Bio-Techne at Morgan Stanley Conference: Strategic Insights on Growth and Challenges

On Wednesday, 10 September 2025, Bio-Techne Corp (NASDAQ:TECH) presented at the Morgan Stanley 23rd Annual Global Healthcare Conference, offering a comprehensive view of its strategic positioning and future outlook. CFO Jim Hippel highlighted both the strengths and challenges facing the company, including solid growth in core areas and hurdles in the academic sector due to funding constraints.

Key Takeaways

• Bio-Techne reported a 3% revenue growth in the latest quarter, with 90% of its business being recurring.
• Spatial biology underperformed due to shipment delays, while China showed a robust 10% growth.
• The company is optimistic about future growth, despite current political and funding uncertainties.
• Large pharma showed strong double-digit growth, while biotech faced funding challenges.
• The divestiture of Exosome Diagnostics was due to a strategic misalignment.

Financial Results

• Revenue grew by 3% in the most recent quarter.
• Approximately 55% of revenue comes from core reagents, with 45% from new growth areas like automation and cell therapy.
• China experienced a 10% growth, although this was influenced by tariff pull-ins.
• The biopharma segment, which contributes to 50% of revenue, saw large pharma grow double digits, while biotech faced low single-digit growth.

Operational Updates

• Spatial Biology faced delays in COMET instrument shipments due to Middle East conflicts.
• The GMP protein business is expanding, with a current run rate of $60 million.
• The divestiture of Exosome Diagnostics was due to its lack of fit with Bio-Techne’s core business model.
• ProteinSimple platforms continue to enhance lab productivity.

Future Outlook

• The company anticipates low single-digit growth due to current administrative and political noise.
• Bio-Techne remains optimistic about resolving these issues and expects growth in areas like ProteinSimple and cell therapy.
• The company is focusing on megatrends, such as an aging population and healthcare innovation.

Q&A Highlights

• CFO Jim Hippel emphasized the importance of the academic segment for early discovery and its strategic role in following customer workflows.
• He expressed confidence in China’s potential to return to double-digit growth.
• The company is well-positioned in the cell and gene therapy market, with thousands of clinical trials underway.

For a detailed understanding of Bio-Techne’s strategic insights, refer to the full transcript below.

Full transcript - Morgan Stanley 23rd Annual Global Healthcare Conference:

Unidentified speaker, Host, Morgan Stanley: All right. Thank you, everyone, for joining today. It’s my pleasure to be here with Jim Hippel, the CFO of Bio-Techne, and Charles Kummeth. Thanks for joining us today, Jim.

Jim Hippel, CFO, Bio-Techne: Yeah, thanks for having us. Appreciate it.

Unidentified speaker, Host, Morgan Stanley: Before we get started, I just need to read a quick disclosure. Please see the Morgan Stanley Research Disclosure website at MorganStanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Jim, thank you very much for being here today. I think maybe just to start off, when investors look at the life science tools landscape today, I think Bio-Techne is really a name that stands out both in terms of the growth and the margin profile, and consequently, the more premium valuation multiple that you all trade at. With that in mind, and maybe for investors that are newer to the story, what is the most important thing for them to understand about how Bio-Techne is positioned within the strategic landscape today?

Jim Hippel, CFO, Bio-Techne: Yeah, sure. Thanks for the question. I know there’s way more than one thing, which is what makes it exciting for us. For those who may not be as familiar, as a reminder, the core of our business, we’ve been doing it for 40, 50 years, is a world leader in reagents for all aspects of life science research, for new therapeutics and diagnostics, namely proteins, antibodies, and assays that are used to detect proteins using the antibodies that we make. Over the last decade, or a little over a decade, we’ve invested heavily both organically and inorganically to scale up the business by investing in kind of new applications that can scale both in terms of dollar value on a per unit basis, like instruments, for example, and/or move downstream and stick with the customer, as in you’ve got to research in the clinic and ultimately commercialization.

Those areas of investment have been around the automation of protein analytics. We refer to it as our ProteinSimple franchise, automating various manual lab processes. The beauty of that is that it also pulls in our reagents along with it. We’ve also invested heavily in spatial biology, which we are currently the world leader in reagents that are used to detect RNA in a tissue sample. With our most recent acquisition of Lunaphore, the COMET instrument automates the process of identifying RNA in a sample, but also proteins in a sample. It’s the world-only instrument that can, same slide, same sample, identify both proteins and RNA at the same time. The beauty of that is it pulls in our RNAscope reagents, but also pulls in our world-leading antibodies as well as a pull-through. Last but not least, we’ve invested in cell therapy.

Cell therapy, we believe, is the tip of the spear of next-generation treatments for, namely, cancer, but also diabetes and many other disease states. We’re very well positioned there, basically taking our core RUO proteins that we’re known for being the gold standard in quality and moving them into a GMP protein manufacturing setting that allows for being used in the process of growing cells for cell therapies. Those three particular growth areas that we’ve invested heavily in weren’t part of our business at all a decade ago. They were roughly 30% of our revenue before COVID, about five or six years ago. Now they’re about 45% of our revenue, with our core being 55%. That increase clearly is not because our core has shrank; our core has grown very nicely throughout that period as well.

It gives you a sense for the large above-market growth that we get from those growth vectors. The other thing I’ll point out about our business that I think makes it somewhat unique and also thought would be very profitable and sustainable is the very nature of the business being very highly recurring. 90% of our business is recurring in nature in the form of consumables or, to a lesser extent, services, and about 10% of it or so is instruments. Hopefully, that gives you some sense of the makeup of our company and the growth vectors that we have and why we’ve been able to perform better than the market overall, both in good times as well as tough times. We believe that will continue in the future.

Unidentified speaker, Host, Morgan Stanley: Right. Thank you. Let’s perhaps move just to a recap of your last quarter. What were some of the more positive surprises or upside that you didn’t expect, and what didn’t play out the way that you expected?

Jim Hippel, CFO, Bio-Techne: Yeah. You know we ended up with a 3% growth quarter in our most recent quarter, which is what we were forecasting coming out of Q3. The overall result didn’t surprise us. There’s always nuances in how you get to that number, and nothing majorly different. If I were to point out a couple, I’d say on the downside, our spatial didn’t hit the mark we were hoping for that quarter. That was largely due to our COMET instrument. Those are our most expensive, highest-priced instruments, and we had three that were set to ship to the Middle East. The bombings that occurred there didn’t allow that to happen. That was a negative surprise, I’d say. On the positive side, we had actually 10% growth in China, which is the best growth we’ve had in China in probably three years, better than anyone else, I think, has reported.

That being said, we also know that there was tariff pull-ins on our instruments in particular when there were concerns about the very high rate of tariffs early on in the quarter. When we backed those placements out, it was probably flattish growth in China, which is still a massive improvement from where they’ve been in the past two years. That was a pleasant surprise. The last thing I’d say on the positive note was large pharma. We had anticipated when we were coming out of Q3 that large pharma would slow down a bit because we had a double-digit growth in pharma in our Q3. With some of the early-on noise that was occurring around tariffs and so forth coming out of the March quarter, we thought that would cause pharma to slow down a bit. It didn’t.

We had another double-digit growth quarter in pharma in Q4 as well. That was also a bright spot. Before you ask the question, because you’ll probably get to it, as you may have heard, in our guidance going forward, we’re expecting pharma to soften up a bit. I mean, not necessarily fall off a cliff or nothing, but the acceleration to slow down a little bit because of the revised kind of rhetoric that has occurred. It started in April. It died down specifically for pharmaceuticals, and then in July, it ratcheted up again with MSM pricing threats and tariffs and so forth. Now, very recently, there’s the EU deal. It seems like the bite there might be a little worse than the bark. We’ll see. Nonetheless, we would expect our pharma customers to take their foot off the accelerator a little bit until the dust settles.

You asked about Q3. I’ll give you a little bit more about guidance, but that’s how we saw it play out.

Unidentified speaker, Host, Morgan Stanley: That’s great. You know there’s been a lot of noise in the U.S. academic and market. How should investors think about Bio-Techne’s overall exposure to U.S. academia and the NIH specifically? What are you experiencing today? What is your outlook for this next fiscal year?

Jim Hippel, CFO, Bio-Techne: Academic is very strategic and important, and customer forth. That’s where a lot of the early discovery part starts. Using a translation when you get into biotech and then clinical when you get into pharma, right? It’s an important strategic place to play if you want to follow the customer and follow the technology or the workflow. That being said, total academic forth globally is a little over 20% of our revenue. For U.S. specific, it’s a little more than half that, maybe 11% or 12% of our revenue. Within that, on an aggregate basis, it’s estimated that roughly 30% to 33% of all academic funding for research and development is NIH sourced. You can do the math. It becomes even a smaller percentage in terms of, call it, NIH exposure. That’s assuming that pro rata, that NIH money comes our way.

We’ve held up very well considering the funding constraints that have been put on academics for the year to date. Our consumables have actually been flat in North America academic. That tells us the strength of our portfolio, but also suggests that everyday reagents aren’t as impacted by the NIH funding as other areas like instruments, for example. We saw, though, a notable, because we were mid-single digit and approaching high single digit or approaching double digit growth in January, believe it or not, in our U.S. academic. In February, when all the noise started around first indirect cuts and then NIH freezes and then NIH budget cuts in the future, we saw a pretty significant step down in our run rates and definitely in our instruments to where we went from almost double digit to flattish growth in our reagents as an example.

It’s pretty much remained there ever since. It hasn’t gotten any worse. Our belief is in talking to our academic customers, just in the tone, they are behaving as if the worst case is going to happen. We’ve heard stories around kind of involuntarily cutting their own internal spend by 15% to 20% across the board in anticipation of what may come. All indications right now is it won’t be as bad as the worst-case scenarios have been played out to be. We believe we are seeing the worst of it now. It won’t probably get any worse in terms of the trajectory. The only question is when does it start to get better? I think they’ve been shell-shocked a bit, that customer base has been, by all the rhetoric. It’ll take some confirmation that things aren’t going to be so bad before we start to see that improve.

Unidentified speaker, Host, Morgan Stanley: Right.

Jim Hippel, CFO, Bio-Techne: That’s how we’re thinking about academics.

Unidentified speaker, Host, Morgan Stanley: Got it. You mentioned China. You had a strong quarter in China. How are you thinking about that geography going forward? Does it feel like that environment is improving?

Jim Hippel, CFO, Bio-Techne: It does. We talked about the 10% growth, which, of course, was the high part of that growth by the size of some polls. Even backing that out at flat growth, much better performance than where it’s been for the past two years in China. Even more importantly, in our most recent visits to China, and not just China, but the rest of Asia, namely Korea and Japan, the reality is so goes China, often so goes the rest of Asia. The tone of the conversations with customers, whether they’re academic or biotech or hospitals, has changed quite differently from where it was the past two years. The past two years, when you met with customers, it was about how bad will next year be? The conversation this last go around in the spring was how good is it going to be? It’s a psychological difference, but it’s important.

I think we saw that start to materialize here already in our fourth quarter with at least some stable growth. All indications are that we’ll see a gradual ramp-up in growth in China for the remainder of our fiscal year. It won’t be a V-shape, but it is gradual. We do believe, and I don’t think we’re the only ones, that China will get back to double-digit growth. I think 10 years from now, our industry will be looking back and saying, "Yeah, China was the fastest growing region yet again for another decade." At the end of the day, their focus on the importance of healthcare, their population set, and where they sit respective to the Western world in terms of development and catch-up is still quite significant. It’s a megatrend that will be with us for a while.

Unidentified speaker, Host, Morgan Stanley: Got it. You touched on this a little bit earlier, but biopharma has also been a resilient end market in recent quarters. Can you maybe just take that a step deeper and peel back the performance of large pharma versus biotech and what’s behind the demand within each of those segments? How do you see what’s really driving the performance?

Jim Hippel, CFO, Bio-Techne: Okay. If biopharma, if you combine the two, it’s roughly 50% of our revenue. The large pharma is 30%, and the smaller biotech is 20%. Starting with the larger pharma, as we just talked about, we had two great quarters in a row, pharma being double-digit growth. Whether leaders within that and from a product perspective, yeah. Our biologics platform, Maurice, has been a stellar growth leader in pharma the past several quarters, which is consistent with what we’re hearing from other companies who have more of their portfolio geared towards biologics and bioprocessing. That’s a very good sign for the industry. Honestly, in pharma, we saw a nice recovery across our entire portfolio, including our reagents, which is what gave us confidence that pharma was kind of back to normal. For us, normal growth in pharma, our expectation is double-digit growth given our product positioning.

Very, very good and very resilient pharma. Biotech, a little different story. It’s probably the most variable and the most uncertain. If I were to look at the three key end markets going forward, it’s the one we had probably the most uncertainty about. It’s largely because you just look at the numbers behind funding. Funding for new biotech or new biotech funding is down over 35% year to date, and it’s at the lowest level it’s been since 2016. How tight is that correlation of funding to spending from a timing perspective? It’s very difficult to tell because 2024 was a very good year for funding. Our thesis going into fiscal year 2025 was that biotech would lead us into recovery. It did improve. It did get better. It got to low single-digit growth. It didn’t lead. Pharma actually led the recovery.

All that extra funding we got in 2024 didn’t necessarily materialize itself in spending. Yet, with the very tough funding environment it’s been in the past six months, biotech continues to be low single-digit growth for us. The big question for biotech is, given this kind of air pocket of funding that we have, because it has gotten better the past two months, which is great. Hopefully, that continues. Given this air pocket of funding, does that translate into any air pocket in the future, meaning does biotech get a little worse before it gets better? That’s kind of the big wild card we have right now.

Unidentified speaker, Host, Morgan Stanley: Got it. Let’s shift gears to your cell therapy business. GMP proteins are a large part of that and have been growing pretty rapidly. What’s behind that demand? How should investors think about your competitive positioning in cell therapy more generally?

Jim Hippel, CFO, Bio-Techne: Like I said before, in cell therapy, the next-generation therapies for treating chronic disease that can never be not just treated but cured. That’s an important distinction. That’s what’s so exciting about it. There’s literally a couple of thousand clinical trials involving cell and gene therapy. You know we are the gold standard, being in the business for 40, 50 years of producing proteins. We’re one of the first, if not the first, companies to actually make proteins available off the shelf for customers. We’re known by far for our quality. Shame on us if we don’t have a GMP offering that is basically that stamp of approval of quality. That’s why about six years ago, we invested heavily organically in GMP factories to be able to follow our customer along that journey of discovery into the clinic in the cell therapy space.

From a competitive positioning perspective, there’s really only two other major players, both being private companies who got into this earlier and were a bit of a step ahead initially. Where we’re winning is, first of all, our reputation of quality follows with us. Also, the faith our customers have with us with regards to being able to produce the products they need. We’ve built up a large amount of capacity where, in a very short lead time, they can get whatever GMP protein they need. That’s not true with all their competitors. The other dynamic to it all, there’s actually two main, I call it two main strains of cell therapy. There’s your CAR-T version of cell therapy, which is where our two biggest competitors play. Then there’s the regenescent side of cell therapy. We’re actually the number one player on the regen side.

It makes up over half of our cell therapy GMP revenue. Why we’re positioned so strongly there is because the proteins needed to grow cells for regen med, there’s a lot more of them that are needed than there is in CAR-T. They’re a lot more complex to make. In some cases, we’re the only ones that even know how to make them. We have an extremely strong position in that area of regen med. Although from a clinical trial perspective, in terms of numbers that are in clinical trials and so forth, they’re a bit behind CAR-T, the actual market potential for regen med is actually even bigger than CAR-T. We’re very excited about that.

If you think about how we’ve gone from essentially no GMP proteins five or six years ago to a roughly $60 million run rate today, which is a really, really big move for a protein business. It probably took us 20 years to get that much RUO protein business in the early days. Why is that? It’s because, of course, we’ve gone from zero customers to over 550. That’s one of the reasons. I talk about scaling with the customer, and that’s what this is all about. As these customers go from early-day discovery and then moving to pre-IND and then IND, they’re using more and more of the product. Ultimately, getting to clinical trials, the usage rates go up exponentially. Yes, that growth has come from adding more customers, but even more of that growth has come from growing with those customers.

The best is yet to come because when they get into late-stage clinicals, like a few of our customers are, it completely dwarfs what’s being bought at a discovery level or even a pre-IND level. When they go commercial, it truly lights out. We’re seeing that as a preview with our investment in Wilson Wolf, which we will fully own in two years or less. They make the G-Rex bioreactor, which is really the next generation for cell therapies. It’s a tool that will truly allow for the scalability of these therapies to be available to all patients at a much more reasonable cost. This bioreactor, guess what? It’s filled up with our reagents and our GMP proteins. They’ve been at it longer than we have. They have over 800 customers. They’re about 45% of all CAR-T trials today.

Out of the nine CAR-T therapies that have been approved, they are in five of them. We’ve been able to watch them progress through this evolution of phases of clinical trials and now into commercialization. It’s really exciting to see how the business can ramp. Now that they have five in commercial, they’re going to be off to the races for the next several years, which is why we can’t wait to own them 100%.

Unidentified speaker, Host, Morgan Stanley: Great. Maybe shifting gears to core reagents. You talked a little bit about it, but any other color on how this business has been performing? You know there’s also been some consolidation here over the last few years. How should investors think about how that’s changed the competitive dynamic, if at all?

Jim Hippel, CFO, Bio-Techne: Yeah, I don’t think it’s changed the competitive dynamic. I mean, we’ve always had, it’s always particularly around antibodies. Antibodies is a very big market, very broad, very diversified, very nichey. It’s always been full of a ton of competitors. It’s always been that way and still is. It really hasn’t changed. Proteins, you know we are the market leader in RUO proteins. There are one or two other larger players and a couple of what we call ankle biters. That’s always been the case and still remains. You know it’s healthy competition. I’d say our core reagents have been around for 40, 50 years. It’s a more mature piece of our market, of our portfolio, which is why we call it, one of the reasons why we call it our core, and tends to grow, you know, with the market overall.

Obviously, we shoot for above market growth rates, whether that’s 1% or 2%. That’s what we always aim for. Generally speaking, it’s going to be the most impacted by fluctuations in the overall market growth rate. It never was intended to be what’s going to lead us to double-digit growth, but it is an enabler for a double-digit growth. That’s a key distinction because these different growth vectors or growth pillars that I talked about, in some way, shape, or form, all use our reagents in their workflows. They may not use a lot of the reagents, but the reagents make their workflows work better and increases their selling proposition and the value add of those workflows.

Unidentified speaker, Host, Morgan Stanley: Got it. In the protein sciences portfolio, in particular in instrumentation, you know, ProteinSimple has held up very well in the current environment.

Jim Hippel, CFO, Bio-Techne: Yep.

Unidentified speaker, Host, Morgan Stanley: Can you just walk us through the primary platforms here and what’s been driving that growth?

Jim Hippel, CFO, Bio-Techne: In ProteinSimple, we have three main instrument platforms. I mentioned a little bit earlier, the Maurice platform, which is kind of our pure play into true production or late-stage clinicals. It’s a QA/QC tool used for protein purity in biologics. As we’ve been hearing, you’ve probably been hearing from our peer companies and so forth who have a heavier play in those downstream activities, bioprocessing is coming back. We’ve seen it in spades in our Maurice platform, which is great. The second platform we have, maybe the platform is Simple Western, which is, you know, in a very simplistic, excuse the pun, but simplistic description is an automated version of Western Blot. Western Blot is one of the most common workflows in a lab to identify a protein sample. The only way to do it is manually. It’s messy. It takes three days.

This is a box that does it in three hours. It’s very clean, very simple with much more accuracy. We’re still probably less than 20% penetrated from a market share perspective. In the meantime, over the last five, six years, the market has continued actually to grow because we continue to increase the sensitivity and the applications that this sensitivity can be used for. Our customers are actually coming to us with new ways to use the instrument that we hadn’t dreamed of. Of course, we learn that and we market it to other customers. All of that has helped drive its growth. During this downturn that we’ve had since post-COVID, the whole idea of these automated instruments has been to increase productivity in the lab.

That thesis is definitely paying out because our consumables, and he knows exactly what the usage is because they run on cartridges that only we produce. Our cartridge consumables on these platforms have been growing every quarter throughout the entire kind of last two and a half years of COVID headwind. Not only that, but in most cases, most quarters growing double digits, enough to have the overall ProteinSimple franchise be a positive growth contributor, even though new instrument placements have been down. What that confirms for us is that they are truly, in fact, productivity tools as they’re meant to be. Our customers are using the hell out of them when budgets are tight. The third platform is our Simple Plex platform. That’s an automated ELISA.

As I mentioned, assays before, when I say assays, I’m really talking about ELISA assays, which use antibodies to detect the protein in the sample. It’s a gold standard core research tool, but it’s very manual. Our Simple Plex allows for automated formats so that you can do many more samples at a time in less than an hour, as opposed to an afternoon, so to speak, to do just the one. Yet another productivity tool, very, very precise. It has potential clinical applications, which we actually have customers trying to use our Simple Plex. Not trying, but they’re using our Simple Plex instrument in their clinical trials for their next-generation diagnostics. That has been driving the growth of that platform. All three of them are, like I said, under 20%, some as low as 5% in terms of market penetration.

It’s collectively a $300 million business today with double-digit growth for the far foreseeable future. We expect to be a large contributor to our growth going forward.

Unidentified speaker, Host, Morgan Stanley: Right. In the spatial biology business, how should investors think about how you’re positioned, where you participate, and the relative level of competition in that market?

Jim Hippel, CFO, Bio-Techne: Yep. Spatial is still, I say, old and new. I mean, you know, IHC, you could argue, and you know chemistry is kind of a form of spatial, but call it the next-generation IHC. That’s how I like to simplistically refer to it. It’s a combination of looking at not only the proteins in a tissue sample, but also looking at it, looking at the RNA that expresses the proteins. It gives the researchers, the pathologists in a clinical setting a lot more useful information. Our RNAscope reagents that we’ve had now for seven, eight years have become kind of the world-class gold standard for the probes that are needed to very specifically identify the targets you’re looking for. The key area of spatial that that’s been used for is more the translational research. If you kind of think of the evolution of research, it starts with high-level discovery, screening.

You get to select targets that you really have interest in to perhaps become a therapeutic or a diagnostic. That becomes translational. You need a lot more specificity, a lot more accuracy, a lot higher quality tools to make sure you get it right. From there, you move into the clinic and then commercial. Our RNAscope is targeted towards that translational space. We do extremely well in that space. It’s important because it’s still early days in spatial. If you are the leading player in translational, you have the best opportunity to continue to go downstream in the clinic and ultimately commercial. In fact, 10% of our RNAscope revenue today is actually commercialized on tests that we partner with Leica on. It’s just the start of, we think, a big wave.

Now with our new COMET instrument we purchased from a company called Lunaphore about a year and a half ago, we now have a tool to automate it because the one drawback that we always heard about our reagents is that it was still a very manual process to use them. Now we have a tool that is the best, we think, the best tool in the market. It’s the fastest, the easiest to use. When I say fastest, the closest competitor takes roughly a week to run the sample or samples. Ours is overnight. Multiplex, of course, capabilities. The only instrument that can identify both RNA and proteins in the same sample on the same slide on the same screen, which gives the pathologist very, very clear information that they’re looking for.

Last but not least, for us, very high pull-through on this instrument, not only on the chips that are used to run the instrument, but pulls through our RNAscope reagents and pulls through our antibodies from our core.

Unidentified speaker, Host, Morgan Stanley: Got it. You recently announced the divestiture of the Exosome Diagnostics business. Can you walk us through the rationale and how you came to that decision and why now is the right time for that?

Jim Hippel, CFO, Bio-Techne: Now is why now is the right time. You know Kim Kelderman, a relatively new CEO, he started as CEO about a year and a half ago. One of his first actions was to, actually, I call it professionalize our corp dev team. I’ll explain why that ties into this. What I mean by that is that we actually have, we piloted some people who’ve done this for a career as opposed to a rotational job internally. Kim, his first gig wasn’t to go out and find M&A targets, although eventually, that’s what they’re doing. It was instead to look internally and say, "I want a full scrubbing of all of our product lines, all of our end markets, our view of our market, potential market sizes.

I want to know what I’m working with so that if we have to make some changes, we can right out of the gate." It was a hell of an interrogation. I felt like we were being purchased for the first six months. If they did their job, they did it well. The great news out of all that is, it’s basically confirmatory of everything we’ve been saying for the better part of a decade in terms of our strategy and our positioning. However, Exosome Diagnostics was an exception to that. It’s not too far-fetched to understand why. At the end of the day, it wasn’t about the Exosome Diagnostics technology. The Exosome Diagnostics technology we still wholeheartedly believe in. It wasn’t about the exoprostate test. The test is a great test. It truly is a value-add test to urologists and to patients. It was more about the model.

There’s a CLIA-based model. There’s nothing else in our company that’s CLIA-based. We sell to CLIA-based companies, but we’re not a CLIA company. It was outside of our expertise. It was outside of our model. We didn’t have a roadmap to be able to leverage that and scale it. It was a one-test kind of model. Therefore, not only strategically, it was becoming more obvious the fit wasn’t there, but financially, the road to profitability, especially the profitability that we set for our standard, was so far out in the horizon. It just didn’t make sense to continue for us to plow more resources into that. We’re very happy with how it ended up. What was most important to us was that we could find a home for it where our patients and doctors could still get what we think is a world-class test.

I think with MDxHealth, that will be the case. MDxHealth, I think, will do very well with it because they actually, you know, are a CLIA-based model. They have other tests in urology they can scale that with, commercial teams, etc. We are very happy with how that ended up. For us internally, we are happy that we can now, you know, redirect those resources into the other growth vectors I talked about that are much closer to our core capabilities.

Unidentified speaker, Host, Morgan Stanley: Got it. On the revenue outlook you provided for kind of low single-digit growth, how should investors think about some of the potential upside opportunities within that and the overall level of conservatism in the guide?

Jim Hippel, CFO, Bio-Techne: Yeah. The guide was, you know, it was, I guess you could say it was a guide, but it was more to give some illustration of how we’re operating the business in this kind of uncertainty. At the end of the day, you got to manage a cost base. You got to manage your rate and investment. You got to manage what kind of productivity actions you got to take to hold margins. We’re always committed to holding margins regardless of how, you know, how bad end markets might be. Looking at all the pros and cons, we saw a good base case with low single digits. We were a bit victim of our own success in the early first half of the year with very tough comps. By the way, no one else in our industry has the kind of comps that we have.

There also are a lot of green shoots that, you know, this, unlike the, I call it the COVID hangover, which has taken two, two and a half years to unwind, that was a structural issue where for two and a half years of COVID halo, you know, the money was flushing into our customer space. Investment was to fight COVID for vaccines, etc. All that extra money was then being replowed back into R&D for other areas. When, you know, kind of COVID went away, that pendulum had to swing back. That was a structural change that had to occur. It took two and a half years to build. It took two and a half years to unwind. What we’re seeing now, I don’t think, is structural. It’s politics. It’s somewhat it’s noise. It’s, you know, barks and bites.

At the end of the day, it’s not, I don’t, we don’t believe it’s structural. We also don’t believe it’s even close enough to be anything that will negate the megatrends of an aging population, an aging population that wants to live healthier, and the innovation that is occurring in our space. I think we’re very optimistic on the future, even the, I call, relatively near term. Now, it depends on your point of view. Near term may mean the next week or next quarter. For us, near term, we mean maybe next year, right, and beyond. We’re very excited about the potential. We do believe that this administrative-induced noise that we’re facing in our key end markets ultimately will settle down. When it does, it won’t be earth-shattering.

Just like we saw last year, and as a reminder why we have such conviction about this, is a year ago, we also were the lucky ones that had to give guidance for halfway into the next year. We put out a roadmap of what a recovery could look like because we saw that most of the headwinds, most of the COVID-induced headwinds, were behind us. The policy headwinds at the time were around pharma and around IRA. Pharma was using 2024 as a year to kind of rebalance their portfolio for what they believe would be the impacts of IRA. We believe that that would be all behind us by the end of 2024, and we start to see recovery in 2025. It did not play out exactly like we thought because pharma actually recovered a lot faster than we thought.

That shows you how quickly, once the dust settles, how quickly it does come back. We do believe that will happen again. What I cannot predict, and I do not think anyone in this room can, and it is why we are not doing that, is when does that dust settle?

Unidentified speaker, Host, Morgan Stanley: Right.

Jim Hippel, CFO, Bio-Techne: There are indications that it’s sooner than later. In academics, we at least have Congress, at least in a more reasonable NIH budget frame, as opposed to where the administration was. The EU trade deals from the details coming in and out are indicating that the tariffs won’t be what was, you know, threatened at an earlier stage. MFM pricing also might be limited to certain areas like generics, for example. Again, all this still needs to be confirmed. The dust hasn’t completely settled, but there’s at least some indications that the dust will settle sooner than later. You know, in the meantime, it’s still dusty out.

Unidentified speaker, Host, Morgan Stanley: All right. Thank you so much, Jim. We really appreciate you taking the time to be with us today.

Jim Hippel, CFO, Bio-Techne: Yeah, thanks for having me. Appreciate it.

Unidentified speaker, Host, Morgan Stanley: Thank you.

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