Bio-Techne Corporation (TECH) Q4 2025 Earnings Call Transcript

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Overview

The earnings call summary and Q&A indicate a positive outlook for Bio-Techne. Despite some macro uncertainties, the company reported organic revenue growth, strong performance in the Protein Sciences segment, and strategic M&A priorities. The Q&A highlights resilience in consumables and optimism about margin expansion and growth in cell and gene therapy. The FDA's announcement and strategic measures against tariffs are positive catalysts. Although there are concerns about NIH funding and macro uncertainties, the overall sentiment is optimistic, suggesting a positive stock price movement in the short term.

Key Financial Performance

Organic Revenue Growth 3% for Q4 2025, driven by strength in biopharma end markets, particularly among large pharma customers. Full fiscal year growth was 5%, supported by innovative product launches and a resilient revenue mix.

Adjusted Operating Margin 32% for Q4 2025, achieved through operational efficiencies and a disciplined approach to balancing growth investments and productivity.

Geographic Revenue Performance Americas grew low single digits, Europe mid-single digits, APAC (excluding China) low single digits, and China low double digits in Q4 2025. China's growth was attributed to demand improvement ahead of tariff uncertainties.

Protein Sciences Segment Revenue $226.5 million in Q4 2025, with 4% organic growth driven by cell therapy and protein analytical tools. Full fiscal year growth was 5%.

Diagnostics and Spatial Biology Segment Revenue $89.7 million in Q4 2025, with a 1% organic decline due to order timing and macro uncertainties. Full fiscal year growth was 6%.

GMP Reagent Portfolio Growth 20% in Q4 2025 and over 30% for the full fiscal year, driven by demand for cell therapy workflow solutions.

Wilson Wolf Performance 20% growth for fiscal 2025, with EBITDA margins above 70%, despite softness in biotech funding.

Adjusted EPS $0.53 for Q4 2025, up from $0.49 in the prior year, with a $0.03 favorable impact from foreign exchange.

GAAP EPS Loss of $0.11 for Q4 2025, compared to a positive $0.25 in the prior year, impacted by unfavorable product mix.

Adjusted Gross Margin 70.1% in Q4 2025, down from 71.1% in the prior year, primarily due to unfavorable product mix.

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Operating Highlights

Leo - Next-generation Simple Western instrument: Strong demand in Q4, robust order funnel, and higher consumable pull-through compared to legacy systems.

ProPak GMP cytokine product line: Introduced in FY 2025, enabling precise cytokine concentrations for cell therapy manufacturers.

AI-enabled designer proteins: Launched in FY 2025, contributing to innovation in protein sciences.

Geographic performance: Americas grew low single digits, Europe mid-single digits, APAC (excluding China) low single digits, and China low double digits.

Biopharma end market: High single-digit growth in Q4 and FY 2025, driven by large pharmaceutical customers.

Academic end market: Declined low single digits in Q4 but grew low single digits for FY 2025. NIH funding uncertainties impacted performance.

Operational efficiencies: Adjusted operating margin of 32% in Q4, driven by cost containment and productivity initiatives.

GMP reagent portfolio: Grew 20% in Q4 and over 30% for FY 2025, supporting cell therapy workflows.

Divestiture of Exosome Diagnostics: Sold to MDxHealth to focus on core growth areas, with expected closure in Q1 FY 2026.

Wilson Wolf acquisition: Bio-Techne owns 20% and plans to acquire the remaining 80% by 2027, contingent on milestones.

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Risk or Challenges

Pharmaceutical Tariffs and Drug Pricing Models: Uncertainty due to potential pharmaceutical tariffs and the proposed implementation of a most favored nation drug pricing model could impact the profitability of large pharmaceutical companies, potentially reducing their reinvestment into R&D and affecting demand for Bio-Techne's products.

Biotech Funding Environment: Smaller biotech firms are cautious with spending due to a constrained funding environment, with biotech funding declining over 40% year-to-date compared to 2024 levels. This has led to subdued performance in this segment.

NIH Funding Uncertainty: Ongoing uncertainty surrounding the NIH budget and potential grant cancellations are causing cautious purchasing behavior among U.S. academic customers, impacting revenue from this segment.

Geopolitical and Tariff Risks in China: While China showed growth, there are concerns about anticipated tariff impacts and geopolitical headwinds, which could affect future performance in the region.

Spatial Biology Segment Challenges: Order timing issues, geopolitical headwinds, and reliance on academic customers have led to a decline in the spatial biology segment, which is more acutely impacted by uncertainties in NIH funding and a softer biotech funding environment.

Product Mix and Margin Pressures: Unfavorable product mix has impacted adjusted gross margins and operating margins, particularly in the Diagnostics and Spatial Biology segment.

Policy-Driven Uncertainties: Emerging risks such as budget precision, multi-year grant funding, and potential shifts in drug pricing reforms are contributing to cautious behavior across various customer segments, including academia and biotech.

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Guidance & Outlook

Revenue Growth: Bio-Techne anticipates low single-digit organic growth in the near term due to uncertainties in NIH funding, tariff policies, and drug pricing reforms. However, the company expects a return to long-term historical growth trajectories once these uncertainties are resolved.

Operating Margin: The company projects an adjusted operating margin expansion of approximately 100 basis points in fiscal year 2026 compared to fiscal 2025, with a flat start in Q1 and ramping to roughly 200 basis points higher by Q4.

Pharma End Market: Uncertainty remains around potential tariff exposure and most favored nation pricing policies, which could impact pharmaceutical companies' profitability and R&D reinvestment. Despite this, Bio-Techne's portfolio remains strong, particularly among large pharmaceutical customers.

Biotech End Market: The biotech segment is expected to remain cautious due to reduced funding, with no meaningful rebound anticipated until there is clarity around NIH appropriations, tariff policies, and drug pricing reforms.

Academic End Market: Cautious purchasing behavior among U.S. academic customers is expected to persist until there is more certainty around NIH funding. The company estimates its exposure to NIH-funded research is in the low single digits.

Geographic Performance: China is expected to stabilize and return to modest growth in the coming quarters, while other regions like the Americas and Europe are anticipated to maintain steady growth.

Strategic Investments: Bio-Techne plans to redirect resources from the ExoDx franchise to core growth pillars, including proteomic analysis, spatial biology platforms, cell therapy applications, and AI-driven protein development.

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Shareholder Return Plan

Dividends: $12.4 million in dividends were returned to shareholders during Q4.

Stock Buybacks: $100.1 million was spent on stock buybacks during Q4, reducing the average diluted shares outstanding by 3% compared to the prior year.

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Key Q&A

Q:Are you expecting low single-digit growth for the full fiscal year 2026?

A:The guidance was not necessarily for full fiscal year 2026 growth of low single digits. It was stated that low single-digit growth is expected until there is more certainty around administration policies on academic funding, pharmaceutical tariffs, and MFN pricing. If uncertainty persists for the full fiscal year, it would translate to low single-digit growth for the year, but this is not necessarily anticipated.

Q:What instruments are driving growth in the large pharma segment, and how is the antibodies and cytokines business expected to perform?

A:Instrumentation did well in large pharma due to increased utilization in early discovery phases and QA/QC applications for production. The Simple Western high-throughput system, Leo, tailored for large pharma users, contributed to this success. The antibodies and cytokines business, being consumables, is expected to be more resilient despite the challenging market backdrop.

Q:Would you still commit to market plus 500 basis points of growth previously discussed?

A:In an extreme environment, it is harder to predict outperforming by 500 basis points or more. However, the company remains confident in its differentiation and long-range model, expecting to grow 500 basis points or more compared to the market over time, eventually returning to double-digit growth.

Q:How can you accomplish 100 basis points of operating margin expansion on low single-digit growth?

A:The margin expansion is driven by the divestiture of Exosome, which was a 200 basis point headwind in fiscal year 2025. Strategic reinvestments into other growth pillars are planned while still providing margin expansion to investors.

Q:Where is the funding coming from for the two-thirds of academic customers not tied to the NIH?

A:Approximately 50-55% of academic funding comes from federal sources, with about half of that from the NIH. This means less than one-third of academic research funding is specifically from the NIH. U.S. academic customers represent only 12% of the company's business.

Q:What is the outlook for Wilson Wolf and its EBITDA threshold?

A:The company is closely monitoring Wilson Wolf's performance. If there is some tailwind in the business, it is possible the EBITDA threshold will be triggered earlier than the December 31, 2027 deadline, allowing the company to acquire the asset sooner.

Q:What did customer outreach and surveys reveal about budget unlock and spending catalysts?

A:Despite NIH funding being less than one-third of academic funding, customers are holding back on spending due to uncertainty, with temporary budget cuts of 10-15%. Resolution of NIH budget uncertainty, even with a negative outcome, is expected to improve customer behavior and spending.

Q:How is the company approaching M&A in light of portfolio reshaping?

A:M&A remains a high priority, focusing on high-margin, high-volume products aligned with the company's strategy. Targets include core reagents, cell therapy capabilities, and instrumentation and consumables in the ProteinSimple franchise.

Q:What trends are being observed between large pharma and biotech?

A:Large pharma showed double-digit growth even in a low single-digit growth quarter, driven by robust performance. Biotech funding remains constrained, but the company expects stabilization and eventual improvement as uncertainties resolve.

Q:What was the impact of pull-forward activity in China, and what is the outlook?

A:China experienced double-digit growth due to funding releases and pull-forward purchases ahead of potential tariffs. The region is expected to stabilize and return to modest growth, with underlying performance driven by consumables.

Q:What is the margin outlook for fiscal 2026, and what factors contribute to it?

A:The company expects 200 basis points of margin improvement by Q4, driven by the Exosome divestiture, productivity initiatives, and natural revenue seasonality in the back half of the year.

Q:What is the growth profile of the cell and gene therapy portfolio?

A:The cell and gene therapy portfolio, including Wilson Wolf, showed approximately 20% growth, demonstrating resilience despite challenges in the biotech market.

Q:What are the drivers of growth in the cell and gene therapy end market?

A:Growth is driven by later-stage companies investing in their programs, with strong interest in cell therapy solutions and applications for instruments like Ella and Simple Western.

Q:What is the outlook for China in the context of low single-digit growth?

A:China is expected to stabilize and return to modest growth, driven by the China-for-China market, out-licensing activities, and recovery in funding.

Q:What are the key indicators for returning to normal growth rates?

A:Resolution of uncertainties around NIH funding, pharma tariffs, and MFN pricing are key indicators. Stabilization in biotech funding and academic sentiment will also contribute to returning to normal growth rates.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer to the question about the specific breakdown of consumables versus instruments in China, stating that they usually do not provide such details. Additionally, while discussing M&A, the response lacked specific details about potential targets or timelines, using general language about alignment with strategy and maintaining a list of targets.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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