Bruker Corp (BRKRP) September 16, 2026 Conference Transcript

All right. Thank you, everyone, for being here. It's my pleasure to welcome the Bruker team to the Morgan Stanley Healthcare Conference. My name is Mike Piddle. I lead Morgan Stanley's life science tools and diagnostic practice in the healthcare and investment banking side. And so I'm joined here by Frank Laukian, Chairman and CEO, as well as Gerald Herman, the Chief Financial Officer. So, Frank, Gerald, welcome. Thank you for having us. So maybe just to start off, Frank, your father founded this company back in 1960 around NMR when the ultimate kind of potential was far from clear. And I'm curious, within Bruker's portfolio today, where do you see similarities or where there's maybe a gap between what you view as having really strong scientific potential versus what's well understood today?

Okay. Interesting question. I think we're in that inflection point where people are trying to understand biology much more deeply, disease biology, drug discovery, biomarkers that may play a role in diagnostics or MRD or whatever it may be. And the biological questions, I think, more so than the technological questions, what magnet, what laser, what mirror, what mass spec do I need. There's fast evolution there as well, but I think we're at that inflection point where people talk or call it sometimes biology or disease biology 2.0. We've used or coined the term the post-genomic era of drug discovery and disease biology. I think that's where the biggest inflection point is right now where people aren't quite sure yet where that will go and where there is a debate. well, we almost understand everything because we have the genes. No, we understand 20% of disease biology and the complexity. So I think it's more on the biology side than necessarily the technology side. Yes, we have better Tim's Toffs and magnets and whatnot coming out all the time. We're a technology powerhouse, but I think it's more important, and we've transitioned the company to really be also deep in disease biology and biomarkers. and the biology 2.0 that's behind that.

Maybe for an investor that's newer to the Bruecker story, double-clicking into what you just said about post-genomics, what exactly do you mean by that? How do you want an investor to understand about how Bruecker fits into that ecosystem and where you're going?

Yeah, so genomics and sequencing are foundational, but they only in some diseases they make the big difference in many other diseases they've scratched a little bit more than the surface but you know I think that maybe we understand 25% of biology and disease biology is sort of maybe that's almost a consensus you know there's a range obviously so clearly proteomics clearly bottom gene expression at the transcriptomic and proteomic level but beyond that even every protein so-called protein is a protein group which is an average of 30 different molecules they're called proteo forms and that's where the that's where the function or pathology as the case may be occurs understanding that with much higher differentiation resolution doing that at scale and with sensitivity is one of the key new important areas where function binding of drug targets or protein-protein interactions function occurs then primarily at the proteomic level and also multiomics at the metabolomic lipidomic small molecule levels. In addition, that's often embedded in a spatial context. So spatial biology has become very, very important. in addition because it does get more complex and we might as well deal with it it's a big market opportunity and ignoring it has led to atrocious rates of translating discoveries into new drugs right they're still very very poor in in addition we need to understand binding and interaction and protein dynamics good old NMR is a crucial technology for that that plays well with mass spectrometry but also with other vendors cryo em or alpha fold so bringing together multi-omics spatial interactions binding dynamics i know you want me to stop probably oh my god it's a long list but unless we really tackle the heart problems and for that ai is a foundational tool it's an enabling tool you can't do that anymore with human expertise only and so it's the confluence of these factors is really crucial i take that as yeah too bad for drug discovery and and for you know for diagnostics development so many failures so expensive so long but of course wow if you could get in the insights from 25 to 50 or to 75 because you're not afraid of the complexity and the depth that's needed and that's the fear that's the hypothesis we're pursuing providing the tools to deal with that is an incredible opportunity. That's the biggest S-curve and inflection point for Bruker over the next 5 to 10 years. Yes, we do deep tech. Yes, we do diagnostics. But that's the really, really big opportunity. And we are pursuing not all but multiple, multiple aspects, usually with the deepest and best tools.

That's great. And where are you seeing, you know, the most demand or, you know, whether that's from what your customers are talking about or, you know, what's actually kind of pulling through, you know, on the one hand and what's taking longer than, you know, you may have otherwise anticipated?

Yeah, so from a very, very fast growth phase for Bruker from post-COVID to about 24, where we're very significantly outgrowing the market and most of the larger peers in the industry, and then some very significant headwinds in 25, from currency to tariffs to academic spending, from which we're still in part recovering in 26. It's now, well, sometimes it's absence of headwinds, as in U.S. academia. And in many areas, we're seeing more and more and accelerating tailwinds. This year, something we normally haven't talked much about, non-life science, deep tech, which is, you know, if you include defense and energy, maybe $700 million of our revenue. So it's, you know, that's the fastest growing. and, by the way, typically very high margin, high incremental margin business, but the life science indicators of academic spending outside of the United States growing strongly for us, China growing on the order side for us, and now we actually do believe that there is a budget flush for NIH and NSF that's going on and they'll put a lot of money into the system before the end of September. And, yeah, that should bode well. And also for Q4 and maybe Q1 orders for us for some of these high-end research tools that people are ready to adopt. And I didn't mention all of them because it's complex enough, but there is additional things for spatial 3D genomics and so on where academic funding will really, really be welcome because I think some of these things are the early phases yet. some of them are getting readily adopted by biopharma like the TIMS-OMNI, others like 3D structural genome, what's that, does that really matter, it's not just the sequence, something we can sequence, no, it interacts, it has topologies, it has proximities, for that we need academic funding and there the US tends to lead it's doing well in China, it's doing well in Europe but the US is now hopefully coming along as well, not sure that answered all your questions but I think it's a good start. Parts of it, at least, yeah.

I mean, you mentioned deep tech. I think one tendency that investors sometimes have is to try to bucket or categorize.

What do you think gets lost about the broker story and what you all are doing if an investor tries to categorize you purely as kind of life science tools? yeah maybe as little as six months ago i would have said well people don't understand that part at all but i have to say that life science tools analysts and and and and in the last six months have done a quite an excellent job in taking a deeper dive into things like semiconductor metrology and even into euv lithography and the latest asml tools and how we're in a small way still plugged into that, but as that's transitioning from the $3,000 to the $5,000 series, what medium-term effect could that have on Brooker? They've actually done a pretty good job, and my colleague Mark Munch has done a good job in a number of opportunities to educate everybody. So yeah, it's not only one semiconductor metrology, 500 million bucket, there's sort of a 200 million bucket that kind of goes with the KPI of WFE, so you can track that. Other things have to do more with the technology trends towards smaller and smaller feature sizes, towards more and more stacks, towards more and more layering of materials. And then, of course, the advanced packaging, which is key for artificial intelligence, high-performance computing, and it's absolute key for the high-bandwidth memory that this year has really taken off. And, of course, if you're Micron and other companies have benefited from that, and we are benefiting from that demand. So it's become explained much better, and even at life science healthcare conferences, we now get some very educated questions from our investors on that part of the business.

And maybe, conversely, for a life sciences investor that may not necessarily be as familiar with the semiconductor world, how should they understand where in the ecosystem Bruker sits with your metrology business?

Yeah, so our deep tech may be around 700 million. So that's a very important part of the business, right? Diagnostics is 550, growing to 600. In addition to this systems biology 2.0, these are two other pillars of the business where we're just delighted that the core technologies, which are measurement technologies, right, and some automation and software, but ultimately measurement technologies, when they really, really mature and find killer apps, they find something like the MALDI biotyper for clinical microbiology, or they go into semiconductor high-volume manufacturing metrology, as our semiconductor metrology example has shown. and this trajectory of taking technologies to applications like proteomics, spatial biology, proteoforms, glycoforms, and then eventually transitioning that also into LDTs and into regulated diagnostics is such an important and fundamental driver in our industry that, of course, it's a key for broker strategy and a part that's important, but that we and a few other companies, Rigaku, Thermo, have some of that. Most other life science companies don't have that. Also have this big deep tech part that has outstanding margins. It has some of the best incremental margins. It's a sizable piece. It's not all semiconductor, but including defense, including fusion energy and things like that. It's around a 700 million business. It's a key pillar that we absolutely like, and it's based on many of the same technology. So it's not a separable business, because sometimes we get that question. No, it has the same technology base. Some of it goes into deep tech and fusion and semiconductor. Some of it goes into diagnostics. Much of it goes into drug discovery. It's a beautiful continuum of what we can derive from these original technology leadership that then more and more becomes applications and market leadership in these segments.

That's great. Maybe shifting gears, AI has certainly been a popular theme this week. How should investors think about where a broker sits in terms of that ecosystem as, you know, there's more and more AI happening around drug discovery, development, the clinical process, and, you know, what are you seeing today versus, you know, what are you think is more aspirational and what do you hope to see, you know, longer term?

Yeah, so starting with a, in a nutshell conclusion, last week I was misquoted and we took a bit of a hit, but let me clarify. So the nutshell conclusion is that for the tools, for selected deep, high-resolution tools that provide you with deeper insights, where we're the best example in the industry, but there are some other companies in spatial or proteomics that also play a significant role there, or structural biology, cry-UM, right? But not all companies. I think it's going to be a very significant structural demand driver. That's a terminology created by someone else. But there's an AI structural demand element that I think will emerge very strongly 27, 28, and beyond. As people have done the basic AI infrastructure investments, or maybe it's a partnership with a new tech biocompany that has hundreds of millions of funding that does that investment in automation and agentic AI and self-driving. People dream of lights out labs. Well, the lights stay on. There's a few people still around. But, you know, very much automated and accelerated and intelligently, AI intelligently accelerated, agentic AI accelerated drug discovery or improvement of new superconductors or materials or battery research. It goes in many more directions. So a very big growth driver for selected, the highest performance tools. If you take all the data that's out there that's scratching the surface and you're throwing a bunch of AI, you'll get some incremental insights. But I think unless you really take the most discerning tools and use them for building your frontier models and then for validating them in this DMTA loop of design, make, test, that's us, analyze, that's human and artificial intelligence, and then intelligently figure out how to keep going in that loop so it's sort of directed and not just boiling oceans, is a huge driver. I did observe last week that with a lot of that investment and mostly fixed biopharma and other industrial CapEx R&D budgets on the R&D or drug discovery side that I thought part of as a retrospective comment, why did the industry, including Bruecker, grow more slowly than we might have expected at that other conference in January or in January 1st, I think part of that is because, of course, that became such an urgent requirement because you're, you know, for many that it did in part crowd out some CapEx earlier in the year. And that all got abbreviated into a soundbite that I thought AI was a headwind. I think it's an enormous tailwind for selected deep high resolution tools that provide you impactful insights. and we're the poster child of that.

Maybe a related question, but for Gerald. Does any of this or what's happening with this AI thematic change how you think about capital allocation?

I don't think our capital allocation decisions have really changed. I mean, most of our capital is being deployed for innovation in the R&D field. After that, it becomes maybe more around our capacity constraints, particularly as it relates to some of the semi-pieces that we've been talking about, where we've made pretty significant CapEx investments to build capacity. And then after that, we begin to look at opportunities on the M&A side and certainly part of our dividend and kind of return capital to shareholders thereafter. But I don't think our priorities have really changed. I think we're hopefully getting back to a place where we've got to kind of, we're building enough capital and cash flow to be able to get back to it, to play the game at a higher level.

Since we did some sizable acquisitions in 2024, the smaller acquisitions we've done since then tended to often strengthen our infectious disease and microbiology diagnostics business with NGS reflex testing, with an additional capability to do fast AST, to metagenomic software, again an NGS application. We don't make sequencers. We know where to buy them. And then we get particular new capabilities on liquid array and direct from blood and on reflex testing and microbiology. We like, of course, at Bruker to also build out the aftermarket and consumables component. Years ago, when we were a pure instrument or nearly pure instrument, still meant 20, 25 percent aftermarket service upgrades, et cetera. Now at least it's at 40. It's clearly going towards 50-50 as diagnostics, but also spatial biology have a lot more consumables and razor blades pull through. So that remains an important area where we are interested. And then one area that we haven't mentioned yet is our recent Mimetas acquisition in the Netherlands, in Leiden. We actually acquired 90% of the company because we wanted the founders and management to keep driving this. And every time you go to a, this is about drug discovery and development and preclinical work, people want to complement their animal models, which there's not so much for ethical and economic reasons, maybe those as well, but primarily because often they just don't work that well. Certainly don't work well in neurodegeneration. The track record on going from mouse to man in cancer drugs is horrible. 95% of drugs do not fail, probably because the immune systems are so different for humans. So they want humanized microphysiological systems, or sometimes it's called NAMS for new approach. And we looked at all the smallish companies in that space. There are quite a few that started up. It had a bit of a hype, and then it had a disillusionment phase. And we thought we picked the one that has the best content, the best organs-on-a-chip humanized physiological relevance but also the best automation that's scalable because they use micro titer plates and we're actually quite delighted with that it's only about a 10 million business but that could move to 50 or 100 over the years plus it'll pull in a lot of spatial and metabolomics proteomics tools sort of at the tip of the spear it is a very that and ai and multi-omics and spatial is actually a very, very high priority for drug companies. And as I went to some of their drug discovery meetings and I look at AstraZeneca and Novartis, I mean I'm picking names in random, they all somewhere on their circle of things to do that are strategically important is organs on a chip, organoids, but you want to go beyond that because you want to have multi-organ capabilities, you want to have a little bit of an immune system that's simulated. So this Mimetas Smaller acquisition is, I think, strategically another very, very important addition for next generation drug discovery and development.

And maybe following on that point, are there particular therapeutic categories or disease areas that you're seeing particular interest in within the portfolio, or is it more these kind of different approaches looking at organ on a chip and trying to understand more of biology from a different perspective? What's the right way to think about that?

So they tend to be different companies in that space, don't only have different technologies, but sometimes different content, and they have these different disease area specializations. They're cardiovascular, metabolic, cardiovascular disease. vascular problems of course cancer play a significant role for our other tools I think it's a lot of it is oncology driven, spatial biology eventually merging with tissue diagnostics or complementing tissue diagnostics that tends to be not only but primarily for oncology, tissue pathology and you know autoimmunity and neurodegeneration are runners up I would say but I think oncology is the most important one.

Got it and when you evaluate whether it's a company or you know even you know a new instrument or technology that you think about developing more organically where is it today that you're kind of most focused and what kind of separates or how do you think about the ultimate commercial potential versus what's critically important from a scientific perspective, even if it may be more niche? How do you balance those?

Well, we still sometimes find niche or technological opportunities where we can innovate because we can technologically leapfrog or do something very, very differentiated. But we more and more look at the overall disease biology, actually, and say, okay, well, if metabolomics and small molecules are an important part, or I could pick something else. I'll pick a second example in a moment. Well, what's really required? Not only do we have a hammer and do we have a screwdriver and what can I do with those two tools, but what's the toolkit that's required? What's generally available tends to be sequencing in our case because you know we think there's plenty of options there and and so what's really required to get a deeper understanding to make drug discovery more successful ultimately maybe faster and cheaper and or to make biomarker and diagnostics discovery for cancer and other applications more successful more differentiated and with a shorter valley of death or whatever they call that and so we then didn't build the tim's omni because we could because we said hey we have a wrench that nobody else says let's what do we do with that we said okay proteomics or bottom-up proteomics which is proteomics 1.0 we really need to understand these functional or pathological molecules we need to understand intact proteo that is so hard but why don't we take a big step forward in that and now we can characterize antibodies and how we can have better tools for immunopeptidomics they also help us in targeted protein degraders these are not things we all figured out up front but these are things as you learn oh my god we have new applications it's fantastic fundamentally we thought we've got to get from gene expression at an average protein group level to proteoforms because that's where the pathology occurs. That's where the drug targets can be very different depending on whether they're glycosylated or where they're glycosylated. It used to be hopelessly complex, and there was no lamp post, so people said, well, then I won't go there because I can't see anything. But now there is a flashlight, and it gets stronger every day, And now people say, yeah, absolutely, that's what we need. That's why biopharm, very unusual for that Tim's Omni technology and proteoforms that pharma invests so early in the new technology. Normally they leave that in academia for a few years. Right now they're half or more of our business because they know how much they're missing and how it might benefit them to have a much deeper understanding of their disease biology and of their targets and mechanism of action, not just shooting more bullets at their target. What if it's not the right target? Or what if the target is really a mix of targets? And you need to understand that in a better way. So the short answer is much more driven by customer needs and overall NMR, mass spec, other vendors, cryo-EM or alpha-fold integration to get the best information on multi-omics structural and dynamics binding interactions in function is sort of how do we get functional deeper functional information and then okay that that wrench or that hammer over there we could make that better and and 10 times more sensitive or higher throughput or whatever it may be and that i think has also led to higher margin products for us because we're not We don't compete. We still compete on technology, but very often we have very unique solutions that, oh, my God, nobody else can answer these high-impact questions. Right.

Perhaps shifting gears to diagnostics, you all recently established microbiology and infection diagnostics as a standalone group. um what does that um structure allow you to do differently um and how are you you know how would you like investors to think about what you're doing in diagnostics you know more broadly great yeah so yeah that's a north of 500 or 550 million business that's grown so rapidly it's also has um it had inorganic growth with the addition of the ellitech molecular diagnostics business That's a delight.

Again, this year they're placing their Genius, InGenius, BeGenius, now MyGenius Pro, higher throughput systems ahead of business plan. They're growing very high single digits, sometimes just into the double digits. Just like the S-curve is highly nonlinear for a while, they were steadily improving their margins in the mid to upper teens, and now all of a sudden they're jumping well into the 20s. So it's a beautiful business. Overall, microbiology, infectious disease, including some other product lines, we think there's a lot of opportunity for innovation. That's been somewhat of an area that was not very innovative in recent years. And innovation with impact, you know, so faster. The syndromic panel market and others, BioMario in particular, or have shown how important that market is, but it's still expensive. Can we bring that into the mainstream? Can we do sepsis detection better? Can we, in some cases, by NGS or other means, do it direct from blood, things that shave off a day or two, which may be critical in life-saving or shortening the ICU time for a patient, and also improving the long-term outlook and recovery? Are there things that have a big medical impact and unmet medical need? And we just found by focusing on that area, and yeah, we're not in MRD. That's a wonderful field. But, you know, we're really, really good at this. And we have a unique and pretty broad set now of tools, including some of the new NGS applications on other people's sequencers that are really coming together. I think we're the innovation leader in much of that field. and we've been enough of a niche strategy that we're not directly colliding with Roche or Abbott or Hologix and that's good. Sometimes they need our more specific MDX tools as part of their big tender for a big university hospital because we take care of some of the long esoteric tail but esoteric tail sounds a little underwhelming but it's actually a nice market and has some very nice right to exist and nice margins plus some of these new capabilities. So it's very exciting. Allow me one more comment. Longer term, having that diagnostics business that right now is microbiology, infectious disease, but so many of our protein, proteomics, lipidomics as well, and then spatial biology tools, when they grow up, some of them will be in LDTs and in regulated IVDR and FDA diagnostics, And therefore, having a diagnostics business with the experience, the regulatory apparatus that you need in Europe, in the U.S., and other countries is really very, very important so that we don't all of a sudden have to hand that over to someone else when maybe the margins and the sustainability of some of these. Today, RUO, proteomics, or spatial biology transition, at least in part, towards the regulated higher barriers to entry, higher margin worlds, which we think will inevitably happen, and we want to drive that and not get stuck in the RUO world. Right.

Maybe a question for Gerald. Given where we sit today, what are you seeing in terms of growth for the rest of the year in terms of the markets and some of the different end markets that Frank mentioned across the tool side of the business versus diagnostics? What's most important to understand?

I think the first point is that for us, fiscal year 26 has still reflected a relatively gradual recovery in the overall markets. We are seeing really solid signals that many of the elements of our market are starting to really improve. I'd say probably the number one piece is biopharma for us. We saw really strong order growth in the second quarter. Even on a first-half perspective, it was quite solid for us. I'd say in the other end markets, we've talked a little bit about semi, mostly being driven by the AI demand field, but that's staggering order growth levels for us, actually, in the first quarter and the second quarter. So continue to feel quite solid and optimistic and encouraged about that. I think the other areas outside of the U.S. for academic and government research and markets were quite strong for us. Here we're talking about, at least in the second quarter, greater than 20% order growth for us outside the U.S. and ACA Gov. And then I think the other piece that's quite important for us, because we had not seen this in a more sustained way, really was China. We saw strong order growth, greater again than 20% order growth in the second quarter. And we're continuing to see solid order performance in China across a broad spectrum of categories, whether it's semi, which we can still sell a limited number of products into the semi field in China, but that's quite solid. I think biopharma, quite strong, and encouragingly for us on the academic and government research side in China also performing quite well, not only in the second quarter, but what we've seen so far, thus far into the third. So China seems to be – I mean, this is a major headwind for us, especially in 2025, with a couple of quarters of good, solid China order growth that will help propel – this will not drive most of our 26 performance, but certainly help our 27 performance dramatically. So solid on those sides.

Maybe just to close it out, Frank, what's one thing that you wish more investors have understood about your business? the one thing I think I'm actually delighted that deep tech and semiconductor people now understand that better, the fusion world, the defense world that's smaller but it's also coming along I think the transition of our mass spec NMR and of our spatial biology tools in how impactful that will be to have a deeper understanding of disease biology 2.0, drug discovery, and diagnostics biomarker development, how compelling and differentiated that is, I think, isn't that visible yet? Because initially some of the more late-stage biopharma and bioprocessing have been the better-growing areas, and they were underrepresented, and so other companies have done remarkably well and resumed growth earlier. I think as we come back to growth, we may well get back to the 200 to 300 BIPs long-term algorithm, above-market algorithm for growth that we've had maybe by 28, but we may also get into a hyper-strong, but a very strong growth phase as we had in 21-24. or we're setting ourselves up for that, and if that doesn't succeed, getting to do 300 bips above market is a very probable scenario, but I think there's a very significant upside to that. Okay. Great. Thank you very much for joining us.

Thank you. Thanks for having us.