Bio-Techne Corp at Barclays Global Healthcare Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Luke Sergott - Barclays - Analyst : <_ALACRA_META_ABSTRACT>I guess to start off, let's do the clean-up crew from some of the comments that were made yesterday. Interpretation is that the academic government market is hitting pretty hard on you guys and that the 3Q is going to be real soft. So just we want to kind of clean up some of the commentary. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Well, I appreciate the opportunity, Luke, and despite the clean-up potential effort here, it's always a pleasure to be down here in Miami at the (inaudible) so thanks for having us. Yeah, so academic market and what's going on there and how does it pertain to us? Let's start making it very clear with regards to what our exposure is regardless of what your belief are with regards to the state of the academic market. Let's talk about our exposure because I think it has been misinterpreted and misrepresented perhaps by a few publications out there. We've always said that 20% of our global revenue is academic and roughly half of that is in the US, so call it 10%. And we've always estimated because it's difficult to tell exactly. We've always estimated that roughly half of our academic revenue is not directly but indirectly influenced by NIH, meaning comes from academic institutions that receive NIH funding. And obviously, with the announcements that came out in early February regarding the -- what was then the freeze on reviewing new grants as well as the proposed 15% indirect cap or cap on indirect costs, we said, let's do a bottoms-up look at it and see what REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Luke Sergott - Barclays - Analyst : And when you're thinking about redeploying that, it's like the $4 billion in savings, right, into direct funds. Arguably, you're going to go towards the leading edge of all the research, right? So proteomics, you have multi-omics, the spatial stuff. That should be also beneficial to how you guys are set up. So walk us through kind of the new products or obviously moving forward to spatial, like how that has been playing out with you guys? And now that you're starting to see it come back in March, like up to low singles, like are these ongoing or obviously, the work that were ongoing grants that were just kind of paused, but like as that kind of continues to build the momentum, where in your portfolio do you see that kind of playing out first? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah. So I guess, first of all, thanks for mentioning that because the analogy I always use, and I try to explain this to others outside the company is with NIH funding, when it goes up and it goes down, kind of all boats rise and all boats may drift down a bit. But what is -- and we've been saying this for years, what's most important to us to our company is what the current in the water is. And honestly, for the last three or four years through all the COVID years, when double-digit increases and NIH funding were occuring, we weren't in the current. We were growing, but we weren't growing double digit in academic. And why? Because most of that extra funding was being directed towards COVID research, infectious disease research, vaccine development, and that's not our wheelhouse. That's not our strength of our portfolio. Our strength in our portfolio is around chronic disease. And by the way, that's where the administration has been very public in saying that's where they want to refocus and reprioritize all their funding, including NIH grants, is around chronic disease. And they've specifically called out cancer, oncology. They've called out diabetes. They've called out neurology. Guess what? Those are probably the three top areas of applications where our tools and reagents are used. So what's way more important for us as a company is getting back in that current. And so as a company, we're much less concerned about the absolute levels of NIH funding as long as they're not draconic reductions then we are about where that money is being spent. And so we're very encouraged about the future with regards to at least what's being said about what the priorities would be for that spending going forward. And our applications are all geared towards those. It's not towards oncology, towards spatial. You mentioned COMET, for example, so we think we're extremely well positioned to benefit from that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Luke Sergott - Barclays - Analyst : And then same -- kind of the same vein of thinking on the biopharma side, right? You guys have always been a bigger push into cell therapy and some of the newer modalities biopharma with the restructuring, you have biotech is obviously still biotech right now. Talk about from the demand perspective that you guys have seen there. You've had a pretty big step up there in the last quarter, some continued improvement, talk about demand across that. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance So biopharma, so biotech and big pharma combined make up 50% of our revenue. So by far, it's our largest and most important end market. And I know that 50% as a reminder, roughly 20% is smaller biotech and roughly 30% is what we call larger pharma customers. And I have a hypothesis, which set for our kind of soft guidance back in August for our fiscal year '25 was kind of a staggered approach to recovery, where we would start to see the smaller biotech momentum increase in our second quarter, which is the December quarter. And that was really predicated on the fact that there has been a nice step up in funding in biotech throughout 2024 relative to 2023 and even relative to pre-COVID and that that funding would eventually start turning to spending by the time we got to the end of our calendar year '24. And then followed by that in our third quarter, which we're in right now, would be a flip on China from being negative growth to positive growth. So no longer being the big headwind that it was to our growth rate. And then the last step to the staircase on the road to recovery was the large pharma, which at the time we had hypothesized would start to show strength for us in our Q4, the June quarter, simply because -- well, going back as to why. Why we think pharma is poised for recovery in our space is that if you step back even further, pharma is not trying to recover, pharma's doing great, really as a whole, that the pharma sector is doing fine. What 2024 was, was a year of reprioritization of their pipelines, largely due to the IRAC. And they reprioritized from a less risk -- less risk from a more risk kind of portfolio, meaning more on downstream clinical activities less on discovery. It doesn't mean they cut discovery completely because that's their future but they just run that pendulum back from maybe where it was geared more towards the higher risk funding and during the COVID days. And if you actually look, the amount of R&D increases that our pharma customers spent last year in 2024 increased at a pretty good clip. It was just more narrowly focused toward that clinical stage activity, which doesn't necessarily go to tools companies. It goes -- running clinical trials are very expensive and it goes to other types of cost than just tools and supplies, right? And so our thesis was that after that normalization of their pipeline, they would go back -- they still have the normal increases that they typically have because they're doing fine financially, but that those increases would be spread more evenly across their entire R&D portfolio, not just shuffle towards 1 end of it. But we would not see that as a company more than likely until the March, April time frame because you got to remember our customers even at big pharma, for the most part, who we interact with and who actually makes the purchasing decision is the individual lab person in the wet lab at the bench. And by the time those budgets get approved, these big companies can get circulated all the way down to the person in the lab, it often takes a few months, right? So that was the thesis. So from an overall perspective, it's played out very well. In fact, we're ahead of schedule, right? We grew mid-single digit in Q1 when we were expecting to grow low single digit. We grew 9% in Q2. Now we -- admittedly, we talked about the fact that we had some large customers, particularly in cell therapy, but also in our Diagnostics Reagent OEM business that we had forecasted for us to deliver that in our third quarter, but call this up in mid-November and said we're ahead of schedule, we want to take delivery now. I don't see that as a bad thing. I see that as a good thing. But when you adjust for that, we still grew in the high range of the mid-single digits in our second quarter, which is more or less where we guided to. If you ask what's changed from -- or what's different from our assumptions, it's a little bit of the mix of it. So REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Luke Sergott - Barclays - Analyst : And so it's not really -- that was the fear is what you're saying. It's like essentially a pull forward of budget flush. We're not going to get it next year. And -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Well, and I think our -- I think the reaffirming of our guidance for the back half of the year says just that, Luke, because I think what was also missed is that this was -- it wasn't just a reaffirmation. It was actually a beat and a raise because if we thought it was going to continue at the pace that we thought back in August, we would have actually guided Q3 to be lower, low single digits perhaps. Because of these orders, large orders that were originally in our forecast that came out of it. But that's not what we guided to. We guided to mid-single-digit growth, which is more or less consistent with what our guidance has been from the get-go. So we actually messaged strength and momentum improving as opposed to the other way around.

Question: Luke Sergott - Barclays - Analyst : Sounds good. On the -- let's talk a little bit of a competitive landscape on the antibody side. You're one of the big four and was described as a big 4, big 5. Talk about pricing and competitive dynamics there. where you guys are seeing your share gains, particular customer set? Or is it from a particular modality and then how that leads into the GMP side on your protein -- how those two play out. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yes. I mean, as you've mentioned, antibodies is probably one of the most competitive pieces of our business. And the good thing for us is not any one product category that makes up such a huge majority of our portfolio that if it ever became a problem, it's going to bring -- it's going to bring our company down in like that. But obviously, antibody is an important part of our portfolio. the most competitive. And I would say the competitive dynamics aren't no different now than they've been 11 years now, I've been with Bio-Techne. We have very formal competitors, but I think we hold our ground -- more than hold our ground very well. And it's becoming harder to track admittedly because a lot of former public companies that were antibody companies are now no longer visible from an external perspective in terms of how they're really doing. But while they were public, we know we were taking share. We know that we were incrementally taking share from those companies. And based on whatever intelligence we have today, both from fellow investors, analysts, peers, customers, there's nothing to suggest that has changed. And when it comes to different by region to some extent. But in the Western markets like the US and Europe, we're very competitive from a price perspective for what I'd call the high-quality premium antibodies. We're not the price leader by any means. And where our antibodies are kind of specialized, which is around those that are used to detect cytokines, which is our specialty proteins. We are extremely strong there and absolutely known for our quality. And it was very reassuring. I'll use an example. We were just in China in December and visited customers like we always do. And in China, in particular, when the economy is down and things are tough there from a budget perspective, you become even more hypersensitive to competition and even local competition, right? And so we asked the customers, every customer went to we asked towards the end of the conversation, if you don't mind sharing what your -- what drives your purchasing behavior? What are your top three or four or five things. And almost forbade them consistently across the customer base. And this is in China. Number one, quality, right? Number two, availability, being it is China. That can be a problem sometimes. Number three, the broadness of your portfolio. Then number four, price. And then number five, is it locally made or not? And so that was almost hands down the criteria in order. And at the end of the day, what you guys step after to remember is scientists or scientists in meter where they reside in the world, and they want their experiments to work and work the first time. So it gave us some reassurance that even in a tough time that China is facing right now, we're still very competitive in the antibody world. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Luke Sergott - Barclays - Analyst : On China. A lot of -- on the diagnostic side, we see increasing competition from local players there. Give us the landscape there from you just kind of walked through it a little bit, but are you seeing increased competition from local Chinese players in some of your pieces of your business? Like where do you think that your portfolio would be at most at risk there? And where you kind of have your moat. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Honestly, it's similar for China as it is everywhere globally. I mean the most competitive part of our portfolio is antibody globally and as well as it is in China. It's arguably nothing is easy in our portfolio to make, but it's arguably the easiest thing to make. And so there's a lot of small antibody companies in China. There's still hardly any that are nearly close to the breadth of what we can offer and some of our larger peer companies can offer. But that's probably the more competitive space. And proteins will probably be second, but even there, there's maybe one or two notable players that are even -- have business in the West as well. But we see them more as global players and China-specific players. When it comes to our instrument portfolio, which, by the way, in China, we have our heaviest concentration of instruments. It's more like 50% of our business as opposed to 10% globally everywhere else. And for most part, our platforms don't have much in the way of competition, globally much less than China. And so they've -- the CapEx environment has been tough globally everywhere as it has been for us, but the consumables that are unique to our instruments that are needed to run our instruments have grown double digit, eight out of nine last quarters. They grew high teens last quarter. And by the way, the -- this is true for China as well, even though China overall has been depressed. It shows that the value of our instruments bring to our customers even in China. And so we're very excited that when the markets come back, and we think that's starting to turn now, we'll see some pent-up demand for some instruments the capacity, I was think is starting to run pretty low.

Question: Luke Sergott - Barclays - Analyst : Great. Thank you. It's all the time we have. Seems like the momentum is kind of coming back and building. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance It is in this room. I'll tell you that. All right. Thanks so much. Appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.