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Small-Cap Confidential
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October 31, 2023

Repligen (RGEN) Beats in Q3

Repligen (RGEN) Beats in Q3

Repligen (RGEN) bucked the trend among the bioprocessors this earnings season by reporting a better-than-anticipated quarter and having shares go up (+18% in early afternoon) rather than down. Keep in mind that the company was a big beneficiary of COVID-related business, which has totally dried up (not unexpected). So the growth numbers look kind of awful when you don’t strip out COVID.

On to the numbers, Q3 revenue was down 29.7% to $141.2 million while EPS of $0.23 was down from $0.77 in the same quarter last year. Stripping COVID-related revenue out, Q3 revenue was down 18%, from $171.7 million to $140.1 million. Management updated guidance for the full year, which meant just trimming the upside but leaving the low end intact (now $635 - $645 million).

These numbers are not awesome. So why is the stock rallying?

Partly because guidance was not whacked, which had been the trend for several quarters. Also, the book-to-bill ratio (ratio of orders received to units shipped and billed) finally grew again, to 1.07. And management had positive things to say, including that they see a return to sequential growth in the first half of 2024 and both sequential and year-over-year growth in the second half of 2024.

Management also said the gene therapy market is strengthening, that pharma was better, and that resin availability shouldn’t be a huge issue next year. Also, margins should expand in 2024.

In short, the quarter wasn’t a disaster, and positive longer-term trends are beginning to materialize. This should be the “bottom” for the bioprocessing market that we’ve been patiently waiting for, so we’ll stick with Repligen. That said, I’d like more positive signals before even remotely considering moving back to buy. HOLD A QUARTER

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.