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

All right. Good morning, everybody. I guess good afternoon to those listening on the East Coast. Welcome to Stephens Conference. I'm Jacob Johnson, life science tools and pharma services analyst here at Stephens. Really happy to be joined by the team from Bio-Techne today, CEO, Kim Kelderman; and CFO, Jim Hippel. In terms of logistics, this will be a fireside chat. I've got plenty of questions, but obviously, I'll try to pause along the way in case anybody in the audience has any questions. With that out of the way, Kim or Jim, I'll turn it over to you for any opening comments, and then we'll go into Q&A.

Well, other than that we want to thank you for your continued interest in Bio-Techne and for hosting this great conference. We're ready for the fire side chat.

Short and sweet in to the point, must be the Dutch. Thanks, Kim. Maybe we'll start off on the macro. On your first quarter call, you mentioned some pickup in demand from biotech customers. Do you think they're beginning to spend the funding they raised earlier this year, kind of what anecdotes are you seeing or hearing from this customer base? Maybe I'll pause there, and I'll have some follow-ups.

Yes. Thank you for the question. Doing a step back, our Q1 came in at 4% growth and that's admittedly on the high end of our expectations. So we're very, very happy with that result. Very proud of the Bio-Techne team and their execution, did really well in multiple aspects. One, of course, is the revenue execution, and that was mainly driven by a larger growth in GMP proteins that came in at 60%. But we were also encouraged by the overall strength in ordering across the board in the GMP proteins also for the smaller customers where either order frequency and/or order size has been at an increased rate. And that indeed points towards your question that indeed the funding that has looked so strong throughout the year, with about 130%-or-so levels versus 2019 is trickling through and is driving some momentum in that end business -- in the end markets. So we benefited from that. But in the meantime, we also delivered very nicely on increased efficiencies in the company. We continue to look at some of the product lines, rightsize organizations and increase our efficiencies in footprint and supply chain and then combine that with making tremendous progress in the R&D funnel. So that in the coming quarters, we have exciting launches coming up that will enable us to bring some extra momentum into the markets.

Got it. Kim, maybe diving in there a little bit further. A couple of questions. You highlighted the GMP proteins is a good guide. I want to come back to kind of cell and gene therapy, which is near and dear to my heart. But maybe first, just kind of -- maybe in the run rate kind of legacy proteins business, what is -- how is demand trending there? And I'm just kind of curious, generally, across the customer base, how you think kind of biopharma activity compares now versus pre-COVID levels? Are there any differences? Are we getting back to where we were? Obviously, a lot transpired over the last 5 years.

Yes. Overall, the run rates are improving. We talked on our call about the last month of the quarter and the first month of the current quarter, seeing stabilizing but also improving trends in the order rate. And if you look at the before and after COVID data, in 2019, we were $714 million company. And now in 2024, after a 5-year 10% CAGR, we are a $1.2 billion company. So substantially larger than after -- before COVID, and we hope to continue that trend.

Got it. And then just -- we talked a little bit about biotech, but just large pharma has been kind of the other topic du jour this year and a lot going on in CRO land from those customers. But what have you seen from that customer base throughout this year?

Yes, large pharma, we saw a significant dip in the first quarter of the calendar year, so that's our Q3 2024. And basically, there was the implementation of budgets that have been designed by large pharma companies in the quarters before, right, in calendar Q3, Q4 of the year before. And at that time, high interest rates, inflation and IRA cloud certainly resulted in very careful budgets. And with those budgets in place, even then you wouldn't spend fully against your budget. So we clearly saw a pullback from the large pharma customers in that first calendar quarter, stabilization in Q2 and Q3 and in line with how Jim laid out our fiscal year cadence if it comes to markets coming back. We do believe that the back end of our fiscal year that would be calendar Q2 next year, we will -- we feel that biopharma budgets will -- are being created right now will be implemented and will give us some momentum in the back end of our fiscal year. Do you have an additional view on it...?

No. The only thing I'd add to that, Kim, is that as it pertains -- what Kim is referring to is our core RUO run rate business, which is our kind of measure of the overall health of the research market. But we've always believed that as the market recovered, we'd see it first in that, call it, micro end market of cell and gene therapy. It's one of the hottest areas. And that's where money is going to be spent first, that's where we'll see it. And so it was very encouraging to see the growth that we did see this most recent quarter in cell and gene therapy. And notably, it wasn't just biotech either. it's 50-50 large pharma and small biotech. So we saw pharma pickup there as well in that piece of the business. And the only thing I'll mention, you probably asked more question on cell and gene therapy. But I'll add to that is the sustainability of cell and gene therapy is also key to the recovery, of course. And for those of you who may follow our company, you'll know that we had a nice increase in cell and gene therapy back in the March quarter, which was the first time we've seen that in a while. We're encouraged by that, but then kind of gave it back in Q4 due to the lumpiness of our large customer base that's in later clinical trials. What's different this go around than 2 quarters ago is that those larger customers that are in clinical trials for the first time are giving us some forward guidance of what they expect to spend in the next couple of quarters. And it would suggest a continued double-digit growth rate in cell and gene therapy for at least the foreseeable future, maybe not at the 60% level. I want to tame that down a bit. But nonetheless, we didn't have -- they weren't giving us that visibility 2 quarters ago that they are now. So that's also an encouraging sign of hopefully a pending market recovery.

Got it. We'll come back to that because there's a couple of follow-ups there. But I just want to kind of knock out the macro and maybe speaking of things we'll knock out maybe quickly. A few things going on last week. I guess there was an election at some point in the last couple of weeks, got new proposed head of HHS, which has, I think, led to a number of questions for you all. So maybe 2 questions, one that maybe you can answer and one that maybe it's too soon. But maybe on the first, you talked about that legacy RUO business focused on the research market. Can you just talk about kind of your exposure to the academic, government end markets, maybe specifically NIH. And then I guess the second question, which is it's probably too soon, but just anything you've heard from your customer base around this or any change in their thinking?

I'll give it a first crack. From the numbers point of view, academic, globally, for Bio-Techne is about 21% of our revenues. We feel that within the U.S., NIH related more or less 10% of our revenues. We talked for many quarters about NIH funding being important for the company, not so much the absolute level because we've talked about this. And many of the increases over time, especially the last couple of years have been related to infectious diseases, pandemic-related, vaccine-related investments. And our company has consciously not aligned with infectious diseases. Strategically, we're way more aligned with chronic diseases, neurology, oncology, immunology. And yes, the last year, 1.5 years, we were kind of happy to see that there is a little bit of a shift of this funding from the pandemic-related research to more the chronic diseases also fully expected, by the way, because these chronic diseases have not gone away. And then with the most recent announcement, what we are kind of enthusiastic about is that there is a focus on those chronic diseases and that would be nicely aligned with our portfolio -- product portfolio and solutions. There might be a question about tariffs. I am very enthusiastic about the fact that we buy almost nothing from China, actually relatively equal from Europe. So that a tariff war would -- at least on our buying side, would not have an immediate impact. On our selling side, yes, 8% of our revenues or 9% of our revenues still go into China. However, last time around, when there was somewhat of a tariff war, we -- our products were exempt because China is very keen on driving their cell and gene therapy programs forward. And also, as I mentioned, our products are very much aligned with the cell and gene therapy efforts. So it would be shooting in their own foot. So I don't think there's a big risk there. There's obviously other aspects that could be puts and takes. But overall, we're confident their original strategy is still holding.

And if I could, I'll just add a little bit more to what Kim said. I'll start off by reiterating what he said, which I think is an overarching theme and let's cut to the chase. Is Kennedy a potential appointment and what concerns, if any, should we have about that? And our view is this, at the end of the day, high level, what he has been very vocal about is less vaccine, less infectious disease concerns and a refocus on chronic disease. And then he specifically pointed out cancer, neurological, other immunology diseases. And guess what, that is our sweet spot. That's what our portfolio is geared towards. So whether he's able in any way to influence that on the public funding front or in the private funding front through the FDA is a net positive to us. Now we can have all kinds of questions and debates as to how realistic and how much influence will he really have if he even gets in the office. But I'm not going to get into that. But even if he does and he does have influence, we actually see it as a net positive. I'm going to dig one layer deeper just kind of explain why. On the NIH, I'm answering this based off questions we've gotten over the past week on this, let's remember that, that office does not set funding. They can potentially influence it, but they don't set it, Congress sets it. And if history is any guide, past dual Republican held congresses, NIH budgets have always gone up, not gone down. But again, they've gone up so much in the last 4, 5 years, largely those increases directed towards COVID-related research and vaccine research that even if they don't go up, if they just get redirected towards the priorities that Kennedy has set out, that, again, is an upside, we think, to our business. So that's how we think about the public side of it. And one last niche is that our business when we say NIH isn't we're selling directly to NIH agency, which means that Kennedy would have direct authority as to how that money gets spent, it's to academic institutions that get grants from the NIH. So there's a nuance there. But basically, what I'm saying is that it's not Kennedy directing how the money gets spent, those grants still have to be submitted. And if they're submitted for our space, maybe they're more likely to get approved, that's good for us. On the pharma side because that's the other big question we get is on pharma, when impacted, has that changed our view on a potential pharma recovery. As a reminder, pharma has gone through 1.5 years of essentially rebalancing their pipeline. When I say pharma, not like every pharma company because I think half have done very well, half have not. But as an aggregate, they've rebalanced their pipeline for the impacts of IRA, which was a passed law. It was a known issue. I think it was the bite ended up being less than the bark. But nonetheless, they've gone through that. And in the past, history shows when pharma does do a major rebalancing of their portfolio based off of any kind of legislation, it's one and done for -- until there's a new legislation or something new down the pipe, which often is years in the making. So that was the thesis for why we believe there'd be some sense of normality with regards to increases in R&D funding across all categories of big pharma spend from discovery all the way to clinical trials in 2025. That's the basis of our thesis, and that has not changed. And the reason I say that hasn't changed even with the potential Kennedy appointment is because if I'm a pharma company, there's really 3 things I can do right now in my opinion. One is overreact and go back to rebalancing my portfolio for all the rumors and guesses, but that's not very responsible. I don't think large pharma companies will behave in that irresponsible fashion. They wait for known facts to move big dollars around. The second option is to sit on their hands and not do anything until they know more. But I'd make the argument that no one is going to know more, for perhaps as much as a year by the time these people get in office, get confirmed, hire the people they need to hire, get their policy agenda set and then get through Congress. So you're talking at least a year, in my opinion, before there's anything to even potentially act on if anything changes at all. So the responsible thing for pharma to do is to move forward with their strategic and execution plans they put in place the past 1.5 years. And I think that's the most likely outcome for what it's worth.

Thank you both for that. Super helpful. And again, now I can just refer people to your comments on this, which I think is what I said last year about China when we talked about that last year, and it's been whack-a-mole with investor concerns. So maybe we'll go to the last big kind of macro subject, just China. It seems like it's kind of bouncing along the bottom. Latest thoughts on demand trends in that environment. And then I think there's -- we'll maybe put trade wars aside for now because that's difficult. But I think there's a hope or a view that we're going to see stimulus there next year, which will hopefully benefit the space. So kind of latest thoughts on that as well.

Yes. China has been stable for a while. And in our estimations, it changed course from red into the black in our Q3. And as far as we can tell, that's still the case. We've helped customers spec'ing their orders and give them the information needed to start submitting for the funding. Those funding requests have been submitted. We know which of our instrumentation is submitted by which customer. Now not all of them might get their grants. But these are with the central government and scheduled to dispatch the funding towards those requesters in back end of this year, but more likely in the first calendar quarter. And yes, for some companies, that means that revenue then will come several quarters later. But for us, since we ship and ship relatively quickly and typically within the same quarter, we expect a little boost, a little tailwind from this funding in Q3. And that is maybe in absolute numbers for the company, not the biggest deal, but certainly will help China from being a detractor to being more in line and that going from red into the black is a big deal for us. And since it's a multiyear program, we have our hopes up that this will more than stabilize but then actually become a less of a detractor for us.

Yes. And maybe just 1 follow-up on China. I think cell and gene therapy in spatial did better in China last quarter. Can you just -- is this just innovative technologies, innovative therapeutic areas? Or what's driving that demand there?

Cell and gene therapy as well as spatial have been doing great even during the tough times in the last couple of years. And there is some specific funding around neurology, but there's also the opportunity for the People Republic of China to leapfrog small molecules and invest in cell and gene therapy. There are 2,000 cell and gene therapy trials going on actively in the country. So obviously, a lot of activity in our product lines, not the least the cell and gene therapy, vertical, that we have, But the product lines, in general, like spatial and like the ProteinSimple applications are nicely aligned. So that's why you see a nice boost in the spatial business as well as in the consumables that have been growing double digit for proteins just as well because they are aligned with that effort.

So I think that's a good segue to kind of talk about some of your key growth verticals. And like I said, cell and gene therapies near and dear to our heart. So we'll start there. And also, as you mentioned earlier, good in the March quarter, not as good in the June quarter, good in the September quarter. I'm just curious, what drives this lumpiness? When do you think it could become more consistent? And maybe along those same lines, Jim, I think you mentioned you're now getting forecast from these companies. Why -- how did that change? Or why did that change?

I'll give it a start here. Overall, so we'll talk about Wilson Wolf in a little bit. But our GMP proteins, basically, our cell and gene therapy business is on a run rate of about $80 million, GMP proteins at $60 million. So it's the majority. And the difference is some media and small molecules, GMP media and GMP small molecules. We have about 400 customers in the pipeline and most of them preclinical. We have 57 of them are in clinical phases. And of these 57, a handful are in Phase II. Now everybody knows that the moment you start further in your clinical trials, patient counts go up and therefore, volumes go up of the materials you order, and therefore, your orders go up in absolute value. And at the moment, you have a relatively small base revenue base business and you have some larger orders coming in from these customers that are progressing to those clinical trials that by definition makes business a little lumpier. We had a good quarter with 60% growth. We just want to make sure that nobody thinks that this is going to be the new minimum or get used to 60% growth. But we also want to make sure that people know it's a very healthy growth even in tough times because that's why we talked about the 12 trailing months if it comes to revenue where we grew high teens, and that's more evened out over the quarters. And that is while there are constrained end markets, so that gives you some -- a little bit of a guardrail when it comes to what we expect going forward.

Yes. And with regards to the forecasting of these customers, I can't precisely say why I can surmise. I think at the end of the day, regardless of the reason, it's a sign of confidence in the underlying markets. I think for our biotech customers, smaller biotech customers, it's a sign of confidence the funding is there and will be there for them as they progress. And for our larger pharma customers, I think it's, again, maybe some confidence that the restructuring hasn't impacted that particular program and they can now proceed. So it's just a clearing of the air, so to speak, and that's what we need is that clarity so that we have confidence going forward. I just see it as an overall sign of confidence.

Maybe 1 follow-up there on just thinking about the growth profile. I certainly understand the caution about extrapolating 60%. But to your point earlier, it was broad-based. It wasn't just these large customers, they also came back. So I guess looking ahead, it would seem to me you probably have 2 key growth opportunities. One is that kind of same-store growth and those customers advancing or maybe adding new programs and then it's winning new customers. Can you -- how do you think about those 2 opportunities over the next several years?

[indiscernible] better myself. They're both opportunities because they're still underpenetrated. And to put it in perspective, Wilson doubled the accounts that we are. We were in over 400 accounts, and they're in over 800 accounts. They've been at it longer, right? And there's over -- you probably know better than I would, Jacob, there's well over 1,000 -- to your point, a couple of thousand trials globally in cell therapies. And then for everyone that's in the clinic, there's 5 to 10 behind it with regards to pre-IND and getting ready for the clinic. So we're still kind of at the tip of the spear of where this can go. The other thing I'll mention, too, is why it's so big and the opportunity set is so large is we talk about this a lot in the context of Wilson Wolf and CAR-T and immunotherapies, but over -- slightly more than half of our GMP business in cell therapy is actually on the regenerative medicine side. And some of our -- couple of our biggest customers are on the regenerative medicine side. So that's another whole area of opportunity that's -- and the application set for regenerative medicine is actually even larger than immunotherapy. So from a long-term perspective, it's an exciting place to be. And our positioning in regen med when it comes to our GMP proteins, we are the #1 player as opposed to maybe a #3 player in the other side. So I'm getting lost of my question, I tangent...

I can ask you a follow-up on that last piece, so maybe I'll do that, I'll try to bail you out. No. But on that competitive dynamic of it, there are some other people who maybe had a little bit of a head start on this. And obviously, this is kind of right -- was right in your wheelhouse. And so you have some people who maybe -- got a head start. Are you catching up to them? Are people more aware of Techne's GMP proteins? Are you getting more traction on that side...?

I surmise that we are. And I say that because the 2 leaders that were ahead of us in the whole cell and gene therapy space, but for us, in particularly as it pertains to GMP proteins was Molteni and CellGenix, both private European companies. And in that -- in the last 5 years, we've essentially gone from practically 0 revenue to $60 million in GMP proteins alone, another $20 million of other GMP reagents. And I doubt their growth rates have been the same. So we're taking that share from somewhere. Now we've always said that to be successful in this space, we don't have to be the #1 player. We don't have to take over the world. It's going to be a fast enough growing market where everyone wins. We always just said we're the leader in RUO proteins. That's our reputation. Shame on us if we're not at least one of the leaders in the GMP space. And so I think we've made amazing traction in a very short period of time.

Got it. And then you both have referenced Wilson Wolf, and obviously, they've been at it longer. You own 20% of the company, the option to buy the rest maybe in a couple of years, maybe sooner, depending on how things go. Can you just talk about the synergies you've seen between kind of that scale-ready JV you have with them?

Yes, 20% and we would own the balance of Wilson Wolf at the end of 2027 latest. Yes, it's a great synergy, right? So the Wilson Wolf have this product G-Rex, it comes in different sizes, but it's basically a bioreactor, liter size is most common, where you grow your cells and you add your GMP proteins and cytokines and GMP small molecules, maybe some media. The difference, though, with this one is that the bottom has a permeable floor where oxygen can easily get to the cells. And that really makes it a very efficient tool to grow yourselves in a very cheap and scalable way because you have a 1-liter vessel that has 1 patient in it that then goes into an incubator. And many of these vessels would fit in the incubator and you can buy as many incubators as you want. So it's very scalable compared to other solutions. We feel that, that the symbiosis is great because, of course, once -- early customers that have utilized a G-Rex and 45% of all clinical trials use G-Rex as a vesicle. Once people already started locking in their reagents of choice, it's harder to start changing it. But our grant program, and you will regularly see grant announcements, where we make sure that certain accounts have access to the G-Rex but also access to our GMP proteins. And that way, kind of locking in the solution is a great seeding program and a collaboration between the 2 companies. And then on top of that, we have launched ProPAKs, which is a name for basically little squeeze bags with the proteins in the right concentrations, in the right quantities in there so that people have a more close solution less error prone to then also grow their cells. So overall, very scalable at a really good price point, which really will help the adoption of cell and gene therapies because if they stay way too expensive, then you won't see broad adoption. So I think we are hoping that, that industry become more standard of care by these solutions. And if you think about dollars, in G-Rex, you would expect to have more or less $5,000 in revenues for treatment. We would put then $5,000 or so of GMP reagents in this solution, and you would expect $2,000 or $3,000 in GMP media. So that would basically be the cost base for something that's a very high value for the workflow of a cell and gene therapy.

Maybe 2 follow-ups on that. One, you talked about, I think, the clinical share Wilson Wolf has, but if you could remind us commercial exposure. And then on those ProPAKs that you've launched, the cell and gene therapy industry was trying to move towards closed and automated solutions. You're trying to close any other efforts on that piece of it? Or was that the big lift?

I'll take the first, you take the second. Yes, so there's, I believe, 10 cell therapies that are currently approved for commercial use and Wilson Wolf is in 5 of them. And most of those 5 are very recently approved. And so a little pivot I'll share with you in terms of getting back to, remember, your other question, you grow in customer base or you grow with the customers, to give you a sense of how you can grow with the customers, these 5 customers have given some initial forecast for their first year commercial launch and just that first year commercial launch alone would give Wilson Wolf a 30% growth in year 1 with nothing else growing. So that gives you a sense of how that -- it supports our thesis is why we want to get in this business...

Yes. And from a closed system point of view, we are definitely designing different variations of the different ingredients you need to put in. So there will be a closed system and it will be foolproof. And then Wilson Wolf has been working on an automatable G-Rex. So that's more -- like there's different customers that already went the route to automate the G-Rex, so it's possible. But we want to make sure that the G-Rex itself has the right features so that it becomes easier for robotic automation.

Got it. Maybe I'll pause there if anybody has any macro cell and gene therapy questions. All right. We'll get to some of the other growth verticals. Maybe on the instrument side of things, obviously, kind of a mixed bag there across the broader space in terms of instrument demand this year. But I think you grew last quarter, really driven by consumables and services. So maybe can you just unpack that performance? And then two, I'm kind of curious, the mix of ProteinSimple revenues in terms of instrument placements versus consumables now versus maybe a couple of years ago?

Yes. So overall, we're extremely happy with our ProteinSimple product lines. The general philosophy is to be able to interrogate and characterize proteins, and this used to be done by a very clunky, manual, not consistent processes. And the 3 different product lines we have are basically to automate these important processes and make them more consistent and quantifiable. So that's the premise of the product line. We have 3 product lines. One is to automate Western Blot, which is obviously a process that's really entrenched. But clunky and not always consistent. So we have a solution there. We will -- we invested heavily in an improvement, next-generation LEO platform that will bolster our offering for various volumes, if you will, and be a solution for Western blotting, and we really see great market adoption because of the consumables across these 3 platforms, have been growing double digits for 7 out of the last 8 quarters. Maurice is also to characterize proteins. It's our larger portion of the revenues. And it's a true building block, and it has been widely used across different applications, but sees a big uptake in cell and gene therapy just as well. We launched MauriceFlex about 1.5 quarters ago, and that allows -- that newer instrument allows you to do fractionation. Basically, it means taking a little part of the sample that comes out at a certain point in time and put it directly on a mass spec for further evaluation. Last product line is around ELISA. It's Ella, Simple Plex. And there, we have a great play, also automated ELISA. And we've seen that product line grow very nicely. Our dimension there where we've been going is not only enable it for cell and gene therapy, but also getting a 13485 announced so that other diagnostic companies can utilize this instrument automated solution for their diagnostics. And that's overall the pipeline of proteomics. Now with constrained budgets in pharma, biopharma and with China in a constrained environment, yes, we saw a reduction in the number of instruments that we've been selling. However, our installed base, even though growing, but at a lesser pace, our installed base has been utilized very heavily. And that's what I mentioned. We know from the double-digit growth in the consumables that are directly related to these instruments. And yes, overall, the revenue mix coming from boxes over time is now a little bit less. But the service related to the installed base and the number of consumables related to the installed base have grown more than double digits. So overall, you see that our revenues from a company perspective have changed from 23% related to the ProteinSimple franchise to 24%. So they have still been taking a larger share of our total revenues.

Maybe just 2 follow-ups on the various platforms. Just 1, Kim, you mentioned Ella for diagnostic applications. I think that opportunity is still largely in front of you, if I'm not mistaken. Can you just talk about the outlook for that? And then two, just on the LEO, remind us of the timing of that and maybe how impactful that could be.

yes, thanks for the question. So let's start with LEO. LEO is a -- it's obviously a capacity, if you think about that, which is 4x Jess, it would be at the price of 3 times -- 3 Jesses. So there is some benefit to be had. But it is not the same as Jess. It's obviously a next-generation platform, so more precise, faster turnaround time and yet the flexibility of running 25 all the way up to 100 samples at the same time, and you get 8 data points out of 1 sample. So it's a real game changer. And obviously, a little higher -- for us at least a higher-priced ticket item, and so therefore, for the product line and for the division could be a true tick up if it comes to the revenue and momentum behind it. The other one you asked about was?

The Ella opportunity for diagnostics.

Yes. We have signed up and announced on Novomol-Dx collaboration, ophthalmic diagnostics. And they're making really, really nice progress, and we have many others that are actually quite interested in utilizing the Ella. There was an announcement earlier this week for Alzheimer's detection. So we will continue to roll out this platform and collaborate with diagnostic companies that see that this platform is the right fit for their diagnostics.

Got it. Well, we're 30-something minutes in, and Kim, we haven't talked about the division you used to have, which I must call D&G but I forgot, it has a fancy new name. So DSB, I guess, if we can try to use that, diagnostics and spatial biology. Maybe on what got added to that was spatial. I think some peers in that space maybe seeing a bit of a slowdown in demand in the current capital equipment environment. Can you just talk about how ACD utilization is trending and then maybe kind of your view for the spatial biology market over the next couple of years?

Spatial biology market is, in our assumption, more or less a TAM of $5 billion, and it's here to stay. I think it's a very exciting market. In the past, you would just want to see if there's a marker present in your sample, yes or no. But these days, with precision treatments in cell and gene therapy, you would want to see what happens where, right? So if there's a delivery of a certain RNA, does it make it to the cancer? Does it start copying? Does it -- is there a certain protein that comes out? Or is there a certain blockage of the creation of a protein? So these are all very important for treatment and how the treatment and if the treatment is effective. So that will be a lens that researchers and clinical diagnostics will want to have access to. So overall, we believe that market is very promising long term. Short term, yes, there has been, again, very similar pressures if it comes to the pharma, biopharma funding over the last year. There's been some pressure on CapEx for different companies. We have a fantastic platform in COMET through the Lunaphore application, obviously, newer in the market, which is now 3 quarters or so. We see good traction. Initially, we couldn't keep up with demand. We fixed that. It's a very competitive instrument and promising for us because it pulls through little microfluid chips, it's more or less $45,000 a year per instrument that we have as a pull-through currently. But our ACD reagents that you talked about, the ones that look at RNA, it's called RNAscope. We have about 50,000-or-so probes that you can order. Those are now making it on to this instrument. So we expect pull-through from that. And over the last quarter, we have validated 25 of our antibodies, and we have 400,000 in our library to also work on this instrument, hoping with that effort over time to double the pull-through that you see from our reagents. We have a very competitive offering. Now overall, spatial -- people are usually wondering like so how do you compete, with whom do you compete, but we're usually very happy when researchers do their discoveries and they look at thousands of markers using the 10x and the NanoString platforms. And then once you need to run more samples of single cell, single molecule resolution, with more throughput, you come to us because you can run 4 samples at the same time with 24 protein and 12 RNA markers all in parallel, true multiomics and have a high throughput, high precision. So the very best solution in the translational market, which is more or less 60% of the TAM I mentioned earlier. And then we also play in the clinical markets because our technologies are robust enough, proven themselves to be viable in the clinical markets, and we have one marker approved by [ FDR ] in Europe, and that is a marker for HPV. But overall, that franchise is very, very promising, and we're very happy with the solutions we offer.

Got it. We just have a couple of minutes left. There's 2 topics I want to get to maybe quickly. Just on Exosome, Kim. Yes, I think last quarter, you mentioned a preference to launch exosome test using Asuragen kits and you've worked to kind of integrate those businesses. I think that was an initiative you probably kicked off. But you did partner off the kidney rejection test a couple of years ago, if I'm not mistaken. Is that a change in thinking where you want to take more of these tests to market yourself? Or has anything changed on that strategy?

Yes. No, good observation, Jacob. So first of all, we have a very successful prostate cancer test in the market, which is obviously exosome based, right? And that was our proof of principle. So we had to drive that as hard as we could. And we see the fruit of that test and the growth we've seen in it and with that had a proof of principle for looking at exosomes as the biological entity that gives us an advantage. Yes, there were other signatures that we could do that we knew we were not going to go to market with ourselves. Specialty sales forces are expensive. And there are plenty of big companies that could help us go to market. So that would be our model. And yes, for a kidney rejection -- kidney transplant rejection test, very important test, we've partnered with Thermo Fisher Scientific as a great partner, and they already had a footprint and other products as well as the sales force available in this space. But the best of both worlds is where we bought Asuragen for a reason is that they know how to kit clinical tests. If you look at exosomes, they're even better, their specificity. So you combine that and now our upcoming launch in the coming months is the ESR1 test. It's a marker for breast cancer resistance, treatment resistance. And that will be a kitted test and much more in line with the product companies. So we will kit it, we will then sell it through our sales force at -- laboratory sales force, basically, the one we acquired through the Asuragen. And we feel that's much more scalable, right, more global, but also you can go to many more accounts with such a solution. So we feel that building out sort of like menu is the way to go for.

And more profitable. .

Well, thanks for that, Jim. Since we didn't get to the margin question, so I'm glad we at least touched on it. Just last quick question, maybe it's not a quick one, but we'll try to make it quick. Just on M&A, that's been the top priority for capital allocation. You've got the Wilson Wolf deal coming at some point in the next couple of years, we'll see. Just how should we think about M&A between now and then?

Yes. So the Wilson Wolf, we're really excited about, but it really has no influence on our capacity to other things in the meantime. And we obviously -- we actually have a good track record of M&A. If anything, we have improved the capabilities internally. We've always been a great integrator. We know how to sniff out good technologies, and we're still -- it's our highest priority of capital deployment. You've seen a little bit of our acquisition -- last acquisition is a year and a quarter or so ago, if that. So you could say like, well, you haven't done anything in a year, but we found -- we're very disciplined. We found high, relatively high prices for good assets, much lower prices for not-so-good assets. But our preference is to buy great assets that have a very compatible financial profile so that we have something that fits our top line aspirations and our bottom line aspirations. So we've not found anything that fit our ROIC at the moment. We will be disciplined about it. We have -- we do feel that in the -- that times will change and that we will be able to do deals that everybody like, and we have real clear strategy right now where we want to acquire and we will always like to bolster our core businesses as well as cell and gene therapy because it's a topic near and dear to your heart.

Well, that's a perfect place to end. Kim and Jim, thanks for being with us [indiscernible].

Thank you, Jacob.