Let’s recapitulate what most of us actually know already, but in turbulent times is nice study the facts over and over again to put things into perspective.

Techne has three business divisions: biotechnology (65% of sales), R&D Europe (30% of sales), haematology (5% of sales). Customers are biopharma, academic institutions and government funded entities, such as the NIH.

For the largest division, the biotechnology division (proteins & antibodies 65%, kits 30%), Biopharma accounts for some 40% of this division’s revenue. Guessing that the same pattern applies to R&D Europe brings us to something like 40% total sales coming from biopharma. According to Techne academic institutions contribute 20% of revenue to the biotechnology division, distribution 28%, and in my numbers, government funded entities (such as NIH) should make up for the remaining 12%.

What headwinds is Techne facing?
Currency is one. The stronger USD cuts into revenues, but long term it is rather unlikely that the USD will appreciate significantly as compared to other currencies, such as the Euro.
Since biopharma are sitting between a rock (patent expirations) and a hard place (hawk governments), are merging and cutting expenses, it is likely that overall, not only sales and marketing expenses will be cut, but also R&D efforts will suffer to some extent. There is little doubt that this will be felt by Techne (see above: about 40% over overall revenues come from the biopharma market). On the other hand the entities, such as NIH, might increase spending (key word stem cells), but I do not think that this will compensate for weakness in these other customer segments. Be it as it is, Techne continues to be THE dominant quality supplier of cytokines and other research molecules. Techne has this long standing excellent customer relations and a firm grip on the quality of its products: 97% of the products Techne sells are developed, manufactured and quality controlled by Techne. (BTW, intangibles are 25 million on the books, where of 20 million “customer relationship”, 4 million “technology” and 1.4 million “trade name” (R&D systems: only 1.4 million “trade name”??? you are kidding?). As we know, R&D’s new products usually grow over a five to seven year time span, only to level then off at a high level for the long run. Thus, there is a wonderful compounding effect of the over 1000 (and growing) new products launched annually. Over time there will be a gradual transition of Techne’s business in that Techne will not only supply R&D markets, but more and more also supply molecules to the diagnostics market, which, of course, is a significantly larger overall market (example: preclampsia diagnostics collaboration with Beckman&Coulter). I shall not mention top managements top qualities, but let’s repeat that ever since (and long before it became chic again to scutinize bonuses), T.E.O has been waving his cash bonus year over year.

to be continued