Azenta at KeyBanc Forum: Strategic Growth and Challenges

On Wednesday, 19 March 2025, Azenta Inc. (NASDAQ: AZTA) participated in the KeyBanc Annual Healthcare Forum 2025, addressing both opportunities and challenges in the current market landscape. The company discussed strategies to navigate NIH funding uncertainties and emphasized its competitive edge in the sample management business. Despite potential headwinds, Azenta remains optimistic about its growth trajectory and operational efficiency.

Key Takeaways

• Azenta anticipates a 2% headwind from NIH funding uncertainties in 2025 but plans to mitigate this through cost savings and increased sales efforts.
• The sample management business is highlighted as a key strength, with significant growth potential due to rising demand for biological sample storage.
• China represents 10% of Azenta’s business, with successful navigation of local challenges and tariffs.
• The ongoing sale of B Medical aims to maximize value for the company.
• An Analyst Day is scheduled for June to provide updates on long-term strategic initiatives.

NIH Academic Exposure

• NIH funding uncertainties pose a 2% potential headwind for 2025.
• No cancellations or lost deals have been reported due to these uncertainties.
• Azenta is redirecting cost savings into sales, marketing, and R&D to counteract potential impacts.
• Approximately 18% of Azenta’s business is academic, with over half in the U.S.

Sample Management Business

• The sample management business is a "crown jewel" for Azenta, offering a competitive advantage.
• This sector generates profitable recurring revenue streams.
• The global market for biological samples is estimated at $24 billion, with 2.6 billion new samples annually.
• Azenta owns 50 million samples and is investing in automation to enhance storage efficiency.

China Market

• China accounts for about 10% of Azenta’s business.
• The company has transitioned to BGI for NGS businesses, overcoming local challenges.
• China experienced high single-digit growth last quarter.
• Tariffs had a $1 million to $2 million impact, which was included in guidance.

Operational Excellence

• Azenta is implementing a lean business system to improve efficiency.
• A Kaizen event identified 97 items of waste for potential efficiency gains.
• A formal indirect procurement team has been established to optimize spending.

B Medical Divestiture

• The B Medical sale process is ongoing, with a focus on maximizing value.

Analyst Day

• Scheduled for June in Indianapolis, the Analyst Day will provide updates on long-term planning and strategic initiatives through 2027.

In conclusion, Azenta’s participation in the KeyBanc Annual Healthcare Forum 2025 highlighted its strategic focus and growth potential. For more details, refer to the full transcript below.

Full transcript - KeyBanc Annual Healthcare Forum 2025:

Paul Knight, Life Science Analyst, Ozinta: Hi. This is Paul Knight, the life science analyst at Ozinta, which I have followed for over a decade. And with me today is Yvonne Barone, the Head of Investor Relations and Lawrence Lin, the Chief Financial Officer of Ozinta. Obviously, a lot of questions in all of life science right now, Lawrence and Yvonne. One of the topics has been, of course, amongst investors, NIHacademic exposure.

I think that’s probably the first topic to start with. You wanna talk to talk to that?

Lawrence Lin, Chief Financial Officer, Ozinta: Yeah. Of course. And, Paul, thanks for hosting us, and, thank you everyone for joining. So, yeah, let’s let’s get into conversation on NIH. I I think, you know, we we’ve done, I think we all agree this topic has created a lot of confusion and uncertainty.

One of the things our Multiomics team has done quite a bit of voice of customer to really better understand the customer segment. Given the the six week pause on reviewing grants, which, you know, has recently, lifted the indirect cost gaps and staffing release, not being hired, you know, the customers are a bit cautious and are looking at, you know, levers to conserve cash. The positive note here is I think is today we have not received cancellations or no bank deals lost due to the NIH funding. We’re we’re seeing some kind of delays right now because of the lack of clarity. But more importantly, here’s where we also see through the voice of customer work that there’s an opportunity that exists for both our businesses, in the segments.

So, really, as as we kinda look at the landscape, our belief, really, in the past has been that there, has been a place for Azenta as a substitution for the Core Labs. Right? And SOME OF WHAT HAS HAPPENED IN THE LAST SEVERAL WEEKS HAS Really ACELTERATED AND CONFIRMED OUR BELIEF. RIGHT? A LOT OF THE COR LABS CAN BE LESS Efficient.

AND, WHAT WE’VE SEEN, IS THAT in two cases recently, there has been kind of an affirmation around, what we believe is our advantage. So just last week, we had a large medical research center make the decision to close their center and work with us. Additionally, one of the large universities that have just contacted us, to ask about getting quotes on how we can provide the service, in replacement for the Kohler lab. So we’re really out of some of this confusion, really optimistic and excited about the opportunities that our, businesses have in light of some of this uncertainty. And so so that’s kind of a bit of the work that’s done.

We spent a lot of time with about our top 30 customers because in the last, several presentations or prior presentations, we went out and said roughly 35 of our revenue is related to academics, medical, and government. We believe the potential headwind is much lower than we, if you look at kind of that macro 35%. So we pulled all our top 30 customers, kind of went customer by customer, asked them about kind of where they are, what their position is, and, what the potential risk is. And what, the outcome of that kind of very intensive work was, we believe in both SMS and multiomics, our potential risk is about two percent for the for 2025. Now that’s kind of in isolation with the macro headwind.

Again, I think that’s a short term impact for us. Long term, there’s a significant opportunity in our multiomics business as well as our sample repository business around biostores. Considering the indirect caps and a possibility that, there will be CapEx constraints in the academic environment. We’re a natural fit as Azenta in our biorepositories to provide them, with a solution to store their samples.

Paul Knight, Life Science Analyst, Ozinta: Right. I mean, I think the argument that you that’s been made by Azenta for many years is right, that a sequencer run is gonna be 35,000 or a lot of money on a next gen sequencer, and some institutions don’t want to make that a) capital investment and b) they don’t have capacity to run on a next gen unit, right?

Yvonne Barone, Head of Investor Relations, Ozinta: That’s right.

Lawrence Lin, Chief Financial Officer, Ozinta: That’s right. And it’s one of those things where we’ve got we we’re actually here in New Jersey, so we’ve just spent a lot of time, with the the lab team. And it it’s it’s, been great to see our capabilities and exactly what you say. We we’ve got the scale, the efficiency, and also the ability for us to do some bespoke, really, partnerships with our customers. Right?

We will walk with them through the process hand in hand. And I think that’s a bit of the value proposition that our GENEWIZ business provides.

Paul Knight, Life Science Analyst, Ozinta: Okay, great. And then drilling into academic a little more, I mean, roughly 18% or so of business is academic and then a little over half is U. S, right? So that’s how you start getting that number to 2%, I think, is one approach as well, right?

Lawrence Lin, Chief Financial Officer, Ozinta: That’s right. And we kind of went from the macro really down to the granular because of the fact, as you know, right, some of the NIH funding can be indirect. Right? And, really, we wanted to wait till this, conference really to talk about this because we wanted to do our homework. Yeah.

And spend a lot of the time. But that that’s about right. So we kind of went, both directions just to make sure that we we, sharpened our pencil here around possible risks. Now what I do will mention that, yes, we’ve got a 2% kind of, headwind to our number, but we’re actively counter measuring that right now. And what I mean by that, we’re, you know, we’ve talked a lot about and John has talked a lot about kind of our cost journey that we’ve kind of embarked on.

But part of that cost journey was around redirecting some of those savings that, has happened over the last several months into sales, marketing, and R and D. And that’s progressing, currently in the quarter. On top of that, there are additional sales incentives we’ve put in place for our sales reps in order to mitigate some of the risks that we’ve seen. So, you know, we’ve sized the price. Now, you know, the hard work begins as we work to ensure we can meet our commitments.

Paul Knight, Life Science Analyst, Ozinta: Yeah. Like it’s probably harder to sell a sequencer than it is to sell sequencing as a service.

Lawrence Lin, Chief Financial Officer, Ozinta: That’s right. That’s right. Exactly.

Paul Knight, Life Science Analyst, Ozinta: Yeah. Completely understood. I think the other bit of confusion is in kind of the old pie chart, you know, excluding the medical, we have government medical nonprofit as maybe 16% of company. There’s a that’s a pretty broad description. I’m guessing a lot of it’s not NIH, right?

Or, yes, it’s not NIH, I guess, or very little.

Lawrence Lin, Chief Financial Officer, Ozinta: That’s right. You’ll and sometimes it’s hard, right, to parse through the customer categorizations, but you’ll you’ll obviously have private funding and private equity funding that’s in the mix. That’s why when, quite frankly, when the team started, as as I mentioned earlier, we looked at the macro level of kind of the pie chart and said, well, that’s probably not enough for us to action it. And and really, that’s when we double clicked into each customer.

Paul Knight, Life Science Analyst, Ozinta: Got it. And then, you know, I guess in the samples business, how much of samples and stores is actual hardware sales?

Lawrence Lin, Chief Financial Officer, Ozinta: Yeah.

Yvonne Barone, Head of Investor Relations, Ozinta: Can you restate the question, Paul? I’m actually not clear what you’re asking.

Paul Knight, Life Science Analyst, Ozinta: Within the storage business, you know, everything x multi omics.

Yvonne Barone, Head of Investor Relations, Ozinta: Okay. A

Paul Knight, Life Science Analyst, Ozinta: portion of that is is cap equipment.

Yvonne Barone, Head of Investor Relations, Ozinta: Well, that would be your, you know, your principally, your store’s systems, right, which would be, you know, your, kind of automated stores, right, with the with the, you know, the software, and then you’d have your clinical bio stores as well as cryo cryogenics.

Paul Knight, Life Science Analyst, Ozinta: Yeah.

Yvonne Barone, Head of Investor Relations, Ozinta: I mean, that would that would be the the bulk that’s that you’re referring to.

Paul Knight, Life Science Analyst, Ozinta: Yeah. Yeah.

Lawrence Lin, Chief Financial Officer, Ozinta: And and and related to stores, I think, Paul, what gives us confidence is around the backlog we have that we refer to in the first quarter. Right? We’re we’re seeing on, about 75% We’re we’re seeing on, about 75% of the year in backlog. There’s been no cancellations around that. And and remember, as you as you’re aware, the these automated stores, there’s a long lead time.

It’s POC accounting. You know, once you’re down the path, a lot of the infrastructure is already set up to kinda accommodate these. So we feel pretty good right now as it stands based on what we have in the backlog.

Yvonne Barone, Head of Investor Relations, Ozinta: Yeah. So I think you think, Paul, I’ll I’ll say core so within SMS, right, you have core products and then you’d have s r SRS. So you you could probably think about, you know, the the core products is, in aggregate, like, roughly 6060%, but the balance being by a repository.

Paul Knight, Life Science Analyst, Ozinta: Yes. Great. Great. Okay. I mean, I think your bite chart that is in your corporate, on the IR pages is pretty direct on talking about how much is it is for cold systems and services.

And then, Lawrence, you’ve been at the job not long. What are you learning?

Lawrence Lin, Chief Financial Officer, Ozinta: Look, I think at the heart of it, we know the products are great. But more importantly, the team has been extremely gracious and really adaptable to change. I know at the face of externally, when we look at kind of what we talked about, some of the rapid iteration around cost, the org restructuring along with implementing a lean business system, and that’s a lot for everyone to digest. What I would say, and, you know, I’ve been on the road for about five months now, consistently. What I’ve heard is the passion from the team and the adaptability.

I participated in two Kaizen events the last three weeks just working on how we improve the customer experience. We’re here, part of the reason we’re here in New Jersey is there’s a group of 15 individuals in a room with sticky notes and Sharpies mapping out the experience, for, when a customer orders, NGS or Sanger testing to at the end of the work stream. And the beauty of it is, one, we’re focused on the customer. But also, secondarily, they’ve just recently identified there’s 97 items of waste that is opportunities for us to get more efficient. So the thesis stands.

I think as John has laid out, previously, right, we are focused on our priorities, right? Portfolio optimization, which we’ve already kicked off around B Medical, operational excellence, which I’ve just touched on around lean, around cost optimization, really kind of rightsizing our P and L, reducing G and A, investing for growth around sales, marketing, R and D. And then around indirect savings, right? And what does that mean? We’re we’re we we at Azenta have not had a formal indirect procurement team, stood up.

So recently, over this quarter, we’ve stood up a group and we’re focused on how we optimize where we spend what we spend. Sounds very rudimentary, basic blocking and tackling, but that you know, I think it’s core to how we get to where we need to be. And then really lastly, around the third priority is value enhancing capital allocation, right? We’re looking at opportunities ahead around how we are disciplined, returning deploying capital. We’re really going to prioritize based on the return opportunities that will yield the growth through productivity initiatives and really areas like M and A tuck ins.

So I think, again, really excited about the opportunity ahead, Azenta. We’ve kind of plotted a path forward. And right now, it’s just we’re executing.

Paul Knight, Life Science Analyst, Ozinta: Yes. Very good. Another question that comes up is China. What are you seeing in that market right now? How much of sales in China?

We’re hearing that the biotech originators are actually very robust and strong as an end market. But if you could talk to I know you have some operations there and we could talk on that.

Lawrence Lin, Chief Financial Officer, Ozinta: Yes. So as mentioned in the last earnings call, our business about 10% of our business is China for China. And and I know in the recent headlines, there’s been two items, right? The China alumna issue, which we’ve pretty much covered in our last earning call, but just to for avoidance of doubt, right? You know, the team has done a nice job anticipating a lot of that, uncertainty in China, you know, for the last several quarters.

You know, we do not own any alumina products. Most of our NGS businesses actually through a partnership that utilizes and, alumna as well as BGI. So the transition and the shift to BGI has been relatively seamless. We’ve also pulled our customers in China and asked them if there would be an issue through the transition. Most of them have said, look, this is our preference was LUNA, but we are absolutely fine with BGI.

And so there’s extremely low risk around that front. As we get to talk about a bit of some of the China tariffs, right, talked about in last quarter, our exposure for the first ten percent tariff was about an incremental $1,000,000 to $2,000,000 that was in our guide. Now the second tranche 10 that came on after our earnings call, we believe we’ve got a line of sight around countermeasures to offset that through cost reductions as well as possible market price increases selectively. More to come around that, but that’s kind of our path forward around China. Overall, as you look at kind of China, last quarter, we grew, high single digits, and we we continue to really see that the team continues to execute.

So really happy with our progress in China.

Paul Knight, Life Science Analyst, Ozinta: Good. The sample management business, meaning the storage as a service, seems like one of the best businesses in life science. What do you plan to do with that? I guess, just keep drawing it or, you know, if you can add more color around that management of storage as a service.

Lawrence Lin, Chief Financial Officer, Ozinta: Yeah. Look, I think, you know, one of the great this we always say this, you know, the the the business is our crown jewel. Right? It it offers us the competitive advantage. Business generates profitable reoccurring revenue streams.

Right? And and so there’s also opportunities here in this business to grow it organically, right? I think we’ve discussed this in the past, Paul, but just to reiterate, right, there’s an estimated 24,000,000,000 clinical and research biological samples that are stored globally.

Paul Knight, Life Science Analyst, Ozinta: Yes.

Lawrence Lin, Chief Financial Officer, Ozinta: 2,600,000,000 new samples generated each year. About 50% of these require cold storage. Right? So that’s kind of the the market. We own 50,000,000 samples right now.

So and these, as you well aware, are are the most precious assets. Right? Like drug compounds, therapeutics, biological samples owned by pharmaceuticals, biotech, academic. Right? And so and so we believe we’ve got a lot of runway to grow this.

More importantly, as I mentioned earlier, as the CapEx constraints, come to play here in areas like NIH, we believe we have a competitive advantage where we could be the solution for a lot of the folks that no longer can afford, like, an ultra low temperature freezer. They will come to us. And a lot of these contracts, as you know, are seven to twenty five years. And more importantly, what happens when most of our customers come to us, they realize our value, fully. Meaning, a lot of times, you know this probably better than I do, right?

There’ll be an ULT at the, at the academic or the customer, and they just put the samples into their freezer and close it. Whereas once they come to us, all the items are categorized. The vials are barcoded. And essentially, we have a warehouse management system. And and we end up becoming extension of kind of what they need, whether they need long term storage or actively, samples come in and out through one of our automated stores that we have in house.

So we believe, one, there’s a huge runway and we have a a competitive advantage because of all the automation we have in place.

Yvonne Barone, Head of Investor Relations, Ozinta: Yeah. I agree.

Paul Knight, Life Science Analyst, Ozinta: And then the BioArc Ultra does seem to be kind of a game changer. Are you selling those yet or are you putting in a facility in Boston, if my memory serves me correct, utilizing the BioArc Ultra?

Lawrence Lin, Chief Financial Officer, Ozinta: That’s right. Yeah. So, in the press release recently, we we talked about UKBC and, them putting in a BioArc Ultra. Right? I I was just in Manchester, I can’t remember, last week.

And and these are impressive, automated warehouse management stores. And so because Manchester manufacturers. Because Manchester manufacturers these. And one, just the, ability to store within the space, is a game changer. And that’s why UKBC has really, gone with us.

Also, I think University of Miami is also looking at this, as well, or has put in one for their Institute of Human Genomics. And and you’re right. In in Boston, we are going to stand up a Ultra, in the back end of the year, and that’s currently in the works.

Paul Knight, Life Science Analyst, Ozinta: I don’t know. I’m guessing that’ll change the, lower the price of storage for some of these customers as well?

Lawrence Lin, Chief Financial Officer, Ozinta: Absolutely. I think down to the metric of sample per square foot, right, that’s going to be key, especially with real estate CapEx constraints. The ability to put more in a similar footprint and go vertically, I think, will be a significant advantage for our customers and us.

Paul Knight, Life Science Analyst, Ozinta: Yes. And then the I’m looking at your PowerPoint from your long ago Analyst Day, but the portion of business that’s related to, like, the B3C freezers, how’s demand for that type of technology?

Yvonne Barone, Head of Investor Relations, Ozinta: So we’ve seen, we saw, you know, coming out of the second half of twenty twenty four, and into Q1, we talked about the solid demand in cryogenics. So, you know, we feel good about that, that space, that performance and continuing to build the funnel there. And I think as we see, you know, more funding, you know, kind of flow in as well as a resurgence in kind of the CGT space, that’s an area we can play, you know, strongly in. And that’s coupled with automation as well, right? So those units as well.

So it has the same advantage that Lawrence really talked about on the automated stores.

Paul Knight, Life Science Analyst, Ozinta: The question we’ve had here is, B Medical obviously up for divestiture. Any update there, Lawrence?

Lawrence Lin, Chief Financial Officer, Ozinta: Yeah. Look, the B Medical sale process continues to progress. At this time, there’s really no additional updates to share beyond what we discussed during our q one earnings call. As as we mentioned previously, our value creation committee is highly involved in the sales process, and and we’ve engaged external advisers. You know, ultimately, we’re we’re really focused on maximizing the value of the sale.

You know, I know we’ve talked in the past of, of kind of putting ourselves in an internal deadline in the first half of the year, but, obviously, we’re we’re looking at a broader scope of, than the twelve months that kind of given ourselves here. Hope to update, everyone as there’s additional news.

Paul Knight, Life Science Analyst, Ozinta: Yep. And then, the, kind of when will we see guidance on long term potential of margins and the growth? Will you do an Autom Analyst Day? What are you thinking there, Yvonne? More Lawrence?

Yvonne Barone, Head of Investor Relations, Ozinta: Yeah. So so we are in the in the midst of planning, our our upcoming Analyst Day. I think John mentioned we’re thinking in the June ish time frame is, at least where we’re targeting right now. And at that time, we will certainly update, LRP, you know, strategic initiatives, as well as additional opportunities that we we kind of see in in our in our capital allocation space, right, in terms of what we wanna do, out to to 2027.

Paul Knight, Life Science Analyst, Ozinta: Yeah.

Lawrence Lin, Chief Financial Officer, Ozinta: And and really, it’ll it’ll be in our Indianapolis facility. So I think that is gonna be really a a highlight that we hope to be able to give the investors a a tour of kind of what we do. So really excited for that opportunity.

Paul Knight, Life Science Analyst, Ozinta: Right. I think you do a lot of Lilly work there. No?

Yvonne Barone, Head of Investor Relations, Ozinta: Mhmm. Lilly. Yeah. Yeah. Yeah.

Absolutely. It’ll be it’ll be great to see. I think you

Paul Knight, Life Science Analyst, Ozinta: What’s the latest count on number of customers that are kind of basically sole outsourcing to you? Last, I remember, was seven, but do you know or can you say?

Yvonne Barone, Head of Investor Relations, Ozinta: I honestly, I’m not sure, Paul. I mean, we can I’m not sure, but we can get back to this group and kind of Sure.

Lawrence Lin, Chief Financial Officer, Ozinta: Yeah.

Yvonne Barone, Head of Investor Relations, Ozinta: But I would think it’s probably not less than what you recall. It’s probably more, but we can follow-up.

Paul Knight, Life Science Analyst, Ozinta: Yeah. I mean, I’m sure that the biopharma market continues to be pretty robust for you on storage.

Yvonne Barone, Head of Investor Relations, Ozinta: Yeah. Absolutely.

Paul Knight, Life Science Analyst, Ozinta: Yeah. I mean, I think there was, what, overcapacity in the industry in ’23, but what’s your view on market as in the year ’twenty four finished and we move into ’twenty five for the biopharma for getting government academic?

Lawrence Lin, Chief Financial Officer, Ozinta: In terms of the market

Yvonne Barone, Head of Investor Relations, Ozinta: Just biopharma and and market.

Lawrence Lin, Chief Financial Officer, Ozinta: Yeah. I I I think, you know, it’s it’s kind of in line with our expectations. You know, Paul, you know, still pretty robust as we look forward. I think the opportunity, as I mentioned, kind of overall landscape still exists. And, it’s really kind of our opportunity and our our, our, you know, ability to win.

Yvonne Barone, Head of Investor Relations, Ozinta: Yeah. I think the biopharma is too, they’re settling in post some of the reorgs that they’ve been doing, right, in terms of where they’re gonna focus and prioritize. So I think that will you know, has the potential to be a tailwind in in ’25 as well once they hopefully get past that that activity and that reprioritization of of, of priorities.

Paul Knight, Life Science Analyst, Ozinta: And you’re in the New Jersey sequencing and service site right

Lawrence Lin, Chief Financial Officer, Ozinta: now? That’s right.

Yvonne Barone, Head of Investor Relations, Ozinta: We are.

Lawrence Lin, Chief Financial Officer, Ozinta: Yeah. That’s right.

Paul Knight, Life Science Analyst, Ozinta: Yeah. What portion of business on service is sequencing? You do a lot more than that, I believe. Right?

Yvonne Barone, Head of Investor Relations, Ozinta: Yeah. So this facility does primarily, it’s the NGS in Sanger.

Paul Knight, Life Science Analyst, Ozinta: Okay. But I don’t, you know, I think in the past you’ve offered other products like PCR.

Yvonne Barone, Head of Investor Relations, Ozinta: Yes, yes. Yeah, yeah, yeah. And there’s the other prep and clinical is here as well.

Paul Knight, Life Science Analyst, Ozinta: Great. And then the China was your last big expansion effort. What’s the utilization rate of the China facilities now?

Lawrence Lin, Chief Financial Officer, Ozinta: Utilization? You know, so we’ve just, you know, we’ve just really gotten to and I John and I had the opportunity to see the China facility. IT’S A LARGE, YOU KNOW, 12 STOREY BUILDING. IN TERMS OF UILIZATION, WE DON’T GET INTO THAT LEVEL OF DETAIL. BUT, YOU KNOW, AGAIN, OUR CHINA GROWTH WAS

Yvonne Barone, Head of Investor Relations, Ozinta: multi omics was 7% in q one

Lawrence Lin, Chief Financial Officer, Ozinta: and continues to grow.

Yvonne Barone, Head of Investor Relations, Ozinta: So China. Yeah. Yeah. I mean, that’s, you know, it’s a it’s it’s a real hub, of kind of our advanced degree specialists, in that area and they’re really situated around a lot of similar life sciences companies. So we continue to see strong performance despite some of the other China more macro headwinds that we’ve seen to date from the China multiomics team.

So great execution from that team there.

Paul Knight, Life Science Analyst, Ozinta: Great. Well, I know you’re very busy. We really appreciate your time today and look forward to the year ahead.

Yvonne Barone, Head of Investor Relations, Ozinta: Yeah. Great. Thanks so much. Thank you so much. Thank

Paul Knight, Life Science Analyst, Ozinta: you. Absolutely. See you soon.

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