Minneapolis Aug 4, 2020 (Thomson StreetEvents) -- Edited Transcript of Bio-Techne Corp earnings conference call or presentation Tuesday, August 4, 2020 at 1:00:00pm GMT

* Charles R. Kummeth

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst

SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst

Good morning, and welcome to the Bio-Techne Earnings Conference Call for the Fourth Quarter of Fiscal Year 2020.

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

David Clair, Bio-Techne Corporation - Senior Director of IR & Corporate Development [2]

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 2019 identifies certain factors that could cause the company's actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements as a result of any new information or future events or 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 http://www.bio-techne.com. I will now turn the call over to Chuck.

Charles R. Kummeth, Bio-Techne Corporation - CEO, President & Director [3]

Thanks, Dave, and good morning, everyone. Thank you for joining us for our fourth quarter conference call.

With the COVID-19 pandemic in full swing, we just finished the most challenging quarter in my tenure at Bio-Techne and perhaps the most challenging in the history of the company. Despite the challenges that COVID-19 has brought to all our stakeholders, namely our customers and employees, we persevered through the last quarter of our fiscal 2020 year by outperforming the expectations we set 1 quarter ago and maintaining a high level of profitability and positive cash flow, all while pivoting a large number of our technical resources toward developing products that will help our customers and society at large, eventually defeat this virus.

I'll cover the highlights of these initiatives in a moment, but first, a high-level review of our overall results for the quarter and the fiscal year. In Q4, our organic revenue decreased by 8%, outperforming our initial expectations for a decline of somewhere between 10% and 20%. We estimate COVID-related products provided a 5% tailwind during the quarter. This tailwind came from products produced by every division in the company, which play a key role in enabling researchers to better understand COVID-19, develop therapies and vaccines to combat the virus as well as screen and diagnose infected patients.

Overall, business trends improved as Q4 progressed with sales declines in the low to mid-teens for the month of April and May and then improving quite significantly in June to low single digit declines. However, the swings by end markets and regions were more pronounced. For example, academic end markets experienced a much more severe trough early in the quarter and have been slower to come back to normal. While from a regional perspective, Europe bounced back towards the end of the quarter ahead of the U.S., this makes sense given that Europe experienced a worse of the economic shutdown before the U.S., and so far seems to have more effectively contained the virus spread. As we all know, the spread of the virus and the containment techniques that go along with it, is a very fluid situation. So we are not out of the woods yet, but I'm encouraged by the improving business trends we experienced exiting the quarter and into July.

Given these challenging and uncertain business conditions, we kept our expenses in check, balancing our spending on growth initiatives and our commitment to keeping the Bio-Techne team intact with strict attention to discretionary spending. This financial discipline enabled us to finish the quarter with an adjusted operating margin of 31.1%, clearly not what we expect long-term but respectable given the current environment. We view the virus impact on our business as transitory and remain confident in our ability to return to at least 40% adjusted operating margins as COVID-related headwinds subside, and we execute on our long-term strategic plan.

Prior to the pandemic, we were on track to deliver another year of double-digit organic growth in fiscal 2020. But with COVID, we finished the year with 4% organic growth. However, when our customers all eventually returned to their labs and clinics, our growth pillars, namely, Cell and Gene Therapy, Exosome Diagnostics, Genomics RNAscope and our portfolio of ProteinSimple branded instruments position Bio-Techne to return quickly to a double-digit organic growth profile. And now layering in the potentially long-term tailwinds from our new COVID portfolio gives us incremental confidence in our ability to return to our targeted growth trajectory.

Before I update you on our key strategic growth and COVID-related activities, I do want to highlight our performance in China. As you know, COVID impacted China most severely back in February and March when government-mandated lockdowns were enforced. You will remember from our last earnings call that our China business still managed to grow in the mid-single digits during that very difficult environment. While I couldn't be happier to report that in Q4 organic growth in China was back over 20%, our China team has done a phenomenal job adopting to the new normal, leveraging webinars and online meeting tools to stay in front of their customers and drive the business forward as the country emerges from the pandemic. As we started fiscal '21, we could see growth slow a bit from its Q4 pace as resurgence of the virus has flared up in places like Beijing and Hong Kong, but over the long term, our China business remains in the early innings of its growth trajectory, and there is runway for many more years of 20% annual growth ahead.

Now an update on our growth in COVID-19 initiatives, starting with the Protein Sciences segment and our core reagents. Our team quickly recognized the need to help our customers conduct their research in all aspects of COVID-19 and responded by ramping production of related proteins, antibodies, small molecules and assays already found in our catalog. They also developed dozens of new products to support research of this novel virus and are continuing to do so. Within our instruments portfolio, production of our Simple Plex platform was also ramped to meet the soaring demand for Ella instruments and its highly sensitive automated immunoassays that are being used to manage patient care associated with the cytokine storm syndrome often found in severely infected patients. With year-on-year growth approaching 100% for this platform in Q4, our operating teams did an outstanding job keeping up with the demand. Also, our biologics platform continued to grow exceedingly well with solid double-digit growth both in Q4 and the full year. We have high-growth expectations for this platform as it continues to expand its application base from traditional biological drug production quality and control into Cell and Gene Therapy applications. Our Biologics portfolio with its subvisible particle characterization analytical capabilities is also seeing strong interest from vaccine developers, enabling them to better understand their manufacturing and [profitability] processes. Speaking of Cell and Gene Therapy, we continued to make progress on the construction of our newly dedicated GMP protein factory. Construction of the facility remains on track provide GMP proteins in large-scale to our Cell and Gene Therapy customers by the second half of fiscal 2021. In the meantime, our GMP protein portfolio continues to expand at a very rapid pace, nearly 100% in Q4, which now includes a number of immune cytokines typically used to grow cells for clinical trials. During the quarter, we also launched GMP ProDots. This disruptive product allows still addition of our renowned R&D systems GMP proteins to culture vessels and Cell and Gene Therapies. As a reminder, earlier this year, we entered into a commercial consortium with Wilson Wolf and Fresenius Kabi that Offers easier access to a complete and simplified Cell and Gene Therapy workflow solution using products from all 3 parties. This workflow includes Fresenius Kabi's logo instrument for leukophoresis, Wilson Wolf GRx bioreactor, and Bio-Techne's cloud cell activation, TcBuster (inaudible) and GMP proteins. During Q4, the JV made additional progress establishing a unified sales structure, a customer-facing website and point-of-sale and creating more impactful marketing collateral, featuring all 3 parents offerings. We believe the JV is well positioned to take share in this emerging therapeutic market.

Moving on to our Diagnostics and Genomics segment, where I'm happy to report that we managed not to decline in revenue this past quarter despite the COVID shutdown headwinds. I'm even more pleased to report that the segment actually expanded operating margins over last year by more than 200 basis points and increased operating profit by 20%. While our genomics products were severely impacted by the closure of academic labs, our team was able to partially mitigate this shortfall by producing and selling hundreds of RNAscope probes for COVID-19 virus detection and tissue, allowing researchers to confirm the organs that are successful to this virus.

Our Diagnostics research division was able to deliver a solid mid single-digit growth in the quarter despite customer delays in ordering controls and calibrators used for routine diagnostics tests used by clinicians. Our team was able to more than offset this shortfall by supplying specialty diagnostic antibodies and other raw materials to COVID-19 testing manufacturers.

And in Exosome Diagnostics, we validated and launched the COVID-19 realtime qPCR test in our labs, both in Waltham, Massachusetts and Munich, Germany. Following the implementation of processes and instruments to automate the test, we will be able -- we will be capable of scaling testing capacity to several hundred samples per day. This lab-developed test will provide rapid and reliable detection of patients with active COVID-19 infections, especially in the Boston area. However, Exosome Diagnostics also experienced headwinds related to COVID-19 as ExoDx prostate test volume was severely impacted by the near complete shutdown of urologist offices.

As we announced last quarter, the team responded by launching an at-home collection kit in Q4 for our ExoDx prostate test, enabling men unable to visit their urologist office to have access to a test and the knowledge of whether a biopsy should be prioritized. The at-home collection kit was launched with a patient-targeted marketing strategy, including search engine optimization, a Facebook campaign and webinars to drive awareness that patients do not need to go into the urologist office to have access to this valuable test. We believe the flexibility of providing a year-end sample at the convenience of the patient will be yet another key differentiator of the ExoDx prostate test from the competition. The response to our at-home collection kit has been very positive with both patients and urologists, and already consists of more than 10% of our current test volume. The impact of the at-home test collection kit, our push-pull cart marking strategy and the gradual reopening of urologist offices, has had a positive impact on our EPI test volume since it bottomed in April, with June daily test counts approximately 75% of pre COVID test monthly run rate and continue to show improvement in July.

Before I turn the call over to Jim for his financial review, I want to provide an update on what could be our biggest COVID-19-related initiative to date, our co-branded R&D system, Mount Sinai COVID serology assay test. During the quarter, we announced a collaboration with Kantaro Biosciences, a Mount Sinai led joint venture to manufacture and commercialize the serology assay based on Mount Sinai's test. This was a tremendous effort by both the Bio-Techne and Mount Sinai teams, convincing the typical 18-month ELISA kit development time frame to just 6 weeks. This 2-step serology test is a truly differentiated offering going beyond the qualitative information provided by other COVID serology assays on the market, with the second step providing a tighter or measurement of the antibodies present to neutralize the virus. This second step completely eliminates false positives, with Mount Sinai's assay having a 100% positive predictive value, or PPV, and 99.6% negative predictive value, or NPV. To date, diagnostic activity is focused on PCR or antigen based test to detect active COVID-19 infections. We believe serology test volumes will increase as the second wave of testing emerges focusing on the surveillance activities necessary to reopen the economy and to help better manage vaccination programs once available.

Yesterday, Kantaro Biosciences submitted a request to the FDA for an emergency use authorization, or EUA, for quantitative use of our serological assay. We anticipate the EUA process to be complete in mid- to late August. Kantaro and Bio-Techne have joined forces to develop marketing materials, a branding and go-to-market strategy for the assay, highlighting the unique quantitative information provided as well as the best-in-class performance of the assay. We are ready to launch this assay upon receipt of the EUA and have the capacity to produce millions of tests per month as needed.

Also yesterday, we announced the launch of a COVID sero index, a research use only, or RUO version of the 2 step serology assay. This assay is designed to meet the current vaccine developer needs for an objective measurement of immune response to a vaccine, making the test ideal for identifying the most potent vaccine candidates determining optimal dosing, identifying the appropriate vaccine schedule and when boosters may be needed.

In summary, I'm extremely proud of the way the team responded to a challenging business environment in the fourth quarter. Our end market showed steady improvement as the quarter progressed and has continued to improve in July with our academic and biopharma end markets reopening and our COVID-related products seeing continued traction. We are on the cusp of launching the first commercial quantitative IgG COVID-19 serology assay, which has potential to answer many of the important questions necessary to reopen our economies further and push the best vaccines forward.

We are entering fiscal 2021 in a positive -- sorry, in a position of financial strength, with a portfolio of best-in-class products targeting high-growth and underpenetrated market opportunities. We are ready to continue to execute on our long-term strategic plan. With that, I will turn the call over to Jim.

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James T. Hippel, Bio-Techne Corporation - Senior VP of Finance & CFO [4]

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Thanks, Chuck. I'll provide an overview of our Q4 fiscal 2020 financial performance for the total company, provide some additional color on the performance of each of our segments and give some initial thoughts on the pace of business recovery from the pandemic in the near term.

Starting with the overall fourth quarter performance. Adjusted EPS was $1 versus $1.25 1 year ago, with foreign exchange negatively impacting EPS by $0.01. GAAP EPS for the quarter was $1.48 compared to $0.42 the prior year. The biggest driver for the increase in GAAP EPS was unrealized gains on our investment in ChemoCentryx this year compared to unrealized ChemoCentryx losses in the prior year.

Q4 revenue was $175.8 million, a decrease of 8% year-over-year on a reported and organic basis. Foreign exchange translation and acquisitions had an immaterial impact on our revenue. For the full year fiscal 2020, revenue was $738.7 million, an increase of 4% on a reported and organic basis. By geography in Q4, the U.S. declined approximately 20% while Europe declined approximately 4% as European customers shut down their labs earlier than the U.S. and then reopened them faster later in the quarter.

As Chuck mentioned, China had a remarkable quarter with organic growth increasing 24%. As for the rest of Asia, organic growth declined mid-single digits, with almost all countries in some way being negatively impacted by the pandemic. By end market, biopharma declined mid-single digits, while academic sales decreased by nearly 30%.

Moving on to the detail of the P&L. Total company adjusted gross margin was 69.5% in the quarter compared to 71.9% in the prior year. The decrease was due to unfavorable volume leverage and mix. Adjusted SG&A in Q4 was 28.9% of revenue, a 60 basis point increase compared to the prior year due to unfavorable volume leverage. I do want to point out that our adjusted SG&A spend was down nearly $3.5 million from the prior year, highlighting our discipline on discretionary spend while keeping our teams intact with no furloughs or reductions enforced. For GAAP reporting, SG&A expense in the current period also reflects an approximately $7 million gain on settlement of the escrow balance associated with the Exosome acquisition. This is accounted for as a reduction in SG&A in Q4 of fiscal year '20.

R&D expense in Q4 was 9.5% of revenue, 100 basis points higher than the prior year due to unfavorable volume leverage and investments in COVID-19-related product development. Here, our adjusted spending was about $0.5 million higher than the prior year, emphasizing our conviction to continue to invest in the business for the long term. The resulting adjusted operating margin for Q4 was 31.1%, a decrease of 400 basis points from the prior year period.

Looking at the numbers below operating income. Net interest expense in Q4 was $4.4 million, decreasing $0.8 million compared to the prior year period. The decrease was due to a substantial reduction of our bank debt during fiscal 2020. Our bank debt on the balance sheet as of the end of Q4 stood at $357 million.

Other adjusted nonoperating income was $0.5 million for the quarter compared to $0.1 million from Q4 last year, primarily reflecting the foreign exchange impact related to our cash pulling 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 Q4 was 21.4%, similar to the prior year in what we expect for the foreseeable future.

Turning to cash flow and return of capital. $44.8 million of cash was generated from operations in the quarter, down 20% over Q4 of last year and consistent with our adjusted earnings. In Q4, our net investment in capital expenditures was $17.3 million, primarily driven by construction of our new GMP protein factory, which remains on schedule for completion by the end of the calendar year. During Q4, we returned capital to shareholders with $12.3 million of dividends. We finished the fiscal year with 39.7 million average diluted shares outstanding.

For the full fiscal year, cash flow from operations was $205.2 million, up 13% from our fiscal 2019 result. Our net investment in capital expenditures was $51.7 million, consisting of $24.1 million in baseline CapEx and a $27.6 million investment in our GMP protein facility.

Our balance sheet remains very strong with $270.9 million in cash and short-term available for (inaudible) investments and the total leverage ratio of well under 1x EBITDA. Our total leverage is at the lowest level since before the 2014 acquisition of ProteinSimple.

Next, I'll discuss the performance of our reporting segments, starting with Protein Sciences. Q4 reported sales were $127.3 million, with reported revenue decreasing 11%. Organic growth also decreased 11% with foreign exchange and acquisitions having a negligible impact on revenue growth. Within this segment, product lines with higher academic exposure, namely our reagent solutions portfolio, experienced significant headwinds. As Chuck mentioned, we had an exceptional quarter in both the Biologics and Simple Plex instrument platforms, which partially offset the impact of lab closures due to the pandemic. Operating margin for the Protein Sciences segment was 38.9%, a decrease of 650 basis points year-over-year due primarily to the unfavorable volume leverage and to a lesser extent, unfavorable product mix.

Turning to the Diagnostics and Genomics segment. Q4 reported sales were $48.7 million, relatively flat with the prior year results. Organically, revenues grew 1%, with foreign exchange translation having an unfavorable 1% impact on revenue. Within this segment, our Diagnostic Reagent division increased mid-single digits with strong COVID-19-related raw material tailwinds benefiting the business. Meanwhile, our Genomics division, which like our Research Solutions division and Protein Sciences, has a large exposure to the academic market and took the biggest COVID-related hit in the segment with a double-digit percentage decline in sales in Q4. However, as labs gradually started to open throughout the quarter and into July, we've also seen Genomics performance dramatically improve. Additionally, we anticipate the launch of micro RNAscope, increased penetration of high-plex and continued adoption of RNAscope for COVID-19 applications to positively contribute to growth going forward.

Finally, Exosome Diagnostics' Q4 revenue increased over 80% from last year, with higher collections from Medicare, private payers and patients as well as progress with biopharma partnerships driving the year-over-year increase. Keep in mind that Exosome is still on a cash basis for revenue recognition, so collections from pre pandemic test helped the recorded sales in the quarter.

Moving on to operating margin for the Diagnostics and Genomics segment, at 12.4%, the segment's operating margin improved from 10.3% reported in the prior year. The increase reflects [stable] volume leverage in our Diagnostics Reagents division, less dilution from Exosome Diagnostics as well as strong cost management.

Before we turn the call over to Q&A, I will share our current perspective of our view ahead. First and most importantly, our strategic financial goals for the next 3 to 5 years remain unchanged. Our novel automated protein analytical capabilities, our cutting-edge tissue and liquid biopsy technologies, our toolkit of Cell and Gene Therapy manufacturing solutions, together with our core world-class protein reagents, are as well positioned ever to help our customers advance the study of life sciences. And we believe in a post-COVID world, the need to advance the study of life sciences will be greater than ever before. This gives us even greater confidence in achieving our long-term financial goals. But first, our customers, namely life science researchers and diagnostic practitioners, need to all get back to work. This is starting to happen as our monthly pacing of sales recovery within Q4 made clear. However, there are still too many unknowns about what the impact of the pandemic and any potential vaccines will have on our lives this fall and winter. This uncertainty prevents us from giving a view on our full fiscal year '21 financial performance with any sort of confidence [intervals]. So we are managing our outlook month-by-month, quarter-by-quarter, staying nimble to deploy resources for the needs of our customers as they arise. As a reminder, our first quarter of fiscal year '20 was very strong and will likely be the toughest comparable for the upcoming year. Thus, holding flat year-over-year in Q1 on both the top and bottom line, we see as the right trajectory to keep us on track to our long-term plan. The downside risk of this trajectory would be a pause or reversal in our customers going back to work due to a worsening of the pandemic. An upside of this trajectory would be regulatory approval of our quantitive COVID serology assay test, coupled with an early successful commercial launch.

That concludes my prepared comments, and with that, I'll turn the call back over to the operator to open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Our first question comes from Puneet Souda with SVB Leerink.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [2]

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So first question is on guide, if you can just elaborate a little bit on the first quarter scenario here that you're presenting flat. Just trying to get a better understanding of what sort of trends are you seeing in July that give you this view? Or is there -- one would have expected the academic labs to continue to improve. And if we do so -- slightly better than flat, is that not something that is doable despite the tough comps here. This is my first question and I have a few follow-ups.

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Charles R. Kummeth, Bio-Techne Corporation - CEO, President & Director [3]

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Sure. Well, first and foremost, we finished this last quarter still down 8% and it could have been worse than that. We did have a tailwind. THe tailwind's improving. We're seeing a resurgence in July, not -- towards this summer we saw with China coming back. So July numbers are a very good start, as Jim alluded to. But there's 2 months to go, and we have a 13% comp from last year to cover. So that's the big one. So coming back from negative coming this quarter in a tough comp, we think flat, we could give a range. We were 9% or 10% minus 20% last quarter. We talked about saying something from 0 to 10% or something or a minus 5% to plus 5%. But I think the best thing is to keep this tight as we can. We think flat's the right trajectory for us. And if there are upsides -- now if we stay with what we see in July, continue into the whole quarter, I think there'll be upside. I agree we did see it in China. We saw things level off, and expect to see things level out here, too. I mean, we're seeing a really strong start in the quarter. And it's just probably not plausible. Not to mention there are hotspots and resurgence going on, and they're just very unpredictable what's going to happen. I know that I looked at the numbers this morning and looks very encouraging in the U.S. for the numbers this week but who is to say it. So I think on top of the comp, I think flat is right. Europe continues to progress to be a little bit ahead of us. U.K. is the only real out liar here, and we'll have to watch and see what happens there. And in China, it's actually a little bit going the wrong direction right now, right? So if that gets worse, we'll see. India and others are not as bad as I would have thought, given their population and their ability to actually deal with this, but that's a good thing. And then on top of all this, there's upside on our COVID, right? So if we get our EUA in 2 to 4 weeks, and we get a solid month of coming out with this product, that's really not in our numbers, in this forecast. So there's upside. We have other COVID products as well. Simple Plex, we talked about had just an amazing quarter, and it's looking like it's going to continue maybe not quite at 100% growth, but darn good growth I guarantee you. So we need academia to come back, we need urologists to come back, and the progression has started, but it's not -- they're not all the way back even at the end of this quarter, we don't think so. We're going to stay cautious. We don't officially give guidance. This is the closest we've ever come, and we're talking about staying flat against a strong comp, that's all. That gives you something, Puneet.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [4]

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I appreciate the details there. And my next question is serology. I think this is a question that we've been getting from investors as well. What is your expectation here for contribution from serology in fiscal year '21? And I'm asking that because COVID serology market has lagged significantly behind the PCR market given that PCRs more has essentially more diagnostic capabilities. Obviously, serology is only giving you a snapshot in time. So -- and some of the peer companies have also lowered their expectations in serology significantly going into the next quarter. So I'm wondering what are you baking in for serology? And what gives you confidence that you can grow sort of above the market here in serology?

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Charles R. Kummeth, Bio-Techne Corporation - CEO, President & Director [5]

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Sure. Well, I want to give you some comments here, and they're really meant for everybody, not just you. So (inaudible) cover the same ground here, and then questions later and that we will get this out kind of to all of you at once just to be really careful. We've invested a lot in our test. We have submitted a one hell of a dossier to the FDA, let me tell you. And it is an incredible data package. We have gone far and beyond, really what the FDA requires for something like this. As you know, it's a 2 step. When we decided to go fully quantitative a couple of months ago and take a step back and take some extra time, the FDA, first of all, was starting to get clogged up with an awful lot of request; two, being we're talking about asking for a fully quantitative EUA and nobody else has done that. And they really, really asked for an awful lot of extra stuff, extra data, extra testing. We have complete sensitivity data done. We did crossed reactivity test against 14 major diseases. We have stats on all this that are phenomenal. We know of nothing out there that compares, but we don't maybe know everything that's coming out either. So we're only (inaudible) there now. We do also know and the FDA, regrettably so, knows that they've issued a lot of preliminary EUAs that they probably regret and a lot of these initial qualitative tests have become a tarnish to the whole serology potential. And we have to overcome that. But we're very sure and we're very clear on the fact there's a need for a quantitative serology test that really can identify the level of immunity in a patient. And this is going to be important. More and more important as these vaccines come in the market, and patients who want to know, are they having a response or not. And so we see a surveillance side of this, it's going to only grow, and it's not going away in a year. So will it match the -- are you sick now testing environment to PCR, maybe not. But it's going to be a very large market, and we're not a very big company, and we're going to have the best test, at least for a while. So we're very confident that we're going to be treated very fairly by the FDA, and we'll be out there before this quarter end, hopefully. But there's no guarantee. This is the FDA, and there are hundreds of tests out there, trying to get in, in all different forms. We know of nothing else out there that can match us. We had incredible partners with Kantaro and then Mount Sinai. They are managing most of the bureaucracy here being -- we're not that experienced at it. And we've got great consultants on the staff through Kantaro as well who've really taken control of our dossier and our package, our data, everything. Our team here at Bio-Techne has worked around the clock for months now and has really fulfilled their mission, we feel. And we're ready to go. And we're not kidding, we're ready to go at millions per month, if not millions per week. So -- but you're right. Right now, it's kind of a 10% kind of market demand compared to [PCR], but we think it'll improve. And it will improve with the test getting better with vaccines coming on the market and the economy is opening up, and people want to go back to work, and knowing they're safe to go back to work. So we're ready. We've been waiting for this, and we're ready.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [6]

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That's very helpful. And my last one is on Cell and Gene Therapy. This is obviously an important growth driver in new market opening for you here for the next few years. So when is the earliest we can see the revenue in that? And maybe if you can provide some details or anything we should be modeling? And how should we be looking for that in 2021? And if you could also provide any updated thoughts on the level of interest you're seeing and early commitments to -- for the capacity that you are building out in the first year? If you could provide some color there, that would be helpful.

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Charles R. Kummeth, Bio-Techne Corporation - CEO, President & Director [7]

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Well, as you know, we're selling GMP proteins now. We're just not selling in larger batches. So our GMP protein business is growing and growing near 100%. So we'll be moving all of that over to the facility once we are able to. So we're on schedule, on budget. We'll be opening the facility in late September, qualifying for the rest of this calendar year and be open for business for scaled out production revenue, probably in January or something. We have a one completed, signed up large customer, and we are in negotiations with half a dozen others. And behind that are a lot more others on preclinicals and testing and people getting ready to check us out. So it's hard to guess right now what that first year revenue will be coming out of the factory, but it's certainly going to be significant. We will fill not show our capacity for first year. We've never said we would be. Probably say, it could take as long as 5 years to a full $140 million. We don't think it will take that long, but it could. Our models don't go beyond that. So it'll only be upside. So we're ready to expand it to a $200 million model. And it takes about a 6-month to 1 year window to do that. So we think we have ample time. We've got ample room in the building. We've got ample green space. So no issues there. Equipment is all here. The site looks phenomenal. We're going to have a fantastic viewing quarter for the processes. Our local Minnesota Science Museum, who is the world or the country leader in exhibition design, they say this is for sale, they're going to help us design how to exhibit and how to show the processes. So it will be a great venue for customers to come in and see what they can expect. And it's going to be fun. So everything is on track. The numbers don't -- haven't changed since we've told you before really, so.

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James T. Hippel, Bio-Techne Corporation - Senior VP of Finance & CFO [8]

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Puneet, the other thing I'll add with regards to the GMP factory itself in terms of the revenue generated from it. Aside from just the growth in our normal clinical business, as Chuck mentioned, where it's growing at 100% for GMP proteins, these large customer deals that we either signed or are in negotiations with right now, they're all in various phases of [clinicals] right now. They are not commercializing themselves yet. So the reality is until they get through their Phase III and commercialize, we really won't have a good view of the timing of when we'll see that major step-up in revenue from those customers.

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Charles R. Kummeth, Bio-Techne Corporation - CEO, President & Director [9]

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And these are ones that aren't really out there out or coming out. As you know, there's an awful lot of viral vector based cell therapies coming out the next year or 2. And we're not really -- we're not in those clinicals. But being we're not part of the drug, it would take just equivalency testing to actually move over our protein if it's deemed to be a better value, better quality, et cetera. So we expect, as we open, we'll get more and more interest from dozens and dozens of cell therapies that will be coming over the next 2 to 3 years. That's our angle anyway.

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Operator [10]

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Our next question comes from Catherine Schulte with Baird.

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Catherine Walden Ramsey Schulte, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [11]

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I guess, first, just on China, great to see that strong return to growth in the quarter. You talked about seeing that reverse to some extent. I guess what's implied for China and the flat overall guide for the first quarter?

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Charles R. Kummeth, Bio-Techne Corporation - CEO, President & Director [12]

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