Full Year 2021 Abcam PLC Earnings Call
Okay.
Ladies and gentlemen, and welcome to the aperture on full year results conference call for the 12, and 18 months period, and especially faster December 2021 .
All participants are currently in a listen only mode. Most of the call. There will be a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Must inform you this call is being recorded today.
I would now like to hand over to James safely Vice President of Investor Relations at Essakane. James. Please go ahead.
Thank you operator, and welcome everyone to outcomes any cool for the 12 month 18 month periods ended 31 December 2021, today's call is hosted by Alan has all of the year.
And Michael Bulldog CSI beforehand, Davidson Island, Michael Let me briefly cover all Safe Harbor statement on slide two some of the comments made during this conference call maybe considered forward looking statements, including beliefs and expectations about the company's future performance.
Forward looking statements are subject to risks and certainties. The based on currently available data. The company assumes no obligation to update them actual results are subject to future events, uncertainties, which can materially impact the company's actual performance.
This may cause the company's recent regulatory filings for a more complete picture of our risks and other factors.
During the call.
The rest of the adjusted financial measures may be used to provide information pertinent to ongoing business performance tables reconciling these measures to the most comparable ISO arrest measures are available in the company's press release issued earlier today.
Finally, if you haven't read the already received them you can download a copy of the slides used in today's presentation at the company's website.
Corporate outcome Dot calm Ford slash investors towards Flash report stash presentations.
I would like to turn the call over to Alan.
Go ahead.
Thank you James and good morning, and good afternoon, everyone.
I am going to just start with a little bit of an overview on where I think we are in our strategy implementation over the kind of five year plan that we laid out in 2019, and then of course, Michael will spend a lot more time.
We're getting into some of the more recent financial performance and will save time at the end for questions.
If I could turn to page four please.
As I said in 2019, we set out to invest in App camera to make us more innovative to accelerate our growth and what we think is a very attractive.
Our market opportunity in life science reagents and tools.
And <unk>.
Right now were in terms of this financial performance period, two years into that five year plan.
And we're feeling really quite good about progress, particularly considering the added complexities of managing.
Implementation of this strategy during.
What has now been two years of a of a pandemic.
And our objectives are really are to make sure that as we're installing new capabilities and new facilities, new product lines, new customers relationships that we're refining along the way and that we're starting to drive growth and performance out of these investments and.
And I'm pleased to say that as schools talk through our plans, where we are today.
Almost completely done with the major.
Installations and investments in the product portfolio and innovations in our manufacturing and facilities.
And we're really starting to pivot more to finishing up the final stages of our digital and it infrastructure as well as putting some growth capital into our expanding.
Kitson assays line, which I'll come back to in a pit.
And we're doing these things really to drive two outcomes to make sure that were influencing life science discovery and impact and that we're building a long term durable enterprise and then both of these in the period 2021 which is a brief snapshot in time of our of.
The history of the company, we feel we've made a tremendous progress either measured by the scale of the publications that were now influencing Atkins products for cider and over 70000 research publications in just one year.
Put that in context, there are companies that are we would compete with where that might be the amount that they would do and in our lifetime.
Their business, we continue to build on our number one global market share and antibodies, but building beyond that and I'll come back to that in a moment.
And importantly, starting to make this transition from not just the influencing discovery, but influencing how those discoveries get translated into the clinic and we now have almost a thousand in app camera antibody clones that are commercialized in diagnostic or proteomics platforms, which are influencing those downstream applications and there are thousands more on.
Evaluation for those types of application.
And in terms of building a durable enterprise what you'll see in our numbers today is a pretty significant transition in the shape of the revenues. We think those revenues are higher quality driven by more proprietary content better customer engagement with more sophisticated customers who are.
Certainly, giving us much stronger feedback and then building a diverse and engaging our employee relationship and engagement with our team.
Is helping us drive the kind of sustainability measures that are important to talent, but also to an overall ESG agenda.
We're we're pleased to say that both MSCI and sustainable administrate it very highly.
If I could turn to page five.
All of this is building to the 'twenty 'twenty four vision that we outlined back in that Investor day in November 2019.
And.
It was more than the six goals that you are reminded of here on the top of this page it was to drive two outcomes and those actions that we've just completed that we believe it put us on course to achieve the eight outcomes that we laid out and really have gone unchanged since that 2008 2019 period.
Such that data is a competitive advantage for the business in house product is now the majority of what we do in driving the majority of our growth.
We are the most recommended inside with brand and antibodies been building that out into other areas of biological research and we are absolutely reinvesting the cash back in the business to drive and sustain double digit revenue growth.
Our customers are getting a very high touch experience that if and when we look for the feedback from them, what's differentiating app game to help gain share. It's it's personalized we're working to digitize that and we'll be on the way to doing that through 2024.
Our team our it through last year and 90% of our team are equity owners in the business as of today. It is 100% of our business now our shareholders in the company and that's providing a different mindset and they're incentivized to drive towards our long term goals.
We are increasingly recognized for how we're managing and leading our enterprise whether that's through glassdoor ratings or ESG ratings are from our customers directly and we feel we're well on track to deliver our 2024 girls. So this has gone beyond the hopes that we had in 2019 that we.
When we wrote these statements about what we'd like 'twenty 'twenty four it looked like to being on track to deliver those things.
If you turn to page six I thought I would share with you some of the changes that we've had are.
In the shape of the revenues in <unk>.
Profile of the company and.
And over a 10 year period that I've been involved in the company are we've seen a dramatic change in product towards a broader range and what you see in each of these is the revenue growth from 2012 to 2021.
Of course, we're still growing our primary antibody business, but we've <unk>.
Substantially added to the breadth of the portfolio and in particular has added large growth opportunities and single Plex multiplex Plex immunoassay and sample preparation protein can sell engineering more recently.
The source of the products, probably the biggest strategic change and the and the company ever is to move from a largely third party.
OEM supply model of products and innovation to now the majority of Atkins revenues and growth coming from our own in house products, just over 60% of our revenue in this last reporting period.
Geographically, we broadened beyond our heritage and roots in the U K and then in the U S to China and Southeast Asia, That's added considerable growth in and breath of the company.
And finally on the customer mix and Michael will say a little bit more about this later.
We've gone from 2012, not actually being able to measure exactly where our customers were not having that data to hand, but our hunch was that it was a majority small volume academic buyer to now and much more diversified portfolio of customers and in particular are well over 25% of our business coming from Biopharma customers.
So a pretty substantial change in strategy is now starting to show a pretty substantial change and shift in and quality of the revenues that we're generating from the business in the ways that we had hoped.
And then page seven if I just do.
Dive into that a little bit deeper in one particular area for example, where we're trying to influence the outcomes not just discovery, but the pathway from discovery to clinic. If you look at our impact on immuno oncology research what we've been doing is to not only innovate in primary antibodies and bring products to market there.
But to look at a whole range of related products such that we've increased our our portfolio from about 850 products in that area in 2016 to now over 4600, which is on average about six.
Times increase across the portfolio for immune checkpoint targets immune response targets tumor response targets that are critical to immuno oncology research and importantly Ria.
Really making sure that those research tools.
Are made available to partners, who are trying to make that journey from preclinical to clinical such that we now have 150 immuno oncology related primary antibodies in clinical applications, where they can be having an impact on patient lives.
So we're very proud of those transitions, it's an important part of strategy as we think about.
Originally our focus in 2013 to 2015 would have been much more about that individual discovery being accelerated in this period from 2019 to 'twenty 'twenty four we're focusing a lot more on making sure. Those discoveries are accelerated and that their impact downstream is isn't is made easier and faster.
Page eight.
And whilst we're making these strategic moves we're we're continuing to do the tactical short term.
Activities that are required to build our company.
Over the last six months some of those practical things have been.
Further improvements in product development throughput, particularly in our newer product areas like cell engineering and proteins, where our productivity is up by five to 10 times in there.
Versus where we started in terms of new product development molecules, bringing being brought to the catalog per month.
Our Oracle implementation continues at pace.
Through the last six months is last year, we were able to implement our manufacturing ERP tools and in four of our sites and as I said that that work continues and we expect that to be wrapped up this year.
We expanded facilities in Eugene, Oregon, Adelaide, Australia, and opened up a new facility in Singapore and that six months period.
Our employee investment plan that I mentioned earlier app share vested and we launched a new plan for all employees that now aligns everyone to the 2024 goals that we laid out.
And finally, we acquired bio vision and started the integration of that business into our company are in November and December .
That work is ongoing but it's an important long term supply of products, we know very well and are helping our expanding applications says.
Cellular analysis and activity analysis.
In proteomics and beyond.
So really important period of business building.
And if I just turn to page nine wrap up my section we remain very confident that 2022 as we go into this calendar year is marking the new phase of our five year plan, we're starting to complete the installation phase of the strategy and move much more of our company's resources and time on refinement and dry.
Giving growth and productivity out of those investments.
And with the quality of the team that we've had a worldwide and the culture that we built in the business I'm certainly confident that we're pulling together in the same direction and I don't want to just call out to them now how.
How thankful, we all are of the board, our shareholders and and myself and Michael for how they've worked through an extraordinary period of challenge with Covid and other things going on.
We're certainly achieving the kind of growth that we aspire to across all of our product categories and geographies.
I am certain the investments, we're making are enabling us not just to grow now, but will help sustain the business to 'twenty 'twenty four and beyond.
And as Michael described we are starting to moderate the pace of investment in and focus much more on on the remaining fine thing few things that we have to install and more of the activity on improving what we've already done.
So I hope you'll agree with me that this is a great stage to be in it's everything that we'd hoped for the company.
Certainly a very positive outlook for the company's what Michael and I have and are looking forward to your questions later, but Mike I'll turn it over to you now.
Great. Thank you Alan good morning, and good afternoon, everyone.
As you know following our year end change our statutory results periods are for the both the 18 months for the UK and the 12 months to December 31, 2021 for the U S. My highlights will focus largely on the 12 month period as it's the most helpful to understand the underlying performance of the business and we provided a compare to 12 month period ending December 31.
2020.
If you turn to slide 11 please.
Talk a bit about revenues.
So revenue in calendar 2021 increased 22% on a constant currency basis compared to calendar 2020, or 17% recorded after a 5% foreign exchange headwind due to the relative strength of Sterling.
Revenue growth was driven by continued recovery in our customer activity with strong growth in our other products in the annualized effect last year of the months most impacted by the pandemic.
We completed the acquisition of bio vision as Alan just mentioned on October 26 of the last year. The biodiesel business last year contributed $2 6 million pounds of revenue or 1% of incremental sales in a year for those last two months.
Give you some additional details later, but we're really pleased with having been able to acquire biodiesel and the results we're seeing from it so far.
As you can see at the chart to the right. Our revenue growth continues to be driven by demand for our own in house products.
Total sales of our in house product catalogs, including by having increased by over 40% on a constant currency basis in the year and by 38%. If you include our custom products and licensing lines, which grew mid teens.
Overall in house sales now represent over 60% of our total sales up from 54% last year.
This trend of higher in house revenue growth together with higher volumes drove a more than 200 basis point improvement in our gross margin to over 72% and it was about 73% in the last six months of the year, we expect that margin trend to continue as a proportion of revenue generated from our own E&S products continues to grow.
And as expected we've now started to see operating and operating margin expansion in the business as we passed the heaviest investment phase of our growth strategy.
As you will have seen in the released earlier today during the year, we took the decision to adjust noncash share based payments out of the adjusted operating profit to align us with our closest peers and so we presented these results on both the old and new basis to make the comparisons player.
On a like for like basis, we delivered 130 basis point improvement year on year to 15, 1%. This is equivalent to just over 19% when you add back the share based payments.
We've also split out a half on half trajectory to show the improvement in the second half, which saw more than 300 basis point improvement on a like for like basis to 16, 5% or just over 20% after adding back share based payments.
We expect further margin progression from here as we continue to drive top line growth slow the rate of investment and leverage the investments in the business to date.
<unk> also continues to be very cash generative with around 63 million pounds at cash generated from operations, which continues to provide the capital to self fund our organic investments.
Finally, as you'll recall, we completed a secondary listing on NASDAQ in October 2020.
We've been very pleased with the response to the listing with a number of 80 S is more than doubling they now represent a little over 10% of our share capital at around 25% of our liquidity.
If you now please turn to slide 12.
This slide shows the detail of our second half performance in the context of the last two years.
As you can see we delivered strong.
To grow sequentially in the second half of 2021 with revenue up 17% on a constant exchange rate basis on the prior year period to 165 million pounds and again. This was supported by 35% growth in our in house products, which contributed almost two thirds or 64% of our revenue in the second half of 2021.
Our gross margin hit almost 73% in the second half of 2021, and our adjusted operating profit increased by 25% half on half to $33 6 million pounds and equivalent incremental contribution margin of over 40%.
If you'd now please turn to slide 13.
Here you see the breakout of our catalog of revenue growth by region.
Category and customer type all growth rates are at a constant exchange rate basis.
As you can see the long term trends Allan discussed at the outset of our presentation with continued into 2021.
Starting with the with product chart on the left hand side with the exception of Japan. All major regions grew at double digit rates in calendar 'twenty, one with China, our fastest growing region posting growth of 34% in the U S delivering over 25%.
These two regions together account for almost 60% of revenue.
The EMEA and the rest of Asia also grew solidly at mid teens rates with Japan at around 5%.
It's been well publicized Japan suffered a more significant wave of COVID-19 during the second half of 2021 than many regions and that disruption together with more longstanding structural issues with regards to life science funding means it's likely to remain a lower growth territory for us over the longer term.
From a product perspective in the Middle chart, you can again see that all categories posted double digit growth rates.
Primary antibodies, our largest category grew high teens, driven by our portfolio of in house for Covenant antibodies, which grew by over 40%.
Our single and multiplex products, which includes our growing of Liza portfolio are higher plex offering and now also by a vision cellular assays grew over 35% and now contributes a fifth of the total sales.
Other developing categories, including our detection labeling kits, a growing portfolio of high quality proteins and our edited cell lines portfolios grew 27% demonstrating great progress.
And finally on the right hand side, you can see the breakdown by customer type as Alan mentioned earlier Biopharma continues to present, a major long term opportunity for us as we develop more of our own products in this customer segment with the strongest area of the market for us in 2021 with growth of over 30%.
Our academic and other research customers also saw good growth as educational and research organizations continue to increase activity levels through 2021.
Now please turn to slide 14.
So looking at our operating profit for the period I thought it'd be helpful. To include this slide to walk you through the bridge from our reported profit in the period to our adjusted operating profit both before and after the changes we've made to the presentation of adjusted operating profit following the launch of the new share incentive scheme in the year that Alan mentioned.
Starting on the left hand side with our reported profit operating profit at 7.1 billion pounds. We had just over 33 million pounds of exceptional costs in the year.
This included 9 million pounds related to the amortization of acquisition intangibles.
13 million pounds of acquisition and reorganization costs, the majority of which related to buy a vision at 7 billion pounds. It related to the final stages of the Oracle implementation, which we expect to complete in 2022.
Can you get back to a like for like operating profit figure. We then add back the noncash costs related to the P. J share scheme and introduced during the year, which amounted to about 7 million pounds.
This together resulted in a comparative in a comparable adjusted operating profit of $47 5 million pounds for 2021.
I went to and operate an adjusted operating margin of 15, 1%.
This compares to a market consensus at 14, 1% and 13, 8% in calendar year 2020. It's also worth remembering that in calendar 2020, we had a restatement of G. R. G R and I uplift in the second half of the year. So the actual comparative adjusted operating profit was 13% for calendar 2022.
Two to 15, 1% in calendar 2021.
For those of you who are not aware the PGA scheme or profitable growth incentive plan is an equity plan that was approved in July 2021 for around 150 of the company's leaders to align their incentive is Asian to delivery at the groups five year growth plan.
And finally in the last two columns after adding back an additional $12 nine of share based payments in the year related to the prior share schemes, including the App share all employee scheme, which vested in November 2021, we arrive at an adjusted figure of $60 4 million pounds for 2021.
In addition to the PGA plan mentioned earlier. The group has also net of loss a successor plan to the App share plant once again, it aligns to our strategic goals as well as customer focused metrics with all employees eligible, but with the peak yet and the new employee share plans right at the end of 2024 with the annual costs rising from around 30 million pounds next year two four.
5 million pounds in 2024 again remember these are all noncash we will continue to provide data for the share based payments for the historic and new schemes going forward to allow you to continue to make a like for like comparison post these changes.
If you'd now please turn to slide 15.
As Alan mentioned, one of our strategic priorities is to supplement our organic growth through acquisitions, and having announced the deal to acquire a bio vision 2021. We're pleased that we were able to complete it last October .
To recap bio vision as an innovator and global distributor of life Science reagents with a focus on biochemical in cell based assays.
This is one of the focus areas of product development, we laid out in 2019 and aligns with our existing areas of research focus, including oncology immuno oncology neuroscience and epigenetics.
We know their products well since they've been one of our largest suppliers wherever decade, and we're now moving through the integration process, which is well on track with our plans.
Regarding the financial headlines as you recall, we paid $340 million in cash dollars in cash for the business were around 250 million pounds at current exchange rates, we bought it on a cash re debt free basis.
We financed the deal using a combination of our existing cash resources and a drawdown of 120 million pounds on a revolving credit facility.
Total revenues of the business in 2021 were a little over $37 million of which around one third was sold through outcome.
As we previously disclosed they generated approximately $5 million of Covid related sales in 2020, which we didn't expect to recur and you can see this has reduced to less than 3% of sales in 2021.
As of the date of acquisition. The latest 12 months recurring revenues were around 18 million pounds or $25 million.
Our gross margin will benefit both from the uplift at our sales of their products and their other product sales, which are at a similar gross margin to our own in house Kids overall, we expect the transaction to be accretive to EPS in 2022.
We've also updated our long term revenue goal to adjust for the acquisition and I'll touch more on this in a couple of slides.
If you'd now please turn to slide 16.
So turning to cash flow and capital investment supporting the delivery of our strategy, our strong balance sheet and cash flow generation.
Following our equity placing on NASDAQ in October 2020, the cash generation of the business and acquisition of bio vision. We ended the period with a modest net debt position of 24 million pounds.
The strong cash generation qualities of the group continued to allow us to self fund our internal capital investment needs to support our growth plans and our capital allocation priorities remain unchanged.
We're confident that the potential for the business to generate profitable growth and attractive returns through organic and inorganic investment remains significant.
Chart on the right shows the profile of our Capex investment over the last few years, which has been fairly consistent and in line with the plans we announced back in 2019 at around 40 to 45 million pounds per annum.
We'd anticipate this level being broadly maintained over the next year as we complete the final installation of the ERP program.
Lots of our front end website and complete the fit out of the new Walter at the law firm site for the scale up of our kit manufacturing capability longer term, we continue to expect our capex to sales ratio to reduce from the elevated levels of recent years in the mid teens to mid to higher single digit range.
Please turn to slide 17.
Before we open it up for questions I wanted to cover the guidance that we set out in the statement earlier today.
We previously committed to reintroducing guidance, when we had more clarity on the path around Covid and whilst we remain mindful that further potential COVID-19 impacts as well as other market at macroeconomic macroeconomic uncertainties and now feels an appropriate time to do so.
Our trading so far this year is in line with our expectations and overall, we currently anticipate total revenue growth of approximately 20% in 2020.
This is at a constant currency basis and includes the impact of biodiesel.
Organic basis, we expect mid teens organic constant currency revenue growth.
As I mentioned earlier, we expect continued adjusted gross margin improvement from both the contribution of higher margin in house products and the full year impact of the <unk> acquisition.
And finally on 2022 guidance. We currently expect total adjusted operating cost growth of mid teens as we slow the rate of investment to leverage recent investments because the avoidance of doubt. This growth rate is for total adjusted costs and includes adjusted depreciation and amortization costs, but excludes share based payments. So the comparative figure is.
For 2021 is about 167 million pounds.
Turning to our long term goals, we've increased our revenue goal target by 25 million pounds to 450 million pounds to 525 million pounds on a constant currency basis.
This is adjusted to incorporate bio vision at our current operating performance.
Our adjusted operating margin and ROIC targets remain unchanged.
Finally, as I mentioned, we've been very pleased with the reception of our U S. IPO both in.
At the time of lifting and fits with the number of Ats is an issue doubling and liquidity increasing.
With this in mind the board continues to review options to increase share liquidity.
To the extent, we come up with those options will consult with shareholders on any proposals and with that Alan I'd like to thank you for your attention and operator, we will open it up to questions.
Thank you ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.
We wish to cancel your request please press the hash key placed.
Please standby, while we compile the Q&A queue. This will only take a few minutes.
Your first question today is from the line of Puneet <unk> from Leerink. Please go ahead.
Yeah, Hi, Michael Thanks for taking my questions. So first one.
Just on the in house number it was ahead of our expectations.
And just wanted to see what what are you building in for the full year, what's your growth expectation for that.
Overall in house business.
And how should we think about the total contribution from that by the year end 2022 and.
Also how should we think about the op margin cadence given.
Sort of the investments that you have ongoing right now and the fact that we're emerging from Covid still.
It's much easier for me to answer questions when I'm not on mute here.
Let me start and then maybe Michael can talk a little bit about the financials.
Overall.
We have in <unk>.
<unk> antibodies still a situation, where we think there's more ideas than we can execute in every year.
<unk>.
And that's in our.
Portfolio, where we've had the most experience building your own products and we're constantly looking for ways of increasing throughput and productivity and that that portfolio last year antibodies in all of our new products. We did about 2500 new product introductions.
And towards the end of the year, we really start to see some uplift in engineered cell lines in proteins. So I guess to answer your question, we don't see the constraints. So much the demand side, we think there's a lot of good tools that need to be introduced.
The productivity and throughput that we can bring to market and your product development. We think is the limiting factor in we're kind of pushing as hard as we can there to keep driving more and more throughput.
Throughput of the right products. So it's a combination of using our data analytic insights.
<unk>, what the market's going to be innovating, where those gaps are and and driving as much throughput as possible.
So I I.
I think.
In general were.
We're we're moving as fast as we can in and.
The answer to your question is not so much kind of planned targa.
Target, but how do we just keep driving more and more through it.
Michael you want to give any kind of guidance on.
What our expectations are.
Oh, Yeah, I mean, we haven't I mean puneet, it's as Alan said, it's that's not the way, we're really driving business with with a target number but we don't see overall I mean, if you look at the growth rate that we're guiding to which is which as you know.
Mid mid teens on an organic basis, and 20% with with by a vision that that implies a they.
Not dissimilar overall growth rate in our old products over the next year.
Okay got it.
Helpful and then in terms of.
This is a broader question about the proteomics companies you have established a number of agreements here.
With.
Novelis Alomar others.
Could you maybe outline your strategy there and how are you structuring these economic what do the economics of these agreements.
Should we assume the in house gross margin on these antibodies. When these products are eventually launched on the market by the by these companies.
Or should we assume something lower and was wondering if you can also talk about any contribution that you have from sort of the old links in the ISO flexes and others. Those are proteome pure play proteomics companies out there that have.
That are incorporating your comments and those companies are obviously seeing.
Meaningful growth in the market.
Again, let me let me start Mike do you want to take that we think.
Yeah.
The investments in innovation and development of proteomics platform companies is great for science.
And for the most part they're using antibodies as their model molecules.
Of course, not just <unk>.
Any old antibodies, a lot of them need to be conjugated to the proper.
Kind of.
Signal molecule and so.
What we're trying to offer to the market is.
The right performance of the antibody the right package of ready to run on your platform solution and being flexible about how we work commercially so that.
They can get up to speed quickly.
Sure.
For products that we've already produced or created for the catalog. Sometimes that's just some adjustments to buffers and addition of of some as I say some conjugation chemistry.
And.
Really there's no difference to our economics, there and its just finding another outlet for our content.
They're more new innovative research can be done in a lot of the relationships that we've established in the marketplace have been like that but.
But what is becoming clear is the ambitions for these companies are are big and there are limited by the range and availability of antibody content.
Required to discover future applications, particularly in some of the kind of.
Pan proteomics approaches like Nautilus.
Where.
We're having to be.
A little more thoughtful about how do we open up a more innovative higher throughput model to create content for those partners at a pace that allows them to grow and for science to expand into those applications that's exciting.
But much of the last year some of the agreements have had components, where we're developing together a new kind of new product development approach.
And.
Again, the economics that are attractive enough that I'm not concerned that there's anything material that would diminish the outlook for <unk>.
But.
You know, it's a different kind of work together.
Those are the minority.
What we're finding is a lot of the content. We've already made is useful but there are a couple of companies that are working with this on a very innovative product assortment approach and we look forward to doing more of that.
Got it and then just last one if I could squeeze in on.
I mean, obviously valuations have come down meaningfully in the sector I'm wondering as you look around beyond bio vision from your vantage point, how does this sort.
Sort of change your view on potential opportunities as you as you look out there. Thank you.
Thank you I I think that's true on the public markets I'm not sure. It's so true from the seller's expectations on the private side quite yet.
You know, maybe maybe that'll play out that way over the next year, but.
You know we're we're.
We're still actively reviewing a lot of interesting tuck ins and opportunities.
As ever we're weighing up the the advantages of those product portfolios and the teams that they bring versus the complexities of integrating small companies.
And you know why Wouldnt, we just do it yourself so.
It's.
You know I think I think we're looking forward to reviewing more companies is that valuation expectation moderates, but equally.
Yeah, we're gonna be very selective.
Got it thanks guys.
Thank you. The next question is from the line of Tejas Savant from Morgan Stanley . Please go ahead.
Hey, guys good morning.
So just a couple of quick ones on <unk>.
On a couple of geographies here, which have been in focus of late so Alan starting with China. I mean, obviously, that's an important region for you I think it was close to about 20% of your sales can you just walk us through sort of the impact of these zero tolerance policies. It's been a point of concern, especially over the weekend there given the recent COVID-19 surge there.
And related to that longer term.
You know there's been a bit of a focus on local suppliers. Following all the recent geopolitical upheaval.
Can you just remind us of your strategy there to navigate that nuance.
Yeah. Thank you China continues to be an important market for us not just for this year, but long term and we.
Believes the investments that are being made in that market both in talent and funding research as well as the translation of that research into clinical applications as a long term theme. That's it's important for <unk> to participate in so that's that's unchanged.
The short term consequences of the Covid policies, there have it's to some extent reminded us of where we were in spring 2020.
But practically.
Our operations in Shanghai and Hangzhou.
Continue pretty much as they were.
And unaffected so far by any any material impact of the zero tolerance Covid policy.
Given what's happened since then and as some of the early school closures in Shanghai that could change wrap up really so what we're doing is making sure that were prepared that we.
Have appropriate inventories and routes to market that allow us to work around any shutdown should they come.
Just as we did in <unk>.
February March April 2020, when our Hangzhou facility was with shut up here for a short period is.
The original outbreak was taking place.
The demand side of the impact is.
It is also likely to be affected in China, depending on how things roll out so far it's not been a major issue, but again, we're watching carefully how that plays out.
So I don't think there's a lot of material information to report now but.
Watching and monitoring on a daily and weekly basis as you might expect.
Got it that's helpful.
And then just broadly on some of these supply chain disruptions, including perhaps an element of inflation you're four for not just you guys in terms of your supply chain, but also you are.
You know your customer has the ability to scale up.
Can you just walk us through your strategy, there and your ability to pass through pricing increases that's been a recurring theme for a lot of your tools P. O. S. T. R. I was just curious about you know it is 2022 is going to be a year of outsized pricing increases and to what extent are you factoring that into your guide.
Mike you want to strike.
Yeah. So I mean, if you look at particularly on the OEM side, where we probably have more potential exposure most of our OEM products now are.
Purchased through longer term contracts and we have the ability to actually pass on price increases, which we've been doing so we're not too worried about things on the on the OEM product side and on our own product side. I think you know we have we've had enough flexibility to make sure that we're recapturing any any inflation right now through price increases.
Being also sensitive to.
Driving prices up too high, but we're fairly comfortable on the pricing side right now vis vis costs.
Got it that's helpful and then Michael if I could follow up with the last one on the guide I mean, obviously the second half of 'twenty. One saw a marked improvement on margins relative to the first half.
And and I was just curious to what extent was that sort of step up related to mix and volume leverage and just usual seasonality versus some of your operating initiatives starting to bear fruit.
I'm going with that is is it fair to use the second half of 'twenty, one as a baseline off of which you should see some nice sequential improvement in the first half and then more so in the second half of this year.
Yes, I'd say that's fair yes.
Got it very helpful. Thank you.
Yeah.
Thank you. The next question is from the line of Stefan Hamill from Numis. Please go ahead.
Hi folks.
And so just the stuff I was just.
Just following up on them.
That's.
New information that we've been giving on Biopharma revenues split there with 33% growth in that area can you just.
Give us a sense of <unk>.
Expedience, helping drive that and is this the kind of growth rate that you can sustain.
Yeah.
Expedient helps but it.
A lot of.
The core of what.
Maybe that can be successful.
Still really high quality antibodies.
Yeah.
That.
That approach that we've been building over the last.
Six or seven years now of making sure that we're innovating in the right target for making we're making a recombinant version of the antibody it's highly validated.
That's.
That engine plus the commercialization approach we have in Biopharma is is driving a lot of growth it helps to have.
Immuno assays that are related to it or conjugation chemistry is related to it are kits that are related to it.
But you know it's still.
That's the thing that we've been that working at the longest to attractive biopharma portfolio and that's the engine for growth there.
Thanks, and then.
On the in house versus third parties is obviously fantastic and highest performance third party relatively subdued.
Can you just give us a sense of any sort of active cannibalization between those two or can we use so view, though is this.
So true like for like growth rates between the two.
Okay.
A lot of the third party sales are.
Related to the historic App Cam business model that we got started with so their sweet spot is academic customers relatively small volumes typically involved in kind of early stages of testing, which molecules are going to be.
Appropriate tools for a line of research. So when you look at 2021 as a calendar year a lot of that activity was still subdued.
So the impact of Covid was disproportionately high on the OEM portfolio, let's see and you know as that lab activity in academic started to come back through October November where we saw that growing pretty nicely again, and then omicron.
Started to have a pretty significant impact on academic buying again in December January so academics gone through some ebbs and flows with Covid.
Which just has a bigger impact on them yet.
Okay, and then just one final one on royalties and licenses this healthy growth and that growth has been sustained for quite a few years now.
And you've done a flurry of partnership deal was in the last year.
So.
Could that actually come through this year in terms of a further acceleration or should we view those partnership deal was just having a fairly long lag time.
I think it's it's.
My response to this is unchanged I think from a planning assumption, we've always felt like we'd be perfectly happy with that.
Portfolio of products and revenues that were in see P&L kept up with overall.
Topline growth.
And that acknowledging that that was likely to be driven by more and more business from supply of in vitro diagnostics and antibodies and kits too and if royalties that can come out of that rather than through custom service projects fee for service.
That's unchanged.
And then we say well if we can if if.
If things that are out of our hands activities are out of our hands are are more and more successful taking up cam products into.
Environments, where we would be paid royalty that's great upside, but we're not.
Not counting on that so it's great to see it I think it's absolutely in line with our strategy.
But the timing of when when those things happen is so out of our control.
For load.
To get in the business of trying to predict higher than group revenue.
Gotcha contribution for this.
Thank you folks.
Thank you. The next question is from the line of Matt <unk> from William Blair. Please go ahead.
Hi.
I guess good afternoon and good morning.
Sure.
You walked through some of the capital investments that will continue in 'twenty.
To like just curious within the Opex line is there anything you can give us in terms of the breakout by segment annual hiring.
<unk> stepped down from about 315 and folks from 20 to $1 50 in 'twenty one but.
What's kind of employee head count you plan to add in 'twenty, two and is it mostly on the R&D side sales and marketing.
Sure. So we ended the year at about 750 people.
So the growth in head count over the years, but it was much lower than the year before and you know we are anticipating.
50.
What did I say sub $3 50, you said sympathy that's okay.
Sorry.
So I mean, we're looking again at a at a a a if you look at the operating costs that we laid out the 167 million pounds.
About a low teen digit increase in those operating costs, it is coming through comp and benefits.
Largely some slight increase in depreciation.
But our.
Our investment has continued is is right is slowing and that's where we're seeing the increase in margin impact.
Okay and then just on the guidance. Obviously you gave the CER guidance just curious how you're viewing currently right now I think 21 was another year with.
A meaningful impact from foreign currency can you just remind us what your policy there is and what we should expect a F 'twenty two.
Yeah last year, the foreign currency impact it was about 14 million pounds 14 million patent headwind.
And that was largely due to the weakness of the dollar against the pound what we've seen so far year to date, and we don't really we don't predict currency changes but.
The strengthening of the dollar has been offset largely by the weakening of the euro against the pound.
Somewhat as a result of what's going on in the Ukraine. So right now we're at we're at about a wash from a foreign currency change impact.
Don't know where that will go but we're hoping that that the strengthening of the dollar will give us will give us some tailwind, but right now that's been largely canceled out by the change in the rates of the euro.
Okay, and then just the last one I think on the.
Last update call you mentioned.
3% headwind from from Cynthia listed products, and obviously that was outsized and something you mentioned, but anything that we should be factoring in for 'twenty, two and was there anything of note to call out in terms of the <unk>.
Back half 'twenty one impact.
No I mean, not theres nothing we didn't have any significant de listings last year, we had a continuation through we've always got some culling our portfolio and to a certain extent if we're we're calling things we try to we try to replace them with other stuff.
And we saw the biggest impact and in 2020 and early 'twenty one from from the large de listing we had in 2020, but it's a it's probably now hit that portfolio and the delisting of that portfolio would have probably had a three that's about a 3 million pound effect this year, but again, we've we've.
We've moved on from there we've replaced what we can and so it just it just shows you that we're actually growing at an even higher rate given the impact of the continued culling of the portfolio of third party products. I mean also remember because of third party product portfolio continues to be a smaller and smaller amount of our of our sales. It has a it has a smaller impact than we do when we do call. It.
Products and we've also done the largest and most significant culling over the last few years and now have a portfolio of what we think is largely very good third party products.
In the second half of last year, we were at 64% of our revenues in the second half of our own products. So the impacts continuing to get smaller.
Okay. That's great. Thank you.
Yeah.
Thank you. The next question is from the line of Charles Weston from RBC. Please go ahead.
Hello, I have three questions. Please first of all on your mid teens organic revenue growth.
That reflective of the first couple of months of trading or you, assuming some acceleration or deceleration.
And on that subject, how much is that mid teens organic growth relates to COVID-19 .
Covid impacted comps and it's sort of a COVID-19 recovery versus more of the underlying growth rates.
So so Charles on the first question. It is what we what we had.
Estimated before the beginning of the year and we are trading consistently with with.
Where we thought we'd be right now so we're not expecting some significant incremental surge in trading to make which are hit those targets.
And no. We think it's we don't think we think we've actually caught most of the recovery from Covid in fact, as Alan mentioned, hopefully there wont be at the level of impact from what's going on in China or anywhere else will not be significant but we're not expecting.
The catch up from Covid to make those numbers.
Thank you and then on page 13, you spits out some immunoassay unknown primary antibody revenues.
How much bigger is the combined markets of the other products not immunoassay <unk>.
And could you expect a similar market share in a similar timeframe you know you're going to use the seventh or eighth year of immuno assays or could that go quick given all your digital investments.
Alan do you want to touch on that.
Yeah, I mean, the immunoassay markets much smaller than the antibody market, but were.
We might have been.
8% to 10% of that business and we just think there's a lot more headroom for us to grow there. So I would agree with you theres more market share to go after.
And then just.
Comes back to a little bit of a penny was saying as there's so much innovation and how immunoassay as is being done through these platforms that are being coming to market.
That adds additional growth, but could expand.
The size of the Tam there, so where we're interested in that that dynamic as well.
On cell engineering, it's so early.
You know to some extent.
The first 3000 products, we have are nice, but we're trying to get to a place where we can make thousands more each year.
And we're in the early stages of developing that kind of capability.
So it's just that's one of those where the market size will grow as we grow out the product portfolio available science worldwide.
Proteins, we're in early days with our cytokines and bioactive proteins, but <unk> got really good uptake that's going to take.
It's going to take us a lot longer to build the kind of share position there, but we're right on track with where we thought we'd be.
The reality is.
There's growth everywhere theres still a lot more to go for and antibodies is there's a lot more share to go for an immunoassay and potentially gross in the addressable markets and then there's growth in addressable markets. Both an edited cell lines and proteins. So we feel like we're in good markets.
Okay. Thank you and my last question relates to your comment about reviewing options to increase liquidity and consultation with shareholders.
Given you said you're going to can sell so I'm sure you're not going to shed too much with me, but it should to pay to be signaling something and I'm not.
Okay fair enough, perhaps to understand what it is signaling.
But does it signal that you'll likely tool youll considering shifting.
Shifting your primary listing.
Michael I think you're on mute.
Yeah.
That's helpful to hear the Mic sorry, Charles I mean look it's certainly one of the things. We're considering if you as you well know our liquidity. If we have 228 million shares outstanding and very low trading volumes and it is interesting that it's in the little over a year since we've listed in the U S. We've gone for five to 10.
Many of our shares here and it is 25% of our liquidity. So we're looking at ways to take advantage of that and.
I guess I'll I'll.
All options are open to consideration and that's what we're looking at this year.
Okay. Thanks very much.
Okay.
Thank you. The next question is from the line of Michael <unk> from Bank of America. Please go ahead.
Hey, Thanks for taking my call and congrats on the on the.
Update on the guide update.
I wanted to start with a question on <unk>.
The vision you indicated.
Really good progress.
Since you've closed the acquisition I was just wondering you know approaching five six months. After the deal closed any insights or any learnings you can take in terms of integrating the operations from an R&D perspective.
How's that progressing as you roll the assay business and what with your existing offerings.
Any way you can take from that as far as future opportunities.
Yeah, no great. Thanks, Michael.
On the R&D integration I think one of the things we always believed about bio vision and any company that we acquire is that our data.
Can help figure out where there are still opportunities to innovate with the team and I think that's been one of the most interesting things is we've gotten together just looking at their kind of prioritization list than ours, how we can help.
To provide more focus and attention and investment and in some hot areas, where they may not have seen opportunity are we where we uniquely saw it so a lot of that works going on now.
I actually think the bigger.
Question that Biovisions raises for us that we're trying to deal with in terms of.
Investments in focus is.
We now have a pretty substantial.
Kits.
Portfolio immunoassay as I say their activity assays activity assays.
And.
Conjugation kits, where the capabilities to manufacture components at the right time store goes in the right places and assemble those into kits becomes a capability that we need to.
<unk> at scale and through high at high throughput and wasted that Cam hadn't historically, Berkeley and none of the acquired companies had so one of the things. We're looking at this year is just how we how.
How do we scale that up and make that a bigger and bigger part of our company and certainly biovisions team.
And that portfolio has given us additional scale and capabilities to think about that opportunity.
Okay, Great and then.
Quick follow up on by the theirs and then I have one more on.
On the long term guide update I think you raised by about 25 million pounds and you indicated it was updated to account for by vision, but also the current operating performance.
You gave us some clarity on that I mean, we can do the math between $17 8 million trailing 12 months and $25 million.
In three years, but the rest of the view roughly unchanged that you're feeling a little bit better a little bit worse, just sort of what's the what's the other naphtha.
Well I think it's just a confidence in the level of growth that we saw last year and that growth going forward.
Both of our antibody business and our kids business, our proprietary products and that that's reflected in the <unk>.
As assumptions.
Yeah.
Okay Alright.
One last quick one for me among the customer segments. If you look at sort of the academic customers in their research Institute.
<unk>.
Customers strong performance trailing.
Trailing 12 months I said, it's a market that doesn't grow as fast typically as biopharma.
And those customers can be could be a little bit more susceptible to COVID-19 .
So anything you can call out there both in the U S with.
Updates on NIH funding recently.
And in Europe , just sort of.
So those customers are they really back to normal or is there more upside from those numbers.
Yes.
Yeah, It's a great question I think it's.
The environment is strong.
Worldwide the.
<unk>.
The impact of Covid.
Continues to be.
One that.
Is an issue whether that was the impact on <unk>.
Our labs closing early in heading out for the winter break or a little bit slow to come back in January where we had some soft December January numbers in the academics.
Institutions, not all of them, but some.
Or what we're seeing in.
China right now with <unk>.
Local regional shutdowns in some locations. So I think theres those factors our own surveys have suggested that the self reported numbers for academics, we'd say that 85% of all labs are back to normal by January .
So whatever whatever that means we'd.
We'd like to declare a victory and move on and say we're done we're just not quite through all of it yet so you know.
Part of.
Part of our updates on the numbers that you asked about earlier as you know, we're very bullish about trying to drive to the top end of our range, but there's still quite a lot of uncertainty in the world and we want to reflect that.
Great. Thanks, so much.
Thank you and the last question today is from the line of miles Dixon from Peel Hunt. Please go ahead.
Many thanks, just quickly returning to two themes that Ive heard you talk about the capital markets day in November 19.
Firstly is on the data team and it was trying to get in front of demand for antibodies and secondly on the success of your relationship with the well the democratize folks foundations that funding bodies essentially how successful has that been in the last couple of years and can we know at that through to a differentiator. If you like for <unk> and why you continue to guide for growth.
[noise] ahead of the market. Thank you.
Thank you miles on the data I think data has always been important to outcome right from the beginning we're just getting better and better at using at structuring data cleaning it up.
Creating the digital architecture to make it more accessible and usable.
And then building models to help predict where science is going and who's relevant to those innovations. So.
<unk>, we can declare quite a lot of progress there but.
We still have really high ambitions for what we can do in some of the investments we're making this year on customer journeys and in our digital experience customer experience.
We're excited about what we can do that over the next few years and that we use in applying that data.
With the foundations that we just keep finding that bringing together our insights about where the gaps in the market or the funding bodies.
Tired, he's researchers priorities and working together with clinical applications that as a group thinking kind of about what where the innovation needs to happen is taking years off of the transition from first discovery to clinical or patient impact and a big part of where our brand is going and where our capabilities.
<unk> is to do more and more of that so we're we're excited about what we've done with Michael J Fox net area. There are many more like that that we want to continue to pursue in and are pursuing.
And I, thank everyone for their extended attention today, it's been a real pleasure to talk about apt camps performance. We're very proud of what we've been able to achieve we're excited about the year ahead and thanks, everyone talk again soon thank you all right.
Okay.
Yeah.
Yeah.
Thank you that does conclude today's.
Conference call. Thank you for your participation, ladies and gentlemen, you may now disconnect.
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