All right, good evening, everyone. I'm Tejas Savant, and I work in the life science tools and diagnostics teams here at Morgan Stanley. Before we begin, for important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, do reach out to your Morgan Stanley sales rep. It's my pleasure to host Maravai this evening, and speaking on behalf of the company, we have CEO Trey Martin and CFO Kevin Herde. Thank you so much for joining us, guys. Maybe Craig, just to kick things off, you know, Maravai has gone through quite a strategic shift since you've joined the company, over a year ago now.
So just talk to us about how your transition to CEO has been, what areas you think needed the most improvement, and hit on what the team has accomplished over the last year.
Sure. Of course, the dynamics for the whole industry were, let's just say, interesting-
... for 2023 as we came out of the pandemic, and, many companies in our space participated in, you know, in the pandemic, maybe not so much as, the impact that was on Maravai, which was transformational-
... obviously. The financial numbers are well known, but the effect of participating in this huge initiative to create the first RNA vaccines really validated the chemistry, had the company scale from grams of RUO to kilos of-
... GMP product, and really brought in a bunch of capital that has been really well redeployed with additional M&A and capital investments in capacity, facilities and so on. So I walked into a position that was really well-stacked with capability and some projects that I'm really thankful started, you know, before my arrival about a year ago. What we had, though, was a period in the pandemic where essentially one customer group and one product dominated all conversations, you know? Now what we have is an ever increasingly diversified set of products and services that will contribute to revenue on a go-forward basis. We sometimes talk about the different phases of the company, from the private equity phase to the IPO and the pandemic, and now the endemic phase.
and what I see there are huge opportunities, but we had to put in some, you know, mechanisms to work on forecasting the rest of the business.
... since the business was no longer dominated by one customer-
... and one take or pay contract. We had some new team members, some that came in right before me, and adjusting, and then, of course, we had the challenge, but the necessary challenge to reduce the corporate costs going forward, which we dealt with in Q4. So there's been a lot of change and a lot of action. I would say that I'm really thrilled still with the position to take the helm of this company, where we have, again, this really thoughtful redeployment of capital that came through the pandemic-
... for capacity that can drive us for the next five to ten years.
Got it.
An ever-increasing product set, a really fantastic team, just a lot of opportunity going forward.
Got it. Yeah, that's a great overview. So let's start with NAP, specifically on the CleanCap side, and we'll get to your favorite topic, which is forecasting COVID sales in a bit, but-
I think I'll let that be Kevin's favorite topic.
So to kick things off, you know, while the infectious disease drug and vaccine pipeline is a bit more mature, the oncology and rare disease pipelines remain in their relatively early stages. Do you think that the rapid rollout of mRNA-based COVID vaccines have helped accelerate those timelines to market for other mRNA candidates?
Absolutely. I think, you know, such a unique situation we've been speaking a lot about, that there certainly, there were decades of work to enable mRNA to have a clinical outcome, but not the traditional. Someone in one of our meetings today called it the slow walk of phase I, some failures, phase II, some, you know, and reprise, reconfiguration, phase III. The methodical walk through that process.
... we really went from early phase to billions of doses of clinical vaccine.
It worked, and it was efficacious. It's an incredible statement for the technology, and I'm very, very hopeful that it pulls the whole industry forward by many, many years because we know at the end of the day that it works.
Got it. How are you thinking about sort of the broader mRNA pipeline opportunity, growth over the medium term, and how far away do you think we are from the next wave of mRNA-based vaccine therapeutics?
Yeah, I think, well, the path to mRNA vaccines is now at least successfully traveled.
So I think people see the easiest path there, and most of the work, as you've seen, is to go from single neoantigens to multiple neoantigens to try to combine immunization into one convenient shot. So obviously there's some work to do to balance, you know, multiple, like influenza A, influenza B, RSV, and so on. But you know, that seems to be a very logical path that will ultimately have success. What I would say is important for the field is in fact even in phase III, there are programs that are varied and show that mRNA is a medical platform, more so than a vaccine.
So for example, there is mRNA used in CRISPR.
There is mRNA as a tool, not as a therapeutic endpoint itself, but as a tool to make cell therapies.
There's personalized oncology. There's a lot going on, even in the small dozen or so phase III that we're looking at-
and tracking, that I think it's gonna be really important for the field, the moment that one of those programs that's not an infectious disease prophylactic vaccine is approved, for people to realize that this is not just a vaccine story, it's actually a new platform for programmable medicine.
Got it. What percentage of these, mRNA pipeline programs are using CleanCap today? And are the rest essentially using enzymatic capping approaches?
There, you know, there are legacy approaches, enzymatic and what's called ARCA, chemical. But we, we have reported previously, and we paid for third-party studies. We've now brought this in-house so that we can more rapidly update it. But when we announced the third-party study last, we, you know, we saw still, that we had maintained roughly 30%-35% market share, about 350 programs out of 1,000.
Got it.
Yeah, and we see that holding steady, and I think we look forward to continuing to innovate so that we can increase that percentage.
Got it. And on that point, Trey, presumably you're probably not running into ARCA as much, but when it comes to, you know, a competitive bid, how does the selection typically happen, in terms of which capping approach to go with, and, especially now that we're, you know, sort of, a couple of years removed from the pandemic?
Yeah, you know, the thing is, we're talking about clinical trials now, phase II, phase III, where these decisions were made three to five years ago. And you know, then if during the pandemic, there was an even... You know, I would say, generally speaking, that up to the last year or so, largely, these programs were just based on what people had done in discovery-
and scaled what they knew. And now we're getting into an environment where people have the time to step back, do process optimization, and look at all the different inputs, rather than just go with whatever, for example, was in their high-throughput or medium-throughput R&D line. And so we get to have the actual value-based discussions, the purity discussions, you know, which includes the purity of the drug substance, but also the lack of impurities, and all the benefits that can come from what was, three years ago, a conversation about CleanCap, is now a conversation about all of the constituent enzymes, all of the chemical inputs, the entire product input ecosystem we now have-
vertical, which I think is fantastic. And so we can really talk to customers about the total economics, and help affect those for them.
Got it. Kevin, the inevitable sort of question on vaccine work, you know, visibility is obviously, you know, challenging to come by in that particular niche. But as we think about a fair estimate for, you know, run rate revenues, your endemic states, a few different things to consider, right? On the one hand, you know, Daiichi was clearly a large driver of your 2024 high volume GMP sort of number. Is reimbursement still in place in Japan? And so do you feel good about that portion of the revenue? Of course, with Pfizer-BioNTech, it's a little bit different because, you know, they can use it across multiple programs. On the other hand, they have been, you know, letting governments cancel orders without sort of imposing any penalties on them.
So as you look at sort of the two biggest drivers of that, you know, high, high volume GMP contribution to CleanCap, how are you thinking about, you know, not just, the back half of this year, which is de-risked, but next year?
Yeah. I think that the interesting thing for us is it's, you know, we support... I think there's, what, five approved vaccines right now that sort of create high volume demand for capping. You know, Moderna has two of them-
... and we're in the other three.
You know, so we have a stable of customers that have commercial programs, and all of our customers have multiple programs they're working on.
So, you know, historically, as we've talked about, you know, we see this as COVID-related CleanCap revenues. There was probably a percentage of that that was going to other things, certainly, but it was our best estimate at the time. You know, that goes back, certainly, starting back in 2020, where we had about $100 million, then $550 million, then $600 million, then down to $60 million last year. And this year, we started the year with 50 million of orders in hand that were from those high volume customers, that group that we talk about. We didn't really want to call it specifically COVID, since our CleanCap product is not indication specific.
... and it's fungible-
... in the hands of our customers, and they're not required to tell us how they use it. You know, and I think underlying that specific to Daiichi, you know, they've been ordering around that level for several years now.
They have multiple programs, and we think they're gonna continue to incorporate CleanCap as their primary capping program for their mRNA. So that's a good customer of ours, and Trey just went and visited them and had a nice conversation with them, and I think they're here as well.
So certainly been successful. You know, I think the high volume CleanCap is gonna continue to evolve. I'd say the potential upsides over time certainly are a combination. I think vaccines, I think that the continued pressure in which we did not assume, I think the industry did not assume a couple of years ago, is that the kind of the compliance rate would be below flu-
... which is, I think everyone thought, and if we think back, over the last few years, we all thought it would be higher. And it's been below.
I think that, so we'll see how that impacts the combination, potentially, and some of these other programs. So it's tough to predict what the endemic state ultimately is going to be because I think there's a combination of you know upside to incorporating into multiple programs. And then I think there's this continued pressure that people aren't concerned.
I think that continues to be, you know, some of the downside as well. But for Maravai, it's interesting, you know, when we go way back. I'm CFO and historian of Maravai, given how long I've been here.
And when we made the acquisition of TriLink, you know, the demand profile for CleanCap was not a big driver for us. You know, we were looking at their, obviously, their ability to do highly modified oligonucleotides and their participation in the handful or so companies that were involved in mRNA at the time, and we were excited about different things at that point in time, and then the progression to GMP-level quality. And those were the sort of things that informed why we built our first purpose-built building-
... that ultimately became the foundation to allow us to scale up and address the pandemic, and allow us then to benefit from it, to build out the rest of the capabilities we have. So, you know, I think the endemic volume of CleanCap is fine. It kind of sits that top of our demand pyramid, where you have large pharma buying just CleanCap.
I think you're going to always have that dynamic. But what we've built out and what we continue to be focused on, and the reason why Trey's here, and I think is excited, is that next tranche down, which is all of those companies that we can sell multiple products to-
... and services to-
... and that are going to be addressing, you know, the therapeutic side. And that's, you know, that's what we're really excited about. We hope to keep that foundation of high-volume CleanCap users, certainly because we think it is the best capping methodology out there. And then also drop that down and apply that technology and others to build out a lot of good singles and doubles to replace-
... you know, the big home run that we enjoyed over the last few years.
Got it. And, Kevin, quick follow-up there. Even at sort of current levels of contribution, is the CleanCap business margin accretive to both NAP and corporate EBITDA margin?
Yeah. I mean, the CleanCap product, when we make it at scale, is one of the higher margin products we have.
You know, I think for us, you know, the interesting thing about where we are, and I think it's exciting as we look forward, is we've put together all the infrastructure now we really need. That's a combination of facility infrastructure, now that we've completed our Flanders building, and the acquisitions and technologies we have. So from enzymes through the cap, you know, we have a very vertical solution there, and we do it with less than 600 employees in fully you know, highly automated facilities that are completed, and we're not going to need to tilt up any more buildings. So very... Understand our cost structure, a ton of capacity, as we've proven, and now evolved into late stage and even commercial FDA drug substance capabilities, gives us a lot of flexibility to address the market demand.
And now it's, you know, fill up the factory, sort of mantra, if you will.
Got it. Turning to the rest of the nucleic acids business outside of CleanCap, I think sometimes when I talk to, 'cause, investors, they're still shocked about the size of that business, you know, even within NAP. So, could you just help us, first of all, dimension the relative sizes of the different pieces? You've got the long mRNA platform, plasmids, custom oligos, oligo synthesis. And then secondly, could you chime in on how differentiated that portfolio is? And how do you compete effectively versus, you know, larger life science companies that play there, including, you know, IDT, Aldevron, you've got Thermo insulin, et cetera, as well?
Well, sub-segmenting NAP, I'll give that to Kevin if,
Well, yeah, I think so. So really, there's a, you know, we look at the NAP segment, there's the high-volume CleanCap that we talked about, and then there's the discovery part of the business-
... where we're doing RUO. And we've really focused on, as you've seen with some of the TriLink releases, a new suite of products, and Trey is really driving that. I mean, I think he has, but he, one of the things he brings to the table is a great knowledge of what the research market really needs
And no one's really doing that today, addressing- Right
... that head on, in a manner that's effective, efficient, allowing for high-volume screening of targets. And, you know, we want to do it, and we want to do it with our technology. That also informs things like the Johns Hopkins collaboration. You know, seed the academia, seed the research market earlier, get them on your technology, used to using it, and then, you know, allow that to bear fruits down the road. So focusing on discovery is still a key part of what we're looking to do. Then you roll into GMP products-
... both on the CleanCap side, but also on the mRNA side.
Then also looking at, you know, potentially GMP oligos, GMP enzymes, other things that support where the industry's going. Certainly, we also do supply oligonucleotide synthesis products-
... through our Glen Research-
... which has been a very solid performer for us.
Then certainly the Alphazyme acquisition, and being able to do both, both custom scale-up as well as products and services. You know, those kind of break down into the, really, the business units underneath this segment, and they all have slightly different dynamics. Again, we continue to be excited about discovery, and really, I think that's important for long-term success.
And then now that we have these full capabilities under cGMP, to be able to do NTPs, to be able to do capping, to be able to do mRNA services all the way through the commercial, again, drug substance. That's that historically was our fastest growing base-
... business segment, as we used to refer to it.
I think it can return there, just given the capabilities and the area we're focused, you know, I think the key thing to understand with our, quote-unquote, services, is we're making custom product.
Right? I mean, and it, it's not a CDMO for the sake of bringing in other people's technologies and just having an assembled workforce and a big, a big plant. It is specific to our customers using our products and helping them with a better final product, and I think that's what's the exciting thing about we do. It's very, still very niche.
Got it.
You know, we're not going after, you know, high volume fill finish-
or something like that.
We're applying our technologies, our science, to customers in a very collaborative relationship. And, you know, that's where I think the growth rate can outstrip the market, because of the uniqueness of that.
Got it.
It's a unique setup.
Certainly unique in the space. The core capabilities that Kevin's described, particularly with TriLink, were about custom nucleic acid chemistry, which is a, which may be an eye-glazing thing for most of our audience here at, you know, 5:00 P.M. But custom nucleic acid chemistry enables things like next gen sequencing, when you were looking at them before. When Weissman and Karikó did their Nobel Prize-winning work with custom chemistry to enable mRNA to be less immunogenic, they used TriLink chemistry. So that participation in the early stages of that industry has existed. TriLink's been in the oligo business for a long time. Glen Research, as Kevin said, supplies the oligo business, but everything really starts there with chemistry.
Because of CleanCap, NTP, pseudouridine, all the other inputs for mRNA, we have this rather unique position where we span very early custom research.
... custom chemistry, all the way through cGMP, APIs, like CleanCap for the vaccine.
But as Kevin said, there's another layer, which is a service layer, where we will use those products to build, research scale or phase, preclinical screening, hit to lead, all that stuff for mRNA. And now, thanks to Flanders 2, as of a few months ago-
... can take that customer all the way through clinical commercial, but as Kevin said, the difference is not only the unique position of having service from RUO to GMP and product from RUO to GMP, but the service is completely vertical for product.
So it's, it's not a traditional CDMO approach, like Kevin says. We're really, our service is really there to assist people to incorporate the products into their programs.
That's actually a great segue to my next question, Trey. Just talk to us a little bit about, you know, the early evidence of customer stickiness and-
... and how they're responding to your push to, essentially, capture their business throughout the development process and beyond.
Mm-hmm. Yeah, I mean, one of the tricks, we were talking about this earlier, that, you know, if you're in phase II or III right now, you know, pushed that boat into the water, so to speak-
... three to five years ago.
The stickiness works both ways. You know, it's unlikely you're gonna get someone to make a material input change or a process change in phase II or III. You really have to establish that connection, and then you become very sticky really post-phase I. So that's one of the reasons why we want to focus so much on the opportunity we have to drive really the screening and discovery part of the industry forward.
Not only can we help move the industry forward even faster, as you said, we know at the end of the road that it works-
... and it's safe.
So now it's about essentially filling in the pipeline that, and the ecosystem that would have otherwise evolved over a decade, that was skipped when we went to early phase to billions of doses, you know, and didn't-
... didn't pass go in the middle, right? We went right from the beginning of the Monopoly board to the end-
... so to speak. And so we have the opportunity to build around the board, if I torture that analogy, and really drive not only the industry forward with discovery, but also concurrently, drive the inclusion of our products, which are incredibly sticky as people progress preclinical, IND, phase I, II, III, all that.
Got it. You mentioned earlier, Trey, that, you know, you were lucky enough to participate in the sort of COVID bonanza, and then you deployed that free cash flow to significantly add and upgrade capacity. What is the current sort of rate of utilization at Flanders 1 and 2, and where do you view that exiting 2025 based on the demand you see today in the pipeline?
Flanders 2 just opened.
So the good news is, we've been, you know, in Kevin's previous comments, I'll add that we've been bearing the occupancy cost of Flanders 1 and 2 for almost a year now. It's not a super, you know, heavy burden, but we've been bearing that cost without running revenue through. We're officially open for business now in Flanders 2, as of literally a month and a half-
... two months ago.
As everything we add is incrementally better.
But, the best way I can answer your question is we are not capacity limited at this point
... nor will we be for some time. We built Flanders 2, for example, to have three parallel suites that can scale all the way to commercial.
So, you know, we can, we're running one shift at this point, one at a time, but we can be running all three in parallel. We have a lot of filling to do-
... before we have any sort of constraint on capacity.
And on the other end of the spectrum, Flanders one has four chemical labs. Yeah
... that are analogous to the single lab that supported the entire pandemic in the Water Ridge facility.
So we have built, at frankly a pretty reasonable cost, incredible parallel capacity to sustain the business for five to 10 years.
Got it. Fair enough. Switching to biologic safety testing, Trey, you've got a very broad portfolio of kits at Cygnus-
... and I think you announced the addition of three more last quarter. What's the uptake been like on the new kits? But more importantly, explain to us why portfolio breadth matters-
In terms of the competitive positioning?
Mm-hmm. Well, it's the, I'll answer the latter half of that first, as best as I can. The biologic production market is still really dominated by a few cell lines.
Frankly, E. coli, HEK, and CHO-
You know, are the vast majority of programs today. But people have done more and more evolutionary work on the cell lines that are hosts for biologic production. And, you know, Cygnus - frankly, Cygnus as a startup, essentially helped create the host cell protein ELISA market.
by essentially leaning forward and saying, "You know, people are doing early work. I think this could work, and I think this will be important someday." So Ken Hoffman, the founder of Cygnus twenty years ago plus-
... just started making these kits in anticipation that some of these cell lines could be, you know, particularly useful and beneficial, and differentiated the company technically by making the most sensitive kits with the widest coverage, so I think that principle still applies today, and this is a process that takes, you know, a year-
To create essentially a host cell protein signature, polyclonal antibody, create the ELISA test, revise, all that stuff. So we don't want to miss the next great cell line, in other word
Cygnus is really differentiated in that way. Like you sa
I think it's 26 or 27 cell lines are covered. The next nearest competitor in the space has four.
Five. So now, of course, they could rationally say, "We're gonna focus on the three that drive most of the industry," but we don't.
... we don't wanna miss the next great thing
It's about being ready for the wave that's coming, rather than the wave that's here.
And applying essentially the differentiated approach to all cell lines. No matter which one people choose, we can be there to help.
Fair enough. As we think about your Biologics Safety Testing revenues, Trey, how do they break down between research versus commercial production workflows?
One of the things we say about BST, Cygnus specifically, is that it's actually kind of an inverse funnel.
Where when people use more, host cell protein detection kits when they're starting their process
-than at the end.
Now, we are very proud, you know, to be in all, I believe the number is now 23 approved CAR-Ts, you know, cell and gene therapies, to be running the host cell protein QC on all of them. But really, the activity is heaviest when people start that process, when they do validation and engineering runs. When they test their run parameters, they will use a lot more kits than at the end, when everything is dialed in.
The good news is, they dial it in, and we are spec'd in with that program. But Cygnus really ends up being a proxy for program starts in biologics.
You know, obviously, we're happy to have the commercial participation, whether they do a run every quarter or every year, whatever it is, we'll be there. But program starts are interesting, and because, you know, they're a bellwether for activity-
in the industry, and that's where we participate more. So we see when program starts slow down, like we did in the second half of 2022, and we are there first when they pick up.
Got it. Fair enough. So maybe, you know, can you just remind us about the, the percentage of that segment's revenue that is indexed to China? And what's the performance in the region been like of late? I think you talked about, you know, some uncertainty leading to unexpectedly soft results in the prior quarter. Has that sort of customer sentiment stabilized through September, or maybe even improved a little bit? And what are you hearing from your distributors in the region? Is there a inventory destocking situation that you're coming up against?
No. Well, so our China exposure is the vast majority Cygnus, right?
China is really a Cygnus story .
I talk about it a lot, you know, for that reporting segment.
What we saw... Actually, I just mentioned it. We saw a slowdown, particularly in China, really second half of 2022.
But then we saw part of that was a function of comparison, where a great deal of the Cygnus growth during the pandemic actually came from China biologics activity. Whether it was, you know, COVID antibody-based or vaccine production or whatever it was, there was a lot of lift and a lot of growth in 2020, 2021, and 2022. So the second half of 2022 slowed down, and that growth, of course, became a headwind. But things, particularly if you focus on BST China, were stable, flat.
They took a step down, and they were flat. And when we looked at projecting this year for the BST segment, we did not expect any growth from China. But what we had was a history of five flat quarters.
So we just stayed flat. The surprise that we mentioned in Q2 was an unexpected step down in Q2 from the previous, at that point, six quarters of very steady state performance. And to answer your question specifically, China was 20%-21% of Cygnus of BST-
... for those six quarters, and then went to 14%.
Just step function. What am I-- What are we hearing from our distribution partners and our people on the street? They still expect, well, they still have the same goals for the year.
But we thought what we would do, not wanting to count on any growth, being conservative, is just take that step down out of the number for the guidance for the year.
Got it. Fair enough.
... longer term, would it be fair to say that, you know, 10%+ growth if China doesn't get better with a path to mid-teens, if China goes back to normalcy?
I think, you know, Biologics Safety Testing grew from 18-22, I think 16%, and I would say most people would say that the market growth for biologics was around 12-14%.
depending on who you cite. So we've always done a few hundred basis points better than the market.
because of the breadth of offering, adding more services, in-housing some of those services.
You know, the shift to CDMOs, and them wanting to use the gold standard that Cygnus represents, as well as getting some traction with MockV and predictive viral clearance studies, so that all helped. Obviously, it's been flat now for a little while. I think most people are seeing that a return to growth probably may be a little lighter just because of some of the dynamics, so, you know, probably an 8%-10% market growth there, and are we gonna continue to do a little bit better? To an extent.
You know, you can only do better than the market for so long, so, you know, I think so I would put it in that, you know, 10%-11% range. I think that's a fair long-term CAGR for BST, and there's some upside there, certainly with-
... MockV. I mean, we're planting those seeds now.
I think it has a great opportunity to be very meaningful over time, just given the cost benefit of being able to do predictive bioclearance studies using a MockV-
... versus a real live virus and trying to clear that. So, we're excited about that opportunity too, certainly.
Yeah, there are three strategic vectors for, I mean, Cygnus is the gold standard for host cell protein detection by ELISA. About a third of the biologics safety testing market is actually in host cell DNA.
So we have some fresh initiatives there. And like Kevin says, where we're most excited was actually a very small technology acquisition, the MockV, which would be essentially creating a new segment, which is a means of significantly lowering the cost and increasing the efficiency of viral clearance studies. Also, you know, right down the fairway for what Cygnus adds value in the market. And then Cygnus has been in the service business for a few years, which is next level. Your ELISA lights up, it shows you these host cell protein, you know, or this number of host cell proteins. And then you can do essentially a follow-on contract mass spec study to look at the specific proteins, they are, get ID and stuff like that. So there are still three very exciting growth vectors for them.
Got it. On the financials, before we wrap up, guys, you know, one of the large preclinical CROs called out weakness on the global pharma side of things recently, and just slower improvement in biotech as well, particularly in that June, July, and August timeframe. Has the tenor of your conversations with either of those customer sets changed at all in the last couple of months?
The tenor? Not really. And one thing to remember that, so first of all, Maravai's collection of companies is 100% consumable.
Cygnus, the biologic safety testing market, writ large, includes CROs-
... that do service.
Cygnus, I was just saying, has a growth vector in service, but it's still 90% products.
Those products are largely stock products. Those twenty-seven kits we talked about, or cell types, and people will order the volume they need when they need them. So we don't have as much... I would say it's more of a transactional business. We don't have as much visibility as, say, a big CRO would have that is, for example, negotiating very large service contracts.
... because those would be negotiated in advance. Where Cygnus, you know, starts any given quarter with less than 50%, you know, of that quarter booked, because it's such a transaction on these products specifically.
So we don't have those kind of conversations as much, but we-
And I
Yeah, go ahead.
... Just to complement that, you know, of the over a thousand drugs that are non-COVID related that we're tracking, they're still very early stage.
In mRNA, yeah.
The people aren't. Those programs, and that's our sweet spot, they're not reaching out to schedule large commercial builds.
Right.
Right. So different part of the market for us, different time in the continuum of where mRNA is going. And so we're still in those early days of sort of the therapeutic applications of mRNA and working with, you know, the next level of customers that are gonna make that a reality. And they're not reaching out to the large CDMOs at this stage. That'll be a few years away, but they're reaching out to us, 'cause that's our sweet spot, and that's where they're at.
And so the market for us, again, continues to be, you know, really focusing on laying those early discovery seeds, supporting that screening and development, moving them through, you know, the phase I, and then, you know, being able to do the later stage, and that will come. It's starting a little bit, obviously, with us, the second half of this year, with a couple of customers that are doing a phase II and a phase II III pivotal build with us. But, you know, that's coming and I wouldn't expect the large CMOs or people that are doing, you know, large builds to be doing that for mRNA therapeutics right now.
Right.
That's a little premature.
We're early days still in mRNA. The potential is enormous, and our position is completely unique there. In biologics, there's a lot of different forces at play, there's no question about it. I would say, the geolocation of jobs with BIOSECURE, you know, affects people's decisions for maybe the future. But we like our position in biologics with Cygnus as a 90/10 products, 100% consumable, and we-
... like our position in the wave to come in mRNA.
Got it.
Just a couple of quick financial ones. One of the benefits of going last is we can just keep going.
I think so. Did you have another one? I thought there was-
... We're going into overtime.
You know, I do wanna ask about, you know, your long-term targets. You know, it's a pretty improbable ramp. So could we see you issue revised long-term targets of a 2024 revenue base?
Look, I think that, you know, that things have changed a lot since we did that. I think, you know, most people would understand that that's, you know, there might be some shifting there. Certainly. You know, we're all, everyone in our industry is probably addressing a couple of things, and one of them is visibility. You know, that continues to be a thing that is. That is tougher back to kind of pre-pandemic levels there, and especially when you're an all-consumable company, you know, you don't have those scheduling that a capital equipment or even a large CRO would have to look forward, you know, three, four quarters to book things and see how that's gonna shape up, 'cause we are all consumable.
So, you know, it makes it challenging, but we believe in the long-term growth rates. We really do. I mean, we look back to, you know, nucleic acid production growing over 35%, 2018-2022. Again, BST growing 16%. You know, so those are not unrealistic growth rates. And I would say that that market in NAP was probably in the mid-20s at the time, and we were doing substantially better because of our investment in that space. And I think we can continue to meet or exceed market expectations. And I think when it comes to long-term CAGRs there, we believe it's a 20%+ CAGR for NAP, and we believe, as I mentioned, it'll be in the low teams for BST.
I don't know if that, you do that math, it gets you to those numbers in that timeframe.
But, you know, we're all here because we believe in it. And, you know, I think the number of programs continues to support that and form our decisions. You know, when we look at phase I, II, III progression and velocity, there's 40% more programs there than there was a year ago in the drugs that we're tracking. And that, again, continues to be a leading indicator, we believe, and we think we're as well suited as anybody to take advantage of that growth and win our fair share of wallet from those drugs.
Right. How would you characterize margin visibility at this point, Kevin? You know, the cost cuts are largely done, and-
... fix is not something you can, you know, particularly control on a quarterly basis.
And then you've got the GMP CleanCap sort of situation as well. And it is a sort of fixed cost-heavy business model in a sense, right?
It is.
And so, as you think about that visibility, at what point do you think it gets better? I mean, it is largely just demand problem. When the recovery happens in the market, that's when-
It is. It's largely volume over that fixed cost structure.
Again, we made, I think, the right cost corrections heading into the year. I think we, if you look at our revenue per employee, our EBITDA per employee, it's among the highest in life sciences. We have all the facilities. We're done with that capital investment cycle, and it's not a huge burden on our P&L, the overall cost of our facilities. And our variable margins continue to be very strong, pricing's solid, inputs are consistent. So, you know, for us, it's labor, it's facilities, and it's a little bit of variable cost. The great thing about having, you know, high variable margins is as great as revenue grows, doesn't give you a lot of flexibility when they don't, right?
And that's why we had to make labor adjustments or dip into that kind of semi-variable pool that's fixed in the short term and more variable in the long term. But yeah, we think we like where we're at from a cost-
... structure perspective and the economics of our business model. And it is 80% a revenue game, and again, filling up that factory, leveraging those costs, and with that, you know, margin expansion, as we've seen historically, nothing's changed in that dynamic, and we have the same sort of leverage there. And if anything, you know, given we have more capabilities now, you know, that opportunity is as robust as ever. But it's gonna be a focus on the top line.
It really is.
Yeah.
I'm not gonna ask you to comment on M&A speculation, but, as you think about just consolidation in the space more broadly, what kind of strategic value do you think Maravai would bring to a buyer? And then, is there a fundamental value in keeping the biologics and NAP segments together in your mind? Not just from a buyer's perspective, but also from Maravai's perspective.
Yeah, I mean, well, I've talked already about the unique position we hold in mRNA. That's a modality that is the wave to come, I would say, and we believe in it so much that, I mean, I live in San Diego now, so I'll use a surfing analogy. We're paddling furiously to catch that wave in a way that I think is unique. We obviously don't comment on any speculation. It just, you know, we just don't. Admittedly, we are in. You know, biologics is the wave that's here, I guess, to talk about the two different segments. There's a reason that BST sits in its own segment.
That's an unfortunate thing to do to a $70 million business.
... that's highly profitable.
Because when you're at that level as your own reporting segment, every little move you make, you know, $100,000 is relevant.
It's just, it's a lot to ask of a little business. But it's a great business that we see upside in and, you know, if you, if you have a unique position in the wave of medicine that's here, and a really unique position in the wave of medicine to come, that's a great place to be.
Yeah, got it.
And, you know, 'cause as we look at companies, you know, the things that attract us, high customer retention, good long-term growth markets, good high variable margins, good quality, good turnaround time, good, you know, customer feedback or market feedback. So when I look at us using that same criteria, we check all those boxes.
Right.
Right, so I think I like, I like where we're at. Those are the intangibles that you have a very hard time recreating if you don't have them, so we have all those, and again, I think it's, it's a testament to the founders that create-
... you know, the very fabric and foundation of the, the customers. Great, just great products, great legacies, you know, and we've woven those together, and I think we can take them all forward successfully.
Absolutely.
Fair enough.
We're going to double overtime?
No.
Yeah.
Thank you so much for being here.