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Bio-Techne Corp (NASDAQ:TECH)
Q1 2020 Earnings Call
Oct 29, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Bio-Techne Earnings Conference Call for the First Quarter of Fiscal Year 2020. [Operator Instructions] The call will be opened for questions following management's prepared remarks.

I would now like to turn the call over to Mr. David Clair, Bio-Techne's Senior Director, Corporate Development. Please go ahead.

David Clair -- Senior Director, Corporate Development

Good morning and thank you for joining us. On the call with me this morning are Chuck Kummeth, Chief Executive Officer and Jim Hippel, Chief Financial Officer of Bio-Techne. 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.

The Company's 10-K for fiscal year 2019 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 development.

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 and the Bio-Techne Corporation website at www.bio-techne.com.

I will now turn the call over to Chuck.

Charles Kummeth -- President and Chief Executive Officer

Thanks, Dave and good morning everyone. Thank you for joining us for our first quarter conference call. We started fiscal 2020 on a strong note with our first quarter organic revenue increasing 13% year-over-year, continuing the double-digit organic growth rate we delivered in fiscal 2019. The double-digit growth was broad across our product segments and geographies with proteins, antibodies, Simple Western, and RNAscope platforms performing exceptionally well. Also rebounding from last quarter, our OEM diagnostics tools business contributed to double-digit growth.

As you look at our performance by geography, I will start with Europe. In Q1, organic revenue increased over 10% for the quarter. As expected, the headwinds we faced last quarter normalized and contributed to the strong performance in the quarter. Recall that the timing of a large order from a European customer was one of the headwinds we experienced in this region last quarter. During Q1, we received this order. Excluding this large order, our European growth was in the high single digits, and this is our expectation for the remainder of fiscal 2020.

Initiatives the European team have put in place over the past several years continue to positively impact of business creating synergies across divisions and implementing creative ways to make it easier for our customers to do business with us. We believe these efforts create the foundation for continued European growth ahead of our industry peers in quarters to come. That said, the popular view regarding Europe is fairly bleak about an economic slowdown there, so we will continue to monitor Europe closely for any signs of weakness.

With regards to North America, organic growth was also noticed at 10%, driven by particular strength in biopharma. There's been a lot of effort dedicated to our digital market strategies including the continued enhancements we make to our website, which allow customers to do complex product searches and find solutions for their research needs.

However, our digital marketing efforts go well beyond our website with our search engine optimization efforts increasing brand visibility and driving traffic to our website. These efforts are translating into double-digit increases in our Bio-Techne web traffic, which correlate very strongly with the double-digit revenue growth we have been seeing, especially in our antibody and protein portfolios. We view these digital market initiatives as a key component of our forward growth strategy and are very pleased with the continued progress through this important channel. For China, organic growth was nearly 20% for the quarter with continued strong performance in both our reagent and instrument products. The life sciences industry is still a high priority in China's five-year plan, and we continue to be well positioned in spite of any local competition and still very under penetrated in our key growth platforms.

Now, let's dive a little deeper into the performance of our growth platforms, starting with those within the Protein Sciences segment, which grew 13% organically for the quarter. As I've already indicated, antibodies and proteins performed extremely well for us in Q1 with both product categories growing in the mid-teens in the quarter.

In addition to our digital marketing efforts, we recently began the process of validating a growing number of our immunohistochemistry antibodies using the ACD branded in-situ hybridization and gene editing platforms leveraging a transcript DOMEX approach to providing high quality validated IHC antibodies for researchers. This initiative leverages across an organizational synergy between our Reagent Solutions Division, our Genomics Division, and our recently acquired B-MoGen Technologies. For background is the number of antibody suppliers has increased over the years. The process of validating the quality of numerous antibodies from various suppliers has become increasingly more challenging for customers.

There are no rules or quality standards that an antibody reseller must abide by before selling an antibody. Customers are increasingly asking for assurance of an antibody has been tested and shown to be specific for cells known to express the protein in question and not buying cells where the gene editing, excuse me, where the gene encoding, a specific protein has been knocked out. We anticipate this multi-omics approach to antibody validation to distinguish the quality of R and D systems Novus biological brand antibodies from our competitors provide superior service to our customers and ultimately benefit our antibody sales. We also continue to position ourselves as the tools provider for the coming wave of cell and gene therapies, while still a relatively small portion of our business today, cell and gene therapy will be very important growth driver for our company in the years to come.

With our GMP proteins polymer bead technology, non-viral vectors, and instrumentation to automate processes and product monitoring, we can now supply a significant portion of the cell and gene therapy workflow. This potential is already evident in our GMP proteins business where we experienced growth over 100% in Q1. We broke ground on our new GMP dedicated protein factory in the quarter, and we will be ready to provide GMP proteins in larger scale to our cell and gene therapy customers by the second half of fiscal 2021.

Moving on to our Instruments portfolio within Protein Sciences where the Simple Western platform continues to be the star of the show. With an installed base of over 1600 worldwide and growing double-digit, we saw a consumable growth from these instruments that was over 40% higher than last year, further evidence that these instruments are quickly achieving market acceptance. They are not just getting installed, they're getting used.

As I mentioned in my opening comments, our growth in Q1 was balanced between both of our operating segments with the Diagnostics and Genomics Segment also growing double-digit in the quarter with 16% organic growth. Here the OEM diagnostics tool business returned to double-digit increases in nearly all of its major product categories, including clinical controls and specialized reagents. As expected, the OEM order timing was more positive in Q1 than it was in the last quarter Q4.

Also our glucose controls business stabilized in the first quarter of our fiscal year with sales relatively flat year-over-year. Going forward, we expect this division to be at least a mid single-digit grower for all of fiscal 2020 with possibly higher growth in future years, as new diagnostic instrument platforms and assays by our OEM customers come online.

Also within the Diagnostics and Genomics Segment, RNAscope continued with its growth recovery with sales increasing over 20% in Q1. During the quarter, we released the RNAscope HiPlex assay which enabled researchers to gain greater insight into cellular mechanisms and functions by combining a simple workflow with the capability of simultaneously detecting up to 12 RNA targets. The HiPlex assay is particularly well suited for spatial genomic studies with the assay requiring minimal sample preparation while delivering high performance and preserving the morphology of precious tissue samples. It is still early in the RNAscope HiPlex assay launch, but we believe this will be another growth driver for our genomics portfolio.

Now, let's discuss our liquid biopsy business Exosome Diagnostics. Of course, the big news here in Q1 is that NGS, our Medicare administrative contractor issued a final Local Coverage Decision or LCD covering EPI for men who are being considered for an initial prostate biopsy. This major reimbursement milestone is effective for EPI test administered for Medicare beneficiaries on or after December 1st, 2019.

Importantly, with this final outflow [Phonetic] of the LCD, more than 60 million Medicare beneficiaries will now be covered for the EPI tests. During the quarter, we also made progress with private payer coverage of EPI. We currently have nearly 30 commercial plans contracted for EPI as well as 38 states covered under Medicaid. We expect the recent Medicare coverage decision to drive increased awareness of EPI within the private payer community and look forward to updating everyone on additional contract wins going forward.

Following these reimbursement and regulatory milestones, we are positioned for an acceleration in EPI volume. All test counts in the most recent quarters were 34% higher than last year. We use the seasonally slower summer months to revitalize our marketing message and strengthen our sales leadership, so that we are well positioned to garner doctor-patient acceptance of the EPI test as a viable alternative to potentially unnecessary prostate biopsies. With over a million unnecessary prostate biopsies performed every year just in the US, we couldn't be more excited about serving what have been until now a very unmet needs.

In summary, we are off to a great start in our fiscal 2020, the second fiscal year of what we intended to be many years of double-digit growth. Our core reagent portfolio is performing at its best in over a decade, while our adjacent proteomic and genomic analytical tools are still ramping in very under penetrated markets.

Meanwhile, our liquid biopsy and cell and gene therapy platforms are still in the pre-game show of what we believe will be a long nine innings with many home runs. That's the strategy we are marching to, and I'm very proud of the Bio-Techne team in their accomplishments to-date.

With that, I will turn the call over to Jim.

Jim Hippel -- Chief Financial Officer

Thanks, Chuck. I will provide an overview of our Q1 financial performance for the total Company as well as provide some color on each of our segments. Starting with the overall first quarter financial performance, adjusted EPS was $1.06 versus $0.98 one year ago with foreign exchange negatively impacting EPS by $0.02. GAAP EPS for the quarter was $0.37 compared to $0.45 in the prior year.

The biggest driver for the decrease in GAAP EPS was the change in fair value of our investment in ChemoCentryx which negatively impacted the GAAP reported number by $0.26. Q1 reported revenue was $183.2 million, an increase of 12% year-over-year with organic revenue increasing 13%. First quarter reported sales included a less than 1% growth contribution from acquisitions and a 1% unfavorable impact from foreign exchange translation. By geography, the US and Europe both grew north of 10% while China grew nearly 20%. As for the rest of Asia, organic growth was in the mid-teens. By end market, which excludes Asia in our Diagnostics Division, Biopharma increased in the low teens, while academia increased in the mid single digits.

Moving on to the details of the P&L, total Company adjusted gross margin was 69.5% in the quarter compared to 72% in the prior year. The decrease was due to unfavorable product mix, some factory absorption timing, and to a lesser extent, the impact of recent acquisitions and foreign currency headwinds. Going forward, we expect adjusted gross margins to be comparable to fiscal '19. Adjusted SG&A in Q1 was 29% of revenue, relatively flat compared to the prior year where volume leverage was offset by additional SG&A expense from acquisitions as well as investments in our core business to support growth. R&D expense in Q1 was 8.8% of revenue, 30 basis points lower than the prior year, primarily due to volume leverage. Recall that the Exosome Diagnostics acquisition closed at the beginning of August 2019. So our Q1 2019 included only two months of related Exosome Diagnostic expenses, whereas Q1 2020 included three months other expenses. The resulting adjusted operating margin for Q1 was 31.8%, a decrease of 210 basis points from the prior year period. However, excluding the extra month at Exosome was included in our results this year as well as the negative impact of foreign exchange, adjusted operating margin was flat to last year.

Looking at our numbers below operating income, net interest expense in Q1 was $5 million, relatively flat with the prior year period. Our bank debt on the balance sheet as of the end of Q1 stood at $486.1 million, down from $505.2 million at the end of Q4, 2019. Other adjusted non-operating income was essentially zero for the quarter compared to $0.8 million of other expense in the prior year quarters, primarily due to differences in transactional foreign exchange. For GAAP reporting, other non-operating includes unrealized losses from our investment in ChemoCentryx. Moving on down the P&L, our adjusted effective tax rate in Q1 was 21.9%, and we expect the adjusted effective tax rate to remain in the range between 21% and 22% for the remainder of the year.

Turning to cash flow and return of capital, $40.5 million of cash was generated from operations in the first quarter and our net investment in capital expenditures was $10.5 million. $12.2 million of dividends were paid out in the quarter and average diluted shares stood at 39.3 million shares outstanding.

Next, I'll discuss the performance of our reporting segments starting with the Protein Sciences segment. Q1 reported sales were $141 million with reported revenue increasing 12%. Organic growth was also 12% with foreign exchange having unfavorable impact of 1% on revenue growth and acquisitions contributing 1% to revenue growth.

As Chuck previously described, the growth in this segment was very broad across almost every major product category and geographic region. Operating margin for the Protein Sciences segment was 42.2%, a decrease of 100 basis points year-over-year due to unfavorable mix and factory absorption and to a lesser extent, unfavorable foreign exchange and the recent B-MoGen acquisition. Turning to the diagnostics and genomics segment, Q1 reported sales were $42.6 million, an increase of 16% from the prior year.

Organically, revenues also grew 16% with a 1% growth contribution from the extra month we owned Exosome Diagnostics this year, offset by a 1% unfavorable impact from foreign exchange translation. As Chuck mentioned, the contribution to growth in the segment was fairly balanced in the quarter with OEM diagnostic orders swinging quite favorably compared to last quarter. Our more run rate hematology controls business growing double-digits and our Genomics Division continuing on its track back to consistent double-digit growth. Going forward, we anticipate less volatility from our OEM diagnostics business and anticipate mid single-digit growth in this division for both next quarter and the full fiscal year.

With regards to Exosome Diagnostics and as I've stated in prior calls, revenue from EPI test performed is being recognized on a cash basis. This is the correct accounting treatment given its recent commercial launch and relatively low penetration of contracted payers. For patients insured by non-contracted private payers, the appeals process for payment by either the insurer or the patient can be quite long. Thus, the revenue from EPI recorded in our Q1 result was rather minimal. As Chuck mentioned, we received the final favorable Local Coverage Decision from Exosome Diagnostics Medicare administrative contractor NGS. After December 1st we anticipate submitting claims to Medicare for test on covered patients. We do expect there will be a 30-day lag between our submission of claims and the receipt of Medicare cash payments, implying a minimal Medicare contribution to our fiscal second quarter EPI revenue. Despite the favorable final LCD, we will continue to recognize Medicare revenue on a cash collection basis until we have a sufficient history of claims paid. We currently expect to switch from cash to accrual revenue recognition for Medicare claims to occur sometime in early fiscal year '21.

Moving on to operating margin for the Diagnostics and Genomics segment, at 2.1%, the segment's operating margin was down from 6.9% reported in the prior year. The decrease reflects the extra month of Exosome Diagnostics expenses compared to the previous year, partially mitigated by strong volume leverage in the rest of the segment. Excluding the dilution from the extra month of Exosome Diagnostics, Q1 operating margin for this segment was 9%.

In summary, Q1 has played out consistent to the full-year guidance we gave at the end of last fiscal year. As a reminder, we discussed on last quarter's call that our plan was to grow organically this year in the 10% to 12% range and hold adjusted operating margins relatively flat while investing in our cell and gene therapy strategy. We also explained the impact of the extra one month ownership of Exosome was likely to have on our year-over-year margin in Q1, followed by sequentially improving margin in the quarters to follow. And finally, we pointed out the unfavorable impact of foreign exchange was likely to have on the year at current rates. We are very pleased with the strong start we had to the fiscal year. However, we were helped some of the training -- helped by some of the timing of the large annual European order that Chuck talked about in our Protein Science segment as well as a favorable OEM order timing in our diagnostics tools business. Thus, even though we started the year with 13% organic growth, we are still anticipating the full year to be in the 10% to 12% range.

We also still expect our adjusted operating margin for fiscal year '20 to be relatively flat to fiscal year '19. Going forward from Q1, the impact of Exosome diagnostic expenses not being included in our baseline is behind us.

At current exchange rates, we expect the unfavorable impact from FX that we realized in Q1 to continue for the remainder of the fiscal year. And even though much of our planned cell and gene therapy investment is still ahead of us, we expect to sequentially improve adjusted operating margins the remainder of the year. That concludes my prepared comments.

And with that, I'll turn the call back over to Nicole to open the line for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. We'll take our first question is from Puneet Souda with SVB Leerink.

Puneet Souda -- SVB Leerink -- Analyst

Thank you. Hi, Chuck, Jim. A strong quarter here. I just wanted to get a view from you and what are you hearing from your BioPharma customers overall, as we head into the end of the calendar year. Just give us a sense of what the demand flow is looking like and overall what's the expectation here. You commented a little bit about Europe. I would love to get more of a longer-term trajectory. How are you thinking about Europe and overall the business in North America. And then I have a few follow-ups.

Charles Kummeth -- President and Chief Executive Officer

Sure. Well, I'll start with the worst of the packs probably Europe and it's kind of a wait and see. So even though we start seeing some softness last quarter, we had a really, really good quarter with Europe, but it was -- there were a couple of anomalies as we pointed out. I think, high-single digits for the full year is probably still the expectation, and we could do a little better. We'll see. The instrument side of the of our platforms is the biggest suspect. I think we're very strong in the reagent side and overall looking good.

Asia is looking really strong for instruments and I think it's probably part of the buying cycles there as well. But we see really no shift or anything coming down off, especially in China, things are looking really good. And the US is kind of steady as she goes, so, we've been pretty, pretty stable in the US and it's a good news from NIH funding that just came out last week, and I expect the next year should be OK as well. But on the academic side helping out the BioPharma side, but pretty steady. I think we try to put some commentary in and around our search engines and our web, and I think we just came off of a very, very strong neuroscience show we had. We had more leads the first day than we had the entire show last year, so our booth has really come a long way. We've got all our platforms, our brands all showing up together now. It's creating an awful lot of interest in the web -- web keeps providing more. So, I think that is helping fuel the way for a continued strength in the US, which has been double-digits here for a while so. So that's kind of the way through region shake out for the instruments side of things, and as well as everything else. Pretty good. I think, Jim was right on it. I think 10 to 12 is where we kind of peg the year, if we get a really good Exo launch here, we'll see. It could be better, but you know it's probably the range we're looking at to be safe.

Puneet Souda -- SVB Leerink -- Analyst

Okay, great. On the facility build out, it's great to see that kicking off, but what's the expectation here for gene and cell therapy workflow products, two to three years from now and wanted to get a view from you on what are some of the pieces that you would still like to add into this gene and cell therapy workflow to enhance the product offering to the customers.

Charles Kummeth -- President and Chief Executive Officer

Sure. So, as you know, we are looking forward with our cell and gene therapy workflow to be the non-viral methodology that is what is expected, and now almost everything in clinicals is a viral method. We will be supplying GMP proteins for that method. So we'll be getting business real [Indecipherable] as we are today, and we had 100% growth in Q1 with our proteins. So, we're looking good there. The factory by itself for GMP proteins is we're building it to $140 million plus in five years of productivity. It probably has expansion capabilities very easily to $200 million of proteins. We probably will take more than five years to get at that level of just proteins.

So from that respect, we kind of look like a mini CDMO, but there is the rest of the workflow, with the beads and with the B-MoGen technology for gene editing. We have more than one instrumentation platform for analysis, both in cell imaging with the AC technology as well as our Simple Plex assay for, call it QC testing if you will. So all told, it's a pretty strong workflow. We still are looking for more areas to fill it out, I think we don't have a leukapheresis instrument to tie it all together. We have certainly relationships that we're working on to try and collaborate to get that parts pulled into the workflow. That's probably the most critical piece, I think -- the box, so to speak, the sterile box that ties it all together. The bioreactors of course are important. We have a very strong relationship locally with that, and we have more than one and we have a bit of a secret weapon for the whole part of the workflow. We have a product we had for four or five years called prodats [Phonetic]. We are able to actually lyophilize our proteins into small dry components and they can be shipped within the bioreactor or positioned with that workflow for reconstitution in a sterile environment with no loss of bioactivity. So, this is really unique to us. We have IP in this area as well, and we are getting -- we are getting eyes wide open when our customers in preclinical have seen this approach, and they want it. So we think we have a lot of things to offer that nobody else will have for the whole workflow. I think like you kind of implied, it's going to take two or three years to get to that point. We're in a bunch of pre-clinicals now, which will then lead to clinicals and it will grow from there. But this is a five to 10 year kind of strategy and it's going to take a while to get to that level, but hey, whoever thought, we're going to be able to more than double our protein business, and we've been 30 years at it, so I don't mind taking five years to double it.

Puneet Souda -- SVB Leerink -- Analyst

That's great, thanks. And if I could just squeeze one more and I wasn't sure if you have already provided, what's the revenue expectation around Exosome for the fiscal year and now that you have Medicare and could you talk about the plans for FDA or next steps now that you have Breakthrough Designation for EPI.

Charles Kummeth -- President and Chief Executive Officer

Yeah. We've done the first submission, and they've come back with a long laundry list and questions as expected. So, we are not even really able to give a date when that will be finalized for FDA, but under a year for sure. But it's, it's going to be a few months at least for that, but we are in process and now the FDA breakthrough status gets us that help from them directly that they promised. So, they are helping. So we'll see what happens with that. In terms of revenue, we right now are trying to figure out where to reach back to for our first submissions for tests previously done. We're trying to figure out what that date will be. It will be, you know, it will be in months and no longer than a year worth, so we're not prepared to give a number on that, but it will be, it will be millions of dollars worth of potential, but there is no guarantee. Going forward, it's 40% to 50% of the tests and you kind of add that number in that ramps, you kind of get estimate of what we're going to be submitting and you know although, once we get everything [Indecipherable] here with CMS, which I promise will be December i that's 30 days to pay kind of, kind of future and then we'll go to accrual next summer probably, so after that amount of time frame. Revenue, you've seen the numbers, so I mean we need a full year to get to a $30 million total in a run rate of about $50 million and that point, we will probably break even. That's going to be a 12 to 18 months kind of time frame we think, but it's early. We don't really know yet. We got to see how this does ramp. We got to see how we execute. We've taken a long time here in the last few months to upgrade our marketing and our sales groups, and we're still hiring. It takes six to nine months with the new people to be able to get in the groove. We just hired out in New York. So, we won't be getting a whole lot of traction for New York for probably another three to six months. It all takes longer than you want, but we are nearly the only game in town. It works the best of anything out there. We got this thing from start to finish through NGS in two years or so, which they tell us is a record. It felt like a long time for us, but we'll see how it ramps, but I think getting to a level of revenue that we've talked about is certainly more than just plausible. So, we're excited to try and feed this beast as we go forward from December 1st.

Puneet Souda -- SVB Leerink -- Analyst

Okay, thanks Chuck.

Operator

And we'll take our next question from Catherine Schulte with Baird.

Catherine Schulte -- Robert W. Baird -- Analyst

Hey guys, thanks for the question and congrats on the quarter. It's first on that EPI Medicare look back topic. How your discussions with NGS has gone and when do you think you'll find out if you'll get those retrospective payments or not?

Jim Hippel -- Chief Financial Officer

You just don't know. There is no precedence as you know. There is no real rule or law around it. It really is up to them. What they feel is appropriate and fair, and we have to decide also what date to go back to, and we can make it more problematic for us to get anything by the farther back we reach. So, we're trying to pick a fair position where there is like no dispute, no doubt and you got to remember when you started out this kind of thing, you're starting out with sales people with unclear practices and processes and data and we don't want anything nebulous about what we're asking for, so we're going to pick a safe date where we have from a point where our processes are really clean and perfect and we have great data and great outcomes and so there is no dispute. So, we're trying to figure that out, but it's going to be, we think at least six months worth and that should be, that should be a few thousand tests, so we'll see. And I hope they are generous.

Catherine Schulte -- Robert W. Baird -- Analyst

Okay. And then for the upcoming quarter, you have a pretty tough stacked comp in Protein Sciences. It's what's your view on that segment next quarter and what are you assuming in terms of the calendar year end budget flush there?

Jim Hippel -- Chief Financial Officer

Yeah, we're not hearing much right now of budget flush. I mean the news that just came out for looking forward to NIH funding is kind of a record. It looks really good. So, we're excited about this coming year coming forward for academia. As I mentioned in my previous answer, I think things are pretty steady as she goes with the rest of the business. We'll see how our processes drive execution, but it's like you said, it's a tough quarter. This is, we're coming into a quarter with a really good one for us last year, and we don't think we're going to let anyone down horribly here, but it's going to be a tough quarter. We've got to execute and that's the way this business is right?. When you're staying -- you want to be a sustainable and be double-digit every quarter going forward, they are never easy anymore, so.

Catherine Schulte -- Robert W. Baird -- Analyst

And then last one from me, can you just give us an update on the general environment that you're seeing in China and what are you expecting for growth there for the full year?

Jim Hippel -- Chief Financial Officer

Yeah, north of 20% for sure. And I'm, we're trying to, we're trying to figure out ways to really be at 25. So, I think we'll be between 20 and 25. Things look pretty good. The fifth year is kind of concluding there. There will be a bit of a budget flush there. I think all the pull forwards and all of the drama around tariffs, I think is behind us, even though we don't have a lot of tariff impact anyway, and I think it's steady as she goes. We still aren't that big in China. So, it's just we're very under penetrated and it's led by institutions, hundreds of them that are more or less led by US Chinese citizens that know our brands and went to school here and grew up with R&D systems in the lab, so we're all over it and it's been just very stable and very solid since the day I got here over six years ago really. We're up to now 150 people plus in China. It was a dozen when I joined. So, you know we're becoming a real company there. I made a comment to some groups last week, when I joined our MD and our Head of HR we're the only ones that spoke English to and trying to -- trying to hire people for a company that has a dozen people on 10-ish million dollars, it's hard. The multinationals grab all the great local talent that are bilingual, and we're now past that. We crossed that hurdle at work. Most of our people who we're hiring these days are rock stars, and they not only speak English, they're coming from the multinationals. They've grown up and they've been trained by somebody else, and they want to come on board because of our -- because of our under-penetration, our growth, our great platform, the synergies they see and the epic culture we're trying to instill in every subsidiary we have around the world, so.

Catherine Schulte -- Robert W. Baird -- Analyst

Great, thank you.

Operator

We'll take our next question from Alex Nowak with Craig-Hallum Capital Group.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Great. Good morning, Chuck and Jim. Thanks for taking our questions. This is actually Will on for Alex today. Chuck, Bio-Techne has built a huge catalog of products and resources for life science researchers. As you move into the GMP grade protein production, how can you leverage these existing products and resources to make you successful in the emerging cell and gene therapy area. To ask the question another way, is this another leg to the stool that needs to be added or can you leverage pieces of the existing businesses into this new growth area? Thanks.

Charles Kummeth -- President and Chief Executive Officer

Well, we don't need a very big catalog because we're talking probably about 10 products. So, as you know, our problem right now, even though we are experiencing a 100% growth in our GMP protein business, we are set up here for research. We're the research leader in the world. We have thousands and thousands of products and thousands of just proteins, and so we are spread a mile wide and an inch deep and that's the fundamental issue. We have amazing quality and with amazing processes here, but it's not really GMP qualify because we cannot make big enough batches to really operate for our production type environment for a CDMO. All right. So, they've all been through. They love us. They love what they see, but you got to be able to make more of it is what we are here and so we bought this factory, we're building it out, and what we are making what the world is looking for for the next generation GMP proteins, which are, which is the food that these cell therapies are eating, right? Basically and using to improve their yields. You know, you look backwards, the spec is kind of IL2, and everybody can make IL2. It's not a difficult protein to make. It's one of the first ones discovered and discovered by this company. Looking forward, we're looking at much more complicated proteins, as the science gets stronger and we're looking at IL7, 10, 15 and others that we think will position us as the supplier of choice, as you start moving toward more complicated proteins, we're the ones that are going to be all make the best and make the highest quality with the best yields with the highest bioactivity. So, we think the future kind of -- kind of comes straight at us. It's kind of hard to lose as the number one protein science manufacturer in the world and that's why we are building this factory. It won't be a large catalog because it really, it's not the way GMP proteins workforce for cell therapies. It's more of a select set, so it is going to be much more about what flavor of an IL10 do you provide, what kind of quality, what kind of bioactivity, what kind of yield that your customers get with their cell therapies with your protein, that's the name of the game.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Got it. Thanks, I appreciate the color and that's interesting. And then, just, what's the update on the ACD, partnerships with Leica and and if you could just talk on the next ACD tests in the pipeline and timing for some launches there? Thanks.

Charles Kummeth -- President and Chief Executive Officer

Yeah, so on we just talk more about the pipeline, and they've kind of guide us against that. So they have a good half a dozen things they are working on. There is a lot of things, a lot of them are smaller orphan like, but they are very big unmet needs. The current businesses in the HPV test is growing quite well. It's strong double-digit growth. We're very happy with how they're really prioritizing it. So, I think our new management team led by Kim Kelderman I think has helped a lot. He comes from running Genomics for Thermo Fisher, he has strong relationships in the industry. So he has helped a lot with moving up the food chain, so you speak in the dinner organization to try and get more priority on us and that's worked very well. So, I think we're looking forward to be hopefully working with them on a number of things. They're not the only game in town Ventana, Roche is also more and more interested in working on things with us and we're a very ubiquitous platform. It's a kit technology that can work on multiple instrumentation platforms, so we're -- we are all working all the, all the issues there, so, and it's so far so good. It's still largely an RNAscope, RUO based business right now and the diagnostic side is still less than 10% of it. Give us five years, it will be much more than that

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Okay, great, thanks. And then, congrats on the final LCD for EPI. I just have one more question. If you have any updated plans to get this product as well as roll out other Exosome DX based tests in either a lab or a kit format. Thanks.

Unidentified Speaker

Will, get the FDA breakthrough status and that will help us. That will give us more freedom to do a lot of things plus create a lot more credibility with the private payers and such, but we don't see any real need to kit it out at this point. It could be that some day, but there is plenty of unchartered territory for us right now to not worry about that. And you got to remember, we're also working now on picking inpatients and starting the studies around the bladder indication and and we've got kidney rejection ready to go, and we have validated tests ready to go to clinicals with somebody who wants to work with us on the blood side for lung and for breast. So, we've got a strong pipeline with this platform that we don't have to go after and dress any kittable version of it right now. There is enough to do.

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Great, thank you.

Operator

And we'll take our next question from Paul Knight from Janney.

We're unable to hear you. Please check your mute function.

Paul Knight -- Janney Montgomery Scott -- Analyst

Hey, Chuck, Paul Knight.

Charles Kummeth -- President and Chief Executive Officer

Hey, Paul. How are you doing?

Paul Knight -- Janney Montgomery Scott -- Analyst

Good. Could you talk about your GMP production facility expansion, specifically timing, but also will this be a footprint where you can add additional capacity around it once the initial investment is made.

Charles Kummeth -- President and Chief Executive Officer

Yeah, as I mentioned earlier, some of that answer, but to expand on it, it's a 50,000 square feet facility. We bought a building so that we could save a year from doing a greenfield somewhere else. That was our main reason we bought. We bought it in St.Paul proper. It is an absolute awesome facility for the way it's laid out for us. So, we really just got to fill with our staff, which is most of the money, as you know, this stuff is expensive to put in there with the large reactors, all the sterile piping, the in and out rooms, the clean rooms that it looks like a small pharma factory right? It's a bioprocessing factory, what it is. It is ready to go on phase 1 to roughly $140 million worth of capacity at today's kind of pricing goals and with expansion easily to $200 million if we need to. There is plenty of room still in that 50,000 that we've not utilized. We will be able to even do other things too. There is possibly other reagents we can work on, there are some antibodies possibly, there is stuff we're looking at, but there is also some room on the site land wise that we can build on it if we need to. So, this thing could be really big for us, and we don't have to worry about buying another one for quite some time.

Paul Knight -- Janney Montgomery Scott -- Analyst

And then regarding protein simple, your 1600 placements, is your pull through going up? Could you talk about where you think you are in market penetration as well.

Charles Kummeth -- President and Chief Executive Officer

Well, we're 10% less in penetration we feel. We've seen that no matter what's going on with instruments or whatever, it being Simple Western has just been knocking out of the park quarter after quarter. I think it's because we have more than crossed that CASM and is still very under-penetrated. We are bringing back into the fold a lot of big pharma customers that have walked away from our Western blot as a process, and are going back to this again because this works so well. It's so fast, it's so reliable. So, we're actually expanding the market again I think. 1600 is a good number, but it's roughly, if you look at, as compared to what imagers that are out there, it's less than 10% of installed imagers in the world. So, we think there's a long way to go. We still have good split between BioPharma and academia. I think we're not done until we really see people leaving college with this is how they learn how to do western blot. When this is the methodology that's taught in schools and becomes a standard, we will know that our job is done and we're a few years off from that.

Paul Knight -- Janney Montgomery Scott -- Analyst

Okay, thank you.

Charles Kummeth -- President and Chief Executive Officer

We have no competition with this Paul. It's the only automated western blot platform out there, and we see nothing on it.

Paul Knight -- Janney Montgomery Scott -- Analyst

You have to keep adding to the library with your antibody probes.

Charles Kummeth -- President and Chief Executive Officer

You mean in terms of Western or...

Paul Knight -- Janney Montgomery Scott -- Analyst

Your reagent kit...

Charles Kummeth -- President and Chief Executive Officer

Yeah. So we're always adding. Right? So we add roughly 1500 new products a year. It's split out between antibodies assays and proteins each and every year. So we're the company people look to for the newest, hardest to make bioactive proteins. We've always been the ELISA leader, and we still crank out new ELISAs every year. We are pushing the envelope on other aspects, especially multiplexing. So we're trying to extend that category, as multiplexing becomes more and more of a standard and antibodies, you know, we supply a lot through Novus. We have in our catalog over 300,000. We make over 20,000 ourselves. But as you know, antibodies come in all different applications and from Western to flow to whatever and we're -- we're the largest catalog in the world. We're not the largest provider, but we're in the top five, and we've seen double-digit growth for quite a few quarters now, and we're enjoying it, and we think it's going to continue.

Paul Knight -- Janney Montgomery Scott -- Analyst

Thank you.

Operator

We have no further questions at this time. I would like to turn the conference back over to Chuck Kummeth for any concluding remarks.

Charles Kummeth -- President and Chief Executive Officer

Well, as our analysts move around from different companies, we're expecting a few more analysts coming back online in the next quarter or two, as that will be good, but we've enjoyed all your questions, and we're here today and rest of the day in the [Indecipherable] further calls, one-on-ones and reach out to David Clair if you have other questions you have, but other than that, we'll check in with all of you again next quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

David Clair -- Senior Director, Corporate Development

Charles Kummeth -- President and Chief Executive Officer

Jim Hippel -- Chief Financial Officer

Unidentified Speaker

Puneet Souda -- SVB Leerink -- Analyst

Catherine Schulte -- Robert W. Baird -- Analyst

Alex Nowak -- Craig-Hallum Capital Group -- Analyst

Paul Knight -- Janney Montgomery Scott -- Analyst

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