Bio-Techne Corp (TECH) 2014 Q1 法說會逐字稿

Good morning and welcome to the Techne Corporation's earnings conference call for the first quarter of its the fiscal year 2014. Hosting the call today is Chuck Kummeth, Chief Executive Officer of the Techne Corporation. At this time, all participants may have been placed in a listen-only line and the floor will be open for questions following the Management's prepared remarks. It is now my pleasure to introduce Mr. Chuck Kummeth.

Thank you, Alicia, and welcome to Techne Corporation's first ever quarterly conference call. Today we will discuss earnings results for the first quarter fiscal 2014 that were released during this morning. Greg Nelson, the Company's Chief Financial Officer is with me on the call today. Our plan this morning as for Greg to provide a review of the financial results for the first fiscal quarter 2014 and I will then address several topics be open for questions. Greg?

Before discussing the financial details for the quarter, allow me to remind you that some of the statements made during this conference call may be considered forward-looking statements. The Company's 10-K for fiscal year 2013 and 10-Q that will be filed for the fiscal quarter ended September 30, 2013, identify certain factors that could cause the Company's actual results to differ materially from those projected in any forward-looking statements made this morning. The Company does not undertake to update any forward-looking statements as a result of the new information or future events or developments. The 10-K and 10-Q, as well as the Company's other SEC filings are available through the Company or online. 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 measurements are available in the Company's press release issued earlier this morning or on the Techne Corporation website at www.techne-corp.com.

Sales as reported increased 14.2% to $85.7 million for the quarter ended September 30, 2013. Organic sales increased 5.1% for the quarter. These organic sales exclude $6.2 million of Bionostic product sales and $610,000 of favorable foreign currency exchange fluctuations. The Bionostics acquisition was completed in July 2013. Adjusted earnings were $30.7 million or $0.83 per share for the first quarter of 2014 and 11.6% increase over adjusted EPS of $0.75 for the first fiscal quarter of 2013. Adjusted earnings and adjusted earnings per share exclude intangible asset amortization, costs recognized upon the sale of inventory that was written up to fair value as part of the acquisitions, and professional fees related to the Bionostics acquisition.

The Company operates two reportable segments based on the nature of its products. Our largest segment is the Biotechnology segment; a segment that develops, manufactures and sells biotechnology research and diagnostic products worldwide. This segment includes R&D Systems, Biotechnology Division, R&D Europe, Tocris, R&D China, BiosPacific and Boston Biochem. The Biotechnology segment sales were $73.2 million for the quarter ended September 30, 2013, an increase of 4.4% after adjustments for foreign currency exchange rate fluctuations.

Our second segment is now called Clinical Controls; a segment we previously referred to as the hematology segment. The segment develops, manufactures, controls and calibrators for world wide sale. The Clinical Control segment now includes sales made through R&D Systems, Clinical Controls Division, and the newly acquired Bionostics. Clinical controls sales for the quarter ended September 30, 2013 were $12.5 million. The sales growth for the quarter ended September 30, 2013 was 13.3%, sales of Bionostics products are excluded. This increase was mainly the result of the timing of shipments at both the beginning and end of the quarter.

A couple of comments regarding key Biotechnology segment customer and geographies may be helpful. About 55% of our Biotech sales are generated in the United States. The two largest US customer groups are the industrial market, which includes pharmaceutical and biotechnology companies of all sizes, and the academic research market. Sales to US industrial pharmaceutical and biotech customers increased by 6.3% in the quarter ended September 30, 2013, as compared to the same period last year. We have now experienced improving sales from these US customers during each of the past three quarters. We expect and hope that these customers will continue their commitment to research investment.

Sales to US academic customers declined 11.8% during the quarter ended September 30, 2013, as compared to the same period last year. This is the ninth straight quarter of sales declines in this customer segment. As you all know, the US academic market is highly dependent on funding from the National Institute of Health. Unfortunately, sequestration moved from a threat to reality last March 31, requiring 8% cut across the NIH budget. The recent government shutdown compounded this situation. We don't know how long this will last, but what is known is that the destruction and angst in the academic research labs will remain high until there's clarity regarding the NIH budget.

Europe is our other major Biotech market. About 28% of Biotech sales are derived from this continent. Like the US, the major customer groups in Europe are the academic market and pharma and biotech companies. Organic growth in Europe, which excludes the impact of foreign currency fluctuations, was 1.5% in the quarter. This was a slight improvement following basically flat sales in fiscal 2013 and declines in each quarter of fiscal 2012. European academic sales were relatively flat during the quarter, with sales growth being derived from biotech and mid-sized pharma customers. Germany, again, showed sales growth in the quarter with slight sales declines being experienced in the UK and France.

Sales in China increased by 38% in the quarter ended September 30, 2013, as compared to the same period last year. Our China presence has been growing at about 20% or more for each year since we established an operation there in fiscal 2006. This growth improved dramatically in the most recent quarter, due to an expanded sales staff and a relatively small base of business. China now generates about 6% of consolidated sales. Although this is relatively small a China presence is important to our strategy of global reach and growth.

Pacific Rim sales increased by almost 14% in the quarter ended September 30, 2013, as compared to the same period last year. The first quarter strength is due to comparison against a weak first quarter a year ago and the emphasis we are placing on Asia sales growth. About 9% of our biotech sales are generated in the Pacific Rim, solely through distribution partners. Japan, Korea and Taiwan are the leading countries in this geography. Gross margins adjusted for cost recognized upon the sale of acquired inventory and amortization of intangible assets were 74.4% and 76.8% for the quarters ended September 30, 2013 and 2012, respectively. The decrease in adjusted gross margins for the quarter was primarily caused by a change in product mix from higher margin biotechnology segment sales to clinical controls segment sales as a result of the Bionostics acquisition. The impact of the medical device excise tax also slightly reduced gross profit margin.

Selling, general, and administrative expenses for the quarter ended September 30, 2013 increased $3.7 million from the quarter ended September 30, 2012. Selling, general, and administrative expenses for the quarter included $532,000 of professional fees related to the acquisition of Bionostics, $1.1 million of selling, general and administrative expenses by Bionostics after the acquisition date, and an increase in intangible assets amortization of $736,000 related to this acquisition. The remaining increase in selling, general, and administrative expenses for the quarter ended September 30, 2013 was mainly the result of increased executive compensation and additional sales staff added since the first quarter of fiscal 2013. Research and development expenses for the quarter ended September 30, 2013, increased $250,000 or 3.3% from the quarter ended September 30, 2012, mainly due to research and development expenses by Bionostics. Effective tax rate for the quarter ended September 30, 2013 was 30.8% compared to 32.4% for the same period last year. The decrease in effective tax rate was primarily the result of decreased tax rates in the UK and the increased percentage of pretax income from foreign operations, which have lower income tax rates than the US.

I will conclude today's financial discussion with a few balance sheet and cash flow comments. At September 30, 2013, Techne has $323 million of cash and available for sale investments and had no debt. We generated $32.6 million from operations in the quarter ended September 30, 2013. This is an 11% increase over the $29.3 million of cash generated from operations in the comparable prior year quarter. We used $103 million for the Bionostics acquisition, $11 million was returned to shareholders in the form of dividends and $3.8 million was invested in capital expenditures.

The available for sale investments also declined $54 million due to a decline in ChemoCentryx market gap. A couple of months ago, ChemoCentryx learned of some less than desired clinical results which negatively impacted their market valuation. We view this as temporary and maintain confidence in ChemoCentryx due to the multiple compounds they are developing. This is an investment we believe and hope will yield additional returns in future years. I will now turn the program back to Chuck Kummeth for his additional comments and observations.

Thanks, Greg. One of the most important aspects of our third quarter results is that the 5.1% organic sales growth is the largest -- highest level sales growth since the June quarter of 2011. This adjusts strategic planning unveiled in late September found (inaudible) intangible results. I would like to add a few supplemental comments regarding our financial results for the first quarter fiscal 2014, and the markets we serve. I will also make a few comments regarding our product offerings and a couple regarding the progress we are making with our strategic plans.

The US, European, and Asian markets all have very different market dynamics and are also working different economic environments. As Greg discussed, we are gaining traction in the US pharma and biotech markets but are facing difficult pressures in the US academic arena. Thousands of large and small pharmaceutical and biotech companies comprise the commercial portion of our North American sales. The largest of these company's have continued to refine their business models, including plant closures, staff restructuring and outsourcing. As we stated in our late September strategy call, we believe customers have the need for innovative new products and further believe investments in research is the key to long-term success (inaudible). At that time, we projected this customer group could reasonably expand at a low single-digit growth rate, the first quarter sales growth of this customer segment confirms our expectation.

(inaudible) sales for our US academic customers have been declining due to uncertainty regarding levels of sustainability of academic funding. A major portion of the US academic research funding is provided by the National Institute of Health. There is a widespread perception that NIH money is relatively protected in the Federal budget process. However, the arbitrary cuts of sequestration and the recent government shutdown -- Again, researchers are reasonably cautious in their spending. We expect the sales to this group of customers will be under severe pressure in the near future.

The pharma and biotech industries in Europe are also having difficulty, especially larger companies. Plant closures, restructuring, and movements to (inaudible) Asia or India have lessened growth in this sector. We have [anniversaried] many of these changes and in late September we believe -- we stated we believe these customers will begin showing single digit sales growth. This is also confirmed by our most recent quarterly results. However, we also expect our European academic customer segment to grow in the low single digits. Sales to this customer group were actually relatively flat in the quarter. Weakness in the financial health of various country governments in Europe has been detrimental because of these administrations (inaudible) of funding.

As we also articulated in late September our best growth opportunity in China and the Pacific Rim where research is expanding at a very rapid rate. We expect overall customer growth in these regions will be in the high single digits to double digits during fiscal 2014. We exceeded these expectations in the first quarter and continue believe we are underrepresented in these countries. This geography is the key to our growth strategy. We have already begun to be more aggressive in our commercial strategies for the addition of sales leadership and staff in both the US and Asia. We have seen an initial value of these investments and believe there will be additional value occurring in future quarters.

Our sales growth in all markets and geographies is highly dependent on the breadth and depth of our product offerings. Proteins build the foundation for the product portfolio. We have a leadership position with our bioactive protein products and our strategy is to build on this leadership position in the protein area through product improvement and innovation. We will also continue to focus on new protein product introductions which are at the leading edge of new research. We are in the early stages of developing (inaudible) [opinion leader] to help address this. We are also early and a plan to place greater emphasis on GNP products as tools of potential interest to the pre-clinical research community. These strategies are important since high-quality proteins are the key to generation of good antibodies and reliable amino acids.

While we are making progress in proteins, much work remains in the antibody and immunoassay areas. The antibody market is very competitive. However, we are in a good position to take advantage of our unique portfolio of bioactive proteins by developing products which have applications of significant competitive advantage specifically related to the immunoassay (inaudible). We will continue our emphasis in launching new (inaudible) grade antibodies which are likely to have utility in a variety of testing platforms.

We also excel at developing high quality immunoassay kits which have become reference standards for new technologies, but also have more work to accomplish in this area. We are striving to retain our leadership position in immunoassay markets with continued development of traditional immunoassay products while simultaneously looking to identify technology platforms which can best leverage our portfolio of antibody content. Partnerships and/or acquisitions may allow us (inaudible) these technologies. More aggressive OEM and outsourcing relationships are also possibilities.

My final prepared comments relate to our improved operational activities. We organized our Research, Development and Operational function and have also already begun to create more structure around our operations. Launching over 1,500 new products a year is difficult and hopefully new organizational structure will reduce this complexity and improve prioritization of the product pipeline. These changes should improve our output and innovation. Better balancing our resources with our priorities will hopefully commercialize more impactful products as well. These changes required a lot of work on part of the Management team and I'm extremely proud of the solutions we have found to improve our business. This leadership is now being powered and held accountable to a greater degree in accretive time. They were also (inaudible) technology and value of contributions to making the Company a success.

In conclusion, Techne is continuing to focus on the operating discipline, balance sheet and cash flow needed to fund our growth and continue return cash to shareholders, as appropriate. We will also be strengthening our growth program and selected discipline acquisitions that will enhance our sales growth rate. Our first quarter results reflect that we are successfully beginning to implement our strategic plan to accelerate sales growth. We will now turn the program back to our moderator and entertain questions and comments. Thank you.

(Operator Instructions)

Stephen Crowley, Craig-Hallum.

Good morning, gentlemen. Congratulations on the excellent start to the fiscal year. And thank you for doing this call. It is of high-value add to us.

In terms of a couple of questions. You high spotted or actually hit on a couple of the highlights of the performance. China with a significant acceleration. US with a nice acceleration. Can you talk to us about what you've done with the sales and marketing infrastructure in both of those geographies and whether you think some of that investment is already being reflected in payback this quarter? Or, whether or not that's really in front of us?

Thanks, Stephen. Thanks for your comments. We are happy to do this and will try to continue as we go on.

As I mentioned, we have made investments in the four major quarters of the country. We started very early, from my coming on board and they started producing quite quickly. They are not all producing. We didn't hire all at the same time. There is enough data to show that it is working to some degree now. One quarter -- one data point doesn't make a trend or anything else. But we like what we are seeing.

I think things change. I think it's time for having more feet in the street right at the customer site. I think it's the right way to go. Same thing goes for Asia and China, in particular, we more than doubled our sales force in China over the last few months. We opened an office in Beijing.

As then as you know, that's been 38% growth; quite a bit higher than 20%. Again, it's a small basis, as Greg pointed out. It's the beginning of the right track. I think it will continue higher than 20% and hopefully at the level it's at currently. And maybe even more. We are not done investing in the commercial side in China, as well.

In Europe, we really are more doing an update -- we have more or less field sales model in Europe and it's actually working quite well.

In terms of the US, and the opportunity to influence the sales line -- in these geographies, where you put, from what it sounds like, relatively senior salespeople, is it getting deeper into the larger accounts and cross-selling? Or, is it getting to the second and third tier customers that you haven't been able, always, to effectively get to in the past?

(Inaudible). These are rock stars we hired. These are very senior, experienced people that could hit the ground running. That knew our products, knew the market, knew to the customers -- knew all our key customers in these regions. So, the territories have been a little bit split between how we handle them from here in Minneapolis to now local, but also allowing more room for that prospecting element that we was missing in the local regions. There are a lot of [feeder] companies in biotech and second-tier and even all the call points in major institutions, quite frankly, I'm not sure we are addressing them all. It will be a team approach and with having a front edge here right at the territory. More a classical model, I guess.

In terms of Asia Pacific, which also seemed to do well, my sense is you brought on some resources to more actively structure and manage distribution in those markets. Can you talk to us a little bit about how you are operating differently in those markets?

Well, if we get larger, we will bring on more infrastructure. We do keep inventory in China. And we are looking at investing in (inaudible) and other tax-free zones to supplement our growth and take care of on-time delivery concerns and metrics that I'm used to doing. As we move forward, there, I think it's a little bit slower (inaudible) than the US, because we are hiring a little bit younger people. As you know, attrition is higher in China, just by definition. So, it's a little more interesting. But, we are also moving more aggressively and doubling of the workforce and six months is a pretty good start, in terms of grabbing it. So, I think as we get bigger, we will have to back it up with other infrastructure. Right now, it's going pretty well.

All right. Just want to follow-up and then I will jump in the queue. In terms of -- that question was actually more geared to some of those other international markets, the Asia Pacific distribution served community, Korea, Japan, some of your other markets. And what you may be able to do to pull that lever harder.

Okay. I get you. So, yes, up until recently, we were managing all our distribution from Minneapolis. To all different countries in Asia. So now, we've hired some resources that are actually located in the region, actually living in Singapore, that will manage distributors and this is the right way to go, we feel. Is to be closely involved with them, working with them on their metrics, their business plans, objectives, their targets and their results, month-on-month.

Excellent. Thanks again for taking the questions.

Sam Jones, Citigroup. Hello, Sam with Citigroup, your line is open.

Amanda Murphy, William Blair.

Hi. Thanks. So, thanks for all the commentary around the various business lines. I'm curious and I'm not sure if you are willing to do this, but are you able to quantify, to some degree, the growth rates in the various -- the three main business lines between protein, antibodies and amino acids?

We don't disclose those, Amanda. We appreciate the question. But we don't disclose those at this time.

Okay. Fair enough. Then, in terms of the sales reps that you added in the US -- I think we've talked before about how productive the reps are that you have already in-house. I guess my question is, how much do expect these new reps to add per rep, over time. And also, is there room or are you planning on adding more reps in the US? I know you said that ultimately you will expand in China, but I didn't catch if you said that you were still looking to add in the US, as well.

We went more than a couple decades of actually nobody in the field with an inside model. It worked very well, because the content was just so good and is so important and so well-recognized. There is more competition. We are moving with the times. We will have these people, these very senior players in key markets. I can think of a couple more and certainly (inaudible) more to think about in some other areas.

As we add more, I think it will depend on how they do produce and how we measure the gap. There's no better way to find growth than to sell more of the stuff you have, because you have a coverage gap and we have to be very, I think, vigilant with our customers in these regions to see if we aren't getting around the loop. We're seeing good progress. It's definitely good progress, and that's one quarter. We will see how it goes. We are also very cognizant that we are aware of our margins and we are not going to over-invest too quickly. We will invest, but pace ourselves.

And then, another thing that you've talked about is expanding the product menu through in-sourcing, whatnot. Just curious how we should think over time. Is that something you are looking to do near term? Or are you trying to maximize your current content, initially?

We are going to stay focused on our core. What we know how to do. We launched over 2,000 products last year. I'm not saying that's the right number. I think there is a bit of prioritization in some work we're doing here. I have talked to you and others -- on the line here -- about the need for a KOL strategy to be working more, collaborating with the leading edge of technology. And made [us in front] in our field with key people out there in the industry. We are doing that. So far, this year, we are on track. We are roughly spin about 300 or so products a quarter -- we're about there. We run usually about 50 or so proteins a quarter and that's kind of where we are at.

I'm looking for more impactful things, as you also know. This is a very interesting field when it comes to products. You don't have $100 million runners or anything. (inaudible) So, we are trying to -- I think the strategy work with KOLs and customers to really find where the leading edge is going. To find what more impactful, more highly sought molecules will be is what we are going at in that area. This extends beyond proteins, of course into antibodies and amino acids.

We are doing a lot of new things coming up in the aciding kit. So I think you will think they're quite a bit a good thing, we launch later this year. And stay tuned. I think innovation is going to be in the upswing, here. I think it has to be for a technology like this, to stay a leader.

Last one on gross margin. You talked about the mix, which I appreciate. How should we think about margin, gross margin, over the next year or so? Do expect it to stay kind of stable at this point? Or, should we expect it to continue to tick down a little bit?

It will probably remain at about the adjusted level, Amanda. About 2% of the impact was related to Bionostics. A little bit of medical devices tax impact. So, the adjusted margin should be about there. There could be some deceleration of the add back and charge from the step ups. But on an adjusted basis, should remain about the same.

Got it. Thanks very much.

Dan Leonard of Leerink Swann.

Hi. Good morning. And this is Justin on for Dan. Just wanted to follow-up on impact. That was really strong in the quarter. I know that you guys have made some investments over there. I was just curious if you think that rate of growth is sustainable?

I think it is. But again, it's a 6% base for us right now. So, being small, we should be able to improve by adding the sales force we are. We've been a very conservative company in the past and we're we are trying to get more in the game here. How far that goes, I don't know. I am hoping it won't drop back to the 20s. I think we are going to be over the 50s going forward. It's too hard to pinpoint to one quarter.

We are very happy with 38% in China and 14% for Pac Rim. That's right on track for what I kind of wanted by any additions that we made.

And, OpEx -- that came in better than what we'd been looking for, as well. Maybe your thoughts on the sustainability of kind of that and kind of juxtaposed with the pacing and potential impact of those OEM and partnership initiatives you mentioned.

I'm not sure I get you. I think, in terms of OEM relationships going forward?

Yes. So I guess maybe what we should look for in terms of timing about some of those relationships and then where we might see the impact of that. Whether it shows up in gross margin or in OpEx, or --

We are in the early stages of considering those opportunities. So it is difficult for us to comment on the impact. But, we view those as other channels of distribution. So, the impact, if any, if we pursue that, would be in gross margins.

The other relationships I mentioned, already focused on the KOLs, key opinion leader, kind of things. Which will be more about innovation and finding more highly impactful products sooner rather than just using serendipity or whatever.

Understand. Congrats again. Thank you.

Thanks, Justin.

Jeff Elliott, Baird.

Good morning and thanks for all the color. I wanted to dig in on the academic and government segment a little bit more. Obviously, you faced some headwinds from the government shutdown. Can you help us understand how big those headwinds were? And maybe talk about the pacing you saw during the fiscal 1Q and any commentary you could provide an the second quarter would be helpful.

I will start and maybe Greg wants to finish up with this one. We try to put as much color in our remarks as we could. With the dramatic cutbacks at NIH, it's clear things are going to be about the way they have been. We are only one quarter or two away, we hope, from kind of the comparable year-on-year. We all thought it kind of bottomed out, right, and then the government went into shutdown. We know, it definitely compounded things for us late in the quarter, here.

We are not hearing it's going to affect forward grant cycle. There were rumors that it might. We don't know for sure, right now. As long as the grant cycle aren't affected going forward, we should be bottomed out. We should coming out of [these comps is] our hope. Being at that minus 10% or so is kind of about where we've been. It's kind of about what we expected.

We certainly compensated in all the other industrial sides of the house -- pharm and biotech. It's just come to a point where we've gone out a lot ourselves, talked to customers. They are not stocking. They're being very careful with their purchases. They don't know what's coming, so they are being really watchful in their experiments and they are not over buying. They are not stocking up. They're holding back. They're being told to cut back. They probably are experimenting with some other lower price competitive situations, as well. All of the above.

But, we don't see it getting any worse and hopefully we will be developing our strategy. And I think also having the stronger commercial reach by having people in the field is also going to help us with that endeavor, as well.

Could you remind us of your NIH exposure? Also, in the past, you talked about perhaps implementing a new pricing initiative. Wondering if you've made progress there that you can share with us today?

We don't have progress to share today in pricing. But, and I'm a consumables guy, we'll do what we have to do on pricing. On top and bottom. We are in the middle of stratifying our very extensive portfolio right now to figure out -- just whether various -- what is there. In terms of what we disclose publicly, we are roughly 28% or so, something like that in US academic.

Yes. Of the biotech -- total biotech sales, biotech segment, 12% of that is from US academics.

Okay. Then, shifting over to the industrial pharma biotech. You did talk about the improvement there. You did mention some of the sequential improvement you've been seeing. Can you help us understand how much of the improvement that you are seeing is due to easing comps versus how much is really underlying improving fundamentals?

I think it's a combination of both. I don't know how to separate out the two pieces, Jeff.

Got it. Okay. All right. I will leave it at that.

Paul Knight, Janney Capital.

Hi, Greg. Historically, you've had a relatively flat level of sequential revenue. Will that be the nature of the business going forward? Or, does the acquisition make this a little different seasonality wise?

I think you've got two factors, as you look at Q2. The December quarter versus the September quarter. Historically, there will be a decline and I think we still expect that in the December quarter due to seasonality. We've got Thanksgiving and, obviously, the Christmas and New Year's break have impact. Especially on the biotech arena, where sales are directly tied to people that are at the bench.

Bionostics will add to that. If you recall, we had probably 10 weeks in the quarter, slightly less than a full quarter. So, we will have a full quarter there. But there is also some seasonality impact, there. A small decline, but a little bit of a pickup from Bionostics.

And then on the pharmaceutical side, was that -- can you talk to that market, Chuck, in the quarter? How was this pharma tracking a little better as the quarter wrapped up? Where are we on that market, excluding the biotech technology discussion?

I think that is probably on the side, we had some short-term impact from the extra reach we have commercially. The biotech/pharma, biopharma. Pharma is still consolidating as an industry. I think it is slowing down. I think there is renewed activity. We are not hearing anything major that's concerning us.

Looking forward, it's probably a better area for us for growth like we had this quarter than the academic side with those issues. Both here and in Europe.

Yes. And then lastly, in China, -- are these sales being targeted to the China Academy of Science? The academic network? Or, is that also including the private research sector?

It's all of the above, there. We are having dramatic growth there. I don't have a (inaudible) here for you which is in the lead. They are all significant and they are all good. There is just a lot of funding available in China.

Okay. Thank you.

I think the Beijing office being open has had a big impact. Something like 100 institutions in Beijing. We did have any presence at all. (inaudible)

Okay. Thank you.

Mike Seppelt, Evercore.

Hi. Thanks for taking my question. And congratulations on a good quarter. Can you speak to the ChemoCentryx investment and whether or not you plan on continuing to hold that longer-term? It's had a fair amount of volatility lately. Thank you.

Sure. We thought there might be a question on that one. We've had this investment for a long time. Something like 15 years. We certainly are all hoping that most of the pain is behind us and we are right on this. I've been out there and visited Tom. And they've been here. We've renewed a lot of our association -- the team is getting tighter again. They have a pipeline of 10 molecules and we are talking about a couple years that have gone a bit sideways with the big partner GSK.

All I can say, we are very supportive. We like what we hear. We like what we see. We are helping them. There's a lot more you can get off of their website and talking to them. They have a very, very good website and a lot of information on this. But they have a strong pipeline. I think the story is not over, there. We are kind of supportive and we are in a hold situation.

Thank you.

There are no more questions in queue.

Thank you.

Thank you.

Ladies and gentlemen, this does conclude the conference. You may all disconnect.