What changed in HARVARD BIOSCIENCE INC's 10-K — 2023 vs 2024

Harvard Bioscience, Inc. is referred to herein as “ we, ” “ our, ” “ us, ” and “ the Company. ” PART I Item 1. Business.

Overview Harvard Bioscience, Inc., a Delaware corporation, is a leading developer, manufacturer and seller of technologies, products and services that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing for pharmaceutical and therapy development.

Our products and services are sold globally to customers ranging from renowned academic institutions and government laboratories to the world’s leading pharmaceutical, biotechnology and contract research organizations (“CROs”). With operations in the United States, Europe and China, we sell through a combination of direct and distribution channels to customers around the world.

Our History and Strategy Our business began in 1901, under the name Harvard Apparatus. It was founded by Dr. William T. Porter, a Professor of Physiology at Harvard Medical School and a pioneer of physiology education. We have grown over the years with the development and evolution of modern life science research and education.

Our early inventions included ventilators based on Dr. Porter’s design, the mechanical syringe pump for drug infusion in the 1950s, and the microprocessor-controlled syringe pump in the 1980s. In 1996, a group of investors acquired a majority of the then existing business of our predecessor, Harvard Apparatus, Inc.

Following this acquisition, our focus was redirected to acquiring complementary companies with innovative technologies while continuing to grow the existing business through internal product development. Harvard Bioscience, Inc. was incorporated in the State of Delaware in September 2000 and became the successor entity to Harvard Apparatus, Inc. by merger in November 2000.

From 1996 to 2018, we completed multiple business or product line acquisitions related to our continuing operations. In 2018, we acquired Data Sciences International, Inc. (“DSI”), a global leader in products, services and solutions focused on preclinical testing.

The DSI product portfolio, which is largely complementary to our cellular and molecular technology (“CMT”) product portfolio, expanded our product portfolio to address the continuum from research and discovery to preclinical testing with principal applications in pharmaceutical and therapy testing.

During 2021, we completed a restructuring program to improve operational efficiency and reduce costs which entailed consolidating and downsizing several sites and reducing headcount in Europe and North America. During 2022, we reviewed our business and product portfolio and identified opportunities to rationalize our product portfolio, improve our cost structure and optimize our sales organization.

In connection with this review, we identified certain non-strategic products for discontinuation and further reduced our headcount in Europe and North America.

We believe that these actions will allow us to focus on product opportunities that drive sustainable revenue growth with attractive gross margins and improved profitability. 1 Table of Contents Our strategy for driving sustainable revenue growth is focused on four areas.

The first is to maintain and strengthen our existing competitive position in the areas of therapy research and pre-clinical testing, which we believe provides a base for expanding our products and technologies to address additional growth opportunities.

The second is to expand our product offerings to higher-volume industrial customers such as CROs, biotechnology and pharmaceutical companies, and government laboratories engaged in the development and testing of new therapeutics, where the ability to reduce costs and improve cycle times in pre-clinical testing has the potential to drive additional demand.

Third, we are expanding our product offerings for biotechnology and pharmaceutical customers in the field of bioproduction, where we believe there are opportunities to provide innovative products and services that bridge from research and development to production in applications that scale with production volume.

Fourth, we are expanding our product offerings for academic, biotechnology, and pharmaceutical customers engaged in therapy, discovery, development and testing, especially in the area of streamlined in vitro testing from cell lines to organoids early in the development cycle.

Our Products As noted above, our products, consumables, software and services enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing. We have organized our product line activities into two product families, CMT and Preclinical.

Our CMT product family is primarily composed of products supporting research related to molecular, cellular, organ and organoid technologies. Our CMT products also have application in the emerging field of bioproduction of pharmaceuticals and therapeutics as well as in in vitro testing of cell lines and organoids in the therapy development.

The principal customers for our CMT products include academic and government laboratories, biotechnology and pharmaceutical companies, and CROs. Our Preclinical product family includes products that support the preclinical research and testing phase for drug development, and in particular testing related to data collection and analysis for safety and regulatory compliance.

Preclinical products are primarily sold to pharmaceutical, biotechnology and CROs, as well as larger academic labs. We sell our products under several brand names, including Harvard Apparatus, DSI, Buxco, Biochrom, BTX, Heka, Hugo Sachs, Multichannel Systems MCS GmbH (“MCS”) and Panlab.

Our solutions range from simple to complex, and generally consist of hardware/firmware and software products, augmented with consumables, options, upgrades and post-sales (scientific, installation and data) services. Sales prices of these products and services range typically from $1,000 to over $100,000.

Our products include spectrophotometers that analyze light to detect and quantify a wide range of molecules as well as cell analysis and electroporation and electrofusion systems to influence and/or analyze cellular processes. Other products and services focus on tissue and organ responses to new drugs and encompass wireless monitors, and signal acquisition and analysis functionality.

We also feature products that monitor physiological processes in living organisms to study behavior. Many of our proprietary products are leaders in their fields. In addition to our proprietarily manufactured products, we distribute products developed by other manufacturers. These distributed products accounted for approximately 13% and 15% of our revenues for the years ended December 31, 2023 and 2022, respectively.

Resale of such products enables us to act as a single source for our customers’ research needs. They consist of a large variety of complementing instruments or accessories as well as consumables used in experiments involving fluid handling, molecular and cell analysis and tissue, organ and animal research. 2 Table of Contents Below is a description of each product family.

Cellular and Molecular Technologies Product Family Our CMT product family includes products designed primarily to support the discovery phase of new drug development. The CMT product family includes the Harvard Apparatus, Biochrom, BTX, Heka, Hugo Sachs, and MCS brands.

CMT products include: ● electroporation and electrofusion instruments, including the bioproduction configuration of our BTX electroporation system, introduced in 2022, which leverages our electroporation technology to bridge from therapy to production in the emerging field of bioproduction; ● amino acid analyzers, spectrophotometers, and other equipment which primarily support molecular level testing and research; ● high precision syringe and peristaltic infusion pump product lines; ● precision scientific measuring instrumentation and equipment in the field of electrophysiology such as: data acquisition systems with custom amplifier configurations for cellular analysis, complete micro electrode array solutions for in vivo recordings and in vitro systems for extracellular recordings; and ● our new Mesh MEA™ platform, launched in 2023, builds on our existing micro-electrode array technology to support streamlined in vitro testing from cell lines to organoids early in the therapy development cycle.

Our CMT product family made up approximately 49% and 51% of our global revenues for the years ended December 31, 2023 and 2022, respectively. Preclinical Product Family Our Preclinical product family provides a complete platform to assess physiological data from organisms for research ranging from basic research to drug discovery, and drug development services.

The Preclinical product family includes the DSI, Panlab and Buxco brands.

It includes: ● implantable and externally worn telemetry systems, which are commonly used in research to collect cardiovascular, central nervous system, respiratory, metabolic data; ● behavioral products; isolated organ and surgical products, a broad range of instruments and accessories for tissue, organ-based lab research, including surgical products, infusion systems, and behavior research systems; ● turn-key respiratory system solutions encompassing plethysmograph chambers, data acquisition hardware, physiological signal analysis software, and final report generation; ● inhalation and exposure systems providing precise, homogenous aerosol delivery for up to 42 subjects, while integrating respiratory parameters for the ultimate delivered dose system; ● powerful GLP-capable data acquisition and analysis systems, capable of integrating third party sensors for a more comprehensive study design; and ● our new VivaMars™ behavioral monitoring system, launched in 2023, which is directed to the high throughput testing needs of higher-volume industrial customers such as CROs, biotechnology and pharmaceutical companies, and government laboratories engaged in the development and testing of new therapeutics.

Our Preclinical product family made up approximately 51% and 49% of our global revenues for the years ended December 31, 2023 and 2022, respectively. 3 Table of Contents Customers Our end-user customers are primarily research and development scientists and engineers at pharmaceutical and biotechnology companies, universities, hospitals, government laboratories, including the United States National Institutes of Health (“NIH”), U.S.

Army and CROs. Our pharmaceutical and biotechnology customers include pharmaceutical companies and research laboratories such as Abbott, Amgen, AstraZeneca, Bayer, Glaxo Smith Kline, Johnson & Johnson, Merck, Novartis, Pfizer and Regeneron.

Our academic customers include major colleges and universities such as Baylor College of Medicine, Cambridge University, Harvard University, Imperial College of London, Johns Hopkins University, Stanford, the University of California system, University of Pennsylvania, University of Pittsburgh, University of Texas and Yale University. Our CRO customers include Charles River Laboratories, Labcorp and Wuxi AppTec.

We have a wide range of diverse customers worldwide, and no customer accounted for more than 10% of our revenues in 2023. Sales We conduct direct sales and through distributors in the United States, China and major European markets. We sell primarily through distributors in other countries.

For the year ended December 31, 2023, revenues from direct sales to end-users represented approximately 65% of our revenues; and revenues from sales of our products through distributors represented approximately 35% of our revenues. Direct Sales We have a global sales organization managing both direct sales and distributors.

Our websites and marketing collateral serve as the primary sales tool for our product lines, which includes both proprietary manufactured products and complementary products from various suppliers. Sales through Distributors We engage distributors for the sales of our own branded and private label products in certain areas of the world and for certain product lines.

Marketing Our marketing activities encompass product management and marketing communications. Marketing maintains value-proposition based product roadmaps, collaborates with research and development on timing and investment for new products, develops marketing and sales strategies, supports direct and distributor sales activities, and sets the global pricing of our products.

Our marketing team also maintains digital presence across the web and social media platforms, creates electronic leads and analyzes opportunities for new product portfolio extensions. Research and Development Our research and development activities are focused primarily on maintaining and strengthening our existing product and technology portfolio and expanding our portfolio to support new opportunities consistent with our growth strategy.

We maintain development staff in many of our manufacturing facilities to design and develop new products and to re-engineer existing products to bring them to the next generation. Our research and development expenses were approximately $11.8 million and $12.3 million for the years ended December 31, 2023 and 2022, respectively.

We anticipate that we will continue to make investments in research and development activities to advance our position in the industry as a provider of life science equipment, software and services.

We plan to continue to pursue a balanced development portfolio strategy of originating new products from internal research and acquiring products and technologies through business and technology acquisitions or collaborations, as appropriate. Manufacturing We manufacture and test the majority of our products in our principal manufacturing facilities located in the United States, Germany and Spain.

We have considerable manufacturing flexibility at our various facilities, and each facility can manufacture multiple products at the same time. We maintain in-house manufacturing expertise, technologies and resources.

We seek to maintain multiple suppliers for key components that are not manufactured in-house, and while some of our products are dependent on sole-source suppliers, we have made investments in new talent in procurement and other functions to reduce exposures related to sole-source suppliers, and are accelerating these efforts given the dynamics of the global supply chain in recent years.

Our manufacturing operations primarily involve assembly and testing activities along with some machine-based processes. Going forward we will continue to evaluate our manufacturing facilities and operations in order to optimize our manufacturing footprint. See “Part I, Item 2.

Properties” of this report for additional information regarding our manufacturing facilities. 4 Table of Contents Competition The markets into which we sell our products are highly competitive, and we expect the intensity of competition to continue or increase. We compete with many companies engaged in developing and selling tools for life science research.

Many of our competitors have greater financial, operational, sales and marketing resources and more experience in research and development and commercialization than we have. Moreover, our competitors may have broader product offerings and greater name recognition than we do, and many offer discounts as a competitive tactic.

These competitors and other companies may have developed or could in the future develop new technologies that compete with our products, which could render our products obsolete. We cannot provide assurance that we will be able to make the enhancements to our technologies necessary to compete successfully with newly emerging technologies.

While we provide a broad selection of differentiated products, we have numerous competitors across our product lines. We believe that we compete favorably with our competitors on the basis of product performance, including quality, reliability, speed, technical support, price and delivery time.

We compete with several companies that provide products for life science research including Becton, Dickinson and Company, Bio-Rad Laboratories, Inc., Danaher Corporation, Emka Technologies, Eppendorf AG, Instem plc, Kent Scientific Corporation, Lonza Group Ltd., PerkinElmer, Inc., Thermo Fisher Scientific, Inc. and TSE Systems. We cannot forecast if or when these or other companies may develop competitive products.

We expect that other products will compete with our products and potential products based on efficacy, safety, cost and intellectual property positions. While we believe that these will be the primary competitive factors, other factors include, in certain instances, availability of supply, manufacturing, marketing and sales expertise and capability.

Seasonality Sales and earnings in our third quarter are usually flat or down from the second quarter primarily because there are a large number of holidays and vacations during such quarter, especially in Europe.

Our fourth quarter revenues and earnings are often the highest in any fiscal year compared to the other three quarters, primarily because many of our customers tend to spend budgeted money before their own fiscal year ends.

Intellectual Property To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality provisions in our contracts. Patents or patent applications cover certain of our new technologies. Most of our product lines are protected principally by trade names and trade secrets.

We have implemented a patent strategy designed to provide us with freedom to operate and facilitate commercialization of our current and future products. Our success depends, to a significant degree, upon our ability to develop proprietary products and technologies.

We intend to continue to file patent applications covering new products and technologies where it is appropriate to do so taking into account factors such as the likely scope of coverage, strategic value, and cost. Patents provide some degree of protection for our intellectual property.

However, the assertion of patent protection involves complex legal and factual determinations and is therefore uncertain. The scope of any of our issued patents may not be sufficiently broad to offer meaningful protection.

In addition, our issued patents or patents licensed to us may be successfully challenged, invalidated, circumvented or unenforceable so that our patent rights would not create an effective competitive barrier. Moreover, the laws of some foreign countries may protect our proprietary rights to a greater or lesser extent than the laws of the United States.

In addition, the laws governing patentability and the scope of patent coverage continue to evolve, particularly in areas of interest to us. As a result, there can be no assurance that patents will be issued from any of our patent applications or from applications licensed to us.

As a result of these factors, our intellectual property positions bear some degree of uncertainty. We also rely in part on trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants.

Our employees and consultants also sign agreements requiring that they assign to us their interests in patents and copyrights arising from their work for us.

Although many of our United States employees have signed agreements not to compete unfairly with us during their employment and after termination of their employment, through the misuse of confidential information, soliciting employees, soliciting customers and the like, the enforceability of these provisions varies from jurisdiction to jurisdiction and, in some circumstances, they may not be enforceable.

In addition, it is possible that these agreements may be breached or invalidated and if so, there may not be an adequate corrective remedy available. Despite the measures we have taken to protect our intellectual property, we cannot provide assurance that third parties will not independently discover or invent competing technologies or reverse engineer our trade secrets or other technologies.

Therefore, the measures we are taking to protect our proprietary rights may not be adequate. 5 Table of Contents We do not believe that our products infringe on the intellectual property rights of any third party. We cannot assure, however, that third parties will not claim such infringement by us or our licensors with respect to current or future products.

We expect that product developers in our market will increasingly be subject to such claims as the number of products and competitors in our market segment grows and the product functionality in different market segments overlaps.

In addition, patents on production and business methods are becoming more common and we expect that more patents will be issued in our technical field. Any such claims, with or without merit, could be time-consuming, result in costly litigation and diversion of management’s attention and resources, cause product shipment delays or require us to enter into royalty or licensing agreements.

Moreover, such royalty or licensing agreements, if required, may not be on terms advantageous to us, or acceptable at all, which could seriously harm our business or financial condition. “Harvard” is a registered trademark of Harvard University.

The marks “Harvard Apparatus” and “Harvard Bioscience” are being used pursuant to a license agreement entered into in December 2002 between us and Harvard University. Government Regulation We are generally not subject to direct governmental regulation other than the laws and regulations generally applicable to businesses in the domestic and foreign jurisdictions in which we operate.

In particular, other than our amino acid analyzer product, our current products are not subject to pre-market approval by the United States Food and Drug Administration for use on human clinical patients. In addition, we believe we are materially in compliance with all relevant environmental laws.

Employees As of December 31, 2023, we employed 416 employees, which included 391 full-time employees. Some of our employees in Europe have statutory collective bargaining rights. We have never experienced a general work stoppage or strike, and management believes that our relations with our employees are good.

Additional information about our employees follows: Country Full-time Part-time United States 248 9 Germany 55 14 United Kingdom 35 2 Spain 26 - China 17 - Rest of World 10 - Total 391 25 Function Full-time Part-time Manufacturing 153 6 Sales and marketing 135 6 Research and development 49 9 General and administrative 54 4 Total 391 25 We make employment decisions without regard to age, color, national origin, citizenship status, physical or mental disability, race, religion, creed, gender, sex, sexual orientation, gender identity and/or expression, genetic information, marital status, status with regard to public assistance, veteran and military status or any other characteristic protected by federal, state or local law.

We take steps to employ and advance in employment qualified protected veterans and qualified individuals with disabilities. Geographic Area Financial information regarding geographic areas in which we operate is provided in Notes 5 and 13 to the Consolidated Financial Statements included in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this report.

Available Information and Website Our website address is www.harvardbioscience.com.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and exhibits and amendments to those reports filed or furnished with the Securities and Exchange Commission pursuant to Section 13(a) of the Exchange Act are available for review on our website and the Securities and Exchange Commission’s website at www.sec.gov.

Any such materials that we file with, or furnish to, the SEC in the future will be available on our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information on our website is not incorporated by reference into this Annual Report on Form 10-K. 6 Table of Contents Item 1A.

Risk Factors. The following factors should be reviewed carefully, in conjunction with the other information contained in this Annual Report on Form 10-K. As previously discussed, our actual results could differ materially from our forward-looking statements. Our business faces a variety of risks.

These risks include those described below and may include additional risks and uncertainties not presently known to us or that we currently deem immaterial. If any of the events or circumstances described in the following risk factors occur, our business operations, performance and financial condition could be adversely affected, and the trading price of our common stock could decline.

Risks Related to Our Industry The life sciences industry is very competitive. We expect to encounter increased competition from both established and development-stage companies that continually enter the market.

These include companies developing and marketing life science instruments, systems and lab consumables, health care companies that manufacture laboratory-based tests and analyzers, diagnostic and pharmaceutical companies, analytical instrument companies, and companies developing life science or drug discovery technologies.

Currently, our principal competition comes from established companies that provide products that perform many of the same functions for which we market our products. Many of our competitors have substantially greater financial, operational, marketing and technical resources than we do. Moreover, these competitors may offer broader product lines and tactical discounts and may have greater name recognition.

Forward-looking statements include, but are not limited to, statements about management ’ s confidence or expectations, our business strategy, our ability to raise capital or borrow funds to consummate acquisitions and the availability of attractive acquisition candidates, our expectations regarding future costs of product revenues, our anticipated compliance with the covenants contained in our credit facility, the adequacy of our financial resources and our plans, objectives, expectations and intentions that are not historical facts.

In some cases, you can identify forward-looking statements by terms such as “ may, ” “ will, ” “ should, ” “ could, ” “ would, ” “ seek, ” “ expects, ” “ plans, ” “ aim, ” “ anticipates, ” “ believes, ” “ estimates, ” “ projects, ” “ predicts, ” “ intends, ” “ think, ” “ strategy, ” “ potential, ” “ objectives, ” “ optimistic, ” “ new, ” “ goal ” and similar expressions intended to identify forward-looking statements.