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Bio-Techne Corporation (TECH -3.10%)
Q1 2022 Earnings Call
Nov 2, 2021, 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 2022. [Operator Instructions]

I would now like to turn the call over to David Clair, Bio-Techne's Senior Director, Investor Relations and Corporate Development.

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David Clair -- Investor Relations

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 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 2021 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 because 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 Bio-Techne Corporation website at www.bio-techne.com.

I will now turn the call over to Chuck.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Thanks, David, and good morning, everyone. Thank you for joining us for our first quarter conference call. The Bio-Techne team kicked off our fiscal 2022 on a very strong note, as we continue the momentum we experienced during our last fiscal year. Our first quarter 21% organic growth rate reflects broad strength across geographies and ongoing penetration and demand for our proteomic research reagents, diagnostic reagents, analytical tools, and services, especially within our biopharma end market. The standouts in the quarter included our instrument portfolio, namely our Biologics, Simple Western and Simple Plex offerings, broad strength across our research agents and triple-digit growth for our burgeoning GMP protein business. Not only were these significant growth drivers for the quarter, but these platforms as well as our spatial biology and molecular diagnostics portfolio remains at the forefront of underpenetrated high-growth markets that position the company for future growth. I'm very proud of the global team's execution and the company is off to a great start as we march forward to the longer-term targets we provided during our recent Investor Day event.

We delivered this strong Q1 revenue performance with a continued focus on profitability with an adjusted operating margin of 37.8%. During the quarter, we made progress hiring to our growth plan, although the tight labor market remained a constraint to us building the team at our desired pace. We anticipate making continued progress with our hiring plans as fiscal 2022 unfolds, supplementing the commercial and technical teams that will enable execution of our long-term growth plan. From a geographic perspective, we experienced robust growth across all geographies, China especially was a standout where the team delivered record organic growth of over 50% in the quarter. The government authorities there are strongly encouraging the development of therapies in the areas of stem cells, organoids, regenerative medicine, and immunology. All areas that have a strong need for our reagents and analytical solutions. For the first time this quarter, our business in China annualized at over $100 million in revenue. While this is an important milestone, we believe we remain in the early innings of realizing our potential in this important geography.

Turning to our end markets. Demand for our unique high-quality products and solutions continues to be very strong for our biopharma end users with revenue growth increasing approximately 25%. Performance within our academic end markets also remain solid overall, delivering organic growth in the mid-single digits. Now let's discuss the performance of our growth platform, starting with the Protein Sciences segment, where we delivered organic growth of 26% in the quarter. We made significant progress with our cell and gene therapy initiatives as growing awareness and demand for our portfolio of workflow solutions led to over 60% organic growth in the quarter. We are nearing completion of the qualification process for initial lots of GMP-grade proteins out of our state-of-the-art GMP protein manufacturing facility in St. Paul, Minnesota, and anticipate commercial orders to be shipped from the facility in the coming weeks. As a reminder, GMP proteins are critical ingredients for growing both autologous and allogeneic cell therapies, and we anticipate increasing demand going forward as the rich pipeline of therapies to make their way through the regulatory approval process.

Our GMP protein business increased over 160% in the quarter. And with our new GMP manufacturing facility open for business, we are well positioned to meet the anticipated growing demand for these critical reagents. Continuing in cell and gene therapy, we added to our portfolio of specialty cell culture products with the launch of Accelerate iPSC expansion medium, a new medium for the expansion and maintenance of induced pluripotent stem cells, or iPSCs, for use in both research and translational workflows. The Accelerate iPSC expansion medium builds on Bio-Techne's portfolio of products and services and regenerative medicine and fit seamlessly into our offerings for stem cell workflows, including cell isolation, reprogramming, genome engineering, cell expansion, differentiation, and characterization. Importantly, Accelerate iPSC expansion medium is manufactured without using components derived from animals or humans, making it ideally suited for use in translational research to produce iPSC-based cell and gene therapies.

This latest offering builds on our growing portfolio of specialty cell culture products addressing customer needs across natural killer or NK T cell and B cell media. The momentum in our core research use only protein and antibody businesses also continues to be very strong with growth in the low 20s in the quarter. We believe the continued success in our core is a reflection of our best-in-class development of a new high-quality relevant reagents that address our customers' current research needs while making them increasingly aware of our capabilities through our strategic digital marketing efforts. Moving on now to our proteomic analytical tools, where we continue to see strong demand across our portfolio of cost-effective productivity solutions. In Q1, our instruments and related consumable hold-through grew over 30%, reflective of a very strong biopharma environment, our biologics instruments led the way growing nearly 50%.

These analytical tools, namely our Maurice instrument enabled a reproducible and quantitative analysis of therapeutic protein identity, purity, homogeneity with ease of use, fast results and reproducibility, all qualities that continue to represent a compelling proposition for new and existing CROs, CDMOs, large pharma accounts. And we are now also seeing adoption in cell and gene therapy quality control applications. Demand for our Simple Western instruments also continues to be strong with over 20% growth compared to the prior year. Encouragingly, we are seeing significant lead generation for Abby and sold several of these systems during its first full quarter in the market. As a reminder, Abby is the lower cost fully automated chemiluminescence Western platform that we introduced in April to further penetrate Simple Western technology into our academic customer base. Separately, we saw robust adoption, a simple Western within cell and gene therapy market and view this as a significant and largely untapped opportunity for this technology going forward. Our Simple Plex multiplexing immunoassay system, Ella, also had a strong quarter, growing over 20%.

This result is especially impressive given the challenging year-over-year comparison where Simple Plex increased more than 75% in the prior year period. We are experiencing a significant uptick in Ella accounts using or evaluating the platform for neurodegenerative applications, specifically for neurofilament light chain or near NFL and neurofilament heavy chain or NFL detection in serum plasma. Ella continues to be the platform of choice for customers requiring excellent sensitivity and assay speed. Now let's discuss our Diagnostics and Genomics segment, where organic revenue increased 6% in the quarter. Our spatial biology business, branded ACD, increased mid-single digits in the quarter as continued demand from our biopharma customers, especially CROs was partially offset by lower reorder rates from our academic customers. I would note our ACD business, and especially in the academic market, faced a challenging comp in the prior year when the business increased over 30%. Within biopharma, the emergence of gene therapy and RNA interface or RNAi therapeutics was created -- has created a shift toward animal model-based projects, driving larger order sizes and increasing custom probe design projects, making for a little more lumpiness in our spatial biology business.

Our menu of pros is now approaching 50,000 targets over many species and publications across over 4,500 demonstrating the continued academic interest in the platform. Next, our Diagnostics Reagents business delivered its ninth consecutive quarter of growth, with organic revenue increasing in the upper single digits. Encouragingly, the pandemic-related headwinds that impacted this business in recent quarters are starting to diminish, and we are experiencing a reacceleration in the chemistry, glucose, and hematology controlled product lines. The diminishing headwinds combined with new product launches and additional penetration within existing OEM customers, we believe are just at the beginning of accelerated growth in this business. During our Investor Day, we highlighted some organizational changes within our Diagnostics and Genomics segment designed to fully realize across developmental opportunities and synergies within our liquid biopsy and molecular products businesses. The new Molecular Diagnostics division is a combination of our Exosome Diagnostics business and the recent Asuragen acquisition and is being led by Matt McManus, the former CEO of the legacy Asuragen business.

This new division structure includes an Exosome Center of Excellence as the Exosome-based liquid biopsy innovation engine developing lab-developed tests, companion diagnostics as well as kitted Exosome-based diagnostic products. We will leverage the established research channel as well as our two CLIA labs to commercialize these products. Our ExoDx prostate cancer test continues to make progress despite ongoing challenges with the urology market. During COVID, patients were not leaving their homes to do annual checkups with senior urologists. This dramatically reduced the volume of PSA test, the primary tool used by urologists to identify the appropriate patients for our ExoDx test for prostate cancer risk analysis and potential biopsy. With patients beginning to return to their doctors for routine checkups or follow-ups, the diagnostic market is continuing to recover and encouragingly, our Q1 ExoDx volume was the highest since the onset of the pandemic and continues to show improvement early in Q2. I would also note that our sales reps are increasingly getting in-person meetings and hosting educational and awareness events with the physician community, which we expect to be a strong impetus to test volume going forward. We also made progress on the ExoDx reimbursement front during the quarter.

We had accounts -- we added contracts with multiple regional payers, expanding both the network of private payers reimbursing for ExoDx and men with covered access to test. We are very excited about the opportunity to present at an overview of the science and publications supporting ExoDx to 600 medical directors and policy decision-makers this week during NAMCP's 2021 Live Fall Managed Care Forum. The confirmed audience includes representatives from the largest national and regional payers. Events like this are an excellent opportunity to drive awareness and acceptance and eventually reimbursement of this important test among the private payer community. Our recent publication of a pooled analysis of over 1,200 patients in the journal of prostate cancer in prostatic diseases demonstrated ExoDx's ability to discriminate between high-grade, low-grade and benign prostate cancer. Using ExoDx's validated 15.6 cutoff score would have avoided 23% of all prostate biopsies and 30% of unnecessary biopsies with a negative predictive value of 90%. We have a pipeline of additional studies and anticipate a steady cadence of publications to drive reimbursement and adoption going forward. In addition to the ExoDx prostate test, we continue to advance our pipeline of innovative Exosome-based diagnostic tests, including our noninvasive kidney transplant rejection assay, ExoTRU kidney.

As a reminder, initial ExoTRU Kidney data was published earlier this year in the Journal of the American Society of Nephrology, showing a negative predictive value of 93.3% and a positive predictive value of 86.2%, which we view as best-in-class performance versus the competition. We are preparing additional studies for publication on ExoTRU assay performance and remain on track to launch its noninvasive urine-based assay later in our fiscal year. With regards to the products from the legacy surgeon business, we continue to gain market traction with our leading portfolio of genetic and oncology molecular diagnostic products, including our kits for FMR1 and BCR-ABL. This business is largely U.S.-centric today, and we see significant potential for these products outside the U.S. and have taken initial steps to position the business to penetrate the European markets. In addition to the geographic expansion this business has a fully -- a very full pipeline, including the expected launches of a cystic fibrosis or CFTR kit as well as a hard-to-do panel, which combines carrier screening assays for FMR1 and SMA 102 and CFTR in one user-friendly kit.

To conclude my opening comments, our fiscal '22 is off to a great start. Our end markets remain strong and our portfolio of differentiated proteomic tool of reagents, molecular diagnostic products are meeting the needs of our customers and growing in underpenetrated markets. Our cell and gene therapy initiatives continue to gain acceptance from biopharma customers and the deepening relationships with these end users are driving adoption of our proteins, media, assays, instrumentation, antibodies and other offerings in our portfolio. During our recent Investor Day in New York City, my leadership team and I laid out the vision and the strategy to bring Bio-Techne from $1 billion revenue company it is today to a target of $2 billion over the next five years. Our first quarter in, we are off to a great start in this journey, and I'm excited to share our progress as we realize this vision over the many quarters to come.

With that, I'll hand the call over to Jim.

Jim Hippel -- Executive Vice President-Chief Financial Officer

Thanks, Chuck. I'll provide an overview of our Q1 fiscal 2022 financial performance for the total company, provide some additional details on the performance of each of our segments and give some thoughts on the remainder of the fiscal year. Starting with the overall first quarter financial performance. Adjusted EPS was $1.83 versus $1.43 one year ago, an increase of 28% over last year. Foreign exchange positively impacted EPS by $0.07. GAAP EPS for the quarter was $1.69 compared to $0.83 in the prior year. The biggest driver for the increase in GAAP EPS other than from business operations, was unrealized gains on our investment in ChemoCentryx this year compared to an unrealized ChemoCentryx loss in the prior year period. Q1 revenue was $257.7 million, an increase of 26% year-over-year on a reported basis and 21% on an organic basis. Foreign exchange translation had a favorable 1% year-over-year impact and acquisitions had a favorable 4% impact to revenue growth. All geographies had strong growth in Q1 led by China growing over 50% filed by the U.S. and EMEA, both growing over 20% for the quarter. The rest of the world grew in the upper teens. By end market, biopharma remained very strong, growing mid-20%, while academia increased mid-single digits year-over-year. Moving on to the details of the P&L.

Total company adjusted gross margin was 71.2% in the quarter, compared to 71.9% in the prior year. The decrease was primarily driven by unfavorable product mix within the Protein Sciences segment, partially offset by favorable volume leverage. Adjusted SG&A in Q1 was 25.1% of revenue, a 70 basis point decrease compared to the prior year. While R&D expense in Q4 was 8.3% of revenue, 40 basis points higher than the prior year. While our adjusted SG&A and R&D spend both increased sequentially and compared to the prior year, a tight life sciences labor market do not allow us to fill all planned headcount additions to the team at the pace we originally anticipated, especially in the more technical, scientific, and engineering fields. However, our pace of hiring continues to increase, and we plan to make additional progress in our fiscal second quarter. This investment in critical human capital will position the company for growth going forward. The resulting adjusted operating margin for Q1 was 37.8%, a decrease of 40 basis points from the prior year period. However, excluding the impact of the Asuragen acquisition made last April, adjusted operating margin increased 40 basis points over the prior year.

Looking at our numbers below operating income. Net interest expense in Q1 was $3.1 million, decreasing $1.1 million compared to the prior year period. Decrease was due to a continued reduction of our bank debt as well as a lower blended interest rate. Our bank debt on the balance sheet as of the end of Q1 stood at $300.2 million. Other adjusted nonoperating income was $1.2 million for the quarter compared to $1.1 million in expense in the prior year, primarily reflecting the foreign exchange impact related to our cash pooling arrangements. For GAAP reporting, other nonoperating income includes unrealized gains from our investment in ChemoCentryx. Moving further down the P&L. Our adjusted effective tax rate in Q1 was 21%. As a reminder, during the second quarter of fiscal 2021, we made a strategic equity investment in China-based Eminence, a company focused on providing media as well as custom cell line development and media formulation services to the Chinese bio-pharmaceutical market. The $634,000 noncontrolling interest line item reflects the loss from the portion of Eminence we do not own. The impact to other lines of the P&L as a result of consulting image was immaterial in Q1.

Turning to cash flow and return of capital, $48.4 million of cash was generated from operations in the quarter compared to $66 million in the prior year period. The decrease was primarily driven by the timing of cash payments for payroll, income taxes and other accounts payable. In Q1, our net investment in capital expenditures was $6.1 million, and during Q1, we returned capital to shareholders by way of $12.5 million in dividends. We finished Q1 with 41.2 million average diluted shares outstanding. Our balance sheet finished Q1 in a very strong position with $235.1 million in cash and short-term available for sale investments and a total leverage ratio of well under 1 times EBITDA. Next, I'll discuss the performance of our reporting segments, starting with the Protein Sciences segment. Q1 reported sales were $197.2 million, with reported revenue increasing 28% compared to the prior year. Organic growth increased 26% with foreign exchange having a favorable impact of 2% on revenue growth. Within this segment, the strong growth was very broad-based in nearly all reagent assay and instrument platforms. As Chuck mentioned, cell and gene therapy increased over 60%, including growth over 160% in our GMP protein products. While Biologics grew almost 50% in our Simple Western, Simple Plex, proteins and antibodies all grew at least 20%.

Operating margin for the Protein Sciences segment was 45.7%, an increase of 10 basis points year-over-year due primarily to favorable volume leverage largely offset by strategic investments to support future growth. Turning to the Diagnostics and Genomics segment. Q1 reported sales were $61 million with reported revenue increasing 22%. Organic growth for the segment was 6%, with acquisitions contributing 15% and foreign exchange translation having a favorable 1% impact on revenue. The diagnostics reagents business increased upper single digits and ACD-branded spatial biology portfolio increased mid-single digits. Although spatial biology had a challenging year-over-year comparable this quarter, we review this business unit as being in a high-growth area within life science tools and are extremely well positioned to capitalize on this growth with our multi-omic product portfolio. For Exosome Diagnostics, revenue was lower year-over-year, but this was mostly due to cash to accrual revenue recognition accounting change in the prior year for Medicare patients. Timing of companion diagnostics projects with biopharma customers also negatively impacted growth for the quarter. Exosome Diagnostic prostate cancer test volume continues to improve with more patients now going back to see their physicians. Test counts increased 20% year-over-year in Q1 and are continuing to ramp as we enter Q2.

Moving on to Diagnostics and Genomics segment operating margin at 12.2%, the segment's operating margin decreased 510 basis points compared to the prior year. The decrease reflects the impact of strategic investments to support future growth as well as the Asuragen acquisition. In summary, our research-oriented end markets remain strong. And as our Q1 performance indicated, we are executing extremely well in serving these markets. The diagnostics end market is also improving, and we believe will continue to be a tailwind going forward. Our end markets have been on a upward march since the depth of the COVID crisis in the fourth quarter of our fiscal 2020. This means our comps become increasingly more challenging and our growth rates will likely be tempered proportionately in the near term. However, given our strong performance out of the gate in Q1, we have increasing confidence that we can achieve a growth rate in fiscal year 2022 that is greater than our 2-year CAGR at the end of fiscal year 2021. As Chuck and I mentioned in our prior commentary, despite progress executing to our hiring plan, there is more to do in order to support our long-term growth plans. We anticipate continued progress in our hiring objectives to put downward pressure on our adjusted operating margin sequentially in the near term before returning to prior year levels by the end of our fiscal Q4. That concludes my prepared comments.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Puneet Souda of SVB Leerink. Please proceed with your question

Puneet Souda -- SVB Leerink -- Analyst

Hi. Thanks, Charles and Jim. Thanks for the questions here. So first one on GMP protein is clearly strong. Just wondering if you could parse that out. Was that due to qualifications of new orders or additional orders sort of shipping out in the quarter? 160% is really strong. And obviously, it seems like it's coming off of a small comparisons of last year. But just trying to understand the sustainability of the GMP growth? And how should we think about an annualized growth rate here for GMP proteins in 2022?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Yes. We've been pretty clear in the past that our growth rate for the next couple of years is probably at the 100% level. So we're ahead of that. But we're still -- as of today, we're actually open for business. The factory has inventory of a lot qualitied -- qualified material products. And we have been gaining more and more, I guess, customers. You saw the slides in the investor deck talk about the potential domain of customers. We got a couple of dozen already and we're getting a lot of help from our partners to dramatically increase that. So we're getting more scale from existing customers, and we're getting more customers. So therefore, the lift. We're well over at $20 million run rate, which is really just the beginning, right, Puneet.

So kind of we're on track. We're ready to start transitioning as much as we can of our orders into the new factory. As you know, we have the largest catalog out there for GMP proteins, but we're only set up for a handful right now in the new factory and the majority of business is really under 10 type of product count versus the 50 or so we have in our catalog. We still have a lot of capacity back at headquarters. It's just in small lots. So we are ready to go on the bigger lots for a few of the more important products that are being asked for, being put in the clinicals, etc. And I see the growth rate to be largely consistent with our guidance, and I think it will continue.

Puneet Souda -- SVB Leerink -- Analyst

Okay. Great. So on ACD, wondering if there is something we need to keep in mind for sort of second quarter. Just it seems -- the comments you made were around lumpiness. But this is the first time we're seeing sort of mid-single-digit growth here after the leadership change to happen in that business. And -- so just trying to understand, is this -- should we just continue to expect lumpiness in the business? And -- or is there any competitive dynamics that we need to be aware of. Just trying to think about the full year number that's traditionally been more than 10% here historically for ACD.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

We're as bullish as ever on this platform. You got to remember the comp was amazing that we're coming off of. And then we had -- the lumpiness is primarily in the service area of it. We do a lot of custom work and that part was just balance. It's just kind of ebbs and flows. So that, combined with -- as you know, we're a couple of hundred people lighting our hiring plan, just like the rest of the world. I mean, we added 275 people last quarter, and we lost 240. We're net 35 ahead, which is even better than average out there. So it's been really crazy, especially in the Bay Area -- to the Bay Area. So we are shorter there than most of our other business units. We are also the largest spatial business out there. So we're a target as well, especially for our reps, and we're definitely shorthanded in our reps. We've put additional focus on it now, and we're correcting that.

But that's -- those are the kind of the one, two and three issues of why this was mid-single-digit growth and why it wasn't 15% to 20%. It's -- there's no issue. It's all there. It actually looks better than ever. DNA scope is coming on. We have XPlex coming on. We are working forward with other partnership ideas with automation. We're stronger than ever with LICA. We're getting going with Ventana. It's -- the leadership change we made one year, 1.5 years ago have done pretty well, and it's more an issue of comps, lumpiness specially in services and probably a handful of sales reps short in some key areas that we need to get refilled, but we'll do that. That's kind of h the bees to F in FPD. It's a hot area of spatial engine. There's a lot of movement right now. So we'll win, don't worry.

Puneet Souda -- SVB Leerink -- Analyst

Got it. And last one quickly on China, if I could, $100 million really great to see that number. But just in terms of what can you do in China now at the current scale versus you couldn't do before? And how should we think about the sustainability of growth there in China, you obviously highlighted strong long term, but just how should we think about this year?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

We're not saying it over in boats, so inventory, so that's a good thing. So we ship it in. We can sell as much there as they can. So we can ship as much as they need to sell. The growth rate -- I mean, forever, we've talked about my goal of getting this growth rate in China over 25% and being told consistently, it's just impossible to grow more than that in China. It's hard. And we've been roughly about 25% over the years here. And today is just to remind you, is my 35th earnings call for this company. So we were just ecstatic that we just are just knocking out of the park on all cylinders there. Now instrumentation is just flying big part of it, but it's also in our reagents. So we're on all cylinders. We are increasing our inventory levels. We are looking at shipment schedules. We're giving them all the help they need. We didn't have any supply issues last quarter, and we're trying to work on that going forward.

Everyone is talking about supply chain problems. We haven't had any to date, knock on wood, we won't have in the future, but we're trying to be as careful as we can. I would just say it's broad-based. And this is one year we had great growth for SPD, by the way. It was a strong growth there. It's just small. But it's a good sign of the future. I would love to see us be safely at 25% or better in China, which we've always said 20% to 25%. And for this year, 25% or better looks pretty good now when you start out at 50% -- over 50%. So -- I don't think I've seen any peers so far having numbers this great, this good in China. So we're definitely in the right areas, and we're taking share in antibodies, which is great to see.

Puneet Souda -- SVB Leerink -- Analyst

Great. Congrats on the growth there. Thanks.

Operator

Our next question is from Dan Arias of Stifel. Please proceed with your question.

Dan Arias -- Stifel -- Analyst

Morning guys. Thanks for the questions. Chuck, on Simple Plex, can you just talk about how system utilization there looks like it tracked in the quarter relative to the first half of the calendar year? And then when you look at the instrument portfolio, I'm sort of curious where if anywhere you think we should think about growth in consumables pull-through per instrument this year. It feels like it's easier to envision that for Simple Western and biologics, more than Simple Plex, but I'd love to hear your thoughts.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

You're right, Dan. And by the way, congrats, I think your predictions for our quarter are like within 1%. So we should be using you more often than our staff maybe.

Dan Arias -- Stifel -- Analyst

But I couldn't agree more to it.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Yes. As you know, Simple Plex is the lumpiest of the bunch. Now we have $12,000 of pull-through per instrument on Simple Western, and we have roughly 15 on biologics. It's 50 on Simple Plex, it's huge. This is a closed system. We make the cartridges for the customer unless it's an open cartridge, which some customers use, especially to start to figure out their assays. So that makes it lumpier by definition. We actually had over 50% growth in instruments this quarter. So we are well on track to instrument deployment. And with that kind of pull-through, it's all about getting boxes out there. So we're very bullish. It's just coming off a huge comp from last year is one thing. So we studied all that. We're sitting pretty good. I think -- and a lot of the uses are large studies. And so some of the instruments -- some of the cartridge orders get very large, and that makes us somewhat lumpy.

So we could have a complete turnaround on cartridges next quarter and then all of a sudden, we're back to 50%, 60% growth. It didn't really help us much in the instrument front because, as you know, we've been right against the rail of trying to finish out our orders every quarter, and this quarter wasn't much different because the instrument growth was still 50%. We're having to build a whole new factory just down the road from where we are at. We'll be done in a year with that. So that's off and running. We did take cartridge manufacturing up last year. And then we've got a couple of hundred a week I think this last quarter of forgiveness, which will hopefully fill back up, but it's still very strong year-on-year. There's -- so I think all things aside, it's still full steam ahead. It's a $50 million plus run rate or better now and probably over more than half the size of Quanterix, and we're gaining traction on them and others out there. So...

Dan Arias -- Stifel -- Analyst

Yes. Okay. All right. That's helpful. And then, Jim, if I'm hearing your comments on the outlook correctly, it sounds like you're calling out the comps that are obviously getting harder, but the confidence in getting above the historical average is higher. And that average that you're thinking about is the 13% number that you alluded to last call, and I believe you talked about at the Investor Day, is that right?

Jim Hippel -- Executive Vice President-Chief Financial Officer

That is correct.

Dan Arias -- Stifel -- Analyst

Okay. Thanks so much.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Thanks, Dan.

Operator

Our next question is from Jacob Johnson of Stephens. Please proceed with your question.

Jacob Johnson -- Stephens -- Analyst

Hi. Good monring. Maybe, Chuck, on the cell and gene therapy side, I think you've been clear that end market is an opportunity for you and a lot of initiatives there. But it seems like yourself and maybe some others saw some pickup in activity from that end market this quarter. Is there something that's changed in the end market? Or was the kind of performance you put up this quarter, just a function of kind of your internal efforts and GMP coming.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

I think so. Yes, I can answer that. It is plain old-fashioned critical mass. So this is getting bigger and bigger. Our scale-ready partners are doing better and better out there, and they're providing additional visibility to our reagents to be embedded within their solutions in clinicals, and we're just getting more and more traction, more and more reorders. The orders are going up in size. But it's just -- we aren't even to the pre-game warm-ups yet for the size of this market. It is all preclinical and clinical and it's already getting sizable. I mean I've mentioned the word tsunami in the past. This is going to be a bow wave that I think is just going to be hard to stay on top of in the next couple 2, 3, 4, five years. So in our -- we've talked in the past about this division of the future being in five years, $300 million or so. it might be dramatically larger than that.

We don't see a lot of people catching up to us or doing what we're doing with total workflow. And we've got like 10 stops on the flywheel here for cell and gene therapy workflow, I think we're going to be nearly unstoppable. And the lead position, of course, is GMP proteins and being the protein leader in the world. We expect to fully capitalize on that first and then follow with everything else we have to our customers who are amazed at all the things we're able to offer already. So it's a one-stop shop now is a portfolio. We had our first customer -- I wouldn't call it a full audit, but a great tour and partial audit of our new factory, and they were blown away. So...

Jacob Johnson -- Stephens -- Analyst

Got it. That makes sense. I guess maybe, Chuck, the natural follow-up to that, I guess, you've got the capabilities you have today, but it seems to me, you'd probably like to add to that at some point. Can you just talk about your thoughts on adding cell and gene therapy capabilities, the potential to do that organically and maybe thoughts on inorganic efforts there as well.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Well, I think -- there is the antibody side, we're going to continue to build out. We just talked about the launch of the medium. We definitely are looking beyond T cell into NK. So there's a lot of expansion just in the therapeutic side. I think instrumentation wise, we're in a great shape. It's amazing. We've had over $2 million of revenue this quarter in Simple Plex being designed into, call it, QC type of applications for cell and gene therapy. So -- and Maurice is going to be used in purity as expected. So we've got a lot going there. There we don't have everything. I mean the nonviral future that we're trying to be part of will use -- we'll use electroporation. We do not have an electroporation partner at this point. We're using -- we're kind of ubiquitous. We have our favorites, but there's more than one out there that be an area. I think there's always room for more spatial interrogation. I think we have RNA scope, and that will be used.

But I think with the right automation, we can probably get into the production side of that and QC side. So there's a few spots we're looking at. But we've got a lot of it covered. And with great partners like Wilson Wolf for bioreactors, who have hundreds of customers and the new Q platform from Fresenius, which we think outdoes the competition on all fronts. I think it's going to be an amazing future. And hopefully, we'll be talking about billions in revenue in a few years, not just hundreds of millions.

Jacob Johnson -- Stephens -- Analyst

All right. I'll leave it at that point. Thanks, Chuck.

Operator

Our next question is from Alex Nowak of Craig-Hallum. Please proceed with your question.

Alex Nowak -- Craig-Hallum -- Analyst

Great. Good morning everyone. Chuck, as we reached the end of the calendar here, what are you hearing beyond the U.S. about life science budget next year, specifically thinking Europe and China? Any reason to suspect of slowdown? Or are these budgets as strong as ever?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

We're not hearing anything negative yet. I mean Europe, you saw our numbers over 20% growth. It seems to be really good country by country. We're kind of through all the Brexit stuff. We're opening up an entirely new warehouse facility in Dublin. We're going to be probably seeing some tax savings and other mainland Europe type of changes going forward. It will help us. Asia is really good in all fronts, except India. India even is dramatically good for what trouble they're still in. Japan is stable. Korea is growing well. Southeast is really back on track, better going to spend a while in China, and we talked about the number they're kind of off the charts. We're in the China's second year now going into their five-year plan, which is usually a big spend year. So for the next couple of years, it should be a big spending in China. And we'll see.

Alex Nowak -- Craig-Hallum -- Analyst

No, that's good. And now that Matt McManus has been -- you've just had the ExosomeDx and then the Asuragen business now under him through this new molecular diagnostics unit. Has him or the team recommended any changes to the ExosomeDx sales strategy with either EPI or the upcoming test here on ExoTRU? Any push to kit those tests? Or were there any changes to the pipeline focus?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Not really, no. I mean they provide incredible help for us on the regulatory side as well as kitting, which you saw us mention, that you saw us mention two CLIA labs, not one because they have one too. You saw us mention the Center of Excellence. So that really is implying partners. So we're going to be able to focus on a lot more call them indications, different tests because this is a platform, not a one-trick pony. And we're going to be doing some ourselves, and we're going to be going in parallel with other partners and other channels. So those negotiations, those relationships are well underway in forming and new ones happen. There's a lot of interest in all these things we're talking about, and I think it's going to be an amazing future. So -- and that's the right guy.

Alex Nowak -- Craig-Hallum -- Analyst

No, got it. And I understand you're not shipping stuff via both to your customers. But I guess at the customer level on the supply chain, is there anything that's getting short basic materials and obviously labor that would cause maybe your customers to see a slowdown and thus push a slowdown up to you?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Well, it is incredible growth we've been seeing in the last few quarters, our biggest issue has been labor, for sure. It's hiring. And it's -- and we've made some -- we've made improvements. We're catching up, but we keep seeing 20-plus percent growth, which we'd love to see. We've got to stay in the game here on that first. In terms of supplies, we put the word out early on, and we're not making cars here, right? So it's the supply chain issues aren't that complicated. Our instrumentation, I think we've looked into -- are we going to see a chip shortage or something like that. Well, again, we're making hundreds of a certain instrument per year. It's not thousand. So it's not too big a deal. And these are not million dollar instruments either. These are great product tools that are roughly $100,000 to $50,000 in that range. So it's doable. Not to say we won't see a problem next quarter or whatever. I mean if things don't start getting better, the mundane things like labels and paint and chassis and everything else, but we're staying on it. All we can say is we had no issue last quarter, and we don't foresee a problem this quarter, but you can't promise everything. We'll see.

Jim Hippel -- Executive Vice President-Chief Financial Officer

Chuck, if I could add from our customers' perspective, one of the things we keep an eye on is our daily sales of our reagents. And we talked about our core reagents, proteins, antibodies, we're up 20% year-over-year. So that's a good indication of the activity that's going on in our customers' labs. So it doesn't appear as though any supply chain issues are slowing them down.

Alex Nowak -- Craig-Hallum -- Analyst

That's great. Thank you. Appreciate it.

Operator

Our next question is from Catherine Schulte of Baird. Please proceed with your question.

Catherine Schulte -- Baird -- Analyst

Hey guys. Congrats on the quarter and thanks for the question. I guess first on ExoTRU. Have you made a decision on whether you'll commercialize the test on your own versus finding a partner there? And then I believe your previous target have been to launch it in calendar year '21. So is that still the plan? And if not, what's driving the delay there?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Yes. It's going to be close to calendar year. I think it's possible. I mean, it all comes down to the LDT and there isn't anything regulatory-wise we have to really commit to now, it's just working with NGS. So it's anyone's guess. So we're kind of ready to go. There's a -- we have the second study being written. Now the data has all been collected. So we're off and running on more data than we need to launch. On the partnership front, there's been a lot of interest, so we're kind of -- to be honest, we're kind of waiting through the interest here and seeing what makes sense from us strategically as well as business-wise, but good chance it could happen but stay tuned.

Catherine Schulte -- Baird -- Analyst

And then you talked a bit about government funding for life science research, but if we think about the pharma and biotech side of the business, we've seen robust funding over the last couple of years, but some volatility in biotech financing over the last few months. So what's your outlook for that end market? And how much of that is driven by what we see on the biotech financing side?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

We -- it was a tremendous quarter, and that's been followed up by previous tremendous quarter. I think everything from vaccine makers to biotechs in general, there's been big demand. We had roughly flat on COVID, but there's a lot of halo still coming off of all that. It's creating more investment opportunities by all of biotech, biopharma. And we're participating all that because we work on all levels of the food chain in those businesses. So it's been good for us. I mean, you don't have to look any further, you have 20% growth in proteins and antibodies, doesn't get more fundamental than that to just prove that the funding is strong. I should make a comment to that -- our digital strategies are also continue to work and work really well. We had -- just in our antibody channels alone, we had in our Novus brand, over 50% year-on-year traffic increases in our R&D Systems brand, our premier products, 75% year-over-year traffic increases on our websites. That's pretty amazing. That's why we're taking share.

Operator

Our next question is from Patrick Donnelly of Citi. Please proceed with your question.

Patrick Donnelly -- Citi -- Analyst

Hey, guys. Thanks for taking the questions. Chuck, you touched a little bit on kind of some of the inflationary pressures, labor, etc. Jim, I was wondering if you could just talk through kind of the moving pieces on the margin side as we work through the rest of the year between again, some of the rising costs, Exo and then, obviously, again, you guys pushing some of that price over to the customers. I just want to make sure we talk through that.

Jim Hippel -- Executive Vice President-Chief Financial Officer

Yes. On the inflationary aspect of it, we're trying to manage that through a combination of productivity as well as selective price increases. So we're not necessarily forecasting any margin pressure as a result of that. You may recall last quarter when I talked about the margin view for this fiscal '22, we said initially that we expected a sequential hit to our margins. I think I messaged roughly a percentage point due to the acquisition of the Asuragen and roughly a percentage point due to getting caught up in our hiring for strategic growth, and that was going to impact us in the first half of the year. And given that we did make some successes around hiring, we didn't go -- we didn't hire as much as we had planned.

And therefore, actually, our margin was better than we internally thought it would be for Q1. And we think we will catch up in Q2. So I think the message that I left you with at the end of last quarter is the same in that by the time we get to the end of the first half of this fiscal year, we're expecting our year-over-year margin to be down roughly two percentage points. One, one point as a result of Asuragen and another point as a result of strategic growth investments, but then that to start to rapidly recover in the second half of the year. So by the time we get to the end of Q4, we think we'll be year-over-year pretty comparable.

Patrick Donnelly -- Citi -- Analyst

Okay. That's helpful. And then, Chuck, just on the Exo side, encouraging to hear about the volume recovery there, sales seems like it's -- the reps are simple to get into the dots. Where do you think we are there in terms of the recovery? What are you hearing from customers. Again, as the pandemic hopefully lifts, I just want to talk through expectations on that front.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Well, it's coming back fast, especially this quarter. I mean we had 1,700 docs order last year with about 2/3 on a reorder rate. And already this year, this fiscal year-to-date, one quarter in, we're over 1,100. So it's really picking up steam. And we see that really from just more customer touch. The reps are being like that back in. If the reps aren't seeing the docs, it's hard to get orders. It's just that simple. And the patients have got to be seeing them and getting PSA test, so there's something to talk about. So it's all coming back pretty quickly. So I still think we're really in early innings here. It's just getting started. And there is like 15,000, 20,000 different docs out there. So we're really addressing at 20%.

So it's just a matter of getting it going, and managing dilution, which we're doing a really good job of. And Matt and the team are going to be helping a lot as well, and there's leverage there. So that's also probably part of the improvement already in the quarter just by the McManus team taking over. But stay tuned. We're really excited. We got one out there going ramping ExoTRU ready to come and we're in discussions on a bunch more that we are doing and can do. And it's an amazing technology, and it's way more predictive than cell for DNA, way more upstream.

Patrick Donnelly -- Citi -- Analyst

Great. Thanks, Chuck.

Operator

[Operator Instructions] Our next question is from Paul Knight of KeyBanc Capital Markets. Please proceed with your question.

Paul Knight -- KeyBanc Capital Markets -- Analyst

Chuck, when you see customers gain, let's call it, maturity at your GMP protein production facility, what do you think the average size will be?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

For a customer?

Paul Knight -- KeyBanc Capital Markets -- Analyst

Yes.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

For -- well, I can tell you right now, it's hard for them to forecast. And so we've done our contracting in terms of percentages. So the deals we put in place, which are quite a few at this point, as they get beyond clinical and go into production, we are contracted to receive 95% of the volume they need. This is such a critical area. They're always going to have backups. And we're going to need back up for some probably as well, but that's good. Most have come in with the requirements before they get started with us, and they range from between $10 million a year annualized per protein all the way to a couple over $50 million. Of course, this is for them getting through their clinicals and surviving and meeting their sales forecast, of course. But this is orders of magnitude beyond proteins for RUO, right? So I don't think you'll see anything in production of a therapeutic for probably less than $1 million per protein, to be honest. So...

Paul Knight -- KeyBanc Capital Markets -- Analyst

And these customers are what, starting out at preclinical, Chuck?

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Most of these are preclinical, some in clinical at this point, but we're at a couple of dozen in. We're being looked at by our scale-ready partners. As an example, Wilson Wolf bioreactor is becoming a de facto standard. It's in well over couple of hundred different accounts out there in clinicals. And they're out there putting pressure and talking to their customers about, you know, if you just use the proteins from Bio-Techne, we can actually deliver them already encapsulated ready to be reconstituted in the bioreactor. So it takes a bunch of risk and a bunch of cost off the table for you. And their eyes are lighting up. So we're getting that process going. It will take a year or two, but that's the kind of opportunity we have by being part of scale-ready.

Paul Knight -- KeyBanc Capital Markets -- Analyst

Okay. And then what's your read on the mRNA market, a number of candidates, customer interest, whatever metric you see or feel since we've had, obviously, the COVID vaccine success.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Well, if you landed Moderna, there'd be 20 different drugs are working on that are going to use mRNA, right? So good for Maravai. They've landed a great -- they've been in the right place at the right time, and they have a great product and they've got CAP technology IP to get around. So mRNA is probably tougher for the rest that's out there than plasmids per se. But we're working on all of these. I think in a couple of years, we'll be in all this stuff at some level. It's not rocket science. It is right down our alley. So it's just a matter of investment in going. Now if we were to get large in mRNA to the same kind of vision that we're talking about with proteins, we would need another factory the size we have now. So it would take some investment. But first things first, it's to make sure we have the science right and we get around the IP and we have working product, and then we'll do what we need to do.

Paul Knight -- KeyBanc Capital Markets -- Analyst

Yeah. Okay thanks.

Operator

We have reached the end of the question-and-answer session. I will now turn the call back over to Chuck Kummeth for closing remarks.

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Well, thanks, everyone. It was a great start to our year, love seeing over 20% organic growth, as always, I'm sure you do as well. We look forward to next quarter and hope we can keep it all going. Thanks again. Bye.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

David Clair -- Investor Relations

Charles (Chuck) Kummeth -- President And Chief Executive Officer

Jim Hippel -- Executive Vice President-Chief Financial Officer

Puneet Souda -- SVB Leerink -- Analyst

Dan Arias -- Stifel -- Analyst

Jacob Johnson -- Stephens -- Analyst

Alex Nowak -- Craig-Hallum -- Analyst

Catherine Schulte -- Baird -- Analyst

Patrick Donnelly -- Citi -- Analyst

Paul Knight -- KeyBanc Capital Markets -- Analyst

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