Q1 2021 Bio-Techne Corp Earnings Call
Welcome to the biotech any earnings conference call for the first quarter of fiscal year 2021. At this time all participants have been placed in listen only mode and the call will be open for questions. Following management's prepared remarks Jerry.
During our Q&A session. Please limit yourself to one question and and a follow up.
I would now like to turn the call over to David Claire Bio technique Senior director Investor Relations and corporate development.
Good morning, and thank you for joining us on the call with me this morning, or Tacoma, Chief Executive Officer, Jim Hippel, Chief Financial Officer of Biotech me.
Before we begin let me briefly cover our safe Harbor statement. Some of the comments made during this conference call me be considered forward looking statements, including beliefs and expectations about the company's future resolved as well as the potential impact of the COVID-19 pandemic on our operations and financial results the.
The company is 10-K for fiscal year 2020 identified certain factors that could cause the company's actual results to differ materially from those projected.
Patients.
This surge in lab productivity tools extends beyond our protein instant platforms and into our genomic assays as well.
We have an often we have often marketed R&D scope assay as a tool to find a gene of interest in a sample before hunting for the express protein using antibodies more than ever. This message is resonating with researchers in the current environment. They have been telling us that they need to know the answer the first time, thus we have been seeing a surge in demand for our new scope just as.
We have our automated protein platforms.
Prevent our portfolio of protein analysis instruments, namely are simple western automated western blot systems as well as our multiplexing platform simple flex had an incredibly strong quarter growing north of 35% and 75% respectively.
As I mentioned before the walkaway automation enabled by our simple western incidents. It's perfectly designed for researchers in need of ways to increase productivity, while partially opened.
Also we continue to expand the capabilities of our simple western platforms. During the quarter, we launched the ability to analyze the same sample twice in one run in our Jess automated western blot system of capability, we call replace initial customers path to replace has been very strong. We also launched a multi antigen covid assay that enables the quantitative.
Asian of patient serum or plasma agg antibodies against five stars Kobe to energy and simultaneously in one three hour run on both are worth and Jeff system.
Local Luke Apheresis instrument and Wilson Wolf Georxt bio reactor creates a compelling cost effective solution necessary to accelerate broad availability and adoption of cell and gene therapies as they make their way through the FDA approval process in coming years.
Eventually and are approaching pre covid volumes.
Or at home Test collection kick continues to have a positive impact and volumes of doctors leverage telehealth strategies to keep their patients engaged during the pandemic.
We have used the COVID-19 pandemic is an opportunity to fortify our XO Dx sales team in marketing efforts strategically, adding replacing reps and high potential or under represented Geography's. The impact of these moves are starting to gain traction certain territories. For example, we're seeing positive momentum in the northeast region, especially in New York City, where volumes have surpassed pre covid let.
<unk>.
And two one we also announced a very high profile National marketing campaign with baseball legend and hall of Famer Cal Ripken Junior to build education and awareness of the exit Dx prostate test we kicked off this partnership with a webinar to discuss his personal prostate cancer journey, including how the XO Dx prostate test impacted his biopsy decision and ultimately.
Treatment of its condition. We are currently rolling out additional direct to consumer advertising with Mr. Ripkin, including a sports radio advertising campaign and Webmd patient advertising.
We are extremely excited to have Mister ripken as our spokesman and shares experience of their tests.
But more importantly, we are thankful that you decided to take the <unk> prostate tests had led him and his doctor to the potentially life saving decision to get a biopsy and catches cancer early.
Next I'll provide a brief update on our COVID-19 initiatives.
We continued to build our COVID-19 product portfolio during Q1, expanding our portfolio with multiple new regent, an assay products to help our customers improve their understanding of the disease developed therapies and vaccines to combat the virus as well as screen and diagnose infected patients. We estimate covid related research products provided a 3% uplift to growth in the quarters.
Also we received some good news last week on the Covid cereal clear quantitative COVID-19, Agg antibodies serology test kit. The assay received marking and is currently available for use by any authorized testing laboratory in the European Union.
As a reminder, this novel quantitative Pharology assay utilizes two virus antigens correlated with antibody neutralization to provide important information regarding a patient past infection with COVID-19, and immunity to the virus dialogue continues with the FDA on the issuance of an emergency use authorization or EUA approval for the Covid Cyril clear assay.
But we.
Months of each of our segments and give some thoughts on the remainder of our fiscal year 2021.
Starting with the overall first quarter financial performance adjusted EPS was $1.43 versus $1.86, one year ago, an increase of 35% over last year with foreign exchange positively impacting EPS by a penny.
GAAP EPS for the quarter was 83 cents compared to 37 cents in the prior year represent a 124% increase over the prior year.
Q1 revenue was $204.2 million, an increase of 11% year over year on reported basis and 10% on an organic basis Foreign exchange translation had a favorable 1% impact on our revenue.
By geography in Q1 overall growth was very similar in the us and Europe with revenues, increasing approximately 10% while.
Ken basis point decrease compared to the prior year and R&D expense in queue and was 7.9% of revenue 90 basis points lower than the prior year.
I do want to point out that are adjusted SG&A, and R&D spend where approximately flat compared to the prior year, reflecting continued discipline on discretionary spend during the timing uncertainty Ah recovery for the pandemic.
This discipline include some delayed head count backfield and additions.
Given the overall improvement we are seeing her in markets. We're trying to fill these positions and continue with investments to position the company for growth going forward.
The resulting adjusted operating margin for Q1 was 38.2% an increase of 640 basis points from the prior year period.
8% with foreign exchange, having a favorable impact of 2% on revenue growth.
Within the segment, we experienced a broad sequential recovery within our protein sciences portfolio.
Although product lines with higher academic exposure, namely our reagent solutions port portfolio led the performance of our instrument platforms.
As Chuck mentioned, we had an exceptional quarter in both our simple western and simple flex instrument platforms with both product lines, gaining significant traction during the pandemic.
Operating margin for the protein Sciences segment was 45.6% an increase of 340 basis points year over year, due primarily to favorable volume leverage and cost control.
Turning to the diagnostics and genomics segment Q1 reported sales were $50.1 million with reported revenue increasing 18% organic growth for the segment was 17% with foreign exchange translation, having a favorable 1% impact on revenue.
As Chuck mentioned, our genomics Division led the segment in the quarter as our portfolio of spatial genomics products combined with the enhanced productivity offered by our tissue biopsy solutions drove increased adoption in the current environment.
We experienced strength across the entire a CD portfolio with R&D scope gaining momentum in key increased interest in high Plex initial attraction with Eni arent any scope and a strong performance in our form I asked a services business during the quarter.
Also a driver of growth for diagnostics and genomics Exosome diagnostics Q1 revenue increased over 125% from last year with higher collections from Medicare private payers and patients driving the year over year increase.
As Chuck mentioned in his comments test counts are approaching pre kobin numbers, even with fewer patient visits to the urologist in the current pandemic environment.
We are excited by the traction we are gaining in our direct to patient marketing coupled with our differentiating capability that enables patients to take our prostate test in the comfort and safety of their own home.
Moving on to operating margin for diagnostics and genomics segment at 17.3% the segment's operating margin improved from 2.1% in the prior year.
The increase reflects favorable volume leverage in our genomics division less dilution from Zelman diagnostics as well as overall strong cost management.
Before we turn the call over to Q enable share our current perspective of the view ahead as.
As Chuck described in his remarks, the current pandemic environment as not only placed a greater emphasis on products like ours that enable scientific discoveries those created increased demand for solutions that increase productivity within the lab.
Biotech these portfolio of protein analysis instruments innovative tissue and liquid biopsy solutions cell and gene therapy workforce solutions and core reagents fit perfectly with the direction scientific discovery is trending and we are positioned to ride the wave of research and discovery is going forward.
As our Q1 results show life Science, researchers are clearly coming back to work, although the initial pace of activity remains much stronger in the biopharma sector compared to the academic setting.
We are clearly off to a strong start to our fiscal 2021, but unknowns remain.
A new wave of coal the 19 outbreaks is materializing across the us and Europe, representing a risk to the pace of increase research lab activity or worse, a potential of labrie closures of Lockdowns are reinstated.
That said based on our Q1 performance as well as the initial trends we are experiencing in our second quarter. We do believe that we have largely turned the corner and see a path to resuming double digit organic growth for the full fiscal year 2021 and beyond.
To support our strategic growth plans beyond fiscal year 21 further investment in our commercial execution and product developed pipeline needs to be made.
After over nine months of a pause on new investment, we intend to start making those investments once again.
What that means for the remainder of the fiscal year is likely lower adjusted operating margin than what we reported in Q1. However, we plan to finish the year with profitability those not only higher than last year, but also higher than fiscal year 19.
As we get back on track to our long term goal of over 40% adjusted operating margin.
That concludes my prepared comments and with that I will turn the call back over to start you to open the line for questions.
Thank you.
We will now begin the question and answer session. Please limit yourself to one question and one follow up.
To join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset forecasting any keys to withdraw your question. Please press Star then Q.
We will pause for a moment as callers during the Q.
Just first question is from Suneet Suda Sdd Leerink. Please go ahead.
Hi, Chuck.
Congrats on the quarter really strong here.
In terms of.
Number of trends that you're seeing from what I'm seeing.
There, there's less protein westerns multiplex thats doing really well.
Hub acds in antibodies contributing strongly to the spatial.
Market and Exosomes delivering it strongly too so if.
If you could given where we stand today I think the key question is you know what are some of those trends that will continue to be really strong in the fourth quarter and into 2021.
Essentially around the sustainability of those trends. So if you could maybe talk to that and just give us a sense of as the labs are opening up and despite you know.
The near term shutdowns that were seeing in Europe waters.
What are some of the segments, where you worry a little and ones, where you are more confident of continued growth.
Sure Thanks beneath Tom I.
I think overall, we're seeing a great recovery, even though you know we had.
Very low single digit growth in our our reagents business may do is still a softness in academia overall it was just such and such a big beat because we're just seeing a lift almost everywhere. The productivity requirements are just been an increase so much because of shifting and because of the way labs, just the out of the way they're operating as.
Different than it was a year ago in it and it just speaks to our sweet spot, where valbart productivity. So we're getting that lift that on instruments as well as his wealth reagents bias.
Biopharma is no different academia their their their productivity is improving because they're shifting and they're having to do different do things differently. They have money. So we're very sharing estimate before there are buying extra and also remember other labs can have it or different shifts or whatever and the reagents or youre. Just the orders have been magnificent now we've also really tuned.
In our commercial force to much more inside sales are much more remote access to two customers you know no.
No travel time for no loss there. So that's probably an improvement and overall, we are seeing the benefit I'm just really happy because.
Even with you would expect them a mix issue because of a slow of a lower protein amount and stuff this quarter because of academia, we're still seeing the everything just being a wonderful overall net net because of.
Because of the average you know growth across every segment.
And this is still with academia not all the way back so and you know as Jim said I think we we've dug in hard into what's really going on how much is a halo effect to COVID-19, how much is this how much of that and we really do think we've seen the corner Cros and lesser is another whole wave of complete lockdowns, but as you've already known and yet.
Seen in Europe Lockdowns are different this time around they are not shutting schools are not showing institutions. They can't take the hit to their GDP like they did the first time and if it should that happen here in the U.S I think it'd be similar felt as long as schools don't shut down an academic continues to progress back will be fine and Biopharma is is rocking and rolling right. Now is all I can say so.
That's great.
And then on the cell and gene therapy. So so on the cell and gene therapy and protein production facility.
I think the big question here on investors mind as the ramp and the cadence that you expect from the revenue from this facility and.
Maybe could you give us a sense of where you stand right now in terms of the backlog. The overall order book and Whats your expectation in terms of the sort of the ramp as we go into 2021, because obviously this is a major expansion for biotech knee in proteins and that well recognize that you are the leaders.
And when it comes to proteins.
Well, we're not the only game in town or logical chasing us right and we're a little bit late to the game on in terms of GMP as you know so we've been very.
I'd say.
Out there really out front talking about a lot of our detailed to try and really show the industry that we're serious about this and that we have the credibility to get to get big and as soon as we can that said we got to be careful because our competitors are also building sites are also going after this and they're reading, what we're putting out there and they're reacting to it so.
We're going to start backing off on a lot of details at this point going forward I will tell you that we are on schedule our factory that numbers out through the capacity that capacity number really is anywhere from 140% over 200. It all depends on the mix of the products, we make and we don't know what the mix will be until we start really getting in the big contracts and they start ramping.
We have signed one big deal and that was before this quarter and we are close to signing many more and we're in we're in.
We're in the final stretch of negotiating with many and these are all multi multi million dollar contract needs.
The Guy that came to US early said that if you guys could give serious in this with your background. Your your quality your bio activity all your reputation and where we're at we're all over it we're buying from you saw.
So we're doing that but as we've always said, it's a bit of a J curve. There. We're we're roughly a 10 million our business going into this quarter, we've talked about that we're not going to talk about it going forward, but we are solid high double digit growth in GMP proteins, even now and will be migrating some of that that production to the new facility as we ramp in.
Build at the new production into it as these contracts come but they are finalizing their fair phase III clinical field, its not going to happen overnight. So we got to qualify and then we've got to build lots and we will be building inventory for them ahead of their purchases. So all that is going to take a year or two so you know.
You can you can.
You can guess as much as we can I think we'll be in a.
Kind of a doubling every year as we grow the site and maybe more for three or four years out, but the first year or two are going to be it's really a set up and we.
We got a lot of customers, where we are migrating a lot of business, we're going to have more than a half a dozen large customers and possibly many many more than that and it's pretty on knowing you got you got the data as well as I do on the number of Clinicals going out there. It's it's exploding right. So the need is great I think it's I really think it it's almost going to be in everybody wins environment for five years.
In this space and we want our share and our share is.
It's a majority share because we are the world leader in proteins. So.
Got it that's great. Thanks, Chuck Congrats again.
The next question is from Dan Arias Stifel. Please go ahead.
Good morning, guys. Thank you Chuck just following up on some of the things that you mentioned there are pretty substantial step up for protein Sciences can you just hone in on simple western a little bit and talk about the outlook that you have for instrument placements at this point there, particularly if we try to separate out.
Pharma, where it sounds like it's pretty pretty rocking rolling to use your words versus academia.
And then along those lines is it fair to say that going forward or for this year anyways growth should be over 20%. This year just given that you are above that level in several quarters pre cove, it and obviously against the fiscal 2000, <unk>. If you have a pretty favorable year over year there.
Yes to put some context, let's let's back up a year I mean two years ago.
We have started we started seeing a major ramp is this is this platform really kind of crossed the chasm and start reaching critical mass and we were on pace delivering over 100 systems a quarter.
And then Colgate hit an ever being locked down and.
Biopharma change the way they operate so they had to get their new processes in place, how they're going to shift and everything else. So things got slow there and then academically shutdown so nothing.
So we had a pretty bad quarter, you know couple of quarters and grow with simple western annual understood why especially academia and shut down. This is a platform heavily used in academia.
And now from now what's happened now with growth well north of 30% things exploding back out of the blocks.
And and academia is not even all the way back yet so how can it be that good.
So I think it comes from two things we've dug in hard on this because we need to understand because we knew we were going to ask him.
And the productivity changes the process changes in Biopharma and labs in general it's changed there is more of a focus on productivity because the shifting because of.
Cutbacks and staff and so more supervisors are having to go back to the bench and help out in and because of that awareness of the of the platform being a great productivity tool, it's accelerated because more and more decision makers are really at the bench and driving that productivity and with extra shifting and then the.
The distance requirements. It just requires requiring more machines more stuff everywhere I think it's driving us not only us but everybody is showing good numbers I don't think anyone is headed is good organic numbers as we have when you subtract the cove in but there.
There's a there's a portion of this for everybody.
And Thats, what we see now as academia improve we're going to we're going to do even better. So you know we're north of 30, this well north mid Thirtys. This quarter can we say we will be on 20% going forward, where we were before pre recorded I think thats, a pretty safe bet I think I think I'd like to see north of 20 by 20 should be in the cards.
Remember, we're still only at at Max 15% share with this platform and is the only automated western blot solution in the world. It's highly protected by IP. There isn't there doesn't seem to be any other decent cheap way to do this in an automated fashion and we want to get 40, 50%, we get that it's hundreds of millions of dollars of growth. So.
Western blot of wanting to singular most most done processes any any any bio chemical chemistry lab and.
Were the only tool so it's going to continue to grow it works great. The word of mouth as they are now I mean, it's you know the demo of anything we suspect it might be a question and how you guys doing demos when you can't go visit.
We've gotten really creative how we ship the instruments in because they're not very big or not complicated unbox. Some plug them in run the set up and we can do demos remotely with with Webcasts and and Webinars and it's working great. So.
Yes to answer your question just short in the end, we do see continued strong growth from here on and with with simple Western no doubt about it yes, okay. I can I can feel your enthusiasm there.
Okay, and then maybe just on Ekso Dx it sounds like you're getting on the right foot there with the B test. So I guess with that in mind are you able to sort of put some numbers on the volume growth that you expect this year. This fiscal year, that's obviously been something that's tough to track for.
For lots of different reasons. So I'd just some guidance on volumes would help and then.
What should we think about in terms of being able to switch over to accrual accounting on the test that you do perform during a quarter. Thanks a bunch.
Yes, so it.
It's probably early to start giving a lot detail on that we do have competition here as well that were wary of but.
But we do we have surpassed most of them and test counts.
We're out to 2400 urologist level of purchases and Thats on a 20000 or so so we're you know we're still on the on the early side of this.
We do have a 91% rebuy rate with all the with though with the purchasing or outages, which is incredible so its ramping even harder alright. So.
The at home is working so we are seeing numbers going up and then we did go to accrual on a portion of our business and let Jim comment further on the cash to accrual process. Yes. So actually we have enough history now with our Medicare payments that we were able to move to an accrual based accounting.
Any recognition process for our Medicare based payments in Q1, so going forward that will remain a recruit basis all of our non Medicare payments are still on a cash basis and will be for the foreseeable future. So we've also focused a lot on.
The direct marketing campaigns in the four to support the at home and we are the only one that can do and at home because we're a noninvasive.
And it's growing well you stack on top of that the promotion with Cal Ripken Junior and the responses Amazing just to give you. Some facts here on we had over we had almost 8 million impressions on Google ads on Facebook in the previous quarter due to the launch Weve.
We've done.
We've done 90000 video views, we had over 100 commercial radio.
Radio commercials on the on the platform with via the campaign with Cal Ripken. We've had today Youve had almost a dozen interview personally and so he's a he's ramped up and going forward.
This guy thinks we saved his life [laughter], you've pretty bullish and he's pretty supportive under and it's been pretty amazing. We've all got signed baseballs by the way [laughter].
So you know I I I don't think weve crossed the core in the corner yet on critical math I think we are way I've had a lot of friends and diagnostics, helping industry and who told me that it takes it takes five years, Chuck and there's just no cutting any corners and and.
And you guys are going to get it done in two years and they're right.
It's not going to be done here in two years and we're crossing that to your point here soon but it won't take five where we are we're we're ahead of schedule in some areas. We're in a strong position for reconsideration, which really haven't heard of any way because of the.
The tiara process with our with our docks anyway. So we're getting a really really good.
Medicare reimbursement rate, even regardless with the with the.
With a multi youth consideration for the offer the expansion that we hope to get here with our Mac here soon that will even improve but but we have next generation stuff coming you know we've got we're kind of halfway there may be a year out on the kidney rejection platform and that market's doubled the size of the prostate cancer market. So you know it's it's easy.
The more exciting so as I've said before this is a platform not a one trick pony and we've got four or five things pipeline over the next five to 10 years. They are going to create explosive growth for this division New Young division so.
Okay.
Still a my space guide some of take your word for it on the Facebook promotion, but I appreciate the pre appreciate the color.
Okay.
The next question is from Catherine chunk of Baird. Please go ahead.
Hey, guys congrats on the quarter and thanks for the questions.
Did I hear you right that coal that related research products contributed three points in the quarter I.
I believe you are expecting slightly higher than the size that you saw last quarter. So curious what the puts and takes there were and is there an additional clinical related tailwind and how do you expect those to trend in the fiscal second quarter, Yeah. It's a great great question.
We probably have over a couple of dozen different product.
Tools out there for for research related to COVID-19, and they are all ramping nicely. You know the are there any scope tools just phenomenal it'll it'll be the biggest seller we have in the portfolio for for the division but.
But but it's not like a PCR test or Surajit test right. Those are the things that they can really scale and we all know what's happening in the world with companies who have PCR right.
We have some of that as well with the with the with our lab doing that be tested to same equipment. So we're we're set up we have any way and we are we are growing that business as well, but it's just starting to ramp now.
The Surajit, we just got the CE Mark a couple of weeks ago, and where we are and where we're closing deals and we're starting to launch and we're ramping.
I was obviously, hoping to have more for allergy this past quarter, and we were hoping to have us in any way in the U.S. and we just haven't been able to secure that you've got the FDA has just.
And the only way to describe is just in turmoil [laughter] theyre just behind behind behind and.
And they're really struggling we have been promise that theyre all over us we have submitted everything we can submit and we're just waiting for the answer and.
We expect we'll get it but thats probably the biggest reason, we didnt have more COVID-19.
Revenue this quarter, because we haven't been able to get things started here in the U.S., because we haven't gunnery oohed. So going forward there will be more it won't be it won't be PCR related revenues, but we are we are at a capacity level. Because this is just the liza the whole world has a life automation. We can we can produce very easily 10 million.
Test a month and and you know we.
We hope it grows we do think that there were still early enough because we think the big need is going to be this bow wave of when the vaccines hit everything along are the immune can they see their kids again can they see the Grand Kids again, there's going to be a lot of interest theres going to be a lot of immune response differences with these vaccines business not unlike in the flu shot and getting getting maybe a headache.
Can get a pretty big response, and so people are going to be wanting to know where theyre at and.
I don't know for the last 10 years, that's going to be a while and there will be there will be a big need for three allergy and.
We will have the only fully quantitative test out there there is only one out there the semiquantitative thats a seamless test and we were given full full quantitative.
Neutralization claims into with a CE Mark in Europe for the only one in the world. So.
So we'll see how the world treats it starting in Europe, and and we'll go from there and hopefully we'll get to.
We'll get to the right the the the opportunity to give this this this best in class World test to the to the to the American public as well here with anyway, but we're waiting on the ft to do that for us and.
Thats. The primary reason everything else grew kind of okay for the quarter and the it was 3% yes.
The 10, I should point out too though.
We're able to really differentiate what is kobe and what isn't because either there are tests that are really devoted to covance.
A lot of companies out there, it's kind of hard to know how many more peak.
Speaker Flath, whatever you're buying that are still already being used for covered that are being put in the cobot numbers, you're putting in there in their core so it's kind of hard to know whats apples to apples. So we really think that are 10% organic growth really is kind of organic and compared to a lot of companies out there, but if you put if you're going to separate by skew where the SKU has something that says koby 19 on.
It is 3%.
And that would be a good question to give all our peers out there as well as I don't think you get the same kind of answers so.
Okay, Great that was very helpful. And then great to hear academic returned to growth can you just give some commentary on how that trended throughout the quarter and where activity levels stood in October.
[noise] slow and steady [laughter] very slow and steady I mean, almost on a a drip all the way through the quarter and it just keeps getting better and better and we've been terrified. The last two weeks here with Europe in my turnaround, but so far our data suggests and our our interactions suggests that it's not going to have an impact on the labs in school.
Sales in Europe, even this locked down so we'll see.
You asked have just been a slow steady return and.
And that you were not there yet, but it's been amazing to see the revenue in the lift we're getting because our our growth is surpassing the actual level of all of their comeback with time. So we got to know why why are we doing better than the roughly 60% that are really opened partially its because of these productivity changes and the shifting.
Changes the duplicity needs. The all these things are having an impact on our growth and there has been probably its a little bit of restocking turning things on kind of like we saw China, when China turned down with a surge they had to rebuy everything to get things go on the difference in China was 100% day one in here, it's going to be a slow turn on but there's still there's still a restocking resurgence.
Piece. So you saw a bit of a wave as things come back online I think in you and you know, we're we're tool supplier and we supply reagents, we supply supplies consumable. So these are things that are you going to see that the initial first.
First wave of new revenue with.
Great. Thank you.
The next question is from Patrick Donnelly from Citigroup. Please go ahead.
Thanks, guys, Chuck maybe just to follow up on the serology commentary that was helpful.
Can you just kind of detailed path forward here I know you, obviously talked a little bit about CMS paying more for your test, where we stand on that front in terms of pricing and then what's built in in terms of the double digit organic growth Jim talked about how much should we expect serology is going to contribute once once it gets rolling both Europe and U.S.
We have zero in those comments.
So it's all gravy talk coming upside so whatever we can strategy you can tack on top of what Weve talked both put it where we've given for any guidance. So our cores is just smoking [laughter] all I can.
Until you saw.
It will just Serologist just is just going to be.
On top of all that so what's happening well, we can't get CMS to give us a new price until we have anyway, and we can get the channel to open up and close deals for us from the U.S. until we have any way to I know what the claims are we.
We know enough to know that at what we sell Eliza kits that in general and we're not trying to galleries anyone we haven't done anything different. So we know we're going to be in the five to 10 dollar test range.
Whether the all the channels going or can or get 80 per $80 or $120 reimbursement. It's all unknown it'll be way above the 10, we know there will be strong interest to sell our kits once things that go on because it's such a good test, but if double antigen test raise a two step test. So you know it's going to it's going to need to go beyond the $42.
The current term reimbursement level out there so and even there are you seeing that the pricing that's happening on these tests, even even PCR is going well beyond what the reimbursement levels are the demand is staggering right. So.
So I I would not underestimate the big guys and the channel to drive these test of trying to getting over $100. A test. These later it will add it.
Theres plenty of proof out there right now that that will carry probably because.
The current PCR testing is at that level or beyond.
So, but it won't be us getting it but we're going to get our fair share and is going to be great. So we know how to make a life buckets, we've been doing it for 35 years. So.
Yes, and then on the antibody side I know you've talked about in the past it some potential for it to be used to your point there on the vaccine have you had any conversations with kind of the vaccine makers about the test being used as part of the vaccine development as you know we've talked to all of them and.
The last thing a vaccine maker can do when they're in a phase three clinical change here is changed or control. So it's really kind of odd because you got the rating on the FDA for you way for this test and yet you can tell them well what do you do and how are you treating the vaccine makers with there do they have to have a test there has to be based the vaccine to be based on something.
Because they're doing all they're all they're all doing their own homebrew because nothing existed early enough for them to go buy anything and they can change until things get out there. We do expect a lot of interest in our test by the big vaccine makers as they get things launched and as we go into the second third fourth generation of these vaccines.
For one where we're doing it in a scalable fashion with a monoclonal they are not there.
They are they're doing home or they're not intend to scale their intend to sell test. So they can use of Holly you can't you can't do this test for the world on a poly their arm of goats. So so you know we're doing it in a in a.
A scalable fashion with highly proprietary processes and antibodies that we have discovered that make us the best in the world working with our partner.
Sinai Cantera, which obviously you need a lot of patient samples to get this done that's a big problem by the way for anyone moving in this area. If you don't have thousands of patient samples to do the work with you really can't get anywhere and it's very big issue. So we are the perfect partnership and that's it's gone very well yeah. We've been ready for two months, we just got to get this through our regulatory process.
The severe and their bogged down there just stared bogged down and they've got tarnish around strategies, because we initially ways. They gave didn't work and they're out there think we'll step qualitative tested this simply don't work in some cases and so we've got a we've got across that hurdle, but we can promise you ours works and they all know what and.
They have been very engage with us and interactive weekly the team at the FDA.
And we've been talking to higher levels of management and the FDA and they have assured us that this is a high priority and they understand.
And they understand the significance of a of a world renowned authorities like Dr. Kramer Ano at at at Mount Sinai, So, it's coming but you know they.
They are not really good at telling you when Oh, we just hope it's coming soon we do have the CE Mark were there in Europe, and we're launching and we're going after it. So we will first data, we'll see on how how will affect revenues and volumes and.
In real demand will be out of Europe first we have a.
We have deals signed up for Germany, and UK completely at this point and we're working with.
Spain, Portugal, Italy at this very moment and the channels are being set.
I'll just add to its probably fair to say that in terms of in terms of in terms of end user demand that likely will not occur until they're actually our vaccines, yes that has been in the market I Hope I think your time.
I think our initial thinking.
Of people wanting to know did they did where they sick before and now are the okay. I just don't think theres that.
Big.
And need it.
It will be the big though in vaccines come out now.
Then the vaccine makers are all very supportive of our work and they they wish they could in a lot of them, which they could use and change what they really can't without taking.
And we'll redo on their Clinicals and there is no way, they're doing that so.
They have to they have to move forward with they have for now until they launch.
Okay that makes a lot of sense, maybe just staying on Europe real quick just on the funding backdrop.
As you've been some locked down measures there it seems like cobot overhangs persisting a bit longer than expected maybe just your latest thoughts on that region, usually have a pretty good handle on the your funding side and what you kind of baking in as you go forward.
Yes, as you know we were having some softness and year before Colgate and so we are kind of re.
Redesigning, our commercial organization and our our go to market strategies than we had just kind of put that in place is called it hit so we weren't able to re measure how it's working.
It's kind of starting to work so our numbers are pretty good in Europe and it's in even that's in light of cobot softness so.
We have changed a lot of management, we've changed out a lot of people we've done a lot more inside sales the code to coincide with the new way to go to market in Europe. You can visit so you've got to have a lot more inside sales and that takes technical people and we have a lot of them. So it's working pretty well I think we see funding stable.
And.
I only mean different inherently there's I don't think if any change the status quo of the future for funding for for life Sciences, I think the needs will be big I think people are angry I think people want more want more assurance that there is safety out there for next pandemic and there is just going to be a lot of research dollars and probably more than ever and if actually infectious diseases again, so we'll be playing harder there than we have in the past.
Okay, great. Thanks.
The next question is from Alex Nowak of Craig Hallum Capital. Please go ahead.
Great Good morning, everyone.
Yes, sure how do you intend to take the transplant us forward into the market and then just a follow up questions that what sort of work has exosomes diagnostics done on early cancer screening because acquisitions might be a unique ways to do something.
Something similar to or better to what grow exact and others have done with cell free DNA. So just any thoughts there would be helpful.
Yeah, we have some work going on all those fronts. We're focused clearly the most focuses on ramping our prostate test.
In parallel we have the.
We have the dilution capability of the investment capability to keep could you working on kidney rejection next were probably halfway there were probably a year away from being at where we were a year ago with happy right. So we will get we have our first peer reviewed paper being worked on right now being.
It's accepted it spits out there working on the second we'll try to get in the guidelines will get an LDC going and it will start going you know, we're working with a with our Mac on getting.
Getting on for Medicare lately, probably in a year or so.
The markets double.
The size the need is huge I think I don't think it will be as hard getting acceptance and getting a ramp on this test because they're just they're just such a big need it is so bad I didnt realize this but.
Half of all kidney transplants fail and 10 years.
And in the first year, a big percentage fail and they they have to start testing immediately for rejection and they do this via via biopsy. They start cutting chunk sadia. It's just not good. So one cut one competitor does it with a blood test and that's a real compared to rework their numbers are pretty good we're going to build do with piano Cup and its going.
Work even better.
And.
So we're on our way there is a lot of excitement around it around it.
Primary care oncologists as Roger I'll, just are excited and we'll be there now.
Now the the companion diagnostic side that that cancer screening and the initiatives we have over a dozen initiatives, we're working with and some are starting to scale and there is there are some that are close to being you know a can becoming a companion diagnostic with a therapeutic so we're getting there these are longer longer fuse initiatives.
We have the ability of doing as much as 170.
Hi, gene screen, it's no 500 like Grail, but at a 170, we're ready to go now if somebody wants to take it through a clinicals we validated it.
We have as you pointed out the platform of Exosomes is has high utility.
Imaging results around using exosomes for neuro disease and in in areas of dealing with what's going on the brain and brain cancer getting through their blood brain barrier is a big problem and zones solve it. So there is a lot of work with US right now on that so the future is bright.
For oncology and blood based oncology related test for axis on but not here today and.
We just don't have the resources to fund and do all these in parallel so we're kind of staggering them and doing partnerships and talking to more people more companies, but the.
The interest is growing and the platform to real Exosomes are here to stay.
Okay very interesting very helpful. And then in the press release and prepared remarks, you called out these long term budget increases across potentially across the world due to the pandemic can you just give any specifics what you're hearing from your other countries such as China and the emerging ones like such as India. What are you hearing as far as their budget.
Going up as a result of a pandemic.
Well all I can comment on is what we as we put.
All these questions with our sales force and our relationships in the field with with our customers and this is what they are telling us.
I'm not I'm not on the speed dial to any any color any country leaders.
But this is what we know so far and in places like China, China is going to be weird. This year, because it's a 50 year their five year plan. So there's going to be it's not going to be that the 25% to 30% automatic but I think twentys in the cards and then come next year I think we'll come out of the gate Super strong because I think funding for life Sciences, and healthcare is going to be off the charts there.
Im around.
You asked this I don't think it's going to matter Who's President I think thats, a bipartisan agreement area and.
I, just think Theres a lot a lot of the population we'd like to see a lot more than the $40 billion spent which is a rounding error compared to what cobiz cost us. So in the NIH funding. So I think it's going to be a big future.
Europe can be obviously country by country, but you know again places like the UK, it's going to go up it's got to.
And so that.
That trickles down to us because we sell broad based tools across all life Sciences research and we've talked about this in the past.
Every 8% to 10% increase in budget you, we usually see about a 1% lift in or in total organic growth and thats kind of whats been the past and you know.
If we see a 20% increase lets say next year in funding you should see a good 2% lift from that alone just in our core and then thats on top everything else. We're doing so I think the future's bright I think.
The tailwind is it's a tailwind currently not a headwind looking forward at least the next couple of years.
Understood. Thank you appreciate it.
[noise]. The next question is from Dan Leonard from Wells Fargo. Please go ahead.
Thank you so.
Jim You mentioned in your remarks that you thought there was some signal a restocking in the quarter how meaningful do you think that was.
I think you when you do that you have to do by accounts. So weve done really big analysis in the order in order sizes, if you've got to an average order size $1000 for University, an offset in the quarter. Its $1200 you start asking why right and some of that's restocking.
Is it significant is it is it something like four without that we would have been four or 5% versus over 10, no way am units.
It's marginal I think but there is some restocking.
Okay, our consumables and then on the outlook for a very long period of time, so you're not going to have a big yes. Following the restocking we generally use our reagents within days of purchase were run rate more flexible.
Okay.
And then on the outlook your comp gets a lot easier in the December quarter is it fair to assume that your.
Your growth rate could accelerate pretty meaningfully in Q2 absent.
Reestablishment of locked down just given the easier comp and the momentum in the business.
Yes, we know one FSR reiterate we're just extending over this quarter. This is the quarter, we are afraid of 13% comp and we just kind of blew away.
This quarter coming up you know was not a great quarter for us last year and so it should get your core well I can just tell you the start of the quarter is really good.
But december might be really weird installing lot of universities are going to going to shut down from from Thanksgiving. All the way into January so they don't have multiple coming and going right for the students. So.
We don't expect a strong December but we've had a great start to the quarter. So we'll see how it ends up but that I don't think December is going to be off the charts for anybody to be honest.
But that said every country is different and we're seeing good strength in China. We're seeing we're seeing really good everywhere it were but India India.
Pretty much a disaster right now, but not very big for us yet.
And going in and then into next year, our Q3 and Q4, obviously the comps get Super easy so ill.
Q4 for sure.
And.
So we're we're.
We talked about a double digit year, we see a double digit year on the cards here for us so.
Okay. Thank you.
Points, we put in the board this quarter were the most the biggest the.
The biggest thing we need to do anything we did it so.
The next question is from Jacob Johnson from Stephens, Inc. Please go ahead.
Hey, guys. This is mason on for Jacob on just a couple of quick ones from me.
First could you update us on Quad technologies in the imaging and then outside of those in GMP proteins are there any cell and gene therapy capabilities that would.
The interest you guys, whether you're adding them organically or via M&A.
Yeah.
We're still hunting that space I'd like to I'd like to buy 10 little companies in this space, if I could find them, all and get them, but they come at high prices.
We have most of the work flow kind of closed so we don't need a lot, but we would certainly add on for scale.
We've launched our Quad technologies and it's it's being sold is being used to it. So we're certainly in preclinical than I think we are close to being in real life Clinicals.
<unk> ramping nicely.
Got it I'll leave it there thanks guys.
Yeah.
This concludes the question and answer session I would like to turn the conference back over to check comments for any closing remarks.
Well.
I'll just conclude with thanks for being a line it's been great to talk with you. All we had a wonderful quarter, but you know the next quarter will be the the most <unk> important quarter in the company's history and we're onto that now so we'll talk to you then thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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Yeah.