Earnings Call: Q4 2020

Mar 2, 2021

Ladies and gentlemen, thank you for standing by, and welcome to Maravai Life Sciences Q4 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host, Senior Director, Investor Relations, Deborah Hart. Ma'am, you may begin. Thank you, Latif. Good afternoon, everyone. Thanks for joining us on our first quarterly earnings call as a public company. On today's call, we will cover our financial results and business highlights for Maravai's Q4 and full year 2020 and will provide financial guidance for 2021. Our CEO, Carl Hull, will first provide a business update and our CFO, Kevin Herdie, We'll review our financial results and guidance. Our President, Eric Tardiff is joining us along with Carl and Kevin to answer questions following the prepared remarks. 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 these risk factors is included in the press release we issued earlier today as well as those that are more fully described in our filings with the SEC. Today's comments reflect our current views, which could change as a result of new information, future events or other factors, and the company does not obligate or commit itself to update these forward looking statements, except as required by law. During this call, we will be using non GAAP measurements of certain results and in providing guidance. Reconciliations of GAAP to non GAAP financial measures are included in the press release that we issued this afternoon, which is posted to the Maravai website and also available on the SEC website. The metrics that we will be discussing in today's call include net income, Adjusted EBITDA, income tax expense and adjusted earnings per share. These adjusted financial measures should not be viewed as an alternative to GAAP measures, but are intended to better enable investors to benchmark our current results against historical performance and the performance of our peers. Now I'll turn the call over to Carl. Thank you, Deb, and good afternoon, everyone. I'd like to take a moment to welcome our newest group of investors to Maruvai. As Deb said, this is our first earnings announcement as a public company, and we are very pleased to have you with us. In addition, I would like to take this opportunity to extend my personal thanks to each and every member of the Maravai team who together have positioned us to make meaningful contributions to the battle against the COVID-nineteen pandemic. Without them and their sustained efforts, we would not be speaking with you here today. By way of introduction, for those of you new to Maravai, we provide reagents and services focused on high growth markets in cell and gene therapies, Vaccines and Biologic Drug Manufacturing. As a supplier of solutions to other life sciences companies, We are positioned nicely to benefit from multiple tailwinds that are affecting the sector from early discovery through clinical trials all the way to the commercialization of healthcare products. Our customers include the top 20 global biopharmaceutical companies as well as emerging biopharma and life science research companies, leading academic research institutions and molecular diagnostic companies. All of this resulted in our exceptional performance in 2020 with full year revenues of $284,100,000 representing growth of 98.5 percent over 2019. Kevin will take you through the details of our financial performance in just a moment. Prior to that, let me explain a bit more about each of our businesses and their current focus. Our TriLink Biotechnology subsidiary is a leader in messenger RNA synthesis, supporting a large number of vaccine and therapeutic programs, Most notably, with our co transcriptional capping technology, CleanCap, which has become critical to the successful scale up of manufacturing capacity for mRNA vaccines and therapeutics, including several COVID-nineteen mRNA vaccines. CleanCAP is a novel chemical capping analog that optimizes the cap structure of an mRNA molecule and provides for the improved stability of and protein expression by the mRNA itself. The many advantages of CleanCap include high capping efficiencies of greater than 94%, higher yields of usable messenger RNA, Simplified manufacturing processes as well as reductions in the unwanted activation of the body's innate immune system. CleanCap enables our customers to produce large quantities of mRNA drug substance reliably and more quickly. Clean Cap is provided to customers in 1 of 3 ways. 1st, as a standalone chemical component that is purchased as either a research grade or customer specified GMP grade product. 2nd, it can be incorporated into an mRNA construct as a custom service offered by Maravod or as a catalog item. Finally, CleanCap can also be incorporated into a GMP grade Custom mRNA solution provided its scale to our biopharma and vaccine customers. As you can see from the results we released today, 2020 was a year of exceptional growth, profitability and transformation from Ravi. While we are very pleased by these results, it is not lost on us that much of that performance has been driven by the work we're doing to help address a global health crisis that has had such a devastating impact upon so many. We are extremely proud of our contributions to the fight against the pandemic and of our ability to scale our operations to meet the explosive demand we are seeing for our products. You can be assured that we'll continue to work diligently to support all of these public health efforts in the future. We and others in the field believe that the intense worldwide efforts to develop mRNA vaccines for the COVID-nineteen pandemic have helped to accelerate the development of mRNA applications of all stripes and by several years. The rapid success of these pandemic mRNA programs has validated the therapeutic modality that is built around messenger RNA, Not only for use in COVID-nineteen vaccines and any potential boosters that may be needed to address variants of the virus, but also as a platform technology for seasonal flu and other infectious disease vaccines, along with cell and gene therapeutics. COVID-nineteen vaccination programs remain a significant immediate opportunity for Maravai and Cleancap, And we expect demand to continue to increase during 2021 as vaccine manufacturers scale production, As additional mRNA vaccine programs receive regulatory authorization for use and as modified vaccines are developed to address multiple new strains of the virus over time. While the definitive clinical research is still very much underway, It's becoming increasingly likely that a periodic booster shot to counter threats from emerging strains of SARS CoV-two or from waning natural immunity will be an important part of the public health toolbox for some time to come. As a vaccine platform technology, mRNA has demonstrated its unique ability to be rapidly and accurately modified as the virus evolves. We expect to be an important part of these new and modified programs being developed by our existing CleanCap customers. Multiple recent industry developments bode well for the accelerating momentum we are already seeing within our new claic acid production business. The rapid expansion of manufacturing capacity for COVID-nineteen vaccines has involved multiple new large scale commercial partnerships, some of which would have been quite hard to imagine pre pandemic. Examples include, Novartis Sanofi have been contracted by Pfizer and BioNTech to support their recently revised 2021 production goal of 2,000,000,000 vaccine doses, up from a previous target of 1,300,000,000 doses. CureVac and Bayer have joined forces to accelerate the production and global distribution of the 1st generation CureVac COVID-nineteen vaccine team with expectations to begin shipments by the end of 2021. CureVac and GlaxoSmithKline announced The parallel effort to expand the production of that first generation vaccine further by over 100,000,000 doses during 2021, while beginning the immediate joint development of a multivalent second generation vaccine intended to address And finally, we have this morning's announcement about Merck supporting Johnson and Johnson with their vaccine program. Pfizer's Project Lightspeed is reducing the manufacturing time needed to produce a COVID-nineteen vaccine batch from 110 days to an average of just 60 days, allowing for an increase in weekly U. S. Production from 5,000,000 to 10,000,000 doses in March within their existing facilities. CureVac's European regulatory review is now progressing rapidly. The EMA just initiated a rolling review of the vaccine candidate. The rolling review will assess the vaccine's efficacy and immunogenicity as the data become available, speeding the final decision process for an eventual marketing authorization. Various recent comments from industry leaders, including the CEOs of Pfizer and Johnson and Johnson have highlighted the potential need for COVID vaccine boosters, similar to seasonal flu shots for the foreseeable future. And our partners at Pfizer and BioNTech are taking the necessary steps and engaging in the appropriate conversations with regulators To be in a position to develop and seek authorization for an updated mRNA vaccine or booster Once a strain that significantly reduces the protection provided by the existing vaccines is identified. The FDA just last week issued guidance concerning the much more limited clinical testing that they will require for such modifications to the existing COVID-nineteen vaccines. Moreover, the significant investments made in vaccine development have paved the way for mRNA's use in other areas as we are seeing a resumption of activity in a number of mRNA therapeutic programs that were paused at various points last year. These programs include cell and gene therapies addressing other high value unmet clinical needs such as immuno oncology vaccines, enzyme replacement therapies, immunotherapy or CAR T treatments and recently emerging gene editing approaches. We are well positioned to serve our biopharmaceutical customers throughout the explosively growing mRNA field and across a wide range of clinical programs for multiple different diseases. In addition to COVID vaccines and the therapeutic GMP service programs that utilize CleanCap today, We have also worked with over 400 customers who have used our CleanCap technology in support of their own research and preclinical work. Our nucleic acid production business also includes Glenn Research, which provides a wide range of reagents used in the synthesis of DNA and RNA. Glenn supplies our reagents to researchers investigating diverse genetic diseases and disorders, Companies developing new genetic therapies and molecular diagnostics and life science OEM partners to incorporate Glenn Research offerings into their products. Our pharmaceutical customers are increasingly relying on outside parties provide important inputs and services for their clinical research and manufacturing programs, a development driving growth for those suppliers with unique capabilities and the ability to manufacture at an appropriate scale and level of quality to support these customer programs. We believe that our rare combination of scientific capabilities, proprietary technology and the requisite investment in manufacturing and quality systems positions us well for continued growth. To ensure our ability to stay ahead of demand and be a trusted partner to our customers, We made significant investments in 2019 2020 to expand our nucleic acid manufacturing capacity, Expanding initially to 5 dedicated manufacturing suites to produce materials under customer specified GMP conditions. In addition, our 3 new CleanCap manufacturing suites and 3 new plasmid DNA manufacturing suites are now up and operational as of the Q1 of 2021, allowing us to supply our customers with much needed CleanCap reagents and DNA plasmid for their own mRNA, gene editing or cell therapy programs. Turning to biologic safety testing. Cygnus Technologies is a global leader in providing critical assays for detecting impurities during biotherapeutic process development and commercial manufacturing. This technology is used to ensure the safety of the biologics manufacturing process and the drug products themselves. We are known for our quality, consistency and for the broad menu of kits we have available. We saw strong demand for all categories of these assays, especially for our host cell protein ELISA kits. Our HCP antibodies are proprietary and therefore can only be supplied by us. We believe that the proprietary nature of our know how and the long standing quality reputation of our products has solidified our long term Customer relationships here. Our Mach V acquisition in early 2020 is now fully integrated as part of the Biologic Safety Testing segment, and we expect that it will contribute to growth beginning in the 2022 time frame. Turning to protein detection. Our Vector Laboratories brand provides research products for labeling and detecting proteins in cell and tissue samples. Our protein detection assays have been recognized for their performance for over 40 years, and we continue to innovate as we see a large and growing need for the accurate characterization of protein expression patterns in tissue samples during early research. While our protein detection business was negatively impacted last year by COVID related lab closures, We expect to return to 2019 revenue levels during 2021 as scientists and academics continue to return to their laboratories full time. Finally, I'd like to comment briefly on the M and A landscape. As you know, we built our business by acquiring established and emerging companies With strong scientific foundations in our target markets and then by investing in their systems, Processes and people in order to accelerate their growth and expand the application for their technologies. Going forward, we will continue to seek a balance between driving substantial organic growth and opportunistic acquisitions that meet our stringent financial and operational requirements. Let me now ask Kevin to cover our 4th quarter and Thank you, Carl, and good afternoon, everyone. First, I'd like to echo Carl's remarks and thank all of our employees and business partners for their tireless commitment and efforts over the last year. It's through these efforts that we have become the strong company we are today. Now, I will review our financial results for the Q4 full year of 2020 and provide our financial guidance for the full year of 2021. As you have seen in our press release this afternoon, we delivered strong financial performance for both the Q4 and full year of 2020. Our Q4 revenues of $98,400,000 represent 173.5% For the full year of 2020, we reported record revenue of $284,100,000 This year over year increase of $141,000,000 represents 98.5 percent annual revenue growth. Operationally, we continue to prioritize key areas of investment in the company. We made important capital investments in our San Diego nucleic acid production manufacturing site with a significant portion of our spend dedicated to increasing overall production capacity, quality systems and automation. We have also continued to invest meaningfully in our infrastructure to support long term growth through investments in further enhancing our IT systems and security, our quality systems and processes, our environmental health and safety programs and our global supply chain efforts. Now to provide more insights into our overall financial performance. As Carl mentioned earlier and as shown in our press release, our nucleic acid production business fueled the most significant portion of the revenue growth for the Q4 the year. Our nucleic acid production segment represented 79% of the company's total revenue in the 4th quarter and 73% for the full year compared to 51% for the full year of 2019. Clean Cap revenue to Support only our COVID-nineteen vaccine customers was 51,400,000 in the Q4 of 2020 and was $99,300,000 for the full year of 2020, showing the accelerated demand we saw in the second half of the year. Our Biologics Safety Testing business contributed 14% of the company's revenue in Q4 and 19% for the full year. This business grew by 21.8% in the quarter and 23.6% in the year, driven by the ongoing market growth of biologic drug development programs and the high quality and breadth of our host cell protein ELISA kits. Our protein detection business accounted for 7% of revenue for the Q4 and 8% for the full year of 2020. Now moving on to our statement of operations. Our GAAP based net income before the amount attributable to non controlling interests was $14,500,000 for the Q4 of 2020 and was $78,800,000 for the full year of 2020. Adjusted EBITDA, a non GAAP measure, was $64,400,000 for Q4 $169,200,000 for the full year of 2020 compared to $13,900,000 for Q4 2019 $62,000,000 for the prior year. This is a 363% increase for the quarter and 173% increase year over year. This overall full year increase in adjusted EBITDA of $107,000,000 was primarily driven by overall sales volume leverage and margin improvements from our nucleic acid production business. Our cash and cash equivalents, which are both GAAP metrics, totaled $236,000,000 at December 31, 2020. With a year end cash balance of $236,000,000 $550,000,000 in long term debt and our trailing 12 month adjusted EBITDA of 169,000,000 We exit the year with a 3.3x gross debt to adjusted EBITDA ratio and 1.9x net debt to adjusted EBITDA ratio. We continue to have a strong balance sheet and cash flows. And these factors, along with the $180,000,000 available on our undrawn credit revolver, combined with the growth that we see for 2021 that I'll talk to next, continues to provide us with the strategic flexibility to make investments to fuel organic growth, while also actively evaluating M and A opportunities. Now moving to our 2021 guidance. Because of the restructuring of the company associated with the November IPO and the Upsea structure that was put in place, we will not be referring back to or attempting to reconcile historical GAAP EPS or share count information as it is not consistent with our current structure moving forward. Today, we are setting our 2021 full year revenue guidance at $580,000,000 to $630,000,000 reflecting growth in the range of 104% to 122%. Included in that range is our estimate for 2021 CleanCap revenues directly attributable to COVID-nineteen vaccine customers that we are estimating at $370,000,000 to $400,000,000 Because of the continually evolving demand for CleanCap As well as the inherent choppiness in supporting our gene and cell therapy customers through their multiple manufacturing cycles, we will not be providing individual quarterly breakouts of revenues this stage. However, we expect Q1 2021 total revenues to be up sequentially in the range of 30% to 35% over our reported Q4 2020 total revenues. For background on how we establish revenue guidance, Our largest customers are generally under master supply agreements in which they provide us with rolling forecast out for several quarters that are further supported by binding POs that may go out for several months. On top of that, we have a forecasted funnel for our GMP suites, which are used to mainly support builds for our customers' nucleic acid therapeutic programs. Based on these factors, our 2021 revenue guidance is based on a good degree of forward visibility. Based on those revenue expectations, We expect our adjusted EBITDA, a non GAAP measure, to be in the range of $350,000,000 to 390,000,000 which at the midpoint of that range represents growth of 119% and an implied adjusted EBITDA margin percentage of 61% when applied to the midpoint of our 2021 revenue range. Adjusted fully diluted EPS and non GAAP measure is expected to be in the range of $0.80 to $0.90 per fully diluted and fully converted share. Adjusted fully diluted EPS is based on the assumption that all Class B shares are converted to Class A shares, which results in a forecasted fully diluted share count of approximately 260,000,000 shares the full year of 2021. The net income included in the adjusted fully diluted EPS has been adjusted to eliminate any net income or loss attributable to non controlling interests as a result of the assumed full conversion of Class B shares for Class A shares. Additionally, our adjusted fully diluted EPS, including certain adjustments that do not reflect our core operations, are based on an adjusted effective tax rate range of 24% to 26%. Now as it relates to certain adjustments to get to our non GAAP adjusted EBITDA range, we see the following items in 2021: Interest expense between $30,000,000 $35,000,000 depreciation and amortization also between $30,000,000 35,000,000 and adjusted tax rate of 24% to 26%. And lastly, we expect equity based compensation, which we show as a reconciling item from GAAP to non GAAP adjusted EBITDA to be $10,000,000 to $12,000,000 in 2021. I would like to note that our Q4 2020 results had approximately $21,500,000 and equity based compensation tied primarily to the vesting of certain performance based units within the pre IPO LLC structure that was above the normal run rate for this non cash expense line item. For 2021, we expect to invest an estimated 20,000,000 $25,000,000 for capital expenditures, including approximately $5,000,000 to complete the last planned phase of our San Diego facility expansion. As you can see, we've successfully scaled the organization in the midst of tremendous growth. We delivered a record year of performance in 2020, including making substantial investments in the company to further support our continued success. Our 2021 guidance is a reflection of these investments, our view of continued strong growth and the overall strength of our business model. I'll now turn it back to Carl for some final remarks. Thanks very much, Kevin. Before we wrap up and turn to questions, I'd like to provide some very high level perspective on 2022 and beyond. While we aren't ready to provide guidance for 2022 yet, we are seeing customers already booking production capacity for the first half of that year. As Kevin just mentioned, we have a direct line of sight into the book of clean cap demand for 2021, which continues to grow. And our 2022 outlook is starting to build nicely with additional mRNA vaccines coming to market And the expansion of our strong existing partnerships with industry leaders in mRNA therapeutics. It is our belief that COVID-nineteen vaccinations will continue to be needed for years to come in order to address new strains of the virus that emerge as selective evolutionary pressure is created by partially This suggests that we should expect COVID-nineteen to become either an endemic disease or similar to seasonal influenza requiring multipronged and ongoing public health interventions. We expect that mRNA vaccines will continue to be very relevant, if not essential, to those interventions. Unfortunately, the science is now telling us that our initial high hopes of this being a one and done vaccination effort are unlikely to be realized anytime soon. We have all learned a lot about viruses, Infectious diseases, critical care, PPE, diagnostics and vaccines in the past 14 months. It's time now to apply that knowledge to comprehensive public health programs that aim to successfully eliminate I'd now like to turn the call back over to Latif to open the line for your questions. Thanks. Thank you, sir. Our first question comes from the line of Tayah Salam of Morgan Stanley. Your question please. Hi, guys. Good evening and congrats on the solid performance out of the gate here. So one quick question for you, Carl. Your updated 'twenty one guide seems to suggest an incremental sort of 650,000,000 doses or so versus the 750,000,000 that at So we had in our model that comes to about 1,400,000,000 doses for 'twenty one. First of all, is that in the right zip code? And if so, how should we juxtapose that versus the comments you made on BioNTech's goal of 2,000,000,000 doses for 'twenty one as well as potentially some upside from CureVac towards year end? Yes. Well, thanks for the question, Tejas. And I think what we're dealing with here is a question of apples and oranges. I know that the models are out there that look at consumption By unit of vaccine and what that dose equilibrates to in terms of revenue for us, we do it from the opposite direction. We are actually looking at The orders that we have on the books today from our customers and the projections that they have given us for their future demands. So to the degree that there is a difference between the output of the model and that order book, it's really a function both of timing And calculations and other things like that. So I'll never be able to reconcile those adequately for you, but I can just tell you that we're guiding to what our customers Tell us they're going to buy for this. Got it. Very helpful, Kyle. And then in terms of just The ongoing steady state consumption of the vaccine here, it's still early days and there's your comments around the likelihood of So, Sean, and the virus becoming endemic and so on, how should we think about sort of a normalized run rate In sort of 'twenty two and beyond, I mean, the question that we've been getting obviously is around now you've had this nice pull forward in 'twenty one, but what does it mean For an ongoing run rate for Clean Cap in 'twenty two, 'twenty three and 'twenty four? Yes. Very good question. It's going to depend on evolution, Right. As the virus evolves to the degree that it evolves in a way that escapes the existing vaccine protections that are provided, Then you're going to have to modify it. That could be something that happens once in a year. It could be something that happens once every 3 years, you just don't know. But that's going to be the catalyst for changes in the vaccine and thus the frequency Of the reinoculation programs. I think the other issue is this whole question of waning immunity. And we really don't know yet How durable the immune response is from a completed 2 dose vaccine or even a single dose vaccine. It's thought to be good, but we don't have a lot of experience under our belts. So to the degree that that happens and the absence Of the antibodies is indicative of perhaps ineffective immune response that will also drive the frequency Of repeat inoculations. So my honest answer to you is, I don't know, but we're thinking and our customers seem to be signaling That you're going to see some reinoculation every 12 to 18 months. Got it. Very helpful. And then one quick One on Cleancap sort of production capacity, I mean how future approved are you? I know you opened up the 3 suites here. But beyond that, I mean, is there anything incremental you need to do to deal with sort of this unprecedented demand situation? Kevin, would you like to take a shot at that? Yes, sure. I'm happy to. Certainly, the expansion we made here in San Diego Included a lot of automation, a large scale waste management, numerous manufacturing efficiencies. We continue to see improvements in that yield, better utilization, more efficiencies And certainly, Cleancap orders at large scale. So as we look at this today through our current lens of pricing and mix, we actually See a little higher capacity than we had previously projected, now comfortable that we can support over $1,000,000,000 in revenue annually for our nucleic acid production out of the San Diego facility. Perfect. Got it. And then Carl, any early color you can share on the plasmid DNA launch? I Obviously, since you guys have invested in that capacity, still have some of the competitors, Thermo had some scale up there, Capitalant acquired, Delphi, etcetera. So it sounds like it's the demand supply disequilibrium continues here. Any early feedback on sort of customer traction? Yes. This equilibrium is definitely still there and perhaps even Growing based on the number of programs that are out there. Our customer reaction has been extremely positive to the capability to produce the Plasmids for an integrated program, we have a couple of different and very exciting programs that we're In sort of the mid stages of negotiation over to actually provide the soup to nuts capabilities that we had anticipated in the first place. So I'd say it's all tracking as expected or better. Got it. Very helpful. Thanks so much for the time here this evening, and congrats on the quarter, guys. Thank you. Thank you. Our next question comes from Matt Sykes of Goldman Sachs. Your line is open. Great. Thank you. Congrats on the quarter. And thanks for taking my question. My first question was just Regarding the non COVID related mRNA therapy and vaccine work, you guys talked a little bit about during the IPO about other programs you are involved with. I'm Curious in terms of the number of those programs or the growth that you've seen there, how can we think about that non COVID related mRNA therapy and vaccine work that you guys are doing? Sure. Look, I think the pipeline there is growing and we're seeing a resumption of the programs that have been delayed due to the pandemic at various So we're working with our customers to support the need for additional infectious disease, but non COVID Vaccines, we expect to see those programs accelerate here benefiting from the mRNA COVID work that's being done today. I believe Pfizer mentioned recently in their conference call that they will use an mRNA platform for their seasonal flu vaccine program. Other examples include non COVID therapeutic products. Many of these are for rare conditions or orphan diseases That can incorporate CleanCap. Examples of the disease states include OTC deficiency, glycogen storage disorders, Acute lymphatic, leukemia, etcetera. So there's a bunch of those applications. I can't really comment much further on those partnerships Unless the sponsors have disclosed publicly their own detailed production methods, that generally doesn't happen in this hypercompetitive field, but we have multiple of those programs continuing, and we see a number of them in the clinic already with the vast majority of those Being Phase 1. Great. Thanks for that. That's very helpful. And just on when you look at the 'twenty one guide, you had mentioned that you're Baking in the assumptions from a number of customers on the COVID vaccine side, I'm just wondering in terms of CureVac, how we should expect that to ramp up? Should it be sort of Back half loaded or is there some manufacturing taking place now that requires some purchase orders, increase in growth in purchase orders? Let me think about how best to answer that. That's a little bit tough because probably getting into close Details about the relationship. I would just say we have an excellent relationship with our partners at CureVac. We've been working with them for a number of years Prior to the onset of COVID-nineteen and we have pretty good visibility to their program. They're obviously from their public announcements accelerating those efforts. So I think it is Totally fair for you to expect to see impact from CureVac's efforts in the first half of this year. And if it scales anything like the relationship with Pfizer and BioNTech, then you will see that continue to accelerate in the back half of the year and beyond. Thanks for that. And just my last question on Biologic Safety. You guys have a pretty good competitive advantage in terms of The breadth of your generic test kit and far above what some of your competitors have. I'm just wondering, have the competitive dynamics changed at all in that over the past few quarters or do you still find yourself in a pretty good position with that generic test kit? No, they haven't changed one iota. We're continuing to see Strong growth in that business. And as you can imagine, a lot of the new therapeutic programs that are targeting COVID-nineteen themselves are now spooling up and utilizing our product based on legacy relationships. So it seems to be in a good spot. Great. Thanks very much. Appreciate it. Thank you, Matt. Thank you. Our next question comes from Brandon Couillard of Jefferies. Your line is open. Hey, thanks. Good afternoon. Hi, Brandon. Carl or Kevin, as we think about the 2021 outlook, Can you help us with the phasing in terms of the first half versus the second half in terms of dollars? Should we assume a fairly linear progression through the year? And what would be the most important upside or downside variables that we should consider that might steer you toward the low or high end of the revenue outlook? Yes. I think from as we said in our prepared remarks, I think we're looking at the Q1 up 30% to 35% Sequentially from Q4 on total revenues. I think the business can get a little choppy as we start to go out. So I think we're going to keep our quarterly gating at that level for now. Certainly as it relates to Clean Cap, we had a solid Q4, but it will be moving up Meaningfully in the Q1, but we don't see the Q1 of 2021 being the largest quarter for Clean Cap at this stage either. So you have to take that into account when looking at the range that we're giving for the Clean Cap for COVID vaccine customers that we put in our prepared remarks. And that's kind of where we're going to stop Got you. And then on the plasma DNA for understanding it's So very early into the launch, but I'm curious, how will you measure success here near term? And given the huge Supply demand imbalance, are you already thinking about adding additional capacity here? And could you speak to kind of the revenue potential with the 3 suites that you just recently brought online? Thanks. Yes. Well, look, you know we're pretty conservative as we project. So we have not baked And a lot of plasmid DNA only revenues into our 2021 numbers. So I think it's fair to think of that as an area of potential upside As time develops, but I'm going to measure success by capacity utilization. How many jobs do I have and how occupied Are the suites, that's how we'll look at it. And I think realistically, given the initial indications of interest, we are spooling up jobs And performing jobs as we speak, and that's the measure of success. So it just Tells us that all the things that everyone has heard about shortages of plasma continue to be true. And when you see investments like Catalent Making and Delphi just confirms that further. Thank you. Our next question comes from Matt Larew of William Blair. Please go ahead. Hey, Matt. Hi. Good afternoon, guys. Carl wanted to follow-up on your commentary around M and A. As you think about how rapidly this market is Progressing and just how much bioprocessing demand is accelerating. How do you balance the idea of building a capability organically like plasmid It maybe leverages your existing infrastructure, but might take some time to scale the maturity versus adding something a little more established Really in the way you've built this business with TriLink, Cygnus, Vector Labs, etcetera. Yes, that's a great question. Eric, do you want to take a shot at that? Yes, sure. I'd be happy to. So I think, as we've told you and as we've discussed on the road in the past, I think our activities in M and A have a lot to do with Shoring up our strategic capabilities and really solidifying our position primarily in mRNA rather and then followed by biologics and then And so we look very much at our capabilities and what we need to fill that pipeline and ultimately be able to provide a complete service And product offering to our customers. We obviously do the build versus buy analysis and we absolutely factor in time to market. But in addition to that analysis, it really is about finding those differentiated capabilities out in the market that frankly we couldn't build ourselves. When it comes to just pure capacity, we certainly look at acquiring capacity and we look at building capacity that's much more of a build versus buy. The majority of our M and A activity is centered on strategic moves that shore up our capabilities. Yes, that makes sense. And then obviously we spent a lot of time talking about the ramp up in infrastructure and manufacturing capacity. But just curious as you're thinking of 2021, how are you thinking about ramping up the spend in terms of customer support, customer engagement, Building out a team at this point, obviously, all of this increased demand that you're seeing. And then maybe Kevin, to the extent you can Help put any numbers around that, that might be helpful too. Yes. I'll just offer a first comment and then turn it over to Kevin. We certainly See the need to stay in close, close touch with our customers throughout this period of hyper expansion. Their needs are changing day to day. Their forecasts are changing day to day, and we have to be on top of that so that we can be that trusted partner That they need right now. We don't want to be the squeaky wheel in anybody's supply chain. So we are expanding the resources that We have in all those areas, marketing, customer support, etcetera, we will spend more time on voice of customer, About what customers' desires are, we think there's some obvious areas that we can and have been expanding in Based on customers' needs already expressed to us, but we want to get better and tighter with them in the very near future. So that will happen during 2021. Kevin? Yes. I think we continue to see SG and A expenses increasing on an absolute basis for some of those investments, but certainly less than revenue growth. I think we'll See them in the mid to high teens for 2021 with some specific increases in marketing as Carl just talked about to really Inform some potential R and D decisions as well and certainly with regards to increasing to support the public company costs that we'll have for a full year in 2021. We're still relatively light on R and D expenses as a percentage of revenue. And I think The further input from our marketing organization, the voice of the customer and working with some of our scientists will help to define Programs that we hope to invest in organically as well going forward. Okay. That makes sense. Thanks guys. Thank you. Thank you. Our next question comes from Catherine Schulte of Baird. Your line is open. Hey guys, thanks for the questions. Hi, guys. I guess first you had a press release out last month about a new issued patent for Clean Cap. Can you just talk through how you feel from an IP perspective and if you're seeing any new competitors coming to market with kind of increased excitement around mRNA based Vaccines and therapeutics. Yes, that's an important point, Catherine. The newest patent that issued is our 3rd patent here in the U. S. It covers multiple advancements on the proprietary CleanCap technology, and we think it further demonstrates our kind of scientific leadership position here In figuring out novel ways to enable this co transcriptional capping of mRNAs. So it's turned out That's important all of a sudden and it's turned out we've got a very good solution that meets the customers' needs there As they scale up some of these incredibly large manufacturing operations for mRNA. So we're feeling pretty good about it and we believe that the IP would encourage people To come to us first and that in fact is what's happening. All right. Got it. And then on the M and A side, when you have the type of adjusted EBITDA margins that you do, it'd be hard for an acquisition To not be margin dilutive, so can you just walk us through kind of what those financial requirements are when you're looking at an Is that the type of leverage that you would be comfortable with? Sure. Eric, you want to do that one? Yes, for sure. Look, you're right that we have margins That are hard to beat and it's hard to find M and A targets that would be accretive to our margins. Certainly, I think we don't really look at margin as a calculation We're doing the math, we're looking at return on invested capital, for example, and the impact on our earnings over time. So it's not really in margin percentage calculation that we do. We are very mindful keeping our margins where we are. But I think really our target right now is on acquiring strategic assets rather than trying to do financial modeling or financial Engineering by acquiring assets. So we have great organic growth. We've got great margins. Really the focus in M and A is on strategic capabilities. And in terms of the leverage, Kevin, you might want to address that one? Sure. I mean with our net debt just over $300,000,000 in Projected adjusted EBITDA for 2021 that puts us about 1 times net leverage for the looking forward to 2021. Obviously, that's Something we're very comfortable with. We certainly feel we can take on more debt if needed for the right asset and also with cash on hand and our immediate liquidity with our undrawn revolver. We like to be in a position to assess and act quickly, either some more organic investments in our product lines or through M and A. So we like flexibility that our balance sheet affords us. Great. Thank you. Thank you. Thank you. Our next question comes from Erin Wright of Credit Suisse. Your line is open. Great. Thanks. So on Clean Cap again, you mentioned the high visibility on the Clean Cap revenue, but I'm just trying to frame maybe the Level of conservatism in the guidance or other factors that you may be considering relative to what's been publicly disclosed out there from Pfizer and others? And has there been any sort of condition or other factors that would help us reconcile with those numbers? And just to clarify, does your guidance assume any meaningful contribution from relationships Okay, sure. Let me see if I can hit those maybe in reverse order. Yes, there are other relationships outside of Pfizer Clean Cap. So considerable number of them in fact and they do contribute Materially to our estimates for the full year. And you are right that we do tend to be conservative when we put together our forecast, But we don't sandbag them intentionally. We just are realistic and gimlet eyed about what do we know, what is our degree of probability of confidence In that particular projection and what could go wrong and we sort of go through a fairly systematic way of digesting all of those data points And coming up with a combined forecast, you won't see us putting out something that's moon in the stars that we have nary a chance of meeting. But at the same time, we think we're being realistic based on what we know today. Now the one qualifier I would offer to you Is that the situation does change, sometimes it seems like on a daily basis. So our customers are figuring out what they need As they go. And I think as you could imagine, with the complex supply chains that are being multiple supply chains that are involved here, A customer is looking at a particular problem being constrained and gives all their other vendors projections based on that constraint being in place. Once they fix that constraint, they rethink it and look at it and move on to what the next problem child is. And our objective is not to be that problem child. Okay. That's fair. And then you mentioned 2022 in your remarks as potentially shaping up nicely here. What are you referring to on that front? Is it largely COVID related work or outside of COVID or across the board? I'm curious how you're seeing things shake up on that front. Yes. It is two elements. 1 is the COVID related work and that just reflects the growing sentiment That there will be repeat vaccinations needed and that they will be enduring. So I think that gives us a greater degree of confidence And what the 2022 opportunity may well be versus what was known even as recently as 4 months ago at the time of the IPO. The second contributor there is just our better understanding of the therapeutic pipeline, These resumed programs and the timeline that these resumed programs would be on and a bunch of that because obviously these development timelines are not COVID super accelerated. Those look like they come into play significantly in 2022 as well. Okay, great. Thank you. Thank you. Thanks, Dan. Thank you. Our next question comes from Dan Drennan of UBS. Your line is open. Great. Thank you. Thanks for taking the question. I guess first question was, I know it was asked earlier, what is your capacity for doses on COVID-nineteen. Did you disclose that earlier in the call? We did not. Kevin indicated that we feel comfortable that our ability To produce and support over $1,000,000,000 in annual revenue on Clean Cap is we're comfortable with that. Got it. Okay. And then kind of back to 2022, if you don't mind. I believe when we were looking at it at the time of the IPO, we were thinking or the company was thinking about an annual in the out years, which is, I guess, where we're getting centered on now today with all the variance out there. So maybe just another follow-up on the 2022 outlook. So when you talk to you're pleased with how things are progressing, could you give us any sense about some of the Committed orders may be in hand or just pleased, it's hard to frame what pleased would mean given the range of outcomes that we could see in 2022. So without giving us a specific number, Just trying to get directionally how we think about that 'twenty two outlook. Yes. Look, that's a tough one. Realistically, We're not projecting a specific variant becoming the dominant one in the globe and now we know that there's going to have to be a new vaccine by x state. But we are realizing how fast the rollout of the existing vaccines is going or not going, depending on where you are, Recognizing then the delta at the end of people who haven't yet been vaccinated or completely vaccinated and then thinking about the number of Potential doses that could come from a change being required. And those changes are breaking down into 1 of 2 areas. I kind of alluded to it. 1 is a true modification of the underlying vaccine sequence. And there, it looks like if you see a variant that you have to change for, the regulators globally are going to have you on an expedited path To get that product authorized and into people's arms. So that's one element of it. And then the other elements are Or the other approach is as Pfizer and BioNTech just announced their study of the impact of yet a third dose. So Initial dosage with 2 boosters, what does that do to your immune response to variants? And those are the things that are driving potential demand in 2022 and beyond. Great. And then maybe you talked about the tremendous interest, I think you called it a transformation just over the mRNA Just given the success so far of the Armani vaccines, could you give us a sense of how we should be thinking about, A, just your base nucleic acid non COVID business in 2021, like what's kind of baked in there? And then B, if we think about like what this opportunity will be on 2021, How would you characterize kind of a steady state normalized growth rate for the non COVID related opportunity for mRNA? Thank you. Kevin, do you want to take a shot at that or you want me to? Yes, Karl. I think when you look at our business and you look at the midpoints of our guidance, Particularly given the midpoint of the COVID-nineteen vaccine Clean Cap related revenues, you see the remaining business growing roughly 20% And that's across the three segments, excluding the impact from the COVID vaccine virus and CleanCap. And I think that's very consistent with some of the underlying market trends That we've been seeing, particularly where we performed in biologics and then in nucleic acid production, certainly the protein detection business being a low single digit grower from a market perspective. And that 20%, because I know historically the nutrimonucleic acid business grew 30% in 2017%, 26%, 30%. So I mean the growth rates certainly have been above that level. I'm just wondering as we look out given the excitement and efficacy and success so far in mRNA, just Without giving a specific number, just how do we think about this transformational opportunity and what it means for Miravai? Well, look, I would say this that I think the 20% and the rest of the business is a blend of the 3 different units that Kevin was talking about. And when you look at the historical numbers, you do have to remember that there was clean cap in those numbers, albeit not for COVID related purposes. So it's also a little bit of apples and oranges. I would say this that we've thought about our SAM pretty carefully and Spell that out at the time of the IPO and how large that market is. And I do think in the broader oligonucleic acid Business that we would expect growth rate outside of some of this stuff to be in the mid-20s. And I think we'd come up with a 28% SAM increase That may have included a clean cap, but it will be a little bit higher than the other areas. Great. Thank you. Thank you. Appreciate it. Thank you. Our next question comes from Michael Ryskin of Bank of America. Your question please. Hey, thanks for taking the question. Thanks for squeezing me in. I want to ask just one sort of big picture, one at the end, a lot of the topics have been covered, but I want to go back to sort of QueenCap broader adoption and some of the longer term growth opportunities in the space. I mean if we Obviously, Queen Cap, you're already working with a number of leading pharma and biotech customers, Pfizer, BioNTech, CureVac, a number of others you've disclosed. But there are other prominent leaders in mRNA therapeutics that are utilizing the technology. So I'm just wondering over the last 3, 6 months as Pfizer BioNTech's success in the vaccine program has become more and more prominent, has gotten a lot more attention. Are you have you even taken steps in terms of penetration into some of these other customers? I guess it's in other words, I'm just wondering on whether Clean Cap will be the dominant epic method for future programs even beyond your existing customers, albeit it's a very long adoption cycle with new technology. And I'm just curious what your ability to penetrate into that base has been? Yes, that is a very important point. Look, we have seen a number of new customers come to us Early in their own therapeutic development programs now because of our involvement in some of the vaccine related work that's ongoing And have caught them early. So I think there's a greater market awareness of the benefits of utilizing Clean Cap as part of your Early phase work, and we are aggressively marketing our capabilities to companies early enough so that it's not a disruptive change to their own plans and methods. Now in fairness, the other side of that is Anybody who's making COVID-nineteen vaccines using mRNA and if they're using enzymatic capping, which is the alternative method here, They're not going to change to clean cap overnight. It would be a re registration and a very, very big change at a time when nobody wants anything to change Just so they can keep up with demand. So we're not expecting to see vaccine programs, change methodologies either towards us or away from us. All right. Thank you. Thank you. Appreciate it. Operator, I think we have time for I'm sorry, we have time for one more question, I think. Okay. Our next question comes from the line of Dan Arias So Stifel, your line is open. Hi, Dan. Hi, guys. Thanks. Hi, Carl. Thanks for getting me in here. I wanted to ask about the capacity expansion in January. If I remember correctly, that was for clean cap and small molecule. I'm just Curious whether you found the need to sort of borrow from the small molecule side in order to get you where you needed to be for vaccines or were you able to build out on both there? Yes. The lines that we use for Clean Cap and other small molecule work Are relatively fungible, so we can move them as demand requires. But we so we haven't robbed Peter to pay Paul on this one. The other thing that came online in the Q1 is the plasmid sweep, which are entirely distinct from this. Yes, okay. If I could sneak one more in. Sure. Last year when we were going through the process, you had talked about being Sort of locked in with 6 mRNA vaccine providers and that there were 3 additional ones that I think were just sort of sitting out there as potentials. It sounds like there could be Others there? So wondering if you would just be sort of willing to update us on where that tally of firmly committed customers lies at the moment. We think that tally is still representative of what's going on. And if we have material developments where there's a significant program That makes progress. We'd probably disclose that at a future point, but I would say no major changes right now. Okay, very good. Thank you. All right. Thank you very much. We appreciate it. Thank you. At this time, I'd like to turn the call back over to Deborah Hart for closing remarks. Madam? Great. Thank you. Thanks everyone for joining us today. I did want to let you know we'll be at the Cowen Healthcare Conference tomorrow, March 3, and will also be at the KeyBanc Capital Markets Life Science and MedTech Investor Forum on March 23. Both presentations can be accessed via live or replay from the Maravai Investor Relations website. So feel free to contact me with any questions and we look forward to stating you during the course of 2021. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.