Good afternoon. Thanks for being here at the last session of our London conference. We're very excited to have Maravai LifeSciences with us, today, here to tell us more about the story. Before we jump into some Q&A, CEO Trey Martin, as well as CFO Kevin Herde. Turn it over to Trey.
All right, thank you. Thanks for being here in person. I know it sounds like we're at the tail end of this conference. And also thanks to those who are joining us online. As with every other presentation, you'll probably see today, we'll be making forward-looking statements using some non-GAAP terms, such as Adjusted EBITDA. And we have, of course, all of our risk factors listed in our SEC filings and on the website. All right, I thought I would start for this group with a little bit of the history of Maravai, where it came from and where it's going. So, Maravai is almost a 10-year-old company. As of next March, that'll be the 10-year anniversary.
It was a venture between Carl Hull and Eric Tardif, who were executives at Gen-Probe with GTCR. And it was meant to be... It was a private roll-up strategy, acquiring differentiated, scientific, founder-driven product-leading companies. Specifically, Vector Laboratories, as you see, TriLink and Cygnus, all in 2016. And then, in 2017, Glen Research, which is an oligo supply company that's been in business over 30 years. So what we kind of call that Maravai 1.0, I would say. Maravai 2.0, which led to a lot of headlines and to an IPO, as you can see there in November of 2020, was our participation, specifically in the global pandemic. TriLink, you see, one of the first acquisitions, has a product category called CleanCap.
That is an improvement to the way that one makes mRNA from a template. And the chemical improvement, called CleanCap, was incorporated into the Pfizer-BioNTech vaccine, and that took Maravai in a completely different direction. Accelerated the adoption from RUO to GMP and led to a lot of investments and a lot of interesting things for the company that I'll get into here in a bit. So then during the pandemic, we made some significant infrastructure investments and acquired two more companies. You see there at the end, MyChem and an enzyme company called Alphazyme. I'll explain a little bit more of that as we go through. So general attributes here. As I implied, the infrastructure adds that came from the pandemic-era investments give us this incredible operational leverage going forward.
We believe we're in the right market, specifically mRNA, and how it interacts with CRISPR gene editing, as well as cell and gene therapy. And we have had and intend to continue to have top-tier growth, and adjusted EBITDA metrics in the market. The way we're going to do that strategically is, as you see here, something that you don't often hear in, biologics in particular, where the focus tends to be at the very end of the value chain, those drugs and compounds that are commercialized. We say, as you can see here, that we want to win the front end of the funnel, which is the discovery category.
If you think about the way mRNA medicines came onto the scene, this was a technology that was in its infancy and, a big bet was made, and it turned out to be the right bet, that this was the best possible modality to quickly innovate infectious disease vaccines for the COVID pandemic. That, that bet worked out, but it took really a, an industry with a few key players and early-stage candidates, all the way to a global pandemic scale with literally billions of patients. So what we don't have really yet is a fundamentally mature, discovery funnel and a heavily weighted funnel of Phase I, Phase II, and Phase III opportunities. It's still led by a few companies, but with a lot of investment interest coming in recently.
There's a rich technical history with the, again, scientific founder-driven companies that were acquired and rolled up in Maravai. And that leads to a technical intimacy with customers that we think is of enormous leverage going forward. How we say we want to be the customer's first choice, but it continues to be on us to drive the industry forward with more enabling technologies. CleanCap's version one was incredibly useful in the pandemic response. We continue to innovate in that area, as well as all the inner areas in and around the mRNA production ecosystem. All right, so the reason that we think that we're in the right markets is well illustrated there by just this, the mRNA cell and gene therapy pipeline progressions for the next several years. But I'll get more specific.
So in playing in the infectious disease vaccines, because the vast majority of revenue last year was for one customer, for the inclusion in that COVID vaccine, that's really dominated the narrative in and around Maravai's participation in these markets. We view that incredible period of time as the opportunity to show the proof that mRNA is a platform that can be leveraged, not just for infectious disease vaccines, but in protein replacement therapy, in therapeutics, in CRISPR gene editing, and so on. We participate in the biologics market in a larger sense with the BST, the Biologics Safety Testing Segment, which is our Cygnus business. And you see over there on the right, strategic vectors for that business. It's predominantly a product business. In fact, all of the Maravai portfolio is completely consumable products.
We've no instrument participation. It's so there is an ability to add services in and around those products for the customers that have trusted Cygnus for many, many years, as well as a new category that was part of a small technology acquisition called MockV Systems. The new category is being launched within Cygnus, and it's called the MockV product line, which seeks to essentially, in the same way that Cygnus, years and years ago, changed the way people did host cell protein detection. This product line intends to change the way people look at viral clearance in their biologics production. So I've mentioned the pandemic a few times. That period of time led to some incredible changes at Maravai. Again, scaling CleanCap from a predominantly RUO to a GMP product, from grams to kilograms.
It brought us into, I think, the right circumstances to support this next generation of medicines. In no small part, the capital was reinvested in four new facilities that you can see there on the right. They're noted by reporting segment. Obviously, the clinical proof of CleanCap as a primary input to mRNA came out of that, as well as significant increases in investment in commercial sophistication and in R&D programs specifically. Then finally, as I mentioned earlier, also through the pandemic and that incredible period of time, two more acquisitions to solidify the ecosystem in and around nucleic acid chemistry and enzymes, which is what MyChem and Alphazyme are, respectively. So these facilities we mention in our public comments are specific.
The Wateridge facility that we talk about really supported the entire pandemic supply for chemistry and for mRNA. As a part of pandemic readiness, Maravai won a significant grant from the government, from BARDA, specifically to support the expansion of supply for the chemical inputs, which is the facility we call Flanders 1, and the service in support of mRNA production, which is the facility we call Flanders 2. Each of these facilities are occupied now and being fitted, so we are bearing the costs of them as it is now, and have tremendous expansion opportunity going forward, using that infrastructure. So the two segments, Nucleic Acid Production is, as you can see there, more than three-quarters of revenue, and it comprises the TriLink business, including the GMP services, the Glen Research business, and the Alphazyme enzyme business.
Here, this is where all of our conversation about mRNA and all the inputs lie. Again, we think of mRNA as a platform more than infectious disease vaccine. It's the opportunity really to usher in the new era of programmable medicine, where just the change in the sequence can be the change between a COVID spike protein neoantigen or a personalized neoantigen for oncology, for protein replacement therapy, or for the endonuclease used in CRISPR gene editing. All of them, all the mRNA molecules that I just described are fundamentally built the same way, and the variance is just in the sequence. I know I have to move quickly. Apologize. What we have here is an example that we put in one of our quarterly reports of a customer moving from that discovery pipeline just through phase one.
So again, we're not, we as a company are not relying on, X number of compounds in commercial and our full-scale participation in them. In fact, this is as good a place as any to reinforce that this is a product and technology company, that has services to help people adopt the products and technologies in their pipelines as early as possible, and then, of course, with the intent to stay with them all the way through. This is just an example of early discovery going to late-phase discovery, going to phase one, and the way those results and that participation can stack as we move through with the customer. So again, Biologics Safety Testing is the other segment, and this is comprised of, the Cygnus Technologies company and the small technology acquisition, MockV.
About a quarter of revenue, tremendously high-margin business and the gold standard in host cell protein detection. As you can see there at the bottom, one of our favorite stats is that all 17 FDA-approved CAR T cell and gene therapies are QC'd with Cygnus kits. And we certainly hope that percentage continues. But here in the BST segment, we're playing across a broader, you know, the breadth really of the biologics market. And so any work done in any primary expressing cell line, your HEK, your CHO, your E. coli, and so on, one has to check for residual host cell proteins during biologics production. So that's why you can see at the top, there are 24 different cellular expression systems that are covered with these tests. Actually, almost 30 kits that do this work.
The output of all of these cell systems across the biologics market can be any of the things you see listed below. Maravai's model then is to take these scientific founder-driven companies and invest in them. To invest in further innovation where there are technology opportunities, to build and leverage scale, which we've done significantly during the pandemic, and to add particularly a commercial overlay where you have a category-leading product-driven company, very often you don't have a sophisticated commercial funnel. We have been adding significantly in that area, focused on key accounts and cross-selling across the different businesses, opportunities there, as well as adding predictability, our full intent as we go through and have more intimate relationships with the customers.
And then, of course, Maravai's model has been acquisition of this type of company, and we expect and intend that to continue so that we have both organic and inorganic growth vectors working for us. To that end, we keep a grossed-up structure. $580 million cash is another nice outcome of the pandemic participation. Long-term gross debt, a good interest rate. You can ask Kevin specific questions about that, but you can see that we have a net cash position, and have recently announced in the post-pandemic move here in Maravai 3.0, that we've taken some cost actions to set ourselves up while the industry regains its footing, and again, with the intent that we maintain our top-tier EBITDA percentage.
We believe then that we're in the right markets with an opportunity to grow significantly there, and hope that the pandemic simply hastens the adoption of the next generation of programmable medicines that leverage nucleic acid chemistry. We are at the center, of course, of nucleic acid chemistry, enzymes and inputs, and mRNA. We again intend to maintain a top-tier margin profile. Yeah, I think that's probably good. Thank you, and we'll take your questions.
Thanks, Trey, for that introduction. Maybe I'd love to start off with the non-COVID opportunity for CleanCap. Just give us an update on the status of the programs that you're involved with, maybe how many that you're involved with today, any color on where they stand in terms of phases, and importantly, are any of them getting canceled? Are they just on pause right now? What's kind of the nature of, I guess, those to the degree that you have visibility?
Yeah. Well, so we get that visibility, and we reported that number publicly in Q4 last year. We intend to do the same thing here for our Q4 this year. It is a deep dive in all all of the clinical trials with available data and then going through the material sheet. So it's something we do with a third party. We have initiated that study again, and we'll report the progress through Q4. But we have specifically, you know, many, particularly in the service area, you know, anecdotal versions of a story you've all probably heard many times today, which is that there are natural and expected, you know, delays in programs that might be technical, they might be regulatory, and so on.
And then there are maybe the abnormal or unnatural delays that are a function of people wanting to concentrate on, if funding is limited and there's concern about future funding, concentrating on latest, later stage, programs where they might be. The thing is, there's not a lot of later stage program, you know, assets in the mRNA space specifically. So in that case, it tends to be a rationalization of discovery activity unfortunately. It tends to be the first thing that dials down, and it tends to be the first thing that comes back when one sees, the market turn a corner.
On the CleanCap COVID business, what happens in 2024? I think the street's modeling like $20 million. You talked about for this year, having firm orders. Will, when you guide for 2024, will you have visibility on firm orders, and how should we just think about that revenue line, next year?
Kevin, you want to take it?
Yeah, I'm happy to take that. You know, look, I think that one of the reasons we didn't guide here at the end of the third quarter was some of the lack of visibility. We've had very strong visibility in the business for the past 3 or 4 years, particularly with regards to demand under our license and supply agreements for CleanCap for high-volume customers. You know, that demand is certainly down, and we're certainly working with the customers to understand what they need, and that's what's going on currently. And that's why we are deferring guidance on 2024 until we have those conversations and get a better handle on what our customers need. And I think they're still struggling with what they need, and I don't think we've reached equilibrium or steady state on this.
But it will be a smaller part of our business, certainly going forward, and that's, you know, one of the reasons we, as Trey mentioned, we made some cost adjustments as well. I think we're really focused on a cost structure that's tied to the base business, and we see that demand, whether it be for the pandemic or for respiratory vaccines in general, because I think you're going to see a less specific application of that, our technology going forward. It'll probably be into multivariant type of vaccines or other type of combinations. So having that discrete visibility, I think, is continuing to get less and less as we go year by year. It's going to be less COVID-specific and probably tied to respiratory panels or other type of vaccines.
So, you know, I think we're working with our customers, and we hope to get their view. Once we have that, I think it'll inform, you know, our total view, and then whether we think it's specific to COVID, it'll determine whether we continue breaking it out in 2024.
Got it. Trey, you talked about a number of the new facilities that have come online. Will Flanders 2 opening be incremental to revenue in 2024? Do you still target, I think, 2Q next year for that opening and given the environment, why not just pause it?
Well, we are actually slow-rolling that to a certain extent. So rather than do a traditional open for a service business where it's fully staffed, the good news is, again, we're supporting all of the GMP business out of Wateridge at the moment. So the intent is to open Flanders 1, which is the chemistry production group, and move some of that existing staff into the new building. And then Flanders 2 is a function of the stage progression for people who need mRNA, specifically phase two and beyond. And we get to plan that proactively with the customers in the pipeline. So there's not a... The facility is built, and again, the operating, you know, the carrying costs of the facilities are already baked in.
The fitment and finishing and formal launch with customer product will be, will be in, you know, targeting Q2 for Flanders 1 and will be specific to customer need for Flanders 2.
Good. One of the things you mentioned on the last quarter call, which I appreciate a lot of the detail about new partnerships with new pharma companies. One of them was with Thermo to utilize CleanCap, one of their Invitrogen systems for i n-vitro transcription kits. Will that be material next year? You know, is that one of the larger opportunities or, or, you know, more incremental, maybe less of a revenue driver in 2024?
We hope so, but it is, it's a part of the larger strategy, which is, again, to win early, and be with the customers when they're doing discovery, so that we can be a part of their entire journey, not just try to get in there, at the end, but really enable discovery. We think the technology's differentiated and gives differentiated performance, and that will hopefully lead to more development and more successful customers who are developing. So that's just part of that broader strategy to be included in as many programs as possible.
At the R&D day, you gave some midterm targets for, like, $700+ million in revenue, I think, in, in five years and getting back to 40%+ EBITDA margins. I give a revenue target, you know, specifically, especially given the lower base that you're coming off of, and what are the leading indicators the external investors should be looking at to, kind of assess how the market is developing, for the customers that you're supporting?
Well, one thing we're optimistic about is, as many in the industry are aware of, is what we hope is the impending announcement of a CRISPR medicine that's actually a cure for a disease. And that, I'm optimistic that, that will bring a newfound interest and vigor to the space. But generally speaking, our long-term model assumes a return to prior pandemic growth for the base business and, the participation in the markets I've described several times, and with roughly, as you've seen, the 1/4 biologics exposure and the 3/4 mRNA cell and gene therapy and, CRISPR gene editing exposure going forward. If you want to talk about how it was built, Kevin can add color.
Yeah, I mean, I think that, you know, for us, again, it is a target, and I think we feel good about the markets that we're in. I think that, you know, 2023 being a down year is certainly a challenge. But if you look back before that, I mean, our nucleic acid business had a CAGR of over 35% from 2018 to 2022. Our biologic safety testing business had a CAGR of around 15%, and that those both outstripped the markets. And I think we continue to think that our technologies, where we play price points, you know, consistency and steady pricing that we've had, continue to support those good, those positive long-term trends.
And as Trey alluded to, you know, that growth that we saw up through 2022 in the base business, excluding COVID, you know, was with a lot of things in very early stages, right? But it really wasn't this trend, this progression of supporting companies from phase one and beyond. It was really in the discovery, the preclinical, and really the early stage phase one work that we've been doing. So you take the progression, you take the transition from RUO to GMP, you take what we believe will be market growth over the next five years, and you perform at or slightly better, which is the embedded assumptions in those CAGRs to get to that number. It's something we feel comfortable with, and we're still very excited about.
I think it's also important to point out the infrastructure we keep talking about is enough to support that level of business today. So we have that capability to do that without tilting up new buildings, in other future investments.
The minute we've got left, and how are you thinking about capital allocation right now with the stock price where it is? Does it make sense to, you know, look at a buyback authorization, and what would, you know, be your priorities right now?
I think we maintain the structure that we talked about there, the growth stock structure, to be opportunistic for M&A and continue that primary mission. Have definitely had that question a few times. But that when, you know, when we get together with the board, as we just did, that we have quite a bit of conversation about the inorganic funnel, and we're still, we're still very interested in continuing that part of the mission.
Pretty good. Well, we're out of time, so we'll leave it there. Trey, Kevin, thanks so much for being here. Everybody, thanks for being at the conference, and have a great day.