Azenta, Inc. (AZTA) Earnings Call Transcript & Summary

Okay. Thanks, everyone, for joining us this afternoon. A real pleasure to have with us Brooks or perhaps the last day of Brooks and the new day for Azenta Life Sciences. We have the management team here; CEO, Steve Schwartz; CFO, Lindon Robertson. I think we have Sara, who heads IR for Azenta in the background. Maybe the one thing from my perspective, there are a very few life sciences companies who have transitioned over the past decade, Danaher and Agilent gets turnaround. 10 years ago if I talked Brooks would have transitioned into a life sciences powerhouse with a niche, I don't think there were many believers. But it's amazing what you guys have done with this transition. So with that, Steve, Lindon, I'm going to hand it off to you to run through the deck.

Great, Vijay. Thank you and hello, everyone. I'm Steve Schwartz, and I'll kick off. Lindon and I will share responsibilities today. But we're really pleased to be here at the Evercore ISI Health Connect Virtual Conference and we're delighted to have an opportunity, Vijay. So thank you. As we go through our remarks, I refer you to our safe harbor statement in more detail at www.brooks.com and momentarily be www.azenta.com as tomorrow, indeed we begin to trade as Azenta and we are launched officially as Azenta Incorporated. Today, we'll just give a quick look at the company. We'll give you an overview of Azenta Life Sciences, who we are, what we do, what are the drivers of a tremendous market opportunity that we have. Also how we don't just have solutions for the market, but really unique solutions in a company, as Vijay mentioned, that's very different from one that you'll find in any other configuration with a really unique portfolio. And then Lindon will talk about the growth prospects and our forecasts for outlook as Azenta. But first, I want to introduce you to the company. We're a $0.5 billion life sciences business, and we'll launch tomorrow officially as Azenta, a very strong growth rate, and we're a profitable company. So we think unique in many respects, maybe none more so than the fact that upon the finalization of the transition, if you will, the sale of our semiconductor automation business will have a balance sheet with a net cash position of more than $2.5 billion to put the work to continue, what's already been tremendous growth in the life sciences business that we started about 10 years ago. So I'll give just a bit of history because it's important to understand how we got to this point and how Azenta Life Sciences launches, not just with a tremendous amount of momentum but with an experience base and a customer base that gives us great confidence in our future. A decade ago, as Vijay mentioned, we were a 100% semiconductor capital equipment business. We had 2 core technologies. We performed automation in controlled environments literally and the movement of semiconductor wafers in the manufacturing process. And we had a technical capability in ultracold, literally the mechanical making of ultracold temperatures that was used for cryogenic vacuum capability. And it's these 2 core technical capabilities that we applied to various verticals and we found in the life sciences space, a burgeoning market for the management of biological samples in automated systems, but at ultracold temperatures. So we acquired a few of these small companies that were serving really distributed marketplace. We applied our engineering and core technical capabilities and we've built our own version of these large automated stores that store millions of samples at ultracold temperatures with automated systems as a core part of the foundation of the product. And in doing so, by acquisition of these companies and developing our own products, we had a customer base that numbered in the hundreds of customers who use these automated cold stores. And as we got experienced in the customer base, we got to learn a lot more about how they manage their samples and the purpose for automation and how they had to manage cold but also workflow. And in doing so, with experience in the customer base, we also understood that the customers would keep samples on-site in automated stores for things that were live and needed to be worked on, but they had a demand for requirements for storage of samples for archive purposes or for potential future use that they would send off-site to biological repositories. And so we understood this is a valuable part of the offering in terms of how customers manage samples, and we acquired the largest independent biorepository company, biostorage technologies in the end of calendar 2015. And by that time, after a 5-year period, in addition to the semiconductor business, we had $100 million cold sample management business that included automated cold stores and archived management of samples. So we had a good attachment to the customers and understanding how they manage samples in the workflow. Moreover, it gave us a look at what else the customers did with their samples, which included the interrogation of these samples from time to time, the performing of genomic analysis and ultimately, the provision of data along with these samples. So as we learned more about how to add value to this customer sample workflow, we also acquired a company, which was a world-class provider of genomic services GENEWIZ. And that transaction took place 3 years ago in November of 2018. And we added this capability along the workflow for customers to perform genomic services to interrogate the samples. And also, we understood from the customer the value of the bioinformatics and data that went along with those samples and we acquired that capability as part of GENEWIZ. In addition, we also understood that customers had access to samples that they had by their normal sources or the normal ways that they could sample -- source samples, but they also had some demands for samples that they did not have access to. And recently, we acquired a company Trans-Hit Biomarkers to provide the sample sourcing for customers who needed things that were outside of their collections or for very rare disease kinds of capabilities. So over a 10-year period, we developed a $500 million company, Azenta Life Sciences, which we're talking about today as a stand-alone company. So some facts about the company. We're a global player in the world of life sciences, where you find concentrations of life sciences activity, you'll find Azenta Life Sciences from a genomic standpoint, from sample and repository services, and we have manufacturing capabilities for our product lines at various locations around the world, both from the standpoint of managing the supply chain and because of the sites of the acquisitions that were part of our company makeup. We have a strong record of growth in the company. You can see on a revenue standpoint, the past couple of years, more than 24% growth. And the majority of this is organic growth. We have tremendous leverage in the earnings per share provided by growth in the gross margin and the top line from a revenue standpoint, and we continue to make operating improvements in the company, and we have tremendous momentum around the opportunity base, and I'll talk about that in just a minute. But to be $0.5 billion company, to be profitable and to have this kind of profitability profile, we have great hopes and promise for the leverage provided by the business model that we've created. So just a little bit about the portfolio. To summarize what we have is an entire life cycle capability to provide the customers from sample sourcing, formatting, to put it into automated storage solutions or into archived biorepository, the retrieval of these samples or samples that come in directly to us to perform genomic analysis, genomic and analytic services and then from a bioinformatic standpoint to be able to provide that data to the customer. And this is a recursive process, too. Sometimes the customer will retrieve a sample, perform measurements on it and put it back into storage. So this entire complex management of the sample chain is something that's a core capability for us and provides tremendous value across the spectrum of people who are participating in the life sciences market. So the thing that encourages us most is that we're a small player right now, gaining share at a rapid rate, but we have strong market drivers that really favor the capabilities that we've brought to market. So when we look at our genomic services capability and the sample management and formatting, we participate in a market that's a very strong grower. So low double digits grower here. Where the prospects we have is a $500 million company, looking at a $10 billion market, just enthuses everybody in the company about what our prospects are. But most importantly, the growth drivers here that are driving these particular segments are exactly where we've aligned our product and services portfolio. So the fastest-growing part of genomics in the NGS space in cell and gene therapy is exactly where we have our offerings, on the sample and repository services and the cell and gene therapy capabilities for ultracold storage, these are exactly where we placed our product portfolio. So in a strong growing market, we've positioned our portfolio around the fastest growers in these segments, and it gives us high confidence that we'll be able to sustain above-market growth rates -- substantially above-market growth rates here for the foreseeable future. Moreover, this sample management, this value chain, if you will, extends from research and discovery all the way through manufacturing and distribution. So across all segments of drug discovery, this value proposition applies in different embodiments, but every part of the drug discovery chain utilizes the capabilities that we bring to market. The key driver for us is related to the sheer number of samples that are stored. 20 years ago, when the genome was first sequenced, there were enormous sample collections of chemical compounds. And the storage here requires often the ability to automate, to be able to locate or do high throughput screening to be able to manage tens of thousands of samples at a time, but at the advent of the sequencing of the genome, the biological sample collections began to grow. And they began to grow rapidly. So today, by our estimations and the estimations of people who help us with the sizing, they are somewhere in excess of 2 billion biological samples stored cold around the world, and we're adding hundreds of millions of samples to these collections every year. So the sheer number of samples continues to grow, the complexity with which they need to be stored and the care with which they need to be stored is more difficult and to be able to perform automation in these controlled environments is a unique capability that we bring across this value chain. Finally, in the space of cell and gene therapy, the challenges get even greater. These are live cells to be frozen carefully to be resurrected carefully by a controlled [ sawing ] process, the automation suddenly becomes critical in the efficacy of these cells. And again, sample counts just continue to increase. The level of complexity that's presented to a customer really requires them to go to a provider like Azenta to help them to manage these incredibly valuable samples across the cold chain. And the myriad types of interrogations that go on from a genomic standpoint, make this even more complex and more involved, and it also requires them to store the samples and store the samples for longer because just because we can make a particular type of measurement today, 3 or 5 years from now, there may be another type of measurement that will be at the fore that we'll want to be able to retrieve these samples and make those kinds of interrogations as well. So we believe our strategic position is essential here in terms of how we capitalize on these markets. More than 50% of biopharma R&D is outsourced. We are a critical, very capable outsourced supplier. So we are ready to receive this kind of capability, and we're an enabler that gives them encouragement that they ought to be outsourcing more of this capability to a company like Azenta. We anticipate over the next 5 years another doubling of the number of samples that are stored cold, if not faster. I think all of us are aware of the incredible potential in and around cell and gene therapy and our offerings specifically address the critical aspects here from a genomics and storage and management standpoint. And anywhere on the globe, did you find any concentration of life sciences capability, you'll find Azenta teams that are serving those customers. So in terms of our solutions, we believe they're highly differentiated. First, we start with the portfolio, which is unique among capabilities that you'll be able to find from any single supplier. We also have a unique team. We have more than 400 scientists who help to manage from the sourcing side to identify a specific rare disease type of sample for the customer, all the way through the management of the sample through the value chain, the genomic analysis and interrogation and the bioinformatics that we deliver. So a unique solution backed up by an incredibly strong scientific team. We have speed and convenience that's unmatched in the market, we believe. The ability to turn to both locate samples to find them, to retrieve them, to provide the results to customers is an essential capability, and we believe a core capability of the company, and we have a broad product capability that we continue to add value to each and every year by identifying the next value proposition that we can bring to customers. I hear -- I show here a snapshot about our customer connections. So clearly, 20 out of the top 20 pharma companies use our capability, 1 in 3 molecular biologists use us. We're cited in journals. We have scientific capability unique in the world, we believe, and we have a customer list now that extends to more than 8,000 active customers in our customer base. And that's an enormous leap from the hundreds we have when we first got into the life sciences space now just 10 years ago. In terms of the revenue profile, when we look at this value chain and we distributed around the revenue breakdown, sequencing is an important part of the capability in this tremendous part of the value proposition. Next-gen sequencing and synthesis are our 2 fastest-growing segments. Sanger sequencing is steady and critical capability that we continue to offer and on the sample and repository solutions business, the management of these samples and tying this in on the value chain to the services that we provide, we believe, is essential. But we have about a 60-40 split between services and products. And on the product side, it's the formatting of the samples into consumables into manageable automatable consumables, if you will, and the ultracold stores that we provide. That's a really steady foundation, continuing to gain momentum in the marketplace as really the one-stop provider for the management of samples in and along this value chain. Moreover, we look at the repository services, the consumables and instruments and now some of these incremental ultracold stores. And these revenue streams now are pretty significant from a recurring revenue standpoint. So the balance is particularly strong. The amount of revenue that's recurring is a really good strong foundation and a very dependable source of revenue as we move to a business that's a relatively steady grower. And when we compare it to the semiconductor side, which is a little more volatile and have a little more volatility, it's incredibly stable from a life sciences standpoint, fostered largely by the recurring revenue stream from a majority of the businesses. We've grown the company with strong organic growth from every investment that we make -- continue to make organic investments to grow the business. There's plenty of market opportunity to gain market share for us to continue to provide offerings of higher value to customers, but M&A has also been a significant part of the growth story of the company. In the 10-year history of the life sciences business of Azenta, we've done 14 different acquisitions. And I call your attention here to, in particular, which is the time we're transformative. In 2016, I mentioned we acquired BioStorage Technologies, the world's largest independent outsourced biorepository company. At the time it was transformative for the company. We understood that by putting extra capability and by putting sales by putting business process by helping them to expand from a capital standpoint that we could reinvigorate their organic growth. Indeed, we did that. We made the investments in BioStorage. And we reinvigorated the growth here and now it's a particularly strong grower, and we've seen that, especially over the past couple of years, where we've had a critical mass of capability to begin to take entire collections from large pharmaceutical companies in the biorepository outsourcing business. Similarly, in fiscal '19 at the end of calendar 2018, we acquired GENEWIZ, once again, a transformative acquisition for the company, but one that provided tremendous opportunity for us to make investments in a company with a strong scientific and technical capability and we help them expand global footprint. In a majority of the 13 GENEWIZ sites, we've put in significant investments to increase footprint, to bring sales, to bring more capability to respond to customer demand, and that's paid off handsomely. We have a more than 20% grower in GENEWIZ. Actually was 20% grower for each of the 5 years prior to acquisition, and we've been able to sustain that growth, and it's been a tremendous contributor to the profitability of the company and also to the uniqueness of the value proposition. You see a lot of tuck-ins, which are normal course, part of how we manage the business, but we have a 40% growth here, which is a combination of M&A and organic growth, and we intend to continue this as we go forward. It's important to note that we have a $500 million business. The 14 acquisitions and the strong organic growth we provided came from $1 billion of invested capital in this business. So when Lindon and I look at this position that we are in right now, fiscal '21, we have a balance sheet that's about to have $2.5 billion business. We have a formula for how to do M&A, how to continue to add capabilities to the company. We believe that we're just in the earliest days of the opportunity here, small market share, growing rapidly and a balance sheet that's going to support continued growth here for the company. So with that, I'll turn it to Lindon to bring this together to talk about both the strategy and the prospects we have from a financial standpoint.

That's great. Thanks, Steve. So as we go into the future, it's going to look a lot like the past in terms of our model and our strategies. In fact, the strategy remains pretty consistent with what we've always executed. We're going to always look to be a leader in the markets we participate in, and we'll work every day to extend that leadership, whether it be on the organic build-out or on the M&A that we had. And we will be active in adding both with an eye toward margin expansion and, of course, using a balanced and disciplined approach. And we do describe ourselves and behave on very much with a ROIC based fundamental approach. And we'll say a little more about that. But this is our strategy of the past and for the future. In the disciplined approach to capital deployment, of course, we will feed our businesses with the CapEx and the R&D required, most of the CapEx is going into our services business. Our manufacturing business is very low CapEx, but our services business does require the expansion of lab spaces and freezer equipment as well as genomic analysis equipment. And we continuously watch this to make sure that our capacity is always ready to meet growing demands. And of course, our R&D is developing additional specialized protocols behind our genomics business as well as some of our products business and generally has ranged in the 4% to 6% of revenue. And then we've got our investments on M&A front going forward. And with the pending divestiture of the semiconductor business, the closure of that deal is still anticipated to be in the early months of the calendar year, that will land us with about $2.5 billion available for investments in the M&A front, and we will continue to look at these investments as a careful opportunity to expand our leadership, extend that leadership, expand our margins and to add value for shareholders. And meanwhile, we did share at Investor Day as we step into the life sciences stand-alone business model, once the deal is closed, we will prioritize all of our cash toward these investments. But meanwhile, we'll continue to pay the dividend up until we close the sale of the divestiture. But once we're done with that, we'll take all of our cash and put it into these investments for returns for shareholders. So we do carry a 3-year model in front of us at all times. And we've just practiced this as a discipline for the benefit of our shareholders to know what we see ahead. And also, it benefits us internally as we strive and focus our businesses to reach these objectives that we see on a long-term basis. These are only a milestone model. And it's built on purely what we own today. So we're not capturing M&A objectives. M&A would be additive to these models. And so what we shared a couple of weeks ago at our Investor Day was this 3-year model to 2024, that on the right, you can see adds up to about 18% growth. It's 16% to 20% revenue range in total. And if you look across the left, you can see that the life science products business is solid double-digit growth of 12% to 16% over that 3-year period is our expectation and the services side is 18% to 22%. And both of these businesses have a really strong, proven track record of being able to provide this growth, as you've seen in the earlier materials. Margin expansion is pretty modest in that it's flat to up 2 points on both businesses. And so where we've gained much more gross margin traction over the last 2 years, we're only expecting and modeling in this equation a modest expansion of gross margin. However, the EBITDA margins will be expanding handsomely with leverage over the operating expense and producing in total, something in the range of 26% by 2024. And I would emphasize, again, this is a milestone. It's not the end of objective. We believe we'll pass through that point, but by 2024, we'll hit that. The ROIC objective with the change of the company structure, we'll look toward achieving 12% by 2024, well ahead of our anticipated weighted average cost of capital as a life sciences stand-alone company. Putting it into numbers for those who are building models, I find it always to be helpful. And again, we have this practice to keep this very clear for our investors. So you can see the 16% to 20% revenue growth produces the $800 million to $880 million. The gross margins, in total, would stay above 50% here, 50% to 52%, and this is by 2024. And the EBITDA, if you look at that, is nearly tripling really building a quite nice source of cash generation as a total business. And again, showing multiple levels of leverage in terms of the bottom line growth above and beyond the top line. As we think about the M&A being additive to the business, we've got a strong track record in the past of many transactions that built the foundation for this transformation and that really build the $0.5 billion life science business that we are today. In my comments earlier, I mentioned that we do focus on ROIC. Our framework here is that we look -- that within 5, perhaps 7 years of an investment that we're looking for that ROIC to exceed our weighted average cost of capital. And that keeps a nice window frame for us to look through of constraints. And that is, if the price is too high today, it requires the model to produce a higher growth level to achieve that kind of return on invested capital. And so it's got a nice, healthy contention for us in a general manager that we're working on, depending on where the business being added may fall. [ Know ] that if we have to commit to a higher level of growth, we've got to be able to see it, have line of sight to it, commit to it and be rewarded on that basis. And so if we see it, we go for it. If we don't, then we work on either the price or we work on another acquisition opportunity. So it's a discipline that we've exercised over the last decade, and we think it carries us nicely into the future. We do provide quarterly guidance on a continuous basis, and the guide for this first quarter is the $130 million to $140 million of revenue growth. At the midpoint, it's about 14% to 15% year-over-year growth. And so a common question for me has been, well, this is a slower start to the 16% to 20% growth rate. But I would remind people that a year ago, we were seeing the height of our COVID consumables demand. And so that's where you're starting to see just a little bit slower, and I even hesitate to call it that at mid-teens revenue growth, but we'll start at this range, and we believe that it will be edging up as we cross through this year. And of course, it's producing EBITDA that's still carrying some weight of managing both continuing and discontinued operations. Of course, discontinued operations, most of the expense to disc op, but we're still carrying some overhead that is actively managing on behalf of the corporation. We will drop about 3 points of expense burden as soon as we separate the business. And that will be the beginning point. And as I've -- the other piece of guidance that we have provided on the more near-term is by the end of 2022, we expect the fourth quarter to be exiting closer to a 22% EBITDA margin, seeing the result of the drop-off of the extra G&A and also the growth leverage occurring above and beyond the operating expense. So this is mostly a summary of what we presented to you. And we believe it's a really unique life sciences business story, a unique investment opportunity, truly. The $0.5 billion revenue business already, high-teen growth and with cash generation already occurring and fording itself but also supplemented with a balance sheet of $2.5 billion once we have the divestiture complete and accelerating the growth and the leadership in the markets we participate in. And so with this, we really believe that the strength of the business model continues to propel itself, but we think the fuel that we're adding to it, we're excited about what we can add and bring in under the umbrella of Azenta Life Sciences. And so with that, I'd go to the last page, just to remind everyone, and Vijay alluded to this, that today is a big day. Tomorrow is a big day for us. Today is the last day that we will trade as Brooks Automation under the BRK ticker symbol. And tomorrow, December 1, we'll be trading under the ACTA ticker symbol and the name officially changes to Azenta Incorporated, a unique and stand-alone life science company, we still have semiconductors. So there's no confusion. Semiconductor will be in our discontinued operations. We expect the closure of that sale to be in the early months of the calendar year. But in the -- certainly in the path of progress. We're moving forward. And Azenta tomorrow comes alive as a company and starts trading as AGTA. So Vijay, with that, we really appreciate you inviting us, and we're ready to take questions with you.

Thanks, Steve and Lindon, for that presentation. It was pretty comprehensive. I think you guys did a good job overlaying on the business. Maybe on the glass comment, Lindon, on your Q1 comments, what was the COVID comp for you guys in Q1? How much were COVID revenue contributions in last fiscal? And I've been getting questions on the Omicron variant, is that a cause for concern in your business at all?

No. In Q1 previous year, we had higher contributions in the December quarter of 2020. And it was really -- it was a rebound of some of the services, which was nice. I wouldn't call that out as being extra juice in the business because there was a rebound from a lower summer period where customers were vacant. But we were seeing consumables ramp nicely. And so at our peak, we had more than $15 million of revenue in consumables business that we associated with COVID. And that was a predominant impact at that point. We hadn't yet in the December quarter, started managing the vaccines. We had won the contract for managing vaccines. We get $2 million of quarter in round numbers from that. But the bigger variance here is consumables. Now we've seen in the recent quarters, about $9 million to $11 million in the last 2 quarters. So call it $10 million a quarter of consumables continuing to be associated with COVID. We don't have great visibility to this. And we've made that very clear. We do see logic for this to have a long tail on it. So we don't think it's all going to drop off. But that's part of the range that we put around our revenue with the COVID demand.

I see. No, that's helpful, Lindon. So it's about $10 million a quarter. When you think about the annual guide, just given the -- the Q1 just seems to be a cadence issue, right? Should the annual -- the fiscal '22 growth be in line with your LRP of high teens?

I think we'll be moving towards the higher teens, so out of the mid-teens up into that range. And we did have about 6 months of heavier COVID in the first half of last year and the last couple of quarters became down around 10%. Vijay, to be clear, our momentum across the business comes in a variety of areas. And most of that momentum is unrelated to COVID. And so I will highlight, for example, we've talked about a couple of large customers in our Sample Repository Solutions that we picked up over the last 6 to 9 months on large contracts. That type of momentum starts to not just mitigate but more to dwarf the growth of the impacts of the COVID environment. But it's when it happens in total, right? So there's so many more vectors driving the growth than just the COVID environment.

Absolutely. The only reason I brought that up, Lindon is some of my other companies who have been big COVID beneficiaries on the testing side, so we're looking at base organic versus ex COVID. So it's something that your peers have been doing as the comps become an issue, something for you guys to consider. Steve, one for you, for the LRP. That was a phenomenal Analyst Day that you guys had. But I think your end markets are growing double digits rate. And I think your LRP is for high teens. Can you walk us through the bridge between your end markets and your LRP? And clearly, you're assuming share gains, what's driving the share gains?

So Vijay, let me give you a few examples here. On the sample side, there seems to be a really strong momentum now for the outsourcing and management of the sample. So over the past 2 years, we announced 2 separate large pharma contracts where they've moved their collections to us. So we're doing global management of their sample collections. We think this will persist. So the number of samples continues to increase. We believe the amount that outsourcing and the number that we'll get will be true share gains there. So for us, we think that's important. For example, we'll help a customer manage samples on-site today. But when we can not just help manage their samples on their site, but we can take them off-site. We continue to drive additional revenue. On the automated stores standpoint, this is where cell and gene therapy has a tremendous impact. So the amount of sample stored continues to increase the number that are stored at minus 150 degrees C or lower. This continues to increase the amount of automation that's required is even greater than that. So the storage itself will increase our participation. Our share is in the faster-growing section there. On the genomics side, the fact that we can -- we have a really rapidly growing NGS business, the amount of gene synthesis is -- there's a tremendous demand from a worldwide standpoint, but our ability to continue to serve has driven these businesses in excess of 20%, which we believe is significantly greater than the opportunity. Part of that, Vijay, is just local presence, the engagement of 400 scientists. So these things just don't come into us. We're out actively working with customers on how we do that. And that brings cutting-edge business into the company and sustains those customers. So we've talked recently -- in the past couple of quarters, we've added 300 customers per quarter. And in a 90-day quarter, it is a hard day's work every day. And so it's those kind of share gains that continue to add to the business and the company. It's not because we have labs, it's because we have scientists in our labs. And we believe that's a critical area, critical success capability for the company. We're a little bit different from a commoditized whole genome sequencer, if you will.

That's helpful perspective, Steve. Maybe on that point of differentiation, right? So Azenta, as far as I'm aware, you're the largest player in sample, anything to do with the sample storage and services, right? And I do think there's some technology differentiation here in terms of ability to store at minus 150, not everyone can do that. So maybe talk about those differentiation points.

Sure. I'll be glad to. Vijay, also to put in perspective, we're the largest independent one who reports some of these kinds of things. There's -- the Fisher BioServices capabilities are very significant. But we provide a different kind of service, just to be clear. On the sample storage for cells and gene therapy, in particular, this is critical. The biological activity stops below minus 136 degrees C, the requirements for automation are such that the samples never go above this glass transition temperature. So when you want to reach in and pull out a rack of samples from a liquid nitrogen tank, you need to be sure that the sample you're looking for, they talk about the chosen and the innocence. You want to make sure that the innocence, they go back into the door didn't get above this critical temperature. We find that the only way to dependably do this and to be able to monitor and manage it is with an automated system. So that an automated system can pull it into an insulated sleeve, we can extract the sample, put the other samples back and we can measure and prove that they never went above minus 150 degrees C. And I think this is a critical capability that people understand. I can't have a liquid nitrogen tank for each individual sample. Have to have thousands of samples in there. But when I retrieve the sample I want, they have to make sure that those thousands are protected and they maintain in that condition. That said, that's obvious conversation. The hardest part is how do you make automation work at those kinds of temperatures. And that's the capability that we knew we possessed 10 years ago and why we embarked on this space in this market because we have the ability to do that. And we've proven that now to 100 different customers.

That's absolutely fascinating. Maybe on the topic of minus 150 storage. I think you mentioned cell and gene therapy, Steve. Do all those customers need at minus 150? I mean, if you're looking at life cell therapy, CAR-Ts, do they need to be stored at minus 150? And how big could those markets be?

So the understanding we have is that it's safe below minus 150, and that's generally where the storage takes place. In terms of the size of the market, Vijay, this is a tough one. And let me give you a couple of examples. One, we're involved with a couple of customers all the way through their manufacturing process, but volumes still remain low. And so we're in an autologous treatment world today for most of what goes on. If we go to allogeneic, the amount of sample storage and sample transport and sample management, we think, increases exponentially. So we're in an interesting trial and development market today that's driving $30 million kind of business for us, if we get to the point where allogeneic treatments go, it increases by an order of magnitude from an opportunity standpoint. So we believe this is -- we think it's the right place to be as the market evolves. We're enablers. So people who are getting into the space, put our capabilities in to make sure that they are going to be prepared. But we've built the business around this opportunity, and we think it has tremendous prospects. We also have not put that into our projections. So we have a continued share gain from an organic standpoint, but we treat that as true upside, but these markets also take a while to evolve. So when we put -- so you won't see it in our 3-year horizon. But you'll see normal growth and normal market expansion and share gain in the projections that Lindon showed.

And just to clarify that, Steve, if these therapies do get approved, FDA approval right, will they need your solutions to store and transport before prescribing these drugs?

Yes. Vijay, we believe so. There's a critical step in here also is that there's a wait period where the sample is tested. And then there's a retained portion of the sample that gets kept. So that's an ongoing storage requirement of a sample that might be administered to me that there's a retained portion that stays back. So we think these kinds of -- we think these kinds of capabilities first are essential. And the risk -- the risk to a retained sample is just as great as the risks that you'd manage on a sample that goes into a patient because you can't -- you retain that for a purpose. So we believe that the same demands will be required and growing the administration of any of these types of cures.

Understood. And one of -- I mean, I have so many questions to you, but in the interest of time, I'll limit myself to 2. Gene since this is -- it's -- my understanding is your peers, the Danahers, the Twist of the world play. How are you guys able to compete in this market and grow in line with the market that you have some unique capabilities here?

So we have non-unique and unique capabilities. So we're an oligo manufacturer, and we sell oligos. But Vijay, we use those mostly for our internal purposes to do gene synthesis. So this is the -- first and foremost, we have that capability and the connections we have with the customers to perform constructs that are critical to what they need is where we apply ourselves. So we -- Twist, for example, is a fantastic technology, fantastic capability that serves a pretty big piece of the customer demand, but there are some things that the technology doesn't apply quite so well. We have the ability to do those kinds of things particularly well. And this has been a really fast-growing portion of our business. So Oligos is something that we all do, but we use it as an internal supply for the synthesized genes, if you will.

Understood. And then maybe last one for you, Lindon. When I look at the LRP, high teens on the top line, but the margin expansion really is remarkable, right, more than 1,200 basis points. And most of it's coming from the OpEx leverage, what kind of visibility or controls do you have on the OpEx line item when you look at -- and the business is growing high teens, I'm assuming OpEx needs to grow. So maybe talk about your confidence in the margin structure.

The first 2.5, 3 points comes off as soon as we close the deal because that extra G&A that's required to help manage the total corporation will separate at that point. That includes some people, some software contracts, some smaller audits, things of that nature, fees that you just can't split when you're doing a discontinued operations treatment. But the remaining point, you're exactly right. It ties to a little bit of gross margin expansion, but primarily the leverage over the operating expense. The key is in the operating expense, we have left this pretty richly developed for investment for growth. And it truly is -- gives you a big envelope when you're able to gain -- go forward with confidence of growth of 16% to 20% growth. Then we -- so I think we've got pretty good line of sight of what our requirements are on the operating expense. The model affords to that, we work continuously collaboratively throughout the year with our general management team and our geographies. We have opportunities, by the way, in the investment equation, not just at the business level, but at the geography level to capitalize on some areas for expansion. We started significant investment in Europe 3 years ago when we acquired GENEWIZ. We'll continue to promote that business there. So we have pretty good line of sight to the requirements. And the execution, we've got a good proven track record at the top line. So I think it's in good hands, Vijay. I appreciate your observations.

Fantastic. Thinks. With that we're out of time. Steve and Lindon, all the best as you embark on this journey. It's really -- it's been remarkable.

Great conference, Vijay. Thanks.

Thank you, Vijay.

Thanks.

Thanks, everybody.