My name is Kathy, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to the Danaher Corporation's 3rd Quarter 2019 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I will now turn the call over to Matt Gugino, Vice President of Investor Relations.
Mr. Gugino, please go ahead.
Thanks, Kathy. Good morning, everyone, and thanks for joining us on the call. With us today are Tom Joyce, our President and Chief Executive Officer and Matt McGrew, our Executive Vice President and Chief Financial Officer. I'd like to point out that our earnings release, the slide presentation supplementing today's call and the reconciliations and other information required by SEC Regulation G relating to any non GAAP financial measures provided during the call are all available on the Investors section of our website, www.danaher.com, under the heading Quarterly Earnings. The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call.
A replay of this call will also be available until October 31, 2019. During the presentation, we will describe certain of the more significant factors that impacted year over year performance. The supplemental materials describe additional factors that impacted year over year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company specific financial metrics relate to the Q3 of 2019 and all references to period to period increases or decreases in financial metrics are year over year. All references to individual operating company operating margins exclude the impact of intangible amortization.
We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we'll make forward looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward looking statements that we make today. These forward looking statements speak only as of the date they are made, and we do not assume any obligation to update any forward looking statements except as required by law. With that, I'd like to turn the call over to Tom.
Thank you, Matt, and good morning, everyone. We're pleased with our strong performance in the Q3 as we delivered 5% core revenue growth and solid core margin expansion. We believe our ongoing investments in innovation and commercial initiatives help to continue building sustainable competitive advantages across a number of our businesses. We also made meaningful progress on our 2 most recent portfolio moves, the acquisition of GE Biopharma and the initial public offering of our dental business. During the quarter, we achieved several important milestones related to the GE Biopharma business.
Earlier this week, we announced that we signed an agreement to sell certain businesses to Sartorius for a purchase price of $750,000,000 The revenue to be divested is approximately $140,000,000 and consists of our label free biomolecular characterization, chromatography hardware and resins, microcarriers and particle validation standards businesses. All of these businesses are part of our life science platform. While the sale to Sartorius remains subject to certain regulatory approval, it represents a significant step in the GE Biopharma regulatory process. Timing around meeting certain closing conditions such as regulatory approvals can of course be uncertain. However, we remain very encouraged by the progress we're making and expect to close the GE Biopharma transaction in the Q1 of 2020.
Additionally, we recently announced that the business will be called Cytiva when it officially becomes part of Danaher. The name is derived from Greek and Latin roots meaning sell and doing as everything biopharma customers do relates to the use, growth or analysis of cells. The name may be new, but the Cytiva logo or the drop is actually a reference to the iconic Pharmacia brand of the business going back to the 1960s. Pharmacia was a pioneer in the development of process chromatography and was one of the first businesses to become part of GE Biopharma. We've received terrific feedback on the reintroduction of the drop logo as we look to build on its legacy under the new Cytiva brand.
And lastly, we continue to make progress on the financing of the GE transaction. In September, we raised approximately $6,800,000,000 in euro denominated debt. We raised this debt at a combined interest rate of less than 1% with an average maturity of approximately 14 years. We anticipate raising the remaining debt required to finance the transaction prior to year end. On September 18, our dental platform now called Envista started trading as a public company on the New York Stock Exchange under the ticker NVST.
I want to thank Amir Agai and all of the Envista associates for their contributions. We wish them the very best as they embark on this exciting new endeavor. Envista released their Q3 earnings earlier this morning and will be holding a conference call at 11 am Eastern Time to discuss those results. We ask that you direct any questions on Envista's business performance to the Envista team. So turning to our Q3 results.
Sales grew 4% to $5,000,000,000 with core revenue growth of 5% on a consolidated basis and 6% core revenue growth when excluding the results of our Dental segment. Acquisitions increased revenues by 0.5% while the impact of foreign currency translation decreased revenues by 1.5%. Geographically, high growth markets increased high single digits with China growing at that rate, while Russia and Eastern Europe both grew double digits. Developed markets increased mid single digits with North America leading the way. Gross margin for the 3rd quarter was 55.8%, up 40 basis points year over year.
Operating profit margin was 16.6% with core operating margins increasing 70 basis points led by our Life Sciences and Diagnostics segments. Now for the 3rd quarter results across the portfolio. In Life Sciences, reported revenue increased 6% with 6.5% core revenue growth. Operating profit margin increased by 60 basis points with core operating margins expanding 100 basis points. At Beckman Life Sciences, we believe we continue to grow above the market as core revenue increased double digits.
We saw strength across most major geographies and product lines as new product introductions continued to contribute meaningfully to core revenue growth. In particular, we believe cytometry with the Cytoplex platform and dry reagents as these innovative product lines are simplifying customer workflows. Additionally, LabSight, the automated liquid handling business we acquired earlier this year is growing double digits and has exceeded our initial expectations. Core revenue at SCIEX declined slightly in part due to a tough year over year comparison as the business grew nearly 10% in the Q3 last year. We saw strength in high growth markets that was offset by softness in North America and Western Europe.
At Pall, the team achieved high single digit core revenue growth as we saw good performance in both the developed and the high growth markets. The biotech and aerospace businesses saw the largest increases offset by continued softness in microelectronics. August marked the 4th anniversary of our acquisition of Pall. Over the last 4 years, with the application of the Danaher Business System, Pall has accelerated core revenue growth, expanded gross margins by greater than 500 basis points to approximately 55% and increased operating margins nearly 1,000 basis points to above 25%. Implementing DVS tools has not only enhanced the financial performance, but also improved operational efficiency, expanded commercial capabilities and increased the cadence of innovation across the business.
Turning to IDT. IDT delivered another quarter of double digit core revenue growth with solid results across all major geographies. By product line, the business saw particular strength in next generation sequencing and synthetic biology. In August, IDT continued to expand its product portfolio in these high growth areas with the launch of a new product, o pools, the longest strands of ready to use DNA on the market. IVT's proprietary manufacturing process allows them to create DNA at the highest quality levels, enabling scientists focused on developing advanced diagnostic tests and treatments to generate more consistent and reliable results in their research.
Now moving to Diagnostics. Reported revenue increased 6.5% with core revenue growth of 8%. Reported and core operating profit margins increased by 100 basis points. DBS led commercial and operational execution drove performance across the diagnostics platform. Beckman Diagnostics had its 4th consecutive quarter of mid single digit core revenue growth, driven by strength in high growth markets and increases in North America.
A key driver of Beckman's improved growth performance has been its increased cadence of new product introductions. At the American Association For Clinical Chemistry trade show in August, Beckman highlighted a number of these recent innovations, including the DXH 900 high volume hematology analyzer as well as the DXH5000 laboratory automation systems. The DXH-nine hundred with its early sepsis indicator has been a key contributor in the improved performance in Beckman's hematology business. In automation, the DXA-five thousand, which was launched in Europe earlier this year, recently received 510 clearance from the FDA. The system's key benefits of detecting pre analytical sample quality, increasing turnaround time and reducing the number of manual processing steps from 32 to 4 are driving early adoption and great customer feedback.
Turning to Radiometer. Core revenue growth increased double digits, led by strong results in China and Japan, as we believe the team drove market share gains in our blood gas and immunoassay product lines. Leica Biosystems also delivered double digit core revenue growth led by North America and Japan. Success at Leica is being driven by new product introductions combined with the implementation of Growth Rooms, one of our most impactful DBS commercial tools. Growth Rooms enable cross functional teams to collaborate and align actions around the business' most critical short and long term commercial initiatives.
With this focused approach, Leica's core histology and advanced staining product lines delivered mid single digit core growth or better in each of the last eight quarters. Finally, at Cepheid, core revenues increased double digits across all major geographies and product lines. Next month will mark Cepheid's 3rd anniversary with Danaher. We could not be more pleased with what the team has accomplished. Since acquisition, the business has grown double digits annually to nearly $1,000,000,000 in revenue.
Gross margins have expanded by 1,000 basis points to approximately 60%. R and D investments have increased by over $50,000,000 annually, while operating profit margins have increased from breakeven to approximately 20%. Cepheid highlights another powerful example of how running the Danaher playbook by applying DBS to drive growth and expand margins allows for investment back into the business that helps drive compounding returns. Moving to our Environmental and Applied Solutions segment. Reported revenues increased 0.5% with core revenue growth increasing at 2%.
Operating profit margin remained constant with core operating margins expanding 10 basis points. In product identification, core revenue declined slightly, driven in part by a tough prior year comparisons at Videojet, partially offset by growth in our packaging businesses. At BJ, core revenue declined low single digits on a nearly 10% comparison to the Q3 last year. Despite the results of the quarter, we're encouraged by a positive order growth and expect improved performance in the Q4. Last month, at the Annual Pack Expo Trade Show, Videojet showcased some of its recent instrument and digital innovations.
On the instrument side, Videojet highlighted the VJ VJ7140 laser printer, featuring the smallest marking head available on the market today and allowing for easy integration into existing packaging lines. Videojet also released Rapid Recover, a digital solution that automatically troubleshoots and diagnoses printer service issues. This functionality builds on Videojet's market leading service capabilities and improves customer uptime by increasing first time fix rates and avoiding costly investigation time. In our packaging businesses, which include Esko and X Rite, core revenue increased at low single digit rates, continuing the improving trends that we referenced in these businesses last quarter. Developed markets led the way, offsetting some softness in high growth markets.
Finally, at water quality, solid execution across the platform drove mid single digit core revenue growth on top of a double digit prior year comparison. So looking at performance by operating company, Trojan core revenue increased double digits led by North America. The team saw strong performance in the municipal market in both its UV and filtration product lines, driven by high win rates and service expansion initiatives. At Hach, core revenue increased low single digits. Strong performance in Europe and North America was offset by declines in China due to a difficult comparison versus 2018 related to China's surface water initiative Policy 61.
At ChemTreat, core revenue increased mid single digits driven by strength in the oil and gas as well as the food and beverage end markets. In September, many of you attended our Water Quality Platform Investor Day at Hach in Loveland, Colorado. In that day, we highlighted the key strategic initiatives of the platform. You also saw details on the sustainable business model that's common across Danaher, including strong underlying secular growth drivers, exceptional margin profiles and high recurring revenues. The team provided examples throughout the day of customer focused workflow solutions, innovation and go to market execution that we believe have led to share gains across water quality.
Finally, the day showcased a variety of tools within the Danaher Business System to accelerate the cadence of innovation and drive sustainable long term results across the platform. The presentation and webcast are available in the Investors section of our website and I encourage those who weren't able to attend the event to take a look.
So to wrap up,
we're very pleased by our Q3 performance and the hard work the team has put in throughout the year. It's also worth highlighting the steps we've taken over the last several years to transform the portfolio. Through acquisitions, we brought in fundamentally higher growth businesses with significant consumables and aftermarket positions. Today, we consider 70% of our revenue to be recurring, with much of it being captive to our installed base and mission critical to our customers' daily operations. Combined with our significant organic investments in innovation and outstanding team, the Danaher Business System, we're excited about the opportunities through the end of 2019 and beyond.
So we're initiating 4th quarter adjusted diluted net EPS guidance of $1.32 to $1.35 We anticipate core revenue growth to be approximately 4.5%, which excludes our Dental segment. We now expect full year 2019 adjusted diluted net EPS to be in the range of $4.74 to $4.77 Both our Q4 and full year EPS guidance include the dilution from non controlling interest related to the 19.4 percent of Anvista we no longer own.
Thanks, Tom. That concludes our formal comments. Kathy, we're now ready for questions.
Your first question comes from the line of Tycho Peterson with JPMorgan.
Good morning, Tycho.
Good morning. I'd like to start with the diagnostic strength. You guys continue to put up great numbers there. Can you talk a little bit about how much of this is driven by the new hematology and automation launches? Can you comment on China?
We've heard about some hospital issues there for diagnostics. And then here in the U. S, we did hear Quest the other day talk about vendor consolidation. Just curious how you think you're positioned as we go through that process with the DXA-five thousand? Thanks.
Sure. Thanks Tycho. A lot to cover there. Starting with hematology, we've talked over the last several months, couple of quarters certainly, and most recently in my prepared remarks about the impact of our new hematology product line. And this has been something as I think you'd probably know Tycho has been in the works, really since we acquired Beckman.
That particular product line was a product line that where we had some real challenges. And these new products, the DSH product line, particularly the 900 with the early sepsis indicator is making a significant difference. We have literally turned that business around from a business where we were not happy with our retention and our win rates to the point where now we're very happy with our retention and our win rates and we're seeing growth in that business now that is having a material impact on the performance improved performance that you're now seeing from Beckman overall. Relative to the overall growth of Beckman, however, it's not purely a hematology story. Improvements in our menu across the board, across each of the analytical modalities, improvements in our automation systems, I noted the DXA 5,000 which is also having impact particularly in labs that are really challenged in terms of throughput and skilled labor where we're reducing the need for skilled labor.
It's really all of those things combined that are having an impact on seeing that consistent mid single digit growth rate that Beckman is now improving towards. And so, I think it's a combination of things. You asked specifically about China, we're seeing continued good performance in China. Beckman has always had a strong position in China. It's always been a key growth driver for us, and it continues to be so.
Clearly, it's a highly competitive market, but we are extremely well positioned there and continuing to see good growth, very high retention rates and very solid win rates as well. You asked about vendor consolidation. If I caught your question accurately, I think the question was related to North America. And assuming I heard that accurately, clearly, there's always an effort across hospitals today to drive cost reductions. Vendor consolidation is certainly a part of that.
But again, as we look at our win rates and our retention rates across our North American business, which is obviously an important part of the overall profile of BEC DX, we continue to see both improved performance there and sustained improved performance. And again, that's underpinning that greater consistency of improvement effects across the board. So hopefully I covered the waterfront. If I didn't Tycho, happy to take a follow-up.
No, that's not fair. Yes.
Yes. Sorry, it's Matt. Tom mentioned Beckman in China, but just to give you some context on diagnostics overall in China, I think that might have been part of the question as well. So from a diagnostics perspective in China, we were double digit core here in the quarter. Just to give you some sense of the overall market.
Okay.
And then just one follow-up on Life Sciences, 6 point 5% core against a 9.5% comp, that certainly stands out. Just curious how you think about the sustainability of that? A lot of that, I guess, was, Paul, up high single digit as well?
Sure. Tycho, we feel very good about the sustainability of our performance across life science. If we step back and we think about both kind of more the Paul side of the house versus life science tools. Life science tools continue to be mid single digit across the platform. Our underlying businesses like molecular devices, like the Microsystems, both mid single digit performance and then Beck LS, as I mentioned in the prepared remarks, double digit performance.
So on the tool side, really good performance. Obviously, a little bit more weakness in SCIEX, but we're very encouraged by the order trends that we see there. So, probably only one spot there that was maybe a little bit weaker, but overall, I'd say the toy side very solid. And then across the Pall business and what we would see is really the biopharma side of Pall, again, very good performance there, solid a solid market that we see continuing to perform well. Our biopharma exposure is now north of $1,500,000,000 most of that obviously coming from Pall Biotech.
Pall Biotech saw double digit core growth in the quarter. That's 6 quarters in a row, of double digit core growth and the order trends look very good. We're also seeing good sustained performance across single use technologies and gene and cell therapy, which are showing double digit core growth. Admittedly, some of those are smaller portions of the overall portfolio, but really good performance and we think those are sustainable positions over time and building.
Okay. Lastly, could you give us the Pall Industrial number?
Pall Industrial on the quarter was
mid low single digits Tycho.
Okay. Thank you.
Your next question comes from the line of Derik De Bruin, Bank of America.
Good morning, Derik. Good morning. Hey, good morning. Hey, did I catch you correctly in the 4th quarter guidance is 4.5% growth ex dental?
That is correct.
All right. Can you sort of walk through just sort of the market dynamics we get there? I think that's a little bit lower than what we would have thought on it. I'm just sort of curious what you're sort of like assuming in terms of year end spending and whatnot. Just sort of unpack that.
Sure.
What's walking into those numbers? Sure, of course. So we've as you know, I think just stepping back a second, we've had 8 quarters in a row of mid single digit core growth and we think the Q4 is a mid single digit growth rate quarter as well. However, there are a couple of timing dynamics relative to our most recent to our Q3 versus the Q4. So particularly in diagnostics where we saw Leica Biosystems and Radiometer at double digit core growth rates in Q3, little help from the VAT impact in Japan, those businesses will moderate a little bit off of that double digit core growth in Q3.
And also a couple of timing issues relative to the life science side where we had a big Q3 particularly for Pall, where there were some larger equipment orders across biotech and the industrial side that moved from Q4 into Q3. So really we're talking about a little bit of timing impact there between Q3 and Q4, but we feel very good about our execution, very good about the underlying market dynamics across both life sciences and diagnostics as well as across water quality and PID. And when you then look at our Q4 guidance in light of the full year, we're still talking about a full year of 2019 at 5.5% to 6% and that's very consistent with what we talked about for the last couple of quarters. So, in general, we would characterize that 4th quarter relative to the 3rd as largely more to do with timing, but still feel very good about where we'll bring in the full year.
Okay, that's helpful. And just out of curiosity, can you talk a little bit about Western Europe and what's going on there? And specifically, just wondering if some of the bioprocess strength is you've seen or some of the stuff you've seen is potentially related to pull forwards in because people worried about Brexit and stuff. We've heard that from some other companies recently that there may be some funny spending patterns that we've seen this year. Can you talk about anything you're seeing trends and sort of how that market is shaping up into the close?
Sure. We are not seeing any sort of unusual procurement behavior in that regard in Western Europe. Europe overall across Q3 was performed at about a low single digit rate. That's down a little bit clearly from the first half. We've seen a bit of softness in certain pockets like at Videojet, a bit at SCIEX and a bit at Leica Microsystems.
As we look at where those pockets of softness are, I think they really speak to some of the overall macro softness in Europe, because when we unpack where some of the differences are between the first half and the second half, it largely looks to be around instrumentation and equipment. Some of our larger some of the larger capital spend, some of the OEM customers, for example, in the packaging world. Those are the areas where we see some of that softness. So I would attribute that low single digit performance in Europe a little bit more to the macro softness in Europe than I would some any unusual procurement behavior going on one way or the other.
And that's stuff that's not sort of been going into the research labs, it's more
the industrial enterprise?
Right. Those are the areas that would speak a little bit more to the industrial side of the house. Admittedly, we're not with our low percentage of the portfolio that is literally industrially exposed, we're not a terrific proxy, but we can certainly see a few of those pockets, whether it's in North America or in developed Europe where some of that macro slowdown exists. But again, those are pretty small pockets.
Great. Thank you.
Thank you.
Your next question comes from the line of Vijay Kumar with Evercore ISI.
Thanks for taking the question guys and congrats on a nice print here. So Tom, maybe one big picture question for you to start off with. On a pro form a basis, right, when you look at the assets, some of the comments you made on DBS and how underlying growth for acquired businesses have improved. If I just look at the numbers, right, the core Danaher is, call it, a mid single core, ex Dental that helps your core. And now GE comes in with DBS.
This seems to be a solid mid singles. And even if macro were to soften going forward, it seems like that mid single digit, stable, strong mid single digit thesis should be pretty much intact. So I'm just curious on that pro form a growth outlook on how you guys are looking at it?
Well, BJ, I think you've first of all, I think your summary of the portfolio today is an accurate one. We've made tremendous progress in the evolution of the portfolio towards establishing that mid single digit growth performance. And I think we've done that with businesses that have demonstrated over time and over cycles their stability in driving that consistent kind of growth performance. Now some of that comes from being in terrific markets with leading positions in those markets. But it also comes from the nature of the balance of sale whereby, as I mentioned earlier, with 70% of our revenue roughly being recurring revenue, largely in the form of consumables that are captive to the instrumentation.
And with the addition of service and other associated aftermarket, the combination of being in great markets with leading businesses and that strong aftermarket consumables position is what gives us confidence that we've built a portfolio that is designed to be sustainable over macro cycles. Now that doesn't mean that we are completely immune as I just mentioned about a couple of soft spots here and there that could be geographic or could be where we have a little bit of exposure to a more industry oriented market. But in general, we've built a portfolio to that effect. And yes, the addition of the GE Biopharma business is but one more significant step in reinforcing that kind of market position. So we feel very good about that looking forward into 2020 beyond.
That's helpful, Tom. And Matt, one quick one for you on this Q4 guidance. It looks like the guide implies a solid margin expansion in Q4. 1, am I right in my math on that solid margin expansion and maybe comment on where this is coming from OpEx versus GM?
Yes, it's probably going to be a little bit of both on the gross margin side and the OpEx side. But the way that I kind of think about I think you're right, Vijay. I think the way that we kind of think about the Q4 guide, especially with some of the noise in there with the NCI and the FX is we're kind of talking about 4.5% core growth, kind of a normal solid 35% fall through. And really that NCI headwind of call it a couple of pennies is really the only change here that we've sort of made to the guide if you will. So, but yes, I think you're right.
We anticipate having pretty good fall through like we normally would expect here in the 4th quarter and I suspect it will be a little bit on the gross margin side and probably with that comes the operating leverage as well.
Thanks guys.
Thanks Vijay.
Your next question comes from the line of Scott Davis with Melasys Research.
Hi, good morning. Hey, Scott.
How are you doing? I'm great.
It's easy covering your company. Every quarter you put up decent numbers and not exactly sure what you make and what you sell, but it's working.
Scott, you know we love
to make life easy for all of the visitors on this call. So one of our goals, among many.
I don't
know if I might be the last industrial guy left, but you're not going to get rid of me that easily.
That's okay. Welcome back. What's up today?
So I got two questions for you, Tom, but the first is just the asset sales. So maybe a little bit of color
around
how this was this a compromise with the regulators? Was this something the regulators requested? Was it U. S. Regulators or was it more globally geared?
I mean, just a little bit more color on that.
Sure, Scott. Well, when we initially announced this deal, we did it with the clear understanding that regulators were going to do what obviously they would do in a deal of this magnitude and that that would be done across a variety of the span of regulatory bodies from the U. S. To Europe, other countries and certainly to China. And so eyes wide open that those reviews would take place and that there was always the prospect that there could be a small portion of the GE portfolio or the Danaher Life Science portfolio that the regulators may have questions about.
And so, the sale of the businesses that we announced earlier this week to Sartorius was really a function of what we believe were very constructive discussions with regulatory bodies across the world and with a clear understanding of what the rationales were from their perspective as well as ours. And this was simply something that regulatory bodies along with us came to the point where we thought where both parties thought that this made sense. And so it really was a series of globally oriented conversations and made sense to take that step.
Okay. Good color. And then just since it's the 4 year anniversary of the Pall deal, I'm just curious to see kind of some of the deltas in the model. I mean, where have things come out versus kind of revenues or things come out versus margins? It doesn't have to be exact numbers, but where there have been the pluses and minuses and kind of at the end of the day, are you going to make the double digit return promise assuming things continue in 2020?
Once you hit that year 5, approaching year 6, are you on target to hit the original targets that you laid out?
Yes, Scott, it's Matt. So I think if you got to look back at maybe the 2 core metrics, if you will, that we sort of talk about with deals, and if you think about core growth at Pulse, when we kind of bought Paul, I would say it was more of a low single digit core growth business and that over the course of, let's say, last, I guess, like you said 4 years here, team has done a really good job at kind of taking DBS and in particular DBS on the growth side and the innovation side and really changing that fundamentally to be more of a mid single digit plus type growth rate. So I think you've seen significant progress on the top line. As far as kind of OP goes, I think when that business came in, it was kind of a high teens type of OP. And today, we sort of own that business, call it, 1,000 basis points better than that.
So we've made really good progress on kind of the team coming in there and taking out some of the costs that we knew were there. I think if you remember, we talked about kind of a cost target at the initial that was kind of $300,000,000 and I think we took that up even to $350,000,000 ultimately. So from an ROIC perspective, I think that so far as we stand here, I would say that exceeds where we thought we would be.
Okay. Well, congratulations on that. Thank you, guys. Thanks, Scott.
Your next question comes from the line of Dan Schenkel with Cowen.
Hey, Doug. Hey, Doug.
Hey, good morning, guys. So, I guess the first a question on interest rates. So the interest rate on the euro bond was under 1%, recognizing you still need to issue the rest of the debt and probably a good chance it's going to come in at a rate that is at least slightly higher than the euro bond. It still seems like you're going to have some upside relative to the deal model you shared with the investment community originally. So by our math, every 50 basis points of lower interest rate translates into about $0.10 of earnings upside.
Does that seem reasonable and should we expect you to let this flow through or is there likely to be some reinvestment?
Yes, I mean, I think the numbers that you're quoting on the Eurobond are accurate obviously. I don't think so and we do still need do the U. S. Deal here and like you said, I suspect that will probably be at a higher rate, but we will get to that in the Q4. But I mean I think as far as kind of trying to think through the deal model, I think I would say at this point we are not trying to update if you will kind of the GE accretion.
We're obviously going to have some moving pieces here, right? You're going to have a little bit of a headwind, though modest from the divestitures that we just announced on Monday. Obviously, you just talked about likely some favorable financing costs so far on the Eurobond deal. Also likely have a business in the GE biopharma business that when it it's had a pretty good year here in 2019. So I think the way to think about it is we will kind of holistically pull all of that together for you when we do update the guide so that we can kind of incorporate all of that at one time.
Okay. Thank you for that. And very quick follow-up related to
the deal as well, and following up on the last question on divestitures. Based on where you are in the regulatory process and the fact that you did announce those divestitures earlier this week, how would you characterize the probability that additional divestitures could be required from here on out?
Well, Doug, as you saw in the announcement, first of all, those divestitures are pretty modest on a relative basis at $140,000,000 So less than 5% of the revenues that we are going to acquire. But of course, the regulatory process is a fluid one. So while we believe this was a significant, a major step towards approval, at this point, we just we can't comment on this any further. It was an important milestone, but as we commented that we don't expect either these deals to this deal to close nor the actual formality of those approvals to be completed until the Q1 and therefore closing immediately following that. We can't comment any further about any prospects for any further actions.
Okay. Totally understood. Maybe just a couple on the quarter. First on Diagnostics, core margin expanded 100 basis points and was ahead of our forecast. Could you talk through some detail on that performance?
And specifically, I'd be curious how Cepheid margins are progressing and how growth improvement at Beckman is really contributing to this performance? And then, just on Paul, it seems like the bioprocessing market is growing broadly at a very strong 15 plus percent rate based on what some of your peers have reported over the last few days. I think you noted that Pall Biotech grew double digits. Is it reasonable to believe that you're growing Pall Biotech at least at that 15% plus level that we're hearing from others? Thank
you. Doug, here I'll take the bio pharma piece first and then Matt will jump back in on the DX margins. Yes, the simple answer is what you are hearing from other sources around the growth of the bioprocessing market overall as being a double digit growth rate market and a very attractive one and one by the way that we and obviously others believe is sustainable in terms of its growth prospects. We at Pall are clearly both benefiting from that and taking advantage of that opportunity to drive that kind of growth. We did put up double digit growth within that business and that's across obviously our filtration business, which is fundamental to biological drug production, but also includes growth in the really innovative ends of the spectrum around biopharma, which is really around single use technologies, which are becoming increasingly important as biological drugs are being produced in smaller and smaller batch sizes for unique patient populations, as well as in the growth areas around cell and gene therapy, which while being somewhat nascent today, are going to be significant growth drivers in the future and we are participating in that growth today with outstanding products and I think a series of new products that will be coming over time that we're very excited about.
Yes, Doug, and as far as the DX margins go, in particular in the quarter, I think we had a pretty good performance generally speaking out of all of the businesses, but I would call out both Leica Biosystems and Radiometer. Those are some of our higher margin businesses and obviously both of those growing sort of in the double digit core growth certainly helps the margin performance. But overall, I think it was pretty good with a little bit of a boost here from those businesses that have been kind of sort of high single digits here year to date turning in kind of a low double digit performance in the quarter. So, I think that's a big ramp of it. As far as Cepheid's margins go, we have again, it's sort of similar to the Paul story.
I think the team there has done a fantastic job of really balancing growth while also focusing on the margin side of it. And they've done a really nice job of kind of embracing DBS and leading from the front. And today, I think when we bought it, it was sort of maybe a breakeven type business from an OP perspective. And today, those margins are, call it, 20% or so from an EBITDA perspective.
Your next question comes from the line of Steve Bouchard with Wolfe Research.
Hi, good morning and thanks for taking my questions.
Good morning.
I had just a couple for Tom and then one for Matt. Tom, I wonder if you wouldn't mind unpacking the number at SCIEX a little bit. I'd say prospectively, you mentioned that you saw some really good trends on orders. It would be helpful to know a little bit more about what you're seeing. And then for the quarter, I mean, SCIEX is a little bit unique relative to some tools businesses and that you have a clinical exposure.
It would be nice to hear how you saw the relative trends in that business between clinical, some of the core applied markets where you have a good presence. And then to the extent you have any comment on what you're seeing on pharma on the R and D, that would be really helpful. Second question is just more of a global question on municipal and broader government project demand. You're uniquely well positioned to have a view on how that's tracking. And then I'll go ahead and Matt ask you just one.
And more of a prospective big picture question, you have a lot of moving parts in the model given that we're divesting dental and we have GE coming in to the fray looking for the majority of 2020. Can you just talk prospectively about the impact on earnings and cash to the extent you can associated with those transitions, if you can give us any update on the thinking so we know how and maybe some of it's below the line to think about those items going forward. Really appreciate the help here.
Sure, Steve. Thanks. So let's start with SCIEX. You heard my comment accurately that while SCIEX was down slightly in the quarter, we were we are in fact encouraged by the order trends that we're seeing and we do in fact expect some improved performance in the Q4. When we look at the quarter itself, Q3, we clearly were up against a tough comp.
SCIEX, so I think I mentioned was up nearly 10% in the Q3 of last year. So certainly a bit of a challenge from a comp standpoint. But we did see some outside of that, some softness in North America. A little bit of that was timing of some larger deals in the second half between Q3 and Q4. But also and it does get a little bit into some of the market segments that you asked about.
We are seeing the consolidation of some small and midsized reference labs and that has created a bit of a headwind there. You asked about specifically the clinical market and SCIEX has certainly had a position in clinical over time, but over the last couple of years, we've seen a number of challenges in that market that are not unique to SCIEX, just broadly defined challenges around changes in reimbursement and guidelines around pain management for one example, and certainly the impact, both across small and midsized labs are related to those challenges in clinical. So, SCIEX was really built on the back of tremendous strength and depth of technologies and capabilities around pharma, small molecule certainly originally and more recently around large molecule positions. And those positions continue to be reasonably good, particularly biopharma, which obviously is a growth segment. Core small molecule pharma was much more modest in its growth globally.
Academic was actually remained pretty good, really across North America and China. And I think overall, we think SCIEX is going to continue to be a leader in that market, a real innovator, and one where over time we'll see a pickup off the 3rd quarter. You asked about the municipal market and our exposure to the municipal market or the government market is for the most part associated with our water quality platform. And in that case, the term municipal is probably more appropriate to our position really than any broader governmental construct, at least in the U. S.
And what we've seen most recently in the U. S. And in Europe would be that municipal spending has generally been pretty consistent and that's what's driven the mid single digit growth rates that we put up at water quality across the U. S. And Western Europe.
And that applies certainly to Hach, it applies to Trojan and a bit to ChemTreat, although ChemTreat tends to be more associated with applied markets. In China, where we continue to see good performance for our water quality platform, albeit against a very tough comp associated with what's called Policy 61, which we noted in the prepared remarks, that market is going to continue to be an outstanding market. And yes, it is largely associated with government or in particular environmental ministry oriented regulations such as Policy 61, which drove an increased level of monitoring in surface waters across China last year, That will continue to be a positive dynamic across water quality. So right now, we see pretty consistent and steady performance around both municipal spending in developed markets as well as a little bit more governmental oriented attention to environmental issues in the high growth markets.
And Steve, as far as your kind of your question on the moving pieces with GE and Dental, I think maybe the way I think about it is sort of that from an EPS perspective, obviously Q4, there's no GE impact. And there will be and we talked a little bit here earlier about all the moving pieces As far as Q4, obviously nothing to think about. As far as Q4 goes for EPS for Envista, the NCI, I kind of put a placeholder of maybe $0.02 in there for the NCI for the Q4. And then as far as kind of cash flow goes, I think that was your next question. If you think about we sort of talked about GE coming in at maybe roughly $1,000,000,000 worth of cash flow and Envista will kind of be out there, I think talking to you guys about their own 2020 cash flow projections when they get a little closer.
So, I don't want to kind of speak for them, but I think you can kind of pencil in that GE of call it a 1,000,000,000 and we'll let Invista talk about 2020 cash flow when they talk to you guys later today.
Okay. Great details. Really appreciate the time here.
Thanks, Steve.
Your next question comes from the line of Dan Brennan with
Thank you. Thank you. Great. So maybe a question just on Q3, Q4. Tom, I think you mentioned a few times, maybe a little bit of timing benefit or timing push out and obviously with the size of Danner, I'm sure there's always lots of small shifts.
But just wanted to understand, was there more pronounced timing benefit this quarter? And maybe could you just help us then think about, you know, and put it in your 4th quarter guide, how do we think about kind of life science diagnostics and kind of EAS?
Sure, Dan. Yes, I think perhaps a little bit of the timing issue between Q3 and Q4 here. I mean, on the margin would have been a little bit more pronounced than what we've seen. But I think if you look at the fundamentals underneath each one of the platforms, life science, diagnostics and EAS, each one of them continued to perform quite well. Again, our exposure to the macro environment is somewhat limited in the sense of being a good proxy for an industrial slowdown.
We don't have a lot of industrial exposure left. And so we generally feel very good about how the overall platform will perform going through the Q4 and how we're set up for 2020.
Okay, great. And then you kind of touched upon my kind of second part of the question. Maybe could you help us think about like maybe between your 70% recurring business and the instrument side of the house, where there you mentioned earlier in the call that there's a bit of pressure there from what you're seeing globally. It's a question we get a lot like differentiating between Danaher and other players in the broader tool space as the global economy is getting softer. So how do we think about kind of your instrument kind of growth rate kind of as we look out here with PMIs being a bit weak and the global economy slowing?
Thanks, Tom.
Sure. So here's one sort of way to think about it, Dan, using some specific numbers. If you look at the Q3, our consumables business was up, call it, 6% versus the equipment side of the house, it was up more like 4%. And so if you think back to the last couple of quarters, those have been closer to even, but equal equipment versus consumables. Here you see the consumables number continuing to be quite strong and the equipment number being a little bit softer.
And I think that's probably the best way to look at what is underneath some of the softness that I talked about that may be impacted by the macro environment across a business like Videojet, for example, or SCIEX or possibly Leica Microsystems, probably to name three examples of businesses where the equipment side of the house is a higher percentage of the balance of sale than on average across the portfolio.
Great. Thank you.
You bet.
We have reached the allotted time for questions. I will now turn the call back over to Matt Gugino for closing remarks.
Thanks, Kathy, and thanks everyone for joining us. We're around all day for questions.
This concludes today's Danaher Corporation's 3rd quarter 2019 earnings results conference call. You may now disconnect.