Okay, let's go ahead and get back on track here with the Life Sciences track of the 2025 Stifel Healthcare Conference. My name is Dan Arias. I'm the Life Sciences and Diagnostics Analyst here at the firm. We're happy to have Maravai with us. We have CFO Raj Asarpota. Raj, fresh in from California. Thanks for joining us.
Thanks for having us.
Fresh in from Florida, if I remember correctly.
Florida.
Yeah.
Today.
Still a flight, which is still a challenge these days. You know, for you guys, I think what a good starting place would be would just be to kind of recap what the last six months or so have been for the company. You joined in June, if I remember correctly. There's been a strategic review in process. Maybe you can just talk a little bit about that process itself and then what came out of the process, how you feel about Maravai as a company heading into the end of the year, heading into 2026.
Yeah, let's start by, you know, I think, first of all, thanks for having us. About five months ago when I joined, the best thing we learned about the business was that, you know, we have great technology, deep customer relationships, great scientific credibility, and above all, very talented teammates. The focus first and foremost for both Bernd and I was to kind of right-size the company and lead a restructure that basically enabled us to commit to over $50 million in annualized expense savings that we hope to achieve. That's already off to a good start in the third quarter of this year. We saw $3 million of that goodness come through. As we kind of go into the fourth quarter, we're going to realize sequentially the growth of another $7 million plus. We're on track to deliver those savings.
As part of our strategic review, you know, we reorganized the company, removed a bunch of layers that had kind of built up during the COVID years. That has kind of really enabled us with centralized functions to start making really crisp decision-making on a streamlined basis. That has really kind of improved how the organization is working. In addition, I think one of the things that has kind of plagued the business in the past has been our whole forecasting capability. Under my finance group, we built out a sales operations group and capability that is now using really great business intelligence tools, bottom-up kind of planning, looking at customer forecasts, talking to our customers. We have this cadence of forecasting where we feel really confident that that accuracy that was missing in the past is now going to be turned on.
I, you know, I would say that as we kind of continue to refine the business, we saw in the fourth, you know, we communicated in the third quarter that we feel really good about the guide for the balance of the year. We have good visibility into orders, customer commitments, et cetera. We have kind of finished our budgeting process, and we feel really good about where 2026 is headed. All in all, there is a little bit more work to do on the strategic side, but, you know, I think we are at least in really good shape to lay the foundation and feel really good about next year.
Okay. And just to probe on the forecasting element, which I think is obviously critical here. It sounds like your own systems and the way that you're going about things is improved from the way that it was. You kind of alluded to it, but are you able to get better information from your customers? I mean, that has historically been an issue for a lot of companies, but certainly for yours.
Yeah, it's a great question, Dan. Let me give you a data point. I talked about kind of like the bottom-up forecast versus just kind of market top-down assumptions. That capability is now, you know, under Jimmy Burnworth, who's in the audience, but he's leading that effort for us. The other thing we've done is just a lot of like products, product segmentation. We've figured out like under a certain dollar threshold, we have a long tail of like orders that generates very little revenue. In the past, our sales teams were equally kind of focused on doing that, like as in, you know, the mantra was, "Don't lose an order at any cost," type of thing. We've gotten smarter about that. Now we've reorganized our commercial functions.
Our sales teams now are more focused on driving orders above a certain threshold that generate most of our revenue. In other words, we've kind of deployed our sales capital a lot more efficiently than we've kind of done in the past. What that has done is open up channels of communication with customers. We are getting good visibility into their forecasts, and that kind of gives us confidence that we've got a good process in place right now. We have a weekly cadence, a monthly cadence at the leadership level, and it's a combined effort between finance, operations, and the commercial teams.
Okay. If I could sort of summarize, it sounds like there has been an opportunity cost, so to speak, in chasing down accounts or orders at the end of the tail.
Yeah.
That has come at the expense of needle moving or better opportunities.
Yeah.
Now you've kind of refocused people towards what is able to move the needle.
Absolutely. That does not mean we are ignoring the tail. The tail is going to be more relegated to our e-commerce initiative. We are building that out. You know, we have got marketing efforts ongoing. That kind of covers the tail, but we are focusing our sales guys on the bigger deals.
Okay. Okay. So you touched on 3Q. Let's, I have to ask about that a little bit. Results were light relative to street expectations, albeit on expectations that were fuzzy a little bit because you had removed the guide for the year.
Yeah.
We were a little bit flying blind there. The NAP revs were, nucleic acid revs were down about 20% to $25 million. They had been in the $30 million range for the first half of the year. It seemed like there was some level of stability there. What drove the step down? The follow-up question will be naturally, you know, $185 million in as a guide for the year suggests a step back up in fourth quarter. You kind of touched on confidence and feeling good, but I'd love if you could just layer and add in a layer to.
Yeah, sure.
The 3Q to 4Q move.
Sure. As part of our diligence and the strategic review that I talked about, and as we were getting our kind of resetting the commercial team, kind of reorganizing that effort, we suspended guidance. Q3 kind of met our internal expectations, but admittedly, we had not communicated that to the street. You know, we wanted to make sure that we understood the timing and the rhythm, and some of our larger, like our CDMO orders and a little bit on the discovery side, just from a timing standpoint, fell more into the fourth quarter. What's really encouraging about our discovery business and the NAP segment is that through the, you know, through Q1 through Q2, even though we are declining, that rate is, the rate of the decline is decreasing, if that makes sense. In addition, we saw sequential growth.
We feel positive going forward into 2026 that we will actually have growth in that segment.
Okay. Are there just, you know, just to think about 4Q specifically and the things that will get you to the number, do you have orders in hand? Are you feeling like you have the confidence in this forecast and in this sales funnel in the near term that allows you to hit the mark on the end?
We do. We just closed the books for October. Strong order volume.
Okay.
Good growth. I think I would caution everybody to look at Q3 and Q4 more holistically since we had that timing issue. There is strong double-digit growth in Q4, but you got to take that into account, what the second half is. That kind of sets the foundation for where we'll go next year.
Okay. I guess, you know, the 3Q forecast was not exactly your own. It sounded like it was in line with expectations, but those were later quarter expectations, not.
Yeah.
June expectations.
Exactly. There was, you know, I mean, there's a lot, as you can imagine. We were going through the restructure, reorganizing the team. You know, a little bit of like moving, a few moving parts there too that we got our arms around.
Yeah, fair enough. Okay. Maybe we could just talk about the backdrop, the industry outlook right now, and just the things that are going on. Can you talk a little bit about where demand is and where the field is when it comes to mRNA-based therapies and how you're feeling about pipelines, project work in a, what is still a somewhat constrained environment?
Yeah.
You know, you sound like you feel good about 2026, but it does come at a time when things are still pretty up in the air.
Sure. Sure. Maybe a little bit of an industry backdrop when you think about, you know, the segments we play in on the biopharma side, I think there's recovery. There are promising signs of recovery. If you look at big pharma, there's a lot of, you know, they're pretty active. As you look at some of the small, you know, like the biotechs, the larger biotechs are doing well. Some of the smaller ones are still kind of cautious. They're starting to rationalize their, they have been rationalizing their program to the most promising assets. We see a little bit of that. Private funding, we think, is healthy. We're cautiously optimistic that at least the industry recovery is happening and it's kind of stabilizing. That gives us confidence on where, you know, we play and where mRNA can get traction.
The good thing with mRNA is just outside of COVID, now we're starting to see, you know, a little bit of traction around oncology and protein replacement and other autoimmune conditions that we feel are good, promising future growth levers.
Okay. Definitely want to hit on that in a second. Just to go back to your comment on project rationalization, which has been an issue over the last 12 to 18 months when biotech funding started to kind of dry up, that was the end result of that experience. I guess I'm curious whether you think project rationalizations are increasing in a way that makes the beginning of the year pipeline situation look different than now, or whether this is just sort of in line with what we've experienced over the last.
Yeah, it's a ladder. It's in line. So, you know, it's been kind of in line, stable. Luckily, not all of our businesses depended on that. So we feel pretty okay to manage through that.
Okay. So headline is you do not feel, you don't feel like there is a downward trajectory at the industry level that makes you, you know, that gives guys like me pause when it comes to what can this business do in the environment that we're in?
No.
Okay. Just got to ask.
Yeah.
All right.
Yep.
Okay. Now let's ask, let's talk about just what you mentioned in terms of non-COVID therapies that are being developed, because that was the thesis as we got to 2023 and said, okay, these COVID revenues are obviously not here to stay, but there is this pipeline of things that are being worked on that have nothing to do with COVID. It feels like it's taking a little bit longer to get some of those in the mainstream. Can you just talk about what it is that you're excited about? When you make the comment that you did, which is that it sounds like you have some things you're excited about, is it more about the number of companies that are starting to get into that field or the progression of discrete assets that are actually making their way through the pipeline?
Yes and yes. I mean, there are more and more companies, but also I think as you look at oncology as an example, you know, I think over the next 12 to 18 months, we're looking forward to some, you know, readouts that will ensure that given mRNA is already kind of written in their protocols, I mean, we'll already have products that can support that.
Okay.
Feel pretty good about that.
Any in particular that you'd call out? It's not a CFO type question, so I'll let you punt if you don't have any at the top, but I mean, is there.
I'll punt on that for now.
Okay. Fair enough.
Yep.
Maybe just thinking about the customer base itself, can you talk about emerging biotech and how much of the demand that you see, maybe to your point on the tail of the curve, coming from those folks versus just larger organizations, CDMOs? I'm going to ask you about your large customer concentration or what is left of it at this point. I'd love to just hear how important you think the emerging bio set of companies is to the next year, year and a half.
I think those set of companies are really important because early discovery, it gives us access to early discovery as these programs start to kind of move through the channel. We definitely, even if it's a shorter tail, but I mean, those customers then eventually, as their programs start to move, become into, translate into larger revenue and orders for us. It gives us great access. We, you know, with our GMP products, and as these guys start to move through, we start to turn the discovery into GMP and in turn start to generate more volume.
Okay. Obviously, a lot of those customers are starting up clinical trial work, and that for us is a metric that we certainly use, you have used as well. In fact, in your 1Q deck, you had a nice slide that I thought was helpful when it comes to the number of trials that have started, the number that are no longer in the process of taking place. In 1Q, that was basically a wash.
Yeah.
If I remember, within one or two trials.
Correct.
How would that snapshot look today?
I think that snapshot right now is pretty similar.
Okay.
Yeah.
All right. Is there anything that you think is a notable trend when it comes to your method versus other methods, co-transcriptional versus enzymatic?
Yeah.
That's obviously a big, you know, that's one way that you slice the market when you say, okay, here's what Moderna is doing and here's what Pfizer is doing.
Yeah. No, I think, you know, co-inscription, CleanCap is basically the gold standard for us, and that's kind of well understood in the market. We think that there's a lot of runway with that. Obviously, industry uses both. I think one way we're going to start taking, you know, deepening our base of customers is through our Mocktail technology. As you use Mocktail with CleanCap, it lends well to enzymatic capping as well. We want to take advantage of that customer base and use Mocktail to kind of have access to that business and get that growth as well.
Okay. Some of the new products that are entering the market now, and you certainly did sound like you were enthusiastic about that on the earnings call, that one got some airtime, should help the penetration rate. I do not presume that you are going to be able to switch from one method to another, but it does sound like for those that are naive to a decision, it certainly helps them get on board with.
Absolutely.
Okay.
Yep.
Pfizer has been a big customer for you over the last five years. They announced a handful of pipeline stoppages as we were heading into the conference. One was a varicella vaccine that was being developed by BioNTech. Do you feel like there is an understanding of the commitment that those two have, that those two have when it comes to what they're going to need going forward versus what they've done?
Look, I think all our intel tells us that they are not, you know, their promise on mRNA therapeutics is not kind of slowing down. They may have adjustments in their pipelines here and there, but they remain committed. Pfizer is definitely not a concern.
Okay. Yeah, I mean, COVID revenues are actually coming back into the picture for you guys.
Absolutely.
That's the thought right now.
Yep.
10-20 million is the way that you've laid it out, I think, initially for next year. What has no COVID revenues in the base this year and has it bringing something back into the picture?
Yeah. COVID in 2024 was like $66 million. This year that dissipated. We had zero COVID revenue. I think as those inventory levels have depleted and as COVID starts to ramp up more from pandemic to endemic, we are starting to see customers start to forecast and they're giving us insight into what their needs are going to be, you know, in the coming years. That's why we feel good about the 10-20 range.
Okay. Do you feel, do you feel as good, do you feel better about being able to forecast those revenues even though they're at a smaller scale or on a smaller scale than you did when you had to forecast revenues during the initial run-up of COVID?
Yes. Again, we've got better visibility. You know, no doubt that these can still be lumpy, but having said that, it's now kind of, it's just going to become part of our GMP portfolio. We're not going to call them out separately, but we feel pretty confident that that 10-20 is a good range.
Okay.
Yeah.
Maybe to the conversation on Pfizer and BioNTech, I mean, they were a very large customer for you. If you look at the filing, they're not as big as they were by any stretch. Now, Nakulai is your biggest customer, at least per the filing in 2024. I cannot say that I know a whole lot about that company, but the percentage of revenues from them does rise to the level that I feel like I should. I would love it if you could just talk about who they are and what they do.
Yeah. Nakulai is a distributor for Daiichi that contributed to a lot of revenue in 2024. We do not have any specific revenue intel on or guidance from them. We have not kind of put that into our numbers going forward. Like, we are not going to guide to that. Again, you know, I think that $10 million-$20 million is going to be a few customers that will continue to contribute to that. Some of that is still to come.
Okay. Nakulai is removed from the little that I know says that they are not in the COVID game or nearly not even in.
They have, I believe they are in Japan, they are like a big, they are doing a lot of development around COVID, et cetera. We just do not have a forecast or anything related to them.
Okay.
It is not part of our guidance.
To our point here on forecasting, is that a source of, is that at all a blind spot if they're 20% of revenues last year and they do seem to be a little bit more of an unknown quantity than some of your closest customers today?
Yes, but we're not counting on that.
Okay. So the point is to.
Yeah, exactly. We've got a more diversified base of customers that we think will fill in that $10-$20 million.
Okay.
Yeah.
Okay. And then maybe on BST, if I go back to 3Q or at least 2025, it was running at $16 million through most of the year. 4Q is expected to step down a little bit, but there is a little bit of historical precedence for that just in terms of seasonality. Is that the dynamic as we finish the year? When we first got to know you guys, that was an excellent business. I'm sure it still is, but the growth is not the same. Can you talk a little bit about the factors that are in play there? China, I'm guessing, is one, and just what you think the outlook for BST is in this new world that we are living in.
Yeah. So, you know, first of all, you're right. There's a step down in Q4 due to seasonality. That's always been the case. Q1 is really strong. Q4 is a little bit softer from that standpoint. We saw great growth this past quarter on, you know, in the Americas, the business grew 7%. In Europe, we had 17%. Growth in China was a little muted in Q3 as a result of the actions we were taking related to tariffs in Q2 and making sure that we had enough of a supply with our key distributor there. China remains a key market. We are continuing to support them and, you know, we will see growth there, but that's kind of the lay of the land there. As you know, the Cygnus business is a gold standard within biosafety testing.
The growth in the future will continue to come from the, you know, the kits that we have, the Mocktail, the Mocktail, we, you know, franchise that basically was developed a couple of years ago. We're seeing strong growth there. And then just kind of continuing to get market share and a little bit of innovation. That's basically the recipe to at least ensure that we're going to have mid to high single-digit growth in that business going forward.
Okay. So China is not up this year in BST, correct? But you're saying.
Correct.
It will be or should be in 2026.
It will be. Yeah.
Okay. And then is there anything that's worth noting about what Europe has going on? I mean, I think for you, U.S. and Europe were both good in BST in 3Q. The European component is naturally just a little bit less clear to us. Is there something about that that would make it non-sustainable, or do you feel like there's just a good path that those companies are on over there?
Yeah. No, I think it's very sustainable and stable. So we feel pretty good about that as well.
Okay. One of the things, if I go back to nucleic acids, one of the things that when you guys held an R&D day a couple of years ago at this point struck me as interesting is just this idea that going forward, there should be products that are in clinical trials or hopefully on the market that use demonstrably higher levels of CleanCap per dose or per patient. It seemed like a nice idea at the time, but it did not really sound like something that, you know, in 2021 or 2022, when that analyst day took place, was in place then. I'd love to just hear whether when you talk to your folks internally about the pipeline and the way in which it's evolving, is that a driver for you?
Can you start to think about just the per dose amount being something that helps you, you know, with revenues?
Yeah, I think so. I think as you start to kind of migrate from, you know, mRNA applications more into from infectious diseases to more into oncology, you know, protein replacement and other autoimmune conditions, that dosage certainly rises. Even within our CDMO business for gene and cell therapy, we think there is potential to drive increased dosage. You know, as I talk to our teams internally, that's what we're hearing.
Okay. Anything else in the pipeline? I mean, I know that you're not going to sit here and tell me what it is that you're going to launch over the next year and a half, but are there other products that you think you will launch that either increase the efficiency of what the customers are doing, drive new market adoption? The flip side of that comment would be, are there anything, is there anything that you're doing that decreases your ability to realize revenue? By that, I mean, when I learned about M6 as a product launch, it sounded great. It sounded like the customers were going to want that, but it also set off some alarm bells when it comes to just the customer efficiency from a new product.
There have been instances in life sciences where you give a customer extra productivity and you do not necessarily see the end result right out of the gate for you anyways. That is a long-winded way of asking about new products and whether efficiency for the customer represents a risk at all for you in the early days.
Yeah. I think that's a great question, but no, I think we feel pretty good about M6. And it's, like I said before, it's kind of like the standard. And we feel pretty good about M6 and how that's kind of increasing the efficiency, et cetera. Really what's kind of exciting is when you combine Mocktail and CleanCap together, it really represents something powerful for customers in terms of the durability of the mRNA, the protein expression, and how long that kind of continues beyond the standard product. It's going to improve their workflow. It's pretty simple to, you know, to use. I think we, you know, our Chief Scientific Officer talked about that in our Q3 earnings call. Customers are excited about it.
We are going to be, there's some, you know, good news and studies that we will talk about in the near future, but we feel pretty good about that.
Okay. I'll finish with a couple of financial questions. I'll give you a breather on the technical details of new products, which.
Oh, thank you. I'm still learning the business.
Thank you for indulging me on that.
Yeah.
You have talked about, or on the call at least, you talked about mid to high single-digit growth as a longer-term range that seems appropriate. Do you think that both segments of the business are set up to be in that range? If not, how would you have us constructing something at that level over the next couple of years?
Yeah. Look, I mean, it's pretty well understood that the Cygnus franchise is rock solid. I mean, it's a steady mid to high single-digit grower. It throws off great margins, incredibly profitable. My focus and Bernd, our CEO's focus is going to be a lot on how do you get TriLink to be, you know, the franchise that is equally valuable. To do that, again, I think we've said that our mid to long-term growth is in line with our peers. Whether you look at Thermo or Danaher or Sartorius, we feel like we're in line. The key differentiator there is the mRNA and how we start to kind of have use that as a catalyst to drive growth in the longer term, much higher than the mid single digits.
You know, as we kind of focus, like I said, on discovery, which will kind of continue that, you know, that shorter tail, I mean, that long tail. When you couple that with our GMP franchise and as customers move from discovery to GMP, a lot of our focus is going to be driving that part of the business along with CDMO. We've got a base of solid customers that's continuing to grow and they are giving us a lot of transparency into their future program. Feel good about CDMO as well.
Okay. That's great. Then on EBITDA, it looks like you'll finish the year with negative margins, but you are talking about positivity next year. What is the recipe for breaking through there?
Yeah. First, let me clarify. I think initially in our previous call, not in the Q3, but in Q2, we had mentioned that EBITDA was going to be positive in the second half of the year. We now feel good given all the actions we've taken, just not around the restructuring, but also where revenue is going to shape up. We feel really good to have that we will deliver positive EBITDA throughout the year for the full year rather. It is really a kind of function of, you know, delivering on those cost benefits. We've talked about the expense reduction. Again, Dan, the beauty of this business is that now that we've resized it, the scale that it enables us is going to make this business very profitable even at lower revenue levels. Again, we do not need to expand facilities.
We don't need to add operating expenses. Just the mix of product that we will sell next year will deliver those growth rates.
Okay. So it sounds like by the time you get to December 31, the recipe for a much higher EBITDA margin in 2026 is set in there and you have it on the table.
100%.
Anything numerically that you would have us think about there?
No. I think all I'll say is that, you know, we've communicated 50, but we feel like we've got many more levers to continue down that path around efficiency, automation, better decision-making like I already articulated, but we've got a lot of levers to expand the margin.
Okay. That'll have to do until the fourth quarter call, I suppose. So, Raj, I appreciate you spending some time with us here today.
Absolutely. Thank you.