Bio-Techne Q3 2025 Earnings Call Transcript

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Provided by Quartr
May 7, 2025

Key Takeaways

  • Bio-Techne delivered 6% organic revenue growth in Q3, with 7% growth in Protein Sciences and 2% growth in Diagnostics & Spatial Biology, demonstrating resilience in a challenging macro environment.
  • Adjusted operating margin reached 34.9%, up 190 basis points year-over-year, driven by operational efficiencies, structural streamlining and disciplined cost control.
  • US academic end markets face uncertainty from the NIH’s proposed 15% indirect cost cap and potential budget cuts, causing customers to delay purchases—especially capital equipment—and dragging Q4 growth to low single digits.
  • A dedicated tariff-mitigation team is leveraging Bio-Techne’s global footprint, supply-chain optimization and targeted pricing to fully offset an estimated $20 M annual tariff impact by the start of FY 2026.
  • Key growth drivers include >30% trailing-12-month growth in GMP reagents for cell & gene therapies and an expected acceleration in demand for organoid solutions after the FDA’s guidance to reduce animal testing.
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Earnings Conference Call
Bio-Techne Q3 2025
00:00 / 00:00

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Operator

Good morning, and welcome to Bio Techne Earnings Conference Call for the Third Quarter of Fiscal Year twenty twenty five. At this time, all participants have been placed in listen only mode, and the call will be opened for questions following the management's prepared remarks. During our Q and A session, please limit yourself to one question and a follow-up. I would now like to turn the call over to David Claire, Bio Vice President, Investor Relations. Please go ahead.

David Clair
David Clair
Investor Relations at Bio-Techne

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 Hipple, Chief Financial Officer of Bio Techne. 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 10 ks for fiscal year twenty twenty four identifies 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.

David Clair
David Clair
Investor Relations at Bio-Techne

The company does not undertake to update any forward looking statements because of any new information or future events or developments. The 10 ks 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 Bio Techne Corporation website at www.biotechne.com. Separately, in the coming weeks, we will be participating in the BofA Securities, RBC Capital Markets, Benchmark, William Blair, Jefferies and Goldman Sachs Healthcare Conferences.

David Clair
David Clair
Investor Relations at Bio-Techne

We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Thanks, Dave, and good morning, everyone. Thank you for joining Bio Techne's third quarter conference call. I'm pleased to report that we delivered yet another strong quarter with 6% organic revenue growth, while operating in a relatively uncertain macro environment. Our differentiated performance was evident across our product portfolio, namely within our core reagents, our automated analytical solutions and in our cell and gene therapy offering. This result was once again delivered with an emphasis on profitability as the operational efficiencies we continue to put in place led to an adjusted operating margin of 34.9%.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

The team continues to do an excellent job balancing investments to position the organization for future growth with initiatives to drive efficiencies. And by doing so, we are maintaining our industry leading profitability. Our performance by end market in Q3 was led by low double digit growth in pharma, which we expected to return to historical growth rates in calendar twenty twenty five following the realignment of their R and D pipelines during much of 2024. We saw early signs of this improvement in our fiscal second quarter with that positive momentum continuing into our third quarter. Going into calendar twenty twenty five, we did not anticipate the major U.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

S. Policy shifts impacting the academic end markets. This started on February 7 with the NIH issuing guidance of a flat indirect cost reimbursement rate of 15% across all NIH grants. With the incoming NIH director announcing that he will be evaluating the impact of the proposed 15% cap, along with a federal judge implementing a permanent injunction on this policy, it remains to be seen how this will play out. In the meantime, however, our U.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

S. Academic customers are facing uncertainty around the future funding of their research projects. This can impact purchase decisions, particularly around capital equipment. Another policy shift that has been announced by the new Secretary of the Department of Health and Human Services is getting a much higher priority around combating chronic diseases like cancer, diabetes, and neurological disorders. Once the dust settles around the overall level of the NIH funding, Bio Techne stands to benefit from the NIH grants geared towards these diseases as our product portfolio is perfectly aligned with those research areas.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Now let's discuss our growth drivers in the Protein Sciences segment, where strong execution drove demand for our market leading catalog of research reagents, protein analysis tools and cell therapy workflow solutions, which resulted in 7% organic revenue growth. Starting with our core portfolio of research use only proteomic reagents, I want to highlight that over the last forty nine years, we have amassed a catalog of over 6,000 proteins and 400,000 antibody types. This biological content is relied upon by our global customers to gain novel insights into biological pathways to develop and manufacture advanced therapeutics and to enable precision diagnostics. In addition, we license and supply our content to other life science tools companies for usage in their assays and consumables. Looking ahead, we are encouraged by the FDA's recent announcement to advance public health by replacing animal testing in the development of monoclonal antibodies and other drugs with more effective human relevant methods.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

The FDA's emphasis on reducing animal testing opens an opportunity for Biotechnese organoid solutions for both making and analyzing organoids. Organoids, which better mimic human physiology than traditional cell cultures or animal models, offer an ethical, cost effective, and faster alternative for assessing drug efficacy, toxicity and mechanisms of action. Annually, we sell over 50,000,000 of our core reagents, including proteins, small molecules and media for organoid solutions in the market that has been growing north of 20. With this recent announcement by the FDA, we expect that the growth of organoid solutions will accelerate and that this will also be a tailwind for our GMP reagents once these solutions advance into the clinic. Staying with our GMP reagents, here we saw growth in the high single digits in Q3.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

We serve over 500 customers who rely on our GMP reagents for their cell therapies across all stages of development. As a reminder, customers in late stage clinical trials can make large, less frequent orders making a trailing twelve month growth metric more reflective of underlying demand. Our GMP reagents business sits just over 13% growth on a TTM basis. The next growth driver in Protein Sciences for this quarter was our protein analytical instrumentation business, especially in our biologics platform, MOREIS. As a reminder, MOREIS is specked into bioproduction processes for protein identity, protein charge and protein purity testing purposes.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

The MORIES family of instruments is enjoying robust growth from our pharma and CRO partners and is gaining traction as a gene therapy QAQC platform. Biologics grew double digits in the quarter with broad based strength in both instrument placements and consumables pull through. Now, we will move to the growth drivers within our Diagnostics and Spatial Biology segment, which delivered 2% organic revenue growth in the quarter. The growth across the divisions in the segment was in general consistent with order timing having a significant impact on our OEM diagnostic reagents business as well as on our Assuragen carrier screening and oncology business. The underlying markets and our performance remained healthy with year to date growth in the high single digits for the diagnostic reagents and low double digits for the Assuragen portfolio.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Assuragen continues to launch innovative products that leverage its proprietary chemistry to resolve difficult to analyze genes. For example, we launched the Amplidex Nanopore Carrier Screening Plus kit, which utilizes Oxford Nanopore's long read sequencing technology to directly capture many complex genomic variants in a single workflow. Also within the segment, we continue to drive ongoing utilization and penetration of our ExoDx prostate cancer test, which increased over 30% for the fiscal year to date. Spatial biology, which has the highest exposure to U. S.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Academic end markets within the company has been most impacted by the NIH uncertainty. However, despite this uncertainty, our Comet instrument was still able to achieve double digit growth in this quarter. The COMET platform provides full automation and multiomic capabilities. These remain key competitive differentiators and enable new scientific discoveries and accelerated drug development. During the quarter, we made excellent progress upgrading the Comet installed base with multiomic capabilities, which provides images of RNA and proteins on the same tissue sample.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

This positions the system for a steady ramp in consumables pull through of RNA scope reagents as well as our portfolio of newly validated spatial antibodies. Before I hand the call over to Jim, I would like to address the most recent dynamic around tariffs, which has impacted the global economy. While the tariff escalation, which began in April has understandably had an impact on our life science tools industry, it does represent a clear opportunity for Bio Techne. We may not be immune to tariff escalations, but by utilizing our global operational footprint, extremely well positioned to mitigate most tariff impacts to our bottom line very quickly. Jim will provide more details, but we mobilized a small, specialized and highly effective team within our company to focus on several work streams.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

One work stream is around the optimization of our global footprint for regional production, which is of course not subject to cross border tariffs. A second work stream is to focus on utilization of our global supply chain. And we also initiated a work stream to make targeted price and or surcharge adjustments with the intent to minimize impact to our customers. The output from this team has yielded excellent results, which we believe will fully mitigate the cost impact of the tariffs as currently configured by the end of the current quarter, which happens to align with the start of our fiscal twenty twenty six. The work done will also position us very well to quickly minimize the impact of future tariff changes.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

This approach allowed the vast majority of our 3,000 employees to continue to focus on our strengths, which include providing our customers with the highest quality products to ultra productivity tools to automate our customers' workflows, which will help offset some of the tariff related cost pressures they may face and we will continue to bring meaningful innovation to the market. And last but not least, we provide access to an expert commercial team that enables our customers to quickly choose the right products and the right solutions to enable their success. With that, I will pass the call over to Jim. Jim?

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Thanks, Kim. I'll start with some additional details on our Q3 financial performance and then give some thoughts on the financial outlook for the remainder of the fiscal year. Starting with the overall third quarter financial results, adjusted EPS was $0.56 compared to $0.48 in the prior year, with foreign exchange having an immaterial impact. GAAP EPS for the quarter was $0.14 compared to $0.31 in the prior year. Q3 revenue was $316,200,000 an increase of 6% year over year on an organic basis and 4% reported.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Foreign exchange was unfavorable to revenue growth by 1% and divestitures also had a 1% impact to revenue. By geography, North America increased low single digits year over year driven primarily by our pharma customers. Europe increased mid single digits year over year led by strength from academic customers. And China decreased mid single digits as the economic situation there is still challenging. Encouragingly, the rest of Asia increased mid teens with our team executing very well on improving market conditions.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

By end market in Q3, biopharma increased mid single digits, while academia was flat in the quarter. Below revenue on the P and L, total company adjusted gross margin was 71.6% in the quarter compared to 71.9% last year, down slightly due to unfavorable foreign exchange. Adjusted SG and A in Q3 was 29% of revenue compared to 30.3% in the prior year, while R and D expense in Q3 was 7.8% of revenue compared to 8.5% in the prior year. The decrease in SG and A and R and D was driven primarily by the benefit of structural streamlining and diligent expense control, which was partially offset by ongoing strategic growth initiatives. Adjusted operating margin for Q3 was 34.9, up 190 basis points compared to the prior year due to the impact of favorable volume leverage, productivity gains and cost controls, partially offset by the impact of foreign exchange.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

We continue to execute cost containment measures and prioritize our growth initiatives to drive efficiencies throughout the organization with the goal of maximizing operating leverage while we are in this dynamic macro environment. Looking at our numbers below operating income, net interest expense in Q3 was $800,000 decreasing $2,300,000 compared to the prior year due to lower net debt levels. Our bank debt in the balance sheet as of the end of Q3 stood at $330,000,000 Other adjusted non operating income was $3,000,000 in the quarter, an increase of $1,400,000 compared to the prior year. The increase was driven by the foreign exchange impact related to our overseas cash pulling arrangements. Moving further down the P and L, our adjusted effective tax rate in Q3 was 21.5%, down 50 points compared to the prior year due to geographic mix.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Turning to cash flow and return of capital, dollars 41,100,000.0 of cash was generated from operations in the quarter and our net investment in capital expenditures was $10,100,000 Also during Q3, we returned capital to shareholders by way of $12,600,000 in dividends and $100,000,000 through stock buybacks. Also, our Board of Directors has recently approved a new share repurchase program authorizing the repurchase of up to $500,000,000 of common stock. We finished the quarter with 158,900,000.0 average diluted shares outstanding. Our balance sheet finished Q3 in a strong position with $140,700,000 in cash and our total leverage ratio remains well below one times EBITDA. Going forward, M and A remains a top priority for capital allocation.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Next, I'll discuss the performance of our reporting segments, starting with the Protein Sciences segment. Q3 reported sales were 227,700,000.0 with reported revenue increasing 6% compared to the prior year. Organic revenue growth was 7% for the quarter with foreign currency exchange having unfavorable impact of one percent. The segment's organic growth was driven by large pharma customers across the portfolio. Operating margin for the Protein Sciences segment was 45.6%, an increase of 140 basis points compared to prior year, primarily due to the impact of favorable volume leverage, cost management and structural alignment initiatives.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Turning to the Diagnostics and Spatial Biology segment, Q3 sales were $89,200,000 with both reported and organic growth increasing 2% compared to the same quarter last year. Segment growth was consistent across the businesses with stronger performance in our automated spatial instrument comment as well as continued strong growth in our EksoDX prostate cancer test. Moving on to Diagnostics and Spatial Biology segment operating margin at 9.4%. The segment operating margin was relatively consistent with the prior year's 9.3%. We anticipate improvement in the Diagnostics and Spatial Biology operating margin as the Comet platform continues to scale.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

In summary, Q3 was a solid quarter overall, and our teams executed extremely well, especially considering the turbulent market conditions induced by NIH funding and tariff uncertainties. Up to this point in the year, our overall top line results have been in line with our expectations at the beginning of the fiscal year, while our bottom line has exceeded our guidance. However, as we approach the finish of our fiscal year, there was no way to predict last July that our market will be facing the uncertainties of future NIH funding and tariffs that we are now experiencing. These uncertainties have only increased in April with the escalation of tariffs that began on April 2, followed by the recent Trump administration's proposed fiscal year twenty six budget, which includes a 40% cut to NIH funding. Let me frame up how we think about our exposure to these two major uncertainties and explain why we are so well positioned to turn these lemons into lemonade.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

First, on the uncertainty of NIH funding. As a reminder, approximately 12% of our annual revenue is from U. S. Academic customers, and we estimate that roughly half of that is sourced from NIH grants. Also, during Trump's first administration, he proposed NIH cuts ranging up to 20% every year.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

However, in each of those four years, Congress actually passed increases to the NIH budget with bipartisan support. So, we view the potential for severe cuts to NIH funding over the next four years as rather unlikely. However, even in the most severe scenarios, the decrease in funding would have an immaterial impact to our overall long term double digit growth rate expectations. And that's before you consider our lemonade, which is that biotechni stands to benefit from a potential shift in NIH's emphasis on areas of research where our products are the most impactful. Next, I'll address the uncertainty swirling around the ongoing tariff war.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

As it stands today, if we were to take no action to absorb all tariffs, the recent increases in global tariffs would amount to approximately $20,000,000 annual impact to our adjusted operating income. Most of this exposure is coming from Chinese tariffs on our proteomic analytical instrument platforms imported into China from The U. S. As Kim stated in his remarks, we have focused teams who are driving work streams to negate the tariff impact to Bio Techne and our customers with the highest priority on leveraging our global footprint to regionally diversify our instrument manufacturing. Our lemonade with respect to tariffs is the speed by which we can negate the impact of these tariffs to our bottom line and position the company even better to mitigate any further tariffs should they escalate from here.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

This speed will allow us to not be distracted internally, but rather double down our focus on our customers, especially as they are facing the same uncertainties. As we close out the remainder of fiscal year twenty twenty five, the additional macro uncertainties around tariffs and potential budget cuts that arose this past month are likely to cause further distraction for our customers. Thus, we expect our growth momentum will temporarily slow to the low single digits in Q4. With respect to the bottom line, there will likely be a temporary headwind due to tariffs resulting in adjusted operating margins being 100 basis to 150 basis points lower than Q4 of last year. However, we are confident that the bottom line impact of current tariffs will be fully mitigated by the time we start our fiscal year 2026, positioning us extremely well to continue our differentiated financial performance.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

That concludes my prepared comments. And with that, I'll turn the call back over to the operator to open the line for questions.

Operator

Thank you. Ladies and gentlemen, we will now be conducting a question and answer The first question comes from Puneet Souda with Leerink Partners. Please go ahead.

Puneet Souda
Senior MD at Leerink Partners

Yeah. Hi, guys. Thanks for taking my questions here. Maybe the first one on the guide. Could you provide more context into that, Jen, in terms of the impact you're expecting on academic and it's a meaningful reduction versus what you had before and what you're seeing in the quarter.

Puneet Souda
Senior MD at Leerink Partners

So it does, you know, beg a question, was there a pull forward that you saw on the pharma side? And as a result, you're seeing more impact in the fourth quarter. Also on the pharma side, if you could clarify, I think you said low double digit at first, but then mid single digit for biopharma. So could you just clarify what was the growth in pharma and large pharma?

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

I don't recall saying anything about biopharma, but so to clarify, pharma was double digit growth for the quarter. With respect to, we think about Q3 versus Q4, Kim mentioned in his comments that our reagents, our quality reagents are also sold to other life science tools companies, our partners, call it ingredients into some of their products. And we had some nice orders come from those customers who were largely serving from our customers as well, this most recent quarter. And some of those orders we don't expect to repeat, again, necessarily in Q4, so that's going to be part of the reason for the step down in organic growth. But as it pertains to academia, we started our Q3 in academia very strong in January.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

And then, of course, in February, with all these announcements, there was a great slowdown in academia. And then it kind of stabilized again in March. And we kind of expect that stabilization to occur or continue throughout Q4, but thus be lower than where we were in Q3. I think the biggest question, and I think where we're being somewhat conservative, but I think prudent to be conservative, is on the pharma side. To expect double digit growth in pharma in Q4, given the tariff environment that had been announced as of April 2, which didn't really impact Q3 as much as it could Q4, is really, I think, where the biggest difference in the guide is in Q4 versus how we performed in Q3.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

And then, with regards to where our expectations were at the very beginning of the year, clearly, even though our performance year to date has more or less been in line with those expectations, how we got there is quite different. Meaning, large pharma has outperformed where we expect it to be up to this point in time. Clearly, didn't expect the situation with the academic in The US policies. And then, since you asked about smaller biotech or pharma, we talked about that being gradually gaining momentum in our first half of the year. But that momentum somewhat stalled.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

It didn't go backwards, but it somewhat stalled in Q3. And I think that's just the nature of the overall global economic uncertainties, where our biotech customers are a little susceptible to that, in terms of where their next dollar might come from down the road. I think they're more highly sensitive to the more macro environment, and that's what we're seeing from them. So, hopefully that helps.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yeah, Puneet, this is Kim. Good morning. Thank you for your question. And you mentioned pull forward, right? In Q2, we posted 9% organic growth, but had mentioned that three of that were probably because of early demand by our customers.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

So we are very transparent in that. This quarter though, we do not see that. So we do not have a carve out related to pull forwards. We do think this was really based upon momentum in the end market of large pharma.

Puneet Souda
Senior MD at Leerink Partners

Got it. That's helpful. And then since we're at fiscal year twenty twenty six is around the corner, wondering what you can provide there just given a lot of I appreciate the uncertainty, but with China, NIH and with tariffs, I appreciate you quantifying at least the gross impact, but how should we think about '26? And there's maybe a specific question on China. I believe it's fiftyfifty instrumentation and consumables for you there.

Puneet Souda
Senior MD at Leerink Partners

How should we think about the China growth rate in 2026? Thank you.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yes, Puneet. Yes, 2026, we usually do a soft guide at the beginning of a fiscal year, which is about three months from now. And the one thing that we feel relatively certain about is that we expect that there will be more clarity from the different headwinds in our end markets over those three months. It seems to be that, of course, a lot of turbulence has been installed upon NIH as well as on the tariff situations, but we think that more clarity will come in the coming months, coming quarters, and that will definitely help us quantifying the impact for biotechnology in the coming year.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Your question around China, I think tariffs, as I mentioned in my prepared remarks, fortunately are very negatable for biotechni. I'm very positive about how we can offset the tariff impacts and negate them. And we'll just have to see how the Chinese economy holds up and how their internal funding works. We definitely saw a little bit of a step back from our initial guide, right? So we had mentioned that China was stabilizing earlier in the fiscal year.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

We had mentioned that it would crawl back to the black, and it was definitely on that trajectory. But this last quarter, with all the turbulence, you could certainly see a step back into mid single digits negative. And that's very much driven by the tariffs and by the local economical activities.

Operator

Thank you. Our next question comes from Dan Leonard with UBS. Please go ahead.

Dan Leonard
Dan Leonard
Managing Director & Research Analyst at UBS Group

Thank you. My first question is on tariffs. I would love to understand your exposure a bit better. I mean China is 9% of your revenue and I think you quantified the analytical instrument exposure into China. But as Puneet mentioned, you sell more than analytical instruments into China.

Dan Leonard
Dan Leonard
Managing Director & Research Analyst at UBS Group

And I would assume that most of that is manufactured outside of China. So any kind of color commentary, Kim, you can provide on why that tariff headwind is not larger?

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yes, Dan, thank you very much for your Yes, China has 9% of revenues. That's a good point. Usually, over the last couple of years, it was fiftyfifty if it comes to the mix between consumables and instruments. Over the last year, that has actually shifted a little bit, so that's not the real ratio anymore. But nonetheless, let's say it's 50% on instruments.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

We have a very clear and fast pathway to be able to move some of the instrumentation manufacturing that we right now have in The US to another location, and that's the benefit of having a global footprint, another biotechnical location that would be exempt from import fees into China. And that is really the largest part of the tariffs. Our consumable part is vastly different if it comes to the tariffs. We've actually, over the last couple of weeks, noticed that we do not pay any tariffs on importing those. That really negated most those two activities really negated most of the tariff exposure going into China.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

If I could just add also, not all the instruments and all the cartridges for the instruments are produced in The US today. So it's not a one for one exposure.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

And it also allows for an easier transition of the instruments that are not currently made that are currently made in The US for China to allow those to be moved to the facility where there are instruments being made for China.

Dan Leonard
Dan Leonard
Managing Director & Research Analyst at UBS Group

Understood. Thank you for that clarification. And then just a follow-up. Does the current tariff situation impact at all your thinking on having more of a local manufacturing footprint in China?

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Dan, I think it doesn't the tariffs have not changed our position there. We always had a mindset of China for China. And yeah, actually last year we talked about Biotechni having opened a new facility in the Shanghai area to serve the Chinese market, And we're actually quite glad that we have this footprint because it might actually be a very will come in handy in the coming quarters as well if necessary, right? But we are really happy with the layout as we have it because the local manufacturing in the different regions and there with minimizing cross border tariffs is definitely a tailwind right now.

Operator

Thank you. Our next question comes from Matt LeRue with William Blair. Please go ahead.

Matt Larew
Research Analyst - Healthcare at William Blair

I'll just circle back on the first question actually. As you'd originally built the guide for this year, which I think you've called fairly well, it was exiting in the high single digits and the streets were used as a proxy for fiscal 'twenty six. As you alluded to, much has changed. But to the point, Jim, on sort of lemons and lemonade, it feels like maybe the lemons are accumulating near term and the lemonade maybe takes a little longer to squeeze out. So 8.5% Street organic growth for next year is maybe the way you're guiding us for fiscal twenty twenty five, at least more reasonable starting point than Maple Ridge Street's at today.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Yeah. Mean, what I would say, Matt, is that what we're experiencing right now is very abrupt, but we also, I think everyone hopes, will be somewhat temporary. Our momentum going into Q3 was very strong. We were basically on our projections for smaller biotech. We were on our projections and trajectory for China.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

And academic was holding up very, very well, as it had been consistently up until this last couple months. And then pharma was actually ahead of our expectations. So it's really this temporary, I call it temporary jolt of uncertainty caused by proposed changes in policies and tariffs. And I think once that uncertainty is resolved and becomes more certain, almost regardless of what the outcome is, we will be extremely well positioned to basically resume the trajectory that we were on. Now, is that a quarter out, or six months out, or a year out?

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Hopefully, we'll have more clarity in three months. But at some point, the uncertainty becomes more certain.

Matt Larew
Research Analyst - Healthcare at William Blair

Okay. And then, obviously, margins were very strong, the strongest in a couple years here. Year over year, that was mostly driven from spending leverage. I think OpEx up something like 5% year to date as the top line has recovered. You've mentioned in the comments, but can you just speak to sort of that tension between ongoing cost containment and investment and where you're seeing additional opportunities to drive leverage?

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

I mean, teams have been doing a great job, actually for a couple years now, with regards to managing that balance between investments and cost containment and alignment of our structure according to the various profiles of our business. And that has just basically continued. And we've been especially been diligent on the, what I call, discretionary cost side, the past three months or so, especially with the increased uncertainty that we've been seeing in our end markets. At times of uncertainty, it's the last time that you want to shift gears with regards to accelerating investment or any kind of discretionary spend. So, I think the outperformance we saw in our margin was a combination of the revenues coming in as we had expected, but really holding back on the cost, seeing the kind of uncertainty build throughout the quarter that we did.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Just to make sure that we're extremely well prepared for fiscal year 'twenty six, in particular, when these uncertainties start to become more certain.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

And I think it's the tension between, it's not even tension really. We always said that we didn't wanna get ahead of our skis if it comes to our cost position. So we've been very prudent, like Jim mentioned, with discretionary spend. But we also have been really focused on efficiencies, right? So we have management processes in the company that we've definitely looked at and streamlined.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

We have integrated further some of our acquisitions to increase efficiencies. The digital side, we have looked at ERPs and the different software packages for efficiency gains. And then last but not least, our operational processes and the margin boost from operations is also fantastic. So those have definitely been driving our results. And in the meantime, the R and D side, have a very, very detailed process, we call it prioritization, to really rank and stack all the investments in all the different R and D projects and make sure that we fund the ones that are of strategic importance and that have good returns of investment.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

And we have a fantastic clarity on where to invest. There, we manage the balance between the two really, really well.

Operator

Thank you. Our next question comes from Daniel Markowitz with Evercore ISI. Please go ahead.

Daniel Markowitz
Vice President at Evercore ISI

Hey, thanks for taking the question. The first one I had is based on the guidance, it seems like 4Q margins are expected in like the 32% type range and that's before tariff mitigation flows through. Is it fair to assume that fiscal twenty twenty six margins at that 4Q exit rate of about 32% makes sense? Or should we be more prudent, given the macro could imply that '26 organic needs to come down a few percent?

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Yeah. We're not going to comment on guiding for fiscal year twenty six at this point in time, again, given all the uncertainties we're still dealing with. And so, similar to the top line, hopefully those uncertainties become more certain or less uncertain. Three months from now, we can provide some more direction then. All I can share with you today is that, I think this quarter demonstrated that we are positioning the company extremely well for whatever fiscal year twenty six brings my end market perspective.

Daniel Markowitz
Vice President at Evercore ISI

Great. And then just one follow-up. On A and G specifically, just using peer comments, it implies that The U. S. Academic and government end market could see like 10% to 15% incremental headwinds in calendar twenty five.

Daniel Markowitz
Vice President at Evercore ISI

Is there any reason to believe this wouldn't be an appropriate way to think about it? Is your exposure a little bit different? And then just what are the cost offsets and a reasonable decremental margin profile on these US academic and government revenues?

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Yeah. I can't comment specifically on the 10% to 15%, except to say that our thoughts are this, is that first of all, the money that's largely being spent now by academic in probably fourth quarters to come are from grants that were already being approved and released. So we're really talking about the impact of probably calendar year '26 and beyond with regards to whatever gets decided upon with regards to NIH budgets. And as a reminder, and I think everyone understands this history, but I'll repeat it. This has happened before in a prior Trump administration, where there were severe cuts proposed, and a bipartisan congress actually increased budgets every single year.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

So, again, think it's a bit overblown with regards to what the impact of budgets will be. But in the meantime, it's understandable that and we have several members of our board who come from academia, and of course, they've shared with us that there's natural concern around all this uncertainty, and it causes distraction for them to, as they think about where their next funds might come from for future grants. So, that's why I think certainty as to where the budgets are at will be the most important thing to calm down the academic market. That all being said, much of the double digit increases that have occurred in NIH funding over the past four or five years since COVID has been directed more towards infectious disease, vaccine development, things around COVID and such. And that is not our sweet spot where our portfolio plays.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

And we've heard the administration say they want to defocus those areas. And so, if that's where the cuts happen, that will likely ultimately be much less, if any, impact to us and could actually be a tailwind, which is the lemonade I spoke of, with regards to funds being redirected more towards traditional chronic diseases such as cancer, diabetes, and neurology. And that's, again, where our portfolio strengths are. So, that's how we think about it.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yeah. And Daniel, thanks for the question. Let me add to that that fortunately Europe academics were really, really strong, right? So it's interesting to see that dynamic, we might continue to see. But in the meantime, you think about our portfolio and how it also maps towards the academic market, arguably, you would think that instrumentation is probably more impacted than our consumables, and we've seen that in our numbers.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Our consumables were relatively flat in The US academic markets. 80% of our revenues come from consumables, 10% from services, that's obviously a very favorable mix. If you then look at the other 10%, that's instrument related. Now these instruments are actually on a relatively low price point, around 50 ks, which then also you would expect is a little bit different decision making process, so lower CapEx. But then in the meantime, are positioned to automate very clunky yet fundamental processes in your laboratories and basically take cost out and increase your efficiencies, which might be something that you really would like during times of constraint.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

So the positioning of those are just really, really, really good. And then last but not least, we're just really happy that we also have fantastic commercial excellence. So we have consultative selling from our team, a team of experts that can help you pick the right reagents really quickly, make sure that your experiments are repeatable and give you the right results. And in the meantime, for convenience, we have a very much valued partnership with Thermo Fisher Scientific, where we utilize the Fisher channels for ease of ordering. And with that, the academic market, we feel that we are, from all angles, as well positioned as you could be.

Operator

Thank you. Our next question comes from Dan Arias with Stifel. Please go ahead.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Hey, good morning, guys. Thanks. Jim, I'm sorry, but I think I need to go back to the academic stuff here. You're calling out the headwinds there, which makes total sense. And then you're guiding organic down next quarter partially with that in mind.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

But I think your comment was that even under the most severe scenarios, funding would have an immaterial impact to getting to double digit growth long term. So if the budget over the next couple of years is down 20%, thirty %, forty %, which is in line with the proposals for 26%, Is the idea that you can still get back to double digits once the smoke clears on the other macro elements? I think I just need a little help with how you're framing that over the 'twenty

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

sure, Dan. Thanks for the question. So yeah, at the end of the day, when you look around our strategic plan, academic has never even said, it's an important part of our business, because it feeds into biotech and pharma, etcetera. It has never been the key growth driver for our growth plans. And our projections never assumed academic being a double digit grower.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

And more like a mid single digit grower, which it historically has been. And so, quite simply, I took the details of our strategic plan and assumed the worst, absolute worst case scenario, which was a 40% cut in our academic revenue across the board. And then from there, a gradual increase to historical growth rates of three to 5%. And we were still overall at double digit growth rate over a five year period. So, yes.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

I've taken that most severe situation into account in stating that it would still be a double digit growth trajectory given our strategic plan.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Okay. Thanks for that. And then just maybe on Celgene, apologies if you did give it, but I didn't catch it. Is there a growth rate for the quarter and just given what we're talking about some of the fluctuations in pharma ordering patterns, can you just sort of orientate us around what a good growth rate for GMP reagent cell and gene would be for this year since it's pretty important to the model? Thanks so much.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yeah, Dan. The cell and gene therapy product line, we talk about the trailing twelve months, right? And that was a little over 30% for the twelve month period. And as you know, we had quarters where it was 90%, sixty %, ten %, and the swings in between, and that's just because the customers further along in the clinical process, so in phase three, they order less frequently and larger orders, and that makes it lumpy. That's why we always look at our twelve month trailing, and that sits north Of 30.

Operator

Thank you. Our next question comes from the line of Thomas DiBerci with Nephron Research. Please go ahead.

Thomas DeBourcy
Principal at Nephron Research LLC

Hi, guys. Thanks for taking the question. The question is just on Diagnostics and Genomics organic growth. I know you have more difficult comps in the second half of the year, but what have they expected, I guess, Assure did overall to kind of be more, I guess, unaffected by changes? And so just curious whether there's, you know, I guess, just timing issues either related to some of the diagnostic and genomics portfolio growth?

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Thank you, Paul, for the question. I think that overall, in my prepared remarks, I mentioned that, of course, we looked very, very stringently at what is going on and in detail understand why the growth rate was lower than we usually have. But it was the diagnostic reagents division as well as Asurion with the larger account, there's, like I mentioned earlier, there's just the larger orders where timing becomes very important. So we definitely look by on a counter to account basis, are we losing shares, the market slowing down and there's a clear no and no. So it was definitely a timing related dip for those two businesses, which is not uncommon.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

And that's why I look back at the year to date numbers for those two businesses, which are in both cases healthy, high single and low double for those two divisions. Our diagnostic tests from the Epi point of view, the prostate test, has been growing very nicely in line with the other quarters, around thirty percent -ish for the year. And then last but not least, we have our spatial biology division, which has been seeing some headwinds from the NIH funding issues. That's the division that's mostly or most severely exposed to NIH markets and certainly did not have the growth numbers that we have seen over the last couple of quarters, last couple of years. And there we just look back at, do we have a fantastic offering?

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Are we competitive with our instrumentation? Do we win the deals that we compete in? And there also everything is very healthy. It is the purely end market driven headwind in that division. So that gives you basically the flavors of the four divisions in the segment.

Thomas DeBourcy
Principal at Nephron Research LLC

Great. Thank you.

Operator

Thank you. Our next question comes from Patrick Donnelli with Citi. Please go ahead.

Patrick Donnelly
Patrick Donnelly
Managing Director at Citi

Hey, guys. Thanks for taking the questions. Maybe one on the biopharma piece, I think you talked about mid single digit growth this quarter. Can you break that down a little bit? I just wanted to talk about the biotech piece in particular.

Patrick Donnelly
Patrick Donnelly
Managing Director at Citi

I know you talked a little bit about GMPs. Can you talk about what you're seeing from the biotech customer base? It's certainly been a concern across the industry just given the volatility of the funding backdrop. So curious what you're hearing from the customers there and expectations on that front.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yes. Thank you, Patrick. We certainly know that large pharma continues to be ahead of biotech in the recovery, right? Biotech is 30% of our revenues and large pharma 30 and biotech was flattish in Q3. And we believe that biotech funding is obviously very sensitive to capital markets, and those are very sensitive to economic uncertainty.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

And that typically leads to more frugal spending. And that's what we saw this quarter and that we expect next quarter.

Patrick Donnelly
Patrick Donnelly
Managing Director at Citi

Okay. That's helpful. And then, if you don't mind, just a quick update on what's happening with WolfsonWolf, what the trends were this quarter? Just want to keep an eye on that as we go, as well. Thanks.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

Yeah, Patrick, this is Jim. Thanks for the question. So, yeah, WolfsonWolf continues to perform very, very well. They had growth very solidly into the double digit growth rates this most recent quarter. So, they were projecting to have a very, very strong year in will be calendar year '25 for them going into calendar year '26. And so far, they're right on track for that.

Patrick Donnelly
Patrick Donnelly
Managing Director at Citi

Alright, thanks guys.

Operator

Thank you. The next question comes from Sung Ji Nam with Scotiabank. Please go ahead.

Sung Ji Nam
Managing Director, Senior Equity Research Analyst at Scotiabank

Hi. Thanks for taking the questions. Maybe if I could go back to pharma, biopharma, the sectoral tariffs that are under discussion. Just curious, you know, we'd love to hear your thoughts in terms of, you know, in an environment where there might be significant CapEx spending going towards US expanding US manufacturing, restoring, etcetera, but potential pressure on the early stage or early discovery development work. Just curious how Bio Techne is positioned in that environment, or if you have different thoughts in terms of how the tariffs could play out. Thanks.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

I'll start off. This is Jim. Thanks for the question. I think part of the looming discussions we're hearing out of the administration around tariffs for pharmaceuticals is, again, part of the reason for the guide that we did for Q4. I think there's going to be perhaps another level there is right now another level of uncertainty as it pertains to our pharma customer base.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

And so, we've seen how uncertainty impacts other parts of our end markets. So, we kind of expect a thing for pharma, at least temporarily. I don't know. It's probably anyone's guess as to how it ultimately plays out. It's hard to put out different scenarios when we don't even know what the proposal's gonna be with regards to tariffs in our pharma base.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

But I would say this, pharma spent the good part of last year already realigning their pipelines for what was the IRA Act. And that's not something they take lightly, and it's a pretty great, large endeavor. And for the most part, what we're hearing from our customers is that's behind them. So, I think there'll be, there clearly could be some changes with regards to CapEx spending and so forth. But at the end of the day, the pharma companies overall are flushed with cash.

Jim Hippel
Jim Hippel
EVP & CFO at Bio-Techne

They're overall doing very, very well. And just because they need to perhaps spend some more on CapEx, if that's what they need to do to move some manufacturing lines around, doesn't necessarily mean that they'll cut that out of their, take that out their P and L for R and D. But it's a good question, it remains to be seen.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yeah, let me add to that. The early stage biotechni with the core reagents was very much research oriented. But over the years, we have definitely diversified our portfolio, made sure that we can continue to join a customer in their downstream processes into clinicals and into eventually a treatment. So we have now our products way more distributed along the different stages, And you can see that in some of our presentations, where we're definitely playing discovery all the way through manufacturing, and of course, also have a portion of our company aligned with the diagnostics and the treatments of diseases. Our portfolio is much more distributed than it has been a long time ago.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

So that means that even though there might be some shifts in where the pharma spending is, we feel that we're nicely distributed and therefore will benefit from the overall spend level.

Sung Ji Nam
Managing Director, Senior Equity Research Analyst at Scotiabank

Got it. That's helpful. And then just quickly on the spatial biology side, thanks for the color there and the exposure to the academic market. Was wondering about academic market outside The US, whether spatial, you know, could be growing faster. And then also the recent launch of the spatial protein proximity detection capability.

Sung Ji Nam
Managing Director, Senior Equity Research Analyst at Scotiabank

Was curious if that could be utilized within pharma and kind of if you could talk about the competitive dynamics there for that particular application, just not familiar with it. Thank you.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Well, thanks for noticing it. Yeah, so I do believe, especially from the instrumentation point of view, where we still booked double digit growth. As I mentioned, we certainly look at our win loss rates and we're really happy where those sit. So we know that we're not losing share. If anything, we're we're doing really well with our placements and a very competitive offering.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

As you noticed, we have an instrument that is fully automated and it can run through multiomics. It will pull through antibodies as well as our RNA scope for the RNA detection. And then on the consumable side, we now have the capability of not only show your proteins as well as your RNA, but then also protein proximity, meaning protein protein interactions, which can be extremely important in the development and the treatment of a disease. So you can see that we've been building out a multiomics where there's truly no competitor already looking at just RNA and proteins, and now we're adding RNA proteins and protein protein interactions. So that's truly unique if it comes to the offering and very high value to our customers. So we're very pleased with our competitive positioning there.

Operator

Thank you. That was the last question for the day. I would now like to hand the conference over to Kim Kelderman for closing remarks.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Yeah. Thank you very much for your insightful questions. And before we conclude the call, I'd like to formally welcome Doctor. Amy Hurd to the Board of Directors of Biotechnology. Doctor.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Herr is currently a Chancellor's Professor of Bioengineering at the University of California, Berkeley, and she also serves as the Vice President of the Chance Zuckerberg BioHealth Network. Doctor. Heur's appointment completes a two year process to identify and appoint successors to retiring director Randy Stier, who retired in 2024, and Doctor. Roland Nusset, who will be retiring later in 2025. Doctor.

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Heur's deep biological and engineering experience are an ideal fit for our board of directors and the strategic direction of the company. Welcome, Doctor. Heur. And to conclude the call, I want to say that I am extremely proud of the team's continued execution in what has proven to be a prolonged period of uncertainty in our end markets. Our differentiated financial performance is a testament to the value our customers place on our uniquely positioned portfolio of research reagents, proteomic analysis tools, cell therapy workflow solutions, and diagnostics and spatial biology products. This portfolio unlocks cutting edge discoveries and significant portfolio

Kim Kelderman
Kim Kelderman
CEO, President & Director at Bio-Techne

Thank you very much for attending our call, and have a great day.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Executives
    • David Clair
      David Clair
      Investor Relations
    • Kim Kelderman
      Kim Kelderman
      CEO, President & Director
    • Jim Hippel
      Jim Hippel
      EVP & CFO
Analysts
    • Puneet Souda
      Senior MD at Leerink Partners
    • Dan Leonard
      Managing Director & Research Analyst at UBS Group
    • Matt Larew
      Research Analyst - Healthcare at William Blair
    • Daniel Markowitz
      Vice President at Evercore ISI
    • Dan Arias
      Managing Director at Stifel Financial Corp
    • Thomas DeBourcy
      Principal at Nephron Research LLC
    • Patrick Donnelly
      Managing Director at Citi
    • Sung Ji Nam
      Managing Director, Senior Equity Research Analyst at Scotiabank
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