The first paragraph is an introductory statement for the Bio-Techne Earnings Conference Call for the third quarter of fiscal year 2025. The operator announces that the call is currently in a listen-only mode and will open for questions after management's remarks, requesting that participants limit themselves to one question and a follow-up. David Claire, the Vice President of Investor Relations, then introduces the company executives present on the call, including CEO Kim Kelderman and CFO Jim Hippel. He provides a brief overview of the Safe Harbor statement, noting that forward-looking statements may be made and that actual results could differ from these statements, as outlined in the company's 2024 10-K filing. Non-GAAP financial measures may also be discussed during the call, and reconciliations to GAAP measures can be found on the company's website. Additionally, Bio-Techne will participate in several upcoming healthcare conferences.

In the third quarter conference call for Bio-Techne, Kim Kelderman reported a successful quarter with 6% organic revenue growth despite economic uncertainties, driven by strong performances across various products and a focus on profitability, reflected by an adjusted operating margin of 34.9%. The company saw significant growth in the pharma sector, anticipating a return to historical growth rates by 2025 after R&D pipeline realignments in 2024. However, uncertainty looms in the US academic sector due to NIH's announcement of a 15% cap on indirect cost reimbursement rates for grants, with the impact of this policy yet to be fully determined amid ongoing legal and policy evaluations.

The paragraph discusses the potential impact of new health policies and NIH funding on Bio-Techne, particularly in relation to combating chronic diseases. Bio-Techne's portfolio, including research reagents, protein analysis tools, and cell therapy solutions, aligns well with these research areas, contributing to their 7% organic revenue growth. The company boasts a large catalog of proteomic agents used globally to advance therapeutics and diagnostics. Additionally, Bio-Techne is positioned to benefit from the FDA's push to reduce animal testing, offering organoid solutions as a more effective and ethical alternative for drug development and analysis.

The paragraph discusses the growth and performance of the company's different segments. The Core reagents sales exceed 50 million annually, with the organoid solutions market growing by over 20%. Following the FDA's recent announcement, further growth is anticipated in organoid solutions and GMP reagents, which grew in the high-single digits for Q3 and 13% on a trailing 12-month basis. The protein analytical instrumentation business, particularly the Maurice platform, saw robust growth from pharma and CRO partners, with biologics growing double digits. In the Diagnostics and Spatial Biology segment, there was 2% organic growth for the quarter, with order timing impacting OEM diagnostic reagents and the Asuragen carrier screening and oncology businesses. Year-to-date growth is in the high-single digits for diagnostic reagents and low double digits for the Asuragen portfolio.

Asuragen is launching innovative products, such as the AmplideX Nanopore Carrier Screening Plus Kit, which uses Oxford Nanopore’s technology for complex genomic analysis. The company has seen over a 30% increase in usage of its ExoDx prostate cancer test. Despite uncertainty in NIH funding affecting its Spatial Biology segment, Asuragen's COMET instrument achieved double-digit growth, offering automation and multiomic analysis. There's progress in upgrading the COMET systems to enhance capabilities and increase reagent sales. The company is also addressing tariff impacts, with its global operations helping to mitigate potential financial consequences. Jim will provide more details on this strategy.

The paragraph discusses the company's strategic initiatives to manage tariff impacts, including optimizing regional production, enhancing the global supply chain, and adjusting prices or surcharges. These efforts are expected to offset tariff costs by the end of the quarter, aligning with the start of fiscal 2026, and prepare the company for future tariff changes. This allows most employees to focus on delivering high-quality products, automating customer workflows, and fostering innovation. Jim Hippel then shares additional details on the company's Q3 financial performance: adjusted EPS increased to $0.56 from $0.48, while GAAP EPS declined to $0.14 from $0.31. Q3 revenue grew by 6% organically but was affected by unfavorable foreign exchange rates and divestitures.

In the given paragraph, it is reported that North America's growth was driven by pharma customers, while Europe's growth was led by academic customers. China saw a decrease in growth, but the rest of Asia experienced significant growth due to improving market conditions. By the end market in Q3, biopharma saw an increase, academia remained flat, and the company's overall adjusted gross margin slightly decreased due to foreign exchange issues. Adjusted SG&A and R&D expenses decreased due to streamlining and expense control, offset by strategic growth initiatives. The adjusted operating margin increased due to volume leverage and cost control, despite foreign exchange impacts. Net interest expense fell significantly due to reduced net debt, while other non-operating income rose, aided by foreign exchange gains related to cash pooling arrangements.

In Q3, the company's adjusted effective tax rate decreased to 21.5%. The company generated $41.1 million in cash from operations and invested $10.1 million in capital expenditures. It returned $112.6 million to shareholders through dividends and stock buybacks. A new share repurchase program was approved, authorizing up to $500 million in stock repurchases. The quarter ended with strong financials, including $140.7 million in cash and a low total leverage ratio. M&A remains a top capital allocation priority. In the Protein Sciences segment, Q3 sales were $227.7 million, reflecting a 6% increase. Organic growth was 7%, hindered slightly by foreign exchange. The segment saw a 45.6% operating margin due to volume leverage and cost management. The Diagnostics and Spatial Biology segment reported $89.2 million in sales, achieving 2% growth, with strong performance from the COMET instrument and ExoDx prostate cancer test. The segment's operating margin was 9.4%.

The company's operating margin remained consistent with the previous year's 9.3%, and they expect improvement in the Diagnostics and Spatial Biology margin as the COMET platform grows. Despite challenging market conditions due to NIH funding and tariff uncertainties, their Q3 performance met top-line expectations and exceeded bottom-line guidance. The uncertainty, particularly stemming from proposed tariffs and a potential 40% cut to NIH funding in the Trump administration's fiscal year 2026 budget, poses challenges. However, the company downplays the impact of possible NIH cuts, citing past bipartisan support for budget increases, and believes any potential decrease in funding would not significantly affect their long-term growth expectations.

The paragraph discusses Bio-Techne's strategies to mitigate the financial impact of ongoing global tariffs, particularly Chinese tariffs on their proteomic analytical instrument platforms, which could otherwise negatively affect their annual adjusted operating income by approximately $20 million. The company plans to leverage its global manufacturing footprint to lessen the impact of these tariffs and enhance its resilience against potential future tariff increases. Although the macroeconomic uncertainties, including tariffs and possible budget cuts, are expected to slow growth to low-single digits and decrease adjusted operating margins by 100 to 150 basis points in Q4 of 2025, Bio-Techne is confident that these impacts will be mitigated by the start of fiscal year 2026, allowing them to maintain strong financial performance.

In the paragraph, Puneet Souda from Leerink Partners asks about the company's guidance, specifically regarding the expected impact on the academic sector and whether a pull forward affected the pharma side, causing a greater impact in the fourth quarter. Jim Hippel clarifies that large pharma experienced double-digit growth in the quarter. He explains that while there was strong ordering in the life science tools sector in Q3, driven by reagent sales to partners, some of these orders are not expected to repeat in Q4, leading to a reduction in organic growth. He also notes that academia started strong in January, experienced a slowdown in February due to announcements, and then stabilized in March.

The paragraph discusses expectations for the company's performance in Q4, particularly in the pharmaceutical sector. The company anticipates stabilization but at a lower level compared to Q3 due to potential impacts from the tariff environment announced in April. Large pharma has exceeded expectations so far, but the growth of smaller biotech or pharma has stalled due to global economic uncertainties. The company notes that smaller biotech firms are more sensitive to macroeconomic conditions. Additionally, the paragraph mentions that Q2 had 9% organic growth, partly due to early demand, while Q3 did not experience such demand pull-forward.

The paragraph discusses expectations for the fiscal year 2026, particularly concerning the impacts of tariffs, the National Institutes of Health (NIH) funding, and the situation in China on Bio-Techne's business. Puneet Souda inquires about the company's outlook for 2026, especially in relation to China, where their business is evenly split between instrumentation and consumables. Kim Kelderman responds, indicating that while there is uncertainty due to external factors, more clarity is anticipated in the coming months. The company is optimistic about mitigating tariff impacts and is monitoring the situation in China, which has faced setbacks due to economic turbulence and tariffs, resulting in a slower growth rate than previously guided.

In the paragraph, Dan Leonard from UBS inquires about the impact of tariffs on the company's operations in China, which accounts for 9% of their revenue. Kim Kelderman explains that their product mix in China has shifted from an even split between consumables and instruments, and tariffs primarily affect the instruments. The company can mitigate tariff impacts by transferring manufacturing from the U.S. to other global locations, avoiding import fees into China. Additionally, their consumables are largely exempt from tariffs, further reducing exposure. Jim Hippel adds that not all instruments are made in the U.S., facilitating smoother transitions to new manufacturing locations for the Chinese market.

In the discussion, Dan Leonard asks Kim Kelderman about whether the current tariff situation has influenced their decision to expand local manufacturing in China. Kim responds that the tariffs have not altered their strategy, as they have always aimed for a "China for China" approach. Bio-Techne had opened a new facility in Shanghai to serve the Chinese market, which they believe is beneficial for reducing cross-border tariffs. Meanwhile, Matt Larew from William Blair asks about future growth projections, noting that despite near-term challenges, they hope for temporary setbacks. Jim Hippel acknowledges abrupt challenges but remains optimistic about returning to strong momentum, particularly highlighting growth in smaller biotech and China markets.

The paragraph discusses the current performance and future outlook of a business, noting that the academic and pharma sectors are performing well, with pharma exceeding expectations. There is, however, a temporary uncertainty due to proposed policy and tariff changes. Once resolved, the business expects to continue its previous growth trajectory, though it's unclear if this clarity will come in three months, six months, or a year. Despite uncertainties, the company has shown strong margins due to effective spending leverage. Jim Hippel commends the teams for balancing investments and cost containment, especially being cautious about discretionary spending amid market uncertainties. The focus remains on prudent cost management rather than accelerating investments during this period.

In this paragraph, Kim Kelderman discusses the company's strategy for maintaining strong margins by managing costs and improving efficiencies despite uncertainties. The company has focused on prudent spending, streamlined management processes, integrated acquisitions, and improved digital and operational efficiencies. They have also developed a detailed R&D investment process to prioritize strategic projects with good returns. These efforts contributed to their performance. Daniel Markowitz from Evercore ISI then asks if the expected 4Q margin rate of about 32%, before tariff mitigation, is a fair assumption for fiscal 2026 margins.

In this paragraph, Jim Hippel addresses uncertainties regarding the company's fiscal year 2026 guidance, suggesting that the company's current positioning is strong despite these uncertainties. Daniel Markowitz inquires about potential impacts on the U.S. academic and government markets, predicting a 10% to 15% headwind in 2025. Hippel responds by stating that current academic spending is based on previously approved grants and that any potential impacts from changes in NIH budgets would affect 2026 and beyond. He also notes historical precedent where proposed governmental budget cuts were countered by bipartisan increases, implying that fears of budgetary impacts might be exaggerated.

The paragraph discusses concerns within the academic community about uncertainty in funding, particularly how recent increases in NIH funding have focused on infectious diseases and COVID-related areas, which are not the focus of the discussed portfolio. The administration's intention to shift funding away from these areas towards traditional chronic diseases like cancer and diabetes aligns with the portfolio's strengths, potentially benefiting them. Kim Kelderman notes that despite challenges, the European academic market remains strong, and their portfolio, which is heavily reliant on consumables, is less affected by market fluctuations compared to instrumentation. Consumables make up 80% of their revenues, with services and instruments comprising the remaining 20%.

The paragraph discusses the competitive advantages of certain laboratory instruments priced around $50,000, highlighting their ability to automate key processes and enhance efficiency in labs, especially during constrained times. The company boasts strong commercial practices, including a consultative sales team that aids in selecting appropriate reagents to ensure experimental success. They also emphasize their partnership with Thermo Fisher Scientific, facilitating easier purchasing through Fisher channels, thus asserting their robust position in the academic market. Following this, Dan Arias from Stifel asks a question about the impacts of academic funding reductions on the company's long-term growth projections, to which Jim Hippel responds.

The paragraph discusses a company’s strategic plan and its projections for academic revenue growth, which has typically been mid-single-digit rather than double-digit. The worst-case scenario considered is a 40% cut in academic revenue, followed by a gradual return to historical growth rates of 3% to 5%, yet the company expects an overall double-digit growth trajectory over five years. Additionally, the cell and gene therapy product line has shown variable quarterly growth rates due to ordering patterns tied to clinical phases, but it has achieved over 30% growth over the trailing 12 months, with revenues exceeding $30 million.

In the paragraph, Kim Kelderman addresses a question about the organic growth of the Diagnosis and Genomics segments, explaining that lower growth rates were primarily due to timing issues rather than a loss of market share or a market slowdown. Asuragen and the diagnostic reagents division experienced timing-related dips in orders. Despite these issues, year-to-date numbers for both divisions remain strong, with high single-digit and low double-digit growth. The prostate diagnostic test has grown around 30% for the year. However, the Spatial Biology division faces challenges due to reduced NIH funding, significantly impacting its growth, although the company remains competitive in offerings and instrumentation.

In the paragraph, Thomas DeBourcy and Patrick Donnelly from Citi discuss biopharma growth, emphasizing mid-single-digit growth for the quarter. Donnelly inquires about the biotech segment, noting concerns over funding volatility. Kim Kelderman explains that large pharma is recovering faster than biotech, which constitutes 30% of their revenue. Biotech showed flat growth in Q3, attributed to market sensitivity and economic uncertainty leading to frugal spending. Donnelly also asks about Wilson Wolf's performance, to which Jim Hippel responds that Wilson Wolf is experiencing strong double-digit growth and is on track for a strong year projecting into 2026.

In this paragraph, Sung Ji Nam asks about the impact of potential sectoral tariffs on pharma and biopharma, particularly in the context of increased U.S. manufacturing and reshoring efforts. Jim Hippel responds by acknowledging the uncertainty surrounding the tariff discussions and how this uncertainty affects their pharma customer base. He notes that, despite potential changes in capital expenditure (CapEx) due to tariff impacts, pharma companies remain financially strong and have largely adjusted to previous policy changes, such as the Inflation Reduction Act (IRA). Overall, the companies may need to invest more in CapEx to adapt to new manufacturing requirements.

In this discussion, Kim Kelderman highlights the diversification of Bio-Techne's portfolio over the years, expanding from core reagents focused on research to products distributed across various stages, including discovery, clinicals, and manufacturing, as well as diagnostics and treatment. This diversification allows them to maintain a stable position despite shifts in pharma spending. Sung Ji Nam asks about the growth potential of Spatial Biology in the academic market outside the U.S. and the application of the newly launched spatial protein proximity detection capability within pharma. Kelderman notes the significant growth in instrumentation and positive win/loss rates, indicating that Bio-Techne is not losing market share.

The paragraph highlights the strong performance and competitive edge of the company's multiomics instrument, which is fully automated and capable of RNA and protein detection, including protein-protein interactions. This unique offering adds significant value to customers. The paragraph also marks the end of a call where Kim Kelderman welcomes Dr. Amy Herr to the Board of Directors of Bio-Techne, as successors to retiring directors are identified. Dr. Herr's expertise in bioengineering is seen as a perfect fit for the company's strategic direction. Finally, Kelderman expresses pride in the team's consistent performance despite facing market uncertainties.

The paragraph highlights Bio-Techne's strong financial performance, attributed to their unique portfolio of research reagents, proteomic tools, cell therapy solutions, and diagnostics, which facilitate scientific advancements and efficiency for customers. This portfolio is presented as a foundation for sustainable value creation, aligning with Bio-Techne’s mission to enhance quality of life through scientific and medical progress. The paragraph concludes by thanking participants for attending a call and ends the teleconference.

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