Repligen Corporation ($RGEN)

All right. Great. Welcome, everyone. I'm Puneet Souda. I cover life science tools and diagnostics here at Leerink. And it's my pleasure to be hosting the Repligen team, CFO, Jason Garland; and also Head of Investor Relations, Jacob Johnson, joining us. Great to have you guys here in Miami.

Good morning.

Thanks for having us, Puneet.

Yes. Okay. Excellent. So maybe always exciting to talk about Repligen, a number of things you have ongoing for you in the markets, strong clinical stage presence that you have and in commercial as well. So maybe -- but let me kick off on the 2026 guide. You framed it as 9% to 13% organic growth rate. And then you pointed out the 500 bps outperformance framework relative to the bioprocessing end market, offset by 200 bps of headwinds from gene therapy. Maybe just give us a view on that sort of 9% to 13%. It was a bit wider than usual historically, but maybe could you walk us through the puts and takes? What takes you to higher end of that guide versus lower end? What was the thinking behind it?

Yes. No. So we had a really strong 2025. So the momentum continues into '26. We've got a great order book that we ended as well with fourth quarter. I think to your point, the midpoint of that guide is right within the framework that we've been talking a lot about. I'm not sure your history, but we look back the last 5 years, and we've always -- we've given 4 points of range kind of coming out of the gate every year. So we actually saw that then if you stick hover around that 11%, plus or minus 2% was a typical range that we've given on the organic side. I think the -- to answer your question, if the pipeline of opportunities that we see continuing to grow is able to execute and convert within the year, that pushes us towards the higher end. And the things that I'd say we're watching are certainly pharma digesting MFN, what that really looks like, FDA and approvals and how that plays out. Those are the things that we're watching that maybe leads us towards the low end. But overall, we're really excited about the pipeline that we've got, the opportunities and again, well within this framework of being able to deliver above-market growth.

And a couple of macro factors that you referenced as well, MFN policy, I think Olivier mentioned that and pharma CapEx timing, FDA biologics approvals as variables that are obviously out of your control. But remind us, I mean, yes, pharma CapEx, I think CapEx is well understood. But generally speaking, biologics approvals are headed in somewhat of the right direction. MFN policy is somewhat behind. So just trying to understand sort of how much of those factors are still playing a role in this overall guide?

Yes. I mean for '26, the approvals, of course, probably have less of an impact or it's later in the year, right? I mean we're not banking on the view from where we are today with approvals. It's more of an indicator of that overall market activity. So I think it really becomes back to the CapEx timing, right? And does that continue to improve from where it is today. And that, again, helps us to do -- to go to that higher end of the range. But the approval side, again, takes a little bit longer to flow through.

Okay. Two things that are still external factors, you could say. One was a recent departure at CBER. And we're seeing -- obviously, some of the more new modality levered names and the therapeutics reacted to that yesterday. But just wondering if you had any sort of conversations, what this news means for you and your customers, at least in the new modality. And remind us what's that level of exposure that you have there?

Yes. So just in terms of new modality exposure in 2025, new modalities was about 16% of our revenue, and that's cell therapy where we saw strength last year. Gene therapy, which we do have a headwind in there that we've talked about. But I think outside of that held up relatively well last year. And then we did see some headwinds on the mRNA side of things. So that's that piece of it. The news you referenced, look, we're not in the business of drug development, and it's pretty recent. So I think it's really too soon to say other than I think anything that reduces uncertainty for our is probably a net positive for us.

Got it. And then another one that's obviously quite a few moving targets that we've been -- all of us have been dealing with. But with the conflict ongoing, there is a question of shipping in terms of cost of -- obviously, oil price and inflationary pressures as a result of it. How does that impact shipping of instrumentation, consumables? Maybe just talk to us about that because obviously, you're shipping globally as well.

Yes. So first, from an exposure within -- sales within the region, it's de minimis. And so again, that doesn't really come into a big play. When we are shipping product from Europe that we manufacture there into our customer base in Asia. That's what typically might go through that region. Obviously, we've spent the last several days, I guess -- yes, it's still been days now here. It seems like a long time, but finding routes around that. So you're right, there may be some inflationary pressure on it, but nothing that we feel like is going to be that meaningful that we need to call out. So the team is all over it in terms of meeting the customer delivery commitments and their requests as well as finding safe passage through to the region.

And in terms of just on the 1Q guide, you indicated 1Q revenue should be down only low single digits sequentially versus 4Q, and that implied about a 10% organic growth at the start of the year. Maybe just talk to us in terms of your level of confidence in the strength of the 1Q exit run rate relative to the typical seasonality. And with this conflict in mind, anything that we ought to consider in terms of shipping delays or booking of revenue sometimes as those products go out the door?

Yes. Look, we think we're in a great position in 1Q to then be able to deliver and establish a great step forward to meet our total year guidance. So we tried to indicate some of that on the call for earnings that the strong fourth quarter orders run rate translated to a steady I'll say, backlog, if you will, to execute in 1Q. We're executing that. Again, we're managing some of the puts and takes within the Middle East traffic. But overall, I think everyone should know that we're expecting to start within that framework and put a good foot forward for the year.

Got it. And since you mentioned orders, I mean, maybe can you talk a little bit about the order book? Any sort of recent feedback that you're getting from the field in terms of just sort of, again, orders first and foremost, I mean, in mind for investors, just given the...

Yes. And I guess I'm speaking out of both sides of my mouth because I've referenced orders even though I said we weren't going to be really quantifying that anymore as well as book-to-bill. But -- and again, we'll focus on revenue guidance as a way to indicate that performance. But by all measures, quarter-over-quarter, year-over-year book-to-bill, fourth quarter was a strong quarter for quarters.

Okay. When I look at the cadence this year, first half being weaker versus second half, is that just primarily Sarepta headwind being sort of front loaded? Or is there other considerations in that?

Yes. So I'd look at it, there's kind of 2 dynamics, Puneet. So there's -- we talked about kind of 48% in the first half, 52% in the second. And that's really just more seasonality, right, kind of very typical, we tend to have a stronger second half, particularly from the fourth quarter. So that's very much in line. It's the year-over-year growth rates that is more impacted by the gene therapy. So in other words, that's why we said the second half would be above the midpoint and the first half might be below. That is -- that's where the timing of the gene therapy comes in. That was much more front-end loaded in 2025, so the year-over-year. But on the order of magnitude of dollars, $48 to $52, that's seasonality that is not related to the gene therapy dynamic. Makes sense?

Yes. And I'm going back and forth to a bit, but just on the -- one of the comments, which was interesting to me is on the call, you called out highest probability conversion funnel since 2022 and obviously, strong order momentum there. It seems to imply -- obviously, it implies book-to-bill being at 1, but the question is, how sustainable is that? But maybe just talk to us a little bit about that conversion from -- what's -- is there -- is just normalization? Is there something more to this in terms of how the CDMOs are ordering, the timing and overall, maybe it's pharma. And I'm -- again, looping in another question, which is, is there any early indication of any facility onshoring or anything going on, on that front?

Yes. So overall, again, we've seen this really big -- the strong growth in the funnel. We're getting -- and we've talked about this as well. We're getting a lot more looks at RFPs for our downstream systems, for our fluid management portfolio. So we're continuing to be brought into a lot more opportunities, which again helps to build that funnel. I would say that we're having some onshoring dialogue, but in terms of it converting into opportunities or proposals that's still to come. But again, that overall strength that we're seeing in the funnel isn't only a certain product, it's really across the board. I think, again, now the dynamic that we're all continuing to watch is how -- what's the timing on how those convert, right? So that's where we still might still be waiting for RFP feedback. We're not getting feedback to say that we've lost or they've moved on, but it's more of a kind of wait and see on some of the things. And so that's really, for us, the switch. It's the convert on this big pipeline, but again, what that timing will be.

Okay. Just a related question on the capital equipment. Obviously, capital equipment demand has remained soft in 2025. Analytics placements were holding up better. But maybe just talk to us assumptions that you're embedding in terms of overall capital equipment recovery. And a number of your products are I mean, in a consumable way, they're utilized over a couple of months or a couple of weeks versus purely capital equipment. So maybe just help us define how large is sort of capital equipment business for you? And what does that entail in terms of overall recovery this year?

Yes. So maybe first on capital, right? So go back to 2025, we wound up the year flat on capital equipment, and we think that was a pretty good outcome in the context of the industry, which at least from what we could see, I think peers were down on capital equipment for the full year, right? So as you think about what we're assuming for 2026, Olivier said, hey, we think low double-digit growth for capital equipment in 2026. But I think there's some nuance there, right? And so -- we talked about analytics growing -- that franchise growing 20% plus in 2026. There's a piece of that, that's the SoloVPE PLUS upgrade cycle. So that's an opportunity that we think is still in front of us and will benefit us in 2026. And the other piece would be, we think, growing contribution from the upstream analytics portfolio we bought last year. So analytics, I think, is a big piece of the capital growth in '26. I'd tell you, there's also some other benefit from like we launched a new mixer last year. We talked about initial placements this year. So I think there's probably a little bit of benefit from that. I think outside of that, what we're looking for, for the balance of the capital equipment portfolio is, I would say, flat to kind of modest growth in 2026.

Got it. On the point of SoloVPE, I'm wondering if you can -- that's a unique innovative product. You have a unique position there. There is a broad applicability of such a product in the marketplace in bioprocessing. Maybe just give us a view into what -- how large is the installed base, timing of how the installs and how long could that take overall the adoption and replacement cycle?

Yes. I'd say there's, I think, 2,500 units installed base. I think 1,500 of those are maybe 5 years or older, I think, is the rough number. And so that's really what we'd be going after, right, those older units. And so we upgraded about a low single-digit percentage of those units in 2025. I think the goal is to probably do roughly double that, so call it, mid-single digits upgrading of that installed base in 2026.

I think the other exciting thing about this is it's also kind of refocused us on the broader portfolio to understand where are there other upgrade cycles and opportunities that we have. And so that's going to be a major part of sort of our thinking on new releases and certainly into our long-term strategic planning as well, like how do we make this more of a muscle for us.

Got it. Okay. Then maybe just shifting a bit to the end market. I mean you have CDMOs and biopharma versus emerging biotech. Wondering if you can maybe give us sort of the state of union right now that you're seeing across those 3 types of customer bases.

Yes. I mean I think we saw growth out all of them, at least in the back half of the year. And so I'd tell you, like pharma and CDMO performance were remarkably consistent for most of the year. Q4 is a little bit different because CDMOs were lapping, I think, a 40% plus comp. So a really difficult comp on the CDMO side of things last year, but good growth out of both those customer bases. And I think it speaks to what we talked about last year is just the broad-based strength we saw across our portfolio, end markets, customer base, et cetera. I think as you look at emerging biotech, we saw growth for the last 3 quarters of the year, which is an encouraging development. Obviously, been really good funding trends in 4Q and I think year-to-date on the biotech funding side of things. I think with that said, if you look at the dollar value of those emerging biotech those revenues, we're still below where we were a couple of years ago. And so that's where we don't believe we've really seen the benefit from funding yet. And I think we'd like to see more concrete evidence of that before we say that customer base is completely back. Though to be clear, they still grew the last 3 quarters.

And there's going to be a natural lag in timing, right, between funding and when we might see an ordering converted to sales as well. So I think we're still well within that range. So it's a lot of really great signs and more momentum to come if that funding continues.

And what's the -- historically speaking, what's the -- I'm wondering if there's a time line in which the clinical funding, which was pretty significant in the second half for the clinical stage companies is still continuing? And how long does that take to trickle into equipment?

2 to 3 quarters on average.

For an order and then whether you can then convert it, whether it's in the same quarter or the one after. So you're kind of that 9 to 12 months.

Got it. Okay. Maybe just wanted to touch on China. It's a smaller piece of your revenue, but it's something that Olivier has talked about quite a bit, and you're investing in China. Maybe just give us the -- a little bit about the landscape there because I think after COVID, a number of local firms gained more prominence there, as you go back into it, how do you want to position into China? How do you take the share? And how do you win in those accounts?

Yes. It's an exciting market for us. And again, even though to your point, we've dropped as our total amount of sales. We now have guided and shared that in '26, we'll be back to growth, right? So that's at least that first pivot that we're making. To your point, we've recognized that how we operate and how we'll win in China is going to be very different than maybe what we've done in the past. And that's -- and we've talked very frequently about this opportunity to find local partners in one way. So again, our view isn't okay, we go in greenfield. It's how do we find the right local partners. We're still spending a lot of time betting that, making sure that we've got the right folks to help us both from a local, I'll say, manufacturing and supply chain capability as well as other market access. And so that will continue to be a focus for us. To your point, we've added a lot of new leaders within the Asia Pac region as well as in China specifically. So we're even still getting some of that halo effect overall in the region. We still believe that we're under-indexed in Asia Pac as a total part of our sales percentage than we should be in the rest of the industry. So we'll continue to really put a big priority there. There are additional investments in '26 for Asia Pac. But again, I don't want to make it sound like we're out doubling the infrastructure, the resources. We're being selective and prioritized in that. And again, finding the right way to find partners. But it's much more than a China story as well, right? It's South Korea, it's Japan, it's India, Singapore. Those are the other regions that we'll continue to grow and focus on.

Got it. Yes. That's -- and makes a ton of sense, just given the prominence of bioprocessing...

Yes, absolutely...

Let me get to margins because, I mean, that's been quite a lot of discussions among investors on that. We fielded a lot of those questions as well. But maybe take a minute and tell us how we ought to think about the overall op margin expansion, not only this year, but more longer term. What are the levers you can pull? Obviously, there is a top line has to be strong and drive some of that, but pricing, maybe on productivity, what are some of the things that you can do? I mean, obviously, for fiscal year '26, I think you're implying 125 bps of gross margin, 150 bps of EBIT margin expansion. But wondering...

Yes. So number one, I just want to make it clear where this is a priority for Olivier and I and the team, right, margin expansion. And I'm hopeful that everybody recognizes that we hit that commitment in 2025 with strong margin expansion, right? I know -- from a reported basis, it was lower. But if you take out the impact of M&A, which, again, to us was a longer-term investment on the technology and the product portfolio that we've been building. You take that out and even take out the good guy from FX and on a "organic basis," we were up 240 basis points of margin expansion for EBIT. So again, very much in line to what we're committed to and kind of helping the say-do ratio on this one. To your point, we've guided another 150 bps for 2026. I think you hit a lot of the pieces. I'll just add some color, right? At the gross margin level, there's some volume leverage, but the real volume leverage sits at the EBIT level, right? So we're able to grow that top line and certainly manage our overall costs under that same growth. So you get good volume leverage there. Price, to your point, will always be one of our top profitability increases. Again, low single-digit price, but we all love that because it helps the top line grow and it falls through to the bottom line. So that will continue that play. But at the same time, that price has to more than offset the inflation that we have primarily in our compensation structure, right? Everyone comes in and we might have 3% to 4% higher overall comp. So you got to offset that inflation and you got -- and if there's some overall inflation as well with our suppliers. And so pricing has to be that lever to offset that completely and maybe even deliver some upside. And then to your point, productivity comes in, right? And so the operating team has continued to build this muscle around day-to-day productivity. We call it our RPS system, but then also really thinking smartly and long term about how do we optimize our footprint, how do we optimize our resources. And so that all falls through. So -- and then we'll continue to just have incredible cost discipline and focus. I can tell you within my organization in finance, we're providing a lot more real-time visibility to spending across all the functions. And we're also built out, I'll say, a mindset and mechanisms to know, all right, to prevent us getting over our skis, meaning if we aren't growing at the high end or whatever the rate, how do we dial things back so that we still deliver the margin expansion we can -- and we have the mechanisms around that. So I think the last piece of -- maybe the question is the framework over a longer period of time, right? So it's really those same dynamics every year. We expect that we'll see more volume leverage, I'll say, in kind of '28 and beyond, right? So the next -- this year and maybe into next year, there's, again, still strong volume leverage, but maybe we'll get more of that after we finish or I'll say, get more focused on our Fit for Growth investments in '26 and '27. We've talked a lot about it, but we recognize that for us to be able to scale and grow and be double the size business over the next several years that we need to do things in some way differently than we've done up to kind of life to date, if you will. And so that's infrastructure, that's having the right talent and organization, some of the IT systems, and that's where we're focused on investing over the next couple of years.

So maybe on that point of investments, I mean, maybe if I could take a bit of a leap here, a lot of these investments have to be done early on and the benefits are more longer term. So as you look at the current -- the investments in IT product, you talked about the executive team, Asia expansion, R&D. Maybe just walk us through sort of how are you prioritizing these? And how should we think about the investment sort of ramp? Does it increase into the back half of the year? And then the benefits, how should we think about those benefits coming back to you and layering that in 2027, just timing of those?

I mean, so we shared on the call that we would step up in first quarter on our operating expenses from 4Q and then be kind of flat to mild or modest growth through the year. So I mean that is the timing. We're trying to -- you walk in again with some immediate increases due to primarily compensation increases and some other things that have now hit in first quarter, that's what will hit. And then again, we're managing that step through the rest of the year in terms of how we effectively hire more resources and the timing of that. The -- to your point, those have to yield benefits. I mean I'll say that, again, some things are about preventing things breaking at the scene, right? There's an infrastructure and an execution that is required to deliver at the higher scales. And so to me, the benefits come in our ability to gain volume leverage. But it's not a, oh, I add this $1 and I get $2 a year later. It's -- I add that $1 and it's now created a capacity for me to grow and grow, right? And I think, again, the good news is that the things we're doing now have a lot of legs and like runway in terms of the ability to scale beyond that. It's not, oh, every year, I need to do that again, right? And so that's where these investments come into play. So I think, again, we'll start to see some of that in '27. But then even beyond that, I think we'll get more of that volume leverage. And so again, still maintaining this target of being kind of -- we said 30% EBITDA, call it, 25% EBIT sort of margin rate by the 2030 time frame. But again, it's not a linear path.

Yes. But despite the flat sequential that you talked about in terms of the modest -- I mean, Q-over-Q through the year in OpEx, these are commitments that you are still -- I mean, again, this is an investment year, so to speak, right? Benefits are still...

Absolutely. Absolutely. But again, an investment year that still delivers at the midpoint of 150 basis points of margin expansion, right? So this isn't one or the other. What we're doing is both at the same time.

Got it. Okay. Another question that we continue to get us with respect to ATF, it's been a very successful product for you, getting now spec-ed into commercial therapies. Maybe just wondering if there's any updates on the competitive front? And maybe just give us sort of how is the funnel looking there, the level of interest?

Look, we are the leader in perfusion technology, right? And we have been for years, a decade or more. We have a ton of experience. And when you look -- peel back the curtains on all the expertise we've got in resources. We have been competing with TFF as an alternative that entire time, right? And nothing that's been kind of recently discussed would suggest, it's not another version of a TFF sort of solution. By the way, we have our own TFF solution. So frankly, we're agnostic if our -- the customers that we're supporting are a TFF house, then we'll provide a solution for them as well. And in fact, we find that in most cases, we win those opportunities as well. So I think the other good, I'll say, point on this is, in addition to that leadership we have, we continue to invest. So this isn't a, oh, we're going to stand on our laurels in terms of, hey, we've been able to beat competition. We're always going to be investing for that next gen and staying steps ahead. So we feel great about the opportunity base. As you know, we've talked -- it's not just a mAb story. It's a new modality as well, cell therapy wins. So it's such a core important growth factor for us within the organization. So...

Absolutely. Maybe just last one in the last minute that we have here. In capital deployment, you had 908 product and then REBEL that you acquired and then Tantti. I mean, maybe just give us a update any -- on the integration front, but more importantly, how should we think about areas where you -- there is a better strategic fit to the current portfolio because portfolio is something Tony used to talk about. Obviously, Olivier is focused on expansion of the portfolio. How should we think about the M&A?

Yes. So first, just on the integrations, they're going incredibly well. I mean, again, you can see the new products that we're launching on the resin side that embed the Tantti technology. We've talked a lot about how do we integrate the 908 portfolio into some of our upstream applications. And so again, still progressing in that way and a lot of integration activities behind the scenes as well, all going well. We continue to focus on innovative, differentiated technologies. We might fill some of the workflow gaps that we have, whether it's bioreactor, cell culture media, biofiltration, maybe a third place. And then we're also going to be looking at other ways that we can provide solutions on customers as they look at their new modality pipeline as well. And again, with a priority on accretive top line, accretive bottom line, and you'd love to see EPS kind of be immediately accretive or soon thereafter. And we also now have been playing -- not playing, sorry, we've been exploring and using this opportunity on minority investments as well so that we can stay connected. So we did the Novasign partnership. Now we stay connected with the technology, but without some of the immediate dilution. So...

We're excited. It's -- I think we've got a great year ahead of us and really strong pipeline and activity and look forward to continue the dialogue.

All right. Great. Thanks.

Thanks, everyone.