Q4 2025 Bio-Techne Corp Earnings Call

Management's prepared remarks during our Q&A session. Please limit yourself to one question and one follow up I would now like to turn the call over to David Clair Bio Tech Neese, Vice President Investor Relations.

And thank you for joining us on the call with me. This morning are Kim Cal Berman, President and Chief Executive Officer, and Jim Hippel, Chief Financial officer of biotech need be.

Before we begin let me briefly cover our safe Harbor statement.

Some of the comments made during this conference call may be considered forward looking statements, including beliefs and expectations about the companys future results.

The company's 10-K for fiscal year 2024 identifies certain factors that could cause the company's actual results to differ materially from those projected in the forward looking statements made during this call. The company does not undertake to update any forward looking statements because of any new information or future events or developments the 10.

K as well as the company's other SEC filings are available on the company's website within its Investor Relations section.

During the call non-GAAP financial measures may be used to provide information pertinent to ongoing business performance tables reconciling. These measures to most comparable GAAP measures are available in the company's press release issued earlier. This morning on the Investor Relations section of our biotech <unk> Corporation Web site.

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At Www Dot bio dash technique dot com.

Separately in the coming weeks, we will be participating in the UBS Wells Fargo Baird Morgan Stanley and Deutsche Bank Healthcare conferences, we look forward to connecting with many of you at these upcoming events.

I'll now turn the call over to Kim.

Thank you, Dave and good morning, everyone.

Welcome to biotech needs fiscal fourth quarter 2025 earnings call.

I am pleased to report that we delivered a solid quarter that was in line with our expectations.

The team's continued execution drove 3% organic revenue growth in a dynamic operating environment.

Our performance was once again fueled by strength in the Biopharma end markets, particularly among large pharma customers, which skewed robust demand for our automated proteomics analytical instrumentation and cell therapy solutions.

Our fourth quarter kept off a fiscal year in which we delivered 5% organic revenue growth, we reinforced our leadership across key markets through a series of innovative product launches and we positioned the company for sustained future growth.

As a reminder, approximately 80% of biotech things revenue is derived from consumables, including those used for our proprietary instrumentation.

And this provides a strong foundation for durable growth.

Resilient revenue mix combined with the critical value our customers place in our portfolio of tools for research manufacturing and precision diagnostics was reflected in our differentiated financial performance. Despite uncertainties many of our customers face throughout 2025.

This performance was once again achieved with a strong emphasis on profitability.

Operational efficiencies, we continue to implement contributed to an adjusted operating margin of 32% for the quarter.

Our team remains focused on striking the right balance between investing for future growth and driving productivity across the organization.

This disciplined approach enables us to maintain our industry, leading profitability, while positioning biotech need for long term success.

Before we delve into the quarterly performance I want to highlight a strategic portfolio action that reflects our long term financial and operational priorities.

Last night, we announced the divestiture of our Exosomes diagnostics business, including the exit of the <unk> postpaid test and our CLIA certified clinical laboratory to Mdx health.

Recognize leader in urology, and specifically cost in cancer diagnostics.

Following a thorough strategic assessment, we concluded that a single high performing CLIA test does not provide us the operational leverage needed to support a broader growth ambitions.

We expect the transaction to close in the first quarters of fiscal 2026.

Importantly, <unk> will retain access to the proprietary Exosomes based technology using our recently launched ESR, one mutation kit for breast cancer recurrence.

We remain committed to leveraging this platform to expand our portfolio of <unk> based gene mutation kits further strengthening our position in precision diagnostics.

Over the past five decades by technique has built a market leading portfolio of high quality high margin <unk> instruments and tools, serving both the life sciences and clinical diagnostic markets.

The divestiture of Exosomes diagnostics it presents a strategic repositioning of our portfolio and this enables us to redirect investments towards strengthening our core foundation and our growth verticals disciplines.

This transaction also delivers an immediate uplift to our already sector, leading operating margin profile.

Jim will provide additional detail on the financial implications of this deal later in the call.

Let's now turn to our end markets beginning with Biopharma.

Throughout fiscal 2025, we saw steady momentum in this segment, particularly among large pharmaceutical customers. However, decent commentary from the U S administration regarding potential pharmaceutical peers and the proposed implementation of a most favored nation drug pricing model has introduced a degree of uncertainty.

Across the pharma landscape.

Despite those evolving dynamics, including shifting timelines changing tariff structures and dynamic messaging regarding policy intense demand for biotech these broad portfolio remains strong.

Large pharmaceutical companies continue to rely on a high quality reagents and productivity enhancing tools to advance their pipeline initiatives underscoring the central role our solutions play in the research development and manufacturing workflows.

The growth driven by a large pharmaceutical customer base continue to be a key driver in the quarter. However, this momentum was partially offset by more subdued performance from smaller biotech firms.

These companies remain cautious with their spending amid a constrained funding environment.

This trend is consistent with broader industry data, which indicates that biotech funding has declined more than 40% year to date compared to the 2024 levels.

Despite these headwinds our overall biopharma end market delivered high single digit growth for both the fourth quarter and full fiscal year.

Turning to academia segment that continues to attract heightened attention across the life science tools industry.

Revenue from our academic customers represents approximately 21% over total business with the U S institutions contributing roughly 12%.

Given the ongoing uncertainty surrounding the upcoming NIH budget, we conducted a comprehensive assessment to better understand our exposure to NIH funded research.

Based on this evaluation, our new estimate is that less than one third of our U S. Academic revenue is directly tied to NIH grants.

In other words, our total company exposure to NIH funded research is likely in the low single digits range and that is notably below our prior estimate of 5% to 6%.

In light of recent reports of NIH cancellations. We also examined publicly available databases to identify which these search areas are most affected.

Encouragingly, our analysis revealed that funding for programs that are aligned with biotech. These core portfolio remains largely intact.

Areas, such as proteomics minerals to chemistry, and spatial biology cell culture cell therapy, and immunology as experienced relatively limited disruption.

This reinforces the durability of our academic exposure, which is concentrated in fields of ongoing scientific and clinical importance.

As a result, our academic end markets declined low single digits in the fourth quarter and increased low single digits for the full fiscal year.

From a geographic standpoint performance was broadly consistent with expectations.

The Americas delivered low single digit growth.

Expanded mid single digits in APAC, excluding China grew low single digits as well.

Noteworthy is that China delivered a positive surprise, increasing low double digits in the quarter as the region returned to growth ahead of anticipated tariff impact this.

This momentum was broad based spanning our portfolio of research in GMP reagents analytical instrumentation and spatial biology solutions.

Beyond the tariff related activity market signals suggest that China has stabilized and is well positioned for a gradual return to modest growth in the coming quarters.

Now, let's discuss the growth drivers in our protein Sciences segment with strong execution drove demand across our portfolio of proteomics analytical tools and cell therapy workflow solutions and this enabled 4% growth for the segment in the quarter.

Fiscal 2025 was marked by several key product launches further strengthened our position in the market.

These launches included the introduction of Leo our next generation simple western instrument. The introduction of Kopecks, enabling the continued expansion of our GMP reagents portfolio and the introduction of AI enabled designer proteins.

For full fiscal year 2025.

<unk> Sciences segment increased revenues by 5%.

The demand for our cell therapy workflow solutions remained strong with over 550 customers relying on biotech nice high quality, consistent and highly bioactive GMP reagents to advance the preclinical and clinical programs.

As mentioned, we introduced our OPEC GMP cytokines product line in fiscal year 2025.

Opex deliver precise cytokine concentrations to cell therapy manufacturers and support close system car T and TCR T manufacturing workflows.

These innovative cytokine delivery systems carrier value proposition that enables biotech need to take share in later stage and potentially commercial stage programs.

Our GMP reagent portfolio grew 20% in Q4 and exceeded 30% growth for the full fiscal year.

Sticking with our cell therapy growth pillar also like to take this opportunity to give an update on the manufacturer of the leading <unk> bio reactors Wilson Wolf.

Biotechnica currently owns 20% of Wilson Wolf and is on track to acquire the remaining 80% by the end of calendar 2027 or earlier contingent upon milestone achievements.

Despite the ongoing softness in biotech funding Wilson rule grew over 20% for fiscal 2025, while maintaining EBITDA margins north of 70% for the year.

And that is notably below our prior estimate of 5 to 6%.

Next I'd like to highlight the continued strength of proteomics analytical instrument business to.

Productivity gains these platforms deliver combined with disciplined execution from our commercial teams drove high single digit growth for both the quarter and the full fiscal year.

Importantly, we saw mid teens growth in instrument revenue, marking the third consecutive quarter of year over year growth and instrument placements.

Turning to our simple western portfolio demand for our next generation high throughput instrument, both Leo was strong in the quarter.

The growing installed base robust order funnel and a higher consumable pull through compared to the legacy simple western systems, all point to a promising future for this platform.

We're also seeing meaningful traction in expanding the use cases for the simple western technology.

Recent example is a real simple lesson plays in supporting the FDA approval of <unk> Therapeutics cell based gene therapy.

Our platform was used for GMP lot release testing of both the viral vector and cell therapy underscoring its growing relevance as a QC tool and therapeutic development and manufacturing.

This is a clear signal that our instrumentation is not only driving productivity in research workflows, but it is increasingly being adopted in a regulated environment an important validation of our strategy.

I'd also like to highlight the continued strength, we're seeing in our biologics business.

<unk> platform.

Moody's continues to gain share driven by its ease of use it produce ability and strong data compliance, which are attributes that align closely with the needs of our pharma bio processing customers.

As a reminder, while he's expecting to pharmaceutical manufacturing lines as a QA QC instrument and demand for bio processing instrumentation remains robust.

There is still when combined with our commercial execution has translated into consistent growth in both instrument placements and consumables pull through.

These lounges included the introduction of Leo. Our next Generation simple Western instruments. The introduction of Pope packs. Enabling the continued expansion of our GMP, reagents portfolio and the introduction of AI enabled, designer proteins.

Wrapping up our protein Sciences segment, I'd like to turn to our quarterly agent and assay portfolio.

For full fiscal year 2025.

5%.

Our research use only consumables, including our industry, leading catalog of 6000 proteins and 400000 antibody types grew low single digits in the quarter.

Importantly, despite ongoing concerns around NIH outlays and uncertainty surrounding the fiscal 2026, NIH budget reagent sales to our U S academic customers remained flat compared to the prior year period.

The demand for Cell Therapy Workflow Solutions remains strong, with over 550 customers relying on Bio-Techne's high-quality, consistent, and highly bioactive GMP reagents to advance their preclinical and clinical programs.

As mentioned we introduced our bopek. GMP cytokine product line in fiscal year 2025,

Another highlight is that we reinforced our leadership in our UO essays through a strategic distribution partnership with <unk>.

BC delivered precise Saito concentrations to cell therapy manufacturers and supported closed system, CARTi, and TCRT manufacturing workflows.

Under disagreement biotechnical distribute spear barrels ultra sensitive.

Assays targeting key Alzheimer's disease, Biomarkers, including <unk>, 2017, NFL and others.

These Innovative Saito Delivery Systems, carry a value proposition that enables biotechnique to take share in later stage and potentially commercial stage programs.

This collaboration builds on our earlier participation in <unk> $45 million a funding round in 2024.

Our GMP PD agent, portfolio, grew, 20% in Q4 and exceeded 30% growth for the full fiscal year.

Let's now turn to the growth pillars within our diagnostics and space Youll be allergy segment <unk>.

Sticking with our cell therapy growth pillar. I also like to take this opportunity to give an update on the manufacturer of the leading GX bioreactors, Wilson wolf,

Organic revenue declined 1% in the fourth quarter, primarily due to order timing across all three businesses for.

For the full year. However, the segment delivered 6% organic revenue growth, reflecting the strength of our portfolio.

Biotechnique currently owns 20% of Wilson Wolf and is on track to acquire the remaining 80% by the end of calendar 2027 or earlier, contingent upon milestone achievements.

Especially will be LNG remains the area with the highest exposure to academic customers and as such has been more acutely impacted by the uncertainties surrounding NIH funding and software biotech funding environment.

Despite the ongoing softness in biotech funding Wilson, wolf grew over 20% for fiscal 2025 while maintaining ibida margins north of 70% for the year.

Additionally, order timing for several lunar for combat systems weighed on our performance with geopolitical headwinds delaying instrument placements in the middle East.

Next, I'd like to highlight the continued strength of a Potomic analytical instrument business.

As a result, <unk> declined mid single digits in Q4, but grew mid single digits for the full fiscal year, including nearly 50% growth for Luna.

The productivity gains these platforms deliver combined with disciplined execution, from our commercial teams drove High single digit growth for both quarter and the full fiscal year.

In summary.

Importantly, we saw mid teams growth in instrument Revenue, marking the third consecutive quarter of the year-over-year growth in instrument placements.

Incredibly proud of the consistent execution by the biotech team throughout fiscal year 2025, especially in the face of persistent macroeconomic challenges and policy driven uncertainties.

Turning to our simple Western portfolio, demand for our next Generation High. Throughput instrument called, Leo was strong, in the quarter,

This past year showcased our innovation at scale with several high impact product launches across both segments that position us well for future growth.

the growing installed base, a robust order funnel, and

Higher consumable, pull through compared to the Legacy. Simple, Western systems all point to a promising future for this platform.

Our portfolio remains tightly aligned with some of the most attractive and fastest growing markets in life Sciences and precision diagnostics.

We're also seeing meaningful Traction in expanding the use cases for the simple Western technology.

With a focused strategy and a world class team, we are well equipped to capitalize on these opportunities and drive long term value creation.

A recent example, is the role of simple Western plays in supporting the FDA, approval of our bayona Therapeutics cell-based gene therapy.

Now with that I'll pass it.

Call over to Jim Jim.

Thank you Ken I'll start with some additional details on our Q4 financial performance and then give some thoughts on the forward outlook.

Our platform was used for GMP lot release testing of both the viral vector and the cell therapy underscoring, its growing relevance as a QC tool in therapeutic development and Manufacturing.

Starting with the overall fourth quarter financial performance adjust.

Adjusted EPS was <unk> 53, compared to 49 in the prior year.

This is a clear signal that our instrumentation is not only driving productivity in research workflows, but it is increasingly being adopted in regulated environments.

Foreign exchange had a favorable <unk> <unk> impact.

GAAP EPS for the quarter was a loss of <unk> 11, compared to a positive 25 in the prior year period.

Important validation of our strategy at also, like to highlight the continued threats. We're seeing in our biologics business led by the mice platform.

Q4 revenue was $317 million, an increase of 3% year over year on an organic basis and 4% reported.

By geography, North America increased low single digits year over year, driven primarily by our pharma customers.

Maurice continues to gain, share driven by its ease of use a producibility and strong data compliance, which are attributes that align closely with the needs of our Pharma and bioprocessing customers.

Europe increased mid single digits led by strength from our Biopharma customers and steady growth in academia.

As a reminder, Maurice is expecting to pharmaceutical manufacturing lines as a qaqc instrument and demand for bioprocessing instrumentation remains robust.

China increased low double digits as demand improved in front of tariff uncertainties, while the rest of Asia increased low single digits.

There's still wind combined with our commercial execution has translated into consistent growth. In both instrument placements and consumables pull through

By end market in Q4, Biopharma increased high single digits, while academia decreased low single digits in the quarter.

Wrapping up our party in Sciences segment. I'd like to turn to our Corey agent and as a portfolio,

Below revenue on the P&L total company adjusted gross margin was 71% in the quarter compared to 71, 1% last year down year over year, primarily due to unfavorable product mix.

All right. He said she was only consumables, including our industry-leading catalog of 6,000 proteins and 400,000 antibody types, crew low single digits in the quarter.

Adjusted SG&A in Q4 was 32% of revenue compared to 29, 8% in the prior year, while R&D expense in Q4 was seven 8% of revenue compared to seven 9% in the prior year.

The overall stability in SG&A and R&D was driven primarily by the ongoing benefits of structural streamlining and diligent expense control offset by the funding our strategic growth initiatives.

another highlight is,

Reinforced our leadership in ruo, essays through a strategic distribution partnership with spear bio.

Adjusted operating margin for Q4 was 32% down 150 basis points compared to the prior year, primarily due to the impact of unfavorable product mix.

Under disagreement biotechnical, distributes peer bios, Ultra sensitive and amino acids, targeting key Alzheimer's disease, biomarkers, including pet out 27 NFL and others.

We continue to execute cost containment measures and prioritize our growth initiatives to drive efficiencies throughout the organization with the goal of maximizing operating leverage.

This collaboration Builds on our earlier, participation in spear bios, 45 million cities a funding round in 2024.

While we are in this uncertain market environment.

Special biology segment.

Looking at numbers below operating income net interest expense in Q4 was $1 4 million flat with the prior year.

Organic Revenue declined. 1% in the fourth quarter primarily due to all the timing across all 3 businesses.

Our bank debt in the balance sheet as of the end of Q4 stood at $346 million.

Other adjusted net operating income was $5 2 million in the quarter, an increase of $4 7 million compared to the prior year.

44 year, however, the segment delivered 6%, organic Revenue, growth reflecting the strength of our portfolio.

The increase was driven by the foreign exchange impact related to our overseas cash pooling arrangements as well as our share of Wilson Wolf net income.

Spatial biology Remains the area with the highest exposure to academic customers and as such has been more accurately impacted by the uncertainties surrounding NIH funding and the software biotech funding environment.

Okay.

Moving further down the P&L.

Adjusted effective tax rate in Q4 was 21, 5% down 60 basis points compared to the prior year due to geographic mix.

Additionally, order timing for several Luna for Comet systems weighed on our performance, with geopolitical headwinds delaying instrument placements in the Middle East.

Turning to cash flow and return of capital of $98 2 million of cash was generated from operations in the quarter and our net investment in capital expenditures was $4 9 million.

As a result spatial biology declined. Mid single digits in Q4 but grew mid single digits for the full fiscal year including nearly 50% growth for Luna for

in some of the

Also during Q4, we returned capital to shareholders by way of $12 4 million in dividends.

$101 million through stock buybacks.

We finished the quarter with $155 8 million average diluted shares outstanding a decrease of 3% compared to the prior year.

incredibly proud of the consistent execution, by the bioteknik team, throughout fiscal year 2025, especially in the face of persistent, microeconomic challenges and policy driven uncertainties.

Our balance sheet finished Q4 in a strong position with $162 2 million in cash and our total leverage remains well below one times EBITDA.

This past year, showcased our Innovation at scale with several high-impact product launches across both segments.

The position as well for future growth.

Going forward M&A remains a top priority for capital allocation.

Our portfolio remains tightly aligned with some of the most attractive and fastest-growing markets in life sciences and precision diagnostics.

Okay.

Next I'll discuss the performance of our reporting segments, starting with the protein Sciences segment.

Q4 reported sales were $226 5 million with reported revenue, increasing 6% compared to the prior year.

With a focused strategy and a world-class team. We are well equipped to capitalize on these opportunities and drive long-term value creation.

Now, with that, I'll pass the call over to Jim Jim.

Organic revenue growth was 4% for the quarter with foreign currency exchange, having a favorable impact of 2%.

Thank you, Kim. I'll start with some additional details on our Q4 financial performance, and then give some thoughts on the forward Outlook.

The segment's organic growth was driven by strong performances in our cell therapy and protein analytical tools businesses.

Starting with the overall fourth quarter financial performance.

Especially from large pharma customers.

Operating margin for the protein Sciences segment was 43, 6% an increase of 60 basis points compared to the prior year, primarily due to the impact of favorable volume leverage cost management and ongoing structural alignment initiatives.

Adjusted EPS was 53 cents. Compared to 49 cents in the prior year with foreign exchange having a favorable 3 set impact.

Gaap EPS for the quarter was a loss of 11 cents, compared to a positive 25 cents in the prior year period.

Turning to the diagnostics and spatial biology segment Q4 sales were $89 7 million with both reported and organic growth decreasing 1% compared to the same period last year.

Q4 Revenue was 317 million. An increase of 3% year-over-year on an organic basis, and 4% reported

By geography, North America, increased low single digits year-over-year driven primarily by our Pharma customers.

Growth in our surgeon or Exo Dx prostate cancer test and our diagnostic reagents business was offset by the impact of macro uncertainties on our spatial biology portfolio and the timing of projects from our companion diagnostics customers.

Europe increased mids single digits led by strength from our biofarma customers and steady growth in Academia.

China increased low double digits as demand. Improved in front of tariff uncertainties while the rest of Asia increased low single digits.

For modeling purposes total exits on diagnostics revenue was $25 9 million in fiscal 2025, with an unfavorable impact of 200 basis points on our corporate adjusted operating margin.

By End Market in Q4, biofarma, increased High single digits, while Academia decreased low, single digits in the quarter.

As Kim mentioned in his remarks, we reached a definitive agreement to divest the Exxon diagnostics business to Mdx health and the business will be classified as a business held for sale until the anticipated close the transaction during the first quarter of our fiscal 2026.

Below revenue on the p&l total company. Adjusted gross margin was 70.1% in the quarter compared to 71.1% last year down year-over-year primarily due to unfavorable product mix.

Okay.

Moving onto the diagnostics and special biotech segment operating margin, which was 6% compared to the prior year's 12, 5%.

Adjusted sgna and Q4 was 30.2% of Revenue compared to 29.8% in the prior year. While R&D expense in Q4 was 7.8% of Revenue compared to 7.9% in the prior year.

The decrease in margin was primarily due to unfavorable product mix.

The overall stability in sg&a and R&D was driven primarily by the ongoing benefits of structural streamlining and diligent expense control offset by the funding of strategic growth initiatives.

We expect this unfavorable product mix within the segment to start to reverse in Q1 of fiscal year 'twenty six and we anticipate an immediate improvement in the diagnostics and spatial biology operating margin following the Exosomes diagnostics. This divesture.

Adjusted operating margin for Q4. Was 32% down? 150 basis points compared to the prior year, primarily due to the impact of unfavorable product mix.

In summary, Q4 was in line with our expectations and our teams continue to execute extremely well, especially considering the turbulent market conditions induced by biotech funding challenges as well as the NIH funding and tariff uncertainty is potentially impacting our customers.

We can see the execute Cost Containment measures and prioritize our growth initiatives, to drive efficiencies throughout the organization with the goal of maximizing operating Leverage.

While we are in this uncertain Market environment.

Prior to the emergence of NIH funding and tariff uncertainties, our business was on its way back towards double digit organic growth, which we continue to view as the long term growth rate of our business under normal market conditions.

Looking at numbers below operating income, net, interest expense, in Q4 was 1.4 million flat with the prior year.

Our bank debt in the balance sheet as of the end of Q4, sit at 3 4, 6. 0,

Looking ahead predicting with these uncertainties will be resolved and when we might see more stabilized end markets remains challenging we are hopeful that the ongoing house and Senate appropriations process will bring greater clarity to the governments fiscal 2026 NIH budget.

Other adjusted net, operating income was 5.2 million and a quarter, and the increase of 4.7 million compared to the prior year.

The increase was driven by the Foreign Exchange impact related to our overseas. Cash Point arrangements as well as our share of Wilson Wolf's net income.

Encouragingly select members of Congress continue to express support for NIH funding.

Moving further down the p&l or adjust the effect of tax rate in Q4 with 21.5% down 60 basis points, compared to the prior year, due to Geographic mix.

While the final outcome is unlikely be known before the swap in the meantime, additional risks are emerging including the potential for budget precision and a shift towards multi year grant funding by the executive branch.

Turning to cash flow and return of capital 98.2. Million of cash, was generated from operations in the quarter and our net investment in capital. Expenditures was 4.9 million.

These factors are contributing to cautious purchasing behavior, among our U S academic customers and we expect this dynamic to persist until there is more certainty around funding.

.1 million through stock BuyBacks.

Turning back to our pharma end market.

We remains around the potential tariff exposure, our pharmaceutical customers may face under the current U S administration.

We finished the quarter with 155.8 million average, due shares outstanding, a decrease of 3%, compared to the prior year.

While the recently announced U S. EU trade agreement, which includes a blank at 15% tariff on pharmaceuticals is a constructive step.

Our balance sheet, finished Q4 in a strong position with 162.2 million in cash and our total leverage remains well below 1 time dividend.

U S administration is still proposing up to a 250% tariff on pharmaceutical companies in the future.

Going forward, m&a remains a top priority for Capital allocation.

Next, I'll discuss the performance of our reporting segments. Starting with the protein side segment.

Compounding this uncertainty as the administration's recent push for most favored nation pricing, which could impact the profitability of the largest pharmaceutical companies and in turn their reinvestment into R&D.

Q4 reported sales were 226.5 million with reported Revenue, increasing 6% compared to the prior year.

And finally, turning to our biotech end market. This segment is responding cautiously to the broader uncertainty impacting innovation and commercialization.

Organic Revenue growth was 4% for the quarter with foreign currency exchange, having a favorable impact of 2%.

Concerns around reduce innovation from the academic sector, coupled with potentially lower returns on invested capital from clinical pipelines are weighed on sentiment.

The segments will get at growth, was driven by strong performances in our cell therapy and protein, analytical tools businesses, especially from large Pharma customers.

These pressures stemmed the possibility of diminished profitability post commercialization to policy shifts shifts such as MFN pricing.

Operating margin for the protein Sciences. Segment was 43.6% and increase of 60 basis points compared to the prior year. Primarily due to the impact of favorable volume, leverage cost management and ongoing structural alignment initiatives.

As Kim noted in biotech funding has been notably soft year to date with industry reports estimate a decline of over 40% compared to 2024 levels.

We do not anticipate a meaningful rebound in funding for smaller biotech companies until there's greater clarity around NIH appropriations tariff policies and drug pricing reforms.

Turning to the Diagnostics and spatial biology segment Q4 sales were 89.7 million with both reported and organic growth. Decreasing 1% compared to the same period last year.

Taking all these factors into account, we believe biotech me has navigated a highly dynamic and uncertain market environment with discipline and resilience.

Growth in a surgeon, our exodx prostate cancer test. And our diagnostic reagents business was offset by the impact of macro uncertainties on our spatial biology portfolio and a timing of projects from our companion, Diagnostics customers

Delivering low single digit organic growth in the most recent quarter.

Moving forward, we anticipate that our organic growth will remain in the low single digit range until the current headwinds across our end markets begin to subside.

For modeling purposes, total xzone, Diagnostics Revenue was 25.9 million in fiscal 2025 with an unfavorable impact of 200 basis points on our corporate adjusted operating margin.

That said, we maintain a high degree of confidence that our end markets will return to our long term historical growth trajectory. Once these uncertainties are resolved.

As Kim mentioned in his remarks, we reached a definitive agreement to invest the EXO Diagnostics business to MDX health and the business will be classified as a business held for sale until the anticipated closed the transaction during the first quarter of our fiscal 2026.

The underlying secular drivers an aging global population, increasing demand for improved quality of life and the accelerating pace of scientific breakthroughs in life Sciences remains firmly intact and continues to support the long term growth outlook for our business.

Moving on to the Diagnostics and spatial biology segment operating margin which was 6% compared to the prior years 12.5%.

The decrease in margin was primarily due to an unfavorable product mix.

In terms of adjusted operating margin, we remain committed to balancing strategic investments that fuel future growth with productivity productivity initiatives that enhanced profitability in today's dynamic environment.

We expect that the unfavorable product mix within the segment will start to reverse in Q1 of fiscal year 2026, and we anticipate an immediate improvement in the Diagnostics and Spatial Biology operating margin following. The Exone Diagnostics is under pressure.

A portion of these strategic investments will be funded through the reallocation of resources previously dedicated to the Exo Dx franchise now redirected toward our core growth pillars.

These include advancing the next generation of our automated proteomics analysis and spatial biology platforms.

In the summary Q4 was in line with our expectations and our teams continue to execute extremely well. Especially considering the turbulent market conditions, induced by biotech funding challenges, as well as the NIH funding and tariff, uncertainties potentially impacting our customers

Expanding applications in cell therapy, and reinvigorating, our core reagents portfolio with targeted investments in ordinary research and AI driven protein development.

Yes.

Prior to the emergence of NIH funding and tariff. Uncertainties our business was on its way, back towards double digit organic growth, which we continue to view as the long-term growth rate of our business under normal market conditions,

Even with this redirected investment.

We expect adjusted operating margin expansion of approximately 100 basis points in fiscal year 2000.

Compared to fiscal 2025.

Starting flat year over year in our first quarter and ramping to roughly 200 basis points higher by Q4.

Looking ahead, predicting when these uncertainties will be resolved. And when we might see more stabilized and markets remains challenging, we are hopeful that the ongoing House and Senate Appropriations process will bring greater Clarity to the government's fiscal 2026. NIH budget.

That concludes my prepared comments and with that I'll turn the call back over the operator to open the line for questions.

Encouragingly, select members of Congress continue to express support for NIH funding.

Thank you if you'd like to ask a question. Please press star one on your keypad to leave the queue at any time press star to please limit yourself to one question and one follow up once again that is star and wanted to ask a question. We will take our first question from.

For the final outcome is unlikely to be known before this fall. In the meantime, additional risks are emerging including the potential for Budget precision and a shift toward multi-year grant funding by the executive branch.

Sudan with Leerink partners. Your line is now open.

These factors are contributing to cautious purchasing Behavior among our us academic customers. And we expect this Dynamic to persist until there is more certainty around funding.

Sure.

Yeah, Hi, guys. Thanks for taking my question so.

First one on the guidance I just wanted to clarify.

Outlook comments you made.

Turning back to our Pharma and Market on certainly remains around the potential. Tariff exposure are from AIT customers May face under the current US Administration.

You're expecting low single digit for the full year fiscal 'twenty six.

And if you could talk a little bit about the cadence of that over the next four quarters. How should we think about the protein sciences segment growth within that context versus the DSS groups.

While the recently announced us EU Trade Agreement which includes a blanket, 15% tariff on, Pharmaceuticals is a constructive step. The US Administration is still proposing up to a 250% tariff on pharmaceutical companies in the future.

Yes.

Excuse me Hi, Tony This is Jim So first of all to declare Fi.

The guidance does not necessarily for full year fiscal 'twenty six growth of low single digits. It was.

This uncertainty is the administration's recent push for most favored nation pricing, which could impact the profitability of the largest pharmaceutical companies and, in turn, their reinvestment into R&D.

We expect low single digit growth until there is more certainty around the various administration policies out there on academic funding and pharmaceutical tariffs on pricing.

and finally turning to our biotech and Market this segment is responding cautiously to the broader uncertainty impacting Innovation and commercialization

And if that takes before fiscal year to become more certain then yes that would translate to a full fiscal year 'twenty six but to be clear I'm not necessarily anticipating they will take the full year for that.

Are weighing on sediment.

Certainly become more known.

These pressures stem from the possibility of diminished profitability. Post-commercialization to the policy shifts, such as MFM pricing.

With regards to segment as you know, we don't give guidance specifically by segment.

I would say there is some puts and takes within both the segments, but I wouldn't expect a big material change in the growth rates in either one under this environment.

As Kim noted, biotech funding has been notably soft year to date with industry reports estimating, decline of over 40% compared to 2024 levels.

Okay.

Helpful and then.

We do not anticipate a meaningful rebounding funding for smaller, biotech companies until there is great greater Clarity around NIH. Appropriations tariff policies and Drug pricing reforms.

On the pharma large pharma segment. It appears instrumentation did well that's in contrast to <unk>.

Some of the things that we're seeing from the peers, maybe can you talk a little bit about whats what.

Taking all these factors into account, we believe biotech is navigated a highly Dynamic and uncertain Market environment with disciplined and resilience.

Delivering low single digit organic growth in the most recent quarter.

Rents are driving growth there Luna for was obviously weak in academic setting but.

Just wanting to understand what was what's picking up in instrumentation and and how should we think about the overall.

Moving forward. We anticipate that our organic growth will remain in the low. Single digit range until the current headwinds AC, our end markets, begin to subside.

Antibodies and cytokines business to perform this year, because obviously, that's consumables and should be more resilient.

That said, we maintain a high degree of confidence that our end markets will return to the long term historical growth trajectories once these uncertainties are resolved.

Despite the somewhat challenging market backdrop.

Estimate.

Thanks for the question.

The instruments, indeed, two unrelated really well in large pharma.

The underlying secular drivers and aging global population, increasing demand for improved quality of life and the accelerating pace of scientific breakthroughs in life sciences. Remain firmly intact and continue to support the long-term growth outlook for our business.

And we've seen that trend over the last couple of quarters, because we know that our instrumentation are getting more and more utilized not only in the early discovery phases, but also in the QA and QC applications for production.

In terms of adjusted operating margin, we remain committed to balancing strategic Investments That fuel future growth with productivity productivity initiatives that enhance profitability in today's Dynamic environment.

And there we're getting spec in and we definitely see see strong growth in the biologics.

Product lines.

A portion of these strategic investments will be funded through the reallocation of resources, previously, dedicated to the exodx franchise. Now redirected toward our core growth pillars.

And then on top of that we've launched.

Simple western high throughput system called Leo which is kind of tailor it to large pharma users equally it has much higher throughput and and that's what I attribute the success to four for serving the large pharma customers.

These include advancing the next generation of our automated proteomic analysis and spatial biology platforms.

Expanding applications in cell therapy and reinvigorating. Our core reagents portfolio with targeted investments, in organoid research and AI driven protein development.

And then on the <unk> side, Yes, we had strong traction and in my prepared remarks, I already mentioned that.

Even with this redirected investment.

We werent pretty unlucky with fee placements.

We expect adjusted operating margin expansion of approximately 100 basis points in fiscal year 2026 compared to fiscal 2025.

The instruments.

We couldnt execute on.

Starting flat year-over-year in our first quarter, and ramping to roughly 200 basis points Higher by Q4.

And putting them in commission in the Middle East Q2.

Political turbulence and.

Therefore, we will have to push out those instruments to next quarter.

That concludes my prepared comments. And with that, I'll turn the call back over to the operator, to open the line for questions.

But in the meantime have a look at the win loss rate and the.

The order book for that product line were looking pretty strong.

Thank you we'll take our next question from Dan Leonard with UBS. Your line is now open.

Thank you. If you like to ask a question, please press star 1 on your keypad to leave the key at any time. Press star 2. Please limit yourself to 1 question and 1 follow up once again that is star and 1 to ask a question. We'll take our first question from pane suda with Larry Nick Partners. Your line is now open.

Thank you very much.

So I appreciate we're in an uncertain environment, but when youre thinking about the outlook Kim would you still commit to that market plus 500 basis points of growth that you've talked about previously.

Uh, yeah. Hi guys. Um, thanks for taking my question. So

In an extreme environment, then and thank you for your question, it's obviously harder or less predictable.

Due to outperform by exactly those 500 basis points or more we obviously have a track record where he has done so for a couple of years.

Uh, first 1 on the guide. I just wanted to clarify, um, and Outlook comments. You made, um, uh, do you you expecting low single digit for the full year fiscal 26. And um and and if you could talk a little bit about the Cadence of that, uh, over the next 4 quarters, uh, how should we think about the protein Sciences segment growth within that context versus the DSs growth?

Yeah. Hi. Excuse me. Hi Penny. This is Jim. So first of all to clarify

But yeah.

<unk> dry up or really turbulent it could be it could be different.

The guidance was not necessarily for full year fiscal, 26, growth of those single digits.

However.

Over the quarters.

And definitely hope and see that there will be more clarity around two or three topics Jim mentioned earlier.

I have no doubt that we have.

We'll have the same differentiation to our peer group, but also a us.

Very much intact long range model, where we will be.

It was that we expect low single digit growth until there is more certainty around the various Administration policies out there on academic funding and pharmaceutical tariffs and ASM pricing. And if that takes the full fiscal year to become more certain than yes, that would translate to a full fiscal year 26, but to be clear, I'm not necessarily anticipating that I'll take the full year for that. I'm sorry to become more known

500 basis points or more compared to the market and that will then naturally also bring us back to double digits.

Understood.

And then my follow up on on your operating margin expansion I am curious how you can accomplish a 100 basis points of operating margin expansion on low single digit growth is that due specifically to the divestiture of <unk> or is that something that you could commit to what that growth level.

Um with regards to, you know, the life segment, as you know we don't give guidance specifically by segment. Um, I'd say there's some puts and takes within both the segments, but I wouldn't expect a a big material change in the growth rates at in either 1, under this environment.

It is being driven by the divestiture of <unk> as we mentioned indexes on was a headwind of about 200 basis points to our margin in fiscal year 'twenty five.

But we are we are making strategic moves to reinvest some of the money we have.

<unk> is on prior into other growth pillars. So we think we can do that and continue to.

Fortify our position for growth going forward in our core growth pillars, while still providing some margin expansion back to investors, hence the 100 basis points.

Business uh, to perform this year because um you know obviously that's consumables and should be more resilient um you know despite some what the challenging Market backdrop. Thank you.

Estimate. Um, thanks for the question.

Thank you we'll take our next question from Dan Arias with Stifel. Your line is now open.

Good morning, guys. Thanks for the questions I appreciate you doing the legwork to understand the NIH exposure there.

Low single digit exposure is actually pretty low can you can you expand on where the funding is coming from for the two thirds of the academic customers that arent tied to the NIH that pharma is it private sources, where these guys getting their money from.

Based on the research we've done that and you probably can see the same as last surveys out there that have been published with regards to where academic institutions do you guys do get the money from them.

The implements, indeed to our delighted really well in large Pharma. And if we have seen that Trend over the last couple of quarters, because we know that our instrumentation are getting more and more utilized, not only in in the early Discovery phases, but also in the QA and QC applications for production and their, we're getting back in and we definitely see see strong growth in the biologics uh, product lines.

Pretty consistent that roughly 50% 55% of their funding comes from federal sources and all of those federal sources, roughly roughly 50% comes from NIH, so that equates to roughly less than a third of.

Uh, and then, on top of that, we've launched the U, simple Western High, throughput system called Leo, which is kind of tailored to large Pharma users because it's has much higher throughput. And, and that's what I attribute the successes to for, uh, for, for serving the lives from our customers.

The academic research.

Funding coming from specifically NIH set the math behind that number.

And for US of course U S academic is only 12% of our business.

Yes.

Okay, and then maybe on.

Wilson Wolf since you guys touched on that obviously, the topline performance that would trigger the change of controllers.

You can only do so much about but the EBITDA threshold could be managed to especially since I think that's the one that.

Actually closer to hitting the target.

Do you have a sense for whether that business is going to be run with a sooner rather than later takeout in mind or is it really just kind of it'll do what it does and that change will take place whenever that happens to happen.

Thank you. We'll take our next question. From Dan Leonard with UBS your line is now open.

Thank you very much.

Yes, Dan I think of course, we keep a close eye on it because we are quite interested in having the asset on the island.

So I appreciate we're in an uncertain environment. But when you're thinking about the Outlook Kim, would you still commit to that market plus 500, basis, points of growth that you've talked about previously?

There are management, because it's a fantastic test.

<unk> product portfolio are very synergistic with not only are the agents, but also with our top and bottom line. So.

EBITDA to your question, it's going to be close I think if there is a little bit of tailwind in the business.

Definitely possible that the EBITDA threshold will be triggered and that we would be rightful owners of the assets earlier than the.

In the, in the extreme environment then, and thanks for your question. It's, it's obviously harder or less predictable to, to outperform by executing. Those 500 basis points or more. We obviously have a track record where we've done so for, for a couple of years, um, but yeah, if if markets dry up or are really turbulent, it it could be, it could be different.

31 27.

Which is the date, where we will get it no matter what right.

It's going to be close so we keep an eye on it and we of course are rooting for for Wilson Wolf two to achieve it.

Thank you we'll take our next question from Matt <unk>.

<unk> with William Blair. Please go ahead your line is open.

However you know, over the quarters where I can definitely hope and see that there will be more clarity around the 2 or 3 topics. You mentioned earlier. Uh I I have no doubt that we uh we will have the same differentiation to our peer group but also a h. A, a very much intact Long Range model where we will be

Hi, Good morning, you referenced are set up.

And that's sort of dragging down to low single digit.

Growing 500 basis points or more compared to Market and that will then naturally also bring us back to double digits.

Outlook I think it's likely that those are not resolved simultaneously and probably some cadence now that occurs it sounds like you did a lot of customer outreach and surveys over the course of the last few months what did you learn about budget unlocked and you know what.

We're really kind of catalyze spend from those different sets of uncertainties.

Understood and then my follow-up on on your operating margin expansion. I'm I'm curious how you can accomplish 100 basis points of operating margin expansion on low single digit growth, is that do specifically to the Devastator of exosome or is that something that you could commit to with that growth level

Yes, Eric looking outlook.

Well I think from the academic perspective, Matt It comes down to its customer behavior. We're fine we're hearing that.

It is being driven by the deficit of exosome. As we mentioned, exosome was a headwind of about 200 basis points to our margin in fiscal year 2025.

Despite the NIH funding being less than a third of what actually fund these academic institutions.

Natural behavior is to kind of overreact and hold back on everything being concerned where money might come from in the future and so we're hearing about.

Um, but we are, you know, making strategic moves to reinvest some of the money we had put next to its own prior into other growth pillars. So, uh, we think we can do that and continue to um,

At least temporary budgets being cut 10%, 15% across the board.

Um, fortify our positions for growth. Going forward in our core growth pillars, while still providing some margin expansion, uh, back to investors, hence the 100 basis points.

In terms of not cut but just in terms of holding back on spending.

And in anticipation of what may or may not happen. So.

Thank you. We'll take our next question from Dan Eras with Stifel. Your line is now open.

Our our actual believes that youre talking to many customers and realize much of surveys around this is that.

What we're experiencing now in academic as behavior perspective might be worse than any actual negative outcome of other funding. So I actually view, our resolution of call. It certainty of where the NIH budget fallout, whether that's flat with minus 10% or even minus 15%.

Morning guys, thanks for the questions. You doing the leg work to understand the NIH exposure, there, uh, low single digit. Exposure is actually pretty low. Can you, can you expand on where the funding is coming from, for the 2/3 of the academic customers that aren't tied to the NIH? Is it Pharma? Is it private sources? Where are these guys getting their money from?

We I actually view that as upside once that known unknown becomes known because we believe customers are actually behaving more conservative than even the worst case scenario.

Okay. Thanks.

So obviously the exit.

Divestment.

Followed the unruly.

We will go up Atlanta biologics on a couple of years ago.

You referenced M&A remains a key focus and lifestyle portfolio reshaping thats going on you've referenced sort of renewed focus on our market profile.

Federal sources. And all those Federal sources roughly roughly. 50% comes from NIH. So that equates to roughly less than a third of the academic, uh, research.

Funding coming from specifically NIH. So that's the math behind that. That number.

How are you thinking about M&A.

And for us, of course, us academic is only 12% of our business. So,

Segment.

Stage of company or relative profitability potential.

Yep. Okay, and then maybe um, on Wilson Walsh since you guys touched on that, obviously the Top Line performance, that would trigger the change of control is

Yes, Thank you, Matt well M&A is still our highest priority and will be.

Something that you can only do so much about. But the Eva threshold could be managed to especially since I think that's the 1, that's

For the capital deployment.

Yes.

We would be very interested in getting product lines and companies that are aligned with our strategy right high margin high volume products that we can ship through our channels globally.

Actually closer to hitting the target. Do you have a sense for whether that business is going to be run with the sooner rather than later? Take out in mind? Or is it really just kind of, you know, it'll do what it does and and that change will take place whenever that happens to to happen.

<unk>.

Therefore investing in our core.

The core reagents, adding to that is very likely a desirable scenario.

Cell therapy, there is still.

Any capability that we could add to our very successful cell therapy franchise and then we have we have a very strong portfolio in instrumentation and related consumables in the protein simple franchise and there. We also see capabilities that we could add and then therefore.

Yeah, Dan. I think, of course, we keep a close eye on it because we are quite interested in having the, uh, the asset under our, uh, under our management. Because it's a fantastic, uh, fantastic products portfolio. I'm very synergistic with, uh, not only our agents, but also with our top and bottom line. So, uh, ibida to your question, uh, it's going to be close, I think if there's a little bit of Tailwind in in the business, uh, it's definitely possible that the ibida th

We're keeping a very precise list.

Markets that we.

We are nurturing and definitely would be.

Eager to two.

Excellent.

Thank you we'll take our next question from Kyle <unk> with TD Cowen. Please go ahead. Your line is open.

Told will be triggered and that we won't be rightful owners of the asset earlier than the, uh, December 31st of 27, uh, which is the date, where we would get it. Uh, no matter what, right? Um, it's going to be closed. So we keep an eye on it and we, of course, are rooting for uh, for Wilson wolf to, to achieve it.

Hey, good morning, Thanks for taking the questions I wanted to just digging a little bit on trends, you're seeing between large pharma and biotech and maybe how they sort of trended throughout the quarter and then maybe on the large pharma side. Some peers have been a little bit more positive on large pharma that it's sort of stable if not steadily improving a little bit.

Thank you, we'll take our next question from Matt. Laro with William Blair. Please go ahead. Your line is open.

you referenced a, a set of

to Los Angeles digits.

Outlook. And, you know, I think it's likely that those are not resolved.

So I guess just from the context of your low single digit growth expectation, how does pharma sort of fit within that framework.

Yes, so even with this most recent quarter, we had low single digit growth and yet our pharma large pharma grew double digits. So large pharma has been very robust for us as well and.

Simultaneously and probably there's some Cadence to how that occurs. It sounds like you did a lot of customer Outreach and surveys over the course of the last few months, what did you learn about budget unlock? And you know what, we're really kind of catalyze spend from, you know, those different sets of uncertainties.

Um, that they're putting Outlook.

Our guidance going forward is basically assumes more of the same.

Is there risk that could soften a bit with the MSN.

Well, I think from the academic perspective, Matt it it comes down to its customary Behavior. We're, we're hearing that.

Concerns and so forth yes.

We feel like that is balanced with the with somewhat from academic being a bit overly concerned right now with regards to what the eventual outcome there could be so.

Despite the NIH funding being or less than a third of what actually funds. These academic institutions

Or that the.

The low single digit basically.

Natural behavior is to kind of overreact and hold back on everything, being concerned about where money might come from in the future. And so, we're hearing about...

It's more of the same that we saw this current quarter.

We just lived through a quarter of somewhat.

Some of the largest uncertainties, we faced in the life science tools industry in quite a long time.

And those uncertainties haven't gone away they haven't got any worse, but they haven't gotten any better and so we kind of expect more of the same in all three of our major end markets until these uncertainties are resolved.

Okay.

Got it and then maybe a quick clarification on China pretty impressive growth there in the fiscal fourth quarter.

Could you quantify how much maybe pull forward you saw in the fiscal fourth quarter I think you mentioned that.

That activity sort of picked up ahead of potential tariff impact is that right.

Yes that was.

Definitely something that we saw <unk> in China.

There were a couple of dynamics one is that we have some benefit from funding that was being delays.

At least temporary budgets, being cut 10, 15% across the board, uh, in terms of not cut, but just in terms of holding back on spending, uh, and on anticipation of what may or may not happen. So, you know, I think our our, our actual belief after talking to many customers and hearing realize bunch of surveys around. This is that, um, what we're experiencing now in academic, is from Behavior perspective, might be worse than any actual negative outcome of the of the funding. So I actually view a resolution of call it certainty of where the NIH budgets fall out whether that's flat whether that's minus 10% or even minus 15%. Um, we I actually view that as upside, once that know that, unknown becomes known because we believe customers are actually behaving more conservative than even the worst case scenario.

That was a tailwind and then.

China itself of course aware that there was a deadline looming if it comes to the tariffs and there might have been some behavior in pulling in purchases before these deadlines expire in before the tariffs would be enacted and thats what drove our double digit results and we wanted to make sure that that's not something we feel that.

The agent would deliver every quarter from now.

But that we would see if you take those out and very stable, China that said that is inching forward and accelerating again to modest growth. So that's how we would look at.

Okay thanks. Um so obviously the exosome uh device uh you know follows the uh an earlier 1, the Atlantic biologics 1 a couple years ago. Uh you referenced m&a remains a key Focus uh in light of some of the portfolio reshaping that's going on you you've referenced sort of renewed focus on on Market profile. Uh how are you thinking about m&a? Be it by segment B, it by stage of company or you know, relative profitability and potential

Thank you we will take our next question from Brandon Couillard with Wells Fargo. Please go ahead. Your line is open.

Hey, Thanks, good morning.

Just want to clarify on the margin outlook I think you've talked about 200 basis points in the second half of the year does that assume an accelerating top line outlook.

You could just touch on kind of what's embedded for net pricing in any of the tariff headwinds for the year it would be helpful. Thanks.

Yeah, just sort of clarify specifically, we expect to be about.

200 basis points of improvement by can we get to Q4, so not necessarily the entire second half.

At the time, we get to Q4.

And the ramp up going from flat to 200 basis points as a combination of the timing of <unk>.

Someday diagnostics completely rolling off of our ledger.

Yes.

Ongoing productivity initiatives that we're implementing right now that will gain traction in terms of hitting the bottom line as the year progresses, and then the natural lift of revenues that we have from a seasonality perspective in the back half of the year versus the <unk>.

Dakota agents, adding to that is very likely, a desirable scenario, uh, Cell Therapy. There are still many many capabilities that we could add to our very successful self therapy franchise. And then, you know, we have, uh, we have a very strong portfolio in instrumentation and related consumables in the protein, simple franchise. And there we uh, we also see capabilities that we could add and um, yeah, therefore we we're keeping a very precise list of of targets, uh, that we are nurturing and and definitely would be uh very very eager to, uh, to act on.

Half of the year. So it's really a combination of all three of those things that allow for that margin expansion accelerate throughout the year.

It, thank you. We'll take our next question. From Kyle butcher with TD Cowen. Please go ahead. Your line is open.

Great and just one follow up on China in the quarter low double digit growth would that kind of breakdown between consumables.

Was there any stimulus benefit in the period.

Yes, there was a handful of instruments that debt.

Let me shift related to stimulus.

And.

The breakout between consumables and instruments, we usually don't give but it's relatively similar.

Hey, good morning. Uh, thanks for taking the questions. I wanted to just dig in a little bit on, you know, trends you're seeing between large pharma and biotech and maybe how they sort of trended throughout the quarter. And maybe on the large pharma side, you know, some peers have been a little bit more positive on large pharma that it's sort of, you know, stable, if not steadily improving a little bit. So I guess just in the context of your low single-digit growth expectation, how does, you know, pharma sort of fit within that framework?

What I'd add to that is that.

I think the growth we saw in China was driven.

A little bit by the stimulus as Kim mentioned, but also by the instruments that we believe customers will order in anticipation of tariffs, which never really materialized.

And we talked about the fact that we think overall the Chinese market is stabilizing.

Yeah, so, even, you know, this most recent quarter we, you know, had low single digit growth and yet our Pharma large Pharma grew double digit. So large Pharma has been very robust for us as well. And, uh, you know, our guidance going forward is basically assumes more the same. Um, is there risk that could soften a bit with the mfn. You know, concerns and so forth. Yes,

Our market growth that's roughly flat.

And going forward, and maybe slightly positive and that would be more consistent with how our reagents performed.

Yes.

Uh, we feel like that's balanced with the with uh somewhat from academic being a bit. Overly conservative right now with regards to what the eventual outcomes there could be. So, um, our, you know, but the, the lowest single digit basically

Thank you we'll take our next question from Daniel Markowitz with Evercore ISI. Please go ahead. Your line is open.

Hey, guys. Thank you for taking my question.

Two the first one as you think through the drivers of margin expansion in fiscal 'twenty six it seems like the guidance assuming low single digit organic.

It's hard to expand margins at that kind of topline growth, but of course, you have a couple of tailwind coming from the tariff offsets and Exo Dx divestiture.

Is more of the same that we saw this current quarter. Uh we live with. We just lived through a quarter of some of the most high that some of the largest uncertainties we faced in the life science, tools industry and quite a long time. Um and those uncertainties haven't gone away. Um they haven't got any worse but they haven't gotten any better. And so we kind of expect more of the same and and all 3 of our major and markets until these uncertainties are resolved.

Dan to toggle the amount of Exo Dx reinvestments, depending on top line or what any upside to the organic topline lead to upside to margin expansion as well.

So I'd say that excuse me our own.

Got it and then maybe a quick clarification on China, you know, pretty impressive growth there in the fiscal fourth quarter. Um, we could you quantify, you know, how much maybe pull forward. You saw in the fiscal fourth quarter, I think you mentioned um, that activity sort of picked up ahead of potential tariff impacts. Is that right?

Our base case that we're operating in right now is low single digit growth until until the markets.

The markets improve and I can't predict when exactly that will be but we are managing the business under that low single digit growth environment.

Yeah, that was definitely something that we saw, like, there in China. Um.

Productivity actions as you would expect us to deal with that and that kind of the current situation those productivity actions combined with XO diagnostic no longer be in our results.

There, there were a couple of dynamics. One is that we have some benefits from funding that was being released. Um, that was until when?

Gives us.

Margin headroom for.

Reinvestment back into our businesses when the markets do return so.

That's how we're managing the business today now if youre asking when these uncertainties get more get resolved and we should see some tailwind from that.

We will decide when that happens.

What next investments are on deck to make in the tradeoffs between reinvesting that upside.

China itself was, of course, aware that there was a deadline looming. If it comes to the tariffs and there might have been some behavior in pulling in purchases before these deadlines expire, and before the tariffs would be enacted. And and that's what drove all of our double digits results. And we wanted to make sure that that's not something, we feel that the region would deliver every quarter from now. Um, but that we would see if you take those out a very stable China, that that is inching forward and and accelerating again to modest growth. So that's that's how we would look at.

In the future growth platforms.

<unk> given them some more margin margin back.

Thank you. We will take our next question from Brandon, kard with Wells Fargo. Please go ahead. Your line is open.

To the investors. So we will continue to have that balancing act as the markets.

Return back to normal, but right now we're managing the business under a low single digit growth environment.

And through.

Productivity actions and Exo Dx.

It allows us to still reinvest for growth.

Hey thanks. Good morning. Um, you know, I just want to clarify on the margin Outlook. I think you talked about 200 basis points in the second half of the year does does that assume an accelerating Topline Outlook. And if you could just touch on uh kind of what's embedded for net pricing and and they need care of headwinds for the Europe to be helpful. Thanks.

While expanding margins.

That's helpful. Thanks, Jim and then the second one just on cell and gene therapy, I know you called out Wilson Wolf plus 20%.

And called out strength in cell therapy in the press release and on the call was this similar across the rest of the Celgene portfolio.

And I'm, sorry could you repeat the question one more time, we're not quite sure we understood the context.

Alright, Yeah, you called out Wilson Wolf about 20% growth was that similar growth profile across the rest of the celgene portfolio.

Yes, so yes. It was it was almost identical yes.

Yeah, I just want to clarify specifically, we expect to be about 200 basis points of improvement by the time we get to Q4 so not necessarily the entire second half but by the time we get to Q4 and I you know, and and the wrap of going from Flat to 200 basis points is a combination of the timing of of EXO Diagnostics completely rolling off of our, our Ledger uh um, ongoing productivity initiatives that were implementing right now that will, uh, gain Traction. In terms of hitting the bottom line as the year progresses and then the natural lift of revenues that we have from the seasonality perspective and the back half of the Year versus the the front half of the year. So it's really a combination of all 3 of those things that allow for that margin expansion and accelerate throughout the year

Thank you we'll take our next question from Mcintosh with Stephens Inc. Please go ahead. Your line is open.

Hey, good morning, maybe just following up on the previous question around cell and gene therapy can you can you maybe flush out some of the puts and takes around this end market just given the current challenges.

Yeah, there was a handful of instruments that, uh, that...

Yes.

That we shipped related to stimulus.

Yes.

Didn't hear the question do you mind repeating it.

Yes apologies.

Good morning.

I just wanted to follow up on the prior question I was just hoping to.

Hoping to see if you all could flush out some of the puts and takes around the cell and gene therapy and market just given the current challenges.

Yes. So so we're actually we know that the biotech markets are depressed from a funding level, but the later stage companies still still invest in the programs and.

Um and uh yeah the breakout between consumables and instruments. We we usually don't give but it's it's relatively similar. Yeah. What I what I just add to that is is that um you know I think the the growth we saw in China was driven a little bit by the stimulus as Kim mentioned but also by the instruments that we believe, customers were ordering and anticipation of terrorists which never really materialized.

Um and we talked about the fact that we think overall the Chinese market is stabilizing to a market growth, that's roughly flat. Uh and going forward and maybe slightly positive, and that would be more consistent with how our reagents performed.

That's really what's driving the results I think.

It could be better.

With a broader healthier market.

Meirowitz with evercore. Isi, please go ahead. Your line is open.

In biotech and pharma, but but overall.

Impressive the resilience of our gene therapy franchise, which.

Which will hope we will hope accelerate at some point, but with with 20% growth.

In constrained market is showing its value and its showing that many companies are still investing behind the cell therapy solutions.

I appreciate that and then you also highlighted the selling gene therapy opportunity for.

Hey guys, thank you for taking my question. Um I had 2 the first 1 as you think through the drivers of margin expansion and fiscal 26, it seems like the guides assuming low single digit organic, uh, and it it's hard to expand margins at that kind of Top Line growth. But of course you have a couple of Tailwind coming from the Tariff offsets and the exodx divestiture is the plan to toggle. The amount of exodx reinvestments depending on Topline, or would any upside to the organic Topline lead to upside to margin expansion as well.

The simple western instruments is there any way to frame up how much of your instrument revenue comes from the Celgene therapy end market or what this can mean for growth going forward.

So I'd say that. Excuse me our um you know, our base case our that we're operating under right now is low single digit growth until until the markets. Uh,

It's hard for us.

We don't divulge that.

Information.

We because customers could order an instrument to use it in several applications. We do notice from the interest and the different application notes that we released that there has been clearly a tilt towards the applications in cell therapy.

Yeah, I would also say that the strength in our protein simple franchise.

It was driven this most recent quarter, but for several quarters now by both our simple western and our mortgage platforms.

And we know that and from both large pharma and small biotech customers both.

And so we know that the applications that those are being used for.

Can.

<unk> tend to be more downstream in nature, whether that's in biologics and whether that's in cell therapies. So.

I think the tactic to.

Kim's point the cell therapy.

You know, the markets improve and I can't predict when exactly that will be. But we are managing the business under that low single digit growth environment, uh taking productivity actions, uh, as you would expect us to do in that in that kind of, in that kind of situation. Those productivity actions combined with EXO diagnostic, no longer being in our results. Um, gives us margin Headroom for, uh, you know, reinvestment back into our businesses when the markets do return. So, um, that's how we're managing the business today. Now, if you're asking when he's uncertainties become, get more, get resolved and and you should see some Tailwinds from that, um, you know, we will decide when that happens. Uh, what next Investments are on Deck to make, and the trade-offs between reinvesting, uh, that upside in the, in the future growth platforms, uh, and or giving them some more uh, margin margin back, uh, you know, to the investors. So we will continue to to have that balance.

Clinical it tends to be more later stage and that's where the money is still going.

Yes.

Act as the markets uh, return back to normal. But right now we're managing the business under a low single digit growth environment.

Thank you we'll take our next question from Patrick Donnelly with Citi. Please go ahead. Your line is open.

Hey, guys. Thanks for thanks for taking the questions.

And, uh, through productivity actions and Exodus, uh, allowing us to still reinvest for growth while, while, while, while expanding margins.

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Maybe on China helpful to talk through it seems like maybe a little bit of some pull forward can you talk about I guess, what you saw underlying in the quarter and then and then the expectations going forward where are we in.

That region, how are you thinking about in terms of that low single digit growth going forward, how China plays into that would be helpful.

That's helpful. Thanks, Jim. And then the second 1, just on cell and gene therapy, I know you called out Wilson, wolf plus 20%, um, and and called out strength and cell therapy in the, in the press release. And on the call, was this similar across the rest of the cell and Gene portfolio.

Thank you Patrick.

Right. There is a couple of dynamics going on in China, and I think.

Yeah, I'm I'm sorry. Could you repeat the question 1 more time? We're not quite sure. We understood that the context.

It's important one for US is of course the funding has been.

Long story line over the last couple of years, but we always knew that we were with the most recent funding that it was going to be you have.

Sorry. Yeah you called out Wilson wolf about 20%. Growth was that similar growth profile across the rest of the cell and Gene portfolio.

Yeah, so yes, it was. It was almost identical. Yes.

We're going to be a slight impact positive impact for us not the main driver and we have the China for China market, which is a positive driver for us, which we feel is stabilizing and then last but not least we now have quite some some activity of high activity level in China.

You will take our next question from Macos with Stevens Inc. Please go ahead. Your line is open.

Hey, good morning. Uh, maybe just following up on the previous question, around. Selling gene therapy. Can you, can you maybe flush out some of the puts and takes around this M Market just giving the current challenges.

<unk> licensing technologies and therapies globally and that is really what is what is driving some of the heightened activity level and that's also what we feel is is going to be the true driver.

I yeah, I didn't. I didn't hear the question. Do you mind repeating it?

For 40 years upcoming growth, where we feel that there will be a continued recovery in the China AGN two to get back to modest growth.

Uh, yeah apologies. I was just saying good morning. Um, but I just wanted to follow up on the prior question. I was just hoping that hoping to see if you all could flush out some of the puts and takes around. Uh, the selling gene therapy and Market just given the current challenges.

Okay. That's helpful.

Then maybe one for Jim just in terms of the guide obviously I get the short term long most single digits.

I guess in terms of the visibility or are you guys just.

Just the biotech and academic piece, just a little bit of caution there and we want to wait and see before calling any sort of inflection or what are you guys looking for in terms of gaining a little more visibility and ramping back to maybe a little bit more of the normal growth rates, we're used to seeing from you guys.

Yeah. So so we're actually we know that the uh the biotech markets are are depressed from the funding level, but the later stage companies still, uh, still invest in the the programs and um,

No that's exactly right I mean, rather than sit here and try to call an inflection point in call at point in time of when the decisions are made around NIH funding and how the executive branch is going to manage to that and when funding will actually return back to biotech I mean, I'm not soothsayer or any more than anyone else does so.

Overall, I I'm impressed with the resilience of of our Sanji therapy franchise which, um, which will hope we will hope accelerate at some point. But, uh, with with 20% growth, it's uh, in constrained Market is showing its value and it's showing that that many companies are still investing behind the Cell Therapy Solutions.

Those are the key indicators, we're looking for we do believe that once the.

Once all of this.

Appreciate that. And then you also highlighted you know the cell engine therapy opportunity for

Noise around NIH funding and settled down we think our customers in academic lawful.

Settle down.

The L and simple Western instruments. Is there any way to frame up how much of your instrument revenue comes from the singing therapy market, or what this can mean for growth going forward?

And regroup and we do think right now we're experiencing the worst of it so I see that as upside.

When that happens.

It's, it's hard for us. Um, we we typically don't involve that that information. Um,

Hopefully that happens.

This fall, but we all know they can drag out longer than that so we'll have to wait and see and then biotech funding same thing. We're all in we're monitoring that the good news is the past couple of months. It appears as though the funding is starting to come back a bit, but it's still down a lot year over year from a from a year to date perspective. So two months doesn't make a trend, but we are we are encouraged by that.

We noticed that customers could, you know, order an instrument and use it in several applications. We do notice, uh, from the interest in the different application notes that we release, there has been a clear tilt towards the applications themselves.

We do believe the biotech.

Funding sentiment follows kind of a combination of both.

Academic setting and the large pharma settlement so.

And it can then can accelerate otherwise so I think getting resolution on the pharma tariffs.

Pharma MSM pricing and how that's going to play out.

Yeah, I'd also say that the strength in our protein, simple franchise. It was driven this last recent quarter, but for several quarters Now, by both our simple Western and our morice platforms, and we know that, and, and from both large Pharma and smaller bar Tech customers both. Uh, and so, we know that the applications that those are being used for, uh, can tend to be more Downstream.

Once those are more known I think those will all be inflection points for stabilization of our market and conference too.

Reinvest in R&D.

In nature whether that's in biologics, or whether that's in cell therapies. So um, yeah, I think to to Kim's point the cell therapy uh, clinical tends to be more later stage and and uh, that's where the money is is still going.

Thank you we have reached our allotted time for question and answer session I would now like to turn the call back over to Kim Keller, Ken Mehlman for any additional or closing remarks.

Thank you, we'll take our next question, from Patrick Donnelly with City. Please go ahead. Your line is open.

Thank you for joining today's earnings call as.

As mentioned I'm extremely proud with the team for their continued execution. During this prolonged period of uncertainty across our end markets.

Our differentiated financial performance reflects the strong value our customers place in a uniquely positioned portfolios lease originations or do you think analysis tools cell therapy, workflow solutions and diagnostic and spatial biology products.

Hey guys. Thanks for, uh, thanks for taking the questions. Um, you know, maybe on China, you know, helpful to talk through, it seems like maybe a little bit of some pull forward. Can you talk about? I guess what you saw underlying in the quarter and then and then the expectations going forward, you know, where are we in in the in that region? You know how are you thinking about in terms of that low single digit growth going forward? How China plays into that would be would be helpful.

Yeah, thank you Patrick. Um,

In fiscal 2025, we strengthened our portfolio with several innovative product launches to the shape the business as the divestiture of non strategic assets.

These strategic moves and enhance our competitive position and allow us to focus investment on our core products and our key growth pillars.

Unlocking sustainable value creation for all our stakeholders.

Thank you again and I wish you all a great day.

Thank you. This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful day.

Right. There's a couple of Dynamics going on in China, and I think most important 1 for us is, of course, the funding has been a, a long story line over the last couple of years. But we always knew that we were with the most recent funding that it was going to be have going to be a, a slide impact positive impact for us, not the main driver. And we had the China for China Market, which is a positive driver for us, which we feel is stabilizing. And then last but not least, we now have quite some uh, some activity, High activity level in China. Uh, out licensing Technologies and Therapies.

Globally. And that is really what is uh, what is driving some of the heightened activity level and and that's also what we feel is is uh, going to be the true driver, uh, for uh, for the upcoming growth, where we feel that there will be a continued recovery, um, in the China region to uh, to get back to, to modest growth.

Okay, that's helpful. Um and maybe 1 for Jim just in terms of the guide you know obviously I get the the kind of the short term long. Most single digits, you know, I guess in terms of visibility are you guys just is it just the biotech and academic piece just a little bit of caution there and and want to wait and see before calling any sort of inflection. You know what are you guys looking for, in terms of gaining a little more visibility and and ramping back to to maybe a little bit more of the normal growth rates. We're used to seeing from you guys.

No. I mean, Patrick that's exactly right. I mean rather than just sit here and try to call an inflection point, and call a point in time of when these decisions are going to be made around NIH funding and how the executive branch is going to manage to that. And when funding will actually return back to biotech, I mean, I'm not at sousi or any more than anyone else's. So, um, those are the key indicators. We're looking for, we do believe that once the, uh, once all this, uh, noise around NIH funding and settle down. We think, uh, our customers and academic will also

You over a year from a, from a year, to date perspective. So, 2 months though, it doesn't make a trend but we are, we are encouraged by that. But uh, I we do believe the biotech

Funding settlement files, kind of a combination of both the, um, academic sentiment and the large farm on settlement. So, um, and it can, it can accelerate otherwise. So, I think getting resolution on the Pharma tariffs, the Pharma MFM pricing, and how that's going to play out. Uh, once those are more known, I think those will all be inflection points for stabilization of our markets and confidence to, you know, re re reinvest in R&D

Thank you. We have reached our a lot of time for the question and answer session. I would now like to turn the call back over to Kim, Keller Kellerman for any additional or closing remarks.

Thank you for joining. Today's, your name is Paul. As you mentioned, I'm extremely proud to biotech the team for their continued execution showing this for a long period of uncertainty across our land markets.

Are differentiated financial performance? Reflects the strong value for customers. Place on a unique position, portfolio of research and agents for your make analysis tools, Cell Therapy, workflow Solutions and Diagnostic and spatial biology products.

64 2035. We strengthened our portfolio for several Innovative product launches to make a shaped business with the deveste of non-strategic assets.

These strategic moves and hands-on competitive positioning can allow us to focus investment on our core values and our key growth pillars, thereby unlocking sustainable value creation for all our stakeholders.

Thank you again and I wish you all a great day.

Thank you. This does conclude today's program. Thank you for your participation.

Wonderful day.