Hi, I'm Christina Jones, Vice President of Strategy and a member of our Investor Relations team at Avantor. I'm excited to welcome you to our 1st Investor Day. We are hosting a virtual event given safety considerations related to the ongoing pandemic. Although we can't be with you in person, our goal is to provide you with an engaging experience to help you better understand our business and our strategy to accelerate growth. Our program today will be a mix of formal presentations and videos, many of which showcase senior leaders from our locations and innovation centers around the world.
Before we start, I will cover a couple of important disclosures. During our event, we will be making forward looking statements. These statements reflect our current views and are not guarantees of future performance. Our presentation also contains certain non GAAP financial measures. A reconciliation of non GAAP measures can be found in the appendix.
A copy of the presentation is available on our Investor Relations website and a recording of this event will be available shortly after we conclude. I'll pause to let you read the rest of our disclosure statements. Now let's move on to today's agenda. Our program will run for about 3 hours and will conclude around noon Eastern Daylight Time. We will start the day with a presentation from Michael Stubblefield, Avantor's President and CEO.
Michael will offer insight on our business and highlight his vision for Avantor's future. When Michael concludes, Doctor. Gerard Brophy will discuss our differentiated position to serve the high growth biopharma market. At the conclusion of Jair's session, Tommy Thomas, Vice President of Investor Relations, we'll moderate a Q and A session with Michael, Jair and our sell side analysts. Next, Fred Vonderhagen will discuss 2 of our end markets, education and government and healthcare.
After Fred, Mark Murray will cover advanced technologies and applied materials. Tommy will then facilitate our next Q and A session with Fred, Mark and Michael on the 3 end markets that were just covered. Following that, our CFO, Tom Sloczek will discuss our financial performance and outlook for the coming years. We will conclude the day with a final question and answer session with Tom and Michael. Before I turn it over to Michael, let's start today's program with a video that highlights Avantor's impact on society and our role in moving science forward.
Thank you again for joining us today.
Every day, science has the power to change lives for the better. It gives the cancer survivor the chance to walk his daughter down the aisle, Helps the little boy hear his mom's voice for the first time. Brings families together again after so On the part, what does it take to keep life changing science moving forward? It takes building a sustainable future where everyday actions generate positive impact for the environment and society. It also takes proven expertise and a trusted portfolio of products and services combined With a global reach and ability to provide customized materials of the highest quality for highly regulated applications.
Most of all, it takes People with a passion for discovery, a commitment to overcome challenges, who innovate and advance the next life changing breakthrough. As a global life sciences leader, Avantor works side by side with the scientific community, pioneers, scientists, Innovators and educators. From discovery to delivery, we relentlessly focus on breakthroughs that help solve the complex challenges the Our customers leverage our resources, expertise, innovative digital capabilities as well as our global scale at Networin so that Together with our customers, we move science forward. To change lives for the better, we collaborate, We innovate, we connect, we inspire to advance the full potential that science offers.
Hello, everyone, and thank you for joining us today. I appreciate your interest in Avantor. I'm Michael Stubblefield, President and CEO, and I'm thrilled to be with you as we kick off our virtual Investor Day event. This is a particularly exciting time to be in the life sciences space as the potential to achieve scientific breakthroughs has never been greater And new therapies are enabling us to treat some of the most challenging diseases we all face, including COVID-nineteen. As highlighted in the video and As we've all experienced this past year, science has the power to change lives for the better.
And everything we do at Avantor is tied to our unique mission of setting science in motion to create a better world. And we're proud of the role that we play in enabling scientific breakthroughs. Our business model is grounded in supporting our customers from discovery to delivery. And Avantor is deeply embedded in virtually Every stage of the most important research, scale up and manufacturing activities in the industries that we serve. We leverage our comprehensive offering and access to early stage research to seed content and solutions that ultimately become specified into our Customers approve production platforms.
Our broad portfolio of products and services and our customer centric innovation model and our world class supply chain enables us to support our customers' journey every step of the way. That's our value. That's how we make an impact and grow And that's how we keep life changing science moving forward. Over the last few years, we've successfully transformed our business and emerged as a global life sciences leader. Avantor is now a Fortune 500 company with nearly $30,000,000,000 in enterprise value With approximately 70% of our revenue earned in life science applications, we have one of the highest life science exposures in our peer group.
Our strong financial performance indicates our progress and the relevance of our business model. We have significant top line momentum and a strong track record of margin expansion. And our rapid deleveraging enabled by our strong free cash flow has given us flexibility to accelerate our growth and enhance our capabilities via M and A. We closed the Rimbio and Ritter acquisitions in the Q2. And earlier this week, we announced the acquisition of Masterflex, a leading global manufacturer of peristaltic pumps and aseptic single use fluid transfer technologies.
With an anticipated closing in the Q4, Masterflex' fully integrated fluid transfer solution will enhance our single use platform For the high growth biopharma end market, Masterflex' technologies are relevant across all established and emerging biopharmaceutical platforms, including monoclonal antibodies, cell and gene therapy and mRNA and are pervasive in both therapy and vaccine research and manufacturing, Including COVID-nineteen. In addition to strengthening our technology position across the end to end bioproduction workflow, This transaction will enhance our overall growth and margin profile, generate compelling financial returns And complement our consumables driven highly recurring revenue model. While we've certainly made significant progress over the last few years, This transaction highlights why we are even more excited about our future. One important aspect of our model is the resiliency of our business, Driven by the diversity of our portfolio and the highly recurring nature of our revenue, approximately half of our revenue comes from proprietary branded products And is supplemented by innovative third party offerings from our critical supplier partners. We serve 4 end markets that features similar characteristics, including high regulatory oversight and complex development processes.
Importantly, No single customer represents more than 4% of our revenue. We have leading positions in the Americas and Europe and are aggressively investing in core biopharma hubs like Singapore, Korea and China to capture exciting growth opportunities in the EMEA region. The result is a proven highly recurring revenue profile. 1 of our primary objectives for today's session is to give you a better understanding of what we do for our customers and the relevance of our offering to each of the end markets we serve. Well, there's nothing simple or straightforward about supplying more than 6,000,000 SKUs on demand To 225,000 customer locations in more than 180 countries in a heavily regulated environment, It's possible to classify our offering into 2 core areas.
1st, we provide comprehensive products and services that enable our customers to achieve precise analytical results in their research, diagnostic or quality assurance and quality control activities. 2nd, we provide customized materials produced to exacting specifications for our customers' commercialized production platforms. Let me elaborate on this framework over the next couple of slides. While each of our end markets is unique, the way we serve them is similar, including a common product offering and supply chain. Within our customers' labs across all four of our end markets, our customers generate precise analytical results To guide high value early stage research, diagnose chronic conditions and infectious diseases or support final product testing and batch release as part of their QA, QC workflows.
Building on our deep scientific and application expertise, We provide our customers comprehensive solutions for each step of their analytical workflows, including sample preparation, Sample detection and sample storage. We realized significant operational efficiency by leveraging our solution and shared infrastructure for these workflows across each of our 4 end markets. Our comprehensive workflow driven solution to support our customers' analytical workflows gives us unparalleled access To our customers' early phase research and development activities and this access is an important differentiator And a foundational element of our business model as it enables us to reach our customers' R and D scientists. By starting where science begins, we are positioned to provide customized solutions for some of the most demanding applications, including novel biologic therapies and Next Generation Semiconductors. As a critical innovation partner, we work side by side with the world's researchers and scientists to customize proprietary material formulations to meet our customers' stringent quality and performance requirements.
Our extensive quality systems, deep regulatory expertise and cGMP manufacturing capabilities enable us to support the technology throughout the development process, including scale up and regulatory approval. Ultimately, our solutions are specified into our customers' final products and processes and are supplied for commercial production. Getting specified into our customers' production processes gives us the opportunity to serve these platforms throughout their lifecycle, enhancing the resiliency and stickiness of our model. With more than 40% of our revenue derived from these high growth production platforms And even more once we close the Masterflex transaction, this is a critical element of our growth algorithm. As I've just described, our scope of comprehensive products and services enables us to keep scientific progress moving forward From discovery to delivery, however, our product offering is just one element of our value proposition.
Another critical capability is the strength of our network and infrastructure. We have more than 30 manufacturing sites around the world, including 13 cGMP sites and a global distribution network that enables us to deliver on demand to our customers. In addition to the production of our trusted proprietary brands, such as J. T. Baker and Newsell, our offering is supplemented by innovative products from our broad supplier network, enabling us to provide comprehensive workflow driven solutions to our customers.
Our technical expertise complemented by our 11 global innovation centers and deep quality and regulatory expertise earns us a trusted position with our customers. And our global customer channel allows us to serve more than 225,000 customer locations in more than 180 countries around the world through both our global sales force and our industry leading e commerce platform. This broad customer access enables us to reach the world's scientists regardless of where they work, whether they're developing a new therapy in a small startup lab in Asia Or in the lab on the campus of a leading academic institution in the U. S. Or even in a large scale biopharma lab in Europe.
These distinctive capabilities set us apart from our peers and position us for long term sustainable growth with our customers. Building on our strong offering and differentiated capabilities, our management team has a proven track record of performance and execution. As I indicated earlier, we've made tremendous progress in transforming our business over the last few years. Our milestones and achievements during this time tell a strong story. Since 2018, We've met or exceeded all of our strategic and financial targets.
We completed the integration of VWR Well ahead of plan and exceeded our target of more than $300,000,000 in synergies. And in 2019, We became the largest healthcare IPO in U. S. History and were subsequently ranked by Fortune as one of America's 500 largest companies. We've expanded our open innovation centers in the U.
S, Korea and China and have completed several raw material, single use biorepository and distribution center expansions around the world. Through all of this, our organic growth has doubled. Margins and overall business profitability have increased substantially and we have deleveraged rapidly. And we recently published our inaugural sustainability report further affirming our long term commitment to corporate responsibility and improving the world through science. Now the foundation of our ability to execute is our Avantor business system.
Our Avantor business system embeds standardized processes and tools that drive consistency through our business and ensures a structured approach to executing our strategy And operating plans. ABS provides our associates a common framework for growth, productivity and leadership and emphasizes database decision making, process rigor and problem solving. We've built this into our DNA as a core element of our culture. For example, we have fully embraced the Kaizen continuous improvement philosophy of making tomorrow better than today, every day. We systematically identify, share and implement best practices and last year alone conducted more than 130 Kaizen events.
We've also deployed Tier Daily Management, a key enabler of operational excellence at more than 90 sites and functions across the enterprise. ABS underpins everything we do at Avantor and is a critical driver of how we deliver value to you And to all of our stakeholders. As we reflect on the strengths of our business and our track record of delivering strong results, We are well positioned to continue our growth trajectory in the coming years. We've highlighted some of our core growth drivers on this slide. And you'll hear more today from each of our leaders on how they are driving growth in our end markets across these different levers And how these things play out in our business strategy.
At a high level, our integrated go to market approach is all about capitalizing on our access to early phase research and development to seed customized materials, enabling us to grow our proprietary content and earn specifications that will drive long term recurring revenue. Innovation and new product introductions will enable us to maintain our relevance as technology evolves and positions us to serve our customers' dynamic and ever changing needs. With significant capital flexibility, M and A will enable us to accelerate growth, expand margins and bring more proprietary content and capabilities to our customers. We will also continue to make strategic investments in our core capabilities, including investments in manufacturing capacity, distribution facilities, digital technologies and Innovation. Finally, we will enhance our focus on sustainability to build on the commitments outlined in the inaugural sustainability report that we published in July.
Let me tell you more about our commitment to sustainability. Our responsibility to improve the world through science is not one that we take lightly. We're committed to measurable sustainability actions that will create a positive impact on the environment And society. Avantor's Science for Goodness Sustainability platform enhances our framework for creating long term value by embedding sound environmental, social and governance practices into our business strategy. The platform also enables us to continually measure and report progress against 4 key commitment pillars.
And we've aligned our pillars with several of the United Nations' sustainable development goals, where we believe we can have a positive impact for our business and for our stakeholders. By providing products and services as well as transparent information and reporting will also strive to support our customers in achieving their sustainability goals. Our sustainability is reflected in our people. The products we create, the transformative services we provide and the integrity with which we serve our shareholders, Business partners, suppliers, customers and communities. We are deeply committed to our global sustainability efforts and keenly aware of the work ahead of us in this important area.
In becoming a global life sciences leader, we've made significant progress And as I've outlined, achieved many important milestones. Couldn't be more proud of our team and what we've accomplished. Importantly, I'm even more excited about our future. The role of Avantor's products and services in enabling scientific breakthroughs, It's never been more important, and we're well positioned for growth. As I look ahead to 2025, Our capabilities, business model and track record of execution will support significant value creation.
By executing our strategy, we expect to generate more than $9,000,000,000 in organic revenue. Along with this mid single digit organic growth, we expect to expand adjusted EBITDA margin to approximately 23%, And we will deliver this margin expansion through multiple levers, including increasing our proprietary content from 50% of our revenue to more than 60%. Additionally, we're targeting approximately $2.40 of earnings per share, driven by strong operational performance and continued deleveraging. And we're excited about the enhancement that Masterflex will have to this outlook once we close the transaction. As referenced on the previous slide, mid single digit organic revenue growth of our existing business We'll yield more than $9,000,000,000 in revenue by 2025.
On top of that, our significant free cash flow will create More than $8,000,000,000 in M and A firepower and perhaps even more if we were to temporarily exceed 4 times leverage or to supplement with equity. And as we deploy this capital like we've done with Ritter and RimBio earlier this year and with Masterflex later this year, We will position ourselves to accelerate our growth, further expand our margins and increase our earnings well beyond what we can do organically. Let me close with this. You heard me say at the beginning that science has the power to change lives for the better. We have a passion for science, for working hand in hand with the world's leading researchers and scientists and for solving complex problems.
And we're helping scientists realize the potential of breakthroughs through innovation and support their journey every step of the way. Our business model is proven, And it's in our DNA to be focused on continuous improvement. And the value we bring is clear. We've also proven we can execute and we're well positioned for long term growth. I outlined our vision for 2025 And all this stems from our relentless focus on keeping life changing science moving forward.
And it's driven by our broader mission of setting science in motion to create a better world. We're about driving progress for you, our business, our customers And all of our associates around the world. And I hope you're as excited about Avantor's future as I am. Thank you for your time today And please enjoy the rest of the event.
Aimia is a critical region for biopharma, and we are committed to expanding our presence in the geography. We established Avantor Shanghai Innovation Center in December of 2019 to enable more efficient collaboration with our customers. The Innovation Center, along with number of recent manufacturing expansions in the region, support local biopharma customers in accelerating the development of life changing treatments.
Now the
team of experts work closely with our customers to create Innovative, safe and effective products and solutions used in the production of biologics drugs. Avantor's mission, critical process chemicals, excipients, chromatography resins and single use products, are used across all existing and emerging biopharmaceutical platforms, including monoclonal antibodies, cell and gene therapy And mRNA. At Shanghai Innovation Center, we focus on downstream process optimization, essentially helping customers optimize their manufacturing process to enhance yield, improve purity and decrease the processing time. We are in active collaboration with around 100 customer on downstream optimization and have Successfully launched several proprietary products to augment our portfolio, including our protein A resin, Pro Achieve A. Our high quality products, collaborative approach and the customer access through our innovation center enable us to create customer solutions that are specified into another customer's biopharmaceuticals platforms.
We are excited about the results We have been able to deliver in our AEMEA biopharma customers and look forward to growing our footprint in the region. As the world of life science and biopharma expands, we will continue to invest in our capabilities to set science
Thanks, Jani. Hello, everyone. It's great to be here. I'm Gerard Bruffy, the Head of Avantor's Biopharma Production Business Unit. I'm here today to talk about our biopharma end market, the role we play, the value we bring and the opportunity we see for the industry moving forward.
As Michael indicated, there's never been a more exciting or important time in the life sciences space. And in the last 18 months, we've seen the importance and impact of Avantor has and will continue to play a significant role in contributing to breakthroughs, and it's part of a bigger story. We're living in a world in need of options, of treatments and cures for some of the world's most debilitating diseases, options needed for patients and their families. The biopharma industry is at the center of this response, and Avantor is a key player in this space. Our products and services need to be high quality, Globally available, effective and safe, we collaborate with our customers to bring innovations to life.
Biopharma end market is a significant portion of Avantor's revenue, dollars 3,000,000,000 and that revenue extends globally. We support it globally with 5 innovation centers, 13 GMP manufacturing facilities and 19 ISO certified distribution facilities. It exposes us to a total addressable market of $38,000,000,000 growing at high single digits. We're embedded in all stages of biopharma from research to commercialization. Specifically, we play in 3 verticals: R and D, 55% of our revenue at mid single digit, where we leverage our channel, our broad portfolio and our on-site service model to excel in this dynamic space.
Clinical and biorepository, roughly 10%, growing at high single digit, double digit and bioproduction, 35%, growing at double digit. So roughly 2 thirds of our biopharma business is in R and D and Services and roughly onethree in the production space. These R and D activities span multiple workflows, multiple disease areas and research spaces. And the market drivers are growing and are important at an incredible rate. Let's look at some of those.
We see increased funding for R and D through the NIH and others. We see a rapid growth of new modalities like clinical trials for cell and gene therapy. We see increased numbers of those clinical trials. We see incredible FDA support to improve the regulatory pathways for approval. And we see in the industry resilient and agile approach towards supply chain, Supporting business continuity.
This is an important long term market for us with significant global exposure, And we expect our market share to grow. More on that later. All science starts in the lab, and now we see amazing Scientific innovation coming from nontraditional areas. In addition to pharmaceutical companies, we see innovation coming from biotechs, From start ups, from government partnerships, and we're well positioned to track that. New platforms are emerging, such Cell therapy, gene therapy and mRNA, and they're complementing more traditional platforms such as monoclonal antibodies.
Those labs are looking at more therapeutic areas than ever before: Alzheimer's, Parkinson's, infant spinal muscular atrophy. Our portfolio model means we have deep and broad access to all these drivers. We don't have to make bets. We have a lot of shots on goal, and we can support all of them. And this is further supported by our involvement in the BIO consortium.
This gives us access to thousands of customers in the R and D space. Our presence in the R and D lab space sets us up for continued strong growth here And positions us to grow in the adjacent biopharma clinical and production spaces. Recall R and D is over 50% of our market. So let's take a look at what happens in that R and D space. In this space, our customers are understanding the basic molecular biology of diseases, developing druggable targets, Finding biomolecules and taking them through the early tests in cell biology and animal studies and then first in man.
We understand where our customers are engaged how we can support them with precise analytical results. And we help them in 3 distinct ways: materials and consumables like high purity proprietary chemicals Equipment and instrumentation in analytical and sample prep mode and upon completion of the pending acquisition of Masterflex, Peristaltic pump technology for lab applications. And with services, we have over 2,000 associates working with 500 customers, Working on operations such as media preparation, bioreactor setup and instrument collaboration, this gives us a great insight into the unmet needs of our customers. Avantor's value to our customers is our willingness to support their unique needs and challenges. Let's take a look at a case study where pieces of our value chain come to life for our customers.
In this particular case, we support our customers with 55,000 unique SKUs through our enabling digital platform. We support them in 100 separate locations with almost 500 associates. This relationship is 15 years old. We get relentless feedback that we're the best in class in this space, and it allows us to enjoy double digit growth with our customer. Let's pivot to the 2nd vertical, clinical trial support and biorepository.
It's roughly 10% of our biopharma revenue, and it adds tremendous value. As customers have validated drug targets and early phase molecules, they advance them into clinical trials, and there's a lot of important science that needs to be done here. It looks different for each customer, but primarily consists of custom kit manufacturing supporting pharma companies and researchers at patient bedsides, Clinical equipment and ancillary supply management and biorepository services where we can store and archive samples for future clinical trials. The 3rd vertical we play in is bioproduction, and 35% of our business is in this space. It gives us access to a fantastic TAM, And our products are specified into 80% of biological drugs out there, the top 20.
And for context, product line covers 95% of excipients and the vast majority of downstream chemicals. This gives us a fantastic Positioned to grow with strengths in new offerings in chromatography and lipids. In this space, the majority of our products are proprietary. We are uniquely positioned to support our customers in ways other companies are not through the leveraging of our innovation centers globally and our global footprint of manufacturing. And we support our customers in 3 distinct ways: first being bioproduction materials such as high purity chemicals The second being single use solutions, aseptic fluid transfer of materials between production unit operations.
And upon completion, the pending acquisition of Masterflex will underpin peristaltic pump and equipment and consumables and last but not least, bioproduction services where we help our customers with process optimization. Having well rounded product lines allow us to customize solutions for our customers. No one customer is alike, and we're well positioned to find a solution for them, thanks to our offerings and Thanks to fundamental but sophisticated scientific breakthroughs, things are moving fast in the biopharmaceutical space. The field of monoclonal antibodies is only a few decades old, but already we're seeing new platforms emerging in cell and gene therapy And now MR and A as seen in the industry's response to COVID-nineteen. However, our business model, our technologies and our investment profile is really well positioned here to support the emergence of all these platforms as well as ones to come.
The highest revenue for us is in the biologicals and monoclonal space, and it continues to grow. The FDA approved It's 100th monoclonal this spring and the pace of approvals continues. We're tracking 100 and thousands of molecules through the clinical trial space. The market continues to benefit and biopharma companies are reaching into new therapeutic spaces like Alzheimer's and Parkinson's and psoriasis. And innovation continues in this space.
Biosimilars, antibody drug conjugates and bispecific antibodies are coming through with new and emerging modalities. For our customers, we support them with high purity chemicals, reagents at scale, direct dispense materials and hydrated solutions. We can offer the right amount of chemicals in the right form for our customers at their top manufacturing sites. Then there is Cell and Gene Therapies and Aviral Vectors. This accounts for about 10% of our businesses is growing very quickly.
Monoclonal operations tend to be at very large scale, cell and gene therapy much smaller scale, and this constitutes A disruptive opportunity for us. There's a trend toward these modalities being explored by everyone, not just small biotechs, Large biopharma companies are making significant acquisitions in this space, and the market is responding. We've seen Cell therapy approvals for dreadful cancers, gene therapy approvals, and now we're seeing the viral vector platforms forms underpinning some of the COVID vaccine responses, for example, for AstraZeneca and for J and J vaccines. Companies are leaning into this space to solve big problems. We anticipate there will be significant growth in this space outside vaccines as well.
For us, we offer novel single use assemblies for sterile fluid transfer between manufacturing unit operations. We offer small scale GMP reagents in convenient formats and closed system sampling technologies. MRNA is a powerful new modality, And we're already seeing almost 10% revenue from novel manufacturing platforms in this space. The growth was accelerated by the pandemic, and Avantor is incredibly well positioned to support the needs of the biopharma industry at all stages of its development. Whether it was our products or solutions like single use technologies Our process and service offerings, this demonstrated the nimbleness of our business model and positions us well in an opportunity for future growth.
We see a robust pipeline of mRNA vaccines and therapies. We anticipate growth. We're following over 100 such molecules through clinical trials. We're supporting this space with novel chemicals for synthetic biology, custom formulation reagents and excipients And single use fluid pathways with specialty materials reflecting the unique needs in this space. Let's look at a video to explain how these amazing therapies
But the process to develop mRNA therapies follows the same path of upstream processing, downstream processing And formulation fill and finish. One critical sub process for mRNA is the encapsulation of mRNA within a carrier structure They can both protect the molecule and deliver the mRNA to the body cells once injected. This is accomplished through the assembly of lipid nanoparticles Or LNP's. In order to create the lipid nanoparticle, 2 solutions are created. 1 contains the mRNA And the other contains 4 key lipids mixed with ethanol.
These are combined in a single use mixing assembly. Changes in both solution pH And polarity are used to induce LNP self assembly. The end result is a lipid nanoparticle with the mRNA Safely protected on the inside. This LNP can be safely administered into the human body and present the mRNA to our body cells, where it is translated into proteins to drive an immune response. Supporting all these process steps, Avantor provides a range of ingredients, including high purity process chemicals, such as lipids, buffers and solvents.
We also designed and manufactured the specialized single use assemblies that are used through the manufacturing and lipid transfer processes. Avantor.
Avantor. Avantor
is one of the few companies in the world that manufactures raw materials used in the LNP production and provides For customers engaged in mRNA development, mRNA technology is presenting new opportunities to tackle some of the world's most challenging diseases. And
We rightly marvel at the amazing clinical and molecular advances like mRNA, But the biopharma industry must bring them to the market efficiently, safely and at scale to allow their amazing potential to be realized, And this is where the Avantor Biopharma Production business fits in. Let's make it real for you. I want to share detail on how Avantor Biopharma offerings are relevant across all workflows, Not just in theory, but in practice. The video outlined the verticals of upstream, downstream and fill finish. These steps are relevant to all biopharmaceutical platforms, Monoclonals to mRNA.
And we have products in each of those stages. They apply to monoclonal antibodies, cell and gene therapies and mRNA or bioengineered therapies. Upstream, we offer our Steradigm Serum, our JT Baker fermentation ingredients and our single use solutions. Downstream, our JT Baker buffers are Proteva Protein A Chromatography Resin and our single use assembly pieces for buffer transfer. And at the fill finish stage, amino acid and sugar excipients, but also novel formulations such as lipids supporting mRNA And of course, supported by our single use sterile fluid transfer connections.
Of course, the safe and efficient transfer of materials between these phases is enabled by aseptic fluid transfer technologies such as the pending acquisition of Masterflex peristaltic pump and tubing technologies. We work with biopharmas to customize to their specific requirements. Our products are specified into customer workflows and not easy to swap out. So these are the elements of our growth strategy, a set of distinct levers that will drive how we execute on future growth. The first is integrated growth to market, Then new product introductions and innovations we're crafting and customizing for our customers.
Next, mergers and acquisitions, both to round out our portfolio, but also to support global expansion and lastly, investing in core capabilities by growing our manufacturing footprints In raw materials, in single use solutions, but also in clinical services. And all of this is underpinned by a focus on sustainability. We're very well positioned in the R and D space, broadly and deeply, and we can leverage that R and D access to seed proprietary biopharma offerings. This is the Nucleus, our integrated go to market strategy. It's an opportunity for us to seed biopharma production products early And follow through by supporting our customers through clinical trials and process development.
This is underpinned by our regulatory and our GMP experience. It's all good business in its own right, but it positions us for follow on in the bioproduction space, giving us access to high quality, High margin and recurring revenues. New product introductions across the business enhanced solutions to support our customers at all stages. In the R and D space, we have new introductions in liquid chromatography, mass spectrometry and next generation sequencing. In the clinical trial space, new product introductions in sample prep and sample processing.
And in the biopharma production space, We leverage our Omni Top single use technology for closed sampling of our customers' workflows reducing their risk. We provide dextrose solutions and concentrates for customers' fermentation requirements, and we provide high purity, low end detoxant sugars for use as excipients in our customers' formulation workflows. Within the last few months, we've acquired 2 strategic assets And now with Masterflex appending 3rd to grow the business. This is aligned with our growth model by augmenting our portfolio offering, adding capacity to our manufacturing enterprise while expanding our global reach. In June, we closed the acquisition of Ritter, As Frederic will discuss, giving us more presence in the lab plastic space.
And also in June, we acquired Rimbio, A China based single use bioprocessing bag manufacturer. It's our 1st manufacturing facility in Asia. Single use needs are growing, and we're meeting those industry needs. Rimbio augments our Aimia expansion strategy and is an example of how we can use M and A to increase our presence regionally. And of course, this week, we've announced our intent to acquire Masterflex.
This pending acquisition will add to our biopharma production portfolio, Allow us to engage with customer design engineering projects earlier and allow us to specify our chemicals and single use portfolio more broadly and deeply into customer applications. Both are great examples of how we can use our M and A to advance our global strategy, adding to our portfolio and supporting expansion into new geographies. Clearly, we understand this market really well, where it's going and what our customers' needs are, and we've got a strong foundation from which to go. All this means we can be very purposeful about our investment profile, investing in R and D and Innovation Centers, Investing in manufacturing capacity to support growth. Raw materials, but also in single use, that space continues to blossom And our investment cycle has been a bit ahead of that.
In services, we've invested in a new biorepository facility in Germany To support our customers in the clinical trial space and in the quality space and regulatory space, we've invested in our quality management systems, but also in the resources required to support our customers in these highly regulated spaces. At the Avantor level, we're a CapEx like company, But our insights and strengths allow us to direct OpEx and CapEx investments precisely to areas where we can support our biopharma business. Avantor has capabilities and capacity to grow as a partner to all our customers and to meet their needs today and tomorrow. And our strategy is in place to grow global capacity to meet the needs of this critical industry. It's impossible not to mention COVID this year, and there are a lot of moving parts in how it's affected our biopharma end market and our business.
But we've seen strong tailwinds In Avantor's business in testing, in personal protective equipment and in COVID vaccines, but it's still important to acknowledge Approximately 5% of Avantor's revenue. But vaccines have come into incredibly sharp focus in this last year and a half. We've responded to our customers quickly, and we've strengthened the relationships we have with them, and we're embedded in all major vaccine platforms. I think the last 18 months have really shown the nimbleness and power of our business model. We see significant durability of our vaccine revenue, But a lot of external events will shape exactly what that is.
We'll see the emergence of boosters. We'll see the emergence of new variants unfortunately. We will see how the market supports Different vaccines in different formats. So we believe that we see durable vaccine revenue. And the fact that we are embedded in all these workflows and all these platforms positions us well to maximize our return from this positions us well to maximize our return from this space.
But in addition to the COVID vaccines, As I've explained, we also understand how this pandemic has galvanized the emergence of mRNA as a modality, which is going to be used for new medicines and new vaccines. And we see significant upside accruing from that long term. So what does all this mean for the Avantor Biopharma business? We see very strong growth. Our order book has grown fivefold in the last 6 quarters.
And our long term growth of the company is based on a business model that focuses on traditional molecules like monoclonal and cell and gene therapy. COVID vaccines account for about 20% of that order book. So we believe we're primed today to succeed in all these spaces for all the reasons we've discussed, both in single use and in chemicals. And we think we're in a really strong position to support our customers in this space. So as you've seen, We're helping our customers and the biopharma end market as it grows through support at every stage of development, relevancy in multiple workflows and global reach.
We're in a great market and our unique and integrated offering from R and D through clinical trials and production positions us very well for growth. We're well positioned to benefit as new modalities come to the market and as new problems need solving. Our integrated model and our ability to grow is clear through M and A, new product introductions, capacity enhancements and others. Thank you very much for your time today, And I'd now like to turn over to Tommy for our first Q and A session.
Thank you, Michael and Jared for your incredible insight. Good morning. I'm Tommy Thomas, Vice President of Investor Relations at Avantor, and I'm excited to welcome our sell side analysts to join us for the first of 3 Q and A sessions. Our first question today is from Tycho Peterson from JPMorgan. Tycho, good morning.
Your line is open.
Hey, Hey, good morning. I want to start with the theme on innovation. Following Ritter, RIM Bio and MasterQuest, you've obviously closed a lot of gaps in the portfolio, but you still have other gaps Power reactors and cell culture media. So how important is it to fill in those gaps organically or inorganically? And then second, how do you differentiate markets like single use that, Maybe from the outside here a little bit more context.
Yeah. Thank you, Tycho for joining us today and great Certainly, one of our core growth levers is indeed innovation. We have a very full pipeline and given the diversity of our Portfolio in the end markets we serve, we have a really rich opportunity to drive organic revenue growth via Innovation. Gerard can highlight some of the specifics from our investments in biopharma innovation. But it is important to recognize that our Approach to innovation is quite broad.
We do bring new products and technologies across our portfolio in all of our end markets. But, Gerard, Perhaps you could highlight some of the things that you're most excited about in biopharma.
Yes. Thanks, Michael. Tycho, I think we have a good history of both And inorganic opportunities, unplugging opportunities in our workflow. As you know, with Proteva, we've got our resin, and we're complementing that with anion and mixed bed resins as well for chromatography. The leverage of innovation in workflows is important.
So we've recently announced our hydrated concentrates, our solutions. These are going Plug right into what customers do. So there is non obvious ways in which we can bring innovation to bear as well. And then Masterflex is a great example of where We've been able to plug a whole area around peristaltic pumps through an M and A. So I like the fact that we understand our customers' workflows well.
We understand their pain points. And I think we have the opportunity to leverage both organic and inorganic opportunities to fill those opportunities.
Thanks, gentlemen. We're going to open up the next question to Doug Schenkel of Cowen. Doug, good morning. You're on the line.
Hey, good morning, Tommy and the rest of the team. Thanks for doing this today. Thanks for all the details on how you are evolving and advancing your Portfolio of products and services that serve biopharma end market customers. I'm just wondering, I guess, three things. First, How much of the associated growth for this end market is expected to come via the addition of new customers versus increasing spend per Customer as your offerings have expanded.
The second thing, maybe a little bit redundant with what Tycho touched on, but are there clear areas where you See gaps to fill the portfolio and specifically what I'd like to
get at is do you need
to go buy new things or are there opportunities to maybe replace third Already offerings with proprietary offerings. And then 3rd, sort of building off of that, can you provide specifics On the margin impact that your expected continued evolution can have on the overall business as you improve the Products that you're selling at to this end market. Thank you.
Doug, a lot of great questions that we'll try to unpack here. Maybe I'll The bookends there, starting with your first question around just organic growth and the role of Putting more content into our solutions. With the access that we have to our customers, We do have a great opportunity to expose them to the entirety of our offering and our solutions. And One evidence of that is if I look at the customers that we've served the longest are those that actually we grow the fastest with. And that's really Just a great example of what we can do over time in exposing our customers to just more and more of our offering, and we That anytime we add new content to the portfolio, whether that's new product introductions from innovation or as we have an opportunity to add in Capabilities from M and A, we can only supplement that.
Specific to your question around content, one of the things that we're most Excited about following the combination with VWR. We've talked a lot about the importance of the channel and access that that gives us, and I highlighted that in my remarks, the way our business model works. And if I look at the way our pipeline has evolved over the last Couple of years with this enhanced access, we're putting more content on every new molecule than we ever have before. And that's certainly An important part of our growth algorithm going forward. But I'd love for Gerard to maybe hit on your second question around Where we're maybe focused from an M and A perspective and just from a solution standpoint, where would be the Opportunities for us to fill holes and gaps and drive accelerated growth.
Yes. And just to amplify maybe Michael's This point on the first point, to a certain extent, it's all new business for us. As our existing customers engage in new molecules, new campaigns, new manufacturing campaigns, we'll will secure that business off the strength of our relationship with them. And then as we outlined in the video, our Breadth and depth in the R and D space means we're really well positioned to spot new customers, some of whom may not even exist properly We can see those guys coming through and we can work well with them. In terms of the M and A gaps and spaces, I mean, Tycho touched upon it.
We There's new opportunities for us in emerging spaces in fermentation, in some of the new production platforms. Our chemicals and our Fermentation ingredients are already well used there, so it's not unknown space to us. And I think we have really good opportunity To do bolt ons so that we have even more comprehensive offerings in these spaces.
Thanks, Doug. Appreciate the question. We're going to open up the line next to Derik De Bruin of Bank of America. Derik, good morning. Your line is open.
Great. Thank you. And thanks for taking the question and good morning. You showed a little bit of a highlight on some of your APAC Strategy, given that you are underpenetrated in that market. I'm just sort of curious how are you sort of thinking about expansion in that And particularly in light of some of the recent news where you're looking for where the Chinese government that you're looking for more push to buy locally and to Buy it from regional suppliers.
I guess, how do you sort of balance this sort of need to your need to expand in that region versus sort of like some of the initiatives
Derek, thanks for the question. Appreciate you joining us today. As you know, and it was highlighted in our presentation, the EMEA region represents Up 5% of our overall revenue. That really understates the importance of that region to our growth story. With our exposure to the high growth bioproduction workflows and our position in key biopharma hubs Like Singapore, Korea and China, we're actually well positioned to drive outsized growth in that region, and it is an important contributor to our organic growth story.
To position us to capture this growth, Derek, you've hit on something that's pretty important. The trends in that region are a little bit different than maybe what we see In Europe or in the U. S, and there's certainly, in a place like China, a real focus on building local capabilities to service China for China, if you will. And so, when you look at our growth playbook to serve an emerging geography like Asia or China specifically, it starts with building sales and application and technology capabilities, investments in our innovation center that was highlighted in Video that Janney shared with you. And then ultimately localizing production.
The acquisition of RimBio was our first step into Giving us local capabilities to become more agile, shorten the supply chains and provide on demand Supply to our customers, it makes us more nimble, and that's an expectation in that region. And certainly, we'll look to do that more and more over time. And if I look at just the presence we have in the bioproduction pipelines as well As the production platforms in those core biopharma hubs, we're very well positioned, and I think we're excited about the pace At which those pipelines and activities are moving forward. But as you suggest, we'll continue to support Our growth in our customers in that region through a mix of kind of imports as well as localization, but more and more, We will look to localize capabilities over time, and some of that could be greenfield investments where that makes sense. And as we did with Rimbau, we certainly showed a willingness to accelerate that positioning via M and A.
Thanks, Eric. Appreciate the question. Our next question comes from Vijay Kumar from Evercore ISI. Doc, go ahead. Your line is open.
Thank you, Tommy, and thanks for hosting the session. Michael, maybe one Bigger picture question for you and I had one for Ankur. The I guess the revenue numbers $9,000,000,000 to $9,500,000,000 of Revenue target by fiscal 2025 and the EPS target of $2.40 Can you walk So what kind of assumptions that's being baked in on the COVID vaccine side? Does it include Mass Reflect? In your 8 1,000,000,000 M and A commentary, does that include Masterflex or is that M and A optionality excluding Masterflex?
Vijay, thanks for joining us. Always great to hear from you. When we look at the targets that I outlined for 25, it is critical and I appreciate you giving me opportunity to reinforce that all of those numbers that we shared there only contemplate the existing business That we have in house. So, it's our core organic business that we've been running. It would include the impact of Rimbio and Ritter in that we have already closed those.
But to be very, very clear, none of those targets would Any impact from Masterflex or any other future M and A that we would be fortunate enough to do. So that's purely an organic target that we've laid out there. And from an assumption standpoint, I think you would see Continuation of kind of this mid single digit organic growth, continued and ongoing margin Expansion highlighted by enhancements to our proprietary content and then significant deleveraging That would all work together to yield the EPS target that we laid out there. We do have Significant M and A firepower as we look over the next several years, and we'll put some of that to work hopefully in the Q4 here as we successfully close Master Flex, but the model will continue to delever roughly a turn a year. And that's going to give us Significant flexibility to expand our capabilities, whether that's in high growth life science workflows in the lab or And our services offering, particularly in the clinical services area or as we've just done here with Masterflex, certainly always interested opportunities to enhance our positioning in the bioproduction workflows.
But the way we think about M and A is it's somewhat opportunistic, And obviously, every deal looks a little bit differently. So didn't want to confuse the story by trying to make too many assumptions. But suffice it to say, We've got a very rich organic story that will only be enhanced through the deals that we're able to close later this year as well as in the years ahead.
Our next question comes from Jack Meehan from Nephron Research. Jack, good morning. Your line is open. Jack, are you there? Let's move on to the next caller here.
Patrick Donnelly from Citigroup.
Hi. Can you hear Great. Thanks, Tommy. Michael, maybe just on the proprietary content shift. I know you talked about going 50% to 60% Over the next 4 or 5 years, is that all kind of organically?
Can you just talk about the key drivers kind of shifting that percentage? Is it all just kind of new product investments? Is it just that growth being a little bit higher than a third party stuff? Just wanted to get a better handle on that 50% to 60% number you cited.
I think it's pretty well understood, Patrick, that the impact that increasing proprietary content has on Margins and so that is an important area of focus for us and a key element of our strategy. The walk from kind of the 50 ish percentage where we're at today to more than 60% over the next few years is in fact the impact from Organic growth. I think I've said it before and highlighted that it's not necessarily that we're Looking to disadvantage other parts of our portfolio to drive this growth, this expansion of Proprietary content organically really is a function of where our proprietary content is used in our customers' workflows. In my the framework that I highlighted in my presentation indicated that we do a lot to support our customers' analytical workflows and that we support our customers' production workflows. And if I look at where our proprietary content is best situated, it would be in that second bucket around our The production workflows of our customers, and I think it's pretty consistent across all four of our end markets.
The Production environment does, in fact, grow faster than the analytical workflows in an R and D setting or in a diagnostic setting. And so we have just naturally built in the advantage of our proprietary content growing disproportionate to the rest of our portfolio, Just given the allocation across the different workflows that we serve, it obviously does that outlook That I provided does include the impact of RemBio and Ritter in that they're part of the portfolio. And so that could maybe explain some of the gap you identified in your model. But to be clear, not to be redundant, but as I mentioned in my answer to the earlier question, It doesn't include anything from Masterflex or any other future M and A that we will do. So we have a nice organic algorithm that will drive Forward in a meaningful way and contribute to significant margin expansion that will only be enhanced by any Future deals that we would do, just given our screening mechanism.
And Tom will highlight that later in his remarks today and walk you through in more detail how we think about M and A and Reinforce our model there, but suffice it to say, in M and A, we will disproportionately allocate our capital to bringing high Growth high margin proprietary content into the portfolio that would extend us well beyond the 60%.
Thanks, Patrick. We're going to go back to Jack Meehan at Nephron. Jack, can you hear us?
Yes. Can you hear me?
Yes, we're good.
Perfect. Sorry about that. My question is for Gerard. I was hoping you could elaborate on the RNA piece here, I think one of the big debates on the COVID side is this transition to a booster market, which you referenced. How do you think that's going to influence the demand for your solutions there?
Is it less demand because we're moving to one dose? Is it more because overall Capacity is expanding. And as you think longer term, just kind of the handoff of COVID starts to wane, just the Transition to other modalities, just talk about that.
Hey, thanks, Jack. Great question. So And I'll come back to this point, but recall that the majority of our revenue, like I've outlined, is in monoclonal. So the growth opportunities for us are in vaccines and in For our vectors and in mRNA, what happens in the future, the shape remains to be determined, but we strongly feel That our revenue in this space is durable. We're well positioned across all the platforms, be it recombinant proteins, be it mRNA, be it Vaccines.
Now that's important because we do think that COVID is going to play out for the future in different ways. The majority of the global population is not vaccinated. New populations Pediatrics are emerging. Booster shots are being talked about. Variants of new concern, vaccines may well and probably are Well, we know they are being developed against those.
So that's important in its own right. But the galvanization of these platforms for new therapeutic areas, RSV vaccines, Flu vaccines and even oncology drugs will obtain as well throughout the period. But Increasingly, and this is why I started my comments with monoclonals, we're seeing a huge uptick in therapies. We're seeing monoclonal antibodies Used now extensively as a therapeutic option, and that's right in our wheelhouse. So even that revenue plays back to us in a very So long term, we see significant durability of our COVID revenue in the space.
Okay. This concludes our first question and answer session. Before we move on to our next presenter, Fred van der Hagen, we're Excited to highlight how our Biomaterials business makes a difference in our lives.
Has been providing high purity medical grade silicones for the biomaterials market for the past 4 decades. We live our mission to set Science in motion to create a better world every day by providing silicones that have a profound positive impact on human lives. Our materials can be found throughout the human body on healthcare and medical devices for life enhancing and even lifesaving purposes. Our silicone is used in devices that help infants with hydrocephalus live full active lives. They're in intraocular lenses that allow cataract patients to see Clearly again, they're in deep brain neurostimulation devices that reduce pain and tremors in Parkinson's patients.
They're in drug delivery devices that free patients from frequent visits to a clinic or a hospital for infusion therapies. In order to serve these critical health care applications, we provide the highest purity silicone, meeting stringent quality and regulatory standards. Our manufacturing facilities are specifically designed with these standards in mind, and our teams are highly trained and dedicated to excellence, From enabling hearing to helping hearts beat, our work makes a difference and helps create a better world.
Thank you, Jim, for this example on how the work we do at Avantor really matters. I'm Frederic Van Der Ragen, Executive Vice President Leading our Americas and Europe regions. In this session, I will be covering 2 of our end markets: education, government and health care. During this presentation, I will explain to you why these markets are important to our business, how we execute our growth strategy and also providing you Two examples of our innovation in that field. As you will recall from Michael's presentation, Aventor's mission is to set science in motion.
The work we do in this market connects to our mission and help to seek for future scientific breakthrough. Additionally, our offerings directly impact patients' outcome through both our diagnostic offering to IVD manufacturer and our silicon product that are used in medical devices. Let's get started by sizing the education and government market. This market is large and growing with a total addressable market of nearly $16,000,000,000 expected to grow in the low single digit. We currently generate 15% of our total revenue from this end market.
Our customers in the education segments are primarily large universities, Medical Schools and K-twelve Schools, who we serve through our scientific education business. 1 of our strategic advantages in education is our status as the preferred providers of laboratory supplies and services through the ENI Corporation. This group, Similar to the Bio Consortium, BioPharma end market services over 5,000 of educational institutions and give us a broad access to the academic community. In government, we sell the federal government entities like NIH and CDCs and also the state government agencies. Customers in both spaces look for providers who can offer them a vast load of solutions From branded product to value based options, which we achieved through our self manufacturing capabilities and our broad supplier network.
Customers also rely on fast delivery to their research labs, which we fulfill through our global distribution footprint. Finally, customers expect us to drive innovations through a workflow approach, which I will talk to you about next. There's a significant investment in biomedical research focusing on developing new therapies, many of which are funded by NIH and are also addressed by the pharmaceutical industry. In order to tackle those challenges, pharma players are seeking for new source of innovation, Often turning to educational institutions for IDs and talent. This is driving education to play a central role in accelerating innovation.
Whether the innovations come from traditional pharma, Academia or an hybrid model, all of these R and D sources rely on the critical workflow to conduct their research. At Haventor, we have invested in understanding the workflows, which are at the heart of the important scientific discoveries and continue enhancing our offering to help scientists innovate. Given how important the workflows are to our customers, I'd like to spend a couple of minutes describing this concept to you in more detail. In its most basic sense, workflows are the way we scientists perform their research. At Aventor, we provide products and services for each steps of the workflow.
Our product here include lab consumable like liquid handling tips, chemical and reagents, equipment and instrumentation and also productive equipment and safety equipments. We also complement our product offering with our services, including on-site services And Sample Storage. As Michael referenced in his remarks, this workflow approach enables Avantor to support scientists As they pursue precise analytical results in research, diagnostic, quality assurance, quality control workflows across all our end markets. Let us transition to the health care market. You'll see a lot of commonalities in both the work through approach as well as the relevance of our core capabilities here.
This overall healthcare market represents nearly 10% of our sales. We break it down into 2 sub segments. The first one is the Diagnostics segment, which is fundamentally about analyzing what's in your bloodstream. The second is the medical implants, where we sell high purity silicones material from our NuSil platforms. Focusing on the diagnostic, This industry is driven by aging population and increasing prevalence of critical diseases as well as the emergence of new therapies and a broader access to genetic testing.
Some of the important workflows in that space include proteomics to fight cancer, Molecular diagnostic to address infectious diseases or next gen sequencing for infant rare disease screening. We serve this market in various ways with a targeted sales force of diagnostic specialists. These specialists serve 3 main customer segments: The OEM that are producing diagnostic kits, the core labs that are performing high throughput diagnostic screening and last but not least, the hospitals providing results at the point of care. Moving to the medical implants. We serve this market through our Nucy plant.
We have a long history of providing silicones approved material that are used in long term implants. Whether we're talking about cochlear implants To enable hearing or pacemaker to improve cardiovascular functions, all these applications require extensive regulatory approvals, Leading our product to be specified for the lifetime of these implants, 100% of our content is proprietary, with gross margin expanding well above our corporate average. I'd like now to transition to how we execute our strategy to grow in those 3 markets. Here, we have post ready vectors. Our first one is to leverage our workflow approach, introducing new product and services to our customer base.
The second is the use of M and A to increase our proprietary content in critical customers' workflows. The third is our ongoing investment in our core capabilities. And last but not the least is the growth of our biopharmaceutical platform through customers driven innovation. Let's begin with our NPI strategy. Here, we take a very methodical approach to enhance our workflow offering.
The first step is to understand the critical workflows that are at the heart of our customer scientific work. In this particular example, we talk about the liquid chromatography mass spectroscopy workflow, which is at the fundamental in both of education and health care markets. 2nd, we map out the critical requirements for that workflow. From there, we evaluate the strengths of our offering in each steps and identify areas of opportunity. Finally, We introduced new product in the areas of opportunity using a variety of approaches.
In this particular case, We used M and A, adding retail's precision tips for sample preparation. I will talk more about retail in a few moment. We also leverage our in house innovation capabilities to develop and launch our own proprietary brand of liquid chromatography and gas chromatography columns. Lastly, we partners with suppliers of liquid chromatography and columns and high pressure liquid chromatography to offer software and hardware that both increase productivity of our scientists. This methodical approach has paid off, as you will see.
We have increased our NPI launches each year and have generated approximately $280,000,000 worth of annual revenue for the product launch in the last 12 months. Moving to the 2nd growth vectors, which is our M and A. Here, Our recent acquisition of Ritter serves as a proof point of our strategy. As an increasing demand for automated consumable across all the workflows And Ritter addresses this market need with robotics and liquid handling consumables. Ritter is aligned with our M and A strategy of looking for companies that address multiple workflows and also offer opportunities for us to leverage our customer channel and drive synergies.
Let me pause here and show you retail's company and facilities in action.
At Avantor, we set science in motion. Our recent acquisition of Ritter demonstrates our commitment to accelerate growth, enhances our proprietary portfolio and provides more comprehensive solutions for our customers. A fast growing technology leader, Ritter manufactures high quality robotic and liquid handling consumables, including conductive tips engineered to exacting standards. Ritter adds to our long standing history of quality and trust. As part of our J.
T. Baker brand, which has a reputation for reliable results That maximizes productivity and efficiency, Ritter brings the same application optimized function tested performance to precision products for life sciences. Ritter enhances Avantor's offerings by expanding our capacity and growth opportunities in key scientific workflows. Ritter's High precision manufacturing footprint includes 40,000 square meters of specialized production space and provides significant growth capacity. Because quality is non negotiable for the customers we serve, Ritter enhances our quality commitment with its fully automated production line that operates in clean And with Ritter's ISO certified production facility, we expand our footprint of high quality manufacturing locations across the globe.
Additionally, these new products meet the high purity standards required by our customers' most demanding applications. Customers engage in genomics, cell biology, drug discovery and LCMS often rely on automated liquid handling To achieve their throughput, reproducibility and safety goals. With Ritter's precision offerings for these automated Systems, we now offer a comprehensive solution for these workflows. Avantor has the access, Customer relationships and channel to accelerate Ritter's growth. By leveraging our global commercial team and distribution network, we make it easy for our customers to get Within weeks of closing the acquisition, Ritter's products were already in the hands of our commercial team and available for easy ordering on bwr.com.
Ritter's platform is an excellent strategic fit with Avantor, Serving applications and end markets that we know well, and Avantor will continue to make the strategic investments And increase our capacity to solve the life sciences challenges of tomorrow and move science forward.
As you can see, Retail's products are consistent with our approach of serving the most demanding customers, both in terms of quality and regulatory requirements. Retail expertise in high precision molding will offer a platform for Aventor to innovate and expand our consumable offering. We're truly excited about the CapEx that retail adds to our company, and we are on track with our integration activities. Let's move to the 3rd growth factors. Here, I'd like to highlight a couple of key investments.
Note that these investments are not limited in relevance to our education Government markets, they also apply to all the customers' base that we serve. We already introduced the relevance of innovation to our customers, including both proprietary and third party innovation. Similar to those investments that JL referenced in terms of capacity expansion for raw material and single We are expanding our manufacturing capacity to support growth in the new steel materials. We recognize that our distribution network remains at Key differentiators, and we are continuously investing through automation, footprint optimization and expansion to broader our service reach and enhance our service level in particularly in Asia. Finally, we view our digital platform as critical to our success With nearly 75% of our transaction growing to our e commerce platform.
In the past 3 years, we have increased our wet traffic by nearly 100% through search engine optimization, digital marketing and enhanced content. Later in the day, you'll see a video featuring Some of our other digital enhancements. For last, but not the least final growth vectors, I'd like to go back to our New Zealand platform and show how we are innovating in that field. We are currently working on over 500 innovation project in that space, including several platforms that scale across multiple customers and application. 1 of these platforms is in situ therapies, which includes implantable devices enabled by silicone that cure once in the body.
This technology opens up possibilities for less invasive medical procedures in many areas, including spinal surgery. Additionally, our drug delivery platform allows us To control release of drugs through implantable silicone devices, these drug delivery devices reduce the burden of frequent doctors' visits and therefore, improved patient adherence. We are very excited about this innovation, and we will continue to invest in growing our Biomaterial platform. In summary, the education, government and healthcare spaces are large, growing market with strategic relevance for Aventor. We address these markets through a workflow driven approach, which help us to deliver innovation to our customers.
We'll continue growing our market share through new product introductions, M and A and core capability investments. And we will leverage Our differentiated position in high purity silicone manufacturing for medical implants to drive outsized growth in our Biomaterial platforms. Thank you for your time and attention today. Before I turn it over to Mark Murray for an overview of our advanced technology and applied materials end market, Let's watch a short video highlighting the capabilities of our Taiwan Innovation Centers. This innovation centers serves an important collaboration app for semiconductors customers in Asia.
Decades of investments in research and commercial development have driven the Taiwan Semiconductor Manufacturing Industry to a Position of global leadership. In 2010, Avantor established its Taiwan Innovation Center to facilitate intimate collaboration with With the technology company driving advancement in this industry, view as an extension of our customers' research and development locations, the And quality of requirements, new technology, including 5 gs, electric vehicles and artificial intelligence, demand increasingly complex semiconductor devices and have driven the industry to introduce new wafer process material to meet this demanding needs. Avantor has developed a portfolio of new proprietary products, including select etchants and cleaner that effectively Remove certain material while carefully preserving others. Our Taiwan Innovation Center is equipped with state of the art Clean rooms, wet chemical processing tools and umbilical instruments that keep us on the leading edge of semiconductor material innovation. This is only a brief highlight of the many capability our Taiwan Innovation Center envisaged to meet our
Hello. Thank you for your attendance at today's event and your time and attention. My name is Mark Murray and I lead our Biomaterials and Advanced Technologies businesses here at Avantor. In this section, we will discuss how we the advanced technologies and applied materials space and how we service these customers in the same exact way that we do in the areas Jer and Fred Took you through earlier. Ultimately, we leverage the same core capabilities and global network to set science in motion for all our customers in the advanced technologies and Avantor's products are used in some of the most high-tech settings from semiconductors that enable us to connect in an increasingly virtual world like we are today to silicone used in space vehicles.
Our products enable scientific breakthroughs with a profound impact on society. By the numbers, Technology and applied materials applications represent 25 percent of Avantor's revenue. You notice that we provide the entire portfolio from materials, Equipment services to a variety of end applications that I'll describe shortly. In this segment, our sales are highly diversified across customers and applications, making the revenue profile quite resilient. Today, 30% of our sales in this space are proprietary, Reflecting the contributions from our proprietary lab products, formulated chemicals for semiconductor manufacturing And our silicone, aerospace and defense applications.
Now let me outline the diverse applications that we serve within this market. Non industrial applications, roughly 50% of our revenue in this space, includes our proprietary materials for semiconductors, Aerospace and Defense as well as applications like food and beverage and consumer goods. Industrial applications, the other 50% of our revenue Include applications like chemical and petroleum, mining, construction, these tend to trend with GDP. Overall this market represents a 16,000,000,000 total addressable market growing at mid single digits. You know, we often get asked about our advanced technologies and applied materials end markets and why we even play in this space.
Let's take a couple of minutes to outline how we service these applications. For all of these applications, if you were to walk on the campus of one of our customers, You'd encounter a couple of common facilities. You find a research lab engaged in R and D activities where our customers are creating their next generation of products. You'd also find a quality lab doing product testing and quality assurance, and you'd find production facilities engaged in core manufacturing activities. For our Advanced Technologies and Applied Materials customers, we provide both the workflow solutions and the customized materials that Michael outlined as the fundamental pieces of our offering here at Avantor.
Our workflow solutions support scientific analysis in both the research and quality labs. While our customized materials are used directly in the production of highly regulated products in the most demanding applications. Focusing in on the workflow solutions, the fundamental activities in Research and Quality Labs are similar really across all of our end markets. This enables us to leverage the same core set of products and services, the same commercial team and e commerce platform And the same distribution and supplier network to efficiently serve these customers really for all of their laboratory needs. On the custom materials side, we provide formulated solutions that are used in some of the most demanding applications that we serve as a company.
From highest quality customized chemical formulations for semiconductor manufacturing to our NuSil brand silicones used extensively in aerospace and defense. Now let's watch a short video where Ruth Castillo, our Vice President of Planning, Engineering and Procurement for our silicones business will highlight our capabilities serving these advanced technologies.
Anders Nussel brand sets the global standard in high purity silicones to serve the most extreme environments and most advanced technologies. From rockets To send spacecraft into orbit to the electronics we use to connect and communicate, we supply the silicons these advanced systems require, even in the harshest conditions. With over 40 years of industry leading expertise, our offerings include highly customized silicon formulations as well as an Established line of off the shelf products, all with the highest levels of stability and integrity to meet the strict standards of highly regulated industries. Our customers leverage our scientific expertise to design high purity custom formulations that meet their specific application From there, Nusil's specialized manufacturing facilities and purification technology enables us to produce silicon with the low volatility levels, a critical requirement for these advanced applications. Additionally, our global regulatory expertise and relationships Our unique combination of ultra high purity silicon offerings, customization capabilities, specialized manufacturing
Thank you, Ruth, for sharing an example of how we serve our advanced Technologies customized with the customized silicones products made there at NewSil. Now let me pivot from how we service these customers to how we're going to grow with these customers. Let's discuss how the same 4 strategic drivers for Avantor also accelerate growth within this space. The workflow approach to NPI building on the foundations you heard from Fred earlier, augmenting our offering to more completely service our customers' laboratories. M and A will continue to enhance our proprietary content for these workflows, including our most recent Ritter acquisition.
We are investing in core capabilities, including our manufacturing capacity to support the growth of our custom materials. And finally, our focus on customer driven innovation in our proprietary semiconductor And silicon materials are going to drive significant value for Avantor going forward. Starting with MPI and M and A, Our methodical approach that Fred walked you through earlier also enhances our content for customers in the advanced technologies and applied materials space. If we take the example of LCMS, many of our customers such as those engaged in agriculture or food and beverage would rely on this workflow nearly every day to analyze a variety of different materials. They benefit from the new products that we've introduced for automated sample prep, Our proprietary LC and GC columns and recent equipment enhancements.
Now moving on to core capability investments, We're making significant investments in our innovations, including the Taiwan Innovation Center that you heard about from Sherman at the start of this presentation. We're also investing in manufacturing capacity to support our custom materials growth in semis and silicones. Recognizing that customers in advanced technologies and applied materials has some of the highest purity and quality requirements, we are augmenting our innovation And our QC labs with advanced instrumentation, including things like trace metal impurity detection to the part per billion level. And given the overlap in core capabilities used to service this market, our investments in our global distribution footprint And digital platforms are also critical to this space. Our final growth accelerator is the robust pipeline of custom materials for use in highly regulated applications.
Here we follow a customer driven innovation model based on long standing customer relationships. Initially, we understand the material requirements of the customer and their specific needs and their processes. We then work in our own labs to customize formulations to deliver the exact performance the customer needs. We then will qualify and register the products as needed And ultimately ensuring that our solutions are being scaled up at the exact time the customer goes into production. The results of this innovation approach is a rich pipeline with over 260 innovation projects across more than 120 different customers.
Now let's take an example of how this model is in action in the semiconductor space. With this customer, we engage very early on with R and D to understand the requirements of their We then worked in our own labs to create a custom chemical blend that met the exact performance and design requirements of that new node. We then qualified and specified into the customer including raw materials through finished products and then ultimately ensured ongoing quality and consistency Through ongoing enhancements as the customers needs ratcheted up. While this is one example, we can describe similar examples with our aerospace and defense customers. Now let's move to how our business model really comes together at a case study of a large semiconductor manufacturer.
For this particular customer, we provide both the custom materials using the collaborative innovation products I just described, But also workflow solutions. In this case, we provide extensive workflow support, including lab consumables And PPE really used across their entire campus. In this example, we have over 200 on-site associates providing value added services to various departments at this customer every day. Our extensive Support across both elements of the Avantor offering has resulted in a 20 plus year customer relationship, Five supplier quality awards, including a special award for our support during COVID based on our service to both their labs and production facilities. Here we have a 10 year plus contract for consumables and services, and perhaps most importantly, a 30% custom materials growth as we head into next year.
To wrap up, I'd like to highlight the diversified applications that we serve within the advanced technologies And applied materials space covering both industrial and non industrial applications. All of these applications Drawing the same set of core capabilities making our model highly synergistic across all of the end markets that we've discussed today. In addition, our innovation model creates a rich pipeline of customized material opportunities with our customers that will yield outsized growth in these higher margin proprietary materials going forward. With that, I'd like to turn it over to Tommy Thomas, who will facilitate our Q and A session.
Thanks, Mark, and welcome back. We're now going to begin our And Q and A session with Fred, Mark and Michael. We're going to start this session with a question from Tejas Savant from Morgan Stanley. Tejas, your line is open.
Hi, guys. Can you hear me?
We can, Tejas. Thank you.
Hi, this is Edmund
on for Tejas. Thanks for taking the question. I just wanted to ask a quick question about the chip shortages going around. I was wondering how this would be impacting your
Yes, it's a great question. Certainly getting a lot of headlines today. I'm going to give you a high level perspective and Mark can give Some details. Clearly, demand for semiconductor chips in all applications are running at a very, very high level and it's certainly getting a lot of media attention around some of the supply chain shortages. Fortunately, I'm happy to report that we're We're certainly not the cause of any of those shortage, but it is enabling significant growth for our business.
And as we've talked about, is one of our growth Levers, we continue to invest in our core infrastructure and certainly, that would include our semiconductors business. You got to see What we're doing from an innovation standpoint in Sherman's presentation, but similar to what you see us doing in Biomaterials and our biopharma business, We're also continuing to expand our production capabilities to keep up with the demand that we see from our customers. But March is probably a Closer to it and can you give a little bit more color on how we see that playing out?
Yes, thanks for the question. Again, a lot of the headlines around chip shortages Been in automotive. Obviously, automotive demand dropped off as the pandemic started. But we did see in our business Things like 5 gs, things like computer demand really stabilized that demand. And so as we look going forward, As a lot of investments being made not only in automotive, but for broadly in the industry, again, great opportunities for growth for not only our
Great to hear from you. We're going to go to the next caller on the line. That's going to be Josh Walden from Cleveland Research. Josh, good morning. Your line is open.
Great. Good morning. Thanks for taking my questions and thanks for the time today. It looks like you're expecting Low single digit growth within the education and government end market. I guess based on earlier comments, it sounds like the Maybe more encouraged by funding outlooks and investment levels there.
I guess just wondered how the low single digit growth outlook for that in Maybe compares to your prior longer term outlook? And then any kind of additional context you could provide on some of the key puts And takes getting you through that assumption would be helpful.
Thanks, Josh, for the question. Appreciate you joining us today. Yes, when we think about Education and government, I think the historical growth that we've seen on that platform is in that low single digit. Occasionally, we'll you maybe see it sneak up Into the mid single digit, but I think we're comfortable on an integrated basis there with both education and government at that low single digit level. The platform is probably 2 thirds education or it is 2 thirds education and about a third of that is in the government sector.
I think historically, we've seen some Limited growth in the government area and probably a stronger growth in the education space. And I think our assumptions, At least over the long term, probably mimic that historical outlook. But would love to bring Fred into this Clearly, with the funding that you talk about and the importance of life science research within academia, there certainly are some high growth workflows That we're excited about that we service at the university level around the world, but especially in the U. S. And Europe.
Love for Fred to be able to highlight Some of those exciting growth opportunities that our portfolio gives us access to. Fred?
Yes. Thank you, Michael. Thank you, John, for the question. I think the way I read the question is how can we outpace the Okay. Growth leveraging our strategy of workflow based approach.
And it's true that the market may evolve at mid single digit, low single The key question is and the key challenge for us is how we can outpace market growth by leveraging our workflow based approach, developing solutions for customers Into the workflows that are the fastest growing one, and those are the length gen sequencing workflow, the cell biology workflows and the liquid chromatography mass spectroscopy workflows. And those are the ones that we execute our strategy and we're well positioned for. So as we look at the market as a whole, It may be growing at low single digit, but as a company, we are aspiring to grow faster in those key workflows.
Thank you. Our next question comes from Luke Sergant from Barclays. Luke, good morning. Your line is open.
Hey, guys. Thanks again for the question here.
So you led each section off with a video from one Your people in China. So hoping you could dig in on the opportunity there as you see fit. It was a major growth Trajectory on the IPO, give us an update there on the exposure you see in the different end markets and segments, is it different than the overall mix? And just any other commentary from a growth trajectory where you see all that the majority coming from?
Luke, good to hear your voice. Thanks for joining us As I indicated in the last segment, Asia for us, while a little bit perhaps underrepresented in our overall portfolio, does represent a significant growth opportunity for us. And In our outlook, we would anticipate double digit growth for that part of the world, really driven off of the production platforms that we serve, Forms that we serve, bioproduction for sure, but also, we have a pretty strong position in our semiconductor business in that Part of the world and a growing position with some of our bio materials solutions as some of those applications start to take hold throughout the region. So We're very well positioned actually from a production standpoint, and we've got significant content that we're putting On to those platforms that are coming through the pipelines that gives us a lot of, I think, excitement about where we're going in the future. We'll Allocate capital into the region, both for organic growth as well as inorganic growth to accelerate that.
But I think that the 2 videos actually that we showed so far from Asia, you saw The one to kick things off there, our General Manager in China. She was actually sitting in our innovation center in Shanghai that we opened just prior to the pandemic. And I'm Anxious to get back out there once travel opens up, but despite that, that lab is extremely busy with collaborations With our customers and then you saw in this segment, Sherman, our lead technologist in our semiconductor business. We have a world class There in Taiwan that we leverage to grow our technology and position it in Next generation and actually multiple generations ahead of where the current semiconductor technology is to earn on those platforms, very similar to what we would do in the bioproduction business. So Asia for us is It's primarily a production growth opportunity at the moment, and we look for niche opportunities to capture some of the higher growth opportunities Where we can on some of the life science workflows in the lab.
Thanks, Luke. We're going to open up the line next to Catherine Schulte from Baird. Catherine, your line is open.
Thanks, Tommy. Maybe just a question on the education and government side. It feels like every few years we get some sort of noise Around Amazon making a bigger push into serving labs. Can you just talk to what you've seen over the last few years and how you view your competitive Positioning going forward?
Catherine, thanks for the question. I appreciate you joining us today. Actually, I haven't had a question on Amazon in a So I appreciate you bringing that up. When I look at Amazon and maybe from my private life As to why my kids and my wife seem to use that platform, there's probably 2 or 3 key elements That I think that they're leveraging there. 1, of course, would be just the broad choice that the platform gives a consumer.
They make the transaction easy to execute. And lastly, the security of the supply chain and the efficiency of the supply chain Efficiency of the supply chain in getting whatever it was you were looking for same day, next day, kind of rounds out that transaction and makes it a pretty compelling model. When I look into the life sciences space where we lead, I would argue our space was disrupted quite a long time ago. If I look at our platform and the strengths that we're leveraging, more than 6,000,000 SKUs give our customers unparalleled choice. We have a leading e commerce platform that Grows every day and with our distribution network, we service a significant portion of our business same day, next day.
We continue to invest as our customers expand around the world to be able to extend that same service. So we're extremely well positioned To provide the value that our customers are looking for in a heavily regulated environment, and I think that's also critical to point That is one of the main differences between a supply chain like ours and what an Amazon might be used to. But clearly, We are broad scanning and always looking around corners to see what other competitors might be trying to do out there, and we try Stay ahead of the game. But as we sit here today, limited to no traction from Amazon in our space. And Certainly, I think that speaks to the strength of the solutions that we bring in into the market today.
Thanks, Catherine. Our next caller is John Sauerbier from UBS. John, your line is open.
Good morning and thanks for taking my question. I have a question on the Applied Materials and Advanced Tech segment. It's around 30% proprietary today, which is below Avantor's Corporate average. Does the company have any plan investments to increase the proprietary projects within this segment? And where does this go in
John, I'll make a couple of comments and then Mark leads that segment for us and can give you some additional color. I think it's just of the mix of the customers and the workflows where we're positioned there. If I go back to the framework that I teed up in my presentation, We do 2 things here at Avantor. We provide comprehensive workflow driven solutions for analytical workflows, And we provide proprietary content or customized solutions to support our customers' production platforms. And Within the Advanced Technologies and Applied Materials, given the nature of our solutions, we're going to have more exposure Research, we're getting more exposure to some of the diagnostic activities.
And predominantly in this segment, we're also Gonna have exposure to QA QC workflows. We do have many examples of where we leverage the other part of our model and getting specked production platforms. And maybe, Mark, you could highlight for the audience today where we see opportunities there. Absolutely. And Michael, just to build on
that, whether it's workflow solutions or our customized materials, we see both of those Proprietary offerings growing faster than the rest of the segment. So for us to go as a company from 50% to 60% over time, Clearly, we see that 30% increasing similarly to dry proprietary content and frankly higher margins in this segment over time.
Thanks, John. We're going to take another question from Tycho Peterson from JPMorgan. Tycho, your line is open.
Hey, thanks. 2 quarter here on the healthcare business. For the 3rd, the healthcare that's tied to medical implants. I Michael, you talked about before remote therapy being as robust in bioprocessant. I'm just wondering if you could talk to that dynamic.
How much of that is post pandemic catch up versus growth Some of the newer areas like GCT therapies and drug delivery that you highlighted. And then second, can you just talk about some of the growth drivers for diagnostics? I know talked about secular translation, pathology and screening, but obviously there's a lot going on in that market with more decentralization, new How are you thinking about the growth outlook for the diagnostic release as well?
Yes, both great questions, Tycho. Mark runs our Biomaterials platform, he can give you some maybe some deeper color. One thing I would offer, though, before he dives in there, We've been pretty disciplined and pretty methodical through the pandemic and making sure that although The terms the way we do business with our customers in the Biomaterials and Medical Implant space would have allowed us to kind of push more product into the market. We've taken a pretty approach to make sure that we were kind of matching supply with demand here. And so as we come out of then the pandemic, elective procedure Start to ramp.
We're seeing that directly translated into our revenue. We've had some record growth here recently, and I think it certainly matches The rapid rebound of those procedures. But Mark, maybe you can give some color on and specifics on just how that order book Has advanced here in recent months?
Yes, thanks for the question. If I reflect back on the last year from Q2, Q3, Q4, You heard Tom talking about elective surgeries impacting that healthcare market. As Michael mentioned, we worked really closely with our customers In early April May of last year to really work with them and understanding what their needs were. Clearly, there was a desire in many cases This is the pullback on inventory. We worked really closely with customers through the second and third quarter.
And as a result now as these elective Surgeries are coming back. It's not only underlying demand, but working closely with customers to rebuild some of those inventories Throughout the second half of this year, but even going into next year to really meet their expanded demand that they're anticipating going into 2022. So Definitely some interesting dynamics in that end use.
Thanks, Mark. And quickly before we end this segment, would love Fred to weigh in on the second In part to Tycho's questions, given our exposure to diagnostics and some of the dynamics in there, I think it would be helpful, Fred, if you could highlight Some of the trends that we're seeing there that are driving the growth right now.
Yes. Thank you, Michael. You may recall through the that we serve this market through 4 different customers. On the OEM side, the customers had to The classical ABD, now we see a shift again towards them running the classical Test that you would run if you would give a if you would have your blood drawn. So that creates, again, opportunities to serve that demand from market for the assays that they are being developed.
The retail acquisition is also offering a tremendous opportunity for As we are serving that market, enabling molecular diagnostic through our offering of high throughput solutions and plastic Where that fits that workflow. So those are the key drivers that I see that will help us to continue serving that market and drive our customer satisfaction into that space. So emergence of molecular diagnostic and more prominence of molecular diagnostic demand as well as serving us those customers through our OEM workflow
Gentlemen, thank you. This concludes our second Q and A session for the day. Before we move to our final presenter, CFO, Tom Sloczek, we are excited to highlight how our team is developing innovative digital solutions for our customers.
At Avantor, Everything we do centers around the customer experience and advancing our customer goal. By empowering scientists with our digital capabilities, We're building the lab of the future with the purpose of maximizing time for scientific breakthrough. We're leveraging on our expertise in laboratory operations, Inventory Management and Supply Chain as well as our unparalleled access to data to build the digital tools that analyze workflows and generate customer insights. These insights tell customers what they need and when they need it, ultimately giving them the ability to better manage and control their stockroom and future purchases in our inventory management A prime example of a digital tool within the lab is our SmartShell. These SmartShell features sensors that detect Scientists spend less time managing inventory and more time analyzing scientific results.
Innovations like This complements enhancements to our online buying platform. Our industry leading e commerce platform enables scientists around the world to efficiently purchase the materials they need. We continue to improve our platform with enhancements like alternative and complementary Product recommendations to improve the buying experience. Together, these initiatives set science in motion to create a better world.
Thank you, Tola, for highlighting these exciting digital innovations. I'm Tom Sloczek, Avantor's Chief Financial Officer. Thank you for joining us today and for your continued interest in Avantor. We hope the sessions today have been valuable to you and convey the confidence that we have in our business. I'll take the next few minutes to tie things together from a financial perspective, and then we'll have our final Q and A session.
Over my time with Avantor, Three things have continually resonated with me. The first is the attractive end markets we serve. Our roughly $80,000,000,000 TAM is in a space With a strong history of capital and R and D investment, much of it in a discovery and life changing solutions. 2nd, we have a differentiated model, driven by offerings that are essential to the workflows of our customers, extensive global channels and e commerce platforms and highly recurring revenue. 3rd, our track record of exceeding expectations for every important financial measure.
In addition to the financials, our succession to a full fledged public company is complete. Over 95% of our shares are held by the public, and 8 of our 10 board members are independent. Also, our record on sustainability is strong. In the environmental category of the most recent ISS ratings, we received the highest possible score. We also scored well in the social and governance categories.
This all adds up to value creation. Our shareholders have enjoyed a 191% return since the IPO compared to the overall 59% S and P return and 47% MSCI world return. Here's a profile of our revenue segmented between the 4 end markets we serve. We have made significant investments into the biopharma end market, resulting in greater than 50% of our sales serving this end market. Ritter and Rimbio add accretive organic revenue growth.
And Upon closing, we expect Masterflex to fit the same mold. We are confident that this end market alone will drive greater than 5 points of organic revenue growth. Gerard talked about the rich funding environment, expanded MABS opportunities like Alzheimer's and the emergence of new platforms like mRNA that are fueling the biopharma growth. Within biopharma, the production portion has historically grown in the mid teens and more recently in the 20% to 30% range. These are proprietary offerings such as GMP, high purity chemicals and reagents as well as our single use offerings and as such generally have superior margin rates relative to the rest of our portfolio.
I referenced our performance track record earlier. This page includes our 2021 expectations at the midpoint of our existing guidance range. It does not include any impact for Masterflex, which we Back to close in the Q4. From 2018 to 2021, we expect to grow revenue at a 7.5% CAGR, which is almost entirely organic. Over the same time frame, we expect adjusted EBITDA to grow at a 14.4% CAGR, roughly 2x that Sales growth rate.
This is consistent with our long term expectation of growing EBITDA 1.5 to 2x the rate of sales growth. Commercial excellence, stronger sales of proprietary products, volume leverage and productivity have driven this result. We're on track to generate approximately $850,000,000 of free cash flow in 2021, a roughly 5x improvement from our pre IPO levels. We've improved our working capital efficiency from 17.1% to 16.6% of sales. Our interest expense has come down significantly From north of 500 annually to less than 200, a reflection of deleveraging and lower interest rates from debt refinancing and repricing activities.
The average cost of our debt is now approximately 3.3%, roughly half of what it was in 2018. Let me shift to our long term financial model. I want to be clear upfront, this model is built on organic growth only, does not reflect any impact from pending M and A like Master Flex or future M and A. All free cash flow is modeled for deleveraging. Our core financial algorithm is 4% to 6% organic revenue growth, 50 to 100 basis points of annual adjusted EBITDA margin expansion and mid teens adjusted EPS growth.
Strong performance on these measures will result in continued strong free cash flow growth, which in turn will provide capital allocation opportunities. The main priority for capital allocation continues to be M and A. Of course, deleveraging the balance sheet is an attractive alternative. All of these elements are underpinned by our Avantor business system, which drives operational rigor throughout our business. Let me go a little deeper on our organic growth expectations.
We expect to generate $7,200,000,000 to $7,400,000,000 of revenue in 2021. Moving forward, we have modeled $1,500,000,000 to 2,000,000,000 of incremental revenue through 2025 from organic growth initiatives. These include our integrated go to market approach, which is focused on seeding biopharma offerings early in our customers' development initiatives, new product introductions to enhance our analytical workflow portfolio, Core capability investments in our manufacturing, distribution and digital footprints and customized materials innovation to drive outsized growth in high margin proprietary materials, including our NuSil brand of high purity silicones. Altogether, this would drive mid single digit growth Through 2025. The end result, dollars 9,000,000,000 to $9,500,000,000 in 2025 revenue is impressive considering where we were before the IPO.
And with our M and A firepower, we have a legitimate opportunity to be north of $10,000,000,000 in 2025. Moving on to adjusted EBITDA margins, we're targeting 50 to 100 basis points of margin expansion per year. One critical driver is the growth of our proprietary content, which has been a recurring theme today. We're expecting growth in proprietary content from roughly 50% of our revenue to approximately 60% in 2025. Proprietary products have superior gross margins.
M and A will further accelerate the weighting of proprietary products. Ritter and Masterflex are good examples. A second driver of margin expansion will be our commercial excellence, which includes a rigorous approach to pricing and COGS management and value based pricing initiatives. 3rd, The volume based leverage and other initiatives to improve operational disciplines and eliminate rework continue to result in productivity and margin improvement. Based on this profile, we're targeting at least 23% adjusted EBITDA margins by 2025.
We're targeting adjusted EPS to grow roughly 15% a year, a reflection of the organic growth and margin expansion I described earlier, I. E, the operating contribution plus continued progress on interest and on the effective tax rate, I. E, the below the line contribution. That operating piece contributes roughly 2 thirds of the adjusted EPS growth and the below the line components the other third. Interest expense today of roughly $200,000,000 is largely eliminated in the model by 2025.
Again, as a reminder, This model excludes any impact from future M and A, including Masterflex. Our effective tax rate has progressed nicely from the pre IPO 30% -ish range to around 23% to 24% this year. Assuming no change to corporate tax rates, we expect continued progress towards 20% in the next few years. This leads to a target adjusted EPS of $2.35 to $2.45 by 2025. On this slide, you can see how rapidly our model delevers.
As our free cash flow grows from today's approximately $850,000,000 to approximately $1,300,000,000 by 2025, The leverage is virtually eliminated. M and A opportunities, of course, will present themselves. And as they do, we're comfortable with a targeted leverage range of 2 times to 4x adjusted EBITDA with a willingness to temporarily stretch for high conviction opportunities. Our model would yield more than $8,000,000,000 of Capacity over the next 4 years solely based on organic growth. There are a few M and A areas we are targeting, and we have a Robust pipeline in each.
They center on leveraging and augmenting our existing market positions and footprint as opposed to pursuing completely new spaces. One focus area is biopharma production, where we intend to build on our strong current position to expand into additional customer workflows. Rimbio is a recent example. It is doubling our global single use manufacturing footprint, expanding Avantor's presence in China and providing us with some important technology. Masterflex should also be a great enhancement to our biopharma business, bringing an end to end proprietary fluid management solution into our portfolio.
Another focus area is clinical and biorepository services, where we see opportunities to expand the scope of our offering to areas like sample management and enhance our presence in the clinical trial and scale up phases of drug development. A third focus area is analytical workflows, where we seek to add additional proprietary content into our portfolio of offerings. Ritter is a prime example. We're leveraging our commercial organization and scale to bring automated robotic tips into the aftermarket. As you'd expect, we do adhere tightly to certain quantitative M and A criteria.
Accretion is important, whether it is to our 4% to 6% growth rate, our 20% -ish adjusted EBITDA margin rate or to our adjusted earnings per share. We also look for a strong free cash flow profile that will allow us to rapidly delever. These are not development stage pre revenue companies we're targeting. ROIC is also critical. We strive for a minimum high single digit return in year 5.
We are willing to stretch that timeframe to the extent we have high conviction and confidence in the target. In this environment, these can be formative hurdles to getting deals over the line. But We have several strategic advantages that differentiate us as a buyer. 1st, in the target identification process, We have differentiated insight and access. We're partnered with over 15,000 suppliers in our network and serve over 225,000 customer locations.
This network helps us to identify attractive potential technologies and targets. 2nd, with respect to speed to closure, our current portfolio is highly diverse and largely free of concentrations that could be problematic from a regulatory perspective. This often can provide a smoother and faster path to closure for sellers. 3rd is the strength of our channel, both the commercial reach and the distribution network. Many of the targets in our pipeline do not have extensive commercial presence.
Combining them with us can often result in more significant commercial and cost synergies. This can also help us to compete more aggressively for deals. Let Let me wrap up by confirming our 2021 full year earnings guidance consistent with our Q2 earnings call. This does not reflect any impact from Masterflex. We expect organic sales growth of 9% to 11% and reported growth of 13% to 15%.
July August performance was in line with our expectations, and COVID tailwinds continue to play out as broadly forecasted. We expect to achieve approximately 150 basis points of adjusted EBITDA expansion, 50% adjusted EPS growth and approximately $850,000,000 of free cash flow. Relative to 2022, we'll follow our normal approach of providing guidance in our Q4 earnings call. For some initial 2022 color, we expect organic growth in line with our long term growth parameters, potentially modified for COVID headwinds, M and A effects and end market inventory levels and demand patterns. Let me close by reiterating what I said at the start.
We serve some very attractive end markets aggregating over $80,000,000,000 in potential revenue. We're well positioned with a differentiated business model, and we have a proven track record of meeting or exceeding expectations. On top of that, we have significant Capital allocation flexibility to pursue M and A opportunities and to continue value driving deleveraging our balance sheet. We'll be transitioning to Q and A next. I'll hand it over to Tommy to facilitate that session and look forward to answering your questions.
Thank you, Tom. We will now begin our final Q and A session of the morning With Tom and Michael. And our first question comes from Dan Arias from Stifel. Dan, good morning. Your line is open.
Good morning, guys. Thanks for the questions. Tom, just wanted to touch on the out year targets relative to some of your Previous goals, on the EBITDA margin outlook, obviously, 50 to 100 basis points going forward sets you up Pretty nicely. If I remember correctly, the long term target that you had during the Analyst Day around the IPO was for 100 to 150 basis points rather And then the 50 to 100 that you're showing here, can you just talk about how you would compare and contrast the way that you're looking at the margin expansion opportunities then Versus now, that was obviously pre COVID. There's a lot of nice volume leverage that you're getting here.
Execution has been Good. So how do those things and then things like pricing and supply chain management just sort of play into the view? How likely is it that you actually get to that higher range that you had talked about a couple of years ago?
Yes. Thanks for the question, Dan, great memory. And we're happy to get in that a little bit. I talked in my presentation about Our levers for margin expansion. I mean, certainly, the volume leverage that we have with that mid single digits growth is going to enable us to leverage some of the fixed cost investments that we have, so we get some natural leverage on Margins on top of that, of course, is that growth in the proprietary content that we've talked about over the course of the day.
A lot of our innovation goes in onto the proprietary side. It does have superior margin characteristics, and it is a big contributor to that growth. 3rd thing I'd mention is the commercial teams and the You know, Avantor Enterprise really have a strong and demonstrated acumen of being able to manage The price COGS relationship pretty well. And you've seen us Year over year, demonstrate year after year, demonstrate that kind of acumen. And lastly is productivity.
We have a productivity agenda. We You have, from an investment perspective, certainly, we're investing. And that would lead to some growth And on the SG and A side, but overall, we have a mantra of trying to keep costs relatively stable year over year from a fixed If you go back to the IPO, just as a reminder, that was the period We were sort of 1st year into or just completing the 1st year of the integration of Avantor and VWR. And in that time frame, we had a good year and a half, two years ahead of us of strong integration It was a pretty scalable scale type acquisition. We generated over $300,000,000 of Synergy benefits over that time frame, over the integration time period, including 2 thirds of them being on the cost side The other third or so on the commercial side, we over delivered on what the expectations were.
And so in that time frame, in that initial post IPO We were clearly capable of delivering those triple digit margin expansions. Certainly, as we move forward, we've still been we've still had pretty attractive margin even post the completion of the integration. 75 to 100 basis points has been the track record. This will be another strong year for us. And going forward, we think all those same levers that I mentioned will help to that margin expansion.
On top of that, I would reference, of course, the cap allocation that we've done. Our cash flows have enabled us to generate some very strong delevering capability as well as investment In M and A. And that investment goes back to contributing some of the mixed benefits that we've talked about. So that hopefully is
Our next question comes from David Westenberg
Can you talk about Competition for M and A and sort of fishing where the Thermos and Danaher's are not and kind of what that means. And as a follow-up Up to that, can you talk about Toast Synergy margin targets? I think you said accretive to your bottom line. Is that maybe just given that some of the other Tools Group has higher margins. Does that open up more opportunities in terms of that fishing where
David, great to hear from you. Thanks for joining our call today. One of the important aspects of our M and A agenda is that we have Multiple areas to invest in. As Tom outlined in his presentation, we would be excited to invest in clinical services and High growth life science workflows in the lab as well as in bioproduction and certainly have maybe a geographic dimension to that as well with Some of our aspirations for Asia, when you look at that breadth, it certainly gives us A lot of different opportunities and enables us to have a very full pipeline. When I think about our strategy and how we're Position in the market space, clearly, we're the leader in materials and consumables, Which is a little bit different than maybe some of the names that you mentioned there, which makes us perhaps advantaged in many of the processes That we've entered into.
But if I look at just us as a buyer, I think there are a number of differentiating elements of regardless of who shows up at an opportunity that really does differentiate us. And I think that we've seen that come into play in all three of the deals that we've been able to Involved in this year, the 2 that we closed earlier in the year and the Masterflex deal that we just announced earlier this week. The pervasive risk of our channel Makes us a very active, attractive buyer. The opportunity to accelerate the growth of the target around the Rolled in across all these end markets really is exciting for the teams that will be coming across into our I would also say that we're relatively unencumbered from a regulatory standpoint. And that shouldn't be overlooked, particularly in the context of the competitive environment that You mentioned the certainty and speed to close that we bring to a transaction for any Stellar is an important aspect of how they're thinking about that opportunity.
And I think we've got a great track record Of integration and preserving the core elements of the value that the seller had built and whether that be in their brands or In their capabilities and the opportunity to continue to leverage those things, I think our approach to innovation our approach to integration, excuse me, Makes us provides another additional element of value to the sellers. So when we look at it, broadly speaking, I think we're competitive because we have multiple places And we're an extremely attractive buyer for the seller.
And if
I could hit on the second point that was raised, in terms of The impact to us, does it are the impacts to us different or does it differentiate us? Certainly, we have opportunity to expand Our margins relative to the peer group, and I think we've demonstrated a good track record of doing so. So it's stand to reason that as we're Competing for some of these deals that have that proprietary content, perhaps the impact on our margin rates would be You know, more meaningful than the industry, just given where we're coming from. And I think that can have an outsized impact on our expansion if we're Successfully able to deploy the capital.
Thanks, David. Our next question comes from Matthew Sykes from Goldman Sachs. Matt, your line is open.
Great. Thanks for taking my question and thanks for doing this today. Maybe just a high level question on internal capital allocation. Just given the growth and margins in biopharma, it's obviously understandable why you've made the investments in that segment. But as you look forward over the next few years, how do you think about the level of investment in the other non biopharma segments of your business that may have lower growth or margin profiles, but where you're committed and want to maintain or grow your position?
Matt, thanks for joining the call today. Great question. One of the things I would highlight here to respond to your question there is The applicability of our products and solutions across all four of our end markets. So when I look at something like new product introductions, particularly to serve Maybe some of the analytical workflows. We're able to leverage those investments across all four of our end markets, whether That'd be in life science research or in the diagnostics world, in our healthcare end market or even in a QA QC workflow, for example, in our Advanced Technologies end market.
And that, I think, is an important element of our story here, and something that knits together all End markets that we serve. I mentioned it, and I think so did a couple of other leaders, that we're able to bring a common and shared Product portfolio as well as shared infrastructure and supply chain to serve these end markets. And so we get tremendous leverage By being able to introduce something into one end market or for one customer and then translate it very broadly across All of our other end markets. But one of the growth levers that I highlighted as part of our framework For driving growth was just investment in core capabilities. You are correct with 50% of our revenue in biopharma.
Clearly, We have a significant allocation going in that area as you would anticipate. And we've had a number of announcements Last number of quarters reflecting investments in additional manufacturing capacity. I think last week we talked about some Expansion to hydration, we've more than doubled our footprint for single use this year, and we have an ongoing Rollout of investments across all of our manufacturing sites in biopharma. Similarly though, we have these types Investments in core manufacturing capacities, for example, in biomaterials, which is in our healthcare space. We've had significant In that business this year, that's expanded capacity, enabled us to grow.
We had some questions earlier about semiconductors. That's another area where we continue To add capacity and allocate capital both in the area of new product introductions and innovation to make sure that we have a relevant offering for The next generation technologies, but we also have the capacity to support growth. So Actually across our proprietary technologies, we're steadily investing in innovation and R and D, as well as in capacity To make sure that we can fuel what happens to be, in most cases, double digit growth. So pretty attractive platform that's scalable, and we have a lot of opportunities To leverage what we do in one area across all of the end markets that we serve. Great question.
Thank you.
Thanks, Matt. Our next question comes from Andrew Cooper from Raymond James. Andrew, your line is open.
Hey, everybody. Thanks for the time today and for the questions. I guess, kind of a high level one here, but look, we can all do the math on the mix and the growth rates you talk about. And I think the end result is somewhere probably north of the midpoint of that 4% to 6% bogey. So that comes before layering And so I just want to think about kind of at a high level, what has to happen to make the lower end of that Range the reality, where is the most risk in your view to being at the higher end?
Is it some of these new therapeutic modalities emerging a little bit slower? Is it COVID tailwinds, lapsing? Just what puts you at the lower end of that range?
Yes, great question. Thanks for joining today. If you look at the track record we've had over the last several years, clearly, we've been running at the high end, if not outside the high end of That mid single digit growth guidance that we have in place, so clearly a lot of momentum across all of our end markets. And when you look at the disparate growth rates between the various end markets that we serve, critical to understand the assumptions that into something like biopharma, for example, which is half of the revenue. As Jer outlined in his presentation, roughly 2 thirds of that platform is R and is R and D, and the growth in that model is driven by funding very, very strongly.
And over the last couple of years, not only Traditional sources of funding have accelerated, but you've seen access to equity markets around the world, venture funding increase. And we're operating in an environment today, given the promise of some of these technologies, where I think funding has never been more available. And clearly, Driving a tremendous amount of activity that has enabled us to see a step up in the growth of the R and D portion of that business, Maybe some from something that's been more traditional mid single digit growth to something that's now probably in the more in the high single digit range. Clearly, our expectation would be for that funding environment to persist in at least in the short to medium term, but if There was to be persistent pullback in funding over a longer period of time, that could potentially lead to The dynamic that you're referencing, but I think we're excited about the momentum that we have In each of our end markets coming out of the pandemic here. And when you layer in the Strong free cash flow and the capital flexibility that will give us for M and A.
Obviously, that's going to give us an opportunity to even accelerate Growth beyond kind of the 4% to 6% where we're at today over the longer period as we integrate and bring these businesses into our portfolio. Tom, I think, Did a great job outlining for you kind of our financial algorithm for screening for opportunities. And right at the headline there clearly is We're looking for businesses that would give us accretion to our top line. We've accomplished that in the 2 that we've closed. When we closed Masterflex in the 4th quarter, that business, as we've talked about this week when we announced it, also exhibits strong double digit And obviously, we'll be accretive to our growth rate.
So over time, as we deploy the capital, as we continue to drive penetration in our core markets, Our expectation would be that we would be operating in the near term at the high end of that range we talked about. And over time, as we successfully deploy capital, Could envision being able to move beyond those levels over time. Thank you.
Thanks, Andrew. Our next caller is from Brandon Couillard from Jefferies. Brandon, good morning. Your line is open.
Hey, thanks. Good morning. Tom, Just in terms of the 25 margin target, a couple of things. First, where do you think gross margins can go over the next 4 to 5 years? And what's contemplated in that 23% adjusted EBITDA margin goal.
And then secondly, what math would suggest that your targeted margin expansion 50 bps or 100 bps is probably doable just on mix shift alone. So should we expect you to manage the business to reinvest in the upside Back into the business, especially that proprietary mix grows, which probably has a higher R and D intensity component to it.
Yes. Thanks, Brandon. Great questions. And in terms of the margin outlook, I think You're looking at what we had in the out year of 23% and the expansion of 50 to 100 Basis points. I think the when you look at the split between gross margin and The SG and A certainly, there are some variable costs on the SG and A side.
But principally, we think of that as a leverageable cost I mean, there's certainly some sales in there and there are sales commissions. And you'll have inflation on your people costs. But our Our goal is investments in M and A would really be innovation based. And I think over time, that can be expected to increase. But I think the when you look at the 50 to 100 basis points, I'd say more than half of that It should be coming from improvement in the gross margin.
All the levers that we mentioned, at least most of them, whether it's managing Commercially, the price COGS dynamic or the mix that you talked about, the feathering in of M and A. A lot of those impacts will be on gross margin. So you can expect to be a more pronounced impact That 50 to 100 basis points on the gross margin rate over that timeframe. Thanks for the question, Brandon.
Thanks. Our next question comes from Vijay Kumar from Evercore ISI. Vijay, welcome back. Your line is open.
Thank you, Tommy. And Michael and Tom, congratulations on hosting this. And I mean, these numbers are impressive. I just To make sure I got some of these numbers correct. So that $240,000,000 of earnings, come, That does not include Masterflex.
Assuming the leverage, I think Masterflex is another $0.10 You guys are probably pushing $250,000,000 And your commentary on incremental M and A, that's probably another $5,000,000,000 Is the earnings power here pretty close to like 3 Just given what you did with Raider and Master Flex and anything that we should be aware of from a cadence perspective as Co Telman's fluctuation.
Yes. Thanks, Vijay. Great questions. And I share your enthusiasm for those To be perfectly clear, as we tried to say at the outset, None of the numbers that we shared with you today reflect anything from Masterflex or for any other acquisition We fully expect to be engaged in over the time frame. And so With that said, I think when you look at the Masterflex model, certainly, over time, It will evolve.
Starting point, it will be accretive in year 1 to EPS. And with the growth rate, the Strong growth that we've talked about, the mid teens kind of growth, as well as the incremental margins that come from that. It will have a nice impact On EPS, on that $2.40 that we've talked about. And so we look forward to delivering that. And Again, I think it's I think we're we want to be grounded in terms of what's in our portfolio today and as and when We close Masterflex, which will be shortly here.
We think we'll have a reasonable path to close, And we'll be prepared to share when we provide our guidance specific impacts on 20 '22 operating plan, as well as what the how dynamics look for that beyond 2022. Thanks, Vijay.
Thanks, Vijay. Our next caller is Derek DeBroun from Bank of America. Derek, your line is open.
Hey, Thanks. A couple of my questions were already asked, but I just wanted to stick around the edges on some stuff. Can you What's sort of embedded in your pricing expectations in the market? Just in terms of what's your business and sort of going I mean, we consistently get questions from investors worried about basically that the life sciences industry is one of the 2 industries where we continue to see Company's ability to take price, what is sort of your what's embedded in your model?
Yes. Thanks for the question, Derek. Over the last as long as I've been here, but probably well before that in both The legacy BWR organization as well as legacy Avantor organization. The commercial capabilities around Managing that dynamic between inflation, material inflation, people cost inflation and the like, And the commercial aspects of it have been very strong. And on top of that, The businesses are pretty good at being able to identify where we have You know, additional value pricing opportunities.
And we make sizable investments, as we've talked about. Jared described our model. Michael described Our model of that upfront collaboration. And once you're specified into these platforms, It gives us a good commercial foundation going forward as well. So historically, I the performance has Ben, 2% to 3% of and depending on the year and depending on the products that we're introducing, And I would expect that to continue going forward.
Shorter term, you might Run into years where there's more inflation. And certainly, we are an inflationary environment. And Yes. So could we be at the higher end of that range? Yes, possibly.
But I think we've built the model to reflect What we expect what we see as reasonable expectations for commercial and cost management.
Thanks, Derek. Our next caller comes from Jack Meehan from Nephron Research. Jack, your line is open.
Thank you. Had two questions. The first was a clarification on something Vijay asked. I think in the slides you Talked about $8,000,000,000 of firepower. Is the Master Flex at $3,000,000,000 or so part of that, so thinking $5,000,000,000 plus from here?
And then You had a comment in the slides about July August running in line with expectations. Obviously, we're seeing Delta lead to some higher COVID demand The rest of the portfolio.
Yes, Jack, let me take that take the questions in reverse here. I'll maybe talk about what we're seeing from A COVID standpoint, and Tom can shed some light on M and A firepower going forward. Just to maybe highlight For the group here at our last earnings call, we talked about $350,000,000 to 450,000,000 of COVID tailwinds in 2021. And that would be split between the 3 offerings that we provide into this area, PPE diagnostics and the vaccine component, roughly 40% to 50% of the tailwind will come each Diagnostics and vaccines. In the vaccine piece of this, obviously, that's going to touch on our proprietary solutions for The bioproduction area, I think we've been pretty transparent about what the impact has had on our order book, which now has us well out into Next year with nearly a full year's worth of revenue on the books.
And so anything that you might see from a change in production upside or down Here in the near term from a vaccine perspective, probably doesn't impact our business from where we sit here to the end of the Given that the order book is pretty full, and I think most of the focus here is into 2022 at this point. And as Jared We would even have some confidence in the durability of the vaccine revenues going even beyond 2022. Within The diagnostic piece, there's obviously a bit more uncertainty in that area. I think we've been pretty transparent that we have relatively limited Forward visibility into demand in that part of our offering, maybe only a few weeks at a time, for example. And one of the things we have observed as we've gone here into the Q3 that certainly here in the U.
S. And in other places Around the world, testing rates have started to increase, in some cases, relatively significantly. And that It's pulling demand from our products into that area. But I think given the experience early in the year around some of the supply chain shortages, I think the ramp up Was probably a little bit more delayed than what you might have anticipated, just given some of the inventory positions in the channel. But I think we still feel very good about the outlook that we had across all three of these elements of our Solution, and we're certainly well positioned to support these diagnostic trends, however they evolve.
One area that's maybe providing some incremental opportunities here, at least as the schools You know, I'll start to ramp up. We all probably have our own experience if you have kids that are in school in terms of what the testing protocols Those are at the various university campuses and K-twelve institutions around the world. But we'll keep our eye closely on how that dynamic plays out through the balance of the year. But we're well positioned on to React to however the diagnostic trends evolve. And clearly, the most durable part, I think, of our solution here is going to be
on the vaccine Yes, Jack, and just to address the question on capacity, just put my to put my answer into context, if you'd Ask me 6 months ago what my immediate capacity is. And Michael and I probably would have said $1,000,000,000 $1,500,000,000 is something we could do. And We would probably be thoughtful and conservative about that. And here we are doing a $3,000,000,000 deal. The model is powerful.
It Depends it all is based on the EBITDA and cash that we generate. Our EBITDA continues to grow As does our cash that is creating really strong capacity for us. So I don't think it's a dollar for dollar reduction in The $8,000,000,000 to take $3,000,000,000 out for Masterflex. Just suffice to say that there's going to be plenty of capacity Between the growth, both from the acquisitions that we had as well as the core business in both EBITDA and cash flow. So I think we're really confident that we'll be able to deploy sizable capacity over that Over the timeframe that we've talked about.
Thanks. Our last question is from Doug Schenkel before we move to closing remarks from Michael. Doug, your line is open.
Thanks again,
Yes. I actually want to ask a couple. The first one is a quick one, I think, because I just think it would be a shame if we came out of today Without having a better handle with more specifics on the margin profile of different categories of proprietary products and services. So I'm Hoping you do want to share a little bit more and delineating between things like maybe bioproduction and say proprietary offerings that other And markets, however you think the best way to do it, I just think that will put a little bit more meat on the bones as we update our models Just that and will help us really elucidate how much margin power there is just based on how things are evolving mix wise. And then my Second question is a high level one.
And it's based on an observation. For the last 18 months, You've done well by doing good serving the needs of the world and COVID-nineteen. This happened to lead to a bit of a cash windfall It allowed you to get more aggressive with capital deployment and balance sheet cleanup initiatives. This year COVID-nineteen demand continues to It's continued, but a lot of growth has been driven by core bioprocessing. And then as we look ahead Over the next 12 months as you outlined today, it sure seems like the academic end markets and the cyclical end markets Are poised for a continued rebound.
I'm wondering if first, the Pending a rebound in academic government and cyclical represents maybe the same type of opportunity you've seen over the last year or so in terms of the cash flow associated with COVID Bioprocessing. And then at a higher level, is this essentially outlining the attractiveness and resilience of your business model, the ability to We serve acute needs, while taking advantage of long term up and down trends across the end markets you serve Really that be that the ability to drive steady GDP plus 2 or 3 growth with different trends Different end markets depending on the year.
Thanks, Doug. Great questions. I'm going to touch on First one, and then Michael will hit on the second. The when you look at the portfolio that we have, I mean, generally, we're in the Low 30s from a gross margin perspective. And if you did a Pareto of all of our products, there There'd be a pretty decent range, as you would imagine.
Some as high on the proprietary side as 60%, 70% in terms of the offerings. And there are others that are modestly higher. And of course, there's some That is lower, of course. I think overall, if you look to our proprietary offerings, particularly those that are on the production side, And I think we referenced production being a decent sized portion of the overall portfolio. You'll see that the higher growth in those areas as well.
I mean, we've talked Chapter and verse over the last 6 or 8 quarters about the growth in biopharma production In biomaterials and some of the other proprietary platforms, those are the higher margin ones. Those are The part of the portfolio that we've referenced. And so the superior growth in the higher margin parts of the portfolio, you should see that expansion that we've talked about.
Yeah, maybe to hit the second part of your question there, One of the complications in kind of looking at the performance of the business is with the COVID noise kind of embedded in here. If we kind of roll back the Back to the Q2 of last year when we were feeling the full brunt of the pandemic. A lot of our end markets, including the ones that you referenced, Doug, education and government really bottomed out. That was probably our hardest hit end market. And so as we move forward then, and we just report our Q2 results, it was not surprising then to see some pretty outsized growth coming from education as That end market had returned to kind of normal levels of demand.
So one of the helpful ways that we've kind of looked at Year over year performance and trying to get a sense for where we're at here in terms of recovery and projecting forward, Looking at these things on kind of a double stack basis has been pretty helpful. And I think when you look at our 2nd quarter results across our end markets in that regard, you'll see that Virtually all of our end markets are kind of back to normalized levels, hitting on all cylinders with a lot of momentum. One of the things we'll do here as we work through the end of the year and into the early days of 2022, obviously, we'll nail down our operating plan. They're going to have to work through the impact of COVID and how that noise starts to subside and becomes more about a core growth Going forward, but we'll come forward with some of those details as we get through the end of the year here. But I would just indicate and agree One of the benefits and maybe one of the things I'm most proud of in terms of what the team has done here over the last 18 months is their agility and their responsiveness.
We brought in over 100 new products last year, Doug, with many of them oriented to serving some of these Really critical needs in driven by the pandemic. It highlighted, 1, just the agility of the team, but just the relevance of the model and being able to tap into so many Sources of innovation, and the relevance of our access and being able to move those solutions into our channel as quickly as we did. So It is an agile model. If there's some tailwinds that continue to come from some of these opportunities, we'll certainly be there to serve it. But a lot of momentum across The business, and I think we've got a lot of confidence as we exit the year here and look ahead to the years ahead.
Thank you for the question.
Well, this concludes our final question and answer session. Before I turn the call over to Michael for his closing remarks, Just a few housekeeping items. Materials covered today during today's call will be available on the avantorsciences.com website Under the Investor Relations tab. Later today, a recording of the session will be available for your reference. And if you haven't Already, please be sure to subscribe to our news feed to stay up to date on information about Avantor, including future events, such as our Q3 results call.
With that, I'd now like to turn over the call to Michael for closing remarks.
Thanks, Tommy, and thank you all for your time and for your engagement today. Hopefully, you can tell that we're extremely excited about our future As a global leader in the life sciences space, as we pointed out today, everything that we do is tied to our unique mission of setting science in motion to create A better world. You heard me say in the opening, the best is yet to come, and I truly believe that. What you saw and heard here today is why we believe and support that notion. Our leaders talked about the exciting spaces that we serve and our differentiated position in all four of our end markets.
We're confident, as I've indicated in even in that last question, in the long term strategies that we've outlined. We're well positioned to maintain our Strong organic growth momentum and important part of our story is increasing our proprietary content that will enable continued margin expansion. The business generates Significant free cash flow, and that gives us capital allocation flexibility that will position us to accelerate our model with M and A. Our track record of delivering strong financial results speaks for itself. And importantly, Let me reiterate, we're deeply, deeply committed to sustainability and the measurable actions that will create positive impact on the environment And for society.
The power of science is clear, these last 18 months have certainly made that In that case, it changes lives, it changes all of our lives. And at Avantor, we know what it takes to enable breakthroughs and maintain scientific progress. And our more than 12,000 associates, they come to work every day with a shared passion to do just that. And we look forward to keeping you updated as we move forward on our growth journey. Thanks again for joining.
Have a great day, everyone.