Derik De Bruin

Derik De Bruin inquired about the growth trajectory of the NASD business, citing concerns over clinical trial pushouts and potential overcapacity. He also asked for an update on the pharma market, seeking signs of an inflection point or budget releases.

Answer

CEO Michael McMullen and CFO Robert McMahon acknowledged that some customer clinical trial pushouts into FY25 could result in the NASD business being 'closer to flat' for the year, but clarified this was not due to industry overcapacity. Regarding pharma, McMullen, COO Padraig McDonnell, and McMahon noted that while the market shows stability, no material improvement is evident yet. They highlighted that strong services and consumables performance indicates continued lab activity despite a depressed capital spending environment.

Derik De Bruin of Bank of America asked about the pharma market, questioning if stalled orders were beginning to move through the sales funnel. He also challenged the guidance as being back-end loaded given the low visibility in both pharma and China, and requested details on order bookings.

Answer

ACG President Padraig McDonnell confirmed that while sales funnels are growing, the velocity of deal closures remains elongated. CFO Robert McMahon noted the forecast assumes very low single-digit growth for pharma in 2024. CEO Michael McMullen defended the guide, stating it doesn't assume a "miracle snapback" but reflects confidence that current steep declines are unsustainable and highlights strength in other applied markets. McMahon confirmed orders were down year-over-year but by less than revenue.

Asked for clarification on whether the Sarepta revenue guidance for FY24 had changed, the expected progression of PCH segment margins, and whether the consensus expectation for a 500 basis point EBITDA margin improvement in FY25 is realistic.

Answer

The Sarepta revenue guidance for FY24 is unchanged from the original forecast. PCH margins are expected to improve sequentially throughout the year, driven by seasonality, cost initiatives, and a new contract. While not providing FY25 guidance, executives pointed to the Q4 FY24 exit rate margin, expected to be near historical levels, as a good benchmark, emphasizing that current margin issues are operational, not structural.

Questioned the confidence in the stated $150M-$170M cost savings target and whether it's a net figure after potential reinvestments. Also asked about the strategy for managing the cell and gene therapy pipeline given the impact of the biotech funding environment.

Answer

Management is highly confident in the cost savings number, which is based on hard actions like headcount reductions, and noted more could come from the strategic review. For cell and gene therapy, the strategy is to not only win early-stage assets but also to leverage their growing commercialization track record to become a partner of choice for later-stage assets, thus diversifying beyond the most funding-sensitive clients.

Asked if the stated cost savings are net of any required remediation investments and how the company is managing its cell and gene therapy pipeline given the challenging biotech funding environment.

Answer

The company expressed high confidence in the cost savings number, stating it is based on executed actions like headcount reductions. For the cell and gene therapy pipeline, the strategy is to focus not just on early-stage clients but also on leveraging their growing track record to win later-stage and commercialization projects.