Yeah, welcome back to the 45th Annual TD Cowen Healthcare Conference. I'm Brendan Smith, Senior Biotech and Life Science Tools and Diagnostics Analyst. It's my pleasure to introduce the CEO of Rapid—Rob Spignesi—excuse me, President and CEO of Rapid Micro Biosystems. He's got a lot going on, so he's going to give, I'd say, 15-20 minutes of prepared remarks up front, and then we'll kind of transition to a moderated Q&A. Again, at any time, if you have any questions that are really burning a hole in your pocket, feel free to email me at brendan.smith@tdsecurities.com, and we'll get to it in a latter half.
Thanks, Brendan. Good morning, everyone. Again, my name is Rob Spignesi, and I'm joined here by Sean Wirtjes, our CFO. Thank you for your time and attention. With that, we will dive right in. I believe for the webcast, the slides should be sequencing automatically for folks online. Disclaimers, we'll jump right in.
J ust by way of background and context, Rapid Micro Biosystems is focused on a critical part of a global pharmaceutical quality control infrastructure called microbial quality control, which is a process by which all pharmaceutical companies go through, no matter where they are in the world, to ensure that their products are free of microbial contamination. Think bacteria, mold, etc., and other organisms, and effectively safe for patients to use.
The problem is the fundamental methods that are used in the vast majority of pharmaceutical locations around the world have not changed since Louis Pasteur invented them about 100 years ago. They are out of date for modern pharmaceutical manufacturing. As a consequence, they are causing costs and risks for the industry.
We have developed a technology platform called the Growth Direct platform that fully automates this legacy process and brings it into the 21st century where it belongs. Before we dive into the materials, a bit about who we are by the numbers, if you will. In 2024, we recently reported our final results of $28 million in revenue for the year, which represented 25% revenue growth in 2024. Notably, $15 million of that was recurring revenue.
It's an important part of our business model, and we'll talk about it today, where we place capital equipment in the Growth Direct platform, and we pull through a high yield, a high rate of durable and sticky recurring revenue. You can see here, it's greater than 50% of our total revenue. Once we are validated in a pharmaceutical environment, that revenue is quite durable. From a Growth Direct System standpoint, globally, we have over 160 placements globally.
I'll go through our customers and where those systems are in a few slides. Notably, over 135 of those systems are validated, mostly in GMP manufacturing environments. That means they're put to work in the daily use for pharmaceutical manufacturing and ultimately release of medications for patients. We operate in about 20 countries globally.
From a customer standpoint, we are very proud to count about 70% of the global top 20 pharmaceutical companies as our customers. Also notably, the vast majority, 86% as of today, of FDA-approved CAR-T manufacturers are using the Growth Direct in routine operation. We will get more into this as well. The Growth Direct platform addresses all pharmaceutical manufacturing modalities, but we are especially strong in the advanced modalities of biologics and cell and gene manufacturing.
Okay, a bit about our financial performance over time. First, from a revenue standpoint, you can see we have had strong growth over the past few years, about 28% compounded. Again, a notable part of our business is that recurring revenue, which you can see here in the darker color. A strong component of our overall growth is that recurring revenue.
We will get into our commercial and growth strategy in a few slides, but it is predicated on landing new customers and expanding with them and growing across their manufacturing networks. That has really helped to deliver this revenue profile, coupled with we install and validate the systems and put them into routine use. That starts generating that very strong recurring revenue you see there. Also notably is our gross margin profile.
It dramatically improved over the past couple of years. You can see the improvement to near break-even from quite negative in 2022 to where we are now in 2024. We have had a withering focus, if you will, on improving our gross margin profile with direct product cost activities, improving our manufacturing efficiencies, and our service productivity as well, which has resulted in a robust improvement in our gross margin profile.
We reported 2024 final results last week and wanted to update you all on some of the highlights. Record Q4 revenue, ninth quarter in a row of meeting or beating our revenue guidance. Again, over 160 Growth Direct Systems deployed around the world. Notably, we inflected to positive gross margins in the business in Q3 and Q4.
We announced a new collaboration with Merck KGaA, doing business as MilliporeSigma in the U.S., and with Lonza as well. We will go through both of these collaborations in a bit more detail in a few slides, but very excited about these collaborations. On a quarterly basis, $8.2 million in revenue, about 30% growth, $4.2 million of that recurring, 6 systems placed, and 4 validated. On the year 2024, $28.1 million in revenue, $15.5 million of that recurring. You can see 21 placed and 16 validated.
We established a 2025 outlook of at least $32 million for 2025 with meaningful improvement in gross margin. Continuing that trend you saw on the previous slide. We announced on our earnings call a distribution and collaboration agreement with Merck KGaA. We'll use the term MilliporeSigma. That's how they do business in the U.S., at least.
Some notable features of the collaboration: it's global. It's global in scope. It's a five-year co-exclusive distribution agreement. It's got a couple of different elements to it. By co-exclusive, we mean that MilliporeSigma can sell the Growth Direct and consumables globally on an exclusive basis with Rapid Micro Biosystems. We will still maintain our direct sales force.
Rapid Micro Biosystems will also install, validate, and service any system sold, whether it comes through the Rapid Micro Biosystems direct channel or via the MilliporeSigma channel. There are minimum commitments in the agreement. We have not publicly released what they are, but we have said in year two of the agreement, it's a significant quantum.
An interesting part of this collaboration is the ability to further penetrate areas that we are not from a customer segment standpoint. We're really strong in pharmaceutical manufacturing globally, but we don't cover all pharmaceutical modalities, just given our size and scale. There is opportunity in adjacent markets such as personal care, cosmetics, med device. Part of the strategy here is to leverage the scale of the MilliporeSigma to get us into some of these segments that we have not even begun to penetrate, for example.
That rounds out the commercial side of it, and we're very, very excited about it. Moreover, there are two additional elements to the collaboration agreement. The first is an agreement to collaborate on supply of product from MilliporeSigma to Rapid Micro Biosystems with a focus on cost of goods. Much of what we procure that goes into our cost structure, especially for consumables, MilliporeSigma has in their product portfolio.
The goal here is to source those materials and further accelerate our gross margin journey. There is also opportunity under the agreement to collaborate on products, technologies, and services. That could be—the portfolios are quite complementary now—that could be creating synergies between the product portfolios as they exist today. Also, potentially development of new technologies, products, and services for customers. Again, over five years.
I think it's straightforward to see this agreement wraps around our priorities quite clearly of accelerating Growth Direct System placements, improving our gross margins, and driving innovation. It's a very, very strong fit with our core strategy. I wanted to zoom out a bit and kind of give you context of the problems that we're solving in our company.
I think we all can agree that advances in scientific and technology developments in how we manufacture modalities of therapeutics, the kind of therapeutics that are being manufactured, have changed the way the value chain works in pharmaceutical drug development, discovery, and manufacturing. Certainly upstream, how we discover drugs has changed clearly, and downstream, how we manufacture.
The problem is, and again, this is what we're going after in a strategic and macro concept, is the fundamental infrastructure and how we make sure these drugs are safe for consumption hasn't changed. You have this incongruent situation where you have all this advanced technology, advanced modalities of manufacturing, and you have a legacy fundamental quality control infrastructure that was developed at a time when these modalities weren't even thought of yet.
That's what we're going after, is to bring this into the 21st century. It's clear to see by this slide here what the weak link in the chain is. Zooming in a bit to kind of how the day-to-day works and kind of what we're going after to give you a little bit of a day in life, if you will.
For those of you who have not been inside a Micro QC lab in a pharmaceutical manufacturing site, here's what one could look like. You're going to see a lot of people, Petri dishes, papers, pens, incubators. Those are the tools of the trade. The way this works briefly is you could have dozens, you could have hundreds in some cases of Micro QC technicians that are coming in, they're gathering their test lists on a piece of paper, stacks and stacks of Petri dishes.
There are different forms and flavors, but they gather all their sample collection, media formats. They fan out across the manufacturing environment, and they start testing, taking samples off themselves and the manufacturing employees. Human beings can be the most prolific source of contamination in any environment.
The manufacturing services, the water systems, the air systems, basically anything that's either touching the product or around the product itself. This could be hundreds of tests per day or thousands of tests per day for some of the larger facilities. Always come back to, for those of you in this room, it could be a room this size. It's basically an incubator with shelving systems all the way around. They put their Petri dishes up there and come back a week, two weeks later.
Each individual will take their Petri dishes, look at, and remember, thousands and thousands per day at the high volume size, minimally hundreds per day. Looking at each sample and count how many A's are contamination and B, what's the count, write that down on a piece of paper. You can see that here in the slide.
Ultimately, it finds its way into a computer system. It sounds exhausting. I'm exhausted just kind of walking through the process verbally here, but hopefully it's clear to you all. It's a high-volume process. Again, it's mandatory. This is what the FDA and the EMA and the other regulators will audit when they come into one of these sites. It's insecure.
Again, it's a lot of people counting, transcribing. It's open, unfortunately, to falsification. There's a lot of that challenge in it. Human error, just counting. We as humans are great at a lot of things. Repetitive, high-accuracy tasks probably isn't top of that pile. Paper-based, slow. Again, you get it. This is kind of what underpins the vast majority of the quality control environment and the vast majority of pharmaceutical manufacturing around the world. We decided to solve this problem.
We did that via the Growth Direct platform, as I mentioned. It is the only fully automated, high-throughput, and secure system available. It consists of the Growth Direct System itself, which you can see on the left, a full suite of proprietary consumables. Our goal here is to—it is a high-capacity, high-throughput system that automates, again, the vast majority of those tests.
There are different forms and flavors for environmental monitoring, water testing, bioburden testing, and sterility testing. The Growth Direct can take all those on board in a high-capacity, high-throughput manner and automate all of it. Some customers have multiple Growth Directs lined up, just giving us so much volume. Importantly, a full data and software complement seamlessly interconnects the Growth Direct or Growth Directs to the customer's information management systems, and we will touch on Lonza a bit later.
Global validation and support services get the systems installed through the validation and into the routine use format and the system of record for our customers. Customers are delivered a very strong value proposition. Data integrity is near the top of most of our customers' list. This is the—think of data integrity as, can you trust the data?
Going through that process that I went through, some of that data might be—it might be questionable. Mistakes could have happened. There could be falsification. Data integrity is being enforced more and more by the regulators. Our customers are reacting to that by acquiring Growth Direct Systems to go from what could be a data integrity challenge environment to a highly robust environment. Operational efficiency is also a very significant value prop. Think of it as—our system is also rapid.
Think of it as we deliver a much faster, secure piece of data so customers can make a faster decision. I can ship to market faster. I can move to the next processing step faster and more securely. I can find a problem faster. If I find a problem on day two with the Growth Direct versus day seven with the legacy system, I can stop manufacturing five days of what will ultimately be scrap material because you have a contamination event.
Huge savings, huge ROI in many cases. Accuracy and insight. It's computer-driven, machine-driven, with an AI-driven vision system that does all the analytics that creates the ultimate analytical result. This is why customers are acquiring our system. On this slide, you can see the transformation through which their workflow goes through.
You go through a very convoluted—basically, the one I walked through, 15 steps here, manual, all the downsides I mentioned. It's slow. It's unsecure, notably. To a leaned-out, fast, walk-away, fully automated, data-secure workflow. Dramatic difference. This is a slide with a broken value chain fixed, effectively. We like to think of it with the Growth Direct becoming the new fundamental quality control infrastructure for global pharmaceutical manufacturing.
A bit more about the market. There are a number of what we consider powerful tailwinds that are persistent, that are not going away anytime soon. It's a large market, roughly $10 billion broken down by $5 billion recurring, $5 billion in systems. There's regulatory pressure to change, pushing the market towards automation, mainly around data integrity. The industry itself, as I touched on, fundamentally, these new modalities require fast turnaround times.
There's usually high test volumes and very high accuracy. The legacy method is just ill-equipped in many cases to handle the new methods of manufacturing, especially in biologics and cell and gene therapy. A bit more about our growth strategy that's propelled the company to where it is today. At its core, it's a land and expand strategy.
We land a new customer, and new customers typically acquire between one and maybe three or four Growth Directs to start. They'll go through the validation process I touched on, put them into routine use, and then typically they'll expand. They can expand through other sites globally with one, for example, EM globally. We'll talk about Lonza in a few minutes. Other customers can expand through multiple of our applications, more of our menu at a site network or a regional network.
The takeaway here, there's multiple ways that customers expand with us, and we are flexible in how they do that. They help them solve their most critical challenges in a priority order. We've also expanded over the years into new geographies. APAC is a really good example of that. This is the core of our fundamental organic growth strategy.
We also view innovation as core to our growth as well. Recent innovations like our mold detection software and our sterility application are good examples of that. Quickly, the way we view innovation is we automate, again, a legacy workflow with a platform technology of the Growth Direct, and then we seek to move upstream and downstream in the customer's workflow to add more value and, of course, capture more share of wallet. That could be products, that could be services.
Data is becoming a big feature of what we do, and how do we look into that data and create insights using cloud and AI technologies. Exciting developments to come. We do have exciting opportunities in our R&D pipeline. Of course, as I touched on earlier, adjacent markets. There are significantly sized markets like personal care and cosmetics and others that we're not in right now.
The MilliporeSigma relationship and collaboration agreement is a great platform to continue to grow in those segments. This strategy has led to our current customers, which you can see on the slide. A couple of quick takeaways of who our customers are and where they are. I won't go through all the logos. It's probably somewhat self-explanatory.
Just to kind of orient you, we have the majority, again, of the global top 20 pharmaceutical companies up there, many of the large CDMOs as well, but also quite strong, I would say, in the mid-size segment across biologics, also across the cell and gene therapy broadly ecosystem, the CDMOs who are manufacturing it, gene therapy manufacturers, plasmid manufacturers.
We have the ecosystem as well. It's important to note, though, that we do address all modalities, and we do have sales into small molecules and vaccines and other segments as well. From a geographic standpoint, we're balanced between North America and Europe. Think of it as roughly 45% of our installations and sites in North America and an equivalent amount in Europe, and then the balance, 10% or so in Asia and growing. I think a well-balanced customer portfolio that we're very excited about.
As I mentioned at the onset, a great customer, I think, case study is our recent announcement and partnership with Lonza. Lonza was solving the problems that we've been chatting about today. They want an end-to-end automated solution to streamline their environmental monitoring program across their cell and gene therapy sites globally and really to create a vision of a paperless lab that's fully secure.
We partnered with Lonza. They selected the Growth Direct platform to do this, and we worked with them hand in glove to interconnect it to their proprietary information management system. Lonza has rolled this out globally. We continue to expect to grow with Lonza with this platform in the coming quarters and years ahead. At the end of the day, they achieved what we endeavor to have every customer achieve. It's more accurate testing.
You can see the speed going from eight days up to eight days to less than three in some cases, dramatic improvement in the quality of the data and the speed of the data, huge improvement, better compliance from a regulatory standpoint and cost savings. This is a value prop our customers seek, and this is a really good case study to understand how we operate and why customers adopt us.
This whitepaper is available on our website. We also think this sets a clear standard for the industry to emulate. Frankly, many of our customers are adopting the technology and rolling it out this way across multiple sites with an interconnectivity to their IT systems. To wrap up, there's a number of reasons why we're excited about where we are and where we're going as a company and industry.
Again, a large market that's growing, operating behind barriers to entry. First mover is really important in this market. You can see by our customer list and where we are. Once we get validated into the manufacturing process, it's a very strong position to be in. We believe we have the right technology for this market. We think the proof point of the adoption that we've had globally backs that up strongly.
We address all modalities of pharmaceutical manufacturing and other segments like personal care. It is important to note that we are especially strong in the more advanced, fast-growing modalities of biologics and cell and gene therapies. As I touched on, a great business model, high-growth business model with capital equipment and a high-yield recurring revenue pull-through. I think we have time for a few questions.
You guys hear me? Okay. All right. Awesome. As somebody who's worked in these labs, I cannot tell you how often you're really throwing plates away for any millions of reasons. It really is very, very needed. First off, one of the things I wanted to touch on a little bit more deeply is you kind of referenced AI in passing here.
I know on the call, we talked about it a little bit. In our follow-up call, I know we talked about it even more. Obviously, it's left and right in the industry, and it tends to go hand in hand with automation in a lot of respects. I think there's this push towards spending conservatism, but people are thinking that that is at odds with certain more traditional tools' approaches here. Everybody's trying to save money, right?
Systems like this obviously are kind of contributing to this. I guess speak to a little bit, what are your plans to integrate AI with some of your moving forward, some of your offerings, and then what that could kind of look like for Rapid down the line?
Right. Great. We have an AI, I would say, competency now in the business. Our fundamental vision, machine learning algorithms are based on the AI format. You mentioned automation. Automation unlocks the ability for AI to be super productive because it generates all the digital data that AI can go after. Our next major release of software, we're very excited about it, but it will have capabilities that will further unlock these types of capabilities, mainly around cloud connectivity and improved insights.
The way we see it is this digital data is being created now, and you can see some of our customers are globally deployed, generating data across multiple sites, multiple instances, multiple test categories, pull that data into a data lake or cloud environment, and then start to provide insights back to customers about quality failures, about predictive analytics, about the state of the quality system using AI.
We can help customers get ahead of quality failures, which can be incredibly expensive, up to including recalls. There's no good news when you have a contamination event. The combination of our technology, what's in our R&D pipeline, new releases like mold detection, which is providing more information about what's in the environment, all that data right now is not being fully used. We think AI/cloud could be a really interesting companion to all this data to really provide insights that have not been provided to industry up to this point.
Okay. I think the other aspect of the growth story here that is probably not being appreciated as much is some of these additional segments that you could want to do: personal care, devices, cosmetics. I guess give us a sense at what point in the, let's say, the five-year deal with MilliporeSigma, right? When do you think you would start to maybe see some of the early signs of where that is going and what that could realistically mean for you guys, upside potential moving forward?
Yeah. It is interesting to note. I mean, I think we see it now. We have sales into personal care now, and it is a more fragmented market, but the ROI is very, very high. It's a bit more of a retail model where they can turn their products quickly and save warehousing costs and move them out quickly into a retail environment.
Cosmetics is an example of a very high-value product too that you don't want to spoil en route to a customer. I think we have some proof points now of a strong value proposition. It's been more of just, frankly, as a commercial scale and focus. We want to stay focused on pharma with the resources that we've allocated. That's why I think this MilliporeSigma collaboration is so powerful is because we have the technology. We think we have the right value proposition. Now we need the execution sort of framework and span to go after it.
I guess now with Lonza and MilliporeSigma now on paper, it's really looking like the next couple of years are fairly de-risked from a growth perspective for you guys. What does Rapid look like five years from now? What additional partners would you consider? What is a solid adjacency to what you're offering now? Where's your head at when it comes to just strategy for growth perspective?
Yeah. I would characterize it by that slide. I think we're always going to be strong in pharmaceutical manufacturing. It's important to note where you saw a lot of great customers on that slide and a lot of great sites, but we're nowhere near penetrated deep into every site and every customer.
Really become the vision would be we truly are the, we believe we're the standard now, but we're more of the standard and the new infrastructure, really the new quality control infrastructure is Growth Direct globally for pharmaceutical manufacturing, coupled with new innovations coming through our R&D pipeline, potentially in partnership with MilliporeSigma, talk about AI and software, and then expansion into adjacent markets such as personal care and others. I'm not sure ubiquity is quite the fair term, but ubiquity would be the vision for where we'd be in five years.
All right. I think with that, we are just at time. Thank you guys for listening. Thank you guys for joining us. It's always a pleasure. Stay tuned. There's a lot of great content today and tomorrow. We'll see you guys around.