Earnings call transcript: Bio-Techne Corp misses Q1 2025 forecasts, stock drops

Bio-Techne Corp reported its Q1 2025 earnings, revealing an EPS of $0.42 and revenue of $286.6 million, both slightly below analyst forecasts. The results prompted a 12.85% drop in the company’s stock during pre-market trading, reflecting investor disappointment. Despite some positive operational and product developments, the financial misses and regional revenue declines have weighed on market sentiment.

Key Takeaways

• Bio-Techne’s EPS and revenue were slightly below expectations, with a negative surprise of -0.31% and -1.68%, respectively.
• The company’s stock dropped 12.85% in pre-market trading following the earnings release.
• North American revenue saw a mid-single-digit decline, contributing to overall performance concerns.
• The company continues to innovate with new product launches, such as the ProximityScope and ultra-sensitive Ella cartridge.
• Bio-Techne achieved a 40% reduction in emissions and transitioned to 100% renewable electricity at its Minneapolis site.

Company Performance

Bio-Techne’s overall performance in Q1 2025 was mixed. While the company maintained its adjusted EPS at $0.42, flat compared to the previous year, its revenue declined by 1% year-over-year. The company’s geographic performance varied, with North America experiencing a mid-single-digit decline, whereas Europe and Asia saw low single-digit growth. Despite these challenges, Bio-Techne’s innovation and operational efficiency continue to support its competitive position in the market.

Financial Highlights

• Revenue: $286.6 million, down 1% year-over-year
• Earnings per share: $0.42, flat year-over-year
• Adjusted operating margin: 29.9%, up 90 basis points year-over-year
• Organic growth: 1% excluding cell therapy timing impact

Earnings vs. Forecast

Bio-Techne’s Q1 2025 results fell short of analyst expectations, with EPS coming in at $0.42 compared to the forecast of $0.4213, and revenue at $286.6 million against a forecast of $291.47 million. The negative surprises of -0.31% for EPS and -1.68% for revenue, while minor, were enough to impact investor confidence.

Market Reaction

Following the earnings release, Bio-Techne’s stock price dropped 12.85% in pre-market trading, settling at $53.25. This decline represents a significant reaction to the earnings miss and is notable compared to the broader market’s more stable trends. The stock’s movement also reflects investor concerns over the company’s regional revenue performance and missed forecasts.

Outlook & Guidance

Looking forward, Bio-Techne targets low single-digit growth for fiscal 2026 and expects positive organic growth in the second half of the fiscal year. The company anticipates at least a 100 basis point margin expansion and projects Q2 growth to mirror Q1’s performance. Despite current challenges, Bio-Techne remains optimistic about market stabilization and its strategic initiatives.

Executive Commentary

CEO Kim Kelderman emphasized the company’s strategic focus and resilience, stating, "We began the fiscal year with continued strong execution, navigating a dynamic environment with discipline and strategic focus." Kelderman also expressed confidence in the company’s future growth prospects, noting, "We feel that overall, the business is well-positioned for a return to stable growth in the region."

Risks and Challenges

• Continued funding challenges in the biotech sector, despite a 6% sequential increase in Q1.
• Regional revenue declines, particularly in North America, could impact overall performance.
• Potential market saturation in core product categories.
• Macroeconomic pressures, including potential changes in NIH funding.
• Ongoing cell therapy headwinds, although expected to moderate in the second half.

Q&A

During the earnings call, analysts inquired about the timing of cell therapy orders and the impact of key customers on revenue. The company addressed these concerns, highlighting early signs of market stabilization and the potential for biotech market recovery.

Full transcript - Bio-Techne Corp (TECH) Q1 2026:

Conference Moderator: Good morning and welcome to the Bio-Techne earnings conference call for the first quarter of fiscal year 2026. At this time, all participants have been placed in a listen-only mode, and the call will be open for questions following management’s prepared remarks. During our Q&A session, please limit yourself to one question and a follow-up. I would now like to turn the call over to David Clair, Bio-Techne’s Vice President, Investor Relations. Please go ahead, sir.

David Clair, Vice President, Investor Relations, Bio-Techne: Good morning and thank you for joining us. On the call with me this morning are Kim Kelderman, President and Chief Executive Officer, and Jim Hippel, Chief Financial Officer of Bio-Techne. Before we begin, let me briefly cover our safe harbor statement. Some of the comments made during this conference call may be considered forward-looking statements, including beliefs and expectations about the company’s future results. The company’s 10-K for fiscal year 2025 identifies certain factors that could cause the company’s actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements because of any new information or future events or developments. The 10-K, as well as the company’s other SEC filings, are available on the company’s website within its Investor Relations section.

During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company’s press release issued earlier this morning on the Investor Relations section of our Bio-Techne website at www.Bio-Techne.com. Separately, in the coming weeks, we will be participating in the UBS, Stifel, Stevens, Jefferies, Citi, Evercore, and NASDAQ Healthcare conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.

Kim Kelderman, President and Chief Executive Officer, Bio-Techne: Thank you, Dave, and good morning, everyone. Welcome to Bio-Techne’s first quarter earnings call on fiscal 2026. We began the fiscal year with continued strong execution, navigating a dynamic environment with discipline and strategic focus. Despite these efforts, organic revenue declined 1% in the quarter, primarily due to clinical stage timing from a couple of large customers in our cell therapy business and the anticipated ongoing softness in biotech funding. The headwind in cell therapy reflects the inherent lumpiness of late-stage clinical programs, which is in this case driven by favorable FDA fast-track designations that support accelerated therapy approval timelines, yet they reduce near-term reagent demand. Importantly, underlying market trends remain constructive, as demand from our large pharma customers was once again robust, and we saw encouraging signs of stabilization in our US academic end market, particularly as the quarter progressed. Our ProteinSimple insulin franchise continued to build momentum.

China delivered its second consecutive quarter of growth, and our spatial biology business resumed sequential improvements. Operationally, the team delivered sector-leading profitability with adjusted operating margin expanding 90 basis points year-over-year to 29.9%, exceeding our initial expectations. This performance reflects our deliberate focus on productivity and cost management while continuing to invest in the strategic growth pillars that will shape Bio-Techne’s future. Now let’s turn to the performance of our end markets, beginning with our biopharma customers, excluding cell therapy. The divergence between large pharma and emerging biotech spending patterns persisted in the first quarter. Revenue from our large pharma customers remained strong, increasing low double digits, reflecting continued demand for our tools and technologies. In contrast, the challenging funding environment in our biotech end market continued to weigh on spending behavior and resulted in high single-digit declines in Q1.

Encouragingly, we are seeing early signs of stabilization in biotech activity levels. These include an uptick in M&A activity, favorable pharma in-licensing trends, and the potential for lower interest rates, all of which support a more constructive outlook for investment levels in emerging biotech companies. Global academic markets remained stable overall in Q1. A modest decline in U.S. academic business was offset by mid-single-digit growth in Europe, where demand trends remained healthy. Within the U.S., it was encouraging to see improvement in our run rate business as the quarter progressed. From a geographic standpoint, revenue declined mid-single digits in the Americas, while both EMEA and Asia delivered low single-digit growth. In China, we achieved our second consecutive quarter of growth, supported by improving CRO pipelines and increased CDMO activity. Growth in the region was primarily driven by strong performance in our ProteinSimple analytical instruments and our spatial biology portfolio.

Importantly, unlike last quarter, the instrument growth does not appear to be driven by tariff-related dynamics. Instead, it reflects underlying demand strength, and we believe that the business is well-positioned for a return to stable growth in the region. Let’s now turn to our growth pillars, beginning with the protein sciences segment, where end market dynamics led to a 3% organic revenue decline. In our cell therapy business, we were pleased to see a couple of our largest customers receive FDA fast-track designation. This recognition enables an accelerated clinical development timeline and eligibility for priority review by the agency, and therewith potentially expediting both approval and commercialization of these next-generation therapies. As customers progress through the development project, they typically front-load purchases of the reagents needed for a full completion of a specific clinical phase in their program.

We have seen this dynamic play out firsthand at Wilson Wolf, where customer ordering patterns moderated as their clients progressed through phase three clinical trials and shifted their focus to the regulatory filing necessary for FDA approval. This is typically followed by an inflection in demand and a revenue ramp as therapies gain commercial traction. It is this clinical stage timing dynamic that introduced greater lumpiness in our cell therapy business in this quarter. Continuing with cell therapy, I’d like to provide a brief update on Wilson Wolf. As a reminder, we currently own 20% of the company and expect to complete the acquisition of the remaining interest by the end of calendar 2027 or potentially sooner, contingent upon the achievement of certain milestones. Wilson Wolf is a developer and manufacturer of the market-leading G-REX bioreactor line, which enables high-yield, cost-effective workflows for cell therapy manufacturing.

The G-REX also allows the scaling of production and therewith treats a greater number of patients efficiently. The G-REX grant program has successfully seeded hundreds of early-stage cell therapy customers, and over half of those also utilize Bio-Techne’s GMP reagents. We are very excited about the upcoming acquisition, as the combination of Wilson Wolf’s bioreactors with Bio-Techne’s GMP reagents, our media, and the POLPAC cytokine delivery system create a compelling, lower-cost, and scalable manufacturing solution for cell therapy developers. Let’s now turn to our suite of easy-to-use, fully automated proteomic analytical solutions, collectively known as ProteinSimple. These platforms are the preferred choice for fast, precise, and intuitive protein analysis. Utilization of our expanding install base remains very strong, as customers increasingly rely on these systems to automate both critical and routine laboratory workflows, driving higher productivity in both biopharma and academia.

This growing reliance was reflected in the cartridge consumable pull-through, which resumed its double-digit growth trajectory in the quarter. We continue to advance innovation across all three of our ProteinSimple instrument platforms, enhancing functionality, productivity, and broadening their application scope. A key highlight is the upcoming launch of an ultra-sensitive cartridge for our fully automated Simple Plex immunoassay platform, branded as Ella. These next-generation assays will deliver a 2-5-fold improvement in sensitivity over our current Simple Plex cartridge offering, enabling femtogram-level biomarker detection in plasma samples. This breakthrough holds significant promise for accelerating neurodegenerative disease research and positions Bio-Techne as a leader in this emerging and impactful field. Adoption of our high-throughput Simple Western platform called Leo continues to build momentum with large pharma customers who value its speed, simplicity, and sensitivity in protein quantification and detection.

We’re very pleased with LEO’s commercialization, as the platform has exceeded both revenue and placement expectations in its first three quarters on the market. Combine this initial momentum with a growing order funnel, and LEO is well-positioned to become a standout performer in our instrument portfolio. Lastly, I’d like to highlight the continued success of our Maurice Biologics platform, which delivered its sixth consecutive quarter of growth. This QA/QC solution is benefiting from a current wave of increased bioprocessing activity. Looking ahead, we see recent U.S. manufacturing investment announcements by several large pharmaceutical companies as a potential catalyst for accelerating growth in this business. Finally, our core portfolio of research-use-only reagents, including our industry-leading catalog of over 6,000 proteins and 400,000 antibody types, continues to demonstrate its enduring value to customers, even amid challenging end market conditions.

In the first quarter, sales of our core reagents remained consistent with the prior year, underscoring the resilience and the essential nature of these tools in supporting foundational research across disciplines. Now let’s turn to our diagnostics and spatial biology segment, beginning with our spatial biology portfolio. In Q1, we delivered low single-digit growth in our RNAscope product suite, which enables biopharma and academic researchers to detect and visualize RNA and short microRNA sequences at the single-cell level within intact tissue samples. We will further strengthen our leadership in spatial biology with the launch of ProximityScope, the first product to enable researchers to interrogate functional protein-protein interactions. This novel assay adds a powerful new dimension to multi-omic RNA and protein detection. By introducing this additional layer of information to spatial biology, ProximityScope enhances researchers’ ability to unravel complex biology and its connections to disease.

It also embeds Bio-Techne’s spatial chemistries more deeply into automated translational research workflows. Momentum also continued with our Comet instrument, which saw solid double-digit growth in bookings year-over-year. Its fully automated multi-omic capabilities are increasingly valued by academic and biopharma customers and enable the discovery of novel biological insights. Spatial biology continues to be our most academically concentrated business, with a meaningful presence in biotech as well. Given the funding uncertainties in both end markets, we are encouraged by the positive momentum in this franchise. Lastly, our diagnostics business grew mid-single digits in Q1, supported by balanced performance across our core diagnostic controls and our diagnostic kits for laboratories. We continue to see rising interest in our ESR1 test, which monitors resistance to standard therapies in breast cancer patients.

Recent clinical trial data reinforced the importance of testing for ESR1 mutations, showing that switching patients that show this mutation to an alternative therapy nearly doubled life expectancy compared to the standard treatment. We also launched the AmplideX PML-RARA kit, a multiplex QPCR assay designed to detect all three major fusion variants associated with APL, an aggressive form of leukemia. This assay runs on widely installed QPCR platforms and delivers results in approximately four hours. This launch broadens our hematology menu alongside the QuantideX BCR-ABL kit and positions us for continued menu expansion. We also announced an expanded agreement with Oxford Nanopore Technologies, building on last year’s successful launch of the AmplideX Nanopore Carrier Plus kit. This comprehensive carrier scanning panel targets 11 hard-to-sequence genes in a single workflow, offering laboratories a streamlined and efficient solution for genetic testing.

Before I wrap up my prepared remarks, I would like to briefly highlight our progress on sustainability. During fiscal 2025, we achieved an estimated 40% reduction in Scope 1 and 2 emissions, driven by our transition to 100% renewable electricity at our largest site located in Minneapolis. I encourage everyone to review the report in the Corporate and Social Responsibility section of our website. I’m proud of the team’s continued progress on this front. To summarize, the Bio-Techne team continues to execute at a high level despite ongoing volatility across some of our end markets. Our focus on productivity and disciplined cost management drove a significant year-over-year operating margin expansion, exceeding our expectations for profitability. While clinical stage timing and cell therapy created a headwind, underlying market trends are constructive.

Recent data points suggest improving visibility for our academic and our biopharma customers, which we expect will translate in stabilizing and ultimately strengthening demand for life science tools and specifically Bio-Techne’s product portfolio. One thing remains clear: our customers continue to rely on Bio-Techne’s innovative life science tools to drive biological discovery, advance next-generation therapies, and deliver precise diagnostic solutions that improve the quality of life for the global population. With that, I’ll turn the call over to Jim. Jim? Thank you, Kim. I’ll begin with additional detail on our Q1 financial performance, followed by thoughts on our forward outlook. Adjusted EPS for the quarter was $0.42, flat year-over-year, with foreign exchange having an immaterial impact. GAAP EPS came in at $0.24, up from $0.21 in the prior year period.

Total revenue for Q1 was $286.6 million, representing a 1% year-over-year decline on both an organic and reported basis. Foreign exchange contributed a 1% tailwind, while businesses held for sale created a 1% headwind. Excluding the timing impact from our largest cell therapy customers who received FDA fast-track designation, organic growth was plus 1% for the quarter. From a geographic lens, North America declined mid-single digits, as strength from large pharma was offset by order timing in cell therapy and continued funding pressure in biotech. Europe grew low single digits, led by consistent performance in academia, while Asia also posted low single-digit growth, marking its second consecutive quarter of sustained momentum. By end market, biopharma declined mid-single digits overall. However, excluding our largest cell therapy customers, biopharma grew low single digits, driven by strong pharma demand but partially offset by biotech softness.

Academia was flat, with solid growth in Europe, balancing modest declines in the U.S. Below the revenue line, adjusted gross margin was 70.2%, up from 69.5% last year. The improvement was driven by the exosome diagnostics divestiture and ongoing productivity initiatives. Adjusted SG&A was 32.1% of revenue, nearly flat versus 32.2% last year. R&D expense was 8.2%, also stable compared to 8.3% in the prior year. This consistency reflects the benefits of structural streamlining and disciplined expense management, partially offset by targeted investments in strategic growth initiatives. Adjusted operating margin reached 29.9%, up 90 basis points year-over-year. This improvement was fueled by the exosome diagnostics divestiture and productivity gains, partially offset by volume deleverage. Our better-than-expected margin reflects deliberate management of productivity and cost containment measures aimed at maximizing operating leverage in a dynamic environment.

Below operating income, net interest expense was $1.8 million, up $0.7 million year-over-year due to the expiration of interest rate hedges. Bank debt at quarter-end stood at $300 million, down $46 million sequentially. Other adjusted non-operating income was $2.7 million, down $1.3 million from the prior year, primarily due to foreign exchange gains last year related to overseas cash pooling arrangements that did not recur. Our adjusted effective tax rate was 22.3%, up 80 basis points year-over-year, driven by geographic mix. Turning to cash flow and capital deployment, we generated $27.6 million in operating cash flow during our Q1, with $5.4 million in net capital expenditures. The year-over-year decline in operating cash flow was due to the timing of cash tax payments. We returned $12.4 million to shareholders via dividends and ended the quarter with 156.4 million average diluted shares outstanding, down 3% year-over-year.

Our balance sheet remained strong, with $145 million in cash and a total leverage ratio well below one times EBITDA. M&A continues to be a top priority for capital allocation. Now let’s review our segment performance, beginning with protein sciences. Q1 reported sales were $202.2 million, down 1% year-over-year. Organic revenue declined 3%, with a 2% benefit from foreign exchange. Excluding the cell therapy timing impact, organic growth was plus 1%. Growth was led by our proteomic analytical tools business, with notable strength from large pharma customers. Protein sciences’ operating margin was 38.4%, down 100 basis points year-over-year, primarily due to volume deleverage and promotional activity, partially offset by operational productivity. In our diagnostics and spatial biology segment, Q1 sales were $79.5 million, down 4% year-over-year. The divestiture of exosome diagnostics negatively impacted reported growth by 7%, resulting in 3% organic growth for the segment.

Diagnostics products grew mid-single digits, while spatial biology was flat. It’s worth noting that this segment grew mid-teens organically in the prior year, creating a challenging comparison. Segment operating margin improved to 11.2%, up from 5.1% last year, driven by the exosome diagnostics divestiture and productivity initiatives. We expect continued margin expansion as our common spatial biology platform scales. In summary, the team delivered strong execution in Q1 despite persistent market headwinds, including biotech funding pressures, NIH budget uncertainty, and lingering tariff concerns. Encouragingly, recent data points suggest improving end market clarity. While biotech funding remains down, approximately 19% year-to-date through October, industry reports show a 6% sequential increase in our Q1. October making the strongest funding month of calendar 2025. Combined with recent large pharma pricing and on-shoring agreements with the US administration, we anticipate improving conditions for biopharma.

On the NIH front, September outlays rose 8% year-over-year, closing the government’s fiscal year on a strong note. While the current government shutdown clouds visibility into the fiscal year 2026 budget, both Senate and House appropriation bills suggest a flat NIH budget year-over-year. Encouragingly, we saw signs of stabilization in the U.S. academic market as the quarter progressed. As Kim noted, we’re excited about the FDA fast-track designation awarded to our largest cell therapy customers. These designations accelerate clinical timelines but reduce near-term reagent demand. Following strong ordering in early fiscal year 2025, these customers are now progressing through their phase three trials, resulting in a temporary slowdown in reagent purchases. We expect this headwind to intensify in Q2, impacting growth by approximately 400 basis points year-over-year before moderating in the second half of the fiscal year.

Despite these headwinds, we anticipate overall Q2 organic growth to be consistent with Q1. This outlook reflects continued strength in pharma, renewed growth in China, a rebound in spatial biology, and gradual stabilization in U.S. academic and biotech end markets. As we lap prior year headwinds that began with the U.S. administration’s policy changes in early calendar 2025, we expect a return to positive organic growth in the second half of the fiscal year. From a margin perspective, we remain focused on balancing growth investments with operational efficiency. We’re pleased with the margin upside delivered in Q1 and remain on track to achieve at least 100 basis points of margin expansion for the full fiscal year. That concludes my prepared remarks. I’ll turn the call now back over to the operator to open the line for questions. Thank you.

If you would like to ask a question, please press Star 1 on your keypad. To leave the queue at any time, please press Star 2. Again, that is Star 1 to ask a question. As a reminder, please limit yourself to one question and a follow-up. We’ll now pause for just a moment to allow everyone the chance to queue. Our first question will come from Dan Leonard with UBS. Your line is open. Thank you very much and good morning. My first question, I appreciate all the quantification on the GMP protein timing dynamics, but what I’m curious about is how long might that air pocket persist and how are you thinking about growth right now for GMP proteins in light of that greater than 30% growth in the prior year? Dan, thank you for the question and good morning.

First of all, these two customers in particular, we’re very excited about the fast-track designation. It’s obviously a very positive sign for these two customers and the therapies they’re working on. As you understand, short-term, this gives us a headwind. To be precise, this Q1, we saw a headwind of about 200 basis points. Based upon this phenomenon, it’s on top of a prior year of 60% organic growth. For Q2, that will be worse. Jim already mentioned 400 basis points, which would then lap a 90% prior year organic growth in cell therapy. From there, the second half of the year, the headwinds will fade. In the meantime, what we will continue to do is to build the funnel. Right now, we’re sitting at 700 customers, 85 in clinical phases, 16 of those in phase two and five in phase three.

We are also very positive about the underlying recovery in the biotech markets. Yeah, that will then result in us having to manage through this valley. I think we’ve positioned the company really well to continue to protect the bottom line, and we’re very positive about all the other underlying strengths. That’s basically how we see the year rolling out. Understood. Thank you for that. My follow-up, Kim, are you still managing the business as a low single-digit grower in fiscal 2026, or have those plans changed given the Q1 result and the upcoming comp you’re facing here in Q2? No, not at all. No change there. As I mentioned, of course, the good news of these fast-track approvals was somewhat of a short-term surprise for us. Our commitment and our conviction of cell therapy markets doing great over time remains exactly the same.

With some positive signs from the other end markets that we serve, we feel that the low single digits for the year is still very, very feasible. As you saw from the Q1 margins, we have managed to protect the bottom line even with a little bit of a headwind. We will always want to be on the safe side of that. In the meantime, we are ready for higher volumes in all the other product lines and for accelerating results. Thank you. Our next question will come from Matt LaRue with William Blair. Your line is open. Hi, good morning. Maybe I will just follow up on that point. There, Kim, you referenced the headwind accelerated, I think, to four different bits in the fiscal second quarter, but still targeting low single digits for the business for the year.

It sounds like you are seeing an improvement in the underlying core, and I think that would suggest sort of mid-single digit growth. In the back half of the fiscal year, which may be consistent with what some of your peers have said, 3-6%. Can you maybe just speak to XCTX, how you see the balance that you are unfolding in light of the macro dynamics you referenced? Yeah, Matt, hi, this is Jim. Thanks for the question. I’ll jump in on this one. You are correct. I mean, in the underlying business, we’re seeing, I’d say, a gradual improvement/acceleration of our end markets and our relative performance. As I talked about, to exclude just these two cell therapy customers, our organic growth would have been 1% for the company. Looking ahead to Q2, what really the guide implies is roughly a 3% growth.

These two customers. That’s before we get into the back half of the year where we start to lap the U.S. administration policy changes that’s impacted our entire industry, particularly academic. As well as, you may remember, we talked about this last quarter, our diagnostics business in particular. It can be lumpy from quarter to quarter, had varied. Last year was very, very strong in the first half, a little bit less so ordering in the second half. That pattern is a bit flipped this year, where we’re expecting a stronger ordering pattern in the second half versus the first half. Both the markets gradually improving. Our specific product lines, namely our spatial, our ProteinSimple product line, and even the region in Asia overall, but especially China, are all seeing some very nice positive momentum. Combine that with.

Lapping easier comps in the second half of the year suggests a continued strength in underlying performance apps in these two customers. Okay, great. That’s really helpful, Jim. Then on the biotech side, you referenced sort of the variety of improving macro indicators and obviously recently some of the nice news on biotech funding. Historically, you’ve thought about kind of a two to three-quarter lag there. I’m curious, given how long we’ve sort of been in the doldrums, if you expect that to be the same timeline or perhaps you’ve already started to see some signs of life from some of your biotech customers who might feel better about the interest rate environment and their ability to raise capital. Yeah, Matt, I’ll take it. Good morning. We feel that biotech funding, as you referred to, over the last couple of months, has definitely increased.

Specifically, the last month has been very, very positive. The lower interest rate environment also is helpful. Increased levels of M&A much higher than prior year. We also see a very encouraging number of licensing deals into biopharma, making it a more investable space. Therewith, we feel positive about the momentum in there. Yes, in the past, a couple of years ago, when we were looking at funding issues, we felt that the funding at that time came into companies that really had to start with brick and mortar, maybe with clean rooms, and then work their way into starting their programs. Currently, in some occasions, that might still be the case, but we feel that overall infrastructure is in place and that many companies are fundraising to kick their programs off and/or to add some of the programs.

That will create an environment where the dollars probably will flow much quicker to us than the two to three quarters we’ve mentioned in the past. Thank you. Our next question will come from Puneet Soda with Leerink Partners. Your line is open. Yeah, hi Kim. I wanted to understand on the GMP protein side. Could you talk about just knowing the number of trials that you’re involved with, the ones that have fast-track designation, and the ones that are program starts or clinical trial starts, maybe can you talk about. Are you continuing to see the momentum on new clinical trial adds? And for the same store customers that have fast-track designation, I mean, when do you think, just given the timing, ordering pattern, the size of the trials, can you give us a view into when this business starts to recover, again for GMP proteins?

Because obviously, it’s been a bright spot for you. Just given the challenges, I wanted to understand when can that start to recover? Puneet, thank you for the question. Good morning. Yeah, the clinical starts have been relatively flat and steady. We don’t see a significant decline in the activity there. There’s certainly some turnover. There are new companies that are starting new clinical trials, and there are companies that are actually adding to their number of clinical trials. We’ve also seen some exits and cancellations, basically a maturing of the market where three, four years ago basically any novel technology or any novel treatment was getting funded. Some of those were basically more about how exciting these possibilities in cell and gene therapy were versus the true viability if it comes to scalability as well as the affordability.

We feel that all the new programs are much more in line with what cell and gene therapy is really fit for. We actually, from a Wilson Wolf as well as a Bio-Techne point of view, have always wanted to enable a scalable as well as an affordable treatment coming out of the cell and gene therapy effort. We feel that we are really well positioned to continue to feed this end market. Okay, that is helpful. If I could ask on the academic side, net net academic sentiment is improving. I appreciate that. There is multi-year funding, number of grants that are lower in 2026 versus 2025. More concentration, fewer grad students, fewer bodies in the lab, fewer postdocs. How does that impact your business into 2026 and beyond? When we look at the guide overall, Jim.

Low single digit is lower than a large diversified peer in the space. In life science tools. Just wondering. Historically, you’ve grown ahead of that peer by a few points. Is that still the assumption. Longer term? And by that, I mean 2026 and 2027, eventually into 2027. I mean, thank you. Sure. Yeah, I’ll take the first part then, Puneet. So yes, we have seen stabilization in the NIH markets, specifically in academic U.S. Academic Europe has continued to grow mid-single digits. In the U.S., it’s been a little lower, but definitely stabilizing. We can see it from the overall activity level, from our run rate, our core products. We’ve always talked about how we feel that the number of NIH grants is important, but that they are aligned with our research areas, the ones that we serve as a company, is more important.

We can clearly see a positive mix if it comes to these grants for us. At the end of the day, we are encouraged by the fact that there are still bipartisan supports for a flat NIH budget for the coming year. We feel overall that this market has bottomed down, that it is now stabilizing, and that it will be a positive driver for us going forward. Puneet, if I understood your question correctly, it is kind of like, how do I think about our performance relative to the space overall? We have always talked about our level of outperformance, and do we expect that to continue going forward? The answer is absolutely yes. I think what we are seeing right now is a bit of a transition, as you would expect when there was kind of a turn in trajectory of the business.

You look at the peer sets, those obviously that have a more diversified portfolio outside even life sciences, but applied markets are accelerating, recovering earlier. Those that have a higher bioprocessing presence are recovering earlier, which is actually a good sign downstream eventually for discovery. We peel back the onion and look at our very specific areas of where we play versus our competition. We feel like we’re either holding our own or doing better. For example, in our core reagents, globally, basically, we’re sitting at flat growth in our core reagents, which, based off of our intel and our peer set, we’re still doing as good, if not taking share there. Our ProteinSimple franchise continues to do better than the market at mid-single digit growth.

Our spatial biology franchise has been hampered by their academic presence, but we’ve seen a turn of momentum there this most recent quarter. We’re seeing that momentum continue here in the second quarter. We believe that will get back to the trajectory that we’re used to seeing. Cell therapy has been one of the reasons for our outperformance in the past. That’s going to be a bit of a headwind for us in the coming quarters. Once we lap those, and particularly once we get into fiscal year 2027, we’ll be completely behind those tough comps with these two specific customers. That will continue to be an accelerator of growth relatively, I think, to our peers. Hopefully, that gives you enough detail to noodle on, but that’s how we think about it. Thank you.

Our next question comes from Patrick Donnelly with Citi. Your line is open. Hey, guys. Thank you for taking the question. Maybe one on the Wilson Wolf piece. I always try to keep tabs on that. Can you just give an update as to what the quarter looked like there, what the momentum looks like? Is there potential for anything to trigger before the end of that timeline, even if they do not hit some of those milestones? We would love just a little more color on how you are thinking about that piece. Thank you for the question. Yes, Wilson Wolf had a flat quarter. Also, looking at some of the biotech headwinds from the past couple of quarters from a funding perspective. Overall, the 12-month trailing sits at mid-teens, low to mid-teens. Yeah, we feel that overall, that business is also very well positioned to accelerate again to their.

Numbers entitled growth rates. Yeah, we feel that will be a great acquisition serving the cell therapy market. The question regarding the triggers, whether we would be able to own it earlier. I bet that John Wilson will still think that he will be able to meet the EBITDA triggers. We’re supportive, of course. With the current market conditions and some of the headwinds, it will be a little tougher, which for us, basically, does not make a huge difference because the deal is structured in a way, and you know how it is structured, that at the end of the day, we would pay $4.4 times 12-month trailing revenues. Then we will calculate the purchase price. We’re rooting for the team, and we see that they have plenty of pipeline to be proud of. Thank you. Our next question will come from Dan Aries with Stifel.

Your line is open. Hey, good morning, guys. Thank you. Jim, apologies for going back on the same question that was asked about 2Q, but I just want to make sure I understand the cadence here. Because it sounds like you feel like demand has troughed and it’s on its way back, and now it’s really kind of just about rounding the corner on growth itself. So plus 1% organic this quarter X the GMP customers, and you’re expecting the same thing next quarter X those accounts, 3% without them, so 1% with them, presumably, despite the comp being 5 basis points more difficult. So the underlying momentum that you guys are talking about basically feels like it can drive 500 basis points or so of sequential improvement in the context of the comparis, excluding these two accounts, obviously. Yeah.

Let me just make—I’ll repeat what I said to my colleagues to make sure I’m clear. Yes, you’re correct that in this current quarter, we just passed Q1, adjusted for these two customers of cell therapy out of our numbers, we would have grown 1% overall. Looking at Q2, these same two customers provide a 400 basis points headwind, but we’re projecting the same overall growth that we had in Q1. That would imply that the underlying business outside of these two customers accelerates to 3% organic growth from the 1% we had this quarter. I see. Okay. Okay. Can you just maybe refresh us on what kind of 80/20 type rule exists when it comes to these cell therapy accounts? I mean, there’s obviously a concentration here.

For instance, what portion of the GMP revenue base is coming from the two customers or, say, the five phase three partners that I think you mentioned that you have? Yeah. We have not talked about exact numbers as to what account amounts to, what portion of our pipeline. Overall, we do know that the later in the stages, the larger the orders become, right? The volumes become larger. At the end of the day, the size of each account is, of course, also predicated on how many clinical study subjects do one need to run and how much raw material do you need per treatment. There’s a big variability, and that’s why it’s really hard for me to answer it, because an account with a big indication and a large.

Amount of proteins in a phase two could be ordering more than a phase three for a specific disease, exotic disease. Therefore, it’s hard to answer the question. Overall, we always look at the total pipeline, and we’ve really made some real progress in adding customers to our pipeline, and we’re sitting at 700 now. Overall, we’re very confident that we’re driving the underlying growth and that we’re participating in the market in a real significant way. Thank you. Our next question will come from Kyle Belcher with TD Cowen. Your line is open. Hey, good morning, guys. Thanks for taking the questions. I wanted to ask on the spatial side of the business. It sounds like pretty decent sequential growth there and trends sort of improved. I know you had some headwinds in the fiscal fourth quarter.

Was there any catch-up in fiscal Q1 from some of those disruptions you saw at the end of the last fiscal year? No, we do not believe that there was a catch-up there. We truly see overall broad recovery in the ACD reagents, the RNAscope. We made it back into the black, which is really, really encouraging to see. As I mentioned, real broad recovery. The instruments, yeah, they had a little bit of a tougher time, like other instruments in relation to the academic side of the market. We have a real nice momentum that we saw in the order book. Overall, we know that the reagents have been improving sequentially, not based upon lumpiness or quarterly order timing, but more just by broad activity level. The instrument funnel is growing really, really nicely looking at our order book. Got it. Thank you.

Maybe on the margin side, came in pretty good in the fiscal first quarter, even. Considering the -1% organic. I guess next quarter, assuming the same level of growth, -1%, what does that sort of imply for the EBIT margin fiscal second quarter? We have not given specific guidance on margin by quarter, but we have seen as the quarter progressed and we realized we were going to have these headwinds with these two specific customers. GMP proteins, of course, are a very profitable part of our business. We have made sure we have taken even additional productivity actions to counter those, which allowed us to get the expansion we got this quarter, but more importantly, prepare us for the headwinds yet to come, especially in Q2.

It gives us even more confidence in our ability to achieve our 100 basis point expansion goal for the year. Maybe even do a little bit better. Obviously, how the top line plays out will have a lot of determination as to whether there’s upside or downside of that figure in any given quarter. Right now, we’re feeling pretty good about margin overall each and every quarter. Thank you. Our next question will come from Katherine Schulte with Baird. Your line is open. Hey, guys. Thanks for the questions. Maybe first, for the fiscal second quarter outlook, what does that assume for a government shutdown impact? Can you maybe talk through the range of outcomes if we get a reopening tomorrow versus a month from now? Hey, Katherine, this is Jim.

I’ll just start by saying that we’re obviously in record territory already with the government shutdown. We haven’t seen any noticeable major differences in our academic customer buying patterns this month versus the prior month. Again, we’re encouraged that academic has appeared to have stabilized over the past quarter, and we’re seeing that continue thus far even with the academic shutdown. Or even with the government shutdown, sorry. Okay. Helpful. And then on the GMP headwinds, what are your assumptions for the back half of the year? They should ease. Is the easing of those due to them annualizing, or are you assuming some of that ordering resumes? It’s really more about how much they ordered in the first half of last year, these two customers, versus the second half. They ordered less in the second half than they did in the first.

There still will be a headwind. It should be—it will definitely be less than what we saw in Q2. We will give you more ideas as the quarter approaches in terms of what we are seeing from these two customers this time next quarter. As of right now, we are not assuming much of any buying for these two programs. It is still a headwind in the second half, but not as severe. Thank you. Yeah, the comparables become easier, right? Comparisons become easier, Kathleen. In the meantime, these companies also need to start validating processes and their manufacturing. We feel that the second half will be less impacted by this phenomenon than the first. Thank you. Our next question will come from Justin Bowers with Deutsche Bank. Your line is open. Hi, good morning, everyone. In the prepared remarks, you talked about.

Instruments that could benefit from the onshoring and reshoring dynamic. Can you point to which cohort of instruments across the portfolio that might be the beneficiary, biggest beneficiaries of this, and potential timing of when we might see some benefits from that? Yeah, thanks for the question. In particular, we are thinking about our biologics instrument line. It’s been growing really nicely compared to market, and we feel it’s taking market share in several applications that it serves. As you can imagine, with onshoring, with more locations, companies typically will utilize similar instrumentation and methods as they did in their primary locations. We feel that we can copy our successes that we’ve booked in Europe and in the past in this particular end market, in large pharma, and that will translate to some momentum going forward. Thank you. Thank you.

Our next question will come from Daniel Morrowitz with Evercore ISI. Your line is open. Hey, guys. Thanks for taking my questions. Good morning. I have a couple of quick ones. First, on cell therapy customer order timing, I just want to make sure I understand the driver here correctly. Sorry for asking another question on this. Have these customers who received FDA fast track already placed orders for their phase three clinical trials, and you have already recognized revenues for those phase three projects, and now you are just waiting for them to float commercial? I just want to make sure I am understanding that right. Yeah. Thanks for your question. Do not apologize. I mean, it is obviously a real result driver for this quarter specifically. Now, the fast track designation, yes, after your initial results, and in these cases, while in phase two.

The fast track designation would give you a hall pass to accelerate your clinical studies. We feel that these customers—of course, there is always a firewall—but we feel that these customers have ordered enough to finalize their clinical trials. That is not uncommon. Typically, you buy your raw materials in quantities to make sure you do not have to deal with a new lot of raw materials during your clinical trials. Yes, the materials for their phase three, for what they have to do, would already, in our assumptions, have ordered last year. The materials that you would need for commercialization and for validation of your production lines, we feel, is still to come. Understood. That is helpful. Thank you. The second one, you mentioned promotional activity in protein sciences when talking about the margins there. Can you talk about these activities?

Where were they focused, and would you expect them to continue in the coming quarters? I just had one more quick question at the end. Yeah, I’ll try to take that. This is Jim. On the promotional activities, as you can imagine, we all know the academic environment is tough right now. The biotech environment has been tough. Therefore, you want to make sure that you stick with your customers in good times and bad. That means perhaps a little bit heavier discounting, promoting certain product lines, helping with their solutions. It is really more about supporting our academic and biotech customers as they go through a tough time right now. Those additional promotional activities, I think, helped our absolute performance relative to those markets as well. At the end of the day, it paid off. Yeah.

If I add to that, our grants, as well as some promotions to get into projects early on, even in tough times. Especially from the story that we just went through, you can clearly identify that being in a project and driving the funnel of companies and/or projects that are using your materials was very important. In constrained markets, we want to make sure we build a funnel and actually double down on all the projects that are currently going on. They’re obviously very viable and important because they’re still getting invested in. Being part of those is of the utmost importance to make sure that you can continue to accelerate and outperform the rest of the market. That’s exactly what we’re doing. Okay.

My last one, it’s impressive you were able to deliver on margins and EPS despite the customer timing in a very high-margin business. I’m curious if there was anything you wanted to call out that helped flex the business to make that happen. One thought that came to mind is maybe once you had less XODX reinvestments and you let more of it drop down to the bottom line. What’s expected for the balance of the year? Anything you wanted to call out on that front? I mean, yeah. As we talked about, we continually want to balance our cost initiatives and productivity initiatives with reinvestment back into our growth drivers. It’s a lever we have to work with. It’s a combination, I’d say, of.

The timing of some of those investments, perhaps pushing them out to later in the year in some cases, but also accelerating on the productivity front. We initiated some new streamlining activities this quarter, which bolstered our efficiencies. It will set us up to be able to continue to deliver that margin performance even with these new headwinds that we’re facing here with the cell therapy. Thank you. That brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

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