Good morning, everyone. Happy to see you all. My name is Arsim, and welcome you all at the Tecan Company presentation at 44th JPMorgan Healthcare Conference. The presentation will be led by the CEO of the company, Monica Manotas, and we're targeting for a 30-minute presentation and a 10-minute Q&A at the end, so save your questions till the end of the presentation. The Q&A will be joined by the CFO of the company, Tania Micki. Monica, over to you.
Thank you, Arsim. So good morning, everyone. First of all, thank you very much for joining. I appreciate your interest in Tecan, and I'm excited to be here to tell you the story. Before I get into the material, just say a word about myself. I've been in this seat for about five months now, so still relatively new to it, but certainly not new to the life sciences tool space. I've been in the industry for over 25 years, and my story with Tecan started actually quite a few years ago when I was in Thermo Fisher and had a lot of dealings with Tecan. We were suppliers and customers to one another, and that's where I really got to get familiar with their product portfolio and maybe more importantly, the people behind it, giving the support and developing the products.
So I joined the board in 2024, which was an easy decision as a result, and when Lukas, our chairman, asked me if I would be interested in the CEO role, it was an easy decision for me, and it was because of the potential that I saw in the company, which is what I'm going to be talking about here. And it's really about reigniting the Tecan story, right? We have a really nice growth story to tell, one that perhaps has lost a little bit of momentum in the last couple of years, but where we really have all the ingredients to reignite it. Very much a leadership position in our space, which is liquid handling and laboratory automation. We service very attractive markets that have very strong fundamentals for growth, so that's good.
And relative to those markets and our customers, they are in front of a very interesting opportunity right now because between the new technologies that they have at their disposal and the power of AI, they are seeing more and more that automation is becoming essential in their workflows, and that means a very important and interesting opportunity for a company like Tecan. So now it's all about building our future, right? And the reason why I am so confident about it is because we can build on a very strong foundation, which is good. And I say that because we have a synergistic portfolio, and I'll talk about that a little bit more in a couple of slides, but we're organized in two businesses that really reinforce each other through technologies and common platforms that allow us to actually service a larger continuum of customers.
We have great customer relationships. We're very close to them. I have had the opportunity over this first five months being in the role to get to meet many of them, and I have seen how close we are, and that allows us to actually do co-innovations with them. A really nice opportunity that our partnering business brings to us. We have data access from them, just faster ability to translate what is going on in the market because we understand it through our customers. We have depth from an innovation and IP perspective.
Obviously, in this space, this is very important, and here it's a combination of a strong patent base, very sustained R&D investment, and you can see it in our P&L over time, and just a very strong team of experts, both from an engineering perspective as well as our application scientists that are working day-to-day straight with our customers, and then finally, that end-to-end value chain control, and here I'm talking about, again, the way we have set up this continuum and how we support our customers. We have capabilities spanning research and clinical applications, and all this under a very much common denominator, which is a clear purpose to improve people's lives and health, and we do it by empowering our customers to scale healthcare innovation globally from research all the way to the clinic.
Now, I wanted to spend a couple of slides just talking a little bit about Tecan and who we are for those of you that are new to the story. And I'd like to use this depiction because what I find is the most unique thing about Tecan is that we have platforms that are flexible enough to allow us to service the entire continuum of healthcare. And what I mean by that, if you look at kind of that top left of the circle, it allows us to serve all kinds of customer needs from research to the clinic, as I mentioned. If you look at the top right, it's for customers that are handling any type of biological sample, so DNA or RNA, cell tissue, proteins, they can use our capabilities. And then in the bottom, also for any kind of detection technologies.
They're working with imaging, they're working with mass spec, or sequencing, PCR, they can use this, and here when I talk about platforms, I mean both the hardware and the software side, and what we do is we create modules that become building blocks to establish the products or the solutions that support the applications in all these categories for the different customers, so as I mentioned, we are organized in two businesses. Our life science business is roughly 40% of our total. This is where we have the Tecan branded portfolio. It serves customers in the life science research side, so this is where we service academic and government institutions, biopharma customers, and clinical labs.
And the portfolio is made up of our instrumentation, so this is mostly our liquid handling robots as well as our detection portfolio, the respective consumables and some reagents, and then our service and digital offerings. Our partnering business is about 60% of the total business, and here we support customers more in the unregulated environment. So think our IVD customers, MedTech, and some applied markets. And we have three components of the portfolio. What we call our Synergence branded offering, this is the OEM offering. So this is where we support mostly IVD and some life science customers, again, utilizing the expertise and platforms that we also use for our own proprietary products. But we do co-developments with these customers that typically have expertise on the reagents and assay side and are looking for a partner that can help them develop instruments.
Again, because these are IVD, typically they tend to be in the end closed systems that work with the respective reagents for the customers. We have the Cavro offering. This is basically standard and customized components, so think pumps, valves. Components that go into the instruments can be just part of the Synergence offering and also within the Tecan branded products at the top. This is for customers that do their own development but would like still to have the components inside. Then finally, our Paramit offering, which is our contract manufacturing expertise. I'll share a little bit more there since this was the latest addition to the portfolio. It was an acquisition that was done in 2021, basically to add contract manufacturing capabilities. Paramit focuses on high complexity, low volume products for highly regulated markets.
Again, very much aligned with the focus areas for Tecan. But Paramit added two capabilities to Tecan. One, it expanded our total addressable market because it was already offering these services to the MedTech space. And number two, also very important, it added manufacturing capabilities for Tecan in the U.S. as well as in Malaysia. So up until that point, the capabilities were concentrated in Europe for Tecan. So this made our entire supply chain much more flexible. Again, something that we can take advantage of ourselves, but very much our customers appreciate in this day and age to have that level of flexibility. And we service very attractive markets. I've mentioned that at the beginning, that perhaps have gone through a little bit of uncertainty in the last couple of years, but have very, very strong fundamentals of growth that I think we all in this room believe in.
And some examples about what the customers are going through in what we're calling the century of biology and all these technology advancements that they have at their disposal. From a biopharma perspective, our customers are now leveraging AI in their drug discovery and development process to identify new drug candidates and accelerate that process. On the diagnostic side, among many things, they're dealing with what it means to have personalized medicine, right? And treatments for those obviously generate a lot more need for volume and data. From an academic and government, these customers tend to be the pioneers when it comes to research, and now they have the power of multi-omics, right? Combining biological data to better understand disease mechanisms, again, needing more power in their workflows.
And finally, MedTech. Here we have innovative surgical procedures, and again, we're lucky to be working already with one of the pioneers for robotic-assisted surgery. So one thing that is a common denominator across all these trends is that all of these needs actually require more lab automation because there is more throughput required, more need for precision to build the data that is needed to feed the various models within the workflow. So maybe turning it around, how does lab automation make a difference? And you can see some examples here. Scalability, obviously important as you have more data, and this is something that our customers, both on the biopharma side and certainly on the diagnostic side, need as they deal with increased complexity, the AI models that need to be fed with cleaner data. All that takes advantage or automation allows that to happen.
Consistent, reliable results obviously needed across the board. Regulatory compliance, very much a need here. We're talking about regulated markets. Reducing dependence on skilled staff, this is something that's been a pain point, particularly for our diagnostics customers for quite some time, and having automation certainly allows them to manage that pain point and lower operating costs. I think this is something that our diagnostics, academia customers are very interested in, but even biopharma customers like to have that efficiency in their processes overall. So I often get asked the question around AI, right? And what does that mean for us? Thinking is this a catalyst for growth in our particular product portfolio, or is it going to be something that makes our products less needed over time? And I wanted to use the example of what our customers are doing with AI in the drug discovery and development process.
You can see it here, but basically our customers are using AI models at the very beginning of the process in the target identification, right? That's the piece that they are doing in the computer in silico to try to get as many candidates at the beginning that have more chance to make it all the way through the process. It just makes the process overall more efficient and adds speed to a process that's already quite long. With that, there is more output that comes to the later stages of the process that actually happen in the wet lab, which is where we come into play. The more potential candidates that come in at the beginning of the process, the more that requires to go through the wet lab to actually check if these candidates are indeed the right candidates to take through the process.
And there is a closed loop that happens. You can see it there depicted in the slide because then as more information gets checked in the wet lab, then it goes back and feeds again the AI models, which is why automation is so used here because it's the only way to ensure consistent data and clean data that is required in these AI models. So very much AI is a catalyst for growth for our products. And before I move on, I'll say that also as you go down the process, this has an implication in the demand for later stages here.
I'll use the example of QC where in this process, this is a part where it has typically been done with manual methods, but we're seeing more and more that customers are valuing automation in that space because as they have to test all these novel drug types, they have more parameters to check QC for, and they are seeing the power and the benefits of using automation in that step. It's something that we've already seen from our customers. So where are we today? Now, I talked about the great foundation that we have. We're leaders in our space. I have talked about the interesting markets that we serve and the opportunity that we have from a growth perspective. That's all good. But here's maybe the sobering moment. This is our performance, right? We have had for a number of years a really nice growth story.
Obviously, it was augmented during the time of the pandemic, and since the pandemic has been over, we have not really been able to get back to growth, and you have seen that come through in our earnings performance as well. So this is the reality, right? Now, I said at the beginning that I joined here because I saw the potential and the opportunity to reignite the growth story. So I've been working the last few months with my team to understand what has happened and not really to dissect and over-dissect an issue, but more really to understand what needs to change. Now, granted, markets have had a role here. They've had some uncertain times, so no question.
But there is a part from our perspective, and I think the bottom line is we've lost some focus on our customers, is what really in the end didn't allow us to truly see what was coming. For example, in 2024, that we had a further correction, and you saw the results there. And also, I think we've executed inconsistently, and those are things that we need to fix because at the end of the day, we need to be able to over-deliver, so deliver a differentiated performance in all kinds of situations from a market perspective. The good news is two things. One is the core is intact. So that is a good place to build. And financially, Tecan is strong. So another very important kind of pillar in the end to build off of.
Over the last few months, focus has been reestablished, and I will recap some of the growth initiatives that maybe some of you have already heard me say. These are working, and we will continue to focus the teams on that. But we've been talking about the concept of future-proofing Tecan within my team. And what this means is taking action to drive consistent execution. As I said, it doesn't matter if the markets are blue-sky situation or if they're having some challenges as we've been facing now. The point is that we always need to deliver differentiated performance. This is good for our investors. This is good for our customers because they have a stable partner in front of them. This is good for our employees because they have a stable source of employment coming through. So good across the board.
So, to do this, we are going to be launching this year a transformation program with the objective to focus us on ensuring that we are delivering, going forward, consistent performance and get the business back to growth. The program is going to have three main pillars. One is going to be around portfolio discipline. And here, this is all going to be about looking at our portfolio and identifying what are those areas where we can compete to lead, where our customers are looking for our support, and making sure that we focus our investments in those areas. And then looking at which ones are those areas that perhaps we made some investments in previous years that made sense at the time, but we just could not get the traction on and deciding what to do about those.
The second pillar will be all about commercial excellence, and this is going to be what drives or reignites the growth. Here, I'll share again a recap of some of the growth initiatives that we are already working on that are driving results. But we will do things like, for example, establish some sharper segmentation to ensure that we have clarity on where we have opportunities to gain share in the markets that we focus on. Value-based pricing. There are parts of the portfolio that can benefit from value-based pricing, and that represents an opportunity for us. And just overall strong commercial execution. And then finally, operational excellence. And this one is really all about ensuring that as we scale, as we get the growth, that converts into margins and cash. It's a responsibility from our perspective to do that.
And here's where we're going to do things at looking overall at our footprint and ensuring that we are using it in the most optimal way, making sure that we're monetizing the investments that we're making in terms of IT tools. From that perspective, all these things are going to be looked at and managed through this pillar. And in the end, this is all going to be underpinned by our people. They are going to be the ones that are executing. And here's all about driving a culture of performance, right? Again, we have to be consistent in our execution. We have to do what we say, execute on our commitments, and just overall create sustainable value both for our customers and our shareholders. Now, to recap some of the growth initiatives that we will continue in 2026. The first one is all about leveraging the innovation investments, right?
I think most of you have heard me talk about Veya. That was a product that was launched in Q1 of last year. It's an interesting new platform for us because it allows us to target a different type of customer, still focused in the medium to high end of the range because that's our sweet spot. But these tend to be customers that are a bit newer to automation that are running applications that perhaps are not needed to be run on a daily basis, which means they require less throughput than perhaps what the Fluent can offer, but still will benefit from the accuracy that automation gives them in their applications. The response by the market has been very strong here, so we're happy with the run rate and the results that we saw last year, and we do expect a continued ramp-up in 2026 from this platform.
Number two, another one that I'm very excited about is the robotic work cell offering. And this is where the acquisition that we made last year of the director scheduling software, we call it FlowPilot for our customers, plays a role. And it's a very interesting combination of the capabilities that we have within our Labwerx offering. These are experts in integrations with now having the software capabilities that creates the brain of the entire workflow operation. And this is where you've all probably heard the concept of autonomous labs, or some people call them the lights-out labs or the dark labs, right? More and more customers in biopharma, and actually we've seen this in some academic institutions in China as well, are going to creating these robotic work cells that benefit from automation.
And again, as they put in AI in their entire drug discovery and development processes. So a very interesting opportunity, one that, again, because of the Labwerx capabilities that we already have, we have a very rightful place to win in and one that we're very excited about now that we have the software capabilities with FlowPilot. The third is about unlocking growth markets, right? These are geographic markets where we have been under-penetrated because we just haven't been directly present in. This one started actually with the investments that we made in 2024 in South Korea that allowed us to generate double-digit growth in that region last year. The next one here is India, where we're going to be making very targeted investments.
Here, the target is to go after the biopharma segment in India that has been growing quite a lot over the last couple of years. Then from there, there will be more opportunities. Again, it's all about targeting under-penetrated markets to drive incremental growth. Then finally, on our partnering business, last year, we made some changes to fix some execution issues. This year, it's really going to be all about strengthening the existing customer partnerships because, again, they're very deep with them. We have much more opportunities to go after an incremental share of wallet with them with new things or even next generations of existing relationships, as well as creating a funnel of new opportunities and new potential partnerships in all three parts of the portfolio.
We have some new exciting things in all three parts of the portfolio here that we're excited will drive growth in 2026. Now, I thought I would recap the sales results that we announced last week for 2025, and I think you've all seen them. Overall, for the year, we generated a 1.6% decline in local currencies total. That was roughly 1% decline in our life sciences business and 2% decline in our partnering business, but what was the most encouraging was to see the order entry. We had overall 3.8% growth in local currency in total for order entry, and perhaps even more importantly, when I looked at the two businesses, we now have book-to-bill ratios of over one in both, so again, encouraging signs for this year. Of course, I'm not going to be talking about specific guidance yet.
We will do that in March of this year, as we typically do. But I thought I'd share a little bit of my view as we come into 2026. And I'm still of the belief that we are going to see these markets recover, but it's going to be a gradual recovery. And I say that for what I see in each of the segments. So starting with the academia and government, I think our customers here, particularly in the U.S., continue to want to get a little bit more clarity. I think everybody's talking about the fact that it will be better than last year, that NIH budgets will be stable and not a major reduction, as was talked about last year. So that's all very good.
But I think our customers are still waiting for maybe some more specifics and clarity around that to be able to feel comfortable to make the investments that they want. So on this one, I'm still being maybe cautiously optimistic, but perhaps a bit conservative as we start the year and obviously one that we will continue to track. Biopharma, I mean, I do think that it will be better than last year. I think at this stage, we see that pretty much all of the large pharma companies have finalized deals with the U.S. government that gives them better clarity, better clarity around the situation with the tariffs. So that's all good. I think that's going to allow them to have a better view of how they're going to make their capital investments, not just in the later stage, but throughout the entire drug discovery process.
Diagnostics, I mean, diagnostics was a very good segment for us last year. We saw strength there, both on the IVD side as well as the piece that we touched within clinical labs in our life sciences industry or in our life sciences business. Here, I don't really see a reason to believe that this is going to change. So I think this is one that will continue to be strong for us in 2026. And then on the med tech side, I think we're going to continue to see those pockets of growth, and that trend towards outsourcing will probably continue. So something that will continue to be an opportunity for us to go after. So all in all, I do expect the market to be better than last year. I mean, I think at this stage, maybe something flat would say in automation in 2025.
It was down in the low single digit, perhaps one and a half-ish or one and a half to two. I think here, say maybe flattish, which will be better, maybe somewhere between minus one and plus one, depending on how the various segments play out. And of course, something that we will continue to keep an eye on as we get ready to provide guidance in a couple of months, but I want to recap this because, yeah, okay, as I said, 2026 will be better, and it will be a gradual improvement. What we still believe in the midterm outlook, which underpins a market growth of 3% to 5%. And then, obviously, as I said, we need to be always delivering differentiated performance and overachieving the market.
So with that, we are thinking from a midterm perspective to go back to the mid to high single digits, which I think is doable given the opportunities that we have in front of us. And then from an EBITDA outlook perspective, we will talk more in a couple of months, but we will work to ensure that we have that line of sight back to that 20% that we talked about in the capital markets in 2024 and then start to see expansions from there. We are working on some dates for an update of capital markets, likely be in the spring. So just keep an eye on that as we finalize the dates and make them public. So I will close with this slide. These are kind of the key takeaways that I want you to leave this room with.
We have a very strong foundation to build off of, including talent, expertise, and customer relationships. We serve as attractive markets where automation is essential now, and AI is a catalyst for growth. We are committed to consistent execution and future-proofing Tecan, and obviously focused on delivering profitable growth for our shareholders. So thank you very much. And with that, Arsim, I think I'm going to turn it back to you for moderating the Q&A.
Thank you very much, Monica. Yeah, now we're moving to Q&A. We'll be joined by Tania Micki, the CFO of the company. And maybe just to get ball rolling, first question is actually coming from me. Monica, you joined like five months ago since August last year. So can you just elaborate more what brought you to Tecan?
And the second part of the question is like, what were your key priorities and learnings since you started? Yeah, maybe starting with the first part. I mean, as I was sharing earlier in the presentation, to me, it was really about seeing the potential to reignite the growth and working with the teams to make it happen. And that's what made it exciting. As I said, I didn't come in totally new, right? I had a lot of experience dealing with Tecan in my time in Thermo. And then when I joined the board, I got a sense of what were the foundation for growth here. And that's really what excited me to take the role.
If I think about my priorities that I've had over the first five months in the role, it's been number one, absolutely to work to ensure we get the company back to growth because that's the beginning of everything. And as I said, I have been happy to see that there were some things already taking place, and it was really all about driving the focu s in these areas to ensure that we can get back, being close to the customers so we can understand their inflection points as they're also navigating some challenges. And our role is to help our customers to navigate those. And I think we have the right expertise, the right products, the right relationships to make all that happen.
And what has been the biggest takeaways from the discussions and feedback from customers, from partners, and from employees as well?
Yeah, I think that they are all excited of the opportunities that they have leveraging the new technologies and the role of AI in accelerating the research, whether this is through an academic institution or to a biopharma or diagnostics or clinical labs companies. They see the opportunities that are in front of them. They are starting to see more clarity in the funding environment, and this means different things in the different areas, like I shared. So I think they are excited to utilize our products on the automation side or as a partner to help them develop new products in the end to support their own customers.
Just want to check with the audience if any other questions from you. Please just wait for a mic.
Thank you. Thank you very much. I just wanted to ask a question on the last couple of years.
As you said, it's been challenging because of the end markets, but as well because of some loss of focus on the customers and some inconsistent execution. Can you please provide some more details on these two aspects in Tecan, what you've seen, and how you're addressing that going forward? Thank you.
Yeah, thanks for the question. I would say that I concluded all of that because, again, when we were navigating, all of us in the space, because I was in the space in a different company through the pandemic, it was very clear that we had a lot going on, generated a lot of growth, but we were going to go back to a more kind of normalized place.
That resulted in quite a lot of change in dynamics, not just for the workflows that were touched directly by the pandemic, be it through testing or on the vaccine side, but also indirectly because as customers tended to have more funding, they actually invested quite a lot in their labs overall. And that created a change in the replacement cycle that is kind of normally going here. So it had a lot of impacts. And the key here was always, from our perspective, to stay very close to the customers to understand how was that landing point going to happen because we weren't really sure when exactly it was going to happen. We just knew it would.
I think my conclusion in seeing what happened in TECN, where we had quite a landing in 2024, as you've seen from the numbers, was that perhaps we lost a little bit of that direct touch with the customers to try to understand it. It was something very difficult to do, but you had to stay in touch with that, see some of the KPIs that hindsight is 20/20. You see it in the order entry. It's one of the KPIs that we see. And we should have seen that going down. There should have been signals that this was going to happen. So this is what I mean by loss of focus and kind of bringing back that focus and back that discipline around execution.
Thank you.
Thank you, Tania. I had a question on the partnering business.
So this, I guess, is driven also by the trend to outsource, development, manufacturing, and so on. So what kind of trends are you seeing there from the customers? Is this going to increase in the future, or is this something where the market essentially has maxed out and it's now more a distribution?
Thanks for the question, Jasper. I see that the trend will continue because I think customers typically don't have just one way of working with partners.
I think what you see in most customers is that there are certain areas that they want to do themselves and certain areas where they see that they don't have the right expertise, and they look for partners like us, which is why when you're already working with one of them and you've established that close connection, it gives you the opportunity to see what are those other areas where there is opportunity. One of the things that I have found very compelling about the portfolio that we have on the partnering side is that we have made it such that there are different options for customers depending on the level that they want to partner with, so as I was saying, if they want the partner to do the full-on development of the instruments, they come to us with our Synergence offering.
But if they have that capability but are looking for components, they have Cavro there. And if they actually have already a design in place, but they don't have or they haven't invested yet in manufacturing capabilities, or they have invested in manufacturing, but they are full with other products, then they come to us with our Paramit offering. So it is nice to be able to have the three and have the customers take their pick depending on what is their philosophy when it comes to outsourcing.
Thank you. Checking if any other questions from the audience. Maybe before we finish, a few questions to Tania. So Tecan returned to sales growth in the second half of 2025 and reporting strong order intake as well. So what was the key driver behind the positive development?
No, indeed, we were very pleased with the development.
Monica has mentioned the 3.8% of order growth as well. In the second half, particularly, we actually had very good momentum across the segments. You will recall that Monica showed four segments. Biopharma, diagnostics, and medtech all were growing, and the only exception was academia and government, as we expected, actually.
Just one question about the impact of U.S. government shutdown. Have you seen any kind of material impact on your business and any recovery following that?
I wouldn't call it material simply because we actually did not expect much. From that perspective, the impact was minimal. We had some administrative issues because the portals were shut down, but we were able at the end to send everything that we needed to the U.S. and to sell as we planned.
Yeah, I think maybe for clarity, the part of the business where we have exposure to academia is in the life sciences part. If you think about that, when we were making our assumptions for the forecast in the fourth quarter, even though the shutdown, I don't think, had happened yet, we thought it would, and for us, it's important because a lot of those instruments come from Europe to the U.S. We knew that we have a certain window when we have to send the instruments to be able to actually have them count, so because we saw the risk, we already planned in the forecast that that was going to likely not happen, and sure enough, this is exactly how it turned out, so yeah, it was not a surprise for that reason. I think we called it right, and yeah, then afterwards, now it's all open.
We are expecting to see customers kind of start to order again.
Just final check of any last question from the audience. Then I think we can conclude this presentation. Thank you very much, Monica and Tania.
Thanks, everybody. Thanks, Arsim.