Bio-Techne Corp

Good morning, and welcome to the Biotechni earnings conference call for the first quarter of fiscal year 2026. At this time, all participants have been placed in a listen-only mode, and the call will be open for questions following management's prepared remarks. During our Q&A session, please limit yourself to one question and a follow-up. I would now like to turn the call over to David Clare, Biotechni's Vice President, Investor Relations. Please go ahead, sir.

Good morning and thank you for joining us. On the call with me this morning are Kim Kelderman, President and Chief Executive Officer, and Jim Hippel, Chief Financial Officer of Biotechni. Before we begin, let me briefly cover our Safe Harbor Statement. Some of the comments made during this conference call may be considered forward-looking statements, including beliefs and expectations about the company's future results. The company's 10K for fiscal year 2025 identify certain factors that could cause the company's actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements because of any new information or future events or developments. The 10-K, as well as the company's other SEC filings, are available on the company's website within its investor relations section. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier this morning on the investor relations section of our Biotechni Corporation website at www.bio-techni.com. Separately, in the coming weeks, We will be participating in the UBS, Stifel, Stevens, Jefferies, Citi, Evercore, and NASDAQ healthcare conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.

Thank you, Dave, and good morning, everyone. Welcome to Biotechniques' first quarter earnings call of fiscal 2026. We began the fiscal year with continued strong execution, navigating a dynamic environment with discipline and strategic focus. Despite these efforts, organic revenue declined 1% in the quarter, primarily due to clinical stage timing from a couple of large customers in our cell therapy business and the anticipated ongoing softness in biotech funding. The headwind in the cell therapy reflects the inherent lumpiness of late-stage clinical programs, which is in this case driven by favorable FDA fast-track designations that support accelerated therapy approval timelines, yet they reduce near-term reagent demand. Importantly, underlying market trends remain constructive, as demand from our large farmer customers was once again robust, and we saw encouraging signs of stabilization in our U.S. academic end market, particularly as the quarter progressed. Our protein simple implement franchise continued to build momentum, China delivered its second consecutive quarter of growth, and our spatial biology business resumed sequential improvements. Operationally, The team delivered sector-leading profitability with adjusted operating margin, expanding 90 basis points year-over-year to 29.9%, exceeding our initial expectations. This performance reflects our deliberate focus on productivity and cost management, while continuing to invest in the strategic growth pillars that will shape Biotechnics' future. Now let's turn to the performance of our end markets, beginning with our biopharma customers, excluding cell therapy. The divergence between large pharma and emerging biotech spending patterns persisted in the first quarter. Revenue from our large pharma customers remained strong, increasing low double digits, reflecting continued demand for our tools and technologies. In contrast, the challenging funding environment in our biotech end market continued to weigh on spending behavior and resulted in high single-digit peak lines in Q1. Encouragingly, we are seeing early signs of stabilization in biotech activity levels. These include an uptick in M&A activity, favorable pharma in-licensing trends, and the potential for lower interest rates, all of which support a more constructive outlook for investment levels in emerging biotech companies. Global academic markets remained stable overall in Q1. A modest decline in U.S. academic business was offset by mid-single-digit growth in Europe, where demand trends remained healthy. But in the U.S., it was encouraging to see improvement in our run-rate business as the quarter progressed. From a geographic standpoint, revenue declined mid-single digits in the Americas, while both EMEA and Asia delivered low single-digit growth. In China, we achieved our second consecutive quarter of growth, supported by improving CRO pipelines and increased CDMO activity. Growth in the region was primarily driven by strong performance in our protein-simple analytical instruments and our spatial biology portfolio. Importantly, unlike last quarter, the instrument growth does not appear to be driven by tariff-related dynamics. Instead, it reflects underlying demand strength, and we believe that the business is well positioned for a return to stable growth in the region. Let's now turn to our growth pillars, beginning with the protein sciences segment, where end-market dynamics led to a 3% organic revenue decline. In our cell therapy business, we were pleased to see a couple of our largest customers receive FDA fast-track designation. This recognition enables an accelerated clinical development timeline and eligibility for priority review by the agency, and therewith potentially expediting both approval and commercialization of these next-generation therapies. As customers progress through the development project, they typically front-load purchases of the reagents needed for a full completion of a specific clinical phase in their program. We have seen this dynamic play out first-hand at Wilson Wolf, where customer ordering patterns moderated as their clients progressed through Phase III clinical trials and shifted their focus to the regulatory filing necessary for FDA approval. This is typically followed by an inflection in demand and a revenue ramp as therapies gain commercial traction. It is this clinical stage timing dynamic that introduced greater lumpiness in our cell therapy business in this quarter. Continuing with cell therapy, I'd like to provide a brief update on Wilson-Wolf. As a reminder, we currently own 20% of the company and expect to complete the acquisition of the remaining interest by the end of calendar 2027 or potentially sooner, contingent upon the achievement of certain milestones. Wilson-Wolf is a developer and manufacturer of the market-leading GDACS bioreactor line, which enables high yield, cost-effective workflows for cell therapy manufacturing. The GRX also allows the scaling of production and therewith treat a greater number of patients efficiently. The GRX grant program has successfully seeded hundreds of early stage cell therapy customers and over half of those also utilize biotechnics GMPV agents. We are very excited about the upcoming acquisition as the combination of Wilson-Wolfe's bioreactors with Biotechnics GMP reagents, our media, and the POPEC cytokine delivery system create a compelling, lower-cost, and scalable manufacturing solution for cell therapy developers. Let's now turn to a suite of easy-to-use, fully automated proteomic analytical solutions collectively known as ProteinSimple. These platforms are the preferred choice for fast, precise and intuitive protein analysis. Utilization of our expanding install base remains very strong, as customers increasingly rely on these systems to automate both critical and routine laboratory workflows, driving higher productivity in both biopharma and academia. This growing reliance was reflected in the cartridge consumable pull-through, which resumed its double-digit growth trajectory in the quarter. We continue to advance innovation across all three of our protein simple instrument platforms, enhancing functionality, productivity, and broadening their application scope. A key highlight is the upcoming launch of an ultra-sensitive cartridge for our fully automated simpleplex immunoassay platform, Granulus ELA. These next-generation assays will deliver a two- to five-fold improvement in sensitivity of our current simpleplex cartridge offering, enabling femtogram-level biomarker detection in plasma samples. This breakthrough holds significant promise for accelerating neurodegenerative disease research and positions Biotechni as a leader in this emerging and impactful field. adoption of a high throughput simple western platform called leo continues to build momentum with large farmer customers who value its speed simplicity and sensitivity in protein quantification and detection we are very pleased with leo's commercialization as the platform has exceeded both revenue and placement expectations in its first three quarters on the market Combine this initial momentum with a growing order funnel, and Leo is well positioned to become a standout performer in our instrument portfolio. Lastly, I'd like to highlight the continued success of our Maurice Biologics platform, which delivered its sixth consecutive quarter of growth. This QAQC solution is benefiting from a current wave of increased bioprocessing activity. Looking ahead, We see recent U.S. manufacturing investment announcements by several large pharmaceutical companies as a potential catalyst for accelerating growth in this business. And finally, our core portfolio of research use-only reagents, including our industry-leading catalog of over 6,000 proteins and 400,000 antibody types, continues to demonstrate its enduring value to customers, even amid challenging and harsh conditions. In the first quarter, sales of our core reagents remained consistent with the prior year, underscoring the resilience and essential nature of these tools in supporting foundational research across disciplines. Now let's turn to our diagnostics and spatial biology segment, beginning with our spatial biology portfolio. In Q1, we delivered low single-digit growth in our RNAscope product suite, which enables biopharma and academic researchers to detect and visualize RNA and short microRNA sequences at the single-cell level within intact tissue samples. We will further strengthen our leadership in spatial biology with the launch of ProximityScope, the first product to enable researchers to interrogate functional protein-protein interactions This novel essay adds a powerful new dimension to multi-omic RNA and protein detection. By introducing this additional layer of information to spatial biology, ProximityScope enhances researchers' ability to unravel complex biology and its connections to disease. It also embeds biotechnical spatial chemistries more deeply into automated translational research workflows. Momentum also continued with our Comet instrument, which saw solid double-digit growth in bookings year over year. Its fully automated multi-omic capabilities are increasingly valued by academic and biopharma customers and enable the discovery of novel biological insights. Spatial biology continues to be our most academically concentrated business, with a meaningful presence in biotech as well. Given the funding uncertainties in both end markets, we are encouraged by the positive momentum in this franchise. Lastly, our diagnostics business grew mid-single digits in Q1, supported by balanced performance across our core diagnostic controls and our diagnostic kits for laboratories. We continue to see rising interest in our ESL-1 test, which monitors resistance to standard therapies in breast cancer patients. Recent clinical trial data reinforced the importance of testing pre-SO1 mutations, showing that switching patients that show this mutation to an alternative therapy nearly doubled life expectancy compared to the standard treatment. We also launched the Amplidex PML-RAGA kit, a multiplex QPCR assay designed to detect all three major fusion variants associated with APL, an aggressive form of leukemia. This assay runs on widely installed QPCR platforms and delivers results in approximately four hours. This launch problems our hematology menu alongside the Quantidex PCR-ABLE kit and positions us for continued menu expansion. We also announced an expanded agreement with Oxford Nanopore Technologies, building on last year's successful launch of the Amplidex Nanopore Carrier Plus kit. This comprehensive carrier scaling panel targets 11 hard-to-sequence genes in a single workflow, offering laboratories a streamlined and efficient solution for genetic testing. And before I wrap up my prepared remarks, I would like to briefly highlight our progress on sustainability. During fiscal 2025, we achieved an estimated 40% reduction in scope 1 and 2 emissions, driven by our transition to 100% renewable electricity at our largest site located in Minneapolis. I encourage everyone to review the report in the corporate and social responsibility section of our website. I'm proud of the team's continued progress on this front. To summarize. The Biotechni team continues to execute at a high level despite ongoing volatility across some of our end markets. Our focus on productivity and disciplined cost management drove a significant year-over-year operating margin expansion, exceeding our expectations for profitability. And while clinical stage timing and cell therapy cater to headwinds, underlying market trends are constructive. These data points suggest improving visibility for academic and bio-pharma customers, which we expect will translate in stabilizing and ultimately strengthening demand for life science tools, and specifically biotechniques product portfolio. One thing remains clear. Our customers continue to rely on biotechniques innovative life science tools to drive biological discovery, advance next generation therapies, and deliver precise diagnostic solutions that improve the quality of life for the global population. With that, I'll turn the call over to Jim. Jim?