here, so thanks for joining us. Welcome back to TD Cowan's 46th Annual Healthcare Conference. I'm Brendan Smith, Tools DX Analyst, and it's my pleasure to introduce the team from Rapid Microbiosystems. They're going to give a presentation for a majority of the time, and then we will have a few minutes at the end for a Q&A. But on my left, your right, is the CEO of Rapid. Thank you for joining. And to his right, excuse me, to his left is Sean Wurchis, the CFO. Thank you guys so much. I'll turn it over to you.
Great. Thanks, Brian. Thank you. Well, good morning, everyone. Thanks for your time this morning. Again, I'm Rob Spignessi. I'm CEO of Rapid Microbiosystems, joined by my colleague and CFO, Sean Wurchis. I look forward to walking you through our business today. So for those of you listening online, this deck is available on our website under investors. It will not automatically sequenced, so I'll do my best to keep us synced up. Disclaimers, you can all read it, but with regard to just kind of a headline statement, we have not released 2025 and Q4 earnings yet. That is next week, so we are not going to be speaking about forward-looking statements during the presentation or Q&A today. The next slide, But just our vision and by background and context of what we do, so we're focused on a critical part of the global pharmaceutical quality control infrastructure called microbial quality control. So this is a regulated process. Every pharmaceutical company in the world has to do this by regulation, and it's essentially a high-volume testing process to ensure the actual pharmaceutical product, many of which are are injectable are free of microbial contamination. So think bacteria, fungi, and other other organisms. The challenge with the current processes that are performed in the vast majority of sites around the world is it hasn't innovated. The process is basically the same process that Louis Pasteur invented about 100 years ago. So think high school biology effectively, petri dishes and people running around collecting samples so it's causing risks and costs for the industry that we'll walk through today and we as a consequence have developed a technology that fully automates that process and accelerates that process and brings it into the 21st century where it belongs. The next slide it's slide four this is just a flyover of our of our business by the numbers if you will to to give you a sense of who we are, about $34 million in 2025 revenue, 20% growth, high growth business. A notable piece of our business is our recurring revenue. I'll get into our business model, but we place our growth direct system, which is, you can see the picture in the bottom right of the slide. Then we validate that with our customers, and then we pull through a high yield of recurring consumable and services revenue. and that the business model is proven and we'll walk through our revenue and recurring revenue in later slides, but this creates a very durable recurring revenue stream as these systems get validated inside GMP manufacturing environments in our customers. We have 190 system placements around the world, 155 of which are validated, also an important point to know about our business. Validation is the point in time in which the system, our growth direct system, becomes a system of record for that manufacturing and quality control process. It's fully validated under GMP. And after it's validated, that's when we expect to have that high yield of occurring revenue. So that's a really, really important milestone in our business. We're global. So we go to where Global Pharma is. I'll walk you through our customers. It's a global industry. Our customers are global, and we are present where they are around the world. We're proud to count 75% of the global top 20 pharma companies as our customers. We'll go through our customer list in a couple slides. I think you'll be able to see, at least those in the room can see the actual logos. Those online, we'll see more of a sanitized view. But the headline is the vast majority of the top-scale companies are our customers. And it's also important to note we serve all modalities in manufacturing, large molecules, small molecules, cell and gene therapy, but we're especially strong, I would say, in the more advanced modalities of biologics and cell and gene manufacturing. And you can see here about 86% or so of approved CAR-T manufacturers are using our system. So in our view, we're becoming the de facto standard in cell and gene therapy generally and cell therapy specifically manufacturing. Okie dokie, slide five. In early January, we pre-announced Q4 and 2025 revenue. It was a notable year. I'll take through our highlights quickly here. You can see on the left side of the slide. But we had record quarterly revenue in Q4. We exceeded our full-year guidance, followed a raise for the quarter and for the year. And there's our 13th consecutive quarter of meeting or exceeding our revenue guide. As I touched on, recurring revenue was strong, double-digit growth throughout the year. We also announced a record single order. I'll just give you a sense of, I think, the vitality of our customer base and how automation is resonating in the market today. Our largest order ever, we announced, and this is an exciting order. It's with an existing customer who's expanding their global footprint. And not only is the size and scale of the order exciting, but also this particular customer is validating across all of our applications. And we'll go through that. So it's also a global deployment. So it ticks all the box that we like to see in these rollouts. Strong margin improvement, which is a really important story about our trajectory. And we strengthened our balance sheet with a $45 million term loan from Trinity Capital. We also, about a year ago, earlier in the year, announced a partnership with Merck Millipore Cigna. And I'll go through the elements of that in a slide or two. I won't read all the results. You can see them, but it was a very strong Q4 with 37% growth, recurring revenue for both a quarter in the year are strong and a very strong placement quarter on the year as well. So we're happy with Shirtland Q4 and the full year 25. So I touched on our distribution and collaboration agreement with Merck Millipore Sigma. We entered into this global relationship to address our key priorities, and this partnership is aligned against our top priorities, which are accelerating growth through existing placements, improving our gross margins, and driving continued innovation and growth in the market. So the agreement has these three elements. At the core is a distribution agreement, and Merck Millipore has an actual purchase commitment for the first two years. We're now in year two and the commitment is uh meaningful so they have the ability to uh sell the growth direct and consumables uh on a co-exclusive basis with us uh globally and as you may imagine their sales uh force is quite a bit larger than ours so we uh we like the way that's set up with regard to uh the scale um uh we also uh envision the the merc milliport team uh where they're where they're strong in addition to pharma in other adjacent markets which are significant for us so for example personal care potentially some food and Bev markets medical device other areas that are the scale of our sales team just isn't focused on those areas so we also view this as a strategic move to get into adjacent markets the second element is gross margins which is a incredibly important part of our of our business much of what we procure from vendors Merck Millipore sells, especially in our consumables business, so the focus here is to procure at preferred rates, if you will, to accelerate gross margins. And lastly, innovation. As we continue to grow our footprint, Merck Millipore is obviously a large company and is in many, if not most, of labs around the world. So how can we, in the near term, have our products and services work well together? And then in a bit in the medium or longer term, how can we co-develop innovations at the market needs and desires? So very excited about this. Again, entering year two pretty much as we speak. It's about a year ago and have high expectations for the partnership. Slide 7, I just want to orient you all to, you know, maybe a high level view of the value chain, pharmaceutical development value chain and the problem that we're solving. We can all probably agree that scientific and technology innovations over the past decades have impacted how we discover drugs upstream in the process, the technologies apply there, and certainly downstream in the manufacturing of drugs has changed dramatically over the years. But I touched on in the introduction, the actual quality control process hasn't moved. It's essentially, next slide, I'll get a little bit more a micro kind of view of the world, but it hasn't changed. And you have this incongruent situation where the speed and quality of drug discovery and the manufacturing is advanced. and the fundamental infrastructure globally about the quality control, which is part and parcel to both manufacturing and to a certain extent R&D, is just not keeping pace. And we're solving this problem of this incongruent situation. So on slide eight, again, beaming you maybe into a micro QC lab. For those of you who have never spent quality time in a pharmaceutical micro QC lab, here's a quick snapshot into a piece of one. So if you walk in, And pretty much no matter which one you walk in around the world, they all kind of look the same from a certain standpoint. So you'll see people, you'll see papers and pens and pencils and lots of Pete Feet issues and incubators. You may see a computer, you might not. So, again, this is a it's a high volume, you know, testing process. And I'll walk through it. I'll walk through it quickly just to give you a sense of the of the process. But folks will come to work, it could be a dozen, it could be hundreds for a large site, they'll have stacks and stacks of petri dishes like you can see in this photo, they'll fan out across typically the manufacturing environments and everything is tested. The air, the water systems, the personnel, people are typically the number one source of contamination in pharmaceutical manufacturing. We just bring bioburden with us into the environment. Manufacturing services, just everything is tested. The product itself, as it goes through the process. The tests are brought back typically to a central lab. Then they're brought into an incubator. In this case, it's a Petri dish format test. So for those of you online can't see, but we're in a pretty large room now. So in some cases, I would say it's probably as large as the room that you're in now. listening to us. And for those of you in this room, it's maybe half this size, which we're in a large room, which is an incubator. So they'll bring them into an incubator with a bunch of shelves around the room, Monday, Tuesday, Wednesday, Thursday, and put all their samples up and then come back after a few days, a week, sometimes two weeks, and physically pick up each petri dish, look to see if there's growth, count what's called the CFU, which is basically an organism growing write that down on a piece of paper and and ultimately type it into a computer system and ultimately that computer system will release the batch for release to the market or to the next processing process I'm just tired walking through what it is like you know doing that on a on a daily basis and the volume is significant so it can be hundreds of tests per day for site are thousands. One fun fact we like to throw out is that at high volume sites if you took the number of petri dishes that site just that site consumes on an annual basis and stacked them it would rise to eight miles high in the air to give you a sense that there's a sheer volume that's going through these sites. Clearly it's a subjective process there's human error you know throughout and we're designed to do a lot of things well but repetitive high-accuracy tasks just tends not to be one of them. So it's perfect, it's custom-made for automation. And enter automation. So slide nine, I'm on now. This is our solution to this problem, which is the Growth Direct platform. It's the only fully automated high-throughput system available. It consists of the Growth Direct itself, proprietary consumables. So we automate, think of our system, you know, the system itself is about six and a half, seven feet tall. People are always a bit amazed by the scale of it. But think of what we're trying to solve is, think of it as almost industrial automation, solving a life sciences problem versus a tabletop type of analyzer. So think of high volume, full automation, high capacity. And our consumables, we design it so we automate the vast majority of daily routine use. So we want all the volume of the labs that I chatted about. Data and software packages and systems that seamlessly interconnect the growth direct to the customer's information management systems to remove all that paper and a lot of the labor and error on the process. And then validation. Under pharmaceutical manufacturing, it's really important to have a strong validation package that can withstand internal regulatory demands as well as external regulatory demands. And we have people around the world that specialize in this. And we've done it, again, 155 times. We've gotten quite good at it. And we generate revenue across all of this. We place a growth direct. It's typically a capital sale. Validation is a service revenue. And then we pull through a high yield of recurring consumables. And then we also have an annual service contract as well. So all that creates our business model. And what do customers get from it? So data integrity is really important. So this is basically, can you trust the quality of that sample in that test? With all that human labor and error involved in that process, mistakes are made. Unfortunately, falsification happens. The FDA and the EMA have issued regulations that basically say, or standards against data integrity, and our system dramatically helps customers in many cases be compliant. Operational efficiency, it's a fully automated, rapid system. So we give answers, for example, an environmental monitoring test, and, you know, as early as, you know, two days full answers versus five or six or seven days. So customers can ship the market faster, move to the next processing step faster, or find problems faster. And lastly, it's machine-driven, computer-driven, and we were using AI, I think before AI was the thing, a backbone in our system. So the elimination of human error is certainly part of it as well. In slide 10, it just gives you an overview of the transformation in the customer's workflow they go through. So as I walk through this 15-step convoluted process to a leaned-out, basically two-step process, the customer takes a sample with our consumable, puts it onto our system, and that's it. It's the last time a human being ever will see that sample. It's a dramatic change in how this process works. In slide 11, just our vision of bringing the quality control process around the world to the contemporary standards of R&D and manufacturing. So another way of thinking about our business is we're replacing and improving the quality control infrastructure globally for pharmaceutical manufacturing. And we're well on the way there. There are a number, from a macro standpoint, a number of forces, market forces pushing pharmaceutical, our customers to adopt automation, and we view these as very powerful and enduring, in some cases accelerating, which is great for our business. The market's large, about $5 billion recurring, and about $5 billion additional in system opportunity. As I touched on regulatory pressure, sometimes this market can move somewhat slowly. A regulatory pressure can accelerate that, and we're seeing that now, especially around data integrity requirements. The industry change, this is a very powerful and interesting one where, you know, as I touched on, in many cases, it's a 100-year-old process invented before cell and gene and even biologics were really a thing. So the fundamental manufacturing requirements and needs around test volume, speed, accuracy have fundamentally changed. So you have, again, another incongruent situation between the demands of the fundamental manufacturing modality and the current processes around microbial quality control. It just can't keep up. And lastly, some of you I'm sure have heard about this, is the onshoring. From what we can tell, it's real. We've already been approached by customers for their newer sites in North America, and it's our view that automation is going to be more deeply penetrating than the new sites, especially in higher-cost areas like the U.S. So all of these create a nice tailwind for our business. Slide 13 just gives you a sense of our growth strategy and why and how we've been successful in growing our business. so we have a we have a land and expand commercial slash sale strategy where we land in a customer we acquire a customer and then expand to that customer through additional systems and applications around the world as you may imagine our system is used to create a compliance environment right so it's you know customers don't buy just one they want to deploy these around their sites and in some cases around the world. So we land and then a customer is going to expand across applications, sites, many more systems and geographies for example. We have several customers who have systems in all the major geographies around the world. So that's the core of our organic growth strategy. Our R&D strategy is, you know, think of it as adjacent steps around our core. So we're automating the legacy workflow. How can we move upstream and downstream in that workflow, especially around data and providing more information to our customers about their manufacturing process and their environment, both again, both downstream and upstream, as you can see in slide 13. And lastly, adjacent markets, as I touched on, personal care is just about the size of pharmaceutical manufacturing, a bit more fragmented market. you know we as a direct team will unlikely go there in the near term but our partnership with Merck Millipore Sigma we're quite excited about the opportunity to to enter into and expand in adjacent markets. Slide 14 is our customer list again those in your room can see the logos those you online cannot but you know from a headline standpoint as I touched on you know 75 percent of the top 20 global pharma companies are customers it's really important to note some folks go well you already got those what's next well we don't it's really important to understand that we are only begun to penetrate these customers yes they're customers but no one is fully expanded around the world so a lot of runway left certainly injustice customer base and of course we're always looking to acquire to acquire new customers so you can see We've got good geographic dispersion. We're about balanced between North America and Europe, call it 45% of our installations, each green dots in installation. Some of those have multiple systems. And Asia is a newer market, but growing strongly. You know, as I touched on, we address all modalities in manufacturing, but we're especially strong on biologics, which is our first size market, our largest market, cell and gene therapy, CDMOs. So we really address the gamut. We're agnostic to modality is the takeaway. Okay, slide 15. It gives you a sense of the intimacy that we have with our customers. We always seek to connect with customers around the world, and our Growth Direct Day is probably one of the better ways in which we do it. So this is an annual two-day event. Historically, it's been in, for the past seven years, it's been in Europe. This year we're actually expanding it to the U.S. We're having a Growth Direct Day, and Asia as well. So this concept is growing, and we're very excited about it. So we had our largest ever in Europe this past, in 2025. Each year a different customer sponsors it. So this year it was Daiichi Sankyo. So we're really excited about that. And just imagine an environment where, you know, current customers and prospective customers come together and talk about the Growth Direct for two days, how they've acquired it, how they've deployed it, regulatory questions, it's really a fantastic environment with with customers helping potential new customers think about the technology and also existing customers trading ideas and concepts and how they continue to expand with regard to our various our various tests and regulatory considerations, geographic considerations, etc. I typically the host site will bring folks on onto their site to see how the growth rack was installed and used on that site. And this year we had a chance to invite our partners at middle of Porsche Sigma for the first time as well. So we're very excited about that. Side 16 just demonstrates our strong financial performance over the past several years, starting with revenue on top, 25% compound annual growth rate over the past several years, driven primarily by that organic sales and growth strategy I went through our land and expand strategy you know new products have been you know certainly part of a part of that as well also just clear evidence that our our recurring business model our consumable pull through and our service pull through is working the dark blue bars are the recurring revenues you can see very very strong growth there and while our Merck Millipore Sigma partnership has not had a material impact on on the previous years we expect it to in the forward looking years which we're very excited about. At the lower part of the other slide a gross margins a very important part of our business where we have very very sharp focus on you can see a meaningful improvement over the past several years as well 60 total percentage point improvement and we continue to drive that Northwood as we go north as we go forward reducing our product costs increasing efficiencies increasing our service productivity in the field we're both both product and service efficiency our volume is helping us as well and then we also expect again our Mercantile of course in a partnership to impact our gross margin trajectory so we'll start the wrap-up process here so on slide 17 we believe we're very well positioned for continued success in 26 and beyond we've got the right customer base with the right product and the right and the right value proposition we've got momentum coming out of 25 headed into headed into 26 our business model is working well with regard to the capital placement and and the pull through as you saw on the previous slide our margin expansion is is definitely on track and we continue to drive that drive that higher as we as we go through the coming quarters in years we're excited about our middle port partnership and it's set to make a meaningful impact in 26 and beyond and we're financially healthy with a with a with a strong balance sheet and lastly it's our team is focused and Sean and I for sure on making sure that we deliver you know sustainable and meaningful long-term shareholder value creation so to wrap up and then we'll have time I think maybe for a question or two the reasons why we're excited about our business it's a large market as I touched on and growing that's under pressure by the regulators and industry to change and we're providing that change the strong barriers to entry you know first mover advantage when you get in first which we are you become incumbent and validated in the process which is a fantastic position to be in the growth direct is the leading platform you know as evidenced by our growth in our customer footprint we we are strong or can address any modality but we are especially strong in the advanced modalities of biologics and cell and gene therapy where you tend to have the higher consumable requirements and needs and that gets translated into our high growth business model where we've proven you sell the capital equipment and we pull through that durable high yield recurring revenue. So with that the shot clock says three minutes left if you want to ask a few questions. Yeah it's
perfect yeah so I think thanks for this guys this is always good to kind of hear the updates across the entire franchise. So I know you touched on a few of these earlier in the presentation, but really just as it relates to on-shoring and really this kind of more secular trend of automation across the board, how should we think about this in 26, 27, 28? Like what kind of a tailwind should we expect and really maybe more so on timing? Is this a 27 type thing, 28? How are you kind of thinking about the potential ramp there? Yeah, it's a good question. I think
to start it's um i might touch on it in the presentation it it's it's real from what we can tell the headline value i'm not sure where it was 500 billion seven i mean it's a big number so i'm not sure if we'll ultimately get there but we definitely have customers that are have started the process and who are engaging us in in uh addressing their sites so that's that's um feels real now as far as timing I think it's you may see the leading edge in 26 so I wouldn't call it a tailwind yet with acceleration 27 28 29 you know these these sites don't go up that quickly and you know who knows a supply and demand of the A&E firms out there so I think I think that'll all have to kind of sort and settle but the trend seems real the commitments that definitely seem real and it's our position that especially in the U.S. where labor costs are not cheap and a new site is a fantastic opportunity to put automation in it's our view and the feedback is starting to suggest that it's working this way that these will be highly automated sites not only in quality control but manufacturing and other parts of the value chain as well which is exciting. Yeah and I mean
I think that kind of lends us up to the other thing I wanted to follow up on is it feels like you know if you're breaking ground in a new factory or even expanding your existing infrastructure whether that's this year next year year after automation is kind of just needs to be part of the conversation right across the board so as you guys are kind of looking at some of these trends now is it just a matter of raising brand visibility getting in front of some of these folks like making sure people are aware of the differentiation of this product itself or is there actually some kind of competitive conversation to be had
amongst other people in this space? So with regard to so I think the um so this question around competition and what's yeah so so the um why would you not realistically work with you guys
is it just a familiarity thing or is there actual kind of competitive conversation to be had that's
really what I'm getting at with the growth direct yeah so so the good news is we're established in in the vast majority of the top companies. So, you know, that being said, our success, we believe, has attracted some competition. So the fact that we are incumbent in so many companies and we've been adopted and validated, the marginal site, the marginal sites, the marginal geography, it just makes sense that they would install the growth direct. You know, for certain sites and certain applications, solutions, could some existing technologies in the market create some type of competitive environment? Sure. We can't say we can get 100% market share. But again, as I touched on in our first mover advantage, having that incumbency and as customers expand the familiarity, the training, the data, the interconnectivity that we've already solved those problems, it just becomes a lot harder to adopt a newer or different technology versus rolling out to the marginal or next set of sites or geographies if that makes sense
maybe just one last one in the last minute here I know you've spoken a little bit to this in the past and it's something I'm sure I'll ask you guys again in the future as it continues to evolve but just kind of given the type of data you all are able to generate internally and and through kind of broader usage of the growth direct what kind of insights do you think could realistically that we've made, kind of leveraging AI in this capacity to really continue to integrate a lot of this into the product software moving forward?
Yeah, so we're generating an enormous amount of digital data, a lot of metadata, and as companies around the world deploy, now you've got a fleet of GrowthRx generating insights and data inside all these sites around the world. So there's different fauna, different types of microorganisms, different quality cultures, different products on our next generation software that we're releasing the second half of this year is cloud enabled so our view of the world is pulling all this metadata into a into a data lake or a common area that can be interrogated by AI to get insights into quality failures what type of organisms are showing up when do they show up and linking it to discrete events like you know employee turnover or preventative maintenance on equipment to help customers look into their a get a status and health check of their quality control globally which I don't really have now in a clear way but more importantly how do you prevent a quality problem in the first place to save money increase capacity and throughput of the environment and interestingly where this industry as I touched on can be slow to change the AI and data part of it we're actually seeing very very strong interest in it we even have some customers who have done it basically on their own where they have a bunch of growth directs and they in their own infrastructure have driven all the data into a data lake and analyze it that way so we we we view our we're facilitating the data that will ultimately be used by these advanced and even AI systems to create a global sort of view into how to run a better pharmaceutical company effectively.
Awesome well thank you guys very much for joining thank you guys for paying attention always good to see you guys. Yep likewise thanks for your time attention.