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# Bio-Techne Corporation (NASDAQ: TECH) — Business, Risks and Management's Discussion Fiscal year ends June 30. Fiscal 2026 covers July 1, 2025 through June 30, 2026. Sources: Annual Report on Form 10-K for the fiscal year ended June 30, 2026, filed August 24, 2026 (accession 0001104659-26-100322); Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, filed May 6, 2026 (accession 0001104659-26-056302). --- ## Business *From the fiscal 2026 Form 10-K, accession 0001104659-26-100322, Item 1.* Bio-Techne develops, manufactures and sells life science reagents, instruments and services for the research, diagnostics and bioprocessing markets worldwide. Its products are inputs to scientific investigation of biological processes and to molecular diagnostics: they support drug discovery work and provide the means for clinical tests and diagnoses. The company is a Minnesota corporation headquartered in Minneapolis. It was founded in 1976 as Research and Diagnostic Systems, Inc. and became publicly traded in 1985 through a merger with Techne Corporation. Its product lines run to hundreds of thousands of individual items, most of which it manufactures itself, in multiple North American locations plus the U.K., Canada, Switzerland and China. Approximately 48% of fiscal 2026 revenue came from outside the United States. As of June 30, 2026 it employed approximately 3,000 people — roughly 2,200 in the U.S. and 800 elsewhere. No U.S. employees are unionized. ### Two operating segments **Protein Sciences — approximately 72% of fiscal 2026 net sales.** The larger segment, run as two divisions serving many of the same customers: - *Reagent Solutions* — specialized proteins (cytokines and growth factors), antibodies, small molecules, tissue culture sera and cell selection technologies, sold both for research use and under current Good Manufacturing Practices (cGMP) for therapeutic manufacture. Key brands are R&D Systems, Tocris Biosciences and Novus Biologicals. The company describes itself as the world leader in high-quality proteins. This division carries the company's cell and gene therapy exposure, built through investment in cGMP-scale protein and small-molecule production facilities and through the Wilson Wolf stake described below. - *Analytical Solutions* — manual and automated protein analysis instruments and immunoassays: plate-based immunoassays, automated multiplex immunoassays, automated western blotting and isoelectric focusing. Key brands are R&D Systems and ProteinSimple. A few of the immunoassays carry FDA marketing clearance. Customers are academic and industrial researchers (pharmaceutical and biotech companies and contract research organizations), plus diagnostic, companion-diagnostic and therapeutic developers. Sales are direct in North America, Europe and China, through a distribution agreement with Thermo Fisher Scientific, and through third-party distributors in China, Japan, parts of eastern Europe and the rest of the world. No single end-user customer exceeded 10% of segment net sales in fiscal 2026, 2025 or 2024. **Diagnostics and Spatial Biology — approximately 28% of fiscal 2026 net revenues.** Also two divisions: - *Spatial Biology* — sold under the Advanced Cell Diagnostics (ACD) brand: in-situ hybridization (ISH) assays for transcriptome, DNA copy and structural variation analysis inside intact cells, preserving spatial context at single-cell resolution, which makes them useful for complex tissue profiling. Lunaphore, acquired at the start of fiscal 2024, contributes the COMET instrument, which automates ACD's RNAscope assays and enables simultaneous hyperplex detection of protein and RNA biomarkers on one slide. - *Bio-Techne Diagnostic* — regulated calibrators and controls for the clinical setting, including instrument and process controls for hematology, blood chemistry, blood gases and coagulation. These are often manufactured to a customer's specific assay technology and sold on an OEM basis to instrument manufacturers, most FDA-cleared. The Asuragen brand covers genetic carrier screening, oncology diagnostics and molecular controls; Asuragen maintains a CLIA certification. Spatial Biology sells direct in North America, Europe and China and through distributors elsewhere; several of its ISH assays are cleared or under FDA review in partnership with diagnostics instrument makers and pharmaceutical companies. Asuragen products go primarily to laboratories for lab-developed tests or as kitted regulated diagnostics. No customer reached 10% of segment net sales in fiscal 2026, 2025 or 2024. ### Strategy Management states five strategic pillars: grow and leverage the core; capitalize on high-potential markets; market expansion through innovation and acquisition; deliver best-in-class customer experience; and develop people through a transformative culture. Acquisition is explicitly part of the growth model — the company acquires businesses and portfolios that fill gaps or extend geography, and it retains acquired brands under a single global Bio-Techne identity. The most recent acquisition of scale was Lunaphore at the beginning of fiscal 2024. The largest committed transaction on the balance sheet is Wilson Wolf, a provider of cell culture devices for cell-based therapies. Bio-Techne paid $25 million in fiscal 2022 for a two-part forward contract, then $232 million in fiscal 2023 for 19.9% of the company once an EBITDA target was met. Because the first part triggered, the second part triggers automatically: Bio-Techne must acquire the remaining 80.1% on December 31, 2027, at a price of approximately 4.4 times Wilson Wolf's trailing-twelve-month revenue. That purchase accelerates ahead of December 31, 2027 if Wilson Wolf meets its second milestone of approximately $226 million in annual revenue or $136 million in annual EBITDA; the second milestone had not been met as of June 30, 2026. The second option payment is forecast at approximately $1 billion plus potential contingent consideration for revenue in excess of the revenue milestone, expected between fiscal 2027 and fiscal 2028. Bio-Techne also participates in ScaleReady LLC, a collaborative marketing venture with Wilson Wolf and another partner aimed at the cell and gene therapy market. ### Other operating characteristics - **R&D output.** Over 1,900 new products were introduced in fiscal 2026. - **Intellectual property.** As of June 30, 2026 the company held rights to approximately 487 granted patents and approximately 230 pending applications. Analytical Solutions and Spatial Biology rely primarily on patents; Reagent Solutions relies substantially on trade secrets. - **Supply chain.** No single supplier is material, though certain specified or regulatorily-qualified components have a single or limited source. Most products ship within one day of order; instruments and cartridges within one to two weeks. There was no significant order backlog at the 10-K date. - **Seasonality.** Some seasonality from customer vacation and academic schedules, chiefly in Protein Sciences. Bio-Techne Diagnostic products are made in large bulk lots on customer-dictated schedules, so that division's sales are unpredictable and can swing the Diagnostics and Spatial Biology segment materially. - **Competition.** Both segments compete in highly competitive markets against a mix of large diversified companies and small niche specialists; no competitor matches the whole product line or market footprint. Competition has increased from new entrants, from producers based in low-cost manufacturing locations, and from consolidation in particular markets. - **Government business.** Less than 1% of fiscal 2026 sales were to the U.S. federal government, and no government contract is large enough that renegotiation or termination would materially affect results. - **Regulation.** A number of products are medical devices subject to the FDCA and FDA oversight (QSR/cGMP, medical device reporting, restrictions on off-label promotion), and to comparable non-U.S. regimes including the EU In Vitro Diagnostic Regulation. Parts of the Diagnostics and Spatial Biology segment are subject to healthcare fraud-and-abuse law (Anti-Kickback Statute, False Claims Act, HIPAA, Open Payments), and the company is subject to GDPR, CCPA and similar data privacy regimes, to environmental health and safety law, and to the FCPA, UK Bribery Act, export/import controls and anti-boycott rules. - **Pending merger.** On June 25, 2026 the company agreed to be acquired by Merck KGaA, Darmstadt, Germany for $73.00 per share in cash. The transaction had not closed as of the 10-K date; the 10-K presents it under the heading "Pending Merger with Merck KGaA, Darmstadt, Germany" and expects a close by late 2026 or early 2027, subject to regulatory approvals and a shareholder vote. Its effects on the risk profile are set out below. ### Executive officers named in the 10-K Kim Kelderman, President and Chief Executive Officer (CEO since February 1, 2024, with the company since 2018); James Hippel, Executive Vice President and Chief Financial Officer (since April 1, 2014); William Geist, President, Protein Sciences (since January 3, 2022); Steve Crouse, President, Diagnostics and Spatial Biology (since March 1, 2026, with the company since 2021); Shane Bohnen, Senior Vice President, General Counsel and Corporate Secretary (since March 3, 2023). --- ## Risk factors *From the fiscal 2026 Form 10-K, accession 0001104659-26-100322, Item 1A, condensed. The Form 10-Q for the quarter ended March 31, 2026 reported no material changes from the risk factors in the prior annual report; the merger-related risks below were added in the fiscal 2026 10-K.* ### Risks arising from the pending Merck KGaA, Darmstadt, Germany transaction - **Disruption during pendency, whether or not the deal closes.** Announcement and pendency create uncertainty for the business. Between signing and closing or termination, Bio-Techne must use commercially reasonable efforts to operate in the ordinary course and maintain relationships with governmental entities, customers, suppliers, distributors, creditors, lessors and employees, and is restricted from specified actions without the acquirer's prior written consent. Those restrictions could constrain the company's ability to execute strategy, pursue acquisitions, make capital investments, incur debt, manage workforce and compensation, enter or modify material contracts, and respond to competitors. - **Employee retention.** Employees and prospective employees face uncertainty about future roles and compensation. Retention arrangements are in place with each current executive officer but may not be sufficient to keep officers or other key employees through closing. - **Business relationships.** Customers, suppliers, distributors, collaborators, service providers and creditors may delay decisions, seek alternatives, or reduce or discontinue business. Preparing for integration also diverts management attention. - **Transaction litigation.** Shareholder litigation or other proceedings relating to the merger may be brought against the company, its board or its officers, potentially seeking to enjoin completion. Costs and diversion of management resources arise whether or not a claim succeeds. - **Transaction costs.** Significant legal, financial, accounting and other transaction fees have been and will continue to be incurred; a material portion is payable whether or not the merger completes. - **Completion risk.** Closing depends on shareholder approval by a majority of the voting power of all outstanding shares, expiration or termination of the Hart-Scott-Rodino waiting period and receipt of all other scheduled antitrust and investment-screening approvals, the absence of any prohibiting order, accuracy of representations and compliance with covenants — and, for the acquirer's obligation, that the required approvals not contain a Burdensome Condition as defined in the merger agreement. Many conditions are outside either party's control. Failure to close on schedule or at all could move the share price (which reflects assumptions about completion), produce negative publicity, invite lower subsequent offers, impair the ability to retain and motivate personnel including senior management, and damage counterparty relationships. A termination fee would be payable to the acquirer in specified circumstances. - **Deterrence of competing bids.** The merger agreement restricts soliciting alternative proposals and providing information to or negotiating with third parties, subject to customary exceptions, and the termination fee may discourage a competing acquirer or push a competing proposal to a lower price. If the agreement is terminated and the company seeks another transaction, it may not obtain comparable terms. - **Dividends and buybacks constrained.** While the merger agreement is in effect the company may not declare or pay any dividend or distribution other than regular quarterly cash dividends materially consistent with past policy and within capped amounts, with record dates consistent with past practice. ### Economic and industry risks - **Global economic conditions.** The business is sensitive to slower growth, inflation, recession, credit and currency volatility, unemployment and labor availability, public health crises, and changes in government trade, fiscal, tax or monetary policy — particularly government budget dynamics in healthcare and scientific research. Named consequences the company has experienced or may experience: unpredictable reductions in demand; supply chain constraints on producing or delivering product; slower receivable collection and higher uncollectible balances plus excess or obsolete inventory; raw material and capital equipment price increases alongside increasing price competition; workforce impacts; counterparty insolvency; and shrinkage in the served markets. - **International political, compliance and trade factors.** With approximately 48% of fiscal 2026 revenue outside the U.S., changes in social, political, regulatory and economic conditions abroad affect results. Geographic expansion — particularly China, India and developing countries — adds currency, tax, legal, intellectual-property-protection, infrastructure, staffing, export-license, tariff and corruption exposures. Military conflict, notably Russia's invasion of Ukraine and the response to it, has aggravated inflation and economic conditions globally even though the company has not historically had significant business in Russia, Ukraine or Israel. - **Healthcare and life sciences customer pressure.** Protein Sciences sells mainly to research scientists at pharmaceutical and biotech companies and at university and government research institutions, whose R&D spending fluctuates with available resources, industry mergers, priorities and government budgets. Diagnostics and Spatial Biology products serve a medical diagnostics market that relies on government healthcare policy and funding; reimbursement changes, most-favored-nation drug pricing, and potential expanded regulation of lab-developed tests may raise customers' commercialization costs or limit their profitability. ### Acquisition and investment risks - **Acquisition pipeline.** Growth through acquisition is a key strategy; the company may be unable to consummate deals at historical rates or appropriate prices, given high valuations, buyer competition, funding availability, closing conditions and antitrust approvals — which could depress the growth rate and the stock price. - **Integration and execution.** Acquired businesses sometimes underperform relative to expectations and price paid; acquisitions can add debt and interest expense; they can strain management, operational resources and internal controls; integration of cultures, personnel, systems and key-employee/customer retention can be difficult; anticipated synergies may not materialize; unknown or larger-than-expected liabilities and control deficiencies may be assumed; post-closing earn-outs, price adjustments and indemnities produce unpredictable results; and early-stage investments and loans may be lost or illiquid for longer than expected. Named positions include Spear Bio (invested at the beginning of fiscal 2025), Lunaphore (acquired at the beginning of fiscal 2024), the 19.9% Wilson Wolf stake with the committed remainder, and ScaleReady LLC. - **Impairment.** Goodwill, amortizable intangibles and other acquired assets must be tested for impairment; adverse changes in business climate or operating results could force further charges. Goodwill was $975.4 million at June 30, 2026, approximately 38% of total assets. ### Strategic and operational risks - **Talent.** The market for skilled scientific, production, sales and management personnel is extremely competitive; a number of businesses and departments continued to face recruitment and retention challenges, labor availability constraints and inflationary cost in fiscal 2026. - **New product development.** Markets feature rapid technological change and frequent new entrants; failure to correctly identify customer needs, allocate research funding, respond to competitors, differentiate against commoditization, secure IP rights, commercialize on time and at competitive cost, obtain regulatory clearances or stimulate adoption would make the offering obsolete. - **Competition and pricing.** Competitors range from fast-moving start-ups to large multinationals with greater resources. Consolidation among pharmaceutical, biotech and diagnostics customers concentrates purchasing and increases pricing pressure, and entry by manufacturers in Asia and other low-cost locations adds further pricing pressure, particularly in developing markets. - **Information technology and data privacy.** Systems, including those acquired or run by third parties, are exposed to hacking, ransomware, human error, outages and hardware failure; attacks can also target products already installed in third-party facilities. Breaches can interrupt operations, delay shipments, disclose trade secrets and personal data, and trigger claims and penalties. GDPR non-compliance alone can draw fines up to €20 million or 4% of worldwide annual turnover; a growing list of U.S. states have broad privacy statutes, and several countries require local data residency. - **Catastrophic loss and site concentration.** Supply chains, distribution systems and IT are subject to fire, flood, earthquake, hurricane, outage, public health crisis, war and terrorism; insurance may be insufficient. The company relies heavily on internal manufacturing, quality control, packaging and distribution, and has significant operations in California near major earthquake faults. - **Manufacturing complexity.** Manufacture is complex and in many cases strictly regulated; problems can result in recalls and product liability, and alternative manufacturing capacity is not always available on a timely basis given customer quality requirements and FDA rules. Use of animal-derived materials in certain products adds regulatory, supply chain, quality and reputational exposure under USDA, APHIS, FDA, customs and comparable foreign oversight. - **Sole and limited-source supply; capacity matching.** Certain materials come from sole or limited sources for quality, regulatory, cost or design reasons, and replacement sources may not be qualified quickly. Non-cancelable purchase commitments limit the ability to shrink inventory when demand falls, risking excess and obsolete inventory charges. - **Product defects and off-label use.** Defects, safety or quality issues (or their perception), unanticipated or off-label use, or inadequate risk disclosure in products sold for diagnostics can cause injury and lead to recalls, safety alerts, market withdrawal and product liability claims. - **Third-party delivery dependence.** Most reagent products must be shipped cold, largely by express carriers such as FedEx in the U.S. and DHL in Europe; a major work stoppage or price increase at those carriers would raise cost or damage customer relationships. - **Climate and environmental measures.** California operations face drought and wildfire risk; temperature extremes raise energy cost and can disrupt facilities and distribution. New greenhouse-gas or climate regulation may raise sourcing, manufacturing and distribution costs, and failure to meet stakeholder ESG expectations may cost business, reputation and talent. ### Intellectual property risks Intellectual property rights obtained are not always broad enough to confer competitive advantage, patents may not issue, and protections can be challenged, invalidated, circumvented, designed around or subjected to compulsory licensing. Nondisclosure and noncompetition agreements may be breached without adequate remedy. These risks are more pronounced in countries with weaker protection than the U.S., relevant given manufacturing in Canada, Switzerland, China and the U.K. Separately, the company has not conducted a patent infringement study for each of its products, has been and may again be sued for infringement, and could be forced to cease activities, alter products or processes, or pay licensing fees. ### Financial and tax risks - **Leverage.** The Credit Agreement provides a $1 billion revolving facility, expandable by a further $400 million subject to conditions, at a variable rate; $200 million was drawn as of August 17, 2026. Indebtedness could limit additional financing, reduce flexibility against adverse conditions and increase sensitivity to interest rates. Negative covenants limit the ability to sell, lease or transfer properties and to enter certain merger, consolidation or reorganization transactions; a default could accelerate amounts outstanding and prohibit dividend payments. - **Currency and tax.** International revenue and cost translate into U.S. dollars, and invoicing in non-functional currencies affects cash flows. In fiscal 2026 currency translation had a favorable effect of approximately $20 million on revenues. As a global taxpayer the effective rate may move with the geographic mix of profitability, accounting changes and new tax law. - **Dividend.** The board may reduce or eliminate the common dividend to fund growth, repurchase shares or conserve capital, and is contractually capped while the merger agreement is in effect. ### Legal, regulatory, compliance and reputational risks Extensive regulation across medical device, healthcare, import/export, anti-corruption and privacy domains means any significant regulatory change could reduce demand or raise expense — for example changes in FDA regulation of drugs or devices, drug price management, or increased scrutiny of lab-developed tests. Government-contract statutes carry suspension, penalty and debarment risk. Failure to comply with FDA, DEA, DHHS, USDA, APHIS or EU IVDR requirements — including failure to remediate inspectional observations — can bring warning letters, recalls or seizures, monetary sanctions, injunctions halting manufacture and distribution, operating restrictions, criminal sanctions and withdrawal or denial of approvals; the company is the sole manufacturer of a number of products for many customers, so a negative regulatory event propagates to customers. Improper conduct by employees, agents or business partners under FCPA, UK Bribery Act and similar laws could draw investigations, shareholder suits and substantial penalties. Failure to comply with HIPAA and HITECH privacy and security rules — a risk the company describes as elevated by acquisitions that use protected health information and use healthcare providers for laboratory testing services — could bring civil and criminal fines. **Tariffs and U.S. trade policy.** The 10-K treats this as an active, not hypothetical, exposure. Beginning in early April 2025 the U.S. implemented or announced tariffs on imports from a wide range of countries, prompting retaliatory tariffs and changes to existing tariffs elsewhere; levels and product- and industry-specific exclusions have been repeatedly revised. As of the report date a number of tariffs remain in effect, including significant tariffs between the U.S. and China. The company states these tariffs have increased and will continue to increase the cost of imported supplies and components and the cost to serve certain markets, requiring it to bear higher costs, implement surcharges, or raise prices — with a possible resulting hit to demand and to its ability to serve certain countries. Where it cannot fully recover higher costs, or where recovery lags, margins and profitability decline. The full impact is described as highly uncertain and subject to rapid change. **Legal proceedings.** As of August 24, 2026 the company was not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on its business, results of operations, financial condition or cash flows (Item 3). **Cybersecurity.** The program is led by the Chief Information Officer, who reports to the Chief Financial Officer, with day-to-day management by the Director of IT Infrastructure and Security and the IT Security Operations team, supported by a cross-functional Incident Response Team. The board holds overall oversight and exercises it through the Audit Committee, which must approve any cybersecurity incident disclosure. Based on information as of the report date, the company does not believe risks from cybersecurity threats have materially affected or are reasonably likely to materially affect its business strategy, results of operations or financial condition (Item 1C). --- ## Management's discussion and analysis — fiscal 2026 *From the fiscal 2026 Form 10-K, accession 0001104659-26-100322, Item 7.* ### The shape of the year: a flat top line and a comparative base distorted by fiscal 2025 charges Consolidated net sales were essentially flat at $1.215 billion against $1.220 billion in fiscal 2025. Organic revenue was flat; foreign currency translation added 2 points and a business held-for-sale subtracted 2 points. The composition of that zero: | Fiscal year | 2026 | 2025 | 2024 | |---|---|---|---| | Organic sales growth | 0% | 5% | 1% | | Acquisitions | — | — | 1% | | Foreign currency | 2% | 0% | 0% | | Business held-for-sale | (2)% | 0% | 0% | | **Consolidated net sales growth** | **0%** | **5%** | **2%** | Reported earnings tell a very different story from the underlying business, and the reason is the prior-year base rather than a fiscal 2026 surge. Consolidated net earnings rose 148%, to $181.9 million from $73.4 million, and GAAP diluted earnings per share were $1.16 against $0.46. Management attributes the increase to three items: a non-recurring impairment charge in the prior year, a non-recurring arbitration award in the prior year, and a recovery of assets held-for-sale in the current year. On an adjusted basis — after cost recognized on sale of acquired inventory, intangibles amortization, acquisition-related costs, certain litigation charges, investment and other non-operating loss, stock-based compensation, restructuring and restructuring-related costs, impairment or recovery of assets held-for-sale, and the impact of businesses held-for-sale — adjusted net earnings **decreased 1%**, hurt by unfavorable product mix and pricing pressure. Adjusted earnings before taxes were $390.4 million in fiscal 2026 against $390.4 million in fiscal 2025; adjusted diluted EPS was $1.93 against $1.92. The three charges that make the comparison what it is sit in selling, general and administrative expense, and the 10-K's SG&A composition table isolates them (in thousands): | | FY2026 | FY2025 | FY2024 | |---|---|---|---| | Protein Sciences | $238,994 | $230,046 | $217,595 | | Diagnostics and Spatial Biology | 115,209 | 136,103 | 127,131 | | Total segment expenses | 354,203 | 366,149 | 344,726 | | Amortization of intangibles | 23,383 | 31,285 | 31,710 | | Acquisition related expenses | 7,988 | 11,672 | 6,980 | | Legal fees | 5,513 | 41,827 | 3,506 | | Restructuring and restructuring-related costs | 14,984 | 8,137 | 8,896 | | Stock-based compensation | 41,104 | 40,860 | 39,452 | | (Recovery) impairment of assets held-for-sale | (6,120) | 80,503 | 21,963 | | Corporate SG&A | 11,360 | 8,088 | 9,142 | | **Total SG&A** | **$452,415** | **$588,521** | **$466,375** | Two lines carry the swing. Legal fees fell from $41.8 million to $5.5 million — fiscal 2025 included the non-recurring arbitration award to the former chief executive over stock option expiration dates. And the held-for-sale line reversed from an $80.5 million impairment in fiscal 2025 to a $6.1 million recovery in fiscal 2026. Together those two lines account for roughly $123 million of the $136.1 million (23%) decrease in SG&A. Strip them out and segment SG&A actually fell only modestly, from $366.1 million to $354.2 million, with Protein Sciences spending up and Diagnostics and Spatial Biology down on the Exosome Diagnostics divestiture. Consolidated operating income was $251.9 million in fiscal 2026. The unallocated items that bridge segment profit to that figure are stated on a different basis from the SG&A composition table above: they are consolidated totals that include the amounts charged to cost of sales and to research and development as well as to SG&A, which is why amortization appears here at $61.2 million against $23.4 million in the SG&A table and restructuring at $21.1 million against $15.0 million. Those items were amortization of intangibles $(61.2) million, acquisition-related expenses and other $(8.0) million, certain litigation charges $(5.5) million, stock-based compensation including employer taxes $(42.6) million, restructuring and restructuring-related costs $(21.1) million, recovery of assets held-for-sale $+6.8 million, corporate SG&A $(11.0) million and the impact of the business held-for-sale $(2.6) million. The mechanics of the fiscal 2025 impairment are worth stating plainly, because they are the base for almost every year-over-year comparison in this report. In the fourth quarter of fiscal 2025, as part of restructuring, assets and liabilities of the Exosome Diagnostics business were classified as held-for-sale as of May 31, 2025, including $4.5 million of goodwill allocated on a relative fair value basis. The triggering event forced impairment testing in May 2025, producing a total impairment charge of $83.1 million, which includes that allocated goodwill. The $83.1 million is the gross charge on the Exosome disposal group alone; the fiscal 2025 SG&A composition line above reads $80.5 million because it is that charge net of a $2.6 million recovery recognized in fiscal 2025 on an earlier Protein Sciences disposal group that had been classified held-for-sale at December 31, 2023. During the quarter ended September 30, 2025 — the first quarter of fiscal 2026 — the company agreed to sell the business for approximately $15.0 million, with approximately $6.8 million in stock received at closing, and recognized a $6.8 million recovery of assets held-for-sale in SG&A in that quarter. That $6.8 million is the figure carried in the operating-income bridge above, in the cash flow statement and in the non-GAAP reconciliation; the SG&A composition table's fiscal 2026 line is $0.7 million smaller, netting to a $6.1 million recovery for the full year. The buyer also signed a promissory note maturing in September 2029 requiring four annual installments of $2.5 million, of which up to $5.0 million is payable in stock of the buyer, MDxHealth; that note's fair value was approximately $9.0 million at June 30, 2026. ### Segments | Net sales (in thousands) | FY2026 | FY2025 | FY2024 | |---|---|---|---| | Protein Sciences | $874,620 | $870,245 | $830,902 | | Diagnostics and Spatial Biology | 336,365 | 346,263 | 326,392 | | Other revenue (business held-for-sale) | 5,439 | 4,152 | 4,153 | | Intersegment | (1,385) | (1,025) | (2,387) | | **Consolidated net sales** | **$1,215,039** | **$1,219,635** | **$1,159,060** | **Protein Sciences** net sales rose 1%, but organic revenue *fell 1%* with foreign exchange contributing a favorable 2 points. Management attributes the segment's revenue performance to unfavorable product mix and pricing pressure. Segment gross margin slipped to 75.0% from 75.6%, on the same mix and pricing causes. Segment operating income fell to $359.4 million from $370.4 million. **Diagnostics and Spatial Biology** net sales fell 3% as reported but grew 4% organically, with foreign exchange adding 1 point and the exclusion of the held-for-sale business subtracting 8 points. Segment gross margin fell to 55.2% from 57.3% on unfavorable product mix. Segment operating income nonetheless rose sharply, to $37.7 million from $21.3 million, because the divestiture removed a loss-making business and profitability initiatives took hold — an operating margin of approximately 11% against approximately 6%. The two-segment picture for fiscal 2026 is therefore: a larger, higher-margin Protein Sciences segment whose organic volume went slightly backwards under mix and price pressure, offset by a smaller Diagnostics and Spatial Biology segment growing organically at 4% and improving profit sharply from a divestiture rather than from expansion. For the prior-year comparison the 10-K notes that fiscal 2025 Protein Sciences grew 5% organically on proteomic analytical solutions, cell therapy performance and commercial execution, and fiscal 2025 Diagnostics and Spatial Biology grew 6% organically on broad-based molecular diagnostics performance and Lunaphore's organic growth. ### Gross margin Consolidated gross margin was 65.8% in fiscal 2026, up from 64.8% in fiscal 2025 and below 66.4% in fiscal 2024 — but the reported improvement is a restructuring artifact: management attributes it to decreased restructuring-related costs for manufacturing optimization versus the prior period (restructuring and restructuring-related costs in the gross margin reconciliation fell from $20.1 million to $5.8 million). On an adjusted basis the direction reverses: adjusted gross margin was 69.6% in fiscal 2026 against 70.4% in fiscal 2025 and 71.0% in fiscal 2024, with the fiscal 2026 decline attributed to unfavorable product mix. Adjusted gross profit was $841.6 million against $856.3 million. ### Other income statement lines - **Research and development** fell $4.7 million (5%) to $94.8 million, attributed primarily to the Exosome Diagnostics divestiture. Fiscal 2025 R&D had risen $2.8 million (3%) on strategic growth investments including Lunaphore. By segment, Protein Sciences R&D was $57.4 million (from $58.6 million) and Diagnostics and Spatial Biology $37.4 million (from $40.9 million). - **Net interest expense** was $5.4 million against $4.6 million in fiscal 2025 and $12.4 million in fiscal 2024. The fiscal 2026 increase is attributed to the maturity of the company's cash flow swap; the fiscal 2025 decrease to lower average monthly outstanding debt. - **Other non-operating expense, net** was $(5.8) million against $0.8 million of income in fiscal 2025. The swing is dominated by a $5.9 million loss on the investment in MDxHealth — the stock received in the Exosome Diagnostics divestiture. Foreign currency was $(0.1) million against $1.4 million of gains; the equity method investment contributed $0.9 million. - **Income taxes** were at an effective rate of 24.4%, against 25.5% in fiscal 2025 and 9.5% in fiscal 2024; the year-over-year change was driven by discrete tax items. The non-GAAP adjusted tax rate was 22.3% against 21.5% and 22.0%. ### Liquidity and capital resources Cash, cash equivalents and available-for-sale investments were $264.7 million at June 30, 2026, against $162.2 million a year earlier. Of the cash, $139.8 million sat in the U.S., the remainder primarily in Canada, China, the U.K. and other European countries. Borrowings under the revolving credit facility were $200.0 million, leaving $800.0 million of unutilized availability. Management expects to meet cash and working capital requirements for operations, facility expansion, capital additions and dividends for at least the next 12 months from available funds, the line of credit and operating cash flow; future acquisitions may or may not require additional borrowing. Operating cash flow was $292.1 million, against $287.6 million in fiscal 2025 and $299.0 million in fiscal 2024, with the year-over-year movements attributed to timing of cash payments on operating assets and liabilities. Capital additions were $28.9 million, down from $31.0 million and from $62.9 million in fiscal 2024 — a marked step-down from the fiscal 2024 building programme — covering new buildings, machinery, construction in progress and IT equipment. On the investing side, there were no business acquisitions in fiscal 2026 or 2025 — the last was Lunaphore, at $169.7 million, in fiscal 2024, and the $15.0 million paid for Spear Bio at the beginning of fiscal 2025 was an investment rather than an acquisition, still carried at $15.0 million within other assets at June 30, 2026. The company received $4.6 million from the sale of assets held-for-sale and $6.0 million of distributions from Wilson Wolf. On the financing side, cash dividends were $49.9 million (against $50.4 million in each of the two prior years); option exercises brought in $80.6 million for 2,785,000 shares, well above the $51.7 million and 1,209,000 shares of fiscal 2025; share repurchases were $41.7 million as a cash outflow, down sharply from $275.7 million in fiscal 2025; there were no new draws on the revolving facility and $146.0 million of repayments were made; and $12.1 million was paid for taxes remitted on behalf of participants in net share settlement transactions. The overhang on liquidity is Wilson Wolf: the second option payment of approximately $1 billion plus potential contingent consideration is forecast to occur between fiscal 2027 and fiscal 2028, and it triggers automatically no later than December 31, 2027 whether or not the second milestone — approximately $226 million of annual revenue or $136 million of annual EBITDA at Wilson Wolf, not met at June 30, 2026 — accelerates it, with the remaining interest priced at approximately 4.4 times trailing-twelve-month revenue. ### Foreign currency exposure Approximately 33% of consolidated net sales in fiscal 2026 were made in foreign currencies: 17% in euro, 5% in Chinese yuan, 4% in British pound sterling, 3% in Canadian dollars, 2% in Swiss francs and 2% other. The company does not enter into foreign currency forward contracts to reduce exposure on forecasted intercompany sales or intercompany balance sheet positions; transaction gains and losses flow through other non-operating income and expense, and translation of foreign subsidiary net assets flows through accumulated other comprehensive loss. ### Critical accounting policies The 10-K identifies business combinations (fair value allocation using multi-period excess earnings for acquired technology, relief-from-royalty for trade names, distributor model for non-primary customer relationships, and probability-weighted discounting for contingent consideration) and goodwill impairment as its critical policies. For fiscal 2026 the company performed a qualitative goodwill analysis for all **four** reporting units and found no evidence that fair value was more likely than not below carrying amount, and identified no triggering events through June 30, 2026. Fiscal 2025 used a quantitative analysis across **five** reporting units — the reduction in reporting-unit count follows the Exosome Diagnostics divestiture — and produced the $83.1 million total impairment charge on the Exosome Diagnostics disposal group, including its allocated goodwill, described above. --- ## Current quarter — fiscal third quarter ended March 31, 2026 *From the Form 10-Q for the quarter ended March 31, 2026, accession 0001104659-26-056302, Item 2.* Consolidated net sales fell 2% to $311.4 million for the quarter and 1% to $893.8 million for the nine months. Organic revenue fell 2% in the quarter and 1% for the nine months, with foreign currency adding 2 points and non-recurring prior-year revenue from a business held-for-sale subtracting 2 points in both periods. Management attributes the quarter's organic decline to unfavorable volume and product mix in Protein Sciences, partially offset by favorable performance in the Diagnostics and Spatial Biology portfolio. Consolidated gross margin was 66.9% for the quarter and 65.7% for the nine months, against 67.9% and 65.5% a year earlier. Adjusted gross margin was 70.4% and 69.7%, against 71.6% and 70.6% — down on both measures, and management attributes the fluctuations primarily to product mix, adding that it expects gross margins to continue to be affected by portfolio components growing at different rates. SG&A fell 28% to $109.3 million for the quarter and 13% to $339.2 million for the nine months, attributed to the prior-year non-recurring arbitration award and to ongoing cost management. R&D fell 5% to $23.5 million and 4% to $70.8 million, with management describing continued strategic growth investment alongside cost management. By segment: **Protein Sciences** net sales were $226.2 million for the quarter (down 1%) and $643.4 million for the nine months (flat), with organic revenue down 4% in the quarter and 2% for the nine months and foreign exchange favorable 3 and 2 points respectively. Segment operating margin was 44.2% and 40.8%, against 45.6% and 42.2%, down on unfavorable volume and product mix partially offset by profitability initiatives. **Diagnostics and Spatial Biology** net sales were $85.6 million and $246.2 million, down 4% in both periods, with organic growth of 3% in each, foreign exchange favorable 1 point and the held-for-sale business an 8-point drag. Segment operating margin was 12.1% and 11.2%, up from 9.4% and 6.2%, favorably affected by the Exosome Diagnostics divestiture and profitability initiatives, partially offset by unfavorable product mix. Income taxes were at an effective rate of 28.3% for the quarter and 25.2% for the nine months, against 41.0% and 24.9%, driven by the mix of net income and discrete tax expense. The company's forward-looking statement in this filing was that, excluding discrete items, it expected the consolidated income tax rate for the remainder of fiscal 2026 to range from 25% to 29%, against a third-quarter forecast rate before discrete items of 26.9% (prior-year comparable 23.1%). It also expected capital expenditures for the remainder of fiscal 2026 of approximately $7 million, related to increasing capacity to meet expected sales growth. This was the only forward guidance in the filing; no revenue or earnings outlook was given. Cash and available-for-sale investments were $214.1 million at March 31, 2026 against $162.2 million at June 30, 2025. Nine-month operating cash flow was $196.7 million against $189.4 million; capital expenditures were $20.4 million against $26.1 million. The company made $146.0 million of debt repayments in the nine months (against $27.0 million a year earlier) with no new draw, and made no share repurchases in the period (against $175.7 million a year earlier) — the capital-allocation shift from buybacks to deleveraging that also shows in the full-year figures. Option exercises brought in $58.2 million. The company reported no material changes to market risk from interest rates or currency exchange against the prior annual report, and no material changes to its risk factors during the quarter and nine months. As of May 6, 2026 it was not a party to any legal proceedings reasonably expected to have a material adverse effect. Note that this quarterly report predates the June 25, 2026 merger agreement, so none of the merger-related constraints or risks discussed above appear in it. --- ## Subsequent events Both of the relevant periodic filings state that there were no subsequent events to report: - **Fiscal 2026 Form 10-K** (accession 0001104659-26-100322), Note 15, Subsequent Events: "None." The pending acquisition by Merck KGaA, Darmstadt, Germany was signed on June 25, 2026 — within fiscal 2026 rather than after it — and so is disclosed in the body of the annual report under "Pending Merger with Merck KGaA, Darmstadt, Germany" and in Note 1 and the commitments and contingencies note, not as a subsequent event. It remained pending and unconsummated at the 10-K date. - **Form 10-Q for the quarter ended March 31, 2026** (accession 0001104659-26-056302), Note 14, Subsequent Events: "None." There is accordingly no post-period acquisition, divestiture, financing, borrowing or litigation outcome disclosed in the subsequent-events note of either filing.