Thank you, Jared. It's like the.
All right, I think we can look to get started. Thanks for being here. I'm Patrick Donnelly, the tools and diagnostics analyst here at Citi. Happy to have the Bio-Techne team with us down here. You know, maybe we can dive in, Kim, just in terms of we were just chatting a little bit about things like China and some of the election topical. It feels like things have cooled down a little bit, but maybe on the academic NIH side, the whole RFK appointment or potential appointment kind of weighed on the group, and you guys included it. I guess it's the right way to frame some of the changes on the election, the appointments that you've seen. Maybe we can start with U.S. academic, and then we can kind of shift around.
Patrick, well, first of all, thanks for having us. And yeah, excited to be here. We had a very, very encouraging Q1, 4% growth as we have continued our outperformance against our overall market. We were, yeah, very, very encouraged coming into the quarter. As you know, we have had our thesis as to how our fiscal year will develop. We already called earlier this calendar year that destocking would be over, and that came true. Then we were mentioning that an improvement in biotech funding would create a tailwind, followed by China in Q3, and then pharma spend in Q4, right? The elections, of course, happened in the meantime. We're glad that some of the who knows what's going to happen is past us. We now have a president-elect. Overall, we feel that that's going to bring with it a pro-business environment.
So positive tailwind, possibly for M&A environment, as well as possibly corporate taxes. So all that feels pretty good. To your question, some of the nominations, of course, those are nominations. They're not really done and set yet. There's the FDA, the NIH directors, the HHS. It brings some volatility with it and speculation. But overall, after all the puts and takes that we get out of all the analysis and thinking through the propositions in the future, we feel that it is neutral to slightly positive for us because the narrative definitely is that the use of proceeds would shift a little bit from more pandemic-related investments, vaccine-related investments, to the chronic diseases. And our portfolio, our product portfolio has intentionally been very aligned with exactly those end markets, neurology, immunology, as well as oncology. And that's definitely for us an encouraging sign.
Academic, as you asked, 12% of our revenue is related to academic, less than 10% related to NIH funding. Overall, NIH funding, of course, is important. But we have always said, not only after this election, but in general, we've always said that the use of proceeds of the NIH is more important for us than the absolute number. Now, in the previous time that President Trump was in his position, the NIH funding went up 6% and 8% respectively in 2017 and 2018. So that had a positive effect. But nonetheless, the use of proceeds into the chronic diseases versus epidemic-focused funding for us is a positive sign.
Yep. Yeah. What ended up happening versus proposals were a little bit different last time, for sure. And I guess when you think about China, another topic that comes up a lot with you guys, and then again, post-election, probably even more so, 9%, 10% of revenues for you. How do you think about that setup? You have been somewhat confident in terms of some level of recovery. The stimulus certainly matters to you guys. Maybe just give us a little bit of the state of the union on China and if anything has changed there.
Yeah, you're right. 9% of our revenues comes from China. It's always been a very, very healthy mix for us there if it comes to instrumentation and consumables. We've talked about a year, year and a half of scraping the bottom there and resetting the business. Obviously, a lot of international activity in China has left the country. We've seen heavy utilization of our instruments installed base, so we've seen double-digit growth, seven out of the eight quarters in China if it comes to consumables that run through our installed base, so very encouraging signs. Our sales team has worked with customers that are applying for grants, so we know relatively precisely who is ordering what, and it's been encouraging. It's not going to be a huge revenue wave that will come through our company as has happened in the past. But we certainly think that it is the differentiator from being a detractor and a negative revenue growth to a back-in-the-black China for us. And that will therefore mean less headwind from the China region for us.
Yeah. And in terms of the stimulus, some of the instrument players have called out there was activity and everyone was waiting on the orders. And apparently, a few of them have seen some orders come through. What's your view of just the cadence on the stimulus front? How impactful could it be for you guys? And what are you seeing on that front?
Yeah, I think our team has always been very, very thoroughly in touch with the funding and the local government. And we have, to be safe, called that it would be our Q3. So in the calendar Q1 that we see the benefit from that. Yes, there is some opportunity that orders would translate earlier, but we have budgeted and so far operated with the assumptions that this would come through in our Q3. And all signs are still on green that that would happen. And if it comes to quantifying it, I just did a little bit in that I mentioned that it would bring our negative growth back into the black and there would be more in line with the growth of the overall company.
Yeah. And then just to close the loop on some of the changes, the tariffs, maybe just refresh us on what you guys saw the first time around and if you're expecting any real impacts on that front?
The tariffs last time around, our products were excluded from tariffs. And we assume that would be similar again. And mainly because China is obviously very keen on making scientific progress in cell and gene therapy. Our instrumentation, as well as our consumables, would enable such breakthroughs and progress. So it would shoot itself in the foot by making it more expensive to have this instrumentation and access to technology. The other way around, our purchases in China are extremely minimal. So I wouldn't know of products or raw materials that we buy ourselves in the region. So I think we're relatively immune from that possible tariff issues.
I guess China, broadly, right? I mean, it's been a challenging region for the whole group for a stretch here. Before that, it was this phenomenal growth opportunity. You guys were probably leading the charge in terms of the growth numbers you put up there. What's the right way to think about just that region as you look the next five plus years? Is it more in line with the whole company? Is it still growth accretive? What's your view on that?
So my view would be that it obviously came from a reset period where funding stimulus, as well as the overall activity in the country, has been very much subdued. The international activity level, as I mentioned, has gone almost to zero. And that was a tough six quarters or so of reset. Now, you take that out of the base and you look forward, there's still over a billion people, obviously, in China, but a government that is definitely interested in making progress in treating diseases and showing its prowess. And cell and gene therapy is an opportunity to kind of quantum leap decades of small molecule and large pharma progress and research. So it's a fantastic opportunity. Yes, it's reset its base, but our assumptions are that with that reset, the growth opportunity is very similar to how it has been in the past. So in line, just on a different base.
Yeah. And it seems like there's pockets over there that you guys touched on cell and gene therapy, spatial. I mean, are there certain verticals where maybe it's a little more in its infancy over there and you guys have the opportunity to still see some pretty healthy growth?
Yeah, exactly. Spatial has been very healthy growing even through this couple of years of reset. And then, yeah, there's over 2,000 cell and gene therapy clinical studies going on. And we have obviously a participation through the G-Rex, an acquisition, future acquisition of Wilson Wolf, but also with our GMP reagents, which are very differentiated and definitely a key building block for all the programs going on in cell and gene therapy. So our product portfolio is nicely aligned with our GMP proteins and GMP small molecules, as well as GMP media. So in addition to that, our portfolio of protein analytics, also essential for cell and gene therapy, is nicely aligned. Combine that with the spatial effort. Overall, we see that those businesses would be setting the pace for the growth in China.
Okay. And then, maybe kind of step back, looking at the whole business. You touched on GMPs a few times there. I think it was 60+% growth last quarter. I mean, certainly jumped off the page. Can you talk about what drove that growth? Obviously, I assume 60 isn't the right number to just pencil in on the go forward. Jim would be a little worried if we did that. But how do you think about just that business, what you saw in the quarter, and what's the sustainability of just overall strength there?
Yeah. So Patrick, one of our principles that we have as a mega trend for the company is we always figured that research and RUO reagents are very important, but eventually, companies would progress through clinicals and eventually then have either a diagnostic or a treatment. And we wanted to make sure that as an RUO company originally over the last half a decade, that we enable the customers to stay with the products they know so well and therewith offer up GMP validated and certified core reagents. And that really nicely aligns, of course, with the different stages the company goes through in order to get to a therapeutic. The funding has been coming back, and we know relatively healthy funding compared to 2019 and 2023 if it comes to pharma, biopharma.
There's a little bit of a focus of the use of proceeds there too in that it is not really aligned, it's not really going into the research efforts, but more pointed towards later stage clinical efforts, lower risk, and closer to revenue. And our GMP portfolio, of course, is very nicely aligned with that. We did see the 60% growth we're proud of, really great. That's really why we did all these investments in GMP capabilities. Don't always pencil it in. We do have a healthy pipeline. But since it can be lumpy, we've talked this last quarter, and we will continue to talk in the future about the 12-month trailing over the subdued last year has been very high teens, so 19%. And that we would give as a kind of a guardrail, a lower guardrail.
And then 60% is just not going to be every quarter the case, even though I would like that. But that's kind of the upper guardrail there. The nice thing is that we had a couple of larger orders that came in, and that's always a good sign because that means people are making progress. But then again, we also saw a healthy progress in adding customers to our funnel, but also the overall average order size of the current 400 customers we have. 56 of those customers are in clinical stages, of which a handful are in stage two. The others are all in stage one if it comes to clinical trials.
Okay, and maybe on that kind of earlier stage stuff, I mean, biotech, I think you guys talked about this quarter, funding continuing to improve, just the activity levels there getting a little better. What are you seeing from that customer base? What's the right way to kind of build those expectations?
Yeah, we had called that Q1 would still be relatively subdued, even though there was a good activity level I mentioned in larger orders, but also in the run rate business. We identify run rate business as orders under $10,000. So we kind of look at activity level as to how healthy is the activity level in the markets. We saw that in the last month of Q1 definitely picking up. And that's why I think that's one of the reasons why we ended up with a 4% growth versus kind of what we expected was lower single digits. And through our earnings call, we saw the activity level continuing to be healthy. And that's very encouraging for us. It's a sign that overall activity level and funding is trickling through and having its effect.
Yeah. And I guess when you think about, maybe we could touch on kind of that pharma end market a little bit. I guess the IRA piece has come up a little bit with you guys. What's the right way to think about that potential impact, how large pharma is going to behave in terms of the spending? Is that headwind going to linger? And is that the last one to turn? What's your view just in terms of how that plays out?
I'll start back a little bit longer ago. So during the back end of 2023, calendar 2023, obviously, larger pharma was making their budgets. They had several risk factors in there. One was the IRA and what the impact would be. High inflation, also high interest rates. So a tough environment to crank up spending, and we immediately noticed it in our Q3, calendar Q1, because it was subdued. It's been flattish. I mean, don't mean from growth, but scraping along. It's stable, stabilized since, and we, of course, have connections into these corporations, but also we know how the budgeting cycle works. Right now, budgets are in the making or being finalized for the upcoming calendar year. Our assumptions have been that there's more know-how around what the IRA impact will be, more know-how as to where interest rates are heading and inflation.
We think therefore that budgets are going to be in a better shape than they were during calendar 2024. Since that's not going to impact the 1st of January, we have mentioned and kind of guided that for us, we think that would be a Q4, fiscal Q4, calendar Q2 type of impact. Also there, we are not assuming a full turnaround, full spend, everything back to normal. We expect an improvement in general of activity level in pharma.
And I guess you touched a little bit on kind of the year-end there. I know your guidance did not assume much of a budget flush. And again, you guys don't have the biggest equipment exposure. But has it been kind of as you expected on that front? Any reason to believe there's going to be a material budget flush or are things still relatively quiet on the equipment side?
You're correct that 80% of our revenues is related to consumables, consumables you would use on a daily basis. So there's relatively little stocking. There's relatively little effect from budget flush. So I hope for our peers that have more exposure to larger equipment purchases that there will be a budget flush. But for us, it's typically not a deciding factor.
Okay. And then, Jim, maybe just on the margins, those always in focus with you guys, kind of guided first half, second half very differently, right? I mean, 200-300 basis points contraction in the first half, and then that flips to the 100-200 basis points expansion in the second half. Maybe just talk through the moving pieces on those and just the visibility into that back half ramp and what leads to that.
Yeah. So as a reminder, the contraction largely in the first half of the year was driven by a reinstatement of our incentive compensation accruals throughout the company on a cash basis. So that was the biggest driver of the year-over-year contraction for the first half year because we took those accruals down mostly in the first half of last year and hope to reinstate those the first half of this year. As we get into the second half, whether you look at it from a year-over-year perspective or even from a sequential perspective, let's talk about sequentially first because there's a significant sequential step up expected in the margins in order to get to that 100 basis point or more improvement year-over-year, and the first being just kind of the natural flow of our business.
So if you go ahead and look back at history, our second half revenues are markedly higher than our first half. And it really has to do with vacation schedules. September quarter, December quarter, much more heavy with vacations versus the March quarter and June quarter. That's really the gets back to the daily run rate nature of our business. So that natural lift in revenue, you just get more leverage and you get an uplift in margins there. As we talked about our expectations and our modeling for the call it the slow- road recovery throughout the year and the steps we get there as that growth recovery incrementally begins, I think we think it's began to happen now in biotech. We hope to see it happen in our third quarter with China, followed by our fourth quarter with pharma.
That additional growth, additional volume leverage allows for yet again a better margin and more importantly, better mix. Because what we've experienced most recently has been just kind of a triple whammy on mix. Our core reagents are our most established products, most competitive products are going to be most impacted by the market, but they're also our highest gross margin pull-through. And so they've been down where, say, our diagnostics and genomics have been doing very, very well, but it's a lower margin pull-through, at least today it is. And even within our, let's call it our protein sciences segment, when you look at our instrument business, ProteinSimple, that's done better than our core reagents, but still great margins, but yet a lower margin pull-through. And I can dissect that even further and talk about the mix within ProteinSimple, which is 50% cartridges, 50% instruments.
And we actually get higher margin on the instruments than we did the cartridges. And yet the cartridges have been growing double digits, but the instruments have been down. So there's been kind of this massive mix issue that we've been facing the first half of the year. As the markets recover, we should start to see that normalize and that higher margin pull-through. And then last but not least, Patrick, we obviously haven't been sitting on our hands the past year and a half at the mercy of the markets. We've been, especially since Kim's taken control here the last year, really looking at our cost base, making sure we have the right resource alignment with the relative revenue. We've been looking at various sites and redundancy there for centers of excellence and done some closures.
And then, last but not least, we've also been looking through our entire portfolio for those nuanced product lines that came with acquisitions that were never strategically important, but didn't have the time to do anything with them strategically. And they're not necessarily accretive to our growth nor our margins. And so, pruning some of those as well. So, I think we're, I would argue, the best position we've ever had then from a cost perspective right now to get additional leverage when that revenue growth returns. And that's really what's largely behind the 100 basis point plus improvement we expect in the back half of the year.
Yeah. And I guess to kind of dig a little deeper into that, I mean, there was certainly a period where you guys were, you're heading to 40% on the margins without slowing down. And then there's some dilutive deals. And then to your point, mix. And then incentive comp. I mean, there's been understandable headwinds. I guess where are we now as you look forward? And again, obviously, we just started fiscal 2025 for you guys. But just in terms of that trajectory on the margins, what are the levers there to keep it going? And again, is that realistic to think that you guys can get back on track and see real expansion towards the high 30s?
Yeah. The largest lever is our contribution margin. I mean, we have extremely high margin pull-through almost on all of our product lines. And so getting a return to mid and then high single-digit growth and eventually double-digit growth will be by far the biggest levers that we have to leverage our cost base. And I think just looking very simply at our first half revenues versus our second half revenues and seeing how much of a margin impact just that is gives you a sense for what kind of impact the top line growth drops through the bottom line. So our long-term models still today get us back to the high end of the 30s, even low end of the 40s, somewhere in five to seven years from now organically. But you'll hear Kim and I say that our long-term expectations is to be in the mid-30s. That's because of the M&A that we still intend to probably do over the next decade.
Yeah. No, it's hard to find deals that are margin accretive to you guys, obviously.
Wilson Wolf.
Wilson Wolf. There's one. There's one. Yeah, maybe that's a good segue into just the M&A landscape. Kim, you touched on the beginning. Maybe this new election cycle is a little more friendly on the antitrust and M&A side. What is your guys' appetite, to your point? Wilson Wolf was an attractive one, an ongoing, in which we'll dive into that a little bit. But just on the M&A side, what's the pipeline look like? Are valuations a little more reasonable and your guys' appetite?
Yeah, the last year, the valuations of good assets have still been relatively high. And of course, we have a full portfolio. We have appetite for private as well as public deals, large as well as small. But we are very disciplined in the requirements, right? So we're relatively good. We're very good, I should say, but when we be polite, we're relatively good in scoping out and assessing technologies and winning technologies that we want to invest in. We are very precise in knowing what we want and what would fit our strategy and our setup with the core as well as the four growth verticals that we've talked about. So we're good integrators. So all that is in great shape. We've also added capabilities within the company if it comes to our strategic thinking and our execution on M&A side.
But we wanted our targets to have the ability to be, of course, growth as well as bottom line accretive over time. And we would like to see ROIC that is over 10% after five years. So we do have these requirements. So we'll continue to be disciplined. But we do feel that the upcoming year that we are going to have a larger shot at, not a larger shot, a better shot at getting more deals done just because we as a team, as a company are more ready. We have worked really hard on integrating and getting the Lunaphore acquisition on the rails. It's going really, really well. So we're proud of that. And I think we can now even more so look forward to being more active.
And the Wilson Wolf piece, you touched on a little bit on. I mean, can you just talk through the synergies on that front? And then probably, Jim, just structurally how that plays out. Obviously, a unique acquisition in the way you guys structured it in terms of the closing. But yeah, maybe we can start with the synergies and then just the progression of it.
Yeah, I'll take the first part of that question. Synergies, obviously, we have this 37 years in the making core business, right, where there's all the proteins, antibodies, and GMP, small molecules, et cetera, that we've pulled through into different areas. For example, in proteomics, we did the ProteinSimple acquisition to eventually pull through antibodies and those reagents. And it's a win-win, right? So we have a differentiated equipment that then looks really good because it pulls through high-quality reagents. And for us, it's great because these high-quality reagents come with very high margins and find their way to the market that way next to going direct with those reagents. The setup with Wilson Wolf is very similar. So it's not an instrument, but it is a disposable. It's a container that has kind of a bioreactor that you use to grow cells.
It has a very nifty patented air permeable floor or bottom, which is very good for growing cells. It's more efficient than other modalities, but it's also scalable because it has a relatively small size and you can put many of them into incubators. There we've run several patients, tens of patients, really, in parallel. It's a very nifty patented differentiator. It pulls through all the ingredients you would need to grow these cells. That's exactly what our core businesses have been working on. We have these 40-plus GMP proteins that you could pull through. We have the GMP small molecules as well as media that you would have to enter it to link more of our reagents towards the G-Rex, which is the name of this consumable disposable.
We've just launched ProPaks, which are basically sealed bags with the right dilution of proteins and the right quantity to make it less operator error prone. And then also to make it a closed system so that contamination is less of an issue. And that way, we provide value to the customer and we pull through our reagents through this consumable. 45% of all clinical trials globally in cell and gene therapy are utilizing the G-Rex. So it's tremendous adoption. And they're progressing through the clinical trials. We have 800 customers. And we have five drugs that are now on the market. So absolutely a fantastic setup for us to pull through more of our consumables. And the deal?
Yeah, the construct of the deal is a reminder. We own currently 20% of the company. There's an agreement, mutual agreement in place that we will purchase the remaining portion of the company no later than December 31st, 2027 on a 4, I think it's 4.4x trailing twelve-month revenues. However, we can execute that sooner by way of earnout if they hit TTM revenues of $226 million or adjusted EBITDA TTM of $136 million. You do that math, you say, well, that's a pretty high pull-through. Well, believe it or not, their EBITDA margins today are actually north of 70%. Now, we're not saying it will be that high under our ownership. There's things you got to do for a private company to make it public worthy. We've modeled more like a 60% under our ownership in the future.
But there is a, and it's a deal where neither one can unilaterally pull out a deal. The only way the deal would not happen is we both mutually agreed not to consummate it, which obviously we're not intending to do that. And I don't think John Wilson is either. And again, that buyout for the next 80% is about a $1 billion purchase price. Our base case is still that it will be the end of 2027 at roughly 4.4 times revenue. John Wilson, the owner of Wilson Wolf, believes it could be as much as a year earlier. And the reason he has that view is understandable because, as Kim mentioned, there's 10 cell therapies that are currently approved and Wilson Wolf in five of them. And those five alone have just given their forecast for their first year of commercialization. And the growth is pretty outstanding. So there is a potential, definitely a potential for us to acquire that sooner by hitting those numbers. And it will likely be the even number that gets hit before the revenue if, in fact, we do an earnout.
Okay. That's interesting, and then I wanted to circle back. You mentioned core reagents just on the margin front, obviously being higher margin. Can you just talk about the core reagents backdrop, what you guys are seeing there? I mean, that's certainly a question we get a good amount is what that recovery could look like. What are the key metrics you're looking at on the core reagent side, but yeah, curious just what the trends are on that front.
Yeah. So we typically look at our, we call it a run rate business. Run rate business, mentioned earlier, is basically all the orders under $10,000. So that's the high-frequency orders of our core reagents. In our core, we have the proteins, the antibodies, as well as diagnostic reagents in general. And we've seen the run rate business tick up. So the number of orders have continued to grow as well as the average order size. So we're very encouraged about the initial traction that we saw at the back end of Q1 and in line with our expectations, in line with our prognosis that some of the funding would be trickling through and the activity level increasing. So that's very encouraging.
Okay. And then I wanted to talk a little bit about COMET. The demand there has been strong. Can you just talk a little bit about the adoption curve there? The consumable pull-through will come. But maybe we can start just on the adoption and then that opportunity as you look out to where the pull-through could make it really attractive.
Yeah. COMET is the name of the instrument that we acquired through the acquisition of Lunaphore . This is an automated instrument for spatial biology. We already had a larger asset in ACD, which are RNA-related probes, reagents to interrogate tissue and RNA. And we sold these reagents for manual usage, but also for high throughput on Leica and Ventana. But we always wanted to have an instrument in the translational aspects of the spatial biology business. And we really are happy with the adoption and the capabilities of this COMET instrument. It's fully automated. So from the moment you have your tissue on a slide all the way through an image on your computer is fully automated. No hands-on time required. It runs overnight. You can run four slides at the same time. So much higher throughput than any other competitive instrument.
And it is differentiated in that it's multiomic. So multiomic in this case means you can look at that we have 50,000 RNA probes. So you can look at and we can make any custom probe you would like. So you can look at everything that's going on an RNA level. And this usually translates into a proteome being present or absent. And for that, you would need an antibody. And we happen to have lots of antibodies, hundreds of thousands, really, that then would give you the proteomic aspect. So a multiomic instrument pull-through is right now with the microfluidic device around $45,000 per instrument per customer. But we feel with the pull-through of RNAscope and the pull-through of antibodies that we ought to be able to double that to $90,000 plus dollars per instrument.
That would then showcase the capabilities of the instrument, which is really differentiated, but then also the multiomic aspects. Of course, aligned with our core reagents as well as our RNAscope portfolio, it would be a fantastic solution for the customer. Of course, for us, a real nice high-margin pull-through of our reagents.
Yeah. And what would the timeline be? And what are the keys to unlocking going from 45 to kind of doubling that on the pull-through side? I mean, what do you see as realistic in terms of that?
Yeah, I think we are currently. We have offered this multiomic capability to some VIP key accounts where you want to kind of learn how the robustness is and how the experiences are because you don't want to have any customer have a negative experience. And so far, we've learned a lot. And we see tremendous capabilities and robustness in the processes and in this setup. And we are about to start rolling that out to the broader installed base. And every future instrument will have these multiomic capabilities. So we feel that it's going to be gradual, but it is definitely an opportunity for customers to jump into because it's the only solution really that has these multiomic capabilities. You would be able to look at 12 RNA targets and 24 proteomic targets all in one slide in parallel.
Okay, and maybe in the last couple of minutes, I mean, Exo, it's been a little quieter on the Exo front, but I mean, the execution seems to be going well. Obviously, continue to put up pretty good numbers there. Maybe just talk about what that platform looks like now. What are the opportunities to continue to grow? And again, obviously, always a focus on kind of that inflection on the profitability on that piece.
So in the molecular diagnostics division, we have the ExoDx acquisition from about eight years ago, seven years ago. And that was really an acquisition around the ability to interrogate exosomes, right? The small little vesicles that pop out of cells with high-quality RNA and proteomic information. And then we've done an acquisition three years ago for Asuragen, which is a team that has a portfolio of genetic testing kitted solutions that you sell into laboratories. Now, we think that the combination of those two is the true go-to-market for us. To prove out the exosome capabilities, we went to market with a prostate test, ExoDx Prostate test. And we had a tremendous learning curve and, of course, proven out that exosomes do give you a higher sensitivity. And really, it's not quiet. We've talked about how 2023 was a real breakthrough year.
Obviously, during the pandemic, fewer men went to the doctor. So that's a couple of years that we have to take out of the equation. But 2023 was a breakthrough year. And right now, we've talked continuously about 40% growth quarter, every quarter, more or less. And so adoption is fantastic. And it's proven out our ExoDx promise, exosome promise. From there, we had a couple of opportunities that we did not want to chase ourselves. And one has been the kidney transplant rejection test. We've partnered with Thermo Fisher Scientific, the One Lambda entity that has fantastic capabilities of donor matching testing, as well as now this future test for kidney transplant rejection. That's going really well. Any other of these outside of our core opportunities, we would also partner for.
However, we will now launch a kitted test on the Asuragen kind of platform, which is qPCR-based, typically in a kitted form, which does interrogate exosomes. So there's an exosome extraction part of that kit. And that goes through our productized laboratory channel. And that's really where we want to build our menu, where there is a clinically proven opportunity. In this case, our first test will be around ESR1, which is a breast cancer treatment resistance marker. And we will continue to roll out a menu that takes the benefit from the exosome interrogation and then takes the benefit of having a laboratory channel and sell kits, product kits to laboratories to then have a win-win. And that's for us more global and more aligned with our setup as a company.
Yeah, and then, Jim, maybe quickly, that has been dilutive. I know as it gets reimbursed, it has potential on the profitability. But I guess where are we on the Exo profitability trajectory there?
We actually look at Exo and Asuragen together now as a single business unit because they're consolidating their products and development and so forth. And as a group together, we see probably a year to maybe a year and a half of breaking even. And then projecting from there with very high, nice gross margins that it has.
Okay. I think we're up on time. So Kim and Jim, thank you so much. This was great.
Thank you, Patrick.
Yeah. Thank you. Cheers.