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What changed in MARAVAI LIFESCIENCES HOLDINGS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MARAVAI LIFESCIENCES HOLDINGS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+513 added−495 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in MARAVAI LIFESCIENCES HOLDINGS, INC.'s 2023 10-K

513 paragraphs added · 495 removed · 367 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

110 edited+30 added−44 removed96 unchanged
Biggest changeJurisdiction Patent Number Title Expiration United States 10494399 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 10519189 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 10913768C1 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 11414453 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Europe 3352584 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Australia 2016328645 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Japan 6814997 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Japan 7082174 Compositions and methods for synthesizing 5′-Capped RNAs 2036 The following patents relate to our MockV related products and technology.
Biggest changeJurisdiction Patent Number Title Expiration United States 10494399 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 10519189 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 10913768C1 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 11414453 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 11878991 Compositions and methods for synthesizing 5′-Capped RNAs 2036 United States 11578095 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Europe 3352584 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Europe 3954225 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Europe 3906789 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Europe 4104687 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Europe 4140491 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Australia 2016328645 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Australia 2021206780 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Canada 2999274 Compositions and methods for synthesizing 5′-Capped RNAs 2036 China ZL 202310734863.0 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Hong Kong 40080484 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Japan 6814997 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Japan 7082174 Compositions and methods for synthesizing 5′-Capped RNAs 2036 Korea, Republic of 10-2500198 Compositions and methods for synthesizing 5′-Capped RNAs 2036 The following patents relate to our MockV related products and technology.
Item 1. Business Overview Maravai LifeSciences Holdings, Inc. (also referred to in this document as “Maravai”, “we”, “us” or “the Company”) is a leading life sciences company providing critical products to enable the development of drug therapies, diagnostics, and novel vaccines and to support research on human diseases.
Item 1. Business Overview Maravai LifeSciences Holdings, Inc. (also referred to in this document as “Maravai”, “we”, “us” or “the Company”) is a leading life sciences company providing critical products to enable the development of novel vaccines, drug therapies, and diagnostics, and to support research on human diseases.
The facility was designed and built by us in conjunction with the building owner to contain fully functional chemical and biological manufacturing operations from material receiving to product distribution and has its own loading dock, manufacturing gas delivery system, solvent delivery and waste system, ISO 8 and ISO 7 designated customer manufacturing suites and integrated building management systems for required site control.
The facility was designed and built by us in conjunction with the building owner to contain fully functional chemical and biological manufacturing operations from material receiving to product distribution and has its own loading dock, manufacturing gas delivery system, solvent delivery and waste system, ISO Class 8 and ISO Class 7 designated customer manufacturing suites and integrated building management systems for required site control.
In addition, we protect our ongoing research and development into critical reagents for cell and gene therapy through patents and other intellectual property rights. Our patent portfolio generally includes patents and patent applications relating to compositions and methods for the production of oligonucleotides, nucleic acids, immunofluorescence assays, and mock viral particles.
In addition, we protect our ongoing research and development into critical reagents for cell and gene therapy through patents and other intellectual property rights. Our patent portfolio generally includes patents and patent applications relating to compositions and methods for the production of CleanCap, oligonucleotides, nucleic acids, immunofluorescence assays, and mock viral particles.
This enzymatic method has several drawbacks, including the high cost of the capping enzymes as well as the need to perform additional processing steps to the mRNA to remove enzymes and byproducts of the capping reaction. While capping efficiency is usually high, the extra processing steps typically result degradation and mRNA of poorer quality.
This enzymatic method has several drawbacks, including the high cost of the capping enzymes as well as the need to perform additional processing steps to the mRNA to remove enzymes and byproducts of the capping reaction. While capping efficiency is usually high, the extra processing steps typically result in degradation and mRNA of poorer quality.
In addition to infectious diseases, these programs address a number of disease states, including ornithine transcarbamylase deficiency, glycogen storage disorders, Alpha-1 antitrypsin deficiency, acute lymphoblastic leukemia, Hurler syndrome, ovarian cancer and cardiovascular disease. These therapeutic programs also use multiple therapeutic modalities, including CRISPR/Cas-9, transcription activator-like effector nuclease (TALENS), enzyme replacement therapies, allogeneic CAR-T cells and base editing.
In addition to infectious diseases, these programs address a number of disease states, including ornithine transcarbamylase deficiency, glycogen storage disorders, Alpha-1 antitrypsin deficiency, acute lymphoblastic leukemia, Hurler syndrome, ovarian cancer and cardiovascular disease. These therapeutic programs also use multiple therapeutic modalities, including CRISPR/Cas-9, transcription activator-like effector nuclease (TALEN), enzyme replacement therapies, allogeneic CAR-T cells and base editing.
If customers choose to develop process-specific assays, we offer custom antibody production and assay development as well as characterization services to meet their needs. Our comprehensive catalog of Cygnus Technologies HCP ELISA kits cover 23 expression platforms and provides the specificity and sensitivity to detect impurities with reproducibility, which supports regulatory compliance.
If customers choose to develop process-specific assays, we offer custom antibody production and assay development as well as characterization services to meet their needs. Our comprehensive catalog of Cygnus Technologies HCP ELISA kits cover 24 expression platforms and provides the specificity and sensitivity to detect impurities with reproducibility, which supports regulatory compliance.
Jurisdiction Patent Number Title Expiration United States 9632087 Methods for evaluating viral clearance from a biopharmaceutical solution employing mock viral particles 2034 United States 10309963 Methods for evaluating viral clearance from a process solution employing mock viral particles 2034 Europe 3044339 Methods and kits for quantifying the removal of mock virus particles from a purified solution 2034 Australia 2014320015 Methods and kits for quantifying the removal of Mock Virus Particles from a purified solution 2034 China 105899684 Methods and kits for quantifying pseudoviral particles removed from purified solution 2034 Japan 6549126 Methods and kits for removal of mock virus particles from a purified solution 2034 Trademarks.
Jurisdiction Patent Number Title Expiration United States 9632087 Methods for evaluating viral clearance from a biopharmaceutical solution employing mock viral particles 2034 United States 10309963 Methods for evaluating viral clearance from a process solution employing mock viral particles 2034 Europe 3044339 Methods and kits for quantifying the removal of mock virus particles from a purified solution 2034 Australia 2014320015 Methods and kits for quantifying the removal of Mock Virus Particles from a purified solution 2034 Australia 2021200484 Methods and kits for quantifying the removal of Mock Virus Particles from a purified solution 2034 China 105899684 Methods and kits for quantifying pseudoviral particles removed from purified solution 2034 Japan 6549126 Methods and kits for removal of mock virus particles from a purified solution 2034 United States 11754565 Methods and kits for removal of mock virus particles from a purified solution 2034 Trademarks.
We offer the following nucleic acid products: mRNA, RNA Capping (CleanCap), oligonucleotides, oligonucleotide inputs, nucleoside triphosphates, custom nucleic acid chemistry and plasmid DNA. mRNA. mRNA is an intermediary molecule that translates the genetic information stored in DNA into proteins. The genetic information stored in DNA is transferred to mRNA in a cellular process called transcription.
We offer the following nucleic acid products: mRNA, RNA Capping (CleanCap), oligonucleotides, oligonucleotide inputs, nucleoside triphosphates, custom nucleic acid chemistry, plasmid DNA and specialty enzymes. mRNA. mRNA is an intermediary molecule that translates the genetic information stored in DNA into proteins. The genetic information stored in DNA is transferred to mRNA in a cellular process called transcription.
Our proprietary capabilities and products underpin the value we aim to provide to our customers. Among other capabilities, we are experts in RNA and mRNA products, which are challenging and often unstable molecules requiring significant chemical modifications to ensure their stability and efficacy in our customers’ applications.
Our proprietary capabilities and products underpin the value we aim to provide to our customers. Among other capabilities, we are experts in RNA and mRNA products, which are challenging and often unstable molecules requiring significant chemical modifications and analytical expertise to ensure their stability and efficacy in our customers’ applications.
We are entitled to terminate the Broad Patent License Agreement for convenience at any time on at least three (3) months written notice, in which case we must continue to pay license maintenance fees and royalties as noted above for the sale of products that are not covered by the specific claims of the licensed patent rights but are otherwise derived from such licensed patent rights or from products covered by such licensed patent rights.
We are entitled to terminate the Broad Patent License Agreement for convenience at any time on at least three (3) months written notice, in which case we must continue to pay license maintenance fees and royalties as noted above for the sale of products that are not covered by the specific claims of the licensed patent rights but are otherwise derived from such 15 Table of Contents licensed patent rights or from products covered by such licensed patent rights.
Our reputation for quality is recognized by the industry and global regulatory agencies, with Cygnus Technologies assays used as reference methods throughout the industry and to support manufacturing and quality control of commercialized biologics. Our customers in this segment are biopharmaceutical companies, contract research organizations (“CROs”), contract development and manufacturing organizations (“CDMOs”) and life science companies.
Our reputation for quality is recognized by the industry and global regulatory agencies, with Cygnus Technologies assays used as reference methods throughout the industry and to support manufacturing and quality control of commercialized biologics and gene therapy products. Our customers in this segment are biopharmaceutical companies, contract research organizations (“CROs”), contract development and manufacturing organizations (“CDMOs”) and life science companies.
Our core offerings include mRNA, long and short oligonucleotides, our proprietary CleanCap mRNA capping technology, mRNA building blocks and oligonucleotide building blocks. Our offerings address key customer needs for critical components, from research to GMP-grade raw materials and API manufacturing. We market our nucleic acid products under the TriLink BioTechnologies® and Glen Research brands.
Our core offerings include mRNA, long and short oligonucleotides, our proprietary CleanCap mRNA capping technology, mRNA building blocks, oligonucleotide building blocks and specialty enzymes. Our offerings address key customer needs for critical components, from research to GMP-grade raw materials and API manufacturing. We market our nucleic acid products under the TriLink BioTechnologies®, Glen Research and Alphazyme brands.
The first clinical trial for an mRNA therapeutic agent occurred in 2016. Now, more than 750 clinical trials are in the pipeline, principally focused on vaccines against viruses and cancer vaccines.
The first clinical trial for an mRNA therapeutic agent occurred in 2016. Now, more than 900 clinical trials are in the pipeline, principally focused on vaccines against viruses and cancer vaccines.
We believe that suppliers like ourselves, with this rare combination of capabilities, proprietary products and the required investment in manufacturing and quality systems, are benefiting from rapid growth as biopharmaceutical customers seek to partner with a small number of trusted partners.
We believe that suppliers like ourselves, with 11 Table of Contents this rare combination of capabilities, proprietary products and the required investment in manufacturing and quality systems, are benefiting from rapid growth as biopharmaceutical customers seek to partner with a small number of trusted partners.
Our Portfolio and Capabilities We provide products that support our customers’ needs from discovery through commercialization of their vaccines, therapeutic agents and in vitro diagnostic products. Our products are frequently incorporated into our customers’ products, whether as research products or APIs used in development or research products incorporated as raw materials into on-market products.
Our Portfolio and Capabilities We provide critical raw materials that support our customers from discovery through commercialization of their vaccines, therapeutic agents and in vitro diagnostic products. Our products are frequently incorporated into our customers’ products, whether as research products or APIs used in development or products incorporated as raw materials into on-market products.
While we have confidence in the measures we take to protect and preserve our trade secrets, they may be inadequate and can be breached, and we may not have adequate 19 Table of Contents remedies for violations of such measures. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
While we have confidence in the measures we take to protect and preserve our trade secrets, they may be inadequate and can be breached, and we may not have adequate remedies for violations of such measures. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
We believe our products are exempt from compliance with the current GMP (“cGMP”) regulations of the 5 Table of Contents FDA, as our products are further processed or incorporated into final drug products by our customers and we do not make claims related to their safety or effectiveness.
We believe our products are exempt from compliance with the current GMP (“cGMP”) regulations of the FDA, as our products are further processed or incorporated into final drug products by our customers and we do not make claims related to their safety or effectiveness.
To prevent disclosure of trade secrets to others, it is our policy to enter into nondisclosure, invention assignment and confidentiality agreements with parties who have access to trade secrets, such as our employees, collaborators, outside scientific collaborators, consultants, advisors and other third parties.
To prevent disclosure of trade secrets to others, it is our policy to enter into nondisclosure, invention assignment and confidentiality agreements with parties who have access to trade secrets, such as our employees, collaborators, outside scientific collaborators, consultants, advisors 19 Table of Contents and other third parties.
However, the quality of our products is critical to meeting customer needs, and we therefore voluntarily follow the quality standards outlined by the International Organization for Standardization for quality management systems (ISO 9001:2015) for the design, 17 Table of Contents development, manufacture, and distribution of our products.
However, the quality of our products is critical to meeting customer needs, and we therefore voluntarily follow the quality standards outlined by the International Organization for Standardization for quality management systems (ISO 9001:2015) for the design, development, manufacture, and distribution of our products.
Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items that may be material or of interest to our investors, including SEC filings, investor events, press and earnings releases, and blogs.
Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items that may be material or of interest to our investors, 20 Table of Contents including SEC filings, investor events, press and earnings releases, and blogs.
The Wateridge facility was purpose-built to address our customers’ needs for critical raw materials manufactured under certain good manufacturing practices (“GMP”) conditions and APIs for investigational use. Our raw material products are manufactured following the voluntary quality standards of ISO 9001:2015. Our GMP-grade raw materials follow ISO 9001:2015 standards, additional voluntary GMP quality standards and customer specific requirements.
The Wateridge facility was purpose-built to address our customers’ needs for critical raw materials manufactured under certain GMP conditions and APIs for investigational use. Our raw material products are manufactured following the voluntary quality standards of ISO 9001:2015. Our GMP-grade raw materials follow ISO 9001:2015 standards, additional voluntary GMP quality standards and customer specific requirements.
Like ARCA, CleanCap is a synthetic, chemically-made mRNA 5’ cap analog added to the transcription process in a single step. Unlike ARCA, however, CleanCap results in significantly higher levels of capping efficiency, resulting in very low levels of uncapped mRNA, which in turn minimizes the risk of activation of the innate immune system.
Like ARCA, CleanCap analogs are synthetic, chemically-made mRNA 5’ cap analogs added to the transcription process in a single step. Unlike ARCA, however, CleanCap results in significantly higher levels of capping efficiency, resulting in very low levels of uncapped mRNA, which in turn minimizes the risk of activation of the innate immune system.
Once our services or products are qualified by our customers, we are written into regulatory documents and standard operating procedures. As a result, our customer relationships frequently span many years. The nature of our products and their uses require that they be manufactured by highly trained personnel in state-of-the-art facilities following exacting procedures to ensure quality.
Once our services or products are qualified by our customers, they are often cited in regulatory documents and standard operating procedures. As a result, our customer relationships frequently span many years. The nature of our products and their uses require that they be manufactured by highly trained personnel in state-of-the-art facilities following exacting procedures to ensure quality.
Our internal analysis, supported by third-party research, projects that by 2027, 40-50% of the mRNA pipeline assets will be for in vivo gene editing and ex vivo gene-edited cell therapies. We support the development of cell and gene therapies by providing products used in gene editing and cell therapy research.
Our internal analysis, supported by third-party research, projects that by 2027, 20-30% of the mRNA pipeline assets will be for in vivo gene editing and ex vivo gene-edited cell therapies. We support the development of cell and gene therapies by providing products used in gene editing and cell therapy research.
As a leading life sciences company. we are committed to the health, safety and well-being of our employees. All employees exposed to potential hazards are required to complete annual health and safety training, including laboratory chemical safety, hazard communication and hazardous waste management.
As a leading life sciences company, we are committed to the health, safety and well-being of our employees. All employees that could be exposed to potential hazards are required to complete annual health and safety training, including laboratory chemical safety, hazard communication and hazardous waste management trainings.
Our products and the end markets they serve are depicted in the following image: Nucleic Acid Production (92% of Revenue for the Year Ended December 31, 2022) We are a global provider of highly modified, complex nucleic acids and related products. We have recognized expertise in complex chemistries and products provided under exacting quality standards.
Our brands, products and the end markets they serve are depicted in the following image: Nucleic Acid Production (78% of Revenue for the Year Ended December 31, 2023) We are a global provider of highly modified, complex nucleic acids and related products. We have recognized expertise in complex chemistries and products provided under exacting quality standards.
Biologics Safety Testing (8% of Revenue for the Year Ended December 31, 2022) We provide products and services under the Cygnus Technologies®, LLC (“Cygnus Technologies”) brand that ensure the purity of our customers’ biopharmaceutical products, including biological drugs.
Biologics Safety Testing (22% of Revenue for the Year Ended December 31, 2023) We provide products and services under the Cygnus Technologies®, LLC (“Cygnus Technologies”) brand that ensure the purity of our customers’ biopharmaceutical products, including biological drugs.
As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. The following granted patents relate to our CleanCap products and technology.
As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. 18 Table of Contents The following granted patents relate to our CleanCap products and technology.
We also provide our customers a host of chemically complex and highly specialized raw materials. Process development is a complex phase that establishes highly validated procedures and determines the investment in facilities and equipment required to bring biopharmaceutical products to market. These decisions impact the viability of our customers’ products for the long term.
We also provide our customers a host of chemically complex and highly specialized raw materials. Process development is a complex phase that establishes highly validated procedures and determines the investment in facilities and equipment required to bring biopharmaceutical products to market. These decisions impact the viability of our customers’ products for use in clinical trials and commercialization.
All of the 15 existing FDA-and EMA-approved CAR-T Cell and Gene Therapies use Cygnus Host Cell Protein ELISA kits for HCP testing for commercial product lot release. Five of these 15 therapies were approved in 2022. ELISA is the benchmark method for monitoring levels of process-related impurities during the purification process and in product release testing.
All of the 19 existing FDA-and EMA-approved CAR-T Cell and Gene Therapies use Cygnus Host Cell Protein ELISA kits for HCP testing for commercial product lot release. Four of these 19 therapies were approved in 2023. ELISA is the benchmark method for monitoring levels of process-related impurities during the purification process and in product release testing.
To date, there have been no material effects upon our earnings or competitive position resulting from our compliance with applicable laws or regulations enacted or adopted relating to the protection of the environment. Our capital and operating expenditures for pollution control in 2022 and 2021 were not material.
To date, there have been no material effects upon our earnings or competitive position resulting from our compliance with applicable laws or regulations enacted or adopted relating to the protection of the environment. Our capital and operating expenditures for pollution control in 2023 and 2022 were not material and are not expected to be material in 2024.
CleanCap is a novel chemical approach to produce the 5’ cap analog, which, in addition to making mRNA more stable, aids in protein production and helps prevent an unwanted immune response to the mRNA. CleanCap had been incorporated into several mRNA programs targeting immunization against the novel strain of coronavirus, SARS-CoV-2 (“COVID-19”).
CleanCap is a novel chemical approach to produce the 5’ cap analog, which, in addition to making mRNA more stable, aids in protein production and helps prevent an unwanted immune response to the mRNA. CleanCap analogs have been incorporated into several mRNA programs targeting 4 Table of Contents immunization against the coronavirus, SARS-CoV-2 (“COVID-19”).
The first two vaccines approved for use in combating the COVID-19 pandemic were mRNA vaccines, 11 Table of Contents including the vaccine developed by Pfizer and BioNTech which uses our CleanCap product. Our CleanCap product is also incorporated into the bivalent booster vaccine developed by Pfizer and BioNTech.
The first two vaccines approved for use in combating the COVID-19 pandemic were mRNA vaccines, including the vaccine developed by Pfizer and BioNTech which uses our CleanCap product. Our CleanCap product is also incorporated into the booster vaccines developed by Pfizer and BioNTech.
Plasmid DNA is integral to the production of mRNA, serving as the nucleic acid template for the DNA-dependant RNA polymases that frequently are used in the manufacturing of mRNA. Our plasmid DNA offering allows us to ensure the quality and timeliness of the mRNA API manufacturing campaigns that we service for our customers.
Plasmid DNA is integral to the production of mRNA, serving as the nucleic acid template for the DNA-dependent RNA polymerases that frequently are used in the manufacturing of mRNA. Our plasmid DNA offering allows us to ensure the quality and timeliness of the mRNA API manufacturing campaigns that we service for our customers. Specialty Enzymes.
Cygnus Technologies product categories include HCP ELISA kits, other bioprocess impurity and contaminant ELISA kits, viral clearance prediction kits, ancillary reagents and custom services. HCP ELISA kits. HCP ELISAs are kits used to detect residual proteins from the expression system used in bioproduction.
Cygnus Technologies product categories include HCP ELISA kits, other bioprocess impurity and contaminant ELISA kits, viral clearance prediction kits, ancillary reagents and custom services. 9 Table of Contents HCP ELISA kits. HCP ELISA kits are bioassays used to detect residual proteins from the expression system used in bioproduction.
Biologics Safety Testing Market The biologics safety testing market includes the detection and clearance of downstream bioprocessing product-related and process-related impurities. Biologics safety testing is a $4.2 billion market in 2022. We participate in the HCP and other process related impurities and viral contamination segments of this market for biopharmaceutical vaccine and therapeutics manufacturing.
Biologics Safety Testing Market The biologics safety testing market includes the detection and clearance of downstream bioprocessing product-related and process-related impurities. We participate in the HCP and other process related impurities and viral contamination segments of this market for biopharmaceutical vaccine and therapeutics manufacturing.
The Flanders San Diego Facility will include the introduction of integrated manufacturing systems, quality of water improvements from Reverse Osmosis De-ionized grade water to WFI (“Water For Injection”), which is pharmaceutical grade water, and other facility infrastructure investments to support potential customer needs related to quality.
Both the Flanders 1 and Flanders 2 facilities include the introduction of integrated manufacturing systems, quality of water improvements from Reverse Osmosis De-ionized grade water to WFI (“Water For Injection”), which is pharmaceutical grade water, and other facility infrastructure investments to support potential customer needs related to quality.
Notably, according to research commissioned by us in November 2021 consisting of over 55 interviews and in November 2022 consisting of 30 additional interviews with our current and former customers, our competitors and industry experts focused across our two ongoing business segments (the “Industry Analysis”), we believe CleanCap is viewed as a leading solution to incorporate the five prime (“5’”) cap into mRNA.
Notably, according to research commissioned by us consisting of interviews with our current and former customers, our competitors and industry experts focused across our two ongoing business segments (the “Industry Analysis”), we believe CleanCap technology is viewed as a leading solution to incorporate the five prime (“5’”) cap into mRNA.
The mRNA molecules may serve as APIs for diverse applications, such as enzyme replacement therapies, gene editing therapies and vaccines. We offer both research grade material and material made under GMP conditions for early phase clinical trials. RNA Capping. Within the mRNA category, we also offer our CleanCap products.
The mRNA molecules may serve as APIs for diverse applications, such as enzyme replacement therapies, gene editing therapies and vaccines. We offer both research grade material and material made under GMP conditions for early phase clinical trials. RNA Capping. Within the mRNA category, we also offer our patented CleanCap technology. CleanCap analogs principally serve the mRNA vaccine and therapeutics markets.
There are more than 2,000 cell and gene therapies in development or launched and sales in this category are expected to grow more than 5 times by 2027, according to industry consultants and management estimates. Our portfolio offers key products for each stage of the cell and gene therapy development lifecycle.
There are more than 4,000 nucleic acid and cell and gene therapies in development or launched and sales in this category are expected to grow more than 3 times by 2030, according to industry consultants and management estimates. Our portfolio offers key products for each stage of the cell and gene therapy development lifecycle.
We built our business through a combination of acquisitions and subsequent investments in our acquired companies to grow their commercial capabilities, upgrade and expand their research and production facilities, deploy stringent quality systems, integrate their back-office functions, and develop the personnel and management to fuel continued growth.
All of our manufacturing facilities meet applicable ISO standards. 5 Table of Contents We built our business through a combination of acquisitions and subsequent investments in our acquired companies to grow their commercial capabilities, upgrade and expand their research and production facilities, deploy stringent quality systems, integrate their back-office functions, and develop the personnel and management to fuel continued growth.
We seek opportunities to invest in their facilities and personnel to provide an operating foundation for growth. We also augment their commercial capabilities through a combination of sales and marketing resources dedicated to each business, supported by our global marketing infrastructure.
We seek opportunities to invest in their facilities and personnel to provide an operating foundation for growth. We also augment their commercial capabilities through a combination of sales and marketing resources dedicated to each business, supported by our global marketing infrastructure. We will continue to seek a balance between driving growth organically and inorganically through acquisitions.
For example, our messenger RNA (“mRNA”) products are used in drug development to assist in the production of immune-activating antigens; our CleanCap® technology is used to stabilize mRNA and streamlines mRNA manufacturing; we were one of the first companies to provide the essential modified uridine, N1-methyl-pseudouridine triphosphate, for research applications; our catalog mRNA products are frequently used by lipid developers to test and validate new mRNA delivery platforms; and our plasmid DNA products are used as templates for the production of our ribonucleic acid mRNA products.
For example, our messenger RNA (“mRNA”) products are used in drug development to assist in the production of immune-activating antigens and to deliver gene editing technologies in cell and gene therapy treatments; our CleanCap® technology is used to stabilize mRNA and streamlines mRNA manufacturing; we were one of the first companies to provide the essential modified uridine, N1-methyl-pseudouridine triphosphate, for research applications and under good manufacturing processes (“GMP”) conditions; our catalog mRNA products are frequently used by lipid developers to test and validate new mRNA delivery platforms; and our plasmid DNA products are used as templates for the production of our mRNA products.
CleanCap mRNA products represented 89% of our nucleic acid production revenue for the year ended December 31, 2022 (including the revenue from CleanCap products). Oligonucleotides. The oligonucleotide product category supports broad customer applications, including therapeutics, in vitro diagnostics, next generation sequencing (“NGS”) and CRISPR-based gene editing.
CleanCap mRNA products represented 69% of our Nucleic Acid Production revenue for the year ended December 31, 2023 (including the revenue from CleanCap products). Oligonucleotides. The oligonucleotide product category supports broad customer applications, including therapeutics, in vitro diagnostics, NGS and CRISPR-based gene editing.
Some customers may choose to use generic assays early in development and migrate to process-specific assays later. The trend in recent years has been for customers to increasingly use generic assays throughout their development pathway, relying on our expertise and the established performance of our assays.
Some customers may choose to use generic assays early in development and migrate to process-specific assays later. The trend in recent years has been for customers to increasingly use generic assays throughout their development and commercialization pathway, relying on our expertise, the established performance of our assays supported by our comprehensive state-of-the-art assay qualification services.
We offer a suite of CleanCap analogs that are specifically made for therapeutics and vaccines. Based on the Industry Analysis, we believe our cap analogs are critical features of several mRNA vaccines in development. Traditionally, the 5’ cap has been added in one of two ways. The cap can be added post mRNA synthesis by an enzymatic process.
Based on the Industry Analysis, we believe our cap analogs are critical features of several mRNA vaccines and therapies in development. Traditionally, the 5’ cap has been added in one of two ways. The cap can be added post mRNA synthesis by an enzymatic process.
The advantages of well-developed ELISA kits include the ability to measure very low levels of 8 Table of Contents impurities in the presence of high amounts of drug product, without requiring a high level of expertise to execute and interpret, and are readily transferable across an organization from process development to manufacturing and quality control bioanalytical groups.
The advantages of well-developed ELISA kits include the ability to measure very low levels of impurities in the presence of high amounts of drug product, and are readily transferable across an organization from process development to manufacturing and quality control bioanalytical groups.
Of all process-related impurities, HCPs present the most complex impurity. Per regulatory requirements, viral vectors used as a component of CAR-T cell therapies or as gene therapies must be produced in certain cell lines, purified and tested for the presence of host cell proteins.
Per regulatory requirements, viral vectors used as a component of CAR-T cell therapies or as gene therapies must be produced in certain cell lines, purified and tested for the presence of host cell proteins.
Our products address the key phases of biopharmaceutical development spanning research to commercialization and include complex nucleic acids for diagnostic, vaccine and therapeutic applications, and antibody-based products to detect impurities during the production of biopharmaceutical products. Our businesses principally address high growth market segments in biopharmaceutical development.
Our products address the key phases of biopharmaceutical development spanning research to commercialization and include complex nucleic acids for vaccine, therapeutic and diagnostic applications, custom enzymes for research and diagnostic use and antibody-based products to detect impurities during the production of biopharmaceutical products.
For over 20 years, the Cygnus Technologies brand has been associated with products and services that enable the detection of impurities present in bioproduction. Our biologics safety testing products are used during development and scale-up, during the regulatory approval process and throughout commercialization. We are recognized globally for the detection of host cell proteins (“HCPs”) and process-related impurities during bioproduction.
For over 25 years, the Cygnus Technologies brand has been associated with products and services that enable the detection of impurities present in bioproduction. Our biologics safety testing products are used during development and scale-up, during the regulatory approval process and 8 Table of Contents throughout commercialization.
We estimate our mRNA and CleanCap products have also been incorporated in over 250 vaccine and therapeutic programs in development as of December 31, 2022, including at least 60 programs that our mRNA CDMO services group manufactured the mRNA APIs using CleanCap.
We estimate our CleanCap products have been incorporated in approximately 350 vaccine and therapeutic programs in development as of December 31, 2023, including at least 60 molecules for which our mRNA CDMO services group manufactured the mRNA APIs using CleanCap.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any 20 Table of Contents amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and any amendments to these reports, are available through our investor relations website, free of charge, as soon as reasonably practicable after we electronically file or furnish them with the SEC.
All of our sites are subject to licensing and regulation, as appropriate under federal, state and local laws relating to: • the surface and air transportation of chemicals, biological reagents and hazardous materials; • the handling, use, storage and disposal of chemicals (including toxic substances), biological reagents and hazardous waste; • the procurement, handling, use, storage and disposal of biological products for research purposes; • the safety and health of employees and visitors to our facilities; and • protection of the environment and general public.
In addition, the specific activities of some of our businesses require us to hold specialized licenses for the manufacture, distribution and/or marketing of particular products. 16 Table of Contents All of our sites are subject to licensing and regulation, as appropriate under federal, state and local laws relating to: • the surface and air transportation of chemicals, biological reagents and hazardous materials; • the handling, use, storage and disposal of chemicals (including toxic substances), biological reagents and hazardous waste; • the procurement, handling, use, storage and disposal of biological products for research purposes; • the safety and health of employees and visitors to our facilities; and • protection of the environment and general public.
However, given CleanCap’s high yield and process efficiency, many customers who previously insourced these processes have begun to partner with us. Based on the Industry Analysis, we believe our products and services are more effective than those of our competitors. Deep scientific expertise, intellectual property protection and specialty equipment serve as barriers to entry in this space.
However, given CleanCap’s high yield and process efficiency, many customers who previously insourced these processes have begun to partner with us. Based on the Industry Analysis, we believe our products and services are more effective than those of our competitors.
Emerging biopharmaceutical customers frequently seek the support we can offer in our state-of-the-art facilities under our stringent quality standards, with the capabilities that result from the capital and process investments we have made over the last several years.
Emerging biopharmaceutical customers frequently seek the support we can offer in our state-of-the-art facilities under our stringent quality standards, with the capabilities that result from the capital and process investments we have made over the last several years. We are capable of manufacturing reagents from research-grade to GMP-grade, which often exceeds the in-house capabilities of our pre-commercial customers.
As of December 31, 2022, approximately 18% of our workforce have earned advanced degrees and all receive rigorous training on our procedures. We manufacture our nucleic acid products at our San Diego, California facility (“Wateridge facility”).
As of December 31, 2023, approximately 24% of our workforce have earned advanced degrees and all receive rigorous training on our procedures. During 2023, the majority of our nucleic acid products were manufactured at our San Diego, California Wateridge facility (“Wateridge facility”).
RNA expertise is highly specialized, and customers seek partners with our expertise to provide these complex products. A small number of providers, like ourselves, with a successful track record for COVID-19, can provide this level of RNA capability. • Rapid growth in development of cell and gene therapies .
A small number of providers, like ourselves, with a successful track record for COVID-19, can provide this level of RNA capability. • Rapid growth in development of cell and gene therapies .
As of December 31, 2022, we had invested approximately $90.9 million into our flagship Wateridge facility and its five dedicated manufacturing suites to produce materials under GMP conditions, along with the required quality systems to meet requirements specified by our customers.
As of December 31, 2023, we had invested approximately $93.2 million into our flagship San Diego, California Wateridge facility and its dedicated manufacturing suites to produce materials from Research Use Only (“RUO”) to GMP conditions, along with the required quality systems to meet requirements specified by our customers.
Customers’ biopharmaceutical products early in their development have a high failure rate and often do not advance through the clinical stages to commercialization. Our customers are required to follow regulatory pathways that are not always known, which may cause additional unforeseen requirements placed on us as their contract manufacturer and delays in advancing to the next stage of product development.
Our customers are required to follow regulatory pathways that are not always known, which may cause additional unforeseen requirements placed on us as their contract manufacturer and delays in advancing to the next stage of product development.
If we do not timely file any national stage patent applications, we may lose our priority date with respect to our provisional patent applications and any patent protection on the inventions disclosed in such provisional patent applications.
If we do not timely file any national stage patent applications, we may lose our priority date with respect to our provisional patent applications and any patent protection on the inventions disclosed in such provisional patent applications. We cannot predict whether any such patent applications will result in the issuance of patents that provide us with any competitive advantage.
Acquiring Leading Life Sciences Businesses and Supporting Their Continued Development We built our business by acquiring established and emerging companies with strong scientific foundations in our target markets and investing in their systems, processes and people to accelerate their growth and expand their technologies.
By investing in technologies at the forefront of biopharmaceutical and in vitro diagnostics, we aim to remain focused on the highest-growth applications. 13 Table of Contents Acquiring Leading Life Sciences Businesses and Supporting Their Continued Development We built our business by acquiring established and emerging companies with strong scientific foundations in our target markets and investing in their systems, processes and people to accelerate their growth and expand their technologies.
The new Flanders San Diego Facility will provide us with additional GMP manufacturing capacity and provide us the optionality downstream to manufacture materials beyond current quality requirements for mRNA raw materials, including CleanCap.
In addition to the Wateridge facility, we have two facilities in San Diego, Flanders 1 and Flanders 2. Flanders 1 provides us with additional GMP manufacturing capacity and provides us the optionality downstream to manufacture materials beyond current quality requirements for mRNA raw materials, including CleanCap.
In certain cases, like our CleanCap technology, our know-how is backed by intellectual property. In other cases, such as our HCP products, our antibodies are proprietary and therefore can only be supplied by us. We believe the proprietary nature of our expertise and products solidifies our long-term customer relationships.
In certain cases, like our CleanCap technology, our know-how features differentiated performance characteristics and is backed by intellectual property. In other cases, such as our HCP products, our antibodies are proprietary and therefore can only be supplied by us.
For our mRNA offerings, we compete with Aldevron Patheon, eTheRNA, Lonza, Catalent, and Samsung Biologics, among others. Based on the Industry Analysis, we believe we have a reputation for our expertise in the RNA space with talented scientists who are constantly pushing the frontier of RNA science. This scientific expertise and the required high-cost equipment serve as barriers to entry.
Based on the Industry Analysis, we believe we have a reputation for our expertise in the RNA space with talented scientists who are constantly pushing the frontier of RNA science. This scientific expertise and the required high-cost equipment serve as barriers to entry. In addition to our expertise, we believe our GMP cleanroom manufacturing process differentiates us from competitors.
Our distributors also sell our products in over 45 countries and provide customer service and local sales and marketing. Competition We compete with a range of companies across our segments.
We serve many of our biopharmaceutical customers, especially in our nucleic acid production segment, via direct sales worldwide. Our distributors also sell our products in over 40 countries and provide customer service and local sales and marketing. Competition We compete with a range of companies across our segments.
Broad may terminate the license for our uncured failure to make payments, for our uncured material breach or if we bring a patent challenge against any of the institutional rights holders.
Broad may terminate the license for our uncured failure to make payments, for our uncured material breach or if we bring a patent challenge against any of the institutional rights holders. Manufacturing and Supply We occupy facilities in San Diego, California, Leland, North Carolina, Sterling, Virginia, and Jupiter, Florida.
Our product portfolio is well positioned to serve the biologic, cell and gene therapy and mRNA vaccine and therapeutic end markets, which are currently experiencing above-market growth. By investing in technologies at the forefront of biopharmaceutical and in vitro diagnostics, we aim to remain focused on the highest-growth applications.
Our product portfolio is well positioned to serve the biologic, cell and gene therapy and mRNA vaccine and therapeutic end markets, which are currently experiencing above-market growth.
Five new cell and gene therapy approvals (Carvykti, Roctavian, Upstanza, Hemgenix, Adstiladrin) were all granted FDA or EMA approval in 2022 and have added clinical credibility to cell and gene therapies.
Seven new cell and gene therapy approvals (Omisirge, Vyjuvek, Roctavian, Lantidra, Casgevy, Lyfgenia, Elvidys) were all granted FDA or EMA approval in 2023 and have added clinical credibility to cell and gene therapies.
Generally, utility patents issued for applications are granted a term of 21 years from the earliest effective filing date of a non-provisional patent application. Issued patents may be extended beyond the natural 21 year term for regulatory or administrative delay in accordance with provisions of applicable local law.
Issued patents may be extended beyond the natural 21 year term for regulatory or administrative delay in accordance with provisions of applicable local law.
Products with Outstanding Quality Performance We believe our products stand out when compared to those of our competitors’ because they present innovative solutions to customer needs, as indicated by the responses to the Industry Analysis, while providing reliable performance and quality. CleanCap, for example, offers advantages over competing capping technologies in yield, stability and safety.
We believe the proprietary nature of our expertise and products solidifies our long-term customer relationships. 10 Table of Contents Products with Outstanding Quality Performance We believe our products stand out when compared to those of our competitors’ because they present innovative solutions to customer needs, as indicated by the responses to the Industry Analysis, while providing reliable performance and quality.
Our customers in this segment manufacture a broad range of biopharmaceutical products. These include monoclonal antibodies and recombinant proteins, both as novel biologics and biosimilars, and recombinant vaccines, including vaccines to prevent COVID-19 and to treat cancer. We also provide products in support of the development of cell and gene therapies.
We are recognized globally for the detection of host cell proteins (“HCPs”) and process-related impurities during bioproduction. Our customers in this segment manufacture a broad range of biopharmaceutical products. These include monoclonal antibodies and recombinant proteins, both as novel biologics and biosimilars, and recombinant vaccines, including oncolytic vaccines to treat cancer.
Recombinant vaccines and cell and gene therapies rely on manufacturing of various viral vectors produced using recombinant nucleic acid and cell culture technologies. Viral vector manufacturing processes require rigorous analytics, including testing for process-related impurities such as HCPs, host cell DNA, purification leachates, growth media additives and enzymes used in viral vector purification processes.
Viral vector manufacturing processes require rigorous analytics, including testing for process-related impurities such as HCPs, host cell DNA, purification leachates, growth media additives and enzymes used in viral vector purification processes. Of all process-related impurities, HCPs present the most complex impurity.
The kit enables manufacturers to conduct viral clearance assessments easily and economically and to predict outcomes in-house ahead of costly and logistically challenging live viral clearance studies. In 2022, Cygnus Technologies introduced MockV® RVLP Kit.
The kit enables manufacturers to conduct viral clearance assessments easily and economically and to predict outcomes in-house ahead of costly and logistically challenging live viral clearance studies. In 2022, Cygnus Technologies introduced MockV® RVLP Kit. This kit enables bioprocess scientists to quantify the removal of Retrovirus-like Particles (RVLPs) produced endogenously by Chinese Hamster Ovary (CHO) cell lines during biopharmaceutical manufacturing.
We are capable of manufacturing reagents from research-grade to GMP-grade, which 12 Table of Contents often exceeds the in-house capabilities of our pre-commercial customers. The results of the Industry Analysis indicate that our emerging and established customers also seek us out for our leading capabilities in nucleic acid chemistries and process control assays.
The results of the Industry Analysis indicate that our emerging and established customers also seek us out for our leading capabilities in nucleic acid chemistries and process control assays.
In addition, CleanCap’s higher mRNA yields compared to ARCA result in lower cost of goods. When compared to enzymatic capping, CleanCap removes the 7 Table of Contents additional downstream purification steps required. We have developed a suite of CleanCap analogs that are specifically designed for therapeutics and vaccines.
In addition, CleanCap’s higher mRNA yields compared to ARCA result in lower cost of goods. When compared to enzymatic capping, CleanCap removes the additional downstream purification steps required. 7 Table of Contents We currently offer several variations of the CleanCap molecule, serving the needs of mRNA and self-amplifying RNA developers.
In the oligonucleotide synthesis inputs market, we compete against large distributor-manufacturers like Thermo Fisher and Millipore Sigma while also serving them as customers. Our Glen Research brand has a long history in this industry, which drives customer loyalty, and has a reputation for high-fidelity technical service, focusing on supplying and sourcing highly modified inputs for its customers.
Our Glen Research brand has a long history in this industry, which drives customer loyalty, and has a reputation for high-fidelity technical service, focusing on supplying and sourcing highly modified inputs for its customers. For our specialty enzymes offering, we compete with New England Biolabs, Thermo Fisher, QIAGEN, and Roche, among others.
We regularly review our supply chain for supplier quality and risks related to concentration of supply and we take appropriate action to manage these potential risks. Government Regulation We provide products used for basic research or as raw materials used by biopharmaceutical customers for further processing, and active pharmaceutical ingredients used for preclinical and clinical studies.
By continuously optimizing our supply chain, we ensure operational resilience and maintain a steady supply of critical materials for our products. Government Regulation We provide products used for basic research or as raw materials used by biopharmaceutical customers for further processing, and active pharmaceutical ingredients used for preclinical and clinical studies.
Extensive process flow analysis has been incorporated into the facility design to optimize and enhance both our manufacturing and kit packaging operations. Our Sterling, Virginia facility was designed to perform quality control, aliquoting, packaging and shipping and houses the appropriate space and systems. 16 Table of Contents Our supply chain relies on a network of specialized suppliers and transportation companies.
It significantly increases our manufacturing and development capacity while providing other R&D, laboratory and automation upgrades. Extensive process flow analysis has been incorporated into the facility design to optimize and enhance both our manufacturing and kit packaging operations. Our Sterling, Virginia facility was designed to perform quality control, aliquoting, packaging and shipping and houses the appropriate space and systems.
Capacity to manufacture these products when approved, however, remains in short supply. Providers of technical expertise and manufacturing capabilities, like ourselves, with the facilities and quality systems demanded by biopharmaceutical customers, benefit from the demand created in the mRNA category.
The field of mRNA-based drugs and vaccines has advanced dramatically within a few short years. Providers of technical expertise and manufacturing capabilities, like ourselves, with the facilities and quality systems demanded by biopharmaceutical customers, benefit from the demand created in the mRNA category.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTopco LLC’s ability to make such distributions may be subject to various limitations and restrictions. • Conflicts of interest could arise between our shareholders and Maravai Life Sciences Holdings, LLC (“MLSH 1”), which may impede business decisions that could benefit our shareholders. • The Tax Receivable Agreement requires us to make cash payments to MLSH 1 and Maravai Life Sciences Holdings 2, LLC (“MLSH 2”) in respect of certain tax benefits to which we may become entitled, and we expect that the payments we will be required to make will be substantial. • Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon MLSH 1 and MLSH 2 that will not benefit the other common shareholders to the same extent as they will benefit MLSH 1 and MLSH 2. • GTCR, LLC (“GTCR”) controls us, and its interests may conflict with ours or yours in the future. • Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.
Biggest changeRisks Related to Our Organizational Structure • Our dependence, by virtue of our principal asset being our interest in Maravai Topco Holdings, LLC (“Topco LLC”), on distributions from Topco LLC to pay our taxes and expenses, including payments under a tax receivable agreement with the former owners of Topco LLC (the “Tax Receivable Agreement” or “TRA”) together with various limitations and restrictions that impact Topco LLC’s ability to make such distributions. • The risk that conflicts of interest could arise between our shareholders and Maravai Life Sciences Holdings, LLC (“MLSH 1”), the only other member of Topco LLC, and impede business decisions that could benefit our shareholders. • The substantial future cash payments we may be required to make under the Tax Receivable Agreement to MLSH 1 and Maravai Life Sciences Holdings 2, LLC (“MLSH 2”), an entity through which certain of our former owners hold their interests in the Company and the negative effect of such payments. • The fact that our organizational structure, including the TRA, confers certain benefits upon MLSH 1 and MLSH 2 that will not benefit our other common shareholders to the same extent as they will benefit MLSH 1 and MLSH 2. • Our ability to realize all or a portion of the tax benefits that are expected to result from the tax attributes covered by the Tax Receivable Agreement. • The possibility that we will receive distributions from Topco LLC significantly in excess of our tax liabilities and obligations to make to make payments under the Tax Receivable Agreement. • Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns.
Some of the products and services that we are developing are based upon new technologies or 30 Table of Contents approaches. As a result, there can be no assurance that these new products and services, even if successfully developed and introduced, will be accepted by customers.
Some of the products and services that we are developing are based upon new technologies or approaches. As a result, there can be no assurance that these new products and services, even if successfully developed and 30 Table of Contents introduced, will be accepted by customers.
Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner.
Additionally, the existence of a material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner.
Any use of distribution arrangements and marketing alliances to commercialize our products and services will subject us to a number of risks, including the following: • we may be required to relinquish important rights to our products; • we may not be able to control the amount and timing of resources that our distributors or collaborators may devote to the distribution or marketing of our products; • our distributors or collaborators may experience financial difficulties; and • business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement.
Our use of distribution arrangements and marketing alliances to commercialize our products and services subject us to a number of risks, including the following: • we may be required to relinquish important rights to our products; • we may not be able to control the amount and timing of resources that our distributors or collaborators may devote to the distribution or marketing of our products; • our distributors or collaborators may experience financial difficulties; and • business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement.
Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we may realize as a result of our purchase of LLC Units in Topco LLC (the “LLC Units”) and LLC Unit exchanges, and the resulting amounts we are likely to pay out to LLC Unitholders pursuant to the Tax Receivable Agreement; however, we estimate that such payments may be substantial.
Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we may realize as a result of our purchase of LLC Units in Topco LLC (the “LLC Units”) and LLC Unit exchanges, and the resulting amounts we are likely to pay out to LLC Unitholders pursuant to the Tax Receivable Agreement; however, such payments may be substantial.
Any acquisition involves numerous risks, uncertainties and operational, financial, and managerial challenges, including the following, any of which could adversely affect our business, financial condition, results of operations, cash flows and prospects: • difficulties in integrating new operations, systems, technologies, products, services and personnel of acquired businesses effectively and in a timely manner; • difficulties in implementing and maintaining controls, procedures and policies with respect to our financial accounting systems, including disclosure controls and procedures and internal control over financial reporting, at acquired businesses that, prior to the acquisition, had lacked such controls, procedures and policies; • lack of synergies or the inability to realize expected synergies and cost-savings, including enhanced revenue, technology, human resources, cost savings, operating efficiencies and other synergies; • difficulties in obtaining and verifying the financial statements and other business information of acquired businesses; • difficulties in managing geographically dispersed operations, including risks associated with entering new or foreign markets in which we have no or limited prior experience; • underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; • negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges; • the potential loss of key employees, customers, contractual relationships, and strategic partners of acquired companies; • declining employee morale and retention issues affecting employees of businesses that we acquire, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or the direction of the acquired business; • claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; • the assumption or incurrence of historical liabilities, obligations and expenses of the acquired business, including unforeseen and contingent or similar liabilities that are difficult to identify or accurately quantify, or other litigation-related liabilities and regulatory actions; • the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; • the issuance of equity or equity-linked securities to finance or as consideration for any acquisitions that dilute the ownership of our shareholders; • the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our Class A common stock is low or volatile which could preclude us from completing any such acquisitions; • the assumption of certain collaboration, strategic alliance and licensing arrangement may require us to relinquish valuable rights to our technologies or products, or grant licenses on terms that are not favorable to us; • disruption of our ongoing operations, diversion of management’s attention and company resources from existing operations of the business, and the dedication of significant efforts and expense across all operational areas, including sales and marketing, research and development, manufacturing, finance, legal and information technologies; • the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; • the need to later divest acquired assets at a loss if an acquisition does not meet our expectations; • risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property; and • difficulties relating to operating with increased leverage and incurring additional interest expense as a result of financing acquisitions with additional indebtedness, which could make us more vulnerable to downturns. 32 Table of Contents There can be no assurance we will identify promising acquisition opportunities.
Any acquisition involves numerous risks, uncertainties and operational, financial, and managerial challenges, including the following, any of which could adversely affect our business, financial condition, results of operations, cash flows and prospects: • difficulties in integrating new operations, systems, technologies, products, services and personnel of acquired businesses effectively and in a timely manner; • difficulties in implementing and maintaining controls, procedures and policies with respect to our financial accounting systems, including disclosure controls and procedures and internal control over financial reporting, at acquired businesses that, prior to the acquisition, had lacked such controls, procedures and policies; • lack of synergies or the inability to realize expected synergies and cost-savings, including enhanced revenue, technology, human resources, cost savings, operating efficiencies and other synergies; • difficulties in obtaining and verifying the financial statements and other business information of acquired businesses; • difficulties in managing geographically dispersed operations, including risks associated with entering new or foreign markets in which we have no or limited prior experience; • underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; • negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges; • the potential loss of key employees, customers, contractual relationships, and strategic partners of acquired companies; • declining employee morale and retention issues affecting employees of businesses that we acquire, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or the direction of the acquired business; • claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; • the assumption or incurrence of historical liabilities, obligations and expenses of the acquired business, including unforeseen and contingent or similar liabilities that are difficult to identify or accurately quantify, or other litigation-related liabilities and regulatory actions; • the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; • the issuance of equity or equity-linked securities to finance or as consideration for any acquisitions that dilute the ownership of our shareholders; • the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our Class A common stock is low or volatile which could preclude us from completing any such acquisitions; 32 Table of Contents • the assumption of certain collaboration, strategic alliance and licensing arrangement may require us to relinquish valuable rights to our technologies or products, or grant licenses on terms that are not favorable to us; • disruption of our ongoing operations, diversion of management’s attention and company resources from existing operations of the business, and the dedication of significant efforts and expense across all operational areas, including sales and marketing, research and development, manufacturing, finance, legal and information technologies; • the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; • the need to later divest acquired assets at a loss if an acquisition does not meet our expectations; • risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property; and • difficulties relating to operating with increased leverage and incurring additional interest expense as a result of financing acquisitions with additional indebtedness, which could make us more vulnerable to downturns.
Among other things: • these provisions allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without shareholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of shareholders; • these provisions provide for a classified board of directors with staggered three-year terms; • these provisions provide that, at any time when GTCR controls, in the aggregate, less than 40% of the outstanding shares of our Class A common stock, directors may only be removed for cause, and only by the affirmative vote of holders of at least 66 2⁄3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; • these provisions prohibit shareholder action by written consent from and after the date on which GTCR controls, in the aggregate, less than 35% in voting power of our stock entitled to vote generally in the election of directors; • these provisions provide that for as long as GTCR controls, in the aggregate, at least 50% in voting power of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of a majority in voting power of the outstanding shares of our capital stock and at any time when GTCR controls, in the aggregate, less than 50% in voting power of all outstanding shares of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of the holders of at least 66 2⁄3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; and • these provisions establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings; provided, however, at any time when GTCR controls, in the aggregate, at least 10% in voting power of our stock entitled to vote generally in the election of directors, such advance notice procedure will not apply to GTCR.
Among other things: • these provisions allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without shareholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of shareholders; • these provisions provide for a classified board of directors with staggered three-year terms; • these provisions provide that, at any time when GTCR controls, in the aggregate, less than 40% of the outstanding shares of our Class A common stock, directors may only be removed for cause, and only by the affirmative vote of 57 Table of Contents holders of at least 66 2⁄3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; • these provisions prohibit shareholder action by written consent from and after the date on which GTCR controls, in the aggregate, less than 35% in voting power of our stock entitled to vote generally in the election of directors; • these provisions provide that for as long as GTCR controls, in the aggregate, at least 50% in voting power of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of a majority in voting power of the outstanding shares of our capital stock and at any time when GTCR controls, in the aggregate, less than 50% in voting power of all outstanding shares of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of the holders of at least 66 2⁄3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; and • these provisions establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings; provided, however, at any time when GTCR controls, in the aggregate, at least 10% in voting power of our stock entitled to vote generally in the election of directors, such advance notice procedure will not apply to GTCR.
We have entered into a Tax Receivable Agreement with MLSH 1 and MLSH 2, which will provide for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) certain tax attributes of certain of the entities (the “Blocker Entities”) through which GTCR and other existing members of MLSH 1 and MLSH 2 held their ownership interests in MLSH 1, Topco LLC and subsidiaries of Topco LLC that existed prior to our initial public offering and (iii) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments that we make under the Tax Receivable Agreement.
We have entered into a Tax Receivable Agreement with MLSH 1 and MLSH 2, which will provide for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) certain tax attributes of certain of the entities through which GTCR and other existing members of MLSH 1 and MLSH 2 held their ownership interests in MLSH 1, Topco LLC and subsidiaries of Topco LLC that existed prior to our initial public offering and (iii) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments that we make under the Tax Receivable Agreement.
For example: • others may be able to develop products that are similar to, or better than, our current or future products in a way that is not covered by the claims of the patents we license or may own currently or in the future; • we, or our licensing partners or current or future collaborators, might not have been the first to make the inventions covered by issued patents or pending patent applications that we license or may own currently or in the future; • we, or our licensing partners or current or future collaborators, might not have been the first to file patent applications for certain of our or their inventions; • our pending owned or in-licensed patent applications may not lead to issued patents; • we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents; • the patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business; • any patents that we obtain may not provide us with any competitive advantages or may ultimately be found not to be owned by us, invalid or unenforceable; or • we may not develop additional proprietary technologies that are patentable.
For example: • others may be able to develop products that are similar to, or better than, our current or future products in a way that is not covered by the claims of the patents we license or may own currently or in the future; • we, or our licensing partners or current or future collaborators, might not have been the first to make the inventions covered by issued patents or pending patent applications that we license or may own currently or in the future; • we, or our licensing partners or current or future collaborators, might not have been the first to file patent applications for certain of our or their inventions; • our pending owned or in-licensed patent applications may not lead to issued patents; • we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents; 49 Table of Contents • the patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business; • any patents that we obtain may not provide us with any competitive advantages or may ultimately be found not to be owned by us, invalid or unenforceable; or • we may not develop additional proprietary technologies that are patentable.
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business, financial condition, results of operations, cash flows and prospects may be adversely affected.
If our trademarks, trade dress, and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business, financial condition, results of operations, cash flows and prospects may be adversely affected.
This subjects us to a number of risks, including international economic, political, and labor conditions; currency fluctuations; tax laws (including U.S. taxes on income earned by foreign subsidiaries); increased financial accounting and reporting burdens and complexities; unexpected changes in, or impositions of, legislative or regulatory requirements; failure of laws to protect intellectual property rights adequately; inadequate local infrastructure and difficulties in managing and staffing international operations; delays resulting from difficulty in obtaining export licenses for certain technology; tariffs, quotas and other trade barriers and restrictions; transportation delays; operating in locations with a higher incidence of corruption and fraudulent business practices; and other factors beyond our control, including terrorism, war, natural disasters, climate change and diseases.
This subjects us to a number of risks, including international economic, political, and labor conditions; currency fluctuations; tax laws (including U.S. taxes on income earned by foreign subsidiaries); increased financial accounting and reporting burdens and complexities; unexpected changes in, or impositions of, legislative or regulatory requirements; failure of laws to protect intellectual property rights adequately; inadequate local infrastructure and difficulties in managing and staffing international operations; delays resulting from difficulty in obtaining export licenses for 38 Table of Contents certain technology; tariffs, quotas and other trade barriers and restrictions; transportation delays; operating in locations with a higher incidence of corruption and fraudulent business practices; and other factors beyond our control, including terrorism, war, natural disasters, climate change and diseases.
Our indebtedness, the cash flow needed to satisfy our debt and the covenants contained in the Credit Agreement have important consequences, including: • limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt; • limiting our ability to incur or prepay existing indebtedness, pay dividends or distributions, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments and make changes in the nature of the business, among other things; 49 Table of Contents • making us more vulnerable to rising interest rates, as certain of our borrowings, including borrowings under the Credit Agreement, bear variable rates of interest; and • making us more vulnerable in the event of a downturn in our business.
Our indebtedness, the cash flow needed to satisfy our debt and the covenants contained in the Credit Agreement have important consequences, including: • limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt; • limiting our ability to incur or prepay existing indebtedness, pay dividends or distributions, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments and make changes in the nature of the business, among other things; • making us more vulnerable to rising interest rates, as certain of our borrowings, including borrowings under the Credit Agreement, bear variable rates of interest; and • making us more vulnerable in the event of a downturn in our business.
While we currently have no basis to expect any such challenge would be successful, if a court were to find our forum selection provisions to be inapplicable or unenforceable with respect to one or more of these specified types of actions or proceedings, we may incur additional costs associated with having to litigate in other jurisdictions, which could have an adverse effect on our business, financial condition, results of operations, cash flows and prospects and result in a diversion of the time and resources of our employees, management and board of directors.
While we currently have no basis to expect any such challenge would be successful, if a court were to find our forum selection provisions to be 58 Table of Contents inapplicable or unenforceable with respect to one or more of these specified types of actions or proceedings, we may incur additional costs associated with having to litigate in other jurisdictions, which could have an adverse effect on our business, financial condition, results of operations, cash flows and prospects and result in a diversion of the time and resources of our employees, management and board of directors.
The financing documents governing our Credit Agreement contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including restrictions on our ability to: • incur additional indebtedness; • incur liens; • merge, dissolve, liquidate, amalgamate, consolidate or sell all or substantially all of our assets; • declare or pay certain dividends, payments or distribution or repurchase or redeem certain capital stock; 50 Table of Contents • permit our subsidiaries to enter into agreements restricting their ability to pay dividends, make loans, incur liens and sell assets; and • make certain investments.
The financing documents governing our Credit Agreement contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including restrictions on our ability to: • incur additional indebtedness; • incur liens; • merge, dissolve, liquidate, amalgamate, consolidate or sell all or substantially all of our assets; • declare or pay certain dividends, payments or distribution or repurchase or redeem certain capital stock; • permit our subsidiaries to enter into agreements restricting their ability to pay dividends, make loans, incur liens and sell assets; and • make certain investments.
Any such failure could, among other things, lead to increased costs, delayed or lost revenue, delayed market acceptance, damaged reputation, diversion of development resources, legal claims, reimbursement to customers for lost drug product, starting materials and active pharmaceutical ingredients, other customer claims, damage to and possibly termination of existing customer relationships, increased insurance costs, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products, any of which could harm our business, financial condition, results of operations, cash flows and prospects.
Any such failure could, among other things, lead to increased costs, delayed or lost revenue, delayed market acceptance, damaged reputation, diversion of development resources, 27 Table of Contents legal claims, reimbursement to customers for lost drug product, starting materials and active pharmaceutical ingredients, other customer claims, damage to and possibly termination of existing customer relationships, increased insurance costs, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products, any of which could harm our business, financial condition, results of operations, cash flows and prospects.
For example, if the IRS later asserts that we did not obtain a tax basis increase or disallows (in whole or in part) the availability of Net Operating Losses (“NOLs”) due to a potential ownership change under Section 382 of the Internal Revenue Code (“IRC” or “the Code”), among other potential challenges, then we would not be reimbursed for any cash payments previously made to MLSH 1 and MLSH 2 pursuant to the Tax Receivable Agreement with respect to such tax 52 Table of Contents benefits that we had initially claimed.
For example, if the IRS later asserts that we did not obtain a tax basis increase or disallows (in whole or in part) the availability of Net Operating Losses (“NOLs”) due to a potential ownership change under Section 382 of the Internal Revenue Code (“IRC” or “the Code”), among other potential challenges, then we would not be reimbursed for any cash payments previously made to MLSH 1 and MLSH 2 pursuant to the Tax Receivable Agreement with respect to such tax benefits that we had initially claimed.
Therefore, we have less than 40% of the value of our 54 Table of Contents total assets (exclusive of U.S. government securities and cash items) in “investment securities.” However, if we were to lose the right to manage and control Topco LLC, interests in Topco LLC could be deemed to be “investment securities” under the 1940 Act.
Therefore, we have less than 40% of the value of our total assets (exclusive of U.S. government securities and cash items) in “investment securities.” However, if we were to lose the 55 Table of Contents right to manage and control Topco LLC, interests in Topco LLC could be deemed to be “investment securities” under the 1940 Act.
Disputes may arise regarding intellectual property subject to license agreements, including: • the scope of rights granted under the license agreement and other interpretation related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement; • the sublicensing of patent and other rights under our collaborative development relationships; 45 Table of Contents • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • our financial obligations under the license agreement; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and • the priority of invention of patented technology.
Disputes may arise regarding intellectual property subject to license agreements, including: • the scope of rights granted under the license agreement and other interpretation related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement; • the sublicensing of patent and other rights under our collaborative development relationships; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • our financial obligations under the license agreement; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and • the priority of invention of patented technology.
If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our Class A common stock to decline, and we may be subject to investigation or sanctions by the SEC.
If we are unable to assert that our internal control over financial reporting is effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our Class A common stock to decline, and we may be subject to investigation or sanctions by the SEC.
Our success depends largely upon the continued service of our management and scientific staff and our ability to attract, retain and motivate highly skilled technical, scientific, management and marketing personnel, who deliver high-quality and timely services to our customers and keep pace with cutting-edge technologies and developments in biologics.
In addition, our future success depends largely upon the continued service of our management and scientific staff and our ability to attract, retain and motivate highly skilled technical, scientific, management and marketing personnel, who deliver high-quality and timely services to our customers and keep pace with cutting-edge technologies and developments in biologics.
Further, if a patent infringement suit is brought against us or 44 Table of Contents our third-party service providers and if we are unable to successfully obtain rights to required third-party intellectual property, we may be required to expend significant time and resources to redesign our current or future products, or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis, and may delay or require us to abandon our development, manufacturing or sales activities relating to our current or future products.
Further, if a patent infringement suit is brought against us or our third-party service providers and if we are unable to successfully obtain rights to required third-party intellectual property, we may be required to expend significant time and resources to redesign our current or future products, or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis, and may delay or require us to abandon our development, manufacturing or sales activities relating to our current or future products.
These conflicts may result in decisions that are not in the best interests of shareholders. The Tax Receivable Agreement requires us to make cash payments to MLSH 1 and MLSH 2 in respect of certain tax benefits to which we may become entitled, and we expect that the payments we will be required to make will be substantial.
These conflicts may result in decisions that are not in the best interests of shareholders. The Tax Receivable Agreement requires us to make cash payments to MLSH 1 and MLSH 2 in respect of certain tax benefits to which we may become entitled, and we expect that the payments we may be required to make could be substantial.
Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks.
Our trademarks, trade dress, or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks.
Further deterioration or a protracted extension of these negative macroeconomic conditions, a potential economic downturn or recession, or a significant reduction or delay in governmental funding as a result of U.S. federal budget issues, or the perception that any of these events may occur, could cause a decline in demand for our products and services and adversely affect our performance and result in declines in our revenue and earnings.
Further deterioration or a protracted extension of these negative macroeconomic conditions, a potential economic downturn or recession, or a significant reduction or delay in governmental funding as a result of U.S. federal budget 25 Table of Contents issues, or the perception that any of these events may occur, could cause a decline in demand for our products and services and adversely affect our performance and result in declines in our revenue and earnings.
Such a loss of patent protection could have a material adverse impact on our business, financial condition, results of operations, cash flows and prospects. Interference proceedings, or other similar enforcement and revocation proceedings, provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications.
Such a loss of patent protection could have a material adverse impact on our business, financial condition, results of operations, cash flows and prospects. 43 Table of Contents Interference proceedings, or other similar enforcement and revocation proceedings, provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications.
Pursuant to the Tax Receivable Agreement we are required to make cash payments to MLSH 1 and MLSH 2, collectively, equal to 85% of the tax benefits, if any, that we actually realize, or, in some circumstances, are deemed to realize, as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) certain tax attributes related to the LLC Units held by the corporations that merged into our corporate structure as part of the Organizational Transactions (as discussed in Note 10 to our consolidated financial statements), Topco LLC and subsidiaries of Topco LLC that existed prior to our initial public offering and (iii) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments that we make under the Tax Receivable Agreement.
Pursuant to the Tax Receivable Agreement we are required to make cash payments to MLSH 1 and MLSH 2, collectively, equal to 85% of the tax benefits, if any, that we actually realize, or, in some circumstances, are deemed to realize, as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) certain tax attributes related to the LLC Units held by the corporations that merged into our corporate structure as part of the Organizational Transactions (as discussed in Note 11 to our consolidated financial statements), Topco LLC and subsidiaries of Topco LLC that existed prior to our initial public offering and (iii) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments that we make under the Tax 52 Table of Contents Receivable Agreement.
In January 2022, we acquired MyChem LLC, a provider of proprietary, ultra-pure 31 Table of Contents nucleotides to customers in the diagnostics, pharma, genomics and research markets to complement our nucleic acid business and in January 2023, we completed the acquisition of Alphazyme, LLC, an original equipment manufacturer provider of custom molecular biology enzymes, servicing customers in the genetic analysis and nucleic acid synthesis markets to complement our nucleic acid production business.
In January 2022, we acquired MyChem LLC, a provider of proprietary, ultra-pure nucleotides to customers in the diagnostics, pharma, genomics and research markets to complement our nucleic acid business and in January 2023, we completed the acquisition of Alphazyme, LLC, an original equipment manufacturer provider of custom molecular biology enzymes, servicing customers in the genetic analysis and nucleic acid synthesis markets to complement our nucleic acid production business.
In the event that the FDA requires us to obtain marketing authorization of our RUO products in the future, there can be no assurance that the FDA will grant any clearance or approval requested by us in a timely manner, or at all. Our raw material products are manufactured following the voluntary quality standards of ISO 9001:2015.
In the event that the FDA requires us to obtain marketing authorization of our RUO products in the future, there can be no assurance that the FDA will grant any clearance or approval requested by us in a timely manner, or at all. 36 Table of Contents Our raw material products are manufactured following the voluntary quality standards of ISO 9001:2015.
In the United States, the unextended expiration of a patent is 20 years after its non-provisional filing date. Various extensions may be available, however, the life of a patent and the protection it affords is limited.
In the United States, the unextended expiration of a patent is generally 20 years after its non-provisional application filing date. Various extensions may be available, however, the life of a patent and the protection it affords is limited.
Furthermore, if one or more of these third-party package-delivery providers were to experience performance problems 35 Table of Contents or other difficulties, it could negatively impact our operating results and our customers’ experience. In the past, some of our products have sustained serious damage in transit such that they were no longer usable.
Furthermore, if one or more of these third-party package-delivery providers were to experience performance problems or other difficulties, it could negatively impact our operating results and our customers’ experience. In the past, some of our products have sustained serious damage in transit such that they were no longer usable.
Our competitors and other third parties may also be able to 40 Table of Contents circumvent our patents by developing similar or alternative products in a non-infringing manner. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
Our competitors and other third parties may also be able to circumvent our patents by developing similar or alternative products in a non-infringing manner. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
Due to the uncertainty of various factors, we cannot estimate the likely tax benefits 53 Table of Contents we will realize as a result of purchases of LLC Units and LLC Unit exchanges, and the resulting amounts we are likely to pay out to MLSH 1 and MLSH 2 pursuant to the Tax Receivable Agreement; however, we estimate that such payments may be substantial.
Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of purchases of LLC Units and LLC Unit exchanges, and the resulting amounts we are likely to pay out to MLSH 1 and MLSH 2 pursuant to the Tax Receivable Agreement; however, we estimate that such payments may be substantial.
We engage in conversations with other companies and institutions regarding potential commercial opportunities on an ongoing basis, which can be time consuming. There is no assurance that any of these conversations will result in a commercial agreement, or if an agreement is reached, that the resulting relationship will be successful.
We engage in conversations with other companies and institutions regarding 34 Table of Contents potential commercial opportunities on an ongoing basis, which can be time consuming. There is no assurance that any of these conversations will result in a commercial agreement, or if an agreement is reached, that the resulting relationship will be successful.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
If we were deemed to be an investment company under the 1940 Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
Our application of the revenue recognition accounting 33 Table of Contents guidance with respect to the nature of future contractual arrangements could impact the forecasting of our revenue for future periods, as both the mix of products and services we will sell in a given period, as well as the size of contracts, is difficult to predict.
Our application of the revenue recognition accounting guidance with respect to the nature of future contractual arrangements could impact the forecasting of our revenue for future periods, as both the mix of products and services we will sell in a given period, as well as the size of contracts, is difficult to predict.
In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices.
In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, 42 Table of Contents including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices.
Because patent applications in the United States, Europe and many other non-U.S. jurisdictions are typically not published until 18 months after filing, or in some cases not at all, because publications of discoveries in scientific literature lag behind actual discoveries, and because we cannot be certain that we or our licensors were the first to make the inventions claimed in any of our owned or any in-licensed issued patents or pending patent applications, or that we or our licensors were the first to file for protection of the inventions set forth in our patents or patent applications.
This may be (1) because patent applications in the United States, Europe and many other non-U.S. jurisdictions are typically not published until 18 months after filing, or in some cases not at all, (2) because publications of discoveries in scientific literature lag behind actual discoveries, and (3) because we cannot be certain that we or our licensors were the first to make the inventions claimed in any of our owned or any in-licensed issued patents or pending patent applications, or that we or our licensors were the first to file for protection of the inventions set forth in our patents or patent applications.
Our commercial success depends in part on obtaining and maintaining patent and trade secret protection of our current and future products, if any, and the methods used to manufacture them, as well as successfully defending such patents and trade secrets against third-party challenges.
Our commercial success depends in part on obtaining and maintaining patent and trade secret protection for our current and future products, if any, and the methods used to manufacture them, as well as successfully defending and protecting such patents and trade secrets against third-party challenges.
Any exercise by the government of any of the foregoing rights or by any third party of its reserved rights could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects. Furthermore, patents have a limited lifespan.
Any exercise by the government of any of the foregoing rights or by any third party of its reserved rights could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects. 41 Table of Contents Furthermore, patents have a limited lifespan.
Filing, prosecuting, and defending patents on current or future products in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the 47 Table of Contents United States.
Filing, prosecuting, and defending patents on current or future products in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.
The market for pharmaceutical, reagent, therapeutic and diagnostic products and services is intensely competitive, rapidly evolving, significantly affected by new product introductions and other market activities by industry participants and subject to rapid technological change. We also expect increased competition as additional companies enter our market and as more advanced technologies become available.
The market for pharmaceutical, reagent, therapeutic and diagnostic products and services is intensely competitive, rapidly evolving, significantly affected by new product introductions and other market activities by industry participants and subject to rapid technological change. We also expect increased competition as additional companies enter our market and as more 26 Table of Contents advanced technologies become available.
The GDPR came into effect in May 2018,and has resulted in, and will continue to result in, significantly greater compliance burdens and costs for companies like us. Any data security breach could require notifications to the data subject and/or owners under U.S. federal, U.S. state, and/or international data breach notification laws and regulations.
The GDPR came into effect in May 2018,and has resulted in, and will continue to result in, significantly greater compliance burdens and costs for companies like us. Any data security breach could require notifications to the data subject and/or owners under U.S. federal, U.S. state, and/or international data 37 Table of Contents breach notification laws and regulations.
Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of NASDAQ. 56 Table of Contents Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.
Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of NASDAQ. Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.
If we are unable 27 Table of Contents to manufacture and ship our products consistently, in sufficient quantities and on a timely basis, our revenue, cash flow, gross margins and our other results of operations will be materially and adversely affected.
If we are unable to manufacture and ship our products consistently, in sufficient quantities and on a timely basis, our revenue, cash flow, gross margins and our other results of operations will be materially and adversely affected.
Our biologics safety testing customers are biopharmaceutical companies, contract research organizations (“CROs”), contract development and manufacturing organizations (“CDMOs”) and life science companies, which largely serve the biopharmaceutical industry. Our nucleic acid production customers are largely vaccine and therapeutic drug makers or diagnostics manufacturers, which rely in 23 Table of Contents part on government healthcare-related policies and funding.
Our biologics safety testing customers are biopharmaceutical companies, contract research organizations (“CROs”), contract development and manufacturing organizations (“CDMOs”) and life science companies, which largely serve the biopharmaceutical industry. Our nucleic acid production customers are largely vaccine and therapeutic drug makers or diagnostics manufacturers, which rely in part on government healthcare-related policies and funding.
These adversarial proceedings at the USPTO review patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts, and use a lower burden of proof 46 Table of Contents than used in litigation in U.S. federal courts.
These adversarial proceedings at the USPTO review patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts, and use a lower burden of proof than used in litigation in U.S. federal courts.
Any such non-compliance, even if prohibited by our internal policies, could have an adverse effect on our business and result in significant fines or penalties. 38 Table of Contents Our activities are and will continue to be subject to extensive government regulation, which is expensive and time consuming.
Any such non-compliance, even if prohibited by our internal policies, could have an adverse effect on our business and result in significant fines or penalties. Our activities are and will continue to be subject to extensive government regulation, which is expensive and time consuming.
We engage in business globally, with approximately 62%, 60% and 47% of our revenue for the years ended December 31, 2022, 2021 and 2020, respectively, coming from outside the U.S. In addition, one of our strategies is to expand geographically, both through distribution and through direct sales.
We engage in business globally, with approximately 51%, 62% and 60% of our revenue for the years ended December 31, 2023, 2022 and 2021, respectively, coming from outside the U.S. In addition, one of our strategies is to expand geographically, both through distribution and through direct sales.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • expiration of, or detrimental changes in, research and development tax credit laws; or • changes in tax laws, regulations or interpretations thereof.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the amount and realizability of our deferred tax assets and liabilities; • changes in any tax valuation allowances; • expiration of, or detrimental changes in, research and development tax credit laws; or • changes in tax laws, regulations or interpretations thereof.
Although we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock.
Although 54 Table of Contents we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock.
Pursuant to our certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any claims in state court for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws or (4) any other action asserting a claim against us that is 57 Table of Contents governed by the internal affairs doctrine; provided that for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action,” will not apply to suits to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Pursuant to our certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any claims in state court for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine; provided that for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action,” will not apply to suits to enforce a duty or liability created by the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any other claim for which the federal courts have exclusive jurisdiction.
Although our products are tested prior to shipment, defects or errors could nonetheless occur. Our operating results depend on our ability to execute and, when necessary, improve our quality management strategy and systems and our ability to effectively 25 Table of Contents train and maintain our employee base with respect to quality management.
Although our products are tested prior to shipment, defects or errors could nonetheless occur. Our operating results depend on our ability to execute and, when necessary, improve our quality management strategy and systems and our ability to effectively train and maintain our employee base with respect to quality management.
In particular, these constituencies are increasingly focusing on environmental stewardship, including climate change, water use, deforestation, waste, and other sustainability concerns, as well as diversity and inclusion, workplace conduct, support for local communities, and other human capital and social issues.
In particular, these constituencies are increasingly focusing on environmental stewardship, including climate change, water use, deforestation, 39 Table of Contents waste, and other sustainability concerns, as well as diversity and inclusion, workplace conduct, support for local communities, and other human capital and social issues.
Risks Related to Our Business and Strategy The extent and duration of our revenue associated with COVID-19 related products and services are uncertain and are dependent, in important respects, on factors outside our control. Certain of our products, including our proprietary CleanCap® analogs, are used by our customers in the production of COVID-19 vaccines.
The extent and duration of our revenue associated with COVID-19 related products and services are uncertain and are dependent, in important respects, on factors outside our control. Certain of our products, including our proprietary CleanCap® analogs, are used by our customers in the production of COVID-19 vaccines.
Complying with export control and sanctions 37 Table of Contents regulations may be time consuming and may result in the delay or loss of sales opportunities or impose other costs.
Complying with export control and sanctions regulations may be time consuming and may result in the delay or loss of sales opportunities or impose other costs.
GTCR controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of NASDAQ.
Currently, GTCR controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance requirements of NASDAQ.
Our ability to make scheduled debt service payments or to refinance outstanding debt obligations depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and certain financial, business, economic and other factors beyond our control, including those discussed under “Risk Related to Our Business and Strategy” above.
Our ability to make scheduled debt service payments or to refinance outstanding debt obligations depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and certain financial, business, economic and other factors beyond our control, including those discussed under “ Risks Related to Our Business and Strategy ” above.
As of December 31, 2022, investment entities affiliated with GTCR collectively controlled approximately 57% of the voting power of our outstanding common stock and therefore GTCR controls the vote of all matters submitted to a vote of our shareholders. This control enables GTCR to control the election of the members of the Board and all other corporate decisions.
As of December 31, 2023, investment entities affiliated with GTCR collectively controlled approximately 56% of the voting power of our outstanding common stock and therefore GTCR controls the outcome of all matters submitted to a vote of our shareholders. This control enables GTCR to control the election of the members of the Board and all other corporate decisions.
In recent years, recruiting, hiring and retaining employees with expertise in our industry and in the geographies where we operate has become increasingly difficult as the demand for skilled professionals has increased and as a result of labor shortages believed to have resulted from actions taken during the onset of the COVID-19 pandemic, but which are expected to continue beyond the near-term.
In recent years, recruiting, hiring and retaining employees with expertise in our industry and in the geographies where we operate has become increasingly difficult as the demand for skilled professionals has increased and as a result of labor shortages believed to have resulted from actions taken during the onset of the COVID-19 pandemic, but which remained following the recovery and which we expect will continue beyond the near-term.
Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Third parties have, and may in the future have, U.S. and non-U.S. issued patents and pending patent applications that may cover our current or future products.
Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence in trial court litigation to overcome the presumption of validity enjoyed by issued patents. Third parties have, and may 44 Table of Contents in the future have, U.S. and non-U.S. issued patents and pending patent applications that may cover our current or future products.
Although we 42 Table of Contents use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, collaborators, CDMOs, CROs and others may unintentionally or willfully disclose our information to competitors.
Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, collaborators, CDMOs, CROs and others may unintentionally or willfully disclose our information to competitors.
Even if we do, there can be no assurance that any of the acquisitions we have made, or that we may make, will be successful or will be, or will remain, profitable.
There can be no assurance we will identify promising acquisition opportunities. Even if we do, there can be no assurance that any of the acquisitions we have made, or that we may make, will be successful or will be, or will remain, profitable.
The degree of future protection afforded by our proprietary and intellectual property rights is uncertain because such rights offer only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
Intellectual property rights do not necessarily address all potential threats. The degree of future protection afforded by our proprietary and intellectual property rights is uncertain because such rights offer only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our Class A common stock at a premium to the market price, and materially adversely affect the market price and the voting and other rights of the holders of our Class A common stock. 58 Table of Contents Item 1B.
The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our Class A common stock at a premium to the market price, and materially adversely affect the market price and the voting and other rights of the holders of our Class A common stock. Item 1B. Unresolved Staff Comments None.
For the years ended December 31, 2022, 2021 and 2020, we estimate that revenue from COVID-19 related products and services represented approximately 67.9%, 69.7% and 35.4%, respectively, of our total revenues.
For the years ended December 31, 2023, 2022 and 2021, we estimate that revenue from COVID-19 related products and services represented approximately 21.0%, 67.9% and 69.7%, respectively, of our total revenues.
Proposed actions to waive intellectual property protections for COVID-19 vaccines and associated technology, such as those under discussion at the World Trade Organization, which are supported by the U.S. government, may impact our ability to fully assert our intellectual property rights related to our CleanCap product in 41 Table of Contents connection with the production of COVID-19 vaccines.
Proposed actions to waive intellectual property protections for COVID-19 vaccines and associated technology, such as those under discussion at the World Trade Organization, which are supported by the U.S. government, may impact our ability to fully assert our intellectual property rights related to our Clea nCap® pro duct in connection with the production of COVID-19 vaccines.
The life sciences industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform.
The life sciences industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use.
We may be required in the future to record additional charges to earnings if our goodwill, amortizable intangible assets or other investments become impaired. Any such charge would adversely impact our consolidated financial results. Changes in accounting principles and guidance could result in unfavorable accounting charges or effects. We prepare our consolidated financial statements in accordance with GAAP.
We may be required in the future to record additional charges to earnings if our goodwill, amortizable intangible assets or other investments become impaired. Any such charge would adversely impact our consolidated financial results. 33 Table of Contents Changes in accounting principles and guidance could result in unfavorable accounting charges or effects.
Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.
As a result,our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our revenues and future operating results.
As of December 31, 2022, we had total current and long-term indebtedness outstanding of approximately $527.4 million, including term loans of $538.6 million, and unamortized debt issuance costs of $11.1 million. We may incur significant additional indebtedness in the future. If we increase our current indebtedness levels, the risks related to our indebtedness as set forth herein could intensify.
As of December 31, 2023, we had total current and long-term indebtedness outstanding of approximately $524.1 million, including term loans of $533.1 million, and unamortized debt issuance costs of $9.0 million. We may incur significant additional indebtedness in the future. If we increase our current indebtedness levels, the risks related to our indebtedness as set forth herein could intensify.
As discussed above, during the COVID-19 pandemic we benefited from a significant increase in demand for our products and service, including our proprietary CleanCap® analogs that are used by our customers in the production of COVID-19 vaccines, and more generally, as a result of the continued growth of the global biologics market, increasing research and development budgets of our customers and a greater degree of outsourcing by our customers.
For example, during the COVID-19 pandemic we benefited from a significant increase in demand for our products and service, including our proprietary CleanCap® analogs that are used by our customers in the production of COVID-19 vaccines, and also benefited during 2021 and 2022, more generally, from the overall growth of the global biologics market, higher research and development budgets of our customers and a greater degree of outsourcing by our customers.
We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be operating effectively, which may adversely affect investor confidence in us and, as a result, the value of our Class A common stock.
We may not complete our analysis of our internal control over financial reporting in a timely manner, or to the extent these internal controls are determined by us or our auditors to not be operating effectively, investor confidence in us and the value of our Class A common stock could be adversely affected.
Any significant disruption of those operations for any reason, such as labor disputes or social unrest, power interruptions, fire, hurricanes, a pandemic (including the ongoing COVID-19 pandemic), earthquakes or other events beyond our control, could adversely affect our sales and customer relationships and therefore adversely affect our business and results of operations.
Any significant disruption of those operations for any reason, such as 29 Table of Contents labor disputes or social unrest, power interruptions, fire, hurricanes, a public health crisis (such as a pandemic), earthquakes or other events beyond our control, could adversely affect our sales and customer relationships and therefore adversely affect our business and results of operations.
It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding Tax Receivable Agreement payments.
The foregoing numbers are merely estimates—the actual payments could differ materially. It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding Tax Receivable Agreement payments.
Payments under the Tax Receivable Agreement will generally be made within five (5) business days after this schedule becomes final pursuant to the procedures set forth in the Tax Receivable Agreement, although interest on such payments will begin to accrue at a rate of Intercontinental Exchange London Interbank Offer Rate (“LIBOR”) for a period of one month (or, if LIBOR ceases to be published, at a rate selected by us in good faith, with characteristics similar to LIBOR or consistent with market practices generally, any such rate, a “Replacement Rate”) plus 100 basis points from the due date (without extensions) of such tax return.
Interest on such payments will begin to accrue at a rate of Intercontinental Exchange London Interbank Offer Rate (“LIBOR”) for a period of one month (or, if LIBOR ceases to be published, at a rate selected by us in good faith, with characteristics similar to LIBOR or consistent with market practices generally, any such rate, a “Replacement Rate”) plus 100 basis points from the due date (without extensions) of such tax return.
The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of Class A common stock as part of a sale of us and ultimately might affect the market price of our Class A common stock. 55 Table of Contents We entered into a Director Nomination Agreement with GTCR that provides GTCR the right to nominate to the Board a number of designees equal to at least: (i) 100% of the total number of directors comprising the Board, so long as GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 40% of the total amount of shares of Class A common stock and Class B common stock it beneficially owned as of November 19, 2020, (ii) 40% of the total number of directors, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 30% but less than 40% of the total amount of shares of Class A common stock and Class B common stock it owned as of November 19, 2020, (iii) 30% of the total number of directors, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 20% but less than 30% of the total amount of shares of Class A common stock and Class B common stock it owned as of November 19, 2020, (iv) 20% of the total number of directors, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 10% but less than 20% of the total amount of shares of Class A common stock and Class B common stock it owns as of November 19, 2020 and (v) one director, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 5% of the total amount of shares of Class A common stock and Class B common stock it owned as of November 19, 2020.
We entered into a Director Nomination Agreement with GTCR that provides GTCR the right to nominate to the Board a number of designees equal to at least: (i) 100% of the total number of directors comprising the Board, so long as GTCR 56 Table of Contents beneficially owns shares of Class A common stock and Class B common stock representing at least 40% of the total amount of shares of Class A common stock and Class B common stock it beneficially owned as of November 19, 2020, (ii) 40% of the total number of directors, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 30% but less than 40% of the total amount of shares of Class A common stock and Class B common stock it owned as of November 19, 2020, (iii) 30% of the total number of directors, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 20% but less than 30% of the total amount of shares of Class A common stock and Class B common stock it owned as of November 19, 2020, (iv) 20% of the total number of directors, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 10% but less than 20% of the total amount of shares of Class A common stock and Class B common stock it owns as of November 19, 2020 and (v) one director, in the event that GTCR beneficially owns shares of Class A common stock and Class B common stock representing at least 5% of the total amount of shares of Class A common stock and Class B common stock it owned as of November 19, 2020.
This could cause the market price of our Class A common stock to drop significantly, even if our business is doing well. Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time.
If our existing investors sell a significant portion of our total outstanding shares of Class A common stock, the market price of our Class A common stock could drop significantly, even if our business is doing well. Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time.
Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: • the requirement that a majority of our Board consist of independent directors; • the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; • the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements of NASDAQ, including: • the requirement that a majority of our Board is composed of “independent directors” as defined under NASDAQ rules; • the requirement that we have a nominations committee that is composed entirely of independent directors; and • the requirement that we have a compensation committee that is composed entirely of independent directors.
As a result, changes in government funding for certain research, decreases in or the imposition of limits on government spending more generally (including as a result of the U.S. federal debt ceiling), or reductions in overall healthcare spending could negatively impact us or our customers and, correspondingly, our sales to them. In particular, if the U.S.
As a result, changes in government funding for certain research, decreases in or the imposition of limits on government spending more generally (including as a result of the ongoing appropriations process for the US. federal government’s fiscal year 2024), or reductions in overall healthcare spending could negatively impact us or our customers and, correspondingly, our sales to them.
We are subject to the risk of disruption by earthquakes, hurricanes, floods and other natural disasters, fire, power shortages, geopolitical unrest, war, terrorist attacks and other hostile acts, public health issues, epidemics or pandemics, such as the COVID-19 pandemic, and other events beyond our control and the control of the third parties on which we depend.
We are subject to the risk of disruption by earthquakes, hurricanes, floods and other natural disasters, fire, power shortages, geopolitical unrest, war (including any escalation of the ongoing military conflicts in Ukraine or the Gaza Strip), terrorist attacks and other hostile acts, public health issues, epidemics or pandemics and other events beyond our control and the control of the third parties on which we depend.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur facility leases expire at varying dates through 2037, not including renewals that are at our option. All facilities are leased. A summary of our facilities is listed below. Location Approx. Square Footage Segment San Diego, CA 185,000 Nucleic Acid Production Sterling, VA 21,000 Nucleic Acid Production Leland, NC 46,000 Biologics Safety Testing Southport, NC 20,000 Biologics Safety Testing
Biggest changeOur facility leases expire at varying dates through 2038, not including renewals that are at our option. All facilities are leased. A summary of our facilities is listed below. Location Approx.
The facilities serve as the principal hub of operations for our nucleic acid production business and were purpose built to expand the capacity of this business segment while adding specialized capabilities in the form of clean rooms, air handling, waste and solvent handling, and GMP capabilities.
The facilities serve as the principal hub of operations for our nucleic acid production business and were purpose built to expand the capacity of this business segment while adding specialized capabilities in the form of clean rooms, air handling, waste and 60 Table of Contents solvent handling, and GMP capabilities.
Added
Square Footage Segment San Diego, CA 237,000 Nucleic Acid Production Sterling, VA 21,000 Nucleic Acid Production Leland, NC 46,000 Biologics Safety Testing Southport, NC 20,000 Biologics Safety Testing Jupiter, FL 17,000 Nucleic Acid Production

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures None. 59 Table of Contents Part II.
Biggest changeMine Safety Disclosures Not applicable. 61 Table of Contents Part II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 as amended, or Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Biggest changeThis graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
As of February 21, 2023, there was one holder of record of our Class B common stock. Dividend Policy We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness and, therefore, we do not anticipate paying any cash dividends in the foreseeable future.
As of February 21, 2024, there was one holder of record of our Class B common stock. Dividend Policy We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness and, therefore, we do not anticipate paying any cash dividends in the foreseeable future.
Stock Performance Graph The following graph shows the total stockholder’s return on an investment of $100 in cash at market close on November 20, 2020 (the first day of trading of our common stock), through December 31, 2022 for (i) our Class A common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index.
Stock Performance Graph The following graph shows the total stockholder’s return on an investment of $100 in cash at market close on November 20, 2020 (the first day of trading of our common stock), through December 31, 2023 for (i) our Class A common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index.
Holders of Common Stock As of February 21, 2023, there were two holders of record of our Class A common stock. This number does not include a greater number of beneficial holders of our Class A common stock whose shares are held by clearing houses, banks, brokers and other financial institutions which are aggregated into a single holder of record.
Holders of Common Stock As of February 21, 2024, there were two holders of record of our Class A common stock. This number does not include a greater number of beneficial holders of our Class A common stock whose shares are held by clearing houses, banks, brokers and other financial institutions which are aggregated into a single holder of record.
Additionally, 60 Table of Contents because we are a holding company, our ability to pay dividends on our Class A common stock may be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us.
Additionally, 62 Table of Contents because we are a holding company, our ability to pay dividends on our Class A common stock may be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us.
Equity Compensation Plan Information The following table sets forth information as of December 31, 2022 regarding shares of our Class A common stock that may be issued under the Company’s equity compensation plan, consisting of our 2020 Omnibus Incentive Plan (the “2020 Plan) and our 2020 Employee Stock Purchase Plan (the “ESPP”).
Equity Compensation Plan Information The following table sets forth information as of December 31, 2023 regarding shares of our Class A common stock that may be issued under the Company’s equity compensation plans, consisting of our 2020 Omnibus Incentive Plan (the “2020 Plan”) and our 2020 Employee Stock Purchase Plan (the “ESPP”).
(2) The weighted average exercise price includes restricted stock unit awards that can be exercised for no consideration. The weighted average exercise price excluding these restricted stock units is $26.45. Item 6. Reserved
(2) The weighted average exercise price includes restricted stock unit and performance stock unit awards that can be exercised for no consideration. The weighted average exercise price excluding these restricted stock units and performance stock units is $20.55. Item 6. Reserved
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (1) (2) 4,464,722 $ 17.14 52,446,489 Total 4,464,722 $ 17.14 52,446,489 ____________________ (1) Includes 10,740,041 shares that remain available for purchase under the 2020 Employee Stock Purchase Plan and 46,171,170 shares of common stock that remain available for grant under the 2020 Omnibus Incentive Plan.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (1) (2) 8,683,194 $ 9.76 57,526,943 Total 8,683,194 $ 9.76 57,526,943 ____________________ (1) Includes 10,482,025 shares that remain available for purchase under the 2020 Employee Stock Purchase Plan and 56,107,859 shares of common stock that remain available for grant under the 2020 Omnibus Incentive Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 2021 Revenue: Nucleic Acid Production $ 813,076 $ 712,520 Biologics Safety Testing 69,932 68,417 Protein Detection — 18,959 Total reportable segments’ revenue 883,008 799,896 Intersegment eliminations (7) (656) Total $ 883,001 $ 799,240 Segment adjusted EBITDA: Nucleic Acid Production $ 638,337 $ 565,254 Biologics Safety Testing 54,841 54,440 Protein Detection — 6,391 Total reportable segments’ adjusted EBITDA 693,178 626,085 Reconciliation of total reportable segments’ adjusted EBITDA to income before income taxes Amortization (24,269) (18,339) Depreciation (7,566) (6,413) Interest expense (20,414) (30,260) Interest income 2,338 — Corporate costs, net of eliminations (55,378) (43,265) Other adjustments: Acquisition contingent consideration 7,800 — Acquisition integration costs (13,362) (44) Equity-based compensation (18,670) (10,458) Gain on sale of business — 11,249 Merger and acquisition related expenses (2,416) (1,508) Financing costs (1,078) (2,383) Acquisition related tax adjustment (349) — Tax Receivable Agreement liability adjustment (4,102) 6,101 Chief Executive Officer transition costs (2,426) — Other (1,814) — Income before income taxes 551,472 530,765 Income tax expense (60,809) (61,515) Net income $ 490,663 $ 469,250 During the year ended December 31, 2022, intersegment revenue was immaterial between the Nucleic Acid Production and Biologics Safety Testing segments.
Biggest changeAs of December 31, 2023, all of our long-lived assets were located within the United States. 70 Table of Contents The following schedule includes revenue and adjusted EBITDA for each of our reportable operating segments (in thousands): Year Ended December 31, 2023 2022 Revenue: Nucleic Acid Production $ 224,769 $ 813,076 Biologics Safety Testing 64,179 69,932 Total reportable segments’ revenue 288,948 883,008 Intersegment eliminations (3) (7) Total $ 288,945 $ 883,001 Segment adjusted EBITDA: Nucleic Acid Production $ 82,658 $ 638,337 Biologics Safety Testing 46,908 54,841 Total reportable segments’ adjusted EBITDA 129,566 693,178 Reconciliation of total reportable segments’ adjusted EBITDA to income before income taxes Amortization (27,356) (24,269) Depreciation (12,898) (7,566) Interest expense (45,892) (20,414) Interest income 27,727 2,338 Corporate costs, net of eliminations (64,257) (55,378) Other adjustments: Acquisition contingent consideration 3,286 7,800 Acquisition integration costs (12,695) (13,362) Equity-based compensation (34,588) (18,670) Merger and acquisition related expenses (4,392) (2,416) Financing costs — (1,078) Acquisition related tax adjustment (1,293) (349) Tax Receivable Agreement liability adjustment 668,886 (4,102) Chief Executive Officer transition costs (28) (2,426) Restructuring costs (1) (6,567) — Other (1,763) (1,814) Income before income taxes 617,736 551,472 Income tax expense (756,111) (60,809) Net (loss) income $ (138,375) $ 490,663 ___________________ (1) Equity-based compensation benefit of $0.1 million related to forfeited equity awards in connection with the restructuring is included on the equity-based compensation line item.
Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) adjusted for interest, provision for income taxes, depreciation, amortization and equity-based compensation expenses. Adjusted EBITDA reflects further adjustments to eliminate the impact of certain items, including certain non-cash and other items, that we do not consider representative of our ongoing operating performance.
Adjusted EBITDA is a non-GAAP financial measure that we define as net (loss) income adjusted for interest, provision for income taxes, depreciation, amortization and equity-based compensation expenses. Adjusted EBITDA reflects further adjustments to eliminate the impact of certain items, including certain non-cash and other items, that we do not consider representative of our ongoing operating performance.
Although the actual timing and amount of any payments that may be made under the TRA will vary, we expect that the aggregate payments that we will be required to make to MLSH 1 and MLSH 2 will be substantial.
Although the actual timing and amount of any payments that may be made under the TRA will vary, we expect that the aggregate payments that we will be required to make to MLSH 1 and MLSH 2 may be substantial.
Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was $267.6 million, which was primarily comprised of $239.0 million for the net cash consideration paid for the acquisition of MyChem, net cash outflows of $17.1 million for property and equipment purchases, and $13.3 million of prepaid lease payments for Flanders II (as defined in Note 7 to our consolidated financial statements).
Net cash used in investing activities for the year ended December 31, 2022 was $267.6 million, which was primarily comprised of $239.0 million for the net cash consideration paid for the acquisition of MyChem, net cash outflows of $17.1 million for property and equipment purchases, and $13.3 million of prepaid lease payments for Flanders II (as defined in Note 7 to our consolidated financial statements).
Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $187.5 million, which was primarily attributable to $150.2 million of distributions for tax liabilities to non-controlling interest holders, required pursuant to the terms of the LLC Operating Agreement, $34.2 million of payments to MLSH 1 and MLSH 2 pursuant to the TRA, and $13.9 million of principal repayments of long-term debt.
Net cash used in financing activities for the year ended December 31, 2022 was $187.5 million, which was primarily attributable to $150.2 million of distributions for tax liabilities to non-controlling interest holders, required pursuant to the terms of the LLC Operating Agreement, $34.2 million of payments to MLSH 1 and MLSH 2 pursuant to the TRA, and $13.9 million of principal repayments of long-term debt.
Any payments made by us under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us or to Topco LLC and, to the extent that we are unable to make payments under the TRA for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us.
Any payments made by us under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us or to Topco LLC and, to the extent that we are unable to make payments under the TRA for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us.
We anticipate funding ordinary course payments under the TRA from cash flow from operations of Topco LLC and its subsidiaries, available cash and/or available borrowings under the Credit Agreement.
We anticipate funding ordinary course payments under the TRA from cash flow from operations of Topco LLC and its subsidiaries, available cash and/or available borrowings under the Credit Agreement.
We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, certain non-cash items and other adjustments that we do not consider in our evaluation of ongoing operating performance from period to period. Corporate costs, net of eliminations, are managed on a standalone basis and are not allocated to segments.
We define Adjusted EBITDA as net (loss) income before interest, taxes, depreciation and amortization, certain non-cash items and other adjustments that we do not consider in our evaluation of ongoing operating performance from period to period. Corporate costs, net of eliminations, are managed on a standalone basis and are not allocated to segments.
The TRA provides for the payment by us to MLSH 1 and MLSH 2, 72 Table of Contents collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, from exchanges of LLC Units (together with the corresponding shares of Class B common stock) for Class A common stock, as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) certain tax attributes of the entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions, Topco LLC and subsidiaries of Topco LLC that existed prior to the IPO, and (iii) certain other tax benefits related to our entering into the TRA, including tax benefits attributable to payments that we make under the TRA (collectively, the “Tax Attributes”).
The TRA provides for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to 74 Table of Contents realize, from exchanges of LLC Units (together with the corresponding shares of Class B common stock) for Class A common stock, as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) certain tax attributes of the entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions, Topco LLC and subsidiaries of Topco LLC that existed prior to the IPO, and (iii) certain other tax benefits related to our entering into the TRA, including tax benefits attributable to payments that we make under the TRA (collectively, the “Tax Attributes”).
The mandatory prepayment shall be reduced to 25% or 0% of the calculated excess cash flow if the first lien net leverage ratio was equal to or less than 4.75:1.00 or 4.25:1.00, respectively; however, no prepayment is required to the extent excess cash flow calculated for the respective period is equal to or less than $10.0 million.
The mandatory prepayment shall be reduced to 25% or 0% of the calculated excess cash flow if the Company’s first lien net leverage ratio was equal to or less than 4.75:1.00 or 4.25:1.00, respectively; however, no prepayment is required to the extent excess cash flow calculated for the respective period is equal to or less than $10.0 million.
Subsequent adjustments to the payable to related parties for the TRA based on changes in anticipated future taxable income, which could include changes in estimated income allocated to the partners of Topco LLC or apportionment of state income taxes, are recorded in our consolidated statements of income.
Subsequent adjustments to the payable to related parties for the TRA based on changes in anticipated future taxable income, which could include changes in estimated income allocated to the partners of Topco LLC or apportionment of state income taxes, are recorded in our consolidated statements of operations.
Another requires that, if as of the end of any fiscal quarter the aggregate amount of 74 Table of Contents letters of credit obligations and borrowings under the Revolving Credit Facility outstanding as of the end of such fiscal quarter (excluding cash collateralized letters of credit obligations and letter of credit obligations in an aggregate amount not in excess of $5.0 million at any time outstanding and for the first four fiscal quarters ending after October 2020, borrowings of revolving credit loans made before October 2020) exceeds 35% of the aggregate amount of all Revolving Credit Commitments in effect as of such date, then the net leverage ratio of Intermediate may not be greater than 8.00 to 1.00.
Another requires that, if as of the end of any fiscal quarter the aggregate amount of 76 Table of Contents letters of credit obligations and borrowings under the Revolving Credit Facility outstanding as of the end of such fiscal quarter (excluding cash collateralized letters of credit obligations and letter of credit obligations in an aggregate amount not in excess of $5.0 million at any time outstanding and for the first four fiscal quarters ending after October 2020, borrowings of revolving credit loans made before October 2020) exceeds 35% of the aggregate amount of all Revolving Credit Commitments in effect as of such date, then the net leverage ratio of Intermediate may not be greater than 8.00 to 1.00.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.” Please also see the section titled “Forward Looking Statements.” We were incorporated in August 2020 and, pursuant to the organizational transactions described in Note 10 to our consolidated financial statements, became a holding company whose principal asset is a controlling equity interest in Topco LLC.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.” Please also see the section titled “Forward Looking Statements.” We were incorporated in August 2020 and, pursuant to the organizational transactions described in Note 1 to our consolidated financial statements, became a holding company whose principal asset is a controlling equity interest in Topco LLC.
The TRA provides for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize from exchanges of LLC Units (together with the corresponding share of Class B Common stock), as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) increase in the tax basis of assets of Topco LLC received form LLC Units held by entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions (“the Blocker Entities”), Topco LLC and subsidiaries of Topco LLC that existed prior to this offering and (iii) certain other tax benefits related to our entering into the TRA, including tax benefits attributable to payments that we make under the TRA (collectively, the “Tax Attributes”).
The TRA provides for the payment by us to MLSH 1 and MLSH 2, collectively, of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize from exchanges of LLC Units (together with the corresponding share of Class B Common stock), as a result of (i) certain increases in the tax basis of assets of Topco LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) increase in the tax basis of assets of Topco LLC received form LLC Units held by entities acquired from MLSH 1 and MLSH 2 in connection with the Organizational Transactions, Topco LLC and subsidiaries of Topco LLC that existed prior to this offering and (iii) certain other tax benefits related to our entering into the TRA, including tax benefits attributable to payments that we make under the TRA (collectively, the “Tax Attributes”).
In addition to tax expenses, we also will incur expenses related to our operations and we will be required to make payments under the TRA with MLSH 1 and MLSH 2.
In addition to tax expenses, we also will incur expenses related to our operations and we may be required to make payments under the TRA with MLSH 1 and MLSH 2.
Income or loss attributed to the non-controlling interests is based on the LLC Units outstanding during the period and is presented on the consolidated statements of income.
Income or loss attributed to the non-controlling interests is based on the LLC Units outstanding during the period and is presented on the consolidated statements of operations.
We cannot, at this time, determine when or if the related targets will be achieved or whether the events triggering the commencement of payment obligations will occur. Therefore, such payments were not included in the table above. See Notes 2 and 4 to our consolidated financial statements for additional details.
We cannot, at this time, determine when or if the related targets will be achieved or whether the events triggering the commencement of payment obligations will occur. Therefore, such payments were not included in the table above. See Notes 2 and 5 to our consolidated financial statements for additional details.
Unless otherwise noted or the context otherwise requires, references in this Annual Report on Form 10-K to “we,” “us” or “our” refer to Maravai LifeSciences Holdings, Inc. and its subsidiaries. This discussion and analysis generally addresses 2022 and 2021 items and year-over-year comparisons between 2022 and 2021.
Unless otherwise noted or the context otherwise requires, references in this Annual Report on Form 10-K to “we,” “us” or “our” refer to Maravai LifeSciences Holdings, Inc. and its subsidiaries. This discussion and analysis generally addresses 2023 and 2022 items and year-over-year comparisons between 2023 and 2022.
These were partially offset by a non-cash gain on the change in estimated fair value of contingent consideration of $7.8 million, and a net cash outflow from the change in our operating assets and liabilities of $45.1 million, which is net of government funding of $17.0 million.
These were partially offset by a non-cash loss on the change in estimated fair value of contingent consideration $7.8 million, and a net cash outflow from the change in our operating assets and liabilities of $45.1 million, which is net of government funding of $17.0 million.
We believe it is more likely than not that the Company will generate sufficient taxable income in the future to fully realize any deductions allocated to it from Topco LLC associated with the reversal of its tax basis as of December 31, 2022.
We believe it is more likely than not that the Company will not generate sufficient taxable income in the future to fully realize any deductions allocated to it from Topco LLC associated with the reversal of its tax basis as of December 31, 2023.
There is no maximum term for the TRA and the TRA will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the TRA for an agreed-upon amount equal to the estimated present value of the remaining payments to be made under the agreement (calculated with certain assumptions, including as to utilization of the 78 Table of Contents Tax Attributes).
There is no maximum term for the TRA and the TRA will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the TRA for an agreed-upon amount equal to the estimated present value of the remaining payments to be made under the agreement (calculated with certain assumptions, including as to utilization of the Tax Attributes).
Tax distributions are required under the terms of the Topco LLC Agreement. As of December 31, 2022, we have made tax distributions equal to the estimated obligation due for 2022. See Note 14 to our consolidated financial statements for additional information regarding tax distributions.
Tax distributions are required under the terms of the Topco LLC Agreement. As of December 31, 2023, we have made tax distributions equal to the estimated obligation due for 2023. See Note 14 to our consolidated financial statements for additional information regarding tax distributions.
Subject to certain exceptions and limitations, we are required to repay borrowings under the Tranche B Term Loan and Revolving Credit Facility with the proceeds of certain occurrences, such as the incurrence of debt, certain equity contributions and certain asset sales or dispositions.
Subject to certain exceptions and limitations, we are required to repay borrowings under the Term Loan and Revolving Credit Facility with the proceeds of certain occurrences, such as the incurrence of debt, certain equity contributions and certain asset sales or dispositions.
Business. 63 Table of Contents How We Assess Our Business We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use to determine how our business is performing are revenue and Adjusted EBITDA.
Business. 65 Table of Contents How We Assess Our Business We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use to determine how our business is performing are revenue and Adjusted EBITDA.
The payment obligations under the TRA are not conditioned upon any LLC Unitholder maintaining a continued ownership interest in us or Topco LLC and the rights of MLSH 1 and MLSH 2 under the TRA are assignable. We expect to benefit from the remaining 15% of the tax benefits, if any, that we may actually realize.
The payment obligations under the TRA are not 80 Table of Contents conditioned upon any LLC Unitholder maintaining a continued ownership interest in us or Topco LLC and the rights of MLSH 1 and MLSH 2 under the TRA are assignable. We expect to benefit from the remaining 15% of the tax benefits, if any, that we may actually realize.
Commencing with the fiscal year ended December 31, 2021, and each fiscal year thereafter, the Credit Agreement requires mandatory prepayments of the Term Loan principal upon certain excess cash flow, subject to certain step-downs based on our first lien net leverage ratio.
Commencing with the fiscal year ended December 31, 2021, and each fiscal year thereafter, the Credit Agreement requires that we make mandatory prepayments of the Term Loan principal upon certain excess cash flow, subject to certain step-downs based on our first lien net leverage ratio.
Our estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Our estimates are based on historical 79 Table of Contents experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
We believe the following discussion addresses our most critical accounting estimates used in the preparation of our consolidated financial statements, which require subjective and complex judgments. 77 Table of Contents Income Taxes We are subject to U.S. federal and state income taxes.
We believe the following discussion addresses our most critical accounting estimates used in the preparation of our consolidated financial statements, which require subjective and complex judgments. Income Taxes We are subject to U.S. federal and state income taxes.
In this scenario, the reduction of the liability under the TRA would result in a benefit to our consolidated statements of income.
In this scenario, the reduction of the liability under the TRA would result in a benefit to our consolidated statements of operations.
Discussions of 2020 items and year-over-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7 of our 2021 Annual Report on Form 10-K filed with the SEC on March 1, 2022. 61 Table of Contents Overview We are a leading life sciences company providing critical products to enable the development of drug therapies, diagnostics, novel vaccines and support research on human diseases.
Discussions of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7 of our 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023. 63 Table of Contents Overview We are a leading life sciences company providing critical products to enable the development of drug therapies, diagnostics, novel vaccines and support research on human diseases.
We also intend to continue making investments in our overall infrastructure and business segments to support our growth. We incurred aggregate selling, general, and administrative expenses of $129.3 million and $100.1 million for the years ended December 31, 2022 and 2021 respectively. Our research and development efforts are geared towards meeting our customers’ needs.
We also intend to continue making investments in our overall infrastructure and business segments to support our growth. We incurred aggregate selling, general, and administrative expenses of $151.4 million and $129.3 million for the years ended December 31, 2023 and 2022, respectively. Our research and development efforts are geared towards meeting our customers’ needs.
As a result of the acquisition, we own all the outstanding interest in MyChem. Our consolidated results of operations for the year ended December 31, 2022 include the operating results of MyChem from the acquisition date. See Note 2 to our consolidated financial statements for additional information.
As a result of the acquisition, we own all the outstanding equity interest in Alphazyme. Our consolidated results of operations for the year ended December 31, 2023 include the operating results of Alphazyme from the acquisition date. See Note 2 to our consolidated financial statements for additional information.
We expect that our selling, general and administrative expenses will continue to increase, primarily due to increased headcount and expanding facilities footprint to support anticipated long-term growth in the business, costs incurred in increasing our presence globally, and increases in marketing activities to drive awareness and adoption of our products and services.
We expect that our selling, general and administrative expenses will gradually increase in future periods, primarily due to expanding facilities footprint to support anticipated long-term growth in the business, costs incurred in increasing our presence globally, and increases in marketing activities to drive awareness and adoption of our products and services.
Payment made prior to the receipt of goods or services to be used in research and development are recognized as prepaid assets until the goods are received or services are rendered. We expect our research and development costs to fluctuate in future periods as we continue our research and development efforts, including meeting our customers’ needs.
Payment made prior to the receipt of goods or services to be used in research and development are recognized as prepaid assets until the goods are received or services are rendered. We expect our research and development costs to increase to support our research and development efforts, including meeting our customers’ needs.
As of December 31, 2022, we were in compliance with these covenants. As of December 31, 2022, interest rate on the Term Loan was 6.96%. Tax Receivable Agreement We are a party to the TRA with MLSH 1 and MLSH 2.
As of December 31, 2023, we were in compliance with these covenants. As of December 31, 2023, interest rate on the Term Loan was 8.40%. Tax Receivable Agreement We are a party to the TRA with MLSH 1 and MLSH 2.
Our primary customers are biopharmaceutical companies who are pursuing novel research and product development programs. Our customers also include a range of government, academic and biotechnology institutions. As of December 31, 2022, we employed a team of over 610 full-time employees, approximately 18% of whom have advanced degrees.
Our primary customers are biopharmaceutical companies who are pursuing novel research and product development programs. Our customers also include a range of government, academic and biotechnology institutions. As of December 31, 2023, we employed a team of over 650 employees, approximately 24% of whom have advanced degrees.
We estimate that revenue from COVID-19 related products and services represented approximately 67.9% and 69.7%, respectively, of our total revenues for the years ended December 31, 2022 and 2021, respectively.
We estimate that revenue from COVID-19 related products and services represented approximately 21.0% and 67.9% of our total revenues for the years ended December 31, 2023 and 2022, respectively.
Due to the uncertainty of various factors, we cannot precisely quantify the likely tax benefits we will realize as a result of LLC Unit exchanges and the resulting amounts we are likely to pay out to LLC Unitholders of Topco LLC pursuant to the TRA; however, we estimate that such payments may be substantial.
Due to the uncertainty of various factors, we cannot precisely quantify the likely tax benefits we will realize as a result of LLC Unit exchanges and the resulting amounts we are likely to pay out to LLC Unitholders of Topco LLC pursuant to the TRA.
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards.
We account for income taxes under the asset and liability method of accounting. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards.
As of December 31, 2022, we hold 51.6% of the outstanding LLC Units of Topco LLC and 48.4% of the outstanding LLC Units of Topco LLC are held by MLSH 1. 66 Table of Contents Results of Operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.
As of December 31, 2023, we held approximately 52.6% of the outstanding LLC Units of Topco LLC, and MLSH 1 held approximately 47.4% of the outstanding LLC Units of Topco LLC. 68 Table of Contents Results of Operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.
We generated total consolidated revenue of $883.0 million and $799.2 million for the years ended December 31, 2022 and 2021, respectively, through the following segments: (i) Nucleic Acid Production, (ii) Biologics Safety Testing and (iii) Protein Detection.
We generated total consolidated revenue of $288.9 million and $883.0 million for the years ended December 31, 2023 and 2022, respectively, through the following segments: (i) Nucleic Acid Production and (ii) Biologics Safety Testing.
We incurred research and development expenses of $18.4 million and $15.2 million for the years ended December 31, 2022 and 2021, respectively.
We incurred research and development expenses of $17.3 million and $18.4 million for the years ended December 31, 2023 and 2022, respectively.
We made payments of $35.3 million to MLSH 1 and MLSH 2 pursuant to the TRA during the year ended December 31, 2022, of which $1.1 million is related to interest. We made payments of $1.3 million to MLSH 1 and MLSH 2 pursuant to the TRA during the year ended December 31, 2021.
We made payments of $35.3 million to MLSH 1 and MLSH 2 pursuant to the TRA during the year ended December 31, 2022, of which $1.1 million is related to interest. This determination was based on our taxable income for the year ended December 31, 2021.
We do not allocate assets to our reportable segments as they are not included in the review performed by our Chief Operating Decision Maker for purposes of assessing segment performance and allocating resources. As of December 31, 2022, all of our long-lived assets were located within the United States.
We do not allocate assets to our reportable segments as they are not included in the review performed by our Chief Operating Decision Maker for purposes of assessing segment performance and allocating resources.
During the years ended 73 Table of Contents December 31, 2022 and 2021, the Company made distributions of $150.2 million and $153.5 million for tax liabilities to MLSH 1 under this agreement, respectively.
During the years ended December 31, 2023 and 2022, the Company made distributions of $9.6 million and $150.2 million, respectively, for tax liabilities to MLSH 1 under this agreement.
Cost of revenue associated with our services primarily consists of personnel and related costs, equity-based compensation expense, cost of materials and allocated costs, including facilities and information technology costs. Costs of services were not material for the years ended December 31, 2022 and 2021.
Cost of revenue also includes adjustments for excess, obsolete or expired inventory, and idle capacity. Cost of revenue associated with our services primarily consists of personnel and related costs, equity-based compensation expense, cost of materials and allocated costs, including facilities and information technology costs. Costs of services were not material for the years ended December 31, 2023 and 2022.
For the year ended December 31, 2021, we estimate that approximately $557.4 million, or 93.0%, of our $599.1 million CleanCap revenue was a result of customer demand attributable to COVID-19 vaccines or other COVID-19 related commercial products or developmental programs.
For the year ended December 31, 2023, we estimate that approximately $60.8 million, or 54.7%, of our $111.1 million CleanCap revenue was a result of customer demand attributable to COVID-19 vaccines or other COVID-19 related commercial products or developmental programs.
(10) Refers to the loss recognized during the period associated with certain working capital and other adjustments related to the sale of Vector, which was completed in September 2021, and a loss incurred on extinguishment of debt. 70 Table of Contents Adjusted Free Cash Flow A reconciliation of Adjusted Free Cash Flow, which is a non-GAAP measure that we define as Adjusted EBITDA less capital expenditures, is set forth below (in thousands): Year Ended December 31, 2022 2021 Adjusted EBITDA $ 637,800 $ 582,820 Capital expenditures (1) (46,903) (16,999) Adjusted Free Cash Flow $ 590,897 $ 565,821 ____________________ (1) We define capital expenditures as: (i) purchases of property and equipment which are included in cash flows from investing activities, accounts payable and accrued expenses, offset by government funding recognized; and (ii) construction costs determined to be lessor improvements recorded as prepaid lease payments and right-of-use assets, including portions included in accounts payable and accrued expenses, offset by government funding recognized.
For the year ended December 31, 2022, refers to the loss recognized during the period associated with certain working capital and other adjustments related to the sale of Vector Laboratories, Inc., which was completed in September 2021, and the loss incurred on extinguishment of debt. 72 Table of Contents Adjusted Free Cash Flow A reconciliation of Adjusted Free Cash Flow, which is a non-GAAP measure that we define as Adjusted EBITDA less capital expenditures, is set forth below (in thousands): Year Ended December 31, 2023 2022 Adjusted EBITDA $ 65,309 $ 637,800 Capital expenditures (1) (52,688) (51,748) Adjusted Free Cash Flow $ 12,621 $ 586,052 ____________________ (1) We define capital expenditures as: (i) purchases of property and equipment which are included in cash flows from investing activities, offset by government funding received; and (ii) construction costs determined to be lessor improvements recorded as prepaid lease payments and right-of-use assets, offset by government funding received.
During the year ended December 31, 2021, intersegment revenue was $0.7 million between the Nucleic Acid Production and Protein Detection segments. The intersegment sales and the related gross margin on inventory recorded at the end of the period are eliminated for consolidation purposes.
During the year ended December 31, 2023 and 2022, intersegment revenue was immaterial between the Nucleic Acid Production and Biologics Safety Testing segments. The intersegment sales and the related gross margin on inventory recorded at the end of the period are eliminated for consolidation purposes.
Although the actual timing and amount of any payments that may be made under the TRA will vary, we expect that the aggregate payments that we will be required to make to MLSH 1 and MLSH 2 will be substantial.
The payment obligations under the TRA are obligations of Maravai LifeSciences Holdings, Inc. and not of Topco LLC. Although the actual timing and amount of any payments that may be made under the TRA will vary, the aggregate payments that we will be required to make to MLSH 1 and MLSH 2 may be substantial.
Selling, General and Administrative Selling, general and administrative expenses increased by $29.2 million from $100.1 million for the year ended December 31, 2021 to $129.3 million for the year ended December 31, 2022, or 29.2%.
Selling, General and Administrative Selling, general and administrative expenses increased by $22.1 million from $129.3 million for the year ended December 31, 2022 to $151.4 million for the year ended December 31, 2023, or 17.1%.
Interest expense also consists of changes in the fair value of our interest rate cap agreement. 65 Table of Contents Interest Income Interest income consists of interest earned on our cash balances held at financial institutions.
Interest expense also consists of changes in the fair value of our interest rate cap agreement. Interest Income Interest income consists of interest earned on our cash balances and short-term investments in money market funds held at financial institutions.
Other Income (Expense) Other income (expense) includes the following for the periods presented (in thousands, except percentages): Year Ended December 31, Percentage of Revenue 2022 2021 Change 2022 2021 Interest expense $ (20,414) $ (30,260) (32.5) % (2.3) % (3.8) % Interest income 2,338 — * 0.2 % — % Loss on extinguishment of debt (208) — * 0.0 % — % Change in payable to related parties pursuant to the Tax Receivable Agreement (4,102) 6,101 * (0.5) % 0.8 % Other income (358) 279 * 0.0 % 0.0 % Total other income (expense), net $ (22,744) $ (23,880) (4.8) % (2.6) % (3.0) % ____________________ * Not meaningful Other expense was $23.9 million for the year ended December 31, 2021 compared to $22.7 million for the year ended December 31, 2022, representing a decrease of $1.1 million, or 4.8%.
Other Income (Expense) Other income (expense) includes the following for the periods presented (in thousands, except percentages): Year Ended December 31, Percentage of Revenue 2023 2022 Change 2023 2022 Interest expense $ (45,892) $ (20,414) 124.8 % (15.9) % (2.3) % Interest income 27,727 2,338 1085.9 % 9.6 % 0.2 % Loss on extinguishment of debt — (208) * — % 0.0 % Change in payable to related parties pursuant to the Tax Receivable Agreement 668,886 (4,102) * 231.5 % (0.5) % Other expense (1,337) (358) 273.5 % (0.5) % 0.0 % Total other income (expense), net $ 649,384 $ (22,744) * 224.7 % (2.6) % ____________________ * Not meaningful Other expense was $22.7 million for the year ended December 31, 2022 compared to Other income of $649.4 million for the year ended December 31, 2023, representing a change of $672.1 million.
As of December 31, 2022, our liability under the TRA was $718.2 million. Liquidity and Capital Resources Overview We have financed our operations primarily from cash flow from operations, borrowings under long-term debt agreements and, to a lesser extent, the sale of our Class A common stock.
Liquidity and Capital Resources Overview We have financed our operations primarily from cash flow from operations, borrowings under long-term debt agreements and, to a lesser extent, the sale of our Class A common stock. As of December 31, 2023, we had cash and cash equivalents of $575.0 million and retained earnings of $285.7 million.
There is no stated term for the TRA, and the TRA will continue until all tax benefits have been utilized or expired unless we exercise our right to terminate the TRA for an agreed-upon amount.
There is no stated term for the TRA, and the TRA will continue until all tax benefits have been utilized or expired unless we exercise our right to terminate the TRA for an agreed-upon amount. We recognize the amount of TRA payments expected to be paid within the next 12 months and classify this amount as current.
The purchase price, which includes the fair value of consideration transferred, is attributed to the fair value of the assets acquired and liabilities assumed.
The purchase price, which includes the fair value of consideration transferred, is attributed to the fair value of the assets acquired and liabilities assumed. The excess of the purchase price of the acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill.
There was no commission expense recognized for intersegment sales for the years ended December 31, 2022 and 2021. 69 Table of Contents Non-GAAP Financial Measures Adjusted EBITDA A reconciliation of net income to Adjusted EBITDA, which is a non-GAAP measure, is set forth below (in thousands): Year Ended December 31, 2022 2021 Net income $ 490,663 $ 469,250 Add: Amortization 24,269 18,339 Depreciation 7,566 6,413 Interest expense 20,414 30,260 Interest income (2,338) — Income tax expense 60,809 61,515 EBITDA 601,383 585,777 Acquisition contingent consideration (1) (7,800) — Acquisition integration costs (2) 13,362 44 Equity-based compensation (3) 18,670 10,458 Gain on sale of business (4) — (11,249) Merger and acquisition related expenses (5) 2,416 1,508 Financing costs (6) 1,078 2,383 Acquisition related tax adjustment (7) 349 — Tax receivable agreement liability adjustment (8) 4,102 (6,101) Chief Executive Officer transition costs (9) 2,426 — Other (10) 1,814 — Adjusted EBITDA $ 637,800 $ 582,820 ____________________ (1) Refers to the change in the estimated fair value of performance payments related to the acquisition of MyChem, which was completed in January 2022.
There was no commission expense recognized for intersegment sales for the years ended December 31, 2023 and 2022. 71 Table of Contents Non-GAAP Financial Measures Adjusted EBITDA A reconciliation of net (loss) income to Adjusted EBITDA, which is a non-GAAP measure, is set forth below (in thousands): Year Ended December 31, 2023 2022 Net (loss) income $ (138,375) $ 490,663 Add: Amortization 27,356 24,269 Depreciation 12,898 7,566 Interest expense 45,892 20,414 Interest income (27,727) (2,338) Income tax expense 756,111 60,809 EBITDA 676,155 601,383 Acquisition contingent consideration (1) (3,286) (7,800) Acquisition integration costs (2) 12,695 13,362 Equity-based compensation (3) 34,588 18,670 Merger and acquisition related expenses (4) 4,392 2,416 Financing costs (5) — 1,078 Acquisition related tax adjustment (6) 1,293 349 Tax Receivable Agreement liability adjustment (7) (668,886) 4,102 Chief Executive Officer transition costs (8) 28 2,426 Restructuring costs (9) 6,567 — Other (10) 1,763 1,814 Adjusted EBITDA $ 65,309 $ 637,800 ____________________ (1) Refers to the change in the estimated fair value of contingent consideration related to completed acquisitions.
Operating Expenses Operating expenses include the following for the periods presented (in thousands, except percentages): Year Ended December 31, Percentage of Revenue 2022 2021 Change 2022 2021 Cost of revenue $ 168,957 $ 140,561 20.2 % 19.1 % 17.6 % Selling, general and administrative 129,259 100,064 29.2 % 14.7 % 12.5 % Research and development 18,369 15,219 20.7 % 2.1 % 1.9 % Change in estimated fair value of contingent consideration (7,800) — * (0.9) % — % Gain on sale of business — (11,249) * — % (1.4) % Total operating expenses $ 308,785 $ 244,595 26.2 % 35.0 % 30.6 % ____________________ * Not meaningful Cost of Revenue Cost of revenue increased by $28.4 million from $140.6 million for the year ended December 31, 2021 to $169.0 million for the year ended December 31, 2022, or 20.2%.
Operating Expenses Operating expenses include the following for the periods presented (in thousands, except percentages): Year Ended December 31, Percentage of Revenue 2023 2022 Change 2023 2022 Cost of revenue $ 148,743 $ 168,957 (12.0) % 51.5 % 19.1 % Selling, general and administrative 151,390 129,259 17.1 % 52.4 % 14.7 % Research and development 17,280 18,369 (5.9) % 6.0 % 2.1 % Change in estimated fair value of contingent consideration (3,286) (7,800) (57.9) % (1.1) % (0.9) % Restructuring 6,466 — * 2.2 % — % Total operating expenses $ 320,593 $ 308,785 3.8 % 111.0 % 35.0 % ____________________ * Not meaningful Cost of Revenue Cost of revenue decreased by $20.2 million from $169.0 million for the year ended December 31, 2022 to $148.7 million for the year ended December 31, 2023, or 12.0%.
Cost of Revenue Cost of revenue associated with our products primarily consists of manufacturing related costs incurred in the production process, including personnel and related costs, equity-based compensation expense, inventory write-downs, costs of materials, labor and overhead, packaging and delivery costs and allocated costs, including facilities, information technology, depreciation, and amortization of intangibles.
Biologics Safety Testing Segment Our Biologics Safety Testing segment focuses on manufacturing and selling biologics safety and impurity tests and assay development services that are utilized by our customers in their biologic drug manufacturing activities. 66 Table of Contents Cost of Revenue Cost of revenue associated with our products primarily consists of manufacturing related costs incurred in the production process, including personnel and related costs, equity-based compensation expense, inventory write-downs, costs of materials, labor and overhead, packaging and delivery costs and allocated costs, including facilities, information technology, depreciation, and amortization of intangibles.
Net cash provided by operating activities for the year ended December 31, 2021 was $368.6 million, which was primarily attributable to a net income of $469.3 million, non-cash depreciation and amortization of $24.8 million, non-cash amortization of right-of-use assets of $8.8 million, non-cash amortization of deferred financing costs of $2.7 million, non-cash equity-based compensation of $10.5 million, and non-cash deferred income taxes of $46.9 million, partially offset by a non-cash gain on sale of business of $11.2 million, non-cash gain on the revaluation of liabilities under the TRA of $6.1 million, and a net cash outflow from the change in our operating assets and liabilities of $176.6 million.
Net cash provided by operating activities for the year ended December 31, 2022 was $536.0 million, which was primarily attributable to a net income of $490.7 million, non-cash depreciation and amortization of $31.8 million, non-cash amortization of operating lease right-of-use assets of $6.3 million, non-cash amortization of deferred financing costs of $2.8 million, non-cash equity-based compensation of $18.7 million, non-cash deferred income taxes of $42.3 million, and non-cash loss on the revaluation of liabilities under the TRA of $4.1 million.
We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated revenue growth rates, management’s plans, and guideline companies.
The estimated fair values were developed by discounting future net cash flows to their present value at market-based rates of return. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated revenue growth rates, management’s plans, and guideline companies.
We are also a party to a Tax Receivable Agreement, or TRA, with MLSH 1, who is primarily owned by GTCR, and MLSH 2 (see Note 14 to our consolidated financial statements).
During the years ended December 31, 2023 and 2022, the Company made distributions of $9.6 million and $150.2 million, respectively, for tax liabilities to MLSH 1. We are also a party to a Tax Receivable Agreement, or TRA, with MLSH 1, who is primarily owned by GTCR, and MLSH 2 (see Note 14 to our consolidated financial statements).
Trends and Uncertainties COVID-19 Related Revenue Trends and Uncertainties Since the start of the COVID-19 pandemic in early 2020, our results of operations and cash flows have substantially benefited from the strong demand for COVID-19 related products and services, including our proprietary CleanCap® analogs and highly modified RNA products, particularly mRNA.
Trends and Uncertainties COVID-19 Related Revenue Trends and Uncertainties Our results of operations and cash flows during each of the years ended December 31, 2022, 2021 and 2020 substantially benefited from the demand for COVID-19 related products and services, including our proprietary CleanCap® analogs and highly modified RNA products, particularly mRNA, which are used by our customers in the production of COVID-19 vaccines.
Recognition of Intangible Assets as Part of a Business Combination For acquisitions of businesses, we are required to record the assets acquired and liabilities assumed of acquired businesses at their respective fair values at the date of acquisition.
Recognition of Intangible Assets as Part of a Business Combination We account for our business combinations using the acquisition method of accounting which requires that the assets acquired and liabilities assumed of acquired businesses be recorded at their respective fair values at the date of acquisition.
Such payments could be due later than estimated depending on the timing of our use of the underlying tax attributes. See "Risk Factors-Risks Related to Our Organizational Structure" and Note 14 to our consolidated financial statements for additional information regarding our liability under the TRA. (4) Represents firm purchase commitments to our suppliers.
See Note 10 to our consolidated financial statements for additional information. (4) Reflects the estimated timing of the current TRA liability payment as of December 31, 2023. See "Risk Factors-Risks Related to Our Organizational Structure" and Note 14 to our consolidated financial statements for additional information regarding our liability under the TRA. (5) Represents firm purchase commitments to our suppliers.
The Revolving Credit Facility allows us to repay and borrow from time to time until October 2025, at which time all amounts borrowed must be repaid.
The Term Loan includes prepayment provisions that allow us, at our option, to repay all or a portion of the principal amount at any time. The Revolving Credit Facility allows us to repay and borrow from time to time until October 2025, at which time all amounts borrowed must be repaid.
In January 2023, we completed the acquisition of Alphazyme, LLC (“Alphazyme”), a privately-held original equipment manufacturer (“OEM”) provider of custom, scalable, molecular biology enzymes to customers in the genetic analysis and nucleic acid synthesis markets.
We intend to continue to invest in research and development and new products and technologies to support our customers’ needs for the foreseeable future. 2023 and Recent Developments Acquisition In January 2023, we completed the acquisition of Alphazyme, LLC (“Alphazyme”), a privately-held original equipment manufacturer (“OEM”) and provider of custom, scalable, molecular biology enzymes to customers in the genetic analysis and nucleic acid synthesis markets, for a total purchase consideration of $75.3 million.
We primarily utilize a direct sales model for our sales to our customers in North America. Our international sales, primarily in Europe and Asia Pacific, are effected through a combination of third-party distributors as well as via a direct sales model.
Our international sales, primarily in Europe and Asia Pacific, are effected through a combination of third-party distributors as well as via a direct sales model. The percentage of our total revenue derived from customers in North America was 48.8% and 38.4% for the years ended December 31, 2023 and 2022, respectively.
As required by U.S. tax law, income or loss generated by these LLCs passes through to their owners. As such, our tax provision consists solely of the activities of Maravai Inc. and its subsidiaries prior to their disposal, as well as our share of income generated by Topco LLC.
As such, our tax provision consists solely of the activities of Maravai Inc. and its subsidiaries, prior to their disposal, and Maravai LifeSciences International Holdings, Inc., as well as our share of income or loss generated by Topco LLC. We anticipate this structure to remain in existence for the foreseeable future.
Total revenue by segment was $813.1 million in Nucleic Acid Production and $69.9 million in Biologics Safety Testing for the year ended December 31, 2022. Total revenue by segment was $711.9 million in Nucleic Acid Production, $68.4 million in Biologics Safety Testing and $19.0 million in Protein Detection for the year ended December 31, 2021.
Total revenue by segment was $813.1 million in Nucleic Acid Production and $69.9 million in Biologics Safety Testing for the year ended December 31, 2022. We focus a substantial portion of our resources supporting our core business segments.
There was no Protein Detection revenue for the year ended December 31, 2022 due to the sale of our Protein Detection business segment, which was completed in early September 2021. Segment Information Management has determined that adjusted earnings before interest, tax, depreciation and amortization is the profit or loss measure used to make resource allocation decisions and evaluate segment performance.
Segment Information Management has determined that adjusted earnings before interest, tax, depreciation and amortization is the profit or loss measure used to make resource allocation decisions and evaluate segment performance.
Year Ended December 31, 2022 2021 Change (in thousands, except per share data) Revenue $ 883,001 $ 799,240 10.5 % Operating expenses: Cost of revenue (1) 168,957 140,561 20.2 % Selling, general and administrative (1) 129,259 100,064 29.2 % Research and development (1) 18,369 15,219 20.7 % Change in estimated fair value of contingent consideration (7,800) — * Gain on sale of business — (11,249) * Total operating expenses 308,785 244,595 26.2 % Income from operations 574,216 554,645 3.5 % Other income (expense), net (22,744) (23,880) (4.8) % Income before income taxes 551,472 530,765 3.9 % Income tax expense 60,809 61,515 (1.1) % Net income $ 490,663 $ 469,250 4.6 % Net income attributable to non-controlling interests 270,458 287,213 (5.8) % Net income attributable to Maravai LifeSciences Holdings, Inc. $ 220,205 $ 182,037 21.0 % Net income per Class A common share attributable to Maravai LifeSciences Holdings, Inc.: Basic $ 1.67 $ 1.59 Diluted $ 1.67 $ 1.56 Weighted average number of Class A common shares outstanding: Basic 131,545 114,791 Diluted 255,323 257,803 Non-GAAP measures: Adjusted EBITDA $ 637,800 $ 582,820 Adjusted Free Cash Flow $ 590,897 $ 565,821 ____________________ * Not meaningful (1) Includes equity-based compensation expense as follows (in thousands, except percentages): Year Ended December 31, 2022 2021 Change Cost of revenue $ 4,192 $ 1,915 118.9 % Selling, general and administrative 13,349 8,263 61.6 % Research and development 1,129 280 303.2 % Total equity-based compensation expense $ 18,670 $ 10,458 78.5 % 67 Table of Contents Revenue Consolidated revenue by segment was as follows for the periods presented (in thousands, except percentages): Year Ended December 31, Percentage of Revenue 2022 2021 Change 2022 2021 Nucleic Acid Production $ 813,069 $ 711,864 14.2 % 92.1 % 89.1 % Biologics Safety Testing 69,932 68,417 2.2 % 7.9 % 8.5 % Protein Detection — 18,959 * — % 2.4 % Total revenue $ 883,001 $ 799,240 10.5 % 100.0 % 100.0 % ____________________ * Not meaningful Total revenue was $883.0 million for the year ended December 31, 2022 compared to $799.2 million for the year ended December 31, 2021, representing an increase of $83.8 million, or 10.5%.
Year Ended December 31, 2023 2022 Change (in thousands, except per share data) Revenue $ 288,945 $ 883,001 (67.3) % Operating expenses: Cost of revenue (1) 148,743 168,957 (12.0) % Selling, general and administrative (1) 151,390 129,259 17.1 % Research and development (1) 17,280 18,369 (5.9) % Change in estimated fair value of contingent consideration (3,286) (7,800) (57.9) % Restructuring (1) 6,466 — * Total operating expenses 320,593 308,785 3.8 % (Loss) income from operations (31,648) 574,216 (105.5) % Other income (expense), net 649,384 (22,744) (2955.2) % Income before income taxes 617,736 551,472 12.0 % Income tax expense 756,111 60,809 1143.4 % Net (loss) income $ (138,375) $ 490,663 (128.2) % Net (loss) income attributable to non-controlling interests (19,346) 270,458 (107.2) % Net (loss) income attributable to Maravai LifeSciences Holdings, Inc. $ (119,029) $ 220,205 (154.1) % Net (loss) income per Class A common share attributable to Maravai LifeSciences Holdings, Inc.: Basic $ (0.90) $ 1.67 Diluted $ (0.90) $ 1.67 Weighted average number of Class A common shares outstanding: Basic 131,919 131,545 Diluted 131,919 255,323 Non-GAAP measures: Adjusted EBITDA $ 65,309 $ 637,800 Adjusted Free Cash Flow $ 12,621 $ 586,052 ____________________ * Not meaningful (1) Includes equity-based compensation expense as follows (in thousands, except percentages): Year Ended December 31, 2023 2022 Change Cost of revenue $ 7,324 $ 4,192 74.7 % Selling, general and administrative 24,650 13,349 84.7 % Research and development 2,715 1,129 140.5 % Restructuring (101) — * Total equity-based compensation expense $ 34,588 $ 18,670 85.3 % 69 Table of Contents Revenue Consolidated revenue by segment was as follows for the periods presented (in thousands, except percentages): Year Ended December 31, Percentage of Revenue 2023 2022 Change 2023 2022 Nucleic Acid Production $ 224,769 $ 813,069 (72.4) % 77.8 % 92.1 % Biologics Safety Testing 64,176 69,932 (8.2) % 22.2 % 7.9 % Total revenue $ 288,945 $ 883,001 (67.3) % 100.0 % 100.0 % Total revenue was $288.9 million for the year ended December 31, 2023 compared to $883.0 million for the year ended December 31, 2022, representing a decrease of $594.1 million, or 67.3%.
(2) Refers to incremental costs incurred to execute and integrate completed acquisitions, and retention payments in connection with these acquisitions. (3) Refers to non-cash expense associated with equity-based compensation. (4) Refers to the gain on the sale of Vector, which was completed in September 2021.
(2) Refers to incremental costs incurred to execute and integrate completed acquisitions, and retention payments in connection with these acquisitions. (3) Refers to non-cash expense associated with equity-based compensation. (4) Refers to diligence, legal, accounting, tax and consulting fees incurred associated with acquisitions that were pursued but not consummated.
We believe our cash on hand, cash generated from operations and continued access to our credit facilities, will be sufficient to satisfy our cash requirements over the next 12 months and beyond.
We believe our cash on hand, cash generated from operations and continued access to our credit facilities, will be sufficient to satisfy our cash requirements over the next 12 months and beyond. We expect to spend approximately $2.8 million in restructuring costs primarily during the first quarter of 2024 associated with the Cost Realignment Plan using existing cash on hand.
Generally. any late payments will continue to accrue interest at LIBOR (or a replacement rate, as applicable) plus 500 basis points until such payments are made. The payment obligations under the TRA are obligations of Maravai LifeSciences Holdings, Inc. and not of Topco LLC.
Generally, any late payments will continue to accrue interest at LIBOR (or a Replacement Rate, as applicable) plus 500 basis points until such payments are made. Given the cessation of LIBOR, we have transitioned to the Secured Overnight Financing Rate (“SOFR”) as the applicable Replacement Rate as allowable under the Tax Receivable Agreement.
As of December 31, 2022, our first lien net leverage ratio was less than 4.25:1.00. In connection with our acquisition of MyChem, we may be required to make certain payments to its sellers.
As of December 31, 2023, our first lien net leverage ratio was less than 4.25:1.00. In connection with our acquisition of Alphazyme, we may be required to make additional payments of up to $75.0 million to the sellers of Alphazyme dependent upon meeting or exceeding defined revenue targets during fiscal years 2023 through 2025.
We are the controlling member of Topco, LLC, which has been, and will continue to be, treated as a partnership for U.S. federal and state income tax purposes. Topco LLC’s subsidiaries are treated as pass-through entities for federal and state income tax purposes. The income or loss generated by these entities is not taxed at the LLC level.
We are the controlling member of Topco LLC, which has been, and will continue to be, treated as a partnership for U.S. federal and state income tax purposes. Topco LLC’s previously wholly-owned U.S. subsidiary, Maravai Life Sciences, Inc. (“Maravai Inc.”) and its subsidiaries, were taxpaying entities in the U.S., Canada, and the U.K.
Capital expenditures, including costs incurred for lessor improvements, for the year ending December 31, 2023 are projected to be in the range of $55.0 million to $65.0 million, which is net of anticipated government funding of $4.3 million.
Capital expenditures for the year ending December 31, 2024 are projected to be in the range of $30.0 million to $35.0 million, which is net of anticipated government funding recognized. This includes leasehold improvements and equipment primarily for the Flanders San Diego Facility.
Assuming no changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that future payments under the TRA relating to the purchase by the Company of LLC Units from MLSH 1 and the tax attributes to be approximately $718.2 million and to range over the next 14 years from approximately $42.3 million to $63.3 million per year and decline thereafter.
Assuming no changes in the relevant tax law, we expect that probable future payments under the TRA relating to the purchase by the Company of LLC Units from MLSH 1 and the tax attributes to be approximately $7.1 million. This determination is based on our estimate of taxable income for the year ended December 31, 2023.
Future payments in respect of subsequent exchanges or financings would be in addition to these amounts and are expected to be substantial. The foregoing numbers are estimates and the actual payments could differ materially. We expect to fund these payments using cash on hand and cash generated from operations.
Future payments in respect of subsequent exchanges or financings and tax attributes relating to the purchase by the Company of LLC Units from MLSH 1 would be in addition to this amount and may be substantial. The foregoing numbers are estimates and the actual payments could differ materially.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe had cash of $632.1 million as of December 31, 2022. Our cash is held in demand deposits and is not subject to market risk. Foreign Currency Risk All of our revenue is denominated in U.S. dollars.
Biggest changeWe had cash and cash equivalents of $575.0 million as of December 31, 2023. Given the short-term nature of our investments, we do not believe there is any material risk to the value of our investments with increases or decreases in interest rates. Foreign Currency Risk All of our revenue is denominated in U.S. dollars.
Borrowings under our Credit Agreement bear interest at a rate equal to the Base Rate plus a margin of 2.00%, with respect to each Base Rate-based loan, or the Term SOFR (Secured Overnight Financing Rate) plus a margin of 3.00% with respect to each Term SOFR-based loan, subject in each case to an applicable Base Rate or Term SOFR floor (see Note 9 to our consolidated financial statements).
Borrowings under our Credit Agreement bear interest at a rate equal to the Base Rate plus a margin of 2.00%, with respect to each Base Rate-based loan, or the Term SOFR (Secured Overnight Financing Rate) plus a margin of 3.00% with respect to each Term SOFR-based loan, subject in each case to an applicable Base Rate or Term SOFR floor (see Note 10 to our consolidated financial statements).
To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. 80 Table of Contents
To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. 83 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of December 31, 2022, our primary exposure to interest rate risk was associated with our variable rate long-term debt.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of December 31, 2023, our primary exposure to interest rate risk was associated with our variable rate long-term debt.
As of December 31, 2022, we have an interest rate cap agreement in place to hedge a portion of our variable interest rate risk on our outstanding long-term debt.
As of December 31, 2023, we have an interest rate cap agreement in place to hedge a portion of our variable interest rate risk on our outstanding long-term debt.
We had $538.6 million of outstanding borrowings under our Tranche B Term Loan and no outstanding borrowings under our Revolving Credit Facility as of December 31, 2022. For the year ended December 31, 2022, the effect of a hypothetical 100 basis point increase or decrease in overall interest rates would have changed our interest expense by approximately $5.5 million.
We had $533.1 million of outstanding borrowings under our Term Loan and no outstanding borrowings under our Revolving Credit Facility as of December 31, 2023. For the year ended December 31, 2023, the effect of a hypothetical 100 basis point increase or decrease in overall interest rates would have changed our interest expense by approximately $5.4 million.
Although approximately 61.6% of our revenue for the year ended December 31, 2022 was derived from international sales, primarily in Europe and Asia Pacific, none of these sales are denominated in local currency. The majority of our expenses are generally denominated in the currencies in which they are incurred, which is primarily in the United States.
Although approximately 51.2% of our revenue for the year ended December 31, 2023 was derived from international sales, primarily in Europe and Asia Pacific, all of these sales are denominated in U.S. dollars. The majority of our expenses are generally denominated in the currencies in which they are incurred, which is primarily in the United States.

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