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    Maravai LifeSciences Holdings Inc (MRVI)

    Q2 2024 Earnings Summary

    Reported on Mar 24, 2025 (After Market Close)
    Pre-Earnings Price$9.10Last close (Aug 7, 2024)
    Post-Earnings Price$8.61Open (Aug 8, 2024)
    Price Change
    $-0.49(-5.38%)

    What went well

    • Maravai's Flanders 2 facility has begun operations and secured commitments for Phase II/III pivotal trials, indicating strong demand for their CDMO services in late-phase and commercial manufacturing.
    • Strategic partnerships with leading CDMOs like Fuji and Lonza are expanding Maravai's product reach, allowing their technology to be included in more products without significantly impacting margins, as they maintain disciplined volume-based pricing.
    • Positive dynamics in mRNA program starts suggest a strong fundamental backdrop, with demand for Maravai's mRNA-related products and services expected to grow.

    What went wrong

    • $MRVI experienced an unexpected and significant decline in its Biologics Safety Testing (BST) revenues due to a drop in China, with over 80% of BST results explained by the China drop. This suggests vulnerability to market conditions in China and potential unpredictability in their business.
    • The company is expecting a sequential decline in revenue in the third quarter in its Nucleic Acid Production (NAP) segment, primarily due to high volume CleanCap orders in the second quarter that will step down in the third quarter. This indicates that revenues may decline in the upcoming quarter.
    • Maravai is not expecting contributions from small and mid-cap biotech companies (SMid biotech) to grow substantially in the rest of this year's guidance, potentially due to weakness in the global biopharma and biotech sectors. This could impact revenues from early-stage biotech customers.

    Q&A Summary

    1. China Sales Impact
      Q: How did China revenue perform this quarter?
      A: Over 80% of the BST segment's results were due to a drop in China sales. The decline in BST China in Q2 was a surprise, and BST's China exposure is now in the teens percentage.

    2. Margin Outlook and Factors
      Q: How transient are the factors affecting margin guidance?
      A: The Flanders start-up costs, around $3 million, were mainly in the first half and are not expected to drag margins going forward. Similarly, start-up expenses from collaborations were drags in the first half but will mostly be behind us for the rest of the year.

    3. Revenue Expectations and CleanCap Orders
      Q: Why expect a sequential decline in Q3 revenue?
      A: The NAP segment had high-volume CleanCap orders in Q2 that will step down in Q3, leading to a slight sequential decline in NAP revenue. We are hopeful that BST can recover from the low point in Q2.

    4. New Products and Margin Impact
      Q: How will new products affect margins?
      A: Incremental products focus on driving revenue growth rather than significantly affecting margins. These products have high variable margins, leverage existing infrastructure, and help drive overall revenue and margin expansion.

    5. Supply Agreements with CDMOs
      Q: Do supply agreements with CDMOs influence EBITDA margins?
      A: These relationships are strategic and symbiotic. Economically, it's about volume-based pricing, and margins are not expected to differ much from historical levels.

    6. Biotech Demand Trends
      Q: What is assumed in back half guidance for early-stage biotech?
      A: Large orders from big pharma reduced SMid biotech contribution from high teens to low teens. We don't expect it to grow substantially in the rest of the year's guidance. Pricing is program-specific, with no significant changes expected.

    7. Flanders 2 Capacity and Programs
      Q: Is Flanders 2 capacity built out, and are Phase II/III programs included in guidance?
      A: We are at the tail end of the capital cycle for Flanders 2, with no substantial CapEx remaining. One of our first commitments is a Phase II/III pivotal program, which is included in this year's guidance.

    8. Strategy to Convert Internal Programs
      Q: Will you convert programs from internal manufacturing to your platform?
      A: Yes, converting internal programs to our CleanScript workflow is seen as a significant market opportunity, as many mRNA programs are still done in-house.

    9. Domestic Manufacturing Advantage
      Q: Is domestic manufacturing important to customers?
      A: Yes, having RUO and GMP chemistry manufacturing in the U.S. is becoming a significant advantage, with customers increasingly interested in supply chain origin.

    10. OpEx Changes in Second Half
      Q: Will OpEx decrease in the second half?
      A: Yes, on an adjusted EBITDA impacting basis, OpEx is expected to decrease from current levels.

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