This Biotech Leader Can’t Stop Growing

Repligen is doing a marvelous job exploiting its niche in the biotech ecosystem.

The growth opportunity from the coronavirus pandemic has proven less than durable for many technology stocks such as Teladoc  (TDOC) – Get Teladoc Health Inc. Report and Netflix  (NFLX) – Get Netflix Inc. Report. The same cannot be said for under-the-radar biotech leader Repligen  (RGEN) – Get Repligen Corporation Report.

The $13 billion company develops, manufactures, and sells equipment required to manufacture biologic drugs including gene therapies, cell therapies, and antibodies. It’s a pretty sweet niche. Repligen rode the pandemic to record revenues as customers gobbled up supplies and accelerated research timelines. Pandemic-related sales accounted for 28% of full-year 2021 revenue.

Cautious investors may be waiting for the party to stop and the nasty hangover to begin. However, that hasn’t happened – not yet. Pandemic-related revenue did slow in Q2 2022, but the rest of business more than made up the difference.

By the Numbers

Repligen delivered record quarterly revenue of $207.6 million in Q2 2022. That marked 27% growth compared to the year-ago period. It would’ve been 5% higher if not for the strength of the U.S. dollar, although currency headwinds were far from a worst-case scenario.

The bioprocess technology leader generated 80% of revenue from the core business, which included filters and purification products. Pandemic-related revenue fell to just 18% of total revenue. That’s down markedly from the 28% average in all of 2021, but still represents a significant chunk of business.

It’s important to point out Repligen is not only delivering impressive revenue growth, but at impressive margins to boot. Gross margin climbed to 58.5% during Q2, while operating margin was an eye-popping 30.4%. That means 30% of revenue trickled down the income statement after paying all non-financial expenses. Truly remarkable.

Can’t Stop, Won’t Stop on the Road to Long-Term Riches

There were few blemishes during the most recent three-month period. Repligen generated first-half revenue of $414 million, enjoyed strong order demand from customers, and expects to open a new manufacturing facility in the coming months. That gave management the confidence it needed to raise full-year 2022 revenue guidance, although that’s become a recurring event for investors in recent years.

Repligen increased guidance for every metric it reports, including:

Full-year 2022 revenue of $790 million to $810 million, up from the prior range of $770 million to $800 million.Adjusted operating income of $234 million to $239 million, up from the prior range of $225 million to $231 million.Adjusted earnings per share (EPS) of $3.13 to $3.20, up from the prior range of $3.07 to $3.15.

Although management’s updated full-year 2022 guidance calls for “slower projected covid-related revenue,” that doesn’t appear to be slowing down the overall business. That’s a sign Repligen’s acquisitions from 2020 and 2021 are more than offsetting shrinking pandemic-related revenue. 

That said, I do expect revenue to level off for a brief period in the future as pandemic projects roll off the books. But for now I’m a happy shareholder benefitting from another quarter of stellar execution. 

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