Business Overview and Historical Milestones

Harvard Bioscience, Inc. (HBIO) is a leading developer, manufacturer, and seller of technologies, products, and services that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction, and preclinical testing. With a rich history dating back to 1901, the company has consistently adapted to the evolving needs of its diverse customer base, which ranges from renowned academic institutions and government laboratories to the world's leading pharmaceutical, biotechnology, and contract research organizations.

Harvard Bioscience's origins trace back to 1901 when it was founded as Harvard Apparatus by Dr. William T. Porter, a Professor of Physiology at Harvard Medical School and a pioneer in physiology education. The company has grown alongside the life science industry, developing innovative products such as ventilators based on Dr. Porter's design, the mechanical syringe pump for drug infusion in the 1950s, and the microprocessor-controlled syringe pump in the 1980s.

In 1996, a group of investors acquired a majority stake in the then-existing business of Harvard Apparatus, Inc. Harvard Bioscience, Inc. was incorporated in the State of Delaware in September 2000 and became the successor entity to Harvard Apparatus, Inc. by merger in November 2000.

The company has continued to expand its product portfolio through both organic growth and strategic acquisitions. A significant milestone was the 2018 acquisition of Data Sciences International, Inc. (DSI), a global leader in preclinical testing solutions. This acquisition expanded Harvard Bioscience's product portfolio to address the continuum from research and discovery to preclinical testing, with principal applications in drug and therapy testing.

Over the years, Harvard Bioscience has faced various challenges and has taken steps to rationalize its product portfolio and improve its operating cost structure. These activities have included the discontinuation of certain non-strategic products, the consolidation of its global operating footprint, and the reduction of its headcount in Europe and North America. In 2024, the company also consolidated its enterprise resource planning (ERP) system in the United States. These actions have allowed the company to focus on product opportunities that drive sustainable revenue growth with attractive gross margins and improved profitability.

Today, Harvard Bioscience operates in two primary product families: Cellular and Molecular Technologies (CMT) and Preclinical. The CMT product family includes a diverse range of instrumentation and consumables that support academic research and the discovery phase of new drug development, while the Preclinical product family provides a comprehensive platform for assessing physiological data from organisms for research ranging from basic research to drug discovery and development.

Financial Performance and Key Metrics

Harvard Bioscience's financial performance has been impacted by the challenging macroeconomic environment, with revenues declining from $112.25 million in 2023 to $94.14 million in 2024. However, the company has maintained a strong gross margin, with gross profit declining from $66.07 million in 2023 to $54.77 million in 2024, representing a gross margin of 58.2% in 2024 compared to 58.9% in 2023.

The company's operating expenses have also been well-managed, with sales and marketing expenses decreasing from $24.06 million in 2023 to $22.21 million in 2024, and general and administrative expenses declining from $22.76 million in 2023 to $21.49 million in 2024. Research and development expenses also decreased from $11.76 million in 2023 to $10.41 million in 2024.

For the most recent fiscal year, Harvard Bioscience reported annual revenue of $94.14 million, with a net loss of $12.40 million. The company generated an annual operating cash flow of $1.44 million and a negative free cash flow of $1.34 million.

In the most recent quarter, the company reported revenue of $24.56 million, a decrease of $18.2 million or 16.1% compared to the prior year quarter. This decline was primarily attributed to softening worldwide demand from distributors, contract research organizations (CROs), and academic medical research institutions. Changes in foreign currency exchange rates had a $0.2 million favorable effect on revenues during the quarter. The company reported a modest net income of $18,000 for the quarter.

Harvard Bioscience operates globally, with revenues by geographic region for 2024 as follows:

• Americas (including US): $45.34 million (48.2% of total)
• Europe, Middle East and Africa: $28.41 million (30.2% of total)
• Asia (including Greater China): $20.40 million (21.6% of total)

Liquidity

Despite the revenue challenges, Harvard Bioscience maintained a net debt position of $32.28 million as of the end of 2023, only slightly above the $30.70 million in net debt at the end of 2022. The company's liquidity position remains stable, with $4.28 million in cash and cash equivalents as of the end of 2023.

As of December 31, 2024, Harvard Bioscience had $37.4 million outstanding under its term loan and senior revolving credit facility. The company was not in compliance with the consolidated net leverage ratio covenant contained in the credit agreement as of the December 31, 2024 test date. On March 10, 2025, the company entered into an amendment to the credit agreement in which the lenders agreed to waive the non-compliance, subject to the company meeting certain refinancing milestones by June 30, 2025.

The company had $4.11 million in cash and cash equivalents as of December 31, 2024. The lenders' commitment under the revolving credit facility is currently capped at the amount outstanding, so the company is unable to make additional borrowings under the revolving facility. Harvard Bioscience's current ratio stands at 0.82, while its quick ratio is 0.40, indicating potential short-term liquidity challenges.

Innovative Product Launches and Market Adoption

Harvard Bioscience has continued to invest in the development of innovative products to meet the evolving needs of its customers. In 2024, the company launched several new products that have gained traction in the market, including:

1. SoHo Telemetry System: The SoHo telemetry solution enables researchers to collect, manage, analyze, and report findings from multiple concurrent small animal models in both shared housing and extended range environments. The company has seen strong quoting requests from both industrial and academic customers for this platform.

2. VivaMARS Neurobehavioral Monitoring System: The VivaMARS system, a turnkey solution for high-throughput behavioral testing, was delivered to a leading contract research organization (CRO), Labcorp, in 2024. The company is now in discussions with Labcorp to acquire another VivaMARS system for a second facility, as well as working to onboard other large CRO customers.

3. BTX Electroporation Systems for Bioproduction: The company's BTX electroporation systems, configured for bioproduction applications, have seen growing adoption, with a top 5 global pharmaceutical company having reached a $1 million annual run rate for consumable revenue from this system in 2024. The company is also working with other pharmaceutical and biotechnology companies to integrate the BTX platform into their bioproduction workflows for new therapies, including vaccines and CAR-T based treatments.

4. MeshMEA Organoid Platform: Harvard Bioscience has adapted its microelectrode array (MEA) technology to create the industry's first in vitro organoid data acquisition and analysis system, the MeshMEA. This platform has gained traction with both academic institutions and pharmaceutical companies, with the company initiating five beta sites in 2024 and seeing early adopters, such as Stanford and the Mayo Clinic, purchase 10 systems in the fourth quarter for neurological and cardiac applications.

These new product introductions, along with the company's established product lines, position Harvard Bioscience to capitalize on growth opportunities in the life science tools market, particularly in areas such as bioproduction, organoid research, and preclinical testing.

Navigating Macroeconomic and Industry Challenges

Harvard Bioscience has faced headwinds in recent years, including the impact of the COVID-19 pandemic, global supply chain disruptions, and the ongoing macroeconomic uncertainty. The company's revenues have declined from $118.90 million in 2021 to $112.25 million in 2023 and $94.14 million in 2024, reflecting these challenges.

One key area of concern has been the impact of changes in government funding, particularly from the National Institutes of Health (NIH), on the company's academic research customer base. The NIH's recent policy changes, including a significant reduction in research grants, have created uncertainty and disruption in the funding landscape for many of Harvard Bioscience's customers.

To navigate these challenges, the company has implemented a range of cost-optimization initiatives, including headcount reductions, facility consolidations, and the migration to a single U.S. enterprise resource planning (ERP) system. These actions have helped the company maintain its profitability, with adjusted EBITDA of $8.66 million in 2023 and $3.00 million in 2024.

Looking Ahead: Refocusing on Growth Opportunities

While the macroeconomic environment remains uncertain, Harvard Bioscience is well-positioned to capitalize on emerging growth opportunities in the life science tools market. The company's focus on innovative product development, strategic partnerships, and operational efficiency has laid the groundwork for future success.

For Q1 2025, Harvard Bioscience expects revenue to range from $19 million to $21 million, with gross margin projected to be in the range of 56% to 58%. The company anticipates a sequential dip in revenues in the first quarter due to the typical seasonality in the academic research market, as well as continued uncertainty around NIH funding. However, the company remains confident in its ability to maintain strong gross margins and manage operating expenses to deliver positive EBITDA, which will support the ongoing servicing of its debt obligations as it works to refinance its credit facility.

Longer-term, Harvard Bioscience is well-positioned to drive growth through the continued adoption of its new product offerings, particularly in the areas of bioproduction, organoid research, and preclinical testing. The company's strategic initiatives, combined with its strong technological capabilities and established customer relationships, position it as a steadfast innovator in the evolving life science landscape.

Product Segments and Market Position

Harvard Bioscience operates in two main product segments: Cellular and Molecular Technologies (CMT) and Preclinical.

The CMT product family is designed primarily to support academic research and the discovery phase of new drug development. This segment includes several branded product lines such as Harvard Apparatus, Biochrom, BTX, HEKA, KD Scientific, MCS and Warner. CMT products include electroporation and electrofusion instruments, amino acid analyzers, spectrophotometers, precision pumps, and electrophysiology equipment like data acquisition systems and micro-electrode array solutions. The CMT segment accounted for approximately 49% of the company's global revenues in both 2024 and 2023.

The Preclinical product family provides a complete platform to assess physiological data from organisms for research ranging from basic research to drug discovery and development. This segment includes the DSI, Panlab, Hugo Sachs and Buxco branded product lines. Key Preclinical products include implantable and externally worn telemetry systems to collect cardiovascular, neural, respiratory and metabolic data, isolated organ and surgical products, respiratory plethysmograph systems, inhalation/exposure systems, and data acquisition and analysis platforms. The Preclinical segment made up around 51% of the company's total revenue in both 2024 and 2023.

In addition to its proprietary product lines, Harvard Bioscience also distributes complementary products developed by other manufacturers, which accounted for approximately 12% and 13% of revenues in 2024 and 2023 respectively. This allows the company to act as a single source provider for customers' research needs.

The diversity of Harvard Bioscience's product lines and end markets has helped the company maintain a balanced revenue mix, with neither the CMT nor Preclinical segment accounting for more than 51% of total revenues in the past two years. This balanced approach helps mitigate risks associated with market fluctuations in specific research areas or funding sources.

Industry Trends and Market Outlook

The life sciences tools market, in which Harvard Bioscience primarily operates, is expected to grow at a compound annual growth rate (CAGR) of 6-8% over the next 5 years. This growth is driven by factors such as increased research and development spending by pharmaceutical and biotechnology companies, as well as growing demand for advanced analytical and diagnostic tools.

Despite the overall positive industry outlook, Harvard Bioscience faces challenges related to the uncertain funding environment, particularly in academic research. The company's ability to navigate these challenges while capitalizing on growth opportunities in areas such as bioproduction and preclinical testing will be crucial to its future success.

Conclusion

Harvard Bioscience's rich history, innovative product portfolio, and adaptability in the face of industry and macroeconomic challenges make it a compelling investment opportunity in the life science tools market. While the company has faced headwinds in recent years, its focus on operational efficiency, strategic product development, and capitalization of emerging growth opportunities positions it well for future success. As the life science industry continues to evolve, Harvard Bioscience remains poised to enable fundamental advances that drive progress in critical areas of research, discovery, and development.