Morning, everybody. I'm Tycho Peterson from the Life Science team. We're pleased to have the team from Bruker here this morning. Joining us, we have Frank Laukien, CFO Gerald Herman , and President of Bruker's CALID Group, Jürgen Srega. Maybe, Frank, I'll kick it off. You're coming off ASMS. I'm sure it was another interesting conference. Can you talk a little bit about, you know, some of the innovation that you're most excited about, maybe one or two of the products that you'd like to highlight?
Yeah. Good morning, everyone. A pleasure to be here, Tycho. Great, great to be back at your conferences.
Thank you.
So yeah, we—Jürgen and I, Jürgen runs the CALID Group that includes our mass spectrometry business and other businesses. We indeed just flew in from ASMS in Anaheim yesterday, and we had a series of major launches. We actually had three new mass spectrometry and product mass spectrometer mass systems launches. We also had some very key new workflow and consumables launches that I'll talk about in a minute. I think it was pretty clear that Bruker, at this ASMS, was the most innovative company. We launched our new flagship, timsTOF Ultra 2, which is only after a year after we launched the timsTOF Ultra.
It basically pushes deeper into the single-cell proteome and even now into subcellular proteomes, into areas where you could look at a nucleus and or you could look at small bacterial or small immune cells and still see well over a thousand proteins. It's just absolutely unheard of. It's another order of magnitude push. It, of course, for other applications, gives you more completeness. You see many, many more peptides, which is really important compared to affinity methods. So major innovation push. The other major innovation push, other than timsTOF, for more high sensitivity, high-performance proteomics, was really in the mass spectrometry imaging, which also goes into spatial biology and really into spatial multi-omics, where we can now see proteins, proteins, peptides, endogenous peptides, but then very importantly, also lipids, metabolites, glycans.
So it's a, it's a different form of I guess when Illumina talks about multi-omics and anything up to transcriptomics, when we talk about multi-omics, it's everything that comes thereafter, and that's a very unique product, very well received.
On timsTOF, you recently called out 1,000 shipments. You know, I think you were 600 at as of the first quarter, maybe over 800 as of JP Morgan. So, you know, the pace is doing quite well and, you know, potentially picking up here. Can you just talk a little bit about what's driving that acceleration, and how do you think about, you know, the potential market opportunity and maybe also in the context of backlog to what degree you're working, you know, working down backlog, too?
I'll turn things over to Jürgen. He runs that business.
Yeah. Yeah. Yeah, the number. We have more than 1,000 instruments out now, so I can confirm that, and they are with customers, so they are not for internal use and R&D and applications and all of these type. These are real customer systems serving customer needs. This number thousand is correlated to what currently, now, before we left for ASMS, was achieved. And yes, we are satisfied with the pickup and sales rate we are seeing globally, and of course, we hope we can keep or accelerate these numbers with all of the innovation Frank just explained here.
Are you able to comment on backlog? You know, what, what that looks like and to what degree, you know, you've been working that down?
We do have typically a normal backlog. We don't have an abnormal backlog. We have the normal rate of backlog. We have not an overbooking situation anymore, like two years ago when we were far behind in shipping and when the instrument sold, and we had supply chain challenges mainly back then. So we are at a very normal rate for the timsTOF, and a normal rate for us is typically a three-month turnaround time for an instrument.
This is not to be confused with the Bruker overall backlog, which remains at about 7.5 months and remains quite elevated.
That's true for the CALID Group as well. So it's the timsTOF, we are very active, and we have a good supply chain, a good production output, and of course, the customers are waiting for shipments, so it's.
Tell them about your new factory and your new capacity.
Of course, yeah, we recently. I don't know whether that made it over the ocean here. We just a couple of weeks ago opened a complete new factory in Bremen. Our main site for the mass spectrometry is in Bremen, north of Germany, and we just opened a couple of weeks ago. It's operational since the beginning of the year. Now it's in full ramp-up mode, and we opened it formally just a couple of weeks ago, which gives us, of course, leaner processes, yeah, environmental cleanness and things like that, but it adds capacity for our manufacturing. We doubled the capacity and the output of that factory versus our before situation.
Over several years, this will be a billion-dollar factory, mass spec factory.
Great. Let's talk about M&A. Gave you some softballs to start. Let's get into the fun stuff. So you've been busy, Frank. I think you spent $1 billion in the past decade, and $1.5 billion in 6 months. Maybe just talk a little bit about, what, what maybe rationale, you know, so what, what drove this strategy to kind of consolidate relatively quickly? Was it just being an opportunistic of dislocation in the market? Was this kind of a pre-planned strategy to get more aggressive on M&A? Just maybe talk a little bit about what led to the wave, and then we'll talk about some of the deals.
Yeah, there is an opportunistic element. I mean, two years ago, everything, you know, some of the assets we're picking up for far, far less cost $3 billion, and we couldn't imagine paying those type. We're, we're value sensitive, but those were highly strategic assets. Our portfolio transformation with Project Accelerate 2.0, which has led us to, you know, three years of double-digit organic growth, and again, this year, 5%-7% is our guidance organic growth, which is way ahead of market, has really transformed us into a fast growth company. But we did see, certainly in single-cell and spatial biology, where we had some business, but it was rather small, and it would have taken us 7+ years to really become one of the top contenders in that space.
So when first PhenomeX, in the single-cell biology space, became available, and then NanoString, in a obviously very accelerated process, coming through a Chapter 11 process, became available, we really did pounce. These will be great ROIC investments. We got them at valuations that are I think are q uite honestly, I think they're brilliant. I know some people want to call them controversial, but if you really look at the, at the chessboard of the post-genomic era and what are some of the key pieces that you can pick up, us being able to pick up a very established company like NanoString in spatial transcriptomics, highly complementary to our much smaller spatial proteomics business, and saving ourselves a decade in doing that. Now, we used to have spatial biology ambitions.
Now we are one of the two or three leaders. We, of course, internally built that proteomics, multi-omics business, so it was a fantastic opportunity. Also, a lot of smaller acquisitions. You don't write that, but some people have called that a spending spree. That's just intellectually lazy. These are really very, very good acquisitions that all smaller companies that we can scale up, that fit perfectly into our product line, and maybe you want to give even some.
Yeah
Of the smaller examples because, you know, very scalable, very smart acquisitions.
Yeah, Yeah, I can back that up with some examples. If you take ASMS now, three of our major launches came out of investments of bolt-on acquisition, as we call it, Diagnostics, PreOmics, helping us to build leading extraction or enrichment tools for our mass spec workflows. We launched from the TOFWERK and ecTOF integrated GC-TOF instruments, a market leading from its performance here just after two years of being in these acquisitions. We have made a couple of investments into Raman spectroscopy, areas where we have been slow, and of course, we have plans about, are we building those positions organically, or are we accelerating those positions inorganically through a bolt-on acquisitions on the technology? And we are very selective, and we are able...
This strategy enables for us, more or less, that we take out two, three, sometimes five years of R&D work before we have products in the market.
If I may, maybe from a bigger perspective, years ago, people were always worried: "Well, you know, there's bigger companies. Do you have enough scale?" Well, if you see how much we've grown, of course, we're not in the Thermo Fisher league. That's a tier one, right? But in the tier two, we've really grown and leapfrogged, at least in size and scale. We now do have the scale, and in some cases, more scale than some of the traditional names that, you know, that you're all familiar with, that are our peers. By this year, we'll reach about $3.4 billion in revenue, and over the next few years, according to our midterm forecast or outlook, we are at $900 million to that, to about, at the midpoint, $4.3 billion in 2027.
We now really do have the scale. We're shifting towards having more consumables and aftermarket. We're still an instruments innovator, so a lot of this just beautifully accelerates our fast organic growth and allows us to have the scale to then add acquisitions and put them into our existing commercial channels and so on in a cost-effective way. Being able to, in many of these smaller $5 million, $10 million businesses, we can probably triple or quadruple within a few years and bring their margins towards more towards the 20%+ range. So many good arguments.
I think among the controversies is, one is just your ability to integrate, you know, a number of deals at once. Talk a little bit about, you know, that process, how you go about it. You've obviously done more deals over the years. It's picked up, so you've got a better, you know, process, but just talk a little bit about how you approach integrating multiple deals at once.
Yeah, very good question. I also don't think this present pace would be a predictor of the pace that we're going to keep up. It's just been really an opportunity. Many of these discussions we've had with founders or owners for years, and it all kind of came together, quite honestly, in late 2023, and a lot of the deals closed in 2024. But those are longer-term discussions, and I don't think we'll continue at that pace because we have so much opportunity to integrate, to your question. It is nicely distributed over various groups and divisions, so this isn't a headquarters-centric company where Gerald and I now have to execute all of that. Jürgen is Jürgen's CALID Group, Mark Munch's Bruker Nano Group , Falko Busse's BioSpin Group, or the Chemspeed and some other acquisitions.
This is actually nicely distributed, and by the fact that we have such strong, strong management teams, each of these group leaders is, you know, CEO quality. So it's nicely distributed, and I mean, you know, the bigger challenges are PhenomeX and NanoString. Those are fixer-uppers, right?
ELITech, we just, My God, it's a beautiful business, and quite honestly, we don't, we don't fix it. We provide some additional channels. There's some minor cost synergies, but it's just a beautiful business that we're plugging in on the diagnostic side. But, you know, I think with PhenomeX, we moved very swiftly. Sadly, because it was such a bloated P&L structure, within two weeks of owning it, we let 55% of the people go. It was absolutely necessary. It's, that's not something we cherish. We're not proud of that at all. NanoString had taken cost action in Q4 and Q1 before they went into Chapter 11. We're not taking on the public company infrastructure and the management board, all of that.
We just did an asset deal out of a Chapter 11 reorganization. So we're moving very swiftly, and we have a lot of experience with M&A and integration. We have a complete process handbook, you know, so we're actually very good at this.
You know, there's obviously a lot of talk about kind of the dilution around, you know, NanoString in particular. You know, the Street, I think, is $3.15 in earnings next year. Can you talk a little bit about does the dilution take in account, you know, the NanoString offset? Does it factor in, you know, the legal fees? Are you able to kind of quantify what you think legal might be there? And then, obviously, the accretion from the other side of the deals like ELITech.
Right. It's a lot of moving pieces.
Yep.
I'll grant you that, right? That's why we did the, the May 17th investor webinar or like a mini investor day. It's kind of off cycle. Normally, we do it every other year, but this year there were so many moving pieces that we wanted to update the Street on what it how it all comes together. And, yeah, I mean, very much bottom line at the even with that additional dilution, which we took on to acquire those assets and the beautiful EPS growth from our core business, which after all, is 90%, which gives us leeway. If the core business wasn't growing at double digits and well above market again this year and had such good further mark organic further margin improvement and nice EPS growth, we couldn't do that.
This allowed us to do that this year, and after all the dust has settled, we'll still show EPS growth this year. Other companies are showing that as well, but on no growth or on perhaps even declining revenues. We took the liberty this year of showing very little EPS growth, but we're still showing EPS growth even this year. And then, if you take the forward rates to the $1.50 that we expect to add in EPS over the three-year forecast or medium-term outlook period to about at the midpoint, $4.15 in 2027, that's $1.50 compared to where we're likely to land this year or where we've guided to land this year. That's greater than 15% EPS growth. So, that's adding a fast EPS growth story to the fast revenue growth story. That's how it's, at the end of the day, coming together financially.
Are you able to back to the legal question, kind of quantify what you think you're gonna spend on that, and what are the odds of a settlement? You had kind of the win in Germany. The U.S. case, obviously, is next year, but what do you think about potentially settling ahead of that?
Yeah, we really don't know, nor could we comment. The legal fees, I mean, those are... They're built in.
Yep.
These are $10 million-$20 million a year. NanoString has had very significant legal fees. Does it make sense to continue with that for a long time, or I don't know. I cannot speculate on a settlement. And we're basically setting up and have planned that this will be a multi-year fight, and yes, the last two rounds we won. Before that, NanoString, unfortunately, lost three rounds in a row. We feel good about, you know, CosMx, the key CosMx, the key patents by the other party attacking CosMx, having been invalidated on May seventh in Germany, and having been recommended to the Unified Patent Court that it is almost clearly invalid, although that ruling may then be later on this year.
So we feel, you know, that doesn't predict or determine the U.S. decision, but we feel positive about that. Yeah, there's many. I think the Street had built in a valuation for NanoString. That's the worst case of every outcome.
Yep.
So from, you know, irrational exuberance to extreme depression, and I think the more likely sets of outcomes with litigation outcomes or settlements are far more positive. So I think it's you know, but it's very difficult to predict litigation. But we're in it, we're planning for it. We like our chances. Yeah.
The guide on NanoString, $80 million this year, I mean, you're kind of implying a $100 million run rate. You know, they did $120 million-$165 million last year. So maybe just talk a little bit about, is that conservatism? You know, there's some academic budget pressures everybody's called out. You know, talk a little bit about how sensitive that business might be to some of the near-term pressures, too, in the academic markets.
Yeah, Tycho, that is hopefully conservatism because we're so it's $80 million in eight months, so that implies about, you know.
Yeah
Simplistically, $10 million per month. That seems about right, for starters, at least. It was at a higher level, but then, remember, they went through Chapter 11. They got- they exited- they had to- there was an injunction in the German market, then on the European market, all temporary. These have all been lifted. We are selling CosMx in Germany, in Europe, very much so. The management team, the public company structure is gone. We had to take over and catch all of that, and we're, we've done that as well. The new management team in Seattle and elsewhere is up and running and is aligned, and we've kept many of the key CSO, key operational, key commercial managers.
So we're in good. We're catching it as this is not a burning plat. Well, it is, you know, it needs to recover. What we do not know is whether it takes two or four quarters for them to recover and then go back into double-digit growth mode. That's why we modeled it for modeling suggestions, just so we have some number to plug in this year at about $10 million a month.
Yeah
Which is $80 million. That is, that is at $120 million a year, the implication is less than the one-- nearly $170 million they had last year. But I think that's a reasonable assumption for this year, 'cause it'll take a few quarters to recover. By 2025, hopefully, it'll be much closer to full recovery, and, and then we'll also intend to build it into our regular guidance.
Got it. There's a lot of debate about kind of the size and growth of the spatial market, but you have the benefit of being able to bundle, right? I mean, can you talk a little bit about how easy is it to integrate with Canopy and some of the other kind of assets you have?
Yeah, I know there were some estimates out there of $12 billion in all, and now people have wondered why we're not there yet. It's we may reach that market TAM eventually, but initially, even at a, you know, whatever number you wanna pick, $2 billion or $3 billion TAM, it's very attractive for us, right? With, you know who the other players are, but we're gonna be one of the top two or three players in the spatial biology market. We also have spatial biology assets with our mass spectrometry imaging part, which is more on the discovery side. NanoString and Canopy with the microscopy, microfluidic systems are more on the translational and clinical research side, and also to some extent transcriptomics discovery. That's what NanoString is particularly good at and better at than anybody else.
So, integrating those in the. We will have a lot of foregone cost increases that we had planned if we had to build up over the next 5-7 years, a large commercial engine for spatial biology to be competitive with 10x or with NanoString. We would've had a lot of planned OpEx increases for our Canopy business. Now, we can just plug this into this very large NanoString channel with over 3,000 customers and a worldwide sales force. So the cost, while it's not immediate synergies of cost we take out at the Bruker side, but we save ourselves a lot of additional investment in OpEx over the next few years by on May 6, after a few months of integrating and having that channel.
So, that's a huge acceleration for us, yeah. And the integration, yes, these two businesses are becoming the Bruker spatial biology business under Mark Munch. Yeah.
Maybe shifting over to ELITech and molecular and kind of sample to answer here. Talk a little bit about, you know, the strategy in that market. You know, you've got obviously a number of players at the high-throughput end, and you know, you've got the MALDI Biotyper for microbiology. Are there kind of synergies and opportunities to bundle there?
Yeah.
Absolutely, yeah.
Yeah. I can take that question. Yeah, we are very proud, having been able to close the deal with ELITech. We think this is an excellent asset. It has main-- it is mainly a consumables and aftermarket business. Almost 90% of the revenue is consumable and aftermarket. It's not instrument-heavy at all. We had about $40 million in molecular diagnostics before in, in our P&L, in our business from an acquisition we did a couple of years ago. And of course, these two businesses will be merged, so there will be some cost synergies we are taking there. ELITech itself is a, is a smaller and organically built company and has not all the infrastructure you need to run a global business, so we have footprints in countries where they have no footprint yet. So there will be sales synergies across Europe.
Our main focus will remain Europe and South America, where we have strong Biotyper footprints. We have a large regulatory footprint, which is typically very expensive these days, in particular in Europe. Europe moving to new regulations where we can help and have a lot of synergies. We have synergies to offer for ELITech from the supply chain and the logistics, the distribution of consumables and all of that. So that's quite a good play of synergies in combining this business. Nevertheless, the main reason for us, it's a very nicely growing business, so we have quite high single-digit, low double-digit growth expectation from our molecular diagnostics business going forward.
It's margin accretive, so their operating margins are somewhat higher in the low 20s, so it pulls us up. It's EPS accretive. Fundamentally, MALDI Biotyper is a beautiful business. We built it over 15 years with a ramp over the last 10 years to nearly $300 million, continues to grow, have beautiful margins. But in infectious disease biology, it's great to also have that. It can't do viruses.
And molecular diagnostics. We didn't have the sample-to-answer platform that ELITech brings, so this is a beautiful combination, and it doesn't threaten Roche or Abbott or Siemens Healthineers or anything like that, or Hologic. It's actually very complementary, and often they put that as the long-tail esoteric panels that, you know, they sometimes we get specified when they compete when two or three of them compete for the big business in large hospitals. So it's just a beautiful business. It's just nice business. It's not post-genomic era, but, you know, diagnostics has been quite healthy. The post-COVID diagnostics has been quite healthy, and they really built a nice position, very defensible, right to exist, and with nice margins, nice growth rates.
Good. Maybe just in the last minute here, budget question. Well, two, one, you know, obviously some pressure here in the U.S. with NIH, NSF. Talk a little bit about your comfort and, you know, the budget environment here in the U.S. And then as we think about China's stimulus, I think there's a narrative that maybe you're under-indexed, you know, this round relative to kind of some of your peers and some of these new markets. Maybe debunk that myth for us.
Okay, um.
In 30 seconds.
I mean, there's a lot of Federal U.S. budgets are not seeing fast growth, but the CHIPS and Science Act finally kicking in, so we're optimistic about U.S. demand as well. There's so much other philanthropic and other funding. As it gets allocated from genomics to the post-genomic era, we just see this very fundamentally high demand for proteomics, which was evident at ASMS. China, I think the stimulus program will be a multi-year program rather than a one-quarter bolus. I think it'll very much favor academic and academic medical center research, innovation and research. That's us, and I think it'll favor very much big-ticket items, and we see opportunities for the first maybe gigahertz-type systems in China. So, while it will take a while to really build up, this may, for us, be a 2025, 2026 revenue story.
We don't mind that. 2024 looks really good for us already, and I think it'll favor us.
Great. Good to see you. Thanks.
Thank you very much.