Everyone, welcome to RBC Capital Markets 2024 Global Healthcare Conference. I'm Conor McNamara, the life science tools and diagnostics analyst at RBC. It's my pleasure to introduce our next company, Bio-Rad. On stage with me is our COO, Andy Last, and CFO, incoming CFO, Roop Lakkaraju. Gentlemen, welcome. Thank you. Thank you. Thank you for joining us. Thanks for having us. Great. Andy, let's start with you. Mm-hmm. You announced your intent to retire in September. I did. Can you just quickly describe some of the major changes you've seen at Bio-Rad since you joined? Yeah. I shall attempt to encapsulate five years of hard endeavor. In two minutes. Get two minutes. In two minutes. You know, I think we've worked hard on kind of the fundamentals of transformation of the company, and that's really a top to bottom exercise. We've revamped the portfolio strategy focus areas, markets we want to focus on, platforms, worked on cost structure, which I think we've showed some improvement there. We've worked a lot on the supply chain, trying to improve the supply chain and our logistics platform in particular. And so I would say, you know, establishing a new strategy framework for the company for growth in, you know, key markets that have played out for us and, I think will continue to do so, once we get a recovery.... in biotech, biopharma. Good. You know, I think a lot of change, and I think it's been well received-... within the company. Okay. Great. Thanks for that, and, Roop, onto you. You recently joined. You know, you came from outside of the healthcare industry. What was it about Bio, Bio-Rad that attracted you to the, to the company? Yeah, there's a few different things that attracted me. First, I mean, when I look at the markets that Bio-Rad plays in, life sciences, clinical diagnostics, and just how those markets are continuing to grow and evolve, and the need for technology, it's a large opportunity there. And then, when I look at Bio-Rad and where it fits within those markets, and specifically having key market leadership in areas like digital PCR and other areas, it has the ability to win in the marketplace. And then, when I looked at the transformation that had already occurred, that Andy just articulated, and the opportunity to do more-... and continue to evolve the business model, both from a P&L perspective, but also a working capital, right, and balance sheet efficiency standpoint, I thought there was more opportunity there. And when I look at my background broadly in tech, and specifically in manufacturing and supply chain areas-... there's an opportunity for me to add my experiences-... to what is already occurring in the, in the company, and I thought there was a, a nice marriage. And then the final piece I would say is meeting the management team and, and the people at Bio-Rad. I mean, it's passionate employees and a passionate executive team.... that's, that's driving this transformation. Great, and so two follow-ups there. First, since joining, you know, do you see low-hanging fruits as far as some of the operations that can be improved upon? Because Bio-Rad has... You know, their margins are significantly lower than other life science tools companies, and I think the company was on track to close the gap there until the pandemic. Yeah. And so do you see anything that's just, "Oh, I see this, well, best practices would imply we should do this"? Or is it, you know, is it just gonna be kind of a more of a continuous improvement? Yeah, it's a great question. I wouldn't say that there is low-hanging fruit because I think all of it requires still work to be done. However, there are opportunities, right? And pricing is one where we can be more programmatic about our pricing and pricing strategy and approach. I think when we look at the markets coming back and how that feeds into our factories, that alignment between sales forecasting and operational execution, and marrying that more tightly, I think there's an opportunity there to drive further efficiencies. That also will help in terms of inventory management and working capital management. So I think there's opportunities to synergize some of the business process improvements that are occurring already to be that much, more robust- Okay ... and drive future improvements from a margin expansion standpoint. Okay, thank you for that. Just another point you made is the enthusiasm by the employees, and-... I guess this is for both of you. From an outsider perspective, you've had four key employees that I think were very, very key in the whole transformation since 2019 and even before that. So, you know, how would you describe the overall morale at the company? And, you know, again, maybe they're just all one-offs, but how do you, how do you answer that question? I mean, you've had four major departures in the last six months. Yeah. Is there something there that investors should be concerned about? I think it's right to ask the question. Okay. I think they are all individual facts and circumstances. Mm-hmm. You know, each case has got their own rationale for doing so. It's unfortunate timing. And yet, we've got a new CFO. You know, we're close to announcing a new president of the clinical business. We had an incumbent internal candidate for the life science business. And so, in many respects, we really didn't miss a beat- Mm, great ...internally....internally. I really can't point to anything that kind of went off the rails, as a consequence-... So morale, look, aside from the fact that I said that, you know, one, you know, the life science segment has taken a bit of a-... a beating, is very good. Mm-hmm. It's very good. You know, the enthusiasm that Roop sees has been there for a while, and it's not disappeared. Okay. And Conor, I would just add, as, as a new person coming into the organization over the last four weeks, it's, it's an appropriate question, right? When you look at each of the discrete changes, they were for personal reasons. I mean, Andy's is a retirement, et cetera, right? There isn't anything that is organizationally a problem or challenging, right? It's just business. It just happens to all occur in a very short timeframe. With that said, to the point of, you know, the products and the passion and, and what we're looking to drive and how we're still trying to drive shareholder value, that doesn't change. Mm-hmm. I want to touch on Q1 results and guidance early in the call. So if you just look at your Q1 results, you maintain guidance for the year of +1% to +2.5%. Yeah ... on a constant currency basis. If you look at the rest of your, you know, the peers of life science tools, more are calling for what we'll say, a flattish year with down in first half, up in second half. And you're calling for a little bit better than that. And, you know, what kind of assumptions are you making as far as in market recovery, and what gives you confidence that, hey, you're going to perform better than a lot of these other life science tools companies this year? Yeah. I'll start, and then Roop can add in. First is I think, you know, put the clinical diagnostics business on the table because not all life science tools companies have a meaningful diagnostic side to the business, and it's more than half our revenue, and we feel it's a pretty solid year for us. So you've got a good foundation. Mm-hmm. So the variance is really driven by the life science side of the business. You know, and it's a, you know, very challenging year last year with slippery slope from basically the beginning of Q2 down onward. So you've got a lot of soft compares. The focus of the recovery is in biotech, biopharma funding. The way, you know, you have to have the capital inflows, which we've seen- Mm-hmm ... as a prerequisite number one, and then an increasing engagement from customers, which we're also seeing, in terms of dialogue and the funnel start to get populated. That's got to turn into orders- Mm-hmm ... which is yet to come. Okay. So, with the comps and, you know, let's call it a building funnel, that's how we look at our life science business. Mm-hmm ... for this year. And we see clinical diagnostics kind of still being in the guidance range, but, you know, a little stronger than perhaps we anticipated coming into the year. Mm-hmm. I think the other thing I would add is, you know, those signals and the specific conversations we had with our commercial organization, region by region, to really understand the voice of the customer and to reinforce, yes, the funding is out there. Are people actually willing to have conversations about spending? Mm-hmm. We saw those positive comments. Mm-hmm ... right, that reinforced, okay, yes, it, it may be a steep, second half climb- Mm-hmm ... but there's positive signals. We obviously need to see that flow through in, in the manner that we've indicated to get to those numbers. But at this point in time, when, as we did the Q1 call, those positive points were there to reinforce our position. If you look at two key product lines within life science, ddPCR and Process Chrom, what's the typical lag between the conversation to an order to revenue conversion? Yeah. On digital PCR, so I'd, I'd like to point out one important thing. The variance is mostly on the instrumentation. The, the consumable and reagent stream has been pretty stable, which, which is a positive. And it's between—it's 3-6 months- Okay ... is a typical sales cycle- Okay ... for a, for one of those systems. Process Chrom is a completely different beast because, you know, it all starts off with a very small volumes- Mm-hmm ... it when you go into it, the early stages of a therapeutic program. And then it ramps as they go through clinical development to full- Mm-hmm ... commercial therapeutic. Lead times on those orders, in terms of visibility, can be 3-9 months. Okay. Yeah. Thank you for that. And just, you know, Roop, maybe this is more a question for you, but one of the pushbacks or questions that we've got from investors is just, we'll say, lack of transparency, meaning that the way that the segments are broken up and the amount of financial information you give, you know, both on the calls and in the Qs and Ks. Have you looked at that and thought, you know, maybe we should update that and give additional color? Or is it or do you feel pretty good about the way things are scripted now? It's a great question. I think it's, I will say it's probably early days for me, Conor, to really say how we might, if we ought to change how we, the level of transparency, as you said. Mm-hmm. Obviously, there are segment disclosures already in the financials from that perspective. I think, you know, one thing to be cognizant of, and I, again, I'm learning this industry, right? And so one of the concerns is always when you break down product family areas, competitive- Mm-hmm ... aspects. And so there are things that I don't know, that I still need to learn, as to what that means from a competitive standpoint, what others say, these sort of things. So with all that said, I think there is an opportunity for us to maybe articulate kind of our initiatives and the opportunity in front of us more effectively- Mm-hmm ... and give, you know, a tighter message around that. But as it relates to transparency of product families and these other things, I think that's an open question- Mm-hmm ... that has broader considerations that I still need to understand. Okay. Great... and if you look back, you know, from 2020, call it 2019, through sometime in 2022, you did see some revenue acceleration, and you guys were actually- Yep - growing faster than the market. And how much of that was this outsized growth in ddPCR and Process Chrom, which were doing extremely well, versus, you know, some, maybe some market share gains that you were taking because of those products, versus, you know, just you guys were executing? Because you were growing above the market. I'm curious what drove that, and are you confident that once the macro environment comes back, that phenomena will, will return? Yeah. Yeah. Now, I'm assuming you're ex-COVID, right? Yes, we're all ex-COVID. You know, I would say, Droplet Digital PCR was a principal driver. Mm-hmm. Process Chrom, now we know that Process Chrom was kind of a little bit on adrenaline- Mm-hmm. ... right? Simply because of the kind of inventory stocking that was going on. Not the same story with Droplet Digital PCR. I mean, that was driven by cell therapy, gene therapy, you know, monoclonal antibody development, and, you know, the manufacturing processes that we're, we're finding the platform useful for too. So, they got a little outsized in that period, in my view. Mm-hmm. I think when they come back, overall, it will still be double-digit growth rates, perhaps not quite as, you know, enthusiastic- Mm-hmm ... double digit. Mm-hmm. Particularly for the Process Chrom side. Okay. You know, as you penetrate, we were under-penetrated in biotech and biopharma, where we started to build channel in that portion of the market, in that segment. So it definitely gave us a halo effect, wraparound sales, and I expect that to continue. Got it. Okay, thank you. Yeah. Just, you know, you mentioned a biotech funding environment that returned in Q1. You know, as the spending reopens or as these customers start to order products, like, is there a hierarchy of what they order first? Is it more on the high end, innovative products like ddPCR, or do you see, you know, there's a gap that needs to be filled where they haven't ordered, you know, replacement equipment or- Yeah ... just consumables on the commodity, more on the commoditized side, or is it- I think it's pretty balanced. I think it'd be a pretty balanced order book, frankly. Mm-hmm. I mean, we do expect to see digital PCR, it's kind of like near the top of their shopping list. Mm-hmm. Especially for some of the more innovative therapeutic players. Mm-hmm. Right? The platform is really a phenomenal fit for their needs. Mm-hmm. You know, if they need Western blot reagents, they still need Western blot reagents. Mm-hmm. I think it's gonna be more of a balanced. Mm-hmm ... order book. And what's the backlog on ddPCR? How will you be able to meet demand pretty quickly when- Uh ... when that comes back? Yeah. I mean, our supply chain, our instrument supply chain issues are all behind us now. Mm-hmm. Okay. They were very painful-... in, you know, 2022 and 2023, but they're all behind us now. Got it. Thank you. And you recently announced some partnerships in the ddPCR side, where, you know, basically, you've talked about this a year ago, getting into—more than a year ago, about getting into liquid biopsy, and we're starting to see that. So- Right ... how big of an opportunity is this for you? You know, maybe start with the ones that you've announced to date versus kind of the stuff that, you know, yet to be heard about. For sure. Yeah, well, the seeding for those occurs, you know, well in advance of commercial market access and announcement. In the case of Geneoscopy, it's been quite a few years. They did all their development work on it. And so, the same with Oncocyte. So, you know, having a broad seeding program- Mm ... is key. Mm-hmm. You know, entry into complex diagnostics, like those two particular plays, you know, it's not a short-term materiality factor, but as they gain market entry and are successful, those will become, over time, meaningful revenue streams for us. Okay. Great. And just, can you comment at all just on the macro environment, things that have been, you know, pressured the last, you know, 12-18 months? China, any rebound there, outside of the funding and the conversations that you're having, anything else that... You know, how are those in market share? Yeah, China's definitely been a ride. Mm-hmm. Still soft in life science. I think we feel reasonably good- Mm ... on the diagnostic side in China. Russia is not talked about by all companies, but we still- Life science business is gone in China. It doesn't exist in Russia; it doesn't exist any longer. But, you know, there's still some essential clinical products that we supply there, but that's proven challenging. You know, the other macros are, you know, the biotech biopharm, but academia stable, I would say. Just some delays in the- Mm-hmm ... NIH grant, cycle-... which kind of created a little hesitancy, I would think to say- Okay ... in Q1. All right. Well, we've got a little bit more than five minutes left, and for those of you that have sat in, you know I like to have a little fun with my management. So, right, we're gonna do that, and I'm gonna test your ability to multitask. Oh ... problem solve, and answer questions while trying to do a Rubik's Cube. So- No. Good luck. You are... So I know why you're doing this. Well, it's, you know- I can't do it anymore. You have- I used to be able to do it in, like, under 30 seconds. I know, but let's see it. I can't. For the record, none of the other management teams have completed it. I'm old and frail now. It's okay. I'm retiring. Well, look, part of being a good manager, you can also delegate, if need be. Yes, don't put it over here. So- No, you know. Dangerous, dangerous. Look, it's not that- I can't even hold it. Give it a try. All right. Thank you, Dr. Robinson. All right. Now I can't. All right. We didn't talk about the clinical diagnostics business, so, can you just talk about the long-term attributes of that business, where you sit from a competitive standpoint, the health of those markets, and, you know- Yeah Should investors think about this as a low single-digit grower? Yeah, I think on our core platforms, right, Immunohematology, diabetes testing, these are kind of low- to mid-single-digit growth demographics, right? Mm-hmm. So you know, fundamentally, that's not going to change a great deal. Mm-hmm. You know, we've got an autoimmune platform, which we're building a next generation instrument system that will be better suited to the large labs. And that's going to drive, you know, ultimately a higher growth rate on that portion of the business. Mm-hmm ... on BioPlex. But really, the kind of inflection point will come back around our investments in entry molecular diagnostics. Okay. PCR|ONE investment, which was an acquisition- Mm-hmm ... building that platform out and launching it, Droplet Digital PCR into clinical applications around reproductive health, and, and we think there's a meaningful oncology opportunity as well. Okay. So, those are really kind of inflection points for the diagnostics business. Got it. But those are a few years out. Okay. And just the base business, the sustainability of that, well, how much margin pressure have you faced from pricing? I know a lot of these are reagent rental contracts, so- Yeah ... well, you know, did you have inflationary adjustments? And if not, how do those adjust over time? Yeah. So, you know, it's pretty hard when you're on tenders that may or may not have had a, you know, an inflation index built into the tender. Mm-hmm. They can be 4, 5, up to 7 years contracts. Okay. The only time you can really get to tweak something is on a renewal. Mm-hmm. We are working hard to try and achieve that, and there is opportunity to do that. But the inflationary pressures were real- Mm-hmm ... still are. Mm-hmm. We have to work hard on the cost outside to offset it. Okay. Now, you mentioned getting into molecular diagnostics. How does that-- what's the requirement from Bio-Rad to build that out? You know, obviously you need the products, and then are you-- is it a different call point, or are you still calling on the same types of products that are buying? I mean, same kind of customers, but a different lab sometimes- Mm-hmm ... within the customer. But you know, we're you know, obviously extremely familiar with molecular biology because of the life science side of the business. Mm-hmm. We've just, you know, historically never parlayed that capability- Mm-hmm ... into the clinic. Mm-hmm. That's going to change. All right. We've got to talk about Sartorius. Mm-hmm. What are... You know, obviously there's a lot going on, and, and maybe we won't get an answer for, you know, till 2028. But just have you guys look at it, what-- you know, how should investors think of some, what your ideal outcome would be with Sartorius, and, and what drives that outcome? Obviously, with macro environment negative, you know, both stock prices are depressed. It, it makes sense that there's no rush to do anything right now, but, inevitably, markets will come back, and assuming there's a, you know, stock price appreciation, what's the, what's the goal? What's the ultimate outcome and, that you see, both of you? Someone that's leaving and someone that's coming in. You go first. So, I mean, I guess where I'll start is, it's an equity investment. Mm-hmm. Right? That's what it is. And frankly, it's not factored into our valuation. But you know, at the end of the day, people have a question as to what does it mean to have that equity investment, to your question, Hunter. Mm-hmm. The end game, I think, you know, what the company has done prior to me coming here is look at the options- Mm-hmm ... in terms of, you know, whether it's acquiring it or selling the shares, or the position, these sort of things. And so I think as we continue to move forward, we'll look at those options. Mm-hmm. The market has changed, valuations have changed, all these sort of things, but at the end of the day, it's an equity investment that can be monetized. Okay. Right? It doesn't need to be the end all, be all, doesn't need to be the acquisition of Sartorius. Because frankly, it can't--mathematically happen- Mm-hmm ... right? From a financial standpoint. Okay, great. Yeah. That's a great answer. I would reinforce that. I mean, you know, it's clear it can't be done now, and it's not clear that it ever could be executed. Great. What we have is a valuable- Mm-hmm ... asset. Mm-hmm. And it is a valuable asset, especially if you want to get into bioproduction. Mm-hmm. Is that something that you see as a need to have in the life science tool space? Because a lot of competitors do have a bioproduction asset, so- I think it's another really compelling leg on a biopharma segment strategy. Mm-hmm. Very attractive market segment, strong growth driver over time- Mm-hmm ... expected to be so for many years. Love to expand our position there. But you know, that's not the only place where we can grow, right? Okay. So yeah, that doesn't mean that we have to be there. Yeah. Right. Just last question, you did mention this at the beginning, Andy. Mm ... but it sounds like you're pretty close on someone, as you know, should we expect any timing you can give us on when you could announce a potential COO? Oh, a COO? Yeah, we, yeah, we're in the interview process. No, I think it's a little early to say- Okay ... but we're in process right now. Okay. We're pretty close on the president for the clinical business. Oh, okay. That's right. Yeah. Okay. Yeah. Well, with that, we'll wrap. Roop, Andy, thank you for your time. We really appreciate it. Thank you. Thanks for having us. Yeah. Appreciate it. I'm disappointed, Andy- No, no ... I was counting on you to be the one management team that could finish this, but nah. Still got a couple more meetings, so who knows? All right. Well, thanks, guys. All right. Thank you. Cheers. Appreciate it.