Bio-Techne at Stephens Conference: Strategies Amid Mixed Results

On Tuesday, 18 November 2025, Bio-Techne (NASDAQ:TECH) participated in the Stephens Annual Investment Conference, where it presented a strategic overview of its recent performance and future plans. The company reported mixed results, with strong growth in pharma but challenges in biotech due to funding cuts. Despite these headwinds, Bio-Techne remains optimistic about its long-term growth potential.

Key Takeaways

• Bio-Techne reported double-digit growth in its pharma sector, which accounts for 30% of its revenue.
• Operating margins increased by 90 basis points, thanks to portfolio management and productivity initiatives.
• The FDA Fast-Track designation for two cell therapy customers presents a short-term headwind but is promising for long-term growth.
• China showed growth for the second consecutive quarter and is expected to contribute positively over the next 12-24 months.
• The Wilson Wolf acquisition is anticipated to significantly boost Bio-Techne's growth and profitability.

Financial Results

• Pharma Growth: Achieved double-digit growth for the third consecutive quarter, representing 30% of revenue.
• Operating Margins: Expanded by 90 basis points in the quarter.
• Organic Growth: Recorded a 3% organic growth in Q4 FY25, with a slight decline in Q1 but a 1% increase when adjusted for FDA impacts.
• Cell Therapy: Despite market pressures, cell therapy showed low double-digit growth.
• Spatial Biology: Consumables grew in low single digits, while instruments saw double-digit growth.

Operational Updates

• Market Dynamics: Exited the ExoLution Plus business; biotech funding showed recent increases after initial declines.
• China: Experienced growth for two quarters and expects continued positive contributions.
• Customer Base: Cell therapy customers increased from 550 to 700, with notable clinical trial engagements.
• ProteinSimple Growth: Consistent growth over 20% for several quarters.

Future Outlook

• China's Potential: Expected to be the fastest-growing region in life science tools over the next five years.
• Revenue from Cell Therapies: Anticipates $100 million from two fast-tracked customers upon full commercialization.
• Growth Expectations: Reiterated low single-digit organic growth for FY2026, with double-digit growth expected in normalized conditions.
• Wilson Wolf Impact: Projected to significantly enhance growth, with EBITDA margins of 60-70%.

Q&A Highlights

• FDA Fast-Track Designation: Seen as a long-term benefit despite short-term challenges.
• China's Growth: Expected to be stable and not a temporary recovery.
• Customer Priorities: Emphasis on quality and consistency, especially in China.
• Commercial Approval Impact: Potential for 5-10 times revenue increase compared to clinical trials.
• Innovative Platforms: Ella platform leads in QC release testing; CosMx offers unique RNA and protein analysis.

In conclusion, Bio-Techne's presentation at the Stephens Annual Investment Conference highlighted both challenges and opportunities, with a focus on strategic growth initiatives. Readers are encouraged to refer to the full transcript for a detailed understanding.

Full transcript - Stephens Annual Investment Conference:

Mac, Analyst: Intend to be more of a fireside chat, so I'll stop along the way and pull for any questions, so feel free to chime in as needed. With that, I'll turn it over to you all for any opening comments that you want to make, and we'll launch into Q&A.

Jim: Yeah, sure. Thank you, Mac. It's always a pleasure to be here. Stephen's always one of my favorite conferences to attend. Just real quickly, I can maybe start off with just some of the highlights for the quarter for us that we just finished in Q1. If we look, first of all, our pharma end market continued to perform very well for us. We had double-digit growth in pharma for the third quarter in a row. That represents roughly 30% of our revenue for those who are keeping score. We saw continued strength in our—or I should say, we saw some rebound and strength in our key core pillars, growth pillars, that being our ProteinSimple franchise, third or fourth straight quarter of double-digit consumable growth. And we saw momentum pick up on the instruments in the back half of the quarter into October. Very encouraging to see.

Our spatial biology franchise also appears to be turning the corner. As a reminder, our spatial franchise is probably the most heavily indexed of our product portfolio to academic and small biotechs, which have been the most end markets under the most pressure. As a reminder, in our Q4, we had low single-digit declines in that business for us, which we were actually pleased with considering the overall market. We saw that flatten out in our Q1. More importantly, we peeled the onion back one level. Consumables actually increased low single digits, and our instruments, or comments, actually improved double-digit. We see the spatial turning a corner and returning to growth as well, which is encouraging. We saw continued growth in China, now the second quarter in a row of growth in China. We're forecasting growth yet again in the third quarter.

It looks as though that market has finally bottomed and is starting to progress forward. I think most exciting, although from a quantitative perspective, it may not sound exciting right away, is with two of our largest cell therapy customers receiving FDA Fast-Track designation. These are very large customers for us, very large designations from a disease perspective, and really increased the NPV, call it, of these two customers to accelerate the approval process. That is the very good news from an intermediate and long-term perspective. From a more short-term perspective, it does create a headwind because they essentially get to skip the clinical trial and do not need any more material for that. That was big news, a big swing item for us in the quarter from a growth perspective, but overall, very positive story for that part of our business.

Finally, on operating margins, we see that as a highlight as well. We expanded operating margins by 90 basis points in the quarter despite the tough conditions in the top line. We did that through a combination of portfolio management. As you know, we exited our ExoLution Plus business in early Q1. We had a lot of productivity initiatives around factory consolidations and together those two items basically enabled us to not only hold our margins but expand our margins in a tough operating environment. It also sets us up well for future margin expansion as the markets turn.

Mac, Analyst: Quite a bit to unpack there. I think you kind of front-ran about half my questions.

Jim: I'm setting you up for some zingers.

Mac, Analyst: On your 1Q25 call, you mentioned a little bit of a pickup in biotech demand as you just highlighted. How would you characterize the current trends across your core end markets, say, large pharma, biotech, academia? How do these compare to what you saw exiting FY25?

Jim: Yeah. As a reminder, when we exited FY25, our Q4, overall, we had 3% organic growth that quarter. We had over 4% organic growth in our protein sciences segment. We exited Q1 with a minus 1%, although adjusting for these two customers, it was plus 1%. Hopefully, it comes across. We sound much more upbeat about the future despite that three or four months later than we did three or four months ago. Why was that? You may recall, for those who listened to our call at the end of our Q4, it was one of the most cloudiest times that I can remember in my 20 years in this space with regards to the immediate future because there was still really not much resolution on what was going to happen with NIH funding.

Biotech funding, as of the end of June, was down 30% year over year. The latest and newest headwind was literally a week before our earnings call, the administration put out new threats on large pharma around MFN pricing and around 100% tariffs if they do not reshore, things of that sort. Pharma had been leading the recovery, had been leading the growth. We were concerned about potentially that softening up a bit going forward. That was, I do not want to say bleak, but short-term, very cloudy forward view that we had three or four months ago. What is encouraging now when I look at those end markets is that, first of all, let's start with pharma. Those potential headwinds and clouds, luckily, appear to be short-lived.

Pharma stepped up pretty quick and pretty bold and put some pricing mechanisms in place both for GLP-1 most recently, but also for Medicaid. Seems to appease the administration. They're also committed, many of them committed to do more onshoring activities in the US, which also appears to appease the administration. We're not hearing much, if anything, anymore about MFN, saber rattling, or tariffs. As a result, we had another double-digit growth in pharma. If anything, the future looks more clear as opposed to less clear with regards to that important end market. We look at academic on the other side of the spectrum. As a reminder, US academic is roughly 12% of our revenues.

What's changed in the last three or four months is both the appropriation committees of both houses have essentially recommended a flattish NIH budget, which is actually great news considering the 20-40% cuts that were desired by the executive branch administration. Now, we're not completely out of the woods here yet, obviously, because we still don't have a bill that's passed. How the Trump administration will actually administer that budget remains to be seen. It's a major headwind, but at least there's more clarity around what the absolute budget size will be. It's a step in the right direction. We saw the behavior of our academic customers also calm down, I would say. The anxiety level came down.

We have seen a nice steady trend where if you go back to February, March, when the hammer first came down on NIH, we had high single-digit declines in academic U.S. Level off a little bit in our Q4, the June quarter, with mid-single-digit declines. The most recent quarter here in Q1 was low single-digit declines. It appears as though our customers are getting more and more comfortable with the fact that it is going to be a flattish budget as opposed to a deep, deep cut. Last but not least, biotech. Biotech has been hanging in there very well for us for all of fiscal year 2025. We had flattish to low single-digit growth in biotech despite the 30% year-over-year funding cuts or, yeah, less funding, I should say.

We kind of forewarned in the last quarter that that spread, although we knew we were taking market share in biotech, that spread was probably not sustainable. We know there is a lag between funding and spending anywhere between six months to a year. We were concerned that those headwinds were still yet to hit us. In fact, they did in Q1. We had probably the worst quarter in small biotech that we have had in a very, very long time at high single-digit declines in small biotech. We actually feel better about biotech going forward than we did three or four months ago because for four months in a row now, I am sure you all see the stats, biotech funding has actually increased and increased steadily higher and higher each and every month, where October, I think, was 80% growth year over year, something like that.

I don't personally think that's a coincidence. Biotech is the most, it's got the highest beta in terms of investors. It's a higher risk profile. They're kind of all in when they see the clouds are clear in pharma and academic, which is their exit and their innovation pipeline. They also are quick to refrain from investing in perhaps going elsewhere like AI when it's cloudy in pharma or cloudy in academic. To us, it's not a coincidence. That's kind of what we expected to see. We probably won't see that recovery in biotech for another two to three quarters down the road. It sets us up well for sure for fiscal year 2027 as long as that continues. It should allow at least our biotech end market to stabilize and not continue to accelerate declines.

Mac, Analyst: Got it. Maybe stepping back just from your end markets, China's obviously been part of the conversation too. How is China today shaping Bio-Techne's growth trajectory over, call it, the next 12 to 24 months from both a regulatory and competitive standpoint, and where do things stand today?

Jim: From a regulatory perspective, not an issue because almost most of our products, if not all, are sold in the REO space. There are no regulatory issues with our company with regards to China. The good news is that we talked about this is two quarters in a row of growth in China. We're expecting a third one this coming quarter. We believe China in the next 12 to 24 months will now be a net contributor to growth as opposed to a detraction from growth like it's been for the past two years. It's encouraging that the decline in the investment in life sciences in China over the past two years has not been because of a change in priorities, by any means of the government. It's been more about their overall economic situation. It does appear that is starting to stabilize.

It does not surprise us that the places where money will go first is in life sciences. That is what we are starting to see, that funding return back from the government, but also seeing a resurgence in smaller biotech activity and CRO activity as we have probably heard about the outlicensing and things like that that are also taking place and accelerating. We think the China market recovery this time is for real. It will not be a V-shape like we saw in the old days. It is going to be a slope out. We are still fairly confident that, and I do not think we are the only ones that say this in our space, that China, five years down the road, China will be the fastest growing region in life science tools, and it will be for us.

Mac, Analyst: Maybe I'll just add one thing. One of the big trends is the advanced therapies innovation that's happening in China. You kind of had the bellwether with Legend and Carvicti, the partnership with Janssen. Those deals have kind of ramped. The local companies want to work with a multinational like Bio-Techne, who's already well penetrated into the space as well. I think we'll get really preferential usage in China itself too. I think all of the underlying elements that Jim kind of outlined were really well positioned for the advanced therapies innovation that's happening in China as well.

Jim: I did not address the comment or question around competition there, local competition. In 12 years I have been at this company, we have always been hypersensitive and concerned about local competition in China because that is how China is. They are very quick to adapt and innovate and sometimes copy. They are very good at all that. We are always very kind of hyper-paranoid about that. The strength of our brand, and let me just summarize it this way. We visit China at least once or twice a year. We visit many customers of all sorts. The question I like to always leave the customer with before the meeting is over is, can you help us understand what your top three or four or five buying criteria are?

Almost hands down, every customer says almost in the exact same order: quality, consistency, availability, then price, then is it made in China or not made in China. What that tells me is that regardless of where you are located in the world, a scientist is a scientist, and they want their stuff to work. At the end of the day, the reagents, especially the reagents, but even our instrumentation, are some of the lowest-cost parts of their experiments. They do not want it to fail because of that. That is what always gives us encouragement that we are still very well positioned in China. Yeah, there is some formal competition there, but there always has been. There is also not enough of it in terms of the actual needs and demand of what the future of life sciences is in China.

There will always be a place for multinationals like ourselves. As long as we continue to live by our quality and live by our brand mission, our competitive strength will be the same in China as it is everywhere else in the world.

Mac, Analyst: Got it. I appreciate that, Leila. Maybe diving into the individual segments themselves. As you highlighted, protein sciences was down modestly year over year in one Q, largely tied to the cell therapy customer dynamic. Ultimately, customers receiving accelerated approval would seem to be a positive for tech. Could you just elaborate on why this causes the unexpected headwind in the near term?

Jim: I'll talk about the headwind quantitatively. We'll talk about it qualitatively. From a headwind perspective, we talked about it last year. We didn't call out too specific, but we did say, especially in our Q2, that the 9% growth we posted last year in Q2 was more like mid-single-digit growth. We said, "Hey, we had 60% growth in cell therapy in Q1. We had 90% growth in cell therapy in Q2." It was driven by our larger customers progressing through clinical trials. Don't expect this kind of growth rate going forward. It's still kind of a 20% growth business. We're in this lumpy stage, right? We were as transparent as we could be about it. We were.

It is really these same two customers that gave us that upside that we talked about, 60%, 90% last year relative to 20% in cell therapy is what is now a headwind this year because they are essentially not buying from us. It equates to roughly a 200 basis point headwind in the first quarter that we just had, which is why the minus 1% is really a 1% growth when you look at everything up, the entire company. For the upcoming quarter, we estimate it is roughly a 400 basis point headwind because it was a much larger purchasing quarter for them last year. In the second half of the year, there are still headwinds with regards to these two customers, but they are less than they are in the first half.

Maybe just some qualitative as to what's going on with these two customers and why they paused buying.

Mac, Analyst: Yeah. I think a couple of things happened, of course. Them getting fast-track status, they had a massive amount of work that kind of went into that. They ramped up their inventory. As they got fast-track designation, they were able to apply that kind of going forward into this last phase of their clinical trials. I think overall, it's great news. I mean, the clinical results from these customers are fantastic. It'd be beneficial, of course, to all of society if both of these ultimately are approved and very good for us kind of long-term as well. If we think about our overall exposure into this space, it's kind of a unique space. We have ramped from about 550 customers a year, year and a half ago to 700 customers. We have 85 of our customers in clinical trials. Six of those are in phase three clinical trials.

In terms of us kind of penetrating, getting shots on goal, we feel fantastic about the position that's growing, notwithstanding our forthcoming acquisition of Wilson Wolf, which will help us actually participate even further in clinical trials. We've got some, I think, welcome exposure coming on that front. I think on the whole, net-net as challenging as the space has been, we've really ramped, I think, our kind of long-term potential in the space. As I said, if both of these therapies go through, if we look at 18-36 months down the road, we should see a pretty substantial amount of return from the work that they're doing and the work we've invested to support them.

Yeah. Maybe a few things to unpack there. This mostly pertains to GMP proteins, but I think that's typically seen to be a 20% plus longer-term growth construct. Do you think the environment has changed and this is less reasonable now, or do you think you can return to that eventually? This is just more of a lumpy.

Yeah, I absolutely think so, for sure. I think this is, in a sense, it's a fairly lumpy piece. A big part of our efforts this last year to drive kind of further into the pre-IND and then expand our basis in the clinical space, I think without a doubt it will return. There's a couple of modalities too for us. There's one kind of getting in early and getting in pre-IND. The other one is really twofold as customers really look to industrialize growing cells, whether it's immune cell or regenerative medicine applications. We've brought kind of a form function to this party for the later stage groups. In our ProPACs, we've already converted a late-stage customer onto the ProPACs, which is a way of directly integrating our GMP proteins into the workflow. We displaced somebody else.

Kind of proving the point that you can get a later stage adoption. The other thing that we've done is we've invested quite heavily in AI-generated proteins. We've launched growth factors, for example, that are more soluble, more heat-stable, etc., that would be very enabling as folks get through to wanting to scale and industrialize production of these therapies. We're getting kind of in early pre-IND just by really broadly seeding the market and engaging customers. Then we're coming in later as well with kind of form factors that would fit into the workflow process. Our view is incredibly positive going forward. I think without a doubt, we have the market-leading position in that regard.

Jim: I'll just add to throw some numbers at that to support what Will just said. If you look actually, because it can be lumpy, if you look at our TTM growth in cell therapy, it is a low double-digit growth despite the fact that the vast majority of our customers in cell therapy are going to be in that biotech, small biotech, and academic space, which has been the most under pressure the past year or more. That gives you a sense of the underlying strength there. As Will said, we've increased our customer base from 550 to 700 in a time period that's also been under a lot of stress.

Some of the reports, some of the analysts do externally, do surveys, and so far, I should say that actual cell therapies, if we take the gene therapies out, the cell therapies continue to increase in terms of the number of the ones that are in clinical trials. It's over 2,000, I believe, now that are in clinical trials. This is a more maybe qualitative thing to say, but we believe that, in this kind of digestion period post-COVID, the quality of those that are in clinical trials, even the quality of those that are in pre-IND and just getting in, are much better. If you think about cell therapy, the excitement around it really kind of got hyped up and exploded during COVID. There was a ton of money floating around with all the COVID-derived revenues being reinvested.

Every idea in cell therapy was being funded, whether it was good or bad. Now, under more constrained environments, it's got to be a pretty good indication for it to get any funding at all. The quality of what's going in the pipeline, we believe, is also better, even if the absolute number isn't dramatically up from where it was, which means the shots on goal just have a higher percentage hit rate.

Got it. You mentioned this headwind. I think it equates to, call it, roughly $20 million CDT-related headwind in fiscal year 2026. You framed up your early and late-stage exposure, but could you just give us a sense qualitatively what a commercial approval might look like in terms of revenue versus a phase three or late-phase project?

Yeah. I mean, I'll jump in and you can add what you need to. Typically, what we expect in a commercialized therapy versus one that's in a clinical trial is it could be 5-10 times the revenue depending on what the indication is. That's true with these two that have been fast-tracked. What's different about these two, dramatically different, frankly, than the other 85 we have in clinical trials today, is the diseases that they're going after in terms of the population set. Very, very large. Therefore, even as a late-phase one, early-phase two trial, the amount of proteins they were buying to support these trials was equivalent to what we'd expect from a commercialized typical T cell therapy. Hence why we had all this lumpiness the past six quarters as these two customers were progressing through.

You can only imagine the same 5-10x applies to these two as it does to the smaller ones. I'll just put it out there now. I mean, we see these customers combined being $100 million of revenue once the commercialization fully ramps up. That's probably a starting point.

That'll obviously take several years to get to that number.

Yeah. Yeah.

Yeah. And then moving on to maybe the last piece of cell and gene therapy, Wilson Wolf, you own 20% of it. I think a lot of people love to understand how this asset really benefits Bio-Techne, whether it's through integrated workflows, GMP protein pull-through, or access to new customers. Then secondly, do you expect any additional benefit once you fully own Wilson Wolf, or is this largely integrated already?

I'll get to Leila on that one.

Mac, Analyst: Yeah, sure. Think about the value creation thesis there. You have kind of the preeminent bioreactor for the immune cells, so growing T cells in that space, kind of paired with both our medias, which are already used in clinical trials, as well as our growth factors and cytokines. Just on the surface, those combine, right? One is kind of the app store, and we have all the apps that go kind of into it with being the bioreactor itself. As you also may know, we've got a joint venture called Scale Ready that is already kind of actively in the market. It's driven a lot of penetration. On the immune cell side of the equation, Wilson Wolf has also over 700 customers. They're more skewed to later-stage clinical trials because they were in very early in the process.

They participate in over half of the immune cell therapy trials. They're in the last four release trials. They've got a fantastic position. If you just looked at the math on it, which is great, it's accretive top and bottom line for us. We start thinking about the more long lines of value creation. I mentioned earlier our ProPAC for cytokine delivery. That can be directly integrated into, just as an example, into the Wilson Wolf GREX bioreactor setup. You could imagine that as you're scaling your industrializing process, we become kind of the perfect marriage in that sense. Are we all the way there in terms of tying off all elements of that workflow? We're pretty close, and we'll only get better as we bring Wilson Wolf in.

I think the other area is where we come at this, and we did not kind of mention it earlier, is that our instruments are also used for potency and quality release testing in immune cell therapies. Every drug that is on the market right now, save one, utilizes our platform, our Ella platform. Very broadly, it has become the standard, much like Maurice is for large molecule production QC release testing. The Ella platform has become the de facto standard there. We start bringing a very different kind of workflow solution from both the development aspect all the way through to QC. Yeah, we think it is going to drive a lot of behaviors.

I think also as we convert and look to convert later-stage folks who want to industrialize the process or improve it, so it becomes more affordable and accessible, that we're kind of uniquely positioned to offer that.

Jim: Of course, from a financial perspective, I could be more excited about it because I believe they have five customers who just got approved for commercialization. They probably have some more on deck we can't talk about. I believe by the time we consummate this purchase, they'll be right at the inflection point where these commercial ones are ramping. As you said, it takes three to five years for even once you launch commercial for it to kind of fully start to ramp. I think it'll be majorly accretive to our growth even post-purchase. Of course, majorly accretive to the bottom line where they have 60-70% EBITDA margins already today.

Maybe just following up on that, I think in the past, you've said it's roughly 70%, but under your umbrella, it'd probably be closer to 60%. Is that correct?

Yes. Yeah. Just simply because they're still a private company and there's some investments we need to make to kind of make it public company-worthy, I'd say.

Still highly accretive, so.

Absolutely.

Maybe I'll stop here before moving on and see if the audience has any questions. Great. Awesome. Maybe touching on the ProteinSimple side or the instrument side, just given the funding environment remains constrained, how has instrument demand trended so far this year?

It's trending in the right direction. It's what I call a little bit choppy the last several quarters. We had a couple of quarters in a row of consecutive instrument growth. Last quarter, it dipped a bit, largely because of the biotech decline I talked about. It's like everything else. I think you get a little bit of choppiness is a sign of a bottoming, perhaps, of a market and stabilization. Given how Q1 played out and we saw the instruments start to come back in the back half as well as continue in October, we do believe Q1 was probably more of an anomaly in that trend. What we started to see a few quarters ago with instrument places increasing year over year, that trend continuing going forward.

You can talk a little bit with Will as to what's driving that and why our instruments are doing so well and will continue to do well.

Mac, Analyst: Sure. I think as we've shared consistently, right, we've had very high levels of growth or consistent growth in the consumables component kind of pulling through as well as the services. We know the systems are kind of being utilized across the page. If we think of our relative position in different markets, in the biologics space, right, we are the standard for QC release assays in that large molecule process. As you think of that market and bioproduction just in general growing, we're really benefiting from that. There are a couple of other elements that really make us uniquely positioned. With the work being done in kind of that ramp in ADCs, the Maurice platform is really uniquely suited for those very more complex analytics required to do the release testing and both the development side there.

We're seeing kind of a ramp-up back in China in that space. We also know with the onshoring that we expect that there'd be a positive driver in the Maurice. The biologics platform is incredibly well positioned. It's very durable in the space. As we kind of expand the applications there, we're seeing utilization of the new applications as well as benefiting from the market. If we think of the Ella platform, it's really playing across an entire continuum of high-throughput discovery, which is happening out there in the university. Think of the Olink platforms. Those platforms and any other doing high-throughput proteomics detection, they're generally using our content, so our antibodies. I won't specifically talk about anyone that utilizes those because we can't. In general, imagine the vast majority of discovery work that's happening is happening with our content.

As that translates through into translational space, there are certain applications where they might use a different platform than Olink or our platform, which is the Ella platform. So we've got this, again, nice continuum broadly playing in the discovery market, and we're kind of catching it in the translational space. We're seeing that with NovoMaltDX and other diagnostic companies that want to adopt that, whether it's for a laboratory-developed test or otherwise. We've taken that through some regulatory hurdles recently here in North America and in Europe. The Simple Western platform is the only fully automated Western platform on the market. We've seen tremendous adoption, but have a marginal penetration, about 18% or so of that market. We've recently launched a platform called Leo within that Simple Western platform. That has just had better than expected adoption. It's a higher throughput format.

We're seeing folks use that for really different kind of expanding the application and usage space there given its level of quantitation, the ability to have standard curves, etc. You start kind of blending this in that we're able to deploy content on a couple of different platforms in Ella and Simple Western in that translational space. If you think about that long-term trend of high-throughput proteomics translating, we have an incredible position there. I think what we're seeing is, as Jim alluded to, the trends are improving, and we're seeing utilization of the consumables or the cartridges ramp accordingly.

Jim: I'll book in that real quickly. Thanks for mentioning the consumables and utilization because even though we had a blip in the actual placements in terms of growth this most recent quarter, the consumables growth was still 20% plus. We've had, I don't know, four or five quarters now in a row of double-digit increases in our consumables, which are the cartridges used in the instruments. To me, that's the ultimate test. As a non-scientist, are they using the instrument or not? When they're using it at that kind of level, even in a tough budgetary environment, it tells you, first of all, these instruments are, hence the name ProteinSimple, the brand. It's around simplification. It's around productivity.

Highly being used in a tough budget environment, it kind of fits our thesis exactly how we thought the intent of these adding value for our customers, these products were supposed to do. Of course, after many, not only quarters, but years of double-digit now growth in our consumables and these instruments, it tells you that they're starting to use up their capacity too. When the money comes back, the first place they're going to go is want to buy some more instruments. That's what we started to see. We started to see that the last several quarters and here more recently as well, which is why we're very encouraged.

That's great to hear. Maybe just trying to keep us on track, moving over to the spatial business. This business has weighed on performance a little bit more recently, and it's more heavily exposed to biotech and academic end market. Could you just talk about what you're seeing in terms of demand here among that end market? Also, outside of that, what do you think it will take to drive an improvement in demand here, and what gives you the confidence long-term?

I mean, I think Will can jump on this after I'm done babbling here because he's got more science background, way more science background than I do. Everyone you talk to, when you talk to customers, spatial is still a very hot area. It's a very exciting area for science. It's called next-generation IHC is the way I think about it in terms of you can arguably even maybe replace all of IHC at some point in time in the future. We have the best solution for that, especially as it pertains to the translational space that Will was talking about. Let me make that clear. Some people ask us, "How do you compete with 10x and so forth?" The answer is we don't. They're much more upstream in discovery.

If they do well, that's great because the output of customers using their instruments becomes the input for us. We absolutely believe we have the best solution for the translational space with our common instrument combined with our world-class leading RNAscope reagents and assays for the RNA. Now with the CosMx, we're going to be the only instrument in the market that can look at both RNA and proteins on the same slide, same time, fastest instrument. I mean, basically every box you'd want: speed, simplicity, overall cost per sample, being able to look at multi-omics in the same run, preserve the sample. There's no other instrument in the market that can do what this instrument does. Of course, no other company has the capability of our RNAscope reagents. Very, very excited about that space.

The fact that the worst quarter we've had was low single-digit decline a couple of quarters ago in a very tough end market, as you alluded to, with both a high academic and biotech exposure tells you not only the strength, I think, of the overall spatial market in terms of priority where money is going to be spent, but also our positioning in it.

I think you talked about the potential for spatial instruments to be the highest pull-through instruments in your portfolio. Could you just talk about what you're seeing in terms of pull-through opportunity, both in the near term and long term?

Yeah. I mean, already we're on a full run rate basis. We're getting roughly $40,000-$45,000 per instrument pull-through. Admittedly, most of that is just off the chips that are used to think of it as the cartridge component of these instruments that you need chips to run the instrument on. What's still yet to come is all the pull-through from our RNAscope, which is all of our instruments have just recently been upgraded for that capability, as well as the antibodies. It is an open system so that you can use anyone's antibodies. Us, of course, us being a world leader in antibodies, we are rapidly producing panels for specific applications so that customers don't have to finagle with their own antibodies to figure it out. They can just check a box and say, "I'm going to use this application.

I'm going to pick that panel. That is still all yet to come. We are rapidly developing these panels, starting to sell them. When those start to ramp, both on the RNAscope and the antibodies, that could double the consumable pull-through that we currently get at very, very high margin.

Just trying to wrap up here over the next couple of minutes, but you've reiterated expectations for this low single-digit organic growth in FY2026 despite the near-term headwinds associated with the cell and gene therapy. What gives you confidence in achieving that, and what are the key levers supporting that sequential improvement?

Let's talk about the sequential improvement from Q1 to Q2 first because it actually is improvement, even though the headline number was relatively the same, i.e., minus 1% if you want to say what we like to say low single-digit minus, but whatever, minus 1%. We already talked about there being a known quantitative four-point headwind with these two customers. That actually translates to a 3% coming off of a 1% adjusted for those two customers. Really, what that relates to is what I call stabilization. First of all, our pharma market remaining strong at double-digit growth, and then continued stabilization of our academic market, and future stabilization of our biotech as opposed to sequential declines in biotech because of the funding improvement. That's kind of the assumptions around the underlying market.

We have a track record of showing that our growth verticals mainly are our ProteinSimple franchise, our spatial franchise, and our cell therapy, although right now those are being impacted by these two headwinds. Spatial and ProteinSimple in particular, in just stable markets, tend to take more market share than they do in declining markets. In normal markets, we expect very solid double-digit growth from those two. The fact that we've seen those two growth verticals turn the corner in the case of spatial, in the case of ProteinSimple start to really ramp, that's what we'd expect to see in a stabilizing market. We think they will lead the growth, and it's really company-specific, but lead the growth for next quarter relative to Q1.

With regards to the back half of the year, it's too early to predict any further improvement in markets at this point. Even if the markets kind of stay the same as they are in Q2, we have easier comps. We'll start to lap the academic headwinds that began in February, and of course, the tough biotech market that kind of hit right away in the early part of the year when funding started to drop. The second-half story right now is more about easier comps. The Q1 to Q2 story is about our growth verticals starting to show that spread, that acceleration in a more stabilized market. As far as beyond that, we don't give any guidance beyond our fiscal year at this point. I will say this.

There are other companies that have calendar year-ends or are starting to talk about calendar 2026 and even calendar 2027. We absolutely fully agree with their assessments that the markets will continue to improve. My personal belief, and I understand why, because everyone's a bit shy after being stubborn on their toes more than once with regards to these end markets, but I think they're being a bit conservative. History shows that in life science tools, when the recovery starts, it usually happens rather rapidly. We are very encouraged right now in terms of the setup for our fiscal year 2027.

That's great to hear. Just to ask a follow-up on that, you're probably not going to answer, but what is the growth potential of this business in a normal environment? You've got a lot of really fast-growing businesses. It seems like there's what it takes in the end markets. We've been dealing with really for three, four years now. In a normal environment, with a couple of things going your way with these cell therapy companies becoming approved, etc., should this be a double-digit growth business? Is that something that?

Absolutely. I mean, absolutely. That's what we've designed the company to be. That's what we want. To us, that's a definition of a growth company is double-digit. We were set up beautifully for that. We've shown historically that we can do that. In fact, even pre-COVID, we were on the path to double-digit growth, and we didn't even have the portfolio we have today. The other thing I mentioned that why it gives us confidence about returning back to double-digit growth in normalized markets is our core reagents. That's our core antibodies, proteins, the most, not only most competitive, but the most highest penetration we have. We never say that those have to be double-digit growth for the company to be double-digit. They just grow at market or even a point. Of course, we always aim to be better than market.

Let's just say they grow at market, call it mid-single digit, because that's a normal market for life science tools. Where the accelerated growth comes in is from these growth pillars: cell therapy, spatial, ProteinSimple in particular, those three. Those three businesses pre-COVID, five, six years ago, made up 30% of our portfolio. Today, they make up 45% of our portfolio. It's not because the core has shrunk. The core has held its own. It's not even grown from there. All three of those are majorly underpenetrated. In the case of ProteinSimple, part of the reason why they're underpenetrated, despite they've grown so much, is because they continue to expand their applications. All three platforms continue to expand their market potential. What you got is a kind of snowball effect. Our three growth factors now are a larger percentage of the company.

When markets return to normal, they will exceed market growth by at least 500 basis points or more and be a larger component to the double-digit growth of the overall company, if that makes sense. It is kind of like a flywheel. This is all before the commercialization of cell therapy kicks in. We believe we are a double-digit. When commercialization of cell therapies really kick in, say, five years from now, it could actually accelerate from there.

Speed of answer.

That's an important question because, I mean, our whole LRP is based off of a double-digit growth.

Okay. Great. I think we're running up on the time limit here, but I think that's a great place to end it.

I like it too. That's a good place.

Thank you. Thanks.

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