Good morning and welcome to the Bio-Techne Earnings Conference Call for the Second 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 second quarter conference call. Hoping you and your families have remained safe as we get closer to turning the corner on this horrible pandemic.

The Bio-Techne team delivered another strong quarter accelerating our organic growth year-over-year to 19% building on the strength we experienced last quarter. In fact our 19% organic growth rate represents our strongest performance since I joined the company in 2013.

This growth was broad based across our segments and geographies as our print annotation [ph] in biopharma continue to be red hot. And even academia returned to double-digit growth.

The new normal of social distancing and staggered shifts has become an accelerant for the continued adoption of several of our technologies namely Simple Plex and Simple Western.

I will dive into the specifics of each of these platforms later but they are all gaining traction or remain in the early innings of penetrating their large respective markets. We delivered this record organic growth with a continued focus on profitability as our adjusted operating margin improved 530 basis points year-over-year to 38.7%.

Some of this improvement reflects the timing of hiring investments to drive future growth but shows a leverage in profitability inherent in our business model. The COVID pandemic continues impact traditional ways researchers are staffing labs and conducting experiments as well as the ways we are interacting with these customers.

But I'm encouraged with the innovative solutions researchers have leveraged to push science further and the innovative strategies our commercial teams have implemented to meet their evolving needs in these challenging times.

Academia in particular is getting better at managing through the COVID related restrictions and we're encouraged with the sequential improvement we experienced in this end market.

While we experienced robust growth with both biopharma and academia customers in Q2, both of these end markets remain largely closed to outside visitors creating challenges for our commercial team to get in front of customers.

Our commercial team once again did an excellent job adjusting to this new normal leveraging webinars to educate current to potential customers on our portfolio of agents, selling gene therapy solutions, tissue biopsy and spatial analysis solutions and instruments.

During the quarter our team got even more creative using virtual coffees and happy hours to get increased face time with our customers. These virtual meetings and webinars will remain an important cost effective part of our commercial strategy for the remainder of the pandemic and beyond.

Our digital marketing initiatives remain an important tool to differentiate Bio-Techne, educate the scientific community on our portfolio of innovative and productivity enabling tools, drive traffic to our website, and ultimately convert this traffic to revenue.

These digital efforts have become an increasingly more effective tool during the COVID pandemic, and we continue to execute this strategy at a high level in Q2.

Researchers often begin their quest for reagents and research productivity tools with an internet search so ensuring Bio-Techne is one of the top results of these searches is critical to drive traffic to our website, convert these visits to sales of our products.

Leveraging search engine optimization and targeted ad strategies remain a key component of our digital strategy and both continue to generate high returns on investment with an outsized impact on sales within our antibody and protein portfolio.

Last quarter we announced the launch of OneWeb, a new website that unites all of Bio-Techne’s brands under one easy to navigate site, enabling our customers to order products across our instrument and reagent portfolio under one website while leveraging algorithms to drive purchases across our portfolio and position the business to realize increased revenue synergies.

We began a scaled launch of OneWeb in November, and initial customer feedback, as well as traffic to our web have been positive. OneWeb paired with our SEO and targeted ad efforts drove double-digit growth this quarter in a number of sessions, page views, new users, and repeat users on our website.

Given the correlation of our revenue growth this quarter, our strategy is clearly generating results and we will continue to pull this growth lever going forward. Now let's discuss the performance of our growth platform, starting with Protein Sciences segment, which grew 19% organically for the quarter.

Growth is strong across our core reagent portfolio, with both RUO [ph] proteins and antibodies growing low double-digits.

In addition to the impact of academic labs reopening in our digital initiatives, our reagent business also experienced a favorable tailwind from custom work for biopharma customers in need of additional protein or antibody capacity.

Our custom reagent development business increased over 60% in the quarter and we are leveraging multiple strategies to capitalize on this outsourcing trend going forward. During Q2 we continue to push our cell and gene therapy initiatives forward.

One of the key components within our cell and gene therapy business is GMP proteins with these cytokines and growth factors playing a critical role in the cell and gene therapy workflow. Revenue generated from our portfolio of GMP proteins once again increased nearly 100% in Q2.

Recall that we recently opened a 61,000 square foot state of the art GMP reagent manufacturing facility to address the expected demand for GMP proteins and reagents as a growing pipeline of cell and gene therapeutics progress through the regulatory approval process.

We made significant progress qualifying the facility and have begun manufacturing production lots of select GMP proteins. We also executed our second long-term GMP protein supply agreement in the quarter.

We remain in various stages of discussion with several other biotech companies of pipeline cell and gene therapies for future potential long-term GMP protein supply agreements and are very pleased with the funnel of potential deals.

Sticking with cell and gene therapy, our genome engineering services business, which includes our non-viral vector based gene transfer technology TCBuster continue to gain attention from the cell and gene therapy industry.

I would also note we're seeing a growing list of collaborators and positive feedback on Cloudz, our non-magnetic deep base cell separation technology for a human T-Cell, natural killer cells, and human regulatory T-Cell T-Reg activation and expansion kits.

We are still in the early innings of both TCBuster and Cloudz but both of these innovative cell and gene therapy workflow of technologies remain important pieces of our cell and gene therapy workflow solutions.

ScaleReady, our JV with Fresenius Kabi and Wilson Wolf formally launched at the beginning of calendar 2021 with a mission of providing a more simple, scalable and versatile cell and gene therapy manufacturing platform in the industry.

As a reminder, this consortium pairs Bio-Techne’s portfolio of cell and gene therapy workflow solutions including our Cloudz cell separation and activation technology, GMP proteins, and genome engineering services with Fresenius Kabi’s leukapheresis instrument and Wilson Wolf’s bioreactor to enable a modular cost efficient workflow solution.

The ScaleReady website is up and running, and the commercial team began its initial customer outreach campaign including initial contact with over 600 industry participants and almost 250 gene therapy companies.

Also during Q2, Bio-Techne made an initial strategic investment in Changzhou Eminence biotechnology company, a China based life science company with best in class media, including CHO cells and other GMP media products.

As well as custom cell line and media formulation development services, Eminence will use the financing proceeds to expand its manufacturing capacity and increase the service capabilities of its China headquarter GMP media production facility.

Investing in Eminence expands Bio-Techne’s foothold in providing additional products and services to support the needs of the rapidly growing Chinese biopharmaceutical industry and fits extremely well with our existing high growth product portfolio in China. We look forward to working with the Eminence team.

Now let's discuss our proteomic analytical tools portion of the protein sciences segment where the strong momentum we saw in Q1 continued with our portfolio of instruments and assays enabling research labs to increase productivity while adhering to social distancing and staggered work shift protocols.

Once again, we experience very strong growth in our SimpleFlex multiplexing ELISA instrument ELLA, our revenue almost doubled year-over-year. Encouragingly, SimpleFlex utilization within our customer base continue to -- by as researchers leveraged ELLA to investigate inflammation, cancer, neuroscience and other disease states and biological pathways.

ELLA’S relatively small footprint, low price point, sub-picogram level of sensitivity and reproducibility is driving both instrument placements and consumable pull through. Our clinical program with Micropoint in China is on track, which speaks to the incredible diversity Ella is capable of.

We are now taking ELLA through a 510k process in the U.S., which will unlock new clinical opportunities for this amazing platform. It was a similar story with our automated Western instrument portfolio, where we grew almost 30% in the quarter.

Our [indiscernible] automated Western platforms turn the labor intensive, messy, inconsistent, cumbersome manual Western Blot process, which can take up to two days into a fully automated, reproducible sample to answer three-hour process. This value proposition has been resonating incredibly well with researchers as they return to the bench.

And with our solutions, less than 15% penetrated in the addressable market, there's plenty of room for continued growth.

Our biologics instruments which provide protein purity information and are used directly in bioprocessing also had a standout quarter as we experienced broad demand from biopharma, including several companies with COVID-19 vaccines in various stages of development or commercialization, as well as continued interest from companies working on cell and gene therapies.

Now I will provide an update on our diagnostics and genomics portfolio where organic growth revenue also increased 19% in Q2. Let's start with an update on our ACD or tissue pathology franchise, where organic revenue increased in the upper 20% range for the quarter.

This growth was broad-based across geographies and product lines, including very strong performances from micro RNAscope following its launch this past summer as well.

Momentum we experienced in RNAscope last quarter continued in Q2 as a single cell spatial resolution and high sensitivity provided by this technology continues to drive market adoption.

Biopharma’s need for increased productivity while working with limited or staggered shifts remains a tailwind for our PAS or pharma assay services business within ACD. Biopharma outsourcing their spatial genomic analysis has driven 40% growth in this business in the first half of fiscal year 2021.

Now let's discuss our Exosomes Diagnostics business, starting with our prostate cancer liquid biopsy assay, the ExoDx prostate test. Encouragingly, we believe most of the urology practices across the country have reopened and we experienced another sequential increase in our prostate test volume.

But patient traffic is still down from last year as older patients are more likely to quarantine at home until they become vaccinated. We expect urology traffic to continue to improve as vaccines make their way into this segment of the population, which in turn should have a positive impact on our ExoDx prostate testing volumes.

In the meantime, our home kit version of the test continues to be the safest solution for patients to continue to work with their urologist.

Recall that we partnered with Baseball Hall Famer Cal Ripken Jr to co-promote our ExoDx prostate test following his personal prostate cancer journey, including his use of the ExoDx prostate test, which ultimately influenced his potentially life saving decision to get the biopsy that led to the discovery of his aggressive prostate cancer.

The marketing campaign continues to be successfully leveraged across all social media platforms and channels and is driving traffic to the Fight Like Hell page on the ExoDx website, where we saw page visits increase over 1400% sequentially.

We also launched a physician locator function on the ExoDx website, enabling patients interested in taking a test to find physicians offering a test in their respective city. Our Exosome Diagnostics platform is not just limited to our ExoDx prostate test.

There is a full pipeline of high value diagnostic tests with our Exo True Kidney Transplant Rejection assay next in line for commercialization. We expect ExpTrue [ph] to become an important tool in the management of kidney transplant patients with it's easy to collect urine based sampling, sample enabling increased adherence to testing protocols.

We completed verification of the assay and have optimized the workflow. Initial ExoTrue data has been accepted for publication in a well-respected medical journal, and we anticipate publication in the coming weeks.

Despite generally soft non-COVID related diagnostic testing volumes our Diagnostic Reagents division once again delivered a solid quarter, with organic revenue increasing in the upper single-digits.

This is actually the sixth quarter in a row that our Diagnostic Reagents division has delivered positive growth as a development pipeline and to a lesser extent COVID related opportunities continue to bear fruit and smooth out the impact of what can sometimes be a lumpy bulk reagents order. I'd like to now give an update on our COVID-19 initiative.

The products we sell are directly related to COVID research, for example, reagents and instruments with specific viral research applications, ACD probes to detect the virus in tissue and sales of bulk diagnostic reagents using COVID testing applications was an estimated 3% tailwind to our business in Q2.

We expect that research in COVID will be around for many years, thus making this tailwind a sustaining new layer of our product portfolio going forward. We continue to make progress with the commercialization of the COVID-19 serology assay that we co-developed with Kantaro Biosciences based on Mount Sinai’s technology.

The Kantaro serology assay is a truly differentiated test, providing not only information on the presence of COVID-19 antibodies, but also the level of titer of those antibodies.

In November the Kantaro COVID-Seroklir assay received EUA approval as a semi-quantitative assay and we have submitted additional data to the FDA supporting a full-quantitative claim as we receive in Europe with a CE Mark. We have commercial agreements now set up in many countries and are in discussions with many U.S. Spacelab systems.

Today most of the demand for COVID-19 testing has been PCR based, geared towards answering the question am I infected with COVID-19.

Now that vaccines are becoming available with a lot of virus continues to mutate, we believe demand for serology testing will increase as patients look to answer the question, am I immune? Ultimately, following a full FDA quantitative claim, we believe the Kantaro assay will be able to answer this important question, allowing us to return to the pre-COVID lifestyle we are all looking forward to.

Our Q2 is evidence of the growth we are starting to unlock with our portfolio of proteomic analytical instruments, tissue pathology in spatial genomics products, cell and gene therapy workflow solutions, and liquid biopsy diagnostics.

These large high growth end markets remain under penetrated and we're in the early innings of realizing the full potential of these growth technologies and platforms.

Later on for these the content and cross divisional synergies inherent in our core reagent portfolio and I'm increasingly confident in our ability to deliver our long-term revenue and profitability targets.

I'm extremely proud of the execution that the Bio-Techne team delivered during the first half of our fiscal 2021, and we're looking forward to building on its success in the second half of 2021 and beyond. With that, I'll turn it over to Jim. .

Thanks, Chuck. I will provide an overview of our Q2 fiscal 2021 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 2021.

Starting with the overall second quarter financial performance adjusted EPS was $1.62 versus $1.08 one year ago, an increase of 50% over last year representing a new company record. Foreign exchange positively impacted EPS by $0.08. GAAP EPS for the quarter was a $1.15 compared to $3.02 in the prior year, representing a 62% decrease.

Our GAAP EPS results in the second quarter of last year benefited from a favorable realized and unrealized gain on our investment in ChemoCentryx. Q2 revenue was 224.3 million, an increase of 21% year-over-year on a reported basis and 19% on an organic basis for exchange. Foreign exchange translation had a favorable 2% impact on our revenue.

Our strong growth in Q2 was fairly consistent across the globe, ranging from the high teens in the U.S. to 25% organic growth in China. By end market biopharma growth was very strong at over 20% and it was nice to see Academia continue to improve grow in the low teens during the second quarter.

Moving on to the details of the P&L, total company adjusted gross margin was 71.5% in the quarter compared to 70.6% in the prior year. The increase was primarily driven by favorable volume leverage.

Adjusted SG&A in Q2 was 25.2% of revenue, a 310 basis point decrease compared to the prior year and R&D expense in Q2 was 7.5% of revenue, 140 basis points lower than the prior year.

While our adjusted SG&A and R&D spend both increased sequentially and compared to the prior year, a tight labor market in the life science space did not allow us to feel all headcount additions to the team at the pace we'd originally anticipated.

Given the continued improvement we are seeing in our end markets, we still plan to fill these positions and continue with investments to position the company for growth going forward.

The resulting adjusted operating margin for Q2 was 38.7%, an increase of 530 basis points from the prior year period and a 50 basis point sequential improvement from Q1. Looking at our numbers below operating income, net interest expense in Q2 was 3.4 million, decreasing 1.1 million compared to the prior year.

The decrease was due to a continued reduction of our bank debt during fiscal 2021, as well as lower floating interest rates. Our bank debt on the balance sheet as of the end of Q2 stood at 231.5 million.

Other adjusted non-operating expense was 1.3 million for the quarter, compared to 2.5 million expected in the prior year, primarily reflecting the foreign exchange impact related to our cashpoint arrangements. For GAAP reporting, other non-operating income includes unrealized gains from our investments in ChemoCentryx.

Moving further down the P&L, our adjusted effective tax rate in Q2 was 20.6%, 120 basis point improvement over the prior year, with the improvement primarily driven by geographic mix. We expect our effective tax rate going forward to be consistent with Q2 barring no changes in corporate tax law.

As Chuck mentioned, during Q2, we made a strategic equity investment in China based Eminence, a company focused on providing media as well as custom cell line development and media formulation services to the Chinese biopharmaceutical market.

$130,000 non-controlling interest line item reflects one-month loss from the portion of Eminence which we do not own. The impact to other lines of the P&L as a result of consolidating Eminence was immaterial in Q2. Turning to cash flow and return of capital, a record 89.3 million of cash was generated from operations in the quarter.

In Q2, our net investment in capital expenditures was 11.4 million, primarily driven by the completion of our new GMP protein factory. And during Q2 we returned capital to shareholders with 12.4 million of dividends. We finished the quarter with 40.3 million average shares outstanding.

Our balance sheet remains very strong with 283 million in cash and short-term available for sale investments and a total leverage ratio of well under one time EBITDA. Next, I'll discuss the performance of our reporting segment, starting with the protein sciences segment. Q2 reported sales were 172.2 million, with reported revenue increasing 22%.

Organic growth increased 19% with foreign exchange having a favorable impact of 3% on revenue growth. Within a segment, a strong growth was very broad based, with double-digit growth in nearly all reagent assay and instrument platforms.

As Chuck described in his remarks, platforms of Noble mentioned include Simple Plex, Simple Western, Biologics, and cell and gene therapy, especially pertaining to GMP proteins. Operating margin for the protein sciences segment was 46.6%, an increase of 360 basis points year-over-year, due primarily to stable volume leverage and cost management.

Turning to diagnostics and genomics segment, Q2 reported sales were 52.5 million, with reported revenue increasing 20%. Organic growth for the segment was 19%, with foreign exchange translation having a favorable 1% impact on revenue. Similar to Q1, our genomics division led this segment in the quarter.

We experienced strength across the entire ACD branded portfolio, with micro RNAscope, Bioscope and our diagnostics partnership with Leica being an honorable mention.

Also a driver of growth for diagnostics and genomics, Exosome Diagnostics Q2 revenue increased over 100% from last year, with higher collections for Medicare, private payers, and patient cash collection driving the year-over-year increase.

As Chuck mentioned, our diagnostic reagents division continued its growth streak by executing on COVID related opportunities to offset the headwind many of its traditional OEM diagnostic customers are facing with patients forgoing routine visits to the doctor.

Moving on to the diagnostics and genomics segment operating margin at 15.5%, this segment’s operating margin improved from 2.2% reported in the prior year. The increase reflects stable volume leverage in our genomics division, less dilution from Exosome Diagnostics, as well as strong cost management.

In summary, our fiscal 2021 is off to a great start with 15% organic revenue growth during the first half of the fiscal year, our results thus far have demonstrated that our portfolio of products and solution offerings are more relevant than ever to our customers who are on the front lines of diagnosing and developing cures for disease.

We believe that the current pandemic has only strengthen the resolve of our customers to accelerate their great work and we will continue to do everything in our power to provide them the tools to help them succeed. Thus, we see the current momentum of our business continuing in the back half of our fiscal year.

However, to support our customer’s needs beyond the remainder of this fiscal year, we need to catch up on our investments and our product pipelines and post sales service and support while continuing to invest in customer engagement activities, especially those of a digital nature.

We start to make progress with these additional investments in Q2, but intend to accelerate back to our plan in the back half of the year.

If successful, these investments may slightly lower our operating margin from its level in the first half of the fiscal year but will position us well for our long-term strategic plan of continued double-digit growth for years to come. That concludes my prepared comments.

And with that, I'll turn the call back over to the operator to open the line for questions. .

[Operator Instructions]. And our first question is from Puneet Souda with SVB. Puneet, please proceed with your question..

Great, thanks and Chuck, congrats on the strong quarter, impressive growth here in protein sciences and across the board.

First of all, could you provide sort of the contribution that we're seeing from GMP proteins and cell and gene therapy and sort of how should we think about that for the full year here given the momentum that you're seeing so far?.

Yeah sure, well, we're not going to give too much grill in the way of detail. We've been talking about throwing 100%. We've talked in the past of being a $30 million type portfolio with most of it being serious right now. And we're pretty much a run rate on protein's at 10 million and we gave you the growth rates in there.

We have the ability to increase capacity -- to increase -- I guess we make here at the headquarters by a factor of four if we need to. So we're good while we take the time to qualify the new site, which is going along really well.

Again, we've talked in the past about this 10 million in GMP approach growing to maybe 20 million next year and doubling in after that and then hopefully it really starts ramping once we start getting the production side of the therapeutics as they come out the back-end of clinical. The rest of the portfolio, it's kind of hard to say.

We had a great quarter for both acceptance, for both Cloudz and for TCBuster we talked about. We're getting an awful lot of new revenue to get a look at these technologies and new preclinical with so we're pretty excited. The team's pretty excited, the best quarter we had for TCBuster. We're actually working on expanding the site already or making it.

So it's a bit of a surprise so far. So it's kind of hard for me to tell you what it is going to be next year, but I think probably double what it is this year and probably double again next year after that. And as we've said in our five year outlook here, in our $1.5 billion goal, we see a $300 million business is what we see.

So it'll be consisting of a bunch of components, 150 or so at least in GMP proteins but the rest is sort of between Cloudz, TCBuster, instrumentation, ACD for technologies for spatial cell analysis, Ella testing for QC testing and workflow, all these bits and pieces, roll up to 300.

And, we're probably a year away from getting any more real -- doing a real detailed guesses on just what the recipes look like. I think the safest one is a GMP protein base right now..

Got it, that's very helpful. On Ella, this is a really strong quarter again, I think you've pointed that out in the past couple of quarters too. Obviously that product line is gaining significant traction here. Can you give us a sense of where this business could be? I mean, this is competitive ELISA market after all.

So where could it be and what are the other key initiatives that you have in including the 510k approval that you're submitting for? And in that same context, if you could just help us understand, I mean, there's quite a bit of momentum right now in proteomics. Obviously, Bio-Techne is core to proteomics.

You are one of the leaders across the board in antibodies, proteins, cytokines and broadly across proteomics.

So maybe just help us understand where that could -- where this business could be, the protein sciences business overall and the proteomics business could be overall and sort of longer term and five-year timeframe?.

Well, it's growing beyond our expectations and clearly we're super well-positioned in proteomics and as the wave of research hits and this golden era keeps growing and in the end, money is siphoned off these stimulus plans for more pandemic relief and pandemic research so it never happens again we're going to be a big beneficiary.

We're seeing -- we're really seeing a lift in every part of our business in every geography, it was just astounding. I don't think I've ever seen a more green dashboard so in my career. It's hard to pin down what's COVID and what's just research.

Now, we've dug into what's going on with our customers and they're certainly bigger biopharma are investing more, they're taking the cash, the ones -- the vaccine makers are obviously doing more. Companies that are doing well off COVID are taking that cash and doing more R&D. And where there's more R&D and more research, we're benefiting.

I've always said that Simple Flex was a sleeper, right and it had for a few years now. And, if it keeps growing at a near 100%, it's going to be really big really soon. So we've now -- we're now well over 500 instruments placed worldwide, which is a lot. This is an amazing machine and it just does a lot for the money.

It is just an amazing piece of technology from an amazing team that has worked on it for many years before we acquired the company. I think that was seen by Micropoint early on in China, and we're on track with their clinical and this could be -- that deal alone could be $100 million of revenue in three or four years if they hit their targets.

This is a guy that did Mine Ray so he has a lot of credibility. He is very interested in making a very standardized patient monitoring platform for large hospital systems in China and there's a lot of them. We are taking through the 510k process here in the U.S. so we can try to elicit more interest like Micropoint in China.

Micropoint is going to do all the CFDA themselves. They're experts. They're doing -- they've done the panels, they're doing everything. Here, I don't know -- we were probably not be able to do all that ourselves.

We'll do the 510K, we're going to do it off a standard analyzer, something well known, something we can get to the system, and we are talking to potential interested parties. But this thing has got legs and it's got legs in neuroscience, it has got legs in oncology, it's anywhere that proteomic needed to be testing biomarkers this is the machine.

As you know, the competition is out there in a multiplex format, starting with Luminex, we're partners with them as well, but we don't have crosstalk with our platform. And now we're increasing the channels. So we're at eight and we maybe could go higher.

But at eight, that's kind of sweet part, three point and they have eight channels with no crosstalk with the type of pseudo noise we have with this machine and only one hour sample to answer, it's kind of unheard of. Of course other is Mesoscale.

I think we've got some work to do to crack where Mesoscale really, really hit because they've got a full workflow with software and it really is integrated into the workflow of their customers. And we've probably got more of a standalone box. We've got to get better at that piece of it and we're working on that.

And then, of course, there's the whole clinical side. This thing really could be a point of care machine. We're working on a 4x8 cartridge, something that you don't have to queue up a lot of tests in order to run it. And anyway, I just I see a strong, strong future.

And you asked what it could become, I think this is $200 million to $300 million our business in five years, to be honest or more. It could be much bigger, it depends on the acceptance and how well we keep diversifying into new applications.

But, automated ELISA, multiplexed based proteomics, bio biomarker research it's as you just said, it's all the rage right now. It's accelerating, not leveling out. So we see a strong future in this platform. We're not surprised by the 100% growth, even though this thing is already a big platform.

It is big as anything we hoped we had in the original protein Simple segment including Simple Western, now it is getting there. Keep strong, it is going to be the biggest very soon. .

That’s super helpful Chuck, and thanks for all the details. And if I could squeeze last one in for Jim. Jim, I appreciate the investments into Eminence, and obviously the GMP facility which is delivering growth now. And, when you look at on the acquisitions front in organic growth, we just -- we have not seen much on that end lately.

Is it largely a function of the valuations in the space or anything else or a certain specific areas that are sort of more challenging versus attractive and just walk us through your assumptions there because obviously that's an important part of what Bio-Techne has done in the past?.

Yeah, what I'd say on the evaluation front is that, the evaluations have been a challenge for many years, if that's really nothing new. It's really the ebbs and flows of the deal flow and what's coming up available and I think for a lot of 2020, probably the pandemic being a good reason why the flow wasn't as strong as it had been in prior years.

But in the last several months, we're starting to see that turn around and seen a lot more deal flow, a lot more interesting targets. So, it's hard to predict because there's a lot of stars that need to align but I would predict that we will see more activity by us on that front in the remainder of calendar 2021 we saw last year. .

Okay, great. Okay, thanks guys. Congrats. .

Thanks Puneet. .

And our next question is from Catherine Schulte with Baird. Please proceed with your question..

Hey guys, congrats on the strong quarter and thanks for the question. I guess first, just as you think about the outlook for fiscal 2021, last quarter you talked about maybe a 10% to 15% range for the year.

So just curious if you had an updated thought on where you should end up in that range or if we should be thinking about a new range, given the strong performance you saw this quarter?.

Sure, I'm not sure who was noted was this morning talking about clearing 15% plus for the year. We've stayed away from that. We certainly were bullish on ending up double-digit again. We left our comments at continuing momentum and the momentum is 15% to half year. And we have the easiest comp ahead of us for the rest of the fiscal year.

So you can do the math from that but yeah, we're pretty bullish continuing at the levels we're at or even better to be honest at this point..

Okay. And you've talked about some research labs, perhaps needing to buy a second version of things given social distancing and building out secondary labs.

How much of the rebound that you've seen do you think is related to perhaps some of that stocking or build out dynamics?.

There is a little bit of stocking. After last quarter and in these below results and we don't have much COVID in our numbers yet. COVID is still coming for us hopefully with serology. We did a big deep dive really globally and what the hell's going on and why are we doing so well and so we did it.

We really did an account by account customer by customer breakdown, by segment of how we are doing and why. And there's really no silver bullet. We're up with vaccine makers for obvious reasons. We're up with biopharma for a lot of reasons we talked about, but there's been more OEM work as well.

They're all having a pretty good year, so they're outsourcing more so we've had more customer given to us. Academia has been certainly the duplicity issue and some surge comeback and maybe some budget flushing on a multiple fronts to be honest, we discovered some I think not material.

It's not like it's half our growth or a third or fourth, but there's a little there. And it's really a sum of the parts is what comes down to for us. So, no silver bullet, it's not all COVID, it's not all anything, but it is a rising tide, really that's just research is doing really well on all fronts for us.

We've been -- we're perfectly positioned as Puneet said earlier. I mean, in proteomics, it's just where we are. We're in the right spot right now. And, whether you're buying antibodies to make COVID tests or you need overflow help because, you're stacked with working capacity to develop vaccines or your academic institutions that are staggering.

You're building out new labs and you've got to buy more equipment, preferably equipment that has its productivity inclinated like ours, not so expensive. That's kind of where it's all coming from. And in our reagents too it's broad based.

Even ELISA, I mean one thing that we can always go back to and just look at our good old ELISA kits, just cute kits, 35 years old and they kind of ebb and flow with projects and kind of health of a project in biopharma with best year in years. So it just kind of speaks to the broad based growth. And we're not the only company talking about it, right.

Everyone's riding its wave right now and we just happen to be riding a little higher than most, which is great for us..

Okay.

And last one for me, just on the Exo kidney transplant test, you talked about publication in the next few weeks, what's the path forward for that test and how should we think about potential launch timing there?.

Yeah. I really was hoping that we'd be talking about that publication by now. It's -- it really is imminent, it's should be days, not weeks, but who knows? The data looks fantastic. If it had been published, we could talk about the data. It's very good data. It's the first peer reviewed article, we need to get a second, we need to do an outcomes test.

There's work to be done before we start going after an LDT approach or working with a Mac or get started, but we're on the path and we think we're at a year or less here of getting into early access selling this thing. Probably a good year away from a crosswalk or anything. But, we'll see -- we're also looking at partnerships as well.

And, we're also looking at the other Macs, not using the same one we did prostate. So we got a lot going on here. It's just been going very well. That platform is astounding. It works so well, it's amazing. As you know, Exosome we feel is the best in class for liquid biopsy and the data is going to prove it here when you start seeing some of it.

And, there it's a big market. There aren't the same kind of barriers like we have with prostate and urologists. We have organ centers and they're not so many of them, so they're not so hard to go after in terms of commercial attack. And, it's a big need.

I mean, it's a horrible thing to have to be given a new kidney and then lose it or to damage it through biopsies or testing it as you're worried about rejection. And half of all these are rejected within 10 years. So this is a tool that really has been needed and it's pee in a cup and it can be sent in.

It doesn't have to be done with a non-contact with phlebotomist or something. So, we see a lot of upside in the price, the cost first and the price second is going to be I think really good compared to what's out there now. .

Okay, great. Thank you. .

And our next question is from Alex Nowak with Craig-Hallum. Please proceed with your question..

Great, good morning everyone. So the vaccines are being administered now, more coming in soon. It looks like immunity to a particular variant actually might last pretty long, but then we're seeing new variants that come out to lower the overall efficacy.

So I guess my question is how has the vaccine rollout and the emergence of these new variants changed your thinking around this quantitative COVID antibody tests? And then you mentioned it in the prepared remarks for where do you stand with partnering this test with the vaccine companies and then just separately, the diagnostic labs?.

Yeah, well as you know, Alex, we've had this test kind of ready to go since late last spring. And, there's been I guess a lot of flutter and cluttered with the FDA and a lot of poor UAS that came out early on unqualitative versions of serology. And, and there's a bit of a hill to climb here for getting accepted.

There won't be real demand until there's enough vaccine out there, enough people vaccinated to create that demand where they're calling their doctors to find out how do I find out if I'm immune or not, can I see my grandkids or not? People want to go back to concerts and get on planes and get on trains and be in malls again.

And no one's going to feel really good until they know they feel safe. And this is without a variant, this is without a mutation. As you know we're tied at the hip of Mount Sinai and they've got the longest range testing known here on immunity and we're running at like seven or eight months.

And they don't see a reduction in immunity with antibodies yet. But, the powers to be there do feel that it'll follow the Corona family and it will be variable with individual but between probably one and two years of immunity, but not forever.

If it doesn't mutate, that means a booster, if it mutates then we're kind of looking at a flu every year kind of thing, right. Then we're trying to hit a moving target like flu does, which is harder. All that speaks to the more of a need to have serology. People are going to want to know consistently are they immune.

Do not be surprised if in a year or two on your app, on your phone, you're carrying an immunity passport and how you're doing with COVID so you can be led onto whatever or led into whatever. All that technology is coming and it's not coming in one full flush, which is a problem. Everything's slower than we want. Vaccinations are going slow.

By summer we're not going to be probably at herd immunity yet. We're not going to be at a point where enough people are vaccinated we're going to feel safe. There's going to be a growing and growing demand for serology and we're hoping to get our quantitative claim be the only one given by the FDA very soon. All the data is submitted.

We have actually from WHO -- we have the sample that'll give us the means to actually quantitate our standard curve to their, so there can be an international standard that the FDA is looking for to get behind. So, we're right in the thick of it, and we've got great partners with Mount Sinai. So, I do expect we'll get through it.

And, over a year we probably will be the only one, but we will be a very -- we'll be the first one, we would be a very good one. But I think serology will be on the rise. I think, people in PCR, I think it's not going away either. It's going to be a much slower tail than people think. You've probably heard that in another call this week.

Unfortunately, we're turning the curve but it's going to be a long tail on getting back to normality. And, then we're going to get a piece of this probably, nothing to the extent of some of the companies are there. They are answering the question am I sick? But, we're a research company first, this is all gravy for us.

We expect to be helping and we're going to have a great piece of science to help with..

Thanks, Chuck. That's very helpful. Maybe to expand on the more macro life science funding flush that you're seeing here. So right now, Washington is hashing out the COVID stimulus plan.

What specifically are you hearing in that plan that could be funded, that could be deployed for life science research funding and for how long could that benefit lab? And then I guess the same question, but directed more towards China, their plans with the next five-year plan.

Are you hearing anything in particular there?.

I will start reverse. China's not really good at laying out what they're going to do, but the demon we're looking at, I think the 14th version of a five-year plan, what typically happens is year one is a little bit soft and year two it kicks into high gear.

Year five is a bit softer too and we had a bit of we'll call it budget flush over there too, because are also changing some tax consequences there. So I think everybody that had strong instrument results in China, probably we're seeing a little bit of pull forward from that.

Haven't seen him much mentioned, but we certainly saw it and we'll admit to it. But I think, it's going to be really good. The next plan for China, I think healthcare is still way behind where they are in other parts of their economy and their industry.

And, it's a lagging industry and now more than ever with COVID and they certainly don't want to see a pandemic hit there that people want health care there. I mean life sciences is on the rise still. That's why we continue to see 25% or better growth and, we will for a long time, I think. .

I think as far as our government is concerned, whether it ends up being 600 million more or a billion more, or 1.9 billion, there's going to definitely be portions of this that are given as grants and been done for pandemic research and which really is infectious diseases, which there really hasn't been a whole lot of.

Most of the NIH is really focused more on oncology neuroscience and different areas like that. I mean, as I've mentioned often, when's the last time you paid more than a dollar for an antibiotic. I mean, if there's -- we're behind in a lot of areas around infections and I think there'll be a lot of overflow in a halo effect from stimuli.

I think that's one reason that's the official NIH budget for this year. Now it looks at looking at 3%. I think they're all holding off until they see what's going to really drift out around these stimulus packages into the science community, which I think there'll be some it's hard to quantify.

I think there'll be some, if there's not you'll see, you'll see more, more, uh, pressure for the NIH to, to, to get more, I think..

Okay, great. Thanks, Chuck, I appreciate it..

And our next question is from Dan Arias with Stifel. Please proceed with your question. .

Good morning guys, thanks. Chuck, on the GMP proteins business, you've talked about pharma customers looking for a provider that can handle some pretty large orders. They're multi-million dollar lots.

Do you have some of these in the pipeline or as semi firm commitment at this point? And then when we think about what you're prepared to do in terms of supplying here in initial days with the new facility, what is the plan for scaling up that portfolio, it sounds like the idea is to kind of start off with a couple of key molecules, and then work from there, so I'm just curious what the portfolio expansion ramp looks like and whether that's what you really need in order to sort of drive the acceleration that you've talked about recently?.

Sure, well we landed our second and these contracts are -- they started years ago with these guys coming to us and asking, we have been buying proteins from you forever and we buy them in small lots and we're probably a large customer for you at maybe a $0.5 million a year.

If we get into cell and gene therapies and we need proteins as part of the workflow, we need something like probably 10 or more million a year, could you do that and back then all we could say was, no, we couldn't.

So now fast forward to here, this is more building a factory, even there we've improved our current site and headquarters that we can do probably upwards of about $40 million or so annually of GMP proteins here.

So we've done a lot of good jobs and that’s going to fill the gap while we qualify this factory and wait for the large orders, because we're not going to have a large venue, a large catalog here. We're going to have you making far less than 50 different proteins there.

We are qualifying on the major runners and you can guess what they are, they start with an IL. And we'll go from there. Both these first two customers have needs of over 10 million a year, and we are in negotiation with at least a half a dozen others. And I won't tell you who, but one of them has a need for $50 million a year.

What we've done with these customers, because it's hard for them to give us a forecast, we've talked to way these contract is that we are demanding 95% of their volume.

Whatever they ended up needing, it's really an unknown right now, how these things take off, when they come out, what the forecast is going to be, what's the ramp, how do we plan for it? And they know it too.

They know it's frustrating for us because how do you prepare? So what we've done is turned our contracting towards we want to see a range, what you need will be there. We don't know when, but we expect 95% of your volume that's contracted. So that's kind of the gist of how we're doing business.

And these call them eight customers would swamp us out for a year if they hit their forecast, just these and there's another 50 to 100 after that. So we're not concerned about filling this factory eventually..

Yeah, okay. Okay and then maybe on the epi side, appreciate some of the comments that you made thus far.

Leaving aside the dark visit dynamic and just the challenges related to the pandemic, what do you think the things are that the urology community needs to see this year in order to really feel like this is a test that's sort of a must use option rather than a nice to have option, is it additional data in publications, is it being seen by a sales rep now that you've kind of solidified the use case a little bit, I'm curious about what you think at this point, given where we are really kind of fulfills the dream here?.

I know your latter comment. I think the utilities, the outcome studies, that's what the large payers are looking more for. And we're probably halfway there and we are very close to landing one of the majors, can't say that we have either but hopefully it's eminent.

And when we get warm, we'll get more, but that's what they're looking for is the outcomes, how does it really save money for the industry, right and save more lives. The urologists, we've sold through roughly 2,500 of them and there's about 20,000. So we've got a lot of work to do. And of that 2577% are reordered. So once they're in it, they believe it.

I think it really is more of a commercial issue of getting in front of them again and selling. And I think the home kits is still in part of the GAAP and certainly it is helping a lot. We have some great KOLs [ph], we're going to get back and front of NGS here in February for reconsideration, that's going to help quite a bit.

I think that'll be a positive story. But I think it's a grind. I think these urologists, like a lot of different specialty doctors, they're hard to convert. I'm sure -- I'm certain a large portion of them enjoy their $1,500 a piece biopsies and know that they're mostly negative and don't care.

So it's just the state of the business that we have to grind through them. We have to almost shame them into moving into this methodology because it's better for the patient, even though it's less revenue for them. And the better urologist get it and they're on board and we're converting them. But, it's not going to be a one-year event here..

Yup, understood. Okay, very good. Thanks, Chuck. .

Next question is from Jacob Johnson with Stephens. Please proceed with your question. .

Hey, thanks. And I'll add my congrats on a really nice quarter. Just Chuck one question on the outlook for this year, and I want to make sure I'm clear on your comment earlier. You're lapping I think a similar organic growth quarter or gain a growth number next quarter, and then obviously much easier comp in the fourth quarter.

Is there any reason organic growth shouldn't be at this 19% level, like this quarter or potentially higher at the next couple of quarters?.

I'm going to let my esteemed CFO, answer that one for you. .

Yeah, hi Jacob. The way we're thinking about the forecast is more about the clear momentum we have in the business and the sequential of that momentum going forward as opposed to year-over-year growth rates cause it gets wonky, especially in Q4 for us with what happened in Q4 last year.

So the way we're thinking about it is that the momentum from the absolute revenue perspective, continuing, if history is any guide usually our Q3 and Q4 -- fiscal Q3 and Q4 are slightly higher than our second quarter if nothing else, because there's less holidays within those quarters as they are in November and December timeframe.

So that's kind of how we're thinking about it. We think the momentum that we saw -- that the step up in momentum that we saw in absolute terms in Q2 is with us, at least for the rest of this fiscal year. And so that's kind of how we're thinking about the forecast going forward. .

Got it. Thanks for that, Jim. And then Chuck you made some interesting comments on TCBuster earlier.

It sounds like business development efforts are going well there, can you give us any more details on where that offering stands, maybe how many customers you're working with, any color around that? And then you mentioned the potential to maybe add some capacity.

Would that suggest that the opportunity here could be greater than I think that kind of 50 million revenue aspirations you've previously outlined?.

I think it's more about the ramp and acceleration to that 50 million. I don't think we know enough yet. The gene editing portion of the workflow is if not the most expensive, not the most valuable part of the workflow. It is a critical part obviously and we'll see.

Given the domain of customers is a little over a hundred as you know, and we are certainly working with a couple dozen and we are certainly sold to more than half a dozen, quite a few. And they are coming in bigger chunks. So they get access and do a trial, it's hundreds of thousands of dollars. So, we're in the millions now for revenue with TCBuster.

So it's starting to get there. This thing's going to happen. Unfortunately, it's a critical part of a brand new workflow for a cell and gene therapy that's radically different than using viral approaches. So it's kind of next generation.

So we've got to kind of grind through getting a half a dozen, two dozen of these guys lined up and get them into their clinical and then get going on it. I think this one really is a J curve for five years from now to the 50, 60, or whatever it ends up being.

But, it's going to -- it's also going to probably be growth rates of 50% to 100% starting now for the next two, three years until it grows even faster as it really ramps as these things go into production. .

Got it. Thanks for taking the questions. .

Our next question is from Patrick Donnelly with Citi. Please proceed with your questions. .

Hey guys, thanks for taking the questions. Chuck, maybe just on the ACD side, nice to see that back to growth pre-pandemic, even beyond that.

Can you just talk a little -- more color on what you're seeing in that market and expectations going forward again, certainly feels like it's found its footing here and what can we expect over the next few quarters there?.

Yeah, I think given the likes of other companies in the domain Nanostring and 10X and others, spatial and they're all helping. They're helping create an industry, right? So we're all working on creating a spatial analysis and there's a big need for spatial analysis in the workflow for all research and proteomics for one as well as other areas.

So it really comes down to that. If you need to do down to single cell analysis and you really care about the morphology of your tissue sample, which is precious, this is a great technology. Also other technologies that use antibodies, sometimes you can't find the antibodies or they aren't working well, or they're not producible.

Looking for a gene is much more -- it's much more on or off, it's there or not. And so this technology with the Z probe [ph] that could detect and get the signal it's full-proof. So, that's why we're seeing the lift. I think a lot of our softness, couple of years ago, we had to reorganize Europe.

Europe is just on fire now, the plans really are definitely working in Europe. Europe is doing great. We had over 20% growth in Europe this quarter. So it's a nice thing to see and our genomics division had a big part of it. We're also seeing good growth across the board in Asia as well, although smaller starting to catch on.

And, we've mentioned RNAscope and base scope, they're also growing nicely and our High Plex, our multiplex version is starting to grow. We'll, get an FFP version of the High Plex out here soon that will really be really needed, I think and compete well with what's out there.

And then of course, DNA scope is coming at the end of this fiscal year we hope. And, that's another platform. So it's a great pipeline. It's got a lot of legs. Again, we see a $200 million to $300 million division here with this technology in our five-year plan and it keeps growing at the near 30% growth. It's back to a -- it won't take that long..

Yes, no, that's helpful. And then one for Jim, just on the margin side, can you just talk through kind of how we should think about that going forward, including, the Exo impact. I know that Medicare shifted over to accrual based accounting this year.

So maybe just the impact of Exo on the margins and expectations as we approach kind of that 40% you've talked about for a little while here. .

Yeah. And I think we've shared this last quarter. It's a similar story this quarter, if you exclude Exosome from our results, the total company would have been in the low forties with regards to our adjusted operating margin. So that'll give you some insight as to the dilution impact of Exo currently.

With regards to the margin profile, second half versus first half, I mean. The margin performance has far exceeded our expectations, but mainly because we are behind on our investment plan, as I've mentioned even last quarter, right.

So, it is absolutely important that we continue to invest in our R&D pipelines and our customer facing and customer service post sale service in order to maintain this momentum.

So, we do expect to get caught up on those investments and if we are successful in doing so, our margin profile, we think will be slightly less than the back-half than it is in the front half. It's still very, very strong compared to last year.

And ahead of plan of where we thought we'd be at this point in time and track to a total comfy performance of North of 40% in the next couple of years..

Understood. Thanks guys..

And we have reached the end of the question-and-answer session, and I'll now turn the call over to management for any closing remarks..

Well, thanks everyone. It was a record quarter. We enjoyed it. We enjoyed this call. We know they're not all like this. We hope we don't have one of those other kind very soon. And, we look forward to seeing the next quarter and it should be a great second half this year we think. So let's tune in again next quarter, thank you. .

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation..