RGEN - NASDAQ

Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Repligen Corporation Earnings Release Third Quarter of 2025. [Operator Instructions] I would now like to turn the call over to Jacob Johnson, VP of Investor Relations. You may begin.

Thank you, operator, and welcome, everyone, to our 2025 third quarter report. On this call, we will cover business highlights and financial performance for the 3-month period ended September 30, 2025, and we'll provide financial guidance for the full year 2025. Joining us on the call today are Repligen's President and Chief Executive Officer, Olivier Loeillot; and our Chief Financial Officer, Jason Garland. As a reminder, the forward-looking statements that we make during this call, including those regarding our business goals and expectations for the financial performance of the company are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning risks related to our business is included in our quarterly reports on Form 10-Q, our annual report on Form 10-K for the fiscal year ended December 31, 2024, and our current reports, including the Form 8-K that we are filing today and other filings that we make with the Securities and Exchange Commission. Today's comments reflect management's current views, which could change as a result of new information, future events or otherwise. The company does not oblige or commit itself to update forward-looking statements, except as required by law. During this call, we are providing non-GAAP financial results and guidance, unless otherwise noted. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to Repligen's website and on sec.gov. Adjusted non-GAAP figures in today's report include the following: non-COVID and organic revenue and/or revenue growth, cost of goods sold, gross profit and gross margin; operating expenses, including R&D and SG&A, income from operations and operating margin, tax rate on pretax income, net income, diluted earnings per share, EBITDA, adjusted EBITDA and adjusted EBITDA margin. These adjusted financial measures should not be viewed as an alternative to GAAP measures but are intended to best reflect the performance of our ongoing operations. With that, I'll turn the call over to Olivier.

Thank you, Jacob. Good morning, everyone, and welcome to our 2025 third quarter call. We had another outstanding quarter in quarter 3 with 18% organic growth. This quarter, every franchise grew double digits, which is a testament to our differentiated broad portfolio and diversified customer base. Our portfolio of products enables us to sell one of the most comprehensive suite of innovative solutions across the bioprocessing workflow. We saw strength across our extensive customer base as both biopharma and CDMOs grew over 20% and all geographies grew double digits. The continued growth from CDMOs is very encouraging as it reflects the health of the ecosystem. From a franchise perspective, analytics led the way with over 50% growth, including more than 30% growth at CTech, while Filtration grew over 20%. Consumable demand remained very robust with greater than 20% growth in the quarter, while capital equipment had another strong quarter with over 20% growth. The better-than-expected performance in analytics and proteins this quarter underscores that growth opportunities exist across our entire portfolio, driven by our innovation engine. In particular, analytics revenue growth was aided by the launch of SoloVPE PLUS earlier this year. This new generation of at-line protein concentration analytics offers customers increased data collection speed and enhanced sensitivity and reproducibility with a streamlined workflow. This has started to drive an upgrade cycle that will last for several years as we have a sizable installed base. Transitioning to orders. Total company orders grew sequentially for the sixth straight quarter and grew over 20% year-over-year, including double-digit order growth across all of our franchises. With customer ordering patterns back to historical trends, we believe quarterly orders are a less relevant metric and plan to provide less detail around orders going forward. We will remain transparent around the trends we are seeing in our business and within the industry as we have always been. We think our Q3 results highlight the broad strength we are seeing across our franchises, customers and geographies and our 18% organic growth continues to outpace industry growth. In fact, this marks the fourth straight quarter of 14% or better organic non-COVID growth. Both our Q3 and year-to-date overall performance was not based on a single customer or product line, but rather the totality of our portfolio. We think this is a testament to our commercial execution as our team capitalizes on the growth strategies for each of our franchises. As a result, we are again raising the midpoint of our organic growth guidance for 2025. Unpacking our performance by end market, Q3 '25 biopharma revenues grew over 20% year-over-year with broad growth across all biopharma customers. Emerging biotech revenue was at the highest level in nearly 3 years. While we're hesitant to call this a trend as growth benefited from some specific opportunities in the quarter, we are encouraged by the recent funding trends we have seen. CDMO revenues also grew over 20%, driven by outperformance from our larger CDMO customers in the quarter. From a geographical point of view, we saw particular strength in Asia Pacific with approximately 50% growth, while the Americas grew 20% and EMEA was up low double digit. New modalities revenue was consistent with our expectation for a muted back half. We saw growth in cell therapy, while AAV and mRNA trends were fairly consistent with last quarter. Turning to strategy. We mentioned last quarter that digitization is a key pillar of our strategic plan. Our analytics franchise is the foundation of this strategy, so we wanted to expand on this effort and provide more detail on the very strong performance in Q3. Digitization will be a multistep and a multiyear journey. Currently, we enable measurement of protein concentration in downstream processes using our innovative solution from C Technologies, then glucose, lactate and biomass upstream with the acquisition of the 908 bioprocessing assets. With the successful in-line integration of CTech FlowVPX into our downstream TFF systems, we can provide real-time monitoring and process control. These are key enablers of continuous manufacturing, which is still in its early days, particularly in downstream applications. We're actively working to develop additional PAC-enabled solutions. Beyond this, we are looking at opportunities to leverage digital twins to utilize this real-time process data with advanced modeling to optimize process development and manufacturing. As a step in this direction, we announced a partnership with Novasign during the third quarter to integrate our system with Novasign's digital twin capability, starting with our bench scale TFF. We aim to deliver solutions that significantly reduce process development time and cost and support a more efficient and reliable scale-up for our customers. We also saw strong growth in overall service revenue in quarter 3. Services currently represents 5% of our consolidated revenue. We have a particularly high attachment rate in analytics, so we benefit from both new installations and annual maintenance. Commercially, a strong service organization allows us to best serve and delight our customers while bringing us to be closer to them. There is a sizable opportunity for us to grow this business in coming years as we expand our services offerings across our entire capital equipment portfolio. Our strategic account strategy initiative launched 3 years ago is a real success story. We are now covering 20 large pharma and CDMO accounts. The focus of our key account team is to engage with key decision-makers at our customers to better understand their needs while demonstrating the breadth of our capabilities. We are seeing great traction here with more of these customers buying multiple products from Repligen. And as a result, many of these strategic accounts are accretive to our growth. In addition to our strategic account strategy, our commercial team is also incentivized to cross-sell products across the entire portfolio. As it pertains to tariffs, we continue to evaluate opportunities to better leverage our global footprint. We are working to have dual manufacturing for the vast majority of our portfolio by the end of next year. This includes a focus on ensuring we have the right footprint to benefit from capital equipment opportunities in coming years, including potential U.S. onshoring projects. Before I turn the call over to Jason, I'll provide some more detail on our franchise level performance. Filtration revenue grew over 20% in the quarter. Flagship cassettes, fluid management, Flow Path along with ATF, all contributed meaningfully to growth this quarter. We continue to see a long runway of growth in ATF, but we think it's important to highlight that multiple products have been key drivers of year-to-date filtration growth. This highlights the breadth of our filtration franchise, which is our largest and most diverse. In addition, we have a strong backlog for fluid management, so we continue to expect robust growth from this product line in coming quarters. After a record Q2, chromatography revenue grew mid-teens in Q3 as resin mix returned to more normal levels. This was mostly driven by continued strength in large column demand from key CDMOs and pharma accounts globally. Protein revenue grew low double digits in quarter 3, driven by chromatography resin. This franchise outperformed our expectation in the quarter and is an area where we are making additional investments to drive future growth. We have several innovative solutions for the new modality market with our Avitide [indiscernible] assets and for the monoclonal antibody market by our Protein A ligand capabilities. We plan to launch additional innovative solutions across this portfolio in coming years. While it will take some time for this opportunity to grow into more meaningful revenues, we think the investment we are making today will position us well for growth in this higher-margin franchise for years to come. Finally, and as already mentioned, Process Analytics had a standout Q3 with more than 50% growth, including $3 million of revenue from the 908 bioprocessing acquisition and over 30% growth at CTech. This was driven by strength across consumables, equipment and services. With strong orders in the quarter, we are encouraged by the momentum in our analytics franchise. As it relates to the 908 bioprocessing assets, we remain on plan with the integration. To wrap up, while the last several years have been a unique period for the bioprocessing market, we believe the dynamics of this year have created additional opportunities for Repligen. Customers are looking for products that enable them to improve yield and productivity. Our product portfolio and customer centricity have opened a number of doors in recent years, and we believe the results we are seeing this year are a testament to our strategy. We remain focused on capitalizing on our growing funnel. Given the opportunities we see across our portfolio, we will continue to invest as needed to ensure we have the right foundation to support sustainable future growth. This includes planned investment in application labs to better serve our customers with differentiated solutions, investments in technology to increase productivity and investment across our business to ensure we have robust processes and tools to continue to delight customers and scale our growing business. We'll balance these initiatives with a commitment to driving margin expansion over the medium term. We're excited about the customer traction across our business as highlighted by our year-to-date performance, which demonstrates the differentiated nature of Repligen. It also reflects the execution on the 5 strategic priorities we outlined at the beginning of the year. We remain focused on closing out a very strong 2025. Now I'll turn the call over to Jason for the financial highlights.

Thank you, Olivier, and good morning, everyone. Today, we are reporting our financial results for the third quarter of 2025 and providing an update to our financial guidance for the full year. Unless otherwise noted, all financial measures discussed reflect adjusted non-GAAP measures. As shared in our press release this morning, we delivered third quarter revenue of $189 million, a reported year-over-year increase of 22%. This is 18% organic growth, excluding the impact of acquisitions and currency. Acquisitions contributed approximately 2 points of the reported growth, while foreign currency was also a 2-point tailwind. As Olivier offered details on our product franchise performance, I'll provide more color on our regional performance. Starting with quarterly revenue. North America represented approximately 50% of our total, Europe represented 30% and Asia Pacific and the rest of the world represented approximately 20%. Asia Pacific grew nearly 50% year-over-year, driven by Fluid Management, Analytics and ATS. Americas grew 20% with strength across the portfolio and EMEA grew low double digits driven by OPUS and TangenX. After strong orders in Q2, we saw China revenue return to growth in Q3, though not a key driver for the overall strength in Asia Pacific, it was encouraging to see growth even off a low prior year base. We remain optimistic that China will return to growth in 2026, but we still expect China to be slightly down this year as orders declined in the quarter after the order acceleration in Q2. Transitioning to profit and margin. Adjusted gross profit was $101 million, up 28% year-over-year or 25% excluding foreign currency and acquisitions. Adjusted gross margin of 53.3% increased 260 basis points year-over-year and 210 basis points sequentially. The year-over-year increase was driven by volume leverage, price and productivity. The sequential increase benefited primarily from improved mix as Repligen procured resin for OPUS columns were at more normal levels and from revenue growth of proteins in the quarter. This dynamic of gross margin fluctuation being driven by changes in sales mix is to be expected quarter-to-quarter. We are more focused on full year trends. Year-to-date, gross margin is 52.7%, which shows 230 basis points of margin expansion over the same period in the prior year and is in line with our gross margin outlook of 52% to 53% for 2025. FX was a benefit to margin in the quarter, while tariffs remained a slight headwind. Continuing through the P&L, our adjusted income from operations was $27 million in the third quarter, up 16% year-over-year on a reported basis and up about 20%, excluding the impact from foreign currency and M&A. This growth was driven by a $22 million increase in gross profit on higher volume and margin improvement, offset by $18 million higher OpEx. Q3 represented our lowest OpEx quarter last year and growth this quarter included $3 million from M&A, $1 million from foreign currency. It also includes about $2 million of onetime expenses in SG&A that will not repeat in the fourth quarter. The remaining increase includes strategic investments, which we will continue to make to support future growth. Year-to-date, OpEx has grown 14%, excluding the impact of M&A and foreign exchange versus our 16% organic non-COVID revenue growth. This translated to an adjusted operating margin of 14.2%. Margins declined 70 bps year-over-year, largely due to M&A. Our third quarter adjusted EBITDA margin was 19%, a year-over-year decline of 160 basis points, which also included a $1 million headwind from foreign currency transaction losses. Adjusted net income was $26 million, a $2 million year-over-year increase. Higher adjusted operating income was offset by $3 million of lower interest income. Our third quarter adjusted effective tax rate was 17%, which benefited from actions executed within our tax planning strategy. We now expect to see an adjusted effective tax rate between 21% to 22% for the year, about 100 basis points lower than our previous guidance. Adjusted fully diluted earnings per share for the third quarter were $0.46 compared to $0.43 in the same period in 2024. Finally, our cash position at the end of the third quarter was $749 million, up $40 million sequentially from the second quarter. This was driven by incredibly strong operating cash flow performance in the quarter, driven mostly by improved working capital. We are very happy with our strong year-to-date results, delivering above-market revenue growth and margin expansion, which positions us to deliver upon our updated outlook. I'll speak to adjusted financial guidance, but please note that our GAAP to non-GAAP reconciliations for our 2025 guidance are included in the reconciliation tables in today's earnings press release. Our guidance includes tariffs and our latest foreign currency assumptions. As highlighted earlier by Olivier and on the strength of our portfolio, we are increasing the midpoint of our revenue growth guidance as we narrow towards the high end of the guidance range. We now see 14% to 15.5% organic non-COVID growth or 12% to 13.5% organic revenue growth with the midpoint of both increasing 75 basis points from our prior guidance. Our new guidance assumes just over a 1 point tailwind from foreign exchange, while our M&A assumptions are unchanged. Putting this together, we are increasing our 2025 revenue guidance to $729 million to $737 million, up from $715 million to $735 million or an increase of $8 million at the midpoint. To summarize the update clearly, of the $8 million increase, $6 million is due to overall portfolio strength and $2 million is from foreign currency benefit. Our guidance implies 4Q revenue will grow low double digits organically at the midpoint while overcoming the headwind from a gene therapy platform mentioned last quarter. In terms of growth by franchise, we now expect the following reported growth rates: Filtration growth of approximately 10% versus our prior expectation of 10% to 12%. This represents approximately 13.5% non-COVID growth. Chromatography growth of approximately 25% versus our prior estimate of 20%. Proteins growth of 15% to 20% versus 10% to 15% previously. And finally, Analytics will grow north of 30% versus our prior guidance of 25%. This includes the 908 bioprocessing acquisition. We continue to expect adjusted gross margins in the range of 52% to 53%, which represents 210 basis points of year-over-year margin expansion at the midpoint, driven by volume leverage, price and manufacturing productivity, offset primarily by inflation and some 2024 COVID sales drag. We assume a slight headwind from tariff charges, offset by benefit from foreign currency. We expect fourth quarter gross margin to be closer to the second quarter following the impact of sales mix fluctuations discussed earlier. The fourth quarter includes a mix shift to products that are below our corporate average. We now expect our adjusted income from operations to be between $98 million to $100 million. This assumes a roughly 13.5% operating margin. As Olivier mentioned earlier, given the strength and traction we are seeing across our portfolio, we continue to make strategic investments today to support tomorrow's growth. This includes investments in specific product lines and geographies like Asia Pacific. In addition, we continue our Fit for Growth journey, and we'll invest to ensure we have the right infrastructure to deliver on these opportunities for our customers, stakeholders and shareholders. These include investments in operations and support functions. They also include investments in digital capabilities that will help drive efficiencies in the future. We will continue to balance cost efficiency and margin expansion with investments that are critical to support future growth. Continuing through the P&L, we are updating our adjusted other income guidance to $21 million, down from $22 million to $23 million due to lower interest income assumptions, along with some impact from foreign currency. As we explained earlier, our 2025 adjusted effective tax rate expectation is now 21% to 22%, a point lower than our prior guidance. Given these dynamics, we now expect our adjusted fully diluted earnings per share to be between $1.65 and $1.68. Our balance sheet remains strong as we ended the third quarter with $749 million of cash, as mentioned earlier. We will remain prudent in our spending while maintaining flexible dry powder for potential acquisitions. We still expect CapEx to be down 20% to 25% versus 2024 with our spending below pre-COVID levels. As we wrap, we are encouraged by our strong year-to-date results, especially considering the headwinds and new modalities that we overcame. We believe this performance reflects solid execution on our growth strategy and broader portfolio. Olivier and I would like to thank our Repligen teammates for helping us to deliver above-market growth yet again. With that, I will turn the call back to the operator to open the line for questions.

[Operator Instructions] Your first question comes from the line of Dan Arias with Stifel.

Olivier, can you maybe just talk about the cadence of order momentum across the quarter and out of the quarter? I mean, obviously, positive industry developments recently. Jason mentioned the China trajectory coming in as maybe a bit of an offset. So how would you sum up purchasing activity here? To what extent does the organic midpoint capture what you're seeing? And then how do you feel like that positions you into next year, just given where expectations seem to be?

Yes. I hope I heard you well enough, Dan. I think you were asking about cadencing of orders in quarter 3 here. So I mean, you've heard like orders went really well for us again in quarter 3. I mean we grew our orders more than 20%, which is the second quarter in a row like our orders are growing more than 20%. In fact, it's sixth quarter in a row that we've seen sequencing order growth. And what I really like among others is every single franchises really grew double digit in the quarter. So -- and then there was no real change between July, August, September. I mean, it was pretty same type of growth during the entire quarter. And then I think I heard a question about what's going on in the industry globally and with a question specifically on China. I mean, yes, we think we are back to really operating that business in a very normal environment. I mean it started with biopharma maybe 1.5 years ago, then CDMOs maybe 3, 4 quarters ago. What was really interesting to see for this quarter was a very nice recovery of small biotech, certainly too early to celebrate, but to see the small biotech business at the highest level for the last 3 years was very encouraging. And then talking about geographies, also very strong across the board. China grew nicely, which was one of the first time for several quarters, grew in terms of sales. Orders were a little bit softer. But as we all know, we're at the beginning of really full -- what we expect to be full recovery, and we do expect to be back to growth in China next year. So that's kind of the overall situation here.

And your next question comes from the line of Dan Leonard with UBS.

A lot of moving parts on the margin side. Jason, I was hoping you could better help me reconcile the sales guidance increase versus narrowing your EBIT margin to the bottom end of prior guide. And wondering also if you can make a comment on what's the right level of operating margin expansion for a high teens revenue growth rate in the Repligen model?

Yes. Look, I mean, first, I'd say we're overall happy with our margin performance in the quarter. And to your point as well, seeing the trends in margin expansion. Gross margin, as we highlighted, are going to move a little bit with the mix of business that we have in the quarter. We are quite favorable in 3Q. And when you look more importantly at the year-to-date, we're up 230 basis points. Kind of rolling that down to operating income. In the quarter, we were up about 20% if you exclude the impact of M&A and currency, that's the dollars of operating income versus about 18% of nonorganic. So again, continuing to get some of that leverage. Look, I know for operating margin overall for the year, again, I put it in that same context, if you look at our overall guide, operating income will be up about 25% if you exclude M&A and FX impact on, again, about a 16% non-COVID organic revenue growth. So again, a lot of good leverage there. If you look specifically, okay, why didn't some of the same sales or that sales drop all the way through. We highlighted about $2 million of onetime operating expenses that we saw in the quarter, primarily driven by some leadership changes that we've been making in our Fit for Growth journey. So those -- that is a hit there. A little bit of FX pressure as well. And then finally, again, we will continue to make investments in the infrastructure and as well as in operations to make sure that we have the right way to support future growth. And we're taking really a long view here, Dan, right? It's -- at the total guide, we dropped our EPS by about $0.01, right, when you look at the midpoint. And when we're thinking about that versus the investments we can make today to keep driving future growth, we're taking a really balanced view.

And your next question comes from the line of Matt Larew with William Blair.

Olivier, maybe following up on Dan's question relative to potential onshoring activity or certainly a pickup in the equipment opportunity over the next couple of years. Obviously, it's still recent since some of the pharma tariff and MFN has come out. But what do you make of any change in cadence or nature of customer conversations? And how would you evaluate Repligen's ability today to potentially participate in larger-scale projects relative to certainly before you joined, but maybe 5 years ago when there was a resurgence in capital equipment related to COVID?

Yes, really good question. Obviously, we're all very encouraged to see a couple of recent announcements that were taking place agreement between those 2 pharma companies and the administration. You nailed it down very well. I mean the big difference for Repligen today versus where we were 2 to 3 years ago. So we have become a real broad actor in the field of hardware solutions, and we are now receiving RFPs for a lot of these big hardware investments that are happening around the world. So obviously, these onshoring projects are going to represent a huge opportunity for all of us in the industry and for us in particular, with our very differentiated hardware portfolio that is, as you know, very well, combined with our PAT technology, which is a huge differentiator. So yes, we are starting to hear more about it. We would expect probably first orders to come towards the second half of 2026 and probably sales from '27, '28 onwards, and we're definitely going to be playing a big role in that exercise here for sure.

And your next question comes from the line of Doug Schenkel with Wolfe Research.

Really just a couple on guidance. So first, as I look back over the past 4 years, recognizing it's been a weird period. But if I just average things, revenue has been, I think, about 9% higher in Q4 versus Q3 on average. I think guidance implies revenue is only about 2% to 3% higher in Q4 this year versus Q3. I'm guessing this is just conservatism given the environment we continue to be in, but there's a lot of positive commentary here. You're coming off a good quarter. It's been a series of good quarters. So I just want to make sure there's no timing dynamics that we should be contemplating. So that's the first question. The second is, in your prepared remarks, I think you noted that we should expect filtration revenue growth at the lower end of the range. And I just want to make sure I heard that right. If so, one, can you delineate between ATF and non-ATF? And two, what does that mean about product mix more broadly? Specifically, are resins tracking stronger than expected? And again, I may have just heard it wrong.

So I think your 2 questions are somewhat linked to each other, so which is going to make it an easier answer here. If you look at seasonality this year, you're absolutely right, like we are seeing much less of it than we were seeing before COVID. And probably with that very strong quarter 3, which is very unusual because we've hardly ever seen a Q3 higher than Q2 in the last 10 to 15 years. I mean this means like, obviously, there will be less seasonality also between Q3 and Q4. And our midpoint -- sorry, our guidance now implies 18% to 13% organic growth in Q4. And keep in mind, we have about 3% headwind coming from that gene therapy customer that was reporting really high sales for us in quarter 4 of last year. So that's really one of the main explanation. And by the way, this is purely filtration, which is why I was saying this is kind of also linked to the second part of your question here. But the other 2 things to take into consideration here as well is the comp was much, much tougher -- is much tougher in quarter 4 than it was in quarter 3 because comp is 9 points more difficult sequentially than it was in quarter 3. So that's another reason why you would imagine indeed that organic growth in Q4 would probably be more towards the 8% to 13% that we just talked about here. And then back to filtration more specifically, we mentioned about that blockbuster ATF project we signed about a year ago. We delivered the hardware towards the end of quarter 3. So this does play a little bit as well of a role why there is a little bit less seasonality between Q3 and Q4 here.

And your next question comes from the line of Puneet Souda with Leerink Partners.

So I appreciate the momentum you're seeing here now. It seems like 6 quarters of continued order growth even sequentially and the momentum you have here. But just trying to capture that for 2026, I think The Street is close to about 13% organic growth here. Given what you're seeing, is that a sort of right number to think about? And then on the gene therapy side, you pointed out the headwinds for the second half this year. There was some more news on that yesterday, not necessarily that this is an in vivo product, so maybe it doesn't affect you from CRISPR products. But just trying to understand how are you thinking about that piece of the modality overall for you? And how should we expect that to trend in 2026?

Thanks, Puneet. Yes. So starting with the first question, as usual, we'll provide 2026 guidance on our Q4 call as we typically do, meaning towards the end of February. But what we said and obviously, with the order growth we've seen now sequentially indeed for the last 6 quarters and being, again, growing more than 20% year-over-year, we were obviously very pleased with the situation we're expecting this year, and we are still aiming to outpace industry growth by 5% over the medium term. So this year, we're probably going to be a bit higher than that 5%. We know that next year, indeed, we'll have a 200 basis point headwind from that specific gene therapy customer. So that's where we are. But again, we're going to give guidance really end of February. And then in terms of new modality, I mean, it's really playing out pretty much as we expected so far this year. I mean -- and this is where the beauty of having a very diversified portfolio with more than 80% of our product going into monoclonal antibodies is a perfect sign of us being able to grow somewhere if for whatever reason, we've got headwind somewhere else. But outside of that specific gene therapy project, I mean, we've been experiencing a pretty good year. I mean -- and yes, sometimes you get some bad news on one specific program, but then you're getting a couple of great news on some other programs. And even on the gene therapy side, beyond that specific program, there have been several announcements made over the last few months of significant funding of some of these programs, and we are enjoying great opportunities with those different programs. So what we've been doing really well this year, among others is to diversify our focus on all the type of new modalities. And indeed, we've been a bit heavier on cell therapy and also on antibody drug conjugate since the beginning of this year, and we've had numerous successes on both sides, which is something we're also very happy about here.

And your next question comes from the line of Mac Etoch with Stephens Inc.

Maybe just a few for me. But as you look towards your geographical performance, specifically Asia Pacific, up 50% this quarter. Maybe I'd like to get a sense of how your recent investments in the region are trending? What variables are driving that performance? And then given the long-term strategic focus here, do you intend on investing additional resources in the region?

Yes, great question. I mean Asia Pac is representing approximately 15% of our sales on a full year basis, which is definitely too low. I mean we know if you look at the benchmark from competition is anywhere between 20% and 25%. So being of this year, we all realize we have to start investing much more into the region. And it's really -- I like to separate China from the rest of Asia Pac because China has been a very specific market. So we decided to onboard a global leader for all of Asia, but also a new leader for China. And we are really in the middle of implementing a pretty new and unique strategy on both sides. And without entering into details for China, really, it's about rebuilding our team and also making sure we now tackle the much stronger local competition that exists today versus what was the situation before COVID, where on the other side, on the rest of Asia, it's really about building infrastructure. And I say infrastructure is from the different part of our business organization, but also adding more people on the field to be able to deal more directly with customers where in some of these geographies, we are mostly going through distributors still. So the 2 strategies we are developing are pretty different. We are enjoying very nice growth for already several quarters outside of China. It's pretty good to see China being back to growth in terms of sales this quarter, but we still have a lot of homework to do down there. And yes, you're right, investment is on the list. We just literally opened our office -- first office in Singapore, yesterday. We're opening a new office in Japan in the next couple of weeks, and we are looking at some further investments across all of Asia over the next few quarters.

And your next question comes from the line of Casey Woodring with JPMorgan.

I wanted to follow up on some of the ATF comments. So you said you delivered hardware for the second blockbuster towards the end of 3Q. Just want to understand if you would expect revenue to fall in 4Q or in 1, '26 -- 1Q '26 there. And then my second question would just be, you called out emerging biotech revenue was the highest level you've seen in 3 years. Just talk towards trends there in terms of orders. You said you didn't really want to call out a trend there, but obviously, significant improvement. So just any further color there.

Yes. No, on ATF, I'll start with the blockbuster first. Yes. So the answer is we don't know yet for sure here, Casey. I mean we are -- we have now delivered the equipment now it's going to be about how long it takes them to really commission the line and have it up and running. And then depending from one customer to the other, they might decide to buy consumable earlier or later. So at this stage, we just don't know. I wouldn't think it's going to come as early as quarter 4, but maybe sometime mid of next year or so would sound like a reasonable time frame. And just before I move to small biotech, maybe just to add about ATF, because I know everybody is very focused on that specific blockbuster. We continue to win a lot of late-stage commercial customers. And we have a really very diversified customer base on ATF. I mean we are probably designing in more than 50 late-stage and commercial drugs today. And every quarter, we are winning more. So we've got a really long runway for growth on ATF which is very well supported by the order trends we've seen in the last few quarters. And then going to small biotech, that was really the great surprise of the quarter. I mean, obviously, it's not a big part of our sales. It's less than 10%. But to see it rebounding as much as we have seen it rebounding in quarter 3 was a really good surprise. And we obviously connect the dot immediately with biotech funding, where biotech funding went from USD 9 billion in quarter 2 to USD 13 billion in quarter 3. So we've seen finally some turnaround in terms of biotech funding. I would like to pair it as well to a lot of M&A activities. You've seen a lot of pharma company acquiring some of these small midsized biotech company over the last 2 quarters. I think that's also going to be a tailwind for the industry because that means probably more cash to be able to accelerate on some of these very promising early phase projects, which we are very, very eager to see progressing. So that's another factor that we are very happy to see happening right now here.

And your next question comes from the line of Daniel Markowitz with Evercore ISI.

I had a quick 2-parter. First, I wanted to ask on the equipment strength. It was another quarter of really strong results, especially when you compare versus peers. I know there were some ATF equipment placements. Is that what explains the better equipment trends versus peers? Or would you say it's more broad-based across different product lines as well? And then the second part related, can you just remind us roughly the revenue contribution from these placements in 3Q? And as we look forward to 2026, how should we think about the consumable pull-through and what this means for broader momentum in the ATF product line?

Yes. So I will spend more time on the first question because I won't answer the second one. So just, I mean, our capital equipment performance was obviously very encouraging. I mean our revenue grew more than 20%, but our orders also grew high teens in the quarter. So we were very happy about that. You're right, the main contributors of growth in quarter 3 were both ATF, but also our analytical equipment. So -- but honestly, the performance so far this year is really across the board. I mean -- so maybe in quarter 3, downstream hardware was a little bit lower than both ATF and analytics. But year-to-date, it's really across the board that our orders have been doing really well, including downstream hardware as well. I'd like to repeat like we are seeing that hardware market from a very different angle than others. First of all, we are very small. I mean we are one of the newcomer in the field. I mean, almost now where we are today 2 years, 3 years ago or so. So we are seeing it definitely from a different angle. But also keep in mind where we are differentiating ourselves a lot is that now we are also pairing our system with our PAT technologies. And so far this year for downstream, 1 system out of 4 is now being paired with our PAT technologies. In fact, customers who bought hardware from competitors in the last few years are now coming to us asking us to enable them to get access to our PAT technologies as well. But it's fair to say like peer, we haven't seen capital equipment spending return to historical level yet globally. So that's why I think all of us are very excited to see those onshoring projects coming in the next couple of years because that should accelerate overall market growth and for us be an extra opportunity to even grow further and faster than we do right now. And then as far as the specific ATF project is concerned, I won't give any specific numbers, but it's only really a small part of the reason why we saw that very nice growth in the quarter. So it's not -- it wouldn't have changed the overall picture like hardware performed very well for us in quarter 3.

And your next question comes from the line of Brendan Smith with TD Cowen.

Congrats [on the quarter], good to see. So I actually wanted to just follow up quickly on some of the process analytics commentary and specifically what you've actually said reclaim about integrating the MAVERICK device from 908 into ATF, for example. Can you maybe just give us a little bit more color on where some of that stands? Maybe just thoughts on timing to that and to what extent that may be playing into how you're thinking about growth opportunities across the franchises, whether or not that kind of works out as expected?

Yes, obviously, you heard us talking a lot about analytics. I mean, again, because it's a perfect showcase of the breadth of the portfolio we have. But really, I have to say this year, one of the most important launch we had was the SoloVPE PLUS, which is a real new generation of our at-line protein concentration piece of hardware. And in quarter 3, this has just enabled us to sell the highest amount of units we've ever sold in the history of CTech. And what's very encouraging is we have a very, very important installed base, and it's probably only less than a couple of portions of that installed base that has been upgraded to the new SoloVPE PLUS. So you would think like this is going to be a real big tailwind for us for the next several years here, which we are very excited about. And then the only other stuff I would add on the CTech side is the first 2 quarters where we saw a huge rebound on both consumable and services as well. And then we will start to have a lot of focus on services with the successes we are seeing here. But it was great to see hardware now being back to this very high growth that we are expecting and with a very strong funnel. As far as the 908 is concerned, I mean, the integration is running as expected. So we've merged now the 2 sales organization, and we start to see a really nice growing funnel for the 908 part of the portfolio. And yes, we are progressing on the R&D side to combine ATF with MAVERICK. So you'll hear us talking more about it in a quarter from now. But at this stage, it looks absolutely promising.

And your next question comes from the line of Anna Snopkowski with KeyBanc Capital Markets.

Congrats on the quarter. This is Anna on for Paul Knight, and I have 2 questions. So maybe first, I think at recent conferences in your last quarter, you mentioned strength in CD and maybe more muted activity with those midsized CDMOs. So I was wondering if we could get an update around midsized CDMOs and if you're seeing activity progressing there? And then my second question is on the protein side. I was wondering how the recent launches have been for your own resins. And I think you mentioned some launching in the second half of this year. So maybe an update there.

Yes. No, I mean, on CDMOs, again, a really great quarter for us, both from a sales and an order point of view. We did mention like the strength was particularly visible on the large-scale CDMOs. So I have to tell you, openly, I didn't really specifically look at the midsized ones, so I can't answer you very specifically. But I know this quarter, really large-scale CDMOs were the one driving that more than 20% growth we had on the CDMO side. As far as protein is concerned, that was really one of the great surprise in the quarter because we expected protein growth to be pretty muted in quarter 3. And in fact, it grew double digits. And for me, that was a great testimony of a very successful strategy that we started developing now 2 to 3 years ago, where we had to switch from being a pure OEM partner delivering protein ligands to start developing custom ligand and custom resin with the acquisition of Tantti Lab. And I mean, the traction we're having on that side is absolutely great. I mean the reason why we delivered more than expected in quarter 3 on the protein side was because of chromatography resins. We know that's a business that can still be lumpy from quarter-to-quarter, but we are working on so many custom projects right now, like we know that's going to become a huge tailwind for us over the next several years. And just to close on product launches, yes, we are still aiming to launch 2 to 3 new resin before the end of this year, and then we're going to make this announcement probably in the next couple of months now. But we are also having a pretty ambitious plan to launch several new resins in 2026. So we really want to have both a broader catalog of products for new modalities, but also working more and more on custom projects on different type of applications for big pharma customers as well here.

And your next question comes from the line of Tom DeBourcy with Nephron Research.

You mentioned the strategic accounts and 20 key CDMO and pharma accounts. I just was wondering what trends in particular, you're seeing at those accounts? Are you seeing similar strong equipment growth? And anything that, I guess, maybe differentiates those larger strategic accounts versus, I guess, the portfolio as a whole?

Tom, great question. I mean strategic accounts have been an incredible success story for us, I have to say. I mean it has really enabled us to really cross-sell our portfolio better and better. And equipment that you just mentioned is a perfect example. I mean these accounts didn't really have a clue about what our capabilities were in terms of hardware probably a couple of years ago. They knew us for ATF. They knew us for prepack column. Now I mean, the vast majority of these people now have either bought a couple of pieces of equipment, if not more than that, or at least had a chance to get trained on how to use our equipment and are sending us RFPs for the big expansion they are working on. But across the board, the strategic accounts have been really, really accretive to growth both from a top line and from an order point of view as well on the quarter. So we are really delighted by the successes we've had. And I know we mentioned several times for a company like ours, which is very focused on innovation, we absolutely need to get access to the key decision makers, and this is what this team of key account management has brought us over the last couple of years. So really delighted about the progress here.

And your next question comes from the line of Luke Sergott with Barclays.

So I wanted to talk about the order between the new modalities versus the mAbs, especially as we're thinking into next year. And then for a second question, I want to think about, all right, if you guys are doing about 13% core and given the -- all the moving pieces from investments and M&A and FX and tariffs, like should we think about margin expansion opportunity next year, something like between like 100 and 150 basis points versus something north of that in a more normalized environment?

Sorry, what was the first question?

Orders for new modalities versus mAbs.

Yes. No, I mean new modalities, I think we mentioned earlier, new modality really played out pretty much as expected in quarter 3. I mean, meaning we expected muted demand, and that's more or less what we experienced. But obviously, we've got now a significant headwind in the second half of this year because of that gene therapy program. Outside of that one, I mean, we've been doing pretty well. I mean, year-to-date sales are growing mid-single digit. And year-to-date revenue of new modality is about 17% of our total portfolio. So it's down a little bit versus last year, but still pretty much on par. And then in terms of margin, I'll let Jason comment here.

Yes. And again, we'll provide more guidance in our 4Q call as we normally do. But again, I'd expect our gross margin to continue to expand at the rate that we've been talking about, and then we'll drive to get additional operating leverage at the EBIT level as well. So again, with this constant balance of driving margin expansion while investing for the growth that we see ahead of us. So I think a well-rounded view on that.

And your next question comes from the line of Brandon Couillard with Wells Fargo.

Jason, just real quick. Could you quantify what's embedded in the guide for net pricing this year? And just kind of quantify the tariff surcharges and whether or not those may or may not recur in '26?

Yes. Price has been pretty consistent at this low single digit. We've seen that through the year and expect that to wrap up in 4Q as well embedded in the overall guide and really kind of see that as we move forward. For tariffs, again, minimal impact in '25, a couple of million or so from a surcharge side in terms of, hey, I see the sales, but I'm going to have an equal amount of cost. And again, from what we see today, I don't think that changes much next year. Every day, we see new headlines. So we'll continue to watch that, but still see a little bit of, I'll say, marginal dilution at the profit level with tariffs as surcharges will remain.

And I would now like to turn the call back over to Olivier Loeillot.

Well, many thanks for joining our call today. I really want to congratulate our Repligen team for executing brilliantly in the quarter 3. We are really looking forward to meeting you all at upcoming conference. Have a great day today.