Cytek Biosciences, Inc. (CTKB) September 16, 2026 Conference Transcript

We're here from the Lifeline Team, and we're standing on for Day 3 of the Global Healthcare Conference. Rudy, please stay to be joined by the team from SciTech. We have Wenbin Zhang, CEO, and Bill McComb, CFO. Thank you both for being here. Good morning, Q. And just before we get started, for any disclosures relating to this webcast, to this fire site, please see morganstani.com forward slash research disclosures. So maybe we can just dive straight in with how 2026 has played out so far versus your expectations, anything that surprised you for the better, anything for the worse, and then we can get into some specifics from there.

Sure. So we guided to 3% to 5% growth at the beginning of the year. In the first half, we recorded 6% growth, so above the high end of our expectations. Now, admittedly, that's against a weak comp in the first half of 2025, but the U.S. academic and government market has proved to be very strong. And, you know, pharma globally has been pretty solid as well with good growth off a low base. So, you know, those have been positive surprises.

Maybe we can just talk through for those investors perhaps a bit newer to the name, how your portfolio differentiates from others in the market? Because the feedback we get is it's highly innovative and there are some standout features there. But just across the continuum from some of your higher-end products to some of your lower-end, what is it that makes the Cytec product stand out? What else is there in the market?

Yeah, as you know, 10 years ago, we actually launched our first product, Aurora, at that time. And when we were launching that product, Clearly, at that time, flow cytometry was already talking about a 50-year-old technology and old industry dominated by a few big players. We were a disruptor at that time. What we came up with, what we called at that time, full special profiling technology-based flow cytometers. What we did, we have so far, over the last 10 years, could change the industry completely and the whole flow cytometry industry today is about full spectrotechnology and I don't think anyone will question and the future of the flow cytometry will be a full spectrotechnology or not. It's about whose full spectrotechnology they will go after and during the last 10 years we have pretty much established the industry with what we have developed as the standard and now the hope especially I know we started with the key opinion leaders those key economic labs from there we penetrate the into all the key pharmaceutical companies and today if you go to any of the labs and in the u.s. in Europe probably you'll be surprised not seeing anything and from sci-tech basically this is what we have now we build upon what we developed we continue to evolve from there we started with analyzer then go to solder and then from analyzer solder continued investment and engagement with customers and from there we developed launched evil as the second generation of flow cytometers. And then just very recently, we launched our latest product, which is called Borealis. Borealis is not just a new flow cytometer. In fact, it's a flow cytometer together with the reagents, the dyes, and we launched the product as the whole package, as a full solution, including the imaging. With what we have now, we become the first flow cytometer companies that enable more than 60 colors, which is exactly what many of the academic labs as well as pharma discovery are looking forward to enable them to truly improve the efficiency of the drug discovery or help them to truly understand the fundamental technology behind the new diseases and they're trying to understand it, a tool which they have been looking forward to. So, SciTech, we changed the whole industry, and now we continue to lead the industry based on the standards we have already very well established over the last 10 years.

That's helpful. How would you characterize the demand environment today for flow instruments versus maybe six months or 12 months back? Just maybe any trends you've been seeing in the end markets.

Sure. There's a substantial improvement. So in the first half of last year, we were down, our growth rate was minus 5%. And as you'll remember, there was a lot of uncertainty about government funding for research at that time, about funding the government was going to make available to universities, and, you know, about trade policy with respect to pharmaceuticals. And most of those issues have largely receded. And so in the first half of this year, we grew 6 percent, so 11 percent better growth rate. So that underscores, you know, a much more solid environment. We've, you know, we've also seen the NIH come back and had several purchases funded by either by the NIH directly or NIH-funded grants. So that's been a positive, so in general, in a much more positive environment in the first half of this year.

I think the U.S. is particularly doing very well with regard to the overall growth.

Yes, exactly.

Okay, amazing. We'll dig into some of that in a bit. But maybe on the replacement cycle, I think you've talked about 50K installed base of mostly conventional flow cytometers ready for replacement by FSP. Typical replacement cycle of around 7 to 10 years. Just given how that market is starting to transition more broadly, I think customers are feeling a bit healthier now with where their spend goes. How do you think about driving that next wave of replacements?

Well, as Wayne Ben mentioned, in 2017 to 2019, we were the disruptor. We were bringing a new technology that the customers hadn't decided on yet. And what's become evident in recent years is that there's broad acceptance that FSP technology is the way to go for the future. So as the pioneer of that technology and the leader in that particular sector, we benefit from the replacement cycle, from the replacement of conventional flow cytometers by FSP. So we're the incumbent leader. You know, there's a broad population of people that know how to use our instruments. We have reputation in the marketplace. So we just need to, you know, continue to execute with a strong selling effort, strong service offering, and continuing to introduce the best new products in the marketplace, which we have done both last year with the Evo and this year with the Borealis and the Evo 2. So, you know, if we continue to execute, we're in an advantage position with respect to that big wave of replacements that are coming. We also, you know, for the low and mid-end of the market, we've now established this separate dedicated sales force to go after those opportunities. So, you know, that's another initiative that we've undertaken to make sure that we benefit as much as possible from that.

How evolved is that process?

You know, we formally implemented it this quarter, so it's just getting going. But we expect, you know, we know that that's the right solution because those are different customers with different needs. But, you know, we're bringing them a more economical, full-spectrum system, our northern lights. So we think it's well adapted for that market. And we think that dedicated selling effort and having the right products for that market will benefit us. And maybe just taking instruments by end market, I think ACAGov globally declined 12% in the second quarter. maybe just unpack geographically where you're seeing pockets and then how we should be thinking about that for the back half of the year I don't want to say tale of two cities tale of two regions US very strong academic and government was up 50% versus last year and for all the reasons I talked about the uncertainty the cloud of uncertainty over university funding being lifted, the NIH coming back, and the new products. And the leading research labs are big buyers of a new product. You introduce a new high-end product, and there's going to be strong demand from those customers for that. In the other part of the... Actually, in China, the academic... What we classify as sales to distributors actually end up going to academic institutions. So that market was pretty good in the first half, but it shows up in our results in the biopharma segment. And then in Europe, we continue to see soft market because the academic and government market in Europe is almost 100% government funded, and governments have been under pressure in Europe because of the geopolitical issues and the funding of the conflict in Ukraine that they're all engaged in doing. So we expect that that will bottom out at some point and that will improve our overall growth rate.

How much visibility do you have and on those academic markets for the back half?

You know, we book and ship pretty much everything within a quarter. We don't carry much backlog at all into the second quarter. So I can't really comment on backlog. You know, we're in the business end of closing the third quarter, and, you know, I won't comment until, you know, we have the third quarter results in the books. but I'd be more than happy to answer the question in a few weeks.

Fair enough. Worth a try. Maybe just moving on to BioPharma, I think that was one of the stronger instrument components, up 22% in the second quarter. Was that strength broad-based across large pharma, biotech, and CROs? Maybe just unpack that a little.

Yeah, the big pharma companies tend to be the big pharma and the big biotech, you know, the $50, $100 billion biotech companies tend to be the big drivers. We have had significant interest from CROs as well. The CROs tend to be fleet buyers, so they're interesting opportunities. But I'd say that big pharma and big biotech are the primary drivers of that. The distributors tend to be more important in markets like Latin America, China, where it goes into the academic market in Latin America, being pretty solid. But Big Pharma, with the investment wave that they're on right now, has probably been the most important driver. And that sector was up 17% in the first half, a little bit higher than that sort of in the 20% in the U.S. because we're seeing some particular focus on reshuring into the U.S. And, you know, these are also fleet buyers, and they've evaluated our technology, and they like it, and they're being consistent customers.

I want to touch a little on the China strength, so double-digit growth there in Q2, I believe. The rest of APAC seemed flat. So maybe, again, just unpack what you're seeing in the region there, and if there's any kind of emerging regulatory or funding changes you think could be up and coming?

Not really. Funding in China has always been pretty strong. The amount of research activity going on in China is extraordinary. That's something that I'm sure other companies will comment on. The funding mostly comes from the government and institutions are ambitious about pushing their programs forward there. So, you know, we've seen, I think in China, they published the results of most of the purchasing is done through a tender, and they published the results there, so we know exactly what our market position there is. I think we're number three, Wenbin, if I'm...

That's right, yeah.

In China, we're number three, and our market share on the insurance side is about 15% right And then other, APAC, I think the economies there have been a little softer than here in the U.S. I think there's been more impact from fuel prices on those economies. And so there have been a little bit more course. It's been a bit tougher there.

And I know one of your...

You know, our market position is very strong in those regions. So it's just a matter of the economies and interest rates being, you know, more of a factor there.

And just on competition in China, I know one of your competitors is localizing some manufacturing in China that should start picking up, I think, in the back half of the years. How are you thinking about that in relation to just your competitive position in that win rate?

Actually, with the value first atomic and looking at the market in China, you always need to look at the market segment. and Citec plays primarily in the high end of the research market where the primary targets are government-funded research institutions. And over there, typically, they all go through the tender process. Pricing is not really a primary factor for that segment. Citec always wins by performance, technology, and instead of pricing therefore localizing manufacturing in China that is not going to really help but there of course there's one aspect right now in China is to buy made in China and for that part of the subject clearly and you are going to see some of the international company may be disqualified from participation with regarding to tenders but sci-tech can participate whether it's made in China or made in international things, we do manufacturing across multiple regions. We do manufacturing in the US, in Singapore, in China, and basically also we have this region, four region manufacturing process. And so that will enable us to participate in tenders, qualify for tenders at whatever conditions. But again, for those type of tenders, Pricing is not really a primary subject always. It's about technology, about performance, and about the needs. That's why I don't feel this localizing manufacturing in China is going to change anything.

Understood. And Bill, maybe just a double-click on EMEA. So decline again in Q2 just so government budgets remained slightly softer. How long should we think about this remaining under pressure? Do you have any visibility into trends there and any kind of green shoots that perhaps could come about?

Yeah, look, we're starting to lap easier comps. So we did have quite a strong Q4 in EMEA. Q3 last year was weaker, and I think the rate of decline has slowed, and hopefully that's a precursor to flattening out And we're getting to a sort of a minimum investment level over there. The replacement cycle should be occurring in Europe as well. But their availability, they don't have the other sources of funding for academic institutions that we have in the U.S. You know, their private donations and endowments are nowhere near as big as they are here. You know, college sports is not a big deal in Europe, which is a big revenue generator here. So, you know, it's all about fighting for a share of the government budget that, you know, continues to be under pressure. But, look, we've got to hit bottom here pretty soon. And, you know, it's like the end of last year when Europe was declining 30 percent and we showed a slide that said, you know, while if Europe was flat, that we would start to grow high single digits. And in Q4, Europe actually went up and, you know, so our growth rate went to 8 percent. So I think at some point we'll see a replay of that. I just, you know, I don't know exactly when. But certainly the comps are getting easier.

That's a good news.

And also its share of the overall pie, because it's shrinking and everything else is growing, is getting smaller.

Yeah, and I think, you know, we spoke about innovation earlier, the Borealis launch back in June. Yeah, that will help.

You know, the European academic market is one that is particularly, They get what's called innovation funding, which is a grant that is specifically made available to buy the newest, latest, greatest instrument. And Borealis certainly qualifies for that, and that's a more important source of funding in Europe, so that should help us.

Talk us through some of the early feedback on that and any numbers you can give on shipments or, I guess, ambitions for placements with time, just how that launch should shape up.

I think Borealis right now is still in the early adopter stage. So right now, our primary shipment is still based on EVO, EVO 2. But Borealis is a product we expect will start to ramp up next year.

Yeah, look, we're selling all of them that we can make, but it's still low single digits. We're single digits in terms of the units. So, and, you know, next year, there was for a long time demand for a high-end analyzer with imaging. And so we knew that the market wanted it. We're going to have the imaging upgrade available next year. And, you know, that will be a knockout product. It will be way better than anything else that's on the market. in terms of number of colors, imaging capability, and it's exactly what the high-end institutions and research labs want. So we think that will be very well received.

And just as we think about manufacturing bottlenecks or demand outstripping supply, is that anything you anticipate or do you think you can service what you have out there demand-wise in the market?

You know, I think with any new product, the production rate improves over time as you, you know, get used to making it and deploying it. So I don't think that'll be a significant factor in next year. I mean, look, the imaging upgrade will be new next year, and, you know, we'll have to work through deploying that. But, you know, we're excited about the prospects for that product.

And then a year prior, Aurora Ava came out to the market. Maybe just talk through customer feedback there and how that works. It's been fantastic.

You know, our volumes, now admittedly we only had half the year last year, but our volumes are 3x, you know, what they were last year, and it's quickly become the vast majority of our Aurora. It'll be our largest-selling individual product probably this quarter. And then we've introduced this year what we call the EVO 2 with the enhanced automation capability that allows it to basically operate completely automatically with a robotic arm. And so that's a key product for the automated lab of the future where you can set it up and load your plate hotel and, you know, it'll operate by itself.

Yeah, how do you think about that lab automation? We've had a lot of questions coming our way about it for the past few weeks. What do you think you sit into that ecosystem?

Well, we think that this product is a key element of that. the customers who are contemplating these projects tend to be the large pharma companies because they have the capital available and they have the visibility on long research programs or high volume. They want to do high volume screening. So we hear about these projects in the works. We believe that some of the construction projects that are underway, this kind of project. We think this is a great product for it, and, you know, it's in the market this quarter and selling very well, good demand. I think this is another one where we're selling everything we can make.

And, you know, we've obviously covered the high-end, and you're known for the high-end products, but you've spoken about that opportunity to penetrate the kind of entry and mid-level cytometry market. So, you know, how have those efforts been progressing so far, and what's uptake been like across the portfolio?

Clearly, as you can see, high end of the market is about a special, but special is not just about high end. It's also across the board, and here, the entry mid-level and the application normally is going to each individual labs, as well as farmer, QA, QC, those kind of applications. Over there, people pay attention more toward consistency, reliability, and ease of use versus the high-end research market always talking about high-performance data flexibility. So there are certainly different aspects with regard to the operation of the instrument. that's a reason why and we formed this new business unit and which is solution and clinical business unit to enable us to really focus on that aspect of the customer applications and to drive into that business now over there from spectrum perspective and we have all the cost structure and we have all the performance needs as well as ease of use kind of qualifications to support that market segment. It's all about how we focus on driving the sales activity, marketing activity to focus on those customer bases, which traditionally was not site-to-focus, but now we start to pay attention to that. And we feel through those dedicated focused efforts that will enable us to grow that part of the market segment. Amazing.

I want to spend a bit of time on just the recurring revenue. I think that was one of the spots that held up pretty strong in the second quarter. Just on services, the installed base now, I think, approaching 4,000 instruments. What percentage of the instruments are currently covered by service contracts, and what do you think the opportunity is to increase that attachment?

Currently, we're at about 60%, 6-0. And it's higher in the U.S. and a little bit lower in Europe and APAC. So as the install base grows, the density of our network or the density of instruments within our network increases so it makes it more efficient. That number, that 60% number, hasn't moved too much. So our base case expectation is that service revenue grows consistent with the growth of the install base. We're not counting on a lot of upside in that attach rate. But by the same token, that's captive business. You can't get the service from anywhere else except us. So it's a very reliable, it has a very reliable growth path that is driven by the growth in the install base, good margins, predictable growth business, and obviously very attractive for us.

Why isn't that something you can push a little harder, just given the margin profile is better?

Well, we do have sales. Well, the margin profile isn't significantly... I can't... We'll have to wait until we see Q3 and Q4 before we can have a good picture of the margin of the product's business, but there isn't a huge difference. we do have dedicated sales efforts so part of our reorganization was to add a dedicated sales team to sell service contracts so we will be pushing on it it's just too early to say how that number that number has been very stable hasn't moved down much or up much so that's why I'm a little cautious about predicting significant upside that we are putting resources behind it on top of

that actually service you know what's really important on the service side is about the usage of the instrument you need to try the instrument to be used in the lab when customer have purchased it so whether there is a service contract or not instrument always require service and even though some of the English may not have the service contract they will eventually still come back to Sightech. Sometimes customers go through the third party. There's a third party insurance company and they offer those type of services. Customer goes through them. But when the instrument actually requires service, they will still come back to Sightech and then we start to charge it by time and materials. So long as the instrument is being used, the business always eventually comes back to Sightech.

And just on reagents as well, maybe just again, clarify the path out there, the growth you're seeing and again, And assuming these end markets get better, that seems like the obvious area.

Yeah, the reagent business in general is a lower growth rate. So what we're doing to drive, and as we talked about in the past, we have about $12 million reagent business. We think there's at least $150 million worth of reagents that flow across our installed base each year. So what we're doing to improve it, to try to drive share gain, is we've significantly improved our delivery rate, the time between order and when the reagent vial lands on the customer's desk. So we brought that down from seven days to three, which is a big difference. The creation of the solutions business unit and sales force means that you now have a dedicated sales force, a big part of whose job is to sell reagents. So we think that will, over time, as they get themselves set, will help growth. We've also done deals with partners to distribute their products so that we have a much broader product portfolio. Having a broad number of SKUs is really important in flow cytometry. We're investing in our e-commerce platform, so it makes it easier for people to order reagents and have an automated flow through to fulfillment. And we're also working on new products. And as an example, these new dyes that we invented for the Borealis, that's going to drive some reagent business. So all across those multiple fronts, we're driving to try to grow this business faster.

Very clear. I want to hit it as well on bioinformatics. I think you now have over 28K users on SciTech Cloud. Can you just elaborate on how that streamlines the user workflow, and then how does that correlate with kind of instrument utilization and then obviously revenue growth for you guys?

Yeah, no, this is in fact a very important platform to help drive customers towards Cytec ecosystem. An example, just recently, the last few days, we launched a new application on Cytec Cloud, which is to enable users to do online data analysis. As you can see, the whole ecosystem involving not only starting from the panel design, then doing the actual experiment, and of course our system enabled virtual experiment on our platform, then go to the real lab live demo, live experiment, and afterwards there's a huge amount of data that require the analysis. Initially, our onboard instrument special provides some basic data analysis, and many times, customers, if they want to do a deeper analysis, they will go to third-party software. Now, with Cytocloud online data analysis module, The customer can rely on the same module starting from panel design until the end of the experiment and simple workflow and to provide all the features that's needed. And that truly enables our customers to stay with SciTech from starting to the end. And this is what can enable SciTech to maintain our leadership to support our customers and to drive customer toward side tech, full special tech knowledge.

Great. So just over a minute left. I want to understand your initial thoughts on how 2027 could look at a high level. We don't have to go into numbers here, but it feels like the end markets themselves are getting better. You obviously have good products coming through the pipeline that I think have strong interest behind them. So how should we think about that rate of change from how we're working through 26 right now into 2027? than that at a high level?

Look, I think the best indicator will be to look at our growth in the second half of 2026. The first half growth, as I said, was 6%. It was above the rate that we had guided to. So fundamental market drivers seem better in the U.S. and China. As we talked about EMEA, we'd like to see it. I think our new product momentum will be a strong factor for us because the reception of the Evo 2 and the Borealis has been good and, you know, we'll be coming out with the imaging upgrade, so that should be a positive. So, you know, we've got a – we're looking forward to 2027 with some optimism. Good. Okay. Well, Bill, thank you so much.