What happened
Shares in bioprocessing technology company Repligen (RGEN 0.22%) rose by a whopping 107% in 2020, according to data provided by S&P Global Market Intelligence.
Bioprocessing uses biological catalysts to produce a pharmaceutical, chemical, or food in a controlled environment. The key end market is biological drugs, including vaccines, gene therapies, and monoclonal antibodies.
Image source: Getty Images.
Simply put, it's been a great year for the industry and particularly for the bioprocessing technology providers that help companies research and produce drugs. For example, Danaher's (DHR 0.24%) acquisition of GE's biopharma business (now called Cytiva) has proved more successful than most had predicted, including Danaher's management. Indeed, management now expects high-single-digit growth from Cytiva rather than the 6% to 7% originally assumed.
It's a similar story at Repligen, and you only have to look at the remarkable shift in full-year revenue and earnings expectations to see that.
|
Full-Year 2020 Guidance |
In November |
In February |
|---|---|---|
|
Revenue |
$348 million to $352 million |
$309 million to $319 million |
|
Gross margin |
57.5% to 58% |
55% to 56% |
|
Adjusted net income |
$75 million to $77 million |
$57 million to $60 million |
|
Non-GAAP EPS |
$1.41 to $1.45 |
$1.07 to $1.12 |
Data source: Repligen.
A few acquisitions have boosted expectations, but if you adjust for them by looking at organic growth expectations, it's still a story of very strong improvement. For example, management started the year expecting 10% to 14% organic growth but now expects 23% to 24%.
So what
There's little doubt that the COVID-19 pandemic has boosted growth prospects at Repligen. In the third-quarter earnings release, CEO Tony Hunt noted "COVID programs accounted for approximately 14% of revenue during the quarter, and approximately 55% of revenue growth."
On the one hand, there could be a snapback in growth as a consequence of a pullback from the boost in 2020. On the other hand, it's possible that a some non-coronavirus-related research and development work was held back as medical bodies shifted investment toward combating the pandemic -- a point that stands despite evidence suggesting non-COVID work is ahead of management's initial expectations.
For example, during the earnings call, Hunt said that non-COVID-related revenue grew by 17% to 18% in the first nine months -- ahead of management's original expectation for 10% to 14% overall organic growth. Nonetheless, Repligen's near-term earnings momentum remains very strong, and it's a growth stock worth considering.
Now what
The company is a key player in niche markets of bioprocessing and is surrounded by much larger companies. As such, it wouldn't be surprising to see it attract the interest of some of them in the future, not least because Danaher's acquisition of Cytiva has consolidated the market.
On a more immediate note, investors will be hoping for more of the same in terms of growth from Repligen in 2021. Hunt has signaled that by February, he will have a clearer idea of how demand growth will play out in 2021, so investors should listen for updates then.
