Thank you both for being with us.
Yeah, James, thanks for having us. Especially first thing after the turkey hangover.
Turkey hangover. Starting off sort of high level on the one Q overview, you posted an organic decline of 1%. Can you just give us a quick overview of the quarter and, I guess, the macro environment as you see it today?
Yeah, let me start with what I see as our highlights for the quarter from an end market perspective. Large pharma continues to perform very well for us. As a reminder, large pharma is about 30% of our revenue. We had like third quarter in a row of double-digit growth in large pharma. We can talk more about what our concerns were there, but we were obviously very pleased to see that the strength there has continued. From a regional perspective, I think the highlight was China. We had our second consecutive quarter of organic growth in China. We're expecting a third here this coming quarter. We do believe there that that market has turned the corner back to a growth scenario, and we think gradually progressing growth.
If you look at our portfolio, highlights again were our ProteinSimple franchise as it has been throughout the softness that's occurred in our industry the past couple of years now. We had yet another quarter of double-digit growth in our consumables, that the instruments, cartridges that the instruments use to run, which continues to confirm our thesis that our instruments are widely used and needed for productivity and in tough budget constraints. Our customers are using them like crazy. Also, spatial was a highlight in the sense that our spatial is probably the most over-indexed to the academic and biotech end market of all of our major product categories. You may recall in our fourth quarter, we slightly declined in spatial as a result of the end market pressures, but we saw that stabilize and then sequentially improve to flat in our most recent quarter.
More importantly, if you dig underneath the surface a bit, our reagents actually flipped from negative to positive growth. Our common instruments, which is the automated version for spatial for us platform, although declined for the quarter from a revenue perspective, the bookings were actually up double-digit year- over- year. We do believe that that's a very encouraging sign to see spatial come back. We are projecting a decent quarter here, the most current quarter as well. We feel like that's turned. Last but not least, it's actually good news, although a temporary intermediate to say headwind is within our cell therapy space. Our two largest customers got Fast Track by the FDA. As a result, they did not need to buy the same material that they had bought from us last year.
That caused us a head, which is what ultimately caused us to be negative 1% as opposed to what would have been positive 1%. Last but not least, I think is our margin profile. Despite being relatively flat, even down 1%, and these two customers being very profitable customers, we were still able to manage 90 basis points of margin expansion on the bottom line.
Great. Very helpful. I guess first starting on, you mentioned spatial. It sounds like bookings are strong. It sounds like it's turned a bit. You mentioned most exposed in biotech. I guess just focusing on that biotech end market, what's your exposure there? How would you describe sort of the current environment versus the last few quarters and how you'd expect that broader market to unfold in the next 6 to 12 months?
Yeah. Smaller biotech represents roughly 20% of our revenue base. If you back up a quarter to the end of our fourth quarter, which was the end of the June quarter, we were still able to show relatively flattish, even low single-digit growth in our biotech end market despite funding as of June, year to date, being down 30% year-over-year. We expressed some concerns coming out of Q4 around how long can that gap really persist. We know there is a gap between funding and spending. Even though we believe we are taking share overall in the biotech end market, that was a pretty wide gap. We figured that there is a chance that is still to hit us. In fact, it did.
In our most recent Q1, biotech was down high single digits for the quarter, which was like the worst quarter we've I think ever had in biotech, small biotech. Yet we actually feel better about the end market now than we did a quarter ago, largely because, well, two reasons. One is if you look at why is biotech funding down, it's more risky investment dollars, and they tend to be more volatile with regards to what's going on in pharma and what's perceived to happen with pharma, maybe with MFN pricing, for example, which was a concern a quarter ago. That's a lot of these investors exit. That can cause them to hold back. Even the stabilized academic environment funding can cause hesitation about it because that's the source of their innovation for the future often is that's the case.
We saw those things happening, not to mention, and then in real dollars, the 30% being down. Now you move a quarter ahead, what's changed? There is definitely more visibility now into pharma as well as even academic. Large pharma, our biggest concern a quarter ago was that the double-digit growth rates could not continue in an environment where the administration was going after MFN pricing, 100% tariff threats for not onshore enough, et cetera, et cetera. Pharma seems to have stepped up to the plate pretty quickly on that and responded in a way that was favorable to the administration. That noise has largely gone away. I think we all pay attention to that and have not heard much about that here recently. Our results in pharma showed that, that double-digit growth. Not to mention you are seeing a lot of M&A activity pickup.
We all know the larger pharma companies have patent cliffs that are coming. Whether they're looking at M&A again to help fill that gap, which often comes from biotech and/or licensing activities, which often comes from biotech, whether it's here or abroad, is making, I think, the investment profile for biotech, that risk profile more reasonable. By the way, it shows in the numbers, right? Every month for our first quarter and into October for four months in a row, there's been increased funding year-over-year into the biotech space. We see that as encouragement. We think that'll hopefully be enough to at least stabilize the biotech market from here. The question is, when does it start to actually improve? It gets back to how long does that, assuming that funding growth continues, when does it manifest itself in spend?
That could be six months. It could be nine months. If we're fortunate, we'll start to see some of it maybe in our Q4 of this year. It definitely sets up well for fiscal year 2027, if nothing else.
Got it. That's super helpful. And then same question for academic and government, I guess, sizing your exposure there. How would you describe the current environment versus the last few quarters and how that market should unfold over the next 6 to 12 months with the NIH budget and these different moving pieces?
As a reminder to everyone, academic and government is roughly 20% of our global revenues. Roughly half of that is in Europe and roughly half of that or so is in the U.S. For what it's worth, the academic market in Europe has been very stable, very steady, nice, relatively mid-single-digit growth. I haven't talked about it much because everyone's concerned on the U.S. side, but Europe's held up very, very well. We expect that to continue. With regards to the U.S., again, similar to biotech, a quarter ago, it was very, very blurry with regards to what the outcome with NIH funding is going to be, what impact it will have on our academic customers. There were still 40%, 20% plus type of reductions being thrown around.
What's changed in the past three, four months is that the appropriations committees from both houses of Congress have signaled that more like flat budgets makes more sense, which is a huge relief considering where we started from at potentially minus 40. I think a lot of the anxiety that our academic customers had faced for the better part of calendar 2025 is starting to subside a bit. We've seen that gradually appear in our results as well. We had high single-digit declines in basically the back half of our fiscal year 2025, which was the first half of calendar 2025. In our most recent Q1, that narrowed down to low single-digit declines. The anxiety level definitely appears to have alleviated a bit and that they're kind of preparing themselves more for perhaps a flat budget going forward as opposed to a very severe negative budget.
We're not out of the woods yet, right? I mean, we still have to have Congress pass something. And then we have to see how the Trump administration actually administers that budget. At least there's some clarity of which direction it's going. To summarize it, I guess I'd say a quarter, four months ago, let's say, it wasn't clear at that point, especially all three of our major end markets, which direction it was going to go from there, flat, up, or down. Whereas right now, we feel like the risk of it getting any worse has definitely neutralized. Now it's more about if there's clarity concerns, it's more about when and how does the recovery start and what kind of ramp does it happen.
It is kind of where we were a year and a half ago or so coming off of the IRA that impacted big pharma. Again, I think it sets us, we have got a couple of quarters here to figure that out, but I think it does set up for a much improved fiscal year 2027.
Great. The last one on the one Q. On the call, you guys spoke about some promotional activities in both academic and government and biotech. Can you talk a little bit about those activities? I guess where in your portfolio they were focused and the thought process behind these actions?
Yeah. We brought it up only because it was a bit of a margin headwind to us in the sense that we did not have the amount of pricing throughout the company that we typically do. We typically get 2-3% pricing. Obviously, during the high inflationary periods, we were getting considerably more. In a normalized state, that is what we usually kind of aim for and what we achieve. This quarter, it was not like our pricing was negative, but it was relatively flat for the quarter. There is still obviously a level of inflation. Therefore, we had a little bit of margin pressure as a result of that. It was not a broad-based discount program or highly advertised or anything like that. This is a very targeted approach.
I mean, at the end of the day, we know, especially our academic customers and some of our biotech customers are struggling right now or at least had a lot of anxiety around concerns. What you want to do is be partners with them and show them that you're there with them in good times and bad. It allows for us to keep customers so that when budgets do come back or stabilize, then they're happy to pay a higher price down the road. It was not even wide scale among academic customers. I mean, we sell to hundreds of thousands of academic, or at least tens of thousands of academic customers. They are not all short on funds or concerned. It is those that you know that are most impacted by this, and then you try to help them out.
That is really what that messaging was about.
Got it. Great. Super helpful. On the 26th, I wouldn't call it a guidance, but a soft guidance. I guess back in August, you provided a framework for the street for about low single-digit growth in fiscal 2026. I'm just confirming, does that framework still hold today?
Yeah, we still think it's in the cards. If you kind of lay out how we're thinking about the very near term and then the back half of the year, we also kind of soft guided that we thought our Q2 will be very similar to our Q1 in terms of absolute results on the top line as it pertains to organic growth. The underlying strength of the business is continuing to improve. That's because this headwind that I'm sure we'll speak more of with these two cell therapy customers caused us about a 200 basis point headwind overall for the company in our first quarter. Based on what they bought from us last year, assuming they don't buy anything more from us this year, that's about a 400 basis point improvement.
As a reminder, we grew 90% in GMP proteins in Q2 last year. A lot of that was driven by these two customers. Bottom line is if our headwinds increase by 200 basis points and our absolute target for organic growth for the company is the same, that means that adjusting for that, the underlying markets are actually getting better, from barely positive to now decent low single-digit growth positive. What is behind that? We talked about the market stabilizing. We have an amazing portfolio of both core reagents, but also these growth vectors we talk about, our ProteinSimple franchise, instrumentation franchise. We talked about our spatial franchise, of course, our cell therapy overall franchise, and even our molecular diagnostics franchise. They are all above market growers by far.
In stabilized markets, they tend to outperform even more than in very tough markets, call it declining markets. In growing markets, that spread even widens further. Given that right now we feel like there is more stabilization in our end markets, we think we will see further strength in our ProteinSimple franchise and our spatial, those two especially, as well as the fact that we continue to have a ton of innovation going on across our businesses with new product launches that even a stable market will allow our organic growth to accelerate from here, albeit slightly, but accelerate from here when you back up the cell therapy impact. That is for Q2. As we get into the back half of the year, I am not about yet to call a turning point in terms of the academic and biotech going from stable to growth.
What I will say is the comps get easier, right? We start to lap the academic comps right away in our Q3, as well as biotech tough comps, or yeah, easy comps, I should say, easier comps. We also have some easier comps in our diagnostics and genomic or diagnostics segment, called our OEM diagnostics business, as well as our lab business. Those tend to be very lumpy in nature in terms of the ordering patterns from more concentrated customers. Last year, they happened to buy a lot more in the first half of the year than they did in the second half of the year. They still was very solid, mid to high single-digit growth for the year. That was kind of the pattern. Whereas this year, it's looking like it's going to be more of a consistent pattern throughout the quarter.
We had much tougher headwinds in that segment. We did not talk about it much, but it was actually a pretty tough headwind we had in the first half of the year with less of a headwind in the second half. Bottom line, I guess, Daniel, is the second half is not about calling in any kind of inflection in the markets. It is really more about the position of our portfolio, being able to take more share in a stabilized market and lapping easier comps.
Got it. Super helpful. We're definitely going to touch more on those cell and gene customers. I'll come back to that. I guess just on the macro uncertainties, I think when you laid out the initial framework, you spoke about this low single-digit framework, but that was until uncertainties lifted. I guess what would you say are the primary uncertainties that are weighing on biotech needs today?
Yeah, I think the main one is the academic outcome and where that it is only 10% of our business on a U.S. perspective, but it does cause ancillary hangovers in our biotech space. I think that to me is the biggest question that still needs to be answered with regards to how that ultimately gets resolved and where that stands and how it gets administered. I think not if, but when that does, that to me, that's the last remaining concern a biotech investor would have with regards to investing in this market going forward. I would expect that to continue as well. To me, that's the biggest item out there.
Got it. I guess how do you feel about the state of that today? I know you mentioned budgets potentially flat and we need to wait to see a final outcome. Would budgets flat mean the business is flat? I guess how would that impact growth?
Yeah, I mean, that's another interesting, that's a good question. For us, what we're saying is I believe we have been overall outperforming in academic U.S. despite the declines. Like I talked about high single-digit decline, mid-single-digit decline, low single-digit declines. We know that our customers are behaving much more severe than that. We've had customers tell us they're cutting budgets 15%-20% in anticipation of what may come down the pipe. We've been monitoring some of what our peers say and based on that, we feel like we are doing better than most in academic. Even as that market stabilizes, we feel like we can outperform. Now, as far as returning to growth, I think we can grow even in a flattish U.S. academic market. It gets back to how the money's being spent.
You may have heard me say this before, Daniel, and many in this room probably have heard me say this in some one-on-ones, but what's always been told to me by our top scientists in our company, many who've come out of academic, is that, yes, NIH levels, when they go up and go down, the water level goes up and down, all boats rise. That's generally a good thing. When all boats go down, generally not a good thing. What really moves the needle is where the current and the river is. You could be in a high NIH funding environment, be stuck in the backwater and not doing a whole lot. You can be in a lower funding environment and be right in the middle of the current and yet be outgrowing what you did in a better NIH.
As an example, during the COVID years, when NIH budgets were being increased by double digit year after year after year, our academic growth was basically mid-single digit. Why? Because so much of that extra money was being earmarked towards infectious disease research and vaccine development, etc. That is not the wheelhouse that our reagents and instruments play in. We did okay, but did not see the massive upswing, at least not in our U.S. academic market. If this administration puts their money where their mouth is, they have been very vocal about that is not their priority. Those areas of research are not their priority. What is a priority is immunotherapy-type diseases, cancer, diabetes, neurological diseases. Guess what? That is exactly the wheelhouse where the majority of our tools play in research.
That is why I believe that if even a flattish market, as long as that existing money is being redirected towards areas of research that our tools are perfectly fitted for, then we could actually grow in that environment.
Great. Then the other uncertainty that I remember, at least at the time, and we touched on this, was within pharma. It seems like a lot of the uncertainty has already sort of seemed to have lifted. I think you already touched on it with tariffs, MFN. I guess, is that potential upside versus what that initial framework laid out? Because I think the main uncertainties were both on the pharma side and academic. Academic still holds, but pharma seems to have lifted. I guess what's the impact there?
Yeah, I mean, I think, well, again, we had double-digit growth in pharma yet again this most recent quarter. In our forward view of guidance, we're not necessarily considering pharma to accelerate from there. It's already, for us, kind of back to normal. We expect to grow double digit in pharma in a normal environment. For us, the upside is really more around the academic and biotech space. Right now, we don't assume much, if any, real true market recovery, at least not in the back half of our fiscal year yet. We are expecting it to stabilize. If it actually starts to inflect and recover, that could be upside. We're thinking that being more of a back half account or 2026 event.
Got it. Okay, great. Now going over to cell and gene therapy to talk about the Fast Track and those sort of dynamics. On the call, you pointed to Fast Track as causing some temporary headwinds in the business. Can you explain this dynamic? I guess why does Fast Track lead to a headwind in the first place? Some basic background.
It's a good question. We're learning this as we go too, both us as well as through our relationship with Wilson Wolf, who's seen it earlier. The first thing is fast track designation doesn't mean anything specific. It's kind of customer specific in terms of how it's implemented. In theory, it's the same in that it basically says that you're looking at a disease state that can impact a lot of people and shows a lot of promise. Therefore, the FDA gives you this designation to get your process through your trials and ultimately through your FDA approval and commercialization ramp, fast track from any kind of bureaucracy and paperwork, etc. That's the spirit of what it is. How it gets implemented, though, could be different from company to company.
We really did not know until this most recent quarter what this was going to mean for these two specific customers that we knew going into the fiscal year had recently got Fast Track designation, but did not really understand what that would really mean from an impact perspective, especially for us. Nor were they very secretive by nature. They were not willing to necessarily come forward and say, "Here's what's going to happen." It really was not until we got halfway through the quarter and saw that the orders were not repeating like they had been all last year and kind of pressured them to help us out to help understand what is going on. Essentially what they told us was that for them, this Fast Track designation allowed them to essentially skip a phase.
Where they were buying material from us to kick off their phase two trial, they got accelerated to basically combine their phase two, phase three in the same trial. Therefore, they do not need to buy material from us this year for phase three because they already have it. It was made very clear to us, they were not going to buy anything from us at that point in Q1 and probably not in Q2. Beyond that, they do not say anything. We have assumed that basically it is going to hold for the rest of the year until they get through these clinical trials and then go through the process of formal approval with the FDA.
Got it. Is it just random that two different programs happen to be getting Fast Track at the same time and having the same impact? Or were they connected in any way?
Yeah, they're not connected. Call us, I guess, very fortunate in terms of how we were positioned. These two customers, they happen to be, like I already mentioned, by far our largest customers. Even though we have 700 customers, these two make up a very significant part of that revenue. They just happen to be very, very large disease states and very promising. This is all about the shot on goal, right? This is why we have 700 customers and continue to build that base and even give grants of free product out to academics on occasion who are starting new therapy ideas. If you get in early, it's very sticky. Statistically, we don't know exactly, but if it follows the same rhythm as biologics, roughly 5% make it all through. When they do, it's big.
We were very fortunate to be linked up with these two very early on and have them both hit Fast Track status. They are not linked in any way.
Got it. Okay. Can you just give us some more color on how you learned about the Fast Track designation? I guess, what was your communication with the customers? Is it that they reached out and told you, "Hey, just so you know, this is happening. This is going to impact the way we purchase." Or is it more, "Hey, we noticed you haven't placed an order in a while. What's going on? Oh, we got this Fast Track thing.
Yeah. I'm not going to say when we knew because I know everyone's trying to figure out which two of these are. Our customers are extremely secretive. We definitely don't want to be the ones that leak anything. I can't give you that information because you could probably narrow down which this might be. I mean, we read about it and tried to reach out to them, say, "What does this mean? What does this mean?" I was saying, I think they were still trying to figure out what it meant for them, quite frankly, until we got into this fiscal year. Yeah, and why is that? In this stage of clinical trials, and this is true with all of our customers, not just these two, I call it a bit of being a victim of our own success, right?
Because one of our selling points, aside from what we believe having the highest quality GMP proteins, is the availability of those proteins that we can invest $60 million in what we believe is the world's largest GMP protein factory. It's basically supply that is basically infinite. It's a very lot, but for what this market probably ever need. We did that purposely to put our customers at ease. It says, no matter where you get in your clinical trials or your commercialization, you don't have to worry about the availability of product. We have it. We have it at a moment's notice. That's the way it's worked. They're very secret by nature. They don't need to give us advance warning of orders.
They can put an order on a Tuesday for millions of dollars of product and have it delivered on Thursday. Obviously, knock on wood, some of these get into commercialization. By the way, they're going to want to start to have formal supply agreements at that point because now you're in commercialization. That supply is going to be locked in. I think there'll be a lot better visibility at that point.
Are you able to say, is there a formal list that gets published by the FDA where you saw the customer on the list? Or is it some sort of news source that mentioned it? I guess, where can investors look to see which programs got Fast Track?
I don't know if you have the answer to that one day, but yeah, I don't have the answer to that. It's probably a combination of both. I'm guessing that it is publicly posted, but there's also often press releases done by companies as well once they've gotten that designation. Do they press release it right when they know? Maybe not. Maybe they do. It's probably a combination of both company-specific notifications, but also looking at government websites and seeing what's going on.
Got it. Okay. The main sort of takeaway on why an air pocket, basically lesser patients need to get dosed in clinicals versus what had been expected prior to the FDA Fast Track, is that the right sort of takeaway?
Yeah, whether it's less or not. Technically, yes, that's the answer. It's basically a whole phase of trials that is no longer needed because they basically condense the two into one. At the end of the day, that means less patients, yes.
Yep. Yep. Got it. I mean, you can sort of frame this as a short-term pain for long-term gain if these programs get approved since I think the approval would come sooner. I guess, how should we handicap the likelihood that either of these gets approved? I know that's a very general question. Obviously, you're hoping that they both get approved because that'd be great for patients, great for you, great for everyone. Should I think about this as a completed phase two? What's the right way to frame it?
I mean, I couldn't give you an odds or what this does in terms of the probability of success. I think it's less, I mean, it's obviously good news because the data was strong enough to accelerate. I don't think it necessarily means that its chances of now surviving phase three is any greater than it otherwise would have been going into phase three. Obviously, skipping a phase two helps a lot. In terms of comparing it to other phase threes, is it statistically any better or not? I'm not so sure I've ever read anything that says that. What it does, though, indicate is just how important these therapies are to society in general because of the very large indications they are and the importance that the administration puts on these two therapies as well.
Bottom line is the NPV, as we call it, of these two customers has gone up dramatically because not only because of the time value in terms of pulling it in, but not only even if the, let's say, it does get approved, the time it will take to get through that approval process should also be lessened. It is more about the NPV going up because however you want to risk adjust it, it comes in considerably sooner than what it otherwise would have.
That NPV going up, is that just because of the timeline? Or is it also this Fast Track indicates to you that there's a higher likelihood of?
From our perspective, we're saying it's because of the timeline coming in closer. I don't think any of us are going to try to guess whether this, I mean, statistically increases the odds or not. I could sit here and tell you high level that it makes sense that it does. I could also counter that and tell you many reasons why it doesn't. I'm not an expert in the area. We're not experts in the FDA approval process. I'm not going to tread that water. All I can say is that it's a net positive. No question about it. We would have been having the same conversation, knock on wood, a year or so from now had they gone through the normal phase. We learned this from Wilson Wolf. Wilson Wolf is earlier into this.
They got five or six that are already in commercial very recently. They have been through this before. We kind of saw this coming and realized, hey, this J curve of exponential buying of proteins and/or bioreactors for clinical trials is true. There is a bit of a cliff that occurs between final phase three approval or final phase three results and actual FDA approval and commercial launch. That gap can be 18 months to three years. It does not mean it goes to zero, but it definitely diminishes because you are basically selling product just for production runs and testing and so forth. There is a bit of a chasm there that occurs naturally. We were talking about that chasm as it pertains to these two customers likely a year or a year and a half from now. It got pulled in.
We're talking about it now.
Right. Obviously, you already touched on a lot of investors are trying to figure out which therapies these could be. Is there anything you're able to share on the population size, disease of interest, just sort of anything to help investors sort of frame?
What I will say is in terms of what we think it means to us based on these disease states and the potential that, call it the midpoint of the ramp of the potential commercial ramp, is somewhere between $40 million-$50 million of revenue to us for each one of these customers. I say mid because it's hard to say exactly if it ever gets full. If you look at a long-term, 10-year kind of commercialization ramp, we believe that a halfway point there would be $40 million-$50 million of revenue for us. Not necessarily in time, but in terms of potential patients to be served on an annual basis.
Okay. If I run through the unit economics, is that on just the reagents business, which I think, correct me if I'm wrong here, is about 5,000?
This is just on the GMP protein part of our business.
Right. So that's about 5,000 of GMP proteins that are sold per therapy. So it's like 5,000 patients a year, obviously.
I will say I don't have the exact numbers on this one. When we put out those numbers, they're usually as they relate to the CAR T-cell therapy, which is in line with where the G-Rex participates. I don't know if we've given out figures on the regen side. The other thing I'll point out is that these are actually, these aren't CAR T therapies. I'll give you that much. They're actually kind of regen medicine, so iPSC type therapies, stem cell. They do involve a lot more protein just by the very nature of having to grow up a lot more cells for these type of therapies. It is a higher, very likely a higher content per dose for us, which is another reason why the numbers have been so big even during clinical trials.
That is super helpful. Thank you. I know it's hard to give a lot of visibility. That's a really helpful data point. When would you expect to see the commercial ramp if one were to get approved? Would that be a fiscal 2027 event, fiscal 2028?
You can tell all different. I mean, I think our base case is fiscal year 2028 to start to see that launched. That still assumes they get through phase three trials this year. And then there's an 18-month or so gap to get to a formal approval, which is a lot shorter still than three years. Could that be sooner? Potentially. But that's our base case right now is fiscal year 2028 to start the commercial ramp.
Okay. In terms of your level of visibility that you actually have within these programs today, do you have regular communication in terms of what stage they're in, how much inventory they're holding? I guess, what is communication with these different customers?
They generally don't hold inventory. They'll buy as they need. They will often buy enough for whether it's a whole trial or as large of a population set that they feel comfortable doing simply for consistency purposes, even though we have amazing lot-to-lot consistency that they want to take out any possibility for variables as much as they can. That's why they tend to buy in very large quantities. It tends to be very lumpy. Is it one? I think some customers buy enough for one whole run or one whole trial. Some, because the trials are so large, can't necessarily do that. They'll buy in stages. They generally don't hold inventory.
Got it. Yeah. I guess, how do you deal with a lumpy business? You just add more lumps and I'm sure you're good.
That's the idea. I always joke that even our RUO reagent business that we often refer to as our run rate business, if you look at it on a, we have 500,000 SKUs, right? If you look at it on a SKU-by-SKU level, it's actually a very lumpy business.
There's SKUs up 10,000%.
There are just so many of them. It evens out. Someday, that's what we think our cell therapy business will be like.
Right. Right. Great. In terms of sizing, it's also really helpful. The $40 million-$50 million each therapy could be when commercial. I guess that's versus if you just size the headwinds that you quantified for us here in fiscal 2026, that gets you to, I think it was about $26 million from these two programs.
Ballpark issue.
In fiscal 2025. I just wanted to make sure I had those numbers right.
You're in the right ballpark.
Got it. They're pretty evenly split? Call it $13 million-ish per program? Is one bigger than the other?
We've not given that information out.
No.
Yeah, I mean, they're both relative to the other 800 programs we have, they're both significantly large. I think one is a little bit bigger than the other one. Yeah, we haven't necessarily given the magnitudes on either one.
Got it. Yeah. I guess I was initially surprised when I heard that two or essentially phase two projects were such a large portion of the cell and gene therapy business because I know there's also a huge ramp as you go from phase one to phase two, two to three. I just wanted to touch on customer concentration a bit. Based on that $26 million, it seems like these two programs are about 40-45% of total GMP reagents for Bio-Techne. I guess, how do you get customer concentration so high within phase two programs? What does that say for the future?
Yeah. I mean, admittedly, we were a bit surprised by this. We're not necessarily surprised this quarter. Over the last six quarters, we've been surprised just how much these two customers have seriously ramped. Actually, surprised just because as we learned more about what these customers were working on, it became more obvious as to why that was the case. Yeah, it just gets back to that these two are, they're essentially outliers. I mean, we've always said our typical cell therapy customer, we think, is somewhere between $5 million-$10 million of revenue on a commercialized basis. These two customers were basically there in a phase one, phase two basis. It does give you a sense of the uniqueness of these two.
It also tells you the scale potential, especially for our, you talk about cell therapy a lot like it's one thing. We talk a lot about the CAR T side of cell therapy, immunotherapy because of the linkage with our G-Rex. We actually are the world's leader in GMP proteins for the iPSC regen medicine space. The applications for that actually, you could argue, dwarf the applications for CAR T. There is a lot earlier stage work being done right now, but the applications are larger. Arguably the eventual addressable market is much larger. I got back, I mentioned this earlier, because of the complexity of the proteins and the number of proteins that are involved in developing therapies from iPSC cells, it requires a lot more of our proteins on a per dosage basis.
Yeah, could another one of these pop out of the woodwork a few years from now that we did not see coming? I'm sure that's always a potential because we do not, for the most part, we do not know exactly what our customers are working on because they do not tell anybody. I would not necessarily model it that way. We've modeled it that, hey, roughly just using, because this is still cell therapy is a new area. Will it be statistically the same as biologics? Who knows? That's the best we have to go off of. Looking at the stats of biologics, roughly 5% kind of make it through. You take 5%, you make it through it. You kind of take an average of $5 million-$10 million per customer on a commercialized basis.
That's how you build up our revenue base to several hundred million over the course of 10 years or so. These two are definitely outliers to that model.
Yep. Yep. Got it. Just on the timing for potentially, I guess, your base case being fiscal 2028, I think I mentioned on a call I had with you guys, fiscal 2028 could be setting up to be a really, really attractive year, bringing on Wilson Wolf, potentially having one of these therapies, which is going to be at a very depressed level, ramping all the way to commercial. I guess, can you just speak to, I know it's super early, but is this the right way to think about it?
I.
It could be a really strong year for.
I mean, I hate to get all giddy about two years on the row when we're struggling in the current quarter. Yes, absolutely. That's why we're still so excited about our opportunity. For sure. Even since you mentioned Wilson Wolf, at the latest, we will own that at the end of calendar year 2027, hence fiscal year 2028. There's always a potential to strike a deal a little bit earlier there. Who knows? Or even for him to hit his target, for Johnson to hit his targets, which he still thinks he can at this point. We'll see. What I'm getting at, I guess, is that the customers, he's already got five or six in commercial. He's in half of the clinical trials in T cell trials already.
There is definitely potential for more between now and the two years that we ultimately own it. I guess what I'm getting at is the real inflection point in that business is most likely to occur post our ownership. As fast as it's growing now, and it's predicted to be 20%+ growth here in the near term, and then continue to accelerate as these commercial programs ramp, the real heavy, steep part of that ramp, we think will likely occur after we own 100% of it.
Yeah. Great. The customer concentration piece that we were just talking to, is it mostly because they're working on stem cell therapy? Because you said the economics are higher there. Or is this just a much bigger patient population than some of the, I guess, the average within your cell and gene?
Yeah. So you're referring to the Wilson Wolf?
Sorry, back to those two customers.
Okay. I'm sorry, say the question again.
The reason that within phase two, there's such high customer concentration, even though it's only phase two, not one of your phase three programs, is it because it's stem cell therapy and not CAR T? Because you said the.
It's one of the reasons, but it's not by far the only reason. I mean, is our average stem cell customer a little higher content than our T cell? Yes. That's not the main reason, we believe, is because of the population size potential for these two disease states.
Got it. Got it. I guess, just zooming out on the broader cell and gene business, what percent of the businesses, or I guess, what percent of programs are stem cell versus CAR T versus any other bucket that you'd put it into?
Yeah. I don't know if we, I don't think we've split it out.
Split it out that way.
If I had a guess, though, I would say that on a pure program basis, there's probably more of the, we call it immunotherapy, which includes CAR T and killer cells, all that stuff. I do want to bet that the number of customers are probably bent more towards that side, just because it's further along in its development. Our actual revenue is more bent towards the regen side just because it's much heavier content per research.
Got it. Great. Can you just remind us how many programs you have total in the cell and gene therapy business? How many in clinical trials, phase one, two, three?
Yeah. Again, we've reached 700 customers, which is up from like $550 a year ago. Continue to add a lot of customers. Only about 85 of those or so, Dave, I think 85 of those are known to be in clinical trials. Roughly, call it a couple dozen are in Phase II, Phase III.
Got it. Okay. Great. I think we hit everything. I can open up to investor questions in the last minute, or I can give it back. Great. Any message you want to leave us with?
I love some of your other comments and observations around what just one of the reasons why it's so exciting to be about our company and not five or 10 years from now, but maybe next year or the year after that. We haven't even, that's just in the cell therapy piece. Our ProteinSimple franchise, we continue to innovate. I mean, we spend pretty consistently 8% of our revenue on R&D. We've got new product launches across our entire portfolio. We have, we didn't talk about, but we can another day around our AI, new AI developed proteins, which have attributes that aren't found in nature and can therefore be patented. We're taking the lead in that. That impacts our core. We have these GMP ProPak, which automates the process of putting the precise amount of GMP proteins into the Wilson Wolf container.
That's enabling us for the first time ever to actually convert a phase three customer to our proteins. We've got new product launches like Leo and ProteinSimple. And we got higher sensitivity cartridges that are going to address our neural market for Simple Plex, proximity, protein to protein identification for our spatial. I can go on and on. But all of our major product categories have these new product launches that have either just launched or are going to launch in the next quarter or two, which is just going to enable us to continue to take share and expand our market.
Great. Lots to look forward to.
Yeah.
Thank you so much for the time.
You bet. Thank you.
Thank you.