Bio-Techne Corp at Morgan Stanley Global Healthcare Conference Transcript

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

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. Kind of maybe I'm let let's start with the recap of the most recent quarter and what played out differently compared to your initial expectations.

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. So that's actually a good segue into my next couple of questions on end markets and geographies. So starting with biopharma, sounds like towards the end of the year, you saw some signs of improvement. Can you just elaborate on the trends that give you confidence that the end market is definitively stabilizing here and then maybe to set the stage and of 50% of your revenue is biopharma is if you can just break it out between large-cap pharma versus biotech. And then within biotech, of course, you've got the emerging companies versus the more mature ones, that would be helpful.

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. And you haven't sort of noticed any recent shift in spending trends from either large pharma or biotech, Kim, is that a fair assessment? I mean, where I'm coming from is one of the large preclinical CROs out there recently called out of a pretty deep and sort of like a softening, if you will, in June and July. And then of course, I mean, it's early discovery work that was impacted for them. And then more recently, another smaller CRO talked about a pickup in cancellations on the biotech side as well. So just curious as to whether that's percolating up through your channel conversations.

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Fair enough. Switching to academic and government relatively stable to low single-digit market and our expectations for that to continue going forward. But then on the other hand, we do your concerns around the Horizon budget cuts over in Europe as they pivot more towards defense, we are spending. And then NIH growth is expected to be sort of flattish for fiscal '25, especially once you adjust for inflation. Could you speak to the dynamics that make you sort of a little bit more optimistic on that end market?

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Fair enough. Let's switch to China. Obviously, a huge area of focus for you guys. But also just generally for everybody at the conference, you expect to see some benefit from stimulus there, although probably not until 2025, what's the latest you are hearing just around clarity around the regional disbursal time lines and priority areas of focus? 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: Tejas Savant - Morgan Stanley, Research Division - Analyst : And just to put a finer point on that, are you confident that we start seeing order pickup sort of essentially in Jan next year with a little bit later in the year, just given what you said about the number of provinces that have submitted documentation for the disbursement of the funds and what parts of your portfolio could see the most meaningful benefit once the start of other, I guess the yuan start to flow?

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. Fair enough. Are there pockets of excess capacity in China at all Kim, in your opinion then from a portfolio positioning standpoint, do you need to do anything differently to sort of fully benefit from the stimulus?

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : And let's switch to the business segments. We'll start with the Protein Sciences side, specifically on the antibodies front, there's been a bit of consolidation in that space recently, you know, Danaher and Abcam Hyprotech and Thermo, has this impacted your market position? Are you noticing any sort of different market approaches from these companies, particularly in terms of discounting or bundling of solutions or things like that.

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Fair enough. Wanted to talk a little bit about cell and gene therapy. You flagged it as an important growth vertical for you guys. But the market has grown a little bit slower than anticipated due to scrutiny around safety profiles and perhaps even limited approvals to date. And now there's this concern around pharma reprioritization towards larger indications due to the IRA., right? So how do you think about sort of the growth prospects here, walk us through how the business performed in '24 for you guys? And what is your expectation for cell and gene therapy in '25?

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. Switching to proteomic instrumentation. I think it was at your Investor Day last year, you talked about strong double-digit momentum in the installed base. I think it was in that 2019 to '23 period right now, obviously right now with the macro factors at play, it's going to be short of that. But do you think you can get back to that sort of strong double-digit growth in the installed base. And then just double-clicking one level deeper, and I think you've got the LEO system coming up in July. You've got, I think, allow which did really well for you double-digit growth this quarter as well. So just contextualize the new launches and upcoming launch, I guess, for LEO and just the broader portfolio growth.

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Perfect. And that was actually my next question. I think seven quarters of double-digit growth on the consumable side. Switching to Diagnostics and Genomics came in a home-based for you. So let's start with [Dom Luna] for many of your special peers are seeing instrument weakness and you're actually seeing pretty robust uptake. What are the key factors that could explain this divergence, if you will, and just walk us through the

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. And so to follow up there, I mean, it's a tough time from a macro perspective to be launching a new instrument. So what's the pricing environment, like are you having to sort of essentially prioritize feeding the installed base at this stage of your journey, given that you're relatively early in the in the installed base sort of phase? And then second, any color you can share and just done the feedback you've got on that multi-omics launch so far has adding this feature opened up conversations with new customers already?

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Are the supply constraints now largely behind you and over what sort of period do you expect to work down the instrument backlog. 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: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. Put the entry of a large sequencing vendor like Illumina to the spatial biology niche impact, how you think about positioning for CalMat? Or is that really a problem for the DNA barcoding based approaches out there?

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. Switching to molecular diagnostics in charge and has done a really nice growth driver for you've got some exciting launches in the hopper as well. I think you've got an ESR1 mutation kit and then some expanded carrier screening. Can you just talk about the opportunity you see for these products,

Question: Tejas Savant - Morgan Stanley, Research Division - Analyst : Got it. You've guided to the low to mid-single-digit growth in the first half of '25 and high single-digit in the back half. Now knowing that your fiscal year is off by six months versus everybody else, a lot of your peers are speaking of sort of mid-single-digit growth next year, right? And so the question we often get is at least for calendar '25, do you think technique and grow it sort of somewhere in those low teens range given how we've historically performed? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Well, thanks for acknowledging that we're the first company at this. They typically stick their neck out for 2025. And yes, so I've heard some of the sound bites and some of the companies talking about recovery in 2025 and and that you're just dispute that or concur with that, I think they'll wait till you have to actually officially come out with guidance and we'll see what they have to say. I hope they are betting on a recovery that is the bigger companies have a lot greater visibility than we do. But having said that, we had to put a plan together and the good news we're putting plenty of that based on the recovery and not trying to catch a falling knife when the deceleration of growth cannot stop. And that was very encouraging after two years of trying to do that. And frankly, failing not just us, but I think the entire and the entire industry and will for 2024 was a year of consistency and stabilization. We grew 1% for the year. We grew 1% from Q4, and there wasn't a whole lot of variations throughout the year. So that's good news. Now the question is when does recover and how does recover. And we had a look at our key end markets, biotech, China and big pharma because those are the three they've been pressured and our view was right now as we had our last earnings call in August, there wasn't any material change in our run rates. So we've been at single low single digit growth we think it will continue with low single digit growth out of the gate. But what could get us to the low end of mid-single digit growth would be a biotech recovery you've seen the biotech funding tenor. We haven't seen the spending yet, but that should be coming. And we expect by December quarter, we should start to see some of that Paolo on the following quarter. Can we talk a lot about China and your expectations there. And we do believe that in the early part, our Q3, we'll start to see that China stimulus hit, that should get us into the upper range of the mid-single digits, let's say. And the last but most ambiguous is big pharma because there's no external data that I can point to to say this is why we think they'll recover, except to say that it's been a very tough year for big pharma in terms of rebase lining there year in and the uncertainty that was there on IRA and macroeconomic times back in November and October when they were doing their budgets for this year, I think there's a lot more clarity now, I think a lot more reasons for them to feel optimistic, but we got to wait for the next budget cycle for that to kick in. And our view is that by time, their boards approve it, and it gets disseminated down deep in the organization. We'll start to see that recovery in our numbers in the June quarter. And that gets the high single digits? Well, there is one that van double digits yet because that would imply a full market recovery by June of 2025. And that's sticking my neck out that far. But I do believe, but hopeful that by the end of by the end of the calendar year, we'll be back to a full recovery. And at that point in time will be a double-digit growth.