Business Overview
Bio-Techne Corporation is a global life sciences company that develops, manufactures, and sells innovative tools and bioactive reagents for the research and clinical diagnostic communities. The company's products assist scientific investigations into biological processes and the nature and progress of specific diseases, aid in drug discovery efforts, and provide the means for accurate clinical tests and diagnoses.Bio-Techne operates in two main segments: Protein Sciences and Diagnostics and Genomics. The Protein Sciences segment is a leading developer and manufacturer of high-quality purified proteins and reagent solutions, including cytokines and growth factors, antibodies, immunoassays, biologically active small molecule compounds, tissue culture reagents, and T-Cell activation technologies. The Diagnostics and Genomics segment develops and provides spatial biology products, including advanced tissue-based in-situ hybridization assays (ISH) and instrumentation for research and clinical use, as well as a portfolio of clinical molecular diagnostic oncology assays.
In fiscal year 2023, Bio-Techne generated over $1.1 billion in net sales and has approximately 3,100 employees worldwide. The company's key business strategies for long-term growth and profitability include geographic expansion, core product innovation, strategic acquisitions, and talent retention and development.
Financial Performance
Bio-Techne's financial performance has been strong, with the company reporting annual net income of $285,263,000 and annual revenue of $1,136,702,000 in fiscal year 2023. The company also generated robust annual operating cash flow of $254,393,000 and annual free cash flow of $216,149,000 during the same period.In the third quarter of fiscal year 2024, Bio-Techne reported revenue of $303.4 million, a 3% increase compared to the prior year quarter. Organic revenue growth for the quarter was 2%, with acquisitions contributing an additional 1% to reported growth. The company's Diagnostics and Genomics segment led the way, reporting 16% reported growth and 10% organic growth, while the Protein Sciences segment declined 2% on a reported basis and 1% organically.
Segmental Performance
Protein Sciences Segment
The Protein Sciences segment reported revenue of $214.6 million in the third quarter, a 2% decrease compared to the prior year period. Organic revenue declined 1%, with the exclusion of the company's fetal bovine serum (FBS) business, which had approximately $10 million in annual revenue, unfavorably impacting reported segment revenue growth by 1%. The segment's operating margin was 44.2%, a decrease of 90 basis points year-over-year, but a 390 basis point improvement sequentially due to cost management and structural alignment initiatives.The performance of the Protein Sciences segment was impacted by continued challenges in the biopharma and China end markets, which are the primary drivers of this business. However, the company's growth pillars, such as the proteomic analysis solutions and cell and gene therapy offerings, continued to perform well, with the company's GMP reagents business achieving a new quarterly revenue record.
Diagnostics and Genomics Segment
The Diagnostics and Genomics segment reported revenue of $87.5 million in the third quarter, an increase of 16% on a reported basis and 10% organically. The segment's operating margin was 9.3%, a decrease compared to the prior year period's 15.2%, primarily due to the impact of the Lunaphore acquisition. However, the segment's operating margin improved 330 basis points sequentially from the second quarter.The strong performance in the Diagnostics and Genomics segment was driven by continued growth in the company's spatial biology and molecular diagnostics businesses. The spatial biology offerings, including the Comet platform from the Lunaphore acquisition, saw robust demand, while the company's ExoDx Prostate test and surgeon-focused molecular diagnostics kits also delivered double-digit growth.
Geographic Performance
Geographically, Bio-Techne's performance was mixed in the third quarter. North America improved sequentially with low single-digit year-over-year growth, led by strength in the cell and gene therapy market. Europe declined mid-single digits, facing a challenging comparison to the prior year's mid-teens growth. China also saw a mid-single-digit revenue decline, though the company noted stabilization in the region compared to the previous quarter.Outlook
For the fourth quarter of fiscal year 2024, Bio-Techne expects revenue to be slightly higher than the third quarter, with organic growth rates potentially facing some headwinds due to tougher year-over-year comparisons, particularly in China. However, the company anticipates continued sequential improvement in adjusted operating margins, driven by the ongoing cost management initiatives and the expected incremental revenue.Looking ahead, the company is closely monitoring the recent increases in biotech funding, as well as the longer-term stimulus announced by the Chinese government, and their potential impact on Bio-Techne's fiscal year 2025 outlook and operating plans. Management remains confident in the company's ability to outperform the overall market, driven by the strength of its growth pillars and the execution of its team.
Risks and Challenges
Bio-Techne faces several risks and challenges, including: - Exposure to macroeconomic and geopolitical factors, particularly in China and Europe - Potential slowdown in biopharma end market due to funding constraints - Integration and scaling challenges related to recent acquisitions, such as Lunaphore - Competitive pressures in the life sciences tools and diagnostics markets - Regulatory and reimbursement risks for its clinical diagnostic productsHowever, the company's diversified product portfolio, strong market positions, and focus on innovation and operational excellence position it well to navigate these challenges and continue delivering value to shareholders.
Conclusion
Bio-Techne is a leading global life sciences company with a diverse portfolio of innovative products and technologies that support scientific research, drug discovery, and clinical diagnostics. The company's strong financial performance, with annual net income of $285,263,000, annual revenue of $1,136,702,000, annual operating cash flow of $254,393,000, and annual free cash flow of $216,149,000 in fiscal year 2023, demonstrates its ability to execute on its strategic priorities and capitalize on growth opportunities.Despite facing some near-term headwinds, Bio-Techne's long-term growth prospects remain promising, driven by the strength of its core business segments, continued investment in innovation, and strategic acquisitions. As the company navigates the evolving market landscape, investors should closely monitor Bio-Techne's ability to maintain its competitive edge, expand its geographic reach, and deliver sustainable financial performance.