Bio-Techne Corporation (NASDAQ:TECH) Q2 2024 Earnings Call Transcript

As a reminder, we recently received ISO 13485 certification of our Wallingford Connecticut facility. With this important certification in hand, we are now ready to pursue clinical diagnostic opportunities on this instrumentation platform. This will open up a large potential end market for this fast, highly sensitive and easy to use multiplexing immuno-essay instrument. We are encouraged by the number of discussions we are having with potential diagnostic partners and we are taking steps to further position Ella as the platform of choice for high-value diagnostic application. The third green shoot, the narrow protein simple growth pillar has been our biologics platform, branded Maurice. Excluding China, this platform grew over 20% in Q2. We see significant traction of the recent launch of Maurice’s flex, specifically in biological drug development and drug production.

This makes a lot of sense because in addition to protein charge, protein size and identity capabilities, this next generation platform is also an easy to use replacement for the legacy mass spectrometry fractionation methods including Ion Exchange Chromatography. Following the Maurice’s flex launch in March of last year, we are seeing a growing number of publications which is driving awareness and demand for this instrument. I’ll shift now to our other major growth pillars within the protein science segment, cell and gene therapy. This business vertical includes our portfolio of proteomic reagents as well as scalable workflow solutions that enable our customers to accelerate progress towards the commercialization of their next generation cell and gene therapies.

The customers for these solutions are mainly biotech companies and our Q2 results were therefore equally impacted by the same funding constraints that I talked about earlier. However, short-term funding constraints have not changed our conviction that cell and gene therapy is here to stay. In fact, we believe that these technologies will play a significant role in treating and curing terrible diseases and therefore we will continue to invest in the strategic growth pillar. During the quarter, we filed the first Drug Master File or DMF for an animal free accelerate GMP expansion medium. This filing joins a growing list of almost three filings that span our GMP product portfolio. These DMFs enable our cell therapy customers to cross-reference that filing when submitting to the FDA making their IMD process much easier.

This way, our products effectively can expect into our customers workflow. We’re also expanding our market leading GMP portfolio to include additional media formulation, gene engineering capabilities and GMP antibodies. These activities will further solidify Bio-Technes market position in this rapidly growing industry. In addition, we are finalizing the closed-to-air-out immune cell therapy manufacturing solution which pairs our GMP proteins and our GMP media with the Wilson-Wolves G-REX. Overall, the protein science segment experienced a full percent organic revenue decrease in the quarter. It’s been impacted by the current biotech funding landscape, the order timing among a handful of large biopharma customers, as well as the constrained macro environment in China.

But as the green shoots that I discussed already indicate, this segment is positioned for accelerated growth than the macro funding challenges abate. Now let’s discuss the growth pillars within our diagnostics and genomics segment starting with our spatial biology franchise. This division includes our ACD-branded products, as well as the Lunaphore branded spatial biology automated solution. ACD’s RNA scope continues to play an important role in advancing gene therapy, neurosciences and cancer research. Despite the challenging macro environment, this portfolio remains in high demand, growing mid-teens globally for the quarter. We’re also excited about the traction we are experiencing with the recently acquired Lunaphore platform. As a reminder, we are currently commercializing the Comet instrument, a fully automated, high-throughput, high-perplex platform that does not require use of conjugated primary antibody.

Comet’s high-value proposition is resonating with the translational research community, which is driving significant interest and rapid growth in our installed base. In fact, demand for the Comet instrument exceeded our manufacturing capacity, which created a backlog during this quarter. We are currently scaling our Comet production capacity to meet this strong demand. A final note around our spatial biology business is that we recently announced the upcoming lounge of fully automated spatial multiomics workflow with detection of RNA and protein markers on the same tissue section. This workflow pairs ACDs, RNA-scoped technologies of Lunaphore’s fully automated Comet platform, and we will be showcasing this complete solution at the upcoming HBT next week in Orlando.

Now, let’s discuss our other growth pillar within DGS, the Molecular Diagnostics business. Our ExoDx prostate test provides valuable information on whether a man with a gray-zone PSA score should proceed with an invasive and potentially dangerous prostate biopsy or not. With 30% volume growth in our second quarter, the value of this test continues to resonate with both patients and physicians. Our Exosome-based development pipeline includes single gene mutation tests for monitoring various cancer markers, as well as a colorectal cancer screening test designed for early detection of both colorectal cancer and pre-cancerous pellets. We look forward to sharing additional data on this exciting pipeline in the coming quarters. Overall, the diagnostics and genomic segments grew by 5% organically in the quarter, but was muted by the de-stocking and strict inventory management from our core diagnostics OEM customers.

As these OEM customers return to normalized buying patterns, the results from our spatial biology and molecular diagnostic growth pillars will become more visible at the segment level. In summary, I’m extremely proud of the team’s ability to navigate the transitory challenges that are impacting both biotechne and the broader life sciences tool industry. Our portfolio of coorley agents, our growth pillars in proteomic analytical tools, in cell and gene therapies, in spatial biology, and in molecular diagnostics are well positioned to improve the quality of life by catalyzing advances in sciences and medicine. Thank you very much, and with that, I’ll turn it over to Jim. Jim?

James Hippel: Thank you, Kim. I’ll start with some additional detail on our Q2 financial performance, then give some thoughts on the financial outlook. Starting with the overall second quarter financial performance, adjusted EPS was $0.40, compared to $0.47 in the prior year quarter. Foreign exchange benefit EPS by $0.02. GAAP EPS for the quarter was $0.17, compared to $0.31 in the prior year. Q2 revenue was $272.6 million, a decrease of 2% year-over-year on an organic basis, and was flat on a reported basis. Foreign exchange translation had a favorable 1% impact, while acquisitions also contributed 1% to reported growth. Looking at our organic growth by region and end market in Q2, North America declined slightly year-over-year.