Bio-Rad at RBC Healthcare Conference: Strategic Focus Amid Challenges

On Wednesday, 21 May 2025, Bio-Rad Laboratories Inc. (NYSE:BIO) shared its strategic insights at the RBC Capital Markets Global Healthcare Conference 2025. The company’s leadership emphasized operational improvements and strategic acquisitions amid revenue headwinds. Despite challenges, Bio-Rad remains cautiously optimistic about future growth, leveraging its strong financial position to navigate uncertainties.

Key Takeaways

• Bio-Rad faces a $40 million revenue headwind due to reduced research spending and market challenges in China.
• The company is focusing on operational improvements and strategic acquisitions to drive growth.
• Bio-Rad plans to utilize cash and debt for acquisitions, prioritizing existing products that align with its portfolio.
• The company expects a stronger second half of the year, consistent with historical trends.
• Tariffs and US policy uncertainties are impacting financial performance, but ongoing reagent sales indicate steady lab activity.

Financial Results

• Bio-Rad exceeded expectations in Q1 on both top-end and operating margins.
• Revenue headwinds of $40 million are anticipated from reduced research spending, particularly affecting NIH-funded customers.
• The company expects continued softness from Q2 to Q4, impacting academia, biotech, and the China market.
• Consumables are showing steady pull-through, despite a slowdown in instrument sales.
• Tariffs have a net negative impact of 30 basis points, approximately $30-40 million, incorporated into guidance.
• The second half of the year is projected to account for 52% of revenue, reflecting typical seasonal trends.

Operational Updates

• Bio-Rad is focusing on operational improvements and lean deployment to drive margin expansion.
• Spending caution among NIH-funded customers is impacting instrument purchases.
• The company is not assuming any uplift from China stimulus in the latter half of the year.
• The acquisition of Stilla Technologies is expected to close by the end of Q3.

Future Outlook

• Bio-Rad anticipates a typical step-up in Q2, with consistent performance in Q2 and Q3, and a seasonal pickup in Q4.
• The company sees potential upside in increased biotech M&A activity and overall pharma spending.
• Bio-Rad is prioritizing cash on hand and debt for M&A, focusing on companies with on-market products that can leverage its network.

Q&A Highlights

• The company is confident in the implied revenue ramp from Q1 to Q4, supported by specific business dynamics.
• No "budget flush" is factored into guidance.
• Biotech M&A is seen as a potential catalyst for recovery in biotech investments.
• Bio-Rad’s capital deployment strategy focuses on M&A with companies of scale, considering deal sizes in the billion-dollar range.
• The company remains agnostic about whether acquisitions are in life science or diagnostics.

In conclusion, Bio-Rad Laboratories is strategically navigating a complex landscape with a focus on operational efficiency and targeted acquisitions. For a deeper dive into the conference call details, readers are encouraged to refer to the full transcript below.

Full transcript - RBC Capital Markets Global Healthcare Conference 2025:

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Good afternoon, and welcome to the RBC Capital Markets twenty twenty five Global Healthcare Conference. I’m Connor McNamara, the life science tools and diagnostics analyst at RBC. It’s my pleasure to introduce our next company, BioRed. On the stage with me today are CEO, Norm Schwartz, and CFO, Roop Lakaraju. Gentlemen, thanks for joining us.

Thanks for having us. Really appreciate you attending again. So we’re gonna start kind of high level question, if that’s alright, before we get into tariffs and NIH and all the fun math stuff with you, Roop. But, Norm, you’ve brought in a new a new CFO, a new president, two business heads. Maybe starting there and just kind of how has the culture at Bio Rad changed now versus what it was in, you know, pre pandemic in 2019?

Do you do you feel from a leadership position you have the right people in place, and then how does that trickle down to what you see as your day to day roles and kind of what the morale is at the company? Start there.

Norm Schwartz, CEO, BioRad: So so I don’t think it’s a you know, fundamentally hasn’t changed. Mhmm. You know, still focused ultimately on the customer and on innovation. I would say that, you know, it has been great to have this new team in place, very engaged, and really working very heavily on kind of operational improvements. You know know, in this period where we’re especially in this period where there’s, you know, kind of some limitation on top line opportunities, focusing on operational improvements, you know, driving margin.

That’s the that’s really the focus. But, again, good team, a lot of things going on, you know, and and ultimately look forward to the kind of the markets recovering and and being able to kind of see the value of some of these improvements that we’ve made.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: And then maybe from just your involvement day to day, I mean, do you have do you feel now more confident being able to kind of step away and and not fully, but just step away and say, look at these four guys or these four folks that we brought in. They’re they’re doing exactly the vision that that I brought them in to execute on, and and you feel pretty comfortable about that? Or do you still feel like you’re you’re in the mix with with the four of them and your day to day operations are still more or less unchanged versus what they were five years ago?

Norm Schwartz, CEO, BioRad: Yeah. There there’s there’s obviously still a lot to do. And, you know, I I feel like I’m as engaged as ever. Okay. You know, if I look back, I you know, I’m not working Saturdays anymore, but aside from that Lucky.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: You know? So lucky. Okay. Well, that’s good. Well, good.

Good. And, Roop, kind of thanks for that, Norm. Roop, you’ve been there for just over a year now, I think. Mhmm. So we had you on stage a year ago when you were kind of excited about the things the changes that were ahead of you.

Obviously, some US policy may have changed kind of the trajectory of that. But maybe if you just look at, you know, what you saw when you came in as the opportunity set for you as a as a as a finance person professional, What you knew would be, okay. These are the the low hanging fruits that I could bring. You know, I’ve run this is my core competency. I can do this versus what you said, okay.

That’s something we need to do on the heavy lifting side. Where do you think you stand as far as how much of the easy stuff has been done? And then how how deep into that kind of the heavy lifting have you already started or even already completed of kind of the big the big changes on especially on margin expansion? Yeah.

Roop Lakaraju, CFO, BioRad: I appreciate the question. I so it’s been about thirteen months now, and I would say that the good news is Norman and and the company have initiated a number of improvements, whether that’s the rationalization of the footprint and and some of these sort of things that were underway. I think with myself and and the new leadership, really, over the course of last twelve, thirteen months, really aligning on where where the markets are, where we need to go from a strategy standpoint, both from a diagnostics and a life science standpoint, by which then you can look at, well, what are the operational improvements that can be driven? And so at the end of the day, we’re early in the in in the baseball game from an inning standpoint in terms of that margin expansion opportunity. As Norman said, having the markets be a little bit more constructive would be helpful towards get to that top line growth, but we’re focused to to drive execution from a top line growth perspective.

We think we’ve got some growth areas that I’m sure you’ll touch on over time, and and from a margin expansion standpoint, it starts with some of that leverage on the top line. And then driving, whether it’s lean deployment, which we’ve been doing over the course of the last fifteen, eighteen months, which is relatively new, not just in the operational area, but taking that upstream as well as into the OpEx areas, there’s a multitude of things that that we’re focused on from an overall margin expansion that over a multiyear basis, we think will drive margin expansion into that teens, you know, and ultimately targeting that 20% on a long term basis. Great.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Thanks for all that color. And and now we’ll dive, I guess, into the more the here and now given especially given all the uncertainties in in in US policy. So in q one, and, Roop, make sure I get these numbers right. You you incorporated about $40,000,000 of revenue headwinds into guidance from from a slowdown in research related spend, and most of that is around US policy, particularly on some of your customers that are are NIH funded. Yep.

Just confirm that number. And then how much of that is what you’ve actually seen versus, okay, you’re taking a view that based on these conversations, there was a step down, and we think that it’s not going to rebound. So how conservative is that 40,000,000 versus you’ve already seen 40,000,000 come out for the year? Yeah.

Roop Lakaraju, CFO, BioRad: So I’ll I’ll start with, you know, q one was was a pretty good quarter for us relative to kind of what we guided. Right? We had a beat on the top end and the operating margin line. So you could argue that q one played out even though there was a lot of moving pieces, played out kinda how we kinda expected it to do from an end numbers perspective. That softness that you speak about is really for the rest of the year in terms of that q two through q four.

Across academia is a big quick portion of that, whether it’s in The US, but that’s really a conversation a global conversation, not just a US conversation. So that’s kind of the expectation. The other piece is biotech softness, which we saw, and and a lot of the softness is focused on instruments. Right? The good news is consumables.

We’ve continued to see that pull through on a fairly steady clip, which was nice to see. That means the activity is continuing, and I think that need for the activity is continuing as well. And and the other part of this is the China market, which has continued to be challenged. Right? That’s factored into that softness that we talk spoke about.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Okay. Okay. And has anything changed? You know, I know in NIH, that was, call it, I think, February 15 when there was a social media post, and that was when there was I I don’t know I don’t know if freak out is the right word, but we’ll say we’ll say freak out that these customers said, we don’t know what we’re gonna do. We don’t know if we’re even gonna be able to stay open for business.

Obviously, that, from what I understand, a lot of these folks did not shut down their labs. So from February 15 to where we are today, has that has the tone improved a little bit? Has it gotten worse than that initial shock, or is it kind of still waiting and seeing?

Roop Lakaraju, CFO, BioRad: I would say that it’s it’s continuing to do work, but being cautious. Got it. Okay.

Norm Schwartz, CEO, BioRad: And that’s reflected mostly in the, you know, the slowdown in instrument purchases. As Roop said, you know, the the the flow of reagents continues, so people are still in the labs, still working, but they’re just being very conservative about their budgets to make sure they can stretch them as far as they can

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Okay.

Norm Schwartz, CEO, BioRad: In the unknown circumstances. Perfect.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Okay. Thank you. And then the other unknown is an unknown, you know, and and it changes on a weekly basis. But as far as the tariffs, I think you incorporated a 30 basis points, which equates to about 30 to 40,000,000 ish net in is it net impact on on the business from tariffs? Mhmm.

And remind us, what what are the components of that? Yep. And we’ll go from there.

Roop Lakaraju, CFO, BioRad: So the so the 30 bps, you’re right, Connor. It it’s a net number. And the the primary areas that that drive that tariff impact are are really three. I’ll break them down into three categories. Number one is US products that are manufactured here, shipped over to China.

There are European products that are made there, shipped to The US, and then there’s broadly global supplier tariffs that that were, you know, working day to day, hand to hand combat, if you will. Right? So those are the three components of it. And and as you said, it’s changing day by day from from that standpoint. Again, the 30 bps, though, is

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: in that number. Okay. And you you incorporated what you assumed would be the impact based on the implemented tariffs at the time you gave guide. That’s right. Obviously, the the tariff policy has changed.

But on top of that, you know, are you actually like, does that 30 basis points, like is that equated to, like, checks you’ve already have to, you know, write for for tariffs, or is that just kind of it’s still evolving. So even though things have been implemented, you’re not actually paying that because of you know, it’s still evolving. So I I that’s where I’m a little confused because it feels like it’s a you’ve you’ve baked in some conservatism, but I don’t wanna Yeah. Put words in

Roop Lakaraju, CFO, BioRad: your mouth. So I the so if it can be all of the above, I would take take all of the above. Right? Because there are tariff rates that have flown through our our books. Right?

So so those are being incurred. There are others that are being paused, and the question is, is it in perpetuity, or is it only for that ninety day period? And so from what we incorporated from a guide standpoint, could there be some positive uptick from that 30 bps? Yeah. That’s a possibility as well.

So it’s kind of these moving pieces, but both are correct in that some has already come through and others are paused and therefore won’t come through or haven’t come through. Okay.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Alright. Thanks for that. So so definitely being conservative. I’m I’m not gonna. Sorry.

Okay. What about just a a from a demand perspective? Is there any you know, we talked about the NIH related academia customers. But just overall, is there kind of a fear of what’s next from US policy that’s driving maybe a temporary slowdown from end market that was already slow where We we can’t really pull the trigger on anything because we don’t know what tariffs going on.

We don’t know what what other policy is gonna come next. We don’t know what’s coming out of Washington. We’re just gonna wait for a while until we absolutely need stuff. Or have you you know, has that already played out? Because you’ve had a, you know, basically a weak purchasing environment from your most of your customer classes over the last couple of years.

And so has there been any more another step down just of of the added uncertainty?

Norm Schwartz, CEO, BioRad: In the in the last month or two?

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Yeah. In last couple

Norm Schwartz, CEO, BioRad: of months.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Just just just over the last you know, basically since April.

Norm Schwartz, CEO, BioRad: Yeah. I wouldn’t I wouldn’t say so. I think it’s it’s it’s pretty much the same. You know, obviously, there’s there’s there’s the kind of latest talk about the kind of most favored nations in in pharma and some of that discussion, questions around what’s that gonna mean. It’s it’s kind of a new uncertainty, but but in terms of the basic research markets, yeah, I don’t I I think my sense we’re kind of at the bottom of that.

You know, I think China’s a little bit of the exception, you know, question in my mind about where China’s going with with their research budgets, you know, given the economy and and the other constraints they have. But, generally, the feeling is we’re we’re at the bottom. Okay. Great.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: And then does your guidance assume any China stimulus uplift in the back half there?

Norm Schwartz, CEO, BioRad: No. Okay. No. I think, you know, we saw before when the China stimulus happened last time around, really not much effect for us, and I don’t think we feel that there’s a big upside this time around either, especially now with the, you know, lot more pressure on the in China for China. You know, I think that’s a kind of counterbalance to stimulus for us.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: And then one of the most widely asked questions I’m getting from investors is the ramp implied by guide. And Mhmm. You go from q one to q four, kind of the both the revenue ramp and the margin ramp, it looks, some would say, looks aggressive and I you know, maybe walk me through that. And I would say, you know, what I’m what I tell investors is, look, the last couple of years have been unique and that it’s not a normal q one to q four progression, given all of the timing of kind of these headwinds that hit. But, you know, walk through your confidence level in being able to hit that ramp that you are that you have implied in guidance.

Yeah. So so I guess I’ll start with the historically,

Roop Lakaraju, CFO, BioRad: if you look at first half, second half, I’ll start there, it’s been 49%, fifty one %. When you look at this year, it’s roughly 48%, fifty two %, not dissimilar. When you look at the profile of how you’ve modeled it, right, q one being lowest, which is typical for us, there’s a q two step up, which is typical. Q two and q three are relatively consistent, then you get a q four pickup from a seasonality standpoint. That’s the profile for the year.

To your to your question of are we there is not a broad presumption of macro improvement in these sort of things. When you look at some of the change from q three to q four, it’s specific to parts of our business where, you know, the the the sales funnel drives that growth in particular areas, like quality systems and the lot release periods there, how process chromatography flows through the year. So there are some very specific things that drive some of the inflection points for us that are unique to what our profile is, if you will. Right? But there’s no broad market uptick that we’re contemplating there.

Maybe with the exception of it’s it there’s a little bit of improvement broadly just because I think as we get towards the end of the year, the economy needs to get on more stable ground, and and therefore, the expectation that there’s at least some clarity around NIH budgets and tariffs and these sort of things, but not necessarily a broad economic recovery.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: What about budget flush at the end of the year? This is something that hasn’t really happened And I mean, have have you baked in any assumption on budget flush this year? We have not as of now, and I

Roop Lakaraju, CFO, BioRad: think it’s a little bit early to to kind of at least for us to predict kind of a budget flush at this point in time.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Okay. And I think all of us are focused on, jeez, we’ve had a shoe drop in every possible end market and geography at this point. So maybe focus on the positive. If you look at your guide, what is one area where you like, you know, this could what’s the area that could surprise to the upside that maybe investors are not asking you about? And, you know, the one that I always look at is, like, biopharma has a ton of cash at, you know, obviously, the early stage biotech that they’re still funding, but the rest of pharma’s got a lot of cash that they really haven’t deployed.

So that I always point to that as, hey. Look. At some point, they’re gonna, you know, turn the faucet back on and start spending. But maybe I’m giving that too much credit. But what are some things that, like, you would love to see and be like, oh, there we go.

Okay. Now things are now we could start looking at the high end of guidance and how we how we outperform because of this one thing that gets going.

Norm Schwartz, CEO, BioRad: Yeah. It’s an interesting point. I think that, you know, in terms of pharma having cash and deploying it, they could do kind of one or two things. It’s internal development or or they could kind of buy up some of these kind of biopharma assets that are that are on the market, the small biotech assets, and I think that that might be a kind of a further stimulus for the biotech recovery, in fact, you know, more activity in that in that group probably spawn more investment in the the biotech area, so so that’s that’s a potential upside.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Biotech M and A, just overall spend in pharma.

Norm Schwartz, CEO, BioRad: Yeah. Yeah. And, okay, biotech has come alive again, so it’s a great place to invest, and let’s go for it. Okay. Great.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Maybe we’ll use that as a good segue into capital deployments. And you guys have been active in your buybacks, which is which is nice to see, especially with with your stock where it is. But how do you think about m and a? And and may actually, maybe we’ll start with the most recent deal and Stella, and give us an update on the timing and how we should think about that opportunity. And then I wanna dig more into to where where some of the opportunities are in M and A going forward.

Roop Lakaraju, CFO, BioRad: So from a timing standpoint, still we still expect it to close by the end of the third quarter. It’s moving moving along well, and so we look forward to getting that closed and and then, you know, we’re getting the integration process there.

Norm Schwartz, CEO, BioRad: Yeah. And I think that’s a that’s a really good model for us. You know, it’s it’s a it’s a product that’s basically on market Mhmm. And it fits extremely well within our portfolio. In fact, it fits a place in our portfolio that that is that is developed in the last twenty four months or thirty six months, which is the low end of the Droplet Digital PCR market, market where we have a leadership position, and that’s that’s kind of a perfect kind of a fit for us on the on the kind of the smaller side of the equation.

I think as we think about m and a going forward, you know, we are we are focusing a little more on assets that with with on market products, and and candidly would would like to find something, you know, a little bit on the larger side where we can leverage our the improvements will be made, the operational improvements, leverage our our our global distribution system, maybe maybe even leverage some of our manufacturing capabilities. So so, you know, that’s the kinds of things we’re looking at, whether it’s in life science or diagnostics. We’re probably a little bit agnostic as to which one it is. It’s just gotta be the the right fit for us and and add value for for the company and and, obviously, then for our customers.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: So so just to summarize, I think, you know, if you look at at your history of m and a, you’ve got, I will I’d say I’ll call it a mixed track record where you’ve bought you’ve typically bought companies that aren’t revenue generating. Either they do have a product on market, but they don’t have the Salesforce, or they’re close to market, but not quite to Bio Rad standards. And so if I look at some of the other deals you’ve done in d d p c r, which I think was QuantStudio, if I’m not mistaken, you didn’t pay much for that. It took a few years to get to put some r and d dollars into that to make it Bio Rad worthy, and you launched and that was an incredibly successful product. So I would say the ROI on that was very, very high.

Roop Lakaraju, CFO, BioRad: Yes.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Then you’ve also had some deals where you’ve bought what I would call, you know, more science projects. They weren’t big investments, but you thought the market might go this way. You bought them. You found out, look, this isn’t working, and so they ended up being a zero ROI or negative ROI. And so I’d but I would say that the wins are probably better than the losses, unless you disagree with that.

So going forward, you know, knowing that as your background, are you more focused now on and I think you said this, but are you going to buy something that is on the market today where you can use your network to significantly expand their their reach, or should we expect to see some more of these science projects?

Roop Lakaraju, CFO, BioRad: It’s it’s the companies of scale, and I think Stila makes that point, if you will. Right? What’s where Stila is and and where it’s competitive is in that entry point of the market for a digital Droplet Digital PCR. Right? As well as the high end QPCR.

And so for us, that’s SAM that we don’t address today. Mhmm. That’s where the greatest growth is in in the digital PCR market. And and so that’s the folks. Now, where they are from a life cycle standpoint is they lack the commercial infrastructure today to really take it broadly.

And so because we are the market leaders in in digital PCR, we can take our network and our capabilities and take them to the market broadly. And so that’s the expectation we have.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: And then on capital deployment and Sartorius specifically and your cash balance, let’s say and you mentioned deal sizes with a b in the most recent comp call. So we’ll start there. Let’s say you had a billion dollar deal today that you wanted to buy. You’ve got several avenues on how you could finance that. And how would you prioritize, one, using the cash on on hand, two, raising debt to do that, and three, selling a portion of your Sartorius holdings to do that deal?

Are all three of those an option to buy that a deal of that size? And and what would be your order of preference of those three?

Roop Lakaraju, CFO, BioRad: So the order of preference, you said it. Cash, debt, Sartorius if necessary. Right? You can argue I mean, I know Sartorius gets a lot of airplay, and it’s been an incredibly successful investment by the company. So, you know, really kudos to to Norman and and the Bio Rad team from that standpoint, and and therefore, it gives us further optionality.

But one can argue also that it’s undervalued where it is today. And so because we have optionality from a cash and a leverage standpoint or a debt standpoint, we’re gonna look at those and but it’s if we’re gonna pay something, it’s got to have the value creation for us, right? It has to have top line. It has to give us margin expansion because, ultimately, that’s what we’re focused on is operating margin expansion and improved free cash flow generation.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Right. And as far as the M and A environment goes today, do you feel that, a, the sellers are being more realistic in valuations and, b, you are at a stronger point relative to your competitors in the M and A process because of all of the avenues you have to finance a deal versus others may may be facing leverage issues with higher interest rates that maybe there are their deal economics won’t be as good. So do you feel like you’re at a stronger point when you get to the negotiating table and are looking at m and

Roop Lakaraju, CFO, BioRad: a deals? I think we have a very strong position. Are we stronger? I mean, that’s a case by case assessment. But because of the strength of our balance sheet and our cash position and the fact that we’ve got two areas of the business, whether it’s diagnostics or life science, and we really are agnostic in terms of which asset.

It’s about the quality of the asset, and and that’s that’s the bottom line.

Norm Schwartz, CEO, BioRad: And the fit. And the fit. Great.

Connor McNamara, Life Science Tools and Diagnostics Analyst, RBC Capital Markets: Well, that just about wraps up our time. Really appreciate you guys joining us, and thanks for everyone in the room and and online for for listening in. Thank for having us.

Roop Lakaraju, CFO, BioRad: For having us, Connor.

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