Good day, and thank you for standing by. Welcome to the PerkinElmer's 3rd quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, this conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Stephen Willoughby, Vice President of Investor Relations. Please go ahead.
Good afternoon, everyone, and welcome to PerkinElmer's 3rd quarter 2021 earnings conference call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer, Jamey Mock, our Senior Vice President and Chief Financial Officer, and Peter Wrighton-Smith, Founder and Chief Executive of Oxford Immunotec. If you have not yet received a copy of our earnings press release or slide presentation, you may find copies of them on the investor section of our website at perkinelmer.com. Please note that this call is being webcast and will be archived on our website. Before we begin, I'd like to remind everyone of the safe harbor statements that we have outlined in our earnings press release issued earlier this afternoon, and also those in our SEC filings.
Statements or comments made on this call will be forward-looking statements, which may include, but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested by any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. Any forward-looking statements made today represent our views as of today. We disclaim any obligation to update these forward-looking statements in the future, even if our estimates change. You should not rely on any of today's forward-looking statements as representing our views as of any date after today. During this call, we will be referring to certain non-GAAP financial measures.
A reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent we use non-GAAP financial measures during this call that are not reconciled to GAAP in that attachment, we will do so promptly. With that, I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad.
Thank you, Steve, and good afternoon, everyone. Reflecting on the 3rd quarter of 2021, I can confidently say that our efforts, our investments, and our business performance together truly reflected the essence and impact of the new PerkinElmer, a concept we introduced at our analyst meeting back in June. The operational improvements, recent acquisitions in life sciences and diagnostics, R&D investments in the food and applied markets, accelerated innovation across the board, and a ramped-up focus on culture, employee engagement, and technological innovation has collectively been bearing fruit. While there is still significantly more to come, I think between our very strong financial results and the additional color that Jamey, Peter, and I will share with you today, we will further illustrate the immense incremental value we are delivering to all our stakeholders now and are positioned to do so well into the future.
To stay on this idea for a moment, our ongoing portfolio transformation into higher growth end markets continued during the 3rd quarter as we closed on our previously announced acquisitions of SIRION Biotech and ImmunoDiagnostic Systems (IDS). We also announced and were able to fairly quickly close on our largest acquisition to date, BioLegend, 3 months ahead of schedule. I'll touch more on these great recent additions in a bit, but I'm thrilled to see the initial teamwork that is already occurring between these businesses and the rest of PerkinElmer. While collaborations are already underway, I expect they will only be expanded and turbocharged coming out of a company-wide innovation summit we are hosting in a couple of weeks.
I'm very proud of how our now 15,000 employees around the world have continued to execute during the 3rd quarter, despite facing existing challenges and even starting to come across some new ones. While Jamey will provide more details in a bit, I'd like to highlight the 16% non-COVID organic growth we generated in the quarter, which was again solidly ahead of our guidance. Our COVID revenues came in close to twice our expectation as testing remained similar to the levels we experienced in the second quarter, and our teams were again well supplied and ready to meet the incremental demand. This led to adjusted earnings per share in the quarter of $2.31, which was over 40% above our guidance despite the ongoing strong investments back in the business.
Overall, we continued to see strong non-COVID demand trends across the business with double-digit growth in all major regions. While we may be facing a few new headwinds, I feel the team is proactively responding and executing for our customers, just as we have successfully done over the past few years when up against numerous other pressures across our business and the global economy. While I'm pleased with our strong performance in the 3rd quarter and excited about all our recent acquisitions, I wanted to spend a little more time today sharing some insights into two of the newer additions as we haven't had the opportunity to discuss them in greater detail with investors up until this point. First, I'd like to touch on Oxford Immunotec, which we closed back in March. As Steve mentioned, Oxford's Founder and CEO, Peter Wrighton-Smith, has joined us on today's call.
As many of you may know, from its days as a standalone, publicly traded company, Oxford is currently the number two player in the latent tuberculosis testing market globally. I think with some of our core capabilities and broader regulatory distribution and service offerings, the business is well-positioned to gain share in the years ahead. In terms of what's been happening since Oxford joined the PerkinElmer family earlier this year, I'm extremely pleased to share that it is on pace to exceed its revenue targets for this year and has been making great progress on rolling out its automation workflows around the world with an anticipated approval for this new workflow in the U.S. next year. I thought it might be helpful to share just some of the ways the two companies have been already collaborating within the first 6 months of being under the same roof.
I hope it'll give you a feel for the synergy potential we both believe exists. With the help of our integration transformation office, which was set up last year, Oxford and PerkinElmer are already leveraging each other's capabilities in a number of ways, such as integrating our JANUS liquid handlers into Oxford's medium throughput automation workflow that is currently seeking and receiving regulatory approvals around the world. Oxford's utilizing Nexcelom's Celigo cell counting instruments in its new high throughput automation workflow. In addition, Oxford is also already starting to leverage PerkinElmer's existing field service force to assist with the installation of these automation offerings. Oxford is now beginning to transition from being a developer and manufacturer of diagnostic kits to now offering customers fully automated workflows for TB testing.
While it is still early and we have many other plans in process that will play out over the longer term, those are just a few examples of the initial progress that we are quite excited about. Now I'd like to turn it over to Peter to share some thoughts on the business since becoming part of the PerkinElmer family, and maybe some perspective on where he sees the business going in the coming years. Peter?
Thank you, Prahlad. Our strategy for advancing in the attractive, growing latent TB testing market is based on a number of key pillars. Firstly, expanding our commercial presence to maximize our penetration of existing and new countries. Secondly, dramatically improving our workflow through automating our assay and bringing that new automated workflow to all major jurisdictions worldwide and in a variety of throughputs to suit customers of different sizes. Thirdly, improving the economics for our customers and us. This is about reducing our cost of goods to our customers and our advantage, but it's also about capturing more value from the product and service ecosystem created by automation. Being part of the wider PerkinElmer family is helping us to execute better in all 3 of those areas.
For example, we're already leveraging EUROIMMUN's presence and field forces to access new countries in South America and leveraging Tulip's presence and relationships in the Indian subcontinent. We are accelerating our automation journey, as Prahlad's already mentioned, by adopting PerkinElmer's suite of automation, both from core PerkinElmer in the form of JANUS and by utilizing technology from acquired companies such as EUROIMMUN and Nexcelom. We're also able now to capture more of the value from automation as we have a pathway through PerkinElmer's OneSource business and its global supply chain capabilities to sell automation consumables and automation service contracts, both things that we were not equipped to do on our own. We're now also exploring a number of additional cost reduction opportunities by insourcing key raw materials that we currently purchase from third parties.
BioLegend, in particular, has a number of antibodies and other immunological reagents that we're looking to incorporate into our own immunology-based technology. At the same time, we've been able to streamline our cost structure. Clearly, we're no longer supporting a public company infrastructure ourselves. More generally, we've been able to reduce our G&A spend by leveraging PerkinElmer's capabilities in those areas. Putting all this together, even just 6 months since becoming part of the PerkinElmer family, we're seeing intensified revenue growth and improved profitability on the bottom line. We're also having growing success in deploying our T-cell technology in SARS-CoV-2. Our testing service revenues continue to grow in support of the Phase II and Phase III licensure studies and in support of vaccine deployment decisions under the umbrella of the U.K. Vaccine Taskforce.
On the kit side, we're also seeing growing and maturing demand as the important role of T-cells has become more widely recognized as a critical means of assessing vaccine efficacy, particularly in immunosuppressed and other high-risk populations. Supported by close to 15 peer-reviewed publications on our technology, T-cell testing is now coming into the mainstream in several European countries. We believe this testing will last well into 2022 and probably beyond, as we learn to live with SARS-CoV-2 as an endemic, mutating global virus. We also see an opportunity to grow our immunology testing services and support the vaccine and pharma clients more broadly outside of SARS-CoV-2. Clearly, we have our own well-respected capabilities in T-cell testing, but as part of PerkinElmer, we have two other distinct advantages.
Firstly, we can leverage the infrastructure of PerkinElmer's global network of specialty clinical laboratories to establish wider worldwide coverage, something of growing importance to vaccine and pharma clients that want to run trials all over the world. Secondly, we're now partnering with BioLegend as their world-leading portfolio of immunology research reagents gives us the expertise to rapidly expand our service offering beyond our own core technology. With that, I'd like to hand it back to Prahlad.
Thank you, Peter. I look forward to seeing the traction we make over the coming quarters. I also wanted to share with you more about our recent acquisition of ImmunoDiagnostic Systems or IDS, which closed in early July and may have been a bit overshadowed by our analyst meeting and the announcement to acquire BioLegend. I wanna make sure our shareholders know why we are so excited about IDS becoming part of PerkinElmer and what we believe it brings to the overall company. The addition of IDS is a great example of where we expect one plus one to equal at least 3 and hopefully more. Let me first tell you a bit more about the company.
It's a developer and manufacturer of medium throughput chemiluminescence analyzers and assays that was previously publicly traded in the U.K. and had been going through an evolution of its assay menu over the last several years. By adding IDS, we have significantly enhanced our in-house chemiluminescence assay development expertise. This expertise will provide even more resources to support the development and launch of EUROIMMUN's high throughput random access chemiluminescence system, Exentis, which we expect to introduce next year. Furthermore, by adding IDS' existing mid-throughput i- 10 chemiluminescence analyzer and its current installed base to the business, upon the launch of the Exentis platform, we will then be able to offer a spectrum of chemiluminescence systems and assays to our customers. Also, in just the first few months since the acquisition closed, we have started to leverage each other's commercial and distribution strengths.
For example, at the recent AACC meeting in Atlanta, PerkinElmer Diagnostics, EUROIMMUN, IDS, and Oxford Immunotec all jointly exhibited and met with customers in person for the first time. Of course, the addition of BioLegend, which closed in mid-September and was the largest deal in our company's history, has kept us busy, to say the least. I'm happy that we were able to close the deal several months before the end of the year, so that all teams and colleagues involved are ready to hit the ground running heading into next year. While BioLegend has been a part of PerkinElmer for only about 45 days, its financial performance has continued to remain extremely strong and hasn't missed a beat as part of this transition.
This is a testament to the strong leadership throughout the BioLegend team, who are doing a terrific job in running the business seamlessly for customers, while also working tirelessly to ensure a successful transition to the PerkinElmer family. However, I'm even more excited about the interactions and collaborations that are beginning to take place between the BioLegend team and the broader PerkinElmer organization. As I briefly mentioned earlier, I'm especially looking forward to our upcoming company-wide innovation summit that is planned for later this year at BioLegend's campus in San Diego. At this event, we'll bring together R&D, innovation, commercial, and operational leaders and experts from across the company for several days to collaborate, strategize, and just get to know one another. I can't wait to see all the impactful ideas and connections that come from this event.
As it relates to innovation, in early October, we received U.S. FDA Emergency Use Authorization for our PKamp respiratory SARS-CoV-2 PCR assay, which provides for the detection of flu, RSV, and COVID in a single assay, which we and others expect will play a larger role in testing during the coming winter months in the Northern Hemisphere. Additionally, our EUROIMMUN business recently received FDA Emergency Use Authorization for its quantitative COVID serology assay, which targets the S1 protein. These two new COVID assays add to our existing strong portfolio of serology, antigen, and PCR assays, which are being used in the ongoing fight against this pandemic.
From a corporate responsibility standpoint, while the world of ESG is still an evolving place, I was enthused to see my colleagues' effort at our recent company-wide Global Impact Day held last month, where it was great to see over 350 different group initiatives take place, all led by our colleagues around the world. As you may recall, we outlined our initial ESG-related targets at our analyst meeting in June, and I'm delighted to see efforts already underway to work towards achieving them. For instance, we recently completed a new company-wide employee engagement survey, which we will use to ensure PerkinElmer continues to be a great place to work and a team everyone is proud to be a part of.
The initial results look very positive on all fronts of engagement, diversity and inclusion, and health and wellbeing perspective, but I'm quite sure there is always room for improvement. Additionally, in our recently released corporate social responsibility report, we have begun reporting under SASB, which is quickly being considered the leading industry standards platform. With PerkinElmer now adhering to this framework, we are building on our historical reporting against the Carbon Disclosure Project, which aligns with the task force on climate-related financial disclosures. I'm confident we have good plans and initial targets in place, and I'm happy to see the company more formally rally around these efforts.
In closing, while there always seems to be various external pressures we must face, such as the current semiconductor shortage, logistics bottlenecks, and potential global tax reform, I'm proud to see our team continue to proactively navigate these challenges with agility, innovation, and a unique and dedicated focus on the customer with strong global teamwork. This corporate character has allowed us to successfully mitigate the impact of these various challenges and provide the opportunity for us to continue to achieve and even exceed our plans like we did here again in the 3rd quarter. The end of the year is always a busy time, filled with commercial activities, strategic and operational planning, and both professional and personal commitments. I expect it to be that way again this year. I'm confident our teams are up for it.
I'd now like to turn the call over to Jamey to provide more detail and perspective on our 3rd quarter results and color as it relates to our guidance for the 4th quarter. Jamey?
Thanks, Prahlad. Good evening, everyone. Before turning to the financial results, I wanna remind everyone that our 3rd quarter earnings call presentation has been posted on the investors section of our website under financial information. As Prahlad mentioned, it was quite a busy quarter for the company. I believe the team performed extremely well, and we continue to make great traction on executing the transformation of the business from both an organic and operational perspective, but also inorganically as well, which I'll touch on in a bit. Both our COVID and non-COVID revenue performance exceeded our expectations, with double-digit growth in both our discovery and analytical solutions and diagnostics segments. Additionally, the recent additions to the PerkinElmer family remain on track, so we are set up well heading into the end of the year.
During the 3rd quarter, adjusted revenue grew 21% compared to last year to almost $1.2 billion and included a 1% foreign exchange tailwind and an 8% contribution from recent acquisitions. Organic revenue grew 12%, 17 percentage points better than our guidance, as our non-COVID revenue grew 16% organically, ahead of our 12% assumption, and our COVID revenue did not fall off to the degree that we had anticipated. As it relates to COVID, we generated approximately $300 million of revenue from our related products and services, which was close to double the $165 million we had projected and down only slightly from the $365 million we generated in the 2nd quarter.
Approximately $170 million of our COVID-related revenue in Q3 came from core products, with the remainder coming from our COVID-related lab services. As also highlighted by others, we saw a noticeable uptick in demand for our PCR tests and RNA extraction kit in the latter half of the quarter, and some contribution from recently awarded testing contracts, such as with the U.S. Department of Health and Human Services and Mount Sinai. As we had assumed in our guidance, we reduced capacity made available for the state of California in our Lab-in-a-Lab offering at the beginning of the quarter, which brought down its revenue contribution as compared to the first half of the year. However, we did see average daily volumes in the lab increase significantly as the quarter progressed, with a number of days in late September surpassing 40,000 tests per day.
I'm extremely proud of what we've been able to accomplish at our lab in California over the last year. From setting it up from scratch in under ninety days, to immediately and appropriately addressing all workflow challenges that may come up when getting something like this off the ground in such a short period of time and in the middle of a pandemic, to successfully meeting and delivering on varying levels of demand on a week-by-week and month-by-month basis. Given the successful contributions, I'm happy to report that our contract with the state for this COVID testing lab has been extended by another year through the end of October 2022. As it relates to our business segments, Diagnostics generated $654 million of revenue in the 3rd quarter, which represented 56% of total revenue and was up 21% year-over-year.
Organically, the business grew 13% and was up 25% organically on a non-COVID basis. Geographically, our diagnostics business was strong around the world, with strong double-digit non-COVID organic growth in all regions. As it relates to our immunodiagnostics franchise, total revenue was up more than 40% in the quarter, with strong growth in both COVID and non-COVID products and services. EUROIMMUN continued to grow robustly and was up more than 20% organically. This business is fantastic and one that we continue to invest in heavily, as it is now on pace to do more than $500 million in revenue this year. As Prahlad mentioned, we closed on our acquisition of IDS in early July and are excited to see the R&D and commercial synergies it can provide with our existing EUROIMMUN franchise.
Our Applied Genomics business, which also falls within our broader Diagnostics segment, continues to take share on our improved brand recognition. While COVID-related sales in the business have fallen off, as equipment-related capacity has been built out, we continue to see strong demand for NGS reagents related to COVID variant detection. Our high throughput real-time PCR workstation, the explorer G3, continues to see strong uptake. Our non-COVID revenue was up more than 50% as core NGS and large molecule activities continues to bounce back after being initially hampered during the pandemic, and funding continues to remain strong.
When I think about all the ways the pandemic has impacted our business, I believe our Applied Genomics business in particular is one that is going to permanently benefit over the longer term as customers now have so much more experience with our high-quality instruments and kits, and our sales force is now even better connected with key opinion leaders in the space. In our reproductive health business, while we continue to face pressure globally from declining birth rates, particularly in China, we were again able to grow this business double digits overall in Q3 through a combination of menu and geographic expansion, new product introductions, growth within our labs business, and a modest benefit from easier year-ago comps, particularly in Asia.
Turning to our Discovery and Analytical Solutions segment, the business generated $513 million in revenue in the quarter, which represented 44% of total revenue and was up 21% year-over-year. Organically, the business grew 10%, led by continued strength in our life science business, with double-digit growth from pharma customers and mid-single digit growth from academic and government end markets. In our discovery business, we are pleased to have closed on our acquisitions of both Cerno and BioLegend in the quarter and are excited to see their contributions to our growth in large molecule in the years to come. Sales into an industrial and applied markets grew in the low double digits, driven by strong growth in mass spec, while food was up mid-single digits.
Looking at the company overall from a geographic perspective, we saw double-digit non-COVID growth in all regions and greater than 20% non-COVID organic growth in China. This led to our total company non-COVID organic growth coming in at 16%, which was 400 basis points above our guidance. Operationally, we are extremely pleased with our performance in light of various macro pressures. Our adjusted operating margins of 31% remain strong, driven by volume leverage, favorable mix, and productivity programs, slightly offset by continued investment in our talent and culture, research and development, improved e-commerce, network and security infrastructure, digital capabilities, and strengthening our customer relationships, which we expect to help drive results in the years to come. Overall adjusted earnings per share were $2.31, which is up 11% versus a year ago and 43% above our Q3 guidance.
As it relates to the balance sheet, we had a lot of moving pieces this quarter with the closing of IDS and Cerno and the financing and closing of BioLegend. We finished the quarter with $5.1 billion of debt and approximately $500 million of cash. Free cash flow was extremely strong in the quarter and so far this year. We generated $324 million of adjusted free cash flow in the quarter, which equates to a 122% conversion of our net income. This brings our adjusted free cash flow so far this year through the first nine months to over $1 billion with a conversion rate of over 100%.
Given these strong cash flows and the better-than-expected earnings, our leverage at the end of the quarter. The 2.2 times net debt to EBITDA on a trailing twelve months basis as we added $2.8 billion in new debt to fund the acquisition of BioLegend. It may be a little counterintuitive, but we expect our net leverage to increase over the next few quarters, even as we begin to aggressively delever, as we expect the earnings related tailwinds from our COVID revenues to come down. As it relates to guidance, we are expecting Q4 adjusted revenues of approximately $1.2 billion, which assumes 8% non-COVID organic growth, $200 million in COVID-related revenues, and an 11% contribution from M&A, and a neutral impact from foreign exchange.
On the bottom line, we are now expecting adjusted earnings per share of $2.05, which assumes approximately $26 million of interest expense, a tax rate of 22%, and 126 million-127 million of diluted shares outstanding. Given our strong performance year to date and our confidence in our 4th quarter outlook, I'm happy to report we are raising our full year revenue and earnings guidance for the 3rd consecutive quarter this year. We now expect over $1.4 billion of COVID revenue and at least 15% non-COVID organic revenue growth for the full year. This brings our total adjusted revenue to just under $5 billion, including an 8% contribution from M&A and a 2% tailwind from foreign exchange.
We are now bringing our adjusted earnings per share guidance for the year up nearly a dollar to $10.81 per share, which equates to 30% year-over-year growth. All of this guidance is detailed on the second to last page of today's presentation as well. As it relates to BioLegend, we expect total year sales this year of approximately $320 million, which would be up 33% from 2020. Included in our 4th quarter adjusted revenue guidance is approximately $80 million of contribution. Due to the faster than expected close of the deal, we are even more confident in the previously announced accretion of $0.30 and greater than $0.50 in 2022 and 2023 respectively. While there will be a modest dilutive impact in the 4th quarter as a result of the earlier closing.
Importantly, integration activities have commenced sooner than anticipated, and as Prahlad mentioned, we are excited about our upcoming company-wide innovation summit in a few weeks at the BioLegend headquarters. Additionally, we were able to close on our financing at rates slightly below our deal model and current interest rate levels. Overall a fantastic outcome and our teams are off and running. In closing, I'm encouraged as our team continues to perform at a high level. Our organic and inorganic investments are paying dividends now and set us up well looking forward, and our transformation of the business to the new PerkinElmer is well underway. We are excited for a strong finish to the year and are well positioned heading into 2022 and the years ahead, not just financially, but also with our people and culture, and most importantly, for our customers.
With that, I'd now like to turn it over to the operator to begin Q&A.
Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Derik De Bruin with Bank of America. Your line is now open.
Hey, thanks for taking the question. This is Michael Ryskin on for Derik De Bruin. I wanna start with your comments on the COVID lab contract being renewed. That was always an option, but not something that was necessarily priced in. Anything you could say in terms of expectation for testing volumes going forward, in Q4 and certainly into 2022 is something in the 100 million a quarter range, a fair assumption to start, or are you being even more conservative than that?
Hey, Michael Ryskin. We are proud to have this renewed. The way I think about it is, while it's renewed for a year, really COVID is such a fluid environment, and we continue to work with the state that it's more like a quarter by quarter basis. As you may know, if you read the contract, the state has the ability to cancel within 45 days. We really only have line of sight to the next 90 days at this point. We also restructured it to take down the capacity to 40,000 tests per day. We also restructured the variable fees. For the most part, it's a pretty steady base in terms of revenue. Irregardless of whether it's 20,000 tests per day or 40,000 tests per day, the revenue remains relatively stagnant.
In the 4th quarter, it's probably to the tune of about $90 million baked into our estimate.
Okay. Great. Then, on the base business, you had some comments on China and the prepared remarks. I was wondering if you can go into a little bit more detail on what you saw there in the quarter and sort of how that's trended. There's been a lot of noise there, both from a sort of a supply chain perspective, but also just underlying demand. If you could go into more detail on that, both for DX and diagnostics, actually.
Yeah. You know, Mike, you know, let me just take sort of what the noise that we are hearing. I mean, you know, it goes both ways. The situation in China, as you know, I mean, some news came out this morning around lockdowns in certain provinces and areas. You know, it continues to remain fluid. I think, but, you know, overall for us, as we look at it, including in China, our end markets continue to remain strong. You know, our backlog is the best that it has ever been. You know, both from a China perspective and across, we continue to execute well. You know, mid to longer term, we continue to feel good about China.
I think we just have to keep our eyes open and be vigilant about what happens vis-a-vis the lockdowns that are taking place.
Any chance you could give us the growth number that you saw in the quarter?
Yeah. It's a little over 20%, Mike, and I would say Diagnostics led the way. Diagnostics was still double digits, but Diagnostics didn't go down as much last year, if you remember. It was a little bit of an easier comp from a Diagnostics perspective because much of the reproductive health and autoimmune testing shut down really in the 2nd quarter last year, a little bit in the 1st quarter. By the 3rd quarter, it started to come back, but I would say it's a little bit of an easier comp on the Diagnostics side, but both businesses grew nicely and have for the last 3 quarters here.
Great. Thanks so much.
Thanks, Mike.
Thank you. Our next question comes from Tycho Peterson with JP Morgan. Your line is open.
Hey, thanks. Sorry to press a little more on the China dynamic, but I think, you know, one of the questions that's coming up is just from the tender front, right? We've seen Anhui and a handful of the other regions, Sichuan, Henan, Zhejiang, et cetera, you know, follow similar policies. Is your view that, you know, the tender headwinds around the IVD market could, you know, expand nationally over the next year or 2? What type of pricing impact do you expect and other offsets, you know, from your perspective with volume?
Yeah, I mean, just building off what Prahlad said, Tycho, I mean, I think we're prepared for that. I think it's inevitable at some point. I don't think localization has been a new thing. It might get a little bit more discussion recently, as now it's kind of impacted some of the the diagnostics products. But, you know, we've got five sites there. We're localizing EUROIMMUN there. They should be ready to produce locally in 2022. We've got over 2,000 people there. We have terrific local brands. You know, we've got a long-standing relationship. I think it still comes down to, you know, every challenge is a bit of an opportunity. Yes, there might be pricing discussions on tenders, but if you have the best value prop, you can also gain a lot of share.
Inevitably that'll come someday, and we'll manage through it, but we have two terrific businesses in autoimmune testing as well as reproductive health. It hasn't hit us yet, but it, you know, I think it will hit us at some point here.
Tycho, I think as we've shared in the past, you know, we've already transitioned most of our reproductive health reagents manufacturing in Taicang. That transition has already taken place over several years. As Jamey pointed out, you know, this is not something new, this has been. Immunodiagnostics is a very small component of our overall revenue, so.
I think maybe you saw, Tycho, that the government has come out and tried to say there's no disadvantage for multinational companies that are local in China. To Prahlad's point, we have the reproductive health side that's local there, and the EUROIMMUN side will be local by the start of 2022.
Okay. That's helpful. Follow up on just guidance here for the 4th quarter. Are you implying that instruments might be down sequentially? As we think about 2022, you obviously laid out the 2023 bridge at the analyst day. Have any of the underlying assumptions for 2022 changed in terms of kind of non-COVID revenue growth in the 5%-7% range?
Yeah. On the instrument side, yes, they will come down really in two areas, Tycho. Our Applied Genomics business from a core perspective or non-COVID, I should say, has been growing like gangbusters. I think over 50% I had in my prepared remarks. I think it's still strong, but I don't think it's gonna continue at the 50% level. We kind of took that down a little bit looking forward here. Then really we've just put a little bit of cushion on all of our instruments in terms of some of the supply chain disruption that's out there. We feel pretty confident about the guide, and instruments will come down a little bit, but we've been able to manage through it to date and hopefully, you know, you'll see us beat the guide again here.
Okay. On 2022.
Yeah, 2022. Yeah. Not too much. I think the way we think about the business in terms of the core growing 5%-7%, and then the numerous acquisitions have all been, you know, mid-teens to high double-digit, you know, growers, and I don't think anything has changed there. As we head into 2022, the end market still seems strong and I feel pretty confident about the 5%-7%.
Okay. Thank you.
Thank you. Our next question comes from Matt Sykes with Goldman Sachs. Your line is open.
Well, thanks for taking my questions. Hi, everybody.
Hey, Matt.
I just wanted to maybe ask a big picture question. I was curious about the comments you made about Oxford Immunotec insourcing some of BioLegend products. I'm just wondering from a big picture standpoint, as you integrate these companies, where you potentially see insourcing opportunities, do you think they're much greater than what you know you think today? Like anything that you can provide context around maybe quantification of potential insourcing opportunities and benefits going forward as you further integrate these companies?
Hey, Matt, this is Prahlad. You know, I'll let Peter talk specifically around Oxford and BioLegend and how that's panning out. I think overall, you know, in most cases, what we have seen, you know, whether it's around Horizon or Nexcelom, you know, I think, you know, initially when we started putting the story together to where we are now, you know, the more and more we get to know these companies and the more and more we get to know the technologies, you know, it's easy for us to foresee that 1 plus 1 is definitely equal to more than 2, and probably in more cases, more than 3. You know, just take a look at Horizon and how Sirion fits the bill. The licensing technology that allows us to bring the cell and gene therapy markets together.
You know, going to our customers, being able to look at small molecule and biologics now at the same time, you know, synergies from a commercial perspective, technology perspective, it continues to help bolster the story that we have seen. On the diagnostic side, you know, with the addition of IDS, you know, while EUROIMMUN was working on iSYS as a big automated platform, the ability to leverage their i-10 platform and at the same time the several assays which they have already qualified, now being able to do that both on a smaller platform and a fully automated platform, it gives you a much more expansive menu than what we thought we could leverage. You know, these are just a couple of examples, and I'll sort of, you know, ask Peter to talk specifically around Oxford and BioLegend. Peter?
Yeah. Thanks, Prahlad. From my perspective, you know, as we have learned more and more about the different aspects of the PerkinElmer family, the opportunity set for us just continues to grow. PerkinElmer is very unusual in having a huge amount of life science reagents, which a lot of diagnostic companies obviously consume as raw materials in production of their kits. But it goes far beyond that. You know, we are starting to benefit from PerkinElmer's purchasing power as a combined entity. We also have the fact that PerkinElmer makes instruments and a lot of different kind of instruments, which is very helpful for us in our automation journey. We also have the fact that PerkinElmer has a great service infrastructure.
All of those things mean that companies like us who've joined the family don't have to replicate and duplicate those capabilities. From my perspective, I'm seeing ever-increasing opportunities to in-source either products or materials or services from the wider PerkinElmer family, and I'm seeing my synergy opportunities there grow as a consequence.
Great. Thanks for that. That's very helpful. Just a specific question, just DAS margins, you guys have made a lot of progress over the past year and a half, and you cited a couple things with the improvement in operating margins for DAS, you know, mix line, leverage, productivity. Of those elements, which can we kind of perceive to be fairly durable, and where do you think the limit might be for, you know, increased margin expansion within DAS?
I think they're all durable, Matt. I would say mix is probably the biggest beneficiary, particularly in the discovery and life sciences side. As that becomes a bigger portion of DAS, it typically comes with higher margins. You know, with the addition of BioLegend and now having a $700 million reagent business sitting in DAS, in terms of life sciences, those normally come with pretty high profit margins. So I'd say mix going forward will be durable and probably the biggest driver. Certainly, there are programs that we've been putting in place that we've been talking about in terms of better procurement. As we roll out NPIs, refreshing all the configurations and the number of configurations we have and the simplicity of them.
We've been doing a little bit around sites, and we've been doing a lot with our service team to be more efficient from a remote service perspective. I think all are durable, but I think the quickest, biggest impact you get is from mix. I think that's what you're seeing in DAS this quarter with life sciences growing double-digit there.
Mm-hmm. Great. Thank you, guys. Appreciate it.
Thanks, Matt.
Thank you. Next question comes from Vijay Kumar with Evercore ISI. Your line is open.
Hey, guys. Thanks for taking my question. Jamey, one on the guidance, and I had one for Prahlad, big picture. On Q4 here. The base non-COVID business organic of 8%, you know, considering that you guys just did 16% in 3Q, your comps don't get materially harder. I'm curious, what that 8% is contemplating in Q4. Is there some China noise, or is this just conservatism on your part?
Yeah, it's a good question, Vijay. I think it's probably more towards the conservatism side. I'd start by saying the end markets are terrific right now. All of them have been growing at least mid-single-digit for us, many, you know, well north of double-digit. Our backlog has grown substantially this year and even over the last quarter. I think the little bit that we put into the 4th quarter here, you can call it conservatism, is two things basically. Any impact from any potential supply chain disruption, which we can talk about more, but we haven't seen too much of to date. And that includes transportation as well. And then anything that's going on around COVID lockdowns, particularly in APAC.
You know, we have seen pockets of it, and particularly in our newborn screening business in places like the Philippines and Vietnam, where screening has just been reduced. Those are the 2 factors that we put in. Otherwise, you know, the end markets have been strong. We're not too concerned about it. The backlog's up, so hopefully it proves to be conservative, but I think it's a prudent thing to do at this time.
That's helpful, Jamey. Prahlad, one for you. I think most of your peers, we've had a number of analyst days, heading into the earnings season. The message from your peers is, we're emerging stronger, from the pandemic. If I look at your business, all the acquisitions you guys have done, these are growth, accretive, and some of them perhaps even transformational. I think I just heard you guys, you know, talk about fiscal 2022 as being in line with LRP, 5%-7%. Is there something different about PerkinElmer why you guys shouldn't be in this emerging stronger from pandemic bandwagon? Or, I'm curious on the 5%-7% versus how your peers are messaging.
I mean, look, Vijay, I think, you know, we extensively talked about this at the analyst day, and then even at the end of the last earnings call. I could not be more confident about the future of PerkinElmer than I am today. You know, the end markets that we are playing in, the portfolio alignment that we have done around growth markets of life sciences and diagnostics, and the team and the talent that we have put in place, and that's executing on all cylinders. So there is no hesitancy on our part in saying that the future is very bright. If you're asking specifically around 2022, I don't think we are doing guidance right now, but I Jamey is very-
Let me just clarify one thing, Vijay, just about the 5%-7%. The 5%-7% is on the core business before all the acquisitions.
Yep.
Just to make sure everybody's clear about that, the 5%-7% ultimately will not be 5%-7% when we roll in the acquisitions. Oxford will roll in there in 2022 into our organic base.
Next year.
Horizon Discovery, Nexcelom, all these, that will raise the 5%-7%. We are just going back to our long-range plan to say, "Look, we broke it up into two things at the time. One was before the acquisitions. That grows 5%-7%. Then here's the 9 acquisitions we've done. That grows obviously more than 5%-7%." BioLegend by itself is obviously very impactful as well. The 5%-7% was prior to the acquisitions. The acquisitions will ultimately make that higher.
That's very helpful, guys. Thank you.
Thank you. Our next question comes from Patrick Donnelly with Citi. Your line is open.
Thanks for taking the questions, guys. Prahlad, maybe picking up on that last one on the acquisition growth rate side. You know, I know BioLegend's only been closed for about a month and a half, but can you just talk about the revenue synergy opportunity there, particularly with some of the more recent acquisitions? It seems like a pretty significant one. Now that, you know, you've had some people in the same room, can you just talk about how you're feeling about those opportunities and what we can expect there?
Yeah. I mean, you heard from Peter around Oxford, Patrick. You know, I mean, he elucidated pretty well the technology synergies, the opportunities around service, commercial. Then I think the theme is the same across the board, whether you look at Nexcelom or Horizon. You know, the ability to be able to leverage our commercial presence, you know, which is direct in more than 100+ countries. You know, which most of these companies do not have access to that are distributor managed. The second one is around technologies. You know, the portfolio that we bring together around instruments, around service, is much. You know, it's very helpful for the acquired companies. The third one obviously is around technology.
You know, as these discussions and interactions happen, you know, I think Peter gave an example around a couple of them, and even with BioLegend, we've become, you know, one of our primary source of raw material supply that we want from antibodies. I think those are the 3 elements that I would point out to. You know, just to give you an example, I think either Jamey or I mentioned during our prepared remarks, we are having an innovation summit in the BioLegend campus in a couple of weeks. Our approach is around 3 verticals or 3 pillars: cell and gene therapy, diagnostics, and everything else around genomics. What the opportunity is for us to leverage the synergies that we can see primarily from a technology perspective.
I think we'll continue and then hopefully over the next couple of months, we will be able to provide more detail around that. Patrick, hopefully that gives you a sense of how we are looking at this.
No, that's definitely helpful. I appreciate it. Jamey, in one of the responses you kind of offered to touch a little bit on the supply chain. I'll take you up on that offer. Yeah, if you could just talk about what you're seeing there, any potential pressures. Secondarily, just on the, you know, the classic inflation labor question, in terms of how that's impacting margins, are you passing that along to customers? That would be helpful.
Yeah, sure. I mean, we certainly see it both on the, you know, disruption side and I would say it's a little bit easier for us. We're mostly air versus any kind of water travels from our shipping standpoint. From a supply base perspective, we've been all over. The team's done an amazing job. You know, I think there was a very minor impact to the 3rd quarter and our backlog obviously increased, improved substantially as well. Inflation, we start to see it. You know, we're looking at what we're doing around price and putting some things into effect right now. But we also have some good things to do. As you might remember, we've been talking about a refreshed procurement process, so we've been able to mitigate some of this. It's certainly there, Patrick, and we're dealing with it.
You know, we've got a happy medium here, where we've got a good size from a scale perspective company, but also we operate in a very agile fashion. Team's been doing a great job managing through it. We put a little bit of buffer into the 4th quarter here, as I mentioned.
Yeah.
Hopefully, it'll be a non-impact for us.
Yeah. I mean, I would sort of re-emphasize that. I really feel strongly that, you know, our size and scale gives us a more speed and agility than one would imagine to be able to rapidly marshal resources around some of these challenges. I think, you know, the COVID pandemic has taught us how to become much more agile and much more reactive to such challenges.
That's helpful. Thanks, Prahlad and Jamey.
Yep.
Thank you. Our next question comes from Brandon Couillard with Jefferies. Your line is open.
Hey, thanks. Good afternoon. Jamey, just a two-part question for you. Given all the moving parts and all the acquisitions, can you just help us sort of frame how to look at gross margins and OpEx in the 4th quarter? Secondarily, is 22% tax rate a good assumption to pencil in for next year?
Yeah. Thanks, Brandon. Gross margin specific to the 4th quarter, I would assume it comes down a little bit here, Brandon. With COVID being, you know, $300 million in the 3rd quarter, going down to $200 million in the 4th quarter, you'll see that come down a little bit. The core comes up, so we always have a bigger volume quarter in the 4th quarter. I would expect gross margins to tick down a little bit. Tax rate for 2022, I think is anybody's guess based on tax reform out there. You know, certainly I think we're, you know, we guided for 21% this year versus, you know, a couple years ago, I think we were 16% or something like that.
Obviously COVID has played a big role in that with greater income and greater, you know, higher tax jurisdiction. I think our tax rate in 2022 is dependent upon two things. One, your view on COVID and how much revenue will be there from that, 'cause it comes typically with a higher tax rate. Two, what happens with tax reform. To date, that has not been changed, but none of our assumptions have taken into account any kind of particular tax reform changes. Hopefully that helps, Brandon.
Super. Thank you.
Thank you. Our next question comes from Joshua Waldman with Cleveland Research. Your line is open.
Good evening. Thanks for taking my questions. Just two for you. First, a follow-up on the non-COVID business. You obviously came in well ahead of your guide. Just wondered if you could provide more context on where you experienced outperformance versus plan. Was this solely tied to a better than expected growth in non-COVID DX, or did DAS also outperform?
DAS definitely outperformed as well. I would say life sciences continues to remain strong. Applied markets or our analytical technology products was strong for us again. On the DX side, I mean, really EUROIMMUN has done extremely well and has continued to do well. I'd just say our applied genomics business, ex-COVID, has continued to be quite strong. I think that probably surpassed our expectation to have the 3rd quarter in a row that I think we've been over 30%-40%. You know, that probably continued to hang in there. I mentioned my prepared remarks that that business, our brand recognition there is probably one of the biggest benefits that we have coming out of COVID here.
Got it. Then as we think about the longer term guide you laid out at the analyst meeting in June, I guess given the improved FY 2021 outlook since that time, and it sounds like a higher level of expected cost synergies going forward, I mean, should we view this as positively impacting how you're thinking about the long term targets, or is it more just kind of a de-risking of those targets?
I think it could be both. It could be both, Joshua. I mean, we've continued to invest through this and certainly, you know, I mentioned in my prepared remarks, we're investing in our talent and culture. We're investing in extra R&D, particularly on the core business as a percent of sales that is far up. We're investing in digital and all these things will, we believe, benefit us moving forward here. Should there be extra sales and extra income, you know, we still feel confident in the margin expansion targets, but it also provides for an opportunity to continue to reinvest back in the business. I think it's a bit of both. It's either de-risk and/or we can make additional investments or you'll see some upside come through versus our long range plan.
Got it. Thank you.
Thank you. Our next question comes from Paul Knight with KeyBanc Capital Markets. Your line is open.
Hi, thanks for the question. On the Discovery and Analytical, you know, very strong growth. Could you talk about, you know, what were the technologies? I would assume that Applied due to petrochemical must be strong, but color there would be great.
Sure, yeah. I mean, hey, Paul. Well now life sciences makes up over 60% of DAS, so I'll start there. In particular, our discovery business, both on a lot of the NPIs we've had in terms of our high content screening business, some of our in vivo products have been operating terrifically. On the reagent side, it's been strong across all regions. We've had a nice cadence of NPIs. Different application areas in terms of oncology and cell and gene therapy have been strong for us. Life sciences, those are a few of the areas. In the analytical side, in applied markets, Paul, it's been more on the semiconductor side, I would say. Chemicals and energy was pretty strong for us. We've launched our triple quad, and so our ICP and ICP-MS business has been extremely strong for us.
I think in general, the whole analytical technologies portfolio, we've had a better cadence of NPIs, which has been proving to benefit the DAS business, and so that's why you see continued strength there.
Do you think you're gaining share on the DAS side of the business?
I believe so in the life sciences side. On the analytical technology side, I think particularly in spectroscopy, we've always had good share. Hard to say whether we're gaining a lot of share at this point.
Yeah. Okay. Thanks.
Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Prahlad Singh for closing comments.
Thank you, Lorna. Thank you all for dialing in today. We are very excited and remain very excited with the trajectory on which the new PerkinElmer has embarked on, and are very proud of the accomplishments that the team have achieved in the 3rd quarter. I'm very thankful to my 15,000 colleagues around the world for their continued hard work and contributions. I look forward to speaking to you all soon. Please stay safe and healthy. Thank you.
This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.