Good day, ladies and gentlemen, and welcome to the Repligen Corporation Second Quarter of 2023 Earnings Conference Call. My name is Vaishnavi, and I will be your coordinator. All participants will be in a listen-only mode. [Operator Instructions] In order to accommodate all individuals who wish to ask questions, there will be a limit of two questions at a time. I would now like to turn the call over to your host for today’s call, Sondra Newman, Head of Investor Relations for Repligen. Please go ahead.

Thank you, Vaishnavi. And welcome to our second quarter of 2023 report. On this call, we will be covering business highlights and financial performance for the three and six months periods ended June 30, 2023. We’ll also provide an update to our financial guidance for the full year 2023. Repligen’s President and CEO, Tony Hunt; and our CFO, Jon Snodgres, will deliver our report, and then we’ll open the call up for Q&A. 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, and the current report on 8-K including the report that we are filing today, also other filings that we make with the SEC. 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 obligate or commit itself to update forward-looking statements, except as required by law. During this call, we are providing non-GAAP results and guidance. 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. Non-GAAP figures in today’s report include the following: Revenue growth at constant currency; cost of sales, gross profit and gross margin; operating expenses, including R&D and SG&A; operating income and operating margin; income expense, net income and earnings per share; as well as EBITDA and adjusted EBITDA. These adjusted financial measures should not be viewed as an alternative to GAAP measures, but are intended to better enable investors to benchmark Repligen’s current results against historical performance and the performance of our peers when evaluating investment opportunities. Now I’ll turn the call over to Tony.

Thank you, and good morning, everyone and welcome to our Q2 earnings call. As you saw in our press release this morning, we delivered $159 million in total revenue in the quarter, down 13% sequentially, and 23% year-over-year. Our base business which excludes COVID revenue and inorganic M&A delivered reasonable performance, our revenues in the quarter were down 2% sequentially, a 9% versus Q2 of last year in what continues to be a very challenging macroenvironment. Looking at the first half of 2023, we delivered $342 million in total revenue. Overall this was down 17% versus H1 of last year, with the base business again holding up relatively well down less than 3% in the same period. As a reminder, our base business is coming off two years of stellar growth. This makes the comps really challenging. In 2022, our base business was up 41% for the second quarter and 34% for the full year. And in 2021, our base business was up 34% in the second quarter, and 38% for the year, in each case well above market growth. On a franchise level, we saw revenue growth during the second quarter in three of the four businesses, the exception being Filtration, which continues to recalibrate, to post COVID market dynamics. Filtration by far has the largest markets inventory overhang, and was the primary contributor to revenue declines in the quarter with base Filtration, down 20% year-over-year off the tough calm and down 2% sequentially. Strength of the quarter came from our Analytics, Chromatography and Protein franchises. For the quarter and first half of the year, we saw mid-single to double digit base business growth. Another area of improvement was Cell and Gene Therapy which includes non-COVID related mRNA. Revenues were up 7% sequentially, though down 4% versus the prior…

Thank you, Tony and good day everyone. Today, we are reporting our financial results for the second quarter of 2023 as well as updating our financial guidance for the year. Unless otherwise mentioned, all financial measures discussed reflect adjusted non-GAAP measures. As shared in our press release this morning, we delivered revenue of $159.2 million in the second quarter, nearly all of which was base business revenue at $157.1 million. As Tony mentioned, the 9% year-over-year decrease in our base business was against difficult comps following two years of well above market growth. While it is an especially challenging year for our company and industry, as we adapt to post COVID and macro market dynamics, we believe we are well positioned to remain the innovation leader in bioprocessing. And we are taking necessary steps to rebalance our resources and preserve margins while looking forward to a return to market growth. I'll share more of those details. But first, let's review the second quarter and year-to-date financial highlights. For the second quarter, our total revenue decreased by 23% as reported and at constant currency. COVID related revenue for the second quarter was nominal at just over $1 million, compared with $36 million for the 2022 quarter. Our base business was down 9% as reported and 8% at constant currency. FX impact in the quarter was less than $1 million, creating less than a one point headwind on reported growth. Based on current market conditions we expect negative negligible impact from FX for the full year. As it relates to regional revenue, we saw contraction in Asia Pacific, Europe and North America as expected, driven by waning COVID demand and softer order trends in our base business. Overall revenues from Asia Pacific decreased by 30%, while Europe and North America contracted by…

[Operator Instructions] Our first question comes from Puneet Souda with Leerink Partners.

Hi, Tony, Jon. Thanks for taking my questions. So first one, if you could maybe step back on the guidance. I think one of the key questions here as the guidance has been cut a few times and understand totally that this is an industry wide phenomenon. But you'll have prior exposure to phase one and two trials. And there's obviously biotech funding pressures beyond the destocking. So I think the question is at this point, is there potential for further cuts beyond this given the environment or this adequately captures. And maybe just talk to us a little bit about what you see the trough levels scale and potential recovery, both on the destocking side and potentially biotech funding, which is I know, it's more of an industry phenomenon when capital markets are turned into biotech funding so. Thanks for covering those points.

Thanks Puneet. May be I’ll start with our guidance cut. So it's down about $90 million from our last guidance. And for us, we felt it was important to derisked the year based on everything we're saying and the difference between where we were in May and where we are right now is when we were all talking to you in May, we could clearly see that most of the destocking issues that we were dealing mainly from Repligen perspective, was really around the CDMOs and the integrators and in Q1, we clearly saw a drop off in orders in China, the revenue in China was absolutely fine in Q1 but it was ordered started dropped off significantly in China. But in Q2, and that's continued all the way through July the orders have come down. So you can clearly see that in our book-to- bill and it's broadened into pharma and what we're seeing in pharma are three things. One is burn off of consumables so there's a destocking but it's only started maybe it started in Q1 and it just wasn't visible to us but definitely visible in terms of the order strength in Q2. And then there's definitely conservatism across the whole industry in terms of capital spent so for any systems, et cetera. It's just taking longer for on the purchase cycle. And then we're seeing project delays. Projects again delayed three months, six months, projects that were supposed to be kicking-in in the second half of this year now slated for Q for early next year. So those things all combined, and really led us to looking exactly what we think we can do this year based, especially based on the order declines that we saw in Q2, which is what gave us to the…

No, that's super helpful. Thanks for covering those. And last one, if I could ask on, there is -- there was an assumption for base business growth of 20%. Is that still accurate for 2024? I know who you've starkly talked about the number and street as I believe near that number two prior to the quarter. And maybe just if you could talk a little bit about margins, sort of jump off point was significantly lower off margin guide now, for 2023. Thank you.

Yes, on the growth for next year, I think we need to see our 2023 and see exactly where we are at the end of the year, before we give a guidance for next year. I think the whole market has honestly changed pretty dramatically over the last four or five months. So I think it's more prudent for us at this stage to wait until the end of the year and then guide for next year. But I will say that based on our funnel, right, and what we're seeing, we do anticipate order pickup in Q4, which will translate into revenue increase in Q1 of next year. And on the margins. I think maybe I'll hand it over to Jon to comment on the margin profile.

Yes, happy to do that. So, Puneet, I think the biggest driver here that we're seeing we've got a $90 million revenue reduction at midpoint, the contribution margin on that which, the piece of costs that goes away when you drop the revenue has the material cost. So that's flowing through at a very high percentage of margin on that revenue decline. And that's the key driver, overall, of the overall margin, drop that expectation for H2.

The next question comes from Jacob Johnson with Stephens.

Hey, thanks. Good morning. Maybe Tony on destocking, you've kind of couple of times this year for a variety of reasons. Now cutting kind of 13%- 14% this quarter, is that a good proxy for the destocking headwind, you face in --you expect to face in 2023. And then any kind of comments around confidence, and maybe that being done by the end of this year. And also you had a peer talking about working with their customers to work down inventory. I'm just curious if you're doing any of that.

Yes, maybe start with the last piece. I don't think we are actively working with customers trying to figure out how to work down inventory levels. I think most of our conversation are on the projects that they are working with us on and the timing of those projects and the product that they need. We absolutely know the customers that have months of inventory that they're working through, and we know the areas where that exists. And, that'll work its way through the system. I think the difference, honestly, Jacob is that, I don't see this as just a destocking phenomenon. It's more than that. It's destocking and it is much more conservatism in terms of spending patterns, much longer purchase cycles, and delays in projects and maybe destocking is 60% of the total headwind, but 40% is these other factors. And I think that's kind of the difference between where we are today. And where we were maybe said four months ago, turns a competence at the end of the year. You know my view on destocking, while the orders dropped in the second half of last year, it really wasn't until the beginning of this year that the destocking started to happen. And I fully expect that the majority of the destocking will be over by the end of the year. And again, I'll reiterate our pipeline continues to grow, our high probability opportunities continue to increase. And we're working on a lot of large projects that are slated to close in the fourth quarter, late third quarter, early fourth quarter. And I think they're all positive signs for us that we will be able to get out of this.

Got it, hat's helpful. And then maybe a bigger picture question, Tony, just process analytics seemed like a bit of a bright spot this quarter, you talked about kind of integrating CTech into something in your systems, I'm just curious kind of how that's been received by customers. And if you're having conversations and seeing additional opportunities to kind of integrate processes analytics further.

Yes, and as you know, we integrated the flow technology into our benchtop TFF. And so the response from customers has been incredibly positive, we definitely are gaining momentum, and selling more and more units each quarter. So we had a good quarter for systems in Q2, expect that we'll do more in the second half than we did in the first half based on the pipeline. We think it's a natural evolution that we moved from benchtop to our, let's call it process scale production scale systems. And that's our plan, especially with the ARTeSYN portfolio is to continue the integration, which will, I would say it'll take probably the best part of 12 months to 18 months to complete all the systems that we have and upgrade to include inline analytics, so we see that as the future. That's what our customers want. That's what we're going to do. And it's going to be a very good business for us as we move forward. So yes, we're really happy with the analytics portfolio and how it's doing.

The next question comes from Dan Arias with Stifel.

Good morning, guys. Thanks for the question. Tony. On China, do your guys on the ground feel like they have a handle on the situation there? It's kind of a tough place to do that, in general, much less than the current environment. It sounds like there's multiple factors that are at play there. So where is the level of understanding on the moving parts? And what is the revenue expectation for China at this point for the year?

Yes, so no, I do think that our team over there has a good handle on what's happening. And to be honest, it is pretty consistent with what you've heard from other players. So it's everything from, weakness at the CDMO level, right, in China. It's not outside China, but really within China, the CDMOs are, the number of projects that are coming through are just not what it was in 2022 and 2021. I think a lot of the early biotech funding dried up and so those biotech companies were feeding into the Tier 2 CDMO. So I think that's been a challenge. I think the other piece that's going on in China is the last year was such a start stop year for all companies in China that, there was an inadvertent buildup of inventory. So how the rest of the industry may have built up, excess inventory, deliberately, I don't think in China that was actually what the plan was, but because of the way last year played out, there is an excess inventory in China that has to get burnt off. And as they said back in May, we don't expect that China turns until the end of the year, we look at our funnel, we have a number of projects and programs that we'd like that we're working on. But the level of activity in China right now is much lower than what we were seeing six months ago, nine months ago, a year ago.

Okay, and then just maybe on the 4Q order improvement that it sounds like you feel pretty good about, I guess. Can you maybe just crystallize for everyone where's the competence highest there? Is it the CDMOs just given the trajectory on the way down? Is it that order funnel or that funnel of activity that you talked about being up nicely? What do you feel best about as we sort of pushed to the end of the year here? Thanks.

Now, I say it's the Filtration portfolio. Because many of the big projects that we're working on fall within that portfolio, so I thought would be for the competencies, Dan, and, I think, when we look at our position in the marketplace, we really have a great portfolio of products. And, it's this macro environment, that's challenging, challenging for us, challenging for everybody else, as well. And, but the conversations are happening with our customers, the programs and projects are happening, it's just at a much slower pace. And based on what we're seeing, we see order pickup in Q4.

Our next question comes from Matt Larew with William Blair.

Hi, good morning. And just kind of wanted to follow up again on the notion of guidance being derisked. And Tony one thing you cited, the 25% increase in higher probability opportunities. May be just helps us understand what exactly that metric means, what it trended, like, perhaps earlier in the year, and then anything else that you've been able to do over the past six months, to get better visibility into customer ordering behavior? And if there are metrics associated with that visibility, I think that'd be helpful as well.

Yes, so on the visibility side, I think the way we've organized our commercial team, or optimized how we organized commercial team this year is definitely helping. So there's a real focus on the opportunities that we know that are out there. And so the conversations are happening with customers, and that is what gives us sort of increased confidence on the funnel. When you look at any funnel, right, you've got various probabilities that you have on closing. So I think our overall funnel has increased, probably, we started to see that, honestly, second half of last year, has continued through this year, but it's probably been more on the early opportunities. So maybe less than the 50% probability. But it increased significantly, we're seeing a lot of what was early now move into the what we call greater than 50% funnel and the 25% increases at the 75% and above. So those are very high probability that they'll close. And we just haven't seen that level of a jump in any other quarter over the last three or four quarters. So we're encouraged by that. And we can tap right down into the exact opportunity that's associated with. So we've got to execute, customers have to continue to close out and provide the POs. But there are activities happening that signal orders and picking up at the end of the year in Q4.

Okay, and then just on the margin side here, thinking about right jumping off point for next year, I think back half margins based on the new guidance suggests something like high 40s gross margin, low double digits operating margin, obviously, you're going through some cost actions that I presume left fuller impact towards the end of the year. But is that a reasonable starting point, at least for sort of first quarter or first half of 2024 margins or what are the other moving pieces to help us get a sense for the right jumping off point for margins next year?

Yes, I think you picked up on that, right, As we look, into the second half of the year. We expect the margins to dip down here a bit in Q3, start to recover in Q4 with additional volume and I'll go ahead and throw this out. Just from a kind of revenue cadence perspective. Our expectation is probably 45% of the implied midpoint in H2 is going to come in Q3, and around 55% of the revenue will come in Q4 the way we've got it laid out right now. This implies margins are going to dip down or until lower 40s on a gross margin level, and in the mid-single digits on an operating margin in Q3, and then they'll rebound up in Q4 to get closer to the mid points by the end of the year. How does that lay us out for 2024? Our views are, we're kind of rebased lining the margins here with the lower volume here at the end of the year. And, our jumping off point, I think a good way to model it right now is to look at the Q4 or excuse me, the second half implied numbers for margins and start to model off that. And we think we can drive improvements in margins in 2024, based on that, I mean, it's really, really driven by we're such a volume driven company and the way our cost structure is built up. We're working on obviously, taking out variable costs where we can, but it did definitely expect margin improvement before it.

The next question comes from Rachel Vatnsdal with J.P. Morgan.

Thanks. Good morning. And thank you for taking the questions. So you previously noted that the inventory overhang was primarily related to CDMO customers, but that has now broadened and you noted that pharma orders declined 17% sequentially. And you talked about some of these dynamics to form a softness by region and on the longer purchasing and approval times product push outs, et cetera. So can you just walk us through what are you hearing with your conversations with those customers in terms of, well, some of the trends improve or really linger into 2024 related to some of those delayed decision making things? Thank you.

Yes, so maybe before I answer the second part of the question, just to give people a sense of the pharma situation. So I think everybody should realize like pharma revenue through the first half of the year, it's actually really consistent with what we saw by quarter last year. So there's really been no change in pharma revenue. But the order is, if you actually start to look at the orders, the orders in Q2 for pharma was down 25% versus Q2 a year ago, it was down 17% sequentially. And just to give you an idea of how that splits up, we think about a third of the 25% drop year-on-year is coming from inventory drawdown, which is consumables, about a third is coming from lower CapEx spend. And the third is China. And if you look at it, then sequentially, probably inventory drawdown is probably 40% to 50%, CapEx is probably 10 to 20. And then there's some product mix changes where you get big orders in one quarter that don't repeat in the following quarter. So overall, when you start to see pharma change by that much in a quarter, it is very, it does start to predict what's going to happen with pharma from a revenue point of view in the second half of the year. So to answer your question on the inventory drawdown and what's pharma saying, will it be done by the end of the year? I think pharma is just moved into more conservative mode, right. And inventory drawdown is just one part of it. I think it's the CapEx spend. It's the conservatism, delays in projects. But it feels like it's a 2023 event, not a 2024 event right now. And when you look at the projects we're working on, we're working on a lot of projects with pharma, some really big projects that will really move the needle for us, as we get into Q4 and definitely in 2024.

Great, thank you for that color. And then just a question here on pricing. Obviously, we've been in an inflationary environment here. So can you just give us an update on your expectations for the updated guide on pricing for this year? And then how are you thinking about that pricing contribution shifting as we move into 2024, just given a multiyear stack pricing has been, a bigger contributor than historical, thank you.

Yes. I would say pricing in general is holding to what we guided at the beginning of the year. And I think that Jon that was 5%.

Right round 5%, yes.

So we're on track for that. And that's just matching all the inflationary issues that we had to deal with as well. So it's covering what we're paying out to our suppliers on all the components and parts that we buy. I think when you get into 2024, I don't want to give a very specific 2024-2025 guide or anything but I would think that pricing is going to return more to normalize level of price increases in our industry, which is probably going to be in that 2%, 3% per year, on average going forward, which is kind of what it's been historical. And it's because, I think the inflationary pressures seem to be subsiding. And, again, everybody in our industry, it's not about putting prices up. It's just about covering costs on materials. So we expect that it's going to be more modest price increases in ‘24, and 2025.

The next question comes from Paul Knight with KeyBanc.

Yes, Tony, when we look at Pfizer and Moderna, the vaccine sales are down 70% to 90% here in Q2, I'm guessing it's like that for other treatments related to COVID. How much of a shock factor do you think pharmas are getting from this cliff of COVID? Is that part of you think, their psychology on their spend?

Yes, I saw the same reports on Pfizer and Moderna. And I don't know if people on the bioprocessing side could predict exactly how much it was going to drop off by but I think everybody knew and realize that related activity would go way down. And because I think those companies are also sitting on some inventory that they would have built, it's probably not a total surprise that the numbers are down 70% to 90%. How that impacts Pharma, in what programs and projects that they do, I don't think I'm close enough to that. But I can tell you that the companies that are worked on COVID vaccines and therapeutics are highly active in other areas. And I haven't seen any change in terms of the programs or projects beyond what I spoke about. There's a general level of conservatism and some of the projects are getting pushed out, but it's across the board. So it's not just the vaccine, guys, it's broad across pharma. So I'm not seeing anything different at the vaccine company, some are senior dealer pharma companies.

Okay. And then, regarding China, I understand multinationals operate there, I understand [inaudible] is doing its own expansion there and worldwide. I was never under the impression that local China companies really had the money for or desire for Western product. I guess there was some demand from emerging China biotech, I guess they were becoming what? They were becoming buyers of Western product. Is that a fair kind of read here?

Yes, I think that's a fair read. I looked at what our sales team does in China, it's, we definitely sell very broadly into the market. And there are a lot of, early biotech, CDMOs that are Chinese CDMOs that served in country. I don't think that's any different, honestly, versus any other country in Asia, whether it's India, or Korea, I think there's a lot of sales that go to companies that are making products for in country use. So I think in general, though, I think the number, because the biotech funding has dried up in China. And because there's been a big pullback in activity, I think the number of projects hitting the CDMOs has gone down pretty dramatically in the first half of the year.

And then lastly, Tony, a rest of Asia looked pretty good. What do you attribute that to? Is it the bill now in biotech in Singapore that's continuing to or what do you see in rest of Asia that made things look, that were pretty good there?

And I can only really answer that question from a Repligen perspective, because I think our peers probably maybe a little different. But when we look at the other countries in Asia, outside China, it really is a handful of accounts that we sell into and we sell into a lot of accounts, but the ones that really move the needle are a handful of accounts and so we have some nice projects going on at those accounts, which I think is what's driving the growth on the order side and on sales.

The next question comes from Conor McNamara with RBC Capital Markets.

Good morning, and thanks for taking the questions. First, Tony, just on your commentary on return to order growth in Q4, can you remind us what your quarter growth was in Q4 last year? And is this a function of easy comps? Or is it more actual activity and pick up an activity that you're seeing in the market?

Yes, so let me talk a little bit about last year in general, right, so we saw the orders begin to dip down in, not dip down, they dropped down in Q3 last year from where we were in Q2 and Q1. But we were able to hold orders at almost at the same amount for Q3, Q4, Q1. So if you go back and look at our book-to-bill, you will see that orders were from dollar point of view were consistently the same. So when you go through three quarters, and you know that there's a pullback happening in the industry, you start to feel like, hey, look, we've hit a steady state we need to grow from here. I think what happened in Q2 is we saw a further dip. So you go from same orders, not from the same customers, but the same volume of orders, over three quarters in a tough environment. And then it drops again, in Q2, which was really unexpected. And then that puts you in a different environment. So we were down to 80% point, I think 0.82 was our book-to-bill in Q2, so you can see the drop down in orders pretty clearly. I think our confidence around Q4 is just based on our funnel and the higher probability or the probability of the projects that we always look at moving through into that higher probability level, which results in increased orders for us. So it's based on activity is based on projects based on programs. That's our view. But we also believe that, our, it's not going to have a material impact on revenue in Q4, it's going to have more of an impact in Q1.

Got it. Thanks for that. And then just, you said you've now derisked your guidance for the year. So how should we be thinking about areas of potential upside for the rest of the year? Would it come from a quicker conversion of that high probability funnel you talked about or potential market share gains that can help you return to growth faster? Or is it more a function of just the overall market coming back?

I think it's a function of the overall market coming back. I, honestly, in terms of what we've guided to, I don't see upside to the guidance unless there's a remarkable turnaround in the next three or four months. And we're just not seeing that in Q3. And when you kind of look at our base business, because you kind of have to look at what where Repligen came into ‘22 and ‘23 with like we were a much higher percent of what we were doing was COVID related, right. So the impact of COVID on us on a percentage base is much higher. And then when you look at our base business, in my script, we had 35% to 40% base business growth two years in a row, and to be down 5% to 9% this year, and this environment is actually not a bad result, considering how much growth we've seen in our base business over the last few years. So if you just average out the last three years, including the latest guidance, it's 22%. And I think we were back three years ago and said we would grow 22% on average over the next three years. Everybody be super happy. So I think that's more of a reflection of how good our portfolio is. And, it's this macro environment we're all dealing with and back to your to the main question here. I think the upside would come from a faster turnaround in the market. But I don't see -- I don't honestly see that happening until we get into Q4, which I think it'll be too late for any revenue upside in 2023.

The next question comes from Matt Hewitt with Craig-Hallum Capital Group.

Good morning. Just one question for me, and I apologize if I missed this earlier, but is it safe to assume that your confidence regarding the pipeline conversion that's expected to start here in Q4 is because as you look at those projects, they're tending to be more late stage so phase three and/or commercial projects which are much more or much less likely to be cancelled or delayed.

Yes, great question, Matt. I haven't looked at exactly, every single opportunity in that funnel, but many of them are late stage. And I think your analysis is accurate, right, I think there's a higher probability that they move forward and get cancelled.

The next question comes from Lisa Garcia with UBS.

Hey, guys, thanks for squeezing in. I guess, I know it's early days, but it would be great to just get a sense of kind of early integration on Flexbiosys. And, obviously, interesting times in the market, but I guess, that can create opportunities. So just given balance sheet optionality, it would be great to kind of get a sense from you guys, kind of how the funnel is looking and kind of get a sense from you guys, M&A appetite, and the opportunities in the market at the moment. And I have a quick follow up.

Yes, maybe partly. So I think the M&A activity, I think is, if I look at the first half of this year versus first half of last year, it was pretty dead first half of last year, first half this year, a lot more activity going on, I would say we continue to be very active in the marketplace. And I think we've shown over the years that we're kind of selective buyers. So it has to fit with our strategy, it has to strengthen some part of the portfolio that we're focused on. We like what we did with Flex earlier in the year, the integration is gone well. We like the fact that we're now in the bioprocess bag part of the market. And we have some big plans and what we want to do over the next 12 months with that portfolio, how we grow what they have, but also how do we expand what they have. So between what we're doing at Flex and what we're doing in our Hopkinton assembly facility, I think that's going to be kind of the drivers of the success of that particular acquisition. So I think the funnel is actually reasonably strong. And I don't see us slowing down in terms of M&A over the next few years. So kind of the pace we've done in the past is probably the pace that we'll move forward with.

Great. And then great to hear like the unit volume increase at OPUS, 15%, I think you said. If you could just give a quick update on kind of how resin availability has been trending relative to expectations for the year. I know that was a little bit of an issue in the beginning of the year and appreciate that.

Yes, Resin availability has steadily improved. We see that from the two three big suppliers, it's getting -- it’s getting definitely better. I think the piece that's always hard to predict is what percent of orders we get are going to be with resin or without resin we've clearly driven a lot of the ordering in North America to just drop ship the resin and since we pulled out or we added in our facility in Breda, customers in Europe are starting to drop ship or resin to us. But yes, look, we're encouraged by the increase in unit volume that helps us on the margin side. And it's a resin availability is definitely improving.

The next question comes from Tim Daley with Wells Fargo Securities.

Great, thanks. So just got one here. So, Tony, you were hesitant to give an update versus the 20% previously communicated ’24 outlook, wanting to see where this year ends up. Just want to understand the factors behind this has consistency. So to Rachel's question earlier, you seem to indicate the pharma spend pause dynamic, maybe a ‘23 event? To another question, you suggested the inventory destock will be over this year. Comps are getting easier with today's cuts, just putting it all together suggests that the prior guide might at least be four here. So long winded way to say are you waiting to update us on ‘24 growth to see where the comps end up in ‘23 or ‘24 growth see where the comp ends up in ’23 or are there other factors that your concern may leak into ‘24?

Yes, no, I think that right now, given the changes that we saw in Q2, and that was not something that we were factoring in at all. And so the weakness in pharma is definitely the primary reason why I don't want to comment on 2024 growth until we get closer to the end of the year. We just have to see this year out, it's had so many twists and turns that, you just don't, I don't think it's prudent right now to start putting another a number out there and saying, hey, we think we can do X and Y. I think we felt a lot more confident about that a quarter ago, because we knew where the destocking and issues were. And it has broadened. So we've got to get through and to a more stable customer base before we start talking about 2024. So it's got nothing to do with the comps. It's got everything to do with market dynamics, and how fast the industry now pulls out what we're dealing with.

The next question comes from Brandon Couillard with Jefferies.

Thanks. Good morning, Tony. You called out, many campaigns that are being pushed back, call it three or six months. I mean, I imagine there's some normal churn that may be a normal part of the business. But this seems to be more of a consistent trend across your customer bases. Is that accurate? And are these mostly for commercial therapies? I imagine make them more material in terms of your revenue impact. Can you just unpack that a little bit?

I think it's the combination of everything, Brandon, right. I think there's probably you could go into any year, right and find a handful of customers that have delayed projects. But we're seeing longer approval cycles on POs. We're seeing projects that were supposed to happen this year, and like capital projects were building out facilities coming online are getting delayed. We've got programs that are getting pushed out by, once two quarters, then you got the inventory overhang. It's the combination of all of these things that are all coming together at the same time, where you could obviously handle some delays at some pharma companies or biotech companies, at CDMOs in the past, but when you have it all in one, it just makes it really, really challenging. And that's the difference.

Okay, that's really helpful. Last one, Jon, could you break up the M&A dollar contribution in 2Q? And then what you have mentioned for the full year?

Yes, we said the M&A would be $5 million for the Flexbiosys. So we haven't changed that, that's consistent with what we said back in Q2 call and Q1 call, excuse me.

Okay, maybe back to the operator.

All right, I will, this conclude the question-and answer session. I I'd like to turn the conference back over to Tony Hunt for any closing remarks.

Right. Thank you. So thanks, everybody for joining us. We'll be back in a few months have an update on Q3.

This concludes our conference. Thank you for attending today's presentation. You may all now disconnect.