Maravai: Can an mRNA Capping Provider Move Beyond Covid? $mrvi

mRNA, Biologics Safety Testing, and Cell/Gene Therapy

Selling to biopharma companies is a weird business. If your product can become a critical component of an FDA approved test or therapeutic the risk of churn is basically zero. This is why Illumina’s diagnostics customer base is so sticky; it doesn't make sense for Personalis/Grail/Natera to change sequencing providers when the accompanying cost is slowing down the regulatory approval process. Critically, however, if the companies you’re serving don’t end up getting FDA approval for their test/therapeutic then they likely either cut the program or go out of business. For life science suppliers at the frontier of new medicine, this means that in the short-term your business health is dictated by the strength of the biotech venture market, and in the long term it's dictated by whether what the venture market funded actually worked. Illumina’s diagnostics business would look substantially less appealing if Grail came out tomorrow and said the NHS’ enormous study leveraging the company’s Galleri test found no evidence of clinical utility!

These life science business quirks are precisely why Maravai is so interesting. The business was started in 2014 by two life sciences executives and private equity firm GTCR. The goal was to be a kind of baby Danaher, acquiring companies in the diagnostics/life sciences space. It operates two business segments: Nucleic Acid Production (NAP) and Biologics Safety Testing (BST). The NAP business began with the acquisition of TriLink in 2016, which is best known as a provider of mRNA capping solutions but also serves the mRNA market more broadly. The BST business began with the acquisition of Cygnus Technologies in 2016. Growth for this segment has been anemic since 2020 (3.4% CAGR), but it possesses some excellent characteristics. Its products ensure there are no process-related impurities in drug bioproduction; impurities can cause an immune response in patients and reduce therapeutic effectiveness, so are fairly important to spot! Once a company picks an impurities detection provider it makes no sense to churn off:

“Because of the extensive validation required for these products, these components are frequently purchased for the life of our customers’ products and we believe they are unlikely to be substituted. In addition, our analytical tools are used in the design and development of manufacturing processes and often will be used throughout the life cycle of our customers’ manufactured products. As a result, our customer relationships may span many years.”¹

Maravai is the dominant player in this safety testing space. It has a broader product portfolio than competitors and, as of the 2024 annual report, was used in all 24 FDA approved CAR-T Cell and Gene Therapies. Unfortunately, as MBI has pointed out, product usage is inversely correlated to a drug candidate’s position in clinical trials. That is to say, revenue ramps down rather than up once a product is commercially available. A further downside to this segment is the majority of sales (58%) go through distributors, so management has less end market insight than would be ideal and can’t cross-sell products from the NAP division. The perk of this outsourcing is margins look much better than they otherwise would.

The focus of this piece will be on TriLink’s CleanCap product, which is really what Maravai is known for. mRNA capping accounted for 72% of Nucleic Acid Production revenue in 2024, and was used by Pfizer/BioNTech in the development and production of their mRNA COVID-19 vaccine. The utility of the capping product is straightforward: mRNA is an inherently unstable molecule, and not the only kind of RNA that’s transcribed in the nucleus. When DNA is transcribed to RNA in regular cells, a 5 prime cap is added to each mRNA molecule. This 5’ cap protects mRNA from degradation by nucleases and aids in translation once the mRNA exits the nucleus and enters the cytosol. Capping is just as essential for therapeutics leveraging mRNA as it is for regular cellular processes. Delivering uncapped mRNA molecules to a patient results in activation of the immune system and consequent degradation of the uncapped mRNA. Put differently, it causes an immune response with no clinical benefit.

I’m actually not going to spend much time explaining how Maravai’s capping technology differs from its competitors, as I’m not convinced the strength of this product is the dominant consideration for how the company will perform in the coming years. I will note that a product’s capping efficiency, which refers to the percentage of mRNA molecules that are successfully capped, is of vital importance to Maravai’s customers. You can think of capping efficiency in the mRNA world as conceptually similar to full to empty capsid ratios in the gene therapy world. Just as a poor full to empty capsid ratio risks an unwanted immune response that ultimately puts FDA approval of your product at risk, so it is with poor capping efficiency.

The yield, or amount of mRNA produced in the capping process, is another salient consideration. The better the yield, the more final product can produce for the same amount of money and in less time. It's worth emphasizing that yield is a secondary consideration. A capping process with extremely high capping efficiency and low yield still results in a potentially efficacious therapeutic. A capping process with poor efficiency but very high yield does not.

I say that yield is a secondary consideration because it helps explain why CleanCap hasn’t entirely taken over the market. The product boasts strong metrics on both capping efficiency (95%) and yield (95%), but these stats weren’t enough to convince Moderna to use the product. Instead, the company elected to use a post-transcriptional capping method that was more time-consuming/lower yield but that had a capping efficiency of 100% rather than 95%.²

As one would expect, Maravai’s business went on a tear in 21/22, with revenue peaking at 883mm in 2022 before crashing back down to 259mm in 2024. Supplying a critical component of mRNA vaccines turns out to be a good business when there’s a global pandemic going on! Its stock price collapse (down 95% from its peak in late ‘21) stems from multiple compression as well as a steep drop in revenue. When the business initially went public it appeared to have a high level of predictability. Covid vaccines were meant to be more than a one time thing for vast portions of the world population, providing a recurring-ish revenue stream that would enable management to continue its predominantly growth by acquisition strategy. Unfortunately for Maravai, the rosy scenario of frequent Covid boosters didn’t come to fruition.

The most optimistic bull case for Maravai goes something like this: It’s true that the business, and the cell/gene therapy space more generally, has struggled in recent years. It’s additionally true that mRNA-based infectious disease vaccines haven’t experienced the expected adoption beyond 2022 and suffered from some fairly severe unforeseen PR issues. However, mRNA still has real potential in the infectious disease space, as well as applications far beyond that area:

“The first clinical trial involving an mRNA therapeutic agent took place in 2016. Since then, over 1,500 clinical trials are now in the pipeline, encompassing a wide range of medical applications.

These trials include vaccine development programs targeting infectious diseases such as avian flu, Lyme disease, malaria, HIV, tuberculosis, shingles, rabies, yellow fever, respiratory syncytial virus (RSV), and Zika. Beyond infectious diseases, mRNA based programs are addressing various medical conditions, including ornithine transcarbamylase deficiency, glycogen storage disorders, alpha-1 antitrypsin deficiency, acute lymphoblastic leukemia, Hurler syndrome, ovarian cancer, cardiovascular disease, and autoimmune disorders.

Cell and gene therapy programs also leverage mRNA across multiple therapeutic modalities, such as CRISPR/Cas9, transcription activator-like effector nucleases (TALENs), enzyme replacement therapies, allogeneic CAR-T cells, and base editing. These advancements underscore the broad and growing impact of mRNA technology in revolutionizing healthcare.”³

In short, Maravai stands to benefit significantly as mRNA programs move beyond Covid vaccines and from clinical trials through to regulatory approval/commercial availability. Furthermore, the approved therapeutics will cover a broad range of diseases, resulting in a much more diversified revenue base going forward. One should underwrite the business based on the exciting future applications of mRNA rather than where Covid boosters might be trending this year.

On the infectious diseases side, I’ll briefly note that HHS cancelled its 590mm in funding for Moderna’s avian flu vaccine, and that uptake of mRNA-based RSV vaccines has been disappointing so far. On the cell/gene therapy side, I think this bull case ignores some important nuances. Firstly, mRNA is used to varying degrees within the therapeutic modalities mentioned above:

• For CRISPR/Cas9 approaches, mRNA can be used to code for the Cas9 protein that makes the double stranded break in the DNA helix. However, for those CRISPR therapeutics that don’t leverage base-editing, using mRNA for the Cas9 is neither the default approach nor viewed as the ideal one.⁴ Casgevy, the only currently FDA approved CRISPR treatment, delivers the Cas9 protein rather than the mRNA that codes for it.

• When it comes to CRISPR treatments leveraging base-editing, mRNA is used when the goal is to target the liver. LNPs, the delivery vehicle used in all mRNA vaccines, are very good at getting to this organ and so it makes sense to utilize the Cas9 mRNA rather than the actual protein.⁵ Unfortunately, CRISPR therapies attempting to target other organs don’t use mRNA or LNPs.⁶ This has an important consequence: it’s likely not a good idea to invest in Maravai based solely on an expected proliferation in base-editing treatments. One would need to be confident in the proliferation of base-editing treatments and (1) either that LNPs will be developed/utilized to target organs beyond the liver or (2) that the number of CRISPR applications via liver delivery is so large it doesn’t matter.

  • The second question for Maravai and base-editing is whether the company can effectively compete with Danaher. Danaher was the supplier/manufacturer for the majority of materials used in the base-editing treatment for a newborn with liver disease. Furthermore, it was recently selected to be the supplier/manufacturer for the recently announced Center for Pediatric CRISPR Cures.

• For TALENs mRNA delivery is the default approach, but that’s a gene-editing tool that’s been largely dwarfed by CRISPR and so is used in far fewer clinical trials (although that doesn’t mean it couldn’t end up being very effective!) Cellectis, Allogene, and Iovance are running clinical trials leveraging TALEN.

• The current slate of FDA-approved enzyme replacement therapies deliver the actual enzyme to patients, rather than the mRNA that codes for said enzymes. That said, there are companies (such as Moderna) working on mRNA-based approaches to enzyme replacement therapies.

• For allogeneic CAR-T therapies, it’s again untrue that mRNA is the default method to deliver the Cas9 protein, although it is the default method when TALEN is used and for the CRISPR approach developed by Intellia.

The other question to mull over is how large Maravai’s business can become even if cell/gene therapies leveraging mRNA do end up taking off. A lot of the excitement about these therapies centers around their potential to treat rare diseases. I hope that such therapies succeed, but they’re unlikely to be a boon to Maravai. Treating rare diseases works economically when you’re the actual therapeutic provider; it also works for a company like Dyno Therapeutics that develops mission critical therapeutic delivery vehicles and so can command hefty royalty fees in return. It doesn’t work when supplying an mRNA cap that costs what it costs regardless of the end therapeutic sticker price. To be sure, cell/gene therapies aren’t only targeting rare diseases. CRISPR Therapeutics and Verve are individually working on base-editing treatments that have the potential to treat broad patient populations. CRISPR’s CTX310 program aims to treat those with very high cardiovascular disease risk, and estimates the potential patient population in the U.S. and Europe to be 14mm. However, even assuming CTX310 passes clinical trials with flying colours, is given to all 14 million people, and is using Maravai’s capping technology, it’s only intended to be a one-time treatment. While 14 million people is a lot, it’s only a small fraction of the 4.6 billion Pfizer/BioNTech Covid vaccines that have been shipped since December 2020. It’s an especially small fraction when Maravai management recently admitted that the capping space has become more competitive and prices will need to come down going forward:

“Pre-pandemic, the mRNA reagent and service market was mostly TriLink, honestly. And so it definitely is a more competitive space, both on the RUO discovery side as well as the GMP side. We know that, and I think we embrace that. That's why you see continued push for technology development and enhancement. The reality is that COVID era programs were scaling processes people have been working on for 5 to 10 years, and sometimes more. And this is a period not only of reset from the pandemic and the volumes of infectious disease vaccine, but also people have had the opportunity to test new innovations -- we know and embrace that people will not use the same reagents they used 5 years ago. They will not use the same processes they used 5 years ago; and that, ultimately, the cost of mRNA needs to come down to have it take its rightful place as a ubiquitous platform in medicine.”⁷

My intent with this note isn’t to argue that a world in the nearish future where there’s a plethora of cell/gene therapies targeting rare and common diseases isn’t possible. My intent is to point out that a lot has to go right for Maravai specifically to profit from this success. Companies like Verve, Intellia, and Beam all stand to gain a lot if their therapeutics are shown to work; the same is not necessarily true of Maravai if it’s supplier to these companies. Maravai’s used its Covid revenues and debt to position itself for future growth, which has led to OpEx increasing YoY even as revenue goes down.⁸ That’s not necessarily a bad strategy, but it might be when you don’t have the cash that Danaher does and so can’t always acquire the number 1 or 2 player in a space. It also might be when there’s high executive turnover (as there is at Maravai), and so an inconsistent acquisition taste (underwriting Berkshire is a different task once Buffett steps down!) I mentioned above that Danaher’s well-positioned in the base-editing realm, and so it’s an interesting signal that its subsidiary Aldevron recently announced a non-exclusive deal with Maravai for its capping technology. The company’s capping franchise and biologics safety testing business makes it a good target to be bought out by a more diversified CDMO, but as a standalone organization it fits pretty firmly in the ‘too-hard’ pile.

Disclaimer: The information in this post is not intended to be and does not constitute investment or financial advice. You should not make any decision based on the information presented without conducting independent due diligence

1. Pg 5, 2020 Annual Report

2. See this paper for further detail. Most relevant passage: “The 5′ cap1 of Moderna’s mRNA was added post-transcriptionally using a vaccinia virus capping enzyme and vaccinia 2′-O-methyltransferase^. Although such post-transcriptional enzymatic reaction can achieve 100% capping efficiency, the process is costly and takes longer compared to the co-transcriptional reaction. In contrast, recently developed co-transcriptional trinucleotide cap1 analog (CleanCap) also provides nearly 100% capping efficiency and is used in the Pfizer-BioNTech mRNA COVID-19 vaccine.”

3. Maravai 2024 Annual Report, Pg 5.

4. From the transcript of the FDA Cellular, Tissue, and Gene Therapies Advisory Committee meeting that covered Casgevy: “the RNP, Ribonucleo Protein Delivery Method is generally the shortest pulse that can be achieved with Cas9 gene editing and is expected to have, thereby, the shortest degree of off-target risk.”

5. Baby KJ, who received a lot of press after receiving the world’s first N of 1 gene-editing treatment, was very lucky in the narrow sense that his genetic mutation was contained within the liver. Consequently, the base-editing treatment could be delivered via LNP, which meant he could be re-dosed as appropriate. This would not have been the case if his genetic mutation was in another organ type. AAVs can cause a severe immune response if delivered a second time (and at times if delivered only one-time).

6. For example, CRISPR Therapeutics is primarily using AAV vectors containing Cas9 DNA for in vivo treatments targeting other organ systems.

7. Q125 earnings call

8. This is still modestly the case if you exclude the substantial goodwill impairment.