Q2 2022 Bio-Techne Corp Earnings Call
Good morning, and welcome to the biotech Mi earnings conference call for the second quarter of fiscal year 2022. At this time all participants have been placed in a listen only mode and the call will be opened for questions. Following management's prepared remarks.
During our Q&A session. Please limit yourself to one question and one follow up.
I would now like to turn the call over to David Clair Biotech Me Senior director Investor Relations and corporate development.
Good morning, and thank you for joining us on the call with me. This morning are Chuck <unk>, Chief Executive Officer, and Jim Hippel, Chief Financial Officer of Biotech me.
Before we begin let me briefly cover our safe Harbor statement. Some of the comments made during this conference call maybe considered forward looking statements, including beliefs and expectations about the company's future results.
As far as the potential impact of the COVID-19 pandemic on our operations and financial results.
The company's 10-K for fiscal year 2021 identifies certain factors that could cause the company's 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 because of any new information or future events or developments.
The 10-K as well as the company's other SEC filings are available on the company's website within its Investor Relations section.
During the call non-GAAP financial measures may be used to provide information pertinent to ongoing business performance.
Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier. This morning on the biotech knee Corporation website at Www Dot bio dashed technique Dot Com I will now turn the call over to Chuck.
Thanks, Dave and good morning, everyone. Thank you for joining us for second quarter conference call. The biotech team once again executed our global growth strategy at a high level continuing the momentum from last quarter in the last fiscal year.
We crossed an important milestone during Q2 as our trailing 12 month revenue exceeded $1 billion for the first time the company has 44 year history.
Our 17% second quarter organic growth rate reflects continued robust demand for our portfolio of high quality products and unique analytical solutions, especially within the Biopharma end user base.
Within biopharm, our positioning with cell and gene therapy customers continues to accelerate with this end market growing north of 80% and our GMP proteins are growing over 180%.
Our portfolio of innovative reagents tools and solutions remain incredibly well positioned to enable the biologics Revolution currently underway.
Transformative technologies like cell and gene therapy spatial biology.
In genetics, and proteomics Biomarkers drive research discoveries, the emergence of transformative diagnostics and therapies and ultimately impact better patient care and outcomes.
I'm extremely proud of our team of scientists continue to develop innovative technologies necessary to advance and enable next generation diagnostics and therapeutics.
This strong performance in Q2 has once again delivered with a focus on driving profitability as our adjusted operating margin increased 50 basis points sequentially to 38, 3%.
While the demand for human capital remains high and the pace of our own hiring to meet current customer demand and support our future growth programs remains challenging.
We continue to make progress in adding talented people to our organization at all levels in each of our businesses during.
During the quarter, we filled several key open positions within our technical and commercial organizations. We are utilizing referral bonuses career fares as well as leveraging industry awards like our recent recognition in Inc. Magazine's inaugural list of best led companies to attract and retain talent.
At the most senior level in our company I'm very pleased to have little Geist and Brenda Eriksen join our leadership team who is our new president of protein Sciences, and most recently served as chief operating officer for context prior.
Prior to that will held multiple leadership positions running large business units for Thermo Fisher scientific.
Transitioning into his new role from Dave answer who will be retiring in Q3.
Brenda as our new senior Vice President of human resources with extensive experience successfully leading HR functions at large organizations, including 18 years at Apple.
Brenda will be transitioning into a new role from Struan Robertson, who will also be retiring in Q3.
The contributions of both Dave and strewn have made to the dynamic growth in culture biotech me over the past eight years have been immeasurable and I wish him all the best in their retirement.
It is largely due to the legacy created by days through and in the remainder of biotech and he has 2700 strong employees that has enabled our company to attract such great talent to lead our businesses onto next decade of success.
Now, let's get to some of the specifics around biotech and a spectacular business performance for the quarter, starting with our regions and end markets.
We once again experienced global strength across the portfolio, China, let all territories, where the team delivered yet another quarter of organic growth above 20% close behind with the U S. The growth also north of 20% and Europe was in the mid teens.
As I mentioned earlier this growth was driven by a very strong both from a market as it has been for many quarters and we don't see that momentum flowing down.
Similar to Q1 academic growth was significantly lower than Biopharma, where alakrana do shutdowns occurred over the holidays and lack of funding clarity impacted larger bulk orders. However, our daily run rate reagent demand from academic customers was strong for most of the quarter, indicating a healthy underlying academic research environment, we anticipate.
This relative lull and academic growth will gradually accelerate the remainder of the calendar year as the Alakrana peaks of sides and is spending budget is finally passed in Congress.
Now, let's discuss performance of our growth platforms, starting with protein Sciences, where we delivered organic growth of 19% in the quarter.
As I mentioned in my opening comments, we continue to experience broad acceptance of our innovative tool for agents and analytical solutions to improve the efficiencies within the cell and gene therapy workflow.
During the quarter, we initiated commercial availability of GMP proteins manufactured in our state of the art GMP protein manufacturing site and are now actively shipping to our customers from this facility. We will continue to expand the number of GMP proteins manufactured in this facility focusing first on scaling the GMP proteins with the highest anticipated demand within our catalog of over 30 G M protein.
Yes.
However, our cell and gene therapy business extends far beyond GMP proteins and includes serum and media for cell growth, our non viral gene editing technology as well as our clouds polymer based cell separation technology in.
In addition to uptake with our cell are of course cell and gene therapy products. We are experiencing a halo effect on several other biotech product lines, including our proteomics analytical tools and spatial biology franchises.
We also continue to explore external opportunities to expand our cell and gene therapy offering in addition to our organic efforts.
In December we struck an agreement with St. Paul, Minnesota based Wolfe Wolfe for future investment and eventual acquisition of this rapidly growing company as background Wilson Wolf manufacturers of <unk> product line.
Leading single use cell culture device, which has enjoyed rapid adoption and is quickly becoming the cell and gene therapy industry standard for Bioreactors.
Wilson Wolf is a very synergistic fit with biotech name with T. Reg cell culture devices, requiring GMP proteins is a key input to scale immune cell growth terms of the agreement include the right to the bank at 20% ownership investment upon Wilson Wolf, reaching $92 million in trailing 12 month revenue or 55 million in EBITDA.
This is followed by an agreement to fully acquire the company upon achieving $226 million in revenue or 136 million and EBITDA for an additional $1 billion, representing a total acquisition price of 1.26 billion.
If these milestones are not reached by the end of calendar year 'twenty twenty-seven biotech me has the right to purchase Wilson Wolf at a set multiple of 4.4 times trailing 12 month revenue.
As a reminder, Wilson Wolf, along with Fresenius Kabi, our already Belichick and partners in a scale ready cell and gene therapy joint venture.
Today Wilson Wolf annualized revenue is greater than $50 million and growing rapidly.
We are looking forward to them hitting their milestones and eventually becoming official members of the biotech team.
With all the excitement around cell and gene therapy opportunities, we haven't taken our eyes off the ball of the core of our company are you old proteins and antibodies. Our core research use only protein and antibody businesses continued to perform extremely well growing double digits in the quarter.
Our broad catalog of argue of proteins is widely recognized as the industry, leading portfolio with our R&D systems brand delivering the highest level of quality bioactivity and lot to lot consistency. In fact, we created the category of researches cytokines more than 35 years ago and have amassed a catalog of over 6000 proteins over this timeframe, including several hundred that are.
Goose to biotech.
Our in house expertise and broad offering in both proteins antibodies creates opportunities for biotech to participate broadly in emerging applications, including high throughput proteomics and the development of engineered proteins and positions us to possibly expand into adjacent opportunities, including mrna and plasma DNA manufacturing.
Moving onto our proteomics analytical tools, where the team once again delivered robust growth across our portfolio of novel instruments, and leading immunoassay solutions are proteins simple branded instrument portfolio increased 25% as biologics simple western and simple Plex, all grew north of 20% in the quarter.
Biologics once again led the way growing over 30% year over year.
Recall, our biologics instruments, namely armories platform enables identification purity testing in charge analysis of proteins in bio processing.
<unk> is also gaining traction in cell and gene therapy applications with its ability to characterize capsid proteins, enabling AAV serotype identity and stability testing.
Our fully automated western blotting solutions simple western continues to gain acceptance within the research community and its ability to convert the messy cumbersome and unreliable process of Emmanuel Western blot into a three hour highly accurate push button process and continues to resonate, particularly.
Particularly with our Biopharma customers.
Simple western is also gaining significant traction for cell and gene therapy applications with stem cell therapy, regenerative medicine gene modified cell therapy, and gene therapy customers, all using simple western for viral vector identification purity testing and empty versus full capsid detection.
The recent launch of the stellar Nia, our IR detection module for our just simple western system is a great example of enhanced enhancements we continue to deliver on this platform.
Stellar fluorescence modules enable the detection of low abundance proteins in the multiplexing of multiple targets, including multi color immuno assay alongside total protein standing within the same detection lane.
Following the commercial availability of stellar module, just now offers a low picogram sensitivity in both chemiluminescence and fluorescence channels.
For simple Plex for L. O. We are also experiencing increased demand in the cell and gene therapy applications with the instrument increasingly being used to detect wholesale related impurities. The yellow S. A L assay development roadmap remains very full with additional neurological biomarker cell and gene therapy, bio processing and immuno oncology assays in the pipeline.
Later.
Later, the untapped clinical opportunity onto this rich assay pipeline and we believe although it remains in the early stages of reaching its potential.
Now, let's discuss the diagnostics and genomics segment, where organic revenue increased 6% for the quarter.
Our spatial biology business branded ACD increased 10% in the quarter. While this growth is not up to our long term expectations. It was a nice improvement over Q1, which was impacted by key open commercial positions at higher exposure to a softer academic market any tougher year over year comp all of those same headwinds remain in queue.
Two however, we did make progress on filling some of the open commercial positions and expect for continued for continued progress and growth rates as new commercial team members onboard in the academic environment improve.
As a reminder, over recent quarters, we've expanded our spatial biology portfolio beyond RNA scope, adding kits for the visualization and quantification of DNA micro Arnie short RNA targets as well as higher flexing RNA capabilities.
We're also very encouraged with the continued market traction we are experiencing with basically a kit for the detection of short RNA targets 50 to 300 basis, enabling the detection of splice variance circular Arnie and gene fusion our menu of probes is now greater than 50000 target over many species and publications of almost cross 5500, demonstrating the growing.
Interest in this platform.
One gene therapy has also been a new market for our spatial biology business with ACD being used to track genes of interest in the cellular environment and determine the quantity of gene uptake in therapeutic cells.
We recently announced a non exclusive partnership with fellow spatial biology company acquire Biosciences pairing our RNA scope high Flex V. Two assay for RNA imaging with acquired protein imaging assays to run out of Coy as Pheno cyclic fusion system.
This single cell spatial multi omics workflow has potential to accelerate scientific understanding of human health and complex diseases like cancer.
Unlocked, new biomarker diagnostic signatures improve patient stratification, and ultimately improve treatment outcomes.
We're excited about the automation of the RNA scope high Flex V. Two assay enabled by the quake partnership.
Moving on to other parts of our diagnostics and genomics portfolio within our molecular diagnostic division our extra Dx prostate cancer test continued to make progress in the quarter as patients returning to their doctors for routine checkups or follows led to a strong improvement in diagnostic testing volumes.
Q2 test volumes for Exo Dx prostate cancer test returned to pre pandemic volumes and have continued to increase year over year by strong double digits as we began Q3.
In addition to the extra Dx prostate test, we continued to advance our pipeline of innovative X zone.
<unk> diagnostic test, including our noninvasive kidney transplant rejection assay XO true kidney.
As a reminder, extra true with a noninvasive multi gene urine based liquid biopsy assay that provides critical allograft health information to assist clinician decision, making in managing kidney transplant patients and optimizing patient care. We continue to work a dual pathway for the X. The true commercial launch focusing on discussions with potential commercial partners and <unk>.
Steps to prepare for potential conversation on our own.
With regards to the products with from the legacy surgeon business, our leading portfolio of genetic and oncology molecular diagnostic products, including our kits for F. M. R. One and V. C are able continue to gain market traction during the quarter, we strengthened our genetic kit offering with the launch of the Amp IDEXX P. C. R. C. C F T. Our kit district fibril.
This is a life limiting autosomal recessive disease caused by variants of the C. F T R gene.
This research use only kit provide some broader coverage of the diverse U S population than any other commercially available targeted C. F T. Our testing assay.
Finally, our diagnostics reagents business delivered its 10th consecutive quarter of growth with organic revenue increasing in the upper single digits. The pandemic related headwinds that impacted this business in recent quarters continue to diminish and we're experiencing a reacceleration in the chemistry blood gas and hematology control product lines.
Improving doctor office visit trends and the resulting diagnostic test volumes combined with new product launches and additional penetration within existing OEM customers position this business for sustainable growth going forward.
In conclusion.
The favorable trends we experienced in recent quarters continued in our Q2 is execution from our global team favorable end market conditions and robust demand for our portfolio Proteomics research reagents analytical tools and molecular diagnostic products remains strong our cell and gene therapy initiatives.
Are resonating with our Biopharma customers is increasing demand for our GMP proteins.
Her and media products are translating into demand across our portfolio, particularly for our protein simple branded proteomics and analytical solutions.
We have our sights firmly focused on hitting our $2 billion 2026 revenue target and following the signing of the Wilson will purchase agreement I'm, even more confident in our ability to deliver and potentially exceed this call with that I'll hand, the call over to Jim.
Thanks, Chuck I will provide an overview of our Q2 fiscal 'twenty two financial performance for the total company provide some additional details on the performance of each of our segments and give some thoughts on the remainder of the fiscal year.
Starting with the overall second quarter financial performance adjusted EPS was a record $1 88 versus $1 60 to one year ago, an increase of 16% over last year.
Foreign exchange negatively impacted EPS by four cents.
GAAP EPS for the quarter was $1 94 compared to $1 15 in the prior year.
The biggest driver for the increase in GAAP EPS all of them from business operations was unrealized gains on our investment in chemo centrex.
Q2 revenue was $269 3 million, an increase of 20% year over year on a reported basis and 17% on an organic basis.
Acquisitions contributed 3% and foreign exchange translation had an immaterial impact to revenue growth.
From a geographic perspective, we experienced a strong and balanced performance with China and the U S growing over 20% and EMEA increasing in the mid teens for the quarter.
The rest of the world grew in the upper single digits.
By end market Biopharma remained very strong growing 30%, while academia increased low single digits year over year.
Moving on to the details of the P&L total company adjusted gross margin was 72, 3% in the quarter compared to 71, 5% in the prior year.
The increase was primarily driven by volume leverage and favorable segment mix.
Adjusted SG&A in Q2 was 26, 5% of revenue compared to 25, 2% in the prior year, while R&D expense in Q2 was seven 5% of revenue in line with the prior year.
The increase in SG&A and R&D was due to the acquisition of a surgeon in the fourth quarter of last year as well as investments made to support our long term strategic growth.
The resulting adjusted operating margin for Q2 was 38, 3% an increase of I'm, sorry, a decrease of 50 basis points from the prior year period, but an increase of 50 basis points over Q1.
Excluding the impact of the a surgeon acquisition made last April adjusted operating margin was in line with the prior year.
Looking at our numbers below operating income net interest expense in Q2 was $2 6 million.
Decreasing $1 8 million compared the prior year.
The decrease was due to a continued reduction of our bank debt or a bank.
Debt on the balance sheet as of the end of Q2 stood at $282 1 million.
Other adjusted Nonoperating expense was $1 9 million for the quarter compared to $1 3 million expense in the prior year Pri.
Primarily reflecting the foreign exchange impacts related to our cash pooling arrangements.
For GAAP reporting other nonoperating income includes unrealized gains from our investment in chemo centrex.
Further down the P&L, our adjusted effective tax rate in Q2 was 21, 4%.
Turning to cash flow and return of capital of $101 million of cash was generated from operations in the quarter compared to $89 3 million in the prior year quarter.
In Q2, our net investment in capital expenditures was $10 2 million and during Q2, we returned capital to shareholders by way of $41 3 million in stock buybacks and $12 6 million in dividends.
We finished the quarter with $41 2 million average diluted shares outstanding.
Our balance sheet finished Q2, and a very strong position with 270 $279 million in cash and short term available for sale investments.
Bringing our net debt position to near zero.
Next I'll discuss the performance of our reporting segments, starting with the protein Sciences segment.
Q2 reported sales were $205 million with reported and organic revenue both increased 19% compared to the prior year.
Within this segment the strong growth was very broad based and nearly all reagent assay and instrument platforms as Chuck mentioned cell and gene therapy increased almost 80% including growth of over 180, 180% in our GMP protein products, while biologics grew over 30% simple western and simple plex, both increased over 20% and proteins and <unk>.
Bodies, all grew low double digits.
Operating margin for the protein Sciences segment was 45, 5% a decrease of 120 basis points year over year due primarily to favorable.
<unk>.
Volume leverage more than offset by the timing of strategic investments to support future growth.
Turning to the diagnostics and genomics segment Q2 reported sales were $64 5 million with reported revenue increasing 23%.
Organic growth for the segment was 7% with acquisitions contributing another 16%.
The diagnostics reagents business increased upper single digits, and the ACD blended spatial biology portfolio improves sequentially, achieving double digit year over year growth in the quarters.
For extra some diagnostics revenue growth was hampered by the timing of companion diagnostic projects with big pharma, but importantly, prostate cancer test counts improved almost 30% compared to the prior year period now surpassing pre pandemic levels were.
We are encouraged with the volume trend and anticipate continued improvement as patients return to their physicians for checkups and our sales force gets more in person interaction with the physician community.
Moving onto the diagnostics and genomics segment operating margin at 16, 9%. The segment's operating margin increased 140 basis points compared to the prior year.
The increase reflects the favorable impact of volume leverage and product mix, partially offset by the impact of strategic investments to support future growth.
In summary, our research oriented end markets remained strong in the diagnostics end market continues to improve.
And our Q2 performance shows our proteomics research reagents and analytic tools remain in high demand and we are executing extremely well in serving these markets.
Our costs become increasingly more challenging in the second half of this fiscal year as they reflect a massive rebound that occurred last year from the COVID-19 lows the year before.
However, given our strong performance during the first half of our fiscal 'twenty. Two we have increasing confidence that we can achieve an overall organic growth rate in the mid teens for the full fiscal 2022.
That concludes my prepared comments and with that I'll turn the call back over to Melissa to open the line for questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
Please press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. As a reminder, we ask that you each keep to one question and one follow up thank you.
Our first question comes from the line of Puneet <unk> with SBB Leerink. Please proceed with your question.
Yeah, Hi, Chuck Jim Thanks for taking the question so.
First one really up I think Jim already covered some of that is really mid teens growth that you expect here for the year, despite the tougher comps.
Just wanted to clarify Jim on the op margin side, given the hiring that's been somewhat delayed how should we expect hiring to how should we account for hiring through the year in op margin.
Performance throughout the year with within this context.
We more or less expect hiring to continue at the pace that it has been.
But how that translates into adjusted operating margin, we said at the beginning of the year that we expected to end the year in Q4 at the same relative operating margin that we ended Q4 of last fiscal year, and we still see that as being the case. So that's really only about 50 basis points higher from where we ended Q2, so we see.
A continued gradual pace towards that towards that mark.
Got it and on you know on capital deployment I just wanted to understand.
I understand obviously you have the new $400 million buyback that you placed given traditionally biotech knee has prioritize growth M&A.
And I think that continues to remain a priority, but just trying to understand how are you balancing that with what versus the buyback. If you could just walk me through the puts and takes out this year.
I'll take that puneet so.
Up to this point you know, we've we've been doing buybacks for two for stock stock option dilution, which is minor.
And we've done 16 17 acquisitions the last eight years, but we've never gone beyond two times leverage they've never been able to we've never done well in the public auctions and we tend to do them with things more private and in which it tends to be more smaller.
Currently evaluation is still remain quite high and they might be getting cheaper, but we'll wait a few months for settling until we didn't know that but today they are very high.
So we felt it was given the status of our stock price, we feel very undervalued and we thought it was probably appropriate our board, especially to make that message and since we have an extra turn or turn and a half that we never use anyway. So we've got as Jim pointed out were net debt zero. It's time to it's time to act and do something here and you know and.
And to put some leverage to work.
Got it that's super helpful.
It's really important.
Important you guys understand that we're not changing our priority on our capital plan still M&A.
We've asked us going to three and a half four times leverage is probably you know not a high.
Not likely so we've got room here.
Still number one though.
Okay.
Yeah that makes sense Chuck a question that we've been getting from investors is it.
About the demand and overall demand in GMP proteins and the recent acquisition in the space as.
As you saw there was an acquisition of GMP cytokine manufacturer by one of your larger peers.
You know given the valuation paid for that asset. It appears that the interest is going to be likely going to be scaling of GMP proteins business and by that peer. So just wanted to understand how do you see your competitive position now in that market and the overall demand youre seeing in that market with the one potentially one.
A competitor a scaling up as well thanks.
<unk>.
We think we're years ahead for starters.
That entity hasn't been very up to date with their work and there are like fourth or fifth on the list out there.
So that's one issue they don't have a lot of assets in place. There. There are expansion has been real slow and if they've been trying to be sold for the last two years they haven't been doing much.
We have hundreds of proteins they can't even make.
We think over time the drift.
In GMP proteins, it'll be like the like the drift as Ben and argue of proteins and towards quality like consistency bioactivity et cetera, I think will be uniquely positioned in say 510 years to probably have against proteins that nobody else can even make more than likely we're gonna go well beyond the IL tens and IL Fifteens, we think as this industry matures.
You know people get smarter and use these proteins for different things.
Aye.
We just think that we're in the best position, we have been we've been at this for four or five years now and you can see I think the movie Wilson Wolf, even more than strengthens that because we all did well below par.
Position full solutions to the to the industry I know bioreactors that have proteins already embedded sterilely. So we're gonna have novel novel innovative concepts to actually improve the whole cell and gene therapy workflow.
And again.
Our new landlord for.
You know for the for these guys is not going to help them. So they have no domain knowledge in that space to begin with so they all have money to help them with but again.
They're years behind Us we feel.
Got it okay Super helpful and congrats on the Wilson both deals guys. Thanks, Thanks for taking my questions.
Thanks.
Thank you. Our next question comes from the line of Dan Arias with Stifel. Please proceed with your question.
Good morning, guys. Thanks for the question Chuck on on GMP proteins into your last point on scaling there.
Just curious how many proteins that you make are driving the bulk of the demand is there is there like an 80 20 rule that we should think about or is it more diverse than that and then relatedly. You know when you think about what's important over the next 12 months or so for growth.
Is the more critical factor related to just scaling up the ones that you make now or is it expanding the message I mean I'm sure. It's both but I'm just sort of looking down to one of the bigger lever on growth this year.
Thanks for the question, it's a very good one.
You know we started early trying to expand to have.
The largest largest breath of the catalog and cheaper proteins. We went to a we went to be on 50. We have now since moved that back to roughly 30 35, they're just there just isn't a lot of demand right now, it's a very embryonic nascent industry and you're right. There's literally a dozen that are really being made and sold and that's about it we have got.
First three totally launched in multiple lots a lot consistency verified and in the middle of selling them and also having them are audited by customers.
These are the you know the IL 710 15, two is coming we have a we have a weren't coming soon so we're going to have we're going to go after the first desert filling it in the first year or two you're probably I doubt we'll ever scale.
You know across the board to 30, 40, 50, plus for probably years to come I doubt anyone will.
It'll it'll it'll depend on.
How the industry, how the how that workflow matures and what they're looking for I guess.
The big deal for Us of course and for everyone as to how to make how to make these and beyond and are you old fashion. So in lots that are sizable and then locked a lot consistency, which as you know near perfect and that's where our focus has been that's what we're good at it. The are you old level and we've been able to replicate that now at I yeah.
You know in an extreme [laughter] multiple in lot size with this factory and that's what we're known for and that that's what we think is going to differentiate us and so far the customer input and the audits have been have been stellar they've they've they're blown away quite frankly, what they see for.
The ability of our quality and lots of lot consistency at the size of lots, we can produce they they want to be assured that as they come out of clinical and then they go into a therapeutic that there you know they can buy.
Now millions of dollars of a single protein in a in a near perfect consistency.
And we're able to do that.
Yeah. Okay. I appreciate that and then maybe just on ACD can you just help us with how you see that business trending across the year. I mean, you had been pretty confident about confidence in a rebound.
Last quarter, which I guess, you saw a little bit of that this quarter was slightly softer than what we were looking for what I think you were looking for so number one how much of what you saw in the quarter was related to sales force versus market factors.
And then two can you maybe help us with a landing zone for.
For growth just given that at least our model. This is kind of like one of the earlier segments. While we were we were mid single digits last quarter, and we were double digits. So we like the recovery, especially when taking into account that there wasn't omicron factor there is an academic.
Tenancy to the to this to this franchise Oh, there's a lot of academic customers in there and that was softer the comp on top of that is near 30% and that and that's continuing for a while so as we go through the rest of this year and then the last of course is the Salesforce.
Spatial you know biology as is all the rage right, there's a lot of and where the biggest business out there in it right now so guests for other up and comers target. So we've had especially passives business is located in the Bay area. We've got you know we've had some attrition I mentioned that last quarter. Our we've we've covered over half of that back.
Pretty good shape now and the results reflect that especially when you take into account the comp and and and where academia is a little bit softer still and and other than that in that area of.
I have also mentioned the same kinds of market conditions. So throughout the rest of the year. We see improvements continue improvements and you know we we still have always said we've had brief periods of 20 and 30% growth. We've always said this is a 15% 20% grower for many years, we still stand by that and I think we're on our way back to that and we're not too worried to be honest.
Just kind of on plan.
Okay. Thank you very much I appreciate it guys.
Okay.
Thank you. Our next question comes from the line of Jacob Johnson with Stephens, Inc. Please proceed with your question.
Hey, good morning, Chuck.
GMP proteins and understandably so.
Your opening comments you mentioned.
There is an opportunity for.
Are those candidates for GMP manufacturing, one day in and when could that occur.
Oh, well, we're working on expanding our our Atlanta facility for being mean right now we have exploding growth there primarily because of market leaders kind of tripped recently and so we're finding a lot of business. So we're expanding on that now, but yeah. You know regular a GMP media will be putting in into into the current GMP factory now proteins.
We're gonna probably do GMP antibodies N G P media there.
And probably in parallel probably a little bit some here summit headquarters, but over the next year will be getting all that online.
We see that as a natural adjacency to GMP proteins and part of the workflow so and we're being as customers are asking why can't you do this too so.
Got it and we are selling we are selling something it's just like this just like we were doing GMP proteins. The last few years. If they were doing all this in our in our research facility in a kind of make do GMP type of a quarter as we get we have to scale. It felt so the way it was a way to scale is to put it in our G&P factory, where we have the room.
Got it that's helpful. Thanks, and then maybe following up on <unk> question on capital allocation.
Good.
At some point interest rates are.
Is and maybe multiples will come down and you would be ready to act honestly.
We've seen some of this play out in the public markets.
But do you think it's flowed through on the private side and do you think youll see more opportunities come to you as a result of this.
Do you think in terms of M&A.
I mean, I think everyone you know humans or human nobody nobody is going to take their current price of where it is today versus a month ago and say, that's our value [laughter] I doubt anyone will no matter what size of the company so things have to settle out.
And probably and probably acquires aren't going to be that you know.
That mean anyway, they're probably going to wait as well, knowing that's probably foolish to even try and just upset the target.
But you know if interest rates go up it affects your check treasury yields it affects a D. C. S out there the models they all come down ours too.
If this is the new world that you know your Chevron shaving 10 points out there multiple then we'll deal with it.
But we'll deal with it you know effectively like we always have during trump's here or there was.
Two and a half 3% interest rates and we were carrying at times of 40 multiple.
There's a flight to quality to I mean, we were a company that makes money double digit growth.
You know a stable unicorns are it's just you know where we are hoping that you know that this will we will end up being a winter and all this when things do settle right now I think we're all still in a bit of don't catch a falling knife kind of scenario right so but.
We know Theres a lot of interest there's a lot of we got a lot of reasons and our company for people to be interested and we'll be ready to capitalize and M&A as well and believe me I'm I'm looking forward to acquiring things a little better price tag as well so.
Yeah, I think anything that whether that would be that you know.
If anything what it might do in the short term in terms of.
Make the environment.
More favorable for M&A is.
You know one of our big competitors, the past year and a half hasn't been another company as it's been going I P. O and this volatility that we're experiencing now, particularly with the IPO market might make owners think twice about that being a viable option and make a private deal more accessible to be honestly, they actually had some inbound inquiries for.
Potential targets that said they are more into an IPO and they've they've called back.
Got it perfect. Thanks, Jack Thanks, Jim.
Thank you. Our next question comes from the line of Patrick Donnelly with Citi. Please proceed with your question.
Hey, guys. Thanks for taking the questions.
Chuck maybe just to expand on some of the kind of demand questions earlier on things like GMP.
People keep a pretty close eye on general Biopharma funding and you kind of mentioned the IPO market areas like that I'm curious, how you're feeling about kind of the sustainability of the demand obviously at your analyst day talked about a few years of really strong growth from some of those high growth.
More biologic area. So just curious if conversations have changed at all or you still feel really confident in the sustainability of strength.
I feel better than ever can I can I say, 180% growth one more time.
Yes.
It's where we're killing it and we can't keep up and we can get this off the ground.
Fast enough.
We're being throttled actually and I. The most exciting thing you you saw on the transfer you put a lot of a lot of extra detail around the applications for cell and gene therapy from the rest of our portfolio all the all the way we're finding all our all of our instruments are being we're having an incredible girl of biologics isn't supposed to be growing continuing at 30%. We kept digging why is this happening.
It's being used inspect inferred cell and gene therapy applications, AAV purity and stuff and on all three of our platforms are being stacked in our cell and gene therapy applications going well beyond the Tam that we are you now positioned these instruments for in the beginning.
So yeah, we see this.
Being a juggernaut for years and.
Our $2 billion.
You know target out there at 2026, the largest component of that with cell and gene therapy and guess, what it's just gotten a lot bigger when you add Wilson Wolf revenue to it. So you know it's going to be it could be roughly you now.
Half the company or more by then we should take a well beyond 2 billion too so.
Yeah, and and are the new things coming we're definitely gonna do media, we're definitely doing antibodies, we have more and more demand for antibodies that are being used in these areas as well. This this.
This halo effect as you know, it's broad and it's because I think we did all the right things starting four years ago, you know with doing more than a one trick pony type of approach. We have about 10 different products that are that can affect the workflow of cell and gene therapy and then the things. We couldnt get you know we created that the JV to give us more power in the channel.
And it's really working.
Both of those entities with Wilson Wolf and Fresenius are doing quite well.
Okay. That's helpful. And then speaking maybe a sustainable growth you know China has been a great spot for you guys again over 20% again this quarter in spite of maybe some minor dislocations.
Things like the Rolling blackouts can you just talk about where the strength there and then again expectations for that to continue as we go throughout this year and even ex China's yeah, China's rinse and repeat.
It was 22% and it's gonna be there 2020 to 25 in that range. We think for some time will cross $100 million. This year, which is great for our company and for the size, we're at but it's only $100 million in China. So.
When we're when we're you know when we're out there at 2 billion plus as a company it's going to be you know twice that or more so I see nothing nothing stopping the growth of China.
Yes.
The entire country shuts down and locks up and stuff there might be a momentary blip, but I don't.
Nothing that's going to change the long term.
And the you know the geopolitical things to it just like before we you know with.
The Trump here all the all the.
Product stoppages and stuff you know it didn't affect us.
We're the only game in town there aren't local suppliers there. So if they want to do research in China, they're going to have to buy our stuff. They knew that then they'll know with continued going forward. So.
No issues.
Okay. That's helpful. Maybe just a quick last one on Echo you mentioned prostate at pre pandemic level of volumes, what sort of encouraging can.
Can you just talk through I guess, the catalyst sit there over the next few quarters in terms of payers coming on board and continuing to ramp the reimbursement side, Yeah, we should play in our XL.
Yeah sure. So you know where there's something like 96 million lives total and were under $1 million for private payers.
We're continuing to grind away and private payers were seeing good growth.
We've touched 3500, or so urologists of which about three fourths of our repeat repeat purchasers. So we're not even you know a third of the way through the domain of the doctors out there. So it's it's a continual issues. So we are now starting to ramp and go after we even where we're seeing these <unk>.
Salt without is still expanding our salesforce, we're just starting to get to that now we have as you know when new leadership, a new team in place with the surgeon and it's already having an immediate effect.
But you know we gotta get out now putting more people on the street and going after more of these urologists that you know they they forget fast and you got to stay on them to even be repeat purchases. So we are now have crossed 75000 tests total sold so you know it's it's.
It's not a surprise now it's starting to become real and we're seeing the growth for it.
But we did have a little bit reverse engines with I'm, a crown and you know we're not all the way back here with patient, yet, it's coming though and Oh.
Again, it's for sure a $1 billion platform it entirely.
And then we're going to do a combination of things ourselves, we're going to have partnerships before.
Before anyone asks you know the extra true.
Program, we definitely are able to do it ourself, we're talking NGF now, but we are very very close to a very very good partnership and I'm I actually feel very strong that will get us here.
And if we don't get that won't get one or two others waiting in the wings for a shot so a lot of interest in this platform and a lot of interest and the other things we have on the drawing board that are already validated assays things in blood.
As an example, so.
It's coming it's the best quarter in well over a year for XO.
Alright, Thanks, Chuck look forward some of those announcements.
Okay.
Thank you. Our next question comes from the line of Catherine Schulte with Baird. Please proceed with your question.
Okay. Thanks for the questions I guess first on your comments on the academic end market can you just quantify the impact on the Crown has had on customer activity levels and any regional differences that you're seeing there.
Yeah, I've got a very insightful question. So it doesn't it isn't we've had academic rate range from flat to double digit.
It depends on the products that depend on the regions. We have some academic accounts are fully funded their multiyear grants and theres no issue with some are not and they are waiting and they're waiting on new grants. Some are pulling back because theres no budget, yet and they're being careful we've got.
Got all of these answers back from our from our field people because we've dug in hard the net net of it all is roughly mid single digits, maybe a little better than that.
The roughly like last quarter, but there is no doubt.
A significant impact from omicron, they send people home longer than the time.
Time period over Christmas and they Havent come back yet.
Our own company, we we brought people back and we send them all back home again.
It's everywhere. So we're not worried it's come in great and this is on top of our.
Some regions that are pretty good as well and and the overall macro environment looks good and then the the budget. You know that was you know that was already passed in the house is 15%. He added 3 million 3 billion on top for the ARPA and you've got to that's where you get the 21% number it's going to be something of a double digit would be a great budget, but you know Congress, Italy.
Eight this year and getting stuff done as we all know they've they've got to get it done we hear its a February deadline, but you will see so I think we'll start seeing an uptick in and.
In the in the academic that going forward even so.
We have you know we've worked hard in this company mitigating academic risk its way smaller than our Biopharma segments now and with the result of Biopharma weird totally swamping out any effect from from Academia. This is by design speaker for this very reason.
So going forward, we're not not too concerned its going to be it's going to get it's going to improve the rest of the year academia and hopefully there's a V.
Two variance not a big deal and we will get back to normality here by summer or at least get a few months off and then I think it would be youll see quite a big snapback everywhere in academia personally.
Yeah.
Okay got it and then with well taking over the protein Sciences segment any changes in strategy or opportunities that you see there with the change in leadership.
Well Theres only one day of Enzo and you'll be sorely missed but you know I won't Miss the sparring with him. He's he's got an edge to them as we all know if our nose, Dave but will comes with a great pedigree. He has very strong domain knowledge, if not stronger than days in biology, so for us that's pretty critical that our leadership here understand.
Science, you know all the way up and down.
He has been here a few you know a few weeks he still residing in California.
But you know, but he's had a great start.
And I just you know we we was quite a long search you know we spent a couple of years looking for the right individual for days and at retirement and I think we found him. So.
Thank you.
Changes yet.
It won't be long that you'll ask for something they all do.
Yeah.
Yes.
Alright, thank you.
Thank you. Our next question comes from line of Alex Nowak with Craig Hallum Capital Group. Please proceed with your question.
Great Good morning, everyone.
Wilson Wolf I think we all understand how strong of a company that is but I guess, what risk do you see in that directs bioreactor business from being a rocket ship that it could be just figuring out what could go wrong is you're on track to buy that business.
I think by far the biggest risk is <unk> got John Wilson, who is more of a R&D scientist type of kayo, our collaborator than an operations Guy and so you know.
Him not finding a partnership somewhere getting beyond 100 million of you know these guys tend to run into trouble growing the company to be on that level. So they're right down the street, they're already integrated because of scale ready JV already so I've known him for over a decade.
And tried buying them first time.
Thermal Fisher 14 years ago, we've been friends ever since.
I I I think this thing is.
The customer base at 800, he has I think over 20 customers have already already over $1 million of annual purchases there isn't anything out there even remotely close to his left.
The level of clinical integration I don't think anywhere from anybody. So this is this is the de facto standard in the future.
Other new ways to do this or they're gonna be copycats or theyre going to be people doing crazy, new things with bags and stuff sure.
But the beautiful thing about G racks in the you know it's a the way it works and it's hard to it's hard walled surface you know it's it's.
It's really really.
Gentle on T cells, and NK cells like it.
So there are a lot of people chasing this technology with bio retrofits simply arent going to be they're going to work very well for T cells <unk> NK cells just.
That being so.
John to learn this years ago, and so he's got a head start.
Not going to let them fail for sure and.
It's a marvelous business is growing like crazy.
He's got a great team.
They work with our great team here and.
I've been waiting years for this to be honest so.
We're at we're ecstatic.
Yeah, that's great and then just going back to China saw the eminence impairment and the P&L just curious what happened there that impacts China on a go forward or at least in the next couple of quarters.
Well you know in China, we have a lot of cash in China, and we took a swing and you know media is going to be big we looked at two other entities and we walked away from them. We didn't think the manager was stable we pick this one guess what the mansion wasn't stable.
So its at a point, where we definitely gotta do the write down we got more than covered it's really immaterial.
It's not all authors there's liquidation there theres assets, we got a nice spot in the social.
Business Park, there so there's there's ways to regroup, but at this point always somebody to say is that we're just taking the next step of the response thing when you do with the impairment and then we'll go from there and let you know more later, if we as we see what our options are with that small assets.
As a reminder, as a reminder, Alex our results that we report for China don't include anything from them minutes right. So it has an immaterial impact on our growth in China.
Got it thanks, Jim Thanks Chuck.
Yeah.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Mike <unk> with Keybanc capital markets. Please proceed with your question.
Hey, Chuck just following up on the Wilson Wolf I mean, you don't need to do diligence do you think that the.
The current operations there.
They have the capacity and the kind of expertise to reach $700 million level.
I kind of give you a dollar for asking that I can I can use.
You just wouldn't believe what he did this site. He bought he bought a 100000 square foot site and it's he bought off he bought over a year a year and a half of supplies early on for the supply chain risks.
Even their all in E decked out facility for as people.
It's it's it's beautiful and you could still part a couple of airliners in there with the empty space. It's.
Or is it just wonderful positioning.
So yeah, we're not worried at all I think I'm, if I had to guess I don't know for sure I don't want to get too crazy, but.
He would scale many multiples of their current revenue rate in Hampshire.
Got it and then just I guess following up on a couple of questions around GNC proteins.
Are customers coming to you knowing exactly what they want whether it's you know IL two IL five or what other protein that raise or more of a consultative process and you know given your experience in the industry and your work with other customers in this space.
Are you really driving customers to the.
The best protein to their process.
Yeah. Another great question so.
The answer is mixed here one we talked about you know we have a lot of interest and a lot of our products are actually going into regenerative medicine as well as cell and gene therapy. So that is a very collaborative effort with our with the customer at our site. So we are doing other kinds of proteins as well and I mentioned, you know whence as one.
Example, but in terms of our of the classic and on T cell type of work going on for clinical as you know we're not the first to the game you got mill Tinian sell generics out there right now and most of the Clinical's right and we're coming up fast. So these customers come to us looking for looking for equivalency looking for a U S supply.
We're looking for R&D systems brand lots of lot consistency and they want to do equivalency testing.
So they already know what they want and in there and there what you would expect or the IL, two 710, fifteens to start of which and by the way a learning for US you know them you need like all three out of the four at least really get serious people seriously doing equivalency, because theres no one's using just one they're using two or three of these and they don't want to do.
The effort on just wanted when they and they can't get all three.
So we're just getting started into that now because we really we've been opened for a few months, but now we're just at the point of working on our fourth one for inventory. So we're at that level now getting serious about equivalency because that makes sense.
Yeah, that's very helpful. Thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Thomas for any final comments.
Okay, well thanks, all for attending the call, we really love being a $1 billion company and we're on our way to two and we will with a great quarter and we think there's some more ahead of US here. So we'll talk to you next quarter. Thanks Bye.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.