Investment research report for TECH

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

Bio-Techne Corporation (TECH) is a life science company that develops and manufactures biological reagents, instruments, and services for research and clinical diagnostics markets. Its diversified portfolio spans proteomics, genomics, and diagnostics, providing multiple growth drivers across biopharma, academic, and applied research end-markets.

Key Insights

Growth Prospects

Bio-Techne is well-positioned to capitalize on secular tailwinds like the “proteomics revolution,” increased research funding, and the rapid growth of cell and gene therapies. The company’s innovative portfolio, including cell and gene therapy workflows, spatial biology, liquid biopsy diagnostics, and analytical instruments, supports sustainable long-term growth.

Financial Strength

Bio-Techne has demonstrated consistent organic revenue growth, averaging around 4-5% annually, supplemented by strategic acquisitions. The company maintains strong adjusted gross margins (around 71-72%) and generates robust operating cash flows, supporting investments and shareholder returns.

Competitive Advantages

Bio-Techne’s diversified product portfolio across research, diagnostics, and genomics markets reduces customer concentration risk and provides multiple growth avenues. Consistent R&D spending and an active M&A strategy help maintain product innovation and expand capabilities, strengthening the company’s competitive position.

Management and Shareholder Alignment

The executive compensation structure, heavily weighted towards variable, performance-based components, aligns management’s interests with long-term shareholder value creation. Insider trading patterns, with limited open market sales and significant equity holdings by executives, suggest confidence in the company’s long-term prospects.

Overall, Bio-Techne’s diversified portfolio, strong financial performance, competitive advantages, and management alignment position the company well for long-term value creation, making it an attractive investment opportunity for long-term investors.

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Valuation Analysis

PE ratio

  • Low: 23.758565735545908
  • Base: 60.82560762904697
  • High: 97.89264952254803

PB ratio

  • Low: 4.040692670489015
  • Base: 6.778347348278622
  • High: 9.516002026068229

DPS Growth

  • Low: -0.09%
  • Med: -0.00%
  • High: 0.08%

FCF Growth

  • Low: -2.36%
  • Med: 6.33%
  • High: 11.26%

Value forecast by FCF

  • Low: 14.86
  • Med: 24.24
  • High: 32.59

Value forecast by DPS

  • Low: 16.80
  • Med: 16.88
  • High: 16.96

The current price for TECH is $74.54.

Price target for 18 months from now

  • Low: 65.26
  • Med: 66.21
  • High: 67.04

Price target for 4 years from now

  • Low: 49.81
  • Med: 52.31
  • High: 54.55

Price target for 10 years from now

  • Low: 12.71
  • Med: 18.98
  • High: 24.55

The net present value multiplier discounted at 10.22% gives the value of the stock as:
– Low: 0.17
– Med: 0.25
– High: 0.33

The upside/downside ratio is 0.06, and our rating is Strong Sell.

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Industry and Competitors Analysis

Bio-Techne Corporation and Industry Overview

Based on the information provided, TECH (Bio-Techne Corporation) operates in the biotechnology industry. Some key points about the company and its competitors:

Bio-Techne is a life science company that develops and manufactures biological reagents, instruments, and services for research and clinical diagnostics markets. Its main competitors appear to be other biotechnology companies focused on therapeutics, diagnostics, and research tools/reagents.

Major Competitors

Major publicly traded competitors mentioned include BioMarin Pharmaceutical, Exelixis, Alnylam Pharmaceuticals, Seagen, BeiGene, and several smaller biotechs like Vaxcyte, Nuvalent, Akero Therapeutics, Blueprint Medicines, etc.

Relative Size and Positioning

In terms of financial metrics like revenue, net income, total assets etc., Bio-Techne appears to be a relatively mid-sized player compared to larger biotechs like BioMarin, Seagen, BeiGene but larger than many smaller clinical-stage biotechs.

Diversified Portfolio and Competitive Positioning

Bio-Techne seems to have a diversified portfolio of products and services spanning reagents, instruments, diagnostics across research and clinical markets. This diversified approach could position it well compared to biotechs focused solely on therapeutics.

However, many of its therapeutic biotech competitors have higher revenue growth and R&D spending geared towards developing novel drugs, which is the biggest value driver in biotechnology.

Conclusion

So in summary, as a life science tools and diagnostics company, Bio-Techne occupies an important niche but likely faces intense competition from larger biotechs and pharmaceuticals operating in the therapeutics space which garners higher valuations. Maintaining a innovative product pipeline will be key for its competitive positioning.

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Chart of Competitors

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Financial Analysis

Financial Strength

The company has a strong current ratio (around 4), indicating good liquidity and ability to meet short-term obligations. The debt-equity ratio is relatively low (around 0.3), suggesting a conservative capital structure and low financial risk. Interest coverage ratios are generally high (above 8), meaning the company can comfortably service its debt obligations.

Potential for Growth

Revenue growth has been positive in most recent quarters, indicating expanding operations. The company has maintained positive net income growth and EPS growth in many quarters, suggesting profitability growth. Operating cash flow growth has been volatile but generally positive, providing funds for investment and growth.

Competitive Advantage

Gross profit margins have been relatively stable, indicating pricing power and cost control abilities. The company seems to have a diversified product portfolio across research, diagnostics, and genomics markets, reducing customer concentration risk. Consistent R&D spending (based on SG&A expenses) could help maintain product innovation and competitiveness.

Quality of Management

Return on equity and return on assets have been mostly positive, indicating effective use of capital and assets. The company has generally maintained a shareholder-friendly dividend policy, albeit with a low yield. Analyst estimates suggest expectations of continued revenue and earnings growth in the coming years.

Shareholder Friendliness

The company pays dividends, though the yield is relatively low. Share buybacks have not been explicitly mentioned, but the low debt levels provide flexibility for capital returns. Profitability levels and cash flow generation appear sufficient to sustain dividends and investments.

Valuation

Price-to-earnings ratios have varied significantly but have generally been high, suggesting potential overvaluation or high growth expectations. Price-to-book ratios have also been elevated, indicating that the market values the company’s assets and growth prospects highly. Price-to-free-cash-flow ratios have fluctuated but have often been high, which could mean the stock is richly valued.

Overall, Bio-Techne appears to be a financially strong company with growth potential, competitive advantages, and shareholder-friendly policies. However, its valuation multiples suggest that the market has priced in high growth expectations, which the company will need to meet or exceed to justify its current valuation levels.

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Chart of Key Per Share Metrics

"Chart of Key Per Share Metrics"

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Chart of Absolute Metrics

"Chart of Absolute Metrics"

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Earnings Call Multi-Year Analysis

Diversified Portfolio and Growth Drivers

Bio-Techne has a diversified portfolio of products and solutions across proteomics, genomics, and diagnostics, providing multiple growth drivers and reducing reliance on any single area. Key growth platforms include cell and gene therapy workflows, spatial biology, liquid biopsy diagnostics (exosomes), analytical instruments, and GMP proteins.

The company is benefiting from strong secular tailwinds driving demand for its products, such as the “proteomics revolution,” increased research funding, and the rapid growth of cell and gene therapies. Bio-Techne appears well-positioned to capitalize on these long-term trends.

Near-Term Headwinds and Underlying Momentum

While facing near-term headwinds from factors like the biotech funding environment, COVID disruptions in China, and academic market softness, the company’s underlying growth momentum remains robust, particularly in the biopharma end-market.

Operational Excellence and Profitability

Bio-Techne has demonstrated operational excellence in managing inflationary pressures, supply chain challenges, and strategic investments to drive future growth. The company’s ability to expand margins and maintain profitability is a positive sign.

Strong Balance Sheet and Active M&A Strategy

The company has a strong balance sheet and remains committed to an active M&A strategy, which has been a key driver of its portfolio expansion and growth. Recent acquisitions like Lunaphore and Wilson Wolf have strengthened Bio-Techne’s position in attractive markets.

Long-Term Focus and Strategic Investments

Bio-Techne’s leadership team appears focused on the long-term, making strategic investments in talent, capacity, and R&D to support sustainable growth, even if it impacts near-term profitability.

Resilient Business Model

While facing some volatility and lumpiness in certain segments, the company’s broad-based growth across geographies and end-markets suggests a resilient business model capable of weathering short-term challenges.

Overall, the earnings call summaries paint a picture of a well-managed company with a diversified portfolio, strong growth prospects, and a disciplined approach to capital allocation and operational execution – characteristics that should appeal to long-term investors.

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Financial Statements Multi Year

Revenue Growth

BioTechne has demonstrated consistent organic revenue growth over the years, averaging around 4-5% annually. This organic growth is supplemented by strategic acquisitions that expand the company’s product portfolio and geographic reach.

Profitability

While gross margins have faced some pressure from product mix, foreign exchange, and growth investments, BioTechne maintains strong adjusted gross margins around 71-72%. The company has been able to leverage revenue growth to drive earnings growth over time.

Acquisitions and Investments

BioTechne has an active acquisition strategy, deploying capital to acquire complementary businesses and technologies. Recent notable deals include Lunaphore, Namocell, Eminence Biotechnology, and Asuragen. The company also makes strategic investments like the stake in Wilson Wolf.

Cash Flow and Balance Sheet

BioTechne generates robust operating cash flows that fund acquisitions, investments, dividends, and share buybacks. The company maintains a strong balance sheet with ample liquidity from cash/investments and its revolving credit facility.

Segment Performance

Both the Protein Sciences and Diagnostics & Genomics segments contribute to growth, with Protein Sciences being the larger and more profitable segment.

Strategic Investments

BioTechne continues to invest in growth initiatives like product innovation, geographic expansion, and operational capabilities to drive long-term sustainable growth.

Overall, BioTechne’s financial performance demonstrates its ability to deliver consistent revenue growth, maintain profitability, execute an acquisition strategy, generate strong cash flows, and invest for the future – factors that position the company well for long-term value creation for investors.

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Insider Trading Analysis

Long-Term Patterns

The CEO, Charles Kummeth, has consistently been acquiring and holding a large number of shares over the long-term. He has received multiple large stock option and restricted stock unit grants, indicating strong alignment with shareholders.

Other key executives like James Hippel (CFO) and Kim Kelderman have also been granted and holding significant equity awards, suggesting a focus on long-term value creation.

There have been relatively few large open market sales by insiders, indicating confidence in the company’s long-term prospects.

Short-Term Patterns

There have been some periodic, smaller open market sales by executives like Hippel, Kelderman, and Furlow, likely for personal financial reasons. However, the size of these sales has been modest compared to their overall holdings.

The CEO and other top executives have been consistently exercising stock options and holding the resulting shares, rather than selling immediately. This suggests they see further upside in the stock price.

There have been a number of routine equity grants to executives and directors, which is common practice and aligns their interests with shareholders.

Implications

The strong insider ownership and equity incentives for the CEO, CFO, and other key leaders point to a focus on long-term value creation. This should be reassuring for long-term investors.

The relatively limited open market selling by insiders, even as the stock price has risen significantly, suggests they believe the company has further upside potential.

Short-term investors should not read too much into the periodic, modest insider sales, as these appear to be for personal financial reasons rather than a lack of confidence in the company’s prospects.

Overall, the insider trading patterns at Bio-Techne Corporation indicate an alignment of interests between management and shareholders, with a focus on driving long-term growth and value. This should be positive for both long-term and short-term investors.

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Management Compensation Benchmark Analysis

Executive compensation structure

The executive compensation for TECH appears to be heavily weighted towards variable, performance-based components like stock awards and incentive plan compensation, rather than fixed salary. This suggests the compensation is designed to align the executives’ interests with long-term shareholder value creation.

Percentage of salary in total compensation

The base salary portion of total compensation for TECH executives is relatively low, ranging from around 7-18% across the different executives and years. This indicates the compensation structure is focused more on variable, at-risk pay tied to company performance.

Benchmarking against other biotech/pharma companies

Compared to the executive compensation structures at BMRN, LQDA, SGEN, and ALNY, TECH’s approach appears to be more heavily weighted towards variable pay. The average base salary portion of total compensation is 32.31% for TECH, lower than the 23.52% for BMRN, 33.77% for LQDA, 18.70% for SGEN, and 32.28% for ALNY. This suggests TECH’s compensation model is more closely aligned with long-term shareholder value creation.

Consistency over time

The compensation structure for TECH executives has remained relatively consistent over the years, with a low base salary component and high variable pay, indicating a long-term focus.

In summary, the executive compensation structure at TECH appears to be well-designed to incentivize the leadership team to focus on long-term value creation for shareholders. The heavy weighting towards variable, performance-based pay suggests the interests of executives are closely aligned with those of long-term investors.

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Proxy Statement Analysis

Compensation Program Overview

The following analysis is based on the latest proxy statement of TECH:

Based on the information provided in the DEF 14A filing, BioTechne Corporation’s executive compensation program appears to be reasonably well-designed to align with long-term shareholder value creation. Here are the key insights:

  1. The compensation mix includes base salary, annual cash incentives tied to financial/operational goals, and long-term equity incentives (stock options, RSUs) that vest over multiple years. This combination of short-term and long-term incentives can help align executives’ interests with both near-term performance and sustained value growth.

  2. A portion of the long-term equity awards is tied to specific performance metrics like revenue growth and earnings per share targets, further linking pay to key drivers of long-term value.

  3. The company has stock ownership guidelines requiring executives to maintain a significant equity stake, aligning their interests with shareholders.

  4. A clawback policy allows the company to recoup incentive pay in cases of misconduct, discouraging excessive risk-taking.

  5. The overall program design, with a emphasis on equity-based pay and performance-contingent awards, appears consistent with incentivizing executives to focus on long-term sustainable growth strategies.

Evaluation and Conclusion

While compensation levels and specific targets would need to be evaluated, the program structure seems reasonably aligned with promoting long-term value creation for shareholders. However, I don’t have full confidence in assessing every aspect of the plan’s effectiveness without more detailed analysis.

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News Analysis for Bio-Techne Corporation

Positive Factors

Bio-Techne is consistently launching new innovative products and services across various areas like cell and gene therapy, diagnostics, antibodies etc. This demonstrates their focus on R&D and expanding product portfolio.

They are making strategic acquisitions (e.g. Asuragen, Exosome Diagnostics) to bolster their capabilities in areas like genetics, oncology diagnostics.

The company is receiving recognition and awards for its innovative COVID-19 antibody tests and solutions.

Bio-Techne is expanding its manufacturing facilities and achieving key certifications like ISO 9001, indicating operational excellence.

They are forming collaborations with other companies to develop biomarkers, diagnostic applications etc.

Potential Concerns

In some recent quarters, Bio-Techne’s earnings/revenues have missed analyst estimates, which could raise concerns over growth trajectory.

The stock has been labeled a “sell” by some analysts at times, possibly due to perceived overvaluation.

As a premium biotech company, Bio-Techne’s products/services likely come at a high price, which could impact demand in recessionary conditions.

Overall, the frequent product launches, acquisitions and collaborations in innovative areas position Bio-Techne well for long-term growth in biotech tools and diagnostics. However, execution on delivering expected financial performance and managing competitive pricing pressures will be important to sustain premium valuations.

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Technical Indicators Analysis

Next Week Trading

Based on the recent technical indicators, the stock appears to be in a consolidation phase. The TEMA (Triple Exponential Moving Average) is showing a downward trend, indicating potential short-term bearishness. The RSI (Relative Strength Index) is in the neutral range, suggesting the stock is neither overbought nor oversold. A next week trader may consider taking a cautious approach, waiting for a clearer trend to emerge before making any trading decisions.

Resistance and Support Levels

The current price of the stock is around $74.54. The 20-day SMA (Simple Moving Average) at $78.17 and the 50-day SMA at $74.34 could act as potential resistance levels. The 200-day SMA at $70.36 could provide support. A break above the 20-day SMA or below the 200-day SMA could signal a change in the overall trend.

Short Term Investor

The short-term technical indicators are mixed. The TEMA is showing a downward trend, while the RSI is in the neutral range. This suggests the stock may be in a consolidation phase. A short-term investor may consider waiting for a clearer trend to emerge before taking a position, as the current market conditions appear uncertain.

Long Term Investor

For a long-term investor, the overall technical picture appears relatively positive. The 200-day SMA is above the current price, indicating a long-term uptrend. However, the recent decline in the TEMA and the neutral RSI may warrant a cautious approach. A long-term investor may consider monitoring the stock’s performance and looking for opportunities to enter the market if the long-term uptrend resumes.

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Chart of Valuation History

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Financial Statements Annual

Financial Statements Annual 2024 Q2

Revenue Growth

Consolidated net sales increased 3% in fiscal 2023 compared to fiscal 2022, driven by 5% organic growth. The Protein Sciences segment saw 2% revenue growth, with 4% organic growth. The Diagnostics and Genomics segment grew 6%, with 8% organic growth.

Profitability

Consolidated gross margins were 67.7% in fiscal 2023, down slightly from 68.4% in fiscal 2022, impacted by foreign currency exchange and strategic growth investments. Adjusted gross margins were 71.7% in fiscal 2023 compared to 72.5% in fiscal 2022. Adjusted net earnings attributable to BioTechne decreased 1% in fiscal 2023 compared to fiscal 2022, primarily due to foreign currency exchange and strategic growth investments.

Acquisitions and Investments

In July 2022, the company acquired Namocell Inc. for $101.2 million net of cash acquired, plus up to $25 million in contingent consideration. The company invested $232 million to acquire a 19.9% stake in Wilson Wolf Corporation in fiscal 2023. The company completed the acquisition of Lunaphore Technologies SA for approximately $165 million net of cash acquired in July 2023.

Financial Position

Cash, cash equivalents, and available-for-sale investments totaled $204.3 million as of June 30, 2023. The company had $350 million in borrowings under its $1 billion revolving credit facility as of June 30, 2023. The company paid $50.3 million in cash dividends in fiscal 2023.

Segment Performance

The Protein Sciences segment represented about 74% of total net sales in fiscal 2023. The Diagnostics and Genomics segment represented about 26% of total net sales in fiscal 2023.

Overall, BioTechne demonstrated solid revenue growth, particularly in its core Protein Sciences and Diagnostics and Genomics segments, though profitability was impacted by strategic investments and foreign currency headwinds. The company continued to execute on its acquisition and investment strategy to expand its product portfolio and geographic reach.

Financial Statements Annual 2023 Q2

Revenue Growth

Consolidated net sales increased 19% in fiscal 2022 compared to fiscal 2021, driven by 17% organic growth and 3% from acquisitions, partially offset by 1% unfavorable impact from foreign currency. The Protein Sciences segment saw 18% revenue growth, with 19% organic growth, while the Diagnostics and Genomics segment grew 21%, with 10% organic growth and 11% from acquisitions.

Profitability

Consolidated earnings including noncontrolling interest increased 88% in fiscal 2022 compared to fiscal 2021, driven by a $16 million non-operating gain on the ChemoCentryx investment compared to a $679 million loss in the prior year, as well as a $204 million benefit related to contingent considerations. Adjusted net earnings (excluding acquisition costs, intangible amortization, stock-based compensation, and other items) increased 18% in fiscal 2022.

Segment Performance

The Protein Sciences segment had an operating margin of 75.5% in fiscal 2022, compared to 76.0% in fiscal 2021, with the decrease primarily due to product mix. The Diagnostics and Genomics segment operating margin improved to 63.1% in fiscal 2022 from 60.5% in fiscal 2021, driven by volume leverage.

Cash Flow and Capital Allocation

The company generated $325 million in operating cash flow in fiscal 2022 and ended the year with $247 million in cash and investments. The company paid $502 million in dividends and repurchased $161 million of its own shares in fiscal 2022. The company entered into a $25 million forward contract to potentially acquire Wilson Wolf Corporation based on certain revenue and EBITDA thresholds.

Acquisitions and Investments

The company did not complete any acquisitions in fiscal 2022 but made a $25 million investment in a forward contract to potentially acquire Wilson Wolf Corporation. In fiscal 2021, the company acquired Eminence Biotechnology and Asuragen Inc. for a total of $225 million net of cash acquired.

Goodwill Impairment

The company recorded a $83 million goodwill impairment charge and an $86 million intangible asset impairment charge related to its Eminence Biotechnology reporting unit in fiscal 2022 due to the subsidiary’s need for additional capital.

Overall, BioTechne delivered strong revenue and earnings growth in fiscal 2022, driven by broad-based organic growth across its Protein Sciences and Diagnostics and Genomics segments. The company continues to invest in growth through targeted acquisitions and strategic partnerships while maintaining a disciplined capital allocation strategy.

Financial Statements Annual 2022 Q2

Strong Revenue Growth

BioTechne experienced robust revenue growth in fiscal 2021, with consolidated net sales increasing 26% compared to the prior year. This was driven by 22% organic growth, 3% from foreign currency impact, and 1% from acquisitions.

Broad-Based Segment Performance

Both the Protein Sciences and Diagnostics and Genomics segments contributed to the strong revenue growth. The Protein Sciences segment grew 27%, with 24% organic growth, while the Diagnostics and Genomics segment grew 23%, with 18% organic growth.

Margin Expansion

Consolidated gross margins improved to 68.0% in fiscal 2021 compared to 65.4% in the prior year, driven by volume leverage and product mix. Adjusted gross margins expanded to 72.2% from 70.3%.

Acquisition Activity

BioTechne made two key acquisitions in fiscal 2021 – Eminence Biotechnology and Asuragen Inc. These acquisitions expanded the company’s product portfolio and geographic reach.

Strong Cash Flow and Balance Sheet

The company generated $352 million in operating cash flow in fiscal 2021 and ended the year with $232 million in cash and short-term investments, providing financial flexibility for future investments and acquisitions.

Goodwill Impairment Assessment

The company’s annual goodwill impairment analysis indicated that all reporting units had substantial headroom, with no impairment identified.

Contingent Consideration Liabilities

The company recorded initial fair values of contingent consideration liabilities related to the Asuragen acquisition, which could result in up to $1.05 billion in future payments upon achievement of certain revenue targets.

Effective Tax Rate Fluctuations

The company’s effective tax rate fluctuated significantly year-over-year, driven by changes in discrete tax items, particularly related to stock-based compensation excess tax benefits.

Overall, BioTechne delivered strong financial performance in fiscal 2021, driven by broad-based organic growth, strategic acquisitions, and operational efficiency, while maintaining a solid balance sheet and cash flow profile.

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Financial Statements Quarterly

Financial Statements Quarterly 2024 Q2

Consolidated Net Sales

Consolidated net sales increased 3% for the quarter and 2% for the nine months ended March 31, 2024 compared to the prior year periods. Organic revenue growth was 2% for the quarter and flat for the nine months.

Gross Margins

Consolidated gross margins were 67.4% for the quarter and 66.4% for the nine months, down from 68.7% and 67.6% in the prior year periods. Adjusted gross margins were 71.9% and 71.0% respectively, down from 72.6% and 71.8% in the prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 13% for the quarter and 14% for the nine months, primarily due to the Lunaphore acquisition, CEO transition costs, and restructuring charges.

Research and Development Expenses

Research and development expenses increased 13% for the quarter and 5% for the nine months, driven by the Lunaphore acquisition and strategic growth investments.

Segment Performance

The Protein Sciences segment saw a 2% and 1% decline in net sales for the quarter and nine months respectively, impacted by lower sales in China and Europe. The Diagnostics and Genomics segment grew 16% and 10% respectively, driven by Spatial Biology and Molecular Diagnostics products as well as the Lunaphore acquisition.

Effective Tax Rate

The effective tax rate was 19.7% for the quarter and 11.5% for the nine months, down from 12.4% and 16.1% in the prior year periods, primarily due to higher discrete tax benefits.

Non-GAAP Adjusted Net Earnings

Non-GAAP adjusted net earnings decreased to $76.4 million for the quarter and $206.2 million for the nine months, compared to $85.7 million and $233.2 million in the prior year periods.

Cash Flow and Liquidity

The company generated $223.5 million in cash from operations in the nine months, up from $171.0 million in the prior year period. The company had $1.45 billion in cash, cash equivalents and short-term investments as of March 31, 2024.

In summary, the company saw modest organic revenue growth, margin pressure, increased operating expenses from acquisitions and restructuring, and a lower effective tax rate leading to a decline in adjusted net earnings compared to the prior year. The company maintained a strong cash position to fund operations and strategic investments.

Financial Statements Quarterly 2024 Q1

Revenue

Revenue remained flat for the quarter and increased 2% for the six months ended December 31, 2023 compared to the prior year periods. Organic revenue declined 2% for the quarter and was flat for the six months, with acquisitions and foreign currency exchange having a favorable impact.

Gross Margins

Gross margins declined to 64.8% for the quarter and 65.8% for the six months, down from 67.5% and 67.1% in the prior year periods. This was driven by unfavorable volume and product mix, as well as the impact of the Lunaphore acquisition.

Operating Expenses

Operating expenses increased 24% for the quarter and 15% for the six months, primarily due to impairment of assets held for sale, restructuring charges, and the Lunaphore acquisition.

Net Earnings

Net earnings attributable to BioTechne decreased to $27.5 million for the quarter and $78.5 million for the six months, compared to $50.0 million and $139.6 million in the prior year periods. This was driven by the impairment, restructuring charges, and unfavorable volume and mix.

Effective Tax Rate

The company’s effective tax rate declined to 17.7% for the quarter and 5.4% for the six months, compared to 24.7% and 17.9% in the prior year, due to discrete tax benefits.

Cash Flow and Debt

The company generated $142.5 million in cash from operations in the six months, up from $120.5 million in the prior year period. Cash and investments declined to $1.36 billion as of December 31, 2023 from $2.04 billion at June 30, 2023, primarily due to the Lunaphore acquisition. The company’s debt balance increased to $549.5 million as of December 31, 2023 from $350.0 million at June 30, 2023, as it drew on its revolving credit facility to fund the Lunaphore acquisition.

In summary, BioTechne faced headwinds from impairment charges, restructuring costs, and unfavorable volume and mix, which pressured profitability despite relatively stable revenue. The company continued to invest in growth through the Lunaphore acquisition, funded in part by increased debt.

Financial Statements Quarterly 2023 Q4

Revenue Growth

Consolidated net sales for the quarter ended September 30, 2023 were $276.9 million, an increase of 3% compared to the same prior year period. Organic growth for the quarter was 2%, with acquisitions contributing 1% to revenue growth and foreign currency exchange having an immaterial impact. Organic growth was primarily driven by the ProteinSimple branded analytical solutions, Cell & Gene Therapy portfolio, Spatial Biology products, and the ExoDx Prostate cancer test, partially offset by weakness in China.

Profitability

Consolidated gross margin for the quarter was 66.9%, compared to 66.6% for the same prior year period. Excluding the impact of acquired inventory, stock compensation, intangible amortization, and partially-owned subsidiaries, adjusted gross margin was 71.3% compared to 70.9% in the prior year quarter. Operating income was $55.9 million, compared to $56.3 million in the same prior year period. Non-GAAP adjusted net earnings attributable to BioTechne were $66.0 million, compared to $72.2 million in the prior year quarter.

Segment Performance

Protein Sciences segment revenue grew 2% organically, driven by ProteinSimple platforms and GMP proteins. Segment operating margin was 43.2%. Diagnostics and Genomics segment revenue grew 4% reported, with acquisitions contributing 3% and foreign currency 1%. Segment operating margin was 0.7%.

Tax Rate

The effective tax rate for the quarter was 29%, compared to 13.5% in the prior year quarter. Excluding discrete items, the non-GAAP adjusted tax rate was 22.0% compared to 21.0% in the prior year quarter.

Cash Flows and Liquidity

Cash and cash equivalents plus available-for-sale investments were $148.7 million as of September 30, 2023, down from $204.3 million as of June 30, 2023. The company generated $59.4 million in cash from operations in the quarter, compared to $56.1 million in the prior year quarter. The company has $560 million available on its $1 billion revolving credit facility as of September 30, 2023.

In summary, BioTechne delivered solid organic revenue growth, maintained profitability, and generated strong cash flows during the quarter, though earnings were impacted by discrete tax items and the timing of strategic investments. The company’s liquidity position remains robust to support ongoing operations and strategic initiatives.

Financial Statements Quarterly 2023 Q3

Organic revenue growth

The company achieved 3% organic revenue growth in Q3 FY2023 and 4% organic growth for the first 9 months of FY2023. This demonstrates the company’s ability to grow its core business despite macroeconomic headwinds.

Gross margins

Consolidated gross margins were 68.7% in Q3 FY2023 and 67.6% for the first 9 months, impacted by higher costs and foreign exchange. Adjusting for acquisition-related charges, gross margins were 72.6% in Q3 and 71.8% for the 9 months, indicating the underlying profitability of the business.

Operating expenses

Selling, general and administrative expenses increased 11% in Q3 and 6% in the 9 months, driven by the Namocell acquisition, inflation, and strategic investments. Research and development expenses also increased 4% in Q3 and 8% in the 9 months, supporting the company’s innovation pipeline.

Segment performance

The Protein Sciences segment grew 3% in Q3 and 1% in the 9 months, driven by strong consumables sales. The Diagnostics and Genomics segment declined 3% in Q3 but grew 5% in the 9 months, impacted by a non-recurring milestone payment in the prior year.

Tax rate

The company’s effective tax rate was 12.4% in Q3 and 16.1% in the 9 months, impacted by discrete tax items. Excluding these items, the company’s non-GAAP tax rate was 21.0%, in line with its long-term expectations.

Cash flow and liquidity

The company generated $171 million in operating cash flow in the 9 months, funding capital expenditures, acquisitions, and dividends. Cash and investments totaled $1.57 billion as of March 31, 2023, providing ample liquidity to support the company’s growth initiatives.

Overall, the financial statements demonstrate BioTechne’s ability to grow its core business organically, maintain strong profitability, and invest in innovation and strategic acquisitions, while managing its capital structure and cash flow effectively. These factors position the company well for long-term value creation.

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Earnings Call Analysis

Earnings Call Analysis 2024 Q2

China remains a significant headwind

China remains a significant headwind, with the funding environment and macroeconomic conditions deteriorating throughout the quarter. The company is cautious about the timing of a recovery in China.

Soft biotech funding environment

The soft biotech funding environment, particularly in the U.S., was a larger-than-expected drag on the business, impacting the Protein Sciences segment. This appears to have worsened towards the end of the quarter.

Growth pillars continue to perform well

The company’s growth pillars, such as GMP proteins, ExoDx prostate, ProteinSimple, and the spatial biology business, continue to perform well and demonstrate the strength of Bio-Techne’s portfolio.

Productivity measures and selective investments

The company remains focused on productivity measures and selective investments to protect profitability, while continuing to invest in the key growth platforms.

Robust M&A pipeline

The M&A pipeline remains robust, with the recent Lunaphore acquisition seen as a strong strategic fit. The company is actively evaluating additional acquisition opportunities.

Positive transition to new CEO

The transition to new CEO Kim Kelderman is viewed positively, with the board confident in his ability to lead the company forward.

Cautious outlook

The analysts seem to be probing for any signs of a potential recovery in the second half of the fiscal year, but the company remains cautious in its outlook given the dynamic macroeconomic environment.

Overall, the key message is that Bio-Techne is navigating the current industry headwinds well, while continuing to invest in its growth platforms and positioning the company for the long term.

Earnings Call Analysis 2024 Q1

Growth Platforms Resilient Despite Headwinds

Bio-Techne’s key growth platforms like cell and gene therapy, spatial biology, and liquid biopsy exosome performed well despite macroeconomic challenges, demonstrating the endurance of these platforms.

China Volatility

China was a mixed bag, with a strong start to Q4 followed by a sudden reversal when expected government funding did not materialize. The company expects the funding to return, but timing is uncertain.

Instrument Portfolio Strength

Bio-Techne’s instrument platforms like Simple Western, MauriceFlex, and Ella continue to see robust demand, especially in applications like cell and gene therapy and neuroscience. The pending ISO 13485 certification for Ella could open up clinical diagnostic opportunities.

GMP Protein Growth

The company’s GMP protein portfolio, critical for cell and gene therapy workflows, saw nearly 60% growth in Q4 and is a key focus area for capacity expansion.

Exosome Diagnostics Momentum

The ExoDx prostate test saw nearly 70% volume and revenue growth, solidified by positive clinical utility data. This platform represents a significant growth opportunity.

Cautious Outlook, but Confidence in Long-Term Platforms

While the company is cautious on the near-term outlook due to macro uncertainties, it remains confident in the long-term potential of its key growth platforms to drive acceleration as the macro environment improves.

M&A Remains a Priority

The company continues to actively pursue M&A opportunities, with the recent Lunaphore acquisition expected to contribute to growth in fiscal 2024.

Overall, the call highlights Bio-Techne’s resilience and the strength of its diversified portfolio, even in a challenging macro environment. The long-term investor should focus on the company’s ability to navigate short-term headwinds while investing in its high-growth platforms.

Earnings Call Analysis 2023 Q4

Temporary headwinds impacting growth

The earnings call revealed several temporary headwinds that are currently impacting Bio-Techne’s growth:

  • The ExoTRU milestone payment in the prior year Q3 was a 3.5% headwind.
  • COVID disruptions in China were a 2.5% headwind.
  • OEM destocking was a 1.5% headwind.
  • A slowdown in spending by smaller biotech customers is also acting as a headwind.

Growth drivers performing well

Despite these temporary challenges, the earnings call highlighted several strong growth drivers for Bio-Techne:

  • The cell and gene therapy workflow solutions, including GMP proteins, grew over 20%.
  • The spatial biology business returned to double-digit growth.
  • Exosome Diagnostics test volumes and revenue grew over 70% and 85% respectively.

Outlook and recovery

The company provided an optimistic outlook for the future:

  • China growth is expected to reaccelerate to over 40% next quarter as the COVID impact subsides.
  • The OEM destocking headwind is expected to diminish in fiscal 2024 as customers restock.
  • The company expects to return to double-digit overall growth in fiscal 2024 as the temporary headwinds subside.

Analyst questions and implications

During the earnings call, analysts probed the company on several key topics:

  • The durability of the China recovery and the timeline for OEM destocking to unwind.
  • The margin profile and path to profitability for the Exosome Diagnostics business.
  • Whether the $2 billion revenue target needs to be updated given the current headwinds.

Overall, the key message from the earnings call is that Bio-Techne has strong growth drivers that should enable a return to double-digit growth once the temporary headwinds subside. The company appears well-positioned for the long-term, though near-term performance may be impacted by macro factors.

Earnings Call Analysis 2023 Q3

Biotech Funding Environment and Ordering Patterns

The biotech funding environment has slowed, leading to a divergence in ordering patterns between biotech customers and larger pharma customers. Biotech customers are being more conservative with spending, delaying some instrument orders.

However, the underlying research activity that accelerated during the strong biotech funding environment continues, as evidenced by the strength in the bio-pharma research reagent run rate business, continued cell and gene therapy growth, and strong utilization trends in the proteomic and analytical tools.

Long-term Growth Opportunities

The company remains optimistic about long-term growth opportunities in areas like cell and gene therapy, spatial biology, liquid biopsies, and diagnostics. The portfolio is well-positioned to capitalize on these trends.

M&A as a Capital Allocation Priority

The company is actively pursuing M&A as a top capital allocation priority, taking advantage of lower valuations in the current environment.

China Rebound Expected

China is expected to see a strong rebound in Q4 as the country moves past the current COVID wave and benefits from government stimulus targeting the healthcare sector.

Expense Management and Resource Allocation

The company is focused on managing expenses and reallocating resources to the higher growth platforms, while maintaining a disciplined approach to prioritization and investment.

Overall, the company appears to be navigating the current challenges well and remains confident in its long-term growth prospects, though near-term headwinds from the biotech funding environment and COVID in China are impacting the pace of growth in the short-term.

Earnings Call Analysis 2023 Q2

Tough year-over-year comparisons in the Protein Sciences segment

The Protein Sciences segment experienced 3% organic growth in Q1 FY2023, compared to 26% growth in Q1 FY2022. However, the segment’s 2-year organic growth CAGR is over 14%, indicating strong underlying performance.

Strong performance in the Diagnostics and Genomics segment

The Diagnostics and Genomics segment delivered 17% organic growth, with strong performance across spatial biology, exosome diagnostics, Asuragen, and diagnostic reagents. This segment is seen as a key growth driver going forward.

Potential macro challenges in Europe and China

The company has experienced some softness in instrument purchases and larger orders in Europe, though it expects improvement as the year progresses. China is also recovering from COVID-related disruptions.

Strategic price increases to offset inflationary pressures

The company is focused on strategic price increases to offset inflationary pressures, though this has had a negative impact on operating margins in the short-term.

Confident in long-term growth prospects

The company remains confident in its long-term growth prospects, with a strong pipeline and continued investment in key growth areas like cell and gene therapy, spatial biology, and exosome diagnostics.

Analyst questions suggest near-term performance concerns

Analyst questions suggest some confusion around the near-term performance, particularly in the Protein Sciences segment, but the company maintains a positive long-term outlook.

Overall, the key insights suggest that while the company is facing some near-term headwinds, the long-term growth story remains intact, with the Diagnostics and Genomics segment emerging as a key driver. The company’s ability to navigate macroeconomic challenges and continue investing in strategic growth areas will be critical going forward.

Earnings Call Analysis 2023 Q1

Strong financial performance

Bio-Techne delivered 17% organic revenue growth for fiscal year 2022, surpassing $1.1 billion in revenue for the first time. This demonstrates the company’s ability to execute and grow despite challenging macroeconomic conditions.

Diversified portfolio and growth drivers

The company has a diverse portfolio spanning protein sciences, diagnostics, and genomics. Key growth drivers include the cell and gene therapy business, spatial biology, and the ExoDx prostate cancer test. This diversification reduces reliance on any single product or market.

The company is successfully managing inflationary pressures through price increases and productivity gains, maintaining gross margins around 73%. This suggests strong pricing power and operational efficiency.

Talent acquisition and retention

Bio-Techne has been actively hiring, adding over 400 employees in fiscal 2022. Retaining and building a strong talent pool is crucial for executing the company’s strategic initiatives.

Transition in leadership

The announcement of CEO Chuck Kummeth’s planned retirement in 2 years provides a smooth transition period. The company has a strong bench of internal candidates and is also considering external candidates, signaling a thoughtful succession plan.

M&A strategy

The company has a strong balance sheet and cash position, indicating potential for continued M&A activity to expand its portfolio and capabilities, particularly in high-growth areas like cell and gene therapy.

Analyst questions

Analysts probed the company’s outlook on the biopharma end market, potential impact of funding environment, and the growth trajectory of the spatial biology business. The management team provided reassuring responses, highlighting the diversified nature of the business.

Overall, the conference call suggests Bio-Techne is well-positioned for continued growth, with a strong portfolio, operational execution, and thoughtful leadership transition. The company’s diversification and ability to navigate challenges make it an attractive long-term investment.

Earnings Call Analysis 2022 Q4

Consistent Strong Growth Momentum

Bio-Techne has delivered consistent mid-to-high teens organic growth over the past 7 quarters, using fiscal year 2019 as a pre-COVID baseline. The company believes it is still in the early stages of a “proteomics revolution” and is well-positioned to continue this growth trajectory.

Diversified Growth Drivers

The company is seeing strong performance across its portfolio, including its core research reagents, cell and gene therapy solutions, proteomic analytical tools, and diagnostic offerings. This diversification reduces reliance on any single product or segment.

Operational Execution

Bio-Techne has effectively managed its supply chain and implemented strategic pricing to offset inflationary pressures, as evidenced by its margin expansion. The company’s digital initiatives are also enhancing the customer experience.

Emerging Diagnostics Opportunity

The company’s Exosome Diagnostics business is gaining momentum, with record test volumes for its prostate cancer test. The upcoming ExoTRU kidney transplant rejection test in partnership with Thermo Fisher also represents a new growth opportunity.

Disciplined M&A Strategy

Bio-Techne has a robust M&A pipeline and a strong balance sheet to support strategic acquisitions, particularly in areas like cell and gene therapy and diagnostics, to further enhance its growth profile.

The analyst questions suggest some caution around the potential impact of China lockdowns and academic funding, but overall, the company appears well-positioned for long-term growth based on its diversified portfolio, operational excellence, and strategic initiatives.

Earnings Call Analysis 2022 Q3

Demand for Bio-Techne’s Products

Demand for Bio-Techne’s products, especially in the biopharma end market, remains very strong. The company’s cell and gene therapy business is growing rapidly, with GMP protein sales up over 180% and the overall cell and gene therapy business growing nearly 80%.

Positioning in the GMP Protein Market

Bio-Techne is well-positioned in the GMP protein market, with a large catalog of proteins and a state-of-the-art GMP manufacturing facility. The company believes it is years ahead of competitors in this space and can differentiate on quality, lot consistency, and bioactivity.

Expanding Cell and Gene Therapy Offerings

The company is expanding its cell and gene therapy offerings beyond just GMP proteins, including serum, media, non-viral gene editing technology, and the acquisition of Wilson Wolf, a leading provider of cell culture bioreactors. This positions Bio-Techne as a comprehensive solutions provider for the cell and gene therapy workflow.

Academic Market Performance

While the academic market was softer due to Omicron-related disruptions, the biopharma market remains very strong, offsetting this weakness. Management expects the academic market to gradually improve through the remainder of the fiscal year.

Growth Outlook

The company is confident it can achieve mid-teens organic growth for the full fiscal year, despite increasingly challenging year-over-year comparisons. This reflects the strength of demand across its portfolio.

Capital Allocation

On capital allocation, Bio-Techne remains focused on M&A as a priority, but is also utilizing a new $400 million share repurchase program to take advantage of what it sees as an undervalued stock price. The company is willing to be opportunistic on M&A if valuations become more attractive.

Overall, the key takeaway is that Bio-Techne is executing very well, with strong demand across its portfolio, particularly in high-growth areas like cell and gene therapy. The company appears well-positioned to continue its strong growth trajectory.

Earnings Call Analysis 2022 Q2

Strong growth momentum

Bio-Techne reported 21% organic revenue growth in Q1, reflecting broad strength across geographies and end markets, especially the biopharma segment. This suggests the company is well-positioned to continue its growth trajectory.

Promising growth platforms

The company’s instrument portfolio (Biologics, Simple Western, Simple Plex), research reagents, and GMP protein business are identified as significant growth drivers with long-term potential.

Cautious on ACD (spatial biology)

While ACD saw mid-single digit growth, the management acknowledged challenges related to lumpiness in the business, hiring constraints, and tough year-over-year comparisons. This suggests the growth in this segment may be more volatile.

Exosome Diagnostics recovery

The management noted improving trends for the ExoDx prostate cancer test, with patient volumes recovering and increased engagement with the physician community. This could be a positive sign for the future of this business.

Investments for future growth

The company is making strategic investments in hiring and capacity expansion, which may put near-term pressure on margins but position the company for long-term growth.

China opportunity

The strong 50%+ organic growth in China is a highlight, and the management believes the company is still in the early innings of realizing its potential in this important geography.

Overall, the company appears to be executing well on its growth strategy, with promising long-term opportunities in cell and gene therapy, proteomic tools, and diagnostics. However, the management’s comments on potential challenges, such as hiring constraints and lumpiness in certain segments, suggest the need for close monitoring of the company’s performance going forward.

Earnings Call Analysis 2022 Q1

Strong growth momentum

Bio-Techne reported 39% organic growth in Q4 and 22% organic growth for the full fiscal year 2021, indicating strong underlying demand for its products and services. The company believes a “multi-year research tsunami” is underway, positioning it well for continued growth.

Broad-based growth across segments and geographies

The growth was broad-based across the Protein Sciences and Diagnostics & Genomics segments, as well as geographies like the U.S., EMEA, and China. This suggests the company is executing well across its diversified portfolio.

Analytical instruments driving growth

The company’s analytical instrument platforms like Simple Western, Jess, Simple Plex, and Ella saw 30-80% growth, enabled by increased productivity needs of customers during the pandemic.

Cell and gene therapy opportunity

Bio-Techne is expanding its GMP protein facility and signing large customers in the fast-growing cell and gene therapy market, which it sees as a key growth driver going forward.

Diagnostics strategy shift

The company is shifting more towards a kit-based diagnostics model rather than a CLIA lab service model, leveraging the expertise of the acquired Asuragen business. This could drive better scalability and margins.

Continued investment in talent and capacity

The company is making investments in headcount and capacity expansion to support its growth, though this may temporarily impact margins in the near-term.

Positive long-term outlook

Bio-Techne believes it is well-positioned to capitalize on favorable research funding and continued strong demand across its portfolio, with a path to double its revenue in the coming years.

Overall, the call suggests Bio-Techne is executing well across its diversified business, with multiple avenues for continued long-term growth, though near-term margin pressure may occur due to necessary investments.

Earnings Call Analysis 2021 Q4

Broad-based growth

Bio-Techne is seeing strong, broad-based growth across its segments and geographies, with acceleration in both biopharma and academic markets. This suggests the company’s products and solutions are in high demand.

Innovative portfolio

Bio-Techne’s innovative proteomic research reagents, analytical tools, tissue biopsy, and spatial products are meeting the productivity needs of the scientific community and driving research and discoveries forward.

Cell and gene therapy opportunity

Bio-Techne sees a large and growing opportunity in the cell and gene therapy market, with its GMP proteins, TcBuster technology, and synergies across its portfolio. This could be a major growth driver in the coming years.

Exosome diagnostics potential

The ExoTRU kidney transplant rejection test is showing promising initial data and could be a significant product for Bio-Techne, potentially surpassing the ExoDx Prostate test over time.

Sustainable profitability

Bio-Techne has demonstrated the ability to achieve 40% adjusted operating margins, suggesting it has a highly profitable business model that can be sustained going forward, even as it invests for growth.

Cautious on analyst questions

The company is careful not to provide too much detail on certain competitive advantages, like its digital marketing efforts, suggesting it wants to protect these areas from competitors.

Overall, the key takeaway is that Bio-Techne appears to be firing on all cylinders, with a diverse and innovative portfolio, strong growth prospects, and a sustainable profitability profile – making it an attractive long-term investment.

Earnings Call Analysis 2021 Q3

Strong Organic Growth

Bio-Techne delivered 19% organic revenue growth in Q2, its strongest performance since 2013. This growth was broad-based across segments and geographies.

Momentum in Proteomic Analytical Tools

The company’s Simple Plex, Simple Western, and biologics instrument platforms saw very strong growth, with Simple Plex revenue almost doubling year-over-year. These platforms have significant room for continued growth in their large addressable markets.

Cell and Gene Therapy Opportunity

Bio-Techne is well-positioned in the fast-growing cell and gene therapy market, with its GMP proteins, genome engineering services, and cell separation technologies. The company sees this as a $300 million business opportunity over the next 5 years.

Exosome Diagnostics Progress

The company is making progress on commercializing its Exo True kidney transplant rejection assay, with publication of initial data expected soon. This could be an important new diagnostic tool.

COVID-19 Tailwind

While a small portion of the business currently, Bio-Techne’s COVID-19 related products and services are expected to provide a sustained new layer of revenue going forward.

Investments for Future Growth

The company plans to accelerate investments in R&D, customer-facing activities, and post-sales support in the second half to support continued momentum, which may slightly impact near-term margins.

Overall, the call highlights Bio-Techne’s strong positioning in high-growth markets like proteomics, cell/gene therapy, and diagnostics, with a focus on driving long-term sustainable growth through strategic investments.

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The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.