The operator introduces the Bio-Techne Earnings Conference Call for the first quarter of fiscal year 2024. The company's Vice President of Investor Relations, David Clair, welcomes participants and introduces the CEO, CFO, and COO. A safe harbor statement is mentioned and non-GAAP financial measures may be used during the call. Upcoming health care conferences are also mentioned. The CEO, Chuck Kummeth, thanks participants for joining the call.

Despite facing challenges in the biotech industry and economic difficulties in certain regions, Bio-Techne achieved 2% organic growth in the first quarter of fiscal 2024. The company's growth pillars, including its GMP proteins business and ExoDx prostate, performed well. The company's portfolio is well-positioned for growth and the team will continue to leverage their strategic playbook and strong financial position to capitalize on opportunities. Additionally, Kim Kelderman has been appointed as the incoming CEO, with the current CEO continuing to lead until February 2024 and then supporting Kelderman until his retirement in July 2024.

Kim has been a successful leader in the Diagnostics and Genomics segment since joining Bio-Techne in 2018. Under his leadership, the team has achieved market acceptance and growth, and the segment's portfolio has been strengthened through acquisitions and partnerships. Kim, who has been working with the company's CEO since 2009, is well-prepared to take Bio-Techne on its journey towards a $5 billion revenue goal. The company's latest Corporate Sustainability Report highlights their commitment to ESG initiatives and responsible growth.

The company's performance in Europe was strong, with mid-teens growth and a particularly strong showing in the biopharma market. North America met expectations with mid-single-digit growth, but there was noticeable impact from the soft biotech funding environment. China's performance was lower than expected, with a decline in the low teens due to funding challenges and a slowdown in private equity and VC funding activity. It is uncertain when R&D funding will stabilize in China.

The company believes that the recent slowdown in China's growth is temporary and remains optimistic about their long-term opportunities in the country. They have seen 2% organic growth in their Protein Sciences segment, with a focus on advancing their cell and gene therapy initiatives. Their portfolio of cell and gene therapy products and services has increased by 25% in the quarter, with a 40% growth in GMP proteins. The company also continues to gain traction with their portfolio of GMP small molecules.

Bio-Techne's small molecules are important in regenerative medicine workflows and their G&P portfolio, which includes media formulations, gene editing capabilities, and antibodies, is growing rapidly. They are also working on aseptic immune cell therapy manufacturing solutions. Their ProteinSimple branded portfolio saw 9% organic growth, with even higher growth in Europe. The growth was driven by their Simple Plex automated multiplexing ELISA instrument, Ella, which has a growing installed base and expanding menu of validated assays. The company has received ISO 1345 certification for their facility, allowing them to pursue clinical diagnostic opportunities for Ella.

The company's Biologics business saw continued growth thanks to the success of their Maurice Flex instrument and consumables. This instrument has entered a new market and has been praised by scientists from top pharmaceutical companies. The company's Simple Western platform, which automates the western blotting process, has also seen strong adoption in the biopharma and academic sectors, as well as in cell and gene therapy applications. In the Diagnostics and Genomics segment, organic revenue growth was flat.

The company experienced significant growth in their ExoDx prostate test, with a nearly 50% increase in test volume and upper teens revenue growth. Their exosome-based diagnostic platform has a broad range of potential applications, including cancer monitoring and screening. They also saw organic growth in their spatial biology business, driven by their multi-omic assays used in gene therapy, neuroscience, and cancer research.

Bio-Techne is experiencing strong momentum in their base and microRNA scope products, with a 20% and 50% increase respectively. Their recent acquisition, Lunaphore, is also performing well and their integration efforts are going smoothly. The company is also developing a fully automated spatial and multiomic workflow that will allow for protein and RNA detection on a single slide. Despite the challenging environment, Bio-Techne's team has executed their growth plan successfully and their portfolio is well-positioned for long-term growth in the $27 billion vessel market.

In this paragraph, Bio-Techne's CEO Chuck Kummeth and CFO James Hippel discuss the company's performance in the first quarter and their outlook for the future. They mention the importance of initiatives to cure diseases and the role Bio-Techne's portfolio plays in these efforts. They also mention the impact of foreign exchange and acquisitions on their financials, as well as the funding environment in different regions. They remain optimistic about the future, but acknowledge the challenges in predicting the timing of recovery in certain markets.

In the first quarter, APAC (excluding China) saw low single digit growth due to government funding constraints in Japan and South Korea. Biopharma and academia grew at upper single digits, with Europe experiencing more growth due to easier comparisons. The company's adjusted gross margin increased due to productivity gains and foreign exchange, but SG&A and R&D expenses also increased due to the Lunaphore acquisition and strategic investments. Adjusted operating margin decreased by 340 basis points, mainly due to the Lunaphore acquisition, but was partially offset by cost management. Net interest expense increased by $1 million, primarily due to higher debt levels. The company's bank debt increased by $90 million due to the Lunaphore acquisition.

In the first quarter, the company saw an increase in other adjusted nonoperating income, primarily due to their share of Wilson Wolf's adjusted net income. However, there was also a negative impact from foreign exchange related to cash pooling arrangements. The adjusted effective tax rate was 22%, higher than the previous quarter due to international mix. The company generated $59.4 million in cash from operations and returned capital to shareholders through dividends. The balance sheet remains strong with $148.7 million in cash and a leverage ratio below 1x EBITDA. M&A remains a top priority for capital allocation. The company faced headwinds in the quarter, including a challenging China funding and macro environment, order timing in the Diagnostics and Genomics segment, and cautious spending from biotech customers. The Protein Sciences segment saw a 2% increase in reported and organic revenue compared to the same period last year.

The Protein Sciences segment has the most exposure to China and the biotech market, with an operating margin of 43.2% in the first quarter. The Diagnostics and Genomics segment reported sales of $72.8 million, with a 4% increase from the previous year. Organic revenue growth was flat, but acquisitions and foreign exchange had a positive impact. The Exosome Diagnostics business and spatial biology business showed strong performances, while Lunaphore's initial integration efforts are progressing well. The Diagnostics and Genomics segment's operating margin decreased to 0.7%, primarily due to the impact of the Lunaphore acquisition and strategic investments.

The speaker discusses the current outlook for the company, mentioning the negative impact of a weakening macro environment in China and a softening biopharma market. They expect overall company growth to be flat in the second quarter and mention the potential for a recovery in the second half of fiscal year '24. The company remains focused on driving productivity and investing in growth pillars to accelerate growth when market conditions improve. The call is then opened for questions. The first question is about the uncertainties surrounding China funding and the overall macro environment.

Charles Kummeth and James Hippel discuss the current state of the company's growth and recovery in the second half of the fiscal year. They mention disappointment in the Chinese market and lack of evidence for a V-shaped recovery, but remain hopeful for the future. They also note a softening in the U.S. market.

The company's guidance for Q2 is flat due to unknown factors, but growth is expected to resume in the future. The China market is currently a weak spot, but is expected to improve in a few quarters. The Wilson Wolf segment is experiencing steady growth, and the company is working on expanding its product offerings. The Diagnostics and Genomics segment faced unexpected challenges, but is expected to recover in the future.

The company is not losing ground and is still making revenue. The larger companies are optimizing their inventories, which has affected the DRD and MDD organizations. However, this is seen as temporary and the company expects to see improvement soon. The Simple Western platform showed strong growth this quarter and is expected to continue growing due to its low market penetration and new applications.

The speaker believes that the long-term growth rate for their company will be around 15% and that there may be fluctuations in the short term. They have strong intellectual property and a unique technology that sets them apart from competitors. The speaker also mentions a recent slowdown in growth due to Apex, but believes they will be back in double digits soon. They attribute their growth to the productivity of their instrument and anticipate usage in clinical settings to help drive growth.

During the conference call, the CEO and CFO of Lunaphore discussed the company's business outlook for the future. They mentioned that the company's partnership with COMET will boost business and increase sales, and that the clinical business is growing at a faster rate than the overall product portfolio. They also stated that the percentage of revenues from China for the spatial business is lower than the overall corporate average. When asked about the impact of macroeconomic conditions on organic investment, the CFO stated that they will continue to manage profitability and invest in growth platforms. The CEO also addressed the outlook for proteins and antibodies, stating that they expect bulk orders to return in the future.

The paragraph discusses the recent performance and outlook for the company's biopharma business, stating that bulks are on the rise and orders are starting to pick up. The company expects improvement in their run rate and retail business, and expresses optimism for the future. The performance for biopharma was stronger in Europe than in the US, with academic and biopharma segments showing similar growth.

The company's performance in the U.S. and China has been poor, particularly in the biopharma sector. However, without China, the company did relatively well, with the academic sector performing better than in previous quarters. The biotech industry is still facing challenges in terms of funding, but there are signs that things may be starting to improve. In China, there has been a significant decline in growth compared to previous quarters, and the company is hoping for a recovery in the second half of the year.

The paragraph discusses the negative growth in the previous quarter and the expectation for the next quarter to be similar. The company is cautious about making promises but remains optimistic about potential growth in China once the government loosens restrictions. The speaker also mentions strong growth in Europe, though it may be influenced by easy comps.

The company is experiencing a positive quarter in Europe and has a new management team in place. They have invested in salespeople and have a strong future in Germany. The company is not focused on Europe as much as they are busy with M&A activities, including the successful acquisition of Lunaphore. The company is confident in their M&A prospects and have recently been involved in other deals such as Link and Olink.

The speaker discusses the company's partnership with Thermo Fisher and their plans for future acquisitions. They mention the challenges in biotech funding and how it has affected their business in the last couple of weeks. They do not have a clear explanation for the drop in funding, but note that other companies are experiencing similar issues.

The company has announced the appointment of a new CEO, Kim, and there is excitement around this decision. The board went through an internal search process and ultimately chose Kim for the position, considering other candidates such as Will and Jim.

The CEO of Bio-Techne, Charles Kummeth, explains the reasoning behind the company's decision to promote an internal candidate, Kim Kelderman, to the role of President. The decision was made after an extensive search for external candidates, but the board ultimately felt that the internal candidates were just as qualified. Kummeth believes that the company's stock has potential for growth and that the team will continue to work well together. Kelderman confirms that there is no preference for either biotech or diagnostics in the company's focus.

The speaker discusses the company's core growth platforms and their focus on investing in true growth platforms. They also mention the increasing presence of private sector funding in the biotech sector in China, and the difficulty in determining the exact proportion of government funding versus private sector funding. The company mainly fulfills through master distributors in China.

The speaker discusses the challenges in understanding the source of growth in the biotech sector in China. They note that government funding plays a significant role, but there is also growth from institutions and OEM opportunities. The government portion is shrinking, but it still has a major impact on the overall size of the business and the economy. The speaker also mentions that unlike in the U.S., government funding in China has a more direct impact on VC funding. The government is supportive of developing the biotech sector and wants to be a leader in this industry.

The speaker discusses the current state of business in China, noting that next quarter may be the low point. They mention the need for sustained infrastructure and the potential impact of funding cuts on the industry. They also mention the outperformance of their company compared to peers and the presence of a full team despite a lack of funding for new programs.

The speaker talks about the economic situation in China and how the people there are hard-working and enjoy playing Mahjong while waiting for checks. He also mentions the success of their ProteinSimple franchise and how they are focusing on three main platforms which have all had strong growth. The company is also investing in building a new factory in China to meet the demand for GMP proteins. The speaker believes that in the future, there will be a strong demand for quality earnings and their company is well-positioned for that.

The speaker acknowledges that the world is in a recession and that interest rates are a major concern. They mention that the life sciences industry has been hit hard, but there is hope for the future due to ongoing issues like disease and aging. The speaker also mentions that they will be stepping back from leading earnings calls in the future. Overall, the company remains optimistic and dedicated to their work in the science industry.

This summary was generated with AI and may contain some inaccuracies.