Good morning, and welcome to the Bio-Techne Earnings Conference Call for the Second Quarter of Fiscal Year 2023. At this time, all participants have been placed in a listen-only mode, and the call will be open for questions following management’s prepared remarks. During our Q&A session, please limit yourself to one question and a follow-up. I would now like to turn the call over to David Clair, Bio-Techne's Vice President, Investor Relations.

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 2022 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 because 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 relevant 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 www.bio-techne.com. Separately, we will be presenting at the Citi, Cowen, Barclays and KeyBank health care conferences in March. We look forward to connecting with many of you at these upcoming conferences. I will now turn the call over to Chuck.

Thanks, Dave, and good morning, everyone. Thank you for joining us for our second quarter conference call. In our second quarter of fiscal 2023, we delivered 4% organic growth on top of a challenging year-on-year comp, where we grew 17% in Q2 of last year. One year ago, the life sciences industry was in the midst of an incredibly strong biotech funding environment, spurred by COVID-related vaccine and therapeutic development that drove high equity valuations for smaller firms. It's been well documented that this funding environment has slowed in recent quarters, returning to pre-COVID levels. In Q2, we did experience a divergence in ordering patterns from our biotech end-market versus our larger pharma customer base, which is still very strong. This divergence was seen in certain large bulk reagent orders, which did not repeat this year, and the delay of instrument orders, as conservation of cash becomes more of a priority for our biotech customers. Encouragingly, the underlying research activity that accelerated during the past strong funding environment continues, which is evident in the strength of our bio-pharma research reagent run rate business, continued cell and gene therapy growth and strong utilization trends within our proteomic and analytical tools. Also, the order funnel for our protein and analytical instruments remains full, and we continue to experience record uptake of our ExoDx Prostate test. I will provide additional details on each of these growth drivers later in the call. Before we discuss the results, I'd first like to welcome Shane Bohnen to the leadership team of our new Senior Vice President, General Counsel effective March 3. Shane will be transitioning into this new role from Brenda Furlow who has served as Executive Vice President and General Counsel for the past nine years. The contributions Brenda has made to the company over…

Thanks, Chuck. I will provide an overview of our Q2 financial performance for the total company, provide some additional details on the performance of each of our segments and give some thoughts on the remainder of the fiscal year. Before we get started, I'd like to remind everyone that Bio-Techne executed a four-for-one stock split on November 29, 2022. All references to share and per share amounts have been retroactively adjusted to reflect the effects of the stock split. Now let's start with the overall second quarter financial performance. Adjusted EPS was $0.47, consistent with the prior year quarter. Foreign exchange negatively impacted earnings per share by $0.02 or minus 4% in the quarter. GAAP EPS for the quarter was $0.31 compared to $0.49 in the prior year. The biggest driver for the decrease in GAAP EPS was a nonrecurring gain on our previously held ChemoCentryx investment in the prior year period. Q2 revenue was $271.6 million, an increase of 4% year-over-year on an organic basis and 1% on a reported basis. Foreign exchange translation had an unfavorable impact of 4% and acquisitions had a favorable impact of 1% to revenue growth. As Chuck mentioned, following a period of RedHawk [ph] biotech funding last year, we are seeing a normalization of purchasing trends from these customers. Additionally, COVID is now sweeping through China and slowing the amount of research activity in this region, temporarily impacting the growth of our proteomic research reagents, analytical tools and spatial biology products. Adjusting our organic growth rate for large orders from a handful of biotech customers that did not repeat and normalizing for China, our organic growth would have been double digits in the quarter. Summarizing our organic growth by region and end market in Q2. North America grew low single digits, Europe grew…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Puneet Souda with SVB Securities. Please proceed with your question.

Yes, hi Chuck, Jim, thanks for taking the question. So, first one, Chuck, I think it would be helpful if you could parse out a little bit more on the impact from the emerging biotechs. Are these smaller emerging biotechs, I think Jim said they're not going broke, but the number of projects are lower. But could you -- if you could describe a little bit more into that? And then is this a spreading to larger bio-pharma -- or the bio-pharma remains largely intact? And then how much of this is sort of COVID adjacencies. And if you could parse out what were -- what segments or what type of products were these sort of bulk orders and then, again, I appreciate that this is comp-related normalization that you're expecting. But I think the question is sort of how long do you think this can last in duration because obviously, funding concerns were -- they're here now. But just wondering how long will it be before -- sort of we see improvement here in a meaningful way?

Okay. I'll try to cover that in less than 20 minutes. Thanks, Puneet. As the quarter finished, we are a little ejected. It's my 40th quarter, and it's been a few years since we've seen a growth rate like this. But as we look back into the data, man, we saw some amazing things. One, our run rate business, most of our business, both -- here in Europe was double-digit. Very strong end markets there, academia about the same, no real issues there. Biotech funding, we've -- as I mentioned last, we started digging in more and more about just how much are we becoming more of a front-end research company supporting our customers as we mitigated from academia to bio-pharma. But within that bio-pharma, how much is really biotech. And with that biotech, how much are really new biotech and start-ups and fresh research and leading-edge stuff. And it's about 30% is the number. About 20-some of most of our businesses has been in instruments, it's about 40%. And then -- and I think that's it's a funding issue right now. And as we dig in more, it's going to wash through, but there is definitely a growth being prudent. Their funding is solid right now, but they're trying to make things last. If you're further along in clinical, as you're probably okay, because it's committed. And if you're doing -- if you're a startup, there's actually funding. If you're kind of out there, but looking for your second round, it's tough right now, and it's just the way it is. So that long -- that's driven a lot of potential growth in OEM and a lot of larger orders as people are -- were starting these clinicals and doing special things with us. And there are a lot…

Yes. No, I think you covered it well, Chuck. Thanks for that. And just -- I'll keep it very simple for Jim. Just on 4Q, I appreciate your comments on Q3 being similar to 2Q. But 4Q, just even if I have double-digit increases there, I'm landing for the full year and single -- in single digits, so for total organic growth. So just wondering, does the aspiration for 15% or mid-teens sort of growth rate longer term still intact. If you could elaborate a bit on that. Thanks, so much.

Yes, they are still intact. And, yes, the math would suggest that likely not hit double-digit growth for the year this year, even if we hit double-digit growth for Q4. But as I mentioned in my opening comments, if you look at it from a multi-year CAGR, we're still in the low teens and would probably end of the year still in the low teens on a multi-year basis. And that's essentially on track to where we said we'd be at this point in our five-year journey. So the mid-year -- the mid-teens is the average over five years, but again, as the cell and gene therapy continues to ramp and become more material for our business, particularly the GMP proteins, as well as the Exosome becomes more material to our business and continues at those kind of growth rates, and as Chuck alluded to, that we're still barely scratching the surface of the potential there, that's what kicks us into the mid- to higher teens growth rates later on in our five-year plan. So as far as we see it, we're still on track.

Our next question comes from Jacob Johnson with Stephens. Please proceed with your question.

Hey. Thanks. Good morning. Maybe kind of first question, kind of dovetailing Jim and Chuck on what Jim was just talking about. You're still targeting this $2 billion of revenue by FY 2026. I do think in your new deck, maybe you moderated some of your expected growth for instruments and on the spatial side. Can we just touch on kind of your latest thoughts on the path to $2 billion by FY 2026, once we get beyond some of these kind of near-term dynamics that you discussed? Thanks.

Yes. We're not coming off that at all. I think the ink isn't even dry on our last analysis. I mean the bottom line is we got way ahead of the curve and I had a forecast last couple of years right in COVID and some of that's re-normalized, but we're still safely in the $2 billion number, we think. A couple of reasons, look at some reflex coming out. We're going to be now attacking $400 million market, $300 million in the HPLC market, for fractionization, just skipping whole while seeing right to mass spec, which can save weeks and months of work in an analytical lab at biopharma customers. And also the protein characterization market, it's a small market, $100 million but peptide mapping is a very important process, and we -- this machine can do that. And so it's going to grow in that category along with everything else that's been doing. It's been -- and things are picking up in cell and gene therapy for being spec-ed in for just good old-fashioned QC for purity, et cetera. ELA is just going to be on fire. We're doing about 90,000 cards a year now. We just finished the factory for 500,000 cards. We've got 1,345 coming. It's just almost done, and we're going to have diagnostic research coming out of our ears, we think, on top of biomarker discovery. So, this is going to be a platform that's going to get bigger than I think we have in our $2 billion model. I can go up and down this, but we're also, I think, possibly light on exosomes. Exosome is screaming now, 100% plus a quarter a scene in sight. We have a nice portfolio of new diagnostics, new tests coming out where we've got partners calling,…

Got it. Thanks for that Chuck. And then just the other big picture question. I heard Jim mention that I think M&A is the number one priority on the capital allocation side. So, I think that speaks to appetite. But maybe just kind of any thoughts on where seller expectations are in the current environment and any areas of interest?

Well, time heals all here. So valuations have come down. They've come down all year, but there's still denial, but there's less denial. There's not a robust IPO market right now. So small companies have limited options. We talked about the funding issues, right? So that means a lot of small companies are going to be looking for ways out and help. So our phone is ringing more than it was. We're very active. We've been active, but we're definitely more active than usual. And I hope we can land a few more. We landed Namocell not too long ago, and we've got some more in the pipeline. And yes, it is our number one capital strategy. We're at net debt zero. We've got – we've got a $1.5 billion work chest rate to go with cash, and we'd love to put it to work. I don't think we'll go over four times leverage, but I'm going to get up near that. Board is very supportive of us getting much more aggressive in M&A. But it's like what you – the – your question is all about the price tags, right? And we've got to get real price tags to get to make to close some deals.

Our next question comes from Dan Arias with Stifel. Please proceed with your question.

Good morning, guys. Thanks for the questions. Chuck, on GMP proteins. Can you just refresh your view on how you think growth shapes up there, when you guys are opening up to St. Paul facility, you talked about expecting a couple of years where revenue basically doubles. It sounds like you dipped a little bit below that, but maybe now you're accelerating again. So what do you think the trajectory there is relative to the overall capacity, which I think at the time of like $140 million to $200 million?

Yeah, there's a little bit of overlap, even in this – in the area we'd call OEMs. So we've got a lot of customers like 180 customers now for gene proteins, but only a handful that are really sizable and they're a little bit lumpy still. We have some year-on-year comps in the area, they are tough as well. Even there, we still had a pretty good quarter, I'd say. And going forward, I think it is going to accelerate. We added another product to the same St. Paul were its fixed. We'll more than double that in the coming year. We have the largest menu for regenerative medicine, and we're moving with most of those over the St. Paul facility in the coming year or two as well. And we're number one there. We're playing catch-up still in the CAR T area, but it's growing strong. It's still kind of, I think, going to be a double kind of year, maybe just a hair under this year, but it won't be too far off, we don't think. And next year should start lighting up as we land a few more larger accounts and we get some things further up in the clinicals to get more volume going. We call it turning minerals in the tunes and tunes in the whales. So we have a whole pipeline of how we move these customers forward. More of indication, we had a few of these customers are fairly sizable, and they went to zero, because their funding is tight right now. So they're going to probably come back online next year, we think, as they get more funding, but they've had some stalls in some of their clinicals. These are small to mid-range biotechs that were kind of hot last year and not so hot this year. They're customers. We're also seeing that with Wilson Wolf as well. It's definitely slowed down, seeing the same thing. Area isn't anybody who has a business that's really in the CAR T, in the biotech side in clinical, I can't say the same thing. It's just honest to God, true. There are things have slowed down. There is less funding and there are less clinical starting, and that's just reality. I don't think it's long term. I think it's just a blip for this year, but it's a reality.

Okay. Okay. That's helpful. And then I guess, I need to go back to the long-term targets here just because – in order to hit that 17% organic growth CAGR that you laid out for 2021 through 2026 and that gets you to the $2 billion at least by my math, you basically have to do a couple of years of 20% growth. And one of the things that we're talking about is how hard comps can be. So apologies for beating a dead horse here, but I guess I just have to ask explicitly if that's at all a decent way to think about out-year growth?

Well, the OEM side of things was bad enough and just on a handful of deals where it took our antibody and our protein business to near to about flat. And that's a short-term blip. We need mid-level, mid-digit growth in that category. We've had way higher than that for the last two years, and in fact, double digit, so I'm not too worried about that. It's more an issue about the back end and making sure that both cell and gene therapy and exosome as a platform can get to 45% to 50% growth in that range. That's what's got to happen. Everything else is within the air bars easily to hit there, but we've got to get to that level. And then we've got a couple more years to get to that point. I don't think we're shook about it. Things can only grow so fast, and we're kind of growing pretty fast.

I'd say I just add that a little bit on. I mean, as I -- we mentioned in the call earlier, in literally a handful of customers, biotech customers, smaller biotech customers was a difference between double-digit growth and mid single-digit growth for us this past quarter. So that's how quickly it can flip the other direction as well when things come back online.

Our next question comes from Dan Leonard with Credit Suisse. Please proceed with your question.

Hi. Thank you. Chuck, in the past, you've talked about hiring challenges as being a gating factor to your growth and wanting to hire more. Can you give us an update on trends there? Are you still planning aggressive hiring, or have you moderated your ambitions there?

No, it's a very insightful question. And I didn't bring it up on the call, but it is more late-breaking news, but we definitely had turnover in our sales force in the biologic platform area. As you know, a lot of instrumentation, things that were not in pretty hot still, larger metal things. And there's been a lot of attrition, and we lost a fair number of people. We're at full strength again, but there's definitely a component there. On spatial, we've come all the way back, I think, really down to one. Overall, we're riding our attrition to kind of stay leaner here as we ride through it. You saw our margins are held pretty well. We're on track. Part of that is that we've just not replaced everything through attrition. We had a pretty big spend plan for this year for this plan to hit these double-digit targets and they're not there. So we pulled back like any good operator would. I think we'll end up the year up 100 to 200 people, but not the 300 to 400. I think the salespeople is the biggest risk. I think there is a productivity hit we probably took in the last quarter or two off of 1,000 people turning over last year, a full third of the company that is probably unappreciated. And that will also level out going forward. But we're watching that very carefully. We're working it hard. We're changing. We've done a lot of market upgrades as wage inflation is a big hit. I mean, I think we've done a remarkable bottom line considering all the wage inflation we've actually had to absorb this past year. And we're on fighting it like everybody else. But we have a great portfolio, a lot of great sexy new products in our road map, and we're still in the business of helping people and helping people develop drugs, and that interests a lot of people to come on board. Demographically, we're a much younger company now than were three, four, five years ago and that makes you want to have more changes too. ESG is very important to us here. We have a lot of different new groups and clubs and dealing with different levels of diversity. The company has never been more focused on that. We're over 50% female in our management. We're 25% Chinese. So we've got a -- award this year for our diversity and stuff. So we're focused on all that. But youth and diversity are key in managing. That is a key to attrition, I think.

Appreciate all that color, Chuck. And my follow-up question on China, I'm not sure I know how to quantify the word explode, but when it comes to the RMB1.7 trillion loan package. What are you seeing on the leading indicators on that? Are you seeing quote activity tied to that spend? Are you seeing RFPs? Is there anything that gives you confidence that money is going to start flowing beginning that June quarter?

I had a meeting on that, just asking those very same questions with the leadership in Asia. And, yes, tenders are going out and there is discussion. So it looks like it's very real. It's about a two-month process so I don't think we'll see much of that here in Q3. It's a Q4 activity. We kind of have them at over 100% to plan in Q4. Of course, they're trying to negotiate that. But I think it's well over 100%. If there's a reality around this RMB1.7 trillion stimulus, which is really instrument driven, then it will be real. I think there's pent-up demand already. We're already -- we had mid-single-digit growth the last quarter with nobody working. So I think it will be a quick comeback story. We have data on that, right? This happened two years ago as well after the COVID quarter, and I think it will be similar. And government is very focused on prioritizing healthcare. I mean that's what the stimulus is for. I don't think anything changes there. People just got to get back to work. Kind of tough to read right now, too, because they're just coming off a new year now, right? So they just come back to work, I think, this week even so. And we're coming back fast. I mean, we had the whole office. 90% of our people are sick at the same time. Like within a two-week period, they all got hit, that was actually similar anywhere in Shanghai.

Customers the same way.

So in customers, too. So it's going to snap back pretty fast, we think, unless there's some new variant. But I asked questions about that too. About when do they expect the second wave and they don't really expect one for a while. According to the people we talk to, everyone's already got it.

Our next question comes from Catherine Schulte with Baird. Please proceed with your question.

Hey guys, thanks for the questions. I guess first, Jim, just circling back, you said adjusted for China and RUO region bulk ordering organic growth would have been double digits. Can you just quantify the bulk ordering portion? It seems like China is maybe a two-point headwind in bulk orders, four points or maybe a little bit more. Is that the right -- about the right ballpark? And then can you just quantify any bulk purchasing activity in the third or fourth quarter of last year, just as we think about comps heading into the back half of the year?

So yeah, your percentages are pretty close to what we show as well. And yes, that's why we said we expect Q3 to be very similar to Q2 in terms of organic growth because the number of one-time bulk orders from these small biotechs was similar to Q2, perhaps a little bit less, but also keep in mind that we had the very large ExoTRU licensing agreement with Thermo Fisher in our Q3. We knew – we didn't know all along that Q3 was going to be our most challenging growth quarter because of that very large ExoTRU agreement that occurred. So that's an additional headwind that we didn't have. But we think with the overall momentum of the business, we'll be able to cover some of that sequentially, so that sequentially our growth rates will be similar.

Okay. Got it. And then can you just talk to the rebound in Europe. On your last earnings call, you talked about September being up double digits and that strength continuing into October. So can you just walk through how things unfolded throughout the rest of the quarter?

Yes, it was definitely a story of Europe doing better than the US and from last quarter. We had run rates 12% plus in Europe. Overall, it was about a mid- to high single-digit kind of level in Europe. So, a good recovery, not all the way back, we want, but remember they were negative last quarter. So, that was good. We have new management, hopefully going into place soon. There as well working on that. We didn't talk about -- we put in a whole new ERP system and without a glitch. So, we're -- that's all coming online. We have a whole new warehousing system in Dublin now to supporting Mainland Europe, and that's coming online with no glitches. So, been a lot of good things in Europe as well. Going forward, I think the risk of the war and energy in Europe, the winter and stuff has been mitigated pretty well. So, we're kind of focused on really getting the teams up to speed, new management in place, completing the mission on cross-selling and the commercialization strategies and tactics that we were in the middle of doing before COVID hit and all that. And funding seems reasonable in Europe, country-by-country. We're still weaker in Germany than we want to be. We always have been. So, we're really focused on trying to build on Germany more going forward. I think that's key. I think there's a risk in the UK given Brexit still, but so far, so good, but I guess I'd answer it that way for now. Europe is out of the hot seat from last quarter. Now, we got OEM issues in the US to deal with.

Our next question comes from Patrick Donnelly with Citi. Please proceed with your question.

Hey guys. Good morning. Thanks for taking the questions. Jim, maybe kind of a follow-up on one of the earlier questions in terms of headcount. As you guys kind of see the growth slowing for a little bit, obviously talked about 3Q being in this area as well. How are you thinking about managing expenses? How are you thinking about the margin cadence? How nimble can you guys be in terms of protecting the bottom line. I guess the margin has held up pretty well this quarter relative to the topline. So, just curious how you're thinking about that piece and if you're changing any growth investments or any way you're thinking about the P&L?

Yes, I mean as we've talked about the last couple of quarters. We were behind in our investment -- investments and hiring for the most of fiscal year 2022 and even really fiscal year 2021. And we made great progress in catching up in those investments and catching up on that head count in Q4 in particular. And that's been a reason for our margin drag. One of the reasons for our margin drag in the first half of the year. And I think we've also been fairly public about this in the past where -- not just us, but everyone was dealing with retention issues for the last year and a half. And when you took about 3,000 employees that we ended the year at a relatively still at today, roughly a 1,000 of those employees have been hired in the last year because of both new hires but also replacements of loss folks. So, that's a huge, huge influx of new people in the organization that need to get up to speed and frankly, get productive. And so we're really focusing on getting the productivity of those folks we hired last year. And so that's really the focus of this year, which is why there's not a lot of new hiring happening nor needed. That being said, there are strategic investments we're making, particularly around our Molecular Diagnostics division to support the amazing growth we're seeing in our prostate test there. And there's a few other R&D programs that were slowing down just a bit, just to catch up from all the hiring we did last year, but nothing that's going to have any issue with our long-term growth plans.

Well, let me interject here. Remember, one of our reasons for being successful over the last 10 years, I think, is our prioritization process. We've talked about it a lot. A lot of you have had the short course meeting with us offline. And it allows us to change priorities and change mix of people and programs very quickly. We do a zero-based every year. And we're already in the middle of that in making those changes. So we've doubled the size of our Namocell team since we hired them. We are adding people, we're up 50% in headcount in our exosome teams in the last years because we're waiting for trigger points to happen. They happen. We told you we'd start investing when we saw that. The reconsiderations went through. Urologists are seeing patients again, and we're lighting it up. So we're adding a lot of people there, but we're changing the mix and some other things. We're holding off and some things that are just prudent to do right now until we see a reason to change. Remember all -- myself and all of our leaders all come from working in large companies, all run billion-dollar-plus P&Ls, every one of them. They know how to operate.

No, that's a great point, Chuck. We are actively reallocating resources towards those higher growth platform. So it's our prioritization process at work real-time. And as that relates to margins and by holding our overall cost base, we're relatively neutral, maybe a slight uptick throughout the year, but relatively neutral for the remainder of the year. Anyone who follows our business knows that our second half is. From a revenue perspective, seasonality-wise is much stronger than our first half, simply because our customers are at the bench more days than they are in the first half of the year without all the vacation interruption. That additional revenue on top of that same cost base should allow our margins to continue to expand sequentially.

And by the way, people are coming back to work here.

Yeah. Got you Chuck, and then maybe one on Wilson Wolf. Can you just refresh us in terms of the milestones and timing there? Has anything changed as your conviction and going forward with that change and all?

We're running out of time, so I got to move fast here. They've slowed down, too. But as you know, the targets are $92 million in revenue or $55 million in EBITDA for the first tranche. They're very close on one of them. And we may strike soon, we may choose to wait. It's as much strategic as it is anything else. We've got the cash, we were ready to go. So we might choose this to weigh in and go sooner than later. We're not sure yet. But it's very -- we're getting close to trigger. I got to believe in the next things pick up at all for them, we're going to hit it soon. If they don't pick up, but it might be in the couple of quarters. But we're within our sights here. Nothing has changed strategically. Nothing has changed culturally, nothing has changed in the relationship. The teams are tighter than ever. If anything, they're pushing to get closer and get this to happen. So a great question. It's looming, and I can't wait.

Our next question comes from Justin Bowers with Deutsche Bank. Please proceed with your question.

Hey good morning, Chuck and everyone. Just one here on China. Just -- is there a way to parse out how much of the slowdown was between the consumables versus the instrument business? And the second part to that would be in terms of the seamless funding coming on, do we have a sense of the duration of that, i.e., will that be a tailwind to calendar year 2024 as well based on some of your conversations?

I think stimulus in the US, or anything related to that is here and gone. I think the OEM comments are more about consumables and the instruments are slow to basically of just prudent conservatism buying biotech and biopharma and funding in general. So it fits more funding on the instrument side and the conservatism and OEM is more on the consumable side. Well, in China, China is just they're not at work. They'll be screaming back here very soon. I'm not worried.

Yes, I'd say the slowdown from our, call it, 20% plus normalized growth to mid single-digit growth was across the board in both instruments and consumables. And rains to be seen how long the stimulus impact last, but it's going to take more than a quarter to spend that much stimulus in our opinion. So I think for the one point, it will be a multi-quarter, if not a year in benefit.

It will be this whole calendar year. They're intending it for that. They're intending it for health care. They're intending it to be in hardware more than anything else. And we play big there. We're about productivity and hardware. So we've got more platforms than ever. So we're going to share in that as well. I mean just to put that into scope, it's 1.7, if that's the real number, that's way bigger than our entire NIH budget. So it's going to be good. It would be good for everybody.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to management for concluding comments.

All right. Well, thanks, everyone. We'll see at the end of next quarter. I think we were as transparent as we can be. We've been doing this a long time together as a team, and we'll always be transparent. Things still look really good here. We don't see any change in our thesis. And anyway, I see the future is bright, we think. So we'll talk to you soon. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.