Participants

Kim Kelderman; n President and Chief Executive Officer; Bio-Techne Corp

Jim Hippel; Executive Vice President - Chief Financial Officer; Bio-Techne Corp

Puneet Souda

Jacob K. Johnson; CFA - Research Analyst; Stephens Inc.

Dan Leonard; Managing Director; UBS

Justin Bowers; Chartered Financial Analyst; Deutsche Bank

TOM Peterson

Matthew Murray

Sung Ji Nam

Presentation

Kim Kelderman

From my end markets, combined with excellent execution by the biotech team led to 4% year-over-year organic revenue growth. Our growth pillars, including our molecular diagnostics for spatial biology platforms as well as our proteomic analysis franchise continue to outperform in constrained end markets.
It's also encouraging to see early indications of improvement in our biotech end markets, which is validated by the strength we experienced nerve cell and gene therapy business during this last quarter, I'll give additional details about the momentum in our growth pillars later in the call.
But first, I want to applaud the Bio-Techne team for delivering this top line performance for the continued focus on profitability. Jim will discuss this in more detail, but the cost containment and productivity initiatives we have put in place in recent quarters, position the company to being maintained its peer leading operating margin profile.
These efficiencies will also allow for continued strategic investments while expanding margins as the life science markets return to their historical growth rates. Before we get to the specifics of the quarter, I'd like to highlight the significant progress being made advancing our environmental, social and governance or ESG initiatives.
During the quarter, Bio-Techne issued the fourth iteration of its corporate sustainability report for CSR. In this latest CSR, we highlight the significant progress we've made on this front, including the recent submission of a letter of credit commitment to reduce the scope one two and three greenhouse gas emissions.
This reduction targets will be evaluated by the Science Based Targets initiative in FY2026. I'm proud of the team's commitment and continued progress which positions Bio-Techne for sustainable future. Now let's discuss our Q1 results, starting with an overview of our performance by end market and by geography. Overall, biopharma increased mid-single digits solutions.
We also saw continued sequential stabilization from large pharma customers and improving ordering trends from a biotech customers. Academia increased low single digits in the quarter with tough year-over-year comparables in both the US and in Europe.
Now for our regions. In the Americas, we grew low single digits, excluding the diagnostics and market. This was driven by strong growth and cell and gene therapy vertical here increased mid-single digits overall, which was bolstered by strong performance in academia is overall performance in Europe is even more impressive considering the mid 10s growth comparable from the prior year quarter.
In China, the challenging funding environment remains a hurdle to grow. However, we did see pockets of strength, including in our cell and gene therapy solutions as well as in our spatial biology franchise. Our instrument business continues to see stimulus-related tender activity, which we expect let's translate into orders in the third quarter of fiscal year.
Overall China declined low double digits during the first quarter, but we anticipate that the Chinese government will continue to prioritize to improve health care through investments in scientific research. Our portfolio, proteomic and spatial biology tools play important role in these efforts.
Now let's discuss the growth pillars within our Protein Sciences segment. Starting with our cell and gene therapy business, you will see that the value proposition of our broad portfolio of GMP re-agents continues to resonate with the customers that are developing this life changing therapies.
Additionally, our cell therapy customers continue to transition from using our usual proteins for preclinical work to GMP-certified the agents as they begin their clinical trial. This dynamic is providing an increasing tailwinds for our business. For the quarter, our GMP re-agent product lines increased over 60%, including low cost growth from both our large customers as well as in the smaller biotech.
As a reminder, order timing among our larger customers can create quarter-to-quarter lumpiness. So on a trailing 12-month basis, our GMP reagents business grew in the upper 10s. We are particularly pleased with this performance considering the market constraints over the same period.
Next, I'd like to give an update on our scaled ready joint venture partner. Wilson will has many of you are aware, Wilson move is a developer of the market-leading GRX bioreactor. Gx is used as an efficient and cost-effective bioreactor for scaling cell therapies. And is currently used in around 45% of the clinical trials taking place in Europe and in the US.
We currently own 20% of Wilson loads and will purchase the remainder of the business by the end of calendar 2027 or potentially earlier, depending on the achievement of various models in front of the imminent Wilson move acquisition.
The Bio-Techne team continues to drive synergies between the two businesses. For example, we recently announced the launch of our OPEC GMP cytokine, which are optimized for use the Wilson who GTx bioreactor. The use of Power Packs provides precise quantity of GMP proteins needed to enable a highly simplified self base.
Addition only scale already launched the GX grant program, an initiative that is actively seeding academic and biopharma customers with GDX bioreactors and Bio-Techne's GmbH. These customers get to experience the power of the combined product offering during the preclinical development process, which nicely positions bulk was involved and Bio-Techne to win in this nascent high growth industry.
Secondly, let's discuss the performance of our other growth pillar. Within Protein Sciences, the proteomic analytical instrumentation division marketed under the boat in simple breath here, the team delivered mid-single-digit growth as the challenging capital equipment environment was once again more than offset by strong consumables and service revenue growth.
Looking specifically at the performance of our proteomic analytical instrument, it's worth noting that after several quarters of decline, our portfolio return to low single digit growth in the America. Continuing with Protein Simple, I'd like to give an update on the latest addition to a simple Western franchise called Leo.
This next-generation instrument is a high throughput automated Western blot, enabling the simultaneous analysis of up to 100 samples in a single, see our ROE. We have experienced significant customer interest in Neose following the public announcement at the end of July, and the team is building a promising funnel for the upcoming launch in the second half of our fiscal year 2025.
Simple Western remain the only fully automated Western blot system on the market. So the penetration rate of less than 20%, we see a long runway for future growth in this portfolio. Before we wrap up our discussion on Protein Sciences, I'd like to give you an update on how Bio-Techne is leveraging artificial intelligence tools to further our already strong proteomics position.
As a reminder, Bio-Techne was the first company to broadly commercialize research use only proteins in 1985. We are bearing the data generated over the last 39 years by our internal R&D team. We have generative AI tools to create new designer boating. These patentable proteins are engineered to exhibit hyperactive properties, enhanced heat stability and other novel features. These attributes are relevant for many applications, including, of course, cell therapies.
We recently launched our first two designer proteins, and these will be followed by many AI. engineered cytokine growth factors and antibodies, antibodies, which is nicely aligned with our roadmap. Overall, the team delivered 1% organic growth in the coating side segment. While this performance is the growth potential in this segment, it is a distinct improvement over the low single digit declines we've experienced over the last three quarters.
Remember that our Protein Sciences segment is where we have the most exposure to both China and biopharma end market headwinds in this segment is positioned to see the most improvement as these markets continue to normalize. Now we will move on to the growth pillars in our recently renamed diagnostics and spatial biology segment.
Segment has been previously referred to as the Diagnostics and Genomics segment. However, given the segments increasing leadership in the emerging spatial biology feel we felt that the new segments name is more indicative of our focus. But in spatial biology, demand remains strong for a fully automated high throughput HyperFlex spatial biology platform called comment.
I'm pleased to report that following the successful cross-company initiative, we have increased comments manufacturing capacity to meet the growing demand for the instruments. We also launched the earnings scope assays on comment this last quarter, which enables the platforms multiomics capability. This means that it can now detect and visualize up to 24 proteins and 12 RNA targets simultaneously.
These enhanced capabilities are in the hands of the top key opinion leaders and spatial biology who are currently generating multiomics data to support a broader rollout, which will take place in this current quarter.
Additionally, we continue to launch Bio-Techne's R&D system branded antibodies validated for use on the comment that Ernie Schaub capabilities paired with a growing portfolio of validated antibodies, will support a consumable stream. It is expected to be there. Pull through of any instrument under the Bio-Techne umbrella.
Our other growth pillar within diagnostics and special is a molecular diagnostics business, which continues to perform at a very high level, with nearly 40% growth in both or extra DX prostate test and our assurance in kit business. We are in the initial stages of realizing the tremendous synergies exist between the extra Kodiak and insurance businesses, illustrated by the upcoming launch of the kitted Exosome based test for breast cancer related ESR1 mutation, which we will commercialize to our change in laboratory channel.
In summary, the team delivered another quarter of differentiated performance in what has proven to be a prolonged period. Challenges facing the industry. Despite these challenges, fiscal year 2025 is off to start. That is aligned with our initial expectation. Our unique portfolio of innovative tools and bioactive re-agents is positioned to continue to generate differentiated growth going forward.
We remain focused on delivering the solutions our customers rely on Amazon. We have the team and the portfolio to accomplish this while creating value for all our stakeholders. With that, I'll turn the call over toJim. Jim.

Jim Hippel

Thanks, Kim. I'll start with some additional detail on our Q1 financial performance and then give some thoughts on the financial outlook. Starting with the overall first quarter financial performance.
Adjusted EPS was $0.42 from $0.41 in the prior year quarter with foreign exchange having a favorable $0.01 impact. Gaap EPS for the quarter was $0.21 compared to $0.31 from the prior year.
Q1 revenue was 289.5 million an increase of 5% year over year on a reported basis and 4% increase on an organic basis, with foreign currency exchange impacting sales by approximately 1%. Kitten one, North America increased low single digits. Europe increased mid-single digits year over year, while China decreased load double digit.
The challenging funding environment remains a headwind for our China business with our instrument business facing the biggest challenges and geography, we are seeing stimulus related instrument activity in China, which should start to benefit revenue growth in the region during the third quarter of this fiscal year, A-Pac outside of China increased low single digits overall with Japan and South Korea, both benefiting from growth in our insurance and spatial biology portfolios, which was partially offset by macro challenges and other Asian countries.
By end market in Q1, excluding China, biopharma increased mid-single digits and academia increased low single digits in the quarter. As Kim previously mentioned, we continue to see sequential global stability in our biopharma end market, which was bolstered by strength in our cell and gene therapy business in the quarter. He will revenue in the P&L.
Total company adjusted gross margin was 69.5% in the quarter compared to 71.3% in the same quarter the prior year, driven by the impact of unfavorable product mix, partially offset by productivity initiatives and exclusion of the lower margin held for sale. FDS. business. Adjusted SG&A in Q1 was 32.3% of revenue compared to 31.3% in the prior year, while R&D expense in Q1 was 8.3% of revenue compared to 8.7% in the prior year.
The increase in SG&A was driven primarily by the reinstatement of bonus and commission accruals, partially offset by diligent expense control. Adjusted operating margin for Q1 was 29%, a decrease of 240 basis points from the prior year period due to the impact of unfavorable product mix as well. The reinstatement of the previously mentioned incentive compensation accruals. We continue to execute cost containment initiatives and prioritize our growth initiatives to drive efficiencies throughout the organization.
With the goal of optimizing operating leverage during the ensuing market recovery. Looking at numbers below operating income, net interest expense in Q1 was $1.1 million, decreasing $2.8 million compared to the prior year period. Lower debt levels compared to last year. Our bank debt on balance sheet as at the end of Q1 stood at $300 million, a decrease of $19 million compared to last quarter.
Other adjusted operating income was $ 3.9 million in the quarter, an increase of $2.3 million compared to the prior year, primarily reflecting our 20% share Wilson, both adjusted net income and the foreign exchange impact related to our cash current arrangements.
Moving further down the P&L. Our adjusted effective tax rate in Q1 was 21.5%, down 50 basis points compared to the prior year due to geographic mix. Turning to cash flow and return of capital, $63.9 million of cash was generated from operations in the quarter and our net investment. Also during Q1, we return capital shareholders by way of $12.7 million in dividends.
We finished the quarter with $161.1 million average diluted shares outstanding. Our balance sheet finished Q1 a strong position with $187.5 million in cash, and our total leverage ratio remains well below one times EBITDA. So going forward, M&A remains a top priority for capital allocation. Now I'll discuss the performance of our reporting segments, starting with the Protein Sciences segment.
Q1 reported sales were $204.5 million with reported revenue flat compared to the prior year period. The exclusion of the fetal bovine serum business, which is currently classified as held for sale business, unfavorably impacted reported segment revenue growth by 1%. Organic revenue increased 1% operating margin for the protein science, and it was 39.4%, a decrease of 380 basis points compared to the prior year quarter as unfavorable volume and product mix as well as the reinstatement of incentive compensation accruals for partially offset by cost management and structural and initiatives.
Turning to diagnostics and spatial biology segment, Q1 sales were $83.2 million with both reported and organic growth increasing 14% compared to same quarter last year. Formula for diagnostics business once again lead segment growth. Moving on to the diagnostics and spatial biology segment operating margin at 5.1%. Segment operating margin increased compared to the prior year's 0.7% due primarily to the impact of volume leverage and productivity initiatives.
Part offset by the reinstatement of incentive compensation accruals. We anticipate steady improvement in diagnostics and spatial biology operating margin as we look for scales throughout the fiscal year. In summary, our Q1 performance was largely in line with the expectations we provided last quarter, which keeps our initial assumptions and expectations for the remainder of fiscal year 25 intact.
As expected, we started the fiscal year with broad strength across our Diagnostics and spatial biology segment. We will for continues to gain acceptance of the instrument of choice in spatial translational research and our molecular diagnostics business. Continued to capitalize on the opportunity in front of it was it's informative, XO, DX, prostate cancer or test and surgeons pipeline of innovative product launches.
Within our Protein Sciences segment, we saw continued stability in our biopharma end markets with initial signs of improvement in a smaller biotech end market improvement, combined with the strength we saw in cell and gene therapy, we believe is indicative of the healthy biotech funding levels we saw throughout 2024 starting to materialize in the biotech spending. That's given our first quarter play out.
Our current momentum would suggest mid single digit growth in the first half of the year. Or said another way, we expect our Q2 top-line performance looks similar to Q1. We continue to see the potential for organic growth toward gradually accelerate in the second half of our 5th year through a Q4 exit rate of high single digits.
As Chinese stimulus funds released file by a gradual recovery in large pharma earlier stage R&D spending. The milling large pharma remains the most significant wildcard in this outlook for the full year of more normal levels of pharma. R&d spend has greater clarity on the IRA impact as well as recent project rationalization and restructuring initiatives. Clear the path for new investments by these customers. Our adjusted operating margin outlook also remains intact.
The first half half of FY 2025 are expected to be 200 to 300 basis points lower than prior year, and the second half margin expected to be approximately 100 to 200 basis points higher than prior year. The first half of the year will have margin headwinds related to incentive compensation accrual reinstatement as well as negative product mix. For the second half margin should benefit from greater revenue, volume, leverage and productivity initiatives and improving product mix.
That concludes my prepared comments. And with that, I'll turn the call back over to the operator to open the line for questions.

Question and Answer Session

Operator

Thank you.
We'll now be conducting a question and answer session. If you would like to ask a question at this time, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two. If you would like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
one moment, please. While we poll for questions. Thank you. First question comes from the line of Puneet Souda with Leerink Partners. Please proceed with your question.

Puneet Souda

Hi, guys. Thanks for taking the question and congrats on the quarter here.
On the first one is, um, you know, it's great to see the beat and diagnostics and special. But could you elaborate how sustainable is that momentum and speak to both the spatial versus the diagnostics side of the business and what you're seeing on the biotech and biopharma improvement?
I have to say, as you know, it is rare in the current market backdrop to see that. So just can you elaborate a bit on on on your confidence to continue to see that growth? And and why is this not something unique to this quarter? And what gives you confidence that that should continue into the December ending quarter and into the first half of FY2025?

Kim Kelderman

Yes. Puneet, thank you for your question. And I'll I'll take the first part of it in and pitch.
The second one. Second part to to Jim and you know, to your question, diagnostics and spatial biology is a sustainable. I do believe so we have a pick it apart. We have the excess or Exosome DX prostate test, right? And it has had great momentum over the over the last six quarters or so. We still have plenty of runway and market penetration ahead of us. So we believe that we still have quite a ways to go there.
In the meantime, we also know that we have similar momentum in the surgeon kits that we are selling tool diagnostic laboratories. That momentum we are we we're also confident we'll continue. We have a strong R&D funnel. We have already talked about a upcoming lounge for AESR. one breast cancer treatment resistance test, right, which is in Exosome based test that we will launch through our Sure Jim laboratory channel.
And in addition, we will launch other genetic tests during this fiscal year in that portfolio. So good momentum in the market as well as good momentum in the R&D. Final dividend. Jump to the spatial biology business. I mean, I've covered loans is still in its early days. And sees very nice adoption from an instrument point of view in the markets. And then we know internally that we will see bolstered growth from the consumables.
We are in enabling on this instrument, right? We have we have earned a scope in the early days that is now compatible so that you can do true multi-omics experiments on the comment lounge. And of course, we are continuing to launch our R & D systems branded antibodies, of which we've launched 25 or so in this last quarter. That also.
So we'll run on this multiomics instruments. So we believe we have momentum in all three arms of this segment. Another will continue like that. For the second half of the question, though, I'll give Jim the microphone you have any.

Jim Hippel

Thanks. As we talked about, as we talked about last quarter and continue this quarter for us to have mid-single digit growth by Q2, we need to see the biotech funding constraints that we've seen throughout the year start to materialize into biotech spend.
And in Q2 through our first quarter here, calendar Q3, we had very strong cell and gene therapy growth, which would benefit both by the smaller biotechs as well as larger pharma and on what we saw a broader and within cell and gene therapy, it was again, broad-based growth. Now we know we had some very large customers that can be lumpy. And yes, those did well this quarter, but even the smaller customer mix within cell and gene therapy, also a strong now with very, very strong.
We don't expect that same level of strength in Q2. We saw in Q1, though, is encouraging, was that in the back half of our first quarter, as you know, Penny, we monitor our daily run rates or run rate business. Those sales that are under 1,000 bucks a pop that make up a very large portion of our U.S. business. We monitor that on a daily basis to look for underlying momentum in trends. And in the back half of the quarter, we started to see the smaller biotechs growth rates, not just stabilize and actually start to pick up a bit.
Now this not ringing off the races, but it's nice to see some positive growth in those run rates within small biotech, more broadly across our entire our usual portfolio. And we saw that momentum continuing into October. So that's what gives us some confidence that that that funding is starting to turn to spending among a more broad-based broad basis. The cell and gene therapy we maintain, we think, are very strong growth in Q2. It did in Q1 is probably not as strong. So that will that will that will meet that will come down of debt perhaps in growth rates. But we think the offset by the rising tide we're seeing in our you have started.

Puneet Souda

That's super helpful, Jim. So I'm just following up on the cell and gene therapy comments you made. Can you elaborate a bit on our E&O? Are these new trial starts or existing trials that are scale up or moving into later phases? And I think you had provided some account metrics before. Just wondering where the overall account metrics are for the GMP proteins and cell and gene therapy business. Thank you.

Kim Kelderman

You have learned from Cell and Gene Therapy growth vertical. As you know, we're really pleased with the progress there. And we mentioned in the past that we have about 400 customers in this funnel and of which 58 customers are now in the early phases of various stages of the clinical trials. And we see customers progressing through the funnel, which then drives order sizes. But fortunately, we also see the volume and the order sizes for the smaller customers increased just as well. So we feel there's broad momentum in this in this business.

Operator

Thank you. Our next question comes from the line of Jacob Johnson with Stephens. Please proceed with your question.

Jacob K. Johnson

Good morning and congrats on the quarter. Maybe sticking with the cell and gene therapy saying, I think kind of below the line, you had positive other income during the quarter. I believe that's where we'll see more flows through to. Can you just talk about how versatile trends in the quarter and in any benefit on the other income line for them? And maybe how to think about that the next few quarters?

Kim Kelderman

Jake, things for the question. So it will also involve is also seeing great momentum, and that's probably where you see the numbers coming from. As you know, we own 20% of Wilson move at the moment, and they had a great quarter with over 30% growth just as well have afforded further financial detail, I'll ask Jim to pitch.

Jim Hippel

And yes, we'll get into specifics of the contribution part of that to have also more, but it did grow nicely year over year. But I'd say a big chunk of that favorability in other non-operating income below the line came from the FX translation from our from our cash pooling arrangements.

Jacob K. Johnson

Guys. Thanks for that, Jim and Jim, maybe secondarily, just on the cost side of things, I guess specifically around OpEx, some moving pieces on the SG&A, the SG&A line. I think you guys are talking about efficiency. I think there's a restructuring charge in there and then obviously the return of incentive comp. Can you just you reiterated your commentary around the margin outlook for this year.
But as you think about SG&A and kind of the pacing the rest of the year, just help us think through kind of a one-time items in 1Q and then any benefits from from cost savings as we get into the rest of the year?

Jim Hippel

Sure. Anything about the margin profile specifically for the upcoming quarter here to Q2? A couple of things to keep in mind is that our incentive comp headwinds are not even more clarity as to where our performance is going to be in Q2 than we did Q1 last year. So we reversed accruals even further. So there's a larger U.S., your headwind when it comes to that part of the equation.
When you think about the sequential margin profile from Q1 to Q2, there's also a slight headwind from the fact that our merit increases that coal annually to our employees are the last month of the quarter. So we basically have two months of a headwind in Q2 relative to Q1 as a result of that. So that's why we're kind of still holding that same same overall guidance for the half.
In terms of margin. When you think about Q3 and Q4, it really is to hold the line as we did last quarter. Our view there is dependent on the pace of recovery on the top line, but we have a lot of productivity initiatives and rationalization that's happening and prioritization to protect the bottom line. And as long as that growth modestly comes through as we predicted, we think we can get back to a positive margin expansion in the back half.

Operator

Thank you. Our next question comes from the line of Dan Leonardo with UBS. Please proceed with your question.

Dan Leonard

Thank you. First one comment, I'd love to better understand the unit model there. Could you remind me what is the ASP. for the instrument and what would you expect pull through per year to look like and consumables? And then also by how much did you increase comment, manufacturing Cassidy?

Kim Kelderman

Dan, thanks. Thanks for your interest in spatial biology that we are also enthusiastic about the. Yes, the Comet ASP. is around the $50 and and $350,000. That is and of course, there's variations of types you can order or certain certain capabilities. So there's a little bit of variation in there, but typically around three 50, and we have not been able or will not have to discount is yet it also.
So we see that that price point to be the right one at the moment, momentum has been great. We have increased our manufacturing capacity to be able to keep up with demand. However, we do not usually talk about unit numbers as to how many how many are in our installed base or how many shifts. So that part I will I will refrain from.

Dan Leonard

Okay. And just to circle back on your comments on China, can you remind me how much of your revenue mix in China is instruments versus consumables? And anymore color you can offer on the magnitude of the tender activity that you were discussing?

Kim Kelderman

Yes. So as you know, China is around 9% of our overall global revenues for Bio-Techne on you. And it has been declining as we believe that the mix has shifted temporarily a little bit more towards the consumables side. But typically the mix in revenue there is 50 50, so 50% in instruments and 50% in consumables.
The activity around the tender area, we are as you know, we are in our models were looking at is some slight benefits from tender activity in our third quarter, which is the first calendar quarter. And we do see this activity if it comes to acquisition additions and inbound questions around instrumentation, most of that in the western Western blot business, the automated Western blot.
And then that makes sense because the funding is aligned with refreshing larger capital and is also focused on the more academic setting. So so that's where we see that's where we would expect a slight tailwind. And then that that could spark definitely a turnaround in the country, which we all have been waiting for.

Jim Hippel

And I'd just add from a magnitude perspective, the ID, we think right now with the pipeline to be enough to go from the declining growth that we're seeing today to modest positive growth in the region in our Q three.

Operator

Thank you. Next question comes from the line of Thomas.
Do you foresee with me from Research, please proceed with your question.

Hi, guys. Thanks for taking the question. I just had a question related to the year directional guidance that Q2 at, I guess, kind of sequentially flat. I think at a year-over-year basis, it would kind of you don't have a roughly mid-single-digit growth split up.
You do have a little bit easier comp in Q2. So just any thoughts just otherwise between the segments in terms of what's kind of drive big sort of mid single digit growth sales for the second half for the target Q2?

Jim Hippel

Yes. I mean, there's there's some there's some nuances within that in a sense that in a again, because we're dealing with much of our businesses based off of daily run rates purchased every day every day that researchers are in their labs. We look at the holidays, for example, and with the holidays fall, particularly around Christmas and New Year's. And they're both of them will the weak this year as opposed to the beginning or the end?
And I know it sounds like a nuance, but it is important with regard to when people take their vacations and so forth. So that's up a bit of a headwind relative to the last year when we talk about an easier comp, for example. So other than that, I'd say it's really just the idea that it's really Pharma had been quite stable for the past couple of quarters, and we see that continuing into Q2 our Q2 without any significant uptick as of yet.
We're hopeful for that as we get into FY2025 new budgets are released academic pretty much chugging along the way. It has been in the low single digits, and it's really about the smaller biotech. And we think there's a bit of a although the overall biotech market for us at least appears to be slowly gaining some momentum.
We did have an exceptional quarter in Q1 of that with repaint with regards to specifically cell and gene therapy, large purchases. And we think that will settle down a bit in our Q four I'm sorry, at our Q2 calendar Q4, but the offset by by the momentum we're seeing in our U.S. biotech.

And just one quick follow-up. Sort of related to that is just in terms of your kind of overall thoughts on year-end calendar year-end budget flush. I think last year there was very little budget flush by your academic and biopharma. It is not back to the wearable, but would you expect that to be incrementally better versus last year and

Jim Hippel

I get a budget flush doesn't impact us as greatly as does perhaps other companies with large with a much higher instrument percentage as well as more expensive instruments. But that being said, it does impact our ProteinSimple franchise in particular.
There are a little bit, and obviously, it's a it's anyone's guess right now, there's there's a day thesis out there that pharma, in particular has been holding back on their CapEx budgets all year and how you spend budgets. And there might be some budget flush as a result of that, if in fact, they're seeing a more return and only into ahead of them FY2025. But we're not necessarily hearing that from the field yet.
So as right now, I would say that it looks less likely that more likely based on what we're hearing out in the field. But I can flip pretty quickly. So we really won't know until we get into December. But if it happens and taking some of it could be some upside.

Thanks.

Operator

Thank you. Our next question comes from the line of Justin Bowers with Deutsche Bank. Please proceed with your question.

Justin Bowers

Hey, good morning, everyone. And just sticking with the previous line of questions with Jim, would sort of the similar organic growth outlook in 2Q. Is there any divergence within the segments IV is are you still looking for sort of like low single digit and Protein Sciences and then call it mid 10s in in DSP?
And then Tom, on on within biopharma, it sounds like you're saying that large pharma has been fairly stable in terms of spend over the last couple of quarters. Is are we hearing that correctly? And then the follow-up to that would be within within the different businesses within protein within the proteins franchise, i.e., ProteinSimple, the run-rate business analyzer is for the trends fairly stable there, or is there is there some movement there?

Jim Hippel

I tried to within a little bit without you have indicated and as you know, we generally don't give any kind of guidance by segment. But I would say in general, it's if you think about the end markets and how I just described the end markets, what I would suggest is that we see a very gradual improvement within our Protein Sciences segment as the biotech funding and hopefully continues to gain momentum.
And with regards to the diagnostics and spatial biology, there is that there is a component of business in there that's very OEM-driven that can be more lumpy. So although we expect double digit growth that we saw this quarter, which is how you kind of get to the same overall growth rate in Q2 as Q1.
As it pertains to the questions around the assays, I would say the assays are generally performing very similar to our agents in terms of the notes, which are euro-based and train them with the middle question was more amounted to a large

Justin Bowers

large pharma. Is that that yes, sorry. Okay. Even started yet another question now.

Jim Hippel

So yes, I mean, it's been stable for us. As we talked about before, we saw our larger pharma customers kind of drop off in their run rates early in the calendar year 2024. We think when their budgets were initially released and we've seen that pretty much piece somewhat down year over year.
Overall, we've seen it be stable sequentially quarter to quarter in terms of what we'd expect to see from a seasonality perspective. So I've not seen any major change in pharma one way or the other as of right now. But we didn't expect to either as our guidance suggested, we feel like if somebody farm it does come back in FY2025, we probably won't see much of it until our April May timeframe, which is our last call it fit lack of last quarter of the fiscal year.

Justin Bowers

Understood. Just one quick follow up. What was the comp for biopharma and fiscal one 24?

Jim Hippel

I know we talked about it. And second, I can find quickly, let's go on our next question and I tried to interject at some point.

Justin Bowers

Sure. Thank you.

Operator

Yes, thank you. Our next question comes from the line of Catherine Schulte with Baird. Please proceed with your question.

TOM Peterson

Everyone. This is Tom Peterson on for Catharine. Thanks for taking our question and congrats on the third quarter. I wanted to maybe or turn to the face of a biology portfolio here. You on the updated manufacturing capacity or comments. I guess what was ACV growth in the quarter, specifically and on?
And with respect to your comments around the pull through on that, ultimately, the Athena potentially that the highest brain, any instrument in the portfolio, I guess, what's your level of visibility into how close do you think you're going to get that less than FY2025?

Kim Kelderman

Yes. Thanks, Tom. For the next question from the So So the yes, overall momentum in the spatial biology, we're very pleased to see. Commerce has indeed, I met our expectations. If it comes to to to the launch the first couple of quarters. As you know, we have to India to do a little bit of a Sprint in the in our building out the capacity.
We feel comfortable we can now deliver on that on the reagents earlier day rate. So we as you heard in the script, we have a scope now running on the comment, but it is in the hands of key opinion leaders, generating the data necessary for a broader rollout, which will happen in this current quarter. The ACD franchise overall saw a little bit of a headwind from them. We call IBS. pharma assays services and that that could put some pressure on the overall numbers of that division.
We don't talk on on that level, though, if it comes to growth and absolutely there, especially related to this pharma projects. So some pharma projects got pushed out, which is in line with our overall health of that market that we've been talking about hum.
So nothing nothing new there, but definitely still a slight impact from projects Got push out some overall, though, we do see that from the future of this special availability will be will be bright. We we know the system is seeing real traction and customers are really happy with it. We'll have Ernie scope available on their numbers, start pulling through our antibodies from the or the R&D Systems brand.

TOM Peterson

Got it. That's super helpful. And maybe just a quick follow-up on China stimulus. I guess you have here some of the comments around the funnel activity. Any changes in underlying activity levels here in the quarter? And then we've heard from some other peers in a state that this stimulus program isn't covering the entirety of the instrument purchases.
So I guess at a high level, how big of an impact do you think that this dynamic is? And do we need to see broader China and macro improvement alongside the stimulus distribution to kind of drive a return to typical market growth in China in FY2025?

Kim Kelderman

Yes, thanks so much. I'll take the first part of it from them. As we mentioned earlier, we see we're pretty much seeing what we expected, which is, you know, at a different quoting activity and interest in our net product lines. As I mentioned in the earlier question, very much related to Western blot, automated Western blot instrumentation, which makes sense. and Jim also mentioned earlier, and I will give him the microphone about the impact it will have on our growth rate. Jim?

Jim Hippel

Yes. As I mentioned earlier, we have a little bit we will believe will be enough of a stimulus to flip China for us from being negative growth to modestly positive growth.

Operator

Thank you. Our next question comes from the line of Matt Murray with William Blair. Please proceed with your question.

Matthew Murray

Good morning.
Wanted to ask on now that's all of these mega cell and gene therapy, which is broadly in biotech and biopharma mix that you have visibility to this. It's sort of the pickup in work that you maybe SaaS was pause or on hold or delayed and now is returning or is this related to new project work and that's been coming in? And the second part, at least it has any breakdown in the room that's sort of a discovery versus clinical data?

Kim Kelderman

Thanks for the question.
And yes, the the I think we see both, right. So I mentioned earlier that we see customers progressing through the funnel and getting into their Phase one clinical, some of them even in Phase two clinicals. And with that order sizes increasing as as you would expect, in the meantime, we've also seen order frequency of the existing smaller accounts or a small orders grow in a similar similar speed.
And then we are glad to also report that we found term. I'm not sure if we should be mentioning the number, but we found a good a good portion of our customers to be new and added to the funnel. So. So basically, we're pretty happy with the activity level on all three of those parts of the equation.

Matthew Murray

Okay. You made another announcement about adherence grants of the examples in Taiwan on the scale reading partnership in advance of owning was involved that that space obviously remains competitive with new entrants will mean and you are clearly investing in the future there. So just be curious for your take on where you stand from that product and strategy development that as well as well, the competitive standing on the portfolio offering.

Kim Kelderman

Yes, thanks.
And I you know, first of we are very happy with the competitive advantages we see utilizing the GRX incubator versus our competitors. The scalability, the cost position and flexibility as well as the performance by our largest, very much where we hope them to be and significantly differentiated from other solutions. In the meantime, we know that there are tremendous synergies with our core portfolio. Leo, specifically the earn on the systems related GMP proteins, cytokine media.
So we have a fantastic overlap there. We also know that it is in the early days of a customer being exposed to achieve the racks and starting their projects where you make your decisions related to what the agents using the GDX. And if you use the GX as a vehicle to be to begin with some. So that's the reason why we feel that these grants are important.
We help these customers not only getting towards the their therapy in the design of their therapy faster, which is great for humanity, but we also help them on getting getting the right the right tools in place. And we also know that once these customers are happy with their solution, that they will be utilizing the GREX. as well as our biotech mediations going forward. So we feel we feel is a smart way to Create win- win

Operator

Thank you. Our next question comes from the line of Sung Ji Nam with Scotiabank. Please proceed with your question.

Sung Ji Nam

Hi, thanks for taking the questions. On the academic end market side of things that's great to see growth there despite the challenging comparisons on you pointed out Europe. But could you maybe elaborate further in terms of which is it perhaps

Kim Kelderman

Ya, better performance than we did mention in Europe because it is grew nicely against very significant comparable. However, that was not very different in the U.S., meaning the U. S comparables were very, very strong as well. And that means that we're really happy with the performance in academic across the across the product lines and across the regions.
As you know, there's been some good good news around Horizon funding in Europe and the and funding levels in the U.S. just as well. However, we always say that the overall funding levels are interesting for us, but not the true driver for a result. It is typically in these last couple of years been related to where the funding flows.
And the last the last year, it's been clearly flowing more in a direction where our products are benefiting from, which are more or to cancer-related neuroscience related fields, which will definitely drive adoption of our products. So that's that's the dynamic there. In academic.

Sung Ji Nam

That's a great. And then just on the molecular diagnostic side and also great to see strong growth there. I was wondering if there might be any update in terms of on any of the partnership opportunity, especially with the Exosome Diagnostics technology?

Kim Kelderman

So we have, as you know, assigned and agreement around kidney rejection with Thermo, the teams are working on that assay and it's in their most hands. As you know, we will we will continue to support the efforts there.
And then yes, we have other signatures in the making. But for now as as I have mentioned, over the last couple of years quarters, the team is mainly focused on creating Exosome based, yes, that we can market ourselves fully a surgeon channel and in the script as well.
As I just mentioned earlier, the SR. one test is the very first product of bringing the extra stone based testing into the U.S. Surgeon channel that goes and sells commercializes into laboratories. And that's really our preferred modus operandi this app. And that's what we're going to focus our pipeline on for the future.

Sung Ji Nam

Great. Thank you so much.

Operator

Thank you. This concludes our Q&A session. I'd like to pass the call back over to Kim for closing remarks. Thank you.

Kim Kelderman

Thank you for joining the call today and for your insightful questions. I'm extremely proud of the Bio-Techne team's accomplishments and the results we have been able to deliver this quarter. Our differentiated portfolio addresses some of the highest growth markets in life sciences and is positioned to deliver to deliver best-in-class performance for all our stakeholders going forward.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. In.