Bio-Techne (NASDAQ:TECH) released third-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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Summary
Bio-Techne reported a 2% organic revenue decline for the quarter, primarily due to softness in emerging biotech spending, offset by strength in large pharmaceutical customers.
The company achieved mid-teens growth in its spatial biology portfolio and a nearly 50% year-over-year increase in its GMP protein portfolio, excluding two fast-track cell therapy customers.
Management expects flat organic growth in the fourth quarter, with low single-digit underlying growth excluding cell therapy headwinds, and anticipates stronger performance in fiscal 2027 as funding conditions improve.
Bio-Techne’s adjusted operating margin improved to 34.2%, up 310 basis points sequentially, but down 70 basis points year-over-year due to unfavorable product mix.
Strategic initiatives include a brand alignment from 10 brands to three, enhancing customer engagement and streamlining product portfolios.
Full Transcript
OPERATOR
Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero and a member of our team will be happy to help you. Good morning and welcome to the Bio-Techne Earnings Conference call for the third quarter and fiscal year 2026. 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 during our Q and A session, please limit yourself to one question and one follow up. I would now like to turn the call over to David Claire, Biotechny’s Vice President, Investor Relations. Please go ahead.
David Claire (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-K for fiscal 2025 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 Generally Accepted Accounting Principles (GAAP) financial measures may be used to provide information pertinent to ongoing business performance Tables Reconciling these measures to most comparable Generally Accepted Accounting Principles (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 and at www.bio-techne.com separately. In the coming weeks we will be participating in the bank of America and Jefferies Healthcare Conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.
Kim Kelderman (President and Chief Executive Officer)
Thank you Dave and good morning everyone. Welcome to Bio-Techne’s third quarter earnings call for fiscal 2026. The Bio-Techne team continued to execute with discipline in a dynamic and uneven end market environment. Our quarterly performance was supported by sustained strength from our large pharmaceutical customers and stable to improving trends in our US Academic end market. These positives were partially offset by continued softness in emerging biotech spending resulting in a 2% organic revenue decline for the quarter. Importantly, we are seeing encouraging indicators that point to an ongoing improvement in the US Academia and an eventual recovery in emerging biotech which positions us well for a stronger fiscal 2027. As discussed in our prior earnings call order, timing related to two cell therapy customers that received FDA fast track designation along with the timing of a large Original Equipment Manufacturer (OEM) commercial supply order created a 400 basis point headwind in excluding these factors. Underlying organic revenue growth was 2%. There were several notable highlights during our third quarter including the Our spatial biology portfolio delivered mid teens growth and exited the quarter with another record backlog for our Comet platform. Our Good Manufacturing Practice (GMP) protein portfolio grew nearly 50% year over year when excluding the two fast track cell therapy customers within our proteomic analysis franchise. Favorable instrument placements and utilization trends drove mid single digit growth. Our China end market achieved positive organic growth for the fourth consecutive quarter and our largest end market Large Pharma, delivered its sixth consecutive quarter of double digit growth. We also remained highly focused on profitability. Adjusted operating margin in the third quarter was 34.2% representing a 310 basis point sequential improvement over fiscal Q2. Jim will provide additional detail on our financial performance later. Nicole Now I turn to our end markets beginning with biopharma excluding cell therapy. Here we continue to see a divergence between the performance of large pharma and the performance of emerging biotech. Revenue from our large pharma customers grew low double digits driven by sustained investment in discovery, translational research and manufacturing. In emerging biotech, however, revenues declined high single digits reflecting the typical lag in spending following the funding constraints experienced in the first half of calendar 2025. Baytech funding activity has since rebounded meaningfully from with estimate increases of more than 90% and 50% in our fiscal Q2 and Q3 respectively. Given the typical 2 to 3 quarter lag between funding and customer spending, we view this as a constructive setup for fiscal 2027. In academia, the team delivered low single digit growth as the US Academic market returned to growth in the third quarter. The improvement in NIH outlays, new grant activity and the 1% increase to the NIH budget have reduced funding uncertainty and positioned this end market for continued stabilization. From a geographic perspective, the Americas declined low single digits while Europe achieved mid single digit growth. Our two largest fast track cell therapy customers are reported within the North America. Results Asia delivered low single digit growth with momentum in China continuing for the fourth consecutive quarter. China is seeing increasing demand from biopharma and CRO customers focused on antibody drug conjugates, cell therapy and autoimmune disorders. These are areas where our reagents, instruments and analytical platforms are particularly well suited. In April, biotechny announced a Strategic Brand Alignment designed to streamline our portfolio from 10 brands down to three. This alignment simplifies how our customers engage with biotechny across the research to clinical continuum. Our three brands now include RD Systems, which integrates a full portfolio of research use only, and Good Manufacturing Practice (GMP) reagents alongside a proteomic analysis instrument previously branded as Protein Simple Biotechni Spatial Biology, which includes our RNA Scope, in situ hybridization kits and reagents as well as our Comet Multiomics spatial platform and Bio-Techne Diagnostics which encompasses our clinical controls and precision diagnostic solutions. This structure better aligns our products and technologies with our customers progress from discovery through translational research into clinical and diagnostic applications. It also enhances the visibility of our solutions across digital and AI driven platforms, making it easier for customers to identify and deploy the right tools within their workflows. Speaking of artificial intelligence, we continue to see AI increasingly influence both how we operate internally and how our customers approach drug discovery internally. We are leveraging AI to design novel and patentable proteins with enhanced properties including improved heat stability, bioactivity and solubility relative to the natural occurring proteins. As you are aware, AI tools are only as effective as the data that informs the model. Our models are trained on five decades of proprietary data, creating a meaningful competitive mode and in parallel we are deploying AI throughout the organization to improve productivity and customer engagement. From a customer perspective, AI adoption is accelerating the earliest stages of drug discovery, particularly target discovery, which is expected to expand the number of viable programs and improve probabilities of success. The effectiveness of these models depends heavily on the generation of high quality biological data, which is an area where Bio-Techne is extremely well positioned. As an example, a recently published collaboration between Providence Health and Microsoft on the Gigatime AI framework used data sets generated on the Biotechni spatial biology platform Comet to convert traditional H and E pathology images into virtual three dimensional tissue representations. We view the growing demand for content rich biological datasets as a durable tailwind for both our spatial biology and and our proteomic analysis platforms. AI also acts as a downstream demand driver for RUO reagent and assay portfolios. Every AI enabled insight ultimately requires biological validation which will fuel demand for highly specific antibodies, functional assays and complex recombinant proteins in mechanism of action studies, biomarker validation and preclinical workflows. These applications align directly with the most differentiated and highest value sections of our portfolio. Now let’s turn to our segments beginning with Protein Sciences where organic revenue declined 4% in the quarter after adjusting for order timing from the previously mentioned cell therapy and Original Equipment Manufacturer (OEM) commercial supply customers, underlaying growth was 2%. Our differentiated portfolio of reagents, instruments and analytical technologies remains foundational to the development and manufacturing of advanced therapeutics including cell therapies. As a reminder, two of our largest cell therapy customers received FDA Fast Track designation with which accelerated clinical timelines and reduced near term Good Manufacturing Practice (GMP) reagent demand as these customers had already secured the materials required to complete their clinical programs. Excluding the impact of these two customers, Good Manufacturing Practice (GMP) protein revenue grew nearly 50% year over year. This strong performance from emerging cell therapy customers underscores the increasing reliance on Good Manufacturing Practice (GMP) grade cytokines and growth factors as programs advance from early development through clinical trials and into manufacturing scale up and commercialization. Staying with cell therapy, I’d like to provide a brief update on Wilson Wolf. We currently own 20% of Wilson Wolf and remain on track to acquire the remainder of this manufacturer of the market leading product line of single use bioreactors called the GREX by the end of calendar 2027 or or potentially earlier upon achievement of specific milestones. Despite the challenging biotech funding environment, Wilson Wolf delivered low double digit growth on a trailing twelve month basis while maintaining EBITDA margins north of 70%. Turning to our proteomic analysis instruments, growth was led by an opportunity increase in our ELLA benchtop immunoassay platform. ELLA automates traditional immunoassays into a cartridge based workflow delivering rapid, highly reproducible protein quantification with minimal hands on time. These attributes are driving strong adoption in neurodegeneration research which is reflected in a three year CAGR of 50% across our neurology assay portfolio. While this remains an emerging portion of the business, the recent launch of Ultra Sensitive Capabilities strengthens ella’s position as a leading platform for blood based neurological biomarker analysis. During the quarter we also achieved CE IVD marking for ella, enabling hospitals, clinical laboratories or or other European organizations to use ELLA as a validated platform for clinical applications in house test development, clinical trials or other translational activities. We also saw continued traction across our biologics characterization portfolio led by our Maurice platform MREZ is increasingly embedded into biopharma manufacturing workflows as a quality control and a characterization tool. It is enabling faster and more consistent assessment of critical protein attributes including size, charge and purity. This drove double digit growth in both MRE’s instruments and consumables. Wrapping up Protein Sciences Our core reagent and assay portfolio, which includes more than 6,000 proteins and 400,000 antibody types, declined mid single digits in the quarter, excluding the impact of order timing related to the previously referenced Original Equipment Manufacturer (OEM) commercial supply. Customer organic growth declined low single digits Strength from large pharma customers was offset by continued softness in US academic demand and the lingering effects of last year’s challenging biotech funding environment. As funding conditions continue to normalize in academia and recent improvements in biotech funding translate into customer spending, we believe that this core portfolio is well positioned to return to growth, supported by its differentiated performance in bioactivity, lot to lot consistency and reproducibility. All of these are attributes that become increasingly critical as customer programs advance towards translational and regulated applications. Shifting to diagnostics and spatial biology, the segment delivered 3% organic revenue growth in the quarter. Before discussing the performance in more detail, I’d like to congratulate Steve Kraus on his promotion to President of the segment. We look forward to Steve building on his prior success leading our analytical solutions business over the past five years. Let’s begin with our recently rebranded Biotechnique spatial Biology portfolio where we continue to strengthen our leadership in in situ hybridization and midplex multiomic applications across translational and clinical research. Strong order momentum over recent quarters translated into more than 65% growth for our Comet multiomics spatial platform. During the quarter we installed the first Comet system in China, an important milestone as demand continues to build in the region. We exited the quarter with another record backlog for the comet, positioning the platform for continued growth performance within our RNA scope portfolio of in situ hybridization kits and reagents improved to high single digit growth. Growth was driven by further customer adoption in EMEA and Asia as well as encasing use in clinical diagnostic applications in the us. Finally, our diagnostics portfolio, recently rebranded as Bio-Techne Diagnostics, declined low single digits as order timing from certain large customers temporarily impacted our results. Given the concentration of large customers, this business can be lumpy from quarter to quarter and therefore I want to mention that on a trailing twelve month basis, growth for biotechny diagnostics remained in the low single digits. In summary, the biotechny team continued to execute effectively in a mixed end market environment. Demand from large pharmaceutical customers remains strong. Our US Economic business has stabilized and we continue to build momentum in China and the broader APEC region. While emerging biotech spending has yet to fully reflect improving funding conditions, engagement and activity levels with this customer base continue to trend positively. We remain highly disciplined in how we operate the business delivering sector leading profitability while continuing to invest in the growth factors that will shape biotechny’s future. With improving funding visibility for our customers and strong positions across our core reagents, cell therapy, proteomic analysis and spatial biology solutions, we believe that biotechny is well positioned for outperformance in the years ahead. With that, I will turn the call over to Jim Jim Thanks Kim.
Jim Hippel (Chief Financial Officer)
I’ll begin with additional details on our Q3 financial performance followed by thoughts on our forward outlook. Adjusted EPS for the quarter was $0.53, down $0.03 from the prior year with foreign exchange having a favorable 2 cent impact. Generally Accepted Accounting Principles (GAAP) EPS came in at 32 cents up from 14 cents in the prior year period. Total revenue for Q3 was 311.4 million, decreasing 2% on both an organic and reported basis. Foreign currency exchange was a 2% tailwind while the prior divestiture of exosome diagnostics created 2% headwind. The timing impact from our two largest cell therapy customers who received FDA fast Track designation was a 3% headwind, while a large Original Equipment Manufacturer (OEM) commercial supply order that we typically receive in Q3 but received in Q2 of this year was an additional 1% headwind to revenue. Adjusting for these previously disclosed items, organic growth was plus 2% for the quarter. From a geographic lens, North America declined low single digits as strength from large pharma and growth in academia was offset by order timing and cell therapy and a biotech M market that is yet to inflect from favorable funding trends. In Europe, revenue increased mid single digits including low single digit growth in biopharma and mid single digit growth from our academic customers in the region. We are encouraged by the fourth consecutive quarter of growth in China where revenue increased low single digits. APAC excluding China also increased low single digits on a very strong comp as the Asian geography continues to show signs of sustained improvement by end market. Biopharma declined low single digits overall. However, excluding our largest cell therapy customers, Biopharma grew low single digits driven by strong pharma demand but partially offset by emerging biotech softness. Academia increased low single digits with the stabilization trends giving way to low single digit growth in the US and Europe growing mid single digits below the revenue line. Adjusted gross margin was 70.4% down from 71.6% last year, but up 190 basis points sequentially. The year over year decline was driven by unfavorable product mix. Adjusted SG&A was 28.7% of revenue, down 30 basis points compared to 29% last year. R&D expense was 7.5% compared to 7.8% in the prior year. The operating leverage reflects the benefits of structural streamlining and disciplined expense management, partially offset by targeted investments in strategic growth initiatives. Adjusted operating margin was 34.2% down 70 basis points year over year. The decline was driven by unfavorable mix and volume deleverage, partially offset by the Exazome Diagnostics divestiture. Below operating income Net interest expense was 1.3 million up 0.4 million year over year due to the expiration of interest rate hedges. Bank debt at quarter end stood at $200 million down $60 million sequentially. Other adjusted net operating income was $1.3 million down $1.8 million from the prior year, primarily due to non recurring foreign exchange gains in the prior year related to overseas cash pooling arrangements. Our adjusted effective tax rate was 22.3% up 80 basis points year over year driven by geography mix. Turning to cash flow and capital deployment, we generated 86.7 million in operating cash flow with 9.1 million in net capital expenditures. Also during Q3 we returned 12.5 million to shareholders via dividends and ended the quarter with 1:57.4 million average diluted shares outstanding down 1% year over year. Our balance sheet remains strong with $209.8 million in cash and a total leverage ratio well below 1x EBITDA. MA remains a top priority for capital allocation. Now let’s review our segment performance beginning with Protein Sciences Q3. Reported sales were 226.2 million, a decrease of 1% year over year. Organic revenue declined 4% with a 3% benefit from foreign exchange excluding cell therapy and Original Equipment Manufacturer (OEM) Commercial supply Timing Impacts from our largest customers organic growth was 2%. Growth was led by our Proteomic Analysis instrument franchise which benefited from continued strength in large phrama paired with double digit growth from our academic end market. As Kim mentioned, our core portfolio of research reagents and assays declined mid single digits reflecting the challenging biotech environment and the lingering impact of the US Government shutdown on grant activity and fund outlays in the quarter. Excluding the timing impact of a large commercial supply customer, the decline in the core portfolio was limited to low single digits. Protein sciences operating margin was 44.2% down 140 basis points year over year primarily due to unfavorable product mix and volume deleverage, partially offset by ongoing profitability initiatives. In our Diagnostics and spatial biology segment, Q3 sales were of 85.6 million down 4% year over year. The divestiture of Exosome Diagnostics negatively impacted reported growth by 8% while foreign exchange had a favorable impact of 1%, resulting in 3% organic growth for the segment. Biotechny diagnostics declined low single digits as order timing from certain large customers impacted growth. Spatial Biology grew mid teens including over 65% growth in our Comet platform while our RNA Scope portfolio increased high single digits. Segment operating margin improved to 12.1% up from 9.4% last year driven by the Exazome Diagnostics divestiture and productivity initiatives, partially offset by unfavorable mix among our Original Equipment Manufacturer (OEM) customers. We expect continued margin expansion commensurate with the scaling of our Comet Spatial Biology platform. As we look ahead to closing out the remainder of our fiscal year 2026, we remain focused on what we can control. This includes our operational and commercial execution, productivity and capital discipline and delivering sector leading profitability while investing across our growth platforms. The state of our pharma end market remains strong. The stabilization and signs of gradual improvement in the US Academic market are encouraging. Funding levels for biotech have been very strong the past two quarters and our commercial teams are reporting increased engagement in a higher opportunity funnel from these customers. However, given the timing lag between funding and spending by biotech customers, which typically is two to three quarters, we believe this end market is the biggest swing factor for growth to accelerate. From here. While we can start to see improvement in the biotech end market as early as our June quarter, our base case is that we won’t see a meaningful uptick in growth until the first half of our fiscal year 2027. As Kim mentioned earlier, we also remain encouraged by the progress of our largest cell therapy customers following FDA fast Track designations. While these designations temporarily reduce near term Good Manufacturing Practice (GMP) reagent demand, as these customers advance through their phase three trials, they meaningfully accelerate potential commercial timelines. This customer specific headwind moderates in the fourth quarter, impacting growth by approximately 150 basis points year year and will be fully out of our comparisons as we enter fiscal 2027. Taking these market and customer specific dynamics into account, we expect organic growth in the fourth quarter to be approximately flat excluding the impact of the cell therapy headwinds. We anticipate low single digit underlying growth across the remainder of the portfolio. This outlook assumes end market conditions are broadly consistent with what we experienced in Q3 and any incremental stabilization or improvement in emerging biotech spending could prove additive. Importantly, this near term outlook positions us well for an acceleration in fiscal 2027 as biotech funding should more fully translate into customer spending. Academic conditions continue to normalize, company specific timing headwinds roll off and we lap easier year over year comparisons. From a margin perspective, we remain focused on balancing growth investments with operational efficiency and intend to close the last quarter of the year with approximately 100 basis points of margin expansion over the prior year. That concludes my prepared remarks. I’ll turn the call back to the operator to open the line for questions.
OPERATOR
Thank you. If you’d like to ask a question, press Star one on your keypad. To leave the queue at any time, press Star two. We ask that you please limit yourself to one question and a follow up. Once again, that is start and one to ask a question. We’ll take our first question from Matt Larow with William Blair. Please go ahead. Your line is now open.
Matt Larow
Hi good morning and thanks for taking my question. One of the follow up on emerging biotech that was down mid single digits in the fiscal second quarter and you mentioned down high single digits this quarter. Acknowledging that the improvement in funding may materialize later in the year. Just given that step down would be curious what you saw from sort of an intra quarter trend perspective and if you’ve seen any improvements from January through to March and then now into April.
Kim Kelderman (President and Chief Executive Officer)
Matt, thank you for the question and good morning. The biotech end market was indeed our surprise, so I appreciate you honing in on it. We had of course very clear visibility to how the funding had been and as you remember funding was relatively Bismarck in the first half of 2025, calendar 2025. It recuperated a little bit to low single digits in the third quarter and then actually had a real step up 90% growth in Q4. And then we rolled into the new calendar year with yet another good quarter in funding. Underneath that we saw our two last quarters at negative mid single digit two times in a row, indicating some sort of stabilization. You take on top of that that you know we saw that the funding was up. We know interest rates were stabilizing, M and A deals were up in biotech and licensing deals just as well. We also had a little bit of visibility to the Comet bookings being positive there, so we assumed a slight improvement in the biotech and market to maybe negative low single digits. But you’re right, it did step down to negative high single digits instead. And that really is the hole for our quarter and it fits very nicely to exactly the gap in our biotech, biotech and market. And there of course we double click and you can see that funding was substantially up in late stage biotech. But early stage biotech, where a larger portion of our core reagents have a direct read on that early stage of funding was actually down. If you tease that apart. And that is where our surprise came in the trend. During the quarter we hear from our sales force that there are, you know, more interaction and dialogue about possible orders and investments. But for now we are assuming that, you know, with two negative mid single digit quarters going to high, high negative singles, you know, we can’t assume that there is clear stabilization or improvement. So for now we’re keeping it, keeping our forecast at flattish because we don’t have clear indicators that there is an improvement.
Matt Larow
Okay, okay, fair enough. And then you just talked about the outlook here for the calendar second quarter. As I think through the way some of your larger peers have characterized both that quarter and then the rest of the year unfolding. You know, given the OEM timing, cell therapy, headwinds being removed from your comps, some improvement in ang would just be curious if you, if you’re thinking that sort of the mid single digit range by the end of the year, again kind of consistent with improvement. Others are citing if that’s reasonable or if there’s another range we should be thinking about. And that’s all for me. Thank you.
Jim Hippel (Chief Financial Officer)
Matt, this is Jim. Thanks for the question. I’m sure I understand your question correctly. You asked him about the end of calendar 26.
Matt Larow
Yeah, that’s right, yeah. Just given how sort of peers have framed the calendar second quarter relative to the balance of the year.
Jim Hippel (Chief Financial Officer)
Yep, yes, sure, yes. I mean again we won’t be giving any kind of even soft guidance around 27 till next quarter. But as I’ve mentioned in my prepared comments, we’re very encouraged about the upcoming fiscal year. So many of these headwinds that are company specific will now finally be behind us. And we’re seeing, we have seen a definite stabilization in the North American academic market and of course pharma remains strong. So it really comes down to, for us to biotech. And admittedly I think, you know, we were probably a little bit, we saw 2/4 of quote unquote stabilization in biotech and thought perhaps the worst was behind Us but in retrospect we may have been a little bit, you know, got the cart a little too far ahead of the horse on that one in the sense that the reality is, let’s call it the two to three quarter lag really hasn’t happened yet given that it’s only been 2/4, 2/2 where we’ve had strong funding. But it does, you know, it does. If history is any guide, it does bode very well for the second half of calendar 26 with respect to the biotech market. And of course that’s our first fiscal quarter of 27. And you know, it’s also encouraging to hear from our peers who’ve already announced that they’re, they’re also expecting the uptick of momentum in the back half of the year and we, we tend to agree to that thesis.
Matt Larow
Okay, thank you.
OPERATOR
Thank you. We’ll take our next question from Punu Tuda with Learning partners. Please go ahead. Your line is open.
Puneet Tuda
Yeah. Hi guys. So Tim, first for you, you’re one quarter away from fiscal 27. Just given, you know, we’ve been in these markets for some time. The challenges, you’re well aware of those, you know, can we still do mid single digit growth? Can biotechnic do mid single digit growth still in fiscal 27? I think it’s an important question just given, you know, how we have ended so far and you know, on the biotech side I understand, but just trying to understand, you know, given the end market challenges, was there something that surprised you later in the quarter or is this more about the way you’re building the overall forecasting? Because I don’t think investors were expecting, you know, surprise at this point given that GMP fast track designations already surprised two quarters ago.
Jim Hippel (Chief Financial Officer)
Yeah, yeah. Hi Puneet, thanks for the question. This is Jim. So yeah, with regards to fiscal year 2017, based off the lens we have right now, yeah, we’d be disappointed if we didn’t do at least mid single digit growth because all the indicators are pointing towards a gradual normalization of market and I remind everyone that put these company specific items aside, which amounts to three customers, we would have been low single digit growth even in this environment we’re in today with a tough biotech end market. So yeah, I think we’d be disappointed and I think in terms of what we’re looking for, in terms of indicators, you know, we talked about the fact that in academic we really saw an uptick in growth in our proteomic analysis instrument portfolio as well as in our spatial portfolio and You’ve heard us say this before, Puneet, that those two in particular, those two growth vectors for us are where we are kind of indicators for us when we start to see the markets come back, that’s where the money often flows first. And it’s exactly where we saw some very nice growth in US Academic this quarter, which gives us added confidence that our customer base is getting more confidence in their funding there. And so that’s also what we’re looking for with regards to our biotech customers in terms of an indicator for that inflection point. And again, it’s too early to call it at this point, which is why we’re being, I think rather prudent about our Q4 forecast in terms of kind of holding it steady in terms of overall base improvement. But it was encouraging to hear from our businesses and our commercial leads that the interest in particularly in our proteomic analysis as well as our spatial biology offerings has picked up recently among our biotech customers. And the funnels there are starting to grow again. So we’ll see if that translates into more orders in Q4 for higher revenue in early fiscal year 27. Those are the things we’ll be looking for out of our biotech end market.
Puneet Tuda
Got it. And then that’s helpful. And then look on the RUO reagent side, I think you commented that that business is soft partly biotech being the emerging biotech being the reason. But we’ve seen two readouts from two competitors so far, one of them as an opco under a larger entity and their business is recovering there. Another one that is a strong inflow, Cytometry is also showing signs of growth. So, you know, how should we what gives you confidence that this is not any share loss in R and D systems and Novus Biologicals?
Jim Hippel (Chief Financial Officer)
Yeah, Puneet, thanks. Yeah, very good question. The, you know, in fact a couple of dynamics here. The one order that we had talked about that got booked in Q2 versus Q3, the 100 basis point swap we’ve talked about previous and this earnings call is actually in, in that number. It sits in that core reagents area. And if you look at, you know, our comparables with, you know, double digit growth last year, it’s almost 20% growth last year and compared to some of the other companies that you’re talking about having negative numbers to compare against. We’ve done our math and our homework and also of course our market work and we’re relatively comfortable, confident that we’re actually still pretty, pretty well off. And that is the situation for that core business. Yeah, I’ll add there Puneet a little bit so that you know, when people think about our core reagents, they typically think about our proteins and antibodies portfolio. Rightfully so. But we also include that there’s some other small molecules, there’s assays, core ELISA assays, et cetera. But as it pertains specifically to that protein in anybody’s portfolio, after you take out this very large one customer OEM order that happened to impact that portion of our portfolio, both our proteins and antibodies combined grew low single digits this quarter.
Puneet Tuda
That’s helpful. Thanks. That’s fair. Thank you.
OPERATOR
Thank you. We’ll take our next question from Patrick Donnelly with Citi. Please go ahead. Your line is open.
Patrick Donnelly
Hey guys, thank you for taking the questions. Kim, maybe one on the China piece continues to show a little bit of growth there. Can you just talk about what you’re seeing and then the expectations visibility going forward. Are you feeling you’re in a pretty good spot there as we head into 27? Would like some more detail just on the overall backdrop and expectations there.
Kim Kelderman (President and Chief Executive Officer)
Patrick, thank you for the question. Yeah, we are quite excited that we have for the fourth time positive growth in China. And you know, obviously Jim and I were earlier this quarter in in China meeting with government officials exploring how we can further support science and medicine in the country. We connected with customers in academic as well as in the new companies that that working on new therapeutics, including CROs and CDMOs. And you know, there’s a lot of activity. You can clearly see a momentum in the market especially around the advanced therapeutics. And you know, so for us, we’re not surprised that we are in growth mode again. We called that one right a year ago and there’s no reason to believe that that is going to. I would expect a continued momentum and strengthening of that particular end market specifically after our visit. We are direct in the market and our team is really well connected with customers on both sides on the biotech as well as pharma as well as the academic side. And yeah, it’s positive all around.
Patrick Donnelly
Okay, that’s helpful. And then maybe just one more on the biotech piece. You know, again, surprising step down there, I guess in terms of your customer conversations. You know, what are you hearing? I mean the funding has looked quite good for over six months here. Typically that does cause an inflection higher for you guys. Just curious, I guess on the visibility, the customer conversations, how you’re feeling about that market as you head into 27. It feels like it should have been a nice tailwind certainly going into the next quarter and 27. Obviously it’s lagged a little bit Just trying to figure out what that could look like as we work our way forward here over the next six, nine months.
Kim Kelderman (President and Chief Executive Officer)
Patrick, I think Jim already touched on it. We were quite surprised to step down after further analysis. And if you look at the funding levels for early stage biotech and later stage biotech, we understand it. But you’re right, the funding levels were very encouraging and as I mentioned interest rates, M and A deals, all those were pointing in the right direction. I already mentioned that the conversations are getting better. Interest levels from the biotech market are improving and last quarter with two times negative mid single digits. We thought stabilization improvement was there but have to step down. We’re going back to okay, stabilization is our next point typically because we need to see the ship turn the corner and and therefore we are somewhat careful and I think that’s the right thing to do. But you’re right, all the indicators including the dialogue with customers are positive.
Jim Hippel (Chief Financial Officer)
And if I could, I’ll just add a little bit, I mean kind of going back to my cart before the horse comment, I we’re kind of trying to thread a needle here with regards to exactly what quarter you see the inflection point and we’ve said that we’ve looked at our history over the last several decades and look at different ebbs and flows of biotech funding and the range is anywhere between 1/4 and as many as 4/4. But the average of the mean is somewhere between two and three. And the reality is it’s only been two quarters of solid funding. So we’re kind of right at that median point now and you know, we’ll see whether we see any of that pickup in Q4 or not. Right now our base case is that it does not, but it doesn’t necessarily get any worse from here either. But it does again bode well for the back half of this calendar year, which is the first half of our fiscal year because at that point in time you start to get to the call it the tail end of the bell curve when we usually start to see that flow through.
Patrick Donnelly
Thank you guys.
OPERATOR
Yep, thank you. We’ll take our next question from Justin Bowers with Deutsche Bank. Please go ahead. Your line is open.
Justin Bowers
Hi, good morning everyone. Just going to stick with the current line of questions but Jim, can you update us on your view for fourth quarter for the different end markets? So what’s the view for academic, US, academic biotech, etc and then also when you double clicked on the funding analysis, what sort of competitive dynamics, if any, did you uncover? And then part three of that would just be what parts of the portfolio would you start to see the recovery the soonest from the EBP customers. Thanks.
Jim Hippel (Chief Financial Officer)
Well, I’ll take the, I’ll take the first one. Thanks for the question. I’ll take the first one and the third one. I’ll let Kim jump in on the second point. You know, real quite simple without going through end market by end market. The very simple answer is our base case is we’re assuming basically the same level of performance across all our end markets in Q3, in Q4 that we saw that we saw in Q2. You know, pharma already is very strong, academic is going the right direction, albeit slowly. So therefore we don’t see a meaningful move, but nonetheless continued progress. And then with biotech we’re assuming the same kind of performance we saw in Q3 for Q4. As we talked about in my opening comments, that would be the, that will be if there’s any potential upside, that’s where we think we might see it as in biotech. But right now that’s not our base case. So that’s really how we’re viewing the end markets with regards to. I said I was going to take the third bullet and tell me what it was. Now it was around. Remind me just around. What parts of the portfolio would you start to see? See the recovery for biotech. Yeah. Yeah. Thank you. So again, as I mentioned answering an earlier question, we look at the performance, particularly our proteomic analysis business, our spatial business. Those two growth factors, cell therapy kind of beats to its own drum, but that’s already doing very well. But those two growth factors for us we believe is usually early indicator for us with regards to a turn in the markets when we see those start to inflect. And just as we saw those two parts of our business do very well with double digit growth in our US Academic market this most recent quarter. That’s what we’re looking for, the inflection point in biotech as well. And like I said, I don’t get, I don’t want to get ahead of us, but it was encouraging to hear that the interest level and funnels among our biotech customers for those two portions of our portfolio has picked up here in the last several months.
OPERATOR
And just into your second question. Oh, go ahead.
Kim Kelderman (President and Chief Executive Officer)
No, go ahead, Kim. Yeah, your second question was around the trends in biotech. Right. So yes, over the Last year funding mix has shifted and the year before you could clearly see 75% of all the funding going into late stage work, clinical development phase one to three and that has become 82% of the funding funding. And the same happened in reverse for the early stage discovery which used to be 25% of budgets and now being 18% of all the funding. So that took a step down the early discovery part. And that’s really what we bumped into with our core portfolio, specifically the assays that Jim mentioned. I don’t think that is by definition a change in competitive trends. It’s just a change in where the money gets spent.
Justin Bowers
Understood. I’ll jump back in queue and if someone else will turn.
OPERATOR
Thank you.
Kyle Boucher
Thank you. We’ll take our next question from Kyle Boucher with TD Cowan. Please go ahead, your line is open. Hey, good morning. Thank you for taking my questions. I know you touched on this a little bit but I wanted to ask another just a clarification question. On the guide you said flat organic in fiscal Q4 sort of implying low single digit underlying growth excluding the GMP headwinds. But it sounds like there’s fewer sort of discrete items in the fiscal fourth quarter. The GNP reagent headwind is pretty small at 150 basis points. The OEM reagent timing headwinds out of the way. You face the easiest comparison year over year on organic I guess. Beyond biotech performance, is there anything else that’s getting worse?
Kim Kelderman (President and Chief Executive Officer)
I can give a flyby and then Jim can double click. No, I’ll look at the our end markets first. The pharma has been double digits and funding have been stable there maybe slightly improving. So we think our entitlement continues to be double digits. Biotech we discussed in detail here academic we see a slight improvement and we are excited that we’re back in positive territory for the first time. It’s still a frail market. It’s certainly not going to be a V shaped recovery I think but stabilizing and improving is a fair assumption there. And China we’ve already discussed with four times in positive territory and continued momentum from that point of view I’m relatively comfortable and the one that we are have been talking about and we feel could be a detractor still in the biotech area from a, from a portfolio point of view, you know our core has been doing good except for these areas that we discussed and if you look at our verticals, I couldn’t be, you know, more more positive. Self therapy. We know about the two customers but you take those out. Underlying growth was 50%. We’re looking at 17%, 12 trailing months and that looks stable. We would like that to be 20% minimum. So it’s heading there. Spatial as you know was back to mid double digits with the reagents improving and Comet instrument at 65% growth. Proteomic analysis right now it’s at mid single digits and we do know that it belongs in, in double digits, deep in double digits. So there we feel that the biotech uptick would be the trigger to get it back into the zone where it belongs in mid double digits. And then the diagnostics area, it was negative for the quarter, especially the diagnostics, molecular diagnostics products. And that was clearly a timing issue. So there I do have some positive backdrop as well that it can come back to normal growth rates. So that’s the flyby on the product lines. So overall comfortable with of course be careful for your next quarter but with a strong trajectory to normalization.
Kyle Boucher
Got it, thank you. And maybe just on the GMP reagent business and even spatial on the Lunaforce side, pretty impressive growth rates, almost 50% on the GMP region side, over 60% for Lunafor. How sustainable do you think these levels of growth are going forward? I mean do they face easy comps year over year?
Kim Kelderman (President and Chief Executive Officer)
Yeah. So taking the two customers out, we clearly look at the funnel underneath. We have 700 plus customers. The number of customers has increased mid single digits, so that’s not carrying it. But customers going deeper into their projects and spending more is clearly the driver. We have 85 programs, the same like last quarter in clinical. However 18 are in phase two and it used to be 15 and still the same six customers in phase three. So there is a progress that the customers are making that drives the growth. If you look at the cell therapy trials globally are also increasing significantly. There’s been a mix shift from gene therapy to cell therapy and that’s where we’re benefiting as well. So we do believe that the 20% growth as a minimum for a 12 month trailing would be the right bar to set. And of course we can always look at our Wilson Wolf numbers. We talked about mid single digit growth this, this last quarter and that was over a comparable of 25% growth last last year. But the number of grants that we’re, that we’re writing there is, is impressive. We are happy that there’s a more or less 50% attachment rates with biotechnies, cytokines and proteins. So overall we are, we’re comfortable, comfortable with the market underlying activity levels, progress of the pipeline and the number of customers that we are putting into the funnel.
Kyle Boucher
Got it. Thank you.
OPERATOR
Thank you. We’ll take our next question from Mac Etalk with Stevens Inc. Please go ahead. Your line is open.
Mac Etalk
Hey, good morning and thank you for taking my questions. Maybe just one for me. And following up on the last question asked on GMP proteins and cell therapies, could you just maybe break down how much of those, how much of the growth that you’re seeing is coming from? Maybe new program wins versus expansion of existing customers. I would really appreciate that. Thank you.
Kim Kelderman (President and Chief Executive Officer)
Yeah, I just touched base on it. Thanks for the question. Our overall number of customers increased 3% over the last couple of quarters. We saw a rotation, some customers rotated out and they started two, three years ago with a setup that turned out to maybe not be a winning strategy within the stealth therapy. But others have come in and it’s all about are you able to scale, Are you able to make it cost effective? And we are certainly helping our customers doing so with the the Wilson Wolf, G. Rex and NR cytokines proteins as well as the form factor of the propag that we’ve launched a quarter or two ago. So overall we feel that 3% increase in customers including the churn is encouraging. The number of clinical studies is increasing and there’s progress in the pipeline from by the customers from clinicals 1 into 2 and 3. So we see positive trends in all three of those dimensions.
OPERATOR
Thank you. At this time we’ve reached our allotted time for questions. I will now turn the program back over to our presenters for final remarks.
Kim Kelderman (President and Chief Executive Officer)
Thank you everyone for joining today’s call. I want to recognize the Biotechni team for their continued focus and execution through what has been an extended period of market and customer specific challenges. We are encouraged by the improving biotech funding visibility, stabilization in US academia, sustained engagement from our large pharmaceutical customers and continued momentum across China in the broader APEC region. As we move through Biotechni’s 50th year, we do so with a portfolio that has never been better aligned with the direction of science and medicine. Our combination of high quality reagents, analytical platforms and enabling technologies supports critical workflows from early discovery through translational research and manufacturing. Continued investments across cell therapy, proteomic analysis, spatial biology and precision diagnostics position us well to support our customers and capture attractive long term growth opportunities. Thank you again for your interest in biotechny and we look forward to updating you on our progress next.
OPERATOR
This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.
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