Summary
- Repligen is a investment on the overall growth of the most exciting portion of the biotech industry without exposure to the full risks of the of drug approval process.
- COVID has a overall effect of increasing demand for Repligen products that helps make the vaccines and therapeutic drugs designed to combat the disease.
- Repligen's valuation is supported by increased cash flow and profits that are expected to more than double over the next several years.
Thesis
Repligen (NASDAQ: RGEN) trades at a rather high valuation, but there are still very good reasons to buy the company today. Repligen supports the biologics industry, which has started a period of strong secular growth that should fuel growing cash flows and earnings over the next several years. This makes Repligen a great investment for long-term, growth oriented investors.
Introduction
Source: Creative Biolabs
Repligen competes as a smaller player in what is known as the bioprocessing industry. There are two distinct parts of the bioprocessing industry. There is the upstream process which involves cell development, cell culture expansion, and the harvesting of the cell culture from the Bioreactor. Then there is the downstream phase which separates out the desired bulk drugs from the waste products through filtration/centrifugation and purification. Repligen primarily operates as a niche player producing filter, chromotography purification and analytics products on the downstream side.
Repligen is not as well known as the larger players in the industry. The two largest players are MilliporeSigma, which makes a wide variety of products on both the upstream side and downstream side, and Danaher (NYSE: DHR), which up until recently has been mostly a downstream company. Danaher, however, recently diversified their product line by purchasing a relatively strong upstream company named GE Healthcare Life Sciences, which Danaher renamed and will run separately as a standalone operating company named Cytiva. There are also other major competitors larger than Repligen in the industry like Thermo Fisher Scientific (NYSE: TMO), which is strong on the upstream side, and Sartorius Stedim Biotech, which is stronger with downstream products. However, despite the fact that Repligen is not as well known as their larger competitors, Repligen operates an excellent high margin, downstream business.
