Executive Summary / Key Takeaways

• Standard BioTools is undergoing a significant strategic overhaul, divesting its SomaScan business to Illumina (ILMN) while retaining core mass cytometry and microfluidics, aiming for a leaner, more focused multi-omics platform.
• Operational discipline, driven by the "Standard BioTools Business System (SBS)," has yielded substantial cost synergies ($90 million annualized by early 2025) and improved efficiencies, underpinning a clear path to adjusted EBITDA breakeven by 2026.
• The company's differentiated proteomics technologies, including CyTOF and Hyperion, along with strategic partnerships like the Illumina collaboration for SomaScan, position it for long-term growth in high-precision, large-scale protein analysis.
• Despite macroeconomic headwinds, including declining Americas academic revenue and tariff impacts, management maintains its 2025 revenue guidance of $165 million-$175 million (inclusive of discontinued operations) and is actively managing risks.
• A strong balance sheet with over $214 million in cash and investments as of September 30, 2025, supports both organic growth and a disciplined M&A strategy to consolidate the fragmented life sciences tools industry.

Setting the Scene: Industry Evolution and Standard BioTools' Strategic Pivot

Standard BioTools Inc. (NASDAQ:LAB) operates at the forefront of the life sciences tools industry, providing a diversified range of instrumentation, consumables, and services that empower scientists and biomedical researchers to accelerate therapeutic development. The company's core mission revolves around offering proprietary multi-omics tools that yield unique insights into human health, immune response, and disease states across proteomics and genomics. This strategic focus positions LAB within a highly fragmented market that is increasingly demanding integrated, scalable solutions to overcome innovation bottlenecks.

The broader life sciences sector is witnessing a significant shift, with proteomics emerging as a critical frontier. While genomics has driven breakthroughs for decades, proteins, as the dynamic molecules of biology, offer unparalleled insights into disease mechanisms, treatment responses, and environmental interactions. However, traditional antibody-based proteomics technologies have struggled with scalability. Standard BioTools aims to address this gap with its advanced platforms, positioning itself as a leader in this evolving landscape.

In this competitive environment, Standard BioTools distinguishes itself through a strategy of strategic consolidation, operational excellence, and a focus on high-margin consumables. The company's competitive standing is shaped by its specialized technological advantages against larger, more diversified players such as Thermo Fisher Scientific (TMO), Illumina, Bio-Rad Laboratories (BIO), and Agilent Technologies (A). While these competitors boast broader portfolios and larger market shares, LAB carves out its niche through superior multiplexing capabilities and specialized tools for high-dimensional data generation. This allows LAB to target specific research applications, particularly in academic and biopharmaceutical settings, where its unique value proposition can translate into stronger customer loyalty and potentially higher gross margins.

Technological Edge: Unlocking Multi-Omics Insights

Standard BioTools' investment thesis is fundamentally underpinned by its differentiated multi-omics technology portfolio, which provides tangible benefits over conventional methods. The company's core platforms, including CyTOF, Hyperion, and Biomark, are engineered to generate high-content data across diverse therapeutic areas such as immuno-oncology, neurology, and infectious diseases.

The CyTOF technology platform, for instance, utilizes metal-tagged antibodies and time-of-flight mass spectrometry to eliminate signal interference, thereby expanding multiplexing capabilities. This allows researchers to analyze a significantly greater number of cellular markers simultaneously, providing a more comprehensive view of biological systems. Similarly, the Hyperion spatial biology platform unlocks deeper insights into tissue organization by preserving spatial context while enabling high-dimensional molecular and proteomic analysis. The Hyperion XTi spatial imaging system, a high-throughput, high-performance instrument, was recognized as the 2024 Nature Method of the Year, underscoring its scientific validation and growing market adoption. Each placement of these instruments builds an install-base leverage for future consumables flow-through, which is crucial for recurring revenue.

A cornerstone of LAB's proteomics strategy, even after its planned divestiture, is the SomaScan technology. While the SomaScan Business is being sold to Illumina, Standard BioTools retains a strategic upside through a specified royalty stream on net revenues generated from sales of SOMAmer-based next-generation sequencing (NGS) library preparation kits (Illumina Protein Prep) and a license agreement for the intellectual property relating to Single SOMAmers for potential development and commercialization. SomaScan, using a DNA aptamer-based approach, measures up to 10,000 proteins with unmatched precision. Recent studies have demonstrated SomaScan's superior proteome coverage and lower technical variability compared to competitor platforms. For example, in a prostate cancer analysis, SomaScan 7K identified over 50 protein markers, including previously unknown ones, whereas a comparable competitor found only one known biomarker. This "more is really more" approach in proteomics allows for the discovery of both known and novel biomarkers, with the potential to assess disease risk decades in advance.

The company is also actively engaged in R&D to further enhance its offerings. The introduction of single SOMAmer agents as a minimal viable product in Fall 2024 is a strategic move to address a large protein reagent market where traditional antibodies are limited. These 11,000 fully synthetic monoclonal reagents offer a highly differentiated solution for protein identification and quantification. Additionally, the CyTOF-XT Pro, a higher-throughput flow system with Part 11-compliant software, was launched for clinical trial researchers, designed to drive consumables pull-through. These technological advancements contribute directly to LAB's competitive moat, enabling higher average selling prices (ASPs), potentially lower costs through efficiency, better margins, and a stronger market position in specialized, high-value research applications.

Operational Transformation and Financial Discipline

Standard BioTools' journey has been marked by significant strategic and operational transformations. Originally incorporated as Fluidigm Corporation in 1999, the company rebranded to Standard BioTools Inc. in April 2022, signaling a new strategic direction. A pivotal moment was the merger with SomaLogic on January 5, 2024, an acquisition valued at $444.20 million, which even resulted in a bargain purchase gain of $25.20 million. This was followed by the acquisition of Sengenics on November 21, 2024, a strategic bolt-on to enhance SomaScan services.

The company's commitment to operational excellence is embodied in its "Standard BioTools Business System (SBS)," which applies lean principles to drive continuous improvement and accountability. This system has been instrumental in accelerating cost synergies, with $80 million in annualized reductions operationalized throughout 2024, a full year ahead of schedule. An additional $10 million in cost reductions, primarily in long-horizon R&D projects, was implemented in early 2025, bringing total annualized synergies to $90 million. These efforts have translated into tangible operational improvements, including an industry-leading on-time delivery for products and services of 98% in Q4 2024 (up from 78% in Q4 2022) and a more than fourfold reduction in customer complaints for its main instrument platform.

These operational efficiencies have had a direct impact on the company's financial performance. For the first quarter of 2025, non-GAAP operating expenses improved 22% year-over-year, operating loss improved 45%, and adjusted EBITDA improved 29%. Further restructuring actions were announced in August and September 2025, including consolidating South San Francisco-based R&D into its Singapore facility, relocating headquarters to Boston, Massachusetts, and an additional reduction in force impacting approximately 20% of its global workforce. These measures are designed to align operating costs with revenue projections and improve overall operational efficiency.

A significant strategic move announced on June 22, 2025, was the definitive agreement to divest the SomaScan Business (SomaLogic and Sengenics) to Illumina for up to $425 million in cash and royalties, a transaction expected to close in the first half of 2026. This divestiture is intended to simplify LAB's operating structure, enable achievement of adjusted EBITDA breakeven, and fuel its inorganic growth strategy, allowing the company to focus on its retained mass cytometry and microfluidics businesses.

Recent Financial Performance and Liquidity

Standard BioTools' recent financial performance reflects both the impact of its operational transformations and the challenging macroeconomic environment. For the three months ended September 30, 2025, total revenue from continuing operations was $19.552 million, an 11% decline year-over-year. For the nine months ended September 30, 2025, total revenue from continuing operations was $61.536 million, down 7% compared to the prior year period. This decline was primarily driven by macroeconomic pressures on customer spending, including budgetary limitations and constrained funding environments.

Breaking down the continuing operations revenue for Q3 2025, product revenue stood at $13.800 million (comprising $5.095 million from instruments and $8.705 million from consumables), while services and other revenue contributed $5.752 million.

Gross profit for continuing operations in Q3 2025 was $9.484 million, a 22% decrease year-over-year, resulting in a gross margin of 48.5%. The decline in gross profit was primarily attributed to the revenue decrease.

Operating expenses have shown the positive impact of the company's cost reduction initiatives. Research and development (R&D) expense decreased by 8% for the three months and 17% for the nine months ended September 30, 2025, due to the deferral of long-term R&D projects and restructuring activities. Selling, general and administrative (SGA) expense, however, increased by 9% for the three months and 12% for the nine months ended September 30, 2025. The three-month increase in SGA reflects the reclassification of SomaScan as discontinued operations, leading to certain shared personnel and corporate overhead costs remaining with continuing operations.

The company reported a net loss of $34.687 million for the three months ended September 30, 2025 (inclusive of discontinued operations). Adjusted EBITDA for the first quarter of 2025 was a loss of $16.9 million, representing a 29% improvement year-over-year. Interest income decreased by 55% for the three months and 54% for the nine months ended September 30, 2025, due to reduced balances and interest rates on investments. Conversely, interest expense decreased by 99% for both periods, as the company fully repaid its term loan facility and convertible notes in 2024, resulting in negligible outstanding debt.

Standard BioTools maintains a healthy liquidity position, with cash, cash equivalents, and investments totaling $214.40 million as of September 30, 2025. While the company has an accumulated deficit of $1,279.80 million, management expects its existing liquidity and capital sources to be sufficient for operations for at least the next 12 months. Net cash used in operating activities decreased by $56.20 million for the nine months ended September 30, 2025, compared to the prior year, reflecting reduced operating expenses from completed restructuring activities.

The company also suspended its $50 million share repurchase program on May 2, 2024, after purchasing approximately 15.4 million shares for about $41 million in cash through the first half of 2024.

Outlook and Strategic Initiatives

Standard BioTools' forward-looking strategy is firmly anchored in achieving profitability and expanding its market footprint through disciplined execution and strategic consolidation. For the full year 2025, the company reiterated its revenue guidance in the range of $165 million to $175 million. It is crucial to note that this guidance includes the SomaScan Business for the full year 2025, even though it is reported as discontinued operations in the latest financial statements, as the divestiture to Illumina is expected to close in the first half of 2026. Management is taking a "measured approach," anticipating persistent macroeconomic headwinds and back-half seasonality, driven by internal funnel metrics rather than an assumed market recovery.

A key assumption within this guidance is a mid-teens percentage decline in Americas academic revenue, translating to a high single-digit million dollar impact, primarily affecting instrument purchases due to anticipated NIH funding pressures and general caution in academic spending. While the company hopes for NIH budget releases, it is not relying on a market recovery. Tariffs are also a factor, with an estimated low single-digit million dollar impact on gross margin and adjusted EBITDA if fully absorbed, though the company plans to pass these costs to customers where possible.

The company's most significant financial objective is to reach adjusted EBITDA breakeven by 2026, a commitment management states will be met "irrespective of the top line." This aggressive profitability target is supported by the substantial cost synergies already operationalized and the ongoing benefits of the SBS.

Strategic partnerships are central to LAB's growth. The collaboration with Illumina for the SomaScan assay, with its full commercial release on Illumina's NovaSeq platform expected in the first half of 2025, represents a significant long-term growth vector. While 2025 is viewed as a "transition year" with moderate growth from this partnership as new sites ramp up, management sees a "very strong value driver" for 2026 and beyond, with the SomaScan platform addressing a multi-billion dollar market opportunity in proteomics.

Beyond organic growth, strategic M&A remains a core tenet of Standard BioTools' strategy. The company has a robust pipeline, targeting 4 to 6 strategic transactions between 2025 and 2026. The focus is on derisked technologies with clear paths to commercialization, strong margin profiles, and exposure to attractive end markets. The current market environment, characterized by depressed valuations and tight funding, presents a unique window for LAB to accelerate its consolidation thesis. Furthermore, the company is expanding its "Omics-as-a-Service" offering, leveraging its full suite of solutions to provide premium lab services and clinical research support, thereby increasing technology adoption while bypassing capital budget constraints in the broader biopharma market.

Risks and Challenges

Despite its strategic transformations and operational discipline, Standard BioTools faces several pertinent risks and challenges that could impact its investment thesis. Macroeconomic headwinds remain a significant concern, including continued capital expenditure constraints in the life sciences sector, particularly affecting instrument sales. The anticipated reduction in NIH spending is expected to lead to a mid-teens percentage decline in Americas academic revenue, primarily impacting capital equipment purchases and delaying consumables orders. While the company is actively assessing the operational impact of new tariff measures, an estimated low single-digit million dollar impact on gross margin and adjusted EBITDA could occur if costs are fully absorbed.

Historically, the SomaScan services business has been heavily reliant on a few large customers, leading to quarter-to-quarter variability in revenue. Although the company is actively working to diversify its customer base through authorized sites and the Illumina partnership, this concentration remains a factor to monitor. Furthermore, the company is responsible for SomaLogic's liabilities and obligations post-merger, including legal, financial, regulatory, and compliance matters. These could result in additional costs, divert management resources, and adversely impact the company if underestimated or not satisfied.

Standard BioTools is also involved in ongoing legal proceedings, including stockholder litigation and a breach of merger agreement lawsuit related to Palamedrix. Such litigation is inherently uncertain and could lead to significant costs and divert management's attention, regardless of the outcome. The company is also exposed to market risks from fluctuations in interest rates and foreign currency exchange rates.

Conclusion

Standard BioTools is in the midst of a profound transformation, strategically divesting its SomaScan business to Illumina to sharpen its focus on its retained mass cytometry and microfluidics platforms, while still benefiting from the long-term potential of SomaScan through royalties and licenses. This disciplined overhaul, guided by the "Standard BioTools Business System," has already yielded significant operational efficiencies and cost reductions, laying a robust foundation for future profitability. The company's commitment to achieving adjusted EBITDA breakeven by 2026, irrespective of top-line fluctuations, underscores its resolve in navigating a challenging macroeconomic landscape.

With a strong balance sheet, a clear technological edge in high-precision proteomics, and a strategic appetite for accretive M&A, Standard BioTools is positioning itself to capitalize on the evolving multi-omics market. While macroeconomic headwinds and inherent execution risks persist, the company's proactive management of costs, strategic partnerships, and diversified growth initiatives suggest a compelling narrative for investors seeking exposure to a leaner, more focused, and operationally resilient player in the life sciences tools sector. The successful execution of its strategic roadmap and the continued adoption of its differentiated technologies will be critical indicators of its long-term value creation.