Good morning, and welcome to the Bio Techne Earnings Conference Call for the Q3 of Fiscal Year 2021. May follow-up. I would now like to turn the call over to David Clair, Bio Techne's Senior Director, Investor Relations and Corporate Development.
Good morning and thank you for joining us. On the call with me this morning are Chuck Commeth, Chief Executive Officer and Jim Hippel, Chief Financial Officer of Bio Techne. Before we begin, let me briefly cover our Safe Harbor statement. Some of the comments made during this conference call may be considered forward looking statements, including beliefs and expectations about the company's future results as well as the potential impact of the COVID-nineteen pandemic on our operations and financial results. The company's 10 ks for fiscal year 2020 identify 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 as a result of any new information or future events or developments. Participants will be 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 are performing. Tables reconciling these measures to most comparable GAAP measures
are
available in the company's press release issued earlier this morning on the Bio Techne Corporation website at www.bio techne.com. I will now turn the call over to Chuck. Thanks, Dave, and good morning, everyone. Thank you for joining us for our Q3 conference call. As you read in our press release earlier this morning, I am very pleased to announce that the Bio Techne team delivered again another strong quarter in our fiscal Q3.
Our year over year organic growth accelerated to 22% for the quarter as we continue to build on momentum from the first half of our fiscal year. This growth was the best organic growth the company has delivered in over 25 years, both year over year as well as on a 2 year CAGR basis. As it has been all year, the growth in Q3 was broad based across our segments and geographies as penetration into biopharma remained very are strong and continued improvement in academia drove the year over year and sequential acceleration in our business. The growth within our product categories was also broad based with most accelerating sequentially from Q2 and continued by leadership from our SimplePlex, Simple Western,
are in the same
store as we've been doing all year, we delivered our record organic growth with a focus on profitability, achieving 40.1 percent adjusted operating margin for the quarter. The timing of hiring to support growth investments combined with COVID restricted travel once again benefited our profitability. However, our positioning in high growth markets with high gross margin products has strengthened the conviction in our ability to sustain 40% operating margins in the future pursuant to our strategic plan. Before we dive deeper into our Q3 performance, I would like to welcome the Asurion team to Bio Techne. As a reminder, we announced the Asurion acquisition in early March and closed the transaction in early April.
SureGen adds a portfolio of leading genetic carrier screening and oncology research products and diagnostic kits, complements our legacy clinical controls business with molecular diagnostic controls and brings a pipeline of high value products to accelerate its penetration and growth. The Surgeon team also brings deep diagnostic commercialization and regulatory expertise, Which we will leverage to accelerate the growth of our clinical platforms across the organization. Unlike many diagnostic companies of our size, the Suragen is already profitable we anticipate this business to be accretive to Bio Techne's top line growth and accretive to our Diagnostics and Genomics segment operating margin over time. I look forward to giving you all updates on Assuredness progress in coming quarters. Now let's discuss the performance of our growth platform, starting with the Protein Sciences segment, or growth accelerated to 24% organically in the quarter.
Our core proteomic research reagent portfolio had another strong quarter with research use only proteins growing nearly 10% and antibodies growing in the mid teens. Our newest proteins are more frequently being used in mRNA research and production. Given the recent success and growing interest in mRNA based vaccines, these can be a sustainable growth driver for this product line going forward. Meanwhile, our antibody business continues to benefit from our custom antibody service business, which grew over 50% in Q3. The catalog of over 6,000 proteins and approximately 450,000 antibody variations we have amassed not only enable scientific research, but also has potential therapeutic applications.
This potential is supported by the recently announced licensing agreement with Xencor, a clinical stage biopharmaceutical company developing engineered monoclonal antibodies and cytokines for the treatment of cancer and autoimmune diseases. Xencor is now evaluating a 3rd proprietary biotech antibody for its therapeutic development pipeline. This agreement speaks to the potential value of the vast protein and antibody we have built over the last 30 plus years and represents a largely untapped potential revenue stream for the company. Our leadership in antibodies has also not gone unnoticed in our industry, with Bio Techne's R and D Systems and Novus Brands recently named winners of the site have COVID-nineteen Innovation Award. This award celebrates innovative solutions or products that help shape the life sciences sector's understanding of or resilience to COVID-nineteen.
The COVID-nineteen Innovation Award reflects Bio Techne's quick and impactful response to the COVID-nineteen pandemic, developing and commercializing new antibodies to support research as well as COVID-nineteen testing initiatives. This represents the 5th consecutive year Bio Techne's antibody innovation efforts have been recognized with the site have a word and we are very proud of our antibody team. During Q3, we also continued to make significant progress advancing our cell and gene therapy initiatives, including our GMP protein business. As a reminder, GMP proteins are a key ingredient in the cell and gene therapy workflow, providing the nutrients to grow the genetically modified cells prior to being infused back into the patient. Our portfolio of GMP proteins increased over 90% in the quarter as customers leveraged our GMP cytokines to advance immune cell and regenerative medicine therapies.
We continue to scale our state of the art GMP production facility with qualifications completed and production lots of initial proteins currently underway. We have launched a digital marketing campaign to promote the new facility, our capacity and capabilities. This marketing message is resonating with the cell and gene therapy industry as our funnel of potential GMP protein supply agreements with biopharma customers continue to grow in Q3. We are also building momentum in market awareness and acceptance of another key component of our cell and gene therapy workflow solution, TC Buster, our novel non viral
are transposon based gene delivery system.
During Q3, we announced the signing of a licensing agreement with Luminary Therapeutics for the use of TC Buster in their development of a participants are in the Q3 of fiscal year 2021. Our genomic engineering service business, which includes the TC Buster solution is gaining traction with customers developing cell and gene therapies with a growing funnel of biopharma companies, relying on our experience in hard to transfect cell lines to deliver solutions for their complex projects. Bio Techne's reach into cell and gene therapy is much broader than our best in class GMP proteins and TC Buster Technologies. Biopharma companies, CROs and CDMOs are increasingly relying on offerings across Biotechnica's portfolio, including antibodies, media and supplements as well as our portfolio of analytical tools including Simple Western, SimplePlex, RNAscope and our Maurice instrument to develop scale their cell and gene therapy manufacturing capabilities. We have united our business leaders from across the company to develop strategies on how our products and technologies can be best positioned create synergistic solutions and maximize productivity for these customers.
Now let's discuss the proteomic and the analytical tools portion of our Protein Sciences segment for the strength we experienced in recent quarters continued into our Q3. Once again, our automated multiplex immunoassay solution, SimplePlex, had a stellar quarter with revenue increasing 90% globally. SimplePlex's ability to deliver high quality and reproducible data with a sub picogram level of sensitivity in a smaller footprint, comparatively less expensive offering continues to drive awareness, interest, placements and utilization of the platform. We are seeing increased SimplePlex adoption from cell and gene therapy customers and the broader biopharma industry as they leverage the platform for biomarker discovery, are expanding SimplePlex's immunoassay cartridge portfolio to include 9 new cartridge formats. These new cartridge offerings provide SimplePlex users with increased flexibility in the number of samples and biomarker assays run on each cartridge.
Until now, SimplePlex assay cartridges were only available in formats delivering 1, 4 or 8 assays run simultaneously. The expanded portfolio of cartridge offerings provides users new options to better align their assay panels with the throughput requirements of their studies. Finally, to keep up with the high demand for our SimplePlex solution, we have added a second manufacturing shift in Q3 and are in the initial stages of are expanding our physical capacity to meet the forecasted demand as SimplePlex's value proposition continues to resonate with customers in need of a fully automated, It was a similarly stellar quarter for our fully automated Western platform. Simple Western with year over year growth accelerating to approximately 50% in Q3. Even with the rapid adoption of Simple Western that we have seen for many quarters now, we continue to invest in the future of this platform and expand its addressable market.
For example, we recently introduced the latest number of the Simple Western family, an instrument we call Abby. This lower cost platform offers picogram level sensitivity with the ability to perform sequential chemoaluminescence assays within the same capillary, a feature we introduced in our higher ingest instrument last year called REPLEX. Academic customers have been increasingly adopting our automated Western platforms to alleviate COVID induced limitations on their lab activities and maximize productivity. And we anticipate AbbVie's features and cost profile to increase penetration of this technology into this customer segment. Finally, are biologics instruments, which provide protein purity information and are used directly in bioprocessing also had a standout quarter with over 30% growth As we continue to experience broad demand from biopharma, including several companies with COVID-nineteen vaccines in various stages of development or commercialization, as well as continued interest from companies working on cell and gene therapies.
Now I will provide an update on our diagnostics and genomics portfolio where organic revenue increased are in Q3. Let's start with an update on our ACD or tissue pathology franchise, where organic revenue increased above 40% for the quarter with RNAscope, basecope and our multiplexing technology, HiPlex, all having a very strong quarter. ACD is seeing significant traction with cell and gene therapy have a great day to day to day basis. We are pleased to announce that we are in a position to be able to identify the potential for the Q3 of fiscal year 2021. At this time, all participants are in a position with RNAscope representing the only currently
available method for understanding single
cell biodistribution information within the context of tissue histology. This information is critical to understanding the safety and efficacy profile of gene and RNAi therapies. And as a result, RNAscope is being used by these companies are on many IND enabling studies. ACD is also being increasingly used as a validation technology following superplexing experiments. With the single cell resolution and spatial information provided by our solutions supporting the move from discovery to translational research.
We remain in the early stages of penetrating both the research and clinical potential of this exciting technology and have plenty of room for continued growth. As we look ahead to Q4 and FY 2022, we are very excited about a new product to the ACD family that we launched recently, which leverages RNAscope technology and expand its addressable market. Bio Techne's new chromogenic DNA in situ hybridivation technology, DNAscope, employs the proven double Z probe design and signal application system of RNAscope enabling rapid and flexible probe development for any DNA target and enabling visualization of targets in formalin are using the same as the are still due to the use of fluorescent nuclear staining that rely on a high resolution microscopy to visualize gene rearrangement and copy number variation signals. Additionally traditional fish uses bacterial artificial chromosome back clone based probes that are large intend to span multiple genes and lack single gene detection specificity. Unlike most commercially available assays, DNAscope utilizes in single gene locus.
Now let's discuss our Exosome Diagnostics liquid biopsy platform, starting with our prostate cancer are in the Q3 of fiscal year 2021. At this time, all participants are in the Q3 of fiscal year 2020 1. At this time, all participants are in the Q3 of fiscal year 2020 1. At this time, all participants are in the Q3 of fiscal year 2020 1. At this time, all participants are in the Q3 of fiscal year 2020 1.
At this time, all participants are in the Q3 of fiscal year 2020 1. At this time, all participants are in the prostate tests has remained hesitant to visit their doctor or urologist due to COVID related concerns, clearly a headwind to test volume since the pandemic began. During Q3, we experienced a continued recovery of exoDS prostate test volumes with March representing the best month for test sample inflow since the beginning of the pandemic. We are encouraged with the volume trajectory we experienced in March and anticipate continued momentum in this business as vaccinations continue to work their way through the population and patients return to their physicians for checkups and their urologists for our EksoDx prostate test. Private payers are increasingly recognizing the patient benefits and cost savings exoDx prostate delivers by avoiding unnecessary biopsies as well as the strong dossier of data we have supporting the efficacy and clinical utility of the test.
During Q3, this recognition led to a contracted coverage decision with Humana, are the 1st national payer to issue a favorable coverage decision. We remain in discussions with several other national and regional payers and look forward to expanding access to this test and enabling additional men to make more informed decisions on whether to defer or proceed with biopsy. We have also expanded our geographic reach with will be performed in our Munich ISO 15,189,000,000 will be performed in our Munich ISO 15,189 accredited clinical laboratory and be made available throughout Europe through various distribution channels beginning in Q4. In addition to the EksoDx prostate test, we continue to advance our pipeline of novel exosome based liquid biopsy products. In Q3, we announced initial data on our next commercial test, ExoTRU, an assay designed to detect kidney transplant rejection.
Initial data supporting the potential of ExoTRU was published in a journal of the American Society of Nephrology with the assay capable of discriminating between any cause rejection and no rejection with a negative predictive value of 93.3 percent and positive predictive value of 77.8%. We view this initial data as best in class compared to repeating kidney transplant rejection assays. EXOTRU is not just differentiated with best in class data. This test uses urine, not blood is a sample which opens up opportunities for at home sample collection allowing these immunocompromised patients to the ability to take the test in the comfort of their home and avoid a trip to the hospital for a blood draw. We look forward to launching ExoTRU later in calendar 2021.
The COVID related headwinds and restrictions have not just impacted our ExosomeDx test volumes with patients deferring routine visits to physicians also impacting broader diagnostic testing plans. Despite these ongoing challenges, our Diagnostic Reagents division increased mid single digits during Q3. This is the 7th quarter in a row that our Diagnostic for Agents division has delivered positive growth as the development pipeline And new COVID related opportunities continued to smooth out the impact of what can sometimes be lumpy ball free agent orders. I'd like to now give an update on our COVID-nineteen initiatives.
Since the start of the
pandemic, Bio Techne's reagents and instruments have enabled insights into the virus, including ACD probes to detect the virus and tissue, sales of bulk diagnostic reagents used in COVID testing applications as well as pathogen specific antibodies and proteins to known variants of the COVID virus. COVID was an estimated 3% tailwind to our business in Q3, including initial revenue from sales of the Contero IgG antibody serology kit. We expect the COVID research and diagnostics to be around for many years, particularly as new viral strains continue to emerge, making this tailwind a
are a sustaining new layer of our product
portfolio going forward. Our business is clearly firing on all cylinders. Our innovative portfolio of proteomic research reagents and analytical tools, tissue biopsy and spatial products are meeting the productivity needs of the scientific community to drive research and discoveries forward. Our emerging cell and gene therapy workflow solutions are set to enable the next class of biological therapies with increased efficiency at lower costs. And our liquid biopsy platform is expanding with the best in class assay for kidney transplant patients in need of a better solution for detecting allograft rejection.
Layer on this a favorable research funding environment and I believe Bio Techne is in the best position ever or at least since I've been with the company will be able to deliver on our long term revenue and profitability aspirations, which keep getting bigger every year. With that, I'll turn the call over to Jim. Thanks, Chuck. I will provide an overview of our Q3 fiscal 2021 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 our fiscal year. Starting with the overall Q3 financial performance, adjusted EPS was $1.79 versus $1.39 1 year ago, an increase of 29% over last year, representing a new company record.
Foreign exchange negatively impacted EPS by $0.04 GAAP EPS for the quarter was $1.12 in the prior year, represent a 22% increase year over year. Q3 revenue was 243,600,000 foreign exchange translation had a favorable 3% impact on our revenue. All geographies had strong growth in Q3, Led by China growing nearly 50%, followed by EMEA with over 30% growth and then the Americas with growth north of 20%. The rest of the world grew in a low teens. You will recall that last year was the start of the pandemic, which severely hit China and to a slightly lesser extent Europe in our Q3 fiscal year are in the U.
S. Was not materially impacted by pandemic shutdowns until April of last year. Hence, the comps in Q3 this year were easier in China and Europe and the U. S. That being said, China's revenue in Q3 of this year was still nearly 60% higher than the same quarter in fiscal year 2019 And Europe's revenue was over 20% higher than Q3 of fiscal year 2019, while the Americas revenue is up over 35% from the same quarter in fiscal year 2019.
Participants By end market, biopharma continues to be very strong with year over year growth well over 25%, while academia continues to make big improvements growing approximately are 20% for the quarter compared to last year. Moving on to the details of the P and L. Total company adjusted gross margin was were 72.9% in the quarter compared to 71.5% in the prior year. The increase was primarily driven by favorable product mix and volume leverage. Adjusted SG and A in Q3 was 25.8 percent of revenue, a 100 basis point decrease compared to the prior year And R and D expense in Q3 was 7% of revenue, 120 basis points lower than the prior year.
While our adjusted SG and A and R and D spend both increased sequentially and versus the prior year, a tight labor market in the life science space did not allow us to fill all planned headcount additions to the team at the pace we had anticipated, especially in the more technical scientific and engineering fields. However, our pace of hiring did increase over the course of Q3 and we still plan to fill remain open positions in Q4. This investment in critical human capital will position the company for growth going forward. The resulting adjusted operating margin in Q3 was 40.1%, an increase of 360 basis points from the prior year and 140 basis points sequential improvement from Q2, the highest adjusted operating margin for the company in 6 years. Looking at our numbers below operating income, net interest expense in Q3 was $2,500,000 decreasing $1,700,000 compared to the prior year period.
The decrease was due to a continued reduction of our bank debt during fiscal 2021 as well as lower floating rates. Are bank debt on the balance sheet as of the end of Q3 stood at $215,400,000 Other adjusted non operating expense was $4,100,000 for the quarter participants are in the range of $3,000,000 of income in the prior year, primarily reflecting the foreign exchange impact related are subject to
our cash pooling arrangements.
For GAAP reporting, other non operating income included unrealized losses from our investment in ChemoCentryx. Moving further down the P and L, our adjusted effective tax rate in Q3 was 20.2%, a 110 basis point improvement over the prior year, with the improvement primarily driven by geographic mix. We expect our effective tax rate going forward to be consistent with Q3 barring no changes in corporate tax law. Note that the GAAP effective tax rate in Q3 was favorably impacted by the discrete timing of stock option exercises. As a reminder, during Q2, we made a strategic equity investment in China based Eminence, a company focused on providing media as well as custom cell line development and media formulation services to the Chinese biopharmaceutical market.
The $380,000 non controlling interest line item on the P and L reflects the loss of a portion of the Emmett's we do not own. The impact to other lines of the P and L as a result of consolidating Emmett's was immaterial in Q3.
Are participating in
the Q3 of fiscal year 2021. At this time, all participants are now participating in the cash flow and return of capital. Dollars 74,900,000 of cash was generated from operations in the quarter, more than a 50% increase over the prior year. In Q3, our net investment in capital expenditures was $10,600,000 and during Q3, we returned $55,600,000 of capital to shareholders
are in the range of
$12,400,000 in dividends and $43,200,000 in stock buyback. We finished Q3 with 40,700,000 average diluted shares outstanding. Our balance sheet finished Q3 in a very strong position with $276,200,000 in cash and short term available for sale investments are in essentially 0 net debt leverage position. Next, I'll discuss the performance of our reporting segments starting with the Protein Sciences segment. Q3 reported sales were $185,600,000 with reported revenue increasing 28%.
Organic growth increased 24% with foreign exchange having a favorable impact of 4% on revenue growth. Within the segment, the strong growth was very broad based with double digit growth in nearly all reagent, assay and instrument platforms. As Chuck described in his remarks, platforms as Noble mentioned include SimplePlex, Simple Western, Biologics and Cell and Gene Therapy, especially pertaining to GMP proteins, as well as our core proteomic reagent business. Operating margin for the Protein Sciences segment was 47.6%, an increase of 2.90 basis points year over year due primarily to favorable volume leverage and cost management. Turning to the Diagnostics and Genomics segment, Q3 reported sales were $58,100,000 with reported revenue increasing 18%.
Organic growth of the segment was 17% with foreign exchange translation having a favorable 1% impact on revenue. Similar to the first half of our fiscal year, our genomics division led the segment in the quarter. We experienced strength across the entire ACD branded portfolio with RNAscope, miRNA in our diagnostic partnership with Leica all driving growth. Exosome Diagnostics Q3 revenue increased over 20% from last year with strong revenue from our companion diagnostic partnerships driving the growth as our EksoDx prostate test continue to recover from the pandemic lows experienced in our fiscal Q4 of last year. And as Chuck mentioned, our Diagnostics Free Agents division continued its growth streak by executing on COVID related opportunities to offset the headwind participants are facing with patients foregoing routine visits to the doctor.
Moving on to the Diagnostics and Genomics segment operating margin at 17.9%. The segment's operating margin improved 360 basis points compared to the prior year. The increase reflects strong volume leverage in our genomics division as well as strong cost management across the segment. In In summary, the momentum we experienced in the first half of our fiscal twenty twenty one accelerated during Q3. With 17% organic revenue growth year to date, our products remain at the forefront of science, enabling cutting edge scientific and therapeutic discoveries, while our key growth drivers remain underpenetrated in large and growing markets.
We believe the COVID pandemic has elevated the profile and market awareness of our tools and solution offerings, positioning Bio Techne to exit the pandemic stronger before the pandemic hit. This brings us to our thoughts on how we might close the year. In short, for our base business, we see Q4 looking very strong and similar to are in the range of 3, both from the top line in terms of absolute revenue and on the bottom line in terms of adjusted EPS. With most of our customers, both in Bio are now back to work and with the need and priority to fund medical research still high in both the private and public sector. We see the strong revenue run rate we experienced in Q3 continuing into Q4.
To fuel and support further revenue growth in fiscal year 2022 and beyond, are in the range of $1,000,000,000
in the Q3
of fiscal year 2020 1.
At this time,
all participants are in the are in Q3 on hiring the human capital needed and we see that continuing into Q4. Thus, we fully expect our adjusted operating margins to finish sequentially lower than Q3, but still significantly higher than the prior year as well as higher than previous analyst consensus estimates. Also, we expect the acquisition of Asurion in April to contribute 2% to 3% sequentially more revenue on top of our base business in Q4. However, as the surgeon has just recently become profitable, it will likely be dilutive to our overall adjusted operating margins in Q4 by approximately 100 basis points. That concludes my prepared comments.
And with that, I'll turn the call over to Maria to open the line for questions.
At this time, we will be will be ready for questions. Our first question is with Dan Arias with Stifel. Please proceed with your question.
Hey, guys. Good morning. Congrats. Hey, Chuck. Congrats on the performance that you're seeing here, very strong.
Can you just talk a bit about the early days of servicing your customers with the expanded GMP capabilities? Are you seeing the orders come in the way that you'd hoped? And then how should we think about building out the portfolio there? And the reason I ask is because if I'm thinking about the situation right, It sounds like one of the key factors that will influence the ramp will just be the pace of expansion of the catalog. So can you just sort of touch on growing the product set there such that you feel like That will be less of a limiting factor than it might be in the near term.
Yes. I'll start kind of from the back Forward. It won't be a limitation to the catalog. We've got the most full GMP catalog already in the world. It's just a matter of qualification getting an inventory.
So the issue is all commercial and it's all waiting for this industry to really happen. So we've had a really good quarter. We're further along with a dozen or so customers. We've talked about a couple of we've locked in already. It's hard for them to talk about forecast and numbers and stuff.
So we've contracted in terms of percents and we've had no issue with contracting at 95% of their needs, whatever those needs be. And I've talked in the past about they range anywhere from $10,000,000 a year to over $50,000,000 of just like a single protein. So we're making progress. We're also getting help because of with Scale Ready out there. We've got a dozen different people in commercial between sales and technical, they're starting to drive more interest and awareness and that's also helping find our way to more potential business more quickly.
It's still a J curve like we've talked about. I mean, so you've been keeping track of the model and we've been talking about the growth rate. So you can do the math and you'll see that we're at a $15,000,000 $16,000,000 run rate right now at G and P proteins. I've talked in the past that even on this site here, Minneapolis headquarters, we can make as much as $40,000,000 So we've got plenty of time here before we exhaust our capacity before we have to have this factory turned on. And we slipped a couple of months, but we're looking at September, October to be selling out inventory, but we're qualifying and making lots right now.
So we're in a good place. It's more about what we got to do for commercialization to accelerate and they come in 2 varieties. They come in new specs for new indications coming, which we've got pretty good pipeline of stuff And then doing a conversion of things that are in clinicals right now and going through talking them into equivalency studies. So if they have nothing else, at least a backup protein. So we're making progress on all those fronts and it has really nothing to do with the catalog.
We've got the best catalog and the best proteins we can make. Anything you heard about that's needed right out there for GMP proteins. And as I've mentioned also before, I think what the world thinks they need today, I think in 5 years will be radically different. And who would you rather put your trust in, the world leader in protein design or people who focus more on instruments or other parts of the workflow? I think over time, these proteins are going to continue to differentiate themselves for different reasons and it's going to play to our strength because we make the best protein in the world, period.
Participants
Okay. It's helpful. And then maybe just moving over to SimplePlex, I mean, you're going to be rounding out a pretty big year there. How are you feeling about carrying that strength into next year? My initial thought a couple of quarters ago
was that a lot
of those L assistance are being driven by COVID, but it also sounds Cell and gene in some unrelated areas are in full replacement rate there.
You may have noticed that our numbers are even bigger this quarter. So we Yes, exactly.
So We
have found ways to make more. We've been throttled because of just we couldn't make anymore. It's hard to grow an instrument business at 90%. So talk to anybody. And now we've also beefed up our cartridge lines.
We have more flexibility. We keep are expanding our analyte lines, so the things that go in the cartridges for the customers. So we're giving them more flexibility. But it really comes down to like I said, it's biomarker discovery, it's QC applications, it's being looked at and being highly received by cell and gene therapy applications. So all of these things are way beyond our expectations 4 or 5 years ago and under diagnostics applications that we really are just getting started on.
We're in the middle of a 510 per process. Of course, we've got partners are going through their own. So this thing is one of the big sleepers of our company. And we've got to get a new building. We've got to expand capacity.
It's more than just Yes, we are all over this. It's right up there with Exosome being the number 1 number 2 priority in the company, and we expect momentum to continue. We're now well over 500 boxes out there. That's kind of a tipping point where things start selling themselves, People start seeing them, the word-of-mouth gets out. Just like we did with Simple Western a couple of years ago, there was a tipping point where it just got a lot easier.
And we're reaching that point now with Simple participants.
Okay. And just I guess a simple way of thinking about it would be to say that if you're expanding manufacturing the way that you are there, then obviously you've got a decent line slide into some out year demand that should
be Yes.
And I think you got to look at the competition here at Quanterix and they've done a good job. I just read their print this morning and They beat as well. It just speaks to the need, what this industry is opening up. There is a need for highly sensitive participants are in multiplexing immunoassay systems. And right now, there's only a couple of really good ones out there.
It's kind of us and Quanterix that are sensitive enough. And ours just happens to be about oneten the size and oneten the price and still highly sensitive. So we're catching up to them. And participants But I think there's room for both of us. I think it's a really expanding market for all these different applications I just mentioned.
It's kind of unknown. It's just it's going to get big.
Yes. Okay. Okay. Thanks, Chuck.
Are ready.
Our next question is with Puneet Souda with Leerink with SVB Leerink. Please proceed with your question.
Participants. Hey, great. Thanks. Thanks, Chuck. So, first of all, congrats on a strong quarter here.
Great to see the strong growth and really are in the Q3 of fiscal year 2020. The key question is, how sustainable is that? And Jim addressed some of that based on what you expect to see here in the Q4. But given the sort of the pent up demand that's already there, the reagents and consumables, which are more easier to order. And if you look back into the sort of the second half of the calendar year or the next fiscal year, obviously, comps get tougher.
So Maybe just speak to us in terms of how long of a sort of sustainable tail that you see here?
Yes. Well, first of all, we put a pretty key phrase in the commentary from Jim. We talked about revenues being similar in Q4 to Q3 on a dollar basis. When you do the math, That's a big growth rate. That's going to give us something north of 20 if we hit that and momentum looks very strong, right?
So whether you talk about for the year or take it for 2 years, it's double digit for 2 years too, almost teens. So and then you got to talk about, well, we're hitting on all cylinders. Everything is growing amazingly well. It speaks to the industry. It speaks to the funding.
It speaks to us crossing all these tipping points as a company. It speaks to our digital presence in our investments and just the awareness of our company and our platforms. The quality has always been there in a lot of our brands, but we're expanding it. It speaks to us being able to entice Companies have come on board like a Sherogen. I don't think we could have talked to them to come on board 3, 4 years ago.
They see the candy in the store and they want it. They want to help out. So we see in the Q1 and Q2 and our further next year, probably it's not a 20% year, but it's going to be strong. And right now, it's too early to talk about what that could be. We've listened to all the other peers out there and everyone's staying kind of shy about next year.
Comps are going to be tough, but you got to look at the market indicators. They're crazy good And we're going to be good. Puneet, I would just add, I think we were a bit beyond the point of pent up demand. I think at the end of our Q2, We had a 19% quarter. We had some questions among ourselves to how much that might have been pent up demand.
But I think by the time we get here into Q3, That's no longer the case. What we're seeing is a really sustainable run rate. In fact, if anything, the momentum accelerated throughout Q3 as Opposed to leveling off or sloping downwards. So I don't think it's pent up at this point. I think it's ongoing funding.
Got it.
And then, Jim, on operating margin, you're suggesting that these are sustainable in the near term, but how are you thinking about those longer in the future given the level of investment that you want to do in the business. And obviously, you have done successful positions here in the past. And so how should we think about that operating margin profile longer term?
Yes. And so I guess if that's how you define long term and short term, I think The message I'm trying to convey here is that the fact we were able to hit 40% well ahead of our well ahead of schedule, some of it for Some reasons that like travel and things like that that were unforeseen a couple of years ago. But the point being is that we have a highly profitable business model And it shows that we can get to 40%. And we have that much more confidence we can get that on a sustained basis going forward in the long term. In the short term, we need to catch up on some investments and that catch up on investments will bring that rate down For a while in the short term until we grow back up and get back to 40%.
But still on plan for Our previous guidance I would argue you had a plan. Had a plan. So I think, if it's compared to fiscal year 2019 and definitely compared to fiscal year 2020, We're well ahead of plan on that trajectory.
Things look good. Got it.
We're getting great leverage. And we have this quarter was a lot more investment than the previous quarter. So We've got great leverage as you saw in our numbers off of our scale and that's going to continue. Okay.
That's very helpful. And Chuck on proteomics, participants are very much core to you. Great to see the growth here in SimplePlex and all the platforms and ProteinSimple. And when you think about the antibodies portfolio that you have, the combination of Symbaflex, how are you thinking about proteomics Now obviously there are linker technologies, Olinc and others that are emerging on the market and have to merge and other approaches that are coming onto the market. So how are you thinking about proteomics overall?
Are there opportunities that you think where You can potentially expand into and how do you see the benefit flowing from that to broadly through the antibodies portfolio?
Don't forget, most of these people you mentioned are also our customers, 1st and foremost. And we enjoy great relationships with almost anybody in the field of proteomics. I think the core underlying growth level for just down to basic research is phenomenal. I do think that Avenues like Lymphoma and Olinc are highplexing kind of different niche high value applications that drive a lot of value. And I think we'll be reaching those spaces as well to work with them and probably compete with them, but we'll be never giving up our core and we'll be king of are in terms of antibodies and proteins for some kind of some time to come, I think.
Okay. And then last one, if I could squeeze in on the UroGen. Obviously, participants are very interesting asset and that appears to be Intel inside for the some of the NIP assays. Participants So just getting I wanted to get your sense on the contribution this year and then sort of next year, if anything you can provide there. That would be very helpful.
And we expect this to be a fixed April close. So I suppose it's going to add to the next quarter too. Thank you.
Yes. So Puneet, in my comments, I addressed what we thought they would add for Q4, roughly 2% to 3% revenue on top of our base, on top of our core business for next quarter, minimal EBITDA contribution, they just broke into profitability. And we'll provide more guidance as to what that might mean for fiscal year 2022 as we wrap up our Q4 earnings call next quarter. I think what you got to remember is they've got a great pipeline. They're about to launch a trio of new assays along with when you get cystic fibrosis out and that We're seeing that as potential home run.
So it's a they've got great credibility. They're known for great quality. They're in some cases, their indications are unique. In some cases, they've got are in the same position, but we seem to be best in class. So stay tuned.
I think as we launch these new things in their pipeline, which is really imminent over the next few months to a year, You're going to see some immediate help and support. And we're not used to buying companies that are already in the black to begin with. So this is all good.
Got it. Thank you. And yes, clarifying that, that was more carrier screening in that versus NIPT. Thanks for the comments, Chuck.
Our next question is with Jacob Johnson with Stephens. Please proceed with your question.
Participants. Hey, thanks. Good morning, everybody. Maybe first, just a broader question than Dan's on cell and gene therapy. Chuck, I lost count on the number of times you mentioned cell and gene therapy in your prepared comments.
Can you just remind us the size of the end market across the portfolio today? What this could be in have a few years. And then are you seeing more applications for this end market across your portfolio outside of things like GMP proteins, TC Buster? Yes.
It seems like you are. You're right, Jake. We probably overdid it, but it is a pretty exciting area for us and it starts really paying for us in a year or 2 out here. But Right now, it's on about a $50,000,000 run rate across all our portfolio, and that's probably we still are a little bit are dark on just what potential is coming out with Scale Ready, but our TSC buster is really starting to land a lot of deals, starting to become significant. You already know the fabulous growth in GMP proteins, but we also have media that's really growing well as well and other things.
So We see it as a $500,000,000 plus market within 5 years for us. I mean, it's addressable to be honest. And And there as we talked, we alluded to all the different synergies across the company. There's just there's a lot of unknowns. We have put in place As you know, the company we designed here, the team is a subsidiary model, multinational model.
We have 5 divisional businesses right now, 6 if you want and call it Sheraje and 1. We'll probably do some synergistic work to get all the diagnostics platforms over the next year or 2. But looking forward, it's going to be 6, 8, 10 different divisions. They're going to be synergistic. And we run a tech council kind of process.
We make are actually working together. We have a strong pipeline of new things that nobody else can do because you add Platform A to Platform B, We've come up with new things nobody else can do because they don't have all the things together. This goes back to my past and a lot of other people's past in this company and are some fabulous companies we come from. Innovation reigns supreme here. And I we probably over said of the gene therapy, but it is probably the most exciting future market for our company.
In terms of size, I think I still think Exosome as a platform is the biggest potential. But it's going to take years to really get all these things through because it's just so much more regulatory aligned with most of those. But we're really excited there too. Don't be surprised in a year or 2 you see ExoTRU LAP prostate. I mean ExoTRU is just there's crazy interest in And we're doing really well as you saw in our report.
Thanks for that Chuck. And I've probably been Called out for saying cell and gene therapy too much as well.
So we're in the
same camp there. The other question, Chuck, my second Just the last two quarters, I think you've called out robust growth in custom products and proteins. Can you just remind us how much of proteins is custom work and maybe just talk about the kinds of customers that demand those custom products.
Yes. It's as much about custom analyzes. We have a custom group. It's really a great development situation for our leaders. We've taken some of these people to work in those areas because they're very strong But they have to be very articulate with customers, etcetera.
And they turn out being great business people, technical business people. So we've been going into that camp. That said, it's roughly under $20,000,000 We don't want it too big because we got to it's hard to scale everything. If we can get in the catalog, it's great, but not everybody wants things in the catalog. They want them unique built to them.
So we charge an awful lot to get access to our really great intellect. But it's not something that we want to make a division or see a road map to $100,000,000 $200,000,000 I think the scalability issue around our custom model because the service is difficult. It would tap too many of our star people And I'd rather have them working on products that we can sell to everybody. So
but it's
good. It's very profitable. It's very good. It's growing very nicely and participants It's an incubator. It feeds into everything else we're doing.
Yes. That makes sense. I'll leave
it there. Congrats on the quarter. Thanks for taking the questions. Are ready.
Our next question is with Alex Nowak with Craig Hallum Capital Group. Please proceed with your question.
Participants Great. Good morning, everyone. Chuck, one item that didn't get any mention was the OneWeb. And as you look through the metrics there, are you seeing a big step up either increased traffic, increased cart sizes or just ways that research labs can put multiyear products together and fit into a solution. Anything that can help explain the broad based growth in the quarter?
Well, here's the funny thing. Participants We know you're right. We've talked a lot about our digital presence and our investments in digital and SEO and how it's driven a lot of our growth and it's explained a lot of our growth outside of our peers. And every time I talk too much about it, all my digital companies come to me and say, you know, you're telling all our competition way too much. And they show me data showing that some of our competitors are actually paying for AdWords on Bio Techne.
They're buying Bio Techne's AdWords. So they're trying to creep in on our flow Of customer contact, they're actually trying to lock up our own company name. So that was pretty clear to me that we're certainly got their attention. And they're trying every avenue they can are interested to get into our model because we're taking share from everybody in our core areas, everybody, and because it's working. If you look at our website lately, it's phenomenal.
And we just keep making it better. And the OneWeb is really it's really an umbrella term over really a complete one basket approach are buying and we're not there yet, but we've made big improvements that you can where instead of you saw how many things we sell, I mean, we continue to have an issue of demystifying and talking about all the different are in the same store. Potential single unicorn platforms in this company and yet can you buy them all together on one side, you couldn't. Now more increasingly you can. And we're not going to talk as much about it going forward because it's one of our differentiators as a company.
But it's going very well.
Yes, understood.
It's clear by the numbers, right, so.
That makes sense. Okay. And then a ton of success in ACD right now, is there really any new innovations or research specific projects that are propelling that business unit forward? And then I guess to take a step back there, Is it fair to put ACD in a similar position as ProteinSimple was maybe 5 years ago? Or would you say you don't expect ACD to hit the levels participants To
the contrary, I think that's very prolific of you, prophetic. Participants But there's RNAscope, there's Basescope, there's DNAscope, there's Hyplex, there's Xplex. We've got a hell of a portfolio coming. And all of our new extensions of our platform are higher plex strategies. So beware all the high plex guys out there and they know it.
You don't need half a 1000000 boxes with our technologies. It doesn't destroy morphology. There is a lot of benefits to the So we have a strong IT protecting it. So no, we've always said this could be a 200, 300 or more larger division. So it's very much at a Tipping point is going to be knocking on $100,000,000 next year probably, real close if not exceeding and very profitable because at the end of the day, it's kits, Great gross margins and the team is unbelievable.
They are really good in terms of cross linking other people in the company and technically and getting help and also helping them, one of the strongest technical teams I've ever seen in my career, to be honest. And participants If anything, our issue is how do we keep acquiring talent in the Bay Area and keep this machine moving. It's really competitive out there for people and that's probably the bigger can be fuel the growth with more investment in key people. I would just add, Chuck, the recent launch of our DNA scope, the market for DNA scope basically doubled our addressable market from just RNA scope. And we've been asked for it for very difficult.
It's probably about a year late because it's just so technically difficult. We cracked it.
No, that's great. Appreciate the update. Thank you.
Our next question is with Catherine Schulte with Desjardins. Please proceed with your question.
Hey, guys. Congrats on the quarter and thanks for the questions. I guess, first in the core reagents business, your last 5 year outlook had a 5% to 7% growth rate there. Can can you just talk through some of the newer growth drivers that you've referred to earlier, whether it's mRNA or proteomics and the potential for those to be additive as you think about that next describe your
outlook. Yes. And that's very astute and it's true. I mean, going back and you've been with us a long time, I mean, in the early days, talked about getting into a healthy mid single digit growth and because the markets weren't really growing anymore than that anyway in terms of antibodies and proteins, even assays. But That's not what's happened, right?
So the markets have all improved. There's a lot more funding out there. There's a lot of halo effect are going to be talking about stimulus. I've talked a couple of quarters ago about don't be too worried about a 3% NIH budget. They're probably going to come back next year with something much bigger.
Sure enough, they're talking 21% starting October, it's going to be big. And this is about infectious disease. This is just oncology, neuro neuroscience, the traditional are funding from NIH. COVID is going to be another layer and there's a halo effect off of all of this. The vaccine makers are all buying, everyone's are exploding.
There's a halo effect off of all of that. And it all starts with proteins and antibodies and assays. What can I say? I think High single digit growth at a minimum going forward, and we've been exceeding that, as you know. We kind of look silly because we've been double digit here for quite a few quarters.
Participants are
in the Q3. Great. And maybe on Exotrue, I can sense your excitement there. Can you just talk about your commercialization strategy and building out a sales force of the launch later this calendar year and maybe the timeline to Medicare coverage.
My number one question is guys is why don't you start with that? It's a lot fewer barriers. We don't have to worry about 20,000 urologists. We don't have to worry about the pathologists that drive the urologists with being paid first sample off a biopsy. There's a lot of converting to do in exosome diagnostics and we're doing it.
We're growing and cranking it. It's are going to be sticky, but it's going to take some time. It's actually true. Kidney rejection, there's only 100 centers. They're very regionally located.
85% of all the work has just been in the top tier of them. So this is why it's important to have an at home collection have a lot of these patients are going to have to be traveling a lot every couple of months to get these to get their new participants can be checked and now they don't have to. Now they can send in urine. It's simple. So we don't have a big commercial plan.
It's going to be like a key account model. There's going to be half a dozen different reps who'll probably hire some heavy hitters that are well known in the industry and go to work. Participants are available. And right now, we've got some good news, right? I mean, we've got MolDX offering up via being a CareDx as a solution.
There's A lot more, I guess, acceptance of the LDT just in general for this issue of kidney rejection. And if we can get our if we can get NGS to abide by this opening, it's going to actually accelerate our process, our LC process. So we don't know yet, but we're talking to NGS and they've been very supportive so far and very open and they're very, are very interested. They like the data. They like the publication we've done already.
And I'm hoping expecting this will be a much Yes. 85 percent. So that's another nice thing.
Yes. Okay. And then last one for me, maybe on the Xencor agreement, how should we think about the time line for those antibodies to move through clinical and potential magnitude of milestones for those agreements?
Yes. Well, it's unknown. As you know, working with therapeutic companies, they won't tell you everything anyway. We're on our 3rd different antibody. They're all along in the first one.
I don't know. All I know is that we're getting paid a prom, we're getting paid milestones, we'll get royalties. We hope that they are successful with their clinicals, but participants We don't have their schedule for clinicals or what's going on, but it certainly won't be 6 months or a year or 2. I'm sure to see much come back from that beyond the milestone payments and are listening. But now we've got a list.
I mean, we're got quite a few of these going out. And it's not $10, $20 here. We're talking are much bigger numbers up front just to get access to our technology whenever you have to do that. And that's becoming a nice new layer of new reps as we mentioned.
Are ready to take
questions. Our next question is with Patrick Donnelly from Citi. Please proceed with your question.
Hey guys, thanks for taking the question. Chuck, maybe just on ExoDx, obviously, you got a nice payer on board, I think, in the beginning of April. I know you've talked often about, I mean, if you get a big one, it will be the first of a few dominoes to fall relatively quickly. Can you just talk about the conversation pace Since then with payers and what we should expect over the next couple of quarters and getting more cash flow there?
Yes, it certainly accelerates things. We have Much more many more of the satellite Blue Cross Blue Shield is now in the final throes of contracting with us. And of course, we're still going after United now, either big ones. And It always starts like this. 1 of the big ones has to go and then eventually the other ones aren't going to be left behind.
And it gets to a point where patients are demanding it, Right. So it's going to happen. It's way too good a technology. It works way too well and we're just going to keep grinding away at it. And it's just too bad that This is a patient set that just aren't leaving their homes and going to see the urologists and getting checkups.
But they're coming back now and our numbers are improving dramatically as we mentioned in March for sure. Participants And we're getting there. I mean, I think all in from the beginning, we're well north of 50,000 tests administered. So we're This is not just getting more than being a secret. So we're getting there.
Right. Okay. And then on the COVID side, I know you talked about a few different product lines that played into the mRNA vaccines. Are you able to quantify what the impact was in the quarter, in the quarter, even at a high level would be helpful.
Well, we had as I mentioned, we had 90% growth and some of that growth are mRNA to vaccine related. I don't even have a number in front of me. I don't think it's half or anything, but it's just a component of the growth in Sonal Cell.
Okay. And then maybe last one, just on a geographic basis, China has been source of strength for much of the group here. Can you just talk through Your performance there and then the outlook, it certainly seems like things are pulling up.
Well, as you remember, China fell off the table first, so they're the easiest comps. So 50% here is gaining the number and they're back strong and the momentum is good. So we're kind of back on track. Level it all out or looking back a year or 2, it's a 25% grower. So at least 2022, we're pushing them for 25% and I think that's going to happen.
We fared better than most last year in China where we still grew in China to a single digit growth as opposed to the typical 20% -plus. So We had an easy comp for China, but not an easy comp compared to much of our competition in China. Yes.
Participants Understood. Thanks, guys.
And we've been hiring there. The group's expanding. It's kind of business as usual in China, to be honest, except for Some of our management trying to get in to help. They have to go through quarantine. It's tough.
And then you aren't there any Chinese extended visas yet. So you can only go in for 2 months and they kick you back out and you got to start over again. So no visits for a while for any of us.
Right. Thanks, John.
Our next question is with Paul Knight from Janney Montgomery Scott. Please proceed with your question.
Participants Hi, Chuck. You've emphasized how your catalog is the very best In a long time for any threat to it. Is it the annotation now that you have around it along with the content? How would you describe the barriers to your catalog now?
There really aren't it. I mean, in the beginning, and you're are pretty up on this, I know, Paul, but IL-two is kind of the first thing being sold. It's probably still a leading protein being sold, and then we make that as well. But we're into IL-seven, IL-ten, IL-fifteen and there's more, there's others. We have a catalog of roughly 50.
Our competition is half to less than that. I'm just saying we have a strong catalog. We are not the largest GMP protein provider yet, but we will be. Participants Right. And the We kind of have to wait and see where are going to be looking for IL-twenty seven or IL-thirty seven Or whatever.
We have all the hardest to make proteins from research that to kind of lead the way for the whole world following on what proteins come about when. How many of these become asked for or put into GMP format is unknown. And to be honest, we'll probably have to work with them. They'll have to use us more than they have been If they want to understand the benefits of an advanced new protein that they don't really understand or don't know about, because we'll always have the most early information in the world on a new protein.
Participants Is that also the profile of your St. Paul customer? Is it a technical product?
What are they finding in your facility to book capacity? Well, right now, I talk about qualification. They want to see that They know R and D Systems brand is a high quality protein. They want to see instead of a couple of $100,000 of purchases for research needs, Can they get $10,000,000 of it at the same quality level, large lot, consistency in lots and all the paperwork that has to go with it for being GMP, right, because it's regulated. So They're coming to do audits and all that.
It's not really about checking us out if we can make the protein or not. They kind of get that. It's more about all everything else. Can you make enough of it? Is it consistent?
Have we done all the G and P regulatory stuff correctly? Do we have the bandwidth of the teams in place, the leadership, Typical audit stuff.
It hasn't gone very well. Yes.
And then
you guys can start traveling again. We will bring tours. It's a deal closer facility. It's amazing.
Yes. And then lastly, there has been a lot of M and
A in the industry with the diagnostics assets.
Participants
are
What's behind your M and A? What do you think is behind the activity in the industry? Well, I think the growth for the industry is driving the activity and now we're going to have a bunch of very difficult comps and a lot of companies participants have COVID cash and so it's going to drive a lot of M and A, I think starting probably now, but certainly been the next fall. I mean, start doing the math and what the big guys in our industry have for cash is amazing. And they're not going to want to shrink now.
They don't want to grow. There's going to be more M and In terms of, we'll be in their sling like we always have. We're not trying to compete with Thermo or Danaher. And Assurant is a perfect example of yet another private deal we did that are getting a great team of bolt on synergies in place and we'll be able to grow much better with them than they would be in their own. We have certainly come in 2nd and third on a few of the past year.
Some sting, maybe I really wanted them, but We're not going to overpay and things are pricey right now. It's just because that's the industry we're in and people are demanding innovation and growth and They can't do it. It's just classic make versus buy in the end, I guess, but it's driving valuations. And the growth we're seeing in our company, We're not the only one, right? It's driving valuations as well.
Yes. Okay. Thank you.
Ladies and gentlemen, we have reached the end of the question and answer session. And I would like to turn the call back over to Chuck Dumas for closing remarks.
All right. Well, thank you, Maria. It was a great quarter. What's not to like with a 25 year record? So as you guys all know, Q4 should be even maybe more fun to talk are in the Q3 of fiscal year 2021.
At this time, all participants are in the same boat and I look forward to next quarter when we're all
together again. Thank you.