Repligen Corp . (NASDAQ:RGEN) reported third-quarter earnings and updated its full-year guidance during its 2023 earnings call. Despite facing industry challenges, the company is showing signs of recovery with an increased demand for its products and a stronger order book. The company's focus is on optimizing resources, controlling costs, and launching new products. Repligen reported $141 million in revenue for Q3, with base business revenue down 18% YoY. However, it expects sequential growth in base business revenues in the first half of 2024.
Key takeaways from the call:
- Repligen's full-year revenue is expected to be in the range of $635 million to $645 million, reflecting a 9% decline at the midpoint for its base business.
- The company anticipates high single-digit growth in its analytics business for the year, falling short of its 15% growth target for 2023.
- Repligen is implementing restructuring plans, including workforce reduction and consolidation of manufacturing operations, to improve margins.
- The company expects improvement in gross margins in 2024 compared to the second half of 2023.
- Repligen sees potential in the gene therapy market, particularly in late-stage and commercial wins.
- The company expects a recovery in the China market in 2024, despite the challenging macro environment.
Despite the decrease in revenue and margins in Q3 due to macro headwinds in the CDMO and China sectors, Repligen sees signs of recovery. Orders have been picking up at pharma accounts, and traction continues in gene therapy accounts. To optimize spending and improve margins, the company is implementing restructuring plans, including workforce reduction, consolidation of manufacturing operations, and discontinuing the sale of certain product SKUs.
During the call, Tony Hunt, a representative from the company, discussed the growth outlook for 2024. He expressed a high degree of confidence that the first half of the year would see improvement compared to the second half of 2023. Despite lower activity among smaller players in the gene therapy market, Hunt noted that gene therapy customers have been a source of strength for the company. He also mentioned that resin availability for chromatography has been improving throughout the year, and while it may still be a constraint in early 2024, it is expected to be less of an issue overall.
Repligen also discussed the growth potential of gene therapy. As gene therapy progresses from Phase 1 to Phase 3 and commercialization, the company expects its business to follow suit. The top 25 accounts in the gene therapy sector are scaling up and spending more, according to the company. Despite the challenging macro environment in China, Repligen expects a recovery in 2024.
Jason Garland, during the earnings call, stated that there was a continuous increase in orders each month from July to September, with September being particularly strong. He mentioned that China is an important region for long-term growth, with orders remaining light this year but expected to improve in 2024.
Tony Hunt acknowledged that this year has been abnormal, making it difficult to draw conclusions on order patterns due to inventory build, destocking, conservatism on capital spend, and delayed projects. However, he noted that the company has seen improvements in its funnel, with more opportunities moving through in the pharma, CDMO, and integrators sectors. He concluded the call by expressing optimism for improvements in 2024.
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