Bio-Techne Corp

Good morning, and welcome to the Biotechni Earnings Conference Call for the first quarter of fiscal year 2021. At this time, all participants have been placed in listen-only mode, and the call will be open for questions following management's prepared remarks. During our Q&A session, please limit yourself to one question and a follow-up. I would now like to turn the call over to David Clare, Biotechni's Senior Director, Investor Relations and Corporate Development.

Good morning, and thank you for joining us. On the call with me this morning are Chuck Cometh, Chief Executive Officer, and Jim Hippel, Chief Financial Officer of Biotechni. Before we begin, let me briefly cover our safe harbor statement. Some of the comments made during this conference call may be considered forward-looking statements, including beliefs and expectations about the company's future results, as well as the potential impact of the COVID-19 pandemic on our operations and financial results. The company's 10-K for fiscal year 2020 identifies certain factors that could cause the company's actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements as a result of any new information or future events or developments. The 10-K, as well as the company's other SEC filings, are available on the company's website within its investor relations section. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier this morning on the Biotechni Corporation website at www.bio-techni.com. I will now turn the call over to Chuck.

Thanks, Dave, and good morning, everyone. Thank you for joining us for our first quarter conference call. Despite the lingering effects of the COVID-19 pandemic, the Biotechni team delivered an outstanding start to fiscal 2021. Our organic growth accelerated 10% in the quarter, returning to our pre-pandemic double-digit organic growth trajectory and topping our initial expectations for flat organic growth. Our business benefited as labs continued the reopening process with researchers returning to the bench in greater numbers and restarting projects that were paused during the height of the lockdown. Our Q1 top-line results are even more impressive considering the 13% comp we faced in the quarter from the prior year. We delivered this growth while keeping a focus on cost controls, leading to incredibly strong operational results, with our adjusted operating margin improving over 600 basis points year-over-year to 38.2 percent. I would note this is our best operating margins result since our fourth quarter of fiscal 2018. This sequential and year-over-year improvement was driven by our biopharma end market and a return to growth by our academic customers. As more and more labs reopened throughout the quarter, we saw increases in both the volume of reagent orders as well as reagent order sizes. which may be indicative of some restocking activity as researchers return to work. What we are learning from our customers is that when they return to work, as you might expect, the lab environment is not always the same as it was pre-COVID. For example, researchers are often on staggered shifts, which means not as much physical time may be spent in the lab as before, and or sharing lab instruments may not be conducive to social distancing requirements. Thus, our lab productivity tools, such as automated multiplexing and Western blot, have been the perfect solution for this new environment, allowing researchers to progress on their experiments even while away from the lab. We are also seeing follow-on purchases of these automation tools from existing customers that previously used them in a shared lab but are now buying them for specific departments within their research organizations. This surge in lab productivity tools extends beyond our protein instrument platforms and into our genomic assays as well. We have often marketed our RNA scope assay as a tool to find the gene of interest in a sample before hunting for the expressed protein using antibodies. More than ever, this message is resonating with researchers. In the current environment, they have been telling us that they need to know the answer the first time. Thus, we have been seeing a surge in demand for our RNA scope, just as we have our automated protein platforms. Another impact of the lab environment not being the same after researchers return to work is the method in which we communicate and consult with our customers. As you can imagine, most labs are not allowing visitors on site as they did pre-COVID. Our commercial teams have had to adjust and have done an amazing job adapting to the pandemic environment by leveraging webinars and other digital mediums to stay in close contact with customers and address their research needs. During Q1, we hosted almost 45 webinars across the organization, educating over 6,800 current potential customers on our portfolio of reagents, protein analysis tools, cell and gene therapy workflow technologies, as well as liquid and tissue biopsy solutions. Also, our commercial teams have used time saved by not traveling to customer sites to aid our web support teams in uploading over 30,000 new images to what was already a best-in-class website. It is clear that effective digital outreach to our customers will remain an important component of our sales and marketing process throughout the pandemic and beyond. Supporting our digital sales and marketing efforts, we recently rolled out an enhanced biotechnology website experience we refer to as OneWeb. This new website brings all biotechnics brands together under one easy-to-navigate site, simplifying the process of finding products of interest while driving awareness of our complete product portfolio. The OneWeb strategy also enables a single-card experience for our customers and leverages enhanced algorithms to make product recommendations and drive additional cross-selling opportunities across our portfolio. We concluded a successful OneWeb soft launch in early October and will be launching a full marketing campaign to coincide with the Scaled launch in November. Now let's discuss the performance of our key growth platforms, starting with the protein sciences segment, which we grew organically by 8%. Our portfolio of protein analysis instruments, namely our Simple Western automated Western blot systems, as well as our multiplexing platform, SimplePlex, had an incredibly strong quarter, growing north of 35% and 75%, respectively. As I mentioned before, the walk-away automation enabled by our Simple Western instruments is perfectly designed for researchers in need of ways to increase productivity all partially opened. Also, we continue to expand the capabilities of our simple Western platforms. During the quarter, we launched the ability to analyze the same sample twice in one run on our just automated Western blot system, a capability we call REPLEX. Initial customer response to REPLEX has been very strong. We also launched a multi-antigen COVID assay that enables the quantitative characterization of patient serum or plasma IgG antibodies against five SARS-CoV-2 antigens simultaneously in one three-hour run on both our WES and GES systems. With SimplePlex, ELA remains an important tool for research surrounding cytokine release syndrome in COVID-19. However, the growth was much more broad-based than COVID-19 in the quarter, as we saw significant demand from CROs and biotechnology companies drive continued instrument placements and increased system utilization. Additionally, we are starting to see several companies assess ELA as a tool for researching the NFL biomarker for neurodegenerative diseases. We believe the high sensitivity combined with an attractive price point positions Alla to become an important tool in neurodegenerative research going forward. Moving on to the reagent part of our protein sciences portfolio for Q1, our core research protein and antibody sales performance improved significantly from Q4, but was still relatively flat year over year as strong demand from biopharma customers was not enough to completely offset academic labs made progress reopening but have not returned fully to pre-COVID operating levels. During the quarter, we made significant strides to position Biotechni as a leader in the nascent cell and gene therapy industry with the opening of our state-of-the-art GMP protein manufacturing facility in St. Paul, Minnesota. As a reminder, this facility has the capacity to produce at least $140 million in GMP proteins and reagents annually. We remain on track to complete the qualification of the facility in early calendar 2021 immediately followed by the start of the production process for commercial proteins. Over 30 years ago, we created the category of research proteins, and the R&D Systems brand is now synonymous with the highest level of bioactivity, quality, and lot-to-lot consistency. We look forward to replicating this position in the emerging category of GMP proteins. Our JV with Fresenius Kabi and Wilson Wolf remains a key pillar in our cell and gene therapy strategy. The JV has been branded as scale-ready, and efforts are actively underway to educate the cell and gene therapy ecosystem on the complete workflow solution offered by our collective portfolio. We believe the modular workflow, which includes Biotech's non-magnetic bead-based cell separation and activation technology, non-viral vector-based gene editing technology, GMP proteins and other products paired with Fresenius-Cobby's lobo-leukophoresis instrument, and Wilson-Wolf's G-REX bioreactor, creates a compelling cost-effective solution necessary to accelerate broad availability and adoption of cell and gene therapies as they make their way through the FDA approval process in coming years. Now I'll provide some highlights from our diagnostics and genomics segment, where growth across its divisions led to an impressive 17 percent organic increase in revenue over the prior year. Our genomics division had a Strong start to the fiscal year, with Q1 revenue increasing over 30%, led by its RNA scope and related pharma assays services. The growth was broad-based across geographies and in markets, as interest in spatial genomics paired with a single-cell resolution and productivity provided by our genomic solutions versus traditional IHC drove demand across the portfolio. During the pandemic, the ACD team made a concerted effort to educate our biopharma customer base on the pharma assay services offered by the genomics business, which enables researchers to outsource their spatial genomics analysis to us. These efforts paid off in Q1 as our PAS business grew almost 60% and allowed customers to stay on track with their research despite more limited and staggered shifts. Moving on to exosome diagnostics, we continue to rebound from the COVID-related shutdowns that occurred in the spring. Urology practices have largely reopened across the country. although we estimate practice capacity remains at approximately half of pre-COVID patient volumes. This reopening had a positive impact on XODX prostate test volumes in our quarter one, and we saw improvement as the quarter progressed. Overall, XODX test volumes increased over 50% sequentially and are approaching pre-COVID volumes. Our at-home test collection kit continues to have a positive impact on volumes as doctors leverage telehealth strategies to keep their patients engaged during the pandemic. We have used the COVID-19 pandemic as an opportunity to fortify our XODX sales team and marketing efforts, strategically adding or replacing reps in high-potential or underrepresented geographies. The impact of these moves is starting to gain traction in certain territories. For example, we are seeing positive momentum in the Northeast region, especially New York City, where volumes have surpassed pre-COVID levels. In Q1, we also announced a very high-profile national marketing campaign with baseball legend and Hall of Famer Cal Ripken Jr., To build education and awareness of the XODX prostate test, we kicked off this partnership with a webinar to discuss his personal prostate cancer journey, including how the XODX prostate test impacted his biopsy decision and ultimately the treatment of his condition. We are currently rolling out additional direct-to-consumer advertising with Mr. Ripken, including a sports radio advertising campaign and WebMD patient advertising. We are extremely excited to have Mr. Ripken as our spokesman and share his experience with our tests. But more importantly, we are thankful that he decided to take the XODS prostate test that led him and his doctor to the potential life-saving decision to get a biopsy and catch his cancer early. Next, I'll provide a brief update on our COVID-19 initiatives. We continued to build our COVID-19 product portfolio during Q1, expanding our portfolio with multiple new reagents and assay products to help our customers improve their understanding of the disease, develop therapies and vaccines to combat the virus, as well as screen and diagnose infected patients. We estimate COVID-related research products provided a 3% uplift to growth in the quarters. Also, we received some good news last week on the COVID Seroclear Quantitative COVID-19 IgG Antibody Serology Test Kit. The assay receives CE marking and is currently available for use by any authorized testing laboratory in the European Union. As a reminder, this novel quantitative serology assay utilizes two virus antigens, correlated with antibody neutralization to provide important information regarding a patient's past infection with COVID-19 and immunity to the virus. Dialogue continues with the FDA on the issuance of an Emergency Use Authorization, or EUA, approval for the COVID seroclear assay kit. We expect COVID-19 research to remain a life science focus for the foreseeable future, benefiting our existing COVID-19 portfolio. And we stand ready with a quantitative antibody serology offering that we believe will help people and society at large better understand their susceptibility to contracting the virus, allowing them to make the decisions that will help keep them safe while returning to a way of life we once all enjoyed not too long ago. Before I pass the call over to Jim, I want to give some perspective on the outcome of the recent election and how I see this impact in life science tools broadly, and more specifically, our company. Regardless of who is president, this pandemic has shown the world The preparation for pandemics is incredibly important layer onto this the ongoing importance of research and oncology. neurodegenerative diseases and now reinvigorated focus on infectious diseases, we believe the overall global life science research funding environment should continue to have broad support for the foreseeable future. For the US life science research funding has been one of the few areas where it was bipartisan support and we would expect us to continue under the new or legacy administration. Our company is well positioned to benefit from these continued trends as our portfolio of life science tools and diagnostic solutions remain key inputs to enable discoveries that push science forward. With that, I'll turn the call over to Jim.