Champions Oncology (CSBR) Q2 2026: Gross Margin Expands to 52% as Radiolabeling and Data Platform Drive Leverage
Gross margin expansion and operational discipline defined Champions Oncology’s quarter as radiolabeling and data platform initiatives gained traction. The company’s margin structure improved materially, underpinned by a shift toward higher-value services and efficiency gains, while investments in new growth levers continued. Management’s focus on self-funded growth and strategic capital allocation sets up a pivotal second half, with Corellia funding and data monetization as key watchpoints.
Summary
- Margin Structure Shift: Radiolabeling and operational efficiency drove a step-change in gross margin profile.
- Data Platform Investment: Targeted hiring and sequencing spend position Champions for differentiated growth.
- Capital Discipline Prevails: Leadership reiterates commitment to positive adjusted EBITDA and self-funded expansion.
Performance Analysis
Champions Oncology delivered an 11% year-over-year revenue increase, with total revenue reaching $15 million, as improved conversion of booked work and lower cancellation rates reflected stabilizing biopharma demand. Gross margin rose sharply to 52% from 45% a year ago, a direct result of flat cost of sales on higher revenue and a gradual shift of radiolabeling work in-house, reducing reliance on outsourced services. Operating income and adjusted EBITDA both turned positive, supporting management’s goal of maintaining profitability while scaling the business.
Operating expenses increased by $2 million, driven by deliberate investments in R&D for the data platform, sales and marketing hires, and temporary G&A costs tied to leadership transitions and IT upgrades. Notably, R&D spend rose by $900,000, with Corellia, the target discovery subsidiary, accounting for a portion. Despite these investments, the company ended the quarter with $8.5 million in cash and no debt, underscoring a continued commitment to fiscal discipline and self-funding.
- Cancellations Normalize: Lower cancellation rates contributed to improved revenue conversion and pipeline stability.
- Radiolabeling Leverage: Bringing specialized radiopharmaceutical workflows in-house is expected to further lift gross margins over time.
- Data Platform Spend: Sequencing and leadership hires are increasing near-term opex but are central to long-term differentiation.
Cash flow from operations was negative, primarily due to changes in deferred revenue, but management characterized all working capital movements as within the ordinary course. With a stable cash position and margin expansion, Champions enters the second half with a clear focus on execution and strategic investment in its highest-conviction growth levers.
Executive Commentary
"A key highlight of the quarter was our continued success in our radiolabeling and radiopharmaceutical support workflows. As we introduced recently, Champions operates one of the very few labs in the industry approved to perform this type of highly specialized radiolabeling work. This is an emerging area of significant interest within oncology drug development, and the demand we're seeing from customers reinforces the strategic importance of this capability."
Rob Brannon, Chief Executive Officer
"Cost of sales for the quarter was $7.3 million compared to $7.4 million last year. Our flat cost of sales on an increased revenue base generated those margins of 52% compared to 45% last year. While there is quarterly margin variability due to the timing of specific costs, such as outsourced lab services, this quarter is a good reflection on the margin expectations of our core business."
David Miller, Chief Financial Officer
Strategic Positioning
1. Radiolabeling as a Differentiator
Champions’ radiolabeling capability, one of the few industry-approved labs for this highly specialized work, positions the company at the forefront of an emerging area in oncology drug development. As more of this workflow transitions in-house, management expects both increased strategic value for biopharma partners and a structural lift to gross margin.
2. Data Platform Monetization
Investment in the data platform, including hiring a dedicated general manager and expanding sequencing capacity, is designed to deepen Champions’ value proposition for pharma clients. The platform’s integration of biological data, pharmacology, and PDX (patient-derived xenograft) assets aims to support target identification and translational research, anchoring long-term growth.
3. Corellia Funding Transition
Corellia, Champions’ target discovery subsidiary, remains on the books pending external venture funding. Management’s stated intent is to redirect future proceeds toward accelerating the data business, rather than short-term P&L relief, signaling a clear prioritization of scalable, high-margin revenue streams.
4. Commercial Expansion
Sales and marketing investments, including targeted hires, are increasing Champions’ capacity to capture growing demand as biopharma budgets recover. Management cited a recent industry survey indicating a trend toward increased outsourcing, which could serve as a tailwind for service bookings in 2026.
Key Considerations
This quarter marked a strategic inflection for Champions Oncology, as operational leverage, targeted investments, and renewed customer engagement converged. The company’s ability to balance margin expansion with disciplined investment will be tested as it scales data and radiolabeling services.
Key Considerations:
- Gross Margin Durability: Sustainability of 52%+ gross margins will depend on successful in-housing of radiolabeling and mix shift toward data.
- Data Platform Execution: Monetization remains early; commercial traction and customer adoption will be critical watchpoints.
- Corellia Funding Milestone: Timing and terms of external funding will influence capital allocation and margin profile in fiscal 2027.
- Biopharma Recovery: Gradual improvement in pharma budgets supports pipeline, but full normalization remains uncertain.
Risks
Champions faces risks from delayed biopharma budget recovery, potential execution missteps in scaling data and radiolabeling, and uncertainty around Corellia’s external funding. Margin gains could reverse if outsourced costs spike or if service mix shifts back toward lower-margin offerings. Additionally, competitive pressures and customer adoption timelines for new data products remain unpredictable, as acknowledged by management’s cautious framing of demand signals.
Forward Outlook
For Q3 and the remainder of fiscal 2026, Champions Oncology guided to:
- Continued year-over-year revenue growth
- Full-year positive adjusted EBITDA
Management reiterated its commitment to:
- Self-funding growth without shareholder dilution
- Investing in data platform and radiolabeling initiatives
Guidance reflects confidence in operational execution and pipeline visibility, tempered by ongoing caution about the pace of full biopharma market normalization.
Takeaways
Champions Oncology’s Q2 performance signals a business at an operational inflection, with margin expansion and targeted investment reshaping its growth profile.
- Margin Expansion: Structural improvements in gross margin reflect successful execution on radiolabeling and operational discipline, providing a foundation for future profitability.
- Strategic Investment: Data platform and commercial team investments are increasing near-term costs, but are essential for long-term differentiation and market share gains.
- Funding and Execution Watchpoints: Corellia’s path to external funding and the pace of data platform monetization remain the most important variables for forward-looking investors.
Conclusion
Champions Oncology’s Q2 results demonstrate clear progress in margin structure and strategic investment, setting the stage for a pivotal second half. Investors should monitor the sustainability of gross margin gains and the execution pace in data and radiolabeling as the company works to unlock higher-value growth.
Industry Read-Through
Champions Oncology’s results provide a window into the broader CRO (contract research organization) and preclinical services landscape, where specialized capabilities like radiolabeling and integrated data platforms are becoming critical differentiators. The normalization of biopharma budgets, while gradual, suggests a slow thaw in R&D outsourcing, with demand for high-complexity services outpacing commoditized offerings. Competitors lacking in-house radiolabeling or advanced data integration may face margin and growth headwinds as customers increasingly seek partners with end-to-end capabilities. The focus on self-funded growth and capital discipline also reflects a wider CRO sector trend toward profitability and selective investment over pure scale.