What changed in this filing

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Item 1A. Risk Factors

2023-08-23 compared with 2022-08-24 · 36 added, 44 removed, 310 unchanged (21% of the section changed)

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Slower economic growth in the domestic or international markets, inflation, recession, volatility in the credit and currency markets, high levels of unemployment or underemployment, labor availability constraints, changes or anticipation of potential changes in government trade, fiscal, tax or monetary policies, government budget dynamics (particularly in the healthcare and scientific research areas), and other challenges in the global economy have in the past adversely affected, and may in the future adversely affect, the Company and its distributors, customers, and suppliers.

In the past three years, COVID-19 has had, and likely will continue to have, an adverse impact on the global economy, including as a result of impacts associated with protective health measures that we, other businesses and governments are taking or might have to take again in the future to manage the pandemic For example, as the world has grappled with the COVID-19 pandemic, some governments, including the People’s Republic of China, have continued to impose strict “stay-at-home” orders to manage the pandemic, which have significantly impacted the economy in that country and our business there.

Should these restrictions continue in China or if they are imposed again elsewhere, our business could be materially impacted.

In the past three years, COVID-19 has had, and may continue to have, an adverse impact on the global economy, including as a result of impacts associated with protective health measures that we, other businesses and governments are taking or might have to take again in the future to manage the pandemic For example, as the world has grappled with the COVID-19 pandemic, some governments, including the People’s Republic of China, imposed strict “stay-at-home” orders to manage the pandemic, which has significantly impacted the economy in that country and our business there.

While these restrictions have now lifted, if they were to be imposed again in China or elsewhere, our business could be materially impacted.

Without limiting the foregoing, we have experienced and/or may in the future experience:

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● adverse impacts on our workforce and/or key employees;

● increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in preference actions against us;

● increased risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in preference actions against us;

● adverse impact to the sizes and growth rates of the markets we serve.

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For example, Congress and the U.S.

administration are also considering significant changes to healthcare in the United States, including government negotiation/regulation of drug prices paid by government programs.

Such impacts could negatively impact certain markets we serve, resulting in adverse impact on our sales revenue.

administration have sought to impose changes to healthcare in the United States, including government negotiation/regulation of drug prices paid by government programs.

Such impacts could negatively impact certain markets we serve, resulting in an adverse impact on our sales revenue.

Political and military conflicts may disrupt our business or negatively impact global economic or business conditions.

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While we have not historically had significant business in either Russia or Ukraine, the broader impact of the conflict could negatively impact our operations and financial results.

Additionally, the UK’s exit from the European Union at the end of calendar year 2020 continues to create political and economic uncertainty, particularly in the UK and the EU, having disrupted the free flow of goods and people between the UK and the EU.

In addition, our business could be negatively affected by new trade agreements between the UK and other countries, including the United States, and by the possible imposition of trade or other regulatory barriers in the UK.

Any of these factors have affected and could continue to adversely affect customer demand, our relationships with customers and suppliers, and our business and financial results, particularly since our European headquarters and primary shipping facilities have traditionally been centered in the UK.

One of our strategies is to expand geographically, particularly in China, India and in developing countries, both through distribution and through direct operations.

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and other factors beyond our control, including terrorism, war, natural disasters, climate change and diseases.

In addition, geopolitical tensions with these countries could exacerbate these risks.

The application of laws and regulations impacting global transactions is often unclear and may at times conflict.

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In addition to the impacts described above relating to COVID-19, research and development spending by our customers and the availability of government research funding can fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology companies, spending priorities, general economic conditions and institutional and governmental budgetary policies.

We carry essentially no

backlog of orders and changes in the level of orders received and filled daily can cause fluctuations in quarterly revenues and earnings.

Our Genomics and Diagnostics segment includes products for the medical diagnostics market, which relies largely on government healthcare-related policies and funding.

Our Diagnostics and Genomics segment products are intended primarily for the medical diagnostics market, which relies largely on government healthcare-related policies and funding.

Changes in government reimbursement for certain diagnostic tests or reductions in overall healthcare spending could negatively impact us directly or our customers and, correspondingly, our sales to them.

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Further, reimbursement reductions due to changes in policy regarding coverage of tests or other requirements for payment (such as prior authorization, diagnosis code and other claims edits, or a physician or qualified practitioner’s signature on test requisitions) may be implemented from time to time.

Additionally, the U.S.

government’s plans to manage prescription drug prices, as well as its recently announced intention to regulate lab developed tests, may impact the customers and industries we serve by increasing the cost of commercializing and/or limiting the profitability of commercialized products.

All of these payor actions and changes may have a material adverse effect on revenue and earnings associated with our diagnostics products.

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Our acquisition of businesses, investments, joint ventures and other strategic relationships, if not properly implemented or integrated, could negatively impact our business and financial results.

As part of our business strategy we acquire businesses, make investments and enter into joint ventures and other strategic relationships in the ordinary course, and we also from time to time complete more significant transactions.

We joined with two partners to establish a collaborative marketing venture, ScaleReady LLC, to address the needs of the rapidly expanding cell and gene therapy market, and subsequently announced that we had entered into an option agreement to potentially invest in and then acquire one of those partners, Wilson Wolf Manufacturing.

More recently, subsequent to the end of our fiscal year, we acquired Namocell Inc., a single cell sorting and dispensing platform company While we believe these business ventures will advance our business strategies and support our growth plans, we may not be successful in managing or integrating them into our company.

As part of our business strategy, we acquire businesses, make investments and enter into joint ventures and other strategic relationships in the ordinary course of business, and we also from time to time complete more significant transactions.

At the beginning of this fiscal year, we completed the acquisition of Namocell, a single cell sorting and dispensing platform company.

Bio-Techne also obtained a 19.9% ownership stake in Wilson Wolf and will acquire the remaining ownership no later than the end of calendar year 2027.

We have also continued participating in our collaborative marketing venture, ScaleReady LLC, with Wilson Wolf and another partner, and which addresses the needs of the rapidly expanding cell and gene therapy market.

While we believe these business ventures will advance our business strategies and support our growth plans, we may not be successful in managing or integrating them into our company.

Acquisitions, investments, joint ventures and strategic relationships involve a number of additional financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including but not limited to the following, any of which could adversely affect our business and our financial results:

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The market for highly skilled workers and leaders in our businesses, particularly in the areas of science and technology, is extremely competitive.

In fiscal 2022, a number of our businesses and departments faced labor availability constraints and inflationary costs.

In general, we have been experiencing turnover at higher rates than usual and have had some difficulties filling certain positions.

In particular, we operate in several geographic locations where competition for talent is strong, making employee retention even more challenging.

For example, some of our fastest growing businesses are located in California and Massachusetts, both of which in the last several years have had low unemployment and a particularly competitive environment for finding and retaining talent.

While retention improved in fiscal 2023, a number of our businesses and departments continued to face recruitment and retention challenges, and faced labor availability constraints and inflationary costs.

Our growth by acquisition also creates challenges in retaining employees.

As we integrate past and future acquisitions and evolve our corporate culture to incorporate the new workforces, some employees may not find such integration or cultural changes appealing.

Finally, as the geographies in which we operate recover from the recent

pandemic and we return employees who had been working from home back to our sites, we may not be able to retain people who prefer continuing to work from home full time.

As we integrate past and future acquisitions and evolve our corporate culture to incorporate new workforces, some employees may not find such integration or cultural changes appealing.

Finally, as the geographies in which we operate recover from the recent pandemic and we return employees who had been working from home back to our sites, we may not be able to retain people who prefer continuing to work from home full time.

The failure to attract and retain such personnel could adversely affect our business.

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The entry into the market by manufacturers in countries in Asia and other low-cost manufacturing locations is also creating increased pricing and competitive pressures, particularly in developing markets.

In order to compete effectively, we must retain longstanding relationships with major customers and continue to grow our business by establishing relationships with new customers, continually developing new products and services to maintain and expand our brand recognition and leadership position in various product and service categories and penetrating new

markets, including high-growth markets.

Our ability to compete can also be impacted by changing customer preferences and requirements (for example increased demand for more environmentally-friendly products and supplier practices).

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Individual states regulate data breach and security requirements, and multiple governmental bodies assert authority over aspects of the protection of personal privacy.

Most notably, in the last several years, some states, including California, Virginia, Utah, Colorado and Connecticut, have passed broad privacy legislation that could result in more material impacts as new regulations are issued.

European laws require us to have an approved legal mechanism to transfer personal data out of Europe.

Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states may result in significant fines and other administrative penalties.

Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states may result in fines of up to €20 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties.

Several other countries such as China and Russia have passed, and other countries are considering passing, laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions.

Government enforcement actions can be costly and interrupt the

regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial results.

Government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial results.

If we suffer loss to our supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations could be seriously harmed.

Our supply chains, distribution systems and information technology systems may be subject to catastrophic loss due to fire, flood, earthquake, hurricane, power shortage or outage, public health crisis (including epidemics and pandemics) and the reaction thereto, war, terrorism, riot or other natural or man-made disasters, such as the COVID-19 pandemic.

Our supply chains, distribution systems and information technology systems may be subject to catastrophic loss due to fire, flood, earthquake, hurricane, power shortage or outage, public health crisis (including epidemics and pandemics) and the reaction thereto, war, terrorism, riot or other man-made or natural disasters, such as the COVID-19 pandemic.

If any of these supply chains or systems were to experience a catastrophic loss, it could disrupt our operations, delay production and shipments, result in defective products or services, diminish demand, damage customer relationships and our reputation and result in legal exposure and significant repair or replacement expenses.

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Any of these manufacturing problems could result in significant adverse impacts to our business and financial results.

If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions and customer demand, our business and financial results may suffer.

If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions or customer demand, our business and financial results may suffer.

In addition, our reliance upon sole or limited sources of supply for certain materials, components and services can cause production interruptions, delays and inefficiencies.

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In addition, our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.

Defects and unanticipated use or inadequate disclosure with respect to our products, or allegations thereof, can adversely affect our business and financial results.

Defects, unanticipated use of, or inadequate disclosure with respect to our products, or allegations thereof, can adversely affect our business and financial results.

Certain of our products and services are sold for use in diagnostics.

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The burden of this additional debt could adversely affect us, make us more vulnerable to adverse economic or industry conditions, and prevent us from funding our expansion strategy.

We currently have a Credit Agreement that provides for a revolving credit facility of $600 million, which can be increased by an additional $200 million subject to certain conditions, and a term loan of $250 million.

We currently have a Credit Agreement that provides for a revolving credit facility of $1 billion, which can be increased by an additional $400 million subject to certain conditions.

Borrowings under the Credit Agreement bear interest at a variable rate.

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Interpretations, assumptions and guidance regarding the Tax Act that have been issued subsequently have had a material impact on our effective tax rate, and we anticipate that there may be additional changes to the U.S.

tax code in the future.

tax code under a new Administration.

In preparing our financial results, we record the amount of tax that is payable in each of the countries, states and other jurisdictions in which we operate.

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Changes in the U.S.

FDA’s regulation of drug or medical device products could have an adverse effect on the demand for these products.

FDA’s regulation of drug or medical device products, such as managing the price of certain prescription drugs or potentially increasing regulatory scrutiny of lab developed tests, could have an adverse effect on the demand for these products.

We have agreements relating to the sale of our products to government entities in the U.S.

and elsewhere and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government (approximately 2% of our fiscal 2022 sales were made to the U.S.

and elsewhere and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government (less than 3% of our fiscal 2023 sales were made to the U.S.

federal government).

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In addition, we are subject to inspections by these regulatory authorities.

For example, the EU has adopted the In Vitro Diagnostic Regulation (the “EU IVDR”), which imposes stricter requirements for the marketing and sale of in vitro diagnostic medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance.

Manufacturers of in vitro diagnostics medical devices that have been marketed and sold under the prior regulatory regime now have to comply with some of the new EU IVDR requirements, while the effective date of other requirements have been delayed.

Complying with EU IVDR, the regulation applicable to the Company, may require material modifications to our quality management systems, additional resources in certain functions, updates to technical files and additional clinical data in some cases, among other

Failure by us or by our customers to comply with the requirements of the EU IVDR, or other requirements imposed by these or similar regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

In addition, such a failure could expose us to contractual or product liability claims, contractual claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients, as well as ongoing remediation and increased compliance costs, any or all of which could be significant.

We are the sole manufacturer of a number of products for many of our customers and a negative regulatory event could impact our customers’ ability to provide products to their customers.

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and abroad such as anti-competition laws.

Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits

and licenses could result in criminal, civil and administrative penalties and could have an adverse effect on our results of operations.

Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could result in criminal, civil and administrative penalties and could have an adverse effect on our results of operations.

Significant developments or changes in U.S.

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Failure to comply with those regulations could adversely affect our business and financial results.

As stated above, certain of our products are medical devices, diagnostics tests and other products that are subject to regulation by the U.S.

Certain of our products are medical devices, diagnostics tests and other products that are subject to regulation by the U.S.

FDA or state CLIA regulations, by other federal and state governmental agencies, by comparable agencies of other countries and regions and by regulations governing hazardous materials and drugs-of abuse (or the manufacture and sale of products containing any such materials).

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Several countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations, including implementation of IVDR regulations in Europe.

Failure by us or by our customers to comply with

the requirements of the EU IVDR, or other requirements imposed by these or similar regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

Failure to meet these requirements adversely impacts our business and financial results in the applicable geographies.

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Such occurrences, regardless of their outcome, could damage the Company’s reputation and adversely affect important business relationships it has with third parties.

Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to the Company ’ s reputation and have a material adverse effect upon the Company ’ s business, a risk that has been elevated with the acquisition of Exosome Diagnostics, whose laboratory testing service is a healthcare provider that obtains and uses protected health information.

Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to the Company ’ s reputation and have a material adverse effect upon the Company ’ s business, a risk that has been elevated with recent acquisitions that use protected health information and utilize healthcare providers for laboratory resting services.

If the Company does not comply with existing or new laws and regulations related to protecting the privacy and security of personal or health information, it could be subject to monetary fines, civil penalties or criminal sanctions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors