Diagnostics team, we're excited to host Repligen for our next fireside chat, joined by Jason Garland, Chief Financial Officer, and Jacob Johnson, IR. With that, we'll kick things off. We're gonna do just a fireside chat. If you've got questions, throw up your hand, we'll try to call on you when we can. Maybe just to kick things off, you know, you guys recently reported 1Q just a couple of weeks ago. Maybe give us a high-level rundown of how the quarter played out relative to expectations. Sort of what was a little bit better, what was a little bit surprising. Any key takeaways there?
We started the year in our view, executing exactly what we set out to do, right? We had a strong first quarter, better than expectations, certainly on a top-line basis as well as earnings. You know, it was right down in the middle of the fairway for our overall total year guide on organic growth. Started strong on the top line and enough confidence in our margin profile that we actually raised EPS guidance for the year. Financially, great start. You know, second, I'd say that it helped build that confidence in our total year guide as well. You know, we look at, again, first quarter 11%. We've shared that second quarter is gonna be around the same.
That's right in line with our total year guide and which means the second half doesn't require an acceleration in growth, right? Again, we kinda keep executing what we're doing, so we've increased our confidence. The other thing is that we've delivered that margin expansion, but we also shared, I think, some tangible actions that we're taking to make margin expansion, I'll say, number one, more sustainable, and two, accelerating a little bit beyond what we've shared before. We launched and announced the Transformation Office, both focused on our Fit for Growth journey in terms of the capabilities we have to continue to grow and scale, as well as some very specific projects that will help deliver, you know, margin expansion.
We shared that by the end of next year, 2027, on a run rate basis, we'll see, you know, about a point of margin expansion as a benefit. Again, we're building a, I'll say a structure, a framework, bringing in the right resources to execute that. We also announced a small sale of our Polymem segment, you know, small, like $7 million-ish of sales last year, but losing money. Again, cleaning that up as well as a part of our transformation. The other thing that we were really excited to share was the signing of an OEM partnership in China.
We've talked a lot about finding ways to be, I'll say Our design using their local manufacturing cost structure, local supply base, but that gives us, again, access to compete with local players in a different way. We couldn't have been happier with the start of the year with the financials we put up and the trends and all the great strategic priorities that we're executing.
Okay. All right. That's a good overview. Maybe we'll dive into it a little bit deeper.
Yeah, absolutely.
into the performance based on the quarter. Can you sort of talk through, you know, filtration, chromatography, protein, sort of like, you know, go through the segment or sub-segments, you know, one by one, walk through it.
Protein grew very strong. We saw both strength on the ligand side, but then also some of the other pieces that we have within our custom and resin. You know, we filtration again, kind of mid single digits with overall growth. We talked about some dynamics there with ATF, and happy to share some more of that a bit later. Chromatography again, really great growth in the quarter, as well as our analytics segments. We've seen a lot of continued traction on particularly our upgrade cycle and the SoloVPE PLUS within our analytics business. In fact, they helped really lead the charge on our overall equipment performance as well in the quarter. It was great as we saw, you know, great growth across all the franchises. Again, a good testament to the kind of the breadth that we have and the diversity through the portfolio.
Okay. I mean, since you touched on ATF, maybe we'll dive into that a little bit deeper.
Yeah, sure.
You have some customer-specific timing, some inventory dynamics. You know, you have a little bit of a more moderated outlook for that for 2026. Sort of what gives you confidence that you've got, you know, strong visibility there and sort of talk about the rebound beyond that?
Yeah, yeah, absolutely. I think my first point is, you know, ATF grew in the first quarter from both consumables and capital equipment. As you mentioned, Mike, we called out a headwind on ATF that, you know, moderated our expectations for ATF for the balance of the year as kind of as part of our updated outlook for the filtration franchise as well. You know, in terms of what's going on there, it really relates to two customers who are managing inventories. You know, we don't think that's totally uncommon for kind of a novel technology like ATF when it's early in its life cycle. We expect those customers to kind of order again next year.
That's what gives us confidence, you know, in ATF returning to robust growth next year. I think the other important point is, you know, both those customers, you know, use ATF beyond, you know, the commercial drugs, or commercial drugs we're referencing there. You know, we think it's really kind of specific inventory management, you know, doesn't relate to anything else. You know, I think as you think about ATF, you know, this year and beyond, we continue to win new customers. You know, we continue to expand with existing customers, and we have a really strong pipeline of opportunities.
I think to the prior point Jason made is, you know, even with that headwind, we still have the same organic growth outlook for the year, which highlights, you know, what we've been emphasizing for some time, which is we have a broad, diversified portfolio of offerings and growth opportunities across all our franchises.
Yeah. One of those customers actually is platforming ATF across a lot of their lines. Again, this is a very specific inventory dynamic they're managing.
Is that like a three, six-month drawdown? Sort of just like how long until you're past this headwind?
We see it as kind of a 2026 item, right? Whether that changes towards the end of the year, we'll continue to connect with them. We're, you know, our outlook and assumptions is that really that there's nothing that comes through point.
Maybe the other important point I should note is, you know, outside of kind of the dynamics in ATF, we see healthy demand for consumables, you know, in the rest of the portfolio. Again, I think this is very much kind of a ATF customer-specific headwind that we called out.
I'm sure you've done this work, you know, outside of those two customers, what are inventory levels like? Is there a concern that someone else, you know, three, six months from now down the road will have the same process? Is this something that, you know, these guys had more elevated inventory to begin with?
I think as of now, we see it really confined to these two customers. I think it's a testament to how close we are with these customers that we kind of were able to identify this and call it out as it became apparent. I don't think we're seeing the impact elsewhere within ATF on any other customers.
We still have a good mix of commercial versus clinical as well, business. You know, this type of order magnitude of inventory is gonna be more on the commercial side as well. Again, the breadth of what we're offering helps in that too.
Okay. All right. Maybe more broadly in the portfolio, you know, the strength you're seeing, in the first quarter, the strength you're projecting for the rest of the year. Anything you can point to in terms of, you know, product type or drug class that's driving that? Is it more, you know, mAbs, biosimilars, you know, cell and gene therapy? Just sort of dive into sort of where you're seeing the best opportunities.
Yeah. I'll start on the kind of modality side of things. Then I'll let Jason kind of maybe chime in on products. Yeah, look, I think it's very much mAb driven. You know, in the first quarter, new modalities were dilutive as expected. You know, we've talked about or cited this gene therapy headwind. You know, as a result, you know, I think we'll continue to view new modalities as dilutive for the year as well. With that said, if you look under the hood, we saw strength in cell therapy, which we've now seen for several quarters now. I think that's really encouraging and we're seeing a lot of opportunities there. Then if you look at gene therapy, you know, ex that particular headwind, we actually saw growth in the quarter.
I think that's encouraging along with the fact that I think there's been two gene therapy approvals this year. I think you put all that together, we continue to view new modalities as a strategic end market for us, and we are seeing opportunities in cell therapy. ADCs aren't in that count, but I think we think about them similarly.
From a product perspective, again, they cut across both mAbs and new modalities. That's what's great is we serve both of those kind of equally across the portfolio. Again, talked already about the analytics growth. That's certainly gonna be one of the things that we continue to lean on this year. Chromatography as well, a lot of good demand, a lot of good conversion of new customers. Again, this is that type of product where you're not we're not very frequently competing with a similar. It's more about convincing customers that they can outsource what they most often do internally, and the service and the value that we can bring for that, and we continue to see good conversion on that. Those are the two areas in particular that we're really excited about. Proteins as well, which have continued to have a strong year.
You talked about, you know, dilutive growth from new modalities and some of the effects there. Is that specifically a 2026 dynamic? Is that a little bit longer? I mean, like, it's still early in the year, but, like, how much visibility do you have into next year and beyond, you know, when that could turn to be, you know, growth accretive again?
I mean, we're still hurt this year by the gene therapy, you know, change. That, and like Jacob said, outside of that in the gene therapy space, we're actually growing. We see it as kind of let's get through, you know, the anniversary of that headwind and overall, you know, still very bullish on new modalities in total, and particularly gene therapy.
To be blunter there, for people who aren't familiar, that relates to a specific customer, and we're assuming zero in revenue from them this year. I think hopeful that we won't have that headwind again next year.
Can't get worse than zero, right?
Yeah. It's an easy comp too, right?
There you go. Maybe one of the, you know, the other lens that investors look at, when thinking about the business and the market is equipment versus consumables. You know, you've had really good strength in consumables just for a while. Equipment, a lot of focus on orders, you know, lead times there sort of as a leading indicator. You know, you talked about some improving equipment order trends later in the quarter. Just help frame the magnitude of that, you know, how strong of a single data point that is. You know, maybe being like week to week on equipment orders and book-to-bill and things like that. How much should we be reading into that or not reading into that?
Yeah. If you take a step back, you know, the guide assumes, you know, equal growth, right? Low double digit for both of those segments through the year. Again, I think good equal contribution overall to our growth story. You know, consumables again, it's been great strength and will continue. The equipment I think is a bit of a tale of two cities. We've got, again, I've already referenced this a couple times now. Equipment's absolutely being helped by the analytics side. Again, that upgrade cycle is a big piece of that. We saw analytics up 50% in the quarter, and 40% was organic, right? Because we still have some inorganic from the 908 Devices portfolio that we purchased from them.
You know, that's really been a leader. Then the other piece on the equipment side that's been a growth driver for us is mixers. You know, this stems from an acquisition we did the end of 2023. We launched new products and really starting to see some good pickup on the, on the mixing side as well. You know, that's another place that's had some good luck in China, in too. Those have been really the growth. When you look at the, I'll say the more traditional, you know, downstream filtration systems, that's where, you know, we're seeing more of a flat dynamic. This is where, you know, your question about kind of customer dynamics, where we continue to see a good pipeline in our funnel, right? Of opportunities.
We're picking our analogy, but waiting for the tap to open or the dam to break. Pick and choose what you like. You know, we're still waiting for customers to start, you know, taking some decisions. We don't see it as a, "Oh, we're bringing in opportunities and we're losing them." It's the decisions aren't being made and there's Whether that's M&A digestion or kind of just some of the overall uncertainty in the overall pharma space, you know, we see some of those decisions being delayed. That's, we talked about that, you know, in February, and that dynamic continues. Again, back to Jacob's point, with a broad and balanced portfolio, we're able to, you know, offset some of those lower points with other fast-growing products.
Why has analytics been so strong? Is this a comp dynamic? Something about, you know, portfolio refresh, newer technologies? You know, what's driving the extra investment there from your customers?
Yeah. It really is that portfolio refresh. I mean, we launched a new generation of our at-line, you know, device. It's the SoloVPE PLUS that we just launched, you know, with upgraded features and technologies. You know, frankly, this is one of those areas where, you know, when Olivier came in, it was, "Well, what do you mean we haven't, you know, upgraded or launched a new gen of this after." What was it? 10 years or six to 10 years old.
You know, it's been a while. We took that on, became a priority, and we're seeing some great traction. Again, it's, you know, we all love new technology, right? Our new next-gen of phone, et cetera. Again, it brings enough good capabilities, functionalities that it's been a real good success. There's a fair number of units out in the install base that we've been going out to capture. We kind of see this as a tailwind for us probably over the next, you know, 18 to 24 months. And then also expect with that to be able to capture some new growth as well. Not just the, you know, the upgrade and replacement cycle, but actually, you know, get new customers.
It's a broad customer base that we sell that to, right? You know, it tends to kind of the at-line tends to be a little bit more on the PD side, but it's not, you know, it's big pharma, CDMOs, it's biotech, et cetera. We've got a lot of good customers.
You, you know, you mentioned some of the larger, more traditional filtration systems still being a little bit touch and go. I mean, what are we waiting there? Is this a capacity issue where there's, you know, there was a lot of investment there in prior years, and you just don't need the extra capacity? Is this a reshoring dynamic? Sort of like what's the, what's the next step there?
Yeah, I mean, look, we've characterized it as just M&A digestion, just kind of the pharma, you know, ensuring and understanding, well, what are the priorities? You know, some of the changes that we've seen with the administration and priorities as well, and how to respond to those. I think our view is that, you know, the capacity will be needed, right? The end therapies and drugs that are ultimately being produced will continue to grow and they'll need, you know, more capacity. It's just kind of deciding when and where, right? I do think there's, you know, that everyone has talked about the opportunity with onshoring, and that it makes sense to either expand or build out within the U.S.
The timing on that still seems to be, you know, somewhat of a question. That in the end of the day, you know, even if a small percentage of the overall, you know, the onshoring opportunities now is very big numbers. Even if you got a small amount of that, you know, we still think there's an opportunity for all players in the space. I think it's just the timing and that we're waiting for to see kind of what our funnel of opportunities continues to grow. Now again it's kind of, you know, when does the tap turn on?
Hanging on a couple other points you briefly touched on earlier from sort of like a customer segment perspective. Emerging biotech, you know, grew nicely in the quarter but still sort of, you know, below historical levels. We've gotten really mixed data points on how biotech is playing out across the industry. What are you seeing there, and what's it gonna take for that to fully come back?
Yeah. I mean, I think first off, because we get asked a lot about this, right? Clearly funding was really good in the fourth quarter last year. I think really good in the first quarter, and it seems like April was really good. I think, you know, that's certainly an encouraging kind of KPI, and I get why people ask about it. You know, the reality is, you know, they get the money, we then need it to get out the door, right? I think, you know, for us, we've had four straight quarters of growth from that customer base. I mean, one, the comps start to get tougher, but I think that suggests, you know, we're seeing stabilization.
With that said, if you look at, you know, whether it's U.S. dollars or our mix from that customer base, you know, it was probably 80% or 90% of our revenues right now. You know, not that long ago, it was 10% of our business, if not a bit higher, right? That's where our view is. It's certainly, you know, encouraging trends there. Certainly think there's an opportunity in front of us, you know, given the funding trends. I think we'd like to see kind of more tangible evidence of that money being spent before we kind of declare that it's back. Certainly we're under indexed there versus where we were, you know, not that long ago.
Yeah. I think for us, you know, the question always becomes, well, you know, as funding's picked up, what's the timing, right? Does that translate to orders and sales? I don't know. People always kind of talk six to nine months, maybe in today's environment, that ends up on the longer end of that range. That's what we're waiting for as well. Overall, we still feel like that segment will be a tailwind for us, you know. The timing and how that flushes through is, I guess, still to be seen.
Okay. You also touched on China In your opening comments, including the OEM partnership, just to get a little bit more of a local presence. China seems to be rebounding strongly, you know, overall. Where are you seeing better performance there, if you could break it into like what are the pockets of growth? Would just love to hear more about, you know, the OEM agreement and maybe next steps beyond that.
Yeah, I mean, number one, we firmly believe that biopharma in China is gonna be, you know, a key leader, right, globally and will be a huge source of growth. You know, really I'd say we've been employing two elements of our strategy. Number one is we brought in new leadership, new team in many cases in our existing China, you know, country structure, and we're already starting to see, I think, some of the benefits for that. We've had our best quarter in the last two years in China on a very low base, mind you, and coming off of, you know, some share loss.
I think again, we've got now a much stronger team that's able to capitalize on the opportunities that we have, and that cuts across a lot of pieces of portfolio. That's the kinda go execute and run what we got, right, and with the team we have, and we're starting to see some good momentum there. The second piece is now back more to our longer term strategy, which is the OEM partnership. Again, our view is that to really be able to support and take advantage of the overall biopharma growth in country is to be more localized, right. Like as I said, you know, our view wasn't, "Oh, let's go plant a flag, build a greenfield." It's how do we find the right partner to grow with?
They'll start, you know, manufacturing our products. We'll sell that. It could evolve into, you know, a broader relationship, building more products. And certainly we'll be able to maybe leverage some of the local relationships that they have otherwise and be able to grow with, you know, in different ways. So the question always becomes, okay, you bring in a partner, you know, is there a risk of technology IP loss? You know, and our view is that, you know, we certainly took the time and vetted to find the right partner. You know, we haven't announced the company, but we know the leaders. You know, our leadership and team have worked with them in the past.
You know, they're trusted, known leaders in the industry. Our view is that there will always be a risk of IP loss, but you either sit out and watch, you know, and not take advantage of any growth in China, or you participate and you manage this risk, and that's really been our approach. We're really excited about what this translates to and allows us to play in a more localized way and take advantage of what we see is again, is going to be a big biopharma growth in the region.
You know, you talked about a local presence and having sort of that flag. Is this one move enough or do you need to do more? Does this get you everywhere you need to be?
Well, I think.
All the way there or is there more you need?
I think for us it's a step. You know, our view, again, depending on how it goes, would be to continue to expand with this partner in different ways. You know, we see it as a first step of multiphases, which could be more products, it could be different relationships, it could be, you know, at some point, you know, if there Within Asia, there's other countries and regions that, you know, are amenable to, you know, trying to build products as you expand out. There's a lot of different ways we could get there. We kind of see this as step one with that path to be defined.
Okay. Maybe along a similar line, let's talk about cash use, M&A, portfolio evolution. You've got, you know, almost $800 million of cash in the books now. You've had a focus on, you know, capacity expansion, analytics, some innovation. How are you thinking about M&A opportunities going forward? Any gaps you'd like to fill? Any opportunities shaping up there from a valuation perspective?
Yeah. I mean, M&A remains our high priority for us. We still think that's the best use of our capital and the cash that we have available. We again, are focused on finding technologies that are differentiated. You know, we don't wanna go down a me too path. You know, there's gaps to be filled in our portfolio. We've shared those a lot, both on the mAbs side, also opportunities to support new modality workflows. A lot of opportunity, you know, very active in the space. We've also gone down the path of, you know, minority interest as well, investments. You know, we announced Novasign earlier last year.
This allows us access to partnerships and new technologies, you know, frankly, without sort of needing to deal with some of the short-term dilution that might come with earlier stage companies. Really excited about what Novasign can bring, and we're open to that type of investment as well. A lot of, lot of activity, a lot of opportunity. You know, it's all got to line up. You know, they got to want to sell when we want to buy and all the pieces that come with it, but very active right now.
Okay. We got about five minutes left if there's any questions from the audience. Give you a chance. All right. Well, we'll keep going. Let's talk a little bit about margin progression. Margin story from here. You know, you introduced the transformation office targeting some incremental margins. What are the biggest levers you have? Can you talk us through sort of what that ramp could look like over the next couple of years, the trajectory would be?
Again, I kind of made this point earlier that the transformation office is a way to formalize and I'll say assign and dedicate the right resources to a lot of different priorities that we've been, you know, either working through or planning. It puts the structured framework around in a way to bring in, again, not only dedicate some of our internal resources, but also bring in some external experts to help us. We see it as a path for acceleration. You know, we've shared, you know, probably over the last year or more this target to get to about a 30% EBITDA, you know, within five years.
I also have shared often that we felt like, you know, 2026, 2027 were still more of investment years, and we would see, you know, say an acceleration of that margin expansion in the latter part of that period. I think the Transformation Office and some of the benefits it can deliver for us is a way of accelerating that employing some, you know, I won't say it's linear, but you know, making it less of a, you know, sort of a ramp-up at the end, and put the framework. It's going to be focused on, you know, products in our portfolio. For example, we, you know, we've talked about, you know, fluid management is 1 of the elements of the portfolio that is below average, right, for our product margins.
That's one of the focal points, which could be design changes, material, it could be manufacturing, adding more automation, et cetera. Outlining all those different opportunities that can drive it. There's other things in terms of supplier, working with them. Then we also talked about beyond the margin expansion, the transformation office would help us on our Fit for Growth journey. The big one in there is our, is our IT modernization, right? Making sure that we take more advantage of the systems we have today, and then also rationalize I mean, for our size company, we have way too many apps, way too many vendors, right? How do we rationalize those? How do we start to align on common platforms?
All of that as well as a push on our data management and infrastructure will be the foundation for us to build more AI. It's, you know, from an internal benefit, as well as in how do we incorporate that into our product as well. That's why that's a really important one because it's the Fit for Growth, it's modernization, but frankly, I might get some savings as well when it comes to some of the rationalization on vendors. Really excited about this. I think again, we said that this be about a point of margin expansion by the, you know, on a run rate basis by the end of 2027. We'll see some of those benefits. Then on a go-forward basis, we'll, you know, kind of see that full point from 2028 and beyond.
Okay. Maybe one last big picture question from me. Just thinking about, you know, the markets and where we sit today, and you know, how we feel about the bioprocess market going forward. It's been, you know, really volatile the last couple years. We talked about some of the moving pieces with some of the individual customer contracts and maybe some modalities. You know, you did 11 in the first quarter. You're guiding to, you know, nine to 13 for the year. You know, taking a step back, everything I've gotten on emerging biotech, pharma, M&A, restore in China, you know, has it changed your views on, you know, bioprocess long-term algorithm, long-term growth demand drivers?
Absolutely not. I mean, this has incredible tailwind behind it. Again, we see this year still kind of this digestion happening, and like I said, the pipeline and the opportunities continue to build up. We think we're well-positioned to capture those opportunities in a different way than we ever have before with our broader and deeper portfolio, as well as the relationships that we build. We, you know, we've talked a lot about starting to actually have some swings at bat for RFPs. We actually won, you know, won recently, and so that's gonna be the start of it. We're thrilled. We're excited about the year and even more excited about the future beyond to 2026 and the opportunities that we have.
Okay. All right. We'll have to leave it there. Thanks everybody.
Thanks, Mike.