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

All right. Good afternoon, everybody. Welcome to the Stephens Investment Conference. I'm Jacob Johnson, the life science tools and pharma services analyst here at Stephens. Really pleased to be joined by the team from Bio-Techne. We have Kim Kelderman, the Chief Operating Officer and CEO, come February 1 next year; and Jim Hippel, the CFO. Kim and Jim, thank you for joining us. Just as a heads up, this will be a fireside chat. So I'll pepper them with questions, but try to take pauses if anybody in the audience has questions along the way. And with that, Kim or Jim or both, I'll turn it over to you for any opening comments, and then we'll go from there.

Now thank you. Thank you, Jacob. Welcome to the conference. Thank you for your interest in Bio-Techne. It's extremely great that you guys have interest because I'm making a career move into being a CEO. So hopefully live up to the expectations. It didn't come overnight, right? So a long career in the life science industry, move back to [indiscernible], I sold a life sciences company into [indiscernible] Genome Sciences, stayed for 4 or 5 years and then eventually joined Chuck at Thermo Fisher Scientific 13 years ago. That's also where I met Jim. Jim was one of the players there as well, managed 3 different businesses of increasing scale and complexity over the 8.5 years I spent with the Thermo Fisher Scientific. The last 4.5 years managing genetic analysis. That was basically all the applied biosystems, reagents and instruments like the QPCR instruments that became so famous -- [indiscernible] instruments. And later on, we added Affymetrix to the mix through an acquisition. Interesting thing why I mentioned it is that it has very similar reagents, instrumentation, services, licensing mixture in revenues as we have on Bio-Techne. Nonetheless, as I turned 50, came a little bit in a mid-life crisis, I guess, [indiscernible] new car also, took a new job, Bio-Techne. It was basically Chuck having continued to stay in contact and at some point, put a couple of assets together, like the ACD asset as well as exosomes, there were some other assets in the Diagnostics and Genomics segment. And just basically wanted to get me on board. And so I did 5.5 years joined Bio-Techne. And, yes. So focused on that segment, but also focused on building out the strategy for the overall company, very active in the M&A funnel, and which acquisitions we did and how. Really liked the company. I've done turnarounds in my career, but this is not a turnaround. It's a extrapolation of the great things Chuck has done for the company, and we have a great team. So fast, innovative, great M&A track record and a fantastic team without any politics. So it's basically a dream come true. And that's why I'm happy to be here, and hopefully, you'll see my [indiscernible].

Thanks for that Kim. Maybe just a couple of follow-ups from that, and I appreciate the introduction and really happy to have you here with us. You're now COO, you'll be CEO in a couple of months. What are you focused on right now as COO? And then what do you foresee your kind of key areas of focus being when you take over as CEO?

Yes. So there's a couple of months, first of all, getting to know key business partners that I might not have known yet, our main investors, our top 10 investments for sure, end up connecting way more with the analyst world. New to me would also be a real tight link and operating mechanism with the Board of Directors. I'm on the Board of Directors, myself, but managing a Board is still something that's relatively new to me, especially coming out of those larger organizations. In the meantime, Chuck has been nice enough to just allow for this transition period. I'm basically -- just like a copilot and putting my hand on this, it's not a steering wheel. I don't know what it is, but you're putting my hand -- in any minute, I think he can go to bathroom or get off the plane, I'll just get ready to steer it. And yes, I think it's a very manageable process, mainly because I've already been with the company for 5.5 years, know the industries, the team and basically getting ready to then run the first Board meeting on end of January and then take the helm 1st of February. From there, I think there's going to be 90% of executing the things that we've set in place anyway. I'm actually pretty good and bride myself that I've been successful in scaling organizations while keeping innovation and agility, right? Because you very often hear that larger companies, yes, they have scale and they have tons of salespeople, but then people lose the agility and fun at work because innovation gets choked a little bit. And other regulations, policies and all these things slow some of these companies down. I'm actually pretty good in keeping the agility in the space. And I think that's exactly the phase that Bio-Techne is now entering. As I said, capital deployment will stay very similar. We've been very proactive. So we went from more reactive, gut feel acquisitions, which were really good at beginning of the tenure of Chuck. We have been really good in being proactive in the last couple of years knowing what we want, built the relationships with the targets, making sure that we come up with deals that are really, a, fitting our synergy; b, are good outlets, differentiated instruments of our core portfolios, meaning our core reagents such as antibodies and proteins, making sure that there's either equipments that use them or G-Rex or other vehicles that utilize our core. So extrapolation strategy maybe speed it up a little bit, enter some -- throw some fun into the mix, build out a team, making sure that, again, we add more great candidates into the [ vault ] management team so that we already have 2 great successors. But having 3 would be nice to keep the status quo like we had this last year.

Got it. That's helpful. I guess 1 kind of follow-up and perhaps a little bit unfair, but I figured -- I think it's worth asking because it's a question received from investors. And so you ran the Diagnostics and Genomics segment. And so I think there are people who wondered when you were named COO, does that mean this is going to be more of a focus going forward? Whether it's from an inorganic perspective. Maybe first, I'll let you address that. And then two, just curious if we should expect any change in the kind of the capital allocation strategy?

Yes. Thank you. I can imagine that fear, but my opening comments were purposely that [indiscernible] analysis of business, there was this mixture of the agents and instruments and you've got to grow where and invest where you see the opportunity. In the DGS, the last 5.5 years in Diagnostics and Genomics, I've a [ log ] of all the children equally across protein sciences just as well. Yes, there were 2 acquisitions on the Diagnostics and Genomics side, but those were really must do type of acquisitions, right? So the Asuragen acquisition, I did about 4 years ago. So it was really important. We have this exosome-based business that where there was tons of innovative ideas, but the team really -- did not really know how to make products out of it, didn't have a laboratory channel. So Asuragen was a perfect fit for that. If you think then the Spatial Biology Division that has ACD in it with the core reagents like RNAscope. First of all, we believe that is a real fast-growing market. But secondly, we knew that automation and the more often you impede the tests, the more important automation is, so we have to get access to an instrument. You think there's still academic users that have a manual approach, but you can clearly see that the automated part of the business grows much faster than the manual part knowing that we already had relationships with like Ventana for the high volume, high throughput, I should say, testing. But that in the translational space, there was a clear need for an automated box, that is why we did these acquisitions, and we're really happy with both of them, seem to be working out really well. Strategic fit is amazing, differentiation is amazing. But long story short, I think since now the ying and yangs are completed and these teams can kind of like execute on the strategy. We feel that the M&A pendulum will swing back to the Protein Sciences segment, where you can always add to your core capabilities. You can also think of adding verticals where basically these outlets I was talking about. So if you have all the proteins and antibodies, yes, we bought ProteinSimple because it pulls through antibodies. Yes, we have a G-Rex because all the protein -- G-Rex is a [indiscernible] product, right? So it pulls through proteins and cytokines and we have the Lunaphore platform, which will pull through antibodies as well as the ACV reagents for RNA. So an outlet, and additional outlet that would make sense, too. So it could be core, it could be outlet, but it will highly likely be back in the protein science.

Got you. That's helpful. Okay. So we kind of talked high level stuff around strategy. But I guess, sticking high level, but moving to the fun that is the life science tools macro backdrop. Like others, you've called out some incremental headwinds last quarter from the funding environment in China. Can you just discuss how those trended throughout the quarter and kind of how that impacted your businesses?

Yes, I can give it a shot and Jim was just in China with Chuck. So I'll go there in 2 weeks from now. But obviously, a real important swing factor for our business, right? So we looked at it as China, we have biotech, and we have some destocking, right? And I think those -- that's also the order of impact, more [indiscernible]. China is clearly, it used to be a very heavy capital deployment or capital acquisition area where lots of [indiscernible] so elegantly, you only have to be 5 days in per month in the office to order more equipment. But if capital is constrained and you come into the office or into the lab, I should say, then you run the agents, we can clearly see that the reagents business is now proportionately much higher than historically. And that some of the business purchase -- the instrument purchases have decreased. And that was a trend that it's unusual for China. And of course, that puts a dent in some of the overall results for the region. We can talk -- Jim will talk more in detail about how we see that rolling out over the coming quarters. But that's the main driver where we see the reagents picking up and instruments coming down. Fortunately, we're mainly the reagent. So that's why I believe that we have had less than a dent than others in our profile right now. But overall, we do believe that China has certain reasons why it's right now not investing as heavily as usual and it's all kind of related to funding. But we do believe that over time, the funding, healthy aging, people in China look at their government for funding and for driving their investments. Healthy aging has always been a top priority in China as it is around the world, specifically in China because the government is deemed responsible. So we have confidence that, that market will come back. The question is how fast [ you win ].

Yes. And I'll elaborate just a little more and just a brief history lesson on fiscal year '23, right? So for fiscal year '23 and actually back up even further in terms of how we may be a little bit differentiated than many other life science tools companies with regards to our, call it, exposure or opportunity in China. Many of our peer companies, particularly the larger ones, as a percentage of their revenue, it's more heavily weighted towards the bioprocessing side, the CDMOs within China. It's not to say they don't do business with research, but proportionately, it's higher in bioprocessing, whereas we have very little in bioprocessing there. We have 1 product line that does some business there, but 90% of our business is through research in China for China research. Whereas the CDMO industry in China, even though it's Chinese CDMO companies, a lot of their business -- customers, are American customers or Western customers. And so for various reasons, Western companies have been not putting as much business into China and some are even taking business out of China, that's severely impacting that space, that subset. And therefore, our peers that are more heavily weighted there are proportionately impacted worse. What's impacting us on a headwind perspective with regards to China is more specific around government funding. And whether it's academic institutions or hospitals that are 100% academic funded or whether it's biotech within China, which is indirectly related to government funding via incentives, to be tax incentives, land grants, whatever it might be. Ultimately, the research space and life sciences in China has a direct line into government funding. So that's what we pay attention to there. And when you look at fiscal year '23, it was a really strange year with rolling lockdowns and shutdowns and then people coming back to work, there's got a light switch going on and off, on and off all throughout the year, ultimately ending with the population all getting COVID, and not being at work for 2 or 3 months and then coming back and the light switch came back on again. And then the back half of our Q4, the light switch mysteriously went off, even though there was no rolling shutdowns and there was -- everyone was pretty much healthy and back to work. It happened late enough quarter that we still had a pretty decent Q4 with mid-teens growth, but we saw that trend start to continue into our first quarter and started messaging that, not knowing ultimately what the real reason for it was, except that the government hadn't released funds "yet". And that environment of lack of funding continue to deteriorate throughout Q1. So Chuck and I, as Kim alluded to, got on a plane and went over to China because you learn things there in person you can't learn over the phone. They won't tell you. And we spent the better part of 10 days in October in 6 different cities, talking to many, many different customers and KOLs and, of course, our own teams there. And the short of it is, is that one of the questions we want to understand was this dynamic around the -- it's where I'm looking for Kim, the -- Thank you. The anticorruption. Because we heard that. That kind of came up soon after also the funding wasn't released and there's a anticorruption crackdown, and that was made public by the government. Well, no 1 told us over the phone, but once you get over there, what they all tell you is that the locals there believe it's more of a smokescreen that the real issue is that the government doesn't have any money, and they don't want to publicly admit that. So they do an anticorruption campaign to explain why they're not releasing funds. And if you step back and reflect on them not having money, I say that relatively speaking, they have spent 3 years of testing their entire population 3 times a day, COVID vaccines like crazy. And meanwhile, no tax revenue coming in because everyone was locked down and told to stay home. So no underlying tax revenue. So it kind of makes sense that their coffers are a little bit light right now. And so that -- everyone there believes is the root cause for the delayed funding that typically is rolled out. And so the question then becomes, well, what's it going to take for that funding to improve and when. And so 1 of the other observations we had been over for the course of 10 days in 6 different cities was kind of observing just the overall economic activity going on in China firsthand. And on the one hand, it was in the very get-go, as soon as we landed, it was a bit depressing because we landed in the Pudong airport, which is a major international airport in Shanghai, and you could roll a bowling ball through the middle of the airport, not hit anybody. I mean never -- I haven't seen that for 23 years. I've been going there for 23 years and never saw it so empty. And then in addition, throughout those 10 days and 6 cities, staying in nothing but Western hotels, I'm not exaggerating it. I was actually counting a total of 3 Westerners that we saw besides us in 10 days. Again, it's been 23 years since I've seen anything like that. So no question, there's a lack of foreign investment and perhaps investment going out, no one in the West is going there. So there's definitely that situation going on. However, once we left the airport, got into a car, gotten to the city, gotten the road. Roads are jampacked as ever, restaurants you still can't get into. People are hustle and bustle in the streets. Starbucks still has a line around the block for it. All the western hotels are full, they're just full of Chinese people, not westerners. We flew a number of domestic airports and airplanes. Planes were all full. Domestic airports were relatively busy, not as busy as they were 4 years ago, but relatively speaking. I always even pay attention to the cranes in the air, right? I always like to count the cranes when I go there, you're typically twice a year to see -- gauge activity. Yes, there are fewer cranes, but there were still cranes, and they were still spinning around. And at 3 in the morning when you can't sleep in China, I went out looked at my window and they were lit up and still spinning around. So yes, the real estate sector is down there, but it's not crashing and burning or there wouldn't be cranes going on 24/7. I mentioned all this because the highlight of the fact that we were looking for -- is there -- you hear about high unemployment rates and all that. And if that's true, I don't know where they're at because again, every place was packed and busy. But the most important thing is that there is domestic economic activity clearly coming back in China. So that tax revenue locally will start to fill up the coffers again. And eventually, that money will be prioritized back into life science research because it is a top priority for China National Security, if nothing else. And so now the question is when. And that dialogue changes almost by the week because nothing ever publicly gets said in China. It's all about who you know, who you know, who you know, who you know said something in government office that happens a [ week ] information. That's how information kind of gets transmitted in China. And so it changes quite a bit. But not to get overly optimistic because we're not, but the feeling in the ground there is that in life sciences and research, the quarter we're currently in here in Q2 could very well be the bottom because at this point, you start getting any less in these academic institutions, they'd have to start laying off people and then China is not going to do that, not in their government institutions. So this quarter, hopefully, will be the bottom. And then the question is when does it start to come back and by the time we hit Chinese New Year, it will be a full year that this [indiscernible] has been in place. And China likes to use a new year as kind of a renewal for the next year and so there's some lease discussion coming to the chatter that they might start getting a little more aggressive in releasing funds after the new year. Now, no one is saying it's going to go back to the way it was. No one is expecting a V-shaped recovery, but they're expecting more of a elongated U-shape recovery. And as the funds come back, they'll start, again, releasing more and more funding. So that's the status of now. We're monitoring this almost week-to-week, month-to-month. Kim is going there again in a couple of weeks. We'll see what they're saying again on the ground. But that's what we're going to be monitoring as kind of that level of optimism that we're hearing from the field there on the ground there. So that's kind of the China situation. And a long story, but I think to put it on perspective, we kind of have to tell that whole story.

No, I appreciate it. Sometimes people ask me what I -- what's going on in China, like I have no idea. But now I just say what Jim said. So thank you. Okay. So just on proteins, just on destocking, I know it's kind of the third tail or third headwind there or third in scale, I guess. Kind of have we lapped all the difficult comps from that? And given the visibility you have into those customers, what do you think that when do they start restocking, I guess, is the question?

I think that we saw it across several businesses, not just Protein Sciences segment. We have diagnostic reagents, also that's a division that supplies also all the big IBD companies, right, the [indiscernible] and Roches and what have you in the world. And we also supply and spatial biology, some of that, for example, the [ Leica ] businesses. Those guys usually tend to put bigger orders in. And then over the last couple of years, after COVID, everybody was kind of happy that there was a rebound of business, but then there were supply constraints, right? So everybody was like, oh, I'm going to over order because they want to run up my inventories because you never know about supply chain. By the way, money was still very cheap at that time. And nobody got dinged for having high inventories in their balance sheet at the end of their fiscal year. Now we have been since swung the other way around, right? Supply chains have eased up, so supply deliveries, quality are back to where they're supposed to be. So companies don't have to carry the same amount of inventory as they had to over the last time -- last period. In the meantime, money get more expensive. All the order purchasers, the purchases and all the companies are getting measured on making sure that you're in the right depressed inventory levels right now, it's a total new focus. So we saw it over the last couple of quarters. We saw it last quarter as well in all these businesses. I think we are in fiscal years for the end of the calendar year is typically where people draw the line and measure it and count their inventory. So I think we're in the midst of the worst of it. And then after that, it's end supply demand or end demand that really is going to pace how much they're going to order. And we believe that if you look at the indicators of the end demand, they are quite normalized and knowing that everybody has kind of burned off their inventories. And certainly, we're in a hurry to burn them off before the end of this year when the inventory counts happen, I think that will totally normalize again to where it's behind us. And in the meantime, the comparables will be behind us as well. So it's a tail end, it's a double tailwind.

Yes. I'll just add in an unusually nonverbrose for me that I think this quarter, we're in Q2 will be the end of the worst of it. And as we ended in the back half of our fiscal year, maybe we'll even see some slight tailwinds when they start reordering again. But a lot of the tough comps that were due to the stocking of COVID, during the COVID times will be behind us after this quarter.

That's helpful. And then just on the instrument side of things and the macro, that's a business that's held up relatively well the last past year. But it feels like some peers were starting to call out some weakness from that end market. So I'm just kind of curious what you're seeing on the instrument side of things? And maybe if you could split it between kind of consumable utilization versus placements?

We talked about the China dynamics. But outside of China, our instrument, like specifically, for example, the protein sciences part, which is ProteinSimple, right? So you get different types of boxes, Western block, the ELISA blocks. And then [indiscernible] for biologics. So all of those have been -- are really applicable in the cell and gene therapy space. So first of all, that space is fast-growing and super hip. So there's a good application for all of those there. A couple of years ago, people were really worried about having so many people in the lab because of the pandemic. Right now, people are not cheap. So most people that have laboratories would like to have some automation, right? And if you then have automation that it's nicely consistently improving your results. And it's not like a $500,000 box with the price point, sits around $50,000, or we usually have -- usually anywhere between $50,000 and $100,000 now with the very new [indiscernible], it's a little higher than that, but it's also a tremendous value proposition. So overall, that business has been growing really nicely, including China, almost double digits, excluding China, almost high double digits. So I think that will continue to trend. And if you -- so I talked about automation being a megatrend, I talked about the productivity in the laboratories where we fit in very nicely. And I think the end market of cell and gene therapy will continue to pull through as well.

I would just add that in our [indiscernible] end markets, our strongest growth area for instrument placements over the past several years has been in the biotech space. So there's -- you can say academic and biopharma, but the reality is there's 3. There's academic, there's pharma, and there's biotech. And with cell and gene therapy and our positioning there, Bio-Techne has gone from being closer to the size of our academic business to now being our biggest end market. And it's been definitely the strongest area of growth for our instrument placement at least for the last 3 or 4 years. And that end market right now outside -- it's everything now outside of China is having the hardest time from a funding perspective. So our instrument placements currently are lower as a result of that. But the actual entirety of that platform, which includes the consumable pull-through is still double-digit growth, which we see as absolutely positive one. They are using the hell of the instruments that they have because of the -- to me, it puts an [ exclamation ] point on the productivity. And once the money comes back, they're going to be buying more instruments because they're seeing how useful they are in their workflow.

Got it. That's really helpful. Maybe pivoting to your old segment, Kim. Just on spatial and this Lunaphore deal. I think Chuck certainly seems jazzed up about it, Chuck often gets jazzed up about things. But I'm just curious, what does that bring to your platform, the spatial platform? How does it work with ACD?

Look, in this case, I'm also very, very into enthusiastic. We think about Spatial Biology business is basically optimizing your information you get out of precious tissue samples. Cell and gene therapy, neuro, immuno-oncology, it's always about what really happens where. So is there a viral vector that gets a gene into a cell, does it get into the cell, does it start getting copied? Is there a fact -- all these things you need spatial biology for. No wonder that the upstream companies such as Tenex are doing really well in that space. We love that they are doing well because early on, you really want to see -- you take 1 sample. You want to see thousands of markers and kind of what -- which markets are relevant, yes or no? The moment you find now which markers are important, you will have to run several samples. You will have to run with precision, high sensitivity, and you will want to know exactly what happens where in a single molecule, single cell level. And our technology is just amazing for that. And that's the ACD RNAscope franchise, right? Now as I mentioned, we did not have an instrument that we owned. We've been very patient and we have been collaborating here and there, but we've been very patient to find the right assets. Lunaphore was for us perfect because not only did the RNAscope reagents we needed to work on that box. It's also one box that runs 4 samples at the time. Others run one sample at a time and it runs for a whole week. We run 4 samples at the time and it runs overnight. So the throughput is 20 slides or so a week, which is unbelievable at that level. And then it's totally hands up. So you design your experiment, which is, first of all, very easy, which is also very nice. You just pick set of antibodies you like. You use any antibody, even the ones that you're going to be using, wherever you buy them, preferably Bio-Techne right away, but wherever you buy them. And then you can pull -- you make your setup for your experiment with using the antibodies. RNAscope is 47,000 different probes. So if we may, we can make any other probe you want. So you click those 2 and eventually that this fully automated system will then including staining, including the imaging, including the software readout, it's all kind of hands off, which is just fantastic. And we believe it's just an amazing box. It pulls through our RNAscope reagents, which is over $100 million in run rate, but it also pulls through antibodies, which is yet another one of our strong cores. So it's just a win-win-win. And we also believe that -- so it's a synergistic with Tenex. So these researchers now have a translational set up and then eventually, if you translate this into a diagnostic set up, you will run 1 or 2 markers on a high-throughput system like a Leica box or a Ventana box. And we have the ISO 13485. We already have HPV as an assay in the clinic. So we provided a journey all the way to a clinical assay, which is also extremely [indiscernible].

Kim, I think we should rebrand it simple scope.

Maybe I'll pause there and see if anybody in the audience has any questions.

Can you just spend a minute that with your background in Thermo and how that's [indiscernible]. What's sort of the minds of the [indiscernible]. What's going on with them, are they -- why are they making cuts because they don't have a [indiscernible] -- is it because they don't have a -- I mean, what are the -- how do they think about it and some past experiences that we should know?

Just to repeat the question for anybody listening online. The question is about what's in the mind of pharma R&D budgets right now, kind of why are they controlling spend? What are you hearing from them?

I think there's several trends going on. Let's start macroeconomics. Some of the pharma companies, I'm not sure how -- like how they're -- the IRA and the new developments around how much will get imbursed at their patents will hold. So there's a little bit of carefulness in their whole portfolio. Then think about in the current funding environment, you also don't want to ruin your bottom line and overspend. So I think what they're doing is really focused -- honing in on the couple of programs where they see a strong compound with lesser risk, where they want to make sure they do things the right way the first time. So they're going to make sure that they pick the right markers, the right disease, right end markets, and that might mean, yes, that they probably take fewer shots on goal, but once they take, they really want to nail, right? And for that, I think we're well positioned because our [indiscernible] reagents are high quality. Our instrumentation helps the productivity and the consistency of the results. And then, for example, in the old days, you could try a couple of compounds and see how they do in clinical studies. But if you want to be careful with your spend, you will want to create an [indiscernible] and look with your spatial biology and see how it does, how your compound works and toxicity, do early experiments and use some of our instrumentation to check out if you're on the right path. So I think that's how they're managing through this long and midterm constraint.

I would just add too that we talked about the tools companies that benefited from pharma and the cash that they have to go out and do a bunch of M&A and things like that, and we weren't necessarily one of those that directly benefited from COVID. I think the pharma companies are similar that way. And there's a lot of pharma companies that benefited both directly and directly from COVID and had a lot of extra money to plow into R&D. Our pharma comps are huge even this year compared to last year. What's kept our growth rates where they were at all last year in fiscal year was our pharma business to offset the Bio-Techne, smaller [ Bio-Techne ] downdraft. So pharma has amazing comps because of the flush with cash and redeploying that cash in R&D from COVID, considering that, that comp and they're still growing on top of that and generally speaking, in the R&D, at least for us, they are. And based on what we hear from the other companies, they are as well, albeit not as fast as it was before, but it's I think relatively speaking, not necessarily a position of weakness. I think this IRA thing is out there in the future, and that's causing some level of conservatism, depending on which pharma company is impacting more or less and sooner or later. But there's time for that to perhaps readjust as well. Political wins will change perhaps, perhaps not. But it's something we're keeping our eye on, but it's not an overarching concern as of now.

[indiscernible]. So thanks for the question. And it was actually exactly what we've been hearing and asked those questions directly as well, both of our teams there as well as our customers. And I was very blunt and I was asking customers, are you financially incentivized to buy local. And across the board, the answer was no. There's no government money for anything, even much less incentivizing us to buy local. And it's not life sciences, it's a total macro China theme right now and not to get a bear in the details, but another observation from this visit versus the last time we were there pre-COVID 4 years ago, was on that drive into Shanghai. More than 50% of the cars on the road were local Chinese cars and they were all electric. 4 years ago, they were still mostly Western cars and all gas. So that's an example of how they're focusing local for sure. In our space, generally speaking, they don't have a lot of local options outside of maybe antibodies. There are a lot of small antibody companies, it's the most competitive environment of any product line we have anywhere globally with China also. So it's one area of our portfolio. But when it comes to proteins, there's really no viable -- you got to remember, too, these researchers, many of them that control the funds of these large academic institutions hold the U.S. passport. They were educated, did their early part of their career in the U.S. and went back to China because at the time that's where the funding was. They grew up on Western reagents, Western tools. And therefore, they understand the quality difference as well. So it's not to say that China -- they're very innovative folks, and they will eventually have their own life science tools space. But yes, remember, it took us 40 years to develop the portfolio of reagents that we've had, and that's partly why there's even in the West, not any company that can compare with us apples-to-apples of what we can offer our customers. That's on the reagent side. On the instrument side, there is no alternative. Our instruments are extremely unique, and so for their applications. So it's not to say we don't take Chinese competition lightly. We don't. In antibodies space, it is competitive. But generally speaking, all the customers we talk to, [indiscernible] we talked to said that's when it comes to life sciences, it's not something they take very seriously at this point.

It is a good question though, because longer term, we feel that there could see that risk and that trend will continue. That's why we are investing in a GMP facility in China that's being built right now in speed you've never seen. And it should be operational, we'll go into validations in a couple of quarters.

That's excellent. I think that's an excellent point. So yes, we actually -- we're the contrarians. We're the only Americans where we're actually investing money in China. But yes, we want -- and it's a speed is still remarkable. This was approved 9 months ago, and it's practically halfway done. We couldn't believe what a beautiful facility is they're building, and we did exactly for that purpose because cell and gene therapies is just being in China as it is anywhere, and that is an area where they are pushing heavily for localization. So we want to be ahead of that game and make sure we have an offering there.

We've got 5 minutes left. And there's 1 thing I want to run through, and there may be time for a couple of follow-ups. But Jim, your stock is trading, I think, at the lowest multiple we've seen it on [indiscernible]. Yes, I'm sorry. Trust me, everybody in this room, I think is painfully aware of that, too. You're pointing to flattish growth next quarter, but you just had this Investor Day where you outlined kind of mid-teens growth outlook. Can you talk about your confidence that assuming we get back to a "normal" macro, which who knows what that is these days that you can return to double-digit growth. And then maybe I'm curious for Kim, like what platforms do you view as key to that?

I might steal a little bit of his thunder in my answer. But -- and the reason is because one of the -- yes, we monitor run rates, we monitor macroeconomic conditions. We monitor bookings, all the stuff that everyone else does as well. The other thing that we hone in on every week, every month, every quarter is how our key growth platforms are doing. And again, on our Investor Day, what's going to take us to doubling the size of our company and doubling it again in 10 years, is going to be 4 key growth areas or platform. Cell and gene therapy as an end market in itself. Our spatial platform that you heard about from Kim, of course, our exosome platform with regards to spatial biology. And then finally, again, we talked a lot about our instruments and how they're being used the hell out of right now and it's still way underpenetrated a long ways ago. Those are our 4 key growth platforms that are going to carry this company's growth rate in the future. And even in this worse environment that we've seen in the over a decade, they're all growing high single digit to very solid double-digit growth. They're just not big enough yet to carry the way to the entire company. And our core portfolio is what is -- I mean more established in what is, call it, suffering the most from the macroeconomic conditions. But I think that's testimony -- that's what gives us all confidence how bad things look and how bad the print looks when those 4 platforms are performing, we know our future is bright.

And maybe Kim, a follow-up for you, just on Exosome. I think that's one deal that's taken longer to play out than I think original expectations. Can you just talk about where that is in size today? And when does that get to an inflection point where to kind of Jim's point, it becomes a more meaningful contributor to the consolidated top line?

Yes. So as you know, we put the in [indiscernible] team, the [indiscernible] business as well as Exosome together, I don't know if we talk about sizes and growth rates, but growth rates have been excellent in -- we call it the molecular diagnosis division, [indiscernible] took a little bit -- it took longer because we were obviously new to the [ MEA ] world and the diagnostics world in a way where to market to urologist, we had to build a channel. We had to make sure that we have the clinical data, get the NCCN guidelines in place, reimbursement. And it's like climbing Mount Everest, we did it, but it was not easy. However, we have to commit to get to the top of it just because the Exosome franchise is kind of hinging on the proof of principle of being able to use it in a test like that, right? So yes, we use urine for the first test, and prostate cancer is a very prevalent disease. So those were good. But making it to the critical point where now private insurers are also signing on to cover the test and we're seeing great progress, especially the clinical data coming out as to how much better it is than the standard of care, that really validates the Exosome modality as such, looking at those little bubbles coming out of cells is true. And now we've been extrapolating it into kidney, like as you know, we licensed that to Thermo Fisher Scientific kidney transplant rejection [indiscernible]. We are going to saliva for sugar disease diagnostics. That's a CDx with a big partner. And then eventually, we're going to show data, then colorectal cancer, which is something also that we would license out, but it shows that we can also have Exosome based assays in blood, right? So then we basically proven Exosome modality. We've proven that we can do any bodily liquid and have a much better test than the ones available. So we're going to roll that out and some of the assays we actually throw into the [indiscernible] team to make a [indiscernible] to sell it through their laboratory channel and then have a win-win. Some of the longer shots, we will parse out to the rightful owners where we do something similar as we did with Thermo where there's upfront fee, milestones and a perpetual high double-digit loyalty associated with it. We will never be the company that goes like, oh, let's go at all ourselves and run tens of millions in clinical studies and become a diagnostic company that way. But our portfolio in Exosomes, we can definitely bring a couple to the laboratories ourselves. And then for the big cost ones, we will go to the specialty companies and license our technology.

And Jacob, real quickly, I'll just add. So roughly a little less than doubling the size of the business today will get us to profitability at a 50% growth rate. You can do the math as to how long we think that might take or 50% plus growth rate. And in terms of additional investment needed to support that growth, particularly as it pertains to Exosome, minimal, because if the commercial -- the [ lug pugs ] that support these urologists are fairly concentrated. We made those investments in the last 2 years to fill up that sales team. So it's really just leveraging what we have.

Got it. Well, unfortunately, we're out of time. So I don't get to pest you with cell and gene therapy questions. But Kim and Jim, thank you for being here with us today.

Thanks very much.

Thank you.