Bio-Techne Corp at Evercore ISI Healthcare Conference Summary

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

Question: Daniel Markowitz - Evercore Inc - Analyst : <_ALACRA_META_ABSTRACT>So starting off sort of high level on the 1Q overview, you posted an organic decline of 1% -- can you just give us a quick overview of the quarter and I guess, the macro environment as you see it today? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah, let me start with what I see as our highlights for the quarter, from an end-market perspective. Large pharma continues to perform very well for us. As a reminder, large pharma is about 30% of our revenue. We had, like, the third quarter in a row of double-digit growth in large pharma. So we can talk more about what our concerns were there, but we were obviously very pleased to see that the strength there has continued. From a regional perspective, I think the highlight was China. We had our second consecutive growth each quarter of organic growth in China. We're expecting a third here this coming quarter. And we do believe there that the -- that market has turned the corner to -- back to a growth scenario, and we think gradually progressing growth. If you look at our portfolio highlights, again, we're our approaching simple franchise as it has been throughout the softness has occurred in our industry in the past couple of years now. We had yet another quarter of double-digit growth in our consumables that the instruments -- cartridges that the instruments used to run, which continues to confirm our thesis that LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : Great. Very helpful. So I guess, first, starting on -- you mentioned Spatial. It sounds like bookings are strong. It sounds like it's turned a bit. And you mentioned most exposed in biotech. I guess just focusing on that biotech end market, what's your exposure there? And how would you describe sort of the current environment versus the last few quarters, and how you'd expect that broader market to unfold in the next 6 to 12 months? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah, so smaller biotech represents roughly 20% of our revenue base. And if you back up a quarter to the end of our fourth quarter, which was the end of the June quarter, we were still able to show relatively flattish, even low single-digit growth in our biotech end market despite funding as of June year to date being down 30% year over year. And we expressed some concerns coming out of Q4 around how long can that gap really persist. We know there's a gap between funding and spending. And even though we believe we're taking share overall in the biotech end market, that was a pretty wide gap. We figured that there's a chance that still to hit us. And in fact, it did. In our most recent Q1, biotech was down high single digits for the quarter, which was like the worst quarter we've I think ever had in biotech, small biotech. But yet, we actually feel better about the end market now than we did a quarter ago, largely because -- well, two reasons. One is if you look at why is biotech funding down, it's more risky investment dollars, and they tend to be more volatile with regards to what's going on in pharma and what's perceived to happen with pharma, maybe with MFN pricing, for example, which was a concern a quarter ago. And that's a lot of these investors exit. So that can cause them to hold back. And even the stabilized academic environment funding can cause hesitation at biotech because that's the source of their innovation for the future often as that's the case. So we saw those things happening, not to mention and then in real dollars, the 30% being down. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. That's super helpful. And then same question for academic and government. I guess, sizing your exposure there, how would you describe the current environment versus the last few quarters and how that market should unfold over the next 6 to 12 months with the NIH budget and these different moving pieces? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance So as a reminder to everyone, academic and government is roughly 20% of our global revenues. Roughly half of that is in Europe and roughly half of that or so is in the US What it's worth the academic market in Europe has been very stable, very steady, nice -- relatively mid-single-digit growth. I haven't talked about it much because everyone is concerned on the US side, but Europe has held up very, very well, and we expect that to continue. With regards to the US, so again, similar to biotech a quarter ago, it was very, very blurry with regards to what the outcome with NIH funding is going to be and what the impact that will have on our academic customers. There were still 40%, 20% plus type of reductions being thrown around. What's changed in the past three, four months is that the appropriations committees from both houses of Congress have signaled that like flat budgets makes more sense, which is a huge relief considering where we started from it, potentially minus 40%. So I think a lot of the anxiety that our academic customers have faced for the better part of calendar 2025 is starting to subside a bit. And we've seen that gradually appear in our results as well. We had high single-digit declines in the -- basically the back half of our fiscal year '25, which is the first half of calendar '25 and in our most recent Q1 that narrowed down to low single-digit declines. So the anxiety level definitely appears to have alleviated a bit and that they're kind of preparing themselves more for perhaps a flat budget going forward as opposed to a very severe negative budget. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : Great. And then the last one on the 1Q. On the call, you guys spoke about some promotional activities in both academic and government and biotech. Can you talk a little bit about those activities, I guess, where in your portfolio, they were focused and the thought process behind these actions? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance And we brought it up only because it was a bit of a margin headwind to us, in the sense that we didn't have the amount of pricing throughout the company that we typically do. We typically get 2% to 3% pricing. Obviously, during the high inflationary period, we're getting considerably more. But in a normalized state, that's what we usually kind of aim for and what we achieve. And this quarter, it wasn't like our pricing was negative, but it was relatively flat for the quarter. So we still -- there is still obviously a level of inflation. So therefore, we had a little bit of margin pressure as a result of that. But it wasn't a broad-based discount program and we're highly advertised. This is a very targeted approach. I mean, at the end of the day, we know especially our academic customers and some of our biotech customers are struggling right now or at least have a lot of anxiety around concerns. And so what you want to do is be partners with them and show them that you're there with them in good times and bad and allows for sticky customers so that when budgets do come back or stabilize, then they're happy to pay a higher price down the road. But it wasn't even wide scale among academic customers. I mean, we sell to hundreds of thousands of academic or at least tens of thousands of academic customers, and they're not all short on funds or concerned. So it's those that you know that are most impacted by this and then you try to help them out. And that's really what that messaging was about.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. Super helpful. And we're definitely going to touch more on those cell and gene customers. I'll come back to that. But I guess just on the macro uncertainties, I think when you laid out the initial framework, you spoke about this low single-digit framework, but that was until uncertainties lifted. I guess what would you say are the primary uncertainties that are weighing on Bio-Techne today? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yes. I think the main one is the academic outcome and more that it is only 10% of our business on a US perspective, but it does cause ancillary hangovers in our biotech space. I think that to me is the biggest question that still needs to be answered with regard to how that ultimately gets resolved and where that stands and how it gets administered. I think not if, but when that does, to me, that's the last remaining concern a biotech investor would have with regard to invest in this market going forward, so I would expect that to continue as well. So to me, that's the biggest item out there. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. And I guess how do you feel about the state of that today? I know you mentioned budgets potentially flat, and we need to wait to see a final outcome, but would budgets flat mean the business is flat? Or I guess, how would that impact growth? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yes, I mean, that's another interesting -- it's a good question. And for us, what we're saying is I believe we have been overall outperforming in academic US despite the declines. Like I talked about high single-digit decline, mid-single-digit decline, low single-digit declines, we know that our customers are behaving much more severe than that. We've had customers tell us they're cutting budgets 15%, 20% in anticipation of what may come down the pipe. We've been monitoring some of what our peers say based on that. We feel like we are doing better than most in academic. And so even in a -- as that market stabilizes, we feel like we can outperform. Now as far as returning to growth, I think we can grow even in a flattish US academic market and it gets back to how the money is being spent. And you may have heard me say this before, Daniel, I know many in this room probably heard me say this in some one-on-ones, but what's always been told to me by our top scientists and our company and many who worked to come out of academic is that, yes, NIH levels when they go up and go down, the water level goes up and down, all boats rise. And that's generally a good thing. And when all boats go down, generally not a good thing. But what really moves the needle is where the current and the river is. And you could be in a high NIH funding environment, be stuck in the back water and not doing a whole lot or you can be in a lower funding environment and be right in the middle of the current and yet be outgrowing what you did in a better NIH. And as an example, during the COVID years when NIH budgets were being increased by double digit year after year after year, our academic growth was basically mid-single digit. Why? Because so much of that extra money was being earmarked towards infectious disease research and vaccine development, et cetera. And that's not the wheelhouse that our reagents and instruments play in. So we did okay, but didn't see the massive upswing, at least not in our US academic market. If this administration puts their money where their mouth is, they're very vocal about, that's not their priority. Those areas of research are not their priority. But what is a priority is immunotherapy type diseases, cancer, diabetes, neurological diseases. And guess what, that's exactly the wheelhouse where the majority of our tools play in research. So that's why I believe that if even a flattish market, as long as that existing money is being redirected towards areas of research that our tools are perfectly fitted for, then we could actually grow in that environment.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. Okay. Great. And so now going over to cell and gene therapy to talk about the Fast Track and those sort of dynamics. So on the call, you pointed to Fast Track as causing some temporary headwinds in the business. Can you explain this dynamic? I guess why does Fast track lead to a headwind in the first place in basic background? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance It's a good question. And we're learning this as we go, too, both us as well as through our relationship with Wilson Wolf who has seen it earlier. So first thing is Fast Track designation doesn't mean anything specific. It's very kind of -- it's kind of customer-specific in terms of how it's implemented. But in theory, it's the same in that it basically says that you have a -- you're looking at a disease state that can impact a lot of people and shows a lot of promise. And therefore, the FDA gives you this designation to get your process through your trials and ultimately through your FDA approval and commercialization ramp Fast Track from any kind of bureaucracy and paperwork, et cetera. So that's the spirit of what it is. How it gets implemented, though, it could be different from company to company. And we really did not know until this most recent quarter what this was going to mean for these two specific customers that we knew going into the fiscal year had recently got Fast Track designation, but didn't really understand what that would really meant from an impact perspective, especially for us and nor were they -- they're very secretive by nature, and they weren't willing to necessarily come forward and say, here's what's going to happen. And so it really wasn't until we got halfway through the quarter and saw that the orders weren't repeating like they had been all last year and kind of pressure them to help us out to help understand what's going on. And essentially, what they told us was that for them, this Fast Track designation allowed them to essentially skip a phase. So where they were buying material from us to kick off their Phase 2 trial, they got accelerated to basically combine their Phase 2, Phase 3 in the same trial. And therefore, they don't need to buy material for us this year for Phase 3 because they already have it. And so made it very clear to us say we're going to buy anything from us at that point in Q1 and probably not in Q2. And beyond that, they don't say anything. But we've assumed that basically it's going to hold for the rest of the year until they get through these clinical trials and then go through the process of formal approval with the FDA.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. Okay. And can you just give us some more color on how you learned about the Fast Track designation? I guess what was your communication with the customers? Is it that they reached out and told you, hey, just so you know this is happening, this is going to impact the way we purchase. Or is it more, hey, we noticed you haven't placed an order in a while, what's going on? Oh, we got this Fast Track thing. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah. I'm not going to say when we knew because I know everyone is trying to figure out which two of these are and our customers are getting extremely secretive. So we definitely don't want to be the ones that leak anything. And so I can't give you that information because you can probably narrow down which this might be. But no, I mean, we read about it and try to reach out to them and say, what does this mean? What does this mean? And I don't -- I was saying I think they were still trying to figure out what it meant for them, quite frankly, until we got into this fiscal year. So yeah, it -- and why is that? In this stage of clinical trials, and this is true with all of our customers, not just these two, I call it a bit of being a victim of our own success, right? So because one of our selling points aside from what we believe is having the highest quality GMP proteins is the availability of those proteins that we can -- we've invested $60 million in what we believe is the world's largest GMP protein factory and basically supply that is -- I'd say, basically infinite and (inaudible) for what this market probably ever need. But we did that purposely to put our customers at ease that says, no matter where you get in your clinical trials or your commercialization, you don't have to worry about the availability of product. We have it, and we have it at a moment's notice. And so -- and that's the way it's worked. They're very secret by nature. And so they don't need to give us advanced orders. They can put an order on a Tuesday for millions of dollars of product and have it delivered on Thursday. Obviously, knock on wood, some of these get into commercialization, that's when you'll -- and by the way, they're going to want to start to have formal supply agreements at that point because now you're in commercialization, that supply is going to be locked in, and I think there'll be a lot better visibility at that point.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. Okay. So the main sort of takeaway on why an air pocket, basically lesser patients need to get dosed in clinicals versus what had been expected prior to the FDA Fast Track. Is that the right way -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Or yes, whether it's less or not, technically, yes, that's the answer, but it's basically a whole phase of trials that is no longer needed because they basically condense the two into one. So at the end of the day, that means less patients, yes.

Question: Daniel Markowitz - Evercore Inc - Analyst : That NPV going up, is that just because of the timeline or is it also this Fast Track indicates to you that there's a higher likelihood of -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance From our perspective, we're saying it's because of the timeline coming in closer. I don't think any of us are going to try to guess whether this -- I mean, statistically increases the odds or not. I can sit here and tell you high level that it makes sense that it does, but I could also counter that and tell you many reasons why it doesn't. I'm not an expert in here. We're not experts in FDA approval process. So I'm not going to tread that water, but all I can say is that it's a net positive, no question about it. And we would have been having the same conversation, knock on wood, a year or so from now, had they gone through the normal phasing. And we learned this from Wilson Wolf. Wilson Wolf is earlier into this, they got 5 or 6 that are already in commercial very recently. And so they've been through this before, and they kind of saw this coming and realized, hey, this J-curve of exponential buying of proteins and/or bioreactors for clinical trials is true, but there is a bit of a cliff that occurs between final Phase 3 approval or final Phase 3 results and actual FDA approval and commercial launch. And that gap can be 18 months to 3 years. It doesn't mean it goes to 0, but it definitely diminishes to 0 because you're basically selling product just for production runs and testing and so forth. But there is a bit of a chasm there that occurs naturally. And we've been talking about that chasm as it pertains to these 2 customers likely a year, 1.5 years from now, but it got pulled in. Now, we're talking about it now.

Question: Daniel Markowitz - Evercore Inc - Analyst : Okay. And if I run through the unit economics, is that on just the reagents business, which I think, correct me if I'm wrong here, is about 5,000? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : Right. So that's about 5,000 of GMP proteins that are sold per therapy. So it's like -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance I don't have the exact numbers on this one, but when we put out those numbers, they're usually as they relate to the CAR T cell therapy, which is in line with where the GRx participates. I don't know if we've given out figures on the regen side. These are -- that's the other thing I'll point out is that these are actually -- these aren't CAR T therapies. I'll give you that much. They're actually kind of regen medicines, so iPSC type therapies, stem cell. And they do involve a lot more protein just by the very nature of having to grow up a lot more cells for these type of therapies. So it is a higher -- it's very likely a higher content per dose for us, which is another reason why the numbers have been so big even during clinical trials.

Question: Daniel Markowitz - Evercore Inc - Analyst : Okay. And in terms of your level of visibility that you actually have within these programs today, do regular communication in terms of what stage they're in, how much inventory they're holding, I guess what is communication with these different customers? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance They generally don't hold inventory. So they'll buy as they need, but they will often buy enough for whether it's a whole trial or a large of a population set that they feel comfortable doing simply for consistency purposes, even though we have amazing lot of consistency that they want to take out any possible -- possibility for variables as much as they can. So that's why they tend to buy in very large quantities and it tend to be very lumpy. But is it one -- I think some customers buy enough for one whole run or one whole trial, some because the trials are so large, they can't necessarily do that and they'll buy in stages. But they generally don't hold inventory. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : And I guess how do you deal with the lumpy business? You just add more lumps. I'm sure you -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance That's the idea you need. Well, I always joke that even our RUO reagent business that we often refer to as our run rate business, if you look at it on a -- we have 500,000 SKUs, right? If you look at it on a SKU by SKU level, it's actually a very lumpy business.

Question: Daniel Markowitz - Evercore Inc - Analyst : Right, right. Great. And so in terms of sizing, it's also really helpful, the $40 million to $50 million each therapy could be when commercial. And I guess that's versus if you just size the headwinds that you quantified for us here in fiscal '26, and it gets you to, I think it was about $26 million from these 2 programs i fiscal '25. So I just want to make sure I had those numbers right. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance You're in the right ballpark.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. Yeah, I guess I was initially surprised when I heard that 2 were essentially Phase 2 projects were such a large portion of the cell and gene therapy business because I know there's also a huge ramp as you go from Phase 1 to Phase 2, 2 to 3. But I just wanted to touch on customer concentration a bit. So based on that $26 million, it seems like these 2 programs are about 40% to 45% of total GMP reagents for Bio-Techne. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : Yes. Got it. And then just on the timing for potentially, I guess, your base case being fiscal '28. I think I mentioned on a call I had with you guys, fiscal '28 could be setting up to be a really, really attractive year, bringing on Wilson Wolf, potentially having one of these therapies, which is going to be at a very depressed level, ramping all the way to commercial. I guess can you just speak to -- I know it's super early, but is this the right way to think about it? Could it be a really strong year for -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance I mean, I hate to get all giddy about two years on the road when we're struggling in the current quarter. But yes, absolutely, that's why we're still so excited about our opportunity for sure. And even since you mentioned Wilson Wolf, so at the latest, we will own that at the end of calendar year '27, hence fiscal year '28. And there's always a potential to strike a deal a bit earlier there, who knows, but -- or even for him to hit his target, for (inaudible) to hit his targets, which he still thinks he can at this point, we'll see. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Daniel Markowitz - Evercore Inc - Analyst : Yes. Great. And the customer concentration piece that we were just talking to, is it mostly because they're working on stem cell therapy, you said the economics are higher there? Or is this just a much bigger patient population than some of the, I guess, the average within your -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Perhaps are you referring to the Wilson Wolf?

Question: Daniel Markowitz - Evercore Inc - Analyst : So the reason that within Phase 2, there's such high customer concentration, even though it's only Phase 2, not one of your Phase 3 programs. Is it because of stem cell therapy and then not CAR T because you said that -- James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance It's not -- it's one of the reasons, but it's not by far the only reason. I mean, is our average stem cell customer a little higher content than our T cell? Yeah. But that's not the main reason is, we believe, it's because of the population size potential for these two disease states.

Question: Daniel Markowitz - Evercore Inc - Analyst : Got it. Great. And then the last one, can you just remind us how many programs you have total in the cell and gene therapy business? How many in clinical trials, Phase 1, 2, 3? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yes. So again, we've reached 700 customers, which is up from like 550 a year ago. So continue to add a lot of customers. But only about 85 of those or so, Dave, I think 85 of those are known to be in clinical trials and roughly, call it, a couple of dozen are in Phase 2, Phase 3.

Question: Daniel Markowitz - Evercore Inc - Analyst : Great. Lots to look forward to. With that, thank you so much for the time. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.