Morningstar | Bio-Techne's Acquisition Strategy Continues to Slowly Evolve the Company
Bio-Techne has a long history of stable growth and attractive returns on capital as a premium supplier of proteins, antibodies, and immunoassays for the biopharma, academic, and diagnostic industries. Over the past few years, the company has embarked on a more aggressive merger and acquisition strategy to broaden its product offerings, particularly in higher-growth and more cutting-edge markets. Management has also attempted to move up-market, including its own branded instruments and proprietary consumables. Largely through the acquisition of Protein Simple in 2016, Bio-Techne is a niche player in protein characterization and analysis tools, especially for automated Western blot.We're generally in favor of Bio-Techne's M&A strategy. The roll-up of early-stage innovative companies should support higher growth long term. The launch of more proprietary diagnostic tests and equipment theoretically enables Bio-Techne to capture more economic value in some of these high-growth markets. Additionally, Bio-Techne's push into equipment exposes the company to more secure recurring revenue sources from associated consumables. We also think it's wise for the company to push into newer emerging areas, such as RNA in situ hybridization through the Advanced Cell Diagnostics acquisition in 2016 and liquid biopsy through the Exosome Diagnostics acquisition in 2018. These higher-barrier-to-entry markets should help diminish concerns on increasing competition in its core legacy markets.Bio-Techne's growth by acquisition strategy doesn't come without risks. Deploying capital to early-stage companies with lower profitability have depressed the company's margins and returns on capital while also increasing debt. Additionally, going up-market with products potentially puts Bio-Techne up against large well-funded peers where the company will need to maintain innovation to not get leapfrogged. Liquid biopsy, for example, is an emerging field with competition likely to substantially increase over time.Bio-Techne and its subsidiaries develop, manufacture and sell biotechnology life science reagents, instruments and services for the research and clinical diagnostic markets.Co.'s segments: Protein Sciences, which developes and manufactures purified proteins and reagent solutions, cytokines and growth factors, antibodies, immunoassays, biologically active small molecule compounds, tissue culture reagents and T-Cell activation technologies; and Diagnostics and Genomics, which develops and manufactures diagnostic products, including Food and Drug Administration-regulated controls, calibrators, blood gas and clinical chemistry controls and other reagents for Original Equipment Manufacturer.
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