All right. I guess we can get started. Good afternoon, everybody. I'm Luke Sergott. I cover the life science tools and diagnostics here at Barclays. I have Vandana and Lindon here from Azenta. Give a presentation, then we can just jump into questions. If th at's okay.
Vandana Sriram, our Senior VP of Finance, will present.
Okay.
Okay.
Great. Thank you so much. I'd love to give you an overview of just who we are, a little bit of our history, and then talk a little bit about our products and our growth prospects. We'd love to take questions from the audience. We'll try to wrap this up so we have enough time for questions. Firstly, before we get started, I'd like to address the safe harbor statement. We will be making some forward-looking statements here, and we would encourage you to look at our website for a more complete disclosure. We will also use certain non-GAAP measures, and we encourage you to use them in conjunction with the appropriate GAAP measures. Firstly, just a quick introduction to Azenta. This is –
We've just completed our first full year of being Azenta Life Sciences, we've actually been in the life sciences space for a while now. Some of you may know us as Brooks Automation. Just a little bit of a walk in history. Brooks Automation really was a semiconductor automation company. Over a decade ago, they started to use the technologies related to automated cold storage and started to apply that to the life sciences space and continued to build that competency through a series of acquisitions. We then entered the sample management space through the acquisition of a biorepository company in the 2016 timeframe, that has now made us leaders in the sample management space. In the 2019 timeframe, we entered genomics again through an acquisition, continued to grow that out further.
Lastly, in 2021, we divested from the semiconductor automation business as well as the Brooks Automation name, and with that Azenta Life Sciences was born. Just a little bit about how we're doing financially. We ended our last fiscal year, which is a September 30th year, at $555 million, which translates to 8% reported. When you strip out some significant COVID compares as well as the effects of currency and acquisitions, we grew double digits, high teens at 17%. We have over 2,500 employees. We are a very global company. These employees are spread across the world. The other notable item I'd call out to is our financial structure. With the sale of the semiconductor automation business, we had somewhere around $2.5 billion of cash.
We started to put that to work very quickly. We did a series of acquisitions. We completed three acquisitions in the last eight months. We also announced a share buyback program, where the first tranche of $500 million is in place right now. As that completes, we intend to do another tranche of $500 million, and is expected to complete in this calendar year. Even with these couple of very significant capital allocations, we still expect to have approximately $900 million of cash, which is available for us for both organic as well as inorganic investment. Just a little overview of what we do, and how we service our customers. We believe that biological samples are really the key to all life sciences research. We say in all aspects of sample management.
We really believe we set ourselves up as being able to work with our customers across this value chain. Starting with sample sourcing, we work with our customers to source different types of samples to ensure they're of the highest quality. We also have the ability to work with them on ensuring good sample formatting. We have competencies in logistics around sample management as well as in providing consumables and instruments that are required to work with them. Within our storage and automation business, we make stores for storage of biological samples, both at a very high level of automation with our large BioStore. We also have cryogenic stores, and we also have the ability to do this at a smaller throughput. Really across a spectrum of different temperatures that benefit our customers.
At the same time, we also have a series of biorepositories where we can manage the samples on behalf of our customers. This is a really neat business which has essentially an annuity stream for every store and we take a sample. Then in the genomics space, again, we provide a series of offerings in terms of being able to provide sequencing services as well as in the areas of gene. We have over 400 advanced degree scientists that are on call for our customers and that partner with our customers to truly provide solutions. Then underlying it all is our bioinformatic platform, which gives our customers additional insights in terms of their samples, sample management, and in terms of data. Really we're an end-to-end sample management and exploration company. We work with all of the large pharma and biotech companies.
We have deep relationships with all of them. We're really well positioned to capitalize on some of the emerging trends in terms of the growth of R&D, as well as outsourcing in terms of the advancements in genetic testing, as well as the global need for advanced cold storage. Very quickly, in summary, we are a truly unique company and what differentiates us and makes us unique is really three things. The first is our growth potential. When you look at our portfolio of offerings, the markets we play in, that gives us tremendous opportunities for future growth, and with that growth also comes margin expansion. Based on our current run rate, we're expected to be approximately in the range of $700 million for this fiscal year.
With continuing high growth opportunities, we feel really good about the composition of our portfolio as it stands today. We have an incredibly strong balance sheet that sets us up for growth both organically and inorganically. What's important to note over here is that we've done this before. We have grown the life sciences business partly through a series of acquisitions, more importantly, taking those acquisitions and being able to continue to grow them on a double-digit basis. It's not just about the layer of revenue that an acquisition brings, but it's also about our ability to grow them organically. Lastly, we are global. Even before the addition of a new acquisition that brought with it a significant footprint, we were selling to over 150 countries.
We have capabilities that support our customers, both in terms of the breadth of our capability as well as our reach globally. In summary, we are a unique company with a really strong value proposition that's backed by a team that knows how to do this, as well as a balance sheet that's really ready for investment.
That-
With that said, that's the key question.
All right. With the backdrop of the new business, talk about the different end markets that you're operating in right now and how those are kind of progressing out through the year.
Okay.
Yeah. In the end markets, one, our largest sector is pharma and biotech by and large. In that space, we've seen customers subscribe significantly to our large infrastructure that we provide on site for them in the ultracold stores. We've also seen substantial enterprise relationships in some of the largest pharma. We serve 20 of the top 20, as you read them by R&D in the area of services as well. It's a substantial traction with pharma and biotech. At the second place in analytics, academics shows up on the map as well. Academics continues to percolate on the research front. Obviously, I think with, you know, government austerity, you may see academics tail going forward, but that remains to be seen.
We haven't seen an impact on our business directly. Then across the other spaces in the end markets, we would say, we've got exposure to certainly government, healthcare, hospitals, research institutes that are distant in terms of the representation of our revenue. If we come back in big picture, pharma, biotech, all spaces, makes use of us.
All right. When we look at that in biopharma and biotech, talk about, I mean, you guys. Brooks is all automation. It's in your DNA.
Yep.
Talk about how you've now transferred that culture into addressing the life sciences and the different hurdles within the clinical trial workflow.
If you look at the automation front, our strength by our legacy is the automation of the large ultracold storage systems, and also the cryogenic capability that we've had for actually well over a decade, a couple of decades, in terms of the background of where our science has been. In the past 12 years as we built the business, this has extended not just automation insight in the ultracold environment, but to finish up, it has also taken us to innovate in the -190 space. When you think about cell and gene therapy, whether it be in the research and development, manufacturing or clinical space, we're helping to enable significant breakthroughs and most important standards and protocols in the cell and gene therapy space.
It really is, we think paramount in the future. Meaning if you try to do an autologous solution today, you can handle it by manual means. If you try to do an allogeneic solution down the road, you're gonna be really challenged to maintain those standards. Even in the autologous solutions, we have presence with our cell and gene therapy customers in the - 190 environment as well as in the controlled-rate thawing of those and the disbursements of those therapies. Anyway, you can see the impact that the automation side has.
Mm-hmm.
In the cryo space, and certainly in the outsourcing, we're helping to take storage needs in overwhelming volumes, but also in the integrity and maintaining of the inventory of the samples in various research environments.
You called out cell and gene therapy, bigger part or smaller part of your business, but significant growth contribution in the quarter. How big is that business for you guys now? Just more on the different, you know, the different areas where you're seeing the most strength.
Cell and gene therapy is less, a little less than 10%. We had the 10% before we added the acquisition of B Medical, but they're in the vaccine end of the cold chain. On gene therapy. The recent addition of Barkey, which was a company in the controlled-rate thawing space, that's substantial. As you highlighted, our growth rate this last quarter, we saw a 60% increase in that revenue over a year ago. With that said, it's still less than 10%. We see this percolating up higher, part of our growth of our portfolio and our strength of our portfolio is highly differentiated in that cryo space, the automated cryo. Again, this comes down to the rigor of the standards and protocols.
If someone tries to manage a cell and gene therapy process manually, you can do it in your shop. When you try to transfer those standards and protocols in a manual environment to another site, say from here to San Diego, then or here to London, you'd really like to see more standards and protocols controlled by the equipment you put in place, not just the instructions you hand someone. We see this as being critical in the going forward in cell and gene therapy.
Yeah, makes sense. Let's switch gears and talk about the genomics side of the business. You've been dealing with several headwinds over the past couple of quarters. Talk about what's going on there, and then how you're expecting the recovery to shape up.
Yes, I can take that. Yeah. Our genomics business has been a really nice growth business for us. It's given us good, consistent double-digit growth, and it did really well during the COVID timeframe as well. We did have a few stumbles in the last year. There were a few different reasons for it. You know, it's been hard to kind of pin down the exact specifics of it. There's been some amount of market pressure. We've been careful not to call it all market pressure. You know, some of our competitors are still growing. We don't really put it on the market. From our side, the most compelling thing we found was as we rebranded and changed our name to Azenta, we lost a little bit of that name recognition and that connection.
You know, most people would go online and look for GenMark. Azenta popped up. They didn't know, you know, who we were. There was a little bit of that we had to really readjust and reset. We've made a series of actions over the last few months that are still kicking in. We expect the right kind of new things. Some of this is in the orientation of our commercial team. Making sure that we have the right touch points with our customer base. The genomics space is highly technical. It's really important that our customers are comfortable with the nature of service we're offering. We're now back to rather than have a generalist sell genomics, making sure that we have scientists talking to scientists, so that that's a good connection with our customers.
It gives our customer the confidence to come back to us. We're making sure we have the right geographical coverage as well, making sure that we're in all of the major centers for life sciences research. We've also relooked our incentive plans making sure those are also well-oriented towards what we need to be sure to test the genomic space. So, w e feel like we've taken all the actions based on what we need so far, and now those are all playing through.
Okay. Is the recovery making the guide in that, I guess, second half weighted, or should we expect a incremental benefit each quarter? Give us a sense of the pacing that you guys are targeting there.
Yeah, we do expect that to be incremental. You know, it always takes time to get all of these changes through. You'll see that in our guide. Our first half guide is weaker than our second half guide.
Mm-hmm.
There's certainly an expectation that these changes will take some time to flow through.
Okay. Just in general, I take it you guys are pretty much instrument agnostic. With all the different competing technologies coming out, talk about the conversations you're having with customers and the solutions they're asking you to provide around these new technologies?
The technology landscape is really interesting. It's changing very, very fast right now. This is actually a huge advantage for us in a way. You know, we are constantly relooking at technology stack. We're reassessing what we need. Generally, customers are agnostic to where the sequencing is going to happen. Some customers are extremely specific about saying, "Hey, I want that mid sequencer." Others are more interested in getting the results of the research. The way we look at it from our perspective is we constantly relook the technology stack. We make sure we have the best technology in-house. We also keep our workhorses. You know, we don't completely discard our technologies within a period of time. The advantage it brings for us versus individual customers doing sequencing on their own is we have the ability to do this because we have critical mass.
Mm-hmm.
If you are a customer with a sequencer in your lab, you don't really have that luxury. For us, it's really nice to be able to continuously stay on top of technology and be ahead of the curve.
If I could add to that just because this is exactly right what Vandana just explained. If you are on top of that, customers turn to us for, it's really the consultative insights of what is applicable. We have multiple platforms of technology. We also have proprietary protocols and prep steps. Our scientists are known by customers by name. They don't just send it in, and it comes back from Azenta. It comes back through a consultative approach where we have more than 400 advanced degree scientists that supplement this.
Sometimes an investor, often at the table, will ask me, "So you guys can buy the equipment at a discounted price because you buy in volume. It's arbitrage capital, isn't it?" I say, "Of course, we get a little bit of that because we use a lot of volumes of the reagents and the platform." More important to our customers is that consultative nature of that scientist that's helping them. They literally know the person by name and call them out and say, "You know, this person is high value to us." We see that. Our management sees what's important to the customer. Help them to accelerate and enable those breakthroughs at the customer site.
Yeah, it makes sense. On the gene synthesis side within GENEWIZ, there's been a softer market for you guys. Talk about what's going on there, and the way you play within that market versus some of the other players that are out there.
The gene synthesis space, for us, understand our model. Our model has been with a strong tie to an operational site in China, Suzhou, China. We manufacture almost all of our gene synthesis materials out of Suzhou and delivered globally. What we've seen is that in 2022 calendar year, COVID environment impacted China, but also some customs changes and export changes inside China, which we always comply with, obviously, disrupted and made it a little bit unpredictable on bringing shipments out of China. We adjusted our own approach to that, simplistically saying we consolidated our shipments, brought them into the U.S. or into Europe, and then shipped to our many customers from there. Made it completely predictable again and turnaround time's very competitive.
Our performance this past calendar year, the last few quarters had been down. Last quarter, we reported a decline in gene synthesis by itself. Not sequencing. Sequencing actually did nicely, but synthesis was down. Some asked us about the competitive. Did you lose share? In our minds, no question, as we slipped off in the deliveries and we declined that we lost some share during that time period. We also know that customer values us first and foremost for the quality of the substance, and we always rate top in this quality of the gene fragments that we send. We don't lose on the substance. We missed on the turnaround time. We fixed that. We have the challenge in marketing and sales to win those customers back.
We reference back to the delight, the delightful experience that they've had in the past and reassure them that our schedules are on track. I think we'll see that come back to us this through this year. It'll take a few months. Some customers have already expressed that, "Yeah, we'd like to run some more trials with you, and then we'll evaluate after we see those proof points," but we think it will come back. In terms of the competition, you know, the most misunderstood aspect is oligos is not where we play so much. We produce oligos. We use oligos in gene synthesis, but a company that produces just purely oligos, they may be disruptive, they may price below, but that's not our impact. We're in the longer gene fragment and the long gene substance.
We're not so much in a disruptive space. We're in a competitive space. I think we'll do well through this year.
Nice gene that you guys write.
You're gonna ask me a question like that, and I'm gonna deny that I can tell you because I don't know the answer. I'm gonna confess right now to see if I don't count the base pairs. I do have this conversation with our science team, but I'm gonna address it here.
That's perfectly fine. On China in general, I mean, this has been, I mean, there's no template for shutting a country down and then all of a sudden just letting the virus run free. As you guys think about the recovery here across all your business, what are you seeing from a recovery standpoint? Is it coming in faster than what you guys were anticipating?
I can take this. You know, this is a question that we've gotten from everybody today. What's been interesting for us is through the lockdowns, through some of the more challenging COVID periods, we certainly had instances where customers weren't available, you know, customers were not in their labs. They were shut down. We didn't really have a period of a steep decline, so we didn't really see revenues fall off a cliff in China. As a result of that, as the lockdowns have been lifted and as things have opened up this last quarter, we haven't seen any major swings in the other direction as well. China grew about 10% for us in the last quarter, which is a pretty healthy growth. We see them on a relatively steady growth trajectory, but there's no massive waves because there was no massive crash either in the past.
Okay. Last year, the medical acquisition that you guys just did. Talk about what that brings to the portfolio, strategy there, the margin and the growth kind of characteristics.
Yeah. The B Medical acquisition is an exciting one for a lot of reasons. one, it's an extension of the cold chain offerings that we have. All of the cold chain of management that we've had up until B Medical addressed the research end, the pharma biotech end of things. We participate in providing services for vaccines in the past. For example, we shared with investors that we service some of the COVID manufacturers on vaccines.
Mm-hmm.
We, we helped with their storage needs, and in some cases, some distribution. We're a subcontractor to the QTC contract with the Federal Reserves. This one is a product capability that extends for vaccine cold chain preservation. It, it's at the endpoint. The exciting part, it's in markets where we haven't been in the past. In other words, 80% of the revenue comes from the summation of, Africa, South America, and Asia. While we're certainly prevalent in Asia, these are parts of Asia that we're not talking about. This is, this is exciting extension of both our product capability as well as the markets that now we have relationships footprint.
Down the road, we believe that this brings us a significant opportunity in those markets that I think we all would agree is vastly underserved by science and research. You don't see population studies on the continent of Africa like you see in mature markets. This is an area for science to grow, and we think that we're not just well suited, we're a natural fit for that space.
Makes sense. All right. Thanks again. This has been very helpful.
Thanks, Luke. It's really good.