NEW YORK – Bio-Techne faced significant headwinds during its fiscal Q3, which saw revenues tick up 1 percent, but some of those issues are expected to wane in the coming quarters.
Those headwinds include difficulties related to China's COVID-19 outbreak early in the year, overstocking from biotechnology customers, and the lowering of biotechnology spending after significant growth over the past couple of years, Bio-Techne President and CEO Chuck Kummeth said on a conference call on Wednesday to discuss the firm's financial results.
Those combined headwinds, plus a difficult comparison to the prior-year quarter, had nearly an 8 percent impact on the company's overall growth, CFO Jim Hippel added.
However, Bio-Techne has already seen improvement in some of those areas, particularly in China. Before the Lunar New Year holiday, sales in the region were "practically nonexistent" as COVID-19 spread through the country and people stayed home, Kummeth said. But after the holiday, as people returned to work, revenue growth climbed in the low-single digit percent range, and the firm expects to see continued acceleration in China, potentially reaching a 40 percent growth rate next quarter, he added.
The stocking issues are also improving, as customers who stocked up on reagents a year ago due to supply chain constraints have almost used up those supplies, Kummeth said. It will likely take at least another quarter for ordering patterns to return to normal, but those headwinds "should become tailwinds," he said.
However, the normalization of biotechnology spending after a "red-hot funding environment" the past few years is a headwind that may take more time to work through, Hippel added.
Overall, the firm said that for the three months ended March 31, its revenues for the three months ended March 31 grew to $294.1 million from $290.4 million, slightly missing analysts' average estimate of $296.7 million, Bio-Techne said.
The firm reported Q3 Diagnostics and Genomics segment revenues of $75.7 million, down 3 percent year over year from $77.7 million, and Protein Sciences segment revenues of $218.9 million, up 3 percent year over year from $213.2 million.
The Diagnostics and Genomics segment was impacted by the comparison to Q3 2022, which included a milestone payment from Thermo Fisher Scientific related to the transfer of technology for the ExoTrue kidney test that increased its revenues for the year-ago period.
Test volume for the firm's ExoDx Prostate test grew by more than 70 percent and associated revenue increased more than 85 percent, with the addressable market growing by about 50 percent after receiving expanded Medicare coverage, the company said in a statement. So far in Q4, the firm is continuing to see record volumes for the test, Kummeth noted.
The spatial biology business, meantime, increased in the low-double digit percent range, he said.
The firm's ProteinSimple brand also saw low-double digit growth in the quarter, as the Ella ELISA instrument saw 25 percent growth in Q3 and more than 1,000 instruments are now in the field, Kummeth said. Bio-Techne is also continuing to make progress on its efforts to move the instrument into the clinical diagnostics market, he added.
Bio-Techne posted Q3 net income of $70.2 million, or $.43 per share, compared to $60.7 million, or $.37 per share, in the prior year. The firm's adjusted EPS was $.53, matching the analysts' average estimate.
At the end of Q3, Bio-Techne had cash and cash equivalents of $127.3 million and short-term available-for-sale investments of $29.9 million. Hippel noted that M&A remains a top priority for the company's capital allocation.
Bio-Techne on Wednesday also announced a quarterly dividend of $0.08 per share, payable on May 26 to common shareholders of record on May 15.
In Wednesday afternoon trading on the Nasdaq, Bio-Techne shares were up nearly 6 percent at $84.73 per share.