Good morning, everyone. This is Rachel Vatnsdal with the Life Science Tools and Diagnostics team here at JPMorgan. I am joined by the Agilent management team on stage. As a reminder, this will be a 40-minute session. The first half will be prepared remarks, followed by roughly 20 minutes of Q&A. With that, Padraig, I will pass it off to you.
Thanks, Rachel, and good morning, everybody. It's great to be here today. It's only four weeks after Investor Day, so great to talk about our strategy, transformation, and our growth ambitions going forward. What you're going to hear today is a lot about our markets. I'm sure there'll be a lot of questions in Q&A about how the markets are doing. You're going to hear about the Ignite transformation, which we're extremely excited about.
You're going to hear about, of course, the new structure and our new leadership team. When I took the job eight months ago, I really talked to a lot of customers, talked to a lot of employees, and, of course, talked to shareholders. Three things really resounded. Agilent is really excellent customer service. Customers trust us. We have a unique culture within the industry, a unique employee engagement.
I would say, from a shareholder perspective, we deliver what we say we're going to deliver. When I talked to Bob, we did $100 million in annualized savings very quickly. We reinvested $50 million back into business. We also set about a new market-based strategy, which was a departure for Agilent. Rather than looking at a product line strategy, looking at the markets and where we have opportunity, and we're going to talk about that today. A very ambitious Ignite transformation, which is driven around growth, margin expansion, and also making the company more effective and efficient. I think, last but not least, a world-class leadership team who I'm going to talk about today, and also a new structure that's going to execute on that strategy. So now, for our legal department, I put up this for a few seconds.
If everybody can read that, you're better than me. But let's get into it. So key takeaways from today. First, we are an established leader in $80 billion markets that are driven by secular growth. Many parts of these markets are fast-growing sectors, and we'll talk about those later on. Leading market share and sustainable customer advantage through customer focus. You're going to hear me talk a lot today about our connection with customers, what the one commercial organization does, and how that's pivotal for our strategy going forward.
As the market recovers, re-accelerating growth through innovation, innovation and excellence through our Ignite program is going to be a really key theme. And, of course, market share gains. I saw a prelim of our latest market share yesterday. And once again, we've gained market share across all geographies, which is great to see.
Driving productivity and reinvesting through Ignite transformation. Of course, cultivating a strong leadership team and culture. All of this, the outcome is delivering 5%-7% long-term growth and double-digit EPS growth. A little bit about Agilent as a reminder. We're in 285,000 laboratories worldwide. In those 285,000 laboratories, we have 500 million assets installed globally. That is a real important position of strength from our install base as we think about customer lifetime value. $6.5 billion in revenue, 26.4% operating margin in 2024, and $5.29 in earnings per share in 2024. Split geography between 40% with the Americas, 27% with Europe, and 33% with Asia. We have been accelerating our recurring revenue business, which has, over the last five years in services to customers, been up 600 basis points.
You're going to see from our strategy, both organic and inorganic, that's something we're going to continue to do and accelerate to more of a recurring revenue business. A little bit about our markets. Extremely strong at $80 billion in total and 4%-6% growth. Biopharma and pharma have been our biggest part of our markets, at $25 billion, 5%-7% growth. And, of course, academia, really important within that. Clinical and diagnostics are a very durable, high-recurring revenue business for us at $20 billion in terms of an opportunity at 5%-7% growth.
And if you look at our applied markets, which we break down between chemical and advanced materials, environmental forensics, and food, in total a $21 billion opportunity. And within that, of course, many sector growth drivers with semiconductor EV testing from our side and also PFAS. So what are Agilent's strong fundamentals?
We're number one in key technology platforms, which really gives us a position of strength. I'm going to talk a lot about our strong customer connection, our robust customer retention rate of 90%, which is leading in the industry. It means customers trust us. They come back. They put their trust in us when budgets are released. And they vote for Agilent. Record orders in terms of digital this year passing $1 billion, which is really important for two areas.
First of all, making it easier to do business with our customers and also making us more productive inside as we move forward. Unparalleled customer support, over 90% in terms of customer satisfaction. That is industry-leading. And it gives us a great competitive advantage as we move forward. And last but not least, a strong free cash flow of over 84% between 2020 and 2024.
So building up a very strong balance sheet to allow us to put capital to work going forward. Last but not least, at the bottom, we were voted number 11 by Fortune's World's Best Workplaces out of all companies. A really strong recognition of the Agilent team and also shows that we have the best team in the business to move forward. So a little bit about our new strategy. Our mission hasn't changed to deliver trusted answers and insights to advance the quality of life. But our vision has changed. And the reason it's changed is because we have a new strategy. We have a new purpose as a company to innovate and deliver seamless solutions for our customers that are going to expand the frontiers of science. Very important for our teams.
It's the reason why we continue to attract talent and very important for the strategy moving forward. Of course, we have the three aggregate end markets: pharma, biopharma, clinical, and diagnostics and applied, and let me go from left to right about our strategic priorities. First, portfolio expansion and innovation. You're going to hear the word innovation. Asymmetric investment in key innovation areas driven through strategy and portfolio expanding. Expanding out our portfolio in key areas, particularly in faster-growing segments of the market. High-growth segments through organic and inorganic means. We have a lot of high-growth segments going forward. The ability to bring in new capabilities to the company and leverage existing capabilities is going to be imperative.
And as I go around the world talking to laboratories, going to scientists, the number one thing that is really top of mind for scientists, and I've been in this business for 27 years, I've never seen it at such the forefront, is productivity. Analysts want to do more with the equipment they have. Scientists and lab managers and actually companies need to know what their assets are doing. So this is a really important strategy moving forward. Leveraging our enterprise service business, which is unique in the industry, and looking at automation and productivity. AI is going to provide a really important enabler here. And we've got a lot of capabilities through our acquisition of Sigsense. Software and informatics was dispersed across the company in many different groups. It's now in one group at the enterprise level.
We will be asymmetrically investing in our software capabilities to drive our data for customers forward. And, of course, critical enablers. Our world-class commercial team, our digital capabilities, which we're going to continue to reinvest in, and, of course, have passed $1 billion this year, Ignite transformation and top talent. So a little bit about our new organizational structure. The team are here with me today. So we have Life Sciences and Diagnostics Group led by Simon May, who's come in with many years' experience in the industry. And you can see from top to bottom, it really overlays our pharma/biopharma market from the top to the middle. And you see our pathology and companion diagnostics at the bottom.
You can see now a very powerful business in one area, which is connected to pharma and biopharma customers, both through analytical and services, is our new combined CDMO businesses between NASD and BioVectra, which we see a long runway to growth. Applied Markets under Mike Tang, who led the GC and GC/MS business, now overlaying most of Applied Markets with gas chromatography, spectroscopy, GC/MS products. Last but not least, our CrossLab Group led by Angelica Riemann, where you see now we have consumables and services in one place, looking at recurring revenue, driving lifetime customer value, improving connect rates, and also software and automation in one place. Now we can talk about how we can improve laboratories. This is an enterprise group that serves the whole company. We're very excited about this new structure.
Talking about our innovation, our innovation has been very impressive over the last period. I will talk about pharma and biopharma. We had the Revident LC/Q-TOF, but also the Infinity III LC Series. And I'm sure we're going to get questions in the Q&A about Infinity III LC Series. But it was a really important launch for us. When we talked to customers, customers said productivity is the main reason for their purchases going forward.
And Infinity III LC Series really gets at that capabilities: sample tracking, ease of use, and making sure that analysts don't have to walk away from the system when they need to upload methods and not walk away to the computer systems and make sure they can be productive with the system. We've seen when this system is installed, laboratories get 10%-20% uptake and improvement on productivity.
We're seeing a very, very strong uptake from this launch. That will harness this system in the clinical and diagnostics, leading throughput and turnaround for pathologists. In applied markets, a new 8850 GC system and a new 7010 triple quad GC/MS, which is really important for the move from environmental testing to food testing and PFAS, making sure that we have the right detection limits. That's not all. There's hundreds of consumables and workflows and services that wrap around this that make our offerings really compelling. We're going to continue to accelerate innovation as we move forward. I talked about the shift to recurring revenue. We've moved from 54% in 2014 to 64% in 2024. What are the recent progresses? In the last four years, we've increased 400 basis points in service connect attach rate. We believe there's significant headroom here.
And we will continue accelerating that. We have an incredible business in services at $1.6 billion, with a 10% CAGR over the last four years, much more than break/fix, driven now by enterprise services, which is growing in double digits, where we now manage customers' assets, all our competitor assets, and show labs how productive and where they need to be more productive within their labs. We also have 70% of this business on contract, so extremely sticky. And new services like Agilent University and, of course, a lot of validation services providing a full offering to our customers. $0.9 billion in consumables growing at an 8% CAGR. This is an area where we're going to continue to expand and, of course, expand in high-growth areas. And $300 million in NASD growing at 19%.
Last year was a bit of an air pocket for NASD with some reconfiguration around clinical trials and so on. We have an extremely strong order book. We're expecting high single-digit, nudging to double-digit this year for that business. So I'm going to talk in general about the Ignite transformation journey and really three pillars. I'm going to, in a few slides, talk about numbers associated with this. But it's very important that we go through this today.
First of all, growth acceleration, making sure that we have product offerings and expanding product offerings through innovation. Simplicity and customer centricity, operating with a customer-first mindset and reducing complexity within a company. And productivity and scalability, improving our manufacturing footprint, improving our manufacturing efficiencies. And I would say between growth and growth acceleration and simplicity, things that are really important are innovation, digital capability, our enterprise pricing across the company.
Traditionally, we've done it at a product line level. We see a lot of value there, and also our ability to do sourcing and get more value from sourcing, both direct and indirect, so a very ambitious program. It's a three-year program. We have all the tracks laid out, and I'll be delighted to come back during investor days and so on, and, of course, our earnings to see our progress on that. Let me go to the overall numbers, so 5%-7% annually in terms of core growth, 50%-100% plus basis points per year. The one thing that I really want to reiterate that maybe it wasn't clear for some people in the investor day, it's 100% plus. This is something we're striving for, and it's something we will be updating you as we go forward. Double-digit EPS growth.
And we believe from our strategy and our capabilities within the company, we can achieve this as the market recovers. A little bit about the long-term algorithm for the company. From 2020 to 2024, it was a 6% CAGR. We are going to grow above the market from 5% to 7% from 2025 to 2028. And how are we going to do that? From the applied markets, of course, PFAS within that is really important. Mid- to high-single digits, our specialized CDMO capabilities, our pathology, which is a highly durable business growing at this rate, and accelerated NPIs like the Infinity III driving our portfolio expansion.
And single- to high-digits, high- to single-digits, increasing connect rates that I talked about, new productivity solutions, and enterprise solutions. And, of course, as we look for the right M&A targets, they will, of course, be a part of this.
What I would say is that M&A is outside the guide. So a little bit about this, margin expansion. So I talked about Ignite, a little bit more detail on that. In FY20, of course, we had 23.5% margin. In FY24, 26.4%. So what is the bridge to get to the 50% to 100% plus basis points? First of all, 50 basis points leveraging revenue growth and mix. Secondly, 50% to 100% plus basis points on our software digital operating model, pricing, and procurement, which we have all very well laid out. And most importantly, 50 basis points of strategic reinvestment in the key areas, including digital. So we're very excited about this program.
So putting up our guide just to reiterate it, our core growth, our net revenues on the low end of 1.65% and our high end of 1.68%, EPS of $1.25-$1.28 for the quarter, FY25 guide $6.79-$6.87, and our EPS from $5.54-$5.61. So I want to make sure we have a lot of time for Q&A. So bringing you back, what is really the important message here? First of all, we're an established leader in $80 billion markets driven by secular growth. You see that through PFAS. You see that through GLP-1 within our CDMO businesses. You see that through EV and, of course, semiconductor. Leading market shares, which I reiterated that we are continuing to gain share across the board, which is objectively identified. A real customer advantage with how we look after customers.
So when we bring out new products, new services, and new innovation, very important that we have the customer teams to deliver on it. Re-accelerating growth. The last two years for this industry has been very difficult. We're seeing the industry markets coming back, so re-accelerating growth through innovation and market share gains. We talked about Ignite, so driving productivity through Ignite and, most importantly, reinvesting for growth in the company, and last but not least, having a world-class leadership team and continuing to cultivate our culture, so with that, go to Q&A. Perfect. Thank you. Let me take this one.
Thank you, Padraig. So maybe you just spoke a lot about some of the updates that you gave us just a few weeks ago at the Analyst Day, but I think one of the things that some investors had questions on was just a new organizational structure and also part of the Ignite transformation program as well. So going forward, Agilent's going to operate under three key businesses: Life Sciences and Diagnostics Markets Group, Applied Markets Group, and then Agilent CrossLab Group. So what are the key advantages to this new structure? And then also just from a logistics and timing perspective, what actions do you guys need to take or what have you already taken to implement this new organizational structure?
Yeah. Great first question, Rachel. So first of all, Agilent has 29 product lines that were dispersed around the company in different groups. So we really felt from the strategy and, of course, structure follows strategy, is how can we aggregate the groups in a more focused strategic way? And you can see that with LSDG, of course, having pharma and biopharma and clinical diagnostics in it, mostly on the overlay. Applied Markets, of course, as well in the AMG group.
And we really felt from the strategic point of view, chemistries and services getting together for recurring revenue, bringing that back together was really important, but having software in one place and automation. So I think it is very logical. It allows us to move with speed. And most importantly, it's going to allow us to make asymmetric investment across the business.
You can imagine with 29 product lines that were dispersed in different areas, what is important is to bring that together and to invest in our fastest growing areas. So that's something that we're very focused on. It's all done. We spent a lot of time thinking through this through strategy. We did all the restatements. All that work is done. And I have to say the Agilent team is super excited about it. But who's even more excited is our customer base now that can see the aggregation in the groups.
Perfect. And then one of the things you mentioned at the end of your preparatory remarks was just around how this sector has kind of been going through a recovery period right now. And so you've talked about within your guidance, you embed 4%-6% market growth over the long term. And so that said, given some of this recovery, how are you guys seeing the pace of recovery over the next 6-12 months? And what do you think that the market growth will really look like over that period?
Yeah, I can start and pass it over to Bob. I mean, as you look at a few things, and I knew we would get to this in the Q&A, but a few things that we're seeing are seeing our funnels improve. We're seeing the deal velocity improve. So the time it takes to close deals from before is now shortening. And a lot of that, of course, is driven about the Infinity III. So what I would say is for more positivity in the markets.
What's really unique, of course, in some pharma and biopharma areas is that the budgets have always existed but not released. We're seeing those released more steady now. So what I would say through the year is going to be a steady recovery. And as we go into the following years, I think we're going to get to our higher growth ambition. But I know about it.
Yeah. And good morning, everyone. Pleasure to talk to you. And Rachel, as you say, we're seeing that steady recovery. That is the $64,000 question, as you say. Our expectation is that the second half of the year will be more normalized. And although what we're seeing is earlier green shoots here in the first quarter and then moving into the second quarter, which is actually positive from our perspective. So I would expect us to exit at that long-term growth rate and see more normalized growth for a full year in 2026 and beyond.
Perfect. Maybe going alongside that, just some of the assumptions built into your 2025 guidance, which really assumes 2.5%-3.5% core revenue growth for the year. It assumes somewhat conservative assumptions in terms of this replacement cycle dynamic, especially relative to some of your peers that have commented a little bit more zealous on what they're expecting for the replacement cycle dynamic. So could you walk us through the puts and takes within that? How does the Infinity III kind of impact any of your assumptions on the replacement cycle dynamics as well?
Yeah. Look, I mean, after going through the last two years, I think conservative is probably the right way to approach this because it's recovering at different paces. Infinity III has a really strong launch. I think that's going to be a creative to that overall number. I think in China as well, the stimulus, and we've been extremely successful in the stimulus. I think that's an add-on to where we're going in terms of the guide. So overall, it's conservative. But I think for anybody saying we're completely out of the woods in the first two quarters, moving into the second half, I would be very prudent on that.
Yeah. A couple of data points to build on what Padraig is saying. When we think about Infinity III, we've been very pleased, as Padraig mentioned. We are actually seeing acceleration, but also a price benefit, a price premium to that product that really recognizes the value that we're providing, that productivity value that Padraig mentioned. We've got tens of thousands of instruments out in the field that are ripe for replacement.
When we look at our average age of the installed base, it's older than it was in 2019. So these are due. Couple the fact with the fact that, particularly in QA/QC, manufacturing volumes continue to grow. So these instruments are being used. The question is how fast that recurring or that replacement cycle. One thing we do know is that the market is not broken, and we've been under the curve, so to speak.
That's a mid-single digit grower just on the instrument side. Long term, we're well underneath that curve, and we would expect to get back to that curve. The question is how fast. And as Padraig is mentioning around China, we've been extremely pleased with our win rates on the stimulus to date. As we mentioned in the call back in November when we set out our initial guide, we took a very prudent approach that said none of that would be incremental.
So that would all be upside. And what I would say is we're tracking ahead of that based on the current win rates today. But we need to see. I mean, it's also still two months into the year. So very pleased with the progress. And as Padraig said, I think we're taking a prudent and conservative approach. But things are looking better than what we had anticipated even just two months ago.
Yeah. Maybe just commenting more on some of the near-term trends, your fiscal 1Q assumptions have a few moving pieces in it. Most importantly, Chinese Lunar New Year, which is going to be roughly a 2-point headwind. So can you walk us through what are the other assumptions that we should be thinking of? Budget flush is also a topic that's come up a lot on stage the last 24 hours. So have you guys seen anything from a budget flush dynamic? Is there anything else we should be aware of?
Yeah, I can start and maybe hand it over to Bob. I think from a budget flush, I think everybody's been waiting for this budget flush for the last three years in our industry. What we'd say is that there was definitely some incremental orders at the end of the year, but it would be hard to say it was a big flush. But I think overall, improving our orders continue to improve.
Of course, Chinese Lunar New Year moves across, but of course, the stimulus orders that we booked were in the start of the quarter. So we're going to be recognizing the revenue after that. And of course, you have the Infinity III moving through the quarter on it, which we're very, very pleased about. So I think all is going according to plan. We'll see as we move through, of course, the second half of the year.
Yeah. I think just to build on what Padraig is saying, I think the other piece that's really important when you think about the stimulus, we have seen an increasing requirement in China for China. And so our ability to be able to provide almost all of our entire portfolio being manufactured in China, I think puts us at a competitive advantage versus some of our competitors. And we've seen that in the win rates that we've had.
In addition, this stimulus is much broader than the previous stimulus, which was much more geared towards high-end academia and research. So we're actually seeing that across our entire portfolio, which really plays into our strengths across multiple end markets, but also technology platforms. So when we talk about Q1, that two points just to kind of, that's an overall number. That translates to roughly 10 points in China.
So our China number will be lower than what you would look at for the long term. It'll come back in Q2 and then continue into Q3 and Q4 just for the folks who are modeling Q1 versus Q2.
For sure. That's helpful. Maybe digging into some of these China stimulus comments a little bit more. I think that's a topic that a lot of us in the room do care about. So you mentioned just the breadth and the magnitude of kind of what you guys are seeing from an orders perspective. When did that start to really pick up meaningfully from your guys' view? And you mentioned it's broad-based, but can you call out some of the specific sectors, any provinces, but then also product type? Where are you guys seeing on that front?
Yeah. So let me kind of give you the highlights around it. So for the last few years, it's really been in academia and high-end equipment, right? So that was a stimulus really where we don't play in super high-end equipment. But this stimulus was very, very broad. And the first ones are around government agencies actually that are doing testing.
It's across all our platforms. So when I look through the stimulus orders and I look through all our platforms, it's LCs, it's GCs, it's spectroscopy. And I have to say the team did an extremely great job in terms of getting our made in China capabilities up and running. We have a long legacy in China of manufacturing, but now we can produce all of our equipment in China for China. That allows us to compete for this business.
As Bob said, our win rate is elevated from what we see globally in terms of that stimulus win. It's tens of millions of dollars, I would say. I would say a big portion of that would be incremental. Of course, there's some normalized business in it, but we're very pleased. Now as we go through the year, we think we probably see maybe one more coming in terms of stimulus. We're waiting to see what that is. The teams are really working with the customers on that. Lots of proposals going out, lots of requests going out. It's not trivial, right? When they go out, you have to manufacture it, you have to deliver it, and you have to install it for the revenue recognition. I think the Agilent team did a great job.
Yeah. I think to build on that, your last question, we've seen that activity really pick up in the last quarter. We started seeing early signs of this, I think, in Q3. We talked about that. And in Q4, we started seeing some of the proposal activity. And now what you've seen really since we last talked is some of those products being, those centers being awarded. And then you start seeing the revenue. And that's consistent with what we were expecting to see, which is the revenue dollars really showing up in 2025. And so we're seeing that. And as Padraig has mentioned, we're expecting another round of this probably in our second half of the year.
Perfect. And then another geographic region that has had a lot of eyes on it lately is India. You guys have pointed out that you expect India to grow double digits going forward. So can you remind us, what does Agilent's India growth profile look like historically? And how large is your exposure to the region at this point? And then also, what's your competitive positioning within the landscape as well?
Yeah. Look, I think we've had a strong double-digit growth in India over the last number of years. Our presence in India is both direct in terms of sales and service, but we have a very big back office function in India. So we have a very focused team, of course, on our service and sales. Pharma and biopharma is really important to us in India. We have lots of big, big installed base in that area.
But also the applied markets. If you think about EV testing and manufacturing of EVs, it's one of the biggest manufacturers in the world. And of course, our spectroscopy products and GC/MS products are installed there. We have a very focused investment plan for India. So over the last few quarters and the coming quarters, we invested in a big biopharma center of excellence in Hyderabad near our customers.
We're continuing to invest in our logistics capabilities inside. So I think the topology of the business is largely pharma and biopharma, particularly with biosimilars and, of course, small and large molecule API production. And they're, of course, getting a lot of business that's now coming from China into that area, a lot of investment moving from China. And of course, we're there to support it. The one thing I would say that is uniquely different about us in India is our support capabilities, our breadth and level of our support capabilities. We have many enterprise support contracts within India where we manage sites, and we're going to continue to build on that.
Another topic that's come up a lot in conversations this week is just election impacts and how some of your customers are thinking about the new administration as well. So can you walk us through what are you guys seeing in terms of NIH budget trends? How are you thinking about that as we head throughout 2025? And then also tariffs. Trump has been vocal about implementing tariffs in Canada, Mexico, China. So can you walk us through how is Agilent thinking about some of these trends related to the new administration? And what are your exposures to some of these potential risks as well?
Yeah. I mean, there's a lot of noise around NIH. We are less than 1% of our business will be relevant to that. So no big issue. I think, of course, a lot of talk around environmental regulatory, of course, around PFAS. We actually think that would be a tailwind in terms of our PFAS business. We also believe in pharma. When I talk to pharma customers, they're not really. It's not top of mind for them. Of course, they're watching the situation.
But one thing that you could really see improve, Rachel, if the rhetoric holds true, is maybe faster FDA approvals, which of course would help the overall area on it. And of course, the IRA. We think we've moved through it a bit. There's, of course, a move from large molecule, from, sorry, small molecule to large molecule. So we're watching that.
And in terms of tariffs, we've got a very global footprint. So for example, our China is in China for China. We don't need to export out of China for the US. And 60% of our business in the US is actually manufactured in the US. The rest is from Europe and around the world. We have no manufacturing in Mexico.
Maybe, you mentioned PFAS. So digging into that, that was, I think, one of the key highlights from the analyst day as well. You estimated it's roughly a $300 million market, growing 15%-20% annually. So can you talk to us? There's some different pockets of PFAS. We were talking about this last night at our dinner as well in terms of environmental, but also food, and now even some highlights on the air side as well for PFAS testing. So what's Agilent's differentiation and competitive advantage within each of those key markets? And why do you think it's so underpenetrated at this point?
Yeah. I mean, let me start by the last. Why is it underpenetrated? Because it's a really fast-moving market, not just from the modalities, but also from the geographic expansion. I think I mentioned on the investor call that China in the last quarter was one of our fastest growing regions because of the focus on regulation in there. But as it moves from classical environmental markets, what's really important is sensitivity. And as it moves to food and air modalities, we have the products and the sensitivity to really test for this. But what I would say to people that the most important thing to know about PFAS is not just your detection limits, not just your chemistries for separation, but your technical teams to get customers up and running for price per sample.
And that's. I talked a lot about our technical teams in the field, our application engineers, and our technical specialists. This is a really big competitive differentiation as we move forward. So for PFAS, you're really going to see two vectors. You're going to see modalities move. Of course, there's only a certain number of compounds that are now being spoken about. That's only going to increase. But also you're going to see geographic expansion as well. So it's a really important business where we're number one across all modalities, environmental, food, and air.
Perfect. Shifting over to another big topic is just GLP-1s. Can you walk us through Agilent's involvement in the GLP-1 market currently? How does BioVectra add some capabilities there? And then overall, what's your current revenue exposure to GLP-1s at this point as well?
Yeah, I'd start off and maybe hand over to Bob in revenue. So GLP-1s, I was actually visiting a site in Europe, which was a greenfield site for GLP-1s. And I'm glad to say it was full of new Agilent equipment for that. So we're a very strong player in GLP-1 on the analytical side. BioVectra are vertically involved with two of the largest GLP-1 suppliers. Our capabilities in there are second to none. So what we've seen from that is that it's a big growth vector from our CDMO business in a fast-growing area. But also we're seeing a lot of cross-sell and up-sell opportunity between our analytical customers and the CDMO capabilities we have in GLP-1. So it's a very exciting business. And I'm not on the revenue side.
Yeah. On the revenue side, if I take a look at it, and I would expand the lens maybe to say all kind of peptide manufacturing is what you're seeing as other applications there as well. It's approaching $100 million, which will then actually accelerate with a full year of BioVectra. So if you looked at that kind of on a pro forma basis, it would be over $100 million and very accretive to the company.
One thing that I forgot to mention, our CDMO business is maybe in that we expect by 2020 to be a billion-dollar business combined.
Then just on NASD, you talked about how you expect NASD to return to growth in 2025. And in the long term, you expect NASD and BioVectra to present a $1 billion-plus revenue opportunity by 2030. So can you unpack that for us a bit? What are the assumptions to kind of get there? And then what is your confidence in achieving that target long term?
First of all, we're extremely confident in the long-term dynamics of this market and our capabilities just because of the key areas that we're in: ADCs, GLP-1, microbial fermentation capability, and also our world-class oligonucleotide business on it. As I said, it was a bit of an air pocket where there were clinical trials being reconfigured, commercial batches, of course, being reconfigured. We see we're kind of through that. We see that our order book is very, very strong for NASD. Now we're building that as we go forward as it is for BioVectra.
Yeah. I would say we're very confident, Rachel. We've put $1.6 billion between our internal capacity expansion on NASD and then the acquisition of BioVectra, our single two biggest largest investments. And we're very excited about the long-term potential there. We continue to move forward. I think what's lost despite the challenges that we had in NASD last year, the portfolio, the order book is extremely strong now. We're actually taking orders already for 2026. And while the revenue was down, the actual number of molecules that we were producing actually increased, which actually speaks to the future opportunities. And so our clinical volume, it's less efficient because there are smaller batches and activities, but the clinical volume continued to grow in 2024. And we would expect that to continue here in 2025.
All those products are also looking at indications that have the potential for even higher volumes, so larger patient populations and so forth. So we're very excited about NASD. Then the complementary nature of BioVectra allows us to have more end-to-end solutions for some of those same customers over time.
Perfect. Then just in terms of the analyst day targets, you raised your operating margin expansion targets from 50-100 basis points to 50-100 plus, as you alluded to. So you expect to drive that plus mark by doing the Ignite transformation initiative. So can you provide more color on the puts and takes associated with that? And what is the potential magnitude that we could see on the upside? What could the plus sign represent?
Yeah. Look, I think if you look at it, it's a three-year program that we're moving through. We're moving through at pace. If you think about in we're expecting to see some margin improvement, of course, this quarter, but in 2025, the second half, we'll see most of that. In the short term, we're looking at our ability on enterprise pricing, which is very important. Also, our sourcing capability, that's something that's going to have a pretty quick impact. And over the middle period, I think over the second year, you're going to see a lot on the digital execution, digital capabilities, and also on our innovation pipeline that we have very well laid out. And I would say the longer term would be more manufacturing footprint, right?
So that's something you can't change in a quarter, but it's something you need to look at, both manufacturing footprint and manufacturing efficiency. So we're really excited about it. So I think you're going to see the progression, and we'll be talking about it in every investor call.
Yeah. I was going to say on the plus, stay tuned, Rachel. But what I can tell you is that the entire leadership team is very incentivized on this. We have a long-term compensation goal that all of us are some of our long-term comp is tied to. So we have a very clear target that we're going after. And you can imagine that if we're committed to this, we probably have a higher target internally to shoot for.
But I also want to say, as we move forward, that investment, that reinvestment that Padraig talked about is really important because what we want to do is make sure that we also accelerate our growth. So Ignite is as much about growth as it is about margin expansion. And so we will shoot for more, but also have the opportunity to reinvest to really drive that growth to the highest.
Yeah. And it's not like growth is an afterthought. We have a lot of growth bridges based on that very clearly in a number of areas about where we're going to accelerate.
Perfect. Maybe last one, squeezing it in just on capital allocation. I think it was very clear from the analyst day, pretty more of a focus on M&A than maybe there was historically. So unpack that for us a bit. What are you looking for in terms of M&A targets? What's the size of deal that you'll be willing to do? And then just timelines associated with that as well.
Yeah. Look, I mean, we have a very pure pipeline, of course, which takes time to develop, but it's going to be based on strategy. You're not going to see surprising moves into areas that we don't have a right to win. It's going to be based on a right to win. I think you look at that $1 billion size, $1.5 billion, that type of size, and you're going to see it really complementary to our existing businesses also moving into faster-growing areas with a recurring revenue model.
Yeah. As Padraig mentioned, we're blessed with a very strong cash flow, very good balance sheet, and so we have plenty of opportunity to allocate that capital to growth-accretive investments over time.
Perfect. With that, we are unfortunately out of time. So thank you so much for joining us today, you guys.