Matthew Hewitt

Matthew Hewitt from Craig-Hallum asked about the assumptions regarding a biotech market rebound that are factored into Schrödinger's 2028 goal of adjusted EBITDA break-even. He also inquired about the company's considerations for capital allocation, specifically regarding potential share buybacks.

Answer

Richie Jain, CFO, stated that for the three-year outlook on growth, the company is assuming a recovery in the biotech market to normalized levels. Regarding capital allocation, Mr. Jain emphasized the company's strong balance sheet supporting growth and the path to adjusted EBITDA profitability. While acknowledging that the current stock price does not reflect intrinsic value, he indicated a preference to invest cash into business growth rather than share buybacks, given the long growth pathway ahead.

Taltz, on for Matt Hewitt at Craig-Hallum, asked if the company was still experiencing 'level pegging' where customer spending increases were offset by decreases from other customers.

Answer

CEO Ramy Farid corrected the premise, stating that it is very rare for a customer to decrease spending and that the company generally sees increases of varying sizes. CFO Richie Jain reinforced this by noting a 100% retention rate for customers with contracts over $500,000.

Matthew Hewitt asked about the expected cadence of drug discovery revenues, customer feedback on the new predictive toxicology platform, and the primary trigger needed for broader adoption among small biotech companies.

Answer

CFO Geoffrey Porges projected that drug discovery revenue would be somewhat back-end weighted as new collaboration teams scale. CEO Ramy Farid and President of R&D Karen Akinsanya reported excellent feedback on the predictive tox platform, which is already in use internally. Regarding small biotechs, Porges clarified the main headwind is not reluctance but segment churn from M&A and restructuring; a healthier capital market for discovery would be the key growth trigger.

Matthew Hewitt of Craig-Hallum, represented by Todd, asked for an update on the predictive toxicity platform and its current availability to customers.

Answer

CEO Ramy Farid explained that the predictive toxicity platform is not yet widely available to software customers. He noted good progress is being made on expanding the virtual panel of targets and that the technology is being used extensively in collaborations. Select partners may get early access, but a broad commercial release has not yet occurred.

Matthew Hewitt inquired about the margins of the MissionCare acquisition and the potential for alignment with corporate averages, as well as the impact of AI on HealthStream's market position, emphasizing the stickiness of its platform and potential M&A opportunities related to integrating third-party data.

Answer

Robert A. Frist Jr., CEO and Chairman, explained that HealthStream does not report per-product margins but noted some gross margin compression due to increased cloud hosting and software licensing costs. He highlighted HealthStream's strong position as a 'system of record' for learning and credentialing, emphasizing how the use of APIs to integrate third-party data enhances stickiness and differentiates the company from point solutions. Frist also stated that AI is a fundamental component of the hStream platform, positioning HealthStream favorably.

Matthew Hewitt inquired about the margins of the recently acquired MissionCare Collective, specifically if they are similar to the corporate average and if there's an opportunity for incremental margin lift. He also asked about the impact of AI, noting customers pushing records into the HealthStream platform, and whether this indicates M&A opportunities or increased stickiness for HealthStream against potential AI displacement.

Answer

Robert A. Frist Jr., CEO and Chairman of HealthStream, explained that the company does not report margins on a per-product basis but noted some gross margin compression due to increased cloud hosting and software licensing costs. He emphasized that being a 'system of record' for customer data, as seen with the use of HealthStream's APIs, is a critical differentiator and a relative strength for long-term viability in the evolving AI landscape, making the platform more sticky.

Matthew Hewitt of Craig-Hallum inquired about the gross margin outlook for the remainder of 2025 and the expected pipeline and ramp-up for the new HealthStream Learning Experience (HLX) platform.

Answer

CFO Scott Roberts stated that gross margins are expected to hover around 65% for the rest of the year due to ongoing costs from scaling improvements. CEO Robert Frist added that the HLX ramp is already factored into guidance, describing it as an incremental subscription opportunity for which the company is now actively building a sales pipeline following its successful launch.

Matthew Hewitt of Craig-Hallum Capital Group LLC inquired about the proportion of HealthStream's portfolio that is considered mandatory versus elective and sought details on the recently announced large contract win, specifically whether it was a new customer or a renewal.

Answer

Robert Frist, CEO and Chairman, explained that a significant majority, estimated at 80-90%, of their products are thematically tied to mandatory requirements such as accreditation, state licensure, or federal standards like OSHA. He contrasted this with the elective Health Equity and Belonging suite, which has seen a drop-off. Frist also confirmed the landmark $14 million deal was entirely new business with a large health system, centered on the Competency suite, which effectively displaced multiple competitors.

Matthew Hewitt of Craig-Hallum Capital Group inquired about the specific levers needed to accelerate top-line growth to the company's mid-term target of 7-10%, the quantifiable impact of legacy product headwinds, and the success rate of closing the strong sales pipeline mentioned in the previous quarter.

Answer

CEO Robert Frist clarified that the 7-10% target includes 1-3% from M&A, which the company plans to rekindle. He acknowledged that achieving the 5-7% organic growth target is challenged by legacy product declines but expects progress through better customer conversion and new product performance. Frist deferred a detailed quantification of the headwind to a future Investor Day. He also confirmed a strong Q4 sales close, which boosted remaining performance obligations, and noted the pipeline remains robust for 2025.

Matthew Hewitt asked about the potential drivers for accelerating revenue growth to meet the company's 7-10% objective and inquired about the current customer spending environment.

Answer

CEO Robert Frist clarified the 7-10% growth target consists of 5-7% organic and 1-3% inorganic growth. He noted that while the company is tracking near 4% organic growth for the year, attrition in legacy applications is a headwind. He stated that gaining traction with new products like Insights Plus, reducing legacy attrition, and inserting price escalators are key to accelerating growth. Frist also confirmed that sales pipelines for core products are strong, suggesting an improving customer spending environment.

Matt Hewitt inquired about the AYON pipeline's growth and acceleration, the team's capacity to handle implementations, and the cadence for AYON's international rollout, including target geographies for 2026.

Answer

CEO Charlie Goodwin noted the increased guidance for Surgical Aesthetics reflects strong AYON expectations. He praised the team's supply chain management and ability to fulfill orders, mentioning a third party assists with installations. For international rollout, he stated the goal is worldwide registration, with initial focus on Europe, the Middle East, Brazil, and other Latin American countries, but the immediate focus for Q3 and Q4 remains the U.S.

Matt Hewitt asked about the Aon system's sales pipeline acceleration, the company's capacity to manage implementations, and the international rollout strategy for the Aon system.

Answer

CEO Charlie Goodwin noted the increased Q4 surgical aesthetics guidance driven by Aon expectations, praising the team's success in strengthening the supply chain and managing installations with third-party support. He stated that while the current focus is on the U.S., Apyx Medical aims for worldwide Aon registration, identifying Europe, the Middle East, and Latin America as key future international markets.

Matthew Hewitt inquired about the progress of upgrading existing customers to the Apyx One Console in anticipation of the AYON platform launch. He also asked for details on the planned soft launch for AYON and sought clarification on the company's strategy to mitigate potential tariff impacts.

Answer

Executive Charles Goodwin stated that the company is pleased with the upgrade trend for the Apyx One Console, driven by excitement for the upcoming AYON system, but declined to comment on the AYON pipeline pending FDA clearance. He confirmed that a list of 20 'AYON ambassadors' is finalized for the launch. Regarding tariffs, Goodwin highlighted Apyx's manufacturing flexibility, with facilities in both the U.S. and Bulgaria, which allows the company to adjust production to mitigate potential financial impacts.

Matthew Hewitt of Craig-Hallum asked for details on the successful direct-to-consumer (DTC) campaign, including what changes were implemented and the outlook for 2025. He also inquired about the disparity between domestic and international performance and whether U.S. strategies could be applied abroad.

Answer

CEO Charles Goodwin attributed the DTC campaign's success to hiring a new PR partner in January 2024 and refining the message to capitalize on the post-GLP-1 weight loss trend, positioning Renuvion as the key surgical solution for skin laxity. Goodwin explained that the stronger U.S. performance is due to the earlier adoption of GLP-1 drugs. He anticipates similar trends will emerge globally as these drugs become more widespread, creating a worldwide opportunity for their surgical aesthetic products.

Asked about the drivers behind the successful direct-to-consumer (DTC) campaign and the reasons for the performance disparity between domestic and international markets.

Answer

The DTC campaign's success is attributed to a new PR partner hired in early 2024 and its alignment with the growing market need for post-GLP-1 weight loss skin tightening. The stronger domestic performance is due to the earlier adoption of GLP-1 drugs in the U.S., a trend expected to replicate internationally, positioning the company for future global growth.

Inquired about the company's strategy for returning to growth in 2025, particularly regarding marketing and pricing, and asked for clarification on the new Ayon system's relationship with the existing Renuvion product and potential for cannibalization.

Answer

The company is focusing on an expanded direct-to-consumer marketing campaign to drive growth in 2025. The new Ayon system is not a replacement for Renuvion but an integrated platform that requires the Apyx One generator, thus encouraging upgrades rather than cannibalization. It combines and improves upon multiple body contouring technologies in a single, efficient unit.

Matthew Hewitt from Craig-Hallum Capital Group sought clarification on the 'variable manufacturing schedule,' asking if it implied order pull-forwards or push-outs. He also asked whether the anticipated GMP scale-up partner would be one of the three CDMOs highlighted at the Tides conference or a different entity.

Answer

CFO Georgia Erbez explained that the variability is due to the unpredictable timing of large customer orders, which causes lumpiness in quarter-to-quarter revenue. Regarding GMP partners, CEO Stephen Dilly and COO Kevin Norrett clarified that while the previously mentioned CDMOs are in the mix, they are in discussions with others as well. Dilly emphasized that CDMO partners are primarily for chemo-enzymatic projects, while Codexis can scale the core ECO process in-house.

Matthew Hewitt of Craig-Hallum asked about the significance of having three different CDMO collaborators presenting at the TIDES conference, questioning if the key was their diverse customer bases or differing skill sets.

Answer

CEO Stephen Dilly responded that it was 'all of the above.' He emphasized that the success of three distinct CDMOs using the ligase in their own labs validates the technology's easy transferability. He noted that two of the CDMOs achieved success without extensive coaching from Codexis. This strategy creates a scalable 'one-to-many' model, expanding the reach of the ligation platform through these partners.

Matthew Hewitt inquired about the interplay between securing CDMO partners and pharma customers, and whether Codexis would consider alternative deal structures like royalties for cash-constrained smaller innovators.

Answer

COO Kevin Norrett explained that the need for a pre-signed CDMO partner depends on the customer; large pharma often has preferred CDMOs, while smaller innovators just need to see a clear path to GMP. President and CEO Dr. Stephen Dilly confirmed that Codexis is very open to flexible deal structures with smaller innovators, including taking back-end economics in exchange for lower upfront payments, viewing it as a key strategy to capture value in that market segment.

Matthew Hewitt of Craig-Hallum Capital Group inquired about the potential financial structure of ECO Synthesis collaborations, the expected magnitude of investments in purification and a new kilogram-scale facility, and the anticipated revenue ramp from the Alphazyme partnership.

Answer

COO Kevin Norrett stated that deal structures will vary, ranging from simple development contracts to complex collaborations with upfronts, milestones, and royalties. President and CEO Dr. Stephen Dilly estimated that near-term facility upgrades would cost low single-digit millions, while the larger kilogram-scale facility investment would occur mainly in late 2025 and 2026. Regarding Alphazyme, Norrett expects revenues could start in 2025 but ramp more significantly in 2026 and 2027.

Matthew Hewitt of Craig-Hallum asked if easing U.S.-China relations could position China as a growth driver into 2026. He also questioned how potential U.S. tariffs on imported drugs might impact the CDMO business and its pipeline.

Answer

CFO Raj Asarpota and CEO Bernd Brust confirmed they expect China and other non-U.S. regions to be growth drivers due to increasing investments. Regarding tariffs, Brust stated that while they haven't seen a direct impact yet, Maravai's expanded U.S. facilities are well-positioned to benefit if drug manufacturing moves onshore as a result.

Matthew Hewitt of Craig-Hallum asked if the FDA's recent push away from animal testing could create a tailwind for the newly acquired Officinae Bio and its AI-driven capabilities, and what initial customer feedback has been.

Answer

Executive William Martin responded enthusiastically about the Officinae Bio acquisition, noting its primary purpose was to enhance the discovery design environment for customers. He acknowledged the potential for its machine learning capabilities to benefit from a shift away from animal testing as an 'exciting unknown,' stating that AI will be critical for modeling biological systems in the future.

Matthew Hewitt sought more detail on the 'soft bioprocessing backdrop' affecting the Biologics Safety Testing (BST) segment and asked for the strategic rationale behind the Officinae Bio acquisition, including whether it was driven by customer demand or portfolio gaps.

Answer

Chief Executive Officer William Martin explained the BST softness is tied to customers deprioritizing early-phase programs, which disproportionately impacts Cygnus kit sales. Regarding Officinae, he clarified the acquisition was driven by a strategic need to add a front-end design environment with AI/ML capabilities to the TriLink discovery platform, rather than customer overlap or specific requests.

Matthew Hewitt of Craig-Hallum Capital Group asked about the consumer products division, inquiring about the launch progress of the 2x Formula chews, the strategy for the new hydration product, and potential impacts from tariffs. He also sought an update on the CDMO pipeline, including the Tate and Lyle partnership.

Answer

CEO Ilan Sobel described the 2x Formula chews launch as having "phenomenal" feedback, citing strong Amazon reviews and premium positioning. He detailed the upcoming blood flow hydration product as a disruptor in the electrolyte market, featuring a unique, clean formulation. Regarding the CDMO pipeline, Sobel noted it is significant with high single-digit leads and that the Tate and Lyle partnership is strengthening. He also confirmed that the 15% tariff from Israel is manageable and has been factored into financial projections.

Asked about the consumer products division, specifically the progress of the '2x2' chews and the upcoming hydration product launch. Also inquired about the CDMO pipeline, the status of the Tate and Lyle partnership, and the potential impact of Israeli tariffs.

Answer

The CEO confirmed phenomenal feedback and strong reviews for the 2x2 chews, which are building momentum. The new hydration product is a powdered stick pack targeting the $4B electrolyte market with a unique blood-flow-powered proposition. The CDMO pipeline is significant, with 1-2 new deals expected by year-end, and the Tate and Lyle partnership is strengthening. The 15% Israeli tariff has been factored into planning and is considered manageable.

Matthew Hewitt of Craig-Hallum Capital Group LLC asked what fiscal 2026 guidance might have looked like without the calendar year change and how customer conversations are being influenced by recent discussions around potential tariffs on imported pharmaceuticals.

Answer

CFO Ryan Lake stated that without the fiscal calendar change, FY26 revenue would have been similar to FY25, but with improved adjusted EBITDA due to realized cost efficiencies. President & CEO Paul Josephs characterized the high tariff threats as 'noise' but emphasized the strong, undeniable trend of onshoring pharmaceutical manufacturing to the U.S. He confirmed Lifecore is 'playing offense' by investing in its sales and marketing to capitalize on this tailwind, which is already reflected in new pipeline opportunities.

Matthew Hewitt inquired about the potential impact of U.S. tariffs and the trend of repatriating drug manufacturing, as well as the development stage of the recently signed Humanetics contract.

Answer

Executive Paul Josephs addressed the questions, noting that while pharmaceuticals are not currently targeted by tariffs, there is significant qualitative discussion among multinational companies about the importance of domestic manufacturing due to 'administrative uncertainty,' a key topic at the recent DCAT conference. He clarified the Humanetics contract is for a Phase II project involving a site transfer from another CDMO, highlighting Lifecore's compelling value proposition.

Matthew Hewitt inquired about the new Nirsum Laboratories opportunity, including its origin, potential size, and future scope. He also asked for feedback from Lifecore's pharmaceutical customers regarding their 2025 outlook, pipeline priorities, and potential bottlenecks.

Answer

President and CEO Paul Josephs explained that the Nirsum deal originated from the business development team's efforts and is expected to expand from an initial limited scope to long-term development and commercialization. Regarding customer feedback, Josephs noted continued momentum in development programs and an increase in the pipeline of opportunities with large multinational pharmaceutical companies, which has grown from under 10% to over 30% of the total pipeline.

Matthew Hewitt inquired about the new partnership with Lindy Biosciences, seeking details on potential expansion into Lindy's customer base and color on three other new customer wins. He also asked for an update on a CDMO customer's inventory destocking and the current size of the sales team.

Answer

Paul Josephs, President and CEO, explained that the Lindy Biosciences deal allows Lifecore to scale Lindy's technology for commercial manufacturing with its partners. He noted the other three wins are early-stage programs. Josephs stated that the CDMO customer's demand is expected to normalize in fiscal 2026 and confirmed the sales team will grow to four representatives plus a VP.

Matthew Hewitt of Craig-Hallum asked how potential regulatory changes from Washington are influencing Ligand's investment pipeline and strategy, and requested details on the cadence of the increased contract revenue guidance.

Answer

CEO Todd Davis explained that Ligand's strategy anticipates continued pricing pressure, focusing investments on drugs with high clinical value to ensure a strong negotiating position. CFO Tavo Espinoza clarified that the increased contract revenue will be recognized primarily in Q3, driven by the ZELSUSMI out-license and a $5 million launch milestone, with the remainder in Q4.

Matthew Hewitt asked about the potential impact of 'most favored nations' drug pricing policies on Ligand's partners and whether the challenging funding environment has altered Ligand's investment sizing strategy.

Answer

CEO Todd Davis acknowledged potential short-term disruption from new pricing policies but stated that most partners focus on the U.S. market first. Regarding investment size, Davis affirmed Ligand's commitment to a diversified portfolio, generally capping investments with binary risk at $50 million. However, he noted the company would consider larger investments, citing the $100 million APEIRON deal as an example, for significantly de-risked, commercial-stage assets.

Matthew Hewitt inquired about the recent Castle Creek investment, asking if it was Ligand's first in cell and gene therapy, its risk profile, and the potential impact of SQ Innovation's Lasix launch on Captisol sales.

Answer

SVP of Investments and Business Development, Paul Hadden, confirmed the Castle Creek deal is Ligand's first in cell/gene therapy, noting it's considered derisked due to an established target. CFO Tavo Espinoza stated that while the SQ Innovation partnership will involve Captisol sales, it is expected to be a minor, not major, contributor to revenue.

Matthew Hewitt inquired about the robustness of Ligand's investment pipeline, the potential impact of recent election results on the market, and the company's strategy for adding new assets.

Answer

CEO Todd Davis responded that the investment pipeline remains very robust with high demand for capital, irrespective of election outcomes. He emphasized that pharmaceutical royalty revenues are generally uncorrelated with capital market volatility and noted that Ligand's business development team is continuously active in sourcing and evaluating high-quality opportunities.

Matthew Hewitt of Craig-Hallum Capital Group asked about the elevated rate of cancellations and negative change orders, and inquired about the next steps for the company's site optimization plan for fiscal 2026.

Answer

Robert Leasure, CEO, President & Director, explained that the company must plan for high cancellations to be the 'new normal' and that the sales team is successfully increasing gross bookings to compensate. Regarding site optimization, Leasure stated the focus is shifting from major 'brick and mortar' changes to fine-tuning existing facilities to improve capacity and efficiency, with no more significant facility closures planned after the current projects.

Matthew Hewitt asked about Inotiv's marketing response to recent FDA and NIH announcements on animal testing alternatives, customer feedback on these services, specifics of the revised RMS site optimization plan, and whether the strong demand seen at the end of Q2 has continued into Q3.

Answer

Executive Robert Leasure and executive John Sagartz explained that while services like computational toxicology are being integrated into discovery sales, widespread customer adoption hasn't accelerated as much as anticipated. Leasure detailed that the revised RMS optimization plan will now yield higher annual savings of $6-7 million on a $6.5 million investment and be completed six months earlier, driven by a focus on efficiency and improved transportation logistics. He also confirmed that the strong quoting and awards momentum from late Q2 has continued into the current quarter, expressing optimism for year-over-year revenue growth in the second half of fiscal 2025.

Matthew Hewitt of Craig-Hallum Capital Group asked about the lumpiness of NHP sales and whether any revenue slipped from Q1 into Q2. He also questioned the reason for the increase in DSA service cancellations in the quarter and inquired about the company's plans for introducing new services during the year.

Answer

President and CEO Robert Leasure acknowledged that minor NHP sales shifts between quarters can occur, but the volatility is much lower than in the previous year, with potential slips now measured in weeks, not months. He attributed the Q1 spike in DSA cancellations to a single, anomalous cancellation of a large project valued at over $4 million. Leasure stated that the company's primary focus for the year is on enhancing customer satisfaction with its existing portfolio, rather than launching significant new services, though minor, customer-driven add-ons might be considered.

Matthew Hewitt of Craig-Hallum Capital Group sought confirmation on whether to expect revenue growth in fiscal 2025, asked about the nature of industry price competition and Inotiv's response, and requested clarification on the timeline for NHP gross margin recovery, noting comments about impacts in fiscal Q1 '25 versus improvements in calendar '25.

Answer

Executive Robert Leasure confirmed expectations for revenue growth in fiscal 2025, driven primarily by volume increases in NHPs, diet/bedding/enrichment, and European operations, with a potential recovery in Discovery services. Regarding pricing, he stated that pressure in the DSA business stems from both lower NHP costs being passed through and general margin compression. Leasure clarified the margin timeline, explaining that pressure from high-cost inventory will persist through fiscal Q1 2025, but that they expect stronger, more normalized margins for the full calendar year 2025 once that inventory is cleared.

Matthew Hewitt of Craig-Hallum Capital Group inquired about the drivers behind the improved adjusted SG&A guidance and asked about the market response to the recently published COPD white paper and its potential for driving new business.

Answer

CFO Peter Kuipers attributed the SG&A efficiencies to a company-wide cost initiative and renegotiating partner contracts from a position of strength due to significant growth. CEO Andrew Toy stated the company is proud of its clinical white papers (COPD, CHF, CKD), which demonstrate Clover Assistant's value in improving outcomes and are used to showcase the technology's effectiveness to potential Counterpart Health partners.

Matt Hewitt inquired about the initial implementations of Counterpart Health, asking for feedback from partners and the key performance metrics being tracked. He also asked about shifts in the competitive landscape, including whether peers are adopting similar models or if new entrants are emerging.

Answer

CEO Andrew Toy explained that the goal for Counterpart is to replicate the value seen in Clover's own MA plan, focusing on KPIs like physician engagement, earlier disease diagnosis, and HEDIS score improvements, with initial data being optimistic. He also noted that Clover's software-backed, wide PPO network model remains a key differentiator, observing that some competitors are pulling back on PPO benefits while Clover is staying its course.

An analyst on behalf of Matt Hewitt asked for more color on the company's expectations for the continued growth of its home care arm in 2025 and beyond.

Answer

CEO Andrew Toy described the home care program as an 'anchor stone' of Clover's strategy for managing the total cost of care for its most vulnerable members. He confirmed plans to invest more in the program, expand the team, and increase its geographic reach to drive MCR improvements, though he did not provide specific growth guidance.

Matthew Hewitt from Craig-Hallum Capital Group asked about customer feedback regarding impending Medicaid cuts and whether this is affecting purchasing decisions or increasing interest in Omnicell's services to reduce overhead.

Answer

Randall Lipps, Founder, Chairman, President & CEO, explained that while customers are not yet feeling the full impact of legislative changes, they are increasingly looking to technology to solve larger cost and efficiency problems. He confirmed that Omnicell has not seen any change in customer purchasing behavior or slowdowns in its sales pipeline.

Matthew Hewitt asked if Omnicell's portfolio remains a top purchasing priority for hospitals, insulating it from macro pressures. He also asked for quantification of the company's component sourcing exposure to China.

Answer

CEO Randall Lipps affirmed that pharmacy is increasingly strategic for large providers, who are looking to expand into outpatient and specialty services, thus prioritizing investments in comprehensive systems like Omnicell's. Regarding sourcing, Lipps stated that China is the biggest exposure and that the company is accelerating a multi-year plan to shift production of subassemblies to North America.

Matthew Hewitt asked about the potential impact of a new administration's focus on technology and innovation on Omnicell's business. He also inquired about the adoption curve for the XT Amplify portfolio and the current state of the sales pipeline.

Answer

CEO Randall Lipps responded that the political focus on efficiency and safety aligns perfectly with Omnicell's core value proposition. He believes the adoption curve for XT Amplify follows a traditional bell shape but could see acceleration as hospitals increase capital spending, a trend he saw in Q4. Lipps expressed enthusiasm that this momentum will continue into 2025, with most parts of the business leaning forward positively.

Matthew Hewitt inquired about the revenue impact from recent hurricanes, the trajectory of product gross margins, and whether the XT Amplify upgrade cycle might be more front-end loaded than typical hardware replacements.

Answer

CFO Nchacha Etta confirmed that hurricanes had no impact on Q3 revenue and that gross margins are expected to improve over time, supported by the scaling of Advanced Services. Executive Kathleen Nemeth noted that the current revenue mix, including lower-margin specialty pharmacy, differs from prior years. CEO Randall Lipps explained that XT Amplify is an "on-ramp" to new technologies and solution selling, making it a broader initiative than a simple upgrade cycle.

Matthew Hewitt inquired about the new product launch pipeline for the second half of 2025 and beyond, asking if any specific launches could be key drivers for the company's five-year growth plan.

Answer

CEO Olivier Loeillot highlighted that two key products were already launched in 2025: a new C-Tech analytical system and single-use mixers. He stated that for the second half of the year, the focus will be on launching multiple new chromatography resins, primarily targeting new modalities. He noted that it typically takes about a year for new products to generate significant revenue.

Matthew Hewitt of Craig-Hallum Capital Group inquired if the strong Q4 equipment sales were influenced by a year-end budget flush and asked what differentiates Repligen's strong performance from peers still facing headwinds.

Answer

President and CEO Olivier Loeillot acknowledged that for smaller, lab-scale hardware, Q4 seasonality and budget flush played a role, alongside a budding market recovery. However, for larger manufacturing hardware, he attributed the outperformance to gaining market share with technologically superior systems that incorporate PAT (Process Analytical Technology). He also cited the recovery in CDMO CapEx spending as a key driver.

Matthew Hewitt asked if the company anticipates growth in the first half of 2025 versus the second half of 2024 and whether forward-looking visibility is returning to pre-COVID levels.

Answer

President and CEO Olivier Loeillot expressed confidence, citing strong H2 2024 growth of ~12% ex-COVID and positive momentum, but deferred formal 2025 guidance to February. He confirmed that visibility has returned to the normal pre-COVID pattern, with a typical backlog of 3-4 months, a situation Repligen has experienced for about a year.

Matthew Hewitt asked for an update on the current biotech and pharma R&D spending environment, expectations for fiscal '26, the pipeline for data licensing deals, and the potential structure and margins for the new radiopharmaceutical services. He also inquired about capital allocation priorities for future growth and the status of partnered programs within the Corellia AI portfolio.

Answer

CEO Ronnie Morris acknowledged the market remains tight but expressed cautious optimism for sustained growth, citing the company's differentiated PDX Bank. He projected data licensing revenue would remain in a similar range for the next year before accelerating, with a growing pipeline of deals. Morris described the new radiopharmaceutical services as high-margin (50-60%) agreements that will be priced higher than standard in vivo work. He stated future investments will prioritize creating new datasets over capital expenditures and noted that the company is actively seeking outside capital to fund its Corellia AI drug development portfolio.

Matthew Hewitt asked for an update on customer sentiment, particularly differentiating between small and large biotech companies, and inquired if positive trends in revenue conversion and cancellation rates from the previous quarter had continued. He also questioned the potential impact and market share opportunity from the Biosecure Act.

Answer

Ronnie Morris, CEO, explained that the customer environment is improving but remains tighter for small biotech companies compared to larger pharma, which continues to spend on preclinical services. He confirmed that both revenue conversion rates and cancellation rates have continued to improve, extending the positive trend from the prior quarter. Regarding the Biosecure Act, Morris stated that it will likely be beneficial for the company as they compete with some of the entities named in the bill.

Matthew Hewitt from Craig-Hallum Capital Group inquired about the impact of the FDA's April guidance on animal testing alternatives and asked to identify the most significant market headwind.

Answer

CEO Shawn O’Connor responded that while the FDA guidance is a positive long-term catalyst, its direct impact on near-term revenue is minimal as it takes time for such goals to become actionable. He emphasized that the primary challenge is not one single factor but a "plethora of uncertainties" causing clients to be cautious with spending.

Matthew Hewitt of Craig-Hallum Capital Group inquired about the Pro-ficiency pipeline, early success with cross-selling, and whether the recent $5 million win was included in the existing guidance. He also asked if the company could incentivize earlier service project starts and if it was prepared for a potential bottleneck in Q4.

Answer

Executive William Frederick confirmed the $15-$18 million guidance for ALI/MC was not changed by the $5 million win, as it was from a recurring client and not entirely unexpected. Executive Shawn O'Connor added that while the cross-selling pipeline is filling, it takes time to convert. He explained that they cannot accelerate client drug development timelines with discounts and affirmed the company is prepared to handle an increase in project starts, viewing it as a welcome challenge without foreseeing major capacity issues.

Matthew Hewitt asked for context on the company's 5% total organic revenue growth relative to the broader market. He also inquired if the company is seeing benefits from the Pro-ficiency acquisition opening up new commercial budgets, and asked for a breakdown of the Q1 services weakness between budget constraints and data delays.

Answer

Executive Shawn O'Connor estimated that peer organic growth was likely in the single-digit range. He confirmed the Pro-ficiency acquisition is opening up budgets in clinical operations and medical affairs, noting the medical communications unit had a strong bookings quarter. He stated it was difficult to precisely quantify the split, but characterized the budget constraints as a typical calendar year-end phenomenon for clients, while data delays are an ongoing operational reality.

Matthew Hewitt asked for clarification on the significant step-up in the fiscal 2025 adjusted EPS guidance compared to previous models. He also requested an update on the integration of Pro-ficiency, specifically regarding the sales and marketing team training and the development of the cross-selling pipeline.

Answer

Executive William Frederick explained the change in EPS guidance is due to standardizing the calculation of adjusted diluted EPS for fiscal 2025 to align with the adjusted EBITDA reconciliation, which includes adjustments for items like D&A and stock-based compensation, not just transaction expenses as in FY24. Executive Shawn O'Connor added that the sales and marketing integration is progressing well, with teams being trained to extend their reach from traditional modeling departments to new touchpoints like clinical operations and medical affairs teams.

Matthew Hewitt questioned the feasibility of customers swapping existing media for the new PanTHERA product and asked if tariff-related costs could be passed on to customers.

Answer

CEO Roderick de Greef explained that switching media for a late-stage or commercial therapy is highly unlikely due to significant costs and time. The primary opportunity for PanTHERA's technology lies with new early-stage programs and the clinical pipelines of existing customers. He also confirmed that if raw material costs were to rise materially due to tariffs, BioLife has the ability under its contracts to implement a surcharge, as it has done in the past.

Matthew Hewitt questioned how much of the 2025 growth guidance is attributable to price increases and whether the company is considering bundling its portfolio products to drive adoption.

Answer

CEO Roderick de Greef confirmed that a mid-single-digit price increase is factored into the guidance, but stressed that volume demand is the primary growth driver. He stated the company does not feel the need to discount or bundle, as the strategy is to position its products at a premium price that reflects their high value and performance benefits.

Matthew Hewitt from Craig-Hallum asked about the company's gross margin trajectory into 2025, given the 60% pro forma margin without SciSafe. He also sought to clarify if the strong Q3 media revenue was driven by the two recent therapy approvals.

Answer

Executive Troy Wichterman reiterated that historical media gross margins were around 70% and the long-term goal is to drive consolidated gross margins into the 'upper 60s'. CEO Roderick de Greef clarified that the Q3 revenue strength was not from recent approvals but from broad-based demand across its top 20 customers, which prompted the company to raise its cell processing guidance.

Speaking on behalf of Matt Hewitt, an analyst named Tal asked how the recent FDA decision to move away from animal testing requirements might affect OmniAb's business prospects, particularly with the rollout of the exploration platform.

Answer

Matthew Foehr, President and CEO, clarified that the FDA's guidance relates to toxicology screening, which is distinct from OmniAb's use of transgenic animals for antibody discovery. He framed the FDA's move as a potential net positive for the industry and OmniAb, as it could streamline timelines and lower costs for partners to advance antibody-based medicines into clinical trials, potentially increasing demand for antibody modalities.

Matthew Hewitt of Craig-Hallum Capital Group asked for confirmation that new clinical entrants would trigger milestones, whether Phase III programs signal a future step-up in royalties, and about the adoption and ramp-up of the new OmniHub platform.

Answer

President and CEO Matthew Foehr confirmed that new clinical trials generally trigger milestone payments, as over 98% of programs have downstream economics. Regarding OmniHub, Foehr stated that partners are actively using the platform following its December launch, and feedback has been excellent, describing it as a natural technological expansion for sharing data and in silico tools.

An analyst on behalf of Matt Hewitt asked if OmniAb is observing increased caution from partners due to the biotech funding environment and requested an outlook on the potential number of new clinical entries for 2025.

Answer

CFO Kurt Gustafson acknowledged the industry pressures and volatility but highlighted that OmniAb's key metrics, including new deals and program starts, remain strong. CEO Matt Foehr added that during portfolio realignments, partners often seek best-in-class platforms like OmniAb. Regarding 2025, Foehr pointed to the 20 preclinical assets as the pool for future clinical entries, noting more clarity would likely emerge after the JPMorgan conference in January.

Matthew Hewitt asked for clarification on the company's 4% revenue exposure to academic and government institutions and inquired about feedback from these customers regarding potential NIH funding cuts.

Answer

President and CEO Stephen Gunstream confirmed that academic and government institutions represent about 4% of revenue, spread across approximately 500 diverse institutions. He stated that Teknova is not currently seeing an impact on its product sales, as they are foundational, low-cost consumables necessary for basic research. While he has heard general concern from the market about postponed hiring, it has not yet translated into a material impact on Teknova's business.

Matthew Hewitt of Craig-Hallum sought more detail on market commentary regarding the bioprocessing sector's recovery and recent shifts in customer behavior. He also asked about the potential impact of a hypothetical 25% tariff on imported drugs on Teknova's domestic business.

Answer

President and CEO Stephen Gunstream clarified that while Teknova expects 15% growth in its bioprocessing segment, the market has not fully returned to historical norms, evidenced by some Q1 orders recently slipping to Q2. Regarding potential tariffs, he stated that with 95% of sales being domestic and all manufacturing in the U.S., Teknova is well-insulated but could see a potential upside if its CDMO customers onshore more manufacturing, thereby increasing demand.

Matthew Hewitt asked about the integration status of SeQure Dx's sales and marketing efforts. He also inquired about any recent changes in the tone of conversations with customers regarding the macroeconomic environment.

Answer

Executive Maher Masoud confirmed that the sales and marketing integration for SeQure Dx was initiated on 'day 1' of the acquisition. Regarding the macro environment, Masoud noted that the customer program reprioritization seen in 2024 has now stabilized. Executive Douglas Swirsky added that business with SPL customers, which constitutes 55% of revenue, is progressing as usual, and the company is comfortable with its guidance based on the current stable, albeit challenging, environment.

Matthew Hewitt, on for Tullyce Corman, asked if the excitement from the CASGEVY approval could lead to SPL signings exceeding the 3-5 annual guidance next year. He also sought clarification on whether gross margins would rebound to the mid-to-upper 80s in Q4.

Answer

CEO Maher Masoud acknowledged a healthier pipeline and slightly faster pace but stated it was too early to revise the 3-5 annual SPL guidance based on the CASGEVY approval, as the scientific validation process still takes time. On margins, Masoud indicated that the non-GAAP adjusted gross margin in the mid-80s is a reasonable level to think about for the business going forward, effectively normalizing for the one-time Q3 write-down.

The analyst asked for details on the improvements being made to the wound care referral process and the timing of their impact. He also inquired about the margin profile of the ChemoMouthpiece product and its potential effect on the company's overall gross margins.

Answer

The company is improving the referral process by working to standardize data intake from various DME partners, which is a continuous effort. Benefits will start in Q1 and ramp throughout the year. Regarding ChemoMouthpiece, while it will be nicely accretive to the overall EBITDA margin, its gross margin will be lower because profits are shared with a partner and recognized through the equity line.

Matthew Hewitt of Craig-Hallum Capital Group asked for details on the improvements to the wound care referral process, including the timeline for realizing benefits, and questioned the expected gross margin impact from the broader adoption of ChemoMouthpiece.

Answer

Executive Richard DiIorio explained that improving the referral process is an ongoing effort to standardize data intake from various partners, with benefits expected to ramp throughout the year. Executive Barry Steele clarified that while ChemoMouthpiece will be 'nicely accretive' to the overall EBITDA margin, its gross margin will be lower as profits are shared with a partner and recognized through the equity line.

Matthew Hewitt asked about the expected impact of the NOPAIN Act on InfuSystem's revenue and margins after its January 1 implementation. He also inquired about the company's share repurchase program, specifically whether any shares were bought back during the quarter.

Answer

Executive Richard DiIorio stated that the NOPAIN Act is expected to be a revenue driver by reimbursing physicians for using non-opioid alternatives, which should increase customer adoption for InfuSystem. Executive Barry Steele confirmed that the company had repurchased a small amount of shares, approximately 40,000 for just over $200,000, during the quarter.

Inquired about the anticipated financial impact of the NOPAIN Act once it becomes effective, and asked for an update on the company's share repurchase activity during the quarter.

Answer

The NOPAIN Act is expected to be a revenue driver by incentivizing physicians to adopt non-opioid pain management solutions, which should increase customer volume for InfuSystem. The company repurchased a small amount of stock, approximately 40,000 shares for over $200,000, during the quarter.

Matthew Hewitt asked about the divergence between portfolio revenue and EBITDA trends, the drivers of net unrealized depreciation, and the potential impact of the recent election on the business.

Answer

CFO Rachael Easton explained that the revenue metric only reflects a small subset of companies, while broader portfolio performance drove EBITDA up. She clarified that the significant net unrealized depreciation was primarily due to the reversal of appreciation from the Nth Degree exit; excluding that, the portfolio saw unrealized gains. President Dave Dullum commented that while they monitor potential tariff impacts, he doesn't foresee major issues from the election outcome at this time.

Matthew Hewitt asked about the growth contribution from the 13 new products launched in the last 18 months and requested details on the commercial team expansion, including headcount targets.

Answer

CEO Chris Smith explained that while individual product revenue isn't disclosed, new products like the solid tumor and large myeloid panels have been key drivers of NGS growth and higher average unit prices. He also reiterated the plan to add 30 to 40 commercial personnel by year-end, aiming to have them in place for the January sales meeting.

Matthew Hewitt of Craig-Hallum Capital Group LLC inquired about the current healthcare market environment, customer feedback on procedure volumes, and the company's confidence in achieving sequential growth in fiscal 2025 following recent software enhancements.

Answer

President and CEO Ben Stilwill responded that while clients are investing to accommodate patient volumes, they still face challenges with payer dynamics. He expressed confidence in future growth, citing products that are superior to the competition, a strong service model, and significant opportunities to upsell new modules to an enthusiastic existing client base.

Asked about the potential impact of the Biosecure Act on business conversations and whether the typical seasonal facility shutdown would be less pronounced this year due to new equipment.

Answer

The executive noted an increase in conversations related to the Biosecure Act, viewing it as a potential positive for a US-based CDMO. Regarding the seasonal shutdown, they advised not to expect a significant reduction this year as the new facilities still require maintenance, though long-term reductions are being explored.

Inquired about the recent cadence of business development inquiries and their primary drivers (onshoring vs. funding environment). Also asked if the increase in later-stage projects would lead to a faster rebound in gross margins.

Answer

The executive confirmed that inbound business development activity is 'definitely up' due to a combination of factors, including onshoring and an improved funding environment for biotech. Regarding margins, while later-stage runs have slightly higher margins, the overall rebound is primarily driven by incremental revenue growth and utilization, as demonstrated by the Q3 to Q4 margin improvement, rather than a significant mix shift.

Asked for more detail on the customer decision-making process related to the Catalent and BIOSECURE situations and inquired about the pipeline and timeline for the new cell and gene therapy facility.

Answer

Executives explained that switching CDMOs is a complex process that can take 3-6 months, but they are seeing motivation for serious conversations. For the cell and gene therapy facility, they are seeing an improving pipeline of opportunities, similar to the mammalian business but lagging by a quarter or two, and feel optimistic about its prospects.

Asked for details about a new cell and gene therapy (CGT) contract and its origin, and also requested an update on a previously mentioned business win from a large pharma customer.

Answer

The new CGT contract is for an early-stage process development project and was not sourced through the CIRM partnership. The executive stated that all business with large pharma and from competitors is progressing well, without recalling a specific 'competitive displacement' win.

Matthew Hewitt inquired about the current macroeconomic environment for research customers, internal targets for the Next Day Quote program's conversion rate, the effectiveness of the newly rationalized supplier network, and key metrics like the number of unique customers and registered users for the quarter.

Answer

CEO Tracy Curley and SVP of Operations Leslie Hoyt addressed the questions. They described the research funding environment as challenging, leading to customer demand for high specificity and timeliness. Regarding the Next Day Quote program, which saw a 58% conversion rate, Ms. Curley confirmed a higher internal goal exists but declined to provide specific guidance. They detailed the "Supplier Refresh" initiative, which reduced the supplier count from 240 to 105, resulting in a more engaged network with better-understood capabilities and no negative impact on supply. Ms. Curley stated she would follow up with the specific customer and user metrics.

Matthew Hewitt inquired about the sustainability of the high conversion rate for the Next-Day Quotes program, the impact of a smaller supplier network on sample access, and whether the bird flu outbreak presents a new business opportunity.

Answer

CEO Tracy Curley and SVP of Operations Leslie Hoyt confirmed the Next-Day Quotes program's success is sustainable and will be the primary operational model going forward. They explained that reducing the supplier network to 140 high-quality partners has actually increased access to a wider variety of specimens by fostering deeper relationships. Regarding bird flu, management acknowledged such events are typically opportunities but stated they have not yet seen specific customer demand for those samples.

Matt Hewitt inquired about the sustainability of the strong performance in the Nutritionals business, the process for reactivating 'parked' products in the Rising pipeline, the timeline for the reduction in back-ordered SKUs, and the breakdown of headwinds in the Human Health segment between pricing and volume.

Answer

President and CEO Bill Kennally explained that the Nutritionals business performance, driven by pricing and new business in Europe, is expected to continue. He clarified that 'parked' products, which can be both unfiled ANDAs or previously launched products, are being brought back online as market conditions improve or due to FDA actions. He noted the reduction in back-orders from 20% to 4% of SKUs occurred since Q3 of the prior fiscal year. Regarding Human Health, he stated that while volumes at Rising increased, significant price erosion, worsened by a new competitor for a large product, negatively impacted results, though he noted pricing declines are beginning to soften.

Matthew Hewitt inquired about the Human Health segment, specifically the $14.9 million in failure-to-supply charges and the portion being passed to partners. He also asked about the segment's gross margin outlook post-resolution, the duration of an industry shortage benefiting Performance Chemicals, and the market trends and competitive differentiators for the API business.

Answer

Interim CFO Rebecca Roof confirmed that $4.2 million of the failure-to-supply charges would be rebilled to partners. President and CEO William Kennally added that contract terms dictate the rebilled amounts and affirmed that Human Health gross margins could return to the high-teens or low-20s. Kennally stated he would follow up regarding the specific industry shortage in Performance Chemicals and attributed the API segment's success to strong sourcing teams in India and China and proactively managing supply chain issues like China's 'Blue Sky' initiative.

Matt Hewitt of Craig-Hallum Capital Group inquired about the cause of the failure-to-supply penalty, manufacturing challenges with Lucid/Citron, generic product portfolio rationalization, potential clawbacks related to the VA contract issue, and the performance disparity between international and domestic API markets.

Answer

President and CEO Bill Kennally confirmed the failure-to-supply penalty was due to manufacturing issues, including a rebuilt supply chain team and partner capacity constraints. He also detailed the complex VA compliance issue and the company's appeal. COO Walt Kaczmarek added that the company continuously evaluates its product portfolio and explained that domestic API softness was due to specific product discontinuations, while international strength was from timing and new business.

Matt Hewitt of Craig-Hallum Capital Group asked about the criteria for discontinuing unprofitable products within the legacy Rising portfolio, the priority level of vertical integration through in-house manufacturing, and the company's capital allocation strategy for future cash flow between debt reduction and acquisitions.

Answer

President and CEO Bill Kennally explained that product discontinuation is a complex decision, influenced by long-term profitability trends and existing partner agreements for product portfolios. He emphasized that vertical integration and owning intellectual property is a "high priority" to increase control and gross profit. Regarding cash flow, Kennally stated the company plans to do both: pay down debt and pursue strategic asset acquisitions.