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

Thanks, everyone, for joining us this afternoon. I'm Vijay Kumar, the life science tools diagnostics and metric analyst. Pleasure to have with us Bio-Techne, representing the company, we have CEO, Chuck Kummeth. And I guess, the incoming as well. Kim Kelderman. Gentleman, thank you for spending the time with us.

So before we get started, this tool has been pretty noisy this year. And one would have thought a business like Techne with reagent exposure to be relatively protected. Obviously, you've had your own sort of macro issues to face with. Any opening comments you want to make out on how third quarter progressed for Bio-Techne and how the macro environment played out?

Our first quarter were fiscal, but about as predicted, I guess, is investing we say and probably more to come this quarter. We're a little bit protected, but we're pretty diversified. And we have 10% of our companies in China. So that's a full 2 points of headwind against us at this point like everybody else. But we did show growth last quarter and not many of our peers did. And going forward, I think we'll show modest growth. And when things recover, we'll get back to the expectations everybody has for us, which is double digit to hopefully back to mid-teen growth. We have a lot of growth platforms that are actually still growing through this May lay we're in, but they're still too small in the mix to carry the company yet. But within a couple of more quarters, they're going to start being more material that's going to help as well.

And just -- sorry, China was 200 basis points headwind in your fiscal year.

It is right now. Down 15 -- minus 15 to minus 20 square, but I mean last quarter, minus 13 quarter for that, we're actually 17% growth while everybody else is already negative. So maybe we'll be, first in first out, I don't know, but we'll see. But it's -- the funding is shut down in China, as we all know.

What is from different companies, you've heard a variety of reasons and what's happening in China. But when you look at your business, is that a particular customer classes that like diagnostics? Is that pharma, between pharma? Is it like large pharma? Is that like CRO? Any color on what's happening in China?

We're mainly RUO focused in China. We focus on the 180 institutions in Beijing, another 180 in Shanghai, and that drives most of our business. We are certainly participating in the pharma side of China, which is really almost all biosimilar driven. There's not a lot of large molecule development drug discovery there. They're sidestepping all that and going after selling gene therapy pretty hard as well. And so we're building a factory for that. We're half done for proteins. And I think we're probably in the midst of all of them together. I don't think there's any one area of doing the other or significant salvation anywhere until we have government funding coming back into the realm. They don't lay off people like we do here in the U.S., right? So they're paying salaries and they're being funded. They're just not -- there's not new funding. There's not new money for new program. It'd be like the NIH saying there's no grants this year. It's kind of the situation we're in there. And there's expectation points of when that will begin, government is not known for giving a lot of data beforehand. It will happen when it happens. And right now, the best guess is probably after Chinese New Year. So February, March time frame, maybe. But nobody knows. And everyone's kind of throwing their hands up right now and [ throwing the band-aid ] off and said no guidance in China. We don't know. So we're a bit in the same boat, I guess. But we're not that big, and we're well established with our brands there. And being we are very front-end RUO focused, and you don't get anything done unless you have reagents to start your work. And so we're pretty optimistic. The webinar and, call it, the team ex-position series is kind of growing strength again. There's a lot of that always happens in China. There's a lot of small shows and your a lot of technical presentations, and they're building up steam, maybe that's a good data point. So there's definitely interest. We probably had some stocking, destocking in China as well through this. And I think like everywhere else it's turning the corner, but people are running out of stuff if they haven't already, right? So I'm maybe more bullish than most, but probably by the second half of 2024, we'll probably see things are turning. And I do think a recovery in China will be a faster recovery than we are seeing here in North America, so.

In that recovery in China, I know for some of your peers as well. China, usually, it's always been like a V-shape recovery. Was there always tied to a stimulus? Or do you expect these kinds of recoveries with EBITDA out a stimulus?

They're not known for stimulus. I think they'll probably just get back to normal funding. And that will be a stimulus [ cycle ] by itself. So they decide to stimulate too, then I think we'll probably see a pretty big surge that will be there next week. So.

I think, Chuck, you mentioned perhaps post Chinese New Year stimulus? Is that a resumption of funding? Or -- sorry, is that like a new stimulus program?

A resumption of funding.

The resumption of funding. Okay.

That's our guess. We don't know any more than anyone else does, but -- they're unlikely to do that during Chinese New Year before it probably, but....

And when we say resumption of funding, what is the baseline we're looking at? Because I feel like the last 2 years, there's a lot of funds being churn in because of pandemic in China, is that the baseline we're looking at? Or is this a pre-pandemic baseline that we're looking at? Like what's the right framework to think about for assumption of funding?

It's hard to say. I mean, -- we've got roughly $100 million business there, and it's shrinking right now modestly. If it gets back to normal, that's a 20% annual grower for us. So that's 35 points away when we are now. So that's quite a bit of revenue for us coming off where we're at. So if that's for everybody, that's a pretty significant rise in funding probably. But they probably got to balance that and match it against any money they want to also have for testing. They do a lot of testing there, as you know. And now there's a new scare on the horizon evidently. So we're hearing about right? So that might affect their thinking too, I don't know. They don't really publish funding like the NIH -- it's just documented as the number one strategy in their 5-year plan. It's our highest priority. And there have been numbers out there floating but there's not a lot of public data on just what's going where. But everybody gets something. We do know that.

We've mainly focused too on like what would be other things the government could go fund and take our money away and that just looks really good. At the end of the day, Chinese people expected to have cleaner air and the country invested heavily in the EV, everybody drives the EV by now. And they have high expectations on health care and being healthy and especially over the last couple of years with the pandemic people just are hyper focused on getting the care they need from the government. And therefore, we do not believe that there's any competing other funding areas and that health care will stay on the highest spot of the list if the funds become available. So we're not worried about it going somewhere else. It's only the when, that's the question.

And maybe a related China question. I think some of your life science tools peers. I think the way they've characterized China or the medium term, whenever the markets normalize, perhaps that normalized growth level may not be as robust as what it was over the past decade, right? And I think...

It might not be if they decided to cleave off some for testing for risk there, maybe that would be affected. But they've been on a healthy increase every year for the 11 years I've been in this job. So -- and there are a long way to go. I mean you leave the big cities. There's not much health care. -- they got a long way you have to go. And they're not overly innovative. A lot of industries are much farther along than having local suppliers than life sciences is, right? So.

Is there -- and sticking on to this China topic, has there been any shift for China for China or any local competition that's sort of come up?

I've been waiting for it for a decade. So not really I mean there's a lot of all small mom and pops there, but not a big threat to us for a lot of reasons. But I think mainly just the breadth of the size of business you have to have to be like we are, you could have somebody creating 20 antibodies and making some pretty good antibodies. But to be in business, you need 100,000. You need a catalog. So it's the only can do so much. And it's never materialized. We bought a protein company there 10 years ago for this reason for this risk. And -- there really wasn't a risk. And our local China-for-China protein business has been modest growth, but even the Chinese don't like Chinese products.

We do have it hedged. And we're building a GMP facility there and in case more activity takes place, we do have the china-for-China program.

But we don't manufacture there. We don't make instruments there. We don't make anything for export there.

And are you importing mostly into China or -- when you sell products in China? Is it mostly manufactured outside China and importing into China.

Yes.

And maybe the last one on China here, is 23 the bottom? Or are there -- what kind of signs are you looking for when you think about the macro headwinds in China?

I think the best sign has been all our peers ripping off the Band-Aid this earnings season. So there's no more [indiscernible] on China. We don't know anything. So everyone has been a little negative in giving no guidance. So that's probably the capitulation we're starting to look for more than likely. But I think China will -- has always surprised me like it will continue to surprise. I bet it. It will come back when it comes back, and it will probably come back faster than we expect once it starts. So that's the way history has been, we'll see.

But so far, the environment has been relatively in line with your expectations? Is that how you would characterize your current trends?

Do you want to take that?

I think, overall, coming to a standstill was a little worse than we expected. We do believe that it will normalize. You already -- Chuck already talked about when and how things will rebound. Let's assume that for a while, it's going to be constrained. I think that our portfolio is nicely aligned with constrained funding. We have a set of instrumentation products that are really helpful in automating things and making manual steps easier to do so. Automation has been a driver of megatrend for a while. And it's been in China, and it will continue to be. If you look at the programs that one would be running if you have limited funding, you want high-quality ingredients. Our core is good for that. You want automation. We have ProteinSimple for that, and you want to validate all the work you've done, and that's why we have a real nice patient biology business. So all of those would -- our growth factors would actually be doing relatively and I say relatively well towards peers if constraints will continue.

I would say 2 things like spatial. Just turning the corner on being I would say, critical mass, but an inflection. So I mean, our size of that business in China is like 1/4 the size of Europe, it should be bigger than that. So it's starting to hit some credit. So that's going to start accelerating and becoming more material. So there are some data points like that, it should help our numbers or help mitigate some of the continual softness whatever. So instruments have always been very strong. Our mix of instruments in China is the highest of anywhere. It's almost 50-50 with reagents versus 20% everywhere else. So for the reasons Kim said it's Chinese-like productivity. They like getting good value for their dollar. They have a pretty fast capital cycle. Our instruments aren't that expensive, and you get a lot done with them. So they have been always very, very in demand there. And we're just like here, we're very low in overall share. I mean we're a fraction of the way of converting westerns to automation, automated Western as an example.

And I guess pivoting away from China, pharma has been the other major topic within life science tools. I think almost half of your revenues are from pharma end markets. When you think about pharma ex China, right, can you talk about recent trends, how is pharma as an end market benefit you guys?

Very strong in Europe. No issues there. We're double-digit growth. North America has gotten soft the last couple of quarters. It was pretty much okay before that. IRA is some component of that. I think there's an overall conservatism coming out of COVID as well that's affecting things. There was certainly a stocking, destocking element as well with them, like everybody doing the supply chain crisis as we were all on a year ago. And I see that probably continuing for a while. I don't think that's any [ V ] recovery to be honest. I think biotech will be more like a V recovery. I think it's funding returns here, hopefully, into 2024, we've always been kind of a go-to company for small biotech because of the different products that we have. There's always a juice or something that makes a new novel biotech companies, new idea work. And so we get a lot of share in small biotech. And that's largely in the sidelines right now, right? So -- but that will probably come back a little more quickly

Are you -- when you look at your fiscal '24, are you expecting pharma overall to like -- to be flat? Or how are you thinking about pharma as an end market?

Well, our fiscal '24 is June, so it's probably more of the same until then to be honest. I think after that, we're all hoping for a modest recovery as well. But I don't think -- like I said, I don't think it will be a V recovery. I think big pharma is working through some things.

So for fiscal '24, we're looking at...

I think our best shot is really new pharma, cell and gene therapy. So I think that will keep accelerating where we've got great growth right now. And I think that will just get back to COVID level growth rates, which were like 100% once things start recovering. I think that's what we're focused on. It's not the preservation of old pharma. It's all about new pharma.

And so overall pharma, is that like a flattish given your fiscal end in June? Are we still expecting [indiscernible]?

Fiscal is probably flattish.

Flattish, with the first half being down in the back half, maybe.

Yes.

You mentioned that...

We've talked about that. I mean we showed growth last quarter, and we're going to show similar this quarter. But within this year, -- if we stay in this funk we're in at these levels, but our growth platform stay at the level they're at, within a year, we're high single-digit growth despite the mix. So there's -- we've kind of built in recovery even in things staying the same because we've got growth things that are still working in also.

And I don't want to come back to cell and gene therapy. But before we get there destocking, is destocking I think when I look at consumables, some of your peers say like we're past destocking, we've bottomed out.

I think after this quarter, we're largely capacity destocking. We're going to get help there from that effect, but we're also going to get help on comps, too.

And what gives us the visibility or confidence that...

The main thing is OEMs calling and wanting more stuff, so.

And you're getting those inbounds now. OEMs calling now.

There's more interest. In some cases, they buy twice a year or even annual large supplies. And a lot of times they call ahead, it gets you ready that you're going to have stuff when they need it built, right? So -- so we're starting to get some of those inquiries on.

So that certainly helps the back half for a step up...

I think it's the back half exactly.

On this IRA, I think some of your peers have brought up on cautiousness because if IRA. Is that...

I'm so tired of being wrong every quarter, everyone's just kind of throwing their hands up, right? So it's...

What happened like why did all of pharma, when I just look at the calendar of third quarter -- it just feels like everyone is citing IRA -- did something happen all these pharmas just woke up and citing IRA as of reason to [indiscernible].

Well, we've been talking about for 2 years. So we've been warning it's coming. So it's a 2028 issue, but it affects pipelines today. It affects what they're doing R&D for, and they've been hold up for a couple of years ever since the law changed came into effect at what they're going to cut back on because they're not going to make the kind of money they thought they were going to make, right? And now the strong opinion is that these will be overturned in court. They won't hold up. But by the time all that happens, the damage will be done. So the pullbacks have happened. And how long that conservatism stays and how deep, I think, is company by company in their own pipelines. If you're [ Lilly ], you're not too worried.

And just sort of putting all of these together, between pharma, China, the sense I'm getting is things are stable, like it's not getting incrementally worse from some of your peers. And obviously, just looking at Street numbers, I think the Street is looking at almost a flattish growth year-on-year. Comps to get easy. Is that just a Street modeling issue? Or is there any reason why your fiscal second quarter can't look similar to fiscal Q1.

I think us and everybody is just trying to be cautious and conservative and not overpromise. That's the biggest issue. I think there's more upside than there ever has been just because we just all pretty beaten up at this point.

Another theme that's come up Chuck has been this concept of LRP issuances during the pandemic [ boomers ] and perhaps companies were a little exuberant. When I look at your targets, this is analyst day last year, right, it's still looking at mid-teens organic. Is that perhaps like robust? Or is that still intact?

Well, it's -- we just came out with our predictions a couple of months ago and not enough time has gone by for us to change any of those directions. We laid out a 5-year direction and a 10-year, and I think we're still within the guide rails to that because we have enough hedge built into that so.

And you brought up cell and gene therapy as one of the drivers of that LRP piece? My understanding was cell and gene therapy, this is a proxy for early-stage biotech, pre-commercial revenues and that environment is challenged, yet you guys are growing pretty strongly. Why is Bio-Techne growing so strongly in cell and gene therapy?

Well, we have a very good workflow for cell and gene therapy. We're going to own Wilson Wolf. We have a very strong position in GMP proteins. We have avenues of media now. We have the instrumentation that's used for QC type applications. We have our spatial technologies for really interrogating the health of the cell line. So we've got a lot of positions in that it's just a growing space even in these tough times. They're growing at half the rates they were. But they -- in today's in the world, they are good numbers, right?

Yes, indeed.

But they're all preclinical to Phase I clinical -- it's -- we're -- there's hardly any products in the market yet. And we won't need too many to actually start making a lot of money. It's just -- it's a waiting game for this market to really begin. I think the -- we just talked about it earlier today. I mean the FDA coming out and slamming CAR-T as having maybe a malignancy issue, a side effect issue. That's probably a good thing. They should have been more engaged the whole way here the last few years of CAR-T. I mean 8 drugs in the market and 2,000 clinicals going on is ridiculous. They're slow. They're too late. They promised better stuff. We've got more activity. So maybe more visibility, even if it's bad visibility, potentially, if they -- the more they get engaged, the more they're going to see the light, it isn't like -- it's not the future. It's already predetermined. Pharma has already said to the world. This is the future. We're all coming here. So you can't ignore it. The future of oncology, right?

Yes, indeed. If there is a cure, yes, and if we can afford it, yes. But I think you brought up spatial a couple of times. Just explain like what do you have within spatial that's a lot of players touched a spatial market, what is differentiated about your offering?

Kim runs it, so he is best to answer this.

Well, differentiated, think about the journey, a science project makes. Usually, you start off with a hypothesis and look for many, many markers like I'm talking thousands of markers. You would highly likely use it the next platform to kind of cast your net really wide figure out which markets are of interest. At the moment you go into your translational space, this is where you need to run more samples and you look at fewer markets because you know about the ones you want to hone in on. That's the translational space that's where you would like to look at few -- several samples, a few markers and our RNAscope, ACD reagents, which, by the way, are the market leaders are best positioned. They're really made for that space. We actually acquired Lunaphore, which is automation platform, right? The COMET, which launched a couple of quarters ago. That automates that whole workflow. And we're the only ones that you can do RNA, you can look at proteins, so it's multi-omic. It's totally hands off, fully-automated, highly precisioned, very repeatable solution, right? And you can see your whole slide, you don't have to change the tissue to another slide or another carrier. It's just a very natural fantastic fit. Researchers can use the antibodies they have been using, so they don't have to really revalidate or figure out what other antibodies to use because you can pick any antibody you want for the system. You can pick any of the 45,000 RNA targets that we have in our library. So we're really well set to occupy that space fully. And at the back end, you have diagnostic applications. And we have worked on our quality systems. We have a couple of assays that serve the market, specifically the HPV assay. And we're now at a level where 10% or a little bit more of our revenue is coming out of the clinical space. So we're really blocking up the clinical space, and we are the market leaders in the translational space as well, very symbiotic with 10X solution. So we're quite happy where we are. And that market will continue to grow in all areas, including China.

And just could you elaborate like when you see our symbiotic with 10X. How sort of you fit in, in that workflow?

Yes. And like I just mentioned, so a researcher finds out -- looks at thousands of markers using the 10X technologies. And then we'll start further interrogating the few markers of interest. And that's where we fit in really nicely. And that's when the Lunaphore platform, the COMET as well as the ACD reagents, the RNAscope specifically are going to be the best solution. Some of our assays are newer or you can look at siRNA and all kinds of shorter RNAs, which none of the other technologies can do. And that, again, is super relevant in cell and gene therapy. So that's a win-win right there, too.

How big is spatial for Bio-Techne?

Yes, run rate is north of $100 million.

And what's it been growing at? I think the markets are growing like 20%, 30%?

Yes. So historically, the CAGR historically is high double digit yes -- high double digits. I would say, in the current environment the last couple of quarters, we've been hovering around double digits.

And I think, Chuck, you didn't mention Wilson Wolf. I know you closed around the [ meta ] milestone, but just give us an update on the transaction on what does Wilson Wolf bring to Bio-Techne -- it was a pretty unusual transaction, how it was structured.

Well, we knew we wanted to get big into cell and gene therapy via GMP proteins. We're the world leader in proteins for research -- stands the reason if the world is going to move into GMP proteins. This is a way for us to actually attacking it into production level proteins, which we've never been able to do because big pharma large molecule will make their own proteins. It is a protein. So this is a way to really scale. Many companies came to us wanting to give us a heads up that they're going to need millions of dollars of a single protein, and they don't want to do that themselves and this manufacturing steps, they're okay with outsourcing that. So we got into it 5, 6 years ago. Probably 5 years too late because at that point, [indiscernible] already established a position and kind of became the de facto standard, right, for the CAR-T side. And the only other de facto standard in the industry is the bioreactor and that's Wilson Wolf GRx. They have 800 customers, they're in most -- all the clinicals right now. And so they're local. I first trying to buy John Wilson out as a Thermo Fisher 14 years ago. So we've had a long relationship. We're 15 minutes apart of our companies. We've stayed engaged. There's probably no company in life science that's been approach to be acquired more than John Wilson by everybody multiple times. It took us years to get it done. It had to be a very creative deal. So we had to start out with a call option, which led to a 20% first share position of the milestone, which we met last year. We paid that for $225 million or whatever. And when it gets to a second threshold, which is 225 revenue or 135 or so in EBITDA is a big trigger, then we'll pay $1 billion. And we have -- they have until December 31, 2027, to achieve that. But wherever they're at. On December 31, 2027, we pay at the 4.4x revenue multiple. So it's an amazing deal by the numbers, but we're earning it because this is a guy who is a KOL and he doesn't want to make [ box ]. He doesn't want to manufacturer. He wants to be out there with clinicians and doing what he does. And as manufacturing is getting bigger, it's becoming a sizable operation. We're helping more and more on the operations side. So we're earning our keep player and helping him do what he does, which is amazing stuff in the industry, driving this whole new market forward. So we expect it to probably play out to the end. I don't expect them to be early. There was a good chance a couple of years ago, but they've -- like everything else with pharma being down, they're not shrinking, they're flat. They're doing okay. They were actually holding up pretty well given the new clinical climate is really contracting right now. So we're just waiting for more of these [ 2.5 ] sized programs become [indiscernible]. So we need more than a couple of drugs to come out a year. It needs to be more like the FDA promised a few years ago, more like 25 to 50 per year. And as that starts happening in a couple of years, we're going to see a major inflection in our demand, so and then we'll totally own Wilson Wolf at that point. And as our 5 and our 10-year model says. I mean, in 10 years, we think we're a $2 billion business just in cell and gene therapy. And probably roughly half of that will be would be [indiscernible] GRx.

And these drugs that could be approved by the FDA? Do we have line of sight on where we are in the clinical trials, when...

Well, we have line of sight what we're involved in. And we have line of sight because what Wilson Wolf involved in, which were hundreds. And there's a lot out there in Phase II, Phase III. It's just a matter of getting through the FDA and getting things done. And it's just been moving slow.

What's been the macro impact on Wilson Wolf right now -- What the impact of macro environment for Wilson Wolf.

I think the same thing we're at. This conservatism in pharma and IRA is causing a consolidation of clinical. So the way John explains it, they'd be working with one customer who was planning 10 clinicals this next year, now they're only going to do 5. So they're pulling back because they don't know if they're going to have the funding that they need because of they got to prepare for price caps,

Sorry, Chuck, are they growing right now or?

They're slightly growing flattish, about like we are, but most everyone in that space is shrinking. So they're holding their own pretty well, actually. But they were growing 75% a year to 2 years ago. So

And remind me, like this business has really high margins, correct, Wilson Wolf.

They're running about 75% op margin right now, yes, it's pretty good.

75% op margins.

Yes. It won't be that when we get hold it. So there's more investments that should be made. It's -- I mean it's analoging bottle on steroids. It's $1,000 a piece. I mean it's a onetime use object. So it's an incredible business and it has superior, superior IP. John Wilson is a mechanical engineer. He understands how to write a patent. So it's a really good spot.

And when you look at your revenue mix, 75% of your revenues are protein sciences, that's your biggest bucket. I think you classify into different buckets, like there's instruments, the risk reagents, small GMP, cell and gene therapy. Is there like a...

Platforms for our size company. We did that by design.

Is there a way to cut that pie, what the GMP is by these different buckets?

It's all laid out in our investor that we gave a couple of months ago, but we can go through quickly. Instruments are roughly 10% hardware, another 10% for the cartridges. Consumables as a company are 80%, right? But when you break it down across the new segments, right, it's different. We have the old R&D systems, we call it proteins, antibodies in kits is roughly 40%, 45% of the company now in that range. So we've done a pretty good job acquiring other things to bolt-on. The [indiscernible] business, which was originally the ProteinSimple business was a $30 million business when we bought them. And roughly $250 million now just on its own. So -- and 30-plus percent op margins. So very good IP, very good gross margins with the platforms. We talked about spatial. Spatial is $100-plus million and is on track to be a low teen growth engine for quite some time to come, I think. I thing I do remember is we're in these segments, roughly 6 or 7 segments, and we're in a low share position in all of them. And our instruments don't really compete head-to-head with much else. They're more about a new way to do things. So our Simple Western platform is a way to automate a Western blot. We're the only one in the world that has it. We have a very strong IP. So it's not about competing with some other mousetrap. It's about converting people from doing them by hand to using automation. -- which is much more reliable, much more eatable, better data, et cetera, et cetera, faster. And it's -- we're sitting at a 15% to 20% share position right now. So even last quarter, we were in the 9% overall, we're roughly in the teens growth still with that platform even in these times. And Covid, that was a 50% grower through COVID. So as an example. But all those are laid out in our investor deck, if you don't have it, just pick it online.

And within GMP proteins, I think that's another bucket. I think you called out like 40% growth in GP protein. How big is it -- why is it growing 40% --

But it was growing 100 before, we get tough times here. So it's an industry. So we expect it will pop back. It's growing that way because there's all that interest. There's 1,000 clinicals in the U.S. There's 315 in China and other 500 or so in Europe, and they're in all stages of preclinical to Phase I and II, and we have 400 customers right now. GRx has 800 . So [indiscernible] is still in more of the later-stage clinicals, but we'll be the one going out with GRx, hopefully in a closed system using that leverage to try and get people to convert to ours. And that's on the T-cell side, on the regenerative medicine side, and we're the leader. We're the world leader for sure there. And that's largely mammalian-based proteins.

You also announced MauriceFlex a new instrument. I think the size it $300 million. What is this instrument? And how do you -- what assumptions are...

The capacity?

MauriceFlex.

Maurice...

Maurice, yes, so it's -- you want to do a filtering and you've got to filter your samples and get them to a mass spec eventually. So usually, that's done with LC or GC. So this -- what we've done is put a front end on the Maurice that actually can eliminate the need for LC. So you can go right directly from that sampling to mass spec. So that actually doubles the TAM of the market. So it's a big space to be able to replace HPLC in that form. That's a big driver. We are also now automated with Empower, which is kind of the standard out there for [indiscernible] and connectivity within the factories. And so it's come -- all these platforms, we bought for one reason, but their applications are expanding. So every one of them, we've more than doubled the TAM since we made the acquisition to new applications. So we see really a big future for instrumentation.

And I think that the real cool addition that MauriceFlex brings, right? So it does all the normal low-teen characterization. Chuck already mentioned fractionation, so you can go directly into a mass spec, but it can also play into the ion exchange market now with that application, right? And the ion exchange market is a nice market just by itself, and there's been -- there's been a couple of players in there, but that's a total new market for us.

Kim should know because he ran that business for Thermo Fisher one, so Diaonics.

Just a couple of maybe. I guess one product question and then some big picture questions. On the product side, ExoDX you cited some reimbursement challenges. But yes, I think the most recent quarter, volumes were up, I think 56.

We're close to inflecting with Exosome. It's -- we're -- it's moving right up -- the growth rate has been 50% plus even in these times, and it's going to get better, I think, more quickly. And then we're not even attacking primary care yet. We're still really only in the urology channel. And we're -- we've only really touched 20% of urologists out there. And even within that 20%, they vary all over the map from buying very little to some buying awful lot. But now we have the new NGS, the rule change for us to be used as a surveillance tool. So it can be reimbursed every year, if possible. So we can go back after the 130,000 tests sold in the last 3 years to those patients and talk to them again if they need another one. So this is all about avoiding unnecessary biopsies of which there's still 1 million done a year, 1 million. It's a big space. And there's a big need.

That inflection is now because of this move to surveillance.

It's just about critical mass. It's just more -- people have heard about it now -- and there's data out there and we're now at a 5-year outcome study data set. So there that's helping the private payers to get on board and it's all happening. It's just -- it's diagnostics. It takes years. It's just the way it is.

So -- we don't figure out how it works. But -- so we're picking our bet. There's a very strong pipeline just as well in exosomes, where the new wave of assays will come out through our laboratory channel, selling directly into laboratories with some real cool markers. And again, like Chuck said for ExosomeDx prostate test, we had to get the NCCN guidelines aligned with the reimbursement, aligned with new data, the 2.5 year study, 5-year study show that it's clearly better than standard of care. That data helps us again with coverage private payers. So it's kind of like coming all together. It was longer rather than we expected or hoped for, but now we're the experts in taking the hurdle.

And it's a platform, many more tests on the way.

So given I have both of you here, obviously, company announced a management transition, Chuck for you are [ timing ] why now, and Kim I know it's tough to answer. What are you going to do that will be different versus your predecessor or [indiscernible].

I hope it changes a lot. Well, I've been in the chair 11 years when I leave, and that's, I think, long enough for any CEO, I think it's time for new eyes. I'm a builder, kind of a turnaround person. There's nothing broke here anymore. I mean it's been really a couple of years of delegating and spending more time on things that just not as necessary for me, I guess, and I'm thrilled that the Board, which did an extensive search. We did -- I did a 2-year preannouncing who does that, right? We did that because there were certain individuals that are under noncompetes out there that maybe want to become CEO of externally and would have to wait that out. The Board fleshed through all those. At the end of the day, decided that the 3 people I personally groomed for the last decade or longer as internal candidates. They picked one of them. They decided there wasn't anything better to take a risk on externally versus internally. And Kim's well deserving, and he's got much more technical domain than I do, which I think is also a need. I've learned a lot in the 15 years I've been in life sciences, but I'm not a biologist. I'm an old programmer in chip design. So it's time for, I think, someone that has more of that background. But someone who also knows our culture and knows our rhythms, our prioritization process and our M&A process, which is pretty extensive and still a very, very big strategy going forward. And he's the right guy and I gave him hard time last night. I hope he turns over a lot more rock than I did and change a bunch of stuff. So let's get the stock back to 120.

It's not a high expectation, fortunately. Now it's a true honor and Chuck has been great in not only grooming me, but also in helping out the transition in this coming months that we are working in [indiscernible] transition. It's been a long time coming. I started my career many decades ago with Medtronic and went through small size, midsize companies, made my way to the U.S. after moving through 5 countries or so, real global mind. Worked with the start-up genome sciences, sold back to [indiscernible] stayed with [indiscernible] for a number of years and then Chuck hired me into Thermo. So that's how we got to meet. And at Thermo Fisher Scientific, I kind of manage 3 different businesses of larger scale and complexity. The last 4.5 years, the genetic analysis business where the QPCR platforms by now world famous was part of the portfolio, CE platforms and a few metrics became part of that business. Real comfortable with larger scaling organization, keeping speed, keeping things nimble. M&A has been my forte for 5.5 years now with Bio-Techne. I really enjoyed it, building the Diagnostics and Genomics field. But that is not the definition in my background. I'll love all the children and the family equally. We have a beautiful core as really strong and kind of feeds all our other businesses, and we have 3 or 4 growth verticals of which 2 I have already managed and 2 of them, the [ CMT ] is newer to me, but looking forward to rolling that out and a total believer in the potential of the cell and gene therapy market. And for the last couple of years, we've been building together the strategic plan. We presented it in New York a couple of months ago. We committed to it. We think it's a very solid plan with upside. And then last but not least, what your question as to what I would change. I think it's not so much what I would change with Chuck. I think it's more the economic environment has changed a little bit. And therefore, you've got to look at how efficient you are. You got to look at your footprint, you got to look at growth opportunities. We will continue to be very keen on adding capabilities inorganically, but also make sure that you accelerate your organic growth and protect your core.

Fantastic. I think with that, we're almost out of time gentlemen. Thanks for your time this afternoon.

Thank you.

Thank you.