Bio-Techne Corporation (TECH) Earnings Call Transcript & Summary

All right. Great. Thank you, everybody, for being here. This is Tim Daley, Life Science Tools, Diagnostics and Pharma Services Analyst here at Wells Fargo. Welcome to the Healthcare Conference 2023 here in Boston. I'm pleased to have Bio-Techne here with us. We've got Jim Hippel, CFO; and David Clair, Investor Relations here with us on the stage. And we have a bunch of questions for them, a lot of hot topics that currently are on top of mind as well as on top of other companies' minds. And I'll probably leave a little bit of time at the end for Q&A. But just to, I guess, kick it off with the hot topic du jour, any update for us on August? How are things trending versus July, month-to-month volatility has been all over the place depending on end market, geographical market, any changes specifically?

Honestly, really nothing, no changes to report on since kind of the view we shared at our last earnings release. It's thus far playing out as we anticipated. I just recall for everyone in terms of what we talked about with regard to the fiscal year '24 in total, but especially in the first half of the year. Some of the COVID hangover, as we call it, headwinds that we faced, not just us as a company, but as an industry, haven't necessarily gone away. Those 3, I think main headwinds would be China situation, which I'm sure we'll get to in more depth. Destocking from certain OEM customers, which is more acute for us than perhaps other customers, but nonetheless, still hurt us by about 10% -- sorry, 2% each quarter, the last 2 quarters in terms of growth. And then lastly, the "slowdown" in biotech funding, right? So those are the 3 main contributors, I would say, to this COVID hangover that we've had in fiscal year '23. And the big question for everyone including us is how long does it hang over last, and when do we kind of get back to a trajectory we saw pre-COVID. And I'd say, if you kind of go through those different 3 headwinds one by one, starting with the biotech funding, we were one of the first, I think companies out there to talk about that as a headwind in the early part of our fiscal year '23 and it has stabilized. It's stabilized now for the last 3 quarters. And what does that mean? It means it's not shrinking, it actually is growing for us, not the kind of rates it was during COVID, but nonetheless, not only gaining and growing at the rates it was during COVID, that's why it was a halo, but it's growing at rates that are more commensurate with what we saw pre-COVID. So we're encouraged by that. The second item being the destocking situation. Again, for us, we're talking about a half a dozen or so different customers that generally buy our antibodies for use as raw materials into their assays that, in some cases, even compete with us, in some cases, don't. They like many others were stocking up during the supply chain crunch of the peak of COVID, and they're working down their inventories. And we know this because these handful of customers or so that I'm speaking about, we also charge them royalties on their end unit sales and we audit their end unit sales. So we get a sense for what their growth is like and what that burn down trajectory might look like of our inventory if they're not buying from us. They haven't been for the past year. And based on what we see, we see a continued headwind in Q1, somewhat less in Q2 and potentially turning back into a tailwind in the back half of the year when they actually start repurchasing again. And that was what we laid out a couple of months ago in our earnings release and that view hasn't changed. And then lastly, there's China. And China has been a very volatile situation all throughout COVID with rolling shutdowns and people getting sick and now a situation in the post-COVID, where there's a macro theme of a Chinese slowdown, and then there's some more micro themes within our space, specifically around bioprocessing and CDMOs that are not having any new runs or moving back onshore to the U.S. or Europe. And then even more acutely within our space, the delay in government funding that many associated with the fact that based on -- the government has spent so much money on testing and vaccines for the last 2.5 years that they're kind of refilling their coffers before they lay out the next round of outflows for budgets and their academic institutions. And then last but not least, there's the anti-bribery or corruption campaign that the government is putting on it now, I guess, call it finally hit our industry. It's hit a lot of other industries and now it's hitting the life sciences space, namely the hospitals and major academic institutions within China. So I would say it's the latter 2 of those situations that are impacting us versus our peers. And it's not to say our peers won't be impacted by that either, but many of our peers have a higher proportion of their revenue more downstream into the biologic manufacturing into the CDMO space. And that's being hit even more severe than the lack of annual funding that occurred in our academic institutions. Keep in mind, Bio-Techne's business in China is largely, I call China for China, it's sold to Chinese institutions with Chinese research ultimately for Chinese evolved therapies and vaccines for the Chinese people. So it has very little impact with what's going on from a geopolitical or macro perspective between onshoring, offshoring or anything in between. But nonetheless, they did the way their funding, and the question is when does that funding come back. And they haven't said anything publicly about it. But so it can come back any time. But if we look at history as a barometer when it might come back, when the government has done off-cycle stimulus in life science area, it's typically been either in the October time frame when students come back from vacations and school restarts and their major institutions or -- and/or it occurs often right after the Chinese New Year, when everyone comes after vacation again and kind of kicks off a whole New Year. So those are the 2 timetables that we're keeping a strong eye on in terms of what, call it, green shoots, I call it, I joke if it is a jungle, because in China, nothing is a green shoot, it goes from bearing to the jungle overnight. But those are the 2 time frames that we're keeping a close eye on it. In fact, Chuck and I will be over there in China in October and kind of see firsthand and talk firsthand with what the current view on that is. But as of right now, it's not known, which is why we said that's -- that will be a big trigger for us in terms of that combined with the OEM destocking that will be a determinant as to whether we can get back to double-digit growth in the back half of the year or not.

Okay. That was fantastic. Thank you for that update. Anti-bribery that is something, again, new to, I guess the tools narrative right now in China. So granted you guys are more exposed there. But if we were to just first frame your China business in terms of, I guess, the channel, whether it's health care versus academia versus biopharma or other, like how should we think about that split?

Well, we purposely don't call that out. And then when we talk about X percent of our business is academic, X percent is biopharma, we exclude China from those metrics. It's only really -- it's really only U.S. and Europe, and it's mainly because it's a little bit of blended everything in China. I mean even in the entrepreneurial biotech sector within China, there's often a lot of government incentives. It could be as simple as free land or a free building or a low-cost loan for equipment. So whether it's directly or indirectly, there's at least some government stimulus associated with the whole space. And so we don't even try to necessarily parse that. But I'd say at least half of our business in China comes from the very large, strong academic institutions within China that are often associated with hospitals. So unlike maybe in the West in China, there a lot of the hospital systems do their own research and even do their own therapy development and sometimes even production. So they're all kind of fully integrated over time. But that -- I'd say 50% more or less comes from that and the other 50% comes from what you think of as more industry, whether it's larger pharma or biotech, but even those again, had some government influence.

Got it. Okay. And just, again, final thing on this anti-bribery. Just given you are in China for China, is that you're going to get hit harder on this dynamic or just trying to think of, again, hypothetical bribe going out, is it going to a multinational? Yes.

Well, a couple of things. So I'd say -- I actually call it out because I think we will be impacted perhaps a little bit less negatively than those companies that have more -- have a larger percent of their revenues, I call it downstream and actual biologic manufacturing or CDMO production, because as much as 80% of those Chinese companies that are doing that activity are for Western customers, are for other Western companies. And so that's -- and that's what's getting pulled back a lot, whether it's call it, back onshoring or what have you. And so there'll be an impact in the more severely proportion than we are. And I'm sorry, the second part of your question is...

Just like is for China in China back like a negative now?

No, actually, we see -- again, in this environment, we see that as a positive.

Okay.

And long-term, again, it's for a -- more than a decade now and even more even as recently the last 5-year plan, China has called out an investment in health care is probably the national interest and national security, and they don't want to be a beacon, a destination of choice for health care for all of Asia in the decades to come. And I'm going to tell you being there firsthand twice a year for the past 25 years, they got a long ways to go to reach that aspiration. So we -- nothing -- all this noise that's occurred throughout COVID, now post COVID has not weathered -- there's nothing to deter our view that long-term, China will be a very strong market for life sciences in general and therapy development in China for China, and that's who we serve.

Okay. Got it. Last China question, that's worth. The -- obviously, last week, we saw some stimulus, obviously, property sector. You just happened to mention there's some secondary or second derivative impacts potentially that come from government stimulus within the property sector. Is there anything that you think this could impact or is this just more like the bailouts are staving off and getting worse?

Well, I mentioned those 2 time frames when stimulus was usually handed out in our space, not because we're expecting additional stimulus, we're just looking for the release of the normal budget.

Okay.

And so that's what we're like, that's what is lacking right now. So we're just looking at those 2 time frames because historically, when they would give stimulus above and beyond their normal budget release, which occurs in April or May, that's when it typically occur. But what's happening right now, they haven't even released their typical annual budget, fund release that they do in April, May, and that's what we're waiting for.

Okay.

Any stimulus above and beyond that would be even more gravy.

Okay. No, that's perfect. So now focusing on Western markets here. Obviously, a hot topic with Abcam Danaher, just I know you guys have almost built the business by having nothing exposed to overlapping with Danaher and now directly competing. Just how does that deal impact your view of the antibody market? How big is it today within your business? What is the growth rate expectations? And how does this, I guess, change the dynamics if at all?

Not to be cocky about it because we're always paranoid about competition, if you're not, you're either getting bit from behind, right? But we're actually quite comfortable with -- it just ends up being Danaher's asset, we're comfortable with that. We see it as a big hole in Danaher's life science portfolio, which is understandably why they would have wanted that asset. But for that same reason, we also don't necessarily see a situation where I think where Danaher will do a lot to make it more competitive against, say, us. I think they'll do a lot from an ES perspective, they continue to drive profitability. So I think it will be a good acquisition for them. But we don't see where Danaher will add anything to Abcam to make it more competitive for us. And frankly, we said the same thing about PeproTech when it was acquired by Thermo a little over a year ago. And so far, that has played out as well. So I think at the end of the day, Danaher is a great -- well-run company. We know them very well. We work with them on very different aspects and different -- across product lines. But the other thing we know about Danaher too is that their general business model, as you all know very well, I'm sure they run their different companies they acquire very independently. And so yet another reason why we're not expecting a major change one way or the other. So if that's the case, then how have we been doing versus Abcam? I mean there's different product niches within their antibody portfolio that have done very, very well. But as a category entirely, we believe we have taken share from Abcam all throughout the COVID era. And it's the last reported results are any indication of that, off the top of my head, so you can correct me, David, if I say this wrong, but I think Abcam reported double-digit growth in Q1. And then year-to-date growth more recently here of like 5% or something like that, which would suggest that they didn't grow or even shrink in Q2, our antibodies didn't shrink in Q2. So it gives us not -- comfort is not the right word, but some indication that we are still taking share for that.

Got it. Okay. No, that's helpful. And I know you guys have quoted citations before and Abcam obviously does as well, and we'll move on after this. But they talk about that 25%, 30% of citation volume is related directly to their catalog. Again, they like to say that the market share, but I don't know how. Is it revenues or volumes or whatever like, what are you...

I can't imagine anyone claiming 25% to 35% market share in antibody because it's a massive space, $3 billion or $4 billion, and clearly they're not that big, right? So it's -- the antibody market is extremely fragmented, and it's somewhat nichey as well. There's flow, which has kind of its own niche. I can go on and on even beyond my technical capability to explain all the different categories of antibodies. I'd say when we think about our catalog of antibodies, we do consider Abcam a direct competitor, probably one of the most direct competitors we have because they play in that kind of same space of a general primary antibody provider. A full catalog not necessarily focused on any one niche or any one area. And I think they are clearly a top 5 in that particular space. But 35% of what is the next question I have.

Yes.

And they're more positioned on the academic side. That's why they quote the...

Okay, that makes sense. Yes. I always scratch my head of that. Okay. So that's helpful. And then if we were to just zoom out a bit within proteomics, the research reagents versus the analytical tools, and we think about kind of the midterm growth here. I think you guys kind of size up the -- I think it's the reagents in kind of a mid-single-digit long-term growth in the tools side of things. So kind of ProteinSimple more in the high single-digit side of things. So just curious how the near-term is where a lot of hype, a lot of excitement, a lot of strength in academia and government, a lot of buzz getting thrown around about proteomics. So just curious, are we in more of a near-term above that growth rate scenario?

Yes. I mean you will hear more about this in our Investor Day in a couple of days, but to give you some preview on, I mean I think we're going to talk about our core proteomics reagents being kind of in that 5% to 7% range and more off the top of my head here, but something like that. So mid to high, but higher mid maybe is the way to put it. But our instrumentation and the consumables associated with that instrumentation. So keep in mind, like our ProteinSimple franchise is our instrument platform, there's 4 -- 3 or 4 major product categories we have there. And instruments -- pure instruments make up 10% of our total company revenue, but the actual consumables that are used specifically for those instruments make up another 10%. So said another way, our ProteinSimple franchise makes roughly 20% of our revenue. And that even in this fiscal year '23 in the midst of this COVID hangover, our ProteinSimple franchise grew double-digit. In fact, all of our key growth platforms, whether it's our proteomic instrumentation, our spatial biology, our liquid biopsy and our cell and gene therapy, all grew double-digits, even in the COVID hangover. So that's what gives us a lot of confidence that we are positioned extremely well for the future. As those businesses continue to grow, become a bigger proportion of the company, if they can grow double-digit in an environment like we just had this past year, there's no reason why we can't expect nice double-digit growth from those same categories for the next decade and higher growth -- higher double-digits that we saw most recently.

Okay.

Now the very near-term is getting back to some of those core questions we just asked in terms of when it's trying to get that -- biotech get back to full strength, we'll see. I think one of the green shoots I look at just at a very high level is from a biotech perspective is in general, how much money is still out there in the private equity world, and is that increasing, decreasing, and I can just tell you on the M&A side, we're up against them all the time in certain deals. There's still a lot of money out there and a lot of interest in life sciences in general. And I always see biotech as being kind of one of the early places that new money gravitates to because it's just an exciting space and the upside is always so huge. So I think when -- overall, when private money starts to accelerate again, it's going to accelerate in our space first. That's my view.

Okay. No, that's really helpful. And if I were to just kind of pose that same question that I asked that proteomics on the spatial biology front, moving over to the X Genomics. Again, that's the other kind of hot area, du jour, on the upside basis in terms of the broader tools universe. So within ACD, just I think long-term, low double-digit, could you just kind of walk us through that same exercise on near-term puts and takes within spatial?

Again, our spatial franchise has done well. It's just -- it's been buried to the core in terms of the destocking in China and all that. So it's done well. I think with the Lunaphore acquisition we just announced, that will be a true accelerator of growth for that platform. I think if there is one hindrance to even higher double-digit growth from what we've experienced out of ACD in the past 5 years, it's been that lack of automation. I mean to run our assay can take a week to 2 weeks depending on how many times you're collecting it, and an instrument like Lunaphore can do it in a day. I mean, so it's a dramatic difference in terms of the efficiency. And we knew that, which is why we've been very -- quite vocal about the last couple of years. That was the top priority, if we will find an instrument that could work with our assay and make and work just as well that does on a stand-alone basis, we would be all over it. And in the meantime, we're going to partner with all the instruments out there and be rather agnostic. That still is our strategy is to be rather agnostic. But if we found the perfect one, we were going to buy it, and we think we found the perfect one with Lunaphore. And so that now there's knocking down that barrier of speed to answer, we think will be the game changer that can really take this to the next level of growth even beyond low double-digit.

Okay. No, that's helpful. And I guess just the faster speed, higher throughput that this facilitates the Lunaphore acquisition is a market there, is a market of that size is demand there for that speed?

We believe so, yes. I mean, because again, there's -- our people out on the street knocking on doors and working to sell our ACD solution, they say they could sell a lot more if it was automated. So yes, we do believe, but it's tricky because it's an evolving market. So let me compare to our proteomics instrumentation. Our proteomics instrumentation, a lot of that is converting a market that always out there from a manual to an automated solution, whereas spatial in itself is a whole new market. And so therefore, it's a little more lumpy in nature in terms of fits and starts and growth CASMs and all that kind of stuff. But I think it's undeniable that talking to researchers, they want to understand a holistic solution. And when they're looking at a tissue, it's one thing to understand the expression of the protein but then also to understand before that, the molecules that caused that expression and how it all ties together in the tissue and how it progresses to the disease. They want to know both, and it gives them a lot more information. And so IHC, which is just part of the answer is a $1 billion market plus just in itself. And the DNA/RNA side of things, the Genomics side of it is still very nascent, new and we're at the forefront of that with our ACD solution. And now with Lunaphore, it provides really only true capability of multiomics looking on the same slide at the same time and seeing on that slide in that tissue sample, the interrelationships between the Genomics side of it and the proteomic expression side of it. And again, our customers are telling us this is what they want, and now we're going to give them a tool that provides this.

All right. Great. That's helpful. Sticking within Diagnostics Genomics, can you just kind of give us an update of the, I guess, materialization curve of the Exo TAM if you will. For a couple of years, a little bit below the curve and then now it seems like we're finally hitting that inflection point. Like where are we today? How much more, I guess, near-term significant sequential growth that we -- should we be expecting?

So let's just talk specifically about the ExoDx prostate test, that's what the commercialized test we have out there right now. Where we're at today is where we thought we'd be 1 year after the acquisition 3 years ago, 3.5 years ago. which sounds bad. But the reality is, is that we had massive headwinds that faced us the past 2.5 years, the biggest one being COVID. I mean throughout most of COVID, no one is even going to a doctor, right? So it was bad for all general diagnostic companies, and that's no different. So the worst timing ever in terms of trying to launch a new test really. You add to that, essentially a 2-year delay we had in getting full coverage under Medicare, and I say full coverage, what I mean is the same coverage that the NCCN guidelines say the test should be used for to get to that total addressable market that's out there. And not even that to just get -- take on the barriers that doctors have it. Doctors have to like have this exception, that exception, they don't want to mess with the [ CTs ], right, where you can say all the barriers are gone, you can just prescribe this based off of this parameter and go, it makes all the difference. We didn't get that until this past year. After 2 successive rounds, we got it incrementally, but not completely until this last February or January, right? So those were kind of the market headwinds that were against us that were major. But the other piece of it, which was we fixed internally in terms of a more internal issue was our go-to-market strategy. And we brought a surgeon a couple of years ago, and they were experts in this area, they took the whole platform over, immediately changed the messaging around rather being just strictly a patient-driven message that this will help prevent you having only a biopsy, it made an equally doctor-oriented message that says, this will actually encourage patients who should get a biopsy to come in and get one because basically, we've done studies that show up to 60% of all patients who are recommended by the doctors that have a biopsy, they're going to show up. If you have a test that says, hey, you have a high probability to have a high-grade cancer, you go to get that biopsy, they're going to show up. So there's that. There's also a bunch of other nuances that a surgeon brought them because they've experience in this area around how to work with doctors, make the monetary side of it as seamless as possible, where we take the burden of teaming with the patient in reimbursement and getting paid and not the doctor, it sounds like a small stuff but these are things doctors don't want to mess with, right? So what's happened as a result of that this past year, we had 90% plus growth in tests -- I'm sorry, in revenue, we had 70% growth plus in tests. We have 100,000 tests cumulatively in the market now. And here's my fair part of the story is that specifically with the prostate test, we estimate that only about less than 20%, somewhere between 15% and 20% of all urologists have even tried to test once. So there's a whole 80-plus percent of the market to still go after. But even there, within that 15% to 20% of the doctors who have used our test, we keep track of the average usage and how that usage increases over time and our doctors that have been with us the longest, on average, subscribe the test about 20x -- more than 20x a quarter. Our overall average is 6. So just our existing doctor base, more ingrained in their workflow as they get more acceptance to the test and get up to the average of our doctors who have been with us the longest, there's a 4x potential just there alone, not to mention the other 80% of the doctors to go after. So there's still -- the opportunity for that test is still as great as we ever thought when we first bought the company. Now you add to that, it's a platform, not a test, the exosome platform. You can hear a lot more about this on Friday, for those of you who can pay attention. But what I'd ask you to pay attention to you for those that are interested, is it's a 3-pronged strategy. It's the urology test strategy because we already have that model built and we've got to see sales team built out, that infrastructure is in place, that LDT model. But then there's other indications like colorectal, Sjogren's disease. There's a whole line there, I think we're going after some more near-term than others, but we're not going to build out an entire sales force to that. We're going to partner like, and a good example of that is ExoTRU kidney transplant that we did with Thermo, where we'll collect very nice royalties. And there's a third prong strategy that involves taking our superior exosome technology and applying it towards the kind of the cancer monitoring market. So post diagnosis, there's already test out there for it. We believe our technology will allow for faster diagnosis of something going along, and we can use the existing surgeon channel to sell those tests into the reference labs and hospital labs. So it will allow for a lot more near-term revenue possible coming out of that platform.

All right. Perfect. Yes, I'm not going to make it Friday, I'm here, so I'm trying to get all of the previews I can get. But yes, we've got 5 minutes left, if anybody in the audience has anything, let me know. All right. One thing I did want to touch on here is kind of higher level year-end budget flush, calendar year-end budget flush. But you guys -- obviously, it's academic and pharma have their own dynamics. But if pharma, like what is -- when do we know if pharma is going to have a year-end budget bush, like is there timing, is there signals, are there conversations they happen in September, October?

Yes, I'll be honest with you, we don't pay too much attention to it. And it's not to say we don't get some until we benefit from that, we probably do. But generally speaking, year-end budget flushes, and I know this from my years at the Thermo when I was in the Cath Lab Consumables division for a while, which was all pipette tips and beakers and models and things like that, that behaves more similar to our reagents business, our consumables business. And I worked in on mass spec business, which was very expensive, I call it higher, $1 million instruments. And in the lab consumables business, we never pay attention to budget flush. I didn't saw no difference. In the mass spec business, we paid a lot of attention to it, right? So we're 80% consumables, it doesn't impact us that much, and even our instruments, not to say, it doesn't help a little bit. But again, our average -- our instruments are pretty much -- most of them are under $200,000 and most of them are even under $100,000. So you're not using budget flush for that. That sits in your normal budget, right? So...

Yes, yes. So in terms of the OpEx, CapEx dynamics, a lot of people have been kind of throwing out the rule of thumb, $100,000 and above, $100,000 and below, $100,000 and above is where we're seeing weakness, softness, positives, whatever words you want to use to describe it. But is that fully playing out? Is that kind of clean cut consistent in your guys' business?

I don't know if $100,000 like a magic number, but there's no question that the sales cycle for instrumentation has lengthened now relative to what, but I always like to ask relative to the COVID halo days, yes. COVID -- if you're in the COVID, everyone is so concerned about getting anything is like they would -- they would order like, can you deliver tomorrow, right? We found back and looked at what our average time from -- in our pipeline to close instrument sale is, and it's pretty much back to where it was pre-COVID. We just forgot that, that was the normal.

Got it. Got it.

And in fact, we've even seen it a bit in terms of the dynamics throughout the quarter because in the instrument business in general, usually, your last month of the quarter is like half of your revenue or more in mass spec, it was like 2/3. Could you build your pipeline on all quarter, and then by the end, you try to close a deal by the end of the quarter. That's just the way the instrument business works in life sciences. During the COVID halo, we saw instrument sales that were almost proportional every month of the quarter because they -- people weren't -- they didn't want to wait. They want to get their hands on because they're afraid something part missing and they wouldn't get their instrument or whatever. So it's just returned back to the way it's always been, that's all.

Yes. Okay. And you guys aren't seeing any difference in -- was there ever a difference in ordering patterns in consumables in particular areas or just thinking of the broader kind of COVID supply chain allocation fears that we were just talking about?

Like I said, we -- as a company, we never had a supply chain issue. We never gave our customers ever a reason to have a supply chain concern, but there was overall a general concern. And the only place that made sense for any customer to stock our products was those handful or so OEM customers because you got to remember, otherwise generally speaking, our customers are the researcher itself, and they're buying a particular reagent that's only good or used for a very particular experiment they're doing on a given day.

Yes.

So there's no rational reason for the stock up on any one reagent because they never use it, they do not even use it for another year, so why would they stock up on it as opposed to another company who needs a lot of key ingredient into their products.

Yes. And they can freeze and forever.

They can freeze forever and all that. Yes.

Okay. All right. Great. So I guess just one more thing I wanted to touch on is kind of timing of stimulus in [ EcoGov ]. There was some stimulus in Europe in 2022. Obviously, there were some in China that did not repeat. Are you guys still seeing the tailwinds from that? And how long will, I guess, that...

So in Europe, yes. There's the HORIZON project. And our academic performance in Europe has been very good in the past 3 quarters or 4 quarters, and we expect that to continue for foreseeable future. So in Europe, in particular, the academic is very strong. In the U.S., there's talks about NIH slowing down or maybe even going backwards a bit on funding, I'll just say this. When there was double-digit increases in NIH spend during COVID, I didn't hear any of our peers bragging about double-digit growth in academic and neither were we, okay?

Yes.

In fact, ironically the strongest 2 quarters we've had in the U.S. academic for our last 2 quarters during the COVID hangover and all the concerns about budgets going forward in academic. So why is that? My theory on it, and I've had some scientists I talked about they kind of they don't want to give me the idea this is how it works. It's for us it's almost arguably more important where the money is being spent than the absolute funding. Now higher funding lifts all boats. But as long as they keep budgets relatively flat, those double-digit increases went to support COVID research.

Yes, yes, yes.

That's not our strength. And so they keep dollars flat, that means that money is being redirected back to other traditional areas like oncology, neurology, immunotherapies, and that's where our strength is. So we -- I'm not signing up for it, but I'm saying we could actually see a stronger academic performance in the year to come even on flat NIH budgets if that redirection occurs.

All right. Perfect. No, that's super helpful. And we're on time here. So thank you, everybody, for attending here. I hope you guys have a good time, rest of the conference, good meeting, productive and look forward to listening to the replay.

All right. Thanks, Tim. Appreciate it.

Appreciate it. Thanks a lot.