Good morning. And welcome to the Bio-Techne earnings conference call for the Second Quarter of Fiscal Year 2025. At this time, all participants have been placed in a listen-only mode. And the call will be open for questions following management's prepared remarks. I would now like to turn the call over to David Clair, Bio-Techne's Vice President, Investor Relations. Good morning, and thank you for joining us.

On the call with me this morning are Kim Kelderman, President and Chief Executive Officer, and Jim Hippel, Chief Financial Officer of Bio-Techne. 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 company's future results. The company's 10-Ks for fiscal year 2024 identify 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 the most comparable GAAP measures are available in the company's press release issued earlier this morning on the Investor Relations section of our Bio-Techne Corporation website, at www.bio-techne.com. Separately, in the coming weeks, we will be participating in the Cowen, Leerink, and Barclays Healthcare Conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim. Thanks, Dave, and good morning, everyone.

Thank you for joining our second-quarter conference call. I'm pleased to report that we delivered yet another strong fiscal quarter that exceeded the initial projections that we made at the beginning of our fiscal year. The improving biopharma end markets, particularly on the large pharma side, benefited our GMP AdHens in their protein analytical instrumentation. This, combined with continued traction in our Exosome VX and spatial biology franchises, drove our 9% organic revenue growth for the quarter. We are also seeing the benefits of the organizational and operational efficiency improvements that we have implemented over the last year and a half. During the second quarter, our adjusted operating margin increased 110 basis points sequentially to 30.1%, and I'm confident that we are well-positioned for ongoing improvement in our peer-leading operating margin profile as our end markets continue to recover. Jim will provide more details on these results later in the call. I hope that many of you had a chance to see the latest corporate presentation we provided last month during the JPMorgan Healthcare Conference. For those that have not seen it, I would encourage you to visit the Investor Relations section of Bio-Techne's website. We presented the company's strategy through a slightly different lens this year by outlining three major challenges we help our customers solve: enable the discovery of novel biological insights, support the development and manufacturing of advanced therapeutics, and enable precision diagnostics. Our product portfolio and solutions are uniquely positioned to reliably and efficiently support our customers in advancing science across these sectors. Now let's review our Q2 results, beginning with an overview across our end markets and geographies. Sales to our biopharma end markets increased mid-teens in the quarter as we experienced strength in both the US and European regions. This strong performance included a notable improvement from large pharma customers, with particular strength in bulk GMP and reagent orders as well as in our protein analysis instrument portfolio.

For our academic end market,

the team delivered mid-single-digit revenue growth. As a reminder, our academic end markets grew upper single digits in the prior year period, and we achieved this quarter's mid-single-digit revenue growth despite the challenging comp as well as the reduced number of selling days related to the mid-week holidays in December. Now for the regions. In the Americas, we grew low double digits for the quarter. This performance was primarily driven by the aforementioned strong demand from our cell therapy customers as well as the strength in our automated protein analysis portfolio. Our EMEA region grew low double digits as well, which was also driven by our automated protein analysis portfolio, which grew more than 20%. In addition, we expanded our geographic reach through two new dissolution agreements. First,

We announced that

partnership with LeaderLife Sciences to fortify access to our portfolio across the Gulf cooperating countries. We followed this with a distribution agreement with MedSomTec to expand access to our portfolio in Turkey and Azerbaijan. In China, sales declined low single digits as the challenging economic environment remained a headwind to growth in the geography. It's worth noting that the Q2 performance is in line with our expectations that the negative growth would ease and will shift to modest positive growth in our fiscal Q3 due to the expectation that the targeted stimulus program and a modest improvement in government funding will slowly materialize. As a side note, Jim and I were just in China to visit our team and, of course, to meet a variety of our customers. It was clear that our team remains extremely motivated and committed to our mission, and our customers continue to value consistent quality across the breadth of our portfolio. In the long term, the modernization of healthcare will remain a high priority for the Chinese government, and Bio-Techne is looking forward to playing a key role in enabling the evolution of healthcare for its citizens and the world. Now let's discuss our growth pillars, starting with our portfolio of cell therapy workflow solutions. During the quarter, we experienced robust growth within our GMP reagent portfolio as customers that are progressing their advanced therapeutic through later-stage clinical trials inquire materially more DMPD agents. We now have over 500 customers relying on our GMP reagents for their cell therapy across all stages of development. Within this expanding customer base, 85 are in various phases of clinical trials, including six currently in phase three. For Q2, our GMV agents' revenue increased over 90%. As a reminder, our GMP liaisons business can be lumpy as orders from…

Our everyday run rate business continues to modestly improve sequentially,

while larger bulk orders of our ULE agents to BioPharma customers also picked up in the quarter. We view this as an indicator that our end markets are gradually starting to improve.

All in.

Our core portfolio of our ULE agents grew low single digits in the quarter. Sticking with our core reagent portfolio, I wanted to give an update on our AI initiatives within Bio-Techne. As we have mentioned in the past, we see tremendous potential leveraging AI to develop proteins and antibodies with enhanced functionality. During the quarter, we continued to utilize our internal knowledge and our vast dataset, which we generated over the last several decades to train our generative AI models and develop designer proteins. These patentable proteins are engineered to exhibit hyperactive properties, enhanced heat stability, and other novel features. These attributes are relevant for many applications, including cell therapies. We added four new designer proteins to our catalog in Q2, bringing the total portfolio to six. You can expect a steady cadence of new designer protein launches going forward. Overall, I'm very excited for the protein sciences team as they delivered 8% organic revenue growth. This is the best performance of this segment since the market headwinds that were related to the aftermath of the pandemic began in the first quarter of our fiscal 2023. We now we will move to the growth pillars within neuro diagnostics and spatial biologics. Segment which delivered 12% organic growth in the quarter. Let's start with our spatial biology business where we continue to make significant progress with the launch of the comet system a fully automated multi-omic spatial radiology instrument, code capabilities on the COVID to allow for visualization of up to 24 proteins and 12 RNA targets simultaneously.

We are actively upgrading Convent's installed base,

to enable researchers to fully leverage the multi-home capabilities of the platform. Additionally, we continue to launch Bio-Techne's R and D Systems branded antibodies for use on the COVID system. There are naysco capabilities paired with the growing portfolio of validated antibodies, will support a consumable stream that is expected to be the highest pull-through of any instrument under the Bio-Techne umbrella. During the quarter, our spatial biology revenue increased mid-teens and we are positioned for continued leadership in this fast-evolving space. Next, I'd like to give an update on our precision diagnostic tools business, previously referred to as the molecular diagnostics business. This We believe the new name is a better reflection of the focus of this team which is to provide clinical level, though it's the precise diagnostic tools that leverage our exosome-based diagnostic technology combined with Assurgeon's proprietary chemistries. During the quarter, announced the launch of a test for ESL-one mutations in breast cancer. This is the first kitted test to utilize our exosome-based technology and presurgeons chemistries. We commercialize these tests through a laboratory channel which we also obtained for the acquisition of a surgeon. Meanwhile, our XODX positive cancer test continues to enjoy rapid adoption as unit volume grew more than 30% in the core. In summary, I'm extremely pleased with the execution by the Bio-Techne team across all our businesses globally. We believe that the strength of our growth pillar in cell and gene therapy and proteomic analysis combined with the momentum that we saw in our core products are indicative of an early-stage recovery in key bio. If you then add to that the performance of our best-in-class facial biology franchise and our high-value precision diagnostic tools platform you will understand why I'm confident that we have positioned Bio-Techne for continued differentiated growth going forward. With that, I will turn the call over to Jim. Jim?

Thank you, Kim. I'll start with some additional details on our Q2 financial performance and then give some thoughts on the financial outlook for the remainder of the fiscal year. Starting with the overall second-quarter financial performance, adjusted EPS was $0.42 compared to $0.40 in the prior year, with foreign exchange having an unfavorable $0.02 impact. GAAP EPS for the quarter was $0.22 compared to $0.17 in the prior year. Q2 revenue was $297 million, an increase of 9% year over year on both a reported and organic basis. Recapping our organic growth by region and in-market in Q2 that you previously heard from Kim, North America and Europe increased low double digits year over year, driven by strength from our biopharma customers, particularly in our cell therapy and proteomic analysis portfolios.

While China and APAC decreased low single digits.

By end market in Q2, excluding China, biopharma increased mid-teens and academia increased mid-single digits in Our biopharma business benefited from larger reagent and instrument orders in our pharma and cell therapy end markets.

While our run rate business in biopharma showed modest improvement year over year.

Below revenue on the P and L, total company adjusted gross margin was 70.5% in the quarter compared to 69.7% last year, driven by the impact of favorable product mix and productivity initiatives. Adjusted SG and A in Q2 was 32% of revenue compared to 31.2% in the prior year, while R and D expense in Q2 was 8.5% of revenue compared to 8.4% in the prior year. The increase in SG and A was driven primarily by the reinstatement of incentive compensation partially offset by the benefit of structural streamlining and diligent expense control. Adjusted operating margin for Q2 was 30.1%, up 110 basis points sequentially and flat compared to the prior year due to the impact of favorable volume leverage and cost control offset by the reinstatement of incentive compensation accruals. We continue to execute cost containment measures and prioritize our growth initiatives to drive efficiencies throughout the organization, with the goal of optimizing operating leverage during the ensuing market recovery. Looking at our numbers below operating income, net interest expense in Q2 was $0.7 million, decreasing $2.7 million compared to the prior year due to lower net debt levels. Our bank debt on the balance sheet as of the end of Q2 stood at $300 million, unchanged from last quarter. Other adjusted non-operating expense was $1.3 million in the quarter, an increase of $4.4 million compared to the prior year. The increase was driven by the foreign exchange impact related to our overseas cash pooling arrangement. Moving further down the P and L, our adjusted effect tax rate in Q2 was 21.5%, down 50 basis points compared to the prior year due to geographic mix. Turning to cash flow and return of capital, $84.3 million of cash was generated from operations in the quarter and our net…

As Lutiform continues to scale.

Earlier than expected in the fiscal year, we saw improvements in all types of order activity from our larger pharma customers. Including CapEx spend for instruments, bulk order reagent requests, and increased daily run rate purchases. We view this as a positive sign that much of the R and D pipeline repositioning by our large pharma customers is behind us. And that a more broad-based increase in R and D funding from discovery through the clinic is more likely in calendar year 2025. We also saw continued outperformance in our GMP protein business in Q2, by several cell therapy customers, Although much of this unexpected upside came from the timing of large orders, who are progressing their programs through clinical trials. Thus, the organic growth outlook for the second half of fiscal year 2025 that we've provided the past two quarters is still in For Q3 specifically, this means the upper range of mid-single-digit organic growth. As you think about our expected organic growth performance, in Q3 relative to Q2, there are a couple of headwinds to consider. First, the year-over-year comp in Q3 is more difficult by four percentage points than it was in Q2. As our revenue declined 2% in Q2 of last year, and then grew 2% the following Q3. Also, the previously mentioned timing of several large GMP protein orders that we had in our recent Q2 are not expected to reoccur in Q3. However, on a more positive note, the earlier-than-expected momentum we are seeing from our larger front-end customers as well as an expected return to growth in China in Q3, allows us to hold the organic revenue outlook that we shared since the beginning of our year. The early improvement in large trauma activity also strengthens our confidence that we can exit our Q4 organic growth in the high single digits as we have predicted all year. As it pertains to reported revenue growth with the recent strike strengthening of the US dollar at current foreign exchange rates, we do expect a headwind of approximately 1% of sales in the back half of our fiscal year. As much of the top-line foreign exchange falls directly to the bottom line of our P and L, we do expect a negative impact to adjusted operating margins by approximately 50 basis points. Thus, we are now forecasting adjusted operating margins in the second half of points higher than the prior year. fiscal year 'twenty five to be between fifty and one hundred and fifty basis This still represents a significant step up in margin from the first half of the fiscal year Due to higher volume leverage, continued improving product mix and the full impact from productivity initiatives.

The

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

questions.

Thank you. We will now be conducting a question and answer session. We ask that all callers limit themselves to one question and one follow-up. If you have additional questions, you may re-queue and those questions will be addressed time permitting. If you would like to ask a question, please press star one on your telephone keypad. Thank you. Our first question comes from the line of Puneet Souda with Leerink Partners.

Yeah. Hi, guys. Thanks for taking my questions. First of all, congrats on the quarter here, really strong. But can you talk a little bit about the pull forward that you saw from Q3 to Q2 in cell and gene therapy GMP products? You seem to be talking about essentially the biopharma momentum continuing China also improving. So that is offset offsetting. But can you elaborate a bit on where you have more confidence in recovery among those sort of three vectors that you talked about, where you think you'll have know, recovery in in in in the third quarter, whereas where there things could be a more a little bit softer just given the backdrop of the market right now. And, you know, sort of the concerns around NIH as well?

Yeah, Puneet. Thank you very much for your for your question. No. First of all, I I think let me talk about the cell and gene therapy orders you mentioned. Fortunately, we're very happy to see that there are there's tremendous traction there. Right? We we grew about 90% on the GMP proteins. And some of these larger orders, right, from customers that are further down in their clinical studies, We have anticipated for for the second half of the fiscal upon customers' demand, these were pulled into Q2 and and were delivered earlier than we originally anticipated. This, of course, drew drove several points of of growth And we we feel confident that this is also a very positive sign for the overall markets, and we're quite happy with the traction we have there. Going to China, we did see that the replacement funding some earlier facts in in our Q2, and a handful of instruments were sold related to this replacement funding. We know it's a three-year plan, so we can we expect continued traction related to the funding. And then the interesting thing is that the China National Science funding you can apply for during the calendar of Q1 and the deadline is March twentieth, that that should also provide some additional lift in China that eventually our forecast or our original projection that we that we anticipated for China where We would go from slight negative to positive growth in Q3, we're still very confident with that with that view. And, you know, maybe, Jim, you wanna you wanna add something?

Yeah. Sure. Something I think the only thing I'd add is that it, you know, gives us

confidence with regards to, you know, holding our our forecast in Q3 despite the timing of the cell and gene three cell and gene therapy large orders. Is really the broad-based strength we saw across pharma. As I mentioned in my comments, it wasn't just cell and gene therapy. We saw it, of course, in our instrument portfolio, our protein simple franchise did phenomenally well, especially in large pharma. And and even our run rate business within the large pharma also, you know, improved from our prior quarter. So it's it's that's what gives us some confidence that it's a it's a broad base large pharma starter recovery. It's not back to normal yet. Our run rates aren't back to normal, but it was a noticeable improvement from the prior quarter. And you mentioned NIH and concern around that, so I'll kinda hit that head on as well.

Know, it is

very early days and all the kind of noise and chatter and you know, a lot of what's happening what we're reading is that not all that on you what happens in the administrative

change with regards to

certain

kind of freezing or holding department funds as they as as the new administration comes in and assesses. All I can tell you is that so far in January, we've seen no we've actually seen improvement in our academic overall growth rates and improvement in our run rate as well. So we're not overly concerned about the noise you're hearing out of Washington right now regarding IH.

Got it. Thanks for touching on all those. Just quickly, if I could ask on your updated thoughts on M and A, your ability to lever just given the backdrop of the market and some of the challenges that some of the small cap tools companies are seeing, M and A? How does that shape your opportunity base when looking at Thank you. Yeah. M and A will continue to be a priority for a cap

We've capital deployment. And during the JPMorgan Healthcare Conference, been relatively clear as to our strategy and where where we feel we we we would like to to to add to our portfolio. Fortunately, we don't really have any huge gaps, so it's not that we have to move, but we do we do like the area of discovery of novel biological insights. Right? There are various analytical platforms that we would be interested in. And would love to continue to support the development and manufacturing of advanced therapeutics. And ought to think about you know, any processes that are sitting before and or after the G REX. And any other analytical tools that would support the cell and gene therapy workflows those those are really the areas that we are we are very interested in. And do have a nice nice time frame here between

the the acquisition of Wilson Wool at the end of twenty twenty seven and right now with a very strong balance sheet and a very very precise strategy and capable management to to to integrate a new M and A activity. That's good. Helpful, guys. Thank you.

You.

Our next question comes from the line of Dan Leonard

with UBS. Please proceed with your question.

Thank you. I wanna circle back on a couple of Puneet's points. I guess first off, when you think about your current run rate business,

where do you think you're currently trending? Is it that upper mid single digit figure you talked about for Q3, and then you need progressive market improvement to hit the high single digit for Q4. Is that the way to the right way to normalize what you called out as being positive lumps in the December quarter?

And I'll try to answer your question, if I understand it correctly, you know, about our our run rate. So you know, our our day-to-day run rate business is gonna perform closer to the overall market. And it's our growth factors, our growth pillars that we talk about that really causes us to, you know, have us see a differentiation in the acceleration versus the market. And so, you know, the way to think about that is is that our So our run rate growth is lagging the overall company growth,

That comment you made on January run rates, was that in academic a US academic and government comment specifically or were you more commenting broadly on your run rate business in the month of January?

That was a specific comment regarding the US academic market.

Hey, Dan. Thanks for the help. This is Kim. I like to help you quantify the NIH exposure, you know, Jim was talking about the overall academic market globally, which represents about 21% of our revenues, And then if you think about the US portion of that is about half of that, which is 11%. Then if you think about NAH exposure, it would say about more or less half of that. That would be mid-single digits. And then know, revenue directly related to NIH itself would be less than 1% of our revenue. So that that really kind of scopes for you the the the exposure there.

Sure. Thank you. But but, like, January comment was specific to that ten ish

percent of revenue. That's US academic and government. Correct. Yeah.

That is correct, Dan. Okay.

Alright. Perfect. Thank you.

Our next question comes from the line of Jacob Johnson with Stephens. Please proceed with your question. Hi. This is actually Hannah on for Jacob. Thanks for taking the question. How much of a benefit from larger cell therapy customers do you think there was in the quarter? Is there any way you could quantify this for us?

Yeah. I I can give it a a initial shot and then Jim can follow-up. The so so I I don't think we really quantify the mix there. But we did see a very nice attraction of our customers in general. So overall order rate from our by now 500 customers in this field is is doing really well. But in the mean meantime, several of these customers are moving up the chain if it comes to their clinical studies And we used to talk about 57 of those being in in clinicals, rather than MPClinicals. And by now, those are 85 customers that are in the in the clinical stages of which 13 or so in phase two And then a little bit more than a handful, six to eight, that are sitting in the phase three clinical stages. And, of course, these the the customers that are sitting in these later stage clinical trials Some those orders are also relatively larger and FDA some of the lumpiness that we've talked about in the past. But nonetheless, we are growing 40% organically If you look at the twelve months trailing, which is very encouraging and that's also where we we hope to expect to be.

And I'll just add a little bit to

an answer Kim gave to Puneet around the same topic around the larger cell and gene therapy customers. What got accelerated in the Q2 was originally forecasted in Q3. It's about two points of overall growth that was attributed to that. For cell and gene therapy. I I think Ken mentioned three, but that's because there was probably another point of of of revenue that also moved within our core diagnostic reagent division. So talk about that. We talk about that for years. It's a very lumpy business and it's not always easy to predict exactly when those orders will come through from our large customers there. And we saw some orders there come in earlier than expected as well, and that and and that won't necessarily repeat either. So I'd say about two points that's coming from cell and gene therapy. Large customer. Large customers and about one point is from our diagnostic reagents to visit core division.

Thanks. And then you also mentioned that instruments grew in Q2. Could you just talk about is this comment around placements growing again? Versus consumables?

Yes. It is. We we've we're very proud that we on the consumable side, have had eight out of the last nine quarters in which we grew double digits. On the consumable side, and we always anticipated that such growth in consumables kinda indicates you know, a capacity constraint eventually in the market. And therefore, we we anticipated it at some point in in it placements of our instruments would be growing again. And And this quarter, we indeed went back into the black when it comes to growth in our instrument base.

Alright. Thanks. I'll leave it there.

Our next

question comes from the line of Matt Larew with William Blair. Please proceed with your question.

Hi, good morning. You you referenced us, the academic market. And and mentioned that in within biopharma, I grew mid-teens. Wondering if you could break that out. Is it still sounds like it's mainly large pharma most of the recovery is. What, if any, recovery are you seeing in terms of the smaller customers or the biotech customers Or if not, are you seeing any signs of green shoots?

I can I can ask, so,

answer high level and then have Jim double double click on it? The overall, the biotech portion of our end markets, which is around 30% of our revenues, was more or less recovering in line with their expectations and you might remember how we laid out the the the the year and our expectations in the different markets and we we certainly expected some of the good biotech funding to trickle through into that market. And and that is some happening in line with our expectations. A little bit better than expected is large pharma. And, you know, that that's that's driving some additional momentum in in our Q2 at the last quarter of the fiscal year. So of the calendar year, sorry. And and and we're quite happy to see that momentum. It's it gives us confidence that our second half will will also roll out in in line with our expectations. Yeah. The only thing I would add to, Kim, is that, you know, we're not

we're not claiming full recovery mode yet in either one of those markets. But we did we did continue to see the smaller biotechs gradually progress. And as Kim alluded to, what was nice surprise was with the the beginning of the recovery in larger pharma that we weren't really expecting until April, May time frame, we we started to see that already here in our Q2, which was nice.

Okay. Thanks. And then I'm flipping to the diagnostics and spatial side. Wanna focus on on Luno four obviously. There's been a couple of mergers in in the space in the past six months. You now are about a year or so into launching the multi ohmic solution with RNAscope. You know, what what is your assessment And then, you know, what's key to of the competitive landscape at this point you know, flipping that from really a significant operating margin headwind to more of a tailwind? Is it just a function of consumable pull through, or are you having any

on the manufacturing side with the instruments

good to get a sense for how that will progress throughout the year.

Yeah. Thanks for the question. So there there has been activity in in the market which we we deem positive. to be in. A positive sign overall that spatial biology is is a market Yes. A year ago, we launched the Comet. and the capabilities of an instrument. I do wanna correct you a little bit that the RNA scope capabilities at least in the multi omics setting, have been launched last quarter. So those are rolling out as we speak. And then we've also been able to launch 45 R and D Systems branded antibodies on the instrument And with that, we expect the the pull through of consumables to be on the Comet to to to be one of the higher pull through instruments in our portfolio. And I I forgot the third But third lag of your question.

Yeah.

do do you mind repeating repeating that part?

Yep. Just had you've obviously called it out as a a headwind to operating margins and in on that segment. So just that's about the timing of that's looking. Yep.

Yeah. So the two components there, of course, will help. And one is continued uptake of of selling the instruments. Right? And then the pull through if it comes to the reagents. And, you know, both will be very important. Going forward to us. So we are measuring us against hitting certain milestones and we we see both positive traction in both these aspects as well. So so our profitability will will will increase as a result of those finding the traction.

Please proceed with your question. Our next question comes from the line of Catherine Schulte with Baird.

Hey, guys. Thanks for the questions. Maybe first on

China. What was reagent performance versus instrumentation in the quarter? And how do you expect that to trend in Q3 as that region returns to growth.

I would say that the growth was

Relatively

comparable for the two. Again, we it was

very stable at low low single digit declines in in China. And we see it gradually improving and turning into the black in in Q in our Q3. And I think it will be very comparable again both on the instrument side as well as the as well as the reagents. So not a notable difference there.

Okay. Great. And then maybe for are you a reagent? You set up low single digits in the quarter. And what was academic versus pharma performance there, and what's your expectation for that as we get into the back half of the year?

I'm sorry, Catherine. The academic versus pharma performance with regards to what?

Within our UO region.

Within RUL Reagents? Actually, it was it was Again, relatively comparable, but slightly stronger in Europe. R U O run rate reagents,

As as as with respect to the

Both in biopharma and in academic. But, again, both are Europe European and US growth totals were, like, within a point or two of each other. So we're not talking about a massive Massive difference.

Great. Thank you. Our next

question comes from the line of Dan Arias with Stifel. Please proceed with your question. Good morning, guys. Thanks for the questions. Jim, two for you on GMP

reagents, if I could. Number one is what kind of growth expectations do you have for that piece next quarter? Obviously, you have the pull forward that you mentioned. It does sound like you you like the overall direction that that business is headed in. So you know, just given how wide the range has been for that piece, it'll be helpful We could kinda put some guardrails just on what we might see there And then the second question is, can you comment on where the margin profile for that business is? I mean, I know you don't get too specific on individual parts of the portfolio, but is it's a piece that's moving the needle. And so it would just be helpful to understand the mix impact that that business has Thanks a bunch. as it accelerates.

Sure. I appreciate the question, Dan. And and, you know, we don't we don't give, you know, guidance down to that that level of fidelity. What I'd say is that it is as we talk about with you large orders, it can be very lumpy. If you back out the larger orders, the underlying growth of our customers continues to increase. Every quarter in cell and gene therapy.

And the revenues do as well.

We talked about the TTM being roughly 40%. I cannot necessarily say it's gonna be that next quarter, but will definitely not be the the the, you know, the the large contributor to to growth that it was this quarter. Which, again, I think that says a lot about the underlying strength of the rest of the business, end the end market's improving. The fact that we can still hold our forecast for Q for Q3 that we've been saying all year. With regards to the margin profile, it is a very nice profitable business for us and and not quite as profitable as our our core RUL reagents, but very, very close. It's probably the second most profitable product line within our business. But, again, we're not necessarily calling that out as any kind of margin issue for Q3. Even though that mix will change just because we do see continued improvement within our RUO business that will compensate for that.

Okay. Just to maybe get you on the grill. So it sounds like for GMP reagents, we can model that up, decently up, but not anywhere near where it's been for half of the year.

That's fair.

Okay. Thank you.

Our next question comes from the line of Connor McNamara with RBC. Please proceed with your question.

Guys. Thanks for the time, and congrats on a really strong quarter.

First off, on

On the

handful of programs and cell gene therapy that are in late stage phase two or phase three. Is there any way you could quantify or give us color on those programs and the incremental opportunity as those advance either from phase two to phase three or as they come to market.

It's that's really hard, Connor.

The so in general, you would see roughly double the size in orders depend each time there's a clinical clinical progress to the next stage. But then again, you know, it really varies with how often the customer orders. And and how how how large the clinical study really is. So there's it's really hard to give you a a a standard template there. It it really depends on on each customer.

Okay. That two x's. That's helpful. Thanks for that. And then just on sell and gene therapy strike, how did Wilson Wolf do in the quarter? And can you remind us if there's any opportunity to consolidate that prior to twenty twenty seven given this rebound you're seeing in that in market. Thanks for that.

Yeah. I'll I'll take this one. So with regards to Walson and Wolf, I would say that their their core growth business mean they're non commercial wise businesses was consistent with consistent with our earlier stage Growth? So we're seeing consistency across the cell and gene three cell and gene therapy market there. I will remind you that they have five of I mean, flat five customers now that are commercial lines,

and just the preliminary forecast from

just the three from three of those alone, will be enough to put them into, you know, very, very, very solid double digit growth for calendar year twenty twenty five. So

future's very bright there.

Our next question comes from the line of Patrick Donnelly with Citi. Please proceed with your question.

Hey, guys. Thanks for taking the questions. Maybe a follow-up on China. I know you guys mentioned you were over there last month. Can you just talk about, I guess, what you saw in terms of the environment confidence level in terms of the recovery? Obviously, a lot of noise over there. Just just curious

you know, from the ground what you guys saw and and the expectations there.

Yeah. I think a couple of aspects. We you know, the the the drive to continue the research in life sciences continues to be there. I I I am certain the country would love to make make big steps forward in in designing treatments and and and helping the Chinese citizens as well as the world getting access to better treatments. On the other hand, we are encouraged that there are some more activities on the funding government funding level which historically has been elevated compared to the last couple of years, So we do see some increased activity there again, and and that's also why our expectations are that China is going to be back into the positive growth slightly But on the other hand, there's no doubt that that there's a tough economic environment in China and that that that things are not all in the in the green just yet. And we we just continue to hope that that things will improve and that and Bio-Techne will be ready to to support all the science activities in order to get to get to a to better better situation there.

Okay. That's helpful.

Then, Jim, maybe one for you. You know, it sounds like the margins and two h FX a little bit of an offset there. Can you just talk about the moving pieces the expansion opportunity, and and again, anything else under the hood other than FX?

In terms of the shift for for two h?

You, guys.

Yeah. Sure. So, you know, nothing's changed

with regards to our outlook in the second half margin. We we knew we initially got it to a hundred to two hundred basis points higher in the beginning of the year. Now with the changes in FX, as you heard me saying this call earlier, there's about point headwind of that, but still significant margin improvement year over year. At fifty to a hundred and fifty basis points in that range. And, you know, the even more significant step up when you think about it sequentially from first half to the second half, and it just shows the power of our of our contribution margin comes from our products. So with the both the seasonality and the continued acceleration of our growth, year over year, but also sequentially, seasonality wise, that step up in revenue has very nice pull through. And we've done a lot to make organizational efficiencies over the past year and a half to be to be ready you know, more ready than ever for margin expansion when the growth returns. So That's been the story all year and and hasn't changed. And and and and that coupled with not just the volume leverage, but also the mix improvement as we saw this quarter When PFS returns to to to solid growth, you can see the the great pull through that we get from that. And we expect that to continue in the second half.

Thank you, guys. Our next

Please proceed with your question. question comes from the line of Sung Ji Nam with Scotia Hi. Thanks for taking the questions. Maybe on the AI capabilities and the new designer proteins, would you be able to comment on kind of how Biotech stacks up against competitors on that front? How game changing is this capability in this industry right now? And kind of what the competitive advantages are moving forward.

Yeah. Thank you for the question. I we do believe that this the AI engineered antibodies as well as proteins will will are truly a stepwise change in innovation We do believe there are sustainable advantages because these products are compatible and we have combined our tremendous internal know how and the fast database that we built over last couple of day couple of decades and and invested very early in in the AI capabilities. And you really need all three to be successful there. And and I know that We were uniquely positioned to grab this opportunity and and and run with it. And if you think about the benefits of having these AI engineered proteins, the hyperactivity temperature stable, so you can really really boost your cell based work. And then the enhanced receptor binding are all very differentiated features and really things that were not possible in the past. And yeah, we we think we will create a real nice stepping letter for customers where know, you you would normally be constrained to only RUO versions of these proteins, but now you can you know, get enhanced activities by picking the AI designed proteins. And then, of course, you can step up to the GMP versions of our proteins. And eventually, we will lounge the GMP AI engineered proteins. So we we will have a real nice continuum for customers to to lean on.

Great. That's super helpful. And then just on the facial bio side, the RNA scope updates on the comment that you just launched, just curious how quickly do you do you expect the customers to adopt the multi omni capabilities whether that would require further market development? And then also how for the clinical market, I think you're gaining good traction there as well, whether the multi only capabilities also will be a competitive advantage. Thank you.

Thanks for that question as well. Yeah. I I think that having the the multi omic capability, and we're truly the only provider of of a multi ohmic our customers can can look at in the spatial market where twelve RNA targets and twenty four protein targets all in parallel on the same slide, And then having the comment with the features of very high throughput, you can use off the shelf antibodies that you've been using in the past. So you don't have to change your experiments. Force slides simultaneously that will give you twenty slides throughput in a week. Those are all market leading performances. And and I I think that to do really well in the spatial markets. that we're really set up to to continue to

The

currently, we have key opinion leaders really work working with the multi omic capabilities, and we envision this rolling out throughout the market. It's very the instrument is very stable, easy to use. And so are the agents. So I don't feel that there's lot of market development to be done. It was truly the rollout of the the product and the solution. And then last but not least, you're right, our footprint in clinical has continued to outpace the growth of this overall spatial biology market. So we're really happy that our RNAscope product line, for example, is stable enough and relevant enough to to to perform in the clinical markets. And also there, we feel that we're one of the few spatial biology solutions that has been successful in the in the clinical space. So think we're very, very confident that we are that we are really well positioned to continue to outperform

Thank you. Our final question comes from the line of Paul Knight with KeyBanc

Hi. This is Lucas on for Paul Knight.

Just kinda sticking with the theme of the previous question. In the press release, you called out signs of improvement for some of your instrumentation businesses. Was the comment one of those instruments you saw an uptick in interest for? And how are placements for that trending generally? Thanks.

Yeah. We we when we talk about our instruments, we really talk most About our protein analytical instrumentation portfolio, which which we were very encouraged about getting back into the black. And this is excluding the spatial biology comment platform, that that still sits and gets reported in in the spatial biology vertical. That answers your question.

I'll just follow on to say that the interest in that still remains very, very high and the growth rates are

are still very, very, very strong. So

Yep.

And then just one final question. The your automated western blot equipment. Is that still what you are seeing, or is interest broaden out to other product groups?

I think you you're correct that that will be the primary

primary product line that we will see traction. But then again, we have we have really good traction in the biological platform as well. So we feel that all three of our platforms will be will be in a much better position in China going forward.

Excellent. That's all I had.

Thank you. Mister Kalderman, I now like to turn the floor back over to you for closing comments.

Yeah. Thank you. And thanks everybody for joining the call today. And, of course, for your insight insightful questions. I'm extremely proud of the accomplishments and the results that Bio-Techne team has been able to deliver this quarter.

And

our differentiated portfolio addresses some of the highest growth markets in Lyme Sciences, and is positioned to deliver best in class performance for all our stakeholders going forward. With that, I wanna thank you, and have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. You for your participation, and have a wonderful day.