Bio-Techne at 50: Five Decades of Platform Evolution

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Kyle Boucher:
I'm Kyle Boucher, one of the life science and diagnostic tools analysts at TD Cowen, and I'm pleased to be joined by Bio-Techne CEO Kim Kelderman here live at the 46th annual TD Cowen Healthcare Conference. So Kim, it's great to have you here.
Kim Kelderman:
Yeah, thank you, Kyle. Thanks for having us.
Kyle Boucher:
So maybe to start, 2026 is a big year for Bio-Techne. The company's celebrating your 50th anniversary, which is a pretty big milestone. I'd like to dig in a little bit on the portfolio of your brands and the reputation Bio-Techne's built over the last 50 years. The life science tools end market really has faced a number of tough headwinds over the last four years, and Bio-Techne has managed through disruptions quite well.
So I guess maybe to start, Kim, can you just take a moment to reflect on Bio-Techne's last 50 years, the portfolio the company's built, and how the company's managed through recent headwinds? How has the company really changed since you joined the company in 2018?
Kim Kelderman:
Yeah, thanks for the question. And we are truly excited about the 50-year anniversary. Obviously, we started as a small company in Minnesota in 1976, and the team was really focused on developing standards and controls for blood testing solutions. That kind of gave us a great position to also enter into proteins and protein sciences, and that gave us a great position to then eventually roll into antibodies.
And that provided a huge portfolio with broad access to markets where we could really have a good interaction with our customers on a scientific level. And that gave us the opportunity to really detect where these markets are heading and what the key tools are that they're looking for. And that then gave us the opportunity to do strategic acquisitions as well as organic innovation, to then play in those new, fast-growing end markets.
We call them verticals. And those are cell therapy, proteomic analysis, spatial biology, and precision diagnostic tools. And that plays in several or many research areas, specifically in cancer, neuroscience, immunology, diabetes, and next generation therapeutics. And on top of that, we have also made sure that the company can support the evolution from research only all the way to clinical setups.
And we, of course, had to invest heavily in quality systems, but also in facilities that can be GMP certified. So now we have the opportunity to help researchers in all states from research to commercialization. And with that, nobody has to change their vendors anymore, and it creates quite some value. And for us, it creates more sticky, steady revenues in that core portfolio.
Kyle Boucher:
You mentioned your growth pillars a little bit in your intro there. Can you discuss a little bit more detail about your growth strategy among these pillars? What are your key priorities for each of them in the context of the life science tools and market?
Kim Kelderman:
The four growth pillars obviously are very relevant in the future. They all link to our core portfolio because they utilize the reagents. That makes these solutions look very good, but it also makes sure that we pull through from these high margin reagents. I already mentioned the cell therapy. Very excited about the opportunities there, not only life-changing treatments, but are set up in GMP reagents and being able to provide high quality reagents.
We've done a fantastic job in creating new kind of proteins that are AI-based, AI-generated and have higher specificity or higher resistance against heat and therefore more heat stable. So quite innovation there. Combine that with an upcoming acquisition of Wilson Wolf, which is a company that creates the generated in cells, the G-Rex, which is a small bioreactor where you can grow your cells very efficiently, scalably, and also affordably. And those are very important aspects.
We feel that the company, which is now participating in 45% of all the clinical studies, that company has a great footprint. We have very essential reagents, high margins that we can pull through this unit and therefore a very promising setup for cell therapy. And very similar needs are taking place in organoids. Organoids is a relatively fast-growing space where also you need to manipulate your cells and grow your cells in a specific way so that you can analyze the data quickly.
And we play on not only the creation of these organoids, but also the analytics of it. So that's the cell therapy growth vertical. If I jump into the proteomic analytical tools, they're the easy to use instrumentation that basically replaces clunky manual processes and then cranks out reproducible data. Those three platforms we have around ELISA, around Western blot and biologic processes, those are all very promising just because of the aspects that I just mentioned.
And in the past, there was certainly a drive for reducing the number of people in your labs. There was a drive for reducing cost and making sure that you can save on headcount and labor cost, even more so in pharma about reproducible results. And I can see in the future an additional drive for having actual data, quantified data that you can store and label and analyze accordingly in the future.
Therefore, I'm very optimistic about all three platforms that we are having. We see fantastic traction in the three. So we just launched Leo, which is a high throughput Western blots. We have Ella in the ELISA market, which where we received the CE mark in Europe, so diagnostic companies can utilize the platform. And we just launched a Ultra-Sensitive Cartridge, which will allow us to play in the neuroscience market.
So also very strong organic new product development, and that certainly even boosts the applicability of these systems more so in the future. The third, growth vertical spatial biology, there we have a real strong portfolio of reagents to visualize RNA in intact tissue, and we have been validating our antibodies to also help detecting proteins in intact tissue. And that can be done on the same slide very fast with a high throughput in an automated way.
Our solutions are going to be extremely differentiated there as well. And those also read oncology, neurology, immunology, and new therapies. So very well-positioned. The one we speak least about of the four growth verticals is the precision diagnostics. We did two acquisitions there. One was Asuragen, which is basically a company that looked at utilizing widely available platforms such as qPCR, et cetera, to read through hard to read genes.
And that's why we were very enthusiastic about the company. In the meantime, we also acquired ExosomeDx. We didn't like the lab space so much because that was low margins and not really up our alley. However, the finding hard to find genes capability, very important to us. So now we combine those two, we'll be able to find hard to find genes and read hard to read genes in wildly available platforms.
And that's definitely a position that we're also very proud of. So those are the four growth verticals that allow us to grow faster than the market and that will not hurt our margins because they all pull through higher margin quarry agents and that creates the charm.
Kyle Boucher:
Right. So moving on from that vast portfolio that you've built over a number of years, on the profitability side, Bio-Techne is one of the highest adjusted EBIT margins and tools, and the company has a material opportunity to expand margins over the next few years. That's driven by end markets recovering, your recent M&A scaling. I guess, can you just talk a bit about what drives Techne's strong profitability, the resiliency of your portfolio, and the leverage you have as organic growth improves?
Kim Kelderman:
Yeah, it's like we mentioned earlier, the growth verticals allow us to place and compete in areas that are of higher relevance going forward. There we have fantastic positions that allow us to drive top line growth. Some of those solutions actually also are high margins, such as the G-Rex, as well as some of our instrumentation and proteomic analysis.
By definition, they pull through very high margin reagents. So you typically see us with a gross margin north of 70%. That will continue to be the case. So we actually are continuing to invest for growth and for profitability, which is the unique position. Underneath, of course, we also make sure that we drive productivity, that we are doing our things smarter. We utilize AI in the right way.
And then we made sure that we, in my first two years, looked at our portfolio and divested some of the lower margin businesses, the businesses that we were not supposed to be in from a strategic point of view. And you take that all into consideration. We should be able under normalized growth conditions to improve our margins by at least a hundred basis points annually.
Kyle Boucher:
Got it. So maybe finishing it out here, when you look over the next two to five years, what excites you the most about the end markets you serve?
Kim Kelderman:
Yeah, I think the position we're in, again, relatively unique and something that really inspires me. We have the core, which is high margin, but more so provides us broad access to basically every corner of research or translational activity. And that gives us a really nice position to then selectively invest in new platforms to enter these spaces and to have a symbiosis between a differentiated platform and pull through of array agents.
As I mentioned, we already invested and are playing in the cell therapy where we have our GMP reagents investments organically, plus the G-Rex bioreactor from Wilson Wolf that will come and join Bio-Techne proteomic analysis. We have these automated solutions in ELISA, Western Blot, and Biologics. Spatial Biology, we bought the COMET platform, which is this high through multiomic patient analysis instrument that can pull through from our RNA scope reagents, as well as from our antibodies.
And then this precision diagnostics where I already talked about the combination of the two capabilities that we did there. As I mentioned, underlying, we have made sure that we can follow our customers all the way from research use only to GMP setups so people can enter the clinical space with our products and we actually help them getting there. And then we always had as a philosophy to automate clunky manual processes and make sure that there are very reproducible, high quality results coming out of these systems.
And of course, you will have to have high quality, very consistent, reliable ingredients or reagents that you would use in those setups. And these experiments then will produce better data. We always made sure that we can label that data in a way that people can make sense of it over time, especially with the emergence of large language models to give customers a boost and being more efficient.
Now in total, we already addressed $27 billion market with the four growth verticals addressing very high growth markets, by definition, mid-teams growing. We, as I mentioned, are really well positioned to do further M&A. So we have the access to the markets. We have organic innovation. We have a P&L that we can leverage to do acquisitions. We're good integrators.
We right now have these four growth verticals. We have plenty of headspace there to continue to grow. But if we look at the upcoming 50 years, there is nothing that would prevent us from starting a fifth and a sixth growth verticals, and then basically repeat and roll out a very similar playbook that we've already proven to be very successful. At the end of the day, I'm also very proud of our organization.
A fantastic evolution we've pushed through. The team has shown to be super deep into the science and stay relevant in our core. Also has proven to be very innovation-minded and make sure that we play in novel areas very successfully as well. Therefore, I believe the company is positioned uniquely to continue to improve the quality of life by catalyzing advances in science.
Kyle Boucher:
That's a really great overview, Kim. We really appreciate you being here. Thank you very much.
Kim Kelderman:
Thank you, Kyle.
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