Good afternoon and welcome to Bank of America's Global Healthcare Conference, coming to you live from London. I'm Derik de Bruin, the senior U.S. Life Sciences and Diagnostics Tools analyst, and it is my pleasure to welcome our next company, which is Waters Corp. Today with me, we have Dr. Udit Batra, President and CEO of Waters. Welcome, Udit, and thanks for making the trip over from Massachusetts. Appreciate it. Sure. To kick things off, any introductory comments or shall we start the inquisition? You call it the inquisition, so I should make some introductory comments- There you go. So that I can delay it. But it's great to see you, Derik, and great to see every one of you here as well. It's been three years, slightly over three years since I joined this wonderful company, Waters, and what a three years it's been, right? Smack in the middle of the pandemic, I joined September 2020. The markets, I guess Waters was going through some struggles. The markets were struggling. Things went up, supply chain crisis, things went down, and now we are struggling through, I guess, a slowing market. But in all, I think it's fair to say over the three years, the team that we've put together has delivered on what we said. We said we will return to our commercial momentum, and we have. We've sort of got some pretty nice growth, and Q2 was no exception. We recharged our innovation. A lot of stuff was stuck in late stages in our pipeline. We launched it, and it's doing pretty well in the market. And we also said we will start to get more open to other ways of allocating capital beyond share buybacks, and we made the largest acquisition in the history of the company, the acquisition of Wyatt. So it's fair to say things are moving along as we said. Now, that said, I know what's on your mind, which is, "Hey, what's going on right now, and what's going on in China? What's going on in pharma?" And we'll get to talk about that. But I wanted to say I'm super, super proud of this team to be able to navigate through all the ups and downs and deliver on what we said, and Q2 was no exception, right? I mean, we said, U.S. and Europe were pretty resilient and in Q1, and I think we came out in Q2 and showed with the results that that's the case. I think the only soft spot, I guess, the only one that we have to be concerned about is China. Perhaps, we'll talk about that- Perhaps. In a minute, but thank you. Thank you for giving me the chance to thank my team for the incredible work that they're doing. Great. Yeah, it's been a good rebound in the business, certainly since you've taken over. So, Udit, you and I are old. We've been around the life sciences industry for a while. I turned 60 last week, so I can say that. So when I look at the tools market today, I see a lot of similarities with the genomics bubble from the early 2000s. You know, at that time, you know, we've been covering Waters since 2001. I mean, since that time, you know, you had, you know, you had this, this, you know, biotech was booming. There were IPOs, you know, you had pharma spending like drunken sailors. You had the NIH budget doubling, you know, good macro tailwinds, and then essentially you had everything hit the fan, you know, in 2001, and things slowed for a number of years. So the, you know, then you saw the markets sort of go from double-digit growth down to low single and mid-single digits. But one of the things that really jumpstarted the market again was in the mid, you know, 2005-2006, when China started spending heavily, right? So that's a very long-winded set of introductions to— Let's talk about China because I think it's the, it's the most critical thing that most investors are asking on. So I think the first question, is this just a cyclical down firm, or do you think there's something more structural going on? I think it's a fantastic piece of context, and there are several differences from that time to this. I mean, I wasn't in the tools industry at the time. I was in the pharma industry at the time. But that said, there are. I think we should look at the facts- Yeah. And we should look at what we are seeing. And I was in China less than two weeks ago, so I can share with you some of the insights. I think the major insight is the government wants the biotech and the pharma industry to become much more innovative. Okay. So if you look at everything that's happening through that lens in China, it starts to make sense. And I had a chance to visit a whole bunch of customers. I'd spent time with our reps. I spent so much time with our teams that they couldn't, they couldn't bullshit the, the CEO, right? So they had to sort of, they had, they had to keep telling me what, what was going on. It took, and it, and at the end, the insight is that the government wants people to focus on innovative molecules. And so why do I come to that conclusion? Let's take the pharma market. I think that's where your question really is. Pharma in China, what's going on, and it has really three segments, right? The first one is biotech, right? So the biotech industry in China went up like it was growing in the U.S., even faster, became 20% of the overall market for us at least. And in March, it crashed. That said, we're starting to see it come back to life, not becoming 20% of the market, but there is some good science going on, and you can follow it, and you can see the in-licensing that is going on. Merck is in-licensing compounds from companies in China, so there is good science going on. So the biotech industry will come back, but probably not to the same levels. Second is the branded generics market, which is the largest portion of the market. And then over many, many years, this market has sort of been subjected to the VBP, right? And price cuts every year, every couple of years. And right now is no different. But what's happened in addition, is the government has launched the anti-corruption campaign. Now, the context behind that is also straightforward to understand, right? The government had said: Look, we don't want you to spend a lot of commercial dollars on generics. Everybody should know what generics are. Physicians should be able to prescribe without you telling them what it is. And the government has just said: Look, we don't want that interaction. We don't want the reps to go and detail to physicians in hospitals. So they took 150, 160 hospitals aside and said, "You guys got to stop." And we went to the pharma industry and told them to stop, and everybody's trying to figure out what that means and how they're going to restructure their commercial forces, and I had a chance to talk to several pharma customers, right? So they're trying to understand it, and I don't know how long it takes, a couple of months, three months, and if I'm confronted with that as a business leader, I restructure my commercial force fast and then get back on track, right? So I think that's what they're going through now. Again, the focus is to move everybody towards innovation. Don't spend money on stuff that is not adding value to innovation. And then the third part of the market is contract manufacturing, right? And this has grown rapidly over the last few years in China, and that is, of course, hit by the slowdown in biotech, the slowdown in branded generics, but also ex-China customers, right, who sort of pulled back some of their volumes, and some of the volumes dissipated after the pandemic as well, right? So that's the breakdown. And in the contract manufacturing piece, it's still going down, right? I mean, the volume is still coming out. Some of it is going to Singapore, the U.S., et cetera, where large contract manufacturers have other sites. Some of it is proportional to the volume that is outsourced from biotech and from the branded generics market. If you take all that in context, it's gonna take a little bit longer for us to figure out when the bottom is, right? I think that's your question. Yeah. I'm not courageous enough to predict exactly when that's happening. I can just give you these factors and say, "Look, it's all trending in the direction of becoming more innovative." And I just want to point out one more thing, which is not related to pharma. And you say, "Well, so okay, so it's becoming innovative. You just said biotech is gonna normalize. Is that where innovation is gonna take place, or is it gonna be in the branded generics market? Surely it's not in the CDMO market, right? So where is it gonna happen?" It's happening in the academic institutions. I had a chance to visit some universities. Boy, are they funded! My goodness, I've never seen so many instruments, so many high-end instruments in a lab. Electron microscopes, NMRs, high-res mass specs. I mean, stuff that's super expensive, and with the stimulus, they got even better equipped, right? So a lot of the basic research is going on in academic institutions, and they are super talented. I mean, top researchers are there, and good science is going on. It's a matter of time when they come up with good leads and good molecules. I think where I'm more optimistic is that all of that is now gonna get translated into clinical medicines, and that's where Waters comes in. And so you say, "Well, what is the implication for Waters?" And it's a long answer, but it's something that I wanted to spend time thinking about. What are the implications for Waters? I mean, we are super excited that the country is gonna focus more on innovation, and it's gonna go towards translational medicine. This is something that plays to our strengths, and that means that we will invest more in technology development in China and not just manufacturing. Sounds counterintuitive. But I wanted to take you through the story, and it took some time for us as a team, and several of us went one after the other, and I went towards the end, and I said, "Okay, so what does this all mean?" But I, I think, I mean, China will rebound. The fundamental demand is there, the population is there, people are gonna consume medicines. And what is interesting now is it's gonna become an innovative economy. The innovative sector, the biopharma sector, is gonna become much more innovative, and I think that bodes well for companies like us. How much of your business in China is biopharma? Because you-- there's also food safety. Yeah. There's also chemicals. Yeah, yeah. I mean, some of the chemicals markets are- About 60%-70%. Okay. Academic and government is 11%-12%, growing, of course, rapidly. I don't expect that to grow like this forever. I mean, you know what, how that segment goes. Yeah. You give academics money, they spend it, and you give them more money, they spend it. But I think the top universities are satiated. I mean, I don't know what they're gonna spend on if you give them more, because they're super well-equipped. They're doing research now. The question is, when these molecules that they're developing need to be translated for the clinic, that's where the spending will go next. What about the push for building out more domestic? I think it's real. I think we should not act like it's not real. It's been there for a long time. Yeah. Let's divide that into two parts. If you look at the consumable segment, right? Reagents, antibodies, even single-use bags, my old business, there are local manufacturers. The interesting thing that happened over the last two-three years is that these consumables were trialed. Earlier, people only wanted branded consumables, branded antibodies, branded bags, et cetera. But now, in the past, there was no supply, right, during the pandemic, so they trialed the local guys, and in some cases, they're just as good. So especially for research use, that transition's happened to a much larger extent. Now, you can't build new instruments in two years. Yeah. Right? So that transition's not occurred, but I'm convinced that there will be a local economy that will build up, that will start making some of the instruments that we supply as well. Now, when you talk about buy local, we've not heard at all anything that suggests that if we are inclined to support the innovative economy, that we would be treated any different than the local, than the local players. The government leaves it in the hands of the buyer to make the decision, right? And if you're a researcher and you're publishing in top journals, you want the top instruments, right? And that's, that's the benefit that we have, and it's the same thing. It's the same thing that happens in the rest of the world. So it's, it's going to catch up. The, the local environment will catch up to the rest of the world. You'll have local players as well, but Waters is the Mercedes of the industry, and so I don't expect that to be a meaningful impact. Even if it is some impact, what do you wanna do? You wanna exit, right? Yeah. You wanna take your market share from 20 to 0 overnight, or do you wanna go from 20 to 19, right? So irrespective of the scenario that you build, having a local technology center, a local manufacturing footprint that serves the customers well, collaborates with the top customers there, builds the innovative biopharma sector, I think is the right direction. So going along the consumables line, obviously, you know, the column usage, I mean, and then there are multiple vendors. There have been for a long time. Yeah. Are you seeing more competition on- Not at all. Columns? I think columns, the challenge, I mean, we've seen this forever, right? Right. There have been low- end columns for generic molecules, simpler molecules. But anything that's complex, I mean, developing new columns is super difficult. It is probably the most difficult part of our, of our portfolio to copy, right? I mean, you're thinking and, and, and we are the only vertically integrated company, right? So we make our own particles, we synthesize our own particle, we pack our own particles, and, and we functionalize our own particles. So we, we think there, even if there is other type of competition, it plays to our strength. So data we have others who are at the lower end. So I'm, again, I mean, I feel good if innovation is rewarded because that plays to our strength. Got it. How much has China been a growth driver for the tools market over the last, I don't know, five, 10 years with it? Because I think it, it's a question on like... I agree with you, it will come back. I think it's a question of timing, but so this question is like, are we looking at slower markets for 20, you know, is it-- and look, I don't think anyone expects the markets to bounce back to 4%-6% for next year. I don't think they overall. Right. It's not, it's not gonna bounce back, right? Just given the cost. China goes and comes back rapidly, right? So we have a scenario that we've built where it comes back faster. We have a scenario where it doesn't. Yeah. We're doing our planning now, and there are reasons to believe that if everybody gets their act together on translational work that we just talked about- Mm-hmm. -that could be a pretty nice growth driver. If the branded generics folks, and that's why I wanted to take you through the- Yeah. The drivers, right? And if you just double-click on them, it's very easy to talk about it in generalities and not come to any conclusions, right? The biotech piece has bottomed out, right? It can't go any worse, and it's starting to get go up. Second, he branded generics piece, it's gonna take a little bit of time for the companies to figure out what the new commercial structure should be. Yeah. So that'll take a little bit of time. And then the contract manufacturers, I think they've been obliterated in the last six months, right? So probably a little bit more to go, but I don't know how long that takes. Does it, does it take three months, six months, nine months? I don't know. Yeah. Right, but coming to your question on importance of China for Waters and the tools industry. Yeah. I can speak Waters because I have the numbers, right? Yeah. If you just look at it for the last 18 or so years, right, 2004-2022, we have data from that much time. Waters grew roughly 6%- Yeah CAGR over that time. I think you know this, I've seen that in your reports, right? That's where my numbers are, yes. Yeah. 5.7% is my number. Yes. So, um- Organically, yeah. And China grew 16% in that time. So if you just take China out, the rest of the business grew roughly 5%, slightly shy of 5%. The incremental growth from China was 100 basis points. Yeah. That's very substantial, right? Yeah. Now, if you take the last three years, which I can speak about much more intimately and confidently, China grew 9% on a CAGR basis. The rest of the world grew 9%, right? So we are growing faster in this time frame, and we're growing faster without China being accretive to growth. Now, there's something else that's happened. I can only speak about Waters. There's something else that has happened in Waters, is the rest of the world has started to contribute, and I think you pointed that out in our last conversation as well. I mean, the U.S. has been growing nicely, Europe's been growing nicely, as nicely as Europe can. And the rest of the world, I mean, India has now been growing mid- to high teens for on versus last year on two-year stacked, four-year stacked. U.S. has rebounded nicely, so I feel the rest of the world is contributing super nicely, right? And if China takes a little bit longer, it's not the end of the world, and you saw that in Q2. That's a data point- Yeah ... for us, right? I mean, for us, U.S. and Europe grew high single digits in Q2, and China declined mid-teens, right? Even liquid chromatography, which everybody said, "Ah, you know, it's gonna be a long cycle." There were two or three different points of view on how long it takes to rebound, that rebounded. I mean, we grew also low single digits, with the exception of China. China went 40%, right? So China is an important market. It will remain important for Waters, but we can do well even if China is struggling for a little bit. It's really important to keep that in mind. Got it. Did you benefit significantly from the prior rounds of the stimulus funding, and what are you sort of like hearing from your sources on the ground on when? Because the government's gonna have to step in at some point. Yeah. The question is, how will they step in? Yeah. Right? And again, if you play out the thesis that I just talked about earlier, first, there was the stimulus, we benefited. Our academic segment grew like it's never grown before, 80% and then 30% in Q2, 80% in Q1. Our high-res mass specs, our LCs, I mean, those guys are equipped like anything, right? I mean, they have everything that they want, and if they want more, they can have more. Maybe there's another stimulus, and it probably goes to lower-tier universities to equip them. But I think if you play out the thesis that we talked about, if you want to become an innovative pharmaceutical economy, you have to do translational work, right? And I don't think there is any intention locally of outsourcing all that translational work to the U.S., and to Europe, and to other countries. They want to build the translational piece... Right? And that's where the investment will go. That's my guess, right? I think, again, it benefits. It benefits us. I'm not sure if there is a small stimulus when it comes, and I'm not sure which universities or which institutions get it. I don't think it goes directly to branded generics companies. Yeah. That's not something that I would expect. There's a sea of difference between the research that is happening in top-tier academic institutions versus different companies. Just going back to something I talked--I mentioned earlier, what about material sciences? What about food, those markets? I mean, how are they sort of from a, from a global basis and also from a China-specific basis, just so- So it's super resilient, right? I mean, we've seen our industrial segment grow double digits for the first half of the year, and stacked also, it's growing double digits. The drivers are robust, right? I mean, PFAS testing. PFAS testing is, it's a small portion of our overall business. I think what I read is some reports say it's growing 20%, some competitors say it's growing 20. I think we're growing well in excess of 20. Right, and it is-- And that portion, the way it's characterized today, it's a $200 million market or so, and that's only for water testing, right? It's now people want to test sewage, people want to test tissue samples, you name it, right? So the number of samples and the types of samples tested are increasing. The number of molecules to be tested is increasing. The EPA in the U.S. listed 40 molecules that they call PFAS or PFOS, and there are another 160. So anything that has fluorinated carbon is PFAS, right? And these things don't degrade easily. So there is gonna be. Over the next decade, there's gonna be a lot of remediation work. There's gonna be a lot of testing work. We feel extremely good about where we are because we have the most sensitive instrument in the industry. And whenever we go head-to-head with competition in a competitive situation, we win because the customers want a sensitive instrument. The EPA is raising the standard. They've asked for parts per trillion detection. The instrument detects parts per quadrillion. In case you're wondering, that's 10 to the minus 15. And that's pretty significant, right? It's a pretty significant competitive advantage. So we think there is a significant unmet need in the PFAS segment. In the materials segment, which is where our TA business has been doing well, battery testing, and again, here, China plays a significant role, right? Testing batteries for their thermal resilience is something that we support our customers to do. In the US, it's mostly in the characterization. In the US and Europe, it's mostly in the characterization segments, whereas in China, the volume of batteries being produced is so high that they want to take it into QC testing, right? And again, here, we're working with customers in China, CATL, Baidu, so, BYD, and the like. And we're we feel very good that some of our testing techniques will move into high volume, high volume arena. So overall, the nature of the industrial segment is changing. Yeah. Right? The drivers are PFAS, the drivers are battery testing. And I also want to talk about clinical for a second, right? This is something that we talked about, and I think you and I had also spoken two years ago about this, use of mass spec in early disease detection, right? And, I mean, we have roughly a $200 million business for newborn screening, where you need to test multiple analytes, and you need to do it fast, right? And they're present in minute quantities. And if you take that logic, multiplexed, multiple analytes in minute quantities, that logic can be applied to other disease areas like endocrinology, like oncology, and that's where we are developing the value proposition. In fact, again, China is in the lead, right? So just to give you some facts, from 2018 to 2020, that clinical business grew roughly 3%. We separated that business in 2021 from the rest of it and said: Okay, we're gonna make it an integrated business, and we're gonna give them their own R&D. We're gonna do some extra capital allocation. That business has grown 13%-15% since then, right? So there are clear unmet needs for early disease detection, for minute quantities of many metabolites at the same time. So let's turn to biopharma, and developed biopharma, shall we say, or U.S. and European. So, you know, you sort of... I mean, Waters sort of stuck out in the quarter is like you were talking, you saw some pickup. I think most of the other life sciences tools companies were down. I guess, first of all, what is going on within the pharma industry in terms of, are they worried about the IRA? Did they overspend during COVID? Are they, you know, budget conscious? I just sort of like, what's going on? Can we and then can we separate pharma from biotech and sort of like those? So it's a big question. It's a good question, and again, we should sort of segment it a little bit- Yes. Right? And I think that's, that's where you want to go as well. But the 10,000-foot view is, yes, there are capital constraints, and we have said nothing different. Yeah. I mean, our results have been good because we've been talking about it, or relatively speaking, good, because we've said: Look, some of the spending was delayed from Q1 to Q2, and we saw Q2 pick up. Yep. Right? The decision time is longer. There's no question about it, right? My old friends who are heads of manufacturing or CEOs in some of these companies that I worked with a while ago, they're all taking, like my CF and I-- CFO and I do now, right? Yeah. We put an extra step and say: "Guys, do you really need this right now? The interest rates are high. Inventories are higher than they were because the demand has gone down, and we need to work on working capital and preserve cash. Do you really need to spend this right now?" Right? So yes, there is a slowdown in approval. However, however, there are zero cancellations of orders in U.S., Europe, and Asia Pacific. Zero, right? We have not seen any cancellation of orders because the quality of orders is very high. People need these instruments, if you're talking CapEx, need these instruments, they're just saying, "Hey, can I just delay it a little bit?" Right? So I'll come to the question of budget flush in a minute, right? Does it, is it use it or lose it again? For 20 years, and I ask my colleagues who've been in the... And you've been around for a while, I mean, there's always been a budget flush. So the question in my mind, I mean, intellectually, you'd say in China, it makes no sense, right? So there will not be a budget flush in China. Maybe there is a little bit, but, hey, no. But I think you'll see different behavior geographically. You'll see different countries and different companies behave a little bit differently. So it will not be a bolus, but you will see some places where they're well-funded. I mean, the companies that have GLP-1s, the companies that have Alzheimer's compound. I mean, you don't want to support those molecules? What do you want to do, right? I mean, I cannot imagine them not supporting them, right? So I think we are trying to oversimplify when we ask that question, is there gonna be a big budget flush or not? Everybody's gonna behave the same way. No. I mean, everybody's situation is different, so they're gonna behave a little bit differently, differently. So you'll see, you'll see a—you'll see probably a weighted average, probably not as high, but a little bit. But, but definitely some, right? Depending upon which institution you're talking about. So what's going on in biopharma? Overall, bit of caution, overall preservation of cash, but not universally so. And I think that's important to keep in mind, and that's why we've sort of said, okay, we don't know where this whole thing is gonna land. Now, separating biotech, biopharma, generics, contract manufacturing. Let's say those are the four segments, right? We talked a bit about contract manufacturing. There's overcapacity in contract manufacturing, in biologics, in small molecules around the globe. I think people went crazy in putting capacity down, even prior to the pandemic, right? Mm-hmm. So I think there, the demand is not gonna be as high as it's been in the past. So let's put that aside for a minute. Generics, I see absolutely no change. I think we've talked about China, and we don't need to repeat that, but in India, I see no change. In the U.S., I see no change. The volume of generics is going up. The testing will go up, and you'll need LCs and columns and mass specs to do those experiments. Now let's move to biotech. And we talked about China, so we put that aside. Biotech in the U.S., because that's the other place where it's pretty strong, went down pretty dramatically in March, but it's come back quite nicely, right? I think there were some low-quality companies and compounds being funded. That is all flushed through the system, right? Which is good, right? Now you're bottomed out, and it's- Mm-hmm ... starting to go up again nicely, and they're starting to purchase. They've not changed their business model dramatically, right? They're just much more conscious on what they're spending on. And then finally, on pharma, we talked about large pharma, and not all large pharma are created equal. So I think it's good to look at the different segments, but large pharma is about 25-ish, 25%-30% of the overall market, not more. Yeah. Right? Biotech is 10, 12%. Generics is 25-ish%, and the rest is contract manufacturing, right? So it's not that you're completely dependent on... And again, there's an obsession of trying to oversimplify and say, "Well, large pharma is behaving this way, so everyone's behaving this way." Not really. Biotech is starting to come back, especially in the U.S., and look at it geographically. So we have a matrix like this in our company where we sort of have segmented the different markets and the different geographies, and there are greens and there are reds, right? China is the red, especially in branded generics, especially in contract manufacturing, and the U.S. is green, right? So again, I would not oversimplify. You're talking, you're talking to a sell-side analyst. That's what we do. We only have so much bandwidth. So you, I mean, are you hearing anything on, are you hearing anything on the. Is this just, Is this caution as people sort of like digest the IRA digest? I guess the question is like: When do you expect to see a bigger rebound in the biopharma spend or the f, you know, I'm not gonna say the floodgates open, but then suddenly become, the budget started to flow again. I mean, historically, that's been a second quarter situation, but I would agree with you. I mean, all of my models assume 4Q is higher than 3Q. I mean, I don't know if it's a flush, it's just the seasonality that you're gonna have some companies spending more. But when do we really get that? Okay, it's 2Q, they know what the IRA is, they know what this thing's worth, and then budget's coming out again. I think, I mean, IRA is in the discussions. Yeah. But again, not everywhere, not as predominantly. Yeah. Some companies have rare disease drugs. I mean, they're, they're fine. It's difficult to predict, Derik. Right. I won't sit here and tell you, "Hey, you know, this is when the behavior changes." And it is different by company and geography. It's very difficult right now to say, hey, exactly when the cycles will be shorter again, exactly when the CapEx crunch is finished, right? I'm not sure. Yeah. I will get yelled at by the hedge funds listening if I don't ask you the question. Since you reported the quarter and today, have you seen any sort of notable changes in the markets? I cannot talk about the quarter. Are you into that? I know, I know, but if I don't ask the question, I'm gonna have a bunch of texts that yell at me for not asking the question. So, I guess the, so I think coming up within the context of RRAs, sort of like corporate tax rates and something like that, do you still feel comfortable with where your tax rate is? I mean, it's- Yeah. historically been relatively conservative. Yeah, no, very. Or not conservative, but low, I should say. Nothing, nothing new to add. Okay. You mentioned GLPs, and you flagged this on your earnings call. Can you sort of talk about how that sort of impacts your business? I think it's too early to start quantifying it. I think that's what you're after. It's too early to start quantifying it. What I can tell you, and you can do the volume calculations yourself, right? What I can tell you is that our columns are in the lead, and they are specified to separate and test the GLP-1s from the two leaders in the industry. Our LCs are the leading LCs for them. In addition, for the largest one, we have our online and at-line testing equipment. This is called a Patrol, something that was developed in collaboration with Merck way back. This is Merck Sharp and Dohme in 2000, the 2000s. And it's something that's been adopted, that's now being used. It's gonna be adopted across multiple manufacturing sites. So we are not yet seeing the volume impact of GLP-1s, right? And the volume has not started to pick up because the multiple manufacturing sites have not started to produce, and so you'll see that in the coming years. But we checked this again and again and again with my colleagues, and I said, "I said this based on what you told me, and I may also talk to the customers." It's super clear that our columns and our LCs are the ones that are in pole position. Got it. How should we think about, you know, you're controlling costs, you're spending, you have current-- Basically, this is a margin question. It's like, how do we sort of think about the margin evolution from here, particularly in the context that you just added Wyatt? Yeah. Right. And that has obviously also impacts your margin. So can we just talk about baseline for this year? How do we think about margin expansion going forward? I think the basic algorithm is this, is what we've talked about in the past, right? We basically said, look, if you grow 5%, there's about 50 basis points in gross margin that comes through. And we've also talked about the fact that Waters really never implemented any of the modern productivity approaches, right? We didn't implement any Lean Six Sigma across our manufacturing sites. We don't have a capability center, so we were, we had all these vendors who were charging us an arm and a leg to do IT work. So we're bringing that in and creating an offshore shared service center. So all of those initiatives are ongoing, right? And they should add another 50 basis points. But we also said that we want to move our business increasingly towards high-volume testing in faster-growing areas, right? Small molecule GLP-1s, by the way, are small molecules. Mm. Right? So much for the theory of only large molecules being great. But we want to move our business and capture faster, faster growth, with the same business model, right? High volume tested, testing in compliance-heavy areas, right? And that requires additional investment. So we said 32, sorry, 70-80 basis points will go in that direction organically, and we are continuing to invest in that area. And so if you add all that up, you're looking at 20-30 basis points of margin expansion every year, right? We saw more than that, in Q1 and Q2. Right, but I don't want to promise that we're going to see 100 basis points every, yeah, every six months. We want to invest, and I think just giving you some proof points on where I have even more confidence in the areas we've picked. Take bioanalytical, take Wyatt and that area, right? We said that we want to build the world's leading bioanalytical frame, meaning for large molecules, for mRNAs, for monoclonal antibodies, for antibody drug conjugates. The QA/QC units should be similar to small molecules. You should be able to take data and file it with regulators and not have to do bioequivalent studies to show molecule A is equal to molecule B. In this case, it requires more than one instrument. It requires LC. Well, LC is already in the flow. It requires a simple mass spec, it requires multi-angle light scattering to get the physics of the molecule, and maybe one or two other techniques. But all of that has to go into one compliant software called Empower. Empower is already used for LC, it'll be used for the others. So that's progressing super well. I mean, in fact, our BioAccord is now used for raw material testing, and Janssen's already published data. So if Janssen's published data, you can imagine others are following. Our BioAccord's already used for online and at-line testing and clone selection. This is our work with Sartorius. Several customers have adopted this. You go downstream, AstraZeneca has taken the BioAccord and started to do at-line testing. And for QA/QC, Regeneron is in the lead. So I'm naming these folks because they allowed us to name them, but you can imagine there's a whole bunch of other customers who feel that it's time that more sophisticated techniques, simpler versions of those, make it into high-volume testing, so they don't have to do 60 tests and file them in the drug master file. And I feel really good about the progress that's been made, right? And I want to invest more in that area, and that's why you won't see a 100 basis points of margin expansion, maybe. Just, I know we're coming up on time. Any questions from the audience? ... You, you touched briefly on Wyatt a couple of times. Can you talk about how that fits into your portfolio and if there's anything else out there, where you see gaps, especially on that bioanalytics side, that complement the business? There's always more, more toys, right? There's always more analytical techniques that we can add, and so I won't name all of them, but there are a few, maybe one or two that we think we can add to the armamentarium, but Wyatt is going super well, right? We just to sort of take a step back, multi-angle light scattering replaces a whole bunch of other techniques, and it's way simpler to use. It replaces analytical ultracentrifugation. It replaces dynamic light scattering. It replaces PCR testing if you want to look for genomic loads. It replaces a couple of other techniques that look at empty versus full capsids for viral vectors, right? So Multi-Angle Light Scattering has already got a place in characterization of large molecules, and it is a technique that is furthest along in QA/QC when you think of any other technique outside of LC. So our customers came to us, and they had said, "Look, can you guys put this data onto Empower or make it compliant ready?" And we're very far along that journey. So just to give you an update on what we had committed to on the synergies, right? So we had said, "Look, we will get the Waters field force to get us a lot more leads for instrument, for Multi-Angle Light Scattering instruments." Despite the slowdown in the market, we still grew to... We still added 200 basis points to our overall growth in Q2 through Wyatt, and it still remains very much on track. Despite the slowdown, right? So the lead sharing is going very well both ways. Second, we had said we will attach our SEC columns to every multi-angle light scattering instrument that's sold. That we had said we'll do in Q3. It's already happening, right? So we're already selling. And number three, we had said our HPLCs will replace the competitor's LC as the LC of choice when multi-angle light scattering instruments are put together with LCs, and that's already happened. So very far ahead of where we thought. And I think were it not for a slowdown in CapEx overall, you'd see even a much larger impact already. But the seeding has happened, and it's a great acquisition, and the cultures are very similar between the two companies. So feeling very good about it. So we're at the one-minute mark. You know my standard question, my closing question. What's misunderstood or underappreciated about Waters? I think given that it's an instrument-heavy business, I think it's important for people to realize that instrument-heavy businesses will always go, they'll always fluctuate. Right? But if you look at it in the long term, on a long-term basis, it grows 5%. Yep. Has a 60% gross margin, mostly a replacement business, requires next to no SG&A. It's a damn good business, right? And now as you go forward, and this is only 50% of our business, the other 50% is growing high single digits, right? And if you go forward now, all the drivers are even better, right? So we're moving towards faster-growing areas like biologics, like LC-MS and diagnostic testing, like battery testing. We've got better pricing because we brought in a lot more innovation, and our systems and processes are better, right? So it used to be 50 basis points in that 5.5%, and now we're seeing in excess of 200 basis points, which we intend to continue, right? So as you look at this and then and then if you look at faster-growing areas, we've just talked about characterization of biologics. This hasn't even moved into QA/QC yet, right? So this is a really darn good area to be in. And I think if we have the stomach for fluctuations, because anytime you have a replacement business, it's very easy to postpone the replacement one or two quarters, but you have to replace it. That's why, that's why this business grows 5%. So I think that's the part where we have to do even more to explain the Waters story and why it is a fantastic business the way it is today itself. And we don't need to now sort of look at massive restructuring of the business going this way or that. Super happy with the structure of the business. We just need to do even a better job of explaining. With that, thank you, Udit. Thanks for being here. Thank you, everyone, for listening. Great conference.