Hello, everyone. I'm Ankur Dhingra, Vice President of Investor Relations for Agilent. I welcome you all to Agilent's Investor Day, our third since launch of New Agilent in 2015. Now this has typically been an in person event. However, due to the pandemic, we have all found new ways of working.
So we are all here virtually this time, and I thank you all for your participation in this new format. Today, we will provide a comprehensive update about our strategy and businesses. Joining today are Mike McMullen, Agilent's President and CEO Bob McMullen, Agilent's Senior Vice President and CFO Jacob Thyssen, President of Agilent's Life Science and Applied Markets Group Sam Rocha, President of Agilent's Diagnostics and Genomics Group and Porig McDonnell, President of Agilent CrossLab Group. Before we get into the event, let me cover our Safe Harbor. Today's presentation and comments by our executive team will include forward looking statements about growth, prospects and financial performance of the company.
These statements are subject to various risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. Today's comments will refer to non GAAP financial measures. For historical measurements, you will find the most directly comparable GAAP financial metrics and reconciliations on our website.
Unless otherwise noted, all references to increases or decreases in financial metrics are year over year, and references to revenue growth are on a core basis. Core revenue growth excludes the impact of currency and the acquisition and divestitures completed within the past twelve months. With that, it's my pleasure to turn the event over to Mike. Mike?
Welcome to our first virtual Analyst and Investor Day. Just delighted you could join us here today. We are very much looking forward to sharing with you the Agilent story. Now the plan for today. Bob and I will open with an Agilent overview.
Then you'll hear from our Group Presidents Jacob, Porg and Sam on their respective group strategies that are aligned directly to our Agilent Enterprise growth strategy. Then we'll open it up for Q and A from our sell side coverage. I'm up first and I will cover three topics with you. First of all, our current shareholder value creation model, how we plan to continue to approach that is delivering, our plan to continue to drive growth, how we plan to accelerate our momentum, and looking forward, what can you expect from the Agile of the future. A reminder, who is Agilent?
We are a global leader in a $58,000,000,000 life science and diagnostics marketplace. We touch almost all the world's 275,000 laboratories. We have significant opportunities for shareholder value creation. We are a greater than $5,000,000,000 revenue, highly profitable, with a track record of double digit EPS growth. And it's not just about maintaining our slice of a big market.
We are focused on growth and value creation. In a global pandemic, we've continued to increase our market share in key markets, improve year over year operating margin while delivering EPS growth, all of which drive value creation and we have a plan to continue on the path we are on. We are not complacent. We plan to continue doing what we promise. I want to remind you about our approach to creating shareholder value.
Our shareholder value creation model is all about delivering above market growth, continued operating margin expansion, and a balanced capital deployment policy with prioritization on growth. And this approach is delivering and remains intact and will remain unchanged. When I first talked about this in 2015 with many of you, I really believed in it. I still believe it's the best approach for Agilent. We are a growth company.
This is the stuff that CEOs dream of. Our team is on fire and has chosen our performance. Growing market share, improving margins, we continue to create shareholder value. Let me remind you of the growth company we've built. In the past five years, we've added 1,300,000,000 in revenue.
We are executing a buy and build strategy to win the high growth markets, building on a strong core franchise. Our strategic approach is relatively straightforward. Our execution is what has made a difference. We are building on our analytical lab instrument franchise. Led by our CrossLab group, we are now targeting the entire lab market ecosystem, not just the Agilent installed base, and the results speak for themselves.
We've also built and expanded our business in other high growth markets. For example, as expanding our biopharma tools offering, building the cell analysis and oligo CDMO business, these investments are paying off. The results to date? More than 80% of the $1,300,000,000 in increased revenue delivered by the Agilent team since 2015 are from high growth markets. And there's more to come.
Our buy and build growth strategy is working. We are outpacing our competition by growing faster in these high growth markets. Our shareholder value creation model is delivering, delivering above market growth, 6% CAGR since 2015. Operating margins, up 500 basis points. Double digit EPS, 14% compound annual growth rate.
We are creating shareholder value, and there's more to come. Now, enough about the past. Let's look to the future. How will we sustain our success, this delivery of excellent results, and accelerate our momentum?
Now, first of all, let's talk about where do we compete.
Just a reminder of the markets we're in. We're in large, attractive markets driven by investments to improve the human condition, the quality of life. Across these markets, have leadership positions in key technologies and service offerings. We are operating from a position of strength. Collectively, for these markets we participate in, the overall growth rate is three percent to 5%.
Solid, but there are faster growing segments within this overall large market. And this is where we are pointing with our Build and Buy strategy on these high growth segments. The result, as you can expect, is continued above market growth. Let's talk about how we're going to do that. Here's Agilent's Build and Buy Growth strategy, which is comprised of our three core growth strategies: First, transform the analytical lab.
We are continuing to lead the transformation of the analytical lab. We believe customers need to have both world class scientific outcomes and to manage the lab environment efficiently and effectively, what we call improving the economics of the lab. Second, gain share in cancer diagnostic genomics. We plan to more deeply penetrate this existing market and build scale in our chosen areas. And finally, enter and expand in high growth markets.
We will continue to add offerings in biopharma tools, grow our cell analysis business and our oligo CDMO businesses, and help in the fight against COVID-nineteen. Our growth strategy is enabled by our innovation prowess, our digital and M and A capabilities, and our ability to expand globally as well, all built on the foundation of our unique One Agilent culture. Now let's take a deeper look at each of these strategies. In the analytical lab market, our customers are in the midst of
a
major transformation. These customers are seeking both innovative scientific outcomes and efficient lab operations. Agilent is leading the transformation. At the core of our efforts is an integrated platform strategy, where in a lab we will offer intelligent instruments, new customer business models like subscription services, integrated workflows, all in an integrated digital ecosystem. You'll hear more later today from Pork and Jacob, but a few additional comments.
In this transformation, our integrated platform is intended to address critical customer needs, shown here in green on this slide. Our customers have four big needs: leading scientific capabilities, efficient operations with knowledgeable and dependable support, all in a digitally connected environment. These needs are met with our integrated platform, as you can see in the center graphic. This is where our LSAG and ACG businesses join together and where we apply our unique winning formula. We have an industry leading portfolio, both the breadth and the size of the installed instrument base.
This is coupled with services, scale and an integrated software and solutions portfolio. The result? Accelerated growth. We are improving both the science and the economics of the lab. Our second growth strategy is focused on gaining share in cancer diagnostics genomics.
We are taking a differentiated approach to these markets to leverage our strengths and competitive advantages, all focused on finding that sweet spot where our strengths match market opportunities for faster growth and building scale in our areas of interest. These are our key growth strategies: For cancer diagnostics, expand the menu on our leading automation platform, leverage our leadership in IHC companion diagnostics with pharma, N4 Genomics provide best in class workflow components, enable clinical research and diagnostic testing. You'll hear later some more exciting details from Sam. We are entering and expanding our presence in high growth markets. Our focus areas are biopharma tools, cell analysis and building a GMP grade oligo business for RNA based therapeutics, what we call our NESD business, and Agilent has a role to play in helping this global fight against COVID-nineteen.
Let's take a deeper look. We have built a greater than $600,000,000 biopharma business, growing double digit across the entire biopharma value chain. We are focused on executing three strategies: developing leading analytical tools and workflows across the entire biopharma value chain building market leadership in oligo based APIs for RNA based therapeutics integrated cell analysis solutions for immunotherapy, biologics research, cell and gene therapy a large double digit growth business for Agilent with more to come. We are aggressively investing to increase our oligo CDMO capacity, building on our strengths to continue to grow share in this high growth market. Our Frederick, Colorado state of the art facility came fully online in 2020 with an initial production line, and we are expanding further to capture more growth as we just announced plans for $150,000,000 capacity expansion.
We have a broad based book of business with over a dozen customers with multiple programs per customer. We have built this business to date on clinical trial demand and expect further growth as products come on market. We continue to take share in this rapidly growing market by capitalizing on our differentiated strengths and capability and our willingness to aggressively invest. More to come from Sam. As you know, cell analysis is a rapidly growing market.
As we entered 2016, we had zero cell analysis business at Agilent. Today, we have a greater than $300,000,000 business. It's scaling fast and growing double digit. Our broad portfolio has positioned us well to meet the needs of emerging therapeutic development. We are well positioned to support research and treatment in areas like immunology, infectious disease and other therapies.
Jacob will cover this in more detail and share our Go Forward Plan to capture continued growth in this very, very exciting market. Agilent continues to help in the fight against the COVID-nineteen pandemic. We put our broad portfolio to immediate use in three key areas: testing, research, therapeutic development. Our quick response to the pandemic delivered a two percentage point bump in revenue growth. As we look forward, we see additional opportunities for Agilent in serology testing, direct viral detection, and wastewater viral detection.
Again, you'll hear more about this later from Jacob and Sam. While COVID-nineteen offerings are not part of our core strategy, we will continue to look for opportunistic ways to support the fight against the virus. So you've heard about our growth strategies. A key question to ask now is how do we consistently execute and outperform? I believe we have a few critical strategic enablers.
Our focus on innovation we'll have a video to show you later about innovation at Agilent our ability to expand globally a successful M and A track record and our growing digital capability all built on a unique One Agilent culture where we emphasize collaboration, people and results orientation. I can't emphasize this enough: The Agilent culture is our secret sauce. It makes high performance sustainable and possible over a long period of time. You know, the pandemic has changed our customers' behavior. They are now increasingly engaging in our digital channels, and we think this is a change that will stick.
Our digital investments are not just about improving how we serve customers, we also continue to invest in our internal systems to improve capability and drive efficiency. We are fortunate to have made the investments prior to the pandemic, and we will continue to invest. The results are clear. We are able to extend what we can offer to customers. We are improving our customer experience.
We have greater efficiency in our operations. We are aggressively investing in digital to drive growth, increase loyalty and improve operating margins. Five years ago, we focused on building a strong core business. In the intervening years, we built M and A capability so we could further expand into high growth strategic markets. This growing focus on strategic deployment of capital occurs within a well defined framework.
We will continue to buy businesses where the market is high growth. It makes strategic sense and where the admission is accretive both to growth and to earnings. The result so far has been the addition of over $400,000,000 of profitable revenue growing double digit. Agilent grows when we focus on a particular geographic growth market. In particular, we are paying close attention to China, where market growth is expected to be above the overall global market average.
Our focus on China is built on three assumptions: first, because it's a high growth market second, because we have not yet fully penetrated the market for some of our lines of business and finally, we are established in China. For the past thirty years, we've built knowledge of the market and built organizational capability that provides us with competitive advantage. We believe we can win in this geographic market because we have compelling offerings, an excellent team, and we are well established and trusted. I believe you'll continue to see revenue growth from our focus on China. Now, this is where I'm tended to brag.
When we are benchmarking externally, our employee engagement scores are well into the ninetieth percentile. You might say world class. Our Glassdoor rating is over four, and you know that employee engagement is a critical predictor of future company performance. As a result, we can attract the talent we need and we get to keep our top talent. It also makes us a much more attractive acquirer in our M and A pursuits.
Our talent advantage allows employees to work as one team focused on a relentless drive to satisfy customers, seamless collaboration to drive results. I often refer to our one Adjunct culture as our secret sauce that drives our high performance. It is our culture that makes our high performance sustainable over time. We have a winning culture, and I couldn't be more proud of our Agilent team. In wrapping up my comments, I want to affirm that we have a plan to continue our high performance.
We have no plans to take our foot off the gas. While the pandemic challenged us this year, the analyst team is engaged, focused and optimistic about our future. Our approach is straightforward and remains the same. We have a single-minded focus on supporting our customers and driving shareholder value creation. You can expect more above market growth, operating margin expansion and a balanced deployment of capital with prioritization and growth.
In summary, you can expect sustained double digit EPS growth. Now I'll turn it over to Bob.
Thanks, Mike. Hello, everyone, and thank you for attending our Analyst and Investor Day. As Mike talked about, we are proud of what we've accomplished. And what's even more exciting are the opportunities ahead of us. I'm gonna spend some time on what we've accomplished and how the company has changed, moving into faster growing markets while still delivering strong returns for our shareholders, how this positions us for the future and what you can expect from us.
Mike touched on our value creation model. It starts with above average market growth. How do we do that? Through driving and investing in innovation, creating a differentiated value proposition to our customers and creating a leading product and service portfolio, one that you can match, helping drive market share gains and by leveraging our global scale to drive growth where the opportunities are. That above market growth helps enable us to continue to expand our operating margins.
We've delivered 500 basis points of improvement since 2015, ending 2020 at 23.5%, and we believe we have more opportunities ahead of us. Leveraging our agile Agilent system that has helped drive gross margin productivity, but also the scale of our service offerings creates increased productivity. We've invested in our digital capabilities, making it easier to do business with us and stay connected to our customers. And this played out during the pandemic. When our customers needed us the most, we were there.
Investing in the business internally, expanding capabilities and focusing on higher growth M and A targets as well, deploying capital in a balanced fashion, and deploying capital back to our shareholders through dividends and share repurchases. This has been and will continue to be a value driver for us, altogether resulting in double digit earnings per share. Our Build and Buy strategy is working. We have been investing internally and externally, driving a meaningful segment of business, now over $600,000,000 or 12% of the company, that has exceptional growth prospects. That top box, biopharma tools, cell analysis and NASD, grew strong double digits in Q4, and we expect we'll continue to have excellent growth prospects going forward, leading the business with high single digit to double digit growth over the next several years.
Our CrossLab business has had outstanding performance, and we expect it to continue. Investing in making our instruments easier to use and smarter helps drive productivity in the labs. In addition, continuing to drive the attachment rates of consumables and services is a multiyear opportunity for us. We believe we are strongly positioned in this market given our technology breadth and global scale and reach, all on top of a strong core franchise. And going forward, we expect growth in all segments with the faster growing areas becoming an even more meaningful part of the business.
And with this increased growth, we've also built a more resilient business model during the same period, with 58% of our revenues recurring. And this was no more apparent than how we performed in 2020. To illustrate just how different the company is today, we went back to compare how today's Agilent performed in 2009 during the global financial crisis. In 2009, our business, a higher instrument oriented business with lower exposure to markets like pharma, performed slightly lower than the world gross domestic product, but we are no longer that company. Now let's fast forward to 2020.
We have demonstrated that our business is vastly different than what it was during the global financial crisis. The focus on higher growth, more resilient segments of the market, such as pharma, and a focus on service and recurring business streams, we've been able to show how much stronger our business is. Even our instrument business performed better in 2020 than 2009, given our technology platforms and technology leadership. And we continue to invest aggressively. If the pandemic showed us anything, it told us we are investing in the right places and will continue to do so.
We are spending almost $400,000,000 a year in R and D and tens of millions more in digital related investments to drive technology leadership. And we are disproportionately spending on higher growth markets, which the group presidents will talk to you about. And it's not just about R and D. We invested $185,000,000 to build new capacity for oligo manufacturing, which came online only a year ago and have already announced another $150,000,000 expansion earlier this year, with more opportunities likely to come in 2021. I spoke earlier about the global scale helping drive above market growth.
That shows up in the broad distribution of our revenue around the globe, enabling us to capture opportunities as they come along. This, along with our footprint, gives us flexibility to meet the needs of our customers while driving growth. And we are leading the way in working with our customers to adopt more ways of interacting with us and providing them with value in multiple ways. We talked often about the digital investments we have made and are making, driving increased customer satisfaction and stickiness. E commerce is leading the way, with almost two thirds of our consumables business ordered digitally.
And we are also providing value in other ways, such as service contract renewals via online and more recently, leveraging technology subscriptions, leasing and software as a service as new ways of interacting with our customers. All told, over $05,000,000,000 of business goes through these channels, increasing at a rate much faster than the company. And these investments have not come at the expense of margins. In fact, they have helped drive our productivity. We have driven 500 basis points of margin expansion, driven by revenue growth but also productivity gains, driving lower raw material costs, increasing capacity and driving productivity.
Going forward, you can expect more of the same, although likely more to come from OpEx leverage. This above market growth and margin expansion has driven a 14% earnings per share compound annual growth rate, with 85% coming from income growth. So earnings per share performance has been driven by high quality earnings growth. Our balanced capital deployment has also served us well as 15% of our earnings per share growth or about two points of the EPS CAGR has come as a result of share repurchases. And you can see our balanced capital deployment in this chart.
We have increased our capital deployment in the last six years, focused on growth investments both internally and externally, while maintaining a healthy balance sheet, while increasing our leverage from years past. Going forward, you can expect more of the same, looking more similar to the past two years. We will remain disciplined on our M and A pursuits, but do not expect to reduce our leverage. We intend to maintain our investment grade rating, but have flexibility within our framework to invest and provide returns to our shareholders. Now let's see how this capital deployment has played out.
Since 2015, we have invested $2,500,000,000 in M and A. The businesses we purchased now represent 8% of our revenue in FY 2020, roughly $400,000,000 with the majority of that in our cell analysis business. That revenue has grown double digits and is a profitable source of income to the company. In addition, we continue to raise our dividends each year, providing a good source of additional returns to our shareholders. And our share repurchase program has been very successful.
So what can you expect from us going forward? Leveraging the faster growing businesses, we expect to increase our expected core growth rates to 5% to 7% over the next several years. This is an acceleration from the last Analyst Investor Day given our increased exposure to faster growing markets, our share gains and compelling opportunities you'll hear more about. We also expect to continue to drive operating margin expansion up to 100 basis points per year, also more aggressive. This is why we continue to invest in fast growing areas and build capabilities.
And you can expect us to continue our build and buy strategy in deploying capital. And you can also expect continued deployment for both M and A but also returning capital to shareholders. You can expect at least 2% earnings per share growth coming from share repurchases as well as continued growing dividend. The result is continued double digit earnings per share growth. Now I'll turn it over to Jacob, who will share more about our Life Sciences and Applied Market businesses.
But first, take a look at one of our key elements of our build and buy strategy, the cell analysis business.
Technology advances our future, and Agilent Technologies is committed to delivering a future filled with innovation. This is particularly true for the cell analysis market. In the last few years, Agilent has established a unique position in this space. Characterizing cellular behavior and function is an increasingly critical step in understanding normal cell behavior versus diseased states. A wide range of diseases, from cancer and diabetes to neurodegenerative disorders, are characterized by altered or abnormal cell function and metabolism.
Studying cellular ecosystems, and the interactions between cells, and in response to disease and therapeutics, cell function and metabolism is key to understanding these diseases, and could lead to the development of future therapies. Traditional methods for measuring cellular function require researchers to kill cells, known as destructive endpoint assays, in order to understand how those cells were functioning when they were alive. Agilent enables a more holistic approach to understanding the entire cellular ecosystem. Our cell analysis solutions allow researchers to gain deeper and more relevant insights to answer biological questions by studying live cells and their interactions and responses in real time. Agilent entered the cell analysis market with the purchase of C Chorus Biosciences in 2015.
The subsequent acquisitions of of Luxel, Luxell, AC Biosciences and BioTek have expanded the portfolio of cell analysis solutions. The combination of these advanced technologies and analytical instruments are highly complementary to one another and form the foundation for Agilent's continued market growth in this area. Agilent is targeting three segments in cell analysis: immunology, immuno oncology and immunotherapy infectious disease, virology and vaccine We are potential advantage the the the
researchers can easily select the optimum combinations that best meet the needs for answering their biological questions and throughput needs. From investigating immuno oncology and potential new immunotherapies, or infectious disease and vaccine analysis
research, the development and production of a new class of therapies, researchers rely on Agilent's cell analysis tools to refresh their fundamental questions about cellular function and behavior. Agilent's cell analysis division is made up
of a global team based in The U.
S, Europe and China, focused on long term growth. This team works with key global customers in development of innovative workflows. Cell analysis tools provide a critical mechanism for better understanding biological function. It's also a key element driving Agilent's growth. As a company, we're committed to both innovation and growth.
There's no better example of this than our thriving cell analysis business.
It is a great pleasure to spend time providing an overview of Agilent's Life Science and Applied Markets Group known as LSEG. As you know, LSEG is a significant part of Agilent and the home of our analytical instrument portfolio, informatics solutions and cell analysis businesses. We are the industry leader with the broadest portfolio in a connected ecosystem. This is key to our strategy on transforming the analytical lab together with ACG, which I will address in more details later in this presentation. And the numbers speak a certain language.
Even though fiscal twenty twenty was a challenging year, our low single digit negative rate of growth was the best in the industry. And hence, we built out our leadership position by taking market share across our portfolio and geographies. And speaking about geographies, we have a well balanced footprint with our largest market being China that constitute approximately 30% of our revenue. We continue to see China as a long term growth driver and we are building out our market share position there. Our leadership position in our six end markets are fueled by an extensive customer reach to more than 260,000 customer labs and a fantastic and strong innovation engine with an industry leading installed base of more than 600,000 instrument.
This is significant aftermarket opportunities for ACG that Porek will address later. And we are not sitting still. Over the past twelve months, we have launched more than 15 new instrument solutions, which I consider quite impressive due to the COVID-nineteen challenges. And over the past twenty four months, we have almost completely refaced our portfolio. And I believe that's a position of strength that is key to drive the transformation of the analytical lab.
However, before digging deeper into our strategy, I wanted to provide you with a few examples that not only illustrate how our solutions support our customers make impact on the quality of life, but also how our commercial team is making a sustainable impact on our customers. Let me start by cell analysis. Many of you know the story about how doctor June at UPenn treated the first child ever with CAR T for leukemia, Emily Whitehead, who has now been cancer free for more than eight years. This was a milestone in the treatment of acute lymphoblastic leukemia and has now resulted in FDA approved treatment. Doctor.
Jun used Agilent's Seahorse solutions to improve the design of the CAR T cells. And in fact, we are now further expanding our collaboration with Doctor. Jun through a thought leader program with the aim of characterizing and monitoring cell therapy production using our broad range of cell analysis tools. I'm quite excited about the opportunity to work closer with Doctor. Jun to advance the fight against cancer where our cell analysis tools play a vital role.
Another great example where our broad analytical instrument solutions are making an impact on human conditions is related to the investigation of long term impact of climate changes. And this example is literally close to home for us here in California, in which researchers are studying the effect of chemicals released in the devastating wildfires that has burned through The U. S. West Coast over the past years. Researchers from UC Davis are using highly sensitive and accurate Agilent solutions based on our GCQ Tough to identify the chemicals in the ashes.
The composition of these ashes are quite different as many of the fires have burned through industrial and residential areas with a significant amount of materials different from the traditional wildfires. At this point, we still don't understand the impact of these particles on the human condition. This has a real impact on mine and many of my colleagues' families. And finally, Agilent is also actively involved in supporting Professor Knappi from NC State and his research team to map out the consequences of PFAS in the environment. PFAS is a chemical that is widely used as a fire retardant in firefighting foam, cookware, but also in food packaging.
These materials have been used for decades and are now posing a real threat to our health. It has been linked to various cancers and hypertension. And as a chemical it's accumulating in the body, even small concentrations of PFAS can become a serious problem if consumed regularly over a long period of time. Based on Professor Knappis' research, it was found that for the past thirty five years, the PFAS level in the Cape Fear River was nearly 1,000 times greater than the recommended levels. And since this is the river, is the main water source for approximately 60,000 people, it's a serious concern.
A significant effort has, since the conclusion of the research, successfully reduced the PFAS level in the Cape Fear River. But the PFAS problem is a real environmental challenge across the world and is not simple to measure due to its composition and low concentration level. However, Agilent's highly accurate GC and LC MS solutions have proven to be best in class for such analysis and we see a significant interest for these solutions around the world. These few examples illustrate well how our instrument solutions are key to address essential challenges for the human conditions. This gives me a great sense of pride to be a part of a team that has such an impact on the world we live in.
But to be honest, I'm just as proud of mentioning the impact our commercial team had on our customers during the past nine months fighting and dealing with the pandemic. When the COVID-nineteen pandemic hit, first in China and then rest of the world, we pivoted quickly to remote customer engagement and continued to serve and support our customers in the challenging times. Many of our customers were struggling in the spring to close down labs in orderly fashion, and our team continued to serve and support them, while dealing with their own COVID-nineteen impact on their own lives. Going through this has created lasting relationship with those customers. And we truly saw the impact of having a clear strategy, a strong culture driving innovation, teamwork and empowerment of each team member.
At all levels in this company, our colleagues used our best effort to reach out, engage and support our customers and each other. This makes me really proud and truly impressed by the innovation and what the team came up with. We quickly moved to digital conferences and took advantage of significant investment we have made in the digital channel, which continue to fuel our sales funnel. As an example, we had more than 2,000 customers signed up for an excellent organized 100% virtual cell analysis conference to the fraction of the cost of a face to face event, but with a similar impact. Remote customer engagement, virtual conferences are areas that we truly believe have long term sustainability way beyond COVID.
And of course, we have also been in the direct fight against COVID with our cell analysis solution supporting research, vaccine development and serology testing, while our Bravo automation platform and consumables is central to the automated qPCR testing. Now let's turn back to the strategy. Our customers' expectations are changing. From making purchase decision focused on each instrument category and scientific outcome to making purchase decision from vendors who can provide a differentiated solution with both scientific and that productivity outcome. This goes way beyond providing a combination of an instrument, service, consumables and informatics.
In fact, delivering on these customer expectations require complete transformation of the analytical lab that focus on the combination of several dimension, including the digital lab ecosystem, intelligent and smart instrument, end to end workflows, data analytics, smart alerts and news business models. LSAG and ACG are executing on this strategy together and you'll see me address the first three elements in my section while Poyd will address the three others. It is beyond question that delivering on these customer expectations will require a broad instrument portfolio, significant investment in the digital lab and strong clinical mass in our aftermarket to ensure uptime and lab productivity. Few industry players have this combination, but Agilent is certainly one of them. So let me start by addressing the digital lab.
We envision that the future lab will be a completely digital connected lab where all instrument solutions are operated from the same informatics platform with smart and intelligent instruments that will inform the user of the performance and the potential need for preventive maintenance. There will be a full traceability of all samples and overview of the laboratory status and bottlenecks. All this information is stored in a cloud based data lake that allows the user to combine informatics across modalities to increase scientific accuracy and ensure complete insight in samples and lab performance. All the relevant data is available at the fingertips for all the stakeholders in the lab. This is powerful and placed to adjunct strength.
And now, let's take a look at the digital app.
As demand for analytical tests continues to increase, Agilent's customers need to improve the productivity of their labs while ensuring the highest levels of data quality and security. At Agilent, we recognize that meeting our customers' needs requires us to evolve and transform as a company. This evolution is being led through the digital lab program, aligning product strategy and development across Agilent to deliver a unique user experience through a comprehensive portfolio of software enabled solutions. This ecosystem will enable Agilent products to deliver significantly more value to customers. The capabilities we will deliver in this ecosystem are focused in three fundamental areas.
First, we will revolutionize data access and analytics through common, secure data and communications infrastructures. Improved data access and analytics will enable our users to use data in completely new ways, providing new insights along with the trusted answers they need. Second, we will improve time to value with intuitive products and intelligent services that require less training, mitigate errors, automate diagnostics, and allow remote assistance. Improved time to value means our customers can deploy their products faster and maintain them with less effort. Third, we will improve lab productivity by facilitating end to end sample tracking, providing comprehensive system utilization data and eliminating manual data reentry.
Improved lab productivity enables our end users to deliver meaningful results to their customers more efficiently and at a lower cost than ever before. By taking a comprehensive holistic view of our customers' are value to to customers. Space. Our journey has already begun. OpenLab Shared Services and OpenLab ECM are providing a unified customer experience with respect to compliance support.
Agilent SLIMs empowers end users to efficiently track samples as they move through the laboratory. CrossLab Asset Monitoring, the first service in the CrossLab Connect suite, and CrossLab Smart Alerts are accelerating our customers' productivity by providing new subscription software services to enable customers to monitor and manage their fleet of instruments as efficiently as possible. The more lifetime value our customers get from their laboratories by using Agilent products and services, the more they will turn to Agilent their trusted partner for those scientific products and services. Watch Agilent for future developments as we continue our digital journey.
As you can see, the digital lab will ensure that the user obtain real time analytical insights, ensure rapid time to value through ease of use and access to data at any time and all the information to ensure a highly efficient lab. Now this is not just a vision on how the future is going to look like. This is actually what we're already doing by transforming the analytical lab. We're already providing the digital lab through our open lab platform, our SLIMS, best in class LIM solution, smart alerts, CrossLab Connect that allow customers today to get a deep insight in the lab performance and productivity. We also fully recognize that our customers are at different maturity levels with respect to the digital lab and we are therefore committed to an ecosystem architecture that allows our customers to move forward step by step.
We call this land and expand. We are leading the way for our customers by executing on the strategy with a clear roadmap for the future. Another key pillar in our strategy are smart instruments. Over the past years and throughout our portfolio, we have integrated sensors and intelligence in our instruments that allows for real time monitoring of performance ensuring that the instruments can signal if and what type of preventive maintenance is needed, helps configure for optimized performance and a lot of other features. Let me share an example of our new 5,800 ICP OES.
By capturing data from the entire wavelength range, the built in algorithm provide a visual periodic table overview of the elements that are available in the sample and ensure that the correct measurement is performed the first time. In many labs, this reduces reruns by up to 30% and hence provides a real productivity improvement. The failure mode predictor deliver proactive information about the health of the instrument, ensuring that no measurement have been started that can't be finished. I'm sharing this as one of the examples, but all our instruments provide similar smarts. And you will hear more from Parekh about the power of smart alerts to get a full overview over the instruments in a lab in OneView.
The final dimension I will touch upon are end to end automation. As mentioned earlier, the user expectation and experience operating analytical instruments are changing, with more focus on rapid time to results and outcome. Here, the lab managers and technician in cannabis labs are good examples. This is a fast moving segment that doesn't have the same experience as we see from many other segments. However, Agilent is committed to enable those customers to ensure the highest quality of analysis, efficient lab performance with ease of use.
We have therefore developed 10 ready to use eMethods that cover all the relevant cannabis analysis, and these can be directly downloaded from adyen.com to develop an instrument and off you go. This not only reduces time to value from weeks into hours, but also ensures that the lab has the optimized eMethods available to ensure highest performance testing from day one. Furthermore, we have made all the relevant consumables, data analysis and report templates available to make this a true end to end experience. Agilent is already the leader in the cannabis space, also a tailwind here in fiscal twenty twenty, and we expect that eMethods will further solidify that position. As mentioned earlier by Mike, we view biopharma as a real growth driver for Agilent.
And for LSEG, this corresponds to approximately $3,000,000,000 market opportunity with an expected 10% CAGR. This space fits us very well with our portfolio strength and our aim of transforming the analytical lab, and we are hence investing more than 7% of our R and D into this space. Over the past years, we have made significant investments to develop the workflow solution required to address the monoclonal antibody market opportunity and we have seen great market adoptions. For example, in recent years, two dimensional LC has been shown to be highly promising for detailed characterization of monoclonal antibodies. We have developed a highly automated two DLC and QTUF system for multi attribute analysis directly from cell culture supernatants.
This workflow enables assessment of five essential parameters, including monoclonal antibody titer, size variance, molecular weight, amino acid sequence and post translational modification in a completely automated way. This takes several labor and time intensive steps away and ensure the highest quality of results. However, we are also making investments beyond monoclonal antibodies and we are making real headway into the cell and gene therapy. Our market leading LCQtopoligo workflow is a great example of us making impact in a new opportunity space. Finally, I see a further extension of the analytical tool opportunity into at line and online measurement at the manufacturing floor for both QAQC and PAT.
We are already in deep partnership and developing workflows to address this space, both from a chromatography and from a spectroscopy perspective. In my final market opportunity example, I am proud of Agilent's leadership position in lifestyle analysis. As you know, we're building this business up through a series of acquisitions starting with Seahorse and followed on by Loxel, a CEO in biotech. We now have a business above $300,000,000 in a $5,000,000,000 market space with a significant growth opportunity. We entered this space based on our deep insight in cancer and immunotherapy from DDG, recognizing that the understanding of live cells would be central to advanced immunotherapy offerings.
However, we also realized that tools for measuring live cells would be central to better understand our immune system for developing treatments for infectious diseases and biology in general. Needless to say, COVID-nineteen has emphasized that hypothesis. And as stated earlier, we see a significant interest from our cell analysis solution in those spaces. However, the real power of our live cell analysis offering is in the clear alignment with our analytical lab strategy by building differentiated multi modality workflows that are connected through a common informatics platform. We have already seen this play out in the CAR T space, where the power of our combined solutions truly come through.
And the best thing, we're just getting started. I think you felt my passion for this business during the past twenty minutes, and I'm proud of leading the best in industry team with a strong company culture. We have an industry leading portfolio of instrument solutions addressing real challenges for a safe and healthy future. Our strategy of transforming the umbilical lab together with ACG is working and in full execution mode. And our customers do agree: We have the numbers to prove it.
Thank you for your attention. And now I'll turn it over to Porrick who will share more about Agilent's CrossLab business. But first, let's take a look at how innovation thrives here at Agilent.
Innovation is in Agilent's DNA. Agilent's scientists, engineers, and technologists are driven to challenge the status quo, continually seeking to create additional capabilities for our 275,000 worldwide laboratory customers. This spirit of innovation helps us deliver industry leading analytical and diagnostic solutions for our customers' critical questions and challenges. Our investment in research and development has been pivotal to innovation. Agilent
is consistently invested in
R and D each year. In addition, we have many programs that enable us to collaborate with leading researchers in universities, government, and industry throughout the world. However, our culture of innovation expands beyond R and D and is core to the company. From the development of products, services, or solutions offered to our customers, to improvements in processes and internal operations, it's that culture of innovation that is key, allowing us to continue to deliver trusted answers for our customers. Our vast range of expertise and unique perspectives result in a broad portfolio of products and services that push scientific boundaries and enable scientific breakthroughs and discoveries.
From infectious disease research, cancer research, diagnostics and companion diagnostics, new drug discovery and ensuring the quality and safety of these next generation therapeutics, food quality, and the safety of air, water, and soil for the sustainability of our planet.
At Agilent, we never use the word failure. If a project doesn't work out as anticipated, we don't call it a failure. Instead, we ask ourselves, how can we learn from this and what can we do better in the future? In the Agilent culture, we work together to tackle the hard problems that, if solved, can really make a difference for our customers. That's really what drives us.
We have the freedom to think creatively and to take the path that will lead us forward in innovation and contribution.
There will always be opportunities to challenge the status quo. Agilent selects markets there are unmet needs, markets where we can make a difference. In meeting those needs, we can help improve the quality of life for everyone for many years to come.
Thank you for the opportunity to share our story today. I'm Parekh MacDonald, President of the Ireland CrossLab Group. CrossLab is an established, healthy and growing business for Agilent. Our foundation set out our out at our establishment nearly six years ago is built on a strong customer focused strategy, execution excellence and a culture and value system that is second to none. And we'll continue to execute on this solid strategy, building investing in capabilities to move us forward fully aligned to Agilent's corporate strategy.
We are making asymmetric investments on a core set of strategic initiatives and enablers to help us grow the entire company. We are doubling down on areas that are fundamental to our future growth, such as digital, biopharma, customer enablement, portfolio expansion, and base business growth. But our secret sauce is our global scale and reach of our customer service organization. I'm excited to share with you now our approach to growth and how we will help transform the analytical lab. First, a quick overview of our business.
The Agilent CrossLab Group is a $1,900,000,000 business with a strong and growing operating margin of 27%, with 4% core growth in FY 2020 and an impressive seven percent five year CAGR growth. And we've been quite resilient through the pandemic, regaining our momentum to generate 7% core growth in Q4 alone. Our sales are evenly distributed across the globe, led ever so slightly by Asia, of which 19% of that 37% is China. Our footprint shows that a service portfolio that represents twothree of our revenue and consumables, which makes up the remaining onethree of our business. We achieve our exceptional performance by delivering customer lifetime value through digitally enabled, innovative, integrated solutions and exceptional service scale and reach.
Like our colleagues in LSAG, we serve six growth markets, delivering innovative, integrated solutions that improve the science and economics of the laboratory. Our products and services can be found in more than 260,000 global customer laboratories. We perform more than 1,000,000 customer interactions from sales to service, and our impressive installed base of more than 600,000 serviceable instruments is a foundation for our growth. Across our divisions, CrossLab provides the products, services and expertise to get labs operational and optimized through the life cycle of the lab from start up to shutdown. As I mentioned in the opening, CrossLab plays a significant role in Agilent's build and buy strategy.
In transforming the analytical lab, we are generating customer lifetime value, taking advantage of our installed base and delivering next generation lab optimized services. Improving the customer experience with digital and innovating our business models to get Agilent's products and services into customer hands. We also helped the company to enter and expand presence in high growth markets, specifically biopharma and China. Of the strategic enablers, we have innovation and digital woven through our approach, and we choose to focus on specific geographies and M and A opportunities where it would help us grow. And as Mike mentioned, our One Agilent culture cements the organization and is a critical component of how we operate.
Above all, the COVID-nineteen pandemic accelerated our digital strategy. In addition to providing critical consumables to our customers, we saw quick and positive responses to our increased online and remote services. We also provided and continue to see solid growth in remote technical service and support offerings. Online and on-site educational services to address the lab operational concerns, automated compliance and computer system validation, remote lab monitoring and scheduling software. Our digitally enabled service portfolio will continue to mitigate the risk of COVID-nineteen related lab challenges and may even be transforming the way customers want their services delivered in the future.
Customer lifetime value is a win win proposition. First Agilent's portfolio digitally enables innovative integrated product software and services solutions that help customers achieve their scientific, operational and economic outcomes over the lifetime of the instruments. Many of our lab wide or enterprise services are vendor agnostic, such as asset utilization monitoring and able to deliver these operational and economic benefits over a wider span of the lab, even to customers that don't own or operate Agilent instruments. Add in our global services scale and reach, and Agilent has created a trusted partnership with customers. This partnership creates customer loyalty for our brand, which in turn generates recurring and growing revenue stream for Agilent.
A second win for us, the revenue doesn't stop at the instrument. It is evergreen of the life of the instrument upwards of seven to ten years, and that is where we focus on growing this lifetime value for our customers who reward us with their consumables and service business and hopefully their loyalty when they need to replace or add an instrument. This is an incredibly powerful flywheel that once started only grows faster and stronger in time. The first part of our flywheel is our installed base. The opportunity for growth by leveraging our installed base is huge, approximately 30,000,000 with every 1% increase in connect rates.
And we are focusing on connecting even more of these instruments with integrated services offerings and platforms for ease of use. Investments in data analytics is helping us generate even more insight into our customer instruments, consumables and services use. This will allow for greater and more targeted cross sell, upsell opportunities. In the same way, we are making smart investments in our portfolio, expanding incrementally in areas that we see most growth potential, like biopharma and emerging areas like COVID-nineteen and cannabis and regions like China. Offering more complete solutions in the form of workflows is key to connecting with customers who want solutions in a box over traditional DIY method development.
Here, we are addressing the needs brought on by the personal turnover with plug and play solutions that a lower skilled replacement workforce can use while maintaining the lab productivity and quality. And we will keep this wheel moving through our proven R and D engine and an open innovation model, which will enable us to take advantage of opportunities faster. Lastly, our global services scale is a competitive advantage for us, enabling us to reach more customer labs with more digitally enabled technical experts faster, delivering the trusted answers our customers have come to expect from Agilent. As I began on the previous slide, the unique global scale of our customer service organization really does make the difference for Agilent through superior customer service and brand loyalty. With 4,500 employees in 28 countries, we have the global scale and reach to deliver on our priorities quickly and expertly.
Our global customer service organization has a deep understanding of lab operations, with 75% of the field engineers with a chemistry or biochemistry degrees, many with advanced degrees. And this expertise benefits Agilent too as our service engineers are a superior source for sales lead generation across the company. In fact, our field service teams helped us to identify and win $265,000,000 from leads that were generated, proving how valuable this team is to the business growth. In addition to the experts we send out to the fields, we believe that our global contact center employees are a key differentiator for us as well. Even before COVID nineteen struck, these professionals were troubleshooting lab issues remotely about 40% of the time.
Many of our competitors don't have remote tech support in certain countries. So clearly, Agilent is an industry leader in this respect. In fact, our customer satisfaction service scores reached record levels across the customer journey, including onboarding, use, and support. Our investments in digital prior to the pandemic paid off immediately as a remote technical infrastructure allowed our employees to seamlessly move from office to home office and stay connected with customers. With the acquisition of ASEAN Biotech, we now have increased our installed base for service opportunity with greater access to untapped or under penetrated segments such as molecular biology and cell analysis laboratories.
We see tremendous opportunity to capture share of the laboratory by addressing customer needs to improve their lab productivity and economics. Our next generation lab optimization services deliver increased visibility and simplification, operational and economic optimization and business transformation solutions to help customers make the most of their instrument investments. From smart alerts to our automated compliance engine, our digitally enabled offerings are helping customers monitor and maintain their systems with greater ease. Our recently released asset utilization monitoring software is delivering unique insights to customers to optimize instrument use and performance. Recently, a large US pharma company registered more than 4,000 assets with our utilization monitoring software, which provides insights to drive capital planning and instrument life cycles.
Our education services saw a surge during COVID nineteen, including a 500% growth in registrations as we quickly pivoted to provide agile university and virtual instructor led training online. We're transforming the way the laboratories work with new access models like instrument subscriptions, which provide whole workflow solutions with instruments, consumables, softwares, and services in one package. Rentals provide flexibility to quickly ramp lab productivity as well as provide support between instruments, order and installation. We'll also continue to deliver consultative services, including lab business intelligence to help customers make smart economic and operational decisions. In fact, a large European headquartered pharma customer tapped into CrossLab's enterprise planning expertise, purchasing €10,000,000 of Agilent's relocation services to establish a new research and development campus, partnering with Agilent to plan for their future.
Together, these next generation service offerings will deliver the productivity and economic outcomes customers want while improving Agilent brand recognition and securing customer loyalty. Early investments in digital were affirmed during the pandemic, where customers used our digitally enabled channels for two thirds of their consumables transactions with us. From our on demand service requests to ready to use cards to on-site inventory options, customers are applauding and adopting our new and expanding shopping options, which is improving their speed and ease of experience. New digitally enabled buying models continue to attract new customers and deliver recurring revenue through e renewals, subscriptions and leasing and rentals. Expanding our flexible spend programs into China and Korea markets opens up additional opportunities to capture more share and tap into changing budgeting behaviors.
Our evolving service models and more self-service support through our award winning online Agilent community and virtual assistant remote support shows that we can continue to deliver quality services in the way the customers want us, even in the hard to reach labs and locations. WeChat tech support and marketing, the preferred method for service interactions in China, continues to be a strong connect point for our customers in this geography. Most of all, our customers have spoken with their words and their wallets, showing that we're on the right track for continued growth through the digitally enabled shop, buy and support programs. I just mentioned that our new digitally enabled buying models are tracking new customers to Agilent, But I want to also point out that new business models, subscriptions, rentals and leasing are helping Alstom penetrate new and emerging markets, accessing customers at different price points and providing growth opportunities through global expansion. The current instrument acquisition process puts a lot of pressure on the customers to know exactly what they want and need over the next seven to ten years and have the budget to acquire those assets.
Agilent has taken the pain out of the process, providing more flexible alternatives to buying an instrument outright. Instrument subscriptions are a great way to bring an entire workflow, including the instrument, consumables, software and services into the lab at one price point for the length of the subscription plan. Rentals, great alternatives for customers with short term or highly dynamic analytical needs, like increasing throughput or testing new processes or try before you buy rentals of new instrumentation. We consider rentals the Zipcar of the analytical instrument world. Leasing, by contrast, is a longer term access model or for those that may not be in the position to buy today, but know that they need and how will they use the instrument.
Think of leasing as a minivan you reserve for the week long road trip with your family, reliable and ready for the road. Instrument subscriptions is the fully loaded option here. The luxury car that comes with GPS, free gas, and roadside assistance all at one price, billed monthly. And our popular flexible spend plan offers customers another option for allocating funds, CapEx or OpEx, not to be used in adjuvant consumables and services later. This is the ultimate ease of use and takes the worry out of the end of your spend plans or use it or lose it lab dollars.
As Mike and Jacob have mentioned, biopharma is a key market for Agilent and CrossLab. Our consumable services and workflows support biotherapeutic research and development, helping customers reduce costs and time to market. Our column portfolio is expanding to adapt the growing range of biotherapeutic modalities. From the proteins, peptides, monoclonal antibodies, antibody drug conjugates and related recombinant proteins and cell and gene therapies. We are adapting and expanding.
Our advanced bio columns have been designed for six different types of analysis and include complementary consumables and standards for sample prep and analysis. In the services space, our compliance services and asset monitoring are becoming increasingly desired by large pharma companies, and we anticipate continued growth as customers realize returns on this investment. A big opportunity for us in biopharma is the expansion of our biomolecular service organization. The addition of biotech and ACR opening more doors to service in biopharma, and we're designing a customer service organization to address the needs of these labs specifically. We also see our flexible buying models as a game changer for these biopharma customers as they quickly ramp up R and D or production while needing to keep on top of the latest technologies.
Our workflows developed with our instrument partners in LSAG is another Agilent advantage. The complexity of biotherapeutic molecules makes general workflows a must for fast, efficient analysis and outcomes. So we focused on this customer need, creating off the shelf solutions with high quality instruments, consumables, software, and services that customers can use to produce trusted answers to solve those tough questions in cell and gene therapy research or in the production or development environment of new medicines. A recent example of partnering with biopharma customers comes from a recent work outfitting a build out of a cGMP production facility in Europe. Here, we developed a fit for purpose solution based on specific requirements to stand up a functional lab.
The solution included three sixty commissioned instruments, strategic sourcing of over 25 vendors, on time delivery, which came in under budget at 1,400,000.0, and trained laboratory staff. This example shows another way we can partner with biopharma customers. This time delivering enterprise wide solutions for laboratory construction based largely on our in-depth knowledge of the market and the needs of our customers. China continues to be a strategic priority for Agilent and CrossLab, contributing significant revenue to our overall results through our large installed base, digitally enabled service and brand loyalty. As you can see, ACG has delivered 15% CAGR in China for the past five years with expectation for us to continue this trend.
We believe we have real competitive advantage here with our installed base opportunity we deliver China is the underpenetrated market for services with room to improve our connect rate
and
regions. Digital pioneer, first mover in WeChat for business. Regional scale, close to 700 employees in Greater China, including contact center, sales, service, and service delivery employees. Brand awareness, strong CrossLab brand loyalty and high ACX scores regionally, local focus and investments, conducting business in China for China, consumables, parts, services, workflows specific to the China market historical presence, delivering products and services in China for years. China is and will continue to be a region we respect and invest for steady and substantial growth.
We deliver results. We continue to grow above market rates with steady growth through the COVID-nineteen pandemic. Our execution is unmatched. Digital investments are paying off, continued strength in China, customer preferred service organization. We produced a growing recurring revenue stream, strong accretive margins resulting from a focus on customer lifetime value, service delivery scale and solution setting.
Our future is bright. Opportunity for greater install base connect rate, new product and service introductions, biopharma market growth potential. In closing, I hope that you're as excited and as optimistic for Agilent and CrossLab's future as I am. I'm buoyed by the knowledge that we have the right team, the right strategy and the right capabilities to move our plans forward and deliver value for you, our investors, as well as the customers and communities we serve. Thank you.
Next, I will turn over to my colleague Sam Rahab, who will share about our diagnostic and genomics group. But first, please enjoy this short video highlighting one of our very exciting and fast growing opportunities in Sam's business.
Agilent's strategic focus on growth can clearly be seen in its involvement in the fast growing market for nucleic acid based therapeutics. For Agilent, the development and manufacture of oligonucleotides, or oligos, which pharmaceutical customers use to produce nucleic acid based therapeutics, is a key element of the company's growth strategy. Oligos have the potential to treat cancer, rare and infectious diseases, cardiovascular indications and other disorders. With the announcement of plans earlier this year to expand its state of the art manufacturing facility in Frederick, Colorado, Agilent will more than double its capacity to develop and manufacture oligos at the site. Agilent expects demand for therapeutic oligos to grow at double digit rates each year to over $750,000,000 by 2025.
Companies added manufacturing capacity will enable Agilent to meet this growing demand and to continue being a partner of choice to pharmaceutical and biotech companies. As a leading oligo manufacturer for more than twenty years, Agilent is uniquely qualified to support this critical and growing industry. Our Frederick facility ensures we keep up with customer demand while continuing to deliver a premium service. Agilent also has an oligo manufacturing site in nearby Boulder. Both oligo manufacturing locations are current Good Manufacturing Practices, CGMP facilities, as designated by the U.
S. Food and Drug Administration. Both produced high purity gram to multi kilogram lots of active pharmaceutical ingredients for clinical stage and on market commercial drugs. When customers part of ReAgiveness, they benefit from our industry leading nucleic acid experience, our understanding of pharma and biotech customers' key requirements and our commitment to this market. Our expertise allows customers and partners to efficiently advance their lead Opigo candidates from clinic to market with a shared common goal of patient health and safety.
Agilent's focus on growth is not only a winning strategy for customers, researchers and shareholders, but is just one more example of the work we do helping to improve the quality of life.
I'm glad we were able to share that with you and give you a sense of the impressive things that our NASE team is accomplishing. We're very proud of them for what they've done and what they continue to do. And I'll have a chance to share more on NASC later in my presentation. Good morning, everyone. I'm Sam Braha, President of Agilent's Diagnostics and Genomics Group, HGG, and I look forward to sharing our story with you today.
DGG provides products and services for research, translational research and clinical testing around the world. And over the last five years, we've delivered revenue growth of on a CAGR of 7%. And in FY 2020, even amidst the pandemic, we delivered growth of 3% on the top line and operating margin of 18% with a business over $1,000,000,000 Now in terms of COVID-nineteen impact for our cancer diagnostic clinical testing business, we saw the most significant dip in late Q2 and early Q3. And since then, we've seen a continuous improvement in the trajectory of our RF volume. Now while employee safety remains our top priority, we are very proud that through the pandemic, we've been able to continue focusing on our customers and provide them the products that they need to continue their testing.
Along with that, we've been in person in their labs to ensure that they have the productivity to continue the level of testing that's required to serve their communities. To give you a frame of reference for DGG in terms of revenue, about $05,000,000,000 comes
from
our cancer diagnostics businesses in pathology and companion diagnostics. The other $05,000,000,000 comes from our DNA and RNA businesses in NASD and genomics. Looking at it geographically, about half of our revenue comes from The Americas when you include NASD. When you exclude NASD, the distribution of revenue is roughly equal between The Americas and EMEA. Either way, we're underpenetrated in Asia Pacific and see a particular opportunity for driving aggressive revenue growth in China.
In DGG, we're focused on improving the human condition by providing our customers in pharma, diagnostics and academia government segments with differentiated solutions that enable them to do four things more effectively. First is to better understand the underlying biology of living organisms. And our products in genomics enables them to do this, from elucidating the mechanisms of action on a molecular basis and key pathways. And that's how we support this. Second, it's enabling customers to diagnose disease.
And we do this with our pathology products with across all cancer indications as well as our genomics products, both for cancer as well as inherited disease. Next, we enable our customers to more effectively select the right treatments. And our companion diagnostic tests really enable this by ensuring that the profile of individuals are used to match them with the most effective therapies. And finally, we play a role in enabling our customers to be more effective in developing and commercializing novel therapeutics. And our role here as a leading CDMO for oligo based therapeutics enables us to really play a part here.
Now while more than 80% of our revenue comes from consumables and services, we're also excited to have a growing installed base now of nearly 30,000 instruments that are serving customers in nearly 20,000 labs around the world. Further to what Mike shared earlier, DGG is also playing an important role in Agilent's build and buy strategy. And I'll be sharing more details on this in the subsequent part of the presentation. Let me start with companion diagnostics. An important driver of our continued penetration of the cancer market continues to be the deep and productive relationships we have with biopharma partners to really develop, register and commercialize companion diagnostic tests.
Globally, we're working with nearly 20 biopharma companies on multiple programs, including over a dozen biomarkers across all types of cancer. And our PD L1 franchise continues to grow, now with seven indications that have been approved by the U. S. FDA and registration in 85 other countries. We've now sold tens of thousands of PD L1 kits.
And the course of treatment of over a million patients have been informed by our tests. Just imagine the thousands of years of life that have been extended by matching patients with the right treatment. Our pathology franchise is focused on cancer diagnostics and continues to grow above market. And the way we've grown here and our continued focus is on expanding our menu of high value assays. Examples of this include MMR and the recent approval in June our second generation Hercept test.
And providing these high value assays on our flagship automated scanning platform, the Daco Omnis, which has industry leading ease of use, flexibility and productivity for medium and high throughput labs. We're also expanding our PD L1 franchise and recently approved approval for our seventh indication. Now our pathology solutions are being used today in over 2,000 anatomical molecular labs around the world in over 85 countries. And finally, in partnership with VisioPharm, we're also excited about our expanding menu of digital pathology image analysis applications. For example, with our breast cancer panel, including ER, PR and HER2.
As I mentioned earlier, we're underpenetrated in China and see it as an opportunity for substantial growth. And we're focusing and investing to see that growth. The heart of our strategy is focusing on customer enablement. And just within the last few months, we opened a new center of excellence for genomics applications to work more closely with customers. Soon in 2021, we'll be launching a pathologist PDL-one training program by leveraging our Daco academies there in Shanghai and Guangzhou.
Now another important part of getting closer to our customers and serving them better is investing in expanding our operational capabilities. Within the last few months, we established the capability to directly import diagnostic products into China. And coming in 2021, we're going to have the manufacturing capability to significantly reduce the turnaround time for customers that are ordering our SureSelect NGS consumables. Now as we continue to serve a growing number of customers in China, we continue to add to the talented team we have there. Now in this coming year, we're going to be making important improvements to our customers' digital experience, both in terms of finding the products that they're interested in online as well as learning more about the applications and ultimately being able to purchase from us in a seamless way.
Now in terms of companion diagnostics, building on our legacy and having developed the first ever companion diagnostic in the world nearly twenty two years ago, we received approval in China last year for the first ever companion diagnostic there, which is PD L1 based for tied to MERSCY KEYTRUDA. And subsequently, we've also received approval for PD L1 tied to Bristol Myers Squibb's Opdivo. Now we are excited about leveraging Agilent's longstanding capabilities and leadership in China for our analytical instruments and our service businesses as we look to building a market leading franchise in cancer diagnostics and genomics there. Let me turn now to our genomics business. And irrespective of if a customer is using a workflow based on NGS, microarrays or qPCR, what's really important is the quality of the starting samples and the confidence that they have in these samples.
And that confidence most often comes from our gold standard platforms, platforms such as the Bioanalyzer and TapeStation that are found in thousands of labs around the world. We also offer customers the market leading NGS target enrichment platform, SureSelect. Now along with being cited in over 4,500 scientific publications, Shore Select chemistry is also being leveraged by over 1,000 customers every day, including some of the leading cancer diagnostic testing labs and inherited disease testing applications. And we continue to innovate here with the recent launch of an RNA Seq application on SureSelect just this last quarter and coming up in early twenty twenty one, the launch of a powerful new efficient exome. Our Bravo automation platform allows customers to process thousands of samples a week.
And our magnet system, uniquely designed for SureSelect, provides walkway automation and provides a level of consistency and reduction in hands on time that is unmatched. Along with our leadership position in genomics quality control as well as for target enrichment for NGS, we're also focusing on applications expansion. This includes a new offering for single guide RNA for CRISPR based gene editing as well as a number of products that are being used for COVID-nineteen, both in research and diagnostic testing. DTG products have been assisting customers in their tireless effort to understand and combat the global pandemic. And while this is not exhaustive, our products are being utilized in a number of ways.
In terms of therapy and vaccine development, our NASD business is working with pharma partners to develop oligo based molecules that could be a therapy for COVID-nineteen. And our fragment analyzer, Automated Quality Control Platform, Nucleic Acids is being used by a number
of the companies that have
been developing mRNA based vaccines for COVID-nineteen. In terms of diagnostics, our ARIA MX qPCR instrument, along with a number of our bioreagents, are being used as core components of the diagnostic tests that are being used by our customers. Also, in response to the demands for reliable and effective serological tests for COVID-nineteen, we plan to submit an IVD serology test to the U. S. FDA in December for emergency use authorization.
And we also intend to register the test in Europe and other regions in the 2021. And we formed a specialist team with the experience and expertise in clinical diagnostic testing to really engage with these customers and advance this opportunity for us. Finally, let me turn to NASD and nucleic acid based therapeutics. This is a market that continues to grow at a rate of nearly 20%, we estimate to be about $05,000,000,000 by 2025. And this growth is fueled by a number of things, including the rapid growth in the number of programs in all its different stages, growing from twenty seventeen nearly 50% to over six fifty programs in 2020.
The growth is also being fueled by an expansion in the number of therapeutic areas that are being treated by oligo molecules. This includes cancer, COVID-nineteen and a number of chronic diseases that much more broadly affect humanity. High cholesterol and heart disease is in my family. The lives of my grandfather and uncle were cut short by it. My father suffered his first heart attack when he was 52.
And I've been managing my cholesterol for over two decades now. The powerful possibility of an algo based therapeutic such as Novartis' inclisiran for heart disease being able to impact population health at a global level is very exciting and can also affect millions of lives. To meet this growing demand, we opened our second manufacturing facility in Frederick, Colorado in the 2019. This is the most state of the art GMP manufacturing facility and also one of the largest. Along with successfully ramping our first manufacturing line there, Train A, thereby doubling our capacity, we announced this past August our plan to invest in an incremental $150,000,000 to build an additional manufacturing line.
And though it's early, we're making progress per our plan and intend to start product shipments from this line in the 2022. And NAST is primed for further capacity scaling to continue our explosive growth. Now as our products are key ingredients or active pharmaceutical ingredients, I'm also happy to share that we've passed FDA inspections at both our Boulder and Frederick, Colorado sites. Along with the enormous capacity that we built we continue to invest in, what really differentiates us is three things. First, it's the deep knowledge and expertise we have with oligos for synthesis, for manipulation, scale up.
And as you know, oligos have been a key part of our business for over two decades, being fundamental to our NGS as well as our microarray product lines. Next, it's the consistent high quality of our GMP oligos, which meet the exacting requirements of our customers to be that dependable API that is at the core of their novel therapies. And finally, it's the way that we engage our pharma customers. It's based on a deep understanding of their requirements, their processes and how they want to and need to work. We provide customized program management for all phases of their work, from development through clinical trial support to on market commercial product support.
Looking ahead, our continued explosive growth will come from a number of things, including molecules moving into the commercial phase and the resulting increase in volume, its new programs that we'll take on with existing and new customers as well as us adding new molecule types, such as single guide RNA for CRISPR. To wrap up, the DGG business has shown the ability to grow profitably over the last several years and even through the pandemic, and we have the right competencies and capabilities to continue that growth. We also have the right leadership team of general managers and commercial leaders with a deep domain expertise in their areas along with a track record of results. You put that together with a compelling portfolio of products that are addressing growing markets. With this combination, I am confident that we will continue to make important contributions to our customers and will continue growing faster than the market.
Thank you again for the opportunity to speak with you today. I'm going to turn it over now to Mike McCollin to share some closing thoughts. Mike?
Thanks, Sam. Now just a few closing words. First, a huge thank you for participating in today's event. I trust you find our growth prospects compelling. I know I do.
Now since I stood in front of you at our last Investor Day over two point five years ago, I'm even more convinced that we're executing the right strategy and are even better positioned for the future. We have higher growth prospects and more aggressive margin goals. I believe Vagil is on a roll and we will continue to be on a roll. If you're a sports fan like me, you know when something special is happening with the team. We have a great team, firing on all cylinders.
We are pursuing the right opportunities and winning. I couldn't be prouder of Agilent. As I often say to the team, the best is yet to come. And before going to Q and A, we want to show you firsthand what we mean about the One Agilent culture, the secret sauce of the company, our sustainable competitive advantage.
Agilent Technologies is a global leader in life sciences, diagnostics, and applied chemical markets. We ignite innovation and provide trusted answers to the 275,000 worldwide labs using Agilent solutions. The key to our success? That's easy.
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culture. The Agilent culture is a competitive advantage. It's the foundational support that underpins our business. We are laser focused with a one company mindset, Delivering integrated products and services to our customers through disciplined, team collaboration, treating people with respect is core to who we are. We have a diverse, inclusive inclusive culture that is essential for bringing in new ideas and experiences that improve what we do.
The strong bonds of our Agilent culture help us succeed during good times and overcome challenges during difficult times.
Even in the midst of
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Agilent also made appointments of stating there will be no layoffs and no reductions in salary as a result of COVID-nineteen. In compliance with local regulations, we also quickly moved to support many employees working remotely. We assisted our team with things like necessary equipment for working from home and improving flexible working hours for parents. We are providing ongoing regular communications to employees about our response to the pandemic, so they're engaged and involved in understanding our approach. We've even done things like granting an additional paid holiday this year as a thank you to all employees for their sacrifices during the pandemic.
Agilent's award winning workplace culture has been recognized around the world by organizations such as the Great Place to Work Institute and media like Forbes and The Wall Street Journal. We have the people, processes, products and services that enable and execute our strategy of delivering value to our customers.
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Ladies and gentlemen, thanks again for participating in today's event. At this time we will transition to a live Q and A session. Joining in the Q and A will be Mike McMullen, Agilent's President and CEO Bob McMahon, Agilent's Vice President and CFO Jacob Tyson, President of Agilent's Life Science and Applied Markets Group Sam Raha, President of Agilent's Diagnostics and Genomics Group and Ford McDonald, President of Agilent CrossLab Group. Please stand by as we bring the panelists into the meeting. Now that the speakers are in position, Agilent's management team will take questions from the analyst community.
Attendees have been placed in a waiting room and will be brought into the speaker panel to ask their question. Our first question comes from Tycho Peterson with JPMorgan. Tycho, please enable your video and audio at this time. Please go ahead, sir.
Hey, guys. Good morning.
Good morning, Tycho.
Mike, I'm wondering if you could talk about the evolution of portfolio. I know in the past, you've talked about downstream applications and bioprocess. So I'm curious how you're thinking about wondering leveraging that technology downstream. And then similarly, it seems like there'll be a number of interesting clinical applications for the cell analysis portfolio. So how are you thinking about, even though it's just an LSAG, maybe leveraging that in the DDG channel as well?
Yes. Great questions. And you're on two themes that we agreed completely with. So I'll make a few opening comments then pass on to Jacob. So in fact, we've built up this cell analysis business through a series of acquisitions that we highlighted today.
But we see the ability to expand into a broader section of the biopharma value chain, if you will, as part of that story. And then this is where the combination of the diagnostics capabilities we have because of the DOC acquisition, we're very comfortable with now taking those platforms and technologies into the diagnostics area as well. But again, I think this is why we emphasize such the importance of this one management culture because you hit on the real key theme, which was the technology may sit in one part of the company, but other parts of the company need to enable that in terms of go to market plan on the diagnostics front. So Jacob, why don't you have a few comments to of course, correct any comments, if you will, on Tycho's question.
Yes. Thanks. This is a good way to start out. It's an area that I'm very excited about. And first of all, Tycho, I think we are very proud of what we have already with the Lifestyle Analysis business we have built over the past years.
We can definitely do more, but we definitely have the portfolio today to make a big difference. As you mentioned, today, we our focus is on life cell analysis, to support immuno oncology, understand the immune system and, of course, biology and infectious diseases. But there's clearly opportunities to use that also in the online space, connecting that up to bioreactors and getting online measurement and real time measurement. So this is something we're working with partners on. We don't have a product on the market today, but it's clearly something that we see interest in industry.
And then from a diagnostic perspective, we are already using a lot of the instruments for diagnostic applications where customers are buying our plate readers, particularly ELISA and other things that is out there. It's a part of that solution that Sam mentioned about going into serology tests where we also offer the biotech automation there. But we're definitely looking for other opportunities. We are connecting also in for the flow analysis business, we're connecting that with the flow antibodies, the best in class flow antibodies that sits in Raden partnership on the SAM. So a lot of opportunities there.
Yes. So we're just getting started.
Okay. And I can ask one follow-up on the HCP I'm curious on the subscription model. You talked about that being a game changer for pharma. Can you talk to the take rate there? And we've seen other industries go through a sales to operating lease transition, most notoriously in clinical chemistry and immunoassay.
That was pretty disruptive for that sector. I don't think it will be as bad as for you guys. But how do you think about shifting from a capital sale model to a subscription model for some of your customers? And why would pharma be most interested per your comments, because they obviously have pretty strong budgets?
Yes, Tycho, great question. And I'm going to have Corrigg jump in on this question as well. We think we're early days, but we think that it really offers a lot of advantages, particularly on the ability to stay fresh on the technology cycle and not have to go through kind of a traditional capital replenishment program. So, Perk, how would you respond to or what would you add to my response to Tycho's question?
Yes. Thanks, Mike, and thanks, Tycho. I think we are in the early stages with subscriptions in the industry. What we see in, for example, in cannabis workflows and small bio pharmas, a big uptake. And there's a strong demand in these sections for customers using access CapEx without using their budgets.
And what we see is that they're able to plan over time. So we're seeing it in certain smaller segments, but we do believe it's going to shift over time as customers require.
Yes. So Tycho, just to build on Cory Srzan. I talked to the CEO of a smaller biopharma company just getting started, and he was all in on the subscription concept because basically, it was a cash conservation view from him. Others see this advantage from maintaining the most recent technology. And then what we see from an agile perspective, it's really a whole different sales process, and you get a much different attachment rate of servicing consumables with the overall instrument portfolio, So fundamentally 100% attach rate.
Yes. If I
can add to that also, I mean, fully agree with your analysis there over to the clinical space that we have seen that. We saw that ten years ago ten, fifteen years ago that that moved and was a disruption or at least a change in that space. I'm not sure we're seeing that in our space yet. There's a lot of different drivers. There's a different kind of reimbursement logic in our space, if any at all.
But what we are focused on is to ensure we have the business models to support our customers wherever they're going. And I
think that's the key focus right now. That's exactly right, Jacob. I think this is think about it as a suite of options to provide customers as opposed to a transformation of the overall business. I think we're still going to have capital sales, but this gives us another arrow in the quiver, so to speak, to be able to support customers that may have a different profile or different stage in their partnership or in their evolution.
Our next question comes from Vijay Kumar with Evercore ISI. Vijay, please enable your video and audio at this time. Please go ahead, sir.
Hey, Vijay. You guys are looking great, and I think the one that is pretty clear is the consistency of the background. It's it's pretty remarkable. No. Thanks thanks for hosting
I guess I won a big picture on the LRP, Mike. You look at the core revenues. You guys did 6% in the last five years, right? The core outlook is 5% to seven Do you have NAIC coming in, which is all incremental analysis, which is coming in incremental? So should we be when you think about that five to seven, should we be perhaps thinking at the upper end of that range?
And I'm curious, I think that Sam in his presentation had that addressable market for NASD at $7.50. Is that your revenue opportunity by 2025? Or is that just the market? Maybe some commentary around that would be helpful.
Yes, sure. Vijay, thanks for joining us. And thanks for the commentary on how we're showing up as one Agilent team, think, even in this virtual world because I hope that message really came through about how important that is for overall the future company's success. And we've put first I got to say is the message we're trying to communicate is we think that the growth prospects are improved for Agilent and from our prior messaging. And I was talking to Bob this morning, I said, this really is an Agilent first to have a core revenue range out there with a seven in it.
And I would lean towards that end of the spectrum. There's always going be some variability up and down if certain markets cycle. But we're really trying to communicate a message here that the growth prospects for Adzeit going forward are actually better than they have been over the last five years. And you also see us taking a similar position relative to margin expansion. So we think the story is only going get better for our investors.
And Sam, do you add some clarity around Vige's question about is it a market size or the Aslan business volume? Yes, happy to, Mike.
And Vijay, thank you very much for the question. There's a lot to be excited about in the NAIC business. You've already heard me talk about the growing number of programs, the number of therapeutic areas that are coming online. I would say beyond what I already shared there that we think that this is going to be $1,000,000,000 market over the next seven years. And when you look at how we continue to take share, we continue to really gain new customers with meaningful molecules that are we can't fully predict it, but likely to have commercial demand for it.
You can see this business over the next five years becoming a $05,000,000,000 business.
Yes. So that was a five year kind of look on the total market. We think we can be, what, dollars $05,000,000,000 in five years. The other point we want to try to communicate, think Sam just hit on that point, is the broad based nature of our customers. We have over 20 different pharma partners.
A few of us allow us to talk publicly out of business with them. So it's a broad based book of business, which gives us a lot of confidence moving forward. And as you can see, we're trying to very aggressively build out future capacity. And Sam dropped a few hints that there will be something perhaps beyond the next train as well.
Thanks for asking. One, maybe for Bob, on the EPS algorithm here, Bob. I think if I heard the numbers correctly, you did make the upper single digits on the revenues, maybe a few 100 basis points from margin expansion, share repurchase, couple of 100 basis points gets us to double digits. I look at your net leverage of sub loan terms right now. I mean, your share repurchase is just supported just by your free cash that you're generating.
Is M and A all of an upside in the model? And how should we be thinking about
That's a great question. Yes, that's a great question, Dmitry, because it is. The model that we were just talking about is core. And so the opportunity to continue to invest in fast growing markets in places like cell analysis and other areas have demonstrated the ability to do that. If you think about the last four years, there's $400,000,000 of revenue that wasn't there before.
If you forecast it's hard to forecast going forward, but if you added that, that 400,000,000 would be on top of that the core business. And we feel very good about the cash flow generation as well as our ability to continue to drive M and A growth opportunities in that balanced fashion that we've seen, returning cash to shareholders but also driving growth.
And just on the pipeline, Mike, on the M and A pipeline?
Yes. It's a fairly active market right now. I think it's picked up, I'd say, in the last few months, Vijay. I think the first few months of the pandemic, I think everybody was trying to figure out how do you kind of keep the deal flow going and how do you keep those relationships going and even how do you start a new one without doing kind of your traditional face to face. And we've really seen a, if you will, almost a resurgence of the strength of our funnel over the last few months.
Nothing to add to announce, but we're actively working on a number of opportunities. I would say, as you probably know, valuations are still fairly rich. And if anybody has the word COVID somewhere in a marketing brochure, they now think the company is worth twice what it should be worth. But we remain interested in adding to our core business. And as you correctly pointed out, this is all upside.
So we don't have to do M and A to make our model work. We can get that double digit EPS growth without it. But if we do the right M and A, which we will, it's the additive to that. So we remain very interested and active in the market, but also want to be disciplined and make sure that we're using the shareholders' money wisely in terms of how we invest.
Fantastic. Thanks for taking the question, guys.
You're quite welcome.
Our next question comes from Doug Schenkel with Cowen. Doug, please enable your video and audio at this time.
Hey, everyone, and thanks for your efforts pulling together all this today, and thank you for taking my questions.
And Doug, thanks for joining us via video. I know you're thrilled.
I'm thrilled to be here. So maybe just going back to I'm back. I'm back. So just going back to some of your prepared remarks early on, Mike, on cancer diagnostics and genomics. You talked about these as, you know, some of your key growth drivers and key areas of focus for the company.
In many ways, this makes sense given your leadership position in pathology and genomics sample prep. That said, there are many adjacencies within this category where you are under indexed or really lack a presence. You know, to that point, given what happened with LaserGen, your current genomics portfolio appears largely focused on ancillary NGS workflows as opposed to the core pieces of the cancer diagnostic workflow that your pathology segment addresses. So with that in mind: (one) Should we expect meaningful catalysts in the form of internal developments related to cancer diagnostics and genomics in calendar 2021? (two) Is this category the highest priority as you think about strategic endeavors?
And then (three) Building off of that, would you be willing to add assets that are more focused on research and translational tools in the near term with the idea of evolving them over time into clinical tools that could be sold into the pathology channel?
Yes, great, big questions. I'm happy to make a few comments here. I'm going actually answer them in reverse order, and then we'll have Sam jump in. So to answer the last question, that's exactly how we see it, which is to really we would very much like to add additional research tools because we have this concept that we've all been this life science research to diagnostics, continuing through translational research. So we've seen that in aspect.
We've seen that in some aspects of genomics already. And we think that will continue with all of the portfolio. So you heard a number of examples today on cell analysis. We didn't talk a lot about it relative to mass spec, but there's a number of our technologies that we see going in this continuum inclusive of other parts of genomics offerings which we don't currently have. So that's very much in our area of interest.
And I wouldn't say I'm just like a father and mother and they ask them which is their favorite child, right? What I would tell you is this is one of our key growth initiatives for the company. But at the same point in time, we have multiple shots and goal. We have multiple vectors. This is very clearly very important in the area that we plan on implementing both our internal investment as well as key priority on the M and A front.
But I would put it up there with a lot the other things you heard about some of our growth initiatives, all pushed towards this higher growth segments of the market. And with this $58,000,000,000 market, what you want to do is you want to pick the segments that are going the fastest, and that's where we're really focused on. And then Sam, maybe you can provide your perspective on the first comments around the strength of the portfolio. And clearly, we want to add scale in certain areas of the marketplace where we see it as well, we're under indexed. So Sam, your thoughts there?
Thanks, Mike. And Doug, thank you very much for the question.
And you already acknowledged even in
the question that we've got leadership in advanced staining in our pathology portfolio. So yeah, that gives us access to thousands of labs around the world. You know, on the NGS based diagnostics side, you know, I want to make sure you're also aware, right, we're already surfing through our Chemistry hundreds of labs, including some of the leading NGS based cancer diagnostic companies and diagnostic testing labs. Our Magnus automation system, particularly for is something that's starting to have good traction in China, in The United States, in Europe. So that's another way, you know, we are deepening how we're serving the diagnostic, you know, the market.
But beyond that, I will tell you that it's more than it's cancer. It's about other application expansion. I think you've heard me talk a little bit about our excitement now to start bringing single guide RNA, you know, for gene editing, CRISPR based gene editing. That's something that we're starting and seeing good interest from our differentiated chemistry there. We also, you know, heard it in Mike's comments, we are looking to apply our two PCR capabilities infrastructure and our reach into environmental testing, which comes from our, you know, really our traditional Jacobs business and forest business to look at wastewater monitoring, for example, for COVID-nineteen.
That would be an expansion there. And then, you know, we also have on record investments to our early stage partnership program, for example, in Mission Bio. So, you know, that gives us insight and closer access into determining how and when we play in single cell genomics, for example. So beyond the leadership we absolutely have in genomics based quality control and target enrichment for NGS, there's a number of expansion applications we're looking at. And we're going to continue to focus on that organically and hopefully look to complement that because we've got great access to the market.
Great. Thank you for all that.
And then maybe just a couple of quick cleanup questions. First, for Bob, on the 50 to 100 basis points of operating margin expansion per year, that target. I'm just wondering, is there a path for ACG margins to get up around 30% and DGG to get past 25%, keeping in mind that your Analytical Instrumentation margins are already, you know, pretty high at this point? So that's the first one. And then the second one is really, I think, for Pedrick.
You know, you talked about 1% of incremental service attachment translating into $30,000,000 in revenue. Can you just remind us where your service attachment rate is today and where you think that can go over the next five years? Thanks again, guys. Great.
Doug? Why don't you take the first one, and Ford can take No. Two?
Yes, yes, yes. So the short answer to Doug is yes. I think we absolutely believe that. I think what you can see, particularly in the ACG business, is just this tremendous advantage that we have with scale and our service organization that really helps drive very nice profitability across multiple years. I think
we still have
a lot of runway in front of us on two vectors. One is that scale that I talked about. The other thing is our consumables business within ACG is already the most profitable business on a group on an operating margin business that we have, but one of the most profitable. And as we get that attach rate up, which Porv will talk about, that helps drive that mix as well. And so we've got not only the ability to kind of leverage the infrastructure or the people in the field, service engineers in that service organization, which we've been able to do even this year to drive margin expansion.
I also see the ability to actually increase that attach rate on the consumable side, which will help drive that as well. And I think on DGG as well, we have the opportunity in those areas that Sam was talking about, certainly driving very good profitable growth in our genomics and pathology business. But don't forget NASD. As we scale that business up over time, that's going be very accretive to the overall operating, not only dollars but margin. And Sam talked about it having a potential to be over $05,000,000,000 in the next several years.
That's a great opportunity to actually drive both of those. So bottom line, I mean, we're super excited about both of the opportunities in the margin there. We're not going to let Jacob off either. And, Bart, maybe you can talk about the connect rates and so forth.
Yes. Think we're really in the early innings of this. We're in the mid-20s in terms of attach rate. And we see it over the years, it expands about one or two points per year. But over the long term, we can see the opportunity to double it.
And in terms of how we're going to do this, it's by adding new digital and services capabilities on that side and also the customer lifetime value of new products and services to keep the instrument running over the lifetime of the product And also continuing to drive the portfolio in best in class chemistries and including for the biopharma market all go towards kind of increasing the attach rate over time, which we're very bullish about.
Thanks, Doug.
Our next question comes from Brandon Couillard with Jefferies. Brandon, please enable your video and audio at this time. Please go ahead, sir.
Thanks, Mike, the team for putting on a great event this morning.
Thank you.
Really slick production. Appreciate it. Maybe a question for Bob or Mike. In terms of the new growth algorithm and the new long term outlook, your new core growth and margin expansion targets imply about a 37.5% incremental as opposed to the prior 35% at the midpoint. Can you tease out how we should view how you will really manage within that new range?
Meaning, the prior in the prior model, incrementals went up as the top line moved up to the top end of the range. But are you going to manage things differently now, meaning managing more toward EPS growth bogey to meet that minimum 10% hurdle? And if you grow 7%, does that mean you grow you expand margins 100 basis points? And how do you manage that relative to the higher reinvestment level?
Yes. I'll take an initial swipe at that, Bob, and then you can jump in and check the find it on the map. But I think the way we manage the company, which is when we get to those higher ends of upper areas of growth, when you get to the 6%, 7%, then you're going be able to really expand the margins. So we're not going to artificially constrain it and say, well, we got to hit 10% so we can actually don't have to worry about increase in the margins because we've got this great top line going. This business, the more volume would come through our facilities, we get the margins.
And you heard Bob talk about the scalability relative to NASD. So I would expect us to see those higher margin flow throughs as we push the higher ends of that growth range as well. As I mentioned earlier, we've never had a growth range out there with a seven in it. So we really wanted to communicate the fact that we think our growth prospects are even better than what they've been in the last five years. And Bob, why don't you provide some additional color on Brandon's question?
Well, I think you're absolutely right. I mean, I think the beauty of this business is as the faster the business grows, stronger the fall for in terms of the profitability. And I would see that continuing to go. The areas that we're focused on in terms of faster growing businesses throw up a very healthy incremental margin, places like Solanalysis that we talked about as well. NAST on the incremental side throw up.
You know, we're making investments there in terms of building capacity. If you look at it on an incremental basis, it's quite healthy. And so forth. And so we think that that model has worked in the past, and we're looking to accelerate that model going forward and continue to see that margin expansion. I think we have margin opportunities across all three businesses.
And I think what you've seen over the last year and a half or so is a significant improvement in the OpEx leverage. And that's through the investments that we've been making in digital and our ability to kind of leverage our footprint as we brought in new businesses and driving out efficiencies there. But the fact that we're we've got that and then once that top line, we're not having to add number of HR people, number of finance people. And the digital capabilities are actually helping drive better connectivity and customer satisfaction, but also driving internal productivity as well.
Yes. Brent, hope one of the things that came through today, to Bob's point, is really the scalable platforms we've built, whether it be the digital platform that Bob's talking about right now, whether it be our shared services model or as you heard from Porek, the scale we have in our services business. And you've seen if you've been and I know you're a very close study of Agilent's performance, the scale advantage we have on services has been a big part of the story on the margin expansion there. So we think we're building these scalable platforms to allow us to be more aggressive in our outlook on margin expansion.
And maybe a follow-up for Jacob. You mentioned you've really refreshed the instrumentation portfolio entirely over the last eighteen, twenty four months. What are the biggest opportunities for an installed base refresh? And to what extent do you see a pent up demand situation in front
of you after a couple of
years of kind of flat to declining growth?
Yes. You're right. There's been some years there where we have seen some more challenging market conditions. So and we use those tough times to really refresh our portfolio, and I see opportunities in many different spaces. I think first that comes to mind is in our the GC space, our GC portfolio, which we have really refreshed, put in a lot of smart instruments.
So they really create value for the customer in terms of increased productivity and insights on the performance of the laboratories. So there's a really good business case for them to upgrade onto the 88 series on the Intubo. Now the market has been a little the HPI market has been a little challenging here over the last few years. So it remains to be seen when exactly that is coming through. But I'm very confident that when the investment flows back, that part will go to a large part of that will go to accident.
But I also see the investment we have done in the particularly in the mass spec over the last few years is paying off. And we have seen that over the actually, last few quarters that our LCMS business is driving a lot. So we are certainly taking share there, and I think we will see a lot more in that going forward.
And I think maybe, Jacob, just to build on what you're saying, I mean, we are certainly seeing some very encouraging signs. It's early days, but certainly Q4 in terms of the performance and of the instrumentation business, and that's a continuum. And I think we're very well positioned, as Jacob was saying, to be able to do it because we've been taking share in a depressed market. Q4 started to see a turnaround, and that's continuing here into our fiscal Q1. So we're very optimistic about not only the portfolio but our competitive position going forward.
Yes, yes. And that combined with our how we worked with our customers in the tough times in spring where they were in big challenges and we were there to help them, I think that is we're seeing that paying off right now. So the combination of a refreshed portfolio, customers starting to see money and us really helping support our customers in tough times is clearly something that pays off.
Our next question will come from Dan Leonard with Wells Fargo. Dan, please enable your video and audio at this time.
So first question maybe is just more on communication strategy. Can you elaborate on your thought process behind offering and operating a high level operating framework as opposed to something that's more specific and dialed into a three year window like you've done in the past? Is that just reflective of COVID uncertainty or something different?
No, no, no. I think we were just trying to be very helpful and communicate a message of increased confidence about our growth and margin expansion prospects. So we thought that these ranges around revenue growth, core revenue growth, our assumptions around share repurchases and dividend growth along with the operating margin expense, it would really be helpful to kind of think about the longer term growth prospects of Agilent from an earnings growth standpoint. And then as Bob mentioned, the M and A would be sort of icing on the top of that cake, so to speak. Bob, anything else you'd
like I think, Dan,
I think it's fair to say you can take this algorithm, as you said, and look at it and apply it to the next three years. Mean, if we think about the business opportunities that we have in those three buckets, the groups or even the high growth, that's going get us to that 5% to 7% growth rate. That's an increase versus where we've seen and certainly we've got a number of catalysts over the next several years that are going to help drive it. Certainly, I think just an expansion of the macro improvement here on the core business, which we just kind of talked about, but things like NASD, the cell analysis business, and the biopharma, which we talked about across a number of the groups here, we think that those are going to be leading the growth rate for the company. And then the beauty of Poreg's business, which is not just the biopharma but the services and so forth, that's going to get back to that high single digit growth rate because we are significantly underpenetrated or underpenetrated there in terms of some of the markets and the dynamics there.
The underlying health of that market is still very strong. I think Porrick talked about even in the space of this last year, which was challenging for sure, our contracted services business grew high single digits. And when you think about that moving forward, there's no reason to think that that shouldn't continue and accelerate. And then you get more activity in the lab, will be on demand and higher attach rates. That's a beautiful flywheel for us.
So we'll certainly think about that the framework as a guide for the next three plus years.
Okay. Appreciate that. And my one follow-up for Jacob. Jacob, you talked a lot about the digital lab strategy. Can you elaborate a bit further on how that's organized internally and how you monetize it?
Is there a stand alone unit inside Agilent focused on this? If so, how big is it? At what rate is it growing? Or does rather the monetization just show up in greater instrument revenue? Like anything you could further add?
Let me start by saying all of that, meaning that we have a division that is our Informatics division that is responsible for our CDS tools. So that's kind of the nucleus of our digital lab strategy. But there's also parts that that sits with Parekh in our business. So we have a business unit that is focused on going out there and place and make money based on our CDS and thereby also our digital ecosystem. But over time, we see that grow beyond the CDS.
I mean, connecting all the instruments with the smart alerts that Craig talked about. We have a business now with our SLIM portfolio. I then connect it all together. So clearly, we believe that we can take market share in the informatics business itself. So that will be a growth driver on its own.
But then the big opportunity is the leverage towards the instrument placement, consumables and services on top of that based on that lifetime customer lifetime value that Fred also talked about. So it's really all of those above, but it's not just something fluffy. It's a real business that drives real growth and real money today.
And just to add to this, Jacob, I'll just say that within our envelope of our R and D investments, this is an area of increase very strong increase year over year. So this is an investment priority for the company.
Our next question comes from Derik De Bruin with Bank of America Merrill Lynch. Derik, please enable your video and audio at this time.
Good morning.
Hey, Derik, looking good.
Thanks. Trying to. So a couple of questions. I mean, obviously, China is a major push for your for you, and it's a huge market for the overall life sciences industry. Can you talk a little bit about local competition, number one?
I mean there's big investments locally in that market. Number two, the markets there are not as well established, and certainly, there's a lot more switching going on and opportunities there. And I'm just sort of wondering, what has been the competitive response in this market from some of the other larger life sciences tools companies in The U. S? I mean what are your competitors doing?
Number three, can you talk about pricing and talent? I mean how are the margins in China holding up relative to some of the other end markets? Are you helping to offset those? So just a big question on sort of that outlook and the competitive dynamic in APAC, but in particular, in the Chinese market.
Yes, Derek, as you know, that's a very important market for Agilent, over 20% of our revenues. And the story I told today in my prepared remarks was still we believe an area of opportunity for the company, not only the overall market growth rate, but we have certain elements of our business such as ACG and DGG, which we think are underpenetrated relative the opportunity. Now to your specific questions, we're seeing it's still it's a very high margin business for us, which makes China attractive. We've seen relatively stable pricing over the last year or so, albeit just like the global situation went down at the start of the pandemic, but it's been fairly stable. I would say that the other thing I would point out to in terms of organizational capability and strength and being established, our attrition rates are half of the market.
So we have the teams, people who joined the company stay with Agilent, perform well. So I think that gives us an edge up because we are actually very well established there, both in terms of our the stability of our organizational structure, but also the stability of our customer relationships. And I think you see us how this has been paying off, which is really we've been doing outside performance relative to our peers over the last several quarters. On the local competition front, competition continues to get better. And it's that pushes us to make sure we stay ahead of them on the innovation front.
I think that's sort of broad a big statement. Some areas are more advanced than others. I mean I think in the core analytical instrumentation business, mass spec and cell analysis and other aspects of that portfolio, the Chinese companies struggle to really kind of keep up and have that same customer experience that you see coming from Agilent. Other places like genomics, they're right on the edge with us. So we got to keep pushing the innovation.
That's why you heard Sam talk about doing more in China relative to his business. And Bob, your close study of this is one thing you'd add to that?
No. Think you hit it spot on. That it's
Yes, Mike, maybe I'll comment. I think both Parex, Sam and I were sitting in China kickoff meeting
Yes, yes, That's good one, yes.
Beginning of the week where we
we spoke to all the leaders in the company in the Chinese companies. First of all, as as Mike's saying, the the team is highly energized in China, and and it's doing very well right now. But as Mike also was saying, we have that it's still a game that's played out between the multinational companies in China, but we have a very close eye to what is happening with the Chinese group in the Chinese market. Just a reminder, you know, ASEA is very much a Chinese entity also. Even though the headquarter was in The U.
S, they had a big operation and a lot of R and D expertise sitting in China. So we definitely expanded our footprint and our presence in China with the ASEA acquisition. So I'm we're continuing to keep a close eye to this close eye to this, and and we'll be ready to move those on on integration front, but also, of course, from an M and A perspective, something is coming off.
Great. And then I just have two quick follow ups. One is you mentioned that you're number two in the MAC market. Who's number one? And what are your what are the competitive differences between the two companies?
I mean, what's the difference between the two? Why would one go with somebody else?
I'll let you know about NASD business, all right? Want to answer to Eric's question?
Yes, sure. I'd be happy to. Mike, do we talk about I'm not sure if we talk about other companies here, but there is another You can
tell who the leader is, but we've a for a while, but in terms of market share, but yes,
The go leader in the space with the most market share is a company called Mittendenko. And but we have been, Derek, I don't if I'd say knock on wood because we feel very good for all the reasons where we're able to gain share. We have been continuing to gain significant share. And the dynamics here are what leads us to win in this market is the combination of not only the technology we have, it's also about pharma really care about can they continue to expand with us, right? Because they are all planning on having successful on market drugs.
And our commitment, as evidenced by both the opening of the new site last year, the further investment this year, those things help. I think another part that I haven't necessarily talked about is, much like in our companion diagnostic business, it's very important here for pharma to have confidence in our ability to also engage with U. S. FDA and other regulatory authorities around the world. And we've been able to do that very successfully to add that.
And it is also about knowing exactly how to work with them to along the programs. Not everyone will succeed their internal programs through the clinical trial phases. So I think we built a reputation. We built a capability set. And like Mike mentioned earlier, though we talk publicly about two customers, our book of business is very strong as we enter 2021.
And we are working on dozens of programs with nearly 20 pharmaceutical companies, including some of the leading pharma in the world that I won't name. So we feel like we're going continue to gain share and really grow this business.
Our next question comes from Dan Brennan with UBS.
Great. For doing this, guys. Hey,
do I look good, Mike? You said you're I didn't get a chance to mention that. Always.
My kids don't
think So I guess the first question is on M and A. Mike Mamoto has been a few questions towards this already. But the balance sheet is great.
You could argue that this is
the most exciting time we've seen in many, many years across know, kind of your end markets, particularly in kind of, you know, cancer diagnostics. So so, you know, the biotech was the largest you've done. But, you know, why not or or is it possible that you might consider to be, you know, a lot more aggressive over the next five years on M
and A? Obviously, you have
to wait for the right deal at the right price. But nonetheless, given the leverage, given the balance sheet, given interest rates, given the science, given the channel and this opportunity today, I just wonder if we look back over the next three
to five years, if it's
the right move, for Agilent to really take a step up on kind of acquisitions.
Yes. Thanks for that question. And that's actually our intent. So it has to be for the right targets. But we as part of my story today, talked about how we've built up organizational capability over the last several years.
And that was culminated in the biotech deal. But you shouldn't assume that's a ceiling of the size of the deal. We think we can do multiples of that for the right opportunity. We want to keep with that overall framework. We're looking for things that are accretive to our growth rates and would add profit to the corporation.
May not be initially at the corporate average. It could be dilutive from our standpoint, but accretive to earnings. And then as Bob mentioned, we want to maintain investment grade. But we want to use that balance sheet to drive growth. And you shouldn't assume that biotech is the ceiling.
For the right opportunities, we will go through multiples of
And just related to that, I'll be afraid of my second question, is there like a natural cap on kind of the leverage that you need to go to for the right deal?
Hey, Bob, how about I let you handle that one?
Yeah. As Mike said, our intention, as I mentioned it, is to maintain investment grade. That would apply roughly a couple of turns from where we are right now and still be comfortably there. And that gets to the multiples here. We're not going to, you know, and because we don't need to, I would say, bet the farm, so to speak, to drive growth.
We think we have excellent growth prospects in the core business, 5% to 7% with the investments that we've been making. So this would be additive. And I think about it as kind of bolt on or decent opportunities across our markets as opposed to kind of a fourth leg of the stool, so to say.
We think we can create shareholder value superior shareholder value without it, but we want to get it, and it will just be additive to our story.
Great. And then maybe
as a follow-up, just on chemicals and energy since it hasn't really been explicitly addressed during the presentation. I'm just wondering, first off, I know the exciting, you know, product innovation that you've had maybe has gotten drowned out with kind of macro environment that we've seen.
So maybe can you speak
to a little bit about, what has been happening with the Intuit Bill 8600 8,800? What kind of feedback has been? And how you think about that opportunity implicit within your guidance range? And then, B, I'm just wondering, is there anything that you can do maybe to mitigate more of
the economic sensitivity of this business? Obviously, it's a
good business to a leader, but nonetheless, it does swing a lot more significantly than your other businesses. So anything
would
be great. I would try to kind of discuss that.
Okay. Sure, Dan. Sorry, was ready to jump in on that one. So I'll make a few opening comments here, then I'll have Jacob give you specifics about how customers are responding to our offerings. So relative to the guide assumptions and what we're seeing, we started seeing some signs of life again in the fourth quarter.
We didn't feel one quarter yet was a reason to call it a turn. But the book of business, as Bob mentioned, through November, since we last spoke in our earnings call, we've now closed off the month of November. And the momentum for that orders and the year end activity is happening relative to customer spending has occurred all through November. We think that relative to the guide assumption that if this trend continues in C and E, this will be upside to guide. Because as you mentioned, there can be a cyclical nature to this aspect on the CapEx side.
And so a little bit cautious in terms of calling that too soon because I learned my lesson in my first year as CEO. But we want to be very clear that this momentum continues in C and E and the PMIs continue to move in the direction you could expect us to outperform up to the current guide assumptions. And to mute that volatility, it really comes back down to the ACG story, which is continuing to build that aftermarket presence in service and consumables with our chemical and energy customers. And what we're seeing is that the skinny customers now moving from more of an in source model where they have everything themselves to now look into vendors like gasoline to start taking up some of the service operations. So I think that's really ultimately the answer for us from a, if you will, volatility standpoint is to continue to build out that ACG franchise.
And then we're the clear leader in this space. And I think we just reinforce that with customers with some of these introductions. Jacob, don't you have some comments there?
Yes. Actually, now it's almost I think it was February 2019, we introduced the eighty eightninety and eighty eightsixty. And at that point in time, the market was still relatively good, though 'nineteen was also very tough year. And we saw a very strong pickup of the 88 series, actually move faster ramp volume that we had in our own clients. So we saw very strong interest from our customers, and they could see the 8,890 being, of course, the next best the new best in class instrument.
But we also saw the 8,860
we were picking
up where this was more focusing on the midrange, but also the combination with mass spec, which really we are taking clear market share in. Now, as you said, the market has been muted here over the last past years, but we have also invested more directly into our informatics platform to even better serve that space when it's coming back. And we spent actually quite a lot of time here with customers over the past twelve months to really understand and really be ready when the markets come back that we can really be a part of that offering. But as I say, as Mike is saying, we see some early indications, but it's
too early to call at this point in time.
Our next question comes from Steve Bouchard with Wolfe Research. Steve, please enable your video and audio at this time.
Hi. Thanks for having me on here. How's everybody doing?
We're doing just fine, Steve. Thanks for joining us today.
Happy to be here. We've covered a lot of ground already, but there are a couple of areas that we haven't really
spoken
about that I thought we might try to round out the story on. Absolutely. One would be the food market. A lot has happened there in the last few years. To some extent, there's been manufacturing consolidation, and this is independent of COVID, right?
It's independent of anything going on in China. There are certainly some changes in China. And then on top of all that, we've had a big change in terms of how people go about eating, right, where you actually consume your meals, which has a lot of upstream implications for the supply chain. Can you put all that together? Sorry, I think I asked you five questions there.
And talk about how you imagine the food business growing within the bounds of your three- to five year plan.
Yes. We think it's a mid- to high single digit grower for all the reasons you outlined. I mean there's been a major transformation of the industry structure relative to China, as you know, but also on a global basis. And if anything, COVID and the way that people want to eat these days has only increased the interest from the public to have safe food. So we think this is really good drivers for the food safety business overall.
But also authentication of is what you're eating really what it's supposed to be. So there's also that element of food fraud prevention, for example, as well. So we think the prospects are really quite good. And Bob, I think we put up a pretty strong number this past quarter.
Yes, yes. I mean it was the 20s in terms of percent of year over year growth and certainly starting off very strong here in this year as well. And to build on what Mike's saying, I think we've made a lot of investments certainly in China as that market had kind of decentralized and so forth. I think we've, over the last several quarters, really seen fruits of that paying off in terms of a nice recovery there. And I think it's not just a China story, though.
I think it's really the world that increased testing and focus on changes in where food is being produced and how it's being produced. I think we have the opportunity to benefit from that. The portfolio that Jacob just talked about in terms of being the strongest that we've ever had, I think really sets us up nicely for capturing opportunity where we're already a leader in the food market.
Yeah, and to add on that, think both of you mentioned well the the Chinese where we've now seen a change over to contract labs, but also still the government's labs have started to purchase again. And and we have definitely a strong mark continue to have strong markets in the government labs, but now have seen the contract labs also increase significantly. But on the global basis, what we also see of great opportunities and great growth drivers are a cannabis market, which sits in our food segment, where we are the absolute leader. And even in a tough market here in 'twenty, we have seen growth in that market and continued momentum in that business. But there's also a lot of upcoming in the plant based food market, know, on a basic meat and all that, that we see a lot of interest in, particularly here in The U.
S. Of companies coming up with new areas. And that's where our instruments again and our solutions really taking share. So a lot of interest and a lot of dynamic going on in the market, but to our benefit.
I appreciate that. The second thing I wanted to ask about that just hadn't been touched on very directly so far in Q and A is setting aside NASD, setting aside some of the COVID specific therapeutic dynamics that are going on, how do you think on your three to five year plan about the structure of manufacturing across broader biopharma? There is some who might call it localized manufacturing, some who might call it onshoring. Is that an important variable for you? And how does Agilent sort of play into any changes to not even necessarily the amount of capacity that's out there, but the structure of that capacity?
Yes. I think we see a structure changing over the marketplace to more onshoring. And I think it's not just with the pharmaceutical industry, but also with the chemical space as well for certain key fine chemicals. So we're already seeing those discussions happen with our customers. Some are driven by their own strategic endeavors or focus to really have a more tighter control of the supply chain locally.
But also you've seen relative to governments pushing the same concept as well. So we think that trend is early days, but we think it's to be there. We're already having discussions with certain customers about it. It's more of a probably more of a 2022 event related, to be honest with you, relative to revenues. And this is where having this global scale is really important, too, because you can help them maybe even move something from one country to another.
I think it's more going be about when they introduce new molecules to the marketplace, let's do it onshore. But I know you studied this one closely.
I was going to jump in here because I think, Steve, one of the things to think about there is all the investments that Jacob was just talking about in terms of the infrastructure and the investment around informatics. When we have a greenfield opportunity, our win rate is significantly higher than our installed base because of the ability for us to invest in the informatics platforms and so forth. We've seen that in China. We've seen it in a you certainly have an incumbent's bias in an existing facility. But these things, we think that we're going to take our disproportionate share going forward, and it's not just in the pharmaceutical space, as Mike said, it's also in some of the chemical spaces where you're looking for regionalization.
Maybe smaller footprint in terms of size of a factory, but that factory, they're not going to take product and instruments from another factory and put them in. They're going to have a new opportunity from a QAQC lab, and I think we've demonstrated in new spaces, we take greater share than what we have. And so we're very excited about that opportunity.
Yeah, I think on top of that, Bob, thanks for mentioning informatics, but it plays very well into Parex and I strategy here. When you have companies that start to go into different market and have global footprint or regional footprint, you also dilute the specialization you have maybe from if you have everything in one place. And that really speaks to that the customers are looking for ease of use, have a global overview on the productivity in the laboratory. So it really fits well into where we're going both the smart instruments, smart alerts and that informatics ecosystem that gives
you the data any way you sit in the world.
Our next question comes from Puneet Souda with SVB Leerink.
Mike and Bob and team.
Thanks, All right,
Can you hear me well?
We sure can.
All right, great. Thanks. So first a bigger question for Mike. I mean, if I could sum it up, the leading growth drivers here is NASD, all it goes, therapeutics, multiyear tailwind for you, especially when you think about the spectrum nature of these products. The cell analysis and cell therapeutics, that's a rapidly growing segment.
Obviously, inorganic growth has helped you in the past there. And you're growing deeper and deeper into pharma and LCMS and GCMS and CrossLab is also helping you there and China position is really doing well. So when you think about that going ahead in the next three to five years, I don't think we could have appreciated that NASD ramp and the cell analysis is going to play out like this five years ago. So what are some of the things that are potentially underappreciated here that become more and more meaningful over the next five year time frame, if you could elaborate on that? And then I have a follow-up for other folks on the call.
Yes. You've got the story, Puneet. That's exactly it. And we've got a number of really positive growth drivers. And I can remember getting similar questions a few years ago, and I'd say people don't appreciate the fact that we've got this NSAD business that could really be material to the company and I think that's played out.
I would say that we often look through our position in cancer diagnostics and genomics. And while they've been a part of the portfolio, there's a lot of exciting things happening in that space today. There's a lot of new things happening there. And I think that's an underappreciated aspect of Agilent's growth story. And a question we got earlier about it's a investment priority both organically and from an MA perspective.
And we think we still have untapped synergies with the presence we have with the former Daco franchise, but also the fact that we can really capitalize on this research technologies to diagnostics continuum. So I think this idea that we that whole area that we can have a bigger play in end markets and diagnostics and overall in the research side of genomics, I think that's part of the story that's underappreciated. I also always get questions about, hey, when is this high single digit game going to be over for ACG? When is it going to stop? And we say, why would it?
So I think that's also an underappreciated part of Agile's story is sustainability of growth in a market that continues to expand as customers' needs change. So there would be a few other things that I would point out. And then the third thing would be whatever we do relative to M and A that we haven't yet announced.
Okay. Okay, great. Sam, if I could ask you quite a bit of discussion about NASD. But when we think about the research oligos market and the expansion there beyond SHORE Select, you have NGS liquid biopsy NGS and liquid biopsy TAM emerging here, quite a large TAM there with other markets, including synthetic biology and others. And so wondering if pricing gets a little bit more competitive in the marketplace.
Obviously, you guys have shown that you can deliver scale here with therapeutic oligos, for example. So wondering how should we think about your position in on the research oligos and longer term? And then I have just a quick follow-up for Jacob and Pedrick.
Puneet, great question. And first affirming that on the oligo side, right, we have over two decades of expertise, deep expertise, manipulation, manufacturing, manufacturing, all the different things we can do, that plays well. And we continue, by the way, to improve our efficiency and our own cost basis for that because it's going to continue being an essential part for many things in the company. There are application expansion, which I think allows us to continue further leveraging our position related to oligos, right? You heard me speak a little bit about single guide RNA, which is really still based on nucleic acids and our manufacturing capability there.
So I think that there's a number of application expansion. And one other thing I will say, and I haven't spoken too much about this yet, is we're focused increasingly now on something called about our interoperability strategy. Because we're already in hundreds of genomics labs, and actually thousands of genomics labs. And we think, particularly around certain applications, like cancer diagnostics, certain inherited diseases, we can provide a truly this combination of easy to use, powerful answers. What I mean by that is setting up a workflow, for example, which would include our tape station for quality control, together with our Magnus system, together with our ELISA Informatics for Interpretation and Reporting.
You put that together in such a way that you provide something that's truly differentiating. And the way the market's going, and it's similar to the trends that you've heard Jacob and Jorge talk about. There's an increasing number of technicians that are getting involved. There's testing is happening in a more diversified way. So by providing that, we think we have value and we think that allows us to protect our customer base and also get more value, if you will, from our offerings.
Hey, Sam, just one other thing to build on that, and Puneet. Because you mentioned liquid biopsy and so forth. And while we don't have a specific outbreak, we play in that market today already. And so many of the customer the companies that are in that space are supported by Sam's business. And so we have the opportunity to kind of play the field here in terms of working with companies as opposed to and it's an area of exploration that we continue to look at.
But we play in that space today. So I don't want people thinking that, Hey, we don't. We just plan it at a different than the liquid biopsy test.
Great point. And by the way, Puneet, just to fill, I don't know how I forgot to answer that key question that you've had in there. So absolutely what Bob said and beyond that, both through our R and D focus in genomics as well as with Darlene Solomon, our CTO, our labs group, liquid biopsy is an area of extreme interest for us.
Got it. Okay, that's very helpful. And then, a quick one for Jacob and Pedrick on LC MS and open lab informatics. Mass spec is becoming increasingly important here as we go to larger molecules as complex mAb, bispecifics and other complex ADCs and also cell and gene therapy emerging into that. So as you think about that, your mix of large molecules versus small molecules, maybe can you speculate as to sort of what that could be over the next five years, where that can land?
And how you're getting levered there? And what sort of the path that you see for getting more mass spec getting more and more important there? Because obviously, you have a strong position here with LSEG. And then does that mean higher utilization for these tools in that? And does that higher revenue for you, higher revenue growth for you in those segments?
And then on the OpenLab, obviously, you're going to gain market share there versus a strong competitor in the marketplace. But going ahead, obviously, you can win in the greenfield opportunities, but just walk us through how do you continue to enhance that position and gain further market share in the CVS market specifically? Appreciate it.
Pork, do you want me to start and then you can start? I think first of yes, you're absolutely right on the LC MS space. We already have a very strong market share in the small molecules. And while might have been kind of a separation between large and small molecules, biotech versus incumbent pharma, this is all blended together. So each pharma each large pharma today have both large molecules.
There's still a separation in many of the laboratories that is different. So what we focused on is to developing those ease of use workflow. So our LCMS business is using for the large molecule a bioconfirm software that makes it You can go and walk up to the instrument, you can get the analysis done and we give you the results back. You don't have to be the actual specialist anymore.
And we have really used also, and Corey can speak to that, the design then to really make sure that it's not only the instrument but the consumables. And of course, the services go hand in hand on the automation. So that's a key focus. We are also on that integrating that into the through our OpenLab CDS, so it becomes a unified experience for the customer. Anything on that part before I talk about this?
Yes. I think on the large molecule side, you see, and as it was in the small molecule, a lot of really key workflows becoming the key topic topic about how it works end to end and the Prozigm acquisition has really helped with that in a lot of the spaces. But over time, we have a big attach rate opportunity. And of course, people that use mass spec analytical labs, they want to make sure it's used efficiently and operating really well. And that's where our services services scale comes in,
our consumables really, really helps too. Yeah. Yeah. So so the question is how do we how do we compete against competition in in an already entrenched space from a from a CBS perspective. I actually think it goes beyond CBS.
It's the ecosystem. I truly believe that the next generation informatics ecosystem is all about how you enable more than one two instrument solutions which attach but really have the full laboratory fully decentralized and how to ensure you can share data in between the different techniques in the laboratory, but also between the sample and understand the operational ability of the labs. So many of the incumbents right now, maybe their data systems are ten, fifteen years old and need and refresh. And when that is happening, you know, the customers are looking for what's the new best in class. And and here, we definitely are seeing that we are able to take share.
Great. Thanks, guys.
Our next question comes from Jack Meehan with Nephron Research.
Hello. Can you guys
sure can.
Yes. It's good to see you guys, too. Thanks for all the detail today. So I wanted to follow-up on cell analysis. It's a $300,000,000 business.
There any goalposts you can give us as to how big you think this is going to be in five years like you did for NASD? And then it's obviously a pretty hot market. Deals would be very strategic. But do you think they'd also be accretive?
We think we I'll take the second one, and then I'll point to you, Jacob, on the first question. Ultimately, you created yes. There's a lot going on in this space, very attractive. It's a hot space. We're really pleased with fact that we invest early in this space.
And we think there's targets out there that fit our M and A framework, to answer your question. And Jacob, how big could this business actually be?
I've got my
labor events out right now.
I'd definitely like to take that conversation off with Sam and see who gets to that $500,000,000 goalpost first. So what I really believe is that the understanding of the immune system, clearly been accelerated by COVID, but even before that, the immuno oncology and so on, is key and is going to be a big investment area over the next years. And we are well positioned from a lifestyle perspective. And so there is great opportunities with the current portfolio we already have in place. But I can definitely envision that we can invest even A perspective and add other techniques or content into our current business.
Now I want to remind you that all the acquisitions we have done in this space has been accretive. These have not been dilutive investments. So I think you will see us continue on that trajectory.
Yes. And I think that if you want to do the math on the growth rate, we would expect this business to be growing faster than the overall company.
I think that's certainly something we should aim for.
Certainly double digits. There's no reason not to pick up.
Yes, right.
We'll see who gets to $500,000,000 first.
Yes, let's take that, Ben.
And then, wanted to also follow-up on liquid chromatography. So this is an area you've been competing well, too. What is the medium term forecast considered for share dynamics? It'd be great just to get your thoughts on what's going on competitively in the market, both share and pricing.
Jacob, why don't you take that one? That's a core part of your business.
Yes. So we are the one if not one of the ones, if not the one leader in liquid chromatography and are doing quite well. I mean, our strategy is really to go in. We have some core platforms and then upsell afterwards. And we see that strategy work well that customers might want to get with an entry level configuration and then afterwards are willing to step into a more dedicated or specialized workflow.
And we have those offerings. So that's a very powerful strategy and we are successful with that today. We have certainly seen while the other markets here over the last few years have been challenging both in China with small molecules and the food market and so on, clearly our liquid chromatography business has been suffering, but so has the industry. And when we look into the numbers, we have over the past year taken share. So I think it depends on I'm pretty confident that we will take share.
Now the question is how is the market going to act. But so far, it looks I'm optimistic about 'twenty one also from a growth perspective.
Our next question comes from Patrick Donnelly with Citi.
Thanks, guys. Good to see you.
Hey, Mike. How are you?
Good. Good. Maybe just one on the wastewater opportunity. We've heard a few companies call that out. Can you just talk through what that could look like for you in terms of sizing and then timing as well?
And then just on the competitive landscape, again, it's been a bit buzzy here. Can you talk about where you guys fit in on the competitive landscape and how things look there?
As it relates to that particular opportunity or Yes. Okay. Sam, how about I start, and you can kind of jump in there. We So really like this opportunity for Agilent because we are a leader in environmental analysis. And this is where this wastewater monitoring is going to occur.
We're already established in these labs, and customers trust us. And we're also in a position to teach them some of the newer techniques on the genomics side. And as Sam, I think, will elaborate here, we have the enabling genomics portfolio that make this happen, along with the customer relationship, along with the science. So I'm not sure we're ready to size the opportunity yet. What I would say is, and I'll pass it to Sam, is whatever happens there will be incremental to what we have included in our FY 'twenty one outlook.
So none of these new opportunities that I talked about in my slide deck relative to COVID are in our guide assumptions. So Sam?
Yeah. Patrick, thanks for the question. And Mike already provided, I think, the core elements of it. First, in terms of the opportunity, as you know, it's still to be seen exactly how big even that market opportunity is. But a unique way, right, for public health officials to really broadly look at the level of infection and also the change as it goes up and goes down, and then being able to drill more deeply into it.
You know, another interesting element of this is that it would allow epidemiologists and others to potentially access individuals who don't have access to health care, right, because they're part of the overall wastewater equation. What we bring to it, combination, building on what Mike said, right, we have, we believe, a relatively unique access into the environmental testing labs. We have leadership there, particularly through Porrig and Jacobs business. We have presence. So these are longstanding relationships.
I think that's a very meaningful part of what Agilent brings and what we differentiate. What we have that others have also, right, it's going to be based fundamentally on quantitative PCR, qPCR. We have that. Something else that we have that's differentiating, right? This will be mass volume testing in these defined hubs.
And our Bravo platform, as you've probably heard, Jacob and others talk about, is one of the leading high throughput automation systems being used with COVID-nineteen. So what we really bring is access to these customers with a great degree of trust. QPCR, which really, at the end of the day, let's be honest, that's not too differentiated between us and all the other major players that you know that are leading in that space. But we have that, too. We could put that together with the automation.
We think that that gives us, together with some of the things that Jacob has also talked about, right? The LEMS systems and the analytics that we can bring together to give a very trustable, dependable, easy answer. So that's what we see as our opportunity.
And then Mike, maybe one for you. I know you touched on China throughout the presentation, during Q
and A a little bit.
I know it's one of your favorite topics. But you guys are obviously underpenetrated in DG, GE, ACG, over 20% of the total revs. Can you just talk through, I guess, that opportunity in the next few years, what we should expect in terms of the growth rate? And then maybe just the most exciting upside drivers in China overall.
Yes. So Patrick, as you know, I love to talk about China. I've always been very bullish on the opportunities there. So we expect geographically this country to be one of the leaders in growth and perhaps the fastest growing geographic market for us because we think the market fundamentals are there. They're building their own indigenous pharmaceutical industry.
They're really investing very heavily in pharma R and D, and we've seen them already. They're also investing very heavily in quality of life concern, whether it be environmental cleanup, air quality, food safety. So we like the market macro picture there. And we like the fact that some of our lines of business aren't yet fully penetrated. So think about ACG.
I think, Ford, maybe about 15%, 18% of your total business is now in China. Yet we have this huge, large installed base already established. And we're seeing the enterprise service before, it was all about placing new instruments and driving the science, but they're also interested very much the productivity of the lab story we have as well. So we think there's tremendous upside on the ACG business in China as well as the DG business, which is an area that historically we have not focused a lot on. We now have built up ability to directly interact with customers.
We changed our commercialization structure. And as Sam alluded to in his presentation, we stepped up our in country investments in China. And then listen, Jacob's on off the hook here. He thinks he's got pockets of growth here as well. He's really well established, but there's upside in some of his platforms as well.
So we think we're going continue to be talking to the investment community about revenue strength coming from China gradually.
Yes. I think the only thing I would add, Mike, is the beauty of what we're able I think we're going to be able to do, particularly in ACP and DTT, these aren't new products. We have a blueprint. We know how to do this. We've demonstrated it in other markets, and we're just going to do it there.
Yes. And you hopefully heard I had to think one other point, Bob, which was this whole theme today about the digital capabilities we've been developing, in particular, the WeChat platform is very important to our ability to service our customers, and we've got a leading position on that platform as well. And as we mentioned earlier, long heritage of being in this country for decades.
We've seen also, Mike, a big move from on demand services to contracts in China, and we're going to see a lot of opportunity increased attach rates due to that.
Our final question today comes from Steve Willoughby with Cleveland Research.
Two questions for you then.
First,
wondering your thoughts because of COVID and the race to develop vaccines and therapeutics and all the related investments by not only pharma but also academic and government entities, Assuming that non COVID related programs do start to return to normal levels, what are your thoughts on underlying market growth rates increasing over the next few years as both COVID and then non COVID programs continue? I'm not holding anything against all the different initiatives that you've talked about today, which I think are very interesting. Just wondering if you thought that there is any potential for sort of underlying market growth rates to improve over the next several years.
Yes. I mean we're not calling that yet, but there's indications that could happen if it plays out that way. So even in this digital world, we've had a lot of customer engagement. And what I hear from the academic research community as well as pharma, you know, right now the investments have been prioritized around COVID, but they're telling a story that it could actually be complementary. And then you're seeing governments globally much more willing to perhaps fund directly and support, investments in life sciences.
So we think that could lead to a more robust overall R and D environment for a few years. Again, lot of things still need to be worked out, but I think that's a reasonable scenario that you put out, Steve. We've got to assume that in the numbers we shared today, but I think that's a possibility that could develop.
Okay. Then my follow-up question, maybe for Sam. Just I don't believe it's been touched on yet today, your COVID serology test. You provided some color on when you're expecting that to be submitted. Any perspective you can provide on sort of what you expect your differentiation to be within the market?
And then it sounds like any revenue that it might generate would be incremental to the guidance that's provided for 'twenty one. But just is there any way to frame up what you think that serology test could look like in terms of opportunity?
Well, Steve, just confirming the first thing that you said, would be incremental. It's not really in our numbers, as you've heard Mike and Bob say. You know, what I would say about this, there are a number of serology antibody based tests that are on the market. But what there's still an opportunity for and dearth of in the market is tests that are reliable, that have continuity of supply, particularly tests that and this is what the FDA is looking for, continue to increase the accessibility in a distributed manner, and also ones that are amenable to high throughput testing and automation. And what we're bringing to market in partnership with Jacobs' organization, biotech capabilities and systems that we have, would allow the last part of what I talked about.
And once again, our access, and this has been part of the theme today, right, into thousands of not only clinical diagnostic testing labs, but also into environmental and all these other places, you know, that are a little bit unusual, but where testing is happening, I think also gives us, you know, a unique opportunity to serve the antibody based testing need, which will be interesting to see, right? Now that the vaccines, we're encouraged by the vaccines that have become available and are becoming available, we think this is going to be managing COVID-nineteen is going to be around for a while, a long time in our lives. Antibody tests, as you know, are a complement to qPCR and really allows, you know, monitoring potentially if even an individual has gained the immunity that they need. So, you know, that's how we see it.
Yeah. And Sam, maybe I should add on that because I think it's important, talked about what's the revenue opportunity. We, of course, made plans and we have some expectations. But I think what we've also learned over the last nine months is that trying to predict how the world is going to look like in a COVID world the next three months is very difficult. This could change very quickly and suddenly that's required for immunity testing.
What happens now if vaccines only have immunity for efficacy for six months or twelve months or something? Now suddenly, you're looking at a completely different landscape of requirement. So that's, of course, the game we want to be a part of. And we will see how that plays out.
Yes. Thanks, Jacob and Sam. And while Steve, while we haven't put anything in our guide assumption for 'twenty one, you shouldn't take away from our excitement we have here. We actually think we can come to market as something and Agilent has a place to take a piece of this market given our quality, our brand, our ability to supply and the fact that people trust us, offerings that come from Agilent and trust our team. So I must say, unfortunately, we're coming up to the end of our time together.
And I do hope that you're walking away from our first virtual Analyst and Investor Day with a deeper understanding and excitement about the Agilent of the future. We're very excited about the future for Agilent, or what I'm calling the Agilent of the future. And the message we're really trying to deliver is we've had a great run, but it's even better in the outer years. And my apologies to everyone on the call that we didn't get to all of your questions, but we look forward to engaging with you in the weeks and days and weeks to come. And I would say again, thank you for joining us, and stay safe and healthy.