Good morning, and welcome to the Bio-Techne Earnings Conference Call for the First Quarter of Fiscal Year 2021. At this time, all participants have been placed in a listen-only mode. And the call will be open for questions following management’s prepared remarks. During our Q&A session, please limit yourself to one question and a 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 Kummeth, 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-19 pandemic on our operations and financial results.

The company's 10-K for fiscal year 2020 identifies 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.

The 10-K as well as the company's other SEC filings are 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 performance, 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 first quarter conference call. Despite the lingering effects of the COVID-19 pandemic, the Bio-Techne team delivered an outstanding start to fiscal 2021.

Our organic growth accelerated 10% in the quarter, returning to our pre-pandemic double-digit organic growth trajectory and topping our initial expectations for flat organic growth.

Our business benefited as labs continued the reopening process with researchers returning to the bench in greater numbers and restarting projects that were paused during the height of the lockdown. Our Q1 top line results are even more impressive considering the 13% comp we faced in the quarter from the prior year to 38.2%.

I would note, this is our best operating margins results since our fourth quarter of fiscal 2018. This sequential and year-over-year improvement was driven by our biopharma end market and the return to growth by our academic customers.

As more and more labs reopened throughout the quarter, we saw increases in both the volume of reagent orders, as well as reagent order sizes, which may be indicative of summary stocking activity as researchers return to work.

What we are learning from our customers is that when they return to work, as you might expect, the lab environment is not always the same as it was pre-COVID.

For example, researchers are often on staggered shifts, which means not as much physical timing be spent in the labs as before, and our sharing lab instruments may not be conducive to social distancing requirements.

Thus, our lab productivity tools were also seeing follow-on purchases of these automation tools from existing customers that previously use them in a shared lab, but are now buying them for specific departments within their research organization.

This surge in lab productivity tools extends beyond our protein instrument platforms and into our genomic assays as well. We have an often - we have often marketed our RNA scope assay as a tool to find a gene of interest in a sample before hunting for the express protein using antibodies. More than ever, this message is resonating with researchers.

In the current environment, they have been telling us that they need to know the answer the first time, thus, we have been seeing a surge in demand for our RNA scope just as we have our automated protein platforms.

Another impact of the lab environment, not being the same after research is return to work is a method in which we communicate and consult with our customers.

As you can imagine, most labs are not allowing visitors on our portfolio of reagents, protein analysis tools, cell and gene therapy workflow technologies, as well as liquid and tissue biopsy solutions.

Also, our commercial teams have used time save by not traveling to customer sites to aid our web support teams and uploading over 30,000 new images to what was already a best-in-class website.

It is clear that effective digital outreach to our customers will remain an important component of our sales and marketing process throughout the pandemic and beyond. Supporting our digital sales and marketing efforts, we recently rolled out an enhanced Bio-Techne website experience we refer to as OneWeb.

This new website brings all Bio-Techne's brands together under one easy-to-navigate site, simplifying the process of finding products of interest while driving awareness of our complete product portfolio.

The OneWeb strategy also enables a single card experience for our customers and leverages enhanced algorithms to make product recommendations and drive additional cross-selling opportunities across our portfolio.

We concluded a successful OneWeb soft launch in early October, and we'll be launching a full marketing campaign to coincide with the scale launch in November. Now let's discuss performance of our key growth platforms, starting with the protein sciences segment, which we grew organically by 8%.

Our portfolio of protein analysis instruments, namely our simple western automated Western Blot systems, as well as our multiplexing platform, SimplePlex, had an incredibly strong quarter, growing north of 35% and 75%, respectively.

As I mentioned before, the walk away automation enabled by our simple western instruments is perfectly designed for researchers in need of ways to increase productivity while partially opened. Also, we continue to expand the capabilities of our simple western platform.

During the quarter, we launched the ability to analyze the same sample twice in one run in our just automated Western Blot system, a capability we call RePlex. Initial customer response to RePlex has been very strong.

We also launched a multi-antigen COVID assay that enables the quantitative characterization of patient serum or plasma IgG antibodies against five SARS COV-2 antigens simultaneously in 1-3 hour RUN on both our Wes and Jess systems. With SimplePlex, Ella remains an important tool for research surrounding cytokine release syndrome in COVID-19.

However, the growth was much more broad-based than COVID-19 in the quarter as we saw a significant demand from CROs and biotechnology companies for neurodegenerative diseases. We believe the high sensitivity, combined with an attractive price point, positions Ella to become an important tool in neurodegenerative research going forward.

Moving on to the reagent part of our protein sciences portfolio for Q1, our core research protein and antibody sales performance improved significantly from Q4, but was still relatively flat year-over-year, as strong demand from biopharma customers was not enough to completely offset academic labs that made progress reopening, but have now got GMP protein manufacturing facility in St.

Paul, Minnesota. As a reminder, this facility has capacity to produce at least $140 million in GMP proteins and reagents annually. We remain on track to complete the qualification of the facility in early calendar 2021, immediately followed by the start of the production process for commercial proteins.

Over 30 years ago, we created a category of research proteins and the R&D systems brand is now synonymous with the highest level of bioactivity, quality and lot-to-lot consistency. We look forward to replicating this position in the emerging category of GMP proteins.

Our JV of Fresenius Kabi and Wilson Wolf remains a key pillar in our cell and gene therapy strategy. The JV has been branded as scale-ready. And efforts are actively underway to educate the cell and gene therapy ecosystem on the complete workflow solution offered by our collective portfolio.

We believe the modular workflow, which includes biotech's augmented beat-based cell separation and activation technology, non-viral vector-based gene editing technology, GMP proteins and other products paired with Fresenius Kabi's Lovo leukapheresis instrument and Wilson Wolf GRx bioreactor creates a compelling cost-effective solution necessary to accelerate broad availability and adoption of cell and gene therapies as they make their way through the FDA approval process in coming revenue over the prior year.

Our Genomics division had a strong start to the fiscal year with Q1 revenue increasing over 30%, led by its RNA scope and related pharma assays services, the growth was broad-based across geographies and end markets as interest in spatial genomics paired with a single cell resolution and productivity provided by our Genomic solutions versus traditional IHC drove demand across the portfolio.

During the pandemic, the ACD team made a concerted effort to educate our biopharma customer base on the pharma assay services offered by the genomics business, which enables researchers to outsource their spatial genomics analysis to us.

These efforts paid off in Q1 as our PAS business grew almost 60% and allowed customers to stay on track with their research despite more limited and staggered shifts. We saw improvement as the quarter progressed. Overall, ExoDx test volumes increased over 50% sequentially and are approaching pre-COVID volumes.

Our at-home test collection kit continues to have a positive impact on volumes as doctors leveraged telehealth strategies to keep their patients engaged during a pandemic.

We have used the COVID-19 pandemic as an opportunity to fortify our ExoDX sales team and marketing efforts, strategically adding or replacing reps in high potential or underrepresented geographies. The impact of these moves is starting to gain traction in certain territories.

For example, we are seeing positive momentum in the Northeast region, especially New York City, providing surpassed pre-COVID levels. In Q1, we also announced a very high-profile national marketing campaign with Baseball Legend and Hall of Famer, Cal Ripken Jr., to build education and awareness of the ExoDx Prostate test.

We kicked off this partnership with a webinar to discuss his personal prostate cancer journey, including how the ExoDX Prostate test impacted his biopsy decision and ultimately, treatment of this condition. We are currently rolling out additional direct-to-consumer advertising with Mr.

Ripken, including a sports radio advertising campaign and WebMD patient advertising. We are extremely excited to have Mr. Ripken as our spokesman and share his experience with our tests.

But more importantly, we are thankful that he decided to take the ExoDX Prostate test that led him and his doctor to the potential life-saving decision to get a biopsy and catch his cancer early. Next, I'll provide a brief update on our COVID-19 initiatives.

We continued to build our COVID-19 product portfolio during Q1, expanding our portfolio with multiple new reagents and assay products to help our customers improve their understanding of the disease, develop therapies and vaccines to combat the virus, as well as screen and diagnose infected patients.

We estimate COVID-related research products provided a 3% uplift to growth in the quarter. Also, we received some good news last week on the COVID seroclear quantitative COVID-19 IgG antibody serology test kit. The assay received CE marking and is currently available for use by any authorized testing laboratory in the European Union.

As a reminder, this novel quantitative serology assay utilizes two virus antigens correlated with antibody neutralization to provide important information regarding a patient's past infection with COVID-19 and immunity to the virus.

Dialogue continues with the FDA on the issuance of an emergency use authorization, or EUA, approval for the COVID seroclear assay kit.

We expect COVID-19 research to remain a life science focus for the foreseeable future, benefiting our existing COVID-19 portfolio, and we stand ready with a quantitative antibody serology offering that we believe will help people and society at large, better understand their susceptibility to contracting the virus, allowing them to make the decisions that will help keep them safe while returning to a way of life, we once all enjoyed not too long ago.

Before I pass the call over to Jim, I want to give some perspective on the outcome of the recent election and how I see this impacting the life science tools broadly and more specifically, our company. Regardless of who is President, this pandemic has shown the world that preparation for pandemics is incredibly important.

Layer on to this, the ongoing importance of research and oncology, discoveries that push science forward. With that, I'll turn the call over to Jim..

Thanks, Chuck. I will provide an overview of our Q1 fiscal '21 financial performance for the total company, provide some additional color on the performance of each of our segments and give some thoughts on the remainder of our fiscal year 2021. Starting with the overall first quarter financial performance.

Adjusted EPS was $1.43 versus $1.06 one year ago, an increase of 35% over last year, with foreign exchange positively impacting EPS by $0.01. GAAP EPS for the quarter was $0.83 compared to $0.37 in the prior year, representing a 124% increase over the prior year.

Q1 revenue was $204.2 million, an increase of 11% year-over-year on a reported basis and 10% on an organic basis. Foreign exchange translation had a favorable 1% impact on our revenue. By geography in Q1, overall growth was very similar in the US and Europe, with revenues increasing approximately 10%.

Biopharma demand in both regions was very strong with growth in the high teens, while the steady reopening of University labs during the quarter allowed academia to rebound from the prior quarter and grow mid-single digits year-over-year.

In Europe, the pace of the academic recovery differed by country with Germany, France and Italy all further along in the reopening process compared to the UK. However, as is the case with everything COVID-19, the situation continues to be very dynamic.

Just in the past week, we have heard that these same countries are reinstating lockdowns to try to slow the followed resurgence of the virus. So far though, there is an important difference from the lockdowns that were implemented last spring, as the current restrictions do not apply to schools.

It was our academic end market that suffered the most from past COVID-related shutdowns. So as long as the academic labs stay open, we believe our business in Europe will continue to ramp.

In China, we grew in the upper teens organically, even though there was a resurgence of virus earlier in the quarter, inflect areas like Beijing and Hong Kong, which negatively impacted revenue for a time while labs were closed.

As for the rest of Asia, organic growth increased upper single digits, with most countries rebounding to growth in the quarter, although pandemic-related shutdowns in India and Australia unfavorably impacted growth in these countries. Moving on to the details of the P&L.

Total company adjusted gross margin was 71.9% in the quarter compared to 69.5% in the prior year. The increase was primarily driven by favorable volume leverage. Adjusted SG&A in Q1 was 25.8% of revenue, a 310 basis point decrease compared to the prior year, and R&D expense in Q1 was 7.9% of revenue, 90 basis points lower than the prior year.

I do want to point out that our adjusted SG&A and R&D spend were approximately flat compared to the prior year, reflecting continued discipline on discretionary spend during the timing uncertainty of a recovery from a pandemic.

This discipline includes some delayed headcount backfills and additions, given the overall improvement we are seeing in our end markets, we find to fill these positions and continue with investments to position the company for growth going forward.

The resulting adjusted operating margin for Q1 was 38.2%, an increase of 640 basis points from the prior year period. Looking at our numbers below operating income. Net interest expense in Q1 was $4.2 million, decreasing $0.8 million compared to the prior year period.

The decrease was due to a reduction of our bank debt during fiscal 2020, as well as lower floating rates. Our bank debt on the balance sheet as of the end of Q1 stood at $323.6 million.

Other adjusted non-operating expense was $1.1 million for the quarter compared to approximately zero expense in the prior year, primarily reflecting the foreign exchange impact related to our cash pooling arrangements. For GAAP reporting, other non-operating income includes unrealized losses from our investment in ChemoCentryx.

Moving down from - moving down to P&L, our adjusted effective tax rate in Q1 was 21.5%, a 40 basis point improvement over the prior year operations in the quarter, up 63% over Q1 of last year and outpacing our adjusted earnings growth.

In Q1, our net investment in capital expenditures was $10.9 million, primarily driven by the construction of our new GMP protein factory. And during Q1, we returned capital to shareholders with $12.3 million of dividends. We finished Q1 with 40 million average diluted shares outstanding.

Our balance sheet remains very strong with $287.4 million in cash and short-term investment. Q1 reported sales were $154.4 million, with reported revenue increasing 10%. Organic growth increased 8% with foreign exchange having a favorable impact of 2% on revenue growth.

Within this segment, we experienced a broad sequential recovery within our protein sciences portfolio, although product lines with higher academic exposure, namely our reagent solutions portfolio, led the performance of our instrument platforms.

As Chuck mentioned, we had an exceptional quarter in both our Simple Western and SimplePlex instrument platforms, with both product lines gaining significant traction during the pandemic.

Operating margin for the protein sciences segment was 45.6%, an increase of 340 basis points year-over-year due primarily to the favorable volume leverage and cost control. Turning to the Diagnostics and Genomics segment. Q1 reported sales were $50.1 million, with reported revenue increasing 18%.

Organic growth for the segment was 17%, with foreign exchange translation having a favorable 1% impact on revenue.

As Chuck mentioned, our Genomics division led this segment in the quarter as our portfolio of spatial genomics products combined with the enhanced productivity offered by our tissue biopsy solutions, drove increased adoption in the current environment.

We experienced strength across the entire ACD portfolio with RNA scope gaining momentum and increased interest in HiPlex, initial traction with niRNA scope and a strong performance in our pharma assay services business during the quarter. Also a driver of growth for diagnostics and genomics.

Exosome Diagnostics Q1 revenue increased over 125% from last year, with higher collections from Medicare, private payers and patients driving the year-over-year increase. As Chuck mentioned in his comments, test counts are approaching pre-COVID numbers even with fewer patient visits to the urologists in the current pandemic environment.

We are excited about the traction we are gaining in our direct-to-patient marketing, coupled with our differentiating capability that enables patients to take our prostate test in the comfort and safety of their own home. Moving on to operating margin for the Diagnostics and Genomics segment.

At 17.3%, the segment's operating margin improved from 2.1% in the prior year. The increase reflects favorable volume leverage in our Genomics division, less dilution from Exosome Diagnostics, as well as overall strong cost management. Before we turn the call over to Q&A, I will share our current perspective of the view ahead.

As Chuck described in his remarks, Bio-Techne's portfolio protein analysis instruments, innovative tissue and liquid biopsy solutions, cell and gene therapy workflow solutions and core reagents fit perfectly with the direction scientific discovery is trending, and we are positioned to ride the wave of research and discoveries going forward.

As our Q1 results show, life science researchers are clearly coming back to work, although the initial pace of activity remains much stronger in the biopharma sector compared to the academic setting. We are clearly off to a strong start to our fiscal 2021, but unknowns remain.

A new wave of COVID-19 outbreak is materializing across the US and Europe, representing a risk to the pace of increased research lab activity or worse, a potential of lab re-closures if lockdowns are reinstated.

That said, based on our Q1 performance as well as the initial to support our strategic growth plans beyond fiscal year '21, further investment in our commercial execution and product development pipeline needs to be made. After over nine months of a pause on new investment, we intend to start making those investments once again.

What that means for the remainder of the fiscal year is a likely lower adjusted operating margin than what we reported in Q1. However, we plan to finish the year with profitability that is not only higher than last year, but also higher than fiscal year '19, as we get back on track to our long-term goal of over 40% adjusted operating margin.

That concludes my prepared comments. And with that, I'll turn the call back over to Tachi to open the line for questions..

Thank you. [Operator Instructions] The first question is from Puneet Souda of SVB Leerink. Please go ahead..

Yes. Hi, Chuck, congrats on the quarter, really strong here. In terms of number of trends that you're seeing from what I'm seeing, there are - there's less protein westerns, multiplex that's doing really well.

So if you could - given where we stand today, I think the key question is, what are some of those trends that will continue to be really strong in the fourth quarter and into 2021, essentially around the sustainability of those trends.

So if you could maybe talk to that and just give us a sense of as the labs are opening up and despite the near term shutdowns that we're seeing in Europe, what are some of the segments where you worry a little and ones where you are more confident of continued growth?.

Sure. Thanks, Puneet. I think overall, we're seeing a great recovery. Even though we had very low single-digit growth in our reagents business, maybe there's still softness in academia. Overall, it was just such a big beat because we're just seeing a lift almost everywhere.

The productivity requirements have just been increased so much because of shifting and because of the way labs - just the way they're operating is different than it was a year ago, and it just speaks to our sweet spot. We're all about productivity. So we're getting that lift to that in instruments, as well as reagents.

Biopharma is no different academia. Their productivity is improving because they're shifting, and they're having - doing things different. And they have money.

So where they were sharing instruments before, they're buying experts now so maybe other labs can have it or different shifts or whatever, and the reagents are just - the orders have been magnificent. Now we've also really tuned our commercial force to much more inside sales and much more remote access to customers, no travel time so no loss there.

So that's probably an improvement. And overall, we're seeing the benefit. I'm just really happy because even with - you would expect a mix issue because of a lower protein amount and stuff this quarter because of academia, we're still seeing everything just being wonderful overall net-net because of the average growth across every segment.

And this is still how much is this, how much is that? And we really do think we've seen a corner crossed. Unless there is another whole wave of complete lockdowns, but as you've already known and in Europe, lockdowns are different this time around. They're not shutting schools. They're not shutting institutions.

They can't take the hit to their GDP like they did the first time. And if should that happen here in the US, I think it'd be similar. So as long as schools don't shut down and academia continues to progress back, we'll be fine. And biopharma is just rocking and rolling right now, it's all I can say, so..

That's great. And then on the cell and gene therapy and protein production facility. I think the big question here on investors' mind is the ramp and the cadence that you expect from the revenue from this facility.

Maybe could you give us a sense of where you stand right now in terms of the backlog, the overall order book and what's your expectation in terms of the sort of the ramp as we go into 2021 because, obviously, this is a major expansion for Bio-Techne in proteins, and it's well recognized that you are the leaders when it comes to proteins?.

Well, we're not the only game in town, a lot of people chasing us, right? And we're a little bit late to the game in terms of GMP, as you know. So we've been very, I'd say, taking this soon as we can. That said, we've got to be careful because our competitors are also building sites.

They're also going after this, and they're reading what we're putting out there. And they're reacting to it. So we're going to start backing off on a lot of details at this point going forward. I will tell you that we are on schedule, our factory. That number is out there to the capacity. That capacity number really is anywhere from 140 to over 200.

It all depends on the mix of the products we make. And we don't know what the mix will be until we start really getting in the big contracts and they start ramping. We have signed one big deal and that was before this quarter, and we're close to signing many more.

And we're in the final stretch of negotiating with many, and these are all multi, multimillion-dollar contract needs. These are the guys that came to us early, said that if you guys get serious on this, with your background, your quality, your bioactivity, your reputation, we're all over it. We're buying from you.

So we're doing that, but as we've always said, it's a bit of digit growth in GMP proteins even now, and we'll be migrating some of that production to the new facility as we ramp and build the new production into it as these contracts come. But they're finalizing their Phase III clinicals. I mean it's not going to happen overnight.

So we got to qualify, and then we've got to build lots, and we'll be building inventory for them ahead of their purchases. So all that's going to take a year or two. So you can guess as much as we can. I think we'll be kind of doubling every year as we grow this site and maybe more so three or four years out.

But the first year or two are going to be - it's really a setup. And we got a lot of customers, we're migrating a lot of business. We're going to have more than half a dozen large customers and possibly many, many more than that, and it's really unknown. You've got the data as well as I do on the number of clinicals going out there.

It's exploding, right? So the need is great. I think it's - I really think it is almost going to be an everybody-wins environment for five years in this space. And we want our share. And our share is a majority share because we're the world leader in proteins, so..

Got it. That's great. Thanks to you. Congrats again..

The next question is from Dan Arias of Stifel. Please go ahead..

Turning on Simple Western a little bit and talk about the outlook that you have for instrument placements at this point there, particularly if we try to separate out pharma where it sounds like it's pretty rocky rolling, to use your words, versus academia.

And then along those lines, is it fair to say that going forward, or for this year anyways, growth should be over 20% this year, just given that you were above that level in several quarters pre-COVID and obviously, against the fiscal '20 comp, you have a pretty favorable year-over-year there?.

Yes. To put some context, let's back up a year. I mean, two years ago, we started and then academia was shut down, so nothing. So we had a pretty bad quarter, couple of quarters ago with Simple Western and everyone understood why, especially academia being shut down. This is a platform heavily used in academia. And now - so now what's happened.

Now with growth well north of 30% as things exploding back out of the blocks. And academia is not at all even back yet. So how can it be that good? So I think it comes from two things. We dug in hard on this because we need to understand because we knew you were going to ask.

And the productivity changes, the process changes in biopharma and labs in general, it's changed. There is more of a focus on productivity because of shifting, because of cutbacks and staff. And so more supervisors are having to go back to the bench and help out.

And because of that awareness of the platform being a great productivity tool, it's accelerated because more and more decision-makers are really at the bench and driving that productivity. And with extra shifting and then the distance requirements, it's just - it's requiring more machines. More stuff everywhere.

I think it's driving us, not only us, but everybody is showing good numbers. I don't think anyone's had as good organic numbers as we have when you subtract the COVID, but there's a portion of this for everybody. And then that's what we see. Now as academia improves, we're going to do even better.

So we're north of 30% this - well north, mid-30s this quarter. Can we say we'll be on 20% going forward where we were before, pre-COVID? I think that's a pretty safe bet. I think I'd like to see north of 20%, but 20% should be in the cards. Remember, we're still only at max 50% share with this platform.

It is the only automated Western Blot solution in the world. It's highly protected by IP. There doesn't seem to be any other decent cheap way to do this in an automated fashion, and we want to get 40%, 50%. If we get that, it's hundreds of millions of dollars of growth.

So Western Blot is one of the singular most done processes in any biochemistry lab, and we're the only tool. So it's going to continue to grow. It works great. The word-of-mouth is there now. I mean it's - the demos, I mean, we suspect there might be a question on how are you guys doing demos when you can't go visit.

We've gotten really creative how we ship the instruments in because they're not very big, they're not complicated. You unbox them, plug them in, run the setup and we can do demos remotely with webcasts and webinars, and it's working great.

So yes, to answer your question, just short in the end, we do see continued strong growth from here on, with simple listing. No doubt about it..

Yes. Okay. I can feel your enthusiasm there. Okay. And then maybe just on ExoDX, it sounds like you're getting on the right foot there with the EPI test.

So I guess with that in mind, are you able to sort of put some numbers on volume growth that you expect this year, this fiscal year, that's obviously been something that's tough to track for lots of different reasons. So just some guidance on volumes would help.

And then what should we think about in terms of being able to switch over to accrual accounting on the test that you do perform during the quarter? Thanks much..

Yes. So it's probably early to start giving a lot of detail on that. We do have competition here as well that we're wary of. But we do - we have surpassed most of them in test counts. We're at a 2,400 urologists level of purchases, and that's out of 20,000 or so. So we're still on the early side of this.

We do have a 91% re-buy rate, but all with the purchasing urologists, which is incredible. So it's ramping even harder, all right? So the at-home is working. So we are seeing numbers going up, and then we did go to accrual on a portion of our business. I'm going to let Jim comment further on the cash to accrual process..

Yes. So actually, we have enough history now with our Medicare payments that we were able to move to an accrual-based accounting revenue recognition process for our Medicare-based payments in Q1. So going forward, that will remain on an accrual basis. All of our non-Medicare payments are still on a cash basis and will be for the foreseeable future..

So we've also focused a lot on the direct marketing campaigns and to support the at-home. We're the only one that can do an at-home because we're non-invasive. And it's growing well. You stack on top of that, the promotion with Cal Ripken Jr. and the response is amazing.

Just to give you some facts here, we had over - we had almost eight million impressions on Google Ads and Facebook in the previous quarter due to the launch. We've done 90,000 video views. We've had over 100 commercial, radio commercials on the platform with - via the campaign with Cal Ripken. We've had - he's had almost a dozen interviews personally.

So he's ramped up and going forward. This guy thinks we saved his life. So he's pretty bullish, and he's pretty supportive and it's been pretty amazing. We've all got signed baseball, by the way. So I don't think we've crossed the corner yet on critical mass. I think we hear away.

I've had a lot of friends in diagnostics up in the industry and who told me it takes five years, Chuck, and there's just no cutting any corners and you guys aren't going to get it done in two years, and they're right. It's not going to be done here in two years, and we're cross from a two year point here soon. But it won't take five.

We're ahead of schedule in some areas. We're in a strong position for reconsideration, which really hasn't hurt us anyway because of the TRF process with our docs anyway.

So we're getting a really, really good Medicare reimbursement rate, even regardless with the multiuse consideration for the - all for the expansion that we hope to get here with our MAC here soon, that will even improve. But we have next-generation stuff coming.

We've got - we're kind of halfway there or maybe a year out on the kidney rejection platform. And that market's double the size of the prostate cancer market. So it's even more exciting.

So as I said before, this is a platform, not a one-trick pony, and we've got four or five things pipelined over the next five to 10 years that are going to create explosive growth for this new young division, so..

Okay. I'm still in Myspace, guys. So I'm going to take your word for it on the Facebook promotion, but appreciate the colors, Chuck. [Technical Difficulty] Thanks for the question. Chuck, did I hear you right that COVID-related research products contributed three points in the quarter.

I believe you're expecting slightly higher than the five that you saw last quarter.

So curious what the puts and takes there were? And is there an additional clinical-related tailwind? And how do you expect those to trend in the fiscal second quarter?.

Yes. It's a great, great question. We probably have over a couple of dozen of different product tools out there for research related to COVID-19, and they're all ramping nicely. The RNA scope tool is just phenomenal.

It will be the biggest seller we have in the portfolio for the division, but it's not like a PCR test or serology test, right? Those are things that can really scale and we all know it's happened in a world with companies who have PCR, right? We have some of that as well with our lab doing EPI test. It's the same equipment. So we're set up.

We have an EUA, and we are growing that business as well, but it's just starting to ramp now. The serology, we just got the CE mark a couple of weeks ago. And we're closing deals, and we're starting to launch, and we're ramping. I was obviously hoping to have more serology this past quarter.

And we're hoping to have an EUA in the US, and we just haven't been able to secure that EUA yet. The FDA is just - and the only way to describe it is just in turmoil. They're just behind, behind, behind, and they're really struggling. We have been promised that they're all over us.

We have submitted everything we can submit, and we're just waiting for the answer, and we expect we'll get it, but that's probably the biggest reason we didn't have more COVID-19 revenue this quarter because we haven't been able to get things started here in the US because we haven't done our EUA yet. So going forward, there will be more.

It won't be PCR-related revenues, but we are at a capacity level because this is just ELISA. The whole world has ELISA automation. We can produce very easily 10 million tests a month, and we hope it grows.

We do think that we're still early enough as we think the big need is going to be this bow wave of when the vaccines hit, everybody is going to want to know are they immune, can they see their kids again? Can they see their grandkids again, there's going to be a lot of interest.

There's going to be a lot of immune response differences with these vaccines. This is not like getting a flu shot and getting maybe a headache, you can get a pretty big response. And so people are going to be wanting to know where they're at. And I don't know if it will last 10 years, it's going to be a while, and there will be a big need for serology.

And we'll have the only fully quantitative test out there. There is only one out there that's semi quantitative and that's a Siemens test. And we were given full quantitative neutralization claims with the CE mark in Europe. We're the only one in the world.

So we'll see this best-in-class world test to the American public as well here with an EUA, but we're waiting on the FDA to do that for us. And that's the primary reason. Everything else grew kind of okay for the quarter, and it was 3%, yes, of the 10%.

I should point out, too, though, we're able to really differentiate what is COVID and what isn't because these are our tests that are really devoted to COVID.

A lot of companies out there, it's kind of hard to know how many more beakers, flasks, whatever you're buying that are still already being used for COVID that aren't being put in the COVID numbers, they're putting in their core. So it's kind of hard to know what's apples-to-apples.

So we really think that our 10% organic growth really is kind of organic and - compared to a lot of companies out there. But if you're going to separate by SKU where the SKU has something that says COVID-19 on it, it's 3%. And that would be a good question to give all our peers out there as well because I don't think you get the same kind of answers..

Okay. Great. That was very helpful. And then great to hear academic return to growth.

Can you just give some commentary on how that trended throughout the quarter and where activity levels stood in October?.

Slow and steady, very slow. I mean, almost a drip all the way through the quarter, and it just keeps getting better and better. And we've been terrified the last two weeks here with Europe.

It might turn around, but so far, our data suggests and our interaction suggests that it's not going to have an impact on labs in schools in Europe even with lockdown. So we'll see.

US has just been a slow steady return and we're not there yet, but it's been amazing to see the revenue and the lift we're getting because our growth is surpassing the actual level of their comeback with science. So we've got to know why. Why are we doing better than the roughly 60% that are really opened partially.

It's because of these productivity changes and the shifting changes, the duplicity needs, the - all these things are having an impact on our growth. And there's been probably a little bit of restocking, turning things on kind of like what we saw China when China turned down with a surge, they had to re-buy everything and get things going.

The difference in China was 100% day one. And here, it's going to be a slow turn on, but there's still a restocking resurgence piece. So a bit of a wave as things come back online, I think. And we're a tool supplier, and we supply reagents, we supply supplies, consumables.

So these are things that you're going to see the initial first wave of new revenue with..

Great. Thank you..

The next question is from Patrick Donnelly from Citigroup. Please go ahead..

Thanks, guys. Chuck, maybe just a follow-up on the serology commentary there was helpful. Can you just kind of detail the path forward here? I know you've obviously talked a little bit about CMS paying more for your test.

Where we stand on that front in terms of pricing? And then what's built-in in terms of the double-digit organic growth, Jim talked about? How much we expect serology is going to contribute once we think it's rolling, both Europe and US?.

We have zero in those comments. So it's all gravy, it's all coming upside. So whatever we get in serology, you can tack on top of what we've talked - what we've given for any guidance. So our cores is just smoking. So I can tell you. So it will just - serology is just going to be on top of all that.

So what's happening? Well, we can't get CMS to give us a new price until we have an EUA. And we can get the channel to open up and close deals for us in the US until we have a EUA too and know what the claims are. We know enough to know that what we sell ELISA kits in general, and we're not trying to gouging anyone. We haven't done anything different.

So we know we're going to be in the $5 to $10 a test range. But whether the channel is going to get $80 or $120 reimbursement, it's all unknown. It will be way above the $10. We know there'll be strong interest to sell our kits once things are going because it's such a good test, but it's a double antigen test, right? It's a two step test.

So it's going to need to go beyond the $42 of the current reimbursement level out there. So - and even there, you've seen that with the pricing that's happening on these tests, even PCR is going well beyond what the reimbursement levels are.

The demand is staggering, right? So I would not underestimate the big guys in the channel they drive these tests and trying to getting over $100 of test these later. Well, there's plenty of proof out there right now that, that will carry probably because the current PCR testing is at that level or beyond.

So - but it won't be us getting it, but we're going to get our fair share, and it's going to be great. So we know how to make ELISA kits. We've been doing it for 35 years..

Yes. And then on the antibody side, I know you've talked about in the past, some potential for it to be used, to your point there on the vaccine.

Have you had any conversations with kind of the vaccine makers about test being used as part of the vaccine development to see that?.

Yes, we talk to all of them. And the last thing a vaccine maker can do when they're on a Phase III clinical is change their control. So it's really kind of odd because you got the - we're waiting on the FDA for EUA for this test.

And yet, you can tell them, well, what are you doing? How are you treating the vaccine makers with their - they have to have a test, they have to be based - the vaccine have to be based on something. Because they're doing all their - they're all doing their own home brew because nothing existed early enough for them to go buy anything.

And they can't change until things get out there. We do expect a lot of interest in our test by the big vaccine makers as they get things launched and as we go into the second, third, fourth generation of these vaccines. For one, we're doing it in a scalable fashion with the monoclonal. They are not.

They're doing home, but they're not intending to scale. They do not intend to sell tests, so they can use a Poly. You can't do this test for the world on a Poly. There aren't enough of those.

So we're doing it in a scalable fashion with highly proprietary processes and antibodies that we have discovered that make us the best in the world, working with our partner, Mount Sinai and Cantera [ph] ], which obviously, you need a lot of patient samples to get this done. That's a big problem, by the way, for anyone moving this area.

If you don't have thousands of patient samples to do the work with, you really can't get anywhere. And it's a very big issue. So we're the perfect partnership, and that it's gone very well. We've been ready for two months. We just got to get this through our regulatory processes here, and they're bogged down.

They're just -- they're bogged down, and they've got tarnished around serologies because the initial EUAs they gave didn't work. And they're out there as single step qualitative tests that simply don't work in some cases. And so we've got across that hurdle, but we can promise you, ours work and they all know it.

And they've been very engaged with us and interactive, weekly, the team at the FDA. And we've been talking to higher levels of management in the FDA, and they've assured us that this is a high priority, and they understand. And they understand the significance of world-renowned authorities like Dr. Kramer [ph] at Mount Sinai. So it's coming.

But they're not really good at telling you when, right? So we just hope it's coming soon. We do have a CE mark. We're there in Europe, and we're launching and we're going after it. So we'll - first data we'll see on how it will affect revenues and volumes and real demand will be out of Europe first.

We have deals signed up for Germany and UK completely at this point, and we're working with Spain, Portugal, Italy at this very moment, and the channels are being set..

I'll just add to, it's probably fair to say that in terms of end-user demand, that likely will not occur until there actually are vaccines prudent in the market..

I think there's time. I think our initial thinking of people wanting to know, did they - were they sick before and are they okay? I just don't think there's that big of a need. It will be the big though, when vaccines come out.

When the vaccine makers are all very supportive of our work, and they wish they could - a lot of them wish they could use and change but they really can't without taking a redo on their clinicals, and there's no way they're doing that. So they have to move forward what they have for now until they launch..

Okay. That makes a lot of sense. And maybe just staying on Europe real quick. Just on the funding backdrop. There's obviously been some lockdown measures there. It seems like COVID overhangs persisting a bit longer than expected.

Maybe just your latest thoughts on that region, usually have a pretty good handle on the Europe funding side and what you're kind of baking in as you go forward?.

Yes. As you know, we were having some softness in Europe before COVID. And so we are kind of redesigning our commercial organization and our go-to-market strategies. And we had just kind of put that in place as COVID hit. So we weren't able to really measure how it's working. It's kind of starting to work.

So our numbers are pretty good in Europe, and it's - and even that's in light of COVID softness. So we have changed a lot of management. We've changed out a lot of people.

We've done a lot more inside sales to coincide with the new way to go-to-market and in Europe, you can't visit, so you've got to have a lot more inside sales, and that takes technical people, and we have a lot of them. So it's working pretty well.

I think we see funding stable, and I don't think any different here - I don't think there's any change to the status quo of the future for funding for life sciences. I think the needs will be big. I think people are angry.

I think people want more assurance that there's safety out there for the next pandemic, and there's just going to be a lot of research dollars and probably more than ever in infectious diseases again. So we'll be playing harder there than we have in the past..

Okay, great. Thanks, Chuck..

The next question is from Alex Nowak of Craig-Hallum Capital. Please go ahead..

Great. Good morning, everyone.

Chuck, how do you intend to take the transplant test forward into the market? And then just a follow-up question to that, what sort of work has Exosome Diagnostics done on early cancer screening because Exosome might be a unique way to do something similar to or better to what GRAIL exactly and others have done with cell free DNA.

So just any thoughts there would be helpful?.

Yes. We have some work going on in all of those fronts. We're focused - clearly, the most focus is on ramping our prostate test. In parallel, we have the dilution capability, the investment capability to keep working on kidney rejection next. And we're probably halfway there.

We're probably a year away from being at where we were a year ago with EPI, all right? So we'll get - we are going to have our first peer-reviewed paper being worked on right now, being - it's accepted, it's out there, working on the second. We'll try to get into guidelines.

We'll get an LDT going and then we'll start going - we're working with our MAC on getting on for Medicare lately, probably in a year or so. The market is double, the size, the need is huge. I think - I don't think that it will be as hard getting acceptance and getting a ramp on this test because there's just such a big need. It is so bad.

I didn't realize this, but half of all kidney transplants fail in 10 years. And in the first year, a big percentage fail, and they have to start testing immediately for rejection, and they do this via biopsy. They start cutting chunks out of you, it's just not good.

So one competitor does it with a blood test, and it's a real competitor really works, their numbers are pretty good. We're going to be able to do with tea in a cup. And it's going to work even better. And so we're on our way. There's a lot of excitement around it. Primary care, oncologists as well as urologists are excited, and we'll be there.

Now the companion diagnostics side, the cancer screening initiatives, we have over a dozen initiatives we're working with, and some are starting to scale. And there are some that are close to being becoming a companion diagnostic with a therapeutic. So we're getting there. These are longer fuse initiatives.

We have the ability of doing as much as 170 gene screen. It's no 500 like GRAIL, but it's 170. We're ready to go now. If somebody wants to take it through clinicals. We validated it. We have, as you pointed out, the platform of Exosomes is - has a high utility.

Amazing results around using Exosomes for neuro disease and in the areas of dealing with what's going on in the brain in brain cancer. Getting through that blood-brain barrier is a big problem and Exosome solves it. So there's a lot of work with us right now on that.

So the future is bright for oncology and blood-based oncology-related test for Exosome, but not here today, and we just don't have the resources to fund and do all these in parallel. So we're kind of staggering them and doing partnerships and talking to more companies, but the interest is growing and the platform is real.

Exosomes are here to stay, so..

So very interesting, very helpful. And then in the press release and the prepared remarks, you called out these long-term budget increases across - potentially across the world due to the pandemic. Can you just give any specifics what you're hearing from other countries such as China and the emerging ones like such as India.

What are you hearing as far as their budgets going up as a result of the pandemic?.

Well, all I can comment on is what - as we put all these questions with our sales force and our relationships in the field with our customers, and this is what they're telling us. I'm not on the speed dial to any country leader, but this is what we know so far. And in places like China.

China is going to be weird this year because it's a fifth year of their 5 year plan.

So there's going to be - it's not going to be the 25% to 30% automatic, but I think 20% is in the cards and then come next year, I think will come out of the gate super strong because I think funding for life sciences is healthier, is going to be off the charts there this time around. US, I don't think it's going to matter who's President.

I think it's a bipartisan agreement area. And I just think there's a lot of the population, would like to see a lot more than the $40 billion spent, which is a rounding year compared to what COVID has cost us, so - in NIH funding. So I think it's going to be a big future.

Europe is going to be obviously country by country, but again, places like the UK, it's going to go up. It's got to.

And so that trickles down to us because we sell broad-based tools across all life sciences research, and we've always talked about this in the past, every 8% to 10% increase in budget, we usually see about a 1% lift in total organic growth. And that's kind of what's been in the past.

And if we see a 20% increase, let's say, next year in funding, you should see a good 2% lift from that alone just in our core. And then not on top of everything else we're doing. So I think the future is right. I think the tailwind is - it's a tailwind currently not a headwind looking forward, at least for next couple of years..

Yes. Understood. Thank you. I appreciate it..

The next question is from Dan Leonard from Wells Fargo. Please go ahead..

Thank you. So Chuck, Jim, you mentioned in your remarks that you thought there was some signal of restocking in the quarter.

How meaningful do you think that was?.

I think when you do that, you have to do it by account. So we've done really big analysis in the order sizes. If you've got an average order size of $1,000 per university and all of a sudden in the quarter, it's $1,200. You start asking why, right? And some of that's restocking.

Is it significant? Is it something like or without that, we would have been 4% or 5% versus over 10%? No way. I mean, it's marginal, I think, but there is some restocking..

Okay….

Our consumers - for a very long period of time. So you're not going to have a big volume of restocking, generally use our reagents within days of purchase, run rate more mostly, so..

Okay. And then on the outlook, your comp gets a lot easier in the December quarter.

Is it fair to assume that your growth rate could accelerate pretty meaningfully in Q2 absent reestablishment of lockdown just given the easier comp and the momentum in the business?.

Yes. One, I just want to reiterate, we're just ecstatic of this quarter. This is the quarter we were afraid of, it's a 13% comp, and we just kind of blew it away. This quarter coming up was not a great quarter for us last year. And so it should go well. I can just tell you, the start of the quarter is really good. But December might be really weird.

And a lot of universities are going to shut down from thanksgiving all the way into January. So you don't have multiple coming and going, right, for the students.

So we don't expect a strong December, but we've had a great start to the quarter, so we'll see how it ends up, but I don't think December is going to be off the chart for anybody, to be honest. But that said, every country is different. And we're seeing good strength in China. We're seeing really good everywhere, everywhere but India.

India is pretty much a disaster right now, but not very big for us yet. And going into next year, our Q3 and Q4, obviously, the comps get super easy. So Q4, for sure. And so we're - as we talked about a double-digit year, we see a double-digit year in the cards here for us, so..

Okay. Thank you..

The points we put in the Board this quarter were the most - the biggest thing we needed to do and I think we did it, so..

The next question is from Jacob Johnson from Stephens, Inc. Please go ahead..

Hey, guys, this is Mason on for Jacob. Just a couple of quick ones from me.

First, could you update us on Quad Technologies and B-MoGen? And then outside of those and GMP proteins, are there any cell and gene therapy capabilities that would - that interest you guys, whether you're adding them organically or via M&A?.

Yes. We're still hunting that space. I'd like to buy 10 little companies in this space, if I could find them all and get them, but they come at high prices. We have most of the workflow kind of closed. So we don't need a lot, but we would certainly add-on for scale. We've launched our Quad technologies, and it's being sold. It's being used.

It's -- we're fairly in preclinicals, and I think we're close to being in real life clinicals, and we've just closed some deals recently here with - and some real strong interest around the B-MoGen. This is a little longer-range idea, right, to walk - to go away from viral vectors and go non-viral vector for gene editing.

That's a big change after 20 years of viral vectors out there. So we are seeing amazing response and supportiveness for this technology, and we are pretty much on plan with the revenue. It's ramping. These deals are getting larger. The team is in great shape.

We have a complete team from the acquisition, including its leader, who's still working for us on this. And the future is bright here.

As part of the JV, with strong leadership from guys like John Wilson and Wilson Wolf, who pretty much is the bioreactor standard of records, inspecting everywhere out there, and we're leveraging him to be looking at our proteins even on viral vector approaches.

We're trying to - we've got a technology we call Pro Dots that you can actually manufacture and ship within the bag, the single-use bioreactors or the GRx, and you don't have to mess around with any sterility risk issues as you reconcentrate shipping protein unreconstituted is a way to go.

So we'll be the world leader in that, and we'll have the best lot-to-lot consistency. And every time you lotalize [ph] you lose - you typically can lose some bioactivity, and we've cracked the recipe for how to do this right, and we have a lot of trade secret around it. So it's growing. It's ramping. It kind of goes back to my earlier decision.

It kind of goes in line with the ramp of the GMP proteins in the factory. It's J-curve over the next five years, and we stand behind our - we think it will be a $250 million, $300 million business unit, five years out, probably less than five years at this point and it's ramping nicely..

Got it. I'll leave it there. Thanks, guys..

This concludes the question-and-answer session. I would like to turn the conference back over to Chuck Kummeth for any closing remarks..

Well, I'll just conclude with thanks for being online. It's been great to talk with you all. We had a wonderful quarter, but the next quarter will be the most important quarter in the company's history, and we're on to that now. So we'll talk to you then. Thank you..

This concludes today’s conference call. You may disconnect your lines. Thank you for your participating, and have a pleasant day..