RGEN
#Yes, great question, <UNK>.
If you look at quarter two and you compare it with last year, the split of OPUS column revenue to resin revenue was about the same, so there was really no change.
But what I think we are going to see as we get into the second half of the year and as we move into 2017, as the volume of 45s and 60s increase, I fully expect that we're going to see more drop shipment of resin to Repligen and that's just the trend that I think will happen as we hit the second half of this year and go into 2017.
I think the reason for that is, when you do one column, it's easy for Repligen to go ahead and procure that resin.
When someone orders 5 or 10 columns, then I think the pricing that they would get versus what we would get at Repligen would be different, so we'd expect to see more of a shift towards drop-shipping.
Sure.
So the majority of the capacity expansion plans, <UNK>, are really related to OPUS.
There are some things we are doing around ATF, but most of the capacity expansion around ATF was done last year.
And the single-use products for ATF are really just getting going now, so I think we are in good shape there.
There will be some capacity, but it's more people that we look at around our ligands business and that's something that we've been adding as we've gone through this year, and we will assess it when we are in Q3, Q4 and see what we need to add for next year as we begin to see some of the forecasts from our partners.
In terms of capacity utilization, we continue to ---+ when I look at obviously OPUS and ATF, we are in good shape on capacity.
Our increasing capacity of OPUS is really related to driving down leadtimes and we think that's something that we are going to continue to focus on here in the second half of the year and into 2017.
But overall I think capacity utilization is very similar to where we were last year where we've got still plenty of capacity on our ligands, and anything we do there will be related to manpower.
Yes, sure.
There are more large pharma that have come in in Q2 that are committing.
Some of the other players that we've always wanted to get into have started to evaluate some of the larger columns that we make, but not to a point where they've said they've fully committed to moving ---+ to replacing say glass columns with prepacked columns, but we've made a lot of progress there.
There's also some of the CMOs, <UNK>, that, again, we are not in every CMO, or we weren't in every CMO at the beginning of the year, but some of the big CMOs that we've wanted to get into globally, we've been able to make some progress there as well.
So it's really across the board.
The CMO traction is very strong.
We are seeing the increase in the number of pharma customers that are migrating to prepacked columns from glass columns, so it's just a very positive trend for us.
Yes.
I would say that we are fully booked through Q3 on OPUS.
We've really done a very nice job with our customer base in terms of teeing people up in terms of when they need columns and making sure they get it on time, so we've really pretty much fully booked through Q3.
Obviously, with two more production suites coming online really at the beginning of September, we would expect that we will be able to drive down leadtimes as we enter Q4.
So you are spot on in your analysis there.
Sure.
So on the growth factor side, the majority of the volume does come from commercial drugs that we've been in that we've been in for a number of years.
We've known really for the last year or so that a number of those companies are making second-gen, next-gen molecules, transferring production to new facilities.
So with that comes some increased volume.
So that's really the major driver.
Obviously, we continue to focus on building out the pipeline, but it's a long and fairly slow process, but overall I think our growth factor business is really driven by the commercial drugs and those that are in late stage.
On your question on platforming, clearly the strategy that we've put in place over the last couple of years, which is to really drive the direct portfolio of products that we have here at Repligen into the marketplace and really leverage the commercial organization that we've also put in place over the last 2.5 years, that's having an impact.
And when you look at the success of ATF and you look at the success of our prepacked column line, we see it this year in the revenue growth that we are achieving and I think what's important is that technologies like ATF are becoming platforms so they are being used in multiple processes, whether it's Phase 1, Phase 2 or commercial processes at key accounts.
So we have a really strong portfolio of ---+ a strong list of accounts and blue-chip pharma accounts that have really adopted ATF over the last few years.
And so we are in a combination of commercial processes and late-stage processes.
What's also encouraging is, as we've looked to China and looked to Asia in general, it's been a real strong area for us and when you see companies purchasing 19 smaller ATF systems, that's a strong leading indicator that they are going to start scaling over the next few years.
So platforming for me is being entrenched at accounts and also having the smaller systems, whether it's smaller columns in OPUS or smaller systems on ATF being used in the process development labs and early clinical, which should become opportunities for us over the next few years as those customers scale.
Sure, sure.
So looking at the second-quarter gross margins, a good estimate is about 50% of the year-over-year reduction from say 60% down to ---+ and the 56% is related to our capacity expansion initiatives and about 50% is also associated with the mix, predominantly the much higher volume of OPUS that we are seeing.
As you look forward into Q3 and Q4 in terms of staging, and I assume you are continuing with the question on gross margin, we expect to see similar type mix, and if you look at our year-end overall full-year guidance of 56% to 57%, you can see that year-to-date we are right in that range and we expect to continue with that range as we go forward.
And then in terms of foreign exchange, a relatively small effect for the year, 1% to 2% on the top line and not a huge effect on the gross margins at this point.
Sure.
So I will start with the Atoll situation.
In the last quarter, we guided $3 million to $3.5 million for Atoll and we are still ---+ the business has taken off well since we purchased it and we are still guiding in that $3 million to $3.5 million range and there are no surprises whatsoever in the second quarter, so business according to plan.
In terms of EPS guidance, the $0.03 versus $0.06, good question; $0.02 related to foreign exchange was already included in last quarter's guidance, <UNK>, so the spread is a little bit lighter.
We've made up a little bit on the volume side, volume gross margin side has made up a little bit of the $0.04 for the cash interest.
Yes, so on the M&A front, <UNK>, obviously, we got the Atoll business back at the beginning of quarter two and, as I said, we are active out there, but I think anyone who knows the bioprocessing business arena knows that it's fairly competitive and we are going to continue to pursue assets that we think are strategic to Repligen and obviously we will give an update on that if we get closer on something.
But for now, I think we are in a good position in terms of our cash to be able to go out and execute on deals as they come up.
That's it.
Thank everybody for joining us this morning.
