Bio-Techne at Goldman Sachs Conference: Strategic Growth Amid Challenges

On Tuesday, 10 June 2025, Bio-Techne (NASDAQ:TECH) participated in the Goldman Sachs 46th Annual Global Healthcare Conference. The company presented a robust strategic overview, reporting solid Q3 results with notable growth in the protein sciences segment. However, challenges in the U.S. academic market and uncertainties in large pharma were highlighted. Despite these hurdles, Bio-Techne remains optimistic about its long-term growth, backed by strategic initiatives and a significant share repurchase plan.

Key Takeaways

• Bio-Techne achieved 6% organic growth in Q3, with strong performance in protein sciences.
• The company announced a $500 million share repurchase plan, signaling confidence in its valuation.
• Challenges include a choppy U.S. academic market and negative growth in China.
• Bio-Techne focuses on strategic areas like cell and gene therapy and spatial biology.
• Tariff impacts are expected to affect Q4 margins, but mitigation strategies are in place.

Financial Results

• Organic Growth: 6% overall growth in Q3, driven by a 7% increase in the protein sciences segment.
• Large Pharma: Double-digit growth in this segment, which accounts for 30% of revenue.
• China Market: Experienced negative mid-single-digit growth, but long-term potential remains.
• U.S. Academic Market: Represents 12% of revenue, with a stable core reagents business despite market fluctuations.
• Margin Performance: Q3 margins expanded by nearly 200 basis points; however, Q4 is expected to see a decrease due to tariff impacts.

Operational Updates

• Tariff Mitigation: Efforts include shifting manufacturing outside China to reduce exposure.
• Instrument Performance: Upper single-digit growth in instrumentation, with strong contributions from the Protein Simple franchise.
• Cell and Gene Therapy: Revenue exhibits variability due to clinical trial purchase timings.
• Spatial Biology: This business area is nearing $120 million in revenue, with an EBITDA approaching 30%.
• Wilson Wolf: Growth in the mid-twenties on a TTM basis, supported by involvement in five approved cell therapies.

Future Outlook

• Q4 Expectations: Anticipated to mirror Q3 performance, with potential slowdowns in large pharma.
• M&A Strategy: Continues to be a key focus, with potential for increased activity as valuations improve.
• Capital Allocation: The share repurchase plan reflects a tactical move, not a shift in long-term priorities.
• China’s Market: Expected to remain the fastest-growing region for life science tools over the next decade.

Q&A Highlights

• Jim Hipple, CFO: Emphasized a solid quarter despite challenging market conditions.
• Academic Revenue: Highlighted the difficulty in directly correlating revenue to NIH funding.
• Recovery Outlook: Expressed optimism about a quick recovery when market conditions improve.
• Stock Valuation: Reiterated confidence in the company’s undervalued stock, justifying the share repurchase plan.

Readers are encouraged to refer to the full transcript for a detailed account of the conference call.

Full transcript - Goldman Sachs 46th Annual Global Healthcare Conference:

Matt Sykes, Analyst, Goldman Sachs: Good morning, everyone. My name is Matt Sykes, the life science tools and diagnostics analyst at Goldman Sachs. And today, have the pleasure of welcoming Jim Hipple, CFO of Bio Techne and David Claire, Head of IR. Jim, David, thanks for joining me today.

Jim Hipple, CFO, Bio Techne: Yeah, Matthew. Thanks for having us. Great to be here. Great to have it not be a typhoon this year.

Matt Sykes, Analyst, Goldman Sachs: Yeah, exactly. We’re going to hold out that everyone can get out okay. But I haven’t even been outside yet.

Jim Hipple, CFO, Bio Techne: Too hot.

Matt Sykes, Analyst, Goldman Sachs: Maybe we just start with your fiscal Q3 results, which was a pretty solid quarter, just given particularly given all the macro headwinds we’re experiencing today. Could you maybe start with some of the highlights from the quarter, Jim, and some things that you really want investors to kind of walk away from?

Jim Hipple, CFO, Bio Techne: Yes, absolutely. Well, of all, thanks for recognizing that it was a good quarter because we were very pleased with the quarter, especially in this environment that we’re in right now with 6% overall organic growth. And more importantly, our protein sciences segment, which is the one markets which is the the segment that’s most impacted by the end markets that we’re talking about mostly today, 7% growth. And what was really encouraging to see was it was very widespread. Wasn’t any one single product line or order or anything like that that drove that kind of growth.

It was we had essentially segment comparable growth across our core reagents, across our instrument platforms. So, yeah, it was very widespread. We saw, you know, Asia outside of China come back to life. And if there was, you know, one area that was that was more impacted that that drove the growth, it was large pharma, which was also encouraging because large pharma is our largest end market, 30% of our revenue as a company. It was the end market that we had, I’d say, the least visibility and maybe, therefore, the least confidence in terms of getting back to more normal end market growth as we entered this fiscal year fiscal year twenty five.

So to see that be so strong, we had double digit growth essentially across large pharma. So it really carried our Protein Sciences segment. So yes, was a very, very solid quarter despite a very choppy end market situation.

Matt Sykes, Analyst, Goldman Sachs: Great. Got it. Maybe moving on to one of the areas that’s is probably the most obvious is The U. S. Academic market.

It’s obviously become increasingly dynamic. Maybe can you remind us of your revenue from these customers and what kind of you’ve been seeing for your U. S. Academic customers lately? I I think there’s been thoughts of perhaps potentially pull forward before the budgets go away.

Obviously, there’s been a lot of flux. Things were suspended in February. And so just kind of, one, put into context what it means for your business. And two, what are you seeing from that customer base? And what are your expectations for the balance of this year?

Jim Hipple, CFO, Bio Techne: Yeah. I mean, academic has, you know, definitely been the choppiest with regards to the noise level with all the, you know, indirect cap costs started with that and then piled on with different levels of budget cuts and so and withholding NIH outflows, etcetera, etcetera. And, again, I can’t be more pleased with how we’re positioned to handle that kind of volatility in that end market, starting with just the fact that the majority of our business with academic is our core reagents. And our core reagents are sold a little bit every day into the academic market, and they’re they’re kind of a they’re just a staple with regards to having those labs open within the academic institutions and how much they’re directly tied to true NIH grants and NIH funding, it’s really harder to determine. And I can tell you eleven years I’ve sat in the seat here as CFO for Bio Techne, I’ve always tried to come up with an algorithm of how our academic business does in The US relative to NIH funding flows and have yet to come up with one because the beta is actually very, very small.

When NIH budgets were double double digit increases during the COVID years, you know, we grew, you know, low to mid single digits. And, you know, now in a situation where, you know, outflows have been down double digits more recently, etcetera, our reagents growth was relatively flat. I’ll take that level of stability considering this environment. So I think our we’re positioned very well with regards to academic to handle whatever happens there from the NIH perspective just because I think our correlation with NIH funding is a lot is a lot smaller than, you know, I think it’s perceived out there. Just it’s a it’s a core staple.

Now, you know, with regards to where, you know, where NIH funding could go for us, As a reminder, our academic revenue in The US is roughly 12% of our revenue. But, again, how much of that is truly from NIH is really hard to determine. We’ve estimated in the past it may be as high as half of that or five or 6%. But based on what we’ve been seeing, you know, here recently, from a correlation perspective, I think it’s actually a lot less than that. So I think we’re positioned very well to weather that storm.

And even in a worst case scenario, it doesn’t have a material impact on our overall growth rate as a company.

Matt Sykes, Analyst, Goldman Sachs: And you have exposure outside of The US to academic and government spend, and do you feel like that could be an offset? I mean, it’s obviously potentially an opportunity for them to spend more, but, and I know it’s really early, but just maybe talk about that as a potential offset. No. Great great point, Matthew. And I, you

Jim Hipple, CFO, Bio Techne: know, I think, I don’t think we’re seeing that yet, you know, it’s I think it’s very possible for that to to happen, at least somewhat offset that. But that was standing, our academic markets outside The US, which is mainly Europe, has been robust for what you know, has been outgrowing our US academic market for well over a year, year and a half now. And this last most recent quarter was was, you know, was no different. We actually grew double digit in academic in Europe. So in Europe, it’s it’s very strong, and and, you know, that’s what allowed us to, you know, allow us to keep our academic growth relatively stable overall as a as a company.

Matt Sykes, Analyst, Goldman Sachs: Got it. Another area of focus from investors is tariffs. Maybe

Jim Hipple, CFO, Bio Techne: give

Matt Sykes, Analyst, Goldman Sachs: us an update on your tariff exposure and mitigation efforts.

Jim Hipple, CFO, Bio Techne: So again, fortunately, we’re positioned very well from a manufacturing base perspective and in terms of what we manufacture. So both from a sourcing perspective and from a end end unit sale perspective, we’re fairly well protected from the tariff situations that have been and that’s most of our products are made in The US. So really, the only issue we have is the is the risk of any retaliatory tariffs. And and but the biggest issue there, the up to this point, potentially, was always China. Mhmm.

And and in in the quarter, everybody was determined and we didn’t become to a surprise to us because it happened during the run of terrorists during the Trump first administration, but our core reagents were actually ended up being exempt from tariffs, from the retaliatory tariffs that China put on. So the only tariff situation we were dealing with was with our instruments. And, again, from a sourcing perspective, luckily, almost entirely, our our our sourcing comes from outside of China, so we had no issue there with cost increases. And our instruments, we we have more than one facility where we make our instruments and outside the country as well. So we’re very easy we can very easily ramp up the production of those instruments in those other locations to source China in the future, know, to to avoid those tariffs.

So I think we were the only company that I saw that came out that said that our not only was our tariff exposure very small, but to the extent we had any tariff exposure, we can fully mitigate it within a quarter. And even though the environment around tariffs has softened a bit, which is great to hear, even with China, mean, there’s ongoing talks going on yesterday and today, we’re not stopping our plans with regards to those mitigation efforts because it it’s the smart thing to do anyway to and it doesn’t really cost us much of anything to move some manufacturing around to to make sure that we’re safe not only from tariffs today, but any potential tariffs in the future.

Matt Sykes, Analyst, Goldman Sachs: Got it. China is about 8% of your revenue. Maybe discuss what you’re seeing in this geography and what your expectations are going forward. I mean, it seems like for some of the more instrument heavy companies, it’s stimulus and then really nothing much else. It’s stable, but there’s not a lot of growth.

Maybe talk about your experience in China, particularly on the reagent side and what you’re seeing there.

Jim Hipple, CFO, Bio Techne: Yes. I mean, I think it’s relatively the same story for us. Our reagent side is it’s been stable, although not growing. I think we overall, we had, I think, negative mid single digit growth in China this most recent quarter, but that’s kind of what our year results have been as well. And that was consistent more or less in the reagents as well as in the instrument side.

So, you know, that’s a little bit below our expectations. We were hoping that China would start to rebound in in our q three a bit, even ahead of this, quote, unquote, stimulus. But with, again, all the saber rattling that has occurred since the, new administration put in place, I think that’s put caution in the wind of a China recovery as well. That all being said, you know, I don’t wanna get our too ahead of our skis here because we’ve there’s been false starts in the past, but we were just I was in China personally in December. Other parts of our management team were there very recently in the past couple months.

And I will say in talking to our customers there, I’ve always talked to some biotech customers. I’ve talked to some hospital and research institutions there, and, of course, our own team. And unlike a year ago, rather than talking about future pessimism, things getting worse, there’s actually a slight tint of optimism in their view with regards to the year ahead. So that’s it’s subtle, but I think it’s important. And and more importantly, if you’re in it for the long term, you know, we’re still standing by that the Chinese market will be a very, very important market for tools.

I think the fact that we were excluded, at least our reagents were excluded from the the tariff retaliatory efforts is a sign that our products are needed and how important they are to China and how important health care and its continued development of health care is to China in the future. So, you know, we get past all the noise that’s occurring right now and China gets back on its feet economically, we still think China will be the largest the fastest growing region, major region in the world for life science tools for the decade to come.

Matt Sykes, Analyst, Goldman Sachs: Got it. Nate, you talked a little bit about biopharma being one of your largest end markets. Maybe discuss what you’re seeing from this end market. You said you were pleasantly surprised, although visibility was low. Obviously, there’s the overhang of potential MFN sector tariffs, very difficult to call.

But just your view, particularly given some of the things that you do are more on the earlier side, the research and development, what is your view of the biopharma end market as we move through the rest of the year?

Jim Hipple, CFO, Bio Techne: Yeah. And it’s with biopharma, there’s there’s pharma and there’s biotech, and we kind of combine them. So I think the biotech market is very different than the pharma market in terms of how they behave in this environment right now and what what you know, where their source of the funds come from, etcetera. Large pharma in particular, you know, it’s I think it’s smallest beta of the three when you think academic biotech pharma. Pharma is just they’re larger corporations.

They’re obviously financially sound. They’re not gonna overreact to headlines. They’re gonna be much more thoughtful in in how they approach things. And they’re not gonna make major moves until there’s certainty as to what moves they need to make. And, you know, I think IRA was a good example of that.

There was actual yeah. There was legislation that was passed, and it became law, and then boom. Okay. We’re gonna reset our our our portfolios, our our long term R and D portfolios now under this new kind of IRA, you know, pricing in the future, which, by the way, from all intents and purposes, it appears like it wasn’t nearly as bad as they had envisioned. So our view going into calendar twenty five was that that reset was mostly behind them in ’24.

It’s a big endeavor. It’s expensive. You got layoff people, etcetera. But then when you got to 2025, that there there are there are increases to r and d budgets, which they still did even last year. It just was bent towards late stage stuff.

It was gonna be more widespread along a new baseline. And that’s exactly what we started to see even before fifth the calendar ’25 started. We started to see that in November and of December and all through our first quarter. So I think that thesis is still intact, and I think they’re not gonna even though I believe, and this is kinda why we took our guidance put down in q four as it pertains to pharma, that they took their foot maybe off the gas a little bit here recently, not the brakes, but just a little bit off the gas, as would you would expect given the rhetoric that’s occurred, started in April and May with regards to to pharma, whether it’s tariffs or whether it’s MFN. But I don’t think they’re gonna overreact.

I think they wanna see what happens when the dust settles. And, you know, the reality is they’ve already did a major repositioning of their portfolio, so I think it’ll take something very major to have them go back to that well again. At the end of the day, you can only strip your discovery and and translational research so far, and you basically jeopardize your future. And you could argue they’ve kind of done that already. So they may have if things do get worse for them, they may have to live with little bit less profitability near term, to make sure that they are viable long term.

Matt Sykes, Analyst, Goldman Sachs: Got it. And then just wrapping up on sort of the, the high level questions. How has your performance in Q3 and your expectations for Q4 inform you as you head into fiscal twenty twenty six?

Jim Hipple, CFO, Bio Techne: It’s a I thought last year was a tough When you gave

Matt Sykes, Analyst, Goldman Sachs: to slap me on the ribs with that Yes.

Jim Hipple, CFO, Bio Techne: They told me not to answer that question. So I’ll vaguely answer it and just said

Matt Sykes, Analyst, Goldman Sachs: Whatever you can do.

Jim Hipple, CFO, Bio Techne: It was, you know, it would I thought last year was a tough year to give get forward any kind of soft guidance for, but this year has proven to be tougher. And I say that because at this point in time last year, you know, a lot of things were known. The biotech funding situation was was it was getting better. It was we could see the numbers in terms of the funding. So that was stabilizing.

Academic wasn’t an issue then at all. And, you know, large pharma, the the the the pipeline reset was in full motion, so you can kind of get a sense for when that would end and kind of things get back to normal. We’re not as far as long as that right now. We’re still in this stage of massive uncertainty as to where all these policies ultimately end up. And so in in that type of environment, it’s very tough to pinpoint exactly, not if there’s gonna be recovery.

I fully believe the megatrends are supporting our industry for decades to come. But what exactly when that recovery, you know, restarts again? Because I think it’s it it was starting, and now we have to do a restart. And by the way, when it starts, it starts it it ramps quickly. I mean, you saw how quickly we started to come out of it, and I think we’d be talking about double digit growth this q four if it wasn’t for what’s occurred starting in February, March, and April.

So I think when it does recover, it’ll recover quickly. That turning point right now would be very difficult to pinpoint. And then normally, I’d say, what am I gonna know two months from now that I’m not I don’t know today. But in this environment, you know a lot more two days from now than what you know for today. So I’m hopeful that there’ll be no more known.

I don’t even I’m concerned less about what the outcomes are. I think a lot of the worst case outcomes are already built in. I just I think everyone just wants to know what those outcomes are so that we can now plan our business from you know, with that in mind and and march forward. And I think once that happens, not only that for us, but for, more importantly, our customers, they’ll feel more confident on their purchases.

Matt Sykes, Analyst, Goldman Sachs: Yeah. It was interesting, like, as you pore through some of the Q1 results for you and your peers, like particularly large pharma was off to a nice potential recovery year. It got kind of

Jim Hipple, CFO, Bio Techne: suspended. Maybe

Matt Sykes, Analyst, Goldman Sachs: let’s move on to your core portfolio of research reagents. Maybe give us an update on the performance of your proteins, antibodies and assays. And there’s obviously been some consolidation in this market over the past couple of years. How has this changed into dynamic or competitive landscape in your view?

Jim Hipple, CFO, Bio Techne: You know, not not as much as you might think, actually. I mean, if you think about, you know, some of the larger ones, there was, you know, there was a a protein I’m sorry. Peppertech that was bought by Thermo a few years back. There’s more recently Abcam that was bought by Danaher. And, you know, the reality is that I think the way these these companies operate under Thermo and under Abcam in terms of commercially isn’t that much different.

It wasn’t like they had these companies already had large existing businesses that they completely synergized with and merged into. And so we haven’t seen a dramatic difference in terms of how they go to market and how they compete. They’re just as, they’re just as strong competitors now as they were before. No better, no worse. You know?

And and I think, you you know, honestly, it comes to, the real tougher competition, it’s always been this way in the eleven years I’ve been in this company. It’s more of the smaller companies, particularly in antibodies. And, you know, they’re not they don’t have the breadth, so they don’t compete with you across your entire portfolio, but they all have their niche, and they all try to take bites out of you in those niche. And that’s that’s where we’ve kind of focused more of our attention on.

Matt Sykes, Analyst, Goldman Sachs: Got it. Maybe shifting to instrumentation. It’s around 20% of your revenue when you look at the actual equipment plus the consumable pull through. The equipment has been a pretty challenging part of the industry recently, yet you delivered upper single digit growth in the third quarter, your fiscal third quarter. What drove the growth in the quarter?

And do you think that can be sustained? And what’s differentiating you in that instrument market relative to peers?

Jim Hipple, CFO, Bio Techne: Yeah. So a number of things. So of all, we’re proud to say that, you know, we have such strong consumable pull through in that protein simple franchise that even though for the better part of the last two years, our instruments were down like everyone’s instruments were down, The platform itself had nice solid growth because of double digit consumable pull through, which just gives us the confidence in our in our thesis that these instruments are truly used for productivity by our by our customers. And and the other thing that’s unique about our our instruments, whether there’s three major platforms, the the automated immunoassay platform with with SimplePlex, the automated Western blot with Simple Western, and then our biologics Maurice platform, is truly a kind of QC tool in in in in bio in in in manufacturing. What makes them unique is that there’s not such maybe one of those three platforms, there’s not any real direct head to head competition.

They all in the case of simple simpleplex, there are other companies that have similar platforms, but they’re either used downstream from us or maybe upstream for the application, which we think we’re the sweet spot for and capture more more of the market more of the potential market with. In Simple Western, there really is no automated solution. You either choose to do it manually or you have our solution. And in the case for a biologics platform, there’s only really one other formidable competitor, and our instrument’s just a a better instrument, quite frankly. So we’re winning on the we’re we’re taking share on on on new products that go into manufacturing, new new manufacturing lines.

And and the cost of these instruments are relatively cheap compared to the your typical life science tools instruments. And so, therefore, they’re easier to get through in tighter budgets than they are now. But what’s encouraging is that the last two quarters, not only has our overall Protein Simple franchise grown nicely, but the actual instrument placements have increased two quarters in a row now despite these difficult times. So we think that’s also a sign, particularly in large pharma, that the the markets were were coming back. And we always believe and still believe that when the markets return to normal, we’re gonna see our protein simple franchise really light on fire because we think there’s a lot of pent up demand for those instruments.

The pipeline is as large as it’s ever been. It’s just a matter of budgets getting released to to to to execute on that.

Matt Sykes, Analyst, Goldman Sachs: Got it. Moving into GMP reagents. It’s obviously a key part of your cell and gene therapy growth pillar. What are these used for, and what is the split between cell and gene therapy within this business?

Jim Hipple, CFO, Bio Techne: So we probably haven’t done ourselves any favors by referring to it as cell and gene therapy, cell and gene therapy, cell and gene therapy. It it’s always that was always in the details. There’s cell therapy, and there’s gene therapy. Yep. And the reality is is that we although our some of our instruments are sold as QC tools into the gene phase, it’s not a material part of our revenue.

As you mentioned, the biggest part of our cell therapy So are actually in clinical trials, and the amount of purchases bought by those 85 dwarf the other 400 or so that are in preclinical. And then within those 85, we have a handful or so that are in late stage stage two, early stage stage three, and those handful or so dwarf the revenue from the remaining 80 that are in clinical trials. That gives you a sense of how these things scale as the customer progresses. And then, ultimately, you get into commercial, and that’s that’s a that’s a home run. And that’s kind of where where Wilson Wolf is entering right now, by the way.

But because we have these, you know, a handful of customers that have reached that point, and they’re driving such a large share of our overall pro GMP protein revenue, it now becomes very lumpy because they buy it when they need it for that clinical trial, which could be once or twice a year. And so that’s why we’re we’re now talking about that more of a TTM basis. And, you know, luckily, two or three years from now, as we get more customers into those late stage clinical trials, that lumpiness will start to smooth out. But it’s lumpiness is often perceived as a bad thing. In this case, it’s actually a good thing.

It means we’re getting customers who are progressing into later stage clinical trials.

Matt Sykes, Analyst, Goldman Sachs: Got it. And Q3 growth did slow a little in that GMP ration business to sort of upper single digits, still healthy growth. But what was behind that slowdown? And what should we expect going forward? Is this some of the lumpiness that you’re talking It’s 100% lumpiness.

Okay.

Jim Hipple, CFO, Bio Techne: Yep, exactly.

Matt Sykes, Analyst, Goldman Sachs: Got it. And you kind of touched on it a little bit, but just kind of want to dig a little bit deeper in terms of your exposure among the phases of drug development. There’s obviously a significant uplift in volumes as programs move through later. I’m assuming a lot of what you do, particularly in GMP phase, you’re specked in. But could you characterize kind of your exposure to each phase, maybe across your business or across the GMP region business?

Jim Hipple, CFO, Bio Techne: Well, I think I kind of already did and then I just outlined there. I mean, I said before, there’s a handful of customers that are in late later stage clinicals that dwarf the revenue of the other 75 or so or 80 or so, whatever that number is, that are in earlier stage clinicals. And then those dwarf the revenue of the 400 or so that are are pre. So that’s kind of how you can think about that Okay.

Matt Sykes, Analyst, Goldman Sachs: And you touched on it before, but another key part of your cell and gene therapy strategy is Wilson Wolf.

Jim Hipple, CFO, Bio Techne: Yes.

Matt Sykes, Analyst, Goldman Sachs: Can you remind us kinda how much of you own the company today, how Wilson Wilson Wolf fits in with the business? Sure. And how has the company actually been performing recently?

Jim Hipple, CFO, Bio Techne: Yeah. So so Wilson Wolf, they have a product called the G Rex, which is basically a a disposable bioreactor about the size of a laptop. And in in cell therapy, particularly in immunostell therapy, it’s all about after you’ve reengineered cells you’ve taken out of the body, you’ve gotta now take those reengineered cells and grow them in the billions before you put them back in the body to make sure they can take effect. That all happens in this bioreactor, and the food and the regulation the the regulate the regulators of that food intake is essentially the media and the GMP proteins that are all put into that bioreactor. So all the magic happens in that space.

And most, if not all the other solutions out there for cell therapy, that bioreactor is in a much more of a traditional type bioreactor, a very large piece of equipment, expensive, takes up a lot of space, thus not very scalable. And Wilson Wolf’s G Rex is this very portable and laptop size. You can fit ten, twenty of these in a in a cabinet the size of a that would be just one of a a normal sized bioreactor. So the the potential to scale is is much greater, which is very important if these ever become mainstream therapies. And also the cost point becomes a lot less because the price of this little bioreactor is a lot less than a than a traditional bioreactor.

And because what it contains is basically our ingredients, that’s where the marriage happens. And and we’ve talked about a tool called ProPak we just recently released, which is a tool that basically snaps onto the GREX that has already a predetermined amount of our reagents in it. So you don’t have to fuss with guessing how much to put in and when to put in. It automatically feeds us. So we’re making it even easier to use our reagents with the GREX.

As you mentioned, we’ve already purchased roughly 20% of the company. We have a buyout in target in place where they hit certain metrics. It’s roughly 226,000,000 in revenue TTM or a 136,000,000 of EBITDA TTM, we would buy the remaining 80% for a billion dollars, which is still a pretty good ratio. And if they don’t hit that target within now by the end of calendar 2027, then we’re obligated to buy, and and Wilson will also obligated to sell, the remaining 80% at 4.4 times trailing revenue. And remember, this is right now 7070% EBITDA business.

It’ll probably be 60% under a public company requirement, but nonetheless, it’ll be a great, great acquisition for us. It mirrors extreme we’re already co marketing our products together. But once we’re all under the same hood, that will be even easier to make those synergistic sales. And and it’s one of those rare acquisitions that’s not only gonna be accretive to growth because they have been growing in the mid twenties on a TTM basis, partly because they have there’s seven cell therapies that are currently approved. They’re in five of them.

But as you go from a transition from phase three to commercial, there’s a bit of a lull. It takes about a year, year and a half to get through all the manufacturing processes with the FDA. So that’s kinda why their growth rates were subdued this past year, even though mid twenties is not bad. Yeah. But now they have at least three of those five are going online this year, and just those three alone will accelerate double digit growth even if the rest of the portfolio is flat, which is probably not gonna happen.

So, again, a massive accretion to growth, great accretion even to our EBITDA percentage, which is extremely difficult to find at a very, very fantastic valuation. So we’re very excited about it.

Matt Sykes, Analyst, Goldman Sachs: Got it. Maybe shifting over to spatial biology and diagnostics. Maybe just give us an update on your spatial biology business. Where is your portfolio currently focused? And how has the Comet platform been performing in the current environment?

Jim Hipple, CFO, Bio Techne: So when you think about spatial, there’s like as there is in any of our end markets, there’s kind of three key phases. There’s discovery, which then out out the output of discovery is translational when you find your few select targets of interest to actually make from it either a diagnosis, a diagnostic, or a therapy from. And when you do that, now it goes into the clinic. Right? And where our focus has been from day one with our acquisition of ACD, that would spend now seven, eight years ago, has been on that translational space.

And and because of that focus and because we got just the ultimate solution in our ACD reagents in terms of single cell resolution and specificity for RNA targets, it you know, I think we are the the the biggest player in that space. And because of that, we also are very well positioned as our customers move from translational ultimately into the clinic to follow that journey with them. And in some cases, we’ve even, like, jump started that because roughly 10% of our revenue in spatial is already coming from the clinic with our partners in Ventana and Leica. So we’re already we’re already there. I think we’re one of the few spatial companies can actually say that we actually already have solutions in the clinic and proven that we’re in the clinic.

With over 120,000,000 of revenue of reagents, we are, I think, the largest player in pure spatial as well. And that business is also, you know, knock on the door of 30% EBITDA. So I think we’re all I think we are the only spatial business that actually is very profitable. Right? Now we more more recently, about two years ago now, added an an instrument to the portfolio, COMET, to the acquisition of Lunofor, which is basically an automated solution for for spatial in the translational space.

We think we bought it because we we’re fully convinced it’s the best tool in the market, whether it’s the fastest, it can it can look at the most targets, easiest to use, all those things. But also, and as importantly, it’s the only tool out there that can truly do multi omic spatial detection on the same tissue, on the same run, on the same screen. So we can find both RNA targets of interest and protein targets of interest in the same run. And the beautiful part about it is, again, the pull through. Not only does it have its own chips that are dedicated to the instrument, but obviously, it pulls through our RNA scope from ACD reagents and also pulls in a lot of antibodies for protein detection.

So it’s one of the most synergistic instruments we have with regards to pulling through our reagents.

Matt Sykes, Analyst, Goldman Sachs: Got it. Maybe shifting more towards financial, maybe walk us through your outlook for Q4. What are the assumptions behind your top line and operating margin expectations for the quarter? Yes.

Jim Hipple, CFO, Bio Techne: So on the top line, we basically were expecting more of the same from Q3 in terms of Q3 was already a tough market for our U. S. Academic, and that obviously hasn’t changed much. And our and our run rates haven’t changed much either. So it’s still holding up very well, consider all considering, but pretty much the same as what we saw in in q Biotech, the smaller biotech end market, same thing.

You know, that’s not has has not come back like we thought it would because, you know, capital markets are still very uncertain in terms of the future, and they’re always concerned where the next dollar is gonna come from. So they’re a bit on you know, they’re they’re they’re they’ve slowed down a bit as well, and we see that continuing this quarter. So the biggest change from our guidance from, you know, how how we ended Q3 versus Q4 because we you know, we did 6% growth, and now we’re guiding to low single digit for q four. It’s really around large pharma. And it’s really just a level of, you know, kind of, know, just makes sense and and some conservatism in the sense that we saw pharma in April come off the gas a little bit.

Can that put the brakes on and come off the gas? And by the way, that we see this on a daily basis because 70% of our business, we can see every day come through our come through our our orders. And and we saw that happen right away in April. Guess what? It coincided exactly with when, you know, the the tariffs were announced and the targeting around pharma, etcetera.

So it kinda makes sense that, you know, again, these large pharma companies aren’t gonna overreact, but they’re not gonna keep the the pedal to the metal in that type of situation. So that’s what we started to see in April, and we just basically are predicting that to continue through the quarter until there’s more certainty around what this all means for pharma at the end of the day. And so we saw we saw the growth rates go from double digit down to kind of mid single digit, and they’ve been holding there fairly nicely. You blend that all together, it basically takes us to low single digit. Got it.

That’s the top line. On the bottom line, we did call out, you know, we had a very nice margin performance in q three. We had almost 200 basis points of margin expansion. And you know, unfortunately, we had to call down q four to basically be down somewhere between a 100 and a 150 basis points year over year. And the main reason for that is the, again, the tariffs.

So even we talked about being relatively immune to tariffs and especially going forward in our quick mitigation strategies, we still were impacted at least for half the quarter on the reagents and for most of the quarter on the instruments until we get this all transitioned to all of our factories, globally. And that’s causing us some headwind this quarter, but it is a one quarter event, we think, only. So that’s those that’s the main main, drivers of the margin.

Matt Sykes, Analyst, Goldman Sachs: Got it. And for my last question, just more on capital allocation. You announced a $500,000,000 share repurchase plan during earnings. Does this signal any shift in priorities in terms of capital allocation? And in that sense, how are you thinking about M and A strategy moving forward?

Jim Hipple, CFO, Bio Techne: The short answer is no. It does not shift. If you think long term, life science tools, it’s such an innovative space to think you can innovate completely on your own. It’d be viable ten years from now. It’s not, you know, it that’s not the way the game’s played.

So you gotta have M and A as part of your strategy going, long term strategy, and it will continue to be for us. The M and A market for us tends to be more private companies. And, you know, for the time in a long time, we’re starting to see some valuation conversations make a little more sense. Okay. So we’re encouraged that you’ll you’ll see more activity from us there in the coming year.

Yeah. You know, at the end of the day, we bought back some stock the last couple quarters because we think we are very much undervalued. And and rather than have cash build up on the balance sheet, put that cash to work on our own company when it’s when it’s as cheap as it is. And the authorization, well, we used we used the the rest of our authorization. It’s just it’s good housekeeping to always have an authorization in place.

So we basically renewed that authorization. We bumped it up by another 100,000,000. And, and, yeah, while the stock continues to be what we believe is severely undervalued, rather than having cash built up in the balance sheet, we’ll, you know, we’ll con if we bought it last two quarters, you can imagine how we think about it right now. So Got it. It’s not necessarily a strategic shift.

It’s more of a tactical shift.

Matt Sykes, Analyst, Goldman Sachs: Understood. Jim, David, thank you very much.

Jim Hipple, CFO, Bio Techne: Appreciate it. Thanks, Matt.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.