Maravai: A Cornerstone in mRNA and Biologics Innovation

You can listen to this Deep Dive here

While I usually focus on covering large-cap companies, I decided to spend some time studying Maravai LifeSciences (Ticker: MRVI) which is only $1.5 Billion market cap company. Admittedly, it caught my attention when one of my friends started tweeting about it. Since I’m also quite keen to widen my circle of competence in Life science industry, I have decided to study Maravai this month.

Maravai LifeSciences was formed in March 2014 as a partnership between Carl Hull, Eric Tardif, and GTCR, a Private Equity (PE) firm.

Hull, a thirty-year veteran of the diagnostics and life sciences industry, had served as CEO of Gen-Probe where he led a strategic transformation that culminated in its $3.75 billion sale to Hologic. Tardif, who joined Hull at Gen-Probe as Senior Vice President of Corporate Development after spending over a decade at Morgan Stanley, was responsible for corporate strategy and mergers & acquisitions. After selling Gen-Probe to Hologic, they both decided to partner with GTCR with the mission to build a company in the life sciences tools and in vitro (i.e. studies, experiments, or procedures that are performed outside of a living organism) diagnostics markets.

GTCR committed to investing up to $300 million of equity capital. Maravai’s strategy focused on acquiring businesses in the life science research market and accelerating their growth through investment, strong leadership, and best practices. This approach led to a series of strategic acquisitions that expanded Maravai's portfolio and capabilities over the years. A common theme across these acquisitions is that they were all founder-owned, scientifically driven, category-leading companies in their own niche.

Couple of years after forming the partnership, Maravai's acquisition spree began with Vector Laboratories in April 2016 (later divested in September 2021), followed by Cygnus Technologies, and TriLink BioTechnologies in the same year.

Cygnus specialized in developing and manufacturing test kits that helped pharmaceutical and biotech companies detect and identify impurities in their biologic drugs. Trilink, founded in 1996, was focused on creating high-quality nucleic acid and mRNA products that were essential for research, diagnostics, and therapeutics. If this starts to feel already a bit intimidating, don’t worry; I will discuss the basics before getting into the weeds of Maravai. For the time being, I am just going to give you a very brief history of how this company was formed.

The following year in 2017, Maravai acquired Glen Research. Glen Research is even older company than Trilink as it was founded in 1987. They made high-quality chemical reagents used to create synthetic DNA and RNA molecules.

Following this deal, Maravai took a hiatus in acquisitions. As the biotech “bubble” started forming following the pandemic, Maravai raised $1.86 Billion from its IPO and became a public company in November 2020. Maravai was valued ~$7 Billion at the time of its IPO, and quickly doubled by August 2021 to reach its peak market cap of ~$15 Billion. It has gone down almost 90% from its peak in 2021. It’s not just the stock price; the fundamentals of the company has mostly followed similar trajectory. Thanks to the Covid boom, its revenue in 2022 was ~6x of what it was in 2019, but then revenue went down a whopping ~67% in 2023 and it is expected to go down another 10% in 2024. Of all the Deep Dives I have written so far, Maravai is the first company to experience such a precipitous decline in revenue. So, I am certainly not used to seeing revenue of a business tumbling so wildly like that.

Although a lot of Covid induced revenue has gone away, Maravai has utilized its pandemic driven cash flows to acquire new companies. Between 2020 and now, Maravai made four more acquisitions.

MockV (acquired in March 2020) developed non-infectious particles that mimic real viruses used in testing biotherapeutic manufacturing processes. Their products helped pharmaceutical companies test their viral clearance procedures without the risks and costs of working with actual viruses.

MyChem specialized in making ultra-pure nucleotides - essential building blocks used in mRNA synthesis, diagnostics, and research. They had been a supplier to Maravai since 2018, and eventually was acquired by Maravai in January 2022.

Alphazyme (acquired in January 2023) was a provider of custom, scalable molecular biology enzymes. The company specialized in manufacturing enzymes used in genetic analysis and nucleic acid synthesis. Maravai acquired Alphazyme for ~$150 million (with potential additional performance-based payments of up to $75 million).

Then just a month ago, Maravai announced the acquisition of DNA and RNA business of Officinae Bio. The acquisition is expected to enhance Maravai's mRNA manufacturing capabilities through its TriLink division. Even though its revenue is in “low single-digit” millions, Maravai mentioned it to be “self-funding”.

Overall, Maravai today is segmented in two broad segments: a) Nucleic Acid Production (NAP), and b) Biologics Safety Testing (BST). As you may already be thinking, this is not the kind of Deep Dive that can be intelligible without understanding some basics in biology. So, I will discuss the basics while elaborating on the economics of these two business segments. I will then expand on the ownership structure and management incentives at Maravai. Finally, I will try to figure out what is priced in today’s stock price.