Q4 2021 Bio-Techne Corp Earnings Call
Ladies and gentlemen, you are currently on hold for the biotech net earnings call. We awaiting the arrival of addition of participants interest be starting shortly thank you.
So for your patients from please continue to hold it.
[music].
From the <unk> Chief financial officer of biotech.
Before we began lumpy briefly cover our safe Harbor statement. Some of the comments made during the conference call may be considered forward looking statements and.
Including beliefs and expectations about the company's future results as well as the potential impact of the COVID-19, pandemic kind of our operations and financial results.
The company is 10-K per fiscal year 2020 identify certain factors that could cause the companies actual results to differ materially from those projected in the forward looking statements made during this call.
The company does not undertake to update any forward looking statements as the result of any new information or future events or developments.
The 10-K as well as the company's other S. E. C filings are available on the company's website within its Investor Relations section.
During the call not get financial measures may be used to provide information pertinent to ongoing business performance.
Tables reconciling these measures to most comparable GAAP measures are available on the company's press release issued earlier. This morning on the biotech any corporation website at Www Dot bio dash technique Dot Com I will now turn the call of it [laughter].
Thanks, Dave and good morning, everyone.
Thank you for joining us for our fourth quarter conference call.
For 39 per cent organic growth in the quarter, the fourth quarter clothes out of the record year for bio checked me, where we achieved 22 per cent of organic growth for the for 2021 fiscal year of.
Difference of your makes we ended fiscal 2020 on on a much different note is lockdowns and disruption of for academic and Biopharma customers to cold and changed the way research was being conducted and.
In the quarter of following the initial Colby pandemic spread there's been a record level of interest in bio techniques portfolio of reagents analytical tools and services that enable researchers to make discoveries and push science forward with robust research demand from Biopharma and markets and expectations for a favorable of government research funding environment, We believe a multi year research tsunami of the punishment.
Oh check me is incredibly well positioned to ride this wave.
For the second quarter in a row the queue for growth rate was the best organic growth of the company of delivered over 25 years, both on a year over year and over to your keg of basis, the accelerated queue for growth with broad based across our end markets and geographies on almost although most of our customer of experienced the worst of the pandemic induced lockdowns during our fiscal queue for last year.
The growth within our product category of it was also broadbased and continue to be led by our analytical instrument platforms cell and gene therapy solution in genomics tissue spatial analysis tools.
EMEA had a strong finished 2 of record year with 25 per cent of getting of growth for the full fiscal year.
Given that our main distribution home for Europe as in the UK breakfast quite a distraction with multiple supply chain of logistics surprised the to conquer between the UK and mainland Europe. The team did an excellent job navigating through this and ensuring the strong demand for European customers was delivered.
China is of similar story as you May recall, China was the first of Lockdown due to Covid and the first to come out of China for US is essentially back to business by our physical queue for of last year for the year over year costs for China for tough this year compared to the U S anemia, yet China delivered 30 per cent growth for the quarter and the full fiscal year.
We are very close to seeing $100 million of annual revenue in China, if not this coming fiscal year, most certainly of the year after.
Across the company, we delivered this record quarter with the continued focus on profitability as our operating margin expanded by over 740 basis points of year over year during the quarter, we made progress investing in the human capital necessary to position of the company for it is the next leg of growth although demand for talent in the life Sciences industry remains very high.
Originally some of the business practices, we took for granted in the Prepandemic world, including business travel are slowly returning but remain below normal levels.
The system with a result throughout the fiscal 2021, the deferral these investments accelerated our profitability of that.
Now, let's discuss the performance of our growth platforms, starting with the protein Sciences segment, where organic growth accelerated the 46 per cent in the quarter and 24% for the full fiscal year.
During the year, we've made great progress with our cell and gene therapy initiative for you open our GMP protein facility and signed several large customers going forward will continue to broaden our G&P portfolio with the clan introduction of GMP grades come recombinant antibodies felon.
Phelan expansion media and other critical reagents the.
Demand for G&P protein is likely to expand beyond T cell based therapies to include gene edited natural killer sales and progenitor cells that fill the regenerative medicine therapies workflows.
All of these areas for gaining momentum and increasingly rely on our products.
As evidence of this growing interest catamaran bio in biotech me recently broaden the scope of the collaboration from include the development of novel sell expansion technology for use in the manufacture car in case tell therapy products.
Additionally, catamaran secured abroad worldwide license for Tc Buster or gene editing part for him and his integrated the technology into its tailwind platform for car in case cell therapies.
Importantly, our cell and gene therapy relationships such as this example are having a broader impact throughout the company driving adoption of our media assays instrumentation antibodies and other offerings in our portfolio.
We are leveraging our digital marketing capabilities to build awareness and the customer funnel for are expanding portfolio of cell and gene therapy work for solutions.
During the quarter, we made enhancements to our website, including promotional videos and additional images to more effectively showcase of complete offering I would encourage all of you to visit the cell and gene therapy section of bio checking the website to view of video providing of virtual tour of our state of the are of GMP protein facility.
Now, let's discuss the analytical instruments, we sell within the protein Sciences segment.
If you would've asked me in the past if we could grow our 3 main platforms simple western Jess Simpleplex, Ella and biologics Marie's bye.
By 30 per cent to 80 per cent all year long I would've said impossible.
So what happened this past year the number of things first.
First of these instruments are great tool of the productivity if labs redesign of bells around working partially from home. It became more important to increase output while in the lab or tools are perfect for this and other great value.
The second proteomics based applications are on fire.
Research in this area is strong in our tool for not only the best in class and in some cases of the only type of tool you can purchase of conduct the specific analysis. For example, simple western is the only fully automated western blot solution on the market the productivity of naval by our simple western instrument combined with our growing installed base has led to a significant <unk>.
Kris and market awareness for this product in fact, we believe this awareness has reached a critical tipping point is almost 90% of the simple western has been sold in the quarter did not require a demo.
Simple flex continued at the shriek of amazing results in queue for with our automated multiplexing platform Hell of delivering over 65 per cent growth in the quarter as demand for neurology immunotherapy and cell and gene therapy research applications drove instruments placements and utilization within the installed base.
This resolved is even more impressive considering the particularly challenging year over year comp lsa's when the high demand for the system for Covid related applications drove and almost 100 per cent increase in the same quarter last year.
We took several steps to meet ongoing demand for the platform, including additional shifts and are in the initial stages of of heading incremental manufacturing capacity to meet forecasted demand.
During this quarter, we announced the collaboration with India based ophthalmic health care provider Narayana, that's for all of them for the evaluation of Ella as of diagnostic tool for to analyze laser vision correction patients for post surge of complications. This is another example of the untapped potential allies of clinical diagnostic platform.
We also recently announced the collaboration with project for the launch of of the Simpleplex of Dino associated virus or AAV to the viral tire titer assay on our Ella platform.
<unk> is commonly used in gene transduction due to its ability to infect a variety of cell types. The.
During the viral vector production process of series of robust analytical measurements are required of determined the viral titer, combining the efficiency and the reproducibility of the established a V..2 the license from the Progen with the convenient work flow and robust performance of the yellow platform creates an assay with broad dynamic range, along with hands free automation to accelerate challenging.
Therapy quality control process.
Our biologics portfolio of very strong showing with growth of of 30% for the quarter and the year. We are excited about the recently announced collaboration with 9 O 8 devices for our Maurice Biologics platform provides reproducible quantitative analysis of of identity purity and heterogeneity profiles for therapeutic protein will be paired.
With the 90 way devices of chip.
For the collaboration wreath will enable the measurement of molecule that have a similar charge or ice of form and click corrections that'd be nice of foreign for purification and the preparation on the ZIP chip prior to being introduced to of mastic dramata, creating a seamless sample crept work flow.
Finally, our core portfolio of Proteonomic research for agents increased over 50% for the quarter of nearly 20% for the fiscal year.
During the fiscal year, we expanded our market leading portfolio of research for agents, including the addition of over 300, New research proteins..2 are expanding catalog of over 6000 protein.
For antibodies Biopharming is increasingly recognizing our capabilities and amino oncology targets and immune favorite fell labeling.
Now, let's discuss our genomics and diagnostics segment, where the team delivered 22 per cent organic growth in the quarter of an 18% for the full fiscal year.
Our spatial genomics and tissue pathology business branded ACD remained extremely strong with the team delivering over 60% growth from the quarter growth was broadbase within the portfolio and across geographies with RNA scope remaining strong any emerging high plex based coke and micro or any product all gaining traction as new marketing campaigns and deeper of <unk>.
Penetration benefit of the business.
We for to fight of RNA scope offering with the introduction of of the latest version of our multiplexing spatial genomic technology highest <unk>. This latest iteration of high for like add the ability to visualize that the 12 target simultaneously formula and fixed paraffin embedded or S. S. T E samples and continues to offer the flexing of up to 48 targets and fresh.
Refresh the frozen tissue samples available in the legacy version of the assets.
F F P E as an important sample type for human samples, especially for studying diseases and we anticipate demand for high Flex V..2 of the tool for cancer and neuroscience applications as well as immune ecology studies.
Next or diagnostic Regents business space large headwinds of staff here with the pandemic dramatically, reducing doctor visits and in turn diagnostic control of the OEM customers for.
Of of this business successfully overcame these headwinds by supplying COVID-19 related antibodies to COVID-19 related testing vaccine manufacturers for Ya.
Realizing 8 consecutive quarters of positive growth.
With people returning to see the doctor of getting a pulls back from the world future is bright for our diagnostic religious business with a strong product and OEM pipeline.
R. X's on diagnostics business unit the continues to make progress despite of very soft urology market.
During COVID-19 patients for not leaving the home to do annual checkups for seeing the urologist. This dramatically reduce their level of PSA tests. The tool used by your allergies to identify of need to prescribe an exit the X test for prostate cancer risk analysis and possible biopsy.
The market of now recovering we established of a commercial sales force in our growth is accelerating.
We also made progress on the reimbursement from during the quarter filing a request for reconsideration or Medicare of administrative contractor National government services are Ngls issued an updated XO Dx cross the local coverage decision or LCB.
This updated LCD removed many of the XO Dx prostate restrictions included in the original of cities, including limitations for chest utilization among certain ethnicities, excluding patients with first degree relative with prostate cancer as well as we're moving the restrictions for patients with the persistently elevated Psa score.
The reconsidered LCD became effective in August 1st.
Following the removal of of the C. F of these EPPY, we use the jurisdictions the LCD better reflects the MCC and guidelines imposition of of the tests for improve utilization of among the Medicare population.
In addition to the X of the X prostate test we continue to advance our pipeline of innovative X is on base diagnostic tests, including our noninvasive kidney transplant rejection assay XO true.
As a reminder, initial X of true data was published earlier this year of the journal of the American Society of Nephrology showing of negative predictive value of of 93.3 per cent any positive predictive value of 86.2%, which we view as best in class performance versus the competition. We remain on track to launch this non invasive urine based as a later.
In calendar 2021, and then held preliminary discussions with our Mac on the pathway for Medicare reimbursement.
Finally, I'd like to highlight the acquisition of the surge and we made this past quarter, a 15 year old diagnostics company with strong competency, great leadership and domain knowledge and diagnostic regulations.
They also bring hitting expertise may of like their oncology diagnostic kits as well as the strong portfolio of carrier screening diagnostics like fragile X the world's best in class test for identifying prenatal intellectual disabilities.
During the quarter of shirts and publish the results of of Multisite evaluation study on his ample IDEXX PCR SMA plus the kids in the journal of molecular diagnostics validating his performance in delivering accurate reliable information to support Kerry identification for the diagnosis of spinal muscular atrophy are SMA.
The surgeon of kit simplifies existing methods for identifying relevant variance in the S. M. In 1 of them SMN 2 genes by identifying all variance in a single reaction.
I want to be clear on our direction for diagnostics. It is not our goal to be simply of clear lab service model, we prefer to sell kitted product primarily in the oncology neuroscience and prenatal market. These markets of strong growth due to strong needs as well of good margin a bit of an average reimbursement levels since closing the acquisition on April 6th we have made.
Significant progress with the integration efforts of the surgeon and are in the initial stage of the building up the commercial team to increased penetration. The large untapped EMEA market. We have also begun of coordinated R&D and marketing strategy to identify synergistic projects across the company, especially with the <unk> on the diagnostics as we position our entire diagnostic offered to penetrate.
I value of markets with kittens and L. D T.
Yeah.
Lastly, I'd like to give an update on the impact of our COVID-19 initiatives since I started the pandemic bio checking the agent's name swings have facilities studies of allow the better understanding of the virus, including ACD prose detected virus and tissue <unk>.
Sales of bulk diagnostic rage, and she was the Kobe testing applications as well as pathogen specific antibodies in proteins 2 known variance of the Covid virus Covid with an estimated 3 per cent tail into our business in queue for and approximately 4% tailwind for the year, including revenue from sales of the Kentaro Agg antibodies for allergy Kid and.
Currently there is growing interest of niche markets, forming around our COVID-19 serology assay offering specifically of the tool to identify immuno compromised individuals that may not have the antibody response falling vaccination to neutralize the virus.
We expect the Covid research.
And diagnostics will be around for many years, particularly of new viral strange continue to emerge, making this tailwind of sustainable new layer of our product portfolio of going forward.
Wrapping up we have reached the tipping point and several of our high growth businesses, including the eighth of the spatial genomic business and are protein simple Brandon portfolio of protein to make analytical tools can remain in the early innings of penetrating the nascent cell and gene therapy in liquid biopsy markets that are in the front here in front of the company.
Lay around to this is strong funding environment for our market, leading catalog of research proteins and antibodies and the scientific know how that is built around them for over the last 40 years and I believe we incredibly well positioned for me 1 of the most innovative high growth highly process of life science tools and diagnostic companies going forward. We are closing in on an important.
Of stone crossing $1 billion in annual revenue and with our existing portfolio of C. A pathway to double that for years to come.
On that note I want to remind everyone. The bio checking will be hosting an investor day in the event on September 10th of New York City.
At the meeting we plan to dive deeper into all of our growth drivers can provide an update on our long term aspirations for you hope to see everyone. There for that all handled of Jim.
Thanks, Chuck I'll provide an overview of our queue for physical 21 financial performance for the total company provide some additional details of the components of each of our statements and get some thoughts on the your head.
Given the anomaly that occurred in queue for last year with the pandemic induced customer Lockdowns I will also provide certain growth rates expressed his 2 year caters disease are likely more representative of our midterm underlying growth momentum.
Starting with the overall fourthquarter financial performance adjusted EPS with $1.87 versus a dollar a year ago, an increase of 87 per cent over the last year representing of new company of record.
Foreign exchange positively impacted EPS by 8 cents.
The P. P S for the quarter was 37 cents compared to $1.48 in the prior year the.
The biggest driver for the decrease in GAAP EPS was unrealized losses on our investment in chemo Centrex this year compared to unrealized keep the sentrix games in the prior year.
Q for revenue was $259 million, an increase of 47% year over year on the reported basis, 39% on the organic basis.
And a and an organic keg of of approximately 13% since queue for the 19th.
Foreign exchange translation had a stable for percent year over year impact and acquisitions also had a stable for percent impact the revenue growth.
For the fiscal year 21 revenue was 931 million an increase of 26% on the reported basis, 22% on the organic basis, and an organic sugar of approximately 13 per cent since fiscal year 19.
Foreign exchange translation and acquisitions had available you or your impact of 3 per cent and 1% respectively.
All of geographies had strong growth in queue for the by the U S. Growing nearly 60 per cent, which represents of 13 per cent CAGR since the queue for fiscal year 19.
Followed by the media with over 35 per cent growth or 2 year taker of 15 per cent.
And then China with growth North of 30 per cent for the quarter, representing the 2 year cater in the high twenties.
The rest of the World grew almost 30% credit 10% to your <unk>.
Q for of last year was the start of the pandemic in the U S was shut down severely impacting this geography, while European customers had begun to emerge from the shutdowns in China is largely reopened in queue for for the fiscal year 20.
And the company the comps in queue for this year were easier in the U S compared to China in Europe.
That being said the 2 year CAGR across the globe are impressive and illustrate the leave emerged from the pandemic even stronger than before it started.
By the end market Biopharma continues to be very strong growing nearly 50 per cent for academia of growth was impacted by the shutdowns.
Most impacted by the shutdowns last year growing nearly 60%.
The 2 year of <unk>, we believe illustrates the real relative strength with Biopharma growth nearly 20 per cent and academic growing approximately 5 per cent per annum over this period.
The expect academia to continue to improve as national funding budgets get approved and dispersed throughout the next year.
Moving onto the details of the piano total company adjusted gross margin was 72.5 per cent in the quarter compared to 69.5 per cent in the prior year.
The increase was currently driven by volume leverage operational productivity in fable product mix.
Adjusted SG&A in queue for was 26.1 per cent of revenue of 200 basis point decrease compared to the prior year and R&D expense in queue for was 8% of the revenue 150 basis points lower than last year.
While adjusted SG&A, and R&D spend both increase sequentially and compared to the prior year of type life Science labor market did not allow us to fill all plan. He kind of editions of the team at the pace with the originally anticipated, especially the more scientific and engineering fields.
For our pace of hiring did increase over the course of queue for and you plan to make additional progress in fiscal 2022.
This investment in critical human capital will position of the company for growth going forward.
Additionally, queue for was the first quarter of that included the surgeons operating costs.
The resulting adjusted operating margin for queue for was 38.5% an increase of 740 basis points from the prior year.
And of 340 basis point improvement from queue for of of fiscal 19th.
For the for fiscal year 21, adjusted operating margin was $38, 9% an increase of 560 basis points from fiscal year 20.
And a 470 basis point improvement from fiscal year 19.
Looking at our numbers below operating income net interest expense in queue for was 3 million decreasing $1.4 million compared to the prior year period.
The decrease was due to a continued reduction of our bank debt during fiscal 2021, as well as lower floating rates.
Our bank debt on the balance sheet as of the end of the queue for so the $341.3 million.
Other adjusted non operating expense was $7 million for the quarter compared to point 5 million of income in the prior year.
Primarily reflecting the foreign exchange impacts related to our cash pulling the arrangements.
For GAAP reporting other non operating income includes unrealized losses from the investment in chemosensory.
Moving further down the P&L or just the effective tax rate in queue for was 23% of.
110 basis point improvement of the prior year with the improvement primarily driven by geographic mix.
Note of the gap effective tax rate in queue for was favorably impacted by the discrete timing of stock option exercises.
As a reminder, during Q2, we made the strategic investment in China based in this Ah company focused on providing media as well as custom cell line development immediate formulation services for the Chinese biopharmaceutical market.
The $316000 non controlling interest in line and the first the loss of the portion of the <unk> Oh.
The <unk> the other the impact of the lines of the P&L as a result of the consulting and this was immaterial in queue for.
Turning of cash flow and return of capital of $122 million of cash was generated from operations in the quarter more than 170 per cent increase all of the prior year.
The increase was driven by strong working capital management will meet our customer commitments of much higher demand.
In queue for our net investment and capital expenditures was $12.8 million and during queue for return capital to shareholders by the way of $12 formerly in dividends.
The finished Q for with $41 million average Dude shares outstanding.
Our balance sheet finished queue for in a very strong position with $231.6 million in cash and short term available for sale of investments and of total leverage ratio well under 1 times EBITDA.
Next I'll discuss the performance of of reporting seventies, starting with the protein Sciences segment.
Q for reported sales or $192.3 million with reported revenue, increasing 51% compared to the prior year.
Organic growth was 46% with foreign exchange, having a stable impact of 5 per cent.
We're gonna <unk> since fourth quarter of fiscal year, 19 was approximately 14% per annum.
Within the segment of the strong growth was very broad based on nearly all of the agent assay an instrument platforms.
Looking at 2 year caterers going back to fourth quarter of fiscal year 19 standouts in the group will be simple flex with approximately 75% annual growth.
Challenging therapy was approximately 50% annual growth the.
The GMP protein component of growing well over 100 per cent annually.
Biologics with approximately 25% annual growth and simple western was approximately 20 per cent annual growth.
Operating margin for the protein Sciences segment was $46, 7%, an increase of 780 basis points of year over year due primarily the favorable volume leverage operational productivity and cost management.
Change the diagnostics in genomics segment queue for reported sales were $67.1 million with reported revenue increasing 38%.
What kind of growth was segment was 22% with accurate acquisitions, contributing 15% and foreign exchange translation, having a favorable 1 per cent impact on revenue.
You're getting a keg or since the fourth quarter of fiscal year 19 was approximately 11% per annum.
The ACD branded spatial analysis of portfolio together with the extra some diagnostics led the segment in the quarter was 2 year of <unk> of nearly 20 per cent and 70 per cent per annum, respectively.
The Chuck mentioned earlier are diagnostics, we agents business day, they're very nice job executing a book Covid related anybody the opportunities to cover for the softness in the general diagnostics market.
Resulting in the mid single digit CAGR over the last 2 years since the fourth quarter of fiscal 19.
Moving onto the diagnostics in genomics segment operating margin is 16.7% the segments of operating margin improved 430 basis points compared to the prior year. The increase also reflects storm volume leverage operational productivity and strong cost management across the segment.
In summary, we finished the fiscal 21 on a very strong note of.
The products are clearly addressing the current needs of the research and clinical communities, we serve providing the proteomics genomics and diagnostic tools necessary to drive science forward.
The some of the largest opportunities still in front of the company. We believe we are just getting started and are looking forward to updating everyone out in our vision for the future during our other upcoming Investor day.
And the more near term with favorable life Science research funding as of tailwind, we expect the organic growth momentum that we've experienced over the last 2 years to carry on in the fiscal year 22.
The 4 C continued strength of across our entire portfolio with cell and gene therapy of analytical instrument portfolio and facial genomic analysis tools, leading the way once again.
While the poor reagents maintain their market the leadership position and the extra don't diagnostic prostate tests continues to ramp.
We also anticipate of surgeon to add approximately 3% growth to our top line during fiscal year 22, and began to be accretive to our organic growth in the fourth quarter.
As Chuck and I mentioned in our prior commentary commentary, we have recently made progress and making the investments needed to support our future growth.
Perhaps other the go to catch up to our strategic plan and enable the acceleration of growth in the future.
Additionally, with our Biopharma, an academic customers now back to work and increasingly more receptive. The in person interaction. We are expecting the return of prepandemic activities, including corporate travel to normalize of fiscal year 22 progresses.
Finally, the surgeon is still in the initial stages of profitability and making the investments necessary to fully realize the synergies and global potential of this business.
All of these considerations taken together the expected are adjusted operating margin going forward to be sequentially lower compared to our queue for fiscal 21 result.
But returning back to this level and the back half of fiscal year 2002.
That concludes my prepared comments and was that I was from the call back over the and to open the line for questions.
Thank you, ladies and gentlemen, if you would like to ask a question at this time. Please press the star 1 on your telephone.
P henshaw of that can be the tongue chin on your telephone of switched off total I would get sick net to reach our equipment.
And we will take our first question from then.
Yes.
Huh.
[noise] morning, guys. Thanks for the questions. Jim appreciate the color of their on the business did I hear you give an organic growth guidance number for the year for 2022.
Well you heard me say was that dark CAGR for the past 2 years have been approximately 13 per cent and we expect that kind of of.
Momentum to continuing to fiscal year 22.
We always given the English sheep.
Okay, obviously, a lot of room for interpretation or just the range of outcomes for double digit or just expecting the carrier to continue the journey is there any way you could comment you saw maybe where the street is the streets looking for I think of right around 15% I hear what you're saying of 13 is is.
Is the fair I assume that something with the yeah.
Yeah, we will have more commentary investor day.
And we'll we'll get into more specifics and kind of breakdown where things are at the right now it's kind of hard we typically we don't give guidance, we would give target range is.
The only way of many years talking about.
10 to 12 in the numbers like that and stuff.
Certainly at 13 ish right now and it could be much higher and we certainly are over a 5 year target the range of our guiding higher than that and to reach our our state of goals of has to be.
But we're very bullish right now, it's just kind of hard to.
With too much more than that but by September with all of them and it's a good story of as Jim said the momentum continues we don't see anything changing and.
Since we've been beating quarter after quarter, maybe that's a good sign.
Yep, that's true Okay, maybe just the high level of question I mean, obviously you guys have a portfolio, that's pretty well positioned in the bunch of areas of your.
You're growing in certain areas of your expanding capacity in certain areas are we are you able to sort of parse out for us. We're in the business of what portion of the business. You think growth is most likely to be limited by just your own capacity or you're still wrapping capabilities versus what the customer base base might bring in terms of <unk>.
And.
Well first I would comment.
1 thing the grow double digit and deal with what you need to expand because nobody nobody does expansion for waste of double your business very quickly of you you go in increments of make sense because you don't want it you don't want to out for your facility empty. It's the competitive world right you started drawing it.
20, plus percent in the kind of growth rejoicing and you get kind of caught.
On top of that with the shortage and talents of just the whole the whole economy of life signs of kind of kind of booming right now funding looking good it's kind of of race. So we're we're kind of work, we're expanding of hair and it kind of ahead of it for now looking for.
Continue to the accelerated growth per of last discussion here.
And to be Frank where virtually expanding every business. We have [laughter] you don't have a single thing we're doing that we're not behind the don't need to expand invest and they're all doing great. We also are not behind the nature of your question. We can meet I think we are there in time, we have the capital of we have the talent we have the consultants we have the land we of the buildings.
We out of.
The supply chain figured offer we need for institutions of we don't think we're gonna get caught behind and throttled of any business that we have.
Okay. So can I go for an American lives here in the last year of the 1 that's been the toughest has been simpleplex right. We've been yeah, that's where the other night about opening a little under that but you know <unk>.
65 per cent growth on top of of 100% a year earlier phenomenal now that 1 we're going to pretty much below at all of the new building new everything this year and will be will be on line in a year. So I don't I don't predict that we will be able to.
Not ship every order that we have to be honest.
Okay I appreciate it thank you.
Growth rate will pick only over 13.
[laughter].
Thank you we take our next question from Jacob Johnson with Steven.
Hey, just 1 quick follow up not to belabor. The 22 outlook. The 13 per cent growth number of you referenced sham that's an organic figure and you expect that momentum to continue plots of <unk>, it's about a 3% and organic benefit does that kind of of the way to think about it.
That is correct.
Perfect Uhm.
Okay, maybe for shock following up on your comment on Simpleplex, you seem to be finding more and more uses for Allah I think I heard you mention neurology and and I think your competitors talking about the opportunity for the use of of their instrument screening of testing for all the time of shrugs as that may be an opportunity you can find for Allah.
Yeah, absolutely. It's it's fast it's Microfluidic uhm. It has it has the incredible sensitivity so yeah. We're.
We are definitely involved in those kinds of applications. It's it's of biomarker discovery tool.
For.
For for.
Therapy creation for drug discovery, it's primarily of issues for and whatnot and now an hour of you know it's morphing into all of these possible clinical applications 2 of which were working on it you know so.
Probably the biggest sleeper we have the it's probably the biggest sleeper we have it already identifying all of the different of gessel markets and potential things, we can do with it so.
I didn't think of what you see the growth. That's why you see the growth rates you see with it it's just kind of off the charts.
Got it and if I could just squeeze 1 more than just Chuck on the expansion into GMP median antibodies is that something you will implement at your existing GMP facility or is this something that requires additional capacity and 2 is this something that was as contemplated kind of in the $140 million of capacity you brought on line for protein or is this something that the <unk>.
Additives for that opportunity.
No. That's all the same discussion we have the capability of doing of roughly $40 million of revenue at headquarters here. It just would be in smaller locks, where GMP here, but some are primarily research. So therefore, we built the new facility, which is open now and we're gonna get started selling out of inventory qualified lots here in the coming months here and that is.
The $140 million for $200 million and capacity, depending on which product mix you have.
It's further expandable very quickly within.
Within 6 months inside of the current building, which we haven't used all of the space shuttle or on site as well so.
Great. Thanks for taking the questions.
Thank you we take our next question from caffeine show of tea with back.
Hey, guys congrats on the corner and thanks for the question I guess, the first thing in your corner reagent solutions for an Asian, just curious what you're seeing in terms of flab activity levels and how is the reopening carried by geography and do you think they are still in preference to be out there.
Obviously mentioned last quarter kind of probably.
Near the end of the quarter of it became apparent that we're probably back to full strength I think there is confusion over just because people aren't in the lab and maybe doing their analytics from their their math in our paper writing at home.
It doesn't mean, they're not back near experiments are ongoing and they're they're being productive in the labs and you know so we think we're academically kind of back of full strength, they're just working differently, they're working smarter, they're being a little more biopharma of.
That would be the that'd be a comment for both the U S and Europe.
China's for.
For 1 has been for quarters.
And you know we're into the next 5 year funding cycle in China and.
The first year, we're actually going into the second year of it you are pretty soon and that's usually a big big ramp year for China. So.
Alright got it and the most curious if you could just talk for you I'm in a priority at priority areas and I've done a lot on the diagnostics side and challenging therapy over the last couple of years Ain't mentioned in your prepared remarks of proteomics being on fire from the research application area other applications like that where you'd be.
Interested in adding onto your capabilities through the lemonade.
Yes, we're hunting all the time, we've probably never spent the quarter with so much activity and so little of the show for it actually [laughter]. We were we came in second and third on a lot of deal of this quarter. So as you know of prices are high and.
We can be picky, we've got great number if you've got great growth, we've got a great balance sheet and there's no sense for us to overpay or take too stupid of risk or.
Or confuse the street with something to adjacent of People's on our stand you also were being kind of the true to our our strategic plan and for hunting within those guidelines and then within the.
The math, we want to find an finding double digit roissy on deals of been very difficult right now so we'll be patient and.
It means we're probably still lean more towards private deals, where we can kind of get something with a management team of an inch an investor the understand this in 1 of the wanted to come onboard versus the public auction, which are you seem to be still on a friendly mode and going too high.
Great. Thank you yeah, we're through we're focused on tool of probably.
More so the diagnostics I think we've got the enough things the integrated non diagnostics and we see of great plan coming together between acrosome diagnostics, the surgeon and even our ACD platforms. So there's a lot of growth come in there and.
And the and also the law.
Application. So we've got quite a current franchise, forming and diagnostics do probably got to start focusing back on tools and and <unk>. It looks of can find it there just.
Isn't enough out there and they're going very high energy of issue saw violation of went for over $5 billion on the next sunbow evil.
We have of comparable antibody.
Business here.
Tells you something about our evaluation.
Great. Thanks.
Thinking.
We take our next question from Alex Norwalk with crank Adam.
Great Good morning, everyone Charles.
Go ahead of the diagnostics cited seem to be a little bit of of tone shifts with the assurance <unk> acquisition closing, including by the fact may be more of a kit diagnostics company of Aquila did I hear that correctly, maybe expand on what you of plans of course through the assure J Kidd of all model of that could include the epitaph. The accident of a true test is that all of the.
Zone task for you have in the pipeline and then I guess the bigger picture of it a couple of years here do you think biotech for me to get a half of the coil lab amicable diagnostics model.
Well you are of diagnostics Guy So I know, you'll get it and yeah first of all of you know they are focused on their panel right. They're capable of panel here, what's the fragile X SMA and.
And the C F, which will be coming out here. This fall that'll be a really kind of.
The best in class only thing you can get in the world kind of kind of of panel.
With that experience of course, we want of kit as much as you can cause we have we have a home kid version of it all of our of our of our EPPY test right. Now we're we're launching that we're in Europe going through distribution with the kit and we're expanding that model and probably deemphasizing. The other CLIA side of the over time, but the clear from the very important right now we're doing the.
Work, but.
Over time, it'll it'll it'll it'll be a mix I don't think we'll probably total the ever out of <unk> I think he needs to be included because that's the way it because of the day to start these things these tests.
<unk> and I think we'll just see how the mixed goes but I.
I think better scale potential I think I'm better past the acceleration exists with kit kidding, if you can get it done but.
You know, it's it's a bit of art to kit and you need people in order to do it and there's a lot of a lot of details of get kidding successful onion channel issues and wishes assured and change the team are really expert at so they are.
They're they're definitely drooling over the chance to get out the excess own portfolio of to be honest. So we're just trying to hold them off until we can integrate completely we will make sure of that we take care of them fairly as part of the of his shirt and deal first it's all coming you are spot on.
No that makes sense and 1 is an ex of true.
Is maybe any update on the commercialization plan there is like a bit of direct sales team of you to go through a partner and then you mentioned the reimbursement on extra true and you're currently working through Ngf's any update of few plan on seeking out of the lab to go after more of a more of the X Mac or just ending up the on the reimbursed from Fargo Sir.
Well with the surgeon, we have the opportunity to be in their their Mac districts. So that's being evaluated we also have a site near Atlanta. So we can be in the Palmetto area of which has the.
The favorable.
Jurisdiction here around around cardiac so that we're not we're not break of nice there that'd be that's also a very strong possibility with the.
There is with the number of as we've shown in our paper, it's the best in class and the beat everybody out there by by far as far as I can tell there's a lot of interest all of all of the main players are talking to US right now and there's a potential of partnership.
We won't do of bad partnerships. So if you see 1 it'll be it'll be great terms, otherwise we will go it.
In my mind, it'll be a hell of a lot easier than the than.
Then the then the the prostate test because again the either.
Oregon transplant centers and we're not talking about it you know of channel of 20000 Urologists, we're talking about less of 100 senators that we kind of deal with an almost like a key account model.
We also don't have the.
For the wall to climb over of talking dark side of doing tests like biopsies right. So it's commercially should be somewhat simpler, especially if you have a great test of great numbers. So we've we've done surveys with with these rejections centers.
The the transplant centers.
And they've come back over 90% positive they want to try out of the tests that they don't they don't see what they're using today as being perfect by any means and there is the mood room for improvement and what they see and understand about the simplicity of.
Of of mail and type capable tests like we have with ear did they want to try it. So we're we're pretty gung Ho I think we had in our commentary of we expect to be out within the year here. So.
Oh, that's great.
I also think the I think the Max will be will be easier on us too I.
This isn't the.
Like prostate the cancer you you live with them that die from the perception is which is inaccurate [laughter]. This is this is the big bad 1 I'll say with the double the market size and as you know half of all kidney stay on 10 years in roughly 30 per cent pay on the first 5 so it's an awful awful condition. So fine.
Finding something that's.
More upstream like exit zones can provide versus Earl for DNA to really help debt.
Primary physician or the the dark figure out what's going on before you have trouble is going to be really important to hit us of sustaining that saying all of that Oregon long term for the patient.
Yeah, all of the accident very favorable there. Thank you.
Thank you we take our next question from Patrick Tiny line [laughter].
Hey, Thanks for taking the question of the guys.
Chuck and I know you called out China, and the prepared remarks that you talked about 30 per cent growth approaching $100 million a year.
You, usually pretty bullish on that but how how are you thinking about 20 to set up their again it seems like all things of point in the right direction for you guys, but would love your take on the trends that are in the quarter and then again expectations for this year.
Yeah. It was.
I think Jim of spot ankle onto the analysis and providing.
Color on a 2 year look back not just 1 year, it's just such a goofy ear last year and when you look at all of our number of gone to Europe preach. The pandemic then you see I think still best in class results for our industry.
And China is no no different so let's of near near 30% high twenties for for 2 years.
We see that consistent we've always kind of of said, we expect trying to be of 25% growth and I guess, we see no reason why not just stay with that game and even as we get past the 100 million, it's only $100 million.
Got a long way to Cohen, China before we're gonna take any victory laps and the the.
The brand is you know like the gold standard brand.
There's no let down there I think of anything or we're going to see things accelerated shiner on research around our products to be honest.
There there is this point of the we've mentioned the word tipping points in our commentary it's I love for term because I think it's really it's really accurate.
Things need to get to a certain size before the they.
They get easier to sell and we've reached that point and a lot of are a lot of our our stable of unicorns here. We've got a dozen different platforms that are all hitting in achieving in getting over that tipping point of becoming almost similar to accelerate so.
China is going to be very good at selling the whole stable and they have been and they're going to continue so I think the numbers of your dad or better going for it.
Okay. That's helpful. And then maybe 1 of them just the GMP order of pace, you've touched on a little bit, but how's that trending relative to your expectations I think last quarter, you're talking about the plan to fill out of inventory by September October I think you've touched a little bit on an earlier, but would love just kind of the ground floor of you there and expectations, how we should think about that piece.
While we're closer than landing some more of a customer's Atlanta. Another 1 the other bigger 1 I think of 145% growth in the quarter coming out of our little headquarters facility of zinc is an amazing execution by the team to be honest.
I don't think we have been over 100 for that just Barrett was hanging around 100, so let's record growth.
It will start transitioning to the factory here you know come this fall.
We're just we're getting close right now and.
There is a lot of excitement.
The product looks fabulous it so it's pier, it's the lots of lots of consistency of the volume of we're going to be all crater gonna be.
Best of class in the World no one's going to compete with us in terms of that so.
I really <unk>.
We mean, when we say get on line I'll look at the video of you're going to see this factory and go lots of deal closer for sure and people are coming in are amazed and it's.
You know, it's been all come down to the close to testing and.
And how fast we can we can ran for these bigger customers as they come out the other end and you know.
Their vision of 100 of the clinical of it's Gonna take a couple of years to get this thing really go on the I mean, the honest I think we're going to have an amazing.
The business, but I don't think we'll be alone I think it is and everybody wins market here for 5 years to be honest, though.
Okay Gotcha, maybe 1 last 1 for Jim just on the op margin commentary. Thank you said entering 20 to be a little lower than the <unk> in the second half getting back to the levels can you just talk about I guess the queue Evers as we get into trying to again some of the spam coming back maybe talking about the impact of the XO and then kind of the the.
The underlying expansion as well would be great.
Yeah, I mean, some of the some of the factories and the other margin of first of all of the acquisition of of surgeon right. So for for 3 out of the for quarters next year, you'll be dilutive to overall margins.
To the tune of 7200 basis points. So that's that's that's the kind of a big headwind inherent right there.
Of.
Of course, we talked about.
Back in front of customers and business travel somewhat returning.
Yeah, that's a pretty hefty number in itself in terms of the headwind year over year, assuming that that activity ramps back up.
With regards to you come on the XO XO will become less dilutive going forward, but still be dilutive, but as we continue our growth trajectory. Despite those headwinds in the near term and the.
The back up for a second we did we did.
Hire a pretty successfully here and the.
Towards the end of Q for so not necessarily represented in our.
The 2 year 21 run right much less even the queue for 1 to be honest with you and that will provide some some headwind that you're not currently seem so all of those factors combined we see it in the near term the the margin dipping slightly but again because as we continue to grow the back half of the year with the with leverage we get from that growth we see it normalizing.
Back to the queue for level of by the end of the year.
Totally agree.
Great Thanks for that.
Thank you and cash how reminder of please press stop on task of question.
We take our next question from Paul 9 Keybank Kapaun.
Hey, guys of my gone for Paul.
Just following up on Patrick's question, you know when the operating margin line I guess, you know it sounds like the diagnosing genomics is going to take the most of the impact of the of surgeon. So I'm guessing protein sciences kind of maintains the 1 of what you saw in 2021 can you kind of just talk to the the dynamics between those 2 a little bit deeper. Thanks.
Yeah, I'll I'll start in June can finish I think.
That's right on it and clearly our investment portfolio of of the when scaling is going to help the overall mix, but you know our court continues to scale.
She is fine leverage to I was quite frankly of May if it's just how well we execute this year of core.
In the past this hasn't been the kind of business model of where you get as much leverage as the other manufacturing models other involved with but we of phone incredible productivity internally and we have fallen more scale leveraged and I I thought possible. It's been it's been help in fact by I think as we talked about the end of the hiring needed in the head.
<unk> charges I think we're a little line there were catching up fast started last quarter and travel of course can help to everyone. But the fact remains even of gross margins 3 strong and we're finding we're finding leverage I I think that will continue.
We're all pretty well 6 Sigma trained here and you know and.
P P I from thermal and every other flavor.
Flavor of this of the <unk>.
Activity you know.
Therapy, you Wanna do and we will use them. All here, we can talk the Corning our own version the biotech the version because we do it and we target and task our teams of productivity every year and they find it and I.
I see it going for it and maybe Jim wants to come in for Yeah. In terms of how that margin might look like by segment actually right. Now we think it might be slightly the opposite in terms of the impact.
Protein Sciences already has it a very high operating margin.
And a lot of the hiring that were behind on to accelerate growth intelligent therapy in other areas will and as well as the instrument portfolio of will be in that protein science statement. So there'll be more heavily impacted by the actual investments that we need to make you are correct in that the the diagnostics or the junk.
Genomics segment will be impacted by the surgeon acquisition.
But again they had the lowest overall operating margin and that's where we've gotten the most expansion in the past with leverage and we expect that to continue and frankly overcome the of surge in headwinds in that segment. So that's kind of how we see a plane out as of right now they don't forget that.
That's an 80 plus per cent growth margin kidding kind of model of which we understand it. So is that scales that'll that'll reach up and won't add some total near 40% and we're we're in the high teens right now we've got a ways to go it's come out of 1000 points in a year, but it's just it's just starting to strike.
And it's on a roughly $90 million run right. So we always said it would be probably at 40th of lights above $200 million or so and I I don't see any reason to.
Change that tone right now.
Great very helpful. And then Charles just on the surge and it looks like it came in a little bit of of kind of expectations of what you're regarding back in Q3. So can you kind of unpack some of the trends you saw with the business. There was that just organic growth within a surgeon was some synergies playing out being underneath the biotech and the umbrella or some you know maybe easy comparable.
I was backing out of 2020.
Yeah, we're not we're not breaking down the division number of anymore for competitive reasons.
I would say, it's more of less on track of wasn't really too much of head weed.
We've given them a lot of homework and if anything keeping him corralled and focused on her business and not not over integrating the the XO of too fast I think has been the challenge of the ages.
No. So much there so experienced I can't I can also tell you how good this integration of been out of 70 and acquisition of this has been the easiest for these guys 15 year old company. The Al Qaeda and there was a spinoff of the bigger company is you know and so their their their their financial for Auditable. It's just kind of of wall Moralist 15, they're they're all keepers and we're working hard on doing that.
Uhm going forward I think what we bought him the like we've done a lot of acquisition of been pretty good and.
Sometimes clever, reaching some things just for that an inflection point up and these guys are no different you know they've been working on it sets of May and sister <unk>. This is the car broseph for awhile and they're launching so over the coming year as a launch yeah I would expect there'll be some accelerated growth.
The we're hoping for a toy bottom among other things.
Great. Thanks for the Tom guys.
Thank you and actually have no other questions in the queue I would like to turn the call back for any additional in closing remarks.
Okay, well thanks, everyone. It was.
It was the year, we're all happy is behind us and a lot of ways, but.
The business wise, where.
Happy with the results and that we're able to execute and provide the world with a lot of badly needed things this past year with the problems with all faiths.
Where the.
We're ready to go in the future, we're investing we're catching up in terms of head count.
The numbers book you know.
Pretty good the momentum as Jim is said to the stable and we see no reason the change or John.
And we will give you more transparency when y'all show up in New York on the 10th so thanks a lot bye.
Thank you that way of concludes today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.