Bio-Techne Corp Q2 2025 Earnings Call Transcript

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

Question: Puneet Souda - Leerink Partners - Analyst : Yeah, hi guys. Thanks for taking my questions. First of all, congrats on the quarter here, really strong. But can you talk a little bit about the pull forward that you saw from 3Q to 2Q in cell and gene therapy GMP products? You seem to be talking about essentially the biopharma momentum continuing, China also improving, so that is offsetting. But can you elaborate a bit on where you have more confidence in recovery among those sort of 3 vectors that you talked about? Where you think you'll have recovery in the third quarter, whereas were there things could be more -- a little bit softer just given the backdrop of the market right now and sort of the concerns around NIH as well?

Question: Puneet Souda - Leerink Partners - Analyst : Got it. Just quickly, if I could ask on your updated thoughts on M&A, your ability to lever just given the backdrop of the market and some of the challenges that some of the small cap tools companies are seeing, how does that shape your opportunity base when looking at M&A?

Question: Puneet Souda - Leerink Partners - Analyst : It's good, helpful guys. Thank you.

Question: Dan Leonard - UBS Investment Bank - Analyst : Thank you. I want to circle back on a couple of Puneet's points. I guess, first off, when you think about your current run rate business, where do you think you're currently trending? Is it that upper mid-single-digit figure you talked about for Q3, and then you need progressive market improvement to hit the high single digit for Q4? Is that the way to -- the right way to normalize what you called out as being positive lumps in the December quarter? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance I'll try to answer your question, if I understand it correctly. It's about our run rate. So our day-to-day run rate business is going to perform closer to the overall market, and it's our growth vectors, our growth pillars that we talk about that really caused us to have the differentiation and the acceleration versus the market. And so the way to think about that is that our run rate is performing closer to market, but the market is gradually improving and thus so are our run rates. So our run rate growth is lagging the overall company growth. In a normalized market of mid-single-digit growth, we do expect our run rate business to be at least mid-single-digit growth. And when it is, we expect to be a double-digit growth company because of our growth vectors and the acceleration that provides, if that helps?

Question: Dan Leonard - UBS Investment Bank - Analyst : Sure, thank you, but the January comment was specific to that 10%-ish of revenue that's US academia government, correct? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah, that is correct. 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: Dan Leonard - UBS Investment Bank - Analyst : All right, perfect. Thank you.

Question: Hannah Hefley - Stephens Inc. - Analyst : Hi, Thanks for taking the question. This is actually Hannah on for Jacob. How much of a benefit from larger cell therapy customers? Do you think there was in the quarter? Is there any way you could quantify this for us?

Question: Hannah Hefley - Stephens Inc. - Analyst : Thanks, and then you also mentioned that instruments grew in 2Q. Could you just talk about, is this comment around placements growing again versus consumables?

Question: Hannah Hefley - Stephens Inc. - Analyst : All right. Thanks. I'll leave it there.

Question: Matt Larew - William Blair & Company L.L.C. - Analyst : Hi good morning, You referenced the academic market and mentioned that within biopharma, mid-teens. Wondering if you could break that out? Is it still -- it sounds like it's mainly large pharma where most of the recovery is. What, if any, recovery are you seeing in terms of the smaller customers for the biotech customers? Or if not, are you seeing any signs of green shoots?

Question: Matt Larew - William Blair & Company L.L.C. - Analyst : Okay. And then flipping to the Diagnostics and Spatial side. I want to focus on Lunaphore. Obviously, there's been a couple of mergers in the space in the past six months. You now are about a year or so into launching the multiomic solutions to RNAscope. What is your assessment of the competitive landscape at this point? And then what's key to flipping that from really a significant operating margin headwind into more of a tailwind? Is it just a function of consumable pull-through? Or are you having any issues on the manufacturing side with the instruments? Good to get a sense for how that will progress throughout the year? 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: Matt Larew - William Blair & Company L.L.C. - Analyst : Oh yeah, just had you've obviously called it out as a headwind to operating parts and in on that site and so I mean [that's flipping], yes.

Question: Catherine Ramsey - Robert W. Baird Incorporated - Analyst : Hey guys, thanks for the questions. Maybe first on China. What was regent performance versus instrumentation in the quarter? And how do you expect that to trend in 3Q as that region returns to growth? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance I would say that the growth was relatively comparable for the two. Again, it was very stable at low single-digit declines in China, and we see it gradually improving and turning to the black in our Q3. And I think it will be very comparable again, both on the instrument side as well as the reagents. So not a notable difference there.

Question: Catherine Ramsey - Robert W. Baird Incorporated - Analyst : Within RUO region? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance RUO reagents. Actually, it was, again, relatively comparable, but slightly stronger in Europe with respect to the RUO run rate reagents both in biopharma and in academic. But again, both our European and US growth totals were like within 1 point or 2 of each other. So we're not talking about a massive difference.

Question: Dan Arias - Stifel, Nicolaus & Company, Incorporated - Analyst : Morning guys. Thanks for the questions, Jim, two for you on GMP reagents, if I could. Number 1 is, what kind of growth expectations do you have for that piece next quarter? Obviously, you have the pull forward that you mentioned, but it does sound like you like the overall direction that, that business is headed in. So just given how wide the range has been for that piece, it will be helpful if you could kind of put some guardrails just on what we might see there. And then the second question is, can you comment on where the margin profile for that business is? I mean, I know you don't get too specific on individual parts of the portfolio, but it's a piece that's moving the needle and so it would just be helpful to understand the mix impact that, that business has as it accelerates. Thanks so much. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Sure. I appreciate the question, Dan. As you know, we don't give guidance down to that level of fidelity. What I'd say is that it is -- as we talk about with these large orders, it can be very lumpy. If you back out the larger orders, the underlying growth of our customers continues to increase every quarter in cell and gene therapy and the revenues do as well. We talked about the TTM being roughly 40%. I cannot necessarily say it's going to be that next quarter, but it will definitely not be the large contributor to growth that it was this quarter, which, again, I think as I said a lot about the underlying strength of the rest of the business and the end markets improving and the fact that we can still hold our forecast for Q3 that we've been saying all year. With regards to the margin profile, it is a very nice profitable business for us and not quite as profitable as our core RUO reagents, but very, very close. It's probably the second most profitable product line within our business. But again, we're not necessarily calling that out as any kind of margin issue for Q3, even though that mix will change just because we do see continued improvement within our RUO business that will compensate for 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: Dan Arias - Stifel, Nicolaus & Company, Incorporated - Analyst : Okay. Just to maybe get you on the growth. So it sounds like for GMP reagents, we can model that up, decently up, but not anywhere near where it's been for the first half of the year? Is that fair? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance That's fair.

Question: Connor McNamara - RBC Capital Markets, LLC - Analyst : Hey guys, thanks for the time and congrats on a really strong quarter. First off, on the handful of programs in cell gene therapy that are in late-stage Phase II or Phase III, is there any way you could quantify or give us color on those programs and the incremental opportunity as those advance either from Phase II to Phase III or as they come to market?

Question: Connor McNamara - RBC Capital Markets, LLC - Analyst : Okay. That two axes. That's helpful. And then just on cell and gene therapy strength, how did Wilson Wolf do in the quarter? And can you remind us if there's any opportunity to consolidate that prior to 2027 given this rebound you're seeing in that end market? Thanks for that. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah, I'll take that one. So with regard to Wilson Wolf, I would say that their core growth business mean they're noncommercial wise businesses was consistent with our earlier stage growth. So we're seeing consistency across the cell and gene therapy market there. I will remind you that they have five customers now that are commercialized and just the preliminary forecast from just the -- from three of those alone will be enough to put them into very, very, very solid double-digit growth for calendar year 2025. So future is very bright there.

Question: Patrick Donnelly - Citi Global Markets Inc. - Analyst : Hey guys, thanks for taking the questions. Maybe a follow-up on China. I know you guys mentioned you were over there last month. Can you just talk about, I guess, what you saw in terms of the environment, confidence level in terms of the recovery. Obviously, a lot of noise over there. Just curious from the ground, what you guys saw and the expectations there?

Question: Patrick Donnelly - Citi Global Markets Inc. - Analyst : Okay. That's helpful. And then, Jim, maybe one for you. It sounds like the margins in 2H, FX is a little bit of an offset there. Can you just talk about the moving pieces, the expansion opportunity, and again, anything else under the hood other than FX in terms of the shift for 2H? Thank you guys. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah, sure. So nothing's changed with regards to our outlook in the second half margin. We knew we initially guided to 100 to 200 basis points higher in the beginning of the year. Now with the changes in FX, as you heard me say in this call earlier, there's about a 50-point headwind into that, but still significant margin improvement year-over-year at 50 to 150 basis points, in that range. And the even more significant step-up when you think about it sequentially from the first half of the second half. And it just shows the power of our contribution margin that comes from our products. So with the -- both the seasonality and the continued acceleration of our growth year-over-year, but also sequentially seasonality wise, that step-up in revenue has very nice pull-through. And we've done a lot to make organizational efficiencies over the past 1.5 years to be ready -- more ready than ever for margin expansion when the growth returns. So that's been the story all year and hasn't changed. And that, coupled with, not just the volume leverage, but also the mix improvement as we saw this quarter when PSS returned to solid growth, you can see the great pull-through that we get from that. And we expect that to continue in the second half.

Question: Sung Ji Nam - Scotiabank Global Banking and Markets - Analyst : Hi, thanks for taking the questions. Maybe on the AI capabilities and the new designer proteins, would you be able to comment on kind of how Bio-Techne stacks up against competitors on that front? How game-changing is this capability in this industry right now? And kind of what the competitive advantages are moving forward?

Question: Sung Ji Nam - Scotiabank Global Banking and Markets - Analyst : Great. That's super helpful. And then just on the spatial bio side. The RNAscope assays on the comment that you just launched. Just curious, how quickly do you expect the customers to adopt the multiomics capabilities? Whether that would require further market development? And then also how -- for the clinical market, I think you're gaining good traction there as well, whether the multiomic capabilities also will be a competitive advantage? Thank you.

Question: Lucas Baranowski - Keybanc Capital Markets Inc. - Analyst : Hi. This is Lucas on for Paul Knight. Just kind of sticking with the theme of the previous question. In the press release, you called out signs of improvement for some of your instrumentation businesses. Was the COMET one of those instruments you saw an uptick in interest for? And how are placements for that trending generally? Thanks.

Question: Lucas Baranowski - Keybanc Capital Markets Inc. - Analyst : And then just one final question. I believe you were expecting China stimulus to primarily benefit your automated western blot equipment. Is that still what you are seeing? Or as interest broaden out to other product groups?

Question: Lucas Baranowski - Keybanc Capital Markets Inc. - Analyst : Excellent. That's all I had.