Repligen Corporation (RGEN) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Repligen Corporation's First Quarter of 2025 Earnings Conference Call. My name is Dovin and I will be your coordinator. [Operator Instructions] I would like to turn the call over to your host for today's call, Jacob Johnson, Vice President of Investor Relations for Repligen.

Thank you, operator, and welcome to our first quarter of 2025 report. On this call, we will cover business highlights and financial performance for the 3-month period ending March 31, 2025, and we'll provide financial guidance for the full year 2025. Joining us on the call today are Repligen's President and Chief Executive Officer, Olivier Loeillot; and our Chief Financial Officer, Jason Garland. As a reminder, the forward-looking statements that we make during this call, including those regarding our business goals and expectations for the financial performance of the company are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning the risks related to our business is included in our quarterly reports on Form 10-Q, our annual report on Form 10-K for the year ended December 31, 2024, and our current reports, including the Form 8-K that we are filing today, and other filings that we make with the Securities and Exchange Commission. Today's comments reflect management's current views, which could change as a result of new information, future events or otherwise. The company does not obligate or commit itself to update forward-looking statements, except as required by law. During this call, we are providing non-GAAP financial results and guidance unless otherwise noted. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted on Repligen's website and on sec.gov. Adjusted non-GAAP figures in today's report include the following: non-COVID and organic revenue and/or revenue growth, cost of goods sold, gross profit and gross margin, operating expenses including R&D and SG&A, income from operations and operating margin, tax rate on pretax income, net income, diluted earnings per share, EBITDA, adjusted EBITDA and adjusted EBITDA margins. These adjusted financial measures should not be viewed as an alternative to GAAP measures but are intended to best reflect the performance of our ongoing operations. Now I'll turn the call over to Olivier.

Thank you, and welcome to Repligen, Jacob. Good morning, everyone, and welcome to our 2025 first quarter call. Before jumping into our overall business performance, I want to spend a few minutes on the current environment. It's obviously a very dynamic macro backdrop with new headlines emerging every day. As you saw in our release, we had a very good first quarter and are encouraged by the underlying trends and opportunities in our business. We acknowledge macro uncertainties exist and are working to adapt to an evolving environment. As it pertains to tariffs at this point in time, we see a limited net impact on our EPS. Given the strengths we have been seeing in orders for the last few quarters and with Q1 '25 orders slightly above Q4 '24, our organic full year '25 guidance remains unchanged. This does not include specific impacts from tariffs. As it pertains to tariffs, I would first highlight that the majority of our manufacturing is in the U.S. In fact, more than 90% of our U.S. revenue is manufactured in the U.S. or currently exempt from tariffs. In an effort to frame the potential impact of tariff, we estimate that approximately 10% of our cost of goods sold are from raw materials directly sourced outside of the manufacturing region. In addition, we estimate a low single-digit percentage of our revenue could be subject to U.S. tariffs. As it relates to Europe and Asia, ex China, this is where we could potentially have greater exposure in the case of retaliation as revenue manufactured in the U.S. for these regions represent about 1/4 of our total revenue. So based on the most recent proposal, we have seen tariffs would not apply to a sizable majority of these revenues. We are working to mitigate tariff impacts by leveraging our global manufacturing network, applying surcharges and pricing where appropriate. Finally, we would note China only represented 2% of our revenue in the quarter. In terms of financial impact, excluding the impact from China, given the unique nature of these tariffs, we believe the net result of these actions could be a tailwind for revenue, a modest headwind for margins and have minimal impact on adjusted earnings per share. Our job as a management team is to navigate through this environment. In the meantime, we remain focused on executing our strategic plan for 2025. Moving on to highlights from the quarter. We had a very strong start to 2025 with 11% organic revenue growth in Q1 '25, which was 14% organic non-COVID. Proteins had the highest growth of all of our franchises, outperforming our expectations, while Chromatography and Analytics, both grew double digits. Filtration revenues were slightly up, excluding COVID due to a tough comp from a large customer sale in the prior year. Consumables were very strong in the quarter. And while we did see some softness in capital equipment due to timing, we have a backlog that supports solid growth in the back half of the year. Orders were up high teens year-on-year with all franchises growing double digits. In addition, our orders increased sequentially from the fourth quarter, which is impressive given the first quarter is typically a seasonally slower quarter. So while there are macro uncertainties, we remain focused on delivering on our strategy in 2025 and beyond. We are encouraged by the many opportunities we are seeing across our portfolio as we sell into resilient end markets that have demonstrated healthy growth over the long term. In fact, our 50% plus probability opportunity funnel was up 30% year-on-year. These opportunities are broad-based, and we want to emphasize that we have a diversified customer base. Our largest monoclonal antibody customer represented 6% of revenue in full year '24 and our largest new modality customer was no more than 3%, within our top customers who are serving multiple programs. Finally, we made progress on many of our key strategic initiatives for 2025, including the acquisition of 908 Devices' bioprocessing portfolio, the launch of new Metenova mixer and continuing our journey to be fit for growth. In short, we are encouraged by the momentum in our business, as highlighted by our Q1 results. while working to navigate through the current environment with a focus on delivering differentiated products for customers, which we believe will drive successful performance for the company. Moving to performance by end market. Q1 '25 biopharma revenues were at the highest level ever, excluding COVID and grew more than 20% year-on-year. This was supported by strong execution from our strategic accounts team, which is helping us to accelerate growth at our top 20 customers. Biopharma orders were also up approximately 20% versus Q1 '24 as these key customers are more broadly adopting products across our portfolio. After 2 very strong quarters, CDMO revenues were down slightly year-on-year with orders up more than 40% year-on-year. We expect revenue growth to accelerate throughout the rest of the year. Consumable revenues, which exclude Proteins, grew greater than 20% year-on-year, a record quarter on a non-COVID basis driven by ATF consumables, OPUS and Fluid Management. Our recent design wins in late phase and commercial drugs are becoming a significant tailwind. Consumable orders were also at a record level and up more than 20% versus quarter 1, '24. Capital equipment revenues declined year-on-year as we expected. Both our backlog and funnel are strong, so we expect capital equipment revenue to strengthen as the year progresses. So given the current backdrop and normal Q1 seasonality, we have seen some delays in customer orders. New modalities revenues were -- and orders were up in the quarter. While there may be some near-term challenges for these end markets, we continue to believe this is a strategic end market for Repligen. Finally, from a geographic point of view, the Americas, Europe, APAC, excluding China, had a very strong quarter, both for revenues and orders. China, on the other hand, continues to decline and represented about only 2% of our Q1 revenues and orders, a very small share of our total business. On our Q4 '24 call, we outlined 5 key areas of strategic focus this year. I want to provide updates on some of the progress we made during the quarter. First, we stated our ambition to acquire 1 to 2 businesses to strengthen our position with a focus on new modalities and PAT. In March, we announced the acquisition of 908 Devices' bioprocessing PAT portfolio. Jason will provide additional details around the financial impact of that transaction. Strategically, this acquisition accelerates our journey to enable the digitization of bioprocessing by adding key technologies, which allow us to bring PAT integrated upstream solutions to the bioprocessing industry and complement our downstream capabilities. Looking ahead, 908's products will benefit from leveraging our commercial infrastructure and we will continue to invest in product development to launch additional PAT technologies as we try to prepare for the next wave of industry digitization. Operationally, we are working to transition 908 Massachusetts manufacturing into a Repligen facility and continue to assess additional footprint optimization. Secondly, we are working to capitalize on our best-in-class innovation and continue to invest in R&D. Recently, we launched a ProConnex MixOne, a single-use mixer based on Metenova's mixing technology. This is a great example of the integration of Repligen's R&D and M&A strategy as this product combines components from a number of our Fluid Management acquisition into a best-in-class single-use technology. Feedback from the INTERPHEX Conference was positive with multiple demos requested. We expect to receive the initial orders of the MixOne mixers in the second half of 2025. Finally, we continue to invest to become further fit for growth, positioning Repligen to be a much larger business in the not-too-distant future. During the quarter, we made investments in finance and quality, which would help increase visibility in our business and improve our customer experience. Moving now to franchise level business highlights. Non-COVID filtration revenue was up slightly year-on-year in Q1. The quarter played out largely as we expected. Fluid Management and TangenX flat sheet cassettes led the way. ATF consumables was strong and at a record level, while ATF hardware was down year-on-year due to a tough comparison. We remain positive about the medium-term outlook for this product line as we continue to see new wins and applications for the technology across end markets given the differentiated performance including customers' ability to scale up and down on the platform. Our Fluid Management products are getting traction with some significant recent wins with pharma customers. TangenX also has real momentum with multiple designing successes. Filtration orders grew low double-digit year-on-year, which sets us up well for double-digit non-COVID growth for the balance of the year. Chromatography grew double digits, driven by growth in large-scale columns. Orders increased greater than 50%, the highest quarterly order intake in the last 3 years. OPUS has long been successful with CDMO customers, and we are now getting more traction with large pharma customers, which is an encouraging development. We expect Chromatography growth will be strong for the remainder of the year. Proteins had a great quarter with strong year-on-year growth. This was driven by a record quarter for Chromatography resins as we benefited from the timing of commercial demand. During the quarter, we strengthened our collaboration with Purolite through joint customer discussions. Our Chromatography custom resins had strong growth in the quarter which highlights our strategy to develop our own content. While the quarter played out better than we expected, our full year outlook for the segment is unchanged. Process Analytics grew 20% with $1 million of revenue from the 908 acquisition in the first quarter and 12% organically. This was mainly driven by consumable and service uptick. To summarize our Q1 performance, 14% organic non-COVID revenue growth is a very good start to the year. Our order and funnel trends highlight the momentum in the business. As a result, we're confident in our 2025 outlook and delivering above market growth. We are focused on executing our strategy, delivering differentiated products to customers while being nimble to adapt to an evolving economic environment to best serve our customers and create value for shareholders. Before I turn the call over to Jason, I want to thank Sondra Newman, our outgoing Vice President of Investor Relations, for the many years of service to Repligen. We wish her the best in retirement.

Thank you, Olivier, and good morning, everyone. Today, we are reporting our financial results for the first quarter of 2025 and providing an update to our financial guidance for the full year. Unless otherwise mentioned, all financial measures discussed reflect adjusted non-GAAP measures. As shared in our press release this morning, we delivered first quarter revenue of $169 million. This exceeded our expectations of a sequential decline from the fourth quarter despite a $2 million or a 1.5 point headwind from foreign exchange. This is a reported increase of 10% for the first quarter. We were up 11% on an organic basis, which excludes the impact of acquisitions and currency and up 14% on an organic non-COVID basis, which we believe best reflects our underlying great performance in the quarter. Acquisitions contributed approximately 1 point of the reported growth. As Olivier shared color on our product franchise performance, I'll provide more detail on the performance across our global regions. Starting with quarterly revenue North America represented 50% of our total, Europe represented 35%, and Asia Pacific and the rest of the world represented 15%. North America and Europe were both up 13% and Asia, excluding China, was equally strong with 12% growth. China was down significantly, and as Olivier mentioned earlier, now represents about 2% of our total business. China remains a region with unique challenges, but given our relatively small exposure to the region, and the strength we are seeing elsewhere, we believe we can largely offset China-related headwinds. For orders, North America and Europe were the regions that drove our growth in the quarter. Transitioning to profit margins, we are very pleased with our performance in the first quarter with an adjusted gross profit of $91 million and delivering 53.7% adjusted gross margin. This is up nearly 450 basis points versus last year, driven by 150 basis points benefit from higher volume, 100 basis points of benefit from favorable mix associated with the strong Protein sales in the first quarter, Olivier discussed earlier, offset by 60 basis points of COVID-related headwinds. The team delivered 200 basis points of benefit from productivity execution in our supply chain as a momentum from year-end carried forward into the first quarter. Given the Protein's mix benefit in the first quarter is unlikely to repeat, we expect the first quarter gross margin to be the highest of the year. Continuing through the P&L, our adjusted income from operations was $23 million in the first quarter, up 72% or approximately $10 million versus the first quarter of 2024 on strong volume leverage. This increase is driven by $15 million higher growth profit from higher sales and the gross margin discussed earlier offset by an increase in operating expenses of approximately $6 million. OpEx grew by about 9% on a reported basis, including some onetime operating expenses in the quarter, but up about 6% on an organic basis, excluding the impact of acquisitions. This is less than half of the equivalent organic non-COVID revenue growth rate of 14%. This translated to an adjusted operating income margin of 13.8%, also driven mostly by strong volume leverage. This was up 490 basis points from the first quarter of 2024. Adjusted operating margin improvement also included the aforementioned mix benefit from Proteins volume, offset by COVID non-repeating and 1-month of 908 Devices' bioprocessing portfolio and the previously mentioned onetime operating expenses. Our first quarter adjusted EBITDA margin rate was 19.3%. Adjusted net income was $22 million, up about $5 million or 29% from the first quarter of 2024. Higher adjusted operating income was offset by lower interest income and higher tax provisions. Our first quarter adjusted effective tax rate was 23.1%, in line with the high end of our total year guidance, but about 4 points higher than last year due to less stock compensation windfall benefits. There is no change in our total year adjusted effective tax rate guide. Adjusted fully diluted earnings per share for the first quarter were $0.39 compared to $0.30 in the same period of 2024, up 29%. Finally, our cash position at the end of the first quarter of 2025 was $697 million, down $60 million sequentially from year-end after using $70 million for the settlement of our acquisition. This was partially offset by a cash flow from operations generation of $15 million in the quarter. We are very happy with the strong first quarter results, delivering above-market revenue growth and strong margin expansion, which positions us well to deliver on our 2025 outlook. I will now provide an update on our guidance for the full year of 2025. I'll speak to adjusted financial guidance. But please note that our GAAP to non-GAAP reconciliations for our 2025 guidance are included in the reconciliation tables in today's earnings press release. And for further clarity, our guidance includes the impact of the December 2024 acquisition of Tantti and now includes the March acquisition of the 908 bioprocessing portfolio. We'll report revenue related to the 908 bioprocessing portfolio, but we do not expect to report acquisition-related revenue to Tantti as its products will be used as a component in our Avitide resin sales. As highlighted earlier by Olivier, our organic 2025 guidance is unchanged at 9.5% to 13.5% growth and 11.5% to 15.5% growth for our organic non-COVID business. That said, we are increasing our reported revenue guidance from $685 million to $710 million to $695 million to $720 million, solely to incorporate the expected additional revenue from the 908 bioprocessing portfolio acquisition. As it relates to the macro level volatility, we have decided not to incorporate any specific changes in this guide. That said, we'll provide as much context on potential impacts as we can. For currency, we have still assumed about 150 basis points of year-over-year FX headwind in this guide. Any additional fluctuations higher or lower could change that view. For example, at last Friday's exchange rates, we could see almost a full point of tailwind on our revenue growth rate for the year. Given the volatility of the trade environment, we have not included any impact from tariffs in the guide. To frame the possible financial impact, we could see a net increase in sales from potential surcharges that Olivier mentioned earlier and we will leverage our global manufacturing network and pricing where appropriate to minimize the impact on gross profit. We will quantify these impacts as much as possible as we report results in the future. Regarding our revenue cadence, we still expect revenues in the second half of 2025 to be higher than the first half. We expect our year-over-year organic non-COVID growth to accelerate in 2Q and revenues to be up sequentially from the first quarter. In terms of growth by franchise, our outlook for our Filtration, Chromatography and Proteins franchises are unchanged versus our previous guidance, while we now expect 20% to 25% growth in analytics as we integrate the 908 bioprocessing portfolio. We now expect to deliver adjusted gross margins in the range of 52% to 53%, which represents 160 to 260 basis points of year-over-year margin expansion. This is a 100 basis point increase versus our prior guidance. This primarily relates to a shift in cost to operating expenses from cost of goods sold where they had been assumed in our previous guide. There is no change in operating income related to this change. The 908 bioprocessing portfolio is also slightly accretive to gross margin. We still expect underlying year-over-year gross margin expansion to be driven by volume leverage, pricing, manufacturing productivity and strategic sourcing savings, primarily offsetting by inflation and some 2024 COVID sales drag. Manufacturing productivity will be driven by our Repligen performance system across all categories of cost of goods sold. We have not changed our assumption that the guide includes roughly 50 basis points of headwind from foreign currency. However, it does not yet include any impacts from potential tariffs being discussed in the current global trade environment. We now expect our adjusted income from operations to be between $95 million to $102 million or 13.5% to 14.5% adjusted operating income margin. The $4 million revision versus prior guidance is due to the acquisition of the 908 bioprocessing portfolio. Inflation, recent acquisitions and investments in operating expenses will be the key headwinds. We expect to more than make up for that with gross margin improvements just outlined. Overall, we continue to manage our organic investments in operating expenses at a lower rate than sales growth as we balance cost efficiency with investments that are critical to support future growth. That said, our implied operating expenses will increase versus the prior guide, primarily due to the acquisition and from the cost change described above. Continuing through the P&L, we have not changed our expectations on adjusted other income. We are now factoring in fewer interest rate cuts, which offset our lower cash balance as a result of the acquisition. Our 2025 adjusted effective tax rate expectations are also unchanged at 22% to 23%. The increase versus 2024 is ending rate of 20.4% is driven primarily by the absence of stock-based compensation windfall benefit that we have seen for the last several years. We will continue to evaluate tax planning options to improve from here. Incorporating the 908 bioprocessing portfolio acquisition impact, we now expect our adjusted fully diluted earnings per share to be between $1.63 and $1.72, down $0.04 from our prior range of $1.67 to $1.76, which represents 3% to 9% growth versus last year. Our balance sheet remains incredibly strong and well positioned to manage the volatile environment. We will remain prudent in our spending while maintaining flexible dry powder for potential acquisitions. We still expect CapEx to be down 20% to 25% versus 2024 with our spending back to pre-COVID levels. As we wrap, we are encouraged by the very strong start to 2025. We made good progress on our strategic priorities in the first quarter with the acquisition of 908 bioprocessing portfolio, new product launches and continue our journey to be fit for growth. We will continue to manage the uncertain environment and expect to maintain above-market growth. With that, I will turn the call back to the operator to open the lines for questions.

[Operator Instructions] The first question comes from Rachel Vatnsdal with JPMorgan.

And quickly, just wanted to say, Sondra, congratulations on the retirement. It's been great working with you. And Jacob, I'm looking forward to working with you on this side as well. So maybe just digging into it. First question, I wanted to ask on the CDMO order trends that you guys saw in the quarter. You mentioned that CDMO orders grew 40%. One question I'm just getting right now is on the tariff dynamics, did the tariffs impact any element of pull forward in your order book this quarter, especially with some of those large CDMO customers. And then just given how solid that order number was, can you walk us through what were some of the key products that drove that solid order? And remind us where are you guys at in terms of ATF adoption within those CDMO customers as well?

Yes. Rachel. Great questions. So I'll start by saying we've not seen really any customer trying to accelerate orders in the quarter. I mean not a single one, in fact. And that does includes all CDMOs. You're right, we had a really great order intake growth from CDMO in quarter 1. The good news, it was really across the board. It was not only the large one, but it was also the smaller one. And also in terms of product line, it was very much across the entire portfolio. I mean you've heard like we had a very strong performance on the OPUS side, particularly with orders up more than 50%. As you know, CDMOs are primary customers on the OPUS side, and we've seen really big orders coming from those guys in the first quarter. So no real trend of accelerating anything. I don't think I've seen a single example here. And as far as ATF is concerned, we mentioned previously that 9 of the top 10 CDMOs are already using ATF and the #10 is just in the process of implementing it as well. So obviously, that's another big driver of the CDMO order growth we've seen in quarter 1, which is on the ATF consumable, which order-wise did very well in quarter 1 as well.

Great. And then on my follow-up, I just wanted to dig into the tariff dynamics. You mentioned really minimal impact to EPS. But just on the top line, you said that you could have up to low single-digit percent of revenue exposure. So can you walk us through the various buckets of offsets that you guys are seeing on that? How much of this is just going to be incremental pricing pass-through. And how much price do you really think that you can pass through in this environment? And then things like some of the manufacturing offsets as well, help us bucket those different ways are mitigating the impact there?

Yes, Rachel. Yes, just to address, I do think we believe that it's probably less than 1% sales increase that we would have from tariffs. And that would come through surcharges, right? Surcharges mostly that we would pass a one-for-one in terms of whenever we were incurring those costs to the customer. The other point there, there could be price increases that's going to be more of how do we offset the inflation that we see on raw materials that we're purchasing. And that then -- and so that ends up on the top line as well. But overall, between those two, we think that it's probably around that 1% of sales increase. That then would translate to probably less than 50 bps of gross margin pressure because you're, effectively you are taking that sales without any cost, and it's a full pass-through. But on a dollar basis, we see same kind of flat, and that's why we said there was minimal EPS expenses. We absolutely are looking at our manufacturing footprint. Like Olivier mentioned, 90% of what we sell in the U.S. is either manufactured or exempt from duties. And so we've got really strong coverage within there. We've also been very clear that our bigger exposure would be if there's retaliatory duties put in place primarily in Europe, that, that's where we would have a bigger exposure. Right now, that's not the case, right? The far majority of what we're selling into Europe is not subject to that. So that's the one that we would watch and take other actions on. But I know there's some questions why we didn't put it in the guide. Maybe I'd just address that now. I think for us, there's just tariffs as well as FX really are moving targets. And so that's why we didn't specifically put them in the guide. but also we've been trying to be very clear and transparent about some sensitivities around that and trying to put a framework through this dialogue. So certainly, if things stabilize, we will, and we'll move forward from there.

The next question is from Dan Arias with Stifel.

Olivier, I wanted to ask about emerging modalities and just how you feel about things there. Obviously, some high-profile news on certain drugs and then certain folks at the FDA, which has been less good. But it feels like the industry activity is still in a good place just when you think about active trials, et cetera. So you mentioned new modalities were up. You alluded to some of the challenges. When you combine all of that high level and ground-level stuff, the puts and takes there, do you see cell and gene therapy on a trajectory that's accelerating, decelerating or flat this year? And when you fix about the things taking place at the FDA and you talk to your partner companies, are you sensing any disruption from some of the changes that are taking place there that would rise to the level of being an issue for you guys?

Yes. No, Dan, a lot of good questions. First of all, you're right, new modalities played out really well for us in quarter 1. Our sales were up mid-single digit. Our orders were up more than 20% again, so which was very encouraging. But we're obviously monitoring all of the headlines. Maybe one thing to mention here is our biggest new modality customer represents less than 3% of our total revenue in 2024. And so I know we get asked a lot of questions about that. So that's probably something very important to mention. So as far as the overall environment is concerned, while there could be some short-term challenges, we remain very optimistic about the mid- to long term. And so far, talking about changes at the FDA, we've not really heard any of our customers telling us at this stage, they are slowing down or they are even canceling some specific trials that they were running on new modalities. So we remain very optimistic. Again, we are watching the news like anybody else. But so far, we don't see any reason to be worried about the future of new modalities at all, Daniel.

We have our next question from Puneet Souda with Leerink Partners.

Jacob, I'm really looking forward to working with you. On the growth side, if I could ask, obviously, the strong growth in the quarter. Orders also strong across different end markets and customers and modalities. But just could you elaborate if your mix of clinical versus commercial is changing as a result as you're getting spec'd into the commercial, maybe things are moving from Phase II to Phase III and maybe into commercial. Maybe could you elaborate a bit on that because the growth -- I think the question here is sort of how sustainable is this growth? And given the questions we are getting on the clinical trials and the momentum on clinical trials versus what we're seeing in the commercial side of the business?

Yes. Puneet, so great question. We are still at 65-35 a year later. So in principle, you would say nothing has changed, but in fact, a lot has changed between 2024 and 2025 because as you know, last year, we had this USD 30-plus million of headwind coming from Protein. And all of this was considered to be going into commercial drugs because that was mostly the OEM business we had with the 2 big guys. So considering we're still 35%, it means that we have onboarded another USD 30-plus million of business going into commercial drugs. So if nothing would have changed on the Protein side, our split would be today 60-40. So, yes, I think I mentioned in previous calls, that's the direction we're going to be going to anywhere between 3 to 5 points of increase of commercial versus clinical probably during the next several years. So it's fair to say like probably 4 to 5 years down the road, we should be around 50-50, something like that.

Got it. Okay. Helpful. And then on the 908 Devices' acquisition, obviously, you have done well with the PAT technologies with CTech, SoloVPE, FlowVPX. Just trying to understand how are you thinking about the commercial land here? What is needed in sales and marketing in order to accelerate a product such as REBEL into the marketplace? And what are some of the cost efforts that you're taking to sort of right-size the business while driving growth?

Yes. So first of all, I'll start by saying the integration is moving exactly as scheduled. We spent quite a bit of time to make sure we have the 2 teams, CTech plus 908 team working together very closely. In fact, we are onboarding a leader that will have the overview of both businesses together because we feel it's going to be very important indeed to generate as many synergies as possible. And if I think about synergies, it's particularly on the R&D side. I mean, you know by now, the way we've been handling a lot of our acquisition is to not only really develop further the products those companies had in their portfolio, but really taking advantage of the rest of the portfolio we have to leverage across the board, the technologies from both sides. So we've got a huge focus on R&D in particular starting by adding more features to some of the products coming out of 908 and REBEL is a good example where we are going to launch a new version within the next quarter or so but also adding more features to MAVERICK on the Raman side and then making sure like we leverage the strong technical team we got with this acquisition to help us also accelerating innovation on the CTech side, particularly with the mid-IR technology we acquired the rights from a few years ago. So a lot of work happening on the R&D side. And then on the commercial side, already the 2 teams are being incentivized to generate leads for the other part. And it's fair to assume like those 2 teams are really going to be working very closely with each other. And then finally, from an operation point of view, we are just finalizing the move from the Massachusetts site to our own site here in Marlborough for the manufacturing of the vast majority of the equipment from 908 and where we are looking at all the potential synergies for the future to improve the cost base here as well.

Our next question comes from Matt Larew with William Blair.

This is Jacob on for Matt. So just wanted to talk a little bit more about trends by customer type, maybe just on small biotech specifically. I didn't hear much about that group in the prepared remarks. But I think last quarter, you said orders for this group grew 10% sequentially, perhaps signaling a leading indicator for return to growth later in the year? However, a lot has changed from a macro standpoint since you last reported and lots changing by the day and minutes. So maybe if you could just provide some incremental color on what you're seeing with this customer group? What did orders look like in the quarter? Are you still optimistic this group will return to this table despite the macro.

Yes, Jacob here. So if you look at all customer segments, obviously, pharma did extremely well, record quarter for us and when I say pharma, big pharma. CDMO did very well in terms of orders with orders up more than 40%. The only segment really that didn't do very well for us in quarter 1 was small biotech. And not so much from an order point of view where orders were pretty flat comparable to last year. But from a sales point of view where the sales to emerging markets went down high single digits. So yes, we are still watching that segment carefully. It's becoming smaller and smaller for us. It's less than 10% of our total business. So it's not very material. But as I mentioned in earlier calls, I mean, it's a segment everybody is watching because the health of that segment is important for the future health of the ecosystem. And the best indicator is biotech funding, which unfortunately went down significantly in quarter 1. If you remember, the trend last year went from $18 billion in quarter 1 to $15 billion and then $12 billion towards the end of the year. And then quarter 1 of this year was only at $8 billion. So unfortunately biotech funding is not doing very well. So something everybody is watching carefully because we want to see that recovering faster than it does right now for sure.

The next question comes from Justin Bowers with Deutsche Bank.

Olivier, we've seen a lot of announcements from large biopharma over the last few weeks around onshoring or increasing CapEx plans. Just curious what your thoughts are on those announcements as it relates to the longer-term outlook and whether any of those announcements are leading to early discussions for you at this point?

Justin, no, obviously, being an American company with a majority of manufacturing here in the U.S. were watching all of these announcements in a very positive manner because, obviously, we think this means extra business coming for all of the bioprocessing industry in the upcoming few years and particularly, certainly for those companies who have got a very strong installed base in the U.S. And then most of these customers that have been making announcements are companies we've been working with very extensively. And as you know, we've been focusing a lot on key accounts during the last couple of years. And today, with most of this company, we are selling across our entire portfolio. So we see that as a very positive tailwind for the next several years, and there are already a few discussions happening on the different front here.

And Jason, just a quick one. How are you thinking about the margin cadence for the rest of the year?

For gross margin, so we highlighted the strength we had in the first quarter, but it was certainly helped by the mix of strong Proteins. And so we see that as the high point and then kind of going down. If you look at some of the implied guide for the rest of the year, you're kind of sitting at a 52-ish, maybe little bit more, and that will kind of maybe pick up a little bit through the course of the quarters. But again, we are really happy with the performance we had. And even if you take out the mix, we had strong productivity good volume leverage. The back half of that of the year or even the third -- second, third and fourth quarter, we'll see mix flip the other way. So we actually kind of go to this hole we have to dig out of and again are able to do that through more productivity and volume leverage. So really happy with the performance we're driving here at the gross margin level.

Our next question comes from Subbu Nambi with Guggenheim Securities.

And Sondra, we'll miss you. Jacob, we are looking forward to working with you. My question is, because of the pharma tariffs, some pharma companies are talking about cutting their R&D. This is likely to impact the clinical pipeline of the drugs. How much of the guide today is driven by growth in the clinical pipeline for Repligen? Or is this a wrong way to think about it for 2025 rather more long term?

No, I mean, I think I mentioned earlier, we've not seen a single customer telling us, hey, bad news, we've decided to put that program on hold or we're going to delay that specific clinical trial. In fact, I think clinical trial starts have been increasing nicely in quarter 1. So where biotech funding was not good, clinical trial start was pretty good in quarter 1. So we've not seen any of these customers telling us anything like that. And I know we are talking a lot about U.S. situation, obviously. I mean half of our business is still outside of the U.S. as well, where everything is running absolutely totally normally as well. So we don't really have any concern for the time being. And also, when you hear about the Commissioner, Makary, who recently announced like, you would like to speed up approval of drugs and so on. I know this is just an announcement, but this might just be another tailwind for the industry. So really nothing we've heard from any of our customers so far that it makes us feel particularly worried at this stage, Subbu.

And then on NIH, you don't have a lot of exposure, but it will be good to hear if there is any impact of these NIH funding changes that are contemplated in the guidance? Or is this something that you think could have a longer-term impact on growth?

Yes. No, it's a bit similar to the discussion we had earlier on small biotechs. For us, I mean, business that is NIH dependent is less than 1%. So it's almost de minimis. But at the end of the day, yes, you want to see NIH funding increasing because in the longer term, I mean, you want to see new product development. No later than this morning, I was seeing statistics showing the number of products under development in each country around the world. And it's interesting to see like particularly in Asia, in country like China, in country like South Korea, I mean the number of products under development is increasing tremendously. So we want to see a strong NIH, a strong product development environment here in the U.S. as well because that's going to be important for the ecosystem in the mid to long term for sure.

The next question comes from Brendan Smith with TD Cowen.

Congrats on the strong quarter. Maybe piggybacking a bit off of an earlier question, I wanted to actually ask how you're thinking about and if you expect any impact specifically from FDA's recent guidance looking to phase out animal testing for biologics. I guess, I'm really just wondering if there's anything of note you've heard from any customers or thoughts on how some of this might play out for your customers and potential timing for some of the impacts just given all the recent staffing side of the agency.

Brendan, no, I have not heard anything at all on that side, to be honest with you. Well, maybe I've heard a few people suggesting this might accelerate somehow some of the clinical move from one phase to the other, but nothing really tangible at this stage.

Okay. Got it. And then maybe just quickly, kind of regarding your manufacturing in the U.S. versus ex U.S. I guess, I'm wondering how much flexibility you have to shift any of that ex U.S. manufacturing to any U.S. facilities? And if any of that is indexed to any particular segment more than others. I guess, I'm really just wondering if there are any levers you can pull there should the EU tariff situation maybe materialize a bit more concretely?

Yes. So the answer is yes. There is leverage. I mean, we've got multiple sites, both in the U.S. but also in Europe. If you look at our portfolio today for several of our product lines, we already have dual manufacturing sites. That includes the OPUS column that includes Fluid Management, that includes to a large extent, our systems as well. So for the remainder of the portfolio, we are indeed looking at opportunities to have dual siding manufacturing in the future indeed in case the tariffs situation would degrade over the next few quarters. So absolutely, we're looking at that, and we could definitely leverage our strong installed base around the world at this stage.

The next question comes from Doug Schenkel with Wolfe Research.

So one on guidance and then one on positioning outside the U.S. given the current policy situation. So on guidance, just a clarification. You are now guiding organic -- actually, it says you are guiding non-COVID revenue growth to 11.5% to 15.5%. That's the growth rate you've guided to. Last quarter, you guided non-COVID organic revenue growth to 10% to 14%. So I'm just trying to see if that's apples-to-apples. And if that is organic to organic specifically? Because if so, that would seem to be a positive sign under view of fundamental non-COVID demand. So I just want to clarify that. We've got a couple of questions there. So that's my first question. The second is really kind of acknowledging something that you talked about last quarter where you talked about adding some roles in Asia. I'm wondering if you'd be willing to speak a little bit more about where you've been adding, what the follow-through has been. And really, I'm focused on this because it could turn out that this is really well timed as it may really improved your positioning to take advantage of customer movements out of China into other Asian locations.

Excellent, Doug. So let me start with the second question on Asia and then Jason will take care of the first question. So yes, you're right. I've been talking quite a bit about Asia. I spent myself quite a bit of time living in the region over there. So it's a region that I know has got huge potential for us, but obviously, we've gone through a lot of changes over the last several years. So let me start with China, with China obviously has not been doing very well for us now for the last few quarters. We just onboarded a global Asia leader who just relocated to China, Singapore and gentleman who just relocated to China and who is really just building our new strategy for China because the way to win in China in the upcoming few years is going to be totally different from the way you were winning before COVID. We also just hired a leader to run China, the GM reporting to that Global Asia leader. We are literally going to do a report out of this track in the next few weeks. And we've got very ambitious plan because I'm convinced that China market will start growing again very nicely, probably from 2026 onwards, and we want to be a big player there. Outside of China, I mean, the rest has been doing very well for us. And obviously, everybody knows how dynamic a country like South Korea are, but also, to a large extent, Japan in the most recent past as well. So here again, as well, we're working on very specific strategies, and we have got a lot of ambition to become much bigger in those 2 countries in particular. I would just add Singapore as well because Singapore is also a very, very important market for us. But I'll hand over back to Jason on the guidance question here.

It's a good question. It is a new metric, and we did it because we think it's a better view of how we're performing. The last -- this one is -- this quarter, it's fully organic, meaning -- and the last one was not, meaning last quarter we excluded M&A in COVID, but we didn't exclude the impact of FX. And now this quarter, we are excluding the impact of FX. So again, I know there's a lot of different nomenclatures. Organic for us is the exclusion of both M&A and FX. So given just the FX volatility that we're seeing, we had $2 million of pressure almost 1.5 points of pressure at the growth rate level in the quarter. We felt like taking acquisition -- or sorry, FX impact in addition to acquisition would be the most sort of apples-to-apples view of our performance. And so that is not a change in overall what we looked at from a performance, but we thought we'd clarify that. Does that answer your question?

I think so. And I know we can follow up after, but the bottom line is strong momentum, but really this isn't a change in view, just continuation in view in terms of how you guys are seeing the business today, at least from an organic standpoint. Is that fair, Jason?

Yes. No change -- exactly. No change to organic, meaning no FX impact in acquisition and taking out COVID. All that's the same. We're trying to isolate. There are so many moving pieces, right, in terms of impact. We're going to have to talk ex-tariffs, ex this and that, right? And so we're trying to isolate it down more...

Just a few moving parts.

The next question is from Matt Stanton with Jefferies.

Maybe one on OPUS. I think, Olivier, you talked about larger scale columns driving some demand here in 1Q as well as really nice order strength, I think you said up 50% in the quarter and talked about some adoption of large pharma. That's traditionally been more CDMO. Can you just talk about what's driving the uptick at large pharma, why now? Obviously, OPUS has been around for a while. And just the durability of these demand in order trends as they maybe look to adopt it a bit more over time?

Yes. No, good question, Matt. So I'll start maybe with the scale because that was your first question, yes. We've indeed seen a shift toward larger scale OPUS columns in quarter 1, which we like quite a bit, obviously, and we try to understand where this might be coming from. I mean, as you know very well, there has been a lot of single-use manufacturing plant being built over the last several years and particularly at the 2,000-liter scale, which is -- which was the highest scale before 5000 liter came recently. So a lot of this plant really started to run at full speed during maybe the last 1 or 2 years. And for this type of large-scale single-use manufacturing plant, you want to use single-use columns, you want to use pre-packed columns. So we think that's probably one of the reasons why we've seen a shift towards more of the larger scale OPUS column over the last quarter or so. And then in terms of the pharma businesses, we managed to grab, I mean, as you know, CDMOs, they love OPUS columns because for them, it's all about having the ability to switch very fast from one customer to the other and having those pre-pack columns on the shelves enable them to do that very fast. So for us, we've been really pushing more on the pharma side because we know like these guys were probably a bit more reluctant to use pre-packed column and we had 2 pharma wins in quarter 1 that we think are going to be staying now for the next several quarters and one of them being with a really big pharma company. So that was a very significant win for us. So we were hoping to see more coming. We've got a big commercial effort to focus on pharma for pre-packed column right now.

And maybe just one on the innovation engine. You launched the first resin out of Tantti a few months ago. Just any early feedback there? And then if you can remind us of the pipeline there. I think you're hopeful to get some other products out from Tantti once it was integrated this year. And then Metenova sounds like early indications on the new mixer launch a few weeks ago going well on demos and orders. Can you also just remind us of the opportunity around the bag strategy with Metenova as you get some of those new mixers out and look to tag on the consumables on the back end.

Yes. So starting with resins, I mean, we are really delighted how quarter 1 played out. And you might remember, I mentioned our strategy was not to become really very independent and then have our destiny in our hands for the future, and we start to collect the fruits of it. I mean, I'll start by just clarifying like the collaboration with Purolite is doing very well. We are delighted to work hand in hand. We have multiple meetings with customers together, and we have a lot of great traction, and that's for monoclonal antibody. And outside of monoclonal indeed, where we are developing and launching our own products. One of the reasons why quarter 1 really outperformed across the board was because of some of our own Chromatography resins that were really a big success for us in quarter 1 including the double-standard RNA, which launch has been doing very well as well. So really great traction. We're going to launch at least 2, if not 3 new resins over the next few quarters. So we're extremely optimistic about the traction we have on the protein/resin side. And then in terms of the mixers, yes, you're right, we just launched our single-use mixers at [ Interphex ] beginning of April, a lot of very positive feedback. Again, it's not like a me-too product because there are so many companies in the field. We are really using the technology from Metenova, which we know because we got that feedback on the stainless steel side is considered to be the best mixing technology by far. So now people who have been using our mixers with stainless steel technology are delighted to see us coming with a single-use solution because I know the quality of mixing is just better than anything else on the market today. So we are just going to demo those equipment probably in quarter 2 and quarter 3, and we'll start collecting orders towards the second half of this year, and we will start to see sales happening in 2026 and beyond here.

The next question is from Dan Leonard with UBS.

My first question is a quick cleanup. Is it possible to quantify the timing benefit in Proteins in the quarter?

The benefit on what, Dan?

Yes. You mentioned, Jason, that there was a timing that contributed to your strong year-on-year growth in Protein. So I was curious if you can quantify the size of whatever moved into Q1 that you weren't expecting?

No, no. The total amount now we -- it was an upside to the quarter from our expectations, but we'll see that sort of unwind through the course of the year, if you will. And that's why we end up with the same overall growth rate expectation for Proteins for the year.

Yes, guidance stays at 10% to 15% for the full year on Protein, Dan So no changes on that side.

Okay. And at a higher level, Olivier, how would you characterize your visibility nowadays now that you've got a couple of quarters of double-digit growth under your belt. How confident are you that this demand is run rate versus any restocking dynamic?

Yes. No. Of course, as you know, we are tracking a lot of different parameters to really have maximum visibility. One, I didn't mention so far is our funnel of opportunities above 50% ended up being higher by 30% at the end of quarter 1 than a year ago. And that's a very big indicator for us because, as you know, we typically have about 4 months of backlog in the pocket. So you want to have a very strong funnel as well. So this is what kind of gets you very confident about growth coming for the next several quarters beyond next 2 quarters. So, yes, all indicators look really good for us at this stage. And I think all of the initiatives we've taken commercially and from a product launch point of view are really coming to fruition right now, which is why we were very confident about the year.

We will now conclude our question-and-answer session. I would like to turn the conference back over to Olivier Loeillot for any closing remarks.

Well, thank you, everybody, for joining us today. We are obviously very pleased with the start of 2025. I would like to really give special thanks to our entire Repligen colleagues and team for helping delivering this very strong growth in quarter 1. As you all know, we are very focused on our strategic plan, and we look forward to speaking with everyone again very soon. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.