Terrific. Thank you for being here. Day three of the TD Cowen Global Healthcare Conference. I'm Dan Brennan. I'm the Tools and DX Analyst. Really pleased to be joined with me on stage here, Frank Laukien, who's the CEO of Bruker, so Frank, welcome.
Thank you very much for having us.
Terrific.
Thank you for your interest.
So, you know, maybe, you know, the fourth quarter results weren't that long ago. So maybe you can just kind of do a quick review of kind of how the year ended and, you know, as you think about the priorities for 2025 and, you know, the organic guide of 3%-4%, just kind of your thoughts on that.
Yeah. So the fourth quarter was a bit better than what we had anticipated and a little bit better than consensus. We managed to almost get to 4% organic growth. I think it was 3.9, which was quite good. We thought we'd be almost flat because the prior year had been at like 16% organic growth and had been very extraordinary. So good, good organic growth. So similar to the rest of the year, we had good bookings, which was also nice, or improving bookings. So very, very close to a one book-to-bill in our BSI business, which is the best within the trend of last year, the best bookings.
There were some initial China stimulus bookings. I'm sure we'll talk about that. Not a lot yet, but some, you know, in the last two quarters of the last year, it added up to a little bit more than $15 million. You know, that makes up. That this is not all baked into our guidance. I'm sure we'll talk about that. So there's some positive drivers there as well. And the margin performance was better. You know, it really shows that this Bruker management system working on the acquisitions and integrating them and making them, taking them towards breakeven and then profitability pretty quickly at a very fast pace.
I think that showed that we're delivering on that commitment. We've also worked, of course, on the core. We're not only taking cost out of the new acquisitions and restructuring those, but have taken cost out in other areas in order to support, which kind of brings me to the guidance, right, and to the multi-year outlook. A guidance that this year is modest on growth, but not bad, right? 5%-7% constant exchange rate growth with 3%-4% organic is decent, but not a standout year.
But we wanted to be conservative and really very much focused this year and in the next few years to coming back towards 20% and beyond 20% operating margin for this year, for 2025. We've guided to 140 basis points of margin expansion. And by the way, that's subtle, but it started at 15.4 for last year, not 15.0. So it's good.
So good, good fast margin expansion, which is going to be what we will be solving for this year and the next few years, and therefore also good EPS growth. I think the reported EPS growth guidance is 11%-13%. And yeah, life's not fair. There's some currency headwind. Without that, it would be 14%-16%. But it shows you that's very much a commitment to profitability.
Terrific. So I'm sure you've gotten this question or you will get it today, but in terms of all the policy initiatives from the Trump administration, you know, creating a lot of questions for the Tools Group, your guide contemplates some uncertainty in academic and government market due to NIH. You know, I know you've publicly stated you don't expect a large reduction in NIH related to kind of what's been going on, so maybe just talk through a little bit about what your exposure is.
I mean, I think a lot of companies have an academic exposure, and then within that, they have an NIH exposure, so they're doing their own math. Just give us a sense of kind of that exposure and kind of what you've assumed.
Yeah, that's the, you know, that's the elephant in the room, right? Our CFO, Gerald, was answering that in New York last week over and over again. So let me just preface this and I'll say it. I'll go through some sensitivity so you get some numbers, and I'll point out what I think is most probable and our guidance and some downside scenarios, which are not our guidance. But since that we are answering that question all the time, we might as well, right?
So yeah, we've built in, we said, hey, this NIH uncertainty, and it's a little bit broader. I mean, it's not just narrowly NIH. It also affects much of U.S. academia. We'll probably take a couple of quarters. It could take longer, but we think it may take a couple of quarters to sort itself out. And therefore, we're modeling some sort of a reduction in that. We have modeled a number that seems reasonable, minus 8%. And that ended up with numbers that we can cushion in our guidance. Yeah.
So maybe some of the buffers that I built into my guidance, as we always do, it is now less likely that we'll have beat and raise, at least raises. So, but, you know, I think that's all stuff we can buffer. That is our guidance that remains our guidance that we think is the most likely scenario and that can absorb because of strong other drivers in biopharma, in semi, in diagnostics with Chinese stimulus, maybe now some German stimulus, some Korean stimulus. Let's see how quickly that moves through.
We think we have enough drivers from the 92% of our business that is not U.S. academia that we can make up for that more probable scenario. Why is -8% the right number? -10%, I don't know that it is the right number, but if I look at all of Bruker in the COVID year, 2020, how much were we affected? And that was about that number as well. So no, we didn't go down 20%. So, but now since you want to ask it and since I get asked all the time, what if it went down 15% or 20% or 25%? Again, I'll preface that that's not our guidance
. And also because I have so much backlog, I think it wouldn't all hit us this year anyway, if even it takes longer to sort out. But you can do the math. Let's just do the simple math. 25% down all of U.S. academia in that unlikely scenario, but not implausible scenario, a bit extreme, that would be 2%. So that would imply that instead of 5%-7% constant exchange rate growth, the implication of that would be 3%-5% constant exchange rate growth. So still growth, still margin expansion, still EPS growth, but a reduced scenario.
Whether we or others would have to look at a reduced scenario like this by mid-year or after the third quarter, I cannot exclude that because nobody can. Again, I don't think that's the most likely scenario, but since people also want us to model a bit more extreme, but still within the plausibility range, there you have it.
In terms of what you're hearing, you know, we were just sounding at the AGBT. You were there as well. What we're hearing is kind of mixed feedback, if you will, on this indirect factor. Some labs are fine, and indirect doesn't really impact us. Others are saying, universities saying to halt spending, slow spending. Others are saying indirect actually pays for certain things. It might pay for labor. So we might have to reach out of our pocket.
Like what's the, you know, in a downside or extreme down 25%, you know, the, you know, President Trump may suggest an NIH budget like he did in the first term, down 15%, and Congress has typically said, no, we're going to fund it flat or up a little, down a little. Is it more the indirect that would be the swing factor?
If it is, I don't know, what is your salespeople hearing from their customers about how that might impact some spending?
No, I cannot imagine anybody saying indirect doesn't matter. It matters for everyone. It doesn't just pay for G&A overhead, right? This is not just a bunch of universities have all bulked up in their bureaucracies, and they could all use a lean program, and they can all use some restructuring. That's good, but that'll take a while. But it pays for a Computation Center, for an animal facility, for a Proteomics Center, and a bunch of other things that you need. In some grants, you can build that into the grant. In some grant, this indirect research facilities cost is an essential part of what U.S. academia needs.
So the 15% won't work. I also think we're not going to go back politically to that, hey, just show us your calculation, then we'll pay you 60% or 70% overhead. I think those times are also over. No point in betting, but I've heard a university president bet or jokingly say, no, I think this will come into 40%, maybe maximum. Others have said, yeah, maybe it'll end up at 30%. That's kind of in the middle somewhere. That's sometimes maybe that's where the new political, you know, consensus will fall, the new deal with the Trump administration.
It'll be the new NIH director, Jay Bhattacharya and RFK Jr. None of those have said they want to spend less on research. They said, hey, I want to focus on chronic diseases. That's legitimate, right? That actually feeds into our post-genomic human phenome biology. That might even accelerate some of those trends that could be in the second derivative, pretty beneficial for Bruker. It will take some time to figure this out. Nobody knows how long it will take. I think it'll take. It's not a matter of weeks. I think it'll take a couple of quarters.
It could take longer, but I'm assuming it'll take a couple of quarters once the new head of FDA, new head of NIH are in, that they will then be empowered. I don't know that for Trump personally, that that's even in the Trump 1.0, and I know 2.0 is different, but 1.0, there were things that he took very much personally as his agenda and other things where he always said, let's have less NIH spending, but then aging senators and congresswomen and congressmen all of a sudden, we're worried about Alzheimer's and cancer, and we know someone who is, right? Then they always increased it anyway.
I don't think the U.S. will give up its leadership role in academic or in non-academic life science and biopharma research. I think that's not going to happen. But how long will the turbulence take until this gets into some new paradigm? None of us know exactly. I think it could be, you know, a few quarters.
Yeah. We just hosted a panel this morning too, with, on China, you know, with the vice chair of the National Security Commission on Emerging Biotech. They're going to have a report on April 7th, and I think they're really going to try to promote R&D, so it'll be interesting to see what they have out.
In China?
In the U.S.
In the U.S. Okay. I didn't.
Yeah. Sorry about that. So let's talk about growth initiatives. One of the growth initiatives, you know, that you've had is expand your business with pharma. Could you just discuss kind of where we are on that path? You know, you've had pharma macro pressure, but it sounds like that's getting better. How successful have you been? What's the opportunity to look ahead?
Yeah. I mean, first of all, organically, it turns out that our timsTOF product lines for proteomics, multi-omics, and also more for isoforms is very applicable to the biopharma industry. And rather than, so they tend to be maybe not relatively early adopters. Our timsTOF business and so on, and some of our high-end NMR business tends to be, you know, about 30% pharma, which for some other academic research tools, some of them tend to be 90% academia.
No, this very early big push into from chemical proteomics to that you need for drug discovery for these, for certain, for these targeted protein degraders and protein glues and so on plays a role. The same will be true for some of our acquisitions. The Beacon platform of the old Berkeley Lights PhenomeX that we acquired, heavily dependent on pharma, therefore last year wasn't so fantastic for them, right? Demand wasn't there for those bigger platforms.
We think that's now. I don't think that biopharma will snap back this year, but I think this year will be a growth year to where maybe you'll be at longer-term growth rates back in, you know, in 2026. Longer-term growth rates in biopharma won't be the boom years immediately post-COVID. I think those were also unique. But, you know, if I think biopharma for us, last but not least, sorry, NanoString also has a significant biopharma business in good years. Last year for us or 10X or maybe Akoya or others also wasn't so hot because biopharma spending was relatively weak last year.
That's gradually coming back, but again, more with being at normalized, whatever they will be growth rates, probably by 2026, but some growth this year. So that already looks healthier. All in, Dan, our biopharma exposure or that being a long-term, one of the most valuable industries and most important industries for us keeps going up, you know, from the low to the mid to the higher teens, and that trend just continues. In some years, it's good not to be 40% or 60% or 80% biopharma because then it does become an exposure.
One of the beautiful things about Bruker is that we are so broad and so resilient. Yes, now we benefit from European defense spending and airport security and in between semiconductor metrology for a big new TSMC plant that does not only logic chips, but that will also look at advanced packaging. One of the things you probably mercifully had no idea we're doing, but we're actually the leading company in advanced packaging metrology tools. I cherry-picked a few things from recent headlines that actually are all positive for us, but that get drowned out right now with, hey, we're all freaking out about NIH.
Right. That's fair. Maybe kind of staying on some of the high-level introductory questions here. So we talked about China a little bit here and then on the prep call. I think 20 million orders to date maybe of China stimulus. You know, Agilent just announced pretty decent-sized stimulus wins in their first quarter in food. Could you just zoom out and give us a sense of, we've tried to do work on China stimulus and we're just trying to understand what the program that you're addressing, what you've seen early on and kind of how you're thinking about the opportunity for Bruker?
Yeah. We just had, again, one of our most senior group presidents for the, who also runs the mass spec business and some other things was just in China and had a lot of customer meetings. So I have a little bit more incremental color and insights. So, and by the way, this part that Agilent reported on the environmental side and PFAS and so on, we don't see that that much. That's kind of an Agilent and others idiosyncratic approach. We see stuff in proteomics and glycoproteomics and spatial biology that they may not see.
So, so confirming from our perspective, although challenged a little bit by what Agilent's doing because they're in a different part of the market, is academic high-end, latest and greatest, preferably not quite released yet. That's what they want to have because they're not going to get these big money for these big ticket items. They may not get that for another five years again. So this is when they want to buy the latest and greatest and preferably something you're launching at ASMS and just talking about for now, which is fine.
So that also has implications in terms of timing. This won't be a tight bolus over one or two quarters or three quarters of orders. It seems to be some very sizable projects that we've come across. And these tend to be $10 million-$100 million type projects. Not all coming to us, but you know, we have a big chunk of it often and some other vendors.
And then there's just some stuff that, you know, it's not some of it's just lab infrastructure and salaries. but very often they go to the latest and greatest in, yes, I will say the post-genomic era and this next chapter of looking at proteomics, multi-omics, interactions, spatial biology, very much onto the next chapter of life science, the genomic science. The last 25 years, we're sort of at the end of the beginning. It wasn't the answer to biology. It's not the blueprint of life.
It was ended up, you know, most people say today we understand maybe 10%-25% of human biology because we have the genomics. Some people say it's much less than that. It just means there are other chapters to be written that we're writing, that we're in the leadership position and have fundamentally transformed ourselves to being a leader or perhaps the leader in this next chapter of studying things completely gets validated in how China is investing.
You know, they are onto the next next thing, not only the last thing and getting more of that or we're getting more capacity or getting another sequencing center going. This is incredibly favorable. I think as the U.S. environment will become highly selective because you'll still, you won't, you can delay some purchases where you just wanted more capacity or replace something from seven years ago and there's better, but you can delay that for a year and two. You will in U.S. academia if you have to make really tough choices right now.
But if something is the first tool where you can do the PaintSCAPE product that we just launched at AGBT, a completely new landmark in science, you can look at the three-dimensional spatial genomics. So, not within the cell, but within the nucleus and within the chromosomal structures where they're located, how they interact, how they translocate, very, very important information, not only for cancer research, basic cancer biology, but how viruses affect our cells or infectious disease. This is something; this will be a Nature and Cell paper printing machine.
Nobody has anything like that. People will invest; they will prioritize that, or what we're going to launch at ASMS, which will be the tims Omni, that is very much looking at protein isoforms and looking at complete intact proteins and getting nearly complete sequence coverage.
That will also create a new category, and interestingly, people are very, very keen on that in stimulus, and I think that's also what I predict what U.S. science, when they have reduced funding, U.S. Academic science will invest in because that they must have for new scientific enabling capabilities, so we're well placed there, which doesn't mean we won't be affected by this turmoil. We will be, but I don't think as much as others perhaps.
So basically just summing it up then, there's some really chunky large orders that are brewing there on some really advanced proteomic technologies looking to tap into some of the newer things. And it's not going to hit in, like, immediately, but you're talking about $20 million, $30 million, $100 million projects of which you could have.
Of which we'll get a fraction, but you know, we might get $5 million out of a big project or $10 million. And sometimes we just get a couple of million, but you know, it does add up, right? So there's healthy funding that we haven't all built into our guidance for 2025 because I think with a word of caution, I think it's also coming a little bit more slowly. I thought, well, it'll probably come through in Q1 and Q2. No, these orders may be coming through all of this year and maybe some into next year, which, from managing a business, actually isn't all bad.
You don't, the boluses are nice while you have them, but then it makes for a tough comp. So it's probably more steady, but there's some very sizable projects and they all got all the stamps from the dean and from the Vice President of Research. And now they just need the money released and that probably, that may be over many quarters rather than over one or two quarters. So probably more slowly, but I think overall a bigger opportunity and very much focused on leading-edge products that give you, that enable new science or new cancer research. So there we're absolutely in the sweet spot.
So maybe just kind of coming back down to the guide for 2025, like we have BioSpin up three, CALID up five, Nano up three. So kind of all around that 3-4 , but CALID the fastest grow, the other two. Is that kind of the right way to think about it? Maybe can you give us some building blocks to how you guys thought about that organic outlook for 25?
No, actually not quite. That's an understandable way of modeling it. It turns out that BioSpin had very fast growth last year and will be flattish or low single digits this year, 2025, and the same for BEST because of some of the trends in the MRI market that are driven by, you know, GE, Siemens, Philips Healthcare.
But you know, so this year there will have a discrepancy with Nano and CALID growing the fastest, pretty good growth rates, and BioSpin and BEST just growing a little bit more slowly this year. That's how it comes together. In some years, everybody grows almost in sync. This year, there'll be a little bit more of a difference.
So academic, we've covered in a lot of detail. So that's a headwind for you. But in terms of getting from that three to five back to six to eight.
But not in other countries, right? I mean, of course we're focused on the U.S. So how can we not be? And here the investors are. But again, in terms of all academic and government spending for us, 77% is outside of the United States. Europe is much more steady, low single digit increases. But because we're in the right spot of that, for us, that can mean high single digit or double digit growth rates. Similar in Taiwan, Korea is planning some big projects, probably won't benefit us till 2026.
Whatever this German infrastructure and defense packages that they're just hashing out right now, apparently I was told by an investor this morning from Europe that, hey, how did you see that also has some science funding in it? I didn't even know yet. So I hope it's true. So, but anyway, to your next question.
Right. So outside of U.S. academic weakness, when you think about your three to five bridging to six to eight, what has to happen to get back towards that six to eight?
Two months ago, I would have said, well, you know, we're in a partial recovery of the markets. From last year, the market was what, down 0% to -2%, and we grew 4% organically. This year, as part of the guidance, we thought that maybe the markets would be growing in the low single digits, but not mid single digits yet. So a long-term recovery to the mid single digit growth rates this market, these markets generally have seen the life science tools market, which we would expect for 2026, maybe the second half of 2025, but not for all of 2025 yet.
So on top of that, you need the U.S. academia and NIH turbulence to settle into perhaps some new paradigm where you can just calculate your overhead and charge that, but there will be maximum. And then if you want to have a separate computational facility or a new animal or proteomics facility, well, apply for a grant. I mean, people who've been at NIH at Senate hearings speaking and applying for NIH jobs have said, no, no, we want to spend more on R&D. We want the universities to take out a few billion in overheads and bureaucracy, which is entirely feasible.
I mean, there are many layers of bureaucracy that aren't benefiting research, except this will all take some time. That doesn't happen within until the U.S. academia restructures will be a two- to three-year process. But during that time, even quickly, they can take out tens of millions, which then, you know, will soften some of the reduced funding they get so that there will be lesser impact on R&D. That's why I'm not looking at, well, I'm happy to answer the questions about worst case scenarios, but I think what we've built in of an 8%-10% decline is much more realistic and probable.
So maybe just looking at CALID and Nano then. So CALID, obviously you've talked about timsTOF about four times so far on this call, just, you know, to grow 5% or 5% plus, just maybe where are we in the evolution of timsTOF and kind of how does that number compare to where you think that growth rate could be as things normalize?
Yeah, that was growing more slowly in recent years because the Astral was the new kid on the block. It's a very good new system that came out a couple of years ago that could speed things up, do things in plasma and so on that were beyond what we could do two years ago. In a lot of these things, we've kind of caught up. In other areas, we retain areas where we have advantages.
Now we're bringing out some things we talked about here at USUPO, some things that tims Omni that we talked about at ASMS will have some very significant new additional releases to where not only have we come back to maybe an even market position in the last two years, we kind of clawed our way back into that with enough innovation and some new capabilities, but there's a big push for some major innovation that's coming out from Bruker this year.
So, will that get reflected, do you think, in your 25 guide? Could that, could the.
Mostly 2026. It'll maybe a little bit in Q4. We haven't built much of that into the 2025 guide. So when you announce these new things, and that's why we're talking to some of them earlier. So something we'll have budgets ready when this launches. Others will begin to look at budgets when they say, wow, this is something nobody can do. We need to be able to do that. Most of that will help us in 2026 and beyond. So yeah, but you know, these things have time constants where it really helps your P&L sort of within after a couple of quarters.
UK Biobank announced.
But I mean, there's enough other healthy stuff built in, right? Yeah. Yeah.
So UK Biobank announced, I think, a 600,000 sample with like Olink and Thermo and Affinity based tools. We hosted a company yesterday and I'd like to get your perspective too because you compete here with Seer with the Proteograph at the front end. I know you have a competitive product they're talking about.
There could be some really big mass spec, like just protein type, not population sequencing. But I guess the question is, as you see these affinity-based population studies, what's going on in kind of mass spec related studies given how much faster the timsTOF is and Astral? Are you seeing a demand for that? Is that part of the excitement here? Would that be upside?
Yeah, with Seer on the one hand and the Enrich Plus and P2 technologies for sample enrichment or depletion, that has enabled mass spectrometry team red or team blue or blue to play a much bigger role in plasma proteomics. Proteomics by mass spectrometry had been terrific in cell lines and even single cell and immunopeptidomics, but in plasma, initially the way to scale was with Olink or SomaLogic, right? That's why they did the initial studies, Olink of the 50,000 samples of the UK Biobank.
So that has changed now in the last few years with the other company that you mentioned and some of the things that we've launched over the last year with our partner companies, PreOmics and Biognosys, the CRO. And now we can do very, very good and very deep, including tissue leakage cancer biomarkers in plasma. Plus we can do the isoforms, plus we have multiple peptide coverage and a much, much higher 99% specificity. Nothing, nobody at Olink, SomaLogic or Olink is ever talking about specificity, but it is dramatically less than that as far as we can tell.
The benign interpretation is it's complementary because people that have studied this and have really compared the various technologies find that they overlap less than 50% and then each have a whole bunch of 25% that you only see with Olink or only see with mass spectrometry. So at a minimum, you'd think you'd want to combine that. We have a program where a U.K. startup company is looking at the physiological plasma proteome and 50,000 samples of the U.K. Biobank.
They haven't made big announcements, but they're often running, they're doing this already while others are making those announcements. And then there's quite the UK Biobank [that] gets a lot of attention, but it's one data point per patient. Eventually we'll all be patients. Hopefully we're healthy individuals when that sample is given. They're much better longitudinal biobanks where people are studied for years once a year.
And then, you know, if at some point they're within one or two years of getting colorectal or ovarian cancer or maybe the emergence of neurodegeneration before it's caught as mild cognitive impairment. So these longitudinal databases that are a little bit smaller are much more valuable for biomarker and pharmaceutical development in the UK Biobank that is well known, but it has its limitations. So there's other programs that are more important. Mass spec plays a big role in many of those.
So we're almost out of time. Maybe I'll just wrap up by asking your opinion. I know you own, you know, over 25% of the company. You bought back stock in December. You bought back stock recently. So maybe just give a perspective on how, you know, how you view is that, is that buyback? Obviously you're the largest owner of the company, so you believe strongly in the value here, but in terms of tactically doing it now, is that more a reflection of like 2025?
Wow, we have so much wind at our back and, you know, numbers and there's cushion here. Or is it more just you're looking at the long-term value of Bruker? You're saying this thing just really looks undervalued here.
Both. I mean, you know, the valuation multiples right now that are out there, in my opinion, are totally not irrational, right? So it's an opportunity for me personally. We've also. The company has buyback authorizations that we haven't used much last year because we did a lot of acquisitions.
Right now, as you know, we're on a big deal diet for a while as we aid deleveraging, but we're not only deleveraging. We can also use some of that for share buybacks. So yeah, I mean, not, you know, yes for 25, but also very much the long-term value. In my opinion, so far exceeds where we're presently at or that, you know, that's an easy one.
Terrific. Well, with that, we're out of time. Frank, thank you so much for being here.
Thank you very much for having us. Yeah.