewing your strategy here now taking over the CEO role officially?

Yes. So I would say part of the situational assessment is what do you come into. And Maravai has certainly had one of the more extreme, I would say, COVID runs. Some great things happened through that despite the fact that we're coming off of COVID and getting into the endemic phase. One is that the RUO CleanCap became GMP CleanCap and was obviously clinically proven in some of the first mRNA vaccines globally. The second thing is that during the pandemic period, they reinvested proceeds in four world-class facilities, which I was thrilled to finally get to tour here. And we've also incorporated 2 more acquisitions, a nucleic acid chemistry specialist company called MyChem and a protein production, specifically enzyme production company called Alphazyme. So those were really great resources, tools and assets to bring in during that period better than I could have hoped for, honestly. And what happened now with the acquisition of MyChem adding to core holdings Glen Research and TriLink is that I can say confidently that Maravai has a very unique strategic advantage in nucleic acid chemistry, which is the base of most of my career and really the base of all of genomics. So that nucleic acid chemistry can manifest itself through the entire workflow from the chemistry itself all the way through to mRNA. And obviously, one of the chemistries that's been proven very well through the pandemic is CleanCap. I would say that tool set, including now the capability of making enzymes in addition to making all the nucleic acid chemistry is one I'm particularly excited to see where we can take it. And notably, we have launched a recent product called CleanCap M6, which is a new version of the cotranscriptional capping chemistry that actually brings functional utility in addition to process utility. So that's just, I would say, an early peek at where we hope to go with the unique advantages that Maravai brings to the market.

Thanks for that great overview there. And I also want to mention we have iPads here on stage 2. There's a QR code if you want to ask a question. Feel free to do, and we can take it up here. So maybe bringing it back down here then to the near term, starting off of 2Q and the guidance cut. Can you just talk about some of the dynamics you're seeing there. Macro headwinds have been pretty widespread across life science industry, but just -- what are you seeing that's resulting in some of those cancellations? Can you talk about the dynamics, maybe just [ even well ] quantify like longer decision-making versus cancellations that's been impacting the business there.

Yes, I think -- and I'll hand to Kevin as well. But I think cancellations, we are seeing far less of than people have lots of different words for it. rationalization, conservatism. We want to do this, but not yet. We were going to do 3. Now we'll do 1 that sort of thing more so than outright program cancellations. I can give to you for more comments.

Yes, absolutely. I think that there's different influences in each segment. But overarching our guidance and where we were and where we are today was really around 4 main components. One was the services business, our nucleic acid services business, which is sort of a solutions business for our customers where we're manufacturing the mRNA along with our proprietary technologies such as CleanCap. That had been our fastest-growing segment within our nucleic acid production overall group. And has it grown faster than the overall CAGR for that segment, it grew over 75% last year and was kind of recognizing our leadership position and certainly manufacturing mRNA. And when we got into this year, we still felt good about growth in that segment, and as we got further into the year, some of these prioritizations of programs, the -- I would say, a little bit of indecision, slower committing and I just think an uneasiness from customers generally gave rise to a slowdown in how we saw those programs gating out and even some of those programs just going on pause. And so that was the largest component of our roughly $100 million takedown in guidance about $40 million was tied to that lower 2023 expectation for the services business. We peel that back one more layer. We've talked a lot certainly about the demand for CleanCap as it relates to COVID, that was the next biggest part of the takedown of the guidance. We've estimated around $100 million is going to be a reasonable run rate. We are waiting to get the updates to our supply agreements that we have with our major customers. We received those in the second quarter, and as a result of that, there was no incremental demand. So we took that number down solely to reflect the purchase orders we have in hand for the year. So that's going to roll out as we discussed on our last call. So that was the second part of that take down. And the other two were really just sort of the run rates we were seeing with our normal customers that were instead of growing 10% to 20% with a lot of our product lines, they were now buying at 70% or 80% of historical levels or some hadn't started rebuying until late in the second quarter just due to some of the overstocking that I think was pretty well characterized. And then lastly, our expectations for China, which we're not overly exposed to. We've done between $20 million and $25 million of business in that country over the last three years. We saw it growing slightly, now we see it as a declining segment, and that's about a $15 million component of that overall takedown. So those are sort of the 4 main factors, all for slightly different reasons. But certainly, these headwinds did not insulate any of our -- we were not insulated from these headwinds in any of our businesses as a lot of our peers are seeing as well.

Thanks Kevin. And maybe just diving into some of the different pieces there. I think you quantified also on the 2Q call that emerging Biotech is about 30% of revenues? Is it fair to say that it wasn't just the emerging component that you saw headwinds that was maybe more widespread across the portfolio? Basically...

Yes it was. I don't think there was any of our divisions that didn't see the trend, I would say, as Trey mentioned earlier, our CleanCap franchise, our CleanCap M6 for non-COVID indications continues to do really well, even in the face of those headwinds. So that is one continuing interest across the board of people evaluating and really being comfortable with that product. But I would say, outside of that, it was a pretty systemic look at all the different declines. We're pretty tied to what we're seeing in the market, frankly.

And the other question I received before the fireside was just any color when you look at your order book intake, any forward-looking metrics or anything you can provide on -- maybe what 3Q is looking like so far versus 2Q? Any way to think about...

Yes, we always look at the order book heading into the quarter before the call and informs our guidance. We look at a combination of things. Certainly, the orders in hand, certainly what we've already shipped, of course, and recognized the ongoing commitments from our supply agreements and then where we're looking on the services business, those opportunities that is already scheduled or a probability adjusted weighting of those opportunities when we roll that up and obviously guide within that range. I would say when you look at our range for the back half of the year, I would say, certainly, the CleanCap number is locked in. So there would only be upside there. I think we feel very comfortable. Biologics safety testing business will come in the range of that $65 million to $70 million, it's been floating around there roughly since the second quarter of last year when we first saw some of the pressures from the China region that impact that business a little bit more disproportionately than the rest of our business. And then from there, I think we feel good about what we're seeing as far as that second half of the year, taking out the uptick we have for some of those COVID shipments to look a little bit like the first half to slightly up, and that's reflected in our guidance range.

Maybe just one more on this topic that also came in. And I think when you look at -- any of this commentary on like for, say, like a monthly tracking during the quarter, I think we saw some drop off in the second half of the second quarter, pretty sharp there in demand. Any way to think about what that run rate is exiting the quarter and how we should think about and maybe from a revenue or margin standpoint, just any additional color you can provide about maybe the run rate in the quarter or actually in the quarter there?

No. I think the first half of the year, as it played out, is a pretty good proxy for what we're seeing in the second half of the year, unless there's, again, another macro step down, which I don't think we feel is there at the moment. But I'd say our range of revenues, I think, incorporates a couple of different slight scenarios on either end of being flat to slightly down to slightly up on the base business. And I think that's consistent with our view right now. So we feel pretty good about that.

And so maybe, Trey, moving beyond the macro headwinds. Just any way you could talk a little bit more about the non-COVID biologics opportunity for CleanCap. How many programs does the company serve today? And just any color on how some of these programs could mature to becoming larger revenue opportunities for the company?

Yes. So we do an annual deep dive on program participation because we don't always get that information directly from our customers. We've been talking about how we have only a minority percentage of our customers on license and supply agreements, what we call LSAs. So it involves a deep dive into program specifics and filings to get the real deep numbers. So we do that once a year, and we'll do that here probably in Q4. The -- however, what I'm excited about in the future, which I appreciate, since I just formally retook the role a couple of weeks ago here, the future, I'm really excited about in that what we've already publicized the launch of what we call the CleanCap M6. The reason that we're so excited about that is that CleanCap is a technology for cotranscriptional capping of mRNA. I think everybody knows that. The interesting opportunity that you have in cotranscriptional capping is the ability to incorporate all sorts of different chemistries to the cap structure itself and potentially optimize its functionality. So what I would call the first generation of CleanCaps are a process improvement that leads to a higher yield, better purity, a quicker process and ultimately lower cost when compared to the other means of capping. What we add to that in the second generation, of which M6 is the first, is a higher functional output. So M6, the modifier in that cap gives you all those benefits of cotranscriptional capping but adds the benefit of being like-for-like dose-for-dose, a higher output of protein expressed in the cell, a more effective, if you will, compound in vivo. And that's the first of what I hope are many iterations around that theme, both on the cap and then other structural elements of the mRNA molecules.

I appreciate that. And I guess while you're discussing M6, any additional customer feedback or early learnings you've had there since the announcement on that product?

Yes, we've seen really good, and I believe the launch was specifically in May but we've seen really good uptake. We've seen reorders and good representation across the top 20 pharma there. The reorders in particular, in that short cycle time are particularly encouraging. So it's ramping quickly. And -- we expect to obviously bring a GMP version of that product offering soon just to make sure our customers are reassured that if they want to adopt that in their programs now that there will be an available path quickly.

And I think during your earnings presentation, you had a slide where it said that there had been about 30 non-COVID mRNA programs entering the clinic year-to-date. I think the company has previously talked about how COVID therapeutics could use much more capping agent than, we say, COVID vaccine. Can you just remind us there some of the details you had? And just how should we think about the capping requirements of some of these products that could be entering the clinic going forward?

Yes. I mean, obviously, having your first proof of concept be a pandemic vaccine in billions of doses sort of skews the scale, all the myriad uses of therapeutic mRNA that excite me across the spectrum, really the pandemic level of infectious disease vaccine is a rare case. When you're talking about infectious disease vaccines, there are small doses like that, when you're talking about potentially individualized therapies on the other end of that scale, it's a different equation. Protein replacement is a different potential dose, chronic dosing. That -- there's a wide range of possibility there. And we hope that as there's more adoption of functionally more active molecules that will have the opportunity to change the economic scale a little bit to capture more of the value being added and have to be less dependent on essentially the mass range or the dose, if that makes sense.

No, that's helpful on that. And I guess just when you think about CleanCap versus enzymatic capping, any just additional color on market share you have there and maybe how that's been tracking as COVID has been rolling off and the other programs coming in?

Yes, it's staying steady at about 1/3 of the market. We -- and again, leaning on the opportunity to not only show the economic process benefits, but also the functional benefits of the next generation is where I hope we can gain share.

And I guess just also CleanCap gets a lot of talk, but there's products in the NAP portfolio and other services. Just any updates on the trajectory of the outlook there and maybe some of the other pieces: plasmids, other services, how do you think those track in the second half and beyond?

Yes. So plasmids for Maravai, when we have been public for this, have always been meant to enable the realization of mRNA with strategic control faster for our customers. Our services really help with adoption of the products, if that makes sense. And that's why we say we're a little bit different. It's not just a pure-play CDMO type of approach. We are over 95% of our services incorporate our products in them and that's really a feedback loop that I think will help evolve the products to be better and help us to come up with unique process that also helps the service to be better.

And I guess maybe on lead times with customers, anything changed there recently. I believe that you have -- with COVID, you had take-or-pay contracts and structure, any changes to those dynamics now that there's more non-COVID programs coming in?

There's definitely more capacity in this industry than there was before. Absolutely. I think we view it as a validation of the era of mRNA medicines is coming at all the major CDMOs have added commercial scale versions of that capacity. But that -- I mean, look, every aspect of the market and service levels is different now than it was during COVID. During COVID, there was certainly much less consternation. There were higher approval levels than we see now where a couple of hundred thousand dollar project required one approval. Now it goes through multiple layers of approval, for example, people are being more careful. We try to figure out this macroeconomic situation. But there is also, for sure, much more mRNA CDMO service capacity available to people for their programs. And again, we hope to focus strategically on those programs that we can enable with our products.

Great. And speaking of the capacity, this is a great time to ask just Flanders 2 is coming online, I believe next year, we continue to ramp. Just any additional color you can provide on how that's coming along and just the capacity ramp into next year?

Yes. We just actually hosted an investor bus tour of Flanders 2 yesterday which seems like a long time ago, and it went very well. So to be specific and help people with the understanding, Wateridge, you've heard us talk about that facility. That facility has RUO and GMP for all the product lines. Flanders 1 is a GMP-only chemistry-focused manufacturing facility that gives us, obviously, duplicate footprint, a different rooftop, but larger scale and purpose-built GMP facility. The entire pandemic was handled out of Wateridge to be clear. So that capacity exists today and supports business today. Flanders 1 and Flanders 2, which is where the biologics, the ability to make the plasmid for the mRNA template and then the mRNA, that's what Flanders 2 is focused on. Flanders 1 is ahead, but that was by plan, and Flanders 2 just received the occupancy, but now it's about the fitment. The fitment validation and launch of that facility, we still plan for roughly Q2 next year.

And I think just when Flanders 2 completely comes online, maybe even Kevin, thinking about total capacity there. Is it about $2 billion of revenue capacity? Is that the right way to think about it?

Yes. certainly, Wateridge is already north of $1 billion. The first part of Flanders would be able to basically replicate everything we've done for CleanCap as well as do high-volume NTPs and other chemical-based raw materials that Trey mentioned, which takes that another step further. And then you add in the three dedicated GMP clean rooms, which will go up through late stage for our customers for drug substance and each of them has a pretty nice output annually. So when you add all those things together, and then we think pricing is going to remain relatively consistent. We have -- we certainly have the facilities to support our growth for a while. And I think the one thing that is nuanced about our investments, which are going to be when we finally -- when we outfit Flanders 2 with all the remaining equipment, probably close to $200 million of investments in our facilities over the last 4 years or so since we started raising Wateridge was. That is not just capacity for the sake of capacity, but it's really purpose-built capabilities. And to us, again, it remains to be what we believe are table stakes to be participatory and where we think mRNA is going and you have to have these, and we've been able to fund them through our profitability over the last few years, while also bolstering our balance sheet while also adding acquisitions and new technologies and are in a very strong position, certainly for a company of our size to be able to capitalize on market movements and opportunities and differentiate ourselves from sort of the big box players. And I think that combination of uniqueness is what attracts people like Trey, it's great to have him and several others that we've added to the management team kind of during this transition period, which is exactly that. I've obviously been here for a while with Maravai, and we've brought in a lot of new leaders for the next phase of this company, which is going to be much more around a lot broader offering of products and services, a much broader customer base and certainly taking us to the next applications of these technologies that when you go back 6, 7 years, when we were acquiring the companies to make up Maravai, particularly in mRNA, we're fairly limited to a handful of customers that we're really actively pursuing this technology. There's a lot more than a handful of customers pursuing this now. And so being able to do what we did certainly on the pandemic side, but also use that to really formulate a foundation for the next decade is a good place to be. And I think we're continuing to make sure we're keeping our eye on completing all of those investments. And then as we sit here and only a few quarters away from that, then we get the opportunity to leverage them. And that's where you're going to see really, as you've seen in the past with us nice opportunity to expand margin as that revenue comes in.

And maybe just even to touch on just broader industry capacity. So I guess just given the maybe access industry capacity right now in this transition phase. And I believe the capacity coming on is clean room -- biologic clean capacity. I guess how fungible is this when you think about maybe even diversifying into new products and new services, maybe meet different customer demands. Any color on thoughts around that?

Yes. So the Wateridge 1 and 2 facilities, so both the chemistry and the biological buildings were designed with multiple parallel programs in mind. So there are multiple suites for in Flanders 1 and 3 and Flanders 2 with final fill -- or with bulk fill, excuse me. And we have the intent, like you say, that those -- that capacity is fungible. It can be scaled up, but really the parallel capacity is more about scaling out and handling multiple programs at the same time quickly. Does that make sense? And each customer program is going to be a little bit unique, but I understand the frame of your question is, could we go into other adjacent spaces? We certainly could. I'm hopeful and optimistic that our differentiated tech and the advantages we can bring will keep us busy in our core markets.

Yes. I think one of the key things what we've always kept an eye towards when we make decisions is are we unique, differentiated, protected and really adding unique values with our science. We're a science-first company, always have been. All of our acquisitions were founder-based scientists and very unique assets, and that's key to our DNA in what we do, certainly, and we want to be very participatory in those high-margin, high-science type of markets. We could do more on high-volume oligos. There's some companies that do that very well. Same with plasmids, there are some companies do high volume very well, same with siRNA and other things that do that very well at very high volumes. That's not what we're going after, we participate in some of that where it makes sense to drive our broader offering forward. But we're going to stay in our areas where we're successful. And again, those are areas that are not, in my view, and I think in Trey's view not easily commoditized because of the technicality of them and the complexity of them and making mRNA at the complexity that we do with our proprietary technology that we've been improving upon for the better part of almost two decades is not a commodity. It's a very unique product, service and skill set. And I think it's going to continue to keep us providing solutions that give our customers a best-in-class product, and that's what we're really focused.

Liza, do you want to ask a few questions.

Let's start with COVID and the kind of the -- the customer relationship you've kind of -- obviously, just thinking about Pfizer-BioNTech. And do you guys have any color on kind of just an update on kind of the non-COVID programs there and how to think about kind of work with these customers? And then could you just confirm the back half what you are including in terms of the COVID guidance?

Yes. Sure. I'll take the first part of that and Trey can splash in some color. First and foremost, we did say on our call that our full year '23 does not include any lean cap revenue for our Pfizer-BioNTech collaboration that they have for COVID. That having been said, Pfizer and BioNTech are still ordering for other programs as they advance those forward. So there are still customers, they are still active, they are still advancing their other M&A programs. But under the construct we have specifically for COVID and our $65 million that we see as the [indiscernible] 0 from them for that. So as we look at that, I think that $65 million, which is all under purchase orders for the year, remained ritual ship, I believe, we said roughly $15 million in 3Q and around $22 million in the fourth quarter on top of what we've already shipped is for other customers that have generally in-country-specific programs that we support. So our list of customers that are developing vaccines specific for COVID, which are probably getting to be fewer that because they're always looking at these combination vaccines and others, but make up that $65 million and have always been part of the demand we've seen over the past few years, and we'll continue to be. I think we have good relationships there, and I don't see anyone switching off of our CleanCap, certainly for the existing vaccines nor the boosters. So I think that covers sort of what we're anticipating for COVID this year and also answer sort of the question about Pfizer-BioNTech still ordering for other programs, which we still continue to have a very good relationship with them there.

Great. Just one more for me. Trey has spent some time at a previous institution where they were pretty infamous for a system DBS. And so it would be just kind of great to kind of understand kind of what learnings you have there, how you think that might apply to nearby additionally, you talked about rounding out the management team, how you feel about kind of the people that you've added and where you think kind of the management team sits today?

Yes. Well, DBS is a proprietary system, of course. I -- but my whole career has been in automating in lean operations. I started that way in '94 when I started at IDT, scaling out nucleic acids and automating and continuous improvement is a way of life. It's not just a talking point, and that is something we actually had. At Maravai, we have what we call Find the Better Way Day, and that program has been going that preceded me. We just had our first celebration of some of the improvements that our folks have added, and it was just -- it was fantastic. So I've seen that -- I've been fortunate to see a lot of great companies, and I've seen that, that is really a function of culture and encouragement and freedom and space to encourage people to, as we say, find a better way. I don't know that we'll need to trade [indiscernible] or anything, but that is -- that's a culture of all the best companies.

Is there an acronym for that [indiscernible].

There is. It's just probably longer and less catchy for sure, but it's kind of cute, right?

I'll just take that further, I would say that the culture for Maravai really comes up from the fact that we are a collection of founder businesses. So we never want to lose that spirit, that entrepreneurial attitude and that passion for what we do and how to do it. I think inherently, the people that have come up with a lot of the companies we have realize the value of each incremental dollar they invest and dollars they spend just because it's a very important thing because we're a small company. I mean there are 650 employees, companies such as Trey's former employer, right, probably 75,000 plus. So it's a lot different atmosphere. We have been bringing in a lot of people that have great experience from much larger companies across all of our peer set and others in some of our customers, et cetera. And they're bringing a lot of that understanding and knowledge, but we're not trying to change the culture either. We're trying to balance that out, and really make sure we have great business systems, we have good information, we have good discipline, but we also have a good entrepreneurial spirit to innovate and be creative and be nimble and be reactive to our customers because we're relatively small versus a lot of the peers in our group. And I think that gives us a tremendous advantage.

Great. So I know I think about it maybe a little bit over a month from now or about a month, you're going to be hosting your next Investor Day, but just the way you think about the base NAP business, now that COVID is a much smaller portion, there's -- greater than 20% growth. Is that still the right trajectory maybe as we move on for maybe an end market or normalized rate? Any color on how to think about the view there?

Yes. We think -- we still believe that the mRNA space is going to be an advantaged area that the NAP reporting segment for us really embodies all of the nucleic acid chemistry, the acronym for this reporting segment is nucleic acid production. So all elements of the products like the chemical products themselves to the services that include making nucleic acids of all types up to and including GMP mRNA. So that's in the NAP reporting segment. And we believe, yes, with mRNA that 20% high teens to 20% long-term market growth rate is the right way to think about it. And it's not a matter of if, but when we return to that rate.

And I guess beyond mRNA, there's also some, I guess, cell therapy, CAR-T therapy products too that you would serve within that segment, too. Is that, I guess, incorporated in the growth you're thinking there?

Yes. Keep in mind that cell therapies are cells that have been engineered the tools -- among the tools that you can use for that cellular engineering is mRNA and, of course, CRISPR gene editing in order to engineer the cell to be the therapy. So mRNA and CRISPR are interesting in that they can be themselves a therapy, but also a tool set to engineer a cellular therapy, both participate in both areas.

That's great. And maybe switching to the biologic safety testing, BST segment, where you spent some time before resuming the role of CEO, maybe start with the near term. I think there was during the call, some talk of China headwinds in the quarter. It sounds like China is maybe a large portion of the softening demand. Can you just talk about what you're seeing there on near-term dynamics?

Yes. Yes. I really enjoyed actually my 7 or so months in BST because that's an area that I was less familiar with. Biochemistry is still biochemistry though, so that was great. What a wonderful business that is that really set the gold standard for host cell protein detection. Again, as Kevin said, a scientific founder-driven startup that became a category leader. And there much more so, as Kevin described earlier, a great deal of the pandemic era growth for BST came from China. The -- as some called the halo effect of the -- on the whole industry, we felt that in BST specifically, China was the fastest-growing area for them in '20 and '21. And so when China dropped off, we felt that more acutely in BST than we did across the rest of the business for which is a much smaller percentage, as Kevin said. So I actually went to China and attended some biologics conferences, visited some customers in June and saw multiple, I would say, overlapping themes there, many of which now have been well publicized. But my memo to everybody when I came back in June, sounds a lot like what you've been hearing from many of our peers who have reported there are macro issues. There are industry-specific issues. And there was, I would say, an atypical level of overbuying of gold standard inputs during the pandemic which becomes an inventory hangover. We have earned our way out of that, I would say, in BST now simply because there's a 1-year expiry on most of those ELISA kits, and we saw China significantly slow for BST, we've been very public about that really in the second half of last year in '22. So there were multiple overlapping factors and I can go deeper and deeper, but it's in our other reporting segment, BST, that was really one of the primary investigations. Now with the second quarter industry headwinds, we've seen the same pressures as everyone else is seeing in biologics in all geographies. It's just that we saw it first in China and BST.

Got it. And maybe just -- would you be able to quantify what percent is China and BST in? What percent maybe overall or NAP segment as well?

Yes, we haven't broken that out from our APAC thus far. But now...

Yes, look, I mean, we've been doing roughly $20 million to $25 million a year in China total company and I'd say that's probably 3 quarters BST, 25% rest of the business, roughly thereabouts. And again, it's gone from a growth factor to a leveling more than anything, and we're not assuming it to grow. And then on the flip side, we're not exposed to, we don't hardly source any products from China either. So the dynamics that are going there, albeit have impacted BST more acutely over the last 4 to 5 quarters. We're really not seeing it other than on the fringes kind of impact how we move forward with the business.

That BST, keep in mind actually all of Maravai is consumable. So we have no equipment revenue of any type. There's no capital cycle going on there, and as you've heard us say publicly many times, we live, we hope to win in discovery. We live on what we call the front end of the funnel. And that means that when discovery activity slows down or is deprioritized or whatever it might be, we see that very quickly. On the flip side of that, when it returns, we see that very quickly. In the BST, the Cygnus kit purchase cycle is a matter of days or weeks, it's not a quote and a PO and 2 quarters later kind of delivery. So it moves quickly in both directions.

I guess just long term there, how do you see that segment recovering? And then also, to with the MockV kit launch, any additional color you can provide there, too?

Yes. So MockV was a technology acquisition that Maravai made for BST for Cygnus and the -- it's a model I really love, which is a small business inside of business. And that group has been building out the product portfolio for what is a new type of biologic testing where obviously, host cell proteins by definition are the proteins that could come along with the drug substance when it's isolated from the host cell system. Host cells also have endogenous viruses. And those virii need to also be tested for clearance. Typically, that's done at the end of the process by a licensed CRO in a longer term and expensive study. The MockV product line allows you to spike in similar virii to the endogenous virus to check your clearance as you're doing your process to development. So it's an end process, which allows you to have a much better -- much more confidence as you go into that final viral clearance because you've tuned it through your whole development cycle. So we think that value prop is intuitive to a lot of people, and we just have to get the word out which Cygnus, as the gold standard for host cell protein for the last 20 years, hasn't had to do a lot of getting the word out. So that's where we're leaning on our shared services and the marketing across ROI.

Yes. It's very -- it's been great to see. We -- I haven't probably -- I would need to go back and see the inception to date revenues of our biologic safety testing assets over from inception when they first started the company, they're probably north of $0.5 billion. So we decided to give them a nice facility finally and well deserved and it gives them the opportunity again to scale to leverage, to offer more services not just for host cell proteins, but for all contaminants and investigational work that they do on behalf of our customers, which is great. And we just -- we've completed that. Everyone has moved in, we've been shipping out of that for a while now and working in it. And the original founder, Ken Hoffman, came back and we dedicated a conference room to him and all those sort of -- and just to see that in his -- that he just couldn't believe what this business is today from where he started it, and it's just those sort of stories with our founders. And that's not the only one. But certainly, just really make you feel good about how we've taken these businesses and invested in them and made them much more than even the founders envisioned, which is what we plan on continuing to do.

And you mentioned a couple of times, the company has had a strong history and track record of acquiring founder-led businesses, integrating them into the portfolio. Trey, we've gotten your vision for the broader company management. Just like to hear your thoughts on M&A as well. Is there anything changed there with the company look at larger deals, different type of deals? Just where do you see that happening?

Yes, we are definitely active. That was one of the first things I jumped into after I was renamed was to find out what was going on in that funnel and see where I could help. Obviously, my entire career history started in a very special scientific founder-driven company and that is something we're extremely active in and hope to be opportunistic here shortly. We have a nice balance sheet as Kevin said, that's one of the many benefits as we have come out of the pandemic. And we intend, as Kevin just said, to continue on that path, as described, we have a lot of great tools, a lot of great technologies and a lot of great people that have come with them, but we're not done building that for sure.

And I guess just looking at some of the recent deals, any updates on Alphazyme or I can -- how integrations are going there?

Great, all greens on the scorecards for those integrations. We -- Alphazyme too has seen the same industry dynamic of a $0.25 million project used to be approved right away. Now it has to go through two levels. And once they approve it, sometimes it might go to another quarter. So they're seeing that same sort of budget consciousness that everybody in our whole industry is seeing. But what's particularly compelling and exciting for me is that Alphazyme is working with TriLink, for example, on the enzymes used in processes. Our experts -- our nucleic acid experts and now our enzyme experts are working together to improve service capability. And the output of that -- those projects is going to ultimately be more products that we can bring to bear for the industry. We want to have the products no matter what we want to enable the product's adoption through the service.

Yes. And we've gotten pretty good at this. We had them up and integrated fully on our ERP system in 45 days. This is something that's become kind of a core skill for us and rolling them over to all of our -- the benefits and then back officing what is painful for scientific leaders to do and that is things that -- I don't know if I enjoy doing them, but I do them, but the accounting and finance and IT side of the house and the legal and administrative efforts that we have and get them focused on the science, on the products and on the customers and through all our acquisitions, that's been a great formula for us to accelerate growth and make them a much more meaningful contributor to where we're going, and we're in a good spot. And I think all of our acquisitions because of that formula and focus have gone really well from an integration perspective, both from our side. But I think if you were to ask the employees there from all of our acquisitions and the founders themselves, I think they would all agree with that statement.

Yes. I was thrilled, as I said, to see the reinvestment in world-class facilities that can be leveraged for the next 5 to 10 years. I was thrilled about the balance sheet, thrilled about the acquisitions, but also that every operating business is completely harmonized on the same ERP and reporting systems and CRMs and everything else so that there's no technical debt or legacy stuff to clean up here. It's already synced.

We're just about at time, but just actually one clarification for Kevin, investor question here. So on the margins, I guess during COVID, coming a very solid -- the margin is 80%-ish [indiscernible] on the high side of a company. That's come down I think maybe in May, the margins maybe turned negative, but then start -- how do we think about the trajectory in the quarter, maybe rebound somewhat in June, more on the trajectory, even if you give us any more...

Yes, certainly. I mean I think we're guiding to a low to mid-20% EBITDA margins, which in a down year is still very good. We saw 22% in the first half of the year. Again, we brought up some big facilities. It's going to be a revenue gain over this cost structure ultimately for us. The good news is we have what we need for a while, and we have the capabilities as well as the capacity and I think we'll be able to pull that through. And as you see, both on the downside and certainly on the upside, our variable COGS as we direct through these revenues are very manageable and allow us to leverage what we have. And I think as revenue ramps, we'll continue to see margin expansion from what we're currently seeing.

Well, Trey and Kevin, thank you very much for joining us today, and thank you for the audience for listening in.

Thank you.

Thank you.