All right. Good afternoon, everybody. Welcome to the Stephens Investment Conference. I'm Jacob Johnson, the life science tools and pharma services analyst here at Stephens. Really pleased to be joined by the team from Bio-Techne, with Kim Kelderman, the Chief Operating Officer, and CEO come February 1 next year, and Jim Hippel, the CFO. Kim and Jim, thank you for joining us. Just as a heads-up, this will be a fireside chat, so I'll pepper them with questions, but try to take pauses if anybody in the audience has questions along the way. And with that, Kim or Jim, or both, I'll turn it over to you for any opening comments, and then we'll go from there.
No, well, thank you. Thank you, Jacob. Welcome to the conference. Thank you for your interest in Bio-Techne. It's really great that you guys have interest because I'm making a career move into being a CEO, so hope to live up to the expectations. Didn't come overnight, right? So a long career in the life sciences industry. Moved back to Becton Dickinson and sold a life sciences company into Becton Dickinson, GeneOhm Sciences. Stayed for four or five years and then eventually joined Chuck at Thermo Fisher Scientific 13 years ago. That's also where I met Jim. Jim was one of the players there as well. Managed three different businesses of increasing scale and complexity over the eight and a half years I spent with Thermo Fisher Scientific.
The last 4.5, managing genetic analysis, that was basically all the Applied Biosystems reagents and instruments like the qPCR instruments that became so famous, the CE instruments, and later on we added Affymetrix to the mix through an acquisition. Interesting thing why I mention it, is that it has very similar reagent, instrumentation, services, licensing mixture in revenues as we have at Bio-Techne. Nonetheless, when I was turned 50, became a little bit in a midlife crisis, I guess, and bought a new car. Also, took a new job at Bio-Techne, and, it was basically Chuck having, continued to stay in contact, and at some point put a couple of assets together, like the ACD asset as well as, Exosomes.
There were some other assets in the diagnostic and genomic segment, and just basically wanted to get me on board, and so I did 5.5 years ago, joining Bio-Techne. And, yeah, so focused on that segment, but also focused on building out the strategy for the overall company. Very active in the M&A funnel and which acquisitions we did and how. Really like the company. it's I've done turnarounds in my career, but this is not a turnaround. This is extrapolation of the great things Chuck has done for the company, and we have a great team. So fast, innovative, great M&A track record, and a fantastic team without any politics. So it's basically a dream come true.
That's why I'm happy to be here, and hopefully, you will see my enthusiasm.
I got nothing else to add. Just get to the questions.
Thanks for that, Kim. Maybe just a couple follow-ups from that, and appreciate the introduction, and really happy to have you here with us. you're now COO, you'll be CEO in a couple of months. What are you focused on right now as COO, and then what do you foresee your kind of key areas of focus being when you take over as CEO?
Yeah. So this couple of months, first of all, getting to know key business partners that I might not have known yet, our main investors or the top 10 investors for sure. End up connecting way more with the analyst world. New to me would also be a real tight link and operating mechanism with the board of directors. I'm on the board of directors myself, but managing a board is still something that's relatively new to me, especially coming out of those large organizations. In the meantime, Chuck has been nice enough to just allow for this transition period. I'm basically just like a co-pilot. I'm putting my hand on this... It's not a steering wheel, I don't know what it is, but putting my hand on it.
The yoke.
Any minute, I think he can go to the bathroom or get off the plane. I'll just be get ready to steer it. Yeah, I think it's a very manageable process, mainly because I've already been with the company for five and a half years, know the industries, the team, and basically getting ready to then run the first board meeting in February on end of January, and then take the helm 1st of February. From there, I think it's there's gonna be 90% of executing the things that we've set in place anyway. I'm actually pretty good and pride myself that I've been successful in scaling organizations while keeping innovation and agility, right?
Because you very often hear that larger companies, yes, they have scale and they have tons of salespeople, but then people lose the agility and fun at work because innovation gets choked a little bit and other regulations, policies, and all these things slow these, some of these companies down. I'm actually pretty good in keeping the agility in a space, and I think that's exactly the phase that Bio-Techne is now entering. As I said, capital deployment will stay very similar. We've been very proactive, so we went from more reactive gut feel acquisitions, which were really good at beginning of the tenure with Chuck.
We have been really good in being proactive in the last couple of years, knowing what we want, build the relationships with the targets, making sure that we come up with deals that are really A, fitting our strategy, B, are good outlets, differentiated instruments of our core portfolios, meaning our core reagents, such as antibodies and proteins, making sure that they're there's either equipments that use them, or G-Rexes, or other vehicles that utilize our core. So extrapolation strategy, maybe speed it up a little bit. Enter some throw some fun into the mix, build out the team, making sure that, again, we add more great candidates into the vault management team, so that, you know...
We already have two great successors, but having three would be nice to keep the status quo like we had this last year.
Got it. That's helpful. I guess one kind of follow-up, and perhaps it's a little bit unfair, but I figured, I think it's worth addressing because it's a question we've received from investors. And so you ran the diagnostics and genomics segment, and so I think there are people who wondered, when you were named CEO, does that mean this is going to be more of a focus going forward, whether it's from an organic or inorganic perspective? Maybe first I'll let you address that, and then two, just curious if we should expect any change in the kind of the capital allocation strategy.
Yeah. Thank you. I can imagine that fear, but yeah. My opening comments were purposely that at Thermo Fisher Scientific, the genetic analysis business, there was this mixture of reagents and instruments, and you gotta grow where and invest where you see the opportunity. In the DGS, the last five and a half years in diagnostics and genomics, I will love all the children equally across protein sciences just as well. Yes, there were two acquisitions on the diagnostics and genomics side, but those were really must-do type acquisitions, right? So the Asuragen acquisition I did about four years ago or so, was really important.
We have this Exosome-based business that, where there's tons of innovative ideas, but the team really did not really know how to make products out of it, didn't have a laboratory channel, so Asuragen was a perfect fit for that, right? If you think then the spatial biology division that has ACD in it, with the core reagents like RNAscope, first of all, we believe that is a real fast-growing market. But secondly, we knew that automation and the more often you repeat a test, the more important automation is. So we had to get access to an instrument. you think in there's still academic users that have a manual approach, but you can clearly see that the automated part of the business grows much faster than the manual part.
Knowing that we already had relationships with Leica and Ventana for the high, high volume, high throughput, I should say, testing, but that in the translational space, there there was a clear need for a automated box. That is why we did these acquisitions, and we're really happy with both of them. Seem to be working out really well. Strategic fit is amazing, differentiation is amazing. but long story short, I think it's since now the yin and yangs are completed, and these teams can kind of like execute on the strategy. We feel that the M&A pendulum will swing back to the protein sciences segment, where you can always add to your core, to your core capabilities, but you can also think on adding verticals or basically these outlets I was talking about.
So if you have all the proteins and antibodies, yes, we bought ProteinSimple because it pulls through antibodies, right? Yes, we have a G-Rex because all the protein, G-Rex is a Wilson Wolf product, right? So it pulls through proteins and cytokines and we have the Lunaphore platform, which will pull through antibodies as well as the ACD reagents for RNA. So an additional outlet would make sense, too. So it could be core, it could be outlet, but it will highly likely be back in the protein sciences segment.
Gotcha. That, that's helpful. Okay, so, we kind of talked high-level stuff around strategy, but I guess sticking high level, but moving to the fun that is the life science tools macro backdrop. Like others, you've called out some, some incremental headwinds last quarter from the funding environment in China. Can you just discuss how those trended throughout the quarter and kind of how that impacted your businesses?
Yeah, I can give it a shot. And Jim was just in China with Chuck, so I'll go there in two weeks from now. But obviously, a real important swing factor for our business, right? So we looked at it as China, we have biotech, and we have some destocking, right? And I think those are—that's also the order of impact more or less-
I agree.
O n our business. Now, China is clearly it used to be a very heavy capital deployment or capital acquisition area where lots of... And Jim says it so elegantly you only have to be five days in per month in the office to order more equipment. But if capital is constrained and you come into the office or into the lab, I should say, then you run reagents. We can clearly see that the reagents business is now proportionally much higher than it than historically, and that some of the business purchase, the instrument purchases have decreased.... And that is a trend that is unusual for China, and of course, that puts a dent in some of the overall results, for the region.
We can talk, and Jim will talk more in detail about how we see that rolling out over the coming quarters. but that's the main driver. We see reagents picking up and instruments coming down. Fortunately, we're mainly reagents, so that's why I believe that we've had less of a dent than others in our profile right now. But overall, we do believe that china has certain reasons why it's right now not investing as heavily as usual, and it's all kinda related to funding. But we do believe that over time, the funding, healthy aging, people in China look at their government for funding and for driving their investments.
Healthy aging has always been a top priority in China, as it is around the world, but specifically in China, because the government deemed responsible. So we have confidence that that market will come back. the question is how fast and when?
Yeah. I'll elaborate just a little more, and just a brief history lesson on fiscal year 2023, right? So for fiscal year 2023, and actually back up even further in terms of how we may be a little bit differentiated than many other life science tools companies with regards to our exposure or opportunity in China. Many of our peer companies, particularly the larger ones, as a percentage of their revenue, it's more heavily weighted towards the bioprocessing side, the CDMOs within China. It's not to say they don't do business with research, but proportionally, it's higher in bioprocessing, whereas we have very little in bioprocessing there. We have one product line that does some business there, but 90% of our business is through research in China for China research.
Whereas the CDMO industry in China, even though it's Chinese CDMO companies, a lot of their business are, customers, are American customers, or Western, Western customers. And so as for various reasons, Western companies have been not putting as much business into China, and some are even taking business out of China. That's severely impacting that space, that subset, and therefore, our peers that are more heavily weighted there are proportionally impacted worse. What's impacting us on a headwind perspective with regards to China is more specific around government funding.
And whether it's academic institutions or hospitals that are 100% academic funded, or whether it's biotech within China, which is indirectly related to government funding via incentives, be it tax incentives land grants, whatever it might be, ultimately, the research space and life sciences in China has a direct line into government funding. So that's what we pay attention to there. And you look at fiscal year 2023, it was a really strange year with rolling lockdowns and shutdowns, and then people coming back to work. So like, there was a light switch going on and off, on and off, all throughout the year, ultimately ending with the population all getting COVID and not being at work for two or three months, and then coming back, and the light switch came back on again.
And then in the back half of our Q4, the light switch mysteriously went off, even though there was no rolling shutdowns and everyone was pretty much healthy and back to work. It happened late enough a quarter that we still had a pretty decent Q4 with mid-teens growth, but we saw that trend start to continue into our first quarter and started messaging, messaging that, not knowing ultimately what the real reason for it was, except that the government hadn't "released funds yet," quote, unquote. And that, that environment of lack of funding continued to deteriorate throughout Q1. So, Chuck and I, as Kim alluded to, got on a plane and went over to China, because you learn things there in person you can't learn over the phone. They won't tell you.
We spent the better part of 10 days in October in 6 different cities, talking to many, many different customers and KOLs, and of course, our own teams there. the short of it is that one of the questions we want to understand was this dynamic around the... What's the word I'm looking for, Kim? The
Anti-corruption.
Thank you. The anti-corruption, because we heard that that kinda came out soon after all of a sudden, the funding wasn't released, and there was this anti-corruption crackdown, and that was made public by the government. Well, no one told us over the phone, but once you get over there, what they all tell you is that the locals there believe it's more of a smoke screen. That the real issue is that the government doesn't have any money, and they don't wanna publicly admit that, so they do an anti-corruption campaign to explain why they're not releasing funds.
And if you step back and reflect on them not having money, and I say that relatively speaking, they spent three years of testing their entire population three times a day, with COVID vaccines like crazy, and meanwhile, no tax revenue coming in because everyone was locked down and told to stay home. So no, no underlying tax revenue. So it kinda makes sense that their coffers are a little bit light right now. And so that, everyone there believes, is the root cause for the delayed funding that typically is rolled out. And so the question then becomes: well what's it gonna take for that funding to improve, and when?
And so one of the other observations we had, being over for the course of 10 days in 6 different cities, was kinda observing just the overall economic activity going on in China firsthand. And on the one hand, it was, in the very get-go, as soon as we landed, it was a bit depressing because we landed in the Pudong Airport, which is a major international airport in Shanghai, and you could roll a bowling ball through the middle of the airport and not hit anybody. I mean, I hadn't seen that for 23 years. I've been going there for 23 years and never saw it so empty. And then in addition, throughout those 10 days in 6 cities, staying in nothing but Western hotels.
I'm not exaggerating, I was actually counting a total of 3 Westerners that we saw besides us in 10 days. Again, it's been 23 years since I've seen anything like that. So no question, there's a lack of foreign investment and perhaps investment going out. No one, no one in the West is going there. So there's definitely that situation going on. However, once we left the airport, got into a car, got into the city, got on the road, roads are as jam-packed as ever. Restaurants you still can't get into. People are hustling and bustling in the streets. Starbucks still has a line around the block for it. All the Western hotels are full. They're just full of Chinese people, not Westerners. We flew a number of domestic airports and airplanes. Planes were all full.
Domestic airports were relatively busy, not as busy as they were 4 years ago, but relatively speaking. I was even paying attention to the cranes in the air, right? I always like to count the cranes when I go there, typically twice a year, to see and gauge the activity. Yes, there are fewer cranes, but there were still cranes, and they were still spinning around. And at 3:00 A.M., when you can't sleep in China, I went out and looked out my window, and they were lit up and still spinning around. So yes, the real estate sector is down there, but it's not crashing and burning, or there wouldn't be cranes going on 24/7.
I mention all this because to highlight the fact that we were looking for, is there economic, you hear about high unemployment rates and all that, and if that's true, I don't know where they're at, because again, every place was packed and busy. The most important thing is that there is domestic economic activity clearly coming back in China, so that tax revenue locally will start to fill up the coffers again, and eventually, that money will be prioritized back into life science research, because it is a top priority for china China national security, if nothing else. So, now the question is when? And, that dialogue changes almost by the week because nothing ever publicly gets said in China.
It's all about who you know sits in some government office that happens to leak information. That's how information kinda gets transmitted in China, and so it changes quite a bit. But not to get overly optimistic or not, but the feeling in the ground there is that in life sciences and research, the quarter we're currently in here in Q2, could very well be the bottom, because at this point, you go, you start getting any less in these academic institutions, they'd have to start laying off people, and then China's not gonna do that, not in their government institutions. So this quarter hopefully will be the bottom, and then the question is: When does it start to come back?
By the time we hit Chinese New Year, it will be a full year that this austerity has been in place, and China likes to use the New Year as kind of a renewal for the next year. So there's some at least discussion coming through the chatter that they might start getting a little more aggressive in releasing funds after the New Year's. Now, no one's saying it's gonna go back to the way it was. No one's expecting a V-shaped recovery, but they're expecting more of a long, elongated U-shaped recovery. And as the funds come back, they'll start again, releasing more and more funding. So that's the status as of now. we're monitoring this almost week to week, month to month. Kim says he's going there again in a couple of weeks.
We'll see what they say again on the ground. But that's, that's what we're gonna be monitoring is, is, kinda that level of optimism that we're hearing from the field there on the ground there. So that's kind of the China situation. long story, but I think that put it in all perspective, you kinda have to tell that whole story.
No, I appreciate it. Sometimes people ask me what I... "What's going on in China?" I'm like: I have no idea. But now I can just say what Jim said. So thank you. All right, so just on proteins, just on destocking, I know it's kind of the third tail or third headwind there, or third in scale, I guess. Kind of, have we lapped all the difficult comps from that? And given the visibility you have into those customers, when do you think that when do they start restocking, I guess, is the question.
I think that we saw it across several businesses, not just protein sciences, proteins, and protein sciences segment. We have diagnostic reagents also. that's a division that supplies all the standards and controls to all the big IVD companies, right? The Siemens and Roche and what have you in the world. And we have, we also supply in spatial biology, some of the, for example, like the Leica lab businesses. Those guys usually tend to put bigger orders in, and then over the last couple of years after COVID, everybody was kinda happy that there was a rebound of business. But then there were supply constraints, right?
So everybody was like: "Oh, I, I'm gonna overorder because I wanna run up my inventories, because you never know about the supply chain." By the way, money was still very cheap at that time. So you and nobody got dinged for having high inventories on their balance sheet at the end of the fiscal year. Now we have the pendulum has swung the other way around, right? Supply chains have eased up. So supply deliveries, quality are back to where they're supposed to be. So companies don't have to carry the same amount of inventory as they had to over the last time. In the meantime, last period. In the meantime, money got more expensive.
All the order purchasers, the purchasers in all the companies are getting measured on making sure that you have the right depressed inventory levels right now. It's a total new focus. So we saw it over the last couple of quarters. We saw it last quarter as well in all these businesses. I think we are in the the fiscal years or the end of the calendar year is typically where people draw the line and measure and count their inventory. So I think we're in the midst of the worst of it. And then after that it's end supply or end demand that really is going to pace how much they're gonna order. And we believe that if you look at the indicators of the end demand, they're quite normalized.
Knowing that everybody has kind of burned off their inventories, and certainly we're in a hurry to burn them off before the end of this year when the inventory counts happen, I think that will totally normalize again to where it's behind us. And this and in the meantime, the comparables will be behind us as well. So it's a tailwind. Well, it's a double tailwind.
Yeah, and I'll just add in, in an unusually non-verbose way for me, that I think this quarter we're in, in Q2, will be the end of the worst of it. And as we end it in the back half of our fiscal year maybe we'll even see some slight tailwinds when they start reordering again. But a lot of, a lot of the tough comps that were due to the stocking of COVID, during the COVID times, will be behind us after this quarter.
Okay, that's helpful. And then just on the instrument side of things and the macro that's a business that's held up relatively well the last past year. But it feels like some peers were starting to call out some weakness from that end market. So I'm just kind of curious what you're seeing on the instrument side of things, and maybe if you could split it between kind of consumable utilization versus placements.
Yeah, we talked about the China dynamics, but outside of China, our instrument... Like specifically, for example, the proteins, protein sciences part, which is ProteinSimple, right?
Yep.
So you get different type of boxes, Western blot, the ELISA box, right, and then, and then Maurice for biologics. So all of those have been are, are really applicable in the cell and gene therapy space. So first of all, that space is a is, is fast growing and super, super hip, so there's a good application for all of those in there. a couple of years ago, people were really worried about having too many people in a lab because of the pandemic. Right now, people are not cheap, so most, most people that have laboratories would like to have some automation, right?
And if you're gonna have automation that is nicely, consistently improving your results, and it's not like a $500,000 box, but the price point sits around $50,000, and we have usually anywhere between $50,000 and $100,000. Now, with the very new Maurice Flex, it's a little higher than that, but it's also a tremendous value proposition. So overall that business has been growing really nicely, including China, almost double digits. Excluding China, almost high double digits. So I think that that will continue the trend. So I talked about automation being a mega trend. I talked about the productivity in laboratories, where we fit in very nicely, and I think the end market of cell and gene therapy will continue to pull through as well.
Okay.
I would just add that if you think about our instrument end markets, our strongest growth area for instrument placements over the past several years has been in the biotech space. we typically say academic and biopharma, but the reality is there's three: there's academic, there's pharma, and there's biotech.
Yes.
With cell and gene therapy and our positioning there, biotech has gone from being closer to the size of our academic business to now being our biggest end market. It's been definitely the strongest area of growth for our instrument placement, at least for, again, for the last three or four years. That end market right now, outside—it's everything now outside of China-
Yeah
... is having the hardest time from a funding perspective.
Yeah.
So our instrument placements currently are lower as a result of that. But the actual entirety of that platform, which includes the consumable pull-through, is still double-digit growth, which we see as an absolutely positive sign. They are using the hell out of the instruments.
Yeah
T hat they have because of the... And it to me, it just puts an exclamation point on the productivity.
Yes.
Once the money comes back, they're gonna be buying more instruments because they're seeing how how useful they are in their, in their workflow.
Got it. That's really helpful. Maybe pivoting to your old segment, Kim, just on spatial and this Lunaphore deal. It's, I think Chuck certainly seems jazzed up about it, that Chuck often gets jazzed up about things. But I'm just curious, what does that bring to your platform, the spatial platform? How does it work with ACD?
Yeah. Like this case, I'm also very, very enthusiastic. The... we think about the spatial biology business as basically optimizing your information you get out of precious tissue samples. So cell and gene therapy, neuro, immuno-oncology it's always about what really happens where. So is there a viral vector that gets a gene into a cell? Does it get into the cell? Does it start getting copied? is is there effect? all these things you need spatial biology for. No wonder that the upstream companies, such as 10x, are doing really well in that space.
We love that they're doing well, because early on, you really wanna see—you take one sample, and you really wanna see thousands of markers and kind of, like, know which markers are, are relevant, yes or no. The moment you find out which markers are important, you will have to run several samples, you will have to run with precision, high sensitivity, and you will wanna know exactly what, what happens where on a single molecule, single cell level. And our technology is just amazing for that, and that's the ACD RNAscope franchise, right? Now, as I mentioned, we did not have an instrument that we owned. We, we've been very patient, and we have been collaborating here and there, but we've been very patient to find the right asset.
Lunaphore was, for us, perfect because not only did the RNAscope reagents immediately work on our, on their box, it's also one box that runs four samples at a time. Others run one sample at a time, and it runs for a whole week. We run four samples at a time, and it runs overnight. So the throughput is 20 slides or so a week, which is unbelievable, that level, and then it's totally hands-off. so you design your experiment, which is first of all, very easy, which is also very nice. You just pick a set of antibodies you like. You can use any antibody, even the ones that you've already been using, wherever you buy them, preferably Bio-Techne, by the way, but wherever you buy them.
And then you can pull—you make your setup for your, the, for your experiment with using the antibodies. RNAscope has 47,000 different probes already pre-made, but we can make any other probe you want. So you click those two, and eventually, this fully automated system will then, including staining, including the imaging, including the software readout, it's all kinda hands-off, which is just fantastic. And we believe it's just an amazing box. It pulls through our RNAscope reagents, which is over $100 million in run rate, but it also pulls through antibodies, which is yet another one of our strong cores. So it's just a win-win-win, and we also believe that... So it's a synergistic with 10x.
So these researchers now have a translational setup, and then eventually, if you translate this into a diagnostic setup, you will run one or two markers on a high-throughput system, like a box or a Ventana box. we have the ISO 13485. We already have HPV as an assay in the clinic. So we provide a journey all the way to a clinical assay, which is also extremely important.
Kim, I think we should rebrand it Simple Scope. That's what we should-
Maybe I'll pause there and see if anybody in the audience has any questions.
Could you just spend a minute with your background in Thermo and now Bio-Techne, what's in the minds of the R&D departments of pharma budgets? So what's going on with them? Are they— Why they're making cuts? Because they don't have a colab, is it because they don't have... What, what are the— How do they think about it in some past experiences? What usually happens?
Just to repeat the question for anybody listening online. The question is about what's in the mind of pharma R&D budgets right now. Kinda why are they controlling spend? What are you hearing from them?
I think there's several trends going on. Let's start with macroeconomics. some of the pharma companies are not sure how—like, how they're the IRA and the new developments around how much they will get reimbursed, if their patents will hold. So there's a little bit of carefulness in their whole portfolio. Then think about in the current funding environment, you also don't want to ruin your bottom line and overspend. So I think what they're doing is really focusing, honing in on the couple of programs where they see a strong a strong compound with lesser risk, where they want to make sure they do things the right way, the first time.
So they're gonna make sure that they, they pick the right markers, the right, the right disease, right end markets, and that might mean that they have, they probably take fewer shots on goal, but the ones they take, they really wanna nail, right? And for that, I think we're well-positioned because our core reagents are high quality. Our instrumentation helps the productivity and the consistency of the results. And then, for example, in the old days, you could try a couple of compounds and see how they do in clinical studies.
But if you wanna be careful with your spend, you will wanna create an organoid and look with your spatial biology and see how it does, how your compound works, and toxicity, do early experiments, and use some of our instrumentation to check out if you're on the right path. So I think that's how they're managing through this long and midterm constraint.
Yeah, I would just add, too, that we talk about the tools companies that benefited from pharma and the cash that they have to go out and do a bunch of M&A and things like that, and we weren't necessarily one of those that directly benefited from COVID. I think the pharma companies are similar that way, and there's a lot of pharma companies that benefited both directly and indirectly from COVID and had a lot of extra money to plow into R&D. Our pharma comps are huge, even this year compared to last year. What's kept our growth rates where they're at, all last year in fiscal year 2020, was our pharma business. to offset the biotech, smaller biotech downdraft.
So pharma has amazing comps because of the they were flush with cash and redeploying that cash in R&D from COVID. Considering that comp, and they're still growing on top of that, generally speaking, in the R&D, at least for us, they are, and based on we hear from the other companies, they are as well, albeit not as fast as it was before. But it's, I think, relatively speaking, not necessarily a position of weakness. I think this IRA thing is out there in the future, and that's causing some level of conservatism, depending on where, which pharma company it's impacting more or less, and sooner or later. But there's time for that to perhaps readjust as well. political winds will change, perhaps.
Perhaps not, but it's something we're keeping our eye on, but it's not an overarching concern as of now.
Follow up regarding China. Heard from a similar company that did the same thing.
Yes.
Back to you.
So thanks for the question, and that was actually exactly another thing we've been hearing, and asked those questions directly as well, both of our teams there as well as our customers. And I was very blunt, and I was asking customers: "Are you financially incentivized to buy local?" And across the board, the answer was no. There's no government money for anything, even much less in incentivizing us to buy local. And it's not life sciences. It's a total macro China theme right now, and that's getting...
Not to get into the details, but another observation from this visit versus the last time we were there pre-COVID, four years ago, was on that drive into Shanghai, more than 50% of the cars on the road were local Chinese cars, and they were all electric. Four years ago, they were still mostly Western cars and all gas. So there's... that's an example of how they're focusing local, for sure. In our space, generally speaking, they don't have a lot of local options outside of maybe antibodies. There are a lot of small antibody companies. It's the most competitive environment of any product line we have anywhere globally, but China also. So it's one area of our portfolio, but when it comes to proteins, there's really no viable...
You gotta remember, too, that these researchers, many of them that control the funds of these large academic institutions, hold a U.S. passport. they were educated, did the early part of their career in the U.S. and went back to China because at the time, that's where the funding was. They grew up on Western reagents, Western tools, and therefore they understand the quality difference as well. So it's not to say that China does... They're very innovative folks, and they will eventually have their own life science tools space. But you gotta remember, it took us 40 years to develop the portfolio of reagents that we have, and that's partly why there's, even in the West, not any company that can compare with us, apples to apples, of what we can offer our customers.
That's on the reagent side. On the instrument side, there is no alternative. Our instruments are extremely unique, and so for their applications. So it's not, not to say we don't take Chinese competition lightly. We, we don't. In the antibody space, it is competitive, but generally speaking, all the customers we talked to, KOLs we talked to, said that's when it comes to life sciences, it's not something they, they take very seriously at this point.
It is a good question, though, because longer term, we feel that there could be that risk, and that trend will continue. That's why we are investing in a GMP facility in China. It's being built right now at a speed you've never seen, and it should be operational. We'll go into validations in a couple of quarters.
That's excellent. Yeah, thanks, Kim. That's an excellent point. So, yes, that we actually—we're the contrarians. We're the only Americans who are actually investing money in China. But, but yes, we want... And it's the speed still remarkable. This was approved nine months ago, and it's practically halfway done. We couldn't believe what a beautiful facility they're building. And we did exactly that purpose, 'cause cell and gene therapies is just as big in China as it is anywhere, and that is an area where they are pushing heavily for localization, and so we want to be ahead of that game and make sure we have an offering there.
We got five minutes left, and there's one thing I want to run through, and there may be time for a couple follow-ups. but Jim, your stock's trading, I think, at the lowest multiple we've seen in some time.
Yeah, thanks for reminding me.
Yeah, I'm sorry. Trust me, everybody in this room, I think, is painfully aware of that too.
Yeah.
You're pointing to flattish growth next quarter, but you just had this Investor Day where you outlined kind of mid-teens growth outlook.
Yep.
Can you talk about your confidence that assuming we get back to, quote-unquote, "normal macro," which who knows what that is these days, that you can return to double-digit growth? And then maybe I'm curious for Kim, like, what platforms do you view as key to that?
Well, I might steal a little bit of his thunder in my answer.
Okay. By all means, yes.
But, and the reason is because one of the we, yeah, we monitor run rates, we monitor macroeconomic conditions, we monitor bookings, all the stuff that everyone else does as well. But the other thing that we hone in on every week, every month, every quarter, is how our key growth platforms are doing.
Again, on our Investor Day, what's gonna take us to doubling the size of our company and doubling it again in 10 years is gonna be 4 key, key growth areas or platforms: cell and gene therapy as an end market in itself, our spatial platform that you heard about from Kim, of course, our Exosome platform with regards to spatial biology, and then finally, again, we talked a lot about our instruments and how they're being used the hell out of right now, and they're still way under-penetrated and a long ways to go. Those are our 4 key growth platforms that are gonna carry this company's growth rate in the future. And even in this worse environment that we've seen over a decade, they're all growing high single digit to very solid double-digit growth.
They're just not big enough yet to carry the weight of the entire company. and our core portfolio is what is, I mean, more established and what is called suffering the most from the macroeconomic conditions. But I think that's testimony. That's what gives us all confidence. No matter how bad things look or how bad the print looks, when those four platforms are performing, we know our future is bright.
Yeah. And maybe, Kim, maybe the follow-up for you, just on Exosome, I think that's, that's one deal that, that's taken longer to play out than I think original expectations. Can you just talk about where that is in size today, and when does that get to an inflection point where, to kind of Jim's point, it becomes a more meaningful contributor to the consolidated top line?
Yeah. So, as we put the Asuragen team, the Asuragen business, as well as Exosome together. I don't know if we talk about sizes and growth rates, but growth rates have been excellent in we call it the molecular diagnostics division. Exo took a little bit longer because we were obviously new to the world and the diagnostics world in a way where to market to urologists, we had to build a channel. We had to make sure that we have the clinical data, get the NCCN guidelines in place reimbursement. and it's like climbing Mount Everest. We did it, but it was not easy.
However, we had to commit to get to the top of it just because the Exosome franchise was kinda hinging on the proof of principle of being able to use it in a test like that, right? So yes, we used urine for the first test, and prostate cancer is a very prevalent disease, so those were good. but making it to the critical point where now private insurers are also signing on to cover the test, and we're seeing great progress. Especially the clinical data coming out as to how much better it is than the standard of care, that really validates that the Exosome modality as such, now looking at those little bubbles coming out of cells, is true. And now we've been extrapolating it into kidney.
Like, as we licensed that to Thermo Fisher Scientific, kidney transplant rejection, that is. We are going to saliva with for Sjögren's disease diagnostics. That's a CDx with a big partner. And then we've— eventually we're going to to show data around colorectal cancer, which is something also that we would license out, but it shows that we can also have Exosome-based tech assays in blood, right? So then we've basically proven the Exosome modality. We've proven that we can do any liquid, liquid, bodily liquid, and have a much better test than the ones available.
So we're gonna roll that out, and some of the assays we actually throw into the Asuragen team to make a kit, to sell it through their, through their, laboratory channel and then have a win-win. Some of the longer shots, we will parse out to the rightful owners, where we do something similar as we did with Thermo, where there's upfront fee, milestones, and a perpetual high double-digit, royalty associated with it. We will never be the company that goes like: Oh, let's go it all ourselves and, and run $10s of millions, in, in clinical studies and, and become a diagnostic company that way.
Our portfolio in Exosomes, we can definitely bring a couple to the laboratories ourselves, and then for the big, the big cost ones, we will go to the specialty companies and license our technology.
And, Jacob, real quickly, I'll just add. so roughly a little less than doubling the size of the business today will get us to profitability. At a 50% growth rate, you can do the math as to how long we think that might take.
Yep.
50%+ growth rate. And in terms of additional investment needed to support that growth, particularly as it pertains to Exosome, minimal, because it... The commercial, the local reps that support these urologists are fairly concentrated. We made those investments the last two years to fill out that sales team, so it's really just leveraging what we have.
Got it. Well, unfortunately, we're out of time, so I don't get to pester you with cell and gene therapy questions. But Kim and Jim, thank you for, for being here with us today.
Yeah. Thanks very much.