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Bio-Techne Hints at Future M&A Plans

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NEW YORK – After acquiring single-cell sorting and dispensing firm Namocell last month, Bio-Techne may have its eye on further M&A deals throughout the rest of the year, according to its executive team.

During the Minneapolis-based company's fiscal Q4 earnings call on Thursday morning, CEO Chuck Kummeth hinted that the firm is looking at M&A opportunities both large and small. "It's going to be a good year for shopping," he said. "We're out there hunting pretty hard." 

According to Kummeth, while Bio-Techne is looking for bigger deals, it "may be a good year to pick up a lot of tuck-in mom and pops" that were thinking about undergoing initial public offerings but have changed their tune in light of broader economic turmoil. "Anything that makes sense for shareholders and makes our company a stronger company" is an option, he said.

Capital allocation will primarily go toward M&A, rather than major buybacks or increasing dividends, he added.

However, any acquisition will likely stay within the company's current wheelhouse. Kummeth said Bio-Techne doesn't want to be "in diagnostics across the board." The firm is focused on oncology and neuroscience and "diagnostics that fit in those realms" because they "leverage our assay expertise," and any assets it picks up are "probably going to be closely related " to what it offers now.

"This is going to be an excellent year for M&A," Kummeth said.

SVB Securities analyst Puneet Souda wrote in an investor note that he believes the company "will continue to pick up differentiated and attractive assets with high growth prospects to fill up adjacencies or further expand its position in consumables." He added that the firm "has shown discipline when pursuing targets" by going after assets that can deliver at least a 10 percent return on invested capital within five years.

On the Namocell acquisition, Kummeth said it will add to Bio-Techne's overall business. Mountain View, California-based Namocell offers multiple instruments, including its Pala two-laser system that has up to 11 fluorescent detection channels. It also has the Hana single-laser system with two fluorescent detection channels. Both instruments use Namocell's proprietary technology that combines microfluidics, flow cytometry, and liquid dispensing to deliver single cells from samples to plates.

The instruments "address several high-growth markets," including cell and gene therapy, cell engineering, antibody discovery, single-cell genomics, and synthetic biology. Although the business is "relatively small," he said, it is "growing quickly." The company already has instrument placements — at the time of the acquisition, Bio-Techne said Namocell had installed nearly 200 instruments — and its technology has "a lot of different applications," he said.

"You'll see this be a major platform for us in the coming years."

He was similarly bullish on another recent acquisition made by Bio-Techne, the up to $320 million purchase of molecular diagnostics firm Asuragen intended to build out its diagnostics business. Asuragen's revenues, driven by demand for genetic carrier screening kits and molecular diagnostics controls, grew over 25 percent in fiscal Q4, Kummeth said. The business has a "rich product pipeline" and is working to expand geographically, he added.

The Asuragen acquisition, as well as the ExosomeDx acquisition that Bio-Techne completed in 2018, "position the company to maintain leadership in supplying reagents for tests and licensing [laboratory-developed tests] while expanding into directly marketing and distributing kits, with a focus on the fast-growing liquid biopsy market," Souda wrote in his note to investors.

This focus on deal-making comes amid a financially fruitful fiscal 2022, punctuated by fourth quarter revenues that rose 11 percent year over year to $288.2 million from $259.0 million a year ago. Its Q4 organic revenues grew 14 percent year over year.

Bio-Techne CFO Jim Hippel noted on the conference call that the firm has seen "growth momentum across [its] businesses," including spatial biology, diagnostics and genomics, and protein sciences.

Diagnostics and Genomics revenues were $71.7 million, up 7 percent year over year from $67.1 million. Much of that growth was driven by demand for the company's ExoDx Prostate test, which saw a nearly 70 percent increase in volumes during the quarter and a 40 percent increase in revenues, Hippel said. That jump is due to increasing traffic in physicians' offices as patients return to routine visits and diagnostic test volumes improve, Kummeth added.

The return to doctors' offices also benefited the company's diagnostics reagents business, sparking demand for hematology and clinical chemistry assays that use Bio-Techne's clinical controls and reagents, Kummeth said. That business saw revenue increases in the low single digits, Hippel added. 

Protein Sciences revenues were $217.0 million, up 13 percent year over year from $192.3 million. Kummeth highlighted multiple segments of the business, noting specifically that increasing interest in regenerative medicine was driving demand across the portfolio, including reagents, assays, media, spatial biology products, and instruments.

The proteomic analytical tools business increased in the high teens in the quarter, and the company continues to see strong demand from protein therapeutic, gene therapy, and contract research organization customers, he said.