Good morning, and welcome to the Techne Corporation's earnings conference call for the first quarter of its fiscal year 2014. Hosting this call today is Chuck Kummeth, Chief Executive Officer of the Techne Corporation. [Operator Instructions] It is now my pleasure to introduce Mr. Chuck Kummeth.

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

Before discussing the financial details for the quarter, allow me to remind you that some of the statements made during this conference call may be considered forward-looking statements. The company's 10-K for fiscal year 2013 and the 10-Q that will be filed for the fiscal quarter ended September 30, 2013, identifies certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made this morning. The company does not undertake to update any forward-looking statements as a result of the new information or future events or developments. The 10-K and 10-Q as well as the company's other SEC filings are available through the company or online. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measurements are available in the company's press release issued earlier this morning or on the Techne Corporation website at www.techne-corp.com. Sales as reported increased 14.2% to $85.7 million for the quarter ended September 30, 2013. Organic sales increased 5.1% for the quarter. These organic sales exclude $6.2 million of Bionostics product sales and $610,000 of favorable foreign currency exchange fluctuation. The Bionostics acquisition was completed in July 2013. Adjusted earnings were $30.7 million or $0.83 per share for the first quarter of 2014, an 11.6% increase over adjusted EPS of $0.75 for the first fiscal quarter of 2013. Adjusted earnings and adjusted earnings per share exclude intangible asset amortization, cost recognized upon the sale of inventory that was written up to fair value as part of the acquisition and professional fees related to the Bionostics acquisition. The company operates 2 reportable segments based on the nature of its products. Our largest segment is the Biotechnology segment, a segment that develops, manufactures…

Thanks, Greg. One of the most important aspects of our third quarter results is that the pipeline [indiscernible] for our organic sales growth is the highest level of sales growth since the June quarter of 2011. This suggests strategic planning unveiled in late September [indiscernible] and starting to deliver some tangible results. I would like to add a few supplemental comments regarding our financial results for the first quarter of fiscal 2014 in the markets we serve. I will also make a few comments regarding our product offerings and a couple regarding the progress we are making with our strategic plan. The U.S., European and Asian markets all have very different market dynamics and are also working in different economic environments. As Greg discussed, we are gaining traction in the U.S. pharma and biotech markets but are facing difficult pressures in the U.S. academic arena. Thousands of large and small pharmaceutical and biotech companies comprise the commercial portion of our North American sales. The largest of these companies have continued to refine their business models, including plant closures, staff restructuring and outsourcing. As we stated on our late September strategy call, we believe these customers have a need for innovative new products and further believe investments in research is a key to our long-term success of [indiscernible]. At that time, we projected this customer group could reasonably expand at a low single-digit growth rate. The first quarter sales growth of this customer segment confirms our expectations. Conversely, sales to our U.S. academic customers have been declining due to uncertainties regarding high-level sustainability of academic funding. A major portion of U.S. academic research funding is provided by the National Institute of Health, NIH. There is a widespread perception NIH money is relatively protected in the federal budget process. However, the arbitrary…

[Operator Instructions] Our first question is from Steven Crowley of Craig-Hallum.

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

As I mentioned, we have made investments in the, I'll say, the 4 major quarters of the country. And we started very early from [indiscernible] onboard, and they started producing quite quickly. They're not all producing. We did hire them all at the same time. But there's enough for the data to show that it is working in some degree now. One quarter doesn't -- and one data point doesn't make a trend or anything else. But we like what we're seeing. I think things change. I think it's time for having more feet in the street right at the customers' site. And I think it's the right way to go. Same thing goes for Asia and China. Particularly, we more or less doubled our sales force in China over the last few months. We opened an office in Beijing. And as you noticed, 38% growth is quite a bit higher than 20%. Again, it's a small base, as Greg pointed out. So it's the beginning of the right tracking. And I think it will continue higher than 20%, and hopefully at the level that it's at currently and maybe even more. We'll see, we're not done investing in the commercial side in China as well. In Europe, we really are more doing an update. And we have a more or less field sales model in Europe and it's actually looking quite well.

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

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

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

Well, as we get larger, we'll bring on more infrastructure. We do keep inventory in China. And we're looking at investing in a hub and other tax-free zones to supplement our growth and take care of on-time delivery concerns and metrics that I'm used to doing. As we move forward there, I think it's a little bit slower view as in the U.S. because you're hiring the younger people. As you know, attrition is higher in China. It is by definition, so it's a little more interesting. But we're also going more aggressively. And the doubling of the workforce in 6 months is a pretty good start in terms of revenue. So I think as we get bigger, we'll have to back it up with other infrastructure. But right now, it's going pretty well.

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

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

Our next question is from Sam Jones [ph] of Citigroup. Our next question will come from Amanda Murphy of William Blair. Amanda Murphy - William Blair & Company L.L.C., Research Division: I'm curious, and I'm not sure if you're willing to do this, but is there -- are you able to quantify to some degree the growth rates in the various -- the 3 main business lines between proteins, antibodies and immunoassays?

Yes, we don't disclose those, Amanda. Appreciate the question, but we don't disclose at this time. Amanda Murphy - William Blair & Company L.L.C., Research Division: Okay, fair enough. And then in terms of the sales reps that you've added in the U.S., I think we talked before about how productive the reps are that you have already in-house. So I guess, my question is how much do you expect these new reps to add per rep over time? And also is there room -- or are you planning on adding more reps in the U.S.? I know you said that ultimately you'll expand in China, but I didn't catch if you said that you were still looking to add in the U.S. as well.

We went more than a couple of decades with absolutely nobody in the field with an inside model. And it worked very well because our content was just so good and so important and so well recognized. There is more competition. I think we're moving with the times. We'll have these people, these very senior players in the key markets. I can think of a couple more. [indiscernible] think about one of the areas. As we add more, I think, will depend on how they do produce and how we measure the gap. I mean, there's no better way to find growth than sell more of the stuff you have because you have a coverage gap and we have to be very, I think, vigilant with our customers in these regions to see if we are getting them around the loop. We're seeing good progress. It's definitely good progress. But it's one quarter, so we'll see how it goes. I also am clearly very cognizant that we're aware of our margins and we're not going to overinvest too quickly. So we'll invest when it pays for itself. Amanda Murphy - William Blair & Company L.L.C., Research Division: And then another thing that you've talked about is expanding the product menu through in-sourcing and whatnot. Just curious how we should think about that over time. Is that something you're looking to do near term? Or are you trying to maximize your current content initially?

Well, we're going to stay focused on our core, what we know how to do. We launched over 2,000 products last year, and I'm not saying that's the right number. I think there's a bit of prioritization on some work we're doing here. And I've talked to you and others about [indiscernible] line here about the need for a KOL strategy to be working more and collaborating with the leading edge of technology. And made it current in our field will keep people out there in the industry. We're doing that. So far, this year, we're on track. We roughly spin out about 300 or so products a quarter, and we're about there. We run usually about 50 or so proteins a quarter, and that's kind of where we're at. And I'm looking for more impactful things. As you also know, this is a very interesting field when it comes to product. You don't have $100 million runners or anything, so it's a very dispersed step [ph]. So we're trying to -- I think the strategy is working with KOLs and customers to really find where the leading edge is going, to find where the more impactful, more highly thought molecules will be is where we want to go in that area. And this extends beyond proteins, of course, and the antibodies and the immunoassays. We're doing a lot new things coming up in the assaying kit. I think you'll think they're quite a good thing when we launch later this year, and stay tuned. I think innovation is going to be in the upswing here. I think it has to be for a technology like this to stay a leader. Amanda Murphy - William Blair & Company L.L.C., Research Division: And then just last one on gross margin. You talked about the mix, which I appreciate. But how should we think about margin, gross margin over the next year or so? Do you expect it to stay kind of stable at this point? Or should we expect it to continue to tick down a little bit?

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

Our next question comes from Dan Leonard of Leerink Swann.

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

I think it is. But again, it's a 6% base for us right now. So being small, we should be able to improve by adding sales force. We've been a very conservative company in the past, and we're trying to get to know more of the game here. How far that goes? I don't know. I'm hoping it won't drop back to the 20s. But saying we're going to be over the 50s going forward is something that's too hard to say at this point, it's 1 quarter. But we're very happy with 38% in China and 14% Pac Rim. That's right on track for what I kind of wanted in light of the additions that we made.

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

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

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

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

And the other relationships I mentioned, we're really focused on is the KOL, key opinion leader side of things, which will be more about innovation and finding more -- how the impactful products sooner rather than just choosing serendipity or whatever.

Your next question is from Jeff Eliott of Baird. Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division: Wanted to get on the academic and government segment a little bit more. Obviously, you faced some headwinds from the government shutdown. But can you help us understand how big those headwinds were and maybe talk about the pacing you saw during the fiscal 1Q? And any commentary you could provide on the second quarter would be helpful.

I'll start, then maybe Greg wants to finish up with this one. We try to put as much color in our remarks as we could. With the dramatic cutbacks in NIH, I mean, it's clear things are going to be about the way they have been. We're only a quarter or 2 away, we hope here, from the comparables year-on-year. So things we thought kind of bottomed out, right, and then the government went to a shutdown. So we know that definitely compounded things for us late in the quarter here. We're not hearing it's going to step it for a grant cycle. There were rumors that it might, but we don't know for sure right now. So as long as the grant cycles aren't affected going forward, we shouldn't be bottomed out. We should be coming out of these comps. Being at that minus 10 or so percent is kind of about where we've been and it's kind of about where we expected. We certainly compensated on all the other industrial side of the house, in pharma and biotech. And it's just come to a point where we've got out a lot ourselves, talk to customers and they're not stocking. They're being very careful with their purchases. They don't know what's coming, so they're being real watchful in their experiments. And they're not overbuying. They're not stocking up. They're holding back. They're being told to cut back. They probably are experimenting with some other lower-priced competitive situations as well, all of the above. But we don't see it get any worse. And hopefully, we'll be developing our strategy. And I think also having the stronger commercial reach by having people in the field is also going to help us with that endeavor as well. Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division: Can you remind us of your NIH exposure? And also in the past, you talked about perhaps implementing a new pricings initiative. And I'm wondering if you've made progress there that you can share with us today.

We do not have progress to share today in pricing. But on the consumables side, we'll do what we have to do with pricing on the top and the bottom. And we're in the middle of stratifying our very extensive portfolio right now to figure out where other avenue there is to deal with there. In terms of what we disclose publicly, we're roughly 28% or so, something like that in the U.S. academic.

Yes. On the biotech, total biotech sales, biotech segment, 12% of that is from the U.S. academics. Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then shifting over to the industrial pharma biotech. You did talk about the improvement there. You did mention some of the sequential improvement that you've been seeing. Can you help us understand how much of the improvement that you're seeing is due to easing comps versus how much is really underlying improving fundamentals?

Well, I think it's a combination of both, but I don't how to separate out the 2 pieces, Jeff.

Your next question is from Paul Knight at Janney Capital.

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

I think you've got 2 factors as you look at Q2, the December quarter versus the September quarter. Historically, there will be a decline. And I think we still expect that in the December quarter, due to seasonality, we've got Thanksgiving and obviously the Christmas and New Year's, right, have impact, especially on the biotech arena, where sales are roughly tied to people that are at the bench. Bionostics will add to that. If you recall, we had probably 10 weeks in the quarter, slightly less than a full quarter. So we'll have a full quarter there, but there is also some seasonality impact there. So a small decline but a little bit of a pickup from Bionostics.

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

I think that's probably on the side we've had some short-term impact here from the extra reach we have commercially. So the biotech/pharma, biopharma. I mean, pharma is still consolidating as an industry. But I think it slowed down. I think there is renewed activity. We're not hearing anything major that's concerning, I think. Looking forward, it's probably a better area for us for growth, like we have this quarter, than the academic side while we look for those issues really both year-on-year.

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

It's all of the above there. We were having dramatic growth there. And I don't have a [indiscernible] here for which is in the lead. But they're all significant, they're all good. There's just a lot of funding available in China. I think the Beijing office being open is not a big impact. I mean, there's something like 100 institutions in Beijing, and we didn't have any presence at all. So there's one tidbit for you.

Your final question will come from Mike Seppelt of Evercore.

Can you speak to the ChemoCentryx investment and whether or not you plan on continuing to hold that longer term? It's had a fair amount of volatility lately.

Sure. We thought there might be a question on that one. But we've had this investment for a long time, something like 15 years. And we certainly are hoping that most of the pain [ph] is behind us and we're kind of riding on this. I've been out there visiting Tom, they've been here. We've had renewed a lot of our association. The team is getting tighter again. They have a pipeline of 10 molecules. And we're talking about a couple here, they've gone sideways with a big partner, GSK. I like it to say is that we're very supportive. We like what we hear. We like what we see. We're helping them. There's a lot more you can get off of their website and talking to them. They have a very, very good website and a lot of information on this. But they have a strong pipeline. I think the story is not over there. So we're kind of supportive and we're in a whole situation.

There are no more questions in queue.

Thank you.

All right. Thank you.