Bio-Techne Corp (TECH) 2015 Q2 法說會逐字稿

Good morning and welcome to the Bio-Techne earnings conference call for the second quarter of the fiscal year 2015. (Operator Instructions).

I would now like to turn the call over to Mr. Jim Hippel, Chief Financial Officer.

Good morning and thank you for joining us as we discuss the second-quarter results of fiscal year 2015. Also on the call this morning is Chuck Kummeth, Chief Executive Officer of Bio-Techne.

Before we begin, let me briefly cover our Safe Harbor Statement. Some of the remarks made during this conference call may be considered forward-looking statements. The Company's 10-K for fiscal year 2014 identified certain factors that could cause the Company's actual results to differ materially from those projected in the forward-looking statements made during this call. The Company does not undertake to update any forward-looking statements as a result of any new information or future events or developments. The 10-K, as well as the Company's other SEC filings, are available on the Company's website within its Investor Relations section.

During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to the most comparable GAAP measures are available in the Company's press release issued earlier this morning or on the Bio-Techne Corporation website at www.bio-techne.com.

One other item before we get started. As I mentioned last quarter, please note that the commentary today regarding the total Company's Q2 organic growth by end market and geography do not include the performance of protein platforms.

Now I'll turn the call over to Chuck.

Thanks, Jim, and good morning, everyone. Thank you for joining us today for our second-quarter earnings call. We continue to develop and implement our plan of moving our core organic growth into the mid-single digit range.

In Q2, I'm pleased to report that we achieved 4% organic growth. Equally important, the growth was widespread throughout the Company, growing organically in each of our major regions: North America, Europe and China in both of our major markets, biotech and pharma and academia governments, and each of our reportable business segments.

Of particular note, Europe returned organic growth, despite the currency headwinds and economic uncertainty that plagues the region in China, return to last year's track record of growing north of 25%, this despite the ongoing anticorruption audits being performed by the Chinese government that are still impacting the release of research funds there.

Here in North America, we continue to see steady improvements in our academia and government markets, achieving positive growth for the first time in many quarters. We believe this is the result of executing our strategies, including expanding our commercial reach by partnering with the Fisher channel, and second, launching fighter brands that offer more choice to these customers, both which are starting to take hold.

It is important to note that the R&D Systems brand remains the premiere brand under which we develop the highest quality in bioactive products which differentiate themselves from our fighter brand product line.

Always mindful of our bottom line, we also grew profitably in Q2 with both adjusted earnings and operating cash flows increasing by double digits in the second quarter over last year. Our core growth and operating margins continue to hold steady versus last year, even with the investments we continue to make in our people, our systems and our website that will enable us to support what we believe will be a much larger company in the future.

Speaking of our people, I'm extremely proud of the work they've done and continue to do to integrate our most recent acquisitions, realizing tremendous benefit for our customers and ultimately to our shareholders. These include but are not limited to our teams from PrimeGene, Novus and R&D Systems working together to align our brands and products into new offerings, giving the customer more choice in bioactive reagents and increasing the chance that their product needs will be supplied by Bio-Techne.

We continue to make good progress with our commercial partner, Fisher. Nine months ago when we launched the partnership, we received about 20 to 30 orders a day. It's now well into the hundreds. The market reach Fisher gives us is one key component in how we have moved to positive organic growth again in the academic and government segments.

Our teams from R&D Systems, ProteinSimple and Novus are developing the only antibodies that are qualified for use on the game-changing Simple Western platform. Since the acquisition, we have now qualified over 600 antibodies with a Simple Western platform and expect thousands more over the coming years.

Our teams from ProteinSimple, CyVek and R&D Systems are developing qualified assays to expand our commercial offering of solutions using our Simple Plex platform Ella, the recently rebranded immunoassay CyVek instrument. We are extremely excited by this platform and currently have over 50 assays developed and ready to commercialize of Ella.

Both ProteinSimple and CyVek teams are working aggressively to define manufacturing and commercial synergies that will accelerate the launch of Ella and thus immunoassay solutions for our customers. Again, binding content with instruments in a proven full solution for the customers is one of our core new strategies.

Also, our teams from both Novus and R&D systems continues to leverage their collective experience, IT and marketing resources to enhance the Bio-Techne web experience and e-commerce capability for our customers.

Our Clinical Controls division continues to meet our objectives both from a financial and product portfolio point of view. We consider Bionostics fully integrated at this point and now are turning our focus toward other acquisition synergies within the Biotech division.

Our employees are very busy executing the integration activities described, but busy with the purpose, admission and determination of building a great company that works together to provide unique and complete solutions to barriers our customers face in driving new life science discoveries and knowledge. This is what motivates us and what will drive us in achieving our long-term goals.

Before we turn the call over to our questions, I'll ask Jim to provide some details on the financials for the second quarter. Jim?

Thanks, Chuck. I will provide an overview of our Q2 financial performance for the total Company, and I'll provide some color on each of our three segments. Before I get into the details of our results, I want to address two events that occurred in the second quarter which materially impacts our financials as compared to the prior year.

The first event was the early November acquisition of CyVek, a company which we previously had a minority ownership position of just under 20%. Since this transaction was conducted in stages, Bio-Techne is required to remeasure our previously held equity interest in CyVek and at acquisition date fair value and recognize any resulting gain or loss in earnings.

Consequently, a gain of $8.3 million was triggered in the second quarter of fiscal 2015 as a result of the Company's purchase of the remaining 80% interest in CyVek. The fair market value was determined based on consideration paid in Q2 of $60 million, plus a potential earnout payment of up to $35 million based on CyVek attained certain revenue targets over the 30-month period following the closing.

This gain is not considered income for tax purposes. Thus, it drops straight to the bottom line net earnings for Q2 and positively impacted GAAP earnings per share by $0.22.

In our adjusted net earnings and adjusted EPS, we have removed the impact of this gain to allow for a more transparent comparison to historical results and a more helpful assessment of ongoing operating performance.

With regard to CyVek's operational results, these were included in Bio-Techne's consolidated financials for the months of November and December, and it impacted the Company's second-quarter GAAP reported EPS by a negative $0.03 and adjusted EPS by negative $0.02.

We expect this run rate to continue for the next several quarters as full-scale commercialization, manufacturing and services activities for the Simple Plex platform ramp up.

The second event that materially impacted Bio-Techne's financial results in Q2 was not Company specific, but rather the macro event of a strengthening US dollar that impacts many if not most companies that sell products outside the United States in local currencies.

As a reminder, approximately 28% of our Biotech segment revenues are generated in Europe and sold in European-based currencies. With the rapid rise of the US dollar versus these currencies in the second quarter, Bio-Techne faced headwinds that impacted revenue by negative 2% and EPS by negative $0.02 when compared to the second quarter of fiscal year 2014.

Assuming foreign exchange rates did not materially change from where they stand today, we expect the effect over the next several quarters compared to prior year to be approximately double the impact we had in Q2.

Now I will discuss the overall financial performance for the second quarter. We delivered a solid quarter, resulting in a 10% increase in adjusted earnings to $30.3 million with adjusted EPS of $0.82. Under GAAP, EPS was $0.89 in Q2 compared to $0.68 in Q2 of 2014 with the increase including the previously mentioned gain in our CyVek investment partially offset by other acquisition-related costs and amortization of intangibles.

On the top line, Q2 reported sales were $111.9 million, an increase of 33% year over year, and inorganic growth was 4%. Q2 sales included 31% from acquisitions and a negative 2% impact from foreign exchange.

By geography, North America increased in the low single digits organically. Biopharma sales were strong in North America with growth in the high single digits, while the academia government market experienced slight positive growth.

Europe grew organically in the low single digits with strong academic growth partially offset by research project timing in the regional biopharma market, particularly in Germany.

China experienced exceptional organic growth in the high 20s%, despite the ongoing Chinese government anticorruption auditing activities that are still in the release of research funds there. And the Pacific Rim growth was in the high single digits.

Moving on to the details of the P&L, total Company adjusted gross margin came in at 71% in Q2, down 170 basis points from the prior year due to the product mix change associated with the acquisitions of Novus and ProteinSimple in July. Excluding acquisitions, gross margins were essentially flat compared to last year.

Adjusted SG&A in Q2, excluding the impact of acquisitions, was 17.3% of revenue, approximately 140 basis points more than the prior year, driven by higher stock compensation expense. And R&D expense came in at 9% of revenue for the quarter, 40 basis points below the prior-year.

Looking at our results below operating income, net interest expense in Q2 was $256,000 compared to $545,000 of net interest income last year as a result of the line of credit that was opened in July to partially fund the acquisition of ProteinSimple and CyVek.

The other expense income line includes this net interest expense, as well as the $8.3 million gain recorded on our existing investment, CyVek, as explained in my opening comments.

Our adjusted effective tax rate in Q2 was 30.3%, down 100 basis points from the second quarter of last year, due to acquisition mix and tax planning activities. In terms of returning capital, we paid out $11.9 million in the form of dividends to our shareholders in the quarter.

Average diluted shares were 37,211,000 in Q2. That's up 283,000 shares or less than 1% from last year as a result of option dilution.

Turning to cash flow on the balance sheet, the headline number is $35.7 million of cash generated from operations for the second quarter. That's up 14% over the prior year. Our Q2 investment in capital expenditures was $3.1 million.

We ended the quarter with $140 million of cash and short-term available-for-sale investments, up $9 million sequentially from the end of Q1. The remainder of free cash flow from the quarter was mostly used to pay dividends and partially fund the acquisition of CyVek.

In conjunction with funding the CyVek acquisition, our outstanding line of credit increased from $112 million at the end of Q1 to $144 million at the end of Q2. And we also booked a $35 million long-term debt obligation with regards to the potential earnout payment for CyVek containing certain future revenue targets, which we view as likely to occur.

That wraps up my comments on the total Company performance for the second quarter. Now I'll walk you through the performance of each of our three business segments, starting with the Protein Platform segment, which now includes our recent acquisition of CyVek, in addition to ProteinSimple which was acquired last July.

In Q2 net sales for Protein Platforms were $20.3 million, although new to this segment and the total Company this year.

On a pro forma basis, assuming ProteinSimple and CyVek were owned for the entire quarter in both current and prior years, organic revenue for the Protein Platforms segment grew 33%. In the quarter, we saw extraordinary growth from both the biologics and Simple Western product line.

Simple Plex, the rebranded product line acquired via CyVek, reported nominal revenue in the second quarter as the marketing activities and commercial integration with ProteinSimple were preparing its flagship instrument, Ella, for a full-scale launch in Q3. Q2 adjusted operating margin for this segment was 17.6%.

As an independent company, ProteinSimple reported 11.8% adjusted operating margin in the quarter ended December 31, 2013.

Turning to the Biotechnology segment, Q2 net sales were $78 million with reported growth of 10% compared to last year and organic growth of 5%.

In the quarter, we had a recovery back to growth in the academic and government markets in both the US and Europe. The US biopharma market remains strong, and China's revenue accelerated back to growth rates we saw last year.

Adjusted operating income for this segment increased increased 3% in Q2, and adjusted operating margin was 50.3%, a decline of 375 basis points in prior year. The lower adjusted margin percentage is mostly attributable to a change in product mix associated with the acquisition of Novus, along with infrastructure investments.

Our Clinical Controls segment for Q2 net sales was $13.7 million with both reported and organic growth at 2% compared to last year. Revenue in Q2 was impacted by timing of a shipment to a large OEM customer. Year to date, organic growth is 6%, and this growth rate is more indicative of what we expect from this business segment over both the intermediate and longer-term.

Adjusted operating income for the segment was increased 4% in Q2, and adjusted operating margin was 27.9%, an increase of 50 basis points from the prior year.

That concludes my prepared comments. And with that, I'll turn the call over to the moderator to open the line for some questions.

(Operator Instructions). Paul Knight, Janney Capital.

Could you talk about the -- what was the adjusted op margin, Chuck, for the consolidated entity?

Adjusted op margin?

EBITA margin.

Well, we are -- I think we're overall just under 40% total all-in. We are looking forward, you know, as we buy -- as we do acquisitions and we are integrating them, we're gaining some back. We expect to be in that range low 40s% going forward.

It is a combination of the mix with our core business. In our core business, our margins are virtually flat. We've been watching that very carefully with our investments, along with our operating promotions and competitive strategies, and overall our core has done pretty well.

We've done a pretty good job of taking costs out in the Biotech area, which is our biggest business as well. And (multiple speakers) we are getting some leverage. I mean we had some actual leverage in Clinical Controls. We actually increased our op margins off to just really scale the business more than anything else.

Okay.

There will be fluctuations with timing of investments versus revenue. I think it's important to remind you that year to date our op margins are -- our adjusted operating margins are 41%.

Right.

That's probably more indicative of what we see going forward.

And then Protein Platform, was that 33% organic for the entire segments combined?

Yes, CyVek basically had nominal revenue in the quarter. So for the most part, it has been ProteinSimple.

And then you had mentioned earlier in the call that you have 600 qualified antibodies for the ProteinSimple. Does that mean that the catalog is now out? Can you talk about how that is going to impact the sales line, this 600 qualified you mentioned earlier?

Sure. Our goal, along with buying instruments businesses, is to find leverage with synergies with our content. So what we had in mind from the very beginning was to qualify antibodies because we have a large portfolio of them ourselves. We also through Novus have the largest portfolio really of anyone in the world. And we're looking through those, and we are trying to find the runners and the ones that people are most interested in and qualifying them on this instrument.

What that means is we'll do the futzing for the customer, and so we will figure out the dilution factors and all the leverage you pull to make these things actually run their best performance on this instrument without wasting content that the customer usually has to do.

This is done online. So we have a trademark certification symbol. So when you look up and you search for the reagents online on our website, you'll see which ones are certified for this platform and which ones are not. So that's a big promotion. We are just starting it. I mean the ink is just drying on all this stuff right now.

So the catalog is virtually online as they all are now, and there's roughly 600 or so that are certified ready to go and are for sale.

We've actually uploaded 135,000 plus antibodies into both the Novus site and in the R&D System site. So we're well ahead of, I think, my original schedule for integrating Novus in the antibody portfolio into the normal norm here.

So this phase is next with that is with the ProteinSimple piece and on to Ella next.

And then lastly, I guess that qualifies -- those number of qualified antibodies, could you -- how many were qualified, let's say, end of September?

End of September? Well, we started roughly in August, probably 200 and some maybe in September.

Okay. Thank you.

I will make one comment. We wanted to do 1000, and it's harder than you think. (laughter) It kind of integrated what customers have been telling us that it's hard to make antibodies work as advertised on all these kind of platforms. And we discovered that firsthand as well, and we are experts at both the content and the instrument obviously.

So we're at 600. Over the coming years, we'll probably get into the thousands, but the customers are right. You've really got to do some work here to make these things work the way you want, and they're not all created equal.

So I'm -- where my team was a little bit down and thinking that, golly, they missed the $1000 goal -- 1000 antibody goal. I was actually kind of happy because it is indicating what customers have been saying. So hopefully we can do that heavy lifting for the customer, and that's just going to create a whole another layer of value for us. (inaudible)

Thank you.

[Justin Bowers], Leerink.

Can you elaborate on some of the strength you saw or the rebound, I guess, in Europe and US academic and whether or not there was any benefits from big bolus of orders and kind of what you are thinking for expectations in those segments for the remainder of the year?

Sure. Europe is still a mixed bag. We talked last quarter about the softness in Germany in particular, and it is still soft for us. It's even a little soft in France. The rest of Europe is really okay. The UK is doing great.

So it's a bit mixed. It is timing. It is -- academia was stronger overall there, but you know the timing is more biopharma. We had a lot of large accounts, and that's kind of bouncing back.

It's very similar to last year. You know, we had a lot of negativity in our immunoassays and our [dual specs], and they've bounced back very nice this year through timing of larger orders with these larger companies.

So there is a bit of that. We're all learning here as well to deal with. Well, that kind of covers that.

In terms of the rebound here in the academia and government, I'd say Fisher is a big component of that. We're still trying to measure where it is all coming in and where it's all landing. It's kind of hard to measure, to be honest, hundreds of thousands of accounts.

And I think the progress on our website, we have the IT team from Novus on staff. We have the head of the company from Novus who is our head of marketing now, and she's doing a brilliant job on working with our website and our e-commerce overall here. That is also helping. And we're getting more activity in our website, so there's some of that. But I would have to tell you the biggest impact, I think, is the incremental steady improvements in growth due to Fisher they have been doing a great job for us. And as we learn how to help each other more and work together, it's been beneficial.

Again, you know a lot of these academic institutions they just have that big blue Fisher button for the lab stock online, and being part of that internal Fisher lab stock at these universities is a major plus. And they -- we're at the platinum level, so we get special treatment, and we're really happy to have that.

So all told, I think I think last year we talked about -- almost every quarter was negative double-digit. Last quarter we were negative [6] I think, and this quarter now combined that with government, we're like up [1], almost flat just on academia alone. So pretty good move in the right direction, and I don't think it's going to be overnight high single digits, I think. But it's just incremental steady progress, and those are the reasons.

Over time, as we get more content and we have more close solutions and like we just talked about the certified antibodies, all of this is going to add to the core and it's going to help.

Okay. Then in terms of China, are you still making investments there, or do you think you are currently kind of scaled properly given some of the government issues there?

We're probably in the third inning in China. (laughter) We are just getting started. We've grown from 12 people to 100 in the just under two years I've been here. Most salespeople are part of PrimeGene, the acquisition we did there, but we went from roughly that dozen to 30 or so on the commercial side.

Now we also have a ProteinSimple team there as well now. So all told about 100. We are looking for other assets and investments there as well. We'll keep building out the team. It is (technical difficulty) set across the channel to deal with.

We have bounced back nicely. We never really were overly impacted too much by the audit scenarios there. I think it's a much bigger issue for instrument players than us. But so we are working hard, and it's going pretty well.

As we go forward, we are building out a new factory with PrimeGene, and that's underway. We are looking at another factory in Suzhou for other content strategies that I won't elaborate today on, but we have a lot of things up our sleeve here for growing bigger in China and going where the action is.

Whether we hold the full 25% growth for full year, we'll see. Still kind of on track for 20% plus for sure. Should be better than most anybody else out there given what I've seen, and we are pretty bullish.

You know, when you are in the content space and this whole area in China is very nascent, snd so research is a good example. It's just an issue, research. It's just exploding there, and it's just early days.

All right. Great. And then just any expectations on the CyVek contribution this year or Ella in content that you can share or --?

Yes, we have kind of a 30-month view here on hitting the next milestone. So that's kind of the guidance we are giving. Since we are about eight months or so ahead of forecast or schedule on taking up control, you can assume that we're going to be ahead of schedule on the launch as well.

I think we'll be probably between the $1 million and $2 million run rate within the year here within a quarter or two. We'll see. The launch is just starting. We are really excited about the naming, the branding. Everything about it looks great. It looks pretty nice. The content is ready to go. You've heard a good launch. We have the right set of larger customers that are very interested. Again, long-term, we're hoping this becomes a companion diagnostics standard. It's getting more momentum and more interest the more we work with it, and now we've got 100-person commercial salesforce of ProteinSimple to actually help take it out. We don't have to reinvent the wheel here with the acquisition of CyVek.

So they are all very excited about it. The training is all completed. Form, fit and factor is done. And it is colored. Everything is done, promotions. So, the launch begins, and we'll hopefully have good news for you in a quarter or two here.

Great. Thanks a lot.

So soon you will know how to sell new instrument platforms on ProteinSimple, so we're counting on big things.

Jeff Elliott, Robert W. Baird.

Thanks for the color on the core margins. Good to hear that those are basically stable. My question really is on the acquired businesses where they cross all the segments here. How should we think about the margins on those businesses? I guess the big one here is ProteinSimple. But how should we think about the acquired margins over the next few quarters? What's the trajectory there?

Well, as Jim pointed out, year on year we've gone from like [11% and change] to near [18%] on ProteinSimple. So they are ramping pretty fast as we build scale.

We've always said that long-term you know that business should get into the mid-30s% for op margins in that range. It won't probably get all the way to content, but you know we are talking about a platform that's roughly 70% gross margins. And over time, as we have more consumables go with that business, it's going to -- the mix is going to improve it some.

The IP we think is very sound. That's the key to all of this, of course, and most instrument businesses are in the 50s% and so on. So we are pretty bullish to get to the low to mid 30s% here within the next year or two.

And Jeff, I'll just share with you it will be the Q as well. But if you actually pull out the CyVek dilutive impact this quarter, the adjusted margins for op margins for ProteinSimple would've been more of a 20%. So it's about a doubling of their op margins in just one year. So we are on a very, very nice trajectory, and as Chuck mentioned, our longer-term models have been hitting the 30% range. So they are definitely on that track.

Got it. That's great. And CyVek, the dilutive impact, what do you think that will be over the next couple quarters? Is that still in that negative $0.02 range?

Yes, I'd say for the next several quarters, although we do expect there to be some revenues ramping up here in the coming quarters, there's contiguous investment that's going right along with it. So we see it being dilutive for the next several quarters, but our goal along with that is to become accretive after about a year and then ramp it from there.

Got it. And then Chuck, just big picture update on the competitive environment. You've made a lot of steps here, but that's 18 months on building up the Company. But I guess have you seen the competitive response, and what's the state of the competitive environment right now?

Well, I think we all just came back from the JPMorgan event, and I think everyone would agree that things are looking pretty good overall in this industry.

Currencies and the world stuff is the biggest drag. In particular, when you've got Japan going from the high [80s] to near $1.20, it is going to affect the buying and purchasing power of distributors in Japan. So we are seeing that.

Other competitive issues against reacting to us, we are seeing some. I mean the Abcam of the world are -- we see them noticing us more. But overall in general, we are very unique, and most of our competitors are very small. And I worry more about their narrow focus than what they do independently.

So it's kind of a mixed bag. We're not really out there worrying about what a Thermo Fisher might do or something like that. We're mostly partnering with these bigger guys. Sigmas are more like partners as well. We're doing a lot of things with Thermo (technical difficulty) the future. We're partnering -- we have projects and virtually everyone else out there because we make due for everything.

But I do worry about these smaller companies getting stronger. I always worry about what's the next Lenovo in this industry in China coming after because there's a lot of entrants, a lot of new things coming in China. And we've got to watch that one, but for the most part, I'm not seeing nothing that I would tell you that we need to relook at our strategy.

Our strategies, I think, are working. I think they are the right strategies. I think we are going to continue them.

We just finished this year a version of our strategic plan, and other than adding a new chapter for Protein Platforms, nothing much has changed for now, so.

I think we're most excited about just getting back to some positive growth here in the academia area and just hoping like everyone else that the NIH funding continues to improve. And should it not, we're going to be going after share with something we're actually talking about.

Great. That's helpful. Thanks.

Matt Tiampo, Craig-Hallum Capital.

Hi, guys. It's Matt Tiampo in for Matt Hewitt. We were just -- we were curious on a couple of things quickly, but first how is the rebranding of CyVek to Ella progressing, and what's the response been like from your customer base?

Well, the launch is really just happening, so it's too early to tell. We looked at some other names, and Ella was the winner, and I really like it. I think everyone is just in love with it. It has a look and feel. We've got the color scheme of the West. They look like brother and sister out there. It's all by design. And this group knows how to market stuff. They know how to sell Stuff. (laughter) So we're pretty pumped to see what happens here.

Great.

So as it is early, next quarter would be a better time to answer that question with some initial data, but the ink isn't even dry on this stuff that we are --

The only indication is actually from the ProteinSimple salesforce themselves, which have embraced this new product line, are just absolutely excited to get out there and start selling it.

It's really been positive to the point where we are trying to remind everybody let's not forget about West now too, guys. (laughter)

Great. That's great to hear. The second thing we were a little bit curious on, did you see an impact last week from the storms in the Northeast?

That's a good question, and yes, we did. But you might remember this coming quarter a year ago, all of us suffered about five days of loss in shipments. And we are a run rate business, and we dug through that pretty well. But we definitely have a couple of days at this point in this quarter that are impacting us.

And you know, in our business, when the researchers don't go into work, they don't use stuff, and if you're not using stuff, they don't need to order more stuff. So it isn't like instruments where it's not a big impact, so we've got a couple of days to worry about, but so does everybody else.

Thanks, guys.

Bryan Kipp, Janney Capital.

Just a few quick follow-ups. Novus and PrimeGene on a QOQ basis, just looking at it backwards, was 7% contribution in the quarter. Is that just seasonality? I think I had 10% last quarter, and so I was just trying to think of how that's performing. Is it seasonality, or is there something else going on there that we should know about?

Yes, with PrimeGene, there's definitely I would call more timing. So that's really an OEM type business model, and we have a lot of timing orders with them right now. So it's not overly material. It's pretty small, but that would be that.

I think on Novus, I think we're pretty close to being on target. We're really focused on integrating. So, these guys have been great in terms of really getting involved with our team here in Minneapolis with the IT side and getting all the stuff online and the content going and the website reskin happening. If you look at our website, it's all changed in the last couple of months. That's all due to Novus people really helping our IT people and getting on this. And so it's moving.

Europe, I'd say a little bit -- if there was anything there, maybe a little softness in Europe, and there we've got normal integration issues. We are harmonizing distributors and things like that. So the normal kind of stuff to work through but nothing material.

At some point, are you guys going to break out the contribution that you guys are getting online from the new Novus platform? I think you cited a 150,000 or 135,000 reagents online now that we are in the past. Is that something you can break out in the future or you want to share with us?

Probably not. Because I really want to fully integrate Novus into our new systems.

Okay. On a QOQ basis?

Our Biotech division will have all this stuff in it, and we'll report division results for content and content's sake.

But at a high level, we do track metrics. We do track metrics regarding orders taken on the web versus phone and fax, which was kind of the traditional way of doing business, and those metrics continue to dramatically improve in terms of moving towards electronic base overtaking.

And a lot of cross-selling is happening in that now. And I will mention, since Jim brought it up here, too, that we -- a little over less than two years ago when I joined, two-thirds of all of our orders were phone and fax. You guys have always heard phone and fax, which is still kind of amazing, but we've reduced that by a factor of [2] here so. We are roughly a third to 40% now.

So a lot of that is better e-commerce, better web systems online now. A lot of it's Fisher, more EDI, but we are slowly getting into the 21st century here, so.

Is there any way you can give us high level just of the 7% the mix on Novus? I'm just thinking is the bigger step function down on QOQ Novus or was it PrimeGene?

On an absolute dollars basis, it was PrimeGene. PrimeGene had some very large orders with a very large customer that tended to be lumpy, and that impacted PrimeGene. Novus was in the mid to high single digit growth rate. So they performed as planned.

Okay. And lastly for me, I think you said there was a CC order that was pushed out. Can you give any color on that? Size of it? When you think it's going to come through?

Well, you remember last quarter I think we were at like 13% growth in Clinical Controls. So it's all timing. We are 6% year to date. We are going to end right on schedule there forecasts maybe even a little bit better. It's all timing. Again, this is a very much OEM-driven business as well, and we have some order timing.

It's a combination of stuff that got pulled in last quarter, and a couple of orders got pushed out this quarter. So you've got to kind of look at it over the year to date to get a true sense of trajectory.

Okay. But you think they'll recognize it in 3Q?

Say again?

You think they'll recognize in 3Q the stuff that was pushed out?

Yes, I think we should be fine.

I think our growth rate should be commensurate to what our year-to-date plan is.

Yes.

Appreciate it.

Bionostics is really working according to plan there. Their funnel, their pipeline is pretty healthy, and it's in line with the core business here that we integrated into, our hematology controls business.

They've always been kind of steady as she goes between 5% and 7%, and we don't see any issue with that.

All right. Thanks, again.

Amanda Murphy, William Blair.

Just a few follow-ups actually. So, just on Paul's original line of questioning, in terms of the antibodies that you rolled out on the ProteinSimple platform, was there actually any revenue contribution yet? I know it's early. And then also, are you going to account for that, or will that flow through the Protein Platforms line as well, you know, the incremental antibody revenue?

No, it will stay in our Biotech side. I believe in a matrix model here, and that's what we're running. The consumables and the cartridges you know with CyVek will probably for the short term be with Protein Platforms, but all reagents, all antibodies, all that will be at Biotech. And I want these teams working together, and they've got to work towards the big picture together.

In terms of any contribution, it's just really launched in the last month or so. So there's probably some incrementals. It would be hard to measure, but you know it's going to -- it will grow in time.

As you know, Amanda, (laughter) there are no homerun products in this space. It's 1000 paper cut kind of model.

So it definitely is an OE date. It typically is for Q2. I mean literally this was getting all finalized at the last couple of weeks of the quarter. So there was fairly minimal if any impact in Q2.

Mainly to get the website and get stuff on, getting it ready to go all quarter, but getting everything virtually online to be positioned and certified with this new trademark symbol we came up. All that, it takes time to get that even to register in customers' minds.

Got it. And then the Fisher relationship, you know, I appreciate the detail there on the volume, and I know it's hard to tease it out. But any sense now that you've been -- had that relationship underway for a few quarters now sort of where that might go ultimately from an additive perspective?

Well, ultimately we hope it keeps going up. I don't think we are going to see big chunks going up. I think it's going to just keep plugging along here and just keep moving in the right direction.

I think as you know, they've had a lot of change in the guard there on that team, and Greg Herrema, who runs all of Fisher now, is a pretty good friend of mine. So we are doing more and more things, talking together.

I've been really surprised at just how open the life tech side of that business has been with us, and we're also discussing things. So we've got a lot of connections with people -- I met people today that are at life tech, so we've got good relationships. So it's been very good.

Hopefully, they'll keep focusing on us and keep promoting us, and we'll keep working with them. There's always things called punchouts, and there's all this stuff -- software for the e-commerce side. So there has to be a continued strong working relationship on the IT side to make this whole thing work.

University by university, the numbers they give us are hundreds of thousands out. So it's all about getting in front of them and making sure that they are thinking of Fisher. And as long as we are doing that, we'll play along.

Now in parallel, we still have our own direct approach, and we have our own home account. Fisher doesn't have an exclusivity issue with us at all. So it hasn't been an issue either.

You know working together, we'll get more, they'll get more, and with more funding happening, hopefully it'll help. But I think this gives us the time we need. You could also talk a lot about our strategy with KOLs and more prioritization and creating more important, more difficult, more GMP-related content here. And ultimately innovation wins, right?

So, if we keep building the best portfolio for high-quality content and with the premium R&D Systems brand behind it, we are going to get more wild share out there. That's the ultimate strategy for us. There is innovation, and then there's channels, and you need them both.

Got it. And then just last one on the fighter brand side. Are you seeing any -- obviously you've had some good numbers here, but how are you guys thinking about potential cannibalization with the premium brand. Any risks there or anything that you seen thus far?

Well, there's always risk, and I think over time I think we're going to have to eat a few of our children. But right now there really hasn't been. We're really focusing our strategies on any accounts that really have kind of gone stage left here towards the low end and have walked away from the premium R&D Systems we are attacking there first. It's been very successful initially with the Novus and PrimeGene brands.

I think as you find bigger accounts that are in the middle with multiple count points and you've got both R&D Systems brand they are purchasing, but they are also buying our competitors. It gets harder. It gets more difficult. But we're working our way through it.

I think ultimately you have got to do it over the web with that academia sector with an awesome web experience, and that's what we're focusing on long-term to just try and manage this.

Long-term, we'll have an integrated search engine-based web that will have all brands, and you'll be able to really pick what you want, and you will be able to even buy from different sites all in the same basket, shopping cart and move from there. We're a year or less away from that. So more coming, but it's kind of like that.

Okay. Thanks very much.

Hard to measure, but we know we are getting some impact there. We've also brought in a couple of more finance people on board as we continue to build out our systems here, and we're working our way towards having a data warehousing and the right data mining to be able to have more of this kind of data to work from so.

Got it. Thank you.

Paul Knight, Janney Capital.

Well, how was seasonality in the quarter? I know the last two weeks can be good or bad depending upon how holidays fall and weather goes. Was it kind of as expected on that seasonality issue in the quarter?

Yes, I would say a pretty insightful question, Paul. But it's I would say we did get hit a little bit in the end there, mainly on the OEM side. And I don't know if it was the timing or the holidays or what, but some of the timing we alluded to kind of got it from the last couple of weeks. And we still pulled out 4% organic growth. We're pretty happy with it. So we'll see what happens. But there was a little bit of seasonality there, and we are trying to figure out is it really seasonality or is it something else some of it but.

It actually impacted -- the two that have been kind of drawn out on this call, which is the PrimeGene and our CCD business, which had the most OEM large account type business. That has over impacted the [margins].

And then I don't know if you care to comment, but I'm sure you follow daily orders. How's tone of business here in the calendar Q1?

Yes, it's really hard right now with so early, and we have weather involved already. So we have in our data this week the storm that hit the Midwest yesterday. So I would say it's not record-breaking yet due to weather mainly, so we'll see how it shakes out to go further in.

This month generally isn't -- January isn't a great month for us to begin with. So we'll see how it goes, but we don't have any early indications of peril or anything in here so.

I think we are all watching the same things, and currency being what it is in Russia and Japan, etc., a little bit guarded out there. On a positive sense, I haven't seen anyone's numbers that match ours in China. So we seem to be kind of ahead of the pile there in China. So that's probably where we'll keep focusing.

And that momentum is continuing. (multiple speakers)

Yes, there's probably if anything accelerating (multiple speakers) next quarter already.

Okay. Thank you, again.

There are no more questions in queue.

All right. Well, I think this is a record for us for length of time on a call. That's appreciated from all of you. If there's one more question, we do have time; otherwise, I'll make it slow winded here goodbye. And thank you for everything, and we'll talk to you next quarter.

And there are no further questions.

Thank you.

Thank you.