Bio-Techne Corporation (TECH) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. While there are positive elements such as expected growth in Q2 and promising developments in cell therapy and spatial biology, uncertainties around NIH funding, tariff policies, and drug pricing reforms pose risks. Management's cautious optimism and strategic investments provide some reassurance, but the lack of specific guidance and flat overall growth tempers expectations. The stock price reaction is likely to remain neutral in the absence of strong catalysts or market cap information.
Key Financial Performance
Organic Revenue Declined 1% year-over-year. The decline was primarily due to clinical stage timing from a couple of large customers in the cell therapy business and the anticipated ongoing softness in biotech funding.
Adjusted Operating Margin Expanded 90 basis points year-over-year to 29.9%. This improvement was driven by a focus on productivity and cost management.
Revenue from Large Pharma Customers Increased low double digits year-over-year, reflecting continued demand for tools and technologies.
Revenue from Biotech End Market Declined high single digits year-over-year due to a challenging funding environment.
Global Academic Markets Revenue Remained stable overall. A modest decline in the U.S. academic business was offset by mid-single-digit growth in Europe.
Revenue in the Americas Declined mid-single digits year-over-year.
Revenue in EMEA and Asia Delivered low single-digit growth year-over-year.
China Revenue Achieved second consecutive quarter of growth, driven by improving CRO pipelines and increased CDMO activity.
Protein Sciences Segment Revenue Declined 3% organically year-over-year. The decline was attributed to end market dynamics, including clinical stage timing in cell therapy.
Diagnostics and Spatial Biology Segment Revenue Declined 4% year-over-year. Organic growth was 3%, with Diagnostics Products growing mid-single digits and Spatial Biology being flat.
Adjusted Gross Margin Improved to 70.2% from 69.5% year-over-year, driven by the Exosome Diagnostics divestiture and productivity initiatives.
Adjusted SG&A Expense Remained nearly flat year-over-year at 32.1% of revenue.
R&D Expense Stable year-over-year at 8.2% of revenue.
Adjusted EPS Flat year-over-year at $0.42.
GAAP EPS Increased to $0.24 from $0.21 year-over-year.
Total Revenue $286.6 million, representing a 1% year-over-year decline on both an organic and reported basis.
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Operating Highlights
ProteinSimple instrument franchise: Continued to build momentum with strong performance in China and spatial biology business resuming sequential improvement.
G-Rex bioreactor line: Developed by Wilson Wolf, enables high-yield, cost-effective workflows for cell therapy manufacturing. Bio-Techne plans to acquire the remaining interest in Wilson Wolf by 2027.
Simple Plex immunoassay platform (Ella): Upcoming launch of ultrasensitive cartridge offering two to fivefold improvement in sensitivity for neurodegenerative disease research.
Simple Western platform (Leo): Exceeding revenue and placement expectations in its first 3 quarters, gaining momentum with large pharma customers.
Maurice biologics platform: Delivered its sixth consecutive quarter of growth, benefiting from increased bioprocessing activity.
ProximityScope: New product launch enabling researchers to interrogate functional protein-protein interactions, enhancing spatial biology research.
AmplideX PML-RARA kit: Newly launched qPCR assay for detecting fusion variants in leukemia, broadening hematology menu.
China market: Achieved second consecutive quarter of growth driven by ProteinSimple instruments and spatial biology portfolio.
Large pharma customers: Revenue increased in low double digits, reflecting strong demand for tools and technologies.
Emerging biotech: High single-digit revenue decline due to challenging funding environment, but early signs of stabilization observed.
Global academic markets: Stable overall with mid-single-digit growth in Europe offsetting modest decline in the U.S.
Adjusted operating margin: Expanded 90 basis points year-over-year to 29.9%, driven by productivity and cost management.
Adjusted gross margin: Improved to 70.2% from 69.5% last year due to productivity initiatives and divestiture of Exosome Diagnostics.
Diagnostics and Spatial Biology segment margin: Improved to 11.2% from 5.1% last year, driven by divestiture and productivity initiatives.
FDA Fast Track designation: Awarded to largest cell therapy customers, accelerating clinical timelines but reducing near-term reagent demand.
Wilson Wolf acquisition: Bio-Techne plans to acquire remaining interest in Wilson Wolf by 2027, integrating G-Rex bioreactors with GMP reagents for scalable cell therapy manufacturing.
Sustainability efforts: Achieved 40% reduction in Scope 1 and 2 emissions by transitioning to 100% renewable electricity at largest site.
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Risk or Challenges
Organic Revenue Decline: Organic revenue declined 1% in the quarter, primarily due to clinical stage timing from large customers in the cell therapy business and ongoing softness in biotech funding.
Cell Therapy Business Challenges: The inherent lumpiness of late-stage clinical programs and FDA Fast Track designation reduced near-term reagent demand, creating revenue headwinds.
Biotech Funding Environment: Challenging funding environment in the biotech end market led to high single-digit revenue declines, though early signs of stabilization were noted.
Geographic Revenue Declines: Revenue declined mid-single digits in the Americas, driven by order timing in cell therapy and funding pressures in biotech.
NIH Budget Uncertainty: Uncertainty around the NIH budget and potential government shutdown clouds visibility into future funding for academic markets.
Volume Deleverage: Volume deleverage in the Protein Sciences segment impacted operating margins, alongside promotional activity.
Tariff Concerns: Lingering tariff concerns, though less pronounced, continue to pose risks to growth in certain regions.
Phase III Clinical Trial Dynamics: Customers progressing through Phase III trials led to a temporary slowdown in reagent purchases, impacting near-term revenue.
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Guidance & Outlook
Revenue Growth: The company anticipates overall Q2 organic growth to be consistent with Q1, with expectations of returning to positive organic growth in the second half of the fiscal year as prior year headwinds subside.
Cell Therapy Business: FDA Fast Track designation for major customers is expected to accelerate clinical timelines but reduce near-term reagent demand. This headwind is projected to intensify in Q2, impacting growth by approximately 400 basis points year-over-year, before moderating in the second half of the fiscal year.
Spatial Biology: The company expects a rebound in spatial biology growth in Q2, supported by positive momentum in the COMET instrument and new product launches like ProximityScope.
China Market: Renewed growth in China is anticipated, driven by improving CRO pipelines, increased CDMO activity, and strong demand for ProteinSimple analytical instruments and spatial biology portfolio.
Biotech Funding Environment: Signs of stabilization in biotech activity levels are noted, with an uptick in M&A activity, favorable pharma in-licensing trends, and potential for lower interest rates supporting a more constructive outlook for investment levels in emerging biotech companies.
U.S. Academic Market: Gradual stabilization is expected in the U.S. academic market, with improving visibility and demand trends as the fiscal year progresses.
Operating Margin: The company remains on track to achieve at least 100 basis points of margin expansion for the full fiscal year, driven by operational efficiency and productivity measures.
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Shareholder Return Plan
Dividends Paid: $12.4 million was returned to shareholders via dividends during the quarter.
Share Repurchase: The average diluted shares outstanding decreased by 3% year-over-year, indicating share repurchase activity.
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Key Q&A
Q:How long might the air pocket for GMP proteins persist, and how is growth being considered given the prior year's growth?
A:The air pocket is expected to persist through Q2, with a headwind of 400 basis points, following a 200 basis point headwind in Q1. Growth is expected to improve in the second half of the year as headwinds fade. The company is focusing on building its customer funnel, which currently includes 700 customers, 85 in clinical phases, 16 in Phase II, and 5 in Phase III.
Q:Are you still managing the business as a low single-digit grower in fiscal '26 despite Q1 results and upcoming challenges in Q2?
A:Yes, the company remains committed to low single-digit growth for fiscal '26. Despite short-term surprises like fast-track approvals, the long-term conviction in cell therapy markets remains strong. The company is prepared for higher volumes in other product lines and accelerating results.
Q:How do you see the balance of the year unfolding for the business excluding the two cell therapy customers?
A:Excluding the two cell therapy customers, the company saw 1% organic growth in Q1 and expects 3% growth in Q2. The second half of the year is expected to benefit from easier comps, improved biotech markets, and stronger ordering patterns in diagnostics and other product lines. Positive momentum is also seen in spatial biology, ProteinSimple, and the Asia region, particularly China.
Q:What is the expected timeline for biotech funding to impact the business?
A:Biotech funding has increased recently, with positive signs such as lower interest rates, increased M&A, and licensing deals. Unlike previous funding cycles, infrastructure is already in place, allowing funds to flow more quickly to the company, potentially reducing the typical 2-3 quarter lag.
Q:What is the outlook for GMP proteins, and when might the business recover?
A:Clinical trial starts have been steady, with some turnover in the market. The company expects the GMP protein business to recover in the second half of the year as headwinds ease and customers begin validating processes and manufacturing for commercialization.
Q:How does the academic funding environment impact the business into '26 and beyond?
A:The academic market has stabilized, with bipartisan support for a flat NIH budget. The company sees a positive mix of grants aligned with its research areas and expects this market to be a positive driver going forward.
Q:What is the update on the Wilson Wolf acquisition and its momentum?
A:Wilson Wolf had a flat quarter, with trailing 12-month growth in the low to mid-teens. The business is well-positioned to accelerate growth, and the acquisition is expected to serve the cell therapy market effectively. The deal structure ensures a purchase price based on 4.4x trailing 12-month revenues.
Q:What is the cadence of growth for Q2 and the impact of the two cell therapy customers?
A:Excluding the two cell therapy customers, the company expects 3% organic growth in Q2, up from 1% in Q1. Including these customers, overall growth is expected to remain flat at -1% due to a 400 basis point headwind.
Q:What portion of GMP revenue comes from the two cell therapy customers or the five Phase III partners?
A:The company has not disclosed exact numbers but noted that later-stage accounts typically place larger orders. The total pipeline includes 700 customers, with significant progress in adding new customers.
Q:Was there any catch-up in spatial biology revenues in Q1 from disruptions in the prior fiscal year?
A:No, the sequential growth in spatial biology was due to broad recovery in ACD reagents and improved momentum in instrument orders, not catch-up from prior disruptions.
Q:What are the assumptions for GMP headwinds in the second half of the year?
A:The headwinds are expected to ease in the second half due to easier comps and the need for customers to validate processes and manufacturing. The company does not assume significant buying from the two customers but expects less impact than in Q2.
Q:Which instruments might benefit from onshoring and reshoring dynamics?
A:The biologics instrument line is expected to benefit, as companies replicate successful methods and instrumentation in new locations.
Q:Have the two cell therapy customers already placed orders for their Phase III clinical trials?
A:Yes, the company believes these customers have already ordered enough materials for their Phase III trials, and future orders will likely be for commercialization and production validation.
Q:What promotional activities were undertaken in Protein Sciences, and will they continue?
A:Promotional activities included heavier discounting and supporting academic and biotech customers during tough times. These activities are expected to continue to build the customer funnel and drive growth.
Q:How was the company able to deliver on margins and EPS despite headwinds?
A:The company balanced cost initiatives with reinvestments in growth drivers, initiated new streamlining activities, and adjusted the timing of some investments to maintain margin performance.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the portion of GMP revenue from the two cell therapy customers or the five Phase III partners, citing variability in order sizes and the difficulty of quantifying contributions from individual accounts.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AmplideX
Bio Techne
Corporate
ESR
FDA Fast
Fast Track
Nanopore
ProteinSimple instrument
ProximityScope
RNA
Rex
Techne GMP
Track designation
approval
cartridge
commercialization
decline
detection
developer
discipline
dynamic
expansion
focus productivity
franchise
generation therapy
kit
lumpiness
market momentum
market trend
menu
mutation
patient
pattern
pillar
productivity cost
research
researcher
sensitivity
sequence
sign stabilization
stage timing
suite
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Where does this earnings call transcript come from?
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