Harvard Bioscience at 37th Annual ROTH Conference: Strategic Growth Amid Challenges

On Monday, 17 March 2025, Harvard Bioscience (NASDAQ: HBIO) participated in the 37th Annual ROTH Conference, where CEO Jim Green and CFO Jim Cote discussed the company’s strategic positioning and growth prospects. Despite facing challenges like debt concerns and funding uncertainties, the company remains optimistic about its innovative technologies and robust preclinical business.

Key Takeaways

• Harvard Bioscience is focusing on new technologies such as organoids and telemetry systems to drive future growth.
• The preclinical business is a strong performer, contributing significantly to the company’s revenue.
• Regional performances are stabilizing, with positive signs in China and Europe.
• The company is actively managing debt and expects improved trading multiples as challenges subside.
• New product lines are anticipated to achieve significant growth, particularly in organoid technology.

Financial Results

• Harvard Bioscience boasts some of the best gross margins in the life sciences tools sector.
• The company is in the process of replacing its debt to improve financial health.
• The preclinical business accounts for over half of the company’s operations, indicating its importance to overall performance.
• There is a perceived gap between the company’s public market value and its intrinsic business value.
• A dollar of growth is expected to contribute $0.60 to $0.70 to the bottom line.

Operational Updates

• The company has streamlined operations from 14 sites to eight, focusing on three major sites for engineering and production.
• Preclinical business remains resilient despite challenges in academic funding affecting other areas.
• Sales in cellular molecular products have slowed due to budget uncertainties, but new technologies aim to counteract this.
• China has shown signs of stabilization, and Europe is picking up, while the U.S. market remains stable.
• Harvard Bioscience launched a new implantable telemetry platform to enhance preclinical testing.

Future Outlook

• The preclinical business is expected to continue as the main growth driver.
• The Asia Pacific region is anticipated to perform well due to limited competition.
• The company aims to return to a typical EV/EBITDA trading multiple of 15-18x as conditions improve.
• Organoid sales are projected to grow at a compound annual growth rate (CAGR) of 50% or more.
• New products are expected to drive near double-digit growth, contributing to overall market expansion.

Q&A Highlights

• Harvard Bioscience’s business is divided into cellular molecular products and preclinical systems.
• Academic funding uncertainties are impacting cellular molecular sales, but new organoid technology is expected to mitigate delays.
• The Soho shared housing telemetry platform will enhance animal testing efficiency, accommodating up to 16 animals and expandable to 100.

For further insights, readers are encouraged to refer to the full transcript below.

Full transcript - 37th Annual ROTH Conference:

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Hi. This is Jason Woodies. I’m one of the senior healthcare analysts here at Roth Capital. Today, we’re very happy to have Harvard Biosciences. We’ve got CEO Jim Green and CFO Jim Cote.

So with that, both of you, thank you so much for joining us. Why don’t we start with just some overview questions for the business? And, Jim, you and I know each other from Analogic Days.

Jim Green, CEO, Harvard Biosciences: Yes, we

Jason Woodies, Senior Healthcare Analyst, Roth Capital: do. And it seems like Harvard is actually somewhat set up similarly with sort of these smaller divisions, sort of self managing businesses. Is that the right way to think about it? Or how do you look at it?

Jim Green, CEO, Harvard Biosciences: First, let me thank you and thank Roth for inviting me to be here. Great conference and a good course, great to see you, Jason. You know me, you know a little bit of my philosophy around business. And to answer your question, yes, it’s interesting. It reminds me a lot of what I picked up originally with Analogic.

There were about nine different operating divisions, very separate, operating separately. We, over the course of a few years, we consolidated down to one core main business area in Boston, and we built a greenfield in China for low cost supply, and we put our technology team that was in Europe and really focus there on new development. This is a very similar type of business where it was built by a number of acquisitions. Like, when I when I took over originally, we had something like 14 different sites, 18 different product lines, really, in many ways, too many sites, too many product lines Mhmm. And and and really very difficult to to turn to to leverage that, for growth or for anything.

So, you know, very similar type of philosophy consolidated. We consolidated down to from the 14 sites down to eight and really three major engineering, science and production sites and then five much smaller specialized areas. So very again, very similar situation. We’ve really taken a lot of the cost out of the business, consolidated our gross margins are among the best in the life science tools business. So, yeah, there were very similar type of structure.

And and also, I wouldn’t say similar types of headwinds that we’ve seen during analogic days. You know, we had the great recession, had to deal with a 40% reduction in revenue. Here, we’ve had a few things that hit us with COVID, interest rates, situation with with the relationship with China, and now, and then, of course, life sciences have had some issues. And and now we have a bit of unknown, as we know, with the whole situation with NIH and academic funding. So, you know, lots lots of things to do, I would say.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Yeah. Definitely want to get to those. But before that, I do, you know, just want to get some more get some more general questions. And that is, you know, basically, Harvard is very well positioned, basically, from drug discovery to preclinical. You’ve got arguably several products which are gold standards within that area.

How do you sort of categorize your businesses and especially the core and what kind of growth rates normalized growth rates should we look for from those businesses? Sure. I will ask you about the macro next, believe me.

Jim Green, CEO, Harvard Biosciences: Okay. Okay. I think that’s what a lot of people are interested in, but yes. So we think of the we basically organize the business into two technological areas. One is our cellular molecular products.

These are leading technologies that are used mainly in the creation of new compounds. You’ll see that in academic research. You’ll see it in research departments of all the big bio pharmas and biotech companies. They know our technology for creating new types of compounds. They also know our cellular molecular products for, the initial cellular level testing that takes place with drugs.

So and that again, you’ll see that heavy in academic research. You’ll see it heavy in research departments of biopharma companies. And then the other area that we focus on is our preclinical systems. So that’s heavily it’s heavily in vivo type systems where you’re testing once the drugs are created. You’ll test those drugs on on very various groups of populations of models to make sure that the the to validate with the regulatory agencies, FDA and such, that a drug that goes through the development process, that it’s that it is safe and effective, that it’s nontoxic to to mammals and to humans, and that’s something that’s required of every drug.

And again, that’s another area where we are a leader in that space, and it’s actually become it’s over half our business at this point is on the preclinical side.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: So listen, you’ve got a well established customer base. Obviously, the macro we’ll talk about. You also got basically the highest gross margins in the industry. The stock is trading at all time lows here. Let’s address the elephant in the room.

What’s going on here? Yeah.

Jim Green, CEO, Harvard Biosciences: That’s your view. Great question. One, of course, that keeps me up at night off and on. Whenever a company has significantly dislocated the public value from what the underlying value of the business is, it’s really important to understand what’s causing that. I look at where we are and I mean, certainly, we’ve had a situation with we’re replacing our debt this year.

We’re in the middle of putting that together. That, of course, is a little bit of noise for investors or maybe more than a little. And then, of course, the investors, you know, they saw that we came out of February, we came out of 2024 with things starting to improve. You know, certainly our preclinical business, by the way, has been soft at all through this time frame and is actually not all that affected by what’s happening with NIH and academics. But the noise around NIH and academics has really given a lot of it’s given it’s really lowered the visibility of what’s happening on that part of the business.

So the way I like to look at when something like that happens, I will tend to look at the sum of the parts of the business that we have and look at where are things, you know, where are things going well, which horses are running and you feed them well, like our preclinical business, what we’re doing with telemetry, that’s a very strong growth part of our business. That’s over half of our business. It’s the highest gross margins that we have. And then I look at the cellular and molecular part of the business and how that is selling into academic research and into research departments and how and why is that being delayed somewhat and what’s the noise around that. So with that, you know, again, when I look at the situation with with NIH and and, you know, some of the delays in purchasing, I don’t really see it affecting the preclinical business, which is my main growth business.

But then I do see it affecting, you know, the products, the more selling molecular ones. What we do there is introducing new technologies like our new mesh organoid technology that will help us offset some of those purchasing delays. But our products are, I mean, they’re essential in the building of these new drugs. And we’re I would say that when I think about the long run and the focus as the pharmaceutical industry gets back to going after their core goal of going after diseases of the aged, you know, neuro based diseases, cardiac, cancer. That’s gonna be where we expect things to really get back on track.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: So you you brought it up, and, of course, we’re gonna get here gonna get there anyways. And that’s what is going on with academic funding in the NIH?

Jim Green, CEO, Harvard Biosciences: Well, it’s it’s hard. It’s we we started to see a little bit of noise with it in in Q4. And the good news for us is even though we we saw our cellular molecular sales start to drop off some, and and it had to do with delays in purchasing people who had already had budgets or deciding, well, you know what, maybe we want to hold off. We don’t really know what’s going on with, with our budgets. NIH doesn’t necessarily, address all of academic research.

It’s probably more like 30% of it, but but it does it it does, of course, have an influence on the rest of academic research. So, you know, as that started to started to and we started to see more delays in purchasing there, we just, of course, focused on getting our new products delivered. So again, when things are kind of noisy like that, it’s natural for our CFOs and CEOs like myself to say, you know what, let’s just hold off until we know that things are clean, until we know that we can that we’re going to that we have the budget and we’re going to spend it and we’re going to continue to advance what we’re doing. My philosophy is, like I said, look at the sum of the business and say, let’s focus on what’s really growing and making sure that we’re dramatically keeping our costs down, make sure we’re paying our bills, that we’re servicing our debts and our capital needs and continue then. And then look at those areas where there is some slow in purchasing and look at how we’re going to address that and how we’re going to continue to be lean through this space, ride it out, but mainly you want to grow past it in the areas that are growing.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: And preclinical has kind of chugged along kind of from your view and it’s somewhat immune to the macro?

Jim Green, CEO, Harvard Biosciences: Yes, I think I wouldn’t say it’s been completely immune, but it’s certainly we saw a nice recovery throughout the year moving into Q4. Our preclinical business grew faster and actually outgrew some of the reductions that we saw, the delays in the cellular molecular side. So we’re very, very excited about that. It sells, it’s based on primary sales to CROs, pharma companies, pharma companies have used us for telemetry and and for safety and pharmacology measuring. We’re the, you know, we’re the gold standard there.

They’ve been using our technology for north of thirty years. Mhmm. They’re not gonna they’re they’re gonna keep doing that. And as they outsource these drugs, you know, to Charles River or LabCorp or whatever, they’re gonna they wanna make sure that they’re using the same type of of measurement take techniques so that they can look at data across the continuum. They need they need to be able to see, you know, thirty years of data.

So that’s a very safe business for us, highly lot of it’s very consumable based. It’s our best gross margins. Again, a great core business for us. And we’re going to get through this time with a little bit of chaos academic side. But still, as we get back to the normal world, these technologies are essential.

We have very few competitors in these spaces, are well known. So it’s we’ll get through this. We’ve been through it before. We’ve just like we’ve done in the past, and we’ll get through it here too.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Got it. And then related to this regionally, you’re a global company. Maybe just give us a little color on what you’re seeing there.

Jim Green, CEO, Harvard Biosciences: Well, certainly, it looks like we thought China was a China was a problem last year, but it does seem like it settled out. We saw it start to stabilize and tick up a little late in the year. We think this year is we don’t have great visibility there. But certainly, we have a feeling that China will be fine, unless, of course, something could always happen at the macro level that caused the problem. But none of our technologies have been identified for any kind of quid pro quo problems that the governments have had.

They’ve talked about energy and other areas, but spaces like ours are essential. We don’t really have it’s hard to find competitors to us in Asia. So we think Asia Pacific should be fine. In Europe, we saw things start to pick up a little in Q4 again. So Europe seems like it’s doing okay.

We all know though that there could be some issues there because of the budget situation there. They’ve got to figure out how they’re going to fund and continue to support the war effort. At the same time, a lot of our technologies, for instance, our new organoid technologies, we really saw the initial first real uptake in Europe, so heavily in the academic side there and with some of the big pharma companies. So we’re pretty happy with how that’s going. In The U.

S, you got the basic run rate of new drug development. So the CROs, we see that as very stable. There’s been some difficulty periodically with the pharma companies we’ve heard about, sometimes somebody is laying offs. But overall, The U. S.

Should be pretty decent. So that’s kind of where we are with that. And again, getting back to the question about the stock price, I mean, we this company typically, if you look at our EV EBITDA, we’re typically traded something like fifteen, eighteen times. So there’s no reason to think that we’re not going to get back to that. It may take a little time as we get through some of these headwinds, but the basic underlying business is rock solid.

We’re growing this business is we’re investing in new technologies, key areas or we see very solid growth in certain key areas, the ones that count. And we know how to manage the cost.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Got it. No. I make a compelling argument here, especially given that valuation. You also brought up Organoids. I wanted to talk about some of your breakout opportunities.

Organoids is probably one of the big ones here. Can you discuss what they are, how they fit in and kind of what the opportunity is for you for Harvard?

Jim Green, CEO, Harvard Biosciences: Sure. Sure. Thanks, Jason. Historically, once you create a new compound, the first thing you’ll do is you’ll test to see how the compound affects human cells. And then if it looks like it’s doing what you expect or it’s not doing what you don’t expect, then they’ll move on to groups of cells and they’ll start in that where our equipment really starts to come in there is our MEA systems and our patch clamp systems where you’re electrophysiologically measuring how these cells are reacting or not reacting to these new compounds.

Well, once you’ve done that, and by the way, cells don’t live very long. Typically, you’re talking about a few days maybe. So typically, I mean, and historically, you would then have to go to if it if you got through that phase, you would go to large populations of small animals. So you’d be talking maybe thousands of small animals and exposing them to this drug to see what happens to the population. Because at and at that point, there’s typically a lot of of, yield loss.

And there was a lot of a lot of the, the drugs fail at that point. So I think the the data suggests that about ten percent of new drugs starts to get through that phase. That means ninety percent fail. So what we’ve introduced with the use of our MEA mesh and organoid systems is is is is to go beyond a group of cells, but to actually allow our customers to build organoids, which are essentially a a proxy for a full organ. And where they’re starting today is brain.

So we have a number of companies and and researchers who are who are they develop organoids of brain organoids and you basically grow it on our mesh. And since the mesh is provides the ability for the organoid to be hydrated, to be fed, to be given oxygen and nutrients, the organoids are living much longer. So brain organoids, we could we’ve seen, you know, live up to a year, cardiac organoids also. So the the thought here is, you know, and and we knew initially, we would get a lot of demand for the mesh systems that, for organized research, and that means mainly new research in on the brain. So things like, you know, you look at Alzheimer’s research, you look at epilepsy.

And again, looking at the diseases of the of the agent, that’s where a lot of research has taken place and that’s where the initial uptake is happening on this product. But we also see this and in some of our areas, we’re working with, more of the industrial companies like CROs and pharma companies to look at providing to not just a research on the brain, but an initial filter for toxicology and safety effects. So there, we’re working with some large companies there to to look at correlation studies around how do our how do our organoids work with, let’s say, a group of, let’s say, you know, pick a particular animal like rat brains, and how do they how does the how does the population of the animals perform and correlate to how their how their brains perform under this in vitro test. So this is envisioned as a way to make the drug development cycle much faster. So you could maybe instead of having a yield of 10, if you could filter out the drugs that would have failed and you could tell early on, then, you know, the pharma companies can play best ball and only put this the put in the comp the compounds that they that they know get through that phase and have a much higher probability of passing.

So it’s a cost reduction situation. It’s a cycle time improvement. And at the end, it means more revenue for the pharma companies and the CROs running these tests. So this is again, the organoids is it’s it’s been it’s been a technology in in emerging for a number of years, but there was never an efficient way to do it because you would have to take the organoid out, look at it look at it under a microscope, and you’d have a research scientist saying, well, here’s what’s happening. Using the our system, we actually are embedded within the organoid.

We electrophysiologically measure what’s happening with the neurons or with the cardiac cells. Are they are they, firing appropriately? Is the neuro network building appropriately? Is it being affected positively or negatively when you apply a certain compound to it? So again, this is probably one of in my mind, one of the few things I’ve worked on over the years where there’s a chance that this could really be, help make a change in the way things are done in the market.

So very exciting time.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Yes, absolutely. And maybe you’ve kind of hinted at, I think, on the last call, kind of your initial, the initial customers here. Can you just elaborate on sort of how that’s how the customer base is evolving for Organizer?

Jim Green, CEO, Harvard Biosciences: Well, I mean, it’s as we thought, we would we’d initially get initially get a lot of uptake with advanced research sites. So, you know, places like Stanford, you know, the high end academic researchers are picking it up or have already picked it up now. We even have we just recently, the NIH itself has now picked it up for neuro based testing. Michigan, you know, it’s a who’s who of the of the researchers, in academic development areas. But also, we’re seeing now adoption by in the industrial side.

So we have a specialized CRO company in France that’s now testing the typical toxicology and safety pharmacology agents using organized using our system. So this is starting to starting to develop this concept of an in vitro filter. Companies like Roche and and Novo Nordisk and others, where there are also we see this developing with us very nicely. As I get to the big pharma companies, they’re thinking about it for an efficient way to take a drug that they’ve done and to and to efficiently get it through the market and through the whole long term activities associated with preclinical testing. And again, that’s where we see the big volume as we start to go to the big industrial players because now they’re not going to buy one or two systems and a handful of consumables.

There we see the opportunity to have much more consumable driven on this with these bio tissue chips.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Got it. Definitely a really interesting new product category here. So then maybe also in terms of new products, I think you just recently launched a new implantable defibrillator excuse me, not defibrillator, telemetry platform. Maybe you could discuss that and sort of how that’s how that initial launch is going?

Jim Green, CEO, Harvard Biosciences: Sure. That that’s a great, great question. Yeah. We we introduced it last year, the first version with only a couple of endpoints because our plan now is to have our family of implantables migrate to where they could not only have to have today, you have to have an individual animal and individual, housing with a receiver underneath the box. So it’s very it’s intensive.

There’s a lot of equipment. It’s costly. What we’ve been asked to do and what this now allows us to do is with these types of with this type of platform, we’ll be we’re rolling out and we initially actually are launching it this weekend at Society for Toxicology, where we’re showing now with the biopotential capabilities. That means now, we’re adding to the base platform that can that we call it Soho, shared for shared housing. So the base platform can now go in these animal models, and the animals can all live in the same place.

So you could have up to 16 animals in a particular housing, and we can now measure what’s going on physiologically in all these animals. And if it’s if they need 32 animals, then they’ll buy, you know, an extra system. If they need a hundred, they can scale up. So it’s much more efficient. And it also provides if you think about it, now these animals are more of their natural environment.

So you can see how their blood pressure, how their cardiac rhythm is working when they’re when they’re now exposed to these these new drugs and see it while while they’re in their natural more natural habitat. Very critical for us. It was something we’ve been asked to do, and and we need we knew we needed to do it because it was really rolling out in Europe initially, but that’s rolling out everywhere, an expectation that you want these animal models to be able to you want to be able to have them live and then what their natural environment looks like and then see how they’re how things might change with them when they’re now using these new drugs. So we would expect much of our our, our platform or much of our, our core systems are gonna be are gonna migrate to both. They’ll be they’ll be the standard versions, and then they’ll be the ones where they really want to be able to go to high populations of in a shared environment.

And we’re going to be rolling it out this week. We’ve already seen a dramatic uptick in quotes, you know, where this will be shown. It’s one of the featured products shown at Cytotoxicology here. This is again starting I think it started yesterday. But, you know, that’s really picking up and it’s going to be a core driver to our main telemetry business, which is, I mean, telemetry is probably half our business.

So really important that this business continue to grow and be strong and continue to generate the kind of profits that it does.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Great. Look forward to that. And then in terms of just generally growth rates, I mean, these new initiatives, organoids, the implantable telemetry, I assume those are kind of the growth pieces. Those are easily growing double digits. I assume the core is kind of growing with market.

So what’s the math here in terms of understanding that the macro is a big determinant? But if I think about core versus emerging, what’s the mix of business and how should we think about potential growth rates here?

Jim Green, CEO, Harvard Biosciences: Great question. So when I think about and again, the way we model this is and you’re exactly right, the core business of what we currently sell would typically go with the market. Now we are by introducing the new SOHO systems that, of course, would drive our base business, which is again, arguably $50,000,000 That should give us a nice pop to that base business that would be will help us grow faster than the market. Our expectation is and then we look at the other two areas, other three areas with organized themselves, that should be growing. We expect that to grow dramatically.

Even though it’s on a smaller base, it’s maybe $6,000,000 I mean, it sounds like it’s

Jason Woodies, Senior Healthcare Analyst, Roth Capital: a real breakout opportunity

Jim Green, CEO, Harvard Biosciences: for you. It is, it is. And that should be growing. We should be seeing 50% CAGRs plus, but it’s on a smaller base. But when you take it that you take something going from last year, maybe at $7,000,000 this year, I would expect to see that, you know, grow 50% or better.

So now you’re starting to talk about, you know, every million dollars of growth is a full point of growth for the company. Yeah. So the new products, you know, we expect to be driving close to double digit growth on their own in the business in a normal world. Of course, we could some of these headwinds are going to get through some of these headwinds with fund academic funding. But the core business itself, the new product should be generating close to double digit growth on its own.

And then we add what the market’s doing. If the market’s flat to at least giving us a few points of growth, we would expect to be in that double digit growth range. And with our cost structure and the gross margins we have, the drop down is dramatic. So a dollar of growth, we expect drops down 0.6 zero point seven zero dollars down to the bottom line. So again, we’re in a really good position with this, very interesting products, very solid products that people buy from us and continue to buy and will continue to buy.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: So you brought up another quick point here. This is a very leverageable P and L. It sounds like every dollar is incremental at this point. You’re pretty much set in terms of your fixed costs. It sounds like in terms of OpEx, you’re pretty much optimized where you want to be.

So it should be that every dollar we see is roughly an incremental dollar, meaning it’s a variable. We see 60% to 70% margins straight to the bottom line on these.

Jim Green, CEO, Harvard Biosciences: That’s exactly right. And by the way, you mentioned OpEx. We are continuing to, like I said, because of the kind of unknown situation with academics right now, we are continuing to lean the business. I expect to see further reductions as we say we make sure that we’re lean and clean through this period and continuing to be able to make sure we have the EBITDA to be able to service our debt, service our CapEx needs. And as this growth starts to pop in, this thing changes dramatically.

If you remember when I first took over before COVID and everything, I mean, the first four or five quarters of growth, this company stock price went from about a buck and a half to nearly $9 So when you’re thinly traded like us, there’s a real opportunity for this to to really develop value very fast.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Great. We’re out of time, but great stuff, great story. Then you just highlighted the opportunity here with the stock.

Jim Green, CEO, Harvard Biosciences: Thank you.

Jason Woodies, Senior Healthcare Analyst, Roth Capital: Thank you so much, Jim and Jen.

Jim Green, CEO, Harvard Biosciences: Thank you.

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